PLEDGE AGREEMENT
For the Benefit of the Contran Deferred Compensation Trust No. 3
This Pledge Agreement (this "Agreement") is made as of August 25, 2005
between Contran Corporation, a Delaware corporation ("Contran"), and Valhi
Holding Company, a Delaware corporation and a subsidiary of Contran ("VHC").
Recitals
A. Contran and Xxxxx X. Xxxxxxx, the vice chairman of the board of Contran
and a resident of Dallas, Texas ("Xxxxxxx"), have entered into certain
nonqualified deferred compensation agreements, namely (collectively with any
further amendments to these agreements, the "Deferred Compensation Agreements"):
(1) The Deferred Compensation Agreement (Originally Established October
31, 1984) Amended and Restated as of January 1, 1999;
(2) The Contran Corporation 2001 Deferred Compensation Agreement as of
December 31, 2001; and
(3) The Deferred Compensation Agreement as of January 1, 2003.
Pursuant to the Deferred Compensation Agreements, Contran has an obligation to
pay Xxxxxxx upon the occurrence of certain events (a "Payout Event") the value
of Xxxxxxx'x deferred compensation accounts established by the Deferred
Compensation Agreements, less the value of assets concurrently distributed to
him at the time by the trustee of the Amended and Restated Contran Deferred
Compensation Trust No. 3 as of July 1, 2004 (the "CDCT").
B. On July 1, 2004, Valhi Group, Inc., a Nevada corporation and a
subsidiary of Contran ("VGI"), in order to assist Contran in funding it
obligations under the Deferred Compensation Agreements, pledged 300,000 shares
(the "Old Shares") of the common stock, par value $0.01 per share ("Valhi Common
Stock"), of Valhi, Inc., a Delaware corporation and also a subsidiary of VGI and
Contran, registered in the name of VGI to the CDCT in consideration of a
collateral fee and an indemnity from Contran pursuant to a Pledge Agreement
dated July 1, 2004 between Contran and VGI.
C. On August 25, 2005, VGI contributed the Old Shares to VHC, which
contribution was subject to all existing liens.
D. Based on the reduced obligations of Contran under the Deferred
Compensation Agreements, VHC desires to pledge 120,000 shares of Valhi Common
Stock registered in the name of VHC (the "New Shares") to the CDCT under the
terms of this Agreement in anticipation of the delivery of the Old Shares to
VHC.
Agreement
In consideration of the mutual premises, representations and covenants
herein contained, the parties hereto mutually agree as follows.
Section 1. The Pledge. VHC agrees to secure Contran's obligations under the
Deferred Compensation Agreements by granting to the CDCT a security interest in
the New Shares and delivering to the CDCT stock certificates for the New Shares
with applicable stock powers duly executed in blank by VHC, all in a form
reasonably satisfactory to the CDCT. VHC warrants that the New Shares, when
delivered to the CDCT will be free and clear of all liens, claims and
encumbrances whatsoever, except for such liens, claims and encumbrances on the
New Shares created by this Agreement. The CDCT may at any time following the
occurrence and during the continuation of a Payout Event cause any or all of the
New Shares to be transferred of record into the name of the CDCT or its nominee
and exercise any and all rights of a secured party holding a security interest
in the New Shares under the uniform commercial code. Prior to the transfer of
record of a New Share to the CDCT upon a Payout Event, VHC shall retain all
rights to vote the New Share and receive dividends on the New Share.
Section 2. The Pledge Fee. As consideration for pledging the New Shares,
Contran shall pay to VHC on March 31, June 30, September 30 and December 31 of
each year (if a business day, and if not, on the next successive business day as
if made as of the end of such calendar quarter) a fee equal to 0.125% of the
value of the New Shares based on the closing sales price per share for shares of
Valhi Common Stock on the second to last day of such calendar quarter on which
such shares traded as reported by the New York Stock Exchange or such other
principal exchange or other market quotation system on which such shares may
then trade. The initial fee payable on September 30, 2005 shall be pro rated
based on the period from the date of this Agreement to September 30, 2005. Upon
the termination of this Agreement, if the termination date is not as of the end
of a calendar quarter, Contran shall pay on the termination date to VHC a pro
rated fee based on the portion of the calendar quarter that the New Shares were
pledged and the closing sales price per share of Valhi Common Stock on the
second to last day on which shares of Valhi Common Stock traded prior to the
termination date as reported by the New York Stock Exchange or such other
principal exchange or other market quotation system on which such shares may
then trade.
Section 3. Indemnity. Contran agrees to indemnify VHC against any loss or
incremental cost resulting from the pledge of the New Shares to the CDCT under
this Agreement or the transfer of the New Shares to the CDCT upon a Payout
Event.
Section 4. Return of Old Shares. Contran agrees to use its best efforts to
deliver stock certificates representing the Old Shares to VHC shortly after the
delivery of the New Shares to the CDCT.
Section 5. Termination. Either party hereto may terminate this Agreement by
giving the other party thirty days advance written notice of such termination.
On the termination date of this Agreement, Contran shall return the stock
certificates representing the New Shares to VHC and the related stock powers
that VHC originally tendered to Contran under this Agreement.
Section 6. Applicable Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the state of Texas, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the state of Texas or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the state of Texas.
Executed as of the date first above written.
CONTRAN CORPORATION VALHI HOLDING COMPANY
By:/s/ Xxxxx X. X'Xxxxx By:/s/ Xxxxxxx X. Xxxxxxxx
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Xxxxx X. X'Xxxxx, Vice President Xxxxxxx X. Xxxxxxxx, Vice President
