PLEDGE AGREEMENT
This
Pledge Agreement is entered into as of October 28, 2005, by Valhi Holding
Company (“VHC”) for the benefit of U.S. Bank National Association (“U.S.
Bank”).
RECITALS
A. U.S.
Bank provides a revolving credit facility to Contran Corporation (“Contran”)
pursuant to a Loan Agreement dated as of September 3, 1998 (as such agreement
has been amended from time to time). That loan agreement, as previously or
hereafter modified or amended, is referred to in this Pledge Agreement as the
“Loan Agreement.”
B. Capitalized
terms used in this Pledge Agreement have the meanings assigned to those terms
in
the Loan Agreement, unless otherwise specified herein.
C. One
of the conditions precedent to U.S. Bank’s agreement to continue to make
Advances to Contran is that VHC execute this Pledge Agreement and deliver to
U.S. Bank the certificates representing the Pledged Securities (as that term
is
defined below) and stock powers executed in blank.
NOW,
THEREFORE, for valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, U.S. Bank and VHC agree as follows:
AGREEMENT
1. Pledge. VHC
hereby pledges, assigns, transfers, and grants a security interest to U.S.
Bank,
for the benefit of U.S. Bank, in and to all of the following investment
securities (including any certificates, voting rights, owner prerogatives,
dividends, redemptions, and other cash and non-cash distributions, and other
entitlements related thereto):
7,000,000
shares of stock of Valhi, Inc., a Delaware corporation (currently evidenced
by
certificate nos. AT11870, AT11872, AT11873, AT11874, AT11875, AT11876, and
AT11877), and all profits, products and other proceeds thereof (the “Pledged
Securities”).
The
security interest granted hereby secures payment and performance of the
Obligations. Without limiting the generality of the foregoing, the Loan
Agreement requires the pledge of additional investment securities in certain
circumstances. When pledged, such additional investment securities immediately
will become part of the Pledged Securities and, therefore, be subject to the
terms and conditions of this Pledge Agreement.
2. Representations
and Warranties. VHC represents and warrants to U.S. Bank
that:
(a) VHC
is and will be the sole legal and beneficial owner and holder of the Pledged
Securities;
(b) Neither
the execution nor the performance of this Pledge Agreement violates any law,
regulation, rule, or order applicable to VHC, or any agreement, instrument,
or
indenture to which VHC is a party, or by which VHC’s property is bound;
and
(c) The
Pledged Securities arc not subject to any security interest, lien, or adverse
claim other than the security interest granted to U.S. Bank in this Pledge
Agreement.
3. Perfection.
VHC promptly will deliver the certificates representing the Pledged Securities
to U.S. Bank and promptly will issue any additional documents, such as stock
powers, and to take any additional action, such as notification to
intermediaries, that U.S. Bank reasonably believes are necessary or appropriate
to perfect the security interest created by this Pledge Agreement.
4. Voting;
Cash Proceeds. VHC will have the right before an Event of Default
to:
(a) Exercise
all voting rights attendant to the Pledged Securities; and
(b) Receive
and use all distributions (which includes any and all dividends) made on account
of the Pledged Securities without accounting to U.S. Bank for such
distributions. Notwithstanding the foregoing, VHC will not, as the owner of
the
Pledged Securities, vote for or consent to any merger, share exchange, transfer
(sale, lease, exchange, mortgage, pledge, dedication, or other disposition)
of
assets outside of the ordinary course of business or other business combination
involving the issuer of the Pledged Securities or the dissolution of the issuer
of the Pledged Securities, without the prior written consent of U.S. Bank,
which
will not be unreasonably withheld or delayed.
Following
an Event of Default, U.S. Bank will have the exclusive right to vote and to
receive, demand, xxx for and use all distributions, proceeds, or other payments
on account of the Pledged Securities. In the event VHC receives any distribution
or payment in respect of or relation to the Pledged Securities after an Event
of
Default, such person will hold such distribution or payment as agent for U.S.
Bank in the form received and will comply with the orders of U.S. Bank with
respect thereto.
5. Custodial
Matters. U.S. Bank’s only duty under this Pledge Agreement is to use
reasonable care in the custody and preservation of the certificates with respect
to the Pledged Securities.
6. Default. VHC
will be in default under this Pledge Agreement if:
(a) An
Event of Default occurs under the Loan Agreement;
(b) Any
representation or warranty made by VHC in this Pledge Agreement is false or
misleading in any material respect; or
(c) VHC
breaches any promise or agreement made in this Pledge Agreement.
7. Remedies.
TIME IS OF THE ESSENCE. Following an Event of Default, U.S. Bank will have
the right to dispose of the Pledged Securities in one or more transactions
in
accordance with applicable federal and state securities laws and the Uniform
Commercial Code. These rights are cumulative with the rights of U.S. Bank at
law
and under the other agreements that U.S. Bank has with VHC and Contran. If
U.S.
Bank is unable to dispose of the Pledged Securities by public sale because
of
limitations imposed by federal or state securities laws (or is unwilling to
invest the time and money necessary to register the Pledged Securities or obtain
an exemption from registration requirements), and U.S. Bank desires to dispose
of the Pledged Securities by private sale(s), then U.S. Bank will give VHC
and
the issuer of the Pledged Securities at least 10 days’ prior written notice of
U.S. Bank’s intention to conduct a private sale and may at any time thereafter
conduct a private sale or sales of all or portions of the Pledged Securities
without further notice to VHC.
8. Costs
and Expenses.
(a) VHC
promises and agrees to reimburse U.S. Bank for all advances made by U.S. Bank
to
protect and preserve the Pledged Securities and for all reasonable costs and
expenses incurred by U.S. Bank (including attorney and brokerage fees) in
exercising its rights and remedies against the Pledged Securities, and to pay
interest on such amounts at the Default Rate from the date reimbursement is
demanded until the amount is paid in immediately available funds.
(b) The
prevailing party in the trial or appeal of any civil action or insolvency
proceeding to collect on or construe this Pledge Agreement will be entitled
to
the award of a reasonable attorney fee in addition to its costs and
disbursements. If U.S. Bank uses an attorney to assist in enforcement of this
Pledge Agreement, VHC will reimburse U.S. Bank on demand for that expense even
if no action or proceeding is commenced.
9. Jurisdiction. VHC
irrevocably submits to the jurisdiction of any state or federal court sitting
in
Portland, Oregon, in any action or proceeding relating to this Pledge Agreement
and waives any and all claims that such forum is inconvenient or that there
is a
more convenient forum located elsewhere.
10. Waiver
of Jury Trial. VHC hereby waives trial by jury in any controversy
(claim, defense, offset, counterclaim, or third-party claim whether asserted
in
tort or contract) arising out of or in any way related to construction,
performance, and/or enforcement of this Pledge Agreement.
11. Miscellaneous.
(a) This
Pledge Agreement will bind the successors and assigns of VHC and will inure
to
the benefit of the participants, successors, and assigns of U.S.
Bank.
(b) The
laws of the state of Oregon will govern construction and enforcement of this
Pledge Agreement, without giving effect to principles of conflicts of
laws.
(c) No
provision of this Pledge Agreement can or will be waived or modified by conduct
or oral agreement either before or after this Pledge Agreement is
executed.
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U.S. BANK
NATIONAL ASSOCIATION
By: /s/Xxxx
X. Xxxxx
Xxxx
X. Xxxxx
Vice
President
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VALHI
HOLDING COMPANY
By: /s/
Xxxxxx X. Xxxxxxxx
Xxxxxx
X. Xxxxxxxx
Vice
President and Assistant Treasurer
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