PLEDGE AGREEMENT
For the Benefit of the Contran Deferred Compensation Trust No. 2
This Pledge Agreement (this "Agreement") is made as of January 1, 2004
between Contran Corporation, a Delaware corporation ("Contran"), and Valhi
Group, Inc., a Nevada corporation and a subsidiary of Contran ("VGI").
Recitals
A. Contran and Xxxxxx X. Xxxxxxx, the chairman of the board of Contran and
a resident of Dallas, Texas ("Xxxxxxx"), have entered into that certain Amended
and Restated 1984 Deferred Compensation Agreement as of January 1, 2004
(Originally Established October 31, 1984) (along with any further amendments,
the "Deferred Compensation Agreement"). Pursuant to the Deferred Compensation
Agreement, Contran has an obligation to pay Xxxxxxx upon the occurrence of
certain events (a "Payout Event") the value of Xxxxxxx'x deferred compensation
account established by the Deferred Compensation Agreement, 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. 2 as of January 1, 2004
(the "CDCT No. 2").
B. Contran desires to fund further its obligations to Xxxxxxx under the
Deferred Compensation Agreement by contributing to the CDCT No. 2 3.3 million
shares (the "Shares") of the common stock, par value $0.01 per share, of Valhi,
Inc., a Delaware corporation ("Valhi"), that VGI holds.
C. To permit Contran to fund its obligations to Xxxxxxx under the Deferred
Compensation Agreement, VGI has agreed to pledge the Shares to the CDCT No. 2 in
consideration of a collateral fee and an indemnity from Contran.
Agreement
In consideration of the mutual premises, representations and covenants
herein contained, the parties hereto mutually agree as follows.
Section 1. The Pledge. VGI agrees to secure Contran's obligations under the
Deferred Compensation Agreement by granting to the CDCT No. 2 a security
interest in the Shares and delivering to the CDCT No. 2 stock certificates for
the Shares with applicable stock powers duly executed in blank by VGI, all in a
form reasonably satisfactory to the CDCT No. 2. VGI warrants that the Shares,
when delivered to the CDCT No. 2 will be free and clear of all liens, claims and
encumbrances whatsoever, except for such liens, claims and encumbrances on the
Shares created by this Agreement. The CDCT No. 2 may at any time following the
occurrence and during the continuation of a Payout Event cause any or all of the
Shares to be transferred of record into the name of the CDCT No. 2 or its
nominee and exercise any and all rights of a secured party holding a security
interest in the Shares under the uniform commercial code. Prior to the transfer
of record of a Share to the CDCT No. 2 upon a Payout Event, VGI shall retain all
rights to vote the Share and receive dividends on the Share.
Section 2. The Pledge Fee. As consideration for pledging the Shares,
Contran shall pay to VGI 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 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. 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 VGI a pro rated fee based on the portion of the calendar quarter that
the Shares were pledged and the closing sales price of Valhi common stock on the
second to last day on which such shares 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 VGI against any loss or
incremental cost resulting from the pledge of the Shares to the CDCT No. 2 under
this Agreement or the transfer of the Shares to the CDCT No. 2 upon a Payout
Event.
Section 4. 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 Shares to VGI and the related stock powers that
VGI originally tendered to Contran under this Agreement.
Section 5. 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
By: /s/Xxxxxx X. Xxxxxx
-----------------------
Xxxxxx X. Xxxxxx, President
VALHI GROUP, INC.
By: /s/Xxxxx X. X'Xxxxx
-----------------------
Xxxxx X. X'Xxxxx, Vice President
