exh101.htm


    
      
        UNSECURED
REVOLVING

         

        DEMAND PROMISSORY
NOTE

         

         

         

        $40,000,000.00                                                                                                                                                                  
November 5, 2008

         

         

      


      Section 1.  Promise to
Pay.  For and in consideration of value received, the
undersigned, Valhi, Inc., a corporation duly organized under the laws of the
state of Delaware (“Borrower”), promises to pay
to the order of NL Industries, Inc., a corporation duly organized under the laws
of the state of New Jersey (“NL”), or the holder hereof
(as applicable, NL or such holder shall be referred to as the “Noteholder”), the principal
sum of FORTY MILLION and NO/100ths United States Dollars ($40,000,000.00) or
such lesser amount as shall equal the unpaid principal amount of the loan made
by the Noteholder to Borrower together with interest on the unpaid principal
balance from time to time pursuant to the terms of this Unsecured Revolving
Demand Promissory Note, as it may be amended from time to time (this “Note”).  This Note shall
be unsecured and will bear interest on the terms set forth in Section 6 below.
Capitalized terms not otherwise defined shall have the meanings given to such
terms in Section 16 of this Note.

       

      Section 2.  Place of
Payment.  All payments will be made at Noteholder’s address at
Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas
  75240-2697, Attention:  Treasurer, or such other place as the
Noteholder may from time to time appoint in writing.

       

      Section 3.  Payments.  The
unpaid principal balance of this Note and any unpaid and accrued interest
thereon shall be due and payable on the Final Payment Date.  Prior to the
Final Payment Date, any unpaid and accrued interest on an unpaid principal
balance shall be paid in arrears quarterly on the last day of each March, June,
September and December, commencing December 31, 2008.  All payments on this
Note shall be applied first to accrued and unpaid interest, next to accrued
interest not yet payable and then to principal.  If any payment of
principal or interest on this Note shall become due on a day that is not a
Business Day, such payment shall be made on the next succeeding Business Day and
the payment shall be the amount owed on the original payment date.

       

      Section 4.  Prepayments.  This
Note may be prepaid in part or in full at any time without penalty.

       

      Section 5.  Borrowings.  Prior
to the Final Payment Date, Noteholder expressly authorizes Borrower to borrow,
repay and re-borrow principal under this Note in increments of $100,000 on a
daily basis so long as:

       

      ·         
the aggregate outstanding principal balance does not exceed
$40,000,000.00;

      ·         
no written demand for payment has been made by the Noteholder; and

      ·         
no Event of Default has occurred and is continuing.

       

      Notwithstanding anything
else in this Note, in no event will Noteholder be required to lend money to
Borrower under this Note and loans under this Note shall be at the sole and
absolute discretion of Noteholder.

       

      Section 6.  Interest.  The
unpaid principal balance of this Note (exclusive of any past due principal)
shall bear interest at the rate per annum of the Prime Rate less one and one
half percent (1.50%).  In the event that principal or interest is not paid
within five Business Days after such payment was due or declared due, all past
due principal and past due interest owed under this Note will bear interest at
rate per annum of the Prime Rate plus four percent (4.00%).  Accrued
interest on the unpaid principal of this Note shall be computed on the basis of
a 365- or 366-day year for actual days (including the first, but excluding the
last day) elapsed, but in no event shall such computation result in an amount of
accrued interest that would exceed accrued interest on the unpaid principal
balance during the same period at the Maximum Rate. Notwithstanding anything to
the contrary, this Note is expressly limited so that in no contingency or event
whatsoever shall the amount paid or agreed to be paid to the Noteholder exceed
the Maximum Rate.  If, from any circumstances whatsoever, the Noteholder
shall ever receive as interest an amount that would exceed the Maximum Rate,
such amount that would be excessive interest shall be applied to the reduction
of the unpaid principal balance and not to the payment of interest, and if the
principal amount of this Note is paid in full, any remaining excess shall be
paid to Borrower, and in such event, the Noteholder shall not be subject to any
penalties provided by any laws for contracting for, charging, taking, reserving
or receiving interest in excess of the highest lawful rate permissible under
applicable law.  All sums paid or agreed to be paid to Noteholder for the
use, forbearance or detention of the indebtedness of the Borrower to Noteholder
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until payment
in full of the principal (including the period of any renewal or extension
thereof) so that the interest on account of such indebtedness shall not exceed
the Maximum Rate.  If at any time the Contract Rate is limited to the
Maximum Rate, any subsequent reductions in the Contract Rate shall not reduce
the rate of interest on this Note below the Maximum Rate until the total amount
of interest accrued equals the amount of interest that would have accrued if the
Contract Rate had at all times been in effect.  In the event that, upon
demand or acceleration of this Note or at final payment of this Note, the total
amount of interest paid or accrued on this Note is less than the amount of
interest that would have accrued if the Contract Rate had at all times been in
effect with respect thereto, then at such time, to the extent permitted by law,
in addition to the principal and any other amounts Borrower owes to the
Noteholder, the Borrower shall pay to the Noteholder an amount equal to the
difference between:  (i) the lesser of the amount of interest that would
have accrued if the Contract Rate had at all times been in effect or the amount
of interest that would have accrued if the Maximum Rate had at all times been in
effect; and (ii) the amount of interest actually paid on this Note.

       

      Section 7.  Remedy.  Upon the
occurrence and during the continuation of an Event of Default, the Noteholder
shall have all of the rights and remedies provided in the applicable Uniform
Commercial Code, this Note or any other agreement among Borrower and in favor of
the Noteholder, as well as those rights and remedies provided by any other
applicable law, rule or regulation.  In conjunction with and in addition to
the foregoing rights and remedies of the Noteholder, the Noteholder may declare
all indebtedness due under this Note, although otherwise unmatured, to be due
and payable immediately without notice or demand whatsoever.  All rights
and remedies of the Noteholder are cumulative and may be exercised singly or
concurrently.  The failure to exercise any right or remedy will not be a
waiver of such right or remedy.

       

      Section 8.  Right of
Offset.  The Noteholder shall have the right of offset against
amounts that may be due by the Noteholder now or in the future to Borrower
against amounts due under this Note.

       

      Section 9.  Record of Outstanding
Indebtedness.  The date and amount of each repayment of
principal outstanding under this Note or interest thereon shall be recorded by
Noteholder in its records.  The principal balance outstanding and all
accrued or accruing interest owed under this Note as recorded by Noteholder in
its records shall be the best evidence of the principal balance outstanding and
all accrued or accruing interest owed under this Note; provided that the failure of
Noteholder to so record or any error in so recording or computing any such
amount owed shall not limit or otherwise affect the obligations of the Borrower
under this Note to repay the principal balance outstanding and all accrued or
accruing interest.

       

      Section 10.  Waiver.  Borrower
and each surety, endorser, guarantor, and other party now or subsequently liable
for payment of this Note, severally waive demand, presentment for payment,
notice of nonpayment, notice of dishonor, protest, notice of protest, notice of
the intention to accelerate, notice of acceleration, diligence in collecting or
bringing suit against any party liable on this Note, and further agree to any
and all extensions, renewals, modifications, partial payments, substitutions of
evidence of indebtedness, and the taking or release of any collateral with or
without notice before or after demand by the Noteholder for payment under this
Note.

       

      Section 11.  Costs and Attorneys’
Fees.  In the event the Noteholder incurs costs in collecting
on this Note, this Note is placed in the hands of any attorney for collection,
suit is filed on this Note or if proceedings are had in bankruptcy,
receivership, reorganization, or other legal or judicial proceedings for the
collection of this Note, Borrower and any guarantor jointly and severally agree
to pay on demand to the Noteholder all expenses and costs of collection,
including, but not limited to, reasonable attorneys’ fees incurred in connection
with any such collection, suit, or proceeding, in addition to the principal and
interest then due.

       

      Section 12.  Time of
Essence.  Time is of the essence with respect to all of
Borrower’s obligations and agreements under this Note.

       

      Section 13.  Jurisdiction and
Venue.  THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
TEXAS, AND BORROWER CONSENTS TO JURISDICTION IN THE COURTS LOCATED IN DALLAS,
TEXAS.

       

      Section 14.  Notice.  Any notice
or demand required by this Note shall be deemed to have been given and received
on the earlier of (i) when the notice or demand is actually received by the
recipient or (ii) 72 hours after the notice is deposited in the United States
mail, certified or registered, with postage prepaid, and addressed to the
recipient.  The address for giving notice or demand under this Note (i) to
the Noteholder shall be the place of payment specified in Section 2 or such
other place as the Noteholder may specify in writing to the Borrower and (ii) to
Borrower shall be the address below the Borrower’s signature or such other place
as the Borrower may specify in writing to the Noteholder.

       

      Section 15.  Successors and
Assigns.  All of the covenants, obligations, promises and
agreements contained in this Note made by Borrower shall be binding upon its
successors and permitted assigns, as applicable.  Notwithstanding the
foregoing, Borrower shall not assign this Note or its performance under this
Note without the prior written consent of the Noteholder.

       

      Section 16.  Definitions.  For
purposes of this Note, the following terms shall have the following
meanings:

       

       

      (a)     
“Business Day” shall mean any
day banks are open in the state of Texas.

       

      (b)     
“Contract Rate” means
the amount of any interest (including fees, charges or expenses or any other
amounts that, under applicable law, are deemed interest) contracted for, charged
or received by or for the account of Noteholder.

       

      (c)     
“Final Payment Date” shall
mean the earlier of:

       

                            · written
demand by the Noteholder for payment of all or part of the principal and
interest accrued and unpaid thereon;

                           
· December 31, 2009; or

                           
· acceleration as provided herein.

       

      (d)          
“Event of Default”
wherever used herein, means any one of the following events:

       

      (i)        
 the Borrower fails to pay any amount due on this Note and/or any fees or
sums due under or in connection with this Note after any such payment otherwise
becomes due and payable and three Business Days after demand for such
payment;

       

      (ii)          
the Borrower otherwise fails to perform or observe any other provision contained
in this Note and such breach or failure to perform shall continue for a period
of thirty days after notice thereof shall have been given to the Borrower by the
Noteholder;

       

      (iii)        
a case shall be commenced against Borrower, or Borrower shall file a petition
commencing a case, under any provision of the Federal Bankruptcy Code of 1978,
as amended, or shall seek relief under any provision of any other bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
shall consent to the filing of any petition against it under such law, or
Borrower shall make an assignment for the benefit of its creditors, or shall
admit in writing its inability to pay its debts generally as they become due, or
shall consent to the appointment of a receiver, trustee or liquidator of
Borrower or all or any part of its property; or

       

      (iv)         
an event occurs that, with notice or lapse of time, or both, would become any of
the foregoing Events of Default.

       

      (e)          
“Maximum Rate” shall
mean the highest lawful rate permissible under applicable law for the use,
forbearance or detention of money.

       

      (f)           
“Prime Rate” shall mean
the fluctuating interest rate per annum in effect from time to time equal to the
base rate on corporate loans as reported as the Prime Rate in the Money Rates
column of The Wall Street
Journal or other reliable source.

       

       

      BORROWER:

       

       

       

      Valhi, Inc.

       

       

       

      By:   /s/ Gregory M.
Swalwell  

       

              
Gregory M.
Swalwell

              
Vice President and Controller

       

                 
Address:

       

                 
5430 LBJ Freeway, Suite 1700

                 
Dallas, Texas   75240-2697