Document:

ex10-10.htm

Exhibit 10.10

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”), dated as of March 4, 2012, (the “Effective Date”) is by and between AeroGrow International, Inc., a Nevada corporation (the “Company”), and John K. Thompson (the “Executive”).

 

 In consideration of the promises and conditions contained herein, the parties hereto agree as follows:

 

Section 1.  Employment.  The Company hereby agrees to employ Executive, and Executive hereby accepts employment by the Company upon the terms and subject to the conditions hereinafter set forth in this Agreement.  Executive’s employment with Company pursuant to the terms of this Agreement commenced on March 4, 2012.

 

Section 2.  Duties During Contract Term.  Executive shall serve as the Senior Vice President, Sales and Marketing (“SVP-Marketing”) of the Company.  Executive’s employment with the Company shall be at the pleasure of the Chief Executive Officer and the Board of Directors of the Company.  Executive hereby agrees to perform such responsibilities and duties, and undertake such authorities, as are customarily performed and undertaken by executives holding positions similar to that assigned to Executive in similar businesses, as well as any other reasonable responsibilities, duties and authorities commensurate with the SVP-Marketing position.  Executive will perform his duties under this paragraph faithfully and to the reasonable best of his ability, will devote substantially all his working time and efforts to the business of the Company, and shall comply with all reasonable and lawful existing and future formal policies applicable to senior management level employees of the Company and to the Company's business.

 

 Section 3.  Term.  Unless Executive's employment hereunder is terminated earlier pursuant to Section 6 of this Agreement, the term of this Agreement began on March 4, 2012 and shall expire on March 4, 2013 (the “Initial Contract Term”), provided that upon the expiration of the Initial Contract Term, the Executive's employment hereunder shall continue for additional consecutive extension terms of one (1) year each until either party gives notice of termination to the other at least thirty (30) days prior to end of the current term.  The Initial Contract Term and any extension thereof are referred to as the Contract Term.

 

Section 4.  Compensation and Benefits.  In consideration for the services of the Executive hereunder, the Company will compensate Executive as follows:

 

(a) Base Salary.  Beginning on the Effective Date, Executive shall be entitled to receive a base salary of $150,000 per annum, payable in accordance with the Company’s normal payroll procedures and subject to applicable tax withholding.  Effective on September 2, 2012, Executive’s base salary will be increased to $167,307.  Effective as of April 1, 2013, and on each April 1 thereafter, Executive’s base salary shall be adjusted upward by a minimum of 3%, or by such higher percentage as may be determined by the Board of Directors and its Compensation Committee.  Executive’s base salary shall be payable in periodic installments in accordance with the terms of the Company's regular payroll practices in effect from time to time during the term of this Agreement, but in no event less frequently than once each month.  Executive’s base salary may be increased from time to time in the discretion of the Board of Directors and its Compensation Committee, but in no event will Executive’s base salary in effect from time to time be reduced from the levels set forth in this Section 4(a).

 

(b) Bonus.  Executive shall participate in the Company’s annual cash incentive compensation plan for senior managers as determined by the Board of Directors and its Compensation Committee from time to time (the “Annual Incentive Plan”).  Any cash bonus earned pursuant to the Annual Incentive Plan shall be payable in a single lump sum payment not later than one hundred and twenty (120) days after the end of the Company’s fiscal year.  In order to be eligible for receipt of this bonus, Executive must be employed by Company on the last day of the fiscal year for which the bonus is payable, subject to the payment provisions provided for in Section 6 hereof.

 

  

  

  

 

(c) Benefits.  Executive shall be entitled to participate in and receive benefits at active executive levels and costs under any and all employee benefit plans and programs which are from time to time generally made available to the employees of the Company, subject to approval and grant by the Governance Committee of the Board with respect to programs calling for such approvals or grants and consistent with plan terms.  Per the standard executive package, Executive will be granted four (4) weeks paid time off each year of the Contract Term.

 

(d) Equity Compensation.  Executive shall be eligible to participate in the 2005 Equity Compensation Plan, and any successor plan providing for compensation in the form of restricted or unrestricted stock, stock options and other equity-related compensation provided by the Company to its employees (“Equity Compensation”).  Any Equity Compensation granted to Executive will be subject to the standard terms and conditions of the 2005 Equity Compensation Plan or any successor plan.  Options that are currently held by Executive, or any additional Equity Compensation granted to Executive will expire one (1) year following Executive’s date of separation of employment pursuant to Section 6(b) of this Agreement, or one (1) year following Executive’s date of separation of employment pursuant to Section 6(c), except that upon Executive’s retirement, disability or death (as those terms are defined in the Stock Option Agreement or other form of agreement relating to such Equity Compensation), such options will expire three (3) years following such event.

 

In the event of a Change in Control, as that term is defined in the 2005 Equity Compensation Plan, all unvested options or other Equity Compensation will immediately vest in accordance with the agreements relating to such Equity Compensation.  If Executive’s employment is terminated by the Company without Cause before the anticipated date that these options are to vest, all unvested options that are scheduled to vest within one year after Executive’s separation of employment will immediately vest as of the date of employment separation.  In the event Executive’s employment is terminated in any manner other than by the Company without Cause before the anticipated date that these options are to vest, no unvested options will vest.

 

Section 5.  Expenses.  It is acknowledged that Executive, in connection with the services to be performed by him pursuant to the terms of this Agreement, will be required to make payments for travel, entertainment of business associates and similar expenses.  The Company will pay or reimburse Executive for all reasonable expenses incurred by Executive in the performance of his duties hereunder within fifteen days from date Executive or his representative submits a request for such reimbursement.  Executive will comply with such budget limitations and approval and reporting requirements with respect to expenses as the Company may establish from time to time.

 

Section 6.  Termination.

 

(a) For Cause.  The Company’s Board of Directors may terminate the Executive's employment under this Agreement at any time for Cause.  “Cause” is defined as (i) a material act of dishonesty by Executive in connection with his responsibilities as an Executive, (ii) conviction of, or plea of nolo contendere to, a felony, (iii) gross misconduct, or (iv) continued substantial violation of his employment duties after Executive has received a written demand for performance from the Company’s Board of Directors which specifically sets forth the factual basis for the Company’s belief that Executive has not substantially performed his duties.

 

  

  

  

 

(b) Without Cause by Company.  The Company’s Board of Directors may terminate the Executive's employment under this Agreement at any time without Cause.  If the Company breaches any term of this Agreement and fails to cure such breach within thirty (30) days of notice of such breach from the Executive, and if Executive terminates his employment with the Company within thirty (30) days after the period for the cure of the breach by the Company expires, the Company shall be deemed to have terminated the Executive's employment hereunder without Cause.  If the Company terminates the Executive’s employment in accordance with this paragraph, the Executive shall be entitled to continuation in payment of his Base Salary for twelve months following the date of termination; additionally, Executive will be entitled to a pro-rated portion of the bonus described in paragraph 4(b) above and to continued coverage under the health and welfare employee benefit plans and programs described in paragraph 4(c) at active executive levels and costs for twelve months following the date of termination.  Payment of all salary continuation and pro-rated bonus payments described in this paragraph are contingent on (i) Executive’s compliance with restrictive covenants provided in Section 7 of this Agreement and (ii) Executive’s execution of a release of all claims arising from his employment with the Company, in such reasonable form as may then be used by the Company respecting termination of employees.

 

In the event the Company determines that any severance or termination payments provided for in this Agreement or otherwise payable to Executive constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and; (A) but for this paragraph, would be subject to the excise tax imposed by Section 4999 of the Code (or any corresponding provisions of state income tax law); and; (B) reduction of such payments to the amount necessary to avoid the application of such excise tax would result in Executive retaining an amount that is greater than the amount he would retain if such payments were made without such reduction but after the application of such tax; then such payments shall be delivered as to such lesser extent which would result in no portion of such payments being subject to excise tax under Section 4999 of the Code.  Any determination required under this paragraph shall be made by the Company’s accountants, whose determination shall be conclusive and binding upon the Executive and the Company for all purposes.  For purposes of making the calculations required by this paragraph, the Company’s accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code.  The Company and Executive shall furnish to the accountants such information and documents as the accountants may reasonably request in order to make a determination under this paragraph.  The Company shall bear all costs the accountants may reasonably incur in connection with any calculations contemplated by this paragraph.  In the event this paragraph applies, then unless otherwise agreed by the parties, lump sum payments shall be reduced before periodic payments reduced to the extent necessary to avoid imposition of such excise taxes.

 

Notwithstanding the foregoing, in the event that the timing of any of the payments or benefits described in this Agreement would cause Executive to incur adverse tax consequences due to application of Section 409A of the Code or the regulations thereunder, the parties agree to negotiate in good faith the revision of the timing of such payments and/or benefits to avoid such adverse tax consequences, but in no event shall such payments and/or benefits be reduced.

 

(c) Without Cause by Executive.  The Executive may terminate the Executive's employment under this Agreement at any time upon giving at least sixty (60) day’s advance written notice.  If the Executive terminates the Executive’s employment in accordance with this paragraph, the Executive shall be entitled to continuation in payment of his Base Salary and to continued coverage under the Company’s employee benefit plans and programs described in Section 4(c) hereof until the end of the month following said notice. 

 

(d) Non-Renewal Deemed Termination.  The timely notice by the Company under Section 3 of this Agreement not to extend the Contract Term for a subsequent one year period shall be deemed a termination without Cause by the Company under this Agreement.

 

(e) Termination Upon Death Or Disability.  This Employment Agreement shall terminate immediately upon the death of Executive or, at the discretion of the Board of Directors of the Company, upon Executive becoming disabled such that Executive becomes qualified for Long Term Disability Benefits.

 

  

  

  

 

(f) Accrued Compensation and Benefits.  In all cases of Executive’s termination of employment, the Company shall, promptly following Executive’s separation of employment, pay to Executive (or, in the case of Executive’s death, his surviving spouse, if any, otherwise his estate) any earned but unpaid salary, bonus, accrued vacation benefits, and other compensation together with reimbursement for unpaid expenses approved by the Company.   In addition, Executive shall be entitled to benefit continuation and conversion rights as required by law or as permitted by the Company’s employee benefit plans and programs described in paragraph 4(c).

 

Section 7.  Restrictive Covenants.

 

(a) Confidential Data.  The Executive will hold in a fiduciary capacity and will not reveal, communicate or divulge during the period of his employment by the Company or thereafter, any information, knowledge or data to any person, firm or corporation other than the Company or persons, firms or corporations designated by the Company, which relates to the names of the customers, finances, technical data concerning products or services, or any other secret or confidential information, knowledge, data, trade secrets, inventions, drawings, file data, test data, documentation, diagrams, specifications, know how, processes, formulas, models, flow charts, software in various stages of development, source codes, object codes, research and development procedures, test results, marketing techniques and materials, marketing and development plans, price lists, pricing policies, business plans, information relating to customers and/or suppliers’ identities, characteristics and agreements, financial information and projection, employee files and all analyses, compilations, studies, reports, records or other documents or materials which contain, or are prepared on the basis of, any such non-public information of the Company, of any firm owned by the Company, or any of its affiliates, which was learned through or as a result of employment by the Company.

 

(b) Covenant Not to Compete.  In consideration for the benefits provided in this Agreement and his employment with Company, during the term of this agreement, and for twelve (12) months after the termination of this Agreement, whichever is later, the Executive shall not, within the United States, either directly or indirectly, own, have a proprietary interest of any kind in, be employed by, or serve as a consultant to or in any other capacity for any firm which is in the primary business of providing hydroponics or aeroponics products or businesses, or which is otherwise engaged in a business that is directly competitive with that conducted by the Company.  Notwithstanding the foregoing, the Executive may invest in the securities of any corporation whose shares are listed on a national securities exchange or registered under the Securities Exchange Act of 1934 (the “Exchange Act”).

 

(c) Ownership of Inventions.  Every invention and improvement conceived, invented or developed by the Executive during the term of his employment hereunder relating to the Company’s business, including but not limited to products or services to be manufactured, sold, used or in the process of development by the Company or by any parent or affiliate of the Company during such period of employment, or which may be sold or used in competition with any such product, whether or not they are eligible for patent, copyright, trademark, trade secret or other legal protection (“Intellectual Property”) shall be considered “works made for hire” and are the exclusive property of the Company, its successors and assigns whether or not fixed in a tangible medium of expression. Executive hereby assigns all Executive’s rights, title, and interest, worldwide, in all Intellectual Property and in all related patent applications, patents, copyrights and trademarks, trade secrets, and other proprietary rights therein, to the Company. Executive shall assist and cooperate with the Company, both during and after the period of Executive’s employment with the Company, at the Company's sole expense, to allow the Company to obtain, maintain and enforce patent, copyright, trademark, trade secret and other legal protection for the Intellectual Property. Executive shall sign such documents, and do such things as necessary, to obtain such protection and to vest the Company with full and exclusive title in all Intellectual Property against infringement by others. Executive hereby accepts and appoints an agent or attorney of Company’s choice as Executive's representative to execute documents on Executive’s behalf, for this purpose.  Executive shall not be entitled to any additional compensation for any and all Intellectual Property made during the period of Executive's employment with or consulting for the Company.

 

  

  

  

 

(d) Solicitation of Employees.  The Executive and any entity controlled by him or with which he is associated (as the terms “control” and “associate” are defined in the Exchange Act) shall not, during the Contract Term and for a period of twenty-four (24) months after the termination of this Agreement, directly or indirectly solicit, interfere with, offer to hire, or induce any person who is or was an officer or employee of the Company or any affiliate (as the term "affiliate" is defined in the Exchange Act) to discontinue his or her relationship with the Company or an affiliate of the Company, in order to accept employment by, or enter into a business relationship with, any other entity or person.  The restrictions contained in this paragraph 7(d) shall not apply if such solicitation or offer to hire results solely from the response of the employee to: 1) a general advertisement for employment in a newspaper, publication, website, or other public information source; 2) a job posting identified by an independent employment agency or “headhunter”; or 3) any other recruiting effort that is targeted to prospective employees generally. The restrictions contained in this paragraph 7(d) shall not apply to officers or employees of the Company or its affiliates whose periods of employment did not overlap with the periods of employment of Executive.

 

(e) Return of Property.  Upon termination of employment, and at the request of the Company, the Executive agrees to promptly deliver to the Company all Company or affiliate memoranda, notes, records, reports, manuals, drawings, designs, computer files in any media, and any other documents (including extracts and copies thereof) relating to the Company or its affiliates, and all other property of the Company.  Upon termination, the Executive shall cease to use all such materials and information set forth under this Section 7(e).

 

(f) Representations. The Executive represents and warrants to the Company that he has full power and authority to enter into this Agreement and perform his duties hereunder, and that he has no outstanding agreement, whether oral or written or any obligation that is or may be in conflict with any of the provisions of this Agreement or that would preclude Executive from complying with the provisions of this Agreement and that the performance of his duties shall not result in a breach of, or constitute a default under, any agreement, whether oral or written, including, without limitation, any restrictive covenant or confidentiality agreement, to which he is a party or by which he may be bound.  Executive further represents and warrants that he has not misappropriated any confidential information and/or trade secrets of any third party that he intends to use in the performance of his duties under this Agreement.

 

(g) Reformation.  If any court shall determine that the duration or scope of any restriction contained in this Section 7 is unenforceable, it is the intention of the parties that the provisions set forth herein shall not be terminated but shall be deemed restricted, amended, and/or reformed to the extent necessary to render it valid and enforceable.

 

(h) Reasonable Restrictions.  Executive acknowledges and agrees that the provisions of this Section 7 are reasonable and necessary protections of the immediate and substantial interests of the Company, that any violation of these restrictions may cause substantial injury to the Company for which the Company has no adequate legal remedy, and that the Company would not have entered into this Employment Agreement with Executive without the additional consideration offered by Executive in binding himself to the provisions of this Section 7.  In the event of a breach or threatened breach by Executive of any provision of this Section 7, the Company shall be entitled to seek a temporary restraining order and preliminary and/or permanent injunction restraining Executive from such breach or threatened breach; provided, however, that nothing herein contained shall be construed to preclude the Company from pursuing any other available remedy for such breach or threatened breach in addition to, or in lieu of, such injunctive relief.

 

  

  

  

 

(i) Forum for Injunctive Relief.  Notwithstanding any arbitration agreements between Executive and Company, Executive and Company irrevocably consent to personal jurisdiction in the state courts of Colorado, as well as the United States District Court for the District of Colorado, for any matter arising out of or associated with any of the provisions contained in this Section 7 of this Agreement, including its subparts, including but not limited to any action seeking to enforce any of the provisions contained in this Section 7 of this Agreement.  Executive further agrees that venue for any action arising out of or associated with any of the provisions contained in this Section 7 of this Agreement, including its subparts (including but not limited to common law claims or claims under the Uniform Trade Secrets Act or claims under the Computer Fraud and Abuse Act, the Lanham Act, the Stored Communications Act or any similar statutes) shall lie exclusively in the state courts of Colorado covering Boulder County and in the United States District Court for the District of Colorado, regardless of where Executive resides or performs duties for Company.

 

Section 8.  Arbitration.

 

The parties agree that any claim, controversy or dispute that may arise directly or indirectly in connection with Executive’s employment or the termination of Executive’s employment, and involving the Company, and/or any employee(s), Director(s), officer(s), or agent(s) of it, whether arising in contract, statute, tort, fraud, misrepresentation, discrimination, common law or any other legal theory, including, but not limited to disputes relating to the making, performance or interpretation of this Employment Agreement; and claims or other disputes arising under any federal or state employment statutes including, without limitation, Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967; as amended; 42 U.S.C. § 1981, § 1981a, § 1983, § 1985, or § 1988; the Family and Medical Act of 1993; the Americans with Disabilities Act of 1990, as amended; the Rehabilitation Act of 1973, as amended; the Fair Labor Standards Act of 1938, as amended; the Worker Adjustment and Retraining Notification Act; the Executive Retirement Income Security Act of 1974, as amended (“ERISA”); the Colorado Anti-Discrimination Act; or any other similar federal, state or local law or regulation, whenever brought, shall be resolved by arbitration.  If, however, any party would otherwise be legally required to exhaust administrative remedies to obtain legal relief, that party can and must exhaust such administrative remedies prior to pursuing arbitration.  The only claims between the parties that are not subject to arbitration are claims for workers’ compensation or unemployment compensation benefits, claims for injunctive relief, or other claims specifically exempted from arbitration by this or any subsequent agreement between Executive and Company, including but not limited to those claims referenced in Section 7 above.  By signing this Agreement, Executive voluntarily, knowingly and intelligently waives any right Executive may otherwise have to seek remedies with a court or other forums, including the right to a jury trial.  Company also hereby voluntarily, knowingly, and intelligently waives any right it might otherwise have to seek remedies against Executive in court or other forums.  The Federal Arbitration Act, 9 U.S.C. §§ 1-16 (“FAA”) shall govern the arbitrability of all claims, provided that they are arbitrable under the FAA, as it may be amended from time to time.  In the event the FAA does not apply, the Colorado Uniform Arbitration Act shall apply.

 

A single arbitrator engaged in the practice of law shall conduct the arbitration under the National Rules For The Resolution Of Employment Disputes of the American Arbitration Association (“AAA”) in effect at the time of the arbitration, unless otherwise agreed to by the parties.  Other than as set forth in this Employment Agreement, the arbitrator shall have no authority to add to, detract from, change, amend, or modify existing law.  All arbitration proceedings will be confidential.  The prevailing party in any arbitration shall be entitled to receive reasonable attorney fees and costs (to include the fees of the arbitrator).  The arbitrator’s decision and award shall be final and binding as to all claims that were or could have been raised in the arbitration, and judgment upon the award rendered by the arbitrator may be entered by any court of competent jurisdiction.  If any party to this Employment Agreement files a judicial or administrative action asserting claims subject to this arbitration provision, and another party successfully stays such action and/or compels arbitration of such claims, the party filing the initial court action shall pay the other party’s costs and expenses incurred in seeking the stay and/or compelling arbitration, including reasonable attorney fees not to exceed Twenty-Five Thousand Dollars ($25,000.00).  Any arbitration under this Section 7 of this Agreement shall take place within 50 miles of Boulder, Colorado.

 

  

  

  

 

Section 9.  General.

 

(a) Notices.  All notices and other communications hereunder will be in writing or by written telecommunication, and will be deemed to have been duly given if delivered personally or if mailed by certified mail, return receipt requested, or by facsimile, to the relevant address set forth below, or to such other address as the recipient of such notice or communication will have specified to the other party hereto in accordance with this Agreement:

 

If to Employer, to:

 

AeroGrow International, Inc.

Attention: Chief Executive Officer

6075 Longbow Drive, Suite 200

Boulder, CO 80301

Fax:  303-444-0406

 

If to Executive, to:

 

John K. Thompson

6945 Walker Drive

Niwot, CO 80503

 

(b) Withholding.  All payments required to be made by Employer under this Agreement to Executive will be subject to the withholding of such amounts, if any, relating to federal, state and local taxes as may be required by law.

 

(c) Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable, such provision will be fully severable and this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision never comprised a part hereof; and the remaining provisions hereof will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom.  Furthermore, in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as part of this Agreement a provision as similar in its terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

 

(d) Waivers.  No delay or omission by either party hereto in exercising any right, power or privilege hereunder will impair such right, power or privilege, nor will any single or partial exercise of any such right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege.

 

(e) Counterparts.  This Agreement may be executed in multiple counterparts, each of which will be deemed an original, and all of which together will constitute one and the same instrument.

 

(f) Captions.  The captions in this Agreement are for convenience of reference only and will not limit or otherwise affect any of the terms or provisions hereof

 

(g) Reference to Agreement.  Use of the words “herein,” “hereof,” “hereto” and the like in this Agreement refer to this Agreement only as a whole and not to any particular subsection or provision of this Agreement, unless otherwise noted.

 

  

  

  

 

(h) Binding Agreement.  This Agreement will be binding upon and inure to the benefit of the parties and will be enforceable by the personal representatives and heirs of Executive and the successors of the Company.  If Executive dies while any amounts would still be payable to him hereunder, such amounts will be paid to Executive’s estate.  This Agreement is not otherwise assignable by Executive.

 

(i) Entire Agreement.  This Agreement contains the entire understanding of the parties, supersedes all prior agreements and understandings relating to the subject matter hereof and may not be amended except by a written instrument hereafter signed by each of the parties hereto.  This Agreement specifically supersedes the Employment Agreement dated as of January 26, 2009, between Executive and the Company.

 

(j) Governing Law.  This Agreement and the performance hereof will be construed and governed in accordance with the laws of the State of Colorado, without regard to its choice of law principles.

 

 

EXECUTED as of the date first above written.

 

	
AEROGROW INTERNATIONAL, INC.

 

	  	  	/s/ Jack J. Walker	 
	
By:

	  	
 Jack J. Walker

	
Its:

	  	
 Chairman

	
 

EXECUTIVE:

	
 

By:

	  	/s/ John K. Thompson	 
	  	  	
John K. ThompsonThird Amended and Restated Unsecured Revolving Demand Promissory Note

 Exhibit 10.23 
 THIRD AMENDED AND RESTATED 
 UNSECURED REVOLVING 

DEMAND PROMISSORY NOTE 
  

			
	$225,000,000.00	 	December 31, 2011

 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, in lawful money of the United States of America,
to the order of KRONOS WORLDWIDE, INC., a corporation duly organized under the laws of the state of Delaware (“Kronos Worldwide”), or the holder hereof (as applicable,
Kronos Worldwide or such holder shall be referred to as the “Noteholder”), the principal sum of TWO HUNDRED TWENTY FIVE MILLION and NO/100ths United States Dollars ($225,000,000.00) or such lesser amount as shall equal
the unpaid principal amount of the loan made by the Noteholder to Borrower together with accrued and unpaid interest on the unpaid principal balance from time to time pursuant to the terms of this Third Amended and Restated 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 7 below. Capitalized terms not otherwise
defined shall have the meanings given to such terms in Section 18 of this Note. 
 Section 2.
Amendment and Restatement. This Note renews and replaces, amends and restates in its entirety the Second Amended and Restated Unsecured Revolving Demand Promissory Note dated June 30, 2011 in the
original principal amount of $175,000,000.00 payable to the order of the Noteholder and executed by the Borrower (the “Second Amended Note”). The Second Amended Note renewed, replaced, amended and restated the First
Amended and Restated Unsecured Revolving Demand Promissory Note dated December 31, 2010 in the original principal amount of $175,000,000.00 payable to the order of the Noteholder and executed by the Borrower (the “First Amended
Note”). The First Amended Note renewed, replaced, amended and restated the Unsecured Revolving Demand Promissory Note dated November 10, 2010 in the original principal amount of $100,000,000.00 payable to the order of the
Noteholder and executed by the Borrower (the “Original Note”). As of the close of business on December 31, 2011, the unpaid principal balance of the Second Amended Note was $136,100,000.00, the accrued and unpaid
interest thereon was nil and the accrued and unpaid commitment fee thereon was nil, which is the unpaid principal, accrued and unpaid interest and accrued and unpaid commitment fee owed under this Note as of the close of business on the date of this
Note. 
 Section 3. 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 4. Payments. The unpaid principal balance of this Note and any accrued and unpaid interest thereon
shall be due and payable on the Final Payment Date. Prior to the Final Payment Date, any accrued and unpaid interest on an unpaid principal balance shall be paid in arrears quarterly on the last day of each March, June, September and December,
commencing March 31, 2012. 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 5. Prepayments. This Note may be prepaid in part or in full at any time without penalty. 
 Section 6. 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 $225,000,000.00; 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 7. Interest. The unpaid principal balance of this Note shall bear
interest at the rate per annum of the Prime Rate plus one percent (1.00%). In the event that an Event of Default occurs and is continuing, the unpaid principal amount shall bear interest from the Event of Default at the rate per annum of the Prime
Rate plus four percent (4.00%) until such time as the Event of Default is cured. 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 not been
limited by the Maximum Rate. In the event that, upon the Final Payment Date, 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 not been limited by the
Maximum Rate, 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 not been limited by the Maximum Rate 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 8. Fees and Expenses. On the last day of each March, June,
September and December, commencing March 31, 2011, and on the Final Payment Date, Borrower shall pay to Noteholder the Unused Commitment Fee for such period. In addition, Borrower and any guarantor jointly and severally agree to pay on the
Final Payment Date to Noteholder any other cost or expense reasonably incurred by Noteholder in connection with Noteholder’s commitment to Borrower pursuant to the terms of this Note, including without limitation any other cost reasonably
incurred by Noteholder pursuant to the terms of any credit facility of Noteholder. 
 Section 9.
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 10.
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 11. 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 12. 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.

  
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 Section 13. Costs and Attorneys’ Fees. In addition to
any other amounts payable to Noteholder pursuant to the terms of this Note, 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 14. Time of Essence. Time is of the essence with respect to all of Borrower’s obligations and
agreements under this Note. 
 Section 15. Jurisdiction and Venue. THIS NOTE 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. BORROWER CONSENTS TO JURISDICTION IN THE COURTS LOCATED IN DALLAS, TEXAS 
 Section 16. 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 3 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 17.
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 18. Definitions. For purposes of this Note, the following terms shall have the following meanings: 

(a) “Basis Point” shall mean 1/100th of 1 percent. 

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

(c) “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. 
 (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; 

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

 

	 	•	 	 written demand by the Noteholder for payment of all or part of the unpaid principal, the accrued and unpaid interest thereon and the accrued and unpaid
commitment fee thereon, but in any event no earlier than December 31, 2013; or 

  

	 	•	 	 acceleration as provided herein. 

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

(g) “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. 

(h) “Unused Commitment Amount” for any period on after the date of this Note shall mean the
average on each day of such period of the difference between (A) $225,000,000.00 and (B) the amount of the unpaid principal balance of this Note. 
 (i) “Unused Commitment Fee” shall mean the product of (A) 50 Basis Points per annum (pro rated to take into account that the fee is payable quarterly, or such shorter
period if applicable) and (B) the Unused Commitment Amount. 
  

			
	BORROWER:
	
	VALHI, INC.
		
	By:	 	 
		 	Gregory M. Swalwell
		 	 Vice President and Controller

 

	
	Address:
	
	5430 LBJ Freeway, Suite 1700
	Dallas, Texas 75240-2697

  
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 As of the date hereof, Kronos Worldwide, Inc., as the Noteholder, hereby agrees that this
Note renews and replaces, amends and restates in its entirety the Second Amended Note, which renewed, replaced, amended and restated the First Amended Note, which renewed, replaced, amended and restated the Original Note, and that the unpaid
principal of $136,100,000, the accrued and unpaid interest thereon of nil and the accrued and unpaid commitment fee thereon of nil that was owed under the Second Amended Note as of the close of business on December 31, 2011 is the unpaid
principal, the accrued and unpaid interest thereon and the accrued and unpaid commitment fee thereon owed under this Note as of the close of business on the date of this Note. 

 

			
	KRONOS WORLDWIDE, INC.
		
	By:	 	 
		 	Tim C. Hafer
		 	Vice President and Controller

  
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