Document:

Certificate of Designations

                                                                                EXHIBIT
    4.1

    CERTIFICATE
      OF DESIGNATIONS, RIGHTS AND PREFERENCES OF

    6%
      SERIES A PREFERRED STOCK

     

     

     

    Pursuant
      to Section 151 of the

    General
      Corporation Law of the State of Delaware

    

     

    Valhi,
      Inc.,
      a
      Delaware corporation (the “Corporation”),
      certifies as follows:

     

    FIRST:
      The
      Certificate of Incorporation of the Corporation authorizes the issuance of
      5,000,000 shares of Preferred Stock, par value $.01 per share, and, further,
      authorizes the Board of Directors of the Corporation, subject to the limitations
      prescribed by law and the provisions of the Certificate of Incorporation, to
      provide for the issuance of shares of the Preferred Stock or to provide for
      the
      issuance of shares of the Preferred Stock in one or more series, to establish
      from time to time the number of shares to be included in each such series and
      to
      fix the designations, voting powers, preference rights and qualifications,
      limitations or restrictions of the shares of the Preferred Stock of each such
      series.

     

    SECOND:
      The
      Board of Directors of the Corporation, as of February 28, 2007, duly adopted
      the
      following resolutions, authorizing the creation and issuance of a series of
      said
      Preferred Stock to be known as 6% Series A Preferred Stock:

     

    RESOLVED,
      the
      Board of Directors, pursuant to the authority vested in it by the provisions
      of
      the Certificate of Incorporation of the Corporation, hereby authorizes the
      issuance of a series of the Corporation’s Preferred Stock, par value $.01 per
      share, consisting of 5,000 shares of which are authorized to be issued under
      the
      Corporation’s Certificate of Incorporation (such 5,000 shares being hereinafter
      referred to as the “Series
      A Preferred Stock”),
      of
      the Corporation and hereby fixes the number, designations, preferences, rights
      and limitations thereof in addition to those set forth in said Certificate
      of
      Incorporation as follows:

     

    Section 1.  Certain
      Definitions.
      As used
      in this Certificate, the following terms shall have the following meanings,
      unless the context otherwise requires:

     

    “Board
      of Directors”
means
      either the board of directors of the Corporation or any duly authorized
      committee of such board.

     

    “Business
      Day”
means
      any day other than a Saturday, Sunday or a day on which state or U.S. federally
      chartered banking institutions in New York, New York are not required to be
      open.

     

    “Capital
      Stock”
of
      any
      Person means any and all shares, interests, participations or other equivalents
      however designated of corporate stock or other equity participations, including
      partnership interests, whether general or limited, of such Person and any rights
      (other than debt securities convertible or exchangeable into an equity
      interest), warrants or options to acquire an equity interest in such Person
      that
      are traded on an established national or regional trading market or exchange,
      including but not limited to the common stock, par value $.01 per share, of
      Valhi, Inc., a Delaware corporation.

     

    “Certificate”
means
      this Certificate of Designations, Rights and Preferences of 6% Series A
      Preferred Stock.

     

    “Certificate
      of Incorporation”
means
      the Certificate of Incorporation of the Corporation, as amended from time to
      time.

     

    “Common
      Stock”
means
      the voting Common Stock, $.01 par value per share, of the Corporation and any
      other stock of any class of the Corporation that has no preference in respect
      of
      dividends or of amounts payable in the event of any voluntary or involuntary
      liquidation, dissolution or winding up of the Corporation.

     

    “Corporation”
means
      Valhi, Inc., a Delaware corporation, and its successors.

     

    “Dividend
      Payment Date”
means
      March 31, June 30, September 30 and December 31, of each year, or if any such
      date is not a Business Day, on the next succeeding Business Day.

     

    “Dividend
      Period”
means
      the period beginning on, and including, a Dividend Payment Date and ending
      on,
      and excluding, the immediately succeeding Dividend Payment Date.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Liquidation
      Preference”
has
      the
      meaning assigned to such term in Section
      4(a).

     

    “Original
      Issue Date”
has
      the
      meaning assigned to such term in Section
      3(a).

     

    “Outstanding”
means,
      when used with respect to Series A Preferred Stock, as of any date of
      determination, all shares of Series A Preferred Stock outstanding as of such
      date; provided
      further
      that, in
      determining whether the holders of Series A Preferred Stock have given any
      request, demand, authorization, direction, notice, consent or waiver or taken
      any other action hereunder, Series A Preferred Stock owned by the Corporation
      shall be deemed not to be outstanding.

     

    “Parity
      Stock”
has
      the
      meaning assigned to such term in Section
      2.

     

    “Person”
means
      an individual, a corporation, a partnership, a limited liability company, an
      association, a trust or any other entity or organization, including a government
      or political subdivision or an agency or instrumentality thereof.

     

    “Record
      Date”
means
      with respect to the dividends payable on March 31, June 30, September 30 and
      December 31 of each year, March 15, June 15, September 15 and December 15
      of each year, respectively, or such other record date, not more than 60 days
      and
      not less than 10 days preceding the applicable Dividend Payment Date, as may
      be
      fixed by the Board of Directors. 

     

    “Senior
      Stock”
has
      the
      meaning assigned to such term in Section
      2.

     

    “Series
      A Preferred Stock”
has
      the
      meaning assigned to such term in the Resolution set forth in the Preamble
      hereto.

     

    Section 2.  Rank.
      The
      Series A Preferred Stock shall, with respect to rights upon liquidation,
      dissolution or winding up of the Corporation, rank (a) senior to all classes
      or
      series of Common Stock and to any other class or series of equity securities
      issued by the Corporation not referred to in clauses (b) or (c) of this
      paragraph, (b) on a parity with all equity securities issued by the Corporation
      in the future, the terms of which specifically provide that such equity
      securities rank on a parity with the Series A Preferred Stock with respect
      to
      dividend rights or rights upon the liquidation, dissolution or winding up of
      the
      Corporation (“Parity
      Stock”)
      and
      (c) junior to all equity securities issued by the Corporation in the future
      the
      terms of which specifically provide that such equity securities rank senior
      to
      the Series A Preferred Stock with respect to dividend rights or rights upon
      the
      liquidation, dissolution or winding up of the Corporation (“Senior
      Stock”).
      The
      term “equity securities” shall not include convertible debt
      securities.

     

    Section 3.  Dividends.

     

    (a) Holders
      of the then Outstanding shares of Series A Preferred Stock shall be entitled
      to
      receive, when and as authorized by the Board of Directors, out of funds legally
      available for the payment of dividends, cash dividends at the rate of 6% of
      the
      $133,466.75 per share Liquidation Preference per annum. Such dividends shall
      accrue from the first date on which any Series A Preferred Stock is issued
      (the
“Original
      Issue Date”)
      and
      shall be payable quarterly in arrears on each Dividend Payment Date. Any
      dividend payable on the Series A Preferred Stock for any partial dividend period
      will be computed on the basis of a 360-day year consisting of twelve 30-day
      months. Dividends will be payable to holders of record as they appear in the
      stock records of the Corporation at the close of business on the applicable
      Record Date.

     

    (b) No
      dividends on shares of Series A Preferred Stock shall be declared by the
      Corporation or paid or set apart for payment by the Corporation at such time
      as
      the terms and provisions of any agreement of the Corporation, including any
      agreement relating to its indebtedness, prohibit such declaration, payment
      or
      setting apart for payment or provide that such declaration, payment or setting
      apart for payment would constitute a breach thereof or a default thereunder,
      or
      if such declaration or payment shall be restricted or prohibited by
      law.

     

    (c) Notwithstanding
      the foregoing, dividends on the Series A Preferred Stock shall accrue whether
      or
      not the terms and provisions set forth in Section
      3(b)
      hereof
      at any time prohibit the current payment of dividends, whether or not the
      Corporation has earnings, whether or not there are funds legally available
      for
      the payment of such dividends and whether or not such dividends are declared.
      Accrued but unpaid dividends on the Series A Preferred Stock will accumulate
      as
      of the Dividend Payment Date on which they first become payable, but interest
      will not accrue on any amount of accrued but unpaid dividends on the Series
      A
      Preferred Stock.

     

    (d) Nothing
      contained herein shall prevent or restrict the Corporation from the declaration,
      payment or set aside for payment or any other distribution of cash or other
      property, directly or indirectly, on or with respect to any shares of the Common
      Stock, or shares of any other class or series of equity securities ranking
      junior to or on a parity with the Series A Preferred Stock as to dividends
      or
      upon liquidation, including without limitation accrued and unpaid dividends
      on
      the Series A Preferred Stock. Further, nothing contained herein shall prevent
      or
      restrict the Corporation from redeeming, purchasing or otherwise acquiring
      for
      any consideration (or any moneys be paid to or made available for a sinking
      fund
      for the redemption of any such shares) by the Corporation any shares of Common
      Stock, or any shares of equity securities ranking junior to or on a parity
      with
      the Series A Preferred Stock as to dividends or upon liquidation.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (e) When
      dividends are not paid in full (or a sum sufficient for such full payment is
      not
      so set apart) on the Series A Preferred Stock and the shares of any other class
      or series of equity securities ranking on a parity as to dividends with the
      Series A Preferred Stock, all dividends declared upon the Series A Preferred
      Stock and any other class or series of such equity securities ranking on a
      parity as to dividends with the Series A Preferred Stock shall be declared
      pro
      rata
      so that
      the amount of dividends declared per share of Series A Preferred Stock and
      such
      other class or series of such equity securities shall in all cases bear to
      each
      other the same ratio that accrued dividends per share on the Series A Preferred
      Stock and such other class or series of such equity securities (which shall
      not
      include any accrual in respect of unpaid dividends for prior dividend periods
      if
      such other class or series of equity securities does not have a cumulative
      dividend) bear to each other. No interest, or sum of money in lieu of interest,
      shall be payable in respect of any dividend payment or payments on Series A
      Preferred Stock which may be in arrears.

     

    (f) Any
      dividend payment made on shares of the Series A Preferred Stock shall be
      credited against the accrued but unpaid dividends due as designated by the
      Corporation. Holders of the Series A Preferred Stock shall not be entitled
      to
      any dividend, whether payable in cash, property or shares of Capital Stock
      in
      excess of full accrued dividends on the Series A Preferred Stock as described
      above.

     

    Section 4.  Liquidation
      Preference.

     

    (a) Upon
      any
      voluntary or involuntary liquidation, dissolution or winding up of the affairs
      of the Corporation, the holders of shares of Series A Preferred Stock then
      Outstanding are entitled to be paid out of the assets of the Corporation,
      legally available for distribution to its stockholders, a liquidation preference
      of $133,466.75 per share of Series A Preferred Stock (the “Liquidation
      Preference”),
      plus
      an amount equal to any accrued and unpaid dividends (whether or not declared)
      to
      the date of payment, before any distribution of assets is made to holders of
      Common Stock or any other class or series of equity securities that ranks junior
      to the Series A Preferred Stock as to liquidation rights.

     

    (b) In
      the
      event that, upon any such voluntary or involuntary liquidation, dissolution
      or
      winding up, the available assets of the Corporation are insufficient to pay
      the
      amount of the liquidating distributions on all Outstanding shares of Series
      A
      Preferred Stock and the corresponding amounts payable on all shares of each
      other class or series of equity securities ranking on a parity with the Series
      A
      Preferred Stock as to liquidation rights, then the holders of the Series A
      Preferred Stock and each such other class or series of equity securities shall
      share proportionately in any such distribution of assets in proportion to the
      full liquidating distributions to which they would otherwise be respectively
      entitled.

     

    (c) After
      payment of the full amount of the liquidating distributions to which they are
      entitled, the holders of Series A Preferred Stock will have no right or claim
      to
      any of the remaining assets of the Corporation. 

     

    (d) Written
      notice of any such liquidation, dissolution or winding up of the Corporation,
      stating the payment date or dates when, and the place or places where, the
      amounts distributable in such circumstances shall be payable, shall be given
      by
      first class mail, postage pre-paid, not less than 30 nor more than 60 days
      prior
      to the payment date stated therein, to each record holder of the Series A
      Preferred Stock at the respective addresses of such holders as the same shall
      appear on the stock transfer records of the Corporation.

     

    (e) The
      consolidation or merger of the Corporation with or into any other corporation,
      trust or entity or of any other corporation with or into the Corporation, or
      the
      sale, lease or conveyance of all or substantially all of the property or
      business of the Corporation, shall not be deemed to constitute a liquidation,
      dissolution or winding up of the Corporation.

     

    Section 5.  Voting
      Rights.

     

    (a) Holders
      of the Series A Preferred Stock will not have any voting rights, except as
      set
      forth below or as otherwise provided in the Certificate of Incorporation, by
      law
      or pursuant to agreements among the holders of voting equity securities of
      the
      Corporation.

     

    (b) The
      affirmative vote of holders of at least two-thirds of the Outstanding shares
      of
      the Series A Preferred Stock and all other Parity Stock with like voting rights,
      voting as a single class, in person or by proxy, at a special meeting called
      for
      the purpose, or by written consent in lieu of meeting, shall be required to
      alter, repeal or amend, whether by merger, consolidation, combination,
      reclassification or otherwise, any provisions of the Certificate of
      Incorporation if the amendment would amend, alter or affect the powers,
      preferences or rights of the Series A Preferred Stock, so as to adversely affect
      the holders thereof; provided,
      however,
      that
      any increase in the amount of the authorized common stock or authorized
      preferred stock or the creation and issuance of other series of common stock
      or
      preferred stock will not be deemed to materially and adversely affect such
      powers, preferences or special rights.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Section 6.  Consolidation,
      Merger and Sale of Assets.
      The
      Corporation, without the consent of the holders of any of the Outstanding Series
      A Preferred Stock, may consolidate with or merge into any other Person or
      convey, transfer or lease all or substantially all of its assets to any Person
      or may permit any Person to consolidate with or merge into, or transfer or
      lease
      all or substantially all its properties to the Corporation.

     

    Section 7.  Headings.
      The
      headings of the Sections of this Certificate are for convenience of reference
      only and shall not define, limit or affect any of the provisions
      hereof.

     

    IN
      WITNESS WHEREOF, the Corporation has caused this Certificate to be signed in
      its
      name and on its behalf on this 26th
      day of
      March, 2007.

     

    Valhi,
      Inc.

    

    

    

    

    By: 

    Gregory
      M. Swalwell

    Vice
      President and ControllerStock Purchase Agreement Exhibit 10.1

                                                                                    EXHIBIT
    10.1

    STOCK
      PURCHASE AGREEMENT

    

    

    This
      Stock Purchase Agreement (the “Agreement”)
      is
      made and entered into as of March 26, 2007 between Contran Corporation, a
      Delaware corporation (“Contran”),
      and
      Valhi, Inc., a Delaware corporation (“Valhi”).

    

    Recitals

    

    A. Valhi
      has
      today paid a stock dividend (the “Stock
      Dividend”)
      to its
      stockholders of record as of March 12, 2007 of approximately 56.8 million shares
      (the “Shares”) in the aggregate of the common stock, par value $0.01 per share,
      of Titanium Metals Corporation, a Delaware corporation and an affiliate of
      Valhi.

    

    B. Valhi
      is
      a member of the consolidated U.S. federal tax return of which Contran is the
      parent company (the “Contran
      Tax Group”).

    

    C. As
      a
      member of the Contran Tax Group and pursuant to a tax policy between Valhi
      and
      Contran, Valhi computes provisions for U.S. income taxes on a separate company
      basis using tax elections made by Contran and makes payments to Contran or
      receives payments from Contran in amounts it would have paid to or received
      from
      the U.S. Internal Revenue Service had it not been a member of the Contran Tax
      Group but instead had been a separate taxpayer.

    

    D. Upon
      the
      payment of the Stock Dividend and pursuant to the tax policy between Valhi
      and
      Contran, Valhi has incurred a tax obligation to Contran, which obligation
      is a function of the difference between the aggregate value of the Shares
      distributed based on their closing market price on the date of distribution
      ($36.90 per share) less Valhi's aggregate tax basis in such Shares (the
      “Tax
      Obligation”).

    

    E. On
      the
      terms and subject to the conditions of this Agreement, including the release
      and
      indemnity of the Tax Obligation by Contran, Valhi wishes to today issue 5,000
      shares (the “Shares”)
      of its
      6% series A preferred stock, par value $0.01 per share, of Valhi, to Contran,
      and Contran wishes to purchase the Shares (the “Transaction”).

    

    Agreement

    

    The
      parties agree as follows:

    

    ARTICLE I.

    THE
      CLOSING

    

    Section 1.  Closing
      and Deliveries.  The
      closing of the purchase and sale of the Shares shall take place effective as
      of
      March 26, 2007 (the “Closing
      Date”).
      On
      the Closing Date:

    

    (a) Valhi
      shall issue and deliver to Contran certificates representing the Shares;
      and

    

    (b) Contran
      shall undertake responsibility for and shall release Valhi from, and indemnify
      Valhi against, the Tax Obligation as set forth in Article IV and Section 5.2
      of
      this Agreement.

    

    ARTICLE II.

    REPRESENTATIONS
      AND WARRANTIES OF VALHI

    

    Valhi
      hereby represents and warrants to Contran as of the date of this Agreement
      as
      follows:

    

    Section 2.1.  Authority.  It
      is a corporation validly existing and in good standing under the laws of the
      state of its incorporation. It has full corporate power and authority, without
      the consent or approval of any other person, to execute and deliver this
      Agreement and to consummate the Transaction. All corporate action required
      to be
      taken by or on behalf of it to authorize the execution, delivery and performance
      of this Agreement has been duly and properly taken.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Section 2.2.  Validity.  This
      Agreement is duly executed and delivered by it and constitutes its lawful,
      valid
      and binding obligation, enforceable in accordance with its terms. The execution
      and delivery of this Agreement and the consummation of the Transaction by it
      are
      not prohibited by, do not violate or conflict with any provision of, and do
      not
      result in a default under (a) its charter or bylaws; (b) any material contract,
      agreement or other instrument to which it is a party or by which it is bound;
      (c) any order, writ, injunction, decree or judgment of any court or governmental
      agency applicable to it; or (d) any law, rule or regulation applicable to it,
      except in each case for such prohibitions, violations, conflicts or defaults
      that would not have a material adverse consequence to the
      Transaction.

    

    Section 2.3.  Terms
      of the Shares.  The
      certificate of designations, rights and preferences of Valhi’s 6% series A
      preferred stock is set forth on Exhibit
      A
      attached
      hereto.

    

    Section 2.4.  Title
      to the Shares.  Upon
      consummation of the transactions contemplated by this Agreement, Contran will
      acquire good and marketable title to the Shares, free and clear of any liens,
      encumbrances, security interests, restrictive agreements, claims or
      imperfections of any nature whatsoever, other than restrictions on transfer
      imposed by applicable securities laws.

    

    ARTICLE III.

    REPRESENTATIONS
      AND WARRANTIES OF CONTRAN

    

    Contran
      hereby represents and warrants to Valhi as of the date of this Agreement as
      follows:

    

    Section 3.1.  Authority.  It
      is a corporation validly existing and in good standing under the laws of the
      state of Delaware. It has full corporate power and authority, without the
      consent or approval of any other person, to execute and deliver this Agreement
      and to consummate the Transaction. All corporate and other actions required
      to
      be taken by or on behalf of it to authorize the execution, delivery and
      performance of this Agreement have been duly and properly taken.

    

    Section 3.2.  Validity.  This
      Agreement is duly executed and delivered by it and constitutes its lawful,
      valid
      and binding obligation, enforceable in accordance with its terms. The execution
      and delivery of this Agreement and the consummation of the Transaction by it
      are
      not prohibited by, do not violate or conflict with any provision of, and do
      not
      result in a default under (a) its charter or bylaws; (b) any material contract,
      agreement or other instrument to which it is a party or by which it is bound;
      (c) any order, writ, injunction, decree or judgment of any court or governmental
      agency applicable to it; or (d) any law, rule or regulation applicable to it,
      except in each case for such prohibitions, violations, conflicts or defaults
      that would not have a material adverse consequence to the
      Transaction.

    

    Section 3.3.  Purchase
      for Investment.  It
      is purchasing the Shares to be sold and delivered to it hereunder for investment
      solely for its own account and not with a view to, or for resale in connection
      with, the distribution thereof. It understands that such Shares are restricted
      securities under the Securities Act of 1933, as amended (the “Securities
      Act”),
      and
      that such Shares must be held indefinitely unless they are registered under
      the
      Securities Act and any applicable state securities or blue sky laws or an
      exemption from such registration is available.

    

    Section 3.4.  Nature
      of Purchaser.  It
      has such knowledge and experience in financial and business matters that it
      is
      capable of evaluating the merits and risks of the purchase of the
      Shares.

    

    ARTICLE IV.

    RELEASE

    

    Upon
      the
      purchase of the Shares pursuant to the terms of this Agreement, Contran from
      and
      after the Closing releases and forever discharges Valhi from the Tax Obligation.
      Notwithstanding the foregoing, if any settlement with the U.S. Internal Revenue
      Service, state or local tax authority or court decision which has become final
      during any taxable period preceding Closing, including the period beginning
      January 1, 2007 and ending on the Closing Date, results in any adjustment to
      Valhi’s aggregate tax basis or the aggregate value of the Shares which affects
      or relates to the Tax Obligation, then the Tax Obligation shall be re-determined
      to give effect to such adjustment as if it had been made as part of or reflected
      in the original computation of such Tax Obligation. If the effect of such
      adjustment results in an increase or decrease in the Tax Obligation, then such
      amount shall promptly be paid to Contran by Valhi or paid to Valhi by Contran,
      respectively.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ARTICLE V.

    INDEMNIFICATION

    

    Section 5.1.  Indemnification
      by Valhi  From
      and after the Closing, Valhi shall defend, indemnify, save and keep harmless
      Contran and its successors and assigns against and from all Damages (as defined
      below) sustained or incurred by Contran resulting from or arising out of or
      by
      virtue of any inaccuracy in or breach of any representation or warranty made
      by
      Valhi in this Agreement or in any closing document delivered to Contran by
      Valhi
      in connection with this Agreement, or any breach by Valhi of, or failure by
      Valhi to comply with, any of its covenants or obligations under this
      Agreement.

    

    As
      used
      in this Agreement, “Damages”
mean
      all liabilities, demands, claims, actions or causes of action, regulatory,
      legislative or judicial proceedings or investigations, assessments, levies,
      losses, fines, penalties, damages, costs and expenses, including, without
      limitation: (a) reasonable attorneys’, accountants’, investigators’, and
      experts’ fees and expenses sustained or incurred in connection with the defense
      or investigation of any such liability, and (b) any and all reasonable costs
      and
      expenses (including reasonable legal fees and expenses) arising from any Damages
      or incurred in an investigation and defense, or in enforcing the indemnification
      provisions of this Agreement.

    

    Section 5.2.  Indemnification
      by Contran.  From
      and after the Closing, Contran shall defend, indemnify, save and keep harmless
      Valhi and its successors and assigns against and from all Damages sustained
      or
      incurred by Valhi resulting from or arising out of or by virtue of:

    

    (a) the
      Tax
      Obligation or adjustments, modifications or changes to the Tax Obligation now
      existing or arising in the future, subject to the provisions set forth in
      Article IV; and

    

    (b) any
      inaccuracy in or breach of any representation or warranty made by Contran in
      this Agreement or in any closing document delivered to Contran by Valhi in
      connection with this Agreement, or any breach by Contran of, or failure by
      Contran to comply with, any of its covenants or obligations under this
      Agreement.

    

    ARTICLE VI.

    GENERAL
      PROVISIONS

    

    Section 6.1.  
      Survival.  The
      representations, warranties covenants and other agreements set forth in this
      Agreement shall survive the execution of this Agreement and the consummation
      of
      the transactions contemplated herein.

    

    Section 6.2. Amendment
      and Waiver.  No
      amendment or waiver of any provision of this Agreement shall in any event be
      effective unless the same shall be in a writing referring to this Agreement
      and
      signed by the parties hereto, and then such amendment, waiver or consent shall
      be effective only in the specific instance and for the specific purpose for
      which given.

    

    Section 6.3.  Parties
      and Interest.  This
      Agreement shall bind and inure to the benefit of the parties named herein and
      their respective heirs, successors and assigns.

    

    Section 6.4.  Entire
      Transaction.  This
      Agreement contains the entire understanding among the parties with respect
      to
      the transactions contemplated hereby and supersedes all other agreements and
      understandings among the parties with respect to the subject matter of this
      Agreement.

    

    Section 6.5.  Applicable
      Law.  This
      Agreement shall be governed by and construed in accordance with the domestic
      laws of the state of Delaware, without giving effect to any choice of law or
      conflict of law provision or rule (whether of the state of Delaware or any
      other
      jurisdiction) that would cause the application of the laws of any jurisdiction
      other than the state of Delaware.

    

    Section 6.6.
       Severability.  If
      any provision of this Agreement is found to violate any statute, regulation,
      rule, order or decree of any governmental authority, court, agency or exchange,
      such invalidity shall not be deemed to effect any other provision hereof or
      the
      validity of the remainder of this Agreement and such invalid provision shall
      be
      deemed deleted to the minimum extent necessary to cure such
      violation.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Section 6.7.  Notice.  All
      notices, requests, demands and other communications hereunder shall be in
      writing and shall be sent by registered or certified mail, postage prepaid
      as
      follows:

     

    If
      toValhi: Valhi,
      Inc.

    5430
      LBJ
      Freeway

    Three
      Lincoln Centre, Suite 1700

    Dallas,
      Texas 75240-2697

    Attention:  Secretary

    

    If
      to
      Contran: Contran
      Corporation

    5430
      LBJ
      Freeway

    Three
      Lincoln Centre, Suite 1700

    Dallas,
      Texas 75240-2697

    Attention:  General
      Counsel

    

    Section 6.8.  Headings.  The
      sections and other headings contained in this Agreement are for reference
      purposes only and shall not effect in any way the meaning or interpretation
      of
      this Agreement.

    

    The
      parties hereto have caused this Agreement to be executed by their duly
      authorized officers as of the date first written above.

    

    VALHI,
      INC.

    

    

    

    

    By:  

    Gregory
      M. Swalwell, Vice President

    

    

    CONTRAN
      CORPORATION

    

    

    

    

    By:  

    Bobby
      D. O’Brien, Vice President

    

    
      
        
          

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    Exhibit
      A

    Certificate
      of Designations, Rights and Preferences of 6% Series A Preferred Stock of Valhi,
      Inc.

    

    CERTIFICATE
      OF DESIGNATIONS, RIGHTS AND PREFERENCES OF

    6%
      SERIES A PREFERRED STOCK

     

     

     

    Pursuant
      to Section 151 of the

    General
      Corporation Law of the State of Delaware

    

     

    Valhi,
      Inc.,
      a
      Delaware corporation (the “Corporation”),
      certifies as follows:

     

    FIRST:
      The
      Certificate of Incorporation of the Corporation authorizes the issuance of
      5,000,000 shares of Preferred Stock, par value $.01 per share, and, further,
      authorizes the Board of Directors of the Corporation, subject to the limitations
      prescribed by law and the provisions of the Certificate of Incorporation, to
      provide for the issuance of shares of the Preferred Stock or to provide for
      the
      issuance of shares of the Preferred Stock in one or more series, to establish
      from time to time the number of shares to be included in each such series and
      to
      fix the designations, voting powers, preference rights and qualifications,
      limitations or restrictions of the shares of the Preferred Stock of each such
      series.

     

    SECOND:
      The
      Board of Directors of the Corporation, as of February 28, 2007, duly adopted
      the
      following resolutions, authorizing the creation and issuance of a series of
      said
      Preferred Stock to be known as 6% Series A Preferred Stock:

     

    RESOLVED,
      the
      Board of Directors, pursuant to the authority vested in it by the provisions
      of
      the Certificate of Incorporation of the Corporation, hereby authorizes the
      issuance of a series of the Corporation’s Preferred Stock, par value $.01 per
      share, consisting of 5,000 shares of which are authorized to be issued under
      the
      Corporation’s Certificate of Incorporation (such 5,000 shares being hereinafter
      referred to as the “Series
      A Preferred Stock”),
      of
      the Corporation and hereby fixes the number, designations, preferences, rights
      and limitations thereof in addition to those set forth in said Certificate
      of
      Incorporation as follows:

     

    Section 1.  Certain
      Definitions.
      As used
      in this Certificate, the following terms shall have the following meanings,
      unless the context otherwise requires:

     

    “Board
      of Directors”
means
      either the board of directors of the Corporation or any duly authorized
      committee of such board.

     

    “Business
      Day”
means
      any day other than a Saturday, Sunday or a day on which state or U.S. federally
      chartered banking institutions in New York, New York are not required to be
      open.

     

    “Capital
      Stock”
of
      any
      Person means any and all shares, interests, participations or other equivalents
      however designated of corporate stock or other equity participations, including
      partnership interests, whether general or limited, of such Person and any rights
      (other than debt securities convertible or exchangeable into an equity
      interest), warrants or options to acquire an equity interest in such Person
      that
      are traded on an established national or regional trading market or exchange,
      including but not limited to the common stock, par value $.01 per share, of
      Valhi, Inc., a Delaware corporation.

     

    “Certificate”
means
      this Certificate of Designations, Rights and Preferences of 6% Series A
      Preferred Stock.

     

    “Certificate
      of Incorporation”
means
      the Certificate of Incorporation of the Corporation, as amended from time to
      time.

     

    “Common
      Stock”
means
      the voting Common Stock, $.01 par value per share, of the Corporation and any
      other stock of any class of the Corporation that has no preference in respect
      of
      dividends or of amounts payable in the event of any voluntary or involuntary
      liquidation, dissolution or winding up of the Corporation.

     

    “Corporation”
means
      Valhi, Inc., a Delaware corporation, and its successors.

     

    “Dividend
      Payment Date”
means
      March 31, June 30, September 30 and December 31, of each year, or if any such
      date is not a Business Day, on the next succeeding Business Day.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Dividend
      Period”
means
      the period beginning on, and including, a Dividend Payment Date and ending
      on,
      and excluding, the immediately succeeding Dividend Payment Date.

     

    “Liquidation
      Preference”
has
      the
      meaning assigned to such term in Section
      4(a).

     

    “Original
      Issue Date”
has
      the
      meaning assigned to such term in Section
      3(a).

     

    “Outstanding”
means,
      when used with respect to Series A Preferred Stock, as of any date of
      determination, all shares of Series A Preferred Stock outstanding as of such
      date; provided
      further
      that, in
      determining whether the holders of Series A Preferred Stock have given any
      request, demand, authorization, direction, notice, consent or waiver or taken
      any other action hereunder, Series A Preferred Stock owned by the Corporation
      shall be deemed not to be outstanding.

     

    “Parity
      Stock”
has
      the
      meaning assigned to such term in Section
      2.

     

    “Person”
means
      an individual, a corporation, a partnership, a limited liability company, an
      association, a trust or any other entity or organization, including a government
      or political subdivision or an agency or instrumentality thereof.

     

    “Record
      Date”
means
      with respect to the dividends payable on March 31, June 30, September 30 and
      December 31 of each year, March 15, June 15, September 15 and December 15
      of each year, respectively, or such other record date, not more than 60 days
      and
      not less than 10 days preceding the applicable Dividend Payment Date, as may
      be
      fixed by the Board of Directors. 

     

    “Senior
      Stock”
has
      the
      meaning assigned to such term in Section
      2.

     

    “Series
      A Preferred Stock”
has
      the
      meaning assigned to such term in the Resolution set forth in the Preamble
      hereto.

     

    Section 2.  Rank.
      The
      Series A Preferred Stock shall, with respect to rights upon liquidation,
      dissolution or winding up of the Corporation, rank (a) senior to all classes
      or
      series of Common Stock and to any other class or series of equity securities
      issued by the Corporation not referred to in clauses (b) or (c) of this
      paragraph, (b) on a parity with all equity securities issued by the Corporation
      in the future, the terms of which specifically provide that such equity
      securities rank on a parity with the Series A Preferred Stock with respect
      to
      dividend rights or rights upon the liquidation, dissolution or winding up of
      the
      Corporation (“Parity
      Stock”)
      and
      (c) junior to all equity securities issued by the Corporation in the future
      the
      terms of which specifically provide that such equity securities rank senior
      to
      the Series A Preferred Stock with respect to dividend rights or rights upon
      the
      liquidation, dissolution or winding up of the Corporation (“Senior
      Stock”).
      The
      term “equity securities” shall not include convertible debt
      securities.

     

    Section 3.  Dividends.

     

    (a) Holders
      of the then Outstanding shares of Series A Preferred Stock shall be entitled
      to
      receive, when and as authorized by the Board of Directors, out of funds legally
      available for the payment of dividends, cash dividends at the rate of 6% of
      the
      $133,466.75 per share Liquidation Preference per annum. Such dividends shall
      accrue from the first date on which any Series A Preferred Stock is issued
      (the
“Original
      Issue Date”)
      and
      shall be payable quarterly in arrears on each Dividend Payment Date. Any
      dividend payable on the Series A Preferred Stock for any partial dividend period
      will be computed on the basis of a 360-day year consisting of twelve 30-day
      months. Dividends will be payable to holders of record as they appear in the
      stock records of the Corporation at the close of business on the applicable
      Record Date.

     

    (b) No
      dividends on shares of Series A Preferred Stock shall be declared by the
      Corporation or paid or set apart for payment by the Corporation at such time
      as
      the terms and provisions of any agreement of the Corporation, including any
      agreement relating to its indebtedness, prohibit such declaration, payment
      or
      setting apart for payment or provide that such declaration, payment or setting
      apart for payment would constitute a breach thereof or a default thereunder,
      or
      if such declaration or payment shall be restricted or prohibited by
      law.

     

    (c) Notwithstanding
      the foregoing, dividends on the Series A Preferred Stock shall accrue whether
      or
      not the terms and provisions set forth in Section
      3(b)
      hereof
      at any time prohibit the current payment of dividends, whether or not the
      Corporation has earnings, whether or not there are funds legally available
      for
      the payment of such dividends and whether or not such dividends are declared.
      Accrued but unpaid dividends on the Series A Preferred Stock will accumulate
      as
      of the Dividend Payment Date on which they first become payable, but interest
      will not accrue on any amount of accrued but unpaid dividends on the Series
      A
      Preferred Stock.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (d) Nothing
      contained herein shall prevent or restrict the Corporation from the declaration,
      payment or set aside for payment or any other distribution of cash or other
      property, directly or indirectly, on or with respect to any shares of the Common
      Stock, or shares of any other class or series of equity securities ranking
      junior to or on a parity with the Series A Preferred Stock as to dividends
      or
      upon liquidation, including without limitation accrued and unpaid dividends
      on
      the Series A Preferred Stock. Further, nothing contained herein shall prevent
      or
      restrict the Corporation from redeeming, purchasing or otherwise acquiring
      for
      any consideration (or any moneys be paid to or made available for a sinking
      fund
      for the redemption of any such shares) by the Corporation any shares of Common
      Stock, or any shares of equity securities ranking junior to or on a parity
      with
      the Series A Preferred Stock as to dividends or upon liquidation.

     

    (e) When
      dividends are not paid in full (or a sum sufficient for such full payment is
      not
      so set apart) on the Series A Preferred Stock and the shares of any other class
      or series of equity securities ranking on a parity as to dividends with the
      Series A Preferred Stock, all dividends declared upon the Series A Preferred
      Stock and any other class or series of such equity securities ranking on a
      parity as to dividends with the Series A Preferred Stock shall be declared
      pro
      rata
      so that
      the amount of dividends declared per share of Series A Preferred Stock and
      such
      other class or series of such equity securities shall in all cases bear to
      each
      other the same ratio that accrued dividends per share on the Series A Preferred
      Stock and such other class or series of such equity securities (which shall
      not
      include any accrual in respect of unpaid dividends for prior dividend periods
      if
      such other class or series of equity securities does not have a cumulative
      dividend) bear to each other. No interest, or sum of money in lieu of interest,
      shall be payable in respect of any dividend payment or payments on Series A
      Preferred Stock which may be in arrears.

     

    (f) Any
      dividend payment made on shares of the Series A Preferred Stock shall be
      credited against the accrued but unpaid dividends due as designated by the
      Corporation. Holders of the Series A Preferred Stock shall not be entitled
      to
      any dividend, whether payable in cash, property or shares of Capital Stock
      in
      excess of full accrued dividends on the Series A Preferred Stock as described
      above.

     

    Section 4.  Liquidation
      Preference.

     

    (a) Upon
      any
      voluntary or involuntary liquidation, dissolution or winding up of the affairs
      of the Corporation, the holders of shares of Series A Preferred Stock then
      Outstanding are entitled to be paid out of the assets of the Corporation,
      legally available for distribution to its stockholders, a liquidation preference
      of $133,466.75 per share of Series A Preferred Stock (the “Liquidation
      Preference”),
      plus
      an amount equal to any accrued and unpaid dividends (whether or not declared)
      to
      the date of payment, before any distribution of assets is made to holders of
      Common Stock or any other class or series of equity securities that ranks junior
      to the Series A Preferred Stock as to liquidation rights.

     

    (b) In
      the
      event that, upon any such voluntary or involuntary liquidation, dissolution
      or
      winding up, the available assets of the Corporation are insufficient to pay
      the
      amount of the liquidating distributions on all Outstanding shares of Series
      A
      Preferred Stock and the corresponding amounts payable on all shares of each
      other class or series of equity securities ranking on a parity with the Series
      A
      Preferred Stock as to liquidation rights, then the holders of the Series A
      Preferred Stock and each such other class or series of equity securities shall
      share proportionately in any such distribution of assets in proportion to the
      full liquidating distributions to which they would otherwise be respectively
      entitled.

     

    (c) After
      payment of the full amount of the liquidating distributions to which they are
      entitled, the holders of Series A Preferred Stock will have no right or claim
      to
      any of the remaining assets of the Corporation. 

     

    (d) Written
      notice of any such liquidation, dissolution or winding up of the Corporation,
      stating the payment date or dates when, and the place or places where, the
      amounts distributable in such circumstances shall be payable, shall be given
      by
      first class mail, postage pre-paid, not less than 30 nor more than 60 days
      prior
      to the payment date stated therein, to each record holder of the Series A
      Preferred Stock at the respective addresses of such holders as the same shall
      appear on the stock transfer records of the Corporation.

     

    (e) The
      consolidation or merger of the Corporation with or into any other corporation,
      trust or entity or of any other corporation with or into the Corporation, or
      the
      sale, lease or conveyance of all or substantially all of the property or
      business of the Corporation, shall not be deemed to constitute a liquidation,
      dissolution or winding up of the Corporation.

     

    Section 5.  Voting
      Rights.

     

    (a) Holders
      of the Series A Preferred Stock will not have any voting rights, except as
      set
      forth below or as otherwise provided in the Certificate of Incorporation, by
      law
      or pursuant to agreements among the holders of voting equity securities of
      the
      Corporation.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b) The
      affirmative vote of holders of at least two-thirds of the Outstanding shares
      of
      the Series A Preferred Stock and all other Parity Stock with like voting rights,
      voting as a single class, in person or by proxy, at a special meeting called
      for
      the purpose, or by written consent in lieu of meeting, shall be required to
      alter, repeal or amend, whether by merger, consolidation, combination,
      reclassification or otherwise, any provisions of the Certificate of
      Incorporation if the amendment would amend, alter or affect the powers,
      preferences or rights of the Series A Preferred Stock, so as to adversely affect
      the holders thereof; provided,
      however,
      that
      any increase in the amount of the authorized common stock or authorized
      preferred stock or the creation and issuance of other series of common stock
      or
      preferred stock will not be deemed to materially and adversely affect such
      powers, preferences or special rights.

     

    Section 6.  Consolidation,
      Merger and Sale of Assets.
      The
      Corporation, without the consent of the holders of any of the Outstanding Series
      A Preferred Stock, may consolidate with or merge into any other Person or
      convey, transfer or lease all or substantially all of its assets to any Person
      or may permit any Person to consolidate with or merge into, or transfer or
      lease
      all or substantially all its properties to the Corporation.

     

    Section 7.  Headings.
      The
      headings of the Sections of this Certificate are for convenience of reference
      only and shall not define, limit or affect any of the provisions
      hereof.

     

    IN
      WITNESS WHEREOF, the Corporation has caused this Certificate to be signed in
      its
      name and on its behalf on this 26th
      day of
      March, 2007.

     

    Valhi,
      Inc.

    

    

    

    

    
      	 	
              By:

            	 	 

    

    Gregory
      M. Swalwell

    Vice
      President and Controller

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