10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K

     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE

     ACT OF 1934 - FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996


     COMMISSION FILE NUMBER 1-5467


                                  VALHI, INC.

             (Exact name of registrant as specified in its charter)

           DELAWARE                                            87-0110150

(State or other jurisdiction of                              (IRS Employer
 incorporation or organization)                            Identification No.)

5430 LBJ FREEWAY, SUITE 1700, DALLAS, TEXAS                    75240-2697

  (Address of principal executive offices)                     (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:          (972) 233-1700


SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                               NAME OF EACH EXCHANGE ON
            TITLE OF EACH CLASS                    WHICH REGISTERED


                Common stock                    New York Stock Exchange
         ($.01 par value per share)             Pacific Stock Exchange

      9.25% Liquid Yield Option Notes,          New York Stock Exchange
            due October 20, 2007

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

          None.

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K.

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST 90 DAYS.  YES  X   NO


AS OF FEBRUARY 28, 1997, 114,365,414 SHARES OF COMMON STOCK WERE OUTSTANDING.
THE AGGREGATE MARKET VALUE OF THE 9.6 MILLION SHARES OF VOTING STOCK HELD BY
NONAFFILIATES OF VALHI, INC. AS OF SUCH DATE APPROXIMATED $77 MILLION.

                      DOCUMENTS INCORPORATED BY REFERENCE


THE INFORMATION REQUIRED BY PART III IS INCORPORATED BY REFERENCE FROM THE
REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE FILED WITH THE COMMISSION PURSUANT
TO REGULATION 14A NOT LATER THAN 120 DAYS AFTER THE END OF THE FISCAL YEAR
COVERED BY THIS REPORT.

                              [INSIDE FRONT COVER]

     A chart showing (i) Valhi's 56% ownership of NL Industries, Inc., (ii)
Valhi's 100% ownership of Valcor, Inc., (iii) Valhi's 50% ownership of Waste
Control Specialists LLC and (iv) Valcor's 100% ownership of CompX International
Inc. and Sybra, Inc.
                                     PART I

ITEM 1.   BUSINESS

     Valhi, Inc. (NYSE: VHI), based in Dallas, Texas, has continuing operations
in the chemicals, component products, fast food and waste management industries.
Information regarding the Company's business segments and the operating
subsidiaries conducting such businesses is set forth below.  Business and
geographic segment financial information is included in Note 2 to the Company's
Consolidated Financial Statements, which information is incorporated herein by
reference.


Chemicals                       NL is the world's fourth-largest producer of
  NL Industries, Inc.           titanium dioxide pigments ("TiO2"), used for
                                imparting whiteness, brightness and opacity to
                                a wide range of products including paints,
                                plastics, paper, fibers and other "quality-of-
                                life" products.  NL had an estimated 11% share
                                of worldwide TiO2 sales volume in 1996.  NL is
                                also the world's largest producer of
                                rheological additives for solvent-based
                                systems.  NL has production facilities
                                throughout Europe and North America.

Component Products              CompX International is a leading North
  CompX International Inc.      American manufacturer of ergonomic office
   (formerly National Cabinet   workstation components, mechanical locks and
     Lock, Inc.)                precision ball bearing drawer slides for
                                furniture and other markets.

Fast Food                       Sybra is the third-largest franchisee of
  Sybra, Inc.                   Arby's restaurants with 150 stores clustered
                                principally in Texas, Michigan, Pennsylvania
                                and Florida.

Waste Management                Waste Control Specialists, formed in late
  Waste Control Specialists LLC 1995, recently completed construction of the
                                initial phase of its West Texas facility for
                                the processing, treatment, storage and
                                disposal of hazardous and toxic wastes.  The
                                first wastes were received for disposal in
                                February 1997.  Waste Control Specialists is
                                also seeking authorizations for, among other
                                things, the treatment, storage and disposal of
                                low-level and mixed radioactive wastes.



     Valhi, a Delaware corporation, is the successor of the 1987 merger of The
Amalgamated Sugar Company and LLC Corporation.  Contran Corporation holds,
directly or through subsidiaries, approximately 91% of Valhi's outstanding
common stock.  Substantially all of Contran's outstanding voting stock is held
by trusts established for the benefit of the children and grandchildren of
Harold C. Simmons, of which Mr. Simmons is the sole trustee.  Mr. Simmons is
Chairman of the Board, President and Chief Executive Officer of Contran and
Valhi and may be deemed to control such companies.

     In September 1996, Medite Corporation, the Company's wholly-owned building
products subsidiary, signed three separate letters of intent involving the sale
of substantially all of its assets.  The first transaction, involving the sale
of Medite's timber and timberlands, closed in October 1996 for approximately
$118 million cash consideration, of which approximately $53 million of the cash
proceeds were used to pay off and terminate Medite's U.S. bank credit
facilities.  The second transaction, involving the sale of Medite's Irish medium
density fiberboard ("MDF") subsidiary, closed in November 1996 for approximately
$61.5 million cash consideration plus the assumption of approximately $21
million of Irish bank debt.  The third transaction, involving the sale of
Medite's Oregon MDF facility, closed in February 1997 for approximately $36
million cash consideration plus the assumption of approximately $3.7 million of
Medite indebtedness.  These three transactions generated total consideration to
Medite of approximately $240 million.  Medite has also determined to permanently
close its two small Oregon timber conversion facilities.  The stud lumber
facility, closed in December 1996, is being dismantled and Medite will sell the
salvageable machinery and equipment.  Medite continues to operate the veneer
facility on a short-term basis and expects to either sell or close this facility
in 1997.  See Note 19 to the Consolidated Financial Statements.

     On January 3, 1997, the Company completed the transfer of control of the
refined sugar operations previously conducted by the Company's wholly-owned
subsidiary, The Amalgamated Sugar Company, to Snake River Sugar Company, an
Oregon agricultural cooperative formed by certain sugarbeet growers in
Amalgamated's areas of operations.  Pursuant to the transaction, Amalgamated
contributed substantially all of its net assets to the Amalgamated Sugar Company
LLC, a limited liability company controlled by Snake River, on a tax-deferred
basis in exchange for a non-voting ownership interest in the LLC.  As part of
the transaction, Snake River made certain loans to Valhi aggregating $250
million in January 1997.  Snake River's sources of funds for its loans to Valhi,
as well as for the $14 million it contributed to the LLC for its voting
ownership interest in the LLC, included cash capital contributions by the grower
members of Snake River and $192 million in debt financing provided by Valhi in
January 1997.  See Note 20 to the Consolidated Financial Statements.
     The Company has executed agreements involving the sale of its fast food
operations conducted by the Company's wholly-owned subsidiary, Sybra, Inc.  The
proposed sale would be accomplished in simultaneous transactions that would
include the sale of certain restaurant real estate owned by Sybra to one party
for $45 million cash consideration, and Valcor's sale of 100% of the stock of
Sybra to another party for approximately $39.7 million cash consideration, of
which approximately $23.7 million would be used to repay Sybra bank
indebtedness.  These transactions are subject to, among other things, completion
of customary due diligence procedures, the purchaser of Sybra's stock obtaining
necessary financing for the transaction and certain consents from third parties.
If completed, the transactions are expected to close in the second quarter of
1997, at which time the Company estimates it would report a pre-tax gain on
disposal in excess of $24 million.  There can be no assurance that any such
transactions will be completed.

     During 1994, Valhi purchased additional NL common shares in market
transactions and thereby increased its direct ownership of NL from 49% to more
than 50% in mid-December 1994.  Accordingly, the Company ceased to report its
interest in NL by the equity method and commenced reporting NL as a consolidated
subsidiary.  The Company consolidated NL's financial position at December 31,
1994 and consolidated NL's results of operations and cash flows beginning in
1995.  Tremont Corporation, a Contran affiliate, holds an additional 18% of NL's
outstanding common stock.  See Note 3 to the Consolidated Financial Statements.

     The statements in this Annual Report on Form 10-K relating to matters that
are not historical facts including, but not limited to, statements found in this
Item 1 - "Business", in Item 3 - "Legal Proceedings", and in Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", are forward-looking statements that involve risks and
uncertainties.  Factors that could cause actual future results to differ
materially from those expressed in such forward-looking statements include, but
are not limited to, future supply and demand for the Company's products
(including cyclicality thereof), general economic conditions, competitive
products, customer and competitor strategies, the impact of pricing and
production decisions, environmental matters, government regulations and possible
changes therein, the ultimate resolution of pending litigation and possible
future litigation, completion of pending asset/business unit dispositions and
other risks and uncertainties discussed elsewhere herein in this Annual Report,
including, without limitation, the sections referenced above.

CHEMICALS - NL INDUSTRIES, INC.

     NL Industries (NYSE: NL) is an international producer and marketer of TiO2
and specialty chemicals to customers in over 100 countries from facilities
located throughout Europe and North America.  Kronos, Inc., the largest of NL's
two principal operating subsidiaries, is the world's fourth-largest TiO2
producer, with an estimated 11% share of worldwide TiO2 sales volume in 1996.
Approximately one-half of Kronos' 1996 sales volume was in Europe, where Kronos
is the second-largest producer of TiO2.  Specialty chemicals, primarily
rheological additives, are produced through NL's Rheox, Inc. subsidiary.  In
1996, Kronos accounted for 86% of NL's sales and Rheox accounted for 14%.

     NL's objective is to maximize its total shareholder returns by (i) focusing
on continued cost control, (ii) investing in certain cost effective
debottlenecking projects to increase TiO2 production capacity and productivity
and (iii) deleveraging as excess liquidity becomes available.

     TiO2 products and operations.  Titanium dioxide pigments are chemical
products used for imparting whiteness, brightness and opacity to a wide range of
products, including paints, paper, plastics, fibers and ceramics.  TiO2 is
considered to be a "quality-of-life" product with demand affected by the gross
domestic product in various regions of the world.
     Demand, supply and pricing within the TiO2 industry is cyclical, and
changes in industry economic conditions can significantly impact NL's earnings
and operating cash flows.  NL's average TiO2 selling prices have been declining
since the last half of 1995, which followed an upturn in TiO2 prices that began
in the third quarter of 1993.  NL expects TiO2 prices will begin to increase
during the second quarter of 1997 as the impact of recently-announced price
increases takes effect.  Despite the recent decline in TiO2 selling prices,
industry wide demand for TiO2 grew in 1996, and Kronos' record 1996 sales volume
was about 6% higher than 1995.  NL's expectations as to the future prospects of
the TiO2 industry are based on several factors beyond NL's control, principally
continued worldwide growth of gross domestic product and the absence of
technological advancements in or modifications to TiO2 processes that would
result in material and unanticipated increases in production efficiencies.  To
the extent that actual developments differ from NL's expectations, NL and the
TiO2 industry's future performance could be unfavorably affected.

     Kronos has an estimated 18% share of European TiO2 sales volume and an
estimated 12% share of North American TiO2 sales volume.  Consumption per capita
in the United States and Western Europe far exceeds that in other areas of the
world and these regions are expected to continue to be the largest consumers of
TiO2.  A significant market for TiO2 could emerge in Eastern Europe, the Far
East and China if the economies in these countries develop to the point where
quality-of-life products, including TiO2, are in greater demand.  Kronos
believes that, due to its strong presence in Western Europe, it is well
positioned to participate in growth in the Eastern European market.

     NL believes that there are no effective substitutes for TiO2.  However,
extenders such as kaolin clays, calcium carbonate and polymeric opacifiers are
used in a number of Kronos' markets.  Generally, extenders are used to reduce to
some extent the utilization of higher cost TiO2.  The use of extenders has not
significantly affected TiO2 consumption over the past decade because extenders
generally have, to date, failed to match the performance characteristics of
TiO2.  NL believes that the use of extenders will not materially alter the
growth of the TiO2 business in the foreseeable future.

     NL currently produces over 40 different TiO2 grades, sold under the Kronos
and Titanox trademarks, which provide a variety of performance properties to
meet customers' specific requirements.  Major TiO2 customers include
international paint, paper and plastics manufacturers.  Kronos and its
distributors and agents sell and provide technical services for its products to
over 4,000 customers with the majority of sales in Europe and North America.

     Kronos and its predecessors have produced and marketed TiO2 in North
America and Europe for over 70 years.  As a result, Kronos believes that it has
developed considerable expertise and efficiency in the manufacture, sale,
shipment and service of its products in domestic and international markets.  By
volume, about one-half of Kronos' 1996 TiO2 sales were to Europe, with 37% to
North America and the balance to export markets.  Kronos' international
operations are conducted through Kronos International, Inc. ("KII"), a German-
based holding company formed in 1989 to manage and coordinate NL's manufacturing
operations in Europe and Canada.

     Kronos is also engaged in the mining and sale of ilmenite ore (a raw
material used in the sulfate pigment production process), and the manufacture
and sale of iron-based water treatment chemicals (derived from co-products of
the pigment production processes). Water treatment chemicals are used as
treatment and conditioning agents for industrial effluents and municipal
wastewater and in the manufacture of iron pigments.

     TiO2 manufacturing process, properties and raw materials.  TiO2 is
manufactured by Kronos using both the chloride process and the sulfate process.
Approximately two-thirds of Kronos' current production capacity is based on its
chloride process, which generates less waste than the sulfate process.  Although
most end-use applications can use pigments produced by either process, chloride
process pigments are generally preferred in certain segments of the coatings and
plastics applications, and sulfate process pigments are generally preferred for
certain paper, fibers and ceramics applications. Due to environmental factors
and customer considerations, the proportion of TiO2 industry sales represented
by chloride process pigments has increased relative to sulfate process pigments
in the past few years, and chloride process production facilities in 1996
represented approximately 56% of industry capacity.

     Kronos currently has four TiO2 facilities in Europe  (Leverkusen and
Nordenham, Germany; Langerbrugge, Belgium; and Fredrikstad, Norway).  In North
America, Kronos has a facility in Varennes, Quebec and, through a manufacturing
joint venture discussed below, a one-half interest in a plant in Lake Charles,
Louisiana.  Kronos' principal German operating subsidiary leases the land under
its Leverkusen production facility pursuant to a lease expiring in 2050.  The
Leverkusen plant, with almost one-third of Kronos' current TiO2 production
capacity, is located within an extensive manufacturing complex owned by Bayer
AG, and Kronos is the only unrelated party so situated.  Under a separate
supplies and services agreement expiring in 2011, Bayer provides some raw
materials, auxiliary and operating materials and utilities services necessary to
operate the Leverkusen plant.  Both the lease and supplies and services
agreement restrict NL's ability to transfer ownership or use of the Leverkusen
plant.  Kronos also has a governmental concession with an unlimited term to
operate its ilmenite mine in Norway.

     Kronos' TiO2 production in 1996 was 373,000 metric tons, compared to the
record 393,000 metric tons produced in 1995 and 357,000 tons in 1994.  Kronos
reduced its production rates in early 1996 in response to softening demand and
its high inventory levels at the end of 1995.  As demand increased during 1996
and inventories declined, Kronos' production rates were increased to near full
capacity in late 1996.  Kronos believes its annual attainable production
capacity is approximately 400,000 metric tons, including its one-half interest
in the Louisiana plant.  Following completion of its $35 million debottlenecking
expansion of its Leverkusen, Germany chloride-process facility in late 1997,
Kronos' expects its worldwide annual attainable production capacity will
increase to about 410,000 metric tons.

     The primary raw materials used in the TiO2 chloride production process are
chlorine, coke and titanium-containing feedstock derived from beach sand
ilmenite and natural rutile ore.  Chlorine and coke are available from a number
of suppliers.  Titanium-containing feedstock suitable for use in the chloride
process is available from a limited number of suppliers around the world,
principally in Australia, Africa, Canada, India and the United States.  Kronos
purchases slag refined from beach sand ilmenite from Richards Bay Iron and
Titanium (Proprietary) Ltd. (South Africa), approximately 50% of which is owned
by Q.I.T. Fer et Titane Inc. ("QIT"), an indirect subsidiary of RTZ Corp., under
a long-term supply contract expiring in 2000.  Natural rutile ore, another
chloride feedstock, is purchased primarily from RGC Mineral Sands Limited
(Australia) under a long-term supply contract that also expires in 2000.  Raw
materials under these contracts are expected to meet Kronos' chloride feedstock
requirements over the next several years.  NL does not expect to encounter
difficulties in obtaining new long-term supply contracts prior to expiration of
its existing contracts.

     The primary raw materials used in the TiO2 sulfate production process are
sulfuric acid and titanium-containing feedstock derived primarily from rock and
beach sand ilmenite.  Sulfuric acid is available from a number of suppliers.
Titanium-containing feedstock suitable for use in the sulfate process is
available from a limited number of suppliers around the world.  Currently, the
principal active sources are located in Norway, Canada, Australia, India and
South Africa.  As one of the few vertically-integrated producers of sulfate
process pigments, Kronos operates a Norwegian rock ilmenite mine which provided
all of Kronos' feedstock for its European sulfate process pigment plants in
1996.  Kronos also purchases sulfate grade slag under contracts negotiated
annually with RTZ and, through 1997, with Tinfos Titanium and Iron K/S.

     Kronos believes the availability of titanium-containing feedstock for both
the chloride and sulfate processes is adequate through the remainder of the
decade.  Kronos does not anticipate experiencing any interruptions of its raw
material supplies because of its long-term supply contracts.  However, political
and economic instability in the countries where NL purchases its raw material
supplies could adversely affect the availability of such feedstock.

     TiO2 manufacturing joint venture.  Subsidiaries of Kronos and Tioxide
Group, Ltd. ("Tioxide"), a wholly-owned subsidiary of Imperial Chemicals
Industries PLC ("ICI"), each own a 50%-interest in a manufacturing joint
venture.  The joint venture owns and operates a chloride process TiO2 plant in
Lake Charles, Louisiana.  Production from the plant is shared equally by Kronos
and Tioxide pursuant to separate offtake agreements.

     A supervisory committee, composed of four members, two of whom are
appointed by each partner, directs the business and affairs of the joint
venture, including production and output decisions.  Two general managers, one
appointed and compensated by each partner, manage the day-to-day operations of
the joint venture acting under the direction of the supervisory committee.

     The manufacturing joint venture is intended to be operated on a break-even
basis, and accordingly Kronos' transfer price for its share of the TiO2 produced
is equal to its share of the joint venture's production costs and interest
expense.  Kronos' share of the production costs are reported as part of cost of
sales as the related TiO2 acquired from the joint venture is sold, and Kronos'
share of the joint venture's interest expense is reported as a component of
interest expense.

     Specialty chemicals products and operations.  Rheological additives
produced by Rheox control the flow and leveling characteristics of a variety of
products, including paints, inks, lubricants, sealants, adhesives and cosmetics.
Organoclay rheological additives are clays which have been chemically reacted
with organic chemicals and compounds.  Rheox produces rheological additives for
both solvent-based and water-based systems.  Rheox is the world's largest
producer of rheological additives for solvent-based systems, and is also a
supplier for rheological additives used in water-based systems.  Rheological
additives for solvent-based systems accounted for 80% of Rheox's sales in 1996,
with the remainder being principally rheological additives for water-based
systems.  Rheox has introduced a number of new products during the past three
years, the majority of which are for water-based systems, which are sold into a
larger market than solvent-based systems.  Rheox believes water-based additives
will account for an increasing portion of its sales in the long term.  Rheox's
plants are in Charleston, West Virginia, Newberry Springs, California, St.
Louis, Missouri, Livingston, Scotland and Nordenham, Germany.

     Sales of rheological additives generally follow growth in gross domestic
product in Rheox's principal markets and are influenced by the volume of
shipments of the worldwide coatings industry.  Since Rheox's rheological
additives are used in industrial coatings, plant and equipment spending has an
influence on demand for this product line.

     The primary raw materials for rheological additives are bentonite clays,
hectorite clays, quaternary amines, polyethylene waxes and castor oil
derivatives.  Bentonite clays are currently purchased under a three-year
contract, renewable through 2004, with a subsidiary of Dresser Industries, Inc.,
which has significant bentonite reserves in Wyoming.  This contract assures
Rheox the right to purchase its anticipated requirements of bentonite clays for
the foreseeable future, and Dresser's reserves are believed to be sufficient for
such purpose.  Hectorite clays are mined from company-owned reserves in Newberry
Springs, California, which NL believes are adequate to supply its needs for the
foreseeable future.  The Newberry Springs ore body contains the largest known
commercial deposit of hectorite clays in the world.  Quaternary amines are
purchased primarily from a joint venture company 50%-owned by Rheox and are also
generally available on the open market from a number of suppliers.  Castor oil-
based rheological additives are purchased from sources outside the United
States.  Rheox has a supply contract with a manufacturer of these products,
which may not be terminated without 180 days notice by either party.

     Competition.  The TiO2 industry is highly competitive.  During the early
1990's, TiO2 supply exceeded demand, primarily due to new chloride-process
capacity coming on-stream.  Relative supply/demand relationships, which had a
favorable impact on industry-wide prices during the late 1980's, had a negative
impact during the subsequent downturn.  During 1994 and the first half of 1995,
strong growth in demand improved industry capacity utilization and resulted in
increases in worldwide TiO2 prices.  Kronos believes that the increased demand
during such period was partially due to customers stocking inventories.  In the
second half of 1995 and first half of 1996, customers reduced inventory levels,
which reduced industry-wide demand.  Demand improved in the second half of 1996,
indicating, Kronos believes, that customer inventories had returned to more-
normal levels.  Price increases were announced in late 1996 by most major
producers, including Kronos, and the results of such announcements are expected
to impact second-quarter 1997 operating results.  However, no assurance can be
given that price trends will conform to NL's expectations.

     Worldwide capacity additions in the TiO2 market resulting from construction
of grassroot plants require significant capital expenditures and substantial
lead time (typically three to five years in NL's experience) for, among other
things, planning, obtaining environmental approvals and construction.  No
grassroot plants have been announced, but industry capacity can be expected to
increase as Kronos and its competitors complete debottlenecking projects at
existing facilities.  Based on factors described under "TiO2 products and
operations" above, NL expects that the average annual increase in industry
capacity from announced debottlenecking projects will be less than the average
annual demand growth for TiO2 during the next few years.
     Kronos competes primarily on the basis of price, product quality and
technical service, and the availability of high performance pigment grades.
Although certain TiO2 grades are considered specialty pigments, the majority of
grades and substantially all of Kronos' production are considered commodity
pigments with price generally being a most significant competitive factor.
Kronos has an estimated 11% share of worldwide TiO2 sales volume, and believes
that it is the leading marketer of TiO2 in a number of countries, including
Germany and Canada.  Kronos' principal competitors are E.I. du Pont de Nemours &
Co.; Tioxide; Millennium Chemicals, Inc., formerly a unit of Hanson PLC; Kemira
Oy; Ishihara Sangyo Kaisha, Ltd; Bayer AG; Thann et Mulhouse and Kerr-McGee
Corporation.  These eight competitors have estimated individual worldwide shares
of TiO2 sales volume ranging from 3% to 21%, and an aggregate estimated 75%
share of TiO2 sales volume.  Du Pont has about one-half of total U.S. TiO2
production capacity and is Kronos' principal North American competitor.  ICI
announced in January 1997 that it intends to spin-off its Tioxide unit to its
shareholders in the next six to 18 months.

     Competition in the specialty chemicals industry generally focuses on
product uniqueness, quality and availability, technical service, knowledge of
end-use applications and price.  Rheox's principal competitors for rheological
additives for solvent-based systems are LaPorte PLC and Sud-Chemie AG.
Principal competitors for water-based systems are Rohm and Haas Company,
Hercules Incorporated and Union Carbide Corporation.
     Research and development.  NL's expenditures for research and development
and certain technical support programs have averaged approximately $11 million
during the past three years, with Kronos accounting for about three-fourths of
the annual spending.  TiO2 research and development activities are conducted
principally at KII's Leverkusen, Germany facility.  Such activities are directed
primarily towards improving both the chloride and sulfate production processes,
improving product quality and strengthening Kronos' competitive position by
developing new pigment applications.  Activities relating to rheological
additives are conducted primarily in the U.S. and are directed towards the
development of new products for water-based systems, environmental applications
and new end-use applications for existing product lines.

     Patents and trademarks.  Patents held for products and production processes
are believed to be important to NL and contribute to the continuing business
activities of Kronos and Rheox.  NL continually seeks patent protection for its
technical developments, principally in the United States, Canada and Europe, and
from time to time enters into licensing arrangements with third parties.  In
connection with the formation of the manufacturing joint venture with Tioxide,
Kronos and certain of its subsidiaries exchanged proprietary chloride process
and product technologies with Tioxide and certain of its affiliates, and use by
each recipient of the other's technology in Europe was restricted until October
1996.  NL does not expect that the technology sharing arrangement with Tioxide
will materially impact its competitive position within the TiO2 industry.  See
"-- TiO2 manufacturing joint venture." NL's major trademarks, including Kronos,
Titanox and Rheox, are protected by registration in the United States and
elsewhere with respect to those products it manufactures and sells.
     Customer base and seasonality.  NL believes that neither its aggregate
sales nor those of any of its principal product groups are concentrated in or
materially dependent upon any single customer or small group of customers.
Neither NL's business as a whole nor that of any of its principal product groups
is seasonal to any significant extent.  Due in part to the increase in paint
production in the spring to meet spring and summer painting season demand, TiO2
sales are generally higher in the second and third calendar quarters than in the
first and fourth calendar quarters.  Sales of rheological additives are
influenced by the worldwide industrial protective coatings industry, where
second calendar quarter sales are generally the strongest.

     Employees.  As of December 31, 1996, NL employed approximately 3,100
persons (excluding the joint venture employees), with 400 employees in the
United States and 2,700 at non-U.S. sites.  Hourly employees in production
facilities worldwide, including the TiO2 joint venture, are represented by a
variety of labor unions, with labor agreements having various expiration dates.
NL believes its labor relations are satisfactory.

     Regulatory and environmental matters.  Certain of NL's businesses are and
have been engaged in the handling, manufacture or use of substances or compounds
that may be considered toxic or hazardous within the meaning of applicable
environmental laws.  As with other companies engaged in similar businesses,
certain past and current operations and products of NL have the potential to
cause environmental or other damage.  NL has implemented and continues to
implement various policies and programs in an effort to minimize these risks.
NL's policy is to achieve compliance with applicable environmental laws and
regulations at all of its facilities and to strive to improve its environmental
performance.  It is possible that future developments, such as stricter
requirements of environmental laws and enforcement policies thereunder, could
adversely affect NL's production, handling, use, storage, transportation, sale
or disposal of such substances as well as NL's financial position, results of
operations or liquidity.

     NL's U.S. manufacturing operations are governed by federal environmental
and worker health and safety laws and regulations, principally the Resource
Conservation and Recovery Act, the Occupational Safety and Health Act, the Clean
Air Act, the Clean Water Act, the Safe Drinking Water Act, the Toxic Substances
Control Act, and the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act
("CERCLA"), as well as the state counterparts of these statutes.  NL believes
that all of its U.S. plants and the Louisiana plant owned and operated by the
joint venture are in substantial compliance with applicable requirements of
these laws or compliance orders issued thereunder.  From time to time, NL
facilities may be subject to environmental regulatory enforcement under such
statutes.  Resolution of such matters typically involves the establishment of
compliance programs.  Occasionally, resolution may result in the payment of
penalties, but to date such penalties have not involved amounts having a
material adverse effect on NL's consolidated financial position, results of
operations or liquidity.

     NL's European and Canadian production facilities operate in an
environmental regulatory framework in which governmental authorities typically
are granted broad discretionary powers which allow them to issue operating
permits required for the plants to operate.  NL believes all of its European and
Canadian plants are in substantial compliance with applicable environmental
laws.

     While the laws regulating operations of industrial facilities in Europe
vary from country to country, a common regulatory denominator is provided by the
European Union ("EU"). Germany, Belgium and the United Kingdom, each a member of
the EU, follow the initiatives of the EU; Norway, although not a member,
generally patterns its environmental regulatory actions after the EU.  Kronos
believes it is in substantial compliance with agreements reached with European
environmental authorities and with an EU directive to control the effluents
produced by TiO2 production facilities.  Rheox also believes it is in
substantial compliance with environmental regulations in Germany and the United
Kingdom.

     NL has a contract with a third party to treat certain German sulfate-
process effluents.  Either party may terminate the contract after giving four
years notice with regard to the Nordenham plant.  After December 1998, and only
under certain circumstances, Kronos may terminate the contract after giving six
months notice with regard to the Leverkusen plant.

     In order to reduce sulfur dioxide emissions into the atmosphere consistent
with applicable environmental regulations, Kronos is completing the installation
of off-gas desulfurization systems at its Norwegian and German plants at a cost
of approximately $30.  The Louisiana manufacturing joint venture installed a $16
million off-gas desulfurization system, and Kronos completed an $11 million
wastewater treatment chemical purification project at its Leverkusen, Germany
facility in 1996.

     The Quebec provincial government has environmental regulatory authority
over Kronos' Canadian chloride and sulfate-process TiO2 production facility.
The provincial government regulates discharges into the St. Lawrence River.  In
May 1992, the Quebec provincial government extended Kronos' right to discharge
effluents from its sulfate process TiO2 plant into the St. Lawrence River until
June 1994.  Kronos completed a waste acid neutralization facility and
discontinued discharging untreated effluents into the St. Lawrence River in June
1994.  Notwithstanding the foregoing, in March 1993 Kronos' Canadian subsidiary
and two of its directors were charged by the Canadian federal government with
five violations of the Canadian Fisheries Act relating to discharges into the
St. Lawrence River from the Varennes sulfate TiO2 plant.  The penalty for these
violations, if proven, could be up to Canadian $15 million.  Additional charges,
if brought, could involve additional penalties.  NL believes that this charge is
inconsistent with the extension granted by provincial authorities, referred to
above, and is vigorously contesting the charge.  A trial date has been set for
May 1997.

     NL's capital expenditures related to its ongoing environmental protection
and compliance programs, including those described above, are currently expected
to approximate $3 million in 1997 and $5 million in 1998.

     NL has been named as a defendant, potentially responsible party ("PRP") or
both, pursuant to CERCLA and similar state laws in approximately 75 governmental
and private actions associated with waste disposal sites, mining locations and
facilities currently or previously owned, operated or used by NL, many of which
are on the U.S. Environmental Protection Agency's Superfund National Priorities
List or similar state lists.  See Item 3 - "Legal Proceedings."

COMPONENT PRODUCTS - COMPX INTERNATIONAL INC.
     Products, operations and properties.  CompX International Inc. (formerly
National Cabinet Lock, Inc.) manufactures ergonomic office workstation
components, precision ball bearing drawer slides and low and medium-security
mechanical locks for furniture and a variety of other applications.  In 1996,
ergonomic workstation products accounted for 34% of the Company's total
component products sales, with drawer slides at 38% and locks at 28%.  Drawer
slides and office workstation components are produced in two separate facilities
in Kitchener, Ontario under the Waterloo Furniture Components, Limited name.
Locks are produced in Mauldin, South Carolina under the National Cabinet Lock
name.  The Company believes its component products compete in relatively well-
defined niche markets and believes that it is (i) the largest supplier of
ergonomic office workstation components to the North American office furniture
manufacturing market, (ii) the largest Canadian producer of drawer slides and
(iii) the largest U.S. cabinet lock producer.

     Strip steel is the major raw material used in the manufacture of drawer
slides and office workstation products.  Purchased components, including zinc
castings, are the principal raw materials used in the manufacture of latching
and security products.  These raw materials, purchased from several suppliers
and readily available, are machined, electroplated, assembled and packaged for
shipment to customers.  One of the Kitchener facilities and the Mauldin facility
are ISO 9001-registered.

     Strategy.  CompX's strategy is to continue to improve manufacturing
efficiency and cost control, to develop specialty, patented products focused on
niche markets and to capitalize on future opportunities which may emerge with
targeted original equipment manufacturers.  The Company will also search for
synergistic acquisitions or product licensing to expand its product base and
seek to expand its established market positions by emphasizing customer service,
promoting its distribution programs and seeking greater penetration of current
markets.
     Competition and customer base.  CompX competes primarily on the basis of
product features, customer service, quality, distribution channels, consumer
brand preferences and price.  The primary market for drawer slides and
workstation products is office furniture manufacturers in the United States and
Canada.  Approximately 30% of lock sales are made through the Company's STOCK
LOCKS distribution program, a program believed to offer a competitive advantage
because delivery generally is made within 48 hours.  Most remaining lock sales
are to original equipment manufacturers' specifications.  Component products are
marketed primarily through the Company's own sales organization as well as
select manufacturers' representatives.

     Major competitors include Weber Knapp (workstations), Accuride and Knape &
Vogt (drawer slides) and Chicago Lock, Hudson Lock and Fort Lock (locks).  CompX
also competes with a large number of other manufacturers, and the variety of
relatively small competitors generally makes significant price increases
difficult.  The Company does not believe it is dependent upon one or a few
customers, the loss of which would have a material adverse effect on its
component products operations.  The ten largest customers accounted for about
one-third of component products sales in each of the past three years, with the
largest customer less than 10% in each year.  In 1996, six of the ten largest
customers were located in the U.S. with four located in Canada.  Of such
customers, all were primarily purchasers of Waterloo Furniture Components'
products.

     Patents and trademarks.  CompX holds a number of patents relating to its
component products operations, none of which by itself is considered
significant, and owns a number of trademarks, including National Cabinet Lock,
STOCK LOCKS and Waterloo Furniture Components, Limited,  which the Company
believes are well recognized in the component products industry.

     Employees.  As of December 31, 1996, CompX employed approximately 820
persons, of which 260 were in the United States and 560 were in Canada.
Approximately two-thirds of Canadian employees are covered by a new three-year
collective bargaining agreement expiring February 2000.  CompX believes that its
labor relations are satisfactory.

     Regulatory and environmental matters.  CompX's operations are subject to
various federal, state, provincial and local provisions regulating, among other
things, worker and product safety and protection, the discharge of materials
into the environment and other environmental protection matters.  CompX believes
it is in substantial compliance with existing permits and regulations and does
not believe future expenditures to comply with these regulations will be
material.
FAST FOOD - SYBRA, INC.

     Products and operations.  Sybra (Arby's spelled backwards) operated 150
Arby's restaurants at December 31, 1996 clustered in four regions, principally
in Michigan (46 stores), Texas (57), Pennsylvania (27) and Florida (20),
pursuant to licenses with Arby's, Inc.  According to information provided by
Arby's, Sybra is the third-largest franchisee in the Arby's restaurant system
based upon the number of restaurants operated and gross sales.  Arby's is a
well-established fast food restaurant chain and features a menu that highlights
roast beef sandwiches along with a variety of chicken sandwiches and products,
deli sandwiches, potato products and soft drinks.  Sybra's menu selections have
expanded over the past few years whereby roast beef accounts for approximately
two-thirds of sandwich sales compared to 80% five years ago.

     Sybra's 150 Arby's restaurants at the end of 1996 represent a net decrease
of ten stores in the past three years (17 opened; 27 closed), during which
period Sybra also remodeled several of its older stores.  The stores closed in
the past three years all represented underperforming leased units which
generally were closed at the end of their respective lease terms.  Sybra
currently expects a net increase of about three stores in 1997, as it plans to
open six new restaurants and close at least three more underperforming stores.

     The Company has executed agreements involving the sale of Sybra's fast food
operations.  See "Business-General" and Note 18 to the Consolidated Financial
Statements.

     Strategy.  Given the extremely competitive environment in which Sybra
operates, Sybra will continue its strong emphasis on operational details and
routinely review the profit contribution of each restaurant with a view toward
closing those stores which do not meet expectations.
     Properties.  At the end of 1996, approximately 80% of Sybra's 150 Arby's
restaurants were free-standing stores with the remainder located within shopping
malls or strip shopping centers.  Approximately 60% of total locations are
leased, with most leases being on a long-term basis and providing for base
monthly rents plus contingent rents based on sales.  In most cases, Sybra
expects that leases could be renewed or replaced by other leases, although
rental rates may increase.  Contingent rentals based upon various percentages of
gross sales of individual restaurants were less than 10% of Sybra's total rent
expense in each of the past three years.  Sybra also leases corporate or
regional office space in five states.

     Under the terms of Sybra's current Development Agreement with Arby's, Sybra
has been given the exclusive right to open new Arby's units within certain
counties in Pennsylvania, in return for which Sybra has agreed to open a minimum
of 25 new stores during 1997 through 2001 in its existing regions (four in 1997,
six in 1998 and five each in 1999, 2000 and 2001), of which ten must be located
in Pennsylvania.  Sybra currently plans to open six new units in 1997, or two
more than the minimum required.  Sybra does not have any other exclusive
territorial or development agreements which would prohibit others from operating
an Arby's restaurant in the general geographic markets in which Sybra now
operates, although each store is given certain narrow geographical protection
(generally a one to four mile radius) from other Arby's units.

     Food products and supplies.  Sybra and other Arby's franchisees are members
of ARCOP, Inc., a non-profit cooperative purchasing organization which
facilitates negotiations of national contracts for food and distribution, taking
advantage of the larger purchasing requirements of the member franchisees.
Since Arby's franchisees are not required to purchase any food products or
supplies from Arby's, Inc., ARCOP facilitates control over food supply costs and
avoids franchisor conflicts of interest.
     License terms and royalty fees.  Generally, franchise agreements relating
to each restaurant location require that Sybra comply with certain requirements
as to business operations and facility maintenance.  Currently, Sybra pays an
initial franchise fee of $25,000 and a royalty rate equal to 4% of sales for a
standard 20-year license.  Because some of Sybra's licenses were issued at times
when license terms were perpetual and lower royalty rates were in effect, 43% of
Sybra's franchise agreements have no fixed termination date and royalties for
all locations aggregated 2.8% to 2.9% of sales in each of the past three years.
Sybra's average royalty rate would be expected to increase over time if new
stores are opened, older stores are closed and existing 20-year licenses are
renewed at then-prevailing higher royalty rates.  The first of Sybra's 20-year
licenses expires in 2003.

     Advertising and marketing.  Sybra directs about 8% of sales towards
marketing.  All franchisees of Arby's, Inc. must belong to AFA Service
Corporation ("AFA"), a non-profit association of Arby's restaurant operators,
and must contribute a specified portion (currently .7%) of their gross revenues
as dues to AFA.  In return, AFA provides franchisees with creative materials
such as television and radio commercials, ad mats for newspapers, point-of-
purchase graphics and other advertising materials.  Sybra also devotes
approximately 3% of sales to coupon sales promotions, including the direct cost
of discounted food, and newspaper and direct mail inserts, and approximately 4%
of its restaurant sales to local advertising.

     Competition and seasonality.  The fast food industry is extremely
competitive and subject to pressures from major business cycles and competition
from many established and new restaurant concepts.  According to industry data,
there is a significant disparity in the revenues and number of restaurants
operated by the largest restaurant systems and the Arby's system.  As a result,
some organizations and franchised restaurant systems have significantly greater
resources for advertising and marketing than the Arby's restaurant system or
Sybra, which is an important competitive factor.  Sybra's response to these
competitive factors has been to cluster its stores in certain geographic areas
where it can achieve economies of scale in advertising and other activities.

     Operating results of Sybra's restaurants have been affected by both retail
shopping patterns and weather conditions.  Accordingly, Sybra has experienced
its most favorable results during the fourth calendar quarter (which includes
the holiday shopping season) and its least favorable results during the first
calendar quarter (which includes winter weather that can be adverse in certain
markets).

     Employees.  As of December 31, 1996, Sybra had approximately 3,700
employees, of which 3,100 were part-time employees.  Approximately 3,600
employees work in Sybra's restaurants with the remainder in its corporate  or
regional offices.  Employees are not covered by collective bargaining agreements
and Sybra believes that its employee relations are satisfactory.

     Governmental regulation.  A significant portion of Sybra's restaurant
employees work on a part-time basis and are paid at rates related to the minimum
wage rate.  Restaurant labor costs currently approximate 29% of sales.  The two-
step, 90-cent increase in the minimum wage rate which became effective October
1, 1996 increased Sybra's labor costs.  Sybra concurrently implemented certain
price increases to offset the impact of the first step of the October 1, 1996
wage rate increase.  Any further increase in the minimum wage rate or
legislation requiring mandatory medical insurance benefits to part-time
employees would further increase Sybra's labor costs.  Although Sybra's
competitors would likely experience similar increases, there can be no assurance
that further increases in sales prices can be implemented to offset future
increases in these costs.

     Various federal, state and local laws affect Sybra's restaurant business,
including laws and regulations relating to minimum wages, overtime and other
working conditions, health, sanitation, employment and safety standards and
local zoning ordinances.  Sybra has not experienced and does not anticipate
unusual difficulties in complying with such laws and regulations.

WASTE MANAGEMENT - WASTE CONTROL SPECIALISTS LLC

     Waste Control Specialists LLC, formed in November 1995, recently completed
construction of the initial phase of its facility in West Texas for the
processing, treatment, storage and disposal of certain hazardous and toxic
wastes, and the first wastes were received for disposal in February 1997.  Valhi
contributed $25 million to Waste Control Specialists through early 1997 for its
50% interest, which was used primarily to fund construction of the facility.
The other 50%-owner (controlled by the Chief Executive Officer of Waste Control
Specialists) contributed certain assets, primarily land and operating permits
for the facility site, and Waste Control Specialists also assumed certain
indebtedness of the other owner.

     Facility, operations, services and customers.  Waste Control Specialists
has been issued permits by the Texas Natural Resource Conservation Commission
("TNRCC") and the U.S. EPA to accept hazardous and toxic wastes governed by The
Resource Conservation and Recovery Act ("RCRA") and the Toxic Substances Control
Act ("TSCA").  The ten-year RCRA and TSCA permits initially expire in 2004, but
are subject to renewal by the TNRCC assuming Waste Control Specialists remains
in compliance with the provisions of the permits.  While there can be no
assurance, Waste Control Specialists believes it will be able to obtain
extensions to continue operating the facility for the foreseeable future.

     Waste Control Specialists is also seeking additional authorizations to
accept wastes regulated under various other environmental laws and regulations,
including low-level and mixed low-level radioactive wastes.  Waste Control
Specialists has an application pending with the Texas Department of Health for a
permit authorizing the treatment and storage of low-level and mixed low-level
radioactive wastes, and expects to receive such permit in 1997.  Waste Control
Specialists has also presented a proposal to the U.S. Department of Energy
("DOE") that seeks DOE authorization for the facility as a disposal site for
much of the low-level and mixed low-level radioactive wastes generated from the
DOE's weapons complex sites.  Under the proposal, an independent private
sector/academia body led by Texas Tech University would provide oversight and
monitoring of the operations.  The DOE is reviewing the proposal.  There can be
no assurance that any such additional permits or authorizations will be
obtained.

     The facility is located on a 1,338 acre site in West Texas owned by Waste
Control Specialists.  The 1,338 acres are permitted for 11.3 million cubic yards
of airspace landfill capacity for RCRA and TSCA wastes.  Following the initial
phase of the construction, Waste Control Specialists has approximately 100,000
cubic yards of airspace landfill capacity in which customers' wastes can be
disposed.  As part of its current permits, Waste Control Specialists has the
authorization to construct separate "condominium" landfills, in which individual
customer's wastes can be segregated from wastes accepted from other customers.
Waste Control Specialists owns approximately 15,000 additional acres of land
surrounding the permitted site, a small portion of which is located in New
Mexico.  This presently undeveloped additional acreage is available for future
expansion assuming appropriate permits could be obtained.

     The 1,338 acre facility site has, in Waste Control Specialists' opinion,
superior geological characteristics which make it an environmentally-desirable
location.  The site is located in a relatively remote and arid section of West
Texas.  The ground is composed of triassic red bed clay for which the
possibility of leakage into any underground water table is considered remote.

     While the West Texas facility will operate as a final repository for wastes
that cannot be further reclaimed and recycled, it will also serve as a staging
and processing location for material that requires other forms of treatment
prior to final disposal as mandated by the U.S. EPA or other regulatory bodies.
The facility, as constructed, provides for waste treatment/stabilization,
warehouse storage, treatment facilities for hazardous, toxic and dioxin wastes,
drum to bulk, and bulk to drum materials handling and repackaging capabilities.
The Company intends to conduct these operations in compliance with the current
RCRA and TSCA permits.  Treatment operations will involve processing wastes
through one or more thermal, chemical or other treatment methods, depending upon
the particular waste being disposed and regulatory and customer requirements.
Thermal treatment will use a thermal destruction technology as the primary
mechanism for waste destruction.  Physical treatment methods may include
distillation, evaporation and separation, all of which result in the separation
or removal of solid materials from liquids.  Chemical treatment uses chemical
oxidation and reduction, chemical precipitation of heavy metals, hydrolysis and
neutralization of acid and alkaline wastes, and basically results in the
transformation of wastes into inert materials through one or more chemical
processes.  Certain of such treatment operations will involve technology which
Waste Control Specialists will acquire or license from third parties.

     Once treated and stabilized, wastes will either be (i) placed in the
landfill disposal site, (ii) stored onsite in drums or other specialized
containers or (iii) shipped to third-party facilities for final disposition.
Only wastes which meet certain specified regulatory requirements can be placed
in the landfill, which landfill is fully-lined and includes a leachate
collection system.

     Waste Control Specialists will take delivery of wastes collected from
customers and transported on behalf of customers, via rail or highway, by
independent contractors to the West Texas site.  Such transportation is subject
to regulations governing the transportation of hazardous wastes issued by the
U.S. Department of Transportation.

     In the U.S., the major federal statutes governing management, and
responsibility for clean-up, of hazardous and toxic wastes include RCRA, TSCA
and CERCLA.  Waste Control Specialists' business is heavily dependent upon the
extent to which regulations promulgated under these or other similar statutes
and their enforcement require wastes to be managed and disposed of at facilities
of the type constructed by Waste Control Specialists.

     Waste Control Specialists' target customers are industrial companies,
including chemical, aerospace and electronics businesses and governmental
agencies, including the DOE, which generate hazardous and other wastes.  A
majority of the customers are expected to be located in the southwest United
States, although customers outside a 500-mile radius can be handled via rail
lines.  Waste Control Specialists employs a salesforce to market its services to
potential customers.  The DOE could become a significant customer if Waste
Control Specialists is successful in obtaining permits for low-level and mixed
low-level radioactive waste.

     Waste Control Specialists also intends to enter into partnership or other
joint venture arrangements with other entities in the waste management industry
to assist Waste Control Specialists in research and development and other
aspects of customer service.  In this regard, Waste Control Specialists has
entered into a joint venture with Battelle Memorial Institute, a leader in the
waste management technology industry, to identify and commercialize
environmental technologies in the waste management industry.  Along these lines,
Waste Control Specialists has a permit application pending with the Texas
Department of Health for a Research, Development and Demonstration facility.
Third parties would be permitted to use the facility for the development and
demonstration of new technologies in the waste management industry, including
those involving low-level and mixed radioactive wastes.  While there can be no
assurance, Waste Control Specialists believes the permit will be issued by mid-
1997.

     Competition.  The hazardous waste industry (other than low-level and mixed
low-level radioactive waste) currently has excess industry capacity caused by a
number of factors, including a relative decline in the number of environmental
remediation projects generating hazardous wastes and efforts on the part of
generators to reduce the volume of waste and/or manage it onsite at their
facilities.  These factors have led to reduced demand and increased price
pressure for non-radioactive hazardous waste management services.  Consequently,
Waste Control Specialists believes its long-term future potential in the waste
management industry is significantly dependent upon its ability to obtain
permits for low-level and mixed low-level radioactive wastes.

     Competition within the hazardous waste industry is diverse.  Competition is
based primarily on pricing and customer service.  Price competition is expected
to be intense with respect to RCRA and TSCA-related wastes.  Principal
competitors are Chemical Waste Management (a wholly-owned subsidiary of WMX
Technologies, Inc.), Laidlaw, Inc.,  American Ecology Corporation, U.S.
Pollution Control, Inc. and Envirosafe Services, Inc.  These competitors are
well-established and have significantly greater resources than Waste Control
Specialists, which could be important competitive factors.  However, Waste
Control Specialists believes it may have certain competitive advantages,
including its environmentally-desirable location, broad level of local community
support, a public transportation network leading to the facility and capability
for future site expansion.

     Employees.  At December 31, 1996, Waste Control Specialists employed 45
persons, and currently expects to have approximately 50 to 75 employees by the
end of 1997.

     Regulatory and environmental matters.  While the waste management industry
has benefitted from increased governmental regulation, the industry itself has
become subject to extensive and evolving regulation by federal, state and local
authorities.  The regulatory process requires businesses in the waste management
industry to obtain and retain numerous operating permits covering various
aspects of their operations, any of which could be subject to revocation,
modification or denial.  Regulations also allow public participation in the
permitting process.  Individuals as well as companies may oppose the grant of
permits.  In addition, governmental policies are by their nature subject to
change and the exercise of broad discretion by regulators, and it is possible
that Waste Control Specialists' ability to obtain any desired applicable permits
on a timely basis, and to retain those permits, could in the future be impaired.
The loss of any individual permit could have a significant impact on Waste
Control Specialists' financial condition, results of operations and liquidity,
especially because Waste Control Specialists owns only one disposal site.  For
example, adverse decisions by governmental authorities on permit applications
submitted by Waste Control Specialists could result in the abandonment of
projects, premature closing of a facility or operating restrictions.  Waste
Control Specialists' ten-year RCRA and TSCA permits expire in 2004, although
such permits are subject to renewal if Waste Control Specialists is in
compliance with the required operating provisions of the permits.

     Federal, state and local authorities have, from time to time, proposed or
adopted other types of laws and regulations with respect to the waste management
industry, including laws and regulations restricting or banning the interstate
or intrastate shipment of certain wastes, imposing higher taxes on out-of-state
waste shipments compared to in-state shipments, reclassifying certain categories
of hazardous wastes as non-hazardous and regulating disposal facilities as
public utilities.  Certain states have issued regulations which attempt to
require that all waste generated within that particular state must be sent to
disposal sites within that state.  The U.S. Congress has also, from time to
time, considered legislation which would enable or facilitate such bans,
restrictions, taxes and regulations.  Due to the complex nature of the waste
management industry regulation, implementation of existing or future laws and
regulations by different levels of government could be inconsistent and
difficult to foresee.  Waste Control Specialists will attempt to monitor and
anticipate regulatory, political and legal developments which affect the waste
management industry, but there can be no assurance that Waste Control
Specialists will be able to do so.  Nor can Waste Control Specialists predict
the extent to which legislation or regulations that may be enacted, or any
failure of legislation or regulations to be enacted, may affect its operations
in the future.

     The demand for certain hazardous waste services expected to be provided by
Waste Control Specialists is dependent in large part upon the existence and
enforcement of federal, state and local environmental laws and regulations
governing the discharge of hazardous wastes into the environment.  The waste
management industry would be adversely affected to the extent such laws or
regulations are amended or repealed or their enforcement is lessened.

     Because of the high degree of public awareness of environmental issues,
companies in the waste management business may be, in the normal course of their
business, subject to judicial and administrative proceedings.  Governmental
agencies may seek to impose fines or revoke, deny renewal of, or modify any
applicable operating permits or licenses.  In addition, private parties and
special interest groups could bring actions against Waste Control Specialists
alleging, among other things, violation of operating permits.
DISCONTINUED OPERATIONS - MEDITE CORPORATION

     In September 1996, Medite determined to dispose of substantially all of its
assets in three separate transactions.  Medite sold its U.S. timber and
timberlands in October 1996, its Irish MDF subsidiary in November 1996 and its
Oregon MDF facility in February 1997.  Medite has also determined to permanently
close its two small Oregon timber conversion facilities.  The stud lumber
facility, closed in December 1996, is being dismantled and Medite will sell the
salvageable machinery and equipment.  Medite continues to operate the veneer
facility on a short-term basis and expects to either sell or close this facility
in 1997.  After the sale of the Oregon MDF facility and the sale or closure of
the two Oregon timber conversion facilities, Medite will have no remaining
operating assets.  See Note 19 to the Consolidated Financial Statements.

     At December 31, 1996, Medite employed approximately 270 persons in the U.S.
Following the sale of the Oregon MDF facility and the sale or closure of the
veneer facility, Medite will have a nominal number of employees remaining.

OTHER

     Foreign operations.  The Company has substantial operations and assets
located outside the United States, principally chemicals operations in Germany,
Belgium, Norway and the United Kingdom and chemicals and component products
operations in Canada.  See Note 2 to the Consolidated Financial Statements.
Foreign operations are subject to, among other things, currency exchange rate
fluctuations and the Company's results of operations have in the past been both
favorably and unfavorably affected by fluctuations in currency exchange rates.
See Item 7 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

     CompX's Canadian component products subsidiary has, from time to time,
entered into forward currency contracts to mitigate exchange rate fluctuation
risk for a portion of its future sales denominated in various currencies, and
the Company has in the past used currency forward contracts to fix the dollar
equivalent of specific commitments.  Otherwise, the Company does not generally
engage in currency derivative transactions.

     Political and economic uncertainties in certain of the countries in which
the Company operates may expose the Company to risk of loss.  The Company does
not believe that there is currently any likelihood of material loss through
political or economic instability, seizure, nationalization or similar event.
The Company cannot predict, however, whether events of this type in the future
could have a material effect on its operations.  The Company's manufacturing and
mining operations are also subject to extensive and diverse environmental
regulation in each of the foreign countries in which they operate, as discussed
in the respective business sections elsewhere herein.

     Regulatory and environmental matters.  Regulatory and environmental matters
are discussed in the respective business sections contained elsewhere herein and
in Item 3 - "Legal Proceedings."  In addition, the information included in Note
18 to the Consolidated Financial Statements under the captions "Legal
proceedings -- Lead pigment litigation and -- Environmental matters and
litigation" is incorporated herein by reference.

     Acquisition and restructuring activities.  The Company routinely compares
its liquidity requirements and alternative uses of capital against the estimated
future cash flows to be received from its subsidiaries and unconsolidated
affiliates, and the estimated sales value of those units.  As a result of this
process, the Company has in the past and may in the future seek to raise
additional capital, refinance or restructure indebtedness, repurchase
indebtedness in the market or otherwise, modify its dividend policy, consider
the sale of interests in subsidiaries, business units, marketable securities or
other assets, or take a combination of such steps or other steps, to increase
liquidity, reduce indebtedness and fund future activities.  Such activities have
in the past and may in the future involve related companies.  From time to time,
the Company also evaluates the restructuring of ownership interests among its
subsidiaries and related companies and expects to continue this activity in the
future.

     The Company and other entities that may be deemed to be controlled by or
affiliated with Mr. Harold C. Simmons routinely evaluate acquisitions of
interests in, or combinations with, companies, including related companies,
perceived by management to be undervalued in the marketplace.  These companies
may or may not be engaged in businesses related to the Company's current
businesses.  In a number of instances, the Company has actively managed the
businesses acquired with a focus on maximizing return-on-investment through cost
reductions, capital expenditures, improved operating efficiencies, selective
marketing to address market niches, disposition of marginal operations, use of
leverage, and redeployment of capital to more productive assets.  In other
instances, the Company has disposed of the acquired interest in a company prior
to gaining control.  The Company intends to consider such activities in the
future and may, in connection with such activities, consider issuing additional
equity securities and increasing the indebtedness of Valhi, its subsidiaries and
related companies.

     Other.  Through June 1989, Valmont Insurance Company, a wholly-owned
captive insurance subsidiary, reinsured workers' compensation and employers'
liability, auto liability, and comprehensive general liability risks of Valhi
and certain affiliates.  Through April 1989, Valmont assumed certain third-party
reinsurance business, primarily property, marine and casualty risks from
insurance subsidiaries of other industrial firms, and a small amount of U.S.
quota share property and casualty risks.  Valmont currently writes certain
direct coverages of Valhi and affiliates.  All of Valmont's third-party
reinsurance risks are on a runoff basis.
     The Company, through a general partnership, has an interest in certain
medical-related research and development activities pursuant to sponsored
research agreements.  See Note 17 to the Consolidated Financial Statements.

ITEM 2.   PROPERTIES

     Valhi leases approximately 34,000 square feet of office space for its
principal executive offices in a building located at 5430 LBJ Freeway, Dallas,
Texas, 75240-2697.

     The principal properties used in the operations of the Company, including
certain risks and uncertainties related thereto, are described in the applicable
business sections of Item 1 - "Business."  The Company believes that its
facilities are generally adequate and suitable for their respective uses.

ITEM 3.   LEGAL PROCEEDINGS

     The Company is involved in various legal proceedings.  In addition to
information that is included below, certain information called for by this Item
is included in Note 18 to the Consolidated Financial Statements under the
caption "Legal proceedings -- Other litigation," which information is
incorporated herein by reference.

     Lead pigment litigation.  NL was formerly involved in the manufacture of
lead pigments for use in paint and lead-based paint.  NL has been named as a
defendant or third party defendant in various legal proceedings alleging that NL
and other manufacturers are responsible for personal injury and property damage
allegedly associated with the use of lead pigments.  NL is vigorously defending
such litigation.  Considering NL's previous involvement in the lead pigment and
lead-based paint businesses, there can be no assurance that additional
litigation, similar to that described below, will not be filed.  In addition,
various legislation and administrative regulations have, from time to time, been
enacted or proposed that seek to (a) impose various obligations on present and
former manufacturers of lead pigment and lead-based paint with respect to
asserted health concerns associated with the use of such products and (b)
effectively overturn court decisions in which NL and other pigment manufacturers
have been successful.  Examples of such proposed legislation include bills which
would permit civil liability for damages on the basis of market share.  No
legislation or regulations have been enacted to date which are expected to have
a material adverse effect on NL's consolidated financial position, results of
operations or liquidity.  NL has not accrued any amounts for the pending lead
pigment and lead-based paint litigation.  There is no assurance that NL will not
incur future liability in respect of this litigation in view of the inherent
uncertainties involved in court and jury rulings in pending and possible future
cases.  However, based on, among other things, the results of such litigation to
date, NL believes that the pending lead pigment and lead-based paint litigation
is without merit.  Liability, if any, that may result is not reasonably capable
of estimation.

     In 1989 and 1990, the Housing Authority of New Orleans ("HANO") filed
third-party complaints for indemnity and/or contribution against NL, other
alleged manufacturers of lead pigment (together with NL, the "pigment
manufacturers") and the Lead Industries Association (the "LIA") in 14 actions
commenced by residents of HANO units seeking compensatory and punitive damages
for injuries allegedly caused by lead pigment.  The actions, which were in the
Civil District Court for the Parish of Orleans, State of Louisiana, were
dismissed by the district court in 1990.  Subsequently, HANO agreed to
consolidate all the cases and appealed.  In March 1992, the Louisiana Court of
Appeals, Fourth Circuit, dismissed HANO's appeal as untimely with respect to
three of these cases.  With respect to the other cases included in the appeal,
the court of appeals reversed the lower court decision dismissing the cases.
These cases were remanded to the District Court for further proceedings.  In
November 1994, the District Court granted defendants' motion for summary
judgment in one of the remaining cases and in June 1995 the District Court
granted defendants' motion for summary judgment in several of the remaining
cases.  After such grant, only two cases remained pending.

     In June 1989, a complaint was filed in the Supreme Court of the State of
New York, County of New York, against the pigment manufacturers and the LIA.
Plaintiffs seek damages, contribution and/or indemnity in an amount in excess of
$50 million for monitoring and abating alleged lead paint hazards in public and
private residential buildings, diagnosing and treating children allegedly
exposed to lead paint in city buildings, the costs of educating city residents
to the hazards of lead paint, and liability in personal injury actions against
the City and the Housing Authority based on alleged lead poisoning of city
residents (The City of New York, the New York City Housing Authority and the New
York City Health and Hospitals Corp. v. Lead Industries Association, Inc., et
al., No. 89-4617).  In December 1991, the court granted the defendants' motion
to dismiss claims alleging negligence and strict liability and denied the
remainder of the motion.  In January 1992, defendants appealed the denial.  NL
has answered the remaining portions of the complaint denying all allegations of
wrongdoing, and the case is in discovery.  In May 1993, the Appellate Division
of the Supreme Court affirmed the denial of the motion to dismiss plaintiffs'
fraud, restitution and indemnification claims.  In May 1994, the trial court
granted the defendants' motion to dismiss the plaintiffs' restitution and
indemnification claims, the plaintiffs appealed, and in June 1996 the appeals
court reversed the trial court's dismissal of the restitution and
indemnification claims, reinstating those claims.  Defendants' motion for
summary judgment on the remaining fraud claim was denied in August 1995;
defendants have appealed.  In February 1996, the court denied the defendants
motion for summary judgment on the basis that the fraud claim was time-barred,
and defendants have appealed.  Discovery is proceeding.

     In March 1992, NL was served with a complaint in Skipworth v. Sherwin-
Williams Co., et al. (No. 92-3069), Court of Common Pleas, Philadelphia County.
Plaintiffs are a minor and her legal guardians seeking damages from lead paint
and pigment producers, the LIA, the Philadelphia Housing Authority and the
owners of the plaintiffs' premises for bodily injuries allegedly suffered by the
minor from lead-based paint.  Plaintiffs' counsel has asserted that
approximately 200 similar complaints would be served shortly, but no such
complaints have yet been served.  In April 1994, the court granted defendants'
motion for summary judgment and the dismissal was affirmed by the Superior Court
in October 1995.  In February 1997, the Pennsylvania Supreme Court unanimously
affirmed the Superior Court's decision.

     In August 1992, NL was served with an amended complaint in Jackson, et al.
v. The Glidden Co., et al., Court of Common Pleas, Cuyahoga County, Cleveland,
Ohio (Case No. 236835).  Plaintiffs seek compensatory and punitive damages for
personal injury caused by the ingestion of lead, and an order directing
defendants to abate lead-based paint in buildings.  Plaintiffs purport to
represent a class of similarly situated persons throughout the State of Ohio.
The amended complaint identifies 18 other defendants who allegedly manufactured
lead products or lead-based paint, and asserts causes of action under theories
of strict liability, negligence per se,  negligence, breach of express and
implied warranty, fraud, nuisance, restitution, and negligent infliction of
emotional distress.  The complaint asserts several theories of liability
including joint and several, market share, enterprise and alternative liability.
In October 1992, NL and the other defendants moved to dismiss the complaint with
prejudice.  In July 1993, the court dismissed the complaint.  In December 1994,
the Ohio Court of Appeals reversed the trial court dismissal and remanded the
case to the trial court. In July 1996, the trial court granted defendants'
motion to dismiss the property damage and enterprise liability claims, but
denied the remainder of the motion.  Discovery is proceeding with respect to
class certification.

     In November 1993, NL was served with a complaint in Brenner, et al. v.
American Cyanamid, et al. (No. 12596-93), Supreme Court, State of New York, Erie
County alleging injuries to two children purportedly caused by lead pigment.
The complaint seeks $24 million in compensatory and $10 million in punitive
damages for alleged negligent failure to warn, strict liability, fraud and
misrepresentation, concert of action, civil conspiracy, enterprise liability,
market share liability, and alternative liability.  In January 1994, NL answered
the complaint, denying liability.  Discovery is proceeding.

     In January 1995, NL was served with complaints in Wright (Alvin) and Wright
(Allen) v. Lead Industries, et. al., (Nos. 94-363042 and 363043), Circuit Court,
Baltimore City, Maryland.  Plaintiffs are two brothers (one deceased) who allege
injuries due to exposure to lead pigment.  The complaints, as amended in April
1995, seek more than $100 million in compensatory and punitive damages for
alleged strict liability, negligence, conspiracy, fraud and unfair and deceptive
trade practices claims.  In July 1995, the trial court granted, in part, the
defendants' motion to dismiss, and dismissed the plaintiffs' fraud and unfair
and deceptive trade practices claims.  In June 1996 the trial court granted
defendants' motion for summary judgment on plaintiffs' conspiracy claim, and
dismissed NL and certain other defendants from the cases.  The court granted
summary judgment in favor of the remaining defendants in September 1996, and
plaintiffs have appealed as to all defendants.

     In November 1995, NL was served with a complaint in Jefferson v. Lead
Industry Association, et al. (No. 95-2835) filed in the U.S. District Court for
the Eastern District of Louisiana.  The complaint asserts claims against the LIA
and the lead pigment defendants on behalf of a putative class of allegedly
injured children in Louisiana.  The complaint purports to allege claims for
strict liability, negligence, failure to warn, breach of alleged warranties,
fraud and misrepresentation and conspiracy, and seeks actual and punitive
damages.  The complaint asserts several theories of liability, including joint
and several and market share liability.  In June 1996, the trial court granted
defendants' motions to dismiss the complaint and entered judgment in favor of
all defendants.  Plaintiffs appealed to the Fifth Circuit Court of Appeals,
which affirmed the judgment in favor of all the defendants in March 1997.

     In January 1996, NL was served with a complaint on behalf of individual
intervenors in German, et.al. v. Federal Home Loan Mortgage Corp., et. al. (U.S.
District Court, Southern District of New York, Civil Action No. 93 Civ. 6941
(RWS)).  This class action lawsuit had originally been brought against the City
of New York and other landlord defendants.  The intervenors' complaint alleges
claims against NL and other former manufacturers of lead pigment for medical
monitoring, property abatement and other injunctive relief, based on various
causes of action, including negligent product design, negligent failure to warn,
strict liability, fraud and misrepresentation, concert of action, civil
conspiracy, enterprise liability, market share liability, breach of express and
implied warranties, and nuisance.  The intervenors purport to represent a class
of children and pregnant women who reside in New York City.  In May 1996 NL and
the other defendants filed motions to dismiss the intervenors complaint.  Class
discovery is proceeding.

     In April 1996, NL was served with a complaint filed in New York state court
which seeks compensatory and punitive damages for personal injury purportedly
caused by lead paint and alleges causes of action against NL and other former
lead pigment manufacturers and the LIA for negligence, strict products
liability, fraud, concert of action, civil conspiracy, enterprise liability,
market share liability and alternative liability (Gates v. American Cyanamid
Co., et al. - I1996-2114).  The complaint also asserts causes of action against
the landlords of the apartments in which plaintiff has lived since 1977.  In
July 1996, NL filed an answer denying plaintiff's allegations.  Discovery is
proceeding.

     In September 1996, NL was served with a complaint filed in Circuit Court of
Marshall County, West Virginia, that seeks compensatory and punitive damages for
alleged personal injury caused by lead paint and asserts causes of action
against NL and five other former manufacturers of lead pigment for negligence,
strict liability, breach of warranty, fraud, conspiracy, market share liability
and alternative liability (Ritchie v. NL Industries, et al. - No. 96-C-179M).
In October 1996, defendants removed the case to federal court and filed motions
to dismiss.  Plaintiff has filed a motion to remand to state court.  The motions
are pending.

     NL believes that the foregoing lead pigment actions are without merit and
intends to continue to deny all allegations of wrongdoing and liability and to
defend such actions vigorously.

     NL has filed actions seeking declaratory judgment and other relief against
various insurance carriers with respect to costs of defense and indemnity
coverage for certain of its environmental and lead pigment litigation.  NL
Industries, Inc. v. Commercial Union Insurance Cos., et al., Nos. 90-2124, -2125
(HLS) (District Court of New Jersey).  The action relating to lead pigment
litigation defense costs, filed in May 1990 against Commercial Union Insurance
Company ("Commercial Union") seeks to recover defense costs incurred in the City
of New York lead pigment case and two other cases which have since been resolved
in NL's favor.  In July 1991, the court granted NL's motion for summary judgment
and ordered Commercial Union to pay NL's reasonable defense costs for such
cases.  In June 1992, NL filed an amended complaint in the United States
District Court for the District of New Jersey against Commercial Union seeking
to recover costs incurred in defending four additional lead pigment cases which
have since been resolved in NL's favor.  In August 1993, the court granted NL's
motion for summary judgment and ordered Commercial Union to pay the reasonable
costs of defending those cases.  In July 1994, the court entered judgment on the
order requiring Commercial Union to pay previously-incurred NL costs in
defending those cases.  In September 1995, the U.S. Court of Appeals for the
Third Circuit reversed and remanded for further consideration the decision by
the trial court that Commercial Union was obligated to pay the Company's
reasonable defense costs in certain of the lead pigment cases.  The trial court
made its decision applying New Jersey law; the Court of Appeals concluded that
New York law, and not New Jersey law, applied and remanded the case to the trial
court for a determination under New York law.  On remand from the Court of
Appeals, the trial court in April 1996 granted NL's motion for summary judgment,
finding that Commercial Union had a duty to defend NL in the four lead paint
cases which are the subject of NL's second amended complaint.  The court also
issued a partial ruling on Commercial Union's motion for summary judgment in
which it sought allocation of defense costs and contribution from NL and two
other insurance carriers in connection with three lead paint actions on which
the court had granted NL summary judgment in 1991.  The court ruled that
Commercial Union is entitled to receive contribution from NL and the two
carriers, but reserved ruling with respect to the relative contributions to be
made by each of the parties, including contributions by NL that may be required
with respect to periods in which NL was self-insured and contributions from one
carrier which were reinsured by a former subsidiary of NL, the reinsurance costs
of which NL may ultimately be required to bear.  Other than granting motions for
summary judgment brought by two excess liability insurance carriers, which
contended their policies contained unique pollution exclusion language, and
certain summary judgment motions regarding policy periods, the court has not
made any final rulings on defense costs or indemnity coverage with respect to
NL's pending environmental litigation.  The Court has not made any final ruling
on indemnity coverage in the lead pigment litigation.  No trial dates have been
set.  Other than ruling to date, the issue of whether insurance coverage for
defense costs or indemnity or both will be found to exist depends upon a variety
of factors, and there can be no assurance that such insurance coverage will
exist in other cases.  NL has not considered any potential insurance recoveries
for lead pigment or environmental litigation in determining related accruals.

     Environmental matters and litigation.  NL has been named as a defendant,
PRP, or both, pursuant to CERCLA and similar state laws in approximately 75
governmental and private actions associated with waste disposal sites, mining
locations and facilities currently or previously owned, operated or used by NL,
or its subsidiaries, or their predecessors, many of which are on the U.S.
Environmental Protection Agency's Superfund National Priorities List or similar
state lists.  These proceedings seek cleanup costs, damages for personal injury
or property damage, or both.  Certain of these proceedings involve claims for
substantial amounts.  Although NL may be jointly and severally liable for such
costs, in most cases, it is only one of a number of PRPs who are also jointly
and severally liable.

     The extent of CERCLA liability cannot be determined until the Remedial
Investigation and Feasibility Study ("RIFS") is complete, the U.S. EPA issues a
record of decision and costs are allocated among PRPs.  The extent of liability
under analogous state cleanup statutes and for common law equivalents are
subject to similar uncertainties.  NL believes it has provided adequate accruals
for reasonably estimable costs for CERCLA matters and other environmental
liabilities.  At December 31, 1996, NL had accrued $113 million with respect to
those environmental matters which are reasonably estimable.  NL determines the
amount of accrual on a quarterly basis by analyzing and estimating the range of
possible costs to NL.  Such costs include, among other things, remedial
investigations, monitoring, studies, clean-up, removal and remediation.  In the
first quarter of 1997, NL's accrual will be increased to include legal fees and
other costs of managing and monitoring certain environmental remediation sites
as required by the adoption of the AICPA's Statement of Position 96-1.  See Note
18 to the Consolidated Financial Statements.  It is not possible to estimate the
range of costs for certain sites.  NL has estimated that the upper end of the
range of reasonably possible costs to NL for sites for which it is possible to
estimate costs is approximately $160 million.  No assurance can be given that
actual costs will not exceed accrued amounts or the upper end of the range for
sites for which estimates have been made, and no assurance can be given that
costs will not be incurred with respect to sites as to which no estimate
presently can be made.  The imposition of more stringent standards or
requirements under environmental laws or regulations, new developments or
changes respecting site cleanup costs or allocation of such costs among PRPs, or
a determination that NL is potentially responsible for the release of hazardous
substances at other sites could result in expenditures in excess of amounts
currently estimated by NL to be required for such matters.  Further, there can
be no assurance that additional environmental matters will not arise in the
future.  More detailed descriptions of certain legal proceedings relating to
environmental matters are set forth below.

     At Pedricktown, the U.S. EPA divided the site into two operable units.
Operable unit one covers contaminated ground water, surface water, soils and
stream sediments.  In July 1994, the U.S. EPA issued the Record of Decision for
operable unit one.  The U.S. EPA estimates the cost to complete operable unit
one is $18.7 million.  In May 1996, certain PRPs, but not NL, entered into an
administrative consent order with the U.S. EPA to perform the remedial phase of
operable unit one.  In addition, the U.S. EPA incurred past costs in the
estimated amount of $5 million.  The U.S. EPA issued an order with respect to
operable unit two in March 1992 to NL and 30 other PRPs directing immediate
removal activities including the cleanup of waste, surface water and building
surfaces.  NL has complied with the order, and the work with respect to operable
unit two is completed.  NL has paid approximately 50% of  operable unit two
costs, or $2.5 million.

     At Granite City, the RIFS is complete, and in 1990 the U.S. EPA selected a
remedy estimated to cost approximately $28 million.  In July 1991, the United
States filed an action in the U.S. District Court for the Southern District of
Illinois against NL and others (United States of America v. NL Industries, Inc.,
et al., Civ. No. 91-CV 00578) with respect to the Granite City smelter.  The
complaint seeks injunctive relief to compel the defendants to comply with an
administrative order issued pursuant to CERCLA, and fines and treble damages for
the alleged failure to comply with the order.  NL and the other parties did not
comply with the order believing that the remedy selected by the U.S. EPA was
invalid, arbitrary, capricious and not in accordance with law.  The complaint
also seeks recovery of past costs and a declaration that the defendants are
liable for future costs.  Although the action was filed against NL and ten other
defendants, there are 330 other PRPs who have been notified by the U.S. EPA.
Some of those notified were also respondents to the administrative order.  In
February 1992, the court entered a case management order directing that the
remedy issues be tried before the liability aspects are presented.  In September
1995, the U.S. EPA released its decision selecting cleanup remedies for the
Granite City site.  At that time, the cost of the remedies selected by the U.S.
EPA aggregated, in its estimation, $40.8 million to $67.8 million, although its
decision stated that the higher amount was not considered to be representative
of expected costs.  NL is presently challenging portions of the U.S. EPA's
selection of the remedy.  The U.S. EPA's current estimate for the completion of
the cleanup is $24.3 million, and in January 1997, NL was informed that the U.S.
EPA incurred past costs approximating $30 million.  There is currently no
allocation among the PRPs for these costs.

     Having completed the RIFS at Portland, NL conducted predesign studies to
explore the viability of the U.S. EPA's selected remedy pursuant to a June 1989
consent decree captioned U.S. v. NL Industries, Inc., Civ. No. 89-408, United
States District Court for the District of Oregon.  Subsequent to the completion
of the predesign studies, the U.S. EPA issued notices of potential liability to
approximately 20 PRPs, including NL, directing them to perform the remedy, which
was initially estimated to cost approximately $17 million, exclusive of
administrative and overhead costs and any additional costs, for the disposition
of recycled materials from the site.  In January 1992, the U.S. EPA issued
unilateral administrative orders to NL and six other PRPs directing the
performance of the remedy.  NL and the other PRPs commenced performance of the
remedy.  In August 1994, the U.S. EPA authorized NL and other PRPs to cease
performing most aspects of the selected remedy.  The U.S. EPA has issued a
Record of Decision Amendment changing portions of the remedy.  The U.S. EPA
currently estimates the cost of the proposed remedy to be from $10 million to
$13 million.  Pursuant to an interim allocation, NL's share of remedial costs is
approximately 50%.  In November 1991, Gould, Inc., the current owner of the
site, filed an action, Gould Inc. v. NL Industries, Inc., No. 91-1091, United
States District Court for the District of Oregon, against NL for damages for
alleged fraud in the sale of the smelter, rescission of the sale, past CERCLA
response costs and a declaratory judgment allocating future response costs and
punitive damages.  The court granted Gould's motion to amend the complaint to
add additional defendants (adjoining current and former landowners and
generators).  The amended complaint deletes the fraud and punitive damages
claims asserted against NL; thus, the pending action is essentially one for
reallocation of past and future cleanup costs.  Discovery is proceeding.  A
trial date has been set for September 1997.  NL and the other PRPs performing
the cleanup have reached a settlement in principle with many of the generators
and adjoining landowner defendants.

     NL and other PRPs entered into an administrative consent order with the
U.S. EPA requiring the performance of a RIFS at two sites in Cherokee County,
Kansas, where NL and others formerly mined lead and zinc.  A former NL
subsidiary mined at the Baxter Springs subsite, where it is the largest viable
PRP.  The final RIFS was submitted to the U.S. EPA in May 1993.   In August
1994, the U.S. EPA issued its proposed plan for the cleanup of the Baxter
Springs and Treece sites in Cherokee County.   The proposed remedy is estimated
by the U.S. EPA to cost $6 million.

     In January 1989, the State of Illinois brought an action against NL and
several other subsequent owners and operators of a former NL facility in
Chicago, Illinois (People of the State of Illinois v. NL Industries, et al., No.
88-CH-11618, Circuit Court, Cook County).  The complaint seeks recovery of $2.3
million of cleanup costs expended by the Illinois Environmental Protection
Agency, plus penalties and treble damages.  In October 1992, the Supreme Court
of Illinois reversed the Appellate Division, which had affirmed the trial
court's earlier dismissal of the complaint, and remanded the case for further
proceedings.  In December 1993, the trial court denied the State's petition to
reinstate the complaint, and dismissed the case with prejudice.  In November
1996, the appeals court reversed the dismissal.  The U.S. EPA has issued an
order to NL to perform a removal action at the site, and NL has notified the
U.S. EPA that it intends to comply with the order.

     In 1980, the State of New York commenced litigation against NL in
connection with the operation of a plant in Colonie, New York formerly owned by
NL.  Flacke v. NL Industries, Inc., No. 1842-80 ("Flacke I") and Flacke v.
Federal Insurance Company and NL Industries, Inc., No. 3131-92 ("Flacke II"),
New York Supreme Court, Albany County.  The plant manufactured military and
civilian products from depleted uranium and was acquired from NL by the U.S.
Department of Energy ("DOE") in 1984.  Flacke I seeks penalties for alleged
violations of New York's Environmental Conservation Law, and of a consent order
entered into to resolve these alleged violations.  Flacke II seeks forfeiture of
a $200,000 surety bond posted in connection with the consent order, plus
interest from February 1980.  NL denied liability in both actions.  The
litigation had been inactive from 1984 until July 1993 when the State moved for
partial summary judgment for approximately $1.5 million on certain of its claims
in Flacke I and for summary judgment in Flacke II.  In January 1994, NL cross-
moved for summary judgment in Flacke I and Flacke II.  All summary judgment
motions have been denied.  NL has reached a settlement in principle with the
State.

     Residents in the vicinity of NL's former Philadelphia lead chemicals plant
commenced a class action allegedly comprised of over 7,500 individuals seeking
medical monitoring and damages allegedly caused by emissions from the plant.
Wagner, et al v. Anzon and NL Industries, Inc., No. 87-4420, Court of Common
Pleas, Philadelphia County.  The complaint sought compensatory and punitive
damages from NL and the current owner of the plant, and alleged causes of action
for, among other things, negligence, strict liability, and nuisance.  A class
was certified to include persons who resided, owned or rented property, or who
work or have worked within up to approximately three-quarters of a mile from the
plant from 1960 through the present.  NL answered the complaint, denying
liability.  In December 1994, the jury returned a verdict in favor of NL.
Plaintiffs appealed, and in September 1996 the Superior Court of Pennsylvania
affirmed the jury verdict in favor of NL.  In December 1996, plaintiffs filed a
petition for allowance of appeal to the Pennsylvania Supreme Court.  Plaintiff's
petition is pending.  Residents also filed consolidated actions in the United
States District Court for the Eastern District of Pennsylvania, Shinozaki v.
Anzon, Inc. and Wagner and Antczak v. Anzon and NL Industries, Inc.,  Nos. 87-
3441, 87-3502, 87-4137 and 87-5150.  The consolidated action is a putative class
action seeking CERCLA response costs, including cleanup and medical monitoring,
declaratory and injunctive relief and civil penalties for alleged violations of
the Resource Conservation and Recovery Act ("RCRA"), and also asserting pendent
common law claims for strict liability, trespass, nuisance and punitive damages.
The court dismissed the common law claims without prejudice, dismissed two of
the three RCRA claims as against NL with prejudice, and stayed the case pending
the outcome of the state court litigation.

     In July 1991, a complaint was filed in the United States District Court for
the Central District of California, United States of America v. Peter Gull and
NL Industries, Inc., Civ. No. 91-4098, seeking recovery of $2 million in costs
incurred by the United States in response to the alleged release of hazardous
substances into the environment from a facility located in Norco, California,
treble damages and $1.75 million in penalties for NL's alleged failure to comply
with the U.S. EPA's administrative order No. 88-13.  The order, which alleged
that NL arranged for the treatment or disposal of materials at the Norco site,
directed the immediate removal of hazardous substances from the site.  NL
carried out a portion of the remedy at the Norco site, but did not complete the
ordered activities because it believed they were in conflict with California
law.  The court ruled that NL was liable for approximately $2.7 million in
response costs plus approximately $3.6 million in penalties for failure to
comply with the administrative order.  In April 1994, the court entered final
judgment in this matter directing NL to pay $6.3 million plus interest.  Both NL
and the government have appealed.  In August 1994, this matter was referred to
mediation, which is pending.

     At a municipal and industrial waste disposal site in Batavia, New York, NL
and six others have been identified as PRPs.  The U.S. EPA has divided the site
into two operable units.  Pursuant to an administrative consent order entered
into with the U.S. EPA, NL conducted a RIFS for operable unit one, the closure
of the industrial waste disposal section of the landfill.  NL's RIFS costs to
date are approximately $2 million.  In June, 1995, the U.S. EPA issued the
record of decision for operable unit one, which is estimated by the U.S. EPA to
cost approximately $12.3 million.  In September 1995, the U.S. EPA and certain
PRPs (including NL), entered into an administrative order on consent for the
remedial design phase of the remedy for operable unit one and the design phase
is proceeding.  NL and other PRPs entered into an interim cost sharing
arrangement for this phase of the work.  With respect to the second operable
unit, the extension of the municipal water supply, the U.S. EPA estimated the
costs at $1.2 million plus annual operation and maintenance costs.  NL and the
other PRPs are performing the work comprising operable unit two.  The U.S. EPA
has also demanded approximately $.9 million in past costs from the PRPs.

     See also Item 1 - "Business - Chemicals - Regulatory and environmental
matters."

     At December 31, 1996, Medite has accrued approximately $4.6 million for the
estimated cost to complete environmental remediation efforts at certain of its
current and former facilities, including amounts included in accrued plant
closure costs.  Costs for future environmental remediation efforts are not
discounted to their present value, and no recoveries for remediation costs from
third parties have been recognized.  Such accruals will be adjusted, if
necessary, as further information becomes available or as circumstances change.
No assurance can be given that the actual costs will not exceed accrued amounts.
None of these facilities are the subject of any litigation, administrative
proceeding or investigation.
     The Company has also been named as a PRP pursuant to CERCLA at one
Superfund site in Indiana and has also undertaken a voluntary cleanup program
approved by state authorities at another Indiana site, both of which involve
operations no longer conducted by the Company.  The total estimated cost for
cleanup and remediation at the Indiana Superfund site is $40 million, of which
the Company's share is currently estimated to be approximately $2 million.  The
Company's estimated cost to complete the voluntary cleanup program at the other
Indiana site, which involves both surface and groundwater remediation, is
relatively nominal.  The Company believes it has adequately provided accruals
for reasonably estimable costs for CERCLA matters and other environmental
liabilities.  At December 31, 1996, the Company had accrued $2 million in
respect of such matters, which accrual is near the Company's estimate of the
upper end of range of possible costs.  No recoveries for remediation costs have
been recognized.  No assurance can be given that actual costs will not exceed
accrued amounts or the upper end of the range.  The imposition of more stringent
standards or requirements under environmental laws or regulations, new
developments or changes respecting site cleanup costs or allocation of such
costs among PRPs or a determination that the Company is potentially responsible
for the release of hazardous substances at other sites could result in
expenditures in excess of amounts currently estimated by the Company to be
required for such matters.  Furthermore, there can be no assurance that
additional environmental matters related to current or former operations will
not arise in the future.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders during the quarter
ended December 31, 1996.

                                    PART II


ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Valhi's common stock is listed and traded on the New York and Pacific Stock
Exchanges (symbol: VHI).  As of March 15, 1997, there were approximately 5,000
holders of record of Valhi common stock.  The following table sets forth the
high and low sales prices for Valhi common stock for the years indicated,
according to the New York Stock Exchange Composite Tape, and dividends paid
during such periods.  On March 14, 1997 the closing price of Valhi common stock
according to the NYSE Composite Tape was $8.



                                                                                                     DIVIDENDS
                                                                      HIGH             LOW              PAID

                                                                                              
Year ended December 31, 1995

  First Quarter                                                     $8 3/8           $6 5/8            $.03
  Second Quarter                                                     8 5/8            6 3/4             .03
  Third Quarter                                                      8 1/8            6 3/4             .03
  Fourth Quarter                                                     7 1/2            5 3/4             .03

Year ended December 31, 1996

  First Quarter                                                     $7 3/4           $6 1/8            $.05
  Second Quarter                                                     7 3/8            5 7/8             .05
  Third Quarter                                                      7                6                 .05
  Fourth Quarter                                                     6 5/8            5 7/8             .05





     Valhi's regular quarterly dividend is currently $.05 per share.
Declaration and payment of future dividends and the amount thereof will be
dependent upon the Company's results of operations, financial condition, cash
requirements for its businesses, contractual requirements and restrictions and
other factors deemed relevant by the Board of Directors.  There are currently no
contractual restrictions on the ability of Valhi to declare or pay dividends.


ITEM 6.  SELECTED FINANCIAL DATA

     The following selected financial data should be read in conjunction with
the Company's Consolidated Financial Statements and Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations."


                                                             YEARS ENDED DECEMBER 31,

                                                  1992          1993           1994           1995          1996

                                                  (IN MILLIONS, EXCEPT PER SHARE DATA)
                                                                                           
STATEMENTS OF OPERATIONS DATA:
  Net sales:
    Chemicals                                    $  -           $  -         $  -          $1,023.9       $  986.1
    Component products                               54.0          64.4          70.0          80.2           88.7
    Fast food                                       103.8         111.6         115.5         115.4          116.0


                                                 $  157.8       $ 176.0      $  185.5      $1,219.5       $1,190.8



  Operating income:
    Chemicals                                    $  -           $  -         $  -          $  178.5       $   92.0
    Component products                               10.7          17.5          20.9          19.9           22.1
    Fast food                                         8.5           9.7           9.0           7.5            8.9


                                                 $   19.2       $  27.2      $   29.9      $  205.9       $  123.0



  Equity in Amalgamated Sugar Company            $   20.5       $  19.6      $   13.9      $    8.9       $   10.0



  Equity in Waste Control Specialists                                                      $    (.5)      $   (6.4)


  Equity in NL prior to consolidation:
    Operations                                   $  (37.4)      $ (52.4)     $  (25.1)
    Provision for market value impairment           -             (84.0)        -


                                                 $  (37.4)      $(136.4)     $  (25.1)



  Income (loss) from continuing operations       $  (15.4)      $ (74.2)     $    1.3      $   57.9       $    4.2
  Discontinued operations                            (6.8)         10.1          10.3          10.6           37.8
  Extraordinary items                                (6.3)        (15.4)        -             -              -
  Cumulative effect of changes in
   accounting principles (1)                        (69.8)           .4      -              -              -


      Net income (loss)                          $  (98.3)      $ (79.1)     $   11.6      $   68.5       $   42.0



PER SHARE DATA:
  Income (loss) from continuing operations       $   (.14)      $  (.65)     $    .01      $    .51       $    .04

  Net income (loss)                              $   (.86)      $  (.69)     $    .10      $    .60       $    .37

  Cash dividends                                 $    .20       $   .05      $    .08      $    .12       $    .20

  Weighted average common shares
   outstanding                                      113.9         114.1         114.3         114.4          114.6

BALANCE SHEET DATA (at year end):
  Total assets                                   $1,077.0       $ 903.9      $2,480.7      $2,572.2       $2,145.0
  Long-term debt                                    288.7         302.5       1,086.7       1,084.3          844.5
  Stockholders' equity                              259.1         207.5         198.4         274.3          303.9


 (1)  Relates to OPEB and income tax accounting in 1992 and marketable
 securities
in 1993.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

RESULTS OF OPERATIONS

CONTINUING OPERATIONS

     The Company reported income from continuing operations of $4.2 million, or
$.04 per share, in 1996 compared to income from continuing operations of $58
million, or $.51 per share, in 1995.  A major factor in the decline in earnings
was due to lower average selling prices for TiO2 at NL Industries.

     Discontinued operations represent the results of operations of Medite
Corporation, and in 1996 includes (i) an aggregate fourth quarter $48 million
after-tax gain on disposition ($75 million pre-tax) related principally to its
U.S. timber and timberland assets and its Irish MDF subsidiary and (ii) a $15
million first quarter after-tax charge ($24 million pre-tax) related to closure
of its New Mexico MDF operations.  See Note 19 to the Consolidated Financial
Statements.

     The Company currently expects to report a loss from continuing operations
in 1997 due to (i) the Company's $30 million pre-tax charge associated with the
first quarter 1997 adoption of AICPA Statement of Position No. 96-1, "Accounting
for Environmental Liabilities," for NL's remediation sites (see Note 18 to the
Consolidated Financial Statements) and (ii) expected lower average selling
prices for TiO2 in 1997 compared with 1996.  TiO2 prices declined throughout
1996, and while NL currently expects TiO2 prices will begin to increase during
1997, the average price for 1997 is expected to be lower than the average price
in 1996.

     The statements in this Annual Report on Form 10-K relating to matters that
are not historical facts, including, but not limited to, statements found in
Item 1 - "Business" and Item 3 - "Legal Proceedings" as well as in this Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", are forward-looking statements that involve a number of risks and
uncertainties.  Factors that could cause actual future results to differ
materially from those expressed in such forward-looking statements include, but
are not limited to, future supply and demand for the Company's products
(including cyclicality thereof), general economic conditions, competitive
products, customer and competitor strategies, the impact of pricing and
production decisions, environmental matters, government regulations and possible
changes therein, the ultimate resolution of pending litigation and possible
future litigation, completion of pending asset/business unit dispositions and
other risks and uncertainties discussed elsewhere herein including, without
limitation, the sections referenced above.


CHEMICALS

     Selling prices for TiO2, NL's principal product, declined during 1996.
NL's TiO2 operations are conducted through Kronos while its specialty chemicals
operations are conducted through Rheox.


                                  YEARS ENDED DECEMBER 31,

                                 1994

                                NL            PRO                                              % CHANGE (B)

                           HISTORICAL     FORMA(A)       1995(A)         1996(A)       1994-1995       1995-1996

                                                (IN MILLIONS)
                                                                                         
Net sales:
  Kronos                      $770.1        $770.1        $  894.1       $  851.2         + 16%            - 5%
  Rheox                        117.9         117.9           129.8          134.9         + 10%            + 4%


                              $888.0        $888.0        $1,023.9       $  986.1         + 15%            - 4%



Operating income:
  Kronos                      $ 80.5        $ 62.6        $  141.6       $   51.9         +126%            -63%
  Rheox                         30.9          29.3            36.9           40.1         + 26%            + 9%


                              $111.4        $ 91.9        $  178.5       $   92.0         + 94%            -48%



Operating income
 margins:
  Kronos                         10%          8%               16%             6%
  Rheox                          26%         25%               28%            30%

TiO2 data:
  Sales volume
   (thousands of
   metric tons)                 376         376               366            388         -   3%            + 6%
  Average price
   index
   (1983=100)                   132         132               152            139         +  15%            - 9%


 (A) Operating income in 1996, 1995 and 1994 pro forma is stated net of
   amortization of Valhi's purchase accounting adjustments made in conjunction
   with the acquisitions of its interest in NL, which adjustments result in
   additional depreciation, depletion and amortization expense beyond amounts
   separately reported by NL.  Such additional non-cash expenses reduce
   chemicals operating income, as reported by Valhi, by approximately $20
   million annually as compared to amounts separately reported by NL.

(B)% change 1994 pro forma to 1995 amounts.

     Kronos' TiO2 operating income declined in 1996 primarily due to lower
average selling prices, partially offset by higher sales volume.  In billing
currency terms, average TiO2 selling prices in 1996 were 9% lower than 1995.
TiO2 selling prices began declining in the last half of 1995, and selling prices
at the end of 1996 were 17% lower than at the end of 1995 and 8% below the
average for 1996.  While TiO2 prices declined in 1996, industry wide demand for
TiO2 has grown, as Kronos' TiO2 sales volume increased 6% in 1996 to a record
388,000 metric tons, with improved sales volumes worldwide.  Sales volumes in
the second half of 1996 were 16% higher than the same period in 1995.  In
response to softening demand in the first half of 1996 and its high inventory
levels at the end of 1995, Kronos curtailed production rates in early 1996.  As
demand increased during the last half of 1996 and inventories returned to more-
normal levels, Kronos' production rates were increased to near full capacity in
late 1996 and the average capacity utilization was 95% for the year.  Kronos'
production rates were 94% of its capacity in 1994 and at full capacity in 1995.
Approximately one-half of Kronos' 1996 TiO2 sales, by volume, were attributable
to markets in Europe, with 37% attributable to North America and the balance to
export markets.

     The improvement in Kronos' 1995 TiO2 results was primarily due to higher
average selling prices and production volume, partially offset by lower sales
volume.  In billing currency terms, average TiO2 selling prices in 1995 were
approximately 15% higher than 1994.  TiO2 sales volume in 1995 was 3% lower than
the record levels of 1994, with declines in both Europe and North America, due
to softening demand in the second half of 1995 and customers building
inventories during 1994 and early 1995.

     Demand, supply and pricing within the TiO2 industry is cyclical, and
changes in industry economic conditions can significantly impact NL's earnings
and operating cash flows.  The average TiO2 selling price index (using 1983 =
100) of 139 in 1996 was 9% lower than the 1995 index of 152 (1995 was 15% above
the 1994 level).  In comparison, the 1996 index was 21% below the 1990 price
index of 175 and 9% higher than the 1993 price index of 127.  Many factors
influence TiO2 pricing levels, including industry capacity, worldwide demand
growth and customer inventory levels and purchasing decisions.  NL believes that
the TiO2 industry has long-term growth potential, as a result of certain
barriers to entry which inhibit industry capacity growth.  The decline in TiO2
prices in 1996, NL believes, was due in part to the impact of recent
debottlenecking projects increasing capacity, TiO2 customers de-stocking
inventories in a period of declining prices, and greater competition for sales
volume with more industry capacity available.

     NL expects its TiO2 operating margins will begin to improve during the
second quarter of 1997 as the impact of recently-announced price increases takes
effect.  However, NL expects its 1997 TiO2 operating income to be below that of
1996, primarily because of anticipated lower average selling prices for TiO2 and
lower technology fee income.  While NL expects TiO2 prices will begin to
increase during 1997, the average for 1997 is expected to be lower than the 1996
average price.  NL expects demand for TiO2 to remain strong in 1997, and the
continued growth in demand should result in significant improvement in average
selling prices for TiO2 over the longer run.

     Rheox's 1996 operating results include a $2.7 million gain related to the
reduction of certain U.S. employee pension benefits.  Rheox's operating results
improved in 1995 compared to 1994 primarily as a result of higher sales volume
and higher average selling prices.

     NL has substantial operations and assets located outside the United States
(principally Germany, Belgium, Norway, the United Kingdom and Canada).  The U.S.
dollar value of NL's foreign sales and operating results are subject to currency
exchange rate fluctuations which may favorably or adversely impact reported
earnings and affect the comparability of period to period operating results.  A
significant amount of NL's sales are denominated in currencies other than the
U.S. dollar (61% in 1996), principally major European currencies and the
Canadian dollar.  Certain raw materials, primarily titanium-containing
feedstocks, are purchased in U.S. dollars, while labor and other production
costs are denominated primarily in the local currencies.  Fluctuations in the
value of the U.S. dollar relative to other currencies decreased 1996 sales by
$14 million compared to 1995 and increased 1995 sales by $54 million compared to
1994.

COMPONENT PRODUCTS


                                         YEARS ENDED DECEMBER 31,                           % CHANGE

                                           1994           1995           1996          1994-95         1995-96

                                               (IN MILLIONS)
                                                                                         
Net sales                                  $70.0         $80.2          $88.7           +15%            +11%
Operating income                            20.9          19.9           22.1           - 5%            +11%

Operating income margin                      30%           25%            25%



     Sales increased in both 1995 and 1996 compared to the respective prior year
due primarily to higher volumes in the office workstation component and drawer
slide lines.  Drawer slide sales increased 18% in 1996 compared to 1995 and
workstation component products were up 14%.  Both office workstation components
and drawer slide lines reported new highs in sales in each of the past three
years.  Lock volumes from a government contract completed in early 1995 have
only been partially replaced, and consequently lock sales declined about 5% in
1996 compared to 1995.  The Company signed a new $650,000 contract with the same
government agency in December 1996, with shipments scheduled to be delivered in
the first nine months of 1997.  Operating income margins in 1995 were impacted
by higher raw material costs, as competitive pressures prevented full recovery
through higher selling prices, as well as costs associated with integrating the
operations of a Canadian competitor acquired in August 1995.

     The new three-year collective bargaining agreement effective February 1997
covering CompX's Canadian employees provides for, among other things, wage rate
increases of 2.5% to 3% per year.

     About 60% of the Company's component products sales are generated by its
Canadian operations.  About two-thirds of these Canadian-produced sales are
denominated in U.S. dollars while substantially all of the related costs are
incurred in Canadian dollars.  Consequently, relative changes in the U.S.
dollar/Canadian dollar exchange rate impact operating results.  Fluctuations in
the value of the U.S. dollar relative to the Canadian dollar favorably impacted
operating results in 1995 compared with 1994 and unfavorably impacted 1996
operating results compared with 1995.

FAST FOOD


                                                YEARS ENDED DECEMBER 31,                    % CHANGE

                                           1994           1995           1996          1994-95         1995-96

                                               (IN MILLIONS)
                                                                                        
Net sales                                  $115.5        $115.4         $116.0          - 0%           + 1%
Operating income                              9.0           7.5            8.9          -17%           +18%

Operating income margin                        8%            7%             8%

Arby's units operated:
  At end of year                              162            158            150         - 2%           - 5%
  Average during the year                     159            158            152         - 1%           - 4%



     Comparable store sales increased 2% in 1996 compared to 1995.  Operating
income and margins improved due to successful marketing promotions, reduced
training and recruiting costs associated with the slower rate of opening new
stores in 1996 and closure of certain under-performing units.  Excluding the
effect of a 53rd week in 1994, comparable store sales were relatively flat in
1995 compared to 1994, and margins in 1995 were adversely impacted by higher
labor costs and discounts associated with competitive promotions.

     A significant portion of Sybra's restaurant employees work on a part-time
basis and are paid at rates related to the minimum wage rate.  Restaurant labor
costs currently approximate 29% of sales. The two-step, 90-cent increase in the
minimum wage rate which became effective October 1, 1996 increased Sybra's labor
costs.  Sybra concurrently implemented certain price increases to offset the
impact of the first step of the October 1, 1996 wage rate increase.  Any further
increase in the minimum wage rate or legislation requiring mandatory medical
insurance benefits to part-time employees would further increase Sybra's labor
costs.  Although Sybra's competitors would likely experience similar increases,
there can be no assurance that further increases in sales prices can be
implemented to offset future increases in these costs.

     Sybra opened 17 new stores during the past three years (one in 1996).
Sybra continually evaluates the profitability of its individual restaurants,
closed 27 stores during the past three years (9 in 1996) and intends to continue
to close unprofitable stores when appropriate.  Costs associated with store
closings were $1.4 million in 1994, $.9 million in 1995 and $1.2 million in
1996.  Sybra currently expects a net increase of about three stores in 1997 as
it plans to open six new stores and close at least three underperforming units.
The first new unit for 1997 is currently under construction and is scheduled to
open by the end of the first quarter.
     The Company has executed agreements involving the sale of its fast food
operations conducted by Sybra.  See Note 18 to the Consolidated Financial
Statements.  If completed, the transactions are expected to close in the second
quarter of 1997, at which time the Company estimates it would report a pre-tax
gain on disposal in excess of $24 million.  There can be no assurance that any
such transactions will be completed.

WASTE MANAGEMENT

     Waste Control Specialists LLC, formed in November 1995, was constructing
its West Texas facility during 1995 and 1996.  Waste Control Specialists
reported a loss of $.5 million during the last two months of 1995 and a $6.4
million loss in 1996 during its development stage.  The Company received its
first wastes for disposal in February 1997.

     Valhi is entitled to a 20% cumulative preferential return on its $25
million investment in Waste Control Specialists after which earnings are
generally split 50/50.  The liabilities assumed by Waste Control Specialists
exceeded the carrying value of the assets contributed by the other 50%-owner by
approximately $3 million.  Accordingly, all of Waste Control Specialists' income
or loss will accrue to Valhi until Waste Control Specialists reports positive
equity attributable to the other 50%-owner.

GENERAL CORPORATE AND OTHER ITEMS

     General corporate.  Net general corporate expenses in 1996 were lower than
in 1995 due primarily to lower provisions for environmental remediation costs as
well as the effect of a $2.8 million litigation settlement gain and a $2.3
million gain on disposition of a surplus grain facility in 1996.  Net general
corporate expenses in 1995 declined compared to the 1994 pro forma amount as
lower environmental remediation and litigation costs at NL in 1995 more than
offset NL's 1994 $20 million litigation settlement gain.  General corporate
expenses in 1997 are expected to be significantly higher than in 1996 due
principally to the $30 million pre-tax charge from adoption of the new standard
regarding accounting for environmental remediation liabilities.  See Note 18 to
the Consolidated Financial Statements.  Securities earnings in 1994 were reduced
by a first quarter 1994 decline in the market value of certain fixed-income
investments, while average balances available for investment were lower in 1996
compared with 1995.  Securities earnings is expected to increase significantly
in 1997 due principally to the impact of (i) distributions to be received from
The Amalgamated Sugar Company LLC, which will be reported as dividend income,
and (ii) interest earned on Valhi's loans to Snake River Sugar Company.  See
Note 20 to the Consolidated Financial Statements.

     Interest expense.  Interest expense declined in 1996 due primarily to lower
average variable interest rates, principally NL's DM-denominated debt, partially
offset by higher average levels of such debt.  Interest expense in 1995
approximated the 1994 pro forma amount as lower borrowing levels associated with
NL's DM and other bank loans and lower average interest rates on NL's DM-
denominated debt were offset by changes in currency exchange rates and higher
average U.S. variable borrowing rates.  Interest expense is expected to increase
significantly in 1997 due to, among other things, Valhi's $250 million in loans
from Snake River Sugar Company.  See Note 20 to the Consolidated Financial
Statements.

     At December 31, 1996, approximately $650 million of consolidated
indebtedness, principally publicly-traded debt, bears interest at fixed interest
rates averaging 11.1%.  The weighted average interest rate on $469 million of
outstanding variable rate borrowings at December 31, 1996 was 5.3%, down from
6.4% on outstanding variable rate borrowings at December 31, 1995 and 7.4% at
December 31, 1994.  These declines in average interest rates are due in large
part to lower rates on NL's DM-denominated borrowings.
     NL has significant DM-denominated variable interest rate borrowings and,
accordingly, NL's interest expense is also subject to currency fluctuations.
Periodic cash interest payments are not required on Valhi's 9.25% deferred
coupon LYONs, and NL's 13% Discount Notes do not require periodic interest
payments until 1998.  As a result, current cash interest expense payments are
lower than accrual basis interest expense.

     Minority interest.  Minority interest in earnings in 1996 consists
principally of NL dividends paid to stockholders other than Valhi.  Based on the
continuing decline in TiO2 selling prices and the current TiO2 industry pricing
outlook, NL's Board of Directors suspended its quarterly dividend in the fourth
quarter of 1996.  Because NL did not pay any dividends in 1995, all of NL's net
income in 1995 accrued to Valhi for financial reporting purposes.  Minority
interest in earnings in 1995 (and pro forma 1994) relates to certain partially-
owned foreign subsidiaries of NL, certain of which minority interest was
purchased by Rheox in early 1996.  At December 31, 1996, NL separately reported
a shareholders' deficit of approximately $203 million and, as a result, no
minority interest in NL Industries is recorded in the Company's consolidated
balance sheet.  Until such time as NL reports positive shareholders' equity in
its separate financial statements, all of NL's undistributed earnings will
accrue to the Company for financial reporting purposes.

PROVISION FOR INCOME TAXES

     The principal reasons for the difference between the Company's effective
income tax rates and the U.S. federal statutory income tax rates are explained
in Note 15 to the Consolidated Financial Statements.  Income tax rates vary by
jurisdiction (country and/or state), and relative changes in the geographic mix
of the Company's pre-tax earnings can result in fluctuations in the Company's
consolidated effective income tax rate.  As discussed in Note 20 to the
Consolidated Financial Statements, The Amalgamated Sugar Company's results of
operations are presented on the equity method during 1994, 1995 and 1996.
Amalgamated is a member of the consolidated U.S. tax group of which Valhi and
Contran are members, and consequently the Company did not provide any
incremental income taxes related to such earnings.  Certain subsidiaries,
including NL, are not members of the consolidated U.S. tax group, and the
Company does provide incremental income taxes on such earnings.  Both of these
factors impact the Company's overall effective tax rate.

     The provision for income taxes in 1995 includes net deferred income tax
benefits resulting from changes in the U.S./Canada income tax treaty and the
reduction of NL's deferred income tax valuation allowance to recognize the
future benefit of certain tax credits.  In both 1994 and 1996, the geographic
mix of pre-tax income included losses in certain of NL's tax jurisdictions for
which no current refund was available and for which recognition of a deferred
tax asset was not considered appropriate.  All of these factors also impacted
the Company's overall effective tax rate.  See Note 15 to the Consolidated
Financial Statements.

EQUITY IN EARNINGS OF AMALGAMATED

     As discussed in Note 20 to the Consolidated Financial Statements, The
Amalgamated Sugar Company's results of operations are presented on the equity
method during 1994, 1995 and 1996.  Amalgamated's sales, operating income and
net earnings for each of the past three years are presented in Note 20 to the
Consolidated Financial Statements. Beginning in 1997, the Company will report
distributions received from The Amalgamated Sugar Company LLC as dividend
income.

     Average sugar selling prices in 1996 were 6% higher than in 1995.
Reflecting a smaller crop size, refined sugar sales volume in 1996 (15.9 million
cwt) decreased 13% from the record levels of 1995.  An increased extraction rate
in 1996, in part due to the implementation of certain recently-completed
productivity improvement capital projects, along with a higher sugar content of
the beets have resulted in a lower beet cost per hundredweight ("cwt")of sugar
produced, lower aggregate sugar processing costs and improved FIFO-based
earnings in 1996 compared to 1995.

     Refined sugar sales volume in 1995 (18.2 million cwt) was an all-time
record.  Due primarily to an abnormally high yield per acre, Amalgamated's sugar
production from the crop harvested in the fall of 1994 was approximately 10%
higher than its previous record crop.  The record volume was aided by expiration
of the U.S. government-imposed restrictive marketing allotments at the end of
the third quarter of 1995, and fourth quarter 1995 volume was almost 50% higher
than the same period in 1994 when marketing allotments were in effect.

     Average refined sugar selling prices in 1995 increased slightly (1%)
compared to 1994 and were aided in part by the effect of marketing allotments
imposed on domestic producers during the crop year ended September 30, 1995.  To
help reduce the relatively high level of sugar inventories resulting from the
record crop, Amalgamated made limited sales into foreign markets during the
first nine months of 1995, which sales were excluded from the domestic
allotments.  Net returns from foreign sales are typically lower than from
domestic sales.  The large sugarbeet crop harvested in the fall of 1994 and
adverse weather conditions resulted in a long and difficult processing campaign.
These factors, along with a lower sugar content of the beets, contributed to a
10% increase in per hundredweight ("cwt") crop processing costs.

     Sugarbeet purchase cost is the largest cost component of producing refined
sugar and the price paid for sugarbeets is, under the terms of contracts with
the sugarbeet growers, a function of the average selling price of Amalgamated's
refined sugar.  As a result, changes in sugar selling prices impact sugarbeet
purchase costs as well as revenues and serve as a partial hedge against changing
prices.  However, the impact of related LIFO inventory adjustments can
significantly affect operating income and margin comparisons relative to FIFO
basis comparisons.

EQUITY IN EARNINGS OF NL PRIOR TO CONSOLIDATION

     As discussed in Note 3 to the Consolidated Financial Statements, the
Company's interest in NL was reported by the equity method during 1994.  As
discussed above and in Note 3, the Company consolidated NL's results of
operations beginning in 1995.  The Company's equity in NL's separately-reported
results of operations for 1994, summarized below, differs from its effective
percentage interest in NL's separate results.  Amortization of basis differences
arising from purchase accounting adjustments made by the Company in conjunction
with the acquisition of its interests in NL generally reduces earnings, or
increases losses, as reported by the Company compared to amounts separately
reported by NL.     NL's sales and operating income are discussed under
"Chemicals" above.


                                                                                                     AMOUNT

                                                                                                 (IN MILLIONS)
                                                                                                   
Net sales                                                                                             $888.0



Operating income                                                                                      $111.3
Corporate, net                                                                                         (40.8)
Interest expense                                                                                       (83.9)

                                                                                                       (13.4)
Income tax expense                                                                                      (9.8)
Minority interest                                                                                        (.8)


Loss from continuing operations                                                                       $(24.0)



The Company's equity in NL's losses, including
 amortization of basis differences

                                                                                                      $(25.1)






DISCONTINUED OPERATIONS

     See Note 19 to the Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES:

CONSOLIDATED CASH FLOWS

     General.  The consolidation of NL's cash flows beginning in 1995
significantly impacts cash flow comparisons with 1994.

     Operating activities.  Cash provided by operating activities before changes
in assets and liabilities was $23 million in 1994, $126 million in 1995 and $88
million in 1996.  Changes in assets and liabilities result primarily from the
timing of production, sales and purchases.  Under the terms of Internal Revenue
Code and similar state regulations regarding the timing of estimated tax
payments, the Company is not required to pay income taxes (approximately $39
million) related to Medite's 1996 asset sales of its timber and timberlands and
Irish MDF subsidiary to such tax authorities until 1997.  At that time, the
payment of such cash income taxes will be shown as a reduction in cash flows
from operating activities even though the pre-tax proceeds from disposition of
such assets are shown as part of cash flow from investing activities.  Cash flow
from operating activities comparisons are also impacted by relatives changes in
the Company's portfolio of marketable trading securities.  Changes in such
portfolio generated approximately $4 million of cash in 1994 and $51 million in
1995.  Noncash interest expense consists of amortization of original issue
discount on certain Valhi and NL indebtedness and amortization of deferred
financing costs.

     Investing activities.  Capital expenditures are disclosed by business
segment in Note 2 to the Consolidated Financial Statements.

     At December 31, 1996, the estimated cost to complete capital projects in
process approximated $10 million, most of which relates to environmental
protection and compliance programs and productivity-enhancing equipment at NL.
The Company's total capital expenditures for 1997 are estimated at approximately
$51 million, down from $76 million in 1996 due principally to lower planned
spending by NL.  Capital expenditures in 1997 are expected to be financed
primarily from operations or existing cash resources and credit facilities.

     During 1996, Valhi purchased $15 million of NL common stock, Rheox acquired
the minority interest of certain of its non-U.S. subsidiaries for $5 million and
Valhi contributed $17 million to Waste Control Specialists.  During 1995, CompX
International purchased the assets of a Canadian workstation/drawer slide
competitor for an aggregate of $6 million, Valhi purchased $13 million of NL
common stock and Valhi invested $5 million in Waste Control Specialists.  During
1994, Valhi purchased $15 million of NL common stock.

     Financing activities.  Net borrowings in 1996 include (i) DM 144 million
($96 million when borrowed) under NL's DM credit facility used primarily to both
fund NL's operations and fund the German income tax settlement payments
discussed below and (ii) $13 million under Valhi short-term credit facilities.
Repayments of indebtedness include scheduled principal payments on NL term
loans.

     Net repayments of indebtedness in 1995 relate primarily to (i) $39 million
of net short-term borrowings under NL DM-denominated short-term credit lines and
(ii) principal repayments under NL term loans, including a $10 million
prepayment under Rheox's term loan.

     After giving effects to the amendments to the DM credit facility and the
Rheox term loan discussed below, unused lines of credit available for borrowing
under revolving credit facilities at December 31, 1996, including the DM
facility, approximated $124 million.

CHEMICALS - NL INDUSTRIES

     Demand, supply and pricing within the TiO2 industry is cyclical, and
changes in industry economic conditions can significantly impact NL's earnings
and operating cash flows.  During 1996, declining TiO2 prices unfavorably
impacted NL's operating income and cash flows from operations comparisons with
1995.  NL generated $58 million in cash flows from operating activities before
changes in assets and liabilities in 1996 compared to $105 million in 1995 and
$39 million in 1994.  Relative changes in NL's inventories, receivables and
payables (excluding the effect of foreign currency translation), including
relative changes in NL's portfolio of marketable trading securities, used $42
million of net cash in 1996, compared to a $33 million use of net cash in 1995.

     Average TiO2 selling prices began a downward trend in the last half of
1995, which trend continued throughout 1996.  NL expects TiO2 prices will begin
to increase during 1997, although NL's average TiO2 selling price in 1997 is
expected to be lower than the 1996 average.  However, no assurance can be given
that price trends will conform to NL's expectations and future cash flows will
be adversely affected should price trends be lower than NL's expectations.  In
order to improve its near-term liquidity, NL refinanced Rheox's term loan in
January 1997, generating approximately $125 million cash,  and used the net cash
proceeds, along with other available funds, to prepay a portion of the DM credit
facility.  See Note 9 to the Consolidated Financial Statements.  In addition, NL
and its lenders modified certain financial covenants of the DM credit facility,
and NL has guaranteed the facility.  As a result of the refinancing and
prepayment, NL's aggregate scheduled debt payments for 1997 and 1998 decreased
by $103 million ($64 million in 1997 and $39 million in 1998).
     Based upon NL's expectations for the TiO2 industry and anticipated demands
on NL's cash resources as discussed herein, NL expects to have sufficient
liquidity to meet its near-term obligations including operations, capital
expenditures and debt service.  To the extent that actual developments differ
from NL's expectations, NL's liquidity could be adversely affected.

     NL's capital expenditures during the past three years aggregated $168
million, including $67 million ($26 million in 1996) for NL's ongoing
environmental protection and compliance programs, including a Canadian waste
acid neutralization facility, a Norwegian onshore tailings disposal system and
various off-gas desulfurization systems.  NL's estimated 1997 capital
expenditures are $35 million and include $3 million in the area of environmental
protection and compliance, primarily related to the off-gas desulfurization and
water treatment chemical purification systems. NL spent $9 million in 1995 and
$18 million in 1996, and plans to spend an additional $8 million in 1997, in
capital expenditures related to a debottlenecking project at its Leverkusen,
Germany chloride process TiO2 facility that is expected to increase NL's
worldwide annual attainable TiO2 production capacity to about 410,000 metric
tons in 1997.  The capital expenditures of the TiO2 manufacturing joint venture
are not included in NL's capital expenditures.

     NL and its subsidiaries held $114 million of cash and cash equivalents (44%
held by non-U.S. subsidiaries at December 31, 1996), of which $11 million is
restricted.  At December 31, 1996, after giving effect for the refinancing
discussed above, NL had cash and cash equivalents of $87 million and had $9
million and $102 million available for borrowing under existing U.S. and non-
U.S. credit facilities, respectively.  The terms of intercompany notes from KII
payable to NL mirror the terms of NL's publicly-traded debt and are designed to
facilitate the flow of funds from NL's subsidiaries to service such
indebtedness.  At December 31, 1996, NL had complied with, or had obtained a
waiver for, all financial covenants governing its debt agreements.
     Certain of NL's U.S. and non-U.S. income tax returns, including Germany,
are being examined and tax authorities have or may propose tax deficiencies.  NL
has reached an agreement with the German tax authorities regarding examinations
which resolve certain significant tax contingencies for years through 1990.  NL
received certain final assessments and paid approximately DM 50 million ($32
million when paid), including interest, in 1996 in final settlement of the
agreed issues.  Certain other German tax contingencies remain outstanding and
will continue to be litigated.  Although NL believes that it will ultimately
prevail in the litigation, NL has granted a DM 100 million ($64 million at
December 31, 1996) lien on its Nordenham, Germany TiO2 plant in favor of the
German tax authorities until the litigation is resolved.  No assurance can be
given that this litigation will be resolved in NL's favor in view of the
inherent uncertainties involved in court rulings.  NL believes that it has
adequately provided accruals for additional income taxes and related interest
expense which may ultimately result from all such examinations and believes that
the ultimate disposition of such examinations should not have a material adverse
effect on its consolidated financial position, results of operations or
liquidity.

     At December 31, 1996, NL had recorded net deferred tax liabilities of $152
million.  NL, which is not a member of the Contran Tax Group, operates in
numerous tax jurisdictions, in certain of which it has temporary differences
that net to deferred tax assets (before valuation allowance).  NL has provided a
deferred tax valuation allowance of $207 million at December 31, 1996,
principally related to the U.S. and Germany, offsetting deferred tax assets
which NL believes do not currently meet the "more-likely-than-not" recognition
criteria.

     In addition to the chemicals businesses conducted through Kronos and Rheox,
NL also has certain interests and associated liabilities relating to certain
discontinued or divested businesses.
     NL has been named as a defendant, PRP, or both, in a number of legal
proceedings associated with environmental matters, including waste disposal
sites, mining locations and facilities currently or previously owned, operated
or used by NL, certain of which are on the U.S. EPA's Superfund National
Priorities List or similar state lists.  On a quarterly basis, NL evaluates the
potential range of its liability at sites where it has been named as a PRP or
defendant.  NL believes it has provided adequate accruals ($113 million at
December 31, 1996) for reasonably estimable costs of such matters, but NL's
ultimate liability may be affected by a number of factors, including changes in
remedial alternatives and costs and the allocation of such costs among PRPs.  NL
is also a defendant in a number of legal proceedings seeking damages for
personal injury and property damage arising out of the sale of lead pigments and
lead-based paints.  NL has not accrued any amounts for the pending lead pigment
and lead-based paint litigation.  There is no assurance that NL will not incur
future liability in respect of this pending litigation in view of the inherent
uncertainties involved in court and jury rulings in pending and possible future
cases.  However, based on, among other things, the results of such litigation to
date, NL believes that the pending lead pigment and lead-based paint litigation
is without merit.  Liability that may result, if any, cannot reasonably be
estimated.  NL currently believes the disposition of all claims and disputes,
individually or in the aggregate, should not have a material adverse effect on
its consolidated financial position, results of operations or liquidity.  There
can be no assurance that additional matters of these types will not arise in the
future.  See Item 3 - "Legal Proceedings" and Note 18 to the Consolidated
Financial Statements.

     As discussed in "Results of Operations - Chemicals,"  NL has substantial
operations located outside the United States for which the functional currency
is not the U.S. dollar. As a result, the reported amount of NL's assets and
liabilities related to its non-U.S. operations, and therefore NL's consolidated
net assets, will fluctuate based upon changes in currency exchange rates.  The
carrying value of NL's net investment in its German operations is a net
liability due principally to its DM bank credit facility, while its net
investment in its other non-U.S. operations are net assets.

     NL periodically evaluates its liquidity requirements, alternative uses of
capital, capital needs and availability of resources in view of, among other
things, its debt service and capital expenditure requirements and estimated
future operating cash flows.  As a result of this process, NL has in the past
and may in the future seek to reduce, refinance, repurchase or restructure
indebtedness, raise additional capital, issue additional securities, modify its
dividend policy, restructure ownership interests, sell interests in subsidiaries
or other assets, or take a combination of such steps or other steps to manage
its liquidity and capital resources.  In the normal course of its business, NL
may review opportunities for the acquisition, divestiture, joint venture or
other business combinations in the chemicals industry.  In the event of any
future acquisition, NL may consider using its available cash, issuing its equity
securities or increasing its indebtedness to the extent permitted by the
agreements governing NL's existing debt. In this regard, the Indentures
governing NL's publicly-traded debt contain provisions which limit the ability
of NL and its subsidiaries to incur additional indebtedness or hold
noncontrolling interests in business units.

WASTE MANAGEMENT - WASTE CONTROL SPECIALISTS

     Waste Control Specialists capital expenditures from its November 1995
formation through 1996 approximated $12 million. Estimated capital expenditures
for projects in process, substantially all of which relate to the West Texas
facility, are approximately $4 million and are expected to be incurred
principally in 1997.  Such capital expenditures, along with its development
stage operating losses, will be funded primarily from Valhi's $25 million of
capital contributions ($5 million in 1995, $17 million in 1996 and the remaining
$3 million in 1997) as well as certain debt financing provided to Waste Control
Specialists by Valhi.  See Note 8 to the Consolidated Financial Statements.

OTHER

     The Company continues to explore additional expansion and/or acquisition
opportunities for its component products business.  At December 31, 1996, CompX
had $5 million of borrowing availability under existing Canadian credit
agreements, and Sybra had $28 million of borrowing availability under its
existing revolving credit agreements.

     Condensed cash flow data for Medite and Amalgamated is presented in Notes
19 and 20, respectively, to the Consolidated Financial Statements.

     Medite has made certain representations and warranties to the purchasers of
its timber and timberlands, Irish MDF subsidiary  and Oregon MDF facility
concerning, among other things, the assets sold.  Such representations are
customary in transactions of these types.  Medite has agreed to indemnify the
three purchasers for up to an aggregate of $6.5 million for certain breaches of
these representations and warranties.  As part of the transactions, Valhi has
agreed to guarantee Medite's indemnification obligations.  The Company does not
currently expect to be required to perform under any of these indemnification
obligations.

GENERAL CORPORATE - VALHI AND VALCOR

     Valhi's operations are conducted principally through subsidiaries and
affiliates (NL Industries, Valcor and Waste Control Specialists).  Valcor is an
intermediate parent company with operations conducted through its subsidiaries
(CompX International and Sybra).  Accordingly, Valhi's and Valcor's long-term
ability to meet their respective corporate obligations are dependent in large
measure on the receipt of dividends or other distributions from their respective
subsidiaries.  NL, which paid dividends in the first three quarters of 1996,
suspended its dividend in the fourth quarter.  Suspension of NL's dividend is
not currently expected to materially adversely impact Valhi's financial position
or liquidity.  Various credit agreements to which subsidiaries are parties
contain customary limitations on the payment of dividends, typically a
percentage of net income or cash flow; however, such restrictions have not
significantly impacted the Company's ability to service parent company level
obligations.  Neither Valhi nor Valcor has guaranteed any indebtedness of their
respective subsidiaries.

     Valhi's LYONs do not require current cash debt service.  Valhi owns 5.5
million shares of Dresser common stock, which shares are held in escrow for the
benefit of holders of the LYONs.  The LYONs are exchangeable at any time, at the
option of the holder, for the Dresser shares owned by Valhi.  Exchanges of LYONs
for Dresser stock would result in the Company reporting income related to the
disposition of the Dresser stock for both financial reporting and income tax
purposes, although no cash proceeds would be generated by such exchanges.  Cash
income taxes that would have been triggered at December 31, 1996 by exchanges of
all of the outstanding LYONs for Dresser stock at such date were approximately
$33 million.  Valhi continues to receive regular quarterly Dresser dividends
(presently $.17 per quarter) on the escrowed shares.  In addition, the Company
is required, at the option of the holder, to purchase the LYONs in October 1997
at the accreted value of approximately $405 per $1,000 principal amount at
maturity (approximately $153 million in October 1997).  Such redemption price
may be paid, at the option of Valhi, in cash, Dresser common stock, or a
combination thereof. At December 31, 1996, the LYONs had an accreted value
equivalent to approximately $26 per Dresser share, and the market price of the
Dresser common stock was $31 per share.  As long as the value of the underlying
Dresser shares exceeds the accreted value of the LYONS, the Company does not
expect a significant number of LYONs holder to seek redemption.  Because the
LYONS are redeemable at the option of the LYON holder in October 1997, the LYONS
are classified as a current liability and the Dresser shares are classified as a
current asset at December 31, 1996.
     During 1995 and 1996, Valhi purchased an additional $13 million and $15
million, respectively, of NL common stock.  In January 1997, Valhi made its
final $3 million contribution to Waste Control Specialists, following $5 million
contributed in 1995 and $17 million in 1996.

     In February 1997, the Company entered into a $4 million revolving credit
facility with Waste Control Specialists.  Borrowings by Waste Control
Specialists bear interest at prime plus 1% and are due no later than December
31, 1997.

     The after-tax proceeds from the disposition of Medite, net of repayments of
Medite's U.S. bank debt, is available for Valcor's general corporate purposes,
subject to compliance with certain covenants contained in the Valcor Senior Note
Indenture.  At December 31, 1996, Valcor had cash, cash equivalents and demand
loans to subsidiaries of approximately $140 million, a portion of which will be
used to pay cash income taxes in 1997 related to Medite's 1996 asset disposals
as discussed above.  Also under the terms of the Indenture, Valcor is required
to tender for a portion of the Valcor Notes, at par, to the extent that a
specified amount of these proceeds is not used to either permanently paydown
senior indebtedness of Valcor or its subsidiaries or invest in related
businesses, both as defined in the Indenture, within one year of disposition.
While Valcor is not yet required to execute a tender offer related to Medite's
asset dispositions, on March 20, 1997, Valcor announced it had initiated a
tender offer whereby Valcor would purchase up to $86.7 million principal amount
of Valcor Notes on a pro-rata basis, at par value, in satisfaction of the
covenant contained in the Indenture.  Pursuant to its terms, the tender offer
will expire on April 24, 1997, unless extended by Valcor.  The amount of Valcor
Notes which will ultimately be purchased by Valcor pursuant to the tender offer
is dependent upon the amount of Valcor Notes properly tendered.  Consequently,
there can be no assurance as to the amount of Valcor Notes which will ultimately
be purchased by Valcor.  The net proceeds from any disposition of the Company's
fast food operations, net of repayments of Sybra's bank indebtedness, would
similarly be available for Valcor's general corporate purposes.  If the
disposition of the Company's fast food operations is completed and none of those
net proceeds are used as provided in the Indenture, a portion of the Notes would
be subject to a subsequent tender offer.

     Valhi received approximately $73 million cash in early 1997 at the transfer
of control of its refined sugar business to Snake River Sugar Company, including
a net $11.5 million received from Amalgamated as a pre-closing dividend.  As
part of the transaction, Snake River made certain loans to Valhi aggregating
$250 million in January 1997. Snake River's sources of funds for its loans to
Valhi, as well as for the $14 million it contributed to The Amalgamated Sugar
Company LLC for its voting interest in the LLC, included cash capital
contributions by the grower members of Snake River and $192 million in debt
financing provided by Valhi in January 1997.  See Note 20 to the Consolidated
Financial Statements.  Valhi currently expects that distributions received from
the LLC, which are dependent in part upon the future operations of the LLC, will
exceed its debt service requirements under its $250 million loans from Snake
River.  The cash proceeds to Valhi upon the transfer of control of Amalgamated's
operations to Snake River, including amounts to be collected in the future from
Valhi's $192 million loans to Snake River, will be available for Valhi's general
corporate purposes.  The Company understands that Snake River intends to
refinance at least $100 million of such loans with a third party lender during
1997; however there can be no assurance that any such refinancing will occur.

     As discussed in Note 20 to the Consolidated Financial Statements, the
Company may, at its option, require the LLC to redeem the Company's interest in
the LLC beginning in January 2002, and the LLC has the right to redeem the
Company's interest in the LLC beginning in January 2027.  In addition, beginning
in January 2002 the Company has the right to require Snake River to purchase the
Company's interest in the LLC.  The redemption/purchase price is generally $250
million plus the amount of any deferrals of cash distributions from the LLC.  In
the event the Company either requires the LLC to redeem the Company's interest
in the LLC or requires Snake River to purchase the Company's interest in the
LLC, Snake River has the right to accelerate the maturity of and call the $250
million of Valhi loans.  If the Company requires the LLC to redeem the Company's
interest in the LLC, then Snake River is required, under the terms of the LLC
Company Agreement, to contribute to the LLC the cash received from calling the
Valhi loans.  Redemption or purchase of the interest in the LLC as discussed
above would result in the Company reporting income related to the disposition of
its LLC interest for both financial reporting and income tax purposes, although
the net cash proceeds that would be generated from such a disposition would
likely be less than the specified redemption/purchase price due to Snake River's
ability to call its $250 million loans to Valhi.  In addition, such net cash
proceeds could be less than the income taxes that would become payable as a
result of the disposition.

     The Company routinely compares its liquidity requirements and alternative
uses of capital against the estimated future cash flows to be received from its
subsidiaries, and the estimated sales value of those units.  As a result of this
process, the Company has in the past and may in the future seek to raise
additional capital, refinance or restructure indebtedness, repurchase
indebtedness in the market or otherwise, modify its dividend policy, consider
the sale of interests in subsidiaries, affiliates, business units, marketable
securities or other assets, or take a combination of such steps or other steps,
to increase liquidity, reduce indebtedness and fund future activities.  Such
activities have in the past and may in the future involve related companies.

     The Company routinely evaluates acquisitions of interests in, or
combinations with, companies, including related companies, perceived by
management to be undervalued in the marketplace.  These companies may or may not
be engaged in businesses related to the Company's current businesses.  The
Company intends to consider such acquisition activities in the future and, in
connection with this activity, may consider issuing additional equity securities
and increasing the indebtedness of the Company, its subsidiaries and related
companies.  From time to time, the Company and related entities also evaluate
the restructuring of ownership interests among their respective subsidiaries and
related companies.  In this regard, the Indentures governing the publicly-traded
debt of NL and Valcor contain provisions which limit the ability of NL, Valcor
and their respective subsidiaries to incur additional indebtedness or hold
noncontrolling interests in business units.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information called for by this Item is contained in a separate section
of this Annual Report.  See "Index of Financial Statements and Schedules" (page
F).

ITEM 9.   CHANGES  IN AND  DISAGREEMENTS WITH  ACCOUNTANTS ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

     None.


                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this Item is incorporated by reference to
Valhi's definitive Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days after the end of the
fiscal year covered by this report (the "Valhi Proxy Statement").

ITEM 11.  EXECUTIVE COMPENSATION
     The information required by this Item is incorporated by reference to the
Valhi Proxy Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item is incorporated by reference to the
Valhi Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is incorporated by reference to the
Valhi Proxy Statement.  See Note 17 to the Consolidated Financial Statements.


                                    PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

 (a) and (d)Financial Statements and Schedules

          The Registrant

               The consolidated financial statements and schedules listed on the
          accompanying Index of Financial Statements and Schedules (see page F)
          are filed as part of this Annual Report.

          50%-or-less owned persons or subsidiaries not consolidated.

          Consolidated financial statements of Waste Control Specialists LLC and
          The Amalgamated Sugar Company are filed as part of this Annual Report
          pursuant to Rule 3.09 of Regulation S-X.


 (b)           Reports on Form 8-K

                    Reports on Form 8-K filed for the quarter ended December 31,
               1996.

               October 25, 1996    - Reported Items 5 and 7.
               October 28, 1996  - Reported Items 5 and 7.
               October 31, 1996  - Reported Items 5 and 7.
               November 20, 1996 - Reported Items 5 and 7.
               December 31, 1996 - Reported Items 2 and 7.


 (c)           Exhibits

                    Included as exhibits are the items listed in the Exhibit
               Index.  Valhi will furnish a copy of any of the exhibits listed
               below upon payment of $4.00 per exhibit to cover the costs to
               Valhi of furnishing the exhibits.  Instruments defining the
               rights of holders of long-term debt issues which do not exceed
               10% of consolidated total assets will be furnished to the
               Commission upon request.


Item No.                                    Exhibit Index


 3.1              Restated Articles of Incorporation of the Registrant -
                  incorporated by reference to Appendix A to the
                  definitive Prospectus/Joint Proxy Statement of The
                  Amalgamated Sugar Company and LLC Corporation (File
                  No. 1-5467) dated February 10, 1987.

 3.2              By-Laws of the Registrant as amended - incorporated by
                  reference to Exhibit 3.1 of the Registrant's Quarterly
                  Report on Form 10-Q for the quarter ended March 31,
                  1992.

 4.1              Form of Indenture between the Registrant and
                  NationsBank of Georgia, N.A., as Trustee, governing
                  Liquid Yield Option Notes due 2007 - incorporated by
                  reference to Exhibit 4.1 to a Registration Statement on
                  Form S-2 (No. 33-49866) filed by the Registrant.

 4.2              Indenture dated November 1, 1993 governing Valcor's
                  9 5/8% Senior Notes due 2003, including form of note -
                  incorporated by reference to Exhibit 4.1 of Valcor's
                  Quarterly Report on Form 10-Q (File No. 33-63044) for
                  the quarter ended September 30, 1993.

 4.3              Indenture dated October 20, 1993 governing NL's 11 3/4%
                  Senior Secured Notes due 2003, including form of note,
                  - incorporated by reference to Exhibit 4.1 of NL's
                  Quarterly Report on Form 10-Q (File No. 1-640) for the
                  quarter ended September 30, 1993.

 4.4              Indenture dated October 20, 1993 governing NL's 13%
                  Senior Secured Discount Notes due 2005, including form
                  of note - incorporated by reference to Exhibit 4.6 of
                  NL's Quarterly Report on Form 10-Q (File No. 1-640) for
                  the quarter ended September 30, 1993.

10.1              Form of Intercorporate Services Agreement between the
                  Registrant and Contran Corporation - incorporated by
                  reference to Exhibit 10.1 of the Registrant's Annual
                  Report on Form 10-K (File No. 1-5467) for the year
                  ended December 31, 1992.

10.2              Intercorporate Services Agreement by and between
                  Contran Corporation and NL effective as of January 1,
                  1996 - incorporated by reference to Exhibit 10.41 to
                  NL's Annual Report on Form 10-K (File No. 1-640) for
                  the year ended December 31, 1996.

10.3              Asset Purchase Agreement between Medite Corporation and
                  Rogue Resources LLC dated October 7, 1996 -
                  incorporated by reference to Exhibit 10.1 of Valcor's
                  Quarterly Report on Form 10-Q (File No. 33-63044) for
                  the quarter ended September 30, 1996.

10.4              Form of Guarantee between Valhi, Inc. and Rogue
                  Resources LLC.

10.5              Share Subscription and Redemption Agreement among
                  Medite Corporation, Willamette Industries, Inc. and
                  Medford International Holdings dated November 4, 1996 -
                  incorporated by reference to Exhibit 10.1 of Valcor's
                  Quarterly Report on Form 10-Q (File No. 33-63044) for
                  the quarter ended September 30, 1996.

10.6              Form of Guarantee between Valhi, Inc. and Willamette
                  Industries, Inc.

10.7              Asset Purchase Agreement between Medite Corporation and
                  SierraPine, a California limited partnership, dated
                  January 31, 1997 - incorporated by reference to Exhibit
                  10.6 of Valcor's Annual Report on Form 10-K (File No.
                  33-63044) for the year ended December 31, 1996.

10.8              Form of Guarantee between Valhi, Inc. and SierraPine.

10.9              Asset Purchase Agreement between Sybra, Inc., Valcor,
                  Inc. and U.S. Restaurant Properties Master L.P. dated
                  December 23, 1996 - incorporated by reference to
                  Exhibit 10.7 of Valcor's Annual Report on Form 10-K
                  (File No. 33-63044) for the year ended December 31,
                  1996.

10.10             Stock Purchase Agreement between Valcor, Inc. and
                  I.C.H. Corporation dated February 7, 1997 -
                  incorporated by reference to Exhibit 10.8 of Valcor's
                  Annual Report on Form 10-K (File No. 33-63044) for the
                  year ended December 31, 1996.

10.11*            Valhi, Inc. 1987 Incentive Stock Option - Stock
                  Appreciation Rights Plan, as amended - incorporated by
                  reference to Exhibit 10.4 to the Registrant's Annual
                  Report on Form 10-K for the year ended December 31,
                  1994.

10.12*            Valhi, Inc. 1997 Stock Option Plan.

10.13*            Valhi, Inc. 1990 Non-Employee Director Stock Option
                  Plan - incorporated by reference to Exhibit 4.1 of a
                  Registration Statement on Form S-8 (No. 33-41508) filed
                  by the Registrant.

10.14*            Executive Severance Agreement effective as of February
                  16, 1994 by and between Joseph S. Compofelice
                  (Executive Vice President of the Registrant) and NL -
                  incorporated by reference to Exhibit 10.2 of NL's
                  Quarterly Report on Form 10-Q (File No. 1-640) for the
                  quarter ended September 30, 1996.

10.15*            1989 Long Term Performance Incentive Plan of NL
                  Industries, Inc. - incorporated by reference to Exhibit
                  B to NL's Proxy Statement on Schedule 14A (File No. 1-
                  640) for the annual meeting held on May 8, 1996.

10.16*            Supplemental Executive Retirement Plan for Executives
                  and Officers of NL Industries, Inc. effective as of
                  January 1, 1991 - incorporated by reference to Exhibit
                  10.26 to NL's Annual Report on Form 10-K (File No. 1-
                  640) for the year ended December 31, 1992.

10.17*            NL Industries, Inc. Variable Compensation Plan -
                  incorporated by reference to Exhibit A of NL's Proxy
                  Statement on Schedule 14A (File No. 1-640) for the
                  annual meeting held on May 8, 1996.

10.18             Second Amended and Restated Loan Agreement dated
                  January 31, 1997 among Kronos International, Inc., the
                  banks set forth therein and Hypobank International
                  S.A., as Agent - incorporated by reference to Exhibit
                  10.2 of NL's Annual Report on Form 10-K (File No.
                  1-640) for the year ended December 31, 1996.

10.19             Formation Agreement dated January 3, 1997 (to be
                  effective December 31, 1996) between Snake River Sugar
                  Company and The Amalgamated Sugar Company of The
                  Amalgamated Sugar Company LLC.

10.20             Company Agreement of The Amalgamated Sugar Company LLC
                  dated January 3, 1997 (to be effective December 31,
                  1996).

10.21             Subordinated Promissory Note in the principal amount of
                  $37.5 million between Valhi, Inc. and Snake River Sugar
                  Company, and the related Pledge Agreement, both dated
                  January 3, 1997.

10.22             Limited Recourse Promissory Note in the principal
                  amount of $212.5 million between Valhi, Inc. and Snake
                  River Sugar Company, and the related Limited Recourse
                  Pledge Agreement, both dated January 3, 1997.

10.23             Loan and Security Agreement between Snake River Sugar
                  Company, as Borrower, and Valhi, Inc., as Lender, dated
                  January 3, 1997.

10.24             Formation Agreement dated as of October 18, 1993 among
                  Tioxide Americas Inc., Kronos Louisiana, Inc. and
                  Louisiana Pigment Company, L.P. - incorporated by
                  reference to Exhibit 10.2 of NL's Quarterly Report on
                  Form 10-Q (File No. 1-640) for the quarter ended
                  September 30, 1993.
10.25             Joint Venture Agreement dated as of October 18, 1993
                  between Tioxide Americas Inc. and Kronos Louisiana,
                  Inc. - incorporated by reference to Exhibit 10.3 of
                  NL's Quarterly Report on Form 10-Q (File No. 1-640) for
                  the quarter ended September 30, 1993.

10.26             Amendment No. 1 to Joint Venture Agreement dated as of
                  December 20, 1995 between Tioxide Americas Inc. and
                  Kronos Louisiana, Inc. - incorporated by reference to
                  Exhibit 10.20 of NL's Annual Report on Form 10-K (File
                  No. 1-640) for the year ended December 31 1995.

10.27             Kronos Offtake Agreement dated as of October 18, 1993
                  by and between Kronos Louisiana, Inc. and Louisiana
                  Pigment Company, L.P. - incorporated by reference to
                  Exhibit 10.4 of NL's Quarterly Report on Form 10-Q
                  (File No. 1-640) for the quarter ended September 30,
                  1993.

10.28             Amendment No. 1 to Kronos Offtake Agreement dated as of
                  December 20, 1995 between Kronos Louisiana, Inc. and
                  Louisiana Pigment Company, L.P. - incorporated by
                  reference to Exhibit 10.22 of NL's Annual Report on
                  Form 10-K (File No. 1-640) for the year ended December
                  31 1995.

10.29             Master Technology and Exchange Agreement dated as of
                  October 18, 1993 among Kronos, Inc., Kronos Louisiana,
                  Inc., Kronos International, Inc., Tioxide Group Limited
                  and Tioxide Group Services Limited - incorporated by
                  reference to Exhibit 10.8 of NL's Quarterly Report on
                  Form 10-Q (File No. 1-640) for the quarter ended
                  September 30, 1993.

10.30             Allocation Agreement dated as of October 18, 1993
                  between Tioxide Americas Inc., ICI American Holdings,
                  Inc., Kronos, Inc. and Kronos Louisiana, Inc. -
                  incorporated by reference to Exhibit 10.10 to NL's
                  Quarterly Report on Form 10-Q (File No. 1-640) for the
                  quarter ended September 30, 1993.

10.31             Lease Contract dated June 21, 1952, between
                  Farbenfabrieken Bayer Aktiengesellschaft and
                  Titangesellschaft mit beschrankter Haftung (German
                  language version and English translation thereof) -
                  incorporated by reference to Exhibit 10.14 of NL's
                  Annual Report on Form 10-K (File No. 1-640) for the
                  year ended December 31, 1985.

10.32             Agreement dated February 8, 1984 between Bayer AG and
                  Kronos Titan GmbH (German language version and English
                  translation thereof) - incorporated by reference to
                  Exhibit 10.16 of NL's Annual Report on Form 10-K (File
                  No. 1-640) for the year ended December 31, 1985.

10.33             Contract on Supplies and Services among Bayer AG,
                  Kronos Titan GmbH and Kronos International, Inc. dated
                  June 30, 1995 (English translation from German language
                  document) - incorporated by reference to Exhibit 10.1
                  of NL's Quarterly Report on Form 10-Q (File No. 1-640)
                  for the quarter ended September 30, 1995.

10.34             Richards Bay Slag Sales Agreement dated May 1, 1995
                  between Richards Bay Iron and Titanium (Proprietary)
                  Limited and Kronos, Inc. - incorporated by reference to
                  Exhibit 10.17 to NL's Annual Report on Form 10-K (File
                  No. 1-640) for the year ended December 31, 1995.

10.35             Registration Rights Agreement dated October 30, 1991,
                  by and between NL and Tremont - incorporated by
                  reference to Exhibit 4.3 of NL's Annual Report on Form
                  10-K (File No. 1-640) for the year ended December 31,
                  1991.

10.36             Insurance Sharing Agreement, effective January 1, 1990,
                  by and between NL, NL Insurance, Ltd. (an indirect
                  subsidiary of Tremont Corporation) and Baroid
                  Corporation - incorporated by reference to Exhibit
                  10.20 to NL's Annual Report on Form 10-K (File No. 1-
                  640) for the year ended December 31, 1991.

21.1              Subsidiaries of the Registrant.

23.1              Consent of Coopers & Lybrand L.L.P.

23.2              Consent of KPMG Peat Marwick LLP.

23.3              Consent of Arthur Andersen LLP.

27.1              Financial Data Schedule for the year ended December 31,
                  1996.

27.2              Reclassified Financial Data Schedule for the (i) three-
                  month period ended March 31, 1996, (ii) six-month
                  period ended June 30, 1996 and (iii) nine-month period
                  ended September 30, 1996.

27.3              Reclassified Financial Data Schedule for the (i) three-
                  month period ended March 31, 1995, (ii) six-month
                  period ended June 30, 1995, (iii) nine-month period
                  ended September 30, 1995 and (iv) year ended December
                  31, 1995.

27.4              Reclassified Financial Data Schedule for the year ended
                  December 31, 1994.


*  Management contract, compensatory plan or agreement.
                                   SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                   VALHI, INC.
                                   (Registrant)


                                   By: /s/ Harold C. Simmons

                                   Harold C. Simmons, March 20, 1997
                                   (President)



     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:



 /s/ Norman S. Edelcup                        /s/ Harold C. Simmons


Norman S. Edelcup, March 20, 1997       Harold C. Simmons, March 20, 1997
(Director)                              (Chairman of the Board, President
                                    and Chief Executive Officer)
/s/ Kenneth R. Ferris                     /s/ Glenn R. Simmons

Kenneth R. Ferris, March 20, 1997       Glenn R. Simmons, March 20, 1997
(Director)                              (Vice Chairman of the Board)



/s/ J. Walter Tucker, Jr.                /s/ Bobby D. O'Brien

J. Walter Tucker, Jr., March 20, 1997   Bobby D. O'Brien, March 20, 1997
(Director)                              (Vice President,
                                    Principal Financial Officer)



                                    /s/ Gregory M. Swalwell

                                   Gregory M. Swalwell, March 20, 1997
                                   (Controller,
                                    Principal Accounting Officer)

                           ANNUAL REPORT ON FORM 10-K

                            ITEMS 8, 14(A) AND 14(D)

                  INDEX OF FINANCIAL STATEMENTS AND SCHEDULES


FINANCIAL STATEMENTS                                                PAGE

  Reports of Independent Accountants                               F-1/F-3

  Consolidated Balance Sheets - December 31, 1995 and 1996         F-4/F-5

  Consolidated Statements of Income -
   Years ended December 31, 1994, 1995 and 1996                    F-6/F-7

  Consolidated Statements of Cash Flows -
   Years ended December 31, 1994, 1995 and 1996                    F-8/F-10

  Consolidated Statements of Stockholders' Equity -
   Years ended December 31, 1994, 1995 and 1996                    F-11

  Notes to Consolidated Financial Statements                       F-12/F-53



FINANCIAL STATEMENT SCHEDULES

  Report of Independent Accountants                                S-1

  Schedule I  - Condensed financial information of Registrant      S-2/S-9

  Schedule II - Valuation and qualifying accounts                  S-10/S-11


     Schedules III and IV are omitted because they are not applicable.
                      REPORT OF INDEPENDENT ACCOUNTANTS



To the Stockholders and Board of Directors of Valhi, Inc.:

     We have audited the accompanying consolidated balance sheets of Valhi, Inc.
and Subsidiaries as of December 31, 1995 and 1996, and the related consolidated
statements of income, cash flows and stockholders' equity for each of the three
years in the period ended December 31, 1996.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.  We did not audit the
financial statements of The Amalgamated Sugar Company as of December 31, 1995
and 1996 and for each of the three years in the period ended December 31, 1996,
which constituted approximately 15% and 2% of consolidated assets as of December
31, 1995 and 1996, respectively, and whose results of operations are presented
on the equity method in the accompanying consolidated statements of income.  We
also did not audit the financial statements of Medite Corporation as of December
31, 1995 and for each of the two years in the period ended December 31, 1995,
which constituted approximately 8% of consolidated assets as of December 31,
1995 and whose results of operations are reported as discontinued operations in
the accompanying consolidated statements of income.  These statements were
audited by other auditors whose reports thereon have been furnished to us, and
our opinion, insofar as it relates to amounts included for such companies, is
based solely upon their reports.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.

     In our opinion, based upon our audits and the reports of other auditors,
the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Valhi, Inc. and Subsidiaries as
of December 31, 1995 and 1996, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.




                                                      COOPERS & LYBRAND L.L.P.

Dallas, Texas
March 7, 1997
                      REPORT OF INDEPENDENT ACCOUNTANTS



To the Shareholder of The Amalgamated Sugar Company:

     We have audited the balance sheets of The Amalgamated Sugar Company as of
December 31, 1995 and 1996, and the related statements of income and
shareholder's equity and cash flows for each of the years in the three year
period ended December 31, 1996.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Amalgamated Sugar
Company at December 31, 1995 and 1996, and the results of its operations and its
cash flows for each of the years in the three year period ended December 31,
1996, in conformity with generally accepted accounting principles.




                                        KPMG PEAT MARWICK LLP

Salt Lake City, Utah
January 31, 1997
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Stockholder of Medite Corporation:

     We have audited the consolidated balance sheet of Medite Corporation as of
December 31, 1995, and the related consolidated statements of income, redeemable
preferred stock and common stockholder's equity and cash flows for each of the
two years in the period ended December 31, 1995 (not presented separately
herein).  These financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements (not presented
separately herein) referred to above present fairly, in all material respects,
the consolidated financial position of Medite Corporation as of December 31,
1995, and the consolidated results of its operations and its cash flows for each
of the two years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.

                                        ARTHUR ANDERSEN LLP

Portland, Oregon,
January 27, 1996
                          VALHI, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 1995 AND 1996

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)


              ASSETS
                                                                                    1995               1996

                                                                                               
Current assets:
  Cash and cash equivalents                                                      $  170,908          $  255,679
  Marketable securities                                                                -                142,478
  Accounts and other receivables                                                    228,940             164,844
  Receivable from affiliates                                                          3,529              13,931
  Inventories                                                                       518,304             251,597
  Prepaid expenses                                                                    7,249               7,537
  Deferred income taxes                                                               2,636               1,597


      Total current assets                                                          931,566             837,663


Other assets:
  Marketable securities                                                             144,256              17,258
  Investment in joint ventures                                                      190,518             196,697
  Investment in Amalgamated Sugar Company                                              -                 34,070
  Natural resource properties                                                        95,774              36,441
  Prepaid pension cost                                                               24,767              25,313
  Goodwill                                                                          252,773             258,359
  Deferred income taxes                                                                 788                 223
  Other assets                                                                       57,084              48,719


      Total other assets                                                            765,960             617,080


Property and equipment:
  Land                                                                               43,313              37,538
  Buildings                                                                         212,729             189,875
  Equipment                                                                         913,763             610,545
  Construction in progress                                                           20,709              15,723

                                                                                  1,190,514             853,681
  Less accumulated depreciation                                                     315,827             163,442


      Net property and equipment                                                    874,687             690,239


                                                                                 $2,572,213          $2,144,982




                          VALHI, INC. AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS (CONTINUED)

                           DECEMBER 31, 1995 AND 1996

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)


   LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                                     1995               1996

                                                                                                
Current liabilities:
  Notes payable                                                                   $  145,932          $   38,732
  Current maturities of long-term debt                                                63,752             235,648
  Accounts payable and accrued liabilities                                           393,119             203,242
  Payable to affiliates                                                               10,188              47,387
  Income taxes                                                                        44,849               8,148
  Deferred income taxes                                                                4,496              30,523


      Total current liabilities                                                      662,336             563,680


Noncurrent liabilities:
  Long-term debt                                                                   1,084,284             844,468
  Accrued pension cost                                                                70,040              59,215
  Accrued OPEB cost                                                                   78,410              56,257
  Accrued environmental costs                                                        115,577             109,908
  Deferred income taxes                                                              239,444             178,049
  Other                                                                               44,765              29,237


      Total noncurrent liabilities                                                 1,632,520           1,277,134


Minority interest in NL Industries                                                      -                   -
Minority interest in NL foreign subsidiaries                                           3,066                 249


Stockholders' equity:
  Preferred stock, $.01 par value; 5,000 shares
   authorized; none issued                                                              -                   -
  Common stock, $.01 par value; 150,000 shares
   authorized; 124,633 and 124,768 shares issued                                       1,246               1,248
  Additional paid-in capital                                                          34,604              35,258
  Retained earnings                                                                  263,777             282,766
  Adjustments:
    Marketable securities                                                             55,629              65,105
    Currency translation                                                              (7,430)             (6,210)
    Pension liabilities                                                               (2,881)             (3,160)
  Treasury stock, at cost - 10,103 and 10,126 shares                                 (70,654)            (71,088)


      Total stockholders' equity                                                     274,291             303,919


                                                                                  $2,572,213          $2,144,982





Commitments and contingencies (Notes 3, 15, 18, 19 and 20)
                          VALHI, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

                  YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                    PRO FORMA

                                                     1994*             1994*             1995*              1996

                                                                   (UNAUDITED)
                                                                                                 
Revenues and other income:
  Net sales                                          $185,522        $1,073,476         $1,219,547         $1,190,791
  Other, net                                            5,332            48,359             28,970             41,441


                                                      190,854         1,121,835          1,248,517          1,232,232

Costs and expenses:
  Cost of sales                                       142,807           803,231            841,847            909,287
  Selling, general and
   administrative                                      23,932           243,542            221,371            211,699
  Interest                                             21,468           105,394            105,222            100,195


                                                      188,207         1,152,167          1,168,440          1,221,181

                                                        2,647           (30,332)            80,077             11,051
Equity in earnings (losses) of:
  Amalgamated Sugar Company                            13,889            13,889              8,900             10,009
  Waste Control Specialists                              -                 -                  (554)            (6,407)
  NL prior to consolidation                           (25,078)             -                 -                   -



    Income (loss) from
     continuing operations
     before taxes                                      (8,542)          (16,443)            88,423             14,653

Income taxes (benefit)                                 (9,864)           (9,590)            29,893              3,511
Minority interest                                        -                  843                622              6,915


    Income (loss) from
     continuing operations                              1,322        $   (7,696)            57,908              4,227



Discontinued operations                                10,278                               10,607             37,819


    Net income                                       $ 11,600                           $   68,515         $   42,046





                          VALHI, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

                     (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                    PRO FORMA

                                                     1994*            1994*             1995*           1996

                                                                  (UNAUDITED)
                                                                                              
Earnings per common share:
  Continuing operations                               $.01           $(.07)              $.51            $.04


  Discontinued operations                              .09                                .09             .33


    Net income                                        $.10                               $.60            $.37




Cash dividends per share                              $.08                               $.12            $.20




Weighted average common shares
 outstanding                                    114,303        114,303           114,437           114,622







* Reclassified.
                          VALHI, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

                                 (IN THOUSANDS)


                                                                   1994*             1995*              1996


                                                                                              
Operating activities:
  Net income                                                       $ 11,600          $ 68,515          $ 42,046
  Depreciation, depletion and
   amortization                                                       7,843            68,640            69,915
  Noncash interest expense                                           10,780            31,186            33,790
  Deferred income tax benefits                                       (9,785)          (11,976)           (9,581)
  Minority interest                                                    -                  622             6,915
  Other, net                                                          2,110           (11,920)          (13,615)
  Equity in:
    Medite Corporation                                              (18,347)          (10,607)          (37,819)
    Amalgamated Sugar Company                                       (13,889)           (8,900)          (10,009)
    Waste Control Specialists                                          -                  554             6,407
    NL prior to consolidation                                        25,078              -                 -
    Tremont Corporation, net                                          8,069              -                 -

                                                                     23,459           126,114            88,049

  Medite, net                                                        33,096            18,464            24,882
  Amalgamated Sugar Company, net                                     14,735            41,692            24,587
  Change in assets and liabilities:
    Accounts and other receivables                                     (765)           (3,381)            1,617
    Inventories                                                      (2,244)          (57,503)            6,723
    Accounts payable and accrued
     liabilities                                                      3,972           (20,169)           (3,241)
    Income taxes                                                     (1,328)           14,987           (40,199)
    Accounts with affiliates                                         (2,495)           (2,789)           (5,959)
    Other, net                                                         (972)            5,704           (15,244)
    Trading securities:
      Sale proceeds                                                  29,375            51,286              -
      Purchases                                                     (25,000)             (762)             -


        Net cash provided by
         operating activities                                        71,833           173,643            81,215





                          VALHI, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

                                 (IN THOUSANDS)


                                                                   1994*              1995*             1996


                                                                                              
Investing activities:
  Capital expenditures                                             $(14,420)        $ (78,267)         $ (75,896)
  Purchases of minority interest:
    NL common stock                                                 (15,060)          (13,250)           (14,627)
    Subsidiaries of NL                                                 -                 -                (5,168)
  Investment in Waste Control
   Specialists                                                         -               (5,000)           (17,000)
  Purchase of business unit                                            -               (5,982)              -
  Loans to affiliates:
    Loans                                                           (16,550)          (62,000)            (7,800)
    Collections                                                      16,550            59,000             10,800
  Medite, net                                                       (32,728)          (12,527)           165,935
  Amalgamated Sugar Company, net                                    (26,633)          (24,013)           (13,460)
  Other, net                                                          4,645             1,108              7,117


      Net cash provided (used) by
       investing activities                                         (84,196)         (140,931)            49,901


Financing activities:
  Indebtedness:
    Borrowings                                                       37,203           161,233            253,261
    Principal payments                                              (45,982)         (154,516)          (214,762)
  Loans from affiliates:
    Loans                                                              -                 -                 7,844
    Repayments                                                         -                 -                  (600)
  Valhi dividends                                                    (9,145)          (13,809)           (23,057)
  Distributions to minority interest                                   -                  (14)            (7,416)
  Medite, net                                                        29,772           (10,940)           (64,018)
  Amalgamated Sugar Company, net                                     18,140           (20,208)             4,329
  Other, net                                                            229             1,153                916


      Net cash provided (used)
       by financing activities                                       30,217           (37,101)           (43,503)


Net increase (decrease)                                            $ 17,854         $  (4,389)         $  87,613





                          VALHI, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

                                 (IN THOUSANDS)


                                                                   1994*             1995*              1996


                                                                                              
Cash and cash equivalents:
  Net increase (decrease) from:
    Operating, investing and
     financing activities                                          $ 17,854          $ (4,389)         $ 87,613
    Currency translation                                               (420)            4,550            (2,842)
    Consolidation of NL                                             131,124              -                 -

                                                                    148,558               161            84,771
  Balance at beginning of year                                       22,189           170,747           170,908


  Balance at end of year                                           $170,747          $170,908          $255,679




Supplemental disclosures - cash paid for:
  Interest, net of amounts capitalized:
    Continuing operations -
     consolidated companies                                        $ 10,612          $ 73,881          $ 65,228
    Amalgamated, net                                                  6,971            13,073             9,205
    Discontinued operations                                           5,824             8,010             8,014
    Eliminations                                                       (210)             (720)             (257)


                                                                   $ 23,197          $ 94,244          $ 82,190


  Income taxes:
    Continuing operations -
     consolidated companies, net                                   $  3,665          $ 29,588          $ 58,013
    Amalgamated, net                                                 10,507             2,623             6,631
    Discontinued operations, net                                      9,135             6,461              (100)


                                                                   $ 23,307          $ 38,672          $ 64,544








* Reclassified.
                          VALHI, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

                                 (IN THOUSANDS)


                                                        ADDITIONAL
                                             COMMON       PAID-IN      RETAINED
                                             STOCK       CAPITAL       EARNINGS

                                                               
Balance at December 31, 1993                 $1,244       $33,409       $222,810

Net income                                     -             -            11,600
Cash dividends                                 -             -            (9,145)
Dividend - Tremont common stock                -             -           (16,194)
Adjustments, net                               -             -              -
Other, net                                        1           (68)          -


Balance at December 31, 1994                  1,245        33,341        209,071

Net income                                     -             -            68,515
Cash dividends                                 -             -           (13,809)
Adjustments, net                               -             -              -
Other, net                                        1         1,263           -


Balance at December 31, 1995                  1,246        34,604        263,777

Net income                                     -             -            42,046
Cash dividends                                 -             -           (23,057)
Adjustments, net                               -             -              -
Other, net                                        2           654           -
Balance at December 31, 1996                 $1,248       $35,258       $282,766








                                                             ADJUSTMENTS                       TOTAL


                                             MARKETABLE       CURRENCY        PENSION        TREASURY    STOCKHOLDERS'
                                             SECURITIES     TRANSLATION     LIABILITIES       STOCK         EQUITY

                                                                                              
Balance at December 31, 1993                   $41,075        $(17,776)        $(1,619)      $(71,642)       $207,501

Net income                                        -               -               -              -             11,600
Cash dividends                                    -               -               -              -             (9,145)
Dividend - Tremont common stock                     73           1,439             445           -            (14,237)
Adjustments, net                                (3,479)          4,209             668           -              1,398
Other, net                                        -               -               -             1,374           1,307


Balance at December 31, 1994                    37,669         (12,128)           (506)       (70,268)        198,424

Net income                                        -               -               -              -             68,515
Cash dividends                                    -               -               -              -            (13,809)
Adjustments, net                                17,960           4,698          (2,375)          -             20,283
Other, net                                        -               -               -              (386)            878


Balance at December 31, 1995                    55,629          (7,430)         (2,881)       (70,654)        274,291

Net income                                        -               -               -              -             42,046
Cash dividends                                    -               -               -              -            (23,057)
Adjustments, net                                 9,476           1,220            (279)          -             10,417
Other, net                                        -               -               -              (434)            222



Balance at December 31, 1996                   $65,105        $ (6,210)        $(3,160)      $(71,088)       $303,919




                                               VALHI, INC. AND SUBSIDIARIES

                                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

       Organization.  Valhi, Inc. (NYSE: VHI) is a subsidiary of Contran
Corporation which holds, directly or through subsidiaries, approximately 91%
of Valhi's outstanding common stock.  Substantially all of Contran's
outstanding voting stock is held by trusts established for the benefit of the
children and grandchildren of Harold C. Simmons, of which Mr. Simmons is sole
trustee.  Mr. Simmons, the Chairman of the Board and Chief Executive Officer
of Valhi and Contran, may be deemed to control such companies.

       Management's estimates.  The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amount of revenues and
expenses during the reporting period.  Ultimate actual results may, in some
instances, differ from previously estimated amounts.

     Principles of consolidation.  The consolidated financial statements
include the accounts of Valhi and its majority-owned subsidiaries
(collectively, the "Company").  All material intercompany accounts and
balances have been eliminated.  The Company has not consolidated the
financial position of its refined sugar operations conducted by The
Amalgamated Sugar Company at December 31, 1996 because control of such
operations was temporary at that date.  Certain prior year amounts have been
reclassified to conform to the current year presentation.  See Notes 19 and
20.

       Pro forma information (unaudited).  The accompanying consolidated
financial statements include certain pro forma financial information as if
the Company's December 31, 1994 consolidation of NL Industries, Inc. (see
Note 3) had occurred as of January 1, 1994.  All such pro forma information
is unaudited.

       Translation of foreign currencies.  Assets and liabilities of
subsidiaries whose functional currency is deemed to be other than the U.S.
dollar are translated at year-end rates of exchange and revenues and expenses
are translated at average exchange rates prevailing during the year.
Resulting translation adjustments, net of related deferred income tax
effects, are accumulated in the currency translation adjustments component of
stockholders' equity.  Currency transaction gains and losses are recognized
in income currently.

       Net sales.  Sales are recorded when products are shipped (fast food
sales at the time of retail sale).

       Inventories and cost of sales.  Inventories are stated at the lower of
cost or market.  The last-in, first-out method is used to determine the cost
of approximately 3% of total inventories at December 31, 1996 (1995 - 43%).
Other inventory costs are generally based on average cost or the first-in,
first-out method.

       Cash and cash equivalents.  Cash equivalents, including restricted
cash, include bank time deposits and government and commercial notes and
bills with original maturities of three months or less.  Restricted cash at
December 31, 1995 and 1996 represents amounts restricted pursuant to
outstanding letters of credit and certain indebtedness agreements ($10
million and $11 million, respectively).
       Marketable securities and securities transactions.  Marketable debt
and equity securities are carried at market, based upon quoted market prices.
Unrealized gains and losses on trading securities are recognized in income
currently.  Unrealized gains and losses on available-for-sale securities are
accumulated in the marketable securities adjustment component of
stockholders' equity, net of related deferred income taxes.  Realized gains
and losses are based upon the specific identification of the securities sold.

       Investment in joint ventures.  Investments in more than 20%-owned but
less than majority-owned companies are accounted for by the equity method.
Differences between the cost of each investment and the Company's pro rata
share of the entity's separately-reported net assets, if any, are allocated
among the assets and liabilities of the entity based upon estimated relative
fair values.  Such differences, which were not material at December 31, 1996,
are charged or credited to income as the entities depreciate, amortize or
dispose of the related net assets.

       Natural resource properties and depletion.  Timber and timberlands and
mining properties are stated at cost less accumulated depletion.  Depletion
is computed primarily by the unit-of-production method.

       Intangible assets and amortization.  Goodwill, representing the excess
of cost over fair value of individual net assets acquired in business
combinations accounted for by the purchase method, is amortized by the
straight-line method over not more than 40 years (weighted average remaining
life of 29.5 years at December 31, 1996) and is stated net of accumulated
amortization of $18.1 million at December 31, 1996 (1995 - $9.4 million).
Substantially all goodwill relates to NL Industries.  The Company's criteria
for evaluating the recoverability of goodwill includes consideration of the
fair value of the applicable subsidiary.  At December 31, 1996, the quoted
market price of NL common stock ($10.88 per share) was in excess of the
Company's net investment in NL at that date ($5.21 per NL share held).

       Fast food restaurant franchise fees and other intangible assets are
amortized by the straight-line method over the periods (10 to 20 years)
expected to be benefited and are stated net of accumulated amortization of
$15.2 million at December 31, 1996 (1995 - $11.5 million).

       Property, equipment and depreciation.  Property and equipment are
stated at cost.  Maintenance, repairs and minor renewals are expensed; major
improvements are capitalized.  Interest costs related to major long-term
capital projects are capitalized as a component of construction costs.
Interest costs capitalized related to the Company's consolidated business
segments and comprising continuing operations were nil in 1994 (pro forma
1994 - $1 million), $1 million in 1995 and $2 million in 1996.

       Depreciation is computed principally by the straight-line and unit-of-
production methods over the estimated useful lives of ten to 40 years for
buildings and three to 20 years for equipment.

       Long-term debt.  Long-term debt is stated net of unamortized original
issue discount ("OID").  OID is amortized over the period during which
interest is not paid and deferred financing costs are amortized over the term
of the applicable issue, both by the interest method.  Capital lease
obligations are stated net of imputed interest.
       Income taxes.  Valhi and its qualifying subsidiaries are members of
Contran's consolidated United States federal income tax group (the "Contran
Tax Group"). The policy for intercompany allocation of federal income taxes
provides that subsidiaries included in the Contran Tax Group compute the
provision for income taxes on a separate company basis.  Subsidiaries make
payments to or receive payments from Contran in the amounts they would have
paid to or received from the Internal Revenue Service had they not been
members of the Contran Tax Group.  The separate company provisions and
payments are computed using the tax elections made by Contran.  NL is a
separate U.S. taxpayer and is not a member of the Contran Tax Group.  Waste
Control Specialists LLC is treated as a partnership for federal income tax
purposes.

       Deferred income tax assets and liabilities are recognized for the
expected future tax consequences of temporary differences between the income
tax and financial reporting carrying amounts of assets and liabilities,
including investments in the Company's subsidiaries and affiliates not
included in the Contran Tax Group.  The Company periodically evaluates its
deferred tax assets and adjusts any related valuation allowance based on the
estimate of the amount of such deferred tax assets which the Company believes
does not meet the "more-likely-than-not" realization criteria.

       Earnings per share.  Earnings per share of common stock is based upon
the weighted average number of common shares outstanding.  Common stock
equivalents are excluded from the computation because the dilutive effect is
either not material or antidilutive.

       Other.  Advertising costs related to the Company's consolidated
business segments and charged to continuing operations, expensed as incurred,
aggregated $9 million in 1994 (pro forma 1994 - $11 million), and $12 million
in each of 1995 and 1996.
       Research and development costs related to the Company's consolidated
business segments and charged to continuing operations, expensed as incurred,
were $400,000 in 1994 (pro forma 1994 - $10 million) and $11 million in each
of 1995 and 1996.

       Deferred technology fee income was amortized by the straight-line
method over three years through October 1996.

       The Company accounts for stock-based employee compensation in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and its various interpretations.  Under APBO No.
25, no compensation cost is generally recognized for fixed stock options in
which the exercise price is not less than the market price on the grant date.
Compensation cost recognized by the Company in accordance with APBO No. 25
has not been significant in any of the past three years.

       Accounting and funding policies for retirement and postretirement
benefits other than pensions ("OPEB") plans are described in Note 16, and
accounting policies for environmental remediation costs are described in Note
18.
NOTE 2 -       BUSINESS AND GEOGRAPHIC SEGMENTS:
                                                                 % OWNED AT
 BUSINESS SEGMENT              PRINCIPAL ENTITIES            DECEMBER 31, 1996


  Chemicals             NL Industries, Inc.                          56%
  Component products    CompX International Inc.                    100%
  Fast food             Sybra, Inc.                                 100%
  Waste management*     Waste Control Specialists LLC                50%

* Unconsolidated equity affiliate



                                                                         YEARS ENDED DECEMBER 31,

                                                                    PRO FORMA

                                                      1994             1994              1995                1996

                                                                   (UNAUDITED)
                                                                              (IN MILLIONS)
                                                                                              
Net sales:
  Chemicals                                            $  -           $  888.0         $1,023.9           $  986.1
  Component products                                     70.0             70.0             80.2               88.7
  Fast food                                             115.5            115.5            115.4              116.0


                                                       $185.5         $1,073.5         $1,219.5           $1,190.8



Operating income:
  Chemicals                                            $  -           $   91.9         $  178.5           $   92.0
  Component products                                     20.9             20.9             19.9               22.1
  Fast food                                               9.0              9.0              7.5                8.9

                                                         29.9            121.8            205.9              123.0
General corporate items:
  Securities earnings                                     4.1              8.0             13.6               10.2
  General expenses and other, net                        (9.9)           (54.7)           (34.3)             (22.0)
  Interest expense                                      (21.5)          (105.4)          (105.2)            (100.2)


                                                          2.6            (30.3)            80.0               11.0

Equity in:
  Amalgamated Sugar Company                              13.9             13.9               8.9              10.0
  Waste Control Specialists                               -               -                  (.5)             (6.4)
  NL prior to consolidation                             (25.1)             -               -                   -


    Income (loss) from continuing
     operations before taxes                           $ (8.6)        $  (16.4)        $   88.4           $   14.6





                                                                        YEARS ENDED DECEMBER 31,

                                                                    PRO FORMA

                                                     1994              1994              1995               1996

                                                                   (UNAUDITED)
                                                                             (IN MILLIONS)
                                                                                               
Depreciation, depletion and
 amortization:
  Chemicals                                           $  -                              $   60.0          $   60.9
  Component products                                     1.8                                 2.2               2.5
  Fast food                                              5.9                                 6.0               6.0
  Corporate                                               .1                                  .4                .5


                                                      $  7.8                            $   68.6          $   69.9



Capital expenditures:
  Chemicals                                           $  -                              $   64.2          $   66.9
  Component products                                     3.4                                 2.0               2.3
  Fast food                                             10.8                                12.0               6.1
  Corporate                                               .2                                  .1                .6


                                                      $ 14.4                            $   78.3          $   75.9



Geographic segments

  Net sales - point of origin:
    United States                                     $139.4         $  442.9           $  477.1          $  487.0
    Europe                                               -              587.3              703.2             653.8
    Canada                                              46.1            169.1              197.4             205.1
    Eliminations                                         -             (125.8)            (158.2)           (155.1)


                                                      $185.5         $1,073.5           $1,219.5          $1,190.8



  Net sales - point of
   destination:
    United States                                     $166.4         $  404.9           $  429.7          $  447.2
    Canada                                              17.2             81.5               83.3              84.2
    Europe                                                .5            469.4              581.2             524.4
    Other                                                1.4            117.7              125.3             135.0


                                                      $185.5         $1,073.5           $1,219.5          $1,190.8



  Operating income:
    United States                                     $ 16.8         $   64.9           $   88.4          $   85.1
    Europe                                               -               33.9               85.0              10.0
    Canada                                              13.1             23.0               32.5              27.9


                                                      $ 29.9         $  121.8           $  205.9          $  123.0








Identifiable assets                                                                    DECEMBER 31,

                                                                                        1995            1996

                                                                                        (IN MILLIONS)
                                                                                                 
  Business segments:
    Chemicals                                                                          $1,586.6        $1,576.5
    Refined sugar                                                                         386.7             -
    Building products                                                                     200.4            44.2
    Component products                                                                     44.4            48.4
    Fast food                                                                              74.4            75.6
    Waste management                                                                        4.6            15.2

                                                                                        2,297.1         1,759.9
    Corporate and eliminations                                                            275.1           385.1


                                                                                       $2,572.2        $2,145.0



  Geographic segments:
    United States                                                                      $  971.6        $  506.5
    Europe                                                                              1,100.7         1,039.8
    Canada                                                                                224.8           213.6

                                                                                        2,297.1         1,759.9
  Corporate and eliminations                                                              275.1           385.1


                                                                                       $2,572.2        $2,145.0





       NL's chemicals operations are conducted through Kronos, Inc. (titanium
dioxide pigments or "TiO2") and Rheox, Inc. (specialty chemicals).  The
Company's component products (CompX International) and fast food (Sybra)
subsidiaries are owned by Valcor, Inc., a wholly-owned subsidiary of Valhi.
Each of NL (NYSE: NL) and Valcor are subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended.

       Capital expenditures exclude amounts attributable to business units
acquired in business combinations accounted for by the purchase method.

       Corporate assets consist principally of cash, cash equivalents and
marketable securities.  At December 31, 1996, approximately 11% of corporate
assets were held by NL (1995 - 27%).  Valhi has a wholly-owned captive insurance
company ("Valmont") registered in Vermont.  Valmont's operations, which are not
significant, are included in general expenses and other, net.

       At December 31, 1996, the net assets of non-U.S. subsidiaries included in
consolidated net assets approximated $460 million.
NOTE 3 -  BUSINESS COMBINATIONS:

     NL Industries, Inc. (NYSE: NL).  At the beginning of 1994, Valhi held 48%
of NL's outstanding common stock and accounted for its interest in NL by the
equity method during the year ended December 31, 1994.  During 1994, Valhi
purchased additional NL shares in market transactions for an aggregate of
approximately $15 million, and thereby increased its direct ownership of NL to
more than 50% in mid-December 1994.  The Company accounted for such increase in
its interest in NL by the purchase method (step purchase) and, accordingly,
consolidated NL's financial position as of December 31, 1994 and consolidated
NL's results of operations and cash flows beginning in 1995.  During 1995 and
1996, the Company purchased additional NL shares in market transactions for an
aggregate of approximately $28 million and increased its ownership of NL to 56%
at December 31, 1996.  NL's separate financial statements reflect a
stockholders' deficit of approximately $203 million at December 31, 1996 and,
accordingly, no minority interest in NL is reported in the Company's
consolidated balance sheet.  Until such time as NL reports positive
stockholders' equity, all undistributed income or loss and other undistributed
changes in NL's reported stockholders' equity will accrue to the Company for
financial reporting purposes.  Minority interest in earnings in 1996 consists
principally of NL dividends paid to NL stockholders other than Valhi.

     Waste Control Specialists LLC.  In November 1995, Valhi acquired a 50%
interest in newly-formed Waste Control Specialists LLC.  See Note 8.  Valhi
committed to contribute $25 million to Waste Control Specialists for its 50%
interest ($22 million contributed through December 31, 1996 and the remaining $3
million contributed in January 1997).  The other 50%-owner contributed certain
assets, primarily land and certain operating permits for the facility site, and
Waste Control Specialists also assumed certain indebtedness of the other owner.
Valhi accounts for its interest in Waste Control Specialists by the equity
method.
     Valhi is entitled to a 20% cumulative preferential return on its $25
million investment after which earnings are generally split 50/50.  The
liabilities of the other 50%-owner assumed by Waste Control Specialists exceeded
the carrying value of the assets contributed.  Accordingly, all of Waste Control
Specialists' net income or loss will accrue to the Company for financial
reporting purposes until Waste Control Specialists reports positive equity
attributable to the other 50%-owner.

     Other.  In 1995, CompX's Canadian subsidiary purchased certain assets,
principally property, equipment and inventory, of a Canadian competitor for
approximately $6 million cash.

NOTE 4 -  INVENTORIES:


                                                                                       DECEMBER 31,

                                                                                        1995            1996

                                                                                       (IN THOUSANDS)
                                                                                                 
Raw materials:
  Chemicals                                                                            $ 35,075        $ 43,284
  Sugarbeets                                                                             47,420            -
  Building products                                                                      12,404           4,306
  Component products                                                                      1,927           2,556
  Fast food                                                                               1,379           1,406

                                                                                         98,205          51,552


In process products:
  Chemicals                                                                               9,132          10,356
  Refined sugar                                                                          57,967            -
  Building products                                                                       2,187              83
  Component products                                                                      4,320           4,974

                                                                                         73,606          15,413


Finished products:
  Chemicals                                                                             173,195         142,956
  Refined sugar and by-products                                                          90,492            -
  Building products                                                                       6,131           1,096
  Component products                                                                      2,921           3,300

                                                                                        272,739         147,352
Supplies                                                                                 73,754          37,280


                                                                                       $518,304        $251,597





       The current cost of LIFO inventories (all of which relate to Medite and
The Amalgamated Sugar Company) exceeded the net carrying value of such
inventories by approximately $3 million at December 31, 1996 (1995 - $36
million).

NOTE 5 -       ACCOUNTS AND OTHER RECEIVABLES:


                                                                                       DECEMBER 31,

                                                                                        1995            1996

                                                                                       (IN THOUSANDS)
                                                                                                 
Accounts receivable                                                                    $225,385        $157,089
Notes receivable                                                                          3,400           1,500
Accrued interest                                                                            149             928
Refundable income taxes                                                                   4,978           9,414
Allowance for doubtful accounts                                                          (4,972)         (4,087)


                                                                                       $228,940        $164,844


NOTE 6 -       MARKETABLE SECURITIES:




                                                                                        DECEMBER 31,

                                                                                        1995           1996

                                                                                       (IN THOUSANDS)
                                                                                                
Current asset (available-for-sale) -
  Dresser Industries common stock                                                      $   -          $142,478



Noncurrent assets (available-for-sale):
  Dresser Industries common stock                                                      $130,366       $   -
  Other common stocks                                                                    13,890         17,258


                                                                                       $144,256       $ 17,258






       Valhi holds 5.5 million shares of Dresser common stock (cost - $44
million) with a quoted market price of $31 at December 31, 1996, or an aggregate
market value of $169 million (1995 - $24.38 per share, or $133 million).  The
Company's Dresser stock is exchangeable for the Company's LYONs at the option of
the LYONs holder, and the carrying value of the Dresser stock is limited to the
accreted LYONs obligation.  The Dresser common stock is classified as a current
asset at December 31, 1996 because the LYONs, which are redeemable at the option
of the holder in October 1997, are classified as a current liability as of such
date.  See Note 9.  Dresser is a supplier of products, services and project
management for hydrocarbon energy-related activities utilized primarily in the
oil and gas industry.  Dresser (NYSE: DI) files periodic reports with the
Securities and Exchange Commission.  The other available-for-sale common stocks
have an aggregate cost of $15.8 million at December 31, 1995 and 1996.

NOTE 7 -       NATURAL RESOURCE PROPERTIES AND OTHER NONCURRENT ASSETS:


                                                                                       DECEMBER 31,

                                                                                        1995            1996

                                                                                       (IN THOUSANDS)
                                                                                                  
Natural resource properties:
  Timber and timberlands                                                                $53,099         $  -
  Mining properties                                                                      42,675          36,441


                                                                                        $95,774         $36,441



Other assets:
  Franchise fees and other intangible assets                                            $24,786         $19,215
  Deferred financing costs                                                               19,537          15,273
  Other                                                                                  12,761          14,231


                                                                                        $57,084         $48,719





NOTE 8 -       INVESTMENT IN JOINT VENTURES:


                                                                                       DECEMBER 31,

                                                                                        1995            1996

                                                                                        (IN THOUSANDS)
                                                                                                 
Ti02 manufacturing joint venture                                                       $183,129        $179,195
Waste Control Specialists LLC                                                             4,625          15,218
Other                                                                                     2,764           2,284


                                                                                       $190,518        $196,697





       TiO2 manufacturing joint venture.  A Kronos TiO2 subsidiary (Kronos
Louisiana, Inc., or "KLA") and Tioxide Group, Ltd., a wholly-owned subsidiary of
Imperial Chemicals Industries PLC ("Tioxide"), are equal owners of a
manufacturing joint venture (Louisiana Pigment Company, L.P., or "LPC") that
owns and operates a TiO2 plant in Louisiana.  LPC has long-term debt which is
collateralized by the partnership interests of the partners and substantially
all joint venture assets.  The long-term debt consists of two tranches, one
attributable to each partner, and each tranche is serviced through (i) the
purchase of the plant's TiO2 output in equal quantities by the partners and (ii)
cash capital contributions.  KLA is required to purchase one-half of the TiO2
produced by LPC.  Kronos' tranche of LPC's debt is reflected as outstanding
indebtedness of the Company because Kronos has guaranteed the purchase
obligation relative to the debt service of such tranche.  See Note 9.

       The manufacturing joint venture is intended to be operated on a break-
even basis and, accordingly, Kronos' acquisition transfer price for its share of
the TiO2 produced is equal to its share of the joint venture's production costs
and interest expense.  Kronos' share of the production costs is reported as TiO2
cost of sales while Kronos' share of joint venture interest expense is reported
as a component of interest expense.

       Summary income statements of the TiO2 joint venture are shown below.


                                                                                   YEARS ENDED DECEMBER 31,

                                                                                    1995               1996

                                                                                        (IN THOUSANDS)
                                                                                                
Revenues and other income:
  Kronos                                                                           $ 76,365           $ 74,916
  Tioxide                                                                            75,241             73,774
  Interest income                                                                       653                518

                                                                                    152,259            149,208


Cost and expenses:
  Cost of sales                                                                     140,103            140,361
  General and administrative                                                            385                377
  Interest                                                                           11,771              8,470

                                                                                    152,259            149,208


    Net income                                                                     $   -              $   -




       Summary balance sheets of the TiO2 joint venture are shown below.


                                                                                       DECEMBER 31,

                                                                                        1995            1996

              ASSETS                                                                   (IN THOUSANDS)
                                                                                                 
Current assets                                                                         $ 49,398        $ 47,861
Other assets                                                                              1,553           1,224
Property and equipment, net                                                             335,254         325,617


                                                                                       $386,205        $374,702




   LIABILITIES AND PARTNERS' EQUITY

Long-term debt, including current portion:
  Kronos tranche                                                                       $ 73,286        $ 57,858
  Tioxide tranche                                                                        59,400          16,800
  Note payable to Tioxide                                                                  -             21,000
Other liabilities, primarily current                                                     17,719          14,084

                                                                                        150,405         109,742

Partners' equity                                                                        235,800         264,960


                                                                                       $386,205        $374,702





     Waste Control Specialists LLC.  Waste Control Specialists, formed in
November 1995, recently completed construction of the initial phase of its
facility in West Texas for the processing, treatment, storage and disposal of
certain hazardous and toxic wastes.  Waste Control Specialists has been issued
permits by the Texas Natural Resource Conservation Commission covering
acceptance of wastes governed by the Resource Conservation Recovery Act ("RCRA")
and the Toxic Substances Control Act ("TSCA"), and received its first wastes for
disposal in February 1997.  Waste Control Specialists is also seeking permits
for, among other things, the treatment and disposal of low-level and mixed
radioactive wastes.

     Waste Control Specialists is equally owned by Valhi and KNB Holdings, Ltd.,
a limited partnership controlled by the Chief Executive Officer of Waste Control
Specialists.

     Waste Control Specialists reported a net loss of $.5 million during the
last two months of 1995 and $6.4 million for 1996, all of which accrued to Valhi
for financial reporting purposes.  See Note 3.  At December 31, 1996, total
assets were $19.1 million and total Members' equity was $12.0 million (1995 -
$7.3 million and $1.4 million, respectively.) Waste Control Specialists' assets
consist principally of property and equipment related to the West Texas
facility, and its liabilities consist principally of bank indebtedness.

     In February 1997, the Company entered into a $4 million revolving credit
facility with Waste Control Specialists.  Borrowings by Waste Control
Specialists bear interest at prime plus 1% and are due no later than December
31, 1997.

NOTE 9 -  NOTES PAYABLE AND LONG-TERM DEBT:


                                                                                     DECEMBER 31,

                                                                                      1995              1996

                                                                                      (IN THOUSANDS)
                                                                                                
Notes payable:
  Amalgamated:
    United States Government loans                                                  $   64,685        $     -
    Bank credit agreements                                                              42,000              -

                                                                                       106,685              -
  Valhi - bank credit agreement                                                           -               13,000
  Kronos - bank credit agreements (DM 56,000 and
   DM 40,000)
                                                                                        39,247            25,732



                                                                                    $  145,932        $   38,732




Long-term debt:
  Valhi - Liquid Yield Option NotesTM ("LYONsTM")                                   $  130,366        $  142,478


  NL Industries:
    Senior Secured Notes                                                               250,000           250,000
    Senior Secured Discount Notes                                                      132,034           149,756
    Deutsche mark bank credit facility (DM 397,610
     and DM 539,971)                                                                   276,895           347,362
    Joint venture term loan                                                             73,286            57,858
    Rheox bank term loan                                                                37,263            14,659
    Other                                                                               14,225             9,411

                                                                                       783,703           829,046


  Amalgamated - bank term loan                                                          24,000              -


  Valcor:
    Valcor - Senior Notes*                                                              99,000            98,910


    Medite:
      U.S. and Irish bank term loans                                                    73,770              -
      U.S. and Irish bank working capital facilities                                    10,830              -
      Other                                                                              4,117             3,895

                                                                                        88,717             3,895

    Other:
      Sybra bank credit agreements                                                      16,770             1,081
      Sybra capital lease obligations                                                    5,382             4,540
      Other                                                                                 98               166

                                                                                        22,250             5,787

                                                                                     1,148,036         1,080,116
  Less current maturities                                                               63,752           235,648


                                                                                    $1,084,284        $  844,468






* Stated net of approximately $1 million principal amount of Senior Notes  held
by Valhi.

     Valhi.  The zero coupon Senior Secured LYONs, $379 million principal amount
at maturity in October 2007, were issued with significant OID to represent a
yield to maturity of 9.25%.  No periodic interest payments are required.  Each
$1,000 in principal amount at maturity of the LYONs is exchangeable, at any
time, for 14.4308 shares of Dresser common stock held by Valhi.  The LYONs are
redeemable, at the option of the holder, in October 1997 or October 2002 at
$404.84 or $636.27, respectively, per $1,000 principal amount (the issue price
plus accrued OID through such purchase dates) and, accordingly, the LYONs are
classified as a current liability at December 31, 1996.  Such redemptions may be
paid, at Valhi's option, in cash, Dresser common stock, or a combination
thereof.  The LYONs are not redeemable at Valhi's option prior to October 1997
unless the market price of Dresser common stock exceeds $35.70 per share for
specified time periods.  At December 31, 1995 and 1996, the net carrying value
of the LYONs per $1,000 principal amount at maturity was $344 and $376,
respectively, and the quoted market price was $378 and $451, respectively.

     The LYONs are secured by the 5.5 million shares of Dresser common stock
held by Valhi, which shares are held in escrow for the benefit of holders of the
LYONs.  Valhi receives the regular quarterly dividend on the escrowed Dresser
shares.

     Valhi also has a $15 million revolving bank credit facility which matures
in March 1998, generally bears interest at LIBOR plus 1.5% and is collateralized
by 4.8 million shares of NL common stock held by Valhi.  Borrowings under this
facility can only be used to fund purchases of additional shares of NL common
stock.  The agreement limits additional indebtedness of Valhi and contains other
provisions customary in lending transactions of this type.

     NL Industries.  NL's $250 million principal amount of 11.75% Senior Secured
Notes due 2003 and $188 million principal amount at maturity ($100 million
proceeds at issuance) of 13% Senior Secured Discount Notes due 2005
(collectively, the "NL Notes") are collateralized by a series of intercompany
notes from Kronos International, Inc. ("KII"), a wholly-owned subsidiary of
Kronos, to NL, the terms of which mirror those of the respective NL Notes (the
"NL Mirror Notes").  The 11.75% Notes are also collateralized by a first
priority lien on the stock of Kronos and a second priority lien on the stock of
Rheox.  In the event of foreclosure, the Note holders would have access to the
consolidated assets, earnings and equity of NL and NL believes the
collateralization of the NL Notes, as described above, is the functional
economic equivalent to a full, unconditional and joint and several guarantee by
Kronos and Rheox.

     The 11.75% Notes and the 13% Discount Notes are redeemable, at NL's option,
after October 2000 and October 1998, respectively, at redemption prices starting
at 101.5% and declining to 100% (after October 2001) of the principal amount for
the 11.75% Notes and starting at 106% and declining to 100% (after October 2001)
of the accreted value of the 13% Discount Notes.  In the event of an NL change
of control, as defined, NL would be required to make an offer to purchase the NL
Notes at 101% of the principal amount of the 11.75% Notes and 101% of the
accreted value of the 13% Discount Notes.  The NL Notes are issued pursuant to
indentures which contain a number of covenants and restrictions which, among
other things, restrict the ability of NL and its subsidiaries to incur debt,
incur liens, pay dividends or merge or consolidate with, or sell or transfer all
or substantially all of their assets to, another entity.  The 13% Discount Notes
do not require cash interest payments until April 1999.  At December 31, 1995
and 1996, the net carrying value of the 13% Discount Notes per $1,000 principal
amount of maturity was $704 and $799, respectively, (quoted market price - $809
and $863, respectively) and the quoted market price of the 11.75% Notes was
$1,071 and $1,061, respectively, per $1,000 principal amount.

     At December 31, 1996, the DM credit facility consisted of a DM 396 million
term loan and a DM 250 million revolving credit facility (DM 396 million and DM
144 million outstanding, respectively).  Borrowings bear interest at DM LIBOR
plus 1.625% (5.5% and 4.8% at December 31, 1995 and 1996, respectively), and are
collateralized by the stock of certain KII subsidiaries.  In January 1997, NL
completed an amendment to the DM credit facility in which NL prepaid a net DM
207 million ($127 million) of the term loan and DM 43 million ($26 million) of
the revolver, leaving DM 188 million and DM 100 million outstanding,
respectively.  In addition, the aggregate available for borrowing under the
revolver was reduced to DM 230 million.  The majority of the cash generated from
a refinancing of the Rheox term loan, discussed below, was used for a portion of
such prepayments.  As amended, the term loan is due in 1998 and 1999 and the
revolver is due in 2000, borrowings bear interest at DM LIBOR plus 2.75%,
additional collateral in the form of pledges of certain Canadian and German
assets was granted and NL guaranteed the facility.

     Borrowings under KLA's tranche of the joint venture term loan bear interest
at LIBOR plus 1.625% (7.3% and 7.2% at December 31, 1995 and 1996, respectively)
and are repayable in quarterly installments through September 2000.  See Note 8.

     At December 31, 1996, Rheox's term loan is due in quarterly installments
through December 1997, is collateralized principally by the stock of Rheox and
its U.S. subsidiaries and bears interest, at Rheox's option, at the prime rate
plus 1.5% or LIBOR plus 2.5% (1995 - 8.3% with LIBOR rate borrowings; 1996 -
9.8% with prime rate borrowings).  In January 1997, NL completed a refinancing
of this facility which increased the term loan to $125 million and provided for
a $25 million revolving facility, generating a net $135 million in cash proceeds
and credit availability.  As amended, the term loan in due in quarterly
installments commencing September 1997 through January 2004 and the revolver is
due no later than January 2004, and the margin on LIBOR-based borrowings will
now range from .75% to 1.75%, depending upon the level of a certain Rheox
financial ratio.

     Notes payable consists of short-term borrowings due within one year from
non-U.S. banks with interest rates ranging from 3.2% to 3.7% (1995 - 4.3% to
4.9%).

     After giving effect to the amendments to the DM credit facility and the
Rheox term loan, unused lines of credit available for borrowing under the Rheox
U.S. facility and under NL's non-U.S. credit facilities, including the DM
facility, approximated $9 million and $102 million, respectively, at December
31, 1996.

     Valcor.  Valcor's unsecured 9 5/8% Senior Notes Due November 2003 are
redeemable at the Company's option beginning November 1998, initially at
104.813% of principal amount declining to 100% after November 2000.  In the
event of a change of control of Valcor or certain asset dispositions, as
defined, Valcor would be required to make an offer to purchase the Valcor Notes
at 101% and 100%, respectively, of principal amount.  At both December 31, 1995
and 1996, the quoted market price of the Valcor Notes was $990 per $1,000
principal amount.  The indenture governing the Valcor Notes, among other things,
limits dividends and additional indebtedness, and prohibits Valcor from co-
investing with affiliates.

     The after-tax proceeds from the disposition of Medite, net of repayments of
Medite's U.S. bank debt, will be available for Valcor's general corporate
purposes, subject to compliance with certain covenants contained in the Valcor
Senior Note Indenture.  Also under the terms of the Indenture, Valcor is
required to tender for a portion of the Valcor Notes, at par, to the extent that
a specified amount of these proceeds are not used to either permanently paydown
senior indebtedness of Valcor or its subsidiaries or invest in related
businesses, both as defined in the Indenture, within one year of disposition.
While Valcor is not yet required to execute a tender offer related to Medite's
asset dispositions, on March 20, 1997, Valcor announced it had initiated a
tender offer whereby Valcor would purchase up to $86.7 million principal amount
of Valcor Notes on a pro-rata basis, at par value, in satisfaction of the
covenant contained in the Indenture.  Pursuant to its terms, the tender offer
will expire on April 24, 1997, unless extended by Valcor.  The amount of Valcor
Notes which will ultimately be purchased by Valcor pursuant to the tender offer
is dependent upon the amount of Valcor Notes properly tendered.  Consequently,
there can be no assurance as to the amount of Valcor Notes which will ultimately
be purchased by Valcor.  The net proceeds from any disposition of the Company's
fast food operations, net of repayments of Sybra's bank indebtedness, would
similarly be available for Valcor's general corporate purposes. If the
disposition of the Company's fast food operations is completed and none of those
net proceeds are used as provided in the Indenture, a portion of the Notes would
be subject to a subsequent tender offer.  See Notes 18 and 19.

     Other. Medite's U.S. bank term and working capital facilities were repaid
and terminated in October 1996 following the sale of its timber and timberlands,
and the Irish bank term and working capital facilities were assumed by the
purchaser upon the sale of Medite's Irish subsidiary in November 1996.  See Note
19.

     Other Medite indebtedness consists principally of a State of Oregon term
loan that was assumed by the purchaser of Medite's Oregon MDF facility in
February 1997.  See Note 19.

     Sybra's revolving bank credit agreements provide for unsecured credit
facilities aggregating $29 million with interest generally at LIBOR plus 1.5%.
Borrowings under these agreements mature through July 1998.  At December 31,
1996, the weighted average interest rate on outstanding revolving borrowings was
6.9% (1995 - 7.5%), and $28 million was available for borrowing.  Future minimum
payments under Sybra's capital lease obligations at December 31, 1996, including
amounts representing interest, are approximately $1.4 million in each of the
next two years, $.6 million in each of the following three years and an
aggregate of $2.6 million thereafter.

     CompX has a Canadian bank credit agreement which currently provides for
approximately $5 million of U.S. or the equivalent Canadian dollar borrowings,
with interest generally at LIBOR plus .5% and collateralized by substantially
all of CompX International's Canadian assets.  At December 31, 1996, the full
amount of these facilities was available for borrowing.

     Aggregate maturities of long-term debt at December 31, 1996


Years ending December 31,                                                                         Amount

                                                                                              (In thousands)
                                                                                               
  1997                                                                                            $  247,146
  1998                                                                                               106,673
  1999                                                                                               134,271
  2000                                                                                                12,721
  2001                                                                                                 1,081
  2002 and thereafter                                                                                629,591

                                                                                                   1,131,483
  Less:
    Unamortized Valhi LYONs OID                                                                      (10,973)
    Unamortized NL Senior Secured Discount Notes OID                                                 (37,744)
    Amounts representing interest on capital leases                                                   (2,650)


                                                                                                  $1,080,116





       The LYONs are reflected in the above table as due October 1997, the first
of the two dates they are redeemable at the option of the holder, at the
aggregate redemption price on such date of $153 million ($404.84 per $1,000
principal amount at maturity in October 2007).

       Other.  In addition to the NL Notes and the Valcor Notes discussed above,
credit agreements of subsidiaries typically require the respective subsidiary to
maintain minimum levels of equity, require the maintenance of certain financial
ratios, limit dividends and additional indebtedness and contain other provisions
and restrictive covenants customary in lending transactions of this type.  At
December 31, 1996, the restricted net assets of consolidated subsidiaries
approximated $243 million.

NOTE 10 - OTHER NONCURRENT LIABILITIES:


                                                                                         DECEMBER 31,

                                                                                        1995            1996

                                                                                        (IN THOUSANDS)
                                                                                                  
Insurance claims and expenses                                                           $15,354         $13,380
Employee benefits                                                                        16,626          12,050
Deferred technology fee income                                                            8,456            -
Other                                                                                     4,329           3,807


                                                                                        $44,765         $29,237






NOTE 11 -      ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:


                                                                                        DECEMBER 31,

                                                                                        1995            1996

                                                                                       (IN THOUSANDS)
                                                                                                 
Accounts payable:
  Sugarbeet purchases                                                                  $ 83,027        $   -
  Other                                                                                 153,946          75,307

                                                                                        236,973          75,307


Accrued liabilities:
  Employee benefits                                                                      63,067          47,331
  Sugar processing costs                                                                 21,569            -
  Plant closure costs                                                                      -              7,669
  Environmental costs                                                                     6,109           6,126
  Interest                                                                               13,208          11,157
  Miscellaneous taxes                                                                     4,275           5,262
  Other                                                                                  47,918          50,390

                                                                                        156,146         127,935


                                                                                       $393,119        $203,242






NOTE 12 -      OTHER INCOME:


                                                                      YEARS ENDED DECEMBER 31,

                                                                    PRO FORMA

                                                     1994             1994               1995               1996

                                                                   (UNAUDITED)
                                                                            (IN THOUSANDS)
                                                                                              
Securities earnings:
  Dividends and interest                             $ 6,128           $11,203          $12,172           $10,090
  Securities transactions                             (2,054)           (3,274)           1,225               138

                                                       4,074             7,929           13,397            10,228
Litigation settlement gains, net                        -               22,978             -                2,756
Technology fee income                                   -               10,344           10,660             8,743
Currency transactions, net                               491             2,226              586             5,774
Pension and OPEB curtailment
 gains                                                  -                 -                -                5,900
Disposal of property and
 equipment                                                                                                      4
                                                          (6)           (1,987)          (2,695)
Other, net                                               773             6,869            7,022             8,036


                                                     $ 5,332           $48,359          $28,970           $41,441





       The litigation settlement gains relate to settlement of certain
litigation in which NL was a plaintiff, and the pension and OPEB curtailment
gains resulted from NL's 1996 reduction of certain U.S. and Canadian,
respectively, employee benefits.


NOTE 13 - STOCKHOLDERS' EQUITY:


                                                                        SHARES OF COMMON STOCK

                                                                     ISSUED         TREASURY       OUTSTANDING

                                                                           (IN THOUSANDS)
                                                                                              
Balance at December 31, 1993                                          124,435         (10,182)         114,253

Issued                                                                     40              32               72
Other                                                                    -                 73               73


Balance at December 31, 1994                                          124,475         (10,077)         114,398

Issued                                                                    158            -                 158
Other                                                                    -                (26)             (26)


Balance at December 31, 1995                                          124,633         (10,103)         114,530

Issued                                                                    135            -                 135
Other                                                                    -                (23)             (23)


Balance at December 31, 1996                                          124,768          10,126          114,642





       Treasury stock includes the Company's proportional interest in 1.2
million Valhi shares held by NL.  Under Delaware Corporation Law, all shares
held by a majority-owned company are considered to be treasury stock.  As a
result, shares outstanding for financial reporting purposes differ from those
outstanding for legal purposes.

       Options and restricted stock.  Valhi has an incentive stock option plan
that provides for the discretionary grant of qualified incentive stock options,
nonqualified stock options, restricted stock and stock appreciation rights.  Up
to nine million shares of Valhi common stock may be issued pursuant to this
plan.  Options are granted at a price not less than 85% of fair market value on
the date of grant, generally vest ratably over a five-year period beginning one
year from the date of grant and expire 10 years from the date of grant.
Authorized future grants under this plan expire in March 1997.  Restricted
stock, forfeitable unless certain periods of employment are completed, is held
in escrow in the name of the grantee until the restriction period expires. No
stock appreciation rights have been granted.  In February 1997, the Company's
Board of Directors adopted, subject to shareholder approval, a new stock option
plan which provides for the discretionary grant of up to 5 million options to
purchase Valhi common stock.

       Pursuant to Valhi's Non-Employee Director Stock Option Plan, under which
authorized future grants expired in 1995, options were automatically granted
once a year to each non-employee director of Valhi at a price equal to the fair
market value on the date of grant.  Such options vested one year from the date
of grant and expire five years from the date of grant.


                                                                                                       AMOUNT
                                                                                    EXERCISE           PAYABLE
                                                                                    PRICE PER           UPON
                                                                    SHARES            SHARE           EXERCISE

                                                                      (IN THOUSANDS, EXCEPT
                                                                        PER SHARE AMOUNTS)
                                                                                                
Outstanding at December 31, 1993                                      4,524           $3.51-15.00        $34,040

Granted                                                               2,308            5.21- 6.89         13,520
Exercised                                                               (40)           3.51- 5.63           (172)
Cancelled                                                            (1,456)           5.00-12.50         (7,724)


Outstanding at December 31, 1994                                      5,336            5.00-15.00         39,664

Adjustment for Tremont Distribution                                    -                   -              (1,603)
Granted                                                                 103            7.75- 8.00            822
Exercised                                                              (158)           4.76- 7.75           (873)
Cancelled                                                               (69)           4.76-14.66           (745)


Outstanding at December 31, 1995                                      5,212            4.76-14.66         37,265

Granted                                                                 295                  6.38          1,881
Exercised                                                              (135)            4.76-5.72           (653)
Cancelled                                                               (44)           5.48-14.66           (423)
Outstanding at December 31, 1996                                      5,328           $4.76-14.66        $38,070





     Outstanding options at December 31, 1996 expire at various dates through
2006, with a weighted-average remaining life of 4 years.  At December 31, 1996,
options to purchase 4.4 million Valhi shares were exercisable at prices ranging
from $4.76 to $14.66 per share, or an aggregate amount payable upon exercise of
$32 million.  Of such exercisable options, 2.1 million options are exercisable
at various dates through 2004 at prices lower than the December 31, 1996 market
price of $6.38 per share for an aggregate amount payable upon exercise of $10.8
million.  At December 31, 1996, options to purchase 301,000 shares are scheduled
to become exercisable in 1997, and an aggregate of 2.6 million shares were
available for future grants.  During 1994, options to purchase 1.4 million
shares at fixed prices ranging from $5.21 to $6.89 per share were granted in
exchange for cancellation of an equal number of variable price options
previously granted at initial prices ranging from $5.00 to $5.50 per share.
During 1995, under terms of the incentive stock option plan, the exercise price
of all options outstanding at December 31, 1994 was reduced by amounts ranging
from $.24 to $.34 per share as a result of the Tremont Distribution discussed in
Note 19.

     NL maintains incentive stock option plans that provide for the
discretionary grant of NL restricted common stock, stock options and stock
appreciation rights.  At December 31, 1996, there were an aggregate of 2.6
million options outstanding to purchase NL common stock at prices ranging from
$4.81 per share to $24.19 per share (aggregate amount payable to NL upon
exercise - $30 million).  At December 31, 1996, options to purchase 1.2 million
NL shares were exercisable at prices lower than the December 31, 1996 quoted
market price of $10.88 per NL share.  The aggregate number of outstanding
options to purchase NL common stock at December 31, 1996 represented
approximately 5% of NL's outstanding common shares at that date.

     Had the Company and NL each elected to account for stock-based employee
compensation for all awards granted after 1994 in accordance with the fair value
based accounting method of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," the impact on the Company's reported
income from continuing operations and related per share amounts for 1995 and
1996 would not be material.

NOTE 14 - FINANCIAL INSTRUMENTS:


                                                                                  DECEMBER 31,


                                                                         1995               1996


                                                                  CARRYING      FAIR      CARRYING       FAIR
                                                                   AMOUNT      VALUE        AMOUNT      VALUE

                                                                          (IN MILLIONS)
                                                                                           
Cash and cash equivalents                                          $170.9     $170.9       $255.7      $255.7
Marketable securities (available-for-sale)                          144.3      147.2        159.7       186.6

Notes payable and long-term debt (excluding
 capitalized leases):
  Publicly-traded fixed rate debt:
    Valhi LYONs                                                    $130.4     $143.1       $142.5      $170.8
    NL Senior Secured Notes                                         250.0      267.7        250.0       265.2
    NL Senior Secured Discount Notes                                132.0      151.8        149.8       161.9
    Valcor Senior Notes                                              99.0       98.0         98.9        97.9
  Medite debt with rates fixed via interest rate swaps               26.0       26.0          -           -
  Other fixed-rate debt                                              18.9       19.2          3.9         4.0
  Variable rate debt                                                632.3      632.3        469.2       469.2

Minority interest in NL common stock                               $  -       $289.6       $  -        $246.9

Valhi common stockholders' equity                                  $274.3     $730.1       $303.9      $730.8



       Fair values of marketable securities and publicly-traded debt are based
upon quoted market prices.  See Notes 6 and 9.  The fair value of the 44%
minority interest in NL Industries and of Valhi's common stockholders' equity
are based upon quoted market prices for NL common stock (1995 - $12.13 per
share; 1996 - $10.88 per share) and Valhi common stock (1995 and 1996 - $6.38
per share).  Medite had entered into interest rate swaps to mitigate the impact
of changes in interest rates for $26 million of its U.S. bank term loan.  The
interest rate swaps were terminated in October 1996 when the related loans were
repaid.  See Note 19.  The fair value of Medite debt on which interest rates had
been effectively fixed through the use of interest rate swaps was deemed to
approximate the book value of the debt plus or minus the fair value of the
related swaps.  See Note 9.  The fair value of Medite's interest rate swaps was
estimated to approximate the contract amount at December 31, 1995.  Such fair
values represented the estimated amount Medite would have received if it
terminated the swap agreements at that date, and were based upon quotes obtained
from the counter party financial institution.  Fair values of other fixed rate
debt have been estimated based upon relative changes in the Company's variable
borrowing rates since the dates the interest rates were fixed.  Fair values of
variable interest rate debt are deemed to approximate book value.

NOTE 15 - INCOME TAXES:


                                                                     YEARS ENDED DECEMBER 31,

                                                                     PRO FORMA

                                                      1994             1994             1995           1996

                                                                    (UNAUDITED)
                                                                           (IN MILLIONS)
                                                                                            
Components of pre-tax income:
  United States:
    Contran Tax Group                                 $(10.5)         $(10.4)            $(11.6)        $(16.0)
    NL Tax Group                                        -               (7.5)              41.8           49.0
    Equity in:
      Amalgamated                                       13.9            13.9                8.9           10.0
      NL prior to consolidation                        (25.1)            -                  -               -

                                                       (21.7)           (4.0)              39.1           43.0
  Non-U.S. subsidiaries                                 13.1           (12.4)              49.3          (28.4)


                                                      $ (8.6)         $(16.4)            $ 88.4         $ 14.6



Expected tax expense (benefit),
 at U.S. federal statutory income
 tax rate of 35%                                      $ (3.0)         $ (5.8)            $ 30.9         $  5.1
Non-U.S. tax rates                                      -               (7.5)              (7.5)           (.6)
Incremental U.S. tax and rate
 differences on equity in
 earnings of non-tax group
 companies                                              (5.6)          (18.4)              19.7           (5.3)
U.S. state income taxes, net                             (.6)            -                  1.4            (.2)
Change in NL's deferred income
 tax valuation allowance                                -               24.3               (9.6)           3.0
No tax benefit for goodwill
 amortization                                             .1             2.7                2.9            3.1
Settlement of U.S. tax audits                           -               (5.4)              -              -
Rate change adjustment of
 deferred taxes                                         -               -                  (7.6)          -
Other, net                                               (.8)             .5                (.3)          (1.6)


                                                      $ (9.9)         $ (9.6)            $ 29.9         $  3.5



Components of income tax expense:
  Currently payable:
    U.S. federal and state                            $ (4.8)         $ (9.6)            $ (3.6)        $  (.6)
    Non-U.S.                                             4.7             7.3               45.5           13.7

                                                         (.1)           (2.3)              41.9           13.1

  Deferred income taxes:
    U.S. federal and state                              (9.7)          (10.4)              12.3          (13.2)
    Non-U.S.                                             (.1)            3.1              (24.3)           3.6

                                                        (9.8)           (7.3)             (12.0)          (9.6)


                                                      $ (9.9)         $ (9.6)            $ 29.9         $  3.5



Comprehensive provision for
 income taxes allocable to:
  Continuing operations                               $  (9.9)        $ (9.6)            $ 29.9         $  3.5


  Discontinued operations                                 6.8                               6.4           22.7
  Stockholders' equity,
   principally deferred taxes
   allocable to adjustments
   components                                              .5                              10.7            6.6


                                                      $  (2.6)                           $ 47.0         $ 32.8




     The components of the net deferred tax liability are summarized in the
following table.  At December 31, 1995 and 1996, all of the deferred tax
valuation allowance relates to NL tax jurisdictions, principally the U.S. and
Germany.  During 1995, NL's gross deferred tax assets and the offsetting
valuation allowance were both increased by $34 million as a result of
recharacterization of certain tax attributes due primarily to changes in certain
tax return elections.  In addition, the valuation allowance increased during
1995 by $6 million due to foreign currency translation and was reduced by $10
million due to a change in estimate of the future tax benefit of certain tax
credits which NL believe satisfied the "more-likely-than-not" recognition
criteria.  During 1996, NL's gross deferred tax assets and the offsetting
valuation allowance were both increased by $14 million as a result of certain
non-U.S. tax losses of its dual resident subsidiary.  In addition, the valuation
allowance decreased during 1996 by $6 million due to foreign currency
translation and was increased by $3 million as a result of certain deductible
temporary differences generated during the year which NL believes do not
currently satisfy the "more-likely-than-not" recognition criteria.


                                                                                  DECEMBER 31


                                                                              1995            1996


                                                                      ASSETS   LIABILITIES   ASSETS   LIABILITIES

                                                                             (IN MILLIONS)
                                                                                            
Tax effect of temporary differences relating to:
  Inventories                                                         $   5.3    $ (14.0)   $   4.1     $  (6.1)
  Marketable securities                                                   -        (28.7)       -         (34.1)
  Natural resource properties                                             -        (17.8)       -          (6.6)
  Property and equipment                                                   .6     (195.6)        .5      (172.6)
  Accrued OPEB cost                                                      30.7        -         21.5         -
  Accrued environmental liabilities and
   other deductible differences                                          89.7        -         97.3         -
  Other taxable differences                                               -       (137.1)       -        (144.1)
  Investments in subsidiaries and affiliates not
   members of the consolidated tax group                                 54.9      (22.2)      53.1       (18.1)
  Tax loss and tax credit carryforwards                                 189.3        -        205.5         -
Valuation allowance                                                    (195.6)       -       (207.1)        -

    Adjusted gross deferred tax assets (liabilities)                    174.9     (415.4)     174.9      (381.6)
Netting of items by tax jurisdiction                                   (171.5)     171.5     (173.1)      173.1

                                                                          3.4     (243.9)       1.8      (208.5)
Less net current deferred tax asset (liability)                           2.6       (4.5)       1.6       (30.5)
    Net noncurrent deferred tax asset (liability)                     $    .8    $(239.4)   $    .2     $(178.0)




       Certain U.S. and non-U.S. income tax returns of the Contran Tax Group
(including non-U.S. subsidiaries thereof) are being examined and tax authorities
have or may propose tax deficiencies.  The Company believes that it has
adequately provided accruals for additional income taxes and related interest
expense which may ultimately result from such examinations and believes that the
ultimate disposition of all such examinations should not have a material adverse
effect on its consolidated financial position, results of operations or
liquidity.

       Certain of NL's U.S. and non-U.S. income tax returns, including Germany,
are being examined and tax authorities have or may propose tax deficiencies.  NL
received certain final assessments and paid tax deficiencies during 1996 of
approximately DM 50 million ($32 million when paid), including interest, in
final settlement of the agreed issues.  The DM 50 million paid to settle these
issues was within previously-accrued amounts.  Certain other German tax
contingencies of NL remain outstanding and will continue to be litigated.  No
assurance can be given that this litigation will be resolved in NL's favor in
view of the inherent uncertainties involved in court rulings.  Although NL
believes that it will ultimately prevail in the litigation, NL has granted a DM
100 million ($64 million at December 31, 1996) lien on its Nordenham, Germany
TiO2 plant until the litigation is resolved.  The Company believes that NL has
adequately provided accruals for additional income taxes and related interest
expense which may ultimately result from all such examinations and believes that
the ultimate disposition of such examinations should not have a material adverse
effect on its consolidated financial position, results of operations or
liquidity.

       During 1995, NL utilized $14 million of foreign tax credit carryforwards
and U.S. net operating loss carryforwards to reduce its current year U.S.
federal income tax expense.  At December 31, 1996, for U.S. federal income tax
purposes, NL had approximately $27 million of foreign tax credit carryforwards
expiring during 1997 through 2001 and approximately $10 million of alternative
minimum tax credit carryforwards with no expiration date.  NL also had
approximately $400 million of income tax loss carryforwards in Germany with no
expiration date.

NOTE 16 - EMPLOYEE BENEFIT PLANS:

       Defined contribution plans.  A majority of the Company's full-time U.S.
employees are eligible to participate in various defined contribution pension
plans with Company contributions based on matching or other formulas.  Defined
contribution plan expense related to the Company's consolidated business
segments and charged to continuing operations approximated $1.5 million in 1994
(pro forma 1994 - $2.3 million) and $2.5 million in 1995 and $2.6 million in
1996.

       Defined benefit plans.  The Company maintains various defined benefit
pension plans covering substantially all full-time employees.  Defined pension
benefits are generally based on years of service and compensation under fixed
dollar, final pay or career average formulas and the related expenses are based
on independent actuarial valuations.  The funding policies for U.S. defined
benefit plans are to contribute amounts satisfying funding requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").  Non-U.S.
defined benefit plans are funded in accordance with applicable statutory
requirements.  Medite maintained a defined benefit pension plan covering
substantially all of its full-time Irish employees, which plan was assumed by
the purchaser upon sale of Medite's Irish subsidiary in November 1996.  Medite
maintains a plan covering its U.S. employees, and substantially all remaining
employees will cease to accrue benefits in 1997 upon the sale of Medite's Oregon
MDF and timber conversion facilities.  See Note 19.  Variances from actuarially
assumed rates will result in increases or decreases in accumulated pension
obligations, pension expense and funding requirements in future periods.  A one
percentage point decrease in the discount rate would increase the aggregate
actuarial present value of accumulated benefit obligations at December 31, 1996
by approximately $39 million.

       The rates used in determining the actuarial present value of benefit
obligations are presented in the table below.


                                                                                   DECEMBER 31,

                                                                    1994               1995               1996

                                                                                               
Discount rate                                                       8.5%            7.5%-8.5%          6.5%-8.5%
Rate of increase in future
 compensation levels                                               4%-6%             3.5%-6%            3.5%-6%
Long-term rate of return on assets                                7.5%-10%           7.5%-10%            7%-10%


       Plan assets are primarily investments in U.S. and non-U.S. corporate
equity and debt securities, short-term investments, mutual funds and group
annuity contracts.  A nominal amount of the aggregate plan assets at December
31, 1996 (1995 - 13%) consists of units in a combined investment fund for
employee benefit plans sponsored by Valhi and its affiliates, including Contran
and certain Contran affiliates.  Assets of the combined investment fund are
primarily investments in corporate equity and debt securities, short-term cash
investments and notes collateralized by residential and commercial real estate.

     The funded status of the Company's defined benefit pension plans and the
components of net periodic defined benefit pension cost are set forth below.
Approximately 76% of the unfunded amounts of plans for which plan assets are
less than the accumulated benefit obligation at December 31, 1996 relate to
certain of NL's non-U.S. plans, and substantially all of the remainder relates
to certain of NL's U.S. plans.  Net periodic pension cost related to the
Company's consolidated business segments and charged to continuing operations is
presented in the table below.  Net periodic pension cost related to
Amalgamated's plans approximated $2 million in each of the past three years, and
net periodic pension cost related to Medite's plans, included in discontinued
operations, was not material in any of the past three years.


                                                                 PLAN ASSETS         ACCUMULATED
                                                              EXCEED              BENEFITS
                                                                ACCUMULATED           EXCEED PLAN

                                                              BENEFITS            ASSETS

                                                                    December 31,         December 31,


                                                                  1995         1996        1995         1996

                                                                        (IN THOUSANDS)
                                                                                          
Actuarial present value of benefit obligations:
  Vested benefits                                                $ 73,309   $ 48,953      $176,659    $191,939
  Nonvested benefits                                                8,579      4,075         3,032       9,966


  Accumulated benefit obligations                                  81,888     53,028       179,691     201,905
  Effect of projected salary increases                             18,183      7,598        22,758      26,311


  Projected benefit obligations ("PBO")                           100,071     60,626       202,449     228,216
Plan assets at fair value                                         108,559     78,511       144,408     149,660


Plan assets over (under) PBO                                        8,488     17,885       (58,041)    (78,556)
Unrecognized net loss (gain) from experience different
 from actuarial assumptions                                        14,769      3,567       (16,313)     16,696
Unrecognized prior service cost (credit), net                       3,751      3,838        (2,308)        791
Unrecognized net obligations (assets) being amortized
 over periods of 9 to 18 years                                        263       (469)        2,175       1,966
Adjustment to recognize minimum liability                            -          -           (5,914)     (6,167)


Total prepaid (accrued) pension cost                               27,271     24,821       (80,401)    (65,270)
Current portion and reclassification, net                          (2,504)       492        10,361       6,055


    Noncurrent prepaid (accrued) pension cost                    $ 24,767   $ 25,313      $(70,040)   $(59,215)







                                                                         YEARS ENDED DECEMBER 31,

                                                                    PRO FORMA

                                                     1994             1994               1995               1996

                                                                   (UNAUDITED)
                                                                             (IN THOUSANDS)
                                                                                              
Net periodic pension cost:
  Service cost benefits                               $ 136            $ 5,041          $  4,457          $  3,642
  Interest cost on PBO                                  156             15,527            18,008            16,795
  Actual return on plan assets                           44             (7,995)          (16,943)          (16,700)
  Net amortization and deferral                        (192)            (6,132)           (2,208)              219


                                                      $ 144            $ 6,441          $  3,314          $  3,956





       Postretirement benefits other than pensions.  Certain subsidiaries
currently provide certain health care and life insurance benefits for eligible
retired employees.  Medical claims are funded as incurred, net of any
contributions by the retirees.  Under plans currently in effect, some currently
active employees of NL may become eligible for postretirement health care
benefits if they reach retirement age while working for the applicable
subsidiary.  At December 31, 1996, substantially all of the Company's aggregate
accrued OPEB cost relates to NL (1995 - about three-fourths related to NL and
substantially all of the remainder related to Amalgamated).  In 1989, NL began
phasing out OPEB benefits for currently active U.S. employees over a ten-year
period.  The majority of NL retirees are required to contribute a portion of the
cost of their benefits.  Health care benefits for certain current and future NL
retirees are reduced at age 65.

       The rates used in determining the actuarial present value of benefit
obligations are presented in the table below.  At December 31, 1996, the
expected rate of increase in future health care costs is 8% in 1997, gradually
declining to 5% in 2000 and thereafter.


                                                                                   DECEMBER 31,

                                                                    1994               1995               1996

                                                                                               
Discount rate                                                       8.5%               7.5%               7.5%
Rate of increase in future
 compensation levels                                               4%-6%             4%-4.5%               6%
Long-term rate of return on assets                                   9%                 9%                 9%



       The components of the periodic OPEB cost and accumulated OPEB obligation
are set forth below.  Variances from actuarially-assumed rates will result in
additional increases or decreases in accumulated OPEB obligations, net periodic
OPEB cost and funding requirements in future periods.  If the health care cost
trend rate was increased by one percentage point for each year, OPEB expense
would have increased $200,000 in 1996, and the actuarial present value of
accumulated OPEB obligations at December 31, 1996 would have increased $2.2
million.  A one percentage point decrease in the discount rate would increase
the aggregate actuarial present value of accumulated benefit obligations at
December 31, 1996 by approximately $3 million.  Net periodic OPEB cost related
to the Company's consolidated business segments and charged to continuing
operations is presented in the table below.  Net periodic OPEB cost related to
Amalgamated approximated $1.5 million in each of the past three years.


                                                                     YEARS ENDED DECEMBER 31,

                                                                    PRO FORMA

                                                      1994            1994              1995             1996

                                                                (UNAUDITED)
                                                                           (IN MILLIONS)
                                                                                           
Service cost benefits earned
 during the year                                      $ -            $    99           $   101         $   112
Interest cost on accumulated
 OPEB obligation                                        -              4,338             4,415           3,995
Return on plan assets                                   -               (688)             (637)           (596)
Net amortization and deferral                           -             (1,495)           (1,870)         (1,473)


                                                      $ -            $ 2,254           $ 2,009         $ 2,038







                                                                                       DECEMBER 31,

                                                                                        1995            1996

                                                                                        (IN THOUSANDS)
                                                                                                 
Actuarial present value of accumulated OPEB obligations:
  Retiree benefits                                                                      $60,373        $41,826
  Other fully eligible active plan participants                                           4,906            865
  Other active plan participants                                                          8,329          2,394

                                                                                         73,608         45,085
Plan assets at fair value                                                                 7,103          6,689

                                                                                         66,505         38,396
Unrecognized net gain from experience different
 from actuarial assumptions                                                               6,957          7,096
Unrecognized prior service credit                                                        12,199         16,259


Total accrued OPEB cost                                                                  85,661         61,751
Less current portion                                                                      7,251          5,494


  Noncurrent accrued OPEB cost                                                          $78,410        $56,257





NOTE 17 - RELATED PARTY TRANSACTIONS:

       The Company may be deemed to be controlled by Harold C. Simmons.  See
Note 1.  Corporations that may be deemed to be controlled by or affiliated with
Mr. Simmons sometimes engage in (a) intercorporate transactions such as
guarantees, management and expense sharing arrangements, shared fee
arrangements, joint ventures, partnerships, loans, options, advances of funds on
open account, and sales, leases and exchanges of assets, including securities
issued by both related and unrelated parties, and (b) common investment and
acquisition strategies, business combinations, reorganizations,
recapitalizations, securities repurchases, and purchases and sales (and other
acquisitions and dispositions) of subsidiaries, divisions or other business
units, which transactions have involved both related and unrelated parties and
have included transactions which resulted in the acquisition by one related
party of a publicly-held minority equity interest in another related party.  The
Company continuously considers, reviews and evaluates, and understands that
Contran and related entities consider, review and evaluate such transactions.
Depending upon the business, tax and other objectives then relevant, it is
possible that the Company might be a party to one or more such transactions in
the future.

       It is the policy of the Company to engage in transactions with related
parties on terms, in the opinion of the Company, no less favorable to the
Company than could be obtained from unrelated parties.

     Receivables from and payables to affiliates are summarized in the table
below.


                                                                                        DECEMBER 31,

                                                                                         1995           1996

                                                                                        (IN THOUSANDS)
                                                                                                  
Receivables from affiliates:
  Demand loan to Contran                                                                  $ 3,000       $  -
  Net dividend receivable from Amalgamated                                                   -           11,518
  Income taxes receivable from Contran                                                        506          -
  Other                                                                                        23         2,413



                                                                                          $ 3,529       $13,931



Payables to affiliates:
  Demand loan from Contran                                                                $  -          $ 7,244
  Income taxes payable to Contran                                                            -           29,633
  Tremont Corporation                                                                       3,525         3,529
  Louisiana Pigment Company                                                                 6,677         6,677
  Other, net                                                                                  (14)          304


                                                                                          $10,188       $47,387





       Amounts receivable from Amalgamated were collected in January 1997.  See
Note 20.  Payables to Louisiana Pigment Company are primarily for the purchase
of TiO2 (see Note 8), and amounts payable to Tremont Corporation relate to NL's
Insurance Sharing Agreement discussed below.

       Loans are made between the Company and related parties, including
Contran, pursuant to term and demand notes, principally for cash management
purposes.  Related party loans generally bear interest at rates related to
credit agreements with unrelated parties.  Interest income on loans to related
parties was $398,000 in 1994, $1.1 million in 1995 and $101,000 in 1996; related
party interest expense was nominal in 1996.

       Contran has a bank credit agreement which includes a letter of credit
facility.  Pursuant to such agreement, Contran may authorize the banks to issue
letters of credit on behalf of the Company ($731,000 outstanding at December 31,
1996).  Obligations under this Contran credit agreement are collateralized by
certain securities held by Contran.

       Under the terms of Intercorporate Services Agreements ("ISAs") with
Contran, Contran provides certain management, administrative and aircraft
maintenance services to the Company, and the Company provides various
administrative and other services to Contran, on a fee basis.  The net ISA fees
charged by Contran to the Company (including amounts charged to Tremont prior to
1995 and to NL) were approximately $480,000 in 1994, $560,000 in 1995 and
$500,000 in 1996.  Purchases in the ordinary course of business from
unconsolidated joint ventures, principally the TiO2 manufacturing joint venture,
were $79 million in 1995 and $81 million in 1996.  Other charges from corporate
related parties for services provided in the ordinary course of business were
less than $250,000 in each of the past three years.  Such charges are
principally pass-through in nature and, in the Company's opinion, are not
materially different from those that would have been incurred on a stand-alone
basis.  The Company has established a policy whereby the Board of Directors will
consider the payment of additional management fees to Contran for certain
financial advisory and other services provided by Contran beyond the scope of
the ISAs.  No such payments were made in the past three years.

       NL and a wholly-owned insurance subsidiary of Tremont that was a
subsidiary of NL prior to 1988 ("NLI Insurance"), are parties to an Insurance
Sharing Agreement with respect to certain loss payments and reserves established
by NLI Insurance that (i) arise out of claims against other entities for which
NL is responsible and (ii) are subject to payment by NLI Insurance under certain
reinsurance contracts.  Also, NLI Insurance will credit NL with respect to
certain underwriting profits or credit recoveries that NLI Insurance receives
from independent reinsurers that relate to retained liabilities.

       COAM Company is a partnership, formed prior to 1993, which has sponsored
research agreements with the University of Texas Southwestern Medical Center at
Dallas (the "University") to develop and commercially market a safe and
effective treatment for arthritis (the "Arthritis Research Agreement") and to
develop and commercially market patents and technology resulting from a cancer
research program (the "Cancer Research Agreement").  At December 31, 1996, COAM
partners are Contran, Valhi and another Contran subsidiary.  Harold C. Simmons
is the manager of COAM.  The Arthritis Research Agreement, as amended, provides
for payments by COAM of up to $6 million over the next eight years and the
Cancer Research Agreement, as amended, provides for funds of up to $16.2 million
over the next 14 years.  Funding requirements pursuant to the Arthritis and
Cancer Research Agreements are without recourse to the COAM partners and the
partnership agreement provides that no partner shall be required to make capital
contributions.  The Company's contributions to COAM were approximately $2
million in 1994 and nil in each of 1995 and 1996.
NOTE 18 - COMMITMENTS AND CONTINGENCIES:

Legal proceedings

       Lead pigment litigation.  Since 1987, NL, other past manufacturers of
lead pigments for use in paint and lead-based paint and the Lead Industries
Association have been named as defendants in various legal proceedings seeking
damages for personal injury and property damage allegedly caused by the use of
lead-based paints.  Certain of these actions have been filed by or on behalf of
large United States cities or their public housing authorities and certain
others have been asserted as class actions.  These legal proceedings seek
recovery under a variety of theories, including negligent product design,
failure to warn, breach of warranty, conspiracy/concert of action, enterprise
liability, market share liability, intentional tort, and fraud and
misrepresentation.

       The plaintiffs in these actions generally seek to impose on the
defendants responsibility for lead paint abatement and asserted health concerns
associated with the use of lead-based paints, including damages for personal
injury, contribution and/or indemnification for medical expenses, medical
monitoring expenses and costs for educational programs.  Most of these legal
proceedings are in various pre-trial stages; several are on appeal.

       NL believes these actions are without merit, intends to continue to deny
all allegations of wrongdoing and liability and to defend all actions
vigorously.  NL has not accrued any amounts for the pending lead pigment and
lead-based paint litigation.  Considering NL's previous involvement in the lead
and lead pigment businesses, there can be no assurance that additional
litigation similar to that currently pending will not be filed.

       Environmental matters and litigation.  The Company's operations are
governed by various federal, state, local and foreign environmental laws and
regulations.  The Company's policy is to comply with environmental laws and
regulations at all of its plants and to continually strive to improve
environmental performance in association with applicable industry initiatives.
The Company believes that its operations are in substantial compliance with
applicable requirements of environmental laws.  From time to time, the Company
may be subject to environmental regulatory enforcement under various statutes,
resolution of which typically involves the establishment of compliance programs.

     The Company records liabilities related to environmental remediation
obligations when estimated future expenditures are probable and reasonably
estimable.  Such accruals are adjusted as further information becomes available
or circumstances change.  Estimated future expenditures are not discounted to
their present value.  Recoveries of remediation costs from other parties, if
any, are recognized as assets when their receipt is deemed probable.  At
December 31, 1995 and 1996, no assets for recoveries have been recognized.

     The Company will adopt the recognition and disclosure requirements of
Statement of Position No. 96-1, "Environmental Remediation Liabilities" in the
first quarter of 1997.  The new rule, among other things, expands the types of
costs that must be considered in determining environmental remediation accruals.
As a result of adopting the new Statement of Position, the Company expects to
recognize a non-cash pre-tax charge of $30 million in the first quarter of 1997
related to NL's environmental matters.  Such charge is comprised primarily of
estimated future undiscounted expenditures associated with managing and
monitoring existing environmental remediation sites.  The expenditures consist
principally of legal and professional fees associated with such sites, but
exclude litigation defense costs with respect to situations in which the Company
asserts that no liability exists.  Currently, such expenditures are expensed as
incurred.

     Some of NL's current and former facilities, including several divested
secondary lead smelters and former mining locations, are the subject of civil
litigation, administrative proceedings or of investigations arising under
federal and state environmental laws.  Additionally, in connection with past
disposal practices, NL has been named a potentially responsible party ("PRP")
pursuant to CERCLA in approximately 75 governmental and private actions
associated with hazardous waste sites and former mining locations, some of which
are on the U.S. EPA's Superfund National Priorities List.  These actions seek
cleanup costs and/or damages for personal injury or property damage.  While NL
may be jointly and severally liable for such costs, in most cases, it is only
one of a number of PRPs who are also jointly and severally liable.  In addition,
NL is a party to a number of lawsuits filed in various jurisdictions alleging
CERCLA or other environmental claims.  At December 31, 1996, NL had accrued $113
million with respect to those environmental matters which are reasonably
estimable.  It is not possible to estimate the range of costs for certain sites.
The upper end of range of reasonably possible costs to NL for sites for which it
is possible to estimate costs is approximately $160 million.  No assurance can
be given that actual costs will not exceed accrued amounts or the upper end of
the range for sites for which estimates have been made, and no assurance can be
given that costs will not be incurred with respect to sites as to which no
estimate presently can be made.  The imposition of more stringent standards or
requirements under environmental laws or regulations, new developments or
changes respecting site cleanup costs or allocation of such costs among PRPs, or
a determination that NL is potentially responsible for the release of hazardous
substances at other sites, could result in expenditures in excess of amounts
currently estimated by NL to be required for such matters.  Further, there can
be no assurance that additional environmental matters will not arise in the
future.

     Certain other information relating to regulatory and environmental matters
pertaining to NL is included in Item 1 - "Business - Chemicals" of this Annual
Report on Form 10-K.
     At December 31, 1996, Medite has accrued approximately $4.6 million for the
estimated cost to complete environmental remediation efforts at certain of its
current and former facilities, including amounts included in accrued plant
closure costs.  Costs for future environmental remediation efforts are not
discounted to their present value, and no recoveries for remediation costs from
third parties have been recognized.  Such accruals will be adjusted, if
necessary, as further information becomes available or as circumstances change.
No assurance can be given that the actual costs will not exceed accrued amounts.
None of these facilities are the subject of any litigation, administrative
proceeding or investigation.

     The Company has also accrued approximately $2 million at December 31, 1996
in respect of other environmental cleanup matters, principally related to one
Superfund site in Indiana where the Company, as a result of former operations,
has been named as a PRP.  Such accrual does not reflect any amounts which the
Company could potentially recover from insurers or other third parties and is
near the upper end of the range of the Company's estimate of reasonably possible
costs for such matters.  The imposition of more strict standards or requirements
under environmental laws or regulations, new developments or changes in site
cleanup costs or allocations of such costs could result in expenditures in
excess of amounts currently estimated to be required for such matters.

     Other litigation.  In November 1992, a complaint was filed in the U.S.
District Court for the District of Utah against Valhi, Amalgamated and the
Amalgamated Retirement Plan Committee (American Federation of Grain Millers
International, et al. v. Valhi, Inc. et al., No. 29-NC-129J).  The complaint, a
purported class action on behalf of certain current and retired hourly employees
of Amalgamated, alleges, among other things, that the defendants breached their
fiduciary duties under ERISA by amending certain provisions of a retirement plan
for hourly employees maintained by Amalgamated to permit the reversion of excess
plan assets to Amalgamated in 1986.  The complaint seeks a variety of remedies,
including, among other things, orders requiring a return of all reverted funds
(alleged to be in excess of $8 million) and any profits earned thereon, a
distribution of such funds to the plan participants, retirees and their
beneficiaries and enhancement of the benefits under the plan, and an award of
costs and expenses, including attorney fees.  In January 1996, the Court granted
the Company's motion for summary judgment with respect to certain counts and
denied the Company's motion for summary judgment with respect to other counts.
The court also granted plaintiffs' permission to amend their complaint to
include new allegations.  Plaintiffs subsequently amended their complaint, and a
hearing was held in September 1996 on defendants motion for partial summary
judgment to dismiss the new counts.  The Company believes it has adequately
accrued for the estimated effect of the ultimate resolution of this matter.

     In November 1991, a purported derivative complaint was filed in the Court
of Chancery of the State of Delaware, New Castle County (Alan Russell Kahn v.
Tremont Corporation, et al., No. 12339), in connection with Tremont's agreement
to purchase 7.8 million NL common shares from Valhi.  In addition to Tremont,
the complaint names as defendants the members of Tremont's board of directors
and Valhi.  The complaint alleges, among other things, that Tremont's purchase
of the NL shares constitutes a waste of Tremont's assets and that Tremont's
board of directors breached their fiduciary duties to Tremont's public
stockholders and seeks, among other things, to rescind Tremont's consummation of
the purchase of the NL shares and award damages to Tremont for injuries
allegedly suffered as a result of the defendants' wrongful conduct.  In March
1996, the court ruled in favor of the defendants, including Valhi, and concluded
that Tremont's purchase did not constitute an overreaching of Tremont by the
controlling shareholder (Valhi), that Tremont's purchase price for the NL shares
was fair and that in all other respects the transaction was fair to Tremont.  In
June 1996, the plaintiffs filed an appeal, with the Delaware Supreme Court.  A
hearing before a three-judge panel of the Supreme Court was held in December
1996, and an en banc hearing before the full Supreme Court was held in February
1997.  Valhi believes, and understands that Tremont and the other defendants
believe, that the action is without merit.

     In July 1996, Medite filed a complaint in U.S. District Court in New Mexico
(Medite Corporation v. Public Service Company of New Mexico, CIV 96-0929LH)
regarding termination of the electricity supply contract for its New Mexico MDF
facility permanently closed in May 1996.  The complaint seeks, among other
things, to declare the contract terminated under New Mexico common law and/or
the force majeure provisions of the agreement.  Defendant filed a motion to
dismiss, and also filed a counterclaim demanding that Medite pay an
approximately $5 million termination penalty contained in the contract.  Medite
does not believe the termination penalty clause applies due to, among other
things, the force majeure provisions of the contract.  Discovery is proceeding.
The Company does not expect the resolution of this matter to have a material
adverse impact on its consolidated results of operations, financial position or
liquidity.

     In November 1995, a complaint was filed against Medite in the U.S. District
Court for the Western District of Oklahoma (Midgard Corporation v. Medite of New
Mexico, Inc., et al., CIV 95-1807-A) alleging, among other things, that Medite
breached Midgard's purportedly exclusive territorial supply contract by
purchasing certain raw materials from a third party located in Oklahoma City.
The complaint seeks, among other things, $4 million in compensatory damages and
$100 million in punitive damages.  Medite has answered the complaint denying
liability.  Discovery is proceeding.  The Company believes the complaint is
without merit, intends to defend the action vigorously and does not expect the
resolution of this matter to have a material adverse impact on its consolidated
results of operations, financial position or liquidity.

     In September 1996, a complaint was filed in the Superior Court of New York,
Bergen County, Chancery Division (Frank D. Seinfeld v. Harold C. Simmons, et
al., No. C-336-96) against Valhi, NL and certain current and former members of
NL's board of directors.  The complaint, a derivative action on behalf of NL,
alleges, among other things, that NL's August 1991 "Dutch auction" tender offer
was an unfair and wasteful expenditure of NL's funds.  The complaint seeks,
among other things, to rescind NL's purchase of approximately 10.9 million
shares of its common stock from Valhi pursuant to the Dutch auction, and the
plaintiff has stated that damages sought are $149 million.  The Company and the
other defendants have answered the complaint and have denied all allegations of
wrongdoing.  The Company believes, and understands each of the other defendants
believe, the complaint is without merit and that each intends to defend the
action vigorously.  Trial is scheduled to begin in November 1997.

     NL has been named as a defendant in various lawsuits alleging personal
injuries as a result of exposure to asbestos in connection with formerly-owned
operations.  Various of these actions remain pending.  Discovery is proceeding
in one such case, In re: Monongalia Mass II, (Circuit Court of Monongalia
County, West Virginia Nos. 93-C-362, et al.), involving approximately 3,100
plaintiffs.  NL intends to defend these matters vigorously.

     In July 1995, twelve plaintiffs brought an action against NL and various
other defendants, Rhodes, et al. v. ACF Industries, Inc., et al.  (Circuit Court
of Putnam County, West Virginia, No. 95-C-261).  Plaintiffs allege that they
were employed by demolition and disposal contractors, and claim that as a result
of the defendants' negligence they were exposed to asbestos during demolition
and disposal of materials from the defendants' premises in West Virginia.
Plaintiffs allege personal injuries and seek compensatory damages totaling $18.5
million and punitive damages totaling $55.5 million.  NL has filed an answer
denying plaintiffs' allegations.  Discovery is proceeding.

     In addition to the litigation described above, the Company is also involved
in various other environmental, contractual, product liability and other claims
and disputes incidental to its present and former businesses.  The Company
currently believes that the disposition of all claims and disputes, individually
or in the aggregate, should not have a material adverse effect on its
consolidated financial position, results of operations or liquidity.

     Concentrations of credit risk.  Sales of TiO2 accounted for approximately
90% of NL's sales in each of the past three years.  TiO2 is sold to the paint,
paper and plastics industries, which are generally considered "quality-of-life"
markets whose demand for TiO2 is influenced by the relative economic well-being
of the various geographic regions.  TiO2 is sold to over 4,000 customers, none
of which represents a significant portion of NL's sales.  In each of the past
three years, approximately one-half of NL's TiO2 sales volume were to Europe
with approximately one-third attributable to North America.

     Component products are sold primarily to original equipment manufacturers
in the U.S. and Canada.  In each of the past three years, the ten largest
customers accounted for approximately one-third of component products sales with
at least five of such customers in each year located in the U.S.

     Sybra's restaurants are clustered in four regions, principally Texas,
Michigan, Pennsylvania and Florida.  All fast food sales are for cash.

     At December 31, 1996, consolidated cash and cash equivalents includes $53
million invested in U.S. Treasury securities purchased under short-term
agreements to resell (1995 - $103 million), of which $41 million are held in
trust for the Company by a single U.S. bank (1995 - $88 million).  In addition,
at December 31, 1996, consolidated cash and cash equivalents included
approximately $120 million invested in A1 or P1-grade commercial paper issued by
various third parties having a maturity of three months or less.

     Operating leases.  Kronos' principal German operating subsidiary leases the
land under its Leverkusen TiO2 production facility pursuant to a lease expiring
in 2050.  The Leverkusen facility, with approximately one-third of Kronos'
current TiO2 production capacity, is located within the lessor's extensive
manufacturing complex, and Kronos is the only unrelated party so situated.
Under a separate supplies and services agreement expiring in 2011, the lessor
provides some raw materials, auxiliary and operating materials and utilities
services necessary to operate the Leverkusen facility.  Both the lease and the
supplies and services agreements restrict NL's ability to transfer ownership or
use of the Leverkusen facility.

     The Company also leases various fast food retail and other manufacturing
facilities and equipment.  Most of the leases contain purchase and/or various
term renewal options at fair market and fair rental values, respectively.  In
most cases the Company expects that, in the normal course of business, such
leases will be renewed or replaced by other leases.

     Net rent expense related to the Company's consolidated business segments
charged to continuing operations approximated $6 million in 1994 (pro forma 1994
- - $14 million), $15 million in 1995 and $17 million in 1996.  Contingent rentals
based upon gross sales of individual fast food restaurants were less than $.5
million in each of the past three years.  At December 31, 1996, future minimum
payments under noncancellable operating leases having an initial or remaining
term of more than one year were as follows:


Years ending December 31,                                                                           AMOUNT

                                                                                                (IN THOUSANDS)

                                                                                               
  1997                                                                                              $ 9,834
  1998                                                                                                8,380
  1999                                                                                                6,537
  2000                                                                                                4,560
  2001                                                                                                3,671
  2002 and thereafter                                                                                32,122

                                                                                                     65,104
  Less minimum rentals due under
   noncancellable subleases                                                                             891


      Net minimum commitments                                                                       $64,213





       Capital expenditures.  At December 31, 1996, the estimated cost to
complete capital projects in process approximated $16 million, most of which
relates to environmental protection and compliance programs and productivity-
enhancing equipment at certain of NL's TiO2 facilities.

       TiO2 raw material supply contract.  NL has long-term supply contracts
that provide for NL's chloride-process TiO2 feedstock requirements through 2000.
The agreements require NL to purchase certain minimum quantities of feedstock
with average minimum annual purchase commitments aggregating approximately $115
million.

       Royalties.  Royalty expense, which relates principally to fast food
operations, approximated $4 million in each of the past three years.  Fast food
royalties are paid to the franchisor based upon a percentage of gross sales, as
specified in the franchise agreement related to each individual restaurant.

     Development agreement.  Under the terms of Sybra's Market Development
Agreement with Arby's, Sybra has the exclusive right to open new Arby's units
within certain counties in Pennsylvania.  The Agreement requires Sybra to open
an aggregate of 25 new stores in its existing regions during 1997 through 2001
(four in 1997, six in 1998 and five each in 1999, 2000 and 2001), with at least
ten of the stores in the Pennsylvania region.

     Disposal of fast food operations.  The Company has executed agreements
involving the sale of its fast food operations conducted by Sybra.  The proposed
sale would be accomplished in simultaneous transactions that would include the
sale of certain restaurant real estate owned by Sybra to one party for $45
million cash consideration, and Valcor's sale of 100% of the stock of Sybra to
another party for approximately $39.7 million cash consideration, of which
approximately $23.7 million would be used to repay Sybra bank indebtedness.
These transactions are subject to, among other things, completion of customary
due diligence procedures, the purchaser of Sybra's stock obtaining necessary
financing for the transaction and certain consents from third parties.  If
completed, the transactions are expected to close in the second quarter of 1997,
at which time the Company estimates it would report a pre-tax gain on disposal
in excess of $24 million.  There can be no assurance that any such transactions
will be completed.

NOTE 19 - DISCONTINUED OPERATIONS:

     Discontinued operations are comprised of the following:


                                                                          YEARS ENDED DECEMBER 31,

                                                                          1994            1995          1996

                                                                             (IN THOUSANDS)
                                                                                                
Medite Corporation                                                        $18,347        $10,607         $37,819
Tremont Corporation, net                                                   (8,069)          -               -


                                                                          $10,278        $10,607         $37,819





     Medite.  In September 1996, Medite Corporation signed three separate
letters of intent involving the sale of substantially all of its assets.  The
first transaction, involving the sale of Medite's timber and timberlands, closed
in October 1996 for approximately $118 million cash consideration, of which
approximately $53 million of the cash proceeds were used to pay off and
terminate Medite's U.S. bank credit facilities.  The second transaction,
involving the sale of Medite's Irish MDF subsidiary, closed in November 1996 for
approximately $61.5 million cash consideration plus the assumption of
approximately $21 million of Irish bank debt.  The third transaction, involving
the sale of Medite's Oregon MDF facility, closed in February 1997 for
approximately $36 million cash consideration plus the assumption of
approximately $3.7 million of Medite indebtedness.  The letter of intent with
the purchaser of the Oregon MDF facility originally contemplated the purchase of
Medite's two small Oregon timber conversion facilities, but in December 1996
negotiations regarding a definitive agreement for the timber conversion
facilities were terminated, and Medite determined to permanently close these
facilities.  The stud lumber facility, closed in December 1996, is being
dismantled and Medite will sell the salvageable machinery and equipment.  Medite
continues to operate the veneer facility on a short-term basis and expects to
either sell or close this facility in 1997.  Accordingly, the accompanying
financial statements present the results of operations of Medite's building
products business segment as discontinued operations for all periods presented.

     As is customary in transactions of these types, Medite has made certain
representations and warranties to the respective purchasers concerning, among
other things, the assets sold.  Medite has agreed to indemnify the three
purchasers for up to an aggregate of $6.5 million for certain breaches of these
representations and warranties.  As part of the transactions, Valhi has agreed
to guarantee Medite's indemnification obligations.  The Company does not
currently expect to be required to perform under any of these indemnification
obligations.

     Medite's 1996 results include a first quarter pre-tax charge of $24 million
for the estimated costs of permanently closing its New Mexico MDF plant, and a
$13 million fourth-quarter pre-tax charge for the estimated costs of permanently
closing its two Oregon timber conversion facilities. Approximately $26 million
of such charges represented non-cash costs, most of which related to the net
carrying value of property and equipment in excess of estimated net realizable
value.  These non-cash costs were deemed utilized upon adoption of the
respective closure plans.  Approximately $11 million of the charge represents
workforce, environmental and other estimated cash costs associated with the
closure of the facilities, of which approximately $3 million had been paid at
December 31, 1996.  In August 1996, Medite completed the sale of substantially
all of the building and equipment of the New Mexico facility for $5.5 million
cash consideration, which approximated the previously-estimated net realizable
value.

     Condensed income statement data for Medite is presented below.  The $24
million pre-tax New Mexico MDF plant charge is included in Medite's operating
income for 1996 because the decision to close the New Mexico MDF facility
occurred prior to the decision to permanently dispose of the entire business
segment.  The aggregate net gain on disposal in 1996 includes the $13 million
charge associated with the closure of the two Oregon timber conversion
facilities, and a nominal charge associated with a curtailment of its U.S.
defined benefit plan.  Medite expects to report a pre-tax gain on disposal of
approximately $20 million in the first quarter of 1997 relating to the sale of
its Oregon MDF facility.  Interest expense included in discontinued operations
represents interest on indebtedness of Medite and its subsidiaries.


                                                                         YEARS ENDED DECEMBER 31,

                                                                            1994          1995           1996

                                                                               (IN MILLIONS)
                                                                                               
Operations of Medite:
  Net sales                                                                $189.9         $200.0        $171.1



  Operating income                                                         $ 36.4         $ 25.2        $ (7.9)
  Interest expense and other, net                                            (6.9)          (8.2)         (6.7)

    Pre-tax income (loss)                                                    29.5           17.0         (14.6)
  Income tax expense (benefit)                                               11.2            6.4          (4.1)

                                                                             18.3           10.6         (10.5)

Net gain on disposal:
  Pre-tax gain                                                                 -             -            75.1
  Income tax expense                                                           -             -            26.8

                                                                               -             -            48.3



                                                                           $ 18.3         $ 10.6        $ 37.8





     Condensed balance sheets for Medite, included in the Company's consolidated
balance sheets, are presented below.


                                                                                     DECEMBER 31,

                                                                                      1995              1996

                                                                                      (IN MILLIONS)
                                                                                                 
Current assets                                                                        $ 56.1           $21.2
Timber and timberlands                                                                  53.1             -
Property and equipment, net                                                             84.8            18.2
Other assets                                                                             6.4             4.8


                                                                                      $200.4           $44.2




Current liabilities                                                                   $ 33.9           $17.6
Long-term debt                                                                          77.2             3.7
Deferred income taxes                                                                   22.1             1.6
Loan from Valcor (*)                                                                     5.0             -
Other liabilities                                                                        2.9             3.0
Stockholder's equity (*)                                                                59.3            18.3



                                                                                      $200.4           $44.2






(*)  Eliminated in consolidation.

       Condensed cash flow data for Medite (excluding dividends paid to and
intercompany loans with Valcor) is presented below.


                                                                         YEARS ENDED DECEMBER 31,

                                                                            1994          1995           1996

                                                                               (IN MILLIONS)
                                                                                                
Cash flows from operating activities                                       $ 33.1         $ 18.5        $ 24.9


Cash flows from investing activities:

  Capital expenditures                                                      (32.0)         (12.3)        (13.3)
  Proceeds from disposal of business units                                    -              -           179.1
  Other, net                                                                  (.7)           (.2)           .1

                                                                            (32.7)         (12.5)        165.9


Cash flows from financing activities:
  Indebtedness, net                                                          28.6          (13.8)        (64.0)
  Other, net                                                                  1.2            2.9             -

                                                                             29.8          (10.9)        (64.0)



                                                                           $ 30.2         $ (4.9)       $126.8





       Tremont Corporation.  At the beginning of 1994, Valhi held 48% of
Tremont's outstanding common stock and accounted for its interest in Tremont by
the equity method.  In December 1994, Valhi's Board of Directors declared a
special dividend on its common stock of all of its 48% interest in Tremont (3.5
million Tremont shares) (the "Distribution").  Valhi stockholders received
approximately .03 (three one-hundreds) of a share of Tremont for each Valhi
share held.  The Distribution of Tremont common stock was accounted for as a
spin-off (recorded at book value, net of tax).  The Distribution was currently
taxable for federal income tax purposes to both Valhi and Valhi stockholders
based upon the aggregate fair market value ($11.19 per Tremont share) of the
Tremont common stock distributed.  The Company's equity in losses of Tremont's
titanium metals operations during 1994, net of allocable deferred income tax
benefits of $4.3 million, is reported as discontinued operations.

       Contran and certain of its subsidiaries, which held approximately 90% of
Valhi's outstanding common stock at the time of the Distribution, received
approximately 3.2 million Tremont shares in the Distribution (44% of Tremont's
outstanding common stock), and may be deemed to control Tremont.  Tremont holds
18% of NL's outstanding common stock and accounts for its interest in NL by the
equity method due to the common control of Contran and certain of its
subsidiaries.  As discussed above, Valhi continues to own an interest in NL,
and, accordingly, the Company's pro rata portion of Tremont's equity in NL is
included, for all periods presented prior to the Distribution, in continuing
operations as a component of the Company's equity in losses of NL prior to
consolidation.

NOTE 20 - TRANSFER OF CONTROL OF THE AMALGAMATED SUGAR COMPANY:
     On January 3, 1997, the Company completed the transfer of control of the
refined sugar operations previously conducted by the Company's wholly-owned
subsidiary, The Amalgamated Sugar Company, to Snake River Sugar Company, an
Oregon agricultural cooperative formed by certain sugarbeet growers in
Amalgamated's areas of operations.  Pursuant to the transaction, which by its
terms was to be effective December 31, 1996 for both financial reporting and
income tax purposes, Amalgamated contributed substantially all of its net assets
to the Amalgamated Sugar Company LLC, a limited liability company controlled by
Snake River, on a tax-deferred basis in exchange for a non-voting ownership
interest in the LLC.  The Company received approximately $11.5 million net of
pre-closing cash dividends from Amalgamated in 1997.

     Also as part of the transaction, Snake River made certain loans to Valhi
aggregating $250 million in January 1997.  These loans bear interest at a
weighted average fixed interest rate of 9.4%, are collateralized by the
Company's interest in the LLC and are due in January 2027.  Currently, these
loans are nonrecourse to Valhi.

     Snake River's sources of funds for its loans to Valhi, as well as for the
$14 million it contributed to the LLC for its voting ownership interest in the
LLC, included cash capital contributions by the grower members of Snake River
and $192 million in debt financing provided by Valhi in January 1997.  Valhi's
debt financing included $180 million of loans to Snake River, of which (i) $100
million bears interest at a fixed rate of 9.99% with monthly payments of
principal and interest through December 2003 and (ii) $80 million bears interest
at a fixed rate of 10.99% in 1997 and 1998 and 12.99% for 1999 through December
2003, with all principal due in December 2003 ($40 million pays interest
monthly, while interest on the other $40 million compounds annually with payment
deferred until maturity).  All $180 million of such loans are collateralized by
substantially all of Snake River's assets, including its $250 million loan to
Valhi and Snake River's interest in the LLC.  The loans may be prepaid, at Snake
River's option, and the Company understands that Snake River intends to
refinance at least $100 million of such loans with a third-party lender during
1997, but there is no assurance that any such refinancing will occur.  When
Valhi's loans to Snake river have been reduced to less than $37.5 million, then
up to 15% of Valhi's $250 million loans from Snake River will become recourse to
Valhi.  Valhi's debt financing also included a $12 million loan to a member of
Snake River.  This loan bears interest at a fixed rate of 10%, is due in
December 1998, is guaranteed by Snake River and is collateralized by the
member's interest in Snake River.

     The Company may, at its option, require the LLC to redeem the Company's
interest in the LLC beginning in January 2002, and the LLC has the right to
redeem the Company's interest in the LLC beginning in January 2027.  In
addition, beginning in January 2002 the Company has the right to require Snake
River to purchase the Company's interest in the LLC.  The redemption/purchase
price is generally $250 million plus the amount of any deferrals of cash
distributions from the LLC discussed below.  In the event the Company either
requires the LLC to redeem the Company's interest in the LLC or requires Snake
River to purchase the Company's interest in the LLC, Snake River has the right
to accelerate the maturity of and call the $250 million of Valhi loans.  If the
Company requires the LLC to redeem the Company's interest in the LLC, then Snake
River is required, under the terms of the LLC Company Agreement, to contribute
to the LLC the cash received from calling such loans.

     The LLC Company Agreement provides that, among other things, the Company is
entitled to receive certain distributions of Distributable Cash, as defined,
from the LLC.  The Company and Snake River share in any Distributable Cash up to
an aggregate of $26.7 million per year, with a preferential 95% of such
aggregate amount going to the Company and the remaining 5% going to Snake River.
This $26.7 million annual distribution is referred to as the LLC's "base
distribution." The Company generally is entitled to receive 5% (10% after 2002)
of any Distributable Cash in excess of this base distribution amount, with
additional Distributable Cash potentially being received through 2002 if certain
levels of Distributable Cash are reached.  However, (i) a portion of the
Company's base distribution each year will be deferred and instead paid to Snake
River to the extent Snake River pays interest currently on $40 million of its
$180 million in loans from Valhi discussed above and (ii) the Company's share of
any Distributable Cash above the base distribution amount is also deferred and
instead paid to Snake River.  Both of these deferrals will continue until the
$180 million of Snake River's loans from Valhi are completely repaid, at which
time any distributions of Distributable Cash which Snake River would otherwise
be entitled to receive in excess of its base distribution amount will instead be
paid to the Company until the Company has recouped these deferrals, including
interest.

     The LLC's Management Committee is comprised of seven persons, all of which
are appointed by Snake River.  Generally, the Company has no representation on
the Management Committee and has no ability to influence the operations or
management of the LLC.  There are some restrictive covenants in the LLC Company
Agreement intended to protect the Company's interest in the LLC, such as limits
on capital expenditures and additional indebtedness of the LLC.  In addition,
the Company has the ability to temporarily take control of the LLC, via election
of a majority of the members of the Management Committee, if its cumulative
"base distributions" become $10 million in arrears (excluding any of the
deferrals discussed above).  Once any such arrearages have been paid, the
Company ceases to have any representation on the Management Committee.

     Neither the Company nor Snake River can sell or otherwise dispose of their
LLC interest without the consent of the other party.  Admission of new members
to the LLC requires the consent of both the Company and Snake River.

     As part of the formation of the LLC, Amalgamated's existing $85 million
revolving bank credit facility was terminated and replaced with a new $100
million facility.  The new facility is collateralized by the LLC's working
capital assets and one of the LLC's four processing facilities.  This agreement
contains provisions and restrictive covenants customary in lending transactions
of this type.  In addition, the agreement contains cross-default provisions with
both Valhi's loans from and to Snake River.

     Because the Company no longer controls the operations contributed to the
LLC, the Company ceased consolidating the net assets, results of operations and
cash flows of such business effective December 31, 1996.  At December 31, 1996,
the Company has reported the net assets contributed to the LLC at cost. Because
the Company receives preferential distributions from the LLC and has the right
to require the LLC to redeem its interest in the LLC for a fixed and
determinable amount, the Company's interest in the LLC is deemed equivalent to a
mandatory redeemable preferred stock which, under generally accepted accounting
principles, is carried at estimated fair value.  Accordingly, beginning in 1997,
the Company will classify its investment in the LLC as an available-for-sale
marketable security carried at estimated fair value.  In determining estimated
fair value of the Company's interest in the LLC, the Company will consider,
among other things, the outstanding balance of the Company's loans to Snake
River and the outstanding balance of the Company's loans from Snake River.  Also
beginning in 1997, the Company will commence reporting the cash distributions
received from the LLC as dividend income.  The amount of such future
distributions is dependent upon, among other things, the future performance of
the LLC's operations.  For comparative purposes, Amalgamated's results of
operations and cash flows are reported by the equity method for all periods
presented.

     Condensed income statement data for Amalgamated is presented below.


                                                                           YEARS ENDED DECEMBER 31,

                                                                            1994          1995          1996

                                                                               (IN MILLIONS)
                                                                                              
Net sales:
  Refined sugar                                                             $422.0        $492.6       $455.7
  By-products and other                                                       35.3          48.7         38.3


                                                                            $457.3        $541.3       $494.0



Operating income:
  FIFO basis                                                                $ 29.3        $ 26.0       $ 39.3
  LIFO adjustment                                                              2.3            .8        (15.5)

                                                                              31.6          26.8         23.8

General corporate items, net                                                  (2.2)           .3          -
Interest expense                                                              (7.3)        (13.4)        (8.6)

                                                                              22.1          13.7         15.2

Income tax expense                                                             8.2           4.8          5.2


    Net income                                                              $ 13.9        $  8.9       $ 10.0






     Condensed cash flow data for Amalgamated (excluding dividends paid to and
intercompany loans with Valhi) is presented below.


                                                                           YEARS ENDED DECEMBER 31,

                                                                            1994          1995          1996

                                                                               (IN MILLIONS)
                                                                                              
Cash flows from operating activities                                        $ 14.7        $ 41.7       $ 24.6


Cash flows from investing activities:
  Capital expenditures                                                       (26.8)        (24.0)       (13.7)
  Other, net                                                                    .2           -             .2

                                                                             (26.6)        (24.0)       (13.5)


Cash flows from financing activities -
 Indebtedness, net                                                            18.1         (20.2)         4.3



                                                                            $  6.2        $ (2.5)      $ 15.4





NOTE 21 -      QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):


                                                                     QUARTER ENDED

                                                          MARCH 31       JUNE 30       SEPT. 30       DEC. 31

                                                        (IN MILLIONS, EXCEPT PER SHARE DATA)
                                                                                            
YEAR ENDED DECEMBER 31, 1995
  Net sales                                                  $297.8       $331.5          $304.3        $285.9
  Operating income                                             43.5         59.0            51.7          51.7

  Income from continuing operations                          $  7.5       $ 13.1          $ 12.2        $ 25.1
  Discontinued operations                                       4.9          4.3             1.5           (.1)


      Net income                                             $ 12.4       $ 17.4          $ 13.7        $ 25.0



  Per common share:
    Continuing operations                                    $ .07          $.11            $.11          $.22
    Discontinued operations                                    .04           .04             .01             -


      Net income                                             $ .11          $.15            $.12          $.22




YEAR ENDED DECEMBER 31, 1996
  Net sales                                                  $289.2       $314.2          $299.3        $288.1
  Operating income                                             42.6         38.2            21.5          20.7

  Income (loss) from continuing
   operations                                                $  9.2       $  6.6          $ (6.9)       $ (4.7)
  Discontinued operations                                     (14.9)         2.2             2.0          48.5


      Net income (loss)                                      $ (5.7)      $  8.8          $ (4.9)       $ 43.8



  Per common share:
    Continuing operations                                    $ .08          $.06           $(.06)         $(.04)
    Discontinued operations                                   (.13)          .02             .02            .42


      Net income (loss)                                      $(.05)         $.08           $(.04)         $ .38






       Net income in the fourth quarter of 1995 includes an aggregate of $13
million ($.11 per share) of net deferred income tax benefits resulting from
changes in the U.S./Canada income tax treaty and a reduction of NL's deferred
income tax valuation allowance to recognize the future benefit of certain tax
credits.




                      REPORT OF INDEPENDENT ACCOUNTANTS
                       ON FINANCIAL STATEMENT SCHEDULES



To the Stockholders and Board of Directors of Valhi, Inc.:

     Our report on the consolidated financial statements of Valhi, Inc. and
Subsidiaries as of December 31, 1995 and 1996 and for each of the three years in
the period ended December 31, 1996, which report is based in part upon the
reports of other auditors, is herein included on this Annual Report on Form 10-
K.  In connection with our audits of such financial statements, we have also
audited the related financial statement schedules listed in the index on page F-
1 of this Annual Report on Form 10-K.  These consolidated financial statement
schedules are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statement schedules based on our audits.

     In our opinion, based upon our audits and the reports of other auditors,
the financial statement schedules referred to above, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.





                                                      COOPERS & LYBRAND L.L.P.


Dallas, Texas
March 7, 1997
                         VALHI, INC. AND SUBSIDIARIES

          SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                           CONDENSED BALANCE SHEETS

                          DECEMBER 31, 1995 AND 1996

                                (IN THOUSANDS)


                                                                                        1995           1996

                                                                                                 
Current assets:
  Cash and cash equivalents                                                             $  8,411       $  5,510
  Marketable securities                                                                     -           142,478
  Net dividend receivable from Amalgamated                                                  -            11,518
  Accounts and notes receivable                                                            1,398          1,522
  Demand loans to affiliates                                                               3,000           -
  Other receivables from subsidiaries and affiliates                                         751          3,414
  Deferred income taxes                                                                    1,101           -
  Other                                                                                      534          1,377


      Total current assets                                                                15,195        165,819


Other assets:
  Marketable securities                                                                  130,873          1,101
  Investment in subsidiaries and affiliates                                              244,832        258,660
  Investment in Amalgamated                                                                 -            34,070
  Deferred income taxes                                                                   20,807         48,595
  Other assets                                                                             4,373          3,971
  Property and equipment, net                                                              3,110          3,064


      Total other assets                                                                 403,995        349,461


                                                                                        $419,190       $515,280


Current liabilities:
  Current debt - LYONs                                                                  $   -          $142,478
  Note payable to bank                                                                      -            13,000
  Accounts payable and accrued liabilities                                                 5,400         10,268
  Demand loan from affiliates                                                               -             7,244
  Other payables to subsidiaries and affiliates                                            3,169            151
  Income taxes                                                                             1,466          1,414
  Deferred income taxes                                                                     -            32,461


      Total current liabilities                                                           10,035        207,016


Noncurrent liabilities:
  Long-term debt - LYONs                                                                 130,366           -
  Other                                                                                    4,498          4,345


      Total noncurrent liabilities                                                       134,864          4,345


Stockholders' equity                                                                     274,291        303,919


                                                                                        $419,190       $515,280



                         VALHI, INC. AND SUBSIDIARIES

    SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)

                        CONDENSED STATEMENTS OF INCOME

                 YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

                                (IN THOUSANDS)


                                                                        1994            1995            1996

                                                                                               
Revenues and other income:
  Securities earnings, net                                             $  3,348        $  4,034         $  4,075
  Other, net                                                              1,317           1,991            4,844

                                                                          4,665           6,025            8,919


Costs and expenses:
  General and administrative                                              9,449           6,845            9,012
  Interest                                                               10,437          11,892           13,579
  Other, net                                                                843             231              (59)

                                                                         20,729          18,968           22,532


                                                                        (16,064)        (12,943)         (13,613)
Equity in subsidiaries and affiliates                                     1,562          86,824            3,025


  Income (loss) before income taxes                                     (14,502)         73,881          (10,588)

Income taxes (benefit)                                                  (15,824)         15,973          (14,815)


  Income from continuing operations                                       1,322          57,908            4,227

Discontinued operations                                                  10,278          10,607           37,819
      Net income                                                       $ 11,600        $ 68,515         $ 42,046







                         VALHI, INC. AND SUBSIDIARIES

    SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)

                      CONDENSED STATEMENTS OF CASH FLOWS

                 YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

                                (IN THOUSANDS)


                                                                    1994              1995             1996

                                                                                              
Cash flows from operating activities:
  Net income                                                       $ 11,600          $ 68,515          $ 42,046
  Noncash interest expense                                           10,437            11,421            12,492
  Deferred income taxes                                             (13,531)           23,153            (6,163)
  Equity in subsidiaries & affiliates:
    Continuing operations                                            (1,562)          (86,824)           (3,025)
    Discontinued operations                                          (5,933)          (10,607)          (37,819)
  Dividends from subsidiaries
   and affiliates                                                    25,707             8,298            25,764
  Other, net                                                          1,045             2,371            (1,911)

                                                                     27,763            16,327            31,384
  Net change in assets and liabilities                                2,368            (7,044)           (7,374)
  Net sales of trading securities                                     4,375            24,184              -


      Net cash provided by
       operating activities                                          34,506            33,467            24,010


Cash flows from investing activities:
  Purchases of NL common stock                                      (15,060)          (13,250)          (14,627)
  Capital contribution to subsidiaries
   and affiliates                                                   (10,000)          (10,000)          (17,000)
  Loans to subsidiaries and affiliates:
    Loans                                                           (34,550)         (132,000)          (10,800)
    Collections                                                      34,550           129,000            13,800
  Other, net                                                          3,906            (1,164)            3,875

      Net cash used by
       investing activities                                         (21,154)          (27,414)          (24,752)



                                           VALHI, INC. AND SUBSIDIARIES

    SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)

                CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)

                 YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

                                (IN THOUSANDS)


                                                                   1994               1995             1996

                                                                                             
Cash flows from financing activities:
  Indebtedness:
    Borrowings                                                     $  -              $ 60,000         $ 127,000
    Principal payments                                                -               (60,000)         (114,000)
  Loans from affiliates:
    Loans                                                             -                  -                7,844
    Repayments                                                        -                  -                 (600)
  Dividends                                                         (9,145)           (13,809)          (23,057)
  Other, net                                                           229                875               654


      Net cash used by
       financing activities                                         (8,916)           (12,934)           (2,159)


Cash and cash equivalents:
  Net increase (decrease)                                            4,436             (6,881)           (2,901)
  Balance at beginning of year                                      10,856             15,292             8,411


  Balance at end of year                                           $15,292           $  8,411         $   5,510




Supplemental disclosures-cash paid for:
  Interest                                                         $  -              $    470         $   2,270
  Income taxes (received)                                           (6,171)            (4,154)           (3,121)




                         VALHI, INC. AND SUBSIDIARIES

    SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)

                   NOTES TO CONDENSED FINANCIAL INFORMATION



NOTE 1 -  BASIS OF PRESENTATION:

     The Consolidated Financial Statements of Valhi, Inc. and Subsidiaries are
incorporated herein by reference.

NOTE 2 -  MARKETABLE SECURITIES:


                                                                                       DECEMBER 31,

                                                                                        1995            1996

                                                                                        (IN THOUSANDS)
                                                                                                 
Current asset (available-for-sale):


  Dresser Industries common stock                                                       $   -          $142,478



Noncurrent assets (available-for-sale):
  Dresser Industries common stock                                                       $103,366       $   -
  Other                                                                                      507          1,101


                                                                                        $103,873       $  1,101





NOTE 3 -       INVESTMENT IN SUBSIDIARIES AND AFFILIATES:


                                                                                       DECEMBER 31,

                                                                                        1995           1996

                                                                                       (IN THOUSANDS)
                                                                                                
Subsidiaries:
  NL Industries                                                                         $150,743      $147,962
  Amalgamated                                                                             44,240          -
  Valcor                                                                                  45,224        95,480
  Waste Control Specialists                                                                4,625        15,218


                                                                                        $244,832      $258,660





NOTE 4 -       LONG-TERM DEBT:

       Long-term debt consists of Valhi's zero coupon LYONs, $379 million
principal amount at maturity in October 2007.  The LYONs were issued with
significant original issue discount ("OID") to represent a yield to maturity of
9.25%.  No periodic interest payments are required.  The LYONs are secured by
the 5.5 million shares of Dresser common stock held by Valhi, which shares are
held in escrow for the benefit of holders of the LYONs.  Each $1,000 in
principal amount at maturity of the LYONs is exchangeable, at any time, for
14.4308 shares of Dresser common stock held by the Company.  The LYONs are
redeemable, at the option of the holder, in October 1997 or October 2002 at the
issue price plus accrued OID through such purchase date and, accordingly, the
LYONs are classified as a current liability at December 31, 1996.  The aggregate
redemption price in October 1997 approximates $153 million.  Such redemptions
may be paid, at Valhi's option, in cash, Dresser common stock, or a combination
thereof.  The LYONs are not redeemable at Valhi's option prior to October 1997
unless the market price of Dresser common stock exceeds $35.70 per share for
specified time periods.

     Valhi also has a $15 million revolving bank credit facility which matures
in March 1998, generally bears interest at LIBOR plus 1.5% and is collateralized
by 4.8 million shares of NL common stock held by Valhi.  Borrowings under this
facility can only be used to fund Valhi's purchases of additional shares of NL
common stock.  The agreement limits additional indebtedness of Valhi and
contains other provisions customary in lending transactions of this type.

NOTE 5 -  DIVIDENDS FROM SUBSIDIARIES AND AFFILIATES:


                                                                        YEARS ENDED DECEMBER 31,

                                                                           1994          1995           1996

                                                                              (IN THOUSANDS)
                                                                                              
Amalgamated                                                                $16,137       $ -            $17,000
Valcor                                                                       9,570        8,298             383
NL Industries                                                                 -            -              8,381
Waste Control Specialists                                                     -            -               -


                                                                           $25,707       $8,398         $25,764







NOTE 6 -       INCOME TAXES:


                                                                       YEARS ENDED DECEMBER 31,

                                                                         1994           1995           1996

                                                                            (IN THOUSANDS)
                                                                                              
Income tax benefit attributable to
 continuing operations:
  Currently refundable                                                  $ (6,638)       $(7,180)       $ (8,652)
  Deferred income taxes                                                   (9,186)        23,153          (6,163)


                                                                        $(15,824)       $15,973        $(14,815)



Cash received for income taxes, net:
  Received from subsidiaries                                            $ 20,479        $ 8,828           7,119
  Paid to Contran                                                        (14,425)        (4,623)         (3,445)
  Paid to tax authorities, net                                               117            (51)           (553)


                                                                        $  6,171        $ 4,154        $  3,121





       Waste Control Specialists LLC is treated as a partnership for federal
income tax purposes.  NL is a separate U.S. taxpayer and is not a member of the
Contran Tax Group.


                                                                                      DEFERRED TAX
                                                                                    ASSET (LIABILITY)

                                                                                       DECEMBER 31,

                                                                                        1995            1996

                                                                                       (IN THOUSANDS)
                                                                                                 
Components of the net deferred tax asset:
  Tax effect of temporary differences related to:
    Marketable securities                                                              $(31,190)       $(35,659)
    Investment in subsidiaries and affiliates not
     members of the Contran Tax Group                                                    55,983          52,962
    Accrued liabilities and other deductible differences                                  5,514           7,282
    Other taxable differences                                                            (8,399)         (8,451)


                                                                                       $ 21,908        $ 16,134



  Current deferred tax asset (liability)                                               $  1,101        $(32,461)
  Noncurrent deferred tax asset                                                          20,807          48,595


                                                                                       $ 21,908        $ 16,134






NOTE 7 -       EQUITY IN EARNINGS OF SUBSIDIARIES AND AFFILIATES:


                                                                       YEARS ENDED DECEMBER 31,

                                                                        1994            1995           1996

                                                                            (IN THOUSANDS)
                                                                                              
Continuing operations:
  NL Industries                                                         $(25,078)        $69,539       $(12,592)
  Valcor                                                                  12,751           8,939         12,015
  Amalgamated                                                             13,889           8,900         10,009
  Waste Control Specialists                                                 -               (554)        (6,407)


                                                                        $  1,562         $86,824       $  3,025



Discontinued operations:
  Valcor                                                                $ 18,347         $10,607       $ 37,819
  Tremont                                                                (12,414)           -              -


                                                                        $  5,933         $10,607       $ 37,819





NOTE 8 -       DISCONTINUED OPERATIONS:

       The components of discontinued operations are presented below.


                                                                        YEARS ENDED DECEMBER 31,

                                                                           1994          1995           1996

                                                                              (IN THOUSANDS)
                                                                                               
Equity in Valcor                                                          $ 18,347       $10,607        $37,819



Tremont:
  Equity in losses                                                         (12,414)         -              -
  Allocable deferred income tax benefit                                      4,345          -              -

                                                                            (8,069)         -              -



                                                                          $ 10,278       $10,607        $37,819





                                        VALHI, INC. AND SUBSIDIARIES

                              SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                               (IN THOUSANDS)


                                                                         ADDITIONS
                                                     BALANCE AT         CHARGED TO
                                                     BEGINNING           COSTS AND
           DESCRIPTION                                OF YEAR            EXPENSES          DEDUCTIONS

                                                                                        
Year ended December 31, 1994:


  Allowance for doubtful accounts                         $    974            $   213            $(502)




  Amortization of intangibles:


    Goodwill                                              $  1,008            $   172            $ -
    Franchise fees and other                                 6,848              1,423             (900)



                                                          $  7,856            $ 1,595            $(900)




  Deferred income tax valuation
   allowance
                                                          $   -               $  -               $ -




Year ended December 31, 1995:


  Allowance for doubtful accounts                         $  4,434            $   665            $(294)



  Amortization of intangibles:
    Goodwill                                              $  1,180            $ 8,172            $ -
    Franchise fees and other                                 7,371              4,549             (453)


                                                          $  8,551            $12,721            $(453)




  Deferred income tax valuation
   allowance

                                                          $164,500            $(9,588)           $ -









                                                                                          BALANCE
                                                      CURRENCY                            AT END
           DESCRIPTION                               TRANSLATION          OTHER(A)        OF YEAR

                                                                                     
Year ended December 31, 1994:


  Allowance for doubtful accounts                          $  -              $  3,749         $  4,434




  Amortization of intangibles:


    Goodwill                                               $  -              $   -            $  1,180
    Franchise fees and other                                  -                  -               7,371



                                                           $  -              $   -            $  8,551




  Deferred income tax valuation
   allowance

                                                           $  -              $164,500         $164,500




Year ended December 31, 1995:


  Allowance for doubtful accounts                          $   167           $   -            $  4,972



  Amortization of intangibles:
    Goodwill                                               $  -              $   -            $  9,352
    Franchise fees and other                                    (8)              -              11,459


                                                           $    (8)          $   -            $ 20,811




  Deferred income tax valuation
   allowance

                                                           $ 6,451           $ 34,206         $195,569








                                        VALHI, INC. AND SUBSIDIARIES

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (CONTINUED)

                                               (IN THOUSANDS)


                                                                         ADDITIONS
                                                     BALANCE AT         CHARGED TO
                                                     BEGINNING           COSTS AND
           DESCRIPTION                                OF YEAR            EXPENSES          DEDUCTIONS

                                                                                       
Year ended December 31, 1996:


  Allowance for doubtful accounts                         $  4,972            $ 1,860           $(1,987)




  Amortization of intangibles:


    Goodwill                                              $  9,352            $ 8,779           $  -
    Franchise fees and other                                11,459              4,447              (372)



                                                          $ 20,811            $13,226           $  (372)




  Deferred income tax valuation
   allowance
                                                          $195,569            $ 3,013           $  -









                                                                                          BALANCE
                                                      CURRENCY                            AT END
           DESCRIPTION                               TRANSLATION          OTHER(A)        OF YEAR

                                                                                     
Year ended December 31, 1996:


  Allowance for doubtful accounts                          $  (169)           $  (589)        $  4,087




  Amortization of intangibles:


    Goodwill                                               $  -               $  -            $ 18,131
    Franchise fees and other                                  (332)              -              15,202



                                                           $  (332)           $  -            $ 33,333




  Deferred income tax valuation
   allowance

                                                           $(5,937)           $14,472         $207,117








(a)1994 - Consolidation of NL Industries, Inc. effective December 31, 1994.
   1995 - Direct offset to the increase in gross deferred tax assets resulting
   from rechartization of
        certain tax attributes primarily due to changes in certain tax return
   elections of NL.
   1996 - Elimination of amounts attributable to (i) the Amalgamated Sugar
   Company, which is no longer
        consolidated, and (ii) Medite's Irish subsidiary, which was sold, and
   direct offset to the                                        increase in gross
   deferred tax assets resulting from the dual residency status of certain NL
             subsidiaries.





   Waste Control Specialists LLC
   (A DEVELOPMENT STAGE ENTERPRISE)

   Financial Statements
 

         December 31, 1996





REPORT OF INDEPENDENT ACCOUNTANTS



To the Members and Management Committee of Waste Control Specialists LLC:

We have audited the accompanying balance sheets of Waste Control
Specialists LLC as of December  31, 1995 and 1996, and the
related statements of operations, members equity and cash flows
for the year ended December 31, 1996 and for the period from
inception to December 31, 1995.  These financial statements are
the  responsibility of the Companys management.  Our
responsibility is to express an opinion on these financial 
statements based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards.  Those standards  require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements  are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting
the  amounts and disclosures in the financial statements.  An
audit also includes assessing the accounting principles  used and
significant estimates made by management, as well as evaluating
the overall financial statement  presentation.  We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the  financial position
of Waste Control Specialists LLC as of December 31, 1995 and
1996, and the results of its  operations and cash flows for the
year ended December 31, 1996 and for the period from inception to
December  31, 1995 in conformity with generally accepted
accounting principles.


COOPERS & LYBRAND L.L.P.

Dallas, Texas
February 12, 1997




Waste Control Specialists LLC
(A Development Stage Enterprise)
BALANCE SHEETS

(In thousands)



                                        December 31,    December 31,
                                            1995            1996
                                                          
ASSETS
Current assets:
   Cash and cash equivalents                  $3,349            $545
   Prepaid insurance                               6             104
   Receivable from officer                         -             250
   Other current assets                           22             111
            Total current assets               3,377           1,010

Property and equipment:
   Land                                        2,134           2,134
   Building                                      247             255
   Furniture and equipment                        80             288
   Construction in progress                       75          12,912
                                               2,536          15,589
   Less accumulated depreciation                   2              41
            Net property and equipment         2,534          15,548

Other assets:
   Organization costs, net                       194             153
   Landfill and other operating permits        1,145           1,841
   Restricted deposits and other                   -             556
            Total other assets                 1,339           2,550

                                              $7,250         $19,108

LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
   Current portion of long-term debt            $274            $300
   Accounts payable and accrued liabili          105           1,360
   Accrued payroll and payroll taxes              31             408
   Payable to member                             100               -
        Total current liabilities                510           2,068

Long-term debt                                 5,308           5,015

Members' equity, including deficit accumulated
   during the development stage of $554        1,432          12,025

                                              $7,250         $19,108



Commitments and contingencies (Note 2)



Waste Control Specialists LLC
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS

(In thousands)



                                        Period from                      Period from 
                                       November 8, 1995                 November 8, 1995
                                       (inception) to    Year ended     (inception) to
                                        December 31,    December 31,     December 31,
                                            1995            1996             1996


                                                                        
Interest income                                  $17            $277             $294

Costs and expenses:
   Operating and startup                         465           6,090            6,555
   Interest                                      106             594              700
                                                 571           6,684            7,255

            Net loss                           ($554)        ($6,407)         ($6,961)





Waste Control Specialists LLC
(A Development Stage Enterprise)
STATEMENTS OF MEMBERS' EQUITY

(In thousands)

Period from November 8, 1995 (inception) to December 31, 1995
and year ended December 31, 1996



                                            ACH              KNB            Total

                                                                      
Contributions                                 $5,000         ($3,014)          $1,986
Net loss                                        (554)              -             (554)
Members' equity at December 31, 1995           4,446          (3,014)           1,432

Contributions                                 17,000               -           17,000
Net loss                                      (6,407)              -           (6,407)

Members' equity at December 31, 1996         $15,039         ($3,014)         $12,025






Waste Control Specialists LLC
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS

(In thousands)



                                        Period from                      Period from 
                                       November 8, 1995                 November 8, 1995
                                       (inception) to    Year ended     (inception) to
                                        December 31,    December 31,     December 31,
                                            1995            1996             1996

                                                                     
Cash flows from operating activities:
   Net loss                                    ($554)        ($6,407)         ($6,961)
   Depreciation and amortization                   9              80               89
   Changes in assets and liablities:
     Other current assets                        (28)           (187)            (215)
     Accounts payable and accrued expen         (358)            800              442

             Net cash used by operating         (931)         (5,714)          (6,645)

Cash flows used by investing activities :
   Capital expenditures                         (153)        (12,238)         (12,391)
   Permitting and other                            -          (1,485)          (1,485)

             Net cash used by investing         (153)        (13,723)         (13,876)


Cash flows from financing activities:
   Capital contribution received               5,000          17,000           22,000
   Principal repayments of:
     Payable to members                         (100)           (100)            (200)
     'Long-term debt                            (467)           (267)            (734)

           Net cash provided by financi        4,433          16,633           21,066

Net increase (decrease) in cash                3,349          (2,804)             545

Cash at beginning of period                   -                3,349                -

Cash at end of period                         $3,349            $545             $545


Supplemental disclosures - cash paid fo         $106            $594             $700





Waste Control Specialists LLC
(A DEVELOPMENT STAGE ENTERPRISE)

Notes To Financial Statements


Note 1 - Organization and basis of presentation:

Waste Control Specialists LLC (the "Company"), a Delaware limited
liability company formed in  November 1995, is a development stage
enterprise.  The Company is currently completing construction of
the  initial phase of a waste disposal facility in West Texas for
the processing, treatment, storage and disposal of  certain
hazardous and toxic wastes.  The Company has been issued permits by
the Texas Natural Resource  Conservation Commission ("TNRCC") and
the U.S. Environmental Protection Agency ("U.S. EPA"), pending 
facility construction and certification, to accept wastes governed
by the Resource Conservation and Recovery  Act ("RCRA") and the
Toxic Substances Control Act ("TSCA").  The facility is expected to
receive its first  wastes for processing in the first quarter of
1997.  The Company is also seeking permits for the processing, 
treatment and disposal of low-level and mixed-level radioactive
wastes.

The Company is equally owned by Andrews County Holdings, Inc.
("ACH") and KNB Holdings, Ltd.  ("KNB").  ACH, a Delaware
corporation, is a wholly-owned subsidiary of Valhi, Inc. (NYSE:
VHI).  KNB, a  Texas limited partnership, is controlled by Kenneth
N. Bigham, Chief Executive Officer of the Company, as  general
partner of KNB.  Collectively, ACH and KNB are referred to as
"Members" of the Company.  See  Notes 3 and 6.

Contran Corporation owns, directly or indirectly, approximately 91%
of Valhis outstanding common  stock.  Substantially all of
Contrans outstanding voting stock is held by trusts established
for the benefit of the  children and grandchildren of Harold C.
Simmons, of which Mr. Simmons is sole trustee.  Mr. Simmons, the 
Chairman of the Board and Chief Executive Officer of each of Valhi
and Contran, may be deemed to control  each of Contran and Valhi.

Note 2 - Summary of significant accounting policies:

Management estimates.  The preparation of financial statements in
conformity with generally accepted  accounting principles requires
management to make estimates and assumptions that affect the
reported  amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial 
statements, and the reported amount of revenues and expenses during
the reporting period.  Ultimate actual  results may, in some
instances, differ from previously estimated amounts.

Cash and cash equivalents.  Cash equivalents include bank time
deposits with maturities of three  months or less.

Organizational costs.  Capitalized organizational costs are
amortized by the straight-line method over  five years and are
stated net of accumulated amortization of $6,000 and $47,000 at
December 31, 1995 and  1996, respectively.



Operating permits.  Costs related to the acquisition of operating
permits are capitalized.  Such costs  will be amortized by the
straight-line method, beginning when operations commence, through
the initial  expiration date of the permits.  The permits currently
held by the Company expire in 2004 and are subject to  renewal at
the option of the issuing governmental agency.

Property and equipment.  Property and equipment are stated at cost.
 Maintenance, repairs and minor  renewals are expensed; major
improvements are capitalized.

Depreciation is computed principally by the straight-line method
over the estimated useful lives of ten  to 40 years for buildings
and three to 20 years for machinery and equipment.  

Income taxes.  The Company, a limited liability company, is not a
federal tax paying entity.  Income  and losses of the Company are
included in the federal income tax returns of the Members and any
resulting  income taxes are the responsibility of the Members.

Note 3 - Summary of significant Member agreements:

Significant agreements entered into by the Company and its Members
in conjunction with formation of  the Company are summarized below.
 See Note 5 for other related party agreements transactions.

Formation Agreement.  ACH agreed to contribute $25 million in cash
(the "ACH Initial Capital  Contribution") to the Company at various
dates through 1997 in return for its 50% Membership Interest in the
 Company.  ACH contributed $5 million in 1995, $17 million in 1996
and the remaining $3 million in January  1997

KNB contributed certain assets, principally all of the outstanding
common stock of Waste Control  Specialists, Inc. ("WCSI") and
approximately 16,073 acres of land including the 1,338 acre
facility site, for its  50% Membership Interest.  In addition, the
Company assumed certain liabilities of Mr. Bigham, principally bank
 indebtedness aggregating $6.1 million.  The net assets of WCSI
consisted primarily of the land for the facility  site and
operating permits issued by the TNRCC and U.S. EPA covering
acceptance of wastes governed by  RCRA and TSCA.  WCSI was
subsequently merged into the Company.

The assets contributed by KNB were recorded by the Company at
predecessor carryover basis of $3.1  million (net liability of $3
million including the carryover basis of $6.1 million of debt of
Mr. Bigham assumed).

Company Agreement.  The Companys business shall be to conduct a
broad array of waste  management services at the West Texas
facility, including the treatment, storage and/or disposal of
wastes  and other materials regulated under RCRA and TSCA.

The business and affairs of the Company are directed by the Members
through a five-member  Management Committee, of which ACH appoints
three members and KNB appoints two members.  The Chief  Executive
Officer is given the authority to manage the Companys affairs in
accordance with the Annual  Operating Plan approved by the
Management Committee.  Among other things, most capital
expenditures,  contracts which obligate the Company to pay for or
provide services valued at more than $1 million,  transactions
outside the ordinary course of business and distributions to
Members (except for required  distributions) must be approved by
the Management Committee.



The Members themselves, by majority vote (one vote per Member),
must approve certain transactions including (i) the sale or
disposition of all or substantially all of the Companys assets
pursuant to a  sale or merger, (ii) engaging the Company in any
business other than the environmental waste business, (iii) 
borrowing more than $10 million prior to the time ACH has completed
its ACH Initial Capital Contribution and  (iv) most related party
transactions.  Other than ACHs completion of funding of the ACH
Initial Capital  Contribution, no Member is obligated to loan,
invest or otherwise provide any funds or property to the  Company
unless a majority of the Members agree.

ACH is generally entitled to a preferential distribution (the "ACH
Preferential Distribution") equal to  20% per annum of the invested
ACH Initial Capital Contribution.  Distributions to Members of
Distributable  Cash, as defined, shall generally (i) first be paid
to ACH up to the ACH Preferential Distribution and (ii) second 
split ratably among the Members based upon their Membership
Interest.  ACH is also generally entitled to a  preferential return
of the ACH Initial Capital Contribution in the event of the
liquidation and winding up of the  Company.

For federal income tax purposes, the net profits and losses of the
Company are generally allocated (i)  first in an amount up to the
Distributable Cash paid to Members, as discussed above,  and (ii)
second ratably  among the Members based on their respective
Membership Interest.  Generally, to the extent a Member has a 
negative capital account for federal income tax purposes, such
Member shall not be allocated any net losses.

Members are generally given a right of first refusal or
participation rights in the event a Member  wishes to sell all or a
portion of his Membership Interest.  Following any initial public
offering of ownership  interests in the Company, each Member may
exercise up to two additional demand registrations, subject to 
certain conditions.

Consulting Agreement.  The Company agreed to assume the obligations
of WCSI under a consulting  agreement entered into in October 1995.
 See Note 6.

Note 4 - Long-term debt:

Approximately $450,000 of bank indebtedness assumed by the Company
at formation was repaid in  November 1995.  The remaining bank
indebtedness consists of a term loan repayable through December 
1999, with interest at the greater of (i) prime plus 3.75% or (ii)
12% (12% at December 31, 1995 and 1996) and  collateralized by
substantially all of the Companys assets.  The term loan
agreement contains provisions and  restrictive covenants customary
in lending transactions of this type.  The fair value of the bank
debt at  December 31, 1995 and 1996 is assumed to approximate its
book value. 

The maturities of the bank term loan at December 31, 1996 are shown
in the table below.


   Years ending December 31,                   Amount        
                                          (In thousands)
 
 
                                             
                1997                            $300
                1998                             338
                1999                           4,677

                                              $5,315


Note 5 - Related party transactions:

It is the policy of the Company to engage in transactions with
related parties on terms, in the opinion of  the Company, no less
favorable to the Company than could be obtained from unrelated
parties.

Certain significant agreements were entered into in conjunction
with formation of the Company.  See  Note 3.

Mr. Bigham, a member of the Management Committee and the general
partner of KNB, was  appointed Chief Executive Officer of the
Company pursuant to a five-year employment agreement through  2000.
 In addition to terms customary for such agreements, the agreement
specifies certain special bonuses  aggregating up to $1 million
payable if, and only if, the Company is issued various new
operating permits  within specified time periods no later than
August 1997.

The Company agreed to reimburse ACH and KNB an aggregate of
$100,000 each for costs incurred  by the respective Member in
connection with formation of the Company.  Such costs have been
capitalized as  organizational costs.  See Note 2.  Payable to
member at December 31, 1995 consists of $100,000 owed to  ACH in
connection with this agreement.

The Company has entered into a five-year lease for its corporate
office facility with an entity controlled  by Mr. Bigham at a rate
of $42,000 per year.  Rent expense related to this lease was $6,000
in 1995 and  $42,000 in 1996.

Loans to officers at December 31, 1996 consists of a 6.02% demand
note receivable from Mr.  Bigham.  Interest income on such loan was
nominal in 1996.  This loan was repaid in February 1997 using a 
portion of the proceeds of a $1.5 million loan made by Valhi to Mr.
Bigham, which loan is collateralized by Mr.  Bighams interest in
the Company.

In February 1997, the Company entered into a $4.0 million revolving
credit facility with ACH.   Borrowings bear interest at prime plus
1% and are due December 31, 1997.

Note 6 - Commitments and contingencies:

Environmental.  The Companys waste management operations
currently involve wastes and other  materials regulated under RCRA
and TSCA.  The Company intends to seek other operating permits to
accept  wastes, including low-level radioactive or mixed wastes,
regulated under other environmental laws and  regulations.  The
Company expects, in the normal course of its business, to expend
funds for environmental  protection and remediation; however its
business is based upon compliance with environmental laws and 
regulations, and its services are expected to be priced accordingly.

Concentrations of credit risk.  At December 31, 1995 and 1996,
substantially all of the Companys  cash and cash equivalents were
held by a single U.S. bank.



Cost to complete capital projects in process.  At December 31,
1996, the estimated cost to complete  the initial phase of the
facility so that it will be ready to accept RCRA and TSCA-regulated
wastes  approximated $3.9 million.  Such capital expenditures,
including approximately $1.2 million included in  accrued
liabilities at December 31, 1996, are expected to be financed by
funds on hand and the $3.0 million  contributed to the Company by
ACH in January 1997.

Consulting agreement.  Under the terms of an agreement entered into
in October 1995 by WCSI and  assumed by the Company at formation,
the Company has agreed to pay an independent consultant up to an 
aggregate of $18.4 million for performing services as a
governmental relations representative and consultant.  Such fees
are based on variable rates of not more than 2% of the revenue
generated and will be payable only  when the Company receives
revenues pursuant to contracts for the disposal of low-level
radioactive or mixed  wastes generated by, or under the supervision
or control of, the U.S. federal government.  The agreement 
currently provides for a security interest in the facility under
construction in West Texas to collateralize the  Companys
obligation under the agreement when the obligation becomes payable.

Bonus program.  The Company has adopted a bonus program whereby up
to $6.3 million may be paid  to certain employees of the Company,
excluding Mr. Bigham, if certain operating and permitting targets
are  met within specified time periods.  A payment of $700,000 is
payable if the initial phase of the facility is  completed at a
total cost of less than $15.8 million, $1.4 million is payable if
operating permits for the treatment  and storage of low-level
radioactive wastes are received before January 2000, $1.4 million
is payable if  operating permits for the disposal of low-level
radioactive wastes are received before January 2000, and $2.8 
million is payable if the Company achieves specified sales and
operating profit targets by the end of 1999.  If  paid, bonuses
with respect to the facility costs will be capitalized as part of
the cost of the facility and bonuses  with respect to the receipt
of permits for low-level radioactive waste treatment and storage or
disposal will be  capitalized as part of the cost of the permit. 
Bonuses with respect to the sales and operating profit targets will
 be accrued through 1999 beginning when it becomes probable that
such bonuses will be paid.







                         THE AMALGAMATED SUGAR COMPANY

                              FINANCIAL STATEMENTS

                               DECEMBER 31, 1996

                                      WITH

                      INDEPENDENT AUDITORS' REPORT THEREON




                  INDEPENDENT AUDITORS' REPORT



To the Shareholder of The Amalgamated Sugar Company:

    We have audited the accompanying balance sheets of The Amalgamated Sugar
Company as of December 31, 1995 and 1996, and the related statements of income
and shareholder's equity and cash flows for each of the years in the three year
period ended December 31, 1996.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

    We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Amalgamated Sugar
Company at December 31, 1995 and 1996, and the results of its operations and its
cash flows for each of the years in the three year period ended December 31,
1996, in conformity with generally accepted accounting principles.






                                                  KPMG Peat Marwick LLP


Salt Lake City, Utah
January 31, 1997



                  THE AMALGAMATED SUGAR COMPANY

                         BALANCE SHEETS

                   December 31, 1995 and 1996
                (In thousands, except share data)




              ASSETS


                                                          1995        1996
                                                          ----        ----

                                                            
Current assets:
  Cash and cash equivalents                           $  3,546    $  2,002
  Accounts and notes receivable                         44,861      38,626
  Inventories                                          229,424     233,713
  Prepaid expenses                                         916       1,079
                                                      --------    --------


      Total current assets                             278,747     275,420
                                                      --------    --------


Other assets                                                26          27
                                                      --------    --------


Property and equipment:
  Land                                                   2,628       2,628
  Buildings                                             11,704      11,732
  Equipment                                            248,627     262,720
  Construction in progress                               1,129         256
                                                      --------    --------

                                                       264,088     277,336
  Less accumulated depreciation                        156,139     170,922
                                                      --------    --------


      Net property and equipment                       107,949     106,414
                                                      --------    --------


                                                      $386,722    $381,861
                                                      ========    ========






                  THE AMALGAMATED SUGAR COMPANY

                   BALANCE SHEETS (CONTINUED)

                   December 31, 1995 and 1996
                (In thousands, except share data)




    LIABILITIES AND SHAREHOLDER'S EQUITY

                                                          1995        1996
                                                          ----        ----

                                                            
Current liabilities:
  Notes payable                                       $106,685    $119,014
  Current maturities of long-term debt                   8,000       8,000
  Dividends payable                                       -         13,000
  Accounts payable and accrued liabilities             182,072     183,551
  Income taxes                                           1,020         493
  Deferred income taxes                                  4,010       2,212
                                                      --------    --------


      Total current liabilities                        301,787     326,270
                                                      --------    --------


Noncurrent liabilities:
  Long-term debt                                        16,000       8,000
  Accrued OPEB cost                                     17,853      18,319
  Deferred income taxes                                  2,635       3,855
  Other                                                  4,207       1,168
                                                      --------    --------


        Total noncurrent liabilities                    40,695      31,342
                                                      --------    --------


Shareholder's equity:
  Common stock, $1 par value; 100,000 shares
   authorized; 1,000 shares issued and outstanding           1           1
  Additional paid-in capital                            35,000      22,000
  Retained earnings                                      9,239       2,248
                                                      --------    --------


      Total shareholder's equity                        44,240      24,249
                                                      --------    --------



                                                      $386,722    $381,861
                                                      ========    ========






Commitments and contingencies (Note 11).


                  THE AMALGAMATED SUGAR COMPANY

          STATEMENTS OF INCOME AND SHAREHOLDER'S EQUITY

          Years ended December 31, 1994, 1995 and 1996
                         (In thousands)





                                              1994        1995        1996
                                              ----        ----        ----

                                                         
Revenues and other income:
  Net sales                               $457,278    $541,303    $493,996
  Interest and other                         3,115       3,316       1,857
                                          --------    --------    --------


                                           460,393     544,619     495,853
                                          --------    --------    --------


Costs and expenses:
  Cost of sales                            345,841     420,260     378,643
  Selling, general and administrative       85,165      97,272      93,359
  Interest                                   7,339      13,371       8,611
                                          --------    --------    --------


                                           438,345     530,903     480,613
                                          --------    --------    --------


    Income before income taxes              22,048      13,716      15,240

Provision for income taxes                   8,159       4,816       5,231
                                          --------    --------    --------


    Net income                              13,889       8,900      10,009

Shareholder's equity at beginning of year   25,245      32,997      44,240
Capital contribution                        10,000       5,000        -
Dividends paid in:
  Cash                                     (16,137)       -        (17,000)
  Stock of subsidiary                         -         (2,657)       -
Dividends accrued                             -           -        (13,000)
                                          --------    --------    --------

Shareholder's equity at end of year       $ 32,997    $ 44,240    $ 24,249
                                          ========    ========    ========





                  THE AMALGAMATED SUGAR COMPANY

                    STATEMENTS OF CASH FLOWS

          Years ended December 31, 1994, 1995 and 1996
                         (In thousands)




                                              1994        1995         1996
                                              ----        ----         ----

                                                         
Cash flows from operating activities:
  Net income                              $  13,889   $   8,900   $  10,009
  Depreciation                               12,167      13,828      14,995
  Deferred income taxes                      (1,417)        426        (578)
  Other, net                                   (524)       (937)      1,227
                                          ---------   ---------   ---------

                                             24,115      22,217      25,653
  Change in assets and liabilities:
    Accounts and notes receivable            (1,492)     (9,347)      6,101
    Inventories                             (33,518)     51,619      (4,289)
    Accounts payable and accrued
     liabilities                             25,088     (25,114)      1,274
    Other, net                                  542       2,317      (4,152)
                                          ---------   ---------   ---------


      Net cash provided by operating
       activities                            14,735      41,692      24,587
                                          ---------   ---------   ---------


Cash flows from investing activities:
  Capital expenditures                      (26,768)    (24,036)    (13,679)
  Other, net                                    135          23         219
                                          ---------   ---------   ---------


      Net cash used by investing
       activities                           (26,633)    (24,013)    (13,460)
                                          ---------   ---------   ---------


Cash flows from financing activities:
  Notes payable, long-term debt and
   loans from Valhi:
    Additions                               421,847     651,928     648,911
    Principal payments                     (403,707)   (672,136)   (644,582)



  Capital transactions                       10,000       5,000        -
  Cash dividends                            (16,137)       -        (17,000)
                                          ---------   ---------   ---------


      Net cash provided (used) by
       financing activities                  12,003     (15,208)    (12,671)
                                          ---------   ---------   ---------


Net increase (decrease) in cash           $     105   $   2,471   $  (1,544)
                                          =========   =========   =========




                  THE AMALGAMATED SUGAR COMPANY

              STATEMENTS OF CASH FLOWS (CONTINUED)

          Years ended December 31, 1994, 1995 and 1996
                         (In thousands)






                                              1994        1995        1996
                                              ----        ----        ----

                                                          
Cash and cash equivalents:
  Net increase (decrease)                  $     105   $   2,471   $  (1,544)
  Balance at beginning of year                   970       1,075       3,546
                                           ---------   ---------   ---------


  Balance at end of year                   $   1,075   $   3,546   $   2,002
                                           =========   =========   =========

Supplemental disclosures - cash paid for:
  Interest, net of amounts capitalized     $   6,971   $  13,073   $   9,205
  Income taxes                                10,507       2,623       6,631





                  THE AMALGAMATED SUGAR COMPANY

                  NOTES TO FINANCIAL STATEMENTS


Note 1 -Organization:

    The Amalgamated Sugar Company (the `Company''), a Utah corporation and an
indirect wholly-owned subsidiary of Valhi, Inc. (NYSE: VHI), is engaged in the
production and sale of refined sugar and by-products from sugarbeets.  Contran
Corporation holds, directly or through subsidiaries, approximately 91% of
Valhi's outstanding common stock.  Substantially all of Contran's outstanding
voting stock is held by trusts established for the benefit of the children and
grandchildren of Harold C. Simmons, of which Mr. Simmons is sole trustee.  Mr.
Simmons, the Chairman of the Board of each of Amalgamated, Valhi and Contran,
may be deemed to control each of such companies.

     Effective December 1, 1995, Amalgamated contributed certain assets that
were primarily used in research and development activities to a newly formed,
wholly-owned subsidiary, Amalgamated Research Inc. and distributed all of the
outstanding stock of Amalgamated Research to its parent.  Such dividend was
recorded at net carrying value.

    Subsequent to December 31, 1996, the Company contributed substantially all
of its net assets to The Amalgamated Sugar Company LLC.  See Note 13.

Note 2 -Summary of significant accounting policies:

    Management's estimates.  The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amount of revenues and expenses
during the reporting period.  Ultimate actual results may, in some instances,
differ from previously estimated amounts.

    Cash and cash equivalents.  Cash equivalents include temporary cash
investments with original maturities of three months or less.

    Inventories and cost of sales.  Inventories are stated at the lower of cost
or market.  The last-in, first-out method is used to determine the cost of
refined sugar, sugarbeets and by-products, and the average-cost method is used
to determine the cost of supplies.

    Under the terms of its contracts with sugarbeet growers, the Company's cost
of sugarbeets is based on average sugar sales prices during the beet crop
purchase contract year, which begins in October and ends the following
September.  Any differences between the sugarbeet cost estimated at the end of
the fiscal year and the amount ultimately paid is an element of cost of sales in
the succeeding year.

    Property, equipment and depreciation.  Property and equipment are stated at
cost.  Maintenance, repairs and minor renewals are expensed; major improvements
capitalized.  Interest costs related to major, long-term capital projects
capitalized as a component of construction costs were $167,000 in 1994, $360,000
in 1995 and nil in 1996.

    Depreciation is computed primarily on the straight-line method over the
estimated useful lives of 20 to 40 years for buildings and five to 20 years for
equipment.

    Income taxes.  Valhi and Amalgamated are members of Contran's consolidated
United States federal income tax group (the "Contran Tax Group").  The policy
for intercompany allocation of federal income taxes provides that subsidiaries
included in the Contran Tax Group compute the provision for federal income taxes
on a separate company basis.  Subsidiaries of Valhi make payments to, or receive
payments from, Valhi in the amount they would have paid to or received from the
Internal Revenue Service had they not been members of the Contran Tax  Group.
The separate company provisions and payments are computed using the tax
elections made by Contran.

    Deferred income tax assets and liabilities are recognized for the expected
future tax consequences of temporary differences between the income tax and
financial reporting carrying amounts of assets and liabilities.

    Other.  Sales are recorded when products are shipped.

    Accounting and funding policies for retirement plans and for postretirement
benefits other than pensions ("OPEB") are described in Note 9.

Note 3 -Operations:

    The Company's operations consist of one business and geographic segment,
the production of refined sugar from sugarbeets in the United States.






                                                Years ended December 31,
                                            -------------------------------

                                            1994        1995         1996
                                            ----        ----         ----

                                                    (In thousands)
                                                         
Net sales:
  Refined sugar                          $421,953    $492,564     $455,717
  By-products and other                    35,325      48,739       38,279
                                         --------    --------     --------


                                         $457,278    $541,303     $493,996
                                         ========    ========     ========

Operating income:
  FIFO basis                             $ 29,299    $ 26,057     $ 39,285
  LIFO adjustment                           2,330         772      (15,437)
                                         --------    --------     --------


    Operating income                       31,629      26,829       23,848

General corporate items, net               (2,242)        258            3
Interest expense                           (7,339)    (13,371)      (8,611)
                                         --------    --------     --------


    Income before income taxes           $ 22,048    $ 13,716     $ 15,240
                                         ========    ========     ========



    Export sales were $8,765,000 in 1994, $21,067,000 in 1995 and $14,885,000
in 1996.  General corporate items in 1994 consist principally of legal and
related expenses.

Note 4 -Notes payable and long-term debt:




                                                              December 31,
                                                          -------------------

                                                            1995      1996
                                                            ----      ----

                                                            (In thousands)
                                                              
Notes payable:
  United States Government loans                          $ 64,685  $ 69,014
  Bank credit agreements                                    42,000    50,000
                                                          --------  --------


                                                          $106,685  $119,014
                                                          ========  ========

Long-term debt:
  Bank term loan                                          $ 24,000  $ 16,000
  Less current maturities                                    8,000     8,000
                                                          --------  --------


                                                          $ 16,000  $  8,000
                                                          ========  ========


    The Government loans are made under the sugar price support loan program,
which program currently extends through the 2002 crop year ending September 30,
2003.  These short-term loans have historically been nonrecourse and will
continue to be nonrecourse if foreign sugar import quotas exceed a specific
level.  At December 31, 1996, all outstanding Government loans are nonrecourse,
and such Government loans will continue to be nonrecourse throughout the
remainder of the current crop year which ends September 30, 1997.  These loans
are collateralized by refined sugar inventories and payable at the earlier of
the date the refined sugar is sold or upon maturity.  At December 31, 1996, the
weighted average interest rate on Government loans was 6.5% (1995 - 5.6%).

    The Company's principal bank credit agreement (the "Sugar Credit
Agreement") provides for a revolving credit facility in varying amounts up to
$80 million, with advances limited to formula-determined amounts of accounts
receivable and inventories, and a term loan.  Borrowings under the revolving
credit facility bear interest, at the Company's option, at the prime rate or
LIBOR plus 1.25% and mature not later than September 30, 1998.  The term loan
bears interest, at the Company's option, at the prime rate plus .25% or LIBOR
plus 1.5%, and matures in annual installments of $8 million through July 1998.
The Sugar Credit Agreement may be terminated by the lenders in the event the
sugar price support loan program is abolished or is materially and adversely
modified.  The Company also has a $5 million unsecured line of credit with the
agent bank for the Sugar Credit Agreement (nil outstanding at December 31,
1996).  At December 31, 1996, the weighted average interest rate on outstanding
bank borrowings was 8.3% (1995 - 7.2%).  See Note 13.

    At December 31, 1996, unused credit available to the Company under its bank
credit agreements and the sugar price support loan program aggregated
approximately $20 million.

    The Sugar Credit Agreement (i) requires the Company to maintain minimum
levels of tangible net worth, earnings and net cash flow, as defined, (ii)
limits dividend payments and additional indebtedness, (iii) is collateralized by
substantially all of the Company's assets and (iv) contains other provisions and
restrictive covenants customary in lending transactions of this type.  At
December 31, 1996, there was no dividend availability under the existing Sugar
Credit Agreement.  See Note 13.

Note 5 -Inventories:





                                                              December 31,
                                                          -------------------

                                                            1995      1996
                                                            ----      ----

                                                            (In thousands)
                                                              
Sugarbeets                                                $ 47,420  $ 46,864
In process sugar                                            57,967    66,375
Refined sugar and by-products                               90,492    89,636
Supplies                                                    33,545    30,838
                                                          --------  --------


                                                          $229,424  $233,713
                                                          ========  ========


    Had the Company used the first-in, first-out method of accounting for the
cost of sugar, sugarbeets and by-products, the net carrying value of inventories
would have increased by approximately $31.8 million and $47.2 million at
December 31, 1995 and 1996, respectively.

Note 6 -Accounts payable and accrued liabilities:




                                                              December 31,
                                                          -------------------

                                                            1995      1996
                                                            ----      ----

                                                            (In thousands)
                                                              
Accounts payable:
  Sugarbeets                                              $ 83,027  $ 83,391
  Other                                                     64,526    58,588
                                                          --------  --------

                                                           147,553   141,979
                                                          --------  --------


Payable to affiliates                                        1,202       937
                                                          --------  --------


Accrued liabilities:
  Sugar processing costs                                    21,569    25,538
  Employee benefits                                          5,428     9,710
  Interest                                                   1,658     1,064
  Other                                                      4,662     4,323
                                                          --------  --------

                                                            33,317    40,635
                                                          --------  --------


                                                          $182,072  $183,551
                                                          ========  ========


Note 7 -Income taxes:




                                                 Years ended December 31,
                                             -------------------------------

                                              1994        1995        1996
                                              ----        ----        ----

                                                     (In thousands)
                                                         
Expected tax expense, at federal statutory
 income tax rate of 35%                    $ 7,717    $  4,801    $  5,334
State income taxes, net                        726         170         247
Other, net                                    (284)       (155)       (350)
                                           -------    --------    --------


                                           $ 8,159    $  4,816    $  5,231
                                           =======    ========    ========

Provision for income taxes:
  Currently payable:
    Federal                                $ 8,236    $  3,928    $  5,107
    State                                    1,340         462         702
                                           -------    --------    --------

                                             9,576       4,390       5,809
  Deferred income taxes (benefit)           (1,417)        426        (578)
                                           -------    --------    --------


                                           $ 8,159    $  4,816    $  5,231
                                           =======    ========    ========





                                                             December 31,
                                                        ---------------------

                                                          1995        1996
                                                          ----        ----

                                                           (In thousands)
                                                              
Components of the net deferred tax benefit (liability):
  Tax effect of temporary differences relating to:
    Inventories                                          $ (7,219)  $ (7,163)
    Property and equipment                                (10,302)   (10,594)
    Accrued OPEB cost                                       7,328      7,514
    Accrued liabilities and other                           3,548      4,176
                                                         --------   --------


      Net liability                                      $ (6,645)  $ (6,067)
                                                         ========   ========

  Net balance comprised of:
    Gross deferred tax assets                            $ 10,876   $ 11,690
    Gross deferred tax liabilities                        (17,521)   (17,757)
                                                         --------   --------


      Net liability                                      $ (6,645)  $ (6,067)
                                                         ========   ========

  Current liability                                      $ (4,010)  $ (2,212)
  Noncurrent liability                                     (2,635)    (3,855)
                                                         --------   --------


                                                         $ (6,645)  $ (6,067)
                                                         ========   ========



Note 8 -Accounts and notes receivable:




                                                            December 31,
                                                        --------------------

                                                          1995        1996
                                                          ----        ----

                                                           (In thousands)
                                                             
Accounts receivable                                    $43,212     $37,286
Notes receivable from sugarbeet growers                  1,161         651
Allowance for doubtful accounts                           (133)        (89)
                                                       -------     -------

                                                        44,240      37,848
Receivable from affiliates                                 621         778
                                                       -------     -------



                                                       $44,861     $38,626
                                                       =======     =======



Note 9 -Employee benefit plans:

    Defined contribution plan.  Substantially all of the Company's full time
employees are eligible to participate in a contributory savings plan with
partial matching Company contributions.  Defined contribution plan expense was
$625,000 in 1994, $583,000 in 1995 and $588,000 in 1996.

    Company-sponsored defined benefit pension plans.  The Company maintains
defined benefit pension plans covering  substantially all full-time employees.
Benefits are based on years of service and average compensation and the related
expenses are based on independent actuarial valuations.  The Company's funding
policy is to contribute amounts equal to or exceeding the amounts required by
the funding requirements of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA").  The plans' assets at December 31, 1995 and 1996 consist
principally of units in a combined investment fund for employee benefit plans
sponsored by Valhi and its affiliates.

    The rates used in determining the actuarial present value of the projected
benefit obligations were (i) discount rate - 7.5%, (ii) expected long-term rate
of return on assets - 10% and (iii) increase in future compensation levels - 4%
to 4.5%.  Variances from actuarially assumed rates will result in increases or
decreases in pension liabilities, pension expense and funding requirements in
future periods.  A one percentage point decrease in the discount rate would
increase the actuarial present value of the accumulated benefit obligations at
December 31, 1996 by approximately $4.0 million.



                                                            December 31,
                                                       ---------------------

                                                         1995         1996
                                                         ----         ----

                                                          (In thousands)
                                                             
Actuarial present value of benefit obligations:
  Vested benefits obligations                         $22,079      $25,559
  Nonvested benefits                                    3,667        3,879
                                                      -------      -------


  Accumulated benefit obligations                      25,746       29,438
  Effect of projected future salary increases           8,805       10,352
                                                      -------      -------


  Projected benefit obligations ("PBO")                34,551       39,790
Plan assets at fair value                              30,686       38,187
                                                      -------      -------


Plan assets less than PBO                              (3,865)      (1,603)
Unrecognized net loss from experience different from
 actuarial assumptions                                  5,565        3,180
Unrecognized prior service cost                           269          223
Unrecognized net obligations being amortized over
 15 years
                                                          535          428
                                                      -------      -------

  Net pension asset                                   $ 2,504      $ 2,228
                                                      =======      =======






                                               Years ended December 31,
                                           -------------------------------

                                             1994        1995        1996
                                             ----        ----        ----

                                                    (In thousands)
                                                         
Net periodic pension cost:
  Service cost benefits earned            $ 1,862     $ 1,612     $ 2,149
  Interest cost on PBO                      1,996       2,249       2,663
  Actual loss (return) on plan assets         615      (4,734)     (6,407)
  Net amortization and deferral            (2,625)      2,467       3,728
                                          -------     -------     -------


                                          $ 1,848     $ 1,594     $ 2,133
                                          =======     =======     =======


    Postretirement benefits other than pensions.  The Company currently
provides certain life insurance and health care benefits to eligible retirees.
Substantially all retirees contribute to the cost of their benefits.  Certain
current and all future retirees either cease to be eligible for health care
benefits at age 65 or are thereafter eligible only for limited benefits.

    The rates used in determining the actuarial present value of the
accumulated OPEB obligations were (i) discount rate - 7.5%, (ii) rate of annual
increases in future compensation levels - 4% to 5% in 1996 (4% to 4.5% in 1995)
and (iii) rate of increase in future health care costs - 10.8% for 1997,
gradually declining to approximately 5.8% in 2017 and thereafter.  If the health
care cost trend rate was increased by one percentage point for each year, OPEB
expense would have increased approximately $187,000 in 1996, and the actuarial
present value of accumulated OPEB obligations at December 31, 1996 would have
increased approximately $1.6 million.  In addition, a one percentage point
decrease in the discount rate would increase the actuarial present value of the
accumulated OPEB obligations at December 31, 1996 by approximately $1.6 million.




                                                              December 31,
                                                           -----------------

                                                             1995      1996
                                                             ----      ----

                                                             (In thousands)
                                                               
Actuarial present value of accumulated OPEB obligations:
  Retiree benefits                                         $ 7,104   $ 6,625
  Other fully eligible active plan participants              3,653     3,744
  Other active plan participants                             5,765     6,025
                                                           -------   -------

                                                            16,522    16,394
Unrecognized net gain from experience different
 from actuarial assumptions                                  2,268     2,874
                                                           -------   -------


Total accrued OPEB cost                                     18,790    19,268
Less current portion                                           937       949
                                                           -------   -------


  Noncurrent accrued OPEB cost                             $17,853   $18,319
                                                           =======   =======





                                                 Years ended December 31,
                                             -------------------------------

                                                1994       1995       1996
                                                ----       ----       ----

                                                      (In thousands)
                                                          
Net periodic OPEB cost:
  Service cost                                $  475    $  447     $  539
  Interest cost                                1,097     1,171      1,137
  Net amortization and deferral                 (110)     (181)      (121)
                                              ------    ------     ------

                                              $1,462    $1,437     $1,555
                                              ======    ======     ======


    Multiemployer pension plans.  A small minority of employees are covered by
union-sponsored, collectively-bargained multiemployer defined benefit pension
plans.  Contributions to multiemployer plans are based upon collective
bargaining agreements and were $47,000 in 1994, $55,000 in 1995 and $56,000 in
1996.  The multiemployer plans' administrators have estimated that the Company's
share of the unfunded benefit obligation of such plans was insignificant at
December 31, 1995 (the most recent information available to the Company).

Note 10 -   Related party transactions:

    The Company may be deemed to be controlled by Harold C. Simmons.  See
Note 1.  It is the policy of the Company to engage in transactions with related
parties on terms, in the opinion of the Company, no less favorable to the
Company than could be obtained from unrelated parties.

    Loans are made between the Company and Valhi with interest at rates related
to the Company's other credit arrangements.  Such loans reprice with changes in
market interest rates and book value is deemed to approximate fair value.
Interest expense on loans from Valhi was $93,000 in 1994, $417,000 in 1995 and
$17,000 in 1996.

    Under the terms of an Intercorporate Service Agreement with Valhi, Valhi
performs certain management, financial and administrative services for the
Company on a fee basis.  Fees pursuant to this agreement were $284,000 in 1994,
$260,000 in 1995 and $220,000 in 1996.

    Certain employees of the Company have been awarded shares of restricted
Valhi common stock and/or granted options to purchase Valhi common stock under
the terms of Valhi's stock option plans.  The Company will pay Valhi the
aggregate difference between the option price and the market value of Valhi's
common stock on the exercise date of such options.  For financial reporting
purposes, the Company accounts for the related expense (credit) of $269,000 in
1994, $(68,000) in 1995 and $5,000 in 1996 in a manner similar to accounting for
stock appreciation rights.  At December 31, 1996, employees of the Company held
options to purchase 272,000 Valhi shares at prices ranging from $4.76 to $14.66
per share (149,000 shares at prices less than the December 31, 1996 quoted
market price of $6.375 per share).

    Restricted stock is forfeitable unless certain periods of employment are
completed.  The Company pays Valhi the market value of the restricted shares on
the dates the restrictions expire, and accrues the related expense over the
restriction period.  Expense related to restricted stock was $191,000 in 1994,
$58,000 in 1995 and $19,000 in 1996.  At December 31, 1996, there was no
restricted stock held for employees of the Company.

    Effective December 1, 1995, Amalgamated entered into a renewable, one-year
agreement to provide administrative services to Amalgamated Research for an
annual fee of $288,000 and a ten-year Service and Sharing Agreement whereby
Amalgamated Research will provide certain research, laboratory and quality
control services to Amalgamated for a fee of $1,659,000 per year to be adjusted
annually based on a composite index.  The Sharing Agreement also (i) grants
Amalgamated a non-exclusive, perpetual royalty-free license to use currently
existing or hereafter developed technology applicable to sugar operations and
(ii) provides for certain royalties to Amalgamated from future sales or licenses
of Amalgamated Research's technology.  Aggregate net expense under these
agreements was $215,000 in 1995 and $1,532,000 in 1996.  See Note 13.

    Amalgamated also leases its corporate office facility from Amalgamated
Research for annual rentals of $256,000 through the year 2000.  The office lease
can be extended for up to ten additional years at the then prevailing market
rental rates.

    Charges (revenues) from other related parties for services provided in the
ordinary course of business aggregated $73,000 in 1994, ($48,000) in 1995 and
$101,000 in 1996.

Note 11 - Commitments and contingencies:

    Legal proceedings.  In November 1992, a complaint was filed in the United
States District Court for the District of Utah against Valhi, Amalgamated and
the Amalgamated Retirement Plan Committee (American Federation of Grain Millers
International, et al. v. Valhi, Inc. et al., No. 29-NC-129J).  The complaint, a
purported class action on behalf of certain current and retired hourly employees
of Amalgamated, alleges, among other things, that the defendants breached their
fiduciary duties under ERISA by amending certain provisions of a retirement plan
for hourly employees maintained by Amalgamated to permit the reversion of excess
plan assets to Amalgamated in 1986.  The complaint seeks a variety of remedies,
including, among other things, orders requiring a return of all reverted funds
(alleged to be in excess of $8 million) and any profits earned thereon, a
distribution of such funds to the plan participants, retirees and their
beneficiaries and enhancement of the benefits under the plan, and an award of
costs and expenses, including attorney fees.  In January 1996, the court granted
the Company's motion for summary judgment with respect to certain counts and
denied the Company's motion for summary judgment with respect to other counts.
The court also granted plaintiffs permission to amend their complaint to include
new allegations.  The plaintiffs subsequently amended their complaint and, in
June 1996, the Company made a motion for summary judgment on the new
allegations.  In September 1996, the court heard the defendants' motion.  The
parties are awaiting a decision on the motion.  See Note 13.

    The Company is also involved in routine legal proceedings incidental to its
normal business activities and environmental related matters.  The Company
believes the disposition of all such proceedings, individually or in the
aggregate, including Grain Millers, should not have a material adverse effect on
the Company's consolidated financial condition, results of operations or
liquidity.

    Concentration of credit risks.  The Company sells sugar primarily in the
North Central and Intermountain Northwest regions of the United States.  The
Company does not believe it is dependent upon one or a few customers; however,
major food processors are substantial customers and represent an important
portion of sales.  The Company's ten largest customers account for approximately
one-third of sales with the largest single customer accounting for approximately
4% to 5% of sales in each of the past three years.  The ten major customers
accounted for 41% of accounts receivable at December 31, 1996 (1995 - 29%).

    At December 31, 1995 and 1996, substantially all of the Company's cash and
cash equivalents was on deposit with three U.S. banks.

    Capital expenditures.  At December 31, 1996, the estimated cost to complete
approved capital projects in process was approximately $650,000.

Note 12 - Other items:

    The fair value of all financial instruments is deemed to approximate
carrying value as they reprice with changes in market interest rates and/or have
short terms to maturity.

    Research and development costs, expensed as incurred, were $487,000 in
1994, $823,000 in 1995 and $1,517,000 in 1996.  Advertising costs, expensed as
incurred, were $306,000 in 1994, $365,000 in 1995 and $125,000 in 1996.

    Rent expense under operating leases, principally for facilities, was
$269,000 in 1994, $350,000 in 1995 and $603,000 in 1996.  At December 31, 1996,
commitments for future minimum rentals under noncancellable operating leases
consist principally of the office lease with Amalgamated Research.  See Note 10.

Note 13 - Subsequent events:

     On January 3, 1997, Amalgamated completed the transfer of control of
substantially all of its operations to Snake River Sugar Company, an Oregon
agricultural cooperative formed by the farmers in Amalgamated's areas of
operations.  Pursuant to the transaction, Amalgamated contributed substantially
all of its net assets to the Amalgamated Sugar Company LLC (the `LLC''), a
limited liability company controlled by Snake River, on a tax-deferred basis, in
exchange for a non-voting ownership interest in the LLC.  Also, as part of the
transaction, Snake River loaned Valhi $250 million and Valhi provided certain
debt financing for the transaction both to Snake River and a related entity.
Valhi's loans from Snake River are collateralized by Amalgamated's interest in
the LLC.

     Amalgamated may, at its option, require the LLC to redeem its interest in
the LLC beginning in January 2002, and the LLC has the right to redeem
Amalgamated's interest beginning in January 2027.  In addition, beginning in
January 2002 Amalgamated has the right to require Snake River to purchase its
interest in the LLC.  The redemption/purchase price is generally $250 million
plus the amount of any deferrals of cash distributions from the LLC discussed
below.  In the event Amalgamated either requires the LLC to redeem its LLC
interest or requires Snake River to purchase its LLC interest, Snake River has
the right to accelerate the maturity and call the loans made to Valhi in
connection with the transaction.  If Amalgamated requires the LLC to redeem its
LLC interest, then Snake River is required, under the terms of the LLC Company
Agreement, to contribute to the LLC the cash received from calling the Valhi
loans.

     The LLC Company Agreement provides that, among other things, Amalgamated is
entitled to receive certain distributions of Distributable Cash, as defined,
from the LLC.  Amalgamated and Snake River share in any Distributable Cash up to
an aggregate of $26.7 million per year, with 95% going to Amalgamated and 5%
going to Snake River.  This $26.7 million distribution is referred to as the
LLC's `base distribution.''  Amalgamated generally is entitled to receive 5%
(10% after 2002) of any Distributable Cash above this base distribution amount,
with additional Distributable Cash potentially being received through 2002 if
certain Distributable Cash levels are reached.  The Company's share of any
Distributable Cash above the base distribution will be deferred and instead paid
to Snake River until Snake River's loans from Valhi are completely repaid.

     As part of the formation of the LLC, the LLC terminated the existing $80
million Sugar Credit Agreement and replaced it with a new $100 million facility
collateralized by the LLC's working capital assets and one of the LLC's four
processing facilities.  In addition, the LLC prepaid the remaining $16 million
outstanding balance of the bank term loan, primarily with the $14 million cash
contribution to the LLC by Snake River for its voting interest in the LLC.

     The Company's net assets contributed to the LLC include the rights and
obligations associated with the agreements between the Company and Amalgamated
Research discussed in Note 10.  However, the LLC did not assume any obligation
arising out of the American Federation of Grain Millers International case
discussed in Note 11.

     In December 1996, Amalgamated declared, and in January 1997 paid, $13
million in pre-closing cash dividends to Valhi.

EX-10

                          FORM OF VALHI, INC. GUARANTY
                          ----------------------------


          Valhi, Inc., a Delaware corporation ("Guarantor"), in order to induce
ROGUE RESOURCES LLC, an Oregon limited liability company (the "Buyer") to enter
into an Asset Purchase Agreement dated as of October   , 1996 (the "Agreement")
                                                     --
by and among Buyer and Medite Corporation, a Delaware corporation and a
subsidiary of Guarantor (the "Seller"), hereby unconditionally and irrevocably
guarantees to Buyer the full and timely performance by Seller of all of the
obligations set forth in Section 8 of the Agreement on Seller's part to be
performed, provided however, that Guarantor shall have no obligation to perform
any of Seller's obligations unless and until (i) Seller shall have defaulted in
the performance of such obligations and such default is continuing without cure
on the part of Seller; and (ii) Buyer shall have given Guarantor thirty (30)
day's notice of such default on the part of Seller.

          Guarantor hereby expressly waives (1) notice of acceptance of this
guaranty and (2) any other notice given to Seller in accordance with the
provisions of the Agreement on any default under the Agreement or otherwise,
except as provided in the first paragraph of this Guaranty.  Guarantor hereby
authorizes Buyer to forbear with respect to, amend, modify, enlarge, extend,
compromise and discharge any or all of the obligations of Seller under the
Agreement without notice to or consent by Guarantor.  Guarantor acknowledges and
agrees that its liability under this guaranty is joint and several with Seller
and, upon any continuing default by Seller, Buyer shall not be obligated to
first attempt enforcement against Seller but shall only be obligated to give the
notice provided in the first paragraph of this Guaranty.  Guarantor hereby
waives any and all defenses to enforcement of this guaranty, now existing or
hereafter arising, which may be available to guarantors, sureties and other
secondary parties at law or in equity.

          Guarantor represents and warrants to Buyer that (a) all necessary
corporate action has been duly taken by it to authorize the execution, delivery
and performance by it of this guaranty, (b) this guaranty is being executed on
Guarantor's behalf by a duly authorized representative, and (c) this guaranty is
the legally valid and binding obligation of Guarantor enforceable in accordance
with its terms.

          Guarantor agrees to pay all reasonable costs and expenses, including
reasonable attorney fees and related costs, incurred by Buyer in enforcing
Guarantor s liability to Buyer under this guaranty whether or not a civil action
or similar proceeding (including claims and proceedings in and before the
bankruptcy court or arbitrators) is filed, prosecuted or appealed.  If an action
or proceeding is filed, prosecuted or appealed, the reasonableness of such
attorney fees shall be determined by the trial judge and if, appealed, by the
appellate court.


          This guaranty shall be binding upon Guarantor and its successors and
assigns, and shall inure to the benefit of and be enforceable by Buyer and its
successors and assigns.

Dated as of October    , 1996.
                    ---

                              VALHI, INC., a Delaware corporation

                              By:
                                  ------------------------------
                              Name:
                                     ---------------------------

EX-10

                          FORM OF VALHI, INC. GUARANTY
                          ----------------------------


          Valhi, Inc., a Delaware corporation ("Guarantor"), in order to induce
Willamette Industries, Inc. (`Willamette'') to subscribe for shares of Medford
International Holdings pursuant to a Share Subscription and Redemption Agreement
dated as of November    , 1996 (the `Agreement'') by and among Willammette and
                     ---
Medite Corporation, a Delaware corporation and an indirect subsidiary of
Guarantor (`Medite''), hereby unconditionally and irrevocably guarantees to
Willamette the full and timely performance by Medite of all of the obligations
set forth in Section 8 of the Agreement on Medite's part to be performed,
provided however, that Guarantor shall have no obligation to perform any of
Medite's obligations unless and until (i) Medite shall have defaulted in the
performance of such obligations and such default is continuing without cure on
the part of Medite; and (ii) Willamette shall have given Guarantor five (5)
day's notice of such default on the part of Medite.

          Guarantor hereby expressly waives (1) notice of acceptance of this
guaranty and (2) any other notice given to Medite in accordance with the
provisions of the Agreement on any default under the Agreement or otherwise,
except as provided in the first paragraph of this Guaranty.  Guarantor hereby
authorizes Willamette to forbear with respect to, amend, modify, enlarge,
extend, compromise and discharge any or all of the obligations of Medite under
the Agreement without notice to or consent by Guarantor.  Guarantor acknowledges
and agrees that its liability under this guaranty is joint and several with
Medite and, upon any continuing default by Medite, Willamette shall not be
obligated to first attempt enforcement against Medite but shall only be
obligated to give the notice provided in the first paragraph of this Guaranty.
Guarantor hereby waives any and all defenses to enforcement of this guaranty,
now existing or hereafter arising, which may be available to guarantors,
sureties and other secondary parties at law or in equity.
          Guarantor represents and warrants to Willamette that (a) all necessary
corporate action has been duly taken by it to authorize the execution, delivery
and performance by it of this guaranty, (b) this guaranty is being executed on
Guarantor's behalf by a duly authorized representative and (c) this guaranty is
the legally valid and binding obligation of Guarantor enforceable in accordance
with its terms.

          Guarantor agrees to pay all reasonable costs and expenses, including
reasonable attorney fees and related costs, incurred by Willamette in enforcing
Guarantor s liability to Willamette under this guaranty whether or not a civil
action or similar proceeding (including claims and proceedings in and before the
bankruptcy court or arbitrators) is filed, prosecuted or appealed.  If an action
or proceeding is filed, prosecuted or appealed, the reasonableness of such
attorney fees shall be determined by the trial judge and if, appealed, by the
appellate court.



          This guaranty shall be binding upon Guarantor and its successors and
assigns, and shall inure to the benefit of and be enforceable by Willamette and
its successors and assigns.

Dated as of November    , 1996
                     ---


                              VALHI, INC., a Delaware corporation

                              By:
                                  ------------------------------
                              Name:
                                     ---------------------------

EX-10

                          FORM OF VALHI, INC. GUARANTY
                          ----------------------------


          Valhi, Inc., a Delaware corporation ("Guarantor"), in order to induce
SIERRA PINE, a California limited partnership (the "Buyer") to enter into an
Asset Purchase Agreement dated as of January   , 1997 (the "Agreement") by and
                                             --
among Buyer and Medite Corporation, a Delaware corporation and a subsidiary of
Guarantor (the "Seller"), hereby unconditionally and irrevocably guarantees to
Buyer the full and timely performance by Seller of all of the obligations set
forth in Section 9, 10, 12 and 13 of the Agreement on Seller s part to be
performed, provided however, that Guarantor shall have no obligation to perform
any of Seller's obligations unless and until (i) Seller shall have defaulted in
the performance of such obligations and such default is continuing without cure
on the part of Seller; and (ii) Buyer shall have given Guarantor thirty (30)
day's notice of such default on the part of Seller.

          Guarantor hereby expressly waives (1) notice of acceptance of this
guaranty and (2) any other notice given to Seller in accordance with the
provisions of the Agreement on any default under the Agreement or otherwise,
except as provided in the first paragraph of this Guaranty.  Guarantor hereby
authorizes Buyer to forbear with respect to, amend, modify, enlarge, extend,
compromise and discharge any or all of the obligations of Seller under the
Agreement without notice to or consent by Guarantor.  Guarantor acknowledges and
agrees that its liability under this guaranty is joint and several with Seller
and, upon any continuing default by Seller, Buyer shall not be obligated to
first attempt enforcement against Seller but shall only be obligated to give the
notice provided in the first paragraph of this Guaranty.  Guarantor hereby
waives any and all defenses to enforcement of this guaranty, now existing or
hereafter arising, which may be available to guarantors, sureties and other
secondary parties at law or in equity.

          Guarantor represents and warrants to Buyer that (a) Guarantor is a
corporation validly existing and in good standing under the laws of the State of
Delaware; (b) all necessary corporate action has been duly taken by it to
authorize the execution, delivery and performance by it of this guaranty, (c)
this guaranty is being executed on Guarantor s behalf by a duly authorized
representative, (d) this guaranty is the legally valid and binding obligation of
Guarantor enforceable in accordance with its terms, and (e) the execution and
the delivery of this Guaranty will not (i) violate any valid constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
the Guarantor is subject or any provision of the charter or bylaws of the
Guarantor, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice or consent under
any agreement, contract, lease, license, instrument, or other arrangement to
which the Guarantor is a party or by which it is bound or to which any of its
assets is subject except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to give notice or
obtain consent, would not have a material adverse effect on the financial
condition of the Guarantor taken as a whole

          Guarantor agrees to pay all reasonable costs and expenses, including
reasonable attorney fees and related costs, incurred by Buyer in enforcing
Guarantor s liability to Buyer under this guaranty whether or not a civil action
or similar proceeding (including claims and proceedings in and before the
bankruptcy court or arbitrators) is filed, prosecuted or appealed.  If an action
or proceeding is filed, prosecuted or appealed, the reasonableness of such
attorney fees shall be determined by the trial judge and if, appealed, by the
appellate court.

          This Guaranty contains the sole and entire understanding and agreement
of the undersigned and the Buyer with respect to the guarantee by the Guarantor
hereunder, and all prior negotiations, discussions, commitments,
representations, agreements and understandings heretofore had with respect
thereto are merged herein.  This Guaranty cannot be changed or terminated
orally.

          This Guaranty shall be governed by, and construed in accordance with,
the domestic laws of the State of Delaware, without giving effect to any choice
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.

          All notices, requests, demands, claims and other communications
hereunder shall be in writing and shall be given in the manner set forth in
Section17(g) of the Agreement, with all notices hereunder to Guarantor being
delivered to the address to which notices are to be given to Seller under
Section17(g) of the Agreement.

          This guaranty shall be binding upon Guarantor and its successors and
assigns, and shall inure to the benefit of and be enforceable by Buyer and its
successors and assigns.

Dated as of January    , 1997.
                    ---

                              VALHI, INC., a Delaware corporation

                              By:
                                  ------------------------------
                              Name:
                                     ---------------------------

EX-10

                                  VALHI, INC.

                         1997 LONG-TERM INCENTIVE PLAN


     SECTION 1.  PURPOSE.  The purpose of this Plan is to advance the interests
of Valhi and its stockholders by providing incentives to certain Eligible
Persons who contribute significantly to the strategic and long-term performance
objectives and growth of the Company.

     SECTION 2.  DEFINITIONS.  The following terms shall have the meaning
indicated:

          (a)  `ACTUAL VALUE'' has the meaning set forth in SECTION 9.

          (b)  `ASSOCIATED AWARD'' shall mean an Award granted concurrently or
     subsequently in conjunction with another Award.

          (c)  `AWARD'' shall mean an award of rights to an Eligible Person
     under this Plan.

          (d)  `AWARD PERIOD'' has the meaning set forth in SUBSECTION 9(B).

          (e)  `BENEFICIARY'' has the meaning set forth in SECTION 16.

          (f)  `BOARD'' shall mean the board of directors of Valhi.

          (g)  `CODE'' shall mean the Internal Revenue Code of 1986, as it now
     exists or may be amended from time to time, and the rules promulgated
     thereunder, as they may exist or may be amended from time to time.

          (h)  `COMMITTEE'' shall mean a committee of the Board, if any,
     designated by the Board to administer this Plan that is comprised of not
     fewer than two directors and shall initially mean the Management,
     Development & Compensation Committee of the Board.  The membership of the
     Committee or any successor committee (i) shall consist of `nonemployee
     directors''(as defined in Rule 16b-3) and meet any other applicable
     requirements so as to comply at all times with the applicable requirements
     of Rule 16b-3, (ii) shall consist of `outside directors'' (as defined in
     Treasury Regulation  Section1.162-27(e)(3)(i) or any successor regulation)
     and meet any other applicable requirements so as to comply at all times
     with the applicable requirements of Section 162(m) and (iii) shall meet any
     applicable requirements of any stock exchange or other market quotation
     system on which Common Shares are listed.  References to the Committee
     hereunder shall include the Board or the Designated Administrator where
     appropriate.

          (i)  `COMPANY'' shall mean Valhi and any parent or subsidiary of
     Valhi.

          (j)  `COMMON SHARES'' shall mean shares of common stock, par value
     $0.01 per share, of Valhi and stock of any other class into which such
     shares may thereafter be changed.

          (k)  `DESIGNATED ADMINISTRATOR'' has the meaning set forth in SECTION
     3.

          (l)  `EFFECTIVE DATE'' shall mean the date the Board adopts this Plan
     (which adoption date may be a date subsequent to the date of the actual
     action taken by the Board if the Board action sets forth such subsequent
     adoption date).

          (m)  `ELIGIBLE PERSON(S)'' shall mean those persons who are key
     employees of the Company or other key individuals who perform services for
     the Company, including, without limitation, directors who are not employees
     of the Company.

          (n)  `EXCHANGE ACT'' shall mean the Securities Exchange Act of 1934,
     as it now exists or may be amended from time to time, and the rules
     promulgated thereunder, as they may exist or may be amended from time to
     time.

          (o)  `FAIR MARKET VALUE'' shall mean such value as determined by the
     Committee in accordance with applicable law.

          (p)  `INCENTIVE STOCK OPTION'' shall mean a Stock Option that is an
     incentive stock option as defined in Section 422 of the Code.  Incentive
     Stock Options are subject, in part, to the terms, conditions and
     restrictions described in SECTION 6.

          (q)  `MAXIMUM VALUE'' has the meaning set forth in SUBSECTION 9(A).

          (r)  `NONQUALIFIED STOCK OPTION'' shall mean a Stock Option that is
     not an incentive stock option as defined in Section 422 of the Code.
     Nonqualified Stock Options are subject, in part, to the terms, conditions
     and restrictions described in SECTION 6.

          (s)  `OTHER VALHI SECURITIES'' shall mean Valhi securities (which may
     include, but need not be limited to, unbundled stock units or components
     thereof, debentures, preferred stock, warrants, securities convertible into
     Common Shares or other property) other than Common Shares.

          (t)  `PARTICIPANT'' shall mean an Eligible Person to whom an Award
     has been granted under this Plan.

          (u)  `PERFORMANCE GRANT'' shall mean an Award subject, in part, to
     the terms, conditions and restrictions described in SECTION 9, pursuant to
     which the recipient may become entitled to receive cash, Common Shares,
     Other Valhi Securities or property, or other forms of payment, or any
     combination thereof, as determined by the Committee.

          (v)  `PLAN'' shall mean this Valhi, Inc. 1997 Long-Term Incentive
     Plan.

          (w)  `PURCHASED OPTION'' shall mean a Stock Option that is sold to an
     Eligible Person at a price determined by the Committee.

          (x)  `RESTRICTED PERIOD'' has the meaning set forth in SUBSECTION
     8(B).

          (y)  `RESTRICTED STOCK'' shall mean an Award of Common Shares that
     are issued subject, in part, to the terms, conditions and restrictions
     described in SECTION 8.

          (z)  `RULE 16B-3'' shall mean Rule 16b-3 promulgated by the
     Securities and Exchange Commission under the Exchange Act and any successor
     rule.

          (aa) `SECTION 162(M)'' shall mean  Section162(m) of the Code, any
     rules or regulations promulgated thereunder, as they may exist or may be
     amended from time to time, or any successor to such section.

          (bb) `STOCK APPRECIATION RIGHT'' shall mean an Award of a right to
     receive (without payment to Valhi) cash, Common Shares, Other Valhi
     Securities or property, or other forms of payment, or any combination
     thereof, as determined by the Committee, based on the increase in the value
     of the number of Common Shares specified in the Stock Appreciation Right.
     Stock Appreciation Rights are subject, in part, to the terms, conditions
     and restrictions described in SECTION 7.
          (cc) `STOCK OPTION'' shall mean an Award of a right to purchase
     Common Shares.  The term Stock Option shall include Nonqualified Stock
     Options, Incentive Stock Options and Purchased Options.

          (dd) `TEN PERCENT EMPLOYEE'' shall mean an employee of the Company
     who owns stock representing more than ten percent of the voting power of
     all classes of stock of Valhi or any parent or subsidiary of Valhi.

          (ee) `TREASURY REGULATION'' shall mean a permanent, proposed or
     temporary regulation of the Department of Treasury under the Code and any
     successor regulation.

          (ff) `VALHI'' shall mean Valhi, Inc., a Delaware corporation.

     SECTION 3.  ADMINISTRATION.  Unless the Board shall designate itself or a
Designated Administrator to administer this Plan, this Plan shall be
administered by the Committee.  If at any time Rule 16b-3 so permits without
adversely affecting the ability of Awards to executive officers of Valhi to
comply with the conditions for Rule 16b-3 or Section 162(m), the Committee may
delegate the administration of this Plan and any of its power and authority in
whole or in part, on such terms and conditions, and to such person or persons as
it may determine in its discretion (a `DESIGNATED ADMINISTRATOR'').

     The Committee has all the powers vested in it by the terms of this Plan,
such powers to include exclusive authority to select the Eligible Persons to be
granted Awards under this Plan, to determine the type, size and terms of the
Award to be made to each Eligible Person selected, to modify the terms of any
Award that has been granted, to determine the time when Awards will be granted,
to establish performance objectives, to make any adjustments necessary or
desirable as a result of the granting of Awards to Eligible Persons located
outside the United States and to prescribe the form of the agreements embodying
Awards made under this Plan.  The Committee is authorized to interpret this Plan
and the Awards granted under this Plan, to establish, amend and rescind any
rules and regulations relating to this Plan, and to make any other
determinations that it deems necessary or desirable for the administration of
this Plan.  The Committee may correct any defect or supply any omission or
reconcile any inconsistency in this Plan or in any Award in the manner and to
the extent the Committee deems necessary or desirable to carry it into effect.
Any decision of the Committee in the interpretation and administration of this
Plan, as described herein, shall lie within its sole and absolute discretion and
shall be final, conclusive and binding on all parties concerned.  The Committee
may act only by a majority of its members in office, except that the members
thereof may authorize any one or more of their members or any officer of the
Company to execute and deliver documents or to take any other ministerial action
on behalf of the Committee with respect to Awards made or to be made to
Participants.

     No member the Committee and no officer of the Company shall be liable for
anything done or omitted to be done by him, by any other member of the Committee
or by any officer of the Company in connection with the performance of duties
under this Plan, except for his own willful misconduct or as expressly provided
by statute.  In addition to all other rights of indemnification and
reimbursement to which a member of the Committee and an officer of the Company
may be entitled, the Company shall indemnify and hold harmless each such member
or officer who was or is a party or is threatened to be made a party to any
threatened, pending or completed proceeding or suit in connection with the
performance of duties under this Plan against expenses (including reasonable
attorneys' fees), judgments, fines, liabilities, losses and amounts paid in
settlement actually and reasonably incurred by him in connection with such
proceeding or suit, except for his own willful misconduct or as expressly
provided otherwise by statute.  Expenses (including reasonable attorneys' fees)
incurred by a such a member or officer in defending any such proceeding or suit
shall be paid by the Company in advance of the final disposition of such
proceeding or suit upon receipt of a written affirmation by such member or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification and a written undertaking by or on behalf of such
member or officer to repay such amount if it shall ultimately be determined that
he is not entitled to be indemnified by the Company as authorized in this
Section.

     SECTION 4.  PARTICIPATION.  Consistent with the purposes of this Plan, the
Committee shall have exclusive power to select the Eligible Persons who may
participate in this Plan and be granted Awards under this Plan. Eligible Persons
may be selected individually or by groups or categories, as determined by the
Committee in its discretion.

     SECTION 5.  AWARDS UNDER THIS PLAN.

          (a)  Types of Awards.  Awards under this Plan may include, but need
     not be limited to, one or more of the following types, either alone or in
     any combination thereof:  (i) Stock Options, (ii) Stock Appreciation
     Rights, (iii) Restricted Stock, (iv) Performance Grants and (v) any other
     type of Award deemed by the Committee in its discretion to be consistent
     with the purposes of this Plan (including, but not limited to, Awards of or
     options or similar rights granted with respect to unbundled stock units or
     components thereof, and Awards to be made to Participants who are foreign
     nationals or are employed or performing services outside the United
     States).

          (b)  Maximum Number of Shares that May be Issued.  There may be issued
     under this Plan (as Restricted Stock, in payment of Performance Grants,
     pursuant to the exercise of Stock Options or Stock Appreciation Rights or
     in payment of or pursuant to the exercise of such other Awards as the
     Committee, in its discretion, may determine) an aggregate of not more than
     5,000,000 Common Shares, subject to adjustment as provided in SECTION 15.
     No Eligible Person may receive Awards under this Plan for more than
     1,000,000 Common Shares in any one fiscal year of Valhi, subject to
     adjustment as provided in SECTION 15.  Common Shares issued pursuant to
     this Plan may be either authorized but unissued shares, treasury shares,
     reacquired shares or any combination thereof.  If any Common Shares issued
     as Restricted Stock or otherwise subject to repurchase or forfeiture rights
     are reacquired by the Company pursuant to such rights or, if any Award is
     canceled, terminates or expires unexercised, any Common Shares that would
     otherwise have been issuable pursuant thereto will be available for
     issuance under new Awards.

          (c)  Rights with Respect to Common Shares and Other Securities.
     Except as provided in SUBSECTION 8(C) with respect to Awards of Restricted
     Stock and unless otherwise determined by the Committee in its discretion, a
     Participant to whom an Award is made (and any person succeeding to such a
     Participant's rights pursuant to this Plan) shall have no rights as a
     stockholder with respect to any Common Shares or as a holder with respect
     to other securities, if any, issuable pursuant to any such Award until the
     date of the issuance of a stock certificate to him for such Common Shares
     or other instrument of ownership, if any. Except as provided in SECTION 15,
     no adjustment shall be made for dividends, distributions or other rights
     (whether ordinary or extraordinary, and whether in cash, securities, other
     property or other forms of consideration, or any combination thereof) for
     which the record date is prior to the date such stock certificate or other
     instrument of ownership, if any, is issued.  In all events, a Participant
     with whom an Award agreement is made to issue Common Shares in the future,
     shall have no rights as a stockholder with respect to Common Shares related
     to such agreement until issuance to him of a stock certificate representing
     such shares.

     SECTION 6.  STOCK OPTIONS.  The Committee may sell Purchased Options or
grant other Stock Options either alone, or in conjunction with Associated
Awards, either at the time of grant or by amendment thereafter; provided that an
Incentive Stock Option may be granted only to Eligible Persons who are employees
of the Company.  Each Stock Option granted or sold under this Plan shall be
evidenced by an agreement in such form as the Committee shall prescribe from
time to time in accordance with this Plan and shall comply with the applicable
terms and conditions of this Section and this Plan, and with such other terms
and conditions, including, but not limited to, restrictions upon the Stock
Option or the Common Shares issuable upon exercise thereof, as the Committee, in
its discretion, shall establish.

          (a)  The exercise price of a Stock Option may be less than, equal to,
     or greater than, the Fair Market Value of the Common Shares subject to such
     Stock Option at the time the Stock Option is granted, as determined by the
     Committee; provided, however, that in the case of an Incentive Stock Option
     granted to an employee of the Company, the exercise price shall not be less
     than the Fair Market Value of the Common Shares subject to such Stock
     Option at the time the Stock Option is granted, or if granted to a Ten
     Percent Employee, such exercise price shall not be less than 110% of such
     Fair Market Value at the time the Stock Option is granted; but in no event
     will such exercise price be less than the par value of such Common Shares.

          (b)  The Committee shall determine the number of Common Shares to be
     subject to each Stock Option.  In the case of a Stock Option awarded in
     conjunction with an Associated Award, the number of Common Shares subject
     to an outstanding Stock Option may be reduced on an appropriate basis to
     the extent that the Associated Award has been exercised, paid to or
     otherwise received by the Participant, as determined by the Committee.

          (c)  The Stock Option shall not be exercisable:

               (i)  in the case of any Incentive Stock Option granted to a Ten
          Percent Employee, after the expiration of five years from the date it
          is granted, and, in the case of any other Stock Option, after the
          expiration of ten years from the date it is granted.  Any Stock Option
          may be exercised during such period only at such time or times and in
          such installments as the Committee may establish; and
               (ii) unless payment in full is made for the shares being acquired
          thereunder at the time of exercise as provided in SUBSECTION 6(H); and

          (d)  The Committee shall determine in its discretion and specify in
     each agreement embodying a Stock Option the effect, if any, the termination
     of the Participant's employment with or performance of services for the
     Company shall have on the exercisability of the Stock Option; provided,
     however, that an Incentive Stock Option shall not be exercisable at a time
     that is beyond the time an Incentive Stock Option may be exercised in order
     to receive favorable treatment under the Code.

          (e)  In the case of an Incentive Stock Option, the amount of the
     aggregate Fair Market Value of Common Shares (determined at the time of
     grant of the Stock Option) with respect to which incentive stock options
     are exercisable for the first time by an employee of the Company during any
     calendar year (under all such plans of his employer corporation and its
     parent and subsidiary corporations) shall not exceed $100,000.

          (f)  It is the intent of Valhi that Nonqualified Stock Options granted
     under this Plan not be classified as Incentive Stock Options, that the
     Incentive Stock Options granted under this Plan be consistent with and
     contain or be deemed to contain all provisions required under Section 422
     and the other appropriate provisions of the Code and any implementing
     regulations (and any successor provisions thereof), and that any
     ambiguities in construction shall be interpreted in order to effectuate
     such intent.

          (g)  A Purchased Option may contain such additional terms not
     inconsistent with this Plan, including but not limited to the circumstances
     under which the purchase price of such Purchased Option may be returned to
     the holder of the Purchased Option, as the Committee may determine in its
     sole discretion.
          (h)  For purposes of payments made to exercise Stock Options, such
     payment shall be made in such form (including, but not limited to, cash,
     Common Shares, the surrender of another outstanding Award under this Plan
     or any combination thereof) as the Committee may determine in its
     discretion; provided, however, that for purposes of making such payment in
     Common Shares, such shares shall be valued at their Fair Market Value on
     the day of exercise and shall have been held by the Participant for a
     period of at least six (6) months.

     SECTION 7.  STOCK APPRECIATION RIGHTS.  The Committee may grant Stock
Appreciation Rights either alone, or in conjunction with Associated Awards,
either at the time of grant or by amendment thereafter.  Each Award of Stock
Appreciation Rights granted under this Plan shall be evidenced by an agreement
in such form as the Committee shall prescribe from time to time in accordance
with this Plan and shall comply with the applicable terms and conditions of this
Section and this Plan, and with such other terms and conditions, including, but
no limited to, restrictions upon the Award of Stock Appreciation Rights or the
Common Shares issuable upon exercise thereof, as the Committee, in its
discretion, shall establish.

          (a)  The Committee shall determine the number of Common Shares to be
     subject to each Award of Stock Appreciation Rights.  In the case of an
     Award of Stock Appreciation Rights awarded in conjunction with an
     Associated Award, the number of Common Shares subject to an outstanding
     Award of Stock Appreciation Rights may be reduced on an appropriate basis
     to the extent that the Associated Award has been exercised, paid to or
     otherwise received by the Participant, as determined by the Committee.

          (b)  The Award of Stock Appreciation Rights shall not be exercisable:

               (i)  unless the Associated Award, if any, is at the time
          exercisable; and
               (ii) if the Associated Award is a Stock Option and the Fair
          Market Value per share of the Common Shares on the exercise date does
          not exceed the exercise price per share of such Stock Option.

          (c)  The Committee shall determine in its discretion and specify in
     each agreement embodying an Award of Stock Appreciation Rights the effect,
     if any, the termination of the Participant's employment with or performance
     of services for the Company shall have on the exercisability of the Award
     of Stock Appreciation Rights.

          (d)  An Award of Stock Appreciation Rights shall entitle the holder to
     exercise such Award or to surrender unexercised an Associated Award (or any
     portion of such Stock Option or Associated Award) to Valhi and to receive
     from Valhi in exchange thereof, without payment to Valhi, that number of
     Common Shares having an aggregate value equal to (or, in the discretion of
     the Committee, less than) the excess of the Fair Market Value of one share,
     at the time of such exercise, over the exercise price, times the number of
     shares subject to the Award or the Associated Award, or portion thereof,
     that is so exercised or surrendered, as the case may be.  The Committee
     shall be entitled in its discretion to elect to settle the obligation
     arising out of the exercise of a Stock Appreciation Right by the payment of
     cash or Other Valhi Securities or property, or other forms of payment or
     any combination thereof, as determined by the Committee, equal to the
     aggregate value of the Common Shares it would otherwise be obligated to
     deliver.  Any such election by the Committee shall be made as soon as
     practicable after the receipt by the Committee of written notice of the
     exercise of the Stock Appreciation Right.

          (e)  A Stock Appreciation Right may provide that it shall be deemed to
     have been exercised at the close of business on the business day preceding
     the expiration date of the Stock Appreciation Right or of the related Stock
     Option (or other Award), or such other date as specified by the Committee,
     if at such time such Stock Appreciation Right has a positive value.  Such
     deemed exercise shall be settled or paid in the same manner as a regular
     exercise thereof as provided in SUBSECTION 7(D) hereof.

     SECTION 8.  RESTRICTED STOCK.  The Committee may grant Awards of Restricted
Stock either alone, or in conjunction with Associated Awards, either at the time
of grant or by amendment thereafter.  Each Award of Restricted Stock under this
Plan shall be evidenced by an agreement in such form as the Committee shall
prescribe from time to time in accordance with this Plan and shall comply with
the applicable terms and conditions of this Section and this Plan, and with such
other terms and conditions as the Committee, in its discretion, shall establish.

          (a)  The Committee shall determine the number of Common Shares to be
     issued to a Participant pursuant to the Award of Restricted Stock, and the
     extent, if any, to which they shall be issued in exchange for cash, other
     consideration, or both.

          (b)  Until the expiration of such period as the Committee shall
     determine from the date on which the Award is granted and subject to such
     other terms and conditions as the Committee in its discretion shall
     establish (the `RESTRICTED PERIOD''), a Participant to whom an Award of
     Restricted Stock is made shall be issued, but shall not be entitled to the
     delivery of, a stock certificate representing the Common Shares subject to
     such Award.

          (c)  Unless otherwise determined by the Committee in its discretion, a
     Participant to whom an Award of Restricted Stock has been made (and any
     person succeeding to such a participant's rights pursuant to this Plan)
     shall have, after issuance of a certificate for the number of Common Shares
     awarded and prior to the expiration of the Restricted Period, ownership of
     such Common Shares, including the right to vote such Common Shares and to
     receive dividends or other distributions made or paid with respect to such
     Common Shares (provided that such Common Shares, and any new, additional or
     different shares, or Other Valhi Securities or property, or other forms of
     consideration that the Participant may be entitled to receive with respect
     to such Common Shares as a result of a stock split, stock dividend or any
     other change in the corporation or capital structure of Valhi, shall be
     subject to the restrictions hereinafter described as determined by the
     Committee in its discretion), subject, however, to the options,
     restrictions and limitations imposed thereon pursuant to this Plan.

          (d)  The Committee shall determine in its discretion and specify in
     each agreement embodying an Award of Restricted Stock the effect, if any,
     the termination of the Participant's employment with or performance of
     services for the Company during the Restricted Period shall have on such
     Award of Restricted Stock.

     SECTION 9.  PERFORMANCE GRANTS.  The Committee may grant Awards of
Performance Grants either alone, or in conjunction with Associated Awards,
either at the time of grant or by amendment thereafter.  The Award of a
Performance Grant to a Participant will entitle him to receive a specified
amount determined by the Committee (the `ACTUAL VALUE''), if the terms and
conditions specified in this Plan and in the Award are satisfied.  Each Award of
a Performance Grant shall be subject to the applicable terms and conditions of
this Section and this Plan, and to such other terms and conditions, including
but not limited to, restrictions upon any cash, Common Shares, Other Valhi
Securities or property, or other forms of payment, or any combination thereof,
issued with respect to the Performance Grant, as the Committee, in its
discretion, shall establish, and shall be embodied in an agreement in such form
and substance as is determined by the Committee.

          (a)  The Committee shall determine the value or range of values of a
     Performance Grant to be awarded to each Participant selected for an Award
     and whether or not such a Performance Grant is granted in conjunction with
     an Associated Award.  As determined by the Committee, the maximum value of
     each Performance Grant (the `MAXIMUM VALUE'') shall be:  (i) an amount
     fixed by the Committee at the time the Award is made or amended thereafter,
     (ii) an amount that varies from time to time based in whole or in part on
     the then current value of the Common Shares, Other Valhi Securities or
     property, or other securities or property, or any combination thereof or
     (iii) an amount that is determinable from criteria specified by the
     Committee.  Performance Grants may be issued in different classes or series
     having different names, terms and conditions.  In the case of a Performance
     Grant awarded in conjunction with an Associated Award, the Performance
     Grant may be reduced on an appropriate basis to the extent that the
     Associated Award has been exercised, paid to or otherwise received by the
     Participant, as determined by the Committee.

          (b)  The award period (`AWARD PERIOD'') related to any Performance
     Grant shall be a period determined by the Committee.  At the time each
     Award is made, the Committee shall establish performance objectives to be
     attained within the Award Period as the means of determining the Actual
     Value of such a Performance Grant.  The performance objectives shall be
     based on such measure or measures of performance, which may include, but
     need not be limited to, the performance of the Participant, the Company or
     one or more of its divisions or units, or any combination of the foregoing,
     as the Committee shall determine, and may be applied on an absolute basis
     or be relative to industry or other indices or any combination thereof.
     The Actual Value of a Performance Grant shall be equal to its Maximum Value
     only if the performance objectives are attained in full, but the Committee
     shall specify the manner in which the Actual Value of Performance Grants
     shall be determined if the performance objectives are met in part.  Such
     performance measures, the Actual Value or the Maximum Value, or any
     combination thereof, may be adjusted in any manner by the Committee in its
     discretion at any time and from time to time during or as soon as
     practicable after the Award Period, if it determines that such performance
     measures, the Actual Value or the Maximum Value, or any combination
     thereof, are not appropriate under the circumstances.
          (c)  The Committee shall determine in its discretion and specify in
     each agreement embodying a Performance Grant the effect, if any, the
     termination of the Participant's employment with or performance of services
     for the Company during the Award Period shall have on such Performance
     Grant.

          (d)  The Committee shall determine whether the conditions of a
     Performance Grant have been met and, if so, shall ascertain the Actual
     Value of the Performance Grant.  If the Performance Grant has no Actual
     Value, the Award and such Performance Grant shall be deemed to have been
     canceled and the Associated Award, if any, may be canceled or permitted to
     continue in effect in accordance with its terms.  If the Performance Grant
     has any Actual Value and:

               (i)  was not awarded in conjunction with an Associated Award, the
          Committee shall cause an amount equal to the Actual Value of the
          Performance Grant earned by the Participant to be paid to him or his
          Beneficiary; or

               (ii) was awarded in conjunction with an Associated Award, the
          Committee shall determine, in accordance with criteria specified by
          the Committee (A) to cancel the Performance Grant, in which event no
          amount with respect thereto shall be paid to the Participant or his
          Beneficiary, and the Associated Award may be permitted to continue in
          effect in accordance with its terms, (B) to pay the Actual Value of
          the Performance Grant to the Participant or his  Beneficiary as
          provided below, in which event the Associated Award may be canceled or
          (C) to pay to the Participant or his Beneficiary, the Actual Value of
          only a portion of the Performance Grants, in which event all or a
          portion of the Associated Award may be permitted to continue in effect
          in accordance with its terms or be canceled, as determined by the
          Committee.
          Such determination by the Committee shall be made as promptly as
     practicable following the end of the Award Period or upon the earlier
     termination of employment or performance of services, or at such other time
     or times as the Committee shall determine, and shall be made pursuant to
     criteria specified by the Committee.

          (e)  Payment of any amount with respect to the Performance Grants that
     the Committee determines to pay as provided above shall be made by Valhi as
     promptly as practicable after the end of the Award Period or at such other
     time or times as the Committee shall determine, and may be made in cash,
     Common Shares, Other Valhi Securities or property, or other forms of
     payment, or any combination thereof or in such other manner, as determined
     by the Committee in its discretion.  Notwithstanding anything in this
     Section to the contrary, the Committee may, in its discretion, determine
     and pay out the Actual Value of the Performance Grants at any time during
     the Award Period.

     SECTION 10.  DEFERRAL OF COMPENSATION.  The Committee shall determine
whether or not an Award shall be made in conjunction with the deferral of the
Participant's salary, bonus or other compensation, or any combination thereof,
and whether or not such deferred amounts may be:

          (a)  forfeited to the Company or to other Participants or any
     combination thereof, under certain circumstances (which may include, but
     need not be limited to, certain types of termination of employment or
     performance of services for the Company);

          (b)  subject to increase or decrease in value based upon the
     attainment of or failure to attain, respectively, certain performance
     measures; and/or
          (c)  credited with income equivalents (which may include, but need not
     be limited to, interest, dividends or other rates of return) until the date
     or dates of payment of the Award, if any.

     SECTION 11.  DEFERRED PAYMENT OF AWARDS.  The Committee may specify that
the payment of all or any portion of cash, Common Shares, Other Valhi Securities
or property, or any other form of payment, or any combination thereof, under an
Award shall be deferred until a later date.  Deferrals shall be for such periods
or until the occurrence of such events, and upon such terms, as the Committee
shall determine in its discretion.  Deferred payments of Awards may be made by
undertaking to make payment in the future based upon the performance of certain
investment equivalents (which may include, but need not be limited to,
government securities, Common Shares, other securities, property or
consideration, or any combination thereof), together with such additional
amounts of income equivalents (which may be compounded and may include, but need
not be limited to, interest, dividends or other rates of return or any
combination thereof) as may accrue thereon until the date or dates of payment,
such investment equivalents and such additional amounts of income equivalents to
be determined by the Committee in its discretion.

     SECTION 12.  TRANSFERABILITY OF AWARDS.  Except as may be approved by the
Committee, a Participant's rights and interest under this Plan or any Award may
not be assigned or transferred, hypothecated or encumbered in whole or in part
either directly or by operation of law or otherwise (except in the event of a
Participant's death), including, but not by way of limitation, execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner; provided,
however, that any Incentive Stock Option granted pursuant to this Plan shall not
be transferable other than by will or the laws of descent and distribution and
shall be exercisable during the Participant's lifetime only by him.

     SECTION 13.  AMENDMENT OR SUBSTITUTION OF AWARDS UNDER THIS PLAN.  The
terms of any outstanding Award under this Plan may be amended or modified from
time to time by the Committee in its discretion in any manner that it deems
appropriate and could have determined at the time of the original Award
(including, but not limited to, acceleration of the date of exercise of any
Award and/or payments thereunder); provided that no such amendment shall
adversely affect in a material manner any right of a Participant under the Award
without his written consent, unless the Committee determines in its discretion
that there have occurred or are about to occur significant changes in the
Participant's position, duties or responsibilities, or significant changes in
economic, legislative, regulatory, tax, accounting or cost/benefit conditions
that are determined by the Committee in its discretion to have or to be expected
to have a substantial effect on the performance of the Company, or any
affiliate, division or department thereof, on this Plan or on any Award under
this Plan.  The Committee may, in its discretion, permit holders of Awards under
this Plan to surrender outstanding Awards in order to exercise or realize the
rights under other Awards, or in exchange for the grant of new Awards, or
require holders of Awards to surrender outstanding Awards as a condition
precedent to the grant of new Awards under this Plan.

     SECTION 14.  TERMINATION OF A PARTICIPANT.  For all purposes under this
Plan, the Committee shall determine whether a Participant has terminated
employment with, or the performance of services for, the Company; provided,
however, an absence or leave approved by the Company shall not be considered an
interruption of employment or performance of services for any purpose under this
Plan.

     SECTION 15.  DILUTION AND OTHER ADJUSTMENTS.  In the event of any change in
the outstanding Common Shares by reason of any stock split, dividend, split-up,
split-off, spin-off, recapitalization, merger, consolidation, rights offering,
reorganization, combination or exchange of shares, a sale by Valhi of all or
substantially all of its assets, any distribution to stockholders other than a
normal cash dividend, or other extraordinary or unusual event, if the Committee
shall determine, in its discretion, that such change equitably requires an
adjustment in the terms of any Award or the number of Common Shares available
for Awards, such adjustment may be made by the Committee and shall be final,
conclusive and binding for all purposes of this Plan.  Each adjustment made
pursuant to this Section shall be made with a view toward preserving the value
of the affected Award had prior to the event or transaction giving cause to such
adjustment.

     In the event of the proposed dissolution or liquidation of Valhi, all
outstanding Awards shall terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Committee.  In the event of a
proposed sale of all or substantially all of the assets of Valhi or the merger
of Valhi with or into another corporation, all restrictions on any outstanding
Awards shall lapse and Participants shall be entitled to the full benefit of all
such Awards immediately prior to the closing date of such sale or merger, unless
otherwise provided by the Committee.

     SECTION 16.  DESIGNATION OF BENEFICIARY BY PARTICIPANT.  A Participant may
name a beneficiary to receive any payment to which he may be entitled with
respect to any Award under this Plan in the event of his death, on a written
form to be provided by and filed with the Committee, and in a manner determined
by the Committee in its discretion (a `BENEFICIARY'').  The Committee reserves
the right to review and approve Beneficiary designations.  A Participant may
change his Beneficiary from time to time in the same manner, unless such
Participant has made an irrevocable designation.  Any designation of a
Beneficiary under this Plan (to the extent it is valid and enforceable under
applicable law) shall be controlling over any other disposition, testamentary or
otherwise, as determined by the Committee in its discretion.  If no designated
Beneficiary survives the Participant and is living on the date on which any
amount becomes payable to such a Participant's Beneficiary, such payment will be
made to the legal representatives of the Participant's estate, and the term
`BENEFICIARY'' as used in this Plan shall be deemed to include such person or
persons.  If there are any questions as to the legal right of any Beneficiary to
receive a distribution under this Plan, the Committee in its discretion may
determine that the amount in question be paid to the legal representatives of
the estate of the Participant, in which event the Company, the Board, the
Committee, the Designated Administrator (if any), and the members thereof, will
have no further liability to anyone with respect to such amount.

     SECTION 17.  FINANCIAL ASSISTANCE.  If the Committee determines that such
action is advisable, the Company may assist any Participant in obtaining
financing from the Company (or under any program of the Company approved
pursuant to applicable law), or from a bank or other third party, on such terms
as are determined by the Committee, and in such amount as is required to
accomplish the purposes of this Plan, including, but not limited to, to permit
the exercise of an Award, the participation therein, and/or the payment of any
taxes with respect thereto.  Such assistance may take any form that the
Committee deems appropriate, including, but not limited to, a direct loan from
the Company, a guarantee of the obligation by the Company or the maintenance by
the Company of deposits with such bank or third party.

     SECTION 18.  MISCELLANEOUS PROVISIONS.

          (a)  Any proceeds from Awards shall constitute general funds of Valhi.

          (b)  No fractional shares may be delivered under an Award, but in lieu
     thereof a cash or other adjustment shall be made as determined by the
     Committee in its discretion.

          (c)  No Eligible Person or other person shall have any claim or right
     to be granted an Award under this Plan.  Determinations made by the
     Committee under this Plan need not be uniform and may be made selectively
     among Eligible Persons under this Plan, whether or not such Eligible
     Persons are similarly situated.  Neither this Plan nor any action taken
     hereunder shall be construed as giving any Eligible Person any right to
     continue to be employed by or perform services for the Company, and the
     right to terminate the employment of or performance of services by Eligible
     Persons at any time and for any reason is specifically reserved.
          (d)  No Participant or other person shall have any right with respect
     to this Plan, the Common Shares reserved for issuance under this Plan or in
     any Award, contingent or otherwise, until written evidence of the Award
     shall have been delivered to the recipient and all the terms, conditions
     and provisions of this Plan and the Award applicable to such recipient (and
     each person claiming under or through him) have been met.

          (e)  No Common Shares, Other Valhi Securities or property, other
     securities or property or other forms of payment shall be issued hereunder
     with respect to any Award unless counsel for Valhi shall be satisfied that
     such issuance will be in compliance with applicable law and any applicable
     rules of any stock exchange or other market quotation system on which
     Common Shares are listed.

          (f)  It is the intent of Valhi that this Plan comply in all respects
     with Rule 16b-3 and Section 162(m) with respect to Awards granted to
     executive officers of Valhi, that any ambiguities or inconsistencies in
     construction of this Plan be interpreted to give effect to such intention
     and that if any provision of this Plan is found not to be in compliance
     with Rule 16b-3 or Section 162(m), such provision shall be deemed null and
     void with respect to Awards granted to executive officers of Valhi to the
     extent required to permit such Awards to comply with Rule 16b-3 and Section
     162(m).  It is also the intent of Valhi that this Plan comply in all
     respects with the provisions of the Code providing favorable treatment to
     Incentive Stock Options, that any ambiguities or inconsistencies in
     construction of this Plan be interpreted to give effect to such intention
     and that if any provision of this Plan is found not to be in compliance
     with the Incentive Stock Option provisions of the Code, such provision
     shall be deemed null and void with respect to Incentive Stock Options
     granted to employees of the Company to the extent required to permit such
     Incentive Stock Options to receive favorable treatment under the Code.
          (g)  The Company shall have the right to deduct from any payment made
     under this Plan any federal, state, local or foreign income or other taxes
     required by law to be withheld with respect to such payment.  It shall be a
     condition to the obligation of Valhi to issue Common Shares, Other Valhi
     Securities or property, other securities or property, or other forms of
     payment, or any combination thereof, upon exercise, settlement or payment
     of any Award under this Plan, that the Participant (or any Beneficiary or
     person entitled to act) pay to Valhi, upon its demand, such amount as may
     be required by the Company for the purpose of satisfying any liability to
     withhold federal, state, local or foreign income or other taxes.  If the
     amount requested is not paid, Valhi may refuse to issue Common Shares,
     Other Valhi Securities or property, other securities or property, or other
     forms of payment, or any combination thereof.  Notwithstanding anything in
     this Plan to the contrary, the Committee may, in its discretion, permit an
     Eligible Person (or any Beneficiary or person entitled to act) to elect to
     pay a portion or all of the amount requested by the Company for such taxes
     with respect to such Award, at such time and in such manner as the
     Committee shall deem to be appropriate (including, but not limited to, by
     authorizing Valhi to withhold, or agreeing to surrender to Valhi on or
     about the date such tax liability is determinable, Common Shares, Other
     Valhi Securities or property, other securities or property, or other forms
     of payment, or any combination thereof, owned by such person or a portion
     of such forms of payment that would otherwise be distributed, or have been
     distributed, as the case may be, pursuant to such Award to such person,
     having a Fair Market Value equal to the amount of such taxes).

          (h)  The expenses of this Plan shall be borne by the Company;
     provided, however, the Company may recover from a Participant or his
     Beneficiary, heirs or assigns any and all damages, fees, expenses and costs
     incurred by the Company arising out of any actions taken by a Participant
     in breach of this Plan or any agreement evidencing such Participant's
     Award.
          (i)  This Plan shall be unfunded.  The Company shall not be required
     to establish any special or separate fund or to make any other segregation
     of assets to assure the payment of any Award under this Plan, and rights to
     the payment of Awards shall be no greater than the rights of the Company's
     general creditors.

          (j)  By accepting any Award or other benefit under this Plan, each
     Participant and each person claiming under or through him shall be
     conclusively deemed to have indicated his acceptance and ratification of,
     and consent to, any action taken under this Plan by the Company, the Board,
     the Committee or the Designated Administrator (if applicable).

          (k)  The appropriate officers of the Company shall cause to be filed
     any reports, returns or other information regarding Awards hereunder of any
     Common Shares issued pursuant hereto as may be required by applicable law
     and any applicable rules of any stock exchange or other market quotation
     system on which Common Shares are listed.

          (l)  The validity, construction, interpretation, administration and
     effect of this Plan, and of its rules and regulations, and rights relating
     to this Plan and to Awards granted under this Plan, shall be governed by
     the substantive laws, but not the choice of law rules, of the State of
     Delaware.

          (m)  Records of the Company shall be conclusive for all purposes under
     this Plan or any Award, unless determined by the Committee to be incorrect.

          (n)  If any provision of this Plan or any Award is held to be illegal
     or invalid for any reason, the illegality or invalidity shall not affect
     the remaining provisions of this Plan or any Award, but such provision
     shall be fully severable, and this Plan or Award, as applicable, shall be
     construed and enforced as if the illegal or invalid provision had never
     been included in this Plan or Award, as applicable.

          (o)  The terms of this Plan shall govern all Awards under this Plan
     and in no event shall the Committee have the power to grant any Award under
     this Plan that is contrary to any of the provisions of this Plan.

          (p)  For purposes of interpretation of this Plan, the masculine
     pronoun includes the feminine and the singular includes the plural wherever
     appropriate.

     SECTION 19.  PLAN AMENDMENT OR SUSPENSION.  This Plan may be amended or
suspended in whole or in part at any time from time to time by the Board.  No
amendment of this Plan shall adversely affect in a material manner any right of
any Participant with respect to any Award previously granted without such
Participant's written consent, except as permitted under SECTION 13.

     SECTION 20.  PLAN TERMINATION.  This Plan shall terminate upon the earlier
of the following dates or events to occur:

          (a)  upon the adoption of a resolution of the Board terminating this
     Plan; or

          (b)  the tenth anniversary of the Effective Date; provided, however,
     that the Board may, prior to such date, extend the term of this Plan for an
     additional period of up to five years for the grant of Awards other than
     Incentive Stock Options.  No termination of this Plan shall materially
     alter or impair any of the rights or obligations of any person, without his
     consent, under any Award previously granted under this Plan, except that
     subsequent to termination of this Plan, the Committee may make amendments
     or modifications permitted under SECTION 13.

     SECTION 21.  EFFECTIVE DATE.  This Plan shall be effective, and Awards may
be granted under this Plan, on or after the Effective Date; provided, however,
if this Plan is not approved by at least a majority of the votes cast by the
stockholders of Valhi at a meeting of stockholders at which a quorum is present
within one year after the Effective Date then, in such event, this Plan and all
Awards granted pursuant to this Plan shall be null and void.


ADOPTED BY THE BOARD:     MAY   , 1997  (BY ACTION OF THE BOARD ON FEBRUARY 13,
                              --
1997)
APPROVED BY THE STOCKHOLDERS: MAY   , 1997
                                  --
EFFECTIVE DATE:           MAY   , 1997
                              --


     EXECUTED to evidence this Valhi, Inc. 1997 Long-Term Incentive Plan adopted
by the Board on May   , 1997 (by action of the Board on February 13, 1997) and
                    --
the stockholders of Valhi on May   , 1997.
                                 --


                                VALHI, INC.




                                By:
                                    -----------------------------

EX-10

                       FORMATION AGREEMENT

                             BETWEEN

                    SNAKE RIVER SUGAR COMPANY

                               AND

                  THE AMALGAMATED SUGAR COMPANY

                             OF THE

                    THE AMALGAMATED SUGAR LLC



                           DATED AS OF

                        JANUARY   , 1996
                                --





                               TABLE OF CONTENTS





RECITALS..................................................................1






ARTICLE IDEFINITIONS......................................................1






ARTICLE IIFORMATION.......................................................7





     2.1  Snake River Capital Contribution................................7
     2.2  Amalgamated Contribution........................................8
     2.3  Assumed Liabilities.............................................8
     2.4  Closing.........................................................8






ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF AMALGAMATED..................9





     3.1  Organization, Qualification and Corporate Power.................9
     3.2  Authorization of Transaction....................................9
     3.3  Noncontravention...............................................10
     3.4  Brokers' Fees..................................................10
     3.5  Title to Tangible Assets.......................................10
     3.6  Subsidiaries...................................................10
     3.7  Financial Statements...........................................10
     3.8  Undisclosed Liabilities........................................11
     3.9  Legal Compliance...............................................11
     3.10 Real Property and Leases.......................................11
     3.11 Contracts......................................................12
     3.12 Powers of Attorney.............................................12
     3.13 Litigation.....................................................12
     3.14 Environment, Health, and Safety................................13
     3.15 Employee Benefits..............................................13
     3.16 Events Subsequent to Most Recent Fiscal Quarter End............14






ARTICLE IVREPRESENTATIONS AND WARRANTIES OF SNAKE RIVER..................14





     4.1  Organization...................................................14
     4.2  Authorization of Transaction...................................14
     4.3  Noncontravention...............................................14
     4.4  Brokers' Fees..................................................15
     4.5  Disclosure.....................................................15






ARTICLE VPRE-CLOSING COVENANTS...........................................15





     5.1  General........................................................15
     5.2  Notices and Consents...........................................15
     5.3  Operation of Business..........................................15
     5.4  Obtaining Financing............................................16
     5.5  Full Access....................................................16
     5.6  Notice of Developments.........................................16
     5.7  Exclusivity....................................................16






ARTICLE VICONDITIONS TO CLOSING..........................................17





     6.1  Conditions to Obligation of Snake River........................17
     6.2  Conditions to Obligation of Amalgamated........................18






ARTICLE VIITERMINATION...................................................19





     7.1  Events of Termination..........................................19
     7.2  Effect of Termination..........................................20






ARTICLE VIIIMISCELLANEOUS................................................20





     8.1  Parties Obligated and Benefited................................20
     8.2  Notices........................................................20
     8.3  Attorneys' Fees................................................22
     8.4  Amendment or Waiver............................................22
     8.5  Captions.......................................................22
     8.6  Choice of Law..................................................22
     8.7  Terms..........................................................22
     8.8  Further Actions................................................22
     8.9  Time...........................................................22
     8.10 Counterparts...................................................23
     8.11 Entire Agreement...............................................23
     8.12 Severability...................................................23
     8.13 Construction...................................................23
     8.14 Expenses.......................................................23
     8.15 Press Releases and Public Announcements........................23
     8.16 References.....................................................23



                                LIST OF EXHIBITS
                                ----------------


EXHIBIT A           Company Agreement of The Amalgamated Sugar LLC
EXHIBIT B           Officers of Amalgamated
EXHIBIT C           Financial Statements
RELATED TRANSACTION AGREEMENTS





     EXHIBIT D-1         Form of Office and Ground Lease
     EXHIBIT D-2         Indemnification and Post Closing Agreement
     EXHIBIT D-3         Form of Limited Recourse Promissory Note
     EXHIBIT D-4         Form of Non-Recourse Promissory Note
     EXHIBIT D-5         Form of Limited Recourse Pledge Agreement
     EXHIBIT D-6         Form of Pledge Agreement (Non-Recourse Note)
     EXHIBIT D-7         Form of Indemnification Pledge Agreement
     EXHIBIT D-8         Four Forms of Memorandum of Agreement between Sugarbeet
Growers and Amalgamated
EXHIBIT E           Directors of Snake River
EXHIBIT F           Form of Employment Agreement


                               LIST OF SCHEDULES
                               -----------------


SCHEDULE 1(D)  Personal Property and Interests
SCHEDULE 2.3        Excluded Liabilities
SCHEDULE 3          General Exceptions to Representations and Warranties of
Amalgamated
SCHEDULE 3.8        Undisclosed Liabilities
SCHEDULE 3.10(A)    Real Property
SCHEDULE 3.10(B)    Leased Real Property
SCHEDULE 3.11  Material Contracts
SCHEDULE 3.12  Powers of Attorney
SCHEDULE 3.13  Pending Litigation





SCHEDULE 3.14  Noncompliance with the Environmental, Health, and Safety Laws
SCHEDULE 3.15  Employee Benefit Plans
SCHEDULE 4          Exceptions to Representations and Warranties of Snake River





                       FORMATION AGREEMENT
                       -------------------



          THIS FORMATION AGREEMENT (this "Agreement" or this "Formation
Agreement") is made as of January   , 1996, between SNAKE RIVER SUGAR COMPANY,
                                  --
an Oregon cooperative (`Snake River''), and THE AMALGAMATED SUGAR COMPANY, a
Utah corporation (`Amalgamated''), and, upon its formation and the execution
and delivery of a counterpart to this Agreement, THE AMALGAMATED SUGAR LLC, a
Delaware limited liability company (the `Company'').  Together, Snake River,
Amalgamated and the Company shall be referred to in this Agreement as the
`Parties.''  Capitalized terms not otherwise defined in this Agreement have the
meaning ascribed to such terms in Article I.

                            RECITALS
                            --------


          WHEREAS, Snake River and Amalgamated desire to form a limited
liability company, to be known as `The Amalgamated Sugar LLC,'' pursuant to the
Company Agreement attached as EXHIBIT A (together with the exhibits thereto, the
"Company Agreement") to conduct a sugarbeet processing business; and

          WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, Amalgamated desires to make a capital contribution to the
Company of certain assets, subject to certain liabilities, in return for which
Amalgamated shall receive a Membership Interest in the Company, as set forth in
the Company Agreement; and






          WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, Snake River shall make a capital contribution to the Company of
$[        ] million in cash, in return for which Snake River shall receive a
  --------
Membership Interest in the Company, as set forth in the Company Agreement;

          NOW, THEREFORE, the Parties agree as follows:

                            ARTICLE I
                           DEFINITIONS

          The following terms used in this Formation Agreement shall have the
following meanings (unless otherwise expressly provided in this Agreement);

          (a)`Affiliate'' has the meaning, with respect to any Person, set
forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange
Act of 1934, as amended as of the Closing Date.

          (b)`Affiliated Group'' has the meaning set forth in Code Sec. 1504.

          (c)`Amalgamated'' has the meaning set forth in the recitals above.

          (d)`Amalgamated Assets'' means all the properties and assets
currently owned by Amalgamated (other than Excluded Assets), whether or not
located on its premises, or shown on the Most Recent Financial Statement,
including, but not limited to, all right, title and interest in, to and under





(i) all real property, and all leaseholds and subleasheholds thereon,
improvements, fixtures and fittings thereon (such as appurtenant rights in and
to public streets), as listed on SCHEDULE 3.11(A) AND (B), (ii) all personal
property and interests, including machinery, equipment, furniture, office
equipment, communications equipment, vehicles, and other tangible property, as
listed on SCHEDULE 1(D), (iii) all Related Contracts and Licenses, (iv) all of
Amalgamated's books, records, ledgers, files, documents, correspondence, lists,
plats, architectural plans, drawings, specifications, creative materials,
advertising and promotional materials, studies, reports and other printed or
written materials, whether in hard copy or computer format, including without
limitation engineering information, manuals and data, fixed asset registers and
engineering reports, lists of present and former suppliers, personnel and
employment records, and any information relating to any Tax (other than income
or franchise Taxes); and (v) all of Amalgamated's Intellectual Property.

          (e)`Amalgamated Credit Agreements'' means the Credit Agreement dated
July 1, 1993, as most recently modified on May 31, 1996, among Amalgamated,
United States National Bank of Oregon and the banks named therein, plus the
$5,000,000 promissory note dated as of August 23, 1996 and due September 30,
1997, issued by Amalgamated in favor of United States National Bank of Oregon.

          (f)`Amcorp'' means Amcorp, Inc., a Delaware corporation.

          (g)`Assumed Liabilities'' has the meaning set forth in Section 2.3.





          (h)`Business Day'' means any day excluding a Saturday, Sunday and any
day which is a legal holiday under the laws of the State of Utah or is a day on
which banking institutions located in such state are closed.

          (i)  `Closing'' has the meaning set forth in Section 2.4.

          (j)  `Closing Date'' means the date of the Closing.

          (k)`Code" means the Internal Revenue Code of 1986, as amended, and
the temporary, proposed and final Treasury Regulations promulgated thereunder,
and any reference to a section of the Code shall include any successor section
or provision of the Code.

          (l)  `Company Agreement'' has the meaning set forth in the Recitals.

          (m)`Confidential Information'' means any information concerning the
businesses and affairs of Amalgamated that is not already generally available to
the public.

          (n)  `Conveyance Documents'' has the meaning set forth in Section
2.4(d).

          (o)  `Drop Date'' has the meaning set forth in Section 7.1.

          (p)"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension





Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any multiemployer plan as defined in Section 3(37) of ERISA), or (d)
Employee Welfare Benefit Plan.

          (q)"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).

          (r)"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(1).

          (s)"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.

          (t)"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended as of the Closing Date, together with all other
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) in effect as of the Closing
Date of federal, state, local, and foreign governments (and all agencies
thereof) concerning pollution or protection of the environment, public health
and safety, or employee health and safety, including laws in effect as of the
Closing Date relating to emissions, discharges, releases, or threatened releases
of pollutants, contaminants, or chemical, industrial, hazardous, or toxic





materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.

          (u)`Entity" means any general partnership, limited partnership,
limited liability company, corporation, joint venture, trust, business trust,
governmental authority, cooperative, association or any foreign trust or foreign
business organization or any other entity of any kind whatsoever.

          (v)`Excluded Assets" means the Amalgamated corporate charter,
qualifications to conduct business as a foreign corporation, arrangements with
registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, stock transfer books, blank stock
certificates, and other documents relating to the organization, maintenance, and
existence of Amalgamated as a corporation.
Confirm whether the beet contract is going to LLC or directly to SRSC (per Lemke
memo of 10/1)
          (w)`Excluded Liabilities" means (i) any Liability related to any
exercise of compensatory options to purchase Valhi stock held by employees or
former employees of Amalgamated as of the Effective Date or upon the lapse of
restrictions on restricted shares of Valhi stock held by such employees or
former employees, and (ii) and the specific Liabilities set forth on SCHEDULE
2.3 (collectively, the `Excluded Liabilities'').]

          (x)"Financial Statement" has the meaning set forth in Section 3.7.






          (y)"GAAP" means United States generally accepted accounting principles
as in effect from time to time.

          (z)"Intellectual Property" means (i) all trademarks, patents, service
marks, trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations and combinations thereof and including
all goodwill associated therewith and (ii) all computer software (including data
and related documentation).

          (aa)"Knowledge" means, for any matter, actual knowledge without
independent investigation of the officers of Amalgamated listed on EXHIBIT B, or
actual knowledge of facts or circumstances such that the matter should
reasonably have been actually known by such officers.

          (bb)`Liability'' means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.

          (cc)`Material Adverse Change'' means a material adverse change in the
financial condition of Amalgamated since the Most Recent Fiscal Quarter End.
Notwithstanding the foregoing, no event occurring after the Most Recent Fiscal
Quarter End generally applicable to all companies involved in the sugar
processing industry, including without limitation changes in market conditions,





trends, government regulations, consumer preferences or competition, shall be
deemed to constitute a Material Adverse Change.

          (dd)`Member'' means each of the Persons with an ownership interest in
the Company and which executes a counterpart of the Company Agreement as a
Member and each of the Persons who may hereafter become Members.

          (ee) `Membership Interest'' means the rights of a Member or, in the
case of an Assignee, the rights of the assigning Member in distributions
(liquidating or otherwise) and allocations of the profits, losses, gains,
deductions and credits of the Company.

          (ff) "Most Recent Financial Statements" has the meaning set forth in
Section 3.7 below.

          (gg) "Most Recent Fiscal Quarter End" has the meaning set forth in
Section 3.7 below.

          (hh) `Ordinary Course of Business'' means the ordinary course of
Amalgamated's business consistent with Amalgamated's past custom and practice
(including with respect to quantity and frequency).

          (ee) `Parties'' has the meaning set forth in the preface of this
Agreement.





          (ff)`Person'' means any individual or Entity, as well as the heirs,
executors, administrators, legal representatives, successors and assigns of such
`Person'' where the context so requires.

          (gg)"Related Contracts and Licenses" means all contracts and
agreements, leases, licenses, commitments, requests for proposals,
correspondence, purchase orders and other instruments, franchises, approvals,
permits, licenses, orders, registrations, certificates, variances and similar
rights obtained from governmental authorities used or held by Amalgamated.

          (hh)`Required Consents'' means all franchises, licenses,
authorizations, approvals and consents required under any agreement or otherwise
for Amalgamated to transfer the Amalgamated Assets to the Company without
breaching or otherwise defaulting any representation or warranty made by
Amalgamated in this Agreement.

          (mm) `Security Interest'' means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
                                                 ----------

materialmen's, and similar liens, (b) liens for Taxes not yet due and payable or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.

          (ii)`Snake River'' has the meaning set forth in the recitals above.






          (jj)`Snake River Capital Contribution'' has the meaning set forth in
Section 2.1 below.

          (kk)`Snake River Materials'' means the offering circular and other
materials relating to Snake River's sale of debt and equity securities in
connection with the organization and funding of Snake River and related
transactions, including this Formation Agreement.

          (qq) `Subsidiary'' means any corporation with respect to which a
specified Person (or a Subsidiary thereof) has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors.

          (ll)"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, or other tax of any
kind whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.

          (mm)`Transaction Agreements'' means this Agreement, the Company
Agreement, the Office and Ground Lease, the form of which is attached as EXHIBIT
D-1, the Indemnification and Post Closing Agreement, the form of which is
attached as EXHIBIT D-2, the Limited Recourse Promissory Note, the form of which





is attached hereto as EXHIBIT D-3, the Non-recourse Promissory Note, the form of
which is attached hereto as EXHIBIT D-4, the Limited Recourse Pledge Agreement,
the form of which is attached hereto as EXHIBIT D-5, the Pledge Agreement (Non-
Recourse Note), the form of which is attached hereto as EXHIBIT D-6, the
Indemnification Pledge Agreement, the form of which is attached hereto as
EXHIBIT D-7, and the four Memoranda of Agreement between the Sugarbeet Growers
and Amalgamated, the form of which is attached hereto as EXHIBIT D-8.

          (nn)`Valhi'' means Valhi, Inc., a Delaware corporation and the parent
of Amcorp.

          (oo)`Valhi Credit Agreement'' means the Credit and Pledge Agreement
among Valhi, Amcorp and The Chase Manhattan Bank, as Agent, dated August 25,
1995, as amended August 23, 1996.


                           ARTICLE II
                            FORMATION
                            ---------


          2.1  Snake River Capital Contribution.  Upon the terms and subject to
               --------------------------------

the conditions of this Formation Agreement, Snake River shall on the Closing
Date contribute to the Company cash in immediately available funds of
$[         ] (the "Snake River Capital Contribution"), for which Snake River
  ---------
will receive a Membership Interest in the Company having the rights and
obligations set forth in the Company Agreement.  Upon the making of the Snake





River Capital Contribution, Snake River will be admitted as a Member of the
Company under the terms of the Company Agreement.

          2.2  Amalgamated Contribution.  Upon the terms and subject to the
               ------------------------

conditions of this Formation Agreement, including but not limited to the
assumption of Liabilities set forth in Section 2.3, Amalgamated agrees to
convey, transfer, assign and deliver to the Company on the date hereof, free and
clear of any Security Interest, all of the Amalgamated Assets, for which
Amalgamated shall receive a Membership Interest in the Company as set forth in
the Company Agreement.  Upon the contribution of the Amalgamated Assets,
Amalgamated will be admitted as a Member of the Company under the terms of the
Company Agreement.

          2.3  Assumed Liabilities.  Upon the terms and subject to the
               -------------------

conditions of this Agreement, the Company agrees, effective at the time of
Closing, to assume all Liabilities of Amalgamated, whether presently in
existence or arising after the date of this Agreement, whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due (the `Assumed Liabilities''), other than Excluded Liabilities.

          2.4  Closing.  Unless the Parties otherwise agree, the closing (the
               -------

`Closing'') of the transactions contemplated by this Agreement shall take place
at the offices of Amalgamated in Ogden, Utah, commencing at 9:00 a.m. local time





on January   , 1996, or, if later, the second Business day following the
           --
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated by this Agreement (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Parties may mutually determine (the
`Closing Date'').  At the Closing:
               (a)  Snake River and Amalgamated shall execute the Transaction
Agreements to which each is a party.






          (b)  Snake River shall contribute the Snake River Capital Contribution
to the Company;

          (c)  The Company shall execute and deliver the assumption and
assignment agreements pursuant to which it shall assume the Assumed Liabilities;

          (d)  Amalgamated shall deliver or cause to be delivered to the Company
such bill of sales, warranty deeds, Required Consents, and other good and
sufficient instruments of conveyance and assignment (the `Conveyance
Documents') as Snake River and its counsel shall deem reasonably necessary or
appropriate to vest in the Company all right, title and interest in, to and
under the Amalgamated Assets.

          (e)  Snake River shall deliver to Amalgamated a copy of its charter
and bylaws, good standing certificates, resolutions of the board of directors,
secretaries' certificates, officers' certificates, in each case, relating to the
existence of Snake River and the authority of Snake River to execute the
Transaction Agreements to which it is a party, all in form and substance
reasonably satisfactory to Amalgamated and its counsel.

          (f)  Amalgamated shall deliver to Snake River a copy of its
certificate of incorporation, good standing certificates, resolutions of the
board of directors, secretaries' certificates, officer's certificates, in each
case, relating to the existence of Amalgamated and the authority and capacity of





Amalgamated to execute the Transaction Agreements to which it is a party, all in
form and substance reasonably satisfactory to Snake River and its counsel.

          (g)  The Company shall execute this Agreement, as of the date hereof,
and deliver to Snake River and Amalgamated resolutions of the Management
Committee, secretaries' certificates, officer's certificates, in each case,
relating to the existence of the Company and the authority and capacity of the
Company to execute this Agreement as of such date and the other Transaction
Agreements to which it is a party, all in form and substance reasonably
satisfactory to Snake River and Amalgamated and their respective counsel.


                                   ARTICLE III
          REPRESENTATIONS AND WARRANTIES OF AMALGAMATED

          For the purpose of inducing Snake River and the Company to enter into
and perform this Agreement, Amalgamated represents and warrants to Snake River
and the Company that the statements contained in this Article III are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Article III), except
as set forth in SCHEDULE 3.

          3.1  Organization, Qualification and Corporate Power.  Amalgamated is
               -----------------------------------------------

a corporation duly organized, validly existing, and in good standing under the





laws of Utah.  Amalgamated is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a material
adverse effect on the financial condition of Amalgamated.  Amalgamated has the
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it.

          3.2  Authorization of Transaction.  Amalgamated has the corporate
               ----------------------------

power and authority to execute and deliver this Agreement and to perform its
obligations hereunder.  This Agreement constitutes the valid and legally binding
obligation of Amalgamated, enforceable in accordance with its terms and condi-
tions, as enforceability may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditor rights
generally and subject to general principles of equity and public policy
considerations.

          3.3  Noncontravention.  Neither the execution and the delivery of this
               ----------------

Agreement, nor the consummation of the transactions contemplated by this
Agreement, will (a) violate any valid constitutional provision, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
Amalgamated is subject or any provision of its charter or bylaws; or (b) except
for the terms of the Amalgamated Credit Agreements, and the Valhi Credit
Agreement, conflict with, result in a material breach of, constitute a material
default under, result in the acceleration of, create in any party the right to





accelerate, terminate, modify, or cancel, or require any notice under any
material agreement, contract, lease, license, instrument, or other arrangement
to which Amalgamated is a party or by which it is bound or to which any of its
material assets is subject (or result in the imposition of any Security Interest
upon any of its assets); except for where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, or Security Interest would not have a material adverse effect on the
financial condition of Amalgamated or on the ability of the Parties to
consummate the transactions contemplated by this Agreement.  Amalgamated does
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a material adverse effect on
the financial condition of Amalgamated or on the ability of the Parties to
consummate the transactions contemplated by this Agreement.

          3.4  Brokers' Fees.  Amalgamated has no Liability or obligation to pay
               -------------

any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Snake River or the Company
could become liable or obligated.

          3.5  Title to Tangible Assets.  Amalgamated has insurable title to, or
               ------------------------

a valid leasehold interest in, the material tangible assets it use regularly in
the conduct of its businesses.






          3.6  Subsidiaries.  Amalgamated has no controlling interest in any
               ------------

Entity.

          3.7  Financial Statements.  Attached hereto as EXHIBIT C are the
               --------------------

following financial statements (collectively the "Financial Statements"):  (i)
                                                  --------------------

audited balance sheets and statements of income, changes in shareholder's
equity, and cash flows as of and for the fiscal years ended December 31, 1995,
December 31, 1994, and December 31, 1993 for Amalgamated; and (ii) unaudited
consolidated balance sheets and statements of income, changes in shareholder's
equity, and cash flows (the "Most Recent Financial Statements") as of and for
                             --------------------------------

the nine months ended September 30, 1996 (the "Most Recent Fiscal Quarter End")
                                               ------------------------------

for Amalgamated.  The Financial Statements (including the notes thereto) have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby and present fairly the financial position of
Amalgamated as of such dates and the results of operations of Amalgamated for
such periods; provided, however, that the Most Recent Financial Statements are
              --------  -------

subject to normal year-end adjustments and lack footnotes and other presentation
items.

          3.8  Undisclosed Liabilities.  To the Knowledge of Amalgamated,
               -----------------------

Amalgamated has no any material debt or Liability (whether asserted or





unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due, including
any Liability for income Taxes), except for (i) such Liabilities included or
disclosed in the Financial Statements (including the notes thereto), (ii) such
Liabilities which have arisen after the Most Recent Fiscal Quarter End in the
Ordinary Course of Business consistent with the provisions of Section 5.3, (iii)
such Liabilities as are disclosed in SCHEDULE 3.8.

          3.9  Legal Compliance.  To the Knowledge of Amalgamated, Amalgamated
               ----------------

has complied with all applicable valid laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof) having jurisdiction over Amalgamated, except where the failure to
comply would not have a material adverse effect upon the financial condition of
Amalgamated.

          3.10 Real Property and Leases.
               ------------------------


          (a)  SCHEDULE 3.10(A) lists all owned real property that is included
in the Amalgamated Assets.  With respect to each such parcel, to the Knowledge
of Amalgamated, except for matters which are set forth in SCHEDULE 3.10(A) or
which would not have a material adverse effect on the financial condition of
Amalgamated:





               i.   Amalgamated has insurable title to the parcel of real
property, free and clear of any Security Interest (except Security Interests
arising under the Amalgamated Credit Agreement), easement, covenant, or other
restriction, except for installments of special assessments not yet delinquent,
recorded restrictions, including easements, covenants, utility easements,
building restrictions, zoning restrictions, and other easements and restrictions
existing generally with respect to properties of a similar character;

               ii.  there are no leases, subleases, licenses, concessions, or
other agreements granting to any party or parties the right of use or occupancy
of any portion of the parcel of real property; and

               iii. there are no outstanding options or rights of first refusal
to purchase the parcel of real property, or any portion thereof or interest
therein.

          (b)  SCHEDULE 3.10(B) lists all real property included in the
Amalgamated Assets not owned by Amalgamated but leased or subleased by
Amalgamated.  Amalgamated has made available to Snake River correct and complete
copies of the leases and subleases listed in SCHEDULE 3.10(B) (as amended to
date).  To the Knowledge of Amalgamated, each lease and sublease listed in
SCHEDULE 3.10(B) is legal, valid, binding, enforceable, and in full force and
effect, except (a) for those matters set forth in SCHEDULE 3.10(B), (b) as
enforceability may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditor rights generally
and subject to general principles of equity and public policy considerations or





(c) where the illegality, invalidity, nonbinding nature, unenforceability, or
ineffectiveness would not have a material adverse effect on the financial
condition of Amalgamated.

          3.11 Contracts.  SCHEDULE 3.11 lists all written contracts and other
               ---------

written agreements included in the Amalgamated Assets which, to the Knowledge of
Amalgamated, Amalgamated is a party, the performance of which will involve
annual payments in excess of $100,000 or which have a remaining term greater
than three years, other than leases listed on SCHEDULE 3.10(B).  Amalgamated has
made available to Snake River a correct and complete copy of each contract or
other agreement listed in SCHEDULE 3.11 (as amended to date).

          3.12 Powers of Attorney.  To the Knowledge of Amalgamated, there are
               ------------------

no outstanding powers of attorney executed on behalf of Amalgamated except as
described in SCHEDULE 3.12.

          3.13 Litigation.  To the Knowledge of Amalgamated, SCHEDULE 3.13 sets
               ----------

forth each instance in which Amalgamated (a) is subject to or is threatened to
be made subject to any outstanding injunction, judgment, order, decree or
ruling, or (b) is a party to or is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction, except where the injunction, judgment, order, decree, ruling,
action, suit, proceeding, hearing, or investigation (A) seeks damages of less





than $100,000, or (B) would not have a material adverse effect on the financial
condition of Amalgamated.

          3.14 Environment, Health, and Safety.
               -------------------------------


          (a)  Except as set forth in SCHEDULE 3.14, to the Knowledge of
Amalgamated, Amalgamated, (i) is in substantial compliance with the
Environmental, Health, and Safety Laws in all material respects (and, except as
set forth in SCHEDULE 3.14, to the Knowledge of Amalgamated no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any such failure to
comply), (ii) is in substantial compliance with all of the terms and conditions
of all material permits, licenses, and other authorizations which are required
under the Environmental, Health, and Safety Laws, and (iii) is in substantial
compliance with, in all material respects, all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in the Environmental, Health, and Safety Laws.

          (b)  Except as set forth in SCHEDULE 3.14, to the Knowledge of
Amalgamated, Amalgamated has no material Liability (whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), and
Amalgamated has not handled or disposed of any substance, arranged for the
disposal of any substance, exposed any employee or other individual to any
substance or condition, or owned or operated any property or facility in any





manner that could give rise to any material Liability, for damage to any site,
location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual under any Environmental,
Health, and Safety Law.

          3.15 Employee Benefits.  SCHEDULE 3.15 lists each Employee Benefit
               -----------------

Plan that Amalgamated maintains or to which Amalgamated contributes.

          (a)  To the Knowledge of Amalgamated, each such Employee Benefit Plan
(and each related trust, insurance contract, or fund) complies in form and in
operation in all respects with the applicable requirements of ERISA and the
Code, except where the failure to comply would not have a material adverse
effect on the financial condition of Amalgamated.

          (b)  Except as set forth in SCHEDULE 3.15, all contributions
(including all employer contributions and employee salary reduction contribu-
tions) which are required to be paid to each such Employee Benefit Plan which is
an Employee Pension Benefit Plan have been paid.

          (c)  Except as set forth in SCHEDULE 3.15, each such Employee Benefit
Plan which is an Employee Pension Benefit Plan has received a determination
letter from the Internal Revenue Service to the effect that at the time of its
issuance such plan met the requirements of Code Sec. 401(a).





          (d)  Amalgamated has made available to Snake River correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report, and all related trust agreements, insurance
contracts, and other funding agreements which implement each such Employee
Benefit Plan.

          3.16 Events Subsequent to Most Recent Fiscal Quarter End.  To the
               ---------------------------------------------------

Knowledge of Amalgamated, since the Most Recent Fiscal Quarter end, there has
not been any Material Adverse Change.  Without limiting the generality of the
foregoing, since the Most Recent Fiscal Quarter End, Amalgamated has not engaged
in any practice, taken any action, or entered into any transaction outside the
Ordinary Course of Business other than in connection with this Formation
Agreement.

                           ARTICLE IV
          REPRESENTATIONS AND WARRANTIES OF SNAKE RIVER

          Snake River represents and warrants to each of Amalgamated and the
Company that the statements contained in this Article IV are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Article IV), except
as set forth in SCHEDULE 4.





          4.1  Organization.  Snake River is a cooperative corporation duly
               ------------

organized, validly existing, and in good standing under the laws of Oregon.
EXHIBIT E lists the directors of Snake River.  Snake River is duly authorized to
conduct business and is in good standing under the laws each other jurisdiction
where such qualification is required, except where the lack of such
qualification would not have a material adverse effect on the financial
condition of Snake River.  Snake River has the power and authority to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it.

          4.2  Authorization of Transaction.  Snake River has power and
               ----------------------------

authority to execute and deliver this Agreement and to perform its obligations
hereunder.  This Agreement constitutes the valid and legally binding obligation
of Snake River, enforceable in accordance with its terms and conditions.

          4.3  Noncontravention. Neither the execution and the delivery of this
               ----------------

Agreement, nor the consummation of the transactions contemplated by this
Agreement, will (a) violate any valid constitutional provision, statute, regula-
tion, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which Snake
River is subject or any provision of its charter or bylaws or (b) conflict with,
result in a material breach of, constitute a material default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any material agreement, contract,





lease, license, instrument, or other arrangement to which Snake River is a party
or by which it is bound or to which any of its material assets is subject.
Snake River does not need to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order for the Parties to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a material adverse effect on
the financial condition of Snake River taken as a whole or on the ability of the
Parties to consummate the transactions contemplated by this Agreement.

          4.4  Brokers' Fees.  Snake River has no Liability or obligation to pay
               -------------

any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Amalgamated or the Company
could become liable or obligated.

          4.5  Disclosure. The Snake River Materials do not contain any untrue
               ----------

statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein not misleading in the light of the circum-
stances under which they will be made.

                            ARTICLE V
                      PRE-CLOSING COVENANTS

          The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.






          5.1  General.  Each of the Parties will use its reasonable best
               -------

efforts to take all actions and to do all things necessary or advisable in order
to consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Article VI below).

          5.2  Notices and Consents.  Each of the Parties will give any notices
               --------------------

to, make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Sections 3.3 and 4.3 above.

          5.3  Operation of Business.  Amalgamated will not engage in any
               ---------------------

practice, take any action, or enter into any transaction outside the Ordinary
Course of Business if such transaction could reasonably be expected to result in
a Material Adverse Change.

          5.4  Obtaining Financing.  Snake River shall use its reasonable best
               -------------------

efforts, including the payment of all commitment and other fees and expenses of
prospective lenders, to obtain the necessary debt and equity financing to
consummate the transactions contemplated by this Agreement and the loan by Snake
River to Valhi.





          5.5  Full Access.  Amalgamated will permit representatives of Snake
               -----------

River to have full access at all reasonable times upon reasonable advance
notice, and in a manner so as not to interfere with the normal business
operations of Amalgamated, to all premises, properties, personnel, books,
records (including income Tax records), contracts, and documents of or
pertaining to Amalgamated.  In addition, Amalgamated will use reasonable efforts
to assist Snake River in obtaining access for representatives of Snake River to
any properties sold or otherwise transferred by Amalgamated prior to the
Closing.  Snake River and its representatives will treat and hold as such any
Confidential Information it receives from Amalgamated in the course of the
reviews contemplated by this Section 5.5, will not use any of the Confidential
Information except in connection with this Agreement, will not provide any trade
secrets included in the Confidential Information to any person, including any
competitor of Amalgamated, and, if this Agreement is terminated for any reason
whatsoever, will promptly return to Amalgamated all tangible embodiments (and
all copies) of the Confidential Information which it has received or created.

          5.6  Notice of Developments.
               ----------------------


          (a)  Amalgamated will give written notice to Snake River of any
development causing a breach of any of the representations and warranties in
Article III promptly upon Amalgamated becoming aware of such development.
Unless Snake River has the right to terminate this Agreement pursuant to Section
7.1(b) below by reason of the development and exercises that right within the
period of 10 Business days referred to in Section 7.1(b)(i) below, the written





notice pursuant to this Section 5.6(a) will be deemed to have amended Schedule
3, to have qualified the representations and warranties contained in Article
III, and to have cured any misrepresentation or breach of warranty that
otherwise might have existed hereunder by reason of the development.

          (b)  Snake River will give written notice to Amalgamated of any
development causing a breach of any of the representations and warranties in
Article IV above promptly upon Snake River becoming aware of such development.
No disclosure by Snake River pursuant to this Section 5.6(b), however, shall be
deemed to prevent or cure any misrepresentation or breach of warranty.

          5.7  Exclusivity.  Amalgamated will not solicit, initiate, or
               -----------

encourage the submission of any proposal or offer from any Person relating to
the acquisition of all or substantially all of the capital stock or assets of
Amalgamated (including any acquisition structured as a merger, consolidation, or
share exchange); provided, however, that Amalgamated and its directors and
                 --------  -------

officers will remain free to participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing to the extent their fiduciary duties may require.


                           ARTICLE VI
                      CONDITIONS TO CLOSING





          6.1  Conditions to Obligation of Snake River.  The obligation of Snake
               ---------------------------------------

River to consummate the transactions to be  performed by it in connection with
the Closing is subject to satisfaction of the following conditions:

          (a)  the representations and warranties set forth in Article III above
shall be true and correct in all material respects at and as of the Closing
Date;

          (b)  Amalgamated shall have performed and complied with all of its
pre-closing covenants hereunder in all material respects through the Closing;

          (c)  there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the transactions
contemplated by this Agreement;

          (d)  Amalgamated shall have delivered to Snake River a certificate to
the effect that each of the conditions specified above in Section 6.1(a), (b)
and (c) is satisfied in all respects;

          (e)  the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies referred to in
Section 3.3 and Section 4.3 above;





          (f)  the Transaction Agreements in form and substance as set forth in
EXHIBITS D-1 through D-8 attached hereto and the same shall be in full force and
effect;

          (g)  each of the officers of Amalgamated identified in EXHIBIT B shall
have entered into an employment agreement with the Company in a form
substantially similar to the employment agreements attached hereto as EXHIBIT F;
and

          (h)  all actions to be taken by Amalgamated in connection with
consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions contem-
plated hereby will be reasonably satisfactory in form and substance to Snake
River.

          Snake River may waive any condition specified in this Section 6.1 if
it executes a writing so stating at or prior to the Closing.

          6.2  Conditions to Obligation of Amalgamated.  The obligation of
               ---------------------------------------

Amalgamated to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:

          (a)  the representations and warranties set forth in Article IV above
shall be true and correct in all material respects at and as of the Closing
Date;






          (b)  Snake River shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;

          (c)  there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of the transactions
contemplated by this Agreement;

          (d)  Valhi shall have borrowed $250 million from Snake River pursuant
to the note and pledge agreements attached hereto as EXHIBITS D-3 through D-7,
inclusive;

          (e)  Amalgamated shall be reasonably satisfied with the equity
structure of Snake River and Snake River's financing;

          (f)  Snake River shall have delivered to Amalgamated a certificate to
the effect that each of the conditions specified above in Section 6.2 (a), (b)
and (c) is satisfied in all respects;

          (g)  the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies referred to in
Section 3.3 and Section 4.3;

          (h)  the Transaction Agreements in form and substance as set forth in
EXHIBITS D-1 through D-8 attached hereto and the same shall be in full force and
effect; and






          (i)  all actions to be taken by Snake River in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
Amalgamated.

          Amalgamated may waive any condition specified in this Section 6.2 if
it executes a writing so stating at or prior to the Closing.


                           ARTICLE VII
                           TERMINATION

          7.1  Events of Termination.  Either of the Parties may terminate this
               ---------------------

Agreement as provided below:

          (a)  Snake River and Amalgamated may terminate this Agreement by
mutual written consent at any time prior to the Closing;

          (b)  Snake River may terminate this Agreement by giving written notice
to Amalgamated at any time prior to the Closing in the event (i) Amalgamated has
within the then previous 10 Business days given Snake River any notice pursuant
to Section 5.6 above and (ii) the development that is the subject of the notice
has resulted in a Material Adverse Change;






          (c)  Snake River may terminate this Agreement by giving written notice
to Amalgamated at any time prior to the Closing (i) in the event Amalgamated has
breached any material representation, warranty, or covenant contained in this
Agreement in any material respect, Snake River has notified Amalgamated of the
breach, and the breach has continued without cure for a period of 30 days after
the notice of breach or (ii) if the Closing shall not have occurred on or before
the Drop Date (as defined below) by reason of the failure of any condition
precedent under Section 6.1 hereof (unless the failure results primarily from
Snake River itself breaching any representation, warranty, or covenant contained
in this Agreement); and

          (d)  Amalgamated may terminate this Agreement by giving written notice
to Snake River at any time prior to the Closing, (i) in the event Snake River
has breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, Amalgamated has notified Snake River of
the breach, and the breach has continued without cure for a period of 30 days
after the notice of breach or (ii) at any time prior to Closing, if the Closing
shall not have occurred on or before the Drop Date by reason of the failure of
any condition precedent under Section 6.2 hereof (unless the failure results
primarily from Amalgamated breaching any representation, warranty, or covenant
contained in this Agreement).

For purposes of this Agreement, the `Drop Date'' shall mean January   , 1997,
                                                                    --
provided, however, that if the parties have not received any consent required by
federal or state law on or prior to             , 199 , then the Drop Date shall
                                    --------- --     -





be automatically extended to a date two business days after receipt of such
consent, but in no event later than January  , 1997.
                                           --

          7.2  Effect of Termination.  If any Party terminates this Agreement
               ---------------------

pursuant to Section 7.1 above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach); provided, however, that
                                                        --------  -------

the confidentiality provisions contained in Section 5.5 above shall survive any
such termination.


                          ARTICLE VIII
                          MISCELLANEOUS

          8.1  Parties Obligated and Benefited.  Subject to the limitations set
               -------------------------------

forth below, this Agreement will be binding upon the Parties and their
respective permitted assigns and successors in interest and will inure solely to
the benefit of the Parties and their respective permitted assigns and successors
in interest, and no other Person will be entitled to any of the benefits
conferred by this Agreement.  In connection with any such assignment or
delegation, the transferring Party shall remain subject to all of its
obligations hereunder, pursuant to this Agreement.





          8.2  Notices.  Any notice, request, demand, waiver or other
               -------

communication required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given only if delivered in person
or by first class, prepaid, registered or certified mail, or sent by courier or,
if receipt is confirmed, by telecopier:






          If to the Company:
          -----------------


               Allan M. Lipman, Jr.
               Amalgamated Sugar LLC
               2427 Lincoln Avenue
               PO Box 1520
               Ogden, Utah 84402

          If to Amalgamated:
          -----------------


               The Amalgamated Sugar Company
               Three Lincoln Centre, Suite 700
               5430 LBJ Freeway
               Dallas, Texas 75240-2697
               Atten: General Counsel

               With a copy to:
               ---------------


               James L. Palenchar, Esq.
               Bartlit Beck Herman Palenchar & Scott
               511 Sixteenth Street, Suite 700
               Denver, CO 80202





          If to Snake River:
          -----------------


               525 Good Avenue
               Nyssa, Oregon 97913
               Attention:  Chief Executive Officer

               With a copy to:
               --------------


               Randon W. Wilson, Esq.
               Jones, Waldo, Holbrook & McDonough
               1500 First Interstate Plaza
               170 South Main Street
               Salt Lake City, UT 84101-1644

Any Party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 8.2.  All
notices will be deemed to have been received on the date of delivery or on the
third Business Day after mailing in accordance with this Section 8.2, except
that any notice of a change of address will be effective only upon actual
receipt.

          8.3  Attorneys' Fees.  In the event of any action or suit based upon
               ---------------

or arising out of any alleged breach by any party of any representation,
warranty, covenant or agreement contained in this Agreement, the prevailing





party will be entitled to recover reasonable attorneys' fees and other costs of
such action or suit from the other party.

          8.4  Amendment or Waiver.  This Agreement or any of its provisions may
               -------------------

not be amended, modified or waived except in a writing that refers to this
Agreement.  The failure of any Party to enforce any right arising under this
Agreement on one or more occasions will not operate as a waiver of that or any
other right on that or any other occasion.

          8.5  Captions.  The article and section captions of this Agreement are
               --------

for convenience only and do not constitute a part of this Agreement.

          8.6  Choice of 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 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.

          8.7  Terms.  Terms used with initial capital letters will have the
               -----

meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement.  The word `include'' and derivatives of that word
are used in this Agreement in an illustrative sense rather than limiting sense.





          8.8  Further Actions.  The Parties will execute and deliver, from time
               ---------------

to time at or after the Closing, for no additional consideration and at no
additional cost to the requesting party, such further assignments, certificates,
instruments, records, or other documents, assurances or things as may be
reasonably necessary to give full effect to this Agreement and to allow each
Party fully to enjoy and exercise the rights accorded and acquired by it under
this Agreement.

          8.9  Time.  Time is of the essence under this Agreement.  If the last
               ----

day permitted for the giving of any notice or the performance of any act
required or permitted under this Agreement falls on a day which is not a
Business Day, the time for the giving of such notice or the performance of such
act will be extended to the next succeeding Business Day.

          8.10 Counterparts.  This Agreement may be executed in one or more
               ------------

counterparts, each of which will be deemed an original and all of which together
shall constitute a single agreement.

          8.11 Entire Agreement.  This Agreement (including the Schedules and
               ----------------

Exhibits referred to in this Agreement, which are incorporated in and constitute
a part of this Agreement), contains the entire agreement of the Parties and
supersedes all prior oral or written agreements and understandings with respect
to the subject matter of this Agreement.





          8.12 Severability.  Any term or provision of this Agreement which is
               ------------

invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefitted by such provision or any other
provisions of this Agreement.

          8.13 Construction.  This Agreement has been negotiated by Snake River,
               ------------

Amalgamated and their respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement or any
provision of this Agreement against the Party drafting this Agreement will not
apply in any construction or interpretation of this Agreement.

          8.14 Expenses. Except as otherwise expressly provided in this
               --------

Agreement, each Party will pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations and the consummation of the transactions
contemplated by this Agreement.

          8.15 Press Releases and Public Announcements.  No Party shall issue
               ---------------------------------------

any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of the
other Party.





          8.16 References.  Numerical or alphabetic references to Recitals,
               ----------

Articles, sections, paragraphs, Schedules, exhibits and appendices in this
Agreement are to Recitals, Articles, sections, paragraphs, Schedules and
Exhibits of this Agreement unless otherwise stated.

                    *     *     *     *     *



     The Parties have executed this Agreement as of the day and year first above
written.


                              SNAKE RIVER SUGAR COMPANY


                              By:
                                 --------------------------------
                              Title:
                                    -----------------------------



                              THE AMALGAMATED SUGAR COMPANY





                              By:
                                 --------------------------------
                              Title:
                                    -----------------------------






                              THE AMALGAMATED SUGAR LLC


                              By:
                                 --------------------------------
                              Title:
                                    -----------------------------

EX-10

                        COMPANY AGREEMENT



                               OF



               THE AMALGAMATED SUGAR COMPANY LLC,
              A DELAWARE LIMITED LIABILITY COMPANY




                         MEMBER MANAGED



     TABLE OF CONTENTS

ARTICLE IFORMATION........................................................2
     1.1  ORGANIZATION....................................................2
     1.2  NAME............................................................2
     1.3  EFFECTIVE DATE..................................................2
     1.4  TERM............................................................2
     1.5  REGISTERED AGENT AND OFFICE.....................................2
     1.6  PRINCIPAL PLACE OF BUSINESS.....................................3

ARTICLE IIDEFINITIONS.....................................................3
     1.   ACCRUAL.........................................................3
     2.   ACCRUAL THRESHOLD...............................................4
     3.   ACT.............................................................4
     4.   ADDITIONAL MEMBER...............................................4
     5.   AFFILIATE.......................................................4
     6.   AGM.............................................................4
     7.   AGM CAPITAL INTEREST............................................4
     8.   AGM INTEREST....................................................4
     9.   ANNUAL OPERATING PLAN...........................................4
     10.  ARTICLES........................................................4
     11.  ASSIGNEE........................................................4
     12.  ASSIGNING MEMBER................................................4
     13.  BANK INDEBTEDNESS...............................................4
     14.  BANKRUPT MEMBER.................................................5
     15.  BEET PAYMENT....................................................5
     16.  BUSINESS........................................................5
     17.  BUSINESS DAY....................................................5
     18.  CAPITAL ACCOUNT.................................................5
     19.  CAPITAL CONTRIBUTION............................................5
     20.  CHANGE IN OWNERSHIP OR STRUCTURE................................6
     21.  CODE............................................................6
     22.  COMPANY.........................................................6
     23.  COMPANY AGREEMENT...............................................6
     24.  COMPANY MINIMUM GAIN............................................6
     25.  DEFERRAL........................................................7
     26.  DEFICIT CAPITAL ACCOUNT.........................................7
     27.  DEPRECIATION....................................................7
     28.  DISPOSITION (OR DISPOSE) .......................................8
     29.  DISTRIBUTABLE CASH..............................................8
     30.  EFFECTIVE DATE..................................................8
     31.  EXCESS BEET PAYMENT ............................................8
     32.  FISCAL YEAR.....................................................9
     33.  FIXED CHARGES...................................................9
     34.  FORMATION AGREEMENT.............................................9
     35.  GAAP............................................................9
     36.  GROSS ASSET VALUE...............................................9
     37.  INDEBTEDNESS...................................................11
     38.  INVESTMENT.....................................................11
     39.  INFORMATION....................................................11
     40.  INITIAL CAPITAL CONTRIBUTION...................................11
     41.  INITIAL MEMBERS................................................11
     42.  INSURANCE DEFERRAL.............................................11
     43.  INSURANCE EVENT................................................11
     44.  MAJOR CAPITAL EVENT............................................11
     45.  MAJORITY OF THE SR INTEREST....................................12
     46.  MAJORITY OF THE AGM INTEREST...................................12
     47.  MANAGEMENT COMMITTEE...........................................12
     48.  MEMBER.........................................................12
     49.  MEMBERSHIP INTEREST............................................12
     50.  MEMBER MINIMUM GAIN............................................12
     51.  MONTHLY TRANCHE B INTEREST.....................................13
     52.  NET PROFITS or NET LOSSES......................................13
     53.  OPERATING CASH FLOW............................................14
     54.  PERMITTED INDEBTEDNESS.........................................14
     55.  PERMITTED INVESTMENTS..........................................15
     56.  PERMITTED MERGERS..............................................16
     57.  PERSON.........................................................16
     58.  PRINCIPAL REDUCTION............................................16
     59.  PROPERTY.......................................................17
     60.  PUT OPTION CONSIDERATION.......................................17
     61.  PUT NOTICE.....................................................17
     62.  PUT OPTION.....................................................17
     63.  REDEMPTION PRICE...............................................17
     64.  REGULATIONS....................................................17
     65.  SHARING RATIO..................................................18
     66.  SR CAPITAL INTEREST............................................18
     67.  SR INTEREST....................................................18
     68.  SR TERM INDEBTEDNESS...........................................18
     69.  SRSC...........................................................18
     70.  SUBSTITUTE MEMBER..............................................18
     71.  TRIGGERING EVENT...............................................18
     72.  VALHI LOANS ...................................................19
     73.  VALHI - .......................................................19
     74.  WITHDRAWAL EVENT...............................................19

ARTICLE IIINATURE OF BUSINESS............................................19

ARTICLE IVNAMES AND ADDRESSES OF MEMBERS.................................20

ARTICLE VTHE MANAGEMENT OF THE COMPANY...................................20
     5.1  MANAGEMENT OF THE COMPANY BY THE MANAGEMENT COMMITTEE..........20
     5.2  AUTHORITY TO BIND THE COMPANY..................................21
     5.3  DUTIES OF THE MANAGEMENT COMMITTEE.............................22
     5.4  LIABILITY FOR CERTAIN ACTS.....................................23
     5.5  MANAGEMENT COMMITTEE REPRESENTATIVES HAVE NO EXCLUSIVE
           DUTY TO COMPANY...............................................23
     5.6  STANDARD OF CARE...............................................24

ARTICLE VIRIGHTS AND DUTIES OF MEMBERS...................................24
     6.1  LIABILITY OF MEMBERS...........................................24
     6.2  VOTING RIGHTS..................................................24
     6.3  AGM MEMBER CONSENT.............................................25
     6.4  REPRESENTATIONS AND WARRANTIES.................................28
     6.5  INDEMNIFICATION................................................29
     6.6  CONFLICTS OF INTEREST..........................................30

ARTICLE VIIACCOUNTING AND RECORDS........................................31
     7.1  RECORDS TO BE MAINTAINED.......................................31
     7.2  REPORTS........................................................31
     7.3  INFORMATION FROM SRSC..........................................35

ARTICLE VIIICONTRIBUTIONS AND CAPITAL ACCOUNTS...........................35
     8.1  MEMBERS' CAPITAL CONTRIBUTION..................................35
     8.2  ADDITIONAL CAPITAL CONTRIBUTIONS...............................35
     8.3  CAPITAL ACCOUNTS...............................................36
     8.4  WITHDRAWAL OR REDUCTION OF MEMBERS' CONTRIBUTIONS..............37

ARTICLE IXALLOCATIONS AND DISTRIBUTIONS,  ELECTIONS AND REPORTS..........38
     9.1  ALLOCATION OF PROFITS AND LOSSES...............................38
     9.2  SPECIAL ALLOCATIONS TO CAPITAL ACCOUNTS AND CERTAIN
           OTHER INCOME TAX ALLOCATIONS. ................................40
     9.3  DISTRIBUTIONS..................................................42
     9.4  ACCOUNTING PRINCIPLES..........................................47

ARTICLE XTAXES...........................................................48
     10.1 ELECTIONS......................................................48
     10.2 TAXES OF TAXING JURISDICTIONS..................................48
     10.3 TAX MATTERS PARTNER............................................48
     10.4 TAX RETURNS....................................................49

ARTICLE XIDISPOSITION OF MEMBERSHIP INTERESTS............................49
     11.1 GENERAL........................................................49
     11.2 REQUIREMENTS OF TRANSFER.......................................49
     11.3 DISPOSITION....................................................49
     11.4 TRANSFEREE NOT MEMBER IN ABSENCE OF CONSENT....................50
     11.5 DISPOSITIONS NOT IN COMPLIANCE WITH THIS ARTICLE VOID..........50

ARTICLE XIIADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS.................51

ARTICLE XIIIDISSOLUTION AND WINDING UP...................................51
     13.1 DISSOLUTION....................................................51
     13.2 EFFECT OF DISSOLUTION.  .......................................52
     13.3 WINDING UP, LIQUIDATION AND DISTRIBUTION OF ASSETS.............53
     13.4 CERTIFICATE OF DISSOLUTION.....................................55
     13.5 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS............55

ARTICLE XIVAMENDMENT.....................................................55
     14.1 ...............................................................55
     AMENDMENT OF COMPANY AGREEMENT......................................55
     14.2 ...............................................................55
     AMENDMENTS UPON A MAJOR CAPITAL EVENT...............................55

ARTICLE XV     MISCELLANEOUS PROVISIONS..................................56
     15.1 ENTIRE AGREEMENT...............................................56
     15.2 NO PARTNERSHIP INTENDED FOR NONTAX PURPOSES....................56
     15.3 RIGHTS OF CREDITORS AND THIRD PARTIES UNDER COMPANY AGREEMENT..56
     15.4 CONFIDENTIALITY................................................56
     15.5 AGREEMENT, EFFECT OF INCONSISTENCIES WITH ACT..................57
     15.6 NOTICE.........................................................58

ARTICLE XVIREMEDY PROVISIONS.............................................59
     16.1 TRIGGERING EVENT...............................................59
     16.2 DISTRIBUTIONS..................................................59

ARTICLE XVIIREDEMPTION OF THE AGM INTEREST...............................60
     17.1 OPTIONAL REDEMPTION BY THE COMPANY.............................60
     17.2 MANDATORY REDEMPTION UPON REQUEST OF A HOLDER..................60
     17.3 REDEMPTION PRICE...............................................61
     17.4 DISTRIBUTIONS AFTER REDEMPTION DATE............................61
     17.5 CERTIFICATES...................................................62
     17.6 OTHER REDEMPTIONS OR ACQUISITIONS..............................62

ARTICLE XVIIIGRANT OF PUT OPTION.........................................62
     18.1 GRANT OF PUT OPTION............................................62
     18.2 CLOSING OF PUT OPTION..........................................63
     18.3 REGULATORY APPROVAL............................................63
                        COMPANY AGREEMENT

          This Company Agreement (this `Agreement'' or this ``Company
Agreement') of The Amalgamated Sugar Company LLC, a limited liability company
organized pursuant to the Act, is entered into and shall be effective as of the
Effective Date, by and among the Company and the persons executing this
Agreement as Members.  Capitalized terms not otherwise defined in this Agreement
have the meanings ascribed to such terms in Article II.

                                   ARTICLE I
                                                               FORMATION

     1.1  ORGANIZATION.  The Members have organized the Company as a Delaware
limited liability company pursuant to the provisions of the Act  by filing that
certain Certificate of Formation with the Secretary of State of Delaware on
December 20, 1996, and by entering into that certain Formation Agreement by and
among The Amalgamated Sugar Company, a Utah corporation (`AGM''), Snake River
Sugar Company, an Oregon cooperative (`SRSC''), and the Company, dated as of
January 3, 1997, to be effective for tax and accounting purposes as of December
31, 1996 (the "Formation Agreement").

     1.2  NAME.  The name of the Company is The Amalgamated Sugar Company LLC,
and all business of the Company shall be conducted under that name except to the
extent necessary for qualification purposes in those states where AGM's presence
initially requires the Company to use a trade name or with the consent of all of
the Members.

     1.3  EFFECTIVE DATE.  This Company Agreement shall become effective upon
the closing under the Formation Agreement or such other date mutually agreeable
to the Members (the `Effective Date'').


     1.4  TERM.  The term of the Company commenced on the Effective Date and
will continue until the Company shall be dissolved and its affairs wound up in
accordance with the Act or this Company Agreement.

     1.5  REGISTERED AGENT AND OFFICE.  The Company's initial registered office
and the name of its initial registered agent at such address shall be as set
forth in the Company's Certificate of Formation.  The Management Committee may,
from time to time, change the registered agent or office through appropriate
filings with the Secretary of State.  In the event the registered agent ceases
to act as such for any reason or the registered office shall change, the
Management Committee shall promptly designate a replacement registered agent or
file a notice of change of address as the case may be.  If the Management
Committee shall fail to designate a replacement registered agent or change of
address of the registered office, any Member may designate a replacement
registered agent or file a notice of change of address upon notice to the other
Members.

     1.6  PRINCIPAL PLACE OF BUSINESS.  The principal place of business of the
Company shall be 2427 Lincoln Avenue, PO Box 1520, Ogden, Utah 84402.  The
Company may locate its place of business to any other place or places as the
Management Committee may from time to time deem advisable.


                                   ARTICLE II
                                                             DEFINITIONS

     For purposes of this Company Agreement, unless the context clearly
indicates otherwise, the following terms shall have the following meanings:

     1.ACCRUAL - shall mean the sum of (i) the positive excess, if any, of (A)
the product of $2,224,781 times the cumulative number of months which have
elapsed during any Fiscal Year of the Company, commencing with January 1, 1997,
less (B) the cash distributions to all Members pursuant to Section 9.3.1(a) in
connection with such months and less the cash distributions pursuant to Section
9.3.1(b)(i) for the Fiscal Year relating to such months, plus (ii) interest on
any amount determined pursuant to clause (i), compounded annually, at an annual
rate of 10.145%, calculated from the date cash distributions for such month are
or would have been made pursuant to Section 9.3.1(a) to the date the Accrual
relating to such date is actually distributed to the Members pursuant to Section
9.3.1; provided, however, that the Deferral and the Insurance Deferral shall not
be included in any Accrual.

     2.ACCRUAL THRESHOLD - has the meaning set forth in Section 16.2.1.

     3.ACT - means the Delaware Limited Liability Company Act, as amended from
time to time.

     4.ADDITIONAL MEMBER - means a Person other than an Initial Member or a
Substitute Member who has acquired a Membership Interest from the Company.


     5.AFFILIATE - has the meaning, with respect to any Person, set forth in
Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of
1934, as amended as of the Closing Date.

     6.   AGM - has the meaning set forth in Section 1.1.

     7.AGM CAPITAL INTEREST - means the proportion that the positive Capital
Account of a Member holding the AGM Interest bears to the aggregate positive
Capital Accounts of all Members holding the AGM Interest whose Capital Accounts
have positive balances as may be adjusted from time to time.

     8.AGM INTEREST - means the Membership Interest received by AGM on the
Effective Date.

     9.ANNUAL OPERATING PLAN - has the meaning set forth in Section 7.2.1.

     10.ARTICLES - means the Certificate of Formation of the Company as properly
adopted and amended from time to time by the Members and filed with the
Secretary of State of Delaware.

     11.ASSIGNEE - means a Person to whom a Membership Interest has been
transferred who has not been admitted as a Substitute Member.

     12.ASSIGNING MEMBER - has the meaning set forth in Section 5.1.2.

     13.BANK INDEBTEDNESS - means revolving Indebtedness in a principal amount
not to exceed $100 million incurred by the Company in connection with providing
working capital for the Company, and any refinancing of such Indebtedness with a
bank or other financial institution, provided that, without the written consent


of the holders of a Majority of the AGM Interest, the maximum amount of
Indebtedness permitted to be incurred in any such refinancing does not increase
over the maximum amount of Indebtedness outstanding immediately prior to such
refinancing, and the terms and conditions of such refinancing do not materially
adversely affect the holders of the AGM Interest.

     14.BANKRUPT MEMBER - means a Member which has commenced any proceeding
under any bankruptcy, debt arrangement, or insolvency law of any jurisdiction,
whether now or hereafter in effect, or a Member against which any such
proceeding has been commenced and to which the Member by any act or omission has
indicated approval thereof, consent thereto or acquiescence therein, or as to
which an order shall be entered and remain in effect for more than 120 days
approving the petition in any such proceeding.

     15.BEET PAYMENT - means payments by the Company for sugarbeets that would
have been incurred if the Company made such payments at the times and pursuant
to the terms and conditions as set forth in the Agreement attached as Exhibit D-
7 to the Formation Agreement.

     16.BUSINESS - has the meaning set forth in Article III.

     17.BUSINESS DAY - means any day excluding a Saturday, Sunday and any day
which is a legal holiday under the laws of the State of Utah or is a day on
which banking institutions located in such state are closed.

     18.CAPITAL ACCOUNT - means, as of any given date, the Capital Contributions
to the Company by a Member or Assignee as adjusted up to the date in question
pursuant to Article VIII.


     19.CAPITAL CONTRIBUTION - means any contribution to the capital of the
Company in cash or Property by a Member or Assignee pursuant to Article VIII.

     20.CHANGE IN OWNERSHIP OR STRUCTURE - means (i) any issuance or
Disposition, or any series of issuances or Dispositions of Membership Interest
by the Company or the holders of Membership Interests which results in any
Person or group of affiliated Persons (other than SRSC) owning Membership
Interests possessing the voting power (under ordinary circumstances) to elect a
majority of the Management Committee, or (ii) any action or failure to act that
causes or results in the Company ceasing to be a duly organized and validly
existing limited liability company under the Act.  No Change in Ownership or
Structure shall be deemed to have occurred solely as a result of (i) the
exercise by the holders of AGM Interest of any remedy provided by Article XVI or
(ii) the transfer of Membership Interest pursuant to the terms of Articles XI,
XVII or XVIII.

     21.CODE - mean the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, as amended, and any reference to a section
of the Code shall include any successor section or provision of the Code.

     22.COMPANY - means The Amalgamated Sugar Company LLC, a limited liability
company formed under the Act, and any successor limited liability company.

     23.COMPANY AGREEMENT - means this Company Agreement including all
amendments adopted in accordance with this Company Agreement and the Act.

     24.COMPANY MINIMUM GAIN - means the gain (regardless of character) which
would be realized by the Company if the Property subject to a nonrecourse debt
(other than a "partner nonrecourse debt" as such term is defined in Section


1.704-2(b)(4) of the Regulations) were disposed of in full satisfaction of such
debt on the relevant date.  Such amount shall be computed separately for each
nonrecourse liability of the Company.  For this purpose the adjusted basis of
Property subject to two or more liabilities of equal priority shall be allocated
among such liabilities in proportion to the outstanding balances of such
liabilities and the adjusted basis of Property subject to two or more
liabilities of unequal priority shall be allocated to the liability of inferior
priority only to the extent of the excess, if any, of the adjusted basis of such
Property over the aggregate outstanding balance of the liabilities of superior
priority.  If Property is reflected in the Capital Accounts of the Company at
other than its basis, Company Minimum Gain shall be determined by using the
amount recorded for such Property in determining Capital Accounts instead of the
basis of such Property.

     25.DEFERRAL - has the meaning set forth in the Section 9.3.1(d).

     26.DEFICIT CAPITAL ACCOUNT - means the deficit balance, if any, in a
Capital Account as of the end of the taxable year, after giving effect to the
following adjustments:

          (1)  credit to such Capital Account any amount which such Member is
obligated to restore under Section 1.704-1(b)(2)(ii)(c) of the Regulations, as
well as any addition thereto pursuant to the next to last sentence of Sections
1.704-2(g)(1) and (i)(5) of the Regulations after taking into account thereunder
any changes during such year in partnership minimum gain (as determined in
accordance with Section 1.704-2(d) of the Regulations) and in the minimum gain
attributable to any partner nonrecourse debt (as determined under Section
1.704-2(i)(3) of the Regulations); and


          (2)  debit to such Capital Account of the items described in Sections
1.704-l(b)(2)(ii)(d)(4),  (5) and (6) of the Regulations.

          This definition of Deficit Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and 1.704-2, and will
be interpreted consistently with those provisions.

     27.DEPRECIATION - means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Management Committee.

     28.DISPOSITION (OR DISPOSE)  - means any sale, assignment, transfer,
exchange, mortgage, pledge, grant, hypothecation or other transfer, absolute or
as security or encumbrance (including dispositions by operation of law).

     29.DISTRIBUTABLE CASH - means, without duplication (A) the Company's net
income for financial statement purposes for each Fiscal Year, calculated in
accordance with GAAP, plus (i) actual book depreciation, depletion, amortization
and interest expense included in the calculation of net income, less (ii) actual
capital expenditures and actual interest paid (net of interest capitalized);


provided, however, that in calculating net income (x) the first-in, first-out
method of accounting for inventories shall be used regardless of the method
actually used by the Company to account for inventories, (y) expenses to reflect
the cost to purchase sugarbeets shall not exceed the Beet Payment, regardless of
the actual expense amounts recorded or payments made for sugarbeets by the
Company and (z) net income shall exclude any income or expense realized upon a
Major Capital Event, (B) any net cash proceeds to the Company generated from a
Major Capital Event, and (C) any cash Capital Contribution by SRSC to the
Company pursuant to Section 8.2.3.

     30.EFFECTIVE DATE - has the meaning set forth in Section 1.3.

     31.EXCESS BEET PAYMENT - means the amounts, if any, by which the Company's
expenses to purchase sugarbeets exceeded the Beet Payment during such Fiscal
Year.

     32.FISCAL YEAR - means the Company's fiscal year beginning January 1 and
ending December 31 of each year.

     33.FIXED CHARGES - means, for any period, the total of the following for
the Company calculated in accordance with GAAP (without duplication): (i)
interest expenses deducted in the determination of net income (including any
amortization of deferred loan fees and costs); plus (ii) scheduled payments of
                                               ----

principal with respect to all Indebtedness (other than Indebtedness referred to
in clauses (i) and (iii) of the definition of Permitted Indebtedness); plus
                                                                       ----

(iii) any provision (to the extent it is greater than zero) for income or
franchise taxes included in the determination of net income (excluding any


provision for deferred taxes); plus (iv) amounts payable with respect to
                               ----

capitalized leases and operating leases; plus (v) payment of deferred taxes
                                         ----

accrued in any prior period.

     34.FORMATION AGREEMENT - has the meaning set forth in Section 1.1.

     35.GAAP - means United States generally accepted accounting principles
applied on a basis consistent with the accounting practices used by AGM during
its 1996 fiscal year.

     36.GROSS ASSET VALUE - means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:

          (1)  The initial Gross Asset Value of any asset contributed by a
Member or Assignee to the Company shall be the gross fair market value of such
asset, as determined by the contributing Member or Assignee and the Management
Committee, provided that the initial Gross Asset Values of the assets
contributed to the Company pursuant to Section 8.1 shall be as set forth in
APPENDIX A.

          (2)  The Gross Asset Values of all Company assets shall be adjusted to
equal their respective gross fair market values, as determined by the unanimous
vote of the Members as of the following times:  (a) the acquisition of an
additional interest by any new or existing Member or Assignee in exchange for
more than a de minimis contribution of Property (including money); (b) the
distribution by the Company to a Member or Assignee of more than a de minimis
amount of Property (including money) as consideration for a Membership Interest;
and (c) the liquidation of the Company within the meaning of Regulations Section


1.704-l(b)(2)(ii)(g): provided, however, that adjustments pursuant to clauses
(a) and (b) above shall be made only if the Management Committee reasonably
determines in good faith that such adjustments are necessary to reflect the
relative economic interests of the Members in and the Assignees of the Company.

          (3)  The Gross Asset Value of any Company asset distributed to any
Member or Assignee shall be adjusted to equal the gross fair market value of
such asset on the date of distribution as determined by the unanimous vote of
the Members.

          (4)  The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 732(d), 734(b) or 743(b), but only to the extent that
such adjustments are taken into account in determining Capital Accounts pursuant
to Regulation Section 1.704-l(b)(2)(iv)(m) and Section 8.3 and subsection (4)
under the definition of Net Profits and Net Losses; provided, however, that
Gross Asset Values shall not be adjusted pursuant to this definition to the
extent the Management Committee determines that an adjustment pursuant to
subsection (2) of this definition is necessary in connection with a transaction
that would otherwise result in an adjustment pursuant to this subsection (4).

          If the Gross Asset Value of an asset has been determined or adjusted
pursuant to subsection (1),  (2) or (4) of this definition, then such Gross
Asset Value shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Net Profits and Net Losses.

     37.INDEBTEDNESS - means all indebtedness for borrowed money, indebtedness
evidenced by notes, debentures, bonds or similar instruments, capitalized lease
obligations, and any guarantees of the obligations of another Person.



     38.INVESTMENT - means (a) any direct or indirect purchase or other
acquisition by the Company of any beneficial interest in, including stock,
partnership interest, limited liability company interest or other securities of,
any other Person or (b) any direct or indirect loan, advance or capital
contribution by the Company to any other Person including all Indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business.

     39.  INFORMATION - has the meaning set forth in Section 15.4.

     40.INITIAL CAPITAL CONTRIBUTION - means the Capital Contributions agreed to
be made by the Initial Members as of the date of this Agreement as described in
Section 8.1 and as specifically described on APPENDIX A.

     41.INITIAL MEMBERS - means AGM and SRSC.

     42.INSURANCE DEFERRAL - has the meaning set forth in Section 9.3.2.

     43.INSURANCE EVENT - means any transaction or series of transactions
involving payment in connection with any condemnations, easements, net
recoveries of damage awards and insurance proceeds (other than incident to or
resulting in the liquidation of the Company), which payment exceeds $50,000 and
is not promptly reinvested in the Company's business.

     44.MAJOR CAPITAL EVENT - means any transaction or series of transactions
involving (i) any sale, transfer or other disposition of all or substantially
all of the Company's assets (other than in the ordinary course of business),
(ii) any Insurance Event, or (iii) any financing or refinancing the purpose of


which financing or refinancing is to distribute all or part of the proceeds to
the Members.

     45.MAJORITY OF THE SR INTEREST - means holders of the SR Interest which
taken together exceed 50% of the SR Capital Interests and, for purposes of
Article XIII, 50% of the interest in Profits allocable to holders of the SR
Capital Interest.

     46.MAJORITY OF THE AGM INTEREST - means holders of the AGM Interest which
taken together exceed 50% of the AGM Capital Interests and, for purposes of
Article XIII, 50% of the interest in Profits allocable to holders of the AGM
Capital Interest.

     47.MANAGEMENT COMMITTEE - has the meaning set forth in Section 5.1.

     48.MEMBER - means an Initial Member, Substituted Member or Additional
Member, provided, that when used in connection with the distribution of cash and
the allocation of profit, loss and other items under Article IX, Member shall
include any Assignee.

     49.MEMBERSHIP INTEREST - means the rights of a Member or, in the case of an
Assignee, the rights of the assigning Member, in distributions (liquidating or
otherwise) and allocations of the Net Profits, Net Losses and other federal
income tax items of gains, deductions and credits of the Company.

     50.MEMBER MINIMUM GAIN - means the gain (regardless of character) which
would be realized by the Company if Property subject to a "partner nonrecourse
debt" (as such term is defined in Section 1.704-2(b)(4) of the Regulations) were
disposed of in full satisfaction of such debt on the relevant date.  The


adjusted basis of Property subject to more than one partner nonrecourse debt
shall be allocated in a manner consistent with the allocation of basis for
purposes of determining Company Minimum Gain under this Company Agreement.

     51.MONTHLY TRANCHE B INTEREST - has the meaning set forth in Section
9.3.1(d).

     52.NET PROFITS or NET LOSSES - means, for each taxable year of the Company,
an amount equal to the Company's net taxable income or loss for such year as
determined for federal income tax purposes (including separately stated items)
in accordance with (a) the accounting method and rules used by the Company and
(b) Section 703 of the Code, with the following adjustments:

          (1)  Any items of income, gain, loss and deduction specifically or
specially allocated to Members or Assignees pursuant to Section 9.2 shall not be
taken into account in computing Net Profits or Net Losses;

          (2)  Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Profits and Net Losses
shall be added to such taxable income or loss;

          (3)  Any expenditure of the Company described or deemed described in
Section 705(a)(2)(B) of the Code and not otherwise taken into account in
computing Net Profits and Net Losses shall be subtracted from such taxable
income or loss;

          (4)  In the event the Gross Asset Value of any Company asset is
adjusted pursuant to clause (2) or (3) of the definition of Gross Asset Value,
the amount of such adjustment shall be taken into account as gain or loss from


the disposition of such asset for purposes of computing Net Profits and Net
Losses;

          (5)  Gain or loss resulting from any disposition of any Company asset
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed with reference to the Gross Asset Value of the asset disposed
of, notwithstanding that the adjusted tax basis of such asset differs from its
Gross Asset Value;

          (6)  In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year; and

          (7)  To the extent an adjustment to the adjusted tax basis of any
Company Property pursuant to Section 732(d), 734(b) or 743(b) of the Code is
required pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations to be taken
into account in determining Capital Accounts, the amount of such adjustment
shall be treated as an item of gain (if the adjustment decreases the basis of
the asset) from the disposition of the asset and shall be taken into account for
purposes of computing Net Profits or Net Losses.

     53.OPERATING CASH FLOW - means, for any period, (i) net income determined
in accordance with GAAP; plus, (ii) to the extent included in the calculation of
                         ----

net income, (a) income and franchise taxes paid or accrued, (b) interest
expenses, paid or accrued, (c) interest paid in kind, (d) depreciation,
depletion and amortization, and (e) other non-cash charges, including
amortization of deferred loan fees and costs; less, (iii) to the extent included
                                              ----

in the calculation of net income, (a) interest and dividend income, (b) the


income of any person (other than wholly-owned Persons of the Company) in which
the Company has an ownership interest unless such income is received by the
Company or such wholly-owned Persons in a cash distribution, (c) gains (but not
losses) from sales or other dispositions of assets (other than inventory in the
normal course of business), (d) extraordinary or non-recurring gains, but not
net of extraordinary or non-recurring "cash" losses, and (e) capital
expenditures.

     54.PERMITTED INDEBTEDNESS - means (i) short term Commodity Credit
Corporation price support Indebtedness in the ordinary course of business
consistent with past practice, (ii) Indebtedness included in the Assumed
Liabilities, as defined in the Formation Agreement, and any refinancing of such
Indebtedness provided that the amount of Indebtedness incurred in any such
refinancing does not increase over the amount of Indebtedness outstanding
immediately prior to such refinancing, (iii) Bank Indebtedness, and (iv)
additional Indebtedness (including Indebtedness assumed in connection with any
merger, acquisition or other transaction), provided that the Company's fixed
charge coverage ratio for the previous 12 months, on a pro forma basis giving
full effect to any Indebtedness incurred since the beginning of such 12 month
period (including any Indebtedness proposed to be incurred) is at least equal to
1.20 to 1.00.  For purposes of this definition, `fixed charge coverage ratio''
means the Company's Operating Cash Flow divided by Fixed Charges.

     55.PERMITTED INVESTMENTS - means (i) reasonable advances to employees in
the ordinary course of business, (ii) Investments having a stated maturity no
greater than one year from the date the Company makes such Investment in
(a) obligations of the United States government or any agency thereof or
obligations guaranteed by the United States government, including repurchase and
reverse repurchase agreements relating to marketable direct obligations issued


or unconditionally guaranteed by the United States government, provided such
agreements are entered into on terms and conditions set forth in the form of
Master Repurchase Agreement promulgated by the Public Securities Association
with a `Buyer's Margin Account'' (as defined therein) at least equal to 100%,
(b) certificates of deposit of commercial banks having combined capital and
surplus of at least $50 million, or (c) commercial paper with a rating of at
least `Prime-1'' by Moody's Investors Services, Inc., (iii) money market mutual
funds investing solely in instruments described in clause (ii) above, (iv) loans
with a maturity date of less than one year to agricultural producers who grow
domestic sugarbeets and sell such sugarbeets to the Company or SRSC under a
written contract and who are `eligible producers'' as that term is defined by 7
C.F.R.  Section 1435.3, provided that the amount of such loan does not exceed
the estimated value of sugarbeets under such contract (at the then estimated
sugar price) and that any such loan that exceeds $5000 is secured by a perfected
first priority security interest in favor of the Company in such producer's
crop, (v) Investments in wholly-owned Persons, (vi) Investments in less than
wholly-owned Persons and joint ventures, provided that the no more than $1
million may be invested in such entities in any Fiscal Year, provided further
that less than 5% of the Company's consolidated assets and earnings are held by
less than wholly-owned Persons and joint ventures at any one time, and provided
further that the Company does not incur any liabilities (including Indebtedness,
contingent or otherwise) in connection with such Investment (by agreement, as a
general partner or otherwise) beyond the amount of the Investment,
(vii) obligations of the United States Farm Credit System, and (ix) Investments
in any farmers cooperative bank to the extent required by the Bank Indebtedness.

     56.PERMITTED MERGERS - means any merger, combination or consolidation
between the Company and another Person if (i) the Company is the surviving
entity and the terms relating to the AGM Interest set forth in this Company


Agreement are not materially changed, (ii) no membership interest (or equivalent
interest, e.g., common or preferred stock in the case of a corporation) other
than the AGM Interest and the SR Interest are outstanding following such
transaction, (iii) no Triggering Event occurs after giving effect to such
transaction and no transaction otherwise prohibited by this Company Agreement
occurs in connection with such transaction, and (iv) the Company, on a pro forma
basis giving effect to such transaction, has consolidated net worth  at least
equal to its consolidated net worth immediately prior to such transaction.  For
purposes of this definition, `consolidated net worth'' means the difference
between the assets and liabilities of the Company, calculated in conformity with
GAAP.

     57.PERSON -  means an individual, a partnership, a limited liability
company, a cooperative, a corporation, an association, a joint stock company, a
trust, an estate, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.

     58.PRINCIPAL REDUCTION - means, except as otherwise consented to by the
lenders under the SR Term Indebtedness, the repayment of all principal, interest
and other amounts owing on the SR Term Indebtedness.

     59.PROPERTY - means any property real or personal, tangible or intangible,
including money and any legal or equitable interest in such property, but
excluding services and promises to perform services in the future.

     60.PUT OPTION CONSIDERATION - means the sum of $250,000,000 (in the sale of
all of the AGM Interest originally issued) or the applicable portion thereof (in
the sale of a portion of the AGM Interest), plus 95% of any unpaid Accrual (or,
in the case of the sale of a portion of the AGM Interest, 95% of any unpaid


Accrual relating to such portion), plus 100% of any Deferral (or, in the case of
the redemption of a portion of the AGM Interest, 100% of any Deferral relating
to such portion), plus 100% of any Insurance Deferral (or, in the case of the
redemption of a portion of the AGM Interest, 100% of any Insurance Deferral
relating to such portion).

     61.PUT NOTICE - has the meaning set forth in Section 18.1.

     62.PUT OPTION - has the meaning set forth in Section 18.1.

     63.REDEMPTION PRICE - means the sum of $250,000,000 (in the redemption of
all of the AGM Interest originally issued) or the applicable portion thereof (in
the redemption of a portion of the AGM Interest), plus 95% of any unpaid Accrual
(or, in the case of the redemption of a portion of the AGM Interest, 95% of any
unpaid Accrual relating to such portion), plus 100% of any Deferral (or, in the
case of the redemption of a portion of the AGM Interest, 100% of any Deferral
relating to such portion), plus 100% of any Insurance Deferral (or, in the case
of the redemption of a portion of the AGM Interest, 100% of any Insurance
Deferral relating to such portion).

     64.REGULATIONS - means, except where the context indicates otherwise, the
permanent, proposed or temporary regulations of the Department of the Treasury
under the Code as such regulations may be lawfully changed from time to time.

     65.SHARING RATIO - means with respect to the holders of the SR Interest,
5.3% and with respect to the holders of the AGM Interest, 94.7%.

     66.SR CAPITAL INTEREST - means the proportion that the positive Capital
Account of a Member holding an SR Interest bears to the aggregate positive


Capital Accounts of all Members holding SR Interests whose Capital Accounts have
positive balances as may be adjusted from time to time.

     67.SR INTEREST - means the Membership Interest received by SRSC on the
Effective Date.

     68.SR TERM INDEBTEDNESS - means SR's term loans, as in effect on the
Effective Date, including any amendments to such loans (provided such amendments
do not increase the outstanding principal amount of such loans, extend the
maturity date of such loans or otherwise materially adversely affect the rights
of the holders of the AGM Interest pursuant to this Agreement).  Except as
otherwise consented by the holders of a Majority of the AGM Interest, SR Term
Indebtedness shall not include any refinancings of such loans.

     69.  SRSC - has the meaning set forth in Section 1.1.

     70.SUBSTITUTE MEMBER - means an Assignee who has been admitted to all of
the rights of membership pursuant to this Company Agreement.

     71.TRIGGERING EVENT - means any failure by the Management Committee or the
Company to comply in all material respects with any of the provisions of this
Company Agreement; provided, however, that, so long as the Company has promptly
notified the holders of the AGM Interest of the existence of such a failure
pursuant to Section 7.2.2(e), such failure (other than a failure to comply with
the provisions of Sections 6.3(i), 6.3(ii), 6.3(xiv) and 6.3(xv) and 7.2.3), if
capable of being cured, shall not be deemed to be a Triggering Event unless such
failure has not been cured within 30 days after the holders of the AGM Interest
have given the Company notice.


     72.VALHI LOANS  - means the loan by SRSC to Valhi in the amount of
$212,500,000, and the loan by SRSC to Valhi, in the amount of $37,500,000, each
dated as of the date of this Agreement.

     73.VALHI - means Valhi, Inc., a Delaware corporation.

     74.WITHDRAWAL EVENT - has the meaning set forth in Section 13.1.1(b).

                                  ARTICLE III
                                                      NATURE OF BUSINESS

     The Company's business shall be the production and sale of refined sugar
and by-products from sugarbeets (the `Business'').  The Company shall have the
authority to do all things necessary or convenient to operate its Business as
described in this Article III including renewal, amending, modifying or altering
any permit, consent or amortization.  The Company exists only for the purposes
specified in this Article III and may not conduct any other business without the
consent of the affirmative vote of all of the Members as provided in this
Agreement.


                                   ARTICLE IV
                                          NAMES AND ADDRESSES OF MEMBERS

     The names and addresses of the Members are identified on APPENDIX A.

                            ARTICLE V
                  THE MANAGEMENT OF THE COMPANY


     5.1  MANAGEMENT OF THE COMPANY BY THE MANAGEMENT COMMITTEE.

          5.1.1     The business and affairs of the Company shall be managed by
the Members.  The Members shall exercise such management duties through a
Management Committee of seven  representatives (the `Management Committee''),
all of whom initially shall be appointed by SRSC, and shall continue to be
appointed by SRSC subject to Article XVI.  Except when the representatives to
the Management Committee are appointed by AGM pursuant to Article XVI, each
representative to the Management Committee shall be an officer, director or
employee of SRSC and a member of SRSC, actively engaged in the growing of
sugarbeets.  The initial representatives are George Grant and Rocky Trail,
provided, however, that following the consummation of the formation of the
Company and related transactions, the initial representatives shall be the
individuals identified on APPENDIX A.  Each representative to the Management
Committee shall serve until such representative's resignation, death, disability
or until removal by SRSC or, upon a Triggering Event, by AGM pursuant to Article
XVI.

          5.1.2     Any Member may at any time remove any of its Management
Committee representatives appointed by such Member and appoint a substitute
representative by delivering written notice of such substitution to the other
Members.  In the event any Member assigns all or any portion of its Membership
Interest (an `Assigning Member'') to a Person that is admitted as a Member
pursuant to the terms of this Agreement, the Assigning Member may, in its sole
discretion, elect to allow such Substitute or Additional Members to designate
any of the Assigning Member's representatives to the Management Committee by
delivering written notice of such election to the other Members.


          5.1.3     Each representative to the Management Committee shall have
one vote in all actions required or permitted to be taken by the Management
Committee.  All actions taken by the Management Committee must be by:  (i) a
majority vote of the representatives then holding office and entitled to vote at
a meeting of the Management Committee; or (ii) by the affirmative written
consent of a majority of the representatives to the Management Committee which
would be entitled to vote at a meeting of the Management Committee called for
the purpose of taking such action, in which case prompt written notice of such
action shall be given to any representative not executing such written consent.

          5.1.4     No representative of the Management Committee shall be
entitled to compensation from the Company solely for serving in such capacity.

          5.1.5     The Management Committee shall review the operation of the
business and the management of the Company and shall establish meeting times,
dates and places and requisite notice requirements and adopt rules or procedures
as it deems necessary.  Any Member may call a special meeting of the Management
Committee for any purpose by giving the other Members and their respective
representatives to the Management Committee at least 24 hours' written or
telephonic notice thereof, except in the case of an emergency, in which case,
such notice as is practicable shall be sufficient.

          5.1.6     One or more representatives to the Management Committee may
attend meetings of the Management Committee by means of conference telephone
call.

          5.1.7     The Management Committee shall appoint and terminate senior
officers of the Company (including a Chief Executive Officer), define their
duties and establish their compensation.



     5.2  AUTHORITY TO BIND THE COMPANY.    The Management Committee shall have
full and complete authority, power and discretion to manage and control the
business, affairs and properties of the Company, to make all determinations
regarding those matters and to perform any and all other acts or activities
customary or incident to the management of the Company's business except for
matters expressly reserved to the determination of the Members elsewhere in this
Company Agreement, including, but not limited to, the matters set forth in
Section 6.3.

     5.3  DUTIES OF THE MANAGEMENT COMMITTEE.  The Management Committee shall
cause the Company to take the following action:

          (i)  at all times cause to be done all things necessary to maintain,
preserve and renew its existence and all material licenses, authorizations and
permits necessary to the conduct of its businesses;

          (ii) maintain and keep its properties in good repair, working order
and condition, and from time to time make all necessary or desirable repairs,
renewals and replacements, so that its businesses may be properly and
advantageously conducted at all times;

          (iii)     pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or profits
therefrom (in each case before the same becomes delinquent and before penalties
accrue thereon) and all claims for labor, materials or supplies which if unpaid
would by law become a lien upon any Company assets, unless and to the extent
that the same are being contested in good faith and by appropriate proceedings


and adequate reserves (as determined in accordance with GAAP) have been
established on its books with respect thereto;

          (iv) comply with all other material obligations which the Company
incurs pursuant to any contract or agreement, whether oral or written, express
or implied, as such obligations become due to the extent to which the failure to
so comply would reasonably be expected to have a material adverse effect upon
the financial condition, operating results, assets, operations or business
prospects of the Company, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with GAAP) have been established on its books with
respect thereto;

          (v)  comply with all applicable laws, rules and regulations of all
governmental authorities, the violation of which would reasonably be expected to
have a material adverse effect upon the financial condition, operating results,
assets, operations or business prospects of the Company;

          (vi) apply for and continue in force with good and responsible
insurance companies adequate insurance covering risks of such types and in such
amounts as are consistent with past practice and are customary for well-insured
corporations of similar size engaged in similar lines of business; and

          (vii)     maintain proper books of record and account which fairly
present its financial condition and results of operations and make provisions on
its financial statements for all such proper reserves as in each case are
required in accordance with GAAP.


     5.4  LIABILITY FOR CERTAIN ACTS.  Each representative to the Management
Committee shall have a fiduciary duty to the Members and shall perform his or
her duties in good faith, in a manner he or she reasonably believes to be in the
best interests of the Members, and with such care as an ordinarily prudent
person in a like position would use under similar circumstances.  A
representative who so performs his or her duties shall not have any liability to
the Company or its Members by reason of being or having been a representative to
the Management Committee.  The representatives to the Management Committee shall
not be liable to the Company or to any Member for any loss or damage sustained
by the Company or any Member, unless the loss or damage shall have been the
result of fraud, deceit, gross negligence or willful misconduct, or willful
breach of this Company Agreement by such representative.

     5.5  MANAGEMENT COMMITTEE REPRESENTATIVES HAVE NO EXCLUSIVE DUTY TO
COMPANY.  No representative to the Management Committee shall be required to
manage the Company as his or her sole and exclusive activity, and
representatives may have other business interests and may engage in other
activities in addition to those relating to the Company.  Neither the Company
nor any Member shall have any right, by virtue of this Company Agreement, to
share or participate in such other interests or activities of such
representatives or to the income or proceeds derived therefrom.  The
representatives to the Management Committee shall not incur any liability to the
Company or to any of the Members solely as a result of engaging in any other
business or venture.

     5.6  STANDARD OF CARE.  The representatives to the Management Committee in
the discharge of their duties to the Company shall manage and operate the
business of the Company in a manner and for the purposes of maximizing its long-
term value and return to the Members.  In discharging their duties, the


representatives to the Management Committee shall be fully protected in relying
in good faith upon the records required to be maintained under Article VII and
upon such information, opinions, reports or statements by the chief executive
officer of the Company, any of the Members or agents of the Company, or by any
other Person, as to matters such representatives reasonably believe are within
such other Person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Company, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits or losses of the Company or any other facts pertinent to
the existence and amount of assets from which distributions to Members might be
paid.

                           ARTICLE VI
                  RIGHTS AND DUTIES OF MEMBERS

     6.1  LIABILITY OF MEMBERS.  The debts, obligations and liabilities
(including, but not limited to, strict liability) of the Company, whether
arising in contract, tort, under statute or otherwise, shall be solely the
debts, obligations and liabilities of the Company.  No Member of the Company
shall be obligated for any such debt, obligation or liability solely by reason
of being a Member.  The failure of the Company to observe any formalities or
requirements relating to the exercise of its powers or management of its
business or affairs under this Company Agreement or the Act shall not be grounds
for imposing personal liability on the Members for liabilities of the Company.

     6.2  VOTING RIGHTS.  All Members shall be entitled to vote on any matter
submitted to a vote of the Members.  Unless the vote of a lesser or greater
proportion or number is otherwise required by the Act or this Company Agreement
or unless the consent of Members holding the AGM Interest is otherwise required


by this Company Agreement, the affirmative vote of one or more Members holding a
Majority of the SR Interest shall be the act of the Members.  Unless required
under applicable law, Members who have an interest (economic or otherwise) in
the outcome of any particular matter upon which the Members vote or consent may
vote or consent upon any such matter and their vote or consent, as the case may
be, shall be counted in the determination of whether the requisite matter was
approved by the Members.

     6.3  AGM MEMBER CONSENT.  Notwithstanding anything in this Company
Agreement to the contrary, the Company shall not do any of the following acts,
directly or indirectly, without the written consent of a Majority of the AGM
Interest:

          (i)  make any distributions upon any Membership Interest other than
distributions pursuant to the terms of Section 9.3;

          (ii) purchase or otherwise acquire all or any portion of any
Membership Interest (including, without limitation, rights to acquire all or any
portion of any Membership Interest) other than the purchase of the AGM Interest
pursuant to Article XVII;

          (iii)     directly or indirectly authorize, issue or enter into any
agreement providing for the issuance (contingent or otherwise) of any notes,
debt securities or other Indebtedness, other than in connection with Permitted
Indebtedness;

          (iv)      make any loans or advances to, guarantees for the benefit
of, or Investments in, any Person, except for Permitted Investments;


          (v)       merge, combine or consolidate with any Person other than
Permitted Mergers;

          (vi) sell, lease or otherwise dispose of more than 5% of the assets of
the Company (computed either on the basis of book value, determined in
accordance with GAAP, or fair market value) in any transaction or series of
related transactions, including without limitation, a merger or consolidation
(other than sales in the ordinary course of business);

          (vii)     effect a recapitalization or reorganization in any form of
transaction;

          (viii)    acquire any interest in any business (whether by a purchase
of assets, merger or otherwise), or enter into any joint venture if the business
or joint venture is engaged in a business other than the processing of
sugarbeets and the sale of sugar and sugar byproducts from sugarbeets, and
businesses substantially related to such businesses;

          (ix) enter into the ownership, active management or operation of any
business other than the processing of sugarbeets and the sale of sugar and sugar
byproducts from sugarbeets, and businesses substantially related to such
businesses;

          (x)  other than in connection with Bank Indebtedness, become subject
to any agreement or instrument which by its terms would (under any
circumstances) restrict the Company's ability to perform the provisions of this
Company Agreement (including, without limitation, provisions relating to payment
of distributions on and making acquisitions of the AGM Interest);


          (xi) enter into any transaction with SRSC or any of the Company's or
SRSC's officers, Management Committee representatives, employees, members or
Affiliates or any individual related by blood or marriage to any such Person or
any entity in which any such Person or individual owns a beneficial interest,
except for (A) normal employment arrangements and benefit programs on reasonable
terms; provided that the Company shall establish and maintain qualified
retirement benefit plans for its employees which are substantially identical to
the qualified retirement benefit plans of AGM and shall not reduce the benefits,
rights and features under such qualified retirement benefit plans in a manner
which would materially adversely impact the qualified retirement benefit plans
of the entities which constitute the Majority of the AGM Interest and of their
Affiliates, (B) normal expense reimbursement arrangements on reasonable terms
with the Management Committee representatives, (C) normal commercial
arrangements, for matters other than the purchase of sugarbeets, on arm's length
terms and conditions, (D) the purchase of sugarbeets in the ordinary course of
the Company's business, provided that any such purchases are at a price no
greater than the applicable Beet Payment, and (E) loans described in clause (v)
of the definition of Permitted Indebtedness;

          (xii)     establish or acquire less than an 100% controlling interest
in any Person, other than pursuant to Investments permitted by clause (vi) of
the definition of Permitted Investments;

          (xiii)    make any capital expenditures (including, without
limitation, payments with respect to capitalized leases, as determined in
accordance with GAAP) exceeding $35 million in the aggregate on a consolidated
basis during any Fiscal Year plus the two previous Fiscal Years, provided,
however, that (A) to the extent such limit has been reached during any Fiscal
Year, the Company may make capital expenditures reasonably required to be made


in such Fiscal Year by legal or regulatory requirements, (B) commencing with the
Company's first Fiscal Year commencing on or after January 1, 1998 and on each
January 1 thereafter, the $35 million aggregate threshold shall be adjusted by
an amount equal to the change since January 1, 1997 in the U.S. producer price
index for refined beet sugar for the most recent twelve months (or, if such
index is no longer available, the closest comparable U.S. producer price index
available, as reasonably determined by the Company), (C) the limitation set
forth in this Section 6.3(xiii) shall not apply to any amounts contributed to
the Company by holders of the SR Interest which are designated to be applied to
capital expenditures, (D) the limitation set forth in this Section 6.3(xiii)
shall not apply to capital expenditures which are financed with Indebtedness
incurred by the Company specifically for the purpose of making such capital
expenditures, so long as such Indebtedness is Permitted Indebtedness, and (E)
for purposes of this Section 6.3(xiii), capital expenditures for each Fiscal
Year prior to January 1, 1997 shall be deemed to be an amount equal to
$10,000,000;

          (xiv)     allow (A) a court to enter a decree or order for relief with
respect to the Company in an involuntary case under the Bankruptcy Code or any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, which decree or order is not stayed or other similar relief is not
granted under any applicable federal or state law; or (B) the continuance of any
of the following events for forty-five (45) days unless dismissed, bonded or
discharged:  (1) an involuntary case commenced against any the Company, under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or (2) a decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over the Company, or over all or a substantial part of the Company
assets, is entered; or (3) an interim receiver, trustee or other custodian is


appointed without the consent of the Company, for all or a substantial part of
the Company assets;

          (xv) (A) seek the entry of an order for relief with respect to the
Company in a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (B)
consent to the entry of an order for relief in an involuntary case or to the
conversion of an involuntary case to a voluntary case under any such law, (C)
consent to the appointment of or taking possession by a receiver, trustee or
other custodian for all or a substantial part of the Company assets;  (D) make
any assignment for the benefit of creditors; or (E) adopt a resolution or
otherwise authorize any action to adopt a resolution or otherwise authorize any
action, to approve any of the actions referred to in this (xv);

          (xvi)     permit any money judgment, writ or warrant of attachment, or
similar process involving (A) an amount in any individual case in excess of
$100,000 or (B) an amount in the aggregate at any time in excess of $1,000,000
(in either case not adequately covered by insurance as to which the insurance
company has acknowledged coverage) to be entered or filed against the Company or
any of the Company's respective assets which remains undischarged, unvacated,
unbonded or unstayed for a period of thirty (30) days or in any event later than
five (5) days prior to the date of any proposed sale thereunder;

          (xvii)    breach or default on any Indebtedness, contingent
obligations or other agreement, if the effect of such breach or default is to
cause or to permit any Person to cause such Indebtedness and/or other
obligations having an individual principal amount in excess of $100,000 or
having an aggregate principal amount in excess of $1,000,000 to become or be


declared due prior to their stated maturity, unless such failure to pay, default
or breach is waived by such holder or holders; or

          (xviii)   permit any Change in Ownership or Structure.

     6.4  REPRESENTATIONS AND WARRANTIES. - Each Member executing this Company
Agreement hereby represents and warrants to the Company and each other Member
that: (a) the Member, is an organization that it is duly organized, validly
existing and in good standing under the law of its state of organization;
(b) that it has full power and authority to execute and agree to this Company
Agreement and to perform its obligations hereunder; and (c) that the Member is
acquiring its interest in the Company for the Member's own account as an
investment and without an intent to distribute the interest.  Each Member
acknowledges that its Membership Interest in the Company has not been registered
under the Securities Act of 1933 or any state securities laws, and may not be
resold or transferred by the Member without appropriate registration or the
availability of an exemption from such requirements.

     6.5  INDEMNIFICATION. - The Company may, to the full extent permitted by
law, indemnify, defend and hold harmless any Person (or the estate of any
Person) who was or is a party to, or is threatened to be made a party to, a
threatened, pending or completed action, suit or proceeding, whether or not by
or in the right of the Company, whether civil, criminal, administrative,
investigative or otherwise, by reason of the fact that such person is or was a
Member, representative to the Management Committee, representative, officer,
employee or agent of the Company, or was serving at the request of the Company
as manager, director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise, from and
against any and all claims, demands, liabilities (including, without limitation,


strict liability), losses, damages, costs or expenses (including attorneys'
fees, judgments, fines and amounts paid in settlement) actually and reasonably
incurred by such person in connection with such action, suit or proceeding.  The
Company may, to the full extent permitted by law, purchase and maintain
insurance on behalf of any such person against any liability which may be
asserted against him or her.  Any expenses covered by the foregoing
indemnification may be paid by the Company in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the persons seeking indemnification to repay such amounts if it is
ultimately determined that he or she is not entitled to be indemnified.  The
indemnification provided in this Section 6.5 shall not be deemed to limit the
right of the Company to indemnify any other person for any such expenses to the
full extent permitted by law, nor shall it be deemed exclusive of any other
rights to which any person seeking indemnification from the Company may be
entitled under any agreement, vote of disinterested representatives to the
Management Committee or otherwise, both as to action in his, her or its official
capacity and as to action in another capacity while service as a Member,
representative, officer, employee or agent.

     6.6  CONFLICTS OF INTEREST.

          6.6.1     Members shall account to the Company and hold as trustee for
it any Company assets, profit or benefit derived by the Member, without the
consent of the Management Committee, in the conduct or winding up of the
Company's business or from a use or appropriation by such Member of Company
assets or opportunity including information developed exclusively for the
Company and opportunities expressly presented to the Company.


          6.6.2     A Member does not violate a duty or obligation to the
Company merely because the Member's conduct furthers the Member's own interest.
 A Member may lend money to and transact other business with the Company to the
extent permitted by this Company Agreement, but no Member is obligated to loan
any money to, or incur any financial obligations for the benefit of, the Company
except as provided by this Company Agreement.  The rights and obligations of a
Member who lends money to or transacts business with the Company are the same as
those of a person who is not a Member, subject to other applicable law.  No
transaction with the Company shall be voidable solely because a Member has a
direct or indirect interest in the transaction if the transaction is either
(i) on terms no less favorable than would be available to the Company from an
unrelated third party or (ii) the Management Committee (and, if applicable under
Section 6.3, the consent of a Majority of the AGM Interest), knowing the
material facts of the transaction and the Member's interest, authorize, approve
or ratify the transaction.

          6.6.3     Notwithstanding anything to the contrary in this Company
Agreement, the Members recognize that AGM's Affiliates have and anticipate
having substantial investments in a variety of industries that may compete with
each other.  By virtue of AGM's investment in the Company, AGM intends to use
reasonable efforts to facilitate the Company's operations and other activities,
although the Members recognize and agree that such effort will not be to the
exclusion of effort by AGM's Affiliates to facilitate other similar and
dissimilar businesses.  Nothing in this Company Agreement or otherwise will
restrict the ability of AGM's Affiliates to establish, acquire or retain an
interest in any business that may be deemed to compete with the Company. AGM and
its Affiliates shall not be obligated to present to the Company any particular
investment or business opportunity, regardless of whether such opportunity is of


a character that the Company could take advantage of if it were presented to the
Company.

                           ARTICLE VII
                     ACCOUNTING AND RECORDS

     7.1  RECORDS TO BE MAINTAINED.   The Management Committee shall maintain
the following records at the Principal Office:

          7.1.1     A current list of the full name and last known business
address of each Member, former Member's and other holders of a Membership
Interest;

          7.1.2     A copy of the Articles and all amendments thereto, together
with executed copies of any powers of attorney pursuant to which Articles have
been executed;

          7.1.3     Copies of the Company's federal, foreign, state and local
income tax returns and reports, if any;

          7.1.4     Copies of this Company Agreement including all amendments
thereto;

          7.1.5     Any financial statements of the Company;

          7.1.6     The general ledger and subsidiary ledgers of the Company;
and

          7.1.7     Employee benefit and benefit plan records.



     7.2  REPORTS.

          7.2.1     At least 30 days but not more than 90 days prior to the
beginning of each Fiscal Year, the chief executive officer or other designated
officer of the Company (acting under the supervision of the chief executive
officer) shall prepare for the approval by the Management Committee and deliver
to the Members an annual business plan (`Annual Operating  Plan'').  The
initial Annual Operating Plan, for the Fiscal Year ending December 31, 1997,
shall be prepared and delivered to the Members within 15 days after the
Effective Date.  Each Annual Operating Plan shall consist of a strategic plan
setting forth the Company's goals and objectives regarding the operation and
growth of the Company's business during the next Fiscal Year, a description of
the methods for accomplishment of these goals and objectives, the Company's
expense budget, market approach and plan for development and closure of
opportunities; and projected financial statements of the Company for such period
(such statements to include a projected balance sheet, income statement and cash
flow statement).  The Annual Operating Plan shall also include such other
information or other matters requested by the Management Committee necessary in
order to enable the Management Committee to make an informed decision with
respect to its approval of such Annual Operating Plan.

          7.2.2  In addition, the chief executive officer shall provide the
Management Committee and deliver to the Members the following information:

          (a)  as soon as available but in any event within 30 days after the
end of each monthly accounting period in each Fiscal Year (including the last
month of the Fiscal Year), unaudited consolidated statements of income of the
Company for such monthly period and for the period from the beginning of the


Fiscal Year to the end of such month, and balance sheet of the Company as of the
end of such monthly period, setting forth in each case comparisons to the
corresponding period in the preceding Fiscal Year, and all such statements shall
be prepared in accordance with GAAP, subject to the absence of footnote
disclosures and to normal year-end adjustments;

          (b)  as soon as available but in any event within 45 days after the
end of the first three quarterly accounting periods in each Fiscal Year,
unaudited consolidating and consolidated statements of income and cash flows of
the Company for such quarterly period and for the period from the beginning of
the Fiscal Year to the end of such quarter, and consolidating and consolidated
balance sheets of the Company as of the end of such quarterly period, setting
forth in each case comparisons to the annual budget and to the corresponding
period in the preceding Fiscal Year, and all such statements shall be prepared
in accordance with GAAP, subject to the absence of footnote disclosures and to
normal year-end adjustments;

          (c)  within 90 days after the end of each Fiscal Year, consolidating
and consolidated statements of income and cash flows of the Company for such
Fiscal Year, and consolidating and consolidated balance sheets of the Company as
of the end of such Fiscal Year, setting forth in each case comparisons to the
annual budget and to the preceding Fiscal Year, all prepared in accordance with
GAAP, and accompanied by an opinion with respect to the consolidated portions of
such statements, containing no exceptions or qualifications (except for
qualifications regarding specified contingent liabilities and exceptions
relating to the adoption of new accounting standards with which the accounting
firm concurs) of an independent accounting firm of recognized national standing;


          (d)   at least 30 days but not more than 90 days prior to the
beginning of each Fiscal Year, an annual budget prepared on a quarterly basis
for the Company for such Fiscal Year (displaying anticipated statements of
income and cash flows and balance sheets), and promptly upon preparation thereof
any other significant budgets prepared by the Company and any revisions of such
annual or other budgets;

          (e)  promptly (but in any event within five business days) after the
discovery, or receipt of notice, of (i) any Triggering Event, (ii) any default
under any material agreement to which the Company is a party or (iii) any other
material adverse event or circumstance affecting the Company (including the
filing of any material litigation against the Company or the existence of any
dispute with any Person which involves a reasonable likelihood of such
litigation being commenced), an officer's certificate specifying the nature and
period of existence thereof and what actions the Company has taken and propose
to take with respect thereof;

          (f)  within ten days after transmission thereof, copies of all press
releases and other statements made available generally by the Company to the
public concerning material developments in the Company's businesses;

          (g)  as soon as available but in any event within 45 days after the
end of each quarterly accounting period in each Fiscal Year, a calculation of
the aggregate of all Beet Payments, the actual amounts paid by the Company for
sugarbeets, and any Excess Beet Payments;

          (h)  the notices required by Section 9.3, at the times set forth in
Section 9.3, and promptly, within five days of any payment, a calculation of any


amounts paid as cash distributions or advances to Members, in each case showing
such amounts for the month then ended and for the Fiscal Year;

          (i)  in a timely manner, subject to Section 10.4, those information
returns required by the Code and the laws of any state and with information
concerning the Company's income, gain, loss, deduction or credit when relevant
to reporting a Member's or Assignee's share of such items for Federal or state
tax purposes; and

          (j)  with reasonable promptness, such other information and financial
data concerning the Company as any holder of the AGM Interest may reasonably
request (including without limitation information relating to the Company's
employee benefits and benefit plans), which information shall not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make such information not misleading.

     Each of the financial statements referred to in Sections 7.2.2 (a), (b) and
(c) above shall be true and correct in all material respects as of the dates and
for the periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end audit adjustments (none of
which would, alone or in the aggregate, be materially adverse to the financial
condition, operating results, assets, operations or business prospects of the
Company taken as a whole).

          7.2.3     The Company shall permit any representatives designated by
any holder of the AGM Interest, for a purpose reasonably related to such
holder's interest as a holder of the AGM Interest,  upon reasonable notice and
during normal business hours and such other times as any such holder may
reasonably request, to (a) visit and inspect any of the properties of the


Company, (b) examine the financial and other records of the Company and make
copies thereof or extracts therefrom and (c) discuss the affairs, finances and
accounts of the Company with the Management Committee, representatives,
officers, key employees and independent accountants of the Company.  The
presentation of a copy of this Company Agreement containing this Section 7.2.3,
certified by the Chief Executive Officer or Secretary of the Company, by any
such holder to the Company's independent accountants shall constitute the
Company's written permission to its independent accountants to participate in
discussions with such representatives.

     7.3  INFORMATION FROM SRSC.  Until the Principal Reduction, SRSC agrees to
provide the Company and the holders of the AGM Interest written notice of the
amount of SR Term Indebtedness and any other information relating to the SR Term
Indebtedness reasonably requested by the Company or the holders of the AGM
Interest.


                                  ARTICLE VIII
                                      CONTRIBUTIONS AND CAPITAL ACCOUNTS

     8.1  MEMBERS' CAPITAL CONTRIBUTION.  Each Member shall contribute such
assets and amounts as is set forth in APPENDIX A as its Initial Capital
Contributions.  Upon Closing (as defined in the Formation Agreement), each Party
shall receive its Membership Interest.  The Initial Capital Contributions shall
have the value set forth on APPENDIX A.  No interest shall accrue on any Capital
Contribution.


     8.2  ADDITIONAL CAPITAL CONTRIBUTIONS.

          8.2.1     Except as provided in Section 8.2.2, Section 8.2.3 or
Section 9.3, no Member shall be required to make any Capital Contributions other
than the Initial Capital Contributions, and no Member shall have the obligation
to fund operating deficits nor have the obligation to loan, invest or otherwise
provide any funds to the Company.  Any amounts distributed to Members pursuant
to Section 9.3 shall be promptly recontributed to the Company if it is
determined subsequent to the distribution that the distribution was not in
accordance with this Company Agreement.

          8.2.2     If Valhi makes any principal payment to SRSC on the Valhi
Loans, then each holder of the SR Interest shall contribute to the Company,
simultaneously with such principal payment, a pro rata portion (such pro rata
portion to be equal to the portion of the SR Interests held by each such holder)
of the aggregate amount of such principal payment.  The Company and SRSC hereby
instruct Valhi to make any such principal payment directly to the Company.  The
provisions of this Section 8.2.2 shall not apply if the Company has previously
redeemed in full all of the AGM Interest pursuant to Article XVII or if the
holders of the AGM Interest have received full payment upon exercise of the Put
Option granted pursuant to Article XVIII.  If the provisions of the SR Term
Indebtedness prohibit such contribution, then this obligation shall be suspended
until such time as SRSC can make such contribution without violation of the
terms of the SR Term Indebtedness.



          8.2.3     If, during any Fiscal Year of the Company, SRSC contracts to
deliver sugarbeets to the Company, pursuant to the Memorandum of Agreement
between the Company and SRSC attached as Exhibit D-7 to the Formation Agreement
or otherwise, from less than 220,000 acres, and if Distributable Cash (as
defined in clause (A) of the definition of Distributable Cash) for such Fiscal
Year is less than $26,697,368, then within 10 days following the completion of
the Company's audit for such Fiscal Year, SRSC will contribute to the Company an
additional amount in cash equal to the lesser of: (a) the amount by which
Distributable Cash (as defined in clause (A) of the definition of Distributable
Cash) for such Fiscal Year is less than $26,697,372 and (b) the product of (i)
$183 per acre times (ii) 220,000 acres less the number of acres from which SRSC
contracted sugarbeets to the Company during such Fiscal Year.

     8.3  CAPITAL ACCOUNTS.


          8.3.1     A separate Capital Account will be maintained for each
Member and Assignee.  The respective Capital Accounts of each Member and
Assignee will be increased by (1) the amount of money contributed by such Member
to the Company; (2) the Gross Asset Value of Property contributed by such Member
or Assignee to the Company (net of liabilities secured by such contributed
Property that the Company is considered to assume or take subject to, as
provided by Section 752 of the Code); (3) allocations to such Member or Assignee
of Net Profits; and (4) any items in the nature of income and gain which are
specially allocated to the Member or Assignee pursuant to Sections 9.2.1, 9.2.2,
9.2.3, 9.2.4, 9.2.5 or 9.2.9.  The Capital Account of each Member or Assignee
will be decreased by (1) the amount of money distributed to such Member or
Assignee by the Company; (2) the Gross Asset Value of Property distributed to
such Member or Assignee by the Company (net of liabilities secured by such
distributed Property that such Member or Assignee is considered to assume or
take subject to, as provided by Section 752 of the Code); (3) any items in the
nature of deduction and loss which are specially allocated to the Member or
Assignee pursuant to Sections 9.2.1, 9.2.2, 9.2.3, 9.2.4, 9.2.5 or 9.2.9; and
(4), allocations of Net Losses.

          8.3.2     In the event of a permitted sale or exchange of a Membership
Interest in the Company, the Capital Account of the transferor shall become the
Capital Account of the transferee to the extent it relates to the transferred
Membership Interest in accordance with Section 1.704-l(b)(2)(iv)(l) of the
Regulations.

          8.3.3     The manner in which Capital Accounts are to be maintained
pursuant to this Section 8.3 is intended to comply with the requirements of
Section 704(b) of the Code and the Regulations promulgated thereunder.  If, in
the opinion of the Company's accountants, the manner in which Capital Accounts


are to be maintained pursuant to the preceding provisions of this Section 8.3
should be modified in order to comply with Section 704(b) of the Code and the
Regulations thereunder, then notwithstanding anything to the contrary contained
in the preceding provisions of this Section 8.3, the method in which Capital
Accounts are maintained shall be so modified; provided, however, that any change
in the manner of maintaining Capital Accounts shall not materially alter the
economic agreement between or among the Members and Assignees.

          8.3.4     Except as otherwise required in the Act, no Member or
Assignee shall have any liability to restore all or any portion of a deficit
balance in such Member's or Assignee's Capital Account.

     8.4  WITHDRAWAL OR REDUCTION OF MEMBERS' CONTRIBUTIONS.

          8.4.1     Without the consent of both a Majority of the SR Interest
and a Majority of the AGM Interest, no Member or Assignee shall receive out of
the Company assets any part of its Capital Contribution until all liabilities of
the Company, except liabilities to Members on account of their Capital
Contributions, have been paid or there remains Company assets sufficient to pay
them.

          8.4.2     A Member, irrespective of the nature of its Capital
Contribution, has only the right to demand and receive cash in return for its
Capital Contribution; provided, however,   no Member or Assignee shall be
                      --------  -------

entitled to a repayment, return or withdrawal of any part of such Member's or
Assignee's Capital Contribution, or similar distribution, except as provided in
this Company Agreement.


                           ARTICLE IX
      ALLOCATIONS AND DISTRIBUTIONS,  ELECTIONS AND REPORTS

     9.1  ALLOCATION OF PROFITS AND LOSSES.  Except as otherwise set forth in
Section 9.2:

     9.1.1     Allocations of Profits from Operations.  For any Fiscal Year or
other taxable period, the Net Profits of the Company from sources other than a
Major Capital Event shall be allocated as follows:

          (a)  First, in an amount up to the net cash distributed to the Members
for the Fiscal Year as to which Net Profits are being allocated, among the
Members in proportion to the net cash paid to each;

          (b)  Second, to those Members with a negative Capital Account balance
at the beginning of the Fiscal Year as to which Net Profits are being allocated,
in proportion to such negative Capital Account balances until the Capital
Account balances of all such Members would be equal to zero; and

          (c)  Third, to the Members in the proportions then in effect as set
forth in Section 9.3.1(b)(iii).

     9.1.2     Allocation of Income or Gain from a Major Capital Event. Any
income or gain realized by the Company from a Major Capital Event shall be
allocated as follows:

          (a)  First, subject to adjustment as hereafter provided, an amount
equal to the cash to be distributed as a result of such transaction shall be


allocated to those Members who will be distributed such cash pursuant to Section
9.3.2;

          (b)  Second, if the cash distributed exceeds the gain from the Major
Capital Event, the amount tentatively allocated pursuant to Section 9.1.2(a) to
Members with a positive Capital Account balance (determined after the tentative
allocation provided for in Section 9.1.2(a) above) shall be reduced in
proportion to the positive balances of the Capital Accounts of all Members
having positive Capital Account balances immediately prior to the allocation
provided from in Section 9.1.2(a) above until the total amount allocated equals
the total gain from such Major Capital Event to be allocated; provided, that the
amount of reduction for any Member shall not exceed the total amount allocated
to all Members under Section 9.1.2(a) and, any excess reduction shall be
allocated among the remaining Members in the same manner as otherwise provided
in this Section 9.1.2(b);

          (c)  Third, to the Members with negative Capital Account balances
(determined prior to the allocation set forth in Section 9.1.2(a)) in proportion
to the negative balances of such Capital Accounts until the Capital Account
balances of all such Members equal zero;

          (d)  Fourth, to the Members in the percentages then in effect as set
forth in Section 9.3.1(b)(iii); and

          (e)  If some Members have negative Capital Accounts and some have
positive Capital Accounts immediately prior to the allocation provided for in
Section 9.1.2(a), the amount of gain allocable to the Members with positive
Capital Accounts pursuant to this Section shall be reduced in proportion to
their positive balances in an amount not to exceed the lesser of the aggregate


positive Capital Account balances of such Members, or the aggregate negative
Capital Account balances of other Members, and such amount of gain shall instead
be allocated to the Members with negative Capital Account balances in proportion
to their negative balances.

          9.1.3     Allocation of Losses.  Losses shall be allocated among all
the Members in accordance with their respective Capital Interest.

          9.1.4     Recapture.  Any recapture of depreciation or investment tax
credits shall be allocated to the Members who were previously allocated such
depreciation or tax credits.

     9.2  SPECIAL ALLOCATIONS TO CAPITAL ACCOUNTS AND CERTAIN OTHER INCOME TAX
ALLOCATIONS.

          9.2.1     In the event any Member or Assignee receives any
adjustments, allocations, or distributions described in Sections
1.704-l(b)(2)(ii)(d)(4), (5), or (6) of the Regulations, which unexpectedly
create or increase a Deficit Capital Account of such Member, then items of
Company income and gain (consisting of a pro rata portion of each item of
Company income, including gross income, and gain for such year and, if
necessary, for subsequent years) shall be specially allocated to such Member or
Assignee in an amount and manner sufficient to eliminate, to the extent required
by the Regulations, the Deficit Capital Account so created as quickly as
possible.  It is the intent that this Section 9.2.1 be interpreted to comply
with the alternate test for economic effect set forth in Section
1.704-l(b)(2)(ii)(d)  of the Regulations.


          9.2.2     In the event any Member or Assignee would have a Deficit
Capital Account at the end of any Company taxable year, the Capital Account of
such Member shall be specially credited with items of income (including gross
income) and gain in the amount of such excess as quickly as possible.

          9.2.3     Notwithstanding any other provision of this Section 9.2, if
there is a net decrease in the Company Minimum Gain as defined in either
Regulation Section 1.704-2(d) or in the definition of Member Minimum Gain during
a taxable year of the Company, then the Capital Accounts of each Member or
Assignee shall be allocated items of income (including gross income) and gain
for such year (and if necessary for subsequent years) equal to that Member's or
Assignee's share of the net decrease in Company Minimum Gain or Member Minimum
Gain, as applicable.  This Section 9.2.3 is intended to comply with the minimum
gain chargeback requirement of Section 1.704-2 of the Regulations and shall be
interpreted consistently therewith.  If in any taxable year that the Company has
a net decrease in the Company Minimum Gain or there is a net decrease in Member
Minimum Gain, if the minimum gain chargeback requirement would cause a
distortion in the economic arrangement among the Members and Assignees and it is
not expected that the Company will have sufficient other income to correct that
distortion, the Management Committee may in its discretion (and shall, if
requested to do so by a Member) seek to have the Internal Revenue Service waive
the minimum gain chargeback requirement in accordance with Regulation Section
1.704-2(f)(4).

          9.2.4     Items of Company loss, deduction and expenditures described
in Section 705(a)(2)(B) which are attributable to any nonrecourse debt of the
Company are characterized as partner (Member) nonrecourse deductions under
Section 1.704-2(i) of the Regulations and shall be allocated to the Members'
Capital Accounts in accordance with Section 1.704-2(i) of the Regulations.



          9.2.5     Beginning in the first taxable year in which there are
allocations of `nonrecourse deductions'' (as described in Section 1.704-2(b) of
the Regulations) such deductions shall be allocated to the Members or Assignees
in the same manner as Net Profits or Net Losses are allocated for such period.

          9.2.6     In accordance with Section 704(c)(1)(A) of the Code and
Section 1.704-l(b)(2)(I)(iv) of the Regulations, if a Member or Assignee
contributes Property with a Gross Asset Value that differs from its adjusted
basis at the time of contribution, income, gain, loss and deductions with
respect to the Property shall, solely for federal income tax purposes (and not
for Capital Account purposes), be allocated among the Members and Assignees so
as to take account of any variation between the adjusted basis of such Property
to the Company and its fair market value at the time of contribution in
accordance with Section 1.704-3(b)(i) of the Regulations; provided, however,
that the gain from the sale of contributed Property shall be allocated first to
the contributing Member to the extent necessary to offset the effect of the
ceiling rule limitation under Section 1.704-3(b)(1) of the Regulations.

          9.2.7     In the case of any distribution of Property other than money
by the Company to a Member or Assignee, such Member or Assignee shall, solely
for federal income tax purposes (and not for Capital Account purposes), be
treated as recognizing gain in an amount equal to the lesser of:

          (a)  the excess (if any) of (A) the fair market value of the Property
received in the distribution over (B) the adjusted basis of such Member's or
Assignee's Membership Interest immediately before the distribution reduced (but
not below zero) by the amount of money received in the distribution; or


          (b)  the Net Precontribution Gain (as defined below in accordance with
Section 737(b) of the Code) of the Member or Assignee.  The Net Precontribution
Gain means the net gain (if any) which would have been recognized by the
distributee Member or Assignee under Section 704(c)(1)(B) of the Code of all
Property which (1) had been contributed to the Company within five years of the
distribution, and (2) is held by the Company immediately before the
distribution, had been distributed by the Company to another Member or Assignee.
 If any portion of the Property distributed consists of Property which had been
contributed by the distributee Member or Assignee to the Company, then such
Property shall not be taken into account under this Section 9.2.7 and shall not
be taken into account in determining the amount of the Net Precontribution Gain.
 If the Property distributed consists of an interest in an organization, the
preceding sentence shall not apply to the extent that the value of such interest
is attributable to the Property contributed to such organization after such
interest had been contributed to the Company.

          9.2.8     All recapture of income tax deductions resulting from sale
or disposition of Company Property shall be allocated to the Member(s) or
Assignee(s) to whom the deduction that gave rise to such recapture was allocated
hereunder to the extent that such Member or Assignee is allocated any gain from
the sale or other disposition of such Property.

          9.2.9      Any credit or charge to the Capital Accounts of the Members
or Assignees pursuant to Sections 9.2.1, 9.2.2, 9.2.3, 9.2.4 and/or 9.2.5 hereof
shall be taken into account in computing subsequent allocations of Net Profits
and Net Losses pursuant to Section 9.1, so that the net amount of any items
charged or credited to Capital Accounts pursuant to Sections 9.1 and 9.2.1,
9.2.2, 9.2.3, 9.2.4 and/or 9.2.5 shall to the extent possible, be equal to the
net amount that would have been allocated to the Capital Account of each Member


or Assignee pursuant to the provisions of this Article IX if the special
allocations required by Sections 9.2.1, 9.2.2, 9.2.3, 9.2.4 and/or 9.2.5 hereof
had not occurred.

     9.3  DISTRIBUTIONS.  Commencing with the Company's 1997 Fiscal Year, the
Company shall make distributions of cash to its Members in accordance with the
following:

          9.3.1     On or before the first day of each calendar month,
commencing with January 1, 1997, the Company shall make a good faith estimate of
Distributable Cash for the then current Fiscal Year and provide written notice
of such estimate to each Member.

          (a)  On or before the 15th day of each calendar month, commencing with
January 1997, the Company shall distribute to its Members cash in an aggregate
amount equal to the lesser of (i) the product of (A) the Company's estimated
Distributable Cash for such Fiscal Year (based on the Company's estimate as of
the first day of such month) times (B) a fraction, the numerator of which is the
number of calendar months which have commenced in the current Fiscal Year
(including the current month) and the denominator of which is 12, and (ii) the
sum of (A) the product of $2,224,781 times the number of calendar  months which
have commenced in the current Fiscal Year (including the current month), plus
(B) any unpaid Accrual as of the beginning of such Fiscal Year; and, in each
case set forth in (i) or (ii) above, less the aggregate amount actually
distributed to Members pursuant to this Section 9.3.1(a) for each prior month of
the current Fiscal Year.  Such distributions shall be in the following
percentages: 95% to the holders of the AGM Interest and 5% to the holders of the
SR Interest.


          (b)  Within 10 days following the completed audit of the books of the
Company for each Fiscal Year commencing with Fiscal Year 1997, the Company will
determine its actual Distributable Cash for such Fiscal Year and provide written
notice of such determination to each Member.  If the Company's actual
Distributable Cash for such Fiscal Year (based on such audit) exceeds amounts
previously distributed to Members for such Fiscal Year pursuant to Section
9.3.1(a) above, then, within 30 days following such audit, the Company shall
distribute to its Members cash in an aggregate amount equal to 100% of such
actual Distributable Cash for such Fiscal Year (based on the Company's audit)
less amounts actually distributed pursuant to Section 9.3.1(a) above.  Such
distributions shall be paid in the following percentages and priority:

          (i)  95% to the holders of the AGM Interest and 5% to the holders of
the SR Interest, until the Members have received, pursuant to this Section
9.3.1(b)(i) and Section 9.3.1(a), cash distributions for such Fiscal Year in an
aggregate amount equal to the lesser of (A) the Company's Distributable Cash for
such Fiscal Year and (B) $26,697,372 plus any unpaid Accrual as of the beginning
of such Fiscal Year, and

          (ii) next, 95% to the holders of the AGM Interest and 5% to the
holders of the SR Interest, until such holders have received an aggregate amount
of $15,789,474 (on a cumulative basis for all Fiscal Years of the Company
commencing with Fiscal Year 1997), provided that the Members shall have no right
to any distribution pursuant to this Section 9.3.1(b)(ii) for any Fiscal Year
following the Company's 2002 Fiscal Year, whether or not the Members have
received all or any part of the distribution pursuant to this Section
9.3.1(b)(ii) (provided that this shall not affect the Member's rights to receive
any Deferral amount after the Company's 2002 Fiscal Year, to the extent such
Deferral amount arose prior to the Company's 2002 Fiscal Year), and



          (iii)     next, 5% to the holders of the AGM Interest and 95% to the
holders of the SR Interest for the Company's 1997 Fiscal Year through and
including the 2002 Fiscal Year, or 10% to the holders of the AGM Interest and
90% to the holders of the SR Interest, for the Company's 2003 Fiscal Year and
thereafter.

     To the extent the amounts distributed to the Members pursuant to Section
9.3.1(a) above exceed the Company's actual Distributable Cash for such Fiscal
Year (based on the Company's audit), the Members shall be obligated to return to
the Company, within 10 days following the completed audit of the books of the
Company, an amount of cash equal to any excess of the aggregate amount actually
distributed during such Fiscal Year to each Member (pursuant to Section 9.3.1(a)
above) over such Member's respective share of the Company's actual Distributable
Cash.  Any such amounts that are owed to the Company by the Members may be
offset against any distributions owed to the Members pursuant to this Section
9.3.1.

          (c)  Notwithstanding the foregoing, any distribution to the holders of
the SR Interest pursuant to this Section 9.3.1 will be reduced by any Excess
Beet Payment made during such Fiscal Year (based upon final distribution of the
Beet Payment), and any Excess Beet Payment made during such Fiscal Year will,
for purposes of this Section 9.3.1, be treated as if distributed in cash to the
holders of the SR Interest ratably at the times and in the manner set forth in
Section 9.3.1(a).

          (d)  Notwithstanding the foregoing,


          (i)  the holders of the AGM Interest may not receive any distribution
for either of the Company's 1997 or 1998 Fiscal Years that, when added to all
other distributions for such Fiscal Year, will exceed an aggregate of
$25,362,500,

          (ii) until the first distribution date following the date of the
Principal Reduction, no amounts shall be distributed to the holders of the AGM
Interest pursuant to the provisions of Sections 9.3.1(b)(ii) and (b)(iii) above,
and

          (iii)     until the first distribution date following the date of the
Principal Reduction, the amounts distributed to holders of the AGM Interest
pursuant to the provisions of Section 9.3.1(a) shall be reduced (but not to an
amount less than zero) by an amount equal to one half of any interest to become
accrued or due on Tranche B of the SR Term Indebtedness (the `Monthly Tranche B
Interest'), during the month in which any distribution is made pursuant to
Section 9.3.1(a).  Except as otherwise consented to by the holders of a Majority
of the AGM Interest, the provisions of this Section 9.3.1(d)(iii) shall cease to
apply (A) following any default under any of the terms of any of the SR Term
Indebtedness, or (B) if the Company's estimate of Distributable Cash for any
month indicates that the amount of any distribution pursuant to Section 9.3.1(a)
to the holders of the AGM Interest during such month would, but for the
provisions of this Section 9.3.1(d)(iii), be less than the Monthly Tranche B
Interest.

          The amounts that would otherwise have been distributed to the holders
of the AGM Interest, but for the provisions of Sections 9.3.1(d)(i), (d)(ii) and
(d)(iii) above, is referred to in this Agreement as the `Deferral.''  Instead
of the Deferral being paid to the holders of the AGM Interest, an amount equal


to the Deferral shall instead be paid dollar for dollar to the holders of the SR
Interest at the times set forth in Section 9.3.1(a) or Section 9.3.1(b), as
appropriate.  Following the date of the Principal Reduction, amounts which would
otherwise be distributed to the holders of the SR Interest pursuant to Sections
9.3.1(b)(ii) and (b)(iii) shall be reduced (and such distribution shall instead
be paid dollar for dollar to the holders of the AGM Interest) in an amount equal
to the sum of  the amount of the Deferral, plus interest on such Deferral, from
the date any Deferral amount would otherwise have been paid to the holders of
the AGM Interest until the date an amount equal to such Deferral and such
interest is actually paid to the holders of the AGM Interest pursuant to this
Section 9.3.1(d), at a rate equal to (i) 10.145% per annum, compounded annually,
for all amounts other than Deferrals arising pursuant to Section 9.3.1(b)(ii),
and (ii) 5.0725% per annum, compounded annually, for all amounts of the Deferral
arising pursuant to Section 9.3.1(b)(ii).

          (e)  Amounts distributed to the holders of the AGM Interest pursuant
to the provisions of Sections 9.3.1(a) and 9.3.1(b)(i) shall be considered
`preferred returns'' for purposes of Section 1.707-4(a)(3) of the Regulations.

          9.3.2     The Company shall distribute any Distributable Cash from a
Major Capital Event, (i) first, to the Members in an amount equal to any unpaid
Accrual, 95% to the holders of the AGM Interest and 5% to the holders of the SR
Interest, (ii) second, to the holders of the AGM Interest, until such holders
have received an amount equal to any Deferral and any Insurance Deferral, (iii)
third, to the Members pro rata in accordance with their Sharing Ratios, until
each Member has received an amount under this Section 9.3.2 equal in the
aggregate to the Capital Contribution made by each Member, and (iv) fourth, to
the Members in the percentages then in effect under Section 9.3.1(b)(iii).  Any
amounts which would be distributed under this Section 9.3.2 to holders of the


AGM Interest during the 1997 or 1998 Fiscal Years of the Company, to the extent
such distributions would cause distributions to the holders of the AGM Interest
for either of the Company's 1997 or 1998 Fiscal Years to exceed an aggregate of
$25,362,500, shall not be distributed in such Fiscal Years but shall instead be
paid to the holders of the AGM Interest in the Company's 1999 Fiscal Year.

          If the Major Capital Event is also an Insurance Event, then prior to
any distribution pursuant to the first paragraph of this Section 9.3.2, an
amount of Distributable Cash from the Insurance Event (up to an amount equal to
any outstanding principal, interest and other amounts outstanding on the SR Term
Indebtedness) shall be distributed to the holders of the SR Interest.  The
amounts that would otherwise have been distributed to the holders of the AGM
Interest, but for the provisions of the immediately preceding sentence is
referred to in this Agreement as the `Insurance Deferral.''  Following the date
of the Principal Reduction, amounts which would otherwise be distributed to the
holders of the SR Interest pursuant to Section 9.3.1(b)(ii) and (b)(iii) shall
be reduced (and such distribution shall instead be paid dollar for dollar to the
holders of the AGM Interest) in an amount equal to the sum of (i) the amount of
the Insurance Deferral, plus (ii) interest on such Insurance Deferral at the
rate of 10.145% per annum, compounded annually, from the date any Insurance
Deferral amount would otherwise have been paid to the holders of the AGM
Interest until the date an amount equal to such Insurance Deferral and such
interest is actually paid to the holders of the AGM Interest pursuant to this
Section 9.3.2.  The provisions of this paragraph shall cease to apply following
the Principal Reduction.

          Notwithstanding anything to the contrary in this Section 9.3.2, if a
Major Capital Event is incident to or results in the liquidation of the Company,


Distributable Cash therefrom shall be distributed in accordance with Section
13.3.

          9.3.3     No distribution shall be declared and paid unless, after the
distribution is made, the fair value of assets of the Company are in excess of
all liabilities of the Company and the Company will be rendered insolvent within
the meaning of UCC  Section1-201(23).

     9.4  ACCOUNTING PRINCIPLES.  The profits and losses of the Company for
Income Tax purposes shall be determined in accordance with accounting principles
applied on a consistent basis using the accrual method of accounting.  It is
intended that the Company will elect those accounting methods for federal income
tax purposes which provide the Members with the greatest income tax benefits.


                                   ARTICLE X
                                                                   TAXES

     10.1 ELECTIONS.  Except as otherwise provided in this Company Agreement,
the Management Committee may make any tax elections for the Company allowed
under the Code or the tax laws of any state or other jurisdiction having taxing
jurisdiction over the Company, provided that the Management Committee shall
first provide reasonable written notice of any proposed tax election to each
Member and shall provide each Member with an opportunity to comment on such
proposed election.

     10.2 TAXES OF TAXING JURISDICTIONS.   All amounts withheld pursuant to the
Code or any provisions of any state or local tax law with respect to any
distribution to the Members shall be treated as amounts distributed in cash to


the Members pursuant to Section 9.3 for all purposes under this Agreement.  The
Management Committee may, where permitted by the rules of any taxing
jurisdiction, file a composite, combined or aggregate tax return reflecting the
income of the Company and pay the tax, interest and penalties of some or all of
the Members on such income to the taxing jurisdiction, in which case the Company
shall inform each Member of the amount of such tax interest and penalties so
paid.

     10.3 TAX MATTERS PARTNER.  SRSC shall serve as the initial "tax matters
partner" pursuant to Section 6231(a)(7) of the Code.  The Management Committee
may designate another Member as the "tax matters partner" of the Company.  Any
Member designated as tax matters partner shall take such action as may be
necessary to cause each other Member to become a notice partner within the
meaning of Section 6223 of the Code.  Any Member who is designated tax matters
partner may not take any action contemplated by Sections 6222 through 6232 of
the Code without the consent of the other Members. SRSC shall have the authority
to represent the Company in all audits or other administrative proceedings with
state or local taxing authorities subject to the same limits, notice
requirements and approval requirements imposed on SRSC in its capacity as `tax
matters partner''under this Section 10.3.

     10.4 TAX RETURNS.  The `tax matters partner'' shall cause all necessary
federal, state and local income tax returns to be timely prepared and filed and
shall furnish to each Member and Assignee a copy of any proposed return not less
than 30 days prior to filing for the purpose of providing each Member and
Assignee an opportunity to review such return and to discuss with the `tax
matters partner''the appropriate treatment of any items of issues relevant to
such return.



                                   ARTICLE XI
                                     DISPOSITION OF MEMBERSHIP INTERESTS

     11.1 GENERAL.  Neither a Member nor an Assignee shall have the right to
Dispose, except in the case of bankruptcy, all or any part of its Membership
Interest to any Person, without the consent of the other Members which consent
may be withheld in the absolute discretion of such non-transferring Members.
Each Member and Assignee hereby acknowledges the reasonableness of the
restrictions on sale and gift of the Membership Interests imposed by this
Company Agreement in view of the Company's purposes and the relationship among
the Members and Assignees.  Accordingly, the restrictions on Disposition
contained herein shall be specifically enforceable.  For purposes of this
Article XI, AGM hereby consents to SR's pledge of the SR Interest to the lenders
under the SR Term Indebtedness, and SR hereby consents to AGM's pledge of the
AGM Interest under the Valhi Loans.

     11.2 REQUIREMENTS OF TRANSFER.  No Disposition of a Membership Interest in
the Company shall be effective unless and until written notice (including the
name and address of the proposed transferee or donee and the date of such
Disposition) has been provided to the Company and the non-transferring Members.

     11.3 DISPOSITION.  Any Member or Assignee may Dispose of all or a portion
of the Member's or Assignee's Membership Interest upon compliance with this
Article XI.  In addition to the other requirements of this Article XI, no
Membership Interest shall be Disposed of:

          11.3.1    without an opinion of counsel satisfactory to the Management
Committee that such assignment is subject to an effective registration under, or


exempt from the registration requirements of, the applicable state and federal
securities laws;

          11.3.2    unless and until the Company receives from the Assignee the
information and agreements that the Management Committee may reasonably require,
including but not limited to any taxpayer identification number and any
agreement that may be required by any taxing jurisdiction;

          11.3.3  without the consent of all Members if such Disposition when
added to the total of all other Dispositions within the preceding twelve (12)
months would result in the Company being considered to have terminated within
the meaning of Code section 708; and

          11.3.4. unless and until the Company receives from the Assignee its
written agreement to be bound by and subject to the terms hereof.

     11.4 TRANSFEREE NOT MEMBER IN ABSENCE OF CONSENT.  Notwithstanding anything
contained in this Agreement to the contrary, if any proposed assignment of the
transferring Member's Membership Interest to an Assignee which is not a Member
is not unanimously approved by the Members (which approval may be withheld in
the absolute discretion of the Members), then the Assignee shall have no right
to participate in the management of the business and affairs of the Company or
to become a Member.  In the event that an Assignee does not become a Member of
the Company, the Assigning Member shall retain all rights to participate in the
management of the business and the affairs of the Company, including all Member
voting rights and all other rights not transferred to Assignee, and the
Assigning Member shall be entitled to exercise all such rights on its own behalf
or on behalf of the Assignee to the same extent as prior to any such transfer.


     11.5 DISPOSITIONS NOT IN COMPLIANCE WITH THIS ARTICLE VOID.  Any attempted
Disposition of a Membership Interest, or any part thereof, not in compliance
with this Article XI shall be, and is declared to be, null and void ab initio.


                                  ARTICLE XII
                           ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS

     Any Person may become a Member of this Company upon (i) the unanimous
consent of the Members or (ii) pursuant to Article XI as an Assignee of a
Member's Interest or any portion thereof, subject to the terms and conditions of
this Company Agreement.  No new Members shall be entitled to any retroactive
allocation of losses, income, expenses or deductions incurred by the Company.
The Management Committee may, in its reasonable discretion, at the time an
Additional Member or Substituted Member is admitted, close the Company books (as
though the Company's tax year had ended) or make pro rata allocations of loss,
income, expenses and  deductions to an Additional Member or Substituted Member
for that portion of the Company's tax year in which a Member was admitted in
accordance with the provisions of Section 706(d) of the Code and the Treasury
Regulations promulgated thereunder.


                                  ARTICLE XIII
                                              DISSOLUTION AND WINDING UP

     13.1 DISSOLUTION.

          13.1.1    The Company shall be dissolved and its affairs wound up,
upon the first to occur of the following events:

          (a)  the unanimous vote of all Members;

          (b)   upon the death, insanity, retirement, resignation, or
dissolution of a Member or upon a Member becoming a Bankrupt Member or
occurrence of any other event which terminates the continued membership of a
Member in the company (a "Withdrawal Event"), unless the business of the Company
is continued by the affirmative vote of the remaining Members holding a Majority
of the SR Interest (if any) and the remaining Members holding a Majority of the
AGM Interest (if any) within 90 days after the Withdrawal Event;

          (c)  the entry of a decree of dissolution pursuant to Section 18-802
of the Act; and

          (d)  upon the written request of AGM, provided that federal tax
legislation has become effective prior to the fifth anniversary of the Effective
Date, providing for the deferral of capital gains taxation on the disposition of
capital stock to an agricultural cooperative.

          13.1.2    Notwithstanding anything to the contrary in this Company
Agreement, if the dissolution of the Company is approved by the affirmative vote
of all Members pursuant to Section 13.1.1(a), then all of the Members shall


agree in writing to dissolve the Company as soon as possible (but in any event
not more than ten (10) days) thereafter.

          13.1.3    As soon as possible following the occurrence of any of the
events specified in this Article XIII effecting the dissolution of the Company,
an appropriate representative of the Company shall execute a statement of intent
to dissolve in such form as shall be prescribed by the Delaware Secretary of
State and file same with the Delaware Secretary of State's office.

          13.1.4    If a Member who is an individual dies or a court of
competent jurisdiction adjudges him to be incompetent to manage his person or
his assets, the Member's executor, administrator, guardian, conservator, or
other legal representative may exercise all of the Member's rights for the
purpose of settling his estate or administering his assets.

          13.1.5    Except as expressly permitted in this Company Agreement, a
Member shall not voluntarily resign or take any other voluntary action which
directly causes a Withdrawal Event.  Damages for breach of this Section 13.1.5
shall be monetary damages only, and such damages may be offset against
distributions by the Company to which such resigning Member would otherwise be
entitled.

     13.2 EFFECT OF DISSOLUTION.  Upon the dissolution of the Company which is
not followed by an election pursuant to Section 13.1.1(b) to continue the
Company, the Company shall cease to carry on its business, except insofar as may
be necessary for the winding up of its business, but its separate existence
shall continue until a certificate of dissolution has been issued by the
Secretary of State or until a decree dissolving the Company has been entered by
a court of competent jurisdiction.



     13.3 WINDING UP, LIQUIDATION AND DISTRIBUTION OF ASSETS.

          13.3.1    Upon dissolution, an accounting shall be made by the
Company's independent accountants of the accounts of the Company and of the
Company's assets, liabilities and operations, from the date of the last previous
accounting until the date of dissolution.  The Management Committee shall
immediately proceed to wind up the affairs of the Company.

          13.3.2    If the Company is dissolved and its affairs are to be wound
up, the Management Committee shall:

          (a)  Sell or otherwise liquidate all of the Company's assets as
promptly as practicable (except to the extent the Management Committee may
determine to distribute any assets to the Members in kind);

          (b)  Allocate any Net Profits or Net Losses resulting from such sales
to the Members' and Assignee's Capital Accounts in accordance with Article IX
hereof;

          (c)  Discharge all liabilities of the Company, including liabilities
to Members and Assignees who are also creditors, to the extent otherwise
permitted by law, other than liabilities to Members and Assignees for
distributions and the return of capital, and establish such reserves as may be
reasonably necessary to provide for contingent liabilities of the Company (for
purposes of determining the Capital Accounts of the Members and Assignees, the
amounts of such reserves shall be deemed to be an expense of the Company); and


          (d)  Distribute the Company assets as follows:

               (i)  First, to all Members and Assignees in an amount equal to
their respective positive Capital Account balances taking into account all
Capital Account adjustments for the Company's taxable year in which the
liquidation occurs; provided, that to the extent the positive Capital Account
balance of AGM exceeds the positive Capital Account balance of SRSC, such excess
shall be paid to AGM first, prior to any distribution to SRSC; and

               (ii) Then, to the Members in the percentages then in effect as
set forth in Section 9.3.1(b)(iii);

     provided, however, that if the dissolution of the Company occurs pursuant
to Section 13.1.1(d), then the Members shall endeavor to terminate and dissolve
the Company and distribute its assets, so that upon such distribution SRSC will
receive a sum in cash equal to its Initial Capital Contribution and AGM will
receive, in kind, all remaining assets of the Company.

          13.3.3    Notwithstanding anything to the contrary in this Company
Agreement, upon a liquidation within the meaning of Section 1.704-l(b)(2)(ii)(g)
of the Regulations, if any Member has a Deficit Capital Account (after giving
effect to all contributions, distributions, allocations and other Capital
Account adjustments for all taxable years, including the year during which such
liquidation occurs), such Member shall have no obligation to make any Capital
Contribution, and the negative balance of such Member's Capital Account shall
not be considered a debt owed by such Member to the Company or to any other
Person for any purpose whatsoever.


          13.3.4    Upon completion of the winding up, liquidation and
distribution of the assets, the Company shall be deemed terminated.

          13.3.5    The Management Committee shall comply with any applicable
requirements of applicable law pertaining to the winding up of the affairs of
the Company and the final distribution of its assets.

     13.4 CERTIFICATE OF DISSOLUTION.  When all debts, liabilities and
obligations have been paid and discharged or adequate provisions have been made
therefor and all of the remaining assets have been distributed to the Members,
the certificate of dissolution shall be executed in duplicate and shall be
delivered to the Delaware Secretary of State.  Upon the issuance of the
certificate of dissolution, the existence of the Company shall cease, except for
the purpose of suits, other proceedings and appropriate action as provided in
the Act.  The Management Committee shall have authority to distribute any
Company assets discovered after dissolution, convey real estate and take such
other action as may be necessary on behalf of and in the name of the Company.

     13.5 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS.  Except as
provided by law or as expressly provided in this Company Agreement, upon
dissolution, each Member shall look solely to the assets of the Company for the
return of its Capital Contribution.  If the Company assets remaining after the
payment or discharge of the debts and liabilities of the Company is insufficient
to return the cash contribution of one or more Members, such Member or Members
shall have no recourse against any other Member, except to the extent any Member
knowingly received a distribution made in violation of this Company Agreement.



                           ARTICLE XIV
                            AMENDMENT

     14.1 AMENDMENT OF COMPANY AGREEMENT.  This Company Agreement may be amended
from time to time only by a written instrument adopted and executed by the
unanimous vote or written consent of all Members.

     14.2 AMENDMENTS UPON A MAJOR CAPITAL EVENT.  Upon the occurrence of a Major
Capital Event, the Members agree to negotiate in good faith to amend this
Company Agreement as necessary or desirable to reflect any economic or
structural changes to the Company or among the Members which may have resulted
from such Major Capital Event.


                                ARTICLE XV
                                                MISCELLANEOUS PROVISIONS

     15.1 ENTIRE AGREEMENT.  This Company Agreement represents the entire
agreement among all the Members and between the Members and the Company and
supersedes all prior oral or written agreements and understandings with respect
to the subject matter of this Company Agreement.

     15.2 NO PARTNERSHIP INTENDED FOR NONTAX PURPOSES.  The Members have formed
the Company under the Act and expressly do not intend hereby to form a
partnership under either the Delaware Uniform Partnership Act or the Delaware
Uniform Limited Partnership Act.  The Members do not intend to be partners one
to another, or partners as to any third party.  To the extent any Member, by
word or action, represents to another person that any other Member is a partner


or that the Company is a partnership, the Member making such wrongful
representation shall be liable to any other Member who incurs personal liability
by reason of such wrongful representation.

     15.3 RIGHTS OF CREDITORS AND THIRD PARTIES UNDER COMPANY AGREEMENT.  This
Company Agreement is entered into among the Company and the Members for the
exclusive benefit of the Company, its Members and their successors and
assignees.  This Company Agreement is expressly not intended for the benefit of
any creditor of the Company or any other Person except to the extent
specifically provided herein.  Except and only to the extent expressly provided
in this Company Agreement or by applicable statute, no such creditor or third
party shall have any rights under this Company Agreement or any agreement
between the Company and any Member with respect to any Capital Contribution or
otherwise.

     15.4 CONFIDENTIALITY.  Each of the Members acknowledges that, in its
capacity as such, it will have access to trade secrets and confidential
information of the Company (collectively, the `Information''), and each agrees
that such Information belongs exclusively to the Company.  The Information shall
include any information which is or has been disclosed to a Member, or of which
such Member became aware as a consequence of or through its status as a Member
of the Company, which has value to the Company, is not generally known by the
public or the Company's competitors and which is treated by the Company as
confidential, whether or not such material or information is marked
`confidential.''  The obligation of confidentiality imposed by this Section
15.4 shall not apply to any information (and, as used in this Agreement, the
term Information shall not include any information) that is: (i) ascertainable
from public or published information or trade sources (provided such information
has not been made public from any act or omission of the disclosing Member); or


(ii) required to be publicly disclosed by law, rule, regulation or court order.
 Each Member acknowledges and agrees that the Information is a unique asset of
the Company which is of a confidential nature and has significant value and that
the disclosure of all or any part of the Information to third Persons may be
damaging to the Company.  Each Member agrees that, during the term of the
Company, it will keep confidential and not directly or indirectly divulge,
furnish or make accessible to anyone any of the Information, unless (i) the
Management Committee determines that such disclosure would be in the best
interest of the Company; (ii) such disclosure is necessary in order for such
Member to enforce its rights or perform its obligations under this Agreement,
(iii) such disclosure is required by law, rule, regulation or court order or by
rule of any stock exchange or similar entity listing the securities of the
Member or an Affiliate of such Member, or (iv) such disclosure is to financial
representatives, counsel, accountants or business advisors of such Member or to
a prospective acquiror of such Member's or any of its parent's business or
assets, provided that such Persons agree to be bound by a similar, appropriate
confidentiality agreement.

     15.5 AGREEMENT, EFFECT OF INCONSISTENCIES WITH ACT.  For and in
consideration of the mutual covenants herein contained and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Members hereby agree to the terms and
conditions of this Company Agreement, as it may from time to time be amended
according to its terms.  It is the express intention of the Members that this
Company Agreement shall be the sole source of agreement among the Members, and,
except to the extent a provision of this Company Agreement expressly
incorporates federal income tax rules by reference to Sections of the Code or
Regulations or is expressly prohibited or ineffective under the Act, this
Company Agreement shall govern, even when inconsistent with, or different than,


the provisions of the Act or any other law or rule.  To the extent any provision
of this Company Agreement is prohibited or ineffective under the Act, this
Company Agreement shall be considered amended to the smallest degree possible in
order to make the Agreement effective under the Act.  In the event the Act is
subsequently amended or interpreted in such a way to make any provision of this
Company Agreement that was formerly invalid valid, such provision shall be
considered to be valid from the effective date of such interpretation or
amendment.  The parties hereby agree that each party shall be entitled to rely
on the provisions of this Company Agreement, and no party shall be liable to the
Company or to any Member for any action or refusal to act taken in good faith
reliance on the terms of this Company Agreement.  The Members and the Company
hereby agree that the duties and obligations imposed on the Company and the
Members as such shall be those set forth in this Company Agreement, which is
intended to govern the relationship among the Company and the Members,
notwithstanding any provision of the Act or common law to the contrary.

     15.6 NOTICE.

          15.6.1    Any notice to any Member shall be at the address of such
Member set forth in APPENDIX A hereto or such other mailing address of which
such Member shall advise the Company in writing.  Any notice to the Company
shall be at the principal office of the Company as set forth in Section 1.6
hereof or such other address as amended by the Management Committee, upon due
notice to each Member in accordance with this Section 15.6.

          15.6.2    Any notice hereunder shall be in writing and shall be deemed
to have been duly given if personally delivered, sent by overnight courier or
sent by United States mail, or by facsimile transmission, and will be deemed
received, (i) if sent by certified or registered mail, return receipt requested,


when actually received, (ii) if sent by overnight courier, when actually
received, (iii) if sent by facsimile transmission on the date sent, and (iv) if
delivered by hand, on the date of receipt.

          15.6.3.  Numerical or alphabetic references to articles, sections,
paragraphs, clauses, schedules, exhibits and appendices in this agreement are to
articles, sections, paragraphs, clauses, schedules, exhibits and appendices of
this Company Agreement unless otherwise stated.


                                  ARTICLE XVI
                                                       REMEDY PROVISIONS

     16.1 TRIGGERING EVENT.  Upon the occurrence of a Triggering Event, the
holders of the AGM Interest will be entitled to enforce the provisions of this
Company Agreement specifically, to recover damages by reason of any breach of
any provision of this Company Agreement and to exercise all other rights to
which they may be entitled.  The Company and its Members agree and acknowledge
that money damages may not be an adequate remedy for breach of the provisions of
this Company Agreement and that the holders of the AGM Interest may in their
sole discretion apply to any court of law or equity of competent jurisdiction
for specific performance and/or injunctive relief in order to enforce or prevent
any violations of the provisions of this Company Agreement.


     16.2 DISTRIBUTIONS.

          16.2.1    In addition to any other remedies provided by this Company
Agreement, if at any time the unpaid Accrual exceeds the sum of $10,526,316 (the
`Accrual Threshold''), or upon the occurrence of a Triggering Event, the
holders of the AGM Interest voting separately as a class shall have the right to
elect a majority of the representatives to the Management Committee.  Whenever
the holders of the AGM Interest shall be entitled to elect such representatives
in accordance with the terms of this Section 16.2, then at the request of a
holders of a Majority of the AGM Interest, the secretary of the Company (or if
at the time the Company has no secretary, then the chief executive officer or
president of the Company) shall call a special meeting of the holders of the AGM
Interest, such special meeting to be held within 60 days after the date on which
the Accrual is equal to or exceeds the Accrual Threshold or such Triggering
Event occurs, for the purpose of enabling the holders of the AGM Interest to
elect such representatives to the Management Committee; provided, however, that
such special meeting need not be called if the holders of the AGM Interest have
duly elected representatives by a written consent or power of attorney executed
by holders of at least a Majority of the AGM Interest or otherwise.  At any such
special meeting, the presence, in person or by proxy, of a Majority of the AGM
Interest shall be required and be sufficient to constitute a quorum for the
election of any Management Committee representative and the affirmative vote of
Majority of the AGM Interest so present at such meeting shall be sufficient to
elect any such representative.

          16.2.2    Immediately after the date on which the Accrual equals or
exceeds the Accrual Threshold or such Triggering Event occurs, the number of
representatives to the Management Committee shall be set at eleven, with five of
such representatives being representatives then in office or otherwise selected


by the holders of a Majority of the SR Interest, and six of such representatives
being selected by the holders of a Majority of the AGM Interest.  Any
representative elected by the holders of the AGM Interest shall cease to serve
as a representative whenever no unpaid Accrual exists and all Accrual amounts
have been paid in full and any Triggering Event has been cured.  If, prior to
the end of the term of any representative elected by the holders of the AGM
Interest, a vacancy in the office of such representative shall occur by reason
of death, resignation, removal or disability, or for any other cause, such
vacancy shall be filled for the unexpired term by the remaining representative
or representatives elected by the holders of the AGM Interest, or in the event
there is no such remaining representative, by a vote of the holders of the AGM
Interest as provided in this Section 16.2.2.  Any representative elected by the
holders of the AGM Interest may be removed with or without cause only by the
vote of the holders of a Majority of the AGM Interest.


                                  ARTICLE XVII
                                          REDEMPTION OF THE AGM INTEREST

     17.1      OPTIONAL REDEMPTION BY THE COMPANY.  At any time and from time to
time after the 30th anniversary of the Effective Date, the Company may redeem
all but not less than all of the AGM Interest at a price equal to the Redemption
Price.  If the Company desires to redeem all of the AGM Interest as permitted by
this Section 17.1, the Company shall mail holders of the AGM Interest written
notice of such determination at least 60 days and not more than 90 days prior to
the date specified in such notice for redemption of the AGM Interest.

     17.2 MANDATORY REDEMPTION UPON REQUEST OF A HOLDER.  At any time and from
time to time on or after the earlier of (i) the fifth anniversary of the


Effective Date and (ii) occurrence of a Triggering Event, any holder of the AGM
Interest may provide the Company with written notice of the holder's intent to
require the Company to redeem all or part of the AGM Interest held by such
holder.  The Company shall redeem all of the AGM Interest specified in such
redemption notice, at a price equal to the Redemption Price, on a date set by
the Company, which shall be within 15 days of the date of the holder's
redemption notice.  For purposes of this Article XVII, the `Redemption Date''
shall be the date specified by the Company for redemption of the AGM Interest
pursuant to Sections 17.1 and 17.2.

     17.3      REDEMPTION PRICE.  The Company will be obligated on the
Redemption Date to pay to the holders of the AGM Interest being redeemed (upon
surrender by such holder at the Company's principal office of the certificate
representing such AGM Interest) an amount in immediately available funds equal
to the Redemption Price.  If the funds of the Company legally available for
redemption of the AGM Interest on the Redemption Date are insufficient to redeem
the AGM Interest to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible amount of the AGM Interest
ratably among the holders of the AGM Interest to be redeemed based upon the
aggregate amounts to be paid to each such holder.  At any time thereafter, when
additional funds of the Company are legally available for the redemption of the
AGM Interest, such funds will immediately be used to redeem the balance of the
AGM Interest which the Company has become obligated to redeem on the Redemption
Date but which it has not redeemed.

     17.4 DISTRIBUTIONS AFTER REDEMPTION DATE.  Following the establishment of a
Redemption Date by the Company, the Company may set aside all funds necessary
for such redemption or reserve such funds by means of an irrevocable letter of
credit, separate and apart from the other funds of the Company, in trust for the


benefit of the holders of the AGM Interest to be redeemed, pro rata, so as to be
and continue to be available therefor, then from and after the Redemption Date,
the AGM Interest shall no longer be deemed outstanding, the right to receive
distributions thereon shall cease to accrue and all rights with respect to such
AGM Interest subject to redemption shall forthwith at the close of business on
such Redemption Date cease and terminate except only the right of the holders
thereof to receive the Redemption Price of the AGM Interest so to be redeemed.
Any moneys so set aside by the Company and unclaimed at the end of three years
from the date fixed for redemption shall revert to the general funds of the
Company and the right of holders of the AGM Interest to receive the Redemption
Price will be unaffected thereby.

     17.5 CERTIFICATES.  In case fewer than the total amount of the AGM Interest
represented by any certificate are redeemed, a new certificate representing the
amount of the AGM Interest shall be issued to the holder thereof without cost to
such holder as soon as practicable after surrender of the certificate
representing the redeemed the AGM Interest.

     17.6 OTHER REDEMPTIONS OR ACQUISITIONS.  Without consent of the holders of
a Majority of the AGM Interest, the Company shall not redeem or otherwise
acquire any of the AGM Interest, except (i) as expressly authorized herein or
(ii) pursuant to a purchase offer made pro-rata to all holders of the AGM
Interest on the basis of the amount of the AGM Interest held by each such
holder.


                                 ARTICLE XVIII
                                                     GRANT OF PUT OPTION

     18.1 GRANT OF PUT OPTION.  SRSC hereby grants to AGM and its successors and
assigns, an option (the "Put Option") giving AGM and its successors and assigns
the right to sell to SRSC, and its successors or assigns (and requiring SRSC and
its successors and assigns to purchase), all or any portion of the AGM Interest,
in exchange for the Put Option Consideration.  The Put Option is exercisable,
from time to time and in amounts as set forth below, at any time and from time
to time on or after the earlier of (i) the fifth anniversary of the Effective
Date and (ii) occurrence of a Triggering Event, and concurrently with the time
that Valhi makes any principal payment on the Valhi Loans, unless the Company
has previously redeemed in full all of the AGM Interest pursuant to Article
XVII.  AGM may exercise the Put Option by giving written notice to SRSC of its
intent to do so (the "Put Notice").  The Put Notice shall include a statement of
AGM's determination of the Put Option Consideration and that proportion of the
AGM Interest that shall be sold.  The portion of the AGM Interest sold pursuant
to any Put Notice (such portion to be determined as if all of the AGM Interest
originally issued to AGM were then outstanding) shall not exceed the proportion
that the principal payment giving rise to such Put Notice bears to the original
principal balance of the Valhi Loans.

     18.2 CLOSING OF PUT OPTION.  The closing of the sale of the AGM Interest
pursuant to the Put Option shall be held at the offices of the Company on the
date set forth by AGM in the Put Notice (unless otherwise delayed in accordance
with the provisions of Section 18.3 below) or at such other time and place as
AGM and SRSC may agree.  At the closing, SRSC shall pay to AGM the Put Option
Consideration by wire transfer of funds, and AGM shall deliver an assignment of
the AGM Interest in a form reasonably acceptable to SRSC, pursuant to which the


AGM Interest will be transferred to SRSC or its permitted designee free and
clear of any liens or encumbrances (other than encumbrances that secure
indebtedness of the Company).

     18.3 REGULATORY APPROVAL.  The consummation of the assignment of the AGM
Interest pursuant to the exercise of the Put Option may be delayed until the
expiration or earlier termination of any waiting period, and the receipt of any
approval, imposed or required by any statute or any regulation promulgated by
any governmental or regulatory authority.  If it is determined that any such
waiting period or prior approval is required to be complied with or obtained,
then each of SRSC and AGM the shall use their diligent best efforts (a) in
connection with the filing or providing of any information in connection
therewith (including, without limitation, a notice and report under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended and (b) to obtain
the approval required.

                    *     *     *     *     *
                           CERTIFICATE
                           -----------


          The undersigned hereby agree, acknowledge and certify that the
foregoing Company Agreement, consisting of 48 pages (excluding the Table of
Contents, this Certificate and attached Appendices) constitutes the Company
Agreement of The Amalgamated Sugar Company LLC, adopted by the Company and its
Members January 3, 1997, to be effective for tax and accounting purposes as of
December 31, 1996.


                              COMPANY:

                              THE AMALGAMATED SUGAR COMPANY LLC

                              By:
                                 ---------------------------------
                              Name:
                              Its:


                              MEMBERS:

                              SNAKE RIVER SUGAR COMPANY

                              By:
                                 ---------------------------------
                              Name:
                              Its:


                              THE AMALGAMATED SUGAR COMPANY

                              By:
                                 ---------------------------------
                              Name:



                              Its:


























                           Appendix A
                           ----------


        Member               Initial Capital   Initial Share of        Initial
                             Contribution and    Total Capital    Representative to
                                  Value                              Management.
                                                                      Committee

                                                              
The Amalgamated Sugar           $250,000,000        94.7%                None
Company
Attn.: Allan M. Lipman, Jr.
2427 Lincoln Avenue
P.O. Box 1520
Ogden, Utah 84402

with a copy to:
- ---------------

Three Lincoln Centre, Suite
1700
5430 LBJ Freeway
Dallas, Texas 75240-2697
Attn.: General Counsel
Snake River Sugar Company      $14,000,000          5.3%         1.  Thomas Church
Attn.: Rich Turner                                               2.  George Grant
525 Good Avenue                                                  3.  Ron Hepworth
P.O. Box 2723                                                    4.  Myron Huettig
Nyssa, Oregon 97913                                              5.  Terry Ketterling
                                                                 6.  Scott Lybbert
                                                                 7.  Rocky Trail

EX-10

                          SUBORDINATED PROMISSORY NOTE
                          ----------------------------


$37,500,000.00           January, 3, 1997             Ogden, Utah



     1.   FOR VALUE RECEIVED, VALHI, INC., a Delaware corporation
(`Borrower''), promises to pay to Snake River Sugar Company, an Oregon
cooperative (`Lender'') at Lender's office at 525 Good Avenue, Nyssa, Oregon,
97913, or at such other place as Lender from time to time may designate, the
principal sum of Thirty-seven Million Five Hundred Thousand Dollars
($37,500,000.00), plus interest as specified in this promissory note (the
`Note'').

     2.   This Note is secured by a pledge of the collateral described in a
Pledge Agreement dated as of the date of this Note (the `Pledge Agreement'').

     3.   The principal sum outstanding from time to time under this Note
shall bear interest at a rate equal to 9% per annum.  Accrued interest shall be
payable in arrears on the last day of each calendar month commencing January 31,
1997.  Notwithstanding the foregoing, if any interest is not paid in full when
due, then interest shall be computed by compounding such unpaid interest monthly
from the date such unpaid interest was due until such unpaid interest is paid in
full.

     4.   All principal and all accrued and unpaid interest shall be due and
payable on January 3, 2027.  Notwithstanding the foregoing, if Borrower directly
or indirectly (through its wholly owned subsidiary, Amcorp, Inc. (`Amcorp'') or
through Amcorp's wholly owned subsidiary, The Amalgamated Sugar Company
(`Amalgamated'')), receives the proceeds, as a result of redemption by The
Amalgamated Sugar Company LLC, a Delaware limited liability company (the
`Company''), of any of the AGM Interest of the Company which is pledged as
collateral for this Note, then, at the option of Lender exercised by written
notice to the Borrower, a portion of the outstanding principal amount of this
Note may be accelerated and shall become immediately due and payable.  Such
accelerated portion of the principal, when added to any accrued and unpaid
interest on this Note, may be up to the amount of any proceeds received by
Borrower, directly or indirectly, in connection with such redemption to the
extent such proceeds are not applied by Lender to reduce principal and interest
on the Borrower's Limited Recourse Promissory Note in the initial principal
amount of $212,500,000 dated as of the date of this Note in favor of Lender.

     5.   Borrower may, at any time and from time to time, prepay some or all of
the principal and interest under this Note, without penalty or premium.

     6.   All indebtedness, obligations and liabilities evidenced by or arising
from this Note or any instrument given or granted for the purpose of securing
the payment of the Note other than the Pledge Agreement (such indebtedness,
obligations and liabilities being referred to herein as the `Subordinated
Debt') shall be subordinate and junior in right of payment and collection to
the payment and collection in full of all `Senior Debt,'' as hereinafter
defined.  The term `Senior Debt'' shall mean all indebtedness, obligations and
liabilities of any kind that are now owed or hereafter may be owed by the
Borrower for borrowed money or evidenced by notes, guarantees or similar
instruments, together with any and all interest and costs of collection in
connection therewith, other than the indebtedness, obligations and liabilities
evidenced by or arising from this Note.  Nothing herein shall be construed as
subordinating Lender's security interest granted under the Pledge Agreement to
the Senior Debt or to any other creditors of Borrower. Lender agrees to execute
all documents reasonably requested by Borrower from time to time to confirm or
more specifically evidence such subordination.
     7.   If Borrower fails to make any payment within five (5) business days
(as defined n section 9 below) after it becomes due and payable, at Lender's
option upon written notice to Borrower, Lender may declare this Note in default
and the entire unpaid principal of and accrued interest on this Note shall
become immediately due and payable without presentment or demand for payment,
protest or notice of nonpayment or dishonor, or other notices or demands of any
kind or character.  In addition, this Note shall be in default and all amounts
owing under this Note shall be automatically accelerated on the occurrence of
any of the following events:

          (i)  (A) a court enters a decree or order for relief with respect to
Borrower, Amcorp or Amalgamated in an involuntary case under the Bankruptcy Code
(defined for this purpose as Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time and all rules and regulations
promulgated thereunder) or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, which decree or order is not stayed or
other similar relief is not granted under any applicable federal or state law;
or (B) the continuance of any of the following events for forty-five (45) days
unless dismissed, bonded or discharged:  (1) an involuntary case commenced
against Borrower, Amcorp or Amalgamated, under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or (2) a decree or
order of a court for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over Borrower, Amcorp
or Amalgamated, or over all or a substantial part of its property, is entered;
or (3) an interim receiver, trustee or other custodian is appointed without the
consent of Borrower, Amcorp or Amalgamated, for all or a substantial part of the
property of Borrower, Amcorp or Amalgamated; or

          (ii)  (A) the entry of an order for relief with respect to Borrower,
Amcorp or Amalgamated in a voluntary case under the Bankruptcy Code or any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, (B) Borrower, Amcorp or Amalgamated consents to the entry of an order
for relief in an involuntary case or to the conversion of an involuntary case to
a voluntary case under any such law, (C) Borrower,  Amcorp or Amalgamated
consents to the appointment of or taking possession by a receiver, trustee or
other custodian for all or a substantial part of its property;  (D) Borrower,
Amcorp or Amalgamated makes any assignment for the benefit of creditors; or (E)
Borrower, Amcorp or Amalgamated adopts a resolution or otherwise authorizes any
action to approve any of the actions referred to in this clause (ii); or





     (iii)     the liquidation or dissolution of Borrower.

     8.   In the event of any default by the Borrower hereunder, Lender may
exercise the remedies provided in the Pledge Agreement.  Borrower agrees to pay
all costs of collection, legal expenses, and reasonable attorneys' fees incurred
by Lender in connection with its collection or enforcement.

          Notwithstanding anything herein to the contrary, if at any time prior
to the payment in full of all amounts owed pursuant to this Note, (x) Lender
owes Borrower any amounts (including principal, interest and any other amounts)
pursuant to the Loan and Security Agreement between Lender and Borrower, dated
as of the date of this Note, relating to the loan in the initial principal
amount of $180 million by Borrower to Lender, and any refinancings of such loan
(collectively the `Term Loan''), and (y) Borrower defaults on this Note; then,
with respect to an outstanding amount of this Note (including principal,
interest and any other amounts) equal to the maximum amount so outstanding or,
if lesser, any amounts outstanding pursuant to the Term Loan (including
principal, interest and any other amounts), Lender shall have only those rights
reserved herein or in the Pledge Agreement, or in any other instrument given or
granted for the purpose of securing the payment of this Note, and Lender shall
have full recourse to the property pledged pursuant to the Pledge Agreement or
such other instrument for the payment of the indebtedness evidenced by this
Note, but Lender shall have no other recourse to any other property or assets of
Borrower, Amcorp, Amalgamated or any affiliate of Borrower.  To the extent
provided in the foregoing sentence, notwithstanding anything to the contrary in




this Note, the Pledge Agreement or any other instrument given or granted for the
purpose of securing the payment of the Note, Lender shall not seek or be allowed
to obtain a personal judgment against the Borrower, Borrower's affiliates,
officers, directors or stockholders or Borrower's successors and assigns, on the
Note, the Pledge Agreement or any other instrument given or granted for the
purpose of securing the payment of the Note, nor shall Lender seek or be allowed
to obtain a personal judgment against the Borrower, Borrower's affiliates,
officers, directors or stockholders or Borrower's successors and assigns for any
deficiency remaining after realization by Lender against any property pledged as
security for the payment of the Note.

          Notwithstanding anything herein to the contrary, if at any time prior
to the payment in full of all amounts owed pursuant to this Note, (x) any
amounts have been paid by Borrower and not reimbursed by Lender pursuant to any
guaranty by Borrower in favor of any lenders to Lender (the `Guaranty''), and
(y) Borrower defaults on this Note; then, with respect to an outstanding amount
of this Note (including principal, interest and any other amounts) equal to the
maximum amount so outstanding or, if lesser, any such unreimbursed amounts,
Lender shall have only those rights reserved herein or in the Pledge Agreement,
and in any other instrument given or granted for the purpose of securing the
payment of the Note, and shall have full recourse to the property pledged
pursuant to the Pledge Agreement or such other instrument for the payment of the
indebtedness evidenced by this Note, but Lender shall have no other recourse to
any other property of Borrower.  To the extent provided in the foregoing
sentence, notwithstanding anything to the contrary in this Note, the Pledge
Agreement or any other instrument given or granted for the purpose of securing




the payment of the Note, Lender shall not seek or be allowed to obtain a
personal judgment against the Borrower, Borrower's affiliates, officers,
directors or stockholders or Borrower's successors and assigns, on the Note, the
Pledge Agreement or any other instrument given or granted for the purpose of
securing the payment of the Note, nor shall Lender seek or be allowed to obtain
a personal judgment against the Borrower, Borrower's affiliates, officers,
directors or stockholders or Borrower's successors and assigns for any
deficiency remaining after realization by Lender against any property pledged as
security for the payment of the Note.

     9.   All amounts payable under this Note are payable in lawful money of the
United States during normal business hours on a day other than a Saturday or
Sunday, on which banks are open for business in Dallas, Texas (`business
days').

     10.  This Note is governed by the laws of the State of Delaware, without
regard to the choice of law rules of that State.

     11.  Borrower agrees that the holder of this Note may accept additional or
substitute security for this Note, or release any security or any party liable
for this Note, or extend or renew this Note, all without notice to Borrower and
without affecting the liability of Borrower.

     12.  If Lender delays in exercising or fails to exercise any of its rights
under this Note, that delay or failure shall not constitute a waiver of any of
Lender's rights, or of any breach, default or failure of condition of or under




this Note.  No waiver by Lender of any of its rights, or of any such breach,
default or failure of condition shall be effective, unless the waiver is
expressly stated in a writing signed by Lender.

     13.  This Note inures to and binds the heirs, personal representatives,
successors and assigns of Borrower and Lender.  If Lender so requests, Borrower
shall sign and deliver a new note to be issued in exchange for this Note.



BORROWER:

VALHI, INC.,                       Mail Address:
a Delaware corporation             Three Lincoln Center
                                   Suite 1700, 5430 LBJ Freeway
                                   Dallas, Texas 75240
By:
    ---------------------------
Name:Steven L. Watson
Its: Vice President

Acknowledge and Agreed:

SNAKE RIVER SUGAR COMPANY
an Oregon cooperative




By:
    --------------------------
Name:George Grant
Its: Chairman


19598



                        PLEDGE AGREEMENT
                        ----------------


          THIS PLEDGE AGREEMENT is entered into this 3rd day of January, to be
effective for tax and accounting purposes as of December 31, 1996, between Snake
River Sugar Company, an Oregon cooperative, as secured party (`SR''), and The
Amalgamated Sugar Company, a Utah corporation (`AGM''), as debtor.

          The parties agree:

          1.   Pledge.  For value received, AGM grants to SR a security interest
               ------

(`Security Interest'') in the limited liability company interest held by AGM in
The Amalgamated Sugar Company LLC, a Delaware limited liability company (the
`Collateral'').  The Security Interest is created to secure all obligations and
indebtedness arising pursuant to the Subordinated Promissory Note dated as of
the date of this Agreement by Valhi, Inc., the indirect holder of 100% of AGM's
outstanding stock, in favor of SR in the initial principal amount of




$37.5 million (the `Note'').  Except as provided below, the Collateral includes
all proceeds, rights to receive future distributions, increases, substitutions,
accessions, attachments, securities, subscription rights or other property or
benefits which AGM receives or is entitled to receive on account of the
Collateral.  SR shall not have a Security Interest in, and SR's Security
Interest shall terminate and be automatically released with respect to (i) any
cash distributions on account of the Collateral paid or distributed on the
Collateral prior to the date of any foreclosure by SR on the Collateral pursuant
to the provisions of this Agreement, and (ii) any Accrual, Deferral or Insurance
Deferral (as such terms are defined in the Company Agreement of The Amalgamated
Sugar Company LLC as in effect on the date of this Agreement (the `Company
Agreement')) arising prior to the date of any foreclosure by SR on the
Collateral pursuant to the provisions of this Agreement.  The Collateral shall
include any limited liability company interest held by AGM to the extent AGM
notifies SR that AGM wishes to pledge such interest to SR pursuant to the terms
and conditions of this Agreement.  Except to the extent provided in the Other
Pledge Agreements, all certificates and other instruments which may constitute
the Collateral shall be endorsed in blank for transfer or be accompanied by
proper instruments of assignment and transfer properly endorsed in blank, and
delivered to SR. SR shall hold the Collateral as security for the repayment of
the Note and shall not encumber or dispose of the Collateral except in
accordance with the provisions of paragraph 8 of this Agreement.

          2.   Voting and Other Rights.  During the term of this Agreement, and
               -----------------------

so long as the maturity date of the Note has not been accelerated as provided in
the Note and except as otherwise provided in the Other Pledge Agreements (as




defined in paragraph 6 of this Agreement), AGM shall have the right to vote the
Collateral on all questions.  Following acceleration of the maturity date of the
Note pursuant to Section 6 of the Note, AGM's right to vote the Collateral shall
terminate (provided that in the case of a partial acceleration of the Note,
AGM's right to vote the Collateral shall terminate only with respect to a
portion of the Collateral equal to the portion of the Note accelerated).
Nothing in this Agreement is intended to restrict or limit in any way AGM's
power to require that all or part of the Collateral be redeemed by the issuer of
such Collateral or purchased by SR pursuant to the terms of the Company
Agreement.  Upon any such redemption or purchase, to the extent such proceeds
are not applied to reduce principal and interest on Valhi Inc.'s Limited
Recourse Subordinated Promissory Note dated as of the date of this Agreement in
favor of SR in the initial principal amount of $212.5 million (or to the extent
proceeds remain after all amounts due under such note have been paid in full),
then AGM may direct that such proceeds (or remaining proceeds) be applied to
reduce the outstanding principal and any interest due on the Note, and SR may
exercise its option as provided in the Note to accelerate a portion of the Note
and apply such proceeds (or remaining proceeds) to reduce such portion of the
Note.  To the extent such proceeds (or remaining proceeds) are not so applied,
then (i) AGM may retain a portion of such proceeds (or remaining proceeds) equal
to the amount of federal and state taxes payable as a result of such redemption
and any proceeds so retained shall cease to be Collateral hereunder, and (ii)
AGM shall direct that the such proceeds (or remaining proceeds) be placed in an
escrow account, pursuant to an escrow agreement with an escrow agent reasonably
acceptable to SR, and SR shall continue to have a security interest in such
proceeds (or remaining proceeds).  AGM may direct the investment of all funds




held in such escrow account until all outstanding principal of the Note becomes
due, in which case such funds shall be applied as provided in this Agreement.

          3.   Representations.  AGM warrants and represents (i) that there are
               ---------------

no restrictions on the transfer of any of the Collateral, other than as set
forth in the Company Agreement and the Other Pledge Agreements (as defined
below), and that AGM has the right to transfer the Collateral free of any
encumbrances other than pursuant to the Company Agreement and pledges of the
Collateral pursuant to the Other Pledge Agreements and (ii) this Agreement
constitutes the valid and legally binding obligation of AGM, enforceable in
accordance with its terms and conditions, as enforceabililty may be limited by
or subject to any bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditor rights generally and subject to general principles of
equity and public policy considerations. AGM shall, at the request of SR,
promptly deliver all reasonable further instruments and documents, and take all
reasonable further actions, in order to perfect the Security Interest granted
herein and to otherwise give effect to the provisions of this Agreement.  AGM
shall not grant any security interest in the Collateral, other than pursuant to
(i) the Other Pledge Agreements; (ii) liens for taxes, assessments or other
governmental charges not yet due and payable; (iii) statutory liens of
landlords, carriers, warehousemen, mechanics, materialmen and other similar
liens imposed by law, which are incurred in the ordinary course of business for
sums not more than thirty (30) days delinquent; and (iv) liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security,
statutory obligations, surety and appeal bonds, bids, leases, government




contracts, trade contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money).

          4.   Adjustments.  In the event that, during the term of this
               -----------

Agreement, any reclassification, readjustment or other change is declared or
made in the capital structure of the issuer of the Collateral, all new,
substituted and additional interests or securities issued in respect of the
Collateral by reason of any such change shall be delivered to SR and held by it
under the terms of this Agreement in the same manner as the Collateral
originally pledged hereunder.

          5.   Warrants and Rights .  In the event that, during the term of this
               --------------------

Agreement, subscription warrants or any other rights or options shall be issued
in connection with the Collateral, such warrants, rights and options shall be
immediately assigned by SR to AGM, and, if exercised by AGM, all new interests
or securities so acquired by AGM shall be immediately assigned to SR to be held
under the terms of this Agreement in the same manner as the Collateral
originally pledged hereunder, except as otherwise provided by the terms of any
Other Pledge Agreement.

          6.   Payment of Note.  Upon payment of all principal of and other
               ---------------

amounts due on the Note, the Security Interest shall be canceled and SR shall
convey to AGM all certificates, documents and other instruments representing the
Collateral, except to the extent the Collateral remains pledged to SR or any




other person pursuant to either (i) the Limited Recourse Pledge Agreement
between AGM and SR dated as of the date of this Agreement in connection with
Valhi, Inc.'s Limited Recourse Promissory Note dated as of the date of this
Agreement, or (ii) the Indemnification Pledge Agreement between AGM and The
Amalgamated Sugar Company LLC dated as of the date of this Agreement in
connection with the Indemnification and Post Closing Agreement dated as of the
date of this Agreement among AGM, The Amalgamated Sugar Company LLC and certain
other parties (collectively, the `Other Pledge Agreements'').

          7.   Rights of SR.  AGM hereby appoints SR as AGM's attorney-in-fact
               ------------

to do any act which AGM is obligated by this Agreement to do and to do all
things deemed necessary by SR to perfect the Security Interest and collect,
preserve and enforce the Collateral, all at AGM's cost and without any
obligation on SR so to act.

          8.   Default.  If, pursuant to the terms and provisions of the Note,
               -------

the maturity date of the Note has been accelerated pursuant to Section 6 of the
Note, then, prior to exercising any remedy under the Note (other than
acceleration) or making any attempt to collect on any amounts due under the
Note, SR shall first proceed to exercise any and all rights and remedies in
connection with the Collateral provided by the Uniform Commercial Code in force
in the State of Delaware (the `Code''), as well as other rights and remedies in
connection with the Collateral possessed by SR under this Agreement.  For
purposes of the notice requirements of the Code, SR and AGM agree that notice
given at least five business days prior to the taking of any action with respect




to which notice is required is reasonable.  If the amount received by SR upon
foreclosure on the Collateral is less than the amount of principal and interest
owing on the Note, then SR may exercise any and all other rights and remedies
possessed by SR at law or equity to enforce payment of the Note or any part
thereof.  Except as otherwise provided, all rights and remedies of SR hereunder
are cumulative and may be exercised singly or concurrently, and the exercise of
any right or remedy shall not be a waiver of any other.

          9.   Miscellaneous.
               -------------


               A.   Parties Bound.  This Agreement shall be binding upon and
                    -------------

inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors, receivers,
trustees and assigns where permitted by this Agreement.

               B.   Delaware Law to Apply.  This Agreement shall be construed in
                    ---------------------

accordance with the Code and other applicable laws of the State of Delaware.

               C.   Modification.  This Agreement shall not be amended in any
                    ------------

way except by a written agreement signed by the parties hereto.

               D.   Severability.  The unenforceability of any provision of this
                    ------------

Agreement shall not affect the enforceability or validity of any other provision
hereof.





               E.   Notice.  Any notice required to be given under this
                    ------

Agreement or under the Code shall be deemed delivered when deposited with the
United States Postal Service, postage prepaid, certified with return receipt
requested and addressed as follows:

                    If to SR:
                    525 Good Avenue
                    Nyssa, Oregon 97913

                    If to AGM:
                    The Amalgamated Sugar Company
                    Three Lincoln Centre
                    Suite 1700
                    5430 LBJ Freeway
                    Dallas, Texas 75240

Any party hereto may change the address to which notices to such party are
required to be sent by giving notice of such change in the manner provided in
this Section 9E.  All notices will be deemed to have been received on the date
of delivery or on the third business day after mailing in accordance with this
Section 9E, except that any notice of a change of address will be effective only
upon actual receipt.




               F.   Waiver of AGM.  AGM hereby waives presentment, demand,
                    -------------

notice of dishonor, protest, notice of protest and all other notices with
respect to collection of the Collateral and Note.



          IN WITNESS WHEREOF, the parties have executed this Agreement.

                                   THE AMALGAMATED SUGAR COMPANY



                                   By:
                                      -------------------------------
                                   Name:     Allan M. Lipman, Jr.
                                   Title:    President


                                   SNAKE RIVER SUGAR COMPANY



                                   By:
                                      -------------------------------
                                   Name:     George Grant
                                   Title:    Chairman

EX-10

                        LIMITED RECOURSE PROMISSORY NOTE
                        --------------------------------


$212,500,000.00                                   January 3, 1997     Ogden,
Utah



     1.   FOR VALUE RECEIVED, VALHI, INC., a Delaware corporation
(`Borrower''), promises to pay to Snake River Sugar Company, an Oregon
cooperative (`Lender'') at Lender's office at 525 Good Avenue, Nyssa, Oregon,
97913, or at such other place as Lender from time to time may designate, the
principal sum of Two Hundred Twelve Million Five Hundred Thousand Dollars
($215,500,000.00), plus interest as specified in this promissory note (the
`Note'').

     2.   This Note is secured by a pledge of the collateral described in a
Limited Recourse Pledge Agreement dated as of the date of this Note (the
`Pledge Agreement'').

     3.   The principal sum outstanding from time to time under this Note
shall bear interest at a rate equal to 91/2% per annum.  Accrued interest shall
be payable in arrears on the last day of each calendar month commencing January
31, 1997.  If on any date for payment of interest, less than all interest then
due is paid on this Note, then any interest paid on such date on the Borrower's
Subordinated Promissory Note dated as of the date of this Note in the initial
principal amount of $37,500,000 (the `Other Note'') shall be deemed to have
been paid on, and shall be applied to, this Note rather than the Other Note.
Notwithstanding the foregoing, if any interest is not paid in full when due,
then interest shall be computed by compounding such unpaid interest quarterly
from the date such unpaid interest was due until such unpaid interest is paid in
full.
     4.   All principal and all accrued and unpaid interest shall be due and
payable on January 3, 2027.  Notwithstanding the foregoing, if Borrower directly
or indirectly (through its wholly owned subsidiary, Amcorp, Inc. (`Amcorp'') or
through Amcorp's wholly owned subsidiary, The Amalgamated Sugar Company
(`Amalgamated'')), receives the proceeds, as a result of redemption by The
Amalgamated Sugar Company LLC, a Delaware limited liability company (the
`Company''), of any of the AGM Interest of the Company which is pledged as
collateral for this Note, then, at the option of Lender exercised by written
notice to the Borrower, a portion of the outstanding principal amount of this
Note may be accelerated and shall become immediately due and payable.  Such
accelerated portion of the principal, when added to any accrued and unpaid
interest on this Note, may be up to the amount of any proceeds received by
Borrower, directly or indirectly, in connection with such redemption.

     5.   Borrower may, at any time and from time to time, prepay some or all of
the principal and interest under this Note, without penalty or premium.

     6.   If Borrower fails to make any payment of within five (5) business days
(as defined section 8 below) in after it becomes due and payable, at Lender's
option upon written notice to Borrower, Lender may declare this Note in default
and the entire unpaid principal of and accrued interest on this Note shall
become immediately due and payable without presentment or demand for payment,
protest or notice of nonpayment or dishonor, or other notices or demands of any
kind or character.  In addition, this Note shall be in default and all amounts
owing under this Note shall be automatically accelerated on the occurrence of
any of the following events:

     (i)  (A) a court enters a decree or order for relief with respect to
Borrower, Amcorp or Amalgamated in an involuntary case under the Bankruptcy Code
(defined for this purpose as Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time and all rules and regulations
promulgated thereunder) or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, which decree or order is not stayed or
other similar relief is not granted under any applicable federal or state law;
or (B) the continuance of any of the following events for forty-five (45) days
unless dismissed, bonded or discharged:  (1) an involuntary case commenced
against Borrower, Amcorp or Amalgamated under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or (2) a decree or
order of a court for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over Borrower, Amcorp
or Amalgamated, or over all or a substantial part of its property, is entered;
or (3) an interim receiver, trustee or other custodian is appointed without the
consent of Borrower, Amcorp or Amalgamated, for all or a substantial part of the
property of Borrower, Amcorp or Amalgamated; or

     (ii) (A) the entry of an order for relief with respect to Borrower, Amcorp
or Amalgamated in a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (B)
Borrower, Amcorp or Amalgamated consents to the entry of an order for relief in
an involuntary case or to the conversion of an involuntary case to a voluntary
case under any such law, (C) Borrower, Amcorp or Amalgamated consents to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property;  (D) Borrower, Amcorp or
Amalgamated makes any assignment for the benefit of creditors; or (E) Borrower,
Amcorp or Amalgamated adopts a resolution or otherwise authorizes any action to
approve any of the actions referred to in this clause (ii); or

     (iii)     the liquidation or dissolution of Borrower.

     7.   In the event of any default by the Borrower hereunder, Lender shall
have only those rights reserved herein or in the Pledge Agreement, and in any
other instrument given or granted for the purpose of securing the payment of the
Note, and shall have full recourse to the property pledged pursuant to the
Pledge Agreement or such other instrument for the payment of the indebtedness
evidenced by this Note, but shall have no other recourse to any other property
or assets of Borrower, Amcorp, Amalgamated or any affiliate of Borrower.  Except
as provided in the foregoing sentence and the instruments referred to therein,
notwithstanding anything to the contrary in this Note, the Pledge Agreement or
any other instrument given or granted for the purpose of securing the payment of
the Note, Lender shall not seek or be allowed to obtain a personal judgment,
against the Borrower, Borrower's affiliates, officers, directors or stockholders
or Borrower's successors and assigns, on the Note, the Pledge Agreement or any
other instrument given or granted for the purpose of securing the payment of the
Note, nor shall Lender seek or be allowed to obtain a personal judgment against
the Borrower, Borrower's affiliates, officers, directors or stockholders or
Borrower's successors and assigns for any deficiency remaining after realization
by Lender against any property pledged as security for the payment of the Note.

     8.   All amounts payable under this Note are payable in lawful money of the
United States during normal business hours on a day other than a Saturday or
Sunday, on which banks are open for business in Dallas, Texas (`business
days').

     9.   This Note is governed by the laws of the State of Delaware, without
regard to the choice of law rules of that State.

     10.  Borrower agrees that the holder of this Note may accept additional or
substitute security for this Note, or release any security or any party liable
for this Note, or extend or renew this Note, all without notice to Borrower and
without affecting the liability of Borrower.

     11.  If Lender delays in exercising or fails to exercise any of its rights
under this Note, that delay or failure shall not constitute a waiver of any of
Lender's rights, or of any breach, default or failure of condition of or under
this Note.  No waiver by Lender of any of its rights, or of any such breach,
default or failure of condition shall be effective, unless the waiver is
expressly stated in a writing signed by Lender.
     12.  This Note inures to and binds the heirs, personal representatives,
successors and assigns of Borrower and Lender.  If Lender so requests, Borrower
shall sign and deliver a new note to be issued in exchange for this Note.

BORROWER:

VALHI, INC.,                       Mail Address:
a Delaware corporation                  Three Lincoln Center
                                        Suite 1700, 5430 LBJ Freeway
                                        Dallas, Texas 75240
By:
    ---------------------------
Name:Steven L. Watson
Its: Vice President

Acknowledge and Agreed:

SNAKE RIVER SUGAR COMPANY
an Oregon cooperative

By:
    ---------------------------
Name:George Grant
Its: Chairman
19597




                LIMITED RECOURSE PLEDGE AGREEMENT
                ---------------------------------


          THIS LIMITED RECOURSE PLEDGE AGREEMENT is entered into this 3rd day of
January, to be effective for tax and accounting purposes as of December 31,
1996, between Snake River Sugar Company, an Oregon cooperative, as secured party
(`SR''), and The Amalgamated Sugar Company, a Utah corporation (``AGM''), as
debtor.

          The parties agree:

          1.   Pledge.  For value received, AGM grants to SR a security interest
               ------

(`Security Interest'') in the limited liability company interest in The
Amalgamated Sugar Company LLC, a Delaware limited liability company (the
`Collateral'').  The Security Interest is created to secure all obligations and
indebtedness arising pursuant to the Limited Recourse Promissory Note dated as
of the date of this Agreement by Valhi, Inc., the indirect holder of 100% of
AGM's outstanding stock, in favor of SR in the initial principal amount of
$212.5 million (the `Note'').  Except as provided below, the Collateral
includes all proceeds, rights to receive future distributions, increases,
substitutions, accessions, attachments, securities, subscription rights or other
property or benefits which AGM receives or is entitled to receive on account of
the Collateral.  SR shall not have a Security Interest in, and SR's Security
Interest shall terminate and be automatically released with respect to (i) any
cash distributions on account of the Collateral paid or distributed on the
Collateral prior to the date of any foreclosure by SR on the Collateral pursuant
to the provisions of this Agreement, and (ii) any Accrual, Deferral or Insurance
Deferral (as such terms are defined in the company agreement of The Amalgamated
Sugar Company LLC as in effect on the date of this Agreement (the `Company
Agreement')) arising prior to the date of any foreclosure by SR on the
Collateral pursuant to the provisions of this Agreement.  Except to the extent
provided in the Other Pledge Agreements (as defined in paragraph 6 of this
Agreement), all certificates and other instruments which may constitute the
Collateral shall be endorsed in blank for transfer or be accompanied by proper
instruments of assignment and transfer properly endorsed in blank, and delivered
to SR.  SR shall hold the Collateral as security for the repayment of the Note
and shall not encumber or dispose of the Collateral except in accordance with
the provisions of paragraph 8 of this Agreement.

          2.   Voting and Other Rights.  During the term of this Agreement, and
               -----------------------

so long as the maturity date of the Note has not been accelerated as provided in
the Note and except as otherwise provided in the Other Pledge Agreements, AGM
shall have the right to vote the Collateral on all questions.  Following
acceleration of the maturity date of the Note pursuant to Section 6 of the Note,
AGM's right to vote the Collateral shall terminate (provided that in the case of
a partial acceleration of the Note, AGM's right to vote the Collateral shall
terminate only with respect to a portion of the Collateral equal to the portion
of the Note accelerated).  Nothing in this Agreement is intended to restrict or
limit in any way AGM's power to require that all or part of the Collateral be
redeemed by the issuer of the Collateral or purchased by SR pursuant to the
terms of any Company Agreement.  Upon any such redemption or purchase, AGM may
direct that such proceeds be applied to reduce the outstanding principal and any
interest due on the Note, and SR may exercise its option as provided in the Note
to accelerate a portion of the Note and apply such proceeds to reduce such
portion of the Note.  To the extent such proceeds are not so applied, then (i)
AGM may retain a portion of such proceeds equal to the amount of federal and
state taxes payable as a result of such redemption and any proceeds so retained
shall cease to be Collateral hereunder, and (ii) AGM shall direct that the
remaining proceeds be placed in an escrow account, pursuant to an escrow
agreement with an escrow agent reasonably acceptable to SR, and SR shall
continue to have a security interest in such remaining proceeds.  AGM may direct
the investment of all funds held in such escrow account until all outstanding
principal of the Note becomes due, in which case such funds shall be applied as
provided in this Agreement.

          3.   Representations.  AGM warrants and represents (i) that there are
               ---------------

no restrictions on the transfer of any of the Collateral, other than as set
forth in the Company Agreement and the Other Pledge Agreements, and that AGM has
the right to transfer the Collateral free of any encumbrances other than
pursuant to the Company Agreement and pledges of the Collateral pursuant to the
Other Pledge Agreements and (ii) this Agreement constitutes the valid and
legally binding obligation of AGM, enforceable in accordance with its terms and
conditions, as enforceabililty may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditor rights
generally and subject to general principles of equity and public policy
considerations.  AGM shall, at the request of SR, promptly deliver all
reasonable further instruments and documents, and take all reasonable further
actions, in order to perfect the Security Interest granted herein and to
otherwise give effect to the provisions of this Agreement.  AGM shall not grant
any security interest in the Collateral, other than pursuant to (i) the Other
Pledge Agreements; (ii) liens for taxes, assessments or other governmental
charges not yet due and payable; (iii) statutory liens of landlords, carriers,
warehousemen, mechanics, materialmen and other similar liens imposed by law,
which are incurred in the ordinary course of business for sums not more than
thirty (30) days delinquent; and (iv) liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, statutory
obligations, surety and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money).

          4.   Adjustments.  In the event that, during the term of this
               -----------

Agreement, any reclassification, readjustment or other change is declared or
made in the capital structure of the issuer of the Collateral, all new,
substituted and additional interests or securities issued in respect of the
Collateral by reason of any such change shall be delivered to SR and held by it
under the terms of this Agreement in the same manner as the Collateral
originally pledged hereunder, except as otherwise provided by the terms of any
Other Pledge Agreement.

          5.   Warrants and Rights.  In the event that, during the term of this
               -------------------

Agreement, subscription warrants or any other rights or options shall be issued
in connection with the Collateral, such warrants, rights and options shall be
immediately assigned by SR to AGM, and, if exercised by AGM, all new interests
or securities so acquired by AGM shall be immediately assigned to SR to be held
under the terms of this Agreement in the same manner as the Collateral
originally pledged hereunder.

          6.   Payment of Note.  Upon payment of all principal of and other
               ---------------

amounts due on the Note, the Security Interest shall be canceled and SR shall
convey to AGM all certificates, documents and other instruments representing the
Collateral, except to the extent the Collateral remains pledged to SR pursuant
to either (i) the Pledge Agreement between AGM and SR dated as of the date of
this Agreement in connection with Valhi, Inc.'s Subordinated Promissory Note
dated as of the date of this Agreement, or (ii) the Indemnification Pledge
Agreement between AGM and The Amalgamated Sugar Company LLC dated as of the date
of this Agreement in connection with the Indemnification and Post Closing
Agreement dated as of the date of this Agreement among AGM, The Amalgamated
Sugar Company LLC and certain other parties (collectively, the `Other Pledge
Agreements').

          7.   Rights of SR.  AGM hereby appoints SR as AGM's attorney-in-fact
               ------------

to do any act which AGM is obligated by this Agreement to do and to do all
things deemed necessary by SR to perfect the Security Interest and collect,
preserve and enforce the Collateral, all at AGM's cost and without any
obligation on SR so to act.

          8.   Default.  If, pursuant to the terms and provisions of the Note,
               -------

the maturity date of the Note has been accelerated pursuant to Section 6 of the
Note, SR may proceed to enforce payment of the Note or any part thereof and to
exercise any and all rights and remedies in connection with the Collateral
provided by the Uniform Commercial Code in force in the State of Delaware (the
`Code''), as well as other rights and remedies in connection with the
Collateral possessed by SR under this Agreement or otherwise at law or equity.
For purposes of the notice requirements of the Code, SR and AGM agree that
notice given at least five business days prior to the taking of any action with
respect to which notice is required is reasonable.  All rights and remedies of
SR in connection with the Collateral hereunder are cumulative and may be
exercised singly or concurrently.  The exercise of any right or remedy shall not
be a waiver of any other.  If the amount received by SR upon foreclosure on the
Collateral is less than the amount of principal and interest owing on the Note,
SR shall have no further recourse to any assets or property of AGM, Valhi, Inc.
or any of their respective affiliates.

          9.   Miscellaneous.
               -------------


               A.   Parties Bound.  This Agreement shall be binding upon and
                    -------------

inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors, receivers,
trustees and assigns where permitted by this Agreement.

               B.   Delaware Law to Apply.  This Agreement shall be construed in
                    ---------------------

accordance with the Code and other applicable laws of the State of Delaware.

               C.   Modification.  This Agreement shall not be amended in any
                    ------------

way except by a written agreement signed by the parties hereto.

               D.   Severability.  The unenforceability of any provision of this
                    ------------

Agreement shall not affect the enforceability or validity of any other provision
hereof.

               E.   Notice.  Any notice required to be given under this
                    ------

Agreement or under the Code shall be deemed delivered when deposited with the
United States Postal Service, postage prepaid, certified with return receipt
requested and addressed as follows:

                    If to SR:
                    525 Good Avenue
                    Nyssa, Oregon 97913

                    If to AGM:
                    The Amalgamated Sugar Company
                    Three Lincoln Centre
                    Suite 1700
                    5430 LBJ Freeway
                    Dallas, Texas 75240

Any party hereto may change the address to which notices to such party are
required to be sent by giving notice of such change in the manner provided in
this Section 9E.  All notices will be deemed to have been received on the date
of delivery or on the third business day after mailing in accordance with this
Section 9E, except that any notice of a change of address will be effective only
upon actual receipt.

               F.   Waiver of AGM.  AGM hereby waives presentment, demand,
                    -------------

notice of dishonor, protest, notice of protest and all other notices with
respect to collection of the Collateral and Note.



          IN WITNESS WHEREOF, the parties have executed this Agreement.

                                   THE AMALGAMATED SUGAR COMPANY

                                   By:
                                      -------------------------------
                                   Name:     Allan M. Lipman, Jr.
                                   Title:    President


                                   SNAKE RIVER SUGAR COMPANY



                                   By:
                                      -------------------------------
                                   Name:     George Grant
                                   Title:    Chairman

EX-10

                          LOAN AND SECURITY AGREEMENT

                             DATED JANUARY 3, 1997

                                    BETWEEN

                           SNAKE RIVER SUGAR COMPANY,

                                  AS BORROWER,

                                      AND

                                  VALHI, INC.,

                                   AS LENDER




                               TABLE OF CONTENTS
                                                             Page

SECTION 1  DEFINITIONS....................................................1
     1.1  Certain Defined Terms...........................................1
     1.2  Accounting Terms................................................8
     1.3  Other Definitional Provisions...................................9

SECTION 2  LOANS AND COLLATERAL...........................................9
     2.1  Loans...........................................................9
          (A)  Tranche A Loan.............................................9
          (B) Tranche B Loan..............................................9
          (C)  Notes.....................................................10
     2.2  Interest.......................................................10
          (A) Rate of Interest...........................................10
          (B)  Computation and Payment of Interest.......................10
          (C)  Interest Laws.............................................10
     2.3  Fees...........................................................11
          (A)  Closing Fee...............................................11
          (B)  Financing Fee.............................................11
          (C)  Other Fees and Expenses...................................12
     2.4  Payments and Prepayments.......................................12
          (A)  Manner and Time of Payment................................12
          (B)  Mandatory Prepayments.....................................12
               (1)  Proceeds of Asset Dispositions.......................12
               (2)  Prepayments from Excess Cash Flow....................12




          (C)  Voluntary Prepayments.....................................12
          (D)  Payments on Business Days.................................12
          (E)  Application of Prepayments................................12
     2.5  Term of this Agreement.........................................13
     2.6  Statements.....................................................13
     2.7  Grant of Security Interest.....................................13
     2.8  Taxes..........................................................13
          (A)  No Deductions.............................................13
          (B)  Changes in Tax Laws.......................................14
     2.9  Use of Proceeds and Margin Security............................14

SECTION 3  CONDITIONS TO LOANS...........................................15
     3.1  Conditions to Loans............................................15
          (A)  Closing Deliveries........................................15
          (B)  Security Interests........................................15
          (C)  Capital Contribution and Working Capital Borrowings.......15
          (D)  Representations and Warranties............................15
          (E)  Fees......................................................15
          (F)  No Default................................................15
          (G)  Performance of Agreements.................................15
          (H)  No Prohibition............................................15
          (I)  No Litigation.............................................16

SECTION 4  BORROWER'S REPRESENTATIONS AND WARRANTIES.....................16
     4.1  Organization, Powers, Capitalization...........................16
          (A)  Organization and Powers...................................16




          (B)  Capitalization............................................16
     4.2  Authorization of Borrowing, No Conflict........................16
     4.3  Financial Condition............................................17
     4.4  Indebtedness and Liabilities...................................17
     4.5  Names..........................................................17
     4.6  Locations; FEIN................................................17
     4.7  Title to Properties; Liens.....................................17
     4.8  Litigation; Adverse Facts......................................17
     4.9  Payment of Taxes...............................................18
     4.10 Performance of Agreements......................................18
     4.11 Employee Benefit Plans.........................................18
     4.12 Intellectual Property..........................................18
     4.13 Broker's Fees..................................................18
     4.14 Environmental Compliance.......................................18
     4.15 Solvency.......................................................18
     4.16 Disclosure.....................................................19
     4.17 Insurance......................................................19
     4.18 Compliance with Laws...........................................19
     4.19     Bank Accounts..............................................19
     4.20 Subsidiaries...................................................19
     4.21 Employee Matters...............................................19
     4.22 Governmental Regulation........................................20

SECTION 5  AFFIRMATIVE COVENANTS.........................................20
     5.1  Financial Statements and Other Reports.........................20
          (A)  Monthly Financials........................................20




          (B)      Year-End Financials...................................20
          (C)  Accountants' Certification and Reports....................21
          (D)  Compliance Certificate....................................21
          (E)  Management Report.........................................21
          (F)  Government Notices........................................21
          (G)  Events of Default, etc....................................22
          (H)  Trade Names...............................................22
          (I)  Locations.................................................22
          (J)  Bank Accounts.............................................22
          (K)  Litigation................................................22
          (L)  Projections...............................................22
          (M)  LLC Notices and Financials................................22
          (N)  Other Information.........................................23
     5.2  Access to Accountants..........................................23
     5.3  Inspection.....................................................23
     5.4  Collateral Records.............................................23
     5.5  Corporate Existence, Etc.......................................23
     5.6  Payment of Taxes...............................................23
     5.7  Maintenance of Properties; Insurance...........................23
     5.8  Compliance with Laws...........................................24
     5.9  Further Assurances.............................................24
     5.10 Collateral Locations...........................................24
     5.11 Bailees........................................................24
     5.12 Collection of Accounts and Payments............................24
     5.13 Refinancing....................................................25




SECTION 6  FINANCIAL COVENANTS...........................................25
     6.1  Tangible Net Worth.............................................25
     6.2  Capital Expenditure Limits.....................................25

SECTION 7.  NEGATIVE COVENANTS...........................................26
     7.1  Indebtedness and Liabilities...................................26
     7.2  Guaranties.....................................................26
     7.3  Transfers, Liens and Related Matters...........................26
          (A)  Transfers.................................................26
          (B)  Liens.....................................................27
          (C)  No Negative Pledges.......................................27
          (D)  No Restrictions on Subsidiary Distributions to Borrower...27
     7.4  Investments and Loans..........................................27
     7.5  Restricted Junior Payments.....................................27
     7.6  Restriction on Fundamental Changes.............................28
     7.7  Changes to Certain Documents...................................28
     7.8  Transactions with Affiliates and Members.......................29
     7.9  Environmental Liabilities......................................29
     7.10 Conduct of Business............................................29
     7.11 Compliance with ERISA..........................................29
     7.12 Tax Consolidations.............................................29
     7.13 Subsidiaries...................................................29
     7.14 Fiscal Year....................................................29
     7.15 Press Release; Public Offering Materials.......................29
     7.16 Bank Accounts..................................................29




SECTION 8  DEFAULT, RIGHTS AND REMEDIES..................................30
     8.1  Event of Default...............................................30
          (A)  Payment...................................................30
          (B)  Default in Other Agreements...............................30
          (C)  Breach of Certain Provisions..............................30
          (D)  Breach of Warranty........................................30
          (E)  Other Defaults Under Loan Documents.......................30
          (F)  Change in Control.........................................30
          (G)  Involuntary Bankruptcy; Appointment of Receiver, etc......30
          (H)  Voluntary Bankruptcy; Appointment of Receiver, etc........31
          (I)   Liens....................................................31
          (J)  Judgment and Attachments..................................31
          (K)  Dissolution...............................................31
          (L)  Solvency..................................................32
          (M)  Injunction................................................32
          (N)  Invalidity of Loan Documents..............................32
          (O)  Failure of Security.......................................32
          (P)  Damage, Strike, Casualty..................................32
          (Q)  Licenses and Permits......................................32
          (R)  Tax Status................................................32
     8.2  Acceleration...................................................32
     8.3  Remedies.......................................................32
     8.4  Appointment of Attorney-in-Fact................................33
     8.5  Limitation on Duty of Lender with Respect to Collateral........34
     8.6  Application of Proceeds........................................34
     8.7  License of Intellectual Property...............................34




     8.8  Waivers, Non-Exclusive Remedies................................34

SECTION 9  MISCELLANEOUS.................................................35
     9.1  Assignments and Participations.................................35
     9.2  Set Off........................................................35
     9.3  Expenses and Attorneys' Fees...................................35
     9.4  Indemnity......................................................36
     9.5  Amendments and Waivers.........................................36
     9.6  Notices........................................................36
     9.7  Survival of Warranties and Certain Agreements..................37
     9.8  Indulgence Not Waiver..........................................37
     9.9  Marshaling; Payments Set Aside.................................38
     9.10 Entire Agreement...............................................38
     9.11 Independence of Covenants......................................38
     9.12 Severability...................................................38
     9.13 Headings.......................................................38
     9.14 Appicable Law..................................................38
     9.15 Successors and Assigns.........................................39
     9.16 No Fiduciary Relationship; Limitation of Liabilities...........39
     9.17 Consent to Jurisdiction........................................39
     9.18 Waiver of Jury Trial...........................................39
     9.19 Construction...................................................40
     9.20 Counterparts; Effectiveness....................................40
     9.21 No Duty........................................................40




                   LOAN AND SECURITY AGREEMENT


     This LOAN AND SECURITY AGREEMENT is dated as of January 3, 1997 and entered
into by and between SNAKE RIVER SUGAR COMPANY, an Oregon cooperative
("BORROWER"), with its principal place of business at 525 Good Avenue Nyssa,
Oregon 97913, and VALHI, INC., a Delaware corporation (`LENDER'') with offices
at Three Lincoln Centre, Suite 1700, 5430 LBJ Freeway, Dallas, Texas 75240.  All
capitalized terms used herein are defined in SECTION 1 of this Agreement.

     WHEREAS, Borrower desires that Lender extend a credit facility to provide
financing for Borrower's investment in The Amalgamated Sugar Company LLC (the
`LLC'') and to provide funds for other general corporate purposes; and

     WHEREAS, Borrower desires to secure its obligations under the Loan
Documents by granting to Lender a security interest in and lien upon Borrower's
property; and

     NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower and Lender agree as follows:




                             SECTION 1  DEFINITIONS

     1.1  CERTAIN DEFINED TERMS.  The following terms used in this Agreement
          ---------------------

shall have the following meanings:

     "ACCOUNTS" means, all "accounts" (as defined in the UCC) now owned or
hereafter created or acquired by Borrower, including all accounts receivable,
contract rights and general intangibles relating thereto, notes, drafts and
other forms of obligations owed to or owned by Borrower arising or resulting
from the sale of goods or the rendering of services, all proceeds thereof, all
guaranties and security therefor, and all goods and rights represented thereby
or arising therefrom including the right of stoppage in transit, replevin and
reclamation.  Notwithstanding the foregoing, `Accounts'' shall not include
amounts owed to Borrower by the LLC pursuant to the memorandum of agreement
attached as Exhibit D-7 to the Formation Agreement if the Borrower has cured any
payment Defaults  through implementation of a unit retain or otherwise.

     "AFFILIATE" means any Person (other than Lender): (A) directly or
indirectly controlling, controlled by, or under common control with, Borrower;
(B) directly or indirectly owning or holding five percent (5%) or more of any
equity interest in Borrower; or (C) five percent (5%) or more of whose voting
stock or other equity interest is directly or indirectly owned or held by
Borrower.  For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with") means the possession directly or indirectly of the power to




direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities or by contract or otherwise.

     "AGREEMENT" means this Loan and Security Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time.

     "ASSET DISPOSITION" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any of the
following:  (A) any shares of the capital stock or other equity interest of
Borrower or of any Person held by the Borrower, or (B) any or all of the assets
of Borrower outside the ordinary course of business.

     "BLOCKED ACCOUNTS" has the meaning assigned to that term in SUBSECTION
5.12.

     "BORROWER" means Snake River Sugar Company, an Oregon cooperative.

     "BUSINESS DAY" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of Utah or Texas or is a day on
which banking institutions located in either of such states are closed.

     "CAPITAL EXPENDITURES" means all expenditures (excluding trade-in
allowances and reinvested proceeds of Asset Dispositions, but including
deposits) for, or contracts for expenditures (excluding contracts for
expenditures under or with respect to Capital Leases, but including cash down
payments for assets acquired under Capital Leases) with respect to, any fixed




assets or improvements, or for replacements, substitutions or additions thereto,
which have a useful life of more than one year, including the direct or indirect
acquisition of such assets by way of increased product or service charges,
offset items or otherwise.

     "CAPITAL LEASE" means any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.

     "CASH EQUIVALENTS" means: (A) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(B) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's Ratings Services, or at least P-1 from Moody's Investors Service, Inc.;
and (C) certificates of deposit or bankers' acceptances maturing within six (6)
months from the date of issuance thereof issued by, or overnight reverse
repurchase agreements from, any commercial bank organized under the laws of the
United States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $250,000,000 and not subject to
setoff rights in favor of such bank.

     "CHANGE IN CONTROL" means any transaction or series of transactions in
which any Person  (other than Lenders) is deemed to have obtained control of the




Borrower, other than members of Borrower on the Closing Date who continue to
grow sugarbeets for sale to the Borrower and the LLC.

     "CLOSING CERTIFICATE" means a certificate duly executed by the chief
executive officer or chief financial officer of Borrower appropriately completed
and in form and substance acceptable to Lender.

     "CLOSING DATE" means December 31, 1996.

     "COLLATERAL" has the meaning assigned to that term in SUBSECTION 2.7.

     "COLLECTING BANKS" has the meaning assigned to that term in SUBSECTION
5.12.

     "COMPANY AGREEMENT" means the Company Agreement dated as of the date of
this Agreement among the LLC, the Borrower and The Amalgamated Sugar Company, a
Utah corporation.

     "COMPLIANCE CERTIFICATE" means a certificate duly executed on behalf of
Borrower by the chief executive officer or chief financial officer of Borrower
appropriately completed and in form and substance reasonably acceptable to
Lender.

     "DEFAULT" means a condition or event that, after notice or lapse of time or
both, would constitute an Event of Default if that condition or event were not
cured or removed within any applicable grace or cure period.





     "DEFAULT RATE" has the meaning assigned to that term in SUBSECTION 2.2.

     "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (A) is maintained for employees of Borrower or
any ERISA Affiliate or (B) has at any time within the preceding six (6) years
been maintained for the employees of Borrower or any current or former ERISA
Affiliate.

     "ENVIRONMENTAL CLAIMS" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials.

     "ENVIRONMENTAL LAWS" means any present or future federal, state or local
law, rule, regulation or order relating to pollution, waste, disposal or the
protection of human health or safety, plant life or animal life, natural
resources or the environment.

     "EQUIPMENT" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by Borrower including, without limitation, all machinery,
motor vehicles, trucks, trailers, vessels, aircraft and rolling stock and all
parts thereof and all additions and accessions thereto and replacements
therefor.




     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.

     "ERISA AFFILIATE" means any Person who is a member of a group which is
under common control with the Borrower, who together with the Borrower is
treated as a single employer within the meaning of Section 414(b) and (c) of the
IRC.

     "EVENT OF DEFAULT" means each of the events set forth in SUBSECTION 8.1.

     "EXCESS CASH FLOW" means, for any period, the greater of (A) zero (0); or
(B) without duplication, the total of the following for Borrower, each
calculated for such period: (1) cash distributions from the LLC; plus (2) net
                                                                 ----

income determined in accordance with GAAP, provided that in determining net
income, Borrower's expenses for the purchase of sugarbeets shall not exceed the
Beet Payment (as defined in the Company Agreement) and Borrower's other expenses
shall not exceed $5,000 in any month; plus, (3) to the extent included in the
                                      ----

calculation of net income, the sum of (A) interest paid in kind, (B)
amortization and depreciation expenses and (C) other non-cash charges, including
amortization of fees paid in connection with consummation of the transactions
contemplated by the Loan Documents and the Formation Agreement (excluding
accruals for cash expenses made in the ordinary course of business); less, (4)
                                                                     ----

to the extent included in the calculation of net income, the sum of (A) the




income of any Person in which Borrower has an ownership interest unless such
income is received by Borrower in a cash distribution, and (B) gains or losses
from Asset Dispositions; less (5) Capital Expenditures (to the extent permitted
                         ----

by SUBSECTION 6.2 of this Agreement and to the extent actually made in cash
and/or due to be made in cash within such period); less (6) any principal
                                                   ----

payment on the Obligations pursuant to SUBSECTIONS 2.1(A), 2.1(B) AND 2.4(C),
any  interest expense paid on the Obligations pursuant to SUBSECTION 2.2(B), any
fees paid in connection with the Obligations pursuant to SUBSECTION 2.3, and any
other amounts paid in connection with the Obligations pursuant to SUBSECTIONS
9.3 AND 9.4; less (7) aggregate distributions in respect of income taxes, to the
             ----

extent permitted pursuant to SUBSECTION 7.5.

     "FISCAL YEAR" means each twelve month period ending on the last day of
September 30 in each year.

     "FORMATION AGREEMENT" means the Formation Agreement dated as of the date of
this Agreement entered into among the LLC, Borrower and The Amalgamated Sugar
Company.

     "FORMATION DOCUMENTS" means the Formation Agreement, the Company Agreement,
and each other agreement or document entered into in connection with the
formation and operation of the LLC, including any agreements relating to the LLC
Indebtedness.




     "GAAP" means U.S. generally accepted accounting principles applied on a
consistent basis.

     "HAZARDOUS MATERIAL" means all or any of the following: (A) substances that
are defined or listed in, or otherwise classified pursuant to, any Environmental
Laws or regulations as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances" or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity or "EP
toxicity"; (B) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (C) any flammable substances or
explosives or any radioactive materials; and (D) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million.

     "INDEBTEDNESS", as applied to any Person, means without duplication: (A)
all indebtedness for borrowed money; (B) obligations under leases which in
accordance with GAAP constitute Capital Leases; (C) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (D) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; (E) all indebtedness secured by any Lien
on any property or asset owned or held by that Person regardless of whether the




indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person, and (F) any mandatorily redeemable
capital stock or other equity interest.

     "INTELLECTUAL PROPERTY" means all present and future designs, patents,
patent rights and applications therefor, trademarks and registrations or
applications therefor, trade names, inventions, copyrights and all applications
and registrations therefor, software or computer programs, license rights, trade
secrets, methods, processes, know-how, drawings, specifications, descriptions,
and all memoranda, notes and records with respect to any research and
development, whether now owned or hereafter acquired, all goodwill associated
with any of the foregoing, and proceeds of all of the foregoing, including,
without limitation, proceeds of insurance policies thereon.

     "INVENTORY" means all "inventory" (as defined in the UCC) now owned or
hereafter acquired, wherever located including finished goods, raw materials,
work in process and other materials and supplies used or consumed in a Person's
business including goods which are returned or repossessed.  Notwithstanding the
foregoing, Inventory shall not include any sugarbeets.

     "IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder.

     "LENDER" means Valhi, Inc. together with its successors and permitted
assigns pursuant to SUBSECTION 9.1.





     "LENDER'S ACCOUNT" has the meaning assigned to that term in SUBSECTION
2.4(A).

     "LIABILITIES" shall have the meaning given that term in accordance with
GAAP and shall include Indebtedness.

     "LIEN" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).

     "LLC" means The Amalgamated Sugar Company LLC, a Delaware limited liability
company.

     "LLC INDEBTEDNESS" means the LLC's Indebtedness pursuant to its working
capital loan agreement with United States National Bank of Oregon and First
Security Bank of Utah, N.A., as in effect on the Closing Date.

     "LOAN" or "LOANS" means the Tranche A Loan and the Tranche B Loan.

     "LOAN DOCUMENTS" means this Agreement, the Notes and all other instruments,
documents and agreements executed by or on behalf of Borrower and delivered
concurrently herewith or at any time hereafter to or for the benefit of Lender
in connection with the Loans and other transactions contemplated by this




Agreement, all as amended, restated, supplemented or otherwise modified from
time to time.

     "MATERIAL ADVERSE EFFECT" means a material adverse effect upon (A) the
business, operations, properties, assets or condition (financial or otherwise)
of the Borrower and its Subsidiaries taken as a whole or (B) the ability of
Borrower to perform its obligations under any Loan Document to which it is a
party or of Lender to enforce or collect any of the Obligations.

     "NET WORTH" means, as of any date, the difference between (A) the total
assets of the Borrower and (B) the sum of the total Liabilities of Borrower,
minority interests in Subsidiaries, and capital stock or equity interests of the
Borrower or any Subsidiary which by its terms is mandatorily redeemable by any
Person, in each case as those terms are used in accordance with GAAP.

     "NOTE" means a Note evidencing the Tranche A Loan or a Note evidencing the
Tranche B Loan.

     "OBLIGATIONS" means all obligations, liabilities and indebtedness of every
nature of Borrower from time to time owed to Lender under the Loan Documents
including the principal amount of all debts, claims and indebtedness, accrued
and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable.




     "PERMITTED ENCUMBRANCES" means the following types of Liens:  (A) Liens
(other than Liens relating to Environmental Claims or ERISA) for taxes,
assessments or other governmental charges not yet due and payable; (B) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
similar liens imposed by law, which are incurred in the ordinary course of
business for sums not more than thirty (30) days delinquent; (C) Liens (other
than any Lien imposed by ERISA) incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (D) easements, rights-of-way, restrictions,
and other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of Borrower or any of its
Subsidiaries; (E) Liens for purchase money obligations, provided that (I) the
                                                        --------

purchase of the asset subject to any such Lien is permitted under SUBSECTION
6.2, (II) the Indebtedness secured by any such Lien is permitted under
SUBSECTION 7.1, and (III) such Lien encumbers only the asset so purchased; and
(F) Liens in favor of Lender.

     "PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.





     "PRO FORMA" means the unaudited balance sheet of Borrower as of the Closing
Date, after giving effect to the transactions contemplated by this Agreement and
the Formation Documents.  The Pro Forma is annexed hereto as SCHEDULE 1.1(C).

     "PROJECTIONS" means Borrower's forecasted:  (A) balance sheets; (B) profit
and loss statements; (C) cash flow statements; and (D) capitalization
statements, all prepared on a basis consistent with the historical financial
statements of The Amalgamated Sugar Company, together with appropriate
supporting details and a statement of underlying assumptions.

     "RESTRICTED JUNIOR PAYMENT" means:  (A) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock, or any other
equity interest of Borrower or any of its Subsidiaries now or hereafter
outstanding, except a dividend or distribution payable solely in shares or
equity interests of such class; (B) any payment or prepayment of principal of,
premium, if any, or interest on, or any redemption, conversion, exchange,
retirement, defeasance, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any Indebtedness other than the
Loans or any shares of any class of stock or any equity interest of Borrower or
any of its Subsidiaries now or hereafter outstanding; (C) any payment made to
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock, or equity interests, of
Borrower or any of its Subsidiaries now or hereafter outstanding; and (D) any
payment by Borrower or any of its Subsidiaries of any management fees or similar
fees to any Affiliate, whether pursuant to a management agreement or otherwise.





     "SCHEDULED INSTALLMENT" has the meaning assigned to that term in SUBSECTION
2.1(A).

     "SUBSIDIARY" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
more than 50% of the total voting power of shares of stock (or equivalent
ownership or controlling interest) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other subsidiaries of that Person or a combination
thereof.  For all purposes of this Agreement, the LLC is a Subsidiary of
Borrower.

     "TANGIBLE NET WORTH" means an amount equal to: (A) Borrower's Net Worth;
less (B) Borrower's intangible assets (determined in conformity with GAAP)
- ----

including, without limitation, goodwill, trademarks, tradenames, licenses,
organizational costs, deferred amounts, covenants not to compete, unearned
income and restricted funds; less (C) all obligations owed to Borrower or any of
                             ----

its Subsidiaries by any Affiliate of Borrower or any of its Subsidiaries; and
less (D) all loans by Borrower to officers, stockholders or employees of
- ----

Borrower.




     "TERMINATION DATE" means the date this Agreement is terminated as specified
in the manner set forth in SUBSECTION 2.5.

     "TRANCHE A LOAN" means the loan made by Lender to Borrower in the initial
principal amount of $100,000,000 pursuant to SUBSECTION 2.1(A).

     "TRANCHE B LOAN" means the loan made by Lender to Borrower in the initial
principal amount of $80,000,000 pursuant to SUBSECTION 2.1(B).

     "UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of Utah, as amended from time to time, and any successor statute.

     1.2  ACCOUNTING TERMS.  For purposes of this Agreement, all accounting
          ----------------

terms not otherwise defined herein shall have the meanings assigned to such
terms in conformity with GAAP.  Financial statements and other information
furnished to Lender pursuant to SUBSECTION 5.1 shall be prepared in accordance
with GAAP (as in effect at the time of such preparation) on a consistent basis.
 In the event any "Accounting Changes" (as defined below) shall occur and such
changes affect financial covenants, standards or terms in this Agreement, then
Borrower and Lender agree to enter into negotiations in order to amend such
provisions of this Agreement so as to equitably reflect such Accounting Changes
with the desired result that the criteria for evaluating the financial condition
of Borrower shall be the same after such Accounting Changes as if such
Accounting Changes had not been made, and until such time as such an amendment
shall have been executed and delivered by Borrower and Lender, (A) all financial




covenants, standards and terms in this Agreement shall be calculated and/or
construed as if such Accounting Changes had not been made, and (B) Borrower
shall prepare footnotes to each Compliance Certificate and the financial
statements required to be delivered hereunder that show the differences between
the financial statements delivered (which reflect such Accounting Changes) and
the basis for calculating financial covenant compliance (without reflecting such
Accounting Changes).  "ACCOUNTING CHANGES" means:  (A) changes in accounting
principles required by GAAP and implemented by Borrower; (B) changes in
accounting principles recommended by Borrower's certified public accountants;
and (C) changes in carrying value of Borrower's assets, liabilities or equity
accounts resulting from any adjustments that, in each case, were applicable to,
but not included in, the Pro Forma.

     1.3  OTHER DEFINITIONAL PROVISIONS.  References to "Sections",
          -----------------------------

"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided.  Any of the terms defined in SUBSECTION 1.1 may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference.  In this Agreement, words importing any gender include the
other genders; herein and hereunder means in this Agreement or under this
Agreement, except as specifically provided to the contrary; the words
"including," "includes" and "include" shall be deemed to be followed by the
words "without limitation"; references to agreements and other contractual
instruments shall be deemed to include subsequent amendments, assignments, and
other modifications thereto, but only to the extent such amendments, assignments




and other modifications are not prohibited by the terms of this Agreement or any
other Loan Document; references to Persons include their respective permitted
successors and assigns or, in the case of governmental Persons, Persons
succeeding to the relevant functions of such Persons; and all references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations.

                        SECTION 2  LOANS AND COLLATERAL

     2.1  LOANS.
          -----


          (A)  TRANCHE A LOAN.  Subject to the terms and conditions of this
               --------------

Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, Lender agrees to lend to the Borrower on the Closing Date the
Tranche A Loan in the initial principal amount of $100,000,000.  The Tranche A
Loan shall be funded in one drawing and any amount of the Tranche A Loan repaid
may not be reborrowed.  Borrower shall make monthly Scheduled Installments of
principal and interest on the Tranche A Loan on the dates and in the amounts set
forth below (or such lesser principal amount of the Tranche A Loan as shall then
be outstanding).  "SCHEDULED INSTALLMENT" of the Tranche A Loan means, for the
last day of each month commencing with January 31, 1997, an amount equal to
$1,659,601.75 (subject to adjustment upon any adjustment of the interest rate
pursuant to SUBSECTION 2.2(A)(3)).




          (B) TRANCHE B LOAN.    Subject to the terms and conditions of this
              --------------

Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, Lender agrees to lend to the Borrower on the Closing Date the
Tranche B Loan in the initial principal amount of $80,000,000.  The Tranche B
Loan shall be funded in one drawing and any amount of the Tranche B Loan repaid
may not be reborrowed.  Borrower shall make one scheduled installment of
principal of the Tranche B Loan on December 31, 2003.

          (C)  NOTES.
               -----


               (1)  Borrower shall execute and deliver to Lender a Tranche A
Term Note to evidence the Tranche A Loan, such Tranche A Term Note to be in the
principal amount of the Tranche A Loan and substantially in the form attached
hereto and Exhibit A.

               (2)  Borrower shall execute and deliver to Lender a Tranche B
Term Note to evidence the Tranche B Loan, such Tranche B Term Note to be in the
principal amount of the Tranche B Loan and substantially in the form attached
hereto as Exhibit B.

               (3)  In the event of an assignment under SUBSECTION 9.1, Borrower
shall, upon surrender of the assigning Lender's Notes, issue new Notes to the
Lender's assignees.




     2.2  INTEREST
          --------


          (A) RATE OF INTEREST.
              ----------------


               (1)  The outstanding principal balance of the Tranche A Loan
shall bear interest at a rate per annum (meaning 360 days) equal to 9.99
percent.

               (2)  Prior to January 1, 1999, the outstanding principal balance
of the Tranche B Loan shall bear interest at a rate per annum (meaning 360 days)
equal to 10.99 percent, and commencing January 1, 1999, the outstanding
principal balance of the Tranche B Loan shall bear interest at a rate per annum
(meaning 360 days) equal to 12.99 percent.

               (3)  After the occurrence and during the continuance of an Event
of Default, each Loan and all other Obligations shall, at Lender's option, bear
interest at a rate per annum (meaning 360 days) equal to two percent (2.0%) plus
the interest rate otherwise applicable to such Loan hereunder (the "DEFAULT
RATE").

          (B)  COMPUTATION AND PAYMENT OF INTEREST.  Interest on the Loans and
               -----------------------------------

all other Obligations shall be computed on the daily principal balance on the
basis of a 360-day year consisting of twelve 30-day months and shall be payable
monthly in arrears on the last day of each month.  Notwithstanding the




foregoing, interest on fifty percent (50%) of the outstanding principal balance
of the Tranche B Loan shall accrue and shall not be payable until December 31,
2003, and such accrued amounts shall bear interest, compounded annually, at the
rates set forth in SUBSECTION 2.2(A)(2).

          (C)  INTEREST LAWS.
               -------------


      Notwithstanding any provision to the contrary contained in this Agreement
or the other Loan Documents, Borrower shall not be required to pay, and Lender
shall not be permitted to collect, any amount of interest in excess of the
maximum amount of interest permitted by law ("EXCESS INTEREST").  If any Excess
Interest is provided for or determined by a court of competent jurisdiction to
have been provided for in this Agreement or in any of the other Loan Documents,
then in such event: (1) the provisions of this subsection shall govern and
control; (2) Borrower shall not be  obligated to pay any Excess Interest; (3)
any Excess Interest that Lender may have received hereunder shall be, at
Lender's option, (A) applied as a credit against the outstanding principal
balance of the Obligations or accrued and unpaid interest (not to exceed the
maximum amount permitted by law), (B) refunded to the payor thereof, or (C) any
combination of the foregoing; (4) the interest rate(s) provided for in this
Agreement shall be automatically reduced to the maximum lawful rate allowed from
time to time under applicable law (the "MAXIMUM RATE"), and this Agreement and
the other Loan Documents shall be deemed to have been and shall be, reformed and
modified to reflect such reduction; and (5) Borrower shall not have any action
against Lender for any damages arising out of the payment or collection of any




Excess Interest.  Notwithstanding the foregoing, if for any period of time
interest on any Obligations is calculated at the Maximum Rate rather than the
applicable rate under this Agreement, and thereafter such applicable rate
becomes less than the Maximum Rate, the rate of interest payable on such
Obligations shall remain at the Maximum Rate until Lender shall have received
the amount of interest which Lender would have received during such period on
such Obligations had the rate of interest not been limited to the Maximum Rate
during such period.

     2.3  FEES.
          ----


          (A)  CLOSING FEE.  Borrower shall pay to Lender on the Closing Date a
               -----------

closing fee in the amount of $3,600,000.  If at least $100,000,000 of the
principal amount of the Loans is refinanced and prepaid in full (in addition to
Scheduled Installments and mandatory prepayments) on or prior to June 30, 1997,
then Lender shall refund to Borrower a portion of such closing fee equal to 2%
of the refinanced amount.  If at least $100,000,000 of the principal amount of
the Loans is refinanced and prepaid in full (in addition to Scheduled
Installments and mandatory prepayments) after June 30, 1997 but on or prior to
September 30, 1997, then Lender shall refund to Borrower a portion of such
closing fee equal to 1.5% of the refinanced amount.  If at least $100,000,000 of
the principal amount of the Loans is refinanced and prepaid in full (in addition
to Scheduled Installments and mandatory prepayments) after September 30, 1997
but on or prior to December 31, 1997, then Lender shall refund to Borrower a
portion of such closing fee equal to 1% of the refinanced amount. If any




principal amount of the Loans is refinanced and prepaid after December 31, 1997,
then no amount of such closing fee shall be refunded.

          (B)  FINANCING FEE.  Borrower shall pay to Lender a financing fee in
               -------------

the following amounts at the following dates:  $1,000,000 will be due on June
30, 1997; $500,000 will be due on September 30, 1997;  $500,000 will be due on
December 31, 1997; and $1,000,000 will be due on each March 31, June 30,
September 30 and December 31, commencing March 31, 1998.  Such financing fee
shall terminate and Borrower shall have no obligation to pay any such fee (other
than to the extent such financing fee has previously accrued and become due) on
or after the date upon which at least $100,000,000 of the principal amount of
the Loans is refinanced and prepaid in full (in addition to Scheduled
Installments and mandatory prepayments).

          (C)  OTHER FEES AND EXPENSES.  Borrower shall pay to Lender, for its
               -----------------------

own account, all charges for returned items and all other bank charges incurred
by Lender.

     2.4  PAYMENTS AND PREPAYMENTS.
          ------------------------


          (A)  MANNER AND TIME OF PAYMENT.  If Lender elects to bill Borrower
               --------------------------

for any amount due hereunder, such amount shall be immediately due and payable
with interest thereon as provided in this Agreement.  All payments made by
Borrower with respect to the Obligations shall be made without deduction,




defense, setoff or counterclaim.  All payments to Lender hereunder shall, unless
otherwise directed by Lender, be made in accordance with the terms and
conditions of this Agreement by delivery of such payment to Lender's Account
("LENDER'S ACCOUNT"), ABA No. 071 000 039, Account No. 78-27296, at Bank of
America, Illinois, Chicago, Illinois, Reference:  Valhi, Inc. for the benefit of
Snake River Sugar Company.  Proceeds remitted to  Lender's Account shall be
credited to the Obligations on the Business Day on which received by Lender in
Lender's Account in immediately available funds; provided, however, for the
                                                 --------  -------

purpose of calculating interest on the Obligations, such funds shall be deemed
received on the first Business Day thereafter.

          (B)  MANDATORY PREPAYMENTS.
               ---------------------


               (1)  PROCEEDS OF ASSET DISPOSITIONS.  (A) Immediately upon
                    ------------------------------

receipt by Borrower of any net cash proceeds of any Asset Disposition (in one or
a series of related transactions), which net cash proceeds exceed $50,000 (it
being understood that if such proceeds exceed $50,000, the entire amount and not
just the portion above $50,000 shall be subject to this SUBSECTION 2.4(B)(1)),
Borrower shall prepay the Obligations in an amount equal to such proceeds.

               (2)  PREPAYMENTS FROM EXCESS CASH FLOW.  On or prior to the end
                    ---------------------------------

of any month in which Borrower has received any Excess Cash Flow, Borrower shall
prepay the Obligations in an amount equal to 100% of Excess Cash Flow for such
month.   Concurrently with the making of any such payment, Borrower shall




deliver to Lender a certificate of Borrower's chief executive officer or chief
financial officer demonstrating its calculation of the amount required to be
paid.

          (C)  VOLUNTARY PREPAYMENTS.  Borrower may, at any time upon not less
               ---------------------

than ten Business Days' prior notice to Lender, prepay the Obligations.  The
Obligations may be prepaid or repaid in full or part without any penalty.

          (D)  PAYMENTS ON BUSINESS DAYS.  Whenever any payment to be made
               -------------------------

hereunder shall be stated to be due on a day that is not a Business Day, the
payment may be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the amount of interest or fees due
hereunder.

          (E)  APPLICATION OF PREPAYMENTS.  Any prepayments pursuant to this
               --------------------------

SUBSECTION 2.4 shall be applied, FIRST, to all fees, costs and expenses incurred
by Lender with respect to this Agreement, the other Loan Documents or the
Collateral; SECOND, to all fees due and owing to Lender; THIRD, to accrued and
unpaid interest on the Obligations; FOURTH, to the principal amounts of the
Tranche A Loan, in the inverse order of maturity; FIFTH, to the principal
amounts of the Tranche B Loan, and SIXTH, to any other indebtedness or
obligations of Borrower owing to Lender.




     2.5  TERM OF THIS AGREEMENT.  This Agreement shall be effective until
          ----------------------

December 31, 2003 (the "TERMINATION DATE").  Upon acceleration in accordance
with SECTION 8.2 or on the Termination Date, all Obligations shall become
immediately due and payable without notice or demand.  Notwithstanding any
termination, until all Obligations (other than continuing indemnity obligations)
have been fully paid and satisfied, Lender shall be entitled to retain security
interests in and liens upon all Collateral, and even after payment of all
Obligations hereunder, Borrower's obligation to indemnify Lender in accordance
with the terms hereof shall continue.

     2.6  STATEMENTS.  Lender shall render a monthly statement of account to
          ----------

Borrower within twenty (20) days after the end of each month.  Such statement of
account shall constitute an account stated unless Borrower makes written
objection thereto within ten (10) days from the date such statement is mailed to
Borrower.  Borrower promises to pay all of its Obligations as such amounts
become due or are declared due pursuant to the terms of this Agreement.

     2.7  GRANT OF SECURITY INTEREST.  To secure the prompt and complete
          --------------------------

payment, performance and observance of the Obligations, including all renewals,
extensions, restructurings and refinancings of any or all of the Obligations,
Borrower hereby grants to Lender a continuing security interest, lien and
mortgage in and to all right, title and interest of Borrower in the following
property of Borrower, whether now owned or existing or hereafter acquired or
arising and regardless of where located (all being collectively referred to as




the "COLLATERAL"):  (A) Accounts; (B) Inventory; (C) general intangibles (as
defined in the UCC); (D) documents (as defined in the UCC) or other receipts
covering, evidencing or representing goods; (E) instruments (as defined in the
UCC), including any membership interest in the LLC and any other capital stock
or other equity interests in any Person held by Borrower; (F) chattel paper (as
defined in the UCC); (G) Equipment; (H) Intellectual Property; (I) all deposit
accounts of Borrower maintained with any bank or financial institution; (J) all
cash and other monies and property of Borrower in the possession or under the
control of Lender or any participant; (K) all books, records, ledger cards,
files, correspondence, computer programs, tapes, disks and related data
processing software that at any time evidence or contain information relating to
any of the property described above or are otherwise necessary or helpful in the
collection thereof or realization thereon; and (L) proceeds of all or any of the
property described above, including, without limitation, the proceeds of any
insurance policies covering any of the above described property.

     2.8  TAXES.
          -----


          (A)  NO DEDUCTIONS.  Any and all payments or reimbursements made
               -------------

hereunder or under any of the other Loan Documents shall be made free and clear
of and without deduction for any and all taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto; excluding,
however, the following:  (I) taxes imposed on the net income of Lender by the
jurisdiction under the laws of which Lender is organized or doing business or
any political subdivision thereof, and (II) similar taxes (including, without




limitation franchise taxes or gross receipts taxes) imposed in lieu of income
taxes, in each case by the jurisdiction under the laws of which Lender is
organized or any political subdivision thereof (all such taxes, levies, imposts,
deductions, charges or withholdings and all liabilities with respect thereto
excluding such taxes imposed on net income, herein "TAX LIABILITIES").  If
Borrower shall be required by law to deduct any such Tax Liabilities from or in
respect of any sum payable hereunder to Lender, then the sum payable hereunder
shall be increased as may be necessary so that, after making all required
deductions, Lender receives an amount equal to the sum it would have received
had no such deductions been made.

          (B)  CHANGES IN TAX LAWS.  In the event that, subsequent to the
               -------------------

Closing Date, (1) any changes in any existing law, regulation, treaty or
directive or in the interpretation or application thereof, (2) any new law,
regulation, treaty or directive enacted or any interpretation or application
thereof, or (3) compliance by Lender with any request or directive (whether or
not having the force of law) from any governmental authority, agency or
instrumentality:

               (A)  does or shall subject Lender to any tax of any kind
whatsoever with respect to this Agreement, the other Loan Documents or any Loans
made under this Agreement or change the basis of taxation of payments to Lender
of principal, fees, interest or any other amount payable hereunder (except for
net income taxes, or franchise taxes imposed in lieu of net income taxes,
imposed generally by federal, state or local taxing authorities with respect to




interest or commitment or other fees payable hereunder or changes in the rate of
tax on the overall net income of Lender); or

               (B)  does or shall impose on Lender any other condition or
increased cost in connection with the transactions contemplated hereby or
participations herein; and the result of any of the foregoing is to increase the
cost to Lender of continuing any Loan made under this Agreement, as the case may
be, or to reduce any amount receivable hereunder, then, in any such case,
Borrower shall promptly pay to Lender, upon its demand, any additional amounts
necessary to compensate Lender, on an after-tax basis, for such additional cost
or reduced amount receivable, as determined by Lender with respect to this
Agreement or the other Loan Documents.  If Lender becomes entitled to claim any
additional amounts pursuant to this subsection, it shall promptly notify
Borrower of the event by reason of which Lender has become so entitled.  A
certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by Lender to Borrower shall, absent manifest error, be final,
conclusive and binding for all purposes.

     2.9  USE OF PROCEEDS AND MARGIN SECURITY.  Borrower shall use the proceeds
          -----------------------------------

of all Loans for proper business purposes consistent with all applicable laws,
statutes, rules and regulations.  No portion of the proceeds of any Loan shall
be used by Borrower for the purpose of purchasing or carrying  of margin stock
within the meaning of Regulation G or Regulation U, or use the proceeds of any
loan in any manner that might cause the borrowing or the application of such
proceeds to violate Regulation T or Regulation X or any other regulation of the




Board of Governors of the Federal Reserve System, or to violate the Exchange
Act.


                         SECTION 3  CONDITIONS TO LOANS

     3.1  CONDITIONS TO LOANS.  The obligations of Lender to make Loans on the
          -------------------

Closing Date are subject to satisfaction of all of the conditions set forth
below.

          (A)  CLOSING DELIVERIES.  Lender shall have received, in form and
               ------------------

substance satisfactory to Lender, all documents, instruments and information
identified on SCHEDULE 3.1(A) and all other agreements, notes, certificates,
orders, authorizations, financing statements, mortgages and other documents
which Lender may at any time reasonably request.

          (B)  SECURITY INTERESTS.  Lender shall have received satisfactory
               ------------------

evidence that all security interests and liens granted to Lender pursuant to
this Agreement or the other Loan Documents have been duly perfected and
constitute first priority liens on the Collateral, subject only to Permitted
Encumbrances, including delivery of all certificates representing membership
interests in the LLC.




          (C)  CAPITAL CONTRIBUTION AND WORKING CAPITAL BORROWINGS.  At least
               ---------------------------------------------------

two Business Days prior to the Closing Date,  Lender shall have received
satisfactory evidence of the receipt by Borrower of cash proceeds of the
issuance of interests in the Borrower in an amount not less than $88,000,000.
On the Closing Date, Lender shall have received satisfactory evidence of  the
formation of the LLC and the receipt by the LLC of the maximum amount of
borrowings permitted under the LLC Indebtedness.

          (D)  REPRESENTATIONS AND WARRANTIES.  The representations and
               ------------------------------

warranties contained herein and in the Loan Documents shall be true, correct and
complete in all material respects on and as of the Closing Date.

          (E)  FEES.  Borrower shall have paid the fees payable on the Closing
               ----

Date referred to in SUBSECTION 2.3(A).

          (F)  NO DEFAULT.  No event shall have occurred and be continuing that
               ----------

would constitute an Event of Default or a Default.

          (G)  PERFORMANCE OF AGREEMENTS.  Borrower shall have performed in all
               -------------------------

material respects all agreements and satisfied all conditions which any Loan
Document provides shall be performed by it on or before that Closing Date.




          (H)  NO PROHIBITION.  No order, judgment or decree of any court,
               --------------

arbitrator or governmental authority shall purport to enjoin or restrain Lender
from making any Loans.

          (I)  NO LITIGATION.  There shall not be pending or, to the knowledge
               -------------

of Borrower, threatened, any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration by, against or affecting
Borrower or the LLC or any property of the Borrower or the LLC (other than as
set forth in the Formation Agreement), and there shall have occurred no
development in any such action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration, that in each case, in the
opinion of Lender, could reasonably be expected to have a Material Adverse
Effect.


              SECTION 4  BORROWER'S REPRESENTATIONS AND WARRANTIES

     To induce Lender to enter into this Agreement, and to make Loans, Borrower
represents and warrants to Lender that the following statements are true,
correct and complete:

     4.1  ORGANIZATION, POWERS, CAPITALIZATION.
          ------------------------------------




          (A)  ORGANIZATION AND POWERS.  Borrower is a cooperative corporation
               -----------------------

duly organized, validly existing and in good standing under the laws of Oregon
and qualified to do business in all states where such qualification is required.
 Borrower has all requisite power and authority to own and operate its
properties, to carry on its business as now conducted and proposed to be
conducted and to enter into each Loan Document.

          (B)  CAPITALIZATION.  As of the Closing Date, the authorized capital
               --------------

stock of Borrower is as set forth on SCHEDULE 4.1(B).  All issued and
outstanding shares of capital stock of Borrower are duly authorized and validly
issued, fully paid, nonassessable, free and clear of all Liens and such shares
were issued in compliance with all applicable state and federal laws concerning
the issuance of securities.  As of the Closing Date, the capital stock of
Borrower is owned by the Persons and in the amounts set forth on SCHEDULE
4.1(B).  As of the Closing Date, no shares of the capital stock of Borrower,
other than those described above, are issued and outstanding.  Except as set
forth on SCHEDULE 4.1(B), as of the Closing Date, there are no preemptive or
other outstanding rights, options, warrants, conversion rights or similar
agreements or understandings for the purchase or acquisition from Borrower of
any shares of capital stock or other securities of Borrower.

     4.2  AUTHORIZATION OF BORROWING, NO CONFLICT.  Borrower has the power and
          ---------------------------------------

authority to incur the Obligations and to grant security interests in the
Collateral.  On the Closing Date, the execution, delivery and performance of the




Loan Documents by Borrower will have been duly authorized by all necessary
action.  The execution, delivery and performance by Borrower of each Loan
Document to which it is a party and the consummation of the transactions
contemplated by this Agreement and the other Loan Documents by Borrower do not
contravene and will not be in contravention of any applicable law, the corporate
charter or bylaws of Borrower or any agreement or order by which Borrower or
Borrower's property is bound.  This Agreement is, and the other Loan Documents,
including the Notes, when executed and delivered will be, the legally valid and
binding obligations of the Borrower, each enforceable against the Borrower, as
applicable, in accordance with their respective terms.

     4.3  FINANCIAL CONDITION.  All financial statements concerning Borrower and
          -------------------

the LLC which have been or will hereafter be furnished by Borrower and the LLC
to Lender pursuant to this Agreement have been or will be prepared in accordance
with GAAP consistently applied throughout the periods involved (except as
disclosed therein) and do or will present fairly in all material respects the
financial condition of the Persons covered thereby as at the dates thereof and
the results of their operations for the periods then ended.  The Pro Forma was
prepared by Borrower based on the unaudited balance sheet of The Amalgamated
Sugar Company dated September 30, 1996.  The Projections delivered and to be
delivered have been and will be prepared by Borrower in light of the past
operations of the business of Borrower and the LLC, and such Projections
represent and will represent the good faith estimate of Borrower and its board
members concerning the most probable course of its business as of the date such
Projections are prepared and delivered.  The Projections have been reviewed by




Eide Helmeke PLLP and such firm has issued a review report on such Projections
which has been delivered to Lender.

     4.4  INDEBTEDNESS AND LIABILITIES.  Borrower has no (A) Indebtedness except
          ----------------------------

pursuant to this Agreement and the Loan Documents; or (B) Liabilities other than
as reflected on the Pro Forma or as incurred in the ordinary course of business
following the date of the Pro Forma.

     4.5  NAMES.  Snake River Sugar Company is the only name, tradename,
          -----

fictitious name or business name under which Borrower currently conducts
business or under which Borrower (or any predecessor in interest of Borrower)
has at any time during the past five years conducted business.

     4.6  LOCATIONS; FEIN.  The Borrower's principal place of business and the
          ---------------

location of Borrower's books and records is 525 Good Avenue, Nyssa, Oregon
97913, and such location is Borrower's sole office and location for its business
and the Collateral.  Borrower's federal employer identification number is set
forth on the signature page of this Agreement.

     4.7  TITLE TO PROPERTIES; LIENS.  Borrower has good, sufficient and legal
          --------------------------

title, subject to Permitted Encumbrances, to all of its properties and assets.
Except for Permitted Encumbrances, all such properties and assets are free and
clear of Liens.




     4.8  LITIGATION; ADVERSE FACTS.  There are no judgments outstanding against
          -------------------------

Borrower or affecting any property of Borrower nor is there any action, charge,
claim, demand, suit, proceeding, petition, governmental investigation or
arbitration now pending or, to the best knowledge of Borrower after due inquiry,
threatened, against or affecting Borrower or any property of Borrower which
could reasonably be expected to result in any Material Adverse Effect.  Borrower
has not received any opinion or memorandum or legal advice from legal counsel to
the effect that it is exposed to any liability which could reasonably be
expected to result in any Material Adverse Effect.

     4.9  PAYMENT OF TAXES.  All material tax returns and reports of Borrower
          ----------------

required to be filed by it have been timely filed, and all taxes, assessments,
fees and other governmental charges upon Borrower and upon its properties,
assets, income and franchises which are shown on such returns as due and payable
have been paid when due and payable.  None of the United States income tax
returns of Borrower are under audit.  No tax liens have been filed and no claims
(except as otherwise permitted by SUBSECTION 5.6) are being asserted with
respect to any such taxes.  The charges, accruals and reserves on the books of
Borrower in respect of any taxes or other governmental charges are in accordance
with GAAP.

     4.10 PERFORMANCE OF AGREEMENTS.  Borrower is not in material default in the
          -------------------------

performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any material contractual obligation of Borrower, and, to




the best of Borrower's knowledge, no condition exists that, with the giving of
notice or the lapse of time or both, would constitute such a material default.

     4.11 EMPLOYEE BENEFIT PLANS.  Borrower and each ERISA Affiliate is in
          ----------------------

compliance in all material respects with all applicable provisions of ERISA, the
IRC and all other applicable laws and the regulations and interpretations
thereof with respect to all Employee Benefit Plans.  No material liability has
been incurred by Borrower or any ERISA Affiliate which remains unsatisfied for
any funding obligation, taxes or penalties with respect to any Employee Benefit
Plan.

     4.12 INTELLECTUAL PROPERTY.  As of the Closing Date, Borrower does not own,
          ---------------------

and is not licensed to use and does not otherwise have the right to use, any
Intellectual Property, other than its corporate name.

     4.13 BROKER'S FEES.  No broker's or finder's fee or commission will be
          -------------

payable by Borrower with respect to the issuance and sale of the Notes or any of
the transactions contemplated by this Agreement.

     4.14 ENVIRONMENTAL COMPLIANCE.  Borrower has been and is currently in
          ------------------------

compliance with all applicable Environmental Laws, including obtaining and
maintaining in effect all permits, licenses or other authorizations required by
applicable Environmental Laws, the noncompliance with which could have a
Material Adverse Effect.  There are no claims, liabilities, investigations,




litigation, administrative proceedings, whether pending or threatened, or
judgments or orders relating to any Hazardous Materials asserted or threatened
against Borrower or relating to any real property currently or formerly owned,
leased or operated by Borrower.

     4.15 SOLVENCY.  As of and from and after the date of this Agreement,
          --------

Borrower: (A) owns and will own assets the fair salable value of which are (I)
greater than the total amount of its liabilities (including contingent
liabilities) and (II) greater than the amount that will be required to pay
probable liabilities as they mature; (B) has capital that is not unreasonably
small in relation to its business as presently conducted or any contemplated or
undertaken transaction; and (C) does not intend to incur and does not believe
that it will incur debts beyond its ability to pay such debts as they become
due.

     4.16 DISCLOSURE.  No representation or warranty of Borrower contained in
          ----------

this Agreement, the financial statements, the other Loan Documents, or any other
document, certificate or written statement furnished to Lender by or on behalf
of Borrower for use in connection with the Loan Documents contains any untrue
statement of a material fact or omitted, omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made.  The
Projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Borrower to be
reasonable at the time made, it being recognized by Lender that such projections




as to future events are not to be viewed as facts and that actual results during
the period or periods covered by any such projections may differ from the
projected results.  There is no material fact known to Borrower that has had or
could reasonably be expected to have a Material Adverse Effect and that has not
been disclosed in this Agreement or in such other documents, certificates and
statements furnished to Lender for use in connection with the transactions
contemplated by this Agreement.

     4.17 INSURANCE.  Borrower maintains adequate insurance policies for public
          ---------

liability, property damage for its business and properties, product liability,
and business interruption, no notice of cancellation has been received with
respect to such policies and Borrower is in compliance with all conditions
contained in such policies.

     4.18 COMPLIANCE WITH LAWS.   Borrower is not in violation of any law,
          --------------------

ordinance, rule, regulation, order, policy, guideline or other requirement of
any domestic or foreign government or any instrumentality or agency thereof,
having jurisdiction over the conduct of its business or the ownership of its
properties, including, without limitation, any violation relating to any use,
release, storage, transport or disposal of any Hazardous Material, which
violation would subject Borrower or any of its officers to criminal liability or
have a Material Adverse Effect and no such violation has been alleged.




     4.19   BANK ACCOUNTS.  SCHEDULE 4.19 sets forth the account numbers and
            -------------

locations of all bank accounts of Borrower as of the Closing Date.

     4.20 SUBSIDIARIES.  Borrower has no Subsidiaries other than the LLC.
          ------------


     4.21 EMPLOYEE MATTERS. (A) no employee of Borrower is subject to any
          ----------------

collective bargaining agreement, (B) no petition for certification or union
election is pending with respect to the employees of Borrower and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of Borrower and (C) there are no strikes, slowdowns,
work stoppages or controversies pending or, to the best knowledge of Borrower
after due inquiry, threatened between Borrower and its employees, other than
employee grievances arising in the ordinary course of business, which could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.  Borrower is not a party to any employment contract.

     4.22 GOVERNMENTAL REGULATION.  Borrower is not, and after giving effect to
          -----------------------

the application of the proceeds of the Loan will not be, subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act or
the Investment Company Act of 1940 or to any federal or state statute or
regulation limiting its ability to incur indebtedness for borrowed money.




                        SECTION 5  AFFIRMATIVE COVENANTS

     Borrower covenants and agrees that until payment in full of all
Obligations, unless Lender shall otherwise give its prior written consent,
Borrower shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this SECTION 5 applicable to such Person.

     5.1  FINANCIAL STATEMENTS AND OTHER REPORTS.  Borrower will maintain a
          --------------------------------------

system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP.  Borrower will deliver to Lender the financial statements and other
reports described below.

          (A)  MONTHLY FINANCIALS.  As soon as available and in any event within
               ------------------

thirty (30) days after the end of each month,  Borrower will deliver (1) the
unaudited consolidated and consolidating balance sheet of Borrower and its
Subsidiaries as at the end of such month and the related unaudited consolidated
and consolidating statements of income, partners' equity and cash flow for such
month and for the period from the beginning of the then current Fiscal Year to
the end of such month, and (2) a schedule of the outstanding Indebtedness for
borrowed money of Borrower and its Subsidiaries describing in reasonable detail
each such debt issue or loan outstanding and the principal amount and amount of
accrued and unpaid interest with respect to each such debt issue or loan.




          (B)  YEAR-END FINANCIALS.  As soon as available and in any event
               -------------------

within ninety (90) days after the end of each Fiscal Year, Borrower will
deliver:  (1) the audited consolidated balance sheet of Borrower and its
Subsidiaries as at the end of such year and the related audited consolidated
statements of income, shareholders' equity and cash flow for such Fiscal Year;
(2) a schedule of the outstanding Indebtedness of Borrower and its Subsidiaries
describing in reasonable detail each such debt issue or loan outstanding and the
principal amount and amount of accrued and unpaid interest with respect to each
such debt issue or loan; and (3) a report with respect to the financial
statements from a firm of independent certified public accountants selected by
Borrower, which report shall be unqualified as to going concern and scope of
audit of Borrower and its Subsidiaries and shall state that (A) such
consolidated financial statements present fairly the consolidated financial
position of Borrower and its Subsidiaries as at the dates indicated and the
results of their operations and cash flow for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years and (B) that
the examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards; and (4) copies of the consolidating financial statements of
Borrower and its Subsidiaries, including (A) consolidating balance sheets of
Borrower and its Subsidiaries as at the end of such Fiscal Year showing
intercompany eliminations and (B) related consolidating statements of earnings
of Borrower and its Subsidiaries showing intercompany eliminations.




          (C)  ACCOUNTANTS' CERTIFICATION AND REPORTS.  Together with each
               --------------------------------------

delivery of audited consolidated financial statements of Borrower and its
Subsidiaries pursuant to SUBSECTION 5.1(B), Borrower will deliver (1) a written
statement by its independent certified public accountants (A) stating that the
examination has included a review of the terms of this Agreement as same relate
to accounting matters and (B) stating whether, in connection with the
examination, any condition or event that constitutes a Default or an Event of
Default has come to their attention and, if such a condition or event has come
to their attention, specifying the nature and period of existence thereof.
Promptly upon receipt thereof, Borrower will deliver copies of all significant
reports submitted to Borrower by independent public accountants in connection
with each annual, interim or special audit of the financial statements of
Borrower made by such accountants, including the comment letter submitted by
such accountants to management in connection with their annual audit.

          (D)  COMPLIANCE CERTIFICATE.  Together with the delivery of each set
               ----------------------

of financial statements referenced in subparts (A) and (B) of this SUBSECTION
5.1, Borrower will deliver to Lender a Compliance Certificate evidencing the
Borrower's continued compliance with its obligations and agreements in this
Agreement, together with copies of the calculations and work-up employed to
determine Borrower's compliance or noncompliance with the financial covenants
set forth in SECTION 6.




          (E)  MANAGEMENT REPORT.  Together with each delivery of financial
               -----------------

statements of Borrower and its Subsidiaries pursuant to subdivisions (A) and (B)
of this SUBSECTION 5.1, Borrower will deliver a management report:  (1)
describing the operations and financial condition of Borrower and its
Subsidiaries for the month then ended and the portion of the current Fiscal Year
then elapsed (or for the Fiscal Year then ended in the case of year-end
financials); (2) setting forth in comparative form the corresponding figures for
the corresponding periods of the previous Fiscal Year and the corresponding
figures from the most recent Projections for the current Fiscal Year delivered
to Lender pursuant to SUBSECTION 5.1(L); and (3) discussing the reasons for any
significant variations.  The information above shall be presented in reasonable
detail and shall be certified by the chief financial officer of Borrower to the
effect that such information fairly presents in all material respects the
results of operations and financial condition of Borrower and its Subsidiaries
as at the dates and for the periods indicated.

          (F)  GOVERNMENT NOTICES.  Borrower will deliver to Lender promptly
               ------------------

after receipt copies of all material notices, requests, subpoenas, inquiries or
other writings received from any governmental agency concerning any Employee
Benefit Plan, the violation or alleged violation of any Environmental Laws, the
storage, use or disposal of any Hazardous Material, the violation or alleged
violation of the Fair Labor Standards Act or Borrower's payment or non-payment
of any taxes including any tax audit.




          (G)  EVENTS OF DEFAULT, ETC. Promptly upon any officer of Borrower
               -----------------------

obtaining knowledge of any of the following events or conditions, Borrower shall
deliver a certificate of Borrower's chief executive officer specifying the
nature and period of existence of such condition or event and what action
Borrower has taken, is taking and proposes to take with respect thereto: (1) any
condition or event that constitutes an Event of Default or Default; (2) any
notice of default that any Person has given to Borrower or any of its
Subsidiaries or any other action taken with respect to a claimed default; or (3)
any Material Adverse Effect.

          (H)  TRADE NAMES.  Borrower and each of its Subsidiaries will give
               -----------

Lender at least thirty (30) days advance written notice of any change of name or
of any new trade name or fictitious business name.  Borrower's use of any trade
name or fictitious business name will be in compliance with all laws regarding
the use of such names.

          (I)  LOCATIONS.  Borrower will give Lender at least thirty (30) days
               ---------

advance written notice of any change in Borrower's principal place of business
or any change in the location of its books and records or the Collateral or of
any new location for its books and records or the Collateral.

          (J)  BANK ACCOUNTS.  Borrower will give Lender prompt notice of any
               -------------

new bank accounts Borrower or any of its Subsidiaries intends to establish prior
to its their opening same.





          (K)  LITIGATION.  Promptly upon any officer of Borrower or its
               ----------

Subsidiaries obtaining knowledge of (1) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting
Borrower or any of its Subsidiaries or any property of Borrower or any of its
Subsidiaries not previously disclosed by Borrower to Lender or (2) any material
development in any  action, suit, proceeding, governmental investigation or
arbitration at any time pending against or affecting Borrower or any of its
Subsidiaries or any property of Borrower or any of its Subsidiaries which is
reasonably likely to have a Material Adverse Effect, Borrower will promptly give
notice thereof to Lender and provide such other information as may be reasonably
available to them to enable Lender and its counsel to evaluate such matter.

          (L)  PROJECTIONS.  As soon as available and in any event no later than
               -----------

90 days prior to the start of Borrower's Fiscal Year, Borrower will deliver
consolidated and consolidating Projections of Borrower and its Subsidiaries for
the forthcoming Fiscal Year, month by month.

          (M)  LLC NOTICES AND FINANCIALS.  Borrower shall promptly deliver
               --------------------------

copies of all notices given or received by the LLC to Borrower, any other member
of the LLC, or any lender to the LLC with respect to noncompliance with any term
or condition of the LLC's organizational documents and loan agreements
(including the LLC Indebtedness), and shall promptly notify Lender of any
potential or actual event of default with respect to the LLC Indebtedness.




Borrower shall promptly deliver to Lender all financial statements of the LLC
required to be delivered to the members of the LLC pursuant to the Company
Agreement.

          (N)  OTHER INFORMATION.  With reasonable promptness, Borrower will
               -----------------

deliver such other information and data with respect to Borrower, the LLC or the
Collateral as Lender may reasonably request from time to time.

     5.2  ACCESS TO ACCOUNTANTS.  Borrower authorizes Lender to discuss the
          ---------------------

financial condition and financial statements of Borrower and its Subsidiaries
with Borrower's independent public accountants upon reasonable notice to
Borrower of its intention to do so, and authorizes such accountants to respond
to all of Lender's inquiries.

     5.3  INSPECTION.  Borrower shall permit Lender and any authorized
          ----------

representatives designated by Lender to visit and inspect any of the properties
of Borrower or any of its Subsidiaries, upon reasonable notice and at reasonable
times, including its and their financial and accounting records, and to make
copies and take extracts therefrom, and to discuss its and their affairs,
finances and business with its and their officers and independent public
accountants, at such reasonable times during normal business hours and as often
as may be reasonably requested.




     5.4  COLLATERAL RECORDS.  Borrower shall keep full and accurate books and
          ------------------

records relating to the Collateral and shall mark such books and records to
indicate Lender's security interests in the Collateral.

     5.5  CORPORATE EXISTENCE, ETC..  Borrower will, and will cause each of its
          -------------------------

Subsidiaries to, at all times preserve and keep in full force and effect its
corporate existence, as the case may be, and all rights and franchises material
to its business.  Borrower will promptly notify Lender of any change in its or
any of its Subsidiaries' ownership or corporate structure.  Borrower shall take
such action as shall be necessary such that each of the representations and
warranties set forth in SECTION 4 of this Agreement continues to be true and
correct in all material respects.

     5.6  PAYMENT OF TAXES.  Borrower will, and will cause each of its
          ----------------

Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or with respect to any of its
franchises, business, income or property before any penalty accrues thereon
provided that no such tax need be paid if Borrower or one of its Subsidiaries is
- --------

contesting same in good faith by appropriate proceedings promptly instituted and
diligently conducted and if Borrower or such Subsidiary has established
appropriate reserves as shall be required in conformity with GAAP.




     5.7  MAINTENANCE OF PROPERTIES; INSURANCE.  Borrower will maintain or cause
          ------------------------------------

to be maintained in good repair, working order and condition all material
properties used in the business of Borrower and its Subsidiaries and will make
or cause to be made all appropriate repairs, renewals and replacements thereof.
 Borrower will maintain or cause to be maintained, with financially sound and
reputable insurers, public liability and property damage insurance with respect
to its business and properties and the business and properties of its
Subsidiaries against loss or damage of the kinds customarily carried or
maintained by corporations of established reputation engaged in similar
businesses and in amounts reasonably acceptable to Lender.  Within 15 days of
the Closing Date, Borrower shall cause Lender to be named as loss payee on all
insurance policies relating to any Collateral and as additional insured under
all liability policies, in each case pursuant to appropriate endorsements in
form and substance satisfactory to Lender and shall collaterally assign to
Lender as security for the payment of the Obligations any business interruption
insurance of Borrower.  Borrower shall apply any proceeds received from any
policies of insurance relating to any Collateral to the Obligations as set forth
in SUBSECTION 2.4(B)(1).

     5.8  COMPLIANCE WITH LAWS.  Borrower will, and will cause each of its
          --------------------

Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority as now in effect and which
may be imposed in the future in all jurisdictions in which Borrower or any of
its Subsidiaries is now doing business or may hereafter be doing business, other




than those laws the noncompliance with which would not have a Material Adverse
Effect.

     5.9  FURTHER ASSURANCES.  Borrower shall, and shall cause each of its
          ------------------

Subsidiaries to, from time to time, execute such guaranties, financing or
continuation statements, documents, security agreements, reports and other
documents or deliver to Lender such instruments, certificates of title or other
documents as Lender at any time may reasonably request to evidence, perfect or
otherwise implement the guaranties and security for repayment of the Obligations
provided for in the Loan Documents.  At Lender's request, Borrower shall cause
any Subsidiaries of Borrower promptly to guaranty the Obligations and to grant
to Lender security interests in the real, personal and mixed property of such
Subsidiary to secure the Obligations.

     5.10 COLLATERAL LOCATIONS.  Borrower will keep the Collateral at the
          --------------------

locations specified in SECTION 4.6.  With respect to any new location (which in
any event shall be within the continental United States), Borrower will execute
such documents and take such actions as Lender deems necessary to perfect and
protect the security interests of the Lender in the Collateral prior to the
transfer or removal of any Collateral to such new location.

     5.11 BAILEES. If any Collateral is at any time in the possession or control
          -------

of any warehouseman, bailee or any of Borrower's agents or processors, Borrower
shall, upon the request of Lender, notify such warehouseman, bailee, agent or




processor of the security interests in favor of Lender created hereby and shall
instruct such Person to hold all such Collateral for Lender's account subject to
Lender's instructions.

     5.12 COLLECTION OF ACCOUNTS AND PAYMENTS.   Within 15 days of the Closing,
          -----------------------------------

Borrower shall establish lockboxes and blocked accounts (collectively, "BLOCKED
ACCOUNTS") in Borrower's name with such banks (collectively, "COLLECTING BANKS")
as are acceptable to Lender (subject to irrevocable instructions acceptable to
Lender as hereinafter set forth) to which the all account debtors shall directly
remit all payments on Accounts and in which Borrower will immediately deposit
all payments constituting proceeds of Collateral (including any distributions
received from the LLC) in the identical form in which such payment was made,
whether by cash or check.  The Collecting Banks shall acknowledge and agree, in
a manner satisfactory to Lender, that all payments made to the Blocked Accounts
are the sole and exclusive property of Lender, and that the Collecting Banks
have no right of setoff against the Blocked Accounts and that all such payments
received will be promptly transferred to Lender's Account.  Borrower hereby
agrees that all payments received by Lender, whether by cash, check, wire
transfer or any other instrument, made to such Blocked Accounts or otherwise
received by Lender and whether on the Accounts or as proceeds of other
Collateral or otherwise will be the sole and exclusive property of Lender.
Borrower shall irrevocably instruct each Collecting Bank that each Collecting
Bank shall promptly transfer all payments or deposits to the Blocked Accounts
into Lender's Account.  Borrower, and any of its Affiliates, employees, Lenders
or other Persons acting for or in concert with Borrower, shall, acting as




trustee for Lender, receive, as the sole and exclusive property of Lender, any
monies, checks, notes, drafts or any other payments relating to and/or proceeds
of Accounts or other Collateral which come into the possession or under the
control of Borrower or any of Borrower's Affiliates, employees, agents or other
Persons acting for or in concert with Borrower, and immediately upon receipt
thereof, Borrower or such Persons shall remit the same or cause the same to be
remitted, in kind, to the Blocked Accounts or to Lender at its address set forth
in SUBSECTION 9.6 below.

     5.13 REFINANCING.   Borrower shall use its best efforts (including payment
          -----------

of any reasonable commitment fees and expenses) to cause at least $100 million
of the Loans to be refinanced (other than through Scheduled Installments and
mandatory prepayments) as soon as reasonably practicable.  In connection with
such refinancing, Borrower shall agree to any reasonable commercial loan terms
and conditions, provided, however, that this SUBSECTION 5.13 shall not require
Borrower to agree to pay interest in excess of commercially reasonable terms and
conditions.

                         SECTION 6  FINANCIAL COVENANTS

     Borrower covenants and agrees that so long as any of the Loans remain in
effect and until payment in full of all Obligations (other than continuing
indemnity obligations), Borrower shall comply with and shall cause each of its
Subsidiaries to comply with all covenants in this SECTION 6 applicable to such
Person.





     6.1  TANGIBLE NET WORTH.  Borrower shall maintain Tangible Net Worth of at
          ------------------

least $88 million at the end of each monthly accounting period.

     6.2  CAPITAL EXPENDITURE LIMITS.  Borrower will make no Capital
          --------------------------

Expenditures and will not enter into any Capital Lease.  The aggregate amount of
all Capital Expenditures of Borrower's Subsidiaries (excluding trade-ins and
excluding Capital Expenditures in respect of replacement assets to the extent
funded with casualty insurance proceeds) will not exceed $35,000,000 in any
Fiscal Year of the Company plus the two previous Fiscal Years (provided than,
for purposes of this SUBSECTION 6.2, Capital Expenditures for each Fiscal Year
prior to January 1, 1997 shall be deemed to be an amount equal to $12,000,000).
 In the event that any Subsidiary of Borrower enters into a Capital Lease or
other contract with respect to fixed assets, for purposes of calculating Capital
Expenditures under this subsection only, the amount of the Capital Lease or
contract initially capitalized on such Subsidiary's balance sheet prepared in
accordance with GAAP shall be considered expended in full on the date that such
Subsidiary enters into such Capital Lease or contract.





                         SECTION 7.  NEGATIVE COVENANTS

     Borrower covenants and agrees that so long as any of the Loans remain in
effect and until payment in full of all Obligations (other than continuing
indemnity obligations), unless Borrower has received the prior written consent
of Lender:

     7.1  INDEBTEDNESS AND LIABILITIES.  Borrower shall not directly or
          ----------------------------

indirectly create, incur, assume, guaranty, or otherwise become or remain
directly or indirectly liable, on a fixed or contingent basis, with respect to,
any Indebtedness except the Obligations and except for Borrower's guarantee
dated as of the date of this Agreement of certain obligations to Henry's Fork
Financial, Inc. of Snake River Farms II, an Idaho limited liability company
(`the Guarantee'').  Borrower shall not incur any Liabilities except for the
Guarantee and for trade payables and normal accruals in the ordinary course of
business not yet due and payable or with respect to which Borrower is contesting
in good faith the amount or validity thereof by appropriate proceedings and then
only to the extent that Borrower has established adequate reserves therefor, if
appropriate under GAAP.

     7.2  GUARANTIES.  Except for the Guarantee and for endorsements of
          ----------

instruments or items of payment for collection in the ordinary course of
business, Borrower shall not guaranty, endorse, or otherwise in any way become
or be responsible for any obligations of any other Person, whether directly or




indirectly by agreement to purchase the indebtedness of any other Person or
through the purchase of goods, supplies or services, or maintenance of working
capital or other balance sheet covenants or conditions, or by way of stock
purchase, capital contribution, advance or loan for the purpose of paying or
discharging any indebtedness or obligation of such other Person or otherwise.

     7.3  TRANSFERS, LIENS AND RELATED MATTERS.
          ------------------------------------


          (A)  TRANSFERS.  Except as a result of condemnation or casualty loss,
               ---------

Borrower shall not sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to any of the Collateral or the
assets of Borrower, except that Borrower may (I) sell inventory in the ordinary
course of business; and (II) make Asset Dispositions if all of the following
conditions are met:  (1) the market value of assets sold or otherwise disposed
of in any single transaction or series of related transactions does not exceed
$1,000,000 and the aggregate market value of assets sold or otherwise disposed
of in any Fiscal Year does not exceed $5,000,000; (2) the consideration received
is at least equal to the fair market value of such assets; (3) the sole
consideration received is cash or Cash Equivalents;  (4) the net proceeds of
such Asset Disposition are applied as required by SUBSECTION 2.4(B); (5) after
giving effect to the sale or other disposition of the assets included within the
Asset Disposition and the repayment of the Obligations with the proceeds
thereof, Borrower is in compliance on a pro forma basis with the covenants set
forth in SECTION 6 recomputed for the most recently ended month for which
information is available and is in compliance with all other terms and




conditions contained in this Agreement; and (6) no Default or Event of Default
shall result from such sale or other disposition.

          (B)  LIENS.  Except for Permitted Encumbrances, Borrower shall not
               -----

directly or indirectly create, incur, assume or permit to exist any Lien on or
with respect to any of the Collateral or the assets of such Person or any
proceeds, income or profits therefrom.

          (C)  NO NEGATIVE PLEDGES.  Borrower shall not enter into or assume any
               -------------------

agreement (other than the Loan Documents) prohibiting the creation or assumption
of any Lien upon its properties or assets, whether now owned or hereafter
acquired.

          (D)  NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO BORROWER.
               -------------------------------------------------------

Borrower shall not directly or indirectly create or otherwise cause or suffer to
exist or become effective or enter into any agreement permitting or providing
for, whether at the time of entering into such agreement or upon the occurrence
of an event subsequent to such time, any consensual encumbrance or restriction
of any kind on the ability of any Subsidiary to:  (1) pay dividends or make any
other distribution on any of such Subsidiary's capital stock or equity interest
owned by Borrower or any Subsidiary of Borrower; (2) subject to subordination
provisions, pay any indebtedness owed to Borrower or to any other Subsidiary;
(3) make loans or advances to Borrower or any other Subsidiary; or (4) transfer




any of its property or assets to Borrower or any other Subsidiary, other than
pursuant to the LLC Indebtedness.

     7.4  INVESTMENTS AND LOANS.  Borrower shall not make or permit to exist
          ---------------------

investments in or loans to any other Person, except:  (1) Cash Equivalents; (2)
loans and advances to employees for moving, entertainment, travel and other
similar expenses in the ordinary course of business in an aggregate outstanding
amount not in excess of $10,000 at any time; (3) Investments received by or
issued to Borrower or any Subsidiary of Borrower on account or in settlement of
any claim of Borrower or such Subsidiary against any other Person in any
bankruptcy or similar insolvency proceeding involving such Person, and (4) loans
to Valhi, Inc. in the aggregate principal amount of $250,000,000.

     7.5  RESTRICTED JUNIOR PAYMENTS.  Borrower shall not directly or indirectly
          --------------------------

declare, order, pay, make or set apart any sum for any Restricted Junior
Payment, or permit any Subsidiary (including the LLC) to directly or indirectly
declare, order, pay, make or set apart any sum for any Restricted Junior
Payment, except that:

     (A)  The LLC may make Restricted Junior Payments with respect to its
membership interests to the extent set forth in the Company Agreement and with
respect to the purchase of sugarbeets from Borrower, so long as such expenses do
not exceed the amounts set forth in the contract set forth as Exhibit D-7 to the
Formation Agreement); and




     (B)  so long as before and after giving effect to each such distribution,
no Event of Default shall have occurred and be continuing, the Borrower may make
payments to its members in connection with the purchase of sugarbeets from
Borrower's members, so long as such payments do not exceed the amounts to be
received from the LLC pursuant to the Memorandum of Agreement set forth as
Exhibit D-7 to the Formation Agreement), provided, that not less than three
                                         --------

Business Days prior to the date of any such payments, Borrower shall have
delivered to Lender a certificate of the Borrower's chief executive officer
setting forth in such form and with such specificity as shall be reasonably
satisfactory to Lender the calculation of the amount of each such payments; and

     (C)  so long as before and after giving effect to each such distribution,
no Event of Default shall have occurred and be continuing, following the
completion of Borrower's audit for its Fiscal Year, Borrower may make tax
distributions to its members in an amount not to exceed 30% of the taxable
income realized by such members during such completed Fiscal Year, provided,
                                                                   --------

that not less than three Business Days prior to the date of any such
distribution, Borrower shall have delivered to Lender a certificate of the
Borrower's chief executive officer setting forth in such form and with such
specificity as shall be reasonably satisfactory to Lender the calculation of the
amount of each such distribution.

     7.6  RESTRICTION ON FUNDAMENTAL CHANGES.  Borrower shall not: (A) enter
          ----------------------------------

into any transaction of merger or consolidation; (B) liquidate, wind-up or




dissolve itself (or suffer any liquidation or dissolution); (C) convey, sell,
lease, sublease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any substantial part of its business or assets,
or the capital stock of any of its Subsidiaries or the membership interest in
the LLC, whether now owned or hereafter acquired; or (D) acquire by purchase or
otherwise all or any substantial part of the business or assets of, or stock or
other evidence of beneficial ownership of, any Person.

     7.7  CHANGES TO CERTAIN DOCUMENTS.   Borrower shall not amend, restate,
          ----------------------------

supplement or otherwise modify (A) any term or provision of its articles of
incorporation or by-laws, or (B) any of the Formation Documents, except for any
of the foregoing which would not singly or in the aggregate have, in Lender's
good faith opinion (based upon reasonable commercial standards of fair dealing),
a material and adverse affect on (I)  Borrower's ability to perform and satisfy
its obligations and liabilities under this Agreement or any of the other Loan
Documents or (II) any right or remedies of Lender under this Agreement or any of
the other Loan Documents and in any event (1) which would not result in any
increase in the amount of any payment or distribution by Borrower to any
Affiliate or member of Borrower restricted pursuant to the terms hereof,
including, without limitation, any Restricted Junior Payment and (2) are not
otherwise expressly prohibited by the terms of any of the Loan Documents.
Borrower shall not permit the LLC to amend, restate, supplement or otherwise
modify any provision of the documents related to the LLC Indebtedness; provided,
however that the foregoing shall not prevent any amendment, restatement,
supplement, modification or waiver which (A) does no more than extend the




maturity date of the LLC Indebtedness, or (B) would not singly or in the
aggregate have, in Lender's good faith opinion (based upon reasonable commercial
standards of fair dealing), a material and adverse affect on Borrower's ability
to perform and satisfy its obligations and liabilities under this Agreement or
any of the other Loan Documents.

     7.8  TRANSACTIONS WITH AFFILIATES AND MEMBERS.  Borrower shall not directly
          ----------------------------------------

or indirectly, enter into or permit to exist any transaction (including the
purchase, sale or exchange of property or the rendering of any service) with any
Affiliate or with any officer, director, employee or member of Borrower, except
for (A) the purchase of sugarbeets from Borrower's members, other than pursuant
to the terms of the contract attached hereto as Exhibit C, and (B)  transactions
(other than the purchase of sugarbeets) in the ordinary course of and pursuant
to the reasonable requirements of Borrower's business and upon fair and
reasonable terms which are fully disclosed to Lender and which are no less
favorable to Borrower than it would obtain in a comparable arm's length
transaction with an unaffiliated Person.

     7.9  ENVIRONMENTAL LIABILITIES.  Borrower shall not: (A) violate any
          -------------------------

applicable Environmental Law; (B) dispose of any Hazardous Materials (except in
accordance with applicable law) into or onto or from, any real property owned,
leased or operated by Borrower; or (C) permit any Lien imposed pursuant to any
Environmental Law to be imposed or to remain on any real property owned, leased
or operated by Borrower.




     7.10 CONDUCT OF BUSINESS.  From and after the Closing Date, Borrower shall
          -------------------

not engage in any business other than businesses of the type engaged in by
Borrower on the Closing Date, or cease to conduct its operations or its business
for any reason.  Borrower shall, and shall cause the LLC to, comply with all
provisions of the Formation Documents, and Borrower shall not permit the LLC to
take any action requiring consent of any member of the LLC pursuant to the
Company Agreement.

     7.11 COMPLIANCE WITH ERISA.  Borrower shall not establish any new Employee
          ---------------------

Benefit Plan or amend any existing Employee Benefit Plan if the liability or
increased liability resulting from such establishment or amendment is material.
 Borrower shall not fail to establish, maintain and operate each Employee
Benefit Plan in compliance in all material respects with the provisions of
ERISA, the IRC and all other applicable laws and the regulations and
interpretations thereof.

     7.12 TAX CONSOLIDATIONS.  Borrower shall not file or consent to the filing
          ------------------

of any consolidated income tax return with any Person.

     7.13 SUBSIDIARIES.  Borrower shall not establish, create or acquire any new
          ------------

Subsidiaries.

     7.14 FISCAL YEAR.  Borrower shall not change its Fiscal Year.
          -----------





     7.15 PRESS RELEASE; PUBLIC OFFERING MATERIALS.  Borrower shall not disclose
          ----------------------------------------

the name of Lender in any press release or in any prospectus, proxy statement or
other materials filed with any governmental entity relating to a public offering
of the capital stock of Borrower or any Subsidiary of Borrower.

     7.16 BANK ACCOUNTS.  Borrower shall not establish any new bank accounts, or
          -------------

amend or terminate any Blocked Account or lockbox agreement without Lender's
prior written consent.


                    SECTION 8  DEFAULT, RIGHTS AND REMEDIES

     8.1  EVENT OF DEFAULT.  "EVENT OF DEFAULT" shall mean the occurrence or
          ----------------

existence of any one or more of the following:

          (A)  PAYMENT.  Failure to make payment of any principal payment within
               -------

3 Business Days following the due date or any failure to make payment of any
other Obligations within 5 days following the due date; or

          (B)  DEFAULT IN OTHER AGREEMENTS.  (1) Failure of Borrower or any of
               ---------------------------

its Subsidiaries to pay when due any principal on any Indebtedness within 3
Business Days following the due date, or failure of Borrower or any of its




Subsidiaries to pay when due any interest on any Indebtedness within 5 days
following the due date, (2) breach or default of Borrower under the Guarantee,
or (3) breach or default of Borrower or any of its Subsidiaries with respect to
any Indebtedness; if such failure to pay, breach or default entitles the holder
to cause such Indebtedness having an individual principal amount in excess of
$50,000 or having an aggregate principal amount in excess of $100,000 to become
or be declared due prior to its stated maturity; or

          (C)  BREACH OF CERTAIN PROVISIONS.  Failure of Borrower to perform or
               ----------------------------

comply with any term or condition contained in SUBSECTIONS 5.1 (A), (B) and (C),
5.3 or 5.5 or contained in SECTION 6 or SECTION 7; or

          (D)  BREACH OF WARRANTY.  Any representation, warranty, certification
               ------------------

or other statement made by Borrower in any Loan Document or in any statement or
certificate at any time given by such Person in writing pursuant or in
connection with any Loan Document is false in any material respect on the date
made; or

          (E)  OTHER DEFAULTS UNDER LOAN DOCUMENTS.  Borrower defaults in the
               -----------------------------------

performance of or compliance with any term contained in this Agreement or the
other Loan Documents and such default is not remedied or waived within ten (10)
days after receipt by Borrower of notice from Lender of such default (other than
occurrences described in other provisions of this SUBSECTION 8.1 for which a




different grace or cure period is specified or which constitute immediate Events
of Default); or

          (F)  CHANGE IN CONTROL.  A Change in Control shall occur; or
               -----------------


          (G)  INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.  (1) A
               -----------------------------------------------------

court enters a decree or order for relief with respect to the Borrower or the
LLC  or any of Borrower's Subsidiaries in an involuntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, which decree or order is not stayed or other similar
relief is not granted under any applicable federal or state law; or (2) the
continuance of any of the following events for ninety (90) days unless
dismissed, bonded or discharged: (A) an involuntary case is commenced against
the Borrower, the LLC or any of the Borrower's Subsidiaries, under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or (B) a decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over the Borrower, the LLC or any of the LLC's Subsidiaries, or over all
or a substantial part of their respective property, is entered; or (C) an
interim receiver, trustee or other custodian is appointed without the consent of
the Borrower, the LLC or any of the Borrower's Subsidiaries, for all or a
substantial part of the property of the Borrower, the LLC or any such
Subsidiary; or




          (H)  VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.  (1) An order
               ---------------------------------------------------

for relief is entered with respect to the Borrower, the LLC or any of the
Borrower's Subsidiaries or the Borrower, the LLC or any of the Borrower's
Subsidiaries commences a voluntary case under the Bankruptcy Code or any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary case
or to the conversion of an involuntary case to a voluntary case under any such
law or consents to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or (2)
the Borrower, the LLC or any of the Borrower's Subsidiaries makes any assignment
for the benefit of creditors; or (3) the board of directors of the Borrower or
any of its Subsidiaries (including the managers of the LLC) adopts any
resolution or otherwise authorizes action to approve any of the actions referred
to in this SUBSECTION 8.1(H); or

          (I)  LIENS.  Any lien, levy or assessment is filed or recorded with
               -----

respect to or otherwise imposed upon all or any part of the Collateral or the
assets of Borrower or any of its Subsidiaries (including the LLC) by the United
States or any department or instrumentality thereof or by any state, county,
municipality or other governmental agency (other than Permitted Encumbrances)
and such lien, levy or assessment is not stayed, vacated, paid or discharged
within ten (10) days; or




          (J)  JUDGMENT AND ATTACHMENTS.  Any money judgment, writ or warrant of
               ------------------------

attachment, or similar process involving (1) an amount in any individual case in
excess of $25,000 or (2) an amount in the aggregate at any time in excess of
$50,000 (in either case not adequately covered by insurance as to which the
insurance company has acknowledged coverage) is entered or filed against
Borrower or any of its Subsidiaries (including the LLC) or any of their
respective assets and remains undischarged, unvacated, unbonded or unstayed for
a period of thirty (30) days or in any event later than five (5) days prior to
the date of any proposed sale thereunder; or

          (K)  DISSOLUTION.  Any order, judgment or decree is entered against
               -----------

Borrower or any of its Subsidiaries (including the LLC) decreeing the
dissolution or split up of Borrower or that Subsidiary and such order remains
undischarged or unstayed for a period in excess of twenty (20) days; or

          (L)  SOLVENCY.  Borrower ceases to be solvent (as represented by
               --------

Borrower in SUBSECTION 4.15) or admits in writing its present or prospective
inability to pay its debts as they become due; or

          (M)  INJUNCTION.  Borrower or any of its Subsidiaries (including the
               ----------

LLC) is enjoined, restrained or in any way prevented by the order of any court
or any administrative or regulatory agency from conducting all or any material
part of its business and such order continues for more than thirty (30) days; or




          (N)  INVALIDITY OF LOAN DOCUMENTS.  Any of the Loan Documents for any
               ----------------------------

reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null and
void, or Borrower denies that it has any further liability under any Loan
Documents to which it is party, or gives notice to such effect; or

          (O)  FAILURE OF SECURITY.  Lender does not have or ceases to have a
               -------------------

valid and perfected first priority security interest in the Collateral (subject
to Permitted Encumbrances), in each case, for any reason other than the failure
of Lender to take any action within its control; or

          (P)  DAMAGE, STRIKE, CASUALTY.  Any material damage to, or loss, theft
               ------------------------

or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than fifteen (15) consecutive days (or, in
the case of any strike, for more than thirty (30) consecutive days), the
cessation or substantial curtailment of revenue producing activities at any
facility of Borrower or any of its Subsidiaries (including the LLC) if any such
event or circumstance could reasonably be expected to have a Material Adverse
Effect; or

          (Q)  LICENSES AND PERMITS.  The loss, suspension or revocation of, or
               --------------------

failure to renew, any license or permit now held or hereafter acquired by
Borrower or any of its Subsidiaries, (including the LLC) if such loss,




suspension, revocation or failure to renew could reasonably be expected to have
a Material Adverse Effect; or

          (R)  TAX STATUS. The Borrower ceases to be an agricultural cooperative
               ----------

taxed as an association or partnership for federal and applicable state income
taxes.

     8.2  ACCELERATION.  Upon the occurrence of any Event of Default described
          ------------

in the foregoing SUBSECTIONS 8.1(G) or 8.1(H), all Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Borrower.  Upon the occurrence and during the continuance of any other
Event of Default, Lender may, by written notice to Borrower, declare all or any
portion of the Obligations to be, and the same shall forthwith become,
immediately due and payable.

     8.3  REMEDIES.  If any Event of Default shall have occurred and be
          --------

continuing, in addition to and not in limitation of any rights or remedies
available to Lender at law or in equity, Lender may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral) and may also (A) notify any or all obligors on Accounts to make all
payments directly to Lender; (B) require Borrower to, and Borrower hereby agrees




that it will, at its expense and upon request of Lender forthwith, assemble all
or part of the Collateral as directed by Lender and make it available to Lender
at a place to be designated by Lender which is reasonably convenient to both
parties; (C) withdraw all cash in the Blocked Accounts and apply such monies in
payment of the Obligations in the manner provided in SUBSECTION 8.6; (D) without
notice or demand or legal process, enter upon any premises of Borrower and take
possession of the Collateral; and (E) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Lender's offices or elsewhere, at such time or
times, for cash, on credit or for future delivery, and at such price or prices
and upon such other terms as Lender may deem commercially reasonable.  Borrower
agrees that, to the extent notice of sale shall be required by law, at least ten
(10) days notice to Borrower of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification.  At any sale of the Collateral, if permitted by law, Lender may
bid (which bid may be, in whole or in part, in the form of cancellation of
indebtedness) for the purchase of the Collateral or any portion thereof for the
account of Lender.  Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given.  Borrower shall remain liable
for any deficiency.  Lender may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. To the extent permitted by law, Borrower hereby specifically waives
all rights of redemption, stay or appraisal which it has or may have under any
law now existing or hereafter enacted.  Lender shall not be required to proceed
against any Collateral but may proceed against Borrower directly.  Borrower




agrees that, in view of the nature of the Collateral, the foregoing is
commercially reasonable.

     8.4  APPOINTMENT OF ATTORNEY-IN-FACT.  Borrower hereby constitutes and
          -------------------------------

appoints Lender as Borrower's attorney-in-fact with full authority in the place
and stead of Borrower and in the name of Borrower, Lender or otherwise, from
time to time in Lender's discretion to take any action and to execute any
instrument that Lender may deem necessary or advisable to accomplish the
purposes of this Agreement, including, (A) to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral; (B) to adjust,
settle or compromise the amount or payment of any Account, or release wholly or
partly any customer or obligor thereunder or allow any credit or discount
thereon; (C) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with CLAUSE (A) above; (D) to file
any claims or take any action or institute any proceedings that Lender may deem
necessary or desirable for the collection of any of the Collateral or otherwise
to enforce the rights of Lender with respect to any of the Collateral; and (E)
to sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, assignments, verifications and notices in
connection with Accounts and other documents relating to the Collateral.  The
appointment of Lender as Borrower's attorney and Lender's rights and powers are
coupled with an interest and are irrevocable until payment in full and complete
performance of all of the Obligations.




     8.5  LIMITATION ON DUTY OF LENDER WITH RESPECT TO COLLATERAL. Beyond the
          -------------------------------------------------------

safe custody thereof, Lender shall have no duty with respect to any Collateral
in its possession or control (or in the possession or control of any agent or
bailee) or with respect to any income thereon or the preservation of rights
against prior parties or any other rights pertaining thereto.  Lender shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which Lender accords its own property.  Lender shall
not be liable or responsible for any loss or damage to any of the Collateral, or
for any diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by Lender in good faith.

     8.6  APPLICATION OF PROCEEDS.  Upon the occurrence and during the
          -----------------------

continuance of an Event of Default, (A) Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times thereafter
received by Lender from or on behalf of Borrower, and Borrower hereby
irrevocably agrees that Lender shall have the continuing exclusive right to
apply and to reapply any and all payments received at any time or times after
the occurrence and during the continuance of an Event of Default against the
Obligations in such manner as Lender may deem advisable notwithstanding any
previous entry by Lender upon any books and records  and (B) the proceeds of any
sale of, or other realization upon, all or any part of the Collateral shall be
applied: FIRST, to all fees, costs and expenses incurred by Lender with respect
to this Agreement, the other Loan Documents or the Collateral; SECOND, to all




fees due and owing to Lender; THIRD, to accrued and unpaid interest on the
Obligations; FOURTH, to the principal amounts of the Obligations outstanding;
and FIFTH, to any other indebtedness or obligations of Borrower owing to Lender.


     8.7  LICENSE OF INTELLECTUAL PROPERTY.  Borrower hereby assigns, transfers
          --------------------------------

and conveys to Lender, effective upon the occurrence of any Event of Default
hereunder, the non-exclusive right and license to use all Intellectual Property
owned or used by Borrower together with any goodwill associated therewith, all
to the extent necessary to enable Lender to realize on the Collateral and any
successor or assign to enjoy the benefits of the Collateral.  This right and
license shall inure to the benefit of all successors, assigns and transferees of
Lender and its successors, assigns and transferees, whether by voluntary
conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise.  Such right and license is granted free of charge,
without requirement that any monetary payment whatsoever be made to Borrower by
Lender.

     8.8  WAIVERS, NON-EXCLUSIVE REMEDIES.  No failure on the part of Lender to
          -------------------------------

exercise, and no delay in exercising and no course of dealing with respect to,
any right under this Agreement or the other Loan Documents shall operate as a
waiver thereof; nor shall any single or partial exercise by Lender of any right
under this Agreement or any other Loan Document preclude any other or further
exercise thereof or the exercise of any other right.  The rights in this




Agreement and the other Loan Documents are cumulative and are not exclusive of
any other remedies provided by law.


                            SECTION 9  MISCELLANEOUS

     9.1  ASSIGNMENTS AND PARTICIPATIONS.  Lender may assign its rights and
          ------------------------------

delegate its obligations under this Agreement and further may assign, or sell
participations in, all or any part of the Loans, the Notes or any other interest
herein to an affiliate or to another Person.  In the case of an assignment
authorized under this SUBSECTION 9.1, the assignee shall have, to the extent of
such assignment, the same rights, benefits and obligations as it would if it
were a Lender hereunder.  Borrower hereby acknowledges and agrees that any
assignment will give rise to a direct obligation of Borrower to the assignee and
that the assignee shall be considered to be a "Lender".  Lender may furnish any
information concerning Borrower and its Subsidiaries in its possession from time
to time to assignees and participants (including prospective assignees and
participants).

     9.2  SET OFF.  In addition to any rights now or hereafter granted under
          -------

applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, Lender, each assignee of Lender's interest,
and each participant is hereby authorized by Borrower at any time or from time
to time, without notice to Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any




and all balances held by it at any of its offices for the account of Borrower or
any of its Subsidiaries (regardless of whether such balances are then due to
Borrower or its Subsidiaries) and any other property at any time held or owing
by that Lender or assignee to or for the credit or for the account of Borrower
against and on account of any of the Obligations then outstanding; provided,
that no participant shall exercise such right without the prior written consent
of Lender.

     Borrower hereby agrees, to the fullest extent permitted by law, that any
Lender, assignee or participant may exercise its right of setoff with respect to
amounts in excess of its pro rata share of the Obligations (or, in the case of a
participant, in excess of its pro rata participation interest in the
Obligations) and that such Lender, assignee or participant, as the case may be,
shall be deemed to have purchased for cash in the amount of such excess,
participations in each other Lender's or holder's share of the Obligations.

     9.3  EXPENSES AND ATTORNEYS' FEES.  Whether or not the transactions
          ----------------------------

contemplated hereby shall be consummated, Borrower agrees to promptly pay all
fees, costs and expenses incurred by Lender in connection with any matters
contemplated by or arising out of this Agreement or the other Loan Documents
including the following, and all such fees, costs and expenses shall be part of
the Obligations, payable on demand and secured by the Collateral:  (A)
reasonable fees, costs and expenses (including attorneys' fees, allocated costs
of internal counsel and fees of environmental consultants, accountants and other
professionals retained by Lender) incurred in connection with the administration




of the Loan Documents, the Loans, and any amendments, waivers, consents,
forbearances and other modifications relating thereto or any subordination or
intercreditor agreements; (B) reasonable fees, costs and expenses incurred in
creating, perfecting and maintaining perfection of Liens in favor of Lender; (C)
fees, costs, expenses and bank charges, including bank charges for returned
checks, incurred by Lender in establishing, maintaining and handling lock box
accounts, blocked accounts or other accounts for collection of the Collateral;
and (D) reasonable fees, costs, expenses (including attorneys' fees and
allocated costs of internal counsel) and costs of settlement incurred in
collecting upon or enforcing rights against the Collateral or incurred in any
action to enforce this Agreement or the other Loan Documents or to collect any
payments due from Borrower under this Agreement or any other Loan Document or
incurred in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement, whether in the nature of a "workout"
or in connection with any insolvency or bankruptcy proceedings or otherwise.

     9.4  INDEMNITY.  In addition to the payment of expenses pursuant to
          ---------

SUBSECTION 9.3, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Lender, and the
officers, directors, employees, agents, consultants, auditors, persons engaged
by Lender to evaluate or monitor the Collateral, affiliates and attorneys of
Lender and such holders (collectively called the "INDEMNITIES") harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including the reasonable fees and disbursements of counsel




for such Indemnities in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not such Indemnitee
shall be designated a party thereto) that may be imposed on, incurred by, or
asserted against that Indemnitee, in any manner relating to or arising out of
this Agreement or the other Loan Documents, the consummation of the transactions
contemplated by this Agreement, the statements contained in the letters of
intent and commitment letters, if any, delivered by Lender, Lender's agreement
to make the Loans hereunder, the use or intended use of the proceeds of any of
the Loans or the exercise of any right or remedy hereunder or under the other
Loan Documents (the "INDEMNIFIED LIABILITIES"); provided that Borrower shall
                                                --------

have no obligation to an Indemnitee hereunder with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of that
Indemnitee as determined by a court of competent jurisdiction.

     9.5  AMENDMENTS AND WAIVERS.  This Agreement together with the other Loan
          ----------------------

Documents constitutes the entire agreement between Lender and Borrower, and no
amendment, modification, termination or waiver of any provision of this
Agreement or of the other Loan Documents, or consent to any departure by
Borrower therefrom, shall be effective unless the same shall be in writing and
signed by Lender and Borrower.  Each amendment, modification, termination or
waiver shall be effective only in the specific instance and for the specific
purpose for which it was given.




     9.6  NOTICES.   Unless otherwise specifically provided herein, all notices
          -------

shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied or sent by overnight courier service or United
States mail and shall be deemed to have been given: (A) if delivered in person,
when delivered; (B) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. (Dallas time) or, if not, on the
next succeeding Business Day; (C) if delivered by overnight courier, two days
after delivery to such courier properly addressed; or (D) if by U.S. Mail, four
Business Days after depositing in the United States mail, with postage prepaid
and properly addressed:

     If to Borrower:     SNAKE RIVER SUGAR COMPANY
                         525 Good Avenue
                         Nyssa, Oregon 97913
                         Attn: Chairman
                         Telecopy No.:
                                       --------------

     With a copy to:     Jones, Waldo, Holbrook & McDonough
                         1500 First Interstate Plaza
                         170 South Main Street
                         Salt Lake City, Utah 84101
                         Attn:  Randon Wilson
                         Telecopy No.: (801) 328-0537




     If to Lender:       VALHI, INC.
                         Three Lincoln Centre
                         Suite 1700
                         5430 LBJ Freeway
                         Dallas, Texas 75240
                         Attn: General Counsel
                         Telecopy No.: (972) 450-4278

     With a copy to:     BARTLIT BECK HERMAN PALENCHAR & SCOTT
                         511 16th Street, Suite 700
                         Denver, Colorado 80202
                         Attn: James L. Palenchar
                         Telecopy No.: (303) 592-3140

or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this SUBSECTION
9.6.

     9.7  SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS.  All agreements,
          ---------------------------------------------

representations and warranties made herein shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrower set forth in SUBSECTIONS 9.3 AND 9.4 shall survive
the payment of the Loans and the termination of this Agreement.




     9.8  INDULGENCE NOT WAIVER.  No failure or delay on the part of Lender in
          ---------------------

the exercise of any power, right or privilege, or any course of dealing between
the Borrower and Lender, shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege.

     9.9  MARSHALING; PAYMENTS SET ASIDE.  Lender shall not be under any
          ------------------------------

obligation to marshal any assets in favor of Borrower or any other party or
against or in payment of any or all of the Obligations.  To the extent that
Borrower makes a payment or payments to Lender or Lender enforces its security
interests or exercise its rights of setoff, and such payment or payments or the
proceeds of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

     9.10 ENTIRE AGREEMENT.  This Agreement, each Note, and the other Loan
          ----------------

Documents embody the final, entire agreement among the parties hereto and
supersede any and all prior commitments, agreements, representations, and




understandings, whether written or oral, relating to the subject matter hereof
and may not be contradicted or varied by evidence of prior, contemporaneous, or
subsequent oral agreements or discussions of the parties hereto.  There are no
oral agreements among the parties hereto.

     9.11 INDEPENDENCE OF COVENANTS.  All covenants hereunder shall be given
          -------------------------

independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.

     9.12 SEVERABILITY.  The invalidity, illegality or unenforceability in any
          ------------

jurisdiction of any provision in or obligation under this Agreement or the other
Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents or of such provision or obligation in any other
jurisdiction.

     9.13 HEADINGS.  Section and subsection headings in this Agreement are
          --------

included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.




     9.14 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
          --------------

CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
UTAH, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

     9.15 SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon and
          ----------------------

inure to the benefit of the parties hereto and their respective successors and
assigns except that Borrower may not assign its rights or obligations hereunder
without the prior written consent of Lender.

     9.16 NO FIDUCIARY RELATIONSHIP; LIMITATION OF LIABILITIES.
          ----------------------------------------------------


          (A)  No provision in this Agreement or in any of the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by Lender to Borrower.

          (B)  Neither Lender, nor any affiliate, officer, director,
shareholder, employee, attorney, or agent of Lender shall have any liability
with respect to, and Borrower hereby waives, releases, and agrees not to sue any
of them upon, any claim for any special, indirect, incidental, or consequential
damages suffered or incurred by Borrower in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Agreement or any of the other Loan
Documents.  Borrower hereby waives, releases, and agrees not to sue Lender or
any of Lender's affiliates, officers, directors, employees, attorneys, or agents




for punitive damages in respect of any claim in connection with, arising out of,
or in any way related to, this Agreement or any of the other Loan Documents, or
any of the transactions contemplated by this Agreement or any of the
transactions contemplated hereby.

     9.17 CONSENT TO JURISDICTION.  BORROWER HEREBY CONSENTS TO THE JURISDICTION
          -----------------------

OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF DALLAS, STATE OF
TEXAS AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TERM NOTE OR THE
OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.  BORROWER ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE TERM NOTE, THE OTHER
LOAN DOCUMENTS OR THE OBLIGATIONS.

     9.18 WAIVER OF JURY TRIAL.  BORROWER AND LENDER HEREBY WAIVE THEIR
          --------------------

RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS.  BORROWER
AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING
INTO THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.  BORROWER AND
LENDER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS




LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
     9.19 CONSTRUCTION. Borrower and Lender each acknowledge that it has had the
          ------------

benefit of legal counsel of its own choice and has been afforded an opportunity
to review this Agreement and the other Loan Documents with its legal counsel and
that this Agreement and the other Loan Documents shall be construed as if
jointly drafted by Borrower and Lender.

     9.20 COUNTERPARTS; EFFECTIVENESS.  This Agreement and any amendments,
          ---------------------------

waivers, consents, or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument.  This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto.

     9.21 NO DUTY.  All attorneys, accountants, appraisers, and other
          -------

professional Persons and consultants retained by Lender shall have the right to
act exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to Borrower or any other Person.




     Witness the due execution hereof by the respective duly authorized officers
of the undersigned as of the date first written above.

                              SNAKE RIVER SUGAR COMPANY


                              By:
                                 ---------------------
                              Title:
                                    ------------------
                              FEIN:
                                   -------------------


                              VALHI, INC.



                              By:
                                 ----------------------

EX-21

EXHIBIT 21.1   SUBSIDIARIES OF THE REGISTRANT
- ------------   ------------------------------


                                              Jurisdiction of          % of Voting
                                              Incorporation or         Securities
Name of Corporation                             Organization            Held (2)
- ----------------------------------------      ----------------        -----------

                                                                       
Amcorp, Inc.                                  Delaware                       100%
  The Amalgamated Sugar Company               Utah                           100
  Amalgamated Research, Inc.                  Idaho                          100

Valcor, Inc.                                  Delaware                       100
  Medite Corporation                          Delaware                       100
  CompX International Inc.                    Delaware                       100
    Waterloo Furniture Components Limited     Canada                         100
  Sybra, Inc.                                 Michigan                       100

Other wholly-owned
  Valmont Insurance Company                   Vermont                        100
    New England Insurance Services Company    Vermont                        100
  Henry Forks Financial, Inc.                 Delaware                       100
  Impex Realty Holding, Inc.                  Delaware                       100
  Medco FSC, Inc.                             U.S. Virgin Islands            100

NL Industries, Inc. (1)                       New Jersey                      56

Andrews County Holdings, Inc.                 Delaware                       100
  Waste Control Specialists LLC               Delaware                        50
    Greenhill Technologies Inc.               Delaware                        50

 
(1) Subsidiaries of NL are incorporated by reference to Exhibit 21.1 of NL's
    Annual Report on Form 10-K for the year ended December 31, 1996



    (File No. 1-640).

(2) Held by the Registrant or the indicated subsidiary of the Registrant.


























                                 22.1

EX-23

                                                    Exhibit 23.1







                      CONSENT OF INDEPENDENT ACCOUNTANTS


     We consent to the incorporation by reference in Valhi, Inc.'s (i)
Registration Statement (Form S-8 Nos. 33-53633, 33-48146, 33-41507 and 33-21758)
and related Prospectus pertaining to the Valhi, Inc. 1987 Incentive Stock Option
- - Stock Appreciation Rights Plan, and (ii) Registration Statement (Form S-8 No.
33-41508) and related Prospectus pertaining to the Valhi, Inc. 1990 Non-Employee
Director Stock Option Plan, of our report dated March 7, 1997, on our audits of
the consolidated financial statements and financial statement schedules of
Valhi, Inc. and Subsidiaries included in this Annual Report on Form 10-K for the
year ended December 31, 1996.




                                                    COOPERS & LYBRAND L.L.P.


Dallas, Texas
March 20, 1997

EX-23

                                                    Exhibit 23.2






                  CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


     We consent to the incorporation by reference in Valhi, Inc.'s (i)
Registration Statement (Form S-8 Nos. 33-53633, 33-48146, 33-41507 and 33-21758)
and related Prospectus pertaining to the Valhi, Inc. 1987 Incentive Stock Option
- - Stock Appreciation Rights Plan, and (ii) Registration Statement (Form S-8 No.
33-41508) and related Prospectus pertaining to the Valhi, Inc. 1990 Non-Employee
Director Stock Option Plan, of our report dated January 31, 1997, relating to
the financial statements of The Amalgamated Sugar Company for each of the years
in the three year period ended December 31, 1996, which report is included in
this Annual Report on Form 10-K of Valhi, Inc. for the year ended December 31,
1996.





                                                    KPMG PEAT MARWICK LLP


Salt Lake City, Utah
March 20, 1997

EX-23

                                                    Exhibit 23.3






                  CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


     As independent public accountants, we hereby consent to the incorporation
by reference of our report related to Medite Corporation dated January 27, 1996,
included in this Annual Report on Form 10-K of Valhi, Inc. for the year ended
December 31, 1996, into Valhi, Inc.'s previously filed  (i) Registration
Statement (Form S-8 Nos. 33-53633, 33-48146, 33-41507 and 33-21758) and related
Prospectus pertaining to the Valhi, Inc. 1987 Incentive Stock Option - Stock
Appreciation Rights Plan, and (ii) Registration Statement (Form S-8 No. 33-
41508) and related Prospectus pertaining to the Valhi, Inc. 1990 Non-Employee
Director Stock Option Plan.





                                                    ARTHUR ANDERSEN LLP


Portland, Oregon,
March 20, 1997

EX-27

 

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VALHI, INC.'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.

<MULTIPLIER> 1,000
       
                             
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-START>                             JAN-01-1996
<PERIOD-END>                               DEC-31-1996
<CASH>                                         255,679
<SECURITIES>                                   142,478
<RECEIVABLES>                                  158,589
<ALLOWANCES>                                     4,087
<INVENTORY>                                    251,597
<CURRENT-ASSETS>                               837,663
<PP&E>                                         853,681
<DEPRECIATION>                                 163,442
<TOTAL-ASSETS>                               2,144,982
<CURRENT-LIABILITIES>                          563,680
<BONDS>                                        844,468
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                         1,248
<OTHER-SE>                                     302,671
<TOTAL-LIABILITY-AND-EQUITY>                 2,144,982
<SALES>                                      1,190,791
<TOTAL-REVENUES>                             1,190,791
<CGS>                                          909,287
<TOTAL-COSTS>                                  909,287
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                 1,860
<INTEREST-EXPENSE>                             100,195
<INCOME-PRETAX>                                 14,653
<INCOME-TAX>                                     3,511
<INCOME-CONTINUING>                              4,227
<DISCONTINUED>                                  37,819
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    42,046
<EPS-PRIMARY>                                      .37
<EPS-DILUTED>                                        0
        

 

EX-27

 

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VALHI, INC.'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS NOTED BELOW AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.  SUCH
SUMMARY FINANCIAL INFORMATION HAS BEEN RECLASSIFIED TO PRESENT THE RESULTS OF
OPERATIONS OF (i) MEDITE CORPORATION AS DISCONTINUED OPERATIONS and (ii) THE
AMALGAMATED SUGAR COMPANY ON THE EQUITY METHOD.

<MULTIPLIER> 1,000
       
                                                                       
<PERIOD-TYPE>                   3-MOS                   6-MOS                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1996             DEC-31-1996             DEC-31-1996 
<PERIOD-START>                             JAN-01-1996             JAN-01-1996             JAN-01-1996
<PERIOD-END>                               MAR-31-1996             JUN-30-1996             SEP-30-1996
<CASH>                                         142,468                 144,669                 160,613
<SECURITIES>                                         0                       0                       0
<RECEIVABLES>                                  249,645                 258,206                 243,427
<ALLOWANCES>                                     5,199                   4,698                   5,509
<INVENTORY>                                    467,842                 373,642                 318,257
<CURRENT-ASSETS>                               872,378                 788,665                 439,861
<PP&E>                                       1,195,631               1,210,003               1,206,277
<DEPRECIATION>                                 345,163                 359,429                 348,725
<TOTAL-ASSETS>                               2,495,730               2,417,988               2,368,890
<CURRENT-LIABILITIES>                          598,036                 561,657                 570,532
<BONDS>                                      1,105,284               1,078,667               1,038,682
<PREFERRED-MANDATORY>                                0                       0                       0
<PREFERRED>                                          0                       0                       0
<COMMON>                                         1,247                   1,248                   1,248
<OTHER-SE>                                     265,390                 268,359                 259,822
<TOTAL-LIABILITY-AND-EQUITY>                 2,495,730               2,417,988               2,368,890
<SALES>                                        289,203                 603,404                 902,681
<TOTAL-REVENUES>                               289,203                 603,404                 902,681
<CGS>                                          211,704                 449,296                 685,265
<TOTAL-COSTS>                                  211,704                 449,296                 685,265
<OTHER-EXPENSES>                                     0                       0                       0
<LOSS-PROVISION>                                   103                   (499)                    (717)
<INTEREST-EXPENSE>                              25,309                  50,078                  74,976
<INCOME-PRETAX>                                 15,695                  28,899                  21,156
<INCOME-TAX>                                     4,178                   8,483                   5,411
<INCOME-CONTINUING>                              9,196                  15,796                   8,826
<DISCONTINUED>                                (14,884)                (12,734)                 (10,674)
<EXTRAORDINARY>                                      0                       0                       0
<CHANGES>                                            0                       0                       0
<NET-INCOME>                                   (5,688)                   3,062                  (1,848)
<EPS-PRIMARY>                                    (.05)                     .03                    (.02)
<EPS-DILUTED>                                        0                       0                       0
        

 

EX-27

 

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VALHI, INC.'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS NOTED BELOW AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.  SUCH
SUMMARY FINANCIAL INFORMATION HAS BEEN RECLASSIFIED TO PRESENT THE RESULTS OF
OPERATIONS OF (i) MEDITE CORPORATION AS DISCONTINUED OPERATIONS and (ii) THE
AMALTAMATED SUGAR COMPANY ON THE EQUITY METHOD.

<MULTIPLIER> 1,000
       
                                                                                            
<PERIOD-TYPE>                   3-MOS                   6-MOS                   9-MOS                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1995             DEC-31-1995             DEC-31-1995             DEC-31-1995
<PERIOD-START>                             JAN-01-1995             JAN-01-1995             JAN-01-1995             JAN-01-1995
<PERIOD-END>                               MAR-31-1995             JUN-30-1995             SEP-30-1995             DEC-31-1995
<CASH>                                         134,126                 165,953                 171,337                 170,908
<SECURITIES>                                    26,516                   2,387                       0                       0
<RECEIVABLES>                                  261,266                 271,760                 269,539                 228,785
<ALLOWANCES>                                     4,710                   5,054                   5,116                   4,972
<INVENTORY>                                    470,460                 384,647                 324,099                 518,304
<CURRENT-ASSETS>                               922,189                 857,368                 807,572                 931,566
<PP&E>                                       1,124,388               1,151,261               1,168,215               1,190,514
<DEPRECIATION>                                 260,905                 278,953                 294,178                 315,827
<TOTAL-ASSETS>                               2,549,715               2,493,593               2,447,112               2,572,213
<CURRENT-LIABILITIES>                          622,790                 548,419                 506,660                 662,336
<BONDS>                                      1,123,698               1,102,119               1,083,383               1,084,284
<PREFERRED-MANDATORY>                                0                       0                       0                       0
<PREFERRED>                                          0                       0                       0                       0
<COMMON>                                         1,245                   1,245                   1,246                   1,246
<OTHER-SE>                                     216,995                 237,775                 255,775                 273,045
<TOTAL-LIABILITY-AND-EQUITY>                 2,549,715               2,493,593               2,447,112               2,572,213
<SALES>                                        297,801                 629,319                 933,565               1,219,547
<TOTAL-REVENUES>                               297,801                 629,319                 933,565               1,219,547
<CGS>                                          209,425                 437,766                 648,882                 841,847
<TOTAL-COSTS>                                  209,425                 437,766                 648,882                 841,847
<OTHER-EXPENSES>                                     0                       0                       0                       0
<LOSS-PROVISION>                                   (19)                    277                     430                     557
<INTEREST-EXPENSE>                              26,553                  53,445                  79,625                 105,222
<INCOME-PRETAX>                                 15,271                  42,239                  64,280                  88,423
<INCOME-TAX>                                     7,468                  21,176                  31,147                  29,893
<INCOME-CONTINUING>                              7,458                  20,577                  32,787                  57,908
<DISCONTINUED>                                   4,957                   9,195                  10,713                  10,607
<EXTRAORDINARY>                                      0                       0                       0                       0
<CHANGES>                                            0                       0                       0                       0
<NET-INCOME>                                    12,415                  29,772                  43,500                  68,515
<EPS-PRIMARY>                                      .11                     .26                     .38                     .60
<EPS-DILUTED>                                        0                       0                       0                       0
        

 

EX-27

 

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VALHI, INC.'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS NOTED BELOW AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.  SUCH
SUMMARY FINANCIAL INFORMATION HAS BEEN RECLASSIFIED TO PRESENT THE RESULTS OF
OPERATIONS OF (i) MEDITE CORPORATION AS DISCONTINUED OPERATIONS and (ii) THE
AMALGAMATED SUGAR COMPANY ON THE EQUITY METHOD.

<MULTIPLIER> 1,000
       
                                                    
<PERIOD-TYPE>                                          12-MOS
<FISCAL-YEAR-END>                                      DEC-31-1994
<PERIOD-START>                                         JAN-01-1994
<PERIOD-END>                                           DEC-31-1994
<CASH>                                                     170,747
<SECURITIES>                                                49,233
<RECEIVABLES>                                              204,828
<ALLOWANCES>                                                 4,434
<INVENTORY>                                                498,097
<CURRENT-ASSETS>                                           936,134
<PP&E>                                                   1,050,427
<DEPRECIATION>                                             242,696
<TOTAL-ASSETS>                                           2,480,703
<CURRENT-LIABILITIES>                                      656,222
<BONDS>                                                  1,086,654
<PREFERRED-MANDATORY>                                            0
<PREFERRED>                                                      0
<COMMON>                                                     1,245
<OTHER-SE>                                                 197,179
<TOTAL-LIABILITY-AND-EQUITY>                             2,480,703
<SALES>                                                    185,522
<TOTAL-REVENUES>                                           185,522
<CGS>                                                      142,807
<TOTAL-COSTS>                                              142,807
<OTHER-EXPENSES>                                                 0
<LOSS-PROVISION>                                                18
<INTEREST-EXPENSE>                                          21,468
<INCOME-PRETAX>                                             (8,542)
<INCOME-TAX>                                                (9,864)
<INCOME-CONTINUING>                                          1,322
<DISCONTINUED>                                              10,278
<EXTRAORDINARY>                                                  0
<CHANGES>                                                        0
<NET-INCOME>                                                11,600
<EPS-PRIMARY>                                                  .10
<EPS-DILUTED>                                                  .10