Exhibit 10.1

TAX AGREEMENT

Between

VALHI, INC.

and

KRONOS WORLDWIDE, INC.

 

 

TAX AGREEMENT (the “Agreement”) dated as of January 1, 2020 by and among Valhi,
Inc. (“VHI”), a Delaware corporation having its principal executive offices at
Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240, Contran
Corporation (“Contran”), a Delaware corporation having its principal executive
offices at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas
75240 and Kronos Worldwide, Inc. (“KWI”), a Delaware corporation having its
principal executive offices at Three Lincoln Centre, 5430 LBJ Freeway, Suite
1700, Dallas, Texas 75240.

 

WHEREAS, VHI and KWI file consolidated returns of federal income taxes and,
subject to certain jurisdictional limitations, are subject to combined state and
local tax reporting;

 

WHEREAS, this Agreement supersedes and amends and restates the Amended and
Restated Tax Agreement dated December 1, 2012, previously entered into among
VHI, Contran and KWI;

 

WHEREAS, VHI and KWI wish to provide for the allocation of liabilities, and
procedures to be followed, with respect to federal income taxes of KWI and any
subsidiaries of KWI and with respect to certain combined state and local taxes
on the terms of this Agreement.

 

NOW, THEREFORE, in consideration of the promises and agreements herein
contained, the parties hereto agree as follows:

 

1.Definitions. As used in this Agreement, the following terms have the meanings
set forth below:

 

(a)Code: The Internal Revenue Code of 1986, as amended, and with respect to any
section thereof any successor provisions under such Code or any successor Code.

 

(b)Combined Foreign, State and Local Taxes: For a taxable period, and with
respect to a specified group of entities, the amount of all Foreign, State and
Local Taxes, for which liability is computed on the basis of a combined, unitary
or consolidated return (whether at the initiative of the tax authority or of the
taxpayer).

 

(c)Contran Corporation: A Delaware corporation that is the common parent of a
group of corporations, which group of corporations includes the KWI Group and
VHI Group, electing to file a consolidated federal income tax return.

 

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(d)Federal Taxes: All federal income taxes, together with all interest and
penalties with respect thereto.

 

(e)Foreign, State and Local Taxes: All foreign, state and local taxes, including
franchise and similar taxes, together with all interest and penalties with
respect thereto.

 

(f)VHI Group: VHI and each of its direct and indirect subsidiaries which would
be a member of an affiliated group, within the meaning of section 1504(a) of the
Code, and eligible to file a combined, unitary or consolidated return of which
Contran was the common parent (the “Contran Tax Group”), as such VHI Group is
constituted from time to time. For purposes of this Agreement (to the extent
related to the determination of Combined Foreign, State and Local Taxes for the
VHI Group), the term “VHI Group” shall include all direct and indirect
subsidiaries of VHI with reference to which Combined Foreign, State and Local
Taxes are determined.

 

(g)KWI Group: KWI and each of its direct or indirect subsidiaries which would be
a member of an affiliated group, within the meaning of section 1504(a) of the
Code, and eligible to file a combined, unitary or consolidated return of which
KWI was the common parent, as such KWI Group is constituted from time to time.
For purposes of this Agreement (to the extent related to the determination of
Combined Foreign, State and Local Taxes for the KWI Group), the term “KWI Group”
shall include all direct and indirect subsidiaries of KWI with reference to
which Combined, Foreign, State and Local taxes are determined.

 

(h)KWI Group Tax Liability: For a taxable period, the liability for Federal
Taxes and Combined Foreign, State and Local taxes, as applicable, that the KWI
Group would have had if it were not a member of the VHI Group or Contran Tax
Group during such taxable period (or during any taxable period prior thereto),
and instead filed a separate consolidated or combined return, as applicable, for
such taxable period; provided, however, that for purposes of determining such
liability for a taxable period all tax elections shall be consistent with the
tax elections made by Contran for such period. In making such tax elections it
is understood Contran will make those tax elections which are beneficial to the
Contran Tax Group on a consolidated basis. Nevertheless, Contran will use its
best efforts in the case of those elections which affect the computation of the
KWI Group Tax Liability, to make elections in a reasonable manner so as to
minimize the KWI Group Tax Liability.  For purposes of this Agreement, in
determining the Combined Foreign, State and Local Taxes for the KWI Group, such
determination shall be made based on a separate Foreign, State and Local Tax
Calculation as if the KWI Group were a separate unitary filer with respect to
states and other jurisdictions in which Contran is required to file on a unitary
or combined basis.

 

(i)Foreign, State and Local Tax Calculation: For each reporting period, the Tax
Calculation will be based on the estimated taxable income of the KWI Group for
the taxable period that includes such reporting period, applied to current year
tax rates and using the KWI Group’s applicable apportionment factors and state,
local or other applicable adjustments, in each case based on the applicable
combined or unitary return

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most recently-filed as of each reporting period by the Contran Tax Group for
each applicable tax jurisdiction (as modified for extraordinary, one-time event
adjustments or tax law changes, if any, impacting the unitary calculation for
the KWI Group).

 

2.Contran as Agent. Contran shall be the sole agent for the KWI Group in all
matters relating to the KWI Group Tax Liability. The KWI Group shall not (a)
terminate such agency or (b) without the consent of Contran, participate, or
attempt to participate, in any matters related to the KWI Group Tax Liability,
including, but not limited to, preparation or filing of, or resolution of
disputes, protests or audits with the Internal Revenue Service, state or local
taxing authorities concerning, the Contran Tax Group’s consolidated returns of
Federal Taxes, returns of Combined Foreign, State and Local Taxes or the KWI
Group Tax Liability with respect thereto. The KWI Group shall cooperate fully in
providing Contran with all information and documents necessary or desirable to
enable Contran to perform its obligations under this Section, including
completion of Internal Revenue Service and state or local tax audits in
connection with such KWI Group Tax Liability and determination of the proper
liability for such KWI Group Tax Liability.

 

3.Liability for Taxes; Refunds.

 

(a)VHI, as the common parent of the KWI Group, shall be responsible for, and
shall pay to Contran or a taxing authority, as applicable, the consolidated tax
liability for Federal Taxes and Combined Foreign, State and Local Taxes for the
VHI Group and has the sole right to any refunds received from Contran or a
taxing authority, as applicable, subject to the provisions of Sections 5 and 6
of this Agreement.

 

(b)Notwithstanding any other provision of this Agreement, KWI and each
subsidiary of KWI which is a member of the KWI Group shall be severally liable
to VHI for the KWI Group Tax Liability.

 

(c)KWI shall indemnify VHI and hold it and the VHI Group other than the KWI
Group, harmless from and against any deficiency in the KWI Group Tax Liability
that may be due to VHI.

 

(d)VHI shall indemnify KWI and hold it and the KWI Group harmless from and
against any Federal Taxes and Combined Foreign, State and Local Taxes
attributable to the VHI Group or any other member of the Contran Tax Group,
other than the KWI Group, as such taxes are determined under this and other tax
sharing agreements.

 

4.Tax Returns. Contran shall file on behalf of the KWI Group any and all
federal, foreign, state and local tax returns that are required as they pertain
to the KWI Group Tax Liability. The KWI Group, at Contran’s request, shall join
in any applicable consolidated returns of Federal Taxes and any returns of
Combined Foreign, State and Local Taxes (for which returns have not been
theretofore filed) and execute its consent, if such consent has not previously
been executed, to each such filing on any form as may be prescribed for such
consent if such consent is required. The decision of Contran’s Chief Tax Officer
(or any other officer so designated by Contran) with responsibility for tax
matters shall, subject to the provisions of this Agreement, be binding in any
dispute between Contran, VHI and the KWI Group as to what tax position should be
taken with

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respect to any item or transaction of the KWI Group. The preceding sentence is
limited to the tax positions that affect the KWI Group Tax Liability and the
combined VHI Group and Contran Tax Group. In addition, VHI and members of the
VHI Group, including KWI and members of the KWI Group, shall provide each other
with such cooperation, assistance and information as each of them may request of
the other with respect to the filing of any tax return, amended return, claim
for refund or other document with any taxing authority. KWI shall be solely
responsible for all taxes due for the KWI Group with respect to tax returns
filed by KWI or a member of the KWI Group that are required to be filed on a
separate company basis, independent of Contran or VHI.

 

5.Payment of KWI Group Tax Liability for Federal Taxes and Foreign, State and
Local Taxes. On or before each date, as determined under section 6655 of the
Code (with respect to Federal Taxes) and the applicable tax provisions with
respect to any Foreign, State and Local Taxes due pursuant to this Agreement,
for payment of an installment of estimated Federal Taxes or any Foreign, State
and Local Taxes, KWI shall pay to VHI an amount equal to the installment which
the KWI Group would have been required to pay as an estimated payment of Federal
Taxes to the Internal Revenue Service or any Foreign, State and Local Taxes to
the applicable taxing authority if it were filing a separate consolidated,
combined or unitary return in respect of the KWI Group Tax Liability. Any
balance owed with respect to the KWI Group Tax Liability for such taxable period
shall be paid to VHI on or before the 15th day of the third month after the
close of such taxable period. If it is not possible to determine the amount of
such balance on or before such day, (a) a reasonable estimate thereof shall be
paid on or before such day, (b) the amount of such balance shall be finally
determined on or before the earlier of; (i) the 15th day of the ninth month
after the close of such taxable period (or the applicable due date for the
Contran foreign, state or local combined or unitary return) and (ii) the date on
which the Contran Tax Group consolidated tax return for such period is filed
with the Internal Revenue Service or the applicable tax authority, and (c) any
difference between the amount so determined and the estimated amount paid shall;
(i) in the case of an underpayment, be promptly paid to VHI and (ii) in the case
of an overpayment, be promptly refunded or applied against the estimated KWI
Group Tax Liability for the immediately following tax period, at the option of
VHI. If the overpayment is not applied to the immediately following tax period,
such overpayment shall be promptly refunded to the KWI Group. As between the
parties to this Agreement, the KWI Group shall be solely responsible for the KWI
Group Tax Liability and shall have no responsibility for Federal Taxes of the
VHI Group or the Contran Tax Group other than payment of the KWI Group Tax
Liability in accordance with the terms of this Agreement.  Notwithstanding the
foregoing, VHI at its option may extend the payment due date for any of the
payments referenced above.

 

6.Refunds for KWI Group Losses and Credits for Federal Taxes. If the calculation
with respect to the KWI Group Tax Liability for Federal Taxes results in a net
operating loss (“NOL”) for the current tax period that, in the absence of a Code
Section 172(b)(3) election made by Contran, is carried back under Code Sections
172 and 1502 to a prior taxable period or periods of the KWI Group with respect
to which the KWI Group previously made payments to VHI, then, in that event, VHI
shall pay (or credit) KWI an amount equal to the tax refund to which the KWI
Group would have been entitled had the KWI Group filed a separate consolidated
federal income tax return for such year (but not in excess of the net aggregate
amount of the KWI Group Tax Liability paid to VHI with respect to the preceding
two taxable periods). If the calculation with respect to the KWI Group Tax
Liability results in an NOL for the current tax period, that subject

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to the Code Section 172(b)(3) election made by Contran, is not carried back
under Code Sections 172 and 1502 to a prior taxable period or periods of the KWI
Group with respect to which KWI made payments to VHI or is not carried back
because the Contran Tax Group does not have a consolidated net operating loss
for the current tax period, then, in that event such NOL shall be an NOL
carryover to be used in computing the KWI Group Tax Liability for future taxable
periods, under the law applicable to NOL carryovers in general, as such law
applies to the relevant taxable period. Payments made pursuant to this Section 6
shall be made on the date that Contran (or any successor common parent of a tax
group to which the VHI Group is a member) files its consolidated federal income
tax return for the taxable period involved. Principles similar to those
discussed in this Section 6 shall apply in the case of the utilization of all
KWI Group loss and credit carrybacks and carryovers.

 

7.Refunds for KWI Group Combined or Unitary Foreign, State and Local Losses and
Credits. The foregoing principles contained in Section 6 shall apply in similar
fashion to any consolidated, unitary or combined foreign, state or other local
income tax returns, containing any member of the KWI Group, which may be filed
based on the KWI Group Tax Liability for Foreign, State and Local Taxes.

 

8.Subsequent Adjustments. If any settlement with the Internal Revenue Service,
foreign, state or local tax authority or court decision which has become final
results in any adjustment to any item of income, deduction, loss or credit to
the Contran Tax Group in respect of any taxable period subject to this
Agreement, which, in any such case, affects or relates to any member of the KWI
Group as constituted during such taxable period, the KWI Tax Group Liability
shall be redetermined to give effect to such adjustment as if it had been made
as part of or reflected in the original computation of the KWI Tax Group
Liability and proper adjustment of amounts paid or owing hereunder in respect of
such liability and allocation shall be promptly made in light thereof.

 

9.Term; Amendments.

 

a.The term of this Agreement shall end on December 31, 2024 and will
automatically be renewed for successive five-year periods unless terminated by
any party by giving the other two parties written notice of termination at least
ninety (90) days prior to the expiration of the then-current term; provided,
however, that this Agreement shall automatically terminate at such time as KWI
is no longer a member of the Contran Tax Group.

 

b.This Agreement may be amended, modified, superseded or cancelled, and any of
the terms, covenants, or conditions hereof may be waived, only by a written
instrument specifically referring to this Agreement and executed by all parties
(or, in the case of a waiver, by or on behalf of the party waiving compliance).
The failure of any party at any time or times to require performance of any
provision of this Agreement shall in no manner affect the right at a later time
to enforce the same. No waiver by any party of any condition, or of any breach
of any term or covenant, contained in this Agreement, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such condition or breach, or a waiver of any other condition or of any
breach of any other term or covenant.

 

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10.Retention of Records. Contran shall retain all tax returns, tax reports,
related workpapers and all schedules (along with all documents that pertain to
any such tax returns, reports or workpapers) that relate to a taxable period in
which the KWI Group is included in a consolidated or combined tax return with
VHI and Contran. Contran shall make such documents available to KWI at KWI’s
request. Contran shall not dispose of such documents without the permission of
KWI.

 

11.Headings. The headings of this Agreement are for convenience of reference
only, and shall not in any way affect the meaning or interpretation of this
Agreement.

 

12.Governing Law. This Agreement shall be construed and enforced in accordance
with the laws of the State of Delaware without regard to conflicts of laws
provisions.

 

13.Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall be an original, but all of which shall constitute but one
agreement.

 

14.Successors. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective subsidiaries, and their respective
successors and assigns.

 

15.Amendment and Restatement. Effective as of January 1, 2020, this Agreement
supersedes and amends and restates the Amended and Restated Tax Agreement dated
as of December 1, 2012, previously entered into among VHI, Contran and KWI.

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written.

 

VALHI, INC.

 

By:    /s/ James W. Brown                    

James W. Brown

Senior Vice President and Chief Financial Officer

:

 

CONTRAN CORPORATION

 

By:    /s/ Gregory M. Swalwell                

Gregory M. Swalwell

Executive Vice President,

Chief Financial Officer and Chief Accounting Officer

 

 

KRONOS WORLDWIDE, INC.

 

By:     /s/ Kelly D. Luttmer                 

Kelly D. Luttmer

Executive Vice President and

Chief Tax Officer

 

 

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