EXHIBIT 10.5






                           PRODUCT EXCHANGE AGREEMENT

                                     BETWEEN

                                   NEWCO, LTD.

                                       AND

                              TIOXIDE EUROPE, LTD.


















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                                      INDEX


ARTICLE     TITLE

   1.              DEFINITIONS
   2.              SUPPLY OF PRODUCTS
   3.              QUANTITIES AND FORECASTS.
   4.              ORDER AND DELIVERY
   5.              PRODUCT IMBALANCES
   6.              QUALITY, ADJUSTMENTS
   7.              TERM AND TERMINATION
   8.              WARRANTY
   9.              CLAIMS
   10.             REMEDY
   11.             PATENT WARRANTY
   12.             NO CONSEQUENTIAL DAMAGES
   13.             FORCE MAJEURE
   14.             ALLOCATION
   15.             GOVERNMENT ACTION
   16.             USER PROTECTION AND PRODUCT INFORMATION
   17.             LABELING AND LITERATURE, NAME ON PRODUCT
   18.             TAXES, INTEREST, VAT, IMPORT DUTIES
   19.             CONFIDENTIAL INFORMATION
   20.             DISPUTE RESOLUTION
   21.             ASSIGNMENT
   22.             NO AGENCY AND NO PARTNERSHIP
   23.             ENTIRE AGREEMENT/AMENDMENTS/SEVERABILITY
   24.             WAIVER
   25.             NOTICES
   26.             GOVERNING LAW
   27.             COVENANT NOT TO COMPETE
   28.             ASSURANCES

   SCHEDULE  "A" -  TIOXIDE  FINISHED  PRODUCTS
   SCHEDULE  "B" - NEWCO  FINISHED PRODUCTS
   SCHEDULE "C" - TIOXIDE CALCINER  DISCHARGE  PRODUCTS
   SCHEDULE "D" - NEWCO  CALCINER  DISCHARGE  PRODUCTS
   SCHEDULE "E" - CUSTOMER  LIST  (SULFATE PRODUCTS)
   SCHEDULE "F" - CUSTOMER LIST (TC4)


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                           PRODUCT EXCHANGE AGREEMENT

      This  Product  Exchange  Agreement  ("Agreement")  is  entered  into  this
_________day  of  _________,  1998,  by and  between  NEWCO,  Ltd.  ("Newco")  a
corporation incorporated in England and Wales and Tioxide Europe, Ltd., ("TEL"),
a corporation of the United Kingdom for the purpose of exchanging  Products,  as
defined herein and specified in the attached Schedules, collectively referred to
herein as the "parties" or singularly as "party" and each party hereto variously
referred to as the "supplying  party" or the  "receiving  party" as the case may
be.

      Whereas, TEL, an Affiliate of DuPont, holds one-hundred percent of the
shares of stock of Newco; and,

      Whereas, the primary asset of Newco is the titanium dioxide
manufacturing plant located at Grimsby, U.K. (the "Grimsby Plant"); and

      Whereas,  concurrent  with the execution of this  Agreement,  Purchaser is
acquiring the Tioxide North American titanium dioxide business; and

      Whereas,  concurrent with the execution of this Agreement,  TEL has agreed
to sell the whole of the issued share capital in Newco,  to Purchaser to provide
Purchaser and its Affiliates with manufacturing  capacity to support Purchaser's
North American business; and

      Whereas,  the Products  currently sold in North America  include  specific
products  not  currently  manufactured  by Newco and the parties  wish to ensure
continued  availability  of the Products while Newco and its  Affiliates  expand
their  product  range to ensure  continuity  and while  the  customers  for such
Products carry out the necessary trials to approve Products newly  manufactured;
and

      Whereas,  the Products  currently sold by the Grimsby Plant are desired by
TEL (and its Affiliates) for sale in Europe for a limited period of time; and

      Whereas, TEL (and its Affiliates) and Newco (and its Affiliates) therefore
wish, for a limited period of time, to exchange as between one another equal, or
close to equal  quantities  of the Products  specified  below for no  additional
consideration other than the Products  themselves,  or as otherwise specified on
the terms and subject to the conditions contained herein; and

      Whereas,  the  parties  intend  to  minimize  both the total  quantity  of
products  exchanged  and the  duration of the  exchange so as  independently  to
supply the needs of each  company's  own  customers  at or before the end of the
Contract Period; and

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      Whereas,  the parties  recognize  that  imbalances may result in one party
hereto not  receiving  the same quantity of Product that said party is supplying
to the receiving party; and

      Whereas, the terms contained herein are, among other things,  developed to
address said Product  Imbalance as defined below in  furtherance of the goals of
this Agreement;

      NOW  THEREFORE,  the  parties  hereto  agree to enter  into  this  Product
Exchange Agreement on the terms set forth below:

      1.    Definitions:

            In this Agreement,  including the attached Schedules,  the recitals,
words and expressions shall have the following meaning:

            "Affiliates"  shall have the same  meaning as set forth in the Share
Purchase and Sale Agreement  between TEL and Purchaser  dated  __________,  1998
relating to the sale and  purchase of the whole of the issued  share  capital of
Newco.

            "Business  Day(s)"  means a day (other than a Saturday or Sunday) on
which banks are generally open for normal  business in each of London,  Montreal
and New York.

            "Calciner Discharge Products" means the Newco Calciner Discharge
Products or the Tioxide Calciner Discharge Products or generally both as the
case may be.

            "Calciner   Discharge  Product   Imbalance"  means  at  any  Product
Imbalance Date any difference in quantity between the Calciner Discharge Product
received  by TEL and the  Calciner  Discharge  Product  received by Newco in the
period  since  the  later  of (1) the  Completion  Date or (2) the  most  recent
preceding  Product Imbalance Date for which the Product Imbalance has been cured
or eliminated pursuant to Subclauses 5.1.4 through 5.1.6, as the case may be.

            "Calciner  Discharge  Product Value" means an amount in U.S. dollars
determined by  calculating  the sum of the average  per-metric-ton  full cost of
manufacturing  Calciner  Discharge  Products  experienced  by the Tioxide  Group
during its 1997 accounting year plus a 2.5% manufacturing margin, such sum to be
escalated  annually  on December  31 each year by the  increase/decrease  in the
Retail  Prices  Index  for  such  year  as  published  by H.M.  Government,  and
multiplying  such escalated sum by the relevant total number of tons of Calciner
Discharge Products.

            "Completion  Date" as used in this Agreement has the same meaning as
that  set  forth  in the  Share  Purchase  and Sale  Agreement  between  TEL and
Purchaser.

            "Contract  Period" means the period beginning on the Completion Date
and ending two (2) years thereafter (subject to early termination under Clause 7
of this Agreement).

            "Delivery Point" means the supplying party's plant.

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            "DuPont" means E. I. du Pont de Nemours and Company., a U.S.
(Delaware) Corporation.

            "Finished Products" means the Newco Finished Products or the Tioxide
Finished Products or generally both as the case may be.

            "Finished  Product  Imbalance" means at any Product Imbalance Date ,
any difference in quantity between the Finished Products received by TEL and the
Finished  Products  received  by Newco in the period  since the later of (1) the
Completion  Date, or (2) the most recent  preceding  Product  Imbalance Date for
which the Product Imbalance has been cured or eliminated  pursuant to Subclauses
5.1.4 through 5.1.6, as the case may be.

            "Finished Product Value" means an amount in U.S. dollars  determined
by calculating the sum of the average  per-metric-ton full cost of manufacturing
Finished  Products  experienced by the Tioxide Group during its 1997  accounting
year plus a 2.5%  manufacturing  margin,  such sum to be  escalated  annually on
December 31 each year by the  increase/decrease  in the Retail  Prices Index for
such year as published by H.M. Government, and multiplying such escalated sum by
the relevant total number of tons of Finished Products.

            "Force Majeure" has the meaning set forth in Paragraph 13 of this
      Agreement.

            "Newco CD  Product  Imbalance"  means a Calciner  Discharge  Product
Imbalance  occurring  because  Newco  receive a quantity of  Calciner  Discharge
Product from TEL that is greater than the quantity of Calciner Discharge Product
received by TEL from Newco.

            "Newco  Calciner  Discharge  Products"  means the Products listed in
Schedule  "D" meeting  the  Specifications,  being all those  grades of calciner
discharge  produced at the Grimsby  Plant (U.K.) during the three years prior to
the Completion Date for subsequent treatment to become Finished Products.  These
Products will be produced by Newco solely at the Grimsby Plant (U.K.)
during the term of this Agreement.

            "Newco FP  Product  Imbalance"  means a Finished  Product  Imbalance
occurring because Newco received a quantity of Finished Product from TEL that is
greater than the quantity of Finished Product received TEL from Newco.

            "Newco Finished  Products" means the products listed in Schedule "B"
meeting  the  Specifications,  being  those  Finished  Products  produced at the
Grimsby Plant (U.K.) during the three years prior to the Completion  Date. These
Products will be produced by Newco solely at the Grimsby Plant (U.K.)
during the term of this Agreement.

            "Newco Products" means the Newco Calciner Discharge Products and
the Newco Finished Products, collectively.

            "Packaging  Materials"  means  all  materials  used to  package  the
Products,  including,  but not  limited  to,  all  bags,  containers  and  other
materials  that are  reasonably  necessary  to package the  Products at the time
title passes in accordance with Clause 4.3.

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            "Product"  means the  Calciner  Discharge  Products or the  Finished
Products,  as the case may be. "Products" means the Calciner  Discharge Products
and the Finished Products, collectively. As used in this Agreement, "Product" or
"Products" may refer to Product or Products produced by the "supplying party" or
received by the "receiving party", or generally both, as the context requires.

            "Product Imbalance" means the Calciner Discharge Products
Imbalance or the Finished Products Imbalance.

            "Product  Imbalance  Date"  means any one of:  (1) the date one year
following the Completion  Date, (2) the date of the end of the Contract  Period,
or (3) the date of termination of this Agreement pursuant to Subclause 7.2.

            "Purchaser" means NL Industries, Inc., a U.S. (New Jersey)
      corporation.

            "Quality" means, for a given Product grade, a set of values
described within the Specifications.

            "Specification(s)" means the standard specifications of the Products
on the day prior to the  Completion  Date or as amended by  agreement in writing
between  the  parties  hereto.   For  a  given  Product  grade,   such  standard
Specifications may describe one or more Quality.

            "Tioxide CD Product  Imbalance" means a Calciner  Discharge  Product
Imbalance  occurring  because  TEL  received a quantity  of  Calciner  Discharge
Product  from Newco that is greater  than the  quantity  of  Calciner  Discharge
Product received by Newco from TEL.

            "Tioxide Calciner  Discharge  Products" means the products listed in
Schedule  "C" meeting  the  Specifications,  being all those  grades of calciner
discharge  produced by TEL or its  Affiliates  for  transfer  to North  American
during the three years prior to the Completion Date for subsequent  treatment to
become  Finished  Products.  These  Products  will  be  produced  by  TEL or its
Affiliates  during  the  term of this  Agreement  at the  former  (ICI)  Tioxide
manufacturing plants.

            "Tioxide FP Product  Imbalance" means a Finished  Product  Imbalance
occurring because TEL received a quantity of Finished Product from Newco that is
greater than the quantity of Finished Product received by Newco from TEL.

            "Tioxide  Finished  Products"  means the products listed in Schedule
"A" meeting the Specifications, being those Finished Products sold by Tioxide or
an Affiliate  in North  America  during the three years prior to the  Completion
Date. These Products will be produced by TEL or its Affiliates  solely at former
(ICI) Tioxide manufacturing plants during the term of this Agreement.

            "Tioxide Products" means the Tioxide Calciner Discharge Products
and the Tioxide Finished Products, collectively.

            "Value" means the Calciner Discharge Product Value and the
Finished Product Value.


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      2.    Supply of Products.

            2.1 During the  Contract  Period,  TEL agrees to deliver to Newco or
Newco's Affiliates and Newco (or Newco's Affiliates,  as the case may be) agrees
to accept from TEL the quantity of Tioxide  Calciner  Discharge  Products and of
Tioxide Finished Products as determined in accordance with Clause 3.

            2.2 In consideration of the Tioxide Calciner  Discharge Products and
the Tioxide Finished  Products  supplied pursuant to Subclause 2.1, Newco agrees
to  deliver to TEL and TEL agrees to accept a like  quantity  of Newco  Calciner
Discharge Products and Newco Finished Products.

            2.3 In consideration  of any Calciner  Discharge  Product  Imbalance
and/or Finished Product  Imbalance that may occur pursuant to Subclauses 2.1 and
2.2,  the  parties  agree  to  cure  such  Product  Imbalance  according  to the
provisions of Clause 5.

            2.4 For Product  supplied  according to Subclauses  2.1 and 2.2, the
grade,  package  type  and  Quality  will be  determined  by the  provisions  of
Subclauses 3.2 through 3.6.

      3.    Quantities and Forecasts.

            3.1  Based on  current  requirements,  the  parties  agree  that for
Tioxide Products delivered to Newco:

                  (a) the total quantity of Tioxide Calciner  Discharge Products
                  listed in Schedule C shall not exceed 25,000 metric tonnes;

                  (b) the total quantity of Tioxide Finished  Products listed in
                  Schedule A, Part 1 shall not exceed 55,000 metric tonnes;

                  (c) the total quantity of Tioxide Finished  Products listed in
                  Schedule A, Part 2 shall not exceed 1,000 metric tonnes; and

                  (d) the total  quantity of Tioxide  Products  shall not exceed
                  75,000 metric  tonnes or such lesser  amount  specified in the
                  forecast provided by Newco pursuant to Subclause 3.2;

during any period of 12 consecutive months within the Contract Period. All Newco
forecasts  will be for product to be made available by TEL at the Delivery Point
for receipt by Newco.  If these  quantities  are not  sufficient to meet Newco's
needs, the parties will negotiate in good faith to establish new limits.

            3.2 Within fifteen (15) days after the Completion  Date, Newco shall
provide to TEL a 12-month  forecast  by month for the total  quantity of Tioxide
Product  needed by  specifying a quantity for each grade,  Quality,  and package
type.

<PAGE>

            3.3 Within ten (10) days after receipt of Newco's forecast  pursuant
to Subclause  3.2,  TEL will  provide a 12-month  forecast by month for the same
total quantity of Newco Product to be supplied to TEL, specifying a quantity for
each grade, Quality and package type.

            3.4 The forecasts  provided  pursuant to Subclauses 3.2 and 3.3 will
be updated  monthly  on a 12-month  rolling  basis by each  receiving  party and
provided:

                  (a)  first  from  Newco  to TEL by the  5th  day of the  month
                  preceding the first month of each updated forecast, and

                  (b) then  from  TEL to  Newco  by the  10th  day of the  month
                  preceding the first month of each updated forecast.

            3.5 On receipt of the reciprocal demand forecasts  provided pursuant
to Subclause 3.4, each supplying  party will promptly assess its ability to meet
the  forecast.  If any potential  problem is foreseen,  the parties will in good
faith promptly discuss the problem, mutually agree on a resolution, and finalize
the  forecast  by the 15th day of the month  preceding  the first  month of each
updated forecast.

            3.6 Each forecast  provided  according to Subclauses 3.2 - 3.4 shall
be  non-binding  and for  planning  purposes  only  and  does  not  represent  a
commitment by the supplying  party to deliver and the receiving  party to accept
delivery of any quantity of Product, except that for each such forecast:

                  3.6.1  Month  1  requirements  shall  be a fixed  and  binding
                  commitment  by the  receiving  party  to  accept  delivery  of
                  Product quantities by grade, Quality and package type.

                  3.6.2  Months  2 and 3 shall be  variable  by plus or minus 5%
                  both for total quantity and for  quantities by grade,  Quality
                  and package type,  but are otherwise  binding on the supplying
                  party and the receiving party.

            3.7 The  parties  will adjust  forecasts  for Months 4 through 12 in
each rolling  forecast in a good faith attempt both to meet the  requirements of
Subclause 3.1 and to ensure that the total  quantity of Tioxide  Products and of
Newco Products are equal at the end of each full year of the Contract Period.

            3.8 Each forecast shall also report the total quantities of Calciner
Discharge Product and of Finished Product supplied and received during each full
year following the Completion Date, so as to enable the parties to calculate any
Product Imbalances.

            3.9 All  exchanges  of  information  pursuant  to this  Clause 3 are
subject to Clause 19.3 "Confidential Information".

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      4.    Order and Delivery.

            4.1 The receiving  party shall place all orders for Product from the
supplying party according to commercially reasonable procedures specified by the
supplying  party at least  forty-five  (45) days  before  the date of  requested
delivery, except that:

                  4.1.1 During the first month  following the  Completion  Date,
                  the parties will  cooperate to maintain  continuity  of supply
                  for orders  placed prior to the  Completion  Date for delivery
                  during that first month; and

                  4.1.2 By mutual  agreement,  the  parties may waive the 45-day
                  lead time to help minimize or avoid a Product Imbalance.

            4.2 All orders from the receiving  party shall be for full container
quantities with each container loaded to the maximum  allowable weight compliant
with legal weight  restrictions  and physical  property  restrictions  and in no
instance more than two (2) grade and package type  combinations  per  container.
The receiving  party shall be  responsible  for providing such  containers.  The
supplying party will make good faith efforts to avoid package damage  associated
with loading products of dissimilar  package size. The supplying party will have
no liability for package damage in the case of containers with more than one (1)
grade of product type where such package damage has been caused by the inclusion
of two (2) grade and package type combinations per container.

            4.3 All Product will be supplied by the supplying party: "Ex Works".
All title and risk for the Product  shall pass to the  receiving  party when the
product is  accepted  for  loading  and  shipment  at the  Delivery  Point.  The
receiving party shall bear all costs of transportation,  freight,  duties, taxes
and related  costs and is  responsible  for the  logistics of  transporting  the
Product.

            4.4  Product  will be  delivered  by  supplying  party in  Packaging
Materials provided by the receiving party at the cost of the receiving party.

                  4.4.1  Packaging  Materials will be available to the supplying
                  party  for its use at the  relevant  Delivery  Point  at least
                  sixty (60) days in advance of any delivery  date in sufficient
                  quantity  to allow  supplying  party to meets its  commitments
                  hereunder.

                  4.4.2 All  Packaging  Materials  will  display  the  receiving
                  party's  name,  trademark(s),   if  any,  and  other  relevant
                  information  for use by the supplying  party in fulfilling the
                  receiving party's requests for Product.

                  4.4.3  Any   failure  to  supply   Product   due  to  lack  of
                  availability  of proper  Packaging  Materials will be deemed a
                  failure  of  receiving   party  to  perform  its   obligations
                  according to the  provisions of this Agreement and will not be
                  a failure of the  supplying  party to perform its  obligations
                  according  to the  provisions  of this  Agreement,  unless the
                  supplying  party is solely  negligent for lack of availability
                  of proper Packaging Materials.

                  4.4.4 During the first one hundred eighty (180) days following
                  the Completion Date or until  sufficient  Packaging  Materials
                  are provided by the  receiving  party,  whichever  shall first
                  occur,  the  supplying  party shall  utilize its own Packaging
                  Materials,  with  associated  costs  to be  reimbursed  by the
                  receiving  party.  Receiving  party shall be  responsible  for
                  re-labeling in accordance with Subclause 4.4.2.

<PAGE>

            4.5  All  Product  made  available  by  the  supplying   party,   in
satisfaction of an order from receiving party,  will be promptly  transported by
receiving party from the Delivery Point.

            4.6 Product will be made available  throughout the delivery month in
accordance with the supplying party's monthly production schedule.

            4.7 The parties will use  reasonable  efforts to cooperate  with one
another in providing any necessary  documentation to support these  transactions
and any subsequent shipments or exports contemplated hereunder.

            4.8 The parties acknowledge that:

            (a)   This  Agreement is of short  duration  and designed  solely to
                  facilitate  the  intent  of  the  parties   described  in  the
                  Recitations,

            (b)   There are no  significant  or material  differences  among the
                  financial values of the Products listed in Schedules A and B,

            (c)   There are no  significant  or material  differences  among the
                  financial  values of the Products  listed in Schedules "C" and
                  "D", and

            (d)   Circumstances  relating  to  documentation,  customs,  duties,
                  taxation,  or other legal  requirements  may  necessitate  the
                  assignment  of a financial  value to a particular  quantity of
                  Product.

            The parties  therefore agree that where required as in Subclause 4.8
(d), the Calciner  Discharge Product value and the Finished Product value at the
time of  delivery  to the  Delivery  Point  shall be  deemed  to be equal to the
Calciner Discharge Product Value and the Finished Product Value, respectively of
such Product, and shall not be applied differently to either Tioxide Products or
Newco Products.

      5.    Product Imbalances.

            5.1 If a Product  Imbalance  should occur, the parties will promptly
cure such Product Imbalance under the following terms:

                  5.1.1 The "Newco Imbalance  Value" for such Product  Imbalance
                  shall be the sum of:

                        (1) The Calciner Discharge Product Value of the Newco
                        CD Product Imbalance, if any; and

                        (2) The Finished Product Value of the Newco FP
                        Imbalance, if any.

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                  5.1.2 The "Tioxide Imbalance Value" for such Product Imbalance
                  shall be the sum of:

                        (1) The Calciner Discharge Product Value of the
                        Tioxide CD  Product Imbalance, if any; and

                        (2)  The  Finished  Product  Value  of  the  Tioxide  FP
                        Imbalance, if any.

                  5.1.3 Newco,  if the Newco  Imbalance Value is larger than the
                  Tioxide  Imbalance  Value,  or TEL, if the  Tioxide  Imbalance
                  Value  is  larger   than  the  Newco   Imbalance   Value  (the
                  "Reimbursing  Party")  shall be  responsible  to reimburse the
                  other party (the "Reimbursed Party") in an amount equal to the
                  net of the larger of the Newco Imbalance Value and the Tioxide
                  Imbalance  Value less the smaller of the Newco Imbalance Value
                  and the Tioxide Imbalance Value (the "Net Imbalance Value").

                   5.1.4 The  Reimbursing  Party will  reimburse the  Reimbursed
                  Party by (a)  supplying a quantity of  Finished  Product,  (b)
                  supplying a quantity of Calciner Discharge Product, and/or (c)
                  making a cash  payment,  such that the sum of (1) the Value of
                  such  Finished  Product,   (2)  the  Value  of  Such  Calciner
                  Discharge  Product,  and (3) the  amount  of the cash  payment
                  shall be equal to the Net Imbalance Value.

                  5.1.5 For any  Product to be supplied  pursuant  to  Subclause
                  5.1.4,  (a) the  Reimbursing  Party  shall  specify  the total
                  quantity and (b) the  Reimbursed  Party shall specify  whether
                  the  Product  will be Calciner  Discharge  Product or Finished
                  Product. The cash payment will be adjusted accordingly.

                  5.1.6 The  calculations,  determinations,  and decisions to be
                  made in  Subclauses  5.1.1.  through  5.1.5 will be  completed
                  within  thirty  (30)  days of the  occurrence  of the  Product
                  Imbalance and any cash payment will be made by the Reimbursing
                  Party within fifteen (15) days thereafter.

                  5.1.7 For any  Product to be supplied  pursuant to  Subclauses
                  5.1.4 and  5.1.5,  the  Reimbursed  Party  shall  specify  the
                  Product  grade(s),  Quality and package type,  and the parties
                  will mutually agree upon delivery timing.

                  5.1.8  For any  cash  payment,  VAT  shall be  charged  to the
                  Reimbursed Party as appropriate.

            5.2 Any quantities of Product supplied and cash payments made by the
Reimbursing  Party  pursuant to Subclause  5.1.4  through 5.1.6 will be excluded
from consideration in the determination of any later Product Imbalance.

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            5.3 The provisions of this Agreement  relating to Product Imbalances
shall not apply where any Product  Imbalance  has been caused by a Force Majeure
event or circumstance, except to the extent that :

                  (a) at or near the end of the Contract  Period the  corrective
                  measures of Subclauses  13.2 or 13.3 are  sufficient to remove
                  what would  otherwise be a  contribution  of the Force Majeure
                  event to a Product Imbalance, or

                  (b) the party  not  declaring  a Force  Majeure  elects  under
                  Clause  13.3(b) to continue to receive  Product  during  Force
                  Majeure.

            5.4 The parties'  obligation to cure Product Imbalances  pursuant to
Clauses 5.1 and 5.2 shall survive termination of this Agreement.

      6.    Quality, Adjustments:

            There  will  be no  change  in the  specifications  of  the  Product
produced by the  supplying  party  without the  express  written  consent of the
receiving  party.  The supplying party shall give sufficient prior notice to the
receiving  party of any  significant  change(s) in raw materials,  manufacturing
processes,  or test methods for mutual  assessment of the probable effect on the
receiving  party's  Product  performance.  Final Product  attributes will remain
unchanged and will be consistent with the Specifications.

      7.    Term and Termination.

            This Agreement  shall become  effective on the  Completion  Date and
terminate at the end of the Contract Period.

                  7.1  Clauses  5, 8, 9, 10,  11,  12,  15 and 19 shall  survive
                  termination of this Agreement.

                  7.2 If both  TEL and  Newco  reach  agreement  at the  time of
                  submission of any rolling  twelve-month  forecasts  that their
                  respective  needs for  Products  for all future  months  after
                  Month 2 of the  forecast  will be zero,  then in that case the
                  Contract Period will be deemed to end at the end of such Month
                  2 for the purposes of this Agreement.

      8.    Warranty:

            Each supplying  party warrants to each receiving party only that any
Product when supplied will meet the Specifications  for the Product.  EXCEPT FOR
THE FOREGOING AND AS EXPRESSLY PROVIDED HEREIN, SUPPLYING PARTY MAKES NO EXPRESS
OR  IMPLIED  WARRANTY   (INCLUDING,   WITHOUT  LIMITATION,   THE  WARRANTIES  OF
MERCHANTABILITY,  FITNESS FOR A PARTICULAR PURPOSE OR FROM ANY COURSE OF DEALING
OR TRADE USAGE)  REGARDING  THE PRODUCT.  Receiving  party  assumes all risk and
liability  for  results  obtained  by the use of the  supplying  party  Product,
whether used alone or in combination with other materials.

<PAGE>

      9.    Claims:

            9.1 With respect to either Tioxide  Products or Newco  Products,  no
claim shall be greater in amount than the Value of the  Product  (plus  freight,
duty and disposal  costs)  exchanged  hereunder in respect of which  damages are
claimed except in the case of willful breach of this Agreement.  Failure to give
notice of a claim within one hundred eighty (180) days from date of delivery, or
the date fixed for delivery (in case of non-delivery), shall constitute a waiver
by the  receiving  party of all claims in respect of the Product so delivered or
not  delivered,  as the case may be except in the case of willful breach of this
Agreement. No Product shall be returned to the supplying party without supplying
party's  permission,  which shall not be unreasonably  withheld or delayed,  and
then only in the  commercially  reasonable  manner  prescribed  by the supplying
party.  No claim  shall be allowed  for Product  that has been  processed  (e.g.
"finished") in any manner.  Claims include,  without  limitation,  claims of any
kind, whether or not (a) for loss,  damage,  expense or injury, (b) with respect
to the Product  delivered or for  non-delivery of the Product,  or (c ) based on
supplying  party's  breach  of  warranty,   contract,   statute,  regulation  or
negligence, strict liability or any tort.

            9.2 No Claim for failure to deliver on time or at all, will be valid
if the reason for said late delivery or  non-delivery  is the failure  either in
whole or in part, by the receiving  party to provide the supplying  party with a
sufficient  quantity of  Packaging  Materials  for the  Products  ordered by the
receiving party.

      10.   Remedy:

            Except in the case of willful  breach of this  Agreement,  a party's
exclusive  and sole remedy for any claim  shall be the  recovery of the Value of
the Product  exchanged  with the other party (plus  freight,  duty and  disposal
costs) in the transaction  giving rise to the claim. Such recovery may be in the
form of cash or in the form of Product at the  discretion  of the party  against
whom the claim is made.

      11.   Patent Warranty:

            The  supplying  party  warrants that the use or sale of the Products
delivered  hereunder  will not infringe the claims of any validly  issued patent
covering the Products themselves,  but does not warrant against infringement due
to: (a) the use of the  Products in  combination  with other  Products (or third
party products of other  manufacturers)  or materials or in the operation of any
process,  or (b) the  compliance  by  supplying  party  with any  specifications
provided to supplying party by the receiving party.

      12.   No Consequential Damages:

            Neither  party shall be liable for  special,  indirect,  incidental,
punitive or consequential  damages (including,  without limitation,  damages for
loss of business profits,  business  interruption or any other loss), whether or
not caused by, or  resulting  from,  the  negligence  of such party even if such
party has been advised of the possibility of such damages.

      13.   Force Majeure:

            13.1 Force Majeure is an event or circumstance beyond the reasonable
control of the party  claiming the Force  Majeure  including but not limited to:
act of God,  fire,  flood,  explosion,  hurricane,  breakdown  of  machinery  or
equipment, governmental action or inaction or request of governmental authority,
accident,  strike,  lockout, labor trouble or shortage,  inability to obtain raw
material,  power, equipment or transportation,  but the party claiming the Force
Majeure shall be diligent in attempting to remove such cause or causes and shall
promptly  notify  the  other  party of its  extent  and  probable  duration.  No
liability  shall  result to  either  party  from  delay in  performance  or from
non-performance  caused by a Force  Majeure  other than that  described  in this
Clause 13 and in Clause 14 and this Agreement shall remain otherwise unaffected.

<PAGE>

            13.2 If the party declaring a Force Majeure is the supplying  party,
the receiving party shall be entitled to reduce its own quantity commitments (by
grade,  Quality,  and package of such receiving  party's  choice) as a supplying
party in an amount equal to the quantity by which the non-performing party fails
to  perform.  The  non-performing  party  shall have no  obligation  to purchase
quantities  of  Product  from other  sources to enable it to perform  under this
Agreement.

            13.3 If the party declaring a Force Majeure is the receiving  party,
the supplying party will be entitled:

                  (a) to reduce its own  commitments as a receiving  party in an
                  amount equal to the quantity by which the non-performing party
                  fails to perform, or

                  (b) to continue  to receive  Product  from the  non-performing
                  party.

            13.4 In  order  to  claim  a  Force  Majeure  hereunder,  the  party
attempting to excuse its delay in performance or non-performance must notify the
other party  within 24 hours of  obtaining  knowledge  of the Force  Majeure and
confirm the Force Majeure event in writing within 5 Business Days thereafter. If
the  other  party  does not  agree  that the  event or  circumstance  is a Force
Majeure,  that  party  may  dispute  the  claim  under  the  Dispute  Resolution
provisions contained herein.

            13.5 YEAR 2000  ISSUE.  A delay in  performance  or  non-performance
attributable to improper processing, management, manipulation, miscalculation or
misreading of data by  computer-operated  systems  arising out of processing for
the year 2000 shall not constitute a Force Majeure.

            14.   Allocation:

            14.1 If a Force Majeure event or  circumstance  occurs which results
in the failure of the supplying party to supply Product to the receiving  party,
supplying  party  will  distribute  its  available  supply  pro rata  (based  on
deliveries  in the three  calendar  months prior to the Force  majeure  event or
circumstance)  between  the  receiving  party  and the  aggregate  of all  other
purchasers,  including,  third  parties as well as  divisions,  joint  ventures,
business units, affiliates and subsidiaries of supplying party, for the duration
of such Force Majeure event or circumstance without liability for any failure of
performance  that  may  result  therefrom.   For  the  avoidance  of  confusion,
distribution  among  such  other  purchasers  will be made on such  basis as the
supplying party may deem fair and practical after first  determining the portion
to be provided to receiving party.

<PAGE>

            14.2 If a  non-Force  Majeure  event or  circumstance  occurs  which
results in the failure of the supplying party to supply Product to the receiving
party according to the forecast commitments hereunder, the supplying party shall
meet all of its supply  obligations under this Product Exchange  Agreement prior
to,  and in  preference  over,  any  other  supply  obligations  to  purchasers,
divisions,  joint  ventures,  business  units,  affiliates and  subsidiaries  of
supplying party.

      15.   Government Action:

            If any Government action should place or continue limitations on the
terms of this  Agreement  such that it would be  illegal  or  against  public or
Government  policy for  supplying  party to receive full value (i.e.  equivalent
exchanged  product) for its Product,  supplying party shall have the option: (a)
to continue to perform under this  Agreement  subject to such  adjustments  that
supplying party may deem necessary to comply with such Government action; (b) to
revise this Agreement,  subject to receiving party's written approval,  in order
to most nearly  accomplish  the  original  intent of this  Agreement;  or (c) to
terminate  performance  of the  affected  portions  of  this  Agreement  without
liability for damages.

      16.   User Protection and Product Information:

            The receiving  party  warrants that it will use its own  independent
skill and  expertise in  connection  with the selection and use of the supplying
party's  Product and that it possesses the skill and expertise to safely handle,
store,  transport,  use, and dispose of the Product.  In  connection  therewith,
receiving party agrees to:

            16.1 Familiarize itself with available safety and health information
and precautions, including, but not limited to, those contained in any pertinent
material safety data sheet;

            16.2 Adopt and follow safe handling, storage,  transportation,  use,
and disposal practices with respect to the Product,  including,  but not limited
to, those required by applicable law and regulation; and

            16.3 Instruct its  employees,  independent  contractors,  agents and
customers in the warning and safe use practices  required in connection with the
unloading, handling, storage, transportation, use and disposal of the Product.

      17. Labeling and Literature, Name on Product:

            Each party hereto acknowledges that there may be risks and liability
resulting from the use of each party's Products.  Each party hereto acknowledges
that it has  received  and is  familiar  with the  supplying  party's  labeling,
literature  and any  pertinent  Material  Safety  Data  Sheets  ("MSDS"  sheets)
concerning such Products and their properties.  The receiving party will forward
such  information  to  receiving  party's  employees  and any others  (including
receiving party's customers),  who may handle, process or sell such Product from
supplying  party and advise such  parties to  familiarize  themselves  with such
information.

<PAGE>

      18.   Taxes, VAT, Import Duties

            18.1 The receiving  party is  responsible  for payment of all taxes,
duties and VAT due and payable upon movement of Product under this Agreement.

            18.2  Where VAT is payable  by one party to  another,  this shall be
charged  by means of a valid VAT  invoice  issued  pursuant  to the  legislation
extant in the country where the VAT charge is levied.

            18.3 For any goods which have been supplied to the  receiving  party
VAT-free  on the basis that those  goods are to be  exported  from the  European
Union by the receiving  party, the receiving party is required to provide within
one month of the date of supply of product a certificate of shipment proving the
goods were removed from the European Union. If such  certificate is not provided
within that time period,  then the  supplying  party shall charge and  receiving
party shall pay VAT and  associated  penalties,  if any. Such VAT and associated
penalties shall be invoiced by the supplying  party and paid,  within 15 days of
receipt of the invoice, by the receiving party.

      19.   Confidential Information:

            19.1 For purposes of this Clause:

      19.1.1  "Confidential  Information" means all information  received by the
receiving party from the disclosing party relating to the disclosing  party, its
Affiliates  and  the  businesses  conducted  by the  disclosing  party  (whether
pursuant to this Agreement or otherwise)  including not only written information
but information transferred orally,  visually,  electronically,  or by any other
means. For the avoidance of doubt, the term  Confidential  Information shall not
include:

            (i)   information that is in the public domain at the date of
                  this Agreement;

            (ii)  information  that  subsequently  comes into the public domain,
                  otherwise than as a result of a breach of this Agreement,  but
                  only after it has come into the public domain;

            (iii) information  which the receiving party or its  Representatives
                  obtain  from a  third  party  not  under  any  confidentiality
                  obligation   to   the   disclosing   party   respecting   such
                  information;

            (iv)  information  which the receiving party or its  Representatives
                  at the time of disclosure  already has in its  possession  and
                  which is not  subject  to any  obligation  of secrecy on their
                  part to the other party;

            (v)   information  which is independently  developed by employees of
                  the receiving party or its  Representatives  who had no access
                  to the information disclosed by the disclosing party.

      19.1.2 "Representatives" means Affiliates, directors, officers, employees,
agents  or  representatives  of  either  party  or  its  Affiliates,  and  their
respective solicitors, accountants, consultants and financial advisors.

<PAGE>

      19.2 Each party hereto  undertakes  to maintain  Confidential  Information
received  by it, its  Affiliates  or its  Representatives  relating to the other
party or the other  party's  Affiliates  in  confidence  and not  disclose  that
Confidential  Information  to any person other than its  Representatives  except
with the prior written approval of the other party.

      19.3 Each  party  undertakes  only to  disclose  to  Representatives  such
Confidential  Information  relating  to the  other  party or the  other  party's
Affiliates  as is  reasonably  required  for  the  purposes  of  performing  the
obligations  under  this  Agreement  and  only  to  Representatives  whom it has
informed of the  confidential  nature of the  Confidential  Information  and who
undertake to keep it confidential.  Such  information  shall not be used for any
other purpose than the performance of the parties' obligations  hereunder.  Each
party shall be responsible for breach of such confidentiality  undertaking by it
or its Representatives.

      19.4 In the event that, after receipt of Confidential Information,  either
party, or any person or Representative  to whom it has transmitted  Confidential
Information,  becomes  legally  required  (by oral  questions,  interrogatories,
requests for information or documents,  subpoena,  civil investigative demand or
similar  process or otherwise) to disclose any of the  Confidential  Information
received,  the legally compelled party shall provide the other party with prompt
written notice of that requirement so that the other party may seek a protective
order or other  appropriate  remedy but shall not be obliged to delay disclosure
if to do so would be in breach of any conditions for such disclosure  imposed by
the authority compelling  disclosure and in any event should the other party not
be  successful in seeking or obtaining a protective  order or other  appropriate
remedy,  the other party  shall waive  compliance  with the  provisions  of this
Agreement for such particular case to enable the legally  compelled party or its
Representative to comply with any such legal requirement.

      19.5 Disclosure of Confidential Information to permitted assigns shall not
be a  violation  of this  Clause  19,  provided  that the  disclosing  party has
complied with the provisions of Clause 21.2.

      20.   Dispute Resolution:

            20.1 In the event of a dispute between supplying party and receiving
party arising in connection with this Agreement,  the parties will first attempt
to resolve the dispute informally.  If such informal efforts fail to resolve the
dispute to the  parties'  satisfaction,  senior  representatives  of each of the
parties  shall be  notified  and  shall,  within 10  Business  Days of a written
request from one party to the other, meet in a good faith effort to resolve such
dispute or difference without recourse to legal proceedings.

            20.2 If the  dispute or  difference  is not  resolved as a result of
such  meeting,  supplying or  receiving  party may (at such meeting or within 10
Business  Days  from  its  conclusion)  propose  to the  other in  writing  that
structured  negotiations be entered into with the assistance of a mediator. Upon
receipt of such notice the parties to the dispute  shall each propose and select
a suitable mediator.

            20.3 All negotiations  connected with the dispute shall be conducted
in strict  confidence and without  prejudice to the rights of the parties in any
future proceedings.

<PAGE>

            20.4  Within  seven  (7)  Business  Days of the  appointment  of the
mediator,  both  parties  shall meet with him/her in order to agree on a program
for the exchange of any relevant information and the structure to be adopted for
negotiations.

            20.5  If  the   parties  to  the  dispute   accept  the   mediator's
recommendations  or otherwise  reach agreement on the resolution of the dispute,
such agreement  shall be reduced to writing and, once it is signed by their duly
authorized representatives,  shall be and remain binding upon the parties. If an
agreement  cannot be reached,  either of the parties may invite the  mediator to
provide a non-binding but informative opinion in writing,  provided however that
neither  party shall be entitled to rely on such  opinion or  introduce  it into
evidence in any legal  proceedings.  If agreement still cannot be reached,  then
any  dispute or  difference  between  the parties may be referred to the courts.
Unless a party is seeking injunctive relief, no dispute shall be referred to the
courts  until  30  Business   Days  after  the   mediator  has  issued   his/her
recommendation(s).

            20.6 Each party shall bear its own costs of this Dispute  Resolution
process.

      21.   Assignment:

            21.1  Except as  provided  in  Subclause  21.2  below,  the  rights,
benefits  and  obligations  of the  parties  under this  Agreement  shall not be
assigned,  transferred or otherwise  disposed of in whole or in part without the
prior express written consent of the other party.

            21.2 Consent to assignment of this  Agreement  shall not be required
(1) in  circumstances  where all the rights,  benefits and obligations of either
party hereto are proposed to be assigned or  transferred  to an Affiliate of the
transferring party; or (2) in the event that either party hereto or such party's
Affiliates  (if  applicable)  proposes  to assign all its rights,  benefits  and
obligations  to a third  party  purchaser  of the  transferring  party's  entire
interest in the manufacture of titanium dioxide;  provided  however,  (upon such
event) the transferring  party obtains the agreement of the proposed assignee or
transferee,  prior to the  transfer or  assignment,  to comply with the terms of
this agreement and except in the case of a sale pursuant to Subclause 21.2(2) to
obtain from the  assignee or  transferee a  re-assignment  in the event that the
assignee or transferee ceases to be an Affiliate.

      22. No Agency and no Partnership:

            22.1 Except as otherwise  expressly  provided for in this  Agreement
and/or the Schedules, or unless otherwise agreed between the parties in writing,
no party shall:

                  22.1.1      make purchases or sales or incur any
                              liabilities whatsoever on behalf of the other
                              party hereto;

                  22.1.2      pledge the credit of the other party; or

                  22.1.3      hold itself out as acting as agent for the
                              other party.

            22.2 The parties hereto have not and expressly do not intend to form
a partnership by virtue of this Agreement and do not intend to be partners.

<PAGE>

      23. Entire Agreement/Amendments/Severability:

            23.1 This Agreement contains the whole agreement between the parties
and their Affiliates relating to the transactions contemplated by this Agreement
and  supersedes  and replaces all  previous  agreements  between the parties and
their Affiliates relating to such transactions.

            23.2 A provision  in another  agreement  between the parties to this
Agreement  or between the  respective  parent  undertakings  of the parties (and
whether  made before or after the date of this  Agreement)  which refers to this
Agreement and which extends or supplements  any provision of this Agreement will
be deemed for the purposes of Subclause 23.1 to form part of the whole agreement
between the parties as referred to in that Subclause.

            23.3 Each of the parties to this agreement  acknowledges  on its own
behalf and on behalf of each of its Affiliates  that , in agreeing to enter into
this Agreement,  it has not relied on any representation,  warranty,  collateral
contract or other assurance  (except those set out in this Agreement) and waives
all rights and  remedies  which,  but for this  Subclause,  might  otherwise  be
available  to it in respect  of any such  representation,  warranty,  collateral
contract or other assurance, provided that nothing in this Clause shall limit or
exclude any liability for fraud.

            23.4 Except as otherwise  specifically  stated,  no  modification or
amendment  hereto shall be of any force or effect  unless (1) reduced to writing
and signed by both  parties  hereto,  and (2)  expressly  referred to as being a
modification of this Agreement, including the attached Schedules.

            23.5 If the  final  judgment  of a court of  competent  jurisdiction
declares   that  any  term  or  provision  of  this   Agreement  is  invalid  or
unenforceable  in whole or in part,  the parties agree that the court making the
determination of invalidity or  unenforceability  shall have the power to reduce
the list of customers in Schedule E, the scope, duration, or area of the term or
provision,  to delete  specific  words or phrases,  or to replace any invalid or
unenforceable  term or  provision  with a term or  provision  that is valid  and
enforceable  and that comes closest to expressing the intention of the pertinent
term or provision (or to approve such  reductions,  deletions or replacements as
agreed by the parties),  and this Agreement  shall be enforceable as so modified
after the expiration of the time within which the judgment may be appealed.

      24.   Waiver:

            24.1  The  failure  of  either  party to  insist  in any one or more
instances upon strict  performance of any of the provisions of this Agreement or
to take advantage of any of its rights shall not be construed as a waiver of any
such provision or the relinquishment of any such right.

            24.2 The  provisions of the United  Nations  Convention on Contracts
for the International Sale of Goods 1980 shall not apply to this contract or any
transaction contemplated hereunder.

<PAGE>

      25.   Notices:

            25.1 Any notice or other  document to be served under this Agreement
shall be in writing and may be  delivered  by hand or sent by post or  facsimile
process where the remote  facsimile  machine has an answer-back  facility to the
party  to be  served  at its  address  or  facsimile  number  appearing  in this
Agreement  and marked for the  attention of the person whose name is referred to
in Subclause 25.2 below. Any notice or other document sent by post shall be sent
by  registered   post  (if  both  posted  and  for  delivery   within  the  same
jurisdiction)  or by  registered  airmail  (if posted for  delivery  outside the
jurisdiction  in which it is  posted).  Any  notice  or other  document  sent by
facsimile  process shall also be sent to the other party by  registered  post or
registered airmail (as the case may be) in accordance with this Clause.

            25.2 The person to whom notices or documents should be addressed for
the purposes of Subclause 25.1 is:

            25.2.1 If to be served on TEL:
                                              ----------------------------
                                              Name or Title, Business Unit

                                              ----------------------------
                                              Address

            25.2.2 If to be served on Newco:

                                              ----------------------------
                                              Name or Title, Business Unit

                                              ----------------------------
                                              Address

            25.3 In  proving  service  of a  notice  or  document  it  shall  be
sufficient  to  prove  that  delivery  was  made by hand  or that  the  envelope
containing  the notice or document was properly  addressed and posted (either by
registered post or by registered airmail, as the case may be, in accordance with
the  requirements of this Clause 25) or that the facsimile  message was properly
addressed and dispatched as the case may be.

      26.   Governing Law:

            This Agreement is governed by and shall be construed in
accordance with Delaware (U.S.) law.

      27.   Covenant Not to Compete

            For a period of two and one-half years from and after the Completion
Date, none of TEL or its Affiliates will directly or indirectly market,  sell or
offer for sale in North America (a) to any of the customers listed in Schedule E
any product  (whether or not such  product is listed in  Schedules A, B, C or D)
that is  manufactured  by the sulfate  process,  and (b) to any of the customers
listed in  Schedule F any TC4  Product.  Schedule E shall  include  all  current
customers  and all former  customers  who have  purchased in North  America from
Tioxide  (or  its  Affiliates),  during  the  three-year  period  ending  on the
Completion Date, titanium dioxide manufactured by the sulfate process.  Schedule
F shall  include  all  current  customers  and all  former  customers  who  have
purchased  in  North  America  from  Tioxide  (or its  Affiliates),  during  the
three-year period ending on the Completion Date, TC4 Product.

<PAGE>

      28.   Assurances

            The parties hereto  acknowledge  that due to inadequate  information
available to them on the Completion Date, there may be other Products (or in the
case of Schedules E and F, other customers)  which,  according to the provisions
of this Agreement,  should have been included on the Schedules A, B, C, D, E and
F. To the extent that the parties  hereto obtain  additional  information  which
indicates  that a Product or customer  should have been included in the relevant
Schedule,  the parties shall consult with a view to agreeing whether the Product
or customer should be included,  such agreement not to be unreasonably withheld.
From and after the parties'  agreement  pursuant to this Clause 28, such Product
or customer  shall be deemed to be a part of the relevant  Schedule as if it had
been included as on the Completion Date.

      IN WITNESS  WHEREOF,  the parties hereto have caused this Product Exchange
Agreement to be executed by their duly authorized representatives.

TIOXIDE EUROPE, LTD.                      NEWCO, Ltd.

By:_________________________________      By:___________________________

Title:_______________________________     Title:_________________________

Date:_______________                      Date:_____________