Exhibit 10.3


 


Execution
Copy


 


TAX SHARING AGREEMENT, dated as of November 28,
2005 (the “Agreement”), between Kerr-McGee Corporation, a Delaware corporation
(“Distributing”) and Tronox Incorporated (“Tronox”), a Delaware corporation.  To the extent not defined herein, all defined
terms shall have the same meaning as in the Master Separation Agreement (as
hereinafter defined).


 


INTRODUCTION


 


WHEREAS, as of the date hereof, Distributing
is the common parent of an affiliated group of domestic corporations, including
Tronox, which has elected to file consolidated federal income tax returns;


 


WHEREAS, the board of directors of Distributing
has determined that it would be in the best interests of Distributing and its
shareholders to separate the Tronox Business (as hereinafter defined) from Distributing;


 


WHEREAS, the boards of directors of Distributing
and Kerr-McGee Worldwide Corporation have determined to contribute to Tronox
Worldwide LLC certain entities engaged in the Tronox Business and to contribute
Tronox Worldwide LLC to Tronox (the “Contribution”);


 


WHEREAS, the board of directors of Distributing
expects to distribute (the “Distribution”) all the outstanding shares of Class B
common stock of Tronox to the shareholders of Distributing;


 


WHEREAS, prior to the Distribution, Tronox
will issue to the public shares of Class A common stock of Tronox which,
when issued, will constitute all of the outstanding shares of Tronox’s Class A
common stock (the “IPO”);


 


WHEREAS, Distributing and Tronox intend that
the Contribution qualify as a tax-free transfer under Sections 368(a)(1)(D) of
the Internal Revenue Code of 1986, as amended (the “Code”), and the
Distribution qualify as a pro rata or non-pro rata tax-free distribution under
Sections 355 and 368(a)(1)(D) of the Code;


 


WHEREAS, it is appropriate and desirable to
set forth the principles and responsibilities of the parties to this Agreement
regarding (i) future adjustments with respect to Taxes, Tax Contests and
other related Tax matters and (ii) current Tax liabilities that arise as a
result of the activities of the parties prior to the IPO and restructuring
activities undertaken to implement the separation and Distribution;


 


NOW, THEREFORE, in consideration of the
mutual covenants and agreements contained herein, the parties hereby agree as
follows:


 





















 


ARTICLE I


 


DEFINITIONS


 


The following terms shall have the following
meanings (such meanings to apply equally to both the singular and the plural
forms of the terms defined).  All section references
are to this Agreement unless otherwise stated.


 


“Claims Court Litigation” means the
litigation that is currently pending in the United States Court of Federal
Claims, docket number 05-5T relating to the question of capitalization versus
deductibility of certain environmental clean-up expenditures with respect to
the contamination of the refining sites in Cushing and Cleveland, Oklahoma.


 


“Claims Court Related Tax Adjustment”
means, with respect to any Pre-Deconsolidation Period, and as computed
separately for each Tax, the net increase in each such Tax equal to the sum of
all adjustments made after the Deconsolidation Date with respect to each such
Tax for each such Pre-Deconsolidation Period that are made pursuant to a Final
Determination in a Tax Contest involving the same or similar factual and legal
issues that are at issue in the Claims Court Litigation.


 


“Claims Court Related Tax Benefit” means
(i) 100% of any Tax refund received in the Claims Court Litigation or any
Tax Contest related to a Pre-Deconsolidation Period involving the same or
similar factual and legal issues that are at issue in the Claims Court
Litigation and (ii) any deduction, amortization, exclusion from income, or
other allowance (including a loss or reduced gain recognized upon a sale of an
asset) that actually reduces in cash the amount of Tax that a member of the
Tronox Group would have been required to pay in a Post-Deconsolidation Period (or
actually increases in cash the amount of any Tax refund to which a member of
the Tronox Group would have been entitled in a Post-Deconsolidation Period) in
the absence of any basis increase resulting from a Final Determination in the
Claims Court Litigation or in a Tax Contest related to a Pre-Deconsolidation
Period involving the same or similar factual and legal issues that are at issue
in the Claims Court Litigation.


 


“Code” means the Internal Revenue of
Code of 1986, as amended.


 


“Combined Tax” means any income or
franchise Tax (whether measured by income or capital) payable to any state,
local or foreign taxing jurisdiction in which any member of the Tronox Group
has filed or will file a Return with a member of the Distributing Group on an
affiliated, consolidated, combined or unitary basis with respect to such Tax.


 


“Combined Tax Return” means any Return
with respect to a Combined Tax.


 


“Controlling Party” means, except as
provided for in Section 4.06 hereof, Distributing or any other member of
the Distributing Group, or Tronox or any other member of the Tronox Group, as
the case may be, that filed or, if no Return has been filed, was required to
file, a Return that is subject to a Tax Contest, or any successor and/or assign
of any of the foregoing, provided that
any Combined Tax Return filed by Kerr-McGee Worldwide Corporation with a Taxing
Authority in Mississippi shall be deemed to be a Return filed by Tronox and
therefore Tronox shall be the Controlling Party with respect to any Tax Contest
related to any such Return.  For


 


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the avoidance of doubt, with the exception of
Returns filed in Mississippi and subject to Section 4.06 hereof, the
company that actually filed any Federal Tax Return or Combined Tax Return (or
any successor or assign of such company) shall be the Controlling Party.


 


“Credit Facility” means the Credit
Agreement dated as of November 28, 2005 among Tronox, Tronox Worldwide
LLC, Lehman Brothers Inc., Credit Suisse, ABN AMRO N.V., JPMorgan Chase Bank,
N.A., Citicorp North America Inc. and the lenders that are parties thereto.


 


“Deconsolidation Date” means, for
purposes of this Agreement, the last date on which Distributing and Tronox are permitted
to file Returns on a consolidated or combined basis, determined on a Tax
jurisdiction by Tax jurisdiction basis.


 


“Distributing Business” means the businesses
conducted by Distributing and its subsidiaries other than the Tronox Business.


 


“Distributing Consolidated Group”
means Distributing and each direct and indirect subsidiary, including members
of the Tronox Group, that is eligible to join Distributing or any other member
of the Distributing Group in the filing of a consolidated Federal Tax Return or
a Combined Tax Return.


 


“Distributing Group” means, at any
time, Distributing and each of its direct and indirect subsidiaries other than
those subsidiaries that are members of the Tronox Group.


 


“Distributing Tax Adjustment” means,
with respect to any taxable period or portion thereof, and as computed
separately for each Tax, the net increase in each such Tax equal to the sum of
all adjustments made pursuant to a Final Determination after the
Deconsolidation Date with respect to each such Tax for each such taxable period
or portion thereof that are attributable to the Distributing Business; provided, however, that
any adjustment comprising a Restructuring Adjustment shall not be considered in
determining the amount of any Distributing Tax Adjustment.


 


“Distributing Tax Benefit” means, with
respect to any taxable period or portion thereof, and as computed separately
for each Federal Tax and Combined Tax, the net decrease in each Tax equal to
the sum of all adjustments made pursuant to a Final Determination after the
Deconsolidation Date with respect to each such Tax for each such taxable period
or portion thereof that are attributable to the Distributing Business; provided, however, that the amount of any Distributing Tax
Benefit shall not exceed the amount that the actual Tax liability for the Tronox
Group for the relevant taxable period is actually reduced by the adjustments
made pursuant to such Final Determination; provided  further,  however, that
any adjustment comprising a Restructuring Adjustment shall not be considered in
determining the amount of any Distributing Tax Benefit.  For purposes of the foregoing, if an
adjustment that would otherwise constitute a Distributing Tax Benefit is not
considered a Distributing Tax Benefit because the Tax liability of the Tronox
Group is not actually reduced as a result of such adjustment, such adjustment
shall be carried-forward and shall constitute a Distributing Tax Benefit at the
time (and to the extent) that the Tax liability of the Tronox Group is actually
reduced as a result of such prior adjustment. 
For purposes of determining when an adjustment described in the


 


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preceding sentence actually reduces the Tax
liability of the Tronox Group, the Tronox Group shall be deemed to use all Tax
Assets of the Tronox Group prior to such adjustment.


 


“Distribution Date” means the date on
which the Distribution is effected.


 


“Federal Tax” means any Tax imposed
under Subtitle A of the Code with respect to which any member of the Tronox
Group has filed or will file a consolidated Return with a member of the
Distributing Group.


 


“Federal Tax Return” means any Return
with respect to a Federal Tax.


 


“Final Determination” means (i) a
decision, judgment, decree or other order by any court of competent
jurisdiction, which has become final and is either no longer subject to appeal
or for which a determination not to appeal has been made, (ii) a closing
agreement made under Section 7121 of the Code or any comparable provision
of state, local or foreign law, (iii) a final disposition by any Taxing
Authority of a claim for refund or (iv) any other written agreement
relating to an adjustment between any Taxing Authority and any Controlling
Party the execution of which is final and prohibits such Taxing Authority or
the Controlling Party from seeking any further legal or administrative remedies
with respect to such adjustment.


 


“Group” means the Distributing Group
or the Tronox Group, as the context requires.


 


“Independent Third Party” means a
nationally recognized law firm or any of the following firms or their
successors: Ernst & Young, KPMG, Deloitte & Touche and
PricewaterhouseCoopers.


 


“Interested Party” means, except as
provided in Section 4.06 hereof, Distributing or Tronox (including any
successor and/or assign of any of the foregoing), as the case may be, to the
extent (i) such person or a member of such person’s Group is not a Controlling
Party with respect to a Tax Contest and (ii) such person or a member of
such person’s Group (A) may be liable for, or required to make, any
indemnity payment, reimbursement, tax sharing payment or other payment pursuant
to this Agreement with respect to such Tax Contest or (B) may be entitled
to receive any indemnity payment, reimbursement, tax sharing payment or other
payment pursuant to this Agreement with respect to such Tax Contest.


 


“Master Separation Agreement” means
the Master Separation Agreement, dated as of November 28, 2005, among Distributing,
Kerr-McGee Worldwide Corporation and Tronox.


 


“Post-Deconsolidation Period” shall
mean (i) a taxable period that begins after the Deconsolidation Date and (ii) the
portion beginning after the Deconsolidation Date of any taxable period that
includes (but does not end on) the Deconsolidation Date.


 


“Pre-Deconsolidation Period” means (i) any
taxable period that ends on or before the close of the Deconsolidation Date and
(ii) the portion ending on the close of the Deconsolidation Date of any
taxable period that includes (but does not end on) the Deconsolidation Date.


 


“Restructuring Adjustment” means, with
respect to any taxable period or portion thereof, and as computed separately
for each Tax, the net increase in each such Tax equal to the sum of


 


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all adjustments made pursuant to a Final
Determination with respect to each such Tax for each such taxable period or
portion thereof that are attributable to any Restructuring Transaction.


 


“Restructuring Transaction” means any
transaction undertaken to effectuate the separation of Distributing’s existing
businesses into two independent businesses other than (i) the Distribution,
(ii) the IPO and (iii) the entering into of the Credit Facility,
including any pledges of collateral thereunder.


 


“Restructuring Tax” means any Tax
incurred as a result of any Restructuring Transaction which in the judgment of
the parties is currently required to be taken into account in determining the tax
liability of any member of the Distributing Group or Tronox Group for any
Pre-Deconsolidation Period.


 


“Return” means any report of Taxes
due, any claims for refund of Taxes paid, any information return with respect
to Taxes, or any other similar report, statement, declaration, or document
required to be filed under the Code or other Tax Law, including any
attachments, exhibits, or other materials submitted with any of the foregoing,
and including any amendments or supplements to any of the foregoing.


 


“Tax” means any income, gross income,
gross receipts, profits, capital, capital stock, franchise, withholding,
payroll, social security, workers compensation, unemployment, disability, real
property, property, ad valorem, stamp, excise, severance, occupation, service,
sales, use, license, lease, transfer, import, export, value added, alternative
minimum, estimated or other similar tax (including any fee, assessment, or
other charge in the nature of or in lieu of any tax) imposed by any governmental
entity or political subdivision thereof, and any interest, penalties, additions
to tax, or additional amounts in respect of the foregoing.


 


“Tax Asset” means any net operating
loss, net capital loss, investment tax credit, foreign tax credit, charitable
deduction or any other loss, credit or tax attribute that could be carried
forward or back to reduce any Tax liability (including, without limitation,
deductions and credits relating to alternative minimum taxes).


 


“Taxing Authority” means, with respect
to any Tax, the governmental entity or political subdivision thereof that
imposes such Tax, and the agency (if any) charged with the collection of such
Tax for such entity or subdivision.


 


“Tax Contest” means an audit, review,
examination, assessment, deficiency or any other administrative or judicial
proceeding with the purpose or effect of redetermining any Taxes (including any
administrative or judicial review of any claim for refund).


 


“Tax Packages” mean one or more
packages of information that are (i) reasonably necessary for the purpose
of preparing Returns of the Distributing Consolidated Group with respect to any
tax period in which the information is relevant, and (ii) completed in all
material respects in accordance with the standards that Distributing has
established for its subsidiaries.


 


“Tiwest JV Entities” means the Tiwest
Joint Venture, Tiwest Sales Pty. Ltd. and Tiwest Pty. Ltd.


 


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“Transition Services Agreement” means
the Transition Services Agreement, dated as of November 28, 2005, among
Distributing, Kerr-McGee Worldwide Corporation and Tronox.


 


“Tronox Business” means the business
of producing and marketing inorganic industrial chemicals (including titanium
dioxide pigment) and heavy minerals conducted by the Tronox Group, together
with the businesses previously conducted by members of the Tronox Group.


 


“Tronox Combined Tax Liability” means,
with respect to any taxable year, except with respect to any Combined Tax
Return filed in a Combined Add-Up State (as defined below) an amount
determined, on a Combined Tax Return by Combined Tax Return basis, by dividing
the total Combined Tax liability reflected on such Return into two segments in
proportion to the Distributing Group’s and the Tronox Group’s relative
contribution, if any, to the apportionment factor relevant to such Combined Tax
liability.  For purposes of the
foregoing, the Distributing Group’s and the Tronox Group’s relative
contribution, if any, to an apportionment factor shall be determined by
Distributing in good faith and in a manner consistent with the past practices
of Distributing and Tronox that have been used in determining apportionment
factors.  In the case of any jurisdiction
in which Combined Taxes are calculated by first determining the taxable income
(or loss) of each member of the combined group and then adding each separate
company calculation to determine the group’s total Combined Tax liability (a “Combined
Add-Up State”), the amount of the Tronox Combined Tax Liability with respect to
such jurisdiction shall be calculated based on the product of the Tronox Group’s
income or loss and the separate apportionment factors (property, payroll and
sales) for each member of the Tronox Group, unless such amount is determined
pursuant to another allocation method mandated by a specific jurisdiction.  For purposes of the preceding sentence, the
apportionment factors shall be determined for each taxable period.


 


“Tronox Federal Tax Liability” means,
with respect to any taxable year, the sum of the Tronox Group’s Federal Tax
liability and any interest, penalties and other additions to Tax for such
taxable year, computed as if the Tronox Group were not and never were part of
the Distributing Consolidated Group, but rather were a separate affiliated
group of corporations filing a consolidated United States federal income tax
return pursuant to Section 1501 of the Code; provided,
however, that transactions between
members of the Tronox Group and members of the Distributing Group shall, so
long as Tronox is a member of the Distributing Consolidated Group, be reflected
in accordance with the consolidated return regulations governing intercompany
transactions.  Such computation shall be
made (i) without regard to the income, deductions (including net operating
loss and capital loss deductions) and credits in any year of any member of the
Distributing Group, (ii) by taking into account any Tax Asset of the
Tronox Group, (iii) with regard to net operating loss and capital loss
carryforwards and carrybacks and minimum tax credits from earlier years of the
Tronox Group, but without regard to any such carryforwards from a Tax period
(or portion thereof) ending on or before the date hereof and arising solely due
to treating the Tronox Group as if it were never part of the Distributing
Consolidated Group, (iv) as though the highest rate of tax specified in Section 11(b) of
the Code were the only rate set forth in that section of the Code, (v) reflecting
positions, elections and accounting methods used by Distributing in preparing
the relevant Federal Tax Return for the Distributing Consolidated Group and (vi) as
though Tronox Worldwide LLC were a corporation rather than a disregarded entity
for all taxable periods.  For purposes of
the foregoing, the Tronox Federal Tax Liability shall not include any
Restructuring Taxes.


 


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“Tronox Group” means (i) prior to
the Contribution, (A) Tronox Worldwide LLC and each of its direct and
indirect subsidiaries, (B) KM (Luxembourg) Holdings Sarl and its direct
and indirect subsidiaries, (C) Kerr-McGee B.V. and its subsidiary, (D) Kerr-McGee
Finance (Curacao) N.V., (E) KM Denmark International ApS and its direct
and indirect subsidiaries and (F) the Tiwest JV Entities and (ii) after
the Contribution, Tronox and each of its direct and indirect subsidiaries and
the Tiwest JV Entities.


 


“Tronox Tax Adjustment” means, with
respect to any taxable period or portion thereof, and as computed separately
for each Tax, the net increase in each such Tax equal to the sum of all
adjustments made pursuant to a Final Determination after the Deconsolidation
Date with respect to each such Tax for each such taxable period or portion
thereof that are attributable to the Tronox Business; provided,
however, that any adjustment comprising
a Restructuring Adjustment shall not be considered in determining the amount of
any Tronox Tax Adjustment.


 


“Tronox Tax Benefit” means, with
respect to any taxable period or portion thereof, and as computed separately
for each Federal Tax and Combined Tax, the net decrease in each such Tax equal
to the sum of all adjustments made pursuant to a Final Determination after the
Deconsolidation Date with respect to each such Tax for each such taxable period
or portion thereof that are attributable to the Tronox Business; provided, however, that the amount of any Tronox Tax Benefit
shall not exceed the amount that the actual Tax liability for the Distributing
Consolidated Group for the relevant taxable period is actually reduced by the
adjustments made pursuant to such Final Determination; provided
further, however, that any adjustment
comprising a Restructuring Adjustment shall not be considered in determining
the amount of any Tronox Tax Benefit. 
For purposes of the foregoing, if an adjustment that would otherwise
constitute a Tronox Tax Benefit is not considered a Tronox Tax Benefit because
the Tax liability of the Distributing Consolidated Group is not actually
reduced as a result of such adjustment, such adjustment shall be
carried-forward and shall constitute a Tronox Tax Benefit at the time (and to
the extent) that the Tax liability of the Distributing Consolidated Group is
actually reduced as a result of such prior adjustment.  For purposes of determining when an
adjustment described in the preceding sentence actually reduces the Tax
liability of the Distributing Consolidated Group, the Distributing Consolidated
Group shall be deemed to use all Tax Assets of the Distributing Group prior to
such adjustment.


 


ARTICLE II


 


ADMINISTRATIVE AND COMPLIANCE MATTERS


 


SECTION 2.01                    Sole Tax Sharing Agreement.  Any and all existing tax sharing agreements
or arrangements, written or unwritten, between any member of the Distributing
Group and any member of the Tronox Group shall be terminated as of the date of
this Agreement.  As of the date of this
Agreement, neither the members of the Distributing Group nor the members of the
Tronox Group shall have any further rights or liabilities under any such
pre-existing tax sharing agreement or arrangement, and this Agreement shall be
the sole tax sharing agreement or arrangement between the members of the
Distributing Group and the members of the Tronox Group.


 


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SECTION 2.02                    Designation as Agent.  Each member of the Tronox Group hereby
irrevocably authorizes and designates Distributing as its agent, coordinator
and administrator for the purpose of taking any and all actions (including the
execution of waivers of applicable statutes of limitations) necessary or
incidental to (i) the filing of any Federal Tax or Combined Tax Return
(including any amended Return), (ii) the claiming of any refund, credit or
offset of Federal Tax or Combined Tax (even where an item or Tax Asset giving
rise to any such refund, credit or offset arises in a Post-Deconsolidation
Period), (iii) the control of any proceeding and (iv) the making of
any payments to, or collecting refunds from, any Taxing Authority, in each case
relating only to Federal Taxes or Combined Tax for any Pre-Deconsolidation
Period.  Distributing covenants to Tronox
that it shall be responsible to see that all such administrative matters
relating thereto shall be handled promptly and appropriately.


 


SECTION 2.03                    Pre-Deconsolidation Period Returns


 


a)                                      Preparation
of Returns.  Distributing shall
prepare, in accordance with applicable law, the Federal Tax Return and Combined
Tax Returns of the Distributing Consolidated Group for all Pre-Deconsolidation
Periods.  Distributing shall have the
right with respect to such Returns to determine (i) the manner in which
such Returns shall be prepared and filed, including, without limitation, the
manner in which any item of income, gain, loss, deduction or credit shall be
reported, (ii) whether any extensions should be requested and (iii) the
elections that will be made by any member of the Distributing Group or the Tronox
Group.  Distributing shall consult with
representatives of Tronox in exercising its rights set forth in the preceding
sentence.  Any Return with respect to a
Pre-Deconsolidation Period, other than the Federal Tax Return and Combined Tax
Returns, shall be prepared by the party required to file such Return under
applicable law.


 


b)                                     Delivery
of Tax Packages.  No later than July 15,
2006, Tronox shall prepare and deliver to Distributing Tax Packages that
include information of the Tronox Group for any taxable period in which a
member of the Tronox Group files Federal Tax Returns or Combined Tax Returns
with a member of the Distributing Group, provided that
if any Combined Tax Return is required to be filed (taking into account
available extensions) on or prior to September 15, 2006, Tronox shall
prepare and deliver Tax Packages to Distributing no later than 60 days prior to
the due date for filing such Return.


 


c)                                      Allocation.  Distributing may, at its option, elect and Tronox
shall join Distributing (if necessary) in electing to ratably allocate items
(other than extraordinary items) of the Tronox Group in accordance with the
relevant provisions of Treasury Regulation Section 1.1502-76 and any
comparable provision of state, local or foreign law.  If Distributing exercises its option to make
such an election, each member of the Tronox Group shall provide a statement
stating its consent to such election as required under applicable regulations.


 


d)                                     Post-Deconsolidation
Period Returns of the Tronox Group.  Subject
to the provisions of the Transition Services Agreement, Tronox shall be solely
responsible for the preparation and filing of the Returns of the Tronox Group
for all Post-Deconsolidation Periods that begin after the Deconsolidation Date.


 


SECTION 2.04                    Cooperation and exchange of
information.  In addition to Tronox’s
obligation pursuant to Section 2.03(b) hereof, Distributing, on the
one hand, and Tronox, on the


 


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other, will provide each other with such cooperation
and information as either of them reasonably may request of the other in (i) filing
any Return, amended return or claim for refund, (ii) determining a
liability for Taxes or a right to a refund of Taxes or (iii) participating
in or conducting any audit or other proceeding in respect of Taxes.  Such cooperation and information shall include
providing copies of relevant Returns or portions thereof, together with
accompanying schedules and related work papers and documents relating to
rulings or other determinations by Tax Authorities.  Each party shall make its employees available
on a mutually convenient basis to provide explanations of any documents or
information provided hereunder.  Any
information obtained under this Section 2.04 shall be kept confidential,
except as may be otherwise necessary in connection with the filing of returns
or claims for refund or in conducting an audit or other proceeding.  Distributing shall retain (or cause to be
retained) all books and records with respect to Tax matters pertinent to any
member of the Tronox Group relating to any Pre-Deconsolidation Period until the
expiration of the relevant statutory period of limitations for the assessment
of Tax, provided that Distributing shall consult with Tronox prior to
destroying any such books and records and shall offer Tronox the opportunity to
retain any such books and records after such date.


 


ARTICLE III


 


TAX SHARING


 


SECTION 3.01                    Intentionally Omitted.


 


SECTION 3.02                    Tax Sharing.


 


a)                                      Deconsolidation
Payment.  On or prior to the
Deconsolidation Date, an intercompany payable shall be owed by Tronox to
Distributing (the “Intercompany Estimated Tax Payable”) in an amount equal to the
sum of the Tronox Federal Tax Liability and the Tronox Combined Tax Liability for
the portion of any taxable period that includes but does not, with respect to
Distributing or any other member of the Distributing Group, end on the Deconsolidation
Date, in both cases as estimated by Distributing in its sole, good-faith
discretion.  The Intercompany Estimated
Tax Payable shall be subject to the treatment of intercompany obligations
provided for pursuant to Section 2.4(b) of the Master Separation
Agreement.


 


b)                                     Pro
Forma Returns.  On the date that is
five (5) business days prior to the due date for the Distributing
Consolidated Group’s 2005 consolidated federal income tax return, including
extensions, Distributing shall deliver to Tronox a pro forma federal income tax
return (the “2005 Pro Forma Federal Tax Return”) of the Tronox Group reflecting
the Tronox Federal Tax Liability for the portion of such taxable year in which
members of the Tronox Group were included in the Distributing Consolidated
Group.  On the date that is five (5) business
days prior to the due date for each Combined Tax Return, including extensions,
for any taxable period that includes, but does not, with respect to
Distributing or any member of the Distributing Group, end on the
Deconsolidation Date, Distributing shall deliver to Tronox the relevant pro
forma Combined Tax Return (each a “Pro Forma Combined Tax Return” and together
with the 2005 Pro Forma Federal Tax Return, the “Pro Forma Returns”) of the Tronox
Group reflecting the relevant Tronox Combined Tax Liability for the portion of
such taxable period in which members of the Tronox Group were included in the
Distributing Consolidated Group with


 


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respect to such Combined Tax.  Distributing shall prepare the Pro Forma
Returns taking into account elections, methods of accounting and positions with
respect to specific items that are consistent with those to be made by
Distributing for purposes of the Federal Tax Returns and Combined Tax Returns.


 


c)                                      True-Up
Payment.  On or before the later of (i) the
date Distributing (or whichever member of the Distributing Group or the Tronox
Group is responsible for filing such Return, if not Distributing) files its
last Combined Tax Return for each taxable period that includes but, with
respect to Distributing or any other member of the Distributing Group, does not
end on the Deconsolidation Date or (ii) the date Distributing files its
Federal Tax Return for the 2005 taxable year, Tronox shall pay to Distributing,
or Distributing shall pay to Tronox, as appropriate, an amount equal to the
difference, if any, between (A) the aggregate of the Tronox Federal Tax
Liability and the Tronox Combined Tax Liabilities reflected on the Pro Forma Returns
and (B) the amount of the 
Intercompany Estimated Tax Payable.


 


d)                                     Tax
Assets.  If a Pro Forma Return
reflects a Tax Asset of a member of the Tronox Group that may under applicable
law be used to reduce a Federal Tax or a Combined Tax of the Distributing Group
for any Pre-Deconsolidation Period, Distributing shall pay to Tronox an amount
equal to the actual Tax savings produced by such Tronox Group Tax Asset at the
time such Tax savings is realized by the Distributing Group.  The amount of any such Tax savings shall be
an amount of any refund actually received from a Taxing Authority or the
reduction in Taxes payable to a Taxing Authority as compared to the Taxes that
would have been payable to a Taxing Authority in the absence of such Tronox
Group Tax Asset.


 


SECTION 3.03                    Audit Payments.


 


a)                                      Except
as provided in Section 3.03(c) hereof, Tronox shall be liable for,
and shall indemnify and hold harmless any member of the Distributing Group
against, any and all Tronox Tax Adjustments for any Pre-Deconsolidation Period
with respect to any Return of any member of the Distributing Group or the Tronox
Group.  Except as provided in Section 3.03(c) hereof,
Tronox shall be entitled to receive, and shall be paid by Distributing, the
amount of any Tronox Tax Benefit for any Pre-Deconsolidation Period with
respect to any Return of any member of the Distributing Group.


 


b)                                     Distributing
shall be liable for, and shall indemnify and hold harmless any member of the Tronox
Group against, any and all Distributing Tax Adjustments for any
Pre-Deconsolidation Period with respect to any Return of any member of the
Distributing Group or the Tronox Group. 
Distributing shall be entitled to receive, and shall be paid by Tronox,
the amount of any Distributing Tax Benefits for any Pre-Deconsolidation Period
with respect to any Return of any member of the Tronox Group.


 


c)                                      Notwithstanding
Section 3.03(a) hereof, Distributing shall be liable for, and shall
indemnify and hold harmless any member of the Tronox Group against, any and all
Claims Court Related Tax Adjustments. 
Notwithstanding Section 3.03(a) hereof, Distributing shall be
entitled to receive, and, to the extent reflected on any Return of any member
of the Tronox Group, shall be paid by Tronox, the amount of any Claims Court Related
Tax Benefits.  For purposes of the
preceding sentence as it applies to a Claims Court Related Tax Benefit
described in clause (ii) of


 


10





















 


the definition thereof, Tronox and the other members
of the Tronox Group shall be deemed to use all other deductions, amortizations,
exclusions from income or other allowances (to the extent that such deductions,
amortizations, exclusions from income or other allowances are entitled to be
used under applicable law) prior to the use of any Claims Court Related Tax
Benefit in respect of which Tronox is required to pay Distributing hereunder.


 


d)                                     Notwithstanding
anything herein to the contrary, for purposes of this Section 3.03, in the
case of an adjustment for any Pre-Deconsolidation Period relating to any state
or local income or franchise Tax that is filed on a Combined Return (other than
any Combined Tax Return filed in a Combined Add-Up State), the amount of any Tronox
Tax Adjustment, Tronox Tax Benefit, Distributing Tax Adjustment or Distributing
Tax Benefit shall be determined on a Combined Return-by-Combined Return basis
as follows:


 


(i)                                     Audit
adjustments resulting in a net increase or net decrease in Tax liability (a “Tax
Adjustment” or “Tax Benefit” respectively) shall be divided into two segments
in proportion to the Distributing Group’s and the Tronox Group’s relative
contribution, if any, to the apportionment factor relevant to such Tax
Adjustment or Tax Benefit, as the case may be, with each such segment referred
to as the “Distributing segment” and the “Tronox segment” for purposes of this Section 3.03(d).  For purposes of this Section 3.03(d),
each of the Distributing Group’s and the Tronox Group’s relative contribution,
if any, to an apportionment factor shall be determined (by Distributing in good
faith) (A) in a manner consistent with the past practices of Distributing
and Tronox that have been used in determining apportionment factors and (B) by
taking into account and giving effect to all adjustments reflected in a Final
Determination with respect to the relevant state or local income or franchise
Tax for the taxable period or portion thereof that is at issue.  Accordingly, the apportionment factor
allocation methodology will be applied to the Net Tax Liability Payable or Net
Tax Refund Receivable (as defined below) in determining the total amount of the
Distributing segment and the Tronox segment. 
For purposes of the preceding sentence, “Net Tax Liability Payable” or “Net
Tax Refund Receivable” shall mean the amount specified in the Final
Determination issued by the applicable state or local Taxing Authority after
both giving effect to utilization of tax credits and net operating losses and
taking into account any adjustments to apportionment factors, federal taxable
income and state modifications to federal taxable income.  In the event that the Final Determination
reflects both adjustments to the overall apportionment factor and to state
taxable income, the Distributing Group’s and the Tronox Group’s respective
share, if any, of the Net Tax Liability Payable 
or Net Tax Refund Receivable shall be calculated as follows:  (I) first, by taking the revised state Tax
liability as reflected in the Final Determination (i.e., the state tax
liability as originally filed (including any prior revisions) modified by all
of the adjustments reflected in the Final Determination) and multiplying it by
the respective Distributing Group’s and Tronox Group’s share of the overall
apportionment factor as revised per such Final Determination in order to
determine the Distributing Group’s and the Tronox Group’s revised share of the
state Tax liability (for purposes of this calculation, the Distributing Group’s
and the Tronox Group’s share of the revised overall apportionment factor will
be a


 


11





















 


percentage determined by dividing each Group’s revised individual
factor by the revised overall apportionment factor); (II) second, by taking the
state Tax liability prior to revision by the Final Determination and
multiplying it by the respective Distributing Group’s and Tronox Group’s share
of the overall apportionment factor prior to revision by such Final
Determination in order to determine the Distributing Group’s and the Tronox
Group’s share of the state Tax liability prior to the revisions made by such
Final Determination (for purposes of this calculation, the Distributing Group’s
and the Tronox Group’s share of the overall apportionment factor prior to its
revision by the Final Determination will be a percentage determined by dividing
each Group’s individual factor prior to the Final Determination by the overall
apportionment factor prior to its revision by the Final Determination); and
(III) third, the difference between items (I) and (II) shall constitute the
Distributing Group’s and/or the Tronox Group’s share of the Net Tax Liability
Payable or the Net Tax Refund Receivable resulting from the adjustments made
pursuant to the Final Determination (and thus determine the relative amounts of
the Distributing segment or the Tronox segment).


 


(ii)                                  The
Tronox Tax Adjustment or Tronox Tax Benefit shall be equal to the amount of the
Tronox segment.


 


(iii)                               The
Distributing Tax Adjustment or Distributing Tax Benefit shall be equal to the
amount of the Distributing segment.


 


SECTION 3.04                    Restructuring Taxes and
Adjustments  The Distributing Group
shall be liable for 100% of any Restructuring Tax and any Restructuring
Adjustment provided that the Distributing Group’s aggregate liability for such
Restructuring Taxes and Restructuring Adjustments shall not exceed $17 million
(after which the Tronox Group shall be liable for 100% of any Restructuring Tax
and Restructuring Adjustment).  If Tronox
or another member of the Tronox Group is required under applicable law to pay
any Restructuring Tax or Restructuring Adjustment which is the liability of the
Distributing Group pursuant to this Section 3.04, Tronox shall, upon written
notice to Distributing, be entitled to a payment equal to the portion of such
Restructuring Tax or Restructuring Adjustment paid by Tronox or other member of
the Tronox Group to the applicable Taxing Authority that is the liability of
the Distributing Group pursuant to this Section 3.04.  If Distributing or another member of the
Distributing Group is required under applicable law to pay any Restructuring
Tax or Restructuring Adjustment which is the liability of the Tronox Group
pursuant to this Section 3.04, Distributing shall, upon written notice to
Tronox, be entitled to a payment equal to the portion of such Restructuring Tax
or Restructuring Adjustment paid by Distributing or other member of the
Distributing Group to the applicable Taxing Authority that is the liability of
the Tronox Group pursuant to this Section 3.04.


 


SECTION 3.05                    Non-Income Taxes.  In the case of any Return related to Taxes
(other than income or franchise Taxes) in which one or more members of the
Distributing Group file with one or members of the Tronox Group (each such
Return, a “Joint Return”) with respect to a Pre-Deconsolidation Period, the
Distributing Group shall be liable for the Taxes reflected on any such Joint
Return attributable to the Distributing Business and the Tronox Group shall be
liable for the Taxes reflected on such Joint Returns attributable to the Tronox
Business.  In the event


 


12





















 


that the portion of such Taxes attributable to a
particular business cannot be determined, then the Distributing Group shall be
liable for such Taxes.


 


SECTION 3.06                    Deductions Related to Options
and Restricted Stock.  For any and
all taxable years ending on or after the Deconsolidation Date, Tronox shall pay
to Distributing the “deemed tax benefit” attributable to all deductions Tronox
is entitled to claim after the Deconsolidation Date in respect of exercises of
compensatory stock options to acquire Distributing stock and the vesting of
Distributing restricted stock (or dividends paid on Distributing restricted
stock), in each case that are held by employees (or former employees) of any
member of the Tronox Group.  For purposes
of the foregoing, the “deemed tax benefit” referred to in the previous sentence
shall conclusively be the total amount of the available deduction for any such
exercise or vesting multiplied by 36%.  Tronox
shall pay the “deemed tax benefit” amount to Distributing no later than the due
date for filing Tronox’s federal income Tax Return for the year in which any
such deduction is eligible to be claimed on such Return.


 


ARTICLE IV


 


TAX CONTESTS


 


SECTION 4.01                    Notification of Tax Contests.  The Controlling Party shall promptly notify
all Interested Parties of (a) the commencement of any Tax Contest pursuant
to which such Interested Parties may be required to make or entitled to receive
an indemnity payment, reimbursement, tax sharing payment or other payment
pursuant to this Agreement and (b) as required and specified in Section 4.04
hereof, any Final Determination made with respect to any Tax Contest pursuant
to which such Interested Parties may be required to make, or entitled to
receive, any indemnity payment, reimbursement, tax sharing payment or other
payment pursuant to this Agreement.  The
failure of a Controlling Party to promptly notify any Interested Party as
specified in the preceding sentence shall not relieve any such Interested Party
of any liability and/or obligation which it may have to the Controlling Party
under this Agreement except to the extent that the Interested Party was actually
materially prejudiced by such failure, and in no event shall such failure
relieve the Interested Party from any other liability or obligation which it
may have to the Controlling Party.


 


SECTION 4.02                    Tax Contest Settlement Rights.  The Controlling Party shall have the sole
right to contest, litigate, compromise and settle any adjustment that is made
or proposed in a Tax Contest without obtaining the prior consent of any
Interested Party; provided, however,
that, unless waived by the parties in writing, the Controlling Party shall, in
connection with any proposed or assessed adjustment in a Tax Contest for which
an Interested Party may be required to make, or entitled to receive, an
indemnity payment, reimbursement, tax sharing payment or other payment pursuant
to this Agreement (a) keep all Interested Parties informed in a timely
manner of all actions taken or proposed to be taken by the Controlling Party
and (b) timely provide all such Interested Parties with copies of any
correspondence or filings submitted to any Taxing Authority or judicial
authority, in each case in connection with any contest, litigation, compromise
or settlement relating to any such adjustment in a Tax Contest.  The failure of a Controlling Party to take
any action as specified in the preceding sentence with respect to an Interested
Party shall not relieve any such Interested Party of any liability and/or
obligation which it may have to such Controlling Party under this Agreement
except to the extent that the


 


13





















 


Interested Party was actually materially prejudiced by
such failure, and in no event shall such failure relieve the Interested Party
from any other liability or obligation which it may have to such Controlling
Party.  The Controlling Party may, at its
sole discretion, take into account any suggestions made by an Interested Party
with respect to such contest, litigation, compromise or settlement of any
adjustment in a Tax Contest.  All costs
of any Tax Contest shall be borne by the Controlling Party; provided, however, that
(x) any costs related to an Interested Party’s attendance at any meeting with a
Taxing Authority or hearing or proceeding before any judicial authority
pursuant to Section 4.03 hereof and (y) the costs of any legal or other
representatives retained by an Interested Party in connection with any Tax
Contest that is subject to the provisions of this Agreement shall, in each
case, be borne by such Interested Party.


 


SECTION 4.03                    Tax Contest Participation.  Unless waived by the parties in writing, the
Controlling Party shall provide an Interested Party with written notice
reasonably in advance of, and such Interested Party shall have the right to
attend, any formally scheduled meetings with Taxing Authorities or hearings or
proceedings before any judicial authorities in connection with any contest,
litigation, compromise or settlement of any proposed or assessed adjustment that
is the subject of any Tax Contest pursuant to which such Interested Party may
be required to make, or entitled to receive, an indemnity payment, reimbursement,
tax sharing payment or other payment pursuant to this Agreement.  In addition, unless waived by the parties in
writing, the Controlling Party shall provide each such Interested Party with
draft copies of any correspondence or filings to be submitted to any Taxing
Authority or judicial authority with respect to such adjustments for such
Interested Party’s review and comment. 
The Controlling Party shall provide such draft copies reasonably in
advance of the date that they are to be submitted to the Taxing Authority or
judicial authority and the Interested Party shall provide comments, if any,
with respect thereto within a reasonable time before such submission.  The failure of a Controlling Party to provide
any notice, correspondence or filing as specified in this Section 4.03 to
an Interested Party shall not relieve any such Interested Party of any
liability and/or obligation which it may have to the Controlling Party under
this Agreement except to the extent that the Interested Party was actually
materially prejudiced by such failure, and in no event shall such failure
relieve the Interested Party from any other liability or obligation which it
may have to the Controlling Party.


 


SECTION 4.04                    Tax Contest Waiver.


 


a)                                      The
Controlling Party shall promptly provide written notice (the “Controlling Party
Notice”), sent postage prepaid by United States mail, certified mail, return
receipt requested, to all Interested Parties in a Tax Contest (i) that a
Final Determination has been made with respect to such Tax Contest and (ii) enumerating
the amount of (A) if the Interested Party is Distributing or any member of
the Distributing Group, the Distributing Tax Adjustment or Distributing Tax
Benefit or (B) if the Interested Party is Tronox or any member of the Tronox
Group, the Tronox Tax Adjustment or Tronox Tax Benefit.


 


b)                                     Within
ninety (90) days after an Interested Party receives the notice described in Section 4.04(a) hereof
from the Controlling Party, such Interested Party shall execute a written
statement giving notice to the Controlling Party (i) that the Interested
Party agrees with the computations set forth in the Controlling Party Notice
except with respect to those adjustments computations that, in the good faith
judgment of the Interested Party, it disagrees with and has specifically


 


14





















 


enumerated its disagreement with, including the amount
of such disagreement, in the statement (each such disagreed computation
hereinafter referred to as a “Disputed Adjustment”) and (ii) that the
Interested Party thereby waives its right to a determination by an Independent
Third Party pursuant to Section 4.05 hereof with respect to all
computations to which it agrees with its share (this statement referred to as
the “Interested Party Notice”).  For the
avoidance of doubt, in the Interested Party Notice, the Interested Party may
set forth its disagreement with the absolute amount of any adjustment set forth
in the Controlling Party Notice as well as the amount of any Distributing Tax
Adjustment, Distributing Tax Benefit, Tronox Tax Adjustment or Tronox Tax
Benefit contained in the Controlling Party Notice.  The failure of an Interested Party to provide
the Interested Party Notice to the Controlling Party within the ninety (90) day
period specified in the preceding sentence shall be deemed to conclusively indicate
that such Interested Party agrees with the computations set forth in the
Controlling Party and that such Interested Party waives its right to a
determination by an Independent Third Party with respect to all such computations
pursuant to Section 4.05 hereof. 
The Controlling Party or the Interested Party, as the case may be, shall
pay as specified in Article III hereof, the amount, if any, of any Distributing
Tax Adjustment, Distributing Tax Benefit, Tronox Tax Adjustment or Tronox Tax
Benefit that is not a Disputed Adjustment to the appropriate party.


 


c)                                      During
the ninety (90) day period immediately following the Controlling Party’s
receipt of the Interested Party Notice, the Controlling Party and the
Interested Party shall in good faith confer with each other to resolve any
disagreement over each Disputed Adjustment that was specifically enumerated in
such Interested Party Notice.  At the end
of such ninety (90) day period, unless otherwise extended in writing by mutual
consent of the parties, the Interested Party shall be deemed to agree with all
Disputed Adjustments that were specifically enumerated in the Interested Party
Notice and waive its right to a determination by an Independent Third Party
pursuant to Section 4.05 hereof with respect to all such Disputed
Adjustments unless, and to the extent that, at any time during such ninety (90)
day (or extended) period, either the Controlling Party or the Interested Party
has given the other party written notice that it is seeking a determination by
an Independent Third Party pursuant to Section 4.05 hereof regarding the
propriety of any such Disputed Adjustment.  If the Disputed Adjustments are not referred
to an Independent Third Party, then the Controlling Party or the Interested
Party, as the case may be, shall pay as specified in Article III hereof,
the amount, if any, of any Distributing Tax Adjustment, Distributing Tax
Benefit, Tronox Tax Adjustment or Tronox Tax Benefit (as adjusted pursuant to
any agreement between the parties reached during the ninety (90) day period
described in this Section 4.04(c)) to the appropriate party.


 


SECTION 4.05                                            Tax
Contest Dispute Resolution.


 


a)                                      In
the event that either a Controlling Party or an Interested Party has given the
other party written notice as required under Section 4.04(c) hereof
that it is seeking a determination by an Independent Third Party pursuant to
this Section 4.05 with respect to any Disputed Adjustment that was
enumerated in an Interested Party Notice, then the parties shall, within ten (10) days
after a party has received such notice, jointly select an Independent Third
Party to make such determination.  In the
event that the parties cannot jointly agree on an Independent Third Party
within such ten (10) day period, then the Controlling Party and the
Interested Party shall each immediately select an Independent Third Party and
the Independent Third Parties so selected by


 


15





















 


the parties shall jointly select, within ten (10) days
of their selection, another Independent Third Party.


 


b)                                     In
making its determination as to the propriety of any Disputed Adjustment, the
Independent Third Party elected pursuant to Section 4.05(a) hereof
shall assume that the Interested Party is not required or entitled under
applicable law to be a member of any consolidated return.  In addition, the Independent Third Party
shall make its determination according to the following procedure:


 


(i)                                     The
Independent Third Party shall analyze each Disputed Adjustment for which a
determination is sought pursuant to this Section 4.05 on a stand-alone
basis to determine whether the actual outcome reached with respect to such
Disputed Adjustment as reflected in the Final Determination of the Tax Contest
was fair and appropriate taking into account the following exclusive criteria: (A) the
facts relating to such adjustment, (B) the applicable law, if any, with
respect to such adjustment, (C) the position of the applicable Taxing
Authority with respect to compromise, settlement or litigation of such
adjustment, (D) the strength of the factual and legal arguments made by
the Controlling Party in reaching the outcome with respect to such adjustment
as reflected in the Final Determination of the Tax Contest and (E) the
strength of the factual and legal arguments being made by the Interested Party
for the alternative outcome being asserted by such Interested Party (including
the availability of fact, information and documentation to support such
alternative outcome).  Based on this
analysis, the Independent Third Party shall determine what is the fair and
appropriate outcome (hereinafter referred to as the “Ultimate Determination”)
with respect to each such adjustment.


 


(ii)                                  The
Interested Party shall only be entitled to modification of its share of a
Disputed Adjustment under this Section 4.05 if either (A) the amount
that would be paid by the Interested Party under the Ultimate Determination
with respect to such Disputed Adjustment is less than 80% of the amount that
would be paid by the Interested Party with respect to the Disputed Adjustment
as set forth in the Controlling Party Notice or (B) the amount that would
be received by the Interested Party under the Ultimate Determination with
respect to such Disputed Adjustment is more than 120% of the amount that the
Interested Party would receive with respect to such Disputed Adjustment as set
forth in the Controlling Party Notice. 
If an Interested Party is entitled to modification of its share of any
Disputed Adjustment under the preceding sentence, the amount the Interested
Party is entitled to receive, or is required to pay, as the case may be, with
respect to such Disputed Adjustment shall be equal to the amount of the
Ultimate Determination of such Disputed Adjustment.


 


c)                                      Any
determination made or notice given by an Independent Third Party pursuant to
this Section 4.05 shall be (i) in writing, (ii) made within
sixty (60) days following the selection of the Independent Third Party unless
such period is otherwise extended by the mutual consent of the parties and (iii) final
and binding upon the parties.  The costs
of any Independent Third Party shall be borne equally by the parties.  The Controlling Party and the Interested
Party shall provide the Independent Third Party with such information or
documentation as may be appropriate or necessary in order for such Independent
Third Party to make the determination requested of it.  Upon issuance of an Independent Third Party’s
notice under this Section 4.05, the Controlling Party or the Interested
Party, as the case may be, shall pay as specified in Article III hereof,
the amount, if any, of the Distributing Tax Adjustment, Distributing Tax
Benefit,


 


16





















 


Tronox Tax Adjustment or Tronox Tax Benefit as a
determined pursuant to the provisions of this Section 4.05 to the
appropriate party.


 


SECTION 4.06                                            Current
Litigation


 


a)                                      Notwithstanding
anything in this Article IV or in the definitions of “Controlling Party” and
“Interested Party” to the contrary, Distributing shall be the Controlling Party
and Tronox shall be an Interested Party with respect to the Claims Court
Litigation.


 


b)                                     Notwithstanding
anything in this Article IV or in the definitions of “Controlling Party”
and “Interested Party” to the contrary, for any taxable year after 1996 that is
part of the Pre-Deconsolidation Period, if a Tax Contest involving the same or
similar factual and legal issues that are at issue in the Claims Court
Litigation arises, Distributing shall be the Controlling Party and Tronox shall
be an Interested Party.


 


SECTION 4.07                    Costs and Expenses.  The costs and expenses of a Controlling Party
and an Interested Party in controlling or participating in (as applicable) a
Tax Contest shall be borne by the party incurring such costs and expenses.


 


ARTICLE V


 


REPRESENTATIONS AND COVENANTS


 


SECTION 5.01                                            Representations.


 


a)                                      Tronox
Representations.  Tronox and each
member of the Tronox Group represent as of the date hereof and as of the
Distribution Date that there is no plan or intention to (i) liquidate,
merge or consolidate Tronox or to liquidate, merge or consolidate any member of
the Tronox Group conducting an active trade or business relied upon, or to be
relied upon, in connection with the Distribution, with any other person
subsequent to the Distribution, (ii) sell or otherwise dispose of any
assets of Tronox or any member of the Tronox Group subsequent to the
Distribution other than in the ordinary course of business, (iii) unify or
otherwise reclassify or recapitalize the two classes of Tronox stock (iv) take
any other action inconsistent with the information and representations
furnished to Covington & Burling in connection with the opinion to be
delivered by Covington & Burling with respect to certain federal
income tax consequences of the Distribution and (v) enter into any
negotiations, agreements or arrangements with respect to transactions or events
(including capital contributions, acquisitions or stock issuances, but not
including the Distribution or stock issuances in connection with the
performance of services by any officer, director or employee of Tronox or any
member of the Tronox Group other than any officer, director or employee who
owns 5% or more of any class of Tronox stock) that may cause the Distribution
to be treated as part of a plan or series of related transactions pursuant to
which one or more persons acquire, directly or indirectly, Tronox stock
representing a “50-percent or greater interest” within the meaning of Section 355(d)(4) of
the Code.  For purposes of determining
whether any transaction may be treated as part of a plan or series of related
transactions pursuant to which one or more persons acquire, directly or indirectly,
Tronox stock representing a “50-percent or greater interest” within the meaning
of Section 355(d)(4) of the Code, Tronox stock issued on the
Deconsolidation Date (and any other


 


17





















 


shares of Tronox stock issued in connection with the
initial public offering of Tronox) shall be aggregated with any Tronox stock
issued or acquired in connection with any such transaction or events together
with any Tronox stock issued or acquired in connection with all other such
transactions or events subsequent to the Deconsolidation Date.


 


b)                                     Distributing
Representations.  Distributing
represents as of the date hereof and as of the Distribution Date that there is
no plan or intention to take any action inconsistent with the information and
representations furnished to Covington & Burling in connection with
the opinion to be delivered by Covington & Burling with respect to
certain federal income tax consequences of the Distribution.


 


c)                                      Distributing
and Tronox Representations.  Each of
Distributing and Tronox respectively represent as of the date hereof and as of
the Distribution Date that neither Distributing nor Tronox respectively (as
applicable) is aware of any present plan or intention by the current
shareholders of Distributing to sell, exchange, transfer by gift or otherwise
dispose of any of their stock or securities in Distributing or Tronox
subsequent to the Distribution.


 


SECTION 5.02                    Covenants.


 


a)                                      Tronox
Covenants.  Tronox covenants to
Distributing that (i) from the date herof until the end of the two-year
period following the Distribution Date, neither Tronox nor any member of the Tronox
Group conducting an active trade or business relied upon in connection with the
Distribution will liquidate, merge or consolidate with any other person, (ii) from
the date hereof until the end of the two-year period following the Distribution
Date, Tronox LLC shall not (and Tronox shall cause Tronox LLC to not) sell,
exchange, distribute or otherwise dispose of more than 20% of its assets that
were used directly by Tronox LLC on the Distribution Date in the active conduct
of the Tronox Business, (iii) following the Deconsolidation Date, Tronox
will, for a minimum of two years following the Distribution Date, continue the
active conduct of the Tronox Business, (iv) Tronox will not, nor will it
permit any member of the Tronox Group to, take any action inconsistent with the
information and representations furnished to Covington & Burling in
connection with the opinion to be delivered by Covington & Burling
with respect to certain federal income tax consequences of the Distribution, (v) from
the date hereof until the end of the five year period following the
Distribution, Tronox will not unify or otherwise reclassify or recapitalize the
two classes of Tronox stock outstanding on the Deconsolidation Date and (vi) from
the date hereof until the end of the two year period following the Distribution
Date, Tronox will not enter into any transaction or make any change in equity
structure (including capital contributions, acquisitions, redemptions or stock
issuances, but not including the Distribution or stock issuances in connection
with the performance of services by any officer, director or employee of Tronox
or any member of the Tronox Group other than any officer, director or employee
who owns 5% or more of any class of Tronox stock) that may cause the
Distribution to be treated as part of a plan or series of related transactions
pursuant to which one or more persons acquire, directly or indirectly, Tronox
stock representing a “50-percent or greater interest” within the meaning of Section 355(d)(4) of
the Code at the time of such transaction or change in equity structure.  For purposes of determining whether any
transaction may be treated as part of a plan or series of related transactions
pursuant to which one or more persons acquire, directly or indirectly, Tronox
stock representing a “50-percent or greater interest” within the meaning of Section 355(d)(4) of
the Code, Tronox stock issued on the


 


18





















 


Deconsolidation Date (and any other shares of Tronox stock
issued in connection with the initial public offering of Tronox) shall be
aggregated with any Tronox stock issued or acquired in connection with any such
transaction or events together with any Tronox stock issued or acquired in
connection with all other such transactions or events subsequent to the
Deconsolidation Date.


 


b)                                     Exceptions.
 Notwithstanding the foregoing covenants
contained in Section 5.02(a) hereof, Tronox shall be permitted to
take an action inconsistent with Section 5.02(a), if, prior to taking such
action, Tronox provides notification to Distributing of its plans with respect
to such action, and promptly responds to any inquiries by Distributing following
such notification, and either:


 


(i)                                     Tronox obtains a
ruling with respect to the action from the Internal Revenue Service or other
applicable Taxing Authority that is reasonably satisfactory to Distributing on
a basis of facts and representations consistent with the facts at the time of
such action, that such action will not result in the Distribution being taxable
to Distributing or its shareholders, or


 


(ii)                                  Tronox obtains an
opinion reasonably acceptable to Distributing of an independent nationally
recognized tax counsel acceptable to Distributing, on a basis of facts and
representations consistent with the facts at the time of such action, that such
action will not result in the Distribution being taxable to Distributing or its
shareholders


 


ARTICLE VI


 


INDEMNITY


 


SECTION 6.01                    Tronox Indemnity.  In addition to any Tax sharing payment
required to be made by Tronox or any member of the Tronox Group pursuant to the
provisions of Article III hereof, Tronox and each member of the Tronox
Group will jointly and severally indemnify Distributing and the members of the
Distributing Group against and hold them harmless from:


 


a)                                      except
in the case of any Restructuring Tax or Restructuring Adjustment, any Tax
liability of the Tronox Group which relates to a Post-Deconsolidation Period;


 


b)                                     in
the case of a Restructuring Tax or Restructuring Adjustment, any Tax which is
the liability of Tronox Group pursuant to Section 3.04 hereof;


 


c)                                      any
Tax or other liability or damage resulting from a breach by Tronox or any
member of the Tronox Group of any representation or covenant made by Tronox or
any member of the Tronox Group herein; and


 


d)                                     all
liabilities, costs, expenses (including, without limitation, reasonable
expenses of investigation and attorney’s fees and expenses), losses, damages,
assessments, settlements or judgments arising out of or incident to the
imposition, assessment or assertion of any Tax liability or damage described in
(a), (b) or (c), including those incurred in the contest in good faith in
appropriate proceeding relating to the imposition, assessment or assertion of
any such Tax, liability or damage.


 


19





















 


SECTION 6.02                    Distributing Indemnity.  In addition to any Tax sharing payment
required to be made by Distributing or any member of the Distributing Group
pursuant to the provisions of Article III hereof, Distributing and each
member of the Distributing Group will jointly and severally indemnify Tronox
and each member of the Tronox Group against and hold them harmless from:


 


a)                                      except
in the case of any Restructuring Tax or Restructuring Adjustment, any Tax
liability of the Distributing Group which relates to a Post-Deconsolidation
Period and any Tax liability resulting from the Distribution, other than any
such liabilities described in Section 6.01(a);


 


b)                                     in
the case of a Restructuring Tax or Restructuring Adjustment, any Tax which is
the liability of Distributing Group pursuant to Section 3.04 hereof;


 


c)                                      any
Tax liability of the Distributing Consolidated Group with respect to a
Pre-Deconsolidation Period, other than Taxes, including any Tronox Tax
Adjustments, for which Tronox or any member of the Tronox Group is required to
reimburse Distributing pursuant to the provisions of Article III hereof;


 


d)                                     any
Tax, or other liability or damage resulting from a breach by Distributing or
any member of the Distributing Group of any representation or covenant made by
Distributing herein; and


 


e)                                      all
liabilities, costs, expenses (including, without limitation, reasonable
expenses of investigation and attorney’s fees and expenses), losses, damages,
assessments, settlements or judgments arising out of or incident to the
imposition, assessment or assertion of any Tax liability or damage described in
(a), (b), (c) or (d), including those incurred in the contest in good
faith in appropriate proceeding relating to the imposition, assessment or
assertion of any such Tax, liability or damage.


 


ARTICLE VII


 


MISCELLANEOUS PROVISIONS


 


SECTION 7.01                    Tax Characterization of Payments.  For all Tax purposes, and notwithstanding any
other provision of this Agreement, to the extent permitted by applicable law,
the parties hereto shall treat any payment made pursuant to this Agreement as a
capital contribution or dividend distribution, as the case may be, immediately
before the Deconsolidation Date and, accordingly, as not includible in the
taxable income of the recipient.  If any
payment under this Agreement is not permitted to be so treated (because, for
example, the payment relates to an event occurring after the Deconsolidation
Date) or as a result of a Final Determination it is determined that the receipt
or accrual of any payment made under this Agreement is taxable to the recipient
of such payment, the party making the payment shall pay to the recipient an
amount equal to any increase in the income Taxes of the recipient as a result
of receiving the payment (grossed up to take into account such payment, if
applicable).


 


SECTION 7.02                    Payment.  All payments to be made hereunder shall be
made in immediately available funds. 
Except as otherwise provided, all payments required to be made pursuant
to this


 


20





















 


Agreement shall be due 30 days after the receipt of
notice of such payment or, where no notice is required, 30 days after the
fixing of liability or the resolution of a dispute.  Payments shall be deemed made when
received.  Any payment that is not made
when due shall bear interest at a rate equal to the published one-month LIBOR
rate plus 2% per annum for each day until paid.


 


SECTION 7.03                    Joint and Several Liability of
Group Members.  Each member of the
Distributing Group shall be jointly and severally liable for the obligations of
each other member of the Distributing Group hereunder.  Each member of the Tronox Group shall be
jointly and severally liable for the obligations of each other member of the Tronox
Group hereunder.


 


SECTION 7.04                    Performance.  Distributing agrees and acknowledges that
Distributing shall be responsible for the performance of the obligations of
each member of the Distributing Group hereunder applicable to such member.  Tronox agrees and acknowledges that Tronox
shall be responsible for the performance by each member of the Tronox Group of
the obligations hereunder applicable to such member.


 


SECTION 7.05                    Notices.  All notices or other communications under
this Agreement shall be in writing (including by telecopy) and shall be deemed
to be duly given or made when delivered, or, in the case of telecopy, when
received, addressed as follows or to such other address as may be hereafter
notified by the respective party:


 


	
  To Distributing:

  	
   

  	
  Kerr-McGee Corporation

  Kerr-McGee Worldwide Corporation

  Kerr-McGee Center

  123 Robert S. Kerr Avenue

  Oklahoma City, Oklahoma 73102

  Facsimile:   405-270-3649

  Attention:   General Counsel

  
	
   

  	
   

  	
   

  
	
  with a
  copy to:

  	
   

  	
  Covington & Burling

  1330 Avenue of the Americas

  New York, New York 10019

  Facsimile:   212-841-1010

  Attention:   Scott F. Smith

  
	
   

  	
   

  	
   

  
	
  To Tronox:

  	
   

  	
  Tronox Incorporated

  123 Robert S. Kerr Avenue

  Oklahoma City, Oklahoma 73102

  Facsimile:   405-270-4504

  Attention:   Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  with a
  copy to:

  	
   

  	
  Tronox Incorporated

  123 Robert S. Kerr Avenue

  Oklahoma City, Oklahoma 73102

  Facsimile:   405-270-4101

  Attention:   General Counsel

  



 


21





















 


SECTION 7.06                                            Governing
Law.


 


This Agreement shall be governed by the laws
applicable to contracts entered into and to be performed within the State of New
York.


 


SECTION 7.07                                            Jurisdiction.


 


Each party agrees to submit itself
exclusively to the personal jurisdiction of any New York court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement and agrees that it will not attempt to deny or defeat such
personal jurisdiction or venue by motion or other request for leave from any
such New York court.  Each party further
agrees that service of any process, summons, notice or document by U.S.
registered mail to such party’s respective address set forth above shall be
effective service of process for any action, suit or proceeding in New York
with respect to any matters to which it has submitted to jurisdiction in this Section 7.07.


 


SECTION 7.08                                            Waiver
of jury trial.


 


Each party waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in
respect of any dispute arising out of this Agreement.


 


SECTION 7.09                                            Entire
Agreement.


 


This Agreement embodies the entire
understanding between the parties relating to its subject matter and supersedes
and terminates all prior agreements and understandings among the parties with
respect to such matters.  No promises,
covenants or representations of any kind, other than those expressly stated
herein, have been made to induce any party to enter into this Agreement.  This Agreement shall not be modified or
terminated except by a writing duly signed by each of the parties hereto, and
no waiver of any provisions of this Agreement shall be effective unless in a
writing duly signed by the party sought to be bound.  If, and to the extent, the provisions of this
Agreement conflict with the Master Separation Agreement, or any other agreement
entered into in connection with the Distribution, the provisions of this
Agreement shall control.


 


SECTION 7.10                                            Assignment;
Binding Effect.


 


Except as otherwise set forth herein, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns; provided,
however, that no party hereto or thereto
may assign its respective rights or delegate its respective obligations under
this Agreement without the express prior written consent of the other party
hereto or thereto (such consent not to be unreasonably withheld or delayed).


 


SECTION 7.11                                            Counterparts.


 


This Agreement may be executed in three or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same.


 


22





















 


SECTION 7.12                                            Severability.


 


If any provision of this Agreement or the
application of any such provision to any person or circumstances shall be held
invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality, or unenforceability shall not affect
any other provision hereof.


 


SECTION 7.13                                            Headings.


 


Headings of sections in this Agreement are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.


 


SECTION 7.14                                            Survival.


 


Notwithstanding anything in this Agreement to
the contrary, the provisions of this Agreement shall survive until the
expiration of the applicable statutes of limitations (giving effect to any
waiver, mitigation or extension thereof).


 


23





















 


IN WITNESS WHEREOF, each of the parties has
caused this Agreement to be executed by its respective duly authorized officer
as of the date first set forth above.


 


	
   

  	
  KERR-MCGEE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Robert M. Wohleber

  	
   

  
	
   

  	
  Name: Robert M. Wohleber

  
	
   

  	
  Title: Senior Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TRONOX INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Thomas W. Adams

  	
   

  
	
   

  	
  Name: Thomas W. Adams

  
	
   

  	
  Title: Chief Executive Officer

  



 


[SIGNATURE PAGE TO TAX SHARING
AGREEMENT]