EXHIBIT 10.27


 


Tax Sharing Agreement




 





 


This Tax Sharing
Agreement is made and entered into as of February 7, 2001 by and among The Dow
Chemical Company, a Delaware corporation (“Dow”), as Common Parent, on behalf
of itself and the other members of the Dow Group (other than any member of the
UCC Group), and Union Carbide Corporation, a Delaware corporation (“UCC”), on
behalf of itself and the other members of the UCC Group.


 


WHEREAS, Dow is the Common Parent of the Dow Group,
and files a Consolidated Return for the Dow Group, which prior to February 7,
2001, did not include the UCC Group;


 


WHEREAS, UCC is the Common Parent of an Affiliated
Group comprised of UCC and its Subsidiaries, and prior to February 7, 2001,
filed a Consolidated Return for the UCC Group;


 


WHEREAS, certain state and local consolidated,
combined or unitary income or franchise tax returns are filed for various
Members or for the Dow Group;


 


WHEREAS, the UCC Group became part of the Dow Group on
February 7, 2001, as a result of a triangular merger transaction;


 


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


 


1.                                       Definitions


 


The following terms as
used in this Agreement, shall have the meanings set forth below:


 


(a)                                  Affiliated Group shall have the meaning attributed to
that term in Section 1504(a) of the Code.


 


(b)                                 Agreement shall mean this Tax sharing Agreement, as amended
from time to time.


 


(c)           Allowable Tax
Attributes are defined in Section 7(b).


 


(d)           Business Day
shall mean a day in the City of New York, N.Y., that is not a legal holiday or
a day on which banking institutions are authorized or obligated by law to
close.


 


(e)           Code shall
mean the Internal Revenue Code of 1986, as amended, and shall include
corresponding provisions of any subsequently enacted federal tax laws.


 


(f)            Combined Return
shall mean any non-federal tax return that (a) is filed on a combined,
consolidated or unitary basis between or among (i) the Dow Group, or any Member
thereof, and (ii) the UCC Group, or any Member thereof, and (b) where any
Member of the Dow Group (other than the UCC Group) makes any payment to the
appropriate state or local tax authority on behalf of all Members of the Dow
Group and the UCC Group included in such return.


 


(g)           Common Parent
shall have the meaning of that term as it is used in the Consolidated Return
Regulations.


 


(h)           Completion
means for any Taxable Year of the Dow Group, shall mean the date on which the
final Consolidated Return is filed.


 


(i)            Consolidated
Return, for any Taxable Year of the Dow Group, shall mean a consolidated
federal income tax return filed pursuant to section 1501 of the Code by the
Common Parent for such Taxable Year.


 


(j)            Consolidated
Return Regulations shall mean Income Tax Regulations Sections 1.1502-1
through 1.1502-100 (26 C.F.R.), as amended from time to time.


 


(k)           Dow Group, as
of any particular date, shall mean the Affiliated Group of which Dow (or any
successor thereto) is the Common Parent as of such date.


 


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(l)            Dow Group
Consolidated Tax Liability shall mean the consolidated U.S. federal income
tax liability of the Dow Group for any Taxable Year for which the Dow Group
files a Consolidated Return.


 


(m)          Effective Date
shall mean February 7, 2001.


 


(n)           Final
Determination shall mean with respect to any issue or item (i) the
execution of a final irrevocable closing agreement or other settlement
agreement with the Service or the relevant state or local taxing authorities,
(ii) the expiration of the time for filing a claim for refund or, if a refund
claim has been timely filed, the expiration of the time for instigating suit in
respect of such refund claim, (iii) the expiration of the time for filing a
petition with the Tax Court or the relevant state or local tribunal if no such
petition has been filed and no suit has been investigated in respect of the
subject matter of such petition, or (iv) a final unappealable decision of any
court of competent jurisdiction.


 


(o)           Includible
Corporation shall have the meaning attributed to that term in section
1504(b) of the Code.


 


(p)           Income Tax
Regulations shall mean the regulations (26 C.F.R.), as amended from time to
time, promulgated to the Code.


 


(q)           Member, for
any Taxable Year of the Dow Group, shall mean any corporation (or any
predecessor in interest to such corporation under section 381 of the Code or
otherwise which was or is an Includible Corporation) which at any time during
such Taxable Year is an Includible Corporation that is included in the Dow
Group and shall include such corporation which at any time during such Taxable
Year is the Common Parent.


 


(r)            Separate Taxable
Income means for any non-federal jurisdiction, with respect to any UCC
Member, the taxable income allocated to such jurisdiction for any taxable year
(but in no case less than zero), determined without reference to any carrybacks
or carryforwards of any net operating loss, net capital loss, charitable
contribution or other item attributable to any other taxable period, as
determined on a basis consistent with the manner in which the members of the
Dow Group’s Separate Taxable Income has been determined.


 


(s)           Service shall
mean the Internal Revenue Service.


 


(t)            Subsidiary
shall mean as to any entity (including the parent corporation) a corporation
that would be an Includible Corporation in an Affiliated Group of which the
parent corporation would be the Common Parent.


 


(u)           Tax Attributes
are defined in Section 7(b).


 


(v)           Taxable Year
shall mean any taxable year or portion thereof beginning on or after January 1,
2001 with respect to which a Consolidated Return is filed on behalf of the Dow
Group which includes any UCC Member  (or
any successor corporation) provided, however, that if any UCC Member is
included in the Dow Group for only a portion of a Taxable Year of the Dow
Group, the “Taxable Year” with respect to such UCC Member shall include only
that portion of the Taxable Year in which such UCC Member is included in the
Dow Group.


 


(w)          UCC Group, as
of any particular date, shall mean the Affiliated Group of which UCC (or any
successor thereto) is the Common Parent as of such date.


 


(x)            UCC Member
shall mean UCC and those present and future corporations that would be
considered Includible Corporations of an Affiliated Group of which UCC would be
the Common Parent if it were not includible in the Dow Group.


 


(y)           UCC Member’s
State and Local Tax Liability shall equal for each Combined Return, (i) the
Separate Taxable Income of each UCC Member that is included in a Combined
Return and has nexus in the jurisdiction for which the Combined Return is
filed, divided by (ii) the sum of the Separate Taxable Incomes for all members
of the Dow Group that are included in the Combined Return and have nexus in such
jurisdiction, multiplied by (iii) the total tax liability, net of any tax
credits (including net operating losses), reflected on such Combined Return.


 


(z)            UCC Member’s
Federal Tax Liability shall, for any Taxable Year, mean the UCC Member’s
United States federal income tax liability determined by Dow pursuant to this
Agreement.  In making such computation
for any such Taxable Year,


 


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such liability shall be determined using any simplifying assumptions and
convention Dow, in its sole discretion, deems necessary to minimize the
administrative burden of making such calculations, including:


 


(i) Utilizing the highest rate of U.S. federal
corporate tax in effect for such taxable year under section 11 of the Code, as
though such rate were the only income tax rate in effect for such Taxable Year,
and


(ii) Assuming that the alternative minimum tax imposed
by Section 55 of the Code is inapplicable.


 


2.             Scope and
Cooperation


 


(a)           Scope. This
Agreement relates solely to (i) U.S. federal income tax liabilities and (ii)
income tax liabilities with respect to certain state and local jurisdictions in
which any UCC Member  participates with
Dow or any Subsidiary of Dow (other than UCC or any of its subsidiaries) in the
filing of a Combined Return.


 


(b)           Cooperation.
Dow and UCC shall cooperate, and each shall cause its respective Subsidiaries
to cooperate fully in the implementation of this Agreement on a consolidated
basis, including but not limited to, providing promptly to the requesting party
such assistance and documentation (at the expense of the providing party) as
may be requested by such party in connection with the preparation or filing of
the Consolidated Return (and any Combined Return), and the conduct of any audit
or other examination, or judicial or administrative proceeding or determination
relating thereto.


 


3.             Filing of
Returns


 


(a)           Appointment of Dow as Agent For
Consolidated Return. UCC and each of its Subsidiaries hereby appoint Dow as
their agent, with respect to all periods during which UCC or such Subsidiary,
as the case may be, is a Member of the Dow Group, for the purpose of filing the
Consolidated Return and for making any election or application or taking any
action in connection therewith on behalf of UCC and such Subsidiary. Nothing
herein shall be construed as requiring Dow to file a Consolidated Return for
any Taxable Year; provided, however, that if Dow decides not to file a
Consolidated Return it shall notify UCC in writing within a period reasonably
sufficient to permit UCC to file timely returns for the UCC Members.


 


(b)           Dow Control Over Consolidated
Return.  Dow shall prepare and file,
or cause to be prepared and filed, the Consolidated Return and any other
documents or statements required to be filed with the Service that pertain to
the determination of the Dow Group Consolidated Tax Liability for each Taxable
Year of the Dow Group. In its sole and absolute discretion, but after prior
good faith consultation with UCC on issues which impact any UCC Member’s Tax
Liability (if requested by such UCC Member), Dow shall have the right with
respect to any Consolidated Return that it has filed or will file to determine
:


 


(i)  the manner in which such Consolidated
Return, as well as any other documents or statements incidental or related
thereto shall be prepared and filed, including without limitation, the manner
in which any item of income, gain, loss, deduction, expense or credit of any
UCC Member  shall be reported therein or
thereon;


 


(ii)  whether
any extensions (including extensions of the date for filing or any statue of
limitations) with respect to any Consolidated Return will be requested;


 


(iii)  the elections that will be made in any such
Consolidated Return by any Member, including without limitation, elections by
any UCC Member;


 


(iv)  whether to file an amended Consolidated
Return and to prosecute, compromise or settle any claim for refund set forth
therein; and


 


(v)  whether
any refunds to which the Dow Group may be entitled shall be passed by way of
cash refund or credited against the Dow Group Consolidated Tax Liability for
any Taxable Year or Taxable Years of the Dow Group.


 


UCC and each
Subsidiary of UCC hereby irrevocably appoints Dow as its agents and
attorney-in-fact to take any action (including the execution of documents) as
Dow may deem appropriate to effect the foregoing.  Nothing contained in this Agreement shall limit Dow’s discretion
to determine the manner in which any item shall be reported on the Consolidated
Return.


 


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(c)           Appointment of Dow as Agent for
Certain Combined Returns.  UCC and
each Subsidiary of UCC hereby appoint Dow as their agent with respect to all
periods during which UCC or such Subsidiary, as the case may be, is a Member of
the Dow Group, for the purpose of filing any Combined Return that Dow (or any
Subsidiary of Dow, other than UCC or any of its Subsidiaries) may elect to
file, and making any election or application or taking any action (including
any extension of statues of limitation) in connection therewith on behalf of
UCC and such Subsidiary.  UCC and each
of its Subsidiaries hereby consent to the filing of such returns, and to the
making of such elections and applications. 
Nothing contained in this Agreement shall be construed as requiring Dow
or any Subsidiary of Dow to file a Combined Return on behalf of UCC or any
Subsidiary of UCC for any Taxable Year. 
Dow shall in its sole and absolute discretion determine whether and with
respect to which jurisdictions UCC or any of its Subsidiaries shall participate
in the filing of any Combined Return.


 


(d)           Other Returns.  UCC and its Subsidiaries shall be solely
responsible for filing all tax returns not described in subsections (b) and (c)
of this Section 3 and that relate solely to UCC and/or its Subsidiaries.


 


(e)           Assistance and Responsibility For
Support of Returns; Provisions of Financial Data.  UCC and its Subsidiaries shall assist Dow in the filing, to the
extent permitted by law, of a Consolidated Return and such Combined Returns as
Dow elects to file or cause to be filed, by maintaining such books and records
and providing such information as may be necessary or useful in the filing of
such returns and executing any documents and taking any actions which Dow may
reasonably request in connection therewith including without limitation
designing and implementing systems, processes and programs for the compilation
and review of financial data; the review of transactions and accounting
methods; and the preparation of returns and of supporting documentation to
assure that such returns and all related reports and schedules are complete and
accurate.  UCC shall, at its own
expense, provide Dow with all information required by Dow to reflect completely
and accurately the financial results of the UCC Members in the Dow Group’s
Consolidated Return (or a Combined Return). 
Such information shall be in such form as determined by Dow from time to
time and shall be delivered to Dow on a mutually agreed upon date, but in no
event later than the first business day in June of the year following such
Taxable Year.  UCC shall, at its own
expense, maintain sufficient books, records and expertise to support all
returns, positions taken thereon and methods used to prepare such returns until
there has been a Final Determination with respect to all issues included on
such returns.  Dow and UCC shall provide
one another with such other information concerning such returns and the
application of payments made under this Agreement as Dow or UCC may reasonably
request of one another.


 


4.             Union
Carbide Tax Calculations


 


For each Taxable
Year for which a Consolidated Return or Combined Return is filed and UCC or any
Subsidiary of UCC is a Member of the Dow Group, Dow shall calculate each  UCC Member’s tax liability for that portion
of the Taxable Year in which the UCC Member 
is included in the Dow Group. 
Dow shall determine the impact to the separate UCC Members of the Code
provisions that require consolidated calculations but with any simplifying
conventions and assumptions approved or suggested by the Tax Director of
Dow.  The calculation shall include
gains and losses with respect to deferred intercompany transactions if, and
only if, and to the extent that, such gains or losses are actually restored and
reflected on the Dow Group’s Consolidated Return.


 


5.             Payments by
UCC Members


 


(a)           UCC Member’s  Federal Tax Liability.  For each Taxable Year of the Dow Group, UCC
Members shall pay to Dow the amount of the UCC Member’s Federal Tax Liability
in the manner provided in Section 9(a) hereof on or before December 31 of the
year following the applicable Taxable Year.


 


(b)           UCC Member’s State and Local Tax
Liability.  For each Taxable Year
with respect to which UCC or any of its Subsidiaries Participates in the filing
of a Combined Return such UCC Member shall pay to Dow, within 30 days of
receipt of a bill from Dow, the UCC Member’s State and Local Tax Liability for
such Taxable Year.


 


(c)           Other Taxes.  UCC shall be solely responsible for paying
tax with respect to all tax returns that UCC or any of its Subsidiaries have
responsibility for filing pursuant to this Agreement.


 


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6.             Payments
to UCC Members


 


Any payment that
UCC Members may be entitled to receive with respect to their last  Taxable Year pursuant to Section 7(c) hereof
shall be paid to such UCC Member in the manner provided in Section 9(a) hereof
on or before December 31 of the calendar year following the end of the
applicable Taxable Year.


 


7.             Use
of Attributes; Additional Rights and Obligations Upon Deconsolidation


 


(a)           In determining the Dow Group’s
Consolidated Tax Liability and in preparing the Consolidated Return for each
taxable year, Dow may utilize on behalf of the Dow Group all the tax attributes
and other items of income, gain, loss, deduction, expense, credit, etc. of UCC
and its Subsidiaries arising in such taxable year or which arose in another
taxable year or taxable years and which properly may be carried back or carried
forward to such taxable year, without regard to whether such attributes and
items are concurrently being, have previously been or may subsequently be
utilized in determining for any Taxable Year or Taxable Years, any UCC Member’s
Tax Liability.  Except as expressly
provided in Section 7(b) and Section 8 of this Agreement, no UCC Member  shall in any manner be entitled to any
compensation for the use of any attributes and other items of income, gain,
loss, deduction, expense, credit, etc. of any UCC Member.  Moreover, in the event any UCC Member ceases
for any reason to be a Member of the Dow Group either (A) after any of its tax
attributes or items of income, gain, loss, deduction, expense, credit, etc. has
been utilized by Dow on behalf of the Dow Group in determining the Dow Group’s
Consolidated Tax Liability for any Taxable Year or Taxable Years of the Dow
Group, but before such UCC Member has utilized such attribute or item (in whole
or in part) in reducing its payment obligation under Section 5(a) of this
Agreement for any Taxable Year or Taxable Years, or (B) after any of its tax
attributes or items of income, gain, loss, deduction, expense, credit, etc. has
been utilized by such UCC Member in reducing its payment obligation under
Section 5(a) of this Agreement for any Taxable Year or Taxable Years, but
before the Dow Group has utilized such attribute or item (in whole or in part)
in determining for any Taxable Year or Taxable Years, the Dow Group
Consolidated Tax Liability, neither the Dow Group nor the UCC Member, as the
case may be, shall be obligated or required to compensate such other party in
any manner for any amount as a result to the occurrence of such event, except
as expressly provided in Sections 7 and 8 below.


 


(b)           Dow
shall determine tax attributes, including but not limited to, foreign tax
credits, net operating losses and general business credits (collectively “Tax
Attributes”), for each UCC Member on a separate Member basis.  For example, the net operating loss of a UCC
Member shall equal the separate net operating loss of such member and not its
share of any consolidated net operating loss of the Dow Group.  The foreign tax credits of a UCC Member
shall equal the foreign taxes paid or deemed paid by such UCC Member.  The research and experimentation credits of
a UCC Member shall equal such Member’s share of the consolidated research and
experimentation credit as determined pursuant to Income Tax Regulation Sections
1.41-6.  Dow will use reasonable simplifying
assumptions and conventional, including assumptions relating to the order Tax
Attributes are utilized, and the manner in which expiration of Tax Attributes
are shared among Dow Group Members, including UCC Members.


 


(c)           Dow
shall annually determine the amount of Tax Attributes allowed to be used by
each UCC Member to reduce such UCC Member’s payment obligation to Dow
hereunder.  Dow shall determine the
cumulative Tax Attributes of each UCC Member during taxable periods when it is
a member of the Dow Group or carried to such a period from a separate return
period by category for each UCC Member which shall be reduced by sum of the
following:


 


(i)  The amount of any Tax Attributes by category
that the UCC  Member would carry to a
separate return year if  it ceased to be
a member of the Dow Group ; and


(ii)  The UCC Member’s allocable share of any Tax
Attributes that expired at the Dow Group level ; and


(iii)  The amount of any Tax Attributes  used by the UCC  Member to reduce the UCC Member’s payment obligation to Dow for
previous Taxable Years  in accordance
with this Agreement.


 


The amount of Tax
Attributes by category remaining after the above described calculation is
hereinafter referred to as “Allowable Tax Attributes”. A UCC Member may reduce
its payment obligation to Dow under Section 5(a) of this Agreement by the value
of the Allowable Tax Attributes.  A UCC
Member may not carry back Allowable Tax Attributes to reduce its payment
obligations to Dow for previous Taxable Years.


 


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(d)           In the event UCC or any of its
Subsidiaries ceases for any reason to be a Member of the Dow group, then within
60 days after the filing of the Consolidated Return for the last Taxable Year
that UCC or such Subsidiary was included therein, Dow shall inform UCC or such
subsidiary, as the case may be, of the amount of Allowable Tax Attributes as of
the end of the UCC Member’s last Taxable Year. 
Dow shall pay the UCC Member the value (as defined below) of such
Allowable Tax Attributes that are not 
used by the UCC Member to reduce its payment obligation to Dow pursuant
to this Agreement.  Dow’s determinations
pursuant to this Section 7(d) shall be presumptively correct and shall be
binding on the parties hereto.  For
purposes of this Section 7(d), tax credits shall be valued on a
dollar-for-dollar basis and losses or deductions shall be valued at the highest
marginal federal tax rate applicable to corporations for the UCC Member’s last
Taxable Year.


 


(e)           If a UCC Member at any time acquires
the assets and properties of another UCC Member pursuant to a transaction to
which Section 381 of the Code applies or otherwise, the acquiring UCC Member
shall, from and after the date of such acquisition, be responsible for all of
the undertakings and obligations of such other UCC Member hereunder and shall,
from after such date, be entitled to receive any and all payments that such
other UCC Member would be entitled to receive hereunder.  Provided such other UCC Member ceases to
exist solely as a result of such transaction, such event shall not, except as
expressly provided herein, in any way result in any acceleration of the time at
which any payments hereunder are due to or from such other UCC Member, and
except as expressly provided herein to the contrary, all such payments shall be
made to or by the acquiring UCC Member at the same time or times that such
payments would be payable to or by such other UCC Member had such other UCC
Member continued to exist as a UCC Member hereunder.


 


8.             Adjustments


 


(a)           If any adjustment is made with
respect to a Taxable Year during which UCC or any of its Subsidiaries is a
member of the Dow Group to any item of income, gain, loss, deduction, expense
or credit of UCC or any Subsidiary of UCC by reason of the filing of an amended
Consolidated Return (or an amended Combined Return), a claim for refund with
respect to such Taxable Year or an audit with respect to such Taxable Year by
the Service (or the applicable State and Local taxing authority), the amounts,
if any, due to or from UCC or a UCC Subsidiary under this Agreement shall be
redetermined by taking into account any such adjustment and applying the
procedures set forth in this Agreement. 
Dow shall have sole and absolute discretion, but after prior good faith
consultation with the Tax Director of UCC, to determine whether and in what
amount an adjustment applies to UCC or any of its Subsidiaries. If, as a result
of such redetermination, any amounts due to or from UCC under this Agreement
differ from the amounts previously paid, then except as herein provided,
payments of such difference together with any interest, penalty or addition to
tax properly allocated to UCC shall be made as an adjustment to the UCC
Member’s Tax Liability for the current Taxable Year.  If such UCC Member is no longer a Member of the Dow Group, then
instead of making an adjustment to the UCC Member’s Tax Liability, the same
amount shall be paid to UCC or by UCC in the manner provided in Section 9(a) as
follows:  (a) in the case of an
adjustment resulting in a credit or refund of tax, within 10 calendar days of
the date on which such refund or notice of such credit is received by Dow or
the UCC Member with respect to such adjustment, or (b) in the case of an
adjustment resulting in a payment of additional tax, within 10 calendar days of
the date on which such additional tax is paid. 
Any interest, penalty or addition to tax will be allocated as Dow, in
its discretion, deems just and proper in view of all applicable circumstances (to
the extent practicable, however, such allocations shall reflect the amount of
interest that the UCC Member would have paid on a stand alone basis).


Nothing in this
Section 8 shall be construed to entitle UCC or any Subsidiary of UCC to receive
a double benefit or compensation with respect to any attribute.


 


9.             Remittance
by and to UCC


 


(a)           Until such time as Dow notifies UCC
in writing to the contrary, any and all payments that UCC and its Subsidiaries
are required to make hereunder shall be made and remitted by UCC and its
Subsidiaries directly to Dow.  Dow shall
be responsible for making all payments required to be made hereunder to UCC and
its Subsidiaries.


 


(b)           Any payments required to be made
hereunder that are not made on or before such date on which such payment is due
under the terms of this Agreement shall bear interest at the rate specified
from time to time pursuant to section 6621(a)(2) of the Code, and the party to
whom such payment is due shall be entitled to receive interest computed at such
rate upon the late payment of any such amount which is required at any time to
be paid hereunder.


 


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10.          Carrybacks


 


If part or all of
an unused consolidated net operating loss or tax credit of UCC or one of its
Subsidiaries arises in a year in which UCC or such Subsidiary is not a Member
of the Dow Group and is carried back to a year in which UCC or such Subsidiary
is a Member of the Dow Group, any refund or reduction in tax liability arising
from the carryback will be retained by or allocated to Dow.  Dow shall have no obligation to pay to UCC
or its Subsidiaries the amount of any refund or credit of federal income tax
that Dow may receive as a result of such carryback (nor will such occurrence
affect the calculation of Allowable Tax Attributes).


 


11.          Allocation
of Dow Group Consolidated Tax Liability For Purposes of Determining Earnings
and Profits


 


The Dow Group
Consolidated Tax Liability for each Taxable Year of the Dow Group shall, for
purposes of determining the earnings and profits of each Member, be allocated
among the Members in accordance with the methods prescribed in Section
1.1552-1(a)(2) of the Income Tax Regulations. 
Notwithstanding the foregoing, Dow may, in its sole and absolute
discretion, change the method set forth above to the extent that is it
permitted to do so by applicable law; provided further that such change in
method is consistently applied to all Members of the Dow Group.


 


12.          Dow
Control of Conduct of Audits, Litigation, Expenses


 


(a)           In any audit, conference or other
proceeding with the Service or the relevant state or local authorities, or in
any judicial proceedings concerning the determination of the Dow Group
Consolidated Return Liability or the state or local income tax liability of any
consolidated, combined or unitary group including Dow or any of it Subsidiaries
(other than UCC or a Subsidiary of UCC) and UCC (or any of the Subsidiaries of
UCC), Dow shall have the exclusive right to contest (with the participation of
the Tax Director of UCC) in (a) any examination by the Service at the district
level or by any state or local authority, or (b) the preparation and submission
of any protest brief or other submission to the  Service’s appellate division (or in any similar administrative
proceeding before any state or local authority), compromise or settle any
adjustment or deficiency proposed, asserted or assessed as a result of such
proceeding and to extend or refuse to extend the applicable time period for
making assessments or adjustments.  UCC
and each subsidiary of UCC hereby appoints Dow as its agent for the purpose of
conducting such contest or proposing and concluding any such compromise and
settlement.  Dow shall have control over
the proceedings, but shall confer in good faith with UCC regarding any proposed
adjustment bearing on any material liability of UCC pursuant to this
Agreement.  UCC shall support any audit
or other examination or judicial or administrative proceeding with respect to
any Taxable Year, at its own expense, in any reasonable way requested by
Dow.  Nothing herein shall limit Dow’s
discretion to determine whether and in what amount an item arising from UCC or
any UCC Subsidiary shall be conceded or otherwise compromised and whether and
in what amount an item results in an adjustment to UCC or any UCC Subsidiary
described in Section 8(a); provided, however, that such decision shall be made
only after full and complete good faith consultation with the Tax Director of
UCC.


 


(b)           Expenses.  UCC shall reimburse Dow for all expenses
(including, without limitation, legal and accounting fees) incurred by Dow in
the course of proceedings described in this Section 12 to the extent such
expenses are allocable, in Dow’s sole and absolute discretion, but after prior
good faith consultation with UCC (if requested by the Tax Director of UCC), to
UCC Member items.


 


13.          Partnership
Interests


 


In connection with
any partnership interest for which UCC or a UCC Subsidiary is the Tax Matters
Partner, UCC shall to the maximum extent feasible make elections, use accounting
methods, and report positions with respect to such partnership interest that
are consistent with positions reported on the Dow Group’s Consolidated Return
and report positions on any other tax returns that consistent with those
reported for such partnership interest on the Dow Group’s Consolidated
Return.  UCC shall confer in good faith
with Dow in advance regarding any such item which may be or could be
inconsistent with items on the Dow Group’s Consolidated Return.


 


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14.          Administration;
Resolution of Disputes


 


The provisions of
this Agreement will be administered by Dow. 
Except as otherwise expressly governed by the terms of this Agreement,
Dow may use any reasonable method in making any computations or allocations
hereunder, and Dow’s calculations will be conclusive.


 


15.          Indemnification
Against Joint and Several Liability


 


Except as may be
expressly provided otherwise in this Agreement, Dow shall be liable for, and
agrees to defend, hold harmless and indemnify the UCC Members from and against,
any and all taxes (and any interest, penalties and similar amounts relating
thereto of the Dow Group (other than the UCC Members), including, but not
limited to, any such taxes (and any interest, penalties and similar amounts
relating thereto) for which any UCC Member is or may be or become liable for
under any successor or transferee liability law or other similar law under
Section 1.1502-6 or 1.1502-78(b) of the Income Tax Regulations or any similar
provision under any applicable foreign, state, or local law.


 


16.          Interpretation


 


This Agreement is
intended to provide for the calculation and allocation of certain federal and
state and local income tax liabilities between the Dow Group (other than UCC
and its Subsidiaries) and the UCC Member, and any situation or circumstances
concerning such calculation and allocation that is not specifically
contemplated hereby or provided for herein shall be dealt with in a manner
consistent with the underlying principles of calculation and allocation in this
Agreement.


 


17.          Effect
of Agreement


 


This Agreement
shall determine the liability of Dow and the UCC Members as to the matters
provided for herein, whether or not such determination is effective for
purposes of the Code or of state or local revenue laws, for financial reporting
purposes or any other purpose.


 


18.          Term


 


This Agreement
will apply to Taxable Years ending after the Effective Date and all subsequent
Taxable Years, unless Dow and any UCC Member agree in writing to terminate this
Agreement.  Notwithstanding such
termination, this Agreement will continue in effect with respect to any payment
or refunds due for all Taxable Years prior to termination.  Any UCC Member that leaves the Dow Group
will be bound this Agreement.  The
failure of one or more parties hereto to qualify for inclusion in the
Consolidated Return filed by Dow will not operate to terminate this Agreement
with respect to the other parties as long as two or more parties hereto
continue to so qualify.


 


19.          Assignment


 


Rights and
obligations under this Agreement will not be assignable by any party without
the prior written consent of the other parties.


 


20.          Confidentiality


 


Dow, and the UCC
Members agree that any information furnished among one another pursuant to this
Agreement is confidential and, except as and to the extent required during the
course of the preparation or returns or the conduct of an audit or litigation,
shall not be disclosed to other persons.


 


21.          Documentation


 


All material,
including but not limited to, returns, supporting schedules, work papers,
correspondence, and other documents relating to the Consolidated Return and any
Combined Returns filed for a Taxable Year subject to this Agreement will be
made available to any party to the Agreement during regular business hours for
a minimum period equal to applicable federal and state record retention
requirements (or the applicable statue or limitations period).


 


66

















 


22.          Additional
Members


 


The parties hereto
specifically recognize that from time to time other Subsidiaries of Dow and UCC
may become or become or become again Members of the Dow Group and hereby agree
that this Agreement shall be deemed to have been adopted and affirmed, or readopted
and reaffirmed, by such Subsidiary.  Dow
and UCC shall, upon the written request of the other, cause any of their
respective Subsidiaries formally to ratify and execute this Agreement.


 


23.          Tax
Law Changes


 


Any alteration,
modification, addition, deletion, or other change in the Code or the Income Tax
Regulations (or the applicable state and local tax provisions) will
automatically be applicable to this Agreement when changed.


 


24.          Successors
and Assigns


 


This Agreement
will bind and inure to the benefit of the respective successors and assigns of
the parties hereto; but no assignment will relieve any party of its obligations
hereunder without the written consent of the other parties.


 


25.          Counterparts


 


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


 


26.          Headings


 


The headings in
this Agreement are inserted for convenience only and shall not constitute a
part hereof or affect the interpretation of this Agreement.


 


27.          Severability


 


If any provision
of this Agreement is held to be unenforceable for any reason, it shall be
adjusted rather than voided, if possible, in order to achieve the intent of the
parties to the maximum extent practicable. 
In any event, all other provisions of this Agreement shall be deemed
valid, binding and enforceable to their full extent.


 


28.          Entire
Agreement


 


This Agreement
constitutes the entire agreement of the parties with respect to the subject
matter hereof and, except as expressly contained herein there are no written or
oral promises, covenants, undertakings, representations or warranties of the
parties with respect to the subject matter hereof.


 


29.          Notices


 


                Any notices or other communications
required or permitted by this Agreement shall be effective upon the receipt,
shall be in writing personally delivered or mailed by registered or certified
mail, return receipt requested, or sent by facsimile to the persons and
addresses shown below:


 


(a)                                  With respect to Dow:


The Dow Chemical Company


2030 Dow Center


Midland, Michigan 48674


Attention:  Mr. Chuck Hahn,
Director of Taxes


 


67

















 


(b)                                 With Respect to UCC


Union Carbide Corporation


39 Old Ridgebury Rd.


Danbury, CT 06817-0001


Attention:  Mr. John Dearborn,
President


 


 


30.          Governing Law


 


This Agreement
shall be construed and interpreted, and all rights and liabilities of the
parties hereto, with respect to this Agreement shall be governed by the laws of
the State of Delaware, U.S.A.


 


 


 


IN WITNESS
WHEREOF, the parties respective authorized representatives executed this
Agreement on the dates below their respective signatures, but effective as of
February 7, 2001.


 


 


 


	
   

  	
  THE DOW CHEMICAL COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  BY

  	
   

  	
  /s/ Charles J.
  Hahn

  	
   

  
	
   

  	
  Name:

  	
  Charles J Hahn

  
	
   

  	
  Title:

  	
  Director of Tax
  and Assistant Secretary

  
	
   

  	
  Date

  	
   

  	
  December 20,
  2002

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  UNION CARBIDE CORPORATION ON BEHALF OF THE UCC
  MEMBERS

  
	
   

  	
   

  	
   

  
	
   

  	
  BY

  	
   

  	
  /s/ Edward W.
  Rich

  	
   

  
	
   

  	
  Name:

  	
  Edward W Rich

  
	
   

  	
  Title:

  	
  Vice President
  and Treasurer

  
	
   

  	
  Date

  	
   

  	
  December 20,
  2002

  	
   

  



 


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