Document:

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                                                                  EXHIBIT 10(16)

                            AMERADA HESS CORPORATION

                           DEFERRED COMPENSATION PLAN

                                   * * * * *

         SECTION 1. PURPOSE. The purpose of the Plan is to provide certain
select employees of the Company with an opportunity to defer the receipt of
compensation for services rendered to the Company. The Plan is intended to aid
the Company in retaining and attracting employees whose abilities, experience
and judgment can contribute to the continued progress of the Company. The Plan
is being maintained primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated employees of the Company.

         SECTION 2. DEFINITIONS.

                  (a)      "Account(s)" means the Deferred Compensation
Account(s).

                  (b)      "Board" means the Company's Board of Directors.

                  (c)      "Bonus" means any special and/or discretionary
compensation amounts in excess of Salary, determined by the Company to be
payable to a Participant with respect to services rendered.

                  (d)      "Change in Control" shall mean:

                           (1)      The acquisition by an individual, entity or
         group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
         Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
         promulgated under the Exchange Act) of 20% or more of either the then
         (i) outstanding shares of common stock of the Company (the "Outstanding
         Company Common Stock") or (ii) combined voting power of the then
         outstanding voting

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         securities of the Company entitled to vote generally in the election of
         directors (the "Outstanding Voting Securities"); provided, however,
         that the following acquisitions shall not constitute a Change in
         Control: (i) any acquisition by the Company or any of its subsidiaries,
         (ii) any acquisition by an employee benefit plan (or related trust)
         sponsored or maintained by the Company or any of its subsidiaries,
         (iii) any acquisition by any corporation with respect to which,
         following such acquisition, more than 60% of, respectively, the then
         outstanding shares of common stock of such corporation and the combined
         voting power of the then outstanding voting securities of such
         corporation entitled to vote generally in the election of directors is
         then beneficially owned, directly or indirectly, by all or
         substantially all of the individuals and entities who were the
         beneficial owners, respectively, of the Outstanding Company Common
         Stock and Outstanding Voting Securities immediately prior to such
         acquisition in substantially the same proportions as their ownership,
         immediately prior to such acquisition, of the Outstanding Company
         Common Stock and Outstanding Voting Securities, as the case may be, or
         (iv) any acquisition by one or more Hess Entity (for this purpose a
         "Hess Entity" means (A) Mr. John Hess or any of his children, parents
         or siblings (B) any spouse of any person described in Section
         2(d)(1)(iv)(A), (C) any trust as to which any of the persons described
         in Section 2(d)(1)(iv)(A) has substantial voting authority, (D) any
         affiliate (as such term is defined in Rule 12b-2 under the Exchange
         Act) of any person described in Section 2(d)(1)(iv)(A), (E) the Hess
         Foundation Inc., or (F) any persons comprising a group controlled (as
         such term is defined in such Rule 12b-2) by one or more of the
         foregoing persons or entities described in Section 2(d)(1)(iv)(A).

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                           (2)      Individuals who, as of the effective date of
         the Plan, constitute the Board (the "Incumbent Board") ceasing for any
         reason to constitute at least a majority of the Board; provided,
         however, that any individual becoming a director subsequent to the
         effective date of the Plan whose election, or nomination for election
         by the Company's shareholders, was approved by a vote of at least a
         majority of the directors then comprising the Incumbent Board shall be
         considered as though such individual were a member of the Incumbent
         Board, but excluding, for this purpose, any such individual whose
         initial assumption of office occurs as a result of either an actual or
         threatened solicitation to which Rule 14a-11 of Regulation 14A
         promulgated under the Exchange Act applies or other actual threatened
         solicitation of proxies or consents; or

                           (3)      Consummation of a reorganization, merger or
         consolidation, in each case, with respect to which all or substantially
         all of the individuals and entities who were the beneficial owners,
         respectively, of the Outstanding Company Common Stock and Outstanding
         Voting Securities immediately prior to such reorganization, merger or
         consolidation do not, following such reorganization, merger or
         consolidation, beneficially own, directly or indirectly, more than 60%
         of, respectively, the then outstanding shares of common stock and the
         combined voting power of the then outstanding voting securities
         entitled to vote generally in the election of directors, as the case
         may be, of the corporation resulting from such reorganization, merger
         or consolidation in substantially the same proportions as their
         ownership, immediately prior to such reorganization, merger or
         consolidation, of the Outstanding Company Common Stock and Outstanding
         Voting Securities, as the case may be; or

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                           (4)      Consummation of (i) a complete liquidation
         or dissolution of the Company or (ii) the sale or other disposition of
         all or substantially all of the assets of the Company other than to a
         corporation with respect to which following such sale or other
         disposition, more than 60% of, respectively, the then outstanding
         shares of common stock of such corporation and the combined voting
         power of the then outstanding voting securities of such corporation
         entitled to vote generally in the election of directors is then
         beneficially owned, directly or indirectly, by all or substantially all
         of the individuals and entities who were the beneficial owners,
         respectively, of the Outstanding Company Common Stock and Outstanding
         Voting Securities immediately prior to such sale or other disposition
         in substantially the same proportion as their ownership, immediately
         prior to such sale or other disposition, of the Outstanding Company
         Common Stock and Outstanding Voting Securities, as the case may be. The
         term "the sale or other disposition of all or substantially all of the
         assets of the Company" shall mean a sale or other disposition
         transaction or series of related transactions involving assets of the
         Company or of any direct or indirect subsidiary of the Company
         (including the stock of any direct or indirect subsidiary of the
         Company) in which the value of the assets or stock being sold or
         otherwise disposed of (as measured by the purchase price being paid
         therefor or by such other method as the Board determines is appropriate
         in a case where there is no readily ascertainable purchase price)
         constitutes more than two-thirds of the fair market value of the
         Company (as hereinafter defined). The "fair market value of the
         Company" shall be the aggregate market value of the then Outstanding
         Company Common Stock (on a fully diluted basis ) plus the aggregate
         market value of the Company's other outstanding equity securities. The
         aggregate market value of the shares

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         of Outstanding Company Common Stock shall be determined by multiplying
         the number of shares of such Common Stock (on a fully diluted basis)
         outstanding on the date of the execution and delivery of a definitive
         agreement with respect to the transaction or series of related
         transactions (the "Transaction Date") by the average closing price of
         the shares of Outstanding Company Common Stock for the ten trading days
         immediately preceding the Transaction Date. The aggregate market value
         of any other equity securities of the Company shall be determined in a
         manner similar to that prescribed in the immediately preceding sentence
         for determining the aggregate market value of the shares of Outstanding
         Company Common Stock or by such other method as the Board shall
         determine is appropriate.

                  (e)      "Committee" means the Compensation Committee of the
Board.

                  (f)      "Company" means the Amerada Hess Corporation.

                  (g)      "Deferred Compensation" means the Eligible Earnings
that are the subject of an elective deferral under Section 5.

                  (h)      "Deferred Compensation Account" means the bookkeeping
account established for a Participant under the Plan and to which Deferred
Compensation amounts with respect to such Participant are credited from time to
time, as adjusted from time to time as provided in the Plan.

                  (i)      "Deferred Compensation Election Form" means the form
pursuant to which Eligible Employees elect to become Participants in the Plan
and to defer Eligible Earnings thereunder, in such form as the Committee
determines from time to time in its sole discretion.

                  (j)      "Disability" means mental or physical disability as
determined by the Committee in accordance with standards and procedures similar
to those under the Company's

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broad-based regular long-term disability plan, if any. At any time that the
Company does not maintain such a long-term disability plan, Disability shall
mean the inability of a Participant, as determined by the Committee,
substantially to perform such Participant's regular duties and responsibilities
due to a medically determinable physical or mental illness which has lasted (or
can reasonably be expected to last) for a period of at least six (6) consecutive
months.

                  (k)      "Eligible Earnings" means a Participant's aggregate
cash Salary and Bonus payments for the Plan Year.

                  (l)      "Eligible Employee" means any employee of the Company
who is selected as being eligible for participation by the Committee.

                  (m)      "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time. References to any provision of the Exchange
Act shall be deemed to include successor provisions thereto and any rules and
regulations thereunder.

                  (n)      "Participant" means an Eligible Employee who has
elected to defer Eligible Earnings pursuant to the Plan.

                  (o)      "Plan" means the Amerada Hess Corporation Deferred
Compensation Plan, as set forth herein and as amended from time to time.

                  (p)      "Plan Year" means the calendar year.

                  (q)      "Salary" means the regular gross base compensation
paid by the Company to an employee (without regard to any reduction thereof
pursuant to the Plan or any cafeteria, flexible spending, thrift or savings plan
maintained by the Company), exclusive of Bonus payments and any other incentive
or special payments made by the Company to such employee, as determined by the
Committee.

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         SECTION 3.  ELIGIBILITY.  Individuals eligible to participate in the
Plan shall consist of the Eligible Employees of the Company.

         SECTION 4.  ADMINISTRATION.

                  (a)      The Plan shall be administered by the Committee. The
Committee is authorized to construe and interpret the Plan and promulgate, amend
and rescind rules and regulations relating to the implementation, administration
and maintenance of the Plan. Subject to the terms and conditions of the Plan,
the Committee shall make all determinations necessary or advisable for the
implementation, administration and maintenance of the Plan including, without
limitation, determining the Eligible Employees and correcting any technical
defect(s) or technical omission(s), or reconciling any technical
inconsistency(ies), in the Plan. The Committee may designate persons other than
members of the Committee to carry out the day-to day ministerial administration
of the Plan under such conditions and limitations as it may prescribe; provided,
however, that the Committee shall not delegate its authority with regard to the
determination of Eligible Employees. The Committee's determinations under the
Plan need not be uniform and may be made selectively among Participants, whether
or not such Participants are similarly situated. Any determination, decision or
action of the Committee in connection with the construction, interpretation,
administration, implementation or maintenance of the Plan shall be final,
conclusive and binding upon all Participants and any person(s) claiming under or
through any Participants.

                  (b)      The Company will indemnify and hold harmless the
Committee and each member thereof against any cost or expense (including without
limitation attorney's fees) or liability (including without limitation any sum
paid in settlement of a claim with the approval of

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the Company) arising out of any act or omission to act, except in the case of
willful gross misconduct or gross negligence.

                  (c)      All fees and expenses incurred by the Committee and
the Company with respect to the administration of the Plan shall be paid by the
Company.

                  (d)      The Committee shall have final and exclusive
authority to decide all questions arising in connection with a Participant's or
a beneficiary of a deceased Participant's (such Participant or beneficiary being
referred to herein as a "Claimant") claim for benefits under the Plan.

         SECTION 5.        PARTICIPATION; ELECTIVE DEFERRALS. To elect to
participate in the Plan for a particular Plan Year, an Eligible Employee must
execute a Deferred Compensation Election Form and file such form with the
Committee (or its designee) before the commencement of such Plan Year. To
participate in the Plan during the year in which the Plan is first implemented,
the Eligible Employee must make an election to defer Eligible Earnings for
services to be performed subsequent to the election within 30 days after the
effective date of the Plan. To participate in the Plan during the first year in
which an individual becomes eligible to participate in the Plan, the new
Eligible Employee must make an election to defer Eligible Earnings for services
to be performed subsequent to the election within 30 days after the date the new
Eligible Employee becomes eligible. Such election shall:

                  (i)      contain a statement that the Eligible Employee elects
         to defer a portion of the Eligible Employee's Eligible Earnings up to
         100% thereof for a specified Plan Year that become payable to the
         Eligible Employee after the filing of such election, or such other
         limit as the Committee may determine from time to time in its sole
         discretion. The minimum dollar amount of Eligible Earnings that an
         Eligible Employee may elect to

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         defer is $10,000, or such other minimum as the Committee may determine
         from time to time in its sole discretion, and such amount shall be pro
         rated with respect to an individual who becomes an Eligible Employee
         during a Plan Year;

                  (ii)     apply only to the Eligible Earnings consisting of
         Salary otherwise payable to the Eligible Employee during the Plan Year
         for which such election is made and to any Bonus payment that is
         attributable to the Eligible Employee's services rendered to the
         Company during the Plan Year for which such election is made (whether
         or not actually payable in such Plan Year);

                  (iii)    be irrevocable with respect to the Plan Year to which
         it applies;

                  (iv)     specify whether upon the Participant's termination of
         employment by reason of retirement, the balance of the Participant's
         Deferred Compensation Account shall be paid, or in the case of
         installment payments, commence being paid, as soon as administratively
         possible after the end of the month in which the termination of the
         Participant's employment by reason of retirement occurs, or as soon as
         administratively possible following the beginning of the Plan Year
         immediately following the Plan Year in which such termination of
         employment by reason of retirement occurs;

                  (v)      specify a date, no earlier than three years after the
         date such election is made, that the Deferred Compensation will be paid
         to the Participant. A Participant may elect to delay the date that the
         Deferred Compensation will be paid or the date of commencement of
         Deferred Compensation distributions; provided, however, that such
         election to delay the payment date or the commencement date of Deferred
         Compensation distributions shall only be effective with respect to
         payments of Deferred Compensation to be made or commencing no earlier
         than 13 months after the date of such changed

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         election. If a Participant is to commence receiving payments of
         Deferred Compensation prior to the date which is 13 months after the
         date of such changed election, such Participant's Deferred Compensation
         shall be paid in accordance with his or her most recent other election
         made more than 13 months prior to the payment date of, or commencement
         of distributions of, such Participant's Deferred Compensation; and

                  (vi)     specify the form, either a lump sum or annual
         installments over a five year period, in which the Deferred
         Compensation will be paid to the Participant; provided, however, that
         in the event of a Participant's termination of employment for any
         reason other than his or her retirement prior to the distribution of
         his or her Deferred Compensation or the commencement of his or her
         Deferred Compensation distributions, such Participant's Deferred
         Compensation shall be paid in a single lump sum regardless of his or
         her election under this Section 5(vi). A Participant may change his or
         her election as to the form in which Deferred Compensation will be paid
         at any time prior to the payment of Deferred Compensation or the
         commencement of Deferred Compensation distributions; provided, however,
         that such election to change the distribution form shall only be
         effective with respect to payments of Deferred Compensation made or
         commencing no earlier than 13 months after the date of such changed
         election. If a Participant does commence receiving payments of Deferred
         Compensation prior to the date which is 13 months after the date of
         such changed election, such Participant's Deferred Compensation shall
         be paid in accordance with his or her most recent other election made
         more than 13 months prior to the payment date of, or commencement of,
         such Participant's Deferred Compensation.

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Upon receipt of an Eligible Employee's Deferred Compensation Election Form, the
Company shall establish as an accounting entry an individual Deferred
Compensation Account for such Eligible Employee and such Eligible Employee shall
become a Participant under the Plan. Thereafter, the Company shall credit the
Participant's Deferred Compensation Account with all Deferred Compensation which
would otherwise have been payable to the Eligible Employee in the absence of an
election under the Plan. The Deferred Compensation Account shall be credited no
less frequently than the last day of each month in an amount equal to the sum of
the Deferred Compensation that would otherwise have been paid by the Company in
accordance with the Company's normal payroll practices for such month.

         SECTION 6. INVESTMENT OF ACCOUNT BALANCES. During and for each Plan
Year, the balances in each Participant's Deferred Compensation Account will be
deemed to be invested, as of the date elective deferrals are credited to such
Deferred Compensation Account under the Plan, in such investment vehicle(s)
offered by the Committee in its sole discretion and selected by the Participant.
The Committee shall, in its sole discretion, have the right to change the
investment vehicles(s) offered to Participants at any time and from time to
time. At the end of each month, each Participant's Deferred Compensation Account
shall be adjusted pursuant to Section 7 below and such adjusted Deferred
Compensation Account balance shall then be reinvested for the immediately
succeeding month.

         SECTION 7. VALUATION. At the end of each month, the balance in the
Deferred Compensation Account of each Participant shall be determined by the
Company, taking into account any increase therein resulting from such
Participant's Deferred Compensation contributions for such month under Section
6, if any, and any earnings attributable to such Participant's existing Deferred
Compensation Account balance, including deferred Eligible

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Earnings for such month under Section 5, if any, and any decrease therein
resulting from the distribution to such Participant, or such Participant's
Designated Beneficiary(ies), of any installment pursuant to such Participant's
Deferred Compensation Election Form and Section 8, and any losses attributable
to such Participant's existing Deferred Compensation Account balance under
Section 6. The balance determined, as of the end of each Plan Year, shall be
communicated in writing to each Participant as soon as practicable after the end
of the Plan Year. In the case of any payment to be made upon a Participant's
termination of employment or payment upon a Change in Control under Section 8
below, the balances in the Deferred Compensation Account of any affected
Participant shall be valued and determined by the Company as of the date on
which occurs any such termination or payment upon a Change in Control.

         SECTION 8.  PAYMENT OF DEFERRED COMPENSATION.

                  (a)      Where no Change in Control has occurred the accrued
balance in a Participant's Deferred Compensation Account shall be paid (or in
the case of installments, commence being paid) to a Participant, or, in the case
of any Participant's death prior to payment, the Participant's designated
beneficiary(ies), in cash, in either a lump sum or installments, as specified by
the Participant in accordance with Section 5, no later than the earlier of:

                  (i)      as soon as administratively possible after the end of
         the month in which the termination of the Participant's employment for
         any reason (other than retirement) including, but not limited to, death
         or Disability, occur;

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                  (ii)     in the event of a Participant's termination of
         employment by reason of his or her retirement, the date specified by
         the Participant on the applicable Deferred Compensation Election Form
         in accordance with Section 5; or

                  (iii)    the date specified by the Participant on the
         applicable Deferred Compensation Election Form in accordance with
         Section 5.

                  (b)      Upon the occurrence of a Change in Control, the
balance of each Participant's Deferred Compensation Account shall be paid by the
Company in a cash lump sum to the Participant, or in the case of any
Participant's death prior to such payment, the Participant's designated
beneficiary(ies) in accordance with the Participant's Deferred Compensation
Election Form (as soon as practicable after such occurrence).

                  (c)      All payments of Deferred Compensation under this
Section 8 shall include earnings and/or losses attributable to the deferred
Eligible Earnings as determined in accordance with Section 6.

         SECTION 9. WITHDRAWAL ELECTION. A Participant may elect, at any time,
to withdraw all or any portion (subject to a minimum of $10,000) of his or her
Account balance, calculated as if the Participant had terminated employment as
of the day of the election, less a withdrawal penalty equal to 10% of such
amount (the net amount shall be referred to as the "Withdrawal Amount"). This
election can be made by the Participant at any time before the Participant's
termination of employment for any reason, including retirement, Disability or
death, and whether or not the Participant is in the process of being paid
pursuant to an installment payment schedule. Once the Withdrawal Amount is paid,
the Participant shall not be eligible to make a new deferral under the Plan for
the next 13 months.

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         SECTION 10. AMENDMENT; TERMINATION. The Plan may be amended or modified
at any time by the Board except that no such amendment or modification shall
have a material adverse effect on the balance or the payment schedule (including
any material change to Section 8(b) above) of any Participant's Deferred
Compensation Account as of the effective date of any such amendment,
modification or termination (without the consent of the Participant or, if the
Participant is dead, his or her beneficiary(ies)). The Company may terminate the
Plan at any time, in which event each Deferred Compensation Account will be paid
out in a lump sum as soon as practicable after such termination.

         SECTION 11. PARTICIPANT'S RIGHTS UNSECURED; NO DUTY TO INVEST. The
right of a Participant to receive any distribution hereunder shall be an
unsecured claim against the general assets of the Company. No Company assets
shall in any way be subject to any prior claim by any Participant. The Company
shall have no duty whatsoever to set aside or invest any amounts credited to any
Deferred Compensation Account established under the Plan. Nothing in the Plan
shall confer upon any employee of the Company any right to continued employment
with the Company, nor shall it interfere in any way with the right, if any, of
the Company to terminate the employment of any employee at any time for any
reason. A Participant shall have no right, title, or interest whatsoever in or
to any specific assets of the Company, nor any investments, if any, which the
Company may make to aid it in meeting its obligations hereunder. Nothing
contained in this Plan, and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or a fiduciary
relationship, between the Company and any Participant or any other person. The
Company may, but is not obligated to, enter into a "rabbi" trust agreement to
provide for a source of funds out of which all or any portion of the benefits
under the Plan may be satisfied.

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         SECTION 12. RESTRICTIONS ON ALIENATION. No amount deferred or credited
to any Account under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, levy or charge. Any
attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber,
levy or charge the same shall be void; nor shall any amount in any manner be
subject to any claims for the debts, contracts, liabilities, engagements or
torts of the Participant (or the Participant's beneficiary or personal
representative) entitled to such benefit. No Participant shall be entitled to
borrow at any time any portion of the Participant's Account balance under the
Plan.

         SECTION 13. WITHHOLDING. There shall be deducted from all payments
under the Plan the amount of any taxes required to be withheld by any Federal,
state, local or other government. The Participants, their beneficiaries and
personal representatives shall bear any and all Federal, foreign, state, local,
income, or other taxes imposed on amounts paid under the Plan.

         SECTION 14. PARTICIPANTS BOUND BY TERMS OF THE PLAN. By electing to
become a Participant, each Eligible Employee shall be deemed conclusively to
have accepted and consented to all terms of the Plan and all actions or
decisions made by the Company with regard to the Plan. Such terms and consent
shall also apply to and be binding upon the beneficiaries, personal
representatives and other successors in interest of each Participant.

         SECTION 15. DESIGNATION OF BENEFICIARY(IES). Each Participant under the
Plan may designate a beneficiary or beneficiaries to receive any payment which
under the terms of the Plan becomes payable on, after or as a result of the
Participant's death. At any time, and from time to time, any such designation
may be changed or cancelled by the Participant without the consent of any such
beneficiary(ies). Any such designation, change or cancellation must be on a form
provided for that purpose by the Committee and shall not be effective until
received by the

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Committee. If no beneficiary(ies) has been designated by a deceased Participant,
or if the designated beneficiaries have predeceased the Participant, the
beneficiary shall be the Participant's estate. If the Participant designates
more than one beneficiary, any payments under the Plan to such beneficiaries
shall be made in equal shares unless the Participant has expressly designated
otherwise, in which case the payments shall be made in the shares designated by
the Participant.

         SECTION 16. SEVERABILITY OF PROVISIONS. In the event any provision of
the Plan would serve to invalidate the Plan, that provision shall be deemed to
be null and void, and the Plan shall be construed as if it did not contain the
particular provision that would make it invalid. The Plan shall be binding upon
and inure to the benefit of (a) the Company and its respective successors and
assigns, and (b) each Participant, his or her designees and estate. Nothing in
the Plan shall preclude the Company from consolidating or merging into or with,
or transferring all or substantially all of its assets to, another corporation,
or engaging in any other corporate transaction.

         SECTION 17. GOVERNING LAW AND INTERPRETATION. The Plan shall be
construed and enforced in accordance with, and the rights of the parties hereto
shall be governed by, the laws of the State of New York, without regard to the
principles of conflict of laws thereof. This Plan shall not be interpreted as
either an employment or trust agreement.

         SECTION 18. OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS. Payments
and other benefits received by a Participant under the Plan shall not be deemed
a part of a Participant's compensation for purposes of the determination of
benefits under any other employee welfare or benefit plans or arrangements, if
any, provided by the Company or any affiliate of the Company. The existence of
the Plan notwithstanding, the Company may adopt

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such other compensation plans or programs and additional compensation
arrangements as it deems necessary to attract, retain and motivate employees.
The Committee is authorized to cause to be established a trust agreement or
several trust agreements or similar arrangements from which the Committee may
make payments of amounts due or to become due to any Participants under the
Plan.

         SECTION 19. EFFECTIVE DATE OF THE PLAN. The Plan shall be effective
upon its adoption by the Company.

         IN WITNESS WHEREOF, the Plan is hereby adopted by the Company on this
1st day of December, 1999.

                                     Amerada Hess Corporation

                                     By: /s/ John B. Hess
                                         ---------------------------

                                     Title: Chairman of the Board and
                                            -------------------------
                                            Chief Executive Officer
                                            -------------------------
                                       17<PAGE>   1
                                                                 Exhibit 10.3

                              TAX SHARING AGREEMENT

                                       BY

                                CABOT CORPORATION

                                       AND

                       CABOT MICROELECTRONICS CORPORATION

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                   PAGE
<S>                                                                <C>
SECTION 1.  Definition of Terms                                       2

SECTION 2.  Allocation of Income Tax Liabilities                      7

SECTION 3.  Preparation and Filing of Tax Returns                    11

SECTION 4.  Refunds, Carrybacks and Tax Benefits                     15

SECTION 5.  Tax Payments and Intercompany Billings                   19

SECTION 6.  Assistance and Cooperation                               25

SECTION 7.  Tax Records.                                             26

SECTION 8.  Tax Contests                                             27

SECTION 9.  No Inconsistent Actions                                  28

SECTION 10. Survival of Obligations                                  30

SECTION 11. Employee Matters                                         30

SECTION 12. Treatment of Payments; Tax Gross Up                      30

SECTION 13. Disagreements                                            31

SECTION 14. Late Payments                                            32

SECTION 15. Expenses                                                 32

SECTION 16. General                                                  32

</TABLE>

                                      -i-
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                              TAX SHARING AGREEMENT

      This Agreement is entered into as of March 28, 2000 by Cabot Corporation,
a Delaware corporation ("Cabot"), and Cabot Microelectronics Corporation, a
Delaware corporation ("CMC"). Capitalized terms used in this Agreement are
defined herein. Unless otherwise indicated, all "Section" references in this
Agreement are to sections of this Agreement.

                                    RECITALS

      WHEREAS, the board of directors of Cabot has determined that it would be
in the best interests of Cabot and its stockholders to completely separate the
MMD Business from Cabot;

      WHEREAS, Cabot has caused CMC to be incorporated in order to effect
such separation;

      WHEREAS, Cabot and CMC have entered into the Master Separation Agreement
and the Ancillary Agreements (other than this Agreement), pursuant to which
Cabot has contributed and transferred to CMC, and CMC has received and assumed,
the assets and liabilities then associated with the MMD Business as described
therein;

      WHEREAS, Cabot and CMC intend that the contribution of the assets and
liabilities associated with the MMD Business in exchange for CMC qualify as
tax-free under Section 351 or 368(a)(1)(D) of the Code;

      WHEREAS, Cabot currently owns all of the issued and outstanding CMC
common stock;

      WHEREAS, Cabot and CMC currently contemplate that CMC will make an initial
public offering of an amount of its common stock that will reduce Cabot's
ownership of CMC to not less than 80%;

      WHEREAS, Cabot currently contemplates that, following such initial public
offering, Cabot will distribute to the holders of its common stock by means of a
pro rata distribution all of the shares of CMC common stock owned by Cabot;

      WHEREAS, Cabot and CMC intend that the Distribution will be tax-free to
Cabot and its stockholders under Section 355 of the Code;
<PAGE>   4
      WHEREAS, as a result of the Distribution, CMC will cease to be a member of
the affiliated group of which Cabot is the common parent, effective as of the
Distribution Date; and

      WHEREAS, the Companies desire to provide for and agree upon the allocation
between the parties of liabilities for Taxes arising prior to, as a result of,
and subsequent to the Distribution, and to provide for and agree upon other
matters relating to Taxes;

      NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereby agree
as follows:

      SECTION 1. Definition of Terms. For purposes of this Agreement
(including the recitals hereof), the following terms have the following
meanings:

      "ACCOUNTING CUTOFF DATE" means, with respect to CMC, any date as of the
end of which there is a closing of its financial accounting records.

      "ACCOUNTING FIRM" shall have the meaning provided in Section 13.

      "ADJUSTMENT REQUEST" means any formal or informal claim or request filed
with any Tax Authority, or with any administrative agency or court, for the
adjustment, refund, or credit of Taxes, including (a) any amended Tax Return
claiming adjustment to the Taxes as reported on the Tax Return, or if
applicable, as previously adjusted, or (b) any claim for refund or credit of
Taxes previously paid.

      "AFFILIATE" means any entity that directly or indirectly is "controlled"
by the person or entity in question. "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through ownership of voting securities, by
contract or otherwise. Except as otherwise provided herein, the term Affiliate
shall refer to Affiliates of a person as determined immediately after the
Distribution.

      "AGREEMENT" means this Tax Sharing Agreement.

                                      -2-
<PAGE>   5
      "ANCILLARY AGREEMENTS" has the meaning set forth in the Master
Separation Agreement.

      "CABOT FEDERAL CONSOLIDATED RETURN" means any United States federal
Consolidated Income Tax Return for the affiliated group (as that term is defined
in Code Section 1504) that includes Cabot as the common parent and that
includes, during the Consolidated Periods, the CMC Group.

      "CABOT GROUP" means all corporations included in the Cabot Federal
Consolidated Return.

      "CARRYBACK" or "CARRYFORWARD" means any net operating loss, net capital
loss, excess tax credit, foreign tax credit or other similar Tax Item which may
or must be carried from one Tax Period to another Tax Period under the Code or
other applicable Tax Law.

      "CMC GROUP" means CMC and all corporations included in the CMC Federal
Consolidated Return, or, during any Consolidation Period, that would be included
in such Return if CMC were not included in the Cabot Federal Consolidated
Return.

      "CMC FEDERAL CONSOLIDATED RETURN" means any United States federal Tax
Return or Returns in respect of periods after the Consolidation Period filed by
CMC alone or by the affiliated group (as that term is defined in Code Section
1504) that includes CMC as the common parent.

      "CODE" means the U.S. Internal Revenue Code of 1986, as amended from
time to time, or any successor law.

      "COMPANY" means Cabot or CMC.

      "CONSOLIDATED INCOME TAX RETURN" OR "COMBINED INCOME TAX RETURN" means any
Tax Return relating to Income Tax which is computed by reference to the assets
and activities of members of the Cabot Group (other than members of the CMC
Group) and the CMC Group.

                                      -3-
<PAGE>   6
       "CONSOLIDATED PERIOD" or "CONSOLIDATED PERIODS" means any taxable period
or periods between the Contribution Date and the Distribution Date, during which
time CMC is a member of the Cabot Group.

      "CONTRIBUTION DATE" has the meaning set forth in the Master
Separation Agreement.

      "DISTRIBUTION" means the distribution to Cabot shareholders of all, or
substantially all, of the CMC common shares held by Cabot or any earlier event
as a result of which CMC ceases to be a member of the Cabot Group.

      "DISTRIBUTION DATE" means the date of the Distribution, as determined by
Cabot in its sole and absolute discretion.

      "FEDERAL INCOME TAX" means any Income Tax imposed by the United
States government.

      "FOREIGN INCOME TAX" means any Income Tax imposed by any foreign country
or any possession of the United States, or by any political subdivision of any
foreign country or United States possession.

      "GROUP" means the Cabot Group or the CMC Group, as the context requires.

      "INCOME TAX" means all Taxes (i) based upon, measured by, or calculated
with respect to, net income or net receipts, proceeds or profits or (ii) based
upon, measured by, or calculated with respect to multiple bases (including, but
not limited to, corporate franchise and occupation Taxes) if such Tax may be
based upon, measured by, or calculated with respect to one or more bases
described in clause (i) above.

      "INITIAL PUBLIC OFFERING" has the meaning set forth in the IPO and
Distribution Agreement.

      "INTERNAL REVENUE SERVICE" OR "IRS" means the United States Internal
Revenue Service or the United States Department of the Treasury, as the
context requires.

                                      -4-
<PAGE>   7
      "IPO AND DISTRIBUTION AGREEMENT" has the meaning set forth in the
Master Separation Agreement.

      "IRS PRIVATE LETTER RULING" means the private letter ruling issued by the
IRS in response to the letter filed by Cabot requesting a ruling from the
Internal Revenue Service regarding certain tax consequences of the Transactions.

      "MASTER SEPARATION AGREEMENT" means the Master Separation Agreement
between Cabot and CMC, dated March 28, 2000.

      "MMD BUSINESS" has the meaning set forth in the Master Separation
Agreement.

      "OTHER TAX" means any Tax that is not an Income Tax.

      "PAYMENT DATE" means (i) with respect to any Cabot Federal Consolidated
Return, the due date for any required installment of estimated taxes determined
under Code Section 6655, the due date (determined without regard to extensions)
for filing the return determined under Code Section 6072, and the date the
return is filed, and (ii) with respect to any Consolidated or Combined State
Income Tax Return, the corresponding dates determined under the applicable Tax
Law.

      "POST-DISTRIBUTION PERIOD" means any Tax Period beginning after the
Distribution Date, and, in the case of any Straddle Period, the portion of such
Straddle Period beginning the day after the Distribution Date.

      "PRE-DISTRIBUTION PERIOD" means any Tax Period ending on or before the
Distribution Date, and, in the case of any Straddle Period, the portion of such
Straddle Period ending on the Distribution Date.

      "PRIME RATE" means the base rate on corporate loans charged by Citibank,
N.A., New York, New York from time to time, compounded on each March 31, June
30, September 30 and December 31.

                                      -5-
<PAGE>   8
      "RESPONSIBLE COMPANY" means, with respect to any Tax Return, the Company
having responsibility for preparing and filing such Tax Return under this
Agreement.

      "RESTRUCTURING TAX" means the Taxes described in Sections 2.4(a).

      "SEPARATE COMPANY TAX" means any Tax computed by reference to the assets
and activities of a member or members of a single Group.

      "STRADDLE PERIOD" means any Tax Period that begins on or before and ends
after the Distribution Date.

      "STATE INCOME TAX" means any Income Tax imposed by any State of the United
States or by any political subdivision of any such State.

      "TAINTING ACT" shall have the meaning provided in Section 9.

      "TAX" or "TAXES" means any income, gross income, gross receipts, profits,
capital stock, franchise, withholding, payroll, social security, workers
compensation, unemployment, disability, 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 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 BENEFIT" means any refund of, credit against, or other reduction in
otherwise required Tax payments (including any reduction in estimated tax
payments) and any interest in respect of the foregoing, net of the effect on
otherwise required Tax payment of any associated or corresponding item of income
or gain, or other increase in otherwise required Tax payments.

                                      -6-
<PAGE>   9
      "TAX CONTEST" means an audit, review, examination, or any other
administrative or judicial proceeding with the purpose or effect of
redetermining Taxes of any of the Companies or their Affiliates (including any
administrative or judicial review of any claim for refund).

      "TAX ITEM" means, with respect to any Income Tax, any item of income,
gain, loss, deduction, or credit.

      "TAX LAW" means the law of any governmental entity or political
subdivision thereof relating to any Tax.

      "TAX PERIOD" means, with respect to any Tax, the period for which the Tax
is reported as provided under the Code or other applicable Tax Law.

      "TAX RECORDS" means Tax Returns, Tax Return workpapers, documentation
relating to any Tax Contests, and any other books of account or records required
to be maintained under the Code or other applicable Tax Laws or under any record
retention agreement with any Tax Authority.

      "TAX 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.

      "TRANSACTIONS" means the transactions contemplated by the Master
Separation Agreement and the IPO and Distribution Agreement.

      "TREASURY REGULATIONS" means the regulations promulgated from time to time
under the Code as in effect for the relevant Tax Period.

      SECTION 2. Allocation of Income Tax Liabilities.

      2.1. Federal Income Tax. Except as otherwise provided in this Agreement,
Federal Income Tax liability shall be allocated as follows:

                                      -7-
<PAGE>   10
      (a) Consolidated Period. For each Consolidated Period, CMC shall be liable
   for and pay to Cabot an amount equal to Federal Income Tax determined under
   the "Stand Alone Method." Under this method CMC's liability for Tax for any
   taxable period is computed as if, since its formation, CMC had (i) never been
   part of the Cabot Group and (ii) filed a consolidated Federal Income Tax
   Return as parent of the CMC Group with each eligible member of that Group;
   provided, however, that the provisions of Section 2.5(a) regarding special
   rules for application of the Stand Alone Method shall apply. Cabot shall be
   liable for all Federal Income Tax for the Consolidated Period other than
   amounts for which CMC is liable pursuant to this Section 2.1(a).

      (b) Non-Consolidated Periods. CMC shall be responsible for all Federal
   Income Tax imposed on members of the CMC Group with respect to all periods
   which are not Consolidated Periods. Cabot shall be responsible for all
   Federal Income Tax imposed on members of the Cabot Group other than members
   of the CMC Group with respect to all periods which are not Consolidated
   Periods.

      2.2. State and Foreign Income Taxes. Except as otherwise provided in this
Agreement, State and Foreign Income Tax liability shall be allocated as follows:

      (a) Consolidated or Combined State and Foreign Income Taxes. CMC shall be
   liable for and pay to Cabot any State or Foreign Income Tax with respect to
   any Consolidated or Combined State or Foreign Income Tax Return in an amount
   that is equal to the amount determined under the Stand Alone Method for the
   period covered by such Tax Return. Cabot shall be liable for and pay any
   State or Foreign Income Tax with respect to any Consolidated or Combined
   State or Foreign Income Tax Return other than the amount for which CMC is
   liable pursuant to this Section 2.2(a).

      b) Separate Company Taxes. In the case of any State or Foreign Income Tax
   which is a Separate Company Tax, CMC shall be liable for and shall pay
   directly the applicable Tax

                                      -8-
<PAGE>   11
   Authority any such Income Tax that is properly imposed under Tax Law on any
   member of the CMC Group and Cabot shall be liable for and shall pay any such
   Separate Company Tax imposed on any member of the Cabot Group other than a
   member of the CMC Group.

      2.3 Other Taxes. Except as otherwise provided in this Agreement, CMC shall
   be liable to and pay the applicable Tax Authority any Other Tax that is
   imposed on any member of the CMC Group and Cabot shall be liable to and pay
   the applicable Tax Authority any Other Tax that is imposed on any member of
   the Cabot Group other than a member of the CMC Group.

      2.4.  Transaction Taxes.

      (a) General. Except as otherwise provided in this Section 2.4 Cabot shall
   be responsible for and pay any and all liability for Taxes resulting from the
   Transactions. This shall include but not be limited to (i) any sales and use,
   gross receipts, or other transfer Taxes imposed on the transfers occurring
   pursuant to the Transactions together with any Tax resulting from any income
   or gain recognized under Treasury Regulation Sections 1.1502-13 or 1.1502-19
   (or any corresponding provisions of other applicable Tax Laws) as a result of
   the Transactions; and (ii) except as otherwise provided in Section 2.4(b),
   any Tax resulting from any income or gain recognized as a result of any of
   the Transactions failing to qualify for tax-free treatment under Code
   Sections 351, 355, 361, or other provisions of the Code (as contemplated in
   the IRS Private Letter Ruling) or corresponding provisions of other
   applicable Tax Laws.

      (b) Inconsistent Acts and Events. Cabot or CMC, as the case may be, shall
   be liable for, and shall indemnify and hold harmless the members of the other
   Group from and against any liability for, any Restructuring Tax (described in
   subparagraphs (i) and (ii) above) to the extent arising from (i) any breach
   by such indemnifying party of the representations or covenants under Section
   9, (ii) any Tainting Act performed by such indemnifying party, (iii) the
   inaccuracy of any factual statements or representations made by such
   indemnifying party in connection with the IRS Private Letter Ruling, but only
   to the extent such inaccuracy

                                      -9-
<PAGE>   12
   arises from facts in existence prior to the Distribution Date or (iv) any
   Section 355(e) Event with respect to the indemnifying party. A Section 355(e)
   Event with respect to an entity occurs if one or more persons acquire
   directly or indirectly stock of such entity representing a 50% or greater
   interest in such entity within the meaning of Section 355(e).

      2.5.  Calculation of Tax Liability.

            (a) Stand Alone Method. The following rules shall apply for purposes
   of computing CMC's liability under the Stand Alone Method - (i) transactions
   during any Consolidated Period between a member of the CMC Group and a member
   of the Cabot Group that is not a member of the CMC Group shall, for Federal
   Income Tax purposes, be accounted for pursuant to the provisions of the
   regulations under IRC Section 1502 that govern intercompany transactions (and
   to the extent appropriate for State or Foreign Income Tax purposes, similar
   rules shall apply in the case of transactions between such members which are
   included in State or Foreign Combined or Consolidated Income Tax Returns),
   provided that the pricing of the provision of goods and services in
   intercompany transactions shall be in accordance with the economic terms of
   any written arrangements among the parties (i.e. liability under the Stand
   Alone Method shall be computed without regard to any adjustments to such
   pricing that may be made under Section 482 of the Code or analogous
   provisions of State or Foreign law); (ii) during Consolidated Periods all
   computations shall be made in conformity with the positions, elections and
   accounting methods used by Cabot in preparing the consolidated returns of the
   Cabot Group; (iii) the highest marginal tax rate to which the CMC Group could
   be subject under applicable Tax Law shall be deemed to be the only Tax rate
   to which such group is subject under such law; and (iv) subject to (i)
   through (iii) above, all computations and other determinations shall be made
   in accordance with the the laws and regulations applying to affiliated groups
   filing consolidated returns (including, in the case of any company that
   becomes or ceases to be a member of any Group, the laws

                                      -10-
<PAGE>   13
   and regulations applicable to a company that becomes or ceases to be a member
   of a such Group), as well as all other relevant federal Tax laws and
   regulations (and similar rules shall apply in the case of State or Foreign
   Taxes in respect to Combined or Consolidated Returns for such Taxes).

      (b) The principles of Treasury Regulation Section 1.1502-76(b) as
   reasonably interpreted and applied by the Companies shall apply in
   determining whether a Tax Item is attributable to a Tax Period provided that
   (x) no election shall be made under Treasury Regulation Section
   1.1502-76(b)(2)(ii) (relating to ratable allocation of a year's items) and
   (y) if the Distribution Date is not an Accounting Cutoff Date, the provisions
   of Treasury Regulation Section 1.1502-76(b)(2)(iii) will be applied to
   ratably allocate the items (other than extraordinary items) for the month
   which includes the Distribution Date.

      (c) In determining the apportionment of Tax Items between Pre-Distribution
   Periods and Post-Distribution Periods, any Tax Items relating to the
   Transactions shall be treated as an extraordinary item described in Treasury
   Regulation Section 1.1502-76(b)(2)(ii)(C) and shall be allocated to
   Pre-Distribution Periods, and any Taxes related to such items shall be
   treated under Treasury Regulation Section 1.1502-76(b)(2)(iv) as relating to
   such extraordinary item and shall be allocated to Pre-Distribution Periods.

      2.6. Tax Payments and Intercompany Billings. Each Company shall pay the
   Taxes allocated to it by this Section 2 either to the applicable Taxing
   Authority or to the other Company in accordance with Section 5.

         SECTION 3.  Preparation and Filing of Tax Returns.

      3.1. General. Except as otherwise provided in this Section 3, Income Tax
Returns shall be prepared and filed when due (including extensions) by the
person obligated to file such Tax Returns under the Code or applicable Tax Law.
The Companies shall provide, and shall cause their Affiliates to provide,
assistance and cooperate with one another in accordance with Section

                                      -11-
<PAGE>   14
6 with respect to the preparation and filing of Tax Returns, including providing
information required to be provided in Section 6.

      3.2. Pre-Distribution Period and Straddle Period Tax Returns. All Income
Tax Returns required to be filed for Pre-Distribution Periods or Straddle
Periods, shall be:

      (1) prepared and filed by Cabot, in the case of any Consolidated or
   Combined Income Tax Return; and

      (2) prepared and filed, or caused to be prepared and filed, by the Company
   to which such Tax Return relates in all other cases.

      CMC shall, for each Tax Period or portion thereof for which CMC or a
member of the CMC Group is included in a Tax Return described in clause (1) of
the preceding sentence, provide Cabot with (i) a true and correct pro forma tax
return for the CMC Group together with an accompanying computation of Tax
liability of the Group prepared in accordance with the Stand Alone Method, (ii)
separate pro forma tax returns for each member of the CMC Group together with
accompanying computations of the separate tax return Tax liabilities of each
member of the Group, and (iii) a reconciliation of book income to federal
taxable income for each member of the CMC Group. CMC hereby agrees to use its
best efforts to provide Cabot with such returns and computations no later than
the first day of the sixth month following the end of the period to which such
returns and computations relate, but in any event shall provide such returns and
computations to Cabot no later than the fifteenth day of the sixth month
following the end of the period to which such returns and computations relate.
CMC, in preparing the above mentioned pro forma tax returns for its Group, shall
not consider or give effect to any (i) net operating loss carryover or
carryback, (ii) capital loss carryover or carryback, (iii) excess charitable
deduction carryover, (iv) excess tax carryover or carryback, or (v) other
similar carryback or carryback item.

                                      -12-
<PAGE>   15
      3.3. Post-Distribution Period Tax Returns. Except as otherwise provided in
Section 3.2 with respect to Straddle Period Tax Returns:

      (1) All Tax Returns related to CMC or the CMC Group for Post-Distribution
Periods shall be prepared and filed (or caused to be prepared and filed) by CMC,

      (2) All Tax Returns related to Cabot or the Cabot Group, excluding for
   this purpose CMC or members of the CMC Group, for Post-Distribution Periods
   shall be prepared and filed (or caused to be prepared and filed) by Cabot.

      3.4.  Tax Accounting Practices.

      (a) General Rule. Except as otherwise provided in this Section 3.4, any
   Income Tax Return for any Pre-Distribution Period or any Straddle Period, and
   any Income Tax Return for any Post-Distribution Period to the extent items
   reported on such Tax Return might reasonably affect items reported on any Tax
   Return for any Pre-Distribution Period or any Straddle Period, shall be
   prepared in accordance with past Tax accounting practices used with respect
   to the Tax Returns in question (unless such past practices are no longer
   permissible under the Code or other applicable Tax Law), and to the extent
   any items are not covered by past practices (or in the event such past
   practices are not longer permissible under the Code or other applicable Tax
   Law), in accordance with reasonable Tax accounting practice selected by the
   Responsible Company.

      (b) Reporting of Transaction Tax Items. The tax treatment reported on any
   Tax Return of Tax Items relating to the Transaction shall be consistent with
   the treatment of such item in the IRS Private Letter Ruling. To the extent
   there is a Tax Item relating to the Transactions which is not covered by the
   IRS Private Letter Ruling, the tax treatment of such Tax Items on a Tax
   Return shall be determined by the Responsible Company with respect to such
   Tax Return, provided (i) there is a reasonable basis for such tax treatment,
   and (ii) such tax treatment is not inconsistent with the tax treatment
   contemplated in the IRS Private Letter

                                      -13-
<PAGE>   16
   Ruling. Such Tax Return shall be submitted for review pursuant to Section
   3.5(a), and any dispute regarding such proper tax treatment shall be referred
   for resolution pursuant to Section 13 sufficiently in advance of the filing
   date of such Tax Return (including extensions) to permit timely filing of the
   return.

      3.5.  Right to Review Tax Returns.

      (a) General. The Responsible Company with respect to any Tax Return shall
   make such Tax Return and related Tax Records available for review by the
   other Company, if requested, to the extent (i) such Tax Return relates to
   Taxes for which the requesting party may be liable, (ii) such Tax Return
   relates to Taxes for which the requesting party may be liable in whole or in
   part for any additional Taxes owing as a result of adjustments to the amount
   of Taxes reported on such Tax Return, (iii) such Tax Return relates to Taxes
   for which the requesting party may have a claim for Tax Benefits under this
   Agreement, or (iv) the requesting party reasonably determines that it must
   inspect such Tax Return to confirm compliance with the terms of this
   Agreement. The Responsible Company shall use its reasonable best efforts to
   make such Tax Return and Tax Records available for review as required under
   this paragraph sufficiently in advance of the due date for filing such Tax
   Returns to provide the requesting party with a meaningful opportunity to
   analyze and comment on such Tax Returns and have such Tax Returns modified
   before filing, taking into account the person responsible for payment of the
   Tax (if any) reported on such Tax Return and the materiality of the amount of
   Tax liability with respect to such Tax Return. The Companies shall attempt in
   good faith to resolve any issues arising out of the review of such Tax
   Returns or Tax Records.

      (b) Execution of Returns Prepared by Other Party. In the case of any Tax
   Return which is required to be prepared and filed by one Company under this
   Agreement and which is required by law to be signed by another Company (or by
   its authorized representative), the

                                      -14-
<PAGE>   17
   Company that is legally required to sign such Tax Return shall not be
   required to sign such Tax Return under this Agreement if there is no
   reasonable basis for the tax treatment of any material items reported on the
   Tax Return. Any such Tax Return shall be supplied by the Company responsible
   for its preparation and filing to the Company responsible for its signing at
   least five days prior to the due date of such Tax Return (including
   applicable extensions) and such signing Company shall deliver an executed
   copy of such Tax Return to the filing Company at least two days prior to the
   due date of such Tax Return (including applicable extensions).

      SECTION 4.  Refunds, Carrybacks and Tax Benefits.

      4.1. Compensation for Use of CMC Consolidated Period Tax Items.

      In the event that (i) the Cabot Group realizes an actual Tax Benefit
   during any Consolidated Period as a result of the use by members of the Cabot
   Group (other than members of the CMC Group) of Tax Items of the CMC Group and
   (ii) as a result of such use the Federal Income Tax liability of the CMC
   Group for any period which is not a Consolidated Period is greater than the
   amount of such liability computed under the Stand Alone Method (but without
   regard to clauses (iii) and (iv) of the the third sentence of Section
   2.5(a)), then Cabot will pay to CMC, in accordance with Section 5.7, an
   amount equal to the lesser of (x) the excess of the Tax Benefit actually
   realized by Cabot referred to in clause (i) over the amount of any prior
   payments to CMC pursuant to this Section 4.1 in respect of that Tax Benefit
   and (y) the excess referred to in clause (ii) for such non-Consolidated
   Period.

      4.2.  Claims for Refund, Carrybacks, and Self-Audit Adjustments
("Adjustment Requests").

      (a) Consent Required for Adjustment Requests Related to Consolidated or
   Combined Income Tax Returns. Except as provided in paragraph (b) below, each
   of the Companies hereby agrees that, unless the other Company consents in
   writing, which consent shall not be

                                      -15-
<PAGE>   18
   unreasonably delayed or withheld, no Adjustment Request shall be filed with
   respect to any Consolidated or Combined Tax Return that included the CMC
   Group for a Pre-Distribution Period and affects the CMC Group Tax liability.
   Any Adjustment Request which the Companies consent to make under this Section
   4.2 shall be prepared and filed by the Responsible Company under Sections 3.2
   and 3.3 for the Tax Return to be adjusted. The Company requesting the
   Adjustment Request shall provide to the Responsible Company all information
   required for the preparation and filing of such Adjustment Request in such
   form and detail as reasonably requested by the Responsible Company.

      (b) Exception for Adjustment Requests Related to Audit Adjustments. Each
   Company shall be entitled, without the consent of the other Company, to
   require Cabot to file an Adjustment Request to take into account any net
   operating loss, net capital loss, deduction, credit, or other adjustment
   attributable to such Company or any member of its Group corresponding to any
   adjustment resulting from any audit by the Internal Revenue Service or other
   Tax Authority with respect to Consolidated or Combined Income Tax Returns for
   any Pre-Distribution Period. In addition, Cabot shall be entitled to require
   CMC to file a corresponding Adjustment Request with respect to Separate
   Company Taxes for any Pre-Distribution Periods.

      (c) Other Adjustment Requests Permitted. Nothing in this Section 4.2 shall
   prevent any Company or its Affiliates from filing any Adjustment Request with
   respect to Tax Returns which are not Consolidated or Combined Income Tax
   Returns or with respect to any Other Taxes; provided, however, that neither
   Company shall file an amended Tax Return with respect to Separate Company or
   Other Taxes for which the other Company is liable under this Agreement
   without the written consent of such other Company (which consent shall not be
   unreasonably withheld). If any refund or credit is obtained as a result of
   any such Adjustment Request (or otherwise), the parties shall recalculate the
   amounts that would have

                                      -16-
<PAGE>   19
   been paid under this Agreement based on the changes resulting in such refund
   or credit, and shall make such payments between them as necessary to place
   each in the position it would have been in had the payments made under this
   Agreement originally been made based on such changes.

      (d) Payment of Refunds and other Tax Benefits. Except as set forth in
   Section 4.2(e), any refunds or other Tax Benefits received by either Company
   (or any of its Affiliates) as a result of any Adjustment Request which are
   for the account of the other Company (or member of such other Company's
   Group) shall be paid by the Company receiving (or whose Affiliate received)
   such refund or Tax Benefit to such other Company in accordance with Section
   5.

      (e) Ordering of and Payment for Carrybacks.

              (i) In the event that a member of the Cabot Group, on the one
   hand, and a member of the CMC Group, on the other hand, are each entitled to
   carryback a Tax Item to a Pre-Distribution Period, the respective Tax Items
   shall be used under the rules of applicable Tax Law (which shall be, in the
   case of Carrybacks to such Tax Periods of the affiliated group of which Cabot
   is the common parent, the rules contained in Treasury Regulation Section
   1.1502-21T).

              (ii) Any Tax refund or other Tax Benefit resulting from the
   Carryback of any member of one Group (the "Carryback Group") of any Tax Item
   arising after the Distribution Date to a Pre-Distribution Period shall be for
   the account of the Carryback Group (and in the event CMC Group is the
   Carryback Group, then upon receipt of the Tax refund or other Tax Benefit
   Cabot shall pay to CMC the amount of such Tax refund or other Tax Benefit);
   provided, however, that if at the time of the use of the Carryback Items of a
   member of the Carryback Group, a member of the other Group (the "Other
   Group") possesses Carryback Tax Items which, but for the ordering rule set
   forth in (i) above, would have been available to be used (the "Other Group
   Carryback") in lieu of the Carryback Group's Tax Items, then (but

                                      -17-
<PAGE>   20
   only to the extent of the Other Group Carryback) the Carryback Group shall
   not be entitled to payment of the amount of such Tax refund or Tax Benefit
   until the earlier of (X) the date on which a member of the Other Group claims
   the Other Group Carryback on a Tax Return or (Y) the date on which a member
   of the Carryback Group would have been able to use the Carryback had it not
   been claimed with respect to the Pre-Distribution Period Tax Return.

              (iii) In the event the Carryback of Tax Items of a member of the
   Cabot Group, or the CMC Group, as the case may be, does not result in a Tax
   refund, due to an offsetting Tax adjustment to a member of the Other Group,
   then the Other Group shall promptly pay the amount of any decrease in Tax
   liability resulting from the Carryback claim, provided, however, that in the
   event the Other Group possesses Carryback Items which, but for the ordering
   rules set forth in (i) above would have been available to be used in lieu of
   the Carryback Group's Items, then (but only to the extent of the Other Group
   Carryback), the Other Group shall not be required to pay the amount of such
   decrease in Tax liability to the Carryback Group until the earlier of (X) the
   date on which a member of the Other Group claims the Other Group Carryback on
   a Tax Return or (Y) the date on which a member of the Carryback Group would
   have been able to utilize the Carryback had it not been claimed with respect
   to the Pre-Distribution Period Tax Return.

      4.3. Adjustment of Tax Items. In the event that the Carryback of Tax Items
of one Group, or a Tax adjustment attributable to such Group under the terms of
this Agreement, results in the disallowance or limitation of Tax Items claimed
on the Tax Return as filed, the Carryback Group shall be responsible for any
increase in Tax liability resulting from the disallowance or limitation of Tax
attributes; provided, however, that in the event the disallowance or limitation
of Tax attributes results in a Tax Benefit resulting from the use of such Tax
attributes in another Tax Period, such Tax Benefit shall be deemed to be for the
account of the Carryback Group for such purposes of this Agreement.

                                      -18-
<PAGE>   21
      4.4. Adjustments on Audit. If, upon examination by any Tax Authority of
any Tax Return including a member of the Cabot Group or CMC Group for any Tax
Period, any item of deduction, credit or expense is disallowed for which Cabot
is or may be liable for Taxes hereunder (or an item of income is required to be
recognized on a Tax Return which was not reported on such Tax Return), in either
such case resulting in a tax detriment suffered by the Cabot Group, and such
disallowance (or recognition) results in a Tax Benefit to the CMC Group (with
respect to that Tax Period or another Tax Period), then CMC shall pay to Cabot
the amount of such Tax Benefit that is realized in the form of an actual
reduction in Tax (which shall be computed by comparing the Tax which would have
been owed by CMC but for the item giving rise to the Tax Benefit with the Tax
owed by CMC taking such item into account) provided, however, that in no case
will the amount that CMC is required to pay to Cabot with respect to such Tax
Benefit exceed the corresponding tax detriment to Cabot (reduced by payments
previously made by CMC to Cabot with respect to such Tax Benefit). Any payment
required to be made hereunder shall be made in accordance with Section 5.10. The
provisions of this Section 4.4 shall apply mutatis mutandis where an item of
deduction, credit or expense is disallowed for which CMC is or may be liable for
Taxes hereunder (or any item of income is required to be recognized on a Tax
Return which was not reported on such Tax Return), as they apply where the Cabot
Group suffers such a detriment. For avoidance of doubt, any payment required to
be made by Cabot to the CMC Group under this Section 4.4 shall, to the extent
applicable, be deemed as an offset to amounts owing by CMC to Cabot under
Section 2.1 hereof.

      SECTION 5.  Tax Payments and Intercompany Billings.

      5.1. Payment of Taxes With Respect to Cabot Federal Consolidated Returns.
In the case of any Cabot Federal Consolidated Return -

      (a) Computation and Payment of Tax Due. At least ten business days prior
   to any Payment Date, Cabot shall compute the amount of Tax required to be
   paid to the Internal

                                      -19-
<PAGE>   22
   Revenue Service (taking into account the requirements of Section 3.4
   relating to consistent accounting practices) with respect to such Tax Return
   on such Payment Date and shall notify CMC in writing of the amount of Tax
   required to be paid on such Payment Date. Cabot will pay such amount to the
   Internal Revenue Service on or before such Payment Date.

      (b) Computation and Payment of CMC Liability With Respect to Tax Due.
   Within 30 days following any Payment Date, CMC will pay to Cabot the excess
   (if any) of

         (i) the amount of liability determined as of such Payment Date with
       respect to the applicable Tax Period allocable to CMC in a manner
       consistent with the provisions of Section 2.1, over

         (ii) the amount equal to the cumulative net payments with respect to
       such Tax Return prior to such Payment Date made by CMC or members of its
       Group.

    If the amount in clause (ii) above is greater than the amount in clause (i)
    above as of any Payment Date, then Cabot shall pay such excess to CMC within
    30 days following the Payment Date.

      (c) Interest on Intergroup Tax Allocation Payments. In the case of any
   payments to Cabot required under paragraph (b) of this Section 5.1, CMC shall
   also pay to Cabot an amount of interest computed at the Prime Rate on the
   amount of the payment required based on the number of days from the
   applicable Payment Date until the date of CMC's subsequent payment. In the
   case of any payments by Cabot required under paragraph (b) of this Section
   5.1, Cabot shall also pay to CMC an amount of interest computed at the Prime
   Rate on the amount of the payment required based on the number of days from
   the applicable Payment Date until the date of Cabot's subsequent payment of
   such amount to CMC.

      5.2.  Payment of Federal Income Tax Related to Adjustments.

      (a) Adjustments Resulting in Underpayments. Cabot shall pay to the
   Internal Revenue Service when due any additional Federal Income Tax required
   to be paid as a result of any

                                      -20-
<PAGE>   23
   adjustment to the tax liability with respect to any Cabot Federal
   Consolidated Return. CMC shall pay to Cabot an amount that is allocable to
   CMC under Section 2.1 within 30 days from the later of (i) the date the
   additional Tax was paid by Cabot or (ii) the date of receipt by CMC of a
   written notice and demand from Cabot for payment of the amount due,
   accompanied by evidence of payment and a statement detailing the Taxes paid
   and describing in reasonable detail the particulars relating thereto. Any
   payments required under this Section 5.2 (a) shall include interest computed
   at the Prime Rate based on the number of days from the date the additional
   Tax was paid by Cabot to the date of the payment under this Section 5.2(a).

      (b) Adjustments Resulting in Overpayments. Within 30 days of receipt by
   Cabot of any Tax Benefit resulting from any adjustment to the tax liability
   with respect to any Cabot Federal Consolidated Return, Cabot shall pay to CMC
   its share of any such Tax Benefit, as determined in accordance with the
   principles of Sections 2.1 and 4. Any payments required under this Section
   5.2(b) shall include interest computed at the Prime Rate based on the number
   of days from the date the Tax Benefit was received by Cabot to the date of
   payment to CMC under this Section 5.2(b).

      5.3.  Payment of State Income Tax Relating to Pre-Distribution Periods.

      (a) Computation and Payment of Tax Due. At least three business days prior
   to any Payment Date for any Tax Return with respect to any State Income Tax
   relating to a Pre-Distribution Period, the Responsible Company shall compute
   the amount of Tax required to be paid to the applicable Tax Authority (taking
   into account the requirements of Section 3.4 relating to consistent
   accounting practices) with respect to such Tax Return on such Payment Date
   and --

         (i) If such Tax Return is with respect to a Consolidated or Combined
       State Income Tax, the Responsible Company shall, if Cabot is not the
       Responsible Company with

                                      -21-
<PAGE>   24
        respect to such Tax Return, notify Cabot in writing of the amount of Tax
        required to be paid on such Payment Date. Cabot will pay such amount to
        such Tax Authority on or before such Payment Date.

         (ii) If such Tax Return is with respect to a Separate Company Tax, the
       Responsible Company shall, if it is not the Company liable for the Tax
       reported on such Tax Return, notify the Company liable for such Tax in
       writing of the amount of Tax required to be paid on such Payment Date.
       The Company liable for such Tax will pay such amount to such Tax
       Authority on or before such Payment Date.

      (b) Computation and Payment of CMC Liability With Respect to Tax Due.
   Within 30 days following the due date (including extensions) for filing any
   Tax Return for any Consolidated or Combined State Income Tax (excluding any
   Tax Return with respect to payment of estimated Taxes or Taxes due with a
   request for extension of time to file) relating to a Pre-Distribution Period,
   CMC shall pay to Cabot the Tax liability allocable to CMC as determined by
   Cabot under the provisions of Sections 2.2 and 4, plus interest computed at
   the Prime Rate on the amount of the payment based on the number of days from
   the due date (including extensions) to the date of payment by CMC to Cabot.

      5.4.  Payment of State Income Taxes Related to Adjustments.

      (a) Adjustments Resulting in Underpayments. Cabot shall pay to the
   applicable Tax Authority when due any additional State Income Tax required to
   be paid as a result of any adjustment to the Tax liability with respect to
   any Tax Return for any Consolidated or Combined State Income Tax for any
   Pre-Distribution Period. CMC shall pay to Cabot its respective share of any
   such additional Tax payment determined in accordance with Sections 2.2 and 4
   within 30 days from the later of (i) the date the additional Tax was paid by
   Cabot or (ii) the date of receipt by CMC of a written notice and demand from
   Cabot for payment of the amount due, accompanied by evidence of payment and a
   statement detailing the Taxes paid

                                      -22-
<PAGE>   25
   and describing in reasonable detail the particulars relating thereto. CMC
   shall also pay to Cabot interest on its respective share of such Tax computed
   at the Prime Rate based on the number of days from the date the additional
   Tax was paid by Cabot to the date of its payment to Cabot under this Section
   5.4(a).

      (b) Adjustments Resulting in Overpayments. Within 30 days of receipt by
   Cabot of any Tax Benefit resulting from any adjustment to the Tax liability
   with respect to any Tax Return for any Consolidated or Combined State Income
   Tax for any Pre-Distribution Period, Cabot shall pay to CMC its share of any
   such Tax Benefit determined in accordance with the principles of Sections 2.2
   and 4. Any payments required under this Section 5.4(b) shall include interest
   computed at the Prime Rate based on the number of days from the date the Tax
   Benefit was received by Cabot to the date of payment under this Section
   5.4(b).

      5.5. Payment of Separate Company Taxes and Other Taxes. Each Company shall
pay, or shall cause to be paid, to the applicable Tax Authority when due all
Separate Company Taxes and Other Taxes owed by such Company or a member of such
Company's Group.

      5.6. Indemnification Payments. If any Company (the "payor") is required to
pay to a Tax Authority a Tax that another Company (the "responsible party") is
required to pay to such Taxing Authority under this Agreement, the responsible
party shall reimburse the payor within 30 days of delivery by the payor to the
responsible party of an invoice for the amount due, accompanied by evidence of
payment and a statement detailing the Taxes paid and describing in reasonable
detail the particulars relating thereto. The reimbursement shall include
interest on the Tax payment computed at the Prime Rate based on the number of
days from the date of the payment to the Tax Authority to the date of
reimbursement under this Section 5.6.

      5.7. Compensation for use of CMC Consolidated Period Tax Items. In the
event Cabot is required to pay CMC in accordance with Section 4.1, CMC shall
deliver to Cabot an invoice stating the amount due to CMC, accompanied by a
reasonably detailed calculation of that

                                      -23-
<PAGE>   26
amount, as prescribed by section 4.1. Cabot shall pay CMC within 30 days from
the due date (including any extensions) for the Tax Return filed by CMC with
respect to such amount, including interest computed at the Prime Rate based on
the number of days from such due date to the date Cabot pays CMC.

      5.8. Payment of Refunds and Other Tax Benefits. (a) Except as otherwise
provided in this Agreement, if a member of one Group receives a Tax refund or
other Tax Benefit with respect to Taxes for which a member of the other Group is
liable hereunder, the Company receiving such Tax refund shall make a payment to
the Company who is liable for such Taxes hereunder within 30 days following the
receipt of the Tax refund in an amount equal to such Tax refund, plus interest
on such amount computed at the Prime Rate based on the number of days from the
date of receipt of the Tax refund to the date of payment under this Section 5.8.

      (b) In the event one Group is reimbursed for its payment of a Tax
liability of the other Group, the amount of such reimbursement shall be computed
net of any Tax Benefit realized by the reimbursed Group as the result of payment
of the other Group's Tax liability.

      5.9. Payment for Carrybacks. Each Company shall pay the other Company for
Carrybacks in accordance with Section 4.2(e). Any such payment shall include
interest at the Prime Rate based on the number of days from the date Company is
required to make the payment under Section 4.2(e) to the date the Company
actually makes the payment.

      5.10. Payment for Adjustments on Audit. Any payment required under Section
4.4 shall be made within 30 days of the due date (including any extensions) of
the Tax Return on which the Tax Benefit described in that section is claimed.
Such payment shall include interest computed at the Prime Rate based on the
number of days from such due date to the date the payment is made.

                                      -24-
<PAGE>   27
      SECTION 6.  Assistance and Cooperation.

      6.1. General. Each of the Companies shall cooperate (and cause their
respective Affiliates to cooperate) with each other and with each other's
agents, including accounting firms and legal counsel, in connection with Tax
matters relating to the Companies and their Affiliates including (i) preparation
and filing of Tax Returns, (ii) determining the liability for and amount of any
Taxes due (including estimated Taxes) or the right to and amount of any refund
of Taxes, (iii) examinations of Tax Returns, and (iv) any administrative or
judicial proceeding in respect of Taxes assessed or proposed to be assessed.
Such cooperation shall include making all information and documents in their
possession relating to the other Companies and their Affiliates available to
such other Companies as provided in Section 7. Each of the Companies shall also
make available to each other, as reasonably requested and available, personnel
(including officers, directors, employees and agents of the Companies or their
respective Affiliates) responsible for preparing, maintaining, and interpreting
information and documents relevant to Taxes, and personnel reasonably required
as witnesses or for purposes of providing information or documents in connection
with any administrative or judicial proceedings relating to Taxes. Any
information or documents provided under this Section 6 shall be kept
confidential by the Company receiving the information or documents, except as
may otherwise be necessary in connection with the filing of Tax Returns or in
connection with any administrative or judicial proceedings relating to Taxes.

      6.2. Income Tax Return Information. Each Company will provide to each
other Company information and documents relating to their respective Groups
required by the other Companies to prepare Tax Returns. The Responsible Company
shall determine a reasonable compliance schedule for such purpose in accordance
with past practices. Any additional information or documents the Responsible
Company requires to prepare such Tax Returns will

                                      -25-
<PAGE>   28
be provided in accordance with past practices, if any, or as the Responsible
Company reasonably requests and in sufficient time for the Responsible Company
to file such Tax Returns timely.

      SECTION 7.  Tax Records.

      7.1. Retention of Tax Records. Except as provided in Section 7.2, each
Company shall preserve and keep all Tax Records exclusively relating to the
assets and activities of their respective Groups for Pre-Distribution Tax
Periods, and Cabot shall preserve and keep all other Tax Records relating to
Taxes of the Groups for Pre-Distribution Tax Periods, for so long as the
contents thereof may become material in the administration of any matter under
the Code or other applicable Tax Law, but in any event until the later of (i)
the expiration of any applicable statutes of limitation, as extended, and (ii)
seven years after the Distribution Date. If, prior to the expiration of the
applicable statute of limitation and such seven-year period, a Company
reasonably determines that any Tax Records which it is required to preserve and
keep under this Section 7 are no longer material in the administration of any
matter under the Code or other applicable Tax Law, such Company may dispose of
such records upon 90 days prior written notice to the other Company. Such notice
shall include a list of the records to be disposed of describing in reasonable
detail each file, book, or other record accumulation being disposed. The
notified Company shall have the opportunity, at its cost and expense, to copy or
remove, within such 90-day period, all or any part of such Tax Records.

      7.2. State Income Tax Returns. Tax Returns with respect to State Income
Taxes and workpapers prepared in connection with preparing such Tax Returns
shall be preserved and kept, in accordance with the guidelines of Section 7.1,
by the Company responsible for preparing and filing the applicable Tax Return.

      7.3. Access to Tax Records. The Companies and their respective Affiliates
shall make available to each other for inspection and copying during normal
business hours upon reasonable notice all Tax Records in their possession to the
extent reasonably requested by the other

                                      -26-
<PAGE>   29
Company in connection with the preparation of Tax Returns, audits, litigation,
or the resolution of items under this Agreement.

      SECTION 8.  Tax Contests.

      8.1. Notice. Each of the parties shall provide prompt notice to the other
party of any pending or threatened Tax audit, assessment or proceeding or other
Tax Contest of which it becomes aware related to Taxes for Tax Periods for which
it is indemnified by the other party hereunder. Such notice shall contain
factual information (to the extent known) describing any asserted Tax liability
in reasonable detail and shall be accompanied by copies of any notice and other
documents received from any Tax Authority in respect of any such matters. If an
indemnified party has knowledge of an asserted Tax liability with respect to a
matter for which it is to be indemnified hereunder and such party fails to give
the indemnifying party prompt notice of such asserted Tax liability, then (i) if
the indemnifying party is precluded from contesting the asserted Tax liability
in any forum as a result of the failure to give prompt notice, the indemnifying
party shall have no obligation to indemnify the indemnified party for any Taxes
arising out of such asserted Tax liability, and (ii) if the indemnifying party
is not precluded from contesting the asserted Tax liability in any forum, but
such failure to give prompt notice results in a monetary detriment to the
indemnifying party, then any amount which the indemnifying party is otherwise
required to pay the indemnified party pursuant to this Agreement shall be
reduced by the amount of such detriment.

      8.2. Control of Tax Contests. Each Company shall have full responsibility
and discretion in handling, settling or contesting any Tax Contest involving a
Tax for which it is liable pursuant to Section 2 of this Agreement; provided,
however, Cabot shall have full responsibility and discretion in handling,
settling or contesting any Tax Contest with respect to a Consolidated or
Combined Income Tax Return of the Cabot Group. Furthermore, Cabot may
participate in any

                                      -27-
<PAGE>   30
Tax Contest with respect to Restructuring Taxes regardless of whether it has
liability or indemnification obligations with respect to such Taxes under this
Agreement.

      SECTION 9.  No Inconsistent Actions.

      (a) Each of the Companies covenants and agrees that it will not take any
   action, and it will cause its Affiliates to refrain from taking any action,
   which may be inconsistent with the Tax treatment of the Transactions as
   contemplated in the IRS Private Letter Ruling (any such action is referred to
   in this Section 9 as a "Tainting Act"), unless (i) the Company or Affiliate
   thereof proposing such Tainting Act (the "Requesting Party") either (A)
   obtains a ruling with respect to the Tainting Act from the Internal Revenue
   Service or other applicable Tax Authority that is reasonably satisfactory to
   the other Company (the "Requested Party") (except that the Requesting Party
   shall not submit any such ruling request if a Requested Party determines in
   good faith that filing such request might have a materially adverse effect
   upon such Requested Party), or (B) obtains an unqualified opinion reasonably
   acceptable to each Requested Party of independent nationally recognized tax
   counsel acceptable to each Requested Party, on a basis of assumed facts and
   representations consistent with the facts at the time of such action, that
   such Tainting Act will not affect the Tax treatment of the Transactions as
   contemplated in the IRS Private Letter Ruling, or (ii) each Requested Party
   consents in writing to such Tainting Act, which consent shall be granted or
   withheld in the sole and absolute discretion of each such Requested Party.
   Without limiting the foregoing:

         (i) Specified Actions. During the two year period following the
       Distribution Date, unless clause (i) or (ii) of the preceding paragraph
       is satisfied with respect to the applicable action, no Company or its
       Affiliate will (A) liquidate or merge with or into any other corporation
       (other than a merger which results in the outstanding stock of such
       Company or its Affiliates immediately before the merger continuing to
       represent at least

                                      -28-
<PAGE>   31
       fifty-five (55) percent of the outstanding voting stock and non-voting
       stock of the merged corporations after the transaction); (B) issue more
       than thirty-five (35) percent, by vote or value, of its capital stock in
       one or more transactions, including the Initial Public Offering; (C)
       redeem, purchase or otherwise reacquire its capital stock in one or more
       transactions, except to the extent such redemption, purchase or
       reacquisition meets the requirements of section 4.05(1)(b) of Revenue
       Procedure 96-30; (D) sell, exchange, distribute or otherwise dispose of,
       other than in the ordinary course of business, more than forty (40)
       percent of the assets constituting the trades or businesses relied upon
       in the IRS Private Letter Ruling to satisfy Section 355(b) of the Code;
       or (E) discontinue or cause to be discontinued the active conduct of the
       trades or businesses relied upon in the IRS Private Letter Ruling to
       satisfy Section 355(b) of the Code.

         (ii) No Inconsistent Plan or Intent. Each of the Companies represents
       and warrants that neither it nor any of its Affiliates has any plan or
       intent to take any action which is inconsistent with any factual
       statements or representations in the IRS Private Letter Ruling.
       Regardless of any change in circumstances, each of the Companies
       covenants and agrees that it will not take, and it will cause its
       Affiliates to refrain from taking, any such inconsistent action on or
       before the last day of the calendar year ending after the second
       anniversary of the Distribution Date other than as permitted in this
       Section 9.

         (iii) 355(e) Covenant. Without in any manner limiting paragraphs (i) or
       (ii) immediately above, each of Cabot and CMC covenants and agrees that,
       during the two-year periods ending on and beginning on the Distribution
       Date, unless clause (i) or (ii) of section 9(a) of this Agreement is
       satisfied with respect to the applicable action, it will not enter into
       any negotiations, agreements or arrangements with respect to transactions
       or events (including stock issuances, option grants, capital
       contributions or acquisitions, but not including the Initial Public
       Offering), which may cause the Distribution to be

                                      -29-
<PAGE>   32
       treated as part of a plan pursuant to which one or more persons acquire
       directly or indirectly Cabot or CMC stock, as the case may be,
       representing a "50 percent or greater interest" within the meaning of
       Section 355(e)(4) of the Code.

         (iv) Amended or Supplemental Rulings. Each of the Companies covenants
       and agrees that it will not file, and it will cause its Affiliates to
       refrain from filing, any amendment or supplement to the IRS Private
       Letter Ruling request with respect to the Transactions subsequent to the
       Distribution Date without the consent of the other Companies, which
       consent shall not be unreasonably withheld.

      (b) Notwithstanding anything to the contrary in this Agreement, each
   Company shall be solely liable for, and shall indemnify and hold harmless the
   other Company from any Restructuring Tax resulting from a Tainting Act by
   such first Company or its Affiliates, regardless of whether clause (i) or
   (ii) of Section 9(a) was satisfied with respect to such Tainting Act.

      SECTION 10. Survival of Obligations. The representations, warranties,
covenants and agreements set forth in this Agreement shall be unconditional and
absolute and shall remain in effect without limitation as to time.

      SECTION 11.  Employee Matters. Each of the Companies agrees to utilize,
or cause its Affiliates to utilize, the alternative procedure set forth in
section 5 of Revenue Procedure 96-60, 1996-2 C.B. 399, with respect to wage
reporting.

      SECTION 12.  Treatment of Payments; Tax Gross Up.

      12.1. Treatment of Tax Indemnity and Tax Benefit Payments. In the absence
   of any change in tax treatment under the Code or other applicable Tax Law,
   any Tax indemnity payments or Tax Benefit payments made by a Company under
   Section 5 shall be reported for Tax purposes by the payor and the recipient
   as distributions or capital contributions, as appropriate, occurring
   immediately before the Distribution on the Distribution Date, but only

                                      -30-
<PAGE>   33
   to the extent the payment does not relate to a Tax allocated to the payor in
   accordance with Treasury Regulation Section 1.1502-33(d) (or under
   corresponding principles of other applicable Tax Laws).

      12.2. Tax Gross Up. If notwithstanding the manner in which Tax indemnity
payments and Tax Benefit payments were reported, there is an adjustment to the
Tax liability of a Company as a result of its receipt of a payment pursuant to
this Agreement, such payment shall be appropriately adjusted so that the amount
of such payment, reduced by the amount of all Income Taxes payable with respect
to the receipt thereof (but taking into account all correlative Tax Benefits
resulting from the payment of such Income Taxes), shall equal the amount of the
payment which the Company receiving such payment would otherwise be entitled to
receive pursuant to this Agreement.

      12.3. Interest Under This Agreement. Anything herein to the contrary
notwithstanding, to the extent one Company ("indemnitor") makes a payment of
interest to another Company ("indemnitee") under this Agreement with respect to
the period from the date that the indemnitee made a payment of Tax to a Tax
Authority to the date that the indemnitor reimbursed the indemnitee for such Tax
payment, or with respect to the period from the date that the indemnitor
received a Tax Benefit to the date indemnitor paid the indemnitee with respect
to such Tax Benefit, the interest payment shall be treated as interest expense
to the indemnitor (deductible to the extent provided by law) and as interest
income by the indemnitee (includible in income to the extent provided by law).
The amount of the payment shall not be adjusted under Section 12.2 to take into
account any associated Tax Benefit to the indemnitor or increase in Tax to the
indemnitee.

      SECTION 13. Disagreements. If after good faith negotiations the parties
cannot agree on the application of this Agreement to any matter, then the matter
will be referred to an accounting firm acceptable to each of the parties (the
"Accounting Firm"). The Accounting Firm shall

                                      -31-
<PAGE>   34
furnish written notice to the parties of its resolution of any such disagreement
as soon as practical, but in any event no later than 45 days after its
acceptance of the matter for resolution. Any such resolution by the Accounting
Firm will be conclusive and binding on all parties to this Agreement. In
accordance with Section 15, each party shall pay its own fees and expenses
(including the fees and expenses of its representatives) incurred in connection
with the referral of the matter to the Accounting Firm. All fees and expenses of
the Accounting Firm in connection with such referral shall be shared equally by
the parties affected by the matter.

      SECTION 14. Late Payments. Any amount owed by one party to another party
under this Agreement which is not paid when due shall bear interest at the Prime
Rate plus two percent, compounded on each March 31, June 30, September 30 and
December 31, from the due date of the payment to the date paid. To the extent
interest required to be paid under this Section 14 duplicates interest required
to be paid under any other provision of this Agreement, interest shall be
computed at the higher of the interest rate provided under this Section 14 or
the interest rate provided under such other provision.

      SECTION 15. Expenses. Except as provided in Section 14, each Company and
its Affiliates shall bear their own expenses incurred in connection with
preparation of Tax Returns, Tax Contests, and other matters related to Taxes
under the provisions of this Agreement.

      SECTION 16.  General Provisions.

      16.1. Notices. All notices and other communications hereunder shall be in
writing and shall be delivered in person, by telecopy, by express or overnight
mail delivered by a nationally recognized air courier (delivery charges
prepaid), or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:

                                      -32-
<PAGE>   35
      (a)   If to Cabot, to:
                  Cabot Corporation
                  75 State Street
                  Boston, Massachusetts  02109

                  Attention:    Chief Financial Officer
                  Telecopy No.: (617) 642-6281

                  With a copy to:

                  Law Department
                  Cabot Corporation
                  75 State Street
                  Boston, Massachusetts  02109

                  Attention:  General Counsel
                  Telecopy No.:     (617) 342-6039

      (b) If to CMC, to:
                  Cabot Microelectronics Corporation
                  870 North Commons Drive
                  Aurora, Illinois  60504

                  Attention:  President
                  Telecopy No.:     (630) 375-5593

or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery or when delivery is refused. Any notice or communication sent by
telecopy or by air courier shall be deemed effective on the first Business Day
at the place at which such notice or communication is received following the day
on which such notice or communication was sent.

            16.2. 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

                                      -33-
<PAGE>   36
constitute one and the same agreement. The Agreement may be delivered by
facsimile transmission of a signed copy thereof.

            16.3. Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon the parties hereto and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Except with respect to a merger of either party, neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
either party hereto without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed; provided, however, that
Cabot and CMC may assign their respective rights, interests, duties, liabilities
and obligations under this Agreement to any of their respective subsidiaries,
but such assignment shall not relieve Cabot or CMC, as the assignee, of its
obligations hereunder. The schedules attached hereto or referred to herein are
an integral part of this Agreement and are hereby incorporated into this
Agreement and made a part hereof as if set forth in full herein.

            16.4. Dispute Resolution. Resolution of any and all disputes arising
from or in connection with this Agreement, whether based on contract, tort, or
otherwise (collectively, "Disputes"), shall be exclusively governed by and
settled in accordance with the provisions of Section 13 and this Section 16.5.
The parties hereto shall use all commercially reasonable efforts to settle all
Disputes without resorting to mediation, arbitration, litigation or other third
party dispute resolution mechanisms. If any Dispute remains unsettled, the
parties hereby agree to mediate such Dispute using a mediator reasonably
acceptable to all parties involved in such Dispute. If the parties are unable to
resolve such dispute through mediation, each party will be free to commence
proceedings for the resolution thereof. No party shall be entitled to
consequential, special, exemplary or punitive damages.

            16.5. Severability. Any provision of this Agreement which is

prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such

                                     -34-
<PAGE>   37
prohibition or unenforceability without invalidating the remaining provisions
hereof. Any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.

            16.6. Waiver. The observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term, but such waiver shall
be effective only if it is in writing signed by the party against which such
waiver is to be asserted. Unless otherwise expressly provided in this Agreement,
no delay or omission on the part of any party in exercising any right or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any right or privilege under this Agreement
operate as a waiver of any other right or privilege under this Agreement nor
shall any single or partial exercise of any right or privilege preclude any
other or further exercise thereof or the exercise of any other right or
privilege under this Agreement. No failure by either party to take any action or
assert any right or privilege hereunder shall be deemed to be a waiver of such
right or privilege in the event of the continuation or repetition of the
circumstances giving rise to such right unless expressly waived in writing by
the party against whom the existence of such waiver is asserted.

            16.7.  Amendment.  This Agreement may not be amended or modified
in any respect except by a written agreement signed by both of the parties
hereto.

            16.8. Authority. Each of the parties hereto represents to the other
that (a) it has the corporate power and authority to execute, deliver and
perform this Agreement, (b) the execution, delivery and performance of this
Agreement by it has been duly authorized by all necessary corporate action, (c)
it has duly and validly executed and delivered this Agreement, and (d) this
Agreement is a legal, valid and binding obligation, enforceable against it in
accordance with its terms subject to applicable bankruptcy, insolvency,
reorganization,

                                      -35-
<PAGE>   38
moratorium or other similar laws affecting creditors' rights generally and
general equity principles.

            16.9. Interpretation. The headings contained in this Agreement, in
any Schedule hereto and in the table or contents to this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule but
not otherwise defined therein, shall have the meaning assigned to such term in
this Agreement. When a reference is made in this Agreement to an Article or a
Section or Schedule, such reference shall be to an Article or Section of, or a
Schedule to, this Agreement unless otherwise indicated.

            16.10. Effective Time. This Agreement shall become effective upon
the closing of CMC's Initial Public Offering.

                                      -36-
<PAGE>   39
      IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by the respective officers as of the date set forth above.

                                CABOT CORPORATION

                                        By:   /s/ Samuel W. Bodman
                                              --------------------------

                                        Name:   Samuel W. Bodman

                                        Title:   Chairman and CEO

                                 CABOT MICROELECTRONIC CORPORATION

                                        By:   /s/ Matthew Neville
                                              --------------------------

                                        Name:  Matthew Neville

                                        Title:   President and CEO

                                      -37-

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