-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, E6oRhwP+brx4AhRlzLV2u08fCZe6BQbu7/3yxPw1RNPb8uKgoIYQakgaSgwuUxoa XBeWSX+DFm0Dl/UX7gga9g== 0000100790-95-000012.txt : 19950615 0000100790-95-000012.hdr.sgml : 19950615 ACCESSION NUMBER: 0000100790-95-000012 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 32 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950310 SROS: MSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION CARBIDE CORP /NEW/ CENTRAL INDEX KEY: 0000100790 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 131421730 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-01463 FILM NUMBER: 95519830 BUSINESS ADDRESS: STREET 1: 39 OLD RIDGEBURY RD CITY: DANBURY STATE: CT ZIP: 06817-0001 BUSINESS PHONE: 2037942000 MAIL ADDRESS: STREET 1: 39 OLD RIDGEBURY RD CITY: DANBURY STATE: CT ZIP: 06817-0001 FORMER COMPANY: FORMER CONFORMED NAME: UNION CARBIDE CORP DATE OF NAME CHANGE: 19890806 FORMER COMPANY: FORMER CONFORMED NAME: UNION CARBIDE & CARBON CORP DATE OF NAME CHANGE: 19710317 10-K405 1 Securities and Exchange Commission, Washington, D.C. 20549 Annual Report on Form 10-K for the year ended December 31, 1994. Filed pursuant to Section 13 of the Securities Exchange Act of 1934. Commission file number 1-1463 Union Carbide Corporation 1994 10-K Union Carbide Corporation Tel. (203) 794-2000 39 Old Ridgebury Road State of incorporation: New York Danbury, Connecticut 06817-0001 IRS identification number: 13-1421730 Securities registered pursuant to Section 12(b) of the Act: Class of security: Registered on: Common Stock ($1 par value) New York Stock Exchange Chicago Stock Exchange, Incorporated The Pacific Stock Exchange Incorporated Share Purchase Rights Plan New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE At February 28, 1995, 137,261,112 shares of common stock were outstanding. Non-affiliates held 136,509,114 of those shares, of which the aggregate market value was $3.908 billion. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 ("the Act") during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X Documents incorporated by reference: Annual report to stockholders for the year ended December 31, 1994 (Parts I and II) Proxy statement for the annual meeting of stockholders to be held on April 26, 1995 (Part III) Table of Contents Part I Item 1: Business 1 Item 2: Properties 3 Item 3: Legal Proceedings 5 Item 4: Submission of Matters to a Vote of Security Holders 5 Part II Item 5: Market for Registrant's Common Equity and Related Stockholder Matters 6 Item 6: Selected Financial Data 6 Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Item 8: Financial Statements and Supplementary Data 6 Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 6 Part III Item 10: Directors and Executive Officers of the Registrant 7 Item 11: Executive Compensation 9 Item 12: Security Ownership of Certain Beneficial Owners and Management 9 Item 13: Certain Relationships and Related Transactions 9 Part IV Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K 10 Signatures 13 Exhibit Index 14 DEFINITION OF TERMS See the inside back cover page of the annual report to stockholders. Terms defined there are used herein. Part I Item 1. Business General-See inside front cover and pages 8 and 9 of the 1994 annual report to stockholders for information about Union Carbide's business. On April 27, 1994, stockholders voted to approve the merger of Union Carbide Corporation (UCC) into Union Carbide Chemicals and Plastics Company Inc. (UCC&P). The merger was effective May 1, 1994. Immediately after the merger, UCC&P had the same consolidated assets, liabilities and stockholders' equity as UCC. UCC&P has changed its name to Union Carbide Corporation. All references to Union Carbide Corporation, the corporation or UCC after the periods starting May 1, 1994, are a reference to the merged company. Union Carbide is engaged in the chemicals and plastics business. The chemicals and plastics industry, especially the commodity sector, is highly cyclical. Union Carbide is a major producer of certain commodity chemicals, principally ethylene glycol and polyethylene. Consequently, Union Carbide's results are subject to the swings of the cycle in those basic chemicals. See pages 4 through 7 of the 1994 annual report to stockholders for a further discussion. Union Carbide does not produce against a backlog of firm orders; production is geared primarily to the level of incoming orders and to projections of future demand. Inventories of finished products, work in process and raw materials are maintained to meet delivery requirements of customers and Union Carbide's production schedules. At year-end 1994, 12,004 people were employed worldwide in approximately 40 plants, factories and laboratories around the world. Raw Materials, Products and Markets-See information herein and in the 1994 annual report to stockholders on pages 8 and 9. Unless otherwise indicated, the products of Union Carbide are sold principally by its own sales force, directly to customers. Union Carbide believes it has contracts or commitments for, or readily available sources of, hydrocarbon feedstocks and fuel supplies to meet its anticipated needs in all major product areas. The corporation's operations are dependent upon the availability of hydrocarbon feedstocks and fuels which are purchased from diverse domestic and international sources, including independent oil and gas producers as well as integrated oil companies. The availability and price of hydrocarbon feedstocks, energy and finished products are subject to plant interruptions and outages and to market and political conditions in the U.S. and elsewhere. Operations and products at times may be adversely affected by legislation, government regulations, shortages, or international or domestic events. Union Carbide is not dependent to a significant extent upon a single customer or a few customers. Patents; Trademarks; Research and Development-Union Carbide owns a large number of United States and foreign patents that relate to a wide variety of products and processes, has pending a substantial number of patent applications throughout the world, and is licensed under a number of patents. These patents expire at various times over the next 20 years. Such patents and patent applications in the aggregate are material to Union Carbide's competitive position. No one patent is considered to be material; however, the patent portfolio relating to the UNIPOL polyethylene process technology is, in the aggregate, considered to be material. Union Carbide also has a large number of trademarks. The UNION CARBIDE, UCAR and UNIPOL trademarks are material; no other single trademark is material. Essentially all of Union Carbide's research and development activities are company-sponsored. The principal research and development facilities of Union Carbide are indicated in the discussion of Properties (Item 2) of this Form 10-K report. In addition to the facilities specifically indicated there, product development and process technology laboratories are maintained at some plants. Union Carbide spent $136 million in 1994, $139 million in 1993 and $155 million in 1992 on company-sponsored research activities to develop new products, processes, or services, or to improve existing ones. Environment-See Costs Relating to Protection of the Environment on pages 14 and 15 of the 1994 annual report to stockholders and Note 16 on pages 35 and 36 thereof. Insurance-Union Carbide's policy is to obtain public liability insurance coverage at terms and conditions and a price that management considers fair and reasonable. Union Carbide's management believes Union Carbide has public liability insurance in an amount sufficient to meet its current needs in light of pending, threatened, and future litigation and claims. There is no assurance, however, that Union Carbide will not incur losses beyond the limits, or outside the coverage, of its insurance. Such insurance is subject to substantial deductibles. Competition-Each of the major products and services areas in which Union Carbide participates is highly competitive. In some instances competition comes from manufacturers of the same products as those produced by Union Carbide and in other cases from manufacturers of different products which may serve the same markets as those served by Union Carbide's products. Some of Union Carbide's competitors, such as companies principally engaged in petroleum operations, have more direct access to hydrocarbon feedstocks, and some have greater financial resources than Union Carbide. There are a number of competitors in each of the products and services areas in which Union Carbide is active. In some of the individual areas in which Union Carbide participates there are many competitors; in others there are few. Competition is primarily on price, on product performance and on service to customers. - - Many producers have important industry positions in polyethylene, and Union Carbide is one of the world's largest producers. Other significant producers are Dow Chemical Company, Chevron Corporation, Exxon Corporation, Mobil Corporation, Novacor Chemicals Ltd, Quantum Chemicals Corporation, Occidental Petroleum Corporation, Phillips Petroleum Company, Saudi Basic Industries Corporation and The British Petroleum Company p.l.c. - - Union Carbide is the world's largest producer of ethylene oxide/glycol and derivatives. Other significant producers include Shell Oil Company, Dow Chemical Company, BASF Aktiengesellschaft, The British Petroleum Company p.l.c., Huntsman Corporation, ICI p.l.c., Occidental Petroleum Corporation, Hoechst Celanese Corporation, and Saudi Basic Industries Corporation. - - In solvents and intermediates and emulsion systems, Union Carbide has a significant position in many product areas. Other significant producers include Air Products and Chemicals, Inc., Hoechst Celanese Corporation, Rohm & Haas Company, Eastman Chemical Company, Shell Oil Company, Exxon Corporation, BASF Aktiengesellschaft and Quantum Chemicals Corporation. - - Union Carbide participates in a wide range of specialty chemical product/market areas. The competitive position varies widely from one product/market area to another. Competitors include a number of domestic and foreign companies, both diversified and specialized. Union Carbide is a major marketer of petrochemical products throughout the world. Products that the corporation markets are largely produced in the United States, while competitive products are produced throughout the world. In addition, the corporation plans to make significant investments in joint ventures in 1995. See pages 4 through 7 of the 1994 annual report to stockholders for a further discussion. Union Carbide's international operations face competition from local producers and global competitors and a number of other risks inherent in carrying on business outside the United States, including risks of nationalization, expropriation, restrictive action by local governments and changes in currency exchange rates. Item 2. Properties In management's opinion, current facilities, together with planned expansions, will provide adequate production capacity to meet Union Carbide's planned business activities. Capital expenditures are discussed on pages 17 and 19 of the 1994 annual report to stockholders. Listed below are the principal manufacturing facilities operated by Union Carbide worldwide. Research and engineering facilities are noted. Most of the domestic properties are owned in fee. Union Carbide maintains numerous domestic sales offices and warehouses, substantially all of which are leased premises under relatively short-term leases. All principal international operations manufacturing properties are owned or held under long-term leases. International operations administrative offices, technical service laboratories, sales offices and warehouses are owned in some instances and held under relatively short-term leases in other instances. The corporation's headquarters are located in Danbury, Connecticut, and are leased. Principal domestic operations manufacturing facilities and the principal products manufactured there are as follows: Location City Principal Product(s) California Torrance Latexes Georgia Tucker Latexes Illinois Alsip Latexes Kentucky Henderson Dielectric fluid Louisiana Greensburg Hydroxyethyl cellulose derivatives Louisiana Taft Acrolein and derivatives, acrylic monomers, caprolacetone, uv-curing, cycloaliphatic epoxides, ethylene oxide and glycol, glycol ethers, olefins, ethyleneamines Louisiana Taft (Star Plant) Polyethylene New Jersey Bound Brook Coatings resins, polyethylene compounding, recycled plastics New Jersey Edison Lanolin derivatives New Jersey Somerset Latexes New York Mamaroneck Lanolin derivatives Puerto Rico Bayamon Latexes Texas Garland Latexes Texas Seadrift Ethanolamines, ethylene oxide and glycol, glycol ethers, olefins, polyethylene, polypropylene, TERGITOL surfactants Texas Texas City Olefins, organic acids and esters, alcohols, TERGITOL surfactants, vinyl acetate, coatings resins Washington Washougal Crystal products West Virginia Institute Caprolacetone derivatives, CARBOWAX polyethylene glycol, hydroxyethyl cellulose, POLYOX polyethylene oxide, ketones, TRITON and TERGITOL surfactants, ethylidene norbornene West Virginia South Charleston Alkyl alkanolamines, brake fluids, miscellaneous specialty products, UCON fluids, TRITON surfactants Research and development are carried on at technical centers in Bound Brook, Edison and Somerset, New Jersey; Tarrytown, New York; Cary, North Carolina; Washougal, Washington; and South Charleston, West Virginia. Process and design engineering is conducted at the technical center in South Charleston, West Virginia, in support of domestic and foreign projects. Principal international operations manufacturing facilities and the principal products manufactured there are as follows: Country City Principal Product(s) Belgium Antwerp Hydroxyethyl cellulose Belgium Vilvoorde Lanolin derivatives Brazil Aratu Hydroxyethyl cellulose Brazil Cubatao Polyethylene Canada Boucherville Molded polyethylene products Canada Prentiss Ethylene glycol Dubai, UAE Jebel Ali Free Trade Zone Latex Ecuador Guayaquil Latex, coatings resins Indonesia Jakarta Latex Malaysia Seremban Latex People's Republic of China Guangdong Province Latex Philippines Batangas Latex Sri Lanka Ekala Latex Thailand Nonthaburi Latex Research and development are carried on at international operations facilities in Antwerp, Belgium; Montreal East, Canada; Cubatao, Brazil; Versoix, Switzerland; and Jurong, Singapore. Item 3. Legal Proceedings See Note 16 of Notes to Financial Statements on pages 35 and 36 of the 1994 annual report to stockholders. On September 28, 1993, the U.S. Environmental Protection Agency (EPA) announced the service of an administrative complaint on Rhone-Poulenc Ag Company (R-P) alleging violations of the Resource Conservation and Recovery Act with respect to operation of the hazardous waste boiler at Institute, West Virginia. The complaint seeks to assess a civil penalty of $915,125 against R- P. If the complaint is sustained, under an agreement between R-P and the corporation, the corporation may be required to indemnify R-P for a portion of any penalty ultimately paid by R-P. On February 23, 1994, the EPA issued a complaint and compliance order to the corporation alleging violations of Federal Hazardous Waste Regulations at the South Charleston, West Virginia, plant. The complaint seeks a civil penalty of $320,300. The corporation is contesting the alleged violations and proposed penalty. On March 31, 1994, the EPA issued an administrative Complaint, Compliance Order and Notice of Opportunity for Hearing to the corporation alleging violations of the Resource Conservation and Recovery Act, as amended, and the Texas Solid Waste Disposal Act at the corporation's Texas City, Texas, plant. EPA proposes to assess a civil penalty of $139,000. The corporation has requested a hearing and is contesting the alleged violations and proposed penalty. On February 14, 1995, the EPA issued a complaint to the corporation alleging violations of the Federal Insecticide, Fungicide, and Rodenticide Act with a proposed civil penalty of $400,000. This matter concerns a discontinued medical instrument sterilant. The corporation voluntarily requested cancellation of its pesticide registration. As reported in the corporation's Form 10-K for the period ended December 31, 1993, the EPA issued an administrative complaint to the corporation on November 19, 1993, alleging violations of the Federal Clean Air Act at the Texas City, Texas, plant. The complaint sought a civil penalty of $194,550. On October 13, 1994, the corporation and EPA reached a settlement of this matter pursuant to which the corporation agreed to pay a penalty of $57,500. Item 4. Submission of Matters to a Vote of Security Holders The corporation did not submit any matters to a stockholder vote during the last quarter of 1994. Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Market and dividend information for the corporation's common stock is contained on pages 18 and 19 of the 1994 annual report to stockholders. The stock exchanges where the stock is traded are listed on page 38 of the 1994 annual report to stockholders. The declaration of dividends is a business decision made from time to time by the Board of Directors based on the corporation's earnings and financial condition and other factors the Board considers relevant. The number of stockholders of record of the corporation's common stock is contained on page 1 of the 1994 annual report to stockholders. Item 6. Selected Financial Data Information pertaining to consolidated operations is included under the captions "From the Income Statement," and "From the Balance Sheet (At Year- End)", and dividend information is included under the caption "Other Data" in the Selected Financial Data on page 19 of the 1994 annual report to stockholders. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations See the information covered in the 1994 annual report to stockholders on pages 11 through 17. Item 8. Financial Statements and Supplementary Data The consolidated balance sheet of Union Carbide Corporation and subsidiaries at December 31, 1994 and 1993, and the consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1994, together with the report thereon of KPMG Peat Marwick LLP dated January 19, 1995, are contained on pages 20 through 37 of the 1994 annual report to stockholders. Quarterly income statement data is contained on page 18 of the 1994 annual report to stockholders. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Union Carbide has not had any disagreements covered by this item with KPMG Peat Marwick LLP, its independent auditors. Part III Item 10. Directors and Executive Officers of the Registrant For background information on the Directors of Union Carbide Corporation whose terms are expected to continue after the annual meeting of stockholders and persons nominated to become Directors, see pages 9 through 13 of the proxy statement for the annual meeting of stockholders to be held on April 26, 1995. C. Peter McColough, age 72, who has been a director of the corporation since 1979, will not stand for reelection at the annual meeting of stockholders and will cease to be a director at that time. The principal executive officers of the corporation are as follows. Data is as of March 9, 1995. Name Age Position Year First Elected Robert D. Kennedy 62 Chairman of the Board and Chief Executive Officer 1986 William H. Joyce 59 President and Chief Operating Officer 1993 Joseph S. Byck 53 Vice-President 1991 James F. Flynn 52 Vice-President 1993 Joseph E. Geoghan 57 Vice-President, General Counsel and Secretary 1987 Thomas D. Jones 60 Vice-President and Treasurer 1993 Malcolm A. Kessinger 51 Vice-President 1991 Lee P. McMaster 52 Vice-President 1993 Gilbert E. Playford 47 Vice-President and Principal Financial Officer 1991 Joseph C. Soviero 56 Vice-President 1993 Roger B. Staub 60 Vice-President 1993 Ronald Van Mynen 57 Vice-President, Health, Safety and Environment 1992 Philip T. Wright 63 Vice-President 1995 John K. Wulff 46 Vice-President, Controller and Principal Accounting Officer 1988 There are no family relationships between any officers or directors of the corporation. There is no arrangement or understanding between any officer and any other person pursuant to which the officer was elected an officer. An officer is elected by the Board of Directors to serve until the next annual meeting of stockholders and until his successor is elected and qualified. The table on the next page gives a summary of the positions held during at least the past five years by each officer. Each of the officers has been employed by the corporation or a subsidiary of the corporation for the past five years. Name Position Years Held Robert D. Kennedy Chairman of the Board and Chief Executive Officer 1990 to present Chairman of the Board, President and Chief Executive Officer 1986 to 1990 William H. Joyce President and Chief Operating Officer 1993 to present Executive Vice-President 1991 to 1993 President, Union Carbide Chemicals and Plastics Company Inc. 1993 to 1994 Executive Vice-President, Union Carbide Chemicals and Plastics Company Inc. 1990 to 1993 Vice-President 1990 to 1991 Vice-President, Union Carbide Chemicals and Plastics Company Inc. 1989 to 1990 President, Polyolefins Division 1985 to 1990 Joseph S. Byck Vice-President 1991 to present Vice-President, Union Carbide Chemicals and Plastics Company Inc. 1991 to 1994 Vice-President, Business Development and Planning, Union Carbide Chemicals and Plastics Company Inc. 1989 to 1991 James F. Flynn Vice-President 1993 to present Vice-President, General Manager Solvents & Coatings Materials Division 1989 to 1993 Joseph E. Geoghan Vice-President, General Counsel and Secretary 1990 to present Vice-President and General Counsel 1987 to 1990 Thomas D. Jones Vice-President and Treasurer 1993 to present Vice-President, Treasurer and Principal Financial Officer, Union Carbide Chemicals and Plastics Company Inc. 1992 to 1994 Associate Treasurer 1992 to 1993 Assistant Treasurer 1987 to 1992 Malcolm A. Kessinger Vice-President 1991 to present Vice-President, Human Resources, Union Carbide Chemicals and Plastics Company Inc. 1990 to 1994 Corporate Director of Human Resources 1986 to 1990 Lee P. McMaster Vice-President 1993 to present President, Industrial Chemicals Division 1992 to 1993 Vice-President, General Manager, Polyolefins Division 1989 to 1992 Gilbert E. Playford Vice-President and Principal Financial Officer 1993 to present Vice-President, Treasurer and Principal Financial Officer 1992 to 1993 Vice-President 1991 to 1992 Vice-President, Corporate Holdings 1991 Vice-President 1989 to 1991 Joseph C. Soviero Vice-President 1993 to present President, Specialty Chemicals Division 1983 to 1993 Roger B. Staub Vice-President 1993 to present President, Polyolefins Division 1990 to 1993 Vice-President, General Manager, Polyolefins Division 1988 to 1990 Ronald Van Mynen Vice-President, Health, Safety and Environment 1992 to present Vice-President, Health, Safety and Environmental Affairs, Union Carbide Chemicals and Plastics Company Inc. 1985 to 1994 Philip T. Wright Vice-President 1995 to present Group Vice-President, Union Carbide Chemicals and Plastics Company Inc. 1990 to 1994 Vice-President, Union Carbide Chemicals and Plastics Company Inc. 1989 to 1990 John K. Wulff Vice-President, Controller and Principal Accounting Officer 1989 to present Item 11. Executive Compensation See pages 22 through 24 of the proxy statement for the annual meeting of stockholders to be held on April 26, 1995. Item 12. Security Ownership of Certain Beneficial Owners and Management See pages 25 and 26 of the proxy statement for the annual meeting of stockholders to be held on April 26, 1995. Item 13. Certain Relationships and Related Transactions No reportable transactions in 1994. Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K UNION CARBIDE CORPORATION (a) The following documents are filed as part of this report: 1. The consolidated financial statements set forth on pages 20 through 36 and the Independent Auditors' Report set forth on page 37 of the 1994 annual report to stockholders are incorporated by reference in this Form 10-K Annual Report. 2. The Report on Schedule of KPMG Peat Marwick LLP appears on page 11 of this Form 10-K Annual Report. 3. The following schedule should be read in conjunction with the consolidated financial statements incorporated by reference in Item 8 of this Form 10-K Annual Report. Schedules other than those listed have been omitted because they are not applicable. Page in this Form 10-K Report Valuation and Qualifying Accounts (Schedule VIII), three years ended December 31, 1994 12 (b) The corporation's Form 8-K dated November 16, 1994 reported the joint announcement by the corporation and Mitsubishi Corporation of Japan of an agreement for the sale of common stock representing 75 percent of UCAR International Inc.'s outstanding shares to a new company formed by Blackstone Capital Partners II Merchant Banking Fund L.P. (c) Exhibits-See Exhibit Index on pages 14 through 17 for exhibits filed with this Annual Report on Form 10-K. UOP (d) Audited financial statements of UOP, with Report of Independent Accountants thereon, appearing on pages 17 through 39 of the Corporation's 1993 Form 10-K, have been filed pursuant to Regulation S-X, Rule 3.09 and are incorporated by reference herein. UOP is a general partnership between EM Sector Holdings Inc. and Catalysts, Adsorbents and Process Systems, Inc., wholly owned subsidiaries of AlliedSignal Inc. and the corporation, respectively. Report of Independent Auditors The Board of Directors Union Carbide Corporation Under date of January 19, 1995, we reported on the consolidated balance sheets of Union Carbide Corporation and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three- year period ended December 31, 1994, as contained on pages 20 through 36 in the 1994 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1994. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedule as listed in Item 14(a)3. This financial statement schedule is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in Note 1 to the consolidated financial statements, in 1993 the company changed its method of accounting for postemployment benefits and in 1992 its methods of accounting for postretirement benefits other than pensions and income taxes. KPMG Peat Marwick LLP Stamford, Conn. January 19, 1995 Schedule VIII-Valuation and Qualifying Accounts Union Carbide Corporation and Consolidated Subsidiaries
Deductions Items determined to be uncollectible, Additions less recovery Balance at Charged to of amounts Balance at beginning costs and previously end of of period expenses written off period Millions of dollars, year ended December 31, 1994 Allowance for doubtful accounts $12 $2 $3 $11 Millions of dollars, year ended December 31, 1993 Allowance for doubtful accounts $ 9 $5 $2 $12 Millions of dollars, year ended December 31, 1992 Allowance for doubtful accounts $10 $2 $3 $ 9
Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Union Carbide Corporation March 9, 1995 by: John K. Wulff Vice-President, Controller and Principal Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the corporation and in the capacities indicated on March 9, 1995. Robert D. Kennedy John J. Creedon Ronald L. Kuehn, Jr. Director, Chairman of the Board Director Director and Chief Executive Officer William H. Joyce C. Fred Fetterolf C. Peter McColough Director, President and Director Director Chief Operating Officer Joseph E. Geoghan Rainer E. Gut Rozanne L. Ridgway Director, Vice-President, Director Director General Counsel and Secretary Gilbert E. Playford James M. Hester William S. Sneath Vice-President Director Director and Principal Financial Officer John K. Wulff Vernon E. Jordan, Jr. Vice-President, Controller and Director Principal Accounting Officer Exhibit Index Exhibit No. 3.1 Restated Certificate of Incorporation as filed May 2, 1994. 3.2 By-Laws of the Corporation as adopted April 26, 1994. 4.1 Indenture dated as of August 1, 1992, among UCC&P, the Corporation and Chemical Bank, Trustee, for debt securities issued and that may be issued (See Exhibit 4.1.1 of the Corporation's Form S-3 filed on December 9, 1992, File No. 33-55560). 4.2 The Corporation will furnish to the Commission upon request any other debt instrument referred to in item 601(b)(4)(iii)(A) of Regulation S-K. 4.3 Rights Agreement, dated as of July 26, 1989, as amended and restated as of May 27, 1992, between the Corporation and Chemical Bank (successor to Manufacturers Hanover Trust Company), as Rights Agent (See Exhibit 4(a) of the Corporation's Form 8 filed June 1, 1992). 7 Opinion of Kelley Drye & Warren regarding liquidation preference, dated February 11, 1993 (See Exhibit 7 of the Corporation's 1992 10-K). 10.1.1 Credit Agreement ($1,000,000,000) dated as of November 4, 1994, among the Corporation, the banks listed therein, the co-agents listed therein, Morgan Guaranty Trust Company of New York, as documentation agent, and Chemical Bank, as administrative agent and auction agent. 10.1.2 Credit Agreement ($200,000,000) dated as of November 4, 1994, among the Corporation, the banks listed therein, the co-agents listed therein, Morgan Guaranty Trust Company of New York, as documentation agent, and Chemical Bank, as administrative agent and auction agent. 10.2 Indemnity Agreement dated as of July 25, 1986, between the Corporation and Robert D. Kennedy. The Indemnity Agreement filed with the Commission is substantially identical in all material respects, except as to the parties thereto and dates thereof, with Indemnity Agreements between the Corporation and each other person who is a director or officer of the Corporation (See Exhibit 10.2 of the Corporation's 1992 Form 10-K). 10.3 Agreement, dated as of October 2, 1986, among UCC&P, GAF Corporation, GAF Chemicals Corporation, Jay & Company, Inc., Mayfair Investments, Inc. and Samuel J. Heyman (See Exhibit 10.3 of the Corporation's 1992 Form 10-K). 10.4 Transfer Agreement dated as of January 1, 1989, between UCC&P and Praxair, Inc. ("Praxair") (formerly named "Union Carbide Industrial Gases Inc."), as amended (See Exhibits 10.06, 10.07, 10.08 and 10.09 of Praxair's Form 10 dated March 10, 1992, as amended by Form 8s dated May 22, 1992, June 9, 1992 and June 12, 1992 ("Praxair Form 10")). 10.5 Transfer Agreement dated as of January 1, 1989, between UCC&P and Union Carbide Coatings Service Corporation ("UCCS"), as amended (See Exhibits 10.14, 10.15 and 10.16 of Praxair Form 10). 10.6 Amended and Restated Realignment Indemnification Agreement dated as of June 4, 1992, among the Corporation, UCC&P, Praxair, UCAR Carbon Company Inc. ("UCAR") and UCCS (See Exhibit 10.23 of Praxair Form 10). 10.7 Environmental Management, Services and Liabilities Allocation Agreement dated as of January 1, 1990, among the Corporation, UCC&P, UCAR, Praxair, and UCCS, as amended (See Exhibits 10.13 and 10.22 of Praxair Form 10). 10.8.1 Danbury Lease Agreements dated as of January 1, 1989, between UCC&P and Praxair, as amended (See Exhibit 10.26 of Praxair Form 10). 10.8.2 Fourth Amendment to Carbide Center Lease between UCC&P and Praxair dated July 1, 1992 (See Exhibit 10.14b of Praxair's 1993 Form 10-K). 10.8.3 Fifth Amendment to Carbide Center Lease between the Corporation and Praxair dated June 30, 1994. 10.8.4 Second Amendment to Linde Data Center Lease between UCC&P and Praxair dated July 2, 1992 (See Exhibit 10.14a of Praxair's 1993 Form 10K). 10.8.5 Third Amendment to Linde Data Center Lease between the Corporation and Praxair dated June 30, 1994. 10.9.1 Tax Disaffiliation Agreement dated as of June 4, 1992, between the Corporation and Praxair (See Exhibit 10.20 of Praxair Form 10). 10.9.2 Tax Settlement Agreement dated as of May 31, 1994, between the Corporation and Praxair. 10.10.1 Employee Benefits Agreement dated as of June 4, 1992, between the Corporation and Praxair (See Exhibit 10.25 of Praxair Form 10). 10.10.2 First Amendatory Agreement to the Employee Benefits Agreement dated May 31, 1994. 10.11.1 Danbury Lease-Related Services Agreement dated as of June 4, 1992, among the Corporation, UCC&P and Praxair (See Exhibit 10.24 of Praxair Form 10). 10.11.2 First Amendment to Danbury Lease Related Services Agreement dated June 30, 1994. 10.12 Additional Provisions Agreement dated as of June 4, 1992, between the Corporation, UCC&P, Praxair and UCCS (See Exhibit 10.21 of Praxair Form 10). 10.13.1* 1984 Union Carbide Stock Option Plan (See Exhibit 10.7.1 of the Corporation's 1991 Form 10-K). 10.13.2* Resolutions adopted by the Board of Directors of the Corporation on January 22, 1986, with respect to the 1984 Union Carbide Stock Option Plan (See Exhibit 10.7.2 of the Corporation's 1991 Form 10-K). 10.13.3* Resolutions adopted by the Board of Directors of the Corporation on April 17, 1986, with respect to the 1984 Union Carbide Stock Option Plan (See Exhibit 10.7.3 of the Corporation's 1991 Form 10-K). 10.13.4* Amendment to the 1984 Union Carbide Stock Option Plan effective June 1, 1989. 10.14.1* 1988 Union Carbide Long-Term Incentive Plan (See Exhibit 10.14.1 of the Corporation's 1993 Form 10-K). 10.14.2* Amendment to the 1988 Union Carbide Long-Term Incentive Plan effective June 1, 1989. 10.14.3 Amendment to the 1988 Union Carbide Long-Term Incentive Plan effective August 1, 1989. 10.14.4 Resolutions adopted by the Board of Directors of the Corporation on February 26, 1992, with respect to stock options granted under the 1984 Union Carbide Stock Option Plan and the 1988 Union Carbide Long- Term Incentive Plan (See Exhibit 10.14.4 of the Corporation's 1992 Form 10-K). 10.14.5 Resolutions adopted by the Compensation and Management Development Committee of the Board of Directors of the Corporation on June 30, 1992, with respect to stock options granted under the 1984 Union Carbide Stock Option Plan and the 1988 Union Carbide Long-Term Incentive Plan (See Exhibit 10.14.5 of the Corporation's 1992 Form 10-K). 10.15.1* 1983 Union Carbide Bonus Deferral Program (See Exhibit 10.8.1 of the Corporation's 1991 Form 10-K). 10.15.2 Amendment to the 1983 Union Carbide Bonus Deferral Program effective January 1, 1992 (See Exhibit 10.15.2 of the Corporation's 1992 Form 10-K). 10.16.1* 1984 Union Carbide Cash Bonus Deferral Program (See Exhibit 10.9.1 of the Corporation's 1991 Form 10-K). 10.16.2* Amendment to the 1984 Union Carbide Cash Bonus Deferral Program effective January 1, 1986 (See Exhibit 10.9.2 of the Corporation's 1991 Form 10-K). 10.16.3 Amendment to the 1984 Union Carbide Cash Bonus Deferral Program effective January 1, 1992 (See Exhibit 10.16.3 of the Corporation's 1992 Form 10-K). 10.17.1* Grantor Trust Agreement for the Equalization Benefit Plan for Participants of the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies and the Supplemental Retirement Income Plan (See Exhibit 10.10.1 of the Corporation's 1991 Form 10-K). 10.17.2* Amendment to Grantor Trust Agreement for the Equalization Benefit Plan for Participants of the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies and the Supplemental Retirement Income Plan (See Exhibit 10.17.2 of the Corporation's 1993 Form 10-K). 10.18.1* Equalization Benefit Plan for Participants of the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies (See Exhibit 10.11 of the Corporation's 1991 Form 10-K). 10.18.2 Amendment to the Equalization Benefit Plan effective January 1, 1994. 10.19.1* Supplemental Retirement Income Plan (See Exhibit 10.12.1 of the Corporation's 1991 Form 10-K). 10.19.2* Amendment to Supplemental Retirement Income Plan effective January 1, 1989 (See Exhibit 10.19.2 of the Corporation's 1993 Form 10-K). 10.19.3 Amendment to the Supplemental Retirement Income Plan effective January 1, 1994. 10.20.1 1992 Stock Compensation Plan for Non-Employee Directors of Union Carbide Corporation (See Appendix A of the Corporation's proxy statement for the annual meeting of the stockholders held on April 22, 1992). 10.20.2 Resolution adopted by the Board of Directors of the Corporation on June 30, 1992, with respect to the 1992 Stock Compensation Plan for Non-Employee Directors of Union Carbide Corporation (See Exhibit 10.20.2 of the Corporation's 1992 Form 10-K). 10.21.1 Severance Compensation Agreement, dated July 21, 1992, between the Corporation and Ronald Van Mynen. The Severance Compensation Agreement filed with the Commission is substantially identical in all material aspects, except as to the parties thereto and dates thereof, with Agreements between the Corporation and other officers and employees of the Corporation. 10.21.2 Amendment of Severance Compensation Agreement, dated September 24, 1993, between the Corporation and Ronald Van Mynen. Identical amendments, except as to the parties thereto, were entered into between the Corporation and other officers and employees of the Corporation. 10.22* Resolution adopted by the Board of Directors of the Corporation on November 30, 1988, with respect to an executive life insurance program for officers and certain other employees (See Exhibit 10.22 of the Corporation's 1993 Form 10-K). 10.23.1* 1989 Union Carbide Variable Compensation Plan (See Exhibit 10.17 of the Corporation's 1991 Form 10-K). 10.23.2 1994 Union Carbide Variable Compensation Plan (See Exhibit 10.23.2 of the Corporation's 1993 Form 10-K). 10.24.1 Union Carbide Corporation Benefits Protection Trust. 10.24.2 Amendment to the Union Carbide Corporation Benefits Protection Trust effective October 23, 1991 (See Exhibit 10.18.2 of the Corporation's 1991 Form 10-K). 10.24.3 Amendment to the Union Carbide Corporation Benefits Protection Trust effective January 1, 1994. 10.25* Resolutions adopted by the Board of Directors of the Corporation on February 24, 1988, with respect to the purchase of annuities to cover liabilities of the Corporation under the Equalization Benefit Plan for Participants of the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies and the Supplemental Retirement Income Plan. 10.26* Resolutions adopted by the Board of Directors of the Corporation on June 28, 1989, with respect to the purchase of annuities to cover liabilities of the Corporation under the Supplemental Retirement Income Plan. 10.27 Union Carbide Corporation Non-Employee Directors' Retirement Plan. 10.28 1994 Union Carbide Long-Term Incentive Plan. 10.29 Compensation Deferral Program effective January 1, 1995. 10.30 Excess Long Term Disability Plan effective January 1, 1994. 10.31 Recapitalization and Stock Purchase and Sale Agreement dated as of November 14, 1994 among Union Carbide Corporation, Mitsubishi Corporation, UCAR International Inc. and UCAR International Acquisition Inc. 11 Computation of Earnings per Share For The Five Years Ended December 31, 1994. 13 The Corporation's 1994 annual report to stockholders (such report, except for those portions which are expressly referred to in this Form 10-K, is furnished for the information of the Commission and is not deemed "filed'' as part of the Form 10-K). 21 Subsidiaries of the Corporation. 23.1 Consent of KPMG Peat Marwick LLP. 23.2 Consent of Price Waterhouse LLP. 27 Financial Data Schedule 99 1993 audited financial statements of UOP, with Report of Independent Accountants thereon (See pages 17 through 39 of the Corporation's 1993 Form 10-K). * The obligations of UCC&P hereunder were assumed by Union Carbide Corporation as of July 1, 1989. On May 1, 1994, Union Carbide Corporation was merged into UCC&P and UCC&P changed its name to "Union Carbide Corporation." Wherever an exhibit listed above refers to another exhibit or document (e.g., "See Exhibit 6 of...."), that exhibit or document is incorporated herein by such reference. A copy of any exhibit listed above may be obtained on written request to the Secretary's Department, Union Carbide Corporation, Section E-4, 39 Old Ridgebury Road, Danbury, CT 06817-0001. The charge for furnishing any exhibit is 25 cents per page plus mailing costs. EX-3.1 2 EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF UNION CARBIDE CORPORATION UNDER SECTION 807 OF THE BUSINESS CORPORATION LAW The undersigned William H. Joyce and John Macdonald, being respectively the President and Assistant Secretary of Union Carbide Corporation, hereby certify as follows: 1. The name of the Corporation is Union Carbide Corporation. The name under which the Corporation was formed was Union Carbide and Carbon Corporation. 2. The certificate of incorporation was filed in the Office of the Secretary of State of the State of New York on November 1, 1917. 3. This restatement of the certificate of incorporation of the Corporation was authorized by unanimous written consent of the Board of Directors of the Corporation. 4. The certificate of incorporation, as heretofore amended and changed to date, is hereby restated, without further amendment or change, to read in its entirety as follows: CERTIFICATE OF INCORPORATION OF UNION CARBIDE CORPORATION UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW l. The name of the Corporation is Union Carbide Corporation. 2. The Corporation may engage in any lawful act or activity for which corporations may be organized under the Business Corporation Law provided that the Corporation is not formed to engage in any act or activity which requires the consent or approval of any state official, department, board, agency or other body, without such consent or approval first being obtained. 3. The total number of shares that the Corporation may issue is 525,000,000, of which 500,000,000 shall be shares of Common Stock, par value $1.00 each, and 25,000,000 shall be shares of Preferred Stock, par value $1.00 each. (a) The holders of the Common Stock shall be entitled to one vote per share on all matters upon which stockholders are entitled to vote and shall not be entitled to any preference in the distribution of dividends or assets. (b) The Preferred Stock may be issued from time to time in series. Each share of a series shall be equal to every other share of the same series. The Board of Directors is authorized to establish and designate series and to fix the number of shares and the relative rights, preferences and limitations as between series, subject to such limitations as may be prescribed by law. In particular, the Board of Directors may establish, designate and fix the following with respect to each series of Preferred Stock: (1) The distinctive serial designation of the shares of the series which shall distinguish those shares from the shares of all other series; (2) The number of shares included in the series, which may be increased or decreased from time to time unless otherwise provided by the Board of Directors in creating the series; (3) The annual dividend rate for the shares of the series and the date or dates upon which such dividends shall be payable; (4) Whether dividends on the shares of the series shall be cumulative and, on the shares of any series having cumulative dividend rights, the date or dates or method of determining the date or dates from which dividends on the shares of the series shall be cumulative; (5) The amount or amounts which shall be paid out of the assets of the Corporation to the holders of the shares of the series upon the involuntary liquidation, dissolution or winding up of the Corporation and upon the voluntary liquidation, dissolution or winding up of the Corporation; (6) The price or prices at which, the period or periods within which and the terms and conditions upon which the shares of the series may be redeemed in whole or in part, at the option of the Corporation; (7) The obligation, if any, of the Corporation to purchase or redeem shares of the series pursuant to a sinking fund and the price or prices at which, the period or periods within which and the terms and conditions upon which the shares of the series shall be redeemed, in whole or in part, pursuant to such sinking fund; (8) The period or periods within which and the terms and conditions, if any, including the price or prices or the rate or rates of conversion and the terms and conditions of any adjustments thereof, upon which the shares of the series shall be convertible at the option of the holder into shares of any class of stock or into shares of any other series of Preferred Stock, except into a class of shares having rights or preferences as to dividends or distributions of assets upon liquidation which are prior or superior in rank to those of the shares being converted; (9) The voting rights, if any, of the shares of the series in addition to those required by law, including the number of votes per share and the transaction of any business or of any specified item of business in connection with which the shares of the series shall vote as a class; and (10) Any other relative rights, preferences, or limitations of the shares of the series not inconsistent herewith or with applicable law. (c) ESOP CONVERTIBLE PREFERRED STOCK Section 1. Definitions, Designation and Issuance. 1.01 Definitions. For purposes of this subparagraph (c): "BCL" means the Business Corporation Law of the State of New York, as amended from time to time. "Board" means the Board of Directors of the Corporation or any authorized committee of the Board. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Common Stock" means the shares of common stock, par value $1.00 each, authorized by paragraph 3 of the Certificate of Incorporation of the Corporation. "Conversion Price" means $8.981 per share, as such may be adjusted from time to time as provided herein. "Dividend Payment Date" means the Quarterly Payment Date or such other dates as the Board may designate for payment of Preferred Dividends in conjunction with an election to cause Preferred Dividends to become payable on an annual or semi-annual basis. "Dividend Redemption" means a redemption of ESOP Shares, at the election of the Holder, in connection with any Preferred Dividend. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ESOP Preferred Stock" or "ESOP Shares" means the ESOP Convertible Preferred Stock as designated in Subsection 1.02. "Holder" means the Trustee holding ESOP Shares. "Junior Stock" means the Common Stock and any series of stock ranking junior to the ESOP Preferred Stock as to dividends or upon dissolution. "Liquidation Price" means $8.981 per share as such may be subject to adjustment from time to time as provided herein. "Parity Stock" means any series of stock ranking on a parity with the ESOP Preferred Stock as to dividends. "Plan" means the Union Carbide Corporation Employee Stock Ownership Plan which forms a part of the Union Carbide Corporation Savings Program. "Preferred Dividend Rate" means the amount per year specified in Subsection 2.01, as such amount may be adjusted from time to time pursuant to the terms hereof. "Preferred Dividends" means cash dividends, when as and if declared by the Board out of funds legally available therefor, with respect to ESOP Preferred Stock. "Quarterly Payment Date" means, at any time that Preferred Dividends are paid on a quarterly basis, the dates determined from time to time by the Board pursuant to Subsection 2.01 for payment of Preferred Dividends. "Rights" means rights to purchase Common Stock (or other securities in lieu thereof) pursuant to the Rights Agreement between the Corporation and Chemical Bank, Rights Agent, as such agreement may be amended from time to time, or any rights issued to holders of Common Stock in addition thereto or in replacement therefor. "Special Redemption Price" means, in connection with a redemption pursuant to Subsection 7.01, a redemption price equal to the higher of (a) the Liquidation Price per share of ESOP Preferred Stock on the date fixed for redemption and (b) the Fair Market Value (as defined in Subsection 9.01) of the number of shares of Common Stock into which each ESOP Share is convertible at the time the notice of such redemption is given, plus in either case an amount equal to accrued (whether or not accumulated) and unpaid dividends thereon to the date fixed for redemption. "Transfer" means any sale, transfer or other disposition of ESOP Shares other than to the Corporation. "Trustee" means a trustee or trustees acting on behalf of the trust established in connection with the Plan. 1.02 Designation. Of the 25,000,000 authorized shares of Preferred Stock, par value $1.00 each, 16,668,893 shares shall be designated ESOP CONVERTIBLE PREFERRED STOCK. The Board may from time to time, by resolution, fix such number of shares to an increased or decreased number. However, no such decrease shall reduce the number of ESOP Shares to a number less than that number of ESOP Shares then outstanding. If the Corporation redeems or purchases any ESOP Shares, such ESOP Shares (a) shall remain issued and outstanding for all purposes (except that as long as such shares are held by the Corporation, no dividends shall be paid on such shares and they shall neither be entitled to vote nor counted for quorum purposes) and (b) may thereafter be transferred by the Corporation from time to time to the Trustee, and upon such transfer the voting and dividend rights of such shares shall be restored. However, the Corporation may, at the time of or at any time after such redemption or purchase, retire any such shares then held by the Corporation, and such shares shall then be restored to the status of authorized but unissued shares of Preferred Stock of the Corporation. 1.03 Issuance. ESOP Shares shall be issued only to the Trustee. In the event of any Transfer to any person (including, without limitation, any participant in the Plan) other than (a) any Trustee or (b) any pledgee (other than the Corporation or any subsidiary of the Corporation) of such ESOP Shares acquiring such ESOP Shares as security for any loan or loans made to the Plan or to any Trustee, the ESOP Shares so Transferred shall, upon such Transfer and without any further action by the Corporation or the Holder, be automatically converted into shares of Common Stock at the Conversion Price and on the terms otherwise provided for conversions pursuant to Section 5. No such transferee shall have any of the voting powers, preferences and relative, participating, optional or special rights ascribed to the ESOP Shares hereunder, but, shall have only the powers and rights pertaining to the Common Stock into which such ESOP Shares shall be so converted. However, in the event of a foreclosure or other realization upon the ESOP Shares pledged as security for any loan or loans made to the Plan or to the Trustee (other than by the Corporation or any subsidiary of the Corporation), the pledged ESOP Shares so foreclosed or otherwise realized upon shall be converted automatically into shares of Common Stock at the Conversion Price and on the terms otherwise provided for conversions pursuant to Section 5. In the event of such a conversion, the transferee shall be treated for all purposes as the record holder of the shares of Common Stock into which the ESOP Shares shall have been converted as of the date of such conversion. Certificates representing ESOP Shares shall be legended to reflect the restrictions on transfer set forth above. Notwithstanding the foregoing provisions of this Subsection 1.03, ESOP Shares (x) may be converted into shares of Common Stock as provided by Section 5 and the shares of Common Stock issued upon such conversion may be transferred by the holder thereof as permitted by law and (y) shall be redeemable by the Corporation upon the terms and conditions provided by Sections 6, 7 and 8. Section 2. Dividends and Distributions. 2.01 Dividends. The Holder shall, subject to the provisions for adjustment hereinafter set forth, be entitled to receive Preferred Dividends payable in an amount initially equal to $0.794 per share per year, and no more, on a quarterly basis, on the last business day of each calendar quarter (or such later date not more than five business days thereafter as the Board may from time to time elect in its absolute discretion), beginning on the second Quarterly Payment Date occurring in 1994. However, the Board may in its absolute discretion elect to cause Preferred Dividends to become payable on an annual or semi-annual basis if such election is made effective during the period beginning on January 5 and ending on March 30 in each year. The Corporation shall give prompt notice to the Holder of (a) any election to cause Preferred Dividends to become payable on an annual or semi-annual basis and (b) the Dividend Payment Date from time to time determined by the Board. Preferred Dividends shall be made to the Holder at the opening of business on each applicable Dividend Payment Date. 2.02 Cumulation. Dividends in respect of ESOP Shares shall begin to accrue from April 1, 1994, except that with respect to any ESOP Shares redeemed or purchased by the Corporation and then reissued, dividends shall accrue on such shares from their date of reissuance. Dividends shall accrue on a daily basis, whether or not the Corporation shall then have earnings or surplus (computed on the basis of a 360-day year of 30-day months in case of any period less than one year), based on the Preferred Dividend Rate then in effect. However, if the Board elects to cause Preferred Dividends to be payable on an annual or semi-annual basis, payments in respect of dividends on ESOP Preferred Stock made after the effective date of such election shall be computed using the Preferred Dividend Rate in effect on the Dividend Payment Date as determined by the Board. Accrued but unpaid Preferred Dividends shall cumulate as of the Dividend Payment Date on which they first become payable. No interest shall accrue on accumulated but unpaid Preferred Dividends. 2.03 Distributions. So long as any ESOP Preferred Stock shall be outstanding, no dividend shall be declared or paid or set apart for payment on any Parity Stock unless there shall also be or have been declared and paid or set apart for payment on the ESOP Preferred Stock, like dividends for all dividend payment periods of the ESOP Preferred Stock ending on or before the dividend payment date of the Parity Stock, ratably in proportion to the respective amounts of dividends (a) accumulated and unpaid or payable on the Parity Stock, and (b) accumulated and unpaid through the dividend payment period or periods of the ESOP Preferred Stock next preceding such dividend payment date. The Corporation shall not declare or pay or set apart for payment any dividends or make any other distributions on, or make any payment on account of the purchase, redemption or other retirement of any Junior Stock until full cumulative dividends on the ESOP Preferred Stock shall have been declared and paid or set apart for payment when due. However, the foregoing sentence shall not apply to (x) any dividend or distribution payable solely in any shares of, or options, warrants or rights to subscribe for or purchase shares of, any Junior Stock or (y) the acquisition of shares of any Junior Stock in exchange solely for or by conversion solely into shares of any other Junior Stock or (z) any payment on account of the redemption of the Rights. Any Preferred Dividend shall first be credited against the earliest accumulated but unpaid dividend due with respect to ESOP Preferred Stock. Section 3. Liquidation Preference. 3.01 Liquidation Price. In the event of any dissolution or liquidation of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of any series or class or classes of stock of the Corporation ranking junior to ESOP Preferred Stock upon dissolution or liquidation, the Holder shall be entitled to receive the Liquidation Price per share in effect at the time of dissolution or liquidation plus an amount equal to all dividends accrued (whether or not accumulated) and unpaid to the date of final distribution to such Holder, and such Holder shall not be entitled to receive any further payments. If, upon any dissolution or liquidation of the Corporation, the assets of the Corporation, or proceeds thereof, distributable to the Holder shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other series ranking, as to dissolution or liquidation, on a parity with ESOP Preferred Stock, then such assets, or the proceeds thereof, shall be distributed to the Holder and any other such shares ratably in accordance with the respective amounts that would be payable on the ESOP Preferred Stock and any other such shares if all amounts payable thereon were paid in full. For the purposes of this Section 3, neither (a) the consolidation or merger of the Corporation with or into one or more corporations, (b) the sale, transfer, lease or exchange (for cash, shares of equity stock, securities or other consideration) of all or substantially all of the assets of the Corporation, nor (c) the distribution to the shareholders of the Corporation of all or substantially all of the consideration for such sale shall be deemed to be a dissolution or liquidation (voluntarily or involuntarily), unless such consideration (apart from assumption of liabilities) or the net proceeds thereof consists substantially entirely of cash. After payment shall have been made in full to the Holder as provided in this Subsection 3.01 the Holder shall not be entitled to share in the remaining assets of the Corporation. Section 4. Ranking and Voting of Shares. 4.01 Ranking. Unless otherwise provided in this Certificate of Incorporation, as the same may be amended, relating to any subsequent series of Preferred Stock, the ESOP Preferred Stock shall rank on a parity with all series of Preferred Stock as to dividends and as to the distribution of assets upon dissolution or liquidation. 4.02 Voting Rights. The Holder shall have the following voting rights: (i) The Holder shall be entitled to vote on all matters submitted to a vote of the shareholders of the Corporation, voting together with the holders of Common Stock as one class. The Holder shall be entitled to a number of votes equal to the number of shares of Common Stock into which the ESOP Shares could be converted on the record date for determining the shareholders entitled to vote. Whenever the Conversion Price is adjusted as provided in Section 9, the number of votes of the ESOP Shares shall also be correspondingly adjusted. (ii) Except as otherwise required by law or set forth herein, the Holder shall have no special voting rights and the consent of the Holder shall not be required (except to the extent the Holder is entitled to vote with holders of Common Stock as set forth herein) for the taking of any corporate action, including the issuance of any Preferred Stock now or hereafter authorized; provided, however, that the vote of at least a majority of the outstanding ESOP Shares, voting separately as a series, shall be necessary to authorize the amendment of the Certificate of Incorporation if the proposed amendment relates to any of the matters enumerated in Section 804 of the BCL. Section 5. Conversion into Common Stock. 5.01 Conversion Price. The Holder shall be entitled to cause any or all of the ESOP Shares to be converted into shares of Common Stock at any time prior to the close of business on the date fixed for redemption of such shares pursuant to Sections 6, 7 or 8. The number of shares of Common Stock into which each ESOP Share may be converted shall be determined by dividing the Liquidation Price in effect at the time of conversion by the Conversion Price in effect at the time of conversion. The initial conversion rate is equivalent to one share of Common Stock for each ESOP Share, and is subject to adjustment as hereinafter provided. 5.02 Surrender of Certificates. The Holder shall convert ESOP Shares into shares of Common Stock by surrender, if certificated, of the certificate or certificates representing the ESOP Shares being converted, duly assigned or endorsed for transfer to the Corporation (or accompanied by duly executed stock powers relating thereto), or if uncertificated, a duly executed stock power relating thereto. Such conversion shall be effected at the principal executive office of the Corporation. The certificate or certificates shall be accompanied by a notice of conversion which shall specify (a) the number of ESOP Shares to be converted, (b) the name or names in which the Common Stock and any ESOP Shares not to be so converted are to be issued, and (c) the address to which delivery is to be made of a confirmation of such conversion, if uncertificated, or any new certificates which may be issued upon such conversion, if certificated. 5.03 Delivery of Common Stock Upon Conversion. The Corporation shall, upon receipt of a certificate representing the ESOP Shares for conversion, or if uncertificated, of a duly executed stock power relating thereto, issue and send by hand delivery (with receipt to be acknowledged) or by first class mail, to the Holder, at the address designated by the Holder, a certificate or certificates for, or if uncertificated, confirmation of, the number of shares of Common Stock to which the Holder shall be entitled upon conversion. If only part of the ESOP Shares surrendered are to be converted, the Corporation shall issue and deliver to the Holder a new certificate or certificates representing the number of ESOP Shares that shall not have been converted, or if uncertificated, confirmation of the number of ESOP Shares that shall not have been converted. 5.04 Effective Date of Issuance of Common Stock. The issuance of shares of Common Stock upon conversion of ESOP Shares shall be effective as of the earlier of (a) the delivery to the Holder of the certificates representing the shares of Common Stock issued upon conversion thereof, if certificated, or confirmation, if uncertificated, and (b) the commencement of business on the second business day after the surrender of the certificate or certificates, if certificated, or a duly executed stock power, if uncertificated, for the ESOP Shares to be converted. The person or persons entitled to receive Common Stock issuable upon such conversion shall, on and after the effective date of conversion, be treated for all purposes as the record holder or holders of such shares of Common Stock, and no allowance or adjustment shall be made in respect of dividends payable to holders of Common Stock of record on any date prior to such effective date. The Corporation shall not be obligated to pay to the Holder any dividend that may have accrued or that may have been declared if the Dividend Payment Date for such dividend is on or subsequent to the effective date of conversion. 5.05 No Fractional Shares. The Corporation shall not be obligated to deliver any fractional share of Common Stock issuable upon any conversion of ESOP Shares, but in lieu thereof may make a cash payment in respect thereof in any manner permitted by law. 5.06 Common Stock Reserved. The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock or treasury Common Stock, solely for issuance upon the conversion of ESOP Shares as herein provided, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all of the ESOP Shares then outstanding. 5.07 Issuance of Rights. Whenever the Corporation shall issue shares of Common Stock upon conversion of ESOP Shares as contemplated by this Section 5, the Corporation shall issue together with each such share of Common Stock one Right, whether or not the Rights shall be exercisable at such time, but only if the Rights are issued and outstanding and held by other holders of Common Stock at such time and have not expired. Section 6. Redemption at the Option of the Corporation. 6.01 Redemption After December 31, 1998. At the option of the Corporation, ESOP Preferred Stock shall be redeemable, in whole or in part, at any time after December 3l, 1998, out of funds legally available therefor, at a redemption price per share equal to the following percentages of the Liquidation Price in effect on the date fixed for redemption: During the Twelve- Month Period Percentage of Beginning January 1, Liquidation Price 1999 101.7750 2000 100.8875 and thereafter at l00%, plus, in each case, an amount equal to all accrued (whether or not accumulated) and unpaid dividends thereon to the date fixed for redemption. 6.02 Notice of Redemption. The Corporation shall deliver a notice of redemption to the Holder, by first class mail, mailed not less than 20 days nor more than 60 days prior to the redemption date. Each notice shall state: (a) the redemption date; (b) the total number of ESOP Shares to be redeemed; (c) the redemption price; (d) that the shares are to be surrendered at the principal office of the Corporation for payment of the redemption price; (e) that dividends on the shares to be redeemed will cease to accrue on such redemption date; (f) whether such redemption price will be paid in cash or in shares of Common Stock; and (g) the conversion rights of the shares to be redeemed, the period within which conversion rights may be exercised, and the Conversion Price and number of shares of Common Stock issuable upon conversion of an ESOP Share at such time. 6.03 Redemption if Change in Tax Law or Plan Does Not Qualify. In the event that: (i) there shall be a change in the federal tax law or regulations of the United States of America or of an interpretation or application of such law or regulations or of a determination by a court of competent jurisdiction that in any case has the effect of precluding the Corporation from claiming (other than for purposes of calculating any alternative minimum tax) any of the tax deductions for dividends paid on the ESOP Preferred Stock when such dividends are used as provided under Section 404(k)(2) of the Code, as in effect on the date the ESOP Preferred Stock is initially issued, or (ii) the Corporation shall certify to the Holder that the Corporation has determined in good faith that the Plan either is not qualified as a "stock bonus plan" within the meaning of Section 401(a) of the Code or is not an "employee stock ownership plan" within the meaning of 4975(e)(7) of the Code, then, notwithstanding anything to the contrary in Subsection 6.01, the Corporation may, in its sole discretion, at any time within one year after either of the foregoing events, elect either to: (a) redeem, out of funds legally available therefor, any or all of the ESOP Preferred Stock at a redemption price equal to the Liquidation Price per share on the date fixed for redemption, plus an amount equal to accrued (whether or not accumulated) and unpaid dividends thereon to the date fixed for redemption, or (b) exchange for any or all of such ESOP Shares, securities of at least equal value (as determined by an independent appraiser) that constitute "qualifying employer securities" with respect to the Holder within the meaning of Section 409(1) of the Code and Section 407(d)(5) of ERISA, or any successor provisions of law. If the Corporation elects to redeem any or all of the ESOP Preferred Stock pursuant to clause (a) above, a notice of redemption shall be given as required in Subsection 6.02. If the Corporation elects to exchange securities for ESOP Preferred Stock pursuant to clause (b) above, it shall cause notice of such election to be sent to the Holder by first class mail, mailed not less than 20 days nor more than 60 days prior to the date of exchange. Each notice of election shall state: (i) the exchange date; (ii) the total number of ESOP Shares to be exchanged; (iii) the exchange rate; (iv) that the shares are to be surrendered for exchange at the principal office of the Corporation; and (v) that dividends on the shares to be exchanged will cease to accrue on such exchange date. 6.04 Redemption upon Termination of Plan. The Corporation may, in its sole discretion and notwithstanding anything to the contrary in Subsection 6.01, call for redemption any or all of the then outstanding ESOP Preferred Stock in the event that the Plan is, or contributions thereto are, terminated. Any such redemption shall be effected upon notice as required in Subsection 6.02. The redemption shall be made out of funds legally available therefor at a redemption price per share equal to the following percentages of the Liquidation Price in effect on the date fixed for redemption: During the Twelve- Month Period Percentage of Beginning January 1, Liquidation Price 1994 106.2125 1995 105.3250 1996 104.4375 1997 103.5500 1998 102.6625 1999 101.7750 2000 100.8875 and thereafter at l00%, plus, in each case, an amount equal to all accrued (whether or not accumulated) and unpaid dividends thereon to the date fixed for redemption. 6.05 Payment of Redemption Price. The Corporation, at its option, may make payment of the redemption price required upon redemption of ESOP Shares pursuant to this Section 6 in cash or in shares of Common Stock, or in a combination of such shares and cash. Any shares of Common Stock shall be valued for such purpose at their Fair Market Value (as defined in Subsection 9.01); provided, however, that in calculating their Fair Market Value, the Adjustment Period (as defined in Subsection 9.01) shall be deemed to be the five consecutive trading days preceding the date of redemption. 6.06 Effect of Redemption. Upon surrender of the certificates, if certificated, for any shares called for redemption, or upon the date fixed for redemption, if uncertificated, the Corporation shall, unless such shares have previously been converted, redeem such shares as of the close of business on the date fixed for redemption and at the redemption price set forth in Subsection 6.01, 6.03 or 6.04 as the case may be. From and after the date fixed for redemption, dividends on ESOP Shares called for redemption will cease to accrue and all rights of the Holder in respect of such shares shall cease, except the right to receive the redemption price. Upon payment of the redemption price, such shares shall be deemed to have been transferred to the Corporation, to be held as provided in Subsection 1.02. Section 7. Redemption at the Option of the Holder. 7.01 Redemption to Provide for Plan Distributions. The Corporation shall, unless otherwise provided by law, redeem ESOP Shares at the option of the Holder when and to the extent necessary for the Holder to provide for distributions required to be made under, or to satisfy an investment election provided to participants in accordance with, the Plan or any successor plan or in connection with a Dividend Redemption. The Holder may exercise such option, at any time and from time to time, by delivering notice to the Corporation not less than five business days prior to the date fixed for redemption by the Holder in such notice. The redemption shall be made at a redemption price equal to the Special Redemption Price, in shares of Common Stock legally available therefor or, at the election of the Corporation, may be made out of funds legally available therefor in cash or a combination of Common Stock and cash. Shares of Common Stock shall be valued for purposes of redemption pursuant to this Subsection 7.01 as provided by Subsection 6.05. In the case of any Dividend Redemption, the Holder shall give the notice specified above on the tenth business day after the related Dividend Payment Date and such redemption shall be effective as to such number of ESOP Shares as shall equal (a) the aggregate amount of such Preferred Dividends paid with respect to ESOP Shares allocated or credited to the accounts of participants in the Plan or any successor plan that are used to repay any loan associated with such allocated or credited shares divided by (b) the Special Redemption Price specified above in this Subsection 7.01. 7.02 Redemption to Satisfy Plan Obligations or if Plan Does Not Qualify Under Certain Circumstances. The Corporation shall, unless otherwise provided by law, redeem ESOP Shares upon certification by the Holder to the Corporation of the following events: (i) when and to the extent necessary for the Holder to make any payments of principal, interest or premium due and payable (whether voluntary, scheduled, upon acceleration or otherwise) upon any obligations of the trust established under the Plan in connection with the acquisition of ESOP Preferred Stock or any indebtedness, expenses or costs incurred by the Holder for the benefit of the Plan, or (ii) when and if it shall be established to the satisfaction of the Holder that the Plan has not initially been determined by the Internal Revenue Service to be qualified as a "stock bonus plan" and an "employee stock ownership plan" within the meaning of Section 401(a) or 4975(e) (7) of the Code, respectively. The Holder may exercise such option at any time and from time to time upon notice to the Corporation given not less than five business days prior to the date fixed for redemption by the Holder in such notice. A redemption pursuant to Subsection 7.02 shall be made in shares of Common Stock legally available therefor, at a redemption price equal to the Liquidation Price plus an amount equal to accrued and unpaid dividends thereon to the date fixed for redemption. At the election of the Corporation, such redemption may instead be made out of funds legally available therefor in cash or a combination of Common Stock and cash. Any shares of Common Stock shall be valued for the purposes of redemption pursuant to this Subsection 7.02 as provided by Subsection 6.05. Section 8. Consolidation, Merger, etc. 8.01 Exchange for Qualifying Employer Securities. If the Corporation shall consummate any consolidation or merger or similar transaction, however named, pursuant to which the outstanding shares of Common Stock are by operation of law exchanged solely for, or changed, reclassified or converted solely into, securities of any successor or resulting company (including the Corporation) that constitute "qualifying employer securities" with respect to the Holder within the meanings of Section 409(l) of the Code and Section 407(d) (5) of ERISA, or any successor provision of law, and, if applicable, for a cash payment in lieu of fractional shares, if any, then, in such event, (i) the terms of such consolidation or merger or similar transaction shall provide that the ESOP Shares shall be converted into or exchanged for and shall become preferred securities of such successor or resulting company, having in respect of such company insofar as possible (taking into account, without limitation, any requirements relating to the listing of such preferred securities on any national securities exchange or the qualification of such preferred securities for trading in any over-the-counter market) the same powers, preferences and relative, participating, optional or other special rights (including the redemption rights provided by Sections 6, 7 and 8), and the qualifications, limitations or restrictions thereon, that the ESOP Preferred Stock had immediately prior to such transaction, (ii) after such transaction each security into which the ESOP Shares are so converted or for which they are exchanged shall be convertible, pursuant to the terms and conditions provided by Subsection 5.01, into the number and kind of qualifying employer securities receivable by the Holder equivalent to the number of shares of Common Stock into which the ESOP Shares could have been converted pursuant to Subsection 5.01 immediately prior to such transaction, (iii) if by virtue of the structure of such transaction, a holder of Common Stock is required to make an election with respect to the nature and kind of consideration to be received in such transaction, which election cannot practicably be made by the Holder, then such election shall be deemed to be solely for "qualifying employer securities" (together, if applicable, with a cash payment in lieu of fractional shares) with the effect provided in clauses (i) and (ii) above on the basis of the number and kind of qualifying employer securities receivable by the Holder of the number of shares of Common Stock into which the ESOP Shares could have been converted pursuant to Subsection 5.01 immediately prior to such transaction (it being understood that if the kind or amount of qualifying employer securities receivable in respect of each share of Common Stock upon such transaction is not the same for each such share, then the kind and amount of qualifying employer securities deemed to be receivable in respect of each share of Common Stock for purposes of this clause (iii) shall be the kind and amount so receivable per share of Common Stock by a plurality of such shares), and (iv) the rights of the ESOP Preferred Stock as preferred equity of such successor or resulting company shall successively be subject to adjustments pursuant to Section 9 after any such transaction as nearly equivalent as practicable to the adjustments provided for by Section 9 prior to such transaction. The Corporation shall not consummate any such merger, consolidation or similar transaction unless all the terms of this Subsection 8.01 are complied with. 8.02. Exchange for Non-Qualifying Employer Securities. If the Corporation shall consummate any consolidation or merger or similar transaction, however named, pursuant to which the outstanding shares of Common Stock are by operation of law exchanged for, or changed, reclassified or converted into, other shares or securities or cash or any other property, or any combination thereof, other than any such consideration which is constituted solely of qualifying employer securities that are common stock or common equity (as referred to in Subsection 8.01) and cash payments, if applicable, in lieu of fractional shares or other interests, the outstanding ESOP Shares shall, without any action on the part of the Corporation or the Holder thereof (but subject to Subsection 8.03), be automatically converted immediately prior to the consummation of such merger, consolidation or similar transaction into shares of Common Stock at the Conversion Price then in effect. 8.03. Redemption Alternative. If the Corporation shall enter into any agreement providing for any consolidation or merger or similar transaction described in Subsection 8.02, then the Corporation shall as soon as practicable thereafter (and in any event at least ten business days before consummation of such transaction) give notice of such agreement and the material terms thereof to the Holder. The Holder may elect, by notice of redemption to the Corporation, to receive, upon consummation of such transaction, in lieu of any cash or other securities which such holder would otherwise be entitled to receive under Subsection 8.02, a cash payment equal to a redemption price per share determined pursuant to Subsection 6.04, plus an amount equal to accrued (whether or not accumulated) and unpaid dividends thereon to the date fixed for such transaction. The cash payment shall be paid out of funds legally available therefor, by the Corporation or the successor of the Corporation, in redemption of the ESOP Preferred Stock. No such notice of redemption shall be effective unless delivered to the Corporation prior to the close of business of the fifth business day prior to consummation of such transaction, unless the Corporation or the successor of the Corporation shall waive such prior notice. The Holder may withdraw the notice of redemption by delivery of a notice of withdrawal to the Corporation at any time prior to the close of business on the fifth business day prior to consummation of such transaction. Section 9. Anti-dilution Adjustments. 9.01 Definitions. For purposes of this Section 9, the following definitions shall apply: "Adjustment Period" means the period of five consecutive trading days, selected by the Corporation, during the 20 trading days preceding, and including, the date as of which the Fair Market Value of a security is to be determined. "Current Market Price" means with respect to publicly traded shares of Common Stock or any other class of capital stock or other security of the Corporation or any other issuer, for a day, the last reported sales price, regular way, or, in case no sale takes place on such day, the average of the reported closing bid and asked prices, regular way, in either case as reported on the New York Stock Exchange Composite Tape or, if such security is not listed on the New York Stock Exchange, on the principal national securities exchange on which such security is listed, if not listed on any national securities exchange, on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") National Market System or, if such security is not quoted on such National Market System, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by NASDAQ or, if bid and asked prices for such security on such day shall not have been reported through NASDAQ, the average of the bid and asked prices for such day as furnished by any New York Stock Exchange member firm regularly making a market in such security selected for such purpose by the Corporation. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "Extraordinary Distribution" means any dividend or other distribution to holders of Common Stock (effected while any of the ESOP Shares are outstanding) of (i) any shares of capital stock of the Corporation (other than shares of Common Stock), other securities of the Corporation (other than securities of the type referred to in Subsection 9.03), evidences of indebtedness of the Corporation or any other person or any other property (including shares of any subsidiary of the Corporation), or (ii) cash, or any combination of the foregoing, where the aggregate amount of such cash dividend or other distribution together with the amount of all cash dividends and other distributions made during the preceding period of twelve months, when combined with the aggregate amount of all Pro Rata Repurchases (for this purpose, including only that portion of the aggregate purchase price of such Pro Rata Repurchase that is in excess of the Fair Market Value of the Common Stock repurchased as determined on the applicable expiration date (including all extensions thereof) of any tender offer or exchange offer that is a Pro Rata Repurchase, or the date of purchase with respect to any other Pro Rata Repurchase that is not a tender offer or exchange offer) made during such period, exceeds 12.5% of the aggregate Fair Market Value of all shares of Common Stock outstanding on the day before the ex-dividend date with respect to such Extraordinary Distribution that is paid in cash and on the distribution date with respect to an Extraordinary Distribution that is paid other than in cash. The Fair Market Value of an Extraordinary Distribution for purposes of Subsection 9.05 shall be the sum of the Fair Market Value of such Extraordinary Distribution plus the aggregate amount of any cash dividends or other distributions that are not Extraordinary Distributions made during such twelve month period and not previously included in the calculation of an adjustment pursuant to Subsection 9.05, but shall exclude the aggregate amount of regular quarterly dividends declared by the Board and paid by the Corporation in such twelve month period. "Fair Market Value" means, (i) as to shares of Common Stock or any other class of capital stock or securities of the Corporation or any other issuer that are publicly traded, the average of the Current Market Price of such shares or securities for each day of the Adjustment Period, and (ii) as to any security that is not publicly traded or of any other property means the fair value thereof as determined by an independent investment banking or appraisal firm experienced in the valuation of such securities or property selected in good faith by the Corporation, or, if no such investment banking or appraisal firm is in the good faith judgment of the Corporation available to make such determination, as determined in good faith by the Corporation. "Non-Dilutive Amount" means, in respect of an issuance, sale or exchange by the Corporation of any right or warrant to purchase or acquire shares of Common Stock (including any security convertible into or exchangeable for shares of Common Stock), the difference between (a) the product of the Fair Market Value of a share of Common Stock on the day preceding the first public announcement of such issuance, sale or exchange multiplied by the maximum number of shares of Common Stock that could be acquired on such date upon the exercise in full of such rights or warrants (including upon the conversion or exchange of all such convertible or exchangeable securities), whether or not exercisable (or convertible or exchangeable) at such date, and (b) the aggregate amount payable pursuant to such right or warrant to purchase or acquire such maximum number of shares of Common Stock including the amount paid to acquire such right or warrant: provided, however, that in no event shall the Non-Dilutive Amount be less than zero. For purposes of the foregoing, in the case of a security convertible into or exchangeable for shares of Common Stock, the amount payable pursuant to a right or warrant to purchase or acquire shares of Common Stock shall be the Fair Market Value of such security on the date of the issuance, sale or exchange of such security by the Corporation. "Pro Rata Repurchase" means any purchase of shares of Common Stock by the Corporation or any subsidiary thereof, whether for cash, shares of capital stock or other securities of the Corporation, evidences of indebtedness of the Corporation or any other person or any other property (including shares of a subsidiary of the Corporation), or any combination thereof, effected while any of the ESOP Shares are outstanding, pursuant to any tender offer or exchange offer subject to Section 13(e) of the Exchange Act, or any successor provision of law, or pursuant to any other offer available to substantially all holders of Common Stock. However, no purchase of shares by the Corporation or any subsidiary thereof made in open market transactions shall be deemed a Pro Rata Repurchase. For purposes of this Subsection 9.01, shares shall be deemed to have been purchased by the Corporation or any subsidiary thereof "in open market transactions" if they have been purchased (a) substantially in accordance with the requirements of Rule 10b-18 as in effect under the Exchange Act on the date the ESOP Shares are initially issued by the Corporation or (b) on such other terms and conditions as the Corporation shall have determined are reasonably designed to prevent such purchases from having a material effect on the trading market for the Common Stock. "Special Dividend" means a dividend in respect of ESOP Preferred Stock in shares of ESOP Preferred Stock. 9.02 Stock Dividend/Stock Split/Recapitalization. (i) Subject to the provisions of Subsections 9.06 and 9.07, in the event the Corporation shall, at any time or from time to time while any of the ESOP Shares are outstanding, (a) pay a dividend or make a distribution in respect of the Common Stock in shares of Common Stock or (b) subdivide the outstanding shares of Common Stock into a greater number of shares, in each case whether by reclassification of shares, recapitalization of the Corporation (excluding a recapitalization or reclassification effected by a merger or consolidation to which Section 8 applies) or otherwise, then, in such event, the Board shall, to the extent legally permissible, declare a Special Dividend in such a manner that the Holder will become a holder of that number of ESOP Shares equal to the product of the number of shares held prior to such event multiplied by a fraction (the "Section 9.02 Fraction") as follows: NA ____ NB Where: NA = Number of shares of Common Stock outstanding immediately after such event. NB = Number of shares of Common Stock outstanding immediately before such event. A Special Dividend declared pursuant to this Subsection 9.02 shall be effective, upon payment of such dividend or distribution in respect of the Common Stock, as of the record date for the determination of shareholders entitled to receive such dividend or distribution (on a retroactive basis), and in the case of a subdivision shall become effective immediately as of the effective date thereof. Concurrently with the declaration of the Special Dividend pursuant to this Subsection 9.02, the Conversion Price, the Liquidation Price and the Preferred Dividend Rate of all ESOP Shares shall be adjusted by dividing the Conversion Price, the Liquidation Price and the Preferred Dividend Rate, respectively, in effect immediately before such event by the Section 9.02 Fraction. (ii) Subject to the provisions of Subsections 9.06 and 9.07, in the event the Corporation shall, at any time or from time to time while any of the ESOP Shares are outstanding, combine the outstanding shares of Common Stock into a lesser number of shares, whether by reclassification of shares, recapitalization of the Corporation (excluding a recapitalization or reclassification effected by a merger, consolidation or other transaction to which Section 8 applies) or otherwise, then, in such event and effective immediately as of the effective date of such combination, the Holder will become a holder of that number of ESOP Shares equal to the number of ESOP Shares held prior to such event multiplied by the Section 9.02 Fraction. Concurrently, the Conversion Price, the Liquidation Price and the Preferred Dividend Rate of all ESOP Shares shall automatically be adjusted by dividing the Conversion Price, the Liquidation Price and the Preferred Dividend Rate, respectively, in effect immediately before such event by the Section 9.02 Fraction. 9.03 Rights or Warrants to Purchase Common Stock. Subject to the provisions of Subsections 9.06 and 9.07, in the event the Corporation shall, at any time or from time to time while any of the ESOP Shares are outstanding, issue to holders of shares of Common Stock as a dividend or distribution, including by way of a reclassification of shares or a recapitalization of the Corporation, any right or warrant to purchase shares of Common Stock (but not including as a right or warrant for this purpose any security convertible into or exchangeable for shares of Common Stock) for a consideration having a Fair Market Value per share less than the Fair Market Value of a share of Common Stock on the date of issuance of such right or warrant (other than pursuant to any employee or director incentive, compensation or benefit plan of the Corporation or any subsidiary of the Corporation heretofore or hereafter adopted), then, in such event, the Board shall, to the extent legally permissible, declare a Special Dividend in such a manner that the Holder will become a holder of that number of ESOP Shares equal to the product of the number of shares held prior to such event multiplied by a fraction (the "Section 9.03 Fraction") as follows: NB + M ______ NB + F Where: NB = Number of shares of Common Stock outstanding immediately before such issuance of rights or warrants. M = Maximum number of shares of Common Stock that could be acquired upon exercise in full of all such rights and warrants. F = Number of shares of Common Stock that could be purchased at the Fair Market Value of a share of Common Stock at the time of such issuance for the maximum aggregate consideration payable upon exercise in full of all rights and warrants. A Special Dividend declared pursuant to this Section 9.03 shall be effective upon such issuance of rights or warrants. Concurrently with the declaration of the Special Dividend pursuant to this Section 9.03, the Conversion Price, the Liquidation Price and the Preferred Dividend Rate of all ESOP Shares shall be adjusted by dividing the Conversion Price, the Liquidation Price and the Preferred Dividend Rate, respectively, in effect immediately before such event by the Section 9.03 Fraction. 9.04 Sale of Common Stock for less than Fair Market Value. (i) Subject to the provisions of Subsections 9.06 and 9.07, in the event the Corporation shall, at any time or from time to time while any of the ESOP Shares are outstanding, issue, sell or exchange shares of Common Stock (other than pursuant to (a) any right or warrant to purchase or acquire shares of Common Stock (including as such a right or warrant any security convertible into or exchangeable for shares of Common Stock) or (b) any employee or director incentive, compensation or benefit plan or arrangement of the Corporation or any subsidiary of the Corporation heretofore or hereafter adopted) for a consideration per share less than the Fair Market Value of a share of Common Stock on the date of such issuance, sale or exchange, then, in such event, the Board shall, to the extent legally permissible, declare a Special Dividend in such a manner that the Holder will become a holder of that number of ESOP Shares equal to the product of the number of shares held prior to such event multiplied by a fraction (the "Section 9.04(i) Fraction") as follows: NB + I ______ NB + F Where: NB = Number of shares of Common Stock outstanding immediately before such issuance, sale or exchange. I = Number of shares of Common Stock so issued, sold or exchanged. F = Number of shares of Common Stock that could be purchased at Fair Market Value of a share of Common Stock at the time of such issuance, sale or exchange for the maximum aggregate consideration paid therefor. (ii) Subject to the provisions of Subsections 9.06 and 9.07, in the event the Corporation shall, at any time or from time to time while any of the ESOP Shares are outstanding, issue, sell or exchange any right or warrant to purchase or acquire shares of Common Stock (including as such a right or warrant any security convertible into or exchangeable for shares of Common Stock) other than pursuant to (a) any employee or director incentive, compensation or benefit plan or arrangement of the Corporation or any subsidiary of the Corporation heretofore or hereafter adopted or (b) any dividend or distribution on shares of Common Stock contemplated in Subsection 9.02 for a consideration having a Fair Market Value, on the date of such issuance, sale or exchange, less than the Non-Dilutive Amount, then, in such event, the Board shall, to the extent legally permissible, declare a Special Dividend in such manner that the Holder will become a holder of that number of ESOP Shares equal to the product of the number of shares held prior to such event times a fraction (the "Section 9.04 (ii) Fraction") as follows: NB + M ______ NB + N Where: NB = Number of shares of Common Stock outstanding immediately before such issuance of rights or warrants. M = Maximum number of shares of Common Stock that could be acquired upon exercise in full of all such rights and warrants. N = Number of shares of Common Stock that could be purchased at the Fair Market Value of a share of Common Stock at the time of such issuance for the total of (x) the maximum aggregate consideration payable at the time of the issuance, sale or exchange of such right or warrant and (y) the maximum aggregate consideration payable upon exercise in full of all such rights or warrants. A Special Dividend declared pursuant to this Subsection 9.04 shall be effective upon the effective date of such issuance, sale or exchange. Concurrently with the declaration of the Special Dividend pursuant to this Subsection 9.04, the Conversion Price, the Liquidation Price and the Preferred Dividend Rate of all ESOP Shares shall be adjusted by dividing the Conversion Price, the Liquidation Price and the Preferred Dividend Rate, respectively, in effect immediately before such event by the Section 9.04(i) Fraction or Section 9.04(ii) Fraction, as the case may be. 9.05 Extraordinary Distribution/Pro Rata Repurchase. (i) Subject to the provisions of Subsections 9.06 and 9.07, in the event the Corporation shall, at any time or from time to time while any of the ESOP Shares are outstanding, make an Extraordinary Distribution in respect of the Common Stocks, whether by dividend, distribution, reclassification of shares or recapitalization of the Corporation (including capitalization or reclassification effected by a merger or consolidation to which Section 8 does not apply), then, in such event, the Board shall, to the extent legally permissible, declare a Special Dividend in such a manner that the Holder will become a holder of that number of ESOP Shares equal to the product of the number of such shares held prior to such event times a fraction (the "Section 9.05(i) Fraction") as follows: NB x F ________________ (NB x F) - D Where: NB = Number of shares of Common Stock outstanding immediately before such Extraordinary Distribution. F = The Fair Market Value of a share of Common Stock on the day before the ex-dividend date with respect to an Extraordinary Distribution that is paid in cash and on the distribution date with respect to an Extraordinary Distribution that is paid in other than cash. D = The Fair Market Value of the Extraordinary Distribution. (ii) Subject to the provisions of Subsections 9.06 and 9.07, in the event the Corporation shall, at a any time or from time to time while any of the ESOP Shares are outstanding, effect a Pro Rata Repurchase of Common Stock, then in such event, the Board shall, to the extent legally permissible, declare a Special Dividend in such a manner that the Holder will become the holder of the number of ESOP Shares equal to the product of the number of such shares held prior to such event times a fraction (the Section 9.05(ii) Fraction") as follows: (NB - R) x F ________________ (NB x F) - A Where: NB = Number of shares of Common Stock outstanding immediately before such Pro Rata Repurchase. R = Number of shares of Common Stock repurchased by the Corporation. F = The Fair Market Value of a share of Common Stock on the applicable expiration date (including all extensions thereof) of any tender offer that is a Pro Rata Repurchase or on the date of purchase with respect to any Pro Rata Repurchase that is not a tender offer. A = The Fair Market Value of the aggregate purchase price of the Pro Rata Repurchase. The Corporation shall deliver to the Holder (a) notice of its intent to make any Extraordinary Distribution and (b) notice of any offer by the Corporation to make a Pro Rata Repurchase, in each case at the same time as, or as soon as practicable after, such offer is first communicated to holders of Common Stock or, in the case of an Extraordinary Distribution, the announcement of a record date in accordance with the rules of any stock exchange on which the Common Stock is listed or admitted to trading. Such notice shall set forth the intended record date and the amount and nature of such dividend or distribution, or, if a Pro Rata Repurchase, (x) the number of shares subject to such offer, (y) the purchase price payable by the Corporation pursuant to such offer, and (z) the Conversion Price and the number of shares of Common Stock into which an ESOP Share may be converted at such time. Concurrently with a Special Dividend paid pursuant to this Subsection 9.05, the Conversion Price, the Liquidation Price and the Preferred Dividend Rate of all ESOP Shares shall be adjusted by dividing the Conversion Price, the Liquidation Price and the Preferred Dividend Rate, respectively, in effect immediately before such Extraordinary Distribution or Pro Rata Repurchase by the Section 9.05(i) Fraction or Section 9.05(ii) Fraction, as the case may be. 9.06 Adjustment Alternatives. Notwithstanding any other provision of this Section 9, the Corporation shall not be required to make (a) any Special Dividend, combination of shares or any adjustment of the Conversion Price, the Liquidation Price or the Preferred Dividend Rate unless such Special Dividend, combination of shares or adjustment would require an increase or decrease of at least one percent in the number of ESOP Shares outstanding, or, (b) if no additional ESOP Shares are issued, any adjustment of the Conversion Price unless such adjustment would require an increase or decrease of at least one percent in the Conversion Price. Any lesser Special Dividend, combination of shares or adjustment shall be carried forward and shall be made no later than the time of, and together with, the next subsequent Special Dividend, combination of shares or adjustment which, together with any Special Dividend or Dividends, adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least one percent of the number of ESOP Shares outstanding or, if no additional ESOP Shares are being issued, an increase or decrease of at least one percent of the Conversion Price, whichever the case may be. 9.07 Alternative to Special Dividend. The Corporation and the Board shall each use their best efforts to take all necessary steps or to take all actions as are reasonably necessary or appropriate for declaration of any Special Dividend or combination of shares provided in this Section 9, but shall not be required to call a special meeting of shareholders in order to implement the provisions thereof. If for any reason the Board is precluded from giving full effect to the Special Dividend provided in this Section 9, then no such Special Dividend shall be declared, but instead the Conversion Price shall automatically be adjusted by dividing the Conversion Price in effect immediately before the relevant event by the applicable Section 9.02, Section 9.03, Section 9.04(i), Section 9.04(ii), Section 9.05(i) or Section 9.05(ii) Fraction, and the Liquidation Price and the Preferred Dividend Rate will not be adjusted. An adjustment to the Conversion Price made pursuant to this Subsection 9.07 shall be given effect, (a) in the case of a payment of a dividend or distribution under Subsection 9.02(i), upon payment thereof as of the record date for the determination of holders entitled to receive such dividend or distribution (on a retroactive basis), and, in the case of a subdivision under Subsection 9.02(ii), immediately as of the effective date thereof, (b) in the case of Subsection 9.03, upon such issuance of rights or warrants,(c) in the case of Subsection 9.04, upon the effective date of a such issuance, sale or exchange, (d) in the case of an Extraordinary Distribution under Subsection 9.05(i), as of the record date for the determination of holders entitled to receive such Extraordinary Distribution (on a retroactive basis) and (e) in the case of a Pro Rata Repurchase under Subsection 9.05(ii), upon the expiration date thereof (if such Pro Rata Repurchase is a tender offer) or the effective date thereof (if such Pro Rata Repurchase is not a tender offer). If subsequently the Board is able to give full effect to the Special Dividend as provided in Subsections 9.02, 9.03, 9.04 or 9.05, then such Special Dividend will be declared and other adjustments will be made in accordance with the provisions of the applicable Subsection and the adjustment in the Conversion Price as provided in this Subsection 9.07 will automatically be reversed and nullified prospectively. 9.08 Equitable Adjustments. If (a) the Corporation shall make any dividend or distribution on the Common Stock or issue any Common Stock, other capital stock or other security of the Corporation or any rights or warrants to purchase or acquire any such security or effect any other similar corporate change, or (b) the Corporation shall otherwise be recapitalized, reorganized or restructured, and in either case the transaction (x) does not result in an adjustment pursuant to the foregoing provisions of this Section 9 or (y) does result in an adjustment pursuant to such provisions but the Board, in its sole discretion, determines that under the circumstances the adjustment is inadequate, then in either case the Board may, in its sole discretion, determine whether an equitable adjustment should be made or an additional equitable adjustment should be made in respect of such transaction. If in such case the Board determines that some type of adjustment should be made, an adjustment shall be made effective as of such date as determined by the Board. The Corporation shall be entitled, but not required, to make such additional adjustments, in addition to the foregoing provisions of this Section 9, as shall be necessary in order that any dividend or distribution in shares of capital stock of the Corporation, subdivision, reclassification or combination of shares of the Corporation or any recapitalization of the Corporation shall not be taxable to the holders of the Common Stock. A determination of the Board made pursuant to this Subsection 9.08 shall be final and binding on the Corporation and all shareholders of the Corporation. If the Corporation shall be required to (a) declare a Special Dividend or combination of shares and effect concurrent adjustments or (b) effect any adjustments in lieu of a Special Dividend, in each case pursuant to this Section 9, the Board may, in its sole discretion, modify the amount of the Special Dividend or combination of shares or any required adjustment for the benefit of the Holder to such extent as the Board deems equitable. 9.09 Documentation of Adjustments. Whenever an adjustment increasing the number of ESOP Shares outstanding is required pursuant hereto, the Board shall take action as is necessary so that a sufficient number of ESOP Shares are designated with respect to such increase resulting from such adjustment. Whenever an adjustment to the Conversion Price, the Liquidation Price or the Preferred Dividend Rate of the ESOP Preferred Stock is required pursuant hereto, the Corporation shall forthwith place on file with the transfer agent for the Common Stock and with the Treasurer of the Corporation a statement signed by the Treasurer or any Assistant Treasurer of the Corporation stating the adjusted Conversion Price, Liquidation Price and Preferred Dividend Rate determined as provided herein. Such statement shall set forth in reasonable detail such facts as shall be necessary to show the reason and the manner of computing such adjustment, including any determination of Fair Market Value involved in such computation. Promptly after each adjustment to the number of ESOP Shares outstanding, the Conversion Price, the Liquidation Price or the Preferred Dividend Rate, the Corporation shall mail a notice to the Holder stating the then prevailing number of ESOP Shares outstanding, the Conversion Price, the Liquidation Price and the Preferred Dividend Rate. Section 10. Miscellaneous. 10.01 Notices. All notices referred to herein shall be in writing. All notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three business days after the mailing thereof. Notices shall be addressed: (a) if to the Corporation, to its office at 39 Old Ridgebury Road, Danbury, Connecticut 06817-0001 (Attention: Secretary), (b) if to the Holder, at the address of the Holder as listed in the stock record books of the Corporation (which may include the records of any transfer agent for Common Stock) or (c) to such other address as the Corporation or the Holder, as the case may be, shall have designated by notice similarly given. 10.02 Stamp Taxes. The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of ESOP Shares or shares of Common Stock or other securities issued on account of ESOP Shares pursuant thereto or certificates representing such shares or securities. The Corporation shall not, however, be required to pay any such tax which may be payable in respect of any transfer involved in the issuance or delivery of ESOP Shares or Common Stock or other securities in a name other than that in which the ESOP Shares with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person with respect to any such shares or securities other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable. 10.03 Failure to Designate Recipient. In the event that the Holder shall not, by notice, designate the name in which shares of Common Stock to be issued upon conversion or exchange should be registered, or to whom payment upon redemption of ESOP Shares should be made or the address to which the certificate or certificates representing such shares, or such payment, should be sent, the Corporation shall be entitled to register such shares, and make such payment, in the name of the Holder and to send the certificate or certificates or other documentation representing such shares, or such payment, to the address of the Holder. 4. The holders of shares of stock of the Corporation shall have no preemptive rights to purchase any shares of stock or any other securities of the Corporation. 5. The number of directors of the Corporation shall be fixed and may from time to time be increased or decreased by resolution or other action of the Board of Directors, but in no event shall the number of directors be less than three or more than 19. 6. The office of the Corporation is to be located in the City of New York, County of New York. The Secretary of State of the State of New York is designated as the agent of the Corporation upon whom process in any action or proceeding against it may be served, and the address without the State to which the Secretary of State shall mail a copy of process in any action or proceeding against the Corporation which may be served upon him is: Secretary Union Carbide Corporation 39 Old Ridgebury Road Danbury, Connecticut 06817-0001 7. The By-laws may be adopted, amended or repealed by the stockholders, or by the Board of Directors by a vote of a majority of the entire Board. 8. A person who is or was a director of the Corporation shall not be liable to the Corporation or its stockholders for damages for any breach of duty in such capacity, except to the extent such liability may not be eliminated or limited by applicable law from time to time in effect. IN WITNESS WHEREOF, the undersigned have signed this Restated Certificate of Incorporation this 2nd day of May, 1994 and affirm the statements contained herein as true under the penalties of perjury. ______________________________ William H. Joyce President ______________________________ John Macdonald Assistant Secretary EX-3.2 3 EXHIBIT 3.2 ___________________________________ BY-LAWS OF UNION CARBIDE CORPORATION ____________________________________ TABLE OF CONTENTS ARTICLE I STOCKHOLDERS Page Section 1 - Annual Meetings.................... 1 2 - Special Meetings................... 1 3 - Time and Place of Meetings......... 1 4 - Notice of Meetings................. 1 5 - Quorum............................. 1 6 - Required Vote...................... 2 7 - Record Date........................ 2 8 - Organization....................... 2 9 - Procedure.......................... 2 10 - Adjournments....................... 3 ARTICLE II BOARD OF DIRECTORS Section 1 - General Powers..................... 3 2 - Number of Directors................ 3 3 - Term of Office..................... 3 4 - Vacancies.......................... 3 5 - Regular Meetings................... 3 6 - Special Meetings................... 4 7 - Notice of Meetings................. 4 8 - Quorum and Manner.................. of Acting 4 9 - Action by Communications........... Equipment 4 10 - Action by Consent.................. 5 11 - Organization....................... 5 12 - Compensation....................... 5 TABLE OF CONTENTS ARTICLE III COMMITTEES Page Section 1 - Executive Committee................ 5 2 - Other Committees................... 6 3 - Quorum and Manner.................. of Acting 6 4 - Procedure.......................... 6 5 - Changes in Committees.............. 6 ARTICLE IV OFFICERS Section 1 - Number............................. 7 2 - Election and Term of............... Office 7 3 - Removal and Vacancies.............. 7 4 - Subordinate and Assistant.......... Officers 7 5 - Duties............................. 8 ARTICLE V INDEMNIFICATION................................... 8 ARTICLE VI MISCELLANEOUS PROVISIONS Section 1 - Transfer of Shares................. 10 2 - Regulations as to Stock............ Certificates 10 3 - Stockholder Inspection............. Rights 10 4 - Corporate Seal..................... 10 5 - Definitions........................ 10 ARTICLE VII AMENDMENTS........................................ 11 BY-LAWS of UNION CARBIDE CORPORATION ARTICLE I STOCKHOLDERS Section 1. Annual Meetings. The annual meeting of stockholders for the election of directors and other purposes shall be held at such place, date and hour as shall designated in the notice of meeting approved by the Board. Section 2. Special Meetings. A special meeting of stockholders may be called at any time by the Board, the Chairman, a President or a Vice-Chairman. Section 3. Time And Place Of Meetings. Each meeting of stockholders shall be held at such time and in such place within or without the State of New York as the Board may determine. Section 4. Notice Of Meetings. Not less than 10 or more than 50 days before the date of each meeting of stockholders, notice of the meeting shall be given in the manner prescribed by law to each stockholder entitled to vote thereat. Section 5. Quorum. Except as otherwise required by law, at each meeting of stockholders, holders of at least a majority of the outstanding shares of stock entitled to vote at the meeting shall be present in person or by proxy to constitute a quorum for the transaction of business. Section 6. Required Vote. At each meeting of stockholders for the election of directors at which a quorum is present, the candidates, up to the number of directors to be elected, shall be elected who receive a plurality of the votes cast at the meeting by the holders of shares entitled to vote in the election. Except as otherwise required by law, at each meeting of stockholders at which a quorum is present, all other matters shall be decided by a majority of the votes cast at the meeting by the holders of shares entitled to vote thereon. Section 7. Record Date. The Board may prescribe a day and hour not more than 50 or less than 10 days before the date of a meeting of stockholders for the purpose of determining the stockholders entitled to notice of or to vote at such meeting or any adjournment thereof. Section 8. Organization. At each meeting of stockholders, one of the following shall act as chairman of the meeting and shall preside thereat, in the following order of precedence: (a) the Chairman; (b) any President; (c) any Vice-Chairman or Vice-President designated by the Board; or (d) any person designated by a majority vote of the stockholders present in person or by proxy. Section 9. Procedure. At each meeting of stockholders, the chairman of the meeting shall determine the order of business and all other matters of procedure. He may establish rules to maintain order and for the conduct of the meeting. The Board in advance of every meeting of stockholders shall appoint one or more inspectors of election to act at the meeting. Section 10. Adjournments. A meeting of stockholders may be adjourned from time to time and place to place until a quorum is present or until its business is completed. ARTICLE II BOARD OF DIRECTORS Section 1. General Powers. The business of the Corporation shall be managed under the direction of the Board. Section 2. Number Of Directors. The number of directors shall be fixed and may from time to time be increased or decreased by vote of a majority of the entire Board, but in no event shall the number of directors be less than three or more than 19. Each director shall be a stockholder. Section 3. Term Of Office. Each director shall hold office until the next annual meeting of stockholders and until his successor has been elected and qualified. Section 4. Vacancies. Except as otherwise required by law, any vacancy occurring in the Board, and any newly created directorship resulting from an increase in the number of directors, may be filled by the Board. Section 5. Regular Meetings. Regular meetings of the Board shall be held at such times and places within or without the State of New York as the Board may determine. Section 6. Special Meetings. A special meeting of the Board may be called at any time by the Chairman, a President, a Vice-Chairman or any three directors and shall be held at such time and place as shall be designated in the notice of meeting or waiver thereof. Section 7. Notice Of Meetings. A notice shall be effective if (i) it is mailed to each director at least three days before the date of the meeting, (ii) it is sent by telegraph, cable or other form of recorded communications or delivered personally or by telephone on such shorter notice, not less than six hours before the meeting, as the person or persons calling the meeting deem appropriate in the circumstances or (iii) in the case of a meeting held in accordance with Article II, Section 9, the notice is sent by telegraph, cable or other form of recorded communications or delivered personally or by telephone on such shorter notice, not less than three hours before the meeting, as the person or persons calling the meeting deem appropriate in the circumstances. Notices shall be given to each director at the address which he has furnished to the Secretary as the address for such notices. Notice of a regular meeting of the Board need not be given if the Board has previously fixed the time and place of such meeting. Section 8. Quorum And Manner Of Acting. Except as otherwise provided by law or in these By-laws, one-third of the entire Board shall be present to constitute a quorum for the transaction of business, and the vote of a majority of the directors present at the time of the vote, if a quorum is present at such time, shall be the act of the Board. Section 9. Action By Communications Equipment. Any one or more members of the Board or any committee thereof may participate in a meeting of the Board or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Section 10. Action By Consent. Any action required or permitted to be taken by the Board or any committee thereof may be taken without a meeting if all members of the Board or committee consent in writing to the adoption of a resolution authorizing the action. Section 11. Organization. At each meeting of the Board, one of the following shall act as chairman of the meeting and shall preside thereat, in the following order of precedence: (a) the Chairman; (b) any President; (c) any Vice-Chairman; or (d) any other director chosen by a majority of the directors present. Section 12. Compensation. For services as a member of the Board and any committee thereof, every director shall receive such compensation, attendance fees and other allowances as the Board may determine. ARTICLE III COMMITTEES Section 1. Executive Committee. The Board, by resolution adopted by a majority of the entire Board, shall designate an Executive Committee, consisting of the Chairman and four or more other directors. The chief executive officer shall serve as chairman of the Executive Committee. Subject to any limitations prescribed by law or by the Board, the Executive Committee shall have and may exercise, when the Board is not in session, all the powers of the Board. Section 2. Other Committees. The Board, by resolution adopted by a majority of the entire Board, may designate from among its members other committees, each consisting of three or more directors. Subject to any limitations prescribed by law, each committee shall have such authority as the Board may determine. Section 3. Quorum And Manner Of Acting. Unless the Board otherwise provides, a majority of a committee of the Board shall be present to constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at the time of the vote, if a quorum is present at such time, shall be the act of such committee. Section 4. Procedure. Unless the Board otherwise provides, each committee of the Board may adopt such rules as it may see fit with respect to the calling of its meetings, the procedures to be followed thereat, and its functioning generally. Each committee shall report its actions to the Board. Section 5. Changes In Committees. Except as otherwise provided in these By-laws, the Board at any time may, by resolution adopted by a majority of the entire Board, with or without cause, change or remove the members of, fill vacancies in, and discharge any committee of the Board. ARTICLE IV OFFICERS Section 1. Number. The officers of the Corporation shall be a Chairman, one or more Presidents and Vice-Presidents, a Treasurer, a Secretary, and a Controller and may include one or more Vice-Chairmen. A chief executive officer shall be designated by the Board from among the officers. Section 2. Election And Term Of Office. Each officer shall be elected by the Board and shall hold office until the meeting of the Board following the next annual meeting of stockholders and until his successor has been elected and qualified or until his earlier retirement, resignation or removal. The Chairman, and any President or Vice-Chairman shall be chosen from among the directors. Section 3. Removal And Vacancies. Any officer may be removed at any time with or without cause by the Board. A vacancy in any office may be filled for the unexpired portion of the term in the same manner as provided for election or appointment to such office. Section 4. Subordinate And Assistant Officers. The Corporation may have such subordinate and assistant officers as the Board may appoint. Each such officer shall hold office at the pleasure of, and may be removed at any time with or without cause by, the Board. Such officers may include one or more Regional Vice-Presidents, Assistant Vice-Presidents, Assistant Treasurers, Assistant Secretaries, and Assistant Controllers. Section 5. Duties. Each officer shall have such authority and shall perform such duties as may be assigned by the Board, the Chairman a President or a Vice-Chairman or as shall be conferred or required by law or these By-laws or as shall be incidental to the office. ARTICLE V INDEMNIFICATION The Corporation shall, to the fullest extent permitted by law, indemnify each of its past, present and future directors, officers and employees and their heirs, executors and administrators (collectively, the "indemnitees") for any and all costs and expenses resulting from or relating to any suit or claim arising out of, or alleged to arise out of, past or future service to the Corporation or to another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise at the Corporation's request. Without limiting the generality of the foregoing, (i) the costs and expenses for which each indemnitee shall, as a matter of right, be entitled to indemnification shall include all costs and expenses incurred by the indemnitee in the defense or settlement of, or in the satisfaction of any order or judgment entered in, any suit or claim (including any suit or claim brought or alleged to be brought in the right of the Corporation to procure a judgment in its favor) arising out of, or alleged to arise out of, any act or failure to act by the indemnitee as a director, officer or employee of, or in any service to, the Corporation or to another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise at the Corporation's request, (ii) the stockholders or the Board of the Corporation are authorized to, by a resolution of the stockholders or the Board, as the case may be, indemnify the indemnitees for costs and expenses, and (iii) the Corporation may, to the extent authorized by resolution of the Board or the stockholders, enter into agreements with indemnitees to indemnify them for costs and expenses; provided, however, that no indemnification may be made to or on behalf of any director, officer, employee or other indemnitee if a judgment or other final adjudication adverse to the director, officer, employee or other indemnitee establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled, and provided further that the foregoing proviso shall prohibit such indemnification only to the extent that such indemnification is prohibited by Sec. 721 of the New York Business Corporation Law. As used in this Article V, (a) "costs and expenses" means any and all costs, expenses and liabilities incurred by an indemnitee, including but not limited to (i) attorney's fees, (ii) amounts paid in settlement of, or in the satisfaction of any order or judgment in, any suit or claim and (iii) fines, penalties and assessments asserted or adjudged in any suit or claim. (b) "suit or claim" means any and all suits, claims, actions, investigations or proceedings, and threats thereof, whether civil, criminal or administrative, heretofore or hereafter instituted or asserted. ARTICLE VI MISCELLANEOUS PROVISIONS Section 1. Transfer Of Shares. Shares of stock of the Corporation shall be transferred only on the books of the Corporation by the record holder thereof, in person or by his attorney or legal representative thereunto duly authorized in writing, upon surrender of certificates for a like number of shares, except as otherwise required by law. Section 2. Regulations As To Stock Certificates. The Board, the Chairman, a President, a Vice-Chairman or the Secretary may make all such rules and regulations as it or such officer may deem advisable concerning the issue, transfer, registration or replacement of certificates for shares of stock of the Corporation. Section 3. Stockholder Inspection Rights. A stockholder shall have the right to inspect any book, record or document of the Corporation to the extent that such right is conferred by provisions of the New York Business Corporation Law or is authorized by the Board or the Chairman. Section 4. Corporate Seal. The Corporation shall have a suitable seal, containing the name of the Corporation. The Secretary shall have custody of the seal, but he may authorize others to keep and use a duplicate seal. Section 5. Definitions. As used herein, the following terms have the following meanings: "Board" means the Board of Directors of the Corporation. "Chairman" means the Chairman of the Board of Directors. "Corporation" means Union Carbide Corporation, a New York corporation. "Entire Board" means the total number of directors the Corporation would have if there were no vacancies. It does not mean the maximum number of directors authorized by these By-laws unless the Board has fixed the number of directors at 19. "Vice-Chairman" means a Vice-Chairman of the Board of Directors. "Vice-President" includes any Executive Vice-President, any Senior Vice-President, and any other officer of the Corporation who is a Vice-President however designated. ARTICLE VII AMENDMENTS The By-laws may be adopted, amended or repealed by the stockholders, or by the Board by a vote of a majority of the entire Board. EX-10.1.1 4 EXHIBIT 10.1.1 $1,000,000,000 CREDIT AGREEMENT dated as of November 4, 1994 among Union Carbide Corporation, The Banks Party Hereto, The Co-Agents Party Hereto, Morgan Guaranty Trust Company of New York, as Documentation Agent and Chemical Bank, as Administrative Agent and Auction Agent TABLE OF CONTENTS* Page ARTICLE I DEFINITIONS SECTION 1.01. Definitions .............................. 1 SECTION 1.02. Accounting Terms and Determinations ......................... 18 SECTION 1.03. Types of Borrowings ...................... 19 ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend ...................... 19 SECTION 2.02. Notice of Committed Borrowings ............................. 19 SECTION 2.03. Money Market Borrowings .................. 20 SECTION 2.04. Notice to Banks; Funding of Loans .................................. 25 SECTION 2.05. Notes .................................... 27 SECTION 2.06. Maturity of Loans ........................ 27 SECTION 2.07. Interest Rates ........................... 28 SECTION 2.08. Fees ..................................... 31 SECTION 2.09. Optional Termination or Reduction of Commitments ............... 32 SECTION 2.10. Prepayments .............................. 32 SECTION 2.11. General Provisions as to Payments ............................... 33 SECTION 2.12. Funding Losses ........................... 34 SECTION 2.13. Computation of Interest and Fees ................................... 34 SECTION 2.14. Withholding Tax Exemption ................ 35 SECTION 2.15. Regulation D Compensation ................ 35 SECTION 2.16. Alternative Currency Advances ............................... 36 ___________ * The Table of Contents is not a part of this Agreement. Page SECTION 2.17. Judgment Currency ........................ 38 SECTION 2.18. Replacement of this Credit Facility ............................... 39 ARTICLE III CONDITIONS SECTION 3.01. Effectiveness ............................ 39 SECTION 3.02. Borrowings ............................... 41 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Corporate Existence and Power .................................. 42 SECTION 4.02. Corporate and Governmental Authorization; No Contravention .......................... 43 SECTION 4.03. Binding Effect ........................... 43 SECTION 4.04. Financial Information .................... 43 SECTION 4.05. Litigation ............................... 44 SECTION 4.06. Compliance with ERISA .................... 44 SECTION 4.07. Environmental Matters .................... 45 SECTION 4.08. Restricted Subsidiaries .................. 45 SECTION 4.09. Not an Investment Company ................ 45 SECTION 4.10. Disclosure ............................... 45 ARTICLE V COVENANTS SECTION 5.01. Information .............................. 46 SECTION 5.02. Maintenance of Property; Insurance .............................. 49 SECTION 5.03. Restricted Subsidiaries .................. 49 SECTION 5.04. Negative Pledge .......................... 50 SECTION 5.05. Limitation on Debt of Subsidiaries ........................... 52 SECTION 5.06. Consolidations, Mergers and Sales of Assets ........................ 53 SECTION 5.07. Minimum Consolidated Tangible Net Worth ..................... 53 SECTION 5.08. Leverage Ratio ........................... 54 Page SECTION 5.09. Interest Coverage Ratio .................. 54 SECTION 5.10. Use of Proceeds .......................... 54 SECTION 5.11. Payments from Domestic Restricted Subsidiaries ................ 54 ARTICLE VI DEFAULTS SECTION 6.01. Events of Default ........................ 54 SECTION 6.02. Notice of Default ........................ 57 ARTICLE VII THE AGENTS AND CO-AGENTS SECTION 7.01. Appointment and Authorization .......................... 58 SECTION 7.02. Agents and Affiliates .................... 58 SECTION 7.03. Action by Agents ......................... 58 SECTION 7.04. Consultation with Experts ................ 58 SECTION 7.05. Liability of Agents ...................... 58 SECTION 7.06. Indemnification .......................... 59 SECTION 7.07. Credit Decision .......................... 59 SECTION 7.08. Successor Agents ......................... 59 SECTION 7.09. Distribution of Information .............. 60 SECTION 7.10. Co-Agents ................................ 60 ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair .............................. 60 SECTION 8.02. Illegality ............................... 61 SECTION 8.03. Increased Cost and Reduced Return......... 62 SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans .................................. 64 Page ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices .................................. 65 SECTION 9.02. No Waivers ............................... 65 SECTION 9.03. Expenses; Documentary Taxes; Indemnification ........................ 65 SECTION 9.04. Sharing of Set-Offs ...................... 66 SECTION 9.05. Amendments and Waivers ................... 67 SECTION 9.06. Successors and Assigns ................... 67 SECTION 9.07. Collateral ............................... 70 SECTION 9.08. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL ............................. 70 SECTION 9.09. Counterparts; Integration ................ 71 SECTION 9.10. Confidentiality .......................... 71 SECTION 9.11. Severability ............................. 72 Pricing Schedule Exhibit A - Note Exhibit B - Money Market Quote Request Exhibit C - Invitation for Money Market Quotes Exhibit D - Money Market Quote Exhibit E - Opinion of Counsel for the Borrower Exhibit F - Opinion of Special Counsel for the Agents Exhibit G - Administrative Questionnaire Exhibit H - Assignment and Assumption Agreement CREDIT AGREEMENT AGREEMENT dated as of November 4, 1994 among UNION CARBIDE CORPORATION, the BANKS party hereto, the CO-AGENTS party hereto, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent, and CHEMICAL BANK, as Administrative Agent and Auction Agent. The parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Adjusted CD Rate" has the meaning set forth in Section 2.07(b). "Adjusted Consolidated Debt" means at any date the consolidated Debt of the Borrower and its Consolidated Subsidiaries determined as of such date, excluding (i) Debt of any Consolidated Kuwait Joint Venture(including its obligation under any Guarantee by it of Debt of any other Kuwait Joint Venture) so long as such Debt (including any such obligation under a Guarantee) is not Guaranteed by the Borrower or any other Consolidated Subsidiary (except a Consolidated Kuwait Joint Venture), (ii) the Borrower's Kuwait Completion Guarantees and the Debt of the Kuwait Joint Ventures Guaranteed pursuant thereto, but only to the extent that the aggregate amount of Debt Guaranteed by the Borrower's Kuwait Completion Guarantees does not exceed $650,000,000 and (iii) Excluded Working Capital Financings. "Administrative Agent" means Chemical Bank in its capacity as Administrative Agent for the Banks hereunder, and its successors in such capacity. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in substantially the form of Exhibit G hereto submitted to the Administrative Agent (which shall promptly following receipt thereof give a copy to the Borrower and the Documentation Agent) duly completed by such Bank. "Affiliate" means, with respect to any Person, (i) any other Person that directly, or indirectly through one or more intermediaries, controls such Person (a "Controlling Person"), or (ii) any other Person which is controlled by or under common control with a Controlling Person. As used in this definition, the term "control" means, with respect to any Person, possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agents" means the Administrative Agent, the Auction Agent and the Documentation Agent, and "Agent" means any of the foregoing. "Alternative Currency" means any currency other than Dollars which is freely transferable and convertible into Dollars. "Alternative Currency Advance" means an advance made by a Bank to the Borrower in an Alternative Currency and designated by the Borrower pursuant to Section 2.16(b) as an Alternative Currency Advance for purposes of this Agreement. "Alternative Currency Advance Report" has the meaning set forth in Section 2.16(b). "Alternative Currency Outstanding" means at any time an amount equal to: (i) for any Alternative Currency Advance with a Dollar Equivalent of less than $5,000,000, $0 and (ii) for any Alternative Currency Advance with a Dollar Equivalent equal to at least $5,000,000, the amount obtained by rounding to the greatest multiple of $1,000,000 that is not larger than such Dollar Equivalent. "Applicable Alternative Currency Outstandings" means at any time an amount equal to the lesser of: (i) the aggregate amount of all Alternative Currency Outstandings and (ii) 30% of the aggregate amount of the Commitments at such time. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Assessment Rate" has the meaning set forth in Section 2.07(b). "Assignee" has the meaning set forth in Section 9.06(c). "Auction Agent" means Chemical Bank in its capacity as Auction Agent for the Banks hereunder, and its successors in such capacity. "Bank" means each lender listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Bank Parties" has the meaning set forth in Section 9.10. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Reference Rate for such day or (ii) the sum of 1/2 of 1% plus the Effective Federal Funds Rate for such day. "Base Rate Loan" means a Committed Loan made or to be made by a Bank as a Base Rate Loan in accordance with the applicable Notice of Committed Borrowing or pursuant to Article VIII. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means Union Carbide Corporation, a New York corporation, and its successors. "Borrower's Kuwait Completion Guarantees" means completion guarantees by the Borrower with respect to the Kuwait Project. "Borrowing" has the meaning set forth in Section 1.03. "CD Base Rate" has the meaning set forth in Section 2.07(b). "CD Loan" means a Committed Loan made or to be made by a Bank as a CD Loan in accordance with the applicable Notice of Committed Borrowing. "CD Margin" has the meaning set forth in Section 2.07(b). "CD Reference Banks" means Chemical Bank, Credit Suisse and Morgan Guaranty Trust Company of New York and each such other Bank as may be appointed pursuant to Section 9.06(g). "Co-Agents" means ABN AMRO Bank N.V., Bank of America Illinois, The Bank of New York, The Bank of Nova Scotia, Banque Nationale de Paris, CIBC Inc., Credit Suisse and NationsBank of North Carolina, N.A., each in its capacity as one of the co-agents for the Banks hereunder. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof (or, in the case of an Assignee, the portion of the transferor Bank's Commitment assigned to such Assignee pursuant to Section 9.06(c)), in each case as such amount may be reduced from time to time pursuant to Section 2.09 or changed as a result of an assignment pursuant to Section 9.06(c). "Committed Loan" means a loan made by a Bank pursuant to Section 2.01. "Consolidated Kuwait Joint Venture" means at any date any Kuwait Joint Venture that is a Consolidated Subsidiary at such date. "Consolidated Net Income" for any period means the consolidated net income of the Borrower and its Consolidated Subsidiaries for such period. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if such statements were prepared as of such date. "Consolidated Tangible Net Worth" means at any date the consolidated stockholders' equity of the Borrower and its Consolidated Subsidiaries minus consolidated Intangible Assets, all determined as of such date. For purposes of this definition "Intangible Assets" means the amount (to the extent reflected in determining such consolidated stockholders' equity) of (i) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of assets of a going concern business made within twelve months after the acquisition of such business) subsequent to June 30, 1994 in the book value of any asset owned by the Borrower or a Consolidated Subsidiary, (ii) all investments of the Borrower and its Consolidated Subsidiaries in unconsolidated Subsidiaries, and (iii) all goodwill, patents, trademarks, service marks, trade names, copyrights, organization or developmental expenses and other intangible assets. "Debt" of any Person means at any date, without duplication, to the extent required in accordance with generally accepted accounting principles to be included in the financial statements of such Person or the footnotes thereto, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other substantially similar instruments containing an unconditional promise to pay a sum certain, (iii) all obligations of such Person for installment purchase transactions involving the purchase of property or services over $5,000,000 for any particular transaction, except trade accounts payable and expense accruals arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid or to be paid under a letter of credit, and (vi) all obligations of others of the types described in clauses (i) through (v) above that are Guaranteed by such Person. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default; provided that an event or condition covered by clause (f) of Section 6.01 (and not covered by any other clause of said Section) shall not constitute a Default unless and until the Required Banks shall have made the determination specified in such clause (f) and the Administrative Agent shall have given the Borrower written notice of such determination. "Designated Subsidiary" has the meaning set forth in Section 5.03(c). "Documentation Agent" means Morgan Guaranty Trust Company of New York, in its capacity as documentation agent for the Banks hereunder, and its successors in such capacity. "Dollar Equivalent" means in respect of any Alternative Currency Advance the amount of Dollars obtained by converting the outstanding amount of currency of such Alternative Currency Advance, as specified in the then most recent Alternative Currency Advance Report or in the report provided pursuant to Section 2.16(b)(ii) in respect of such Alternative Currency Advance, into Dollars at the spot rate for the purchase of Dollars with such currency as quoted by the Administrative Agent at its principal foreign exchange trading operations office in New York City promptly upon receipt of such Alternative Currency Advance Report or such report provided pursuant to Section 2.16(b)(ii), as the case may be. "Dollars" and the sign "$" mean lawful money of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. "Domestic Consolidated Subsidiary" means a Consolidated Subsidiary organized and existing under the laws of the United States of America, any State thereof or the District of Columbia. "Domestic Lending Office" means, as to each Bank, its office identified in its Administrative Questionnaire as its Domestic Lending Office or such other office of such Bank as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b). "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Effective Federal Funds Rate" means the weighted average of the rates on overnight federal funds transactions between members of the Federal Reserve System arranged by federal funds brokers as published daily (or, if such day is not a Domestic Business Day, for the immediately preceding Domestic Business Day) by the Federal Reserve Bank of New York in the Composite Closing Quotations for U.S. Government Securities (or any successor quotations). "Environmental Laws" means all applicable federal, state, local and foreign laws, ordinances, codes, regulations, orders and requirements relating to the protection of, or discharge of materials into, the environment, including, without limitation, the Resource Conservation and Recovery Act of 1976, as amended; the Comprehensive Environmental Response, Compensation and Liability Act; the Toxic Substance Control Act; the Clean Water Act; the Clean Air Act; and the Safe Drinking Water Act. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Borrower, any Restricted Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Restricted Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Eurocurrency Reserve Ratio" has the meaning set forth in Section 2.15. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office or branch located at its address identified in its Administrative Questionnaire as its Euro-Dollar Lending Office or such other office or branch of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. "Euro-Dollar Loan" means a Committed Loan made or to be made by a Bank as a Euro-Dollar Loan in accordance with the applicable Notice of Committed Borrowing. "Euro-Dollar Margin" has the meaning set forth in Section 2.07(c). "Euro-Dollar Reference Banks" means the principal London offices of Chemical Bank, Credit Suisse and Morgan Guaranty Trust Company of New York, and each such other Bank as may be appointed pursuant to Section 9.06(g). "Event of Default" has the meaning set forth in Section 6.01. "Excluded Working Capital Financings" means obligations of the Borrower or any of its Consolidated Subsidiaries (other than a Consolidated Kuwait Joint Venture), up to an aggregate outstanding amount of $150,000,000, incurred in connection with working capital financings. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01) or any combination of the foregoing, in each case that are not overdue. "Foreign Subsidiary" means a Subsidiary other than a Subsidiary organized and existing under the laws of the United States of America, any State thereof or the District of Columbia. "Guarantee" by any Person means, without duplication, any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person, and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person: (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise); or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include: (a) endorsements for collection or deposit in the ordinary course of business; (b) obligations that are not required in accordance with generally accepted accounting principles to be included in the financial statements of such Person or the footnotes thereto; (c) "unconditional purchase obligations" (including take-or-pay contracts) as defined in and as required to be disclosed pursuant to Statement of Financial Accounting Standards No. 47 and the related interpretations, as the same may be amended from time to time, but only to the extent the aggregate amount of all such obligations of the Borrower and its Consolidated Subsidiaries (other than amounts reflected on the balance sheet of the Borrower and its Consolidated Subsidiaries) is equal to or less than 15% of the net sales of the Borrower and its Consolidated Subsidiaries as set forth in their Consolidated Statement of Income, determined as of the end of the preceding quarter for the twelve months then ending; (d) any obligation required to be disclosed pursuant to the Statement of Financial Accounting Standards No. 105, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk, issued March 1990, and the related interpretations, as the same may be amended from time to time (except to the extent any such obligation is required to be reflected on the balance sheet of the Borrower and its Consolidated Subsidiaries or to be disclosed pursuant to Statement of Financial Accounting Standards No. 5 and related interpretations, as the same may be amended from time to time); or (e) any difference between the fair market value and the book value of any obligation that is required to be disclosed pursuant to the Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments, issued December 1991, and the related interpretations, as the same may be amended from time to time. The term "Guarantee" used as a verb has a corresponding meaning. "Interest Coverage Ratio" means, with respect to the Borrower and its Consolidated Subsidiaries, for any period, the ratio of (x) the sum of (i) Consolidated Net Income, excluding any extraordinary items of gain or loss, (ii) consolidated interest expense, (iii) consolidated operating lease expense, (iv) consolidated provision for income taxes and (v) Restructuring Charges (to the extent deducted in determining the amount specified in (i) above) that the Borrower elects (by so stating in a certificate delivered pursuant to Section 5.01(c)) to add back to such Consolidated Net Income; provided that the aggregate amount of all Restructuring Charges added back pursuant to this clause (v) shall not exceed $100,000,000 on a cumulative basis after June 30, 1994 to (y) the sum of (i) consolidated interest expense and (ii) consolidated operating lease expense. The amounts referred to in clauses (x)(ii), (x)(iii), (x)(iv), (y)(i) and (y)(ii) of this definition shall be adjusted to exclude the interest expense, operating lease expense and income taxes of Consolidated Kuwait Joint Ventures, if any. In addition, the consolidated interest expense referred to in clauses (x)(ii) and (y)(i) of this definition, shall be adjusted to exclude interest on Excluded Working Capital Financings. "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (2) with respect to each CD Borrowing, the period commencing on the date of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (3) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending 30 days thereafter; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (4) with respect to each Money Market LIBOR Borrowing, the period commencing on the date of such Borrowing and ending such whole number of months thereafter (but not more than 12 months) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. (5) with respect to each Money Market Absolute Rate Borrowing, the period commencing on the date of such Borrowing and ending such number of days thereafter (but not less than seven nor more than 180 days) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. Notwithstanding the foregoing, all Interest Periods at any one time outstanding hereunder shall end on not more than 25 different dates, and the duration of any Interest Period which would otherwise exceed such limitation shall be adjusted so as to coincide with the remaining term of such other then current Interest Period as the Borrower may specify in the related Notice of Borrowing. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Invitation for Money Market Quotes" means an invitation by the Auction Agent on behalf of the Borrower to each Bank to submit Money Market Quotes offering to make Money Market Loans in accordance with Section 2.03, substantially in the form of Exhibit C hereto. "Kuwait Joint Ventures" means the joint ventures to which the Borrower and/or any of its Subsidiaries is or is to be a party and formed or to be formed to build and operate the Kuwait Project or to market products produced thereby. "Kuwait Project" means the proposed petrochemical complex in Kuwait disclosed in the Borrower's 1993 annual report to stockholders. "Leverage Ratio" means the ratio of (x) Adjusted Consolidated Debt to (y) the sum of (i) Consolidated Tangible Net Worth plus (ii) Restructuring Charges taken after June 30, 1994 up to a maximum cumulative amount of $100,000,000. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market LIBOR Margins pursuant to Section 2.03. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Material Debt" means at any time Adjusted Consolidated Debt (other than the Debt evidenced by the Notes) and/or Excluded Working Capital Financings (to the extent that they constitute Debt), having an aggregate principal amount outstanding at such time equal to or exceeding $50,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $15,000,000. "Material Subsidiaries" means at any time (the "time of determination") one or more Subsidiaries with respect to which any of the events specified in clause (g) or (h) of Section 6.01 shall have occurred after the date hereof (and not been cured before the time of determination), but only if the assets of such Subsidiaries (calculated in each case at the time such event occurred) exceed, in the aggregate, 1 1/2% of the consolidated assets of the Borrower and its Consolidated Subsidiaries at the time of determination. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d)(ii)(D). "Money Market Absolute Rate Loan" means a loan made or to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office or branch of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may from time to time by notice to the Borrower and the Administrative Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan made or to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01). "Money Market LIBOR Margin" has the meaning set forth in Section 2.03(d)(ii)(C). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either: (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group; or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Potential Cross-Default" means at any time an event or condition described in Section 6.01(f) that has occurred and is continuing at such time and that is not a Default, but would be a Default if the determination by the Required Banks contemplated by Section 6.01(f) had been made and notice of such determination had been given to the Borrower. "Pricing Schedule" means the Pricing Schedule attached hereto. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Reference Rate" means the rate of interest publicly announced by Chemical Bank in New York City from time to time as its reference rate. The Reference Rate is not intended to be the lowest rate of interest charged by Chemical Bank in connection with extensions of credit to borrowers. "Refunding Borrowing" means a Committed Borrowing which, after application of the proceeds thereof, results in no net increase in the outstanding principal amount of Committed Loans made by any Bank. "Regulation D", "Regulation U" and "Regulation X" means Regulation D, Regulation U and Regulation X, respectively, of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having at least two-thirds of the aggregate amount of the Commitments, or, if the Commitments have been terminated, holding Notes evidencing at least two-thirds of the aggregate unpaid principal amount of the outstanding Loans. "Restricted Subsidiary" means at any time: (i) any Domestic Consolidated Subsidiary with (a) more than $20,000,000 in total assets or (b) more than $5,000,000 in total net worth, and (ii) any other Consolidated Subsidiary designated by the Borrower as a Restricted Subsidiary (a) in the certificate delivered pursuant to Section 3.01(h) or (b) in accordance with Section 5.03, unless and until such designated Consolidated Subsidiary becomes an Unrestricted Subsidiary pursuant to Section 5.03. At the Effective Date, the Restricted Subsidiaries shall be those set forth in such certificate. "Restructuring Charges" means all nonrecurring after-tax charges taken after June 30, 1994 by the Borrower and its Consolidated Subsidiaries, on a consolidated basis, to provide for the cost of discontinuing a business, adopting a severance program or other profit improvement program or writing off or writing down impaired assets. "SEC" means the Securities and Exchange Commission. "Subsidiary" with respect to any Person means any corporation or other entity of which such Person directly or indirectly owns the securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions. Unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. "Termination Date" means November 3, 1999, or, if such day is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the Termination Date shall be the next preceding Euro-Dollar Business Day. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "Unrestricted Subsidiary" means any Subsidiary other than a Restricted Subsidiary. "Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. SECTION 1.02. Accounting Terms and Determina- tions. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Borrower notifies the Agent that the Borrower wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Borrower that the Required Banks wish to amend Article V for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article II on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article II under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend. Each Bank severally agrees, on the terms and conditions set forth in this Agreement (including, without limitation, Section 3.02), to make Domestic Loans and Euro-Dollar Loans to the Borrower pursuant to this Section from time to time in amounts such that the aggregate principal amount of Committed Loans by such Bank at any one time outstanding hereunder shall not exceed the amount of its Commitment. Each Borrowing under this Section 2.01 shall be in an aggregate principal amount of $25,000,000 or any larger multiple of $5,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(b) and, if less than $5,000,000, must be a Base Rate Borrowing) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section 2.01, repay, or to the extent permitted by Section 2.10 or 8.03(d)(ii), prepay Loans and reborrow at any time under this Section 2.01. SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give the Administrative Agent notice (a "Notice of Committed Borrowing") not later than 11:00 A.M. (New York City time) on: (x) the date of each Base Rate Borrowing, (y) the Domestic Business Day next preceding the date of each CD Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to be CD Loans, Base Rate Loans or Euro-Dollar Loans, and (d) in the case of a Fixed Rate Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Money Market Borrowings. (a) The Money Market Option. In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks to make offers to make Money Market Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Auction Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 11:00 A.M. (New York City time) on: (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Auction Agent shall have mutually agreed and shall have notified the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $25,000,000 or a larger multiple of $5,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market LIBOR Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within four Euro-Dollar Business Days (or such other number of days as the Borrower and the Auction Agent may agree and the Auction Agent shall have promptly notified to the Banks) of any other Money Market Quote Request. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request, the Auction Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto with respect to such Money Market Quote Request. (d) Submission and Contents of Money Market Quotes. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Auction Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than: (x) 12:00 Noon (New York City time) on the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Auction Agent shall have mutually agreed, and the Auction Agent shall have notified the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Auction Agent in the capacity of a Bank may be submitted, and may only be submitted, if the Auction Agent notifies the Borrower of the terms of the offer or offers contained therein not later than: (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles III and VI, any Money Market Quote so made shall be irrevocable except with the written consent of the Auction Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount: (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market LIBOR Margin") offered for each such Money Market Loan, expressed as a percentage (rounded to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (rounded to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Auction Agent shall promptly notify the Borrower of the terms: (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Auction Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Auction Agent's notice to the Borrower shall specify: (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market LIBOR Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than: (x) 1:30 P.M. (New York City time) on the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 10:30 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Auction Agent shall have mutually agreed and the Auction Agent shall have notified the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Auction Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e) and the Auction Agent shall so notify the Administrative Agent. In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $25,000,000 or a larger multiple of $5,000,000 and the principal amount of each Money Market Loan with respect to such Money Market Borrowing must be in an amount of $5,000,000 or a larger multiple of $1,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market LIBOR Margins or Money Market Absolute Rates, as the case may be, (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement, and (v) failure by the Borrower to notify the Auction Agent by the time specified above shall be deemed a rejection of all offers. (g) Allocation by Borrower. If offers are made by two or more Banks with the same Money Market LIBOR Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Borrower among such Banks as nearly as possible in proportion to the aggregate principal amounts of such offers (or as nearly in proportion as shall be practicable after giving effect to the requirement that Money Market Loans for each relevant maturity date shall each be in a principal amount of $5,000,000 or a multiple of $1,000,000 in excess thereof). SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 12:00 Noon (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make the amount of its share of such Borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in or pursuant to Section 9.01 in funds immediately available to the Administrative Agent. Unless the Administrative Agent determines (or, in the case of the first Borrowing, the Documentation Agent and the Administrative Agent determine) that any applicable condition specified in Article III has not been satisfied, the Administrative Agent shall make such aggregate funds available to the Borrower by depositing as promptly as practicable the proceeds thereof, in like funds as received by the Administrative Agent, in the account of the Borrower with the Administrative Agent on the date of such Borrowing. (c) If any Bank makes a new Committed Loan hereunder to the Borrower on a day on which the Borrower is to repay all or any part of an outstanding Committed Loan from such Bank, such Bank shall apply the proceeds of its new Committed Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Bank to the Administrative Agent as provided in subsection (b), or remitted by the Borrower to the Administrative Agent as provided in Section 2.11, as the case may be. (d) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent does, in such circumstances, make available to the Borrower such amount, such Bank shall within three Domestic Business Days following such Borrowing make such share available to the Administrative Agent, together with interest thereon for each day from and including the date of such Borrowing that such share was not made available, at the Effective Federal Funds Rate. If such amount is so made available, such payment to the Administrative Agent shall constitute such Bank's share of such Borrowing for all purposes of this Agreement. If such amount is not so made available to the Administrative Agent, then the Administrative Agent shall on the third Domestic Business Day following such Borrowing notify the Borrower of such failure and on the fourth Domestic Business Day following the date of such Borrowing, the Borrower shall pay to the Administrative Agent such share, together with interest thereon for each day that the Borrower had the use of such share, at the Effective Federal Funds Rate. Nothing contained in this subsection (d) shall relieve any Bank which has failed to make available its share of any Borrowing hereunder from its obligation to do so in accordance with the terms hereof. (e) The failure of any Bank to make available to the Administrative Agent its share of any Borrowing on the date of such Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make available to the Administrative Agent its share of such Borrowing, but no Bank shall be responsible for the failure of any other Bank to make available the share of any Borrowing to be made available by such other Bank on such date of Borrowing. SECTION 2.05. Notes. (a) The Loans of each Bank shall be evidenced by a single Note payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans. (b) Each Bank may, by notice to the Borrower and the Administrative Agent (to be given not later than two Domestic Business Days prior to the first Borrowing), request that its Loans of a particular type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the Documentation Agent shall mail such Note to such Bank. Each Bank shall record the date, amount and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and prior to any transfer of its Note may endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. Each Loan included in any Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made to but excluding the date it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (b) Subject to Section 8.01, each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin for such day plus the applicable Adjusted CD Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day thereof. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment at a rate per annum equal to the sum of 1% plus the Base Rate for such day. "CD Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate __________ * The amount in brackets being rounded upwards, if necessary, to the next higher 1/100 of 1% The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding $5,000,000,000 in respect of new non-personal time deposits in Dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. Section 327.3(e) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Subject to Section 8.01, each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the applicable London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. "Euro-Dollar Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in Dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (e) Subject to Section 8.01, each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market LIBOR Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Interest on each Money Market Loan shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (f) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the Banks making such Loans by telex, facsimile transmission or cable of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Administrative Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.08. Fees. (a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the account of the Banks ratably in proportion to their Commitments a commitment fee at the Commitment Fee Rate (determined for each day in accordance with the Pricing Schedule). Such commitment fee shall be payable for each day on the amount by which the aggregate amount of the Commitments exceeds the sum of: (i) the aggregate outstanding principal amount of the Loans plus (ii) the Applicable Alternative Currency Outstandings. Such commitment fee shall accrue from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety). (b) Facility Fee. The Borrower shall pay to the Administrative Agent for the account of the Banks ratably in proportion to their Commitments a facility fee at the Facility Fee Rate (determined for each day in accordance with the Pricing Schedule). Such facility fee shall accrue: (i) from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily aggregate amount of the Commitments (whether used or unused) and (ii) from and including the Termination Date (or such earlier date of termination) to but excluding the date the Loans shall be repaid in their entirety, on the daily aggregate outstanding principal amount of the Loans. (c) Payments. Accrued fees under this Section shall be payable quarterly on each March 31, June 30, September 30 and December 31 (in arrears) commencing on December 31, 1994 and upon the date of termination of the Commitments in their entirety (and, if later, in the case of the facility fee, the date the Loans shall be repaid in their entirety). SECTION 2.09. Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time, or (ii) ratably reduce from time to time, by an aggregate amount of at least $25,000,000, the aggregate amount of the Commitments, provided that the aggregate amount of Commitments may not be reduced below the sum of (x) the aggregate outstanding principal amount of the Loans plus (y) the Applicable Alternative Currency Outstandings (after giving effect to such reduction). SECTION 2.10. Prepayments. (a) The Borrower may, upon giving notice to the Administrative Agent not later than 11:00 A.M. (New York City time) on the date of prepayment, prepay any Base Rate Borrowing (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01) in whole at any time, or from time to time in part in amounts aggregating $25,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Subject to Section 8.03(d)(ii), each such optional prepayment shall be applied to prepay ratably the Base Rate Loans of the several Banks included in such Borrowing. (b) Subject to Section 2.12, upon giving notice to the Administrative Agent not later than 11:00 A.M. (New York City time) on the Domestic Business Day next preceding the date of prepayment (in the case of a CD Borrowing) or the third Euro-Dollar Business Day before the date of prepayment (in the case of a Euro-Dollar Borrowing), the Borrower may prepay any CD Borrowing or Euro-Dollar Borrowing in whole at any time, or from time to time in part in amounts aggregating $25,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Subject to Section 8.03(d)(ii), each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Borrowing. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. (d) The Borrower may not prepay the Money Market Loans at any time (other than Money Market Loans bearing interest at the Base Rate pursuant to Section 8.01). (e) On any day upon which, as a result of any reduction of Commitments under this Agreement, the sum of (i) the aggregate outstanding principal amount of the Loans plus (ii) the Applicable Alternative Currency Outstandings exceeds the aggregate amount of the Commitments, the Borrower shall prepay such principal amount (together with accrued interest thereon) of outstanding Loans hereunder as may be necessary so that after such repayment such sum does not exceed such aggregate amount of Commitments. Any such prepayment shall be made in accordance with all applicable provisions of this Agreement (including without limitation subsections (a), (b), (c) and (d) of this Section 2.10). SECTION 2.11. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 11:00 A.M. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 9.01. The Administrative Agent will promptly distribute to each Bank its share of each such payment received by the Administrative Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Effective Federal Funds Rate. SECTION 2.12. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan (pursuant to Section 2.10, Section 2.18, Article VI, Article VIII or otherwise) on any day other than the last day of the Interest Period applicable thereto or if the Borrower fails to borrow or prepay any Fixed Rate Loans after notice of such borrowing or prepayment has been given to any Bank in accordance with Section 2.04(a) or Section 2.10(c), the Borrower shall reimburse each Bank on demand for any resulting loss or expense actually incurred by it (or a Participant which has purchased or agreed to purchase a participation in the relevant Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow or prepay, provided that such Bank shall have delivered to the Borrower a certificate containing a computation in reasonable detail of the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.13. Computation of Interest and Fees. Interest based on the Reference Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day), except for interest on Alternative Currency Advances, which shall be computed according to prevailing market practices. SECTION 2.14. Withholding Tax Exemption. At least five Domestic Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Bank, each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to each of the Borrower and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Bank is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. Each Bank which so delivers a Form 1001 or 4224 further undertakes to deliver to each of the Borrower and the Administrative Agent two additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrower or the Administrative Agent, in each case certifying that such Bank is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank promptly advises the Borrower and the Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. SECTION 2.15. Regulation D Compensation. (a) So long as Regulation D shall require reserves to be maintained against "Eurocurrency liabilities" (or against any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents), each Bank subject to and actually incurring such reserve requirement may require the Borrower to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum (the "Regulation D Rate") determined pursuant to the following formula: [ LIBOR ] RDR = [ -------- ] - LIBOR [ 1 - ERR ] RDR = Regulation D Rate LIBOR = The applicable London Interbank Offered Rate ERR = Eurocurrency Reserve Ratio "Eurocurrency Reserve Ratio" means the applicable reserve ratio prescribed by Regulation D (as such Regulation shall have been amended to the first day of the related Interest Period) for such reserve requirements (expressed as a decimal). Notwithstanding anything contained herein to the contrary, the Regulation D Rate shall be adjusted automatically on and as of the effective date of any change in such reserve ratio. (b) Any Bank wishing to require payment of such additional interest: (i) shall so notify the Borrower, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable on any date interest is payable with respect to each Euro-Dollar Loan commencing after the giving of such notice and (ii) shall notify the Borrower from time to time of the amount due it under this Section; provided that the Borrower shall not be required to make any payment of an amount due hereunder earlier than the fifth Euro-Dollar Business Day after receipt of the notice referred to in clause (ii) of this Section. SECTION 2.16. Alternative Currency Advances. (a) Requests for Offers. From time to time the Borrower may request any or all of the Banks to make offers to make Alternative Currency Advances, each in a minimum principal amount in the currency of such Alternative Currency Advance equivalent to $1,000,000, to the Borrower; provided that the aggregate Dollar Equivalents of all Alternative Currency Advances outstanding at any one time shall not exceed $300,000,000; provided further that immediately after the making of an Alternative Currency Advance, the sum of (i) the aggregate principal amount of the Loans plus (ii) the Applicable Alternative Currency Outstandings will not exceed the aggregate amount of the Commitments. Any such request shall be transmitted directly to any such Bank at the Euro-Dollar Lending Office of such Bank or at any other address that the Borrower and such Bank may agree from time to time. Each Bank may, but shall have no obligation to, make such offers on terms and conditions as are satisfactory to such Bank, and the Borrower may, but shall have no obligation to, accept any such offers. (b) Reports to Agent. (i) The Borrower shall deliver to the Administrative Agent a report in respect of each Alternative Currency Advance (an "Alternative Currency Advance Report") by 12:00 Noon (New York City time) on (x) the date on which the Borrower accepts such Alternative Currency Advance (such report to constitute the designation of such advance as an Alternative Currency Advance for purposes of this Agreement), (y) the date on which any principal amount thereof is repaid prior to the scheduled maturity date and (z) the scheduled maturity date if payment thereof is not made on such scheduled maturity date, specifying for such Alternative Currency Advance: (w) the date such advance was or will be made, on which such amount of principal is prepaid or will be repaid or on which payment was not made, as the case may be; (x) the Alternative Currency of such advance; and (y) the principal amount of such advance or principal prepayment or repayment or the amount not paid (in such Alternative Currency). On the basis of each such Alternative Currency Advance Report, the Administrative Agent shall determine the Dollar Equivalent of the advance then made or remaining after such principal repayment and the Applicable Alternative Currency Outstandings on such date after giving effect to such advance or principal repayment and shall promptly notify the Borrower and the Banks of such Dollar Equivalent and such Applicable Alternative Currency Outstandings. (ii) If the aggregate amount of Loans and Alternative Currency Advances outstanding under this Agreement equals or exceeds $850,000,000, at the time of each Borrowing hereunder that is not a Refunding Borrowing, the Administrative Agent shall determine the Dollar Equivalent of each Alternative Currency Advance then outstanding and the Applicable Alternative Currency Outstandings on such date, based on such Dollar Equivalents, and shall promptly notify the Borrower and the Banks of such Dollar Equivalents, and such Applicable Alternative Currency Outstandings. (c) Other Alternative Currency Borrowings. Nothing in this Section shall restrict the Borrower's ability to borrow in Alternative Currencies from one or more Banks or other lenders without reporting such borrowings as Alternative Currency Advances for purposes of this Agreement. If and to the extent that any report designating such a borrowing as an Alternative Currency Advance would cause the Borrower to exceed any applicable limit set forth in Section 2.16(a) or 3.02(b) on the day such report is received by the Administrative Agent, such designation shall be ineffective. Except as provided in the immediately preceding sentence, a report delivered by the Borrower pursuant to Section 2.16(b) designating a borrowing as an Alternative Currency Advance for purposes of this Agreement shall be effective upon receipt by the Administrative Agent and may not thereafter be revoked by the Borrower. SECTION 2.17. Judgment Currency. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due from the Borrower hereunder or under any of the Notes in the currency expressed to be payable herein or under the Notes (the "specified currency") into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the specified currency with such other currency at the Administrative Agent's New York office on the Domestic Business Day preceding that on which final judgment is given. The obligations of the Borrower in respect of any sum due to any Bank or the Administrative Agent hereunder or under any Note shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Domestic Business Day following receipt by such Bank or the Administrative Agent (as the case may be) of any sum adjudged to be so due in such other currency such Bank or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the specified currency with such other currency. If the amount of the specified currency so purchased is less than the sum originally due to such Bank or the Administrative Agent, as the case may be, in the specified currency, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Bank or the Administrative Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds: (a) the sum originally due to such Bank or the Administrative Agent, as the case may be, and (b) any amounts shared with other Banks as a result of allocations of such excess as a disproportionate payment to such Bank under Section 9.04, such Bank or the Administrative Agent, as the case may be, agrees to remit such excess to the Borrower. SECTION 2.18. Replacement of this Credit Facility. If the Borrower wishes at any time to replace the credit facility provided under this Agreement with another credit facility, the Borrower may give prior notice of the termination of the Commitments hereunder as required by Section 2.09 and prior notice of the prepayment of any Committed Loans outstanding hereunder as required by Section 2.10, in each case on a conditional basis (i.e., conditioned upon such other credit facility becoming available to the Borrower), provided that the Borrower gives definitive notice of such termination of the Commitments and prepayment of outstanding Committed Loans (if any) to the Administrative Agent before 11:00 A.M. (New York City time) on the date of such termination and prepayment (if any) and complies with the applicable requirements of Sections 2.09 and 2.10 in all other respects. ARTICLE III CONDITIONS SECTION 3.01. Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05): (a) receipt by the Documentation Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Documentation Agent in form satisfactory to it of telegraphic, telex, facsimile or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Documentation Agent for the account of each Bank of one executed Note dated on or before the Effective Date complying with the provisions of Section 2.05; (c) receipt by the Documentation Agent of an opinion of Phyllis Savage, counsel to the Borrower, covering the matters described in Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) receipt by the Documentation Agent of an opinion of Davis Polk & Wardwell, special counsel for the Agents, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (e) receipt by the Documentation Agent of a certificate signed by any of the Chairman, any Vice Chairman, the President, any Vice President, the Treasurer, such Treasurer's designee, or any Associate Treasurer or Assistant Treasurer of the Borrower, dated the Effective Date, to the effect set forth in clauses (c), (d) and (e) of Section 3.02; (f) receipt by the Documentation Agent of a copy of the Borrower's certificate of incorporation, certified by the Secretary of State of New York; (g) receipt by the Documentation Agent of a certificate on behalf of the Borrower signed by the Secretary or Assistant Secretary of the Borrower or such other authorized officer of the Borrower satisfactory to the Documentation Agent certifying (i) that the Borrower's certificate of incorporation has not been amended since May 2, 1994, (ii) that no proceeding for the dissolution or liquidation of the Borrower exists, (iii) that the copy of the by-laws of the Borrower attached to the certificate is true, correct and complete, (iv) that the copies of the resolutions of the Borrower's board of directors attached to the certificate are true and correct and in full force and effect and (v) as to the incumbency of each officer of the Borrower who signed this Agreement and the Notes on behalf of the Borrower; (h) receipt by the Documentation Agent of a certificate listing the Restricted Subsidiaries as of the Effective Date; (i) the commitments of the banks under the $850,000,000 Credit Agreement dated as of April 15, 1992 among Union Carbide Corporation, Union Carbide Chemicals and Plastics Company Inc., the banks listed on the signature pages thereof, Morgan Guaranty Trust Company of New York, Chemical Bank and Credit Suisse, as Co-Agents, and Chemical Bank, as Administrative Agent and as Auction Agent, shall have been terminated and all amounts due and payable under such Agreement shall have been paid; and (j) receipt by the Documentation Agent of all documents that the Documentation Agent may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Documentation Agent; provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than November 20, 1994. The Documentation Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (b) immediately after such Borrowing, the sum of (i) the aggregate outstanding principal amount of the Loans plus (ii) the Applicable Alternative Currency Outstandings will not exceed the aggregate amount of the Commitments; (c) immediately after such Borrowing, no Default shall have occurred and be continuing; (d) none of the principal financial officer, the principal accounting officer or the Treasurer of the Borrower shall be aware of any Potential Cross-Default that will exist after giving effect to such Borrowing and was not disclosed to the Banks at least two Domestic Business Days before the date of such Borrowing; (e) if such Borrowing is not a Refunding Borrowing, the fact that the representations and warranties of the Borrower contained in this Agreement shall be true on and as of the date of such Borrowing; and (f) if such Borrowing is a Refunding Borrowing, the fact that the representations and warranties of the Borrower contained in this Agreement (except the representations and warranties set forth in Sections 4.04(c) and 4.07 as to any material adverse change which has theretofore been disclosed in writing by the Borrower to the Banks and in Section 4.05) shall be true on and as of the date of such Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (b), (c) and (d) and either clause (e) or (f), as the case may be, of this Section, and each Notice of Borrowing shall be deemed to be a confirmation by the Borrower to such effect. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of New York, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries or result in or permit the termination or modification of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower. SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 1993 and the related consolidated statements of income and cash flows for the fiscal year then ended, reported on by KPMG Peat Marwick, set forth in the Borrower's 1993 annual report to stockholders, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of June 30, 1994 and the related unaudited consolidated statements of income and cash flows for the six months then ended, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the consolidated financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such six month period (subject to normal year-end adjustments). (c) Since June 30, 1994 there has been no change in the business, financial position, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, which could materially adversely affect the present or prospective ability of the Borrower to perform its obligations under this Agreement or any Note or which in any manner draws into question the validity or enforceability of this Agreement or any Note. SECTION 4.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the present or prospective ability of the Borrower to perform its obligations under this Agreement or any Note or which in any manner draws into question the validity of this Agreement or the Notes. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the currently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has: (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA and aggregate withdrawal liabilities not in excess of $5,000,000 at any one time outstanding. SECTION 4.07. Environmental Matters. In the ordinary course of its business, the Borrower conducts reviews of the effect of Environmental Laws on the business, operations and properties of the Borrower and its Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, related United States environmental protection operating expenses, which include operating costs of pollution control facilities and certain environmental accruals and administrative expenses, and capital expenditures for the current fiscal year and related amounts projected for capital expenditures up to five years subsequent to such current fiscal year, expressed in then-current dollar amounts). On the basis of this review, the Borrower has reasonably concluded that Environmental Laws are unlikely to have an effect on the business, financial condition, results of operations or prospects of the Borrower and its Consolidated Subsidiaries during the term of this Agreement, which could materially adversely affect the present or prospective ability of the Borrower to perform its obligations under this Agreement or any Note. SECTION 4.08. Restricted Subsidiaries. Each corporate Restricted Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.09. Not an Investment Company. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.10. Disclosure. None of the material furnished to the Agents and the Banks in connection herewith (excluding financial projections and estimates of future results) contains, or contained at the time so furnished, any untrue statement of a material fact or omits, or omitted at the time so furnished, to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. All financial projections and estimates of future results included in such material represented the Borrower's good faith estimates, based on assumptions which the Borrower considered reasonable, as of the date thereof (it being understood that the Borrower does not represent or warrant that such projections and future results will in fact be realized or that such assumptions included all possible assumptions). ARTICLE V COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Borrower will deliver to each of the Banks and the Administrative Agent: (a) as promptly as practicable and in any event within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in accordance with generally accepted accounting principles (and in a manner acceptable to the SEC) by KPMG Peat Marwick or other independent public accountants of nationally recognized standing; (b) as promptly as practicable and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and comparative financial information as of the end of the previous fiscal year, the related consolidated statement of income for such quarter and the related consolidated statements of income and cash flows for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the principal financial officer, the principal accounting officer or the Treasurer of the Borrower or a person designated in writing by any of the foregoing persons, and if such financial statements are filed with the SEC, all reported on in conformity with the financial reporting requirements of the SEC; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the principal financial officer, the principal accounting officer or the Treasurer of the Borrower, or a person designated in writing by any of the foregoing persons (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with any applicable requirements of Sections 5.05, 5.07, 5.08 and 5.09 on the date of such financial statements, (ii) stating whether the Borrower was in compliance with the requirements of Sections 5.02 through 5.04, inclusive, on the date of such financial statements, and (iii) stating whether any Default or Potential Cross-Default exists on the date of such certificate and, if any Default or Potential Cross-Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements whether anything has come to their attention to cause them to believe that any Default or Potential Cross-Default existed on the date of such statements; (e) within five days after any officer of the Borrower obtains knowledge of any Default or Potential Cross-Default, if such Default or Potential Cross- Default is then continuing, a certificate of the principal financial officer, the principal accounting officer or the Treasurer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the public shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the SEC; (h) if and when any member of the ERISA Group: (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability in excess of $5,000,000, under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer, any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the principal financial officer, the principal accounting officer or the Treasurer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; (i) promptly after the Borrower is notified by any rating agency referred to in the Pricing Schedule of any actual change in any rating referred to in the Pricing Schedule, written notice of such change; and (j) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Documentation Agent or the Administrative Agent, at the request of any Bank, may reasonably request. SECTION 5.02. Maintenance of Property; Insurance. (a) The Borrower will keep, and will cause each of its Subsidiaries to keep, all property useful and necessary in its respective business in good working order and condition, ordinary wear and tear excepted. (b) The Borrower will maintain, and will cause each of its Subsidiaries to maintain, insurance policies on its assets at coverage levels that are at least as high as the coverage levels that are usually insured against in the same general area by companies of established repute engaged in the same or a similar business as the Borrower or such Subsidiary, as the case may be; and, upon request of the Documentation Agent, will promptly furnish to the Documentation Agent for distribution to the Banks information presented in reasonable detail as to the insurance so carried. SECTION 5.03. Restricted Subsidiaries. (a) The Borrower will notify the Administrative Agent, each time that the Borrower delivers financial statements pursuant to Section 5.01(a) or (b), whether or not the total assets of the Borrower and all Restricted Subsidiaries (excluding any loans or other extensions of credit, other than receivables related to trade transactions, from any Restricted Subsidiary to any Unrestricted Subsidiary) were equal to at least 60% of the total assets of the Borrower and its Consolidated Subsidiaries as of the date of such financial statements (the "Restricted Subsidiary Asset Test"). (b) If the total assets of the Borrower and all Restricted Subsidiaries as so reported did not meet the Restricted Subsidiary Asset Test as of such date, the Borrower will, on the date such financial statements are delivered to the Administrative Agent, designate as Restricted Subsidiaries one or more additional Consolidated Subsidiaries which were theretofore Unrestricted Subsidiaries having sufficient assets as of the date of such financial statements so that the Restricted Subsidiary Asset Test as of such date will be met. (c) Each Consolidated Subsidiary which is a Restricted Subsidiary by reason of clause (ii) of the definition of "Restricted Subsidiary" (a "Designated Subsidiary") shall be a Restricted Subsidiary from the time of such designation until (subject to Section 5.03(d)) the Borrower subsequently notifies the Administrative Agent, concurrently with the delivery of financial statements pursuant to Section 5.01(a) or (b), that it is no longer necessary to include such Designated Subsidiary as a Restricted Subsidiary to meet the Restricted Subsidiary Asset Test (measured as of the date of such financial statements), at which time such Designated Subsidiary shall become an Unrestricted Subsidiary. (d) The Borrower may from time to time substitute one or more (i) Domestic Consolidated Subsidiaries of the Borrower having (x) total assets of $20,000,000 or less and (y) total net worth of $5,000,000 or less or (ii) Foreign Consolidated Subsidiaries which (in either case) are Unrestricted Subsidiaries for one or more Designated Subsidiaries, provided the Restricted Subsidiary Asset Test (measured as of the date of the most recent financial statements delivered pursuant to Section 5.01(a) or (b)) continues to be met, upon which substitution such theretofore Designated Subsidiaries shall become Unrestricted Subsidiaries. SECTION 5.04. Negative Pledge. The Borrower will not, and will not permit any of its Restricted Subsidiaries to, create, assume or suffer to exist any Lien securing Debt on any asset now owned or hereafter acquired by it, except: (a) any Lien existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $50,000,000; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Restricted Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof; (d) any Lien on any improvements constructed on any property of the Borrower or any Restricted Subsidiary and any theretofore unimproved real property on which such improvements are located securing Debt incurred for the purpose of financing all or any part of the cost of constructing such improvements, provided that such Lien attaches to such improvements within 90 days after the later of (1) completion of construction of such improvements and (2) commencement of full operation of such improvements; (e) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Restricted Subsidiary and not created in contemplation of such acquisition; (f) Liens on property of the Borrower or a Restricted Subsidiary in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, or any other government or department, agency, instrumentality or political subdivision thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any Debt incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such Liens; (g) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, but only to the extent that such Debt is not increased and is not secured by any additional assets; (h) Liens securing Debt permitted to be secured under Section 5.05(a)(i); and (i) Liens not otherwise permitted by the foregoing clauses of this Section securing Debt in an aggregate principal amount at any time outstanding not to exceed $200,000,000. SECTION 5.05. Limitation on Debt of Subsidiaries. (a) The Borrower shall not permit any of its Restricted Subsidiaries to create, incur, assume or suffer to exist any Debt, except: (i) any Debt owing to the Borrower or another Subsidiary, provided that any such Debt owing to the Borrower is made or issued solely on a senior basis, and provided further that any such Debt owing to a Subsidiary is made or issued solely on a senior, unsecured basis; (ii) Debt of a Designated Subsidiary existing at the time such Subsidiary is designated as a Restricted Subsidiary; (iii) Excluded Working Capital Financings; and (iv) (A) unsecured Debt not otherwise permitted by the foregoing clauses (i), (ii) and (iii) of this Section, in an aggregate principal amount at any time outstanding not to exceed $200,000,000 and (B) Debt secured by Liens permitted by Section 5.04. (b) The Borrower shall not permit any of its Unrestricted Subsidiaries that are Consolidated Subsidiaries or any of their respective Subsidiaries that are Consolidated Subsidiaries to create, incur, assume or suffer to exist any Debt owing to a Person other than the Borrower or a Subsidiary (including Debt referred to in clause (ii) of subsection (a) of this Section) if the aggregate outstanding principal amount of all such Debt (except Excluded Working Capital Financings) of all such Subsidiaries would at any time exceed $800,000,000. For purposes of this subsection (b), a Consolidated Kuwait Joint Venture shall be deemed not to be a Subsidiary or a Consolidated Subsidiary. SECTION 5.06. Consolidations, Mergers and Sales of Assets. The Borrower will not merge or consolidate with or into any other Person or sell, lease, transfer or otherwise dispose of all or substantially all of its assets, property or business in any single transaction or series of related transactions, unless (i) in the case of any such merger or consolidation, the Borrower shall be the continuing corporation, or, in the case of any such sale, lease, transfer or other disposition, the transferee or transferees shall be one or more Wholly-Owned Consolidated Subsidiaries organized and existing under the laws of the United States of America or any State thereof, each of which shall expressly assume the due and punctual performance and observance of all of the covenants and agreements of the Borrower contained in this Agreement and the Notes, and (ii) immediately after giving effect to such merger or consolidation, or such sale, lease, transfer or other disposition, no Default or Potential Cross- Default shall have occurred and be continuing. SECTION 5.07. Minimum Consolidated Tangible Net Worth. Consolidated Tangible Net Worth will not at any time be less than the sum of (i) $1,050,000,000 less Restructuring Charges taken after June 30, 1994 up to a maximum cumulative amount of $100,000,000, (ii) 50% of Consolidated Net Income (calculated before giving effect to any Restructuring Charges deducted pursuant to clause (i) above), for each fiscal quarter beginning after June 30, 1994 for which such Consolidated Net Income (as so calculated) is positive, and (iii) 50% of the proceeds from the sale after June 30, 1994 of capital stock that is not redeemable at the option of the holder thereof and that the issuer thereof is not required to repurchase at the option of the holder thereof; provided that proceeds from the sale of capital stock issued pursuant to any employee benefit plan, stock option plan or dividend reinvestment plan shall be excluded from any determination under this Section 5.07. SECTION 5.08. Leverage Ratio. The Leverage Ratio will not (i) at any time prior to June 30, 1995 exceed 1.65 to 1 and (ii) at any time on or after June 30, 1995 exceed 1.5 to 1. SECTION 5.09. Interest Coverage Ratio. At the end of any fiscal quarter ending after June 30, 1994, the Interest Coverage Ratio for the period of four consecutive fiscal quarters then ended will not be less than 2.0 to 1. SECTION 5.10. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for working capital and general corporate purposes of the Borrower and its Subsidiaries. None of such proceeds will be used, directly or indirectly, in violation of Regulation X or for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. SECTION 5.11. Payments from Domestic Restricted Subsidiaries. The Borrower shall not, and shall not permit any Domestic Consolidated Subsidiary that is a Restricted Subsidiary to, enter into any agreement which expressly prohibits or limits in any manner the ability of such Restricted Subsidiary, directly or indirectly, to declare or pay any dividend or other distribution, loan, advance or other payment to the Borrower. ARTICLE VI DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan or, within five days, any interest on any Loan, any fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.04 to 5.11, inclusive; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 20 days after written notice thereof has been given to the Borrower by the Administrative Agent at the request of any Bank; (d) any representation, warranty, certification or statement made (or deemed made) by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Subsidiary shall fail to make any payment in respect of Material Debt when due or within any applicable grace period or any event or condition shall occur which results in the acceleration of the maturity of Material Debt; (f) any event or condition (except a failure to pay or other event or condition covered by clause (e) above) shall occur which enables (or, with the giving of notice or lapse of time or both, would enable) the holder or holders of Material Debt or any Person or Persons acting on its or their behalf to accelerate the maturity thereof or terminate its or their commitment in respect thereof and such event or condition shall not have been cured within two Domestic Business Days after both (i) the Required Banks shall have determined that such event or condition, if not cured within two Domestic Business Days, should be an Event of Default under this clause (f) and (ii) the Administrative Agent shall have given the Borrower written notice of such determination; (g) the Borrower or Material Subsidiaries shall: (i) commence a voluntary case or other proceeding seeking (1) liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or (2) the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property; (ii) consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it; (iii) make a general assignment for the benefit of creditors; (iv) fail generally to pay its debts as they become due; or (v) take any corporate action to authorize any of the foregoing; (h) (i) an involuntary case or other proceeding shall be commenced against the Borrower or Material Subsidiaries seeking (1) liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or (2) the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or (ii) an order for relief shall be entered against the Borrower or Material Subsidiaries under the federal bankruptcy laws as now or hereafter in effect; (i) (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $50,000,000 which it shall have become liable to pay under Title IV of ERISA; (ii) notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; (iii) the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer, any Material Plan; (iv) a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; (v) there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $50,000,000; (j) a judgment or order for the payment of money in excess of $50,000,000 shall be rendered against the Borrower or any Subsidiary and shall remain unsatisfied for a period of ten consecutive days after it becomes due and payable, during which ten-day period execution shall not be effectively stayed or otherwise effectively precluded; or (k) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said Act) of 30% or more of the outstanding shares of common stock of the Borrower; or, during any period of twelve consecutive calendar months, individuals who were directors of the Borrower on the first day of such period shall cease to constitute a majority of the board of directors of the Borrower; then, and in every such event, the Administrative Agent shall: (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate outstanding principal amount of the Loans, by notice to the Borrower declare the Notes (together with accrued interest thereon) to be, and the Notes (together with accrued interest thereon) shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon automatically terminate and the Notes (together with accrued interest thereon) shall automatically become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 6.02. Notice of Default. The Administra- tive Agent shall give notice under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE VII THE AGENTS AND CO-AGENTS SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to such Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agents and Affiliates. Morgan Guaranty Trust Company of New York and Chemical Bank shall each have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not an Agent, and Morgan Guaranty Trust Company of New York and Chemical Bank and their respective affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not an Agent hereunder. SECTION 7.03. Action by Agents. The obligations of each Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, no Agent shall be required to take any action with respect to any Default or Potential Cross-Default, except as expressly provided in Article VI. SECTION 7.04. Consultation with Experts. Any Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Agents. Neither any Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither any Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article III, except, in the case of the Documentation Agent or the Administrative Agent, receipt of items required to be delivered to it; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. An Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify each Agent (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such Agent's gross negligence or willful misconduct) that such Agent may suffer or incur in connection with this Agreement or any action taken or omitted by such Agent hereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon any Agent, any Co-Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon any Agent, any Co- Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Agents. (a) Any Agent may resign at any time by giving 30 days' prior written notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent which shall be a Bank. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a Bank. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent. (b) If at any time any Agent shall have assigned its rights and obligations in respect of all of its Commitment hereunder, such Agent shall resign as Agent in accordance with the procedures set forth in subsection (a) of this Section 7.08. SECTION 7.09. Distribution of Information. The Administrative Agent and the Documentation Agent each agree to mail or deliver to each of the Banks so requesting photocopies of documents, certificates, financial statements and other information received by it from the Borrower pursuant to the express provisions of this Agreement and not otherwise distributed to the Banks. SECTION 7.10. Co-Agents. The Co-Agents, in their capacities as such, shall have no duties or obligations of any kind under this Agreement. ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Fixed Rate Borrowing (other than Money Market Absolute Rate Borrowings): (a) the Administrative Agent is advised by the Reference Banks that deposits in Dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of a Committed Borrowing, Banks having 50% or more of the aggregate amount of the Commitments advise the Administrative Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended. Unless the Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. Illegality. (a) If, after the date of this Agreement, the adoption of, or any change in, any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall promptly so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans shall be suspended. (b) Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall immediately prepay in full the then outstanding principal amount of each such Euro-Dollar Loan, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. SECTION 8.03. Increased Cost and Reduced Return. (a) If, after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of, or any change in, any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) shall subject any Bank (or its Applicable Lending Office) to any tax, duty or other charge with respect to its Fixed Rate Loans, its Note to the extent evidencing Fixed Rate Loans or its obligation to make Fixed Rate Loans, or shall change the basis of taxation of payments to any Bank (or its Applicable Lending Office) of the principal of or interest on its Fixed Rate Loans or any other amounts due under this Agreement in respect of its Fixed Rate Loans or its obligation to make Fixed Rate Loans (except for changes in the rate of tax on the overall net income of such Bank or its Applicable Lending Office imposed by the jurisdiction in which such Bank's principal executive office or Applicable Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note to the extent evidencing Fixed Rate Loans or its obligation to make Fixed Rate Loans; and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of, or any change in, any applicable law, rule or regulation regarding capital adequacy, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency has the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent), without duplication, for such reduction. (c) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder, accompanied by a computation thereof in reasonable detail, shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. (d) If any Bank has demanded compensation under this Section, the Borrower: (i) shall have the right, with the assistance of the Documentation Agent and the Administrative Agent and upon notification to such Bank, to require such Bank to transfer, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit H hereto, its Note and Commitment to a substitute bank or banks satisfactory to the Borrower and such Agents (which may be one or more of the Banks) or (ii) may elect to terminate this Agreement as to such Bank, and in connection therewith to prepay any Base Rate Loan made pursuant to Section 8.04, provided that the Borrower (1) notifies the Administrative Agent (which will forthwith notify such Bank) of such election at least three Euro-Dollar Business Days before any date fixed for such a prepayment, and (2) either (x) repays all of such Bank's outstanding Loans at the end of the respective Interest Periods applicable thereto or as otherwise required by Section 8.02 or (y) subject to Section 2.12, prepays all of such Bank's outstanding Loans (other than Money Market Loans). Upon receipt by the Administrative Agent of such notice, the Commitment of such Bank shall terminate. SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans. Subject to Sections 2.10 and 2.12, if (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Bank as CD Loans or Euro-Dollar Loans, as the case may be, shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid, all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. All notices, requests, instructions and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (w) in the case of the Borrower or any Agent, at its address, facsimile number or telex number (if any) set forth on the signature pages hereof, (x) in the case of any Bank, at its address, facsimile number or telex number (if any) set forth in its Administrative Questionnaire, (y) in the case of any party hereto, such other address, facsimile number or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article II or Article VIII and notices to the Borrower under Section 6.01(c) or 6.01(f) shall not be effective until received. SECTION 9.02. No Waivers. No failure or delay by any Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Documentary Taxes; Indemnification. (a) The Borrower shall pay (i) all out-of-pocket expenses of the Agents, including reasonable fees and disbursements of one special counsel (Davis Polk & Wardwell) for the Agents, in connection with the preparation of this Agreement, any waiver or consent hereunder or any amendment hereof or any actual or alleged Default or Potential Cross-Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agents or any Bank, including fees and disbursements of counsel (including the cost of staff counsel where used, without duplication of work, in lieu of separate special counsel), in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. The Borrower shall indemnify each Bank against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of this Agreement or the Notes. (b) The Borrower shall indemnify each Bank and its directors, officers and employees for, and hold each Bank and its directors, officers and employees harmless from and against (i) any and all damages, losses and other liabilities of any kind, including, without limitation, judgments and costs of settlement, and (ii) any and all reasonable out-of-pocket costs and expenses of any kind, including, without limitation, fees and disbursements of counsel (including the cost of staff counsel where used, without duplication of work, in lieu of separate special counsel) and any other costs of defense, including, without limitation, costs of discovery and investigation, for such Bank and its officers and directors (all of which shall be paid or reimbursed by the Borrower monthly), suffered or incurred in connection with any investigative, administrative or judicial proceeding (whether or not such Bank shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no such Bank, director, officer or employee shall have any right to be indemnified or held harmless hereunder for its own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. The Borrower shall indemnify and hold harmless each Agent, in its capacity as Agent hereunder, to the same extent that the Borrower indemnifies and holds harmless each Bank pursuant to this Section. SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise (except pursuant to Section 8.03(d)(ii)), receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that if at any time thereafter, the Bank that originally received such payment is required to repay (whether to the Borrower or to any other Person) all or any portion of such payment, each other Bank shall promptly (and in any event within five Domestic Business Days of its receipt of notification from such Bank requiring such repayment) repay to such Bank the portion of such payment previously received by it under this Section 9.04, together with such amount (if any) as is equal to the appropriate portion of any interest (in respect of the period during which such other Bank held such amount) such Bank shall have been obligated to pay when repaying such amount as aforesaid, in exchange for such participation in the Note of such other Bank as was previously purchased by such Bank; provided further that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes. SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of any Agent are affected thereby, by such Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for the termination of any Commitment, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement or (v) amend or waive the provisions of this Section 9.05. The exercise by the Borrower of its right to decrease the Commitments pursuant to Section 2.09 or to decrease the Commitment of a Bank pursuant to Section 8.03(d) shall not be deemed to require the consent of any party to this Agreement. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Agents, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agents shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement and such Bank's Note. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder and under the Notes including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i) (only to the extent such modification, amendment or waiver would decrease the Commitment of such Bank), (ii) or (iii) of Section 9.05 or to any modification, amendment or waiver that would have the effect of increasing the amount of a Participant's participation in such Bank's Commitment, in any such case without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII with respect to its participating interest, subject to subsection (f) below. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit H hereto executed by such Assignee and such transferor Bank, with the subscribed consent of the Borrower in consultation with the Administrative Agent and with the subscribed acknowledgment of the Administrative Agent; provided that, (i) if an Assignee is (x) any Person which controls, is controlled by, or is under common control with, or is otherwise substantially affiliated with such transferor Bank or (y) another Bank, no such consent shall be required, (ii) such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans and (iii) if the transferor Bank is assigning a proportionate part (but not all) of its rights and obligations under this Agreement and the Notes to an Assignee that was not a Bank party to this Agreement prior to such assignment, the amount so assigned (disregarding Money Market Loans) shall be not less than the amount that would be held at such time (disregarding Money Market Loans) by a Bank having an initial Commitment of $10,000,000. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee and the transferor Bank and the original Note is cancelled, and the Administrative Agent shall notify the other Agents of such assignment. In connection with any such assignment, the transferor Bank shall pay to the Administrative Agent an administrative fee of $2,000 for processing such assignment. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.14. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) The Agents and the Borrower may, for all purposes of this Agreement, treat any Bank as the holder of any Note drawn to its order (and owner of the Loans evidenced thereby) until written notice of assignment or other transfer shall have been received by them. (f) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (g) If any Reference Bank assigns its Note to an unaffiliated institution, the Administrative Agent shall, with the consent of the Borrower and the Required Banks, appoint another Bank to act as a Reference Bank hereunder. SECTION 9.07. Collateral. Each of the Banks represents to the Agents and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. THIS AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE BORROWER HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE BORROWER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE BORROWER, THE AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 9.09. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. SECTION 9.10. Confidentiality. In addition to any confidentiality requirements under applicable law, each of the Agents and each of the Banks (each a "Bank Party" and, collectively, the "Bank Parties") agrees that, through and including the later of (a) the Termination Date and (b) a date three years from the relevant Bank Party's receipt of the relevant information, it will take normal and reasonable precautions so that (i) all information expressly designated by its provider as confidential provided to any of them by the Borrower, any Person on behalf of the Borrower, or by any other Bank Party on behalf of the Borrower, in connection with this Agreement or the transactions contemplated hereby will be held and treated by each such Bank Party and its respective directors, Affiliates, officers, agents and employees in confidence and (ii) neither it nor any of its respective directors, Affiliates, officers, agents or employees shall, without the prior written consent of the Borrower, use any such information for any purpose or in any manner other than pursuant to the terms of and for the purposes contemplated by this Agreement. Notwithstanding the immediately preceding sentence, any Bank Party may disclose any such information or portions thereof (a) that is or becomes publicly available other than through a breach by such Bank Party of its obligations hereunder; (b) that is also provided to such Bank Party by a Person other than the Borrower not in violation, to the actual knowledge of such Bank Party, of any duty of confidentiality; (c) at the request of any bank regulatory authority or examiner; (d) pursuant to subpoena or other court process; (e) when required by applicable law; (f) at the written request or the express direction of any other authorized government agency; (g) to its independent auditors, counsel and other professional advisors in connection with their provision of professional services to such Bank Party; or (h) to any (i) Participant or (ii) prospective Participant or prospective Bank, if such Participant, prospective Participant or prospective Bank (which prospective Bank is promptly identified to the Borrower), prior to any such disclosure, agrees in writing to keep such information confidential to the same extent required of the Bank Parties hereunder; provided that any Bank Party's failure to comply with the provisions of this Section 9.10 shall not affect the obligations of the Borrower hereunder. SECTION 9.11. Severability. Any provision of this Agreement that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. UNION CARBIDE CORPORATION By /s/ Thomas D. Jones Title: Vice President and Treasurer 39 Old Ridgebury Road Danbury, CT 06817-0001 Telecopy number: (203) 794-5135 Attention: Vice President and Treasurer Commitments $59,166,666.67 ABN AMRO BANK N.V., NEW YORK BRANCH as a Co-Agent and a Bank By /s/ David A. Mandell Title:Vice President By /s/ David W. Stack Title: Corporate Banking Officer $59,166,666.67 BANK OF AMERICA ILLINOIS, as a Co-Agent and a Bank By /s/ Nancy McGaw Title: Vice President $59,166,666.67 THE BANK OF NEW YORK, as a Co-Agent and a Bank By /s/ Nancy McEwen Title: Vice President $59,166,666.67 THE BANK OF NOVA SCOTIA, as a Co-Agent and a Bank By /s/ Terry K. Fryett Title: Vice President Commitments $59,166,666.67 BANQUE NATIONALE DE PARIS, as a Co-Agent and a Bank By /s/ Sophie Revillard Kaufman Title: Vice President By /s/ Eric Vigne Title: Senior Vice President $59,166,666.67 CIBC INC., as a Co-Agent and a Bank By /s/ Julia C. Collins Title: Vice President $59,166,666.66 CHEMICAL BANK, as a Bank By /s/ William Ewing IV Title: Managing Director $59,166,666.67 CREDIT SUISSE, as a Co-Agent and a Bank By /s/ Kristina Catlin Title: Associate By /s/ Lynn Allegaert Title: Member of Senior Management Commitments $59,166,666.67 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Bank By /s/ James S. Finch Title: Vice President $59,166,666.67 NATIONSBANK OF NORTH CAROLINA, N.A., as a Co-Agent and a Bank By /s/ Margaret K. Vandenberg Title: Senior Vice President $37,500,000.00 BANCA COMMERCIALE ITALIANA By /s/ Edward Bermant Title: First Vice President By /s/ Julia M. Welch Title: Assistant Vice President $37,500,000.00 BARCLAYS BANK PLC By /s/ J. Onischuk Title: Associate Director $37,500,000.00 FUJI BANK LIMITED By /s/ Yoshihiko Shiotsugu Title: Vice President & Manager Commitments $37,500,000.00 ROYAL BANK OF CANADA By /s/ Peter D. Steffen Title: Senior Manager $37,500,000.00 THE SUMITOMO BANK, LIMITED By /s/ Yoshinori Kawamura Title: Joint General Manager $37,500,000.00 SWISS BANK CORPORATION By /s/ Colin T. Taylor Title: Director Merchant Banking By /s/ Paul D. Stendig Title: Associate Director Merchant Banking $37,500,000.00 TORONTO DOMINION (NEW YORK), INC. By /s/ Jano Mott Title: Vice President $20,833,333.33 COMMERZBANK AG NEW YORK BRANCH By /s/ Werner Niemeyer Title: Vice President By /s/ Michael D. Hintz Title: Vice President Commitments $20,833,333.33 GENERALE BANK By /s/ Alain Verschueren Title: Senior Vice President Corporate By /s/ Hans U. Neukomm Title: General Manager $20,833,333.33 THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED By /s/ Jeffry S. Dykes Title: Vice President $20,833,333.3 INSTITUTO BANCARIO SAN PAOLO DI TORINO, S.P.A. By /s/ William J. DeAngelo Title: First Vice President By /s/ Robert S. Wurster Title: First Vice President $20,833,333.3 MELLON BANK, N.A. By /s/ James S. Adelsheim Title: Vice President $20,833,333.33 NATIONAL BANK OF KUWAIT By /s/ Phillip M, Johnson Title: Executive Manager By /s/ George Y. Nasra Title: General Manager Commitments $20,833,333.33 SOCIETE GENERALE By /s/ Philippe de Rozieres Title: Vice President _________________ Total Commitments: $1,000,000,000.00 ================= MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent By /s/ James S. Finch Title: Vice President 60 Wall Street New York, New York 10260 Attention: James Finch Telex number: 177615 Telecopy number: (212) 648-5014 CHEMICAL BANK, as Administrative Agent By /s/ William Ewing IV Title: Managing Director 270 Park Avenue New York, New York 10017-2070 Attention: Terry Kennon Telecopy number: (212) 270-7138 CHEMICAL BANK, as Auction Agent By /s/ William Ewing IV Title: Managing Director 270 Park Avenue New York, New York 10017-2070 Attention: Terry Kennon Telecopy number: (212) 270-7138 PRICING SCHEDULE The "Euro-Dollar Margin", "CD Margin", "Commitment Fee Rate" and "Facility Fee Rate" for any day are the respective rates per annum set forth below in the applicable row under the column corresponding to the Pricing Level that applies on such day: Status Level I Level II Level III Level IV Level V Euro-Dollar Margin 0.2250% 0.2750% 0.3250% 0.4000% 0.4500% CD Margin 0.3500% 0.4000% 0.4500% 0.5250% 0.5750% Commitment Fee Rate 0.0200% 0.0150% 0.0250% 0.0500% 0.0625% Facility Fee Rate 0.1000% 0.1250% 0.1250% 0.1750% 0.2500% For purposes of this Schedule, the following terms have the following meanings: "Level I Pricing" applies on any day if on such day the Borrower's long-term debt securities (whether or not outstanding at such date) are rated either A- or higher (or the equivalent) by S&P or A3 or higher (or the equivalent) by Moody's. "Level II Pricing" applies on any day if on such day (i) the Borrower's long-term debt securities (whether or not outstanding at such date) are rated either BBB+ (or the equivalent) by S&P or Baa1 (or the equivalent) by Moody's and (ii) Level I Pricing does not apply. "Level III Pricing" applies on any day if on such day (i) the Borrower's long-term debt securities (whether or not outstanding at such date) are rated either BBB (or the equivalent) by S&P or Baa2 (or the equivalent) by Moody's and (ii) no higher Pricing Level applies. "Level IV Pricing" applies on any day if on such day the Borrower's long-term debt securities (whether or not outstanding at such date) are rated BBB- (or the equivalent) by S&P and Baa3 (or the equivalent) by Moody's. "Level V Pricing" applies on any day if no higher Pricing Level applies on such day. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation. "Pricing Level" refers to the determination of which of Level I Pricing, Level II Pricing, Level III Pricing, Level IV Pricing or Level V Pricing applies on any day. Level I Pricing is the highest Pricing Level and Level V Pricing the lowest. "S&P" means Standard & Poor's Ratings Group. The ratings to be utilized for purposes of this Pricing Schedule are those assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement, and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect on any day is the rating in effect at the close of business on such day. If either Moody's or S&P is merged or consolidated with another Person or if the ratings business of Moody's or S&P is acquired by another Person (the entity conducting such ratings business after any such merger, consolidation or acquisition being herein called the "Successor"), the ratings provided by the Successor shall be used for purposes of this Pricing Schedule unless and until the Borrower and the Required Banks shall, by notice to the Administrative Agent, designate a different rating agency to provide such ratings, in which case the ratings provided by the rating agency so designated shall thereafter replace those provided by the Successor for purposes of this Pricing Schedule. EXHIBIT A NOTE New York, New York , 199_ For value received, UNION CARBIDE CORPORATION, a New York corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the last day of the Interest Period relating to such Loan. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Chemical Bank, 270 Park Avenue, New York, New York 10017-2070. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the $1,000,000,000 Credit Agreement dated as of November 4, 1994 among the Borrower, the Banks party thereto, the Co-Agents party thereto, Morgan Guaranty Trust Company of New York, as Documentation Agent, and Chemical Bank, as Administrative Agent and Auction Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. UNION CARBIDE CORPORATION By__________________________ Name: Title: Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL ______________________________________________________________ Amount of Amount of Type of Principal Maturity Notation Date Loan Loan Repaid Date Made By ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ EXHIBIT B Form of Money Market Quote Request [Date] To: Chemical Bank (the "Auction Agent") From: Union Carbide Corporation Re: $1,000,000,000 Credit Agreement dated as of November 4, 1994 (as the same may be amended from time to time, the "Credit Agreement") among the Borrower, the Banks party thereto, the Co-Agents party thereto and the Agents (as defined in the Credit Agreement) We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount* Interest Period** $ Such Money Market Quotes should offer a Money Market [LIBOR Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. UNION CARBIDE CORPORATION By________________________ Name: Title: * Amount must be $25,000,000 or a larger multiple of $5,000,000. ** Not less than one month (LIBOR Auction) or not less than 7 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. EXHIBIT C Form of Invitation for Money Market Quotes To: [Name of Bank] Re: Invitation for Money Market Quotes to Union Carbide Corporation (the "Borrower") Pursuant to Section 2.03 of the $1,000,000,000 Credit Agreement dated as of November 4, 1994 (as the same may be amended from time to time, the "Credit Agreement") among the Borrower, the Banks parties thereto, the Co-Agents party thereto, the undersigned, as Auction Agent, and the other Agents (as defined therein), we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount Interest Period $ Such Money Market Quotes should offer a Money Market [LIBOR Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [12:00 Noon] [9:30 A.M.] (New York City time) on [date]. Terms used herein have the meanings assigned to them in the Credit Agreement. CHEMICAL BANK By____________________________ Authorized Officer EXHIBIT D Form of Money Market Quote CHEMICAL BANK, as Auction Agent [Address] Attention: Re: Money Market Quote to Union Carbide Corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated __________ we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: ________________________________ 2. Person to contact at Quoting Bank: _____________________________ 3. Date of Borrowing: ____________________1 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest Money Market Amount2 Period3 [LIBOR Margin4] [Absolute Rate5] $ $ [Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $____________.]2 __________ 1 As specified in the related Invitation. 2 Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. (notes continued on following page) We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the $1,000,000,000 Credit Agreement dated as of November 4, 1994 (as the same may be amended from time to time, the "Credit Agreement") among the Borrower, the Banks party thereto, the Co-Agents party thereto, yourselves, as Auction Agent, and the other Agents (as defined therein), irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Terms used herein have the meanings assigned to them in the Credit Agreement. Very truly yours, [NAME OF BANK] Dated:_______________ By:__________________________ Authorized Officer __________ 3 [Not less than one month and not more than 12 months] [Not less than seven days and not more than 180 days], as specified in the related Invitation. No more than five bids are permitted for each Interest Period. 4 Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (rounded to the nearest 1/10,000th of 1%) and specify whether "PLUS" or "MINUS". 5 Specify rate of interest per annum (rounded to the nearest 1/10,000th of 1%). EXHIBIT E OPINION OF COUNSEL FOR THE BORROWER [Effective Date] To the Banks and the Agents Referred to Below c/o Morgan Guaranty Trust Company of New York, as Documentation Agent 60 Wall Street New York, New York 10260 Dear Sirs: I have acted as counsel to Union Carbide Corporation (the "Borrower") in connection with the $1,000,000,000 Credit Agreement dated as of November 4, 1994 (the "Credit Agreement") among the Borrower, the Banks party thereto, the Co-Agents party thereto, Morgan Guaranty Trust Company of New York, as Documentation Agent, and Chemical Bank, as Administrative Agent and Auction Agent, and I am rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement. Capitalized terms used herein without definition have the same meanings as in the Credit Agreement. I have examined originals or copies, certified or otherwise identified to my satisfaction as being true copies, of the Credit Agreement, the Notes, certain information and documents provided to me by responsible officers or employees of the Borrower and such other documents, certificates and corporate or other records as I have deemed necessary or appropriate as a basis for the opinions set forth herein. In my examination I have assumed the genuineness of all signatures (other than signatures on behalf of the Borrower), the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies and the authenticity of the originals of such copies. No opinion is expressed herein as to any matters involving or governed by the laws of any jurisdiction other than the laws of the State of New York, the laws of the State of Connecticut and the federal laws of the United States of America. Without limiting the foregoing, I express no opinion as to the effect (if any) of any law of any jurisdiction (except the States of New York and Connecticut) in which any Bank is located which limits the rate of interest that such Bank may charge. I have investigated such questions of law and investigated such questions of fact for the purpose of rendering the opinions expressed herein as I have deemed necessary or appropriate. On the basis of and subject to the foregoing, and to the qualifications set forth below, I am of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of New York and is duly qualified as a foreign corporation to do business and in good standing under the laws of the State of Connecticut. 2. The Borrower has the corporate power and corporate authority to enter into the Credit Agreement and the Notes and to consummate the transactions provided for therein. 3. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes and the consummation by the Borrower of the transactions provided for therein have been duly authorized by all requisite corporate action on the part of the Borrower. 4. The Credit Agreement and the Notes have been duly executed and delivered by the Borrower and are valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as (i) limited by bankruptcy, insolvency, reorganization, moratorium or other laws now or hereafter in effect relating to or limiting creditors' rights generally, (ii) limited by equitable principles of general applicability and the discretion of the court before which any proceeding thereafter may be brought in applying such principles and (iii) the enforceability of indemnification against securities law liabilities may be limited by applicable federal and state securities laws and general principles of public policy. Additionally, I express no opinion as to the validity of the provisions of Section 9.08 of the Agreement providing for a waiver of trial by jury. 5. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes will not (i) constitute a violation of any law or regulation of the State of New York or Connecticut or the United States of America which is binding on the Borrower, (ii) violate the certificate of incorporation or by-laws of the Borrower or (iii) result in a breach of, or constitute a default under, or require any consent under, any indenture or other agreement or instrument known to me (such agreements being listed in Schedule 1 hereto) evidencing or governing indebtedness for borrowed money of the Borrower. 6. No consent or approval of, or action by or filing with, any court or administrative or governmental body which has not been obtained, taken or made is required under the laws of the State of New York or Connecticut or the United States of America for the Borrower to execute and deliver the Credit Agreement and the Notes and to consummate the transactions provided for therein. 7. To the best of my knowledge, there is no action, suit or proceeding pending or threatened against or affecting the Borrower or any of its Restricted Subsidiaries, before any court or arbitrator or any governmental body, agency or official in which there is a reasonable likelihood of an adverse decision which could materially adversely affect the present or prospective ability of the Borrower to perform its obligations under the Credit Agreement or any Note or which draws into question the validity of the Credit Agreement or the Notes. In giving the opinions set forth in paragraphs 1 and 2 above, I have relied upon telegraphic or oral confirmations as to the existence and good standing of the Borrower. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person (except for deliveries required in accordance with applicable law) without my prior written consent. Very truly yours, EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE AGENTS [Effective Date] To the Banks and the Agents Referred to Below c/o Morgan Guaranty Trust Company of New York, as Documentation Agent 60 Wall Street New York, New York 10260 Dear Sirs: We have participated in the preparation of the $1,000,000,000 Credit Agreement (the "Credit Agreement") dated as of November 4, 1994 among Union Carbide Corporation, a New York corporation (the "Borrower"), the Banks party thereto, the Co-Agents party thereto, Morgan Guaranty Trust Company of New York, as Documentation Agent, and Chemical Bank, as Administrative Agent and Auction Agent, and have acted as special counsel for the Agents for the purpose of rendering this opinion pursuant to Section 3.01(d) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action. 2. The Credit Agreement constitutes a valid and binding agreement of the Borrower and the Notes constitute valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms except as limited by (i) bankruptcy, insolvency or other laws affecting creditors' rights generally and (ii) equitable principles of general applicability. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York and the federal laws of the United States of America. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person (except for deliveries required in accordance with applicable law) without our prior written consent. Very truly yours, EXHIBIT G ADMINISTRATIVE QUESTIONNAIRE ______________________________________________________________ Please provide the following details: I. Information to be included in the Credit Agreement: (A) BANK NAME: _________________________________________________ (B) DOMESTIC LENDING OFFICE NAME AND ADDRESS: _________________________________________________ _________________________________________________ _________________________________________________ TELEX NUMBER/ANSWERBACK: _________________________________________________ TELECOPIER/FAX NUMBER: _________________________________________________ (C) EURODOLLAR LENDING OFFICE NAME AND ADDRESS _________________________________________________ _________________________________________________ _________________________________________________ TELEX NUMBER/ANSWERBACK: __________________________________________________ TELECOPIER/FAX NUMBER: __________________________________________________ (D) MONEY MARKET LENDING OFFICE: __________________________________________________ __________________________________________________ __________________________________________________ TELEX NUMBER/ANSWERBACK: __________________________________________________ TELECOPIER/FAX NUMBER: __________________________________________________ II. Information for the administration of the facility: (A) Where execution copies should be sent: NAME: _________________________________________________ ADDRESS: _________________________________________________ _________________________________________________ _________________________________________________ (B) Where conformed copies should be sent: NAME: _________________________________________________ ADDRESS: _________________________________________________ _________________________________________________ _________________________________________________ (C) FOR CREDIT MATTERS: CONTACT NAMES/DEPT.: _________________________________________________ TELEPHONE NUMBER: _________________________________________________ TELEX NUMBER/ANSWERBACK: _________________________________________________ TELECOPIER/FAX NUMBER: _________________________________________________ (D) FOR ADMINISTRATIVE/OPERATIONS MATTERS: CONTACT NAMES/DEPT.: _________________________________________________ TELEPHONE NUMBER: _________________________________________________ TELEX NUMBER/ANSWERBACK: _________________________________________________ TELECOPIER/FAX NUMBER: _________________________________________________ (E) FOR MONEY MARKET LOANS: PRIMARY CONTACT NAME/DEPT.: _________________________________________________ TELEPHONE NUMBER: _________________________________________________ TELEX NUMBER/ANSWERBACK: _________________________________________________ TELECOPIER/FAX NUMBER: _________________________________________________ SECONDARY CONTACT NAME/DEPT.: _________________________________________________ TELEPHONE NUMBER: _________________________________________________ TELEX NUMBER/ANSWERBACK: _________________________________________________ TELECOPIER/FAX NUMBER: _________________________________________________ (F) PAYMENT INSTRUCTIONS (Please specify where funds, i.e. interest, commitment fees, repayment of loans, should be wired): ________________________________________________ ________________________________________________ ________________________________________________ EXHIBIT H ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), UNION CARBIDE CORPORATION (the "Borrower")* and CHEMICAL BANK, as the Administrative Agent (the "Administrative Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the $1,000,000,000 Credit Agreement dated as of November 4, 1994 among the Borrower, the Assignor and the other Banks party thereto, as Banks, the Co- Agents party thereto, the Administrative Agent and the other Agents (as defined therein) (as the same may be amended from time to time, the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Committed Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $__________; WHEREAS, Committed Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; * If the Borrower's consent to this assignment is not required by Section 9.06(c) of the Credit Agreement, references to the Borrower as a party hereto and Section 4 hereof should be deleted. NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Borrower and the Administrative Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds an amount equal to $_________.** It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof with respect to the Assigned Amount are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for ** Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent of the Borrower. This Agreement is conditioned upon the consent of the Borrower pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by the Borrower is evidence of this consent. Pursuant to Section 9.06(c) the Borrower agrees to execute and deliver Notes payable to the order of the Assignee (and, if necessary, to the Assignor) to evidence the assignment and assumption provided for herein. SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower, or the validity and enforceability of the obligations of the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, any other Bank, any Co-Agent or any Agent, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By __________________________________ Name: Title: [ASSIGNEE] By __________________________________ Name: Title: UNION CARBIDE CORPORATION By __________________________________ Name: Title: Acknowledged this ____ day of ____ by Chemical Bank, as Administra- tive Agent By________________________________ Name: Title EX-10.1.2 5 EXHIBIT 10.1.2 $200,000,000 CREDIT AGREEMENT dated as of November 4, 1994 among Union Carbide Corporation, The Banks Party Hereto, The Co-Agents Party Hereto, Morgan Guaranty Trust Company of New York, as Documentation Agent and Chemical Bank, as Administrative Agent and Auction Agent TABLE OF CONTENTS* Page ARTICLE I DEFINITIONS SECTION 1.01. Definitions............................... 1 SECTION 1.02. Accounting Terms and Determinations.......................... 18 SECTION 1.03. Types of Borrowings....................... 18 ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend....................... 19 SECTION 2.02. Notice of Committed Borrowings.............................. 20 SECTION 2.03. Money Market Borrowings................... 21 SECTION 2.04. Notice to Banks; Funding of Loans................................... 26 SECTION 2.05. Notes..................................... 27 SECTION 2.06. Maturity of Loans......................... 28 SECTION 2.07. Interest Rates............................ 28 SECTION 2.08. Facility Fees............................. 31 SECTION 2.09. Optional Termination or Reduction of Commitments................ 32 SECTION 2.10. Method of Electing Interest Rates................................... 33 SECTION 2.11. Prepayments............................... 34 SECTION 2.12. General Provisions as to Payments................................ 35 SECTION 2.13. Funding Losses............................ 36 SECTION 2.14. Computation of Interest and Fees.................................... 36 SECTION 2.15. Withholding Tax Exemption................. 37 SECTION 2.16. Regulation D Compensation................. 37 _______________ * The Table of Contents is not a part of this Agreement. Page SECTION 2.17. Judgment Currency......................... 38 SECTION 2.18. Replacement of this Credit Facility....... 39 ARTICLE III CONDITIONS SECTION 3.01. Effectiveness............................. 40 SECTION 3.02. Borrowings................................ 42 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Corporate Existence and Power................................... 43 SECTION 4.02. Corporate and Governmental Authorization; No Contravention........................... 43 SECTION 4.03. Binding Effect............................ 43 SECTION 4.04. Financial Information..................... 43 SECTION 4.05. Litigation................................ 44 SECTION 4.06. Compliance with ERISA..................... 44 SECTION 4.07. Environmental Matters..................... 45 SECTION 4.08. Restricted Subsidiaries................... 45 SECTION 4.09. Not an Investment Company................. 45 SECTION 4.10. Disclosure................................ 45 ARTICLE V COVENANTS SECTION 5.01. Information............................... 46 SECTION 5.02. Maintenance of Property; Insurance............................... 49 SECTION 5.03. Restricted Subsidiaries................... 50 SECTION 5.04. Negative Pledge........................... 51 SECTION 5.05. Limitation on Debt of Subsidiaries............................ 52 SECTION 5.06. Consolidations, Mergers and Sales of Assets......................... 53 SECTION 5.07. Minimum Consolidated Tangible Net Worth...................... 53 SECTION 5.08. Leverage Ratio............................ 54 Page SECTION 5.09. Interest Coverage Ratio................... 54 SECTION 5.10. Use of Proceeds........................... 54 SECTION 5.11. Payments from Domestic Restricted Subsidiaries................. 54 ARTICLE VI DEFAULTS SECTION 6.01. Events of Default......................... 54 SECTION 6.02. Notice of Default......................... 58 ARTICLE VII THE AGENTS AND CO-AGENTS SECTION 7.01. Appointment and Authorization........................... 58 SECTION 7.02. Agents and Affiliates..................... 58 SECTION 7.03. Action by Agents.......................... 58 SECTION 7.04. Consultation with Experts................. 58 SECTION 7.05. Liability of Agents....................... 59 SECTION 7.06. Indemnification........................... 59 SECTION 7.07. Credit Decision........................... 59 SECTION 7.08. Successor Agents.......................... 60 SECTION 7.09. Distribution of Information............... 60 SECTION 7.10. Co-Agents................................. 60 ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair............................... 60 SECTION 8.02. Illegality................................ 61 SECTION 8.03. Increased Cost and Reduced Return.................................. 62 SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans................................... 65 Page ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices................................... 66 SECTION 9.02. No Waivers................................ 66 SECTION 9.03. Expenses; Documentary Taxes; Indemnification......................... 66 SECTION 9.04. Sharing of SetOffs........................ 67 SECTION 9.05. Amendments and Waivers.................... 68 SECTION 9.06. Successors and Assigns.................... 68 SECTION 9.07. Collateral................................ 71 SECTION 9.08. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL...... 71 SECTION 9.09. Counterparts; Integration................. 71 SECTION 9.10. Confidentiality........................... 72 SECTION 9.11. Severability.............................. 73 Pricing Schedule Exhibit A - Note Exhibit B - Money Market Quote Request Exhibit C - Invitation for Money Market Quotes Exhibit D - Money Market Quote Exhibit E - Opinion of Counsel for the Borrower Exhibit F - Opinion of Special Counsel for the Agents Exhibit G - Administrative Questionnaire Exhibit H - Assignment and Assumption Agreement CREDIT AGREEMENT AGREEMENT dated as of November 4, 1994 among UNION CARBIDE CORPORATION, the BANKS party hereto, the CO-AGENTS party hereto, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent, and CHEMICAL BANK, as Administrative Agent and Auction Agent. The parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Adjusted CD Rate" has the meaning set forth in Section 2.07(b). "Adjusted Consolidated Debt" means at any date the consolidated Debt of the Borrower and its Consolidated Subsidiaries determined as of such date, excluding (i) Debt of any Consolidated Kuwait Joint Venture (including its obligation under any Guarantee by it of Debt of any other Kuwait Joint Venture) so long as such Debt (including any such obligation under a Guarantee) is not Guaranteed by the Borrower or any other Consolidated Subsidiary (except a Consolidated Kuwait Joint Venture), (ii) the Borrower's Kuwait Completion Guarantees and the Debt of the Kuwait Joint Ventures Guaranteed pursuant thereto, but only to the extent that the aggregate amount of Debt Guaranteed by the Borrower's Kuwait Completion Guarantees does not exceed $650,000,000 and (iii) Excluded Working Capital Financings. "Administrative Agent" means Chemical Bank in its capacity as Administrative Agent for the Banks hereunder, and its successors in such capacity. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in substantially the form of Exhibit G hereto submitted to the Administrative Agent (which shall promptly following receipt thereof give a copy to the Borrower and the Documentation Agent) duly completed by such Bank. "Affiliate" means, with respect to any Person, (i) any other Person that directly, or indirectly through one or more intermediaries, controls such Person (a "Controlling Person"), or (ii) any other Person which is controlled by or under common control with a Controlling Person. As used in this definition, the term "control" means, with respect to any Person, possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agents" means the Administrative Agent, the Auction Agent and the Documentation Agent, and "Agent" means any of the foregoing. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Assessment Rate" has the meaning set forth in Section 2.07(b). "Assignee" has the meaning set forth in Section 9.06(c). "Auction Agent" means Chemical Bank in its capacity as Auction Agent for the Banks hereunder, and its successors in such capacity. "Bank" means each lender listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Bank Parties" has the meaning set forth in Section 9.10. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Reference Rate for such day or (ii) the sum of 1/2 of 1% plus the Effective Federal Funds Rate for such day. "Base Rate Loan" means (i) a Committed Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article VIII or (ii) an overdue amount which was a Base Rate Loan immediately before it became overdue. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means Union Carbide Corporation, a New York corporation, and its successors. "Borrower's Kuwait Completion Guarantees" means completion guarantees by the Borrower with respect to the Kuwait Project. "Borrowing" has the meaning set forth in Section 1.03. "CD Base Rate" has the meaning set forth in Section 2.07(b). "CD Loan" means (i) a Committed Loan which bears interest at a CD Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a CD Loan immediately before it became overdue. "CD Margin" has the meaning set forth in Section 2.07(b). "CD Rate" means a rate of interest determined pursuant to Section 2.07(b) on the basis of an Adjusted CD Rate. "CD Reference Banks" means Chemical Bank, Credit Suisse and Morgan Guaranty Trust Company of New York and each such other Bank as may be appointed pursuant to Section 9.06(g). "Co-Agents" means ABN AMRO Bank N.V., Bank of America Illinois, The Bank of New York, The Bank of Nova Scotia, Banque Nationale de Paris, CIBC Inc., Credit Suisse and NationsBank of North Carolina, N.A., each in its capacity as one of the co- agents for the Banks hereunder. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof (or, in the case of an Assignee, the portion of the transferor Bank's Commitment assigned to such Assignee pursuant to Section 9.06(c)), in each case as such amount may be reduced from time to time pursuant to Sections 2.01(a) and 2.09 or changed as a result of an assignment pursuant to Section 9.06(c). "Committed Loan" means a revolving credit loan made by a Bank pursuant to Section 2.01(a) or a term loan made by a Bank pursuant to Section 2.01(b); provided that, if any such loan or loans are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Consolidated Kuwait Joint Venture" means at any date any Kuwait Joint Venture that is a Consolidated Subsidiary at such date. "Consolidated Net Income" for any period means the consolidated net income of the Borrower and its Consolidated Subsidiaries for such period. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if such statements were prepared as of such date. "Consolidated Tangible Net Worth" means at any date the consolidated stockholders' equity of the Borrower and its Consolidated Subsidiaries minus consolidated Intangible Assets, all determined as of such date. For purposes of this definition "Intangible Assets" means the amount (to the extent reflected in determining such consolidated stockholders' equity) of (i) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of assets of a going concern business made within twelve months after the acquisition of such business) subsequent to June 30, 1994 in the book value of any asset owned by the Borrower or a Consolidated Subsidiary, (ii) all investments of the Borrower and its Consolidated Subsidiaries in unconsolidated Subsidiaries, and (iii) all goodwill, patents, trademarks, service marks, trade names, copyrights, organization or developmental expenses and other intangible assets. "Debt" of any Person means at any date, without duplication, to the extent required in accordance with generally accepted accounting principles to be included in the financial statements of such Person or the footnotes thereto, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other substantially similar instruments containing an unconditional promise to pay a sum certain, (iii) all obligations of such Person for installment purchase transactions involving the purchase of property or services over $5,000,000 for any particular transaction, except trade accounts payable and expense accruals arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid or to be paid under a letter of credit, and (vi) all obligations of others of the types described in clauses (i) through (v) above that are Guaranteed by such Person. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default; provided that an event or condition covered by clause (f) of Section 6.01 (and not covered by any other clause of said Section) shall not constitute a Default unless and until the Required Banks shall have made the determination specified in such clause (f) and the Administrative Agent shall have given the Borrower written notice of such determination. "Designated Subsidiary" has the meaning set forth in Section 5.03(c). "Documentation Agent" means Morgan Guaranty Trust Company of New York, in its capacity as documentation agent for the Banks hereunder, and its successors in such capacity. "Dollars" and the sign "$" mean lawful money of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. "Domestic Consolidated Subsidiary" means a Consolidated Subsidiary organized and existing under the laws of the United States of America, any State thereof or the District of Columbia. "Domestic Lending Office" means, as to each Bank, its office identified in its Administrative Questionnaire as its Domestic Lending Office or such other office of such Bank as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b). "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Effective Federal Funds Rate" means the weighted average of the rates on overnight federal funds transactions between members of the Federal Reserve System arranged by federal funds brokers as published daily (or, if such day is not a Domestic Business Day, for the immediately preceding Domestic Business Day) by the Federal Reserve Bank of New York in the Composite Closing Quotations for U.S. Government Securities (or any successor quotations). "Environmental Laws" means all applicable federal, state, local and foreign laws, ordinances, codes, regulations, orders and requirements relating to the protection of, or discharge of materials into, the environment, including, without limitation, the Resource Conservation and Recovery Act of 1976, as amended; the Comprehensive Environmental Response, Compensation and Liability Act; the Toxic Substance Control Act; the Clean Water Act; the Clean Air Act; and the Safe Drinking Water Act. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Borrower, any Restricted Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Restricted Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Eurocurrency Reserve Ratio" has the meaning set forth in Section 2.16. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office or branch located at its address identified in its Administrative Questionnaire as its Euro-Dollar Lending Office or such other office or branch of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. "Euro-Dollar Loan" means (i) a Committed Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan immediately before it became overdue. "Euro-Dollar Margin" has the meaning set forth in Section 2.07(c). "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07(c) on the basis of a London Interbank Offered Rate. "Euro-Dollar Reference Banks" means the principal London offices of Chemical Bank, Credit Suisse and Morgan Guaranty Trust Company of New York, and each such other Bank as may be appointed pursuant to Section 9.06(g). "Event of Default" has the meaning set forth in Section 6.01. "Excluded Working Capital Financings" means obligations of the Borrower or any of its Consolidated Subsidiaries (other than a Consolidated Kuwait Joint Venture), up to an aggregate outstanding amount of $150,000,000, incurred in connection with working capital financings. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01) or any combination of the foregoing, in each case that are not overdue. "Foreign Subsidiary" means a Subsidiary other than a Subsidiary organized and existing under the laws of the United States of America, any State thereof or the District of Columbia. "Group of Loans" means at any time a group of Loans consisting of (i) all Revolving Credit Loans which are Base Rate Loans at such time, (ii) all Term Loans which are Base Rate Loans at such time, (iii) all Revolving Credit Loans which are Fixed Rate Loans of the same type having the same Interest Period at such time or (iv) all Term Loans which are Fixed Rate Loans of the same type having the same Interest Period at such time; provided that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Section 8.02 or 8.04, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Guarantee" by any Person means, without duplication, any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person, and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person: (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise); or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term Guarantee shall not include: (a) endorsements for collection or deposit in the ordinary course of business; (b) obligations that are not required in accordance with generally accepted accounting principles to be included in the financial statements of such Person or the footnotes thereto; (c) "unconditional purchase obligations" (including take-or-pay contracts) as defined in and as required to be disclosed pursuant to Statement of Financial Accounting Standards No. 47 and the related interpretations, as the same may be amended from time to time, but only to the extent the aggregate amount of all such obligations of the Borrower and its Consolidated Subsidiaries (other than amounts reflected on the balance sheet of the Borrower and its Consolidated Subsidiaries) is equal to or less than 15% of the net sales of the Borrower and its Consolidated Subsidiaries as set forth in their Consolidated Statement of Income, determined as of the end of the preceding quarter for the twelve months then ending; (d) any obligation required to be disclosed pursuant to the Statement of Financial Accounting Standards No. 105, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk, issued March 1990, and the related interpretations, as the same may be amended from time to time (except to the extent any such obligation is required to be reflected on the balance sheet of the Borrower and its Consolidated Subsidiaries or to be disclosed pursuant to Statement of Financial Accounting Standards No. 5 and related interpretations, as the same may be amended from time to time); or (e) any difference between the fair market value and the book value of any obligation that is required to be disclosed pursuant to the Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments, issued December 1991, and the related interpretations, as the same may be amended from time to time. The term "Guarantee" used as a verb has a corresponding meaning. "Interest Coverage Ratio" means, with respect to the Borrower and its Consolidated Subsidiaries, for any period, the ratio of (x) the sum of (i) Consolidated Net Income, excluding any extraordinary items of gain or loss, (ii) consolidated interest expense, (iii) consolidated operating lease expense, (iv) consolidated provision for income taxes and (v) Restructuring Charges (to the extent deducted in determining the amount specified in (i) above) that the Borrower elects (by so stating in a certificate delivered pursuant to Section 5.01(c)) to add back to such Consolidated Net Income; provided that the aggregate amount of all Restructuring Charges added back pursuant to this clause (v) shall not exceed $100,000,000 on a cumulative basis after June 30, 1994 to (y) the sum of (i) consolidated interest expense and (ii) consolidated operating lease expense. The amounts referred to in clauses (x)(ii), (x)(iii), (x)(iv), (y)(i) and (y)(ii) of this definition shall be adjusted to exclude the interest expense, operating lease expense and income taxes of Consolidated Kuwait Joint Ventures, if any. In addition, the consolidated interest expense referred to in clauses (x)(ii) and (y)(i) of this definition, shall be adjusted to exclude interest on Excluded Working Capital Financings. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period with respect to a Revolving Credit Loan which would otherwise end after the Revolving Credit Termination Date shall end on the Revolving Credit Termination Date, and any Interest Period with respect to a Term Loan which would otherwise end after the Term Loan Maturity Date shall end on the Term Loan Maturity Date. (2) with respect to each CD Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or the date specified in the applicable Notice of Interest Rate Election and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period with respect to a Revolving Credit Loan which would otherwise end after the Revolving Credit Termination Date shall end on the Revolving Credit Termination Date, and any Interest Period with respect to a Term Loan which would otherwise end after the Term Loan Maturity Date shall end on the Term Loan Maturity Date. (3) with respect to each Money Market LIBOR Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such whole number of months thereafter (but not more than 12 months) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Revolving Credit Termination Date shall end on the Revolving Credit Termination Date. (4) with respect to each Money Market Absolute Rate Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than seven nor more than 180 days) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Revolving Credit Termination Date shall end on the Revolving Credit Termination Date. Notwithstanding the foregoing, all Interest Periods at any one time outstanding hereunder shall end on not more than 25 different dates, and the duration of any Interest Period which would otherwise exceed such limitation shall be adjusted so as to coincide with the remaining term of such other then current Interest Period as the Borrower may specify in the related Notice of Borrowing. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Invitation for Money Market Quotes" means an invitation by the Auction Agent on behalf of the Borrower to each Bank to submit Money Market Quotes offering to make Money Market Loans in accordance with Section 2.03, substantially in the form of Exhibit C hereto. "Kuwait Joint Ventures" means the joint ventures to which the Borrower and/or any of its Subsidiaries is or is to be a party and formed or to be formed to build and operate the Kuwait Project or to market products produced thereby. "Kuwait Project" means the proposed petrochemical complex in Kuwait disclosed in the Borrower's 1993 annual report to stockholders. "Leverage Ratio" means the ratio of (x) Adjusted Consolidated Debt to (y) the sum of (i) Consolidated Tangible Net Worth plus (ii) Restructuring Charges taken after June 30, 1994 up to a maximum cumulative amount of $100,000,000. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market LIBOR Margins pursuant to Section 2.03. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Material Debt" means at any time Adjusted Consolidated Debt (other than the Debt evidenced by the Notes) and/or Excluded Working Capital Financings (to the extent that they constitute Debt), having an aggregate principal amount outstanding at such time equal to or exceeding $50,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $15,000,000. "Material Subsidiaries" means at any time (the "time of determination") one or more Subsidiaries with respect to which any of the events specified in clause (g) or (h) of Section 6.01 shall have occurred after the date hereof (and not been cured before the time of determination), but only if the assets of such Subsidiaries (calculated in each case at the time such event occurred) exceed, in the aggregate, 1 1/2% of the consolidated assets of the Borrower and its Consolidated Subsidiaries at the time of determination. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d)(ii)(D). "Money Market Absolute Rate Loan" means a loan made or to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office or branch of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may from time to time by notice to the Borrower and the Administrative Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan made or to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01). "Money Market LIBOR Margin" has the meaning set forth in Section 2.03(d)(ii)(C). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "Notice of Interest Rate Election" has the meaning set forth in Section 2.10. "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either: (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group; or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Potential Cross-Default" means at any time an event or condition described in Section 6.01(f) that has occurred and is continuing at such time and that is not a Default, but would be a Default if the determination by the Required Banks contemplated by Section 6.01(f) had been made and notice of such determination had been given to the Borrower. "Pricing Schedule" means the Pricing Schedule attached hereto. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Reference Rate" means the rate of interest publicly announced by Chemical Bank in New York City from time to time as its reference rate. The Reference Rate is not intended to be the lowest rate of interest charged by Chemical Bank in connection with extensions of credit to borrowers. "Regulation D", "Regulation U" and "Regulation X" means Regulation D, Regulation U and Regulation X, respectively, of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having at least two-thirds of the aggregate amount of the Commitments, or, if the Commitments have been terminated, holding Notes evidencing at least two-thirds of the aggregate unpaid principal amount of the outstanding Loans. "Restricted Subsidiary" means at any time: (i) any Domestic Consolidated Subsidiary with (a) more than $20,000,000 in total assets or (b) more than $5,000,000 in total net worth, and (ii) any other Consolidated Subsidiary designated by the Borrower as a Restricted Subsidiary (a) in the certificate delivered pursuant to Section 3.01(h) or (b) in accordance with Section 5.03, unless and until such designated Consolidated Subsidiary becomes an Unrestricted Subsidiary pursuant to Section 5.03. At the Effective Date, the Restricted Subsidiaries shall be those set forth in such certificate. "Restructuring Charges" means all nonrecurring after- tax charges taken after June 30, 1994 by the Borrower and its Consolidated Subsidiaries, on a consolidated basis, to provide for the cost of discontinuing a business, adopting a severance program or other profit improvement program or writing off or writing down impaired assets. "Revolving Credit Loan" means a Committed Loan made pursuant to Section 2.01(a). "Revolving Credit Period" means the period from and including the Effective Date to and including the Revolving Credit Termination Date. "Revolving Credit Termination Date" means November 2, 1995, or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "SEC" means the Securities and Exchange Commission. "Subsidiary" with respect to any Person means any corporation or other entity of which such Person directly or indirectly owns the securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions. Unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. "Term Loan" means a Committed Loan made pursuant to Section 2.01(b). "Term Loan Maturity Date" has the meaning set forth in Section 2.01(b). "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "Unrestricted Subsidiary" means any Subsidiary other than a Restricted Subsidiary. "Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Borrower notifies the Agent that the Borrower wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Borrower that the Required Banks wish to amend Article V for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article II on a single date, all of which Loans are of the same type (subject to clause (a) of Section 8.04) and, except in the case of Base Rate Loans, have the same initial Interest Period; provided that Revolving Credit Loans and Term Loans shall not be aggregated in the same Borrowing. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article II under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend. (a) Revolving Credit Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement (including, without limitation, Section 3.02), to make Domestic Loans and Euro-Dollar Loans to the Borrower pursuant to this Section from time to time during the Revolving Credit Period in amounts such that the aggregate principal amount of Revolving Credit Loans by such Bank at any one time outstanding hereunder shall not exceed the amount of its Commitment. Each Borrowing under this subsection (a) shall be in an aggregate principal amount of $25,000,000 or any larger multiple of $5,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(b) and, if less than $5,000,000, must be a Base Rate Borrowing) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this subsection (a), repay, or to the extent permitted by Section 2.11 or 8.03(d)(ii), prepay Revolving Credit Loans and reborrow at any time during the Revolving Credit Period under this subsection (a). The Commitments shall terminate at the close of business on the Revolving Credit Termination Date, and shall automatically be reduced pro rata by the aggregate amount borrowed pursuant to subsection (b) below at the close of business on the date of such borrowing. (b) Term Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make one or more term loans to the Borrower on a single day (to be specified by the Borrower in the applicable Notice of Borrowing) on or before the Revolving Credit Termination Date in amounts such that the aggregate principal amount of Committed Loans by such Bank to be outstanding at the close of business on such day shall not exceed its Commitment (as in effect immediately before any termination or reduction thereof on such day). Each such Term Loan shall mature on the date (the "Term Loan Maturity Date") which is either the first anniversary of the date of borrowing or the second anniversary of the date of borrowing, as specified by the Borrower in the applicable Notice of Borrowing. Each Borrowing under this subsection (b) shall be made from the several Banks ratably in proportion to their respective Commitments. Amounts of Term Loans repaid pursuant to Section 2.11 shall not be reborrowed. SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give the Administrative Agent notice (a "Notice of Committed Borrowing") not later than 11:00 A.M. (New York City time) on: (x) the date of each Base Rate Borrowing, (y) the Domestic Business Day next preceding the date of each CD Borrowing, and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or at a CD Rate or at a Euro-Dollar Rate, (d) in the case of a Fixed Rate Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (e) in the case of a Borrowing under Section 2.01(b), (i) that such Borrowing is under such subsection (b) (in the absence of which specification a Borrowing shall be deemed to be under Section 2.01(a)) and (ii) whether the Term Loan Maturity Date is to be the first anniversary or the second anniversary of the date of such Borrowing. SECTION 2.03. Money Market Borrowings. (a) The Money Market Option. In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks during the Revolving Credit Period to make offers to make Money Market Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Auction Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 11:00 A.M. (New York City time) on: (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Auction Agent shall have mutually agreed and shall have notified the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $25,000,000 or a larger multiple of $5,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market LIBOR Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within four Euro-Dollar Business Days (or such other number of days as the Borrower and the Auction Agent may agree and the Auction Agent shall have promptly notified the Banks) of any other Money Market Quote Request. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request, the Auction Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto with respect to such Money Market Quote Request. (d) Submission and Contents of Money Market Quotes. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Auction Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than: (x) 12:00 Noon (New York City time) on the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Auction Agent shall have mutually agreed, and the Auction Agent shall have notified the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Auction Agent in the capacity of a Bank may be submitted, and may only be submitted, if the Auction Agent notifies the Borrower of the terms of the offer or offers contained therein not later than: (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles III and VI, any Money Market Quote so made shall be irrevocable except with the written consent of the Auction Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount: (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market LIBOR Margin") offered for each such Money Market Loan, expressed as a percentage (rounded to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (rounded to the nearest 1/10,000th of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Auction Agent shall promptly notify the Borrower of the terms: (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Auction Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Auction Agent's notice to the Borrower shall specify: (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market LIBOR Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than: (x) 1:30 P.M. (New York City time) on the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 10:30 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Auction Agent shall have mutually agreed and the Auction Agent shall have notified the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Auction Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e) and the Auction Agent shall so notify the Administrative Agent. In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $25,000,000 or a larger multiple of $5,000,000 and the principal amount of each Money Market Loan with respect to such Money Market Borrowing must be in an amount of $5,000,000 or a larger multiple of $1,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market LIBOR Margins or Money Market Absolute Rates, as the case may be, (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement, and (v) failure by the Borrower to notify the Auction Agent by the time specified above shall be deemed a rejection of all offers. (g) Allocation by Borrower. If offers are made by two or more Banks with the same Money Market LIBOR Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Borrower among such Banks as nearly as possible in proportion to the aggregate principal amounts of such offers (or as nearly in proportion as shall be practicable after giving effect to the requirement that Money Market Loans for each relevant maturity date shall each be in a principal amount of $5,000,000 or a multiple of $1,000,000 in excess thereof). SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 12:00 Noon (New York City time) on the date of each Borrowing, each Bank participating therein shall make the amount of its share of such Borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in or pursuant to Section 9.01 in funds immediately available to the Administrative Agent. Unless the Administrative Agent determines (or, in the case of the first Borrowing, the Documentation Agent and the Administrative Agent determine) that any applicable condition specified in Article III has not been satisfied, the Administrative Agent shall make such aggregate funds available to the Borrower by depositing as promptly as practicable the proceeds thereof, in like funds as received by the Administrative Agent, in the account of the Borrower with the Administrative Agent on the date of such Borrowing. (c) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsection (b) of this Section 2.04 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent does, in such circumstances, make available to the Borrower such amount, such Bank shall within three Domestic Business Days following such Borrowing make such share available to the Administrative Agent, together with interest thereon for each day from and including the date of such Borrowing that such share was not made available, at the Effective Federal Funds Rate. If such amount is so made available, such payment to the Administrative Agent shall constitute such Bank's share of such Borrowing for all purposes of this Agreement. If such amount is not so made available to the Administrative Agent, then the Administrative Agent shall on the third Domestic Business Day following such Borrowing notify the Borrower of such failure and on the fourth Domestic Business Day following the date of such Borrowing, the Borrower shall pay to the Administrative Agent such share, together with interest thereon for each day that the Borrower had the use of such share, at the Effective Federal Funds Rate. Nothing contained in this subsection (c) shall relieve any Bank which has failed to make available its share of any Borrowing hereunder from its obligation to do so in accordance with the terms hereof. (d) The failure of any Bank to make available to the Administrative Agent its share of any Borrowing on the date of such Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make available to the Administrative Agent its share of such Borrowing, but no Bank shall be responsible for the failure of any other Bank to make available the share of any Borrowing to be made available by such other Bank on such date of Borrowing. SECTION 2.05. Notes. (a) The Loans of each Bank shall be evidenced by a single Note payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans. (b) Each Bank may, by notice to the Borrower and the Administrative Agent (to be given not later than two Domestic Business Days prior to the first Borrowing), request that its Loans of a particular type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the Documentation Agent shall mail such Note to such Bank. Each Bank shall record the date, amount and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and prior to any transfer of its Note may endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. Each Revolving Credit Loan shall mature, and the principal amount thereof shall be due and payable, on the Revolving Credit Termination Date. Each Term Loan shall mature, and the principal amount thereof shall be due and payable, on the Term Loan Maturity Date. Each Money Market Loan shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Money Market Loan. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made to but excluding the date it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable monthly in arrears on the last day of each calendar month and, with respect to the principal amount of any Base Rate Loan converted to a CD Loan or a Euro-Dollar Loan, on the date such principal amount is so converted. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (b) Subject to Section 8.01, each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin for such day plus the applicable Adjusted CD Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day thereof. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment at a rate per annum equal to the sum of 1% plus the Base Rate for such day. "CD Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate __________ * The amount in brackets being rounded upwards, if necessary, to the next higher 1/100 of 1% The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding $5,000,000,000 in respect of new non-personal time deposits in Dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. Section 327.3(e) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Subject to Section 8.01, each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the applicable London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. "Euro-Dollar Margin" means a rate per annum determined in accordance with the Pricing Schedule. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in Dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (e) Subject to Section 8.01, each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market LIBOR Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Interest on each Money Market Loan shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (f) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the Banks making such Loans by telex, facsimile transmission or cable of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Administrative Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.08. Facility Fees. (a) Revolving Credit Facility Fee. The Borrower shall pay to the Administrative Agent for the account of the Banks ratably in proportion to their Commitments a facility fee at the Facility Fee Rate (determined for each day in accordance with the Pricing Schedule). Such facility fee shall accrue: (i) from and including the Effective Date to but excluding the Revolving Credit Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily aggregate amount of the Commitments (whether used or unused), and (ii) from and including the Revolving Credit Termination Date (or such earlier date of termination) to but excluding the date the Revolving Credit Loans shall be repaid in their entirety, on the daily aggregate outstanding principal amount of the Revolving Credit Loans. (b) Term Loan Facility Fee. The Borrower shall pay to the Administrative Agent for the account of the Banks ratably in proportion to the outstanding principal amounts of their Term Loans a facility fee at the Facility Fee Rate (determined for each day in accordance with the Pricing Schedule). Such facility fee shall accrue from and including the date on which the Term Loans are borrowed pursuant to Section 2.01(b) to but excluding the date the Term Loans shall be repaid in their entirety, on the daily aggregate outstanding principal amount of the Term Loans. (c) Payments. Accrued fees under this Section shall be payable quarterly on each March 31, June 30, September 30 and December 31 (in arrears) commencing on December 31, 1994. In the case of the facility fee payable with respect to the Commitments, such facility fee shall also be payable on the date of termination of the Commitments in their entirety (and, if later, the date the Revolving Credit Loans shall be repaid in their entirety). In the case of the facility fee payable with respect to the Term Loans, such facility fee shall also be payable on the date the Term Loans shall be repaid in their entirety. SECTION 2.09. Optional Termination or Reduction of Commitments. During the Revolving Credit Period, the Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans (other than Term Loans) are outstanding at such time, or (ii) ratably reduce from time to time, by an aggregate amount of at least $25,000,000, the aggregate amount of the Commitments, provided that the aggregate amount of the Commitments may not be reduced below the aggregate outstanding principal amount of the Loans (other than Term Loans). SECTION 2.10. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article VIII), as follows: (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to CD Loans as of any Domestic Business Day or to Euro-Dollar Loans as of any Euro-Dollar Business Day; (ii) if such Loans are CD Loans, the Borrower may elect to convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to continue such Loans as CD Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans; and (iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans or CD Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective (unless the relevant Loans are to be converted from Domestic Loans to Domestic Loans of the other type or continued as Domestic Loans of the same type for an additional Interest Period, in which case such notice shall be delivered to the Administrative Agent not later than 11:00 A.M. (New York City time) on the Domestic Business Day next preceding the date the conversion or continuation selected in such notice is be effective). A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each $25,000,000 or any larger multiple of $5,000,000. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if such new Loans are Fixed Rate Loans, the duration of the initial Interest Period applicable thereto; and (iv) if such Loans are to be continued as CD Loans or Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Administrative Agent shall promptly notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate Election to the Administrative Agent for any Group of Fixed Rate Loans, such Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto. SECTION 2.11. Prepayments. (a) The Borrower may, upon giving notice to the Administrative Agent not later than 11:00 A.M. (New York City time) on the date of prepayment, prepay a Group of Base Rate Loans (or any Money Market Loan bearing interest at the Base Rate pursuant to Section 8.01) in whole at any time, or from time to time in part in amounts aggregating $25,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. (b) Subject to Section 2.13, upon giving notice to the Administrative Agent not later than 11:00 A.M. (New York City time) on the Domestic Business Day next preceding the date of prepayment (in the case of a Group of CD Loans) or the third Euro-Dollar Business Day before the date of prepayment (in the case of a Group of Euro-Dollar Loans), the Borrower may prepay the Loans comprising such Group of Loans in whole at any time, or from time to time in part in amounts aggregating $25,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in the relevant Group of Loans. (d) The Borrower may not prepay the Money Market Loans at any time (other than Money Market Loans bearing interest at the Base Rate pursuant to Section 8.01). SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 11:00 A.M. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 9.01. The Administrative Agent will promptly distribute to each Bank its share of each such payment received by the Administrative Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Effective Federal Funds Rate. SECTION 2.13. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan (pursuant to Section 2.11, Section 2.18, Article VI, Article VIII or otherwise) on any day other than the last day of an Interest Period applicable thereto or if any Euro-Dollar Loan is converted to a Base Rate Loan pursuant to Section 8.02(b)(ii) on any day other than the last day of an Interest Period applicable thereto or if the Borrower fails to borrow or prepay any Fixed Rate Loans after notice of such borrowing or prepayment has been given to any Bank in accordance with Section 2.04(a) or 2.11(c), the Borrower shall reimburse each Bank on demand for any resulting loss or expense actually incurred by it (or a Participant which has purchased or agreed to purchase a participation in the relevant Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow or prepay, provided that such Bank shall have delivered to the Borrower a certificate containing a computation in reasonable detail of the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.14. Computation of Interest and Fees. Interest based on the Reference Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.15. Withholding Tax Exemption. At least five Domestic Business Days prior to the first date on which interest or fees are payable hereunder for the account of any Bank, each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to each of the Borrower and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, certifying in either case that such Bank is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes. Each Bank which so delivers a Form 1001 or 4224 further undertakes to deliver to each of the Borrower and the Administrative Agent two additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrower or the Administrative Agent, in each case certifying that such Bank is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank promptly advises the Borrower and the Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. SECTION 2.16. Regulation D Compensation. (a) So long as Regulation D shall require reserves to be maintained against "Eurocurrency liabilities" (or against any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents), each Bank subject to and actually incurring such reserve requirement may require the Borrower to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum (the "Regulation D Rate") determined pursuant to the following formula: [ LIBOR ] RDR = [ -------- ] - LIBOR [ 1 - ERR ] RDR = Regulation D Rate LIBOR = The applicable London Interbank Offered Rate ERR = Eurocurrency Reserve Ratio "Eurocurrency Reserve Ratio" means the applicable reserve ratio prescribed by Regulation D (as such Regulation shall have been amended to the first day of the related Interest Period) for such reserve requirements (expressed as a decimal). Notwithstanding anything contained herein to the contrary, the Regulation D Rate shall be adjusted automatically on and as of the effective date of any change in such reserve ratio. (b) Any Bank wishing to require payment of such additional interest: (i) shall so notify the Borrower, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable on any date interest is payable with respect to each Euro-Dollar Loan commencing after the giving of such notice and (ii) shall notify the Borrower from time to time of the amount due it under this Section; provided that the Borrower shall not be required to make any payment of an amount due hereunder earlier than the fifth Euro-Dollar Business Day after receipt of the notice referred to in clause (ii) of this Section. SECTION 2.17. Judgment Currency. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due from the Borrower hereunder or under any of the Notes in the currency expressed to be payable herein or under the Notes (the "specified currency") into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the specified currency with such other currency at the Administrative Agent's New York office on the Domestic Business Day preceding that on which final judgment is given. The obligations of the Borrower in respect of any sum due to any Bank or the Administrative Agent hereunder or under any Note shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Domestic Business Day following receipt by such Bank or the Administrative Agent (as the case may be) of any sum adjudged to be so due in such other currency such Bank or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the specified currency with such other currency. If the amount of the specified currency so purchased is less than the sum originally due to such Bank or the Administrative Agent, as the case may be, in the specified currency, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Bank or the Administrative Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds: (a) the sum originally due to such Bank or the Administrative Agent, as the case may be, and (b) any amounts shared with other Banks as a result of allocations of such excess as a disproportionate payment to such Bank under Section 9.04, such Bank or the Administrative Agent, as the case may be, agrees to remit such excess to the Borrower. SECTION 2.18. Replacement of this Credit Facility. If the Borrower wishes at any time to replace the credit facility provided under this Agreement with another credit facility, the Borrower may give prior notice of the termination of the Commitments hereunder as required by Section 2.09 and prior notice of the prepayment of any Committed Loans outstanding hereunder as required by Section 2.11, in each case on a conditional basis (i.e., conditioned upon such other credit facility becoming available to the Borrower), provided that the Borrower gives definitive notice of such termination of the Commitments and prepayment of outstanding Committed Loans (if any) to the Administrative Agent before 11:00 A.M. (New York City time) on the date of such termination and prepayment (if any) and complies with the applicable requirements of Sections 2.09 and 2.11 in all other respects. ARTICLE III CONDITIONS SECTION 3.01. Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05): (a) receipt by the Documentation Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Documentation Agent in form satisfactory to it of telegraphic, telex, facsimile or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Documentation Agent for the account of each Bank of one executed Note dated on or before the Effective Date complying with the provisions of Section 2.05; (c) receipt by the Documentation Agent of an opinion of Phyllis Savage, counsel to the Borrower, covering the matters described in Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) receipt by the Documentation Agent of an opinion of Davis Polk & Wardwell, special counsel for the Agents, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (e) receipt by the Documentation Agent of a certificate signed by any of the Chairman, any Vice Chairman, the President, any Vice President, the Treasurer, such Treasurer's designee, or any Associate Treasurer or Assistant Treasurer of the Borrower, dated the Effective Date, to the effect set forth in clauses (c), (d) and (e) of Section 3.02; (f) receipt by the Documentation Agent of a copy of the Borrower's certificate of incorporation, certified by the Secretary of State of New York; (g) receipt by the Documentation Agent of a certificate on behalf of the Borrower signed by the Secretary or Assistant Secretary of the Borrower or such other authorized officer of the Borrower satisfactory to the Documentation Agent certifying (i) that the Borrower's certificate of incorporation has not been amended since May 2, 1994, (ii) that no proceeding for the dissolution or liquidation of the Borrower exists, (iii) that the copy of the by-laws of the Borrower attached to the certificate is true, correct and complete, (iv) that the copies of the resolutions of the Borrower's board of directors attached to the certificate are true and correct and in full force and effect and (v) as to the incumbency of each officer of the Borrower who signed this Agreement and the Notes on behalf of the Borrower; (h) receipt by the Documentation Agent of a certificate listing the Restricted Subsidiaries as of the Effective Date; i) the commitments of the banks under the $850,000,000 Credit Agreement dated as of April 15, 1992 among Union Carbide Corporation, Union Carbide Chemicals and Plastics Company Inc., the banks listed on the signature pages thereof, Morgan Guaranty Trust Company of New York, Chemical Bank and Credit Suisse, as Co-Agents, and Chemical Bank, as Administrative Agent and as Auction Agent, shall have been terminated and all amounts due and payable under such Agreement shall have been paid; and (j) receipt by the Documentation Agent of all documents that the Documentation Agent may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Documentation Agent; provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than November 20, 1994. The Documentation Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (b) immediately after such Borrowing, the aggregate outstanding principal amount of the Loans (other than Term Loans) will not exceed the aggregate amount of the Commitments (as reduced by any reduction thereof on the date of such Borrowing); (c) immediately after such Borrowing, no Default shall have occurred and be continuing; (d) none of the principal financial officer, the principal accounting officer or the Treasurer of the Borrower shall be aware of any Potential Cross-Default that will exist after giving effect to such Borrowing and was not disclosed to the Banks at least two Domestic Business Days before the date of such Borrowing; and (e) the fact that the representations and warranties of the Borrower contained in this Agreement shall be true on and as of the date of such Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (b), (c), (d) and (e) of this Section, and each Notice of Borrowing shall be deemed to be a confirmation by the Borrower to such effect. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of New York, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries or result in or permit the termination or modification of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower. SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 1993 and the related consolidated statements of income and cash flows for the fiscal year then ended, reported on by KPMG Peat Marwick, set forth in the Borrower's 1993 annual report to stockholders, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of June 30, 1994 and the related unaudited consolidated statements of income and cash flows for the six months then ended, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the consolidated financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such six month period (subject to normal year-end adjustments). (c) Since June 30, 1994 there has been no change in the business, financial position, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, which could materially adversely affect the present or prospective ability of the Borrower to perform its obligations under this Agreement or any Note or which in any manner draws into question the validity or enforceability of this Agreement or any Note. SECTION 4.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the present or prospective ability of the Borrower to perform its obligations under this Agreement or any Note or which in any manner draws into question the validity of this Agreement or the Notes. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the currently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has: (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA and aggregate withdrawal liabilities not in excess of $5,000,000 at any one time outstanding. SECTION 4.07. Environmental Matters. In the ordinary course of its business, the Borrower conducts reviews of the effect of Environmental Laws on the business, operations and properties of the Borrower and its Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, related United States environmental protection operating expenses, which include operating costs of pollution control facilities and certain environmental accruals and administrative expenses, and capital expenditures for the current fiscal year and related amounts projected for capital expenditures up to five years subsequent to such current fiscal year, expressed in then-current dollar amounts). On the basis of this review, the Borrower has reasonably concluded that Environmental Laws are unlikely to have an effect on the business, financial condition, results of operations or prospects of the Borrower and its Consolidated Subsidiaries during the term of this Agreement, which could materially adversely affect the present or prospective ability of the Borrower to perform its obligations under this Agreement or any Note. SECTION 4.08. Restricted Subsidiaries. Each corporate Restricted Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.09. Not an Investment Company. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.10. Disclosure. None of the material furnished to the Agents and the Banks in connection herewith (excluding financial projections and estimates of future results) contains, or contained at the time so furnished, any untrue statement of a material fact or omits, or omitted at the time so furnished, to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. All financial projections and estimates of future results included in such material represented the Borrower's good faith estimates, based on assumptions which the Borrower considered reasonable, as of the date thereof (it being understood that the Borrower does not represent or warrant that such projections and future results will in fact be realized or that such assumptions included all possible assumptions). ARTICLE V COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Borrower will deliver to each of the Banks and the Administrative Agent: (a) as promptly as practicable and in any event within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in accordance with generally accepted accounting principles (and in a manner acceptable to the SEC) by KPMG Peat Marwick or other independent public accountants of nationally recognized standing; (b) as promptly as practicable and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and comparative financial information as of the end of the previous fiscal year, the related consolidated statement of income for such quarter and the related consolidated statements of income and cash flows for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the principal financial officer, the principal accounting officer or the Treasurer of the Borrower or a person designated in writing by any of the foregoing persons, and if such financial statements are filed with the SEC, all reported on in conformity with the financial reporting requirements of the SEC; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the principal financial officer, the principal accounting officer or the Treasurer of the Borrower, or a person designated in writing by any of the foregoing persons (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with any applicable requirements of Sections 5.05, 5.07, 5.08 and 5.09 on the date of such financial statements, (ii) stating whether the Borrower was in compliance with the requirements of Sections 5.02 through 5.04, inclusive, on the date of such financial statements, and (iii) stating whether any Default or Potential Cross-Default exists on the date of such certificate and, if any Default or Potential Cross-Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements whether anything has come to their attention to cause them to believe that any Default or Potential Cross-Default existed on the date of such statements; (e) within five days after any officer of the Borrower obtains knowledge of any Default or Potential Cross-Default, if such Default or Potential Cross- Default is then continuing, a certificate of the principal financial officer, the principal accounting officer or the Treasurer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the public shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the SEC; (h) if and when any member of the ERISA Group: (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability in excess of $5,000,000, under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer, any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the principal financial officer, the principal accounting officer or the Treasurer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; (i) promptly after the Borrower is notified by any rating agency referred to in the Pricing Schedule of any actual change in any rating referred to in the Pricing Schedule, written notice of such change; and (j) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Documentation Agent or the Administrative Agent, at the request of any Bank, may reasonably request. SECTION 5.02. Maintenance of Property; Insurance. (a) The Borrower will keep, and will cause each of its Subsidiaries to keep, all property useful and necessary in its respective business in good working order and condition, ordinary wear and tear excepted. (b) The Borrower will maintain, and will cause each of its Subsidiaries to maintain, insurance policies on its assets at coverage levels that are at least as high as the coverage levels that are usually insured against in the same general area by companies of established repute engaged in the same or a similar business as the Borrower or such Subsidiary, as the case may be; and, upon request of the Documentation Agent, will promptly furnish to the Documentation Agent for distribution to the Banks information presented in reasonable detail as to the insurance so carried. SECTION 5.03. Restricted Subsidiaries. (a) The Borrower will notify the Administrative Agent, each time that the Borrower delivers financial statements pursuant to Section 5.01(a) or (b), whether or not the total assets of the Borrower and all Restricted Subsidiaries (excluding any loans or other extensions of credit, other than receivables related to trade transactions, from any Restricted Subsidiary to any Unrestricted Subsidiary) were equal to at least 60% of the total assets of the Borrower and its Consolidated Subsidiaries as of the date of such financial statements (the "Restricted Subsidiary Asset Test"). (b) If the total assets of the Borrower and all Restricted Subsidiaries as so reported did not meet the Restricted Subsidiary Asset Test as of such date, the Borrower will, on the date such financial statements are delivered to the Administrative Agent, designate as Restricted Subsidiaries one or more additional Consolidated Subsidiaries which were theretofore Unrestricted Subsidiaries having sufficient assets as of the date of such financial statements so that the Restricted Subsidiary Asset Test as of such date will be met. (c) Each Consolidated Subsidiary which is a Restricted Subsidiary by reason of clause (ii) of the definition of "Restricted Subsidiary" (a "Designated Subsidiary") shall be a Restricted Subsidiary from the time of such designation until (subject to Section 5.03(d)) the Borrower subsequently notifies the Administrative Agent, concurrently with the delivery of financial statements pursuant to Section 5.01(a) or (b), that it is no longer necessary to include such Designated Subsidiary as a Restricted Subsidiary to meet the Restricted Subsidiary Asset Test (measured as of the date of such financial statements), at which time such Designated Subsidiary shall become an Unrestricted Subsidiary. (d) The Borrower may from time to time substitute one or more (i) Domestic Consolidated Subsidiaries of the Borrower having (x) total assets of $20,000,000 or less and (y) total net worth of $5,000,000 or less or (ii) Foreign Consolidated Subsidiaries which (in either case) are Unrestricted Subsidiaries for one or more Designated Subsidiaries, provided the Restricted Subsidiary Asset Test (measured as of the date of the most recent financial statements delivered pursuant to Section 5.01(a) or (b)) continues to be met, upon which substitution such theretofore Designated Subsidiaries shall become Unrestricted Subsidiaries. SECTION 5.04. Negative Pledge. The Borrower will not, and will not permit any of its Restricted Subsidiaries to, create, assume or suffer to exist any Lien securing Debt on any asset now owned or hereafter acquired by it, except: (a) any Lien existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $50,000,000; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Restricted Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof; (d) any Lien on any improvements constructed on any property of the Borrower or any Restricted Subsidiary and any theretofore unimproved real property on which such improvements are located securing Debt incurred for the purpose of financing all or any part of the cost of constructing such improvements, provided that such Lien attaches to such improvements within 90 days after the later of (1) completion of construction of such improvements and (2) commencement of full operation of such improvements; (e) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Restricted Subsidiary and not created in contemplation of such acquisition; (f) Liens on property of the Borrower or a Restricted Subsidiary in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, or any other government or department, agency, instrumentality or political subdivision thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any Debt incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such Liens; (g) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, but only to the extent that such Debt is not increased and is not secured by any additional assets; (h) Liens securing Debt permitted to be secured under Section 5.05(a)(i); and (i) Liens not otherwise permitted by the foregoing clauses of this Section securing Debt in an aggregate principal amount at any time outstanding not to exceed $200,000,000. SECTION 5.05. Limitation on Debt of Subsidiaries. (a) The Borrower shall not permit any of its Restricted Subsidiaries to create, incur, assume or suffer to exist any Debt, except: (i) any Debt owing to the Borrower or another Subsidiary, provided that any such Debt owing to the Borrower is made or issued solely on a senior basis, and provided further that any such Debt owing to a Subsidiary is made or issued solely on a senior, unsecured basis; (ii) Debt of a Designated Subsidiary existing at he time such Subsidiary is designated as a Restricted Subsidiary; (iii) Excluded Working Capital Financings; and (iv) (A) unsecured Debt not otherwise permitted by the foregoing clauses (i), (ii) and (iii) of this Section, in an aggregate principal amount at any time outstanding not to exceed $200,000,000 and (B) Debt secured by Liens permitted by Section 5.04. (b) The Borrower shall not permit any of its Unrestricted Subsidiaries that are Consolidated Subsidiaries or any of their respective Subsidiaries that are Consolidated Subsidiaries to create, incur, assume or suffer to exist any Debt owing to a Person other than the Borrower or a Subsidiary (including Debt referred to in clause (ii) of subsection (a) of this Section) if the aggregate outstanding principal amount of all such Debt (except Excluded Working Capital Financings) of all such Subsidiaries would at any time exceed $800,000,000. For purposes of this subsection (b), a Consolidated Kuwait Joint Venture shall be deemed not to be a Subsidiary or a Consolidated Subsidiary. SECTION 5.06. Consolidations, Mergers and Sales of Assets. The Borrower will not merge or consolidate with or into any other Person or sell, lease, transfer or otherwise dispose of all or substantially all of its assets, property or business in any single transaction or series of related transactions, unless (i) in the case of any such merger or consolidation, the Borrower shall be the continuing corporation, or, in the case of any such sale, lease, transfer or other disposition, the transferee or transferees shall be one or more Wholly-Owned Consolidated Subsidiaries organized and existing under the laws of the United States of America or any State thereof, each of which shall expressly assume the due and punctual performance and observance of all of the covenants and agreements of the Borrower contained in this Agreement and the Notes, and (ii) immediately after giving effect to such merger or consolidation, or such sale, lease, transfer or other disposition, no Default or Potential Cross-Default shall have occurred and be continuing. SECTION 5.07. Minimum Consolidated Tangible Net Worth. Consolidated Tangible Net Worth will not at any time be less than the sum of (i) $1,050,000,000 less Restructuring Charges taken after June 30, 1994 up to a maximum cumulative amount of $100,000,000, (ii) 50% of Consolidated Net Income (calculated before giving effect to any Restructuring Charges deducted pursuant to clause (i) above), for each fiscal quarter beginning after June 30, 1994 for which such Consolidated Net Income (as so calculated) is positive, and (iii) 50% of the proceeds from the sale after June 30, 1994 of capital stock that is not redeemable at the option of the holder thereof and that the issuer thereof is not required to repurchase at the option of the holder thereof; provided that proceeds from the sale of capital stock issued pursuant to any employee benefit plan, stock option plan or dividend reinvestment plan shall be excluded from any determination under this Section 5.07. SECTION 5.08. Leverage Ratio. The Leverage Ratio will not (i) at any time prior to June 30, 1995 exceed 1.65 to 1 and (ii) at any time on or after June 30, 1995 exceed 1.5 to 1. SECTION 5.09. Interest Coverage Ratio. At the end of any fiscal quarter ending after June 30, 1994, the Interest Coverage Ratio for the period of four consecutive fiscal quarters then ended will not be less than 2.0 to 1. SECTION 5.10. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for working capital and general corporate purposes of the Borrower and its Subsidiaries. None of such proceeds will be used, directly or indirectly, in violation of Regulation X or for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. SECTION 5.11. Payments from Domestic Restricted Subsidiaries. The Borrower shall not, and shall not permit any Domestic Consolidated Subsidiary that is a Restricted Subsidiary to, enter into any agreement which expressly prohibits or limits in any manner the ability of such Restricted Subsidiary, directly or indirectly, to declare or pay any dividend or other distribution, loan, advance or other payment to the Borrower. ARTICLE VI DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan or, within five days, any interest on any Loan, any fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.04 to 5.11, inclusive; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 20 days after written notice thereof has been given to the Borrower by the Administrative Agent at the request of any Bank; (d) any representation, warranty, certification or statement made (or deemed made) by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Subsidiary shall fail to make any payment in respect of Material Debt when due or within any applicable grace period or any event or condition shall occur which results in the acceleration of the maturity of Material Debt; (f) any event or condition (except a failure to pay or other event or condition covered by clause (e) above) shall occur which enables (or, with the giving of notice or lapse of time or both, would enable) the holder or holders of Material Debt or any Person or Persons acting on its or their behalf to accelerate the maturity thereof or terminate its or their commitment in respect thereof and such event or condition shall not have been cured within two Domestic Business Days after both (i) the Required Banks shall have determined that such event or condition, if not cured within two Domestic Business Days, should be an Event of Default under this clause (f) and (ii) the Administrative Agent shall have given the Borrower written notice of such determination; (g) the Borrower or Material Subsidiaries shall: (i) commence a voluntary case or other proceeding seeking (1) liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or (2) the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property; (ii) consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it; (iii) make a general assignment for the benefit of creditors; (iv) fail generally to pay its debts as they become due; or (v) take any corporate action to authorize any of the foregoing; (h) (i) an involuntary case or other proceeding shall be commenced against the Borrower or Material Subsidiaries seeking (1) liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or (2) the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or (ii) an order for relief shall be entered against the Borrower or Material Subsidiaries under the federal bankruptcy laws as now or hereafter in effect; (i) (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $50,000,000 which it shall have become liable to pay under Title IV of ERISA; (ii) notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; (iii) the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer, any Material Plan; (iv) a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; (v) there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $50,000,000; (j) a judgment or order for the payment of money in excess of $50,000,000 shall be rendered against the Borrower or any Subsidiary and shall remain unsatisfied for a period of ten consecutive days after it becomes due and payable, during which ten-day period execution shall not be effectively stayed or otherwise effectively precluded; or (k) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under said Act) of 30% or more of the outstanding shares of common stock of the Borrower; or, during any period of twelve consecutive calendar months, individuals who were directors of the Borrower on the first day of such period shall cease to constitute a majority of the board of directors of the Borrower; then, and in every such event, the Administrative Agent shall: (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate outstanding principal amount of the Loans, by notice to the Borrower declare the Notes (together with accrued interest thereon) to be, and the Notes (together with accrued interest thereon) shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon automatically terminate and the Notes (together with accrued interest thereon) shall automatically become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 6.02. Notice of Default. The Administrative Agent shall give notice under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE VII THE AGENTS AND CO-AGENTS SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to such Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agents and Affiliates. Morgan Guaranty Trust Company of New York and Chemical Bank shall each have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not an Agent, and Morgan Guaranty Trust Company of New York and Chemical Bank and their respective affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not an Agent hereunder. SECTION 7.03. Action by Agents. The obligations of each Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, no Agent shall be required to take any action with respect to any Default or Potential Cross-Default, except as expressly provided in Article VI. SECTION 7.04. Consultation with Experts. Any Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Agents. Neither any Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither any Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article III, except, in the case of the Documentation Agent or the Administrative Agent, receipt of items required to be delivered to it; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. An Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify each Agent (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such Agent's gross negligence or willful misconduct) that such Agent may suffer or incur in connection with this Agreement or any action taken or omitted by such Agent hereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon any Agent, any Co-Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon any Agent, any Co-Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Agents. (a) Any Agent may resign at any time by giving 30 days prior written notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent which shall be a Bank. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a Bank. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent. (b) If at any time any Agent shall have assigned its rights and obligations in respect of all of its Commitment hereunder, such Agent shall resign as Agent in accordance with the procedures set forth in subsection (a) of this Section 7.08. SECTION 7.09. Distribution of Information. The Administrative Agent and the Documentation Agent each agree to mail or deliver to each of the Banks so requesting photocopies of documents, certificates, financial statements and other information received by it from the Borrower pursuant to the express provisions of this Agreement and not otherwise distributed to the Banks. SECTION 7.10. Co-Agents. The Co-Agents, in their capacities as such, shall have no duties or obligations of any kind under this Agreement. ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Fixed Rate Loan (other than Money Market Absolute Rate Loans): (a) the Administrative Agent is advised by the Reference Banks that deposits in Dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or more of the aggregate amount of the affected Loans advise the Administrative Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, or to convert outstanding Loans into CD Loans or Euro- Dollar Loans, as the case may be, shall be suspended and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. Illegality. (a) If, after the date of this Agreement, the adoption of, or any change in, any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall promptly so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans, shall be suspended. (b) Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (i) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (ii) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. SECTION 8.03. Increased Cost and Reduced Return. (a) If, after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of, or any change in, any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) shall subject any Bank (or its Applicable Lending Office) to any tax, duty or other charge with respect to its Fixed Rate Loans, its Note to the extent evidencing Fixed Rate Loans or its obligation to make Fixed Rate Loans, or shall change the basis of taxation of payments to any Bank (or its Applicable Lending Office) of the principal of or interest on its Fixed Rate Loans or any other amounts due under this Agreement in respect of its Fixed Rate Loans or its obligation to make Fixed Rate Loans (except for changes in the rate of tax on the overall net income of such Bank or its Applicable Lending Office imposed by the jurisdiction in which such Bank's principal executive office or Applicable Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note to the extent evidencing Fixed Rate Loans or its obligation to make Fixed Rate Loans; and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of, or any change in, any applicable law, rule or regulation regarding capital adequacy, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency has the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent), without duplication, for such reduction. Any determination by any such authority, central bank or comparable agency that, for purposes of capital adequacy requirements, the Commitments hereunder do not constitute commitments with an original maturity of one year or less, shall be deemed a change in the interpretation and administration of such requirements for purposes of this subsection (b), and the additional amount or amounts payable by the Borrower to each Bank under this subsection (b) as a result thereof shall be calculated, with respect to the relevant unused portion of such Bank's Commitment for the relevant period, at the rate of 0.05% per annum. (c) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder, accompanied by a computation thereof in reasonable detail, shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. (d) If any Bank has demanded compensation under this Section, the Borrower: (i) shall have the right, with the assistance of the Documentation Agent and the Administrative Agent and upon notification to such Bank, to require such Bank to transfer, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit H hereto, its Note and Commitment to a substitute bank or banks satisfactory to the Borrower and such Agents (which may be one or more of the Banks) or (ii) may elect to terminate this Agreement as to such Bank, and in connection therewith to prepay any Base Rate Loan made pursuant to Section 8.04, provided that the Borrower (1) notifies the Administrative Agent (which will forthwith notify such Bank) of such election at least three Euro-Dollar Business Days before any date fixed for such a prepayment, and (2) either (x) repays all of such Bank's outstanding Loans at the end of the respective Interest Periods applicable thereto or as otherwise required by Section 8.02 or (y) subject to Section 2.13, prepays all of such Bank's outstanding Loans (other than Money Market Loans). Upon receipt by the Administrative Agent of such notice, the Commitment of such Bank shall terminate. SECTION 8.04. Base Rate Loans Substituted for Affected Fixed Rate Loans. Subject to Sections 2.11 and 2.13, if (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Bank as (or continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may be, shall instead be made as or converted into Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid (or converted to a Base Rate Loan), all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such notice no longer apply, the principal amount of each such Base Rate Loan shall be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the first day of the next succeeding Interest Period applicable to the related CD Loans or Euro-Dollar Loans of the other Banks. ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. All notices, requests, instructions and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (w) in the case of the Borrower or any Agent, at its address, facsimile number or telex number (if any) set forth on the signature pages hereof, (x) in the case of any Bank, at its address, facsimile number or telex number (if any) set forth in its Administrative Questionnaire, (y) in the case of any party hereto, such other address, facsimile number or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article II or Article VIII and notices to the Borrower under Section 6.01(c) or 6.01(f) shall not be effective until received. SECTION 9.02. No Waivers. No failure or delay by any Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Documentary Taxes; Indemnification. (a) The Borrower shall pay (i) all out-of-pocket expenses of the Agents, including reasonable fees and disbursements of one special counsel (Davis Polk & Wardwell) for the Agents, in connection with the preparation of this Agreement, any waiver or consent hereunder or any amendment hereof or any actual or alleged Default or Potential Cross-Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agents or any Bank, including fees and disbursements of counsel (including the cost of staff counsel where used, without duplication of work, in lieu of separate special counsel), in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. The Borrower shall indemnify each Bank against any transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of this Agreement or the Notes. (b) The Borrower shall indemnify each Bank and its directors, officers and employees for, and hold each Bank and its directors, officers and employees harmless from and against (i) any and all damages, losses and other liabilities of any kind, including, without limitation, judgments and costs of settlement, and (ii) any and all reasonable out-of-pocket costs and expenses of any kind, including, without limitation, fees and disbursements of counsel (including the cost of staff counsel where used, without duplication of work, in lieu of separate special counsel) and any other costs of defense, including, without limitation, costs of discovery and investigation, for such Bank and its officers and directors (all of which shall be paid or reimbursed by the Borrower monthly), suffered or incurred in connection with any investigative, administrative or judicial proceeding (whether or not such Bank shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no such Bank, director, officer or employee shall have any right to be indemnified or held harmless hereunder for its own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. The Borrower shall indemnify and hold harmless each Agent, in its capacity as Agent hereunder, to the same extent that the Borrower indemnifies and holds harmless each Bank pursuant to this Section. SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise (except pursuant to Section 8.03(d)(ii)), receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that if at any time thereafter, the Bank that originally received such payment is required to repay (whether to the Borrower or to any other Person) all or any portion of such payment, each other Bank shall promptly (and in any event within five Domestic Business Days of its receipt of notification from such Bank requiring such repayment) repay to such Bank the portion of such payment previously received by it under this Section 9.04, together with such amount (if any) as is equal to the appropriate portion of any interest (in respect of the period during which such other Bank held such amount) such Bank shall have been obligated to pay when repaying such amount as aforesaid, in exchange for such participation in the Note of such other Bank as was previously purchased by such Bank; provided further that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes. SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of any Agent are affected thereby, by such Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement or (v) amend or waive the provisions of this Section 9.05. Neither a pro rata reduction of the Commitments pursuant to Section 2.01(a) nor any exercise by the Borrower of its right to decrease the Commitments pro rata pursuant to Section 2.09 or to decrease the Commitment of a Bank pursuant to Section 8.03(d) shall require the consent of any party to this Agreement. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Agents, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agents shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement and such Bank's Note. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder and under the Notes including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i) (only to the extent such modification, amendment or waiver would decrease the Commitment of such Bank), (ii) or (iii) of Section 9.05 or to any modification, amendment or waiver that would have the effect of increasing the amount of a Participant's participation in such Bank's Commitment, in any such case without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII with respect to its participating interest, subject to subsection (f) below. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit H hereto executed by such Assignee and such transferor Bank, with the subscribed consent of the Borrower in consultation with the Administrative Agent and with the subscribed acknowledgment of the Administrative Agent; provided that, (i) if an Assignee is (x) any Person which controls, is controlled by, or is under common control with, or is otherwise substantially affiliated with such transferor Bank or (y) another Bank, no such consent shall be required, (ii) such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans and (iii) if the transferor Bank is assigning a proportionate part (but not all) of its rights and obligations under this Agreement and the Notes to an Assignee that was not a Bank party to this Agreement prior to such assignment, the amount so assigned (disregarding Money Market Loans) shall be not less than the amount that would be held at such time (disregarding Money Market Loans) by a Bank having an initial Commitment of $10,000,000. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee and the transferor Bank and the original Note is cancelled, and the Administrative Agent shall notify the other Agents of such assignment. In connection with any such assignment, the transferor Bank shall pay to the Administrative Agent an administrative fee of $2,000 for processing such assignment. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.15. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) The Agents and the Borrower may, for all purposes of this Agreement, treat any Bank as the holder of any Note drawn to its order (and owner of the Loans evidenced thereby) until written notice of assignment or other transfer shall have been received by them. (f) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (g) If any Reference Bank assigns its Note to an unaffiliated institution, the Administrative Agent shall, with the consent of the Borrower and the Required Banks, appoint another Bank to act as a Reference Bank hereunder. SECTION 9.07. Collateral. Each of the Banks represents to the Agents and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. THIS AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE BORROWER HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE BORROWER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE BORROWER, THE AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 9.09. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. SECTION 9.10. Confidentiality. In addition to any confidentiality requirements under applicable law, each of the Agents and each of the Banks (each a "Bank Party" and, collectively, the "Bank Parties") agrees that, through and including the latest of (a) the Revolving Credit Termination Date, (b) the Term Loan Maturity Date and (c) a date three years from the relevant Bank Party's receipt of the relevant information, it will take normal and reasonable precautions so that (i) all information expressly designated by its provider as confidential provided to any of them by the Borrower, any Person on behalf of the Borrower, or by any other Bank Party on behalf of the Borrower, in connection with this Agreement or the transactions contemplated hereby will be held and treated by each such Bank Party and its respective directors, Affiliates, officers, agents and employees in confidence and (ii) neither it nor any of its respective directors, Affiliates, officers, agents or employees shall, without the prior written consent of the Borrower, use any such information for any purpose or in any manner other than pursuant to the terms of and for the purposes contemplated by this Agreement. Notwithstanding the immediately preceding sentence, any Bank Party may disclose any such information or portions thereof (a) that is or becomes publicly available other than through a breach by such Bank Party of its obligations hereunder; (b) that is also provided to such Bank Party by a Person other than the Borrower not in violation, to the actual knowledge of such Bank Party, of any duty of confidentiality; (c) at the request of any bank regulatory authority or examiner; (d) pursuant to subpoena or other court process; (e) when required by applicable law; (f) at the written request or the express direction of any other authorized government agency; (g) to its independent auditors, counsel and other professional advisors in connection with their provision of professional services to such Bank Party; or (h) to any (i) Participant or (ii) prospective Participant or prospective Bank, if such Participant, prospective Participant or prospective Bank (which prospective Bank is promptly identified to the Borrower), prior to any such disclosure, agrees in writing to keep such information confidential to the same extent required of the Bank Parties hereunder; provided that any Bank Party's failure to comply with the provisions of this Section 9.10 shall not affect the obligations of the Borrower hereunder. SECTION 9.11. Severability. Any provision of this Agreement that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. UNION CARBIDE CORPORATION By /s/ Thomas D. Jones Title: Vice President and Treasurer 39 Old Ridgebury Road Danbury, CT 06817-0001 Telecopy number: (203) 794-5135 Attention: Vice President and Treasurer Commitments $11,833,333.33 ABN AMRO BANK N.V., NEW YORK BRANCH as a Co-Agent and a Bank By /s/ David A. Mandell Title: Vice President By /s/ David W. Stack Title: Corporate Banking Officer $11,833,333.33 BANK OF AMERICA ILLINOIS, as a Co-Agent and a Bank By /s/ Nancy McGaw Title: Vice President $11,833,333.33 THE BANK OF NEW YORK, as a Co-Agent and a Bank By /s/ Nancy McEwen Title: Vice President $11,833,333.33 THE BANK OF NOVA SCOTIA, as a Co-Agent and a Bank By /s/ Terry K. Fryett Title: Vice President Commitments $11,833,333.33 BANQUE NATIONALE DE PARIS, as a Co-Agent and a Bank By /s/ Sophie Revillard Kaufman Title: Vice President By /s/ Eric Vigne Title: Senior Vice President $11,833,333.33 CIBC INC., as a Co-Agent and a Bank By /s/ Julia C. Collins Title: Vice President $11,833,333.34 CHEMICAL BANK, as a Bank By /s/ William Ewing IV Title: Managing Director $11,833,333.33 CREDIT SUISSE, as a Co-Agent and a Bank By /s/ Kristina Catlin Title: Associate By /s/ Lynn Allegaert Title: Member of Senior Commitments $11,833,333.33 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Bank By /s/ James S. Finch Title: Vice President $11,833,333.33 NATIONSBANK OF NORTH CAROLINA, N.A., as a Co-Agent and a Bank By /s/ Margaret K. Vandenberg Title: Senior Vice President $ 7,500,000.00 BANCA COMMERCIALE ITALIANA By /s/ Edward Bermant Title: First Vice President By /s/ Julia M. Welch Title: Assistant Vice President $ 7,500,000.00 BARCLAYS BANK PLC By /s/ J. Onischuk Title: Associate Director $ 7,500,000.00 FUJI BANK LIMITED By /s/ Yoshihiko Shiotsugu Title: Vice President and Manager Commitments $ 7,500,000.00 ROYAL BANK OF CANADA By /s/ Peter D. Steffen Title: Senior Manager $ 7,500,000.00 THE SUMITOMO BANK, LIMITED By /s/ Yoshinori Kawamura Title: Joint General Manager $ 7,500,000.00 SWISS BANK CORPORATION By /s/ Colin T. Taylor Title: Director Merchant Banking By /s/ Paul D. Stendig Title: Associate Director Merchant Banking $ 7,500,000.00 TORONTO DOMINION (NEW YORK), INC. By /s/ Jano Mott Title: Vice President $ 4,166,666.67 COMMERZBANK AG NEW YORK BRANCH By /s/ Werner Niemeyer Title: Vice President By /s/ Michael D. Hintz Title: Vice President Commitments $ 4,166,666.67 GENERALE BANK By /s/ Alain Verschueren Title: Senior Vice President Corporate By /s/ Hans U. Neukomm Title: General Manager $ 4,166,666.67 THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED By /s/ Jeffry S. Dykes Title: Vice President $ 4,166,666.67 INSTITUTO BANCARIO SAN PAOLO DI TORINO, S.P.A. By /s/ William J. DeAngelo Title: First Vice President By /s/ Robert S. Wurster Title: First Vice President $ 4,166,666.67 MELLON BANK, N.A. By /s/ James S. Adelsheim Title: Vice President $ 4,166,666.67 NATIONAL BANK OF KUWAIT By /s/ Phillip M. Johnson Title: Executive Manager By /s/ George Y. Nasra Title: General Manager Commitments $ 4,166,666.67 SOCIETE GENERALE By /s/ Philippe de Rozieres Title: Vice President _________________ Total Commitments: $200,000,000.00 =============== MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent By /s/ James S. Finch Title: Vice President 60 Wall Street New York, New York 10260 Attention: James Finch Telex number: 177615 Telecopy number: (212) 648-5014 CHEMICAL BANK, as Administrative Agent By /s/ William Ewing IV Title: Managing Director 270 Park Avenue New York, New York 10017-2070 Attention: Terry Kennon Telecopy number: (212) 270-7138 CHEMICAL BANK, as Auction Agent By /s/ William Ewing IV Title: Managing Director 270 Park Avenue New York, New York 10017-2070 Attention: Terry Kennon Telecopy number: (212) 270-7138 PRICING SCHEDULE The "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate" for any day are the respective rates per annum set forth below in the applicable row under the column corresponding to the Pricing Level that applies on such day; provided that the Euro-Dollar Margins and CD Margins applicable to Term Loans shall be the applicable rate per annum set forth below plus 0.0625% if the Borrower selects a one-year maturity for the Term Loans or 0.1250% if the Borrower selects a two-year maturity for the Term Loans: Status Level I Level II Level III Euro-Dollar Margin 0.3250% 0.3250% 0.4000% CD Margin 0.4500% 0.4500% 0.5250% Facility Fee Rate 0.1000% 0.1250% 0.1750% For purposes of this Schedule, the following terms have the following meanings: "Level I Pricing" applies on any day if on such day the Borrower's long-term debt securities (whether or not outstanding at such date) are rated BBB or higher (or the equivalent) by S&P and Baa2 or higher (or the equivalent) by Moody's. "Level II Pricing" applies on any day if on such day (i) the Borrower's long-term debt securities (whether or not outstanding at such date) are rated either BBB or higher (or the equivalent) by S&P or Baa2 or higher (or the equivalent) by Moody's and (ii) Level I Pricing does not apply. "Level III Pricing" applies on any day if no higher Pricing Level applies on such day. "Moody's" means Moody's Investors Service, Inc., a Delaware corporation. "Pricing Level" refers to the determination of which of Level I Pricing, Level II Pricing or Level III Pricing applies on any day. Level I Pricing is the highest Pricing Level and Level III Pricing the lowest. "S&P" means Standard & Poor's Ratings Group. The ratings to be utilized for purposes of this Pricing Schedule are those assigned to the senior unsecured long-term debt securities of the Borrower without thirdparty credit enhancement, and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect on any day is the rating in effect at the close of business on such day. If either Moody's or S&P is merged or consolidated with another Person or if the ratings business of Moody's or S&P is acquired by another Person (the entity conducting such ratings business after any such merger, consolidation or acquisition being herein called the "Successor"), the ratings provided by the Successor shall be used for purposes of this Pricing Schedule unless and until the Borrower and the Required Banks shall, by notice to the Administrative Agent, designate a different rating agency to provide such ratings, in which case the ratings provided by the rating agency so designated shall thereafter replace those provided by the Successor for purposes of this Pricing Schedule. EXHIBIT A NOTE New York, New York , 199_ For value received, UNION CARBIDE CORPORATION, a New York corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the applicable maturity date specified in or pursuant to the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Chemical Bank, 270 Park Avenue, New York, New York 10017-2070. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the $200,000,000 Credit Agreement dated as of November 4, 1994 among the Borrower, the Banks party thereto, the Co-Agents party thereto, Morgan Guaranty Trust Company of New York, as Documentation Agent, and Chemical Bank, as Administrative Agent and Auction Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. UNION CARBIDE CORPORATION By__________________________ Name: Title: Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL ______________________________________________________________ Amount of Amount of Type of Principal Maturity Notation Date Loan Loan Repaid Date Made By ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ EXHIBIT B Form of Money Market Quote Request [Date] To: Chemical Bank (the "Auction Agent") From: Union Carbide Corporation Re: $200,000,000 Credit Agreement dated as of November 4, 1994 (as the same may be amended from time to time, the "Credit Agreement") among the Borrower, the Banks party thereto, the Co-Agents party thereto and the Agents (as defined in the Credit Agreement) We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Money Market Quotes for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount** Interest Period*** $ Such Money Market Quotes should offer a Money Market [LIBOR Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. [NAME OF BORROWER] By________________________ Name: Title: ** Amount must be $25,000,000 or a larger multiple of $5,000,000. *** Not less than one month (LIBOR Auction) or not less than 7 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. EXHIBIT C Form of Invitation for Money Market Quotes To: [Name of Bank] Re: Invitation for Money Market Quotes to Union Carbide Corporation (the "Borrower") Pursuant to Section 2.03 of the $200,000,000 Credit Agreement dated as of November 4, 1994 (as the same may be amended from time to time, the "Credit Agreement") among the Borrower, the Banks parties thereto, the Co-Agents party thereto, the undersigned, as Auction Agent, and the other Agents (as defined therein), we are pleased on behalf of the Borrower to invite you to submit Money Market Quotes to the Borrower for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________ Principal Amount Interest Period $ Such Money Market Quotes should offer a Money Market [LIBOR Margin] [Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [12:00 Noon] [9:30 A.M.] (New York City time) on [date]. Terms used herein have the meanings assigned to them in the Credit Agreement. CHEMICAL BANK By________________________________ Authorized Officer EXHIBIT D Form of Money Market Quote CHEMICAL BANK, as Auction Agent [Address] Attention: Re: Money Market Quote to Union Carbide Corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated __________ we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: ________________________________ 2. Person to contact at Quoting Bank: _____________________________ 3. Date of Borrowing: ____________________1 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest Money Market Amount2 Period3 [LIBOR Margin4] [Absolute Rate5] $ $ [Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $____________.]2 __________ 1 As specified in the related Invitation. 2 Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger multiple of $1,000,000. (notes continued on following page) We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the $200,000,000 Credit Agreement dated as of November 4, 1994 (as the same may be amended from time to time, the "Credit Agreement") among the Borrower, the Banks party thereto, the Co-Agents party thereto, yourselves, as Auction Agent, and the other Agents (as defined therein), irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Terms used herein have the meanings assigned to them in the Credit Agreement. Very truly yours, [NAME OF BANK] Dated:_______________ By:__________________________ Authorized Officer __________ 3 [Not less than one month and not more than 12 months] [Not less than seven days and not more than 180 days], as specified in the related Invitation. No more than five bids are permitted for each Interest Period. 4 Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (rounded to the nearest 1/10,000th of 1%) and specify whether "PLUS" or "MINUS". 5 Specify rate of interest per annum (rounded to the nearest 1/10,000th of 1%). EXHIBIT E OPINION OF COUNSEL FOR THE BORROWER [Effective Date] To the Banks and the Agents Referred to Below c/o Morgan Guaranty Trust Company of New York, as Documentation Agent 60 Wall Street New York, New York 10260 Dear Sirs: I have acted as counsel to Union Carbide Corporation (the "Borrower") in connection with the $200,000,000 Credit Agreement dated as of November 4, 1994 (the "Credit Agreement") among the Borrower, the Banks party thereto, the Co-Agents party thereto, Morgan Guaranty Trust Company of New York, as Documentation Agent, and Chemical Bank, as Administrative Agent and Auction Agent, and I am rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement. Capitalized terms used herein without definition have the same meanings as in the Credit Agreement. I have examined originals or copies, certified or otherwise identified to my satisfaction as being true copies, of the Credit Agreement, the Notes, certain information and documents provided to me by responsible officers or employees of the Borrower and such other documents, certificates and corporate or other records as I have deemed necessary or appropriate as a basis for the opinions set forth herein. In my examination I have assumed the genuineness of all signatures (other than signatures on behalf of the Borrower), the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostatic copies and the authenticity of the originals of such copies. No opinion is expressed herein as to any matters involving or governed by the laws of any jurisdiction other than the laws of the State of New York, the laws of the State of Connecticut and the federal laws of the United States of America. Without limiting the foregoing, I express no opinion as to the effect (if any) of any law of any jurisdiction (except the States of New York and Connecticut) in which any Bank is located which limits the rate of interest that such Bank may charge. I have investigated such questions of law and investigated such questions of fact for the purpose of rendering the opinions expressed herein as I have deemed necessary or appropriate. On the basis of and subject to the foregoing, and to the qualifications set forth below, I am of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of New York and is duly qualified as a foreign corporation to do business and in good standing under the laws of the State of Connecticut. 2. The Borrower has the corporate power and corporate authority to enter into the Credit Agreement and the Notes and to consummate the transactions provided for therein. 3. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes and the consummation by the Borrower of the transactions provided for therein have been duly authorized by all requisite corporate action on the part of the Borrower. 4. The Credit Agreement and the Notes have been duly executed and delivered by the Borrower and are valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as (i) limited by bankruptcy, insolvency, reorganization, moratorium or other laws now or hereafter in effect relating to or limiting creditors' rights generally, (ii) limited by equitable principles of general applicability and the discretion of the court before which any proceeding thereafter may be brought in applying such principles and (iii) the enforceability of indemnification against securities law liabilities may be limited by applicable federal and state securities laws and general principles of public policy. Additionally, I express no opinion as to the validity of the provisions of Section 9.08 of the Agreement providing for a waiver of trial by jury. 5. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes will not (i) constitute a violation of any law or regulation of the State of New York or Connecticut or the United States of America which is binding on the Borrower, (ii) violate the certificate of incorporation or by-laws of the Borrower or (iii) result in a breach of, or constitute a default under, or require any consent under, any indenture or other agreement or instrument known to me (such agreements being listed in Schedule 1 hereto) evidencing or governing indebtedness for borrowed money of the Borrower. 6. No consent or approval of, or action by or filing with, any court or administrative or governmental body which has not been obtained, taken or made is required under the laws of the State of New York or Connecticut or the United States of America for the Borrower to execute and deliver the Credit Agreement and the Notes and to consummate the transactions provided for therein. 7. To the best of my knowledge, there is no action, suit or proceeding pending or threatened against or affecting the Borrower or any of its Restricted Subsidiaries, before any court or arbitrator or any governmental body, agency or official in which there is a reasonable likelihood of an adverse decision which could materially adversely affect the present or prospective ability of the Borrower to perform its obligations under the Credit Agreement or any Note or which draws into question the validity of the Credit Agreement or the Notes. In giving the opinions set forth in paragraphs 1 and 2 above, I have relied upon telegraphic or oral confirmations as to the existence and good standing of the Borrower. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person (except for deliveries required in accordance with applicable law) without my prior written consent. Very truly yours, EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE AGENTS____________ [Effective Date] To the Banks and the Agents Referred to Below c/o Morgan Guaranty Trust Company of New York, as Documentation Agent 60 Wall Street New York, New York 10260 Dear Sirs: We have participated in the preparation of the $200,000,000 Credit Agreement (the "Credit Agreement") dated as of November 4, 1994 among Union Carbide Corporation, a New York corporation (the "Borrower"), the Banks party thereto, the Co- Agents party thereto, Morgan Guaranty Trust Company of New York, as Documentation Agent, and Chemical Bank, as Administrative Agent and Auction Agent, and have acted as special counsel for the Agents for the purpose of rendering this opinion pursuant to Section 3.01(d) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action. 2. The Credit Agreement constitutes a valid and binding agreement of the Borrower and the Notes constitute valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms except as limited by (i) bankruptcy, insolvency or other laws affecting creditors' rights generally and (ii) equitable principles of general applicability. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York and the federal laws of the United States of America. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person (except for deliveries required in accordance with applicable law) without our prior written consent. Very truly yours, EXHIBIT G ADMINISTRATIVE QUESTIONNAIRE ___________________________________________________________ Please provide the following details: I. Information to be included in the Credit Agreement: (A) BANK NAME: _________________________________________________ (B) DOMESTIC LENDING OFFICE NAME AND ADDRESS: _________________________________________________ _________________________________________________ _________________________________________________ TELEX NUMBER/ANSWERBACK: __________________________________________________ TELECOPIER/FAX NUMBER: __________________________________________________ (C) EURO-DOLLAR LENDING OFFICE NAME AND ADDRESS __________________________________________________ __________________________________________________ __________________________________________________ TELEX NUMBER/ANSWERBACK: __________________________________________________ TELECOPIER/FAX NUMBER: __________________________________________________ (D) MONEY MARKET LENDING OFFICE: __________________________________________________ __________________________________________________ __________________________________________________ TELEX NUMBER/ANSWERBACK: __________________________________________________ TELECOPIER/FAX NUMBER: __________________________________________________ II. Information for the administration of the facility: (A) Where execution copies should be sent: NAME: _________________________________________________ ADDRESS: _________________________________________________ _________________________________________________ _________________________________________________ (B) Where conformed copies should be sent: NAME: _________________________________________________ ADDRESS: _________________________________________________ _________________________________________________ _________________________________________________ (C) FOR CREDIT MATTERS: CONTACT NAMES/DEPT.: _________________________________________________ TELEPHONE NUMBER: _________________________________________________ TELEX NUMBER/ANSWERBACK: _________________________________________________ TELECOPIER/FAX NUMBER: _________________________________________________ (D) FOR ADMINISTRATIVE/OPERATIONS MATTERS: CONTACT NAMES/DEPT.: _________________________________________________ TELEPHONE NUMBER: _________________________________________________ TELEX NUMBER/ANSWERBACK: _________________________________________________ TELECOPIER/FAX NUMBER: _________________________________________________ (E) FOR MONEY MARKET LOANS: PRIMARY CONTACT NAME/DEPT.: _________________________________________________ TELEPHONE NUMBER: _________________________________________________ TELEX NUMBER/ANSWERBACK: _________________________________________________ TELECOPIER/FAX NUMBER: _________________________________________________ SECONDARY CONTACT NAME/DEPT.: _________________________________________________ TELEPHONE NUMBER: _________________________________________________ TELEX NUMBER/ANSWERBACK: _________________________________________________ TELECOPIER/FAX NUMBER: _________________________________________________ (F) PAYMENT INSTRUCTIONS (Please specify where funds, i.e., interest, commitment fees, repayment of loans, should be wired): ________________________________________________ ________________________________________________ ________________________________________________ EXHIBIT H ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), UNION CARBIDE CORPORATION (the "Borrower")** and CHEMICAL BANK, as the Administrative Agent (the "Administrative Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the $200,000,000 Credit Agreement dated as of November 4, 1994 among the Borrower, the Assignor and the other Banks party thereto, as Banks, the Co-Agents party thereto, the Administrative Agent and the other Agents (as defined therein) (as the same may be amended from time to time, the "Credit Agreement"); [WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Committed Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $__________;] WHEREAS, Committed Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and [WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding __________________ * If the Borrower's consent to this assignment is not required by Section 9.06(c) of the Credit Agreement, references to the Borrower as a party hereto and Section 4 hereof should be deleted. Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;] [WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its outstanding Term Loans in an amount equal to $_______ (the "Assigned Amount"), and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;] NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Borrower and the Administrative Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds an amount equal to $_________.** It is understood that facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof with respect to the Assigned Amount are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent of the Borrower. This Agreement is conditioned upon the consent of the Borrower pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by the Borrower is evidence of this consent. Pursuant to Section 9.06(c) the Borrower agrees to execute and deliver Notes payable to the order of the Assignee (and, if necessary, to the Assignor) to evidence the assignment and assumption provided for herein. SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower, or the validity and enforceability of the obligations of the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, any other Bank, any Co-Agent or any Agent, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be ____________________ ** Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By __________________________________ Name: Title: [ASSIGNEE] By __________________________________ Name: Title: UNION CARBIDE CORPORATION By __________________________________ Name: Title: Acknowledged this ____ day of ____ by Chemical Bank, as Administrative Agent By________________________________ Name: Title EX-10.8.3 6 EXHIBIT 10.8.3 FIFTH AMENDMENT TO CARBIDE CENTER LEASE THIS AMENDMENT, made as of June 30, 1994, between UNION CARBIDE CORPORATION (formerly known as UNION CARBIDE CHEMICALS AND PLASTICS COMPANY INC.), a New York corporation having offices at 39 Old Ridgebury Road, Danbury, Connecticut 06817 ("Landlord"), and PRAXAIR, INC. (formerly known as UNION CARBIDE INDUSTRIAL GASES INC.), a Delaware corporation having offices at 39 Old Ridgebury Road, Danbury Connecticut 06817 ("Tenant"), W I T N E S S E T H: WHEREAS, by Danbury Lease Agreement dated as of January 1, 1989, as modified by First Amendment of Lease dated as of June 1, 1989, Second Amendment of Lease dated as of October 24, 1990, Third Amendment to Carbide Center Lease dated as of June 4, 1992, and Fourth Amendment to Carbide Center Lease dated as of July 1, 1992 (collectively, the "Lease"), Landlord has leased to Tenant certain office space in the building known as Carbide Center, Danbury, Connecticut, as more particularly identified in the Lease (the "Demised Premises"); and WHEREAS, Landlord is the tenant of Danbury Buildings, Inc.("Overlandlord"); and WHEREAS, the parties wish to amend the lease to clarify the computation of the Base Rent and the Additional Rent; NOW, THEREFORE, in consideration of the Lease and the mutual undertakings set forth herein, Landlord and Tenant hereby amend the Lease effective as of July 1, 1992 as follows: 1. Section 1.03(a): The Base Rent, as set forth in Section 1.03(a) of the Lease, shall be modified by deleting Exhibit C-3 from the Lease and Exhibit C-4 attached hereto shall be substituted in place thereof. 2. Section 3.06(a): Section 3.06(a) shall be modified by adding the following subdivision: "(vii) costs incurred after April 30, 1994 by Landlord, after reasonable consultation with Tenant, that do not otherwise qualify hereunder as Operating Expenses and that result in, and are directly related to, a net decrease in aggregate related Operating Expenses for the Building, as reasonably justified by Landlord, at least equivalent to such costs in the year incurred or thereafter (but not to exceed twenty-four (24) months)." 3. Section 3.06: Delete subdivision (d) of Section 3.06. 4. Section 3.07: Section 3.07 of the Lease shall be modified to read as follows: "3.07 Landlord shall furnish to Tenant on or about December 15 of each year a statement setting forth (i) the estimated Operating Expenses for the forthcoming Operational Year, and (ii) Tenant's Proportionate Share of the Operating Expenses for the Operational Year (computed on the basis of such estimate). Tenant shall pay to Landlord, together with each monthly installment of Base Rent, an amount equal to one-twelfth (1/12th) of Tenant's Proportionate Share of Operating Expenses as so estimated. Landlord shall furnish to Tenant as soon as practicable following the close of each Operational Year a detailed statement setting forth with respect to such Operational Year (i) the actual amount of the Operating Expenses, and (ii) the actual amount of Tenant's Proportionate Share of Operating Expenses, adjusted to reflect the payments on account theretofore made by Tenant; and within thirty (30) days after receipt of such statement, Tenant shall pay to Landlord the amount so shown to be payable by Tenant. The Operating Expenses for any Operational Year which is only partly within the Term shall be prorated. Landlord shall refund to Tenant any overpayment of Operating Expenses for any Operational Year within thirty (30) days after presentation of Landlord's statement of actual Operating Expenses or as soon as practicable after any termination of this Lease." 5. Section 3.09: In Section 3.09 of the Lease, line 3, delete "any increase in." 6. Section 3.10 (New): The following provision shall be added to the Lease: "3.10 Landlord shall inform Tenant within a reasonable period prior to (i) adopting annual operating budgets (commencing not later than October 30 in each Operational Year), (ii) extending or executing major service agreements (viz., involving annual payments exceeding $100,000) or (iii) incurring extraordinary expenses (viz., exceeding $100,000) with respect to Operating Expenses. Such annual budgets shall be based upon reasonable, documented cost estimates." 7. Section 3.11 (New): The following provision shall be added to the Lease: "3.11 On or before November 1, 1994, Tenant shall have the right to assume or decline, for the 1995 Operational Year and the balance of the Term, responsibility for those Operating Expenses comprising Tenant Services, as identified on Schedule I attached hereto; provided, however, that (i) Tenant shall give Landlord reasonable notice of any Tenant Services work it performs in excess of $2,000.00 per job, (ii) any Tenant Services work shall conform to Building standard as to materials and workmanship, (iii) Tenant shall be liable for any damage to the Building due to such work, except to the extent of Landlord's negligence or willful misconduct, and (iv) Landlord and Tenant shall each promptly notify the other in writing of its representative with respect to all matters concerning Tenant Services. As to any safety or environmentally related items of Tenant Services, if Tenant does not perform any necessary repairs within forty-eight (48) hours after written notification from Landlord, Landlord may do so and invoice Tenant for the reasonable costs of such work. At the request of Tenant, after December 31, 1994, as to those Tenant Services for which Tenant has assumed responsibility, Landlord shall perform such Tenant Services on a project basis at a mutually agreed upon cost in each instance." 8. Section 12.03 (New): The following provision shall be added to the Lease: "12.03 Tenant shall have the right to use all telecommunications and computer wiring in the Building which now services the Demised Premises or the Linde Data Center located at 55 Old Ridgebury Road, Danbury, Connecticut (the "Linde Data Center"), to install its own telephone switching equipment for the Demised Premises and the Linde Data Center in Landlord's N-0 telephone room and to use the telecommunications cables located between (i) Old Ridgebury Road and the Linde Data Center, (ii) the Linde Data Center and the Building, and (iii) Old Ridgebury Road and the Building. Further, Tenant shall have the right to repair and replace, or cause to be repaired and replaced, any such telecommunications and computer wiring, switching equipment or cables. Landlord shall cooperate fully to permit Tenant to receive telecommunications service at the Demised Premises and the Linde Data Center." 9. Tenant hereby acknowledges that Landlord is not required by the Lease and does not intend to seek the consent of Overlandlord with respect to this Amendment. 10. Landlord shall inform Tenant in advance of any modifications of the Prime Lease with Overlandlord and Landlord shall give to Tenant a reasonable opportunity to benefit from any transaction with Overlandlord reducing Landlord's payments to Overlandlord. Tenant will take no benefit under the Lease from any decrease in Landlord's payments of Basic Rent, Additional Rent or other amounts to Overlandlord unless Tenant has contributed in a mutually agreed proportionate amount to the cost of obtaining any such decrease. As used herein, "cost" shall include all costs and expenses incurred by Landlord and related to such reductions, whether paid to Overlandlord or to others, including but not limited to, prepayments of Basic Rent or Additional Rent and payment of transaction costs such as underwriting fees, legal fees, appraisal fees, survey fees, brokers' fees, or otherwise, of any nature whatsoever, whether similar or dissimilar to the foregoing. 11. All terms which are defined in the Lease shall have the same meaning when used herein. 12. Except as otherwise provided herein, the Lease shall remain in full force and effect. IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment by their duly authorized officers as of the day and year first above written. UNION CARBIDE CORPORATION By: Robert F.X. Fusaro Attorney-in-Fact PRAXAIR, INC. By: David H. Chaifetz Vice President EXHIBIT C-4 Base Rent Period Base Rent ($/Month) 1. July 1992 $221,020.10 through December 1996 2. January 1997 through $268,909.27 December 2001 3. January 2002 through $327,213.00 December 2006 SCHEDULE I Tenant Services 1. Repair chairs/furniture 2. Jammed cabinet/desk drawers 3. Repair baseboards 4. Adjust and/or repair ceiling panels 5. Close and lost windows 6. Repair/replace carpet and floor tiles 7. Repair doors/latches for offices, closets and conference rooms 8. Repair furniture locks 9. Brushlon and vinyl repair 10. Tripping hazards 11. Missing/broken outlet covers 12. Hang pictures 13. Pendaflex frames 14. Extension cords 15. Adjust chairs 16. Relamping/no power call-lights 17. Replace sprinkler caps 18. Temperature complaints where HVAC meets Lease standard 19. Faucet leaks in K-1, K-2, M-1 and M-2 support areas 20. Restroom repairs caused by improper use of Tenant's employees EX-10.8.5 7 EXHIBIT 10.8.5 THIRD AMENDMENT TO LINDE DATA CENTER LEASE THIS AMENDMENT, made as of June 30, 1994, between UNION CARBIDE CORPORATION (formerly known as UNION CARBIDE CHEMICALS AND PLASTICS COMPANY INC.), a New York corporation having offices at 39 Old Ridgebury Road, Danbury, Connecticut 06817 ("Landlord"), and PRAXAIR, INC. (formerly known as UNION CARBIDE INDUSTRIAL GASES INC.), a Delaware corporation having offices at 39 Old Ridgebury Road, Danbury, Connecticut 06817 ("Tenant"), W I T N E S S E T H: WHEREAS, by Danbury lease Agreement dated as of January 1, 1989, as modified by First Amendment to Linde Data Center Lease (Danbury) dated as of June 4, 1992 and Second Amendment to Linde Data Center Lease (Danbury) dated as of July 1, 1992 (collectively, the "Lease"), Landlord has leased to Tenant certain office space in the building known as Linde Data Center, Danbury, Connecticut, as more particularly identified in the Lease (the "Demised Premises"); and WHEREAS, Landlord is the tenant of Danbury Buildings, Inc. ("Overlandlord"); and WHEREAS, the parties wish to amend the Lease to clarify the computation of the Base Rent and the Additional Rent; NOW, THEREFORE, in consideration of the Lease and the mutual undertakings set forth herein, Landlord and Tenant hereby amend the Lease effective as of July 1, 1992 as follows: 1. Section 3.02: In Section 3.02 of the Lease, line 5, after "Term" insert" all in accordance with section 3.07"; and delete the second sentence. 2. Section 3.07: Section 3.07 of the Lease shall be modified to read as follows: "3.07. Landlord shall furnish to Tenant on or about December 15 of each year a statement setting forth (i) the estimated Operating Expenses and Taxes for the forthcoming Operational Year, and (ii) Tenant's Proportionate Share of any increase or decrease in the total aggregate Operating Expenses and Taxes for the Operational Year (computed on the basis of such estimate) over the total aggregate Operating Expenses and Taxes for the Base Year, viz., $11.56. Tenant shall pay to Landlord, together with each monthly installment of Base Rent, an amount equal to one-twelfth (1/12th) of Tenant's Proportionate Share of any increase in Operating Expenses and Taxes as so estimated and Landlord shall issue to Tenant a monthly credit applicable against the Base Rent equal to one- twelfth (1/12th) of Tenant's Proportionate Share of any decrease in Operating Expenses and Taxes as so estimated. Landlord shall furnish to Tenant as soon as practicable following the close of each Operational Year a detailed statement setting forth with respect to such Operational Year (i) the actual amount of the Operational Expenses and Taxes, and (ii) the actual amount of Tenant's Proportionate Share of any total aggregate increase or decrease in Operating Expenses and Taxes, adjusted to reflect the payments on account theretofore made by Tenant or credits received from Landlord; and within thirty (30) days after receipt of such statement, Tenant shall pay to Landlord the amount so shown to be payable by Tenant. The Operating Expenses for any Operational Year which is only partly within the Term shall be prorated. Landlord shall refund to Tenant any overpayment of Operating Expenses and taxes for any Operational Year within thirty (30) days after presentation of Landlord's statement of actual Operating Expenses and Taxes or as soon as practicable after any termination of this Lease. As of August 1 of each Operational Year, Landlord shall deliver to Tenant an estimate of Operating Expenses and Taxes paid or incurred through June 30 of such Operational Year." 3. Section 3.11: Section 3.11 of the Lease shall be modified to read as follows: "3.11. On or before November 1 of any year, Tenant shall have the right to assume or decline, for the next succeeding Operational Year, responsibility for the following categories of Operating Expenses: cleaning services, in-building security, and such other categories as may be mutually agreed upon by the parties. Tenant shall conform to reasonable standards in performing any such work." Landlord and Tenant hereby acknowledge that (i) for the 1994 Operational Year, Tenant has duly assumed responsibility for cleaning and in-building security (as of August 1, 1994); (ii) administration expenses shall consist only of costs of administering the Prime Lease and Superior Mortgages as to the Building, Building maintenance and repairs, and Danbury Operating Emergency Center activities to the Building; and (iii) Landlord shall have the right from time to time to audit Tenant's cleaning activities at the Demised Premises against reasonable standards. 4. Section 3.12: Delete Section 3.12 from the Lease. 5. Section 12.03 (New): The following provision shall be added to the Lease: "12.03. Tenant shall have the right to use all telecommunications and computer wiring in the Building which now services the Demised Premises, to install its own telephone switching equipment for the Demised Premises in Landlord's N-O telephone room in the Corporate Center located at 39 Old Ridgebury Road, Danbury, Connecticut (the "Corporate Center"), and to use the telecommunications cables located between (i) Old Ridgebury Road and the Demised Premises, (ii) the Demised Premises and the Corporate Center, and (iii) the Corporate Center and Old Ridgebury Road. Further, Tenant shall have the right to repair and replace, or cause to be repaired and replaced, any such telecommunications and computer wiring, switching equipment or cables. Landlord shall cooperate fully to permit Tenant to receive telecommunications service at the Demised Premises." 6. Tenant hereby acknowledges that Landlord is not required by the Lease and does not intend to seek the consent of Overlandlord with respect to this Amendment. 7. Landlord shall inform Tenant in advance of any modifications of the Prime Lease with Overlandlord and Landlord shall give to Tenant a reasonable opportunity to benefit from any transaction with Overlandlord reducing Landlord's payments to Overlandlord. Tenant will take no benefit under the Lease from any decrease in Landlord's payments of Basic Rent, Additional Rent or other amounts to Overlandlord unless Tenant has contributed in a mutually agreed proportionate amount to the cost of obtaining any such decrease. As used herein, "cost" shall include all costs and expenses incurred by Landlord and related to such reductions, whether paid to Overlandlord or to others, including but not limited to, prepayments of Basic Rent or Additional Rent and payment of transaction costs such as underwriting fees, legal fees, appraisal fees, survey fees, brokers' fees, or otherwise, of any nature whatsoever, whether similar or dissimilar to the foregoing. 8. All terms which are defined in the Lease shall have the same meaning when used herein. 9. Except as otherwise provided herein, the Lease shall remain in full force and effect. IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment by their duly authorized officers as of the day and year first above written. UNION CARBIDE CORPORATION By: Robert F.X. Fusaro Attorney-in-Fact PRAXAIR, INC. By: David H. Chaifetz Vice President EX-10.9.2 8 EXHIBIT 10.9.2 TAX SETTLEMENT AGREEMENT AGREEMENT made May 31, 1994 among Union Carbide Corporation, a New York corporation ("Union Carbide") with offices at 39 Old Ridgebury Road, Danbury, Connecticut 06817, and Praxair, Inc., a Delaware corporation ("Praxair"), with offices at 39 Old Ridgebury Road, Danbury, Connecticut 06817, W I T N E S S E T H: WHEREAS, Union Carbide spun-off its industrial gases and coatings service businesses to its shareholders on June 30, 1992 by distributing the shares of Praxair to such shareholders; WHEREAS, Union Carbide and Praxair each have a number of tax claims and open items relating to the spin-off; WHEREAS, Union Carbide and Praxair hereby agree to resolve the tax issues as set forth below; NOW, THEREFORE, for and in consideration of the mutual covenants and agreements hereinafter set forth, the parties hereby agree as follows: 1. Reference is made to the Tax Disaffiliation Agreement dated as of June 4, 1992 between Union Carbide and Praxair ("TDA"). (a) Praxair acknowledges its liability under the TDA and agrees to pay Union Carbide $6,495,624 representing Praxair's share of federal income taxes for the short taxable period January 1, 1992 through June 30, 1992. (b) This is to clarify that Section 1.04 "Business of Gases" includes assets or liabilities transferred to Praxair pursuant to the Transfer Agreement. In particular, Praxair acknowledges its liability under Section 2.02(a)(v) of the TDA for any sales, use or similar transfer taxes imposed by a taxing jurisdiction in California or any other taxing jurisdiction outside California in connection with the transfer of the assets and liabilities pursuant to the Transfer Agreement. Capitalized terms used herein without definition shall have the meanings ascribed to them in the TDA. (c) Pursuant to Section 2.02(a)(i)(A) and Section 2.02(a)(ii) of the TDA, Praxair is liable to Union Carbide for any unintentional erroneous exclusion of income for periods prior to July 1, 1992. Praxair inadvertently omitted income for the year 1991 on the sale of the assets of Linde Gases of the Great Lakes, Inc. and Linde Gases of the Mid-Atlantic, Inc. resulting in additional federal income tax in the amount of $5,607,163. The TDA does not specifically provide for a payment of a tax audit issue prior to the time of a Final Determination as defined in the TDA. In order to stop the running of interest on the $5,607,163 owed to Union Carbide, Praxair will pay Union Carbide $5,607,163 plus interest at 7% i.e. $938,036 for a total of $6,545,199 (plus $1,241 interest per day for any period after May 31, 1994 for which the sum of $6,545,199 remains unpaid). Union Carbide hereby waives and shall hold Praxair harmless for any additional interest (other than interest stated in the preceding sentence) that may otherwise become due under the TDA on the amount of $5,607,163 owed to the Internal Revenue Service for federal income taxes on the sale of Linde Gases of the Great Lakes, Inc. and Linde Gases of the Mid-Atlantic, Inc. State and local income taxes (and interest and penalties if any,) for which Praxair acknowledges liability to Union Carbide under Section 2.02(a)(ii) of the TDA, shall be computed and paid to Union Carbide at the time of a Final Determination of such liability. For this purpose, a Final Determination will occur when the federal revenue agent's report (RAR) results in a state and local income tax assessment against Union Carbide. (d) Section 9.01 of the TDA , Deduction for Employee Stock Options, 3rd sentence shall be amended to read as follows: "...The amount of the decrease in the cumulative income taxes actually paid by a party shall equal the difference, if any, between (a) the income tax liability of the party determined without regard to any deduction claimed or income realized with respect to the transfer or exercise of the stock option and (b) the actual income tax liability of the party." 2. Reference is made to the Transfer Agreement as defined in the TDA. Although the Transfer Agreement is unclear because Praxair is referred to as the "Transferee", Union Carbide acknowledges its liability within the spirit of the Transfer Agreement for the Stock Exchange Transfer Tax for the transfer of Union Carbide Chemicals (Deutschland) GmbH and Union Carbide Metals GmbH. The aggregate tax liability for the transfer of shares of both companies is $23,410 which Union Carbide hereby agrees to pay Praxair. 3. A credit memorandum of $3,400,000 will be issued to Praxair by Union Carbide representing the tax accrual for the 8% tax imposed on Electric Furnace Products Company (EFP) for undistributed profits of S.A. White Martins (SAWM) for which Praxair is liable and for which Union Carbide received the $3,400,000 tax accrual. The $3,400,000 credit memorandum is to reverse the inadvertent error. 4. Praxair acknowledges liability for and hereby agrees to pay Union Carbide $67,000 for Connecticut Sales taxes in connection with services provided to Praxair by Union Carbide Chemicals and Plastics Company Inc. ("UCC&P") during the period July 1, 1992 and September 30, 1993 pursuant to the Bridging Services Agreement among Union Carbide, UCC&P, Praxair and Praxair Surface Technologies Inc.("PST") dated June 4, 1992, the Services Agreement between Union Carbide, UCC&P, Praxair and PST dated June 4, 1992 and the Aviation Services Agreement between Union Carbide and Praxair dated June 10, 1992. IN WITNESSETH WHEREOF, the parties have executed this Agreement as of the date first set forth above. UNION CARBIDE CORPORATION By: Robert F.X. Fusaro Title: Attorney-in-Fact PRAXAIR, INC. By: David H. Chaifetz Title: General Counsel EX-10.10.2 9 EXHIBIT 10.10.2 FIRST AMENDATORY AGREEMENT TO THE EMPLOYEE BENEFITS AGREEMENT This Amendatory Agreement, dated as of May 31, 1994, between Union Carbide Corporation ("UCC") and Praxair, Inc. (formerly Union Carbide Industrial Gases Inc.) ("Praxair") amends the Employee Benefits Agreement between the same parties dated as of June 4, 1992 ("Employee Benefits Agreement"). All capitalized terms in this Agreement, unless otherwise defined herein, shall have the same meaning as set forth in the Employee Benefits Agreement. W I T N E S S E T H: WHEREAS, UCC and Praxair are parties to the Employee Benefits Agreement, which was intended, inter alia, to establish a system of payments and reimbursements between the parties with respect to employee benefit matters arising out of the spinoff of Praxair (formerly a wholly owned subsidiary of UCC) to UCC's shareholders; and WHEREAS, UCC and Praxair wish to settle the transfer of assets between their respective defined benefit plans as provided in Paragraph 1 below; and WHEREAS, UCC and Praxair desire to revise certain provisions of the Employee Benefits Agreement for simplification purposes and have determined that the best way to achieve such simplification is for each party to give up the right to certain payments under the Employee Benefits Agreement in amounts which are intended to be, to the extent possible, economically neutral, as provided in Paragraphs 2 to 5 below. NOW, THEREFORE, in consideration of the mutual premises and covenants contained herein, UCC and Praxair agree as follows: 1. In final satisfaction of all obligations with respect to the transfer of assets between the parties' qualified defined benefit plans, Two Million Dollars ($2,000,000.00) shall be transferred in cash or securities from the trust for Praxair's Retirement Plan to the trust for UCC's Retirement Plan ten days after the date of this Agreement. 2. With respect to Paragraph 6 of the Employee Benefits Agreement: (a) A book reserve is maintained under UCC's retire medical plan for claims incurred but unpaid (as of June 30, 1992). The Praxair portion (29%) of such reserve is fixed at Three Million Seven Hundred Thousand Dollars ($3,700,000.00). This amount shall be applied to Praxair's obligations for retiree medical claims. Praxair's obligation to reimburse UCC for retiree medical claims will commence only when such reserve amount has been exhausted. (b) There are reserves at Metropolitan Life for Basic Life Plan claims for deaths before the Spinoff Date and for employees who were disabled before 1986 and die before attaining age 65. Settlement of these claims shall be entirely for UCC's account. Thus, UCC will be entitled to the positive or negative experience of such reserves after payment of such claims. Praxair shall have no responsibility for, or rights in, such reserves and shall have no liability with respect to such claims. (c) The Consumer Products reserve credit adjustment, and the value of Kemet reimbursements, for retiree life and medical benefits shall be eliminated from all calculations under the Employee Benefits Agreement. (d) Internal and external administrative costs for retiree life and medical shall be 7.5% of gross claims paid. (e) The value of UCAR reimbursement is eliminated from all calculations under retiree life and medical and, in exchange, Praxair's reimbursement obligations is changed from twenty-nine percent (29%) to twenty-seven and four one-hundredths percent (27.04%). In keeping with UCC's past practice for charging businesses for expenses before the Spinoff Date, if UCAR defaults on its payment obligation to UCC, and UCC is not otherwise compensated with respect to such default, Praxair's obligation will revert to twenty-nine percent (29%) during the period of any such default. Should UCC subsequently be reimbursed by UCAR with respect to such defaulted amount, Praxair will share in such reimbursement to the extent necessary to restore it to its 27.04% contribution level. 3. Paragraph 8 of the Employee Benefits Agreement is expanded to provide that from and after the Spinoff Date, Praxair will be entitled to twenty-nine percent (29%) of any recovery, whether by successful claim or settlement, made by the UCC Retirement Plan arising from events which occurred before the Spinoff Date, excluding any recovery in the Aqua Culture investment which was retained in UCC's Retirement Plan after the Spinoff. The calculation of any such recovery will be net of expenses, including legal fees, incurred in pursuing such claims. For purposes of Paragraph 8 of the Employee Benefits Agreement, the American Typlax settlement is expressly included in claims against the UCC Retirement Plan for which Praxair has a contribution obligation. 4. With respect to Paragraph 22 of the Employee Benefits Agreement: (a) The administrative cost of UCC's pension operations is excluded from all calculations of Praxair's reimbursement obligations. (b) Praxair's annual reimbursement obligation for administrative services other than pension operations shall be the lesser of (i) fourteen and one-half percent (14.5%) of UCC's cost, or (ii) one-hundred thousand dollars ($100,000.00). 5. All the above provisions are effective as of the Spinoff Date, as if included in the Employee Benefits Agreement, and any contrary or inconsistent provision in the Employee Benefits Agreement is hereby superceded. 6. In the event of national health care legislation which would substantially change the rights of the parties under the Employee Benefits Agreement and this Amendatory Agreement, the parties agree to re-negotiate the provisions of this Amendatory Agreement to the extent necessary to achieve an equitable arrangement which comports with the intent of the Employee Benefits Agreement and this Amendatory Agreement. 7. All bills rendered and paid to date under the Employee Benefits Agreement will be adjusted to comport with this Amendatory Agreement. 8. The parties believe that Exhibit A hereto is an accurate representation of the financial impact of the terms of this Amendatory Agreement for the period July 1, 1992 through December 31, 1993, but reserve the right to subject to contents of such Exhibit A to the review and audit procedures described in Paragraph 28 of the Employee Benefits Agreement. IN WITNESS WHEREOF, the parties have duly executed and entered into this Agreement, as of the date first above written. UNION CARBIDE CORPORATION By:____Robert F.X. Fusaro Name:__Robert F.X. Fusaro Title: Attorney-in-Fact__ PRAXAIR, INC. By:____David H. Chaifetz_ Name:__David H. Chaifetz_ Title:_General Counsel___ UCC will furnish to the Commission supplementally on request a copy of Exhibit A (financial impact of terms of this Amendatory Agreement for the period July 1, 1992 through December 31, 1993) which has been omitted. EX-10.11.2 10 EXHIBIT 10.11.2 FIRST AMENDMENT TO DANBURY LEASE-RELATED SERVICES AGREEMENT THIS AMENDMENT, made as of June 30, 1994, between UNION CARBIDE CORPORATION (formerly known as UNION CARBIDE CHEMICALS AND PLASTICS COMPANY INC.), a New York corporation having offices at 39 Old Ridgebury Road, Danbury, Connecticut 06810 ("UCC"), and PRAXAIR, INC. (formerly known as UNION CARBIDE INDUSTRIAL GASES INC.), a Delaware corporation having offices at 39 Old Ridgebury Road, Danbury, Connecticut 06817 ("Praxair"), W I T N E S S E T H: WHEREAS, by Danbury Lease Agreement dated as of January 1, 1989, as modified by First Amendment of Lease dated as of June 1, 1989, Second Amendment of Lease dated as of October 24, 1990, Third Amendment to Carbide Center Lease dated as of June 4, 1992, Fourth Amendment to Carbide Center Lease dated as of July 1, 1992 and Fifth Amendment to Carbide Center Lease of even date herewith (collectively, the "Lease"), UCC has leased to Praxair certain office space in the building known as Carbide Center, Danbury, Connecticut, as more particularly identified in the Lease (the "Demised Premises") for the lease period stated therein ("Lease Period"); and WHEREAS, pursuant to the Danbury Lease-Related Services Agreement dated as of June 4, 1992 (the "DLRS"), UCC furnishes to Praxair certain services as more particularly identified therein (the "Services"); and WHEREAS, the parties wish to amend the DLRS to add certain additional Services; NOW, THEREFORE, in consideration of the DLRS and the mutual undertakings set forth herein, UCC and Praxair hereby amend Annex A of the DLRS, as follows: 1. Part II of Annex A shall be amended effective as of August 1, 1994, so that the provisions concerning Mailroom Services shall read as follows: (a) Mailroom Services shall consist of the following: non-exclusive right to use N-O mailroom and loading dock area of the Carbide Center between 7 a.m. and 5 p.m., Monday through Friday, except building holidays, for shipments and deliveries of mail and packages via United States Postal Service and commercial courier services. (b) The Fee for Mailroom Services included in the CCSA Services shall equal the following amount with respect to each MS Period (as defined below): 1.3 (8504 dL x CCL _________ 1,198,380 where: d = number of days in such MS Period divided by 365 L = UCIG Lease Rate during such MS Period CCL: = space leased by Praxair under the Lease (currently 106,816 square feet) during such MS Period An "MS Period" shall begin on the day following the end of the previous MS Period (except for the first MS Period, which shall begin on August 1, 1994) and shall end on any day on which the value of L changes. The Fee for the MS Services shall be payable on each day on which, and by the same payment mechanism as that by which, an installment of Base Rent is payable under the Lease. Through December 31, 1997, the following monthly charges shall be added to the Fee and payable in the following amounts during the respective calendar years as set forth below: Period Monthly Charges 1994 $3,333.33 1995 $2,500.00 1996 $1,666.66 1997 $ 833.33 2. Effective July 1, 1994, Part VI as set forth below shall be added to Annex A: Part VI - Medical and Fitness Center Allowance Services Provided ("MF Services"). Personnel of Praxair and its subsidiaries and affiliates shall have the right to use the Medical Department located in P2 of Carbide Center (consisting of 6,150 square feet) and the Fitness Center located in N-0 (Basement) of Carbide Center (consisting of 12,941 square feet), subject to execution of a suitable agreement with any third party provider operating either such facility or UCC&P, if it operates either facility. Fee. In addition to any amounts payable to the provider of medical or fitness services, the Fee for the MF Services shall equal the following amount with respect to each MF Period (as defined below): [6,150 + .4 (12,941)] dL X CCL + SA _________ 1,198,380 where: d = number of days in such MF Period divided by 365 L = UCIG Lease Rate during such MF Period CCL = space leased by Praxair under the Lease (currently 106,816 square feet) during such MF Period SA = effective area of the Carbide Center space for which Praxair is liable to pay Fees under Parts I through V of this Annex A excluding the mailroom/ loading dock area (currently 66,016 square feet) during such MF Period An "MF Period" shall begin on the day following the end of the previous MF Period (except for the first MF Period, which shall begin on July 1, 1994) and shall end on any day on which the value of L changes. The Fee for the MF Services shall be payable on each day on which, and by the same payment mechanism as that by which, an installment of Base Rent is payable under the Lease. 3. Except as otherwise provided herein, the DLRS shall remain in full force and effect. IN WITNESS WHEREOF, UCC and Praxair have executed this Amendment by their duly authorized officers as of the day and year first above written. UNION CARBIDE CORPORATION By: Robert F.X. Fusaro Attorney-in-Fact PRAXAIR, INC. By: David H. Chaifetz Vice President EX-10.13.4 11 Exhibit 10.13.4 THIRD AMENDMENT TO THE 1984 UNION CARBIDE STOCK OPTION PLAN The 1984 Union Carbide Stock Option Plan (the "Plan") is hereby amended as follows: 1. The second sentence of the second paragraph of Section 5.4 of the Plan is hereby amended to read as follows: "In the case of a participant's death, an option may be exercised at any time during the remaining term of the option, and, in the case of a participant's termination of employment other than for cause under subclause (iii) of the previous sentence, an option may be exercised only within three years after such termination." 2. Section 9.1 of the Plan is amended by adding the following at the end thereof: "Provided, however, that the Share Exchange provided for in the Plan of Exchange with UCC Holdings, Inc., shall not be considered a Change in Control for the purposes of this Plan." 3. The amendments set forth herein shall be effective June 1, 1989. Signed this 9th day of August, 1989. UNION CARBIDE CORPORATION By: M.A. Kessinger Attest: EX-10.14.2 12 Exhibit 10.14.2 FIRST AMENDMENT TO THE 1988 UNION CARBIDE LONG-TERM INCENTIVE PLAN The 1988 Union Carbide Long-Term Incentive Plan (the "Plan") is hereby amended as follows: 1. The second paragraph of Section 5.3 of the Plan is hereby amended by substituting the following for the first sentence thereof: "An option is only exercisable by a participant while the participant is in active employment with the Corporation except (i) in the case of a participant's death or Retirement, (ii) during a three-year period commencing on the date of a participant's termination of employment by the Corporation other than for cause, but only to the extent permitted under Section 5.5, (iii) during a three-year period commencing on the date of termination, by the participant or the Corporation, of employment after a change in Control of the Corporation unless such termination of employment is for cause, but only to the extent permitted under Section 5.5, or (iv) if the Committee decides that it is in the best interest of the Corporation to permit individual exceptions." 2. Section 11.1 of the Plan is amended by adding the following at the end thereof: "Provided, however, that the Share Exchange provided for in the Plan of exchange with UCC Holdings, Inc., shall not be considered a Change of Control for the purposes of this Plan." 3. The amendments set forth herein shall be effective as of June 1 1989. Signed this 9th day of August, 1989. UNION CARBIDE CORPORATION By: M.A. Kessinger Attest: EX-10.14.3 13 Exhibit 10.14.3 SECOND AMENDMENT TO THE 1988 UNION CARBIDE LONG-TERM INCENTIVE PLAN The 1988 Union Carbide Long-Term Incentive Plan (the "Plan") is hereby amended as follows: 1. The first paragraph of Section 5.3 of the Plan is hereby amended by deleting the phrase ", but only to the extent permitted under Section 5.5" at the end thereof. 2. The second paragraph of Section 5.3 of the Plan is hereby amended to read as follows: "An option is only exercisable by a participant while the participant is in active employment with the Corporation except (i) in the case of a participant's death or Retirement, (ii) during a three-year period commencing on the date of a participant's termination of employment by the Corporation other than for cause, (iii) during a three-year period commencing on the date of termination, by the participant or the Corporation, of employment after a Change in Control of the Corporation, unless such termination of employment is for cause, or (iv) if the Committee decides that it is in the best interest of the Corporation to permit individual exceptions. An option may not be exercised pursuant to this paragraph after the expiration date of the option." 3. Section 5.5 of the Plan is hereby deleted, and Sections 5.6 through 5.8 are hereby redesignated as Sections 5.5 through 5.7, respectively. 4. Section 6.4 of the Plan is hereby amended by deleting the last sentence thereof. 5. Section 11.1(ii) of the Plan is hereby amended by substituting "20%" for "35%" whenever "35%" appears therein. 6. Section 11.7 of the Plan is hereby amended by deleting the last sentence thereof, and by substituting "20%" for "35%" whenever "35%" appears therein. 7. The amendments set forth herein shall be effective as of August 1, 1989. Signed this 9th day of August, 1989. UNION CARBIDE CORPORATION By: M.A. Kessinger Attest: EX-10.18.2 14 Exhibit 10.18.2 AMENDMENT TO THE EQUALIZATION BENEFIT PLAN FOR PARTICIPANTS OF THE RETIREMENT PROGRAM PLAN FOR EMPLOYEES OF UNION CARBIDE CORPORATION AND ITS PARTICIPATING SUBSIDIARY COMPANIES The Equalization Benefit Plan for Participants of the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies (the "Plan") is hereby amended as follows: 1. The following is added after the first sentence in the first paragraph of Article II of the Plan: "Notwithstanding the preceding sentence, for employees retiring after January 1, 1994, such employees may elect, in the calendar year in which the last amounts included in average monthly compensation are determined, that their payments under the Plan shall be made either (i) in a lump sum as of January 1 of the calendar year following such election, or (ii) in substantially equal installments over a period of at least 2 but not more than 5 years commencing as of that date. The lump sum payment or installment payments described in the preceding sentence shall be calculated using (A) a discount rate equal to the average of 10 and 20 year Aaa municipal bonds as published by Moody's or a similar rating service for the third month prior to the month payments commence, and (B) a mortality table determined by the administrative committee for the Plan. The administrative committee shall determine the procedures for such elections and the time and method of payment for payments in accordance with the preceding two sentences." 2. The amendment set forth herein shall be effective as of January 1, 1994. UNION CARBIDE CORPORATION By: M.A. Kessinger EX-10.19.3 15 Exhibit 10.19.3 THIRD AMENDMENT TO THE UNION CARBIDE CORPORATION SUPPLEMENTAL RETIREMENT INCOME PLAN The Union Carbide Corporation Supplemental Retirement Income Plan (the "Plan") is hereby amended as follows: 1. A new Section 5 is hereby added to Article IV of the Plan to read as follows: "Section 5. Notwithstanding the provisions of Section 1 of this Article IV, for employees retiring after January 1, 1994, such employees may elect, in the calendar year in which the last amounts included in average monthly compensation are determined, that their payments under the Plan shall be made either (i) in a lump sum as of January 1 of the calendar year following such election, or (ii) in substantially equal installments over a period of at least 2 but not more than 5 years commencing as of that date. The lump sum payment or installment payments described in the preceding sentence shall be calculated using (A) a discount rate equal to the average of 10 and 20 year Aaa municipal bonds as published by Moody's or a similar rating service for the third month prior to the month payments commence, and (B) a mortality table determined by the administrative committee for the Plan. The administrative committee shall determine the procedures for such elections and the time and method of payment for payments in accordance with this Section 5. For eligible employees who make the election described in this Section 5, the provisions of Sections 1, 2 and 3 of this Article IV shall not apply." 2. The amendment set forth herein shall be effective as of January 1, 1994. UNION CARBIDE CORPORATION By: M.A. Kessinger EX-10.21.1 16 EXHIBIT 10.21.1 July 21, 1992 Mr. R. Van Mynen P2-607 Dear Ron: The Board of Directors (the "Board") of Union Carbide Corporation (the "Corporation") recognizes that the possibility of a change in control of the Corporation exists, as is the case with many publicly held corporations, and the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Corporation and its stockholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation's management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from a possible change in control of the Corporation. The Board has also determined that it is in the best interests of the Corporation and its stockholders to ensure your continued availability to the Corporation in the event of a potential change in control of the Corporation. In order to induce you to remain in the employ of the Corporation and in consideration of your agreement set forth in Paragraph 2 hereof, the Corporation agrees that you shall receive the severance benefits set forth in this letter agreement ("Agreement") in the event your employment with the Corporation is terminated subsequent to a change in control under the circumstances described below. 1. Definitions. a. "Change in Control" of the Corporation shall be deemed to occur if any of the following circumstances shall occur: (i) if a change in control of the Corporation would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Act"), whether or not the Corporation is then subject to such reporting requirement; (ii) there shall be consummated (x) any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Corporation's Common Stock would be converted into cash, securities or other property, other than a merger of the Corporation in which the holders of the Corporation's Common Stock immediately prior to the merger have the same proportion and ownership of common stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation, provided, that the divestiture of less than substantially all of the assets of the Corporation in one transaction or a series of related transactions, whether effected by sale, lease, exchange, spin-off, sale of the stock or merger of a subsidiary or otherwise, shall not constitute a Change in Control; (iii) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Act (x) becomes the "beneficial owner" as defined in Rule 13d-3 under the Act of more than 20% of the then outstanding voting securities of the Corporation, otherwise than through a transaction or transactions arranged by, or consummated with the prior approval of, the Board, or (y) acquires by proxy or otherwise the right to vote for the election of directors, for any merger or consolidation of the Corporation or for any other matter or question more than 20% of the then outstanding voting securities of the Corporation, otherwise than through an arrangement or arrangements consummated with the prior approval of the Board; (iv) if during any period of twenty-four consecutive months (not including any period prior to the date of this Agreement), Present Directors and/or New Directors cease for any reason to constitute a majority of the Board. For purposes of the preceding sentence, "Present Directors" shall mean individuals who at the beginning of such consecutive twenty-four month period were members of the Board and "New Directors" shall mean any director whose election by the Board or whose nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the Directors then still in office who were Present Directors or New Directors. b. "Date of Termination" shall mean: (i) in case employment is terminated for Total Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full- time performance of your duties during such thirty (30) day period), and (ii) in all other cases, the date specified in the Notice of Termination (which shall not be less than thirty (30) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given), (iii) provided that if within thirty (30) days after any Notice of Termination is given, the party receiving the Notice advises the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally resolved, either by mutual written agreement of the parties, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or the time for appeal therefrom having expired and no appeal having been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. c. "Total Disability" shall mean total and permanent physical or mental disability to perform any work for compensation in any occupation or position. Any question as to the existence of your Total Disability upon which you and the Corporation cannot agree shall be determined by a qualified physician not employed by the Corporation and selected by you (or, if you are unable to make such selection, it shall be made by any adult member of your immediate family), and approved by the Corporation. The determination of such physician made in writing to the Corporation and to you shall be final and conclusive for all purposes of this Agreement. d. "Good Reason for Resignation" shall mean, without your express written consent, any of the following: (i) a change in your status or position with the Corporation which in your reasonable judgment does not represent a promotion from your status or position immediately prior to the Change in Control, or the assignment to you of any duties or responsibilities which in your reasonable judgment are inconsistent with your status as an employee of the Corporation in effect immediately prior to the Change in Control, it being understood that any of the foregoing in connection with termination of your employment for Cause, Retirement, or Total Disability shall not constitute Good Reason for Resignation; (ii) a reduction by the Corporation in the annual rate of your base salary as in effect immediately prior to the date of a Change of Control or as the same may be increased from time to time thereafter, or the Corporation's failure to increase the annual rate of your base salary in an amount at least equal to the average percentage increase in base salary for all officers of the Corporation in the preceding 12 months; (iii) the relocation of the Corporation's principal executive offices to a location more than thirty-five miles from Danbury, Connecticut or the Corporation's requiring you to be based anywhere other than the Corporation's principal executive offices (or, if you were not based at the Corporation's principal executive offices immediately prior to a Change in Control, the Corporation's requiring you to be based anywhere other than where your office is located immediately prior to such Change in Control) except for required travel on the Corporation's business to an extent substantially consistent with your business travel obligations immediately prior to a Change in Control; (iv) the failure by the Corporation to continue in effect any compensation plan in which you participate as in effect immediately prior to the Change in Control, including but not limited to the Retirement Program, the Savings Program and the Incentive Compensation Plans, or any substitute plans adopted prior to the Change in Control, unless an arrangement satisfactory to you (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Corporation to continue your participation therein on at least as favorable a basis, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed immediately prior to the Change in Control; (v) the failure by the Corporation to continue to provide you with benefits at least as favorable as those enjoyed by you under any of the Corporation's pre-retirement and post-retirement life insurance, medical, health and accident, and disability plans or any other plan, program or policy of the Corporation intended to benefit employees in which you were participating immediately prior to the Change in Control, the taking of any action by the Corporation which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you immediately prior to the Change in Control, or the failure by the Corporation to provide you with the number of annual paid vacation days to which you were annually entitled immediately prior to the Change in Control; (vi) the failure of the Corporation to obtain a satisfactory agreement from any Successor (as defined in Paragraph 5a hereof) to assume and agree to perform this Agreement, as contemplated in Paragraph 5a hereof; or (vii) any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements hereof; for purposes of this Agreement, no such purported termination shall be effective for any purpose except to constitute a Good Reason for Resignation. e. "Incentive Compensation Plans" shall mean: (i) the 1989 Bonus Plan (ii) the 1988 Long-Term Incentive Plan (iii) the 1984 UCC Cash Bonus Plan (iv) the 1983 UCC Bonus Deferral Program (v) the 1984 UCC Bonus Deferral Plan (vi) the 1984 UCC Stock Option Plan (vii) the 1979 UCC Incentive Compensation Plan, and (viii) dividend equivalents under the 1959 UCC Incentive Plan f. "Potential Change in Control of the Corporation" shall be deemed to have occurred if: (i) the Corporation enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (ii) any person (including any individual, corporation, partnership, group, association or other "person", as such term is used in Section 14(d) of the Act, including the Corporation) publicly announces an intention to take actions which if consummated would constitute a Change in Control; (iii) any person as defined above becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing 9.5 percent or more of the combined voting power of the Corporation's then outstanding securities; or (iv) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Corporation has occurred. g. "Notice of Termination" shall mean a written notice as provided in Paragraph 9 hereof. h. "Retirement" shall mean (1) voluntary retirement before your mandatory retirement age with an immediate, nonactuarially- reduced pension under the Corporation's Retirement Program (termination of your employment by you before your mandatory retirement age with Good Reason for Resignation shall not be deemed a Retirement for purposes of this Agreement even though you are eligible for and elect to receive an immediate, nonactuarially-reduced pension under the Corporation's Retirement Program) or (2) termination in accordance with any retirement arrangement other than under the Corporation's Retirement Program, which is established with your consent with respect to you or (3) mandatory retirement under the Corporation's Retirement Program. i. "Retirement Program" shall mean: (i) the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiaries; (ii) the Equalization Benefit Plan for Participants of The Retirement Program Plan; and (iii) the Supplemental Retirement Income Plan. j. "Savings Program" shall mean: (i) the Savings Plan for Employees of Union Carbide Corporation and Participating Subsidiary Companies; and (ii) the 401(k) Opportunity Plan for Salaried Employees of Union Carbide Corporation. k. "Termination for Cause" shall mean termination of your employment upon: (i) your willful and continued failure to substantially perform your duties with the Corporation (other than any such failure resulting from your Total Disability or any such actual or anticipated failure resulting from your resignation with Good Reason for Resignation) after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (ii) your willfully engaging in conduct demonstrably and materially injurious to the Corporation, monetarily or otherwise, but only so long as there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth and specifying the particulars thereof in detail. For purposes of this Paragraph 1k, no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Corporation. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Corporation shall be conclusively presumed to be done or omitted to be done by you in good faith and in the best interests of the Corporation. 2. Agreement to Remain Employed. You agree that, subject to the terms and conditions of this Agreement, you will remain in the employ of the Corporation and continue to render the services contemplated in the recitals to this Agreement (except for Total Disability or Retirement or resignation with Good Reason for Resignation) for a period of six (6) months from the date of this Agreement. If a Potential Change in Control of the Corporation occurs during the term of this Agreement, you will remain in the employ of the Corporation and continue to render such services for a period of six (6) months after the occurrence of each such Potential Change in Control of the Corporation occurring prior to the occurrence of a Change in Control. 3. Compensation Upon Termination or While Disabled. Following a Change in Control of the Corporation you shall be entitled to the following benefits: a. Termination Other Than for Cause, Retirement, Death or Total Disability; Termination By Your Resignation with Good Reason for Resignation. If your employment by the Corporation shall be terminated subsequent to the Change in Control and during the term of this Agreement (a) by the Corporation other than for Cause, Retirement, Death or Disability or (b) by you for Good Reason for Resignation, then you shall be entitled to the benefits provided below, without regard to any contrary provision of any plan: (i) Accrued Salary. The Corporation shall pay you, in a lump sum in cash, not later than the fifth day following the Date of Termination your full base salary and vacation pay accrued through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or at the rate in effect immediately prior to a Change in Control, if such amounts were higher). (ii) Accrued Incentive Compensation. If the Date of Termination is after a Bonus Year, but before Incentive Compensation for said Bonus Year has been paid, the Corporation shall pay you as Incentive Compensation for that Bonus Year, the greater of (x) the amount of Incentive Compensation awarded or determined to be awarded to you by the Board for that Bonus Year, or (y) an amount that bears the same ratio to your total base salary in said Bonus Year as the total of all Incentive Compensation paid to participants in the Incentive Compensation Program for said Bonus Year bears to the total of all base salaries paid to said participants in said Bonus Year, such payment to you to be made at the same time the Corporation pays Incentive Compensation for said Bonus Year under the applicable Incentive Compensation Program. In addition, if the Date of Termination is other than the first day of a Bonus Year, the Corporation shall pay you, as Incentive Compensation for the Bonus Year in which the Date of Termination occurs, the greater of (x) the amount of incentive compensation awarded or determined to be awarded to you by the Board for that Bonus Year, or (y) an amount that bears the same ratio to your total base salary in said Bonus Year as the total of all Incentive Compensation paid to participants in the Incentive Program for said Bonus Year bears to the total of all base salaries paid to said participants in said Bonus Year, such payment to you to be made at the same time the Corporation pays Incentive Compensation for said Bonus Year under the applicable Incentive Compensation Program. If there is more than one Incentive Compensation Program, your accrued Incentive Compensation under each Program shall be determined individually for that Program. For the purpose of this Paragraph 3(a)(ii), "Incentive Compensation Program" means any of the Incentive Compensation Plans defined in Paragraph 1e and any other plan or program for the payment of incentive compensation, bonus, benefits or awards for which you were, or your position was, eligible to participate; "Incentive Compensation" means any compensation, bonus, benefit or award paid or payable under an Incentive Compensation Program; "Bonus Year" means a calendar year of an Incentive Compensation Program, and "Board" means the Board of Directors of the Corporation, any committee of the Board of Directors or any person or group designated by the Board of Directors to determine the amount of Incentive Compensation payable under an Incentive Compensation Program. (iii) Insurance Coverage. The Corporation shall arrange to provide you with life, disability, accident and health insurance benefits substantially similar to those which you are receiving or entitled to receive immediately prior to the Change in Control of the Corporation. Such insurance benefits shall be provided to you for the longer of (x) twenty-four (24) months after such Date of Termination or (y) the period during which such insurance benefits would have been provided to you under the applicable life insurance, medical, health and accident and disability insurance plans of the Corporation in effect immediately prior to the Change in Control of the Corporation. (iv) Retirement Benefits. The Corporation shall pay you, at the time you are entitled to be paid a retirement pension under the Retirement Program, a retirement pension equal to the greater of (x) an amount computed in accordance with the terms of the Retirement Program in effect immediately prior to the Change in Control of the Corporation and as if those terms were in effect on the Date of Termination, or (y) an amount computed in accordance with the terms of the Retirement Program in effect immediately prior to the Date of Termination, in either case less the amount of retirement pension actually to be paid to you under the Retirement Program. In computing the amounts of your retirement pension under clauses (x) and (y) of this Paragraph 3a(iv), to the extent such benefits are payable under the tax qualified Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiaries, three years shall be added to your actual age and to your actual Company Service Credit under the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiaries so that your retirement pension under clauses (x) and (y) will be the amount it would have been if you had been three years older than you actually were, and had three years more Company Service Credit than you actually had, on the Date of Termination. (v) Severance Payment. The Corporation shall pay as severance pay to you, not later than the fifth day following the Date of Termination, a lump sum severance payment (the "Severance Payment") equal to 2.99 times the average of the annual compensation which was payable to you by the Corporation (or any corporation affiliated with the Corporation within the meaning of section 1504 of the Internal Revenue Code of 1954, as amended ("Code")) and includible in your gross income for Federal income tax purposes for the five calendar years (the "Base Period") preceding the calendar year in which a Change in Control of the Corporation occurred. The Severance Payment shall be reduced pursuant to Paragraph 3a(vi) hereof to the extent the Corporation could not properly deduct amounts paid pursuant to Paragraph 3a(i) through 3a(iv) hereof or otherwise pursuant to section 280G of the Code. For purposes hereunder, the average annual compensation shall be determined in accordance with proposed, temporary or final regulations promulgated under section 280G(d) of the Code. Compensation payable to you by the Corporation (or an affiliate) shall include every type and form of compensation includible in your gross income in respect of your employment by the Corporation (or an affiliate), including but not limited to compensation income recognized as a result of your exercise of stock options or sale of the stock so acquired, bonuses, dividend equivalents, fringe benefits, relocation payments, and stock appreciation rights, except to the extent otherwise provided in proposed, temporary or final regulations promulgated under section 280G(d) of the Code. For purposes of Paragraphs 3a(v) and 3a(vi) only, a "Change in control of the Corporation" shall have the meaning set forth in section 280G(d) of the Code and any proposed, temporary or final regulations promulgated thereunder. (vi) Reduction in Severance Payment. The Severance Payment shall be reduced but not below zero by the amount of any other payment or the value of any benefit received or to be received by you contingent upon a Change in Control of the Corporation (whether payable pursuant to the terms of this Agreement, any other plan, agreement or arrangement with the Corporation or an affiliate) unless (1) you shall have effectively waived your receipt or enjoyment of such payment or benefit prior to the date of payment of the Severance Payment, or (2) in the opinion of Messrs. Kelley Drye & Warren, which shall be binding upon the Corporation and upon you, such other payment or benefit plus the Severance Payment (in its full amount or as partially reduced hereunder, as the case may be) would be properly deductible by the Corporation without restriction pursuant to Code section 280G. The value of any non-cash benefit or any deferred cash payment shall promptly be determined by the Corporation's independent auditors in accordance with the principles of sections 280G(d)(3) and (4) of the Code. (vii) Repayment of excess payment. If it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that, notwithstanding the good faith of you and the Corporation in applying the terms of this Paragraph 3a, the aggregate payments hereunder to or for your benefit would result in any portion of such payments not being deductible by the Corporation or its affiliates by reason of section 280G of the Code, then you agree to pay the Corporation upon demand an amount equal to the sum of (1) the excess of the aggregate payments hereunder paid to or for your benefit over the aggregate payments hereunder that would have been paid to or for your benefit without any portion of such payments not being deductible by reason of section 280G of the Code; and (2) interest on the amount set forth in clause (1) of this sentence at the applicable Federal rate (as defined in section 1274(d) of the Code) from the date of your receipt of such excess until the date of such payment. No amount shall be payable by you hereunder if and to the extent that in the opinion of Messrs. Kelley Drye & Warren such repayment would not reduce the amount of payments to you which are considered nondeductible by the Corporation pursuant to Code section 280G. (viii) No duty to mitigate. You shall not be required to mitigate the amount of any payment provided for in this Paragraph 3 by seeking other employment or otherwise, nor shall the amount of any payment or benefit as provided for be reduced by any compensation earned by you as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise except as specifically provided herein. b. Payments While Disabled. During any period prior to the Date of Termination and during the term of this Agreement that you are unable to perform your full-time duties with the Corporation, whether as a result of your Total Disability or as a result of a physical or mental disability that is not total or is not permanent and therefore is not a Total Disability, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all other compensation and benefits that are payable under the Corporation's disability benefit plans. After the Date of Termination, your benefits shall be determined in accordance with the Corporation's Retirement Program, insurance and other applicable programs. The compensation and benefits, other than salary, payable pursuant to this Paragraph 3b shall be the greater of (x) the amounts computed under the Retirement Program, disability benefit plans, insurance and other applicable programs in effect immediately prior to a Change in Control of the Corporation, and (y) the amounts computed under the Retirement Program, disability benefit plans, insurance and other applicable programs in effect at the time the compensation and benefits are paid. c. Payments if Terminated for Cause, or by You Except With Good Reason. If your employment shall be terminated by the Corporation for Cause or by you other than with Good Reason for Resignation, the Corporation shall pay you your full base salary then in effect through the Date of Termination, at the rate in effect at the time Notice of Termination is given plus any benefits or awards which have been earned or become payable but which have not yet been paid to you. Thereafter the Corporation shall have no further obligation to you under this Agreement. d. After Retirement or Death. If your employment shall be terminated by your Retirement, or by reason of your death, your benefits shall be determined in accordance with the Corporation's retirement and insurance programs then in effect. 4. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1992; provided, however, that commencing on January 1, 1993 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Corporation or you shall have given notice that it or you do not wish to extend this Agreement; provided, further, that notwithstanding any such notice by the Corporation or you not to extend, if a Change in Control shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term in effect immediately before such Change in Control. This Agreement shall terminate if your employment is terminated by you or the Corporation prior to a Change in Control. 5. Successors; Binding Agreement. a. Successors of the Corporation. The Corporation will require any Successor to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree, by an agreement in form and substance satisfactory to you, to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assent at least five business days prior to the time a person becomes a Successor (or where the Corporation does not have at least five business days advance notice that a person may become a Successor, within three business days after having notice that such person may become or has become a Successor) shall constitute Good Reason for Resignation by you and, if a Change in Control of the Corporation has occurred or thereafter occurs, shall entitle you immediately to the benefits provided in Paragraph 3a hereof upon delivery by you of a Notice of Termination which the Corporation, by executing this Agreement hereby assents to. For purposes of this Agreement, "Successor" shall mean any person that obtains or succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Corporation's business directly, by merger or consolidation, or indirectly, by purchase of voting securities of the Corporation, by acquisition of rights to vote voting securities of the Corporation or otherwise, including but not limited to any person or group that acquires the beneficial ownership or voting rights described in Paragraph 1a(iii) and any person or group required to be identified in a Current Report on Form 8-K described in Paragraph 1a(i). b. Your Successor. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 6. Relationship to Other Agreements. To the extent that any provision of any other agreement between the Corporation or any of its subsidiaries and you shall limit, qualify or be inconsistent with any provision of this Agreement, then for purposes of this Agreement, while the same shall remain in force, the provision of this Agreement shall control and such provision of such other agreement shall be deemed to have been superseded, and to be of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose. 7. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 8. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 9. Notice. Any purported termination by the Corporation or by you following a Change in Control shall be communicated to the other party by a Notice of Termination. A Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Corporation shall be directed to the attention of the Board with a copy to the Secretary of the Corporation, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 10. Fees and Expenses. The Corporation shall pay all legal fees and related expenses incurred by you as a result of your termination following a Change in Control or by you in seeking to obtain or enforce any right or benefit provided by this Agreement (including all fees and expenses, if any, incurred in contesting or disputing any such termination or incurred by you in seeking advice in connection therewith). 11. Survival. The respective obligations of, and benefits afforded to, the Corporation and you as provided in Paragraphs 3, 5, 6 and 10 of this Agreement shall survive termination of this Agreement. 12. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Corporation the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, UNION CARBIDE CORPORATION Robert D. Kennedy Chairman of the Board and Chief Executive Officer Agreed to this 12th day of August, 1992 EX-10.21.2 17 EXHIBIT 10.21.2 September 24, 1993 R. Van Mynen P2-607 Re: Amendment of Severance Compensation Agreement Dear Ron: Pursuant to paragraph 12 of Severance Compensation Agreement ("Agreement") between you and Union Carbide Corporation ("Corporation"), dated as of July 21, 1992, the Corporation and you now agree to amend the Agreement as follows: 1. The Agreement is amended by adding the following sentence at the end of Paragraph 4: "Notwithstanding the foregoing, the Corporation may terminate this Agreement at any time by giving you at least five (5) days prior written notice, provided a change in control has not occurred as of the date notice of termination is given." This amendment to the Agreement shall be effective as of the date of this letter and as hereby amended the Agreement shall continue in full force and effect. If this letter sets forth our Agreement on the subject matter discussed above, kindly sign and return the enclosed copy to the Corporation. If you fail to sign and return this letter by September 30, 1993, this letter shall constitute notice pursuant to Paragraph 4 of the Agreement that the Corporation does not wish to extend the Agreement beyond January 1, 1994. Sincerely, UNION CARBIDE CORPORATION By: M.A. Kessinger Title: Vice President, Human Resources Agreed and accepted this 28th day of September, 1993 R. Van Mynen EX-10.24.1 18 EXHIBIT 10.24.1 UNION CARBIDE CORPORATION BENEFITS PROTECTION TRUST TABLE OF CONTENTS ARTICLE PAGE FIRST: Definitions 2 SECOND: Creation of Trust 6 THIRD: Payments from the Trust 11 FOURTH: Management of Trust Assets 14 FIFTH: Administrative Powers 24 SIXTH: Insurance and Annuity Contracts 25 SEVENTH: Taxes, Expenses and Compensation of Trustee 28 EIGHTH: General Duties of Trustee and Investment Director 30 NINTH: Indemnification 35 TENTH: No Duty To Advance Funds 35 ELEVENTH: Accounts 36 TWELFTH: Administration of the Plans; Communications 37 THIRTEENTH: Resignation or Removal of Trustee 39 FOURTEENTH: Amendment of Agreement; Termination of Trust 41 FIFTEENTH: Prohibition of Diversion 44 SIXTEENTH: Prohibition of Assignment of Interest 45 SEVENTEENTH: Affiliates 45 EIGHTEENTH: Miscellaneous 46 BENEFITS PROTECTION TRUST AGREEMENT THIS AGREEMENT, made as of the 1st day of August 1989, by and between UNION CARBIDE CORPORATION, a corporation organized and existing under the laws of the State of New York (hereinafter referred to as the "Company"), and MANUFACTURERS HANOVER TRUST COMPANY, a corporation organized and existing under the laws of the State of New York (hereinafter referred to as the "Trustee"), W I T N E S S E T H : WHEREAS, the Company has adopted the plans listed on Schedule 1 (hereinafter referred to as defined in Schedule 1 or collectively as the "Plans") and may adopt or enter into other such Plans as will be listed from time to time on Schedule 1 and may, from time to time, amend, modify or terminate any such Plan in accordance with its terms; and WHEREAS, the Company has adopted the plans, programs, and policies listed on Schedule 2 (hereinafter referred to collectively as the "Protected Plans") and may adopt or enter into other such Protected Plans as will be listed from time to time on Schedule 2 and may, from time to time, amend, modify, or terminate any such Protected Plan in accordance with its terms; and WHEREAS, the Company desires to establish the Benefits Protection Trust (hereinafter referred to as the "Trust") in order to ensure that its employees, the employees of its Participating Subsidiaries, and their beneficiaries will receive the benefits which the Company is obligated to provide for them or which they reasonably anticipate receiving pursuant to the Protected Plans; and WHEREAS, the Trust is intended to be a "grantor trust" with the corpus and income of the Trust treated as assets and income of the Company for federal income tax purposes pursuant to Sections 671 through 678 of the Internal Revenue Code of 1986 (the "Code"), as amended; and WHEREAS, the Company intends that the assets of the Trust will be subject to the claims of creditors of the Company as provided in Article FIFTEENTH; and WHEREAS, the Company intends that the existence of the Trust will not alter the characterization of the Plans as "unfunded" and will not be construed to provide taxable income to any participant under the Plans prior to actual payment of benefits thereunder; and WHEREAS, the Trustee is not a party to the Plans and makes no representations with respect thereto, and all representations and recitals with respect to the Plans shall be deemed to be those of the Company; NOW, THEREFORE, the Company and the Trustee agree as follows: FIRST: Definitions. (a) Any term that is referenced in the Plans shall have in this Agreement the same meaning ascribed to it in the Plans, unless the context clearly indicates a different meaning. (b) For purposes of this Agreement, an Unfriendly Change In Control shall be deemed to occur if: (1) a change in control of the Company would be required to be reported in response to item 1(a) of the current Report of Form 8-K, as in effect on the date hereof, pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement; (2) there shall be consummated (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's common stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock immediately prior to the merger have the same proportion and ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, provided, that the divestiture of less than substantially all of the assets of the Company in one transaction or a series of related transactions, whether effected by sale, lease, exchange, spin- off, sale of the stock or merger of a subsidiary or otherwise, shall not constitute an Unfriendly Change in Control; (3) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act (A) becomes the "beneficial owner" as defined in Rule 13d-3 under the Exchange Act of more than 20% of the then outstanding voting securities of the Company, otherwise than through a transaction or transactions arranged by, or consummated with the prior approval of, the Board of Directors of the Company, or (B) acquires by proxy or otherwise the right to vote for the election of directors, for any merger or consolidation of the Company or for any other matter or question more than 20% of the then outstanding voting securities of the Company, otherwise than through an arrangement or arrangements consummated with the prior approval of the Board of Directors of the Company; or (4) during any period of twenty-four consecutive months (not including any period prior to the adoption of this Agreement), Present Directors and/or New Directors cease for any reason to constitute a majority of the Board of Directors of the Company. For purposes of this Agreement, "Present Directors" shall mean individuals who at the beginning of such consecutive twenty-four month period were members of the Board and "New Directors" shall mean any director whose election by the Board of Directors of the Company or whose nomination for election by the Company's stockholders was approved by a vote of at least two- thirds of the Directors then still in office who were Present Directors or New Directors. Notwithstanding the foregoing, an Unfriendly Change of Control shall not be deemed to occur pursuant to Subparagraph (2), above, solely because twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities is acquired by one or more employee benefit plans maintained by the Company. Provided, however, that a transaction or transactions described in Subparagraphs (b)(1), (b)(2), or (b)(3) of this Article FIRST arranged by, or consummated with the prior approval of, a majority of the Present Directors and New Directors, shall not be deemed an Unfriendly Change in Control if a majority of the Present Directors and New Directors certify to the Trustee that such transaction or transactions should not be deemed an Unfriendly Change in Control. The Company shall notify the Trustee in writing of the occurrence of any event described in subparagraphs (b)(1) through (b)(4) above, as soon as practicable after the Company first learns of such event. The Trustee may rely upon such notice from the Company in performing any of its obligations or taking any discretionary action under this Agreement which is dependent upon an Unfriendly Change in Control having occurred, provided, however, that in the absence of such notice, the Trustee may rely on its own determination, including opinion of counsel (who may be counsel to the Company or the Trustee), that an Unfriendly Change in Control has occurred, unless such a determination arises out of the Trustee's gross negligence or willful misconduct. The Trustee may also request that the Company furnish evidence to determine or to enable the Trustee to determine, whether an Unfriendly Change in Control has occurred. The Trustee's determination whether an Unfriendly Change in Control has occurred shall be binding and conclusive on all Participants. (c) "Threatened Change in Control" shall mean each of the following events (but no event other than the following events), except as otherwise provided below: (1) Any persons as defined in Paragraph (b) above, without the prior approval of a majority of the Present Directors (A) becomes the beneficial owner, directly or indirectly, of securities of the Company representing ten percent (10%) or more of the combined voting power of the Company's then outstanding voting securities, or (B) initiates a tender offer to acquire securities of the Company representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding voting securities; or (2) The Board of Directors of the Company notifies the Trustee in writing that a Threatened Change in Control exists. Notwithstanding the foregoing, a Threatened Change in Control shall not be deemed to occur pursuant to Subparagraph (1) above solely because ten percent (10%) or more of the combined voting power of the Company's then outstanding voting securities is acquired by one or more employee benefit plans maintained by the Company. The Company shall notify the Trustee in writing of the occurrence of any event described in subparagraph (c)(1) above as soon as practicable after the Company first learns of such event. The Trustee may rely upon such notice from the Company in performing any of its obligations or taking any discretionary action under this Agreement which is dependent upon a Threatened Change in Control having occurred, provided, however, that in the absence of such notice, the Trustee may rely on its own determination, including opinion of counsel (who may be counsel to the Company or the Trustee), that a Threatened Change in Control has occurred, unless such a determination arises out of the Trustee's gross negligence or willful misconduct. The Trustee may also request that the Company furnish evidence to determine or to enable the Trustee to determine, whether a Threatened Change in Control has occurred. The Trustee's determination whether a Threatened Change in Control has occurred shall be binding and conclusive on all Participants. (d) "Threatened Change in Control Period" shall mean the period beginning on the date a Threatened Change of Control occurs and ending on the earliest of (1) If the Threatened Change in Control was caused by an event described in Subparagraph (c)(1), on the date first subsequent to the date on which the person referred to therein does not own securities of the Company representing ten percent (10%) or more of the combined voting power of the Company's then outstanding voting securities, having terminated any tender offer instituted by him; or (2) If the Threatened Change in Control shall be deemed to have occurred by reason of the notice described in Subparagraph (c)(2), on the date that a majority of the Present Directors and New Directors of the Board of Directors of the Company shall have notified the Trustee in writing that the Threatened Change in Control has terminated; or (e) The date the Unfriendly Change in Control occurs. SECOND: Creation of Trust. (a) The Company hereby establishes with the Trustee and the Trustee hereby accepts a trust consisting of the following property (subject to the rights of the Company to withdraw such property pursuant to Paragraph (f) of this Article SECOND): (1) such cash or other property acceptable to the Trustee as shall be paid or delivered to the Trustee from time to time as contributions under the Equalization Plan, together with the earnings, income, additions and appreciation thereon and thereto (all of which is hereinafter called the "Equalization Account"); (2) such cash and other property acceptable to the Trustee as shall be paid or delivered to the Trustee from time to time as contributions under the Supplemental Retirement Income Plan, together with the earnings, income, additions and appreciation thereon and thereto (all of which is hereinafter referred to as the "SRIP Account"); (3) such cash or other property acceptable to the Trustee as shall be paid or delivered to the Trustee from time to time as contributions under the 1983 Bonus Deferral Plan, together with the earnings, income, additions and appreciation thereon and thereto (all of which is hereinafter called the "1983 Bonus Deferral Account"); (4) such cash or other property acceptable to the Trustee as shall be paid or delivered to the Trustee from time to time as contributions under the 1984 Bonus Deferral Plan, together with the earnings, income, additions and appreciation thereon and thereto (all of which is hereinafter called the "1984 Bonus Deferral Account"); (5) such cash or other property acceptable to the Trustee as shall be paid or delivered to the Trustee from time to time as contributions under the Key International Management Plan, together with the earnings, income, additions and appreciation thereon and thereto (all of which is hereinafter called the "KIMP Account"); (6) such cash or other property acceptable to the Trustee as shall be paid or delivered to the Trustee from time to time to be used to satisfy future liabilities of the Company with regard to the Severance Compensation Agreements of the Company, together with the earnings, income, additions and appreciation thereon and thereto (all of which is hereinafter called the "Severance Compensation Agreement Account"); and (7) cash in the amount of 1.5 million dollars ($1,500,000), together with the earnings thereon, and realized and unrealized gains (net of any losses) attributable thereto, (all of which is hereinafter called the "Benefits Protection Account"). Neither the cash nor any other property held in the Benefits Protection Account shall be available for payment of benefits to participants and beneficiaries under the Plans. (b) The Company may contribute to any Account an irrevocable letter of credit (hereinafter referred to as a "L/C"). The following provisions shall be applicable to any such L/C: (1) the L/C shall expire no sooner than two (2) years from the date of issuance, (2) the Company shall continue to maintain such L/C in effect until it is replaced by cash or another irrevocable L/C or the Company withdraws such L/C pursuant to Paragraph (f) of this Article SECOND or this Agreement terminates, whichever occurs first, (3) the Company shall renew or replace such L/C at least thirty (30) days before its expiration for an additional period of one (1) year, (4) if such L/C, or any renewal thereof, is not renewed or replaced by a L/C delivered to the Trustee at least thirty (30) days before the expiration of the predecessor L/C, the Trustee may draw down the full amount of such L/C and hold the proceeds pursuant to the terms of this Agreement, (5) the Trustee may also draw down on such L/C at any time the Trustee determines the proceeds of such L/C are necessary to allow the Trustee to fulfill its obligations under this Agreement, (6) the proceeds of such L/C shall be available to the Trustee upon the Trustee's presentation of its sight draft, (7) the Company may, at any time, replace such L/C with another irrevocable L/C having substantially similar terms, or with an equal amount of cash, or any combination thereof, (8) any L/C shall be issued by a bank (including the Trustee) with assets in excess of $2 billion and net worth in excess of $100 million, shall be reasonably acceptable to the Trustee, and shall be in a form as shall be reasonably acceptable to the Trustee. (c) The Trustee, for investment purposes only, may commingle all Trust assets and treat them as a single fund, but the records of the Trustee at all times shall show the percentages of the Trust allocable to the Equalization Account, the SRIP Account, the 1983 Bonus Deferral Account, the 1984 Bonus Deferral Account, the KIMP Account, the Severance Compensation Agreement Account, the Benefits Protection Account and such other Account(s) as may subsequently be established under this Trust (herein referred to collectively as the "Accounts"). (d) The assets of the Accounts may be used to discharge the obligations of the Company as follows: (1) The assets of the Equalization Account may be used to discharge the obligations of the Equalization Plan and, to the extent the assets of the SRIP Account are insufficient, the obligations of the Supplemental Retirement Income Plan; (2) The assets of the SRIP Account may be used to discharge the obligations of the Supplemental Retirement Income Plan and, to the extent the assets of the Equalization Account are insufficient, the obligations of the Equalization Plan. (3) The assets of the 1983 Bonus Deferral Account may be used to discharge the obligations of the 1983 Bonus Deferral Plan and, to the extent the assets of the 1984 Bonus Deferral Account are insufficient, the obligations of the 1984 Bonus Deferral Plan. (4) The assets of the 1984 Bonus Deferral Account may be used to discharge the obligations of the 1984 Bonus Deferral Plan and, to the extent the assets of the 1983 Bonus Deferral Account are insufficient, the obligations of the 1983 Bonus Deferral Plan. (5) The assets of the KIMP Account shall be used to discharge the obligations of the Key International Management Plan. (6) The assets of the Severance Compensation Agreement Account shall be used to discharge the obligations of the Company under the Severance Compensation Agreements. (7) The assets of the Benefits Protection Account may be used as set forth in Paragraph (c) of Article EIGHTH, and Article SEVENTH. (8) After an Unfriendly Change in Control occurs, the assets of each Account, upon the termination of the Plan under which such Account was established, and the satisfaction of all liabilities with regard to such terminated Plan pursuant to Paragraph (d) of Article FOURTEENTH, shall be distributed among such remaining Account(s), other than the Benefits Protection Account, that the Trustee determines may not have sufficient assets to pay all future liabilities relating to such Account(s). (e) The Company and the Trustee agree that the Trust created herein shall not be revocable by the Company or by any successor thereto during a Threatened Change in Control Period or after an Unfriendly Change in Control, and is intended to be a grantor trust under the provisions of Sections 671 through 678 of the Internal Revenue Code of 1986, as amended. (f) The Company may, from time to time, add to or withdraw from the assets of the Trust, but subject to the termination provisions of Article FOURTEENTH hereof, such withdrawal may not reduce the property in the Benefits Protection Account of the Trust, including any L/C, below 1.5 million dollars ($1,500,000). The Company may add funds to the Trust at any time and shall designate the Account to which such funds shall be credited. Any such additional funds shall also be available to pay the fees and expenses of the Trustee if the amounts transferred pursuant to the Benefits Protection Account are exhausted. Notwithstanding the foregoing, the Company shall not make any withdrawal from the Trust during a Threatened Change in Control Period or after an Unfriendly Change in Control until all liabilities of the Company under the Plans are satisfied and all of the purposes of this Agreement are fulfilled. THIRD: Payments from the Trust. (a) Subject to Paragraph (f) of Article SECOND hereof, Paragraph (b) of this Article THIRD and Paragraph (b) of Article FIFTEENTH hereof, the Trustee, from time to time upon receipt of direction from the Company prior to an Unfriendly Change in Control (other than during a Threatened Change in Control Period), shall make payments from the Trust, as specified in such direction to such persons, in such manner and in such amounts as the Company shall direct, and amounts paid pursuant to such direction (or in accordance with Article SEVENTH hereof) thereafter no longer shall constitute a part of the Trust. (b) The Company may, from time to time, prior to an Unfriendly Change in Control, furnish the Trustee with certain information regarding the participants and beneficiaries under the Plans and the determination of the benefits under the Plans (hereinafter referred to as "Participants Data"). The Trustee shall be entitled to rely on the accuracy of the Participant Data provided by the Company prior to an Unfriendly Change in Control, and shall have no duty to verify the accuracy thereof. The Company shall, during a Threatened Change in Control Period, and after an Unfriendly Change in Control occurs, furnish the Trustee with Participant Data at least once each Plan Year. Such Participant Data shall include (1) names, addresses, dates of birth, and social security numbers of each participant and beneficiary in the Plans; (2) the amount and form of benefits under each of the Plans of each participant and beneficiary if such participant would retire or die as of either the last day of such Plan Year or the last day of the Plan Year in which such Participant attained age 62; (3) earnings history, compensation (cash and deferred) and bonus history of each participant; (4) amounts payable from the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies on behalf of each participant; (5) a schedule of the estimated yearly cash payments under the Plans; and (6) any other information regarding the Plan which the Trustee may reasonably request or which the Company may deem necessary. During a Threatened Change in Control Period or after an Unfriendly Change in Control and notwithstanding any other provisions of this Agreement, the Trustee shall, without direction from the Company, to the extent funds are available in the Trust for such purpose, make payments to participants and beneficiaries in such manner and in such amounts as the Trustee shall determine they are entitled to be paid under the Plans based on the most recent Participant Data furnished to the Trustee by the Company prior to an Unfriendly Change in Control and any supplemental information furnished to the Trustee by a participant or beneficiary upon which the Trustee may reasonably rely in making such determination. The Trustee may make such reasonable inquiry of the Company as is necessary to determine whether any amounts that would otherwise be payable under this Agreement have previously been paid by the Company, and may reasonably rely on any information provided by the Company with regard to such payment. A determination by the Trustee with regard to a Participant's entitlement to payments under the terms of this Agreement shall be binding as to all Participants and the Company. (c) In the event it shall be determined prior to an Unfriendly Change in Control that the participants and/or beneficiaries of the Plans are subject to any tax under the terms of the Trust created hereunder, then the Trustee, upon receipt of direction from the Company, shall make payments from the Trust to such persons, in such manner and in such amounts as the Company shall direct, for purposes of (1) paying the amount of Federal, State and Local tax and interest and any penalties thereon which such participants and/or beneficiaries may incur arising out of such determination or (2) distributing the interests of participants and beneficiaries in the Trust. In the event such a determination is made after an Unfriendly Change in Control occurs, then each participant or beneficiary who is subject to such tax, may direct the Trustee, in writing, to make payments from the Trust for either of the purposes set forth in section (1) or (2) of the preceding sentence. The Trustee shall not make the payments for the purposes set forth in the first sentence of this Paragraph (c) without such written direction. (d) Payments to participants and beneficiaries pursuant to Paragraphs (b) and (c) of this Article THIRD shall be made by the Trustee to the extent that Trust funds for such purposes are sufficient to allow such payments. Subject to Paragraph (d) of Article SECOND, in any month in which the Trustee determines that a particular Account in the Trust does not have sufficient funds to provide for the payment of all amounts otherwise payable to participants and beneficiaries in such month under a particular Plan, the amount otherwise payable to each such participant or beneficiary under such Plan during such month shall be multiplied by a fraction, the numerator of which is the amount of funds then available for the payment of benefits under such Plan and the denominator of which is the total of the benefits payable prior to such reduction during such month to all participants and beneficiaries under such Plan. (e) After an Unfriendly Change in Control occurs the Company shall make such contributions to the Trust created hereunder as shall be necessary to ensure the assets of the Trust shall at all times be sufficient to discharge the Company's obligations under the Plans. FOURTH: Management of Trust Assets. (a) Subject to Paragraph (b) of this Article FOURTH, the Trustee, prior to an Unfriendly Change in Control, shall have exclusive authority and discretion to manage and control the Trust assets, and pursuant to such authority and discretion, may exercise, from time to time and at any time, the power: (1) To invest and reinvest the Trust, without distinction between principal and income, in shares of stock (whether common or preferred) or other evidences of ownership, bonds, debentures, notes or other evidences of indebtedness, unsecured or secured by mortgages on real or personal property wherever situated (including any part interest in a bond and mortgage or note and mortgage whether insured or uninsured) and other property, or part interest in property, real or personal, foreign or domestic, whether or not productive of income or consisting of wasting assets, and in order to reduce the rate of interest rate fluctuations, contracts, as either buyer or seller, for the future delivery of United States Treasury securities and comparable Federal-Government-backed securities; (2) To sell, convey, redeem, exchange, grant options for the purchase or exchange of, or otherwise dispose of, any real or personal property, at public or private sale, for cash or upon credit, with or without security, without obligation on the part of any person dealing with the Trustee to see to the application of the proceeds of or to inquire into the validity, expediency or propriety of any such disposition; (3) To manage, operate, repair and improve, and mortgage or lease for any length of time any real property held in the Trust; to renew or extend any mortgage, upon any terms the Trustee may deem expedient; to agree to reduction of the rate of interest or any other modification in the terms of any mortgage or of any guarantee pertaining to it; to enforce any covenant or condition of any mortgage or guarantee or to waive any default in the performance thereof; to exercise and enforce any right of foreclosure; to bid in property on foreclosure; to take a deed in lieu of foreclosure with or without paying consideration therefor and in connection therewith to release the obligation on the bond secured by the mortgage; and to exercise and enforce in any action, suit or proceeding at law or in equity any rights or remedies in respect of any mortgage or guarantee; (4) To exercise, personally or by general or limited proxy, the right to vote any shares of stock, bonds or other securities held in the Trust; to delegate discretionary voting power to trustees of a voting trust for any period of time; and to exercise, personally or by power of attorney, any other right appurtenant to any securities or other property of the Trust; (5) To join in or oppose any reorganization, recapitalization, consolidation, merger or liquidation, or any plan therefor, or any lease, mortgage or sale of the property of any organization the securities of which are held in the Trust; to pay from the Trust any assessments, charges or compensation specified in any plan of reorganization, recapitalization, consolidation, merger or liquidation; to deposit any property with any committee or depositary; and to retain any property allotted to the Trust in any reorganization, recapitalization, consolidation, merger or liquidation; (6) To exercise or sell any conversion or subscription or other rights appurtenant to any stock, security or other property held in the Trust; (7) To borrow from any lender (including the Trustee in its individual capacity) money, in any amount and upon any reasonable terms and conditions, for purposes of this Agreement, and to pledge or mortgage any property held in the Trust to secure the repayment of any such loan; (8) To compromise, settle or arbitrate any claim, debt, or obligation of or against the Trust; to enforce or abstain from enforcing any right, claim, debt or obligation; and to abandon any property determined by it to be worthless; (9) To make loans of securities held in the Trust to registered brokers and dealers upon such terms and conditions as are permitted by applicable law and regulations, and in each instance to permit the securities so lent to be registered in the name of the borrower or a nominee of the borrower, provided that in each instance the loan is adequately secured and neither the borrower nor any affiliate of the borrower has discretionary authority or control with respect to the assets of the Trust involved in the transaction or renders investment advice with respect to those assets; and (10) To invest and reinvest any property in the Trust in any other form or type of investment not specifically mentioned in this Paragraph (a) of Article FOURTH, so long as such form or type of investment is a form or type of investment approved by the Principal Financial Officer of the Company, or such other officer designated by the Company, for the investment of assets of the Trust. (b) (1) (A) The Principal Financial Officer of the Company, or such other officer designated by the Company, at any time and from time to time may direct the Trustee to segregate one or more specified portions of the Trust into a separate investment account or accounts (each hereinafter called a "Segregated Investment Account"), and may appoint and designate an Investment Director to direct the Trustee in the management of the assets of each such Segregated Investment Account (hereinafter called "that Investment Director's Segregated Investment Account"). (B) Any Investment Director appointed by the Principal Financial Officer of the Company may be either an officer or employee of the Company, a subsidiary or affiliate of the Company, or an Investment Manager who is not an officer or employee of the Company. Any Investment Manager so appointed must be either (i) an investment adviser registered as such under the Investment Advisers Act; or (ii) a bank, as defined in that Act; or (iii) an insurance company qualified to perform services in the management, acquisition or disposition of the assets of the Trust under the laws of more than one State. The Trustee until notified in writing to the contrary shall be fully protected in relying upon any written notice of the appointment of an Investment Director furnished to it by the Company. In the event of any vacancy in the office of Investment Director, the Trustee shall be deemed to be the Investment Director of that Investment Director's Segregated Investment Account until an Investment Director shall have been duly appointed to direct the Trustee in the management of the assets of that Investment Director's Segregated Investment Account; and in such event until an Investment Director shall have been so appointed and qualified, references herein to the Trustee's acting in respect of that Investment Director's Segregated Investment Account pursuant to direction from the Investment Director shall be deemed to authorize the Trustee to act on its own discretion in managing and controlling the assets of that Investment Director's Segregated Investment Account, and Paragraphs (4) and (5) of this Paragraph (b) shall have no effect and shall be disregarded. (2) Any Investment Director appointed pursuant to Paragraph (b) (1) of this Article FOURTH shall have exclusive authority and discretion to manage and control the assets of that Investment Director's Segregated Investment Account, and pursuant to such authority and discretion may direct the Trustee from time to time and at any time: (A) To invest and reinvest that Investment Director's Segregated Investment Account, without distinction between principal and income, in shares of stock (whether common or preferred) or other evidences of ownership, bonds, debentures, notes or other evidences of indebtedness, unsecured or secured by mortgages on real or personal property wherever situated (including any part interest in a bond and mortgage or note and mortgage whether insured or uninsured) and other property, or part interest in property, real or personal, foreign or domestic, whether or not productive of income or consisting of wasting assets, and in order to reduce the risk of interest rate fluctuations, contracts, as either buyer or seller, for the future delivery of United States Treasury securities and comparable Federal Government-backed securities; provided, however, that the Trustee, upon specific directions in writing from that Investment Director, shall invest and reinvest some or all of the assets of that Investment Director's Segregated Investment Account in qualifying securities issued by the Company or by an affiliate of the Company, to the extent permitted by the Employee Retirement Income Security Act of 1974, unless the Trustee shall deem such directed investment or reinvestment to be inconsistent with the provisions of Paragraph (a) of Article EIGHTH and that the Trustee may retain any such securities acquired for that Investment Director's Segregated Investment Account at the direction of that Investment Director until that Investment Director directs the Trustee to dispose of them; but no direction of any Investment Director to sell any securities issued by the Company or by an affiliate of the Company shall be binding if it would require the Trustee to violate any law respecting the public distribution of securities, and, in any event, without limiting the generality of the provisions of Article NINTH, the Company agrees, to the extent permitted by law, to indemnify the Trustee and hold it harmless from and against any claim or liability that may be asserted against it, otherwise than on account of the Trustee's breach of his own duties, by reason of the Trustee's investing in, or reinvesting in or selling such securities in accordance with any direction from any Investment Director or by reason of the Trustee's failure to sell any such securities in the absence of any direction from that Investment Director to sell them; and (B) To perform acts similar to those authorized to the Trustee in Subparagraphs (2) through (10) of Paragraph (a) of this Article FOURTH. (3) In addition, each Investment Director from time to time and at any time may delegate to the Trustee discretionary authority to invest and reinvest funds of that Investment Director's Segregated Investment Account in debt securities (including obligations of the Government of the United States) payable on demand or having maturities not exceeding one year or in interests in any trust fund that has been or shall be created and maintained by the Trustee as trustee for the collective short-term investment of funds, the instrument creating such trust fund, together with any amendments, modifications or supplements thereof, being hereby effective when and as such investments are made, incorporated in and made a part of this Agreement as fully and to all intents and purposes as if set forth herein at length. (4) The Trustee shall exercise in respect of each Investment Director's Segregated Investment Account the powers set forth in Paragraph (b) (2) of this Article FOURTH only when and to the extent directed in writing by that Investment Director. Each Investment Director, from time to time and at any time, may issue orders for the purchase or sale of securities directly to a broker or dealer, and for such purpose the Trustee will upon request execute and deliver to that Investment Director one or more trading authorizations. Written notification of the issuance of each such order shall be given promptly to the Trustee by that Investment Director, and the execution of each such order shall be confirmed by the broker to that Investment Director and to the Trustee. Such notification shall be authority to the Trustee to receive securities purchased against payment therefor and to deliver securities sold against receipt of the proceeds therefrom, as the case may be. (5) Unless the Trustee participates knowingly in, or knowingly undertakes to conceal, an act or omission of any Investment Director, knowing such act or omission to be a breach of the fiduciary responsibility of that Investment Director with respect to the Trust, or enables such a breach to occur through the Trustee's failure to comply with the Trustee's own duties, the Trustee shall not be liable for any act or omission of any Investment Director, and shall not be under any obligation to invest or otherwise manage the assets of the Trust that are subject to the management of any Investment Director. Without limiting the generality of the foregoing, the Trustee shall not be liable by reason of its taking or refraining from taking at the direction of any Investment Director any action in respect of that Investment Director's Segregated Fund, pursuant to this Paragraph (b), or pursuant to a notification of an order to purchase or sell securities for the account of any Investment Director's Segregated Investment Account issued by that Investment Director, nor shall the Trustee be liable by reason of its refraining from taking any action in respect of any Investment Director's Segregated Investment Account because of the failure of that Investment Director to give such direction or order; the Trustee shall be under no duty to question or to make inquiries as to any direction or order or failure to give direction or order by any Investment Director; and the Trustee shall be under no duty to make any review of investments acquired for any Investment Manager's Segregated Investment Account at the direction or order of that Investment Manager and shall be under no duty at any time to make any recommendation with respect to disposing of or continuing to retain any such investment. (6) Without limiting the generality of the provisions of Article NINTH, the Company agrees, to the extent permitted by law, to indemnify the Trustee and hold it harmless from and against any claim or liability that may be asserted against it, otherwise than on account of the Trustee's breach of his own duties, by reason of the Trustee's taking or refraining from taking any action in accordance with this Paragraph (b), including, without limiting the generality of the foregoing, any claim or liability that may be asserted against the Trustee on account of failure to receive securities purchased, or failure to deliver securities sold, pursuant to orders issued by an Investment Director directly to a broker or dealer. (c) After an Unfriendly Change in Control occurs and subject to Article SIXTH hereof, the Trustee shall have the exclusive authority and discretion to manage and control the Trust assets, and may appoint Investment Managers (as defined in Paragraph (b) (1) (A) of this Article FOURTH) including affiliates of the Company or the Trustee to manage the investment of the Trust assets. Pursuant to such authority and discretion, the Trustee, or any investment manager appointed pursuant to this Paragraph (c), may exercise, from time to time and at any time, the power to hold or dispose of any assets held by the Trust on the date an Unfriendly Change in Control occurs, and shall invest and reinvest the Trust, without distinction between principal and income, in an immunized or dedicated portfolio of bonds, debentures, equipment or collateral trust certificates, notes or other evidences of indebtedness, unsecured or secured by mortgages on real or personal property wherever situated (including any part interest in a bond and mortgage or note and mortgage whether insured or uninsured) and any portfolio of other property, or part interest in property, real or personal, foreign or domestic, such that the rates of return and maturity dates of the instruments of such portfolio may reasonably be expected to yield assets of the Trust sufficient to discharge the Company's obligations under the Plans as set forth in the most recent Participant Data (including, without limitation, the information specified in clause (5) of Paragraph (b) of Article THIRD hereof) furnished to the Trustee prior to such Unfriendly Change in Control. FIFTH: Administrative Powers. The Trustee shall have and in its sole and absolute discretion may exercise from time to time and at any time the following administrative powers and authority with respect to the Trust: (a) To hold property of the Trust in its own name or in the name of a nominee or nominees, without disclosure of the Trust, or in bearer form so that it will pass by delivery, but no such holding shall relieve the Trustee of its responsibility for the safe custody and disposition of the Trust in accordance with the provisions of this Agreement; the Trustee's books and records shall at all times show that such property is part of the Trust; and the Trustee shall be absolutely liable for any loss occasioned by the acts of its nominee or nominees with respect to securities registered in the name of the nominee or nominees; (b) To continue to hold any property of the Trust whether or not productive of income; to reserve from investment and keep unproductive of income, without liability for interest, cash temporarily awaiting investment and such cash as it deems advisable or as the Company from time to time may specify prior to an Unfriendly Change in Control in order to meet the administrative expenses of the Trust or anticipated distributions therefrom; (c) To organize and incorporate under the laws of any state it may deem advisable one or more corporations (and to acquire an interest in any such corporation that it may have organized and incorporated) for the purpose of acquiring and holding title to any property, interests or rights that the Trustee is authorized to acquire under Article FOURTH hereof; (d) To employ in the management of the Trust suitable agents, without liability for any loss occasioned by any such agents selected by the Trustee with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; (e) To make, execute and deliver, as Trustee, any deeds, conveyances, leases, mortgages, contracts, waivers or other instruments in writing that the Trustee may deem necessary or desirable in the exercise of its powers under this Agreement; and (f) To do all other acts that the Trustee may deem necessary or proper to carry out any of the powers set forth in Articles FOURTH, FIFTH, and SIXTH hereof or otherwise in the best interests of the Trust. SIXTH: Insurance and Annuity Contracts. (a) The Trustee, upon written direction of the Company prior to an Unfriendly Change in Control, shall pay from the Trust such sums to such insurance company or companies as. the Company may direct for the purpose of procuring participating or nonparticipating insurance and/or annuity contracts for the Trust (hereinafter in Article SIXTH referred to as "Contracts"). The Company shall prepare, or cause to be prepared in such form as it shall prescribe, the application for any Contract to be applied for. The Trustee shall receive and hold in the Trust, subject to the provisions hereinafter set forth in this Article SIXTH, all Contracts so obtained. (b) The Trustee shall be the complete and absolute owner of Contracts held in the Trust and, upon written direction of the Company prior to an Unfriendly Change in Control, shall have the power, without the consent of any other person, to exercise any and all of the rights, options or privileges that belong to the absolute owner of any Contract held in the Trust or that are granted by the terms of any such Contract or by the terms of this Agreement. Prior to an Unfriendly Change in Control, the Trustee shall have no discretion with respect to the exercise of any of the foregoing powers or to take any other action permitted by any Contract held in the Trust, but shall exercise such powers or take such action only upon the written direction of the Company and the Trustee shall have no duty to exercise any of such powers or to take any such action unless and until it shall have received such direction. The Trustee, upon the written direction of the Company prior to an Unfriendly Change in Control, shall deliver any Contract held in the Trust to such person or persons as may be specified in the direction. (c) The Trustee shall hold in the Trust the proceeds of any sale, assignment or surrender of any Contract held in the Trust and any and all dividends and other payments of any kind received in respect of any Contract held in the Trust. (d) Upon the written direction of the Company prior to an Unfriendly Change in Control, the Trustee shall pay from the Trust premiums, assessments, dues, charges and interest, if any, upon any Contract held in the Trust. The Trustee shall have no duty to make any such payment unless and until it shall have received such direction. After an Unfriendly Change in Control, the Trustee shall pay from the Trust premiums, assessments, dues, charges and interest, if any, upon any Contract held in the Trust, without direction from the Company. (e) No insurance company that may issue any Contract or Contracts held in the Trust shall be deemed to be a party to this Agreement for any purpose, or to be responsible in any way for the validity of this Agreement or to have any liability under this Agreement other than as stated in each Contract that it may issue. Any insurance company may deal with the Trustee as sole owner of any Contract issued by it and held in the Trust, without inquiry as to the authority of the Trustee to act, and may accept and rely upon any written notice, instruction, direction, certificate or other communication from the Trustee believed by it to be genuine and to be signed by an officer of the Trustee and shall incur no liability or responsibility for so doing. Any sums paid out by any insurance company under any of the terms of a Contract issued by it and held in the Trust either to the Trustee, or, in accordance with its direction, to any other person or persons designated as payees in such Contract shall be a full and complete discharge of the liability to pay such sums, and the insurance company shall have no obligation to look to the disposition of any sums so paid. No insurance company shall be required to look into the terms of this Agreement, to question any action of the Trustee or to see that any action of the Trustee is authorized by the terms of this Agreement. (f) Anything contained herein to the contrary notwithstanding, neither the Company nor the Trustee shall be liable for the refusal of any insurance company to issue or change any Contract or Contracts or to take any other action requested by the Trustee; nor for the form, genuineness, validity, sufficiency or effect of any Contract or Contracts held in the Trust; nor for the act of any person or persons that may render any such Contract or Contracts null and void; nor for the failure of any insurance company to pay the proceeds and avails of any such Contract or Contracts as and when the same shall become due and payable; nor for any delay in payment resulting from any provision contained in any such Contract or Contracts; nor for the fact that for any reason whatsoever (other than their own negligence or willful misconduct) any Contract or Contracts shall lapse or otherwise become uncollectible. (g) After an Unfriendly Change in Control, the Trustee shall exercise any of the powers set forth in this Article SIXTH without direction from the Company, including the power to negotiate for and purchase Contracts the rates of return and maturity dates of which may reasonably be expected to yield assets of the Trust sufficient to discharge any or all of the obligations of the Company under the Plans. SEVENTH: Taxes, Expenses and Compensation of Trustee. (a) The Company shall pay any Federal, State, Local or other taxes imposed or levied with respect to the corpus and/or income of the Trust or any part thereof under existing or future laws, and the Company, in its discretion, or the Trustee, in its discretion, may contest the validity or amount of any tax, assessment, claim or demand respecting the Trust or any part thereof. The Trustee shall deduct any payroll taxes required to be withheld with respect to any payments made pursuant to the Trust. (b) The Trustee, without direction from the Company, shall pay from the Trust the reasonable and necessary expenses and compensation of counsel and all other reasonable and necessary expenses of managing and administering the Trust that are not paid by the Company including, but not limited to, Participant record keeping expenses, investment management fees, computer time charges, data retrieval and input costs, and charges for time expended by personnel of the Trustee in fulfilling the Trustee's duties. (c) The Company shall pay to the Trustee from time to time such reasonable compensation for its services as trustee as is specified in Schedule 3 or as subsequently agreed to by the Company and the Trustee, but until paid, such compensation and reimbursement for expenses incurred by the Trustee pursuant to this Article SEVENTH shall constitute a charge upon the Trust, such charge to have priority over any payments due participants under the Plans. Notwithstanding the foregoing, in the event the initial three-year term of this Agreement or any renewal term ends during a Threatened Change in Control Period, or after an Unfriendly Change in Control, the Trustee's compensation for each twelve-month period beginning upon termination of such initial or renewal term shall be adjusted for any increases in the cost of living by multiplying the rate of compensation at the end of such initial or renewal term by a fraction (but not less than one)1 the numerator of which is the monthly average for such twelve- month period of the Consumer Price Index for the New York City Standard Metropolitan Statistical Area, as published by the Bureau of Labor Statistics, and the denominator of which is the monthly average of said Consumer Price Index for the last twelve months of the initial term, or the last renewal term, if any. If the Consumer Price Index referred to in the preceding sentence is hereafter discontinued or revised so that the computation of the adjustment cannot be made in the manner hereinabove provided, then such other index then published by the United States Government, or an agency or department thereof, as shall most closely approximate the Consumer Price Index in effect on the date hereof, shall be used to make such adjustment. Any such adjustment shall be billed when computed as an additional fee in respect of the twelve-month period to which it relates and shall be payable within thirty (30) days of the date billed, and the Trustee's compensation, as so adjusted, shall become the minimum fee for the next succeeding twelve-month period. (d) After an Unfriendly Change in Control, the Trustee shall bill the Company directly, on a monthly basis, for all expenses described in Paragraph (b) of this Article SEVENTH and all fees described in Paragraph (c) thereof which amounts shall be immediately due and payable except as otherwise provided in Paragraph (c). If such amounts are not paid by the Company within thirty (30) days of the billing date, the Trustee may pay such amounts from the Benefits Protection Account. The Trustee may commence legal action to recover any amount not paid within thirty (30) days of the billing date, and shall be obligated to commence such an action if the Company's failure to pay causes a reduction below $1,500,000 in the assets of the Trust attributable to the Benefits Protection Account. EIGHTH: General Duties of Trustee and Investment Director. (a) Subject to Article FIFTEENTH hereof, the Trustee, any Investment Director appointed pursuant to Paragraph (b) of Article FOURTH, and any Investment Manager appointed pursuant to Paragraph (c) of Article FOURTH, shall discharge their duties under this Agreement solely in the interest of the participants in the Plans and their beneficiaries and (1) for the exclusive purpose of providing benefits to such participants and their beneficiaries and defraying reasonable expenses of administering the Plans; and (2) with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; and (3) by diversifying the investments of the Trust so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; but the duties and obligations of the Trustee and any Investment Director shall be limited to those expressly imposed upon them by this Agreement notwithstanding any reference herein to the Plans or the Protected Plans. (b) The Trustee may consult with counsel, who may be counsel for the Company or for the Trustee in its individual capacity, and shall not be deemed imprudent by reason of its taking or refraining from taking any action in accordance with the opinion of counsel. (c) (1) Within thirty (30) days after an Unfriendly Change in Control, the Company shall notify participants and beneficiaries of the Protected Plans in writing of the Trustee's availability to aid them in pursuing any claims they may have against the Company under the terms of those of the Protected Plans under which they are covered. The Company shall provide such notice by using the same method used by Department of Labor 29 C. F. R. Section 2520. 104b-1(b)(1) as now in effect without regard to subsequent amendments. If the Company fails to do so, the Trustee shall provide such notification by placing an advertisement in one newspaper of general circulation in each of the ten locations in which the largest number of employees are located as communicated by the Company to the Trustee prior to an Unfriendly Change in Control. (2) If, after an Unfriendly Change of Control, a participant or beneficiary of a Protected Plan notifies the Trustee that the Company (or insurance company, contract administrator or any other party, if applicable) has refused to pay a claim asserted by the participant or beneficiary under any of the Protected Plans, and the Trustee determines that the assets held in the Accounts are not available to pay such claim, then, unless the Trustee shall determine that the claim has no basis in law and fact (in which case the Trustee shall notify the participant or beneficiary of such determination and shall take no further action with respect to the claim), the Trustee: (A) will promptly attempt to negotiate with the Company (or insurance company, contract administrator or other party, if applicable) to obtain payment, settlement, or other disposition of the claim, subject to the consent of the participant or beneficiary; (B) will if (i) negotiations fail after sixty (60) days of their commencement to result in a payment, settlement or other disposition agreeable to the participant or beneficiary (hereafter referred to in this Paragraph (c) of Article EIGHTH as the "Plaintiff"), (ii) the Trustee at any time reasonably believes further negotiations not to be in the Plaintiff's best interest, or (iii) any applicable statute of limitations would otherwise expire within sixty (60) days, upon the receipt of written authorization from the Plaintiff in substantially the form attached as Exhibit A hereto, institute and maintain legal proceedings (the "Litigation") against the Company or other appropriate person or entity to recover on the claim on behalf of the Plaintiff; and (C) may, subject to the written consent of the Plaintiff, settle or discontinue the Litigation. The Trustee shall direct the course of the Litigation and shall keep the Plaintiff informed of the progress of the Litigation as the Trustee deems appropriate, but no less frequently than quarterly. If, during the Litigation, (i) the Plaintiff directs in writing that the Litigation on behalf of the Plaintiff be settled or discontinued, the Trustee shall take all appropriate action to follow such direction, provided that the written direction specifies the terms and conditions of the settlement or discontinuance, and further provided that the Plaintiff, if requested by the Trustee, shall execute and deliver to the Trustee a document in a form acceptable to the Trustee releasing and holding harmless the Trustee from any liability resulting from the Trustees following such direction; or (ii) the Plaintiff refuses to consent to the settlement or other disposition of the Litigation on terms recommended in writing by the Trustee, the Trustee may proceed, in its sole and absolute discretion, to take such action as it deems appropriate in the Litigation, including settlement or discontinuance of the Litigation, provided that the Trustee shall afford the Plaintiff at least fourteen (14) days' advance notice of any decision to settle or otherwise discontinue the Litigation, subject to the provisions of the following sentence. If, at any time, the Plaintiff (x) revokes in writing (in substantially the form attached as Exhibit B hereto) the authorization of the Trustee to proceed on his behalf and delivers such writing to the Trustee and (y) appoints his own counsel and so notifies the Trustee in writing, whose fees and expenses are not to be paid by the Trust and who shall appear in the Litigation on behalf of the Plaintiff in lieu of counsel retained by the Trustee, then the Trustee shall not be authorized to proceed in the Litigation on behalf of the Plaintiff. Thereafter, the Trustee shall have no obligation to proceed further on behalf of such Plaintiff or to pay any costs or expenses incurred in the Litigation after the date of the delivery of such writing. The Trustee is empowered to retain, at the expense of the Trust, counsel and other appropriate experts, including actuaries and accountants, to aid it in making any determination under this Paragraph (c) of Article EIGHTH and in determining whether to pursue or settle any Litigation. The Trustee shall have the discretion to determine the form and nature that any Litigation against the Company or other appropriate person or entity shall take, and the procedural rules and laws applicable to such Litigation shall supersede any inconsistent provision of this Agreement. (3) Subparagraph (c)(2) shall be inapplicable in respect of any Litigation involving the payment of benefits under any Plan in which the Trustee is named a defendant. Any Plaintiff in an action in which the Trustee is named a defendant shall engage his own counsel, whose fees and expenses shall be paid by the Plaintiff, provided, however, that the Trustee shall pay out of the assets of the Benefits Protection Account of the Trust any legal fees and costs awarded to the Plaintiff by a court in such Litigation pursuant to Section 502 (g) (1) of ERISA. (4) In the event the Trustee determines that the claim of a participant or beneficiary has no basis in law or fact and such participant or beneficiary pursues such claim against the Company, then the Trustee shall reimburse the participant or beneficiary out of the assets of the Benefits Protection Account of the Trust for any reasonable legal fees and other reasonable costs incurred in pursuing such claim if such participant or beneficiary obtains a settlement or final judgment of a court of competent jurisdiction under which the participant or beneficiary is to receive not less than 50% of the amount originally claimed to the Trustee as the amount owed by the Company. (5) With respect to claims by holders of Severance Compensation Agreements, such holders may elect to pursue their own claim (with counsel of their choice) or to have the Trustee pursue such claim. In the event such holders elect to pursue their own claims, the Trustee shall promptly reimburse such holders for all attorneys fees and other expenses incurred to the extent the Company does not pay such amounts as provided in the Severance Compensation Agreements. (d) The Company may designate, prior to an Unfriendly Change in Control, counsel to be retained by the Trustee at the expense of the Trust after an Unfriendly Change in Control, to enforce the rights of participants and beneficiaries to benefits under the Protected Plans, as described above. If the designated counsel declines to provide representation, or the Trustee is not satisfied with the quality of representation provided, the Trustee may, from time to time, dismiss the designated firm or any successor and engage another qualified law firm for this purpose including the same law firm which represents the Trustee with respect to its responsibilities as Trustee under this Agreement. The Company may not dismiss or engage such counsel or cause the Trustee to engage or dismiss such counsel after an Unfriendly Change in Control. NINTH: Indemnification. The Company agrees, to the extent permitted by law, to indemnify and hold the Trustee harmless from and against any liability that it may incur in the administration of the Trust, unless arising from the Trustee's own gross negligence or willful breach of the provisions of its obligations under this Agreement. The Trustee shall not be required to give any bond or any other security for the faithful performance of its duties under this Agreement, except as required by law. TENTH: No Duty To Advance Funds. The Trustee shall have no obligation to advance its own funds for the purposes of fulfilling its responsibilities under this Agreement, and its obligation to incur expenses shall at all times be limited to amounts in the Trust available to be applied toward such expenses. ELEVENTH: Accounts. (a) (1) The Trustee shall keep accurate and detailed accounts of all its receipts, investments and disbursements under this Agreement on a calendar year basis, accounting for each Account on a separate basis. Such person or persons as the Company shall designate shall be allowed to inspect the books of account relating to the Trust upon request at any reasonable time during the regular business hours of the Trustee. (2) Within 120 days after the close of each calendar year, the Trustee shall transmit to the Company, and certify the accuracy of, a written statement of the assets and liabilities of the Trust, showing the current value of each asset at that date, and a written account of all the Trustee's transactions relating to the Trust during the period from the last previous accounting to the close of that year. The report of any such valuation shall not constitute a representation by the Trustee that the amounts reported as fair market values would actually be realized upon the liquidation of the Trust. For the purposes of this Subparagraph, the date of the Trustee's resignation or removal as provided in Article THIRTEENTH hereof or the date of termination of the Trust as provided in Article FOURTEENTH hereof shall be deemed to be the close of a year. (3) Unless the Company shall have filed with the Trustee written exceptions or objections to any such statement and account within 60 days after receipt thereof, the Company shall be deemed to have approved such statement and account; and in such case or upon the written approval by the Company of any such statement and account, the Trustee shall be forever released and discharged with respect to all matters and things contained in such statement and account as though it had been settled by decree of a court of competent jurisdiction in an action or proceeding to which the Company and all persons having any beneficial interest in the Trust were parties. (b) Nothing contained in this Agreement or in the Plans shall deprive the Trustee of the right to have a judicial settlement of its accounts. In any proceeding for a judicial settlement of the Trustee's accounts or for instructions in connection with the Trust, the only other necessary party thereto in addition to the Trustee shall be the Company. If the Trustee so elects, it may bring in as a party or parties defendant any other person or persons. No person interested in the Trust, other than the Company, shall have a right to compel an accounting, judicial or otherwise, by the Trustee, and each such person shall be bound by all accountings by the Trustee to the Company, as herein provided, as if the account had been settled by decree of a court of competent jurisdiction in an action or proceeding to which such person was a party. TWELFTH: Administration of the Plans; Communications. (a) The Company shall administer the Plans as provided therein and subject to Paragraph (b) of Article THIRD and Paragraph (c) of Article EIGHTH hereof, or subject to any other delegation by the Company and assumption by the Trustee of the duties of administering the Plans, the Trustee shall not be responsible in any respect for administering the Plans nor shall the Trustee be responsible for the adequacy of the Trust to meet and discharge all payments and liabilities under the Plans. The Trustee shall be fully protected in relying upon any written notice, instruction, direction or other communication signed by an officer of the Company who is authorized to execute and deliver, in the name and on behalf of the Company, documents or instruments relating to the Trust (hereinafter an "Authorized Officer"). The Company, from time to time, shall furnish the Trustee with the names and specimen signatures of the Authorized Officers and shall promptly notify the Trustee of the termination of office of any Authorized Officer and the appointment of a successor thereto. Until notified to the contrary, the Trustee shall be fully protected in relying upon the most recent list of Authorized Officers furnished to it by the Company. (b) Any action required by any provision of this Agreement to be taken by the Board of Directors of the Company shall be evidenced by a resolution of such Board of Directors certified to the Trustee by the Secretary or an Assistant Secretary of the Company under its corporate seal, and the Trustee shall be fully protected in relying upon any resolution so certified to it. Unless other evidence with respect thereto has been specifically prescribed in this Agreement, any other action of the Company under any provision of this Agreement, including any approval of or exceptions to the Trustee's accounts, shall be evidenced by a certificate signed by an authorized officer, and the Trustee shall be fully protected in relying upon such certificate. The Trustee may accept a certificate signed by an authorized officer as proof of any fact or matter that it deems necessary or desirable to have established in the administration of the Trust (unless other evidence of such fact or matter is expressly prescribed herein), and the Trustee shall be fully protected in relying upon the statements in the certificate. (c) The Trustee shall be entitled conclusively to rely upon any written notice, instruction, direction, certificate or other communication believed by it to be genuine and to be signed by an authorized officer, and the Trustee shall be under no duty to make investigation or inquiry as to the truth or accuracy of any statement contained therein. (d) Until written notice is given to the contrary, communications to the Trustee shall be sent to it at its office at 450 West 33rd Street, New York, New York 10001; communications to the Company shall be sent to it at its office at 39 Old Ridgebury Road, Danbury, Connecticut 06817. THIRTEENTH: Resignation or Removal of Trustee. (a) The Trustee may resign at any time other than during a Threatened Change in Control Period or after an Unfriendly Change in Control upon 60 days' written notice to the Company or such shorter period as is acceptable to the Company. During a Threatened Change in Control Period or after an Unfriendly Change in Control, the Trustee may resign only under one of the following circumstances: (1) The Trustee is no longer in the business, or is actively in the process of removing itself from the business, of acting as trustee for employee benefit plans. (2) The Trustee determines that a conflict of interest exists which would prohibit it from fulfilling its duties under this Agreement in an ethically proper manner, and a law firm (appointed by the President of the Association of the Bar of the City of New York, or by the American Arbitration Association, if the President of the Association of the Bar of the City of New York fails to so appoint within thirty days of a request for such appointment, or notifies the Trustee that it is unable to make such appointment) concurs with the Trustee. The Trustee shall use its best efforts to avoid the creation of such a conflict. The decision of such law firm shall be binding, but may be appealed in the same manner, and under the same conditions, as if it were made by an arbitrator. All costs incurred by the Trustee in connection with obtaining or appealing such a decision shall be reimbursable expenses pursuant to Article SEVENTH hereof. (3) The assets of the Trust have been exhausted or are insufficient to pay accrued and reasonably anticipated fees and expenses of the Trustee hereunder, the Company has refused voluntarily to pay the Trustee's accrued fees and expenses as required pursuant to Paragraph (d) of Article SEVENTH and the Trustee has been unsuccessful in obtaining a court order requiring the Company to make such payments or has been unable to collect on a judgment for such fees and expenses. Notwithstanding the above, the Trustee may resign for reasons set forth in (1) or (2) only if it has obtained the agreement of a bank with assets in excess of $2 billion and net worth in excess of $100 million to replace it as trustee under the terms of this Agreement. The decision rendered under (ii), if that is the reason for the Trustee's resignation, may expressly excuse the Trustee from this requirement. In any event, the Trustee shall continue to be custodian of the Trust assets until the new trustee is in place, and the Trustee shall be entitled to expenses and fees through the later of the effective date of its resignation as Trustee and the end of its custodianship of the Trust assets. (b) The Company, by action of its Board of Directors, may, other than during a Threatened Change in Control Period, remove the Trustee before an Unfriendly Change in Control, upon 60 days' written notice to the Trustee, or upon shorter notice if acceptable to the Trustees but in either event, if the removal occurs during the first three years of this Agreement, the Company shall pay to the Trustee all fees (but not expenses) which would have been due the Trustee for the remainder of such initial three-year period. If the removal occurs after the first three years of this Agreement, the Company shall pay to the Trustee all fees (but not expenses) which would have been due the Trustee through the next one-year anniversary of the effective date of this Agreement. The Company may not remove the Trustee during a Threatened Change in Control Period or after an Unfriendly Change in Control. In the event it resigns or is removed, the Trustee shall have a right to have its accounts settled as provided in Article ELEVENTH hereof. (c) Each successor trustee shall have the powers and duties conferred upon the Trustee in this Agreement, and the term "Trustee" as used in this Agreement shall be deemed to include any successor trustee. Upon designation or appointment of a successor trustee, the Trustee shall transfer and deliver the Trust to the successor trustee, reserving such sums as the Trustee shall deem necessary to defray its expenses in settling its accounts, to pay any of its compensation due and unpaid and to discharge any obligation of the Trust for which the Trustee may be liable. If the sums so reserved are not sufficient for these purposes, the Trustee shall be entitled to recover the amount of any deficiency from either the Company or the successor trustee, or both. When the Trust shall have been transferred and delivered to the successor trustee and the accounts of the Trustee have been settled as provided in Article ELEVENTH hereof, the Trustee shall be released and discharged from all further accountability or liability for the Trust and shall not be responsible in any way for the further disposition of the Trust or any part thereof. FOURTEENTH: Amendment of Agreement; Termination of Trust. (a) Subject to Paragraph (b) of this Article FOURTEENTH, the Company expressly reserves the right at any time to amend or terminate this Agreement and the Trust created thereby to any extent that it may deem advisable. No amendment shall be made without the Trustee's consent thereto in writing if, and to the extent that, the effect of such amendment is to increase the Trustee's responsibilities hereunder. Such proposed amendment shall be delivered to the Trustee as a written instrument of amendment, duly executed and acknowledged by the Company and accompanied by a certified copy of a resolution of the Board of Directors of the Company authorizing such amendment. The Company also shall deliver to the Trustee a copy of any modifications or amendments to the Plans. The Trustee's consent shall not be required for the termination of the Trust or its removal as Trustee. (b) Notwithstanding any other provisions of this Agreement, the provisions of this Agreement and the Trust created thereby may not be amended after the date an Unfriendly Change in Control occurs without the written consent of a majority in number of participants and beneficiaries. The Trustee may request that the Company furnish evidence to establish that such a majority in number of participants and beneficiaries have granted written consent to such an amendment. The Trustee, after an Unfriendly Change in Control, upon written advice of counsel, may amend the provisions of this Agreement to the extent required by applicable law. The Company reserves the right to amend or eliminate this Paragraph (b) of Article FOURTEENTH prior to the date of an Unfriendly Change in Control. (c) In the event the Company terminates the Trust prior to the occurrence of an Unfriendly Change in Control, other than during a Threatened Change in Control Period, the Trustee (subject to the provisions of Paragraph (d) of Article THIRD and Article FIFTEENTH hereof and reserving such sums as the Trustee shall deem necessary in settling its accounts and to discharge any obligation of the Trust for which the Trustee may be liable) shall distribute all remaining assets of the Trust in accordance with the written directions of the Company. (d) In case any one or all of the Equalization Plan, the Supplemental Retirement Income Plan, the 1983 Bonus Deferral Plan, the 1984 Bonus Deferral Plan and the Key International Management Plan is terminated in whole or in part after an Unfriendly Change in Control occurs, then the Trustee, subject to the provisions of Paragraph (d) of Article THIRD, and Article FIFTEENTH hereof, and reserving such sums as the Trustee shall deem necessary in settling its accounts and to discharge any obligation of the Trust for which the Trustee may be liable) shall apply or distribute the Account established with regard to such Plan pursuant to Paragraph (a) of Article SECOND, in such manner and in such amounts as the Trustee shall determine based upon the most recent Participant Data (as defined in Paragraph (b) of Article THIRD hereof) forwarded by the Company to the Trustee prior to such Unfriendly Change in Control and any supplemental information furnished to the Trustee by a participant or beneficiary upon which the Trustee may reasonably rely in making such a determination. After satisfying all liabilities with regard to such terminated Plan, from the Account established with regard to such Plan, the Trustee shall distribute the remaining assets in such Account in accordance with Paragraph (c)(8) of Article SECOND. Subject to Paragraph (b) of Article FIFTEENTH, in the event of an Unfriendly Change in Control, the Trust shall continue in effect until the later of the fifth one year anniversary of the date on which an Unfriendly Change in Control occurs or the date upon which all of the participants' and beneficiaries' benefits under all of the Plans have been paid or otherwise provided for. Upon termination of the Trust, the Trustee shall have a right to have its account settled as provided in Article ELEVENTH hereof. Any assets remaining in the Trust after payment or provision for all benefits payable under the Plans, and after the Trustee has reserved such sums as it deems necessary for the payment of its expenses and fees hereunder shall be paid in accordance with the written directions of the Company. When the Trust assets shall have been so applied or distributed and the accounts of the Trustee shall have been so settled, the Trustee shall be released and discharged from all further accountability or liability respecting the Trust. FIFTEENTH: Prohibition of Diversion. (a) Except as provided in Paragraph (b) below, at no time prior to the satisfaction of all liabilities with respect to the beneficiaries under this Trust shall any part of the corpus and/or income of the Trust be used for, or diverted to, purposes other than for the exclusive benefit of such beneficiaries and the assets of the Trust shall never inure to the benefit of the Company and shall be held for the exclusive purposes of providing benefits to participants in the Plans and their beneficiaries and defraying reasonable expenses of administering the Plans or performing any of the Trustee's duties under this Agreement. (b) Notwithstanding any provision of this Agreement to the contrary, the assets of the Trust shall at all times be subject to claims of the creditors of the Company. In the event that (1) a final judicial determination is entered that the Company is unable to pay its debts as such debts mature or (2) there shall have been filed by or against the Company in any court or other tribunal either of the United States or of any State or of any other authority now or hereafter exercising jurisdiction, a petition in bankruptcy or insolvency proceedings or for reorganization or for the appointment of a receiver or trustee of all or substantially all of the Company's property under the present or any future Federal bankruptcy code or any other present or future applicable Federal, State or other bankruptcy or insolvency statute or law, then the Trustee shall not make payments from the Trust to any participant or beneficiary, but under either of such circumstances, the Trustee shall deliver any property held in the Trust only as a court or other tribunal of competent jurisdiction may direct to satisfy the claims of the Company's creditors. The Trustee shall resume payments under the terms of the Trust only after determining that the Company is not insolvent or after receiving a judicial decision to that effect. The Principal Financial Officer of the Company, or an officer of the Company with duties similar to those of a Principal Financial Officer, and the Board of Directors of the Company shall have the duty to inform the Trustee of the insolvency of the Company. The Trustee is empowered to retain, at the expense of the Trust, counsel and other appropriate experts, including accountants, to aid it in making any determination with regard to the Company's insolvency under this Paragraph (b) of Article FIFTEENTH. SIXTEENTH: Prohibition of Assignment of Interest. No interest, right or claim in or to any part of the Trust or any payment therefrom shall be assignable, transferable or subject to sale, mortgage, pledge, hypothecation, commutation, anticipation, garnishment, attachment, execution or levy of any kind, and the Trustee shall not recognize any attempt to assign, transfer, sell, mortgage, pledge, hypothecate, commute or anticipate the same, except to the extent required by law. SEVENTEENTH: Affiliates. Any corporation that, directly or through one or more intermediaries, controls, is controlled by or is under common control with the Company may adopt and become a party to this Agreement by delivering to the Trustee an instrument in writing, duly executed and acknowledged, adopting and assuming jointly and severally the obligations of the Company under this Agreement and constituting and appointing the Company to be the agent and attorney in fact of such corporation for the purposes of giving or receiving notices, instructions, directions and other communications to or from the Trustee and approving the accounts of the Trustee, accompanied by duly certified copies of resolutions of the Board of Directors of such corporation adopting the Plans and approving and authorizing execution, acknowledgment and delivery of such instrument and a duly certified copy of a resolution of the Board of Directors of the Company approving and consenting to the same. Notwithstanding the foregoing, no Affiliate may become a party to this Agreement after an Unfriendly or Threatened Change in Control. EIGHTEENTH: Miscellaneous. (a) This Agreement shall be interpreted, construed and enforced, and the trust hereby created shall be administered, in accordance with the laws of the United States and of the State of New York. Nothing in this Agreement shall be construed to subject either the Trust created hereunder or the Plans to the Employee Retirement Income Security Act of 1974, as amended. (b) The titles to Articles of this Agreement are placed herein for convenience of reference only, and the Agreement is not to be construed by reference thereto. (c) This Agreement shall bind and inure to the benefit of the successors and assigns of the Company and the Trustee, respectively and the Plans. (d) This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original but all of which together shall constitute but one instrument, which may be sufficiently evidenced by any counterpart. (e) If any provision of this Agreement is determined to be invalid or unenforceable the remaining provisions shall not for that reason alone also be determined to be invalid or unenforceable. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their respective names by their duly authorized officers under their corporate seals as of the day and year first above written. UNION CARBIDE CORPORATION By ATTEST: Secretary MANUFACTURERS HANOVER TRUST COMPANY By ATTEST: Trust Officer EXHIBIT A Authorization Pursuant to Paragraph (c) of Article EIGHTH of Union Carbide Corporation Benefits Protection Trust TO: Manufacturers Hanover Trust Company This is to authorize the Manufacturers Hanover Trust Company, as Trustee of the Union Carbide Corporation Benefits Protection Trust (the "Trust"), to institute and maintain legal proceedings against the Company (as defined in the Trust) or other appropriate person or entity to assert the following claim on my behalf: [nature of claim]. The Trustee shall have the powers and be subject to the procedures set forth in Paragraph (c) of Article EIGHTH of the Trust. Any proceedings by the Trustee under this authorization may be initiated in my name as a plaintiff (or as a member of a class) or in the name of the Trustee, or both, as the Trustee determines is necessary or appropriate at the time proceedings are commenced. Participant EXHIBIT B Revocation of Authorization Pursuant to Paragraph (c) of Article EIGHTH of Union Carbide Corporation Benefits Protection Trust To: Manufacturers Hanover Trust Company This is to notify you that I revoke any prior authorization I have given to you as Trustee of the Union Carbide Corporation Benefits Protection Trust (the "Trust") to maintain legal proceedings against the Company (as defined in the Trust) or other appropriate person or entity to assert the following claim on my behalf: [nature of claim]. I understand that this Revocation of Authorization is conditioned upon, and shall not be effective until, the appointment by me of my own counsel and the appearance of that counsel in any legal proceeding on my behalf in lieu of counsel retained by the Trustee. I understand further that, upon the occurrence of these conditions, the Trustee shall have no obligation to proceed further on my behalf, or to pay any costs or expenses incurred after the delivery of this Revocation of Authorization. Participant STATE OF CONNECTICUT ) : SS. : COUNTY OF ) On this _____ day of ____________, 1989, before me personally came ________________, to me known, who, being by me duly sworn, did depose and say that he resides at ___________________, and that he is _________________ of UNION CARBIDE CORPORATION, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order. STATE OF NEW YORK ) : SS. : COUNTY OF NEW YORK ) On this ____ day of______________, 1989, before me personally came _________________, to me known, who, being by me duly sworn, did depose and say that he resides at ________________, and that he is a Vice President of MANUFACTURERS HANOVER TRUST COMPANY, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instruments is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation; and that he signed his name thereto by like order. SCHEDULE 1 1. The Equalization Benefit Plan for Participants of the Retirement Program Plan for Employees of Union Carbide Corporation and Its Participating Subsidiary Companies (hereinafter, together with all amendments thereto from time to time in effect, referred to as the "Equalization Plan"). 2. The Supplemental Retirement Income Plan (hereinafter, together with all amendments thereto from time to time in effect, referred to as the "Supplemental Retirement Income Plan"). 3. The 1983 Union Carbide Bonus Deferral Program (hereinafter, together with all amendments thereto from time to time in effect, referred to as the "1983 Bonus Deferral Plan"). 4. The 1984 Union Carbide Bonus Deferral Program (hereinafter, together with all amendments thereto from time to time in effect, referred to as the "1984 Bonus Deferral Plan"). 5. The Benefit Plan for Designated Key International Management Employees (hereinafter, together with all amendments thereto from time to time in effect, referred to as the "Key International Management Plan"). 6. All outstanding severance compensation agreements of the Company as approved by the Board of Directors of the Company (hereinafter, together with all amendments thereto from time to time in effect, referred to as "Severance Compensation Agreements"). SCHEDULE 2 1. The Equalization Benefit Plan for Participants of the Retirement Program Plan for Employees of Union Carbide Corporation and It's Participating Subsidiary Companies. 2. The Supplemental Retirement Income Plan. 3. The 1983 Union Carbide Bonus Deferral Program. 4. The 1984 Union Carbide Bonus Deferral Program. 5. The Benefit Plan for Designated Key International Management Employees. 6. All outstanding severance compensation agreements of the Company as approved by the Board of Directors of the Company. 7. Special Severance Protection Program. SCHEDULE 3 TRUSTEE'S FEES Prior to Unfriendly Change in Control $ 55,000 Annually Subsequent to Unfriendly Change in Control $200,000 Annually EX-10.24.3 19 Exhibit 10.24.3 FIRST AMENDMENT TO THE UNION CARBIDE CORPORATION BENEFITS PROTECTION TRUST The Union Carbide Corporation Benefits Protections Trust (the "Trust") is hereby amended as follows: 1. Schedule 1 of the Trust is amended by adding the following sentences at the end thereof: "7. The Union Carbide Corporation Compensation Deferral Program (hereinafter, together with all amendments thereto from time to time in effect, referred to as the "Compensation Deferral Program"). 8. The Union Carbide Corporation Excess Long Term Disability Plan (hereinafter, together with all amendments thereto from time to time in effect, referred to as the "Excess LTD Plan")." 2. Schedule 2 of the Trust is amended by adding the following sentences at the end thereof: "7. Compensation Deferral Program. 8. Excess LTD Plan." 3. The amendment set forth herein shall be effective as of January 1, 1994. UNION CARBIDE CORPORATION By: M.A. Kessinger CHEMICAL BANK By: Geoffrey Tripp EX-10.25 20 EXHIBIT 10.25 February 24, 1988: RESOLVED, that the proper officers of the Corporation be, and they hereby are, authorized to purchase annuities from an insurance company to be selected by the Chief Financial Officer to cover current accrued benefits for retired employees who are participants in either the Equalization Benefit Plan ("EBP") or Supplemental Retirement Income Plan ("SRIP") and to cover only EBP benefits for active employees (with additional annuities to be purchased upon such employees' retirement to provide SRIP benefits and additional annuities to be purchased from time to time to cover EBP benefits which hereafter accrue); and be it further RESOLVED, that the proper officers of the Corporation be, and they hereby are, authorized to withdraw funds currently in the Grantor Trust established in connection with the EBP and the SRIP; and be it further RESOLVED, that the proper officers of the Corporation be, and they hereby are, authorized to amend Article Thirteenth of the Grantor Trust Agreement with Manufacturers Hanover Trust Company to allow the withdrawal of funds by the Corporation; and be it further RESOLVED, that the proper officers of the Corporation be, and they hereby are, authorized to make cash payments to participants, in amounts to be determined by the Chief Financial Officer, to enable such participants to meet their tax obligations created by the purchase of annuities; and be it further RESOLVED, that the proper officers of this Corporation be, and they hereby are, authorized to execute or cause to be executed such documents and other writings, and to take or do or cause to be taken or done such other actions or things, as may be necessary or desirable to effectuate the purposes and intent of the foregoing resolutions. EX-10.26 21 EXHIBIT 10.26 June 28, 1989: RESOLVED, that the proper officers of the Corporation be, and they hereby are, authorized to purchase an annuity from an insurance company to provide benefits for active employees under the Supplemental Retirement Income Program resulting from the $200,000 (as indexed) limit on pensionable compensation under the Retirement Program Plan; and be it further RESOLVED, that the proper officers of this Corporation be, and they hereby are, authorized to execute or cause to be executed such documents and other writings, and to take or do or cause to be taken or done such other actions or things, as may be necessary or desirable to effectuate the purposes and intent of the foregoing resolution. EX-10.27 22 EXHIBIT 10.27 UNION CARBIDE CORPORATION NON-EMPLOYEE DIRECTORS' RETIREMENT PLAN TABLE OF CONTENTS Section Title Page 1 Purpose 1 2 Definitions 1 3 Administration 2 4 Participation 2 5 Retirement Benefits 3 6 Death Benefits 5 7 Amendment, Suspensions or Termination 5 8 General 5 UNION CARBIDE CORPORATION NON-EMPLOYEE DIRECTORS' RETIREMENT PLAN Section 1: Purpose. The purpose of the Union Carbide Corporation Non-Employee Directors' Retirement Plan (hereinafter referred to as the "Plan") is to provide an additional incentive for Non-Employee Directors to continue in service to the Corporation and to attract future Non-Employee Directors to the Corporation. Section 2: Definitions. Unless the context clearly requires a different meaning, the following words shall have the following meanings when used herein. (a) "Annual Basic Benefit" means the benefit described in Section 5.2. (b) "Benefit Period" means the period described in Section 5.3. (c) "Board" means the Board of Directors of the Corporation. (d) "Corporation" means Union Carbide Corporation. (e) "Disability" means a disability of such a nature that it prevents a Director from performing his or her duties as a Director for the Corporation. (f) "Effective Date" means January 1, 1991. (g) "Non-Employee Director" or "Director" means a member or former member of the Board who is not considered as an employee by the Corporation or any Subsidiary. (h) "Plan Year" means the calendar year. (i) "Retainer" means the annual base fee as adjusted from time to time, paid to members of the Board as compensation for their service. Such term excludes (in addition to any other excludable amounts) (i) any additional fees paid for attendance at any meeting of the Board or a committee thereof, or chairing any committee, (ii) any stock awards paid to a Director, and (iii) any reimbursement of expenses paid to a Director. (j) "Subsidiary" means any corporation of which more than 50% of the voting stock is owned directly or indirectly by the Corporation. (k) "Surviving Spouse Benefit" means the benefit, if any, payable under Section 5.4. (l) "Year of Service" means a Plan Year or any calendar year prior to the Effective Date during which a Non-Employee Director served as a member of the Board throughout the entirety of such year. Only years as a Non-Employee Director shall count as Years of Service for purposes of this Plan. Section 3: Administration. This Plan shall be administered by the Nominating Committee (hereinafter referred to as the "Committee") of the Board of Directors or such other committee as the Board shall designate. The Committee shall have full discretionary authority to interpret the Plan, establish administrative regulations to further the purpose of the Plan and take any other action necessary to the proper operation of the Plan. All decisions and acts of the Committee shall be final and binding upon all Participants. Section 4: Participation. Each non-employee who is a Non-Employee Director of the Corporation on the Effective Date of the Plan or who thereafter becomes a Non-Employee Director of the Corporation shall be a Participant in the Plan (herein referred to as a "Participant"). Section 5: Annual Basic Benefits. 5.1. Eligibility. To receive an Annual Basic Benefit under the Plan, a Non-Employee Director must: (1) have completed at least five (5) Years of Service as a Non-Employee Director; and (2) no longer serve as a Non-Employee Director of the Corporation. 5.2. Amount of Benefits. The annual amount of a Non-Employee Director's Annual Basic Benefit shall equal one-hundred percent (100%) of the Retainer in effect at the time the Non-Employee Director terminates service as a Non-Employee Director. 5.3 Benefit Period. A Non-Employee Director's Benefit Period shall be his or her life expectancy and shall commence at the later of (i) age 65, or (ii) termination of service with the Corporation. 5.4 Surviving Spouse Benefit. Upon the death of a Non-Employee Director prior to termination of service with the Corporation, and provided the Non-Employee Director had completed five (5) Years of Service as a Non-Employee Director, a benefit equal to fifty percent (50%) of the Retainer in effect at the time the Non-Employee Director dies shall be paid to his or her surviving spouse, if any, for a period of ten (10) years. There shall be no benefits payable on behalf of a Non-Employee Director or any beneficiary subsequent to his or her death if such Non-Employee Director has no surviving spouse. 5.5 Payment of Benefit. Within thirty (30) days after a Non-Employee Director becomes eligible for benefits under the Plan, the Corporation shall pay such Non-Employee Director a lump sum payment equal to the then net present value of the Annual Basic Benefit for the Benefit Period. The Surviving Spouse Benefit payable in accordance with Section 5.4 shall be paid to the surviving spouse within thirty (30) days of the date of the Non-Employee Director's death, in a lump sum payment equal to the then net present value of the Surviving Spouse Benefit. 5.6 Net Present Value. For purposes of Section 5.5, net present value shall be determined using (i) the discount rate of interest established by the Pension Benefit Guaranty Corporation as in effect thirty (30) days prior to the time of distribution of the Non-Employee Director's retirement benefit or the Surviving Spouse Benefit, as applicable, and (ii) the 1983 Group Annuity Mortality Table. 5.7. Disability or Death. If any Non-Employee Director terminates service as a Non-Employee Director before completing five (5) Years of Service as a result of a Disability or death, notwithstanding the requirements of Section 5.1, the Committee may authorize a benefit to be paid to such Non-Employee Director or the surviving spouse under this Plan. Section 6: Assignment and Alienation of Benefits. No retirement benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, transfer, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, assign, transfer, pledge, encumber, or charge the same shall be void. No rights or benefits hereunder shall in any manner be liable for or be subject to the debts, contracts, liabilities, engagements, or torts of the person entitled to such benefit and, to the extent permitted by law, the rights of any Non-Employee Director shall not be subject in any manner to attachment or other legal process for the debts of such Non-Employee Director. Section 7: Amendment, Suspensions or Termination. The Board of Directors may amend, suspend or terminate the Plan at any time; provided, however, that no such termination of the Plan shall alter or impair the rights of a Non-Employee Director to receive a benefit under the Plan if such Non-Employee Director would be eligible to receive a benefit at the time of termination but for the Director's continuing to serve as a Non-Employee Director at the time of such Plan termination. Section 8: General 8.1. Nothing in the Plan shall be deemed to confer upon any Non-Employee Director any right to continued service as director of the Corporation or any Subsidiary or affect any right of the Corporation or a Subsidiary, acting through their Board of Directors or otherwise, to terminate or otherwise affect the service of such Non-Employee Director. 8.2. The Plan shall be interpreted in accordance with, and the enforcement of the Plan shall be governed by, the laws of the State of New York. 8.3. All costs and expenses incurred in the operation and administration of this Plan shall be borne by the Corporation. 8.4. This Plan is intended to be administered as an unfunded employee benefit plan established and maintained primarily for the purpose of providing deferred compensation for a select group of Management or highly compensated employees within the meaning of Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended. EX-10.28 23 EXHIBIT 10.28 1994 UNION CARBIDE LONG-TERM INCENTIVE PLAN 1994 UNION CARBIDE LONG-TERM INCENTIVE PLAN Section 1: Purpose. The purpose of the 1994 Union Carbide Long- Term Incentive Plan (hereinafter referred to as the "Plan") is to (a) advance the interests of Union Carbide Corporation (the "Corporation") and its stockholders by providing incentives and rewards to those employees who are in a position to contribute to the long-term growth and profitability of the Corporation; (b) assist the Corporation and its subsidiaries and affiliates in attracting, retaining, and motivating highly qualified employees for the successful conduct of their business; and (c) make the Corporation's compensation program competitive with those of other major employers. Section 2: Definitions. 2.1 A "Change in Control of the Corporation" shall be deemed to occur in the event that any of the following circumstances have occurred: (i) if a change in control of the Corporation would be required to be reported in response to Item 1(a) of the Current Report on Form 8- K as in effect on the date hereof, pursuant to Sections 13 or 15(d) of the Exchange Act, whether or not the Corporation is then subject to such reporting requirement; (ii) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act (x) becomes the "beneficial owner", as defined in rule 13d-3 under the Exchange Act, of more than 20% of the then outstanding voting securities of the Corporation, otherwise than through a transaction or transactions arranged by, or consummated with the prior approval of, the Board or (y) acquires by proxy or otherwise the right to vote for the election of directors, for any merger or consolidation of the Corporation or for any other matter or question, more than 20% of the then outstanding voting securities of the Corporation, otherwise than through an arrangement or arrangements consummated with the prior approval of the Board; (iii) if during any period of twenty-four consecutive months (not including any period prior to the adoption of this section), Present Directors and/or New Directors cease for any reason to constitute a majority of the Board; For purposes of this subsection (iii), "Present Directors" shall mean individuals who at the beginning of such consecutive twenty-four month period were members of the Board and "New Directors" shall mean any director whose election by the Board or whose nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the Directors then still in office who were Present Directors or New Directors; or (iv) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act that is the "beneficial owner" as defined in Rule 13d-3 under the Exchange Act of 20% or more of the then outstanding voting securities of the Corporation commences soliciting proxies. 2.2: "Code" means the Internal Revenue Code of 1986, as now or hereafter amended. 2.3: "Employee" means all employees of the Corporation or of a subsidiary or affiliate of the Corporation participating in the Plan, including officers of the Corporation, as well as officers of the Corporation who are also directors of the Corporation. However, an individual who is a member of the Committee shall not be an "employee" for purposes of this Plan. 2.4: "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 2.5: "Exercise Payment" is a payment upon the exercise of a stock option of an amount determined by the Committee in its discretion, which amount shall not be greater than 60% of the excess of the Market Price over the option price of the stock acquired upon the exercise of the option. 2.6: "Incentive Stock Option" means any stock option granted pursuant to this Plan which is designated as such by the Committee and which complies with Section 422 of the Code. 2.7: "Market Price" is the mean of the high and low prices of the common stock of the Corporation as reported in the New York Stock Exchange-Composite Transactions on the date the option or stock appreciation right is exercised (or on the next preceding day such stock was traded on a stock exchange included in the New York Stock Exchange-Composite Transactions if it was not traded on any such exchange on the date the option or stock appreciation right is exercised), except that in the case of a stock appreciation right that is exercised for cash during the first three days of the ten-day period set forth in Section 7.5, "Market Price" is the highest daily closing price of the common stock of the Corporation as reported in the New York Stock Exchange-Composite Transactions during such ten-day period. Notwithstanding the foregoing provisions, if a stock appreciation right is exercised during the 60-day period commencing on the date of a Change in Control of the Corporation, the Market Price for purposes of determining the stock appreciation shall be the highest of (1) the market price of the common stock of the Corporation, as determined under the preceding sentence; (2) the highest market price of a share of the common stock of the Corporation during the period commencing on the ninetieth day preceding the date of exercise of the stock appreciation right and ending on the date of exercise of the stock appreciation right; (3) the highest price per share of common stock of the Corporation shown on Schedule 13D or an amendment thereto filed pursuant to Section 13(d) of the Securities Exchange Act of 1934 by any person holding 20% of the combined voting power of the Corporation's then outstanding voting securities; or (4) the highest price paid or to be paid per share of common stock of the Corporation pursuant to a tender or exchange offer as determined by the Committee. 2.8: "Non-Qualified Stock Option" means any stock option granted pursuant to this Plan which is not an Incentive Stock Option. 2.9: "Retirement" shall mean retirement from employment by the Corporation or a subsidiary or affiliate with the right to receive immediately a non-actuarially reduced pension under the Corporation's Retirement Program. 2.10: "Restricted Stock" means stock of the Corporation subject to restrictions on the transfer of such stock, conditions of forfeitability of such stock, or any other limitations or restrictions as determined by the Committee. 2.11: "Stock Appreciation" shall be based on the excess of the Market Price of the common stock over the option price of the related option stock, as determined by the Committee. Section 3: Participation. The Participants in the Plan ("Participants") shall be those Employees serving in a managerial, administrative, or professional position who are selected to participate in the Plan by the Committee of the Board of Directors of the Corporation named to administer the Plan pursuant to Section 4. Section 4: Administration. The Plan shall be administered and interpreted by a Committee of three or more members of the Board of Directors (hereinafter referred to as the "Committee") appointed by the Board. Members of the Committee are not eligible to participate in the Plan and no member may have been eligible for selection as a person to whom stock may be allocated or to whom stock options or stock appreciation rights may be granted pursuant to the Plan or any other plan of the Corporation or any of its affiliates within one year prior to serving on the Committee. All decisions and acts of the Committee shall be final and binding upon all Participants. The Committee shall: (i) determine the number and types of awards to be made under the Plan; (ii) select the awards to be made to Participants; (iii) set the option price, the number of options to be awarded, and the number of shares to be awarded out of the total number of shares available for award; (iv) delegate to the Chief Executive Officer of the Corporation the right to allocate awards among Employees who are not officers or directors of the Corporation within the meaning of the Exchange Act, such delegation to be subject to such terms and conditions as the Committee in its discretion shall determine; (v) establish administrative regulations to further the purpose of the Plan; and (vi) take any other action desirable or necessary to interpret, construe or implement properly the provisions of the Plan. Section 5: Awards. Awards under this Plan may be in any of the following forms (or a combination thereof): (i) stock option awards; (ii) stock appreciation rights; (iii) exercise payment rights; (iv) grants of stock or Restricted Stock; or (v) performance awards. Except as otherwise defined herein, "stock" shall mean the common stock, $1.00 par value, of the Corporation. All awards shall be made pursuant to award agreements between the Participant and the Corporation. The agreements shall be in such form as the Committee approves from time to time. a. Maximum Amount Available. The total number of shares of stock (including Restricted Stock, if any) optioned or granted under this Plan during the term of the Plan shall not exceed 7,500,000 shares. No Participant may be granted, in the aggregate, awards which would result in the Participant receiving more than 10% of the maximum number of shares available for award under the Plan. Solely for the purpose of computing the total number of shares of stock optioned or granted under this Plan, there shall not be counted any shares which have been forfeited and any shares covered by an option which, prior to such computation, has terminated in accordance with its terms or has been canceled by the Participant or the Corporation. b. Adjustment in the Event of Recapitalization, etc. In the event of any change in the outstanding shares of the Corporation by reason of any stock split, stock dividend, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change or in the event of any special distribution to the stockholders, the Committee shall make such equitable adjustments in the number of shares and prices per share applicable to options then outstanding and in the number of shares which are available thereafter for Stock Option Awards or other awards, both under the Plan as a whole and with respect to individuals, as the Committee determines are necessary and appropriate. Any such adjustment shall be conclusive and binding for all purposes of the Plan. Section 6: Stock Options. 6.1: The Corporation may award options to purchase common stock or Restricted Stock of the Corporation (hereinafter referred to as "Stock Option Awards") to such Participants as the Committee, or the Chief Executive Officer of the Corporation, if the Committee in its discretion delegates the right to allocate awards pursuant to Section 4, authorizes and under such terms as the Committee establishes. The Committee shall determine with respect to each Stock Option Award and designate in the grant whether a Participant is to receive an Incentive Stock Option or a Non-Qualified Stock Option. 6.2: The option price of each share of stock subject to a Stock Option Award shall be specified in the grant, but in no event shall the exercise price be less than the closing price of the common stock of the Corporation on the date the award is authorized as reported in the New York Stock Exchange-Composite Transactions. If the Participant to whom an Incentive Stock Option is granted owns, at the time of the grant, more than ten percent (10%) of the combined voting power of the Participant's employer or a parent or subsidiary of the employer, the option price of each share of stock subject to such grant shall be not less than one hundred ten percent (110%) of the closing price described in the preceding sentence. 6.3: A stock option by its terms shall not be transferable by the Participant other than by will or the laws of descent and distribution, and, during the Participant's lifetime, will be exercisable only by the Participant. A stock option by its terms also shall be of no more than 10 years' duration, except that an Incentive Stock Option granted to a Participant who, at the time of the grant, owns stock representing more than ten percent (10%) of the combined voting power of the Participant's employer or a parent or subsidiary of the employer shall be by its terms be of no more than five (5) years' duration. A stock option by its terms shall be exercisable only after the earliest of: (i) such period of time as the Committee shall determine and specify in the grant, but in no event less than one year following the date of grant of such award; (ii) the Participant's death; or (iii) a Change in Control of the Corporation. An option is only exercisable by a Participant while the Participant is in active employment with the Corporation, or its subsidiary, except (i) in the case of a Participant's death, Retirement or disability; (ii) during a three-year period commencing on the date of a Participant's termination of employment by the Corporation other than for cause; (iii) during a three-year period commencing on the date of termination, by the Participant or the Corporation, of employment after a Change in Control of the Corporation, unless such termination of employment is for cause; or (iv) if the Committee decides that it is in the best interest of the Corporation to permit individual exceptions. An option may not be exercised pursuant to this paragraph after the expiration date of the option. 6.4: An option may be exercised with respect to part or all of the shares subject to the option by giving written notice to the Corporation of the exercise of the option. The option price for the shares for which an option is exercised shall be paid on or within ten business days after the date of exercise in cash, in whole shares of common stock of the Corporation owned by the Participant prior to exercising the option, or in a combination of cash and such shares of common stock. The value of any share of common stock delivered in payment of the option price shall be its Market Price on the date the option is exercised. 6.5: The Committee may, in its discretion, grant to Participants holding stock options the right to receive with respect to each share covered by an option payments of amounts equal to the regular cash dividends paid to holders of the Company's common stock during the period that the option is outstanding (such payments are hereinafter referred to as "Dividend Payments"). 6.6: The aggregate fair market value of all shares of stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant in any one calendar year, under this Plan or any other stock option plan maintained by the Corporation (or by any subsidiary or parent of the Corporation), shall not exceed $100,000. The fair market value of such shares of stock shall be the mean of the high and low prices of the common stock of the Corporation as reported in the New York Stock Exchange - Composite Transactions on the date the related stock option is granted (or on the next preceding day such stock was traded on a stock exchange included in the New York Stock Exchange - Composite Transactions if it was not traded on any such exchange on the date the related stock option is granted). Section 7: Stock Appreciation Rights. 7.1: The Committee may, in its discretion, grant stock appreciation rights to Participants who have received a Stock Option Award. The stock appreciation rights may relate to such number of shares, not exceeding the number of shares that the Participant may acquire upon exercise of a related stock option, as the Committee determines in its discretion. Upon exercise of a stock option by a Participant, the stock appreciation rights relating to the shares covered by such exercise shall terminate. Upon termination or expiration of a stock option, any unexercised stock appreciation rights related to that option shall also terminate. Upon exercise of stock appreciation rights, such rights and the related option to the extent of an equal number of shares shall terminate. 7.2: The Committee at its discretion may revoke at any time any unexercised stock appreciation rights granted to a Participant under this Plan, without compensation to such Participant. Revocation of a Participant's stock appreciation rights under this section shall not affect any related stock options granted to the Participant under this Plan. 7.3: Upon a Participant's exercise of some or all of the Participant's stock appreciation rights, the Participant shall receive an amount equal to the value of the Stock Appreciation for the number of rights exercised, payable in cash, common stock, Restricted Stock, or a combination thereof, at the discretion of the Committee. 7.4: The Committee shall have the discretion either to determine the form in which payment of a stock appreciation right will be made, or to consent to or disapprove the election of the Participant to receive cash in full or partial settlement of the right. Such consent or disapproval may be given at any time before or after the election to which it relates. Notwithstanding the foregoing provision, if a Participant exercises a stock appreciation right during the 60-day period commencing on the date of a Change in Control of the Corporation, the form of payment of such stock appreciation right shall be cash, provided that such stock appreciation right was granted as least six months prior to the date of exercise, and shall be common stock if such stock appreciation right was granted six months or less prior to the date of the exercise. 7.5: Except in the case of a stock appreciation right that was granted at least six months prior to exercise and is exercised for cash during the 60-day period commencing on the date of the Change in Control of the Corporation, any election by the Participant to receive cash in full or partial settlement of the stock appreciation right, as well as any exercise by the Participant of the Participant's stock appreciation right for such cash, shall be made only during the period beginning on the third business day following the date of release of the quarterly or annual summary statements of sales and earnings and ending on the twelfth business day following such date. 7.6: Settlement for exercised stock appreciation rights may be deferred by the Committee in its discretion to such date and under such terms and conditions as the Committee may determine. 7.7: A stock appreciation right is only exercisable and transferable during the period when the stock option to which it is related is also exercisable and transferable, respectively. If the Participant is a person subject to Section 16 of the Exchange Act, the election to exercise the stock appreciation right may not be exercised within six months after the grant of the option, unless otherwise permitted by law. Section 8: Exercise Payments. 8.1: The Committee may, in its discretion, grant to Participants holding stock options the right to receive Exercise Payments relating to such number of shares covered by the Participant's stock options as the Committee determines in its discretion. Exercise Payments shall be reduced by the total amount which may have been received as Dividend Payments pursuant to Section 6.5 with respect to the stock option that is being exercised. 8.2: At the discretion of the Committee, the Exercise Payment may be made in cash, common stock, Restricted Stock, or a combination thereof; provided, however, Exercise Payments may be made in cash to Participants subject to Section 16(b) of the Exchange Act only if they exercise the related stock option during a period beginning on the third business day following the date of release of the quarterly or annual summary statements of sales and earnings and ending on the twelfth business day following such date. Exercise Payments shall be paid within 20 business days following the exercise of a related stock option; provided, however, that payment may be deferred by the Committee in its discretion to such date and under such terms and conditions as the Committee may determine. 8.3: Exercise Payments shall be paid only upon the exercise of related stock options which are exercised by the Participant while an active Employee; provided, however, that in the case of a Participant's death, Exercise Payments will be paid if the related stock options are exercised within nine months after death, but before the expiration of the stock option's term. In the case of a Participant's Retirement, any exercise payments awarded to the Participant will be paid if the stock options are exercised within the later of (i) three months after Retirement or (ii) three months after such options became exercisable, but before the expiration of the term of the stock option. Section 9: Grants of Stock. 9.1: The Committee may grant, either alone or in addition to other awards granted under the Plan, shares of stock or Restricted Stock to such Participants as the Committee, or the Chief Executive Officer of the Corporation, if the Committee in its discretion delegates the right to allocate awards pursuant to Section 4, authorizes and under such terms as the Committee establishes. The Committee, in its discretion, may also make a cash payment to a Participant granted shares of stock or Restricted Stock under the Plan to allow such Participant to satisfy tax obligations arising out of receipt of the stock or Restricted Stock. 9.2: The Committee from time to time may authorize a Participant to elect within 60 days of the receipt of the variable compensation payment paid by the Corporation to the Participant to deposit with the Corporation shares of common stock of the Corporation owned by the Participant with a value on the date of deposit not exceeding twenty-five percent (25%) of the variable compensation payment, and receive a matching grant of an equal number of shares of Restricted Stock subject to the following terms and conditions: (i) A Participant may designate shares of common stock of the Corporation (exclusive of ESOP Stock) held for the Participant's account in the Savings Program for Employees of Union Carbide Corporation and Participating Subsidiary Companies (the "Savings Plan") in lieu of depositing shares of stock owned by the Participant. (ii) The Restricted Stock shall be issued and registered in the name of the Participant but shall be held in the custody of the Corporation until the Restricted Stock becomes non-forfeitable; (iii) The Restricted Stock shall not be transferable until the earlier of (a) three years from the date of grant and (b) the date the Restricted Stock becomes non-forfeitable; (iv) The Restricted Stock shall be forfeited by the Participant if the shares of common stock deposited with the Corporation (or designated pursuant to (i) above) do not remain deposited with the Corporation or so designated for three years from the date of grant; provided, however, that such stock may be withdrawn without any resulting forfeiture upon the Participant's separation from service by reason of death, disability, Retirement or termination by the Corporation without cause if such separation from service occurs within the three year period; (v) The Restricted Stock shall be forfeited by the Participant if the Participant separates from service with the Corporation during the three year period from the date of grant. However, if a Participant separates from service on account of death, disability, or termination by the Corporation without cause, the Restricted Stock shall become nonforfeitable at the time of such separation from service. If the Participant separates from service on account of Retirement, the Restricted Stock shall become nonforfeitable at the expiration of three years from the date of grant, provided the Participant complies with clause (iv) above. (vi) Dividends paid on the stock held in the Participant's Savings Plan accounts and utilized for the purpose of obtaining the Restricted Stock grant under this Section 9.2 shall be paid according to the terms of the Savings Plan; (vii) Dividends paid on the stock deposited with the Corporation during the three-year period from the date of grant shall be distributed to the Participant, or, at the Participant's election, reinvested in the Union Carbide Dividend Reinvestment and Stock Purchase Plan; and (viii) Dividends paid on the Restricted Stock during the three year period from the date of grant shall be held in the custody of the Corporation and reinvested on the Participant's behalf in common stock of the Corporation at its market value at the time of purchase; provided, however, that the stock so purchased shall be forfeited by the Participant if the Restricted Stock to which the dividends relate is forfeited. This provision does not limit the Committee's authority under Section 9.1 to grant Restricted Stock to Participants under different terms than those described in this Section 9.2. Section 10: Performance Awards. 10.1: The Committee may grant, either alone or in addition to other awards granted under the Plan, awards of stock and other awards that are valued in whole or in part by reference to, or are otherwise based on, the market value of the common stock, Restricted Stock or other securities of the Corporation ("Performance Awards") to such Participants as the Committee, or the Chief Executive Officer of the Corporation, if the Committee in its discretion delegates the right to allocate awards pursuant to Section 4, authorizes and under such terms as the Committee establishes. Performance Awards may be paid in common stock, Restricted Stock or other securities of the Company, cash or any other form of property as the Committee shall determine. Performance Awards shall entitle the Participant to receive an award if the measures of performance established by the Committee are met. The measures of performance shall be established by the Committee in its absolute discretion. 10.2: The Committee shall determine the times at which Performance Awards are to be made and all conditions of such awards. 10.3: The Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber shares received pursuant to this Section 10 prior to the date on which any applicable restriction or performance period established by the Committee lapses. Section 11: General Provisions. 11.1: Any assignment or transfer of any awards without the written consent of the Corporation shall be null and void. 11.2: Nothing contained herein shall require the Corporation to segregate any monies from its general funds, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant for any year. 11.3: Participation in this Plan shall not affect the Corporation's right to discharge a Participant. 11.4: Restricted Stock may not be sold or transferred by the Participant until any restrictions that have been established by the Committee have lapsed. 11.5: The Participant shall have, with respect to Restricted Stock, all of the rights of a stockholder of the Corporation, including the right to vote the shares and the right to receive any dividends, unless the Committee shall otherwise determine. 11.6: Upon a Participant's termination of employment during the period any restrictions are in effect, all Restricted Stock shall be forfeited without compensation to the Participant unless the Committee decides that it is in the best interest of the Corporation to permit individual exceptions. Section 12: Amendment, Suspension, or Termination. 12.1: The Board of Directors may suspend, terminate, or amend the Plan, including but not limited to such amendments as may be necessary or desirable resulting from changes in the federal income tax laws and other applicable laws, but may not, without approval by the holders of a majority of all outstanding shares entitled to vote on the subject at a meeting of stockholders of the Corporation, increase the total number of shares of stock that may be optioned or granted under this Plan. 12.2: This Plan is intended to comply with the requirements of Rule 16b-3 under the Exchange Act, as applicable during the term of the Plan. Should the requirements of Rule 16b-3 change, the Board of Directors may amend this Plan to comply with the requirements of that rule or its successor provision or provisions. Section 13: Effective Date and Duration of the Plan. This Plan shall be effective following approval by the stockholders of the Corporation. No award shall be granted under this Plan subsequent to the date of the meeting of shareholders of the Corporation in 1997. EX-10.29 24 Exhibit 10.29 UNION CARBIDE COMPENSATION DEFERRAL PROGRAM UNION CARBIDE COMPENSATION DEFERRAL PROGRAM ARTICLE I PURPOSE 1.1 The purpose of this Program is to (i) allow Eligible Employees under the Variable Compensation Plans to defer a portion or all of their Variable Compensation, (ii) allow Eligible Employees to defer a portion of their base salary, (iii) allow Eligible Employees to defer a portion or all of their lump sum payments otherwise payable from the SRIP and/or Equalization Plan, and (iv) restore to Eligible Employees a portion of their matching contribution under the Savings Program which is limited by restrictions imposed under Section 401(a)(17) of the Code. 1.2 This Program shall be effective for amounts payable on or after January 1, 1995. ARTICLE II DEFINITIONS 2.1 "Administrative Committee" means the Administrative Committee of the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies and certain Non-Qualified Employee Benefit Plans of Union Carbide Corporation. 2.2 "Aggregate Compensation" means the sum of a Participant's Compensation and Deferred Compensation. 2.3 "Annual Plan" means the 1994 Union Carbide Variable Compensation Plan or such successor plan thereto maintained by the Corporation. 2.4 "Applicable Equity Investment Fund Rate" means the difference between the value of each of the applicable investment funds under the Savings Program elected by a Participant under Section 8.2 of this Program: Balanced Fund, Equity Income Fund, Equity Indexed Fund and Equity Growth Fund, determined on a fund by fund basis, as of (i) the later of the Date of Deferral or the effective date of a Participant's election under Section 8.2(c), and (ii) the relevant valuation date for determining the amount of earnings of such investment fund in accordance with Section 8. Such value shall include any hypothetical dividends and hypothetical capital gains distributions paid on such investment fund during the period for which the Applicable Equity Investment Fund Rate is being determined, as if such hypothetical dividends or hypothetical capital gains distributions are reinvested when payable in additional shares of such fund. The value of a respective investment fund for purposes of this Section 2.4, shall mean the net asset value of such investment fund as reported by such fund. 2.5 "Beneficiary" means the person, persons or estate entitled (as determined under Article 7) to receive payment under this Program following a Participant's death. 2.6 "Change in Control" means the occurrence of any of the following: (1) A change in control of the Corporation would be required to be reported in response to item 1(a) of the current Report of Form 8-K, as in effect on the date hereof, pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Corporation is then subject to such reporting requirement; (2) there shall be consummated (A) any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Corporation's common stock would be converted into cash, securities or other property, other than a merger of the Corporation in which the holders of the Corporation's common stock immediately prior to the merger have the same proportion and ownership of common stock of the surviving corporation immediately after the merger, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation, provided, that the divestiture of less than substantially all of the assets of the Corporation in one transaction or a series of related transactions, whether effected by sale, lease, exchange, spin-off, sale of the stock or merger of a subsidiary or otherwise, shall not constitute a Change in Control; (3) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act (A) becomes the "beneficial owner" as defined in Rule 13d-3 under the Exchange Act of more than 20% of the then outstanding voting securities of the Corporation, otherwise than through a transaction or transactions arranged by, or consummated with the prior approval of, the board of directors of the Corporation, or (B) acquires by proxy or otherwise the right to vote for the election of directors, for any merger or consolidation of the Corporation or for any other matter or question more than 20% of the then outstanding voting securities of the Corporation, otherwise than through an arrangement or arrangements consummated with the prior approval of the board of directors of the Corporation; (4) during any period of twenty-four consecutive months, Present Directors and/or New Directors cease for any reason to constitute a majority of the Board of Directors of the Corporation. For purposes of this Agreement, "Present Directors" shall mean individuals who at the beginning of such consecutive twenty-four month period were members of the Board and "New Directors" shall mean any director whose election by the Board of Directors of the Corporation or whose nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the Directors then still in office who were Present Directors or New Directors. Notwithstanding the foregoing, a Change of Control shall not be deemed to occur pursuant to subparagraph (2), above, solely because twenty percent (20%) or more of the combined voting power of the Corporation's then outstanding securities is acquired by one or more employee benefit plans maintained by the Corporation. 2.7 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 2.8 "Compensation Committee" means the Compensation Committee of the Board of Directors of the Corporation. 2.9 "Compensation" means, solely for purposes of this Program, a Participant's taxable base salary, taxable Variable Compensation awarded under a Variable Compensation Plan and any compensation that is deferred by the Participant to any other plan maintained by the Corporation which satisfies the requirements of Code Sections 125 or 401(k). 2.10 "Corporation" means Union Carbide Corporation, a New York Corporation, any predecessor thereof and any successor thereof by merger, consolidation or otherwise. 2.11 "Date of Deferral" means (i) with respect to Variable Compensation, the date on which the Corporation issues checks for Variable Compensation awards for a given Service Year, (ii) with respect to base salary deferral, the date on which the relevant salary would be paid, (iii) with respect to matching contributions made by the Corporation pursuant to Section 5.4 of this Program, December 31st and (iv) with respect to amounts which would otherwise have been paid from the SRIP, or Equalization Plan, the date on which lump sum amounts would have otherwise been distributed in accordance with the terms of such Plan. 2.12 "Deferred Compensation" means the amount of Compensation deferred by a Participant under this Program pursuant to Section 5.3 of this Program. 2.13 "Disability" means a Participant's total physical or mental inability to perform any work for compensation or profit in any occupation for which the Participant is reasonably qualified by reason of training, education or ability, and which inability is adjudged to be permanent, as determined by the Administrative Committee or its designee. 2.14 "Eligible Employee" means (i) an individual who, at the Date of Deferral, is employed in the United States by the Corporation, or one of its subsidiaries that is participating in this Program, and is a participant in the Annual Plan or the Mid- Management Plan or is otherwise approved for participation in this Program by the Compensation Committee. 2.15 "Equalization Plan" means the Equalization Benefit Plan for Participants in the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies. 2.16 "Exchange Act" means the Securities Exchange Act of 1934 as amended. 2.17 "Fixed Income Rate" means the rate of interest for the Fixed Income Fund under the Savings Program, in effect from time to time. 2.18 "Mid-Management Plan" means the 1994 Union Carbide Mid-Management Variable Compensation Plan. 2.19 [Intentionally Omitted] 2.20 "Participant" means an Eligible Employee who (i) elects in advance to defer a portion of his or her base salary in accordance with Section 5.3 of this Program, (ii) elects in advance to defer a portion or all of his or her variable compensation for a given Service Year under one of the Variable Compensation Plans in accordance with Section 5.2 of this Program, if one were to be paid to such Participant for that year, and who is in fact subsequently awarded Variable Compensation for that year, payable during the following calendar year on the Date of Deferral, (iii) elects in advance under this Program to defer his or her lump sum distribution from the SRIP or Equalization Plan or (iv) is a participant in the Savings Program for a given calendar year and receives compensation (as defined in Section 1.12 of the Savings Program) for such calendar year in an amount which is in excess of the compensation which may be considered under Section 1.12 of the Savings Program because of the limitations imposed by Code Section 401(a)(17). 2.21 "Program" means this Union Carbide Compensation Deferral Program. 2.22 "Retirement" means (a) for participants in the Retirement Program, the date on which a Participant attains age 65 or is eligible for a non-actuarially reduced pension benefit under the Retirement Program and actually retires from employment with the Corporation and (b) for those employees who are not participants in the Retirement Program, the date on which a Participant attains age 65, attains age 62 with at least 10 years of service or whose age and service totals at least 85 and actually retires from employment with the Corporation. 2.23 "Retirement Program" means The Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies. 2.24 "Savings Program" means The Savings Program for Employees of Union Carbide Corporation and Participating Subsidiary Companies. 2.25 "Service Year" means one of the calendar years on and after 1994, as to which an election may be made in accordance with Section 5, and in respect of which Variable Compensation may be paid during the following calendar year on the Date of Deferral. 2.26 "SRIP" means the Union Carbide Corporation Supplemental Retirement Income Plan. 2.27 "UCC Discounted Stock Value Rate" means the UCC Stock Value Rate except that the value of the Corporation's common stock as of the Date of Deferral pursuant to which earnings shall accrue at the UCC Stock Value Rate, shall be determined as if purchased as a ten percent (10%) discount. 2.28 "UCC Stock Value Rate" means the difference between the value of the Corporation's common stock as of the later of (i) the Date of Deferral or the effective date of a Participant's election under Section 8.2 pursuant to which earnings shall accrue at the UCC Stock Value Rate and (ii) the relevant date of determination of the amount of earnings in accordance with Section 8(c) of this Program. Such value shall include the value of any hypothetical dividends paid on the common stock during the period for which the UCC Stock Value Rate is being determined, as if such hypothetical dividends were reinvested when payable (at a five percent (5%) discount) in additional shares of the Corporation's common stock as determined on the later of the Date of Deferral or the effective date of a Participant's election under Section 8.2(c) pursuant to which earnings shall accrue at the UCC Stock Value Rate. The value of the Corporation's common stock for purposes of this Section 2.28, shall mean the closing price of the stock on the New York Stock Exchange - Composite Transaction on the relevant date of determination. 2.29 "Unforeseen Emergency" means an event beyond the control of the Participant that would result in severe financial hardship to the Participant if early withdrawal of the Participant's Variable Compensation deferral were not permitted. Whether a Participant has an Unforeseen Emergency shall be determined by the Committee, except if a Participant is subject to Section 16 of the Exchange Act, the Compensation Committee shall determine if such Participant has an Unforeseen Emergency. 2.30 "Variable Compensation" means any amounts awarded in accordance with one of the Variable Compensation Plans. 2.31 "Variable Compensation Plans" means, collectively, the Annual Plan, the Mid-Management Plan and any other variable compensation plan authorized by the Compensation Committee to participate in this Program. ARTICLE III ADMINISTRATION 3.1 Except as otherwise indicated, the Compensation Committee shall supervise the administration and interpretation of this Program, may establish administrative regulations to further the purpose of this Program and shall take any other action necessary to the proper operation of this Program. All decisions and acts of the Compensation Committee shall be final and binding upon all Participants, their Beneficiaries and all other persons. ARTICLE IV ELIGIBILITY 4.1 To be eligible to participate in this Program for a given year, a person must have become an Eligible Employee not later than the day on or before the date which an Eligible Employee must make the election provided for in Section 5 of this Program for that year and be employed by the Corporation on the Date of Deferral for that year. ARTICLE V DEFERRALS 5.1 During each of the years this Program is in effect, Eligible Employees shall be informed of the opportunity to participate in this Program. An Eligible Employee choosing to participate in this Program must make an election to do so on or before the date designated by the Administrative Committee and otherwise in accordance with such procedures as may be established by the Administrative Committee. 5.2 (a) While an election to defer Variable Compensation under one of the Variable Compensation Plans shall be irrevocable when made until the next scheduled annual election period, participation in this Program with respect to Variable Compensation shall become effective only on the Date of Deferral and only if, on such date, the Eligible Employee receives an award under one of the Variable Compensation Plans (or would have received an award but for an election to defer under this Program). Variable Compensation awards, if any, for services performed in calendar years 1994 and 1995, must be deferred during the 1994 annual election period. Variable Compensation awards, if any, for services performed in calendar years 1996 and beyond, must be deferred during the annual election period immediately preceding the calendar year in which such services will be performed. Notwithstanding the foregoing, an Eligible Employee who becomes eligible to participate in this Program after January 1, 1995 may elect to defer a Variable Compensation award during the calendar year in which services will be performed; provided, however, he or she makes an election to defer within 31 days after becoming eligible to participate in this Program. (b) An Eligible Employee must elect to defer his or her base salary for services performed in calendar year 1995 during the 1994 annual election period. Participation in this Program shall become effective only on the Date of Deferral and only if, on such date, the Eligible Employee remains employed with the Corporation. Base salary for services performed in calendar years 1996, and beyond, must be deferred during the annual election period immediately preceding the calendar year in which such services will be performed. A Participant may suspend his or her election to defer his or her base salary at any time; provided, however, that such Eligible Employee may not resume deferrals of base salary until the following calendar year. Notwithstanding the foregoing, an Eligible Employee who becomes eligible to participate in this Program after January 1, 1995, may elect to defer a portion of his or her base salary during the calendar year in which services will be performed; provided he or she makes an election to defer within 31 days after becoming eligible to participate in this Program. (c) A Participant must elect to defer lump sum payments that he or she would otherwise receive in accordance with the terms of the SRIP or Equalization Plan during the annual election period immediately preceding the calendar year in which such payments would otherwise be received. 5.3 (a) On or before the date designated by the Administrative Committee and otherwise in accordance with such procedures as may be established, a Participant may elect voluntarily to defer (i) up to 100% of the Participant's award under the Variable Compensation Plans (in 10% increments), (ii) up to 25% of his or her base salary (in 5% increments), and/or (iii) up to 100% of his or her lump sum payment from the SRIP or Equalization Plan. (b) A Participant must elect, during any applicable calendar year, to defer in the aggregate a minimum of $2,000 of his base salary, Variable Compensation, lump sum payment from the SRIP or Equalization Plan in order to participate in this Program. Notwithstanding any provision in this Program to the contrary, if a Participant fails to defer at least $2,000 of his base salary, Variable Compensation, lump sum payment from the SRIP or Equalization Plan in any calendar year, the Administrative Committee may, in its sole discretion, require such Participant to irrevocably elect to defer a minimum of $2,000 in the calendar year immediately following thereafter in order to participate in this Program. 5.4 (a) The Corporation shall credit a Participant with an amount equal to 75% of a Participant's deemed annual contribution as determined under subsection (b) of this Section 5.4. (b) A Participant's deemed annual contribution shall equal A multiplied by B, where A and B are as follow: A equals that portion of a Participant's compensation (as defined in Section 1.12 of the Savings Program without regard to Code Section 401(a)(17), and without regard to any deferrals under this Program), which is between $150,000 and $235,840 and is deferred under this Program. Such $235,840 shall be adjusted at the same time and in the same manner as the limitation described in Code Section 415(d)(3) and such $150,000 shall be adjusted at the same time and in the same manner as the limitation described in Code Section 401(a)(17); and B equals the percentage of such Participant's compensation (as defined under Section 1.12 of the Savings Program) which has been contributed to the Savings Program for the applicable calendar year as a Basic Deduction pursuant to Section 2.7.2 of the Savings Program. (c) The Corporation shall credit each Participant with the amount determined pursuant to subsection (a) of this Section 5.4, in arrears, on each Deferral Date; provided that such Participant remains eligible to participate in this Program and is employed by the Corporation on the Deferral Date. Notwithstanding the foregoing, the Corporation shall not credit a Participant with the amount determined pursuant to subsection (a) of this Section 5.4 (as of the Participant's termination of employment) if the Participant terminates employment with the Corporation during a calendar year for any reason, except if the Participant's employment is terminated by reason of death, Disability, Retirement or termination by the Corporation other than for cause. ARTICLE VI PAYMENTS TO PARTICIPANTS AND BENEFICIARIES 6.1 Time of Payment. (a) Subject to subsections (b), (c) and (d) of this Section 6.1, a Participant shall begin to receive payment of his or her deferrals, and any earnings accruals credited under Section 8, during the January next following his or her date of Retirement, or immediately upon his or her other termination of employment. (b) (i) Notwithstanding any provision in this Program to the contrary, a Participant may elect to commence receipt of payments of any amounts deferred upon a specific future payment date which is at least five years after the Date of Deferral or such shorter schedule as the Compensation Committee may determine. Such payments must begin no later than the calendar year in which the Participant attains age seventy and one half. A Participant making such an election shall receive his or her lump sum payment in the January next following his or her future payment date or, if applicable, such Participant shall receive installment payments in accordance with Section 6.2. (ii) With respect to a Participant who has attained age 55 at the time of the election of his or her deferral, the five year period described in subsection (i) shall instead be one year with respect to deferrals of base salary or Variable Compensation. (iii) A Participant is limited to two future fixed year payments. The amounts paid out in such fixed year payments may not exceed the sum of a Participant's deferral of base salary or Variable Compensation under this Program. (c) A Participant who has not yet terminated employment, but has an Unforeseen Emergency, may receive any or all of his or her Variable Compensation and base salary deferrals, excluding any earning accruals credited to him or her pursuant to Section 8 of this Program; provided that the Participant may not receive an amount greater than the amount necessary to meet the Unforeseen Emergency and any amounts necessary to pay federal, state and local income taxes or penalties reasonably anticipated to result from a withdrawal under this Section 6.1. Earning accruals will remain in the Program and continue to accrue earnings under Article VIII until the payment date or dates described in Article VI. (d) Notwithstanding any provision in this Program to the contrary, a Participant may, on the applicable Date of Deferral or at any time thereafter prior to a Change in Control, elect to receive payment of his or her entire account balance under this Program at such time as the Board of Directors of the Corporation determines that a Change in Control has occurred. Such payment shall be made in a lump sum within 45 days after the Change in Control. 6.2 Form of Payments. (a) A Participant may elect to receive payments under this Program in annual or quarterly installments. Such installments must commence as described in Section 6.1, and must be completed by the calendar year in which the Participant attains age 85. (b) A Participant may elect to receive installment payments either (i) annually during each January or (ii) quarterly, commencing in the January that payment was otherwise due in accordance with Section 6.1. If a Participant does not elect the form of his or her installment payments, such installment payments shall be made annually during each January. (c) If a Participant does not elect the form of his or her payments, such payments shall be made in a lump sum payment. (d) A Participant may change the form of payment previously elected only one time and subject to the following restrictions: (i) such election is made in the calendar year that the Participant terminates employment, to be effective no earlier than the following calendar year; (ii) the election is subject to the consent of the Administrative Committee. (e) 1. If a Participant dies at any time prior to receiving any portion of his or her account balance under this Program, payment shall be made to the Participant's Beneficiary as follows: (A) If the Participant's Beneficiary is his or her surviving spouse, such Participant's entire account balance under this Program shall be paid as follows: (i) ten annual installments or a shorter schedule, if so elected by the surviving spouse, or (ii) a lump sum payment payable on or about the January 1st following the Participant's death. (B) If the Participant's Beneficiary is someone other than his or her surviving spouse, such Participant's entire account balance under this Program shall be paid in a lump sum payment as soon as practical following the Participant's death. 2. If a Participant dies at any time after payment of his or her account balance under this Program has begun, such Participant's Beneficiary shall continue to receive payment of the Participant's account in the same manner as the Participant elected, or such shorter payment schedule as elected by the Beneficiary. (f) If any lump sum distribution otherwise payable under this Program would be disallowed in any part as a deduction to the Corporation in accordance with Section 162(m) (or a successor Section) of the Internal Revenue Code, the Compensation Committee may determine to distribute the amount of such benefit in installments such that the Participant or Beneficiary shall receive the maximum amount permissible in each installment and still preserve the Corporation's full tax deduction. 6.3 Amount of Payment (a) If a Participant is terminated by the Corporation for cause, he or she shall receive the lesser of (A) any amounts he or she actually deferred under Section 5, less any previous payments made or (B) his or her account balance under this Program. Such payment shall be made in a lump sum payment as soon as administratively practical following the Participant's termination of employment; provided, however, that such Participant will forfeit all Earnings Accruals credited to him or her pursuant to Section 8. (b) If a Participant voluntarily separates from employment with the Corporation or retires under the Retirement Program with an actuarially reduced pension, he or she shall receive a lump sum payment equal to the lesser of (A) any amounts he or she actually deferred under this Program, plus credits to his or her account at the Fixed Income Rate from his or her Date of Deferral less any previous payments made or (B) his or her account balance under this Program. Such payments will be made as soon as administratively practical after the Participant's termination of employment. (c) If a Participant terminates employment on account of Retirement, Disability, death, or through action of the Corporation taken without cause, such Participant (or Beneficiary) shall be entitled to receive the full amount of his or her account balance. 6.4 Payment in U.S. Dollars. All payments under this Program shall be made in U.S. dollars. 6.5 Reduction of Payments. All payments under this Program shall be reduced by any and all amounts that the Corporation is required to withhold pursuant to applicable law. ARTICLE VII BENEFICIARIES 7.1 A Participant may at any time, and from time to time, prior to his or her death designate one or more Beneficiaries to receive any payments to be made following the Participant's death. If no such designation is on file with the Corporation at the time of a Participant's death, the Participant's Beneficiary shall be the beneficiary or beneficiaries named in the beneficiary designation most recently filed by the Participant under the Corporation's Savings Program. If a Participant has not effectively designated a beneficiary under the Savings Program, or if no designated beneficiary has survived the Participant, the Participant's Beneficiary shall be the Participant's surviving spouse, or, if no spouse has survived the Participant, the estate of the deceased Participant. If an individual Beneficiary cannot be located for a period of one year following the Participant's death, despite mail notification to the Beneficiary's last known address, and if the Beneficiary has not made a written claim for benefits within such period to the Administrative Committee, the Beneficiary shall be treated as having predeceased the Participant. The Administrative Committee may require such proof of death and such evidence of the right of any person to receive all or part of a deceased Participant account balance, as the Administrative Committee may consider appropriate. The Administrative Committee may rely upon any direction by the legal representatives of the estate of a deceased Participant, without liability to any other person. ARTICLE VIII EARNINGS ACCRUALS 8.1 Each Participant's account balance under this Program shall be credited with earnings from the Date of Deferral through the date such deferral is paid out or withdrawn pursuant to Section 6. Earnings under this Section 8.1 shall accrue at the rate elected in accordance with Section 8.2. 8.2 (a) Earnings accruing in accordance with Section 8.1 shall accrue at (i) the Fixed Income Rate, (ii) the UCC Stock Value Rate, (iii) the UCC Discounted Stock Value Rate, (iv) the Applicable Equity Investment Fund Rate or (v) a combination of the four rates. An election to use the UCC Discounted Stock Value Rate shall be effective for not less than one (1) year. Notwithstanding the foregoing, if a Participant has elected under Section 6.1 to receive payment of his or her account balance upon termination of employment, and such Participant's employment is terminated by the Corporation without cause, such Participant may then receive a distribution based on the UCC Discounted Stock Value Rate even if one (1) year has not yet passed since the relevant Date of Deferral. (b) Subject to subparagraph (c), a Participant shall designate at the time of his or her election to defer any amounts under this Program which accrual rate or rates shall apply to his or her deferrals, including deferrals of matching contributions made pursuant to Section 5.4; provided such elections must be in whole percentage points. Such elections shall be effective as of the Date of Deferral through the date such deferral is paid out or withdrawn pursuant to Article 6. (c) A Participant may, one time each calendar month, elect to change the accrual rate under this Section 8.2 with respect to any or all previous deferrals under this Program; provided, however, that Participants may elect to utilize the UCC Discounted Stock Value Rate with respect to future deferrals only, and not for the reallocation of any prior deferrals. Participants may utilize the UCC Stock Value Rate only for reallocation of previous deferrals. ARTICLE IX GENERAL PROVISIONS 9.1 Prohibition of Assignment of Transfer. Any assignment, hypothecation, pledge or transfer of a Participant's or Beneficiary's right to receive payments under this Program shall be null and void and shall be disregarded, except to the extent required by law. 9.2 Program Not to Be Funded. The Corporation is not required to, and will not, for the purpose of funding this Program, segregate any monies from its general funds, create any trusts, or make any special deposits, and the right of a Participant or Beneficiary to receive a payment under this Program shall be no greater than the right of an unsecured general creditor of the Corporation. 9.3 Effect of Participation. Neither selection as a Participant, nor an election to participate or participation in this Program, shall entitle a Participant to receive awards under the Variable Compensation Plans, SRIP or Equalization Plan or a matching contribution under the Savings Program, or affect the Corporation's right to discharge a Participant. 9.4 Communications To Be in Writing. All elections, requests and communications to the Corporation from Participants and Beneficiaries, and all communications to such persons from the Corporation, shall be in writing, and in such form and manner, and within such time, as the Corporation shall determine. In lieu of the foregoing, the Corporation may install a telephonic voice response system for such elections, requests and communications. 9.5 Absence of Liability. No officer, director or employee of the Corporation shall be personally liable for any acts or omission to act under this Program or, except in circumstances involving bad faith, for such officer's, director's or employee's own act or omission to act. 9.6 Titles for Reference Only. The titles given herein to sections and subsections are for reference only and are not to be used to interpret the provisions of this Program. 9.7 New York Law To Govern. All questions pertaining to the construction, regulation, validity and effect of the provisions of this Program shall be determined in accordance with New York law. 9.8 Amendment. The Compensation Committee may amend this Program at any time, but no amendment may be adopted which alters the payments due Participants or Beneficiaries, as of the date of the amendment, or the times at which payments are due, without the consent of each Participant affected by the amendment and of each Beneficiary (of a then deceased Participant) affected by the amendment. In addition, any amendment which does not increase the Corporation's annual cost of any past or future benefits under this Program by more than $500,000, change the eligibility requirements, or impact the ability of officers to utilize the UCC Discounted Stock Value Rate or the UCC Stock Value Rate, may be authorized by the Administrative Committee. 9.9 Program Termination. The Compensation Committee may terminate this Program for any reason and at any time. In the event of such termination, the accounts of each Participant or Beneficiary under this Program shall become immediately payable in accordance with Section 6.1; provided that the Compensation Committee, in its sole discretion, upon Program termination or at any time thereafter, may decide to make lump sum payments in lieu of annual payments. UNION CARBIDE CORPORATION By: M.A. Kessinger EX-10.30 25 Exhibit 10.30 UNION CARBIDE CORPORATION EXCESS LONG TERM DISABILITY PLAN Effective January 1, 1994 EXCESS LONG TERM DISABILITY PLAN ARTICLE I General This is an excess long term disability plan (the "Plan") for participants in the Union Carbide Corporation Long Term Disability Plan (the "LTD Plan"). The Plan has been established to restore certain long term disability benefits to those participants entitled to benefits under the LTD Plan, whose benefits under the LTD Plan are, or will be, limited by the restrictions on recognizable compensation imposed by Section 505(b)(7) of the Code. The Plan is completely separate from the LTD Plan, is unfunded, and is not qualified for special tax treatment under the Code. ARTICLE II Definitions Section 1. "Benefit" means the amount payable under this Plan as described in Article IV. Section 2. "Code" means the Internal Revenue Code of 1986, as amended from time to time. Section 3. "Corporation" means Union Carbide Corporation and such of its subsidiary companies as shall, from time to time, participate in the LTD Plan. Section 4. "Effective Date" means January 1, 1994. Section 5. "LTD Plan" means the Union Carbide Corporation Long Term Disability Plan. Section 6. "Plan" means this Union Carbide Corporation Excess Long Term Disability Plan and any amendments thereto. Section 7. "VEBA" means the Union Carbide Corporation Long Term Disability Plan Voluntary Employees' Beneficiary Associations, which are used to fund benefits for the LTD Plan. ARTICLE III Eligibility Section 1. An employee will be eligible to receive a Benefit under the Plan, if, on or after the Effective Date, such employee becomes entitled to benefits under the LTD Plan and the amount of such employee's benefits under the LTD Plan are limited because the employee's compensation exceeds the limits imposed on the VEBA and LTD Plan in accordance with Section 505(b)(7) of the Code. ARTICLE IV Amount of Benefit Section 1. The monthly amount of Benefit payable to a participant shall be the excess, if any, of (a) the amount of such participant's monthly benefit under the LTD Plan computed under the provisions of the LTD Plan without regard to the limitations of Section 505(b)(7) of the Code, but not exceeding $10,000 per month, over (b) the amount of such participant's monthly benefit actually payable under the LTD Plan computed under the provisions of the LTD Plan and subject to the limitations of Section 505(b)(7) of the Code. ARTICLE V Payments Section 1. Benefits shall be paid to a participant commencing with the month in which benefit payments to such participant commence under the LTD Plan, and shall cease or be suspended at the same time the participant ceases to receive (or has suspended) benefits under the LTD Plan. Section 2. Benefits shall be paid in the same form, and with the same adjustments and restrictions, as distributions to the participant from the LTD Plan. ARTICLE VI Miscellaneous Section 1. The Administrative Committee of the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies and Certain Non-Qualified Employee Benefit Plans of Union Carbide Corporation shall be the administrator of the Plan and shall be responsible for the administration and operation of the Plan. The committee may adopt such rules as it may deem necessary for the proper administration of this Plan and its decision in all matters involving the interpretation and application of the Plan shall be final, conclusive, and binding. Section 2. The Corporation may amend or terminate the Plan at any time, but any such amendment or termination shall not adversely affect the rights of any participant then receiving Benefits under the Plan. Section 3. Except to the extent required by law, no assignment of the rights and interests of a participant or survivor under the Plan shall be permitted, nor shall such rights be subject to attachment or other legal process or debts. Section 4. The rights of a participant shall be solely those of an unsecured creditor of the Corporation. Any asset acquired by the Corporation in connection with the obligations assumed by it hereunder shall not be deemed to be held under any trust for the benefit of a participant or to be security for the performance of the obligations of the Corporation, but shall be, and remain, a general, unpledged, unrestricted asset of the Corporation. Section 5. Nothing contained in this Plan and no action taken pursuant to the provisions of this Plan shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Corporation and a participant. Section 6. Nothing contained in the Plan shall give any participant the right to continue in the employment of the Corporation, or affect the right of the Corporation to discharge a participant. Section 7. The Plan shall be construed and governed in accordance with the laws of the State of New York. UNION CARBIDE CORPORATION By: M.A. Kessinger EX-11 26 EXHIBIT 11 UNION CARBIDE CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE FOR THE FIVE YEARS ENDED DECEMBER 31, 1994 (In millions of dollars except per share amounts)
Year Ended December 31, 1994 1993 1992 Earnings Per Share - Primary Income (loss) from continuing operations $ 389 $ 165 $ 119 Less: Preferred stock dividend 13 13 17 Net income (loss) from continuing operations for primary income calculation 376 152 102 Income from discontinued operations - - 67 Cumulative effect of accounting changes - (97) (361) Net income (loss) - common stockholders $ 376 $ 55 $ (192) Weighted average number of common and common equivalent shares applicable to primary earnings per share calculation Weighted average number of shares outstanding 149,904,755 147,821,255 129,723,738 Dilutive effect of stock options 4,270,033 3,549,905 2,625,735 154,174,788 151,371,160 132,349,473 Earnings per share - primary Income (loss) from continuing operations $ 2.44 $ 1.00 $ 0.76 Discontinued operations - - 0.51 Cumulative effect of accounting changes - (0.64) (2.73) Net income (loss) - common stockholders $ 2.44 $ 0.36 $(1.46) Earnings Per Share Assuming Full Dilution Income (loss) from continuing operations $ 389 $ 165 $ 119 Plus: Interest on convertible debentures (net of taxes) - 4 17 Less: Additional ESOP contribution resulting from assumed conversion of preferred stock 1 1 7 Income (loss) from continuing operations for fully diluted income calculation 388 168 129 Income from discontinued operations - - 67 Cumulative effect of accounting changes - (97) (361) Net income (loss) for fully diluted income calculation $ 388 $ 71 $ (165) Weighted average number of common and common equivalent shares applicable to fully diluted earnings per share calculation Weighted average number of shares outstanding 149,904,755 147,821,255 129,723,738 Dilutive effect of stock options 4,439,006 4,244,866 4,038,716 Shares issuable upon conversion of UCC convertible debentures - 4,482,931 15,774,784 Shares issuable upon conversion of UCC convertible preferred stock 16,542,644 16,796,109 14,655,935 170,886,405 173,345,161 164,193,173 Per share assuming full dilution Income (loss) from continuing operations $ 2.27 $ 0.97 $ 0.78 Discontinued operations - - 0.41 Cumulative effect of accounting changes - (0.56) (2.20) Net income (loss) $ 2.27 $ 0.41 * $(1.01)* Year Ended December 31, 1991 1990 Earnings Per Share - Primary Income (loss) from continuing operations $ (116) $ 188 Less: Preferred stock dividend 19 - Net income (loss) from continuing operations for primary income calculation (135) 188 Income from discontinued operations 107 120 Cumulative effect of accounting changes - - Net income (loss) - common stockholders $ (28) $ 308 Weighted average number of common and common equivalent shares applicable to primary earnings per share calculation Weighted average number of shares outstanding 126,449,140 140,665,386 Dilutive effect of stock options 327,068 346,810 126,776,208 141,012,196 Earnings per share - primary Income (loss) from continuing operations $(1.06) $ 1.34 Discontinued operations 0.84 0.85 Cumulative effect of accounting changes - - Net income (loss) - common stockholders $(0.22) $ 2.19 Earnings Per Share Assuming Full Dilution Income (loss) from continuing operations $ (116) $ 188 Plus: Interest on convertible debentures (net of taxes) 17 17 Less: Additional ESOP contribution resulting from assumed conversion of preferred stock 4 - Income (loss) from continuing operations for fully diluted income calculation (103) 205 Income from discontinued operations 107 120 Cumulative effect of accounting changes - - Net income (loss) for fully diluted income calculation $ 4 $ 325 Weighted average number of common and common equivalent shares applicable to fully diluted earnings per share calculation Weighted average number of shares outstanding 126,449,140 140,665,386 Dilutive effect of stock options 392,058 346,810 Shares issuable upon conversion of UCC convertible debentures 9,718,310 9,718,310 Shares issuable upon conversion of UCC convertible preferred stock 15,116,167 1,905,065 151,675,675 152,635,571 Per share assuming full dilution Income (loss) from continuing operations $(0.68) $ 1.34 Discontinued operations 0.71 0.79 Cumulative effect of accounting changes - - Net income (loss) $ 0.03* $ 2.13 * Fully diluted per share amounts are not presented in the consolidated statements of income where amounts are antidilutive.
EX-21 27 EXHIBIT 21 SUBSIDIARIES OF THE CORPORATION Percentage of Voting State or Securities Sovereign Owned By Power of Immediate Name of Company Incorporation Parent Union Carbide Corporation (the "Corporation") New York - % Subsidiaries included in the Consolidated Financial Statements except where noted otherwise: Amerchol Corporation Delaware 100.00 Catalysts, Adsorbents & Process Systems, Inc. Maryland 100.00 Prentiss Glycol Company Delaware 100.00 Seadrift Pipeline Corporation Delaware 100.00 UCAR Emulsion Systems International, Inc. Delaware 100.00 UCAR, Polimeros y Quimicos C.A. Ecuador 100.00 Umetco Minerals Corporation Delaware 100.00 Union Carbide Argentina S.A.I.C.S. Argentina 100.00 Union Carbide Asia Limited Hong Kong 100.00 Union Carbide (Guangdong Zhongshan) Company Limited People's Rep. of China 75.00 Union Carbide Asia Pacific, Inc. Delaware 100.00 Union Carbide Austria G.m.b.H. Austria 100.00 Union Carbide Benelux N.V. Belgium (1) Union Carbide do Brasil S/A Brazil 100.00 Union Carbide Caribe Inc. Delaware 100.00 Union Carbide Canada Inc. Canada 100.00 Union Carbide Chemicals (Australia) Pty. Ltd. Australia 100.00 Union Carbide Chemicals Korea Limited Korea 100.00 Union Carbide Comercial, C.A. Venezuela 100.00 Union Carbide Deutchland G.m.b.H. Germany 100.00 Union Carbide Engineering and Hydrocarbons Service Company, Inc. Delaware 100.00 Union Carbide Ethylene Oxide/Glycol Company Delaware 100.00 Union Carbide Eurofinance B.V. Netherlands 100.00 Union Carbide (Europe) S.A. Switzerland 100.00 Union Carbide Foreign Sales Corporation US Virgin Is. 100.00 Union Carbide Formosa Co., Ltd. Taiwan 100.00 Union Carbide France S.A. France 100.00 P.T. Union Carbide Indonesia Indonesia 100.00 Union Carbide Inter-America Inc. Delaware 100.00 Union Carbide Inter-America Inc. New Jersey 100.00 Union Carbide Investimentos e Participacoes S/C Ltda. Brazil 100.00 Union Carbide Japan K.K. Japan 100.00 Union Carbide Limited England 100.00 Percentage of Voting State or Securities Sovereign Owned By Power of Immediate Name of Company Incorporation Parent Union Carbide Corporation. (Continued) Union Carbide Middle East Limited Delaware 100.00 Union Carbide Pan America, Inc. Delaware 100.00 Union Carbide Philippines (Far East) Inc. Philippines 100.00 Union Carbide Quimicos y Plasticos, S.A. de C.V. Mexico 100.00 Union Carbide Services Eastern Limited Hong Kong 100.00 Union Carbide Singapore Pte. Ltd. Singapore 100.00 Union Carbide South Africa (Proprietary) Limited South Africa 100.00 Union Carbide Thailand Limited Thailand 100.00 Union Carbide Turkey, Inc. Delaware 100.00 Union Polymers Sdn. Bhd. Malaysia 60.00 Companies reported in the Consolidated Financial Statements on an Equity in Net Assets Basis included: Union Carbide Corporation (Continued) Alberta & Orient Glycol Company Limited Canada 50.00 Aspen Polimeres France 50.00 Elektrode Maatskappy Van Suid Afrika (Eiendoms) Beperk South Africa 25.00 Nippon Unicar Company Limited Japan 50.00 UCAR Carbon Canada Inc. Canada 25.00 UCAR International Inc. Delaware 25.00 UCAR Carbon France S.A. France 25.00 UCAR Carbon Navarra S.L. Spain 25.00 UCAR Carbon S.A. Brazil (2) Union Showa K.K. Japan 50.00 * * * * * * * * * * * * The names of the Corporation's other consolidated subsidiaries and companies carried on an equity in net assets basis are not listed. These subsidiaries and companies, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. In addition, the Corporation has investments in other subsidiaries and 20-to-50%-owned companies for which financial statements are not submitted because all such subsidiaries and companies, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. (1)99.83% of the voting securities of Union Carbide Benelux N.V. is owned by Union Carbide Corporation; and 00.17% by Union Carbide (Europe) S.A. (2)12.535% of the voting securities of UCAR Carbon S.A. is owned by Union Carbide Corporation. EX-23.1 28 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS The Board of Directors Union Carbide Corporation We consent to the incorporation by reference in each of the Registration Statements of Union Carbide Corporation on Form S-3 (Nos. 33-26185, 33-55560 and 33-63412), and on Form S-8 (Nos.2-90419, 33-22125, 33-38714 and 33-53573) of our reports dated January 19, 1995, relating to the consolidated balance sheets of Union Carbide Corporation and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity and cash flows and related schedule for each of the years in the three-year period ended December 31, 1994, appearing and incorporated by reference, in the annual report on Form 10-K of Union Carbide Corporation for the year ended December 31, 1994. Our reports refer to changes in accounting principles as described in Note 1 to the consolidated financial statements. KPMG PEAT MARWICK LLP Stamford, Connecticut March 7, 1995 EX-27 29
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNION CARBIDE CORPORATION'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000100790 UNION CARBIDE CORPORATION 1,000,000 YEAR DEC-31-1994 DEC-31-1994 109 0 909 11 390 1614 5889 3347 5028 1285 899 155 148 0 1354 5028 4865 4865 3673 3673 410 0 80 471 137 389 0 0 0 379 2.44 2.27
EX-13 30 EXHIBIT 13 1994 Annual Report to Stockholders Contents 1 Financial Highlights Summary comparison of 1994 and 1993 results. 2 Chairman's Letter Bob Kennedy recaps 1994 performance and discusses Carbide's strategic objectives and long-term outlook. 4 President's Report Bill Joyce reviews 1994 operations and the major initiatives taken during the year to advance Carbide's business strategy. 8 Principal Products and Services Carbide's products, services, major site locations and competitors. 10 Financial Index Management's discussion and analysis, financial statements and notes. 38 Corporate Information Important dates, names, addresses, telephone numbers and other information. 39 Directors, Corporate Officers Information on directors, corporate officers and other senior corporate staff. 40 A Chemical Glossary, Definition of Terms Definitions of chemical and nonchemical terms used in this report. At a Glance Union Carbide Corporation is a basic chemicals company with many of the industry's most advanced process technologies and some of the most cost- efficient, large-scale production facilities in the world. The company also produces and markets numerous specialty chemicals from manufactured or purchased chemicals, and targets sharply defined market segments for many of its technologies. Union Carbide buys liquefied petroleum gas and naphtha to make ethylene and propylene - basic building-block chemicals (also known as olefins). The company then uses state-of-the-art process technologies to convert manufactured and purchased ethylene and propylene into products that include polyethylene (the world's most widely used plastic); ethylene oxide/glycol and derivatives for surfactants, polyester fiber, resin and film, and automobile antifreeze; and one of the industry's broadest lines of resins, intermediates, emulsions and additives for the paints and coatings, cosmetic and personal care, adhesives, household, pharmaceutical, fuel and lube oil additives and agricultural products markets. Union Carbide also licenses certain of its key olefins-based technologies and offers other specialized technology licensing and services. The leading Union Carbide end markets as a percentage of sales are: Paints, coatings and adhesives 23% Packaging and consumer plastics 19% Wire and cable 10% Textile 8% Household and personal care 7% Automotive, including antifreeze 6% Agricultural and food 4% Oil and gas 4% Industrial cleaners 3% On the Cover The linear low-density polyethylene molecule. Union Carbide is among the largest manufacturers of polyethylene, the world's most widely used plastic, and is the industry's leading licenser of polyethylene process technology. Financial Highlights Dollar amounts in millions (except per share figures) 1994 1993 For the Year Net sales $ 4,865 $ 4,640 Income available to common stockholders before accounting change 379 155 Per common share - Primary 2.44 1.00 Cumulative effect of change in accounting principle - (97) Per common share - Primary - (0.64) Net income - common stockholders 379 58 Per common share - Primary 2.44 0.36 Per common share - Fully diluted(a) 2.27 - Cash dividends 113 110 Per common share 0.75 0.75 Capital expenditures 409 395 At Year-End Total assets $ 5,028 $ 4,689 Total debt 946 966 UCC stockholders' equity 1,509 1,428 Per common share 10.45 9.49 Common shares outstanding (thousands) 144,412 150,548 Common stockholders of record 55,049 58,795 Employees 12,004 13,051 a) Fully diluted per share amounts are not presented where amounts are antidilutive. Chairman's Letter Volume Growth, Competitive Advantage Spell Bright Prospects for the Decade Nothing beats performance for validating a business strategy, and I'm pleased to report that Carbide's strategy of backing businesses with significant competitive advantage got a ringing endorsement from our 1994 performance. Net income available to shareholders from continuing operations rose 145 percent from the prior year to $379 million, and per share income climbed to $2.44 from $1.00. Stockholders had another good year as well. Carbide's share price rose more than 31 percent for the year to close at $29.38. The increase put our stock performance at the top of the Dow Jones list of 30 industrials for the second time in the past three years. As stockholders know, we've made progress over several years in the teeth of the worst chemical industry downturn in memory. We did it mainly through massive cost reductions - approaching $575 million at year-end - made possible by the drive and initiative of Carbide people, who worked long and hard to streamline our major work processes. In mid-1994 we began to get help from the marketplace. As supply and demand came into better balance in the second half, stronger pricing signaled that the worst of the cyclical downturn was behind us. But I'm confident that today's Carbide can post highly competitive financial results regardless of conditions in the chemical markets. Our operations are lean and efficient. Our people are working flat out, with a will to win bred of success. And we're keeping the pressure on costs through further work process improvements. With costs in line, our financial condition sound and returns exceeding our cost of capital, it is clearly time to expand in growing markets for our core operations. By spreading fixed costs over larger volumes, and further reducing variable costs, we reduce our total cost per pound of product. And when billions of pounds of product are involved, shaving just a little off the cost of each pound can mean significantly improved profitability and greater shareholder value. Several internal expansions underway will help. And large productivity gains will come from joint ventures, acquisitions and business extensions that accelerate growth. We've announced several that will add substantial capacity around the world, for an average investment cost far below the cost of building new, "greenfield" capacity. Our planned joint venture with Petrochemical Industries Company of Kuwait, for example, will have a total of more than 3 billion pounds of ethylene, polyethylene and ethylene glycol capacity when completed in 1997. With an advantaged feedstock position and the benefit of Carbide process technologies - so highly prized that they formed part of our equity - venture production costs should be among the lowest in the world. Two European joint ventures announced in 1994 will add substantial volumes in key operations. In one, we're joining with EniChem of Italy, Europe's co-leader in polyethylene production. The venture, which is subject to approval of the European Union, will own all of EniChem's polyethylene operations. Combined capacity of these facilities in Italy, France and Germany is about 3 billion pounds a year. In another venture, we've joined with Elf Atochem of France to produce and market specialty polyethylene compounds primarily for the wire and cable industry. The venture will operate about 600 million pounds per year of capacity in France by the end of 1995, plus new compounding capacity for wire and cable products. In a business extension we think has considerable potential for profitable growth, we announced plans to build a 200 million-pounds-per-year- capacity plant in Texas to produce ethylene/propylene rubber. The business is a new one for Carbide, but one we enter with a product and cost advantage based on our UNIPOL Process technology that could reshape the industry. And as the year ended, we agreed to purchase ethylene oxide derivatives operations with 330 million pounds of capacity - which we'll expand to about 600 million pounds - from Imperial Chemical Industries in London. The purchase will solidify our position as the industry's leading producer of these chemicals, used in fibers, resins, paints and personal care products. The combination of internal expansions and joint ventures will increase our polyethylene and ethylene glycol capacity by more than 50 percent to 10 billion pounds by 1997. All the additions will benefit our customers and fit neatly with our strategy. All support or extend operations in which Carbide already has a significant competitive advantage. All will be advantaged in their own right. And all are going forward when the chemical business cycle appears to be trending upward. Those who recall the deep pessimism many felt about Carbide's future after the tragedy in Bhopal, India, in 1984, and the takeover attempt a year later that shrank the company by half, will appreciate how much has changed since then. We are in some of the same basic businesses, but we are a different company in virtually everything but name. Dec. 3 marked the 10th anniversary of that terrible event, the result of sabotage by a disgruntled employee. Carbide only recently was allowed to sell its shares in its former Indian affiliate. Part of the proceeds will be used to build and operate a hospital in Bhopal. This is beyond the $470 million settlement paid to the Indian government in 1989. Another outcome, important for every community where chemicals are made, is the RESPONSIBLE CARE initiative adopted by Union Carbide and other chemical companies in 35 countries around the world. RESPONSIBLE CARE commits signatory companies to a rigorous set of codes and practices designed to improve environmental and safety performance. Carbide operating policies, safety and environmental reporting, and work with community advisory panels all reflect our commitment to those codes and practices. Write to our Public Affairs Department for a copy of Carbide's 1994 RESPONSIBLE CARE progress report. On a personal note, C. Peter McColough, who has served on the board with distinction since 1979, will not stand for reelection in accordance with the board's retirement policy. His wisdom, experience and unswerving support will be greatly missed. Also, as this report went to press I announced that I'll be ending my long and satisfying career with Union Carbide at the end of 1995. In passing the baton to President Bill Joyce, who will become chief executive officer in April and chairman of the board when I retire, I could not entrust the future of this great company to more capable hands. Robert D. Kennedy Feb. 22, 1995 (Contained within the Chairman's Letter is a picture of Robert D. Kennedy, Chairman and Chief Executive Officer and William H. Joyce, President and Chief Operating Officer, as well as a separate depiction of an ethylene oxide molecule.) President's Report Carbide Boosts Profitability, Accelerates Growth As 1994 began, the chemical business cycle was still in the cellar, with prices and margins near their historic lows. Producers got some modest price relief in the second quarter for the simple reason that they could no longer withstand the huge losses of the past two years in their commodity operations. As the year wore on, the economies of the U.S. and other major markets picked up steam, driving up the demand for chemicals and boosting prices. At the same time, operating problems at several ethylene production facilities in the U.S. tightened raw material supplies, causing prices of polyethylene and ethylene glycol, the two highest-volume downstream chemicals, to move up in earnest. And Union Carbide, with substantial help from cost reductions and operating improvements, benefited handsomely as margins improved and sales volumes rose. Several years of declining margins in our largest ethylene-based commodity chemical operations - ethylene glycol and commodity polyethylene resins - overwhelmed even the massive cost reductions Carbide had achieved. But results improved substantially as margins began to rebound in the second half of the year. The businesses, which had been losing money, were profitable in the third and fourth quarters. Sales volume for the ethylene-based commodities group rose 6 percent compared to the prior year. Carbide's less cyclical businesses, which prospered during the downturn, also benefited from the improved economy. They accounted for 56 percent of volume and 75 percent of revenues in 1994. The group - consisting of industrial performance chemicals, solvents and intermediates, UCAR emulsion systems, specialty polymers and products, UNIPOL licensing and specialty polyolefins - continued to post a rate of return substantially above the cost of capital, a sure sign of robust health. Not enough can be said about the contribution Carbide people made to our improved performance. They are largely responsible for Carbide successfully completing our $575 million cost reduction program by year-end 1994. And at year-end they were operating our businesses with great efficiency, introducing promising new products and doing more for our customers, while further improving Carbide's environmental and safety performance. Better Work Processes Over the past several years, continuous improvement - the notion that things can be done better and more efficiently no matter how well they were done before - has become ingrained in the Carbide culture. And several new initiatives were under way as 1994 ended. In one, we eliminated more than $70 million of engineering support and installation costs by simplifying the design and construction process, and by sharply curtailing engineering work that did not directly support the strategies of our individual businesses. The Engineering Excellence initiative is targeting additional reductions in engineering support costs, and has a capital cost reduction target for 1995 of about $100 million. In one such project, associated with our entry into the ethylene/ propylene rubber business, we expect to save nearly $30 million in capital costs by simplifying product handling systems and using off-the-shelf designs where possible instead of starting from scratch, among other improvements. Another initiative, called Pathfinder, seeks to reduce product distribution costs. Pathfinder eliminated $8 million of annualized costs in 1994 by finding more efficient ways of getting our products from the manufacturing plant to the customer. In one example, we expect to save $6 million a year through better scheduling and routing, and by ensuring optimum loads for the 37,000 railcar shipments Carbide makes each year. Optimum loads will mean fewer cars and trips, less cleaning and handling, and lower total freight costs. We are also applying the reengineering concept to Carbide's research and development work. Our scientists and technicians are exploring ways to reduce by nearly one-third the time it takes to get newly developed products to the marketplace. And they are looking at ways to test product viability at early stages of development, so they can halt work quickly when the market outlook is doubtful. Because we expect work process improvement to be a long-term effort, we have formed a team of Carbide people who are permanently assigned as reengineering consultants. Their job is to help any group in our system identify new opportunities to improve efficiency and reduce costs. With Carbide people replacing outside consultants, the cost of doing the reengineering will itself be reduced by some 55 percent. Along with improved efficiency and lower costs in 1994, many of our operations made important advances during the year. Examples include: Several value-added polyethylene products introduced by UNIPOL Polymers, including a new line of TUFLIN-PLUS film resins with superior puncture- and tear-resistance for garbage bags and stretch wrap. An 18 percent increase in export sales of telecommunications and power cable compounds (by Specialty Polyolefins) mainly to the fast-growing markets of the Pacific Rim. And a 40 percent increase in sales of flame-retardant cable jacketing and insulation compounds to the maritime and building industries. Signing of another licensee in Asia (by our UNIPOL Systems group) for our UNIPOL Process technology, bringing the new total of Asian licensees to 28 and the new worldwide total to 67. Eleven licensees - in Indonesia, China, France, Ukraine and the U.S. - are scheduled to start up operations in the 1995-96 period. When they do, it is estimated that UNIPOL will account for 18.5 billion pounds of world polyethylene operating capacity, or 18 percent, and 5.6 billion pounds, or 11 percent, of world polypropylene capacity. Introduction in North America by Industrial Performance Chemicals of an aircraft anti-icing fluid, called UCAR AAF Ultra. Independent laboratory simulations have shown that UCAR Ultra can prevent ice formation on aircraft surfaces for at least 90 minutes, nearly three times as long as competing materials. A great benefit to aircraft facing long takeoff delays in bad weather, UCAR Ultra increased Carbide's share of the anti-icing fluid market in 1994 from less than 10 percent to an estimated 50 percent. A 9 percent increase in sales volumes of latex emulsions to the architectural coatings and waterborne adhesives markets by UCAR Emulsion Systems, the result of sharper marketing focus on the industry's fastest- growing companies. An intensified marketing campaign in the Middle East and Southeast Asia that expanded sales volumes in those fast-growing markets by more than 10 percent. Completion of a plant in South Charleston, W.Va., for the manufacture of our line of TRITON specialty surfactants - chemicals that put the cleaning power in household and industrial detergents, and ensure even dispersal of color in paints and coatings. This state-of-the-art plant, operated by Industrial Performance Chemicals, nearly triples the number of specialty surfactants Carbide can produce. Capacity Expansion With results improved, our strategies opening new opportunities, and employees working hard to make Carbide the preferred supplier in our industry, we are accelerating expansion of those operations in which we have a clear competitive advantage. For example, the new 650 million-pounds-per-year UNIPOL II polyethylene production facility under construction at Taft, La., is scheduled to come on stream in the second quarter of 1995. Its new resins will enable fabricators of industrial liner bags and construction film to make their products with 15 percent less raw material, or to make products 15 percent stronger with the same amount of raw material. And they can do so without costly modifications of their fabricating equipment. To help customers meet the growing demand for paints and cleaning compounds, we completed a 50 percent expansion of production capacity for Butyl CARBITOL and Butyl CELLOSOLVE solvents at Seadrift, Tex. We accomplished the expansion through technology modifications, with little capital expense. We increased capacity for making isophorone at our Institute, W.Va., plant by 30 percent. Isophorone is a specialty chemical used in paint and agricultural chemicals. We're building a new butanol facility at our Taft, La., plant that will incorporate the industry's lowest-cost technology and increase our total butanol capacity by more than 50 percent. Butanol is a key ingredient in paints, coatings and plasticizers. And to help customers keep up with growing demand for coatings and adhesives, we began an expansion of our vinyl acetate facility in Texas City, Tex., that will increase capacity by 25 percent when completed in 1995. Other significant expansions include: acrolein derivatives for animal feed supplements, fragrances and industrial chemicals; POLYOX water-soluble resins used in personal care products, pharmaceuticals and adhesives; polyvinyl acetate used for chewing-gum resins and thermoplastic additives; specialty ketones used in agricultural chemicals; and alkyl alkanolamines used in gas treating, pharmaceuticals and other markets. UOP, a company owned equally by Carbide and AlliedSignal, also made a good contribution to 1994 results, broadening its product line while positioning itself for further growth. UOP provides technology, catalysts and related products and services to the oil refining, petrochemical and gas industries. UOP is doubling worldwide capacity for beaded adsorbents - products that selectively adsorb many compounds - through a recently completed expansion at its facility in Reggio, Italy, and another expansion under way in Mobile, Ala. UOP also acquired Separex Membrane Systems from Hoechst Celanese in 1994, expanding its gas processing technology offerings. And in January 1995 it acquired UNOCAL's licensing business for process technology. All of these initiatives and expansions are occurring in operations with strong technology-based competitive advantages. Technology is also a key to the advantaged position we believe our new joint ventures will have at start- up. New Ventures The largest of these, our planned joint venture with Petrochemical Industries Company of Kuwait, would combine a substantial raw materials advantage with our state-of-the-art polyethylene and ethylene glycol processing technologies. The combination will make the venture a formidable competitor in world markets. The Kuwait-based venture would have posted returns exceeding its cost of capital even at the lowest point of this latest cycle, which covered a span of about 7 years. Planning and financing for the venture are in the final stages. A Carbide management team is in place, contractors have been named and teams of Carbide and Kuwaiti engineers are making good progress on design and engineering of key units of the world-scale petrochemical complex. The venture is expected to start up in 1997. Our joint venture with EniChem of Italy, combining UNIPOL Process technology with EniChem's European production facilities and marketing network, will have all the earmarks of becoming Europe's leading and lowest- cost polyolefins producer. In February 1995 we announced board-of-director approval of the formation of the joint venture company, Polimeri Europa. The venture is subject to European Union approval. At year-end we completed a joint venture with Elf Atochem of France that also combines our technology and experience with our partner's manufacturing facilities. In this case we will license the venture to use our UNIPOL Process technology, which will double the output of existing facilities. Carbide will license other technology to the venture to produce compounds for the wire and cable industry in Europe. Our customers had asked us to establish a manufacturing presence in Europe, so along with the venture's competitive strength, we expect it will have a warm welcome. Carbide sales people in Europe will market the wire and cable compounds, while Atochem will market the venture's other products. A fourth joint venture, with Mitsui of Japan and Far Eastern Textile Limited of Taiwan, started up glycol production in September at a new, world- scale unit at our plant in Alberta, Canada. Production will supply Asia's fast-growing textile market. The unit combines raw material and technology advantages with a highly efficient distribution system. We are also expanding through acquisitions, and through entry into related businesses. In October we announced that Carbide would enter the ethylene/ propylene rubber (EPDM) business with a substantial competitive advantage based on our UNIPOL Process technology. We expect that manufacturing costs, excluding monomer costs, will be about half of competitors', with investment cost well under half. In addition, substituting our granular product for the big blocks of material supplied by competitors using conventional technology will reduce customers' handling and processing costs several cents a pound. Production is scheduled to start up at our new, 200 million-pounds-per-year plant at Seadrift, Tex., in 1996. And at year-end 1994, Carbide announced its intention to acquire certain ethylene oxide derivatives operations in Europe from Imperial Chemical Industries of London. Carbide is the leading producer of oxide derivatives used in polyester fibers and film, paints, solvents, personal care products and detergents. The acquisition, completed in February 1995, establishes a strong presence for us in Europe, with potential for further expansion in a growing market. The newly acquired operations also double Carbide's brake fluid capacity, making us one of the world's leading suppliers. Carbide reduced its 50 percent interest in UCAR International, a noncore business, by half in January 1995. The advances and expansions of 1994, and the hard work of the past several years that made them possible, have brought us measurably closer to our vision of Carbide as the low-cost, preferred supplier in our segment of the industry. Although Carbide's financial results will continue to reflect turns in the chemical business cycle, our performance in 1994 is solid evidence that we are a stronger company, better able to withstand the downturns and to profit from strong markets. William H. Joyce Feb. 22, 1995 (Contained within the President's Report is a depiction of a butanol molecule.) Principal Products and Services Olefins/Ethylene Oxide/Glycol/Derivatives L.P. McMaster - Corporate VP, General Mgr., Ethylene Oxide/Glycol G.D. Mounts - VP, General Mgr., Industrial Performance Chemicals V.F. Villani - VP, General Mgr., Hydrocarbons Sales (in millions) 1994 1993 1992 ($) 1,253 1,093 1,100 (%) 26 24 23 Union Carbide manufactures about three-quarters of its ethylene requirements and more than one-half of its propylene requirements. Ethylene and propylene are the key raw materials for Union Carbide's olefins-chain businesses. Union Carbide is the world's leading producer of ethylene oxide/glycol and manufactures a broad range of derivatives. Ethylene oxide is a chemical intermediate primarily used in the manufacture of ethylene glycol, polyethylene glycol, glycol ethers, ethanolamines, surfactants, antimicrobials and cold-sterilants. Ethylene glycol is used extensively in the production of polyester fiber, resin and film; automotive antifreeze and engine coolants; and a variety of freeze/thaw stabilizers, including UCAR aircraft and runway deicing and anti-icing fluids and NORKOOL coolants and UCARTHERM heat-transfer fluids. Other ethylene oxide-based glycol products include di-, tri-, and tetraethylene glycols used as chemical intermediates and in dehydrating natural gas. Ethylene oxide derivative products include CARBOWAX polyethylene glycols, with hundreds of uses as a processing aid in nearly all industries; ethanolamines for detergents, personal care products and in natural gas conditioning and refining; ethyleneamines for many industrial uses; TERGITOL and TRITON specialty surfactants for industrial and household cleaning products and personal care products; UCON fluids and lubricants; alkyl alkanolamines, and gas treating products, including UCARSOL and SELEXOL solvents. Manufacturing Sites Institute, W.Va. Taft, La. Prentiss, Alberta, Canada Texas City, Tex. Seadrift, Tex. Washougal, Wash. South Charleston, W.Va. Wilton, U.K. (2/1/95) Major Competitors Saudi Basic Industries Dow Chemical Occidental Chemical Huntsman Shell Chemical Polyolefins F.D. Ryan - VP, General Mgr., Specialty Polyolefins R.B. Staub - Corporate VP, General Mgr., UNIPOL Systems P.T. Wright - Corporate VP, General Mgr., UNIPOL Polymers Sales (in millions) 1994 1993 1992 ($) 1,562 1,477 1,461 (%) 32 32 30 Union Carbide is a leading manufacturer of polyethylene, the world's most widely used plastic. The company also licenses its UNIPOL Process technology, the most cost-efficient and versatile method of manufacturing polyethylene and polypropylene. UNIPOL Polymers produces and markets linear low-density (LLDPE), medium- density (MDPE) and high-density (HDPE) polyethylenes used in high-volume applications such as housewares, milk and water bottles, grocery sacks, trash bags, packaging and industrial liners, and FLEXOMER very low-density resins, used to produce hose and tubing, and frozen-food bags and stretch wrap. UNIPOL Polymers also processes and markets postconsumer recycled polyethylene resins (under the CURBSIDE BLEND and PRISMA trademarks) used to produce plastic garbage cans and personal care product, bleach and detergent bottles. Specialty Polyolefins manufactures and markets worldwide polyolefin-based insulation, semiconducting and jacketing compounds for wire and cable applications. These include power distribution, telecommunications and flame- retardant power and control cables. UNIPOL Systems licenses UNIPOL Process technology to polyethylene and polypropylene producers worldwide, and it develops new process technology for the manufacture of other olefins-based polymers, such as ethylene/propylene rubber. Manufacturing Sites Boucherville, Quebec, Canada Seadrift, Tex. Bound Brook, N.J. Taft (Star Plant), La. Cubatao, Brazil Major Competitors Quantum Chemicals Chevron Chemical Dow Chemical Exxon Chemical Novacor Chemical Solvents, Intermediates and Emulsion Systems J.F. Flynn - Corporate VP, General Mgr., Solvents and Intermediates G.E. Playford - Corporate VP, General Mgr., UCAR Emulsion Systems Sales (in millions) 1994 1993 1992 ($) 1,344 1,226 1,289 (%) 27 26 26 Union Carbide supplies one of the industry's broadest product lines of solvents, resins, intermediates, emulsions and additives. Solvents and Intermediates products include aldehydes, acids and alcohols, including high-quality synthetic and fermentation ethanol; esters; glycol ethers (CARBITOL and CELLOSOLVE solvents); ketones, and monomers (vinyl acetate and acrylics for waterborne coatings). Its principal customers are the paints and coatings industries, and many of its products are also used widely in cosmetics and personal care preparations, adhesives, household and institutional products, drugs and pharmaceuticals, fuel and lube oil additives, and agricultural products. The company's UNICARB System is a pollution-reducing, supercritical fluid technology that can cut costs and reduce volatile organic compounds in spray-applied coatings by up to 80 percent. Emulsion Systems products, found in exterior and interior house paints, include UCAR latex products (acrylics and vinyl-acrylics that impart enhanced staining, weather and scrub resistance to paints) and POLYPHOBE thickeners. Manufacturing Sites Alsip, Ill. Jebel Ali Free Trade Zone, Batangas, Philippines Dubai, United Arab Emirates Bayamon, P.R. Nonthaburi, Thailand Ekala, Sri Lanka Seadrift, Tex. Garland, Tex. Seremban, Malaysia Guangdong Province, Somerset, N.J. People's Republic of China Taft, La. Guayaquil, Ecuador Texas City, Tex. Institute, W.Va. Torrance, Calif. Jakarta, Indonesia Tucker, Ga. Wilton, U.K. (2/1/95) Major Competitors Eastman Chemical Shell Chemical Hoechst Celanese Rohm & Haas BASF Specialty Polymers and Products and UOP E.J. Boros - VP, General Mgr., Specialty Polymers and Products J.C. Soviero - Corporate VP and Chairman of UOP Sales (in millions)(a) 1994 1993 1992 ($) 706 844 1,022 (%) 15 18 21 (a) The OrganoSilicon business was included in results for the full year 1992 and in 1993 until its sale in July. Carbide manufactures and markets numerous specialty products. It targets sharply defined market segments for many of its technologies. Specialty Industrial Products includes acrolein derivatives, glutaraldehyde, vinyl methyl ether, ethylidene norbornene (ENB), specialty ketones and biocides used to control microorganisms in applications such as sterilants, water treatment, papermaking, metalworking, oil field operations and industrial preservatives. Performance Polymers includes POLYOX water- soluble resins used in personal care products, pharmaceuticals, inks and thermoplastics; and polyvinyl acetate resins used in chewing-gum resins, low- profile additives, NEULON polyester modifiers, fast-cure additives and pigmentable systems, and UCURE reactive modifiers. Coating Materials reaches markets for paints, coatings, inks, substrates and other materials for magnetic tape, food and beverage packaging, plastics and orthopedic materials. Its products include CELLOSIZE hydroxyethyl cellulose (HEC); UCAR solution vinyl resins; TONE caprolactone-based materials; and cycloaliphatic epoxides, including CYRACURE UV-curing products and FLEXOL plasticizers. Amerchol Corporation, a Union Carbide subsidiary, manufactures and sells a wide variety of lanolin-, glucose- and cellulose-based materials for personal care products. UOP, a company owned equally by Carbide and AlliedSignal Inc., is a leading international supplier of process technology, catalysts, molecular sieves and adsorbents to the petrochemical and gas processing industries. Manufacturing Sites Antwerp, Belgium Mamaroneck, N.Y. Aratu, Brazil South Charleston, W.Va. Edison, N.J. Taft, La. Greensburg, La. Texas City, Tex. Henderson, Ky. Vilvoorde, Belgium Institute, W.Va. Major Competitors Union Carbide's competitive position varies widely from one product/market segment to another. Competitors include a number of domestic and foreign companies, both diversified and specialized. (Within the Principal Products and Services section, next to each table is a pie chart depicting each principal products and services' share of the total consolidated 1994 sales.) Financial Index 11 Management's Discussion and Analysis 11 Results of Operations 16 Liquidity, Capital Resources and Other Financial Data 18 Quarterly Data 19 Selected Financial Data 20 Consolidated Statement of Income 21 Consolidated Balance Sheet 22 Consolidated Statement of Cash Flows 23 Consolidated Statement of Stockholders' Equity 24 Notes to Financial Statements 24 Note 1 - Summary of Significant Accounting Policies 25 Note 2 - Financial Instruments 27 Note 3 - Geographic Segment Information 27 Note 4 - Other Expense - Net 27 Note 5 - Spin-off of Praxair, Inc. 28 Note 6 - Income Taxes 29 Note 7 - Supplementary Balance Sheet Detail 30 Note 8 - Interest Costs 30 Note 9 - Companies Carried at Equity 30 Note 10 - Long-Term Debt 31 Note 11 - Convertible Preferred Stock 32 Note 12 - UCC Stockholders' Equity 32 Note 13 - Leases 33 Note 14 - Retirement Programs 35 Note 15 - Incentive Plans 35 Note 16 - Commitments and Contingencies 36 Note 17 - Subsequent Events 37 Management's Statement of Responsibility for Financial Statements 37 Independent Auditors' Report Management's Discussion and Analysis RESULTS OF OPERATIONS Dollar amounts in millions (except per share figures) 1994 1993 1992 Net sales $4,865 $4,640 $4,872 Operating profit(a) 551 297 324 Interest expense 80 70 146 Pre-tax income from continuing operations 471 227 178 Income from continuing operations 389 165 119 Income from discontinued operations - - 67 Cumulative effect of change in accounting principles(b) - (97) (361) Net income (loss) - common stockholders 379 58 (187) Per share, primary: Continuing operations 2.44 1.00 0.76 Discontinued operations - - 0.51 Cumulative effect of change in accounting principles - (0.64) (2.73) Net Income (Loss) 2.44 0.36 (1.46) Per Share, Fully Diluted(c) 2.27 - - a) On April 27, 1994, stockholders voted to approve the merger of Union Carbide Corporation into Union Carbide Chemicals and Plastics Company Inc. As a result, operating profit is now calculated on a total consolidated basis. Prior years' totals have been restated to reflect this change. b) Effective Jan. 1, 1993, the corporation adopted Financial Accounting Standard (FAS) 112, "Employers' Accounting for Postemployment Benefits." Effective Jan. 1, 1992, the corporation adopted FAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and FAS 109, "Accounting for Income Taxes." c) Fully diluted per share amounts are not presented where amounts are antidilutive. Summary and Outlook In 1994, as well as in the preceding 2 years, Union Carbide's profitability benefited from on-going cost reduction programs, increasing sales volumes (exclusive of divestitures) and improved partnership and corporate joint venture results. Throughout most of the 3-year period, however, corporate results were negatively affected by record low margins in ethylene oxide/glycol and in polyethylene, the corporation's two largest volume products. Strong U.S. and world economic demand, as well as shortages in ethylene, caused selling prices for these product lines to increase beginning in the third quarter of 1994. These price increases, coupled with relatively stable raw material feedstock costs, led to improved margins in the second half of 1994. Highlights of 1994 included: Completion of the corporation's $575 million cost reduction program. Start up of new ethylene oxide/glycol production facilities in Alberta (a joint venture with Asian partners) and new surfactant manufacturing facilities in South Charleston, W.Va. Formation of a 50-50 joint venture with Elf Atochem of Paris to manufacture and sell specialty polyethylene compounds for the European wire and cable industry. Announcement of a 50-50 joint venture with EniChem of Italy to develop, manufacture and sell polyethylene resins in Europe. The venture is subject to European Union approval. Announcement of the acquisition of certain ethylene oxide derivatives businesses from Imperial Chemical Industries of London. This transaction was finalized on Feb. 1, 1995. Reduction by one-half of the corporation's 50 percent interest in UCAR International for before-tax cash proceeds of $347 million received in January 1995. Doubling the corporation's borrowing capacity to $1.2 billion through new lines of credit. The increased commodity product margins experienced in the second half of 1994 are expected to continue through at least the first half of 1995. Whether these trends continue beyond that will depend on the strength of U.S. and global economies as well as on the availability of ethylene supplies. Nonethylene chain businesses should continue to perform well, although any slowness in the overall economy may affect their profitability. The reduction of the corporation's interest in UCAR International will result in a material nonrecurring gain to be recorded in the first quarter of 1995. However, the corporation's share of ongoing future earnings from UCAR will be essentially eliminated. The corporation regularly reviews its assets with the objective of maximizing the deployment of resources in core operations. In this regard, UCC continues to consider strategies and/or transactions with respect to certain noncore assets and other assets not essential to the operation of the business that, if implemented, could result in material nonrecurring gains or losses. Dollar amounts in millions 1994 1993 1992 Employees (year-end) 12,004 13,051 15,075 Employment costs (wages, benefits, payroll taxes) $820 $886 $983 1994 Compared with 1993 Sales revenues increased almost 5 percent from 1993 levels to $4.865 billion, based on a 7 percent increase in volumes. After decreasing through mid-year, average selling prices increased through the third and fourth quarters while raw material feedstock prices remained relatively stable throughout the year (averaging slightly less than in 1993). Export revenues from domestic operations have averaged approximately $565 million in each of the past 3 years. The corporation's variable margin (sales revenues less variable manufacturing and distribution costs) as a percentage of sales rose to 45.8 percent from 45.6 percent in 1993 reflecting an improvement in ethylene/glycol and polyethylene margins in the second half of 1994. Excluding the OrganoSilicon business (OSi), sold in July 1993, the 1993 variable margin would have been 45.0 percent. The corporation's gross margin (variable margin less fixed manufacturing and distribution costs) as a percentage of sales rose to 24.5 percent in 1994 as compared with 22.7 percent in 1993 (22.1 percent excluding OSi). Fixed manufacturing and distribution costs, excluding OSi, remained level versus 1993, notwithstanding the year-to-year increases in volume. Selling, administration and other expenses (SA&O) continued their downward trend as the corporation benefited from its ongoing cost reduction/work process improvement programs. SA&O decreased nearly 15 percent in 1994 (a 10 percent decline excluding OSi from the 1993 totals) and represented less than two-thirds of 1990 spending levels. Research and development expenses increased 5 percent (excluding OSi) as a result of a number of new developmental projects, including the ethylene/propylene rubber program. Operating profit in 1994 increased to $551 million from $297 million in 1993. Nonrecurring gains in 1994 of $81 million on the sale of a manufacturing site and distribution terminal in Hong Kong and $24 million on the sale of the corporation's preferred stock investment in its former OSi business offset charges of $24 million on the write-down and sale of the corporation's stockholding in Union Carbide India Limited, a $12 million loss on the sale of interests in a uranium mill and mines, and $74 million of litigation costs and other costs related to divested operations. 1993 Compared with 1992 Sales revenues fell 5 percent from 1992 levels to $4.640 billion, largely a result of the sale of the OSi business in midyear 1993. The impact of a slight improvement in overall volume, excluding the OSi business, was offset by weaker pricing, particularly in ethylene glycol and polyethylene. The corporation's variable margin as a percentage of sales rose slightly in 1993 to 45.6 percent, from 45.5 percent in 1992. Weaker pricing in commodity product lines and the absence of margins from the OSi business in the second half of 1993 were offset by strong licensing results as well as reduced feedstock costs. The corporation's gross margin as a percentage of sales was 22.7 percent in 1993, the same as in 1992. After excluding the effect of the OSi sale, fixed manufacturing costs decreased 1 percent versus the prior year, more than offsetting inflation. SA&O continued to decline as a result of ongoing cost reduction/work process improvement programs. In 1993 SA&O totaled $340 million, down 11 percent compared with 1992 (a 5 percent decline excluding the OSi sale). Excluding OSi, research and development expenses declined modestly compared with 1992. In general, the corporation sought to use work process initiatives to improve research and development productivity rather than increasing expenditures. Operating profit fell 8 percent in 1993 to $297 million. This included a gain of $54 million from the sale of the OSi business and a gain of $8 million from the sale of a corporate aircraft, offset by a charge of $46 million from the shutdown of an ethylene oxide/glycol manufacturing facility at Montreal East, Quebec, Canada, a loss of $9 million on the sale of Vitaphore Corporation, a medical device company, and a loss of $9 million on the write- down of a Canadian business. 1992 Compared with 1991 Sales of $4.872 billion were essentially flat compared with prior year sales of $4.877 billion. The impact of increasing volumes in most product lines, including ethylene glycol and polyethylene, was more than offset by declining prices. The corporation's variable margin decreased from 46.1 percent in 1991 to 45.5 percent in 1992 due to higher feedstock costs. Gross margin as a percentage of sales increased from 22.3 percent in 1991 to 22.7 percent in 1992, due to lower fixed manufacturing costs. In addition, the corporation realized overhead cost savings through tight cost controls and work process improvements in concert with the profit improvement program. Operating profit for 1992 was $324 million. This included a charge of $35 million for additional severance expense associated with the corporation's profit improvement program, and income of $25 million from the settlement of a patent infringement case. Operating profit for 1991 totaled $81 million, including charges of $165 million for severance and relocation costs, joint venture charges, legal costs and the sale and wind-down of the transformer retrofill service business of the Unison Transformer Services subsidiary. Below is the data contained on the bar graphs on pages 12, 13 and 14 of Management's Discussion & Analysis. (1) Selling Price Fixed Cost (cents/pound) 1991 43.9 15.5 1992 40.7 13.8 1993 38.8 12.9 1994 38.1 11.5 (2) Variable Margin Millions of Dollars Percent of Sales 1990 2,507 47.8 1991 2,248 46.1 1992 2,219 45.5 1993 2,116 45.6 1994 2,228 45.8 (3) Fixed Costs - Millions of Dollars As Reported Constant 1990 Dollars 1990 1,768 1,768 1991 1,723 1,660 1992 1,649 1,545 1993 1,544 1,409 1994 1,462 1,299 (4) Total Volume Employee Productivity (Millions of Pounds) (Thousands of Pounds per Employee) 1991 11,102 665 1992 11,968 794 1993 11,956 916 1994 12,773 1,064 (5) Manufacturing and Distribution Period Costs As Reported Constant 1990 Dollars 1990 1,145 1,145 1991 1,158 1,116 1992 1,110 1,040 1993 1,065 972 1994 1,037 921 (6) Selling, Administration and Other Expenses As Reported Constant 1990 Dollars 1990 466 466 1991 408 393 1992 383 359 1993 340 310 1994 290 257 Costs Relating to Protection of the Environment Worldwide costs relating to environmental protection continue to be significant, due primarily to increasingly stringent laws and regulations and to the corporation's commitment to industry initiatives such as RESPONSIBLE CARE, as well as to its own internal standards. In 1994 worldwide expenses of continuing operations related to environmental protection for compliance with Federal, state and local laws regulating solid and hazardous wastes and discharge of materials to air and water, as well as for waste site remedial activities, totaled $153 million. Expenses in 1993 and 1992 were $149 million and $150 million, respectively. In addition, worldwide capital expenditures relating to environmental protection in 1994 totaled $57 million, compared with $51 million and $82 million in 1993 and 1992, respectively. The corporation, like other companies in the U.S., periodically receives notices from the U.S. Environmental Protection Agency and from state environmental agencies, as well as claims from other companies, alleging that the corporation is a potentially responsible party (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act and equivalent state laws (hereafter referred to collectively as Superfund) for past and future cleanup costs at hazardous waste sites at which the corporation is alleged to have arranged for treatment or disposal of hazardous substances. The corporation is also undertaking environmental investigation and remediation projects at hazardous waste sites located on property currently and formerly owned by the corporation pursuant to Superfund, as well as to the Resource Conservation and Recovery Act and equivalent state laws. There are approximately 130 hazardous waste sites at which management believes it is probable or reasonably possible that the corporation will incur liability for investigation and/or remediation costs. The corporation has established accruals for those hazardous waste sites where it is probable that a loss has been incurred and the amount of the loss can reasonably be estimated. The reliability and precision of the loss estimates are affected by numerous factors, such as the stage of site evaluation, the allocation of responsibility among PRPs and the assertion of additional claims. The corporation adjusts its accruals as new remediation requirements are defined, as information becomes available permitting reasonable estimates to be made, and to reflect new and changing facts. At Dec. 31, 1994, the corporation's accruals for environmental remediation totaled $297 million ($265 million in 1993). Approximately 46 percent of the accrual pertains to closure and postclosure costs for both operating and closed facilities. Additionally, environmental loss contingencies of $147 million in excess of amounts accrued existed at Dec. 31, 1994 ($115 million in 1993). Estimates of future costs of environmental protection are necessarily imprecise, due to numerous uncertainties. These include the impact of new laws and regulations, the availability and application of new and diverse technologies, the identification of new hazardous waste sites at which the corporation may be a PRP and, in the case of Superfund sites, the ultimate allocation of costs among PRPs and the final determination of the remedial requirements. While estimating such future costs is inherently imprecise, taking into consideration the corporation's experience to date regarding environmental matters of a similar nature and facts currently known, the corporation estimates that worldwide expenses related to environmental protection, expressed in 1994 dollars, should average about $152 million annually over the next 5 years. Worldwide capital expenditures for environmental protection, also expressed in 1994 dollars, are expected to average about $53 million annually over the same period. Management anticipates that future annual costs for environmental protection after 1999 will continue at levels comparable to the 5-year average estimates. Subject to the inherent imprecision and uncertainties in estimating and predicting future costs of environmental protection, it is management's opinion that any future annual costs for environmental protection in excess of the 5-year average estimates stated here, plus those costs anticipated to continue thereafter, would not have a material adverse effect on the corporation's consolidated financial position. However, such excess costs, if any, could have a material adverse effect on consolidated results of operations in a given quarter or year. Litigation The corporation and its consolidated subsidiaries are involved in a number of legal proceedings and claims with both private and governmental parties. These cover a wide range of matters, including, but not limited to, product liability; governmental regulatory proceedings; health, safety and environmental matters; employment; patents; contracts and taxes. In addition, the corporation is one of a number of defendants named in an increasing number of lawsuits, some of which have more than one plaintiff, involving silicone gel breast implants. The corporation supplied bulk silicone materials to certain companies that at various times were involved in the manufacture of breast implants. These cases are discussed in more detail in the Commitments and Contingencies note to the financial statements. In some of these legal proceedings and claims, the cost of remedies that may be sought or damages claimed is substantial. While it is impossible at this time to determine with certainty the ultimate outcome of any such legal proceedings and claims, management believes that adequate provisions have been made for probable losses with respect thereto and that such ultimate outcome, after provisions therefor, will not have a material adverse effect on the consolidated financial position of the corporation, but could have a material effect on consolidated results of operations in a given quarter or year. Should any losses be sustained in connection with any of such legal proceedings and claims, in excess of provisions therefor, they will be charged to income in the future. Interest Expense Interest expense rose $10 million in 1994 to $80 million due to rising interest rates. In 1993 interest expense totaled $70 million, a decrease of $76 million from 1992. The decrease resulted primarily from reduction and refinancing of debt and benefits of lower rates from interest rate hedging activity. Partnerships and Corporate Joint Ventures The corporation has for many years participated in a number of businesses through 50 percent-owned partnerships and corporate joint ventures. On a combined basis, the unconsolidated sales of these entities exceeded $2.8 billion in 1994. The most significant of these businesses include: Partnerships: UOP - a worldwide supplier of process technology catalysts, molecular sieves and adsorbents. Petromont - a Canadian polyolefins producer. Union Carbide/Shell Polypropylene - a U.S.-based producer of specialty polypropylene and licenser of polypropylene technology. World Ethanol - a U.S.-based supplier of ethanol. Corporate Joint Ventures: UCAR International - a worldwide supplier of carbon and graphite electrodes and carbon specialties. Effective Jan. 26, 1995, the corporation's ownership interest in UCAR International was reduced to 25 percent. Nippon Unicar - a Japan-based producer of commodity and specialty polyolefins. Following is a summary of partnership and corporate joint venture results for the past 3 years. Dollar amounts in millions Partnerships Corporate Joint Ventures 1994 1993 1992 1994 1993 1992 Combined sales $1,616 $1,445 $1,527 $1,206 $1,144 $1,061 UCC share of partnership income 98 67 60 - - - UCC share of net income (loss)of corporate joint ventures - - - 55 16 (14) UCC share of dividends and distributions 83 82 64 45 10 - Partnership income increased during the 3-year period, largely due to improved results from the polyethylene and polypropylene partnerships. Earnings from UOP, our largest partnership, remained relatively stable over the period. The significant improvement in UCC share of net income of corporate ventures was largely due to improved results from UCAR. On Dec. 31, 1994, the corporation and Elf Atochem of Paris concluded the formation of a new partnership to produce and sell specialty polyolefins in Europe. The corporation has also announced a planned joint venture with Petrochemical Industries of Kuwait to produce ethylene, polyethylene and ethylene oxide/glycol in Kuwait, as well as approval of the formation, subject to European Union approval, of a joint venture with EniChem of Italy to produce ethylene and polyethylene in Italy, France and Germany. In addition, in late 1994, a new joint venture with Mitsui of Japan and Far Eastern Textile Limited of Taiwan started up a 660 million-pound-per-year-capacity ethylene glycol plant in Alberta, Canada. Provision for Income Taxes The effective tax rate for 1994 decreased to 29.1 percent from 34.4 percent in 1993 as a result of lower taxes for operations outside the U.S. (1993 was unusually high due to taxes provided on the sale of certain OSi international subsidiaries) and a reduction for state and local income taxes. The corporation's tax rate of 25.3 percent in 1992 reflected research and development credits, foreign sales corporation benefits, reduced taxes from joint venture partnerships and income from foreign affiliates taxed at lower than statutory rates. Income from Discontinued Operations Income from discontinued operations for 1992 included the net income of Praxair for the first six months of 1992, prior to the June 30 spin-off. At that time Praxair became a separate public company. Accounting Changes In 1994 the corporation adopted FAS 115, "Accounting for Certain Investments in Debt and Equity Securities." The effect of the adoption was immaterial. In 1993 the corporation recorded a noncash after-tax charge of $97 million as a result of adopting FAS 112. The charge represents the cumulative effect of the accounting standard and is set forth separately in the Consolidated Statement of Income. In 1992 the corporation recorded a noncash after-tax charge of $360 million as a result of adopting FAS 106 and a tax charge of $1 million as a result of adopting FAS 109. LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA Cash Flow from Operations Cash flow from operations increased by $104 million to $561 million in 1994, as compared with 1993, primarily due to a significant increase in operating earnings partially offset by working capital increases consistent with increased sales. Cash Flow from (Used for) Investing Cash flow from (used for) investing includes capital expenditures, investments, proceeds from the sale of assets and businesses and net cash received from Praxair. Capital expenditures totaled $409 million in 1994, compared with $395 million in 1993 and $359 million in 1992. Major domestic capital projects in 1994 include the UNIPOL II unit at Taft (Star Plant), La., the butanol unit at Taft, La., a bulk chemicals storage facility in Bedford Park, Ill., and the TRITON surfactants unit at the South Charleston, W.Va., facility. Over the past 3 years, 34 percent of capital expenditures was directed at new capacity, 48 percent to cost reduction and replacement, and 18 percent to environmental, safety and health facilities. Of these expenditures, 90 percent were in the U.S. and Puerto Rico. Investments during 1994 totaling $16 million included a $26 million investment in a Brazilian ethylene company and a return of investment of $30 million from a financing affiliate. Investments during 1993 totaled $39 million, including a $13 million investment in Petromont. Investments in 1992 included $30 million to a financing affiliate. Proceeds from sale of fixed and other assets in 1994 of $138 million include $84 million from the sale of the Hong Kong terminal property and $13 million from the divestiture of the corporation's specialty electronic materials business and its interest in a Zimbabwe mining and smelting operation. Proceeds from the sale of investments included $86 million from the sale of the corporation's preferred stock investment in OSi. In 1993 proceeds from the sale of fixed and other assets included $220 million related to the sale of the OSi business and $18 million from the sale of a corporate aircraft. In 1992 proceeds included receipt of $50 million from a licensee in settlement of a receivable and $9 million relating to the sale of an aircraft. Proceeds from the sale of investments in 1992 included $44 million from the sale of the corporation's investment in a casualty insurance company, $32 million from the sale of a Canadian investment and $17 million from the remaining interest in KEMET Electronics. At Dec. 31, 1994, the cost of completing authorized construction projects was estimated to be $406 million, of which $30 million is covered by firm commitments. Future construction expenditures are anticipated to be sourced through operating cash flows and borrowings. During 1995 the corporation will make significant investments in joint ventures. The cost of these investments is expected to be funded from operating cash flows as well as proceeds from the UCAR transaction. Cash Flow Used for Financing Cash flow used for financing includes stockholder dividends, funds used to buy back common stock and debt reduction, offset in part by proceeds from sales of common stock pursuant to the corporation's dividend reinvestment plan and its employee savings and incentive programs. Cash flow used for financing in 1994 totaled $360 million compared to $378 million in 1993 and $1.041 billion in 1992. Over the past 3 years, cash totaling $1.233 billion was used to reduce debt to its present level of $946 million. In addition, pursuant to resolutions of the board of directors, the corporation has periodically repurchased shares of its common stock. In 1994, 11.6 million shares were repurchased for $337 million at an average effective price of $29.03 per share. In the previous year, 3.7 million shares were repurchased for $70 million at an average effective price of $18.87 per share. On Nov. 4, 1994, the corporation entered into 2 new credit agreements with a group of banks, replacing an existing $600 million agreement. One of the new agreements provides the corporation with $1 billion in credit for the next 5 years, and the other agreement provides $200 million for 364 days. Several options are available to borrow at various rates on a revolving basis. At Dec. 31, 1994, there were no outstanding borrowings under the credit agreements. Debt Ratios Total debt outstanding at year-end for the past 3 years was: Dollar amounts in millions 1994 1993 1992 Domestic $862 $895 $1,274 International 84 71 197 Total $946 $966 $1,471 Year-end ratios of total debt to total capital were: 1994 1993 1992 Debt ratio 38.2% 40.3% 54.3% Total debt consists of short-term debt, long-term debt and the current portion of long-term debt. Total capital consists of total debt plus minority stockholders' equity in consolidated subsidiaries and UCC stockholders' equity. Quarterly Data Union Carbide Corporation and Subsidiaries Millions of dollars 1Q 2Q 3Q 4Q Year 1994 Net sales $1,126 $ 1,177 $1,252 $1,310 $4,865 Cost of sales 856 906 953 958 3,673 Gross profit 270 271 299 352 1,192 Depreciation and amortization 67 67 69 71 274 Net income 63 73 96 157 389 Net income - common stockholders 61 70 94 154 379 1993 Net sales $1,193 $1,244 $1,130 $1,073 $4,640 Cost of sales 892 969 889 839 3,589 Gross profit 301 275 241 234 1,051 Depreciation and amortization 76 68 66 66 276 Net income before accounting change 42 41 38 44 165 Cumulative effect of change in accounting principle (97) - - - (97) Net income (loss) - common stockholders (57) 38 36 41 58 Dollars per common share 1Q 2Q 3Q 4Q Year 1994 Primary net income $ 0.39 $ 0.44 $ 0.61 $ 1.01 $ 2.44 Fully diluted net income 0.37 0.42 0.57 0.93 2.27 Cash dividends 0.1875 0.1875 0.1875 0.1875 0.75 Market price - high(a) 26.13 28.63 35.88 35.13 35.88 Market price - low(a) 21.75 21.50 26.00 26.38 21.50 1993 Primary income from continuing operations $ 0.28 $ 0.24 $ 0.23 $ 0.26 $ 1.00 Cumulative effect of change in accounting principle (0.69) - - - (0.64) Primary net income (loss) (0.41) 0.24 0.23 0.26 0.36 Fully diluted net income(b) - 0.24 0.22 0.25 - Cash dividends 0.1875 0.1875 0.1875 0.1875 0.75 Market price - high(a) 18.00 20.63 19.50 23.13 23.13 Market price - low(a) 16.00 17.63 17.63 19.25 16.00 a) Prices are based on New York Stock Exchange Composite Transactions. b) Fully diluted per share amounts are not presented where amounts are antidilutive. Selected Financial Data Union Carbide Corporation and Subsidiaries
Dollar amounts in millions (except per share figures), year ended December 31,(a) 1994 1993 1992 From the Income Statement Net sales $4,865 $4,640 $4,872 Cost of sales 3,673 3,589 3,764 Research and development 136 139 155 Selling, administration and other expenses 290 340 383 Depreciation and amortization 274 276 293 Interest on long-term and short-term debt 80 70 146 Partnership income (loss) 98 67 60 Pre-tax income (loss) from continuing operations 471 227 178 Provision (credit) for income taxes 137 78 45 UCC share of net income (loss) from corporate investments carried at equity 55 16 (14) Income (loss) from continuing operations 389 165 119 Income from discontinued operations - - 67 Cumulative effect of change in accounting principles - (97) (361) Net income (loss) - common stockholders 379 58 (187) Per common share Primary - Income (loss) from continuing operations $ 2.44 $ 1.00 $ 0.76 - Net income (loss) 2.44 0.36 (1.46) Fully diluted(b) - Income from continuing operations $ 2.27 $ - $ - - Net income 2.27 - - From the Balance Sheet (At Year-End) Net current assets of continuing operations $ 329 $ 233 $ 66 Total assets 5,028 4,689 4,941 Long-term debt 899 931 1,113 Other long-term obligations 537 378 277 Total capital 2,479 2,395 2,710 UCC stockholders' equity 1,509 1,428 1,238 UCC stockholders' equity per common share 10.45 9.49 9.32 Other Data Cash dividends on common stock $ 113 $ 110 $ 114 Cash dividends per common share 0.75 0.75 0.875 Special distribution per common share - - 15.875 Market price per common share - high(c) 35.88 23.13 17.13(d) Market price per common share - low(c) 21.50 16.00 10.88(d) Common shares outstanding (thousands) 144,412 150,548 132,865 Capital expenditures 409 395 359 Employees - continuing operations 12,004 13,051 15,075 Selected Financial Ratios Total debt/total capital 38.2% 40.3% 54.3% Return on capital(e) 18.0% 7.7% 6.9% Income from continuing operations/ average UCC stockholders' equity 26.5% 12.4% 6.8% Cash dividends on common stock/income from continuing operations 29.0% 66.7% 95.8% Dollar amounts in millions (except per share figures), year ended December 31,(a) 1991 1990 From the Income Statement Net sales $4,877 $5,238 Cost of sales 3,787 3,876 Research and development 157 157 Selling, administration and other expenses 408 466 Depreciation and amortization 287 278 Interest on long-term and short-term debt 228 269 Partnership income (loss) (22) 70 Pre-tax income (loss) from continuing operations (147) 365 Provision (credit) for income taxes (50) 130 UCC share of net income (loss) from corporate investments carried at equity (21) (42) Income (loss) from continuing operations (116) 188 Income from discontinued operations 107 120 Cumulative effect of change in accounting principles - - Net income (loss) - common stockholders (28) 308 Per common share Primary - Income (loss) from continuing operations $(1.06) $ 1.34 - Net income (loss) (0.22) 2.19 Fully diluted(b) - Income from continuing operations $ - $ 1.34 - Net income - 2.13 From the Balance Sheet (At Year-End) Net current assets of continuing operations $ 209 $ 7 Total assets 6,826 7,389 Long-term debt 1,160 2,058 Other long-term obligations 428 357 Total capital 4,694 5,338 UCC stockholders' equity 2,239 2,373 UCC stockholders' equity per common share 17.55 18.88 Other Data Cash dividends on common stock $ 126 $ 138 Cash dividends per common share 1.00 1.00 Special distribution per common share - - Market price per common share - high(c) 22.63 24.88 Market price per common share - low(c) 15.13 14.13 Common shares outstanding (thousands) 127,607 125,674 Capital expenditures 400 381 Employees - continuing operations 16,705 17,722 Selected Financial Ratios Total debt/total capital 52.0% 54.0% Return on capital(e) - 8.4% Income from continuing operations/ average UCC stockholders' equity - 7.9% Cash dividends on common stock/income from continuing operations - 73.4% Dollar amounts in millions (except per share figures), year ended December 31,(a) 1989 1988 From the Income Statement Net sales $5,613 $5,525 Cost of sales 3,909 3,696 Research and development 143 124 Selling, administration and other expenses 442 394 Depreciation and amortization 261 255 Interest on long-term and short-term debt 268 172 Partnership income (loss) 82 95 Pre-tax income (loss) from continuing operations 780 978 Provision (credit) for income taxes 257 381 UCC share of net income (loss) from corporate investments carried at equity 27 33 Income (loss) from continuing operations 530 608 Income from discontinued operations 43 54 Cumulative effect of change in accounting principles - - Net income (loss) - common stockholders 573 662 Per common share Primary - Income (loss) from continuing operations $ 3.76 $ 4.48 - Net income (loss) 4.07 4.88 Fully diluted(b) - Income from continuing operations $ 3.63 $ 4.29 - Net income 3.92 4.66 From the Balance Sheet (At Year-End) Net current assets of continuing operations $ 22 $ 14 Total assets 7,355 7,327 Long-term debt 2,060 2,271 Other long-term obligations 572 594 Total capital 5,319 4,805 UCC stockholders' equity 2,383 1,836 UCC stockholders' equity per common share 16.83 13.34 Other Data Cash dividends on common stock $ 140 $ 155 Cash dividends per common share 1.00 1.15 Special distribution per common share - - Market price per common share - high(c) 33.25 28.38 Market price per common share - low(c) 22.75 17.00 Common shares outstanding (thousands) 141,578 137,602 Capital expenditures 483 380 Employees - continuing operations 18,032 17,258 Selected Financial Ratios Total debt/total capital 49.9% 56.1% Return on capital(e) 21.2% 24.5% Income from continuing operations/ average UCC stockholders' equity 25.1% 39.4% Cash dividends on common stock/income from continuing operations 26.4% 25.5% a) The OrganoSilicon business was included in the results of the corporation until its sale in July 1993. b) Fully diluted per share amounts are not presented where amounts are antidilutive. c) Prices are based on New York Stock Exchange Composite Transactions. d) On June 30, 1992, the corporation completed the spin-off of Praxair, distributing to holders of common stock one share of Praxair common stock for each share of UCC common stock. The high and low presented in the table for 1992 represent the value of the common stock after the spin-off. The high for the year before the spin-off was $29.63; the low before the spin-off was $20.13. e) Return on capital is computed by dividing income by beginning of year capital. Income consists of income from continuing operations, less preferred dividends, plus after-tax interest cost (net of interest income received from Praxair), plus income from minority interests. Capital consists of the components described below, adjusted for the corporation's Praxair-related assets and the cumulative effect of the changes in accounting principles. Total debt consists of short-term debt, long-term debt and current portion of long-term debt. Total capital consists of total debt plus minority stockholders' equity in consolidated subsidiaries and UCC stockholders' equity.
Consolidated Statement of Income Union Carbide Corporation and Subsidiaries
Millions of dollars (except per share figures), year ended December 31, 1994 1993 1992 Net Sales $4,865 $4,640 $4,872 Cost of sales, exclusive of depreciation and amortization shown separately below 3,673 3,589 3,764 Research and development 136 139 155 Selling, administration and other expenses 290 340 383 Depreciation and amortization 274 276 293 Interest on long-term and short-term debt 80 70 146 Partnership income 98 67 60 Other expense - net 39 66 13 Income Before Provision for Income Taxes - Continuing Operations 471 227 178 Provision for income taxes 137 78 45 Income of Consolidated Companies - Continuing Operations 334 149 133 Plus: UCC share of net income (loss) from corporate investments carried at equity 55 16 (14) Income from Continuing Operations $ 389 $ 165 $ 119 Income from discontinued operations, net of income taxes and minority interest - - 67 Net Income Before Cumulative Effect of Change in Accounting Principles $ 389 $ 165 $ 186 Cumulative effect of change in accounting principles - (97) (361) Net Income (Loss) 389 68 (175) Preferred stock dividends, net of income taxes 10 10 12 Net Income (Loss) - Common Stockholders $ 379 $ 58 $ (187) Earnings per Common Share Primary - Income from continuing operations $ 2.44 $ 1.00 $ 0.76 - Income from discontinued operations $ - $ - $ 0.51 - Cumulative effect of change in accounting principles $ - $(0.64) $(2.73) - Net income (loss) - common stockholders $ 2.44 $ 0.36 $(1.46) Fully diluted(a) $ 2.27 $ - $ - Cash Dividends Declared per Common Share $ 0.75 $ 0.75 $0.875 a) Fully diluted per share amounts are not presented where amounts are antidilutive. The Notes to Financial Statements on pages 24 through 36 should be read in conjunction with this statement.
Consolidated Balance Sheet Union Carbide Corporation and Subsidiaries Millions of dollars at December 31, 1994 1993 Assets Cash and cash equivalents $ 109 $ 108 Notes and accounts receivable 898 689 Inventories 390 385 Prepaid expenses 217 247 Total Current Assets 1,614 1,429 Property, plant and equipment 5,889 5,626 Less: Accumulated depreciation 3,347 3,206 Net Fixed Assets 2,542 2,420 Companies carried at equity 418 437 Other investments and advances 88 137 Total Investments and Advances 506 574 Other assets 366 266 Total Assets $5,028 $4,689 Liabilities and Stockholders' Equity Accounts payable $ 326 $ 310 Short-term debt 28 24 Payments to be made within 1 year on long-term debt 19 11 Accrued income and other taxes 179 189 Other accrued liabilities 733 662 Total Current Liabilities 1,285 1,196 Long-term debt 899 931 Postretirement benefit obligation 488 489 Other long-term obligations 537 378 Deferred credits 242 230 Minority stockholders' equity in consolidated subsidiaries 24 1 Convertible preferred stock - ESOP 148 150 Unearned employee compensation - ESOP (104) (114) UCC stockholders' equity Common stock Authorized - 500,000,000 shares Issued - 154,609,669 shares 155 155 Additional paid-in capital 369 366 Equity adjustment from foreign currency translation (59) (84) Retained earnings 1,333 1,067 1,798 1,504 Less: Treasury stock, at cost - 10,197,367 shares (4,062,189 in 1993) 289 76 Total UCC Stockholders' Equity 1,509 1,428 Total Liabilities and Stockholders' Equity $5,028 $4,689 The Notes to Financial Statements on pages 24 through 36 should be read in conjunction with this statement. Consolidated Statement of Cash Flows Union Carbide Corporation and Subsidiaries Increase (Decrease) in Cash and Cash Equivalents Millions of dollars, year ended December 31, 1994 1993 1992 Operations Income from continuing operations $ 389 $ 165 $ 119 Noncash charges (credits) to net income Depreciation and amortization 274 276 293 Deferred income taxes 31 (34) (44) Other noncash charges 88 65 8 Investing debits to net income (100) (52) (59) Working capital(a) (151) (9) 2 Long-term assets and liabilities 30 46 (39) Cash Flow from Operations 561 457 280 Investing Capital expenditures (409) (395) (359) Investments (16) (39) (69) Sale of investments 87 29 101 Sale of fixed and other assets 138 266 132 Net cash transferred from Praxair, Inc. - - 1,066 Cash Flow from (Used for) Investing (200) (139) 871 Financing Change in short-term debt (3 months or less) 8 (263) (260) Proceeds from short-term debt 43 - 203 Repayment of short-term debt (48) (36) (222) Proceeds from long-term debt 18 320 324 Repayment of long-term debt (36) (262) (1,022) Issuance of common stock 111 57 73 Purchase of common stock (337) (70) - Repurchase of convertible preferred stock - - (202) Repayment of loan by ESOP - - 202 Payment of dividends (126) (124) (130) Other 7 - (7) Cash Flow Used for Financing (360) (378) (1,041) Effect of exchange rate changes on cash and cash equivalents - (3) (3) Change in cash and cash equivalents 1 (63) 107 Cash and cash equivalents beginning-of-year 108 171 64 Cash and Cash Equivalents End-of-Year $ 109 $ 108 $ 171 Cash Paid for Interest and Income Taxes Interest (net of amount capitalized) $ 89 $ 67 $ 174 Income taxes $ 74 $ 44 $ 59 a) Net change in working capital by component (excluding cash and cash equivalents, and due from Praxair, deferred income taxes and short-term debt): 1994 1993 1992 (Increase) decrease in current assets Notes and accounts receivable $ (206) $ 5 $ 73 Inventories (22) 11 71 Prepaid expenses (19) 16 (13) Increase (decrease) in payables and accruals 96 (41) (129) Working capital $ (151) $ (9) $ 2 The Notes to Financial Statements on pages 24 through 36 should be read in conjunction with this statement. Consolidated Statement of Stockholders' Equity Union Carbide Corporation and Subsidiaries
1994 1993 1992 Shares Millions Shares Million Shares Millions (in thousands) of dollars (in thousands) of dollars (in thousands) of dollars Common Stock Balance at January 1 154,610 $ 155 135,513 $ 136 130,256 $ 130 Issued: For the Dividend Reinvestment and Stock Purchase Plan - 134 - 483 1 For employee savings and incentive plans - 2,463 2 4,742 5 Conversion of debentures - 16,500 17 32 - Balance at December 31 154,610 $ 155 154,610 $ 155 135,513 $ 136 Additional Paid-in Capital Balance at January 1 $ 366 $ 100 $ 33 Proceeds from the sale of put options 3 1 - Reclassification of put option obligations (3) (2) - Issued: For the Dividend Reinvestment and Stock Purchase Plan 1 2 9 For employee savings and incentive plans 2 19 58 Conversion of debentures - 246 - Balance at December 31 $ 369 $ 366 $ 100 Equity Adjustment from Foreign Currency Translation Balance at January 1 $ (84) $ (71) $ (8) Translation and other adjustments 7 (11) (47) Praxair spin-off - - (16) Sale of businesses 18 (2) - Balance at December 31 $ (59) $ (84) $ (71) Retained Earnings Balance at January 1 $1,067 $1,119 $2,130 Net income (loss) - common stockholders 379 58 (187) Dividends on spin-off of Praxair - - (710) Cash dividends on common stock (113) (110) (114) Balance at December 31 $1,333 $1,067 $1,119 Less: Treasury Stock Balance at January 1 4,062 $ 76 2,649 $ 46 2,649 $ 46 Common Stock repurchase program 11,624 337 3,688 71 - - Issued: For the Dividend Reinvestment and Stock Purchase Plan (275) (6) (322) (6) - - For employee savings and incentive plans (5,214) (118) (1,953) (35) - - Balance at December 31 10,197 $ 289 4,062 $ 76 2,649 $ 46 Total Stockholders' Equity $1,509 $1,428 $1,238 The Notes to Financial Statements on pages 24 through 36 should be read in conjunction with this statement.
Notes to Financial Statements 1. Summary of Significant Accounting Policies Principles of Consolidation - The consolidated financial statements include the accounts of all significant subsidiaries. All significant intercompany transactions have been eliminated in consolidation. Investments in 20 percent- to 50 percent-owned companies and partnerships are carried at equity in net assets. Other investments are carried generally at cost. On April 27, 1994, stockholders voted to approve the merger of Union Carbide Corporation (UCC) into Union Carbide Chemicals and Plastics Company Inc. (UCC&P). The merger was effective May 1, 1994. Immediately after the merger, UCC&P had the same consolidated assets, liabilities and stockholders' equity as the corporation. UCC&P changed its name to Union Carbide Corporation. Accounting and Reporting Changes - Effective Jan. 1, 1994, the corporation adopted Financial Accounting Standard (FAS) 115, "Accounting for Certain Investments in Debt and Equity Securities." The effect of the adoption of FAS 115 was immaterial. Effective Jan. 1, 1993, the corporation adopted FAS 112, "Employers' Accounting for Postemployment Benefits." The cumulative effect of the change in the method of accounting for postemployment benefits is reported in the 1993 Consolidated Statement of Income. Effective Jan. 1, 1992, the corporation adopted FAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and FAS 109, "Accounting for Income Taxes." The cumulative effects of the changes in the method of accounting for postretirement benefits and income taxes are reported in the 1992 Consolidated Statement of Income. Foreign Currency Translation - Unrealized gains and losses resulting from translating foreign subsidiaries' assets and liabilities into U.S. dollars generally are accumulated in an equity account on the balance sheet until such time as the subsidiary is sold or substantially or completely liquidated, except for Latin America. Translation gains and losses relating to operations located in Latin American countries, where hyperinflation exists, are included in the income statement until hyperinflation ceases. Financial Instruments - Financial instruments are used to hedge financial risk caused by fluctuating interest and currency rates. The amounts to be paid or received on interest rate swap agreements and forward rate agreements (FRAs) that hedge debt accrue and are recognized over the lives of the agreements. Gains and losses on foreign currency forward contracts and foreign currency options used to hedge firm commitments are deferred and recognized as part of the related foreign currency transactions. Interest rate swaps and FRAs, which are designated to offset earnings fluctuations due to cyclical business conditions, and foreign currency forward contracts, which are designated to offset earnings fluctuations from anticipated foreign currency cash flows, are marked to market and the results recognized immediately as other income or other expense. Cash Equivalents - The corporation considers as cash equivalents all highly liquid investments that are readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Inventories - Inventories are stated at cost or market, whichever is lower. These amounts do not include depreciation and amortization, the impact of which is not significant to the financial statements. Approximately 65 percent of inventory amounts before application of the LIFO method at Dec. 31, 1994 (66 percent at Dec. 31, 1993) have been valued on the LIFO basis; the "average cost" method is used for the balance. It is estimated that if inventories had been valued at current costs, they would have been approximately $275 million and $287 million higher than reported at Dec. 31, 1994, and Dec. 31, 1993, respectively. Fixed Assets - Fixed assets are carried at cost. Expenditures for replacements are capitalized, and the replaced items are retired. Gains and losses from the sale of property are included in income. Depreciation is calculated on a straight-line basis. The corporation and its subsidiaries generally use accelerated depreciation methods for tax purposes where appropriate. Patents, Trademarks and Goodwill - Amounts paid for purchased patents and newly acquired businesses in excess of the fair value of the net assets of such businesses have been charged to patents, trademarks and goodwill. The portion of such amounts determined to be attributable to patents is amortized over their remaining lives, while trademarks and goodwill are amortized over the estimated period of benefit, generally 5 to 20 years. Research and Development - Research and development costs are charged to expense as incurred. Depreciation expense applicable to research and development facilities and equipment is included in Depreciation and amortization in the Consolidated Statement of Income ($13 million in 1994, $12 million in 1993 and $13 million in 1992). Income Taxes - Provisions have been made, pursuant to FAS 109, for deferred income taxes based on differences between financial statement and tax bases of assets and liabilities using currently enacted tax rates and regulations. Environmental Costs - Environmental expenditures are expensed or capitalized as appropriate, depending on their future economic benefit. Expenditures relating to an existing condition caused by past operations and having no future economic benefits are expensed. Environmental expenditures include site investigation, physical remediation, operation and maintenance, and legal and administrative costs. Environmental accruals are established for sites where it is probable that a loss has been incurred and the amount of the loss can reasonably be estimated. Where the estimate is a range and no amount within the range is a better estimate than any other amount, the corporation accrues the minimum amount in the range. Retirement Programs - The cost of pension benefits under the U.S. Retirement Program is determined by an independent actuarial firm using the projected unit credit actuarial cost method, with an unrecognized net asset at Jan. 1, 1986, amortized over 15 years. Contributions to this program are made in accordance with the regulations of the Employee Retirement Income Security Act of 1974. Pursuant to FAS 106, the cost of postretirement benefits are recognized on the accrual basis over the period in which employees become eligible for benefits. Earnings per Common Share - Primary earnings per common share is computed by dividing net income (loss) - common stockholders, excluding tax benefits related to unallocated preferred stock dividends, by the weighted average number of common shares outstanding during the year and common stock equivalents related to dilutive stock options. Fully diluted earnings per common share is computed by dividing adjusted net income (loss) - common stockholders by the weighted average number of common shares outstanding, common stock equivalents related to dilutive stock options, and common shares issuable upon conversion of debentures and convertible preferred stock. 2. Financial Instruments Fair values of financial instruments are estimated by using a method that indicates the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The fair values of the financial instruments included on the Consolidated Balance Sheet were estimated as follows: Cash, Short-Term Receivables and Accounts Payable - At Dec. 31, 1994 and 1993, the carrying amounts approximate fair value because of the short maturity of these instruments. The corporation had foreign currency forward contracts of $67 million at Dec. 31, 1994, hedging fluctuations in short-term foreign currency receivables and payables by offsetting the effects of currency changes in these accounts. Deferred gains and losses on these contracts are not material. Investments - The corporation's investments in equity companies, partnerships and other businesses generally involve joint ventures for which it is not practicable to determine fair values. The corporation purchased a currency option ($50 million notional amount, expiring March 1995) to hedge partially a committed foreign currency transaction related to an investment in a joint venture. Long-Term Receivables - The fair values of long-term receivables are calculated using current interest rates and consideration of underlying collateral where appropriate. The fair values approximate the carrying value of $200 million and $96 million reported in the Consolidated Balance Sheet at Dec. 31, 1994 and 1993, respectively. Debt - The corporation uses various types of financial instruments to manage exposure to financial market risk caused by interest rate fluctuations. Such instruments include interest rate swaps and FRAs. See Note 10 for a discussion of debt instruments. Other Financial Instruments - Interest rate swaps and FRAs, which were designated to offset earnings fluctuations due to cyclical business conditions, were carried at fair market value. At Dec. 31, 1993, the net notional amount of interest rate swaps was $615 million and the net notional amount of related FRAs was $1.3 billion. In the first half of 1994, as the risk of cyclically higher interest rates increased, the corporation unwound its positions in these instruments, resulting in a before-tax charge to Other expense - net of $9 million. Outstanding foreign currency forward contracts used as a means of offsetting earnings fluctuations from anticipated foreign currency cash flows totaled $182 million at Dec. 31, 1994 ($269 million at Dec. 31, 1993). During 1994 their fair values averaged a $1 million loss. Total net losses associated with these contracts were $6 million. Carrying and Fair Values - The carrying values and fair values of the corporation's investments, receivables and debt financial instruments at Dec. 31, 1994 and 1993 are summarized in the table below. Fair values are based on quoted market values, where available, or discounted cash flows (principally long-term debt). Individually and in total, other derivative positions, interest rate swaps, FRAs and open forward currency contracts and options had a nominal carrying amount and fair value. Put stock options on equity securities are discussed in Note 12. At December 31, 1994 1993 Millions of dollars Carrying Fair Carrying Fair Assets (liabilities) Amount Value Amount Value Investments and receivables $ 288 $ 288 $ 233 $ 237 Debt(a) Short and long-term debt $(946) $(896) $(966) $(991) Debt-related derivative instruments - Swap positions - (1) - 30 FRA positions - - - 2 Net debt $(946) $(897) $(966) $(959) a) See Note 10. 3. Geographic Segment Information Millions of dollars Net Sales 1994 1993 1992 United States & Puerto Rico(a) $3,535 $3,443 $3,529 Canada 136 130 137 Europe 474 454 550 Latin America 218 241 222 Far East & Other 502 372 434 International operations 1,330 1,197 1,343 Total UCC Consolidated $4,865 $4,640 $4,872 a) Includes export sales of $532 million in 1994 ($604 million in 1993 and $560 million in 1992). Operating Profit (Loss)(a) 1994 1993 1992 United States & Puerto Rico $ 433 $ 299 $ 285 Canada 14 (53) (16) Europe 12 18 13 Latin America 16 6 8 Far East & Other 74(b) 28 31 International operations 116 (1) 36 Inter-segment eliminations 2 (1) 3 Total Operating Profit $ 551 $ 297 $ 324 Less: Interest Expense (80) (70) (146) Income Before Provision for Income Taxes $ 471 $ 227 $ 178 a) Due to the merger between UCC & UCC&P (see Note 1), operating profit is calculated on a total consolidated basis; prior years' totals have been restated to reflect this change. b) Includes an $81 million gain on the sale of a manufacturing facility and distribution terminal in Hong Kong and a $24 million charge from the write- down and sale of the corporation's stockholding in Union Carbide India Limited. Identifiable Assets 1994 1993 1992 United States & Puerto Rico $3,777 $3,579 $3,575 Canada 259 263 367 Europe 305 255 316 Latin America 203 140 151 Far East & Other 272 210 213 International operations 1,039 868 1,047 Inter-segment eliminations (7) (28) (53) Total Identifiable Assets $4,809 $4,419 $4,569 Other 219 270 372 Total Assets $5,028 $4,689 $4,941 4. Other Expense - Net The following is an analysis of Other expense - net: Millions of dollars 1994 1993 1992 (Gains) losses on sales and disposals of businesses and other assets(a) $(67) $ 14 $(45) Foreign currency adjustments 16 31 24 Severance - - 35 Interest income from Praxair - - (31) Other(b) 90 21 30 $ 39 $ 66 $ 13 a) Includes for 1994 an $81 million gain on the sale of a manufacturing facility and distribution terminal in Hong Kong; a $24 million gain on a preferred stock investment in OSi; a $24 million charge from the write-down and sale of the corporation's stockholding in Union Carbide India Limited; and a $12 million loss on the sale of the corporation's interest in a uranium mill and certain uranium mines. Includes for 1993 a $54 million gain from the sale of OSi; a $46 million charge from the shut-down of an ethylene oxide/glycol manufacturing facility at Montreal East, Quebec, Canada; a $9 million loss on the sale of a medical device company; a $9 million loss on the write-down of a Canadian business; and a gain of $8 million on the sale of a corporate aircraft. Includes for 1992 gains of $34 million on the sale of the corporation's investments in a casualty insurance company and $8 million on the sale of a corporate aircraft. b) Includes for 1994 $74 million for litigation costs and other costs related to divested operations. Includes $7 million, $10 million and $21 million, in 1994, 1993 and 1992, respectively, related to discontinued and noncore businesses. 5. Spin-off of Praxair, Inc. On June 30, 1992, the corporation completed the spin-off of its industrial gases subsidiary, Praxair, Inc. Under the terms of the spin-off, UCC distributed to its holders of common stock 1 share of Praxair common stock and an associated Praxair common stock purchase right for each share of UCC common stock. The conversion prices of the corporation's convertible preferred stock and common stock purchase rights were adjusted for the dilutive effects of the spin-off (see Notes 11 and 12). For the first 6 months of 1992, Praxair had sales of $1.315 billion, provision for income taxes of $43 million and net income of $67 million. 6. Income Taxes The following is a summary of the U.S. and non-U.S. components of Income before provision for income taxes - continuing operations: Millions of dollars 1994 1993 1992 Income (loss) before provision for income taxes: U.S. $362 $235 $147 Non-U.S. 109 (8) 31 $471 $227 $178 The following is an analysis of income tax expense:
1994 1993 1992 Millions of dollars Current Deferred Current Deferred Current Deferred U.S. Federal income taxes $ 77 $46 $ 60 $(21) $45 $(28) U.S. business and research and experimentation tax credits (10) - (9) - (5) - U.S. state and local taxes based on income 4 (2) 19 2 18 (4) Non-U.S. income taxes 35 (13) 42 (15) 31 (12) $106 $31 $112 $(34) $89 $(44) Provision for Income Taxes - Continuing Operations $137 $78 $45
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
1994 1993 Deferred Deferred Deferred Deferred Millions of dollars Assets Liabilities Assets Liabilities Depreciation and amortization $ - $354 $ - $320 Postretirement benefits other than pensions 221 - 214 - Postemployment benefits and severance costs 25 - 62 - Environmental and litigation 147 - 124 - Sale/leaseback and related deferrals 45 - 47 - Other 177 216 170 205 Gross deferred tax assets and liabilities $615 $570 $617 $525 Net Deferred Tax Asset $45 $92
Net noncurrent deferred tax liabilities of $91 million ($78 million in 1993) are included in Deferred credits in the Consolidated Balance Sheet. Net current deferred tax assets of $129 million ($170 million in 1993) are included in Prepaid expenses. Net noncurrent deferred tax assets of $7 million (none in 1993) are included in Other assets. In 1994 there were $6 million in non-U.S. net operating loss carryforwards included in the deferred tax assets above. There were $8 million at Dec. 31, 1993, offset by a valuation allowance of $2 million. There were no alternate minimum tax credit carryforwards in 1994 ($10 million were included in deferred tax assets in 1993). Undistributed earnings of affiliates intended to be reinvested indefinitely amounted to approximately $374 million at Dec. 31, 1994 ($350 million at Dec. 31, 1993). Determination of deferred taxes related to these earnings is not practicable. The consolidated effective income tax rate was 29.1 percent in 1994, 34.4 percent in 1993 and 25.3 percent in 1992. An analysis of the difference between Provision for income taxes and the amount computed by applying the statutory Federal income tax rate to Income before provision for income taxes - - continuing operations is as follows: Percent of pre-tax income 1994 1993 1992 Tax at statutory Federal rate 35.0% 35.0% 34.0% Taxes related to operations outside the U.S. - 3.1 (0.4) U.S. state and local taxes based on income 0.2 5.7 5.6 Foreign sales corporation (2.8) (4.0) (6.7) Business credits (2.1) (4.0) (2.8) Other, net (1.2) (1.4) (4.4) 29.1% 34.4% 25.3% 7. Supplementary Balance Sheet Detail Millions of dollars at December 31, 1994 1993 Notes and Accounts Receivable Trade $ 726 $ 555 Other 183 146 909 701 Less: Allowance for doubtful accounts 11 12 $ 898 $ 689 Inventories Raw materials and supplies $ 103 $ 104 Work in process 41 52 Finished goods 246 229 $ 390 $ 385 Property, Plant and Equipment Land and improvements $ 296 $ 287 Buildings 351 338 Machinery and equipment 4,847 4,656 Construction in progress and other 395 345 $5,889 $5,626 Other Assets Deferred charges $ 129 $ 126 Insurance recoveries 103 - Long-term receivables 97 96 Patents, trademarks and goodwill 37 44 $ 366 $ 266 Other Accrued Liabilities Accrued accounts payable $ 266 $ 213 Payrolls 61 57 Severance and relocation costs 36 94 Environmental remediation costs 62 51 Postretirement benefit obligation 34 30 Other 274 217 $ 733 $ 662 Other Long-term Obligations Environmental remediation costs $ 235 $ 214 Product liability costs 138 35 Postemployment benefits 42 63 Other 122 66 $ 537 $ 378 Equity Adjustment from Foreign Currency Translation Canada $ (48) $ (38) Europe (17) (39) Far East & Other 6 (7) $ (59) $ (84) 8. Interest Costs The following is an analysis of Interest on long-term and short-term debt: Millions of dollars 1994 1993 1992 Interest incurred on debt $ 93 $ 84 $164 Less: Interest capitalized and other adjustments 13 14 18 $ 80 $ 70 $146 9. Companies Carried at Equity The following are financial summaries of partnerships and 20 percent- to 50 percent-owned corporate investments carried at equity. The corporation's most significant partnerships include UOP, Petromont and Company Limited Partnership, World Ethanol Company and a Union Carbide/Shell polypropylene partnership. In 1994 the corporation and Elf Atochem completed the formation of a partnership, located in France, to produce and market specialty polyethylene compounds for the wire and cable industry. It began operations on Dec. 31, 1994. Partnerships Millions of dollars 1994 1993 1992 Net sales(a) $1,616 $1,445 $1,527 Cost of sales 954 863 902 Depreciation 51 50 59 Partnership income 229 199 194 Union Carbide Share of Partnership Income $ 98 $ 67 $ 60 Current assets $ 494 $ 450 Noncurrent assets 735 673 Total assets $1,229 $1,123 Current liabilities $ 309 $ 248 Noncurrent liabilities 455 435 Total liabilities $ 764 $ 683 Net assets $ 465 $ 440 Union Carbide Equity $ 220 $ 234 a) Includes $209 million net sales to Union Carbide Corporation in 1994 ($175 million in 1993 and $171 million in 1992). Corporate investments carried at equity include UCAR International Inc., Nippon Unicar Company Limited, Alberta & Orient Glycol Company Limited and several smaller entities. 20% - 50% Corporate Investments Millions of dollars 1994 1993 1992 Net sales(a) $1,206 $1,144 $1,061 Cost of sales 817 823 834 Depreciation 58 55 58 Net income (loss) 109 36 (82)(b) Union Carbide Share of Net Income (Loss) $ 55 $ 16 $ (14) Current assets $ 622 $ 572 Noncurrent assets 920 879 Total assets $1,542 $1,451 Current liabilities $ 457 $ 594 Noncurrent liabilities 676 407 Total liabilities $1,133 $1,001 Net assets $ 409 $ 450 Union Carbide Equity $ 198 $ 203 a) Includes $73 million net sales to the corporation in 1994 ($46 million in 1993 and $63 million in 1992). b) Includes $55 million after-tax charge representing UCAR's adoption of FAS 106 and FAS 109. 10. Long-Term Debt Millions of dollars at December 31, 1994 1993 Domestic 5.30% Sinking fund debentures, with equal annual sinking fund payments to 1997 $ - $ 25 6.75% Notes due 2003 125 125 7.00% Notes due 1999 175 175 7.875% Debentures due 2023 175 175 8.75% Debentures due 2022 125 125 Pollution control and other facility obligations 248 249 Obligations under capital leases 14 19 Other - 2 International Subsidiaries Obligations under capital leases 39 40 Other debt - various maturities and interest rates 17 7 918 942 Less: Payments to be made within 1 year 19 11 $899 $931 On Nov. 4, 1994, the corporation entered into 2 new credit agreements with a group of banks, replacing an existing $600 million agreement. One of the new agreements provides the corporation with $1 billion in credit for the next 5 years, and the other agreement provides $200 million for 364 days. Several options are available to borrow at various rates on a revolving basis. At Dec. 31, 1994, there were no outstanding borrowings under the credit agreements. Interest rates on credit agreements are floating interest rates based on LIBOR (London Interbank Offered Rate), CD (Certificate of Deposit), or Bank Reference Rate. There were no borrowings under the credit agreements in 1994 and 1993. The bank credit agreements contain covenants, normal for this type of agreement, that place certain limits on the ability of UCC to merge with another entity, incur debt or create liens on assets, and that require the corporation to meet net worth, leverage and interest coverage tests. Other indentures also restrict the corporation from incurring liens to secure debt. Pollution control and other facility obligations represent state, commonwealth and local governmental bond financing of pollution control and other facilities, and are treated for accounting and tax purposes as debt of the corporation. These tax-exempt obligations mature at various dates from 1996 through 2023, and have an average annual effective rate of 7.3 percent. During the first half of 1994, to reduce exposure to rising interest rates, the corporation terminated substantially all of its interest rate swaps and FRAs used as hedges to manage exposure to financial market risk caused by interest rate fluctuations on debt. A net charge of $19 million ($13 million after-tax) resulting from these terminations was deferred and is being amortized to interest expense over the remaining terms of the underlying instruments, which have various maturity dates through the year 2002. At Dec. 31, 1994, $16 million of the deferred loss remained, and it will be amortized as follows: $7 million in 1995, $3 million in 1996, and the balance from 1997 through 2002. At Dec. 31, 1994, the corporation had 2 open swap positions totaling $48 million ($625 million at Dec. 31, 1993) for which the corporation receives a fixed rate and pays a floating rate. The corporation had no open FRAs at Dec. 31, 1994 ($1.7 billion at Dec. 31, 1993). The corporation's exposure to counterparty creditworthiness is not material. The average and effective interest rates in 1994 on the corporation's fixed rate debt, other than pollution control and other facility obligations, were 7.5 percent. At Dec. 31, 1994, $40 million of consolidated assets were pledged as security for $36 million of subsidiaries' debt. Payments due on long-term debt in the 4 years following 1995 are: 1996, $20 million; 1997, $5 million; 1998, $5 million; and 1999, $180 million. 11. Convertible Preferred Stock The Union Carbide Corporation Employee Stock Ownership Plan (ESOP) is an integral part of the Savings Program for employees. On Jan. 1, 1991, the Trust for the ESOP purchased 15.1 million shares of a new series of convertible preferred stock (ESOP stock) from the corporation for $325 million. Each share of ESOP stock is convertible into and has the same voting rights as 1 share of the corporation's common stock, and is protected from dilution. The annual preferred dividend is $0.794 per share. Prior to the spin-off of Praxair in 1992, the corporation repurchased and retired 7.5 million shares of unallocated ESOP stock from the ESOP's trustee for $202 million, and unearned employee compensation was reduced accordingly. Also in connection with the spin-off, approximately 1 million shares of the ESOP stock held by individuals who became employees of Praxair were redeemed for Union Carbide Corporation common stock. At the date of the spin-off of Praxair, the conversion price, liquidation price and annual preferred dividend of the ESOP stock were adjusted and a special ESOP stock dividend of 10.5 million shares was issued so that the interests of the ESOP stockholders were not diluted. Substantially all full-time employees in the U.S. are eligible to participate in the ESOP through the corporation's matching contribution of 50 percent (75 percent beginning Jan. 1, 1995) on eligible employee contributions. At the corporation's option, ESOP shares may be redeemed either in cash or the corporation's common stock when employees make withdrawals from their accounts. It has been UCC's policy to redeem ESOP shares with cash. The cost of the ESOP is recognized as incurred and was $6 million in 1994 ($6 million in 1993 and $16 million in 1992). Reductions in ESOP costs in 1993 were due primarily to appreciation in the corporation's common stock and to the spin-off of Praxair. At Dec. 31, 1994, 16.4 million preferred shares were outstanding, 4.8 million of which were credited to employees' accounts, including 0.8 million credited during 1994. 12. UCC Stockholders' Equity At Dec. 31, 1994, Retained earnings included $134 million ($108 million at Dec. 31, 1993), representing the corporation's share of undistributed earnings of 20 percent- to 50 percent-owned companies accounted for by the equity method. Dividends received from companies carried at equity aggregated $128 million in 1994 ($92 million in 1993 and $64 million in 1992). At Dec. 31, 1994, restrictions on the transfer of funds from consolidated subsidiaries to the parent were not material. In July 1989 the board of directors adopted a stockholder rights plan and declared a dividend, payable on Aug. 31, 1989, of one Right for each outstanding share of common stock. Each Right entitles its holder, under certain circumstances, to buy a share of common stock at a purchase price of $37.67 (subject to adjustment). The Rights may not be exercised until 10 days after a person or group acquires 20 percent or more of UCC's common stock, or announces a tender offer that, if consummated, would result in 20 percent or more ownership of the common stock. Until then, separate Rights certificates will not be issued, nor will the Rights be traded separately from the stock. Should an acquirer become the beneficial owner of 20 percent of the common stock, and under certain additional circumstances, Union Carbide Corporation stockholders (other than the acquirer) would have the right to buy common stock in Union Carbide Corporation, or in the surviving enterprise if the corporation is acquired, having a value equal to 2 times the purchase price of the Right then in effect. The Rights will expire on Aug. 31, 1999, unless redeemed prior to that date. The redemption price is $0.01 per Right. The corporation's independent directors may redeem the Rights by a majority vote during the 10-day period following public announcement that a person or group has acquired 20 percent of UCC's common stock. On July 27, 1994, the board of directors announced that it had authorized the repurchase of an additional 10 million shares of UCC common stock, bringing to 20 million shares the total number authorized for repurchase. The repurchase program, which began in the first quarter of 1993 with an initial authorization of 10 million shares, was carried out to minimize future earnings dilution due to common stock requirements under certain employee benefit plans. Through Dec. 31, 1994, the corporation had repurchased 15,312,260 shares at an average effective price of $26.59 per share. On Feb. 6, 1995, the board of directors increased the number of shares that may be repurchased under the program to an aggregate of 30 million shares. Additional share repurchases under the repurchase program will be made over an unlimited period in a manner consistent with the combination of corporate cash flow and market conditions. In conjunction with the corporation's common stock buyback program, put options were sold in a series of private placements entitling the holders to sell 4.8 million shares of common stock to UCC, at specified prices upon exercise of the options. Since inception of this program through Dec. 31, 1994, options representing 3,663,800 common shares have expired unexercised, and options representing 986,200 shares were exercised for $30 million, or an average of $30.88 per share. Options representing 150,000 shares remain outstanding at Dec. 31, 1994. Premiums received since inception of the program have reduced the average price of repurchased shares to $26.59 per share from $26.84 per share. 13. Leases Leases that meet the criteria for capitalization have been classified and accounted for as capital leases. For operating leases, primarily involving facilities and distribution equipment, the future minimum rental payments under leases with remaining noncancelable terms in excess of 1 year are: Year ending Millions of dollars 1995 $ 84 1996 68 1997 67 1998 55 1999 52 Subsequent to 1999 338 Total minimum payments 664 Future sublease rentals 130 Net Minimum Rental Commitments $534 The present value of the net minimum rental commitments amounts to $335 million. Total lease and rental payments (net of sublease rental of $20 million in 1994, and $10 million in 1993 and 1992) were $65 million, $98 million and $92 million for 1994, 1993 and 1992, respectively. The corporation is contingently required to pay certain domestic lease obligations assigned to Praxair, in the event of Praxair's default, the present value of which totals $21 million. If such a payment is required, the corporation has a legal right to set off any such amounts paid against amounts it may owe to Praxair. 14. Retirement Programs Pension Benefits The noncontributory defined benefit retirement program of Union Carbide Corporation ("U.S. Retirement Program") covers substantially all U.S. employees and certain employees in other countries. Pension benefits are based primarily on years of service and compensation levels prior to retirement. Pension coverage for employees of the corporation's non-U.S. consolidated subsidiaries is provided through separate plans, to the extent deemed appropriate. Obligations under such plans are principally provided for by depositing funds with trustees. Worldwide Retirement Program net pension cost applicable to continuing operations amounted to $21 million in 1994, $20 million in 1993 and $22 million in 1992. Net pension cost for discontinued operations amounted to $8 million through June 30, 1992 (see Note 5). The components of net pension cost for the U.S. Retirement Program and non-U.S. plans are as follows: Millions of dollars 1994 1993 1992(a) Service cost - benefits earned during the period $ 51 $ 48 $ 61 Interest cost on projected benefit obligation 180 182 191 Return on plan assets (gain) loss - Actual $154 $(430) $(150) - Unrecognized return (355) (201) 229 (201) (64) (214) Amortization of net gain (9) (9) (8) Net Pension Cost $ 21 $ 20 $ 30 a) Includes net pension costs for Praxair through June 30, 1992. The funded status of the U.S. Retirement Program and non-U.S. plans was as follows: Millions of dollars at December 31, 1994 1993 Actuarial present value of plan benefits: Accumulated benefit obligation, including vested benefits of $2,037 million at Dec. 31, 1994, and $2,261 million at Dec. 31, 1993 $(2,150) $(2,404) Projected benefit obligation $(2,398) $(2,652) Fair value of plan assets, primarily invested in common stocks and fixed income securities $ 2,414 $ 2,747 Plan assets in excess of projected benefit obligation $ 16 $ 95 Unamortized net asset at transition (80) (92) Unamortized prior service cost 25 30 Unrecognized (gains) losses - net 35 (20) Prepaid (Accrued) Pension Cost $ (4) $ 13 Pension obligations are valued using the 1983 Group Annuity Mortality Table. The actuarial assumptions used were as follows: 1994 1993 Discount rate for determining projected benefit obligation 8.50% 7.00% Rate of increase in compensation levels 5.75% 4.25% Expected long-term rate of return on plan assets 8.50% 8.25% Postretirement Benefits Other Than Pensions The corporation and certain of its consolidated subsidiaries provide health care and life insurance benefits for eligible retired employees and their eligible dependents. These benefits are provided through various insurance companies and health care providers. FAS 106 was adopted in the fourth quarter of 1992, effective Jan. 1, 1992, for U.S. and international employees. The standard requires employers to account for retiree benefit obligations on an accrual basis rather than on a "pay-as-you-go" basis. The cumulative effect of adopting FAS 106 as of Jan. 1, 1992, resulted in a charge of $360 million to 1992 earnings, net of $205 million of income taxes ($2.72 per share). The obligation is determined by application of the terms of health and life insurance plans, together with relevant actuarial assumptions and health care cost trends that are projected to increase annually at rates of 13.5 percent in 1994, 12.5 percent in 1995, reduced incrementally to 7 percent in 2004 and thereafter. The effect of a 1 percent annual increase in the assumed health care cost trend rates would increase the accumulated postretirement benefits obligation at Dec. 31, 1994, by $15 million and the aggregate of service and interest cost components of net periodic postretirement benefit costs by $2 million. Measurement of the accumulated postretirement benefit obligation was based on the same assumptions used in the pension calculations referred to on page 33. During 1993 the corporation made changes to its health care programs, principally related to plan eligibility requirements for active employees. These changes resulted in a reduction of the accumulated postretirement benefit obligations. The corporation has funded postretirement benefits for certain retirees who retired prior to Dec. 31, 1988. The funds are invested primarily in common stocks and fixed income securities. The following tables provide information on the status of the plans. The components of net periodic postretirement benefit cost are as follows: Millions of dollars 1994 1993 1992 Service cost-benefits earned during the period $ 12 $ 12 $ 11 Interest cost 32 32 42 Return on plan assets (gain) loss - Actual $ 1 $(5) $(3) - Unrecognized return (3) (2) 3 (2) 1 (2) Net amortization and deferral (21) (21) - Net Periodic Postretirement Benefit Cost $ 21 $ 21 $ 51 The status of the postretirement benefit obligation was as follows: Millions of dollars at December 31, 1994 1993 Accumulated postretirement benefit obligations: Retirees $354 $347 Fully eligible active plan participants 78 88 Other active plan participants 20 23 Accumulated postretirement benefit obligations $452 $458 Fair value of plan assets (19) (26) Accumulated postretirement benefits in excess of plan assets 433 432 Unrecognized gains - net 89 87 Accrued Unfunded Postretirement Benefit Obligations $522 $519 The accumulated postretirement benefit obligation for retirees is net of $130 million at Dec. 31, 1994 ($145 million at Dec. 31, 1993) related to all retirees, which is reimbursed to the corporation in part from Praxair and UCAR under benefit-sharing agreements. Deferred Compensation Plan During 1994 the board of directors approved an unfunded, nonqualified deferred compensation plan for certain key employees, who may defer a portion of their gross pay beginning Jan. 1, 1995. The corporation's obligation to employees will be adjusted to reflect changes in the market values of employees' investment choices. With limited exceptions, participants' deferred account balances are scheduled for payment at or after full retirement. Postemployment Benefits The cumulative effect of adopting FAS 112 as of Jan. 1, 1993, resulted in a $97 million after-tax charge to 1993 earnings ($0.64 per common share). FAS 112 requires that postemployment benefits expected to be paid before retirement, principally severance, be accrued over employees' working lives. This charge includes postemployment benefits based on normal year-to-year attrition rates, giving effect to the corporation's cost reduction program as of Jan. 1, 1993. Prior year financial statements were not restated. 15. Incentive Plans In 1994 stockholders approved the 1994 Union Carbide Long-Term Incentive Plan for key employees, which replaced the 1988 Union Carbide Long-Term Incentive Plan. The new incentive plan, effective until the 1997 shareholders' meeting, provides for granting incentive and nonqualified stock options, stock appreciation rights, exercise payment rights, grants of stock, including restricted stock, and performance awards. Holders of options may be granted the right to receive payments of amounts equal to the regular cash dividends paid to holders of the corporation's common stock during the period an option is outstanding. The number of shares granted or subject to options cannot exceed 7.5 million under the plan. Option prices are equal to the closing price of the corporation's common stock on the date of the grant, as listed on the New York Stock Exchange Composite Transactions. Options generally become exercisable 2 years after such date. Options may not have a duration of more than 10 years. Restricted stock award shares to be issued in 1995 will be entitled to vote and dividends will be credited to the holder's account, but these shares will be nontransferable for 3 years after the grant date. These restricted stock awards and accumulated dividends are subject to forfeiture if matching employee-owned stock on deposit with the corporation is withdrawn or if other conditions are not met. Performance awards may be paid in common stock, cash or any other form of property. No stock appreciation rights or performance awards were granted in 1994. No further awards can be made under either the 1988 or 1984 plan programs. Options granted under both plans are still outstanding and have terms similar to nonqualified stock options under the 1994 plan. Changes during 1994 in outstanding shares under option were as follows: Shares (in thousands) 1994 Total Outstanding at January 1 14,112 Granted 1,930 Exercised (2,213) Canceled or expired (22) Outstanding at December 31 13,807 Options outstanding at Dec. 31, 1994, ranged in price from $1.00 to $28.625 per share with a weighted average price of $15.702 per share, as adjusted for the distribution of Praxair stock in accordance with the terms of the plan, for options outstanding prior to July 1, 1992. At Dec. 31, 1994, 6.5 million options were generally exercisable at prices ranging from $1.00 to $11.368 per share, with a weighted average price of $9.089 per share. Options were exercised during 1994 at prices ranging from $1.00 to $16.75 per share. 16. Commitments and Contingencies Purchase Agreements - The corporation has 3 major agreements for the purchase of ethylene-related products and 3 other purchase agreements in the U.S. and Canada. The net present value of the fixed and determinable portion of obligations under these purchase commitments at Dec. 31, 1994 (at current exchange rates, where applicable) are presented in the following table. Millions of dollars 1995 $ 80 1996 71 1997 61 1998 54 1999 47 2000 to expiration of contracts 132 Total $445 Environmental - The corporation is subject to loss contingencies resulting from environmental laws and regulations, which include obligations to remove or mitigate the effects on the environment of the disposal or release of certain wastes and substances at various sites. The corporation has established accruals for those hazardous waste sites where it is probable that a loss has been incurred and the amount of the loss can reasonably be estimated. The reliability and precision of the loss estimates are affected by numerous factors, such as different stages of site evaluation, the allocation of responsibility among potentially responsible parties and the assertion of additional claims. The corporation adjusts its accruals as new remediation requirements are defined, as information becomes available permitting reasonable estimates to be made, and to reflect new and changing facts. At Dec. 31, 1994, the corporation had established environmental remediation accruals in the amount of $297 million ($265 million in 1993), of which $235 million is classified as Other long-term obligations ($214 million in 1993). Approximately 46 percent of the corporation's environmental accrual at Dec. 31, 1994, pertained to closure and postclosure costs for both operating and closed facilities. In addition, the corporation had environmental loss contingencies of $147 million at Dec. 31, 1994 ($115 million at Dec. 31, 1993). Other - The corporation sold certain receivables with recourse to various banks for proceeds of $101 million in 1994 ($270 million in 1993). At Dec. 31, 1994, approximately $11 million remained due ($47 million in 1993). The fair value of the recourse provisions at Dec. 31, 1994, approximates the carrying value. The corporation and its consolidated subsidiaries had additional contingent obligations at Dec. 31, 1994, totaling $83 million, of which $35 million related to guarantees of debt. Litigation - The corporation's stock in Union Carbide India Limited (UCIL) has been sold for the Indian rupee equivalent of $92 million. Of that amount the equivalent of approximately $15 million went to The Bhopal Hospital Trust, which, with other funding from unremitted dividends and UCIL, discharged the corporation's and UCIL's commitment for funding, in the amount of approximately $19 million, a hospital to be built in Bhopal by the Government of India. The remainder of the proceeds of the sale of the stock, after payment of certain expenses of the transaction, is subject to attachment in the pending criminal proceedings against the corporation in Bhopal, in which the corporation has not appeared. The corporation had earlier reduced the carrying value of its stock in UCIL to zero. In the opinion of counsel for the corporation, under generally recognized legal principles, the criminal proceedings in India should not have adverse financial consequences for the corporation outside of India. The corporation provisionally joined a multibillion-dollar silicone breast implant litigation settlement agreement. Union Carbide's contribution to the settlement will be $138 million over the next several years. The corporation has previously taken before-tax charges aggregating $35 million for this litigation. Although insurance coverage is subject to issues as to scope and application of policies, retention limits, exclusions and policy limits, and the insurers have reserved their right to deny coverage, the corporation believes that after probable insurance recoveries neither the settlement nor ongoing litigation outside the settlement will have a material adverse effect on the consolidated financial position of the corporation. The corporation was not a manufacturer of breast implants but did supply generic bulk silicone materials to the industry. Also, in 1990 the corporation acquired and in 1992 divested the stock of a small specialty silicones company which, among other things, supplied silicone gel intermediates and silicone dispersions for breast implants. The settlement has been approved by the United States District Court, Northern District of Alabama. A number of appeals have been filed that will delay implementation and might require settlement terms to be reconsidered. Both the corporation and the other companies which are parties to the agreement have the right to withdraw from the settlement if, among other factors, in their individual judgment, there are too few recipients of breast implants covered by the final settlement. In addition, the corporation and its consolidated subsidiaries are involved in a number of legal proceedings and claims with both private and governmental parties. These cover a wide range of matters, including, but not limited to: product liability; governmental regulatory proceedings; health, safety and environmental matters; employment; patents; contracts; and taxes. In some of these legal proceedings and claims, the cost of remedies that may be sought or damages claimed is substantial. While it is impossible at this time to determine with certainty the ultimate outcome of any legal proceedings and claims referred to in this note, management believes that adequate provisions have been made for probable losses with respect thereto and that such ultimate outcome, after provisions therefor, will not have a material adverse effect on the consolidated financial position of the corporation but could have a material effect on consolidated results of operations in a given quarter or year. Should any losses be sustained in connection with any of such legal proceedings and claims in excess of provisions therefor, they will be charged to income in the future. 17. Subsequent Events The corporation regularly reviews its assets with the objective of maximizing the deployment of resources in core operations. In this regard, UCC continues to consider strategies and/or transactions with respect to certain noncore assets and other assets not essential to the operation of the business that, if implemented, could result in material nonrecurring gains or losses. As part of this process, on Jan. 26, 1995, the corporation and Mitsubishi Corporation reached an agreement for the sale of newly issued common stock of UCAR International Inc. to a new company formed by Blackstone Capital Partners II Merchant Banking Fund L.P. and a repurchase of certain shares by UCAR that resulted in Blackstone acquiring a 75 percent interest in UCAR. The corporation received $347 million in cash proceeds and retained a 25 percent equity interest in UCAR. This transaction resulted in a nonrecurring material gain to be recorded in the first quarter of 1995 and essentially eliminates the corporation's share of ongoing future earnings from UCAR. On Feb. 1, 1995, the corporation purchased certain ethylene oxide derivative businesses from Imperial Chemical Industries of London. On Feb. 9, 1995, the corporation and EniChem of Milan, Italy, announced that their boards of directors had approved the formation of Polimeri Europa, S.r.l., a 50-50 joint venture company to produce and market polyethylene in Europe. The formation is subject to the approval of the European Union. Management's Statement of Responsibility for Financial Statements Union Carbide Corporation's financial statements are prepared by management, which is responsible for their fairness, integrity and objectivity. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles and, accordingly, include amounts that are estimates and judgments. All historical financial information in this annual report is consistent with the accompanying financial statements. The corporation maintains accounting systems, including internal accounting controls monitored by a staff of internal auditors, that are designed to provide reasonable assurance of the reliability of financial records and the protection of assets. The concept of reasonable assurance is based on recognition that the cost of a system must not exceed the related benefits. The effectiveness of those systems depends primarily upon the careful selection of financial and other managers, clear delegation of authority and assignment of accountability, inculcation of high business ethics and conflict-of-interest standards, policies and procedures for coordinating the management of corporate resources and the leadership and commitment of top management. The corporation's financial statements are audited by KPMG Peat Marwick LLP, independent certified public accountants, in accordance with generally accepted auditing standards. These standards provide for the auditors to consider the corporation's internal control structure to the extent they deem necessary in order to issue their opinion on the financial statements. The Audit Committee of the board of directors, which consists solely of nonemployee directors, is responsible for overseeing the functioning of the accounting system and related controls and the preparation of annual financial statements. The Audit Committee recommends to the board of directors the selection of the independent auditors, subject to the approval of stockholders. The Audit Committee periodically meets with the independent auditors, management and internal auditors to review and evaluate their accounting, auditing and financial reporting activities and responsibilities. The independent and internal auditors have full and free access to the Audit Committee and meet with the committee, with and without management present. Robert D. Kennedy John K. Wulff Chairman and Vice President, Controller and Chief Executive Officer Principal Accounting Officer Danbury, Conn. Jan. 19, 1995 Independent Auditors' Report To the Stockholders and Board of Directors of Union Carbide Corporation: We have audited the accompanying consolidated balance sheet of Union Carbide Corporation and subsidiaries as of Dec. 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three-year period ended Dec. 31, 1994. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Union Carbide Corporation and subsidiaries at Dec. 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended Dec. 31, 1994, in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, in 1993 the company changed its method of accounting for postemployment benefits and in 1992 its methods of accounting for postretirement benefits other than pensions and income taxes. KPMG Peat Marwick LLP Stamford, Conn. Jan. 19, 1995 Corporate Information 1995 Annual Meeting The 1995 annual meeting of stockholders will be held on Wednesday, April 26, in the Grand Ballroom of the Danbury Hilton and Towers, 18 Old Ridgebury Road, Danbury, CT 06810, beginning at 8:30 A.M. A notice of the annual meeting, a proxy statement and a proxy voting card are mailed to each stockholder in March, together with a copy of the current annual report. General Offices The general offices of Union Carbide Corporation are located at 39 Old Ridgebury Road, Danbury, CT 06817-0001 (Telephone: 203-794-2000). Inquiries from the public about Union Carbide and its products and services should be directed to the Corporate Information Center, Union Carbide Corporation, Section N-0, 39 Old Ridgebury Road, Danbury, CT 06817-0001 (Telephone: 203-794-5300). Stock Exchanges Union Carbide stock is traded primarily on the New York Stock Exchange (ticker symbol: UK). The stock is also listed on the Chicago and Pacific Stock Exchanges in the U.S., and overseas on the exchanges in Amsterdam, Basel, Brussels, Frankfurt, Geneva, Lausanne, London, Paris and Zurich. Stockholder Inquiries Inquiries about stockholder accounts and dividend reinvestment should be directed to Union Carbide Corporation, William H. Smith, manager, Shareholder Services Department, Section G-1328, 39 Old Ridgebury Road, Danbury, CT 06817- 0001 (Telephone: 203-794-3350). Stock Records and Transfer The corporation acts as its own stock transfer agent through Shareholder Services, which also maintains stockholder records, transfers stock and answers questions regarding stockholders' accounts, including dividend reinvestment accounts. Stockholders wishing to transfer stock to someone else or to change the name on a stock certificate should contact Shareholder Services for assistance. The Registrar is Chemical Bank. Dividend Reinvestment Stockholders of record may purchase shares directly through Union Carbide's Dividend Reinvestment and Stock Purchase Plan. Under the plan, shares may be purchased from UCC free of commissions and service charges. Requests for a prospectus that explains the plan in detail should be directed to Shareholder Services (Telephone: 800-934-3350). Form 10-K/Charitable Contributions Booklet A Form 10-K Report for the year ended Dec. 31, 1994, will be available in April 1995. A copy without exhibits may be obtained without charge by writing to Union Carbide Corporation, Joseph E. Geoghan, secretary, Section E-4, 39 Old Ridgebury Road, Danbury, CT 06817-0001. Union Carbide annually publishes a booklet that lists organizations receiving charitable, educational, cultural or similar grants of $500 or more. The booklet is available to any stockholder on written request to the secretary. RESPONSIBLE CARE Progress Report This reports covers health, safety and environmental progress at Union Carbide. Information includes performance data for U.S. and international locations, goals, and progress toward full implementation of RESPONSIBLE CARE management practices in the U.S. To obtain a copy, write to Union Carbide Corporation, Scott L. Brier, business communications manager, Public Affairs Department, Section L-4503, 39 Old Ridgebury Road, Danbury, CT 06817-0001 (Telephone: 203-794-7011). Inquiries Institutional investors, financial analysts and portfolio managers should direct questions about Union Carbide to Union Carbide Corporation, D. Nicholas Thold, director of investor relations, Investor Relations Department, Section E-4286, 39 Old Ridgebury Road, Danbury, CT 06817-0001 (Telephone 203-794- 6440). Financial journalists should direct questions to Union Carbide Corporation, Tomm F. Sprick, assistant manager, financial communications, Public Affairs Department, Section L-4505, 39 Old Ridgebury Road, Danbury, CT 06817-0001 (Telephone: 203-794-6992). Directors John J. Creedon is retired president and chief executive officer of Metropolitan Life Insurance Company. A Carbide director since 1984, he chairs the Audit Committee and serves on the Compensation & Management Development, Executive and Health, Safety and Environmental Affairs (HS&EA) Committees. C. Fred Fetterolf is a retired director, president and chief operating officer of Aluminum Company of America. A UCC director since 1987, he chairs the HS&EA Committee and serves on the Audit, Compensation & Management Development and Nominating Committees. Joseph E. Geoghan is vice-president, general counsel and secretary of Union Carbide, and has been a director since 1990. He serves on the Executive and Public Policy Committees. Rainer E. Gut is chairman of Credit Suisse and CS Holding, Zurich, Switzerland. A UCC board member since 1994, he is a member of the Finance & Pension and Nominating Committees. James M. Hester is president of The Harry Frank Guggenheim Foundation. A director since 1963, he is chairman of the Public Policy Committee and serves on the Audit, Executive and Nominating Committees. Vernon E. Jordan, Jr. is a partner with Akin, Gump, Strauss, Hauer & Feld. He is chairman of the Nominating Committee and a member of the Compensation & Management Development, Finance & Pension and Public Policy Committees. He has been a board member since 1987. William H. Joyce is president and chief operating officer of Union Carbide Corporation. He serves on the Executive and Finance & Pension Committees and has been a director since 1992. Robert D. Kennedy is chairman and chief executive officer of Union Carbide Corporation and has been a director since 1985. He is chairman of the Executive Committee. Ronald L. Kuehn, Jr. is a director and chairman, president and chief executive officer of Sonat, Inc. A UCC board member since 1984, he chairs the Compensation & Management Development Committee and serves on the Finance & Pension, HS&EA and Nominating Committees. C. Peter McColough is a director and retired chairman of the board of Xerox Corporation. He has been a Carbide director since 1979 and is a member of the Compensation & Management Development, Executive, HS&EA and Public Policy Committees. Rozanne L. Ridgway is co-chair of the Atlantic Council of the United States. Appointed to the board in 1990, she is a member of the Audit, HS&EA, Nominating and Public Policy Committees. William S. Sneath is a director of various corporations and retired chairman and chief executive officer of Union Carbide Corporation. He chairs the Finance & Pension Committee and serves on the Executive, HS&EA and Nominating Committees. He has been a director since 1969. In accordance with the board's retirement policy, Mr. McColough, who has served on the board with distinction for more than 15 years, will not stand for reelection. Corporate Officers Robert D. Kennedy Chairman of the Board and Chief Executive Officer William H. Joyce President and Chief Operating Officer Joseph S. Byck Vice-President, Strategic Planning, Investor Relations and Public Affairs James F. Flynn Vice-President, General Manager, Solvents and Intermediates Joseph E. Geoghan Vice-President, General Counsel and Secretary Thomas D. Jones Vice-President and Treasurer Malcolm A. Kessinger Vice-President, Human Resources Lee P. McMaster Vice-President, General Manager, Ethylene Oxide/Glycol Gilbert E. Playford Vice-President and Principal Financial Officer Joseph C. Soviero Vice-President, Corporate Ventures and Purchasing Roger B. Staub Vice-President, General Manager, UNIPOL Systems Ronald Van Mynen Vice-President, Health, Safety and Environment Philip T. Wright Vice-President, General Manager, UNIPOL Polymers John K. Wulff Vice-President, Controller and Principal Accounting Officer Other Senior Corporate Staff David L. Brucker Vice-President, Engineering and Operations John L. Gigerich Vice-President, Information Systems William Lindner Vice-President, Purchasing Philip F. McGovern Vice-President, Tax John P. Yimoyines Vice-President, Venture Management A Chemical Glossary Monomer - a reactive chemical that can be converted into a polymer. For example, ethylene is a monomer that is made into polyethylene. Polymer - a chain or network made up of many monomer units, such as ethylene. All plastics are polymers. Ethylene - a reactive chemical made from natural gas or crude oil components. In Carbide's olefins units, ethylene is the starting material from which many of the company's chemical products are made. Propylene - a basic chemical made from crude oil or natural gas components. It is used as a starting material to produce many of Carbide's chemical products. Olefins - the generic name for ethylene, propylene and other unsaturated hydrocarbons made from components of crude oil or natural gas. Olefins are the starting material from which most of Union Carbide's chemical products are made. Ethylene Oxide - a chemical made from ethylene and oxygen. It combines with other chemicals to produce a wide range of products, such as ethylene glycol, and surfactants for detergents and cleaning products. Ethylene Glycol - a chemical made from ethylene oxide and water. It is used to make polyester fiber, resin and film, and automobile antifreeze and engine coolants. Polyethylene - the world's most widely used plastic, made by reacting ethylene and other olefins to form polymers. Union Carbide uses its low-pressure UNIPOL Process technology to make most of its polyethylene. Solvent - a liquid chemical used to dissolve other chemicals. For example, butyl alcohol and related solvents are manufactured, starting from propylene, using Union Carbide's low-pressure Oxo process. Definition of Terms Unless the context otherwise requires, the terms below refer to the following: Union Carbide Corporation, Union Carbide Corporation, Union Carbide, Carbide, the parent company, and its the corporation, we, our consolidated subsidiaries the company, UCC Domestic United States and Puerto Rico Domestic operations Operations of Union Carbide in this area, including exports International operations Operations of Union Carbide in areas of the world other than the United States and Puerto Rico The use of these terms is for convenience of reference only. The consolidated subsidiaries are separate legal entities that are managed by, and accountable to, their respective boards of directors. EX-10.31 31 EXHIBIT 10.31 EXECUTION COPY RECAPITALIZATION AND STOCK PURCHASE AND SALE AGREEMENT dated as of November 14, 1994 among UNION CARBIDE CORPORATION, MITSUBISHI CORPORATION, UCAR INTERNATIONAL INC., AND UCAR INTERNATIONAL ACQUISITION INC. TABLE OF CONTENTS Page TITLE...........................................................1 RECITALS........................................................1 ARTICLE 1 - PURCHASE AND SALE OF SHARES; RECAPITALIZATION; CLOSING............................................2 1.1 Purchase and Sale of Shares; Recapitalization.........2 1.2 Closing...............................................3 1.3 Payments..............................................6 1.4 Closing Deliveries....................................6 1.5 Recapitalization Price Adjustment.....................9 1.6 Termination of Agreements on Closing Date............11 ARTICLE 2 - REPRESENTATIONS AND WARRANTIES REGARDING BUYER....13 2.1 Organization.........................................13 2.2 Authorization........................................13 2.3 No Breach............................................13 2.4 Consents.............................................14 2.5 Purchase for Investment..............................15 2.6 Investigation by Buyer...............................15 ARTICLE 3 - REPRESENTATIONS AND WARRANTIES REGARDING UNION CARBIDE...........................................15 3.1 Organization.........................................15 3.2 Authorization........................................15 3.3 No Breach............................................16 3.4 Consents.............................................17 3.5 Ownership of Capital Stock...........................17 ARTICLE 4 - REPRESENTATIONS AND WARRANTIES REGARDING MITSUBISHI........................................17 4.1 Organization.........................................17 4.2 Authorization........................................17 4.3 No Breach............................................18 4.4 Consents.............................................19 4.5 Ownership of Capital Stock...........................19 ARTICLE 5 - REPRESENTATIONS AND WARRANTIES REGARDING UCAR.....19 5.1 Organization.........................................19 5.2 Authorization........................................20 5.3 No Breach............................................20 5.4 Consents.............................................22 5.5 Organizational Instruments...........................22 5.6 Capital Stock........................................23 5.7 Subsidiaries.........................................24 5.8 Financial Statements.................................25 5.9 Tax Matters..........................................26 5.10 Real Property........................................28 5.11 Owned Personal Property..............................30 5.12 Title to Owned Properties............................30 5.13 Contracts; Leases; Licenses..........................31 5.14 Performance of Contracts, Leases and Licenses........33 5.15 Compliance with Laws.................................34 5.16 Permits; Licenses....................................35 5.17 Environmental Conditions.............................35 5.18 Litigation; Claims; Proceedings......................42 5.19 Patents; Technology..................................43 5.20 Trademarks; Copyrights...............................45 5.21 Human Resources......................................46 5.22 Business Operations..................................51 5.23 Health and Safety Conditions.........................52 5.24 Insurance............................................53 5.25 Liabilities..........................................53 5.26 Entire Business......................................54 5.27 Full Disclosure......................................54 5.28 Limitation on Representations........................55 5.29 Receivables..........................................55 5.30 Limitations on Representations.......................56 ARTICLE 6 - PRE-CLOSING COVENANTS.............................56 6.1 Conduct By Buyer.....................................56 6.2 Conduct by Stockholders and UCAR.....................57 6.3 Conduct of the Business..............................59 6.4 Filings and Consents.................................61 6.5 Fulfillment of Conditions............................62 6.6 Supplemental Disclosure..............................63 6.7 Limitation of Stockholders' Liabilities..............63 6.8 Tax Certificate......................................64 ARTICLE 7 - BUYER'S CONDITIONS TO CLOSING.....................64 ARTICLE 8 - STOCKHOLDERS' AND UCAR'S CONDITIONS TO CLOSING....66 ARTICLE 9 - EFFECTIVENESS; TERMINATION; SURVIVAL OF AGREEMENT.68 9.1 Effectiveness........................................68 9.2 Termination..........................................68 9.3 Survival after Termination...........................69 ARTICLE 10 - TAX MATTERS; POST-CLOSING COVENANTS..............70 10.1 Transactional Taxes and Costs........................70 10.2 Records Retained by Stockholders.....................71 10.3 Access by Stockholders...............................73 10.4 Preservation of Records..............................73 10.5 Agreement Not To Compete.............................74 ARTICLE 11 - EMPLOYEES AND BENEFITS...........................77 ARTICLE 12 - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.....79 12.1 Survival of Representations and Covenants of Buyer...79 12.2 Survival of Representations and Covenants of Union Carbide..............................................80 12.3 Survival of Representations and Covenants of Mitsubishi...........................................81 12.4 Indemnification by Buyer.............................82 12.5 Indemnification by Stockholders......................83 12.6 Indemnification by UCAR..............................87 12.7 Indemnification Procedure............................88 ARTICLE 13 - PUBLICITY; CONFIDENTIALITY.......................93 13.1 Publicity............................................93 13.2 Confidentiality......................................94 13.3 Survival.............................................96 ARTICLE 14 - NOTICES..........................................96 ARTICLE 15 - BROKERAGE FEES; CERTAIN EXPENSES.................98 15.1 Brokerage Fees.......................................98 15.2 Certain Expenses.....................................98 ARTICLE 16 - GOVERNING LAW; FORUM.............................99 ARTICLE 17 - BINDING EFFECT; ASSIGNMENT; THIRD PARTY BENEFICIARIES....................................99 ARTICLE 18 - ENTIRE AGREEMENT................................100 ARTICLE 19 - FURTHER ASSURANCES..............................101 ARTICLE 20 - AMENDMENTS......................................101 ARTICLE 21 - WAIVERS.........................................102 ARTICLE 22 - REMEDIES LIMITED................................103 ARTICLE 23 - HEADINGS; COUNTERPARTS..........................103 ARTICLE 24 - SEVERABILITY....................................104 ARTICLE 25 - CERTAIN REFERENCES..............................104 25.1 Affiliate...........................................104 25.2 Knowledge...........................................105 25.3 Person..............................................105 ARTICLE 26 - INDEX TO DEFINED TERMS..........................105 EXHIBITS Exhibit A Stockholders' Agreement *Exhibit B Amended and Restated Certificate of Incorporation of UCAR *Exhibit C Amended and Restated By-Laws of UCAR [Note: With respect to the Certificate of Incorporation and By-Laws of UCAR, the only changes that will be made relate to eliminating the class of common stock currently held by Mitsubishi, and specifying an authorized number of shares of common stock, which would result in the only unissued shares being those reserved for issuance to management.] * To be appended after execution of the Agreement. UCC will furnish to the Commission supplementally on request a copy of the above Exhibits which have been omitted. DISCLOSURE SCHEDULES I SUBSIDIARIES AND AFFILIATES II FINANCIAL STATEMENTS; CERTAIN TAX MATTERS III REAL PROPERTY IV CONTRACTS V PERMITS & LICENSES VI ENVIRONMENTAL CONDITIONS VII LITIGATION, CLAIMS & PROCEEDINGS VIII PATENTS IX TRADEMARKS & COPYRIGHTS X EMPLOYEES XI EMPLOYEE BENEFIT PLANS XII HEALTH AND SAFETY CONDITIONS XIII INSURANCE XIV CONSENTS XV LIENS XVI BUSINESS OPERATIONS, CAPITAL EXPENDITURES AND OTHER MATTERS XVII INTERNATIONAL EMPLOYEE BENEFIT MATTERS UCC will furnish to the Commission supplementally on request a copy of the above Disclosure Schedules which have been ommitted. RECAPITALIZATION AND STOCK PURCHASE AND SALE AGREEMENT (the "Agreement") dated as of November 14, 1994 among UNION CARBIDE CORPORATION, a corporation validly existing under the laws of New York ("Union Carbide"), MITSUBISHI CORPORATION, a corporation validly existing under the laws of Japan ("Mitsubishi"), UCAR INTERNATIONAL INC., a corporation validly existing under the laws of Delaware ("UCAR"), and UCAR INTERNATIONAL ACQUISITION INC., a corporation validly existing under the laws of Delaware ("Buyer"), W I T N E S S E T H: WHEREAS, Union Carbide and Mitsubishi (collectively, "Stockholders") own all of the issued and outstanding shares of capital stock of UCAR (the "Capital Stock"); WHEREAS, UCAR is engaged in the development, manufacture, marketing, use, sale, distribution and servicing of carbon and graphite products, components and systems for furnaces, and related products and equipment throughout the world (the "Business"); and WHEREAS, UCAR desires to issue and sell to Buyer, and Buyer desires to purchase from UCAR, newly issued shares of the Capital Stock on the terms and subject to the conditions set forth herein; WHEREAS, in connection with such sale of Capital Stock to Buyer, Union Carbide, Mitsubishi, Buyer and UCAR (collectively, the "Parties" and, sometimes individually, a "Party") desire to recapitalize UCAR by virtue of extensions of credit to UCAR and its Subsidiaries (as hereinafter defined in Article 5.3 hereof) and to effect certain related transactions as more fully set forth herein; WHEREAS, the Parties desire to utilize the proceeds from such extensions of credit and such sale of Capital Stock to Buyer to (i) repay or redeem certain outstanding indebtedness of UCAR and its Subsidiaries, (ii) redeem all of the Capital Stock currently held by Mitsubishi, and (iii) pay a cash dividend to Union Carbide, in each case as more fully set forth herein; NOW, THEREFORE, in consideration of the premises, representations and warranties and the mutual covenants and agreements contained herein and other good, valuable and sufficient consideration, the receipt of which is hereby acknowledged, each of the Parties, intending to be legally bound, hereby agrees as follows: ARTICLE 1 - PURCHASE AND SALE OF SHARES; RECAPITALIZATION; CLOSING 1.1 Purchase and Sale of Shares; Recapitalization. (a) Subject to the terms and conditions set forth herein, at the Closing (as defined in Article 1.2 hereof), UCAR shall issue, sell and deliver to Buyer, and Buyer shall purchase and accept from UCAR, seven hundred fifty (750)1 shares of common __________________ 1 Based upon 1,000 shares to be outstanding following the Closing, the actual number to be determined. stock, $1.00 par value, of UCAR (the "Acquired Shares"), free and clear of all preemptive rights, liens, claims and encumbrances (the "Acquisition"). In consideration for the Acquired Shares, Buyer will pay UCAR in cash an aggregate purchase price of not less than one hundred ninety-five million U.S. dollars ($195,000,000) and not more than two hundred two million five hundred thousand U.S. dollars ($202,500,000), as determined by the Buyer (the "Purchase Price"). (b) Subject to the terms and conditions set forth herein, at the Closing the Stockholders shall cause UCAR and its Subsidiaries to collectively borrow (the "Borrowings"), and Buyer shall cause certain providers of financing (the "Lenders") to collectively lend to UCAR and its Subsidiaries with respect to such Borrowings, such amount so that, when taken together with the Purchase Price and other cash available to UCAR and its Subsidiaries, UCAR has sufficient cash at the Closing (net of any fees, expenses or other costs required to be paid by UCAR in connection with the Transactions (as defined below)) to (i) repay or redeem certain indebtedness of UCAR and its Subsidiaries (the "Repayment"), (ii) redeem (the "Redemption") the two hundred fifty (250) shares of Class A Common Stock currently held by Mitsubishi (the "Redeemed Shares") and (iii) pay a cash dividend (the "Dividend") to Union Carbide. The aggregate amount of the price to be paid for the Redeemed Shares (the "Redemption Price") and the Dividend shall be equal to eight hundred twenty million U.S. dollars ($820,000,000) minus one-third of the Purchase Price (the "Recapitalization Amount"), subject to adjustment as provided in Article 1.5. The Acquisition, the Borrowings, the Repayment, the Redemption, the Dividend and the other transactions contemplated hereby are collectively referred to herein as the "Transactions." 1.2 Closing. (a) The closing of the Transactions (the "Closing") shall take place at the offices of Union Carbide located at 39 Old Ridgebury Road, Danbury, Connecticut or such other place as the Parties may mutually agree (the "Closing Place") on the day (the "Closing Date") which is the fifth day following the satisfaction or waiver by the affected Party of each condition to the obligations of the Parties to this Agreement set forth in Articles 7 and 8; provided, however, that Buyer shall have the right to defer the Closing to not later than January 31, 1995 (the "Deferral Date") if there have not previously been sold not less than $375,000,000 of senior subordinated securities of UCAR or a new subsidiary of UCAR to be incorporated under the laws of a state in the United States (the "New Non-Foreign Subsidiary"); provided further that, the Deferral Date shall be December 29, 1994, if Chemical Bank agrees to such date. Subject to completion, the Closing shall be deemed to have been consummated and become effective for all purposes as of 12:01 AM New York time on the Closing Date; provided, that to the extent necessary or desirable, any Borrowing relating to a Subsidiary whose jurisdiction of organization is (i) outside of the United States or (ii) Puerto Rico (a "Foreign Subsidiary") may be closed at a location in such jurisdiction; provided, further, that such closings shall be considered part of the Closing for all purposes hereof. (b) At the Closing, the Stockholders shall cause UCAR to take the following actions: (i) UCAR and each of its Subsidiaries (including in certain cases the New Foreign Subsidiaries (as defined below)) shall consummate the Borrowings on such terms and conditions as the Buyer shall determine in its sole discretion; (ii) UCAR shall (A) form such new subsidiaries (the "New Foreign Subsidiaries") as are necessary or desirable to consummate the Borrowings with respect to any Foreign Subsidiary, and (B) cause each such New Foreign Subsidiary to merge with or purchase the Foreign Subsidiary whose jurisdiction of organization is the same as that of the New Foreign Subsidiary; (iii) UCAR shall, to the extent required by any of the Lenders, (A) contribute or cause to be contributed the capital stock of certain of its Subsidiaries (which may include New Foreign Subsidiaries) to the New Non-Foreign Subsidiary, and the New Non-Foreign Subsidiary shall consummate certain Borrowings and otherwise serve as the obligor on certain extensions of credit relating to certain other Borrowings, (B) pledge the capital stock of the New Non-Foreign Subsidiary and cause the New Non-Foreign Subsidiary to pledge the capital stock of its subsidiaries to such Lenders as collateral with respect to the Borrowings, (C) pledge its assets and cause its Subsidiaries (which may include the New Non-Foreign Subsidiary) to pledge their respective assets to such Lenders as collateral with respect to the Borrowings and (D) to the extent consistent with applicable laws, cause its Foreign Subsidiaries or New Foreign Subsidiaries to guarantee certain obligations of certain other Subsidiaries; (iv) UCAR shall repay all amounts outstanding under (A) the $100,000,000 Credit Agreement, dated as of September 15, 1994, by and among UCAR, Credit Suisse, as Agent, and the Banks parties thereto, and (B) the $50,000,000 Credit Agreement, dated as of September 15, 1994 by and among UCAR, Credit Suisse, as Agent, and the Banks parties thereto; (v) UCAR shall redeem all of the outstanding UCAR 7.88% Series A Senior Notes due June 1, 2004 and UCAR 8.18% Series B Senior Notes due June 1, 2009; (vi) UCAR shall redeem the Redeemed Shares as provided in Article 1.3 below and otherwise on the terms and subject to the conditions set forth herein; (vii) The Stockholders shall cause UCAR to pay the Dividend as provided in Article 1.3 below and otherwise on the terms and subject to the conditions set forth herein; (viii) UCAR shall, along with Union Carbide and Buyer, enter into a Stockholders' Agreement in the form attached hereto as Exhibit A; (ix) UCAR shall amend and restate UCAR's Certificate of Incorporation and By-laws in the forms attached hereto as Exhibits B and C, respectively. 1.3 Payments. At the Closing, (a) Buyer shall pay the Purchase Price to UCAR by wire transfer of immediately available funds, and (b) immediately following the consummation of the Borrowings and the Acquisition, and the receipt by UCAR of the proceeds therefrom, UCAR shall pay to each of Union Carbide and Mitsubishi, such portion of the Recapitalization Amount (net of any applicable withholding taxes) as shall be mutually determined by Union Carbide and Mitsubishi prior to the Closing Date by wire transfer of immediately available funds. Prior to the Closing, the Parties shall provide all necessary information as to the accounts to which such payments shall be made. 1.4 Closing Deliveries. (a) At the Closing, Stockholders shall each deliver to Buyer or the Stockholders shall cause UCAR to deliver to Buyer, as applicable: (i) one (1) copy of the resolutions adopted by the Boards of Directors of Union Carbide and Mitsubishi, respectively, authorizing the Transactions certified by appropriate authorized officers of Union Carbide and Mitsubishi, respectively; (ii) one (1) copy of the resolutions adopted by the Board of Directors of UCAR authorizing the Transactions, certified by the Secretary or an Assistant Secretary of UCAR; (iii) evidence of the action taken by the Stockholders as the sole holders of Capital Stock authorizing the Transactions, certified by the Secretary or an Assistant Secretary of UCAR; (iv) one (1) copy of the resolutions adopted by the Board of Directors of each of the Subsidiaries authorizing, to the extent required, any of the Transactions, in each case certified by an appropriate authorized officer of each of such Subsidiaries; (v) evidence of the action taken by the stockholder of each of the Subsidiaries authorizing, to the extent required, any of the Transactions, in each case certified by an appropriate authorized officer of each of such Subsidiaries; (vi) certificates to the effect of Articles 7(v) and 7(vi) hereof executed by appropriate authorized officers of Union Carbide and Mitsubishi respectively; (vii) the duly executed and sealed stock certificates representing the Acquired Shares registered in the name of the Buyer; and (viii) resignations of all directors of UCAR serving in office immediately prior to the Closing. (b) At the Closing, Buyer shall deliver or cause to be delivered to Union Carbide and Mitsubishi: (i) one (1) copy of the resolutions adopted by the Board of Directors (or equivalent) of Buyer authorizing the Transactions certified by the Secretary or an Assistant Secretary of Buyer; (ii) a certificate to the effect of Articles 8(v) and 8(vi) hereof executed by an appropriate authorized officer of Buyer; and (iii) one (1) copy of the resolutions adopted by the Board of Directors (or equivalent) of Blackstone Capital Partners II Merchant Banking Fund L.P. and of Blackstone Offshore Capital Partners II L.P. authorizing the Guaranty provided herewith certified by the Secretary or an Assistant Secretary (or equivalent Person) of each such entity. (c) At the Closing, Mitsubishi shall deliver to UCAR the stock certificates representing the Redeemed Shares currently owned by it duly endorsed in blank or accompanied by stock transfer powers in proper form for transfer and duly endorsed in blank and such certificates shall immediately be cancelled by UCAR. (d) At the Closing, each of the Parties shall execute, deliver and acknowledge, or cause to be executed, delivered and acknowledged, to the other Parties such certificates and other documents related to the consummation of the Transactions as may be reasonably requested by the other Parties. 1.5 Recapitalization Price Adjustment. (a) The Recapitalization Amount shall be reduced for all purposes hereof by an amount (the "Adjustment Amount") equal to the greater of: (i) the amount by which $194.2 million exceeds Net Worth (as defined below); and (ii) the amount by which Net Indebtedness (as defined below) exceeds $256.3 million. (b) For purposes of Article 1.5(a), "Net Worth" shall mean, as of the Closing Date, the aggregate amount of all assets of UCAR and its Subsidiaries on a consolidated basis less the aggregate amount of all liabilities of UCAR and its Subsidiaries on a consolidated basis, in each case, calculated in a manner consistent with the basis and manner of preparation of the Audited Financial Statements (as defined in Article 5.8(a)). For purposes of Article 1.5(a), "Net Indebtedness" shall mean, as of the Closing Date, the aggregate amount of all indebtedness of UCAR and its Subsidiaries on a consolidated basis, less cash and cash equivalents held by UCAR and its Subsidiaries on a consolidated basis (excluding cash and cash equivalents held by UCAR Carbon S.A.), in each case, calculated in a manner consistent with the basis and manner of preparation of the Audited Financial Statements. For purposes of Article 1.5(a), (i) any accruals, expenses or payments relating to the worker's compensation claim by Union Carbide set forth on Schedule VII and (ii) the Borrowings and any payments to be made as part of the Closing, shall be excluded in the calculation of Net Worth or Net Indebtedness. (c) Buyer shall provide Stockholders full access during normal business hours to the books and records of Buyer and its Affiliates (as defined in Article 25.1 hereof) pertaining to UCAR and the Subsidiaries for the purpose of determining the Adjustment Amount. Stockholders shall deliver to Buyer within thirty (30) days following the Closing Date a statement (the "Statement") setting forth the Adjustment Amount. (d) Within thirty (30) days after delivery to the Buyer of the Statement the Buyer shall notify the Stockholders of any dispute of any item contained therein, which notice shall set forth in reasonable detail the basis for such dispute (the "Notice of Dispute"). If the Buyer fails to deliver to the Stockholders any such Notice of Dispute within such thirty (30) day period, the Statement shall be deemed to be final and binding. (e) In the event that the Buyer timely delivers a Notice of Dispute to the Stockholders of any dispute, the Buyer and the Stockholders shall cooperate in good faith to resolve such dispute as promptly as possible. If the Buyer and the Stockholders are unable to resolve such dispute within ten (10) days after delivery by the Buyer of the Notice of Dispute, such dispute shall be submitted to and finally resolved by, within thirty (30) days after submission, a nationally recognized firm of accountants mutually agreeable to the Parties (the "Arbitrator"), whose determination with respect to such dispute shall be final and binding upon the Parties. Any expenses relating to the engagement of the Arbitrator shall be shared equally by UCAR and the Stockholders. The Statement shall be deemed final as modified by the resolution of any dispute by the Buyer and the Stockholders or by the Arbitrator. (f) The Stockholders shall each pay to UCAR the Adjustment Amount in such proportions as shall be mutually agreed between the Stockholders at the Post-Closing referred to in Article 1.5(g) hereof, in immediately available funds by wire transfer to such account as Buyer shall specify prior to the date of the Post-Closing. (g) The closing of the transactions contemplated by this Article 1.5 (the "Post-Closing") shall take place (i) if the Buyer does not deliver a Notice of Dispute to the Stockholders within the time period specified in Article 1.5(d) hereof, on the fifth day after the expiration of such period, or (ii) if the Buyer delivers a Notice of Dispute to the Stockholders within the specified time period, on the fifth day after the final resolution of any dispute detailed in such Notice of Dispute by the Buyer and the Stockholders, or by the Arbitrator, as the case may be. 1.6 Termination of Agreements on Closing Date. The following agreements shall be terminated at the Closing: (i) The Stockholders Agreement dated as of November 9, 1990; (ii) Amendment to the Stockholders Agreement dated as of May 27, 1993; (iii) The Letter Agreement dated as of November 9, 1990 entitled "Re: Stockholders Agreement"; (iv) The Letter Agreement dated as of February 25, 1991 entitled "Re: Miscellaneous Issues"; (v) The Letter Agreement dated as of February 25, 1991 entitled "Re: Project Atlas"; (vi) The Letter Agreement regarding "C&M" dated September 4, 1992; (vii) The Letter Agreement dated December 31, 1993 entitled "Re: Stockholders Agreement"; (viii) The Stockholders Agreement dated as of December 31, 1993; and (ix) Summary of Agreements agreed as of October 8, 1992. Upon such termination, notwithstanding any provisions contained in the documents listed in subparagraphs (i) through (ix) above (the "Documents") to the contrary, the consequent force and effect of the Documents shall be nullified and none of the provisions thereof shall survive the termination for any reason. Notwithstanding anything contained herein to the contrary, the Stockholders and their Affiliates who are parties to the contracts indicated with an asterisk in Schedule IV (other than the Documents) shall remain bound thereby after the Closing. ARTICLE 2 - REPRESENTATIONS AND WARRANTIES REGARDING BUYER Buyer represents and warrants as of the date hereof as follows: 2.1 Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware. Buyer has all corporate power and authority necessary to (i) execute, deliver and perform its obligations under this Agreement and (ii) consummate the Transactions. 2.2 Authorization. The execution and delivery by Buyer of this Agreement, the performance by Buyer of its obligations hereunder and the consummation by Buyer of the Transactions have been duly authorized by all necessary corporate actions on the part of Buyer. This Agreement constitutes a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except insofar as enforceability may be limited by bankruptcy, insolvency, moratorium or other laws which may affect creditors' rights and remedies generally and by principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). 2.3 No Breach. The execution and delivery by Buyer of this Agreement, the performance by Buyer of its obligations hereunder and the consummation by Buyer of the Transactions will not: (i) conflict with, result in a violation of, or constitute a default under, the Articles of Incorporation or Bylaws (or comparable instruments) of Buyer, as amended to date; (ii) constitute a default under, result in a violation or breach of, result in the cancellation or termination of, accelerate the performance required under or result in the creation of any lien, claim or encumbrance upon any of the material properties of Buyer pursuant to any material mortgage, guaranty, deed of trust, note, indenture, bond, lease, agreement or other instrument to which Buyer is a party or by which any of such properties is bound; or (iii) result in a violation of or conflict with any law, ordinance, rule or regulation or any order, writ, judgment, award, edict or decree of any court of competent jurisdiction or any governmental or quasi- governmental agency, authority or instrumentality of competent jurisdiction applicable to Buyer or any of its material properties, which default, breach, cancellation, termination, acceleration, creation, violation or conflict would have a Material Adverse Effect (as defined in Article 5.1 as it would relate to Buyer) on the consummation by Buyer of the Transactions. 2.4 Consents. Except as otherwise contemplated by Article 6.4 hereof, no consent, approval, exemption or authorization is required to be obtained from, no notice is required to be given to and no filing is required to be made with any third party (including, without limitation, governmental and quasi-governmental agencies, authorities and instrumentalities of competent jurisdiction) by Buyer, in order (i) for this Agreement to constitute a legal, valid and binding obligation of Buyer or (ii) to authorize or permit the consummation by Buyer of the Transactions. 2.5 Purchase for Investment. Buyer is purchasing the Acquired Shares for its own account and investment and not with a view toward, or for resale in connection with any distribution thereof. 2.6 Investigation by Buyer. Buyer has conducted its own independent review and analysis of the business, operations, technology, assets, liabilities, results of operations, financial condition and prospects of the Business, UCAR and the Subsidiaries and acknowledges that Stockholders have provided, caused to be provided, made available to or caused to be made available to Buyer the personnel, properties, premises and records of UCAR and the Subsidiaries for this purpose; provided, that this Article 2.6 in no way limits the representation contained in Article 5.27. ARTICLE 3 - REPRESENTATIONS AND WARRANTIES REGARDING UNION CARBIDE Union Carbide represents and warrants as of the date hereof as follows: 3.1 Organization. Union Carbide is a corporation duly organized, validly existing and in good standing under the laws of New York. Union Carbide has all corporate power and authority necessary to (i) execute, deliver and perform its obligations under this Agreement and (ii) consummate the Transactions. 3.2 Authorization. The execution and delivery by Union Carbide of this Agreement, the performance by Union Carbide of its obligations hereunder and the consummation by Union Carbide of the Transactions have been duly authorized by all necessary corporate actions on the part of Union Carbide. This Agreement constitutes a legal, valid and binding obligation of Union Carbide, enforceable against Union Carbide in accordance with its terms, except insofar as enforceability may be limited by bankruptcy, insolvency, moratorium or other laws which may affect creditors' rights and remedies generally and by principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). 3.3 No Breach. The execution and delivery by Union Carbide of this Agreement, the performance by Union Carbide of its obligations hereunder and the consummation by Union Carbide of the Transactions will not: (i) conflict with, result in a violation of, or constitute a default under, the Certificate of Incorporation or Bylaws of Union Carbide, each as amended to date; (ii) constitute a default under, result in a violation or breach of, result in the cancellation or termination of, accelerate the performance required under or result in the creation of any lien, claim or encumbrance upon any of the material properties of Union Carbide or the Class B Common Stock (as defined in Article 5.6 hereof) pursuant to any material mortgage, guaranty, deed of trust, note, indenture, bond, lease, agreement or other instrument to which Union Carbide is a party or by which any of such properties or the Class B Common Stock is bound; or (iii) result in a violation of or conflict with any law, ordinance, rule or regulation or any order, writ, judgment, award, edict or decree of any court of competent jurisdiction or any governmental or quasi- governmental agency, authority or instrumentality of competent jurisdiction applicable to Union Carbide or any of its material properties or the Class B Common Stock, which default, breach, cancellation, termination, acceleration, creation, violation or conflict would have a material adverse effect on the consummation by Union Carbide of the Transactions. 3.4 Consents. Except as otherwise contemplated by Article 6.4 hereof, or as set forth in Schedule XIV attached hereto, no consent, approval, exemption or authorization is required to be obtained from, no notice is required to be given to and no filing is required to be made with any third party (including, without limitation, governmental and quasi- governmental agencies, authorities and instrumentalities of competent jurisdiction) by Union Carbide in order (i) for this Agreement to constitute a legal, valid and binding obligation of Union Carbide or (ii) to authorize or permit the consummation by Union Carbide of the Transactions. 3.5 Ownership of Capital Stock. All of the issued and outstanding shares of Class B Common Stock are owned by Union Carbide, free and clear of all preemptive rights, liens, claims and encumbrances other than restrictions on transfer under federal and state securities laws. ARTICLE 4 - REPRESENTATIONS AND WARRANTIES REGARDING MITSUBISHI Mitsubishi represents and warrants as of the date hereof as follows: 4.1 Organization. Mitsubishi is a corporation duly organized and validly existing under the laws of Japan. Mitsubishi has all corporate power and authority necessary to (i) execute, deliver and perform its obligations under this Agreement and (ii) consummate the Transactions. 4.2 Authorization. The execution and delivery by Mitsubishi of this Agreement, the performance by Mitsubishi of its obligations hereunder and the consummation by Mitsubishi of the Transactions have been duly authorized by all necessary corporate actions on the part of Mitsubishi. This Agreement constitutes a legal, valid and binding obligation of Mitsubishi, enforceable against Mitsubishi in accordance with its terms, except insofar as enforceability may be limited by bankruptcy, insolvency, moratorium or other laws which may affect creditors' rights and remedies generally and by principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). 4.3 No Breach. The execution and delivery by Mitsubishi of this Agreement, the performance by Mitsubishi of its obligations hereunder and the consummation by Mitsubishi of the Transactions will not: (i) conflict with, result in a violation of, or constitute a default under, the Articles of Incorporation of Mitsubishi, as amended to date; (ii) constitute a default under, result in a violation or breach of, result in the cancellation or termination of, accelerate the performance required under or result in the creation of any lien, claim or encumbrance upon any of the material properties of Mitsubishi or the Class A Common Stock (as defined in Article 5.6 hereof) pursuant to any material mortgage, guaranty, deed of trust, note, indenture, bond, lease, agreement or other instrument to which Mitsubishi is a party or by which any of such properties or the Class A Common Stock is bound; or (iii) result in a violation of or conflict with any law, ordinance, rule or regulation or any order, writ, judgment, award, edict or decree of any court of competent jurisdiction or any governmental or quasi- governmental agency, authority or instrumentality of competent jurisdiction applicable to Mitsubishi or any of its material properties or the Class A Common Stock, which default, breach, cancellation, termination, acceleration, creation, violation or conflict would have a material adverse effect on the consummation by Mitsubishi of the Transactions. 4.4 Consents. Except as otherwise contemplated by Article 6.4 hereof, or as set forth in Schedule XIV hereto, no consent, approval, exemption or authorization is required to be obtained from, no notice is required to be given to and no filing is required to be made with any third party (including, without limitation, governmental and quasi-governmental agencies, authorities and instrumentalities of competent jurisdiction) by Mitsubishi in order (i) for this Agreement to constitute a legal, valid and binding obligation of Mitsubishi or (ii) to authorize or permit the consummation by Mitsubishi of the Transactions. 4.5 Ownership of Capital Stock. All of the issued and outstanding shares of Class A Common Stock are owned by Mitsubishi, free and clear of all preemptive rights, liens, claims and encumbrances other than restrictions on transfer under federal and state securities laws. ARTICLE 5 - REPRESENTATIONS AND WARRANTIES REGARDING UCAR Stockholders represent and warrant as of the date hereof as follows: 5.1 Organization. UCAR is a corporation duly organized, validly existing and in good standing under the laws of Delaware. UCAR has all corporate power and authority necessary to (i) execute, deliver and perform its obligations under this Agreement and (ii) consummate the Transactions. UCAR has all corporate power and authority necessary to (A) own, lease or use the properties owned, leased or used by it and (B) conduct the Business as presently conducted by it. UCAR is duly qualified or licensed and in good standing as a foreign corporation authorized to do business under the laws of the jurisdictions where the failure to be so qualified or licensed would have a material adverse effect, individually or in the aggregate, on (i) the business, assets, properties, financial condition or results of operations of UCAR and the Subsidiaries taken as a whole, or (ii) the ownership, leasing or use by UCAR and any of the Subsidiaries of the properties owned, leased or used by them (which is material to UCAR and the Subsidiaries taken as a whole) as presently owned, leased or used by them (a "Material Adverse Effect"). 5.2 Authorization. The execution and delivery by UCAR of this Agreement, the performance by UCAR of its other obligations hereunder and the consummation by UCAR of the Transactions have been duly authorized by all necessary corporate actions on the part of UCAR. This Agreement constitutes a legal, valid and binding obligation of UCAR, enforceable against UCAR in accordance with its terms except insofar as enforceability may be limited by bankruptcy, insolvency, moratorium or other laws which may affect creditors' rights and remedies generally and by principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). 5.3 No Breach. The execution and delivery by Stockholders and UCAR of this Agreement, the performance by Stockholders and UCAR of their other respective obligations hereunder and the consummation by Stockholders and UCAR of the Transactions will not: (i) except as set forth in Schedule XVI, constitute a default under, result in a violation or breach of, result in the cancellation or termination of (except as specifically contemplated by Article 1.6), accelerate the performance required under or result in the creation of any lien, claim or encumbrance (other than liens, claims or encumbrances arising under this Agreement) upon any of the material properties owned, leased or used by UCAR and the subsidiaries and Affiliates listed on Schedule I attached hereto (collectively, the "Subsidiaries" and, sometimes individually, a "Subsidiary") pursuant to any mortgage, guaranty, deed of trust, note, indenture, bond, lease, agreement or other instrument to which UCAR or any Subsidiary is a party or by which any of such properties is bound; (ii) result in a violation of or conflict with any law, ordinance, rule or regulation or any order, writ, judgment, award, edict or decree of any court of competent jurisdiction or any governmental or quasi- governmental agency, authority or instrumentality of competent jurisdiction applicable to UCAR, any Subsidiary or any of the properties owned, leased or used by UCAR and the Subsidiaries; or (iii) conflict with, result in a violation of or constitute a default under the charters or other organizational documents of UCAR or any Subsidiary, in each case as amended to date; except, in the case of subparagraphs (i), (ii) and (iii) above, for any defaults, breaches, cancellations, terminations, accelerations, creations, violations or conflicts which would not have a Material Adverse Effect. 5.4 Consents. Except as otherwise contemplated by Article 6.4 hereof, or set forth in Schedule XIV attached hereto, no consent, approval, exemption or authorization is required to be obtained from, no notice is required to be given to and no filing is required to be made with any third party (including, without limitation, governmental and quasi-governmental agencies, authorities and instrumentalities of competent jurisdiction) by UCAR or any of its Subsidiaries (A) in order (i) for this Agreement to constitute a legal, valid and binding obligation of UCAR or (ii) to authorize or permit the consummation by UCAR of the Transactions or (B) under or pursuant to any governmental or quasi-governmental permits, licenses, consents, authorizations or approvals held by or issued to UCAR or any Subsidiary (including, without limitation, environmental, health, safety and operating permits and licenses) by reason of this Agreement or the consummation of the Transactions. 5.5 Organizational Instruments. Stockholders have delivered to Buyer complete and accurate copies of the Certificate of Incorporation and By-laws of UCAR, in each case as amended to date. UCAR is not in violation of any provision of its Certificate of Incorporation or By-laws, in each case as amended to date. Stockholders have made available or caused to be made available to Buyer complete and accurate copies of the charter or other organizational documents of each of the Subsidiaries, in each case as amended to date. No Subsidiary is in violation of any provision of its charter or other organizational documents, in each case as amended to date. Except for this Agreement, there are no agreements or commitments which obligate or require Stockholders or UCAR to amend or authorize an amendment of the Certificate of Incorporation or By-laws of UCAR, in each case as amended to date. Except for this Agreement, there are no agreements or commitments which obligate or require Stockholders, UCAR or any Subsidiary to amend or authorize an amendment of the charter or other organizational documents of any Subsidiary, in each case as amended to date. Stockholders have made available or caused to be made available to Buyer complete and accurate copies of the minute books with respect to meetings of the Board of Directors and shareholders of UCAR since February 25, 1991 and the stock books of (i) UCAR and (ii) each of the Subsidiaries. Such minute books contain complete and accurate copies of all records of all meetings and consents in lieu of a meeting of (a) the board of directors (and any committee thereof) of UCAR and its non- Foreign Subsidiaries, and to the knowledge of the Stockholders, of each of the Foreign Subsidiaries, and (b) the stockholders of UCAR and its non-Foreign Subsidiaries, and to the knowledge of the Stockholders, of each of the Foreign Subsidiaries. 5.6 Capital Stock. The authorized capital stock of UCAR consists of five hundred (500) shares of Class A Common Stock, par value $1.00 per share ("Class A Common Stock"), of which two hundred and fifty (250) shares have been duly authorized and validly issued and are outstanding, fully paid and non- assessable and five hundred (500) shares of Class B Common Stock, par value $1.00 per share ("Class B Common Stock"), of which two hundred and fifty (250) shares have been duly authorized and validly issued and are outstanding, fully paid and non-assessable. Except for this Agreement, there are no outstanding subscriptions, options, warrants, rights, convertible or exchangeable securities, agreements or commitments which obligate or require Stockholders or UCAR to issue, sell or transfer any shares of Capital Stock. The Acquired Shares, when issued and delivered at the Closing in accordance herewith, shall be duly authorized, validly issued, fully paid and non-assessable and shall be sold and delivered to Buyer, free and clear of all preemptive rights, liens, claims and encumbrances except for such rights, liens, claims and encumbrances of which the Buyer or its Affiliates have knowledge. 5.7 Subsidiaries. UCAR does not directly or indirectly own or have the power to vote shares of the capital stock or other ownership interests of any corporation or other Person (as defined in Article 25.3 hereof) such that it has voting power to elect a majority of the directors of such corporation, or other Persons performing similar functions for such Person, as the case may be, other than the Subsidiaries. Neither UCAR nor any Subsidiary is a partner of any partnership or a member of any joint venture or other business entity other than the partnerships and joint ventures listed on Schedule I attached hereto. Except as set forth in Schedule I attached hereto, UCAR or its nominees own all of the outstanding shares of capital stock of each Subsidiary directly or indirectly through another Subsidiary free and clear of all liens, claims and encumbrances (other than liens, claims and encumbrances on such shares owned by its nominees in favor of UCAR or such other Subsidiary) and there are no outstanding subscriptions, options, warrants, rights, convertible or exchangeable securities, agreements or commitments which obligate or require Stockholders, UCAR, any Subsidiary or any of such nominees to issue, sell or transfer (i) any shares of capital stock of any Subsidiary (other than agreements or commitments by such nominees to transfer such shares owned by such nominees to UCAR, a Subsidiary or other such nominees) or (ii) any securities convertible into or exchangeable for shares of capital stock of any Subsidiary. UCAR's nominees and the percentage of outstanding shares of capital stock of each Subsidiary owned by them are listed on Schedule I attached hereto. Each Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction under which it has been organized, which are set forth on Schedule I attached hereto. All of the issued and outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued. Each Subsidiary has all corporate power and authority necessary to (i) own, lease or use the properties owned, leased or used by it and (ii) engage in the conduct of the Business as presently conducted by it. Each Subsidiary is duly qualified or licensed and in good standing as a foreign corporation authorized to do business under the laws of the jurisdictions listed on Schedule I attached hereto which are the only jurisdictions where the failure to so qualify would have a Material Adverse Effect. 5.8 Financial Statements. (a) Schedule II attached hereto sets forth a complete and accurate copy of the audited consolidated balance sheets of UCAR and the Subsidiaries as of December 31, 1992 and 1993 and the consolidated statements of operations and retained earnings and of cash flows for each of the three calendar years in the three calendar year period ended December 31, 1993, including the report of KPMG Peat Marwick LLP, certified public accountants ("Peat Marwick"), thereon and the notes thereto (collectively, the "Audited Financial Statements"). The Audited Financial Statements (i) present fairly, in all material respects, the consolidated financial position of UCAR and the Subsidiaries as of December 31, 1992 and 1993, respectively, and the consolidated results of operations and retained earnings and of cash flows of UCAR and the Subsidiaries for each of the three calendar years in the three calendar year period ended December 31, 1993 in conformity with generally accepted accounting principles applied on a consistent basis other than as disclosed therein and (ii) except as otherwise stated therein, for dates and periods on or before February 25, 1991, have been derived from the books and records of UCAR and the Subsidiaries. (b) Schedule II attached hereto sets forth a complete and accurate copy of the unaudited consolidated balance sheets of UCAR and the Subsidiaries for the nine-month period ended September 30, 1994 (the "Balance Sheet Date") and the consolidated statements of operations and retained earnings and of cash flows for each of the nine- month periods ended September 30, 1993 and 1994 (collectively, the "Unaudited Financial Statements"). The Unaudited Financial Statements (i) present fairly, in all material respects, the consolidated financial position of UCAR and the Subsidiaries as of the Balance Sheet Date and the consolidated results of operations and retained earnings and cash flows of UCAR and the Subsidiaries for the nine-month periods ended September 30, 1993 and 1994 in conformity with generally accepted accounting principles applied on a consistent basis other than as disclosed therein, and subject to normal year- end adjustments (except that footnote disclosure may not be included therewith) and (ii) have been derived from the books and records of UCAR and the Subsidiaries. 5.9 Tax Matters. (a) All Tax Returns (as defined in Article 5.9(d) hereof) required to be filed by or on behalf of UCAR or any Subsidiary have been timely filed for all years and periods for which such Tax Returns were due (taking into account all filing date extensions) and to the extent required by applicable law all Taxes (as defined in Article 5.9(c) hereof) required to be paid during the period from February 26, 1991 through the Closing Date (regardless of whether shown on a Tax Return) have been paid. Except as set forth in Schedule II attached hereto, since the Balance Sheet Date, none of UCAR or its non-Foreign Subsidiaries nor, to the knowledge of Stockholders, any Foreign Subsidiary has incurred any material liability with respect to any Tax except in the ordinary course of business. Except as set forth in Schedule II or XVII attached hereto, there are no presently pending written claims by any foreign, federal, state or local taxing authority which pertain to UCAR, any Subsidiary, any of the material properties owned, used or leased by UCAR and the Subsidiaries or any of such Tax Returns, which, if adversely determined, would have a Material Adverse Effect. (b) Except as set forth on Schedule II attached hereto, with respect to all Tax Returns, (i) the statute of limitations for the assessment of any Tax in respect of such Tax Return has expired through the taxable years set forth in Schedule II attached hereto and (ii) except as set forth in Schedule II attached hereto, no audit is in progress and no waiver or agreement is in force for the extension of time for the assessment or payment of any Tax in respect of such Tax Returns. (c) As used herein, the term "Tax" or "Taxes" shall mean any or all federal, state, local and foreign taxes, assessments, imposts, duties and other similar governmental charges (including, without limitation, income, profits, excise, sales, use, occupancy, value added, gross receipts, franchise, ad valorem, capital, transfer, withholding, employment, payroll and property taxes and import duties), any or all interest thereon, any or all additions thereto or to any such interest and any or all penalties with respect thereto. (d) As used herein, the term "Tax Return" shall mean any return, report, declaration, estimate or information statement filed or required to be filed with any taxing authority with respect to any Tax. (e) Except as set forth on Schedule II, (i) none of UCAR and its Subsidiaries has filed a consent under Code Section 341(f) concerning collapsible corporations, (ii) except as provided in UCAR's Long Term Incentive Compensation Plan, as amended, none of UCAR and its Subsidiaries has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code Section 280G, and (iii) neither UCAR nor any of its Subsidiaries is a party to, or has any tax-related contractual liability with respect to, any lease made pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, as amended. 5.10 Real Property. (a) Schedule III attached hereto identifies (i) all of the real property which is owned by UCAR or any Subsidiary (the "Owned Real Property"), all of which UCAR and its Subsidiaries have good and valid title to, subject to the exceptions set forth in Article 5.12 below, (ii) all of the real property which is leased by UCAR or any Subsidiary (the "Leased Real Property" together with the Owned Real Property the "Real Property"), (iii) all of the leases and subleases pertaining to the Owned Real Property, all leases to and/or subleases by UCAR or any Subsidiary of Leased Real Property and all amendments thereto, including, without limitation, all of the leases to third parties by UCAR or any Subsidiary pertaining to the Real Property (collectively, the "Real Property Leases"), (iv) all of the suits, actions, proceedings, investigations and written claims presently pending or to the knowledge of Stockholders, threatened which (A) pertain to the Owned Real Property or (B) pertain to the Leased Real Property or the Real Property Leases and to which UCAR or any Subsidiary is a party or, to the knowledge of Stockholders, is threatened in writing to be made a party and (v) all of the final orders, writs, judgments, awards, edicts and decrees of any court of competent jurisdiction presently outstanding against UCAR or any Subsidiary which pertain to the Owned Real Property and which materially affect the ownership or use of the Owned Real Property as presently owned or used by UCAR and the Subsidiaries. Except as set forth in Schedule III attached hereto, all of the real property which is reflected in the balance sheet included among the Unaudited Financial Statements is owned by UCAR or one of the Subsidiaries. (b) Except as set forth in Schedule III attached hereto, neither UCAR nor any of the Subsidiaries owns, holds, is obligated under or a party to any option, right of first refusal or other contractual right to purchase, acquire, sell or dispose of the Real Property or any portion thereof or interest therein. (c) The components of the buildings, structures and other improvements which are located on the Owned Real Property are in reasonable working order and repair for the conduct of the Business as presently conducted by UCAR and the Subsidiaries. The buildings, structures and other improvements which are located on the Owned Real Property are supplied with all utilities necessary for the operation thereof as presently operated by UCAR and the Subsidiaries and all associated "hook-up" fees and other similar charges due and payable through the date hereof have been fully paid. (d) Except as set forth in Schedule III attached hereto, neither UCAR nor any of the Subsidiaries has received written notice of any, and, there is not any pending, or, to the knowledge of Stockholders, threatened, (i) condemnation proceeding affecting the Real Property or any part thereof or (ii) sale or other disposition of the Real Property or any part thereof in lieu of condemnation. (e) The representations and warranties set forth in this Article 5.10 shall be deemed to have been breached only if one or more events or circumstances which give rise to such a breach would have a Material Adverse Effect. 5.11 Owned Personal Property. Except as set forth in Schedule XVI attached hereto and except for properties sold, transferred or otherwise disposed by UCAR or any Subsidiary in the ordinary course of business since the Balance Sheet Date, all of the material tangible personal property (including, without limitation, furnishings, furniture, office equipment, vehicles, inventories, tools, machinery, equipment, structures and movable fixtures) which is reflected in the balance sheet included among the Unaudited Financial Statements is (i) owned by UCAR or one of the Subsidiaries and (ii) in reasonable working order and repair for use as presently used by UCAR and the Subsidiaries in connection with the Business. 5.12 Title to Owned Properties. Except as set forth in Schedule III attached hereto with respect to the properties listed therein or in Schedule XV attached hereto, UCAR and each Subsidiary has good and valid title to all of the material properties owned by it, free and clear of all liens, claims and encumbrances other than: (i) liens, claims and encumbrances reflected in the Unaudited Financial Statements; (ii) liens for taxes, charges and assessments imposed by any taxing authority which are not yet due and payable or which are being contested in good faith by appropriate proceedings listed in Schedule II or VII attached hereto; (iii) mechanics', suppliers', installment sales and similar liens for services rendered or materials furnished, the charges for which are not yet due and payable or which are being contested in good faith by appropriate proceedings; (iv) defects or imperfections in title, liens, claims, easements or rights, restrictions and encumbrances which do not materially, individually or in the aggregate, interfere with the use of such properties as presently used by, or the conduct of the Business as presently conducted by, UCAR and the Subsidiaries. 5.13 Contracts; Leases; Licenses. Except for contracts, agreements and commitments contemplated by Article 5.7 hereof, leases and subleases described in Article 5.10 hereof, licenses and agreements described in Articles 5.19 and 5.20 hereof, plans, policies, practices, programs, agreements, arrangements, contracts and commitments described in Article 5.21 hereof, consent orders described in Article 5.23 hereof and insurance policies described in Article 5.24 hereof (collectively, the "Other Scheduled Contracts"), Schedule IV attached hereto sets forth all written contracts, agreements and commitments (including, without limitation, leases, subleases, licenses and installment sales contracts) to which UCAR or any Subsidiary is a party and: (i) which involve future expenditures with respect to the purchase of raw materials, manufacturing supplies or utilities used in the ordinary course of business in excess of $1,000,000; (ii) which involve future receipts with respect to the sale of products in the ordinary course of business in excess of $1,000,000; (iii) which involve future expenditures or receipts with respect to the purchase, sale or lease of real property or personal property (other than raw materials, manufacturing supplies and products described in clauses (i) and (ii) of this Article 5.13) in excess of $1,000,000; (iv) which involve future expenditures or receipts with respect to the rendition of services (other than the purchase of utilities) in excess of $1,000,000; (v) which contain commitments of suretyship, guaranty or indemnification (other than guarantees, warranties and indemnities provided in connection with the purchase, sale or lease of materials, supplies, utilities, products or other personal property or the rendition of services in the ordinary course of business); (vi) which involve the handling, treatment, storage, transportation, recycling, reclamation or disposal of wastes or hazardous substances; (vii) which provide for the grant of a security interest or the extension of credit, constitute a mortgage or lien on or pledge of any properties or relate to the borrowing or lending of funds (other than security interests granted and credit extended in connection with the purchase, lease or sale of materials, supplies, utilities, products or other personal property or the rendition of services in the ordinary course of business and security interests, mortgages, liens and pledges described in Article 5.12 hereof); (viii) which relate to the disposition or acquisition of any material business or any material equity interest in any business; (ix) which are material to the conduct of the Business as presently conducted by UCAR and the Subsidiaries; (x) to which Union Carbide, Mitsubishi or any of their respective Affiliates is also a party (other than those described in Article 1.6 hereof), which are in each case marked by an asterisk in Schedule IV; (xi) pursuant to which UCAR or any of the Subsidiaries agrees not to compete in any line of business with any Person or in any geographical area; or (xii) to which the United States government is a party. 5.14 Performance of Contracts, Leases and Licenses. Except as set forth in each Schedule attached hereto with respect to the contracts, agreements and commitments listed therein, to the knowledge of Stockholders, (i) all of the contracts, agreements and commitments set forth in Schedule IV attached hereto and all of the Other Scheduled Contracts are legal, valid and binding obligations of UCAR and the Subsidiaries, as the case may be, and are in full force and effect in all material respects, (ii) neither UCAR nor any Subsidiary is in default, or has received written notice of any default or of any event which, with the passage of time, the giving of further notice or both, would constitute a default by UCAR or any Subsidiary under any such contract, agreement or commitment or any of the Other Scheduled Contracts in any material respect and (iii) to the knowledge of Stockholders none of the other parties to any such contract, agreement or commitment or any of the Other Scheduled Contracts is in default thereunder in any material respect. 5.15 Compliance with Laws. (a) Except as set forth in any Schedule attached hereto with respect to the matters set forth therein or in Schedule VII attached hereto, to the knowledge of Stockholders, neither Stockholders, UCAR nor any of their respective subsidiaries (including the Subsidiaries) is in default under or in violation of any foreign, federal, state or local law, ordinance, regulation or rule or any judgment, writ, order, award, edict or decree of any court of competent jurisdiction or any governmental or quasi-governmental agency, authority or instrumentality of competent jurisdiction pertaining to UCAR, any of the Subsidiaries or any of the properties owned, leased or used by UCAR or any of the Subsidiaries other than such defaults and violations, if any, which will not have a Material Adverse Effect. (b) To the knowledge of Stockholders, neither Stockholders, UCAR nor any of the Subsidiaries has, in connection with the conduct of the Business, (i) made any payment to officers or employees of any governmental agency, authority or instrumentality, (ii) made any payment to customers for the sharing of fees or to customers or suppliers for rebating of charges, (iii) engaged in any other reciprocal practice or (iv) made any payment or given any other consideration to purchasing agents or other representatives of customers in respect of sales made or to be made, in each case which was illegal under any applicable United States or foreign law. 5.16 Permits; Licenses. Schedule V attached hereto sets forth all of the governmental and quasi-governmental consents, approvals, exemptions, permits, licenses, franchises and other authorizations which have been issued to or are held for use by UCAR or any Subsidiary, or for which UCAR or any Subsidiary has applied and which are material to the conduct of the Business as presently conducted by UCAR and any of the Subsidiaries. Except as described in Schedule V attached hereto, to the knowledge of Stockholders, the consummation of the Transactions will not result in a violation or invalidation of any of such consents, approvals, exemptions, permits, licenses, franchises or other authorizations. Except as described in Schedule V, VI or XII attached hereto, to the knowledge of Stockholders, UCAR and the Subsidiaries have obtained all of the material governmental and quasi-governmental consents, approvals, permits, exemptions, licenses, franchises and other authorizations which are necessary in order to conduct the Business as presently conducted by them or own, lease or use the material properties presently owned, leased or used by them. 5.17 Environmental Conditions. (a) Schedule VI attached hereto: (i) lists (A) all waste treatment, storage and disposal facilities and sites (including, without limitation, underground storage tanks) which are located on the Real Property and which are presently used by UCAR or any Subsidiary and (B) as to each such facility or site, the time period used and the type of material treated, stored or disposed; (ii) lists (A) all waste treatment, storage and disposal facilities and sites which are not located on the Real Property and which are presently used by UCAR or any Subsidiary and (B) as to each such facility or site, the time period used and the type of material treated, stored or disposed; (iii) to the knowledge of Stockholders, lists (A) all waste treatment, storage and disposal facilities and sites (including, without limitation, underground storage tanks) which are located on the Real Property but are not presently used by UCAR or any Subsidiary and (B) as to each such facility or site, the time period used and the type of material treated, stored or disposed; (iv) to the knowledge of Stockholders, lists (A) all waste treatment, storage and disposal facilities and sites which are not located on the Real Property and which were used in the conduct of the Business as conducted by UCAR and the Subsidiaries but are not presently used by UCAR or any Subsidiary and (B) as to each such facility or site, the time period used and the type of material treated, stored or disposed; (v) identifies all written internal environmental audits conducted since February 26, 1991 relating to UCAR or any of the Subsidiaries; (vi) lists all reports of releases (including, without limitation, continuous release reports) of hazardous substances relating to UCAR or any of the Subsidiaries furnished since February 26, 1991 to any foreign, federal, state or local governmental or quasi-governmental agency, authority or instrumentality, including, without limitation, all such reports furnished to the National Response Center, any state emergency response commission, any local emergency planning committee or the United States Environmental Protection Agency (the "EPA") pursuant to requirements of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (collectively, "CERCLA"); (vii) lists all reports made to the EPA or any state or local governmental agency, authority or instrumentality pursuant to Sections 302, 311, 312 and 313 of Title III of the Superfund Amendments and Reauthorization Act of 1986; and (viii) describes all material events of non- compliance relating to UCAR or any of the Subsidiaries reported to or, to the knowledge of Stockholders, identified by any governmental or quasi-governmental agency, authority or instrumentality since February 26, 1991 with (A) environmental permits, approvals, authorizations or licenses or (B) the requirements of HS&EA Laws (as defined in Article 5.17(d)(iii) hereof), including without limitation, the Clean Air Act, as amended, the Clean Water Act, as amended, the Resource Conservation and Recovery Act, as amended, or the Toxic Substance Control Act, as amended ("TSCA"). (b) Except as set forth in Schedule II, III, IV, V, VI,VII or XII attached hereto, to the knowledge of Stockholders: (i) UCAR and the Subsidiaries are in compliance, in all material respects, with all HS&EA Permits (as defined in Article 5.17(d)(v) hereof) held by them and all of such HS&EA Permits are in full force and effect and no action to revoke any of such HS&EA Permits is pending; (ii) neither Stockholders, UCAR nor any of the Subsidiaries has received written notice from any governmental or quasi-governmental authority of any event, condition, circumstance, activity, practice, incident, action or plan (A) which may materially interfere with or prevent compliance with (1) any HS&EA Law in connection with the conduct of the Business as presently conducted by UCAR and the Subsidiaries or (2) any HS&EA Permit held by UCAR or any Subsidiary in connection with the conduct of the Business or (B) which may (1) require the amendment or transfer of any HS&EA Permit held in connection with the conduct of the Business as presently conducted by UCAR and the Subsidiaries or (2) materially interfere with any such amendment or transfer; (iii) neither Stockholders, UCAR nor any of the Subsidiaries has received written notice that it is subject to, responsible or liable for any material HS&EA Liabilities and Costs (as defined in Article 5.17(d)(iv) hereof) based upon or arising out of (A) past or present environmental conditions on, under, above or about real property, or assets, equipment or facilities located on, under, above or about real property, previously or presently used by UCAR or any of the Subsidiaries, including, without limitation, HS&EA Liabilities and Costs arising from, related to or associated with notices given, claims made, actions and proceedings instituted or orders issued by a federal, state, local or foreign government or governmental agency or by any third party, (B) the use, production, manufacture, processing, distribution, management, handling, shipment, transport, treatment, generation, storage, or Release (as defined in Article 5.17(d)(vi) hereof) of any Contaminant (as defined in Article 5.17(d)(i) hereof) in connection with the conduct of the Business by UCAR and the Subsidiaries or (C) the failure of such real property, assets, equipment or facilities, or property about such real property, to comply in full or in part with all requirements of any HS&EA Law or any HS&EA Permit; (iv) with respect to real property previously or presently owned or operated in connection with the conduct of Business by UCAR and the Subsidiaries, neither Stockholders, UCAR nor any of the Subsidiaries or any of the other present or prior owners or operators thereof are subject to any outstanding written notice or order from, or agreement with, any governmental authority or other Person in respect of which it (A) is required to incur any material HS&EA Liabilities and Costs or (B) is subject to any investigation by any governmental authority evaluating whether any material Remedial Action (as defined in Article 5.17(d)(vii) hereof) is needed to respond to a Release of a Contaminant into the Environment (as defined in Article 5.17(d)(ii) hereof) or as a result of which other material HS&EA Liabilities and Costs may arise; (v) UCAR and the Subsidiaries have filed all notices required to be filed under the HS&EA Laws indicating past and present Releases of Contaminants used or held in connection with the conduct of the Business by UCAR and the Subsidiaries; and (vi) neither Stockholders, UCAR nor any Subsidiary has entered into any written agreement with any governmental authority or other Person pursuant to which it has assumed responsibility for, either directly or as a guarantor, indemnitor, surety or Remedial Action, which provides for future expenditures in excess of $1,000,000. (c) The representations and warranties set forth in Article 5.17(b) hereof shall be deemed to have been breached only if one or more events or circumstances which give rise to such breach would have a Material Adverse Effect. (d) As used in this Agreement, the following terms shall have the meanings set forth below: (i) "Contaminant" shall mean any waste, pollutant, noise, hazardous substance, toxic substance, hazardous material, hazardous waste, special waste, industrial substance or waste, radioactive material or waste, petroleum or petroleum-derived substance or waste or any constituent of any such substance or waste (including, without limitation, any such substance regulated under or defined by any HS&EA Law or otherwise determined by a court of law to be a basis for personal injury or property damage liability). (ii) "Environment" shall have the meanings set forth in Section 9601(8) of Title 42 of the United States Code and "Environmental" shall have a concomitant meaning. (iii) "HS&EA Laws" shall mean foreign and domestic laws, and any rules and regulations promulgated thereunder by any governmental entity, relating to pollution, health and safety or protection of the Environment (including, without limitation, laws relating to the Release or threatened Release of Contaminants into the Environment or otherwise relating to the presence, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Contaminants). (iv) "HS&EA Liabilities and Costs" shall mean all liabilities, obligations, obligations to conduct Remedial Actions, responsibilities, losses, damages, punitive damages, consequential damages, treble damages, costs or expenses (including, without limitation, all reasonable fees, disbursements and expenses of counsel and experts and all reasonable consulting fees and costs of investigations and feasibility studies), fines, penalties, monetary sanctions and interest resulting from any claim or demand by any person or governmental entity, domestic or foreign, arising pursuant to the HS&EA Laws, from (A) environmental, health or safety conditions, or the Release or threatened Release of a Contaminant into the Environment, as a result of the conduct of the Business by UCAR and the Subsidiaries and (B) conditions on, under, above or about any real property owned or operated by UCAR or any of the Subsidiaries. (v) "HS&EA Permit" shall mean any permit, license, authorization, approval or registration required pursuant to the HS&EA Laws. (vi) "Release" shall mean any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, disbursal, leaching or migration of any Contaminant into the Environment or into, out of or through any structure, property, air, soil, surface water or ground water. (vii) "Remedial Action" shall mean all actions required to (A) clean up, remove, treat, mitigate or remediate Contaminants in the Environment (including, without limitation, any structure or property), or (B) perform pre- remedial studies and investigations and post-remedial monitoring and care with respect to Contaminants in the Environment. (e) No modification, revocation, reissuance, alteration, transfer, or amendment of the HS&EA Permits, or any review by, or approval of, any third party of the HS&EA Permits is required in connection with the execution or delivery of this Agreement or the consummation of the Transactions where such modification, revocation, reissuance, alteration, transfer or amendment would have a Material Adverse Effect. 5.18 Litigation; Claims; Proceedings. Except for suits, actions, proceedings, investigations, audits, examinations and written claims described in Articles 5.9, 5.10, 5.12, 5.17, 5.19, 5.20, 5.21 and 5.23 hereof and orders, judgments, writs, decrees, awards and edicts described in Articles 5.9, 5.10, 5.15, 5.19, 5.20 and 5.23 hereof, Schedule VII attached hereto sets forth all of the civil, criminal, administrative and arbitral suits, actions, proceedings, investigations and written claims presently pending or, to the knowledge of Stockholders, threatened in writing and all of the final orders, judgments, writs, decrees, awards and edicts presently outstanding which pertain to UCAR, any Subsidiary or any of the material properties owned, leased or used by UCAR and the Subsidiaries other than routine suits, actions, proceedings, investigations and written claims (including, without limitation, product liability, product warranty and worker's compensation suits, actions, proceedings, investigations and written claims) where the amount involved therein does not exceed $1,000,000 or where the amount involved therein and in all suits, actions, proceedings, investigations and written claims involving substantially similar issues outstanding at any time after February 26, 1991 does not exceed $1,000,000. Neither Stockholders, UCAR nor any of the Subsidiaries has received written notice of any statements, citations or decisions by any governmental agency, authority or instrumentality stating that any product made by UCAR or any of the Subsidiaries is defective or unsafe or fails to meet any standards promulgated by such agency, authority or instrumentality. To the knowledge of Stockholders, there have been no recalls ordered by any such agency, authority or instrumentality with respect to any such product. 5.19 Patents; Technology. (a) Schedule VIII attached hereto lists: (i) all of the United States and foreign patents and patent applications owned by or licensed or assignable to UCAR or any Subsidiary which are material to the conduct of the Business as presently conducted by UCAR and the Subsidiaries; (ii) all of the licenses and non-assertion rights granted to or by UCAR or any Subsidiary pursuant to written agreements pertaining to patents, patent applications, proprietary technology or inventions which are material to the conduct of the Business as presently conducted by UCAR and the Subsidiaries; (iii) all of the written confidentiality, secrecy, screening, development and settlement agreements pertaining to patents, patent applications, proprietary technology or inventions which are material to the conduct of the Business as presently conducted by UCAR and the Subsidiaries (other than confidentiality or secrecy agreements made in connection with the purchase, sale or lease of materials, supplies, products or other personal property or the rendition of services in the ordinary course of business); and (iv) all of the suits, actions, proceedings (including, without limitation, interference, opposition, revocation and conflict proceedings) and written claims presently pending or, to the knowledge of Stockholders, threatened and all of the orders, judgments, writs, edicts, awards and decrees presently outstanding pertaining to patents, patent applications, proprietary technology or inventions described in the preceding clauses of this Article. (b) Except as set forth in Schedule VIII attached hereto, to the knowledge of Stockholders, all of the patents, patent applications, trade secrets, know-how, inventions, processes, manufacturing information, engineering information and technical information, which are material to the conduct of the Business as presently conducted by UCAR and the Subsidiaries and which are not available in the public domain are owned by, licensed to or subject to non-assertion rights granted to UCAR or a Subsidiary. Except as set forth in Schedule VIII attached hereto, to the knowledge of Stockholders, neither UCAR nor any of the Subsidiaries has received written notice that it has infringed the patent rights of third parties. 5.20 Trademarks; Copyrights. (a) Schedule IX attached hereto lists: (i) all of the foreign, United States and state trademarks, service marks, trade names and copyrights owned by or licensed or assignable to UCAR or any Subsidiary which are material to the conduct of the Business as presently conducted by UCAR and the Subsidiaries; (ii) all of the written licenses and all of the rights under registered user or other written agreements granted to UCAR or any Subsidiary by third parties pertaining to trademarks, service marks, trade names and copyrights which are material to the conduct of the Business as presently conducted by UCAR and the Subsidiaries; (iii) all of the written licenses and all of the rights under registered user or other written agreements granted to third parties by UCAR or any Subsidiary pertaining to trademarks, service marks, trade names and copyrights which are material to the conduct of the Business as presently conducted by UCAR and the Subsidiaries; and (iv) all of the suits, actions, proceedings (including, without limitation, interference, opposition and cancellation proceedings) and written claims presently pending or, to the knowledge of Stockholders threatened and all of the orders, judgments, writs, edicts, awards and decrees presently outstanding pertaining to trademarks, service marks, trade names or copyrights described in the preceding clauses of this Article 5.20. (b) Except as set forth in Schedule IX attached hereto, all of the trademarks and service marks described in Article 5.20(a)(i) hereof have been duly registered or are the subject of pending registration applications in the jurisdictions indicated in Schedule IX attached hereto. Except as set forth in Schedule IX attached hereto, to the knowledge of Stockholders, neither Stockholders, UCAR nor any Subsidiary has received written notice that it has infringed the trademark rights or copyrights of third parties in connection with the conduct of the Business by them. 5.21 Human Resources. (a) Schedule X attached hereto sets forth a complete and accurate list of (i) all of the collective bargaining agreements and agreements with labor unions or associations representing employees to which UCAR or any of the Subsidiaries is a party and (ii) as of the dates set forth in Schedule X attached hereto, the total number of employees of UCAR and the Subsidiaries and the number of such employees represented by each such agreement. Such numbers of employees have not changed since such dates except in the ordinary course of business. Except as set forth in Schedule X attached hereto, to the knowledge of Stockholders, there are no organizing efforts, strikes, slowdowns, picketing, work stoppages, labor troubles or other similar events in which employees of UCAR or any Subsidiary are participating and which is having or is reasonably likely to have a Material Adverse Effect. (b) For purposes of this Agreement, the following terms shall have the meanings set forth below: (i) "Benefit Plan" shall mean any plan, agreement or arrangement which is (A) an employment, change of control, consulting or deferred compensation agreement, (B) an incentive, pension, profit-sharing, savings, retirement, stock option, stock purchase, appreciation, thrift or savings plan, (C) a severance pay plan, (D) a life, health, disability or accident insurance plan, (E) a holiday, vacation or other bonus practice or (F) any other material "employee benefit plan" as defined in Section 3(3) of ERISA (as defined below), or fringe benefit, in each of the cases as described in clauses (A) through (F) of this clause (i) which is maintained by UCAR or any Subsidiary or ERISA Affiliate (as defined below) with respect to any employee, officer, director or consultant of UCAR or any of the Subsidiaries or any ERISA Affiliate or in respect of which UCAR or any Subsidiary has any present or future liability (including any foreign benefit plan). (ii) "Code" shall mean the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. (iii) "ERISA Affiliate" shall mean any entity, whether or not incorporated, which is, or since February 26, 1991 has been, treated as a single employer with UCAR or any of the Subsidiaries under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA. (iv) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder. (v) "PBGC" shall mean the Pension Benefit Guaranty Corporation. (vi) "IRS" shall mean the Internal Revenue Service. (vii) "Pension Plan" shall mean a Benefit Plan which is a "pension plan" as defined in Section 3(3) of ERISA and which is covered by ERISA. (c) Schedule XI attached hereto sets forth a complete and accurate list of all Benefit Plans and Stockholders have delivered to or made available to the Buyer current copies of each such Benefit Plan including any amendments thereto since the Balance Sheet Date (or, to the extent no such copy exists, an accurate description thereof) and, to the extent applicable, (i) any related trust agreement, annuity contract or other funding instrument; (ii) any summary plan description and other material written communications to UCAR and its Subsidiaries' employees concerning the extent of the benefits provided under a Benefit Plan; and (iii) the most recent (I) Form 5500s and attached schedules, (II) determination letter, (III) audited financial statements and (IV) actuarial valuation reports. (d) With respect to each Benefit Plan: (i) UCAR and each of the Subsidiaries have made all contributions and other payments (including premiums payable to the PBGC) due from it to date on a timely basis and all amounts properly accrued as liabilities of UCAR or any of the Subsidiaries which have not been paid have been properly recorded on the books of UCAR or such Subsidiaries; (ii) no Benefit Plan which is subject to Section 302 of ERISA or Section 412 of the Code has incurred an "accumulated funding deficiency" as defined in either of such Sections (whether or not waived); (iii) to the knowledge of Stockholders, each Benefit Plan and its related trust agreement has been administered in all material respects in accordance with its terms and is in material compliance with ERISA and the Code or, if applicable, foreign laws; (iv) each Benefit Plan which is intended to qualify under Section 401(a) or 403(a) of the Code has received a favorable determination letter from the IRS with respect to its qualification and its related trust has been determined to be exempt from taxation under Section 501(a) of the Code; and (v) other than as described in Schedule VII, X or XI attached hereto, there are no actions, suits, liens (statutory or otherwise) or claims pending (other than routine claims for benefits) or, to the knowledge of Stockholders, threatened in writing against or with respect to any Benefit Plan. (e) With respect to each Pension Plan that is subject to Title IV of ERISA: (i) no filing of a notice to terminate any such Pension Plan has been made by UCAR or any of the Subsidiaries; and (ii) Stockholders have received no written notice from the PBGC of the initiation of a proceeding to terminate any such Pension Plan and, to the knowledge of Stockholders, no proceeding has been initiated by the PBGC to terminate any such Pension Plan. (f) Except as set forth in Schedule XI attached hereto, no Benefit Plan provides medical or death benefits with respect to any employee, officer, director or consultant of UCAR or any of the Subsidiaries beyond their retirement or other termination of service other than (i) COBRA coverage or (ii) death benefits provided under any pension plan. (g) With respect to each Benefit Plan, no such Benefit Plan has engaged in a non-exempt "prohibited transaction" within the meaning of Section 4975 of the Code or Section 406 of ERISA. (h) Except as provided in UCAR's Long Term Incentive Compensation Plan, as amended, and as set forth in Schedule XI, the Transactions will not result in (i) the payment to any employee of UCAR or the Subsidiaries of any money or other property or right, (ii) the acceleration or provision of any other rights or benefits to any employee of UCAR or the Subsidiaries, or (iii) any increase in benefits or compensation under any Benefit Plan. 5.22 Business Operations. (a) Except as set forth herein or in any Schedule attached hereto: (i) since the Balance Sheet Date, neither UCAR nor any Subsidiary has, except in the ordinary course of business, made any material change in practices, operations or policies with respect to (A) the standard terms and conditions of sale of products (including standard terms regarding returns and discounts, but excluding price changes), (B) the method of accounting for sale of products, (C) the policy regarding maintenance of inventory levels or (D) the conduct of accounts receivable collection and accounts payable payment activities; (ii) since the Balance Sheet Date, neither UCAR nor any Subsidiary has, except in the ordinary course of business, or as specifically contemplated by this Agreement in connection with the Transactions, (A) engaged in any material transaction, (B) entered into any material agreement, (C) incurred, paid or discharged any material obligation or liability, (D) sold or transferred any material property, (E) waived or released any material right or obligation, (F) guaranteed, assumed or otherwise become responsible for the material obligations of any Person, (G) made any material loan or advance to any Person, (H) made any payments to any of the Stockholders or their Affiliates, (I) made any repurchase or redemption of, or any reclassification of, shares of its Capital Stock, (J) issued or sold any shares of its Capital Stock or granted any of its Capital Stock or granted any options, rights, subscriptions or warrants to purchase any shares of its Capital Stock, or issued any convertible or exchangeable securities or entered into any agreements or commitments pending for the issuance or sale of any shares of its Capital Stock, (K) acquired or sold, leased, granted any interest in or otherwise disposed of any material assets or businesses, or (L) entered into any agreement or commitment, other than this Agreement, to do any of the foregoing; provided, that one or more cash dividends declared and paid after the Balance Sheet Date and prior to the Closing Date shall not be considered a breach of this Section 5.22; provided further, that this in no way limits or otherwise modifies the provisions of Article 1.5 hereof; and (iii) since the Balance Sheet Date, there has been no material damage to or loss of the material properties owned, leased or used by UCAR and the Subsidiaries (regardless of whether such damage or destruction is covered by insurance). (b) Except as set forth in Schedule XVI attached hereto, to the knowledge of Stockholders, no material supplier or customer of UCAR and the Subsidiaries has indicated in writing that it will cease doing business with UCAR and the Subsidiaries as a result of the Transactions. 5.23 Health and Safety Conditions. Schedule XII attached hereto: (i) lists all current material safety data sheets relating to the products currently sold by UCAR and the Subsidiaries and the chemical substances or mixtures currently used by UCAR and the Subsidiaries in the conduct of the Business as presently conducted by them; (ii) lists all written internal safety and health audits conducted since February 26, 1991 by UCAR or any of the Subsidiaries; and (iii) lists all citations, notices of violations, orders and consent orders issued and administrative or judicial enforcement proceedings commenced by governmental or quasi-governmental agencies, authorities and instrumentalities (including the United States Occupational Safety and Health Administration, any state occupational safety and health administration and, with respect to TSCA, the EPA) with respect to safety and health matters relating to UCAR or any of the Subsidiaries since February 26, 1991. 5.24 Insurance. Schedule XIII attached hereto lists all of the material insurance policies (other than insurance policies relating to plans, policies, practices, programs, contracts, agreements, arrangements and commitments described in Article 5.21 hereof) which cover employees, properties, products or operations (including, without limitation, fire, public liability, worker's compensation and vehicular insurance policies) and which are held by or on behalf of UCAR or any Subsidiary for their respective accounts. To the knowledge of Stockholders, there is no material inaccuracy in any application for any such policy which would form a basis for termination of any such policy. 5.25 Liabilities. Except as set forth herein or in any Schedule attached hereto, to the knowledge of Stockholders, there are no material liabilities of UCAR and the Subsidiaries other than liabilities incurred since the Balance Sheet Date in the ordinary course of business. 5.26 Entire Business. UCAR and the Subsidiaries own, lease or have licenses or other contractual rights to use all of the material tangible and intangible assets used by them in the conduct of the Business as presently conducted by them except for (i) assets used to provide services or goods to UCAR or a Subsidiary pursuant to a contract, agreement or commitment set forth in Schedule IV attached hereto or one of the Other Scheduled Contracts, and (ii) pension or other funded employee benefit plan assets. The contracts, agreements and commitments under which such contractual rights have been granted are listed on Schedule IV attached hereto or included among the Other Scheduled Contracts. 5.27 Full Disclosure. Stockholders have made or caused to be made available to Buyer, upon request, complete and accurate copies of all documents listed in the Schedules attached hereto and all files, records and papers related to all claims, actions, suits, proceedings and investigations listed in the Schedules attached hereto, in each case (i) other than documents, files, records and papers which, in the reasonable opinion of Stockholders, contain information (including, without limitation, price and cost data on any basis other than an aggregate basis) the disclosure of which to competitors of UCAR or any of the Subsidiaries might be detrimental to UCAR or any of the Subsidiaries and (ii) except to the extent that such access would (A) violate the terms of any agreement to which UCAR or any of the Subsidiaries is a party, any applicable law, ordinance, rule or regulation or any order, writ, judgment, award, edict or decree of any court of competent jurisdiction or any governmental or quasi- governmental agency, authority or instrumentality of competent jurisdiction or (B) result in the loss of any attorney-client or other privilege. Stockholders have not knowingly withheld any documents, files, records, papers or related materials necessary to make the representations and warranties set forth in Articles 3, 4 and 5 hereof, in the context in which they are made, not misleading in any material respect. To the knowledge of Stockholders, UCAR has not furnished any documents, files, records, papers or related materials to the Buyer that contain any untrue statement of a material fact. 5.28 Limitation on Representations. Except as set forth in Articles 3 and 4 hereof or this Article 5, no representations, warranties or guarantees have been, are being or will be made by Union Carbide, Mitsubishi or UCAR as to the quality, condition, character, size, quantity, type, earnings, revenues, expenses, suitability or value of UCAR, the Subsidiaries or any of the properties owned, leased or used by UCAR or any Subsidiary and ALL REPRESENTATIONS, WARRANTIES OR GUARANTEES IMPLIED OR OTHERWISE CREATED UNDER ANY APPLICABLE LAW ARE EXPRESSLY DISCLAIMED BY THE STOCKHOLDERS. 5.29 Receivables. (a) All of UCAR's and, to the knowledge of Stockholders, the Subsidiaries' receivables have arisen only from bona fide transactions in the ordinary course of business. (b) As of the Balance Sheet Date there had not been, and since the Balance Sheet Date there have not been, sales of any receivables or other similar assets pursuant to (i) the Asset Purchase and Sale Agreement, dated as of June 26, 1992, among UCAR Carbon Company Inc., Omnibus Funding Corporation and Manufacturers Hanover Agent Bank Services and the Secondary Asset Purchase and Sale Agreement, dated as of June 26, 1992, among UCAR Carbon Company Inc., Internationale Nederlanden Bank N.V. and Manufacturers Hanover Agent Bank Services or (ii) any other similar arrangement, nor have Stockholders entered into any other similar arrangement that remains in effect as of the date hereof. 5.30 Limitations on Representations. Notwithstanding anything contained herein to the contrary, to the extent any representation or warranty contained in Article 3, 4 or 5 is not true as a result of any action (i) taken or omitted to be taken by the Stockholders, UCAR, or the Subsidiaries at the request of the Buyer, or (ii) that is necessary in connection with the consummation of the Transactions (and disclosed to Buyer as contemplated by Article 6.2(a)), then the failure of such representation or warranty to be true shall not be deemed to be a violation or breach of any such representation or warranty for all purposes hereof. ARTICLE 6 - PRE-CLOSING COVENANTS 6.1 Conduct By Buyer. (a) From the date hereof until the Closing, Buyer shall refrain from taking any action which would cause any representation or warranty contained in Article 2 hereof to be untrue or incorrect in any material respect as of the Closing. (b) If, for any reason (including, without limitation, termination of this Agreement pursuant to Article 9 hereof), the Closing does not take place, Buyer will, and will cause its officers, employees and other representatives to, keep confidential and not use in any manner any information or documents obtained from, Stockholders, UCAR or any of the Subsidiaries concerning UCAR's or any of its Subsidiaries' respective properties, businesses and operations and shall promptly (i) return to UCAR all documents, papers, books, records and other materials (and all copies thereof) obtained by any of them from Stockholders, UCAR, or any of their respective subsidiaries or Affiliates (including, without limitation, the Subsidiaries) or any of the directors, officers, employees, agents, representatives or consultants of Stockholders, UCAR or any of their respective subsidiaries or Affiliates (including, without limitation, the Subsidiaries) in connection with the investigation and evaluation of the Transactions, and the negotiation and preparation of this Agreement or the consummation of the Transactions, (ii) destroy all copies of all analyses, studies and other documents prepared by or for Buyer which contain or reflect information contained in such documents, papers, books, records and other materials or obtained in connection with visits to the facilities of UCAR or any of the Subsidiaries and (iii) furnish to Stockholders a certificate signed by an appropriate authorized officer of Buyer to the effect that such destruction has been completed. (c) Buyer agrees to take all reasonable action that is necessary or desirable prior to the Closing (other than actions to be taken by the Stockholders, UCAR and its Subsidiaries) such that the Lenders are prepared to lend the aggregate amount of the Borrowings on the Closing Date. 6.2 Conduct by Stockholders and UCAR. From the date hereof until the Closing, (a) Stockholders shall, and shall cause UCAR and its non-Foreign Subsidiaries and shall use their reasonable efforts to cause the Foreign Subsidiaries to (i) refrain from taking any action which would cause any representation or warranty contained in Article 3, 4 or 5 hereof to be untrue or incorrect in any material respect (or in any respect, in the case of the representations or warranties contained in Article 5.22 or 5.29(b)) as of the Closing Date and (ii) notify Buyer of any event, condition or circumstance occurring from the date hereof through the Closing Date that would, or but for Section 5.30 would, constitute a violation or breach of any representation or warranty or cause such representation or warranty to be untrue as of the Closing Date (assuming such event, condition or circumstance existed on the Closing Date); (b) except as otherwise provided herein, Stockholders shall not permit UCAR to amend or authorize any amendment of the Certificate of Incorporation or the Bylaws of UCAR prior to the Closing; (c) except as Buyer shall otherwise agree in writing, Stockholders, UCAR and their Affiliates shall not enter into any new, or amend any existing, Benefit Plan or any other agreement, program, or arrangement in connection therewith (including any trust agreement, insurance contract or credit facility) or grant any increases in compensation, other than in the ordinary course of business or pursuant to promotions, in each case consistent with past practice; and (d) the Stockholders shall cause UCAR and its non- Foreign Subsidiaries, and shall use their reasonable efforts to cause the Foreign Subsidiaries, to take such reasonable action at the request of the Buyer (to the extent such actions are reasonably contemplated hereby) prior to the Closing that is necessary or desirable such that the Borrowings and the other Transactions are consummated on the Closing Date. 6.3 Conduct of the Business. (a) From the date hereof until the Closing, Stockholders shall cause UCAR and its non-Foreign Subsidiaries, and shall use their reasonable efforts to cause the Foreign Subsidiaries, to: (i) employ the properties owned, leased or used by them and conduct the Business only in the ordinary course; (ii) use all reasonable efforts to retain their employees and preserve their business relationships; (iii) refrain from entering into any contract except in the ordinary course of business; (iv) refrain from taking any action which would cause any representation or warranty contained in Article 3, 4 or 5 hereof to be untrue or incorrect in any material respect as of the Closing; (v) provide reasonable access by Buyer and its officers, employees and other representatives to their books, files, papers and records upon reasonable request with due regard to minimizing interference with the conduct of the Business by them; provided, however, that no such access shall be provided (A) to technical, financial or operating books, files, papers or records (including, without limitation, price and cost data on any basis other than an aggregate basis) which, in the reasonable opinion of Stockholders, contain information the disclosure of which to competitors of UCAR or any of the Subsidiaries might be detrimental to UCAR or any of the Subsidiaries (but only to the extent that the lack of access of Buyer or its officers, employees and other representatives thereto would not materially impair the ability of Buyer to evaluate the accuracy of the representations and warranties set forth in Articles 3, 4 and 5 hereof) or (B) to the extent that such access would (1) violate the terms of any agreement to which UCAR or any of the Subsidiaries is a party, any applicable law, ordinance, rule or regulation or any order, writ, judgment, award, edict or decree of any court of competent jurisdiction or any governmental or quasi-governmental agency, authority or instrumentality of competent jurisdiction or (2) result in the loss of any attorney-client or other privilege; (vi) permit with reasonable frequency senior management and representatives of Buyer and the sources of Buyer's financing to meet with senior management of UCAR to discuss the Business as presently conducted by UCAR and the Subsidiaries; provided, that the Stockholders will be given prior notice of all such meetings, and representatives of the Stockholders will be permitted to attend all such meetings; provided, further, that senior management of UCAR shall not disclose during such discussions (A) any technical, financial or operating information or data (including, without limitation, price and cost data on any basis other than an aggregate basis) the disclosure of which to competitors of UCAR or any of the Subsidiaries would, in the reasonable opinion of Stockholders, be detrimental to UCAR or any of the Subsidiaries (but only to the extent that the non-disclosure by the senior management of UCAR of such information or data would not materially impair the ability of Buyer to evaluate the accuracy of the representations and warranties set forth in Articles 3, 4 and 5 hereof) or (B) any information or data the disclosure of which would (1) violate the terms of any agreement to which UCAR or any of the Subsidiaries is a party, any applicable law, ordinance, rule or regulation or any order, writ, judgment, award, edict or decree of any court of competent jurisdiction or any governmental or quasi- governmental agency, authority or instrumentality of competent jurisdiction or (2) result in the loss of any attorney-client or other privilege; and (vii) refrain from making or revoking any elections with respect to Taxes other than in the ordinary course of business. (b) Notwithstanding anything contained herein to the contrary, no action by the Stockholders, UCAR or any of the Subsidiaries taken pursuant to the request of the Buyer or that is necessary in connection with the consummation of the Transactions (and disclosed to Buyer with reasonable promptness) shall be deemed a breach of any of the covenants contained in clauses (i) through (iv) of Article 6.3(a) hereof. 6.4 Filings and Consents. (a) Each Party shall, at its own cost and expense, promptly file and thereafter diligently pursue any filing required on its part under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and all rules and regulations adopted thereunder (collectively, the "HSR Act") in connection with the Transactions. (b) Each Party shall, at its own cost and expense, promptly file and thereafter diligently pursue any filing required on its part under the European Union regulations, as amended, and all rules and regulations adopted thereunder (collectively, the "EU") in connection with the Transactions. (c) Each Party shall, at its own cost and expense, promptly file and thereafter diligently pursue any filing required on its part under French, Canadian, Spanish and Italian laws, if any, in connection with the transactions contemplated by this Agreement. (d) Stockholders shall use all reasonable efforts to obtain the consents, approvals or other authorizations required to be obtained from, make all filings required to be made with and give all notices required to be given to any third party (including, without limitation, governmental or quasi-governmental agencies, authorities and instrumentalities of competent jurisdiction) that are required on their respective parts in connection with the consummation of the Transactions (other than those contemplated by Articles 6.4(a), 6.4(b) and 6.4(c) hereof), in each case if (but only if) the failure to obtain, give or make such consent, approval, authorization or filing would have a Material Adverse Effect (collectively, the "Required Consents"). (e) Each Party shall, upon request, cooperate with the other Parties in connection with the performance of their respective obligations under this Article 6.4. 6.5 Fulfillment of Conditions. Each party shall use all reasonable efforts to fulfill or cause to be fulfilled the conditions set forth in Articles 7 and 8 hereof. Without limitation of the foregoing, each of the Parties shall have the right to review and consult concerning the preparation by UCAR of the Certificate referred to in Article 8(xi). 6.6 Supplemental Disclosure. The Stockholders shall have the right from time to time prior to the Closing to supplement the disclosure Schedules prepared by them or UCAR, with respect to any matter hereafter arising which, if existing or known as of the date of this Agreement, would have been required to be set forth or described in such Schedule. Any such supplemental disclosure will be deemed to have cured any breach of any representation or warranty made in this Agreement, but will not be deemed to have been disclosed as of the date of this Agreement for purposes of determining whether or not the conditions set forth in Articles 7 and 8 hereof have been satisfied. The Stockholders shall also have the right through November 23, 1994 to supplement the disclosure Schedules; provided, that such supplemental disclosure shall, in the aggregate, taken together with the Schedules accompanying this Agreement when first executed (the "Original Schedules"), not disclose any liens, claims or encumbrances which would materially and adversely impair the value of the Lender's collateral package with respect to the Borrowings or any state of affairs representing a Material Adverse Effect, in either case, not disclosed on the Original Schedules. 6.7 Limitation of Stockholders' Liabilities. From and after the Closing Date, except as expressly provided for in this Agreement or the agreements identified with an asterisk on Schedule IV, (a) the Stockholders shall have no obligations or liabilities whatsoever relating to the business, properties or assets of UCAR and the Subsidiaries as the same may exist at the Closing Date or arise thereafter and (b) the Buyer shall release, indemnify and hold the Stockholders harmless from all such obligations and liabilities (including the costs of defense thereof and reasonable attorneys' fees and expenses) that are alleged against or might otherwise be imposed on the Stockholders. The Buyer shall cooperate with the Stockholders, both before and after the Closing Date, by taking, and after Closing, by causing the appropriate entity to take, all actions the Stockholders shall reasonably request to effect the termination of any such Stockholders' obligation or liability. 6.8 Tax Certificate. UCAR shall deliver to Mitsubishi prior to the Closing the certificate referred to in Article 8(xi). ARTICLE 7 - BUYER'S CONDITIONS TO CLOSING The obligations of Buyer to consummate the Transactions are, unless waived by Buyer, subject to the fulfillment, at or before the Closing, of each of the following conditions: (i) No statute or law, no rule or regulation of a governmental agency, authority or instrumentality of competent jurisdiction and no injunction or restraining order of a court of competent jurisdiction shall be in effect which prohibits, restricts or enjoins, and no suit, action or proceeding shall be pending or threatened which seeks to prohibit, restrict, enjoin, nullify, seek material damages with respect to or otherwise materially adversely affect, the consummation of the Transactions. (ii) The applicable waiting period under the HSR Act, including all extensions thereof, shall have expired or been terminated. (iii) The applicable waiting period under the EU regulations, including all extensions thereof, shall have expired or been terminated. (iv) The applicable waiting period under French, Canadian, Spanish and Italian laws, if any, including all extensions thereof shall have expired or been terminated. (v) Except for such changes as may occur in the ordinary course of business or as may be permitted or required pursuant to the terms hereof, the representations and warranties of Stockholders set forth in Articles 3, 4, and 5 hereof shall be true and correct in all material respects on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date. The reference to "in all material respects" in this condition is not intended to broaden the scope of any exception for materiality contained in any specific representation or warranty. (vi) Stockholders shall have performed and complied with all covenants and agreements required to be performed or complied with by Stockholders under this Agreement prior to or concurrently with the Closing in all material respects. The reference to "in all material respects" in this condition is not intended to broaden the scope of any exception for materiality contained in any covenant or agreement. (vii) Buyer shall have received all certificates and other documents, in form and substance reasonably satisfactory to Buyer, required to be delivered to Buyer at or before the Closing pursuant to this Agreement duly executed by all necessary persons (other than Buyer). (viii) Buyer shall have received the stock certificates described in Article 1.4(a)(vii) hereof in accordance with the terms of Article 1.4(a)(vii) hereof. (ix) Buyer shall have received the resignation of directors described in Article 1.4(a)(viii) hereof. (x) Stockholders and UCAR shall have obtained the Required Consents. (xi) Chemical Bank, on behalf of the Lenders, shall not have declined to consummate the Borrowings as a result of (i) "any material disruption of, or material adverse change in, the financial, banking or capital markets" or (ii) "any material adverse change in the assets, business, properties, financial condition or results of operations of UCAR and the Subsidiaries". ARTICLE 8 - STOCKHOLDERS' AND UCAR'S CONDITIONS TO CLOSING The obligations of Stockholders and UCAR to consummate the Transactions are, unless waived by Stockholders, subject to the fulfillment, at or before the Closing, of each of the following conditions: (i) No statute or law, no rule or regulation of a governmental agency, authority or instrumentality of competent jurisdiction and no injunction or restraining order of a court of competent jurisdiction shall be in effect which prohibits, restricts or enjoins, and no suit, action or proceeding shall be pending or threatened which seeks to prohibit, restrict, enjoin, nullify, seek material damages with respect to or otherwise materially adversely affect, the consummation of the Transactions. (ii) The applicable waiting period under the HSR Act, including all extensions thereof, shall have expired or been terminated. (iii) The applicable waiting period under the EU regulations, including all extensions thereof, shall have expired or been terminated. (iv) The applicable waiting period under French, Canadian, Spanish and Italian laws, if any, including all extensions thereof shall have expired or been terminated. (v) Except for such changes as may occur in the ordinary course of business or as may be permitted or required pursuant to the terms hereof, the representations and warranties of Buyer set forth in Article 2 hereof shall be true and correct in all material respects on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date. The reference to "in all material respects" in this condition is not intended to broaden the scope of any exception for materiality contained in any specific representation or warranty. (vi) Buyer shall have performed and complied with all covenants and agreements required to be performed or complied with by Buyer under this Agreement prior to or concurrently with the Closing in all material respects. The reference to "in all material respects" in this condition is not intended to broaden the scope of any exception for materiality contained in any covenant or agreement. (vii) Stockholders and UCAR shall have received all certificates and other documents, in form and substance reasonably satisfactory to Stockholders, required to be delivered to Stockholders and UCAR at or before the Closing pursuant to this Agreement duly executed by all necessary persons (other than Stockholders and UCAR). (viii) UCAR shall have received the Purchase Price, Mitsubishi's shares of Class A Common Stock shall have been redeemed by UCAR and cancelled, and Union Carbide shall have received the Dividend in accordance with Article 1.3 hereof. (ix) Stockholders and UCAR shall have obtained the Required Consents. (x) The Board of Directors of UCAR shall have received a report, in form and substance, and from a Person, satisfactory to it in the reasonable exercise of its judgment, demonstrating that the surplus of UCAR for purposes of the Delaware General Corporation Law is sufficient to pay the Recapitalization Amount. (xi) UCAR shall have delivered to Mitsubishi the certificate described in Treasury Regulation section 1.897-2(h) under the Code with respect to the Redemption. ARTICLE 9 - EFFECTIVENESS; TERMINATION; SURVIVAL OF AGREEMENT 9.1 Effectiveness. This Agreement shall become effective upon the approval hereof by the Board of Directors of Mitsubishi. 9.2 Termination. Notwithstanding anything contained herein to the contrary, this Agreement may be terminated: (i) at the Closing or at any time prior thereto, by mutual written agreement of Stockholders and Buyer; (ii) at any time after March 31, 1995 (the "Termination Date") and prior to the Closing, by Buyer, if (A) the Closing shall not have been consummated on or before the Termination Date and (B) the failure to consummate the Closing on or before the Termination Date did not result from the failure by Buyer to perform or comply with any covenant or agreement contained in this Agreement required to be performed or complied with prior to the Closing by Buyer; or (iii) at any time after the Termination Date and prior to the Closing, by Union Carbide or Mitsubishi, if (A) the Closing shall not have been consummated on or before the Termination Date and (B) the failure to consummate the Closing on or before the Termination Date did not result from the failure by Union Carbide or Mitsubishi to perform or comply with any covenant or agreement contained in this Agreement required to be performed or complied with prior to the Closing by Union Carbide or Mitsubishi. If this Agreement so terminates, it shall become null and void and have no further force or effect, except as provided in Article 9.3 hereof. 9.3 Survival after Termination. If this Agreement is terminated in accordance with Article 9.2 hereof and the Transactions are not consummated, this Agreement shall become null and void and of no further force and effect, except for the provisions of Articles 6.1(b), 13, 14, 15, 16, 17, 18 and 22; provided, however, that none of the Parties shall have any liability in respect of a termination of this Agreement. ARTICLE 10 - TAX MATTERS; POST-CLOSING COVENANTS 10.1 Transactional Taxes and Costs. (a) Stockholders shall be responsible for all sales, transfer, conveyance, gains, stamp, value added or gross income taxes (other than gross income taxes based on revenue or income of UCAR or Buyer) or other taxes, duties, excises or governmental charges, fees, imposts or assessments, and any interest or penalties thereon, imposed by any taxing jurisdiction (the foregoing are hereinafter referred to as "Transactional Taxes") with respect to the Acquisition, the Dividend or the Redemption, to the extent that such Transactional Taxes would have been due if the Acquisition, the Dividend and the Redemption had been structured as a sale of 75% of the Capital Stock owned by each of the Stockholders (the "Stockholder Transactional Taxes"). UCAR shall be responsible for all Transactional Taxes relating to the Transactions other than the Stockholder Transactional Taxes. Each Party shall provide the other Parties with appropriate exemption certificates or direct pay certificates where possible, or shall promptly pay and discharge any Transactional Taxes for which such Party is responsible pursuant to the first two sentences of this Article 10.1(a). The foregoing notwithstanding, in the event any Party shall be required to pay any Transactional Taxes for which any other Party is responsible pursuant to the first two sentences of this Article 10.1(a), such other Party shall promptly reimburse such Party and hold such Party harmless from any Transactional Taxes paid by such Party on behalf of such other Party. In the event any taxing jurisdiction subsequently determines that any additional Transactional Taxes (including interest or penalties thereon) are due, the Party responsible for such Transactional Taxes pursuant to the first two sentences of this Article 10.1(a) shall hold any other Party harmless therefrom. (b) Notwithstanding anything to the contrary contained in this Agreement, Union Carbide's assumption of "Assumed UCAR Tax Liabilities" pursuant to Section 9.2 of the Stock Purchase and Sale Agreement, dated November 9, 1990, among Mitsubishi, Union Carbide, and UCAR Carbon Company, Inc. shall continue in effect pursuant to its terms. (c) Buyer will be responsible for and shall hold Stockholders harmless from any Tax arising from any election by Buyer under Section 338 of the Internal Revenue Code. (d) UCAR shall be responsible for all recording fees and notarial fees arising out of the sale of the Acquired Shares or otherwise on account of this Agreement or the Transactions. UCAR shall promptly pay and discharge such fees and shall promptly reimburse Buyer for any amounts Buyer may have expended on such fees. 10.2 Records Retained by Stockholders. (a) Except as otherwise provided in Articles 10.2(b), 10.2(c) and 10.2(d) hereof or in any other agreement to which UCAR or any of the Subsidiaries and Stockholders or any of their respective subsidiaries are parties which are in each case shown on Schedule IV, Stockholders shall deliver or cause to be delivered to UCAR or the Subsidiaries within sixty (60) days after the Closing, all books, records and files which pertain to the Business as conducted by UCAR and the Subsidiaries, UCAR, any Subsidiary or any of the properties owned, leased or used by UCAR or any Subsidiary, to the extent such books and records relate solely to the Business and do not contain any information pertaining to the Stockholders or Stockholders' Affiliates (other than UCAR and the Subsidiaries) and which are possessed by Stockholders, or their respective subsidiaries or their respective directors, officers, employees, agents, representatives or nominees (the "Business Records"). (b) All Business Records which are (i) required by Stockholders or their subsidiaries or their respective directors, officers, employees, agents, representatives or nominees in connection with any pending or threatened claim, suit, action, proceeding or investigation or termination or (ii) subject to any "Hold Order" issued pursuant to the Records Retention and Protection Manual of Union Carbide (a complete and accurate copy of which has been made available to Buyer) shall be retained by Stockholders or such subsidiary, director, officer, employee, agent, representative or nominee until the final termination of such claim, suit, action, proceeding or investigation or termination of such "Hold Order" as the case may be. Prior to such termination, copies of such Business Records shall be delivered to UCAR or the Subsidiaries. After such final termination, such Business Records shall be delivered to UCAR or the Subsidiaries. (c) Nothing contained herein shall obligate or require Stockholders to deliver or cause to be delivered to UCAR or the Subsidiaries any Business Records which pertain to the Transactions and the photocopies of Business Records contained in the data room for the Transactions. (d) All Business Records which contain information relating to Stockholders or any of their respective subsidiaries or Affiliates shall be retained by Stockholders or such subsidiary or Affiliate and copies of such Business Records (from which such information shall have been deleted) shall be delivered to UCAR or the Subsidiaries. 10.3 Access by Stockholders. At any time and from time to time after the Closing, upon reasonable request by Stockholders, UCAR shall, and shall cause the Subsidiaries to, (i) provide full access, during normal business hours, to Stockholders and their respective subsidiaries and the officers, employees, other representatives and counsel of Stockholders and their respective subsidiaries to the facilities, books, records, files, paper, data and information relating to UCAR, any Subsidiary or any of the properties owned, leased or used by UCAR or any Subsidiary and (ii) make their employees available to Stockholders and their respective subsidiaries and the officers, employees, other representatives and counsel of Stockholders and their respective subsidiaries, in each case to the extent reasonably necessary and within a reasonable time period in connection with any tax, pension or employee benefit matter pertaining to Stockholders or any of their respective subsidiaries or any Taxes for which Stockholders are responsible under this Agreement, at no charge to Stockholders or such subsidiaries, officers, employees, other representatives or counsel; provided, however, that Stockholders shall reimburse UCAR and the Subsidiaries for travel, lodging, meal and other expenses directly and reasonably incurred by such employees in connection with such request. 10.4 Preservation of Records. After the Closing, UCAR shall, and shall cause the Subsidiaries to, preserve all books, records, files, papers, data and information which is possessed by it or them and which relates to UCAR or the Subsidiaries for (i) a period of seven (7) years after the Closing and (ii) for such longer period as may be required (A) by an agreement, law, ordinance, rule, regulation or any order, writ, judgment, stipulation, edict, award or decree known to UCAR or any of the Subsidiaries or (B) in connection with any pending or threatened claim, suit, action, proceeding or investigation (including, without limitation, tax examinations and audits) known to UCAR or any of the Subsidiaries. If, upon the expiration of such period, UCAR or any Subsidiary desires to destroy any of such books, records, files, papers, data or information, UCAR shall, or shall cause such Subsidiary to, give written notice to that effect to Stockholders not more than one hundred eighty (180) and not less than ninety (90) days prior to such destruction. Stockholders shall have the right, at their respective cost and expense, to take possession of such books, records, files, papers, data or information; provided, that Stockholders give written notice to that effect to UCAR within ninety (90) days after such notice shall have been given and takes such possession within one hundred eighty (180) days thereafter. UCAR shall, and shall cause the Subsidiaries to, cooperate with Stockholders in connection with taking such possession. 10.5 Agreement Not To Compete. (a) Neither Union Carbide nor Mitsubishi shall, or shall permit its Controlled Affiliates (as defined below) to, directly or indirectly develop, manufacture, service, market, sell or otherwise distribute Certain Products (as defined below) in the UCAR Home Markets (as defined below) at any time after the Closing Date until the Release Date (as defined below). (b) Notwithstanding the foregoing, Mitsubishi and Union Carbide and their respective Controlled Affiliates may sell or otherwise distribute Certain Products in the UCAR Home Markets if appointed by UCAR or a Subsidiary as a distributor or other agent of UCAR or a Subsidiary, on such terms and conditions as are mutually agreed between the respective parties thereto; provided, however, that such terms and conditions shall include the right of any party to such distributorship or other agency to terminate at any time. (c) Except as otherwise provided in this Article 10.5, Union Carbide and Mitsubishi and their respective Affiliates shall have the right to (1) engage in any and all businesses and activities of any kind whatsoever, (2) use, lease and own any and all assets, rights and properties of any kind whatsoever, however used, leased or owned and wherever used, leased or owned, and (3) receive compensation or profit therefrom for its or their own account and without in any manner being obligated to disclose or offer such businesses, activities, assets, rights, properties, compensation or profit to the other Parties or their Affiliates. (d) Nothing contained herein shall be deemed or construed to restrict, limit or otherwise reduce the right of UCAR and its Controlled Affiliates to engage in the Business anywhere in the world at any time. (e) Each of the Parties agrees that any breach of this Article 10.5 by a Party would cause irreparable damage to the other Parties and that, in the event of such breach, the other Parties and their Affiliates shall have, in addition to any and all other rights and remedies, the right to an injunction, an order of specific performance or other equitable relief to prevent or redress such breach. (f) For purposes of this Article 10.5: (i) "Certain Products" shall mean carbon or graphite electrodes, carbon or graphite blocks (other than NDK Blocks) (as defined below), flexible graphite, graphite specialties (other than isotropic graphite), graphite anode and calcined coal. (ii) "Controlled Affiliate" shall mean, with respect to any Person, any other Person which, directly or indirectly, is controlled by such Person; provided, however, that neither UCAR nor any of the Controlled Affiliates of UCAR shall be deemed to be a "Controlled Affiliate" of Union Carbide or Mitsubishi for the purposes hereof. (iii) "NDK Blocks" shall mean carbon or graphite blocks used as lining for furnaces, of substantially the size and type presently manufactured by Nippon Electrode Co., Ltd., a Japanese corporation. (iv) "UCAR Home Markets" shall mean Austria, Belgium, Brazil, Canada, Denmark, Switzerland, France, Germany (including the territory formerly known as East Germany), Greece, Iceland, Ireland, Italy, Luxembourg, Mexico, the Netherlands, Norway, Portugal, South Africa, Spain, Sweden, the United Kingdom, and the United States. (v) "Release Date" shall mean (A) with respect to Mitsubishi, the date that is four (4) years after the Closing Date, and (B) with respect to Union Carbide, the date that is two (2) years after the date upon which Union Carbide is no longer represented on the UCAR Board of Directors, shall beneficially own less than ten percent (10%) of the issued and outstanding Capital Stock, and shall have no contractual right (or shall have permanently waived any contractual right) to recommend, nominate or have, or require to be, elected any Director of UCAR, which shall in no event be a date that is less than four (4) years after the Closing Date. ARTICLE 11 - EMPLOYEES AND BENEFITS At the Closing, Buyer shall cause UCAR to continue to employ the employees listed in Schedule X attached hereto (collectively, the "Employee(s)") (i) in equivalent or greater positions, (ii) at the same or greater wage rates, and (iii) with benefit plans, compensation policies and practices which in the aggregate are substantially equivalent to the Benefit Plans set forth on Schedule XI attached hereto (the "Benefits"). Buyer agrees to maintain the Benefits for at least two (2) years from and after the Closing Date. Buyer shall accept and credit to all Employees all previous service recognized by the UCAR Retirement Plan ("UCAR Pension Plan") and Union Carbide benefit plans and compensation practices under all of Buyer's benefit plans, compensation policies and practices where such service is applicable. (a) United States and Canada. In the event any salaried Employee in the United States or Canada is terminated involuntarily by Buyer or UCAR (other than for cause) within one year of the Closing Date, in lieu of the regular layoff allowance, such Employee will be provided those severance benefits listed in Schedule XI for which such employee is eligible in addition to any other benefits (other than the regular layoff allowance) to which such Employee is entitled. The following provisions shall pertain to the UCAR Pension Plan and the UCAR Carbon Savings Plan ("UCAR Savings Plan") (collectively, the "UCAR Plans"). (1) Pension Plan. Buyer shall cause UCAR to continue to maintain the UCAR Pension Plan for at least two (2) years from and after the Closing Date. The UCAR Pension Plan shall continue to recognize service and earnings recognized under the Retirement Program Plan for Employees of Union Carbide Corporation and its Participating Subsidiary Companies ("UCC Plan") prior to February 25, 1991. No transfer of assets from the UCC Plan to the UCAR Pension Plan shall be made with respect to any Employee. Upon each Employee's retirement from UCAR, the UCC Plan shall provide to such Employee the benefits to which such Employee is entitled under the UCC Plan as of the Closing Date, based on earnings and service with UCAR prior to the Closing Date, but only to the extent any obligation to recognize such service and earnings exists prior to the Closing Date. UCAR may reduce any benefit payable to such Employee under the UCAR Pension Plan by the amount paid to such Employee under the Union Carbide Plan. Union Carbide shall have the right to suspend payment of benefits under the UCC Plan to any Employee, or to any person who was an employee of Union Carbide at any time during the twelve (12) month period immediately preceding February 25, 1991 ("Former Employees"), for any period during which such Employee or Former Employee is or was either an employee of UCAR or, unless otherwise agreed to in writing by Union Carbide, an independent contractor or consultant performing duties for UCAR on a substantially full-time basis. UCAR or Buyer shall notify Union Carbide within ten (10) days of employment, as employee, independent contractor or consultant, of any person who was a Former Employee, or re-employment of any Employee whose employment with UCAR terminates after the Closing Date. (2) For purposes of Buyer's and UCAR's obligations with respect to Employees under this Article 11, former Employees shall be deemed to be Employees as of the first date of employment with UCAR. (3) Buyer shall continue to maintain the UCAR Savings Plan for at least two (2) years from and after the Closing Date. (b) International. Schedule XVII attached hereto sets forth the international benefit plans, compensation policies and practices provided to Employees of UCAR and certain Foreign Subsidiaries (collectively, the "International Plans"). Buyer agrees to cause UCAR to maintain benefit plans, compensation policies and practices which in the aggregate are substantially equivalent to the International Plans for at least two (2) years from and after the Closing Date. ARTICLE 12 - SURVIVAL OF REPRESENTATIONS INDEMNIFICATION 12.1 Survival of Representations and Covenants of Buyer. The representations and warranties set forth in Article 2 hereof shall survive the execution, delivery and performance of this Agreement and the consummation of the Transactions for a period of eighteen (18) months following the Closing Date. Except as otherwise provided in the next sentence, the covenants and agreements of Buyer set forth in this Agreement shall survive such execution, delivery, performance and consummation for a period of eighteen (18) months following the Closing Date. Each covenant and agreement of Buyer set forth in this Agreement which, by its terms, is not required to be fully performed or complied with prior to the Closing shall survive such execution, delivery, performance and consummation for a period of eighteen (18) months following the date by which such covenant or agreement is so required to be fully performed or complied with. No suit, action or proceeding may be commenced by Stockholders or UCAR with respect to any claim arising out of or relating to such warranties, representations, covenants or agreements after the expiration of the period for which such representations, warranties, covenants and agreements shall survive pursuant to this Article 12.1 (the "Applicable Buyer Survival Period"); provided, however, that subject to this Article 12 and Article 22 hereof, Stockholders and UCAR shall have the right to commence a suit, action or proceeding after the expiration of the Applicable Buyer Survival Period with respect to claims arising out of or relating to such representations, warranties, covenants or agreements which shall have been asserted by Stockholders or UCAR under Article 12.7 hereof before the expiration of the Applicable Buyer Survival Period. 12.2 Survival of Representations and Covenants of Union Carbide. The representations and warranties set forth in Articles 3 and 5 hereof shall survive the execution, delivery and performance of this Agreement and the consummation of the Transactions for a period of eighteen (18) months following the Closing Date, except (i) in the case of representations and warranties set forth in Article 5.9 as to which the period shall be three years following the Closing Date and (ii) for the indemnity set forth in Article 12.5(a)(iii) as to which the period shall be ten years following the Closing Date. Except as otherwise provided in the next sentence, the covenants and agreements of Union Carbide set forth in this Agreement shall survive such execution, delivery, performance and consummation for a period of eighteen (18) months following the Closing Date. Each covenant and agreement of Union Carbide set forth in this Agreement which, by its terms, is not required to be fully performed or complied with prior to the Closing shall survive such execution, delivery, performance and consummation for a period of eighteen (18) months following the date by which such covenant or agreement is so required to be fully performed or complied with. No suit, action or proceeding may be commenced by Buyer with respect to any claim arising out of or relating to such warranties, representations, covenants or agreements after the expiration of the period for which such representations, warranties, covenants and agreements shall survive pursuant to this Article 12.2 (the "Applicable UCC Survival Period"); provided, however, that, subject to this Article 12 and Article 22 hereof, Buyer shall have the right to commence a suit, action or proceeding after the expiration of the Applicable UCC Survival Period with respect to claims arising out of or relating to such representations, warranties, covenants and agreements which shall have been asserted by Buyer under Article 12.7 hereof before the expiration of the Applicable UCC Survival Period. 12.3 Survival of Representations and Covenants of Mitsubishi. The representations and warranties set forth in Articles 4 and 5 hereof shall survive the execution, delivery and performance of this Agreement and the consummation of the Transactions for a period of eighteen (18) months following the Closing Date, except (i) in the case of representations and warranties set forth in Article 5.9 as to which the period shall be three years following the Closing Date and (ii) for the indemnity set forth in Article 12.5(a)(iii) as to which the period shall be ten years following the Closing Date. Except as otherwise provided in the next sentence, the covenants and agreements of Mitsubishi set forth in this Agreement shall survive such execution, delivery, performance and consummation for a period of eighteen (18) months following the Closing Date. Each covenant and agreement of Mitsubishi set forth in this Agreement which, by its terms, is not required to be fully performed or complied with prior to the Closing shall survive such execution, delivery, performance and consummation for a period of eighteen (18) months following the date by which such covenant or agreement is so required to be fully performed or complied with. No suit, action or proceeding may be commenced by Buyer with respect to any claim arising out of or relating to such warranties, representations, covenants or agreements after the expiration of the period for which such representations, warranties, covenants and agreements shall survive pursuant to this Article 12.3 (the "Applicable MC Survival Period"); provided, however, that, subject to this Article 12 and Article 22 hereof, Buyer, shall have the right to commence a suit, action or proceeding after the expiration of the Applicable MC Survival Period with respect to claims arising out of or relating to such representations, warranties, covenants and agreements which shall have been asserted by Buyer under Article 12.7 hereof before the expiration of the Applicable MC Survival Period. 12.4 Indemnification by Buyer. Subject to Articles 12.1, 12.7 and 22 hereof, Buyer shall indemnify Stockholders and their respective directors, officers, employees, affiliates, successors and assigns ("Stockholders' Indemnitees") for, and shall hold, Stockholders' Indemnitees harmless from and against, any and all damages, claims, losses, liabilities and expenses (including, without limitation, interest, penalties and reasonable legal, accounting and other expenses) asserted against or incurred or sustained by Stockholders' Indemnitees arising out of: (i) any breach of any covenant or agreement contained in Article 6,10 or 11 hereof by Buyer; or (ii) any breach of any of the warranties or representations set forth in Article 2 hereof. 12.5 Indemnification by Stockholders. (a) Subject to Articles 12.2, 12.3, 12.5(d), 12.5(e), 12.7 and 22, Stockholders shall indemnify UCAR (to the extent set forth below), Buyer, and Buyer's directors, officers, employees, affiliates, successors and assigns (to the extent set forth below) (collectively "Buyer's Indemnitees") for, and shall hold Buyer's Indemnitees harmless from and against, any and all damages, claims, losses, liabilities and expenses (including, without limitation, interest, penalties and reasonable legal, accounting and other expenses) asserted against or incurred or sustained by Buyer's Indemnitees arising out of: (i) any breach of any covenant or agreement contained in Article 6 or 10 hereof by Stockholders (to the extent such breach is not attributable to any action, delay in acting or failure to act after the Closing by Buyer, UCAR or their respective subsidiaries or Affiliates); (ii) any breach of any of the warranties or representations set forth in Article 5 hereof; or (iii) any liabilities for personal injury or property damage alleged to arise out of emissions from UCAR's facility in Yabucoa, Puerto Rico. (b) Subject to Articles 12.2, 12.3, 12.5(d), 12.5(e), 12.7 and 22 hereof Union Carbide shall indemnify Buyer's Indemnitees for and shall hold Buyer's Indemnitees harmless from and against, any and all damages, claims, losses, liabilities and expenses (including, without limitation, interest, penalties and reasonable legal, accounting and other expenses) asserted against or incurred or sustained by Buyer's Indemnitees arising out of any breach of any of the warranties or representations set forth in Article 3 hereof. (c) Subject to Articles 12.2, 12.3, 12.5(d), 12.5(e), 12.7 and 22 hereof Mitsubishi shall indemnify Buyer's Indemnitees for and shall hold Buyer's Indemnitees harmless from and against, any and all damages, claims, losses, liabilities and expenses (including, without limitation, interest, penalties and reasonable legal, accounting and other expenses) asserted against or incurred or sustained by Buyer's Indemnitees arising out of any breach of any of the warranties or representations set forth in Article 4 hereof. (d) Buyer's Indemnitees shall be entitled to indemnification (i) under Article 12.5(a)(i) or (ii) with respect to Taxes imposed on or measured by net income of UCAR or any Subsidiary thereof ("Income Taxes") only when, and only with respect to amounts by which, the aggregate amount of all claims, damages, losses, liabilities and expenses for Income Taxes with respect to which Buyer's Indemnitees would otherwise be entitled to indemnification under Article 12.5(a)(i) or (ii) hereof with respect to Income Taxes exceeds Ten Million U.S. Dollars ($10,000,000); (ii) under Article 12.5(a)(iii) hereof only when, and only with respect to amounts by which, the aggregate amount of all claims, damages, losses, liabilities and expenses with respect to which Buyer's Indemnitees would otherwise be entitled to indemnification under Article 12.5(a)(iii) hereof exceeds Twenty Million U.S. Dollars ($20,000,000); and (iii) under Articles 12.5(a)(i) or (ii), (b) or (c) hereof with respect to items other than Income Taxes only when, and only with respect to amounts by which, the aggregate amount of all claims, damages, losses, liabilities and expenses with respect to which Buyer's Indemnitees would otherwise be entitled to indemnification under Articles 12.5(a)(i) or (ii), (b) and (c) hereof, with respect to items other than Income Taxes, exceeds Ten Million U.S. Dollars ($10,000,000). In no event shall the aggregate amount of indemnification to which Buyer's Indemnitees would otherwise be entitled under Articles 12.5(a)(i), (a)(ii), (b) and (c) hereof, with respect to items other than Income Taxes, hereof exceed Fifty Million U.S. Dollars ($50,000,000). The limitations contained in this Article 12.5(d) shall not apply to indemnities relating to Articles 10.1(a) or 10.1(b). (e) If any event shall occur or circumstance shall exist which would otherwise entitle Buyer's Indemnitees to indemnification under Articles 12.5(a), (b) or (c) hereof, no loss, damage, claim, liability or expense shall be deemed to have been asserted against or incurred or sustained by Buyer's Indemnitees to the extent of any proceeds recovered or recoverable by Buyer, UCAR or any of their respective subsidiaries or Affiliates from any third party (including, without limitation, any insurance company) with respect thereto. Buyer agrees (i) in good faith, to diligently seek recovery, and to cause UCAR, Buyer and their respective subsidiaries and Affiliates to diligently seek to recover, at its and their cost and expense, from all third parties (including, without limitation, all insurance companies) with respect to all losses, claims, damages, liabilities and expenses with respect to which Buyer's Indemnitees make or may make a claim for indemnification hereunder and (ii) to keep Stockholders fully and promptly informed of all material matters related thereto. No insurance recovery by UCAR or any of its Subsidiaries will reduce the limits on indemnification specified in Article 12.5(d); provided, that in no way shall the foregoing be construed to apply to any payment by a Stockholder under Article 12.5, including payments by a Stockholder using the proceeds from an insurance policy held by either of them or their Affiliates. (f) Payments pursuant to this Article 12.5 arising out of any breach of any warranties or representations set forth in Article 5 hereof or any covenants or agreements under this Agreement relating to UCAR or any of its Subsidiaries shall be made to UCAR. Other payments pursuant to this Article 12.5 shall be made as Buyer shall direct. (g) The indemnities provided by Stockholders under this Article 12.5 with respect to Taxes shall not be diminished as a result of any additional disclosure provided pursuant to Article 6.6 hereof after November 23, 1994. (h) Notwithstanding anything to the contrary set forth in this Agreement, if any Taxes are required to be withheld (other than withholding Taxes under section 1445 of the Code), but are not withheld, from a payment made to a Stockholder pursuant to this Agreement, such Stockholder shall indemnify UCAR or Buyer and shall hold UCAR or Buyer harmless from and against, any and all damages, claims, losses, liabilities and expenses (including without limitation, interest, penalties and reasonable legal, accounting and other expenses) asserted against or sustained by UCAR or Buyer as a result of UCAR or Buyer failing to withhold any Taxes required to be withheld. If UCAR fails to withhold with respect to the Redemption pursuant to section 1445 of the Code and the IRS later asserts a claim against Buyer or UCAR with respect to such failure to withhold, Mitsubishi shall indemnify Buyer or UCAR, as the case may be, for any Taxes or interest thereon (and associated legal, accounting and other expenses), but not for any penalties, additions to Tax or interest thereon (and associated legal, accounting and other expenses). 12.6 Indemnification by UCAR. (a) As used herein, the term "Stockholders Group" shall mean Mitsubishi, Union Carbide, their respective subsidiaries, the shareholders, partners, directors, officers, employees, agents, representatives and consultants of Mitsubishi, Union Carbide and their respective subsidiaries and the successors, transferees and assigns of Mitsubishi, Union Carbide, their respective subsidiaries and the shareholders, partners, directors, officers, employees, agents, representatives and consultants of Mitsubishi, Union Carbide and their respective subsidiaries. (b) Except as otherwise provided in Article 12.6(c) hereof, after the Closing, UCAR shall, or shall cause its subsidiaries to, indemnify the Stockholders Group for, and shall hold, or shall cause its subsidiaries to hold, the Stockholders Group harmless from, any and all claims, demands, allegations, suits, actions, proceedings, investigations, liabilities, obligations, losses, expenses, expenditures, costs, duties, fines, fees, taxes, levies, imposts, charges, assessments, deficiencies, penalties, damages, settlements and judgments of any kind or nature whatsoever asserted against or incurred or sustained by any or all of the members of the Stockholders Group arising out of, related to or associated with UCAR, its subsidiaries or Affiliates or the conduct of the Business, regardless of whether they are reflected in any of the Schedules attached hereto, regardless of whether they arise out of, relate to or are associated with events occurring or circumstances existing before or after the Closing, regardless of whether they are asserted, incurred or sustained before or after the Closing, regardless of when they became fixed or known, regardless of whom they are asserted by or against, regardless of where they are asserted, incurred or sustained, and regardless of whether they arise out of, relate to or are associated with health, safety, the environment, personal injury, contracts, property damage, employment, negligence, recklessness, violation of law, rule or regulation, misrepresentation, strict liability or product liability (collectively, the "Business Liabilities"). (c) Notwithstanding anything contained in Article 12.6(b) hereof, any now existing contracts, agreements or commitments or any agreement contemplated hereby to the contrary, Stockholders agree that UCAR shall not be obligated to indemnify or cause its or their respective subsidiaries or Affiliates to indemnify any member of the Stockholder Group for, or to hold or cause its subsidiaries or Affiliates to hold them harmless from, any of the Business Liabilities under Article 12.6(b) hereof (i) where indemnification in respect of the same Business Liabilities would deprive Buyer or UCAR of the benefit of indemnification to which it is entitled pursuant to Articles 12.5 (a), (b) and (c) hereof or (ii) where such Business Liabilities arise out of a breach by any of them of any contract, agreement or commitment entered into by any of them with UCAR or any of its subsidiaries or Affiliates after the date hereof. 12.7 Indemnification Procedure. (a) Upon obtaining knowledge thereof, a Person who may be entitled to indemnification hereunder (the "Indemnitee") shall promptly give the Party who may be obligated to provide such indemnification (the "Indemnitor") written notice of any Loss (as defined in Article 12.7(b) hereof) which the Indemnitee has determined has given or could give rise to a claim for indemnification hereunder (a "Notice of Claim"). A Notice of Claim shall specify in reasonable detail the nature and all known particulars related to a Loss. The Indemnitor shall perform its indemnification obligations in respect of a Loss described in a Notice of Claim under Articles 12.4, 12.5, or 12.6 hereof, as the case may be, within thirty (30) days after the Indemnitor shall have received such Notice of Claim; provided, however, such obligation shall be suspended (i) so long as the Indemnitor is in good faith performing its obligations under Article 12.7(c) hereof with respect to such Loss and (ii) in the case of a Notice of Claim given by Buyer's Indemnitees, until Buyer's Indemnitees shall have fully performed their respective obligations under Article 12.5(c) hereof with respect to a Loss for which Buyer's Indemnitees may be entitled to recovery from a third party (including, without limitation, any insurance company). (b) As used in this Article 12.7, the term "Loss" shall mean a damage, claim, suit, notice, loss, liability, expense, cost, tax, penalty or interest described in Articles 12.4, 12.5(a), 12.5(b) and 12.5(c), and one of the Business Liabilities or a fee, commission, compensation or payment described in Article 15.1 hereof, as the case may be. (c) Subject to Articles 12.7(d), 12.7(e) and 12.7(f) hereof, the Indemnitor shall have the sole and exclusive right and obligation in good faith and at its own cost and expense, to cure, remediate, mitigate, remedy or otherwise handle any event or circumstance which gives rise to a Loss (including events and circumstances which can be cured, remediated, mitigated or remedied through the expenditure of money and events and circumstances which give rise to a Loss which can be measured in terms of money), regardless of whether such Loss arises out of a breach of or default under any representation, warranty, covenant or agreement contained in this Agreement or otherwise. Such right and obligation shall include, without limitation, (i) the right to investigate any such event or circumstance, (ii) the sole and exclusive right and obligation to cure, mitigate, remediate, remedy and otherwise handle any such event or circumstance on such terms and conditions and by such means as the Indemnitor may determine, in its sole discretion, and (iii) the sole and exclusive right to defend, contest or otherwise oppose any third party claim, demand, suit, action or proceeding related to such event or circumstance with legal counsel selected by it. The Indemnitor shall promptly inform the Indemnitee of all material developments related to any such event or circumstance. Notwithstanding anything contained herein (other than Articles 12.7(d), 12.7(e) and 12.7(f), hereof) to the contrary, the Indemnitee shall have the right, but not the obligation, to participate, at its own cost and expense, in the defense, contest or other opposition of any such third party claim, demand, suit, action or proceeding through legal counsel selected by it and shall have the right, but not the obligation, to assert any and all cross-claims or counterclaims which it may have. So long as the Indemnitor is in good faith performing its obligations under this Article 12.7(c), the Indemnitee shall, and shall cause its subsidiaries to, (i) at all times, at its and their own cost and expense, cooperate in all reasonable ways with, make its and their relevant files and records available for inspection and copying by, make its and their employees reasonably available to and otherwise render reasonable assistance to the Indemnitor upon request and (ii) not compromise or settle any such claim, demand, suit, action or proceeding without the prior written consent of the Indemnitor. If the Indemnitor fails to perform its obligations under this Article 12.7(c), the Indemnitee shall have the right, but not the obligation, to take the actions which the Indemnitor would have had the right to take in connection with the performance of such obligations and, if the Indemnitee is entitled to indemnification hereunder in respect of the event or circumstance as to which the Indemnitee takes such actions, then the Indemnitor shall also indemnify the Indemnitee for all of the legal, accounting and other costs, fees and expenses reasonably and actually incurred in connection therewith. If the Indemnitor proposes to settle or compromise any such third party action, demand, claim, suit or proceeding, the Indemnitor shall give written notice to that effect (together with a statement in reasonable detail of the terms and conditions of such settlement or compromise) to the Indemnitee a reasonable time prior to effecting such settlement or compromise. Notwithstanding anything contained herein (other than Article 12.7(d) hereof) to the contrary, the Indemnitee shall have the right (i) to object to the settlement or compromise of any such third party action, demand, claim, suit or proceeding whereupon (A) the Indemnitee will assume the defense, contest or other opposition of any such third party action, demand, claim, suit or proceeding for its own account and as if it were the Indemnitor and (B) the Indemnitor shall be released from any and all liability with respect to any such third party action, demand, claim, suit or proceeding to the extent that such liability exceeds the liability which the Indemnitor would have had in respect of such a settlement or compromise; provided, however, that the Indemnitor shall not be so released if the reason for the Indemnitee's so objecting is that, in the reasonable opinion of the Indemnitee, such settlement or compromise would have a materially adverse effect on the conduct of the Business by UCAR and the Subsidiaries as presently conducted or upon the Indemnitee, or (ii) to assume, at any time by giving written notice to that effect to the Indemnitor, the cure, mitigation, remediation, remedy or other handling of such event or circumstance and the defense, contest or other opposition of any such third party action, demand, claim, suit or proceeding for its own account whereupon the Indemnitor shall be released from any and all liability with respect to such event or circumstance and such third party action, demand, claim, suit or proceeding. (d) Stockholders shall have the right, at their own cost and expense, to participate in the defense, contest or other opposition of all of the actions, claims, demands, suits or proceedings which involve events occurring or circumstances existing prior to the Closing with respect to the Business or the properties owned, leased or used by UCAR or any of the Subsidiaries and which, in the sole opinion of Stockholders, might have an adverse impact on Stockholders or their respective subsidiaries or Affiliates. Stockholders shall give prompt written notice to Buyer and UCAR of their election to exercise such right. After the Closing, UCAR shall not, and shall not permit the Subsidiaries to, settle or compromise any action, demand, claim, suit or proceeding in respect of which Stockholders shall have given such a notice without the prior written consent of Stockholders. If Stockholders do not consent to such a settlement or compromise, Stockholders will assume the defense, contest or other opposition of such action, demand, claim, suit or proceeding for their own account whereupon UCAR and the Subsidiaries shall be released from any liability with respect to such action, claim, demand, suit or proceeding to the extent that such liability exceeds the liability which UCAR and the Subsidiaries would have had in respect of such a settlement or compromise. Except as otherwise provided in the preceding sentence, neither such right nor the exercise thereof shall be construed to modify, expand or enlarge the obligations or liabilities of Stockholders hereunder in any respect. (e) Each Party shall, and shall cause its subsidiaries to, take all actions which may be necessary to enable the Indemnitor to exercise its rights and perform its obligations under Article 12.7(c) hereof. (f) Notwithstanding anything contained herein to the contrary, each Party shall use, and shall cause its subsidiaries and Affiliates to use, all reasonable efforts to mitigate any and all Losses, in respect of which it may be entitled to indemnification hereunder. ARTICLE 13 - PUBLICITY; CONFIDENTIALITY 13.1 Publicity. No Party shall or shall permit its subsidiaries to issue any publicity, release or announcement concerning the execution and delivery of this Agreement, the provisions hereof or the Transactions without the prior written approval of the form and content of such publicity, release or announcement by the other Parties hereto; provided, however, that no such approval shall be required when such publicity, release or announcement is required by (i) any applicable law, ordinance, rule or regulation, (ii) any applicable rules or regulations of a national or foreign stock exchange or the Automated Quotation System maintained by the National Association of Securities Dealers, Inc. or (iii) any order, writ, judgment, award, edict or decree of any court of competent jurisdiction or any governmental or quasi-governmental agency, authority or instrumentality of competent jurisdiction and, provided further, that, prior to issuing any publicity, release or announcement without such prior written approval, the Party issuing or whose subsidiary is issuing such publicity, release or announcement shall have given reasonable prior notice to the other Parties of such intended issuance and, if requested by any of the other Parties, shall have used reasonable efforts at its own cost and expense to obtain a protective order or similar protection for the benefit of such other Party. 13.2 Confidentiality. (a) All data, reports, records and other information of any kind received by a Party or the Affiliates, subsidiaries, shareholders, directors, partners, officers, employees, agents, representatives, consultants or lenders of a Party (such Party being hereinafter referred to as the "Receiving Party") from one of the other Parties or the Affiliates, subsidiaries, shareholders, partners, directors, officers, employees, agents, representatives, consultants or lenders of one of the other Parties (such other Party being hereinafter referred to as the "Delivering Party") under this Agreement or in connection with the Transactions shall be treated as confidential (collectively, "Confidential Information"). Except as otherwise provided herein, the Receiving Party shall not use (and shall not permit its Affiliates, subsidiaries, shareholders, directors, officers, partners, employees, agents, representatives, consultants or lenders to use) Confidential Information for its own (or their own) benefit and shall use all reasonable efforts (and shall cause its Affiliates, subsidiaries, shareholders, partners, directors, officers, employees, agents, representatives, consultants and lenders to use all reasonable efforts) to maintain the confidentiality of Confidential Information. If the Receiving Party or any of its Affiliates, subsidiaries, shareholders, directors, officers, partners, employees, agents, representatives, consultants or lenders is required to disclose Confidential Information by or to any court of competent jurisdiction or any governmental or quasi-governmental agency, authority or instrumentality of competent jurisdiction, the Receiving Party shall, prior to such disclosure, immediately notify the Delivering Party of such requirement and all particulars related to such requirement. The Delivering Party shall have the right, at its expense, to object to such disclosure and to seek confidential treatment of any Confidential Information to be so disclosed on such terms as it shall determine. (b) The restrictions set forth in Article 13.2(a) hereof shall not apply to the use or disclosure of Confidential Information to the extent, but only to the extent, (i) permitted or required pursuant to any other agreement between or among the Parties (or their respective subsidiaries and Affiliates), (ii) necessary by a Party (or its subsidiaries or Affiliates) in connection with exercising its (or their) rights or performing its (or their) duties or obligations under this Agreement or any other agreements, instruments and documents contemplated hereby or thereby or the other agreements described in clause (i) of this Article 13.2(b), (iii) contemplated by the last two (2) sentences of Article 13.2(a) hereof or (iv) that the Receiving Party can demonstrate Confidential Information (A) is or becomes generally available to the public through no fault or neglect of the Receiving Party, (B) is received in good faith on a non- confidential basis from a third party who discloses such Confidential Information without violating any obligations of secrecy or confidentiality or (C) was already possessed at the time of receipt as shown by prior dated written records. The restrictions set forth in Article 13.2(a) hereof shall not apply to the use or disclosure by UCAR or any of its subsidiaries or Affiliates of Confidential Information which consists of data, reports, records and information relating to the Business or the ownership, leasing or use of the properties owned, leased or used by UCAR or any of its subsidiaries or Affiliates and which is used or disclosed in connection with the conduct of the Business. (c) For the purposes of this Article 13.2, (i) information which is specific shall not be deemed to be within an exception set forth in Article 13.2(b) hereof merely because it is embraced by general information which is within such an exception and (ii) a combination of information shall not be deemed to be within an exception set forth in Article 13.2(b) hereof merely because individual aspects of such combination are within such an exception unless the combination of information itself, its principle of operation and its value or advantages are within such an exception. 13.3 Survival. This Article 13 shall survive the termination of this Agreement for any reason and the consummation of the Transactions. ARTICLE 14 - NOTICES All notices required or permitted to be given pursuant to this Agreement shall be given in writing in the English language, shall be transmitted by personal delivery, by registered or certified mail, return receipt requested, postage prepaid, or by telecopier or other electronic means and shall be addressed as follows: When Mitsubishi is the intended recipient: Mitsubishi Corporation 6-3 Marunouchi 2-chome Chiyoda-ku Tokyo 100-86, Japan Attention: General Manager of the Carbon Division Telecopy No: (81-3) 3210-8357 When Union Carbide is the intended recipient: Union Carbide Corporation Corporate Acquisitions and Divestitures 39 Old Ridgebury Road Danbury, Connecticut 06817 Attention: Mr. Robert F.X. Fusaro Associate General Counsel Telecopy No: (1-203)794-4423 When UCAR is the intended recipient: UCAR International Inc. 39 Old Ridgebury Road Danbury, Connecticut 06817 Attention: President Telecopy No: (1-203) 794-3180 When Buyer is the intended recipient: UCAR International Acquisition Inc. c/o Blackstone Capital Partners II Merchant Banking Fund L.P. 118 North Bedford Road Suite 300 Mount Kisco, New York 10549 Attention: Mr. David Stockman Telecopy: (1-914) 241-3786 A Party may designate a new address to which notices required or permitted to be given pursuant to this Agreement shall thereafter be transmitted by giving written notice to that effect to the other Parties. Each notice transmitted in the manner described in this Article 14 shall be deemed to have been given, received and become effective for all purposes at the time it shall have been (i) delivered to the addressee as indicated by the return receipt (if transmitted by mail), the affidavit of the messenger (if transmitted by personal delivery) or the answer back or call back (if transmitted by telecopier or other electronic means) or (ii) presented for delivery to the addressee as so indicated during normal business hours, if such delivery shall have been refused for any reason. ARTICLE 15 - BROKERAGE FEES; CERTAIN EXPENSES 15.1 Brokerage Fees. Each Party agrees to indemnify the other Parties for, and to hold the other Parties harmless from, any claim or liability for any fee, commission, compensation or other payment by any broker, finder or similar agent who claims to have been, or who was in fact, engaged by or on behalf of it in connection with the Transactions in accordance with the procedure set forth in Article 12.7 hereof. Without limiting the foregoing, Stockholders agree to pay all fees and expenses of Goldman, Sachs & Co. and CS First Boston Corporation relating to the Transactions. 15.2 Certain Expenses. Except as otherwise provided in this Agreement and regardless of whether the Transactions are consummated, each Party agrees to pay all expenses, fees and costs (including, without limitation, legal, accounting and consulting expenses) incurred by it in connection with the Transactions. ARTICLE 16 - GOVERNING LAW; FORUM The validity, interpretation, performance and enforcement of this Agreement shall be governed by the law of the State of New York (without giving effect to the laws, rules or principles of the State of New York regarding conflicts of laws). Each Party agrees that any proceeding arising out of or relating to this Agreement or the breach or threatened breach of this Agreement shall be commenced and prosecuted in a court in the State of New York. Each Party consents and submits to the non-exclusive personal jurisdiction of any court in the State of New York in respect of any such proceeding. Each Party consents to service of process upon it with respect to any such proceeding by registered mail, return receipt requested, and by any other means permitted by applicable laws and rules. Each Party waives any objection that it may now or hereafter have to the laying of venue of any such proceeding in any court in the State of New York and any claim that it may now or hereafter have that any such proceeding in any court in the State of New York has been brought in an inconvenient forum. Each Party waives trial by jury in any such proceeding. ARTICLE 17 - BINDING EFFECT; ASSIGNMENT; THIRD PARTY BENEFICIARIES This Agreement shall be binding upon the Parties and their respective successors and assigns and shall inure to the benefit of the Parties and their respective successors and permitted assigns. No Party shall assign any of its rights or delegate any of its duties under this Agreement (by operation of law or otherwise) without the prior written consent of the other Parties. Any assignment of rights or delegation of duties under this Agreement by a Party without the prior written consent of the other Parties if such consent is required hereby, shall be void; provided, that Buyer may, without such prior written consent, assign all of its rights and obligations under this Agreement on or prior to the Closing to one or more of its Affiliates; and provided further, that Buyer or UCAR may without such prior written consent, for collateral security purposes assign its rights (but not its obligations) effective on or after the Closing Date to providers of financing in connection with the Transactions. No Person shall be, or be deemed to be, a third party beneficiary of this Agreement. ARTICLE 18 - ENTIRE AGREEMENT This Agreement and the Schedules and Exhibits attached hereto constitute the entire contract among the Parties with respect to the subject matter hereof and cancel and supersede all of the previous or contemporaneous contracts, representations, warranties and understandings (whether oral or written), including without limitation, the Counteroffer, dated November 14, 1994 from Mitsubishi and Union Carbide to the Buyer, by, between or among the Parties with respect to the subject matter hereof. Except as otherwise provided in Articles 5.21(a) and 7(vi) hereof, all of the Schedules attached hereto shall be deemed to be dated the date hereof. Except for the representations and warranties expressly set forth in this Agreement, Buyer disclaims reliance upon (i) any representations, warranties or guarantees (whether express or implied and whether oral or written) by Stockholders, UCAR, any of the Subsidiaries or any of their respective Affiliates, officers, employees, agents or representatives (including, without limitation, any projections of future sales, revenues, expenses or earnings and any statements regarding the prospects of the Business) or (ii) any other information with respect to the Business, UCAR or the Subsidiaries provided by or on behalf of them. Buyer represents and warrants that it has relied on its own projections in connection with the Transactions. Each Party agrees that the other Parties have the right to rely upon the representations, warranties, covenants and agreements of such party contained in this Agreement. Except as otherwise provided in Articles 20 and 21 hereof, nothing contained in any document or instrument of conveyance, transfer, assignment or delivery executed or delivered at the Closing pursuant to this Agreement shall amend, extend, modify, renew or alter in any manner any representation, warranty, covenant, agreement or indemnity contained herein. Nothing contained in this Agreement or in any of the Schedules or Exhibits attached hereto shall constitute or be interpreted or construed as an admission by any Party or any of its subsidiaries or Affiliates of liability to third parties, whether under any foreign, federal, state or local laws, rules, regulations or ordinances or otherwise, or as an admission that any Party or any of its subsidiaries or Affiliates are in violation of or have ever violated any such laws, rules, regulations or ordinances. ARTICLE 19 - FURTHER ASSURANCES At any time and from time to time after the Closing, the Parties shall execute, deliver and acknowledge such other documents and take such further actions as may be reasonably required in order to consummate the Transactions. ARTICLE 20 - AMENDMENTS No addition to, and no cancellation, renewal, extension, modification or amendment of, this Agreement shall be binding upon a Party unless such addition, cancellation, renewal, extension, modification or amendment is set forth in a written instrument which states that it adds to, amends, cancels, renews, extends or modifies this Agreement and which is executed and delivered on behalf of such Party by an officer of, or attorney-in-fact for, such Party. No addition to, and no cancellation, renewal, extension, modification or amendment of, the Tradename and Trademark License Agreement, dated as of November 1, 1990, (the "Trademark License") between Union Carbide and UCAR Carbon Technology Corporation ("UCAR Technology"), by UCAR or UCAR Technology, respectively, or to which UCAR or UCAR Technology, respectively, is a party shall be effective unless Buyer shall have given its prior written approval thereto. [Note: At the Closing Date the Trademark License will have a remaining term of not less than 20 years.] ARTICLE 21 - WAIVERS No waiver of any provision of this Agreement shall be binding upon a Party unless such waiver is expressly set forth in a written instrument which is executed and delivered on behalf of such Party by an officer of, or attorney-in-fact for, such Party. Such waiver shall be effective only to the extent specifically set forth in such written instrument. Neither the exercise (from time to time and at any time) by a Party of, nor the delay or failure (at any time or for any period of time) to exercise, any right, power or remedy shall constitute a waiver of the right to exercise, or impair, limit or restrict the exercise of, such right, power or remedy or any other right, power or remedy at any time and from time to time thereafter. No waiver of any right, power or remedy of a Party shall be deemed to be a waiver of any other right, power or remedy of such Party or shall, except to the extent so waived, impair, limit or restrict the exercise of such right, power or remedy. ARTICLE 22 - REMEDIES LIMITED The sole and exclusive rights, powers and remedies of the Parties, other than such injunctive or other equitable remedies as may be available to a Party, for a breach of or default under this Agreement (including, without limitation, a breach of or default under any of the representations, warranties, covenants or agreements contained in this Agreement) shall be termination under Article 9 hereof and indemnification under Articles 12 and 15 hereof, in each case limited as set forth therein. None of the Parties shall, for any reason or under any legal theory, be liable for any special, indirect, incidental or consequential damages arising out of any breach of or default under this Agreement, even if informed of the possibility of such damages in advance. ARTICLE 23 - HEADINGS; COUNTERPARTS The headings set forth in this Agreement have been inserted for convenience of reference only, shall not be considered a part of this Agreement and shall not limit, modify or affect in any way the meaning or interpretation of this Agreement. This Agreement may be signed in any number of counterparts, each of which (when executed and delivered) shall constitute an original instrument, but all of which together shall constitute one and the same instrument. This Agreement shall become effective and be deemed to have been executed and delivered by all of the Parties at such time as counterparts shall have been executed and delivered by each of the Parties, regardless of whether each of the Parties has executed the same counterpart. It shall not be necessary when making proof of this Agreement to account for any counterpart other than a sufficient number of counterparts which, when taken together, contain signatures of all of the Parties. ARTICLE 24 - SEVERABILITY If any provision of this Agreement shall hereafter be held to be invalid, unenforceable or illegal in whole or in part, in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal while preserving the intent of the Parties as expressed in, and the benefits to the Parties provided by, this Agreement or (ii) if such provision cannot be so reformed, such provision shall be severed from this Agreement and an equitable adjustment shall be made to this Agreement (including, without limitation, addition of necessary further provisions to this Agreement) so as to give effect to the intent as so expressed and the benefits so provided. Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding nor such reformation or severance shall affect or impair the legality, validity or enforceability of any other provision of this Agreement. ARTICLE 25 - CERTAIN REFERENCES 25.1 Affiliate. As used herein, reference to an affiliate means, with respect to any Person, any other Person controlling, controlled by or under common control with, or the parents, spouse, lineal descendants or beneficiaries of, such Person. The term "control" (including the terms "controlling", "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. 25.2 Knowledge. As used herein, references to knowledge of Union Carbide, Mitsubishi or UCAR shall mean the actual knowledge of a senior officer or a director of Union Carbide or Mitsubishi, as the case may be, or of a director of UCAR or the Chairman, Chief Executive Officer, President, Chief Financial Officer, Chief Operating Officer, Secretary, Treasurer or a Vice President of UCAR. 25.3 Person. As used herein, references to a person shall mean an individual or an entity, including, without limitation, a corporation, limited liability company, partnership, limited liability partnership, joint venture, trust, joint stock company, association, unincorporated organization or group acting in concert. ARTICLE 26 - INDEX TO DEFINED TERMS The capitalized terms set forth below have been defined herein in the respective Articles or other parts hereof set forth below: Defined Term Article Acquired Shares 1.1(a) Acquisition 1.1(a) Adjustment Amount 1.5(a) Affiliates 25.1 Agreement Preamble Applicable Buyer Survival Period 12.1 Applicable MC Survival Period 12.3 Applicable UCC Survival Period 12.2 Arbitrator 1.5(e) Audited Financial Statements 5.8(a) Balance Sheet Date 5.8(b) Benefits 11.1 Benefit Plan 5.21(b)(i) Borrowings 1.1(b) Business 2nd Whereas Business Records 10.2(a) Business Liabilities 12.6(b) Buyer Preamble Buyer's Indemnitees 12.5(a) Capital Stock 1st Whereas CERCLA 5.17(a)(vi) Class A Common Stock 5.6 Class B Common Stock 5.6 Closing 1.2(a) Closing Date 1.2(a) Closing Place 1.2(a) Code 5.21(b)(ii) Confidential Information 13.2(a) Contaminant 5.17(d)(i) Deferral Date 1.2(a) Delivering Party 13.2(a) Dividend 1.1(b) Documents 1.6 Employee(s) 11.1 Environment and Environmental 5.17(d)(ii) EPA 5.17(a)(vi) ERISA Affiliate 5.21(b)(iii) ERISA 5.21(b)(iv) EU 6.4(b) Foreign Subsidiary 1.2(a) Former Employees 11.1(a) Hold Order 10.2(b)(ii) HS&EA Laws 5.17(d)(iii) HS&EA Liabilities and Costs 5.17(d)(iv) HS&EA Permits 5.17(d)(v) HSR Act 6.4(a) Income Taxes 12.5(d)(i) Indemnitee 12.7(a) Indemnitor 12.7(a) International Plans 11.1(b) IRS 5.21(b)(vi) Knowledge 25.2 Leased Real Property 5.10(a) Lenders 1.1(b) Loss 12.7(b) Material Adverse Effect 5.1 Mitsubishi Preamble Net Indebtedness 1.5(b) Net Worth 1.5(b) New Non-Foreign Subsidiary 1.2(a) New Foreign Subsidiaries 1.2(b)(ii) Notice of Claim 12.7(a) Notice of Dispute 1.5(d) Original Schedules 6.6 Other Scheduled Contracts 5.13 Owned Real Property 5.10(a) Parties 4th Whereas Party 4th Whereas PBGC 5.21(b)(v) Peat Marwick 5.8(a) Pension Plan 5.21(b)(vii) Person 25.3 Post Closing 1.5(g) Purchase Price 1.1(a) Real Property 5.10(a) Real Property Leases 5.10(a) Recapitalization Amount 1.1(b) Receiving Party 13.2(a) Redeemed Shares 1.1(b) Redemption 1.1(b) Redemption Price 1.1(b) Release 5.17(d)(vi) Remedial Action 5.17(d)(vii) Repayment 1.1(b) Required Consents 6.4(d) Statement 1.5(c) Stockholder Transactional Taxes 10.1(a) Stockholders 1st Whereas Stockholders Indemnitees 12.4 Stockholders Group 12.6(a) Subsidiaries 5.3(i) Subsidiary 5.3(i) Tax 5.9(c) Taxes 5.9(c) Tax Return 5.9(d) Termination Date 9.1(ii) Trademark License 20 Transactional Taxes 10.1(a) Transactions 1.1(b) TSCA 5.17(a)(viii) Unaudited Financial Statements 5.8(b) UCAR Preamble UCAR Pension Plan 11.1 UCAR Plans 11.1(a) UCAR Savings Plan 11.1(a) UCAR Technology 20 UCC Plan 11.1(a)(1) Union Carbide Preamble IN WITNESS WHEREOF, the Parties have duly executed and delivered this Agreement as of the date first above written. UNION CARBIDE CORPORATION By: /s/ Robert D. Kennedy Name: Robert D. Kennedy Title: Chairman and Chief Executive Officer MITSUBISHI CORPORATION By: /s/ Hiro Kawamura Name: Hiro Kawamura Title: Managing Director UCAR INTERNATIONAL INC. By: /s/ Robert P. Krass Name: Robert P. Krass Title: President and Chief Executive Officer UCAR INTERNATIONAL ACQUISITION INC. By: /s/ Peter G. Peterson Name: Peter G. Peterson Title: Chairman GUARANTY The undersigned unilaterally, unconditionally and irrevocably guarantee to the Stockholders the full and timely performance by Buyer or its assigns of all obligations of Buyer and such assigns under the Recapitalization and Stock Purchase and Sale Agreement dated as of November 14, 1994, among Union Carbide Corporation, Mitsubishi Corporation, UCAR International Inc., and UCAR International Acquisition Inc., including, without limitation, all obligations for the payment of all damages, costs and expenses which may become payable in accordance therewith; provided that the obligations of the undersigned pursuant to this guaranty shall be limited in amount by the aggregate sum of Eighty Million Dollars ($80,000,000). This Guaranty has been duly authorized, executed and delivered by the undersigned and constitutes a legal, valid and binding agreement enforceable against the undersigned in accordance with its terms, except insofar as enforceability may be limited by bankruptcy, insolvency, moratorium or other laws which may affect creditors' rights and remedies generally and by principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). The undersigned unconditionally waive any and all notices of any nature in connection with their guaranty obligations pursuant to this Guaranty and also unconditionally waive any and all rights they might otherwise have to require that the Stockholders first make a demand or institute a proceeding against the Buyer or any other person, entity or enterprise, or to resort to any security or other guaranty, as conditions to the obligations of the undersigned under this Guaranty. BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P. By: Blackstone Management Associates II L.P., General Partner By: /s/ Peter G. Peterson Name: Peter G. Peterson Title: General Partner By: /s/ Stephen A. Scharzman Name: Stephen A. Schwarzman Title: General Partner BLACKSTONE OFFSHORE CAPITAL PARTNERS II L.P. By: Blackstone Management Associates II L.P., General Partner By: /s/ Peter G. Peterson Name: Peter G. Peterson Title: General Partner By: /s/ Stephen A. Schwarzman Name: Stephen A. Schwarzman Title: General Partner EX-23.2 32 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (Nos. 33-26185, 33-55560 and 33-63412) and the Registration Statements on Form S-8 (File Nos. 2-90419, 33-22125, 33-38714 and 33-53573) of Union Carbide Corporation of our report dated January 24, 1994 relating to the consolidated financial statements of UOP and its subsidiaries appearing on page 17 of Union Carbide Corporation's Annual Report on Form 10-K for the year ended December 31, 1993, which is incorporated by reference in this Annual Report on Form 10-K. PRICE WATERHOUSE LLP Chicago, Illinois March 6, 1995 -----END PRIVACY-ENHANCED MESSAGE-----