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