UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Class Action Suit, jury trial demanded


MARTIN F. STATFELD, on behalf of himself and all others similarly situated,

Plaintiff, : Civil Action No. v. :


FRANK P. POPOFF, WILLIAM S. STAVROPOULOS, MICHAEL D. PARKER, J. PEDRO REINHARD, ANTHONY J. CARBONE, ARNOLD A. ALLEMANG, ENRIQUE C. FALLA, DAVID T. BUZZELLI, JOSEPH L. DOWNEY, JOHN C. DANFORTH, HAROLD T. SHAPIRO, J. MICHAEL COOK, WILLIE D. DAVIS, BARBARA HACKMAN FRANKLIN, JACQUELINE K. BARTON, ALLAN D. GILMOUR, PAUL G. STERN, and the DOW CHEMICAL CORPORATION    Defendants,

Plaintiff Martin F. Statfeld, by his undersigned attorneys, as and for his complaint against Defendants Frank P. Popoff, William S. Stavropoulos, Michael D. Parker, J. Pedro Reinhard, Anthony J. Carbone, Arnold A. Allemang, Enrique C. Falla, David T. Buzzeli, Joseph L. Downey, John C. Danforth, Harold T. Shapiro, J. Michael Cook, Willie D. Davis, Barbara Hackman Franklin, Jacqueline K. Barton, Allan D. Gilmour, and Paul G. Stern (collectively, the "Individual Defendants") and Dow Chemical Corporation ("Dow" or the "Company"), alleges as follows:

1. This case arises out of Defendants’ actions in filing false and misleading information with the U.S. Securities and Exchange Commission (the "SEC") in which Defendants have failed to disclose the potentially enormous adverse impact on Dow of Union Carbide’s continuing involvement in the aftermath of the disastrous leak in 1984 of approximately 40 metric tons of poisonous gas from Union Carbide’s pesticide plant in Bhopal, India, into the adjacent densely populated neighborhoods, as well as ongoing environmental contamination in the vicinity of the long-abandoned its affiliate’s plant. Dow failed to disclose all such potential liabilities to which Union Carbide is remains exposed, and also failed to disclose the fact that the Dow stands to assume all such potential liabilities pursuant to its planned acquisition by merger of Union Carbide. Through Defendants’ material omissions, and through the inclusion of affirmative statements of denial, Defendants purvey misrepresentations that Union Carbide is no longer exposed to any adverse consequences from its former Bhopal pesticide plant and from its involvement in what was, and remains, the most devastating industrial disaster ever, which continues as an evolving tragedy for Bhopal and as an unresolved liability for Union Carbide.

2. The false and misleading information that Defendants have filed with the SEC regards: (i) the existing pending criminal prosecution(s) in India of Union Carbide Corporation ("Union Carbide") and others, and the potential criminal liabilities and sanctions to which Union Carbide is exposed therein; (ii) the Indian judicial declarations and findings that Union Carbide and others certain of its officers have absconded from such criminal prosecutions; (iii) the existing investigations of environmental harms allegedly caused by Union Carbide in Bhopal, India; and (iv) the reasonable likely material effects of such prosecutions, potential liabilities, absconding, and investigations on Dow and Dow shareholders following resulting from Dow’s proposed acquisition by merger of Union Carbide. The proposed merger of Dow1 and Union Carbide (the "Union Carbide Transaction" or the "Merger") is currently valued at approximately $11 billion ($11,000,000,000), consisting of approximately $9 billion of shares exchanged and approximately $2 billion of Union Carbide debt assumed by Dow, and is to be implemented pursuant to a merger agreement dated August 3, 1999 (the "Merger Agreement").

3. Specifically, by means of a materially false and misleading Schedule 13D, which was filed by Dow as of August 13, 1999 (the "Schedule 13D"), and which has not been corrected or amended as to the issues discussed herein in any other SEC filings by Dow or Union Carbide, Defendants have failed to disclose to the investing public pertinent facts regarding:

(i) Union Carbide’s existing criminal prosecution and the enormous potential liabilities, restitutionary damages, and sanctions arising from allegations and evidence of its responsibility for the disastrous 1984 gas leak in Bhopal, India, and the consequential massive human and other injuries (the "Bhopal Gas Disaster");

(ii) declarations decisions, orders and findings by the Bhopal District Court and the Supreme Court of India that Union Carbide, a Hong Kong subsidiary, and a former Chief Executive Officer and Chairman have absconded from India in order to evade criminal prosecution, and the adverse effects of such absconding, including the Bhopal District Court’s continuing attachment of all Indian assets of Union Carbide, and Union Carbide’s inability to conduct or pursue other business activities within India;

    1. the ongoing investigations by governmental and public interest entities into allegations that Union Carbide effectively abandoned the Bhopal plant in the aftermath of the 1984 Bhopal Gas Disaster and took insufficient precautions to prevent hazardous materials stored, spilled, or otherwise located at the plant site from contaminating the environment and natural resources in the heavily populated areas surrounding the Bhopal plant, and Union Carbide’s potential civil and criminal liability resulting from such contamination; and
    2. the ongoing investigation by governmental and public interest entities into claims that Union Carbide engaged in ‘indiscriminate disposal’ of chemical waste and toxic by-products as well as other hazardous materials located at the Bhopal plant site which subsequently contaminated the environment and natural resources, specifically water, in the populated residential areas surrounding the Bhopal plant and Union Carbide’s potential civil and criminal liability for such contamination; and

(iv) the reasonably likely material effects of such ongoing prosecutions, absconding, investigations and potential liabilities on Dow, on the valuation of the Union Carbide Transaction, and on Dow’s own Indian assets and prospects for future business in India.

4. In the materially false and misleading Schedule 13D, Dow has not only failed to disclose any pertinent facts regarding the continuing impacts of the worst industrial disaster ever and the abandoned ongoing environmental contamination by Bhopal pesticide plant, but Dow has also incorporated statements that affirmatively deny the existence of the ongoing prosecutions, investigations and potential liabilities.

5. Through this action, Plaintiff seeks to compel Defendants to make full and complete disclosure as required by law to prevent Defendants from further injuring Plaintiff and the class of all other current Dow shareholders (the "Class"), to amend current public filings in all manners deemed appropriate by this Court, to preclude Defendants from benefiting from their unlawful conduct, and to compensate all current Dow shareholders for any injuries arising from the aforesaid conduct.


THE PARTIES

6. Plaintiff Martin F. Statfeld is a shareholder of Dow common stock and has held such stock at all times relevant to this action.

7. Dow is a corporation organized and existing under the laws of the State of Delaware, and maintains its principal executive offices at 2030 Dow Center, Midland, Michigan 48674. Dow’s principal business is the manufacture and sale of chemicals, plastic materials, agricultural and other specialized products and services.

8. Frank P. Popoff has been, at all times relevant hereto, a director and Chairman of the Board of Dow. Mr. Popoff is scheduled to remain as Chairman until his planned retirement date on November 1, 2000. Mr. Popoff has also been, at all times relevant hereto, a member of Dow’s Finance Committee, which reviews Dow’s financial affairs and makes recommendations to the Board concerning financial matters. Mr. Popoff voted to approve the Union Carbide Transaction.

9. William S. Stavropoulos has been, at all times relevant hereto, President and Chief Executive Officer and a director of Dow. On February 11, 2000, Mr. Stavropoulos was elected Chairman of the Executive Committee of the Board, and also was elected Chairman of the Board of Dow. Mr. Stavropoulos is scheduled to succeed Mr. Popoff as Chairman of the Board on November 1, 2000. Mr. Stavropoulos has also been, at all times relevant hereto, a member of Dow’s Management Executive Committee, which is responsible for ensuring the effective integration of Union Carbide into Dow. Mr. Stavropoulos has also been, at all times relevant hereto, a member of Dow’s Environment, Health, Safety and Public Policy Committee, which assesses the Company’s environment, health and safety policies and performance, and the social impact of Company decisions. Mr. Stavropoulos has also been, at all times relevant hereto, a member of Dow’s Finance Committee. Mr. Stavropoulos voted to approve the Union Carbide Transaction.

10. Michael D. Parker has been, at all times relevant hereto, Executive Vice President and a director of Dow. On February 11, 2000, Mr. Parker was elected President and Chief Executive Officer, and is scheduled to succeed Mr. Stavropoulos in those positions on November 1, 2000. Mr. Parker has also been, at all times relevant hereto, a member of Dow’s Management Executive Committee; a member of Dow’s Environment, Health, Safety and Public Policy Committee; and also a member of Dow’s Finance Committee. Mr. Parker voted to approve the Union Carbide Transaction.

11. J. Pedro Reinhard has been, at all times relevant hereto, Executive Vice President, Chief Financial Officer, and a director of Dow. Mr. Reinhard has also been, at all times relevant hereto, a member of Dow’s Management Executive Committee, and the Chairman of Dow’s Finance Committee. Mr. Reinhard voted to approve the Union Carbide Transaction. Mr. Reinhard personally signed the Schedule 13D at issue.

12. Anthony J. Carbone has been, at all times relevant hereto, Executive Vice President and a director of Dow. On February 11, 2000, Mr. Carbone was elected and became, effective immediately, the Vice Chairman of the Board of Dow. Mr. Carbone has been, at all times relevant hereto, a member of Dow’s Management Executive Committee; a member of Dow’s Environment, Health, Safety and Public Policy Committee; and also a member of Dow’s Finance Committee. Mr. Carbone voted to approve the Union Carbide Transaction.

13. Arnold A. Allemang has been, at all times relevant hereto, Vice President of Operations and a director of Dow. Mr. Allemang has also been, at all times relevant hereto, a member of Dow’s Environment, Health, Safety and Public Policy Committee. Mr. Allemang voted to approve the Union Carbide Transaction.

14. Enrique C. Falla has been, at all times relevant hereto, a Senior Consultant to, and a director of, Dow. Mr. Falla has also been, at all times relevant hereto, a member of Dow’s Environment, Health, Safety and Public Policy Committee, and also a member of Dow’s Finance Committee. Mr. Falla voted to approve the Union Carbide Transaction.

15. David T. Buzzelli has been, at all times relevant hereto, a Senior Consultant to, and a director of, Dow. Mr. Buzzelli has also been, at all times relevant hereto, the Chairman of Dow’s Environment, Health, Safety and Public Policy Committee. Mr. Buzzelli voted to approve the Union Carbide Transaction.

16. Joseph L. Downey has been, at all times relevant hereto, a Senior Consultant to, and a director of, Dow. Mr. Downey voted to approve the Union Carbide Transaction.

17. John C. Danforth has been, at all times relevant hereto, a director of Dow. Mr. Danforth has also been, at all times relevant hereto, a member of Dow’s Environment, Health, Safety and Public Policy Committee. Mr. Danforth voted to approve the Union Carbide Transaction.

18. Harold T. Shapiro has been, at all times relevant hereto, a director of Dow. Mr. Shapiro has also been, at all times relevant hereto, a member of Dow’s Environment, Health, Safety and Public Policy Committee. Mr. Shapiro voted to approve the Union Carbide Transaction.

19. J. Michael Cook has been, at all times relevant hereto, a director of Dow. Mr. Cook has also been, at all times relevant hereto, a member of Dow’s Environment, Health, Safety and Public Policy Committee. Mr. Cook voted to approve the Union Carbide Transaction.

20. Willie D. Davis has been, at all times relevant hereto, a director of Dow. Mr. Davis has also been, at all times relevant hereto, a member of Dow’s Environment, Health, Safety and Public Policy Committee. Mr. Davis voted to approve the Union Carbide Transaction.

21. Barbara Hackman Franklin has been, at all times relevant hereto, a director of Dow. Ms. Franklin has also been, at all times relevant hereto, a member of Dow’s Environment, Health, Safety and Public Policy Committee. Ms. Franklin voted to approve the Union Carbide Transaction.

22. Jacqueline K. Barton has been, at all times relevant hereto, a director of Dow. Ms. Barton has also been, at all times relevant hereto, a member of Dow’s Environment, Health, Safety and Public Policy Committee. Ms. Barton voted to approve the Union Carbide Transaction.

23. Allan D. Gilmour has been, at all times relevant hereto, a director of Dow. Mr. Gilmour has also been, at all times relevant hereto, a member of Dow’s Environment, Health, Safety and Public Policy Committee. Mr. Gilmour voted to approve the Union Carbide Transaction.

24. Paul G. Stern has been, at all times relevant hereto, a director of Dow. Mr. Stern has also been, at all times relevant hereto, a member of Dow’s Environment, Health, Safety and Public Policy Committee. Mr. Stern voted to approve the Union Carbide Transaction.


JURISDICTION AND VENUE

25. This Court has jurisdiction over this action pursuant to Title 28, United States Code, Sections 1331 and 1337, and Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. 78aa.

26. Venue in this Court is proper pursuant to Title 28, United States Code, Section 1391(b) and Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. 78aa.


PLAINTIFF’S CLASS ACTION ALLEGATIONS

27. Plaintiff bring this action as a class action pursuant to Federal Rules of Civil Procedure 23(a) and (b)(3) on behalf of a class consisting of all persons or entities who purchased or held shares of Dow Chemical Corporation at anytime on or following August 13, 1999, and who were damaged thereby. Excluded from the Class are the defendants, officers and directors of the Company, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest.

28. The members of the Class are so numerous that joinder of all members is imprac-ticable. While the exact number of Class members is unknown to Plaintiff at this time and can only be learned through appropri-ate discovery, Plaintiff believes that there are thousands of members of the Class throughout the United States. As of December 31, 1999, there were approximately 223,280,000 shares of Dow common stock out-standing and actively traded in an efficient market on the New York Stock Exchange and other exchanges. Record owners and other members of the Class may be identified from records main-tained by Dow or its transfer agent and Class members may be notified of the pendency of this action by mail, using the form of notice similar to that custom-arily used in securities class actions.

29. Plaintiff’s claims are typical of the claims of the mem-bers of the Class as all members of the Class are similarly affected by Defendants’ wrongful conduct in violation of federal law complained of herein.

30. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation.

31. Common questions of law and fact exist as to all mem-bers of the Class and predominate over any questions affecting solely individual members of the Class. Among the questions of law and fact common to the Class are:

(A) Whether the federal securities laws were violated by Defendants’ acts as further alleged herein;

(B) Whether Defendants participated in and pursued the common course of conduct complained of herein;

(C) Whether documents, press releases and other statements disseminated to the investing public and the Company's share-holders during the Class Period misrepresented material facts about the conditions and effects of Dow’s acquisition of Union Carbide stock and Dow’s intentions to acquire by merger all assets and liabilities of Union Carbide;

(D) Whether Dow’s shareholders and the investing public are being wrongfully compelled to make investment decisions concerning Dow without the benefit of information required to be disclosed, due to Dow’s material mis-representations and omissions and Dow’s failure to correct the prior material misrepresentations and omissions as complained of herein; and

(E) Whether the members of the Class have sustained dam-ages and, if so, the proper measure of damages as a result of the actions of the defendants complained of herein.

32. A class action is superior to all other avail-able me-thods for the fair and efficient adjudication of this con-tro-versy since join-der of all members is impracticable. Further-more, a class action is appropriate since the damages suffered by individual Class members may be -small, and the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the man-age--ment of this action as a class action.


STATEMENT OF FACTS

The Bhopal Gas Disaster

33. Just after midnight, on December 3, 1984, a pesticide planned operated by Union Carbide India, Ltd. ("UCIL") released approximately 40 metric tons of highly toxic chemicals into the atmosphere of causing widespread death and injury in adjacent, densely populated neighborhoods. The enormous discharge of lethal gas clouds resulted from an uncontrolled and uncontained volatile reaction of methyl isocyanate, which is a key poisonous component of industrial pesticides that UCIL fabricated and stored in vast quantities at the plant. UCIL was a subsidiary of Union Carbide that the Company controlled by virtue of its ownership of 50.9% of UCIL’s shares.

34. The discharge of a massive toxic gas plume was a catastrophe for the city of Bhopal, swiftly killing thousands of residents, and causing thousands more to suffer and die in the wake of the disaster. Authorities and clinicians have conservatively estimated that from 8,000 to 16,000 people have died due to the disaster, and hundreds of thousands of victims suffered injuries, and livestock and crops were extensively damaged. According to still growing official government figures, authorities have examined hundreds of thousands of residents and have already found that almost half a million victims suffered injuries caused by the poisonous discharge.

35. Moreover, the long-term health effects from exposure to the airborne poisons are still evolving. Survivors who were exposed to the toxic gas continue to die of complications from their injuries. The International Medical Commission estimated that as of 1994 upwards of 50,000 people remained partially or totally disabled due to the Bhopal incident. Independent estimates place the number of those affected at anywhere between 250,000 to 500,000 individuals. Birth defects, miscarriages, immune system damage, various cancers and other long-term injuries and diseases have also been found to have been caused by the disaster.

36. The Bhopal Gas Disaster was the most devastating industrial disaster that had ever occurred. It still ranks as the most devastating ever, as no other incident has exceeded the still growing numbers of human and other casualties, the disruptions of communities and ways of life, and the ongoing health complications and maladies.


The Legal Proceedings Against Union Carbide

37. A First Information Report for causing death by negligence "culpable homicide not amounting to murder" and a number of other serious offenses, which is the equivalent of a criminal indictment, was registered on December 3, 1984, at the local police station in Bhopal. On December 4, 1984, Indian police arrested Warren Anderson, Union Carbide’s Chief Executive Officer and Chairman.2 Thereafter, multiple criminal, legal, scientific, engineering, and other investigations ensued regarding the causes of and the parties responsible for the Bhopal Gas Disaster. On December 1, 1987, the Indian government’s prosecution agency, the Central Bureau of Investigation, indicted and pressed charges in the Bhopal District Court against Union Carbide, Union Carbide Eastern (UCE) Hong Kong ("Union Carbide Eastern"), Mr. Anderson and UCIL, as well as nine UCIL officials of Indian nationality.

38. Under Bhopal District Court docket number R.T. No. 2792 of 1987, criminal summonses were served upon Union Carbide and Anderson, as well as the other accused parties. The Union of India, thereby, properly asserted its jurisdiction over Union Carbide and Anderson based upon allegations that they violated the laws of India by taking actions that caused devastating harms within India. [David: Anderson was a bail jumper so all that was issued for him was a "notice to appear for trial" and, subsequently, a non-bailable arrest warrant].

39. The aforesaid entities and individuals were charged under Sections 304 (Part 1F), 324, 326, and 429 of the Indian Penal Code, and charged with culpable homicide, causing grievous hurt, causing the death of and poisoning of animals and other serious offenses punishable by imprisonment up to ten years, as well as the imposition of restitutionary and punitive fines as a result of their alleged culpable participation in the Bhopal Gas Disaster.

40. On December 7, 1984, the first civil lawsuit, Dawani v. Union Carbide Corp., Civ. No. 84-2479 (S.D.W. Va.), was filed by lawyers in the United States seeking damages on behalf of thousands of Indian victims of the Bhopal Gas Disaster. Subsequently, 144 actions concerning the Bhopal Gas Disaster were commenced in federal courts in the United States. The civil actions were all joined and assigned by the Judicial Panel on Multidistrict Litigation to the United States District Court for the Southern District of New York by order dated February 6, 1985.

41. On May 12, 1986, United States District Judge John F. Keenan dismissed the consolidated action on forum non conveniens grounds subject to the condition that Union Carbide consent to the jurisdiction of the courts of India.3

42. Subsequently, on September 5, 1986, the Union of India commenced a civil action on behalf of all claimants in the Bhopal District Court against Union Carbide.4 In February of 1989, Union Carbide and the government of India reached a preliminarily agreed to settlement terms, which was were recorded in an order of the Supreme Court of India dated February 14, 1989. Under the proposed terms of settlement, Union Carbide would pay $470 million (U.S.) to the government of India as compensation, though it would make no admission of wrongdoing; all extant civil actions would be dismissed; the criminal prosecution, R.T. No. 2792 of 1987, would be quashed; and all the criminally accused parties would be granted immunity from further criminal prosecution.

43. In February and March of 1989, there was extensive public protest against the settlement. Thereafter, a number of review and writ petitions were filed in the Supreme Court of India by the Bhopal Gas Peedith Mahila Udyog Sangatan ("BGPMUS"), the Bhopal Gas Peedith Sangarsh Sahayog Samiti ("BGPSSS") and other concerned groups. Such petitions sought to have the Supreme Court reconsider numerous issues relating to giving its approval to the settlement. The Indian Supreme Court ruled that the writ petitions raised valid issues that required consideration.

44. In response to such writ petitions, the Supreme Court of India, in October of 1991, found that the government of India had exceeded its authority under the Bhopal Act by compromising legal matters that did not fall within its mandate. Therefore, the Supreme Court ordered the modification of the settlement terms in several regards, including the revocation of the criminal immunity which had been granted to Union Carbide and all other accused parties in the settlement, and mandating that the criminal prosecutions charges, R.T. No. 2792 of 1987, be restored be fully prosecuted.5 This decision was predicated, in part, upon the holding by the Supreme Court of India that the Bhopal Act was constitutional, but only to the extent that it authorized the government of India to pursue civil claims for the victims of the Bhopal Gas Disaster unrelated to any criminal matters; the government was, therefore, not authorized by the Bhopal Act to quash any criminal charges, nor to compromise any of the victims’ claims or rights arising from any criminal charges. This decision was made on submissions of, among others, the Attorney General of the Union of India.


The Restored Indian Criminal Prosecution of Union Carbide and the Attachment of Union Carbide’s Indian Assets

45. In November of 1991, the criminal cases against all the accused, including Union Carbide, Union Carbide Eastern, and Anderson, were revived in the Chief Judicial Magistrate’s proceeding in Bhopal District Court. On December 7, 1991, the Chief Judicial Magistrate issued a proclamation ordering Anderson as accused No. 1, Union Carbide (USA) as accused No. 10, and Union Carbide Eastern as accused No. 11, to appear in court on February 1, 1992 in connection with the criminal prosecution. On January 1, 1992, a proclamation giving notice that Anderson was ordered appear in the Indian criminal proceeding was published in the Washington Post.

46. Despite these orders, on February 1, 1992, Union Carbide, Union Carbide Eastern, and Anderson failed to appear in Indian court and, thereafter, the Chief Judicial Magistrate declared that Anderson, Union Carbide, and Union Carbide Eastern were "proclaimed absconders" due to their non-appearance in the criminal action. The Chief Judicial Magistrate also declared that if the accused parties did not appear in Court on March 27, 1992, the corporate defendants’ properties would be liable to attachment and forfeiture.

47. On March 27, 1992, Union Carbide, Union Carbide Eastern, and Anderson again failed to appear; accordingly the Indian court issued a non-bailable warrant for Anderson’s arrest. However, the attachment of Union Carbide’s Indian assets was postponed at UCIL’s request.

48. Meanwhile, in April 1992, Union Carbide, which was still refusing to appear in the pending criminal action, announced that it planned to sell its 50.9% stake in UCIL. The Indian government, concerned that Union Carbide was attempting to evade criminal jurisdiction by selling all of its Indian assets, initiated procedures to prevent Union Carbide from fleeing the country with its remaining Indian assets. Therefore, on April 23, 1992, the Indian Central Bureau of Investigation filed an application with the court for attachment of Union Carbide’s assets. Furthermore, on April 29, 1992, BGPSSS, BGPMUS, and the Bhopal Group for Information and Action, all of whom represent the interests of individuals harmed in the Bhopal Gas Disaster, also filed an application for such attachment.

49. On April 30, 1992, the Bhopal District Court in the criminal proceedings again proclaimed Union Carbide, Union Carbide Eastern, and Anderson as absconders, and the Chief Judicial Magistrate, in response to the attachment applications, "ordered the seizure of all Indian assets of the Danbury Connecticut chemical company as part of continuing criminal proceedings against [Union] Carbide." Indian Judge Orders Seizure of Carbide Assets in Country, The Wall Street Journal, May 1, 1992.

50. According to the same report in The Wall Street Journal, "Bud Holman, an attorney with the New York law firm Kelley Drye & Warren, who represents Carbide, reiterated Carbide’s position that the Indian courts have no jurisdiction over the U.S. company. . . . Nor does the court have jurisdiction over former Carbide chairman Warren Anderson, whom the court has ordered to appear and answer charges of culpable homicide relating to the gas leak, Mr. Holman added." Id.

51. In May of 1992, the criminal case against the nine Indian executives of UCIL was committed to trial by the Chief Judicial Magistrate, Bhopal. The court had segregated the prosecution of the three accused parties, Union Carbide, Union Carbide Eastern, and Anderson, who had been proclaimed as absconders.

52. Despite refusing to appear in the pending criminal proceeding, Union Carbide made numerous attempts to gain permission to sell its shares in UCIL, which continued to be attached. Early attempts were rejected by the district court, in part, on the express grounds that the court found that Union Carbide wished to sell its shares in order to evade criminal jurisdiction. However, on February 14, 1994, the Supreme Court of India modified the April 30, 1992, attachment order by allowing Union Carbide to sell its shares in UCIL, and, as a result, achieved some progress in the long-delayed hospital project: a portion of the proceeds was designated by the Supreme Court to be spent on the 500 bed hospital that Union Carbide, having absconded, had failed to build within the eighteen month deadline, as ordered, and also had refused to fund with direct contributions. The remaining proceeds of the sale were to remain attached and to be kept in Union Carbide’s name, subject to the orders of the Chief Judicial Magistrate.

53. On September 10, 1994, an announcement was published regarding the initiation of Union Carbide’s sale of the attached shares in UCIL. Union Carbide would sell its shares to a former subsidiary for approximately $92 million; approximately $15 million of the proceeds would be dedicated to the hospital project; the remaining approximately $77 million would continue to be attached and held in Union Carbide’s name. [repeated below]

54. According to a report by Chemical Week and industry publication, published November 23, 1994, "Criminal charges are still outstanding against Union Carbide India Ltd., [Robert Berzok, Carbide’s director of corporate communications] says, but [Union] Carbide sold its 50.9% share of that company in September to McLeod Russel Ltd. (Calcutta). ‘Once that deal is closed, we’ll be totally out of it,’ he says." Indeed, earlier in 1994, Union Carbide had unilaterally declared that its shares in UCIL were worth zero dollars for purposes of accounting for the company’s assets.

55. However, earlier in the year, on May 16, 1994, the Supreme Court of India had expressly declined requests to drop the criminal proceedings against Union Carbide, Union Carbide Eastern, and Anderson. The Supreme Court had been asked to drop the criminal charges by the "Sole Trustee" of the Bhopal Hospital Trust because, according to the argument, the UCIL shares could only be sold at a distressed price as long as the prosecution was pending. The Supreme Court rejected the request and preserved the pending prosecution.

56. Furthermore, Union Carbide, in disclosing the details of the UCIL stock sale in its SEC filings, recognized that the criminal prosecution against it continued. In its Form 10-K Annual Report for the year ended December 31, 1994, filed with the SEC on March 10, 1995, Union Carbide stated:

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 commitment6 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.

A year later, in its 1995 Annual Report, Union Carbide still recognized that the pending criminal prosecution was a material fact that was required to be disclosed, even though no new developments had occurred during 1995 and the situation was unchanged since the filing of its 1994 Annual Report. In its Form 10-K Annual Report for the year ended December 31, 1995, filed with the SEC on March 22, 1996, Union Carbide stated:

Litigation – * * * Criminal proceedings continue in India, arising out of the 1984 gas release from the Bhopal plant of Union Carbide India Limited. The corporation has not appeared in those proceedings. 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 carrying value of the remaining proceeds from the sale of the corporation’s stock in Union Carbide India Limited, which remains subject to the attachment order of the Bhopal criminal court, is zero.

57. These developments and Union Carbide’s decisions placed Union Carbide in the contradictory position of retaining title to $77 millions of dollars in cash attached in India that had a declared carrying value to Union Carbide of zero dollars, since Union Carbide had chosen to continue absconding from India, even to the extent of abandoning substantial assets there.

58. The amounts previously dedicated to the hospital project had been found by the Supreme Court of India to be inadequate to fund the 500 bed hospital that had been mandated by the Court to provide care for the affected region. Therefore, on April 3, 1996, an additional portion of the proceeds from the sale of Union Carbide’s stake in UCIL, which remained attached and in Union Carbide’s name, was ordered to be spent to facilitate construction work for the long-delayed hospital, after Union Carbide had expressly rejected the Court’s request for utilizing its unencumbered assets to satisfy that deficiency. The balance of the proceeds remains attached to date and continues to be held in Union Carbide’s name.

59. In several of the orders of 1994 and 1996 regarding the disposition of the attached assets of Union Carbide, the Supreme Court of India repeatedly referenced, relied upon, and endorsed the finding that Union Carbide and Anderson were proclaimed absconders. Those findings have not been modified and continue in full force to have full force and legal effect in India.

60. Therefore, despite all of Union Carbide’s efforts to evade prosecution and to minimize its exposure to criminal charges, the criminal prosecutions against Union Carbide, Union Carbide Eastern, and Anderson remain open and pending today. All three accused parties continue to be labeled as absconders by the Bhopal District Court and the Supreme Court of India. Furthermore, a non-bailable arrest warrant for Warren Anderson is still outstanding. Since Union Carbide’s Indian properties remain attached, Union Carbide has been precluded from pursuing or acquiring any businesses or assets within India, since such assets would also become subject to writs of attachment and forfeiture. As such, despite Union Carbide’s public assurances that it should not be adversely affected outside India, Union Carbide continues to be adversely affected inside India.

61. Furthermore, the criminal investigation of Union Carbide has continued actively as the prosecution of the Indian criminal defendants has proceeded. No charges against Union Carbide or Anderson have been dropped or reduced. On the other hand, charges against several of the Indian managers of UCIL, who appeared in court and whose criminal trials are currently underway in India, have been modified. Such modification resulted, in part, from evidence that Union Carbide and its U.S. executives (rather than local UCIL managers) were substantially in control of the aspects of UCIL’s operation that caused the disaster.

62. Consequently, Union Carbide, Union Carbide Eastern, and Anderson remain subject to outstanding criminal prosecutions for the Bhopal Gas Disaster to the full extent of the original charges. Union Carbide has indicated the seriousness of the potential liability it faces in the prosecution inasmuch as it has chosen to abandon its substantial Indian assets rather than defend itself against the criminal charges and face the likelihood that Union Carbide would be found culpable and would be fined and sanctioned. Furthermore, as accumulating evidence submitted in the ongoing criminal trials increasingly implicates Union Carbide in the disaster, Union Carbide’s exposure to potential criminal liability has not faded or diminished during the time that they have remained absconders. Rather, the allegations of criminal liability have never been more potent.


The Undisclosed Potential Liabilities of Union Carbide that Dow Stands To Assume

63. Because Union Carbide and Dow are combining in a merger that will leave Dow as the sole surviving entity, Dow will assume all of the liabilities, whether manifest or potential, both actual and contingent, of Union Carbide. As such, Dow stands to assume Union Carbide’s exposure to the following: (i) the outstanding criminal prosecution of Union Carbide and the potential imposition of criminal fines, restitutionary damages, and sanctions for which Union Carbide would be liable from the Bhopal Gas Disaster; (ii) ongoing investigations of environmental contamination allegedly originating from the UCIL plant in Bhopal and Union Carbide’s expressly preserved civil and criminal liabilities for such contamination; (iii) the attachment and forfeiture of all Indian assets, such that Dow’s Indian assets would be exposed to attachment in the same manner that Union Carbide’s Indian assets were and continue to be attached due to Union Carbide’s status as a proclaimed absconder from the criminal prosecution in India for the Bhopal Gas Disaster; and (iv) the inability to pursue future business activities and opportunities within India, under currently prevailing conditions, such that Dow’s current plans for expansion would be jeopardized.

64. Facts relating to these potential liabilities have not been disclosed in any public filings or statements by Dow relating to the Merger. Rather, the existence of any such criminal prosecution or any such environmental impact investigation is affirmatively denied in the Merger agreement attached to and submitted with the Schedule 13D, as well as in other public SEC filings, as discussed in detail below. Such omitted facts and direct misrepresentations are material inasmuch as they (a) indicate that Union Carbide is exposed to possibly billions of dollars worth of undisclosed potential liabilities, (b) give rise to an imminent danger of attachment and forfeiture to substantial corporate assets, (c) cause serious impediments to Dow’s ability to pursue its planned expansion of business activities in India, and therefore, (d) potentially affect the fairness and accuracy of the components of the Union Carbide Transaction’s $11 billion valuation, which at present consists of as much as $9 billion rendered for Union Carbide due to the fact that only $2 billion of debt is recognized as the liabilities assumed (a correspondingly lesser amount should be rendered if greater liabilities were properly recognized).


The Undisclosed Potential Liabilities: Criminal and Civil Liabilities

65. Though Plaintiff does cannot, at this stage, proffer a specific quantification of the potential criminal fines, restitutionary damages, and sanctions which Dow stands to assume due to the Merger, such amounts could be in the billions of dollars. The Indian government has vowed to seek the full value of the original three to four billion U.S. dollar estimate for restitution. Furthermore, the Indian criminal statutes under which the Union of India initiated its prosecution of Union Carbide do not provide for any limit to the criminal fines which could be imposed and such fines could sanctions would include punitive, as well as restitutionary components. Also, the matters before the criminal courts can be reviewed by the Supreme Court of India, and the Constitution of the Union of India grants the Supreme Court wide latitude in fashioning whatever remedies and sanctions are deemed appropriate in order to achieve "complete justice." [this seems to imply "unfettered discretion" which violates due process].

66. Dow also stands to assume the potential liabilities that may arise as a result of ongoing investigations into environmental contamination that has been found in the soil and water resources in highly populated areas near the UCIL plant in Bhopal. Union Carbide has been alleged to have taken inadequate steps to insure that hazardous substances that had been utilized at the UCIL pesticide plant were properly disposed of, quickly removed, cleaned up or securely contained after the disaster occurred. throughout its time of operation in India. Rather, during the period following the Bhopal Gas Disaster, Union Carbide participated in an effort to remove the MIC that remained on site, and provided some minimal assistance in a few insufficient attempts to detect and contain hazardous substances that contaminated the plant site.

67. Otherwise, Union Carbide has performed no thorough and adequate environmental assessments or cleanup due to the fact that, from1991 to the present time, Union Carbide has absconded from India in order to evade criminal prosecution in Bhopal District Court. Consequently, the soil and water in and around the UCIL plant site has become contaminated with severely hazardous substances and the approximately 10,000 residents of several highly populated neighborhoods in the vicinity of the UCIL plant have been exposed to health-threatening chemicals migrating through the soil and/or through the area’s water resources. Many residents may have already suffered medical and other harms caused by such contamination.

68. Investigations and scientific studies by various governmental, academic, scientific, and public interest organizations and entities have found substantial environmental contamination within and outside the UCIL plant, and are continuing their efforts to establish that the UCIL plant is the source of the contamination and the cause of the injuries and maladies suffered by various Bhopal residents. The most recent study, which is also one of the most thorough studies, documented extensive contamination of drinking water resources in the vicinity of the UCIL plant and measured numerous specific contaminants directly traceable from the UCIL site in concentrations far exceeding levels determined to be safe according to environmental standards published by U.S. and European authorities. The study was conducted by Greenpeace International, Greenpeace Research Laboratories, and the University of Exeter, UK, which published a thorough 110 page scientific report on their methods and findings in November 1999.

69. The State Government of Madhya Pradesh, the Indian state in which Bhopal is located, has been conducting ongoing investigations of the environment and water resources in Bhopal through the Madhya Pradesh Pollution Control Board, with the assistance of an independent Indian scientific organization, the National Environment Engineering Research Institute. These investigations have confirmed that the environment has been contaminated. As recently as July, 1998, the State Government of Madhya Pradesh asserted, with regard to environmental contamination found in and around the UCIL plant site, that the civil and criminal liabilities of Union Carbide for such contamination will remain legally unchanged despite the recent revocation of Union Carbide’s lease for the land that the UCIL plant occupied.7

70. Plaintiff does cannot, at this stage, proffer any specific quantification of such potential civil and criminal liabilities. At a minimum, the costs would include defenses of such civil and criminal matters. Furthermore, it has been anticipated in some of these investigations that such liabilities would include the costs for removal or containment of hazardous materials stored, spilled or dumped within the UCIL plant site, removal of contaminants from the soil and groundwater resources of the adjacent residential areas, monitoring of the medical conditions of residents of the area who may have already, or may in the future, be harmed by exposure to the contaminants, and damages for residents who have already been or may be harmed by exposure. Such costs and damages, of course, would be enormous. Criminal liabilities would also entail substantial punitive fines and sanctions, which could be severe since Union Carbide’s neglect of the contaminated properties is aggravated by the fact that Union Carbide has been absent from Bhopal for purposes of absconding from India’s criminal justice system.


The Undisclosed Potential Liabilities: Attachment of Dow’s Indian Assets

71. More immediately, Dow will be exposed to the likelihood that its Indian assets would be attached in the same manner as Union Carbide’s Indian assets were attached as a result of Union Carbide’s status in India as a proclaimed absconder.

72. Dow currently has, at a minimum, the following subsidiaries located in India:

a. Dow Chemical (India) Private Ltd., of which Dow is 100% owner;

b. Dow Chemical International Private Ltd., of which Dow is 100% owner;

c. Anabond Essex India Private Limited ("Anabond Essex"), which is 50% owned by a New Jersey corporation, Essex Specialty Products, Inc., which in turn is 100% owned by Dow; and

d. DE-NOCIL Crop Protection Ltd. ("DE-NOCIL"), a joint venture which is 51% owned by Dow through various subsidiaries.

73. Dow conducts substantial and wide-ranging business operations in India through its Indian subsidiaries Dow Chemical (India) Private Ltd. and Dow Chemical International Private Ltd., including the importation, marketing and sale in Indian markets of a variety of Dow products, including but not limited to STYRON polystyrene resins, paper and paperboard latexes, and Ethyleneamines, which are used as raw materials for the production of several pharmaceutical products. Dow Chemical International Private Ltd. also houses the Technical Centre for Polyurethane Systems.

74. Anabond Essex imports and sells paste grade PVC resins, PPT calcium carbonate, DIOP and other specialty chemicals. In addition, it manufactures and sells adhesives and sealants in the automotive industry.

75. DE-NOCIL is a joint venture between Dow AgroSciences LLC and NOCIL (National Organic Chemical India, Ltd.), a petrochemical company which is the 48th highest earning manufacturing company in India. DE-NOCIL participates in global generic product development, sales of technical phenoxy herbicides, and the production and sale of chlorpyrifos. It also operates an agricultural chemicals plant in India.

76. Upon the consummation of the Merger, these Indian subsidiaries of Dow will be in immediate danger of losing control of their assets through attachment and forfeiture due to Union Carbide’s ongoing status in India as a proclaimed absconder from criminal prosecution. Such attachment would proceed, as it did against Union Carbide in 1992, pursuant to initiatives, writs and applications made by the Bhopal District Court, the Indian Central Bureau of Investigation, and/or various individuals and private organizations representing the interests of the hundreds of thousands of victims of the Bhopal Gas Disaster as Intervenors Assisting the Prosecution.


The Undisclosed Potential Liabilities: The Future Business of Dow in India

77. Dow has repeatedly stated that it has substantial interests in expanding its business activities in India, and that its strategic plans for growth include India as a key component.

78. Dow Chemical’s GAS/SPEC news published on June 3, 1996, a press release titled "Dow Chemical's GAS/SPEC Expansion To Asia Makes Sense, Aligning With World Energy Demand," which stated the following:

The U.S. Department of Energy reported that world energy demand will rise 60% by the year 2015 and that Asia will lead the way. China and India are the two countries that will lead the world in energy consumption according to the DOE. . . . Dow Chemical is keen to expand its GAS/SPEC operation to Asia.

(Emphasis added.)

79. It is evident that Dow has been planning for profound expansion of its business interests in India. On December 17, 1996, Dow issued a press release published by PR Newswire that stated the following:

The Dow Chemical Company has announced a comprehensive development plan to grow its business in the Asia Pacific region. The plan was unveiled by Dow’s President and Chief Executive Officer, William Stavropoulos [who] explained that Dow’s primary focus will be on three main markets – ASEAN, China and India. . . . Stavropoulos outlined Dow’s three-part strategy for geographic growth – establishing key partnerships, developing markets for down-stream derivatives and building globally competitive, world-scale production facilities to meet demand.

"We believe all three elements are critical to long-term success," Stavropoulos said. . . . [D]ownstream products, such as polystyrene, polyurethanes, latex, epoxy and agricultural products are essential materials for developing economies. . . . "In-market production is crucial to a long-term competitive position," Stavropoulos said, "and reduces the company’s reliance on imports." . . . . Dow is evaluating several investment opportunities for both integrated sites and down-stream products in India. . . . DowElanco [renamed Dow Agrosciences LLC], Dow’s agricultural products joint venture, already operates an agricultural chemicals plant in India as part of a joint venture with NOCIL.

In 1995, regional sales reached $2.5 billion, representing 10% of the company’s total turnover.

(Emphasis added.)

80. In February of 1997, Modern Plastics reported the following:

Dow Chemical Co., Midland, MI, is moving to expand its presence in the ASEAN region, China and India , building on its solid presence in Japan.

Dow estimates PE growth in Asia at about 10% per year and sees the region constituting 50% of global demand in 10 years.

(Emphasis added.)

81. On March 12, 1997, Chemical Week reported that David Ford, area director of strategic development for Dow Chemical Pacific, said that "Dow’s initial plans for India will probably involve building some ‘stand-alone derivative units’" regarding natural gas processing and that an "olefins plant could follow at a later stage . . . ."

82. Despite Dow’s extensive goals for expansion in India, on October 26, 1999, Dow Jones Newswire published an article stating that Dow had removed itself from the competition for 25% ownership interest in Indian Petrochemical Corporation because of possible complications originating from the upcoming Merger. A Dow source was quoted as saying "It has been decided that Dow won’t do anything major until after the merger . . . ." However, Dow made no disclosures that related this decision in any way to the outstanding Indian criminal prosecution of Union Carbide.

83. Dow’s present – and potential – Indian market is enormous as India has a population of almost one billion people. Moreover, Dow has publicly announced, and pursued, a comprehensive growth plan in India which would be adversely impacted by the Union Carbide Transaction under currently prevailing circumstances. Dow’s Indian business and market share will be irreparably harmed in the reasonably likely event that Dow will be unable to effectively conduct any business in India after the consummation of the Merger because Dow’s assets will be subject to attachment and forfeiture by the Indian courts pursuant to initiatives by the court, or applications by the Indian Central Bureau of Investigation, or by various private victims’ interest groups, once Dow assumes the existing liabilities and potential liabilities of Union Carbide, and becomes exposed to the same judicial actions in India which have resulted in the attachment of Union Carbide’s assets.


The Undisclosed Potential Liabilities: the Valuation of the Merger

84. The Schedule 13D makes no disclosures or assessments relating to these potential liabilities that Union Carbide faces and that Dow stands to assume. This in itself amounts to a criminal violation of U.S. law. Nevertheless, with no disclosed consideration for such potential liabilities, Dow and the Individual Defendants evaluated the Merger and determined the following: (a) Dow would render to Union Carbide shareholders, in exchange for all outstanding Union Carbide shares, the equivalent of approximately $9 billion worth of Dow’s own stock; (b) Dow would assume Union Carbide’s disclosed indebtedness that amounted to approximately $2 billion; and, therefore (c) the fair acquisition value of Union Carbide would be approximately $11 billion. Based on this valuation, the acquisition by merger would proceed through an exchange of stock at an agreed upon ratio whereby Dow would give all Union Carbide shareholders 0.537 shares of Dow stock in exchange for each share of Union Carbide stock.

85. The valuation of the merger and the share exchange ratio were found to be fair in an opinion letter by Credit Suisse First Boston Corporation. However, Credit Suisse appears to have considered no information related to Union Carbide’s undisclosed potential liabilities. In reaching its opinion, Credit Suisse did not independently verify any of the corporate information that Dow and Union Carbide supplied. Also, Credit Suisse was not requested to make, and did not make, any independent evaluation or appraisal of the assets or liabilities of Union Carbide or Dow, nor were they furnished with any such evaluations or appraisals.

86. Furthermore, the due diligence performed in preparation for the Union Carbide Transaction appears to have been brief, considering that Dow was ??? to making an $11 billion acquisition. Due diligence began on Friday, July 30, 1999, and was conducted simultaneously with the final negotiations of the definitive terms of the merger agreement, and was over by Tuesday, August 3, 1999, when the respective boards met and heard presentations from their legal and financial advisors, discussed the matter, voted to approve the Merger, and finalized all Merger documents. The Merger was publicly announced on Wednesday, August 4, 1999. Therefore, due diligence was completed in only a few days, and over a weekend which would have further limited recourse to expansive necessary inquiries.

87. If the undisclosed potential liabilities had been properly evaluated and fully disclosed, they should have had a meaningful impact on the valuation of the Union Carbide Transaction and on the share exchange ratio, due to the substantial potential criminal liability for the Bhopal Gas Disaster and the additional potential civil and criminal liability for environmental contamination and consequential injuries, as well as due to the exposure to attachment of Dow’s assets and jeopardized business plans. In addition to Union Carbide’s disclosed indebtedness of approximately $2 billion, these undisclosed potential liabilities, though inchoate, may fairly be valued as additional billions of dollars of risk and probable liabilities. Nevertheless, there has been no disclosed consideration for these potential liabilities, nor have any terms or conditions been formulated to address these specific inchoate liabilities when they become manifest.

88. Therefore, the rendering of approximately $9 billion worth of Dow stock is a substantially excessive price for Dow to pay in acquiring all assets, liabilities and potential liabilities of Union Carbide.


The Dow Director’s Committees

89. Facts relating to the undisclosed potential liabilities at issue in this matter were or should have been the subject of review and consideration by Dow’s Board of Directors, and especially, at least, three of Dow’s committees of Directors: (i) the Finance Committee; (ii) the Management Executive Committee; and (iii) the Environment, Health, Safety and Public Policy Committee.

90. Dow’s Finance Committee is charged with reviewing Dow’s financial affairs and makes recommendations to the Board concerning financial matters. As such, the members of this committee should have been, and should continue to be, responsible for reviewing the assessments of Union Carbide’s assets and liabilities and should have recognized, and should now recognize, that the approximately $2 billion of disclosed indebtedness was only a portion of the liabilities Dow stood to assume. The members of this committee should therefore have facilitated, and should now facilitate, an assessment of Union Carbide’s undisclosed liabilities such that, upon completion of the Merger, Dow would render substantially less than $9 billion in its own shares, since Dow would assume more than the approximately $2 billion of Union Carbide’s liabilities that was disclosed.

91. Dow’s Management Executive Committee is responsible for ensuring the effective integration of Union Carbide into Dow. As such, the members of this committee should have been, and should continue to be, responsible for investigating, assessing, and disclosing all facts relating to Union Carbide’s undisclosed potential liabilities at issue in this matter that Dow stands to assume upon acquiring Union Carbide.

92. Dow’s Environment, Health, Safety and Public Policy Committee is responsible for assessing the Company’s environment, health and safety policies and performance, and the social impact of Company decisions. As such, the members of this committee should have been, and should continue to be, responsible for investigating, assessing and disclosing all material facts relating to Union Carbide’s undisclosed potential liabilities at issue in this matter, due to the fact that Dow’s acquisition of Union Carbide and its assumption of these liabilities constitute decisions by Dow that are reasonably likely to have significant environmental, health, safety, and social impact.

93. Therefore, all Directors of Dow, and especially those who serve on the Finance Committee, the Management Executive Committee, and the Environment, Health, Safety and Public Policy Committee, have had and continue to have an affirmative duty to consider fully all facts relating to the undisclosed potential liabilities, to incorporate an assessment of them in the valuation and structure of the Union Carbide Transaction, and disclose them in public filings with the SEC. Therefore, having had sufficient opportunities and responsibilities to investigate and identify all material facts that impact the Union Carbide Transaction, the Individual Defendants knew or recklessly disregarded the false and misleading nature of Schedule 13D.


The False Filings

94. On August 13, 1999, Dow filed with the SEC its Schedule 13D concerning the proposed Merger.

95. Dow attached as the first exhibit to its Schedule 13D, the Merger Agreement. In Article V of the Merger Agreement, Dow and Union Carbide made respective Representations and Warranties as to the conditions obtaining in the two corporations at the time the Merger Agreement was executed. Numerous Representations and Warranties are materially false and misleading with respect to Union Carbide. Dow incorporated all such materially false and misleading statements into the Schedule 13D, and has relied upon this filing as constituting adequate disclosure that complies with all lawful requirements, which it does not for the reasons set forth below.

96. In Article V of the Merger Agreement, paragraph 5.1(g), the following statements are made, which are false and misleading with respect to Union Carbide:

(g) Litigation and Liabilities. Except as to matters involving Taxes, there are no (i) civil, criminal or administrative actions, suits, claims, hearings, investigations or proceedings pending or, to the actual knowledge of its executive officers, threatened against it or any of its Subsidiaries . . . except for those that are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect on it.

(Emphasis added.) These representations and warranties that assert that there are no criminal actions, suits, claims, hearings, or proceedings, nor any administrative investigations, pending or threatened against Union Carbide are blunt misrepresentations. They are flatly contradicted by the plain facts recited above regarding (i) the outstanding criminal prosecution of Union Carbide for the Bhopal Gas Disaster, (ii) the continued attachment of Union Carbide’s Indian assets, and (iii) the express preservation by the State of Madhya Pradesh, with respect to its and the Madhya Pradesh Pollution Control Board’s investigations, of all of Union Carbide’s civil and criminal liabilities that might be established as a result of investigations into allegations that Union Carbide’s is responsible for existing and continuing environmental contamination in Bhopal, all of which are reasonably likely to have a material adverse affect on Union Carbide and on Dow following the Merger.

97. In Article V of the Merger Agreement, the same paragraph 5.1(g) continues with the following statements, which are false and misleading with respect to Union Carbide:

(g) Litigation and Liabilities. Except as to matters involving Taxes, there are no . . . (ii) obligations or liabilities of it and its Subsidiaries, whether or not accrued, contingent or otherwise and whether or not required to be disclosed, or any other facts or circumstances, in either such case, except for those that are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect on it.

(Emphasis added.) These representations and warranties that assert that Union Carbide has no undisclosed general liabilities, even extending to the point of a denial that there are "any other facts or circumstances . . . reasonably likely to have a Material Adverse Effect," constitute additional outright misrepresentations. They are contradicted by the plain facts recited above relating to all of the undisclosed potential liabilities at issue herein.

98. In Article V of the Merger Agreement, paragraph 5.1(i), the following statements are made, which are false and misleading with respect to Union Carbide:

(i) Compliance with Laws. The businesses of each of it and its Subsidiaries have not been, and are not being, conducted in violation of any law, statute, ordinance, regulation, judgment, order, decree, injunction, arbitration award, license, authorization, opinion, agency requirement or permit of any Governmental Entity (collectively, "Laws") . . . except for violations or possible violations that are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect on it.

(Emphasis added.) These representations and warranties that assert that Union Carbide and its subsidiaries have operated in compliance with all applicable laws, regulations and legal mandates, including "any order" or "requirement" of "any Governmental Entity," are further blunt misrepresentations. They are simply untrue and are contradicted by the facts, recited above, that Union Carbide has for years defied at least one lawful criminal summons of the Union of India and has not complied with numerous orders of the Bhopal District Court, and consequently has been declared to be an absconder. Furthermore, such non-compliance led the Indian courts to attach all of Union Carbide’s Indian assets. This defiance constitutes an ongoing non-compliance with laws inasmuch as a portion of Union Carbide’s Indian assets remains attached in Union Carbide’s name and would be available to Union Carbide whenever it chose to comply with the criminal summons. Instead of complying, Union Carbide continues to evade the ongoing criminal prosecution, which remains open and pending. This non-compliance has had and continues to have the material adverse affect of the ongoing attachment of all Union Carbide’s Indian assets, as well as the additional adverse impact of restricting Union Carbide from undertaking any business expansion or new business ventures in India, lest they, too, become subject to attachment.

99. In Article V of the Merger Agreement, the same paragraph 5.1(i) continues with the following statements, which are false and misleading with respect to Union Carbide:

(i) Compliance with Laws. The businesses of each of it and its Subsidiaries . . . has not received any notice or communication of any material noncompliance with any such Laws that has not been cured as of the date of this Agreement, except for such changes and noncompliance that are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect on it.

(Emphasis added.) This representation and warranty that asserts that Union Carbide and its subsidiaries received no notice or communication relating to non-compliance that has not yet been cured is another blunt misrepresentation. It is contradicted by the facts, recited above, regarding: Union Carbide’s ongoing failure to comply with the Union of India’s criminal summons and the Bhopal District Court’s orders to appear in criminal court; the Indian courts’ findings and communications that Union Carbide is a proclaimed absconder; and the extensive communications and motion practice surrounding the continuing attachment of all of Union Carbide’s Indian assets, which were attached due to Union Carbide’s failure to comply with the above-referenced summons and court orders.

100. In Article V of the Merger Agreement, the same paragraph 5.1(i) continues with the following statements, which are false and misleading with respect to Union Carbide:

(i) Compliance with Laws. . . . No investigation or review by any Governmental Entity with respect to it or any of its Subsidiaries is pending or, to the actual knowledge of its executive officers, threatened, nor has any Governmental Entity indicated an intention to conduct the same, except for those the outcome of which are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect on it.

(Emphasis added.) These representations and warranties that assert that Union Carbide and its subsidiaries are subject to no governmental investigations or reviews, nor even the threat of investigation, are further patent misrepresentations. They are contradicted by the facts recited above regarding the ongoing criminal investigation being conducted by the Indian prosecutors of the Indian managers of the UCIL plant. An active issue in that current and ongoing prosecution is the degree to which Union Carbide controlled UCIL, as its corporate of parent. Evidence of such control shows Union Carbide’s involvement in the determination of plant conditions and establishes Union Carbide’s culpability in the Bhopal Gas Disaster. Therefore, the continued investigation of Union Carbide’s role with UCIL has been an active element of the prosecution of the local Indian managers of the UCIL plant. Such investigation has continued to accumulate evidence that shows that Union Carbide was substantially involved in and was controlling actions which resulted in the Bhopal Gas Disaster. Such investigations are reasonably likely to have material and adverse impacts on Union Carbide and on Dow for the reasons stated above.

101. These misrepresentations in paragraph 5.1(i) of the Merger Agreement are also contradicted by the facts recited above regarding the ongoing investigations being conducted by the State Government of Madhya Pradesh into allegations that Union Carbide is responsible for the environmental contamination that has been detected in the soil and water resources in and around the UCIL plant. Such investigations are also reasonably likely to have material and adverse impacts on Union Carbide and on Dow for the reasons stated above.

102. In Article V of the Merger Agreement, paragraph 5.1(k), the following statements are made, which are false and misleading with respect to Union Carbide:

(k) Environmental Matters. Except for such matters that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect on the Company: (i) each of the Company and its Subsidiaries has complied with all applicable Environmental Laws; (ii) neither the Company nor any Subsidiary has received any notice, demand, letter, claim or request for information alleging that the Company or any of its Subsidiaries may be in violation of or liable under any Environmental Law or is involved in any litigation related to any Environmental Laws; (iii) neither the Company nor any of its Subsidiaries is subject to any Orders, decrees, injunctions or other arrangements with any Governmental Entity relating to the remediation of Hazardous Substances or compliance with Environmental Laws.

(Emphasis added.) These representations and warranties regarding Union Carbide and its subsidiaries, taken together, are misrepresentations and are misleading inasmuch as they omit the material facts recited above regarding the investigations that have been conducted for years into allegations that Union Carbide is liable for environmental contamination that has been detected in and around the UCIL plant site in Bhopal. While no governmental legal actions have yet been initiated, as referenced above, the State Government of Madhya Pradesh recently expressly preserved Union Carbide’s civil and criminal liabilities with respect to the Bhopal environmental contamination. Accordingly, Union Carbide has, indeed, received information concerning its possible liability for environmental contamination resulting from operations of a subsidiary that were not in compliance with applicable environmental laws.

103. In Article V of the Merger Agreement, the same paragraph 5.1(k) continues with the following statements, which are false and misleading with respect to Union Carbide:

(k) Environmental Matters. Except for such matters that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect on the Company: . . . (iv) there are no circumstances or conditions involving the Company or any of its Subsidiaries that could reasonably be expected to result in any claims, liability, investigations, costs or restrictions on the ownership, use, or transfer of any of the Company's properties pursuant to any Environmental Law.

(Emphasis added.) These representations and warranties that assert broadly that there are no circumstances or conditions that could reasonably be expected to lead to claims, liability, costs, or even investigations are further patent misrepresentations. They are contradicted by the facts recited above regarding the circumstances and conditions of environmental contamination detected in and around the UCIL plant site, the investigations that have been underway into allegations that Union Carbide is liable for such contamination, and the State of Madhya Pradesh’s express preservation of Union Carbide’s civil and criminal liabilities for such contamination.

104. In Article V of the Merger Agreement, paragraph 5.1(e), the following statements are made, which are false and misleading with respect to Union Carbide:

(e) Reports; Financial Statements. It has made available to the other party each . . . information statement prepared by it since December 31, 1996, including its Annual Report on Form 10-K for the years ended December 31, 1996, December 31, 1997 and December 31, 1998 . . . . As of their respective dates, its Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.

(Emphasis added.) These representations and warranties that assert that Union Carbide’s Form 10-K Annual Reports were true and complete and omitted no material facts and were not misleading, are, themselves, misrepresentations and misleading. Union Carbide’s Form 10-K filings with the SEC were devoid of any facts relating to any of Union Carbide’s enormous potential liabilities at issue herein relating to: the Bhopal Gas Disaster; the Indian criminal prosecutions for the Bhopal Gas Disaster; Union Carbide’s status as an absconder from Indian justice; the ongoing attachment of Union Carbide’s Indian assets; Union Carbide’s inability to develop business in India; and the environmental contamination detected in and around the UCIL plant in Bhopal. Each of the undisclosed potential liabilities at issue herein can reasonably be expected to result in material adverse impacts or has already resulted in ongoing material adverse impacts on Union Carbide.

105. Instead of including any such specific disclosures, Union Carbide disclosed specific facts relating to only one other significant litigation in these Annual Reports. In the Silicone Breast Implant Litigation, Union Carbide recognized and disclosed that there was a potential multi-billion dollar exposure among all defendants. However, in all three years, Union Carbide characterized all other potential legal liabilities in general language:

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, trade regulation; 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.

(Emphasis added.) This general language appears in nearly identical form in all of Union Carbide’s Annual Reports for 1996, 1997, and 1998. This general disclosure omits material facts and is misleading because the characterizations therein do not encompass the undisclosed potential legal liabilities relating to the Indian criminal prosecution of Union Carbide for culpable homicide, manslaughter, grievous harm, or other serious criminal charges that were pending in Bhopal District Court throughout the time periods covered by these Annual Reports. This general language also fails to disclose Union Carbide’s continuing legal status as a "proclaimed absconder" from the criminal courts of India, which status has had a material adverse impact throughout this time period, because it has effectively prevented Union Carbide from developing any business plans to expand or initiate new or joint ventures in the burgeoning market of India. Lastly, this language fails to disclose the outstanding and preserved criminal and civil liability to which Union Carbide is exposed for environmental contamination emanating from the UCIL plant.

106. Furthermore, the Annual Reports for 1996, 1997, and 1998 include misleading assurances regarding the likelihood that Union Carbide’s exposure to litigation liabilities will not have material adverse impacts:

[M]anagement believes adequate provisions have been made for probable losses with respect [to legal proceedings and claims] and that such ultimate outcome, after provisions therefore, will not have a materially adverse effect on the consolidated financial position of the corporation.

(Emphasis added.) These assurances appear in substantially identical form in the 1996, 1997, and 1998 Annual Reports. However, loss contingencies for non-environmental litigation disclosed in those same Reports were only established for a total of $53 million in 1996, $57 million in 1997, and $51 million in 1998. The scale of the potential liability relating to the Bhopal Gas Disaster alone dwarfs these loss contingencies. Therefore, the omission of specific facts relating to the Bhopal Gas Disaster, as well as the other undisclosed potential liabilities at issue in this matter, rendered the above-quoted assurances in these Annual Reports misleading.

107. In contrast to Union Carbide’s Annual Reports for 1996, 1997, and 1998, Union Carbide recognized the need to include in its Form 10-K for 1994 and 1995 some limited disclosure of the fact that Dow was an accused party in the criminal prosecution for the Bhopal Gas Disaster. As discussed above, Union Carbide disclosed the facts that (a) there was an ongoing criminal prosecution in India, (b) it was not appearing in the Indian criminal court, and (c) consequently, the Indian court had attached all of Union Carbide’s assets located in India, which at one point consisted of $92 million dollars in cash.

108. Though Union Carbide also states in its 1994 and 1995 Annual Reports that the pending criminal trial "should not have adverse financial consequences for the corporation outside of India," the implication is clear that Union Carbide also understands that there is a very high probability that the criminal proceeding would lead to substantial adverse financial consequences if Union Carbide were to appear in India and defend itself against the criminal charges. Indeed, Union Carbide appears to have calculated that it was more prudent to forfeit as much as $92 million in cash than to expose itself to the obviously high probability of much greater losses in criminal fines, restitutionary damages, and sanctions.

109. Nevertheless, despite the fact that its exposure to substantial losses in India did not diminish as long as its legal predicament remained unresolved, Union Carbide omitted without comment all such disclosures from its Form 10-K Annual Report for 1996 and for each year thereafter. Union Carbide continued to be an absconded criminal defendant whose assets were attached and held in its name in an ongoing effort by the Indian courts to compel Union Carbide to appear in criminal court as ordered to face serious charges and the possibility of heavy penalties. However, no mention of these facts was made from 1996 onward, in direct violation of applicable disclosure requirements.

110. For all the reasons stated above, Dow’s Schedule 13D is false and misleading and omits material facts that would be necessary to render the filing not misleading. The Schedule 13D incorporated all false and misleading Representations, Warrants and untrue denials made by Union Carbide in Article V of the Merger Agreement, and Dow also failed to supplement Union Carbide’s false statements with true and correct representations of its own regarding the matters at issue herein. As such, Dow has improperly relied upon this filing as constituting adequate disclosure, and thereby has violated applicable lawful disclosure requirements.

111. The false statements and omissions are material in that the withheld information would have a significant impact on investors’ choices of whether to buy, sell, or hold Dow stock given Dow’s plans to acquire Union Carbide.

112. Dow is subject to on ongoing obligation to disclose all pertinent facts that were wrongfully omitted or denied in its Schedule 13D. Nevertheless, Dow has not submitted any public SEC filings that amend, revise, supplement or otherwise correct the misrepresentations made in the Schedule 13D, despite the fact that Dow has submitted numerous filings with the SEC that relate to the Merger since it filed the Schedule 13D, such as: a Form S-4 Registration Statement, filed October 5, 1999; three Form 424 Prospectus Supplements, dated October 25, November 5, and December 17, 1999, respectively; five Form 8-K disclosure statements, dated November 15, December 2, and December 20, 1999, and January 24 and February 11, 2000, respectively; and a Form Pre-14A Proxy Statement, dated March 6, 2000. Therefore, Dow is continuing to fail to meet its disclosure obligations.

113. Rather than correct its prior misrepresentations, Dow has repeated them in its Form S-4 Registration Statement pertaining to the Merger and filed with the Securities and Exchange Commission on October 5, 1999, which also attaches the Merger Agreement and incorporates all of the materially false statements and omissions of material facts discussed herein.


IRREPARABLE INJURY

114. Dow, its shareholders, and the investing public, are being irreparably injured by Defendants’ conduct because, inter alia, Dow’s shareholders and the investing public are being compelled to make investment decisions concerning Dow without the benefit of information required to be disclosed under Section 13(d) of the Exchange Act, 15 U.S.C. 78m(d), and Rules 240.13d-101 and 420.12b-20, promulgated thereunder.

115. This decision-making pressure and deficiency in information cannot be alleviated by monetary damages, and thus, is irreparable in nature.


FIRST CLAIM OF RELIEF

116. Plaintiff repeats and realleges each and every allegation in the foregoing paragraphs, as if fully set forth herein.

117. As a result of the above-described acts of the Defendants, they have violated Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. 78m(d), and Rules 240.13d-101 and 420.12b-20, promulgated thereunder. Section 13(d) of the Exchange Act requires any party acquiring more than five per cent (5%) of certain classes of securities to make various reports and public disclosures, and to make certain specific disclosures "if the purpose of the purchases or prospective purchases is to acquire control of the business of the issuer of the securities" (15 U.S.C. 78m(d)(1)(C)), which is Dow’s stated purpose in acquiring Union Carbide shares.

118. As such, Section 13(d) of the Exchange Act requires Dow to disclose, specifically, "any plans or proposals . . . to make any other major change in [Union Carbide’s] business . . . ." 15 U.S.C. 78m(d)(1)(C). Nevertheless, Dow has made no disclosures regarding any changes Dow would make regarding Union Carbide’s business with regard to the pending criminal prosecution in India, Union Carbide’s ongoing and unyielding actions taken in failing to appear in those criminal proceedings, and the consequential attachment of all of Union Carbide’s assets in India, which has had the material adverse impacts on Union Carbide’s business discussed herein. Although these harms and potential liabilities will be assumed by Dow, including the exposure of all of Dow’s Indian assets to attachment under the currently prevailing circumstances, Dow has made no disclosure of what major changes to Union Carbide’s prior conduct Dow would make in order to relinquish these unresolved matters. As of result of its ongoing failure to make this and other required disclosures, Dow has violated and continues to violate Section 13(d) of the Exchange Act.

119. Section 13(d) of the Exchange Act also requires Dow to disclose, specifically, "information as to any contracts, arrangements, or understandings . . . with respect to . . . transfer of any . . . guaranties against loss or . . . division of losses . . . and giving the details thereof." Although Dow attached to its Schedule 13D the Merger Agreement pursuant to which Dow will assume all of Union Carbide’s liabilities, whether manifest and potential, there is no disclosure of any details regarding Dow’s arrangements or understandings regarding the substantial losses and potential liabilities, discussed herein, to which Dow would be exposed under the Merger. As of result of its ongoing failure to make this and other required disclosures, Dow has violated and continues to violate Section 13(d) of the Exchange Act.

120. Furthermore, the Schedule 13D filed by Dow with the SEC on August 13, 1999, was intentionally or recklessly false and misleading in that it contains untrue statements of material fact and fails to state material information. Defendants knew or recklessly disregarded the false and misleading nature of the Schedule 13D filing. Furthermore, Defendants have not supplemented, amended, or otherwise corrected the false and misleading statements and material omissions of the Schedule 13D in any subsequent public filings.

121. The material omissions that Schedule 13D fails to disclose, thereby rendering the Schedule 13D filing misleading include the failure to disclose all pertinent facts related to the following: the existing criminal prosecutions of Union Carbide in India and the associated enormous potential liabilities; the existing judicial declarations and findings that Union Carbide is a proclaimed absconder from the aforesaid criminal prosecution in Indian, and the continuing adverse effects on Union Carbide’s ability to conduct business within India; the existing investigations of environmental harms allegedly caused by Union Carbide at and near the UCIL plant, and the substantial potential civil and criminal liabilities to which Union Carbide is exposed therefrom; Dow’s assumption upon completion of the Merger of all of Union Carbide’s costs and potential liabilities associated with these matters; the materially adverse effects on Dow of such assumption of Union Carbide’s costs and potential liabilities; the imminent danger that Dow’s Indian assets and business operations in India would be interrupted and attached, and the danger that Dow’s current plans for expanding its business operations in India would be jeopardized; and the true impact of all these matters, exposures and potential liabilities on the valuation and circumstances of the Union Carbide Transaction.

122. In addition to these material omissions, the Schedule 13D filing also includes false statements in that it incorporates affirmative denials of the existence of any such criminal prosecutions, environmental investigations, and material potential criminal and civil liabilities. Furthermore, the Schedule 13D filing contains additional false statements in that it erroneously declares that Union Carbide’s Form 10-K Annual Reports for the years 1996, 1997, and 1998 "did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading." These affirmations of the truthfulness and completeness of Union Carbide’s Annual Reports are false because the three Annual Reports at issue also contain misleading information and omissions of material fact in that they fail to disclose the existing criminal prosecutions in India, the existing judicial declarations that Union Carbide is a proclaimed absconder from the Indian criminal proceedings, the existing investigations of environmental harms allegedly caused by Union Carbide in Bhopal, and the related potential liabilities to which Union Carbide is exposed.

123. Such existing matters and potential liabilities are clearly material on account of, inter alia, the deleterious effect on Dow’s positive public image that will arise from its assumption of the liabilities from the Bhopal Gas Disaster; the enormous potential liabilities of the Bhopal Gas Disaster that will have material adverse financial consequences upon Dow when resolved; and moreover, the magnitude of Dow’s current business operations in Indian, which will be in imminent danger of disruption and attachment; as well as Dow’s significant planned expansions of its business operations in India, which will also be jeopardized by imminent dangers of disruption and attachment. Under conditions that at present obtain, including the current valuation of the Union Carbide Transaction, which has not been assessed with consideration for the matters at issue herein, Dow’s business operations, financial condition, and shareholders will be damaged as a result of Dow’s assumption of the undisclosed potential liabilities through the Merger with Union Carbide.

124. By reason of the foregoing, the Defendants have violated and continue to violate Section 13(d) of the Exchange Act, and Rules 240.13d-101 and 420.12b-20, promulgated thereunder, and Plaintiff and the other class members have been substantially injured and continue to be injured thereby, and are due compensation for their injuries arising from Dow’s conduct.


OTHER AVAILABLE RELIEF

125. In the event that Dow does not perform a full, fair, and adequate evaluation of the undisclosed potential liabilities, and, as a result, does not adjust the current exchange ratio of the Merger in such a way as to cause Dow to render substantially less than the current Merger price of approximately $9 billion in Dow shares, then the injury to Plaintiff and the other class members, as shareholders of Dow, would be directly related to the adverse impact of the undisclosed potential liabilities and the costs to Dow of relinquishing the imminent dangers to its holdings and future business plans in Indian. If there is no such adjustment, Dow would render approximately $9 billion in stock and assume approximately $2 billion in disclosed debt. However, Dow would also assume potentially billions of dollars worth of the undisclosed liabilities at issue herein and would face immanent disruptions of its business operations in India, which would be additional financial burdens added to the cost of the Merger and would diminish the value of Dow’s shareholders’ equity interest in the Company.

126. Several possible measures of damages are available to formulate a remedy for such injury. One suitable measure for the determination of monetary damages, in lieu of or in addition to injunctive relief, can be based upon an estimation of the total harm to which Dow is exposed due to the undisclosed potential liabilities at issue herein, divided by the number of publicly held shares of Dow currently outstanding. Therefore, if the total potential damages were conservatively estimated as a range from $2 billion to $4 billion, since Dow currently has approximately 223,280,000 shares outstanding, the damages per share would be estimated within a range from $8.96 to $17.92 per share.


SECOND CLAIM FOR RELIEF

127. Plaintiff repeats and realleges each and every allegation in the foregoing paragraphs, as if fully set forth herein.

128. The Individual Defendants, through their positions of control and authority as officers and/or directors of Dow, had, and exercised, the power to direct and cause the direction of management, policies and activities of Dow, including the unlawful conduct and practices complained of herein. Significantly, every director voted for the Merger under its current -- and unacceptable -- terms. Moreover, each director was under a fiduciary duty to reasonably inquire as to all facts pertinent to the Merger prior to their vote. As a result, at the time of the wrongs alleged herein, the Individual Defendants were controlling persons under Section 20(a) of the Exchange Act.

129. By reason of the foregoing, the Individual Defendants are liable under Section 20(a) of the Exchange Act, for Dow’s violation of the Exchange Act as alleged herein.


THIRD CLAIM OF RELIEF

130. Plaintiff repeats and realleges each and every allegation in the foregoing paragraphs, as if fully set forth herein.

131. Defendants have, at all times relevant hereto, owed and continue to owe a fiduciary duty to Plaintiff and the other class members as shareholders of Dow.

132. Furthermore, the shareholders of Dow were provided with no opportunity to consider and vote on the Merger with Union Carbide that was disclosed in the Schedule 13D. The Merger was structured such that no Proxy Statement and no shareholder approval was required by Dow’s bylaws in order to complete the Merger.

133. The Schedule 13D was intentionally or recklessly false and misleading in that it contains untrue statements of material fact and fails to state material information. Furthermore, Dow incorporated into the Schedule 13D affirmative statements, which are patently erroneous, denying the existence of material facts that, contrary to those affirmative statements, do exist. Defendants knew or recklessly disregarded the false and misleading nature of the Schedule 13D. Defendants have not supplemented, amended, or otherwise corrected the false and misleading statements and material omissions of the Schedule 13D in any subsequent public filings.

134. By its defective Schedule 13D and by all subsequent public disclosures regarding the Merger with Union Carbide, Defendants have failed to make proper and adequate disclosure of the material adverse consequences to which Plaintiff and the other class members, as Dow shareholders, are exposed as a result of Dow’s assumption of the undisclosed potential liabilities of Union Carbide.

135. By reason of the foregoing, Defendants have violated and continue to violate the fiduciary duties they owe to Plaintiff and the other class members, who have been substantially injured and continue to be injured thereby, and who are due compensation for their injuries arising from Defendants’ conduct.


PRAYER FOR RELIEF

WHEREFORE, Plaintiff prays for judgment against Dow and the Individual Defendants awarding Plaintiff and the Class an order:

A. enjoining Defendants from continuing to violate Section 13(d) of the Exchange act by directing Defendants to file an amended Schedule 13D that truthfully discloses all pertinent facts relating to:

(i) the existing criminal prosecution of Union Carbide in India and the associated enormous potential liabilities, as well as the massive human and other injuries that resulted from the Bhopal Gas Disaster;

(ii) the Indian judicial findings that Union Carbide is a proclaimed absconder from the Indian criminal proceedings related to the Bhopal Gas Disaster, and the adverse effects thereof, including, inter alia, the continued attachment of all Union Carbide’s Indian assets and Union Carbide’s inability to conduct or pursue other business activities within India;

(iii) the existing investigations into the causes of environmental contamination detected in and around the Bhopal pesticide plant of a former subsidiary of Union Carbide, and the substantial potential criminal and civil liabilities to which Union Carbide is exposed as a result of such contamination;

(iv) Dow’s assumption upon the Merger of all of Union Carbide’s costs and potential liabilities associated with these matters;

(v) the materially adverse effects such assumption of Union Carbide’s costs and potential liabilities would have on Dow;

(vi) the imminent danger that Dow’s Indian assets and business operations would be interrupted and attached, and Dow’s current plans for conducting and expanding business operations in India in the future would be jeopardized (just as Union Carbide’s Indian assets were attached and its business prospects in India were foreclosed), due to the fact that Union Carbide continues to be recognized in the courts of India as a proclaimed absconder from the existing criminal prosecution in India; and

(vii) a proper and adequate assessment of the impact of all of these considerations on the valuation of the Union Carbide Transaction and on the determination that Dow would render, under the Merger, as much as approximately $9 billion of its own stock in exchange for all outstanding Union Carbide shares.

B. enjoining Defendants, and all those acting in concert with them, from merging with Union Carbide until the potential liabilities arising from the Bhopal Gas Disaster and its aftermath, and the Bhopal environmental contamination, as well as the impact on Dow of all matters at issue herein, have been fully investigated and disclosed;

C. to the extent, if any, that the Union Carbide Transaction complained of is consummated prior to the entry of the Court’s final judgment, rescinding such transaction including, but not limited to, rescissory damages;

D. awarding Plaintiff and the other class members compensation for any injuries arising from the aforesaid conduct;

E. awarding Plaintiff and the other class members the costs and expenses of this action, including reasonable attorneys’ fees and accountants’ and experts’ fees; and

F. granting such other and further relief as the Court deems just and proper.

    1. Plaintiff hereby demands a trial by jury on all issues triable by jury.

Dated: New York, New York April , 2000

LAW OFFICES OF CURTIS V.TRINKO, LLP

By: Curtis V. Trinko (CT-1838), Joseph R. Seidman, Jr. (JS-____)
16 West 46th Street, Seventh Floor, New York, New York 10036    Telephone: 212-490-9550

GOODKIND, LABATON, RUDOFF & SUCHAROW, LLP

Kenneth McCallion, H. Rajan Sharma
100 Park Avenue, New York, New York 10017    Telephone: 212-907-0700

-and-

LAW OFFICES OF KENNETH A. ELAN

Kenneth A. Elan, Joseph P. Garland
217 Broadway, Suite 404, New York, New York 10007    Telephone: 212-619-0261

ATTORNEYS FOR PLAINTIFF