The
Dow Chemical Company
QUARTERLY
REPORT ON FORM 10-Q
For
the quarterly period ended March 31, 2009
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PAGE
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PART
I – FINANCIAL INFORMATION
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Item
1.
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3
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3
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4
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5
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6
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7
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8
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Item
2.
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36
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36
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36
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43
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46
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Item
3.
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49
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Item
4.
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50
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PART
II – OTHER INFORMATION
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Item
1.
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51
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Item
1A.
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51
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Item
2.
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54
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Item
6.
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54
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56
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57
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PART
I - FINANCIAL INFORMATION
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|||||||||
Item 1.
Financial Statements.
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|||||||||
The Dow Chemical Company and Subsidiaries | |||||||||
Consolidated Statements of Income | |||||||||
Three
Months Ended
|
|||||||||
March
31,
|
March
31,
|
||||||||
In
millions, except per share
amounts (Unaudited)
|
2009
|
2008
|
|||||||
Net
Sales
|
$ | 9,087 | $ | 14,824 | |||||
Cost
of sales
|
8,165 | 12,908 | |||||||
Research
and development expenses
|
292 | 331 | |||||||
Selling,
general and administrative expenses
|
444 | 498 | |||||||
Amortization
of intangibles
|
22 | 22 | |||||||
Restructuring
charges
|
19 | - | |||||||
Acquisition-related
expenses
|
48 | - | |||||||
Equity
in earnings of nonconsolidated affiliates
|
65 | 274 | |||||||
Sundry
income (expense) - net
|
(3 | ) | 46 | ||||||
Interest
income
|
12 | 24 | |||||||
Interest
expense and amortization of debt discount
|
154 | 145 | |||||||
Income
before Income Taxes
|
17 | 1,264 | |||||||
Provision
(Credit) for income taxes
|
(18 | ) | 299 | ||||||
Net
Income
|
35 | 965 | |||||||
Net
income attributable to noncontrolling interests
|
11 | 24 | |||||||
Net
Income Attributable to The Dow Chemical Company
|
$ | 24 | $ | 941 | |||||
Share
Data
|
|||||||||
Earnings
per common share - basic
|
$ | 0.03 | $ | 1.00 | |||||
Earnings
per common share - diluted
|
$ | 0.03 | $ | 0.99 | |||||
Common
stock dividends declared per share of common stock
|
$ | 0.15 | $ | 0.42 | |||||
Weighted-average
common shares outstanding - basic
|
925.4 | 942.1 | |||||||
Weighted-average
common shares outstanding - diluted
|
932.0 | 951.6 | |||||||
Depreciation
|
$ | 455 | $ | 495 | |||||
Capital
Expenditures
|
$ | 234 | $ | 359 | |||||
See
Notes to the Consolidated Financial Statements.
|
The
Dow Chemical Company and Subsidiaries
|
||||||||
Consolidated Balance Sheets | ||||||||
March
31,
|
Dec. 31, | |||||||
In
millions (Unaudited)
|
2009
|
2008
|
||||||
Assets
|
||||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
$ | 2,956 | $ | 2,800 | ||||
Accounts
and notes receivable:
|
||||||||
Trade
(net of allowance for doubtful receivables - 2009: $141; 2008:
$124)
|
3,819 | 3,782 | ||||||
Other
|
2,714 | 3,074 | ||||||
Inventories
|
5,916 | 6,036 | ||||||
Deferred
income tax assets - current
|
201 | 368 | ||||||
Total
current assets
|
15,606 | 16,060 | ||||||
Investments
|
||||||||
Investment
in nonconsolidated affiliates
|
2,627 | 3,204 | ||||||
Other
investments
|
2,165 | 2,245 | ||||||
Noncurrent
receivables
|
336 | 276 | ||||||
Total
investments
|
5,128 | 5,725 | ||||||
Property
|
||||||||
Property
|
47,370 | 48,391 | ||||||
Less
accumulated depreciation
|
33,547 | 34,097 | ||||||
Net
property
|
13,823 | 14,294 | ||||||
Other
Assets
|
||||||||
Goodwill
|
3,392 | 3,394 | ||||||
Other
intangible assets (net of accumulated amortization - 2009: $853; 2008:
$825)
|
813 | 829 | ||||||
Deferred
income tax assets - noncurrent
|
3,865 | 3,900 | ||||||
Asbestos-related
insurance receivables - noncurrent
|
657 | 658 | ||||||
Deferred
charges and other assets
|
875 | 614 | ||||||
Total
other assets
|
9,602 | 9,395 | ||||||
Total
Assets
|
$ | 44,159 | $ | 45,474 | ||||
Liabilities
and Equity
|
||||||||
Current
Liabilities
|
||||||||
Notes
payable
|
$ | 844 | $ | 2,360 | ||||
Long-term
debt due within one year
|
1,223 | 1,454 | ||||||
Accounts
payable:
|
||||||||
Trade
|
2,885 | 3,306 | ||||||
Other
|
1,972 | 2,227 | ||||||
Income
taxes payable
|
305 | 637 | ||||||
Deferred
income tax liabilities - current
|
64 | 88 | ||||||
Dividends
payable
|
141 | 411 | ||||||
Accrued
and other current liabilities
|
2,318 | 2,625 | ||||||
Total
current liabilities
|
9,752 | 13,108 | ||||||
Long-Term
Debt
|
10,897 | 8,042 | ||||||
Other
Noncurrent Liabilities
|
||||||||
Deferred
income tax liabilities - noncurrent
|
613 | 746 | ||||||
Pension
and other postretirement benefits - noncurrent
|
5,420 | 5,466 | ||||||
Asbestos-related
liabilities - noncurrent
|
800 | 824 | ||||||
Other
noncurrent obligations
|
2,998 | 3,208 | ||||||
Total
other noncurrent liabilities
|
9,831 | 10,244 | ||||||
Preferred
Securities of Subsidiaries
|
500 | 500 | ||||||
Stockholders'
Equity
|
||||||||
Common
stock
|
2,453 | 2,453 | ||||||
Additional
paid-in capital
|
825 | 872 | ||||||
Retained
earnings
|
16,896 | 17,013 | ||||||
Accumulated
other comprehensive loss
|
(4,674 | ) | (4,389 | ) | ||||
Treasury
stock at cost
|
(2,384 | ) | (2,438 | ) | ||||
The
Dow Chemical Company's stockholders' equity
|
13,116 | 13,511 | ||||||
Noncontrolling
interests
|
63 | 69 | ||||||
Total
equity
|
13,179 | 13,580 | ||||||
Total
Liabilities and Equity
|
$ | 44,159 | $ | 45,474 | ||||
See
Notes to the Consolidated Financial Statements.
|
The Dow Chemical Company and
Subsidiaries
|
||
PART I – FINANCIAL
INFORMATION, Item 1. Financial Statements.
|
||
(Unaudited) |
·
|
The
Consolidated Statements of Income now present “Net Income,” which includes
“Net income attributable to noncontrolling interests” and “Net Income
Attributable to The Dow Chemical Company.” “Net Income Attributable to The
Dow Chemical Company” is equivalent to the previously reported “Net Income
Available for Common Stockholders.” No change was required to the
presentation of earnings per share.
|
·
|
The
Consolidated Balance Sheets now present “Noncontrolling interests” as a
component of “Total equity.” “Noncontrolling interests” is equivalent to
the previously reported “Minority Interest in Subsidiaries.” “The Dow
Chemical Company’s stockholders’ equity” is equivalent to the previously
reported “Net stockholders’ equity.”
|
·
|
The
Consolidated Statements of Comprehensive Income now present “Comprehensive
Income,” which includes “Comprehensive income attributable to
noncontrolling interests” and “Comprehensive Income Attributable to The
Dow Chemical Company.” “Comprehensive Income Attributable to The Dow
Chemical Company” is equivalent to the previously reported “Comprehensive
Income.”
|
·
|
The
Consolidated Statements of Cash Flows now begin with “Net Income” instead
of “Net Income Available for Common Stockholders.”
|
·
|
Interim
Consolidated Statements of Equity have been added to fulfill the
disclosure requirements of SFAS
No. 160.
|
2009
Activities Related to 2008 Restructuring
In
millions
|
Costs
associated
with
Exit or
Disposal
Activities
|
Severance
Costs
|
Total
|
|||||||||
Reserve
balance at December 31, 2008
|
$ | 128 | $ | 319 | $ | 447 | ||||||
Adjustment
to reserve
|
- | 19 | 19 | |||||||||
Cash
payments
|
- | (123 | ) | (123 | ) | |||||||
Foreign
currency impact
|
- | (5 | ) | (5 | ) | |||||||
Reserve
balance at March 31, 2009
|
$ | 128 | $ | 210 | $ | 338 |
2009
Activities Related to 2007 Restructuring
In
millions
|
Costs
associated
with
Exit or
Disposal
Activities
|
Severance
Costs
|
Total
|
|||||||||
Reserve
balance at December 31, 2008
|
$ | 93 | $ | 37 | $ | 130 | ||||||
Cash
payments
|
(18 | ) | (12 | ) | (30 | ) | ||||||
Foreign
currency impact
|
1 | (1 | ) | - | ||||||||
Reserve
balance at March 31, 2009
|
$ | 76 | $ | 24 | $ | 100 |
2009
Activities Related to 2006 Restructuring
In
millions
|
Costs
associated
with
Exit or
Disposal
Activities
|
Severance
Costs
|
Total
|
|||||||||
Reserve
balance at December 31, 2008
|
$ | 92 | $ | 14 | $ | 106 | ||||||
Cash
payments
|
(3 | ) | (4 | ) | (7 | ) | ||||||
Foreign
currency impact
|
(1 | ) | - | (1 | ) | |||||||
Reserve
balance at March 31, 2009
|
$ | 88 | $ | 10 | $ | 98 |
Inventories
In
millions
|
March
31,
2009
|
Dec.
31,
2008
|
||||||
Finished
goods
|
$ | 3,239 | $ | 3,351 | ||||
Work
in process
|
1,215 | 1,217 | ||||||
Raw
materials
|
823 | 830 | ||||||
Supplies
|
639 | 638 | ||||||
Total
inventories
|
$ | 5,916 | $ | 6,036 |
Goodwill
In
millions
|
Performance
Plastics
|
Performance
Chemicals
|
Agricultural
Sciences
|
Basic
Plastics
|
Hydrocarbons
and
Energy
|
Total
|
||||||||||||||||||
Balance
at December 31, 2008
|
$ | 874 | $ | 1,001 | $ | 1,391 | $ | 65 | $ | 63 | $ | 3,394 | ||||||||||||
Adjustment
to goodwill related to the 2008 acquisition of Dairyland Seed Co.,
Inc.
|
- | - | (2 | ) | - | - | (2 | ) | ||||||||||||||||
Balance
at March 31, 2009
|
$ | 874 | $ | 1,001 | $ | 1,389 | $ | 65 | $ | 63 | $ | 3,392 |
Other
Intangible Assets
|
At
March 31, 2009
|
At
December 31, 2008
|
||||||||||||||||||||||
In
millions
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
|
||||||||||||||||||
Intangible
assets with finite lives:
|
||||||||||||||||||||||||
Licenses
and intellectual property
|
$ | 309 | $ | (197 | ) | $ | 112 | $ | 316 | $ | (192 | ) | $ | 124 | ||||||||||
Patents
|
139 | (101 | ) | 38 | 139 | (100 | ) | 39 | ||||||||||||||||
Software
|
719 | (373 | ) | 346 | 700 | (363 | ) | 337 | ||||||||||||||||
Trademarks
|
174 | (63 | ) | 111 | 169 | (61 | ) | 108 | ||||||||||||||||
Other
|
325 | (119 | ) | 206 | 330 | (109 | ) | 221 | ||||||||||||||||
Total
|
$ | 1,666 | $ | (853 | ) | $ | 813 | $ | 1,654 | $ | (825 | ) | $ | 829 |
Amortization
Expense
|
Three Months Ended
|
|
In
millions
|
March
31,
2009
|
March
31,
2008
|
Other
intangible assets, excluding software
|
$22
|
$22
|
Software,
included in “Cost of sales”
|
$14
|
$11
|
Fair
Value of Derivative Instruments
In millions
|
Balance
Sheet Classification
|
March
31,
2009
|
Dec.
31,
2008
|
||||||
Asset
Derivatives
|
|||||||||
Derivatives
designated as hedges:
|
|||||||||
Foreign
currency
|
Accounts
and notes receivable – Other
|
$ | 44 | $ | 77 | ||||
Commodities
|
Accounts
and notes receivable – Other
|
79 | 68 | ||||||
Total
derivatives designated as hedges
|
$ | 123 | $ | 145 | |||||
Derivatives
not designated as hedges:
|
|||||||||
Foreign
currency
|
Accounts
and notes receivable – Other
|
$ | 114 | $ | 235 | ||||
Commodities
|
Accounts
and notes receivable – Other
|
37 | 63 | ||||||
Total
derivatives not designated as hedges
|
$ | 151 | $ | 298 | |||||
Total
asset derivatives
|
$ | 274 | $ | 443 | |||||
Liability
Derivatives
|
|||||||||
Derivatives
designated as hedges:
|
|||||||||
Foreign
currency
|
Accounts
payable – Other
|
$ | 47 | $ | 69 | ||||
Commodities
|
Accounts
payable – Other
|
171 | 262 | ||||||
Commodities
|
Other
noncurrent obligations
|
- | 22 | ||||||
Total
derivatives designated as hedges
|
$ | 218 | $ | 353 | |||||
Derivatives
not designated as hedges:
|
|||||||||
Foreign
currency
|
Accounts
payable – Other
|
$ | 156 | $ | 284 | ||||
Commodities
|
Accounts
payable – Other
|
36 | 61 | ||||||
Total
derivatives not designated as hedges
|
$ | 192 | $ | 345 | |||||
Total
liability derivatives
|
$ | 410 | $ | 698 |
Effect
of Derivative Instruments for the three months ended March 31,
2009
In
millions
|
Change in
Unrealized
Gain (Loss)
in AOCI
(1,2)
|
Income
Statement Classification
|
Gain (Loss) Reclassified
from AOCI to
Income
(3)
|
Additional Loss Recognized in
Income
(3,4)
|
||||||||||||
Derivatives
designated as hedges:
|
||||||||||||||||
Cash
flow:
|
||||||||||||||||
Interest
rates
|
- |
Cost
of sales
|
$ | (3 | ) | - | ||||||||||
Commodities
|
$ | (5 | ) |
Cost
of sales
|
(187 | ) | $ | (1 | ) | |||||||
Foreign
currency
|
(10 | ) |
Cost
of sales
|
11 | - | |||||||||||
Net
foreign investment:
|
||||||||||||||||
Foreign
currency
|
(3 | ) | n/a |
|
- | - | ||||||||||
Total
derivatives designated as hedges
|
$ | (18 | ) | $ | (179 | ) | $ | (1 | ) | |||||||
Derivatives
not designated as hedges:
|
||||||||||||||||
Foreign
currency
(5)
|
- |
Sundry
income – net
|
- | $ | (94 | ) | ||||||||||
Commodities
|
- |
Cost
of sales
|
- | (1 | ) | |||||||||||
Total
derivatives not designated as hedges
|
- | - | $ | (95 | ) | |||||||||||
Total
derivatives
|
$ | (18 | ) | $ | (179 | ) | $ | (96 | ) |
(1)
|
Accumulated
other comprehensive income (loss)
(“AOCI”)
|
(2)
|
Net
unrealized gains/losses from hedges related to interest rates and
commodities are included in “Accumulated Derivative Gain (Loss) – Net
hedging results” in the consolidated statements of equity; net unrealized
gains/losses from hedges related to foreign currency (net of tax) are
included in “Cumulative Translation Adjustments – Translation adjustments”
in the consolidated statements of
equity.
|
(3)
|
Pretax
amounts.
|
(4)
|
Amounts
impacting income not related to AOCI reclassification; also includes
immaterial amounts of hedge
ineffectiveness.
|
(5)
|
Foreign
currency derivatives not designated as hedges under SFAS No. 133 are
offset by foreign exchange gains of $93 million resulting from the
underlying exposures of foreign currency denominated assets and
liabilities per SFAS No. 52, “Foreign Currency
Translation.”
|
Basis
of Fair Value Measurements at March 31, 2009
In
millions
|
Quoted
Prices
in
Active
Markets
for Identical Items
(Level
1)
|
Significant
Other
Observable
Inputs
(Level
2)
|
Counterparty
and Cash Collateral
Netting
(1)
|
Total
|
||||||||||||
Assets
at fair value:
|
||||||||||||||||
Equity
securities
(2)
|
$ | 321 | $ | 21 | - | $ | 342 | |||||||||
Debt
securities
(2)
|
- | 1,430 | - | 1,430 | ||||||||||||
Derivatives
relating to:
(3)
|
||||||||||||||||
Foreign
currency
|
- | 158 | $ | (84 | ) | 74 | ||||||||||
Commodities
|
- | 116 | (67 | ) | 49 | |||||||||||
Total
assets at fair value
|
$ | 321 | $ | 1,725 | $ | (151 | ) | $ | 1,895 | |||||||
Liabilities
at fair value:
|
||||||||||||||||
Derivatives
relating to:
(3)
|
||||||||||||||||
Foreign
currency
|
- | $ | 203 | $ | (84 | ) | $ | 119 | ||||||||
Commodities
|
- | 207 | (67 | ) | 140 | |||||||||||
Total
liabilities at fair value
|
- | $ | 410 | $ | (151 | ) | $ | 259 |
(1)
|
Cash
collateral is classified as “Accounts and notes receivable – Other” in the
consolidated balance sheets. Amounts represent the effect of legally
enforceable master netting arrangements between the Company and its
counterparties and the payable or receivable for cash collateral held or
placed with the same counterparty.
|
(2)
|
The
Company’s investments in equity and debt securities are classified as
available-for-sale, and are included in “Other investments” in the
consolidated balance sheets.
|
(3)
|
See
Note G for the classification of derivatives in the consolidated
balance sheets.
|
Fixed
and Determinable Portion of Take-or-Pay and
Throughput
Obligations at December 31, 2008
In
millions
|
||||
2009
|
$ | 2,023 | ||
2010
|
1,708 | |||
2011
|
1,798 | |||
2012
|
1,392 | |||
2013
|
895 | |||
2014
and beyond
|
5,969 | |||
Total
|
$ | 13,785 |
Guarantees
at March 31, 2009
In
millions
|
Final
Expiration
|
Maximum
Future Payments
|
Recorded
Liability
|
||||||
Guarantees
|
2014
|
$ | 452 | $ | 16 | ||||
Residual
value guarantees
|
2015
|
974 | 5 | ||||||
Total
guarantees
|
$ | 1,426 | $ | 21 |
Guarantees
at December 31, 2008
In
millions
|
Final
Expiration
|
Maximum
Future Payments
|
Recorded
Liability
|
||||||
Guarantees
|
2014
|
$ | 330 | $ | 23 | ||||
Residual
value guarantees
|
2015
|
985 | 4 | ||||||
Total
guarantees
|
$ | 1,315 | $ | 27 |
Annual
Installments on Long-Term Debt
for
Next Five Years
In
millions
|
|
2009
|
$1,148
|
2010
|
$1,027
|
2011
|
$4,472
|
2012
|
$1,008
|
2013
|
$611
|
2014
|
$135
|
Net
Periodic Benefit Cost for All Significant Plans
|
Three
Months Ended
|
|||||||
In
millions
|
March
31,
2009
|
March
31,
2008
|
||||||
Defined
Benefit Pension Plans:
|
||||||||
Service
cost
|
$ | 58 | $ | 67 | ||||
Interest
cost
|
238 | 241 | ||||||
Expected
return on plan assets
|
(288 | ) | (310 | ) | ||||
Amortization
of prior service cost
|
8 | 8 | ||||||
Amortization
of net loss
|
26 | 11 | ||||||
Net
periodic benefit cost
|
$ | 42 | $ | 17 | ||||
Other
Postretirement Benefits:
|
||||||||
Service
cost
|
$ | 4 | $ | 4 | ||||
Interest
cost
|
29 | 30 | ||||||
Expected
return on plan assets
|
(4 | ) | (7 | ) | ||||
Amortization
of prior service credit
|
(1 | ) | (1 | ) | ||||
Net
periodic benefit cost
|
$ | 28 | $ | 26 |
|
·
|
11.4 million
stock options with a weighted-average exercise price of $9.53 per
share and a weighted-average fair value of $2.60 per
share.
|
|
·
|
5.2 million
shares of deferred stock with a weighted-average fair value of
$9.50 per share.
|
|
·
|
53,600
shares of restricted stock with a weighted-average fair value of
$6.47 per share.
|
Earnings
Per Share Calculations
|
Three
Months Ended
March
31, 2009
|
Three
Months Ended
March
31, 2008
|
||
In
millions, except per share amounts
|
Basic
|
Diluted
|
Basic
|
Diluted
|
Net
Income Attributable to The Dow Chemical Company
|
$24
|
$24
|
$941
|
$941
|
Weighted-average
common shares outstanding
|
925.4
|
925.4
|
942.1
|
942.1
|
Add
dilutive effect of stock options and awards
|
-
|
6.6
|
-
|
9.5
|
Weighted-average
common shares for EPS calculations
|
925.4
|
932.0
|
942.1
|
951.6
|
Earnings
per common share
|
$0.03
|
$0.03
|
$1.00
|
$0.99
|
Stock
options and deferred stock awards excluded from EPS calculations
(1)
|
|
65.8
|
|
34.0
|
(1)
|
Outstanding
options to purchase shares of common stock and deferred stock awards that
were not included in the calculation of diluted earnings per share because
the effect of including them would have been
anti-dilutive.
|
|
·
|
Products
: BETAFOAM™ NVH
and structural foams; BETAMATE™ structural adhesives; BETASEAL™ glass
bonding systems; DOW™ polyethylene resins; IMPAXX™ energy management foam;
INSPIRE™
performance
polymers; INTEGRAL™ adhesive films; ISONATE™ pure and modified methylene
diphenyl diisocyanate (MDI) products; MAGNUM™ ABS resins; PELLETHANE™
thermoplastic polyurethane elastomers; Premium brake fluids and
lubricants; PULSE™ engineering resins; SPECFLEX™ semi-flexible
polyurethane foam systems; VORACTIV™ polyether and copolymer
polyols
|
|
·
|
Products
: FROTH-PAK™
polyurethane spray foam; GREAT STUFF™ polyurethane foam sealant;
INSTA-STIK™ roof insulation adhesive; SARAN™ vapor retarder film and tape;
STYROFOAM™ brand insulation products (including XPS and polyisocyanurate
rigid foam sheathing products); THERMAX™ brand insulation; TILE BOND™ roof
tile adhesive; WEATHERMATE™ weather barrier solutions (housewraps, sill
pans, flashings and tapes)
|
|
Dow Epoxy
is a leading
global producer of epoxy resins, intermediates and specialty resins and
epoxy systems for a wide range of industries and applications such as
coatings, electrical laminates, civil engineering, wind energy, adhesives
and composites. With plants strategically located across four continents,
the business is focused on providing customers around the world with
differentiated solution-based epoxy products and innovative technologies
and services.
|
|
·
|
Products
: AIRSTONE™
epoxy systems; D.E.H.™ epoxy curing agents or hardeners; D.E.N.™ epoxy
novolac resins; D.E.R.™ epoxy resins (liquids, solids and solutions);
Epoxy resin waterborne emulsions and dispersions; Epoxy intermediates
(acetone, allyl chloride, bisphenol A, epichlorohydrin, and phenol);
FORTEGRA™ epoxy tougheners; Glycidyl methacrylate (GMA); UCAR™ solution
vinyl resins
|
|
·
|
Products
: ECHELON™
polyurethane prepolymer; ENFORCER™ and ENHANCER™ for polyurethane carpet
and turf backing; HYPOL™ prepolymers; ISONATE™ MDI; MONOTHANE™ single
component polyurethane elastomers; PAPI™ polymeric MDI; Propylene glycol;
Propylene oxide; RENUVA™ Renewable Resource Technology; SPECFLEX™
copolymer
polyols; TRAFFIDECK™ and VERDISEAL™ waterproofing systems; VORACOR™ and
VORALAST™ polyurethane systems and VORALAST™ R renewable content
system; VORALUX™ and VORAMER™ MR series; VORANATE™ isocyanate; VORANOL™
VORACTIV™ polyether and copolymer polyols; VORASTAR™ polyurethane systems;
XITRACK™ polyurethane rail ballast stabilization
systems
|
|
·
|
Products
: AFFINITY™
polyolefin plastomers (POPs); AMPLIFY™
functional
polymers; CALIBRE™ polycarbonate resins; DOW XLA™ elastic fiber; EMERGE™
advanced resins; ENGAGE™ polyolefin elastomers; FLEXOMER™ very low density
polyethylene (VLDPE) resins; INTEGRAL™ adhesive films; ISOPLAST™
engineering thermoplastic polyurethane resins; MAGNUM™ ABS resins; NORDEL™
hydrocarbon rubber; PELLETHANE™ thermoplastic polyurethane elastomers;
PRIMACOR™ copolymers; PROCITE™ window envelope films; PULSE™ engineering
resins; REDI-LINK™ polyethylene-based wire & cable insulation
compounds; SARAN™ PVDC resin and SARAN™ PVDC film; SARANEX™ barrier films;
SI-LINK™ polyethylene-based low voltage insulation compounds; TRENCHCOAT™
protective films; TYRIL™ SAN resins; TYRIN™ chlorinated polyethylene;
UNIGARD™ HP high-performance flame-retardant compounds; UNIGARD™ RE
reduced emissions flame-retardant compounds; UNIPURGE™ purging compound;
VERSIFY™ plastomers and elastomers
|
|
·
|
Products
:
LP OXO™ SELECTOR™
technology and NORMAX™ catalysts; METEOR™ EO/EG process technology and
catalysts; PTA process technology; UNIPOL™ PP process technology and SHAC™
and SHAC™ ADT catalyst systems
|
|
·
|
Products and Services
:
Acrolein derivatives; Basic nitroparaffins and nitroparaffin-based
specialty chemicals; CANGUARD™ BIT preservatives; CELLOSIZE™ hydroxyethyl
cellulose; Chiral compounds and biocatalysts; CLEAR+STABLE™ carboxymethyl
cellulose; CYCLOTENE™ advanced electronics resins; DOW™
electrodeionization; DOW™ latex powders; DOW™ ultrafiltration; DOWEX™ ion
exchange resins; DOWICIDE™ antimicrobial bactericides and fungicides;
FILMTEC™ elements; FORTEFIBER™ soluble dietary fiber; Hydrocarbon resins;
Industrial biocides; METHOCEL™ cellulose ethers; POLYOX™ water-soluble
resins; Quaternaries; Reverse osmosis, electrodeionization and
ultrafiltration modules; SATINFX™ delivery system; SATISFIT™ Weight Care
Technology; SILK™ semiconductor dielectric resins; SOLTERRA™ boost; UCARE™
polymers; WALOCEL™ cellulose polymers; WALSRODER™
nitrocellulose
|
|
·
|
Products
: EVOCAR™ vinyl
acetate ethylene; FOUNDATIONS™ latex; NEOCAR™ branched vinyl ester
latexes; Styrene-acrylic latex; Styrene-butadiene latex; UCAR™
all-acrylic, styrene-acrylic and vinyl-acrylic latexes;
UCAR™ POLYPHOBE™
rheology modifiers; UCARHIDE™
opacifier
|
|
·
|
Products
: Acrylic
acid/Acrylic esters; AMBITROL™ and NORKOOL™ industrial coolants; Butyl
CARBITOL™ and Butyl CELLOSOLVE™ solvents; CARBOWAX™ and CARBOWAX™ SENTRY™
polyethylene glycols and methoxypolyethylene glycols; DOW™ polypropylene
glycols; DOWANOL™ glycol ethers; DOWCAL™, DOWFROST™ and DOWTHERM™ heat
transfer fluids; DOWFAX™, TERGITOL™ and TRITON™ surfactants; Dow
Haltermann Custom Processing and Haltermann Products; Ethanolamines;
Ethyleneamines; SAFE-TAINER™ closed-loop delivery system; SYNALOX™
lubricants; UCAR™ deicing fluids; UCARSOL™ formulated solvents; UCON™
fluids and VERSENE™ chelating
agents
|
|
·
|
Products
: AGROMEN™
seeds; BRODBECK™ seed; CLINCHER™ herbicide; DAIRYLAND™ seed; DELEGATE™
insecticide; DITHANE™ fungicide; EXZACT™ precision traits; FORTRESS™
fungicide; GARLON™ herbicide; GLYPHOMAX™ herbicide; GRANITE™ herbicide;
HERCULEX™ I, HERCULEX™ RW and HERCULEX™ XTRA insect protection;
KEYSTONE™ herbicides; LAREDO™
|
|
·
|
Products
: ASPUN™ fiber
grade resins; ATTANE™ ultra low density polyethylene (ULDPE) resins;
CONTINUUM™ bimodal polyethylene resins; DOW™ high density polyethylene
(HDPE) resins; DOW™ low density polyethylene (LDPE) resins; DOWLEX™
polyethylene resins; ELITE™ enhanced polyethylene (EPE) resins; TUFLIN™
linear low density polyethylene (LLDPE) resins; UNIVAL™ HDPE
resins
|
|
·
|
Products
: DOW™
homopolymer polypropylene resins; DOW™ impact copolymer polypropylene
resins; DOW™ random copolymer polypropylene resins; INSPIRE™ performance
polymers
|
|
·
|
Products
: STYRON A-TECH™
and C-TECH™ advanced technology polystyrene resins and a full line of
STYRON™ general purpose polystyrene resins; STYRON™ high-impact
polystyrene resins
|
|
·
|
Products
: Acids;
Alcohols; Aldehydes; Caustic soda; Chlorine; Chloroform; COMBOTHERM™
blended deicer; DOWFLAKE™ calcium chloride; DOWPER™ dry cleaning solvent;
Esters; Ethylene dichloride (EDC); LIQUIDOW™ liquid calcium chloride;
MAXICHECK™ procedure for testing the strength of reagents; MAXISTAB™
stabilizers for chlorinated solvents; Methyl chloride; Methylene chloride;
Monochloroacetic acid (MCAA); Oxo products; PELADOW™ calcium chloride
pellets;
|
|
·
|
Products
: Ethylene
glycol (EG); Ethylene oxide (EO)
|
|
·
|
Products
: Benzene;
Butadiene; Butylene; Cumene; Ethylene; Propylene; Styrene; Power, steam
and other utilities
|
Operating
Segments
|
Three
Months Ended
|
|||||||
In
millions
|
March
31,
2009
|
March
31,
2008
|
||||||
Sales
by operating segment
|
||||||||
Performance
Plastics
|
$ | 2,435 | $ | 3,963 | ||||
Performance
Chemicals
|
1,517 | 2,323 | ||||||
Agricultural
Sciences
|
1,446 | 1,314 | ||||||
Basic
Plastics
|
1,847 | 3,492 | ||||||
Basic
Chemicals
|
801 | 1,559 | ||||||
Hydrocarbons
and Energy
|
988 | 2,165 | ||||||
Unallocated
and Other
|
53 | 8 | ||||||
Total
|
$ | 9,087 | $ | 14,824 | ||||
EBIT
(1)
by operating
segment
|
||||||||
Performance
Plastics
|
$ | 30 | $ | 329 | ||||
Performance
Chemicals
|
115 | 271 | ||||||
Agricultural
Sciences
|
338 | 331 | ||||||
Basic
Plastics
|
4 | 427 | ||||||
Basic
Chemicals
|
(92 | ) | 159 | |||||
Hydrocarbons
and Energy
|
- | - | ||||||
Unallocated
and Other
|
(236 | ) | (132 | ) | ||||
Total
|
$ | 159 | $ | 1,385 | ||||
Equity
in earnings (losses) of nonconsolidated affiliates by operating segment
(included in EBIT)
|
||||||||
Performance
Plastics
|
$ | 2 | $ | 18 | ||||
Performance
Chemicals
|
11 | 95 | ||||||
Agricultural
Sciences
|
1 | 1 | ||||||
Basic
Plastics
|
13 | 42 | ||||||
Basic
Chemicals
|
40 | 97 | ||||||
Hydrocarbons
and Energy
|
(2 | ) | 22 | |||||
Unallocated
and Other
|
- | (1 | ) | |||||
Total
|
$ | 65 | $ | 274 |
(1)
|
The
Company uses EBIT (which Dow defines as earnings before interest, income
taxes and noncontrolling interests) as its measure of profit/loss for
segment reporting purposes. EBIT by operating segment includes all
operating items relating to the businesses; items that principally apply
to the Company as a whole are assigned to Unallocated and Other. A
reconciliation of EBIT to “Net Income Attributable to The Dow Chemical
Company” is provided
below:
|
Three
Months Ended
|
||||||||
In
millions
|
March
31,
2009
|
March
31,
2008
|
||||||
EBIT
|
$ | 159 | $ | 1,385 | ||||
+
Interest income
|
12 | 24 | ||||||
- Interest
expense and amortization of debt discount
|
154 | 145 | ||||||
- Provision
(credit) for income taxes
|
(18 | ) | 299 | |||||
- Net
income attributable to noncontrolling interests
|
11 | 24 | ||||||
Net
Income Attributable to The Dow Chemical Company
|
$ | 24 | $ | 941 |
Geographic
Areas
|
Three
Months Ended
|
|||||||
In
millions
|
March
31,
2009
|
March
31,
2008
|
||||||
Sales
by geographic area
|
||||||||
United
States
|
$ | 2,964 | $ | 4,658 | ||||
Europe
|
3,289 | 5,858 | ||||||
Rest
of World
|
2,834 | 4,308 | ||||||
Total
|
$ | 9,087 | $ | 14,824 |
Pro
Forma Results
|
Three
Months Ended
|
|
In
millions
|
March
31,
2009
|
March
31,
2008
|
Net
Sales
|
$10,331
|
$16,640
|
Net
Income (Loss)
|
$(273)
|
$893
|
Net
Income (Loss) Available to The Dow Chemical Company Common
Stockholders
|
$(461)
|
$672
|
Assets
Acquired and Liabilities Assumed
In
millions
|
At
April 1, 2009
|
|||
Purchase
Price
|
$ | 15,681 | ||
Fair
Value of Assets Acquired
|
||||
Current
assets
|
$ | 2,912 | ||
Property
|
3,810 | |||
Other
intangible assets
|
4,545 | |||
Other
assets
|
1,153 | |||
Net
salt assets
|
1,570 | |||
Total
Assets Acquired
|
$ | 13,990 | ||
Fair
Value of Liabilities and Noncontrolling Interests Assumed
|
||||
Current
liabilities
|
$ | 1,190 | ||
Long-term
debt
|
2,624 | |||
Accrued
and other liabilities and noncontrolling interests
|
686 | |||
Pension
benefits
|
914 | |||
Deferred
tax liabilities - noncurrent
|
2,067 | |||
Total
Liabilities and Noncontrolling Interests Assumed
|
$ | 7,481 | ||
Goodwill
|
$ | 9,172 |
The Dow Chemical Company and
Subsidiaries
|
Analysis
of Financial Condition and Results of
Operations.
|
·
|
The
Company reported sales in the first quarter of 2009 of $9.1 billion,
down 39 percent from $14.8 billion in the first quarter of 2008.
Prices were down 20 percent and volume was down 19 percent,
reflecting deflation in feedstock and energy costs and worsening economic
conditions.
|
·
|
Purchased
feedstock and energy costs, which account for almost half of Dow’s total
costs, decreased 49 percent or $3.1 billion compared with the
first quarter of 2008.
|
·
|
Operating
expenses declined during the first quarter of 2009 as a result of
management’s cost cutting initiatives and actions taken related to the
2008 restructuring plan.
|
·
|
Equity
earnings were $65 million in the first quarter of 2009, down
significantly from the first quarter of 2008, and up compared with the
fourth quarter of 2008.
|
·
|
Capital
spending was $234 million in the first quarter of 2009, on track with
the full-year pre-acquisition target of $1.1 billion; debt as a
percent of total capitalization was 48.7 percent, up
3 percentage points from year-end 2008.
|
·
|
On
April 1, 2009, the Company completed the $15.7 billion
acquisition of Rohm and Haas Company, financed by $7 billion of
preferred equity securities and $9.2 billion of
debt.
|
Pretax
Impact
(1)
|
Impact
on
Net Income
(2)
|
Impact
on
EPS
(3)
|
||||||||||||||||||||||
Three
Months Ended
|
Three
Months Ended
|
Three
Months Ended
|
||||||||||||||||||||||
In
millions, except per share amounts
|
March
31,
2009
|
March
31,
2008
|
March
31,
2009
|
March.
31,
2008
|
March
31,
2009
|
March.
31,
2008
|
||||||||||||||||||
Restructuring
charges
|
$ | (19 | ) | - | $ | (17 | ) | - | $ | (0.02 | ) | - | ||||||||||||
Acquisition-related
expenses
|
(48 | ) | - | (41 | ) | - | (0.04 | ) | - | |||||||||||||||
Dow
Corning restructuring
|
(29 | ) | - | (27 | ) | - | (0.03 | ) | - | |||||||||||||||
Total
|
$ | (96 | ) | - | $ | (85 | ) | - | $ | (0.09 | ) | - |
(1)
|
Impact
on “Income before Income Taxes”
|
(2)
|
Impact
on “Net Income Attributable to The Dow Chemical
Company”
|
(3)
|
Impact
on “Earnings per common share –
diluted”
|
|
·
|
results
of insurance company operations,
|
|
·
|
gains
and losses on sales of financial assets,
|
|
·
|
stock-based
compensation expense and severance costs,
|
|
·
|
changes
in the allowance for doubtful receivables,
|
|
·
|
expenses
related to New Ventures,
|
|
·
|
asbestos-related
defense and resolution costs,
|
|
·
|
foreign
exchange hedging results, and
|
|
·
|
certain
overhead and other cost recovery variances not allocated to the operating
segments.
|
Cash
Flow Summary
|
Three
Months Ended
|
|||||||
In
millions
|
March
31,
2009
|
March
31,
2008
|
||||||
Cash
provided by (used in):
|
||||||||
Operating
activities
|
$ | (77 | ) | $ | 447 | |||
Investing
activities
|
(176 | ) | (290 | ) | ||||
Financing
activities
|
462 | (300 | ) | |||||
Effect
of exchange rate changes on cash
|
(53 | ) | 80 | |||||
Net
change in cash and cash equivalents
|
$ | 156 | $ | (63 | ) |
Working
Capital
In
millions
|
March
31,
2009
|
Dec.
31,
2008
|
||||||
Current
assets
|
$ | 15,606 | $ | 16,060 | ||||
Current
liabilities
|
9,752 | 13,108 | ||||||
Working
capital
|
$ | 5,854 | $ | 2,952 | ||||
Current
ratio
|
1.60:1
|
1.23:1
|
||||||
Days-sales-outstanding-in-receivables
|
42 | 42 | ||||||
Days-sales-in-inventory
|
71 | 58 |
Total
Debt
In
millions
|
March
31,
2009
|
Dec.
31,
2008
|
||||||
Notes
payable
|
$ | 844 | $ | 2,360 | ||||
Long-term
debt due within one year
|
1,223 | 1,454 | ||||||
Long-term
debt
|
10,897 | 8,042 | ||||||
Total
debt
|
$ | 12,964 | $ | 11,856 | ||||
Debt
as a percent of total capitalization
|
48.7 | % | 45.7 | % |
Contractual
Obligations at March 31, 2009
|
Payments
Due by Year
|
||||||
In
millions
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
and beyond
|
Total
|
Long-term
debt – current and noncurrent
(1)
|
$1,148
|
$1,027
|
$4,472
|
$1,008
|
$611
|
$3,854
|
$12,120
|
Expected
cash requirements for interest
(1)
|
$548
|
$514
|
$452
|
$350
|
$289
|
$3,989
|
$6,142
|
(1)
|
Updated
to reflect additional debt issued in the first quarter of 2009 (see Note J
to the Consolidated Financial
Statements).
|
Contractual
Obligations at December 31, 2008
|
Payments
Due by Year
|
||||||
In
millions
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
and beyond
|
Total
|
Long-term
debt – current and noncurrent
|
$1,454
|
$1,060
|
$1,523
|
$1,004
|
$601
|
$3,854
|
$9,496
|
Expected
cash requirements for interest
|
$552
|
$501
|
$438
|
$356
|
$298
|
$4,096
|
$6,241
|
2009
|
2008
|
|||||||
Claims
unresolved at January 1
|
75,706 | 90,322 | ||||||
Claims
filed
|
2,295 | 2,716 | ||||||
Claims
settled, dismissed or otherwise resolved
|
(3,199 | ) | (2,854 | ) | ||||
Claims
unresolved at March 31
|
74,802 | 90,184 | ||||||
Claimants
with claims against both UCC and Amchem
|
24,126 | 28,893 | ||||||
Individual
claimants at March 31
|
50,676 | 61,291 |
Defense
and Resolution Costs
|
Three
Months Ended
|
Aggregate
Costs
|
||
In
millions
|
March
31,
2009
|
March
31,
2008
|
to
Date as of
March
31, 2009
|
|
Defense
costs
|
$11
|
$14
|
$636
|
|
Resolution
costs
|
$24
|
$42
|
$1,410
|
The Dow Chemical Company and
Subsidiaries
|
PART I – FINANCIAL
INFORMATION
|
Total Daily
VAR
|
|
Dec. 31, 2008
|
|
In
millions
|
At
March 31, 2009
|
Year-end
|
2008
Average
|
Foreign
exchange
|
$3
|
$1
|
$3
|
Interest
rate
|
$152
|
$161
|
$105
|
Equity
exposures, net of hedges
|
$22
|
$24
|
$16
|
Commodities
|
$5
|
$6
|
$13
|
Composite
|
$153
|
$158
|
$112
|
Issuer
Purchases of Equity Securities
|
Total
number of
shares
purchased as
part
of the Company’s
publicly
announced
share
repurchase
program
|
Approximate
dollar
value
of shares that
may
yet be purchased
under
the Company’s
publicly
announced
share
repurchase
program
|
||
Period
|
Total number
of shares
purchased
(1)
|
Average
price
paid
per
share
|
||
January
2009
|
-
|
-
|
-
|
-
|
February
2009
|
477,588
|
$9.78
|
-
|
-
|
March
2009
|
543
|
$6.73
|
-
|
-
|
First
quarter 2009
|
478,131
|
$9.78
|
-
|
-
|
(1)
|
Represents
shares received from employees and non-employee directors to pay taxes
owed to the Company as a result of the exercise of stock options or the
delivery of deferred stock.
|
The Dow Chemical Company and
Subsidiaries
|
Trademark
Listing
|
|
The following
trademarks or service marks of The Dow Chemical Company and certain
affiliated companies of Dow appear in this
report:
AFFINITY, AIRSTONE, AMBITROL, AMPLIFY, ASPUN,
ATTANE, BETAFOAM, BETAMATE, BETASEAL, CALIBRE, CANGUARD, CARBITOL,
CARBOWAX, CELLOSIZE, CELLOSOLVE, CLEAR+STABLE, COMBOTHERM, CONTINUUM,
CYCLOTENE, D.E.H., D.E.N., D.E.R., DOW, DOW XLA, DOWANOL, DOWCAL, DOWEX,
DOWFAX, DOWFLAKE, DOWFROST, DOWICIDE, DOWLEX, DOWPER, DOWTHERM, ECHELON,
ELITE, EMERGE, ENFORCER, ENGAGE, ENHANCER, EVOCAR, FILMTEC, FLEXOMER,
FORTEFIBER, FORTEGRA, FOUNDATIONS, FROTH-PAK, GREAT STUFF, HYPOL, IMPAXX,
INSPIRE, INSTA-STIK, INTEGRAL, ISONATE, ISOPLAST, LIQUIDOW, LP OXO,
MAGNUM, MAXICHECK, MAXISTAB, METEOR, METHOCEL, MONOTHANE, NEOCAR, NORDEL,
NORKOOL, NORMAX, PAPI, PELADOW, PELLETHANE, POLYOX, POLYPHOBE, PRIMACOR,
PROCITE, PULSE, REDI-LINK, RENUVA, SAFE-TAINER, SARAN, SARANEX, SATINFX,
SATISFIT, SELECTOR, SENTRY, SHAC, SI-LINK, SILK, SOLTERRA, SPECFLEX,
STYROFOAM, STYRON, STYRON A-TECH, STYRON C-TECH, SYNALOX, TERGITOL,
THERMAX, TILE BOND, TRAFFIDECK, TRENCHCOAT, TRITON, TUFLIN, TYRIL, TYRIN,
UCAR, UCARE, UCARHIDE, UCARSOL, UCON, UNIGARD, UNIPOL, UNIPURGE, UNIVAL,
VERDISEAL, VERSENE, VERSIFY, VORACOR, VORACTIV, VORALAST, VORALUX,
VORAMER, VORANATE, VORANOL, VORASTAR, WALOCEL, WALSRODER, WEATHERMATE,
XITRACK
|
|
The following
trademarks or service marks of Dow AgroSciences LLC and certain affiliated
companies of Dow AgroSciences LLC appear in this
report: AGROMEN, BRODBECK,
CLINCHER, DAIRYLAND,
DELEGATE, DITHANE, EXZACT, FORTRESS, GARLON, GLYPHOMAX, GRANITE, HERCULEX,
KEYSTONE, LAREDO, LONTREL, LORSBAN, MILESTONE, MUSTANG, MYCOGEN, NEXERA,
PHYTOGEN, PROFUME, RENZE, SENTRICON, SIMPLICITY, STARANE, TELONE, TORDON,
TRACER NATURALYTE, TRIUMPH, VIKANE,
WIDESTRIKE
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EXHIBIT
NO.
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DESCRIPTION
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2(d)
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Stock
Purchase Agreement, dated as of April 1, 2009, between Rohm and Haas
Company and K+S Aktiengesellschaft, incorporated by reference to
Exhibit 2.1 to The Dow Chemical Company Current Report on
Form 8-K filed on April 7,
2009.
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3(i)(a)
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Certificate
of Designations for the Cumulative Convertible Perpetual Preferred Stock,
Series A, as filed with the Secretary of State, State of Delaware on
March 31, 2009, incorporated by reference to Exhibit 3.1 to The
Dow Chemical Company Current Report on Form 8-K filed on
April 1, 2009.
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3(i)(b)
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Certificate
of Designations for the Cumulative Perpetual Preferred Stock,
Series B, as filed with the Secretary of State, State of Delaware on
March 31, 2009, incorporated by reference to Exhibit 3.2 to The
Dow Chemical Company Current Report on Form 8-K filed on
April 1, 2009.
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3(i)(c)
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Certificate
of Designations for the Cumulative Convertible Perpetual Preferred Stock,
Series C, as filed with the Secretary of State, State of Delaware on
March 31, 2009, incorporated by reference to Exhibit 3.3 to The
Dow Chemical Company Current Report on Form 8-K filed on
April 1, 2009.
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A
copy of The Dow Chemical Company 1979 Award and Option Plan, as amended
and restated on May 13, 1983.
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A
copy of a resolution adopted by the Board of Directors of The Dow Chemical
Company on April 12, 1984 amending The Dow Chemical Company 1979
Award and Option Plan.
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A
copy of a resolution adopted by the Board of Directors of The Dow Chemical
Company on April 18, 1985 amending The Dow Chemical Company 1979
Award and Option Plan.
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A
copy of a resolution adopted by the Executive Committee of the Board of
Directors of The Dow Chemical Company on October 30, 1987 amending
The Dow Chemical Company 1979 Award and Option
Plan.
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A
copy of The Dow Chemical Company Dividend Unit
Plan.
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A
copy of The Dow Chemical Company 1994 Non-Employee Directors’ Stock
Plan.
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10(mm)(i)
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First
Amendment to the Term Loan Agreement, dated as of March 4, 2009,
among The Dow Chemical Company, the lenders party to the Term Loan
Agreement dated as of September 8, 2008, Citibank, N.A., as
administrative agent, and Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Morgan Stanley Senior Funding, Inc., as co-syndication
agents, incorporated by reference to Exhibit 10.1 to The Dow Chemical
Company Current Report on Form 8-K filed on March 6,
2009.
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10(pp)
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Securities
Issuance Letter, dated March 4, 2009, among The Dow Chemical Company,
Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Morgan Stanley Senior Funding, Inc., incorporated
by reference to Exhibit 10.2 to The Dow Chemical Company Current
Report on Form 8-K filed on March 6,
2009.
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10(qq)
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Commitment
to Close, dated March 9, 2009, among The Dow Chemical Company, Ramses
Acquisition Corp. and Rohm and Haas Company, incorporated by reference to
Exhibit 10.1 to The Dow Chemical Company Current Report on
Form 8-K filed on March 12,
2009.
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10(rr)
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Investment
Agreement, dated March 9, 2009, among The Dow Chemical Company,
Paulson & Co. Inc. and the Haas Family Trusts, incorporated by
reference to Exhibit 10.2 to The Dow Chemical Company Current Report
on Form 8-K filed on March 12,
2009.
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10(ss)
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Letter
Agreement, dated March 9, 2009, among The Dow Chemical Company,
Ramses Acquisition Corp. and the Haas Family Trusts, incorporated by
reference to Exhibit 10.3 to The Dow Chemical Company Current Report
on Form 8-K filed on March 12,
2009.
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10(tt)
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Letter
Agreement, dated March 9, 2009, among The Dow Chemical Company,
Ramses Acquisition Corp. and Paulson & Co. Inc., incorporated by
reference to Exhibit 10.4 to The Dow Chemical Company Current Report
on Form 8-K filed on March 12,
2009.
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Computation
of Ratio of Earnings to Fixed
charges.
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Analysis,
Research & Planning Corporation’s
Consent.
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Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
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Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
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Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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99.1
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Replacement
Capital Covenant, dated April 1, 2009, relating to the Cumulative
Perpetual Preferred Stock, Series B, incorporated by reference to
Exhibit 99.2 to The Dow Chemical Company Current Report on
Form 8-K filed on April 1,
2009.
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99.2
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Replacement
Capital Covenant, dated April 1, 2009, relating to the Cumulative
Convertible Perpetual Preferred Stock, Series C, incorporated by
reference to Exhibit 99.3 to The Dow Chemical Company Current Report
on Form 8-K filed on April 1,
2009.
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99.3
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Guarantee
relating to the 5.60% Notes of Rohm and Haas Company, incorporated by
reference to Exhibit 99.4 to The Dow Chemical Company Current Report
on Form 8-K filed on April 1,
2009.
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99.4
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Guarantee
relating to the 6.00% Notes of Rohm and Haas Company, incorporated by
reference to Exhibit 99.5 to The Dow Chemical Company Current Report
on Form 8-K filed on April 1,
2009.
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99.5
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Guarantee
relating to the 9.80% Debentures of Rohm and Haas Company, incorporated by
reference to Exhibit 99.6 to The Dow Chemical Company Current Report
on Form 8-K filed on April 1,
2009.
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The
Dow Chemical Company and Subsidiaries
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EXHIBIT
10(b)
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1.
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Establishment and Purpose of
the Plan
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2.
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Definitions
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(a)
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Awardee:
An Employee to
whom Deferred Stock, Dividend Units, an Option or Options or Incentive
Rights are granted or awarded under the
Plan.
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(b)
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Board of Directors:
The
Board of Directors of the Company.
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(c)
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Common Stock:
The common
stock of the Company, par value $2.50 a share, or such other class or kind
of shares or other securities as may be applicable pursuant to the
provisions of Section 10.
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(d)
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Company:
The Dow
Chemical Company, a Delaware corporation, or any successor to
substantially all its business.
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(e)
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Compensation Committee or
Committee:
The committee designated to administer the Plan pursuant
to the provisions of Section 4 of the
Plan.
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(f)
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Deferred Stock
: Common
Stock awarded by the Compensation Committee pursuant to Section 6 of the
Plan.
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(g)
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Dividend Unit:
The
right, pursuant to either Section 7 or Section 9 of the Plan, to receive
for a specified period of time cash payments from the Company or a
Subsidiary equivalent in value to cash dividends paid during such period
on one share of Common Stock.
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(h)
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Employee:
A full-time
managerial, administrative or professional employee of the Company or a
Subsidiary, including an officer or director who is such an
employee.
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(i)
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Fair Market Value:
As
applied to a specific date, the average of the highest and lowest market
prices of Common Stock, as reported on the consolidated transaction
reporting system for New York Stock Exchange issues on such date or, if
Common Stock was not traded on such date, on the next preceding day on
which the Common Stock was traded. However, in the case of an
Incentive Stock Option, if such method of determining Fair Market Value
shall not be consistent with the regulations of the Secretary of the
Treasury or his delegate at the time applicable to an Incentive Stock
Option, Fair Market Value shall be determined in accordance with such
regulations and shall mean the value as so
determined.
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(j)
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Incentive Right:
A right
to receive a number of shares of Common Stock (and cash in lieu of a
fractional share), or Dividend Units granted as Incentive Rights, based
upon the increase in value of Common Stock, in respect of an Option
granted under the Plan to the extent that such Option shall not have been
exercised upon its expiration, as more particularly set forth in Section
9.
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(k)
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Incentive Stock
Option:
Any Option or Options intended to meet the
requirements of an incentive stock option or options as defined in Section
422A of the Internal Revenue Code of 1954 as amended or any statutory
provision that may replace such Section and designated an Incentive Stock
Option by the Compensation
Committee.
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(l)
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Non-Qualified Option or
Options
: Any Option or Options not intended to meet
either the requirements of a qualified stock option or options as defined
in Section 422 of the Internal Revenue Code of 1954 as amended or the
requirements of an incentive stock option or options as defined in Section
422A of the Internal Revenue Code of 1954 as
amended.
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(m)
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Option or Options:
Any
option or options granted from time to time under the Plan, including both
Non-Qualified Options and Incentive Stock
Options.
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(n)
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Plan:
The Dow Chemical
Company 1979 Award and Option Plan herein set forth, as the same may from
time to time be amended.
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(o)
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Subsidiary:
Any business
association (including a corporation or a partnership), other than the
Company, in an unbroken chain of such associations beginning with the
Company if, at the time of granting of an award or Option , each of the
associations other than the last association in the unbroken chain owns
equity interest (including stock or partnership interest)possessing 50% or
more of the total combined voting power of all classes of equity interests
- in one of the other associations in such
chain.
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3.
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Components
of the Plan
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4.
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Compensation
Committee; Interpretation and
Regulations
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(a)
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Constitution and Noneligibility
for Awards:
The Plan shall be administered by the Compensation
Committee as from time to time constituted pursuant to the By-Laws of the
Company. No person appointed to the Compensation Committee shall be
eligible for an award of Deferred Stock, Dividend Units, Options, or
Incentive Rights pursuant to the Plan or the allocation of stock of the
Company or the grant of a stock option pursuant to any other “plan” of the
Company or any of its affiliates, as prescribed in Rule l6b-3, of the
General Rules and Regulations under the Securities Exchange Act of 1934 as
at such time in effect or any other provision that may replace such Rule
and be in effect at such time, while serving on the Compensation
Committee.
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(b)
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Administrative Powers:
The Compensation Committee shall have full power to interpret and
administer the Plan and full authority to act in selecting the Employees
to whom Deferred Stock, Dividend Units, Options or Incentive Rights will
be granted, in determining the number of shares of Deferred Stock,
Dividend Units, Options or Incentive Rights to be granted to each such
Employee and the terms and conditions of awards granted under the Plan and
shall have the power to make regulations for carrying out the Plan and to
make such changes in such regulations as from time to time the
Compensation Committee deems proper. Any interpretation by the
Compensation Committee of the terms and provisions of the Plan and the
administration thereof, and all action taken by the Compensation
Committee, shall be final, binding and conclusive on the Company, its
stockholders, Subsidiaries, all Employees, their respective legal
representatives, successors and assigns and upon all other persons
claiming under or through any of them. Furthermore, the
Compensation Committee shall have the authority to determine, in the
committee’s sole discretion, which Options shall be intended to be
Incentive Stock Options for the purpose of this Plan and to designate said
Options as Incentive Stock Options in such manner as the Compensation
Committee may deem appropriate.
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(c)
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Limitation on Liability:
Members of the Board of Directors and members of the Compensation
Committee acting under the Plan shall be fully protected in relying in
good faith upon the advice of counsel and shall incur no liability except
for gross negligence or willful misconduct in the performance of their
duties.
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(d)
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Effect of Prior Awards on
Qualification to Act:
The fact that a member of the Board of
Directors shall at the time be, or shall theretofore have been or
thereafter may be, a person who has received or is eligible to receive
Deferred Stock, Dividend Units, Options or Incentive Rights shall not
disqualify such member from taking part in and voting at any time as a
member of the Board of Directors in favor of or against any amendment or
repeal of the Plan, provided that such action by the Board of Directors
shall be only in accordance with the recommendations of the Compensation
Committee as provided in Section
11.
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5.
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Reservation
of Shares
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6.
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Deferred
Stock Rules and Conditions
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(a)
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Deferred Stock Grants:
Deferred Stock shall be evidenced by Deferred Stock agreements in such
form or forms as the Compensation Committee shall from time to time
approve. Such agreements shall conform to the requirements of the plan and
may contain such other provisions (including provisions for the protection
of Deferred Stock in the event of mergers, consolidations, dissolutions,
and liquidations, and provisions to the effect that the shares of Common
Stock that may be issued subject to the Deferred Stock agreement shall be
shares of Common Stock transferred subject to restrictions precluding a
sale or other disposition for a period of time and requiring compliance
with any other terms and conditions) as the Compensation Committee shall
deem advisable.
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(b)
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Crediting of Deferred
Stock:
Upon determination of the number of shares of Deferred Stock
to be granted to an Awardee the Committee shall direct that the same be
credited to the Awardee’s account on the books of the Company but that
issuance and delivery of the same shall be deferred until the date or
dates provided in subsection 6(d) hereof. Prior to issuance and delivery
hereunder the Awardee shall have no rights as a stockholder with respect
to any shares of Deferred Stock credited to his or her account. The
Awardee’s right to future issuance and delivery of Deferred Stock may not
be sold, pledged, assigned or otherwise transferred (except as hereinafter
provided) and any attempt so to sell, pledge, assign or otherwise transfer
(except as hereinafter provided) shall be void and the account of the
Awardee shall be forfeited. The right of the Awardee to such future
issuance and delivery shall, however, be transferable by will or pursuant
to the laws of descent and distribution and an Awardee who has been
granted Deferred Stock may make a written designation of a beneficiary on
forms prescribed by and filed with the Compensation Committee. Upon the
death of an Awardee, such beneficiary, or, if no such designation of any
beneficiary has been made, the legal representative of such Awardee, shall
succeed to the rights of the
Awardee.
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(c)
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Payment Equivalent to
Dividends:
During the period that shares of Deferred Stock remain
credited to the account of an Awardee and before their issuance and
delivery, the Company shall pay to the Awardee as additional compensation
on each date for the payment of dividends on Common Stock a sum of money
equal to the amount the Awardee would have received if the shares of
Deferred Stock credited to the Awardee’s account had been issued and
delivered to the Awardee.
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(d)
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Delivery:
Subject to the
terms and conditions described below, the shares of Deferred Stock
credited to the account of an Awardee shall be issued and delivered to the
Awardee in one or more installments beginning with such date as the
Compensation Committee may determine. In each year prior to such delivery
the Awardee shall make arrangements satisfactory to the Compensation
Committee for the payment of any taxes required to be withheld in
connection with his or her right to Deferred Stock under the applicable
laws or other regulations of any governmental authority, whether Federal,
state or local and whether domestic or foreign. The Compensation Committee
may, in its sole discretion, modify or accelerate the delivery of any
shares of Deferred Stock after consulting with the Awardee or his or her
successors in the event of (i) death, (ii) hardship after termination of
employment, or (iii) any change in tax or other applicable laws,
decisions, regulations, or rulings that might have a substantial adverse
effect on either such Awardee (or his or her successors) or the
Company.
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(e)
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Forfeiture:
Shares of
Deferred Stock may be forfeited if the Awardee terminates his or her
employment with the Company or its Subsidiaries for any reason other than
death or retirement, except that the Compensation Committee shall have the
authority to provide for the continuation of such Deferred Stock in whole
or in part whenever the Compensation Committee in its judgment shall
determine that such continuation is in the best interests of the Company.
Shares of Deferred Stock may furthermore be forfeited by an Awardee if the
Compensation Committee determines that the Awardee has at any time engaged
in any activity harmful to the interest of or in competition with the
Company or its Subsidiaries or accepts employment with a
competitor.
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7.
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Dividend
Unit Rules and Conditions
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(a)
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Dividend Unit Grants:
Dividend Units shall be evidenced by Dividend Unit agreements in such form
or forms as the Compensation Committee shall from time to time approve.
Such agreements shall conform to the requirements of the Plan and may
contain such other provisions (including provisions for the protection of
Dividend Units in the event of mergers, consolidations, dissolutions, and
liquidations, provisions that may require the Awardee of Dividend Units to
be available to render such consultant or advisory services for the
Company or its Subsidiaries as the Company may request and as may be
reasonable following the Awardee’s retirement before the expiration of his
or her Dividend Units, and provisions requiring compliance with any other
terms and conditions) as the Compensation Committee shall deem
advisable.
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(b)
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Limitations on Numbers:
The total number of Dividend Units granted to Employees under this Section
7 shall not exceed 4,000,000 outstanding at any one time, a number that
shall be subject to adjustment as provided in Section10. Any Dividend
Units terminating during the period of granting authority may be granted
again during such period to the same or different Employees at the
discretion of the Committee.
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(c)
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Duration:
Unless
forfeited as hereinafter provided, Dividend Units shall remain in effect
for such period or periods of time as the Compensation Committee shall
specify but in no event beyond the date of the death of the Awardee except
that the Compensation Committee may upon granting Dividend Units provide
for payment of the same to the surviving spouse of an Awardee until the
death of such spouse or until the eightieth anniversary of the Awardee’s
birth, whichever shall first occur.
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(d)
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Forfeiture:
Dividend
Units may be forfeited if the Awardee terminates his or her employment
with the Company or its Subsidiaries for any reason other than death or
retirement, except that the Compensation Committee shall have the
authority to provide for the continuation of such Dividend Units in whole
or in part whenever the Compensation Committee in its judgment shall
determine that such continuation is in the best interest of the Company.
Dividend Units may furthermore be forfeited by an Awardee if the
Compensation Committee determines that the Awardee has at any time engaged
in any activity harmful to the interest of or in competition with the
Company or its Subsidiaries or accepts employment with a
competitor.
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(e)
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Non-assignability:
Dividend Units may not be pledged, assigned or transferred for any
reason.
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8.
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Option
Rules and Conditions
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(a)
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Option Grants:
Options
shall be evidenced by Option agreements in such form or forms as the
Compensation Committee shall from time to time approve. Such agreements
shall conform to the requirements of the Plan, and may contain such other
provisions (including restrictions upon the exercise of the Option,
provisions for the protection of Options in the event of mergers,
consolidations, dissolutions, and liquidations, and provisions to the
effect that the shares subject to the Option shall be shares of Common
Stock transferred subject to restrictions precluding a sale or other
disposition for a period of time and requiring compliance with any other
terms and conditions) as the Compensation Committee shall deem
advisable.
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(b)
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Option Price:
The price
at which Common Stock may be purchased upon exercise of an Option shall be
determined by the Compensation Committee, but shall in no event be less
than the greater of the Fair Market Value of such shares on the date the
Option is granted or the par value of such Common
Stock.
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(c)
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Terms of Options:
Each
Option shall be exercisable during such period of time as the Compensation
Committee shall determine. Each such Option shall in all events, however,
and notwithstanding any provision of Section 12(d), not be exercisable
after the expiration of ten years from the date on which the Option shall
have been granted. Except in the case of death, disability or retirement,
each Option shall, however, terminate upon termination of employment of
the Awardee with the Company and its Subsidiaries, notwithstanding the
fact that the stated term of such Option may not have expired. In the
event of retirement, any Non-Qualified Option shall terminate not later
than three years after retirement and any Incentive Stock Option not later
then three months after retirement, provided, however, that the expiration
date for Options granted as Incentive Stock Options may be extended by the
Compensation Committee to a date that is not more than three years after
the date of an Awardee’s retirement (such Options being Non-Qualified
Options after the original expiration date). In the case of death of the
Awardee while employed by the Company or a Subsidiary the Option shall
terminate on such date as shall be provided in the Option Agreement or
three years from the date of death, whichever shall be the earlier. In the
case of disability of the Awardee while employed by the Company or a
Subsidiary, each Option shall terminate on such date as shall be provided
in the Option Agreement or three years from the dare of disability in the
case of a Non-Qualified Option and one year from such date in the case of
an Incentive Stock Option, whichever shall be the earlier. In cases of the
sale of a subsidiary, division, business or other unit of the Company or a
Subsidiary, the expiration dates for Options held by Awardees who are
transferred to the purchaser in connection with such a sale may be
extended by the Compensation Committee to a date that is not more than
three years after the date of the sale, but not beyond the original
expiration date of the option. The Compensation Committee shall have the
sole power to determine under the circumstances of each case whether or
not a leave of absence or entering military service shall constitute
cessation of employment, but with respect to an Incentive Stock Option
such leaves of absence not constituting cessation of employment shall be
limited to those permitted under the laws and regulations governing
incentive stock options.
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(d)
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Incentive Stock
Option:
Each provision of the Plan and of each Option
agreement relating to an Incentive Stock Option shall be construed so that
each Incentive Stock Option shall be an incentive stock option as defined
in Section 422A of the Internal Revenue Code of 1954 as amended or any
statutory provision that may replace such Section, and any provisions
thereof that cannot be so construed shall be disregarded. The
total number of shares of Common Stock that may be purchased upon exercise
of Incentive Stock Options shall not exceed the total specified in Section
5. Incentive Stock Options shall, in addition to complying with
the other provisions of the Plan relating to Options generally, be subject
to the following conditions:
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(i)
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Each
Incentive Stock Option shall in all events, and notwithstanding any
provision of 8(c), 8(f) or 12(d), not be exercisable after the expiration
of ten years from the date of which such Incentive Stock Option shall have
been granted.
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(ii)
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No
Incentive Stock Option is exercisable by the Awardee while a previously
granted Incentive Stock Option grated to the Awardee is
outstanding.
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(iii)
|
In
the case of an Incentive Stock Option granted to an Employee who, at the
time the Incentive Stock Option is granted, owns stock possessing more
then 10% of the total combined voting power of all classes of stock of the
Company or any of its Subsidiaries, the option price shall be at least
110% of the Fair Market Value of the stock subject to the Incentive Stock
Option and such Incentive Stock Option shall not be exercisable after the
expiration of 5 years for the date such Incentive Stock Option is granted
notwithstanding any other provision of the Plan or any Option
Agreement.
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(iv)
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The
aggregate Fair Market Value of the Common Stock for which any Employee may
be granted Incentive Stock Options after December 31, 1980 is limited to
$100,000 per year (determined as of the time the Incentive Stock Option is
granted). The maximum carryover from any single year is
one-half of the amount by which $100,000 exceeds the Fair market Value of
the Common Stock for which an Employee was granted Incentive Stock Options
in that year. Such amount may be carried over to each of the
three succeeding calendar years.
|
(v)
|
Any
other terms and conditions that the Compensation Committee determines,
upon advice of counsel, must be imposed for the Option to be an Incentive
Stock Option.
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(e)
|
Multiple Non-Qualified
Options/Incentive Stock Option Grants:
An Employee may
be granted both Non-Qualified Option and Incentive Stock Options, either
concurrently or separately, subject to the limitations set forth in 8(d),
and to such other limitations as may be imposed on the aggregate number of
shares of Common Stock that may be purchased under either or both types of
grants.
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(f)
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Exercise of
Option:
An Option may be exercised by the Awardee to
whom it is granted after the expiration of such period of time immediately
following the date on which the Option is granted as shall be recommended
by the Compensation Committee and prescribed in the Option Agreement. In
no event shall the required period of time be less than one year. After
the expiration of the required period of time, the Option may be exercised
according to its terms during the balance of the term of the Option. The
purchase price of the shares of Common Stock for which an Option shall be
exercised shall be paid in full in cash at the time of the exercise or,
with the consent of the Compensation Committee, in whole or in part in
Common Stock valued at Fair Market Value. An Awardee shall have no rights
of a stockholder with respect to any shares of Common Stock subject to an
Option unless and until a stock certificate for such shares shall have
been issued to him or her. Incentive Stock Options must be
exercised in the same sequential order in which they were
granted.
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(g)
|
Assignment:
During the
lifetime of an Awardee, no Option may be exercised by any person other
than the Awardee. An Option may not be pledged, assigned or transferred
except by will, under the laws of descent and distribution or as otherwise
provided in subsection (h) hereof, nor may any Incentive Rights be
pledged, assigned or transferred except by will, under the laws of descent
and distribution or as otherwise provided in subsection (h)
hereof.
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(h)
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Beneficiary Upon an Awardee’s
Death:
An Awardee holding an Option or an Incentive Right may make
a written designation of a beneficiary on forms prescribed by and filed
with the Compensation Committee. Upon the death of an Awardee, such
beneficiary, or, if no such designation of any beneficiary has been made,
the legal representative of such Awardee may exercise any unterminated and
unexpired Option or any Incentive Right granted to such Awardee and
otherwise succeed to the rights of such
Awardee.
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(i)
|
Forfeiture:
Options
shall be forfeited by an Awardee if the Compensation Committee determines
that the Awardee has at any time engaged in any activity harmful to the
interest of or in competition with the Company or its Subsidiaries or
accepts employment with a
competitor.
|
9.
|
Incentive
Rights, Rules and Conditions
|
(a)
|
Incentive Rights Grants:
Incentive Rights shall be evidenced by Incentive Rights agreements in such
form or forms as the Compensation Committee shall from time to time
approve. Such agreements shall conform to the requirements of the Plan and
may contain such other provisions (including provisions deferring the
issuance and delivery of any Common Stock that may be granted to an
Awardee pursuant to his or her Incentive Right until a date or dates
determined pursuant to subsection (d) of Section 6, above, as well as
providing for payments equivalent to dividends during the period the
issuance and delivery of such Common Stock is deferred and requiring
compliance with any other terms and conditions) as the Compensation
Committee shall deem advisable. An Incentive Rights agreement relating to
an Option may be made a part of the related Option agreement or may be
granted pursuant to a separate Incentive Rights agreement at any time
prior to the expiration of such
Option.
|
(b)
|
Nature of Incentive
Rights:
An Incentive Right shall entitle the Awardee (or, in the
event of his or her death, the person or persons to whom the related
Option shall have been transferred by will, the laws of descent and
distribution or as provided in Section 8(h) above) upon expiration of the
related Option during the Awardee’s employment as a result of the lapse of
time or following the termination of the Awardee’s employment as a result
of his or her retirement or death, but not otherwise, to receive either
(i) the number of shares of Common Stock determined under subsection (c)
hereof, without payment to the Company, or (ii) a number of Dividend
Units, determined by the Compensation Committee, which number shall not
exceed three times the number of shares of Common Stock which would
otherwise be transferred pursuant to the Incentive Right, the selection of
the appropriate form of Incentive Right being made by the Compensation
Committee in its discretion. Dividend Units granted as Incentive Rights
shall not be subject to the limitations on numbers or otherwise affect the
number of Dividend Units that may otherwise be granted under Section
7.
|
(c)
|
Limit on Size of Incentive
Rights:
The number of shares of Common Stock that shall be
transferred in respect of an Incentive Right or used as a measure of
Dividend Units granted as Incentive Rights shall be determined by
dividing
|
(i)
|
the
total number of shares of Common Stock that could have been, but were not,
purchased by exercise of the Option to which it relates (as determined
pursuant to Sections 8(c) and 8(f), and as adjusted pursuant to Section
10) on the last day such Option could have been exercised, multiplied by
the amount by which the Fair Market Value of a share of Common Stock on
such last day of exercise exceeds the option price of the Option,
by
|
(ii)
|
the
Fair Market Value of a share of Common Stock on such last day of
exercise.
|
(d)
|
No
fractional shares shall be issued under this subsection, but, in lieu
thereof, an adjustment shall be made in cash equal to the same fraction of
the Fair Market Value of a share of Common Stock on such date of
expiration.
|
(e)
|
Awardee’s Rights as a
Stockholder:
An Awardee shall have no rights as a stockholder with
respect to any shares of Common Stock subject to an Incentive Right unless
and until a stock certificate for such shares shall have been issued to
him or her.
|
(f)
|
Dividend Units Granted as
Payment of Incentive Rights:
Dividend Units shall be granted as
payment of Incentive Rights for such period or periods of time as the
Compensation Committee shall specify but in no event beyond the date of
the death of the Awardee, except that the Compensation Committee may, upon
granting such Dividend Units, provide for payment of the same to the
surviving spouse of an Awardee until the death of such spouse or until the
eightieth anniversary of the Awardee’s birth, whichever shall first occur.
Such payments may be made subject to such other terms and conditions, if
any, as the Compensation Committee shall
specify.
|
10.
|
Adjustments
Upon Changes in Capitalization
|
11.
|
Termination
and Amendment
|
(a)
|
Without
the consent of the affected Awardee, impair any Option or the terms of any
other award theretofore granted under the Plan or, except as otherwise
provided in the Plan, deprive any Awardee of any shares of Common Stock
that he or she may have acquired through or as a result of the
Plan;
|
(b)
|
Increase
the total number of shares of Deferred Stock to be awarded or the total
number of shares reserved for Options to be awarded under the
Plan;
|
(c)
|
Increase
the total number of shares of Common Stock that may be transferred in
respect of Incentive Rights or that may be used as a measure of Dividend
Units, either in the aggregate or with respect to any one
Awardee;
|
(d)
|
Decrease
the purchase price of any Option below the Fair Market Value on the date
of grant;
|
(e)
|
Extend
the period during which shares of Deferred Stock, Dividend Units, Options
or Incentive Rights may be awarded, or the period during which Options may
be exercised;
|
(f)
|
Extend
the time during which payments in respect of Dividend Units may be
made;
|
(g)
|
Abolish
the Compensation Committee, change eligibility for membership on the
Compensation Committee (except as may from time to time be required by
law) or permit the grant of Deferred Stock, Dividend Units, Options or
Incentive Rights to members or former members of the Compensation
Committee; or
|
(h)
|
Change
the provisions of this Section 11.
|
12.
|
General
Provisions
|
(a)
|
Nothing
contained in the Plan, or in any award granted pursuant to the Plan, shall
confer upon any Employee any right with respect to continuance of
employment by the Company or a Subsidiary, nor interfere in any way with
the right of the Company or a Subsidiary to terminate the employment of
any Employee at any time with or without assigning any reason
therefor.
|
(b)
|
For
purposes of this Plan, transfer of employment from the Company to a
Subsidiary, from a Subsidiary to the Company, or from one Subsidiary to
another Subsidiary shall not be deemed termination of
employment.
|
(c)
|
Appropriate
provision may be made for all taxes required to be withheld in connection
with any award, the exercise thereof and the transfer of shares of Common
Stock or grant of and payment in respect of any Dividend Units under the
applicable laws or other regulations of any governmental authority,
whether Federal, state or local and whether domestic or
foreign.
|
(d)
|
If
any day on or before which action under the Plan must be taken falls on a
Saturday, Sunday or legal holiday, such action may be taken on the next
succeeding day not a Saturday, Sunday or legal
holiday.
|
(e)
|
Without
amending the Plan, awards may be granted to Employees who are foreign
nationals or employed outside the United States or both, on such terms and
conditions different from those specified in the Plan as may, in the
judgment of the Compensation Committee, be necessary or desirable to
further the purpose of the Plan.
|
(f)
|
To
the extent that Federal laws (such as the Securities Exchange Act of 1934
or the Employee Retirement Income Security Act of 1974) do not otherwise
control, the Plan and all determinations made and actions taken pursuant
hereto shall be governed by the law of Delaware and construed
accordingly.
|
The
Dow Chemical Company and Subsidiaries
|
EXHIBIT
10(b)(i)
|
|
|
The
Dow Chemical Company and Subsidiaries
|
EXHIBIT
10(b)(ii)
|
|
|
The
Dow Chemical Company and Subsidiaries
|
EXHIBIT
10(b)(iii)
|
|
|
|
(g)
|
Notwithstanding
any other provision of the Plan to the
contrary:
|
|
(i)
|
Deferred
Stock
: Upon the occurrence of a Change in Control, an
Awardee’s right to receive the number of shares of Deferred Stock credited
to the account of the Awardee shall not be forfeitable under any
circumstances, including but not limited to those circumstances set forth
in subsection 6(e) of the Plan. The Company shall deliver to
the Awardee the shares of Deferred Stock credited to the account of the
Awardee on the thirtieth day following the occurrence of a Change in
Control unless the Awardee elects prior to the date of delivery of such
Deferred Stock to receive a lump sum cash amount in lieu of such Deferred
Stock, equal to the number of shares of Deferred Stock credited to the
account of the Awardee multiplied by the greater of: (A) the highest price
per share paid for the purchase of Common Stock in connection with the
Change in Control and (B) the highest closing price per share paid for the
purchase of Common Stock on the principal exchange on which the Common
Stock is listed, or, if the Common Stock is not listed, on the NASD
automatic quotation system, during the 30-day period immediately preceding
the Change in Control. The Compensation Committee shall have no
discretion or authority to alter or delay the amount or form of payment of
the Awardee’s shares of Deferred Stock, except to accelerate such
payment.
|
|
(ii)
|
Dividend
Units
: Within 30 days after the occurrence of a Change
in Control, the Company shall pay to each Awardee an amount in cash, in a
lump sum, equal to the product of (A), (B), (C) and (D), where (A) is
equal to the amount of the dividend on a share of Common Stock most
recently declared prior to the Change in Control, (B) is equal to the
number of Dividend Units granted to an Awardee pursuant to a Dividend Unit
agreement, (C) is equal to the number of calendar quarters remaining
during the term of the applicable Dividend Unit agreement and (D) is equal
to 90 percent.
|
|
(iii)
|
Definition
:
“Change in Control” shall mean a change in control of the Company of a
nature that would be required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), whether or not the Company
is then subject to such reporting requirement; provided that, without
limitation, a Change in Control shall be deemed to have occurred if (A)
any individual, partnership, firm, corporation, association, trust,
unincorporated organization or other entity, or any syndicate or group
deemed to be a person under Section 14(d) (2) of the Exchange Act, is or
becomes the “beneficial owner” (as defined in Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), directly or indirectly, of
securities of the Company representing 20 percent or more of the combined
voting power of the Company’s then outstanding securities entitled to vote
in the election of directors of the Company; or (B) during any period of
two (2) consecutive years (not including any period prior to the execution
of this Agreement), individuals who at the beginning of such period
constitute the Board of Directors and any new directors, whose election by
the Board of Directors or nomination for election by the Company’s
stockholders was approved by a vote of at least three quarters (3/4) of
the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority
thereof; provided, further, that a change in control shall not be deemed
to be a Change in Control for purposes of this Agreement if the Board of
Directors has approved such change in control prior to either the
occurrence of any of the events described in the foregoing clauses (A) and
(B) or the commencement by any person other than the Company of a tender
offer for the Common Stock not approved by the Board of Directors prior to
such commencement.
|
The
Dow Chemical Company and Subsidiaries
|
EXHIBIT
10(e)
|
|
|
|
2.01 Awardee:
An
Employee to whom Dividend Units are awarded under the
Plan.
|
|
2.02 Board
of Directors:
The Board of Directors of the
Company.
|
|
2.03 Common
Stock:
The common stock of the Company, par value $2.50
a share.
|
|
2.04 Company:
The Dow Chemical Company, a Delaware corporation, or any successor
to substantially all its business.
|
|
2.05 Compensation
Committee or Committee:
The committee designated to
administer the Plan under
Section 4.
|
|
2.06 Dividend
Unit:
The right awarded by the Committee under Section 5 of the
Plan.
|
|
2.07 Employee:
A
full-time managerial, administrative or professional employee of the
Company or a Subsidiary, including an officer or director who is such an
employee.
|
|
2.08 Plan:
The
Dow Chemical Company Dividend Unit Plan herein set forth, as the same may
from time to time be amended.
|
|
2.09 Subsidiary:
Any business association (including a corporation or a partnership,
other than the Company) in an unbroken chain of such associations
beginning with the Company if each of the associations other than the last
association in the unbroken chain owns equity interests (including stock
or partnership interests) possessing 50% or more of the total combined
voting power of all classes of equity interests in one of the other
associations in such chain.
|
|
4.01 Constitution
and Noneligibility for Awards:
The Plan shall be
administered by the Compensation Committee as established in the By—Laws
of the Company. No persons appointed to the Compensation Committee shall
be eligible for an award of Dividend Units while serving on the
Committee.
|
|
4.02 Administrative
Powers:
The Compensation Committee shall have full power
to interpret and administer the Plan and full authority to act in
selecting the Employees to whom awards will be granted, the terms and
conditions of awards granted under the Plan and the term of agreements
which will be entered into with Awardees. The Compensation Committee shall
have the power to make regulations for carrying out the Plan and to make
changes in such regulations as they from time to time deem proper. Any
interpretation by the Compensation Committee of the terms and provisions
of the Plan and the administration thereof, and all action taken by the
Compensation Committee, shall be final, binding and conclusive on the
Company, its stockholders, Subsidiaries, all Employees, their respective
legal representatives, successors and assigns and upon all other persons
claiming under or through any of them. As to the selection of and grants
of dividend units to Awardees who are not subject to Sections 16(a) and
16(b) of the Securities Exchange Act of 1934, the Committee may delegate
any or all of its responsibilities to members of the Company’s
administration.
|
|
4.03 Limitation
on Liability:
Members of the Board of Directors and
members of the Compensation Committee acting under the Plan shall be fully
protected in relying in good faith upon the advice of counsel and shall
incur no liability except for gross negligence or willful misconduct in
the performance of their duties.
|
|
5.01 Dividend
Unit Grants:
Dividend Units, which are rights to receive
for a specified period of time cash payments from the Company or a
Subsidiary equivalent in value to cash dividends paid during that period
on one share of Common Stock, shall be evidenced by Dividend Unit
agreements. Such agreements shall conform to the requirements of the Plan
and may contain such other provisions (including provisions for the
protection of Dividend Units in the event of mergers, consolidations,
dissolutions, and liquidations) as the Committee shall deem
advisable.
|
|
5.02 Duration:
Unless
forfeited as hereinafter provided, Dividend Units shall remain in effect
for such period of time as the Compensation Committee shall specify but in
no event beyond the date of the death of the Awardee except that the
Committee may upon granting Dividend Units provide for payment of the same
to the surviving spouse of an Awardee until the earlier of the death of
such spouse or the original expiration
date.
|
|
10.01
Nothing
contained in the Plan, or in any award granted pursuant to the Plan, shall
confer upon any Employee any right with respect to continuance of
employment by the Company or a Subsidiary, nor interfere in any way with
the right of the Company or a Subsidiary to terminate the employment of
any Employee at any time with or without assigning any reason
therefor.
|
|
10.02
For
purposes of this Plan, transfer of employment from the Company to a
Subsidiary, from a Subsidiary to the Company, or from one Subsidiary to
another Subsidiary shall not be deemed termination of employment. In
addition, the Committee may on a case—by—case basis treat a transfer to a
related company which is not a Subsidiary as not being a termination of
employment.
|
|
10.03
Appropriate
provision may be made for all taxes required to be withheld in connection
with any grant of and payment in respect of any Dividend Units under the
applicable laws or other regulations of any governmental authority,
whether Federal, state or local and whether domestic or
foreign.
|
|
10.04
Without
amending the Plan, awards may be granted to Employees who are foreign
nationals or employed outside the United States or both, on such terms and
conditions different from those specified in the Plan as may, in the
judgment of the Compensation Committee, be necessary or desirable to
further the purpose of the Plan.
|
|
10.05
To
the extent that Federal laws (such as the Securities Exchange Act of 1934,
the Internal Revenue Code of 1954 or the Employee Retirement Income
Security Act of 1974) do not otherwise control, the Plan and all
determinations made and actions taken pursuant hereto shall be governed by
the law of Delaware and construed
accordingly.
|
|
10.06
Notwithstanding
any other provision of the Plan to the
contrary:
|
|
(i)
Within
30 days after the occurrence of a Change in Control, the Company shall pay
to each Awardee an amount in cash, in a lump sum, equal to the product of
(A), (B), (C) and (B), where (A) is equal to the amount of the dividend on
a share of Common Stock most recently declared prior to the Change in
Control, (B) is equal to the number of Dividend Units granted to an
Awardee pursuant to a Dividend Unit agreement, (C) is equal to the number
of regular dividend payment dates (assuming normal quarterly dividends)
remaining during the term of the applicable Dividend Unit agreement and
(D) is equal to 90 percent.
|
|
(ii)
Definition:
“Change
in Control” shall mean a change in control of the Company of a nature that
would be required to be reported in response to Item 5(f) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), whether or not the Company is then
subject to such reporting requirement; provided that, without limitation,
a Change in Control shall be deemed to have occurred if (A) any
individual, partnership, firm, corporation, association, trust,
unincorporated organization or other entity, or any syndicate or group
deemed to be a person under Section 14(d)(2) of the Exchange Act, is or
becomes the “beneficial owner” (as defined in Rule 13d—3 of the General
Rules and Regulations under the Exchange Act) , directly or indirectly, of
securities of the Company representing 20% or more of the combined voting
power of the company’s then outstanding securities entitled to vote in the
election of directors of the Company; or (B) during any period of two (2)
consecutive years (not including any period prior to the execution of this
Plan), individuals who at the beginning of
such
|
The
Dow Chemical Company and Subsidiaries
|
EXHIBIT
10(i)
|
|
|
This
document constitutes part of a prospectus covering
securities
that have been or will be registered under the
Securities
Act of 1933.
|
The
Dow Chemical Company and Subsidiaries
|
EXHIBIT
12.1
|
|
|
Three Months
Ended March 31
|
For
the Year Ended December 31
|
|||||||||||||||||||||||||||
In
millions, except ratio (Unaudited)
|
2009
|
2008
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||||||||
Income
before Income Taxes
|
$ | 17 | $ | 1,264 | $ | 1,321 | $ | 4,229 | $ | 4,972 | $ | 6,399 | $ | 3,796 | ||||||||||||||
Add
(deduct):
|
||||||||||||||||||||||||||||
Equity
in earnings of nonconsolidated affiliates
|
(65 | ) | (274 | ) | (787 | ) | (1,122 | ) | (959 | ) | (964 | ) | (923 | ) | ||||||||||||||
Distributed
income of earnings of nonconsolidated affiliates
|
561 | 319 | 836 | 774 | 616 | 495 | 370 | |||||||||||||||||||||
Capitalized
interest
|
(25 | ) | (26 | ) | (97 | ) | (85 | ) | (73 | ) | (56 | ) | (48 | ) | ||||||||||||||
Amortization
of capitalized interest
|
23 | 21 | 84 | 79 | 70 | 70 | 65 | |||||||||||||||||||||
Preferred
security dividends
|
(10 | ) | (20 | ) | (63 | ) | (81 | ) | (77 | ) | (65 | ) | (54 | ) | ||||||||||||||
Adjusted
earnings
|
$ | 501 | $ | 1,284 | $ | 1,294 | $ | 3,794 | $ | 4,549 | $ | 5,879 | $ | 3,206 | ||||||||||||||
Fixed
charges:
|
||||||||||||||||||||||||||||
Interest
expense and amortization of debt discount
|
$ | 154 | $ | 145 | $ | 648 | $ | 584 | $ | 616 | $ | 702 | $ | 747 | ||||||||||||||
Capitalized
interest
|
25 | 26 | 97 | 85 | 73 | 56 | 48 | |||||||||||||||||||||
Preferred
security dividends
|
10 | 20 | 63 | 81 | 77 | 65 | 54 | |||||||||||||||||||||
Rental
expense – interest component
|
26 | 28 | 120 | 124 | 131 | 133 | 135 | |||||||||||||||||||||
Total
fixed charges
|
$ | 215 | $ | 219 | $ | 928 | $ | 874 | $ | 897 | $ | 956 | $ | 984 | ||||||||||||||
Earnings
available for the payment of fixed charges
|
$ | 716 | $ | 1,503 | $ | 2,222 | $ | 4,668 | $ | 5,446 | $ | 6,835 | $ | 4,190 | ||||||||||||||
Ratio
of earnings to fixed charges
|
3.3 | 6.9 | 2.4 | 5.3 | 6.1 | 7.2 | 4.3 |
Analysis,
Research & Planning Corporation’s Consent
|
EXHIBIT
23
|
|
|
Form
S-3:
|
|
Nos.
|
333-140859
|
Form
S-4:
|
|
No.
|
333-88443
|
Form
S-8:
|
|
Nos.
|
2-64560
|
33-21748
|
|
33-51453
|
|
33-52841
|
|
33-58205
|
|
33-61795
|
|
333-27381
|
|
333-40271
|
|
333-43730
|
|
333-49183
|
|
333-67414
|
|
333-88443
|
|
333-91027
|
|
333-103518
|
|
333-103519
|
|
333-105080
|
|
333-115185
|
|
333-122932
|
|
333-145015
|
|
333-155074
|
/s/
B.
THOMAS FLORENCE
|
B.
Thomas Florence
President
Analysis,
Research & Planning Corporation
April 30,
2009
|
The Dow Chemical Company and
Subsidiaries
|
EXHIBIT
31(a)
|
|
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of The Dow Chemical
Company;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c)
|
evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
d)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent
function):
|
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
|
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
/s/
ANDREW N. LIVERIS
|
Andrew
N. Liveris
President,
Chief Executive Officer and
Chairman
of the Board
|
The Dow Chemical Company and
Subsidiaries
|
EXHIBIT
31(b)
|
|
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of The Dow Chemical
Company;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c)
|
evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
d)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent
function):
|
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
|
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
/s/
GEOFFERY E. MERSZEI
|
Geoffery
E. Merszei
Executive
Vice President and Chief Financial
Officer
|
The Dow Chemical Company and
Subsidiaries
|
EXHIBIT
32(a)
|
|
|
1.
|
the
Quarterly Report on Form 10-Q of the Company for the quarter ended March
31, 2009 as filed with the Securities and Exchange Commission (the
“Report”) fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934;
and
|
2.
|
the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
/s/
ANDREW N. LIVERIS
|
Andrew
N. Liveris
President,
Chief Executive Officer and
Chairman
of the Board
May
4, 2009
|
The Dow Chemical Company and
Subsidiaries
|
EXHIBIT
32(b)
|
|
|
1.
|
the
Quarterly Report on Form 10-Q of the Company for the quarter ended March
31, 2009 as filed with the Securities and Exchange Commission (the
“Report”) fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934;
and
|
2.
|
the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
/s/
GEOFFERY E. MERSZEI
|
Geoffery
E. Merszei
Executive
Vice President and Chief Financial Officer
May 4,
2009
|