Dow Chemical 2013 Annual Report Download - page 136

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or convey all or substantially all of the Company’s assets. The outstanding debt also contains customary default provisions.
Failure of the Company to comply with any of these covenants could result in a default under the applicable indenture, which
would allow the note holders to accelerate the due date of the outstanding principal and accrued interest on the underlying
notes.
The Company’s primary, private credit agreements also contain certain customary restrictive covenant and default provisions in
addition to the covenants set forth above with respect to the Company’s debt. Significant other restrictive covenants and default
provisions related to these agreements include:
(a) the obligation to maintain the ratio of the Company’s consolidated indebtedness to consolidated capitalization at no
greater than 0.65 to 1.00 at any time the aggregate outstanding amount of loans under the Five Year Competitive
Advance and Revolving Credit Facility Agreement dated October 18, 2011 equals or exceeds $500 million,
(b) a default if the Company or an applicable subsidiary fails to make any payment, including principal, premium or
interest, under the applicable agreement on other indebtedness of, or guaranteed by, the Company or such applicable
subsidiary in an aggregate amount of $100 million or more when due, or any other default or other event under the
applicable agreement with respect to such indebtedness occurs which permits or results in the acceleration of
$400 million or more in the aggregate of principal, and
(c) a default if the Company or any applicable subsidiary fails to discharge or stay within 60 days after the entry of a final
judgment against the Company or such applicable subsidiary of more than $400 million.
Failure of the Company to comply with any of the covenants or default provisions could result in a default under the applicable
credit agreement which would allow the lenders to not fund future loan requests and to accelerate the due date of the
outstanding principal and accrued interest on any outstanding indebtedness.
NOTE 17 – PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Pension Plans
The Company has defined benefit pension plans that cover employees in the United States and a number of other countries. The
U.S. qualified plan covering the parent company is the largest plan. Benefits for employees hired before January 1, 2008 are
based on length of service and the employee’s three highest consecutive years of compensation. Employees hired after
January 1, 2008 earn benefits that are based on a set percentage of annual pay, plus interest.
The Company’s funding policy is to contribute to the plans when pension laws and/or economics either require or encourage
funding. In 2013, Dow contributed $865 million to its pension plans, including contributions to fund benefit payments for its
non-qualified supplemental plans. Dow expects to contribute approximately $800 million to its pension plans in 2014.
The weighted-average assumptions used to determine pension plan obligations and net periodic benefit costs for the plans are
provided in the two tables below:
Weighted-Average Assumptions
for All Pension Plans
Benefit Obligations
at December 31
Net Periodic Costs
for the Year
2013 2012 2011 2013 2012 2011
Discount rate 4.54% 3.88% 4.93% 3.88% 4.93% 5.38%
Rate of increase in future compensation levels 4.15% 3.96% 4.14% 3.96% 4.14% 4.16%
Expected long-term rate of return on plan assets — — — 7.47% 7.60% 7.86%
Weighted-Average Assumptions
for U.S. Pension Plans
Benefit Obligations
at December 31
Net Periodic Costs
for the Year
2013 2012 2011 2013 2012 2011
Discount rate 4.92% 4.02% 4.98% 4.02% 4.98% 5.51%
Rate of increase in future compensation levels 4.50% 4.50% 4.50% 4.50% 4.50% 4.50%
Expected long-term rate of return on plan assets — — — 7.85% 7.83% 8.18%