Dow Chemical 2009 Annual Report Download - page 156

Table of Contents
Other Litigation Matters
In addition to breast implant, DBCP, environmental and synthetic rubber industry matters, the Company is party to a number of other claims and lawsuits
arising out of the normal course of business with respect to commercial matters, including product liability, governmental regulation and other actions. Certain
of these actions purport to be class actions and seek damages in very large amounts. All such claims are being contested. Dow has an active risk management
program consisting of numerous insurance policies secured from many carriers at various times. These policies provide coverage that will be utilized to
minimize the impact, if any, of the contingencies described above.
Summary
Except for the possible effect of Union Carbide’s asbestos-related liability described above, it is the opinion of the Company’s management that the possibility
is remote that the aggregate of all claims and lawsuits will have a material adverse impact on the Company’s consolidated financial statements.
Purchase Commitments
The Company has numerous agreements for the purchase of ethylene-related products globally. The purchase prices are determined primarily on a cost-plus
basis. Total purchases under these agreements were $784 million in 2009, $1,502 million in 2008 and $1,624 million in 2007. The Company’s take-or-pay
commitments associated with these agreements at December 31, 2009 are included in the table below.
The Company also has various commitments for take-or-pay and throughput agreements. Such commitments are at prices not in excess of current market
prices. The terms of all but two of these agreements extend from one to 25 years. One agreement has terms extending to 35 years and another has terms
extending to 80 years. The determinable future commitments for these agreements are included for 10 years in the following table which presents the fixed and
determinable portion of obligations under the Company’s purchase commitments at December 31, 2009:
Fixed and Determinable Portion of Take-or-Pay and
Throughput Obligations at December 31, 2009
In millions
2010 $ 2,845
2011 2,655
2012 1,716
2013 1,088
2014 944
2015 and beyond 5,969
Total $ 15,217
In addition to the take-or-pay obligations at December 31, 2009, the Company had outstanding commitments which ranged from one to seven years for
steam, electrical power, materials, property and other items used in the normal course of business of approximately $48 million. Such commitments were at
prices not in excess of current market prices.
Guarantees
The Company provides a variety of guarantees, as described more fully in the following sections.
Guarantees
Guarantees arise during the ordinary course of business from relationships with customers and nonconsolidated affiliates when the Company undertakes an
obligation to guarantee the performance of others (via delivery of cash or other assets) if specified triggering events occur. With guarantees, such as commercial
or financial contracts, non-performance by the guaranteed party triggers the obligation of the Company to make payments to the beneficiary of the guarantee.
The majority of the Company’s guarantees relate to debt of nonconsolidated affiliates, which have expiration dates ranging from less than one year to eleven
years, and trade financing transactions in Latin America and Asia Pacific, which typically expire within one year of their inception. The Company’s current
expectation is that future payment or performance related to the non-performance of others is considered unlikely.
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