Dow Chemical 2009 Annual Report Download - page 170

Table of Contents
The dividend yield assumption for 2009 was based on a 10-year dividend yield average. In 2008 and 2007, the dividend yield assumption was based on
the Company’s current declared dividend as a percentage of the stock price on the grant date. The expected volatility assumption for 2009 was based entirely
on historical daily volatility, while the expected volatility assumption for 2008 and 2007 was based on an equal weighting of the historical daily volatility and
current implied volatility from exchange-traded options for the contractual term of the options. The risk-free interest rate for all years was based on the
weighted-average of U.S. Treasury strip rates over the contractual term of the options. Based on an analysis of historical exercise patterns, exercise rates were
developed that resulted in an average life of 6.25 years for 2009 and 6 years for 2008 and 2007.
EMPLOYEES’ STOCK PURCHASE PLAN
On February 13, 2003, the Board of Directors authorized a 10-year ESPP, which was approved by stockholders at the Company’s annual meeting on May 8,
2003. Under the 2009 annual offering, most employees were eligible to purchase shares of common stock of the Company valued at up to 20 percent of their
annual base earnings. The value is determined using the plan price multiplied by the number of shares subscribed to by the employee. The plan price of the
stock is set each year at no less than 85 percent of market price. Approximately 36 percent of the eligible employees enrolled in the annual plan for 2009;
approximately 51 percent of the eligible employees enrolled in the annual plan for 2008; and approximately 59 percent of the eligible employees enrolled in
2007.
Employees’ Stock Purchase Plan 2009
Shares in thousands Shares
Exercise
Price (1)
Outstanding at beginning of year - -
Granted 10,538 $ 20.81
Exercised (6,563) $ 20.81
Forfeited/Expired (3,975) $ 20.81
Outstanding and exercisable at end of year - -
(1) Weighted-average per share
Additional Information about ESPP
In millions, except per share amounts 2009 2008 2007
Weighted-average fair value per share of purchase rights granted $ 1.00 $ 4.33 $ 10.62
Total compensation expense for ESPP $ 10 $ 20 $ 57
Related tax benefit $ 4 $ 7 $ 21
Total amount of cash received from the exercise of purchase rights $ 137 $ 32 $ 145
Total intrinsic value of purchase rights exercised (1) $ 38 $ 3 $ 65
Related tax benefit $ 14 $ 1 $ 24
(1) Difference between the market price at exercise and the price paid by the employee to exercise the purchase rights
STOCK OPTION PLANS
Under the 1988 Award and Option Plan (the “1988 Plan”), a plan approved by stockholders, the Company may grant options or shares of common stock to
its employees subject to certain annual and individual limits. The terms of the grants are fixed at the grant date. At December 31, 2009, there were 19,782,822
shares available for grant under this plan.
Under the 1994 Non-Employee Directors’ Stock Plan, the Company was previously allowed to grant up to 300,000 options to non-employee directors;
however, no additional grants will be made under this plan. At December 31, 2009, there were 34,650 options outstanding under this plan.
Under the 1998 Non-Employee Directors’ Stock Plan, the Company was previously allowed to grant up to 600,000 options to non-employee directors;
however, no additional grants will be made under this plan. At December 31, 2009, there were 112,600 options outstanding under this plan.
The exercise price of each stock option equals the market price of the Company’s stock on the date of grant. Options vest from one to three years, and
have a maximum term of 10 years.
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