Dow Chemical 2009 Annual Report Download - page 175

Table of Contents
Shareholders of preferred series A may convert all or any portion of their shares, at their option, at any time, into shares of the Company’s common stock
at an initial conversion rate of 24.2010 shares of common stock for each share of preferred series A. Under certain circumstances, the Company will be
required to adjust the conversion rate. On or after the fifth anniversary of the issuance date, if the common stock price exceeds $53.72 per share for any
20 trading days in a consecutive 30-day window, the Company may, at its option, at any time, in whole or in part, convert preferred series A into common
stock at the then applicable conversion rate. Upon conversion, accrued and unpaid dividends will be payable, at the option of the Company, in either cash,
shares of common stock, or any combination thereof.
Common Stock
On May 6, 2009, the Company launched a public offering of 150.0 million shares of its common stock at a price of $15.00 per share. Included in the
150.0 million shares offered to the public were 83.3 million shares issued to the Haas Trusts and Paulson in consideration for shares of preferred series B held
by the Haas Trusts and Paulson (see Note V). Gross proceeds were $2,250 million, of which the Company’s net proceeds (after underwriting discounts and
commissions) were $966 million for the sale of the Company’s 66.7 million shares.
On May 26, 2009, the Company entered into an underwriting agreement and filed the corresponding shelf registration statement to effect the conversion of
the preferred series C into shares of the Company’s common stock (see Note V). On June 9, 2009, following the end of the sale period and determination of the
share conversion amount, the Company issued 31.0 million shares to the Haas Trusts.
Retained Earnings
There are no significant restrictions limiting the Company’s ability to pay dividends.
Undistributed earnings of nonconsolidated affiliates included in retained earnings were $1,826 million at December 31, 2009 and $2,089 million at
December 31, 2008.
Employee Stock Ownership Plan
The Company has the Dow Employee Stock Ownership Plan (the “ESOP”), which is an integral part of The Dow Chemical Company Employees’ Savings
Plan (the “Plan”). A significant majority of full-time employees in the United States are eligible to participate in the Plan. The Company uses the ESOP to
provide the Company’s matching contribution in the form of the Company’s stock to Plan participants.
In connection with the acquisition of Rohm and Haas (see Note D), $552 million in cash was paid to the Rohm and Haas Company Employee Stock
Ownership Plan (the “Rohm and Haas ESOP”) for 7.0 million shares of Rohm and Haas common stock held by the Rohm and Haas ESOP on April 1, 2009.
On the date of the acquisition, the Rohm and Haas ESOP was merged into the Plan, and the Company assumed the $78 million balance of debt at 9.8 percent
interest with final maturity in 2020 that was used to finance share purchases by the Rohm and Haas ESOP in 1990. The outstanding balance of the debt was
$71 million at December 31, 2009.
On May 11, 2009, the Company sold 36.7 million shares of common stock (from treasury stock) to the ESOP at a price of $15.0561 per share for a
total of $553 million. The treasury stock was carried at an aggregate historical cost of $1,529 million.
Dividends on unallocated shares held by the ESOP are used by the ESOP to make debt service payments. Dividends on allocated shares are used by the
ESOP to make debt service payments to the extent needed; otherwise, they are paid to the Plan participants. Shares are released for allocation to participants
based on the ratio of the current year’s debt service to the sum of the principal and interest payments over the life of the loan. The shares are allocated to Plan
participants in accordance with the terms of the Plan.
In accordance with the accounting guidance for stock-based compensation, compensation expense for allocated shares is recorded at the fair value of the
shares on the date of allocation. Under this guidance, ESOP shares that have not been released or committed to be released are not considered outstanding for
purposes of computing basic and diluted earnings per share.
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