Dow Chemical 2011 Annual Report Download - page 231

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NOTE V – REDEEMABLE PREFERRED STOCKS
Cumulative Perpetual Preferred Stock, Series B
With the April 1, 2009 acquisition of Rohm and Haas, certain trusts established by members of the Haas family (the “Haas
Trusts”) and Paulson & Co. Inc. (“Paulson”) purchased from the Company Cumulative Perpetual Preferred Stock, Series B
(“preferred series B”) in the amount of 2.5 million shares (Haas Trusts – 1.5 million shares; Paulson – 1.0 million shares) for an
aggregate price of $2.5 billion (Haas Trusts – $1.5 billion; Paulson – $1.0 billion). Under the terms of the preferred series B, the
holders were entitled to cumulative dividends at a rate of 7 percent per annum in cash and 8 percent per annum either in cash or
as an increase in the liquidation preference of the preferred series B, at the Company’s option.
In May 2009, the Company entered into a purchase agreement with the Haas Trusts and Paulson, whereby the Haas Trusts
and Paulson agreed to sell to the Company their shares of the preferred series B in consideration for shares of the Company’s
common stock and/or notes, at the discretion of the Company. Pursuant to the purchase agreement, the Company issued
83.3 million shares of its common stock to the Haas Trusts and Paulson in consideration for the purchase of 1.2 million shares
of preferred series B held by the Haas Trusts and Paulson. In a separate transaction as part of a $6 billion offering of senior
notes, the Company issued $1.35 billion aggregate principal amount of 8.55 percent notes due 2019 to the Haas Trusts and
Paulson in consideration for the purchase of the remaining 1.3 million shares of preferred series B at par plus accrued
dividends. Upon the consummation of these transactions, all shares of preferred series B were retired. For additional
information concerning the common stock and debt issuances, see Notes P and W.
Cumulative Convertible Perpetual Preferred Stock, Series C
With the April 1, 2009 acquisition of Rohm and Haas, the Haas Trusts invested $500 million in Cumulative Convertible
Perpetual Preferred Stock, Series C (“preferred series C”). Under the terms of the preferred series C, prior to June 8, 2009, the
holders were entitled to cumulative dividends at a rate of 7 percent per annum in cash and 8 percent per annum either in cash or
as an increase in the liquidation preference of the preferred series C, at the Company’s option. On and after June 8, 2009, the
Company would have been required to pay cumulative dividends of 12 percent per annum in cash.
The preferred series C shares would automatically convert to common stock on the date immediately following the ten full
trading days commencing on the date on which there was an effective shelf registration statement relating to the common stock
underlying the preferred series C, if such registration statement was effective prior to June 8, 2009. On May 26, 2009, the
Company entered into an underwriting agreement and filed the corresponding shelf registration statement to effect the
conversion of preferred series C into the Company’s common stock in accordance with the terms of the preferred series C.
Under the terms of the preferred series C, the shares of preferred series C would convert into shares of the Company’s common
stock at a conversion price per share of common stock based upon 95 percent of the average of the common stock volume-
weighted average price for the ten trading days preceding the conversion. After ten full trading days and upon the automatic
conversion of the preferred series C, the Company issued 31.0 million shares of the Company’s common stock to the Haas
Trusts on June 9, 2009, and all shares of preferred series C were retired (see Note W).
NOTE W – STOCKHOLDERS’ EQUITY
Cumulative Convertible Perpetual Preferred Stock, Series A
Equity securities in the form of Cumulative Convertible Perpetual Preferred Stock, Series A (“preferred series A”) were issued
on April 1, 2009 to Berkshire Hathaway Inc. in the amount of $3 billion (3 million shares) and the Kuwait Investment Authority
in the amount of $1 billion (1 million shares). The Company will pay cumulative dividends on preferred series A at a rate of
8.5 percent per annum in either cash, shares of common stock, or any combination thereof, at the option of the Company.
Dividends may be deferred indefinitely, at the Company’s option. If deferred, common stock dividends must also be deferred.
Any past due and unpaid dividends will accrue additional dividends at a rate of 10 percent per annum, compounded quarterly. If
dividends are deferred for any six quarters, the preferred series A shareholders may elect two directors to the Company’s Board
of Directors until all past due dividends are paid. Ongoing dividends related to preferred series A are $85 million per quarter;
no dividends had been deferred at December 31, 2011.
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.