Filed Pursuant to Rule 424(b)(2)
Registration No. 333-59964
PROSPECTUS SUPPLEMENT
(To Prospectus Dated May 15, 2001)
[LOGO FOR DOW CHEMICAL]
$500,000,000
The Dow Chemical Company
5 3/4% Notes due 2008
------------
The Notes will bear interest at the rate of 5 3/4% per year. Interest on the
Notes is payable on June 15 and December 15 of each year, beginning on June 15,
2002. The Notes will mature on December 15, 2008. We may redeem some or all of
the Notes at any time at the price described under the heading "Description of
Notes--Optional Redemption." In addition, we may redeem all of the Notes under
the circumstances described under "Description of Notes--Redemption for Tax
Reasons."
The Notes will be senior obligations of our company and will rank equally
with all of our other unsecured senior indebtedness from time to time
outstanding.
We will apply to list the Notes on the Luxembourg Stock Exchange.
------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the related prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
------------
Per Note Total
-------- ------------
Public Offering Price 99.994% $499,970,000
Underwriting Discount 0.400% $ 2,000,000
Proceeds to Dow (before expenses) 99.594% $497,970,000
Interest on the Notes will accrue from December 13, 2001 to date of
delivery.
------------
The underwriters expect to deliver the Notes to purchasers in book-entry
form only through The Depository Trust Company, Clearstream, Luxembourg or the
Euroclear System on or about December 13, 2001.
------------
Joint Book-Running Managers
Banc of America Securities LLC Salomon Smith Barney
------------
Banc One Capital Markets, Inc.
Credit Suisse First Boston
Wachovia Securities
December 6, 2001
You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not authorized anyone to provide you with different information. We are
not making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information contained in this
prospectus supplement or the accompanying prospectus is accurate as of any date
other than the date on the front of this prospectus supplement.
------------
TABLE OF CONTENTS
Prospectus Supplement
Page
----
Alternative Settlement Date................................................ S-3
About Dow.................................................................. S-3
Use of Proceeds............................................................ S-3
Ratio of Earnings to Fixed Charges......................................... S-3
Capitalization............................................................. S-4
Selected Consolidated Financial Data....................................... S-5
Directors and Management................................................... S-6
Description of Notes....................................................... S-7
United States Federal Taxation............................................. S-14
Underwriting............................................................... S-19
Validity of Notes.......................................................... S-21
General Information........................................................ S-21
Prospectus
About this Prospectus...................................................... 2
The Dow Chemical Company................................................... 2
Use of Proceeds............................................................ 2
Description of Capital Stock............................................... 2
Description of Debt Securities............................................. 7
Description of Warrants to Purchase Common Stock or Preferred Stock........ 17
Description of Debt Warrants............................................... 18
Plan of Distribution....................................................... 20
Legal Matters.............................................................. 20
Experts.................................................................... 21
Where You Can Find More Information........................................ 21
Unless the context indicates otherwise, the words "Dow", "we", "our", "ours"
and "us" refer to The Dow Chemical Company. If we use a capitalized term in
this prospectus supplement and do not define the term in this document, it is
defined in the accompanying prospectus.
The distribution of this prospectus supplement and the accompanying
prospectus and the offering of the Notes may be restricted in certain
jurisdictions. You should inform yourself about and observe any such
restrictions. This prospectus supplement and the accompanying prospectus do not
constitute, and may not be used in connection with, an offer or solicitation by
anyone in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to any person to whom it is unlawful to make such offer
or solicitation.
This prospectus supplement and the accompanying prospectus include
particulars given in compliance with the rules governing the listing of
securities on the Luxembourg Stock Exchange. We accept full responsibility for
the accuracy of the information contained in this prospectus supplement and the
accompanying prospectus and, having made all reasonable inquiries, confirm that
to the best of our knowledge and belief there are no other facts the omission
of which would make any statement contained in this prospectus supplement and
the accompanying prospectus misleading.
S-2
Unless otherwise specified or the context otherwise requires, references in
this prospectus supplement and accompanying prospectus to "dollars," "$" and
"U.S.$" are to United States dollars.
ALTERNATIVE SETTLEMENT DATE
It is expected that delivery of the Notes will be made on or about the date
specified on the cover page of this prospectus supplement, which will be the
fifth business day following the date of this prospectus supplement. Under Rule
15c6-1 of the SEC under the Securities Exchange Act of 1934, trades in the
secondary market generally are required to settle in three business days,
unless the parties to any such trade expressly agree otherwise. Accordingly,
the purchasers who wish to trade Notes on the date of this prospectus
supplement or the next succeeding business day will be required to specify an
alternate settlement cycle at the time of any such trade to prevent failed
settlement. Purchasers of Notes who wish to trade Notes on the date of this
prospectus supplement or the next succeeding business day should consult their
own advisors.
ABOUT DOW
We are a leading science and technology company that provides innovative
chemical, plastic and agricultural products and services to many essential
consumer markets. We serve customers in more than 170 countries and a wide
range of markets that are important to human progress, including food,
transportation, health and medicine, personal and home care, and building and
construction, among others. We have 171 manufacturing sites in 35 countries and
supply more than 2,500 products.
On February 6, 2001, we and Union Carbide Corporation completed a merger in
which Union Carbide became our wholly owned subsidiary. In the merger, we
exchanged approximately 219 million treasury shares of Dow common stock for all
of the issued and outstanding shares of Union Carbide common stock. The merger
is being accounted for as a pooling of interests.
We were incorporated in 1947 under Delaware law and are the successor to a
Michigan corporation, of the same name, organized in 1897. Our principal
executive offices are located at 2030 Dow Center, Midland, Michigan 48674, and
our telephone number is 989-636-1000.
USE OF PROCEEDS
The net proceeds from the sale of Notes is expected to be approximately
$497,900,000. We will use the net proceeds for general corporate purposes,
including repayment of short-term debt.
RATIO OF EARNINGS TO FIXED CHARGES
For the
Nine Months
Ended For the Year Ended
September 30, December 31,
--------------- ----------------------------
2001 2000 2000 1999 1998 1997 1996
------ ------ ---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges.. (a) 4.3x 3.6x 4.3x 4.3x 6.1x 6.3x
For the purpose of these ratios, earnings consist of income before (1)
taxes, (2) minority interests, (3) extraordinary items, (4) cumulative effect
of change in accounting principle, (5) amortization of capitalized interest and
(6) fixed charges (adjusted to exclude capitalized interest) and after
adjustment for unremitted earnings of 20%-50% owned companies. Fixed charges
consist of interest on all indebtedness, amortization of capitalized debt
costs, discount or premium and a portion of rentals deemed to represent an
interest factor. The ratios of earnings to fixed charges give retroactive
effect to our February 6, 2001 merger with Union Carbide.
(a) As a result of $1,454 million in pretax costs recorded for merger-related
expenses and restructuring, earnings for the nine months ended September
30, 2001 were inadequate to cover fixed charges, with a deficiency of
$626.6 million.
S-3
CAPITALIZATION
The following table sets forth as of September 30, 2001 our short-term debt
and long-term debt and stockholders' equity. The table should be read in
conjunction with our financial statements, the notes to our financial
statements, and the other financial data included or incorporated by reference
into this prospectus supplement and the accompanying prospectus.
September 30, 2001
(Unaudited)
---------------------
As
Actual Adjusted
--------- ----------
(in millions)
Short-term debt(a)....................................... $ 3,343 $ 3,343
========= =========
Long-term debt:
Notes offered hereby................................... $ -- $ 500
Other long-term debt................................... 8,711 8,711
--------- ---------
Total long-term debt................................. 8,711 9,211
Stockholders' equity:
Common stock (authorized 1,500,000,000 shares of $2.50
par value each;
issued 981,377,562)................................... 2,453 2,453
Additional paid-in capital............................. 19 19
Unearned ESOP shares................................... (103) (103)
Retained earnings...................................... 11,462 11,462
Accumulated other comprehensive loss................... (1,002) (1,002)
Treasury stock at cost (79,489,231 shares)............. (2,494) (2,494)
--------- ---------
Net stockholders' equity............................. 10,335 10,335
--------- ---------
Total long-term debt and stockholders' equity...... $ 19,046 $ 19,546
========= =========
--------
(a) Includes current portion of long-term debt of $42.0 million.
On October 18, 2001, we issued a Euro 600 million (approximately $540
million) five-year bond under our European medium-term note program. Other than
as disclosed herein, there has been no material change in our consolidated
capitalization since September 30, 2001.
S-4
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data for the years ended December 31,
2000, 1999 and 1998 have been derived from our audited consolidated financial
statements. The selected consolidated financial data for the years ended
December 31, 1997 and 1996 and the nine months ended September 30, 2001 and
2000 have been derived from our unaudited consolidated financial statements and
reflect all adjustments (consisting of normal recurring accruals) which, in the
opinion of management, are considered necessary for a fair presentation of the
results for the periods covered. The consolidated financial data have been
prepared to give retroactive effect to our February 6, 2001 merger with Union
Carbide and include the combined accounts of Dow and Union Carbide for all
periods presented. This data should be read in conjunction with the
consolidated financial statements and related notes incorporated by reference
in this prospectus supplement and the accompanying prospectus. See "Where You
Can Find More Information."
For the Nine Months
Ended
September 30, For the Year Ended December 31,
-------------------- -----------------------------------------
2001 2000 2000 1999 1998 1997 1996
--------- --------- ------- ------- ------- ------- -------
(in millions)
Income statement data:
Net sales............... $ 21,459 $ 22,303 $29,534 $25,859 $25,101 $27,476 $27,067
Cost of sales......... 18,232 17,994 24,131 20,300 19,395 20,750 19,866
Research and
development
expenses............. 804 820 1,119 1,075 1,026 990 962
Selling, general and
administrative
expenses............. 1,341 1,354 1,825 1,776 1,964 2,168 2,426
Amortization of
intangibles.......... 118 106 139 160 106 80 58
Purchased in-process
research and
development charges.. 69 -- 6 6 349 -- --
Special charges....... -- -- -- 94 458 -- --
Merger related
expenses and
restructuring(1)..... 1,454 -- -- -- -- -- --
Insurance and finance
company operations,
pretax income........ 20 69 85 150 124 127 85
Equity in earnings of
nonconsolidated
affiliates........... 84 365 354 95 31 211 194
Sundry income--net.... 384 262 352 329 1,135 446 329
--------- --------- ------- ------- ------- ------- -------
Earnings (loss) before
interest, income taxes
and minority
interests.............. (71) 2,725 3,105 3,022 3,093 4,272 4,363
--------- --------- ------- ------- ------- ------- -------
Interest income....... 61 100 146 132 149 195 324
Interest expense and
amortization of debt
discount............. 555 494 665 564 607 550 570
--------- --------- ------- ------- ------- ------- -------
Income (loss) before
income taxes and
minority interests..... (565) 2,331 2,586 2,590 2,635 3,917 4,117
--------- --------- ------- ------- ------- ------- -------
Provision (credit) for
income taxes......... (200) 750 839 874 902 1,320 1,423
Minority interests'
share in income...... 15 55 72 74 20 113 194
Preferred stock
dividends............ -- -- -- 5 6 13 17
--------- --------- ------- ------- ------- ------- -------
Income (loss) before
cumulative effect of
change in accounting
principle.............. (380) 1,526 1,675 1,637 1,707 2,471 2,483
--------- --------- ------- ------- ------- ------- -------
Cumulative effect of
change in accounting
principle(2)......... 32 -- -- (20) -- (17) --
--------- --------- ------- ------- ------- ------- -------
Net income (loss)
available for common
stockholders........... $ (348) $ 1,526 $ 1,675 $ 1,617 $ 1,707 $ 2,454 $ 2,483
========= ========= ======= ======= ======= ======= =======
Depreciation............ $ 1,174 $ 1,151 $ 1,554 $ 1,516 $ 1,559 $ 1,529 $ 1,552
========= ========= ======= ======= ======= ======= =======
Earnings (loss) per
common share from
continuing operations
(before cumulative
effect of change in
accounting principle)--
diluted................ $ (0.42) $ 1.69 $ 1.85 $ 1.84 $ 1.89 $ 2.63 $ 2.51
Dividends per share of
Dow common stock....... $ 0.96 $ 0.87 $ 1.16 $ 1.16 $ 1.16 $ 1.12 $ 1.00
At December 31,
At September 30, ---------------------------------------
2001 2000 1999 1998 1997 1996
---------------- ------- ------- ------- ------- -------
(in millions)
Balance sheet data:
Total assets.......... $38,052 $35,991 $33,456 $31,121 $31,004 $31,219
Working capital....... 2,181 1,150 2,848 1,570 1,925 4,799
Property--gross....... 35,721 34,852 33,333 32,844 31,052 30,896
Property--net......... 13,619 13,711 13,011 12,628 11,832 11,893
Long-term debt and
redeemable preferred
stock................ 8,711 6,613 6,941 5,890 5,703 5,770
Total debt............ 12,054 9,450 8,708 8,099 8,145 7,067
Net stockholders'
equity............... 10,335 11,840 10,940 9,878 9,974 10,068
Capital expenditures.. 998 1,808 2,176 2,328 1,953 2,065
--------
(1) During 2001, pretax costs of $1,454 million were recorded for merger-
related expenses and restructuring. These costs included transaction costs,
employee severance, the write-down of duplicate assets and facilities and
other merger-related expenses.
(2) On January 1, 2001, we recorded a cumulative transition adjustment gain of
$32 million (net of related income tax of $19 million) upon adoption of
Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities."
S-5
DIRECTORS AND MANAGEMENT
Directors
Name Principal Occupation
---- --------------------
Arnold A. Allemang.......... Executive Vice President, Operations
Jacqueline K. Barton........ Professor of Chemistry, California Institute of Technology
Anthony J. Carbone.......... Senior Consultant
J. Michael Cook............. Retired Chairman and Chief Executive Officer of Deloitte &
Touche LLP
John C. Danforth............ Partner, Bryan Cave LLP; Former U.S. Senator
Willie D. Davis............. President and Chief Executive Officer, All Pro Broadcasting,
Inc.
Barbara Hackman Franklin.... President and Chief Executive Officer, Barbara Franklin
Enterprises; Former U.S. Secretary of Commerce
Allan D. Gilmour............ Retired Vice Chairman, Ford Motor Company
Michael D. Parker........... President and Chief Executive Officer
J. Pedro Reinhard........... Executive Vice President and Chief Financial Officer
James M. Ringler............ Vice Chairman, Illinois Tool Works, Inc.
Harold T. Shapiro........... President, Princeton University
William S. Stavropoulos..... Chairman of the Board
Paul G. Stern............... Partner, Thayer Capital Partners
Officers
Name Office Held
---- -----------
William S. Stavropoulos..... Chairman of the Board
Anthony J. Carbone.......... Vice Chairman of the Board
Michael D. Parker........... President and Chief Executive Officer
J. Pedro Reinhard........... Executive Vice President and Chief Financial Officer
Arnold A. Allemang.......... Executive Vice President, Operations
Richard L. Manetta.......... Corporate Vice President and General Counsel
Lawrence J. Washington, Jr. Corporate Vice President, Environment, Health and Safety,
........................... Human Resources and Public Affairs
Richard M. Gross............ Corporate Vice President, Research & Development
David E. Kepler II.......... Corporate Vice President and Chief Information Officer
Fernando Ruiz............... Vice President and Treasurer
Frank H. Brod............... Vice President and Controller
Tina S. Van Dam............. Corporate Secretary
Charles J. Hahn............. Assistant Secretary
Douglas J. Anderson......... Corporate Auditor
S-6
DESCRIPTION OF NOTES
General
The following description of the particular terms of the 5 3/4% Notes due
2008 offered by this prospectus supplement supplements the description of the
general terms and provisions of the debt securities included in the
accompanying prospectus. The Notes will be issued under an indenture, dated as
of April 1, 1992, as supplemented by a supplemental indenture, dated as of
January 1, 1994, a second supplemental indenture, dated as of October 1, 1999,
and a third supplemental indenture, dated as of May 15, 2001, between us and
Bank One Trust Company, N.A. (as successor in interest to The First National
Bank of Chicago), as trustee. The following summary of the Notes is qualified
in its entirety by reference to the description of the debt securities and
indenture contained in the accompanying prospectus.
The Notes will mature on December 15, 2008. The Notes will be unsecured
obligations and will rank equally with all of our other unsecured and
unsubordinated indebtedness. The Notes will be issued in fully registered form
only, in denominations of $1,000 and integral multiples of that amount.
We may, without the consent of the holders of Notes, issue additional notes
having the same ranking and the same interest rate, maturity and other terms as
the Notes. Any additional debt securities having such similar terms, together
with the Notes, will constitute a single series of debt securities under the
indenture. In the event that we issue additional notes, we will make a new
application to list such notes on the Luxembourg Stock Exchange.
Interest
We will pay interest on the Notes at a rate of 5 3/4% per year semiannually
in arrears on June 15 and December 15 of each year, commencing June 15, 2002,
to the persons in whose names the Notes are registered at the close of business
on the June 1 or December 1, as the case may be (whether or not a business
day), immediately preceding the relevant interest payment date. Interest will
be computed on the basis of a 360-day year of twelve 30-day months.
If any interest payment date falls on a day that is not a business day, the
interest payment will be postponed to the next day that is a business day, and
no interest on such payment will accrue for the period from and after such
interest payment date. If the maturity date of the Notes falls on a day that is
not a business day, the payment of interest and principal may be made on the
next succeeding business day, and no interest on such payment will accrue for
the period from and after the maturity date. Interest payments for the Notes
will include accrued interest from and including the date of issue or from and
including the last date in respect of which interest has been paid, as the case
may be, to, but excluding, the interest payment date or the date of maturity,
as the case may be.
As used in this prospectus supplement, a business day means any day, other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which
banking institutions are authorized or required by law or regulation to close
in The City of New York.
The Notes will not have the benefit of any sinking fund.
Optional Redemption
All or a portion of the Notes may be redeemed at our option at any time or
from time to time. The redemption price for the Notes to be redeemed on any
redemption date will be equal to the greater of the following amounts:
.100% of the principal amount of the Notes being redeemed on the
redemption date; and
S-7
.the sum of the present values of the remaining scheduled payments of
principal and interest on the Notes being redeemed on that redemption
date (not including any portion of any payments of interest accrued to
the redemption date), discounted to the redemption date on a semiannual
basis at the Treasury Rate (as defined below), plus 15 basis points, as
determined by the Reference Treasury Dealer (as defined below),
plus, in each case, accrued and unpaid interest on the Notes to the redemption
date. Notwithstanding the foregoing, installments of interest on Notes that are
due and payable on interest payment dates falling on or prior to a redemption
date will be payable on the interest payment date to the registered holders as
of the close of business on the relevant record date according to the Notes and
the indenture. The redemption price will be calculated on the basis of a 360-
day year consisting of twelve 30-day months.
We will mail notice of any redemption at least 30 days but not more than 60
days before the redemption date to each registered holder of the Notes to be
redeemed. Once notice of redemption is mailed, the Notes called for redemption
will become due and payable on the redemption date and at the applicable
redemption price, plus accrued and unpaid interest to the redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed
as a percentage of its principal amount) equal to the Comparable Treasury Price
for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Reference Treasury Dealer as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Notes.
"Comparable Treasury Price" means, with respect to any redemption date, (A)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such Quotations, or (C) if only
one Reference Treasury Dealer Quotation is received, such Quotation.
"Reference Treasury Dealer" means (A) Banc of America Securities LLC or
Salomon Smith Barney Inc. (or their respective affiliates which are Primary
Treasury Dealers) and their respective successors; provided, however, that if
any of the foregoing shall cease to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), we will substitute
therefor another Primary Treasury Dealer; and (B) any other Primary Treasury
Dealer(s) selected by the trustee after consultation with us.
"Reference Treasury Dealer Quotation" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer at 5:00 p.m. (New York
City time) on the third business day preceding such redemption date.
On and after the redemption date, interest will cease to accrue on the Notes
or any portion of the Notes called for redemption (unless we default in the
payment of the redemption price and accrued interest). On or before the
redemption date, we will deposit with a paying agent (or the trustee) money
sufficient to pay the redemption price of and accrued interest on the Notes to
be redeemed on that date. If less than all of the Notes are to be redeemed, the
Notes to be redeemed shall be selected by lot by DTC, in the case of Notes
represented by a global security, or by the trustee by a method the trustee
deems to be fair and appropriate, in the case of Notes that are not represented
by a global security.
S-8
Book-Entry, Delivery and Form
The Notes will be issued in the form of one or more fully registered global
notes which will be deposited with, or on behalf of, DTC and registered in the
name of the Cede & Co., DTC's nominee. Beneficial interests in the global Notes
will be represented through book-entry accounts of financial institutions
acting on behalf of beneficial owners as direct and indirect participants in
DTC. Investors may elect to hold interests in the global Notes through DTC,
Clearstream Banking, societe anonyme, Luxembourg ("Clearstream"), or Euroclear
Bank S.A./NV, as operator of the Euroclear System ("Euroclear") if they are
participants of such systems, or indirectly through organizations which are
participants in such systems. Clearstream and Euroclear will hold interests on
behalf of their participants through customers' securities accounts in
Clearstream's and Euroclear's names on the books of their respective
depositaries. Clearstream's and Euroclear's depositaries will hold interests in
customers' securities accounts in the depositaries' names on the books of DTC.
Citibank, N.A. will act as depositary for Clearstream and The Chase Manhattan
Bank will act as depositary for Euroclear (in such capacities, the "U.S.
Depositaries"). Except as set forth below, the global Notes may be transferred,
in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee.
DTC has advised us that DTC is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC holds securities deposited with it by its
participants and facilitates the settlement of transactions among its
participants in those securities through electronic computerized book-entry
changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. DTC's participants include
securities brokers and dealers, including the underwriters, banks, trust
companies, clearing corporations and certain other organizations, some of whom,
and/or their representatives, own DTC. Access to the DTC book-entry system is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly.
According to DTC, the foregoing information with respect to DTC has been
provided to the financial community for informational purposes only and is not
intended to serve as a representation, warranty or contract modification of any
kind. We make no representation as to the accuracy or completeness of such
information.
Clearstream has advised that it is incorporated under the laws of the Grand
Duchy of Luxembourg as a professional depositary. Clearstream holds securities
for its participating organizations ("Clearstream participants"). Clearstream
facilitates the clearance and settlement of securities transactions between
Clearstream participants through electronic book-entry changes in accounts of
Clearstream participants, eliminating the need for physical movement of
certificates. Clearstream provides to Clearstream participants, among other
things, services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream interfaces with domestic markets in several countries. As a
professional depositary, Clearstream is subject to regulation by the Luxembourg
Commission for the Supervision of the Financial Sector (CSSF). Clearstream
participants are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. Indirect access to Clearstream is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Clearstream
participant, either directly or indirectly.
Distributions, to the extent received by the U.S. Depositary for
Clearstream, with respect to the Notes held beneficially through Clearstream
will be credited to cash accounts of Clearstream participants in accordance
with its rules and procedures.
Euroclear has advised that it was created in 1968 to hold securities for its
participants ("Euroclear participants") and to clear and settle transactions
between Euroclear participants through simultaneous
S-9
electronic book-entry delivery against payment, eliminating the need for
physical movement of certificates and eliminating any risk from lack of
simultaneous transfers of securities and cash. Euroclear provides various other
services, including securities lending and borrowing and interfaces with
domestic markets in several countries. Euroclear is operated by Euroclear Bank
S.A./NV (the "Euroclear Operator"), under contract with Euroclear Clearance
Systems S.C., a Belgian cooperative corporation (the "Cooperative"). All
operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
Euroclear on behalf of Euroclear participants. Euroclear participants include
banks (including central banks), securities brokers and dealers and other
professional financial intermediaries and may include the underwriters.
Indirect access to Euroclear is also available to other firms that clear
through or maintain a custodial relationship with a Euroclear participant,
either directly or indirectly.
The Euroclear Operator has advised us that it is licensed by the Belgian
Banking and Finance Commission to carry out banking activities on a global
basis. As a Belgian bank, it is regulated and examined by the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities
and cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear participants, and has no record of or relationship with persons
holding through Euroclear participants.
Distributions, to the extent received by the U.S. Depositary for Euroclear,
with respect to Notes held beneficially through Euroclear will be credited to
the cash accounts of Euroclear participants in accordance with the Terms and
Conditions.
In the event definitive Notes are issued, we will appoint a paying agent and
transfer agent in Luxembourg (the "Luxembourg Paying and Transfer Agent").
Holders of definitive Notes will be able to receive payments and effect
transfers at the offices of the Luxembourg Paying and Transfer Agent.
Individual certificates in respect of the Notes will not be issued in
exchange for the global Notes, except in very limited circumstances. If DTC,
Clearstream or Euroclear notifies us that it is unwilling or unable to continue
as a clearing system in connection with the global Notes or DTC ceases to be a
clearing agency registered under the Exchange Act, and a successor clearing
system is not appointed by us within 90 days after receiving that notice from
DTC, Clearstream or Euroclear or upon becoming aware that DTC is no longer so
registered, we will issue or cause to be issued individual certificates in
registered form on registration of transfer of, or in exchange for, book-entry
interests in the Notes represented by such global Notes upon delivery of such
global Notes for cancellation.
Title to book-entry interests in the global Notes will pass by book-entry
registration of the transfer within the records of DTC, Clearstream or
Euroclear in accordance with their respective procedures. Book-entry interests
in the global Notes may be transferred within DTC in accordance with procedures
established for this purpose by DTC. Book-entry interests in the Notes may be
transferred within Euroclear and within Clearstream and between Euroclear and
Clearstream in accordance with procedures established for these purposes by
Euroclear and Clearstream. A further description of DTC's procedures with
respect to the global Notes is set forth in the prospectus under "Description
of Debt Securities--Global Securities". Transfers of book-entry interests in
the Notes between Euroclear and Clearstream and DTC may be effected in
accordance with procedures established for this purpose by Euroclear,
Clearstream and DTC.
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Global Clearance and Settlement Procedures
Initial settlement for the Notes will be made in immediately available
funds. Secondary market trading between DTC participants will occur in the
ordinary way in accordance with DTC's rules and will be settled in immediately
available funds using the DTC's Same-Day Funds Settlement System. Secondary
market trading between Clearstream participants and/or Euroclear participants
will occur in the ordinary way in accordance with the applicable rules and
operating procedures of Clearstream and Euroclear and will be settled using the
procedures applicable to conventional Eurobonds in immediately available funds.
Cross-market transfers between persons holding directly or indirectly
through DTC on the one hand, and directly or indirectly through Clearstream or
Euroclear participants, on the other, will be effected in DTC in accordance
with the DTC's rules on behalf of the relevant European international clearing
system by its U.S. Depositary. However, a cross-market transfer will require
delivery of instructions to the relevant European international clearing
system, by the counterparty in such European international clearing system, in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to its
U.S. Depositary to take action to effect final settlement on its behalf by
delivering or receiving Notes in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Clearstream participants and Euroclear participants may not deliver
instructions directly to their respective U.S. Depositaries.
Because of time-zone differences, credits of Notes received in Clearstream
or Euroclear as a result of a transaction with a DTC participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Credits or any transactions of the type
described above settled during subsequent securities settlement processing will
be reported to the relevant Euroclear or Clearstream participants on the
business day that the processing occurs. Cash received in Clearstream or
Euroclear as a result of sales of Notes by or through a Clearstream participant
or a Euroclear participant to a DTC participant will be received with value on
the DTC settlement date but will be available in the relevant Clearstream or
Euroclear cash account only as of the business day following settlement in DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Notes among participants of DTC,
Clearstream and Euroclear, they are under no obligation to perform or continue
to perform these procedures. The foregoing procedures may be changed or
discontinued at any time.
Proposed EU Directive on The Taxation of Savings Income
The European Union is currently considering proposals for a new directive
regarding the taxation of savings income. Subject to a number of conditions
being met, it is proposed that member states of the European Union will be
required to provide to the tax authorities of another member state details of
payments of interest or other similar income paid by a paying agent resident
within its jurisdiction to an individual resident in that other member state,
subject to the right of certain member states (including possibly Luxembourg)
to opt instead for a withholding system for a transitional period in relation
to such payments. This directive, if adopted, may be conditioned on the
adoption of equivalent measures in non-European Union countries with
significant financial centers (such as the United States) and in dependent or
associated territories of certain member states. Pending agreement on the
precise text of the directive, it is difficult to say what effect, if any, the
adoption of the directive would have on the Notes or payments in respect
thereof. Additional amounts, as described below, will not, in any event, be
payable by Dow as a result of such directive.
Payment of Additional Amounts
We will pay to the holder of any of the Notes who is a non-United States
person (as defined below) such additional amounts as may be necessary in order
that every net payment in respect of the principal, premium, if
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any, or interest, if any, on the Notes, after deduction or withholding by Dow
or any paying agent for or on account of any present or future tax, assessment
or governmental charge imposed upon or as a result of such payment by the
United States or any political subdivision or taxing authority thereof or
therein, will not be less than the amount provided for in the Notes to be then
due and payable before any such deduction or withholding for or on account of
any such tax, assessment or governmental charge. The foregoing obligation to
pay such additional amounts shall not apply to:
(a) any tax, assessment or other governmental charge which would not
have been so imposed but for:
. the existence of any present or former connection between such
holder (or a fiduciary, settlor, beneficiary, member or shareholder
of, or holder of a power over, such holder, if such holder is an
estate, trust, partnership or corporation) and the United States,
including, without limitation, such holder (or such fiduciary,
settlor, beneficiary, member, shareholder of, or holder of a power)
being or having been a citizen or resident or treated as a resident
thereof or being or having been engaged in a trade or business
therein or being or having been present therein or having or having
had a permanent establishment therein, or
. such holder's present or former status as a personal holding company
or foreign personal holding company or controlled foreign
corporation for United States federal income tax purposes or
corporation which accumulates earnings to avoid United States
federal income tax;
(b) any tax, assessment or other governmental charge which would not
have been so imposed but for the presentation by the holder of the Notes
for payment on a date more than 10 days after the date on which such
payment became due and payable or the date on which payment thereof is duly
provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, personal property or
excise tax or any similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge which is payable
otherwise than by withholding from payments in respect of principal of,
premium, if any, or interest, if any, on any of the Notes;
(e) any tax, assessment or other governmental charge imposed on interest
received by a holder or beneficial owner of the Notes who actually or
constructively owns 10% or more of the total combined voting power of all
classes of stock of Dow entitled to vote within the meaning of Section
871(h)(3) of the United States Internal Revenue Code of 1986, as amended;
(f) any tax, assessment or other governmental charge imposed as a result
of the failure to comply with:
. certification, information, documentation, reporting or other
similar requirements concerning the nationality, residence, identity
or connection with the United States of the holder or beneficial
owner of the Notes, if such compliance is required by statute, or by
regulation of the United States Treasury Department, as a
precondition to relief or exemption from such tax, assessment or
other governmental charge (including backup withholding), or
. any other certification, information, documentation, reporting or
other similar requirements under United States income tax laws or
regulations that would establish entitlement to otherwise applicable
relief or exemption from such tax, assessment or other governmental
charge;
(g) any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of the principal of, premium,
if any, or interest, if any, on any of the Notes, if such payment can be
made without such withholding by at least one other paying agent;
(h) any tax, assessment or other governmental charge that is required to
be made pursuant to any European Union directive on the taxation of savings
income or any law implementing or complying with,
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or introduced to conform to, any such directive (see "--Proposed EU
Directive on the Taxation of Savings Income" above); or
(i) any combination of items (a) through (h), inclusive;
nor will such additional amounts be paid to any holder who is a fiduciary or
partnership or other than the sole beneficial owner of the Notes to the extent
a settlor or beneficiary with respect to such fiduciary or a member of such
partnership or a beneficial owner of the Notes would not have been entitled to
payment of such additional amounts had such beneficiary, settlor, member or
beneficial owner been the holder of the Notes. The Notes are subject in all
cases to any tax, fiscal or other law or regulation or administrative or
judicial interpretation applicable thereto. Except as specifically provided
under this heading "--Payment of Additional Amounts" and under the heading "--
Redemption for Tax Reasons," Dow shall not be required to make any payment with
respect to any tax, assessment or governmental charge imposed by any government
or a political subdivision or taxing authority thereof or therein.
As used under this heading "--Payment of Additional Amounts" and under the
headings "--Redemption for Tax Reasons" and "United States Federal Taxation--
Tax Consequences to Non-United States Persons" the term "United States" means
the United States of America (including the States and the District of
Columbia) and its territories, its possessions and other areas subject to its
jurisdiction. "United States person" has the meaning set forth under "United
States Federal Taxation--Tax Consequences to United States Persons" and "non-
United States person" has the meaning set forth under "United States Federal
Taxation--Tax Consequences to Non-United States Persons."
Redemption for Tax Reasons
If, as a result of:
. any change in or amendment to the laws (including any regulations or
rulings promulgated thereunder) of the United States or any political
subdivision thereof or therein affecting taxation, which becomes
effective after the date of this prospectus supplement or which proposal
is made after such date,
. any change in the official application or interpretation of such laws,
including any official proposal for such a change, amendment or change
in the application or interpretation of such laws, which change,
amendment, application or interpretation is announced or becomes
effective after the date of this prospectus supplement or which proposal
is made after such date,
. any action taken by any taxing authority of the United States which
action is taken or becomes generally known after the date of this
prospectus supplement, or any commencement of a proceeding in a court of
competent jurisdiction in the United States after such date, whether or
not such action was taken or such proceeding was brought with respect to
Dow,
there is, in such case, in the written opinion of independent legal counsel of
recognized standing to Dow, a material increase in the probability that Dow has
or may become obligated to pay additional amounts (as described above under "--
Payment of Additional Amounts"), and Dow in its business judgment, determines
that such obligation cannot be avoided by the use of reasonable measures
available to it, not including assignment of the Notes, the Notes may be
redeemed, as a whole but not in part, at Dow's option at any time thereafter,
upon notice to the trustee and the holders of the Notes in accordance with the
provisions of the indenture at a redemption price equal to 100% of the
principal amount of the Notes to be redeemed together with accrued interest
thereon to the date fixed for redemption.
Notices
Notices to holders of the Notes will be published in authorized daily
newspapers in The City of New York, in London, and, so long as the Notes are
listed on the Luxembourg Stock Exchange, in Luxembourg. It is
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expected that publication will be made in The City of New York in The Wall
Street Journal, in London in the Financial Times, and in Luxembourg in the
Luxemburger Wort. Any notice given pursuant to these provisions shall be deemed
to have been given on the date of publication or, if published more than once,
on the date first published.
Concerning the Trustee
Dow maintains banking relationships in the ordinary course of business with
the trustee's affiliate, Bank One, N.A. In addition, Banc One Capital Markets,
Inc., an affiliate of the trustee, is one of the underwriters of the Notes. The
trustee's principal corporate trust office is located at 1 Bank One Plaza,
Chicago, Illinois 60670-0126. The trustee's principal office in New York City
is located at 14 Wall Street, Eighth Floor, New York, New York 10005.
UNITED STATES FEDERAL TAXATION
The following summary describes the material United States federal income
and certain estate tax consequences of ownership and disposition of the Notes.
This summary provides general information only and is directed solely to
original holders purchasing Notes at the "issue price", that is, the first
price to the public at which a substantial amount of the Notes in an issue is
sold (excluding sales to bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters, placement agents or
wholesalers). This summary is based on the Internal Revenue Code of 1986, as
amended to the date hereof (the "Code"), existing administrative pronouncements
and judicial decisions, existing and proposed Treasury Regulations currently in
effect, and interpretations of the foregoing, changes to any of which
subsequent to the date of this prospectus supplement may affect the tax
consequences described herein, possibly with retroactive effect. This summary
discusses only Notes held as capital assets within the meaning of Section 1221
of the Code. This summary does not discuss all of the tax consequences that may
be relevant to a holder in light of the holder's particular circumstances or to
holders subject to special rules, such as certain financial institutions,
insurance companies, dealers in securities, persons holding Notes in connection
with a hedging transaction, "straddle," conversion transaction or other
integrated transaction or persons who have ceased to be United States citizens
or to be taxed as resident aliens or United States persons whose functional
currency (as defined in Section 985 of the Code) is not the U.S. dollar.
Persons considering the purchase of Notes should consult their tax advisors
with regard to the application of the United States federal income and estate
tax laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction.
Tax Consequences to United States Persons
For purposes of the following discussion, "United States person" means a
beneficial owner of a Note that is for United States federal income tax
purposes:
. a citizen or resident of the United States,
. a corporation or other entity created or organized in or under the laws
of the United States or of any political subdivision thereof,
. an estate the income of which is subject to United States federal income
taxation regardless of its source, or
. a trust if (1) a court within the United States is able to exercise
primary supervision over the administration of the trust and (2) one or
more United States persons have the authority to control all substantial
decisions of the trust.
If a partnership holds Notes, the tax treatment of a partner will generally
depend upon the status of the partner and upon the activities of the
partnership. Partners of partnerships holding Notes should consult their tax
advisors.
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Payments of Interest
Interest on a Note will generally be taxable to a United States person as
ordinary interest income at the time it is accrued or is received in accordance
with the United States person's method of accounting for tax purposes. A United
States person that purchases a Note at issuance for an amount greater than the
Note's stated redemption price at maturity (in this case, the Note's stated
principal amount) will be considered to hold the Note with bond premium equal
to the difference. A holder of a bond premium Note may elect to reduce its
taxable interest income on the Note in each interest accrual period by the
portion of bond premium allocable to that accrual period. The portion allocable
to each interest payment or accrual is determined under Treasury regulations
and is based on the holder's yield to maturity, calculated on a constant
accrual basis from the date the holder acquires the Note, the Note's interest
accrual periods and the holder's tax basis in the Note. The election to
amortize bond premium, once made, applies to all taxable premium bonds of the
holder owned during the year of election and all subsequent years, and
generally may not be revoked without the consent of the Commissioner of
Internal Revenue. Holders of bond premium Notes should consult their tax
advisors about the advisability, time and manner of making such an election in
their own particular circumstances.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or retirement of a Note, a United States person will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and the United States person's
adjusted tax basis in the Note. For these purposes, the amount realized does
not include any amount attributable to interest on the Note that has not
previously been included in income, which will be includable as interest as
described under "--Payments of Interest" above. A United States person's
adjusted tax basis in a Note generally will equal the cost of the Note to the
United States person, reduced, in the case of holders of Notes who have elected
to amortize bond premium, by the amount of bond premium used as an offset to
interest accrual.
In general, gain or loss realized on the sale, exchange or redemption of a
Note will be capital gain or loss. Prospective investors should consult their
tax advisors regarding the treatment of capital gains (which may be taxed at
lower rates than ordinary income for taxpayers who are individuals, trusts or
estates) and losses (the deductibility of which is subject to limitations).
Backup Withholding and Information Reporting
Backup withholding and information reporting requirements may apply to
certain payments of principal, premium and interest on a Note, and to payments
of proceeds of the sale or redemption of a Note, to certain non-corporate
United States persons. Dow, its agent, a broker, or any paying agent, as the
case may be, will be required to withhold from any payment a tax equal to no
more than 30.5 percent of such payment if the United States person fails to
furnish or certify his correct taxpayer identification number to the payor in
the manner required, fails to certify that such United States person is not
subject to backup withholding, or otherwise fails to comply with the applicable
requirements of the backup withholding rules. Any amounts withheld under the
backup withholding rules from a payment to a United States person may be
credited against that United States person's United States federal income tax
and may entitle that United States person to a refund, provided that the
required information is furnished to the United States Internal Revenue
Service.
Tax Consequences to Non-United States Persons
As used herein, the term "non-United States person" means an owner of a Note
that is, for United States federal income tax purposes:
. a nonresident alien individual,
. a foreign corporation, or
. a nonresident alien fiduciary of a foreign estate or trust.
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If a partnership holds Notes, the tax treatment of a partner will generally
depend upon the status of the partner and upon the activities of the
partnership. Partners of partnerships holding Notes should consult their tax
advisors.
Income and Withholding Tax
Subject to the discussion of backup withholding below:
(a) payments of principal and interest on a Note that is beneficially
owned by a non-United States person will not be subject to United States
federal withholding tax; provided, that in the case of interest,
. (1) the beneficial owner does not actually or constructively own 10%
or more of the total combined voting power of all classes of stock
of Dow entitled to vote, (2) the beneficial owner is not a
controlled foreign corporation that is related, directly or
indirectly, to Dow through stock ownership, and (3) either (A) the
beneficial owner of the Note certifies (generally on an IRS Form W-
8BEN) to the person otherwise required to withhold United States
federal income tax from such interest, under penalties of perjury,
that it is not a United States person and provides its name and
address or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the
ordinary course of its trade or business (a "financial institution")
and holds the Note certifies to the person otherwise required to
withhold United States federal income tax from such interest, under
penalties of perjury, that such statement has been received from the
beneficial owner by it or by a financial institution between it and
the beneficial owner and furnishes the payor with a copy thereof;
. the beneficial owner is entitled to the benefits of an income tax
treaty under which the interest is exempt from United States federal
withholding tax and the beneficial owner of the Note or such owner's
agent provides an IRS Form W-8BEN claiming the exemption; or
. the beneficial owner conducts a trade or business in the United
States to which the interest is effectively connected and the
beneficial owner of the Note or such owner's agent provides an IRS
Form W-8ECI;
provided that in each such case, the relevant certification or IRS Form is
delivered pursuant to applicable procedures and is properly transmitted to
the person otherwise required to withhold United States federal income
tax, and none of the persons receiving the relevant certification or IRS
Form has actual knowledge that the certification or any statement on the
IRS Form is false.
(b) a non-United States person will not be subject to United States
federal withholding tax on any gain realized on the sale, exchange or other
disposition of a Note unless the gain is effectively connected with the
beneficial owner's trade or business in the United States or, in the case
of an individual, the holder is present in the United States for 183 days
or more in the taxable year in which the sale, exchange or other
disposition occurs and certain other conditions are met; and
(c) a Note owned by an individual who at the time of death is not, for
United States estate tax purposes, a citizen or resident of the United
States generally will not be subject to United States federal estate tax as
a result of such individual's death if the individual does not actually or
constructively own 10% or more of the total combined voting power of all
classes of Dow's stock entitled to vote and, at the time of such
individual's death the income on the Note would not have been effectively
connected with a United States trade or business of the individual.
With respect to the certification requirement referred to in subparagraph
(a), for Notes held by a foreign partnership, unless the foreign partnership
has entered into a withholding agreement with the IRS, a foreign partnership
will be required, in addition to providing a Form W-8IMY, to attach an
appropriate certification by each partner. Prospective investors, including
foreign partnerships and their partners, should consult their tax advisors
regarding possible additional reporting requirements.
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If a non-United States person holding a Note is engaged in a trade or
business in the United States, and if interest on the Note (or gain realized on
its sale, exchange or other disposition) is effectively connected with the
conduct of such trade or business, such holder, although exempt from the
withholding tax discussed in the preceding paragraphs, will generally be
subject to regular United States income tax on such effectively connected
income in the same manner as if it were a United States person. Such a holder
may also need to provide a United States taxpayer identification number on the
forms referred to in paragraph (a) above in order to meet the requirements set
forth above. In addition, if such holder is a foreign corporation, it may be
subject to a 30% branch profits tax (unless reduced or eliminated by an
applicable treaty) of its effectively connected earnings and profits for the
taxable year, subject to certain adjustments. For purposes of the branch
profits tax, interest on, and any gain recognized on the sale, exchange or
other disposition of, a Note will be included in the effectively connected
earnings and profits of such holder if such interest or gain, as the case may
be, is effectively connected with the conduct by such holder of a trade or
business in the United States.
Each holder of a Note should be aware that if it does not properly provide
the required IRS form, or if the IRS form (or if permissible a copy of such
form) is not properly transmitted to and received by the United States person
otherwise required to withhold United States federal income tax, interest on
the Note may be subject to United States withholding tax at a 30% rate and the
holder, including the beneficial owner, will not be entitled to any additional
amounts from Dow described under the heading "Description of Notes--Payment of
Additional Amounts" with respect to such tax. Such tax, however, may in certain
circumstances be allowed as a refund or as a credit against such holder's
United States federal income tax. The foregoing does not deal with all aspects
of federal income tax withholding that may be relevant to foreign holders of
the Notes. Investors are advised to consult their own tax advisors for specific
advice concerning the ownership and disposition of Notes.
Backup Withholding and Information Reporting
Under current Treasury Regulations, backup withholding (imposed at a rate
not higher than 30.5%) will not apply to payments made by Dow or a paying agent
to a non-United States person in respect of a Note if the certifications
required by Sections 871(h) and 881(c) of the Code, which are described above,
are received, provided in each case that Dow or the paying agent, as the case
may be, does not have actual knowledge that the payee is a United States
person.
Under current Treasury Regulations, payments of the proceeds from the sale,
exchange or other disposition of a Note made to or through a foreign office of
a broker (including a custodian, nominee or other agent acting on behalf of the
beneficial owner of a Note) generally will not be subject to information
reporting or backup withholding. However, if such broker is a United States
person, a controlled foreign corporation for United States federal tax
purposes, a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, or a foreign partnership with certain connections with the United
States, then information reporting will be required unless the broker has in
its records documentary evidence that the beneficial owner is not a United
States person and certain other conditions are met or the beneficial owner
otherwise establishes an exemption. Backup withholding may apply to any payment
that such broker is required to report if such broker has actual knowledge that
the payee is a United States person. Payments to or through the United States
office of a broker are subject to information reporting and backup withholding
unless the holder or beneficial owner certifies, under penalties of perjury
that it is a non-United States person and that it satisfies certain other
conditions or otherwise establishes an exemption from information reporting and
backup withholding.
Non-United States persons holding Notes should consult their tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and
the procedure for obtaining such an exemption, if available. Backup withholding
is not a separate tax, but is allowed as a refund or credit against the
holder's United States federal income tax, provided the necessary information
is furnished to the Internal Revenue Service.
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Interest on a Note that is beneficially owned by a non-United States person
will be reported annually on IRS Form 1042S, which must be filed with the
Internal Revenue Service and furnished to such beneficial owner.
The United States federal income tax discussion set forth above is included
for general information only and may not be applicable depending upon a
holder's particular situation. Holders should consult their own tax advisors
with respect to the tax consequences to them of the ownership and disposition
of the Notes, including the tax consequences under state, local, foreign and
other tax laws and the possible effects of changes in federal or other tax
laws.
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UNDERWRITING
Salomon Smith Barney Inc. is acting as representative of the underwriters
named below.
Subject to the terms and conditions stated in the underwriting agreement
dated the date of this prospectus supplement, each underwriter named below has
agreed to purchase, and we have agreed to sell to that underwriter, the
principal amount of Notes set forth opposite the underwriter's name.
Principal Amount
Underwriters of Notes
------------ ----------------
Banc of America Securities LLC........................... $235,000,000
Salomon Smith Barney Inc................................. 235,000,000
Banc One Capital Markets, Inc. .......................... 10,000,000
Credit Suisse First Boston Corporation................... 10,000,000
First Union Securities, Inc. ............................ 10,000,000
------------
Total.................................................. $500,000,000
============
The underwriting agreement provides that the obligations of the underwriters
to purchase the Notes included in this offering are subject to approval of
legal matters by counsel and to other conditions. The underwriters are
obligated to purchase all the Notes if they purchase any of the Notes.
The underwriters propose to offer some of the Notes directly to the public
at the public offering price set forth on the cover page of this prospectus
supplement and some of the Notes to dealers at the public offering price less a
concession not to exceed 0.20% of the principal amount of the Notes. The
underwriters may allow, and dealers may reallow a concession not to exceed
0.10% of the principal amount of the Notes on sales to other dealers. After the
initial offering of the Notes to the public, the representative may change the
public offering price and concessions.
The following table shows the underwriting discounts and commissions that we
are to pay to the underwriters in connection with this offering (expressed as a
percentage of the principal amount of the Notes).
Paid by Dow
-----------
Per note...................................................... 0.400%
Although we will apply to list the Notes on the Luxembourg Stock Exchange, a
listing may not be obtained. The Notes are a new issue of securities with no
established trading market. Dow has been advised by the underwriters that the
underwriters intend to make a market in the Notes but are not obligated to do
so and may discontinue market making at any time without notice. No assurance
can be given as to the liquidity of the trading market for the Notes.
The Notes are offered for sale in those jurisdictions in the United States,
Europe, Asia and Canada where it is legal to make such offers. Only offers and
sales of the Notes in the United States, as part of the initial distribution
thereof or in connection with resales thereof under circumstances where this
prospectus supplement and the accompanying prospectus must be delivered, are
made pursuant to the registration statement of which the accompanying
prospectus, as supplemented by this prospectus supplement, is a part.
Each underwriter has represented and agreed that it will comply with all
applicable laws and regulations in force in any jurisdiction in which it
purchases, offers, sells or delivers the Notes or possesses or distributes this
prospectus supplement or the accompanying prospectus and will obtain any
consent, approval or permission required by it for the purchase, offer or sale
by it of the Notes under the laws and regulations in force in any jurisdiction
to which it is subject or in which it makes such purchases, offers or sales and
neither Dow nor any other underwriter shall have responsibility therefor.
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Each underwriter, severally and not jointly, has represented and agreed
that:
. it has not offered or sold and, prior to the expiry of the period of six
months from the issue date of the Notes, will not offer or sell any
Notes to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses
or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995;
. it has only communicated or caused to be communicated and will only
communicate or cause to be communicated an invitation or inducement to
engage investment activity (within the meaning of Section 21 of the
Financial Services and Markets Act 2000 of the United Kingdom (the
"FSMA")) received by it in connection with the issue of the Notes in
circumstances in which Section 21(1) of the FSMA does not apply to us;
and
. it has complied and will comply with all applicable provisions of the
FSMA with respect to anything done by it in relation to any Notes in,
from or otherwise involving the United Kingdom.
In connection with the offering, Salomon Smith Barney, on behalf of the
underwriters, may purchase and sell Notes in the open market. These
transactions may include over-allotment, syndicate covering transactions and
stabilizing transactions. Over-allotment involves syndicate sales of Notes in
excess of the principal amount of Notes to be purchased by the underwriters in
the offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the Notes in the open market after the
distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of Notes made for
the purpose of preventing or retarding a decline in the market price of the
Notes while the offering is in progress.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney, in covering syndicate short positions or making
stabilizing purchases, repurchases Notes originally sold by that syndicate
member.
Any of these activities may have the effect of preventing or retarding a
decline in the market price of the Notes. They may also cause the price of the
Notes to be higher than the price that otherwise would exist in the open market
in the absence of these transactions. The underwriters may conduct these
transactions in the over-the-counter market or otherwise. If the underwriters
commence any of these transactions, they may discontinue them at any time.
We estimate that our total expenses for this offering will be $5,000, net of
amounts reimbursed to us by the underwriters.
First Union Securities, Inc. is an indirect, wholly-owned subsidiary of
Wachovia Corporation. Wachovia Corporation conducts its investment banking,
institutional and capital markets businesses through its various bank, broker-
dealer and non-bank subsidiaries under the trade name of Wachovia Securities.
Any references to Wachovia Securities, however, do not include Wachovia
Securities, Inc., member NASD/SIPC, a separate broker-dealer subsidiary of
Wachovia Corporation and sister affiliate of First Union Securities, Inc.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make because of any of those
liabilities.
S-20
VALIDITY OF NOTES
The validity of the Notes will be passed upon for Dow by Charles J. Kalil,
Dow's Assistant General Counsel. As of September 30, 2001, Mr. Kalil
beneficially owned 9,070 shares, and held options to purchase 63,800 shares, of
Dow common stock, of which options to purchase 44,200 shares of Dow common
stock were exercisable. Mayer, Brown & Platt, Chicago, Illinois, will pass on
certain matters for the underwriters. Mayer, Brown & Platt from time to time
represents Dow in connection with certain matters.
GENERAL INFORMATION
We will apply to list the Notes on the Luxembourg Stock Exchange. In
connection with the listing application and if the application is to be
approved, the Certificate of Incorporation and the By-Laws of Dow and a legal
notice relating to the issuance of the Notes will be deposited prior to listing
with the Greffier en Chef du Tribunal d'Arrondissement de et a Luxembourg,
where copies thereof may be obtained upon request.
Copies of the above documents together with this prospectus supplement, the
accompanying prospectus, the indenture and Dow's Annual Report on Form 10-K for
the year ended December 31, 2000 as well as all Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed since
December 31, 2000, so long as any of the Notes are outstanding, will be made
available for inspection at the main office of Kredietbank S.A.
Luxembourgeoise, 43 Boulevard Royal, L-2955 Luxembourg. Kredietbank S.A.
Luxembourgeoise will act as intermediary between the Luxembourg Stock Exchange
and Dow and the holders of the Notes. In addition, copies of the Annual
Reports, Quarterly Reports and Current Reports of Dow may be obtained free of
charge at such office.
Except as may be disclosed herein (including the documents incorporated by
reference), there has been no material adverse change in the financial or
trading position of Dow since December 31, 2000.
Except as may be disclosed in the documents incorporated by reference, Dow
is not a party to any legal or arbitration proceedings (including any that are
pending or threatened) which may have or have had during the previous 12 months
a significant effect on Dow's consolidated financial position.
Resolutions relating to the issuance and sale of the Notes were adopted by
the Executive Committee of the Board of Directors of Dow as of March 7, 2001
and December 5, 2001.
The Notes, the indenture and the underwriting agreement are governing by,
and shall be construed in accordance with, the laws of the State of New York,
United States of America.
The Notes have been accepted for clearance through Euroclear and Clearstream
and have been assigned Euroclear and Clearstream Common Code No. 014037179,
International Security Identification Number (ISIN) US260543BP79 and CUSIP No.
260543 BP 7.
S-21
PROSPECTUS
The Dow Chemical Company
By this prospectus, Dow may offer from time to time a total of up to
$2,000,000,000 of securities, which may include:
. common stock
. preferred stock
. warrants to purchase common stock
. warrants to purchase preferred stock
. debt securities
. warrants to purchase debt securities
Dow will provide you with the specific terms and the public offering prices
of these securities in supplements to this prospectus. You should read this
prospectus and the prospectus supplements carefully before you invest. This
prospectus may not be used to offer and sell securities unless accompanied by a
prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful and complete. Any representation to the contrary is
a criminal offense.
This prospectus is dated May 15, 2001
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that Dow filed with the
Securities and Exchange Commission under the shelf registration process. Dow
may sell common stock, preferred stock, debt securities, warrants to purchase
common stock, warrants to purchase preferred stock and warrants to purchase
debt securities. The total sales of all securities sold under this prospectus,
however, may not exceed $2,000,000,000. This prospectus provides you with a
general description of the securities Dow may offer. Each time Dow sells
securities, Dow will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may
also add, update or change information contained in this prospectus. You should
read both this prospectus and any prospectus supplement together with
additional information described under the heading "Where You Can Find More
Information."
THE DOW CHEMICAL COMPANY
Dow is a leading science and technology company that provides innovative
chemical, plastic and agricultural products and services to many essential
consumer markets. Dow serves customers in more than 170 countries and a wide
range of markets that are important to human progress, including food,
transportation, health and medicine, personal and home care, and building and
construction, among others. Dow has 171 manufacturing sites in 35 countries and
supplies more than 2,500 products. Dow's corporate offices are located at 2030
Dow Center, Midland, Michigan 48674, and Dow's telephone number is (517) 636-
1000.
Additional information concerning Dow and its subsidiaries is included in
the documents filed with the Securities and Exchange Commission and
incorporated in this prospectus by reference. See the discussion under the
heading "Where You Can Find More Information."
USE OF PROCEEDS
Dow will use the net proceeds from the sale of the securities for general
corporate purposes.
DESCRIPTION OF CAPITAL STOCK
The following summary of common stock and preferred stock of Dow does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the relevant provisions of Delaware law, and by Dow's certificate
of incorporation and bylaws, which are incorporated by reference as exhibits to
the registration statement of which this prospectus is a part.
Dow is authorized to issue 1,750,000,000 shares of all classes of stock,
1,500,000,000 of which are shares of common stock, par value $2.50 per share,
and 250,000,000 of which are shares of preferred stock. As of March 31, 2001,
there were 981,377,562 shares of common stock issued and no shares of preferred
stock issued or outstanding. All issued and outstanding shares of common stock
are fully paid and non-assessable. Any additional shares of common stock and
preferred stock that Dow issues will be fully paid and non-assessable. Neither
Dow's common stockholders nor preferred stockholders have preemptive rights.
Common Stock
General
Dow's certificate of incorporation provides that, subject to all of the
rights of holders of preferred stock provided for by the board of directors or
by Delaware corporate law, the holders of common stock will have full voting
rights on all matters requiring stockholder action, with each share of common
stock being entitled to one vote and having equal rights of participation in
the dividends and assets of Dow.
2
Board of Directors
Dow's certificate of incorporation divides Dow's board of directors into
three classes of directors that are as nearly equal in number as possible with
three-year terms. As a result, approximately one-third of Dow's board of
directors is elected each year. A quorum of directors consists of a majority of
Dow's entire board of directors then holding office.
Number, Filling of Vacancies and Removal of Directors
Dow's certificate of incorporation and bylaws provide that its board of
directors may not have less than six or more than twenty-one members. The
actual number of directors is determined by a vote of a majority of Dow's
entire board of directors. Currently, Dow has fifteen members on its board of
directors. Vacancies on Dow's board of directors and any newly created
directorships are filled by a vote of the majority of the other directors then
in office. Directors elected to fill a vacancy or a new position hold office
until the next annual meeting of stockholders. Directors can be removed only
for cause and only by the vote of stockholders holding 80% of the voting power
of Dow's outstanding stock entitled to vote generally in the election of
directors, voting together as a single class.
Dividends
Delaware corporate law generally provides that a corporation, subject to
restrictions in its certificate of incorporation, including preferred
stockholders' rights to receive dividends prior to common stockholders, may
declare and pay dividends out of:
. surplus; or
. net profits for the fiscal year in which the dividend is declared and/or
the preceding fiscal year, if there is no surplus.
Dividends may not be paid out of net profits so long as the capital of the
corporation is less than the aggregate amount of capital represented by the
issued and outstanding stock of all classes having a preference on the
distribution of assets. Dividends on Dow common stock are not cumulative. Dow's
certificate of incorporation does not contain any additional restrictions on
the declaration or payment of dividends.
Special Meetings of Stockholders
Dow's bylaws provide that a special stockholders' meeting for any purpose
may be called only by the board of directors by a resolution adopted by a
majority of the entire board:
. upon motion of a director; or
. upon written request of stockholders holding at least 50% of the voting
power of the shares of capital stock outstanding and entitled to vote
generally in the election of directors.
Stockholder notices requesting a special meeting must be given to Dow's
secretary. The notice must include, as to each matter the stockholder proposes
to bring before the meeting:
. the name and address of the stockholder;
. the class or series and number of shares of capital stock that are
beneficially owned by the stockholder;
. a brief description of the business to be brought before the meeting,
including the text of any proposed amendment to the certificate of
incorporation or bylaws;
. a description of all arrangements or understandings between the
stockholder and any other persons related to the business proposal;
. any material business interests of the stockholder in the business
proposal; and
. a representation that the stockholder intends to appear in person or by
proxy at the meeting to bring the business before the meeting.
3
Advance Notice Provisions for Stockholder Proposals Other than Election of
Directors
Dow's bylaws provide that a stockholder may bring business before an annual
stockholders' meeting if the stockholder is a stockholder on the record date of
giving notice and on the record date of the meeting and gives notice to Dow's
secretary of business that is proper to be brought at the meeting under
Delaware corporate law:
. no earlier than 120 days or later than 60 days before the anniversary
date of the first mailing of proxy materials for the last annual meeting;
or
. if the annual meeting is more than 30 days before or after the
anniversary date of the last annual meeting, Dow must receive the
stockholder's notice no later than the close of business on the 10th day
after the earlier of the date on which notice of the annual meeting date
was mailed or publicly disclosed.
The notice must include the same information required to be included in a
stockholder's notice in connection with requesting a special meeting. See the
section of this prospectus captioned "Special Meetings of Stockholders."
Advance Notice Provisions for Stockholder Nominations of Directors at an
Annual Meeting
Dow's bylaws provide that a stockholder may nominate a person for election
to the board of directors at an annual stockholders' meeting if the stockholder
gives notice to Dow's secretary:
. no more than 120 days and no less than 60 days before the anniversary
date of the first mailing of proxy materials for the last annual meeting;
or
. if the annual meeting is more than 30 days before or after the
anniversary date of the last annual meeting, Dow must receive the
stockholder's notice no later than the close of business on the 10th day
after the earlier of the day on which notice of the annual meeting date
was mailed or publicly disclosed.
The notice must include the following:
. a description of all arrangements or understandings between the
stockholder and the nominee and any other person pursuant to which the
nomination is made;
. the information regarding the nominee that would have been required to be
included in a proxy statement filed under the proxy rules of the
Securities and Exchange Commission if the nominee had been nominated by
the board of directors;
. the consent of the nominee to serve as a director if he or she is
elected; and
. the information required to be included in a stockholder's notice in
connection with requesting a special meeting. See the section of this
prospectus captioned "Special Meetings of Stockholders."
Advance Notice Provisions for Stockholder Nominations of Directors at a
Special Meeting
Dow's bylaws provide that a stockholder may nominate a person for election
to the board of directors at a special meeting of stockholders if the
stockholder gives Dow's secretary notice of the nomination no later than the
close of business on the seventh day after notice of the special meeting is
first given to stockholders.
In addition to the information required to be included in a stockholder's
notice in connection with a special meeting, the notice must include the same
information that would be required to nominate a person for election as a
director at an annual meeting. See the section of this prospectus captioned
"Advance Notice Provisions for Stockholder Nominations of Directors at an
Annual Meeting."
Stockholder Action by Written Consent
Under Delaware corporate law, unless otherwise provided in a corporation's
certificate of incorporation, any action required or permitted to be taken at
an annual or special stockholders' meeting may be taken by written consent,
without a meeting, prior notice or a vote. The written consent must be signed
by holders of
4
outstanding stock having the minimum number of votes necessary to authorize or
take such action at a meeting at which all shares entitled to vote on the
matter were present and voted. Dow's certificate of incorporation, however,
provides that any action required or permitted to be taken by the stockholders
must be taken at a duly called annual or special stockholders' meeting and may
not be taken by written consent.
Transactions with Interested Stockholders and a Merger or Sale of Assets
Delaware corporate law requires the approval of the board of directors and a
majority of a corporation's outstanding stock entitled to vote to authorize a
merger or consolidation unless the company's certificate of incorporation
requires a greater percentage. Unless required by a corporation's certificate
of incorporation, stockholder approval, however, is not required in certain
cases, such as where:
. either no shares of common stock of the surviving corporation and no
shares, securities or obligations convertible into common stock are to be
issued or delivered in the merger; or
. the authorized and unissued shares or the treasury shares of common stock
of the surviving corporation to be issued or delivered in the merger,
plus those initially issuable upon conversion of any other shares,
securities or obligations to be issued or delivered in the merger;
do not exceed 20% of the shares of common stock of the corporation outstanding
immediately prior to the effective date of the merger. A sale of all or
substantially all of a Delaware corporation's assets or a voluntary dissolution
of a Delaware corporation requires the vote of a majority of the board of
directors and a majority of the corporation's outstanding shares entitled to
vote on the matter unless the company's certificate of incorporation requires a
greater percentage. Dow's certificate of incorporation does not require a
greater percentage, except as described below.
Delaware corporate law generally defines an interested stockholder as a
person, other than the corporation and any direct or indirect majority owned
subsidiary of the corporation:
. who is the direct or indirect owner of 15% or more of the outstanding
voting stock of the corporation; or
. is an affiliate or associate of the corporation and was the direct or
indirect owner of 15% or more of the outstanding voting stock of the
corporation at any time within the three-year period immediately prior to
the date it asked for determination of its status as an interested
stockholder; and
. the affiliates and associates of that person.
Delaware corporate law prohibits an interested stockholder from engaging in
a business combination with the Delaware corporation for three years following
the time of becoming an interested stockholder. This three-year waiting period
does not apply when:
. prior to the time of becoming an interested stockholder, the board of
directors approves either the business combination or the transaction
that resulted in the stockholder becoming an interested stockholder;
. as a result of becoming an interested stockholder, the stockholder owned,
excluding shares owned by directors who are also officers and certain
employee stock plans, at least 85% of the outstanding voting stock of the
corporation at the time the transaction began; or
. at or after the time of becoming an interested stockholder, the business
combination is approved by the board of directors and authorized at a
meeting of stockholders by a vote of at least two-thirds of the
outstanding voting stock that is not owned by the interested stockholder.
These restrictions also do not apply in certain other circumstances,
including business combinations with an interested stockholder that are
proposed after a public announcement of and prior to the consummation or
abandonment of:
. certain mergers or consolidations;
5
. sales of 50% or more of the aggregate market value of a corporation's
assets or outstanding voting stock; or
. tender offers or exchange offers for 50% or more of a corporation's
voting stock.
Delaware corporate law allows a corporation to specify in its certificate of
incorporation or bylaws that it will not be governed by the section relating to
transactions with interested stockholders. Dow has not made that election in
its certificate of incorporation or bylaws.
Dow's certificate of incorporation provides that, in addition to the vote
required pursuant to Delaware corporate law, the vote of stockholders owning at
least 80% of the voting power of the shares of capital stock entitled to vote
generally in the election of directors, voting together as a single class, is
required to approve any of the following business combination transactions:
. a merger or consolidation of Dow or a subsidiary of which Dow ultimately
owns 50% or more of the capital stock with:
-- an interested stockholder; or
-- any other individual or entity that, after the merger or
consolidation, would be an affiliate or associate of an interested
stockholder;
. a sale, lease, exchange, mortgage, pledge, transfer or other disposition,
in one or more transactions with or on behalf of an interested
stockholder or an affiliate or associate of an interested stockholder, of
any assets of Dow or any subsidiary of Dow that constitutes 5% or more of
Dow's total consolidated assets as of the end of the most recent quarter;
. the issuance or transfer by Dow or any of its subsidiaries of any
securities of Dow or its subsidiaries in one or more transactions to, or
proposed by or on behalf of, an interested stockholder or an affiliate or
associate of an interested stockholder in exchange for cash, securities
or other property constituting not less than 5% of Dow's consolidated
total assets as of the end of the most recent quarter;
. the adoption of a plan or proposal for liquidation or dissolution of Dow
or any spin-off or split-up of any kind of Dow or any subsidiary of Dow
that is proposed by or on behalf of an interested stockholder or an
affiliate or associate of an interested stockholder; or
. any reclassification of securities or recapitalization of Dow, or any
merger or consolidation of Dow with a subsidiary of Dow or other
transaction that has the direct or indirect effect of increasing the
percentage of the outstanding shares of:
-- any class of equity securities of Dow or any subsidiary of Dow; or
-- any class of securities of Dow or any subsidiary that are convertible
into equity securities of Dow or any subsidiary that are owned
directly or indirectly by an interested stockholder and all of its
affiliates and associates.
However, the vote of only a majority of the stockholders entitled to vote
generally in the election of directors, voting together as a single class, is
required to approve a business combination transaction that:
. has been approved by a majority of continuing directors, even if they
constitute less than a quorum; or
. meets certain price and consideration conditions and procedures.
A "continuing director" is:
-- any member of the board of directors who is not an interested
stockholder involved in a business combination described above or an
affiliate, associate, employee, agent or nominee of an interested
stockholder or relative of any of the foregoing persons, and was a
member of the board before the interested stockholder became an
interested stockholder; or
-- a successor of a director described above who is recommended or
elected to succeed a director described above by the vote of a
majority of such directors then on the board.
6
Dow's certificate of incorporation defines an interested stockholder as any
person or entity other than Dow, any subsidiary of Dow or any employee benefit
plan of Dow or a subsidiary of Dow, that:
. is, or was at any time within the two-year period prior to the date in
question, the direct or indirect beneficial owner of 10% or more of the
voting power of the then-outstanding voting stock of Dow;
. is an affiliate of Dow and, at any time within the two-year period
immediately prior to the date in question, was the direct or indirect
beneficial owner of 10% or more of the voting power of the outstanding
voting stock of Dow; or
. is an assignee of, or has otherwise succeeded to, any shares of voting
stock of Dow of which an interested stockholder was the direct or
indirect beneficial owner, at any time within the two-year period
immediately prior to the date in question, if such assignment or
succession occurred in the course of a transaction or series of
transactions not involving a public offering under the Securities Act of
1933.
For purposes of determining whether a person is an interested stockholder,
the outstanding voting stock of Dow includes unissued shares of voting stock of
Dow beneficially owned by the interested stockholder but not other shares of
voting stock of Dow that may be issuable pursuant to an agreement, arrangement
or understanding or upon the exercise of conversion rights, warrants or
options, or otherwise, to any person who is not an interested stockholder.
Preferred Stock
Dow's board of directors is authorized, subject to Delaware corporate law
and without a vote of its stockholders, to issue shares of preferred stock from
time to time in one or more series and to determine the voting rights,
designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations and restrictions of any series
of preferred stock. The prospectus supplement relating to an offering of shares
of Dow's preferred stock will describe the terms of the series of preferred
stock Dow is offering.
DESCRIPTION OF DEBT SECURITIES
The following description of the debt securities summarizes the material
terms and provisions of the debt securities to which a prospectus supplement
may relate. Each time Dow offers debt securities, the prospectus supplement
related to that offering will describe the terms of the debt securities Dow is
offering.
The debt securities will be issued under an indenture, dated as of April 1,
1992, as supplemented by a supplemental indenture, dated as of January 1, 1994,
and a second supplemental indenture dated as of October 1, 1999, between Dow
and Bank One Trust Company, NA (successor in interest to The First National
Bank of Chicago), as trustee. The indenture as supplemented by the supplemental
indentures is referred to in this section as the "indenture." The following
summary of the debt securities and the indenture does not purport to be
complete and is subject to the provisions of the indenture, including the
defined terms. Whenever Dow refers to particular sections, articles or defined
terms of the indenture, those sections, articles or defined terms are
incorporated by reference in this prospectus and prospectus supplement. You
should review the indenture that is filed as exhibits to the registration
statement for additional information.
General
Dow may issue debt securities from time to time in one or more series
without limitation as to aggregate principal amount. The indenture does not
limit the amount of other indebtedness or securities which Dow may issue.
The debt securities will be unsecured obligations and will rank equally with
all of Dow's other unsecured and unsubordinated indebtedness.
7
The prospectus supplement will describe the following terms of the debt
securities Dow is offering:
. the title of the debt securities or the series in which the debt
securities will be included;
. any limit on the aggregate principal amount of the debt securities of
that series;
. whether the debt securities may be issued as registered securities or
bearer securities or both, whether any of the debt securities may be
issued initially in temporary global form and whether any of the debt
securities may be issued in permanent global form;
. the price or prices at which the debt securities will be issued;
. the date or dates on which the principal amount of the debt securities is
payable;
. the interest rate or rates, or the formula by which the interest rate or
rates will be determined, if any, and the dates from which any interest
will accrue;
. the interest payment dates on which any interest will be payable, the
regular record date for any interest payable on any debt securities that
are registered securities on any interest payment date, and the extent to
which, or the manner in which, any interest payable on a global security
on an interest payment date will be paid if different from the manner
described below under the section of this prospectus captioned "Global
Securities";
. any mandatory or optional sinking fund or analogous provisions;
. each office or agency where the principal of and any premium and interest
on the debt securities will be payable and each office or agency where
the debt securities may be presented for registration of transfer or
exchange;
. the date, if any, after which and the price or prices at which the debt
securities may, pursuant to any optional or mandatory redemption
provisions, be redeemed, in whole or in part, and the other detailed
terms and provisions of any optional or mandatory redemption provisions;
. the denominations in which Dow may issue any debt securities which are
registered securities, if other than denominations of $1,000 and any
integral multiple thereof, and the denominations in which Dow may issue
any debt securities which are bearer securities, if other than
denominations of $5,000;
. the currency or currencies of payment of principal of and any premium and
interest on the debt securities;
. any index used to determine the amount of payments of principal of and
any premium and interest on the debt securities;
. any additional covenants applicable to the debt securities; and
. any other terms and provisions of the debt securities not inconsistent
with the terms and provisions of the indenture.
The prospectus supplement also will describe any special provisions for the
payment of additional amounts with respect to the debt securities.
If the purchase price of any of the debt securities is denominated in one or
more foreign currencies or currency units or if the principal of, or any
premium and interest on, any series of debt securities is payable in one or
more foreign currencies or currency units, the restrictions, elections, general
tax considerations, specific terms and other information with respect to such
debt securities and such foreign currency or currency units will be set forth
in the related prospectus supplement.
Some of the debt securities may be issued as original issue discount
securities (bearing no interest or bearing interest at a rate which at the time
of issuance is below market rates) to be sold at a substantial discount below
their principal amount. The prospectus supplement will describe the federal
income tax considerations and other special considerations which apply to any
original issue discount securities.
8
Denominations, Registration and Transfer
The debt securities may be issued as registered securities, bearer
securities or both. Debt securities may be issued in the form of one or more
global securities, as described below under the section of this prospectus
captioned "Global Securities." Unless otherwise provided in the prospectus
supplement, registered securities denominated in U.S. dollars will be issued
only in denominations of $1,000 or any integral multiple thereof and bearer
securities denominated in U.S. dollars will be issued only in denominations of
$5,000 with coupons attached. A global security will be issued in a
denomination equal to the aggregate principal amount of outstanding debt
securities represented by that global security. The prospectus supplement
relating to debt securities denominated in a foreign or composite currency will
specify the denominations in which the debt securities will be issued.
During the "restricted period" as defined in Treasury Regulation Section
1.163-5(c)(2)(i)(D)(7), no bearer security will be mailed or otherwise
delivered to any location in the United States and a bearer security may be
delivered during such restricted period only if the person entitled to receive
the bearer security furnishes proper written certification that the bearer
security is owned by:
. a person that is not a U.S. person;
. a qualifying foreign branch of a U.S. financial institution; or
. a U.S. person who acquired the obligation through the qualifying foreign
branch of a U.S. financial institution and holds the obligation through
that qualifying foreign branch of a U.S. financial institution on the
date of certification; or
. a financial institution for resale during the restricted period but not
for resale directly or indirectly to a U.S. person or to a person within
the United States or its possessions.
Registered securities of any series may be exchanged for other registered
securities of the same series and of a like aggregate principal amount and
tenor of different authorized denominations. In addition, if debt securities of
any series may be issued as both registered securities and as bearer
securities, at the option of the holder upon written request, and subject to
the terms of the indenture, bearer securities (with all unmatured coupons,
except as provided below, and all matured coupons in default attached) of such
series may be exchanged for registered securities of the same series of any
authorized denominations and of a like aggregate principal amount and tenor.
Unless otherwise indicated in the prospectus supplement, any bearer security
surrendered in exchange for a registered security between a record date and the
relevant date for payment of interest will be surrendered without the coupon
relating to the date for payment of interest attached, and interest may be paid
only to the holder of such coupon when due in accordance with the terms of the
indenture. Except as indicated in the prospectus supplement, bearer securities
will not be issued in exchange for registered securities.
Debt securities may be presented for exchange as described in the previous
paragraph, and registered securities, other than a global security, may be
presented for registration of transfer, with the form of transfer duly
executed, at the office of the security registrar designated by Dow or at the
office of any transfer agent designated by Dow for that purpose, without
service charge and upon payment of any taxes and other governmental charges as
described in the indenture. The transfer or exchange will be effected when the
security registrar or the transfer agent is satisfied with the documents of
title and identity of the person making the request. Dow has initially
appointed the trustee as the security registrar under the indenture. If a
prospectus supplement refers to any transfer agent initially designated by Dow
with respect to any series of debt securities, Dow may at any time cancel the
designation of the transfer agent or approve a change in the location through
which such transfer agent acts, except that:
. if debt securities of a series may be issued only as registered
securities, Dow will be required to maintain a transfer agent in each
place of payment for such series; and
9
. if debt securities of a series are issuable as bearer securities, Dow
will be required to maintain (in addition to the security registrar) a
transfer agent in a place of payment for such series located outside the
United States.
Dow may at any time designate additional transfer agents with respect to any
series of debt securities.
In the event of any redemption in part, Dow will not be required to:
. issue, register the transfer of or exchange debt securities of any series
during a period beginning at the opening of business 15 days before the
date of the mailing of a notice of redemption of debt securities of that
series selected to be redeemed and ending at the close of business on:
-- if debt securities of the series may be issued only as registered
securities, the day of mailing of the relevant notice of redemption;
and
-- if debt securities of the series may be issued as bearer securities,
the day of the first publication of the notice of redemption or, if
debt securities of the series also may be issued as registered
securities and there is no publication, the mailing of the relevant
notice of redemption;
. register the transfer of or exchange any registered security or portion
of any registered security called for redemption, except the unredeemed
portion of any registered security being redeemed in part; or
. exchange any bearer security called for redemption, except to exchange
the bearer security for a registered security of that series and like
tenor which is immediately surrendered for redemption.
Payments and Paying Agents
Unless otherwise indicated in the prospectus supplement, Dow will pay the
principal of and any premium and interest on registered securities other than a
global security at the office of one or more paying agents designated by Dow.
At Dow's option, however, Dow may pay any interest by check mailed to the
address of the payee entitled to the interest at the address which appears in
the security register. Unless otherwise indicated in the prospectus supplement,
payment of any installment of interest on registered securities will be made to
the person in whose name the registered security is registered at the close of
business on the record date for such interest payment.
Unless otherwise indicated in the prospectus supplement, Dow may pay the
principal of and any premium and interest on bearer securities, subject to
applicable laws and regulations, at the offices of one or more paying agents
outside the United States designated by Dow. At Dow's option, however, Dow may
pay any interest by check or by wire transfer to an account maintained by the
payee outside the United States. Unless otherwise indicated in the prospectus
supplement, payment of interest on bearer securities on any interest payment
date will be made only upon surrender of the coupon relating to such interest
payment date. No payment with respect to any bearer security will be made at
any office or agency of Dow in the United States by check mailed to any address
in the United States or by transfer to an account maintained in the United
States. Payments will not be made in respect of bearer securities or coupons
related to such bearer securities upon presentation to or any other demand for
payment from Dow or its paying agents within the United States. Dow will pay
the principal of and any premium and interest on bearer securities denominated
and payable in U.S. dollars, however, at the office of Dow's paying agent in
the United States if, and only if:
. payment of the full amount in U.S. dollars at all offices or agencies
outside the United States is illegal or effectively precluded by exchange
controls or other similar restrictions; and
. Dow has delivered to the trustee an opinion of counsel to that effect.
Unless otherwise indicated in the prospectus supplement, the principal
office of the trustee in New York City will be Dow's sole paying agent for
payments with respect to debt securities which may be issued only as registered
securities. Any paying agent outside the United States and any other paying
agent in the United States initially designated by Dow for the debt securities
will be named in the prospectus supplement. Dow
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may at any time designate additional paying agents, or cancel the designation
of any paying agent or approve a change in the office through which any paying
agent acts, except that:
. if debt securities of a series may be issued only as registered
securities, Dow will be required to maintain a paying agent in each place
of payment for such series; and
. if debt securities of a series may be issued as bearer securities, Dow
will be required to maintain:
-- a paying agent in each place of payment for such series in the United
States for payments with respect to any registered securities of such
series and for payments with respect to bearer securities of such
series in the circumstances described above;
-- a paying agent in each place of payment located outside the United
States where debt securities of such series and any coupons related to
the debt securities may be presented and surrendered for payment,
provided that if the debt securities of such series are listed on The
International Stock Exchange, London or the Luxembourg Stock Exchange
or any other stock exchange located outside the United States and such
stock exchange so requires, Dow will maintain a paying agent in London
or Luxembourg City or any other required city located outside the
United States for debt securities of such series; and
-- a paying agent in each place of payment located outside the United
States where, subject to applicable laws and regulations, registered
securities of such series may be surrendered for registration of
transfer or exchange and where notices and demands to or upon Dow may
be served.
All amounts paid by Dow to a paying agent for the payment of principal of
and any premium and interest on any debt security that remain unclaimed at the
end of two years after the principal, premium or interest has become due and
payable will be repaid to Dow and after such repayment the holder of the debt
security or any coupon related to the debt security may look only to Dow for
the payment of principal of and any premium and interest on any such debt
security.
Global Securities
The debt securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on behalf
of, a depositary identified in the prospectus supplement. Global securities may
be issued in either registered or bearer form and in either temporary or
permanent form. Unless and until it is exchanged for debt securities in
definitive form, a temporary global security in registered form may not be
transferred except as a whole by:
. the depositary for such global security to a nominee of such depositary;
. a nominee of the depositary for such global security to such depositary
or another nominee of such depositary; or
. the depository for such global security or any such nominee to a
successor of such depositary or a nominee of such successor.
Unless otherwise indicated in the prospectus supplement, registered debt
securities issued in global form will be represented by one or more global
securities deposited with, or on behalf of, The Depository Trust Company, New
York, New York, which we refer to as DTC, or other depositary Dow appoints and
registered in the name of the depository or its nominee. The debt securities
will not be issued in definitive form unless otherwise provided in the
prospectus supplement.
DTC will act as securities depository for the securities. The debt
securities will be issued as fully-registered securities registered in the name
of Cede & Co. (DTC's partnership nominee). One fully-registered global security
will be issued with respect to each $200 million of principal amount and an
additional certificate will be issued with respect to any remaining principal
amount of debt securities.
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DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants deposit with DTC. DTC
also facilitates the settlement among participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is owned by a number of its
direct participants and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to indirect participants such as
securities brokers and dealers, banks, and trust companies that clear through
or maintain a custodial relationship with a direct participant, either directly
or indirectly. The rules applicable to DTC and its participants are on file
with the SEC.
Purchases of debt securities under the DTC system must be made by or through
direct participants, which will receive a credit for the debt securities on
DTC's records. The ownership interest of each actual purchaser of each debt
security is in turn to be recorded on the direct and indirect participants'
records. These beneficial owners will not receive written confirmation from DTC
of their purchase, but beneficial owners are expected to receive a written
confirmation providing details of the transaction, as well as periodic
statements of their holdings, from the direct or indirect participants through
which the beneficial owner entered into the transaction. Transfers of ownership
interests in the debt securities are to be accomplished by entries made on the
books of participants acting on behalf of beneficial owners. Beneficial owners
will not receive certificates representing their ownership interests in debt
securities, except in the event that use of the book-entry system for the debt
securities is discontinued.
To facilitate subsequent transfers, all debt securities deposited by
participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of debt securities with DTC and their registration in
the name of Cede & Co. will effect no change in beneficial ownership. DTC has
no knowledge of the actual beneficial owners of the debt securities; DTC's
records reflect only the identity of the direct participants to whose accounts
the debt securities are credited, which may or may not be the beneficial
owners. The participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Delivery of notices and other communications by DTC to direct participants,
by direct participants to indirect participants, and by direct participants and
indirect participants to beneficial owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices will be sent to DTC. If less than all of the debt
securities within an issue are being redeemed, DTC's practice is to determine
by lot the amount of the interest of each direct participant in such issue to
be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to debt
securities. Under its usual procedures, DTC mails an omnibus proxy to Dow as
soon as possible after the record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants to whose accounts the
debt securities are credited on the record date (identified in a listing
attached to the omnibus proxy).
Principal and interest payments, if any, on the debt securities will be made
to Cede & Co., as nominee of DTC. DTC's practice is to credit direct
participants' accounts, upon DTC's receipt of funds and corresponding detail
information from Dow or the trustee, on the applicable payable date in
accordance with their respective holdings shown on DTC's records. Payments by
participants to beneficial owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer
12
form or registered in "street name," and will be the responsibility of that
participant and not of DTC, the trustee or Dow, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal and interest to Cede & Co. is Dow's responsibility or the trustee's,
disbursement of payments to direct participants shall be the responsibility of
DTC, and disbursement of payments to beneficial owners is the responsibility of
direct and indirect participants.
A beneficial owner must give notice to elect to have its debt securities
purchased or tendered, through its participant, to a tender agent, and shall
effect delivery of debt securities by causing the direct participants to
transfer the participant's interest in the debt securities, on DTC's records,
to a tender agent. The requirement for physical delivery of debt securities in
connection with an optional tender or a mandatory purchase will be deemed
satisfied when the ownership rights in the debt securities are transferred by
direct participants on DTC's records and followed by a book-entry credit of
tendered debt securities to the tender agent's account.
DTC may discontinue providing its services as securities depository with
respect to the debt securities at any time by giving reasonable notice to Dow
or the trustee. Under these circumstances, in the event Dow does not appoint a
successor securities depository, debt security certificates will be printed and
delivered.
Dow may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event, debt
security certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Dow believes to be reliable, but Dow takes
no responsibility for their accuracy.
Limitations on Issuance of Bearer Securities
Bearer securities may not be offered, sold, resold or delivered during the
"restricted period" as defined in Treasury Regulation Section 1.163-
5(c)(2)(i)(D)(7) in the United States or its possessions or to U.S. persons
other than to a qualifying foreign branch of a institution, and any
underwriters, participating in the offering of debt securities must agree that
they will not:
. offer any bearer securities for sale or resale in the United States or
its possessions or to United States persons, other than a qualifying
foreign branch of a U.S. financial institution); nor
. deliver bearer securities within the United States.
Bearer securities and any coupons related to bearer securities will bear a
legend substantially to the following effect: "Any United States person who
holds this obligation will be subject to limitations under the United States
income tax laws, including the limitations provided in Section 165(j) and
1287(a) of the Internal Revenue Code". Under Sections 165(j) and 1287(a) of the
Internal Revenue Code, holders that are U.S. persons, with certain exceptions,
will not be entitled to deduct any loss on bearer securities and must treat as
ordinary income any gain realized on the sale or other disposition (including
the receipt of principal) of bearer securities.
The term "qualifying foreign branch of a United States financial
institution" means a branch located outside the United States of a U.S.
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business and
that provides a certificate within a reasonable time, or a blanket certificate
in the year the debt security is issued or either of the preceding two calendar
years, stating that it agrees to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Internal Revenue Code and its regulations.
The term "U.S. person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision of the United States,
and an estate or trust the income of which is subject to U.S. federal income
taxation regardless of its source.
13
The term "United States" means the United States of America, including the
states and the District of Columbia.
The term "possessions" includes Puerto Rico, the U.S. Virgin Islands, Guam,
American Samoa, Wake Island and the Northern Mariana Islands.
Certain Covenants of Dow
Limitations on Liens
Subject to the exceptions described below and those set forth under
"Exempted Indebtedness," Dow may not, and may not permit any restricted
subsidiary to create or permit to exist any lien on any principal property,
additions to principal property or shares of capital stock of any restricted
subsidiary without equally and ratably securing the debt securities. This
restriction will not apply to certain permitted liens, including:
. liens on principal property existing at the time of its acquisition and
certain purchase money mortgages;
. liens existing on the date of the indenture;
. liens on property or shares of capital stock, or arising out of any
indebtedness of any corporation existing at the time the corporation
becomes or is merged into Dow or a restricted subsidiary;
. liens which secure debt owing to Dow or a subsidiary by a restricted
subsidiary;
. liens in connection with the issuance of tax-exempt industrial
development or pollution control bonds or other similar bonds issued
pursuant to Section 103(b) of the Internal Revenue Code to finance all or
any part of the purchase price of or the cost of construction, equipping
or improving property, provided that those liens are limited to the
property acquired or constructed or the improvement and to substantially
unimproved real property on which such construction or improvement is
located; provided further, that Dow and restricted subsidiaries may
further secure all or any part of such purchase price or the cost of
construction of such improvements and personal property by an interest on
additional property of Dow and restricted subsidiaries only to the extent
necessary for the construction, maintenance and operation of, and access
to, such property so acquired or constructed or such improvement;
. liens arising from assignments of money due under contracts with the
United States or any State, or any department, agency or political
subdivision of the United States or any State;
. liens in favor of any customer arising in respect of certain payments
made by or on behalf of a customer for goods produced for or services
rendered to customers in the ordinary course of business not exceeding
the amount of those payments;
. any extension, renewal or replacement of any lien referred to in any of
the previous clauses; and
. certain statutory liens, liens for taxes and certain other liens.
Limitation on Sale and Lease-Back Transactions
Subject to the exceptions set forth below under the section of this
prospectus captioned "Exempted Indebtedness," sale and lease-back transactions
by Dow or any restricted subsidiary of any principal property are prohibited
(except for temporary leases for a term, including any renewal thereof, of not
more than three years and except for leases between Dow and a subsidiary or
between subsidiaries) unless the net proceeds of such sale and leaseback
transaction are at least equal to the fair value of the property.
Exempted Indebtedness
Dow or any restricted subsidiary may create or assume liens or enter into
sale and lease-back transactions not otherwise permitted under the limitations
on liens and sale and lease-back transactions described above, so long as at
that time and after giving effect to the lien or sale and lease-back
transaction, the sum of:
(1) the aggregate outstanding indebtedness of Dow and its consolidated
subsidiaries incurred after the date of the indenture and secured by
such liens relating to principal property; plus
14
(2) the aggregate discounted value of the obligations for rental payments
in respect to such sale and lease-back transactions relating to
principal property does not exceed 10% of consolidated net tangible
assets.
There are no covenants or provisions contained in the indenture which protect
holders of debt securities in the event of a highly leveraged transaction.
Certain Definitions
The following are the meanings of terms that are important in understanding
the covenants previously described:
. ""consolidated net tangible assets" means the total assets of Dow and its
consolidated subsidiaries as shown on or reflected in its balance sheet,
less:
-- all current liabilities, excluding current liabilities which could be
classified as long-term debt under generally accepted accounting
principles and current liabilities which are by their terms extendible
or renewable at the obligor's option to a time more than 12 months
after the time as of which the amount of current liabilities is being
computed;
-- advances to entities accounted for on the equity method of accounting;
and
-- intangible assets.
. ""intangible assets" means the aggregate value, net of any applicable
reserves, as shown on or reflected in Dow's balance sheet, of:
-- all trade names, trademarks, licenses, patents, copyrights and
goodwill;
-- organizational and development costs;
-- deferred charges, other than prepaid items such as insurance, taxes,
interest, commissions, rents and similar items and tangible assets
being amortized; and
-- amortized debt discount and expense, less unamortized premium.
. ""principal property" means any manufacturing facility having a gross
book value in excess of 1% of consolidated net tangible assets that is
owned by Dow or any restricted subsidiary and located within the United
States, excluding its territories and possessions and Puerto Rico, other
than any facility or portion of a facility which Dow's board of directors
reasonably determines is not material to the business conducted by Dow
and its subsidiaries as a whole.
. ""restricted subsidiary" means any subsidiary:
-- of which substantially all of the property of is located, and
substantially all of the business is carried on, within the United
States, excluding its territories and possessions and Puerto Rico; and
-- which owns or operates one or more principal properties; provided,
however, restricted subsidiary shall not include a subsidiary which is
primarily engaged in the business of a finance or insurance company,
and branches of such finance or insurance company.
. ""subsidiary'' means each corporation of which more than 50% of the
outstanding voting stock is owned, directly or indirectly, by Dow or one
or more of its subsidiaries, or by Dow and one or more of its
subsidiaries.
Consolidation, Merger and Sale of Assets
Dow may not merge or consolidate or sell or convey all or substantially all
of its assets unless:
. the successor corporation is Dow or is a domestic corporation which
assumes Dow's obligations on the debt securities and under the indenture;
and
. after giving effect to such transaction, Dow or the successor corporation
would not be in default under the indenture.
15
Events of Default
With respect to any series of debt securities, any one of the following
events will constitute an event of default under the indenture:
(1) default by Dow for 30 days in the payment of any installment of
interest on the debt securities of such series;
(2) default by Dow in the payment of any principal on the debt securities
of such series;
(3) default by Dow in the payment of any sinking fund installment;
(4) default by Dow in the performance of any of the covenants or warranties
contained in the indenture for the benefit of the debt securities of
such series which is not remedied within a period of 90 days after
receipt of written notice by Dow from the trustee or by Dow and the
trustee for the holders of not less than 25% in principal amount of the
debt securities of such series then outstanding;
(5) certain events of bankruptcy, insolvency or reorganization of Dow; or
(6) any other event of default established in accordance with the indenture
with respect to any series of debt securities.
No event of default described in clauses (1), (2), (3), (4) or (6) above
with respect to a particular series of debt securities necessarily constitutes
an event of default with respect to any other series of debt securities.
The indenture provides that if an event of default under clauses (1), (2),
(3), (4) or (6) above (but only if the event of default under clause (4) or (6)
is with respect to less than all series of debt securities then outstanding)
shall have occurred and be continuing, either the trustee or the holders of not
less than 25% in aggregate principal amount of the then outstanding debt
securities of the series affected by such event of default, each such series
treated as a separate class, may declare the principal of all the debt
securities of each such series, together with accrued interest, to be due and
payable immediately. If an Event of Default under clause (4), (5) or (6) above
(but only if the event of default under clause (4) or (6) is with respect to
all of the series of debt securities then outstanding) shall have occurred and
be continuing, either the trustee or the holders of not less than 25% in the
aggregate principal amount of all the debt securities then outstanding, treated
as one class, may declare the principal of all the debt securities, together
with accrued interest, to be due and payable immediately. Upon certain
conditions, such declaration (including a declaration caused by a default in
the payment of principal or interest, the payment for which has subsequently
been provided) may be annulled by the holders of a majority in principal amount
of the debt securities of the series then outstanding, each such series treated
as a separate class, or all debt securities treated as one class, as the case
may be, as were entitled to declare such default. In addition, past defaults
may be waived by the holders of a majority in principal amount of the debt
securities of the series then outstanding, each series treated as a separate
class, or all debt securities treated as one class, as the case may be, as were
entitled to declare such default, except a default in the payment of the
principal of or interest on the debt securities or in respect of a covenant or
provision of the indenture which cannot be modified or amended without the
approval of the holder of each debt security so affected.
The indenture contains a provision entitling the trustee, subject to the
duty of the trustee during default to act with the required standard of care,
to be indemnified by the holders of debt securities before exercising any right
or power under the indenture at the request of the holders of the debt
securities. The indenture also provides that the holders of a majority in
principal amount of the outstanding debt securities of all series affected,
each series treated as a separate class, may direct the time, method and place
of conducting any proceeding for any remedy available to the trustee, or
exercising any trust or power conferred on the trustee, with respect to the
debt securities of such series.
The indenture requires Dow to file annually with the trustee a certificate
as to the absence of any default or specifying any default that exists.
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Satisfaction and Discharge of Indenture
The indenture with respect to any series, except for certain specified
surviving obligations, including Dow's obligation to pay the principal of and
interest on the debt securities of such series, will be discharged and canceled
upon the satisfaction of certain conditions, including:
. payment of all the debt securities of such series; or
. the deposit with the trustee of cash or U.S. government obligations or a
combination of cash or U.S. government obligations sufficient for such
payment or redemption in accordance with the indenture and the terms of
the debt securities of such series.
Modification and Waiver
Dow and the trustee may modify and amend the indenture with the consent of
the holders of more than 50% of the principal amount of the outstanding debt
securities of each series which is affected. No supplemental indenture may:
. extend the final maturity of, reduce the rate or extend the time of
payment of interest on, reduce the principal amount of, or reduce any
amount payable on any redemption of, any debt securities without the
consent of the holder of each debt security affected; or
. reduce the percentage in principal amount of outstanding debt securities
of any series, the consent of whose holders is required for any
supplemental indenture, without the consent of the holders of all
outstanding debt securities.
Governing Law
The indenture and the debt securities are governed by and construed in
accordance with the laws of the State of New York.
Information About the Trustee
Dow maintains banking relationships in the ordinary course of business with
the trustee. The trustee's principal corporate trust office is located at 1
Bank One Plaza, Chicago, Illinois 60670-0126. The trustee's principal office in
New York City is located at 14 Wall Street, Eighth Floor, New York, New York
10005.
DESCRIPTION OF WARRANTS TO PURCHASE
COMMON STOCK OR PREFERRED STOCK
Dow may issue, alone or together with common stock or preferred stock, stock
warrants for the purchase of common stock or preferred stock. The stock
warrants will be issued under a stock warrant agreement to be entered into
between Dow and a bank or trust company, as stock warrant agent, at the time of
issue. A copy of the form of the stock warrant agreement and the stock warrant
certificate for both common stock and preferred stock is filed as an exhibit to
the registration statement of which this prospectus is a part. The following
summary of the material provisions of the stock warrant agreement and the stock
warrant certificate does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the stock
warrant agreement and the stock warrant certificate, including the defined
terms.
General
A prospectus supplement will describe the terms of the stock warrants
offered, the stock warrant agreement relating to the stock warrants and the
stock warrant certificates representing the stock warrants, including the
following:
. the offering price, if any;
17
. the designation and terms of the common stock or preferred stock that may
be purchased upon exercise of the stock warrants;
. if applicable, the date on and after which the stock warrants and the
related securities will be separately transferable;
. the number of shares of common stock or preferred stock that may be
purchased upon exercise of one stock warrant and the initial price at
which such shares may be purchased upon exercise;
. the date on which the right to exercise the stock warrants will begin and
the date on which such right will expire;
. a discussion of material U.S. federal income tax considerations;
. the call provisions, if any;
. the currency, currencies or currency units in which the offering price,
if any, and exercise price are payable;
. the antidilution provisions of the stock warrants; and
. any other terms of the stock warrants.
The shares of common stock or preferred stock to be issued upon exercise of
the stock warrants will, when issued in accordance with the stock warrant
agreement, be fully paid and nonassessable.
Exercise of Stock Warrants
Stock warrants may be exercised by surrendering to the stock warrant agent
the stock warrant certificate with the form of election to purchase on the
reverse side of the certificate duly completed and signed by the warrant
holder, or its duly authorized agent, with such signature guaranteed by a bank
or trust company, by a broker or dealer which is a member of the National
Association of Securities Dealers, Inc. or by a member of a national securities
exchange. The form of election should indicate the warrant holder's election to
exercise all or a portion of the stock warrants evidenced by the certificate.
Surrendered stock warrant certificates must be accompanied by payment of the
aggregate exercise price of the stock warrants to be exercised, as set forth in
the prospectus supplement. The payment should be made in U.S. dollars, unless
otherwise provided in the prospectus supplement. Upon the stock warrant agent's
receipt of the surrendered stock warrant certificates and payment of the
aggregate exercise price of the stock warrants, the stock warrant agent will
request that the transfer agent issue and deliver to or upon the written order
of the exercising warrant holder, a certificate stating the number of shares of
common stock or preferred stock purchased. If less than all of the stock
warrants evidenced by any stock warrant certificate are exercised, the stock
warrant agent will deliver to the exercising warrant holder a new stock warrant
certificate representing the unexercised stock warrants.
No Rights as Stockholders
Holders of stock warrants, by virtue of being such holders, will not be
entitled to vote, consent, receive dividends, receive notice as shareholder
with respect to any meeting of stockholders for election of directors of Dow or
any other matter, or exercise any rights whatsoever as stockholders of Dow.
DESCRIPTION OF DEBT WARRANTS
Dow may issue, alone or together with debt securities, debt warrants for the
purchase of debt securities. The debt warrants will be issued under debt
warrant agreements to be entered into between Dow and a bank or trust company,
as debt warrant agent, at the time of issue. A copy of the form of the debt
warrant agreement and debt warrant certificate is incorporated by reference as
an exhibit to the registration statement of which this prospectus forms a part.
The following summary of certain provisions of the debt warrant agreement and
the debt warrant certificates does not purport to be complete and is subject
to, and qualified in its entirety by reference to, all the provisions of the
debt warrant agreement and the debt warrant certificates, including the defined
terms.
18
General
A prospectus supplement will describe the terms of the debt warrants
offered, the debt warrant agreement relating to the debt warrants and the debt
warrant certificates representing the debt warrants, including the following:
. the designation, aggregate principal amount and terms of the debt
securities purchasable upon exercise of the debt warrants and the
procedures and conditions relating to the exercise of the debt warrants;
. the designation and terms of any related debt securities with which the
debt warrants are issued and the number of debt warrants issued with each
debt security;
. the date, if any, on and after which the debt warrants and the related
debt securities may be separately transferred;
. the principal amount of debt securities purchasable upon exercise of debt
warrants and the price at which such principal amount of debt securities
may be purchased upon exercise;
. the date on which the right to exercise the debt warrants shall commence
and the date on which the right shall expire;
. if the debt securities purchasable upon exercise of the debt warrants are
original issue discount debt securities, a discussion of the material
Federal income tax considerations applicable to the debt securities; and
. whether the debt warrants represented by the debt warrant certificates
will be issued in registered or bearer form, and, if registered, where
they may be transferred and registered.
Debt warrant certificates may be exchanged for new debt warrant certificates
of different denominations and debt warrants may be exercised at the corporate
trust office of the debt warrant agent or any other office indicated in the
prospectus supplement.
No Rights as Holders of Debt Securities
Prior to the exercise of their debt warrants, holders of debt warrants will
not have any of the rights of holders of the debt securities purchasable upon
such exercise (except to the extent that consent of holders of debt warrants
may be required for certain modifications of the terms of the indenture and a
series of debt securities issuable upon exercise of the debt warrants). In
addition, holders of debt warrants will not be entitled to payments of
principal of (and premium, if any) or interest, if any, on the debt securities
purchasable upon exercise.
Exercise of Debt Warrants
Each debt warrant will entitle the holder to purchase for cash the principal
amount of debt securities at the exercise price set forth or to be determined
as set forth in the prospectus supplement. Debt warrants may be exercised at
any time up to the close of business on the expiration date set forth in the
prospectus supplement. After the close of business on the expiration date,
unexercised debt warrants will become void.
Debt warrants may be exercised in the manner set forth in the prospectus
supplement. Upon receipt of payment and the properly completed and duly
executed warrant certificate at the corporate trust office of the debt warrant
agent or any other office indicated in the prospectus supplement, Dow will, as
soon as practicable, forward the debt securities purchased upon such exercise.
If less than all of the debt warrants represented by the debt warrant
certificate are exercised, a new debt warrant certificate will be issued for
the remaining amount of debt warrants.
19
PLAN OF DISTRIBUTION
Dow may sell the securities:
. directly to purchasers, or
. through agents, underwriters, or dealers, or
. through a combination of any of these methods of sale.
Dow may distribute the securities from time to time in one or more
transactions at a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices related to the prevailing
market prices or at negotiated prices.
Dow may determine the price or other terms of the securities offered under
this prospectus by use of an electronic auction. Dow will describe how any
auction will determine the price or any other terms, how potential investors
may participate in the auction and the nature of the underwriters' obligations
in the related supplement to this prospectus.
Dow may designate agents to solicit offers to purchase the securities from
time to time. These agents may be deemed to be underwriters, as defined in the
Securities Act of 1933, involved in the offer or sale of the securities. The
prospectus supplement will name the agents and any commissions Dow pays them.
Agents may be entitled to indemnification by Dow against certain liabilities,
including liabilities under the Securities Act of 1933, under agreements
between Dow and the agents, and the agents or their affiliates may extend
credit to or engage in transactions with or perform services for Dow in the
ordinary course of business. Unless otherwise indicated in the prospectus
supplement, any agent will be acting on a reasonable efforts basis for the
period of its appointment.
If Dow uses any underwriters in the sale, Dow will enter into an
underwriting agreement with them at the time of sale and the names of the
underwriters and the terms of the transaction will be set forth in the
prospectus supplement that the underwriters use to make resales of the
securities. The underwriters may be entitled under the relevant underwriting
agreement to indemnification by Dow against certain liabilities, including
liabilities under the Securities Act of 1933, and the underwriters or their
affiliates may extend credit to or engage in transactions with or perform
services for Dow in the ordinary course of business.
If Dow uses dealers in the sale of the securities, Dow will sell the
securities to those dealers, as principal. The dealers may then resell the
securities to the public at varying prices to be determined by them at the time
of resale. Dealers may be entitled to indemnification by Dow against certain
liabilities, including liabilities under the Securities Act of 1933, and the
dealers or their affiliates may extend credit to or engage in transactions with
or perform services for Dow in the ordinary course of business.
Shares of Dow common stock are principally traded on the New York Stock
Exchange. Shares of Dow common stock also are listed on the Chicago, Pacific,
Amsterdam, Berlin, Brussels, Dusseldorf, Frankfurt, Hamburg, Hannover, London,
Paris, Switzerland and Tokyo exchanges and are traded on the Toronto, Boston,
Cincinnati and Philadelphia Exchanges. Other than the common stock, Dow does
not propose to list the offered securities on a securities exchange, and any
underwriters or dealers will not be obligated to make a market in the offered
securities. Dow may elect to list any series of offered securities on an
exchange, and in the case of the common stock, on any additional exchange, but,
unless otherwise specified in the applicable prospectus supplement, Dow will
not be obligated to do so. Dow can give no assurance as to the liquidity of the
trading market for any of the offered securities.
LEGAL MATTERS
Certain legal matters in connection with the securities offered by this
prospectus will be passed upon for Dow by Charles J. Kalil, Dow's Assistant
General Counsel and for any underwriters or agents by Mayer,
20
Brown & Platt, Chicago, Illinois. As of April 30, 2001, Mr. Kalil beneficially
owned 9,070 shares of Dow common stock, and held options to purchase 63,800
shares of Dow common stock, of which options to purchase 44,200 shares of Dow
common stock were exercisable. The opinions of Mr. Kalil and Mayer, Brown &
Platt may be conditioned upon and may be subject to certain assumptions
regarding, future action required to be taken by Dow and any underwriter(s),
dealer(s) or agent(s) in connection with the issuance and sale of any
securities. The opinions of Mr. Kalil and Mayer, Brown & Platt and with respect
to securities may be subject to other conditions and assumptions, as indicated
in the prospectus supplement. Mayer, Brown & Platt from time to time represents
Dow in connection with certain matters.
EXPERTS
The Dow consolidated financial statements and related financial statement
schedules incorporated by reference in this registration statement from Dow's
Annual Report on Form 10-K and Dow's Current Report on Form 8-K dated April 4,
2001, each for the year ended December 31, 2000 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm, given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Dow files reports, proxy statements and other information with the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
You may read and copy that information at the following locations of the
Securities and Exchange Commission:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
1-800-SEC-0330 Chicago, Illinois
60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The Securities and Exchange Commission also maintains an Internet world wide
web site that contains reports, proxy statements and other information about
issuers, including Dow, that file electronically with the Securities and
Exchange Commission. The address of that site is http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
Dow at the offices of the New York Stock Exchange, 20 Broad Street, New York,
New York 10005.
The Securities and Exchange Commission allows Dow to "incorporate by
reference" information into this prospectus. This means that Dow can disclose
important information to you by referring you to another document filed
separately with the Securities and Exchange Commission. The information
incorporated by reference is considered to be a part of this prospectus, except
for any information that is superseded by information that is included directly
in this document.
21
This prospectus incorporates by reference the documents listed below that
Dow has previously filed with the Securities and Exchange Commission. The
documents contain important information about Dow and Dow's financial
condition.
Dow's Filings with the Commission Period
--------------------------------- ------------------------------
Annual Report on Form 10-K................. Year ended December 31, 2000
Current Reports on Form 8-K................ February 5, 2001
February 6, 2001
February 6, 2001
February 20, 2001 (as amended)
April 4, 2001
April 16, 2001
April 26, 2001
Dow also incorporates by reference any future filings it makes with the
Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 (1) after the date of the filing of this
registration statement and before its effectiveness and (2) until Dow has sold
all of the securities to which this prospectus relates or the offering is
otherwise terminated. Dow's subsequent filings with the Securities and Exchange
Commission will automatically update and supersede information in this
prospectus.
You may obtain a copy of any of the documents incorporated by reference in
this document at no cost by writing to or telephoning Dow at the following
address and telephone number:
Office of the Corporate Secretary
The Dow Chemical Company
2030 Dow Center
Midland, Michigan 48674
Telephone: 517-636-1792
Dow has not authorized anyone to give any information or make any
representation about Dow that is different from, or in addition to, that
contained in this prospectus or in any of the materials that have been
incorporated into this document. Therefore, if anyone does give you information
of this sort, you should not rely on it. This prospectus is an offer to sell or
buy only the securities described in this document, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this document speaks only as of the date of this document unless
the information specifically indicates that another date applies.
22
PRINCIPAL OFFICE OF
THE DOW CHEMICAL COMPANY
2030 Dow Center
Midland, Michigan 48674
U.S.A.
TRUSTEE AND REGISTRAR
Bank One Trust Company, N.A.
1 Bank One Plaza
Chicago, Illinois 60670
U.S.A.
PAYING AND TRANSFER AGENT IN LUXEMBOURG
Credit Agricole Indosuez Luxembourg
39 Allee Schoffer
L-2520 Luxembourg
LISTING AGENT
Kredietbank S.A. Luxembourgeoise, S.A.
43, Boulevard Royal L-2955
Luxembourg R.C. Luxembourg B 6395
LEGAL ADVISORS
To The Dow Chemical Company To the Initial Purchasers
Charles J. Kalil Mayer, Brown & Platt
Assistant General Counsel 190 South LaSalle Street
The Dow Chemical Company Chicago, Illinois 60603
Midland, Michigan 48674 U.S.A.
U.S.A. AUDITORS
Deloitte & Touche LLP
Suite 400
3320 Ridgecrest Drive
Midland, Michigan 48674
U.S.A.
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$500,000,000
The Dow Chemical Company
5 3/4% Notes due 2008
[LOGO OF DOW CHEMICAL CO]
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PROSPECTUS SUPPLEMENT
December 6, 2001
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Joint Book-Running Managers
Banc of America Securities LLC
Salomon Smith Barney
--------
Banc One Capital Markets, Inc.
Credit Suisse First Boston
Wachovia Securities
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