Filed Pursuant to Rule 424(b)(2)
Registration No. 333-59964
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 15, 2001)
THE DOW CHEMICAL COMPANY
$500,000,000 DOW INTERNOTES(R)
. We may offer to sell our Dow InterNotes(R) from time to time. The
specific terms of the notes will be set prior to the time of sale and
described in a pricing supplement. You should read this prospectus
supplement, the accompanying prospectus and the applicable pricing
supplement carefully before you invest.
. We may offer the notes to or through agents for resale. The amount we
expect to receive if all of the notes are sold to or through the agents
is from $499,000,000 to $485,000,000, after paying agent discounts and
commissions of between $1,000,000 and $15,000,000. We also may offer the
notes directly. We have not set a date for termination of our offering.
. The agents have advised us that from time to time they may purchase and
sell notes in the secondary market, but they are not obligated to make a
market in the notes and may suspend or completely stop that activity at
any time. Unless otherwise specified in the applicable pricing
supplement, we do not intend to list the notes on any stock exchange.
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INVESTING IN THE NOTES INVOLVES CERTAIN RISKS, INCLUDING THOSE DESCRIBED
IN THE "RISK FACTORS" SECTION BEGINNING ON PAGE S-6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE NOTES OR PASSED ON THE ADEQUACY
OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS OR ANY
PRICING SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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JOINT LEAD MANAGERS AND LEAD AGENTS
BANC OF AMERICA SECURITIES LLC INCAPITAL LLC
AGENTS
CHARLES SCHWAB & CO., INC. MERRILL LYNCH & CO.
MORGAN STANLEY PRUDENTIAL SECURITIES
SALOMON SMITH BARNEY UBS PAINEWEBBER
WACHOVIA SECURITIES
Prospectus Supplement dated June 21, 2002.
InterNotes(R) is a registered servicemark of Incapital Holdings LLC
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TABLE OF CONTENTS
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PROSPECTUS SUPPLEMENT
Summary........................... S-3
Risk Factors...................... S-6
About Dow......................... S-7
Use of Proceeds................... S-7
Ratio of Earnings to Fixed Charges S-7
Description of Notes.............. S-7
Registration and Settlement............ S-13
Material U.S. Federal Income Tax
Considerations....................... S-16
Employee Retirement Income Security Act S-21
Plan of Distribution................... S-22
Legal Matters.......................... S-23
PROSPECTUS
About This Prospectus..................... 2
The Dow Chemical Company.................. 2
Use of Proceeds........................... 2
Description of Capital Stock.............. 2
Description of Debt Securities............ 8
Description of Warrants to Purchase Common
Stock or Preferred Stock................ 20
Description of Debt Warrants....... 22
Plan of Distribution............... 23
Legal Matters...................... 24
Experts............................ 25
Where You Can Find More Information 25
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the accompanying prospectus and any
pricing supplement. We have not authorized any other person to provide you with
different or additional information. If anyone provides you with different or
additional information, you should not rely on it. We are not making an offer
to sell these securities or soliciting an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement, the accompanying
prospectus and any pricing supplement, as well as information filed by us with
the Securities and Exchange Commission and incorporated by reference in these
documents, is accurate as of their dates. Our business, financial condition,
results of operations and prospects may have changed since then.
Unless otherwise indicated or the context require otherwise, references
in this prospectus supplement to "we," "us," "our" and "Dow" are to The Dow
Chemical Company and its subsidiaries.
S-2
SUMMARY
THIS SECTION SUMMARIZES THE LEGAL AND FINANCIAL TERMS OF THE NOTES THAT
ARE DESCRIBED IN MORE DETAIL IN "DESCRIPTION OF NOTES" BEGINNING ON PAGE S-7.
FINAL TERMS OF ANY PARTICULAR NOTES WILL BE DETERMINED AT THE TIME OF SALE AND
WILL BE CONTAINED IN THE PRICING SUPPLEMENT RELATING TO THOSE NOTES. THE TERMS
IN THAT PRICING SUPPLEMENT MAY VARY FROM AND SUPERSEDE THE TERMS CONTAINED IN
THIS SUMMARY AND IN "DESCRIPTION OF NOTES." IN ADDITION, YOU SHOULD READ THE
MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT,
THE ACCOMPANYING PROSPECTUS AND IN THAT PRICING SUPPLEMENT.
Issuer...................... The Dow Chemical Company
Purchasing Agent............ Incapital LLC
Joint Lead Managers and Lead
Agents.................... Banc of America Securities LLC and Incapital LLC
Agents...................... Charles Schwab & Co., Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Morgan Stanley & Co. Incorporated
Prudential Securities Incorporated
Salomon Smith Barney Inc.
UBS PaineWebber Inc.
Wachovia Securities, Inc.
Title of Notes.............. Dow InterNotes(R)
Amount...................... We may issue up to $500,000,000 of notes in
connection with this program. Additional notes
may be issued in the future without the consent
of note holders. The notes will not contain any
limitations on our ability to issue additional
indebtedness in the form of InterNotes(R) or
otherwise.
Denominations............... The notes will be issued and sold in
denominations of $1,000 and multiples of $1,000
(unless otherwise stated in the pricing
supplement).
Status...................... The notes will be our direct unsecured senior
obligations and will rank equally with all of
our other unsecured senior indebtedness from
time to time outstanding.
Maturities.................. Each note will mature nine months or more from
its date of original issuance.
Interest.................... Each note will bear interest from its date of
original issuance at a fixed rate per year.
S-3
Interest on each note will be payable either
monthly, quarterly, semi-annually or annually on
each interest payment date and on the stated
maturity date. Interest also will be paid on the
date of redemption or repayment if a note is
redeemed or repurchased prior to its stated
maturity in accordance with its terms.
Interest on the notes will be computed on the
basis of a 360-day year of twelve 30-day months.
Principal................... The principal amount of each note will be
payable on its stated maturity date at the
corporate trust office of the paying agent or at
any other place we may designate.
Redemption and Repayment.... Unless otherwise stated in the applicable
pricing supplement, a note will not be
redeemable at our option or be repayable at the
option of the holder prior to its stated
maturity date. The notes will not be subject to
any sinking fund.
Survivor's Option........... Specific notes may contain a provision
permitting the optional repayment of those notes
prior to stated maturity, if requested by the
authorized representative of the beneficial
owner of those notes, following the death of the
beneficial owner of the notes, so long as the
notes were owned by the beneficial owner or his
or her estate at least six months prior to the
request. This feature is referred to as a
"Survivor's Option." Your notes will not be
repaid in this manner unless the pricing
supplement for your notes provides for the
Survivor's Option. The right to exercise the
Survivor's Option is subject to limits set by us
on (1) the permitted dollar amount of total
exercises by all holders of notes in any
calendar year, and (2) the permitted dollar
amount of an individual exercise by a holder of
a note in any calendar year. Additional details
on the Survivor's Option are described in the
section entitled "Description of
Notes--Survivor's Option" on page S-11.
Sale and Clearance.......... We will sell notes in the United States only.
Notes will be issued in book-entry only form and
will clear through The Depository Trust Company.
We do not intend to issue notes in certificated
form.
Trustee..................... The trustee for the notes is Bank One Trust
Company, N.A. under an indenture dated as of
April 1, 1992, as supplemented by a first
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.
S-4
Selling Group............... The agents and dealers comprising the selling
group are broker-dealers and securities firms.
The agents, including the Purchasing Agent, have
entered into a Selling Agent Agreement with us
dated June 21, 2002. Dealers who are members of
the selling group have executed a Master
Selected Dealer Agreement with the Purchasing
Agent. The agents and the dealers have agreed to
market and sell the notes in accordance with the
terms of those respective agreements and all
other applicable laws and regulations. You may
contact the Purchasing Agent at
info@incapital.com for a list of selling group
members.
S-5
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RISK FACTORS
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YOUR INVESTMENT IN THE NOTES WILL INVOLVE CERTAIN RISKS. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT DESCRIBE ALL OF THOSE RISKS.
YOU SHOULD, IN CONSULTATION WITH YOUR OWN FINANCIAL AND LEGAL ADVISORS,
CAREFULLY CONSIDER THE FOLLOWING DISCUSSION OF RISKS BEFORE DECIDING WHETHER AN
INVESTMENT IN THE NOTES IS SUITABLE FOR YOU. THE NOTES WILL NOT BE AN
APPROPRIATE INVESTMENT FOR YOU IF YOU ARE NOT KNOWLEDGEABLE ABOUT SIGNIFICANT
FEATURES OF THE NOTES OR FINANCIAL MATTERS IN GENERAL. YOU SHOULD NOT PURCHASE
THE NOTES UNLESS YOU UNDERSTAND, AND KNOW THAT YOU CAN BEAR, THESE INVESTMENT
RISKS.
THE MARKET VALUE OF THE NOTES MAY BE AFFECTED BY FACTORS IN ADDITION TO CREDIT
RATINGS
Any credit ratings that are assigned to the notes may not reflect the
potential impact of all risks on the market value of the notes.
WE MAY CHOOSE TO REDEEM NOTES WHEN PREVAILING INTEREST RATES ARE RELATIVELY LOW
If your notes will be redeemable at our option, we may choose to redeem
your notes from time to time, especially when prevailing interest rates are
lower than the rate borne by the notes. If prevailing rates are lower at the
time of redemption, you would not be able to reinvest the redemption proceeds
in a comparable security at an effective interest rate as high as the interest
rate on the notes being redeemed. Our redemption right also may adversely
impact your ability to sell your notes as the optional redemption date or
period approaches.
SURVIVOR'S OPTION MAY BE LIMITED IN AMOUNT
We will have a discretionary right to limit the aggregate principal
amount of notes subject to the Survivor's Option that may be exercised in any
calendar year to an amount equal to the greater of $2,000,000 or 2% of the
outstanding principal amount of all notes outstanding as of the end of the most
recent calendar year. We also have the discretionary right to limit to $250,000
in any calendar year the aggregate principal amount of notes subject to the
Survivor's Option that may be exercised in such calendar year on behalf of any
individual deceased beneficial owner of notes. Accordingly, no assurance can be
given that exercise of the Survivor's Option for the desired amount will be
permitted in any single calendar year.
WE CANNOT ASSURE THAT A TRADING MARKET FOR YOUR NOTES WILL EVER DEVELOP OR BE
MAINTAINED
In evaluating the notes, you should assume that you will be holding the
notes until their stated maturity. The notes are a new issue of securities. We
cannot assure you that a trading market for your notes will ever develop, be
liquid or be maintained. Many factors independent of our creditworthiness
affect the trading market for and market value of your notes. Those factors
include, without limitation:
. the method of calculating the principal and interest for the notes;
. the time remaining to the stated maturity of the notes;
. the outstanding amount of the notes;
. the redemption or repayment features of the notes; and
. the level, direction and volatility of interest rates generally.
There may be a limited number of buyers when you decide to sell your
notes. This may affect the price you receive for your notes or your ability to
sell your notes at all.
S-6
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ABOUT DOW
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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 208 manufacturing sites in 38 countries and
supply more than 3,200 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
was 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.
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USE OF PROCEEDS
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Unless otherwise indicated in a pricing supplement for the notes, we will
use the net proceeds from the sale of the notes for general corporate purposes,
including repayment of short-term debt.
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RATIO OF EARNINGS TO FIXED CHARGES
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FOR THE
THREE
MONTHS
ENDED FOR THE YEAR ENDED
MARCH 31 DECEMBER 31,
-------- ------------------------
2002 2001 2001 2000 1999 1998 1997
---- ---- ---- ---- ---- ---- ----
Ratio of Earnings to
Fixed Charges...... 1.6x (a) 0.4x 3.6x 4.3x 4.3x 6.1x
For the purpose of these ratios, earnings consist of income before (1)
income 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% to 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 the February 6, 2001 Union Carbide merger.
(a) As a result of $1,384 million in pretax costs recorded for
merger-related expenses and restructuring, earnings for the three months ended
March 31, 2001 were inadequate to cover fixed charges, with a deficiency of
$1,059 million.
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DESCRIPTION OF NOTES
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THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES BEING
OFFERED SUPPLEMENTS AND, TO THE EXTENT INCONSISTENT WITH OR TO THE EXTENT
OTHERWISE SPECIFIED IN AN APPLICABLE PRICING SUPPLEMENT, REPLACES THE
DESCRIPTION OF THE GENERAL TERMS AND PROVISIONS OF THE DEBT SECURITIES SET
FORTH UNDER THE HEADING "DESCRIPTION OF DEBT SECURITIES" IN THE ACCOMPANYING
PROSPECTUS. UNLESS OTHERWISE SPECIFIED IN AN APPLICABLE PRICING SUPPLEMENT, THE
NOTES WILL HAVE THE TERMS DESCRIBED BELOW.
S-7
CAPITALIZED TERMS USED BUT NOT DEFINED BELOW HAVE THE MEANINGS GIVEN TO THEM IN
THE ACCOMPANYING PROSPECTUS AND IN THE INDENTURE RELATING TO THE NOTES.
The notes being offered by this prospectus supplement, the accompanying
prospectus and the applicable pricing supplement 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 indenture is more fully
described in the accompanying prospectus. The indenture does not limit the
aggregate amount of debt securities that may be issued under it and provides
that the debt securities may be issued under it from time to time in one or
more series. The following statements are summaries of the material provisions
of the indenture and the notes. These summaries do not purport to be complete
and are qualified in their entirety by reference to the indenture, including
for the definitions of certain terms.
The notes constitute a single series of debt securities for purposes of
the indenture and are limited to an aggregate principal amount of up to
$500,000,000. We may increase the foregoing limit, however, without the consent
of any holders of the notes, by appropriate corporate action if in the future
we wish to sell additional notes.
Notes issued in accordance with this prospectus supplement, the
accompanying prospectus and the applicable pricing supplement will have the
following general characteristics:
. the notes will be our direct unsecured senior obligations and will rank
equally with all of our other unsecured senior indebtedness from time to
time outstanding;
. the notes may be offered from time to time by us through the Purchasing
Agent and each note will mature on a day that is at least nine months
from its date of original issuance;
. each note will bear interest from its date of original issuance at a
fixed rate per year;
. the notes will not be subject to any sinking fund; and
. the minimum denomination of the notes will be $1,000 (unless otherwise
stated in the pricing supplement).
In addition, the pricing supplement relating to each offering of notes
will describe specific terms of the notes, including:
. the price, which may be expressed as a percentage of the aggregate
initial public offering price of the notes, at which the notes will be
issued to the public;
. the date on which the notes will be issued to the public;
. the stated maturity date of the notes;
. the rate per year at which the notes will bear interest;
. the interest payment frequency;
. the purchase price, Purchasing Agent's discount and net proceeds to us;
. whether the authorized representative of the holder of a beneficial
interest in the notes will have the right to seek repayment upon the
death of the holder as described under "Survivor's Option" on page S-11;
. if the notes may be redeemed at our option or repaid at the option of
the
S-8
holder prior to its stated maturity date, the provisions relating to
any such redemption or repayment;
. any special U.S. Federal income tax consequences of the purchase,
ownership and disposition of the notes; and
. any other significant terms of the notes not inconsistent with the
provisions of the indenture.
We may at any time purchase notes at any price or prices in the open
market or otherwise. Notes so purchased by us may, at our discretion, be held,
resold or surrendered to the trustee for cancellation.
PAYMENT OF PRINCIPAL AND INTEREST
Principal of and interest on beneficial interests in the notes will be
made in accordance with the arrangements then in place between the paying agent
and The Depository Trust Company (referred to as "DTC") and its participants as
described under "Registration and Settlement--The Depository Trust Company" on
page S-13. Payments in respect of any notes in certificated form will be made
as described under "Registration and Settlement--Registration, Transfer and
Payment of Certificated Notes" on page S-16.
Interest on each note will be payable either monthly, quarterly,
semi-annually or annually on each interest payment date and at the note's
stated maturity or on the date of redemption or repayment if a note is redeemed
or repaid prior to maturity. Interest is payable to the person in whose name a
note is registered at the close of business on the regular record date before
each interest payment date. Interest due at a note's stated maturity or on a
date of redemption or repayment will be payable to the person to whom principal
is payable.
We will pay any administrative costs imposed by banks in connection with
making payments in immediately available funds, but any tax, assessment or
governmental charge imposed upon any payments on a note, including, without
limitation, any withholding tax, is the responsibility of the holders of
beneficial interests in the note in respect of which such payments are made.
INTEREST AND INTEREST RATES
Each note will accrue interest from its date of original issuance until
its stated maturity or earlier redemption or repayment. The applicable pricing
supplement will specify a fixed interest rate per year payable monthly,
quarterly, semi-annually or annually. Interest on the notes will be computed on
the basis of a 360-day year of twelve 30-day months. If the stated maturity
date, date of earlier redemption or repayment or interest payment date for any
note is not a business day, principal and interest for that note will be paid
on the next business day, and no interest will accrue on the amount payable
from, and after, the stated maturity date, date of earlier redemption or
repayment or interest payment date.
PAYMENT OF INTEREST
Interest on the notes will be paid as follows:
INTEREST PAYMENT INTEREST PAYMENT
FREQUENCY DATES
Monthly........ Fifteenth day of each calendar month,
beginning in the first calendar month
following the month the note was
issued.
Quarterly...... Fifteenth day of every third month,
beginning in the third calendar month
following the month the note was
issued.
Semi-annually.. Fifteenth day of every sixth month,
beginning in the sixth calendar month
following the month the note was
issued.
Annually....... Fifteenth day of every twelfth month,
beginning in the twelfth calendar
month following the month the note
was issued.
S-9
The regular record date for any interest payment date will be the first
day of the calendar month in which the interest payment date occurs, except
that the regular record date for interest due on the note's stated maturity
date or date of earlier redemption or repayment will be that particular date.
Interest on a note will be payable beginning on the first interest
payment date after its date of original issuance to holders of record on the
corresponding regular record date.
"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.
REDEMPTION AND REPAYMENT
Unless we otherwise provide in the applicable pricing supplement, a note
will not be redeemable or repayable prior to its stated maturity date.
If the pricing supplement states that the note will be redeemable at our
option prior to its stated maturity date, then on such date or dates specified
in the pricing supplement, we may redeem those notes at our option either in
whole or from time to time in part, upon not less than 30 nor more than 60
days' written notice to the holder of those notes.
If the pricing supplement states that your note will be repayable at your
option prior to its stated maturity date, we will require receipt of notice of
the request for repayment at least 30 but not more than 60 days prior to the
date or dates specified in the pricing supplement. We also must receive the
completed form entitled "Option to Elect Repayment." Exercise of the repayment
option by the holder of a note is irrevocable.
Since the notes will be represented by a global note, DTC or its nominee
will be treated as the holder of the notes; therefore DTC or its nominee will
be the only entity that receives notices of redemption of notes from us, in the
case of our redemption of notes, and will be the only entity that can exercise
the right to repayment of notes, in the case of optional repayment. See
"Registration and Settlement" on page S-13.
To ensure that DTC or its nominee will timely exercise a right to
repayment with respect to a particular beneficial interest in a note, the
beneficial owner of the interest in that note must instruct the broker or other
direct or indirect participant through which it holds the beneficial interest
to notify DTC or its nominee of its desire to exercise a right to repayment.
Because different firms have different cut-off times for accepting instructions
from their customers, each beneficial owner should consult the broker or other
direct or indirect participant through which it holds an interest in a note to
determine the cut-off time by which the instruction must be given for timely
notice to be delivered to DTC or its nominee. Conveyance of notices and other
communications by DTC or its nominee to participants, by participants to
indirect participants and by participants and indirect participants to
beneficial owners of the notes will be governed by agreements among them and
any applicable statutory or regulatory requirements.
The redemption or repayment of a note normally will occur on the interest
payment date or dates following receipt of a valid notice. Unless otherwise
specified in the pricing supplement, the redemption or repayment price will
equal 100% of the principal amount of the note plus unpaid interest accrued to
the date or dates of redemption or repayment.
We may at any time purchase notes at any price or prices in the open
market or otherwise. We may also purchase notes otherwise tendered for
repayment by a holder or tendered by a holder's duly
S-10
authorized representative through exercise of the Survivor's Option described
below. If we purchase the notes in this manner, we have the discretion to
either hold, resell or surrender the notes to the trustee for cancellation.
SURVIVOR'S OPTION
The "Survivor's Option" is a provision in a note pursuant to which we
agree to repay that note, if requested by the authorized representative of the
beneficial owner of that note, following the death of the beneficial owner of
the note, so long as the note was owned by that beneficial owner or the estate
of that beneficial owner at least six months prior to the request. The pricing
supplement relating to each offering of notes will state whether the Survivor's
Option applies to those notes.
If a note is entitled to a Survivor's Option, upon the valid exercise of
the Survivor's Option and the proper tender of that note for repayment, we
will, at our option, repay or repurchase that note, in whole or in part, at a
price equal to 100% of the principal amount of the deceased beneficial owner's
interest in that note plus unpaid interest accrued to the date of repayment.
To be valid, the Survivor's Option must be exercised by or on behalf of
the person who has authority to act on behalf of the deceased beneficial owner
of the note (including, without limitation, the personal representative or
executor of the deceased beneficial owner or the surviving joint owner with the
deceased beneficial owner) under the laws of the applicable jurisdiction.
The death of a person holding a beneficial ownership interest in a note
as a joint tenant or tenant by the entirety with another person, or as a tenant
in common with the deceased holder's spouse, will be deemed the death of a
beneficial owner of that note, and the entire principal amount of the note so
held will be subject to repayment by us upon request. However, the death of a
person holding a beneficial ownership interest in a note as tenant in common
with a person other than such deceased holder's spouse will be deemed the death
of a beneficial owner only with respect to such deceased person's interest in
the note.
The death of a person who, during his or her lifetime, was entitled to
substantially all of the beneficial ownership interests in a note will be
deemed the death of the beneficial owner of that note for purposes of the
Survivor's Option, regardless of whether that beneficial owner was the
registered holder of that note, if entitlement to those interests can be
established to the satisfaction of the trustee. A beneficial ownership interest
will be deemed to exist in typical cases of nominee ownership, ownership under
the Uniform Transfers to Minors Act or Uniform Gifts to Minors Act, community
property or other joint ownership arrangements between a husband and wife. In
addition, a beneficial ownership interest will be deemed to exist in custodial
and trust arrangements where one person has all of the beneficial ownership
interests in the applicable note during his or her lifetime.
We have the discretionary right to limit the aggregate principal amount
of notes as to which exercises of the Survivor's Option shall be accepted by us
from authorized representatives of all deceased beneficial owners in any
calendar year to an amount equal to the greater of $2,000,000 or 2% of the
principal amount of all notes outstanding as of the end of the most recent
calendar year. We also have the discretionary right to limit to $250,000 in any
calendar year the aggregate principal amount of notes as to which exercises of
the Survivor's Option shall be accepted by us from the authorized
representative of any individual deceased beneficial owner of notes in such
calendar year. In addition, we will not permit the exercise of the Survivor's
Option except in principal amounts of $1,000 and multiples of $1,000.
S-11
An otherwise valid election to exercise the Survivor's Option may not be
withdrawn. Each election to exercise the Survivor's Option will be accepted in
the order that elections are received by the trustee, except for any note the
acceptance of which would contravene any of the limitations described in the
preceding paragraph. Notes accepted for repayment through the exercise of the
Survivor's Option normally will be repaid on the first interest payment date
that occurs 20 or more calendar days after the date of the acceptance. For
example, if the acceptance date of a note tendered through a valid exercise of
the Survivor's Option is July 1, 2002, and interest on that note is paid
monthly, we would normally, at our option, repay that note on the interest
payment date occurring on August 15, 2002, because the July 15, 2002 interest
payment date would occur less than 20 days from the date of acceptance. Each
tendered note that is not accepted in any calendar year due to the application
of any of the limitations described in the preceding paragraph will be deemed
to be tendered in the following calendar year in the order in which all such
notes were originally tendered. If a note tendered through a valid exercise of
the Survivor's Option is not accepted, the trustee will deliver a notice by
first-class mail to the registered holder, at that holder's last known address
as indicated in the note register, that states the reason that note has not
been accepted for repayment.
With respect to notes represented by a global note, DTC or its nominee is
treated as the holder of the notes and will be the only entity that can
exercise the Survivor's Option for such notes. To obtain repayment pursuant to
exercise of the Survivor's Option for a note, the deceased beneficial owner's
authorized representative must provide the following items to the broker or
other entity through which the beneficial interest in the note is held by the
deceased beneficial owner:
. a written instruction to such broker or other entity to notify DTC of the
authorized representative's desire to obtain repayment pursuant to
exercise of the Survivor's Option;
. appropriate evidence satisfactory to the trustee (a) that the deceased
was the beneficial owner of the note at the time of death and his or her
interest in the note was owned by the deceased beneficial owner or his or
her estate at least six months prior to the request for repayment, (b)
that the death of the beneficial owner has occurred, (c) of the date of
death of the beneficial owner, and (d) that the representative has
authority to act on behalf of the beneficial owner;
. if the interest in the note is held by a nominee of the deceased
beneficial owner, a certificate satisfactory to the trustee from the
nominee attesting to the deceased's beneficial ownership of such note;
. a written request for repayment signed by the authorized representative
of the deceased beneficial owner with the signature guaranteed by a
member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc. or a commercial bank or
trust company having an office or correspondent in the United States;
. if applicable, a properly executed assignment or endorsement;
. tax waivers and any other instruments or documents that the trustee
reasonably requires in order to establish the validity of the beneficial
ownership of the note and the claimant's entitlement to payment; and
. any additional information the trustee reasonably requires to evidence
satisfaction of any conditions to the exercise of the Survivor's Option
or to document beneficial ownership or authority to make the election and
to cause the repayment of the note.
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In turn, the broker or other entity will deliver each of these items to
the trustee, together with evidence satisfactory to the trustee from the broker
or other entity stating that it represents the deceased beneficial owner.
We retain the right to limit the aggregate principal amount of notes as
to which exercises of the Survivor's Option applicable to the notes will be
accepted in any one calendar year as described above. All other questions
regarding the eligibility or validity of any exercise of the Survivor's Option
will be determined by the trustee, in its sole discretion, which determination
will be final and binding on all parties.
The broker or other entity will be responsible for disbursing payments
received from the trustee to the authorized representative. See "Registration
and Settlement" on page S-13.
Forms for the exercise of the Survivor's Option may be obtained from Bank
One Trust Company, N.A., 1 Bank One Plaza, Chicago, Illinois, 60670, Attention:
Corporate Trust.
If applicable, we will comply with the requirements of Section 14(e) of
the Securities Exchange Act of 1934, and the rules promulgated thereunder, and
any other securities laws or regulations in connection with any repayment of
notes at the option of the registered holders or beneficial owners thereof.
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REGISTRATION AND SETTLEMENT
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THE DEPOSITORY TRUST COMPANY
All of the notes we offer will be issued in book-entry only form. This
means that we will not issue certificates for notes, except in the limited case
described below. Instead, we will issue global notes in registered form. Each
global note will be held through DTC and will be registered in the name of Cede
& Co., as nominee of DTC. Accordingly, Cede & Co. will be the holder of record
of the notes. Each note represented by a global note evidences a beneficial
interest in that global note.
Beneficial interests in a global note will be shown on, and transfers are
effected through, records maintained by DTC or its participants. In order to
own a beneficial interest in a note, you must be an institution that has an
account with DTC or have a direct or indirect account with such an institution.
Transfers of ownership interests in the notes will be accomplished by making
entries in DTC participants' books acting on behalf of beneficial owners.
So long as DTC or its nominee is the registered holder of a global note,
DTC or its nominee, as the case may be, will be the sole holder and owner of
the notes represented thereby for all purposes, including payment of principal
and interest, under the indenture. Except as otherwise provided below, you will
not be entitled to receive physical delivery of certificated notes and will not
be considered the holder of the notes for any purpose under the indenture.
Accordingly, you must rely on the procedures of DTC and the procedures of the
DTC participant through which you own your note in order to exercise any rights
of a holder of a note under the indenture. The laws of some jurisdictions
require that certain purchasers of notes take physical delivery of such notes
in certificated form. Those limits and laws may impair the ability to transfer
beneficial interests in the notes.
Each global note representing notes will be exchangeable for certificated
notes of like tenor and terms and of differing authorized denominations in a
like aggregate principal amount, only if (1) DTC notifies us that it is
unwilling or unable to continue as depositary for the global notes or we become
aware that DTC has ceased to be a clearing agency registered under the
Securities Exchange Act of 1934
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and, in any such case we fail to appoint a successor to DTC within 60 calendar
days, (2) we, in our sole discretion, determine that the global notes shall be
exchangeable for certificated notes or (3) an event of default has occurred and
is continuing with respect to the notes under the indenture. Upon any such
exchange, the certificated notes shall be registered in the names of the
beneficial owners of the global note representing the notes.
The following is based on information furnished by DTC:
DTC will act as securities depositary for the notes. The notes will be
issued as fully-registered notes registered in the name of Cede & Co. (DTC's
partnership nominee) or such other name as may be requested by an authorized
representative of DTC. Generally, one fully registered global note will be
issued for all of the principal amount of the notes.
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 and provides asset servicing for over 2 million
issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues
and money market instruments from over 85 countries that DTC's direct
participants deposit with DTC.
DTC also facilitates the post-trade settlement among direct participants
of sales and other securities transactions in deposited securities, through
electronic computerized book-entry transfers and pledges between direct
participants' accounts. This eliminates the need for physical movement of
securities certificates. Direct participants include both U.S. and non U.S.
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. DTC is a wholly-owned subsidiary of The
Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a
number of direct participants of DTC and members of the National Securities
Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing
Corporation, and Emerging Markets Clearing Corporation, as well as by The New
York Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as both U.S. and non-U.S. securities brokers and
dealers, banks, trust companies and clearing corporations that clear through or
maintain a custodial relationship with a direct participant, either directly or
indirectly. DTC has Standard & Poor's highest rating: AAA. The DTC rules
applicable to its participants are on file with the SEC. More information about
DTC can be found at www.dtcc.com.
Purchases of the notes under the DTC system must be made by or through
direct participants, which will receive a credit for the notes on DTC's
records. The beneficial interest of each actual purchaser of each note is in
turn to be recorded on the direct and indirect participants' records.
Beneficial owners will not receive written confirmation from DTC of their
purchase. Beneficial owners are, however, expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the direct or indirect participant through
which the beneficial owner entered into the transaction. Transfers of
beneficial interests in the notes are to be accomplished by entries made on the
books of direct and indirect participants acting on behalf of beneficial
owners. Beneficial owners will not receive certificates representing their
beneficial interests in notes, except in the event that use of the book-entry
system for the notes is discontinued.
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To facilitate subsequent transfers, all notes deposited by direct
participants with DTC will be registered in the name of DTC's partnership
nominee, Cede & Co. or such other name as may be requested by an authorized
representative of DTC. The deposit of the notes with DTC and their registration
in the name of Cede & Co. or such other nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual beneficial owners of
the notes; DTC's records reflect only the identity of the direct participants
to whose accounts such notes will be credited, which may or may not be the
beneficial owners. The direct and indirect participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance 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. Beneficial owners of the notes may wish to
take certain steps to augment the transmission to them of notices of
significant events with respect to the notes, such as redemption, tenders,
defaults, and proposed amendments to the security documents. For example,
beneficial owners of the notes may wish to ascertain that the nominee holding
the notes for their benefit has agreed to obtain and transmit notices to
beneficial owners. In the alternative, beneficial owners may wish to provide
their names and addresses to the registrar of the notes and request that copies
of the notices be provided to them directly. Any such request may or may not be
successful.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or
vote with respect to the notes unless authorized by a direct participant in
accordance with DTC's procedures. Under its usual procedures, DTC mails an
Omnibus Proxy to us as soon as possible after the regular record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those direct
participants to whose accounts the notes are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
We will pay principal and or interest payments on the notes in same-day
funds directly to Cede & Co., or such other nominee as may be requested by an
authorized representative of DTC. DTC's practice is to credit direct
participants' accounts on the applicable payment date in accordance with their
respective holdings shown on DTC's records upon DTC's receipt of funds and
corresponding detail information. 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 form or
registered in "street name," and will be the responsibility of these
participants and not of DTC or any other party, subject to any statutory or
regulatory requirements that may be in effect from time to time. Payment of
principal and interest to Cede & Co., or such other nominee as may be requested
by an authorized representative of DTC, is our responsibility, disbursement of
such payments to direct participants is the responsibility of DTC, and
disbursement of such payments to the beneficial owners is the responsibility of
the direct or indirect participant.
We will send any redemption notices to DTC. If less than all of the notes
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.
A beneficial owner, or its authorized representative, shall give notice
to elect to have its notes repaid by us, through its direct or indirect
participant, to the trustee, and shall effect delivery of such notes by causing
the direct participant to
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transfer that participant's interest in the global note representing such
notes, on DTC's records, to the trustee. The requirement for physical delivery
of notes in connection with a demand for repayment will be deemed satisfied
when the ownership rights in the global note representing such notes are
transferred by the direct participants on DTC's records.
DTC may discontinue providing its services as securities depository for
the notes at any time by giving us reasonable notice. Under such circumstances,
if a successor securities depositary is not obtained, we will print and deliver
certificated notes. We may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depositary). In
that event, we will print and deliver certificated notes.
The information in this section concerning DTC and DTC's system has been
obtained from sources that we believe to be reliable, but neither we, the
Purchasing Agent nor any agent takes any responsibility for its accuracy.
REGISTRATION, TRANSFER AND PAYMENT OF CERTIFICATED NOTES
If we ever issue notes in certificated form, those notes may be presented
for registration, transfer and payment at the office of the registrar or at the
office of any transfer agent designated and maintained by us. We have
originally designated Bank One Trust Company, N.A. to act in those capacities
for the notes. The registrar or transfer agent will make the transfer or
registration only if it is satisfied with the documents of title and identity
of the person making the request. There will not be a service charge for any
exchange or registration of transfer of the notes, but we may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with the exchange. At any time, we may change transfer
agents or approve a change in the location through which any transfer agent
acts. We also may designate additional transfer agents for any notes at any
time.
We will not be required to: (1) issue, exchange or register the transfer
of any note to be redeemed for a period of 15 days after the selection of the
notes to be redeemed; (2) exchange or register the transfer of any note that
was selected, called or is being called for redemption, except the unredeemed
portion of any note being redeemed in part; or (3) exchange or register the
transfer of any note as to which an election for repayment by the holder has
been made, except the unrepaid portion of any note being repaid in part.
We will pay principal of and interest on any certificated notes at the
offices of the paying agents we may designate from time to time. Generally, we
will pay interest on a note by check on any interest payment date other than at
stated maturity or upon earlier redemption or repayment to the person in whose
name the note is registered at the close of business on the regular record date
for that payment. We will pay principal and interest at stated maturity or upon
earlier redemption or repayment in same-day funds against presentation and
surrender of the applicable notes.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
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The following summary of certain U.S. federal income tax consequences of
the purchase, ownership and disposition of the notes is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (including changes in effective dates) or possible differing
interpretations. It deals only with notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
S-16
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding notes as a hedge against currency
risks or as a position in a "straddle" or other risk reduction transaction for
tax purposes, or persons whose functional currency is not the U.S. dollar. It
also does not deal with holders other than original purchasers (except where
otherwise specifically noted). Persons considering the purchase of the notes
should consult their own tax advisors concerning the application of U.S.
federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the notes arising
under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a note
that is for U.S. federal income tax purposes (1) a citizen or resident of the
United States, (2) a corporation or partnership (including an entity treated as
a corporation or partnership for U.S. Federal income tax purposes) created or
organized in or under the laws of the United States, any state thereof or the
District of Columbia (other than a partnership that is not treated as a U.S.
person under any applicable Treasury regulations), (3) an estate whose income
is subject to U.S. federal income tax regardless of its source, (4) a trust if
a court within the U.S. is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust, or (5) any other person whose
income or gain in respect of a note is effectively connected with the conduct
of a U.S. trade or business. Notwithstanding the preceding clause (4), to the
extent provided in regulations, certain trusts in existence on August 20, 1996
and treated as U.S. persons prior to such date that elect to continue to be so
treated also shall be considered U.S. Holders. An individual will be deemed to
be a resident of the United States by reason of being a lawful permanent
resident or, subject to certain exceptions, present in the United States for at
least 31 days in the calendar year and for an aggregate of at least 183 days
during a three-year period including the current calendar year (counting for
such purposes all of the days present in the current year, one-third of the
days present in the immediately preceding year, and one-sixth of the days
present in the second preceding year).
PAYMENTS OF INTEREST
Payments of interest on a note, other than interest on a note issued with
"original issue discount" that is not "qualified stated interest," generally
will be taxable to a U.S. Holder as ordinary interest income at the time such
payments are accrued or are received (in accordance with the U.S. Holder's
regular method of tax accounting).
ORIGINAL ISSUE DISCOUNT
The following summary is a general discussion of the U.S. federal income
tax consequences to U.S. Holders of the purchase, ownership and disposition of
notes issued with original issue discount ("original issue discount notes").
The following summary is based upon final Treasury regulations (the "OID
Regulations") under the original issue discount provisions of the Internal
Revenue Code of 1986, as amended.
For U.S. federal income tax purposes, original issue discount is the
excess of the stated redemption price at the stated maturity of a note over its
issue price, if such excess equals or exceeds a DE MINIMIS amount (generally
1/4 of 1% of the note's stated redemption price at maturity multiplied by the
number of complete years to its stated maturity from its issue date or, in the
case of a note providing for the payment of any amount other than qualified
stated interest (as defined below) prior to stated maturity, multiplied by the
weighted average maturity of such note). The issue price of each note in an
issue of notes equals the first price at which a
S-17
substantial amount of such notes has been sold (ignoring sales to bond houses,
brokers, or similar persons or organizations acting in the capacity of
underwriters, placement agents, or wholesalers). The stated redemption price at
maturity of a note is the sum of all payments provided by the note other than
"qualified stated interest" payments. The term "qualified stated interest"
generally means stated interest that is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually at a
single fixed rate. In addition, under the OID Regulations, if a note bears
interest for one or more accrual periods at a rate below the rate applicable
for the remaining term of such note (E.G., notes with teaser rates or interest
holidays), and if the greater of either the resulting foregone interest on such
note or any "true" discount on such note (I.E., the excess of the note's stated
principal amount over its issue price) equals or exceeds a specified DE MINIMIS
amount, then the stated interest on the note would be treated as original issue
discount rather than qualified stated interest.
A U.S. Holder of an original issue discount note must include original
issue discount in income as ordinary interest for U.S. federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of an original issue
discount note is the sum of the daily portions of original issue discount with
respect to such original issue discount note for each day during the taxable
year (or portion of the taxable year) on which such U.S. Holder held such
original issue discount note. The "daily portion" of original issue discount on
any original issue discount note is determined by allocating to each day in any
accrual period a ratable portion of the original issue discount allocable to
that accrual period. An "accrual period" may be of any length and the accrual
periods may vary in length over the term of the original issue discount note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between (1) the product of the original issue discount note's adjusted issue
price at the beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the close of each accrual period and
appropriately adjusted to take into account the length of the particular
accrual period) and (2) the amount of any qualified stated interest payments
allocable to such accrual period. The "adjusted issue price" of an original
issue discount note at the beginning of any accrual period is the sum of the
issue price of the original issue discount note plus the amount of original
issue discount allocable to all prior accrual periods minus the amount of any
prior payments on the original issue discount note that were not qualified
stated interest payments. Under these rules, U.S. Holders generally will have
to include in income increasingly greater amounts of original issue discount in
successive accrual periods.
A U.S. Holder who purchases an original issue discount note for an amount
that is greater than its adjusted issue price as of the purchase date and less
than or equal to the sum of all amounts payable on the original issue discount
note after the purchase date, other than payments of qualified stated interest,
will be considered to have purchased the original issue discount note at an
"acquisition premium." Under the acquisition premium rules, the amount of
original issue discount which such U.S. Holder must include in its gross income
with respect to such original issue discount note for any taxable year (or
portion thereof in which the U.S. Holder holds the original issue discount
note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
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Certain of the notes (1) may be redeemable at our option prior to their
stated maturity (a "call option") and/or (2) may be repayable at the option of
the holder prior to their stated maturity (a "put option"). Notes containing
such features may be subject to rules that differ from the general rules
discussed above. Investors intending to purchase notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions. A U.S. holder considering such an election should
consult a tax advisor.
SHORT-TERM NOTES
Notes that have a fixed maturity of one year or less ("short-term notes")
will be treated as having been issued with acquisition discount. In general, an
individual or other cash method U.S. Holder is not required to accrue such
acquisition discount unless the U.S. Holder elects to do so. If such an
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the short-term note will be ordinary income to the
extent of the acquisition discount accrued on a straight-line basis, or upon
election under the constant yield method (based on daily compounding), through
the date of sale or stated maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
short-term note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for U.S. federal income tax purposes
under the accrual method, and certain other holders including banks and dealers
in securities, are required to accrue acquisition discount on a short-term note
on a straight-line basis unless an election is made to accrue the acquisition
discount under a constant yield method (based on daily compounding).
MARKET DISCOUNT
If a U.S. Holder purchases a note, other than an original issue discount
note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of an original issue discount note, for an amount that is less than its
adjusted issue price as of the purchase date, such U.S. Holder will be treated
as having purchased such note at a "market discount," unless such market
discount is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of an original issue discount
note, any payment that does not constitute qualified stated interest) on, or
any gain realized on the sale, exchange, retirement or other disposition of, a
note as ordinary income to the extent of the lesser of (1) the amount of such
payment or realized gain or (2) the market discount which has not previously
been included in income and is treated as having accrued on such note at the
time of such payment or disposition. Market discount will be considered to
accrue ratably during the period from the date of acquisition to the stated
maturity date of the note, unless the U.S. Holder elects (as described below)
to accrue market discount on the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion
of the interest paid or accrued on any indebtedness incurred or maintained
S-19
to purchase or carry a note with market discount until the stated maturity of
the note or certain earlier dispositions, because a current deduction is only
allowed to the extent the interest expense exceeds an allocable portion of
market discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for U.S. federal income tax purposes. Such an election will apply to
all debt instruments acquired by the U.S. Holder on or after the first day of
the first taxable year to which such election applies and may be revoked only
with the consent of the Internal Revenue Service ("IRS").
PREMIUM
If a U.S. Holder purchases a note for an amount that is greater than the
sum of all amounts payable on the note after the purchase date other than
payments of qualified stated interest, such U.S. Holder will be considered to
have purchased the note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the note and may offset interest otherwise
required to be included in respect of the note during any taxable year by the
amortized amount of such excess for the taxable year. However, if the note may
be optionally redeemed after the U.S. Holder acquires it at a price in excess
of its stated redemption price at maturity, special rules would apply which
could result in a deferral of the amortization of some bond premium until later
in the term of the note. Any election to amortize bond premium applies to all
taxable debt instruments acquired by the U.S. Holder on or after the first day
of the first taxable year to which such election applies and may be revoked
only with the consent of the IRS.
DISPOSITION OF A NOTE
Except as described above, upon the sale, exchange or retirement of a
note, a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the note. A U.S. Holder's adjusted tax basis in
a note generally will equal such U.S. Holder's initial investment in the note
increased by any original issue discount included in income (as adjusted by
allocations of acquisition premium, if any) and accrued market discount, if
any, if the U.S. Holder has included such market discount in income, and
decreased by the amount of any payments, other than qualified stated interest
payments, received and amortizable bond premium taken with respect to such
note. Such gain or loss generally will be long-term capital gain or loss if the
note were held for more than the applicable holding period. Non-corporate
taxpayers are subject to reduced maximum rates on long-term capital gains and
are generally subject to tax at ordinary income rates on short-term capital
gains. The deductibility of capital losses is subject to certain limitations.
Prospective investors should consult their own tax advisors concerning these
tax law provisions.
If a U.S. Holder disposes of only a portion of a note pursuant to a
redemption or repayment (including the Survivor's Option, if applicable), such
disposition will be treated as a pro rata prepayment in retirement of a portion
of a debt instrument. Generally, the resulting gain or loss would be calculated
by assuming that the original note being tendered consists of two instruments,
one that is retired (or repaid), and one that remains outstanding. The adjusted
issue price and the U.S. Holder's
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adjusted basis, determined immediately before the disposition, would be
allocated between these two instruments based on the portion of the instrument
that is treated as retired by the pro rata prepayment.
BACKUP WITHHOLDING
Backup withholding of U.S. federal income tax at the applicable rate may
apply to payments of principal and interest on a note, and to payments of
proceeds of the sale or redemption of a note, to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Any amounts
withheld under the backup withholding rules from a payment to a beneficial
owner would be allowed as a refund or credit against such owner's U.S. federal
income tax liability, provided the required information is furnished to the
I.R.S.
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EMPLOYEE RETIREMENT INCOME SECURITY ACT
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A fiduciary of a pension plan or other employee benefit plan (including a
governmental plan, an individual retirement account or a Keogh plan) proposing
to invest in the notes should consider this section carefully.
A fiduciary of an employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended (commonly referred to as
"ERISA") should consider fiduciary standards under ERISA in the context of the
particular circumstances of such plan before authorizing an investment in
the notes. Such fiduciary should consider whether the investment is in
accordance with the documents and instruments governing the plan.
In addition, ERISA and the Code prohibit certain transactions (referred
to as "prohibited transactions") involving the assets of a plan subject to
ERISA or the assets of an individual retirement account or plan subject to
Section 4975 of the Code (referred to as an "ERISA plan"), on the one hand, and
persons who have certain specified relationships to the plan ("parties in
interest" within the meaning of ERISA or "disqualified persons" within the
meaning of the Code), on the other. If we (or an affiliate) are considered a
party in interest or disqualified person with respect to an ERISA plan, then
the investment in notes by the ERISA plan may give rise to a prohibited
transaction.
By purchasing and holding the notes, the person making the decision to
invest on behalf of an ERISA plan is representing that the purchase and holding
of the notes will not result in a prohibited transaction under ERISA or the
Code. Therefore, an ERISA plan should not invest in the notes unless the plan
fiduciary or other person acquiring securities on behalf of the ERISA plan
determines that neither we nor an affiliate is a party in interest or a
disqualified person or, alternatively, that an exemption from the prohibited
transaction rules is available. If an ERISA plan engages in a prohibited
transaction, the transaction may require "correction" and may cause the ERISA
plan fiduciary to incur certain liabilities and the parties in interest or
disqualified persons to be subject to excise taxes.
If you are the fiduciary of a pension plan or other ERISA plan, or an
insurance company that is providing investment advice or other features to a
pension plan or other ERISA plan, and you propose to invest in the notes with
the assets of the ERISA plan, you should consult your own legal counsel for
further guidance.
S-21
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PLAN OF DISTRIBUTION
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Under the terms of a Selling Agent Agreement dated June 21, 2002, the
notes will be offered from time to time by us to the Purchasing Agent for
subsequent resale to the agents and other dealers who are broker-dealers and
securities firms. The agents, including the Purchasing Agent, are parties to
the Selling Agent Agreement. The notes will be offered for sale in the United
States only. Dealers who are members of the selling group have executed a
Master Selected Dealer Agreement with the Purchasing Agent. We also may appoint
additional agents to sell the notes. Any sale of the notes through those
additional agents, however, will be on the same terms and conditions to which
the original agents have agreed. The Purchasing Agent will purchase the notes
at a discount ranging from 0.2% to 3.0% of the non-discounted price for each
note sold. However, we also may sell the notes to the Purchasing Agent at a
discount greater than or less than the range specified above. The discount at
which we sell the notes to the Purchasing Agent will be set forth in the
applicable pricing supplement. The Purchasing Agent also may sell notes to
dealers at a concession not in excess of the discount it received from us. In
certain cases, the Purchasing Agent and the other agents and dealers may agree
that the Purchasing Agent will retain the entire discount. We will disclose any
particular arrangements in the applicable pricing supplement.
Following the solicitation of orders, each of the agents, severally and
not jointly, may purchase notes as principal for its own account from the
Purchasing Agent. Unless otherwise set forth in the applicable pricing
supplement, these notes will be purchased by the agents and resold by them to
one or more investors at a fixed public offering price. After the initial
public offering of notes, the public offering price (in the case of notes to be
resold at a fixed public offering price), discount and concession may be
changed.
We have the sole right to accept offers to purchase notes and may reject
any proposed offer to purchase notes in whole or in part. Each agent also has
the right, in its discretion reasonably exercised, to reject any proposed offer
to purchase notes in whole or in part. We reserve the right to withdraw, cancel
or modify any offer without notice. We also may change the terms, including the
interest rate we will pay on the notes, at any time prior to our acceptance of
an offer to purchase.
Each agent, including the Purchasing Agent, may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933. We have agreed
to indemnify the agents against certain liabilities, including liabilities
under the Securities Act of 1933, or to contribute to any payments they may be
required to make in respect of such liabilities. We also have agreed to
reimburse the agents for certain expenses.
No note will have an established trading market when issued. We do not
intend to apply for the listing of the notes on any securities exchange.
However, we have been advised by the agents that they may purchase and sell
notes in the secondary market as permitted by applicable laws and regulations.
The agents are not obligated to make a market in the notes, and they may
discontinue making a market in the notes at any time without notice. Neither we
nor the agents can provide any assurance regarding the development, liquidity
or maintenance of any trading market for any notes. All secondary trading in
the notes will settle in same-day funds. See "Registration and Settlement" on
page S-13.
In connection with certain offerings of notes, the rules of the SEC
permit the Purchasing Agent to engage in transactions that may stabilize
the price of the notes. The Purchasing Agent will conduct these activities for
the agents. These transactions may consist of short sales, stabilizing
S-22
transactions and purchases to cover positions created by short sales. A short
sale is the sale by the Purchasing Agent of a greater amount of notes than the
amount the Purchasing Agent has agreed to purchase in connection with a
specific offering of notes. Stabilizing transactions consist of certain bids or
purchases made by the Purchasing Agent to prevent or retard a decline in the
price of the notes while an offering of notes is in process. In general, these
purchases or bids for the notes for the purpose of stabilization or to reduce a
syndicate short position could cause the price of the notes to be higher than
it might otherwise be in the absence of those purchases or bids. Neither we nor
the Purchasing Agent makes any representation or prediction as to the direction
or magnitude of any effect that these transactions may have on the price of any
notes. In addition, neither we nor the Purchasing Agent makes any
representation that, once commenced, these transactions will not be
discontinued without notice. The Purchasing Agent is not required to engage in
these activities and may end any of these activities at any time.
The agents or dealers to or through which we may sell notes may engage in
transactions with us and perform services for us in the ordinary course of
business.
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LEGAL MATTERS
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The legality of the notes will be passed upon for Dow by Charles J.
Kalil, Dow's Assistant General Counsel. As of May 31, 2002, Mr. Kalil
beneficially owned 6,794 shares, and held options to purchase 77,050 shares, of
Dow common stock, of which options to purchase 47,966 shares of Dow common
stock were exercisable. Mayer, Brown, Rowe & Maw, Chicago, Illinois, will pass
on certain matters for the agents. Mayer, Brown, Rowe & Maw from time to time
represents Dow in connection with certain matters.
S-23
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
2
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.
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.
3
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.
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
4
. 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 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
5
. 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;
. 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.
6
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
7
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.
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,
8
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.
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;
9
. 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.
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
10
. 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
. 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
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-- 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 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
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. 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
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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.
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.
14
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 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
15
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.
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;
16
. 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
(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;
17
-- 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.
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;
18
(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.
19
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
20
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;
. 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
21
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.
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
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. 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.
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
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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, 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
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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
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considered to be a part of this prospectus, except for any information that is
superseded by information that is included directly in this document.
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.
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