<PAGE>
As Filed with the Securities and Exchange Commission on October 5, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------
THE DOW CHEMICAL COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 2800 38-1285128
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction Classification Code Number) Identification No.)
of incorporation or
organization)
The Dow Chemical Company
2030 Dow Center
Midland, Michigan 48674
517-636-1000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
John Scriven
Vice President, General Counsel and Secretary
2030 Dow Center
Midland, Michigan 48674
517-636-1000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
Copy to:
Scott J. Davis Neil T. Anderson
Philip J. Niehoff Stephen M. Kotran
Mayer, Brown & Platt Sullivan & Cromwell
190 South LaSalle Street 125 Broad Street
Chicago, Illinois 60603-3441 New York, New York 10004-2498
312-782-0600 212-558-4000
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable following the effectiveness of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
--------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Proposed maximum
Title of each class of Amount maximum aggregate Amount of
securities to be to be offering price offering registration
registered(1) registered per share(2) price(2) fee(3)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $2.50 par
value per share....... 80,500,000 Shares $100.68 $8,104,740,000 $2,253,118
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) This Registration Statement relates to the shares of common stock of The
Dow Chemical Company to be issued in exchange for the outstanding shares of
common stock and options of Union Carbide Corporation pursuant to the
merger described in the proxy statement/prospectus included herein.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f), based on the market value of the shares of Union
Carbide common stock to be received in the exchange using the average of
the low and high sales prices of shares of Union Carbide common stock as
reported on the New York Stock Exchange Composite Tape on September 28,
1999.
(3) Pursuant to Rule 457(b), $1,732,927 of the registration fee that was
previously paid pursuant to Section 14(g) of the Securities Exchange Act of
1934, as amended, in connection with the filing of preliminary proxy
materials on August 26, 1999, has been credited against the registration
fee payable in connection with this filing.
--------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
[UNION CARBIDE LOGO]
PROPOSED MERGER--YOUR VOTE IS VERY IMPORTANT
To the Stockholders of Union Carbide Corporation:
Union Carbide Corporation has entered into a merger agreement with The Dow
Chemical Company and a wholly owned subsidiary of Dow. As a result of the
merger contemplated by the merger agreement, Union Carbide would become a
subsidiary of Dow. In the merger, each then outstanding share of Union Carbide
common stock will be converted into 0.537 of a share of Dow common stock.
We are truly excited about this opportunity for Union Carbide to join forces
with Dow to create what we believe will be the world's premier diversified
chemical company. I encourage you, our stockholders, to participate in this
achievement by casting your vote in favor of the merger.
The merger is intended to be tax-free to you for federal income tax purposes
except for taxes due on cash, if any, that you receive instead of fractional
shares.
The attached notice contains important information about a stockholders
meeting at which you will be asked to vote on the merger agreement. The
affirmative vote of holders of two-thirds of the outstanding shares of Union
Carbide common stock is required to adopt the merger agreement.
Your board of directors recommends that you vote FOR adoption of the merger
agreement.
Your vote is important. Regardless of the number of shares you own or
whether you plan to attend the meeting, please complete, sign, date and mail
your proxy card or grant your proxy by telephone, fax or the Internet as soon
as possible to make sure your shares are represented at the meeting. Please do
not send your Union Carbide common stock certificates with the enclosed proxy.
The accompanying proxy statement/prospectus provides you with detailed
information about the proposed merger. I urge you to read the entire document
carefully.
For a discussion of risks relevant to the merger, see "Risk Factors"
beginning on page 13 of this proxy statement/prospectus.
Sincerely,
[DR. WILLIAM H. JOYCE SIG]
Dr. William H. Joyce
Chairman of the Board, President and
Chief Executive Officer
Shares of Union Carbide common stock are traded on the New York Stock
Exchange under the symbol "UK," and shares of Dow common stock are traded on
the New York Stock Exchange under the symbol "DOW."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this proxy statement/prospectus. Any representation to
the contrary is a criminal offense and should be reported immediately to the
Securities and Exchange Commission.
----------------
The date of this proxy statement/prospectus is October 5, 1999.
<PAGE>
This proxy statement/prospectus incorporates by reference important business
and financial information about both Dow and Union Carbide that is not included
in or delivered with this proxy statement/prospectus. See "Additional
Information--Where You Can Find More Information."
You can obtain any of the documents incorporated by reference in this
document through Dow or Union Carbide, as the case may be, or from the
Securities and Exchange Commission's web site at http://www.sec.gov. Documents
incorporated by reference are available from Dow and Union Carbide without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference in this proxy statement/prospectus. You
can obtain documents incorporated by reference in this proxy
statement/prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses:
Dow Union Carbide
------------------------- -------------------------
John Scriven Bruce D. Fitzgerald
Vice President, General Counsel Vice President, General Counsel
and Secretary and Secretary
Office of the Corporate Secretary Union Carbide Corporation
The Dow Chemical Company 39 Old Ridgebury Road
2030 Dow Center Danbury, Connecticut 06817-0001
Midland, Michigan 48674 Telephone: 203-794-2000
Telephone: 517-636-1792
If you would like to request documents, please do so by Tuesday, November
23, 1999, to receive them before the meeting. Please be sure to include your
complete name and address in your request. If you request any documents
incorporated by reference, we will mail them to you by first class mail, or
another equally prompt means, within one business day after we receive your
request.
<PAGE>
[LOGO OF UNION CARBIDE]
NOTICE
of Special Meeting of Stockholders
to be held on December 1, 1999
To Union Carbide Corporation stockholders:
We will hold a meeting of stockholders of Union Carbide Corporation on
Wednesday, December 1, 1999, at 10:00 a.m. Eastern time, in the John C. Creasy
Health Education Center, 24 Hospital Avenue, Danbury, Connecticut. The purpose
of the meeting is:
1. to vote on the adoption of an agreement and plan of merger relating to a
merger of a subsidiary of The Dow Chemical Company with and into Union
Carbide. The affirmative vote of the holders of two-thirds of Union
Carbide's common stock outstanding on the record date is required to
adopt the merger agreement. If the stockholders adopt the merger
agreement, you will receive 0.537 of a share of Dow common stock for
each share of Union Carbide common stock you own at the effective time
of the merger, and Union Carbide will become a subsidiary of Dow.
Additional information concerning the merger is set forth in the
accompanying proxy statement/prospectus and in the merger agreement, a
copy of which is attached as Annex A to the proxy statement/prospectus;
and
2. to transact such other matters as may properly come before the meeting.
The merger agreement and merger are described in the attached proxy
statement/prospectus. The record date to determine who is entitled to vote at
the meeting is Monday, October 4, 1999. Only holders of Union Carbide common
stock at the close of business on the record date are entitled to notice of,
and to vote at, the meeting. You should complete, sign and mail your proxy card
or grant your proxy by telephone, fax or the Internet following the
instructions on the proxy card as soon as possible to make sure your shares are
represented at the meeting. If you attend the meeting and wish to vote in
person, you may revoke your proxy and vote in person. If you have instructed a
broker to vote your shares, you must follow directions received from the broker
to change or revoke your proxy.
Your vote is important. Please vote today.
If you plan to attend the meeting, you will need to obtain a ticket. Please
call the toll-free number-- 1-800-934-3350--and a member of our Shareholder
Services Department will process your ticket request. If you have any questions
about the merger or if you need additional copies of this proxy
statement/prospectus or the enclosed proxy card, call D.F. King & Co., Inc. at
1-800-994-3227.
By Order of the Board of Directors,
[BRUCE D. FITZGERALD SIG]
BRUCE D. FITZGERALD
Vice President, General Counsel and
Secretary
October 7, 1999
Danbury, Connecticut
Whether or not you plan to attend the meeting in person, please vote as
soon as possible by completing, signing, dating and returning the
enclosed proxy card in the accompanying self-addressed stamped
envelope or by granting your proxy by telephone, fax or
the Internet.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why are Dow and Union Carbide proposing the merger?
A: Dow and Union Carbide believe, among other things, that the combined company
will be able to capitalize on numerous opportunities for revenue growth,
provide improved business and earnings stability and take advantage of
synergies resulting from the merger, for the benefit of our respective
stockholders.
Q: What will I receive when the merger occurs?
A: You will receive 0.537 of a share of Dow common stock for each share of
Union Carbide common stock that you own at the effective time of the merger.
Instead of issuing fractional shares, Dow will pay cash, without interest,
for any fractional shares, based on the closing price for a share of Dow
common stock on the New York Stock Exchange trading day immediately before
the date of the merger. Participants in Union Carbide's Dividend
Reinvestment and Stock Purchase Plan and Union Carbide's employee benefits
plans will be credited with fractional shares rather than cash.
Q: What do I need to do now?
A: After carefully reading and considering the information contained in this
proxy statement/prospectus, please vote in one of the following ways:
. complete, sign and mail your proxy card;
. phone the toll-free number listed on your proxy card and follow the
recorded instructions;
. fax your proxy card to the fax number listed on your proxy card; or
. go to the Internet website listed on your proxy card and follow the
instructions provided.
If you sign and send in your proxy card or grant your proxy by fax,
telephone or the Internet without specifying how your shares should be
voted, the proxyholders will vote for the adoption of the merger agreement.
YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
Q: If I am not going to attend the meeting in person, should I grant my proxy
instead?
A. Yes. Whether or not you plan to attend the meeting, you should grant your
proxy as described above. If you neither attend the meeting and vote nor
grant your proxy in one of the ways described above, your shares will not be
voted, which will have the effect of voting against adoption of the merger
agreement.
Q: Should I send in my stock certificates now?
A. No. You should not send in your Union Carbide common stock certificates
until you receive the letter of transmittal after the merger is completed.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares. Without instructions, your
shares will not be voted, which will have the effect of voting against
adoption of the merger agreement.
Q. Who must approve the merger agreement?
A: The affirmative vote of the holders of at least two-thirds of the shares of
Union Carbide common stock outstanding and entitled to vote at the meeting
is required to adopt the merger agreement.
Q: What are the U.S. federal income tax consequences of the merger to me?
A: You are expected not to be taxed on the receipt of shares of Dow common
stock in the merger, but you may be taxed with respect to cash you receive
instead of fractional shares.
<PAGE>
Q: When will the merger be completed?
A: We are working to complete the merger as quickly as possible; however,
delays in fulfilling closing conditions, including the receipt of regulatory
approvals, could delay the merger.
Q: How will the merger be accomplished?
A: On the date that the merger is completed, a wholly owned subsidiary of Dow
will merge with and into Union Carbide, and Union Carbide will continue in
existence as a wholly owned subsidiary of Dow. After the merger, Union
Carbide's stock will cease to be publicly traded.
Q: Will I continue to receive dividends after the merger?
A: The payment of dividends by Dow in the future will depend on business
conditions, Dow's financial condition and earnings, and other factors. Since
1912 Dow has paid a dividend every quarter and has maintained or increased
the dividend amount throughout that time. If you have a Union Carbide common
stock certificate, then once you have exchanged your stock certificates, you
will be entitled to receive dividends, without interest, payable to holders
of Dow common stock with a record date after the effective time of the
merger, subject to applicable abandonment, escheat and similar laws.
Q: Who can help answer my questions?
A: If you have any questions about the merger or if you need additional copies
of this proxy statement/prospectus or the enclosed proxy card, call:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Telephone: 800-994-3227
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY................................................................... 1
The Companies........................................................... 1
What You Will Receive in the Merger..................................... 1
Material Federal Income Tax Considerations.............................. 1
Market Prices of Dow Common Stock and Union Carbide Common Stock on
Important Dates........................................................ 1
Union Carbide's Reasons for the Merger.................................. 2
Dow's Reasons for the Merger............................................ 2
No Appraisal Rights..................................................... 2
Exchange of Stock....................................................... 2
Comparative Rights of Dow Stockholders and Union Carbide Stockholders... 3
Comparative per Share Information....................................... 3
The Meeting............................................................. 4
Vote Required........................................................... 4
The Merger Agreement and the Merger..................................... 5
The Stock Option Agreement.............................................. 8
Selected Historical Financial Information of Dow........................ 9
Selected Historical Financial Information of Union Carbide.............. 10
Selected Unaudited Pro Forma Combined Condensed Financial Information... 11
RISK FACTORS.............................................................. 13
You will receive 0.537 of a share of Dow common stock regardless of
changes in the market value of Dow common stock or Union Carbide common
stock.................................................................. 13
Failure to qualify for pooling-of-interests accounting treatment may
impact reported operating results...................................... 13
The integration of Union Carbide into Dow may be difficult and expensive
to achieve and may not result in the benefits currently anticipated by
Dow and Union Carbide.................................................. 13
Expenses resulting from the merger will be substantial and may affect
Dow's results of operations............................................ 14
Regulatory agencies enforcing antitrust and similar laws could delay,
oppose or refuse to approve the merger or impose conditions that could
have an adverse effect on the combined company......................... 14
THE COMPANIES............................................................. 14
The Dow Chemical Company................................................ 14
Union Carbide Corporation............................................... 14
THE MEETING............................................................... 15
Purpose of the Meeting.................................................. 15
Date, Time and Place; Record Date....................................... 15
Your Voting Rights; Required Vote....................................... 15
Confidential Voting..................................................... 16
Giving and Revoking Your Proxy; Solicitation............................ 16
No Appraisal Rights..................................................... 17
THE MERGER AGREEMENT AND THE MERGER....................................... 18
General Description of the Merger....................................... 18
Background of the Merger................................................ 18
Recommendation of Union Carbide's Board of Directors and Reasons for the
Merger................................................................. 20
Opinion of Union Carbide's Financial Advisor............................ 22
Structure of the Merger................................................. 28
When the Merger Becomes Effective....................................... 28
Conversion of Stock, Stock Options and Other Awards..................... 28
Fractional Shares....................................................... 29
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Exchange Procedures..................................................... 29
Representations and Warranties.......................................... 30
Certain Covenants....................................................... 31
Non-Solicitation of Competing Proposals................................. 33
Filings and Other Actions............................................... 34
Conditions to Completion of the Merger.................................. 35
Termination of the Merger Agreement..................................... 36
Expenses................................................................ 37
Modification or Amendment to the Merger Agreement....................... 37
Regulatory Requirements................................................. 37
Material Federal Income Tax Considerations.............................. 38
Anticipated Accounting Treatment........................................ 39
Resale Restrictions..................................................... 40
Interests of Union Carbide Directors and Officers in the Merger that are
Different from Your Interests.......................................... 41
The Stock Option Agreement.............................................. 43
MARKET PRICES AND DIVIDEND INFORMATION.................................... 45
COMPARISON OF RIGHTS OF DOW STOCKHOLDERS AND UNION CARBIDE STOCKHOLDERS... 45
Authorized Capital...................................................... 46
Boards of Directors..................................................... 47
Number, Filling of Vacancies and Removal of Directors................... 47
Dividends............................................................... 48
Corporations' Best Interests............................................ 48
Indemnification......................................................... 49
Limitations on a Director's Liability................................... 50
Special Meetings of Stockholders........................................ 51
Advance Notice Provisions for Stockholder Proposals Other than Election
of Directors........................................................... 52
Advance Notice Provisions for Stockholder Nominations of Directors at an
Annual Meeting......................................................... 52
Advance Notice Provisions for Stockholder Nominations of Directors at a
Special Meeting........................................................ 53
Stockholder Lists and Inspection Rights................................. 54
Stockholder Action by Written Consent................................... 54
Transactions with Interested Stockholders and a Merger or Sale of
Assets................................................................. 55
Dissenters' or Appraisal Rights......................................... 58
Amendments to Certificates of Incorporation and Bylaws.................. 59
ADDITIONAL INFORMATION.................................................... 60
Deadline for Union Carbide Stockholder Proposals and Dow Stockholder
Proposals.............................................................. 60
Legal Matters........................................................... 61
Experts................................................................. 61
Where You Can Find More Information..................................... 61
Forward-Looking Statements.............................................. 63
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION.............. 65
ANNEXES:
A--Agreement and Plan of Merger......................................... A-1
B--Opinion of Credit Suisse First Boston Corporation.................... B-1
</TABLE>
ii
<PAGE>
SUMMARY
This summary highlights some of the information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should carefully read this
entire document, including the annexes and other documents to which we have
referred you. See "Additional Information--Where You Can Find More Information"
for more details.
The Companies
The Dow Chemical Company
2030 Dow Center
Midland, Michigan 48674
Telephone: 517-636-1000
website: http://www.dow.com
Dow is a global science and technology-based company that develops and
manufactures a portfolio of chemicals, plastics and agricultural products and
services for customers around the world.
Union Carbide Corporation
39 Old Ridgebury Road
Danbury, Connecticut 06817-0001
Telephone: 203-794-2000
website: http://www.unioncarbide.com
Union Carbide operates in two business segments of the chemicals and
plastics industry. The specialties and intermediates segment converts basic and
intermediate chemicals into a diverse portfolio of chemicals and polymers
serving industrial customers in many markets. This segment also provides
technology services, including licensing, to the oil and gas and petrochemicals
industries. The basic chemicals and polymers segment converts hydrocarbon
feedstocks into ethylene or propylene used to manufacture polyethylene,
polypropylene, ethylene oxide and ethylene glycol for sale to third parties, as
well as for consumption by Union Carbide's specialties and intermediates
segment.
In this proxy statement/prospectus, we refer to Dow, Union Carbide and their
subsidiaries after the effective time of the merger as the "combined company."
What You Will Receive in the Merger
You will receive 0.537 of a share of Dow common stock for each share of
Union Carbide common stock that you own at the effective time of the merger.
Except as described in the next sentence, instead of issuing fractional shares
of Dow common stock in the merger, Dow will pay cash, without interest, based
on the closing price for a share of Dow common stock on the New York Stock
Exchange trading day immediately before the date of the merger. Fractional
shares of Dow common stock will be credited to participants' accounts in Union
Carbide's Dividend Reinvestment and Stock Purchase Plan and Union Carbide's
employee benefits plans.
Material Federal Income Tax Considerations
Because the merger is expected to be treated as a "reorganization" for U.S.
federal income tax purposes, you are expected not to be taxed on the receipt of
shares of Dow common stock in the merger, but you may be taxed with respect to
cash you receive instead of fractional shares. See "The Merger Agreement and
the Merger--Material Federal Income Tax Considerations."
Tax matters are very complicated. The tax consequences of the merger to you
will depend on your own situation. You should consult your tax advisors for a
full understanding of the U.S. federal, state, local and foreign tax
consequences of the merger to you.
Market Prices of Dow Common Stock and Union Carbide Common Stock on Important
Dates
Shares of Dow common stock are traded on the New York Stock Exchange under
the symbol "DOW," and shares of Union Carbide common stock are traded on the
New York Stock Exchange under the symbol "UK." The following table provides the
closing per share sales prices of Dow common stock and Union Carbide common
stock, as
1
<PAGE>
reported on the New York Stock Exchange Composite Tape, on:
. August 3, 1999--the last trading day before Dow and Union Carbide announced
the proposed merger; and
. October 4, 1999--the last business day before the date of this proxy
statement/prospectus.
<TABLE>
<CAPTION>
Union
Dow Carbide
Common Common
Date Stock Stock
---- --------- ---------
<S> <C> <C>
August 3, 1999.............................................. $124 9/16 $48 13/16
October 4, 1999............................................. 113 56 15/16
</TABLE>
The value of 0.537 of a share of Dow common stock on August 3, 1999, was
$66.96 and on October 4, 1999, was $60.68.
Union Carbide's Reasons for the Merger
Union Carbide's board of directors considered a number of factors, including
its belief that the combined company will:
. be able to capitalize on numerous opportunities for revenue growth by
offering more products to existing customers more quickly and on a global
basis;
. provide improved stability of the combined company's businesses and earnings
in varying economic and industry climates relative to Union Carbide on a
stand-alone basis;
. strengthen Union Carbide's operations as the chemicals industry continues to
consolidate and build mass;
. have greater flexibility to pursue acquisitions and other strategic options;
and
. be able to take advantage of synergies resulting from the merger estimated to
be $250 million in the first year following the merger and $500 million per
year thereafter.
Dow's Reasons for the Merger
The merger is part of Dow's overall business strategy for growth through
increased sales of existing products, product development, and strategic
mergers and acquisitions. Dow's board of directors believes that Dow and its
stockholders will benefit from the merger because the merger:
. will combine two predominantly complementary chemical producers to achieve a
broader product line and geographic scope than either of them individually
possesses;
. is expected to enhance the ability of the combined company to maintain its
competitiveness through efficiency and reduced costs in the face of
marketplace pressures for lower cost and higher quality chemical products;
. is expected to produce an estimated $250 million in synergies in the first
year following the merger and $500 million in synergies per year thereafter;
. is expected to provide the combined company with greater technological
resources required to meet increasing and evolving customer demands for
higher performance chemical products; and
. is expected to strengthen the combined company's balance sheet which will
permit the combined company to fund strategic investments.
No Appraisal Rights
Under New York corporate law, you are not entitled to dissenters' or
appraisal rights in connection with the merger. See "The Meeting--No Appraisal
Rights."
Exchange of Stock
If you have a Union Carbide stock certificate, then promptly after the
merger takes place the exchange agent for this transaction will send you a
letter of transmittal for you to use in surrendering your Union Carbide common
stock certificates for shares of Dow common stock. You should not send in your
Union Carbide common stock certificates until you receive the letter of
transmittal. If you own Union Carbide common stock through a broker, Union
Carbide's Dividend Reinvestment and Stock Purchase Plan, Union Carbide's
employee benefit plans or other arrangement where you do not hold a Union
Carbide common stock certificate, then your stock will be converted to Dow
common stock without any action by you, subject to adjustment to reflect the
exchange ratio. See "The Merger Agreement and the Merger--Conversion of Stock,
Stock Options and Other Awards."
2
<PAGE>
Comparative Rights of Dow Stockholders and Union Carbide Stockholders
Because Dow and Union Carbide have different certificates of incorporation
and bylaws and Dow is a Delaware corporation and Union Carbide is a New York
corporation, some of your rights as a stockholder of Dow will be different from
your rights as a stockholder of Union Carbide. Several of the important
differences are summarized in the following table:
<TABLE>
<CAPTION>
Dow Union Carbide
------------------------------- -------------------------------
<S> <C> <C>
Can stockholders take No, the holders of Dow's common Yes, Union Carbide's
corporate action without stock may only take corporate stockholders may take corporate
holding a meeting? action at a stockholders' action by unanimous written
meeting. consent.
Is the board of Yes, Dow's board of directors No, Union Carbide's entire
directors divided into is divided into three classes, board of directors is elected
separate classes? with one class elected each each year.
year for three-year terms.
Can stockholders remove Yes, a director may be removed Yes, a director may be removed
a director? for "cause" upon the vote of for "cause" upon the vote of
stockholders holding 80% of the stockholders holding a majority
voting power of Dow's capital of the votes cast on the
stock outstanding and entitled matter.
to vote.
What stockholder action The vote of a majority of Dow's The vote of two-thirds of the
is generally required to capital stock outstanding and shares of Union Carbide's
merge or sell all or entitled to vote. capital stock outstanding and
substantially all entitled to vote.
corporate assets?
<CAPTION>
------------------------------- -------------------------------
</TABLE>
Comparative per Share Information
The following table summarizes on a per share basis certain (1) historical
financial information and (2) unaudited pro forma and equivalent pro forma
financial information.
The unaudited pro forma financial information assumes that the merger was
completed at the beginning of each of the periods presented for the statement
of income information and at the end of the period for the balance sheet
information and gives effect to the merger as a pooling-of-interests for
accounting purposes. The basic unaudited pro forma per share information for
Dow is based on the weighted average number of outstanding shares of Dow common
stock adjusted to include (1) the number of shares of Dow common stock that
would be issued in the merger in exchange for the outstanding Union Carbide
common stock, based on the number of shares of Union Carbide common stock
outstanding for the periods reported, and (2) the issuance of an estimated 3.8
million shares of Dow common stock in order to qualify for pooling-of-interests
accounting treatment. The diluted unaudited pro forma per share information for
Dow is based on the weighted average number of outstanding shares of Dow common
stock adjusted to include (1) the dilutive effect of Dow convertible preferred
stock, Dow employee stock options and Dow restricted stock awards, (2) the
number of shares of Dow common stock that would be issued in the merger,
including the issuance of an estimated 3.8 million shares of Dow common stock
previously described and (3) the dilutive effect of Union Carbide employee
stock options and, in applicable periods, equity put options and Union Carbide
convertible preferred stock. For the years ended December 31, 1996 and 1997,
certain adjustments to net income available to common stockholders are
considered in the computation of basic and diluted earnings per share, as
described in Union Carbide's historical financial statements for the periods
ended December 31, 1996 and 1997.
3
<PAGE>
The unaudited equivalent pro forma per share information for Union Carbide
is based on the unaudited pro forma amounts per share for Dow multiplied by the
exchange ratio of 0.537.
The information set forth below is qualified in its entirety by reference
to, and should be read in conjunction with, the historical consolidated
financial information of Dow and Union Carbide incorporated by reference in
this proxy statement/prospectus and the unaudited pro forma combined condensed
financial information included in this proxy statement/prospectus.
<TABLE>
<CAPTION>
Year Ended
Six Months December 31,
Ended --------------------
June 30, 1999 1998 1997 1996
------------- ------ ------- -----
<S> <C> <C> <C> <C>
Dow:
Income per share from continuing
operations:
Basic:
Historical............................. $ 3.35 $ 5.83 $ 7.81 $7.71
Pro forma.............................. 2.93 5.69 8.07 7.75
Diluted:
Historical............................. $ 3.30 $ 5.76 $ 7.70 $7.60
Pro forma.............................. 2.88 5.61 7.79 7.44
Book value per share:
Historical............................. $35.20 $33.91
Pro forma.............................. 35.84 34.93
Cash dividends declared per share:
Historical............................. $ 1.74 $ 3.48 $ 3.36 $3.00
Pro forma.............................. 1.74 3.48 3.36 3.00
Union Carbide:
Income per share before the cumulative
effect of change in accounting principle:
Basic:
Historical............................. $ 0.95 $ 2.98 $ 5.02 $4.43
Equivalent pro forma................... 1.57 3.06 4.33 4.16
Diluted:
Historical............................. $ 0.93 $ 2.91 $ 4.53 $3.90
Equivalent pro forma................... 1.55 3.01 4.18 4.00
Book value per share:
Historical............................. $18.33 $18.46
Equivalent pro forma................... 19.25 18.76
Cash dividends declared per share:
Historical............................. $ 0.45 $ 0.90 $0.7875 $0.75
Equivalent pro forma................... 0.93 1.87 1.80 1.61
</TABLE>
The Meeting
The meeting of Union Carbide's stockholders will take place on Wednesday,
December 1, 1999, in the John C. Creasy Health Education Center, 24 Hospital
Avenue, Danbury, Connecticut, at 10:00 a.m. Eastern time. At the meeting, you
will be asked to vote on adoption of the merger agreement. If you plan to
attend the meeting, you will need to obtain a ticket. Please call the toll-free
number--1-800-934-3350--and a member of Union Carbide's Shareholder Services
Department will process your ticket request.
Vote Required
Each stockholder of record on the record date is entitled to one vote on
each matter submitted to a vote at the meeting for each share of Union Carbide
common stock held. A majority of the shares of Union Carbide common stock
outstanding on the record date represented in person or by proxy
4
<PAGE>
constitutes a quorum for consideration of such matters at the meeting. If a
quorum is present at the meeting, the affirmative vote of at least two-thirds
of the shares of Union Carbide common stock outstanding and entitled to vote is
required to adopt the merger agreement.
The Merger Agreement and the Merger
The merger agreement is attached as Annex A to this proxy
statement/prospectus. You should read the merger agreement because it, and not
this proxy statement/prospectus, is the legal document that governs the merger.
Recommendation to Union Carbide's Stockholders
Union Carbide's board of directors has determined that the merger agreement
and the merger are in the best interests of Union Carbide and its stockholders.
Accordingly, Union Carbide's board of directors has adopted, by a unanimous
vote of all directors present and voting at a meeting at which a quorum of
directors was present, the merger agreement, and recommends that you vote to
adopt the merger agreement. See "The Merger Agreement and the Merger--
Background of the Merger" and "The Merger Agreement and the Merger--
Recommendations of Union Carbide's Board of Directors and Reasons for the
Merger."
Interests of Union Carbide Directors and Officers in the Merger that are
Different from Your Interests
Some of the members of Union Carbide's board of directors and some of Union
Carbide's officers have interests in the merger that are different from your
interests:
. All outstanding options granted by Union Carbide to purchase Union Carbide
common stock, including those held by officers and directors of Union
Carbide, will fully vest at the effective time of the merger and, if not
exercised at that time, will be converted into fully vested options to
purchase shares of Dow common stock, subject to adjustment to reflect the
exchange ratio.
. Restrictions on distribution of share units in the compensation deferral
plans held by officers and directors of Union Carbide may lapse at the
effective time of the merger, and those share units will be converted to
unrestricted share units of Dow common stock, subject to adjustment to
reflect the exchange ratio.
. Some current officers of Union Carbide may remain officers of Union Carbide
after the merger.
. Some officers of Union Carbide will be entitled to severance payments and
enhanced pension benefits in the event their employment ceases following the
merger.
. At the effective time of the merger, Dr. William H. Joyce and one other
current Union Carbide director, will be appointed as members of Dow's board
of directors, each to hold office until his successor is elected and
qualified or until his earlier resignation or removal. Dr. Joyce will also be
appointed Vice Chairman of Dow's board of directors.
. At the effective time of the merger, some of Union Carbide's executive
officers and senior management may receive payments under Union Carbide's
1997 EPS Incentive Plan.
. Some Union Carbide officers may have accounts under the Savings and
Investment Program for Employees of Union Carbide and the Union Carbide
Employee Stock Ownership Plan. Any Union Carbide common stock held by the
plans will be converted into Dow common stock at the effective time of the
merger, subject to adjustments to reflect the exchange ratio.
These interests are more fully described under "The Merger Agreement and the
Merger--Interests of Union Carbide Directors and Officers in the Merger that
are Different from Your Interests."
Each share of Union Carbide common stock held by Union Carbide's directors,
officers and their affiliates at the effective time of the merger will, along
with all other Union Carbide common stock, be converted into the right to
receive 0.537 of a share of Dow common stock.
Union Carbide's board of directors was aware of these interests and
considered them, among other matters, when adopting the merger agreement.
Union Carbide's directors, officers and their affiliates beneficially owned,
as of October 1, 1999, approximately 2.46% of Union Carbide's common stock.
Dow's directors, officers and their affiliates did not beneficially own, as of
October 1, 1999, any shares of Union Carbide's common stock.
5
<PAGE>
Opinion of Union Carbide's Financial Advisor
Union Carbide's financial advisor, Credit Suisse First Boston Corporation,
delivered a written opinion to Union Carbide's board of directors as to the
fairness, from a financial point of view, of the exchange ratio provided for in
the merger. The full text of Credit Suisse First Boston's written opinion dated
August 3, 1999 is attached to this proxy statement/prospectus as Annex B. We
encourage you to read this opinion carefully in its entirety for a description
of the procedures followed, assumptions made, matters considered and
limitations on the review undertaken. Credit Suisse First Boston's opinion is
directed to Union Carbide's board of directors and does not constitute a
recommendation to any stockholder as to any matter relating to the merger.
What We Need to Do to Complete the Merger
We will complete the merger only if the conditions set forth in the merger
agreement are satisfied or, in some cases, waived. These conditions include:
. adoption of the merger agreement by Union Carbide's stockholders;
. the expiration or termination of the waiting period applicable to the
completion of the merger under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and the receipt of any consents to the transaction contemplated
by the merger agreement required under the European Community Merger Control
Regulation or other applicable competition laws;
. that no governmental entity of competent jurisdiction enacts, issues,
promulgates, enforces or enters any law or order, whether temporary,
preliminary or permanent, that is in effect and restrains, enjoins or
otherwise prohibits completion of the merger or the other transactions
contemplated by the merger agreement and no governmental entity institutes
any proceeding, and no senior official of any governmental entity in the
United States is then threatening to institute any proceeding, seeking any of
the above;
. that no stop order suspending the effectiveness of Dow's filing with the
Securities and Exchange Commission for this transaction has been issued and
that no proceedings for that purpose have been initiated or threatened by the
Securities and Exchange Commission;
. Dow's receipt of a letter from its independent public accountants to the
effect that no conditions exist that could preclude accounting for the merger
as a "pooling-of-interests;"
. Union Carbide's receipt of a letter from its independent public accountants
to the effect that such accounting firm knows of no reason why the merger
should not receive pooling-of-interests accounting treatment;
. Dow and Union Carbide each being reasonably satisfied that the merger will
qualify for pooling-of-interests accounting treatment; and
. that the representations and warranties of Dow and Union Carbide are true and
correct in all material respects.
Union Carbide's obligation to complete the merger is also conditioned on its
receipt of a legal opinion that the merger will be treated as a tax-free
reorganization under the Internal Revenue Code.
At any time before the merger, to the extent legally allowed, the board of
directors of either Dow or Union Carbide may waive compliance with any of the
conditions contained in the merger agreement without the approval of their
respective stockholders. As of the date of this proxy statement/prospectus,
neither Dow nor Union Carbide expects that any condition will be waived.
The approval of the merger by Dow's stockholders is not required, and Dow is
not seeking the approval of the merger from its stockholders.
Required Regulatory Approvals
Under the Hart-Scott-Rodino Act, the merger cannot be completed until
notifications have been given and certain information has been furnished to the
Federal Trade Commission and the Antitrust Division of the Department of
Justice and specified waiting period requirements have been satisfied. The
6
<PAGE>
European Commission must review the merger to determine whether or not it is
compatible with the common market and, accordingly, whether or not to permit it
to proceed.
Union Carbide and Dow expect to file notification and report forms under the
Hart-Scott-Rodino Act and a merger notification with the European Union
antitrust authorities before the meeting.
Union Carbide and Dow conduct operations in a number of jurisdictions where
other regulatory filings or approvals may be required or advisable in
connection with the completion of the merger. Union Carbide and Dow are
currently reviewing whether filings or approvals may be required or desirable
in those jurisdictions that may be material to Union Carbide and Dow and their
subsidiaries. It is possible that one or more of these filings may not be made,
or that one or more of these approvals may not be obtained, prior to the
merger.
While Dow and Union Carbide are obligated to use their best efforts to
obtain all antitrust consents, approvals and authorizations, Dow is not
obligated to agree to any conditions that would reasonably be expected to have
a material adverse effect on the combined company.
Termination of the Merger Agreement
Dow and Union Carbide can agree to terminate the merger agreement at any
time without completing the merger.
Also, either Dow or Union Carbide can, without the consent of the other,
terminate the merger agreement if:
. the merger is not completed by March 30, 2000, or, if extended by either
party under some circumstances relating primarily to obtaining governmental
approvals of the merger, August 2, 2000, unless the merger is not completed
because the party that wants to terminate the merger agreement has violated
the agreement;
. Union Carbide's stockholders do not adopt the merger agreement at the
meeting;
. any order permanently restraining, enjoining or otherwise prohibiting
completion of the merger has become final and non-appealable; or
. the other party materially breaches the merger agreement and cannot or does
not correct the breach before March 30, 2000, or, if extended by either party
under some circumstances relating primarily to obtaining governmental
approvals of the merger, August 2, 2000.
In addition, Union Carbide can terminate the merger agreement before the
effective time of the merger if Union Carbide's board of directors provides
written notice to Dow that Union Carbide intends to enter into a binding
written agreement for a superior proposal from another person, so long as Union
Carbide gives Dow an opportunity to match or exceed the other person's
proposal.
Finally, Dow can terminate the merger agreement if Union Carbide's board of
directors:
. withdraws, adversely modifies or changes its recommendation for adoption of
the merger agreement; or
. fails to reconfirm its recommendation for adoption of the merger agreement
within 15 business days after a written request by Dow to do so.
Termination Fee
Union Carbide must pay Dow a fee of $300 million in cash if the merger
agreement is terminated under any of the following circumstances:
. if all of the following occur:
(1) another person makes an acquisition proposal or expresses an intention to
make an acquisition proposal with respect to Union Carbide and that
acquisition proposal is not withdrawn before the meeting;
(2) Union Carbide's stockholders do not adopt the merger agreement with Dow
at the meeting;
(3) either Dow or Union Carbide terminates the merger agreement with Dow
because Union Carbide's stockholders do not adopt the merger agreement
with Dow at the meeting; and
7
<PAGE>
(4) within 12 months after termination of the merger agreement with Dow,
Union Carbide enters into an agreement to complete an acquisition
transaction that meets certain conditions; or
. if Union Carbide terminates the merger agreement because Union Carbide's
board of directors provides written notice to Dow that Union Carbide intends
to enter into a binding written agreement for a superior proposal from
another person; or
. if Dow terminates the merger agreement because:
(1) before the meeting, Union Carbide's board of directors withdraws,
adversely modifies or changes its recommendation for adoption of the
merger agreement or fails to reconfirm its recommendation for adoption of
the merger agreement within 15 business days after a written request by
Dow to do so; or
(2) at any time, there has been a material breach by Union Carbide of its
obligation not to solicit, encourage or engage in negotiations regarding
an alternative acquisition proposal.
The termination fee described above is in addition to any profit Dow may
receive under the stock option agreement described below.
Non-Solicitation of Competing Proposals
The merger agreement generally restricts Union Carbide's ability to
initiate, solicit, encourage or otherwise facilitate any competing merger or
acquisition inquiries, proposals or offers; however, Union Carbide may respond
to unsolicited offers as required by the fiduciary duties of Union Carbide's
board of directors. Any response to an offer from another person that is not
permitted by the merger agreement may entitle Dow to receive the termination
fee and to exercise the option Union Carbide has granted to Dow under the stock
option agreement.
Modifying or Amending the Merger Agreement
Dow and Union Carbide can modify or amend the merger agreement, whether
before or after the meeting, if they both agree to do so. Each can waive its
right to require the other to comply with the merger agreement where the law
allows.
Expenses
Dow will pay the expenses in connection with the registration fees paid to
the Securities and Exchange Commission, printing and mailing this proxy
statement/prospectus and other filing fees. Dow and Union Carbide will each pay
its own expenses in connection with the merger and the related transactions,
except as described above.
The Stock Option Agreement
Union Carbide has granted Dow an option to purchase shares of Union Carbide
common stock equal to approximately 19.9% of the number of outstanding shares
of Union Carbide common stock at a price per share in cash equal to $48.8125.
Dow can exercise this option if it becomes entitled to receive the termination
fee under the merger agreement. The stock option agreement limits to $50
million the total profit Dow may receive from the option. The profit Dow may
receive under the stock option agreement is in addition to the termination fee
Dow may receive under the merger agreement.
8
<PAGE>
Selected Historical Financial Information of Dow
Dow is providing the following information to aid your analysis of the
financial aspects of the merger. Dow derived this information from audited
financial statements for the years 1994 through 1998 and unaudited financial
statements for the six months ended June 30, 1998 and 1999. In the opinion of
Dow management, this unaudited interim information reflects all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations and financial condition for the six
months ended June 30, 1998 and 1999. Results for interim periods should not be
considered indicative of results for any other periods or for the year. This
information is only a summary. You should read it along with Dow's historical
financial statements and related notes and the section titled "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in Dow's annual reports, quarterly reports and other information on
file with the Securities and Exchange Commission and incorporated by reference
in this proxy statement/prospectus. See "Additional Information--Where You Can
Find More Information."
<TABLE>
<CAPTION>
Dow
-----------------------------------------------------
Six Months
Ended June
30, Year Ended December 31,
------------- ---------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------- ------- ------- ------- -------
(in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Historical
Consolidated Statements
of Income Information:
Net sales............... $9,036 $9,686 $18,441 $20,018 $20,053 $20,200 $16,742
Income from continuing
operations............. 739 846 1,304 1,802 1,900 1,884 765
Income from continuing
operations per common
share--basic........... $ 3.35 $ 3.76 $ 5.83 $ 7.81 $ 7.71 $ 7.03 $ 2.77
Income from continuing
operations per common
share--diluted......... 3.30 3.70 5.76 7.70 7.60 6.93 2.75
Cash dividends declared
per
common share........... 1.74 1.74 3.48 3.36 3.00 2.90 2.60
Weighted average common
shares outstanding--
basic.................. 220.4 225.1 223.5 230.6 246.3 268.2 276.1
Weighted average common
shares outstanding--
diluted................ 224.4 229.6 227.3 234.8 250.9 273.0 280.9
</TABLE>
<TABLE>
<CAPTION>
June December 31,
30, ---------------------------------------
1999 1998 1997 1996 1995 1994
------- ------- ------- ------- ------- -------
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Selected Historical
Consolidated Balance Sheet
Information:
Working capital............... $ 1,457 $ 1,198 $ 1,629 $ 4,276 $ 5,451 $ 2,339
Total assets.................. 23,105 23,830 24,040 24,673 23,582 26,545
Total long-term debt and
redeemable preferred stock... 4,116 4,094 4,245 4,230 4,733 5,325
Net stockholders' equity...... 7,694 7,429 7,626 7,954 7,361 8,212
</TABLE>
9
<PAGE>
Selected Historical Financial Information of Union Carbide
Union Carbide is providing the following information to aid your analysis of
the financial aspects of the merger. Union Carbide derived this information
from audited financial statements for the years 1994 through 1998 and unaudited
financial statements for the six months ended June 30, 1998 and 1999. In the
opinion of Union Carbide management, this unaudited interim information
reflects all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of operations and financial
condition for the six months ended June 30, 1998 and 1999. Results for interim
periods should not be considered indicative of results for any other periods or
for the year. This information is only a summary. You should read it along with
Union Carbide's historical financial statements and related notes and the
section titled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in Union Carbide's annual reports, quarterly
reports and other information on file with the Securities and Exchange
Commission and incorporated by reference in this proxy statement/prospectus.
See "Additional Information--Where You Can Find More Information."
<TABLE>
<CAPTION>
Union Carbide
-------------------------------------------------
Six Months
Ended
June 30, Year Ended December 31,
------------- -----------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ------ ------- ------ ------ ------
(in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Historical
Consolidated Statements of
Income Information:
Net sales................... $2,820 $3,020 $5,659 $ 6,502 $6,106 $5,888 $4,865
Earnings before cumulative
effect
of change in accounting
principle.................. 127 260 403 669 583 915 379
Earnings before cumulative
effect
of change in accounting
principle
per common share--basic.... $ 0.95 $ 1.91 $ 2.98 $ 5.02 $ 4.43 $ 6.65 $ 2.51
Earnings before cumulative
effect
of change in accounting
principle
per common share--diluted.. 0.93 1.86 2.91 4.53 3.90 5.85 2.27
Cash dividends declared per
common share............... 0.45 0.45 0.90 0.7875 0.75 0.75 0.75
Weighted average common
shares
outstanding--basic......... 133.0 136.5 135.0 128.2 131.0 137.2 149.9
Weighted average common
shares
outstanding--diluted....... 136.1 140.2 138.4 144.0 151.6 157.9 170.7
</TABLE>
<TABLE>
<CAPTION>
December 31,
June 30, ----------------------------------
1999 1998 1997 1996 1995 1994
-------- ------ ------ ------ ------ ------
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Selected Historical Consolidated
Balance Sheet Information:
Working capital................... $ 600 $ 436 $ 362 $ 595 $ 858 $ 329
Total assets...................... 7,465 7,291 6,964 6,546 6,256 5,028
Total long-term debt.............. 2,044 1,796 1,458 1,487 1,285 899
Total stockholders' equity........ 2,441 2,449 2,348 2,114 2,045 1,509
</TABLE>
10
<PAGE>
Selected Unaudited Pro Forma Combined Condensed Financial Information
The following describes the pro forma effect of the merger on (1) the
unaudited statements of income information for the six months ended June 30,
1998 and 1999 and the statements of income information for the years ended
December 31, 1996, 1997 and 1998 and (2) the unaudited balance sheet
information as of June 30, 1999 and the balance sheet information as of
December 31, 1996, 1997 and 1998 of Dow and Union Carbide.
You should read the unaudited pro forma combined condensed financial
information and the accompanying notes along with the historical financial
information and related notes of Dow and Union Carbide, incorporated by
reference in this proxy statement/prospectus.
The unaudited pro forma combined condensed financial information is provided
for informational purposes only and does not purport to represent what the
financial position and results of operations of the combined company would
actually have been had the merger and other pro forma adjustments in fact
occurred at the dates indicated.
The unaudited pro forma combined condensed statements of income information
and combined condensed balance sheet information illustrate the estimated
effects of the merger as if that transaction had occurred at the beginning of
the periods presented and end of the periods presented, respectively.
Management of Dow and Union Carbide expect that this merger will qualify as
a pooling-of-interests business combination for accounting purposes. Under that
method of accounting, the recorded historical cost basis of the assets and
liabilities of Dow and Union Carbide will be carried forward to the combined
company. Results of operations of the combined company will include income of
Dow and Union Carbide for the entire fiscal period in which the combination
occurs, and the historical results of operations of the separate companies for
fiscal years before the merger will be combined and reported as the results of
operations of the combined company. No adjustments have been made in the
unaudited pro forma combined condensed financial information of Dow and Union
Carbide to conform the accounting policies of the combined company as the
nature and amounts of such adjustments are not expected to be significant. In
addition, no adjustments have been made in the unaudited pro forma combined
condensed financial information for transactions between Dow and Union Carbide
as such transactions were determined to be immaterial.
Some of the conditions to be met to qualify for pooling-of-interests
accounting cannot be fully assessed until specified periods of time after the
effective time of the merger have passed, because certain of the conditions for
pooling-of-interests accounting address transactions occurring within those
specified periods of time. Certain events, including certain transactions in
Dow common stock or Union Carbide common stock by affiliates of Dow and Union
Carbide, respectively, could prevent the merger from qualifying as a pooling-
of-interests for accounting purposes.
11
<PAGE>
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended December 31,
--------------- -----------------------
1999 1998 1998 1997 1996
------- ------- ------- ------- -------
(in millions, except per share data)
<S> <C> <C> <C> <C> <C>
Selected Unaudited Pro Forma Combined
Statements of Income Information:
Net sales.............................. $11,856 $12,706 $24,100 $26,520 $26,159
Earnings before cumulative effect of
change in accounting principle........ 866 1,106 1,707 2,471 2,483
Earnings before cumulative effect of
change in accounting principle per
common share--basic................... $ 2.93 $ 3.66 $ 5.69 $ 8.07 $ 7.75
Earnings before cumulative effect of
change in accounting principle per
common share--diluted................. 2.88 3.59 5.61 7.79 7.44
Weighted average common shares
outstanding--basic.................... 295.6 302.2 299.8 303.2 320.4
Weighted average common shares
outstanding--diluted.................. 301.3 308.7 305.4 315.9 336.1
</TABLE>
<TABLE>
<CAPTION>
December 31,
June 30, -----------------------
1999 1998 1997 1996
-------- ------- ------- -------
(in millions)
<S> <C> <C> <C> <C>
Selected Unaudited Pro Forma Combined Balance
Sheet Information:
Working capital.............................. $ 2,457 $ 2,034 $ 2,391 $ 5,271
Total assets................................. 31,545 32,005 31,878 32,158
Total long-term debt and redeemable preferred
stock....................................... 6,160 5,890 5,703 5,717
Net stockholders' equity..................... 10,535 10,278 10,374 10,468
</TABLE>
12
<PAGE>
RISK FACTORS
In addition to the other information included in this proxy
statement/prospectus, you should carefully consider the following risk factors
in determining whether to vote to adopt the merger agreement. These matters
should be considered in addition to the other information included or
incorporated by reference in this proxy statement/prospectus.
You will receive 0.537 of a share of Dow common stock regardless of changes in
the market value of Dow common stock or Union Carbide common stock.
Upon completion of the merger, each share of Union Carbide common stock will
be exchanged for 0.537 of a share of Dow common stock. Although this exchange
ratio reflects a premium to be paid to Union Carbide stockholders based on the
market price of Union Carbide common stock as of August 3, 1999, the business
day before Dow and Union Carbide announced the proposed merger, the market
value of a share of Union Carbide common stock could be equal to or greater
than the market value of 0.537 of a share of Dow common stock at the effective
time of the merger. In addition, the market value of 0.537 of a share of Dow
common stock at the effective time of the merger could be less than the market
value of that stock on August 3, 1999. There will be no adjustment in the
exchange ratio for changes in the market price of either Union Carbide common
stock or Dow common stock.
Failure to qualify for pooling-of-interests accounting treatment may impact
reported operating results.
If, after completion of the merger, the merger fails to qualify for pooling-
of-interests accounting treatment, the purchase method of accounting will
apply. Under that method, the estimated fair value of the shares of Dow common
stock issued in the merger would be recorded as the cost of acquiring the
business of Union Carbide. That cost would be allocated to the individual Union
Carbide assets acquired and liabilities assumed according to their respective
fair values, with the excess of the estimated fair value of shares of Dow
common stock over the fair value of net assets acquired recorded as goodwill,
to be amortized over its estimated useful life with a maximum of 40 years.
Purchase accounting treatment would have a material adverse effect on the
reported operating results of Dow as compared to pooling-of-interests
accounting treatment because of required charges to Dow's earnings for any
identified in-process research and development, amortization of goodwill and
possible increased depreciation and amortization charges relating to the excess
of fair value of individual assets over their carrying values, as required by
the purchase accounting treatment.
The integration of Union Carbide into Dow may be difficult and expensive to
achieve and may not result in the benefits currently anticipated by Dow and
Union Carbide.
The merger will present challenges to management, including the integration
of the operations, technologies and personnel of Dow and Union Carbide, and
special risks, including possible unanticipated liabilities, unanticipated
costs, diversion of management attention and loss of personnel.
Dow may not be able to successfully integrate or profitably manage Union
Carbide's businesses. Following the merger, Union Carbide's businesses may not
achieve sales levels, profitability or cost savings that justify the investment
made and the acquisition, while expected to be, may not be accretive to
earnings in any future periods. In addition, although the merger is expected to
create an estimated $250 million in synergies in the first year following the
merger and an estimated $500 million in yearly synergies thereafter, there can
be no assurance that those synergies will be achieved.
13
<PAGE>
Expenses resulting from the merger will be substantial and may affect Dow's
results of operations.
Dow and Union Carbide estimate they will incur combined aggregate direct
transaction costs of approximately $75 million associated with the merger,
consisting of transaction fees for investment bankers, attorneys, accountants
and other related costs. These one-time transaction costs will be charged to
expenses upon completion of the merger. It is expected that following the
merger, the combined company will incur additional one-time costs, currently
estimated to be approximately $200 to $400 million, principally for severance
and other restructuring costs. There can be no assurance that the combined
company will not incur additional charges to reflect costs associated with the
merger.
Regulatory agencies enforcing antitrust and similar laws could delay, oppose or
refuse to approve the merger or impose conditions that could have an adverse
effect on the combined company.
If federal and certain regulatory agencies that enforce antitrust and
similar laws oppose or do not approve the merger, the merger may be delayed,
not completed or completed subject to conditions, such as divestitures, that
could have an adverse effect on the combined company. While Dow and Union
Carbide are obligated to use their best efforts to obtain all antitrust
consents, approvals and authorizations, Dow is not obligated to agree to any
conditions that would reasonably be expected to have a material adverse effect
on the combined company. See "The Merger Agreement and the Merger--Conditions
to Completion of the Merger" and "The Merger Agreement and the Merger--
Regulatory Requirements."
THE COMPANIES
The Dow Chemical Company
Dow manufactures and sells chemicals, plastic materials, agricultural and
other specialized products and services. Dow is a global science and
technology-based company that develops and manufactures a portfolio of
chemicals, plastics and agricultural products and services for customers in 168
countries around the world. Dow conducts its operations through subsidiaries
and 14 global businesses, including 121 manufacturing sites in 32 countries,
and supplies more than 3,500 products through the efforts of its 39,000
employees.
Additional information concerning Dow and its subsidiaries is included in
the Dow documents filed with the Securities and Exchange Commission and
incorporated in this proxy statement/prospectus by reference. See "Additional
Information--Where You Can Find More Information."
Union Carbide Corporation
Union Carbide operates in two business segments of the chemicals and
plastics industry. The specialties and intermediates segment converts basic and
intermediate chemicals into a diverse portfolio of chemicals and polymers
serving industrial customers in many markets. This segment also provides
technology services, including licensing, to the oil and gas and petrochemicals
industries. The basic chemicals and polymers segment converts hydrocarbon
feedstocks, principally liquefied petroleum gas and naphtha, into ethylene or
propylene used to manufacture polyethylene, polypropylene, ethylene oxide and
ethylene glycol for sale to third parties, as well as for consumption by Union
Carbide's specialties and intermediates segment. Union Carbide, with nearly
12,000 employees worldwide, operates 32 principal manufacturing facilities in
13 countries to provide products to customers in over 100 countries. In
addition to these operations, Union Carbide participates in the global market
through 10 principal corporate joint ventures and partnerships.
Additional information concerning Union Carbide and its subsidiaries is
included in the Union Carbide documents filed with the Securities and Exchange
Commission and incorporated in this proxy statement/prospectus by reference.
See "Additional Information--Where You Can Find More Information."
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THE MEETING
Purpose of the Meeting
At the meeting, you will be asked to consider and vote upon:
. a proposal to adopt the merger agreement; and
. such other matters as may properly be brought before the meeting.
Union Carbide's board of directors is not aware, as of the date of this
proxy statement/prospectus, of any other matters that may properly come before
the meeting. If any such other matters properly come before the meeting, or at
a subsequent meeting following any adjournment or postponement of the meeting,
the persons named in Union Carbide's proxy intend to vote proxies in accordance
with their discretion on any such matters and, unless other instructions are
given, Union Carbide's proxy will give such persons the power to do so.
Union Carbide's board of directors carefully reviewed and considered the
terms and conditions of the merger and concluded that the merger is in the best
interests of Union Carbide and its stockholders. Accordingly, by a unanimous
vote of all directors present and voting at a meeting at which a quorum of
directors was present, Union Carbide's board of directors adopted the merger
agreement and recommends that you vote to adopt the merger agreement.
Date, Time and Place; Record Date
The meeting of Union Carbide's stockholders will take place on Wednesday,
December 1, 1999 at 10:00 a.m. Eastern time, in the John C. Creasy Health
Education Center, 24 Hospital Avenue, Danbury, Connecticut. The record date to
determine who is entitled to vote at the meeting is Monday, October 4, 1999.
Only holders of record of Union Carbide common stock at the close of business
on the record date are entitled to notice of, and to vote at, the meeting. As
of the record date, approximately 133,850,000 shares of Union Carbide common
stock, and no shares of Union Carbide capital stock other than common stock,
were outstanding and entitled to vote.
The meeting may be adjourned or postponed to another date or place for
proper purposes, including, without limitation, for the purpose of soliciting
additional proxies. Unless revoked, proxies will remain valid following such
adjournment or postponement.
Your Voting Rights; Required Vote
Each stockholder of record on the record date is entitled to one vote on
each matter submitted to a vote at the meeting for each share of Union Carbide
common stock held. A majority of the shares of Union Carbide common stock
outstanding on the record date represented in person, or by proxy, constitutes
a quorum for consideration of such matters at the meeting. Abstentions and
broker non-votes will be counted as present or represented for the purpose of
determining a quorum. If a quorum is present at the meeting, the affirmative
vote of at least two-thirds of the shares of Union Carbide common stock
outstanding and entitled to vote is required to adopt the merger agreement.
Abstentions and broker non-votes will have the effect of votes against the
merger. Accordingly, Union Carbide's board of directors urges you to complete,
sign, date and return the enclosed proxy card in the accompanying self-
addressed stamped envelope or vote by telephone, fax or the Internet as soon as
possible, even if you plan to attend the meeting in person.
If you are a participant in Union Carbide's Dividend Reinvestment and Stock
Purchase Plan, your proxy card will represent both the number of shares
registered in your name and the number of shares credited to your account.
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By the terms of the applicable trust agreements, the trustees of the Savings
and Investment Program for Employees of Union Carbide and the Union Carbide
Employee Stock Ownership Plan will vote stock allocated to individual
participants' accounts as instructed by such participants and will vote any
allocated shares for which instructions are not received and, with respect to
the Employee Stock Ownership Plan all unallocated shares, in the same
proportion as the trustee votes allocated shares for which voting instructions
are received.
If you own stock or maintain multiple accounts under different names, for
example, with and without a middle initial, you may receive more than one set
of proxy statement/prospectus materials. To ensure that all of your shares of
Union Carbide common stock are voted, you must either sign and return by mail
or fax every proxy card you receive or provide your proxy with voting
instructions by telephone or the Internet in the manner listed on each proxy
card.
Confidential Voting
It is Union Carbide's policy to keep confidential proxy cards and voting
tabulations that identify individual stockholders, except where disclosure is
mandated by law or in the event of a contested proxy solicitation. This policy
neither prohibits stockholders from disclosing the nature of their votes to
Union Carbide or its board of directors if any stockholder so chooses nor
impairs free and voluntary communication between Union Carbide and its
stockholders.
Giving and Revoking Your Proxy; Solicitation
Any holder of shares of Union Carbide common stock may vote such shares
either in person or by duly authorized proxy.
You may grant a proxy by:
. signing and mailing your proxy card;
. phoning the toll-free number listed on your proxy card and following the
recorded instructions;
. faxing your proxy card to the fax number listed on your proxy card; or
. going to the Internet website listed on your proxy card and following the
instructions provided.
If your shares are not registered in your own name, the bank, broker or
other institution holding your shares of Union Carbide common stock may not
offer telephone, fax or Internet proxy voting. If your proxy card does not
include telephone, fax or Internet voting instructions, please complete and
return your proxy card by mail. You may also cast your vote in person at the
meeting. By granting a proxy, the proxyholders named on the proxy card will
vote your shares in accordance with your directions. If you grant a proxy and
either indicate that the proxyholder is instructed to vote FOR the adoption of
the merger agreement or if you do not specify how your shares should be voted,
the proxyholders will vote FOR the adoption of the merger agreement and any
amendments to the merger agreement. If any other matters are properly presented
for consideration at the meeting or any adjournments or postponements of the
meeting, the proxyholders will have the discretion to vote as they decide on
those matters. On the date of this proxy statement/prospectus, Union Carbide
knew of no other business that will be presented for action at the meeting.
By Mail
To grant your proxy by mail, please complete the proxy card provided with
this proxy statement/ prospectus and sign, date and return it in the enclosed
envelope. To be valid, a returned proxy card must be signed and dated.
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By Telephone
You may call the toll-free number listed on your proxy card to grant your
proxy. You must have your proxy card ready. Call the toll-free number and:
. enter the control number listed on the proxy card provided with this
proxy statement/prospectus; and
. follow the recorded instructions.
By Fax
You may return your proxy card by fax. To do so, you must complete the proxy
card provided with this proxy statement/prospectus and sign, date and fax it to
the telephone number listed on the proxy card.
By Internet
You may also use the Internet to grant your proxy. You must have your proxy
card ready and:
. go to the website listed on the proxy card provided with this proxy
statement/prospectus and follow the instructions provided; and
. enter the control number listed on the proxy card provided with this
proxy statement/prospectus.
In Person
If you attend the meeting in person, you may vote your shares of Union
Carbide common stock as described above or by completing a ballot at the
meeting. If you plan to attend the meeting, you will need to obtain a ticket.
Please call the toll-free number--1-800-934-3350--and a member of Union
Carbide's Shareholder Services Department will process your ticket request.
Revocation of Proxy
The giving of a proxy by a Union Carbide stockholder will not affect the
stockholder's right to vote such shares if the stockholder attends the meeting
and desires to vote in person. You may revoke a previously submitted proxy at
any time before the polls are closed by delivering written notice of revocation
to the Secretary of Union Carbide at 39 Old Ridgebury Road, Danbury,
Connecticut 06817-0001, by executing a subsequently dated proxy that is
received prior to the meeting or by voting in person at the meeting. Attendance
at the meeting will not by itself constitute revocation of a proxy. If you have
instructed a broker to vote your shares, you must follow directions received
from the broker to change or revoke your proxy.
Solicitation
In addition to soliciting proxies by mail, officers, directors and employees
of Union Carbide, without receiving any additional compensation, may solicit
proxies by telephone, fax, in person or by other means. Arrangements will also
be made with brokerage firms and other custodians, nominees and fiduciaries to
forward proxy solicitation materials to the beneficial owners of Union Carbide
common stock held of record by those persons, and Union Carbide will reimburse
the brokerage firms, custodians, nominees and fiduciaries for reasonable out-
of-pocket expenses incurred by them in connection with the solicitation. Union
Carbide has retained D.F. King & Co., Inc. to assist in the solicitation of
proxies at an estimated cost of $30,000.
No Appraisal Rights
Under New York corporate law, holders of Union Carbide common stock are not
entitled to dissenters' or appraisal rights in connection with the merger.
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THE MERGER AGREEMENT AND THE MERGER
The following is a summary of the material terms of the merger agreement and
is qualified in its entirety by reference to the merger agreement. A copy of
the merger agreement is attached as Annex A to this proxy statement/prospectus
and is incorporated in this proxy statement/prospectus by reference. You should
read the merger agreement because it, and not this proxy statement/prospectus,
is the legal document that governs the merger.
General Description of the Merger
The merger agreement provides that, at the effective time of the merger,
Transition Sub Inc., a wholly owned subsidiary of Dow, will merge with and into
Union Carbide, with Union Carbide continuing in existence as the surviving
corporation. Each share of Union Carbide common stock issued and outstanding at
the effective time of the merger, other than shares owned by Dow, Union Carbide
or any direct or indirect subsidiary of Dow or Union Carbide, which will be
canceled in the merger, will be converted into 0.537 of a share of Dow common
stock. At the effective time of the merger, Union Carbide will become a wholly
owned subsidiary of Dow and market trading of Union Carbide common stock will
cease.
Background of the Merger
Following some informal contacts between the senior managements of Union
Carbide and Dow, on October 19, 1998, Union Carbide and Dow entered into a
confidentiality agreement with the intention of exploring a business
combination between the two companies. After executing the confidentiality
agreement, Union Carbide and Dow exchanged data in order to permit the two
companies to make estimates of synergies with respect to a potential business
combination.
At various times between December 1998 and June 1999, Dow made proposals to
Union Carbide for a stock-for-stock merger. Union Carbide rejected these
proposals, concluding that in each case the proposal was inadequate in light of
the circumstances existing at the time the proposal was made.
At the regularly scheduled meeting of Union Carbide's board of directors on
June 23, 1999, Dr. William H. Joyce, Chairman, President and Chief Executive
Officer of Union Carbide, comprehensively reviewed the Dow discussions. Union
Carbide's board of directors reiterated its dissatisfaction with respect to the
Dow proposals received to date and expressed its confidence with respect to
Union Carbide's independent course. It also reinforced its position on
maximizing stockholder value and authorized Dr. Joyce to respond to unsolicited
overtures. Dr. Joyce reported that an updated long-range financial forecast
with respect to Union Carbide was nearing completion. Union Carbide's board of
directors agreed that the forecast and related valuations would be presented at
the next regularly scheduled meeting of Union Carbide's board of directors. It
was also agreed that Union Carbide should retain financial advisors to aid in
the evaluation of the long-range financial forecast and subsequently engaged
Credit Suisse First Boston to assist Union Carbide in this evaluation and
related matters.
On July 22, 1999, Dr. Joyce and Dr. William S. Stavropoulos, President and
Chief Executive Officer of Dow, met and Dow made a revised proposal for a
stock-for-stock merger. Dr. Joyce agreed to consider the new proposal and to
discuss it with Union Carbide's advisors.
From July 23 through July 25, 1999, Dr. Joyce met with Union Carbide's
senior management, as well as Credit Suisse First Boston and Union Carbide's
legal advisors, Sullivan & Cromwell. After extensive discussions regarding the
strategic benefits of the merger, the potential cost savings, technology
leveraging and other financial and operating benefits that could be obtained
through a merger between the two companies, Union Carbide decided to meet again
with Dow to discuss its proposal.
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On July 25, 1999, Dr. Joyce and Dr. Stavropoulos and their respective senior
managements met to negotiate pricing and terms of due diligence with respect to
a potential transaction. As a result of those negotiations, the parties,
subject to the approval of each company's board of directors, agreed that an
exchange ratio of 0.537 of a share of Dow common stock per share of Union
Carbide common stock would be acceptable if other aspects of a merger agreement
could be worked out. Subject to the favorable reactions of their respective
boards of directors, Dr. Joyce and Dr. Stavropoulos proposed a tentative
schedule for merger agreement negotiations, including the start of due
diligence on July 30, 1999.
On July 27, 1999, Union Carbide's board of directors met, together with
Union Carbide's legal and financial advisors, to review the status of
discussions with Dow. At this meeting, Dr. Joyce summarized the proposed
combination, and John K. Wulff, Union Carbide's Chief Financial Officer,
presented management's long-range financial forecast with respect to Union
Carbide.
Also on July 27, 1999, Dow's board of directors, which had previously been
advised of the discussions between Dow and Union Carbide, met to discuss the
proposed transaction with Union Carbide. At that meeting, Dow's board of
directors authorized Dow's senior management to continue negotiations with
respect to the proposed transaction, subject to approval by the board of any
agreements that might be reached in those discussions.
On July 28, 1999, Union Carbide's board of directors met again.
Representatives of Union Carbide's financial advisors, Credit Suisse First
Boston, reviewed with Union Carbide's board of directors the financial aspects
of the proposed transaction. Representatives from Sullivan & Cromwell provided
advice as to the responsibilities and duties of the board of directors and the
legal standards that would govern Union Carbide's board of directors'
consideration of any proposed transaction. Union Carbide's management
recommended proceeding to detailed negotiations of a definitive merger
agreement. The Union Carbide board of directors, after discussing the matter,
unanimously voted to authorize management to commence detailed negotiations of
a definitive merger agreement.
From July 30 to August 3, 1999, senior management of both companies and
their respective legal and financial advisors met in New York City, performing
due diligence and negotiating definitive terms of the merger agreement. At
Dow's insistence and subject to the approval of Union Carbide's board of
directors, Union Carbide agreed to enter into a stock option agreement at the
same time it entered into a definitive merger agreement. The stock option
agreement would grant Dow the right to purchase up to 19.9% of Union Carbide's
stock at a specified price and upon specified events. See "The Merger Agreement
and the Merger--The Stock Option Agreement."
On August 3, 1999, Union Carbide's board of directors met to consider the
merger agreement. Representatives of Sullivan & Cromwell reviewed the merger
agreement. Representatives of Credit Suisse First Boston presented a financial
analysis of the proposed exchange ratio, and rendered to Union Carbide's board
of directors its oral opinion, which opinion was confirmed by delivery of a
written opinion dated August 3, 1999, to the effect that, as of that date and
based on and subject to the matters described in its opinion, the exchange
ratio was fair, from a financial point of view, to the holders of Union
Carbide's common stock. After questions by and discussion among Union Carbide's
board of directors, Union Carbide's board of directors, by a unanimous vote of
the directors present and voting, adopted the merger agreement and approved
entering into the merger agreement and stock option agreement and the
transactions contemplated by those agreements.
Also on August 3, 1999, Dow's board of directors met to consider the merger
agreement and the stock option agreement. After hearing presentations from its
legal and financial advisors and discussing the matter, Dow's board of
directors unanimously approved entering into the merger agreement and the stock
option agreement and the transactions contemplated by those agreements.
Union Carbide and Dow entered into the merger agreement and stock option
agreement on August 3, 1999, and the transaction was publicly announced on
August 4, 1999.
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Merger-Related Litigation
Union Carbide, its board of directors and Dow have been named as defendants
in three purported class actions recently filed in New York State Supreme Court
on behalf of holders of Union Carbide's common stock. The complaints generally
allege that the merger consideration is inadequate because, among other things,
it did not result from an appropriate consideration of the value of Union
Carbide and, therefore, the approval of the merger did not reflect an informed
decision of Union Carbide's board of directors. The complaints, which seek
injunctive relief and damages, assert that the directors of Union Carbide
thereby violated their fiduciary duties to Union Carbide's stockholders and
that Dow aided and abetted these violations. One of the complaints also alleges
that one of the Union Carbide directors had a conflict of interest with respect
to the approval of the transaction. It is expected that an amended complaint
will be filed that will consolidate the three actions.
Recommendation of Union Carbide's Board of Directors and Reasons for the Merger
Union Carbide's board of directors has adopted, by a unanimous vote of all
of the directors present and voting at a meeting at which a quorum of directors
was present, the merger agreement, and recommends that Union Carbide
stockholders vote to adopt the merger agreement.
In reaching its decision to adopt the merger agreement, Union Carbide's
board of directors consulted with Union Carbide's management, as well as its
financial and legal advisors, and considered a variety of factors, including
the following:
. the structure of the transaction as a stock-for-stock merger and that
Union Carbide's stockholders will continue to benefit from future
appreciation in the value of the combined company;
. the premium of approximately 37% to be received by the stockholders of
Union Carbide based on the exchange ratio provided for in the merger
agreement and the closing stock prices of Union Carbide and Dow on August
3, 1999, the last trading day before the announcement of the merger, and
the premium of approximately 41% based on the average closing stock
prices of Union Carbide and Dow during the one-month period before the
announcement of the merger;
. that during recent years Union Carbide has periodically reviewed its
strategic alternatives and that Union Carbide's board of directors
believed the merger with Dow to be the most favorable alternative for
Union Carbide's stockholders;
. the anticipated benefit to Union Carbide's stockholders of the
anticipated reduced earnings cyclicality of the combined company's
business portfolio;
. Union Carbide's board of directors' belief that the increased scale of
the combined company will:
--strengthen Union Carbide's operations as the chemicals industry
continues to consolidate and build mass;
--provide greater flexibility to pursue acquisitions and other strategic
options; and
--provide the combined company with greater access to capital than
available to Union Carbide on a stand-alone basis;
. the business, operations, financial condition, earnings and prospects of
each of Union Carbide and Dow--in making its determination, Union
Carbide's board of directors took into account Union Carbide's long-range
financial forecasts and the results of Union Carbide's due diligence
review of Dow's business plan;
. the scale, scope and diversity of operations and product lines that could
be achieved by combining Union Carbide and Dow, as illustrated by the
fact that, based on information available as of the date of the merger
agreement, the combined company would have a market capitalization of
approximately $35 billion and annual revenue of approximately $24 billion
and would be the second largest chemical company in the world;
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. the opportunity to capitalize on numerous opportunities for revenue
growth by offering more products to existing customers more quickly on a
global basis;
. the complementary nature of the businesses of Union Carbide and Dow and
the anticipated improved stability of the combined company's businesses
and earnings in varying economic and industry climates relative to Union
Carbide on a stand-alone basis made possible by the merger as a result of
greater geographic and product line diversification;
. the expectation that the merger will result in synergies for the combined
company estimated at $250 million in the first year following the merger
and $500 million per year thereafter;
. the structure of the merger, which is intended to qualify as a tax-free
"reorganization" for U.S. federal income tax purposes and a "pooling-of-
interests" for accounting purposes;
. the proposed arrangements with respect to employees and the management of
the combined company, including the fact that Dr. Joyce and one other
director serving on Union Carbide's board of directors will serve on
Dow's board of directors and that Dr. Joyce will serve as Vice Chairman
of the board of directors of Dow--see "The Merger Agreement and the
Merger--Interests of Union Carbide Directors and Officers in the Merger
that are Different from Your Interests;"
. the likelihood of the merger being approved by the applicable regulatory
authorities, including the parties' obligations to use their respective
best efforts to obtain all required antitrust approvals, although Dow is
not required to, and Union Carbide may not, divest, license or hold
separate any assets if doing so would have a material adverse effect on
the combined company--see "The Merger Agreement and the Merger--
Regulatory Requirements;"
. the opinion of Credit Suisse First Boston to Union Carbide's board of
directors as to the fairness, from a financial point of view, of the
exchange ratio to the holders of Union Carbide common stock and the
related financial analyses performed by Credit Suisse First Boston, as
described below under "The Merger Agreement and the Merger--Opinion of
Union Carbide's Financial Advisor;"
. that the merger agreement must be adopted by the holders of two-thirds of
the outstanding shares of Union Carbide;
. the terms of the merger agreement, including the term that permits Union
Carbide's board of directors to take the steps necessary to accept a
superior proposal in compliance with its fiduciary duties to
stockholders;
. that the termination payment provisions of the merger agreement could
have the effect of deterring alternative business combination proposals
and that the stock option agreement, which would have the effect of
precluding any alternative business combination from being accounted for
as a pooling-of-interests, might deter certain potential acquirors--Union
Carbide's board of directors determined that agreement to these
provisions, which it regarded as customary for transactions of this
nature, was required for Dow to enter into the merger agreement; and
. the possibility that the market value of the merger consideration
received by Union Carbide's stockholders upon completion of the merger
(which is determined by a fixed exchange ratio) may be higher or lower
than the value that would have been received if the merger had been
consummated on the date the merger agreement was executed.
This discussion of the information and factors considered by Union Carbide's
board of directors is not intended to be exhaustive but includes all material
factors considered by Union Carbide's board of directors. In reaching its
determination to adopt and recommend the merger, Union Carbide's board of
directors did not assign any relative or specific weights to those factors, and
individual directors may have given differing weights to differing factors.
Union Carbide's board of directors has adopted, by a unanimous vote of all
directors present and voting at a meeting at which a quorum of directors was
present, the merger agreement, and recommends that you vote to adopt the merger
agreement at the meeting. Among the directors present for such vote was Rainer
E. Gut, chairman of the Credit Suisse Group, the indirect parent company of
Credit Suisse First Boston. At the time of the vote, Union Carbide's board of
directors was aware of Mr. Gut's affiliation with the Credit Suisse Group.
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In considering the recommendation of Union Carbide's board of directors with
respect to the merger agreement, you should be aware that certain directors and
officers of Union Carbide have interests in the merger that are different from,
or are in addition to, the interests of Union Carbide stockholders generally.
Please see the section of this proxy statement/prospectus titled "The Merger
Agreement and the Merger--Interests of Union Carbide Directors and Officers in
the Merger that are Different from Your Interests."
Dow's Reasons for the Merger
The merger is part of Dow's overall business strategy for growth through
increased sales of existing products, product development, and strategic
mergers and acquisitions. Dow's board of directors believes that Dow and its
stockholders will benefit from the merger because the merger:
. will combine two predominantly complementary chemical producers to
achieve a broader product line and geographic scope than either of them
individually possesses;
. is expected to enhance the ability of the combined company to maintain
its competitiveness through efficiency and reduced costs in the face of
marketplace pressures for lower cost and higher quality chemical
products;
. is expected to produce an estimated $250 million in synergies in the
first year following the merger and $500 million in synergies per year
thereafter, which should translate into increased cash flow and earnings
per share for the combined company;
. is expected to provide the combined company with greater technological
resources required to meet increasing and evolving customer demands for
higher performance chemical products;
. is expected to increase the combined company's array of chemical
products, permitting multinational customers to achieve purchasing
efficiencies through one-stop shopping;
. is expected to strengthen Dow's product offerings to customers in such
industries as automotive, pharmaceuticals, coatings and personal care
products; and
. is expected to strengthen the combined company's balance sheet, which
will permit the combined company to fund strategic investments.
Opinion of Union Carbide's Financial Advisor
Credit Suisse First Boston has acted as Union Carbide's financial advisor in
connection with the merger. Union Carbide selected Credit Suisse First Boston
based on Credit Suisse First Boston's experience, expertise and reputation and
familiarity with Union Carbide's business. Credit Suisse First Boston is an
internationally recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes.
In connection with Credit Suisse First Boston's engagement, Union Carbide
requested that Credit Suisse First Boston evaluate the fairness, from a
financial point of view, to the holders of Union Carbide common stock of the
exchange ratio provided for in the merger. On August 3, 1999, at a meeting of
Union Carbide's board of directors held to consider the merger, Credit Suisse
First Boston rendered to Union Carbide's board of directors an oral opinion,
which opinion was confirmed by delivery of a written opinion dated August 3,
1999, to the effect that, as of that date and based on and subject to the
matters described in its opinion, the exchange ratio was fair, from a financial
point of view, to the holders of Union Carbide common stock.
The full text of Credit Suisse First Boston's written opinion dated August
3, 1999 to Union Carbide's board of directors, which sets forth the procedures
followed, assumptions made, matters considered and limitations on the review
undertaken, is attached as Annex B and is incorporated by reference into this
proxy statement/prospectus. Union Carbide stockholders are urged to read
carefully this opinion in its entirety. Credit
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Suisse First Boston's opinion is addressed to Union Carbide's board of
directors and relates only to the fairness of the exchange ratio from a
financial point of view. The opinion does not address any other aspect of the
proposed merger or any related transaction and does not constitute a
recommendation to any stockholder as to any matter relating to the merger. The
summary of Credit Suisse First Boston's opinion in this proxy
statement/prospectus is qualified in its entirety by reference to the full text
of the opinion.
In arriving at its opinion, Credit Suisse First Boston reviewed the merger
agreement and related documents, as well as publicly available business and
financial information relating to Union Carbide and Dow. Credit Suisse First
Boston also reviewed other information relating to Union Carbide and Dow,
including financial forecasts, which Union Carbide and Dow provided to or
discussed with Credit Suisse First Boston, and met with the managements of
Union Carbide and Dow to discuss the businesses and prospects of Union Carbide
and Dow.
Credit Suisse First Boston also considered financial and stock market data
of Union Carbide and Dow and compared those data with similar data for other
publicly held companies in businesses similar to Union Carbide and Dow and
considered, to the extent publicly available, the financial terms of other
business combinations and other transactions recently effected. Credit Suisse
First Boston also considered other information, financial studies, analyses and
investigations and financial, economic and market criteria that it deemed
relevant.
In connection with its review, Credit Suisse First Boston did not assume any
responsibility for independent verification of any of the information that was
provided to or otherwise reviewed by it and relied on that information being
complete and accurate in all material respects. With respect to financial
forecasts, Credit Suisse First Boston was advised, and assumed, that the
forecasts were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of Union Carbide and Dow
as to the future financial performance of Union Carbide and Dow and the
potential synergies and strategic benefits anticipated to result from the
merger, including the amount, timing and achievability of those synergies and
benefits. Credit Suisse First Boston also assumed that the merger will be
treated as a pooling-of-interests in accordance with generally accepted
accounting principles and as a tax-free reorganization for U.S. federal income
tax purposes. In addition, Credit Suisse First Boston assumed that in the
course of obtaining the necessary regulatory and third party consents for the
proposed merger and related transactions, no delay or restriction will be
imposed that will have a material adverse effect on the contemplated benefits
of the proposed merger or related transactions.
Credit Suisse First Boston was not requested to, and did not, make an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of Union Carbide or Dow, and was not furnished with any evaluations
or appraisals. Credit Suisse First Boston's opinion was based on information
available to, and financial, economic, market and other conditions as they
existed and could be evaluated by, Credit Suisse First Boston on the date of
its opinion. Credit Suisse First Boston did not express any opinion as to the
actual value of Dow common stock when issued in the merger or the prices at
which shares of Dow common stock will trade after the merger. In connection
with its engagement, Credit Suisse First Boston was not requested to, and did
not, solicit third party indications of interest in the possible acquisition of
all or a part of Union Carbide. Although Credit Suisse First Boston evaluated
the exchange ratio from a financial point of view, Credit Suisse First Boston
was not requested to, and did not, recommend the specific consideration payable
in the merger, which consideration was determined by Union Carbide and Dow. No
other limitations were imposed on Credit Suisse First Boston with respect to
the investigations made or procedures followed in rendering its opinion.
In preparing its opinion to Union Carbide's board of directors, Credit
Suisse First Boston performed a variety of financial and comparative analyses,
including those described below. This summary of Credit Suisse First Boston's
analyses is not a complete description of the analyses underlying Credit Suisse
First Boston's opinion. The preparation of a fairness opinion is a complex
analytical process involving various determinations as to the most appropriate
and relevant methods of financial analysis and the application of those methods
to the particular circumstances, and, therefore, a fairness opinion is not
readily susceptible to summary description. In arriving at its opinion, Credit
Suisse First Boston made qualitative judgments as to the
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significance and relevance of each analysis and factor that it considered.
Accordingly, Credit Suisse First Boston believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors
or focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, could create
a misleading or incomplete view of the processes underlying its analyses and
opinion.
In its analyses, Credit Suisse First Boston considered industry performance,
regulatory, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Union Carbide and Dow.
No company, transaction or business used in Credit Suisse First Boston's
analyses as a comparison is identical to Union Carbide or Dow or the proposed
merger, and an evaluation of the results of those analyses is not entirely
mathematical. Rather, the analyses involve complex considerations and judgments
concerning financial and operating characteristics and other factors that could
affect the acquisition, public trading or other values of the companies,
business segments or transactions analyzed.
The estimates contained in Credit Suisse First Boston's analyses and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than those suggested by the
analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, Credit Suisse First
Boston's analyses and estimates are inherently subject to substantial
uncertainty.
Credit Suisse First Boston's opinion and financial analyses were not the
only factors considered by Union Carbide's board of directors in its evaluation
of the proposed merger and should not be viewed as necessarily determinative of
the views of Union Carbide's board of directors with respect to the merger or
the exchange ratio.
The following is a summary of the material analyses underlying Credit Suisse
First Boston's opinion to Union Carbide's board of directors in connection with
the merger. The financial analyses summarized below include information
presented in tabular format. In order to fully understand Credit Suisse First
Boston's financial analyses, the tables must be read together with the text of
each summary. The tables alone do not constitute a complete description of the
financial analyses. Considering the data set forth in the tables below without
considering the full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of Credit Suisse First Boston's financial
analyses.
Discounted Cash Flow Analysis
Credit Suisse First Boston estimated the present value of the stand-alone,
unlevered, after-tax free cash flows that Union Carbide could produce over
calendar years 1999 through 2008, and that Dow could produce over calendar
years 1999 through 2003, based on two scenarios. The first scenario, the
management case, was based on estimates of the managements of Union Carbide and
Dow. The second scenario, the adjusted management case, was based on
adjustments to the management case developed by, or discussed with and reviewed
by, Union Carbide management to reflect, among other things, the potential for
lower variable margins, and in the case of Union Carbide higher capital
expenditures, than the management case.
Ranges of estimated terminal values were calculated by multiplying the
average of estimated calendar year 1999 to estimated calendar year 2008
earnings before interest, taxes, depreciation and amortization, commonly
referred to as EBITDA, by terminal EBITDA multiples of 6.0x to 7.0x in the case
of Union Carbide and by multiplying the average of estimated calendar year 1999
to estimated calendar year 2003 EBITDA by terminal EBITDA multiples of 7.0x to
8.0x in the case of Dow. Ranges of estimated terminal values were also
calculated using the average of estimated unlevered, after-tax free cash flows
over the same periods for Union
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Carbide and Dow as above and perpetuity growth rates of 1.5% to 2.5% in the
case of Union Carbide and 4.0% to 4.5% in the case of Dow. The estimated
unlevered after-tax free cash flows and estimated terminal values were then
discounted to present value using discount rates of 10.0% to 11.0%. This
analysis indicated an implied exchange ratio reference range of 0.43x to 0.68x.
Selected Companies Analysis
Credit Suisse First Boston compared financial, operating and stock market
data of Union Carbide and Dow to corresponding data of the following publicly
traded companies in the commodity chemicals business:
. The Geon Company
. Georgia Gulf Corp.
. Lyondell Chemical Co.
. Millennium Chemicals Inc.
. NOVA Chemicals Corp.
In addition, Credit Suisse First Boston compared financial, operating and
stock market data of Union Carbide to corresponding data of the following
publicly traded companies in the commodity and specialty chemicals businesses:
. Cytec Industries Inc.
. E.I. du Pont de Nemours and Company
. Eastman Chemical Co.
. PPG Industries, Inc.
. Rohm and Haas Co.
. Solutia Inc.
Credit Suisse First Boston reviewed equity values as a multiple of estimated
calendar years 1999 and 2000 earnings per share, commonly referred to as EPS,
and enterprise values, calculated as equity value, plus debt and minority
interest, less cash and options proceeds, as multiples of estimated calendar
years 1999 and 2000 EBITDA and latest 12 months revenues. All multiples were
based on closing stock prices on August 2, 1999. Estimated financial data for
the selected companies were based on publicly available research analysts'
estimates, and estimated financial data for Union Carbide and Dow were based on
internal estimates of the managements of Union Carbide and Dow, respectively.
Credit Suisse First Boston then applied a range of selected multiples for the
selected companies of estimated calendar years 1999 and 2000 EPS, estimated
calendar years 1999 and 2000 EBITDA, and the latest 12 months revenues to
corresponding financial data of Union Carbide and Dow, utilizing adjusted
management case estimates for Union Carbide and Dow. This analysis indicated an
implied exchange ratio reference range of 0.30x to 0.47x.
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Selected Mergers and Acquisitions Analysis
Credit Suisse First Boston analyzed the implied transaction multiples paid
in the following selected merger and acquisition transactions in the commodity
chemicals industry announced since April 1998:
Acquiror Acquired Company
. OMV/International Petroleum . Borealis Technology Corp.
Investment Co. . ARCO Chemical Co.
. Lyondell Chemical Co. . Rexene Corp.
. Huntsman Polymers Corp. . Texaco Chemical Company
. Huntsman Polymers Corp. . Quantum Chemical Corp.
. Hanson America Inc. . Goodyear Tire & Rubber Co.
. Shell Oil Co. (Polyester division)
. Occidental Petroleum Corp. . Cain Chemical Inc.
. The Sterling Group, Inc./The . Sterling Chemicals, Inc.
Unicorn Group, LLC . Texas Petrochemicals Corp.
. Gordon Cain (The Sterling Group, . Petroquimica Bahia Blanca/Indupa
Inc.) . Occidental Chemical Co. (Alathon
. Dow/YPF S.A./Itochu Corp. product line)
. Lyondell Chemical Co. . Vista Chemical Co.
. RWE-DEA . Aristech Chemical Corp.
. Management . Himont Inc.
. Montedison SPA . Rexene Products Co. (Bayport
. Lyondell Chemical Co. product lines)
Credit Suisse First Boston compared enterprise values in the selected
transactions as multiples of, among other things, latest 12 months revenues and
EBITDA. All multiples were based on publicly available financial information.
Credit Suisse First Boston then applied a range of selected multiples for the
selected transactions of latest 12 months revenues and EBITDA to corresponding
financial data of Union Carbide and Dow. This analysis indicated an implied
exchange ratio reference range of 0.31x to 0.54x.
Aggregate Reference Range
Based on the valuation methodologies described above, Credit Suisse First
Boston derived an aggregate reference range of 0.43x to 0.60x, as compared to
the exchange ratio in the merger of 0.537x.
Relative Analyses
Credit Suisse First Boston also conducted the following relative analyses
and compared the exchange ratio in the merger of 0.537x with the exchange
ratios implied by these analyses, based on closing stock prices of Union
Carbide common stock and Dow common stock on August 2, 1999:
Relative Contribution Analysis
Credit Suisse First Boston performed an exchange ratio analysis, based on
adjusted management case estimates of Union Carbide and Dow, comparing the
relative contributions of Union Carbide and Dow to calendar year 1998 and
estimated calendar years 1999 and 2000 net income and cash flows of the
combined company. This analysis yielded, after adjustment for extraordinary
items, an implied exchange ratio reference range of 0.293x to 0.433x and an
implied percentage contribution reference range for Union Carbide of 16% to
21%, as indicated in the following table:
<TABLE>
<CAPTION>
Union Carbide Dow Implied
Percentage Contribution Percentage Contribution Exchange Ratios
----------------------- ----------------------- ---------------
<S> <C> <C> <C>
Net Income:
1998.................... 18% 82% 0.344x
1999.................... 19% 81% 0.383x
2000.................... 16% 84% 0.293x
Cash Flow:
1998.................... 21% 79% 0.433x
1999.................... 21% 79% 0.423x
2000.................... 20% 80% 0.394x
</TABLE>
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Historical Stock Trading Analysis
Credit Suisse First Boston performed an exchange ratio analysis comparing
the average daily closing stock prices for Union Carbide common stock and Dow
common stock on August 2, 1999, and during the one-week, one-month, three-
month, six-month, one-year and two-year periods preceding August 2, 1999, and
the premiums over those periods implied by the exchange ratio in the merger.
This comparison yielded an implied exchange ratio reference range of 0.377x
to 0.483x and an implied premium reference range of 11.2% to 42.6%, as
indicated in the following table:
<TABLE>
<CAPTION>
Implied Premium at
Period Implied Exchange Ratio Merger Exchange Ratio
------ ---------------------- ---------------------
<S> <C> <C>
August 2, 1999.............. 0.385x 39.3%
One week preceding.......... 0.386x 39.2%
One month preceding......... 0.377x 42.6%
Three months preceding...... 0.396x 35.5%
Six months preceding........ 0.422x 27.1%
One year preceding.......... 0.450x 19.3%
Two years preceding......... 0.483x 11.2%
</TABLE>
Pro Forma Merger Analysis
Credit Suisse First Boston analyzed the potential pro forma effect of the
merger on Dow's estimated EPS and cash flows for calendar years 2000 and 2001,
based on publicly available research analysts' estimates, both before and after
giving effect to potential cost savings and other synergies anticipated by the
management of Union Carbide to result from the merger. Based on the exchange
ratio in the merger of 0.537x, this analysis indicated that the merger would be
accretive with synergies and dilutive without synergies on an EPS basis, and
accretive both with and without synergies on a cash flow basis, in each of the
years analyzed. The actual results achieved by the combined company may vary
from projected results and the variations may be material.
Other Factors
In the course of preparing its opinion, Credit Suisse First Boston also
reviewed and considered other information and data, including:
. the trading characteristics of Union Carbide common stock and Dow common
stock;
. the earnings performance of Dow and price-to-earnings and EBITDA
multiples of Dow relative to selected companies in the chemical industry;
. equity research coverage of Dow;
. the pro forma capitalization of Union Carbide and Dow; and
. selected market premium data in selected transactions announced in 1998
and 1999 with transaction values of $5.0 billion to $15.0 billion.
Miscellaneous
Union Carbide has agreed to pay Credit Suisse First Boston for its financial
advisory services upon completion of the merger an aggregate fee equal to 0.17%
of the total consideration, including liabilities assumed, payable in the
merger. Union Carbide also has agreed to reimburse Credit Suisse First Boston
for its reasonable out-of-pocket expenses, including reasonable fees and
expenses of legal counsel and any other advisor retained by Credit Suisse First
Boston, and to indemnify Credit Suisse First Boston and related parties against
liabilities, including liabilities under the federal securities laws, arising
out of its engagement.
Credit Suisse First Boston and its affiliates have in the past provided
financial services to Union Carbide and its affiliates and to Dow and its
affiliates unrelated to the proposed merger, for which services Credit Suisse
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First Boston and its affiliates have received compensation, and are currently
providing financial services to Union Carbide and its affiliates unrelated to
the proposed merger. The Chairman of the board of directors of Credit Suisse
Group, the indirect parent company of Credit Suisse First Boston, is a director
of Union Carbide and beneficially owns shares of Union Carbide common stock. In
the ordinary course of business, Credit Suisse First Boston and its affiliates
may actively trade the debt and equity securities of both Union Carbide and Dow
for their own accounts and for the accounts of customers and, accordingly, may
at any time hold long or short positions in such securities.
Structure of the Merger
At the effective time of the merger, Transition Sub will merge with and into
Union Carbide, and the separate corporate existence of Transition Sub will end.
Union Carbide will be the surviving corporation in the merger and a wholly
owned subsidiary of Dow, and will continue to be a New York corporation after
the merger.
The certificate of incorporation of Union Carbide, as amended pursuant to
the merger agreement, and the bylaws of Transition Sub immediately before the
effective time of the merger will be the certificate of incorporation and
bylaws of the surviving corporation at the effective time of the merger until
duly amended. The directors of Transition Sub at the effective time of the
merger will be the directors of the surviving corporation until their
successors have been duly elected or appointed or qualified or until their
earlier death, resignation or removal. Some of the officers of Union Carbide at
the effective time of the merger will be the officers of the surviving
corporation until their successors have been duly elected or appointed or
qualified or until their earlier death, resignation or removal.
When the Merger Becomes Effective
Transition Sub and Union Carbide will execute and file with the New York
Department of State and the Delaware Secretary of State certificates of merger
as soon as practicable after the second business day on which the last of the
closing conditions to the completion of the merger is fulfilled or waived or
such other time and date as they may agree. The merger will become effective at
the time and on the date on which the certificates of merger are filed with the
New York Department of State and the Delaware Secretary of State or such other
time upon which the parties agree and specify in the certificates of merger.
That time is the "effective time of the merger."
Conversion of Stock, Stock Options and Other Awards
At the effective time of the merger:
. each outstanding share of Union Carbide common stock, including shares of
Union Carbide common stock held under Union Carbide's Dividend
Reinvestment and Stock Purchase Plan, the Savings and Investment Program
for Employees of Union Carbide and Union Carbide's Employee Stock
Ownership Plan, but not including shares of Union Carbide common stock
owned by Dow, Union Carbide or any direct or indirect subsidiary of Dow
or Union Carbide, will be converted into 0.537 of a share of Dow common
stock;
. shares of Union Carbide common stock owned by Dow, Union Carbide or any
direct or indirect subsidiary of Dow or Union Carbide will be canceled;
and
. Union Carbide will become a wholly owned subsidiary of Dow.
If, before the effective time of the merger, the issued and outstanding
shares of Dow common stock are changed into a different number of shares as a
result of a reclassification, stock split, reverse stock split, stock dividend
or stock distribution, an appropriate adjustment will be made to the number or
kind of shares of Dow common stock that Union Carbide stockholders are to
receive in the merger.
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At the effective time of the merger, Union Carbide's Dividend Reinvestment
and Stock Purchase Plan will terminate and Union Carbide stockholders' accounts
in and dividend reinvestment instructions under the plan will automatically be
transferred to and governed by the terms of the Dow Dividend Reinvestment
Program. Some of the provisions of the two plans differ. If you participate in
Union Carbide's plan, we will send to you, prior to the effective time of the
merger, information about Dow's plan. If you participate in Union Carbide's
plan, but do not wish to participate in Dow's plan, you must terminate your
participation in Union Carbide's plan prior to the effective time of the merger
by following the instructions contained in the materials sent with the
information referred to above.
Each option to purchase Union Carbide common stock granted under Union
Carbide's stock plans that is outstanding and unexercised as of the effective
time of the merger will vest and will be converted automatically at the
effective time of the merger into, and will become, a fully vested option to
purchase 0.537 of a share of Dow common stock for each share of Union Carbide
common stock covered by the option before the merger. After conversion, the
exercise price per Dow common share subject to each option will equal its pre-
conversion exercise price per share of Union Carbide common stock, subject to
such option divided by 0.537. The number of share units and phantom equity
awards under Union Carbide's compensation and benefit plans and restricted
stock outstanding will be similarly converted.
For a description of Dow's common stock and a description of the differences
between the rights of holders of Dow common stock and Union Carbide common
stock, see "Comparison of Rights of Dow Stockholders and Union Carbide
Stockholders."
Fractional Shares
No fractional shares of Dow common stock will be issued in the merger other
than fractional shares to be received by participants in Union Carbide's
Dividend Reinvestment and Stock Purchase Plan and employee benefits plans.
Instead of issuing fractional shares of Dow common stock, Dow will pay cash,
without interest, in an amount equal to such fraction, rounded to the nearest
one-hundredth of a share, multiplied by the closing price per share of Dow
common stock as reported in The Wall Street Journal, New York City edition, on
the trading day immediately before the effective time of the merger.
Exchange Procedures
As of the effective time of the merger, Dow will deposit, or will cause to
be deposited, with the exchange agent, for the benefit of Union Carbide
stockholders, sufficient shares of Dow common stock to be issued and, after the
effective time of the merger, any cash instead of fractional shares, dividends
or other distributions to be issued or paid pursuant to the merger agreement in
exchange for outstanding Union Carbide common stock.
At the effective time of the merger, the stock transfer books of Union
Carbide will be closed and no further issuances or transfers of shares of Union
Carbide common stock will be made. If, after the effective time, valid Union
Carbide stock certificates are presented to the surviving corporation for any
reason, they will be canceled and exchanged as described above to the extent
allowed by applicable law.
If you have a Union Carbide stock certificate, then promptly after the
merger takes place, the exchange agent will send you a letter of transmittal
for you to use in surrendering your Union Carbide common stock certificates for
shares of Dow common stock. You should not send in your Union Carbide common
stock certificates until you receive the letter of transmittal. If you own
Union Carbide common stock through a broker, Union Carbide's Dividend
Reinvestment and Stock Purchase Plan, Union Carbide's employee benefit plans or
other arrangement where you do not hold a Union Carbide certificate, then your
stock will be converted to Dow common stock without any action by you, subject
to adjustment to reflect the exchange ratio.
If any certificates for shares of Dow common stock are to be issued in a
name other than that in which the Union Carbide stock certificate surrendered
in exchange therefor is registered, the person requesting such
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exchange must (1) pay to Dow or any agent designated by it any transfer or
other taxes required by reason thereof or (2) establish to the satisfaction of
Dow or any agent designated by it that such tax has been paid or is not
applicable.
The exchange agent will deduct and withhold from the consideration otherwise
payable pursuant to the merger agreement such amounts as the exchange agent is
required to deduct and withhold under the Internal Revenue Code, or any
provision of state, local or foreign tax law, with respect to the making of
such payment. To the extent that amounts are withheld by the exchange agent,
the withheld amounts shall be treated for purposes of the merger agreement as
having been paid to the person in respect of whom the deduction and withholding
was made by the exchange agent.
If you have a Union Carbide stock certificate, then until you surrender that
certificate for exchange after the effective time of the merger, dividends or
other distributions declared and with a record date after the effective time of
the merger will accrue, but will not be paid, with respect to shares of Dow
common stock into which your shares of Union Carbide common stock have been
converted. When you surrender your certificates, any unpaid dividends or other
distributions will be paid. No interest will be paid or accrued on cash to be
paid instead of fractional shares, unpaid dividends and distributions, if any,
payable to holders of Union Carbide common stock certificates. Registered
holders of unsurrendered Union Carbide common stock certificates, subject to
applicable abandoned property, escheat or similar laws, will be entitled to
vote after the effective time of the merger at any meeting of Dow stockholders
with a record date at or after the effective time of the merger the number of
whole shares of Dow common stock represented by such Union Carbide common stock
certificates, regardless of whether such holders have exchanged their Union
Carbide common stock certificates. None of Dow, Union Carbide, Transition Sub
or the exchange agent, or any other person, will be liable to any holder or
former holder or their heirs of Union Carbide common stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
If a certificate for Union Carbide common stock has been lost, stolen or
destroyed, the exchange agent will issue the consideration properly payable in
accordance with the merger agreement upon receipt of: appropriate evidence as
to such loss, theft or destruction; appropriate evidence as to the ownership of
such certificate by the claimant; and appropriate and customary
indemnification.
Representations and Warranties
The merger agreement contains representations and warranties of each of
Union Carbide, Dow and Transition Sub as to, among other things:
. the corporate organization, existence and good standing of it and its
subsidiaries;
. its capitalization;
. its corporate power and authority to execute, deliver and perform the
merger agreement and the stock option agreement and to complete the
merger;
. the absence of any required governmental and third-party approvals other
than those specified in the merger agreement;
. the accuracy of its financial statements and filings with the Securities
and Exchange Commission;
. the absence of certain changes in its business since December 31, 1998;
. the absence of litigation and liabilities, except for certain tax
matters;
. its compliance with applicable law;
. the absence of any actions that would prevent the merger from being
treated as a pooling-of-interests from an accounting standpoint and as a
tax-free reorganization under the Internal Revenue Code;
. its timely filing of all tax returns and payment of all taxes;
. the absence of undisclosed brokers and finders; and
. its preparedness with respect to Year 2000 compliance.
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The merger agreement also contains representations and warranties of Union
Carbide as to, among other things:
. the adoption, by the unanimous vote of all of Union Carbide's directors
present and voting at a meeting at which a quorum of directors was
present, of the merger agreement, the stock option agreement and the
merger and the other transactions contemplated by the merger agreement
and the stock option agreement;
. the receipt by Union Carbide's board of directors of the opinion of
Credit Suisse First Boston to the effect that, as of August 3, 1999, the
exchange ratio is fair to holders of Union Carbide common stock from a
financial point of view;
. Union Carbide's employee benefits plans;
. Union Carbide's taking all appropriate and necessary actions to permit
Dow and Transition Sub to enter into a business combination with Union
Carbide for purposes of New York's interested stockholder business
combination law;
. environmental matters and compliance with environmental laws;
. Union Carbide's relationships with its employees;
. Union Carbide's adoption of an amendment to its rights agreement to
prevent Dow and Transition Sub from triggering the rights agreement; and
. Union Carbide's ownership or right to use all intellectual property
material to Union Carbide's business.
The merger agreement also contains representations and warranties of Dow as
to, among other things, the unanimous adoption by Dow's board of directors of
the merger agreement, the merger and the other transactions contemplated by the
merger agreement and that the shares of Dow common stock issuable to Union
Carbide's stockholders under the merger agreement are listed on the New York
Stock Exchange and, when issued, will be validly issued, fully paid and
nonassessable.
Certain Covenants
The merger agreement provides that, except as disclosed, agreed to in
writing by Dow, or as contemplated by the merger agreement, the stock option
agreement or as required by applicable law, Union Carbide, as to itself and its
subsidiaries, will, before the effective time of the merger:
. conduct its business in the ordinary and usual course;
. not do any of the following:
--amend its certificate of incorporation or bylaws;
--split, combine, subdivide or reclassify its outstanding shares of
capital stock;
--declare, set aside or pay any dividend payable in cash, stock or
property in respect of any capital stock, other than regular quarterly
cash dividends not in excess of $0.225 per share of Union Carbide common
stock; or
--repurchase, redeem or otherwise acquire, except in connection with
commitments under or the express terms of Union Carbide's stock plans as
in effect on the date of the merger agreement, but subject to Union
Carbide's obligations described in the next bullet point, or permit any
of its subsidiaries to purchase or otherwise acquire, any shares of its
capital stock or any securities convertible into or exchangeable or
exercisable for any shares of its capital stock;
. not take any action that would prevent the merger from qualifying for
pooling-of-interests accounting treatment or as a tax-free reorganization
under the Internal Revenue Code;
. not take any action that would cause any of its representations and
warranties to become untrue in any material respect;
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. not take certain actions related to employee benefits plans or employee
compensation;
. not incur, repay or retire before maturity, or refinance before maturity
any indebtedness for borrowed money nor guarantee any such indebtedness
nor issue, sell, repurchase or redeem before maturity any debt securities
or warrants or rights to acquire any debt securities nor guarantee any
debt securities of others, in all such cases in excess of, in the
aggregate, U.S. $500 million;
. not make any capital expenditures in an aggregate amount in excess of the
aggregate amount reflected in Union Carbide's capital expenditure budget
for the applicable fiscal year;
. not issue, deliver, sell, pledge or encumber shares of any class of its
capital stock or any securities convertible or exchangeable into, any
rights, warrants or options to acquire, or any bonds, debentures, notes
or other debt obligations having the right to vote or convertible into or
exercisable for any such shares, provided that Union Carbide may issue
stock under employee benefit plans, its Savings and Investment Program
and its Dividend Reinvestment and Stock Purchase Plan and may award
equity-based compensation under its stock plans, provided that those
awards are made in the ordinary course of business and are consistent
with past practices;
. not complete, authorize, propose or announce an intention to authorize or
propose, nor enter into an agreement with respect to, any merger,
consolidation, joint venture or business combination (other than the
merger), or any purchase, sale, lease, license or other acquisition or
disposition of any business or of a material amount of assets or
securities, except, in the case of assets, for transactions entered into
in the ordinary and usual course of its business;
. not make any material change in its accounting policies or procedures,
other than any such change that is required by generally accepted
accounting principles;
. not release, assign, settle or compromise any material claims or
litigation nor make any material tax election or settle or compromise any
material federal, state, local or foreign tax liability; and
. use its best efforts, in cooperation with Dow, to obtain any required
waiver of a provision of a joint venture agreement that, to the extent
that that provision may apply, may prohibit Union Carbide from permitting
its affiliates to compete with the joint venture in the production and
sale of polyethylene in Europe.
The merger agreement also provides that, except as disclosed, agreed to in
writing by Union Carbide, or as contemplated by the merger agreement or as
required by applicable law, Dow, as to itself and its subsidiaries, will,
before the effective time of the merger:
. not do any of the following:
--reclassify its outstanding shares of capital stock; or
--declare, set aside or pay any dividend payable in cash, stock (other
than shares of Dow common stock) or property in respect of any capital
stock, except (x) for regular quarterly cash dividends not in excess of
$0.87 per share of Dow common stock or (y) for a dividend that would be
received by the holders of the Union Carbide common stock on an
equivalent basis per share of Dow common stock after the effective time
of the merger;
. not take any action that would prevent the merger from qualifying for
pooling-of-interests accounting treatment or as a tax-free reorganization
under the Internal Revenue Code;
. not take any action that would cause any of its representations and
warranties in the merger agreement to become untrue in any material
respect; and
. not make acquisitions of businesses nor enter into any joint ventures,
except for acquisitions of certain businesses or joint ventures
specifically permitted under the merger agreement or any other
acquisition or joint venture approved by Union Carbide's chief executive
officer.
The merger agreement generally provides that for a period of at least two
years following the effective time of the merger, Dow will cause Union Carbide
to provide Union Carbide's employees compensation and benefits which are in the
aggregate not materially less favorable than those in effect at the effective
time of the
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merger. The merger agreement also provides that Dow will cause Union Carbide to
provide Union Carbide's employees with service credit as in effect at the
effective time of the merger. The merger agreement also provides that Union
Carbide may, at the effective time of the merger and subject to certain
conditions, make payments of up to $25 million in the aggregate to certain
Union Carbide executives under its 1997 EPS Incentive Plan. See "The Merger
Agreement and the Merger--Interests of Union Carbide Directors and Officers in
the Merger that are Different from Your Interests."
Non-Solicitation of Competing Proposals
The merger agreement provides that:
. neither Union Carbide nor any of its subsidiaries nor any of the officers
and directors of it or its subsidiaries will, and that Union Carbide will
direct and use its best efforts to cause its and its subsidiaries'
employees, agents and representatives not to, initiate, solicit,
encourage or otherwise facilitate any inquiries or the making of any
acquisition proposal, which is defined to mean any proposal or offer with
respect to a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, liquidation, dissolution or
similar transaction involving Union Carbide, or any purchase or sale of
the consolidated assets of Union Carbide or any of its subsidiaries,
taken as a whole, having an aggregate value equal to 20% or more of its
market capitalization, or any purchase or sale of, or tender or exchange
offer for, 20% or more of its or any of its subsidiaries' equity
securities; and
. neither Union Carbide nor any of its subsidiaries nor any of the officers
and directors of it or its subsidiaries will, and Union Carbide will
direct and use its best efforts to cause Union Carbide's representatives
not to, have any discussion with or provide any confidential information
or data to any person relating to or in contemplation of an acquisition
proposal or engage in any negotiations concerning an acquisition
proposal, or otherwise facilitate any effort or attempt to make or
implement an acquisition proposal;
provided, however, that nothing contained in the merger agreement will
prevent either Union Carbide or its board of directors from:
--publishing, sending or giving to Union Carbide's stockholders
management's recommendation with respect to a tender offer;
--engaging in any discussions or negotiations with or providing any
information to any person in response to an unsolicited bona fide
written acquisition proposal by any such person; or
--recommending such an unsolicited bona fide written acquisition proposal
to the stockholders;
if, and only to the extent that, with respect to the actions referred to
in the last two items above:
(1) Union Carbide's board of directors concludes in good faith, after
consultation with its outside legal counsel and its financial
advisor, that such acquisition proposal is reasonably capable of
being completed, taking into account all legal, financial,
regulatory and other aspects of the proposal and the person making
the proposal, and would, if consummated, result in a transaction
more favorable to Union Carbide's stockholders from a financial
point of view than the transaction contemplated by the merger
agreement;
(2) Union Carbide's board of directors determines in good faith, after
consultation with outside legal counsel, that such action is
necessary for Union Carbide's board of directors to comply with its
fiduciary duties to Union Carbide's stockholders under applicable
law; and
(3) before providing any information or data to any person in
connection with an acquisition proposal by any such person, Union
Carbide's board of directors receives from such person an executed
confidentiality agreement on terms substantially similar to those
contained in the confidentiality agreement previously entered into
between Dow and Union Carbide in connection with their
consideration of the merger.
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Any response to an offer from another person that is not permitted by the
merger agreement may entitle Dow to receive the termination fee and to exercise
the option Union Carbide has granted to Dow under the stock option agreement.
Filings and Other Actions
The merger agreement provides that Union Carbide and Dow will cooperate with
each other and use their respective best efforts to satisfy the "pooling-of-
interests" related conditions to the completion of the merger and competition
law matters, and their respective reasonable best efforts in all other
circumstances, to obtain all consents, registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any person or any
governmental entity in order to complete the merger and the other transactions
contemplated by the merger agreement and the stock option agreement, and to
take or cause to be taken all actions, and do or cause to be done all things,
necessary, proper or advisable on their part under the merger agreement and the
stock option agreement and applicable laws to complete the merger and the other
transactions contemplated by the merger agreement and the stock option
agreement, including:
. obtaining the opinions of their respective public accountants and
attorneys as required under the merger agreement and, in Dow's case,
causing the issuance of the number of its treasury shares necessary such
that Dow can account for the merger as a pooling-of-interests;
. preparing and filing all documentation to effect all necessary
applications, notices, petitions, filings and other documents;
. engaging in active negotiations with relevant governmental entities with
respect to competition law matters and, subject to the limitation
described below, resolving the concerns, if any, of those governmental
entities; and
. promptly instituting proceedings, including, if necessary, court actions,
necessary to obtain the approvals required to complete the merger or the
other transactions contemplated by the merger agreement and the stock
option agreement or defending or otherwise opposing all court actions and
other proceedings instituted by a governmental entity or other person
under competition laws or otherwise for purposes of delaying,
restraining, enjoining or otherwise preventing the completion of the
merger and the other transactions contemplated by the merger agreement
and the stock option agreement, and to take all steps necessary to
vacate, modify or suspend any order so as to permit completion of the
merger and the transactions contemplated by the merger agreement or the
stock option agreement on a schedule as close as possible to that
contemplated by the merger agreement and the stock option agreement.
Dow's obligations with respect to competition law matters described above are
limited in the following respects: Dow is not required to agree, with respect
to itself or its subsidiaries or Union Carbide or its subsidiaries, to any
divestitures, licenses, hold separate arrangements or similar matters in order
to obtain approval of the transactions contemplated by the merger agreement and
the stock option agreement under applicable competition laws if those
divestitures, licenses, arrangements or matters would reasonably be expected to
have a material adverse effect on the financial condition, assets and
liabilities (taken together) or business of Dow and Union Carbide and their
subsidiaries on a combined basis.
The merger agreement also provides that Union Carbide will not, without
Dow's prior written consent, commit to any divestitures, licenses, hold
separate arrangements or similar matters nor allow its subsidiaries to commit
to any divestitures, licenses, hold separate arrangements or similar matters,
and Union Carbide will commit to, and will use best efforts to, effect, and
will cause its subsidiaries to commit to and use their efforts to effect, any
such divestitures, licenses, hold separate arrangements or similar matters as
Dow requests in order to obtain approval of the transactions contemplated by
the merger agreement and the stock option agreement under applicable
competition laws.
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Conditions to Completion of the Merger
We will complete the merger only if the conditions set forth in the merger
agreement are satisfied or, in some cases, waived. Each of Dow's and Union
Carbide's obligation to complete the merger is conditioned on:
. adoption of the merger agreement by Union Carbide's stockholders;
. the expiration or termination of the waiting period applicable to the
completion of the merger under the Hart-Scott-Rodino Act and the receipt
of any consents to the transaction contemplated by the merger agreement
required under the European Community Merger Control Regulation or other
applicable competition laws;
. that no governmental entity of competent jurisdiction enacts, issues,
promulgates, enforces or enters any law or order, whether temporary,
preliminary or permanent, that is in effect and restrains, enjoins or
otherwise prohibits completion of the merger or the other transactions
contemplated by the merger agreement and that no governmental entity
institutes any proceeding, and no senior official of any governmental
entity in the United States is then threatening to institute any
proceeding, seeking any of the above;
. that no stop order suspending the effectiveness of Dow's filing with the
Securities and Exchange Commission for this transaction has been issued
and that no proceedings for that purpose have been initiated or
threatened by the Securities and Exchange Commission;
. Dow's receipt of a letter from its independent public accountants to the
effect that no conditions exist that could preclude accounting for the
merger as a "pooling-of-interests;"
. Union Carbide's receipt of a letter from its independent public
accountants to the effect that such accounting firm knows of no reason
why the merger should not receive pooling-of-interests accounting
treatment; and
. Dow and Union Carbide each being reasonably satisfied that the merger
will qualify for pooling-of-interests accounting treatment.
Dow's obligation to complete the merger is also conditioned on:
. the representations and warranties of Union Carbide and its subsidiaries
being true and correct in all material respects;
. Union Carbide's performance in all material respects of all obligations
required to be performed by Union Carbide under the merger agreement; and
. Union Carbide's obtaining all required consents to the merger.
Union Carbide's obligation to complete the merger is also conditioned on:
. the representations and warranties of Dow and its subsidiaries being true
and correct in all material respects;
. Dow's performance in all material respects of all obligations required to
be performed by Dow under the merger agreement;
. Union Carbide's receipt of a legal opinion that the merger will be
treated as a tax-free reorganization under the Internal Revenue Code; and
. Dow's obtaining all required consents to the merger.
At any time before the merger, to the extent legally allowed, the board of
directors of either Dow or Union Carbide may waive compliance with any of the
conditions contained in the merger agreement without the approval of their
respective stockholders. As of the date of this proxy statement/prospectus,
neither Dow nor Union Carbide expects that any condition will be waived.
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The approval of the merger by Dow's stockholders is not required, and Dow is
not seeking the approval of the merger from its stockholders.
Termination of the Merger Agreement
Dow and Union Carbide can agree to terminate the merger agreement at any
time without completing the merger.
Also, either Dow or Union Carbide can, without the consent of the other,
terminate the merger agreement if:
. the merger is not completed by March 30, 2000, or, if extended by either
party under some circumstances relating primarily to obtaining
governmental approvals of the merger, August 2, 2000, unless the merger
is not completed because the party that wants to terminate the merger
agreement has violated the merger agreement;
. Union Carbide's stockholders do not adopt the merger agreement at the
meeting;
. any order permanently restraining, enjoining or otherwise prohibiting
completion of the merger has become final and non-appealable; or
. the other party materially breaches the merger agreement that causes a
failure of a condition to the completion of the merger and cannot or does
not correct the breach before March 30, 2000, or, if extended by either
party under some circumstances relating primarily to obtaining
governmental approvals of the merger, August 2, 2000.
In addition, Union Carbide can terminate the merger agreement before the
effective time of the merger if Union Carbide's board of directors provides
written notice to Dow that Union Carbide intends to enter into a binding
written agreement for a superior proposal from another person; so long as Union
Carbide gives Dow an opportunity to match or exceed the other proposal.
Finally, Dow can terminate the merger agreement if Union Carbide's board of
directors withdraws, adversely modifies or changes its recommendation for
adoption of the merger agreement or fails to reconfirm its recommendation for
adoption of the merger agreement within 15 business days after a written
request by Dow to do so.
Termination Fee
Union Carbide must pay Dow a fee of $300 million in cash if the merger
agreement is terminated under any of the following circumstances:
. if all of the following occur:
(1) another person makes an acquisition proposal or expresses an
intention to make an acquisition proposal and that acquisition
proposal with respect to Union Carbide is not withdrawn before the
meeting;
(2) Union Carbide's stockholders do not adopt the merger agreement with
Dow at the meeting;
(3) either Dow or Union Carbide terminates the merger agreement with Dow
because Union Carbide's stockholders do not adopt the merger
agreement with Dow at the meeting; and
(4) within 12 months after termination of the merger agreement with Dow,
Union Carbide enters into an agreement to complete an acquisition
transaction that meets certain conditions; or
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. if Union Carbide terminates the merger agreement because Union Carbide's
board of directors provides written notice to Dow that Union Carbide
intends to enter into a binding written agreement for a superior proposal
from another person; or
. if Dow terminates the merger agreement because:
(1) before the meeting, Union Carbide's board of directors withdraws,
adversely modifies or changes its recommendation for adoption of the
merger agreement or fails to reconfirm its recommendation for
adoption of the merger agreement within 15 business days after a
written request by Dow to do so; or
(2) at any time, there has been a material breach by Union Carbide of its
obligation not to solicit, encourage or engage in negotiations
regarding an alternative acquisition proposal.
The termination fee described above is in addition to any profit Dow may
receive under the stock option agreement.
Expenses
Dow will pay the expenses in connection with the registration fees paid to
the Securities and Exchange Commission, printing and mailing this proxy
statement/prospectus and other filing fees. Dow and Union Carbide will each pay
its own expenses in connection with the merger and the related transactions,
except as described above.
Modification or Amendment to the Merger Agreement
Dow and Union Carbide can modify or amend the merger agreement, whether
before or after the meeting, if they both agree to do so. Each can waive its
right to require the other to comply with the merger agreement where the law
allows.
Regulatory Requirements
Under the Hart-Scott-Rodino Act and the rules promulgated thereunder by the
Federal Trade Commission, the merger cannot be completed until notifications
have been given and certain information has been furnished to the Federal Trade
Commission and the Antitrust Division of the Department of Justice and
specified waiting period requirements have been satisfied. Dow and Union
Carbide expect to file notification and report forms under the Hart-Scott-
Rodino Act with the Federal Trade Commission and the Antitrust Division before
the meeting. The Department of Justice or Federal Trade Commission may make a
request for additional information in response to those filings.
At any time before or after completion of the merger, the Antitrust Division
or the Federal Trade Commission or any state could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the completion of the merger, to rescind the merger
or seeking divestiture of particular assets of Dow or Union Carbide. Private
parties also may seek to take legal action under the antitrust laws under
certain circumstances. In addition, non-United States governmental and
regulatory authorities may seek to take action under applicable antitrust laws.
A challenge to the merger on antitrust grounds may be made and, if such a
challenge is made, Dow and Union Carbide may not prevail.
Union Carbide and Dow each conducts business in member states of the
European Union. Council Regulation (ECC) 4064/89, as amended, requires
notification to and approval by the European Commission of mergers or
acquisitions involving parties with aggregate worldwide sales and individual
European Union sales exceeding specific thresholds before these mergers or
acquisitions are implemented. Union Carbide and Dow expect to file a merger
notification with the European Union antitrust authorities before the meeting.
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The European Commission must review the merger to determine whether or not
it is compatible with the common market and, accordingly, whether or not to
permit it to proceed. A merger or acquisition that does not create or
strengthen a dominant position that would significantly impede effective
competition in the common market or in a substantial part of it shall be
declared compatible with the common market and must be allowed to proceed. If,
following a preliminary one-month Phase I investigation, the European
Commission determines that it needs to examine the merger more closely because
it raises serious doubts as to its compatibility with the common market, it
must initiate Phase II investigation procedures. If it initiates a Phase II
investigation, the European Commission must issue a final decision as to
whether or not the merger is compatible with the common market no later than
four months after the initiation of the Phase II investigation.
Union Carbide and Dow conduct operations in a number of jurisdictions where
other regulatory filings or approvals may be required or advisable in
connection with the completion of the merger. Union Carbide and Dow are
currently reviewing whether filings or approvals may be required or desirable
in those jurisdictions that may be material to Union Carbide and Dow and their
subsidiaries. It is possible that one or more of these filings may not be made,
or that one or more of these approvals may not be obtained, prior to the
merger.
Regulatory agencies enforcing antitrust and similar laws could delay, oppose
or refuse to approve the merger or impose conditions that could have an adverse
effect on the combined company. See "Risk Factors--Regulatory agencies
enforcing antitrust and similar laws could delay, oppose or refuse to approve
the merger or impose conditions that could have an adverse effect on the
combined company" and "The Merger Agreement and the Merger--Filings and Other
Actions."
Material Federal Income Tax Considerations
The following discussion summarizes the material U.S. federal income tax
considerations of the merger that are applicable to Union Carbide stockholders.
This summary is based on the Internal Revenue Code, applicable U.S. Treasury
Regulations, judicial authority, and administrative rulings and practice, all
as of the date of this proxy statement/prospectus, all of which are subject to
change, possibly with retroactive effect. This summary does not purport to be a
complete discussion of all U.S. federal income tax consequences of the merger.
The discussion below does not address any state, local or foreign tax
consequences of the merger. In addition, this discussion may not apply, in
whole or in part, to particular stockholders, such as individuals who hold
options in Union Carbide common stock or who have acquired Union Carbide common
stock under a compensatory or other employment-related arrangement, insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
persons who are neither citizens nor residents of the United States, traders in
securities that elect to mark-to-market, and persons who hold Union Carbide
common stock as part of a hedge, straddle or conversion transaction. The
following discussion assumes that Union Carbide common stock is held as a
capital asset at the effective time of the merger.
Union Carbide stockholders are urged to consult their tax advisors as to the
particular tax consequences of the merger to them, including the applicability
and effect of any U.S. federal, state, local or foreign laws, and the effect of
possible changes in applicable tax laws.
General
The obligation of Union Carbide to complete the merger is conditioned upon
the receipt by Union Carbide of the opinion of Sullivan & Cromwell, counsel to
Union Carbide, that on the basis of the facts, representations and assumptions
set forth or referred to therein, and based on interpretations of law by
counsel, for U.S. federal income tax purposes, the merger will qualify as a
tax-free reorganization under Section 368(a) of the Internal Revenue Code and
that each of Dow, Transition Sub and Union Carbide will be a party to the
reorganization within the meaning of Section 368(b) of the Internal Revenue
Code. However, neither Dow nor Union Carbide has requested nor will request an
advance ruling from the Internal Revenue Service as to the tax consequences of
the merger, and there can be no assurance that the Internal Revenue Service
will agree with the conclusions set forth in this proxy statement/prospectus.
Moreover, the tax opinion is based upon certain facts, representations and
assumptions set forth or referred to in that opinion and the continued accuracy
and
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completeness of certain representations made by Dow, Transition Sub and Union
Carbide, including representations in certificates to be delivered to Sullivan
& Cromwell by the management of each of Dow and Union Carbide that, if
incorrect in certain material respects, would jeopardize the conclusions
reached by Sullivan & Cromwell in its opinion. The discussion below assumes
that the merger qualifies as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code.
Tax Treatment to Holders of Union Carbide Common Stock
Except for any cash received instead of fractional shares, a Union Carbide
stockholder will not recognize any gain or loss as a result of the receipt of
shares of Dow common stock pursuant to the merger. A Union Carbide
stockholder's aggregate tax basis for the shares of Dow common stock received
pursuant to the merger, including any fractional share interest for which cash
is received, will equal such stockholder's aggregate tax basis in shares of
Union Carbide common stock held immediately before the merger. A Union Carbide
stockholder's holding period for the shares of Dow common stock received
pursuant to the merger, including any fractional share interest for which cash
is received, will include the period during which the shares of Union Carbide
common stock were held.
A holder of Union Carbide common stock who receives cash instead of a
fractional share of Dow common stock in the merger will be treated as having
received the cash in redemption of the fractional share interest. The cash
payment will be treated as a distribution in payment of the fractional interest
deemed redeemed under Section 302 of the Internal Revenue Code. A holder of
Union Carbide common stock, who, immediately after the merger, holds a minimal
interest in Dow, exercises no control over Dow and, as a result of the deemed
redemption and after giving effect to certain constructive ownership rules,
experiences an actual reduction in his or her interest in Dow will recognize
capital gain or loss on the deemed redemption in an amount equal to the
difference between the amount of cash received and such holder's adjusted tax
basis allocable to such fractional share. Otherwise, the cash payment will be
taxable as a dividend.
If the Internal Revenue Service were to successfully challenge the status of
the merger as a tax-free reorganization, Union Carbide stockholders would be
required to recognize gain or loss with respect to each share of Union Carbide
common stock surrendered equal to the difference between the stockholder's
basis in such share and the fair market value, as of the effective time of the
merger, of the shares of Dow common stock received in exchange therefor. In
such event, a Union Carbide stockholder's aggregate basis in the Dow common
stock so received would equal its fair market value, and the stockholder's
holding period for such stock would begin the day after the merger.
Furthermore, a Union Carbide stockholder would recognize gain or loss with
respect to cash received for a fractional share interest in an amount equal to
the difference between the cash received and such holder's adjusted tax basis
allocable to the fractional share.
Anticipated Accounting Treatment
The merger is intended to qualify as a pooling-of-interests for accounting
purposes. Under that method of accounting, the recorded historical cost basis
of the assets and liabilities of Dow and Union Carbide will be carried forward
to the combined company. Results of operations of the combined company will
include income of Dow and Union Carbide for the entire fiscal period in which
the combination occurs, and the historical results of operations of the
separate companies for fiscal years before the merger will be combined and
reported as the results of operations of the combined company. No adjustments
have been made to the unaudited pro forma combined condensed financial
information of Dow and Union Carbide to conform the accounting policies of the
combined company as the nature and amounts of such adjustments are not expected
to be significant. In addition, no adjustments have been made in the unaudited
pro forma combined condensed financial information for transactions between Dow
and Union Carbide as such transactions were determined to be immaterial.
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Completion of the merger is conditioned upon:
. Dow's receipt of a letter from its independent public accountants to the
effect that no conditions exist that could preclude accounting for the
merger as a pooling-of-interests;
. Union Carbide's receipt of a letter from its independent public
accountants to the effect that such accounting firm knows of no reason
why the merger should not receive pooling-of-interests accounting
treatment; and
. Dow and Union Carbide each being reasonably satisfied that the merger
will qualify for pooling-of-interests accounting treatment.
See "The Merger Agreement and the Merger--Conditions to Completion of the
Merger." However, some of the conditions to be met to qualify for pooling-of-
interests accounting treatment cannot be fully assessed until specified periods
of time after the effective time of the merger have passed, because certain of
the conditions for pooling-of-interests accounting treatment address
transactions occurring within such specified periods of time. Certain events,
including certain transactions with respect to Dow common stock or Union
Carbide common stock by affiliates of Dow and Union Carbide, respectively,
could prevent the merger from qualifying as a pooling of interests for
accounting purposes. For information concerning restrictions to be imposed on
the transferability of Dow common stock to be received by affiliates in order,
among other things, to ensure the availability of pooling-of-interests
accounting treatment, see "The Merger Agreement and the Merger--Resale
Restrictions."
If, after completion of the merger, events occur that cause the merger to be
deemed no longer to qualify for pooling-of-interests accounting treatment, the
purchase method of accounting would be applied. The purchase method of
accounting would have a material adverse effect on the reported operating
results of Dow as compared to pooling-of-interests accounting treatment. See
"Risk Factors--Failure to qualify for pooling-of-interests accounting treatment
may impact reported operating results."
Resale Restrictions
This proxy statement/prospectus does not cover resales of the shares of Dow
common stock to be received by the stockholders of Union Carbide upon
completion of the merger, and no person is authorized to make any use of this
proxy statement/prospectus in connection with any such resale.
All Dow common stock received by Union Carbide stockholders in the merger
will be freely transferable, except that shares of Dow common stock received by
persons who are deemed to be "affiliates" (as such term is defined under the
Securities Act of 1933) of Union Carbide may be resold by them only in
transactions permitted by the resale provisions of Rule 145 (or Rule 144 in the
case of such persons who become affiliates of Dow) promulgated under the
Securities Act of 1933 or as otherwise permitted under the Securities Act of
1933. Persons who may be deemed to be affiliates of Dow or Union Carbide
generally include individuals or entities that control, are controlled by or
are under common control with such party and may include certain officers and
directors of Dow or Union Carbide, as well as significant stockholders.
Guidelines regarding qualification for the use of the pooling-of-interests
method of accounting also limit sales of capital stock by affiliates of the
acquiring and acquired companies in a business combination. These guidelines
indicate further that the pooling-of-interests method of accounting generally
will not be challenged on the basis of sales of capital stock by affiliates of
the acquiring or acquired company if they do not dispose of any of the shares
they own or shares they receive in connection with a merger during the period
beginning 30 days before the merger and ending when financial results covering
at least 30 days of combined operations have been published. See "The Merger
Agreement and the Merger--Anticipated Accounting Treatment."
Under the merger agreement, Union Carbide is required to use all reasonable
efforts to cause each of its affiliates to execute a written agreement
restricting the disposition by such affiliate of shares of Dow common stock or
Union Carbide common stock or the shares of Dow common stock to be received by
such affiliate in
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the merger. Also under the merger agreement, Dow is required to use all
reasonable efforts to cause each of its affiliates to execute a written
agreement restricting the disposition by such affiliate of any shares of Dow
common stock.
Interests of Union Carbide Directors and Officers in the Merger that are
Different from Your Interests
In considering the recommendation of Union Carbide's board of directors with
respect to the merger, stockholders should be aware that some of the members of
Union Carbide's board of directors and some of Union Carbide's officers have
interests in the merger that are different from the interests of stockholders
of Union Carbide generally and that could potentially represent conflicts of
interest.
Some of the members of Union Carbide's board of directors and some of Union
Carbide's officers have interests in the merger that are different from your
interests.
. All outstanding options granted by Union Carbide to purchase Union
Carbide common stock, including those held by officers and directors of
Union Carbide, will fully vest at the effective time of the merger and,
if not exercised at that time, will be converted into fully vested
options to purchase shares of Dow common stock, subject to adjustment to
reflect the exchange ratio. Based upon the options outstanding as of
October 1, 1999, options held by Union Carbide's officers and directors
relating to 3,001,170 shares of Union Carbide common stock, plus any
additional options granted prior to the merger, will vest at the
effective time of the merger.
. Restrictions on distribution of share units in the compensation deferral
plans held by officers and directors of Union Carbide may lapse at the
effective time of the merger, and those share units will be converted to
unrestricted share units of Dow common stock, subject to adjustment to
reflect the exchange ratio.
. Some current officers of Union Carbide may remain officers of Union
Carbide after the merger.
. Some officers of Union Carbide will be entitled to severance payments and
enhanced pension benefits in the event their employment ceases following
the merger.
. At the effective time of the merger, Dr. William H. Joyce and one other
current Union Carbide director, will be appointed as additional members
of Dow's board of directors, each to hold office until his successor is
elected and qualified or until his earlier resignation or removal. Dr.
Joyce will also be appointed Vice Chairman of Dow's board of directors.
Additional information about Dr. Joyce and the other current Union
Carbide directors is contained in Union Carbide's proxy statement dated
March 15, 1999, which is incorporated by reference in this proxy
statement/prospectus. See "Additional Information--Where You Can Find
More Information."
. Under Union Carbide's 1997 EPS Incentive Plan, certain executives and
senior management agreed to forfeit a portion of their compensation if
Union Carbide's earnings per share for the year 2000 failed to meet
prescribed goals, and were to receive incentive payments if earnings per
share goals were achieved for 1999 and 2000. While no actual level of
earnings can be predicted, it is not likely that the prescribed goal is
attainable in 1999. There is also uncertainty as to whether the
prescribed goal is attainable in 2000. However, the 1997 EPS Incentive
Plan provides that, in the event that a change of control, such as the
merger, occurs before the end of 2000, the compensation and management
development committee of the Union Carbide board of directors may approve
payments under the plan. Under the merger agreement, such payment is
subject to the approval of Union Carbide's chief executive officer after
he consults with Dow's chief executive officer and is limited to $25
million in the aggregate, including any award to Union Carbide's chief
executive officer. Additional information about the 1997 EPS Incentive
Plan is contained in Union Carbide's Annual Report on Form 10-K for the
year ended December 31, 1998, which is incorporated by reference in this
proxy statement/prospectus. See "Additional Information--Where You Can
Find More Information."
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. Some Union Carbide officers may have accounts under the Savings and
Investment Program for Employees of Union Carbide and Union Carbide's
Employee Stock Ownership Plan. Any Union Carbide common stock held by the
plans will be converted into Dow common stock at the effective time of
the merger subject to adjustment to reflect the exchange ratio.
Each share of Union Carbide common stock held by Union Carbide's directors,
officers and their affiliates at the effective time of the merger will, along
with all other Union Carbide common stock, be converted into the right to
receive 0.537 of a share of Dow common stock.
Union Carbide's board of directors was aware of these interests and
considered them, among other matters, when adopting the merger.
Union Carbide's directors, officers and their affiliates beneficially owned,
as of October 1, 1999, approximately 2.46% of Union Carbide's outstanding
common stock. Dow's directors, officers and their affiliates did not
beneficially own, as of October 1, 1999, any shares of Union Carbide's common
stock.
Indemnification and Insurance
The merger agreement provides that, for six years after the effective time
of the merger, Dow will cause Union Carbide to indemnify and hold harmless each
present and former Union Carbide director and officer (solely when acting in
such capacity) determined as of the effective time of the merger, against any
costs or expenses, including reasonable attorneys' fees, judgments, fines,
losses, claims, damages or liabilities incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or before the effective time of the merger, whether
asserted or claimed before, at or after the effective time of the merger, to
the fullest extent that Union Carbide would have been permitted under New York
corporate law and its certificate of incorporation or bylaws in effect on
August 3, 1999, to indemnify those persons. Union Carbide after the merger will
also advance expenses as incurred to the fullest extent permitted under
applicable law, provided the person to whom expenses are advanced provides an
undertaking to repay any advances if it is ultimately determined that he or she
is not entitled to indemnification.
The merger agreement also provides that, for a period of six years after the
effective time of the merger, Union Carbide will maintain a policy of officers'
and directors' liability insurance for acts and omissions occurring before the
effective time of the merger with coverage in amount and scope at least as
favorable as Union Carbide's directors' and officers' liability insurance
coverage on August 3, 1999. If Union Carbide's insurance policy in effect on
August 3, 1999, expires, is terminated or is canceled, or if the annual premium
is increased to an amount in excess of 175% of the last annual premium paid
before August 3, 1999, in each case during the six-year period, Union Carbide
will use its best efforts to obtain insurance in an amount and scope as great
as can be obtained for the remainder of the period for a premium not in excess,
on an annualized basis, of 175% of the current premium. In the alternative,
Union Carbide can obtain prepaid policies that provide such directors and
officers with coverage for an aggregate period of six years with respect to
claims arising from facts or events that occurred on or before the effective
time of the merger, including, without limitation, in respect of the
transactions contemplated by the merger agreement and for a premium not in
excess of the aggregate of the premiums set forth in the preceding sentence.
Dow has agreed to guaranty Union Carbide's obligations under the two
previous paragraphs.
In addition to the provisions of the three previous paragraphs, each officer
and director of Union Carbide is entitled to indemnification and insurance in
accordance with the indemnity agreement between such officer or director and
Union Carbide.
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The Stock Option Agreement
General Description of the Stock Option Agreement
At the same time of the execution and delivery of the merger agreement, Dow
and Union Carbide entered into a stock option agreement under which Union
Carbide granted Dow an option to purchase up to 26,502,964 shares of Union
Carbide common stock, or, if less, such number of shares of Union Carbide
common stock as represents 19.9% of the then-outstanding shares of Union
Carbide common stock, at a price per share of $48.8125. A copy of the form of
the Stock Option Agreement is included as Exhibit 1 to the merger agreement
included in Annex A to this proxy statement/prospectus.
Exercise of the Option
Except as described below, the option is exercisable within 180 days
following any event entitling Dow to receive the termination fee under the
merger agreement unless, before that event, the effective time of the merger
occurs. The right to purchase shares under the stock option agreement expires
upon either:
. the effective time of the merger; or
. the earlier of:
--180 days after the date that Dow becomes entitled to receive the
termination fee under the merger agreement; and
--the date that Dow is no longer potentially entitled to receive the
termination fee under the merger agreement for a reason other than that
Dow has already received the termination fee.
Adjustments to Number and Type of Shares
The total number of shares of Union Carbide common stock purchasable upon
the exercise of the option and the option price are subject to adjustment from
time to time as follows:
. If there is any change in the outstanding shares of Union Carbide common
stock by reason of stock dividends, stock splits, reverse stock splits,
mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares or the like, the type and number of shares of Union
Carbide common stock purchasable upon exercise of the option will be
appropriately adjusted so that:
--Dow will receive, upon exercise of the option, the number and class of
shares, other securities, property or cash that Dow would have received
in respect of the shares of Union Carbide common stock purchasable upon
exercise of the option if the option had been exercised and those shares
of Union Carbide common stock had been issued to Dow immediately before
that event or the event's record date; and
--if any additional shares of Union Carbide common stock are to be issued
or otherwise become outstanding as a result of any such change, other
than pursuant to an exercise of the option, the number of shares of
Union Carbide common stock purchasable upon exercise of the option will
increase so that, after that issuance and, together with shares of Union
Carbide common stock previously issued pursuant to the exercise of the
option, the number of shares purchasable equals 19.9% of the shares of
Union Carbide common stock issued and outstanding immediately after the
consummation of the change in outstanding shares of Union Carbide common
stock.
. Whenever the number of shares of Union Carbide common stock purchasable
upon exercise of the option is adjusted as described above, the option
price will be adjusted by multiplying the option price by a fraction, the
numerator of which is equal to the number of shares of Union Carbide
common stock purchasable before the adjustment and the denominator of
which is equal to the number of shares of Union Carbide common stock
purchasable after the adjustment.
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Cash Payment for the Option
Instead of purchasing shares of Union Carbide common stock under the option,
Dow may exercise its right to have Union Carbide pay to Dow an amount per share
of Union Carbide common stock subject to the option, or a lesser number of
shares if Dow chooses, equal to an amount derived by subtracting $48.8125, the
exercise price of the option, from the highest of:
. the price per share of Union Carbide common stock at which a tender or
exchange offer for Union Carbide common stock has been made;
. the price per share of Union Carbide common stock to be paid by any other
person pursuant to an agreement with Union Carbide; and
. the highest trading price for shares of Union Carbide common stock on the
New York Stock Exchange within the 120-day period immediately preceding
the delivery of the notice requesting cash payment for the option.
Limitation on Profit
The stock option agreement provides that in no event will Dow's total profit
from the option exceed in the aggregate $50 million and, if Dow's total profit
from the option would otherwise exceed such amount, Dow is required to either:
. reduce the number of shares of Union Carbide common stock subject to the
option;
. deliver to Union Carbide for cancellation shares of Union Carbide common
stock previously purchased by Dow;
. pay cash to Union Carbide; or
. any combination of the foregoing;
so that Dow's total profit from the option does not exceed $50 million, taking
into account the foregoing actions.
The profit Dow may receive under the stock option agreement is in addition
to the termination fee Dow may receive under the merger agreement.
Registration Rights and Listing
Dow may require Union Carbide to register any shares purchased under the
option under the securities laws if necessary for Dow to be able to sell such
shares and to require the listing of such shares on the New York Stock
Exchange.
Assignability
The stock option agreement may not be assigned by Dow or Union Carbide
without the prior written consent of the other, except that Dow may assign the
option to any affiliate of Dow.
Effect of Stock Option Agreement
The stock option agreement is intended to increase the likelihood that the
merger will be completed with Dow and to compensate Dow in certain
circumstances if the merger is not completed. Certain aspects of the stock
option agreement would have the effect of precluding any alternative business
combination from being accounted for as a pooling-of-interests and may
discourage persons who before the effective time of the merger might have been
interested in acquiring all of or a significant interest in Union Carbide from
considering or proposing such an acquisition, even if such persons were
prepared to offer higher consideration per share for Union Carbide common stock
than that implicit in the 0.537 exchange ratio.
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MARKET PRICES AND DIVIDEND INFORMATION
Shares of Dow common stock are principally traded on the New York Stock
Exchange under the symbol "DOW," and shares of Union Carbide common stock are
traded on the New York Stock Exchange under the symbol "UK." Shares of Dow
common stock are also 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. Shares of Union Carbide common stock are also listed on
the Chicago, Pacific and Brussels Stock Exchanges. The following table sets
forth, for the periods indicated, the range of high and low per share sales
prices for Dow common stock and Union Carbide common stock as reported on the
New York Stock Exchange, as well as information concerning quarterly cash
dividends declared on such shares.
<TABLE>
<CAPTION>
Shares of Union
Shares of Dow Carbide
Common Stock Common Stock
------------------------------ -----------------------------
High Low Dividends High Low Dividends
----- ---- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter........... $ 84 3/4 $75 3/4 $0.75 $49 3/8 $40 1/2 $0.1875
Second Quarter.......... 90 1/4 78 1/8 0.87 50 5/8 42 1/2 0.1875
Third Quarter........... 95 13/16 85 5/8 0.87 56 13/16 46 11/16 0.4125
Fourth Quarter.......... 102 5/8 84 3/4 0.87 50 1/8 41 7/16 --
1998
First Quarter........... $101 7/16 $87 1/16 $0.87 $50 5/16 $40 1/8 $ 0.225
Second Quarter.......... 101 1/16 93 0.87 55 3/4 45 5/16 0.225
Third Quarter........... 99 74 11/16 0.87 55 5/8 36 3/4 0.225
Fourth Quarter.......... 100 13/16 83 11/16 0.87 46 1/4 37 7/16 0.225
1999
First Quarter........... $101 1/2 $85 1/2 $0.87 $47 3/4 $37 1/8 $ 0.225
Second Quarter.......... 138 92 1/2 0.87 56 7/8 45 5/16 0.225
Third Quarter........... 134 7/16 106 1/4 0.87 65 7/8 44 3/8 0.225
Fourth Quarter (through
October 4, 1999)....... 113 11/16 110 7/8 -- 57 3/16 55 9/16 --
</TABLE>
The payment of dividends by Dow in the future will depend on business
conditions, Dow's financial condition and earnings, and other factors. Since
1912 Dow has paid a dividend every quarter and has maintained or increased the
dividend amount throughout that time.
COMPARISON OF RIGHTS OF DOW STOCKHOLDERS
AND UNION CARBIDE STOCKHOLDERS
The rights of Union Carbide stockholders are currently governed by New York
corporate law and Union Carbide's certificate of incorporation and bylaws. Upon
completion of the merger, Union Carbide stockholders will become stockholders
of Dow and their rights as Dow stockholders will be governed by Delaware
corporate law and Dow's certificate of incorporation and bylaws. There are a
number of differences between the rights of Dow stockholders and Union Carbide
stockholders. The following is a brief summary of the material differences
between the rights of Dow stockholders and the rights of Union Carbide
stockholders and is qualified in its entirety by reference to the relevant
provisions of Delaware corporate law and New York corporate law and by Dow's
certificate of incorporation and bylaws and Union Carbide's certificate of
incorporation and bylaws, which charter documents are incorporated by reference
as exhibits to the registration statement of which this proxy
statement/prospectus is a part.
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Authorized Capital
Dow
Dow is authorized to issue 750,000,000 shares of all classes of stock,
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. 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. As of September
30, 1999, there were 219,297,129 shares of common stock issued and outstanding
and 1,324,306 shares of series A ESOP convertible preferred stock issued and
outstanding. Neither Dow's common stockholders nor preferred stockholders have
preemptive rights.
Dow's series A preferred stockholders are entitled to receive annual
dividends, payable semi-annually, of $6.67 per share. Dow's series A preferred
stock ranks senior to Dow's common stock as to the payment of dividends.
If Dow is liquidated, dissolved or wound up, series A preferred stockholders
are entitled to receive, out of Dow's remaining assets and subject to the
rights of holders of stock ranking senior to or on parity with the series A
preferred stock, $86.125 per share plus all accumulated and unpaid dividends.
Dow's series A preferred stock ranks senior to Dow's common stock as to the
distribution of assets upon liquidation, dissolution and winding up of Dow.
Series A preferred shares are currently convertible into shares of Dow
common stock at a conversion rate of one share of Dow common stock for one
share of series A preferred stock based on a fixed formula related to the
market price of Dow common stock.
All or part of the series A preferred stock is redeemable by Dow at any
time:
. after January 1, 2000, at $86.125 per share plus accrued and unpaid
dividends to the redemption date;
. at $86.125 per share plus accrued and unpaid dividends to the redemption
date if:
--there is a change in U.S. federal tax law that has the effect of
preventing Dow from claiming tax deductions on series A preferred stock
dividends;
--the Internal Revenue Service determines that Dow's employee stock
ownership plan does not comply with its rules or regulations;
--Dow terminates the employee stock ownership plan or future
contributions to its employee stock ownership plan because a change in
laws materially affects the employee stock ownership plan; or
--the redemption of series A preferred stock is necessary or appropriate
to satisfy any investment election provided to employee stock ownership
plan participants or to provide for distributions to be made under the
employee stock ownership plan; and
. at $90.43 per share plus accrued and unpaid dividends to the redemption
date if Dow terminates the employee stock ownership plan for a reason
other than a change in law that materially affects the employee stock
ownership plan.
Dow will redeem shares of series A preferred stock for $86.125 plus accrued
and unpaid dividends when and to the extent necessary to pay principal,
interest or premium due on any indebtedness incurred by the trustee for the
benefit of the employee stock option plan.
If Dow consolidates or merges with another entity and Dow's common stock is
exchanged, converted or changed by operation of law into:
. only "qualified employer securities," as defined in the Internal Revenue
Code and Employee Retirement Income Security Act of 1974, of a successor
corporation, series A preferred stock will be
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assumed by and become preferred stock of the successor corporation and be
convertible into qualified employer securities; or
. securities other than only qualified employer securities, series A
preferred stockholders will receive $90.43 per share plus accrued and
unpaid dividends.
Dow will be unable to complete a consolidation or merger if the series A
preferred shares outstanding are not assumed and authorized by the surviving
corporation.
Dow's series A preferred stock holders are entitled to vote on all matters
submitted to a vote of Dow's common stockholders and to vote together with
Dow's common stockholders as one class. Each share of Dow's series A preferred
stock is entitled to the number of votes equal to the number of shares of Dow
common stock into which a share of series A preferred stock could be converted
on the record date, rounded to the nearest one-tenth of a vote.
Dow is not prohibited, either under the merger agreement or otherwise, from
issuing additional Dow common shares or preferred shares.
Union Carbide
Union Carbide is authorized to issue 525,000,000 shares of all classes of
stock, 500,000,000 of which are common shares and 25,000,000 of which are
preferred shares. Union Carbide's board of directors is authorized, subject to
New York corporate law and without a vote of its stockholders, to establish and
issue shares of preferred stock in one or more series and to fix the number of
shares and the relative rights, preferences and limitations of any series of
preferred stock. As of October 4, 1999, there were approximately 133,850,000
shares of common stock issued and outstanding and no shares of preferred stock
issued and outstanding. Union Carbide's common stockholders do not have
preemptive rights.
According to the merger agreement, from the date of that agreement to the
effective time of the merger, Union Carbide is prohibited from issuing common
stock or preferred stock, except for awards of stock pursuant to existing Union
Carbide stock plans granted in the ordinary course of business and consistent
with past practice.
Boards of Directors
Dow
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 directors then holding office.
Union Carbide
Union Carbide's bylaws provide that the entire board of directors is elected
each year. A quorum of directors consists of a majority of Union Carbide's
entire board of directors.
Number, Filling of Vacancies and Removal of Directors
Dow
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 15 members on its board of
directors. After the effective time of the merger, Dow will add two members to
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 so 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
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voting power of Dow's outstanding stock entitled to vote generally in the
election of directors, voting together as a single class.
Union Carbide
Union Carbide's certificate of incorporation and bylaws provide that its
board of directors may not have less than three or more than nineteen members.
The actual number of directors is determined by a vote of a majority of the
entire board of directors. Currently, Union Carbide has nine members on its
board of directors. Except as otherwise required by New York corporate law,
Union Carbide's bylaws provide that vacancies on the board and newly created
directorships are filled by the vote of a majority of the directors
constituting a quorum. Directors can be removed for cause by a majority of the
stockholder votes cast on the matter.
Dividends
Dow
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.
Union Carbide
New York 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 or make other distributions, except when the
corporation is or would be insolvent after paying the dividend or other
distribution. Dividends may be declared and paid only out of the corporation's
surplus, so that, after the declaration, payment or distribution, the
corporation's net assets are at least equal to the corporation's stated
capital. Dividends on Union Carbide common stock are not cumulative. Union
Carbide's certificate of incorporation does not contain any additional
restrictions on the declaration or payment of dividends.
Corporations' Best Interests
Dow
Neither Delaware corporate law nor Dow's certificate of incorporation or
bylaws contains a provision authorizing the board of directors, in taking
action, to consider any interests other than the interests of stockholders.
Union Carbide
Under New York corporate law, a director of a New York corporation, in
taking action, including action that may involve a change in control of the
corporation, is entitled to consider, among other things:
. both the long-term and short-term interests of the corporation and its
stockholders; and
. the effects that the corporation's actions may have in the short-term or
long-term upon any of the following:
--the corporation's prospects for growth, development, productivity and
profitability;
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--the corporation's current employees;
--the corporation's retired employees and other beneficiaries receiving
or entitled to receive retirement, welfare or similar benefits pursuant
to a plan sponsored, or agreement entered into, by the corporation;
--the corporation's customers and creditors; and
--the corporation's ability to provide, as a going concern, goods,
services, employment opportunities and employment benefits and to
otherwise contribute to the communities in which it does business.
Indemnification
Dow
Dow's certificate of incorporation enables Dow to indemnify its directors,
officers, employees and agents to the extent permitted by Delaware corporate
law and Dow's bylaws.
Dow's bylaws provide that, to the full extent provided by Delaware corporate
law, Dow will indemnify any person who was or is a defendant or is threatened
to be made a defendant to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, because
the person:
. is or was a director, officer or employee of Dow; or
. is or was a director, officer or employee of Dow and is or was serving as
a director, trustee, member, officer, employee or agent of another entity
at Dow's request, against expenses (including attorneys' fees),
judgments, fines and settlement amounts paid that are actually and
reasonably incurred by the person in connection with the action, suit or
proceeding.
Dow's bylaws also provide that Dow may indemnify, to the full extent
permitted by Delaware corporate law, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
because the person:
. is or was a director, officer, employee or agent of Dow; or
. is or was a director, officer or employee of Dow and is or was serving as
a director, officer, trustee, member, officer, employee or agent of
another entity at Dow's request, against expenses (including attorneys'
fees), judgments, fines and settlement amounts paid that are actually and
reasonably incurred by the person in connection with the action, suit or
proceeding.
Delaware corporate law qualifies Dow's mandatory and optional
indemnification by requiring that the person must have:
. acted in good faith and in a manner that he or she reasonably believed to
be in, or not opposed to, the best interests of the corporation; and
. with respect to any criminal action or proceeding, had no reasonable
cause to believe that his or her conduct was unlawful.
Dow's bylaws enable Dow to advance expenses to a director or officer who is
defending or investigating a threatened or pending action, suit or proceeding
if the person promises, in writing, to repay the expenses if he or she is
ultimately determined not to qualify for indemnification by Dow. Such expenses
incurred by other employees and agents of Dow may be similarly paid on terms
and conditions, if any, as Dow's board of directors deems appropriate.
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Dow's indemnification and advancement of expenses continues after the person
is no longer a director, officer, employee or agent and inures to the benefit
of the person's heirs, executors and administrators. Indemnification and
advancement of expenses are not exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any:
. bylaw;
. agreement;
. contract;
. vote of stockholders or disinterested directors; or
. pursuant to the direction of any court of competent jurisdiction or
otherwise.
After the effective time of the merger, the indemnification provisions of
Dow's bylaws will also apply to the then-current directors of Union Carbide for
his or her actions as a director after the effective time of the merger.
Union Carbide
Union Carbide's bylaws provide that it will indemnify, to the fullest extent
permitted by law, each of its past, present and future directors, officers and
employees and their heirs, executors and administrators from costs and expenses
incurred by the person resulting from or relating to suits or claims arising
out of past or future service to Union Carbide or for another entity at Union
Carbide's request. The bylaws also provide that Union Carbide's stockholders
can indemnify the person from costs and expenses and that Union Carbide can
enter into agreements to indemnify the person from costs and expenses.
However, only to the extent prohibited by New York corporate law, Union
Carbide may not indemnify any director, officer, employee or other indemnified
person if:
. a judgment or other final adjudication adverse to the director, officer,
employee or other indemnified person establishes that his or her acts
were:
--committed in bad faith; or
--the result of active and deliberate dishonesty and were material to the
cause of action adjudicated; or
. he or she personally gained a financial profit or other advantage to
which he or she was not legally entitled.
Limitations on a Director's Liability
Dow
Dow's certificate of incorporation provides that, to the fullest extent
allowed by Delaware corporate law, a director of Dow will not be personally
liable to Dow or its stockholders for monetary damages for breach of his or her
fiduciary duty as a director.
Delaware corporate law prohibits Dow from eliminating or limiting the
liability of a director for any of the following:
. any breach of the director's duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. unlawful payments of a dividend or an unlawful stock purchase or
redemption; or
. any transaction in which the director derived an improper personal
benefit.
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Union Carbide
Union Carbide's certificate of incorporation provides that a person who is
or was a director will not be liable to Union Carbide or its stockholders for
damages for any breach of duty as a director, except to the extent liability
may not be eliminated or limited by applicable law.
New York corporate law prohibits Union Carbide from eliminating or limiting
the personal liability of a director for damages for any breach of duty under
the following circumstances:
. if a judgment or other final adjudication adverse to the director
establishes any of the following:
--his or her acts or omissions were in bad faith, involved intentional
misconduct or a knowing violation of law;
--he or she personally gained a financial profit or other advantage to
which he or she was not legally entitled; or
--his or her acts involved the declaration of an unlawful dividend or
other distribution, the unlawful purchase or redemption of Union
Carbide's own shares, the unlawful distribution of assets to
stockholders after dissolution, or the making of an unlawful loan to
directors; or
. for any act or omission of the director before the adoption of the
provision in Union Carbide's certificate of incorporation that limits the
liability of Union Carbide's directors for breach of duty.
Special Meetings of Stockholders
Dow
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.
Union Carbide
Union Carbide's bylaws provide that a special meeting of stockholders may be
called at any time by the board of directors, the chairman of the board, a
president or a vice-chairman.
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Advance Notice Provisions for Stockholder Proposals Other than Election of
Directors
Dow
Dow's bylaws provide that a stockholder may bring business before an annual
stockholders' meeting if the stockholder is a stockholder on the 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
"Comparison of Rights of Dow Stockholders and Union Carbide Stockholders--
Special Meetings of Stockholders."
Union Carbide
Union Carbide's bylaws provide that a stockholder may propose that business
be brought before an annual stockholders' meeting if the stockholder gives
Union Carbide's secretary written notice of business that is a proper matter
for stockholder action:
. no earlier than 120 days or later than the close of business on the 90th
day before the anniversary date of the last annual meeting; or
. if the annual meeting is more than 30 days before or more than 60 days
after the anniversary date of the last annual meeting, the stockholder's
notice must be given no earlier than the close of business on the 120th
day before the annual meeting and no later than the close of business on
the 90th day before the annual meeting or the 10th day following the day
on which a public announcement of the annual meeting date is first made
by Union Carbide.
The notice must include the following:
. a brief description of any business the stockholder proposes to bring
before the meeting, the reasons for conducting the business at the
meeting and any material interest in the business of the stockholder, and
any beneficial owner on whose behalf the stockholder is making the
proposal;
. the name and address of the stockholder and beneficial owner; and
. the class and number of shares of Union Carbide's stock that are owned
beneficially and of record by the stockholder and beneficial owner.
Advance Notice Provisions for Stockholder Nominations of Directors at an Annual
Meeting
Dow
Dow's bylaws provide that a stockholder may nominate a person for election
to the board of directors at an annual stockholders' meeting if the stockholder
gives notice to Dow's secretary:
. no more than 120 days and no less than 60 days before the anniversary
date of the first mailing of proxy materials for the last annual meeting;
or
. if the annual meeting is more than 30 days before or after the
anniversary date of the last annual meeting, Dow must receive the
stockholder's notice no later than the close of business on the 10th day
after the earlier of the day on which notice of the annual meeting date
was mailed or publicly disclosed.
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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 "Comparison of Rights
of Dow Stockholders and Union Carbide Stockholders--Special Meetings of
Stockholders."
Union Carbide
Union Carbide's bylaws provide that a stockholder may nominate one or more
persons for election to the board of directors at an annual meeting under the
same requirements as for raising business proposals.
However, if the number of directors is increased and Union Carbide's public
announcement naming all of the nominees for director or stating the size of the
increased board is made less than 100 days prior to the first anniversary of
the prior year's annual meeting, a stockholder's notice for nominations for new
board positions created by the increase must be given to Union Carbide's
secretary no later than the close of business on the 10th day after the public
announcement is first made.
The notice must include the following:
. for each nominee, all information required to be disclosed in proxy
solicitations for election of directors in an election contest or
otherwise required under the Securities Exchange Act and related rules;
. the name and address of the stockholder and beneficial owner; and
. the class and number of shares of Union Carbide's stock that are owned
beneficially and of record by the stockholder and beneficial owner.
Advance Notice Provisions for Stockholder Nominations of Directors at a Special
Meeting
Dow
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 "Comparison of Rights of Dow Stockholders
and Union Carbide Stockholders--Advance Notice Provisions for Stockholder
Nominations of Directors at an Annual Meeting."
Union Carbide
Union Carbide's bylaws provide that a stockholder may nominate a person for
election to the board of directors at a special meeting if the stockholder
gives written notice of the nomination to Union Carbide's secretary no earlier
than the close of business on the 120th day prior to the special meeting and no
later than:
. the 90th day prior to the special meeting; or
. the 10th day after the day the public announcement is first made of the
special meeting date and of the persons proposed by Union Carbide's board
of directors to be elected to the board of directors at the meeting.
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Union Carbide's bylaws do not contain a provision regarding the contents of
a stockholder's notice for nominations for election to the board of directors
at a special meeting.
Stockholder Lists and Inspection Rights
Dow
Under Delaware corporate law, a stockholder may examine a list of
stockholders, for any reason reasonably related to the person's interest as a
stockholder during ordinary business hours, for at least 10 days before a
stockholders' meeting. The list is also to be produced and kept available
during the entire meeting and may be inspected by any stockholder who attends
the meeting. A stockholder also may inspect the corporation's stock ledger and
its other books and records for any reason reasonably related to the person's
interest as a stockholder.
Dow's bylaws provide that a list of the name, address and number of
registered shares of each stockholder entitled to vote at a stockholders'
meeting will be open to examination by any stockholder for at least 10 days
before the meeting and during the meeting.
Union Carbide
New York corporate law provides that a stockholder of record has a right to
inspect the corporation's minutes and record of stockholders, during usual
business hours, on at least five business days' written request. A stockholder
can examine, or can authorize, in writing, an agent or attorney to examine, the
stockholder minutes and record of stockholders and can make extracts from those
documents for any purpose reasonably related to the stockholder's interest as a
stockholder.
A stockholder can also request, in writing, that the corporation give or
mail to him or her an annual balance sheet and profit and loss statement for
the preceding fiscal year, and if any interim balance sheet or profit and loss
statement has been distributed to stockholders or otherwise been made available
to the public, the most recent balance sheet or profit and loss statement.
New York corporate law provides that a corporation can deny a stockholder or
other person these inspection rights if the stockholder or other person refuses
to provide an affidavit that:
. the inspection is only for the business of the corporation; and
. that he or she has not, within the last five years:
--sold or offered to sell any stockholder list of any corporation; or
--aided or abetted any person in obtaining a stockholder list in order to
sell it.
Union Carbide's bylaws provide that a stockholder has the right to inspect
any book, record or document of the corporation to the extent that such right
is:
. conferred by New York corporate law; or
. authorized by Union Carbide's board of directors or the chairman of Union
Carbide's board of directors.
Stockholder Action by Written Consent
Dow
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.
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Union Carbide
Under New York corporate law, any action required or permitted to be taken
by stockholders may be taken without a meeting by written consent signed by
holders of all outstanding shares entitled to vote on the matter, or if the
corporation's certificate of incorporation permits, signed by the holders of
outstanding stock having not less than the minimum number of votes necessary to
authorize or take the action at a meeting at which all shares entitled to vote
on the matter were present and voted. Union Carbide's certificate of
incorporation does not contain this less restrictive provision. As a result,
stockholders of Union Carbide may only act without a meeting by unanimous
written consent.
Transactions with Interested Stockholders and a Merger or Sale of Assets
Dow
Delaware corporate law requires the approval of the board of directors and a
majority of a corporation's outstanding stock entitled to vote to authorize a
merger or consolidation unless the company's certificate of incorporation
requires a greater percentage. Unless required by a corporation's certificate
of incorporation, stockholder approval, however, is not required in certain
cases, such as where:
. either no shares of common stock of the surviving corporation and no
shares, securities or obligations convertible into common stock are to be
issued or delivered in the merger; or
. the authorized and unissued shares or the treasury shares of common stock
of the surviving corporation to be issued or delivered in the merger,
plus those initially issuable upon conversion of any other shares,
securities or obligations to be issued or delivered in the merger;
do not exceed 20% of the shares of common stock of the corporation outstanding
immediately prior to the effective date of the merger. A sale of all or
substantially all of a Delaware corporation's assets or a voluntary dissolution
of a Delaware corporation requires the vote of a majority of the board of
directors and a majority of the corporation's outstanding shares entitled to
vote on the matter unless the company's certificate of incorporation requires a
greater percentage. Dow's certificate of incorporation does not require a
greater percentage, except as described below.
Delaware corporate law generally defines an interested stockholder as a
person, other than the corporation and any direct or indirect majority owned
subsidiary of the corporation:
. who is the direct or indirect owner of 15% or more of the outstanding
voting stock of the corporation; or
. is an affiliate or associate of the corporation and was the direct or
indirect owner of 15% or more of the outstanding voting stock of the
corporation at any time within the three-year period immediately prior to
the date it asked for determination of its status as an interested
stockholder; and
. the affiliates and associates of that person.
Delaware corporate law prohibits an interested stockholder from engaging in
a business combination with the Delaware corporation for three years following
the time of becoming an interested stockholder. This three-year waiting period
does not apply when:
. prior to the time of becoming an interested stockholder, the board of
directors approves either the business combination or the transaction
that resulted in the stockholder becoming an interested stockholder;
. as a result of becoming an interested stockholder, the stockholder owned,
excluding shares owned by directors who are also officers and certain
employee stock plans, at least 85% of the outstanding voting stock of the
corporation at the time the transaction began; or
. at or after the time of becoming an interested stockholder, the business
combination is approved by the board of directors and authorized at a
meeting of stockholders by a vote of at least two-thirds of the
outstanding voting stock that is not owned by the interested stockholder.
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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.
Delaware corporate law allows a corporation to specify in its certificate of
incorporation or bylaws that it will not be governed by the section relating to
transactions with interested stockholders. Dow has not made that election in
its certificate of incorporation or bylaws.
Dow's certificate of incorporation provides that, in addition to the vote
required pursuant to Delaware corporate law, the vote of stockholders owning at
least 80% of the voting power of the shares of capital stock entitled to vote
generally in the election of directors, voting together as a single class, is
required to approve any of the following business combination transactions:
. a merger or consolidation of Dow or a subsidiary of which Dow ultimately
owns 50% or more of the capital stock with:
--an interested stockholder; or
--any other individual or entity that, after the merger or consolidation,
would be an affiliate or associate of an interested stockholder;
. a sale, lease, exchange, mortgage, pledge, transfer or other disposition,
in one or more transactions with or on behalf of an interested
stockholder or an affiliate or associate of an interested stockholder, of
any assets of Dow or any subsidiary of Dow that constitutes 5% or more of
Dow's total consolidated assets as of the end of the most recent quarter;
. the issuance or transfer by Dow or any of its subsidiaries of any
securities of Dow or its subsidiaries in one or more transactions to, or
proposed by or on behalf of, an interested stockholder or an affiliate or
associate of an interested stockholder in exchange for cash, securities
or other property constituting not less than 5% of Dow's consolidated
total assets as of the end of the most recent quarter;
. the adoption of a plan or proposal for liquidation or dissolution of Dow
or any spin-off or split-up of any kind of Dow or any subsidiary of Dow
that is proposed by or on behalf of an interested stockholder or an
affiliate or associate of an interested stockholder; or
. any reclassification of securities or recapitalization of Dow, or any
merger or consolidation of Dow with a subsidiary of Dow or other
transaction that has the direct or indirect effect of increasing the
percentage of the outstanding shares of:
--any class of equity securities of Dow or any subsidiary of Dow; or
--any class of securities of Dow or any subsidiary that are convertible
into equity securities of Dow or any subsidiary that are owned directly
or indirectly by an interested stockholder and all of its affiliates and
associates.
However, the vote of only a majority of the stockholders entitled to vote
generally in the election of directors, voting together as a single class, is
required to approve a business combination transaction that:
. has been approved by a majority of continuing directors, even if they
constitute less than a quorum; or
. meets certain price and consideration conditions and procedures.
A "continuing director" is:
--any member of the board of directors who is not an interested
stockholder involved in a business combination described above or an
affiliate, associate, employee, agent or nominee of an interested
stockholder or relative of any of the foregoing persons, and was a
member of the board before the interested stockholder became an
interested stockholder; or
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--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.
Union Carbide
Under New York corporate law, a merger, consolidation, dissolution or
disposition of substantially all of the assets of a corporation requires the
approval of the corporation's board of directors and approval of two-thirds of
all outstanding shares entitled to vote, unless the corporation was
incorporated after February 22, 1998, or the corporation's certificate of
incorporation expressly adopts a lower requirement, in which case a majority of
the votes of the shares entitled to vote is required. Union Carbide's
certificate of incorporation does not provide for a lower standard, so the
approval of two-thirds of all outstanding shares is necessary to adopt the
merger agreement.
New York corporate law defines an interested stockholder as a person who:
. beneficially owns 20% or more of a corporation's outstanding voting
stock; or
. is an affiliate or associate of the corporation and at any time within
the five-year period before the date in question was the beneficial owner
of 20% or more of the outstanding voting stock of the corporation.
New York corporate law prohibits certain business combinations, including
mergers and sales of 10% of a corporation's assets, between a New York
corporation and an interested stockholder:
. for five years after the date the stockholder becomes an interested
stockholder, unless prior to the stockholder becoming an interested
stockholder, the board of directors approves the business combination or
the purchase of stock that resulted in the stockholder becoming an
interested stockholder; and
. at any time unless:
--the business combination is approved by stockholders representing a
majority of the outstanding voting stock that is not beneficially owned
by the interested stockholder or any affiliate or associate of the
interested stockholder at a meeting called for that purpose not earlier
than five years after the person becomes an interested stockholder; or
--the business combination meets certain statutory fair price
requirements.
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A New York corporation may adopt an amendment to its bylaws expressly
electing not to be governed by the interested stockholder law. The amendment
must be approved by the affirmative vote of the holders, other than interested
stockholders and their affiliates and associates, of a majority of the
outstanding voting stock, excluding the voting stock of interested stockholders
and their affiliates and associates. Such amendment, however, will not become
effective until 18 months after such stockholder vote and will not apply to any
business combination with an interested stockholder who was an interested
stockholder on or before the effective date of such amendment. Union Carbide
has not amended its bylaws and remains governed by the interested stockholder
law.
Dissenters' or Appraisal Rights
Dow
Under Delaware corporate law, appraisal rights may be available in
connection with a statutory merger or consolidation in certain specific
situations. Appraisal rights are not available when a corporation is the
surviving corporation, and no vote of its stockholders is required to approve
the merger or consideration. In addition, no appraisal rights are available to
holders of shares of any class of stock that is either:
. listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc.; or
. held of record by more than 2,000 stockholders, unless such stockholders
are required by the terms of the merger or consolidation to accept
anything except:
--shares of stock of the surviving corporation;
--shares of stock of other than the surviving corporation that are, at
the effective date of the merger or consolidation:
--listed on a national securities exchange;
--designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers,
Inc.; or
--held of record by more than 2,000 stockholders;
--cash instead of fractional shares; or
--any combination of the above.
Stockholders who perfect their appraisal rights are entitled to receive cash
from the corporation equal to the fair market value of their shares as
established by judicial appraisal. Corporations may enlarge these statutory
rights by including in their certificate of incorporation a provision allowing
appraisal rights in any merger or consolidation in which the corporation is a
constituent corporation or in which there is a sale of all or substantially all
of the assets of the corporation. Dow's certificate of incorporation does not
enlarge these rights.
Union Carbide
Under New York corporate law, a stockholder has the right to receive the
fair value of his or her shares and other rights and benefits provided under
New York corporate law if that stockholder:
. is entitled to vote on a plan of merger or consolidation to which the
corporation is a party; and
. does not assent to that plan of merger or consolidation, sale or
disposition of all or substantially all of the assets or certain share
exchanges.
A stockholder's right to receive payment of the fair value of his shares,
however, is not generally available:
. to a stockholder of the surviving corporation in a merger, unless the
merger adversely affects certain stockholder rights; or
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. to a stockholder whose shares are listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc.
Union Carbide stockholders do not have appraisal rights in the merger.
Amendments to Certificates of Incorporation and Bylaws
Dow
Dow's certificate of incorporation requires the vote of stockholders holding
at least 80% of the voting power of all shares of capital stock then entitled
to vote generally in the election of directors, voting together as a single
class, to amend, alter, change, repeal or adopt any provision of the
certificate of incorporation that is inconsistent with any provision in Dow's
certificate of incorporation relating to:
. authorized capital stock;
. the powers of, the number of, the division into classes of, the filling
of vacancies on and the removal of members of the board of directors;
. indemnification of Dow's directors, officers, employees and agents;
. the approval of business combination transactions;
. stockholders' meetings;
. amendments to Dow's bylaws; or
. amendments to Dow's certificate of incorporation;
unless the amendment, alteration, change, repeal or adoption of any
inconsistent provision or provisions is declared advisable by the board of
directors by vote of:
. two-thirds of the entire board of directors; and
. a majority of continuing directors.
All other amendments to Dow's certificate of incorporation must be approved
by at least 50% of the voting power of all shares of capital stock then
entitled to vote generally in the election of directors, voting together as a
single class.
Dow's certificate of incorporation and bylaws provide that its board of
directors is authorized to amend, alter, change, adopt or repeal Dow's bylaws.
Stockholders of Dow representing at least 80% of the voting power of all shares
of capital stock then entitled to vote generally in the election of directors,
voting together as a single class, are required to amend, alter, change, adopt
or repeal Dow's bylaws, unless the proposed amendment, alteration, change,
adoption or repeal has been approved by:
. two-thirds of the entire board of directors; and
. a majority of continuing directors.
Union Carbide
Under New York corporate law, unless a higher vote is required in a
corporation's certificate of incorporation, an amendment to a corporation's
certificate of incorporation must be approved by the board of directors and
then by the holders of a majority of all outstanding shares entitled to vote on
the proposed amendment. Union Carbide's certificate of incorporation does not
contain a provision increasing the vote required to amend its certificate of
incorporation.
Under New York corporate law, except as otherwise provided in its
certificate of incorporation or a bylaw adopted by the stockholders, a
corporation's bylaws may be adopted, amended or repealed by a majority of votes
cast by the shares then entitled to vote in the election of directors. Bylaws
may also be adopted, amended or repealed by the board of directors when so
provided in the corporation's certificate of incorporation or pursuant to a
bylaw adopted by the stockholders, but any bylaw adopted by the board of
directors may be amended or repealed by the stockholders. Union Carbide's
certificate of incorporation and bylaws provide that the stockholders or a
majority of the entire board can adopt, amend or repeal the bylaws.
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ADDITIONAL INFORMATION
Deadline for Union Carbide Stockholder Proposals and Dow Stockholder Proposals
Union Carbide's 2000 Annual Meeting
If the merger is not completed, Union Carbide plans to hold an annual
meeting on April 22, 2000.
Stockholders' eligibility to submit proposals for inclusion in Union
Carbide's annual meeting proxy statement, proper subjects for such proposals
and the form of stockholder proposals are regulated by Rule 14a-8 under Section
14(a) of the Securities Exchange Act of 1934. Each proposal submitted should be
sent to Union Carbide's Secretary, 39 Old Ridgebury Road, Danbury, Connecticut
06817-0001. The stockholder or his or her representative must appear in person
at Union Carbide's annual meeting and must present the proposal, unless he or
she can show good cause for not doing so.
Stockholder proposals for inclusion in Union Carbide's 2000 annual meeting
proxy statement must be received at Union Carbide's principal executive office
on or before November 16, 1999. Union Carbide plans to hold its 2000 annual
meeting in Danbury, Connecticut on April 22, 2000.
Union Carbide's bylaws require stockholders who intend to propose the
nominations of persons for election as directors or other business to be
considered by Union Carbide's stockholders at the annual meeting (other than
stockholder proposals included in the annual meeting proxy statement pursuant
to Rule 14a-8) to give written notice to Union Carbide's Secretary at least 90
days but no more than 120 days before the anniversary date of Union Carbide's
previous year's annual meeting. Matters to be raised by a stockholder at Union
Carbide's 2000 annual meeting must be submitted on or after December 30, 1999,
but no later than January 29, 2000. The written notice must, as to the election
of a director, include information relating to a person or persons nominated
for director and the person's written consent to be named as nominee and to
serve, if elected; or, as to any other business, a brief description of the
business, the reasons for conducting such business and any material interest in
such business by the stockholder bringing the proposal before the meeting.
Dow's 2000 Annual Meeting
If Dow stockholders wish to submit a proposal to be considered for inclusion
in the proxy material for Dow's 2000 annual meeting, they must send it to the
Office of the Corporate Secretary, The Dow Chemical Company, 2030 Dow Center,
Midland, Michigan 48674. Under the rules of the Securities and Exchange
Commission, proposals must be received no later than November 24, 1999, to be
eligible for inclusion in Dow's 2000 annual meeting proxy statement.
Dow's Committee on Directors will continue its long-standing practice of
accepting stockholders' suggestions of candidates to consider as potential Dow
board members, as part of the committee's periodic review of the size and
composition of Dow's board and its committees. Such recommendations may be sent
to the Committee on Directors through the Office of the Corporate Secretary at
The Dow Chemical Company, 2030 Dow Center, Midland, Michigan 48674.
Under Dow's bylaws, Dow stockholders wishing to formally nominate a person
for election as a Dow director at Dow's 2000 annual meeting must notify the
secretary of Dow at the address above in writing between November 24, 1999, and
January 24, 2000. Such notices must comply with the provisions set forth in
Dow's bylaws. A copy of the relevant provisions of Dow's bylaws will be sent
without charge to any Dow stockholder who requests it in writing. Such requests
should be addressed to the Office of the Corporate Secretary at the address
noted above.
Under Dow's bylaws, if a Dow stockholder wishes to raise items of proper
business at Dow's 2000 annual meeting, the stockholder must give advance
written notification to the Office of the Corporate Secretary at the address
above. For Dow's 2000 annual meeting, written notice must be given between
November 24, 1999, and
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January 24, 2000. Such notices must comply with the stockholder's bylaws
provisions and include the stockholder's name and address, representation that
the stockholder is a holder of Dow common stock entitled to vote at such annual
meeting and intends to appear in person or by proxy at the annual meeting,
disclosure of any material interest in such business, description of the
business proposed, and the reasons for conducting such business. A copy of the
relevant provisions of its bylaws will be sent without charge to any Dow
stockholder who requests it in writing. Such requests should be addressed to
the Office of the Corporate Secretary at the address noted.
Legal Matters
The validity of the securities to be issued in the merger will be passed
upon for Dow by Mayer, Brown & Platt, Chicago, Illinois. The opinions
underlying the discussion set forth under "The Merger Agreement and the
Merger--Material Federal Income Tax Considerations" in this proxy
statement/prospectus and the federal income tax considerations of the merger to
Union Carbide and its stockholders will be provided to Union Carbide by
Sullivan & Cromwell, New York, New York.
Experts
The Dow consolidated financial statements and related financial statement
schedule incorporated by reference in this proxy statement/prospectus from
Dow's Annual Report on Form 10-K for the year ended December 31, 1998 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.
KPMG LLP, independent public accountants, have audited Union Carbide's
consolidated financial statements and schedule included in Union Carbide's
Annual Report on Form 10-K for the year ended December 31, 1998, as set forth
in their report, which is incorporated by reference in this proxy
statement/prospectus. Union Carbide's consolidated financial statements and
schedule are incorporated by reference in reliance upon the reports of KPMG
LLP, given upon its authority as experts in accounting and auditing.
Where You Can Find More Information
Dow has filed with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933 that registers the distribution of
the shares of Dow common stock to be issued to Union Carbide stockholders in
connection with the merger. The registration statement, including the attached
exhibits and schedules, contains additional relevant information about Dow and
Dow common stock. The rules and regulations of the Securities and Exchange
Commission allow Dow and Union Carbide to omit certain information included in
the registration statement from this proxy statement/prospectus.
In addition, Dow and Union Carbide file 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
450 Fifth Street, N.W. 7 World Trade Center Office
Room 1024 Suite 1300 Citicorp Center
Washington, D.C. 20549 New York, New York 10048 500 West Madison
1-800-SEC-0330 Street
Suite 1400
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.
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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 and Union Carbide, 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 and Union Carbide at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
The Securities and Exchange Commission allows Dow and Union Carbide to
"incorporate by reference" information into this proxy statement/prospectus.
This means that the companies can disclose important information to you by
referring you to another document filed separately with the Securities and
Exchange Commission. The information incorporated by reference is considered to
be a part of this proxy statement/prospectus, except for any information that
is superseded by information that is included directly in this document.
This proxy statement/prospectus incorporates by reference the documents
listed below that Dow and Union Carbide have previously filed with the
Securities and Exchange Commission. The documents contain important information
about Dow and Union Carbide and their respective financial conditions.
<TABLE>
<CAPTION>
Dow's Filings with the Commission Period
--------------------------------- ------
<S> <C>
Annual Report on Form 10-K......................... Year ended December 31, 1998
Quarterly Reports on Form 10-Q..................... Quarters ended:
.March 31, 1999
.June 30, 1999
Current Report on Form 8-K......................... Filed on August 4, 1999
<CAPTION>
Union Carbide's Filings with the Commission Period
------------------------------------------- ------
<S> <C>
Annual Report on Form 10-K......................... Year ended December 31, 1998
Quarterly Reports on Form 10-Q..................... Quarters ended:
.March 31, 1999
.June 30, 1999
Current Reports on Form 8-K........................ Filed on:
.January 25, 1999
.March 16, 1999
.April 7, 1999
.April 26, 1999
.July 26, 1999
.August 5, 1999
.September 22, 1999
.September 24, 1999
</TABLE>
Dow and Union Carbide incorporate by reference additional documents that
either company may file with the Securities and Exchange Commission between the
date of this proxy statement/prospectus and the date of the Union Carbide
stockholders' meeting. Those documents include periodic reports, such as Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K, as well as proxy statements.
Dow has supplied all information contained or incorporated by reference in
this proxy statement/prospectus relating to Dow, and Union Carbide has supplied
all such information relating to Union Carbide.
You can obtain any of the documents incorporated by reference in this
document through Dow or Union Carbide, as the case may be, or from the
Securities and Exchange Commission's web site at the address
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described above. Documents incorporated by reference are available from the
companies without charge, excluding any exhibits to those documents unless the
exhibit is specifically incorporated by reference as an exhibit in this proxy
statement/prospectus. You can obtain documents incorporated by reference in
this proxy statement/prospectus by requesting them in writing or by telephone
from the appropriate company at the following addresses:
<TABLE>
<CAPTION>
Dow Union Carbide
--- -------------
<S> <C>
John Scriven Bruce D. Fitzgerald
Vice President, General Counsel Vice President, General Counsel
and Secretary and Secretary
Office of the Corporate Secretary Union Carbide Corporation
The Dow Chemical Company 39 Old Ridgebury Road
2030 Dow Center Danbury, Connecticut 06817-0001
Midland, Michigan 48674 Telephone: 203-794-2000
Telephone: 517-636-1792
</TABLE>
If you would like to request documents, please do so by Tuesday, November
23, 1999, to receive them before the meeting. Please be sure to include your
complete name and address in your request. If you request any incorporated
documents, we will mail them to you by first class mail, or another equally
prompt means, within one business day after we receive your request.
Neither Dow nor Union Carbide has authorized anyone to give any information
or make any representation about the merger, Dow or Union Carbide that is
different from, or in addition to, that contained in this proxy
statement/prospectus or in any of the materials that we have incorporated into
this document. Therefore, if anyone does give you information of this sort, you
should not rely on it. If you are in a jurisdiction where offers to exchange or
sell, or solicitations of offers to exchange or purchase, the securities
offered by this document or the solicitation of proxies is unlawful, or if you
are a person to whom it is unlawful to direct these types of activities, then
the offer presented in this document does not extend to you. The information
contained in this document speaks only as of the date of this document unless
the information specifically indicates that another date applies.
Forward-Looking Statements
This proxy statement/prospectus, including information included or
incorporated by reference in this document, contains certain forward-looking
statements with respect to the financial condition, results of operations,
plans, objectives, future performance and business of each of Dow and Union
Carbide, as well as certain information relating to the merger, including,
without limitation, statements preceded by, followed by or that include the
words "believes," "expects," "anticipates," "estimates" or similar expressions.
Those forward-looking statements involve certain risks and uncertainties. For
those statements, Dow and Union Carbide claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those
contemplated by such forward-looking statements due to, among others, the
factors described under "Risk Factors" in this proxy statement/prospectus and
the following factors:
. competitive pressures among developers and manufacturers of chemicals,
plastics and agricultural products and services may increase
significantly;
. general economic, financial or business conditions, either
internationally, nationally or in the states in which Dow or Union
Carbide is doing business, may be less favorable than expected, resulting
in, among other things, a reduced demand for chemicals, plastics and
agricultural products and services;
. supply/demand balance for the products of Dow and Union Carbide;
. feedstock availability and costs;
. difficulties in achieving expected synergies;
63
<PAGE>
. legislative or regulatory changes may adversely affect the business in
which Dow and Union Carbide are engaged;
. technological changes, including "Year 2000" data systems compliance
issues, may be more difficult or expensive than anticipated;
. changes may occur in the securities markets;
. failure to achieve technology objectives or complete projects on schedule
and on budget; and
. currency exchange risk.
64
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following describes the pro forma effect of the merger on (1) the
unaudited historical condensed statements of income for the six months ended
June 30, 1998 and 1999, (2) the condensed statements of income for the years
ended December 31, 1996, 1997 and 1998 and (3) the unaudited historical
condensed balance sheet as of June 30, 1999 of Dow and Union Carbide under the
assumptions and adjustments described below.
The pro forma adjustments reflect the application of pooling-of-interests
accounting discussed in "The Merger Agreement and the Merger--Anticipated
Accounting Treatment." The unaudited pro forma combined condensed financial
information and the accompanying notes should be read in conjunction with the
historical financial statements and related notes of Dow and Union Carbide,
incorporated by reference in this proxy statement/prospectus.
The unaudited pro forma combined condensed financial information is provided
for informational purposes only and does not purport to represent what the
combined financial position and results of operations would actually have been
had the merger and other pro forma adjustments in fact occurred at the dates
indicated. The following unaudited pro forma combined condensed statements of
income and unaudited pro forma combined condensed balance sheet illustrate the
estimated effects of the merger as if that transaction had occurred for the
statements of income as of January 1, 1996, and for the balance sheet as of
June 30, 1999. The unaudited pro forma combined condensed statements of income
do not include the impact of nonrecurring charges or credits directly
attributable to the transaction.
For financial accounting purposes, it is expected that the merger will be
accounted for using the pooling-of-interests method of accounting. Accordingly,
it is expected that (1) the recorded historical cost basis of the assets and
liabilities of Dow and Union Carbide will be carried forward to the combined
company, (2) results of operations of the combined company will include income
of Dow and Union Carbide for the entire fiscal period in which the combination
occurs and (3) the historical results of operations of the separate companies
for fiscal years before the merger will be combined and reported as the results
of operations of the combined company. No adjustments have been made to the
historical financial statements of Dow or Union Carbide to conform the
accounting policies of the combining companies as the nature and amounts of
such adjustments are not expected to be significant. In addition, no
adjustments have been made in the unaudited pro forma combined condensed
financial information for transactions between Dow and Union Carbide as such
transactions were determined to be immaterial.
65
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
June 30, 1999
(in millions)
<TABLE>
<CAPTION>
The Dow Union Merger
Chemical Carbide Pro Forma Combined
Company Corporation Adjustments Pro Forma
-------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....... $ 218 $ 41 $ (75)(1) $ 659
475 (2)
Accounts and notes receivable... 4,065 1,075 -- 5,140
Inventories..................... 2,593 599 -- 3,192
Other current assets............ 574 247 6 (4) 827
------- ------- ------- -------
Total current assets.......... 7,450 1,962 406 9,818
------- ------- ------- -------
Investments:
Investment in nonconsolidated
affiliates..................... 1,379 561 -- 1,940
Other investments and noncurrent
receivables.................... 2,720 119 -- 2,839
------- ------- ------- -------
Total investments............. 4,099 680 -- 4,779
------- ------- ------- -------
Net Property...................... 8,226 4,351 -- 12,577
------- ------- ------- -------
Total Other Assets................ 3,330 472 569 (4) 4,371
------- ------- ------- -------
Total Assets.................. $23,105 $ 7,465 $ 975 $31,545
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Notes payable and long-term debt
due within one year............ $ 1,286 $ 419 -- $ 1,705
Accounts payable................ 2,394 259 -- 2,653
Other current liabilities....... 2,313 684 $ 6 (4) 3,003
------- ------- ------- -------
Total current liabilities..... 5,993 1,362 6 7,361
------- ------- ------- -------
Long-Term Debt.................... 4,063 2,044 -- 6,107
------- ------- ------- -------
Other Noncurrent Liabilities:
Deferred income tax
liabilities--noncurrent........ 785 -- 977 (4) 1,762
Pension and other postretirement
benefits--noncurrent........... 1,870 439 20 (4) 2,329
Other noncurrent obligations.... 2,241 1,141 (428)(4) 2,954
------- ------- ------- -------
Total other noncurrent
liabilities.................. 4,896 1,580 569 7,045
------- ------- ------- -------
Minority Interest in Subsidiary
Companies........................ 406 38 -- 444
------- ------- ------- -------
Temporary Equity.................. 53 -- -- 53
------- ------- ------- -------
Stockholders' Equity:
Common stock.................... 818 157 (157)(3) 818
Additional paid-in capital...... 891 114 433 (2) --
(4,892)(3)
3,454 (3)
Retained earnings............... 13,242 3,404 (75)(1) 13,117
(3,454)(3)
Unearned employee compensation--
ESOP and other equity
adjustments.................... -- (58) -- (58)
Accumulated other comprehensive
loss........................... (300) (157) -- (457)
Treasury stock, at cost......... (6,957) (1,019) 42 (2) (2,885)
5,049 (3)
------- ------- ------- -------
Net stockholders' equity...... 7,694 2,441 400 10,535
------- ------- ------- -------
Total Liabilities and
Stockholders' Equity......... $23,105 $ 7,465 $ 975 $31,545
======= ======= ======= =======
</TABLE>
66
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
For the six months ended June 30, 1999
(in millions, except per share data)
<TABLE>
<CAPTION>
The Dow Union Merger Combined
Chemical Carbide Pro Forma Pro
Company Corporation Adjustments Forma
-------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Net Sales........................... $9,036 $2,820 -- $11,856
------ ------ ----- -------
Cost of sales..................... 6,671 2,157 $ 187 (4) 9,015
Research and development expenses. 415 76 5 (4) 496
Selling, general and
administrative expenses.......... 764 127 -- 891
Amortization of intangibles....... 54 -- 7 (4) 61
Depreciation and amortization..... -- 199 (199)(4) --
Partnership income................ -- 2 (2)(4) --
Insurance and finance company
operations, pretax income........ 61 -- 10 (4) 71
Equity in earnings (losses) of
nonconsolidated affiliates....... 47 (50) 2 (4) (1)
Sundry income--net................ 157 41 (16)(4) 182
------ ------ ----- -------
Earnings Before Interest, Income
Taxes and Minority Interests....... 1,397 254 (6) 1,645
------ ------ ----- -------
Interest income................... 52 -- 6 (4) 58
Interest expense and amortization
of debt discount................. 241 66 -- 307
------ ------ ----- -------
Income Before Income Taxes and
Minority Interests................. 1,208 188 -- 1,396
------ ------ ----- -------
Provision for income taxes........ 431 59 -- 490
Minority interests' share in
income........................... 35 2 -- 37
Preferred stock dividends......... 3 -- -- 3
------ ------ ----- -------
Earnings before cumulative effect of
change in accounting principle..... 739 127 -- 866
------ ------ ----- -------
Cumulative effect of change in
accounting principle............. -- (20) -- (20)
------ ------ ----- -------
Net Income Available for Common
Stockholders....................... $ 739 $ 107 -- $ 846
====== ====== ===== =======
Share Data:
Earnings before cumulative effect
of change in accounting principle
per common share--basic.......... $ 3.35 $ 0.95 (5) $ 2.93
Earnings per common share--basic.. 3.35 0.80 (5) 2.86
Earnings before cumulative effect
of change in accounting principle
per common share--diluted........ 3.30 0.93 (5) 2.88
Earnings per common share--
diluted.......................... 3.30 0.79 (5) 2.82
Weighted average common shares
outstanding--basic............... 220.4 133.0 (5) 295.6
Weighted average common shares
outstanding--diluted............. 224.4 136.1 (5) 301.3
</TABLE>
67
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
For the six months ended June 30, 1998
(in millions, except per share data)
<TABLE>
<CAPTION>
The Dow Union Merger Combined
Chemical Carbide Pro Forma Pro
Company Corporation Adjustments Forma
-------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Net Sales........................... $9,686 $3,020 -- $12,706
------ ------ ----- -------
Cost of sales..................... 7,193 2,248 $ 179 (4) 9,620
Research and development expenses. 382 73 5 (4) 460
Selling, general and
administrative expenses.......... 843 156 -- 999
Amortization of intangibles....... 39 -- 9 (4) 48
Depreciation and amortization..... -- 193 (193)(4) --
Partnership income................ -- 64 (64)(4) --
Purchased in-process research and
development
charges.......................... 350 -- -- 350
Special charges................... 330 -- -- 330
Insurance and finance company
operations, pretax income........ 58 -- 6 (4) 64
Equity in earnings (losses) of
nonconsolidated affiliates....... 50 (7) 64 (4) 107
Sundry income--net................ 854 21 (10)(4) 865
------ ------ ----- -------
Earnings Before Interest, Income
Taxes and Minority Interests....... 1,511 428 (4) 1,935
------ ------ ----- -------
Interest income................... 66 -- 4 (4) 70
Interest expense and amortization
of debt discount................. 249 56 -- 305
------ ------ ----- -------
Income Before Income Taxes and
Minority Interests................. 1,328 372 -- 1,700
------ ------ ----- -------
Provision for income taxes........ 474 110 -- 584
Minority interests' share in
income........................... 5 2 -- 7
Preferred stock dividends......... 3 -- -- 3
------ ------ ----- -------
Net Income Available for Common
Stockholders....................... $ 846 $ 260 -- $ 1,106
====== ====== ===== =======
Share Data:
Earnings per common share--basic.. $ 3.76 $ 1.91 (5) $ 3.66
Earnings per common share--
diluted.......................... 3.70 1.86 (5) 3.59
Weighted average common shares
outstanding--basic............... 225.1 136.5 (5) 302.2
Weighted average common shares
outstanding--diluted............. 229.6 140.2 (5) 308.7
</TABLE>
68
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
For the year ended December 31, 1998
(in millions, except per share data)
<TABLE>
<CAPTION>
The Dow Union Merger Combined
Chemical Carbide Pro Forma Pro
Company Corporation Adjustments Forma
-------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Net Sales........................... $18,441 $5,659 -- $24,100
------- ------ ----- -------
Cost of sales..................... 13,799 4,294 $ 360 (4) 18,453
Research and development expenses. 807 143 11 (4) 961
Selling, general and
administrative expenses.......... 1,666 304 -- 1,970
Amortization of intangibles....... 88 -- 18 (4) 106
Depreciation and amortization..... -- 389 (389)(4) --
Partnership income................ -- 33 (33)(4) --
Purchased in-process research and
development charges.............. 349 -- -- 349
Special charges................... 458 -- -- 458
Insurance and finance company
operations, pretax income........ 112 -- 12 (4) 124
Equity in earnings (losses) of
nonconsolidated affiliates....... 64 (66) 33 (4) 31
Sundry income--net................ 916 241 (22)(4) 1,135
------- ------ ----- -------
Earnings Before Interest, Income
Taxes and Minority Interests....... 2,366 737 (10) 3,093
------- ------ ----- -------
Interest income................... 139 -- 10 (4) 149
Interest expense and amortization
of debt discount................. 493 114 -- 607
------- ------ ----- -------
Income Before Income Taxes and
Minority Interests................. 2,012 623 -- 2,635
------- ------ ----- -------
Provision for income taxes........ 685 217 -- 902
Minority interests' share in
income........................... 17 3 -- 20
Preferred stock dividends......... 6 -- -- 6
------- ------ ----- -------
Net Income Available for Common
Stockholders....................... $ 1,304 $ 403 -- $ 1,707
======= ====== ===== =======
Share Data:
Earnings per common share--basic.. $ 5.83 $ 2.98 (5) $ 5.69
Earnings per common share--
diluted.......................... 5.76 2.91 (5) 5.61
Weighted average common shares
outstanding--basic............... 223.5 135.0 (5) 299.8
Weighted average common shares
outstanding--diluted............. 227.3 138.4 (5) 305.4
</TABLE>
69
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
For the year ended December 31, 1997
(in millions, except per share data)
<TABLE>
<CAPTION>
The Dow Union Merger
Chemical Carbide Pro Forma Combined
Company Corporation Adjustments Pro Forma
-------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales.......................... $20,018 $6,502 -- $26,520
------- ------ ----- -------
Cost of sales.................... 14,679 4,806 $ 309 (4) 19,794
Research and development
expenses........................ 785 157 12 (4) 954
Selling, general and
administrative expenses......... 1,880 324 -- 2,204
Amortization of intangibles...... 61 -- 19 (4) 80
Depreciation and amortization.... -- 340 (340)(4) --
Partnership income............... -- 133 (133)(4) --
Insurance and finance company
operations, pretax income....... 113 -- 14 (4) 127
Equity in earnings of
nonconsolidated affiliates...... 75 3 133 (4) 211
Sundry income--net............... 436 37 (27)(4) 446
------- ------ ----- -------
Earnings Before Interest, Income
Taxes and Minority Interests...... 3,237 1,048 (13) 4,272
------- ------ ----- -------
Interest income.................. 182 -- 13 (4) 195
Interest expense and amortization
of debt discount................ 471 79 -- 550
------- ------ ----- -------
Income Before Income Taxes and
Minority Interests................ 2,948 969 -- 3,917
------- ------ ----- -------
Provision for income taxes....... 1,041 279 -- 1,320
Minority interests' share in
income.......................... 99 14 -- 113
Preferred stock dividends........ 6 7 -- 13
------- ------ ----- -------
Earnings before cumulative effect
of change in accounting principle. 1,802 669 -- 2,471
------- ------ ----- -------
Cumulative effect of change in
accounting principle............ -- (17) -- (17)
------- ------ ----- -------
Net Income Available for Common
Stockholders...................... $ 1,802 $ 652 -- $ 2,454
======= ====== ===== =======
Share Data:
Earnings before cumulative effect
of change in accounting
principle per common share--
basic........................... $ 7.81 $ 5.02 (5) $ 8.07
Earnings per common share--basic. 7.81 4.89 (5) 8.02
Earnings before cumulative effect
of change in accounting
principle per common share--
diluted......................... 7.70 4.53 (5) 7.79
Earnings per common share--
diluted......................... 7.70 4.41 (5) 7.73
Weighted average common shares
outstanding--basic.............. 230.6 128.2 (5) 303.2
Weighted average common shares
outstanding--diluted............ 234.8 144.0 (5) 315.9
</TABLE>
70
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
For the year ended December 31, 1996
(in millions, except per share data)
<TABLE>
<CAPTION>
The Dow Union Merger
Chemical Carbide Pro Forma Combined
Company Corporation Adjustments Pro Forma
-------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales........................... $20,053 $6,106 -- $26,159
------- ------ ---- -------
Cost of sales..................... 14,108 4,568 $282 (4) 18,958
Research and development expenses. 761 159 11 (4) 931
Selling, general and
administrative expenses.......... 2,136 321 -- 2,457
Amortization of intangibles....... 39 -- 19 (4) 58
Depreciation and amortization..... -- 312 (312)(4) --
Partnership income................ -- 144 (144)(4) --
Insurance and finance company
operations, pretax income........ 78 -- 7 (4) 85
Equity in earnings (losses) of
nonconsolidated affiliates....... 66 (16) 144 (4) 194
Sundry income--net................ 339 31 (41)(4) 329
------- ------ ---- -------
Earnings Before Interest, Income
Taxes and Minority Interests....... 3,492 905 (34) 4,363
------- ------ ---- -------
Interest income................... 290 -- 34 (4) 324
Interest expense and amortization
of debt discount................. 494 76 -- 570
------- ------ ---- -------
Income Before Income Taxes and
Minority Interests................. 3,288 829 -- 4,117
------- ------ ---- -------
Provision for income taxes........ 1,187 236 -- 1,423
Minority interests' share in
income........................... 194 -- -- 194
Preferred stock dividends......... 7 10 -- 17
------- ------ ---- -------
Net Income Available for Common
Stockholders....................... $ 1,900 $ 583 -- $ 2,483
======= ====== ==== =======
Share Data:
Earnings per common share--basic.. $ 7.71 $ 4.43 (5) $ 7.75
Earnings per common share--
diluted.......................... 7.60 3.90 (5) 7.44
Weighted average common shares
outstanding--basic............... 246.3 131.0 (5) 320.4
Weighted average common shares
outstanding--diluted............. 250.9 151.6 (5) 336.1
</TABLE>
71
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(in millions, except per share amounts)
(1) Dow and Union Carbide estimate that they will incur direct transaction
costs of approximately $75 (pre-tax) associated with the merger. These
costs consist primarily of investment banking, legal and accounting fees.
The unaudited pro forma combined condensed balance sheet reflects such
expenses as if they had been paid as of the end of the second quarter of
1999.
(2) Adjustments reflect the estimated proceeds to be received by Dow from the
sale of an estimated 3.8 million shares of Dow common stock held in
treasury, using an assumed price of $125 per share. No offering expenses
have been reflected in the analysis. It is anticipated that such shares
will be issued in order to qualify for pooling-of-interests accounting
treatment. The cost basis of the treasury shares to be issued was estimated
to be $42.
(3) Adjustments for the issuance of 71.5 million shares of Dow common stock to
effect the exchange of Union Carbide common stock at the exchange ratio of
0.537 of a share of Dow common stock for each share of Union Carbide common
stock, and for the retirement of Union Carbide common stock held in
treasury. For accounting purposes, the Dow common shares held in treasury
issued to effect the pooling-of-interests are first treated as though the
shares of stock are retired and then reissued. The cost basis of the
retired Dow common stock held in treasury is $4,030 and the cost basis of
Union Carbide treasury stock as of June 30, 1999 is $1,019. The cost of
treasury stock in excess of the additional paid-in capital balance is
recorded as an adjustment to retained earnings.
(4) Adjustments reflect a reclassification of Union Carbide's reported amounts
of partnership income, depreciation, amortization of intangibles, interest
income, insurance and finance company operations pre-tax income, pension
liabilities, and deferred tax assets and liabilities to conform to Dow's
presentation.
(5) The pro forma combined per share amounts and weighted average common shares
outstanding reflect:
. the combined weighted average of Dow and Union Carbide common shares
outstanding for all periods presented, after adjusting the number of
Union Carbide common shares to reflect the exchange ratio of 0.537 of a
share of Dow common stock for each share of Union Carbide common stock;
and
. the issuance of an estimated 3.8 million shares of Dow common stock held
in treasury in order to qualify for pooling-of-interests accounting
treatment described in note (2).
72
<PAGE>
ANNEX A
Agreement and Plan of Merger
Among
UNION CARBIDE CORPORATION,
THE DOW CHEMICAL COMPANY
and
TRANSITION SUB INC.
Dated as of August 3, 1999
A-1
<PAGE>
TABLE OF CONTENTS
ARTICLE I
The Merger; Closing; Effective Time
<TABLE>
<C> <S> <C>
1.1. The Merger........................................................ A-7
1.2. Closing........................................................... A-7
1.3. Effective Time.................................................... A-8
ARTICLE II
Certificate of Incorporation and Bylaws of the Surviving Corporation
2.1. The Certificate of Incorporation.................................. A-8
2.2. The Bylaws........................................................ A-8
ARTICLE III
Officers, Directors and Management
3.1. Directors of Surviving Corporation................................ A-8
3.2. Officers of Surviving Corporation................................. A-8
3.3. Additional Directors of Parent.................................... A-8
ARTICLE IV
Effect of the Merger on Capital Stock; Exchange of Certificates
4.1. Effect on Capital Stock........................................... A-8
4.2. Exchange of Certificates for Company Shares....................... A-9
4.3. Dissenters' Rights................................................ A-11
4.4. Adjustments to Prevent Dilution................................... A-11
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company, Parent and Merger
Sub.............................................................. A-11
ARTICLE VI
Covenants
6.1. Interim Operations................................................ A-21
6.2. Acquisition Proposals............................................. A-23
6.3. Information Supplied.............................................. A-24
6.4. Shareholders Meeting.............................................. A-24
6.5. Filings; Other Actions; Notification.............................. A-25
6.6. Access; Consultation.............................................. A-27
6.7 Affiliates........................................................ A-27
6.8. Stock Exchange Listing and De-listing............................. A-27
6.9. Publicity......................................................... A-27
6.10. Benefits.......................................................... A-28
6.11. Expenses.......................................................... A-29
6.12. Indemnification; Directors' and Officers' Insurance............... A-29
6.13. Takeover Statute.................................................. A-31
6.14. Dividends......................................................... A-31
6.15. Confidentiality................................................... A-31
6.16. Tax-Free Reorganization........................................... A-31
</TABLE>
A-2
<PAGE>
ARTICLE VII
Conditions
<TABLE>
<C> <S> <C>
7.1. Conditions to Each Party's Obligation to Effect the Merger......... A-31
7.2. Conditions to Obligations of Parent and Merger Sub................. A-32
7.3. Conditions to Obligation of the Company............................ A-32
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent...................................... A-33
8.2. Termination by Either Parent or the Company........................ A-33
8.3. Termination by the Company......................................... A-33
8.4. Termination by Parent.............................................. A-34
8.5. Effect of Termination and Abandonment.............................. A-34
ARTICLE IX
Miscellaneous and General
9.1. Survival........................................................... A-34
9.2. Modification or Amendment.......................................... A-35
9.3. Waiver of Conditions............................................... A-35
9.4. Counterparts....................................................... A-35
9.5. Governing Law and Venue; Waiver of Jury Trial...................... A-35
9.6. Notices............................................................ A-36
9.7. Entire Agreement................................................... A-37
9.8. No Third Party Beneficiaries....................................... A-37
9.9. Obligations of Parent and of the Company........................... A-37
9.10. Severability....................................................... A-37
9.11. Interpretation..................................................... A-37
9.12. Assignment......................................................... A-37
</TABLE>
EXHIBITS
<TABLE>
<C> <S> <C>
Exhibit 1 Stock Option Agreement.................................... A-40
Exhibit 6.7(A) Form of Company Affiliate's Letter........................ A-48
Exhibit 6.7(B) Form of Parent Affiliate's Letter......................... A-52
</TABLE>
A-3
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Acquisition Proposal................................................ 6.2(a)
Agreement........................................................... preamble
APB No. 16.......................................................... recitals
Audit Date.......................................................... 5.1(f)
Bankruptcy and Equity Exception..................................... 5.1(c)(i)
Bylaws.............................................................. 2.2
Certificate......................................................... 4.1(a)
Certificates of Merger.............................................. 1.3
Change Date......................................................... 6.10(f)
Charter............................................................. 2.1
Charter and Bylaw Provisions........................................ 5.1(j)
Closing............................................................. 1.2
Closing Date........................................................ 1.2
Code................................................................ recitals
Company............................................................. preamble
Company Affiliate's Letter.......................................... 6.7
Company Disclosure Letter........................................... 5.1
Company Employee.................................................... 6.10(i)
Company IP Rights................................................... 5.1(q)
Company Option...................................................... 6.10(a)(i)
Company Preferred Shares............................................ 5.1(b)(i)
Company Representatives............................................. 6.2(a)
Company Required Consents........................................... 5.1(d)(iii)
Company Required Filings............................................ 5.1(d)(i)
Company Requisite Vote.............................................. 5.1(c)(i)
Company Share....................................................... 4.1(a)
Company Shares...................................................... 4.1(a)
Company Stock Plans................................................. 5.1(b)(i)
Compensation and Benefit Plans...................................... 5.1(h)(i)
Competition Laws.................................................... 5.1(d)(i)
Computer Systems.................................................... 5.1(r)
Confidentiality Agreement........................................... 6.15
Contracts........................................................... 5.1(d)(ii)
Costs............................................................... 6.12(a)
Current Premium..................................................... 6.12(c)
D&O Insurance....................................................... 6.12(c)
Delaware Courts..................................................... 9.5(a)
Disclosure Letter................................................... 5.1
DGCL................................................................ 1.1
Effective Time...................................................... 1.3
Environmental Law................................................... 5.1(k)
EPS Plan............................................................ 6.10(h)
ERISA............................................................... 5.1(h)(i)
ERISA Affiliate..................................................... 5.1(h)(i)
ESOP................................................................ 4.1(a)
Exchange Act........................................................ 5.1(b)(i)
Exchange Agent...................................................... 4.2(a)
Exchange Fund....................................................... 4.2(a)
Exchange Ratio...................................................... 4.1(a)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Excluded Company Shares............................................. 4.1(a)
executive officers.................................................. 5.1(g)
GAAP................................................................ 5.1(e)
Governmental Entity................................................. 5.1(d)(i)
Hazardous Substance................................................. 5.1(k)
HSR Act............................................................. 5.1(d)(i)
Indemnified Parties................................................. 6.12(a)
IRS................................................................. 5.1(h)(ii)
Laws................................................................ 5.1(i)
Material Adverse Effect............................................. 5.1(a)
Merger.............................................................. recitals
Merger Consideration................................................ 4.1(a)
Merger Sub.......................................................... preamble
NYBCL............................................................... 1.1
NYSE................................................................ 6.8
Order............................................................... 7.1(d)
Parent.............................................................. preamble
Parent Affiliate's Letter........................................... 6.7
Parent Common Stock................................................. 4.1(a)
Parent Companies.................................................... 4.1(a)
Parent Disclosure Letter............................................ 5.1
Parent Plan......................................................... 6.10(i)
Parent Preferred Shares............................................. 5.1(b)(ii)
Parent Required Consents............................................ 5.1(d)(iii)
Parent Required Filings............................................. 5.1(d)(i)
Parent Stock Plans.................................................. 5.1(b)(ii)
Pension Plan........................................................ 5.1(h)(ii)
Person.............................................................. 4.2(b)
Pooling Affiliates.................................................. 6.7
Prospectus/Proxy Statement.......................................... 6.3
Rabbi Trust......................................................... 6.1(a)(iv)
Registered Parent Shares............................................ 4.2(b)
Reports............................................................. 5.1(e)
Restricted Share.................................................... 6.10(c)
Rights Agreement.................................................... 5.1(b)(i)
Rule 145 Affiliates................................................. 6.7
S-4 Registration Statement.......................................... 6.3
SEC................................................................. 5.1(e)
Securities Act...................................................... 5.1(d)(i)
Shareholders Meeting................................................ 6.4
Significant Investees............................................... 5.1(d)(ii)
Significant Subsidiaries............................................ 5.1(b)(i)
SIP................................................................. 4.1(a)
Stock Option Agreement.............................................. recitals
Subsequent Agreement................................................ 8.5(b)
Subsequent Transaction.............................................. 6.5(e)
Subsidiary.......................................................... 5.1(a)
Substitute Option................................................... 6.10(a)(i)
Superior Proposal................................................... 6.2(a)
Substitute Restricted Shares........................................ 6.10(c)
Surviving Corporation............................................... 1.1
</TABLE>
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<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Takeover Statute........................................................ 5.1(j)
Tax..................................................................... 5.1(m)
Taxes................................................................... 5.1(m)
Taxable................................................................. 5.1(m)
Tax Return.............................................................. 5.1(m)
Termination Date........................................................ 8.2
Termination Fee......................................................... 8.5(b)
Year 2000 Compliance.................................................... 5.1(r)
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement"), dated as of August 3, 1999,
is among Union Carbide Corporation, a New York corporation (the "Company"), The
Dow Chemical Company, a Delaware corporation ("Parent"), and Transition Sub
Inc., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger
Sub").
RECITALS
Whereas, the respective Boards of Directors of each of Parent, Merger Sub
and the Company have approved this Agreement and the merger of Merger Sub with
and into the Company (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement;
Whereas, the parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code;
Whereas, for financial accounting purposes, it is intended that the Merger
shall be accounted for as a "pooling-of-interests" in accordance with the
requirements of Opinion No. 16 "Business Combinations" of the Accounting
Principles Board of the American Institute of Certified Public Accountants, as
amended by applicable pronouncements by the Financial Accounting Standards
Board ("APB No. 16"); and
Whereas, contemporaneously with the execution and delivery of this
Agreement, as a condition and inducement to Parent's and Merger Sub's
willingness to enter into this Agreement, the Company is entering into a stock
option agreement with Parent, substantially in the form of Exhibit 1 (the
"Stock Option Agreement"), pursuant to which the Company has granted to Parent
an option to purchase shares of common stock of the Company under the terms and
conditions set forth in the Stock Option Agreement; and
Whereas, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
Now, Therefore, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time Merger Sub shall be merged with and into
the Company and the separate corporate existence of Merger Sub shall thereupon
cease. The Company shall be the surviving corporation in the Merger (sometimes
referred to as the "Surviving Corporation") and shall continue to be governed
by the laws of the State of New York, and the separate corporate existence of
the Company with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger except as set forth in Article III of
this Agreement. The Merger shall have the effects specified in the New York
Business Corporation Law, as amended (the "NYBCL") and the Delaware General
Corporation Law, as amended (the "DGCL").
1.2. Closing. The closing of the Merger (the "Closing") shall take place (i)
at the offices of Mayer, Brown & Platt, 190 South LaSalle Street, Chicago,
Illinois, at 9:00 A.M., local time, on the second business day after the date
on which the last to be fulfilled or waived of the conditions set forth in
Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions) shall be satisfied or waived in accordance with this Agreement or
(ii) at such other
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place and time and/or on such other date as the Company and Parent may agree in
writing (the "Closing Date").
1.3. Effective Time. As soon as practicable following the Closing, the
Company and Parent will cause certificates of merger (collectively, the
"Certificates of Merger") to be executed, acknowledged and filed with the New
York Department of State as provided in Section 904 of the NYBCL and with the
Secretary of State of Delaware as provided in Section 251 of the DGCL. The
Merger shall become effective at the time when the Certificates of Merger have
been duly filed with the New York Department of State and with the Secretary of
State of Delaware or such other time as shall be agreed upon by the parties and
set forth in the Certificates of Merger in accordance with the NYBCL and the
DGCL (the "Effective Time").
ARTICLE II
Certificate of Incorporation and Bylaws of the Surviving Corporation
2.1. The Certificate of Incorporation. The certificate of incorporation of
the Company as in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation (the "Charter"),
until duly amended as provided therein or by applicable Law, except that (i)
Article 3 of the Charter shall be amended to read in its entirety as follows:
"3. The aggregate number of shares that the Corporation shall have the
authority to issue is 1,000 shares of Common Stock, par value $0.01 per
share."; and (ii) Article 5 of the Charter shall be amended to read in its
entirety as follows: "5. The number of directors, their terms and their manner
of election shall be fixed by or pursuant to the Bylaws of the Corporation."
2.2. The Bylaws. The bylaws of Merger Sub in effect at the Effective Time
shall be the Bylaws of the Surviving Corporation (the "Bylaws"), until
thereafter amended as provided therein or by applicable Law.
ARTICLE III
Officers, Directors and Management
3.1. Directors of Surviving Corporation. The directors of Merger Sub at the
Effective Time shall, from and after the Effective Time, be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Charter and the Bylaws.
3.2. Officers of Surviving Corporation. The officers of the Company at the
Effective Time shall, from and after the Effective Time, be the officers of the
Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Charter and the Bylaws.
3.3. Additional Directors of Parent. At the Effective Time, two current
Company directors shall be appointed as additional members of the board of
directors of Parent.
ARTICLE IV
Effect of the Merger on Capital Stock; Exchange of Certificates
4.1. Effect on Capital Stock. At the Effective Time, the Merger shall have
the following effects on the capital stock of the Company and Merger Sub,
without any action on the part of the holder of any capital stock of the
Company or Merger Sub:
(a) Merger Consideration. Each share of Common Stock, $1.00 par value
per share, of the Company (each a "Company Share" and together the "Company
Shares") issued and outstanding immediately prior
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<PAGE>
to the Effective Time, including Company Shares held under the Company's
Savings and Investment Program (the "SIP") and the Company's Employee Stock
Ownership Plan (the "ESOP") (but not including Company Shares that are
owned by Parent, Merger Sub or any other direct or indirect subsidiary of
Parent (collectively, the "Parent Companies") or Company Shares that are
owned by the Company or any direct or indirect subsidiary of the Company
and in each case not held on behalf of third parties (collectively,
"Excluded Company Shares")), shall be converted into and become
exchangeable for 0.537 of a share (the "Exchange Ratio") of Common Stock,
par value $2.50 per share, of Parent ("Parent Common Stock"), subject to
adjustment as provided in Section 4.4 (the "Merger Consideration"). Parent
shall use treasury shares to supply all of the Parent Common Stock that the
shareholders of the Company are to receive pursuant to this Agreement. At
the Effective Time, all Company Shares shall no longer be outstanding,
shall be canceled and retired and shall cease to exist, and each
certificate (a "Certificate") formerly representing any of such Company
Shares (other than Excluded Company Shares) shall thereafter represent only
the right to the Merger Consideration and the right, if any, to receive
pursuant to Section 4.2(e) cash in lieu of fractional shares into which
such Company Shares have been converted pursuant to this Section 4.1(a) and
any distribution or dividend pursuant to Section 4.2(c), in each case
without interest.
(b) Cancellation of Excluded Company Shares. Each Excluded Company Share
issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder
thereof, no longer be outstanding, shall be canceled and retired without
payment of any consideration therefor and shall cease to exist.
(c) Conversion of Merger Sub Shares. At the Effective Time, each share
of Common Stock, par value $0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into
one share of common stock of the Surviving Corporation, and the Surviving
Corporation shall be a wholly-owned subsidiary of Parent.
4.2. Exchange of Certificates for Company Shares.
(a) Exchange Agent. As of the Effective Time, Parent shall deposit, or
shall cause to be deposited, with an exchange agent selected by Parent with
the Company's prior approval, which shall not be unreasonably withheld (the
"Exchange Agent"), for the benefit of the holders of Company Shares,
certificates representing the shares of Parent Common Stock and, after the
Effective Time, if applicable, any cash, dividends or other distributions
with respect to the Parent Common Stock to be issued or paid pursuant to
the last sentence of Section 4.1(a) in exchange for Company Shares
outstanding immediately prior to the Effective Time upon due surrender of
the Certificates (or affidavits of loss in lieu thereof) pursuant to the
provisions of this Article IV (such certificates for shares of Parent
Common Stock, together with the amount of any dividends or other
distributions payable with respect thereto, being referred to as the
"Exchange Fund").
(b) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder
of record as of the Effective Time of a Certificate in respect of Company
Shares (other than holders of a Certificate in respect of Excluded Company
Shares) (i) a letter of transmittal specifying that delivery shall be
effected, and that risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates (or affidavits of loss in lieu
thereof) to the Exchange Agent, such letter of transmittal to be in such
form and have such other provisions as Parent and the Company may
reasonably agree, and (ii) instructions for exchanging the Certificates for
(A) uncertificated shares of Parent Common Stock registered on the stock
transfer books of Parent in the name of such holder ("Registered Parent
Shares") or at the election of such holder, certificates representing
shares of Parent Common Stock and (B) any unpaid dividends and other
distributions and cash in lieu of fractional shares. Subject to Section
4.2(h), upon surrender of a Certificate for cancellation to the Exchange
Agent together with such letter of transmittal, duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor (x)
Registered Parent Shares or, at the election of such holder, a certificate,
in either case representing that number of whole shares of Parent Common
Stock that such holder is entitled to receive pursuant to this Article IV,
and (y) a check in the amount (after giving effect to any required tax
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<PAGE>
withholdings) of (A) any cash in lieu of fractional shares determined in
accordance with Section 4.2(e) plus (B) any cash dividends and any other
dividends or other distributions that such holder has the right to receive
pursuant to the provisions of this Article IV. The Certificate so
surrendered shall forthwith be canceled. No interest will be paid or
accrued on any amount payable upon due surrender of any Certificate. In the
event of a transfer of ownership of Company Shares that is not registered
in the transfer records of the Company, Registered Parent Shares or a
certificate, as the case may be, representing the proper number of shares
of Parent Common Stock, together with a check for any cash in lieu of
fractional shares to be paid upon due surrender of the Certificate and any
other dividends or distributions in respect thereof, may be issued and/or
paid to such a transferee if the Certificate formerly representing such
Company Shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid. If any Registered
Parent Shares or any certificate for shares of Parent Common Stock is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange
that the Person requesting such exchange shall pay any transfer or other
taxes required by reason of the issuance of Registered Parent Shares or
certificates for shares of Parent Common Stock in a name other than that of
the registered holder of the Certificate surrendered, or shall establish to
the satisfaction of Parent or the Exchange Agent that such tax has been
paid or is not applicable.
The term "Person" means any individual, corporation (including not-for-
profit), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, Governmental Entity or other
entity of any kind or nature.
(c) Distributions with Respect to Unexchanged Shares; Voting.
(i) Whenever a dividend or other distribution is declared by Parent in
respect of Parent Common Stock, the record date for which is at or after
the Effective Time, that declaration shall include dividends or other
distributions in respect of all shares of Parent Common Stock issuable
pursuant to this Agreement. No dividends or other distributions in respect
of such Parent Common Stock shall be paid to any holder of any
unsurrendered Certificate until such Certificate is surrendered for
exchange in accordance with this Article IV. Subject to the effect of
applicable Laws, following surrender of any such Certificate, there shall
be issued or paid to the holder of the Registered Parent Shares or the
certificates, as the case may be, representing whole shares of Parent
Common Stock issued in exchange therefor (A) at the time of such surrender,
the dividends or other distributions with a record date after the Effective
Time and a payment date on or prior to the date of issuance of such whole
shares of Parent Common Stock and not previously paid and (B) at the
appropriate payment date, the dividends or other distributions payable with
respect to such whole shares of Parent Common Stock with a record date
after the Effective Time but with a payment date subsequent to surrender;
provided, however, that no such holder shall be entitled to interest on any
amount issued or paid pursuant to (A) or (B) above. For purposes of
dividends or other distributions in respect of shares of Parent Common
Stock, all shares of Parent Common Stock to be issued pursuant to the
Merger shall be deemed issued and outstanding as of the Effective Time.
(ii) Registered holders of unsurrendered Certificates shall be entitled
to vote after the Effective Time at any meeting of Parent stockholders with
a record date at or after the Effective Time the number of whole shares of
Parent Common Stock represented by such Certificates, regardless of whether
such holders have exchanged their Certificates.
(d) Transfers. After the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the Company Shares that were
outstanding immediately prior to the Effective Time.
(e) Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of Parent Common Stock will be issued and
any holder of Company Shares entitled to receive a fractional share of
Parent Common Stock but for this Section 4.2(e) shall be entitled to
receive in lieu thereof an amount in cash (without interest) determined by
multiplying such fraction (rounded to the nearest one-hundredth of a share)
by the closing price of a share of Parent Common Stock, as reported in The
Wall Street Journal, New York City edition, on the trading day immediately
prior to the Effective Time.
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<PAGE>
(f) Termination of Exchange Period; Unclaimed Stock. Any portion of the
Exchange Fund (including the proceeds of any investments thereof) that
remain unclaimed by the shareholders of the Company 180 days after the
Effective Time shall be paid to Parent. Any shareholders of the Company who
have not theretofore complied with this Article IV shall thereafter look
only to Parent for payment of their shares of Parent Common Stock and any
cash, dividends and other distributions in respect thereof issuable and/or
payable pursuant to Section 4.1, Section 4.2(c) and Section 4.2(e) upon due
surrender of their Certificates (or affidavits of loss in lieu thereof), in
each case, without any interest thereon. Notwithstanding the foregoing,
none of Parent, the Surviving Corporation, the Exchange Agent nor any other
Person shall be liable to any former holder of Company Shares for any
amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(g) Lost, Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the Person claiming such Certificate to be lost, stolen or
destroyed and the posting by such Person of a bond in the form customarily
required by Parent as indemnity against any claim that may be made against
it with respect to such Certificate, Parent will issue the shares of Parent
Common Stock and the Exchange Agent will distribute stock, any cash,
dividends and other distributions in respect thereof issuable or payable in
exchange for such lost, stolen or destroyed Certificate pursuant to Section
4.1, Section 4.2(c) and Section 4.2(e), in each case, without interest.
(h) Affiliates. Notwithstanding anything in this Agreement to the
contrary, Certificates surrendered for exchange by any "Pooling Affiliate"
(as determined pursuant to Section 6.7) of the Company shall not be
exchanged until Parent has received a written agreement from such Person as
provided in Section 6.7.
4.3. Dissenters' Rights. In accordance with Section 910 of the NYBCL, no
appraisal rights shall be available to holders of Company Shares in connection
with the Merger.
4.4. Adjustments to Prevent Dilution. In the event that prior to the
Effective Time, solely as a result of a reclassification, stock split
(including a reverse split), or stock dividend or stock distribution, made on a
pro rata basis to all holders of stock of the entity making such a stock
dividend or stock distribution, there is a change in the number of Company
Shares or shares of Parent Common Stock outstanding or issuable upon the
conversion, exchange or exercise of securities or rights convertible or
exchangeable into or exercisable for Company Shares or shares of Parent Common
Stock, the Exchange Ratio shall be equitably adjusted to eliminate the effects
of such event.
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company, Parent and Merger Sub.
Except as set forth or disclosed in (i) the corresponding sections or
subsections of the disclosure letter, dated the date of this Agreement,
delivered by the Company to Parent or by Parent to the Company (each a
"Disclosure Letter," and the "Company Disclosure Letter" and the "Parent
Disclosure Letter," respectively), as the case may be, or (ii) in its Reports
filed prior to the date of this Agreement, the Company (except for
subparagraphs (b)(ii), (b)(iii), (c)(ii), (f)(ii) and (o)(ii) below and
references in subparagraphs (a) and (e) below to documents made available by
Parent to the Company) represents and warrants to Parent and Merger Sub, and
Parent (except for subparagraphs (b)(i), (c)(i), (f)(i), (h), (j), (k), (n),
(o)(i), (p) and (q) below and references in subparagraphs (a) and (e) below to
documents made available by the Company to Parent), on behalf of itself and
Merger Sub, represents and warrants to the Company, that:
(a) Organization, Good Standing and Qualification. Each of it and its
Subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of its respective jurisdiction
of organization and has all requisite corporate or similar power and
authority to own and operate its properties and assets and to carry on its
business as presently conducted and is qualified to do
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<PAGE>
business and is in good standing as a foreign corporation in each
jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualification, except where the failure to be
so qualified or in good standing is not, when taken together with all other
such failures, reasonably likely to have a Material Adverse Effect on it.
It has made available to Parent, in the case of the Company, and to the
Company, in the case of Parent, a complete and correct copy of its
certificate of incorporation and bylaws, each as amended to date. Such
certificates of incorporation and bylaws are in full force and effect.
The term "Subsidiary" means, with respect to the Company, Parent or Merger
Sub, as the case may be, any entity, whether incorporated or unincorporated, of
which at least a majority of the securities or ownership interests having by
their terms ordinary voting power to elect at least a majority of the Board of
Directors or other persons performing similar functions is directly or
indirectly owned by such party.
The term "Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the financial condition, assets and liabilities
(taken together) or business of such Person and its Subsidiaries, taken as a
whole; provided, however, that Material Adverse Effect shall exclude any effect
resulting from or related to changes or developments involving (1) a change
arising out of any proposed or adopted legislation, or any other proposal or
enactment by any governmental, regulatory or administrative authority, (2)
general conditions applicable to the United States economy or the economy of
regions where such Person has business operations, including changes in
interest rates, (3) conditions or effects resulting from the announcement of
the existence or terms of this Agreement, (4) conditions affecting the chemical
industry in the United States or other areas where such Person has business
operations, (5) changes in raw materials or commodity prices, in each case
taken as a whole, or (6) a failure of a Person to achieve Year 2000 Compliance
as a result of supplier, customer or third party non compliance.
Reference to "the other party" means, with respect to the Company, Parent,
and with respect to Parent, the Company.
(b) Capital Structure.
(i) The authorized capital stock of the Company consists of
500,000,000 Company Shares, of which 133,180,727 Company Shares were
issued and outstanding and 23,416,643 Company Shares were held in
treasury as of the close of business on July 31, 1999, and 25,000,000
shares of Preferred Stock, value $1.00 per share (the "Company
Preferred Shares"), none of which were outstanding as of the close of
business on the date of this Agreement. All of the outstanding Company
Shares have been duly authorized and are validly issued, fully paid and
nonassessable. Other than Company Shares reserved for issuance pursuant
to the Rights Agreement dated as of July 26, 1989, as Amended and
Restated as of May 27, 1992 and as further amended on December 3, 1996
between the Company and Chase Mellon Shareholder Services, Inc., as
successor Rights Agent (the "Rights Agreement"), and Company Shares
subject to issuance as set forth below or that are permitted to become
subject to issuance pursuant to Section 6.1(a)(iv) or (vii) of this
Agreement, the Company has no Company Shares, Company Preferred Shares
or other shares of capital stock reserved for or otherwise subject to
issuance. As of the date of this Agreement, there were not more than
12,750,000 Company Shares that the Company was obligated to issue
pursuant to the Company's stock option plans, each of which are listed
in Section 5.1(b)(i) of the Company Disclosure Letter under the heading
"Company Stock Option Plans." Each of the outstanding shares of capital
stock or other securities of each of the Company's "Significant
Subsidiaries" (as defined in Rule 1-02.(w) of Regulation S-X
promulgated pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) is duly authorized, validly issued, fully paid
and nonassessable and owned by the Company or a direct or indirect
wholly-owned Subsidiary of the Company, free and clear of any lien,
pledge, security interest, claim or other encumbrance. Except pursuant
to the plans listed in Section 5.1(b)(i) of the Company Disclosure
Letter under the heading "Company Stock Plans" (collectively, the
"Company Stock Plans"), the Stock Option Agreement or as set forth
above, there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights,
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<PAGE>
redemption rights, repurchase rights, agreements, arrangements or
commitments to issue or sell any shares of capital stock or other
securities of the Company or any of its Significant Subsidiaries or any
securities or obligations convertible or exchangeable into or
exercisable for, or giving any Person a right to subscribe for or
acquire, any securities of the Company or any of its Significant
Subsidiaries, and no securities or obligations evidencing such rights
are authorized, issued or outstanding. The Company does not have
outstanding any bonds, debentures, notes or other debt obligations the
holders of which have the right to vote (or convertible into or
exercisable for securities having the right to vote) with the
shareholders of the Company on any matter. The Company Shares issuable
pursuant to the Stock Option Agreement have been duly reserved for
issuance by the Company, and upon any issuance of such Company Shares
in accordance with the terms of the Stock Option Agreement, such
Company Shares will be duly and validly issued and fully paid and
nonassessable. No Company Shares are held by a Subsidiary of the
Company.
(ii) The authorized capital stock of Parent consists of 500,000,000
shares of Parent Common Stock, of which 219,246,242 shares were issued
and outstanding and 107,879,612 shares were held in treasury as of the
close of business on July 31, 1999, and 250,000,000 shares of Preferred
Stock, par value $1.00 per share (the "Parent Preferred Shares"), of
which 1,328,526 shares of Series A Parent Preferred Shares were
outstanding as of the close of business on July 31, 1999. All of the
outstanding shares of Parent Common Stock have been duly authorized and
are validly issued, fully paid and nonassessable. Other than Parent
Common Stock subject to issuance as set forth below, as of the date of
this Agreement, Parent has no shares of Parent Common Stock or Parent
Preferred Shares reserved for or subject to issuance. As of July 31,
1999, there were not more than 14,419,613.5 shares of Parent Common
Stock that Parent was obligated to issue pursuant to the Parent's stock
plans, each of which are listed in Section 5.1(b)(ii) of the Parent
Disclosure Letter (collectively, the "Parent Stock Plans"). Each of the
outstanding shares of capital stock of each of Parent's Significant
Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and owned by Parent or a direct or indirect wholly-owned
subsidiary of Parent, free and clear of any lien, pledge, security
interest, claim or other encumbrance. Except as set forth above, as of
the date of this Agreement there are no preemptive or other outstanding
rights, options, warrants, conversion rights, stock appreciation
rights, redemption rights, repurchase rights, agreements, arrangements
or commitments to issue or to sell any shares of capital stock or other
securities of Parent or any of its Significant Subsidiaries or any
securities or obligations convertible or exchangeable into or
exercisable for, or giving any Person a right to subscribe for or
acquire, any securities of Parent or any of its Significant
Subsidiaries, and no securities or obligation evidencing such rights
are authorized, issued or outstanding. As of the date of this
Agreement, Parent does not have outstanding any bonds, debentures,
notes or other debt obligations the holders of which have the right to
vote (or convertible into or exercisable for securities having the
right to vote) with the stockholders of Parent on any matter.
(iii) The authorized capital stock of Merger Sub consists of 100
shares of Common Stock, par value $0.01 per share, all of which are
validly issued and outstanding. All of the issued and outstanding
capital stock of Merger Sub is, and at the Effective Time will be,
owned by Parent, and there are (A) no other shares of capital stock or
other voting securities of Merger Sub, (B) no securities of Merger Sub
convertible into or exchangeable for shares of capital stock or other
voting securities of Merger Sub and (C) no options or other rights to
acquire from Merger Sub, and no obligations of Merger Sub to issue, any
capital stock, other voting securities or securities convertible into
or exchangeable for capital stock or other voting securities of Merger
Sub. Merger Sub has not conducted any business prior to the date of
this Agreement and has no, and prior to the Effective Time will have
no, assets, liabilities or obligations of any nature other than those
incident to its formation and pursuant to this Agreement and the Merger
and the other transactions contemplated by this Agreement.
(c) Corporate Authority; Approval and Fairness.
(i) The Company has all requisite corporate power and authority and
has taken all corporate action necessary in order to execute, deliver
and perform its obligations under this Agreement and the
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Stock Option Agreement and, subject only to adoption of this Agreement
by the holders of two-thirds of the outstanding Company Shares (the
"Company Requisite Vote"), to consummate the Merger. Each of this
Agreement and the Stock Option Agreement has been duly executed and
delivered by the Company and is a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles (the
"Bankruptcy and Equity Exception"). The Board of Directors of the
Company (A) has approved, by the unanimous vote of all of the directors
present and voting at a meeting at which a quorum was present, this
Agreement, the Stock Option Agreement and the Merger and the other
transactions contemplated by this Agreement and the Stock Option
Agreement and (B) has received the opinion of its financial advisor,
Credit Suisse First Boston Corporation, to the effect that, as of the
date of this Agreement, the Exchange Ratio is fair to holders of
Company Shares from a financial point of view.
(ii) Parent and Merger Sub each has all requisite corporate power
and authority and each has taken all corporate action necessary in
order to execute, deliver and perform its obligations under this
Agreement and, in the case of Parent, the Stock Option Agreement, and,
to consummate the Merger. This Agreement has been duly executed and
delivered by Parent and Merger Sub and is a valid and binding agreement
of Parent and Merger Sub, enforceable against each of Parent and Merger
Sub in accordance with its terms, subject to the Bankruptcy and Equity
Exception. Without limiting the generality of the foregoing, no vote or
approval of the holders of any class of capital stock of Parent is
required in order for Parent and Merger Sub to execute, deliver and
perform its obligations under this Agreement, to consummate the Merger
or to issue Parent Common Stock pursuant to the Merger. The Board of
Directors of Parent has unanimously approved this Agreement and the
Merger and the other transactions contemplated by this Agreement. The
shares of Parent Common Stock issuable to the Company shareholders
pursuant to the Agreement are listed on the NYSE and, when issued
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable, and no stockholder of Parent will have any preemptive
right of subscription or purchase in respect thereof.
(d) Government Filings; No Violations.
(i) Other than the filings and/or notices (A) pursuant to Section
1.3, (B) under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the Exchange Act and the Securities
Act of 1933, as amended (the "Securities Act"), (C) pursuant to the
European Community Merger Control Regulation, (D) to comply with state
securities or "blue-sky" laws, and (E) to comply with any other
relevant Competition Laws (including such laws in Canada and, if
necessary, Japan) (such filings and/or notices of Parent being the
"Parent Required Filings" and of the Company being the "Company
Required Filings"), no notices, reports or other filings are required
to be made by it with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by it from, any
governmental or regulatory authority, court, agency, commission, body
or other governmental entity ("Governmental Entity"), in connection
with the execution and delivery of this Agreement and the Stock Option
Agreement by it and the consummation by it of the Merger and the other
transactions contemplated by this Agreement and the Stock Option
Agreement, except those that the failure to make or obtain are not,
individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on it and not reasonably likely to prevent, materially
delay or materially impair its ability to consummate the transactions
contemplated by this Agreement or the Stock Option Agreement.
The term "Competition Laws" includes the HSR Act, the European Community
Merger Control Regulation, and any other antitrust or competition Law of the
United States, the European Community or any other nation, province, territory
or locality which must be satisfied or complied with in order to consummate and
make effective the Merger or the other transactions contemplated by this
Agreement and the Stock Option Agreement.
(ii) The execution, delivery and performance of this Agreement and
the Stock Option Agreement by it do not, and the consummation by it of
the Merger and the other transactions
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<PAGE>
contemplated by this Agreement and the Stock Option Agreement will not,
constitute or result in (A) a breach or violation of, or a default
under, its certificate of incorporation or bylaws or the comparable
governing instruments of any of its Significant Subsidiaries, (B) a
breach or violation of, or a default under, the certificate of
incorporation or bylaws of any entity in which it has an equity
interest of 20% or more (collectively, with Significant Subsidiaries,
"Significant Investees"), (C) a breach or violation of, or a default
under, the acceleration of any obligations or the creation of a lien,
pledge, security interest or other encumbrance on its or its
Subsidiaries' assets or the assets of any of its Significant Investees
(with or without notice, lapse of time or both) pursuant to any
agreement, license, lease, contract, note, mortgage, indenture,
arrangement or other obligation ("Contracts") binding upon it or its
Subsidiaries or any of its Significant Investees or any Law or
governmental or non-governmental permit or license to which it or its
Subsidiaries or any of its Significant Investees is subject or (D) any
change in the rights or obligations of any party under any Contracts to
which it or its Subsidiaries or its Significant Investees are a party,
except, in the case of clauses (B), (C) or (D) above, for any breach,
violation, default, acceleration, creation or change that, individually
or in the aggregate, is not reasonably likely to have a Material
Adverse Effect on it and not reasonably likely to prevent, materially
delay or materially impair its ability to consummate the transactions
contemplated by this Agreement or the Stock Option Agreement.
(iii) For purposes of this Agreement, the "Company Required
Consents" means the consents that are listed in Section 5.1(d)(iii) of
the Company Disclosure Letter and the "Parent Required Consents" means
the consents that are listed in Section 5.1(d)(iii) of the Parent
Disclosure Letter.
(e) Reports; Financial Statements. It has made available to the other
party each registration statement, report, proxy statement or information
statement prepared by it since December 31, 1996, including its Annual
Report on Form 10-K for the years ended December 31, 1996, December 31,
1997 and December 31, 1998 in the form (including exhibits, annexes,
schedules and any amendments thereto) filed with the Securities and
Exchange Commission (the "SEC") (collectively, including any such reports
filed subsequent to the date of this Agreement, its "Reports"). As of their
respective dates, its Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. Each of the
consolidated balance sheets included in or incorporated by reference into
its Reports (including the related notes and schedules) fairly presents in
all material respects the consolidated financial position of it and its
Subsidiaries as of its date and each of the consolidated statements of
income and of cash flows included in or incorporated by reference into its
Reports (including any related notes and schedules) fairly presents in all
material respects the consolidated results of operations, retained earnings
and cash flows, as the case may be, of it and its Subsidiaries for the
periods set forth therein (subject, in the case of unaudited statements, to
notes and normal year-end audit adjustments that will not be material in
amount or effect), in each case in accordance with U.S. generally accepted
accounting principles ("GAAP") consistently applied during the periods
involved, except as may be noted therein.
(f) Absence of Certain Changes.
(i) Since December 31, 1998 (the "Audit Date") there has not been
(w) any change in the financial condition, liabilities and assets
(taken together) or business of the Company and its Subsidiaries,
except those changes that are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on the Company; (x)
any damage, destruction or other casualty loss with respect to any
asset or property owned, leased or otherwise used by the Company or any
of its Subsidiaries, whether or not covered by insurance, which damage,
destruction or loss is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company; (y) any
declaration, setting aside or payment of any dividend or other
distribution in respect of the Company's capital stock, except publicly
announced regular quarterly cash dividends on its common stock; or (z)
any change by the Company in accounting principles, practices or
methods, except as required by GAAP. Since the Audit Date, except as
provided for in this Agreement, there has not
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been any increase in the salary, wage, bonus, grants, awards, benefits
or other compensation payable or that could become payable by the
Company or any of its Subsidiaries to directors, officers or key
employees or any amendment of any of its Compensation and Benefit Plans
other than increases or amendments in the ordinary and usual course of
its business (which may include ordinary periodic performance reviews
and related compensation and benefit increases and the provision of new
individual compensation and benefits for promoted or newly hired
officers and employees on terms consistent with past practice) and no
additional contributions have been made to the Company Benefits
Protection Trust and no actions have been taken to provide for any such
contributions. From the Audit Date through the date of this Agreement,
the Company and its Subsidiaries have conducted their respective
businesses only in, and have not engaged in any material transaction
other than according to, the ordinary and usual course of such
business.
(ii) Since the Audit Date, there has not been (w) any change in the
financial condition, liabilities and assets (taken together) or
business of Parent and its Subsidiaries, except those changes that are
not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on Parent; (x) any damage, destruction or other
casualty loss with respect to any asset or property owned, leased or
otherwise used by Parent or any of its Subsidiaries, whether or not
covered by insurance, which damage, destruction or loss is reasonably
likely, individually or in the aggregate, to have a Material Adverse
Effect on Parent; (y) any declaration, setting aside or payment of any
dividend or other distribution in respect of Parent's capital stock,
except publicly announced regular quarterly cash dividends on its
common stock and except as permitted by Section 6.1(b); or (z) any
change by Parent in accounting principles, practices or methods, except
as required by GAAP. From the Audit Date through the date of this
Agreement, Parent and its Subsidiaries have conducted their respective
businesses only in, and have not engaged in any material transaction
other than according to the ordinary and usual course of such
businesses.
(g) Litigation and Liabilities. Except as to matters involving Taxes,
there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings pending or, to the actual knowledge
of its executive officers, threatened against it or any of its Subsidiaries
or (ii) obligations or liabilities of it and its Subsidiaries, whether or
not accrued, contingent or otherwise and whether or not required to be
disclosed, or any other facts or circumstances, in either such case, except
for those that are not, individually or in the aggregate, reasonably likely
to have a Material Adverse Effect on it and not reasonably likely to
prevent, materially delay or materially impair its ability to consummate
the transactions contemplated by this Agreement or the Stock Option
Agreement.
The term "executive officers" means, with respect to the Company and its
Subsidiaries, William Joyce, Joseph Soviero, John K. Wulff, Malcolm Kessinger
and Bruce Fitzgerald, and with respect to Parent and its Subsidiaries, William
S. Stavropoulous, J. Pedro Reinhard and John G. Scriven.
(h) Employee Benefits.
(i) None of the Company nor any ERISA Affiliate maintains, is a
party to, participates in or has any liability or contingent liability
with respect to any employee benefit plan (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or any bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock, stock option,
employment, consulting, termination, severance, compensation, medical,
health or fringe benefit plan, or other plan, program, agreement,
policy or arrangement for any agents, consultants, employees,
directors, former employees or former directors of the Company and or
any ERISA Affiliate which does not constitute an employee benefit plan
(which employee benefit plans and other plans, programs, agreements
policies and arrangements are collectively referred to as the
"Compensation and Benefit Plans"). A true and correct copy of each
Compensation and Benefit Plan and, to the extent applicable, copies of
the most recent annual report, actuarial report, accountant's opinion
of the plan's financial statements, summary plan description and
Internal Revenue Service determination letter with respect to any
Compensation and Benefit Plans and any trust agreements or insurance
contracts forming a part of such
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Compensation and Benefit Plans has been made available by the Company
to Parent prior to the date of this Agreement. In the case of any
Compensation and Benefit Plan which is not in written form, the Company
has supplied to Parent an accurate description of such Compensation and
Benefit Plan as in effect on the date of this Agreement. For purposes
of this Agreement, the term "ERISA Affiliate" means any corporation or
trade or business which, together with the Company, is a member of a
controlled group of Persons or a group of trades or businesses under
common control with the Company within the meaning of Sections 414(b),
(c), (m) or (o) of the Code.
(ii) All Compensation and Benefit Plans are in substantial
compliance with all requirements of applicable Law, including the Code
and ERISA and no event has occurred which will or could cause any such
Compensation and Benefit Plan to fail to substantially comply with such
requirements and no notice has been issued by any governmental
authority questioning or challenging such compliance. There have been
no acts or omissions by the Company or any ERISA Affiliate which have
given rise to or may give rise to fines, penalties, taxes or related
charges under Section 502 of ERISA or Chapters 43, 47, 68 or 100 of the
Code for which the Company or ERISA Affiliate may be liable and which
are, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect. Each of the Compensation and Benefit Plans
that is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA, other than a multiemployer plan (as defined in
Section 3(37) of ERISA (each a "Pension Plan"), and that is intended to
be qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service (the "IRS")
which covers all changes in Law for which the remedial amendment period
(within the meaning of Section 401(b) of the Code and applicable
regulations) has expired and none of the Company nor any of its ERISA
Affiliates is aware of any circumstances likely to result in revocation
of any such favorable determination letter. There is no pending or, to
the actual knowledge of the Company's executive officers, threatened
material litigation relating to its Compensation and Benefit Plans.
Neither the Company nor any of the ERISA Affiliates has engaged in a
transaction with respect to any of the Compensation and Benefit Plans
that, assuming the taxable period of such transaction expired as of the
date of this Agreement, would subject it or any of the ERISA Affiliates
to a material tax or penalty imposed by either Section 4975 of the Code
or Section 502 of ERISA.
(iii) As of the date of this Agreement, no liability under Title IV
of ERISA (other than the payment of prospective premium amounts to the
Pension Benefit Guaranty Corporation in the normal course) has been or
is expected to be incurred by the Company or any ERISA Affiliate with
respect to any Compensation and Benefit Plan. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been
required to be filed for any Pension Plans within the 12-month period
ending on the date of this Agreement or will be required to be filed in
connection with the transactions contemplated by this Agreement.
(iv) All contributions required to be made under the terms of any of
the Compensation and Benefit Plans as of the date of this Agreement
have been timely made or have been reflected on the most recent
consolidated balance sheet filed or incorporated by reference in its
Reports prior to the date of this Agreement. None of the Pension Plans
has an "accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA. Neither
the Company nor any ERISA Affiliate has provided, or is required to
provide, security to any Pension Plans pursuant to Section 401(a)(29)
of the Code or to the PBGC pursuant to Title IV or ERISA.
(v) Under each of the Pension Plans as of the last day of the most
recent plan year ended prior to the date of this Agreement, the
actuarially determined present value of all "benefit liabilities",
within the meaning of Section 4001(a)(16) of ERISA (as determined on
the basis of the actuarial assumptions contained in such Pension Plan's
most recent actuarial valuation), did not exceed the then current value
of the assets of such Pension Plan, and there has been no material
change in the financial condition of such Pension Plan since the last
day of the most recent plan year.
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<PAGE>
(vi) None of the Company nor any ERISA Affiliate have any
obligations for post-termination health and life benefits under any of
the Compensation and Benefit Plans, except as set forth in its Reports
filed prior to the date of this Agreement or as required by applicable
Law.
(vii) The consummation of the Merger (or its approval by
shareholders of the Company) and the other transactions contemplated by
this Agreement or the Stock Option Agreement will not (x) entitle any
employees or directors of the Company or any employees of any of the
Company's ERISA Affiliates to severance pay, directly or indirectly,
upon termination of employment or otherwise, (y) accelerate the time of
payment or vesting or trigger any payment of compensation or benefits
under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Compensation and Benefit Plans or
(z) result in any breach or violation of, or a default under, any of
the Compensation and Benefit Plans.
(viii) None of the Compensation and Benefit Plans is a multiemployer
plan and none of the Company or any of the ERISA Affiliates have
contributed or been obligated to contribute to a multiemployer plan at
any time since January 1, 1993.
(i) Compliance with Laws. The businesses of each of it and its
Subsidiaries have not been, and are not being, conducted in violation of
any law, statute, ordinance, regulation, judgment, order, decree,
injunction, arbitration award, license, authorization, opinion, agency
requirement or permit of any Governmental Entity (collectively, "Laws"),
and to the actual knowledge of the executive officers no Significant
Investor is in violation of any Law, except for violations or possible
violations that are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on it and not reasonably likely to
prevent, materially delay or materially impair its ability to consummate
the transactions contemplated by this Agreement or the Stock Option
Agreement. No investigation or review by any Governmental Entity with
respect to it or any of its Subsidiaries is pending or, to the actual
knowledge of its executive officers, threatened, nor has any Governmental
Entity indicated an intention to conduct the same, except for those the
outcome of which are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on it and not reasonably likely to
prevent, materially delay or materially impair its ability to consummate
the transactions contemplated by this Agreement and the Stock Option
Agreement. To the actual knowledge of its executive officers, no material
change is required in its or any of its Subsidiaries' processes, properties
or procedures in connection with any such Laws, and it has not received any
notice or communication of any material noncompliance with any such Laws
that has not been cured as of the date of this Agreement, except for such
changes and noncompliance that are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on it and not
reasonably likely to prevent, materially delay or materially impair its
ability to consummate the transactions contemplated by this Agreement and
the Stock Option Agreement. Each of it and its Subsidiaries has all
permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals necessary to conduct
their business as presently conducted, except for those the absence of
which are not, individually or in the aggregate, reasonably likely to have
a Material Adverse Effect on it and not reasonably likely to prevent,
materially delay or materially impair its ability to consummate the
transactions contemplated by this Agreement and the Stock Option Agreement.
(j) Takeover Statutes; Charter and Bylaw Provisions. The Board of
Directors of the Company has taken all appropriate and necessary actions
such that the transactions contemplated under this Agreement and the Stock
Option Agreement can be consummated and neither Parent or Merger Sub, as
"interested shareholders" (as defined in Section 912 of the NYBCL), will be
prohibited at any time from entering into one or more "business
combinations" (within the meaning of Section 912 of the NYBCL) with the
Company, without any need to satisfy the conditions set forth in Section
912(c)(3) of the NYBCL, as a result of the execution and delivery of this
Agreement and the Stock Option Agreement, or as a result of the
consummation of the transactions contemplated by this Agreement or the
Stock Option Agreement. Except for the applicable provisions of the NYBCL,
no other "fair price," "moratorium," "control share acquisition" or other
similar state law anti-takeover statute or regulation (each a "Takeover
Statute") as in
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effect on the date of this Agreement is applicable to the Company, the
Company Shares, the Merger or the other transactions contemplated by this
Agreement or the Stock Option Agreement. No anti-takeover provision
contained in the Company's certificate of incorporation or its bylaws
(collectively,"Charter and Bylaw Provisions") is, or at the Effective Time
will be, applicable to the Merger or the other transactions contemplated by
this Agreement or the Stock Option Agreement.
(k) Environmental Matters. Except for such matters that, individually or
in the aggregate, are not reasonably likely to have a Material Adverse
Effect on the Company: (i) each of the Company and its Subsidiaries has
complied with all applicable Environmental Laws; (ii) neither the Company
nor any Subsidiary has received any notice, demand, letter, claim or
request for information alleging that the Company or any of its
Subsidiaries may be in violation of or liable under any Environmental Law
or is involved in any litigation related to any Environmental Laws; (iii)
neither the Company nor any of its Subsidiaries is subject to any Orders,
decrees, injunctions or other arrangements with any Governmental Entity
relating to the remediation of Hazardous Substances or compliance with
Environmental Laws; (iv) there are no circumstances or conditions involving
the Company or any of its Subsidiaries that could reasonably be expected to
result in any claims, liability, investigations, costs or restrictions on
the ownership, use, or transfer of any of the Company's properties pursuant
to any Environmental Law; and (v) the executive officers of the Company
have no actual knowledge of any breach of any Environmental Law by any
Significant Investee. This Section 5.1(k) constitutes the sole
representation and warranty of the Company with respect to any
Environmental Law or relating to Hazardous Substances notwithstanding any
other representation of this Article V.
The term "Environmental Law" means any Law relating to: (A) the protection,
investigation or restoration of the environment, health, safety, or natural
resources; (B) the handling, use, presence, disposal, release or threatened
release of any Hazardous Substance; or (C) noise, odor, wetlands, pollution,
contamination or (i) any injury or threat of injury to persons or property or
(ii) notifications to government agencies or the public in connection with any
Hazardous Substance.
The term "Hazardous Substance" means any substance that is listed,
classified or regulated pursuant to any Environmental Law, including any
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls or radioactive materials.
(l) Accounting and Tax Matters. Neither it nor any of its Subsidiaries
or Pooling Affiliates has taken or agreed to take any action, nor do its
executive officers have any actual knowledge of any fact or circumstance,
that would prevent Parent from accounting for the business combination to
be effected by the Merger as a "pooling-of-interests" in accordance with
APB No. 16 or prevent the Merger and the other transactions contemplated by
this Agreement from qualifying as a "reorganization" within the meaning of
Section 368(a) of the Code. It and its Subsidiaries have provided to its
independent auditors all information requested by such auditors to assess
whether the Merger can be properly accounted for as a "pooling of
interests" in accordance with APB No. 16, and have fully cooperated with
such auditors with respect to all reasonable requests made in connection
with such assessment.
(m) Taxes. It and its Subsidiaries have prepared in good faith and duly
and timely filed (taking into account any extension of time within which to
file) all material Tax Returns required to be filed by any of them at or
before the Effective Time and all such filed Tax Returns are complete and
accurate in all material respects. It and each of its Subsidiaries as of
the Effective Time (x) will have paid all Taxes that they are required to
pay prior to the Effective Time, and (y) will have withheld all federal,
state and local income taxes, FICA, FUTA and other Taxes, including,
without limitation, similar foreign Taxes, required to be withheld from
amounts owing to any employee, creditor or other Person, except for such
amounts that, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect on it. There are not, to the actual
knowledge of its executive officers, any unresolved questions, claims or
outstanding proposed or assessed deficiencies concerning its or any of its
Subsidiaries' Tax liability that are reasonably likely to have a Material
Adverse Effect on it. Neither it nor any of its Subsidiaries has any
liability with respect to income, franchise or similar Taxes in excess of
the amounts accrued in respect
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thereof that are reflected in the financial statements included in Reports,
except such excess liabilities as are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it. No
payments to be made to any of the officers and employees of it or its
Subsidiaries will as a result of consummation of the Merger be subject to
the deduction limitations under Section 280G of the Code.
The term "Tax" (including, with correlative meaning, the terms "Taxes," and
"Taxable") includes all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment, disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions. The term "Tax Return"
includes all federal, state, local and foreign returns and reports (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be supplied to a Tax authority relating to Taxes.
(n) Labor Matters. Neither the Company nor any of its Subsidiaries is
the subject of any material proceeding asserting that the Company or any of
its Subsidiaries has committed an unfair labor practice or is seeking to
compel the Company to bargain with any labor union or labor organization
nor is there pending or, to the actual knowledge of the Company's executive
officers, threatened, nor has there been for the past five years, any labor
strike, dispute, walkout, work stoppage, slow-down or lockout involving the
Company or any of its Subsidiaries, except in each case as is not,
individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Company.
(o) Brokers and Finders. Neither it nor any of its officers, directors
or employees has employed any broker or finder or incurred any liability
for any brokerage fees, commissions or finders' fees in connection with the
Merger or the other transactions contemplated in this Agreement except that
(i) the Company has employed Credit Suisse First Boston Corporation as its
financial advisor, the arrangements with which have been disclosed to
Parent prior to the date of this Agreement, and (ii) Parent has employed
Goldman, Sachs & Co. and Morgan Stanley Dean Witter & Co. as its financial
advisors.
(p) Rights Agreement. The Company has adopted an amendment to the Rights
Agreement with the effect that neither Parent nor Merger Sub shall be
deemed to be an Acquiring Person (as defined in the Rights Agreement) and
the Distribution Date (as defined in the Rights Agreement) shall not be
deemed to occur and that the Rights (as defined in the Rights Agreement)
will not separate from the Company Shares, as a result of entering into
this Agreement or the Stock Option Agreement or consummating the Merger
and/or the other transactions contemplated by this Agreement and the Stock
Option Agreement.
(q) Intellectual Property Rights. The Company and its Subsidiaries own
or have the right to use all intellectual property material to the conduct
of their respective businesses (such intellectual property and such rights
are collectively referred to as the "Company IP Rights") except for any
such failures to own or have the right to use that, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect on
the Company. Except in each case as is not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on the
Company, neither the manufacture, marketing, license, export, sale or
promoted use of any product by the Company or its Subsidiaries nor the
current use by it or its Subsidiaries or licensees of the Company or its
Subsidiaries of any Company IP Rights (A) violates any license or agreement
between the Company or any of its Subsidiaries and any Person or (B)
infringes any patents or other intellectual property rights of any other
Person; and there is no pending or, to the actual knowledge of the
Company's executive officers, threatened claim or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any
Company IP Rights, or asserting that any Company IP Rights or the proposed
use, sale, export, license or disposition of Company IP Rights, or the
manufacture, use or sale of any products made using any Company IP Rights,
conflicts or will conflict with the contractual or intellectual property
rights of any other Person, other than any that would not, individually or
in the aggregate, be reasonably likely to have a Material Adverse Effect on
it.
(r) Year 2000 Compliance. It has instituted processes and controls to
attain Year 2000 Compliance, and the foreseeable expenses or other
liabilities associated with the process of securing full Year 2000
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Compliance would not be reasonably likely to have a Material Adverse Effect
on it. "Year 2000 Compliance" means, except for any noncompliance that,
individually or in the aggregate would not be reasonably likely to cause a
Material Adverse Effect on it, that such hardware or software used by it or
any of its Subsidiaries including, but not limited to, microcode, firmware,
system and application programs, files, databases, computer services, and
microcontrollers, including those embedded in computer and non-computer
equipment (the "Computer Systems") will not fail (because of a date change
event resulting from a transition to the year 2000) to:
(i) process date data consistently from, before and after January 1,
2000;
(ii) maintain functionality with respect to the introduction
processing or output of records containing dates falling on or after
January 1, 2000; and
(iii) be interoperable with other Year 2000 Compliant software or
hardware which may deliver records to, receive records from or interact
with such Computer Systems in the course of conducting its business of,
including processing data, manufacturing process control systems and
manufacturing its products.
ARTICLE VI
Covenants
6.1. Interim Operations.
(a) The Company covenants and agrees as to itself and its Subsidiaries that,
after the date of this Agreement and prior to the Effective Time (unless Parent
shall otherwise approve in writing, which approval shall not be unreasonably
withheld or delayed, or except as otherwise expressly contemplated by this
Agreement, the Stock Option Agreement, disclosed in the Company Disclosure
Letter or required by applicable Law):
(i) The business of it and its Subsidiaries shall be conducted in the
ordinary and usual course and, to the extent consistent therewith, it and
its Subsidiaries shall use their reasonable best efforts to preserve its
business organization intact and maintain its existing relations and
goodwill with customers, suppliers, regulators, distributors, creditors,
lessors, licensors and licensees, employees and business associates;
(ii) It shall not: (A) amend its certificate of incorporation or bylaws;
(B) split, combine, subdivide or reclassify its outstanding shares of
capital stock; (C) declare, set aside or pay any dividend payable in cash,
stock or property in respect of any capital stock, other than regular
quarterly cash dividends not in excess of $.225 per Company Share; or (D)
repurchase, redeem or otherwise acquire, except in connection with
commitments under or the express terms of the Company Stock Plans as in
effect on the date of this Agreement but subject to the Company's
obligations under subparagraph (iii) below, or permit any of its
Subsidiaries to purchase or otherwise acquire, any shares of its capital
stock or any securities convertible into or exchangeable or exercisable for
any shares of its capital stock;
(iii) Neither it nor any of its Subsidiaries shall take any action that
would prevent the Merger from qualifying for "pooling-of-interests"
accounting treatment in accordance with the requirements of APB No. 16 or
as a "reorganization" within the meaning of Section 368(a) of the Code or
that would cause any of its representations and warranties in this
Agreement to become untrue in any material respect;
(iv) Neither it nor any of its ERISA Affiliates shall: (A) make any
contribution to the Company Benefits Protection Trust (the "Rabbi Trust")
in excess of $5,000,000; (B) accelerate, amend or change the period of
exerciseability of or terminate, establish, adopt, enter into, increase,
make any new grants or awards of stock-based compensation or other benefits
under any Compensation and Benefit Plans; (C) amend or otherwise modify or
increase the benefits under any Compensation and Benefit Plans; or (D)
increase the salary, wage, bonus or other cash compensation of any
directors, officers or key employees, in the case of (B), (C) and (D),
except for actions necessary to satisfy existing contractual obligations
under Compensation and Benefit Plans existing as of the date of this
Agreement and in the case of (D) except in
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the ordinary course of business and consistent with past practice and
neither it nor any of its ERISA Affiliates shall take any actions that
would or could have the effect of any of the foregoing; provided, however,
that after the date of this Agreement and prior to the Effective Time, the
Company may (I) establish a transition retention program which provides
non-equity based retention incentives (not to exceed a maximum value of
$20,000,000 in the aggregate), the criteria for which, including the
criteria for the timing of payments thereunder, are reviewed in advance by
Parent; (II) make new grants or awards of stock-based compensation to the
extent permitted under Section 6.1(a)(vii); (III) take actions to appoint
the Administrative Committee under the Rabbi Trust and to establish
reasonable compensation for members of the Administrative Committee who are
not employees of the Company or its affiliates for services rendered as
members of the Administrative Committee; and (IV) in the event that the
Effective Time has not occurred prior to the next regularly scheduled
meeting of the Company's shareholders and provided that the amendment would
not prevent the Merger from qualifying for pooling-of-interest accounting
treatment in accordance with APB No. 16, to seek approval from the
Company's shareholders of an amendment to the 1997 Company Long-Term
Incentive Plan to provide for the issuance of additional shares of Company
Common Stock for grants and awards in the ordinary course of business and
consistent with past practice as described in Section 6.1(a)(vii);
(v) Neither it nor any of its Subsidiaries shall incur, repay or retire
prior to maturity or refinance prior to maturity any indebtedness for
borrowed money or guarantee any such indebtedness or issue, sell,
repurchase or redeem prior to maturity any debt securities or warrants or
rights to acquire any debt securities or guarantee any debt securities of
others, in all such cases in excess of, in the aggregate, $500,000,000;
(vi) Neither it nor any of its Subsidiaries shall make any capital
expenditures in an aggregate amount in excess of the aggregate amount
reflected in the Company's capital expenditure budget for the applicable
fiscal year;
(vii) Neither it nor any of its Subsidiaries shall issue, deliver, sell,
pledge or encumber shares of any class of its capital stock or any
securities convertible or exchangeable into, any rights, warrants or
options to acquire, or any bonds, debentures, notes or other debt
obligations having the right to vote or convertible into or exercisable for
any such shares, provided, however, that the Company may award equity-based
compensation under the Company Stock Plans provided such awards are made in
the ordinary course of business and are consistent (including the value of
such awards, determined on an individual basis) with past practices;
(viii) Neither it nor any of its Subsidiaries shall consummate,
authorize, propose or announce an intention to authorize or propose, or
enter into an agreement with respect to, any merger, consolidation, joint
venture or business combination (other than the Merger), or any purchase,
sale, lease, license or other acquisition or disposition of any business or
of a material amount of assets or securities except (in the case of assets)
for transactions entered into in the ordinary and usual course of its
business;
(ix) It shall not make any material change in its accounting policies or
procedures, other than any such change that is required by GAAP;
(x) It shall not release, assign, settle or compromise any material
claims or litigation or make any material tax election or settle or
compromise any material federal, state, local or foreign tax liability; and
(xi) Neither it nor any of its Subsidiaries shall authorize or enter
into any agreement to do any of the foregoing.
(b) Parent covenants and agrees as to itself and its Subsidiaries that,
after the date of this Agreement and prior to the Effective Time (unless the
Company shall otherwise approve in writing, which approval shall not be
unreasonably withheld or delayed, or except as otherwise expressly contemplated
by this Agreement, disclosed in the Parent Disclosure Letter or required by
applicable Law):
(i) It shall not: (A) reclassify its outstanding shares of capital
stock; or (B) declare, set aside or pay any dividend payable in cash, stock
(other than Parent Common Stock) or property in respect of any
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capital stock, except (x) for regular quarterly cash dividends not in
excess of $.87 per share of Parent Common Stock, or (y) for a dividend that
would be received by the holders of the Company Common Stock on an
equivalent basis per share of Parent Common Stock after the Effective Time;
(ii) Neither it nor any of its Subsidiaries shall take any action that
would prevent the Merger from qualifying for "pooling-of-interest"
accounting treatment in accordance with the requirements of APB No. 16 or
as a "reorganization" within the meaning of Section 368(a) of the Code or
that would cause any of its representations and warranties in this
Agreement to become untrue in any material respect;
(iii) It shall not make acquisitions of businesses or enter into any
joint ventures, except for acquisitions of businesses or joint ventures
engaged in businesses of the type listed in Section 6.1(b)(iii) of the
Parent Disclosure Letter. If Parent seeks the consent of the Company to
make other acquisitions of businesses or enter into other joint ventures,
the decision whether to grant such consent shall be made solely by the
Company's Chief Executive Officer, who shall treat any information provided
to him in connection with the request confidentially and shall not share
such information, or the fact of the request, with any other Person;
provided, however, that the Company's Chief Executive Officer may share
such information, and disclose the fact of the request, with such of the
Company's outside legal advisors as are reasonably necessary to enable the
Chief Executive Officer to make an informed decision with respect to the
requested consent.
(iv) Neither it nor any of its Subsidiaries shall authorize or enter
into any agreement to do any of the foregoing.
(c) Parent and the Company agree that any written approval obtained under
this Section 6.1 must be signed by the Chief Executive Officer or Chief
Financial Officer if signing for Parent and by the Chief Executive Officer if
signing for the Company.
6.2. Acquisition Proposals.
(a) The Company agrees that neither it nor any of its Subsidiaries nor
any of the officers and directors of it or its Subsidiaries shall, and that
it shall direct and use its best efforts to cause its and its Subsidiaries'
employees, agents and representatives (including any investment banker,
attorney or accountant retained by it or any of its Subsidiaries) (the
Company, its Subsidiaries and their officers, directors, employees, agents
and representatives being the "Company Representatives") not to, directly
or indirectly, initiate, solicit, encourage or otherwise facilitate any
inquiries or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
it, or any purchase or sale of the consolidated assets (including without
limitation stock of Subsidiaries) of it or any of its Subsidiaries, taken
as a whole, having an aggregate value equal to 20% or more of its market
capitalization, or any purchase or sale of, or tender or exchange offer
for, 20% or more of its or any of its Subsidiaries' equity securities (any
such proposal or offer being referred to as an "Acquisition Proposal"). The
Company further agrees that neither it nor any of its Subsidiaries nor any
of the officers and directors of it or its Subsidiaries shall, and that it
shall direct and use its best efforts to cause the Company Representatives
not to, directly or indirectly, have any discussion with or provide any
confidential information or data to any Person relating to or in
contemplation of an Acquisition Proposal or engage in any negotiations
concerning an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; provided, however,
that nothing contained in this Agreement shall prevent either the Company
or its Board of Directors from (A) complying with Rule 14e-2 promulgated
under the Exchange Act with regard to an Acquisition Proposal; (B) engaging
in any discussions or negotiations with or providing any information to,
any Person in response to an unsolicited bona fide written Acquisition
Proposal by any such Person; or (C) recommending such an unsolicited bona
fide written Acquisition Proposal to the shareholders of the Company if and
only to the extent that, with respect to the actions referred to in clauses
(B) or (C), (i) the Board of Directors of the Company concludes in good
faith (after consultation with its outside legal counsel and its financial
advisor) that such Acquisition Proposal is reasonably
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capable of being completed, taking into account all legal, financial,
regulatory and other aspects of the proposal and the Person making the
proposal, and would, if consummated, result in a transaction more favorable
to the Company's shareholders from a financial point of view than the
transaction contemplated by this Agreement, (any such more favorable
Acquisition Proposal being referred to as a "Superior Proposal") (ii) the
Board of Directors of the Company determines in good faith after
consultation with outside legal counsel that such action is necessary for
the Board of Directors to comply with its fiduciary duties to the Company's
shareholders under applicable Law and (iii) prior to providing any
information or data to any Person in connection with an Acquisition
Proposal by any such Person, the Board of Directors of the Company shall
receive from such Person an executed confidentiality agreement on terms
substantially similar to those contained in the Confidentiality Agreement;
provided, that such confidentiality agreement shall contain terms that
allow the Company to comply with its obligations under this Section 6.2.
(b) The Company agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Company agrees that it will take the necessary steps to promptly inform
each Company Representative of the obligations undertaken in Section
6.2(a). The Company agrees that it will notify Parent promptly (in any
event, within 24 hours) if any such inquiries, proposals or offers are
received by, any such information is requested from, or any such
discussions or negotiations are sought to be initiated or continued with,
any Company Representative indicating, in connection with such notice, the
name of such Person making such inquiry, proposal, offer or request and the
substance of any such inquiries, proposals or offers. The Company
thereafter shall keep Parent informed, on a reasonably current basis, of
the status and terms of any such inquiries, proposals or offers and the
status of any such inquiries, proposals or offers and the status of any
such discussions or negotiations. The Company also agrees that it will
promptly request each Person that has heretofore executed a confidentiality
agreement in connection with its consideration of any Acquisition Proposal
to return or destroy all confidential information heretofore furnished to
such Person by or on behalf of the Company or any of its Subsidiaries.
6.3. Information Supplied. The Company and Parent each agrees, as to itself
and its Subsidiaries, that none of the information supplied or to be supplied
by it or its Subsidiaries for inclusion or incorporation by reference in (i)
the Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger
(including the joint proxy statement and prospectus (the "Prospectus/Proxy
Statement") constituting a part thereof) (the "S-4 Registration Statement")
will, at the time the S-4 Registration Statement becomes effective under the
Securities Act, and (ii) the Prospectus/Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to shareholders and at the time
of the meeting of shareholders of the Company to be held in connection with the
Merger, in any such case, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. If at any time prior to the Effective Time any
information relating to Parent or the Company, or any of their respective
affiliates (as defined in SEC Rule 12b-2), officers or directors, is discovered
by Parent or the Company which should be set forth in an amendment or
supplement to any of the S-4 Registration Statement or the Prospectus/Proxy
Statement, so that any of such documents would not include any misstatement of
a material fact or would omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties to this
Agreement and an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and, to the extent required by
law, disseminated to the shareholders of the Company.
6.4. Shareholders Meeting. The Company will take, in accordance with
applicable Law and its certificate of incorporation and bylaws, all action
necessary to convene a meeting of holders of Company Shares (the "Shareholders
Meeting") as promptly as practicable after the S-4 Registration Statement is
declared effective to consider and vote upon the adoption of this Agreement and
Merger. The Company's Board of Directors shall (i) recommend that the
shareholders of the Company adopt this Agreement and thereby approve the
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transactions contemplated by this Agreement and (ii) take all lawful action
(including the solicitation of proxies) to solicit such adoption; provided,
however, that the Company's Board of Directors may, at any time prior to the
Effective Time, withdraw, modify or change any such recommendation to the
extent that the Company's Board of Directors determines in good faith, after
consultation with outside legal counsel, that such withdrawal, modification or
change of its recommendation is necessary to comply with its fiduciary duties
to the Company's shareholders under applicable Law.
6.5. Filings; Other Actions; Notification.
(a) Parent and the Company shall promptly prepare and file with the SEC the
Prospectus/Proxy Statement, and Parent shall prepare and file with the SEC the
S-4 Registration Statement as promptly as practicable. Parent and the Company
each shall use its reasonable best efforts to have the S-4 Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing, and promptly thereafter mail the
Prospectus/Proxy Statement to the shareholders of the Company. Parent shall
also use its reasonable best efforts to obtain prior to the effective date of
the S-4 Registration Statement all necessary state securities law or "blue sky"
permits and approvals required in connection with the Merger and the other
transactions contemplated by this Agreement and will pay all expenses incident
thereto.
(b) The Company and Parent each shall use its respective reasonable best
efforts to cause to be delivered to the other party and its directors a letter
of its independent auditors, dated (i) the date on which the S-4 Registration
Statement shall become effective and (ii) the Closing Date, and addressed to
the other party and its directors, in form and substance customary for
"comfort" letters delivered by independent public accountants in connection
with registration statements similar to the S-4 Registration Statement.
(c) The Company and Parent shall cooperate with each other and, subject to
Sections 6.5(d) and (e), use (and shall cause their respective Subsidiaries to
use) their respective reasonable best efforts (and, with respect to the
satisfaction of the condition set forth in Section 7.1(f), and, except as set
forth in the proviso to this sentence, Competition Law matters, their
respective best efforts) (i) to take or cause to be taken all actions, and do
or cause to be done all things, necessary, proper or advisable on their part
under this Agreement and the Stock Option Agreement and applicable Laws to
consummate and make effective the Merger and the other transactions
contemplated by this Agreement and the Stock Option Agreement as soon as
practicable, including (A) obtaining opinions of their respective accountants
and attorneys referred to in Section 6.16 and Article VII of this Agreement,
and, in the case of Parent, causing the issuance of that number of shares of
Parent Common Stock currently held as treasury stock as shall be necessary to
satisfy the condition set forth in Section 7.1(f), (B) preparing and filing as
promptly as practicable all documentation to effect all necessary applications,
notices, petitions, filings and other documents, (C) engaging in active
negotiations with the relevant Governmental Entities with respect to
Competition Law matters and, subject to the limits set forth in the proviso to
this sentence, resolving the concerns, if any, of those Governmental Entities
and (D) promptly instituting proceedings (including, if necessary, court
actions) necessary to obtain the approvals required to consummate the Merger or
the other transactions contemplated by this Agreement and the Stock Option
Agreement or defending or otherwise opposing all court actions and other
proceedings instituted by a Governmental Entity or other Person under the
Competition Laws or otherwise for purposes of delaying, restraining, enjoining
or otherwise preventing the consummation of the Merger and the other
transactions contemplated by this Agreement and the Stock Option Agreement and
to take all steps necessary to vacate, modify or suspend any Order so as to
permit consummation of the Merger and the transactions contemplated by this
Agreement or the Stock Option Agreement on a schedule as close as possible to
that contemplated by this Agreement and the Stock Option Agreement and (ii) to
obtain as promptly as practicable all consents, registrations, approvals,
permits and authorizations necessary or advisable to be obtained from any
Person and/or any Governmental Entity in order to satisfy the conditions in
Article VII and to consummate the Merger and the other transactions
contemplated by this Agreement and the Stock Option Agreement; provided,
however, that, notwithstanding anything to the contrary in this Agreement,
neither Parent nor any of its Subsidiaries shall be required to agree (with
respect to (x) Parent or its Subsidiaries or (y) the Company or its
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Subsidiaries) to any divestitures, licenses, hold separate arrangements or
similar matters in order to obtain approval of the transactions contemplated by
this Agreement and the Stock Option Agreement under applicable Competition Laws
if such divestitures, licenses, arrangements or matters would reasonably be
expected to have a material adverse effect on the financial condition, assets
and liabilities (taken together) or business of Parent and its Subsidiaries and
the Company and its Subsidiaries on a combined basis. Subject to applicable
laws relating to the exchange of information, Parent and the Company shall have
the right to review in advance, and to the extent practicable each will consult
the other on, all the information relating to Parent or the Company, as the
case may be, and any of their respective Subsidiaries, that appear in any
filing made with, or written materials submitted to, any third party and/or any
Governmental Entity in connection with the Merger and the other transactions
contemplated by this Agreement and the Stock Option Agreement. The Company
shall have the right to have its representatives present during any meetings or
substantive telephone discussions with representatives of Governmental Entities
with respect to Competition Law matters; provided, however, that Parent's
representatives shall control all discussions, and the Company's
representatives shall not initiate discussions, with representatives of
Governmental Entities with respect to Competition Law matters and will, if
contacted by a Governmental Entity, delegate control to Parent. Without
limiting the generality of the preceding sentence, Parent shall keep the
Company informed, on a reasonably current basis, of the status of discussions
and communications between Parent's representatives and any Governmental Entity
with respect to Competition Law matters. In exercising the foregoing right,
each of the Company and Parent shall act reasonably and as promptly as
practicable.
(d) The Company shall not, without Parent's prior written consent, commit to
any divestitures, licenses, hold separate arrangements or similar matters (or
allow its Subsidiaries to commit to any divestitures, licenses, hold separate
arrangements or similar matters), and the Company shall commit to, and shall
use best efforts to effect (and shall cause its Subsidiaries to commit to and
use efforts to effect), any such divestitures, licenses, hold separate
arrangements or matters as Parent shall request in order to obtain approval of
the transactions contemplated by this Agreement and the Stock Option Agreement
under applicable Competition Laws.
(e) Notwithstanding anything to the contrary in this Agreement, nothing in
this Section 6.5 or any other part of this Agreement shall require Parent to
refrain from entering into any agreement with respect to, or issuing Parent
Common Stock or other consideration in connection with, a business acquisition
or joint venture permitted under Section 6.1(b)(iii) (a "Subsequent
Transaction"), and such actions by Parent shall not cause a breach of this
Agreement. In the event of a Subsequent Transaction, Parent shall agree to any
divestitures, licenses, hold separate arrangements or similar matters necessary
in order to lawfully consummate the transactions contemplated by this Agreement
under applicable Competition Laws that would not otherwise have been required
in order to obtain such approval but for the Subsequent Transaction.
(f) The Company and Parent each shall, upon request by the other, furnish
the other with all information concerning itself, its Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary
or advisable in connection with the Prospectus/Proxy Statement, the S-4
Registration Statement or any other statement, filing, notice or application
made by or on behalf of Parent, the Company or any of their respective
Subsidiaries to any third party and/or any Governmental Entity in connection
with the Merger and the transactions contemplated by this Agreement and the
Stock Option Agreement.
(g) The Company and Parent each shall keep the other apprised of the status
of matters relating to completion of the transactions contemplated by this
Agreement and the Stock Option Agreement, including promptly furnishing the
other with copies of notice or other communications received by Parent or the
Company, as the case may be, or any of its Subsidiaries, from any third party
and/or any Governmental Entity with respect to the Merger and the other
transactions contemplated by this Agreement and the Stock Option Agreement.
Each of the Company and Parent shall give prompt notice to the other of any
change that is reasonably likely to result in a Material Adverse Effect on it
or of any failure of any conditions to the other party's obligations to effect
the Merger set forth in Article VII.
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6.6. Access; Consultation.
(a) Upon reasonable notice, and except as may be prohibited by applicable
Law, the Company and Parent each shall (and shall cause its Subsidiaries to)
afford Parent's and its Subsidiaries' employees, agents and representatives
(including any investment banker, attorney or accountant retained by Parent or
any of its Subsidiaries) or the Company Representatives, as the case may be,
reasonable access, during normal business hours throughout the period prior to
the Effective Time, to its properties, books, contracts and records and, during
such period, each shall (and shall cause its Subsidiaries to) furnish promptly
to the other all information concerning its business, properties and personnel
as may reasonably be requested, provided that no investigation pursuant to this
Section shall affect or be deemed to modify any representation or warranty made
by the Company, Parent or Merger Sub under this Agreement, and provided,
further, that the foregoing shall not require the Company or Parent to permit
the other party to conduct any environmental testing or sampling or to permit
any inspection, or to disclose any information, that in the reasonable judgment
of the Company or Parent, as the case may be, would be in violation of
applicable Law or result in the disclosure of any trade secrets of third
parties or violate any of its obligations with respect to confidentiality if
the Company or Parent, as the case may be, shall have used all reasonable
efforts to obtain the consent of such third party to such inspection or
disclosure. All requests for information made pursuant to this Section shall be
directed to such executive officers of the Company or Parent, as the case may
be, as shall be designated from time to time by the Company or Parent as the
case may be.
(b) Subject to applicable Laws relating to the exchange of information, from
the date of this Agreement to the Effective Time, Parent and the Company agree
to consult with each other on a regular basis on a schedule to be agreed with
regard to their respective operations.
6.7. Affiliates. Each of the Company and Parent shall deliver to the other a
letter identifying all Persons whom such party believes to be, at the date of
the Shareholders Meeting, affiliates of such party for purposes of applicable
interpretations regarding use of the pooling-of-interests accounting method
("Pooling Affiliates") and, in the case of the Company, affiliates of the
Company for purposes of Rule 145 under the Securities Act ("Rule 145
Affiliates"). Each of the Company and Parent shall use all reasonable efforts
to cause each Person who is identified as a Pooling Affiliate or Rule 145
Affiliate in the letter referred to above to deliver to Parent on or prior to
the date of the Shareholders Meeting a written agreement, in the form attached
as Exhibit 6.7(A), in the case of a Pooling Affiliate or Rule 145 Affiliate of
the Company (the "Company Affiliate's Letter"), and Exhibit 6.7(B), in the case
of a Pooling Affiliate of Parent (the "Parent Affiliate's Letter"). Prior to
the Effective Time, each of the Company and Parent shall use all reasonable
efforts to cause each additional Person who is identified as a Pooling
Affiliate or Rule 145 Affiliate after the date of the Shareholders Meeting to
execute the applicable written agreement as set forth in this Section 6.7, as
soon as practicable after such Person is identified; provided, however, that no
such Person shall be required to execute such letter as an affiliate of a party
if such Person is identified by the other Party and the other Party receives,
on or before the date of the Shareholders Meeting, an opinion of counsel,
reasonably acceptable to Parent, to the effect that such Person is not an
affiliate.
6.8. Stock Exchange Listing and De-listing. To the extent they are not
already listed, Parent shall use its best efforts to cause the shares of Parent
Common Stock to be issued in the Merger to be approved for listing on the New
York Stock Exchange ("NYSE") and on all other stock exchanges on which shares
of Parent Common Stock are then listed, subject to official notice of issuance,
prior to the Closing Date. The Surviving Corporation shall use its reasonable
best efforts to cause the Company Shares to be de-listed from the NYSE, the
Chicago and the Pacific stock exchanges and de-registered under the Exchange
Act as soon as practicable following the Effective Time.
6.9. Publicity. The initial press release with respect to the Merger shall
be a joint press release. Thereafter the Company and Parent shall consult with
each other prior to issuing any press releases or otherwise making public
announcements with respect to the Merger and the other transactions
contemplated by this Agreement and prior to making any filings with any third
party and/or any Governmental Entity (including any securities exchange) with
respect thereto, except as may be required by law or by obligations pursuant to
any listing agreement with or rules of any securities exchange.
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6.10. Benefits.
(a) Stock Options.
(i) At the Effective Time, each outstanding option to purchase Company
Shares (a "Company Option") under the Company Stock Plans, whether vested
or unvested, shall be converted to an option to acquire, on the same terms
and conditions as were applicable under such Company Option, the same
number of shares of Parent Common Stock as the holder of such Company
Option would have been entitled to receive pursuant to the Merger had such
holder exercised such Company Option in full immediately prior to the
Effective Time (rounded down to the nearest whole number) (a "Substitute
Option"), at an exercise price per share (rounded to the nearest whole
cent) equal to (y) the aggregate exercise price for the Company Shares
otherwise purchasable pursuant to such Company Option divided by (z) the
number of full shares of Parent Common Stock deemed purchasable pursuant to
such Company Option in accordance with the foregoing.
(ii) As promptly as practicable after the Effective Time, the Company
shall deliver to the participants in the Company Stock Plans appropriate
notices setting forth such participants' rights pursuant to the Substitute
Options.
(b) Share Units. At or prior to the Effective Time, the Company shall make
all necessary arrangements to cause any Company Share units under the Company's
Compensation and Benefit Plans to be converted into share units with respect to
Parent Common Stock by multiplying the Company Shares subject to such Company
Share units by the Exchange Ratio.
(c) Restricted Stock. At the Effective Time, each Company Share which is
subject to restrictions or forfeiture risks (a "Restricted Share") under the
Company Stock Plans shall be converted to the same number of shares of Parent
Common Stock as the holder of such Restricted Share would have been entitled to
receive pursuant to the Merger had the Restricted Share not been subject to
restrictions or forfeiture risks immediately prior to the Effective Time
(rounded to the nearest whole cent), which shares of Parent Common Stock shall
be subject to the restrictions and forfeiture risks as set forth in the 1997
Long Term Incentive Plan ("Substitute Restricted Shares").
(d) Conversion and Registration. At or prior to the Effective Time, the
Company shall make all necessary arrangements with respect to the Company Stock
Plans to permit the conversion of the unexercised Company Options into
Substitute Options, the conversion of Restricted Shares into Substitute
Restricted Shares and the conversion of Company Share units to share units with
respect to Parent Common Stock pursuant to this Section and, as soon as
practicable after the Effective Time, Parent shall use its reasonable best
efforts to register under the Securities Act on Form S-8 or other appropriate
form (and use its best efforts to maintain the effectiveness thereof) shares of
Parent Common Stock issuable pursuant to all Substitute Options, Substitute
Restricted Shares and share units with respect to Parent Common Stock and
shares of Parent Common Stock under the SIP and the ESOP.
(e) Phantom Stock Awards. After the Effective Time, the Company shall make
all necessary arrangements to cause any phantom equity awards (such as phantom
stock options or phantom stock units) under the Company's Compensation and
Benefits Plans to be converted into phantom equity awards with respect to
Parent Common Stock by applying the same general principles described in
Sections 6.10(a), (b) and (c) above, as applicable.
(f) For a period of at least two years following the Effective Time, to the
extent permitted by applicable Law, Parent shall, and shall cause the Surviving
Corporation to, provide employees of the Surviving Corporation with wages,
salaries and employee benefits (including benefits under the Company ESOP and
the Retirement Program Plan for the Employees of Union Carbide Corporation and
its Participating Subsidiary Companies) which, in the aggregate, are not
materially less favorable to those applicable to employees of the Company
immediately prior to the Effective Time; provided, however, that Parent may
make modifications to
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equity-based (or phantom equity-based) compensation arrangements to reflect the
transactions contemplated by this Agreement. Notwithstanding anything in the
preceding sentence to the contrary, for the period beginning on the Effective
Time and ending two years following the Effective Time, to the extent permitted
by applicable Law, Parent shall, or shall cause the Company to, make available
to individuals who were Company Employees eligible to participate in the
Company ESOP as of the Effective Time, a defined contribution plan (as defined
in section 3(34) of ERISA), which is intended to be qualified under section
401(a) of the Code, which provides eligibility conditions not materially less
favorable than those of the Company ESOP and which provides for employer
matching contributions equal to at least 5.625% of eligible compensation
deferred by participants pursuant to the terms of the plan. If within two years
after the Effective Time a new defined benefit plan is implemented in place of
the Retirement Program Plan or if the benefits under the Retirement Program
Plan are reduced (the "Change Date") then for all participants in the
Retirement Program Plan as of the Change Date, the benefits thereunder shall be
grandfathered for a period of two years following the Effective Time.
(g) Prior to the Effective Time, the Company shall take all actions
necessary to amend the Rabbi Trust to eliminate any requirements to make
contributions thereto at or after the Effective Time.
(h) At the Effective Time, the Company, subject to the approval of the
Chairman, President and Chief Executive Officer of the Company, after
consultation with the President and Chief Executive Officer of Parent, may take
such actions as it deems appropriate with respect to awards under the 1997
Company EPS Incentive Plan (the "EPS Plan"), provided, however, that in no
event shall the aggregate payments made and benefits provided under the EPS
Plan exceed $25,000,000.
(i) At any time after the Effective Time that an individual who is an
employee of the Company as of the Effective Time (each a "Company Employee")
becomes an employee of Parent or otherwise becomes entitled to participate in
any employee benefit plans, programs, policies and arrangements of Parent (each
a "Parent Plan"), such Company Employee shall be given credit for his service
under such Parent Plan for his service recognized by the Company for similar
purposes; provided, however, that the foregoing provisions of this Section
6.10(i) shall not require any Company Employee to be given credit under the
Parent Plans for his service prior to the Effective Time (i) to the extent that
such service credit would result in the duplication of benefits, or (ii) to the
extent that such service would not be recognized for similarly situated
employees of Parent.
6.11. Expenses. The Surviving Corporation shall pay all charges and
expenses, including those of the Exchange Agent, in connection with the
transactions contemplated in Article IV, and parent shall reimburse the
Surviving Corporation for such charges and expenses. The expenses incurred in
connection with the filing fee for the S-4 Registration Statement, printing and
mailing the Prospectus/Proxy Statement, the S-4 Registration Statement and the
filing fees under the HSR Act and any other Competition Law filings shall be
paid by the Parent. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the Merger and the
other transactions contemplated by this Agreement shall be paid by the party
incurring such expense, except as set forth in the two preceding sentences.
6.12. Indemnification; Directors' and Officers' Insurance.
(a) For six years from and after the Effective Time, Parent will cause the
Surviving Corporation to indemnify and hold harmless each present and former
director and officer of the Company (solely when acting in such capacity)
determined as of the Effective Time (the "Indemnified Parties"), against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
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extent that the Company would have been permitted under New York law and its
certificate of incorporation or bylaws in effect on the date of this Agreement
to indemnify such Person (and the Surviving Corporation shall also advance
expenses as incurred to the fullest extent permitted under applicable law,
provided the Person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such Person is not
entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 6.12 shall promptly notify the Surviving Corporation, upon
learning of any such claim, action, suit, proceeding or investigation, but the
failure to so notify shall not relieve the Surviving Corporation of any
liability it may have to such Indemnified Party if such failure does not
materially prejudice the Surviving Corporation. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) the Surviving Corporation shall have the right to assume
the defense thereof and the Surviving Corporation shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if the Surviving Corporation elects not to
assume such defense or counsel for the Indemnified Parties advises that there
are issues which raise conflicts of interest between the Surviving Corporation
and the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and the Surviving Corporation shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received; provided, however, that the Surviving
Corporation shall be obligated pursuant to this paragraph (b) to pay for only
one firm of counsel for all Indemnified Parties in any jurisdiction (unless
there is such a conflict of interest), (ii) the Indemnified Parties will
cooperate in the defense of any such matter and (iii) the Surviving Corporation
shall not be liable for any settlement effected without its prior written
consent.
(c) The Surviving Corporation shall maintain a policy of officers' and
directors' liability insurance for acts and omissions occurring prior to the
Effective Time ("D&O Insurance") with coverage in amount and scope at least as
favorable as the Company's existing directors' and officers' liability
insurance coverage for a period of six years after the Effective Time;
provided, however, if the existing D&O Insurance expires, is terminated or
canceled, or if the annual premium therefor is increased to an amount in excess
of 175% of the last annual premium paid prior to the date of this Agreement
(the "Current Premium"), in each case during such six year period, the
Surviving Corporation will use its best efforts to obtain D&O Insurance in an
amount and scope as great as can be obtained for the remainder of such period
for a premium not in excess (on an annualized basis) of 175% of the Current
Premium. The provisions of this Section 6.12(c) shall be deemed to have been
satisfied if prepaid policies have been obtained by the Company prior to the
Closing, which policies provide such directors and officers with coverage for
an aggregate period of six years with respect to claims arising from facts or
events that occurred on or before the Effective Time, including, without
limitation, in respect of the transactions contemplated by this Agreement and
for a premium not in excess of the aggregate of the premiums set forth in the
preceding sentence. If such prepaid policies have been obtained by the Company
prior to the Closing, Parent shall and shall cause the Surviving Corporation to
maintain such policies in full force and effect, and continue to honor the
Company's obligations thereunder.
(d) Parent shall cause the Surviving Corporation to perform its obligations
under this Section 6.12 and shall, in addition, guarantee, as co-obligor with
the Surviving Corporation, the performance of such obligations by the Surviving
Corporation subject to the limits imposed on the Surviving Corporation under
the NYBCL.
(e) If the Parent or the Surviving Corporation or any of their respective
successors or assigns (i) shall consolidate with or merge into any other
corporation or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to any individual, corporation
or other entity, then and in each such case, proper provisions shall be made so
that the successors and assigns of the Parent or the Surviving Corporation, as
the case may be, shall assume all of the obligations set forth in this Section.
(f) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs and
their representatives.
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(g) The provisions of this Section shall be in addition to and shall not be
deemed to abrogate, terminate, amend, modify, limit or otherwise affect any
existing agreements regarding indemnification between the Company and any
Indemnified Party.
6.13. Takeover Statute. If any Takeover Statute is or may become applicable
to the Merger or the other transactions contemplated by this Agreement or the
Stock Option Agreement, each of Parent and the Company and their respective
Boards of Directors shall grant such approvals and take such actions as are
necessary so that such transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement or by the Merger and
otherwise act to eliminate or minimize the effects of such statute or
regulation on such transactions. The Company's Board of Directors shall take
all actions, including the adoption of any resolutions, as may be necessary or
reasonably requested by Parent to assure that any Charter and Bylaw Provisions
are, and at the Effective Time will be, inapplicable to the Merger and the
other transactions contemplated by this Agreement or the Stock Option
Agreement.
6.14. Dividends. The Company shall coordinate with Parent the declaration,
setting of record dates and payment dates of dividends on Company Shares so
that holders of Company Shares do not receive dividends on both Company Shares
and Parent Common Stock received in the Merger in respect of any calendar
quarter or fail to receive a dividend on either Company Shares or Parent Common
Stock received in the Merger in respect of any calendar quarter.
6.15. Confidentiality. The Company and Parent each acknowledges and confirms
that it has entered into a Confidentiality Agreement, dated October 19, 1998,
as amended on July 28, 1999 (the "Confidentiality Agreement"), and that the
Confidentiality Agreement shall remain in full force and effect in accordance
with its terms; provided, however, that paragraph 10 of the Confidentiality
Agreement shall not prevent the consummation of the transactions contemplated
in this Agreement and the Stock Option Agreement.
6.16. Tax-Free Reorganization. Parent, Merger Sub, and the Company shall
each use its best efforts to cause the Merger to be treated as a reorganization
with the meaning of Section 368(a) of the Code, and the Company shall use its
reasonable best efforts to obtain an opinion of its counsel as contemplated by
Section 7.3(c).
ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver, if applicable, at or prior to the Effective Time of
each of the following conditions:
(a) Shareholder Approval. This Agreement shall have been duly adopted by
holders of Company Shares constituting the Company Requisite Vote;
(b) Intentionally Omitted.
(c) HSR and Competition Laws. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and any consents to the transactions contemplated under this
Agreement required under the European Community Merger Control Regulation
or other applicable Competition Laws shall have been obtained;
(d) Laws and Orders. No Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any Law
(whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger or the
other transactions contemplated by this Agreement (an "Order"), no
Governmental Entity shall have instituted any proceeding and no senior
official of any Governmental Entity in the United States shall then be
threatening to institute any proceeding seeking any such Order;
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(e) S-4. The S-4 Registration Statement shall have become effective
under the Securities Act. No stop order suspending the effectiveness of the
S-4 Registration Statement shall have been issued, and no proceedings for
that purpose shall have been initiated or be threatened by the SEC; and
(f) Pooling. The following has occurred: (i) Parent shall have received
a letter from its independent public accounting firm to the effect that no
conditions exist that could preclude accounting for the Merger "as a
pooling-of-interests", (ii) the Company shall have received a letter from
its independent public accounting firm to the effect that such accounting
firm knows of no reason why the Merger should not receive pooling-of-
interests accounting treatment, and (iii) Parent and the Company shall each
be reasonably satisfied that the Merger will qualify for pooling-of-
interests accounting treatment.
7.2. Conditions to Obligations of Parent and Merger Sub. The obligations of
Parent and Merger Sub to effect the Merger are also subject to the satisfaction
or waiver by Parent at or prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement (i) to the extent qualified by
Material Adverse Effect shall be true and correct and (ii) to the extent
not qualified by Material Adverse Effect shall be true and correct in all
material respects, in the case of each of (i) and (ii) as of the date of
this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date, and Parent shall have received a
certificate signed on behalf of the Company by an executive officer of the
Company to such effect;
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect; and
(c) Required Consents. The Company shall have obtained each of the
Company Required Consents.
7.3. Conditions to Obligation of the Company. The obligation of the Company
to effect the Merger is also subject to the satisfaction or waiver by the
Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub set forth in this Agreement (i) to the extent
qualified by Material Adverse Effect shall be true and correct and (ii) to
the extent not qualified by Material Adverse Effect shall be true and
correct in all material respects, in the case of each of (i) and (ii), as
of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, and the Company
shall have received a certificate signed on behalf of Parent by an
executive officer of Parent to such effect;
(b) Performance of Obligations of Parent and Merger Sub. Each of Parent
and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and the Company shall have received a certificate
signed on behalf of Parent and Merger Sub by an executive officer of Parent
to such effect; and
(c) Tax Opinion. The Company shall have received the opinion of Sullivan
& Cromwell, counsel to the Company, dated the Closing Date, the effect that
the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that
each of Parent, Merger Sub and the Company will be a party to that
reorganization within the meaning of Section 368(b) of the Code. In
rendering such opinions, such counsel may rely upon reasonable
representations and certificates of Parent, Merger Sub and the Company and
certain stockholders or shareholders of Parent, Merger Sub and the Company;
and Parent, Merger Sub and the Company will make, and each of them agrees
to use its reasonable best efforts to cause such of its respective
stockholders or shareholders to make, such representations and deliver such
certificates.
(d) Parent shall have obtained each of the Parent Required Consents.
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ARTICLE VIII
Termination
8.1. Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after the approval by shareholders of the Company referred to in Section
7.1(a), by mutual written consent of the Company and Parent, through action of
their respective Boards of Directors.
8.2. Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of either Parent or the Company if (i)
whether or not the approval by the shareholders of the Company referred to in
Section 7.1(a) shall have occurred, the Merger shall not have been consummated
within 240 days from the date of this Agreement (the "Termination Date");
provided, however, that either Parent or the Company shall have the option, in
its sole discretion, to extend the Termination Date for an additional period of
time not to exceed 125 days if the sole reason that the Merger has not been
consummated within 240 days from the date of this Agreement is that either (A)
the condition set forth in Section 7.1(c) has not been satisfied due to the
failure to obtain the necessary consents and approvals under applicable
Competition Laws and Parent or the Company are still attempting to obtain such
necessary consents and approvals under applicable Competition Laws or are
contesting the refusal of the relevant Governmental Entities to give such
consents or approvals in court or through other applicable proceedings or (B)
the condition set forth in Section 7.1(d) has not been satisfied; (ii) the
Shareholders Meeting shall have been held and completed and the adoption of
this Agreement by the Company's shareholders required by Section 7.1(a) shall
not have occurred; or (iii) any Order permanently restraining, enjoining or
otherwise prohibiting consummation of the Merger shall become final and non-
appealable (whether before or after the adoption or approval by the
shareholders of the Company); provided, that the right to terminate this
Agreement pursuant to clause (i) above shall not be available to any party that
has breached in any material respect its obligations under this Agreement in
any manner that shall have proximately contributed to the failure of the Merger
to be consummated.
8.3. Termination by the Company.
(a) This Agreement may be terminated and the Merger may be abandoned by the
Company at any time prior to the Effective Time, whether before or after the
approval by the shareholders of the Company referred to in Section 7.1(a), if
the Board of Directors of the Company has provided written notice to Parent
that the Company intends to enter into a binding written agreement for a
Superior Proposal; provided, however, that: (i) the Company shall have complied
with Section 6.2 in all material respects; (ii) the Board of Directors of the
Company shall have reasonably concluded in good faith, prior to giving effect
to all concessions which may be offered to the Company by Parent pursuant to
clause (iv) below, on the basis of the advice of its financial advisors and
outside counsel, that such proposal is a Superior Proposal; (iii) the Company
shall have (A) notified Parent in writing of its receipt of such Superior
Proposal, (B) further notified Parent in such writing that the Company intends
to enter into a binding agreement for such Superior Proposal subject to clause
(iv) below and (C) attached the most current written version of such Superior
Proposal (or a summary containing all material terms and conditions of such
Superior Proposal) to such notice; and (iv) Parent does not make, within five
business days after receipt of the Company's written notice pursuant to clause
(iii) above, an offer that the Board of Directors of the Company shall have
reasonably concluded in good faith on the basis of the advice of its financial
advisors and outside counsel is at least as favorable to the shareholders of
the Company as the Superior Proposal; provided, further, that it shall be a
condition to termination pursuant to this Section 8.3(a) that the Company shall
have made the payment of the Termination Fee to Parent required by Section
8.5(b).
(b) This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, whether before or after the adoption of this
Agreement by the shareholders of the Company referred to in Section 7.1(a), by
action of the Board of Directors of the Company if there has been a material
breach by Parent or Merger Sub of any representation, warranty, covenant or
agreement contained in this
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Agreement which (x) would result in a failure of a condition set forth in
Section 7.1 or Section 7.3(a) or 7.3(b) or 7.3(c) or 7.3(d) and (y) cannot be
or is not cured prior to the Termination Date.
8.4. Termination by Parent. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after the
approval by the shareholders of the Company referred to in Section 7.1(a), by
action of the Board of Directors of Parent if:
(a) the Board of Directors of the Company shall have withdrawn,
adversely modified or changed its approval or recommendation of this
Agreement, or failed to reconfirm its recommendation of this Agreement to
the Company's shareholders within 15 business days after a written request
by Parent to do so; or
(b) there has been a material breach by the Company of any
representation, warranty, covenant or agreement contained in this Agreement
which (i) would result in a failure of a condition set forth in Section 7.1
or Section 7.2(a), 7.2(b) or 7.2(c) and (ii) cannot be or is not cured
prior to the Termination Date.
8.5. Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the abandonment of the
Merger pursuant to this Article VIII, this Agreement (other than as set forth
in Section 9.1) shall become void and of no effect with no liability (other
than as set forth in Section 8.5(b) or in the proviso at the end of this
sentence) on the part of any party to this Agreement or of any of its
directors, officers, employees, agents, legal or financial advisors or other
representatives; provided, however, no such termination shall relieve any party
to this Agreement from any liability for damages or other relief resulting from
any breach of this Agreement.
(b) In the event that (i) an Acquisition Proposal shall have been made to
the Company and made known to shareholders of the Company generally or have
been made directly to shareholders of the Company generally or any Person shall
have publicly announced an intention (whether or not conditional) to make an
Acquisition Proposal and such Acquisition Proposal or announced intention shall
not have been withdrawn prior to the Shareholders Meeting and thereafter, there
is a failure to obtain the Company Requisite Vote at the Shareholders Meeting,
and this Agreement is terminated by either Parent or the Company pursuant to
Section 8.2(ii) and within 12 months after such termination the Company shall
have entered into an agreement (a "Subsequent Agreement") to consummate a
transaction that would constitute an Acquisition Proposal if it were the
subject of a proposal or (ii) this Agreement is terminated (x) by the Company
pursuant to Section 8.3(a) or (y) by Parent prior to the Shareholders Meeting
pursuant to Section 8.4(a) or at any time pursuant to Section 8.4(b) (solely
with respect to a breach of Section 6.2), then the Company shall promptly, but
in no event later than two days after the date of such termination (except as
otherwise provided in Section 8.3(a)), or, in the case of termination pursuant
to Section 8.5(b)(i), two days after a Subsequent Agreement is entered into,
pay Parent a fee equal to $300 million (the "Termination Fee"), which amount
shall be exclusive of any expenses to be paid pursuant to Section 6.11, payable
by wire transfer of same day funds. The Company acknowledges that the
agreements contained in this Section 8.5(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these
agreements, Parent and Merger Sub would not enter into this Agreement;
accordingly, if the Company fails to pay promptly the amount due pursuant to
this Section 8.5(b), and, in order to obtain such payment, Parent or Merger Sub
commences a suit which results in a judgment against the Company for the fee
set forth in this paragraph (b), the Company shall pay to Parent or Merger Sub
its costs and expenses (including attorneys' fees) in connection with such
suit, together with interest on the amount of the fee at the prime rate of
Citibank N.A. in effect on the date such payment was required to be made.
ARTICLE IX
Miscellaneous and General
9.1. Survival. Article II, Article III, Article IV and this Article IX, and
the agreements of the Company, Parent and Merger Sub contained in Sections
6.7(b) (Affiliates), 6.10 (Benefits), 6.11 (Expenses) and 6.12
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(Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Merger. This Article IX and the agreements of the Company,
Parent and Merger Sub contained in Section 6.11 (Expenses), Section 6.13
(Takeover Statute), Section 6.15 (Confidentiality) and Section 8.5 (Effect of
Termination and Abandonment) shall survive the termination of this Agreement.
All other representations, warranties, covenants and agreements in this
Agreement shall not survive the consummation of the Merger or the termination
of this Agreement.
9.2. Modification or Amendment. Subject to the provisions of the applicable
Law, at any time prior to the Effective Time, the parties to this Agreement may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties.
9.3. Waiver of Conditions.
(a) any provision of this Agreement may be waived prior to the Effective
Time if, and only if, such waiver is in writing and signed by an authorized
representative of the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. Except as
otherwise provided in this Agreement, the rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
Law.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5. Governing Law and Venue; Waiver of Jury Trial.
(a) This Agreement shall be deemed to be made in and in all respects shall
be interpreted, construed and governed by and in accordance with Delaware law
without regard to the conflict of law principles thereof, except that matters
relating to the corporate governance of the Company shall be governed by New
York law. The parties hereby irrevocably and unconditionally consent to submit
to the exclusive jurisdiction of the courts of the State of Delaware and of the
United States of America located in Wilmington, Delaware (the "Delaware
Courts") for any litigation arising out of or relating to this Agreement and
the transactions contemplated by this Agreement (and agree not to commence any
litigation relating thereto except in such Delaware Courts), waive any
objection to the laying of venue of any such litigation in the Delaware Courts
and agree not to plead or claim in any Delaware Court that such litigation
brought therein has been brought in an inconvenient forum.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i)
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 9.5.
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9.6. Notices. Notices, requests, instructions or other documents to be given
under this Agreement shall be in writing and shall be deemed given, (i) three
business days following sending by registered or certified mail, postage
prepaid, (ii) when sent if sent by facsimile, provided that a copy of the fax
is promptly sent by U.S. mail, (iii) when delivered, if delivered personally to
the intended recipient, and (iv) one business day later, if sent by overnight
delivery via a national courier service, and in each case, addressed to a party
at the following address for such party:
If to Parent or Merger Sub
The Dow Chemical Company
2030 Dow Center
Midland, Michigan 48674
Attention: Chief Executive Officer
Fax: (517) 638-9397
and
The Dow Chemical Company
2030 Dow Center
Midland, Michigan 48674
Attention: General Counsel
Fax: (517) 638-9397
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, IL 60603
Attention: Scott J. Davis
Marc F. Sperber
Fax: (312) 701-7711
and if to the Company
Union Carbide Corporation
39 Old Ridgebury Road
Danbury, CT 06817
Attention: Chief Executive Officer
Fax: (203) 794-6104
and
Union Carbide Corporation
39 Old Ridgebury Road
Danbury, CT 06817
Attention: General Counsel
Fax: (203) 794-5865
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attention: Neil T. Anderson
Stephen M. Kotran
Fax: (212) 558-3588
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
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9.7. Entire Agreement. This Agreement (including any exhibits to this
Agreement), the Stock Option Agreement, the Confidentiality Agreement, the
Company Disclosure Letter and the Parent Disclosure Letter constitute the
entire agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter of this Agreement. EACH PARTY TO THIS AGREEMENT
AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS
AGREEMENT, NEITHER PARENT AND MERGER SUB NOR THE COMPANY MAKES ANY OTHER
REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS ANY OTHER
REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH
RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO
THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER
INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
9.8. No Third Party Beneficiaries. Except as provided in Article IV (Effect
of the Merger on Capital Stock; Exchange of Certificates) and Section 6.12
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties to this Agreement any
rights or remedies under this Agreement.
9.9. Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action, subject to any existing contractual or legal restraints on
Parent's ability to unilaterally cause such Subsidiary to take such action.
Whenever this Agreement requires a Subsidiary of the Company to take any
action, such requirement shall be deemed to include an undertaking on the part
of the Company to cause such Subsidiary to take such action and, after the
Effective Time, on the part of the Surviving Corporation to cause such
Subsidiary to take such action, subject to any existing contractual or legal
restraints on the Company's ability to unilaterally cause such Subsidiary to
take such action.
9.10. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions of this
Agreement. If any provision of this Agreement, or the application thereof to
any Person or any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or
the application thereof, in any other jurisdiction.
9.11. Interpretation. The table of contents and headings and Article,
Section and paragraph captions in this Agreement are for convenience of
reference only, do not constitute part of this Agreement and shall not be
deemed to limit or otherwise affect any of the provisions of this Agreement.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including"
are used in this Agreement, they shall be deemed to be followed by the words
"without limitation."
9.12. Assignment. This Agreement shall not be assignable by operation of law
or otherwise; provided, however, that Parent may designate prior to the
Effective Time, by written notice to the Company, another wholly-owned direct
or indirect Subsidiary to be a party to the Merger in lieu of Merger Sub, in
which event all references in this Agreement to Merger Sub shall be deemed
references to such other Subsidiary (except with respect to representations and
warranties made in this Agreement with respect to Merger Sub as of the date of
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this Agreement) and all representations and warranties made in this Agreement
with respect to Merger Sub as of the date of this Agreement shall also be made
with respect to such other subsidiary as of the date of such designation. Any
assignment in contravention of the preceding sentence shall be null and void.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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In Witness Whereof, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties to this Agreement as of the date
first written above.
Union Carbide Corporation
By: /s/ William H. Joyce
----------------------------------
Name: William H. Joyce
Title:Chairman, President and
Chief Executive Officer
The Dow Chemical Company
By: /s/ J. Pedro Reinhard
----------------------------------
Name: J. Pedro Reinhard
Title:Executive Vice President
and
Chief Financial Officer
Transition Sub Inc.
By: /s/ Brian Taylorson
----------------------------------
Name: Brian Taylorson
Title:President
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<PAGE>
EXHIBIT 1
STOCK OPTION AGREEMENT
This Stock Option Agreement, dated as of August 3, 1999 (this "Agreement"),
is between Union Carbide Corporation, a New York corporation ("Issuer") and The
Dow Chemical Company, a Delaware corporation ("Grantee").
RECITALS
A. The Merger Agreement. Prior to the entry into this Agreement and prior to
the grant of the Option, Issuer, Grantee, and Transition Sub Inc., a wholly-
owned subsidiary of Grantee ("Merger Sub") have entered into an Agreement and
Plan of Merger, dated as of the date of this Agreement (the "Merger
Agreement"), pursuant to which Grantee and Issuer intend to effect a merger of
Merger Sub with and into Issuer (the "Merger").
B. The Stock Option Agreement. As an inducement and condition to Grantee's
and Merger Sub's willingness to enter into the Merger Agreement, and in
consideration thereof, the board of directors of Issuer has approved the grant
to Grantee of the Option pursuant to this Agreement and the acquisition of
Common Stock by Grantee pursuant to this Agreement; provided, that such grant
was expressly conditioned upon, and made of no effect until after, execution
and delivery by Issuer, Grantee and Merger Sub of the Merger Agreement.
Now, Therefore, in consideration of the premises and the mutual covenants
and agreements set forth in this Agreement and in the Merger Agreement, the
parties agree as follows:
1. The Option. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms of this
Agreement, up to 26,502,964 fully paid and nonassessable shares of common
stock, $1.00 par value per share ("Common Stock"), of Issuer at a price per
share in cash equal to $48.8125 (the "Option Price"); provided, however, that
in no event shall the number of shares for which the Option is exercisable
exceed 19.9% of the shares of Common Stock issued and outstanding at the time
of exercise (without giving effect to the shares of Common Stock issued or
issuable under the Option) (the "Maximum Applicable Percentage"). The number of
shares of Common Stock purchasable upon exercise of the Option and the Option
Price are subject to adjustment as set forth in this Agreement.
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement), the aggregate number of shares of Common
Stock purchasable upon exercise of the Option (inclusive of shares, if any,
previously purchased upon exercise of the Option) shall automatically be
increased (without any further action on the part of Issuer or Grantee
being necessary) so that, after such issuance, it equals the Maximum
Applicable Percentage. Any such increase shall not affect the Option Price.
2. Exercise; Closing. (a) Conditions to Exercise; Termination. Grantee or
any other person that shall become a holder of all or a part of the Option in
accordance with the terms of this Agreement (each such person being referred to
in this Agreement as the "Holder") may exercise the Option, in whole or in
part, by delivering a written notice thereof as provided in Section 2(d) within
180 days following the occurrence of a Triggering Event unless prior to such
Triggering Event the Effective Time (as defined in the Merger Agreement) shall
have occurred. If no notice pursuant to the preceding sentence has been
delivered prior thereto, the Option shall terminate upon either (i) the
occurrence of the Effective Time or (ii) the close of business on the earlier
of (x) the day 180 days after the date that Grantee becomes entitled to receive
the Termination Fee (as defined in the Merger Agreement) under Section 8.5(b)
of the Merger Agreement and (y) the date that Grantee is no longer potentially
entitled to receive the Termination Fee under Section 8.5(b) of the Merger
Agreement for a reason other than that Grantee has already received the
Termination Fee.
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(b) Triggering Event. A "Triggering Event" shall have occurred if the
Merger Agreement is terminated and Grantee thereby becomes entitled to
receive the Termination Fee pursuant to Section 8.5(b) of the Merger
Agreement.
(c) Notice of Triggering Event by Issuer. Issuer shall notify Grantee
promptly in writing of the occurrence of any Triggering Event, it being
understood that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(d) Notice of Exercise by Grantee. If a Holder shall be entitled to and
wishes to exercise the Option, it shall send to Issuer a written notice
(the date of which is referred to in this Agreement as the "Notice Date")
specifying (i) the total number of shares that the Holder will purchase
pursuant to such exercise and (ii) a place and date (a "Closing Date") not
earlier than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (a "Closing"); provided, that
if a filing is required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), or any other notice, report,
filing or approval is required with respect to any governmental or
regulatory authority, court, agency, commission, body or other governmental
entity (a "Governmental Entity") in connection with such purchase, (x) the
Holder or Issuer, as required, promptly after the giving of such notice
shall file the required notice, report, filing or application for approval
and shall expeditiously process the same and (y) the period of time
referred to in clause (ii) above shall commence on the date on which the
Holder furnishes to Issuer a supplemental written notice setting forth the
Closing Date, which notice shall be furnished as promptly as practicable
after all required notification, reporting or filing periods shall have
expired or been terminated, all required approvals shall have been obtained
and all requisite waiting periods shall have passed. Each of the Holder and
the Issuer agrees to use its reasonable best efforts to cooperate with and
provide information to Issuer or Holder, as the case may be, for the
purpose of any required notice, report, filing or application for approval.
(e) Payment of Purchase Price. At each Closing, the Holder shall pay to
Issuer the aggregate purchase price for the shares of Common Stock
purchased pursuant to the exercise of the Option in immediately available
funds by a wire transfer to a bank account designated by Issuer; provided,
that failure or refusal of Issuer to designate such a bank account shall
not preclude the Holder from exercising the Option, in whole or in part.
(f) Delivery of Common Stock. At such Closing, simultaneously with the
payment of the purchase price by the Holder, Issuer shall deliver to the
Holder a certificate or certificates representing the number of shares of
Common Stock purchased by the Holder and, if the Option shall be exercised
in part only, a new Option evidencing the rights of the Holder to purchase
the balance (as adjusted pursuant to Section 1(b)) of the shares of Common
Stock then purchasable under this Agreement.
(g) Restrictive Legend. Certificates for Common Stock delivered at a
Closing may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to resale restrictions arising under the Securities Act of
1933, as amended."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the Holder
shall have delivered to Issuer a copy of a letter from the staff of the
Securities and Exchange Commission, or a written opinion of counsel, in
form and substance reasonably satisfactory to Issuer, to the effect that
such legend is not required for purposes of the Securities Act of 1933, as
amended (the "Securities Act"). In addition, such certificates shall bear
any other legend as may be required by applicable law.
(h) Ownership of Record; Tender of Purchase Price; Expenses. Upon the
giving by the Holder to Issuer of a written notice of exercise referred to
in Section 2(d) and the tender of the applicable purchase price in
immediately available funds, the Holder shall be deemed to be the holder of
record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be
closed or that certificates representing such shares of Common Stock shall
not have been delivered to the Holder. Issuer shall pay all expenses, and
any and all United States federal, state and local
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taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2
in the name of the Holder or its assignee, transferee or designee.
3. Covenants of Issuer. In addition to its other agreements and covenants in
this Agreement, Issuer agrees:
(a) Shares Reserved for Issuance. It will maintain, free from preemptive
rights, sufficient authorized but unissued or treasury shares of Common
Stock to issue the appropriate number of shares of Common Stock pursuant to
the terms of this Agreement so that the Option may be fully exercised
without additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights of third
parties to purchase shares of Common Stock from Issuer.
(b) No Avoidance. It will not avoid or seek to avoid (whether by charter
amendment or through reorganization, consolidation, merger, issuance of
rights, dissolution or sale of assets, or by any other voluntary act) the
observance or performance of any of the covenants, agreements or conditions
to be observed or performed under this Agreement by Issuer.
(c) Further Assurances. Promptly after the date of this Agreement it
will take all actions as may from time to time be required (including (i)
complying with all applicable premerger notification, reporting and waiting
period requirements under the HSR Act and (ii) in the event that prior
notice, report, filing or approval with respect to any Governmental Entity
is necessary under any applicable foreign or United States federal, state
or local law before the Option may be exercised, cooperating fully with the
Holder in preparing and processing the required applications or notices) in
order to permit each Holder to exercise the Option and purchase shares of
Common Stock pursuant to such exercise and to take all action necessary to
protect the rights of the Holder against dilution.
(d) Stock Exchange Listing. It will use its reasonable best efforts to
cause the shares of Common Stock to be issued pursuant to the Option to be
approved for listing (to the extent they are not already listed) on the New
York Stock Exchange ("NYSE") and on all other stock exchanges on which
shares of Common Stock of the Issuer are then listed, subject to official
notice of issuance.
4. Representations and Warranties of Issuer. Issuer represents and warrants
to Grantee as follows:
(a) Merger Agreement. Issuer hereby makes each of the representations
and warranties contained in Sections 5.1(a), (b)(i), (c)(i), (d)(i),
(d)(ii), (j) and (p) of the Merger Agreement as they relate to Issuer and
this Agreement, as if such representations were set forth in this
Agreement.
(b) Shares Reserved for Issuance; Capital Stock. Issuer has taken all
necessary corporate action to authorize and reserve, free from preemptive
rights, and permit it to issue, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be fully exercised
without additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights of third
parties to purchase shares of Common Stock from Issuer, and all such
shares, upon issuance pursuant to the Option, will be duly authorized,
validly issued, fully paid and nonassessable, and will be delivered free
and clear of all claims, liens, encumbrances, and security interests (other
than those created by this Agreement) and not subject to any preemptive
rights.
5. Representations and Warranties of Grantee. Grantee represents and
warrants to Issuer that Grantee has all requisite corporate power and authority
and has taken all corporate action necessary in order to execute, deliver and
perform its obligations under and to consummate the transactions contemplated
by this Agreement. This Agreement has been duly and validly executed and
delivered by Grantee and constitutes a valid and binding agreement of Grantee
enforceable against Grantee in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
6. Exchange; Replacement. This Agreement and the Option granted by this
Agreement are exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal office of Issuer,
for other Agreements providing for Options of different denominations entitling
the holder
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thereof to purchase in the aggregate the same number of shares of Common Stock
purchasable at such time under this Agreement, subject to corresponding
adjustments in the number of shares of Common Stock purchasable upon exercise
so that the aggregate number of such shares under all stock option agreements
issued in respect of this Agreement shall not exceed the Maximum Applicable
Percentage. Unless the context shall require otherwise, the terms "Agreement"
and "Option" as used in this Agreement include any stock option agreements and
related Options for which this Agreement (and the Option granted by this
Agreement) may be exchanged. Upon (i) receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction of this Agreement, or
mutilation of this Agreement, (ii) receipt by Issuer of reasonably satisfactory
indemnification in the case of loss, theft or destruction of this Agreement and
(iii) surrender and cancellation of this Agreement in the case of mutilation,
Issuer will execute and deliver a new Agreement of like tenor and date. Any
such new Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be enforceable by any
person other than the holder of the new Agreement.
7. Adjustments. In addition to the adjustment to the total number of shares
of Common Stock purchasable upon exercise of the Option pursuant to Section
1(b), the total number of shares of Common Stock purchasable upon the exercise
of the Option and the Option Price shall be subject to adjustment from time to
time as follows:
(a) In the event of any change in the outstanding shares of Common Stock
by reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares or the like,
the type and number of shares of Common Stock purchasable upon exercise of
the Option shall be appropriately adjusted, and proper provision shall be
made in the agreements governing any such transaction, so that (i) any
Holder shall receive upon exercise of the Option the number and class of
shares, other securities, property or cash that such Holder would have
received in respect of the shares of Common Stock purchasable upon exercise
of the Option if the Option had been exercised and such shares of Common
Stock had been issued to such Holder immediately prior to such event or the
record date therefor, as applicable, and (ii) in the event any additional
shares of Common Stock are to be issued or otherwise become outstanding as
a result of any such change (other than pursuant to an exercise of the
Option), the number of shares of Common Stock purchasable upon exercise of
the Option shall be increased so that, after such issuance and together
with shares of Common Stock previously issued pursuant to the exercise of
the Option (as adjusted on account of any of the foregoing changes in the
Common Stock), the number of shares so purchasable equals the Maximum
Applicable Percentage of the number of shares of Common Stock issued and
outstanding immediately after the consummation of such change.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise of the Option is adjusted as provided in this Section 7, the
Option Price shall be adjusted by multiplying the Option Price by a
fraction, the numerator of which is equal to the number of shares of Common
Stock purchasable prior to the adjustment and the denominator of which is
equal to the number of shares of Common Stock purchasable after the
adjustment.
8. Registration. (a) Upon the occurrence of a Triggering Event, Issuer
shall, at the request of Grantee delivered in the written notice of exercise of
the Option provided for in Section 2(d), as promptly as practicable prepare,
file and keep current a shelf registration statement under the Securities Act
covering any or all shares issued and issuable pursuant to the Option and shall
use its best efforts to cause such registration statement to become effective
and remain current in order to permit the sale or other disposition of any
shares of Common Stock issued upon total or partial exercise of the Option
("Option Shares") in accordance with any plan of disposition requested by
Grantee; provided, however, that Issuer may postpone filing a registration
statement relating to a registration request by Grantee under this Section 8
for a period of time (not in excess of 30 days) if in its judgment such filing
would require the disclosure of material information that Issuer has a bona
fide business purpose for preserving as confidential. Issuer will use its best
efforts to cause such registration statement first to become effective as soon
as practicable and then to remain effective for 270 days from the
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day such registration statement first becomes effective or until such earlier
date as all shares registered shall have been sold by Grantee. In connection
with any such registration, Issuer and Grantee shall provide each other with
representations, warranties, indemnities and other agreements customarily given
in connection with such registrations. If requested by Grantee in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating Issuer in respect of representations, warranties, indemnities,
contribution and other agreements customarily made by issuers in such
underwriting agreements.
(b) In the event that Grantee so requests, the closing of the sale or other
disposition of the Common Stock or other securities pursuant to a registration
statement filed pursuant to Section 8(a) shall occur substantially
simultaneously with the exercise of the Option.
9. Repurchase of Option and/or Shares. (a) Repurchase; Repurchase Price.
Upon the occurrence of a Triggering Event, (i) at the request of a Holder,
delivered in writing within 180 days of such occurrence (or such later period
as provided in Section 2(d) with respect to any required notice or application
or in Section 10), Issuer shall repurchase the Option from the Holder, in whole
or in part, at a price (the "Option Repurchase Price") equal to the number of
shares of Common Stock then purchasable upon exercise of the Option (or such
lesser number of shares as may be designated in the Repurchase Notice)
multiplied by the amount by which the market/offer price exceeds the Option
Price and (ii) at the request of a Holder or any person who has been a Holder
(for purposes of this Section 9 only, each such person being referred to as a
"Holder"), delivered in writing within 180 days of such occurrence (or such
later period as provided in Section 2(d) with respect to any required notice or
application or in Section 10), Issuer shall repurchase such number of Option
Shares from such Holder as the Holder shall designate in the Repurchase Notice
at a price (the "Option Share Repurchase Price") equal to the number of shares
designated multiplied by the market/offer price. The term "market/offer price"
shall mean the highest of (x) the price per share of Common Stock at which a
tender or exchange offer for Common Stock has been made, (y) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer and (z) the highest trading price for shares of Common Stock on the
NYSE (or, if the Common Stock is not then listed on the NYSE, any other
national securities exchange or automated quotation system on which the Common
Stock is then listed or quoted) within the 120-day period immediately preceding
the delivery of the Repurchase Notice. In the event that a tender or exchange
offer is made for the Common Stock or an agreement is entered into for a
merger, share exchange, consolidation or reorganization involving consideration
other than cash, the value of the securities or other property issuable or
deliverable in exchange for the Common Stock shall (I) if such consideration is
in securities and such securities are listed on a national securities exchange,
be determined to be the highest trading price for such securities on such
national securities exchange within the 120-day period immediately preceding
the delivery of the Repurchase Notice or (II) if such consideration is not
securities, or if in securities and such securities are not traded on a
national securities exchange, be determined in good faith by a nationally
recognized investment banking firm selected by an investment banking firm
designated by Grantee and an investment banking firm designated by Issuer.
(b) Method of Repurchase. A Holder may exercise its right to require Issuer
to repurchase the Option, in whole or in part, and/or any Option Shares then
owned by such Holder pursuant to this Section 9 by surrendering for such
purpose to Issuer, at its principal office, this Agreement or certificates for
Option Shares, as applicable, accompanied by a written notice or notices
stating that the Holder elects to require Issuer to repurchase the Option
and/or such Option Shares in accordance with the provisions of this Section 9
(each such notice, a "Repurchase Notice"). As promptly as practicable, and in
any event within two business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of the Repurchase
Notice relating thereto, Issuer shall deliver or cause to be delivered to the
Holder the applicable Option Repurchase Price and/or the Option Share
Repurchase Price. Any Holder shall have the right to require that the
repurchase of Option Shares shall occur immediately after the exercise of all
or part of the Option. In the event that the Repurchase Notice shall request
the repurchase of the Option in part, Issuer shall deliver with the Option
Repurchase Price a new Stock Option Agreement evidencing the right of the
Holder to purchase that
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number of shares of Common Stock purchasable pursuant to the Option at the time
of delivery of the Repurchase Notice minus the number of shares of Common Stock
represented by that portion of the Option then being repurchased.
(c) Effect of Statutory or Regulatory Restraints on Repurchase. To the
extent that, upon or following the delivery of a Repurchase Notice, Issuer is
prohibited under applicable law or regulation from repurchasing the Option (or
portion thereof) and/or any Option Shares subject to such Repurchase Notice
(and Issuer will undertake to use its reasonable best efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase), Issuer shall
immediately so notify the Holder in writing and thereafter deliver or cause to
be delivered, from time to time, to the Holder the portion of the Option
Repurchase Price and the Option Share Repurchase Price that Issuer is no longer
prohibited from delivering, within two business days after the date on which it
is no longer so prohibited; provided, however, that upon notification by Issuer
in writing of such prohibition, the Holder may, within five days of receipt of
such notification from Issuer, revoke in writing its Repurchase Notice, whether
in whole or to the extent of the prohibition, whereupon, in the latter case,
Issuer shall promptly (i) deliver to the Holder that portion of the Option
Repurchase Price and/or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver to the Holder, as appropriate, (A)
with respect to the Option, a new Stock Option Agreement evidencing the right
of the Holder to purchase that number of shares of Common Stock for which the
surrendered Stock Option Agreement was exercisable at the time of delivery of
the Repurchase Notice less the number of shares as to which the Option
Repurchase Price has theretofore been delivered to the Holder, and/or (B) with
respect to Option Shares, a certificate for the Option Shares as to which the
Option Share Repurchase Price has not theretofore been delivered to the Holder.
Notwithstanding anything to the contrary in this Agreement, including, without
limitation, the time limitations on the exercise of the Option, the Holder may
give notice of exercise of the Option for 180 days after a notice of revocation
has been issued pursuant to this Section 9(c) and thereafter exercise the
Option in accordance with the applicable provisions of this Agreement.
(d) Acquisition Transactions. In addition to any other restrictions or
covenants, Issuer agrees that, in the event that a Holder delivers a Repurchase
Notice, Issuer shall not enter or agree to enter into an agreement or series of
agreements relating to a merger with or into or the consolidation with any
other person or entity, the sale of all or substantially all of the assets of
Issuer or any similar disposition unless the other party or parties to such
agreement or agreements agree to assume in writing Issuer's obligations under
Section 9(a) and, notwithstanding any notice of revocation delivered pursuant
to the proviso to Section 9(c), a Holder may require such other party or
parties to perform Issuer's obligations under Section 9(a) unless such party or
parties are prohibited by law or regulation from such performance, in which
case such party or parties shall be subject to the obligations of the Issuer
under Section 9(c).
10. Extension of Exercise Periods. The 180-day periods for exercise of
certain rights under Sections 2 and 9 shall be extended in each such case at
the request of the Holder to the extent necessary to avoid liability by the
Holder under Section 16(b) of the Securities Exchange Act of 1934, as amended,
by reason of such exercise.
11. Assignment. Neither party may assign any of its rights or obligations
under this Agreement or the Option to any other person without the express
written consent of the other party except that Grantee may, without the prior
written consent of Issuer assign the Option, in whole or in part, to any
affiliate of Grantee. Any attempted assignment in contravention of the
preceding sentence shall be null and void.
12. Filings; Other Actions. Issuer and Grantee each will use its best
efforts to make all filings with, and to obtain consents of, all third parties
and governmental authorities necessary for the consummation of the transactions
contemplated by this Agreement.
13. Specific Performance. The parties acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party and that the
obligations of the parties shall be specifically enforceable through injunctive
or other equitable relief.
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<PAGE>
14. Severability. If any term, provision, covenant, or restriction contained
in this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void, or unenforceable, the remainder of
the terms, provisions, covenants, and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected,
impaired, or invalidated. If for any reason such court or regulatory agency
determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 9, the full number of shares of
Common Stock provided in Section 1(a) of this Agreement (as adjusted pursuant
to Sections 1(b) and 7 of this Agreement), it is the express intention of
Issuer to allow the Holder to acquire or to require Issuer to repurchase such
lesser number of shares as may be permissible, without any amendment or
modification of this Agreement.
15. Notices. Notices, requests, instructions, or other documents to be given
under this Agreement shall be in writing and shall be deemed given (i) three
business days following sending by registered or certified mail, postage
prepaid, (ii) when sent, if sent by facsimile, provided that a copy of the fax
is promptly sent by U.S. mail, (iii) when delivered, if delivered personally to
the intended recipient, and (iv) one business day later, if sent by overnight
delivery via a national courier service, in each case at the respective
addresses of the parties set forth in the Merger Agreement.
16. Expenses. Except as otherwise expressly provided in this Agreement or in
the Merger Agreement, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such expense, including fees and expenses of its own
financial consultants, investment bankers, accountants, and counsel.
17. Entire Agreement. This Agreement, the Confidentiality Agreement (as
defined in the Merger Agreement) and the Merger Agreement constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties, both written and oral, between the parties,
with respect to the subject matter of this Agreement. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
and their respective successors and permitted assigns. Nothing in this
Agreement, is intended to confer upon any person or entity, other than the
parties to this Agreement, and their respective successors and permitted
assigns, any rights or remedies under this Agreement.
18. Governing Law and Venue; Waiver of Jury Trial.
(a) This Agreement shall be deemed to be made in and in all respects shall
be interpreted, construed and governed by and in accordance with Delaware law
without regard to the conflict of law principles thereof, except that matters
relating to the corporate governance of Issuer shall be governed by New York
law. The parties irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of the courts of the State of Delaware and of the United
States of America located in Wilmington, Delaware (the "Delaware Courts") for
any litigation arising out of or relating to this Agreement and the
transactions contemplated by this Agreement (and agree not to commence any
litigation relating thereto except in such Delaware Courts), waive any
objection to the laying of venue of any such litigation in the Delaware Courts
and agree not to plead or claim in any Delaware Court that such litigation
brought therein has been brought in an inconvenient forum.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i)
NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
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<PAGE>
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 18.
19. Captions. The Section and paragraph captions in this Agreement are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions of this
Agreement.
20. Limitation on Profit. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Grantee's Total Profit (as defined herein)
exceed in the aggregate $50 million (the "Maximum Amount") and, if it otherwise
would exceed such amount, the Grantee, at its sole election, shall either: (i)
reduce the number of shares of Common Stock subject to this Option; (ii)
deliver to the Issuer for cancellation Option Shares previously purchased by
Grantee; (iii) pay cash to the Issuer; or (iv) any combination thereof, so that
Grantee's actually realized Total Profit shall not exceed the Maximum Amount
taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of shares as would, as of the date of exercise,
result in a Notional Total Profit (as defined below) which would exceed the
Maximum Amount; provided, that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date.
(c) As used in this Agreement, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) (x) the amount received
by Grantee pursuant to Issuer's repurchase of the Option (or any portion
thereof) or any Option Shares pursuant to Section 9, less, in the case of any
repurchase of Option Shares, (y) the Grantee's purchase price for such Option
Shares, as the case may be and (ii) (x) the net cash amounts received by
Grantee pursuant to the sale of Option Shares (or any other securities into
which such Option Shares are converted or exchanged) to any unaffiliated party,
less (y) the Grantee's purchase price of such Option Shares.
(d) As used in this Agreement, the term "Notional Total Profit" with respect
to any number of shares as to which Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of such proposal assuming
that this Option were exercised on such date for such number of shares and
assuming that such shares, together with all other Option Shares held by
Grantee and its affiliates as of such date, were sold for cash at the closing
market price for the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
In Witness Whereof, this Agreement has been duly executed and delivered by
duly authorized officers of the parties as of the day and year first written
above.
Union Carbide Corporation
By: _________________________________
Name: William H. Joyce
Title:
Chairman, President and
Chief Executive Officer
The Dow Chemical Company
By: _________________________________
Name: J. Pedro Reinhard
Title:Executive Vice President
and Chief
Financial Officer
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<PAGE>
EXHIBIT 6.7(A)
FORM OF COMPANY AFFILIATE'S LETTER
This Shareholder Agreement, dated as of August , 1999 (this "Agreement")
is between The Dow Chemical Company, a Delaware corporation ("Parent"), and the
undersigned shareholder ("Shareholder") of Union Carbide Corporation, a New
York corporation ("Company"). Capitalized terms not otherwise defined in this
Agreement have the meanings ascribed to them in the Merger Agreement.
RECITALS
A. Parent and the Company have entered into an Agreement and Plan of Merger,
dated as of August 3, 1999 (the "Merger Agreement"), pursuant to which
Transition Sub Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), will merge with and into the Company (the "Merger"),
with the Company surviving the Merger and becoming a wholly-owned subsidiary of
Parent;
B. Pursuant to the Merger Agreement, at the Effective Time, outstanding
shares of the Company Common Stock, including any the Company Common Stock
owned by Shareholder, will be converted into the right to receive shares of
Parent Common Stock;
C. It is a condition to each party's obligation to effect the Merger that
(i) legal counsel to the Company and Parent shall have delivered their
respective opinions to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and Parent, Merger Sub, and the Company
each will be a party to the reorganization within the meaning of Section 368(b)
of the Code, and (ii) the independent public accounting firms for the Company
and Parent shall have delivered their respective opinions to the effect that
the Merger will qualify for pooling-of-interests accounting treatment;
D. The execution and delivery of this Agreement by Shareholder is a material
inducement to Parent to enter into the Merger Agreement; and
E. Shareholder has been advised that Shareholder may be deemed to be an
"affiliate" of the Company, as such term is used (i) for purposes of paragraphs
(c) and (d) of Rule 145 of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), or (ii)
in the Commission's Accounting Series Releases 130 and 135, as amended,
although nothing contained herein shall be construed as an admission by
Shareholder that Shareholder is in fact an affiliate of the Company.
Now, Therefore, intending to be legally bound, the parties agree as follows:
1. Acknowledgments by Shareholder. Shareholder acknowledges and understands
that the representations, warranties and covenants made by Shareholder set
forth in this Agreement will be relied upon by Parent, the Company, and their
respective affiliates, counsel and accounting firms, and that substantial
losses and damages may be incurred by such persons if Shareholder's
representations, warranties or covenants are breached. Shareholder has
carefully read this Agreement and the Merger Agreement and has consulted with
such legal counsel and financial advisers as Shareholder has deemed appropriate
in connection with the execution of this Agreement.
2. Compliance with Rule 145 and the Act.
(a) Shareholder has been advised that (i) the issuance of shares of Parent
Common Stock in connection with the Merger is expected to be effected pursuant
to a Registration Statement filed by Parent on Form S-4, and the resale of such
shares will be subject to the restrictions set forth in Rule 145 under the Act
unless such shares are otherwise transferred pursuant to an effective
registration statement under the Act or an appropriate exemption from
registration, and (ii) Shareholder may be deemed to be an affiliate of the
Company.
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<PAGE>
Shareholder accordingly agrees not to sell, pledge, transfer or otherwise
dispose of any shares of Parent Common Stock issued to Shareholder in the
Merger unless (i) such sale, pledge, transfer or other disposition is made in
conformity with the requirements of Rule 145 under the Act, (ii) such sale,
pledge, transfer or other disposition is made pursuant to an effective
registration statement under the Act, or (iii) Shareholder delivers to Parent a
written opinion of counsel, in form and substance reasonably acceptable to
Parent, to the effect that such sale, pledge, transfer or other disposition is
otherwise exempt from registration under the Act.
(b) Parent will give stop transfer instructions to its transfer agent with
respect to any Parent Common Stock received by Shareholder pursuant to the
Merger, and there will be placed on the certificates representing such Parent
Common Stock, or any substitutions therefor, legends stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED PURSUANT TO A
BUSINESS COMBINATION WHICH IS BEING ACCOUNTED FOR AS A POOLING OF
INTERESTS, IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES, AND MAY ONLY BE TRANSFERRED IN CONFORMITY
WITH RULE 145, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR IN
ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE
ISSUER, IN FORM AND SUBSTANCE TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE
TRANSFERRED UNTIL SUCH TIME AS THE DOW CHEMICAL COMPANY SHALL HAVE
PUBLISHED FINANCIAL RESULTS COVERING AT LEAST 30 DAYS OF COMBINED
OPERATIONS WITH THE COMPANY."
and
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE
REQUIREMENTS OF THE CONDITIONS SPECIFIED IN THE SHAREHOLDER AGREEMENT DATED
AS OF AUGUST , 1999 BETWEEN THE HOLDER OF THIS CERTIFICATE AND THE DOW
CHEMICAL COMPANY, A COPY OF WHICH AGREEMENT MAY BE INSPECTED BY THE HOLDER
OF THIS CERTIFICATE AT THE PRINCIPAL OFFICES OF THE DOW CHEMICAL COMPANY OR
FURNISHED BY THE DOW CHEMICAL COMPANY TO THE HOLDER OF THIS CERTIFICATE
UPON WRITTEN REQUEST AND WITHOUT CHARGE."
The legend set forth above shall be removed (by delivery of a substitute
certificate without such legend), and Parent shall so instruct its transfer
agent, if a registration statement respecting the sale of the shares has been
declared effective under the Act or if Shareholder delivers to Parent (i)
satisfactory written evidence that the shares have been sold in compliance with
Rule 145 (in which case, the substitute certificate will be issued in the name
of the transferee), or (ii) an opinion of counsel, in form and substance
reasonably acceptable to Parent, to the effect that sale of the shares by the
holder thereof is no longer subject to Rule 145.
3. Covenants Related to Pooling of Interests.
(a) During the period beginning on the date 30 days prior to the Closing
Date (as defined in the Merger Agreement) and ending on the day after Parent
has published (within the meaning of Section 201.01 of the Commission's
Codification of Financial Reporting Policies) financial results covering at
least 30 days of combined operations of Parent and the Company (the "Restricted
Period"), Shareholder will not sell, exchange, transfer, pledge, distribute, or
otherwise dispose of or grant any option, establish any "short" or "put"-
equivalent position with respect to or enter into any similar transaction
(through derivatives or otherwise) intended to have or having the effect,
directly or indirectly, or reducing its risk relative to (i) any shares of the
Company Common Stock or Parent Common Stock owned by Shareholder or (ii) any
shares of Parent Common Stock received by Shareholder in connection with the
Merger.
(b) Notwithstanding anything to the contrary contained in Section 3(a),
Shareholder will be permitted, during the Restricted Period, (ii) to sell,
exchange, transfer, pledge, distribute or otherwise dispose of or grant
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<PAGE>
any option, establish any "short" or "put"-equivalent position with respect to
or enter into any similar transaction (through derivatives or otherwise)
intended to have or having the effect, directly or indirectly, of reducing its
risk relative to any shares of the Company Common Stock or Parent Common Stock
received by Shareholder in connection with the Merger (a "Transfer") equal to
the lesser of (A) 10% of the Company Common Stock, or equivalent post-Merger
Parent Common Stock, owned by Shareholder and (B) Shareholder's pro rata
portion of 1% of the total number of outstanding shares of the Company Common
Stock, or equivalent post-Merger Parent Common Stock, owned by Shareholder and
all other "affiliates" of the Company (in each of clause (A) and clause (B)
above as measured as of the date of such Transfer and subject to confirmation
of such calculation by Parent), and (ii) to make bona fide charitable
contributions or gifts of such securities; provided, however, that the
transferee(s) of such charitable contributions or gifts agree(s) in writing to
hold such securities for the period specified in Section 3(a).
4. Miscellaneous.
(a) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the benefit
of and be binding upon, the parties and their respective successors and
assigns. As used in this Agreement, the term "successors and assigns" means,
where the context to permits, heirs, executors, administrators, trustees and
successor trustees, and personal and other representatives.
(c) This Agreement shall be deemed to be made in and in all respects shall
be interpreted, construed and governed by and in accordance with Delaware law
without regard to the conflict of law principles thereof, except that matters
relating to the corporate governance of the Company shall be governed by New
York law. The parties irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of the courts of the State of Delaware and of the United
States of America located in Wilmington, Delaware (the "Delaware Courts") for
any litigation arising out of or relating to this Agreement and the
transactions contemplated by this Agreement (and agree not to commence any
litigation relating thereto except in such Delaware Courts), waive any
objection to the laying of venue of any such litigation in the Delaware Courts
and agree not to plead or claim in any Delaware Court that such litigation
brought therein has been brought in an inconvenient forum.
(d) If any term, provision, covenant, or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void, or unenforceable, the remainder of
the terms, provisions, covenants, and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected,
impaired, or invalidated.
(e) Counsel to and accountants for the parties to the Merger Agreement shall
be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right waived or
any obligations excused, except by a written agreement signed by both parties.
(g) Notwithstanding any other provision contained in this Agreement, this
Agreement and all obligations under this Agreement shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
(h) From and after the Effective Time of the Merger and as long as is
necessary in order to permit Shareholder to sell Parent Common Stock held by
Shareholder pursuant to Rule 145 and, to the extent applicable, Rule 144 under
the Act, Parent will file on a timely basis all reports required to be filed by
it pursuant to the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, as the same shall be in effect at the time, and
shall otherwise make available adequate public information regarding Parent in
such manner as may be required to satisfy the requirements of paragraph (c) of
Rule 144 under the Act.
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<PAGE>
In Witness Whereof, this Agreement is executed as of the date first stated
above.
The Dow Chemical Company,
a Delaware corporation
By: _________________________________
Name:
Title:
Shareholder
By: _________________________________
Name:
Name of Signatory
(if different from name of
Shareholder):
_____________________________________
Title of Signatory
(if applicable): ____________________
Number of Shares Owned: _____________
Number of Shares Issuable upon
Exercise of Stock Options: __________
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<PAGE>
EXHIBIT 6.7(B)
FORM OF PARENT AFFILIATE'S LETTER
This Stockholder Agreement, dated as of August , 1999 (this "Agreement"),
is by and between Union Carbide Corporation, a New York corporation (the
"Company"), and the undersigned stockholder ("Stockholder") of The Dow Chemical
Company, a Delaware corporation ("Parent"). Capitalized terms not otherwise
defined in this Agreement have the meanings ascribed to them in the Merger
Agreement.
RECITALS
A. The Company and Parent have entered into an Agreement and Plan of Merger,
dated as of August 3, 1999 (the "Merger Agreement"), pursuant to which
Transition Sub Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), will merge with and into the Company (the "Merger"),
with the Company surviving the Merger and becoming a wholly-owned subsidiary of
Parent;
B. It is a condition to the effectiveness of the Merger that (i) legal
counsel to Parent and the Company shall have delivered their respective
opinions to the effect that the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code") and Parent, Merger Sub and the Company each will be a party to the
reorganization within the meaning of Section 368(b) of the Code, and (ii) the
independent public accounting firms for Parent and the Company shall have
delivered their respective opinions to the effect that the Merger will qualify
for pooling-of-interests accounting treatment;
C. The execution and delivery of this Agreement by Stockholder is a material
inducement to the Company to enter into the Merger Agreement; and
D. Stockholder has been advised that Stockholder may be deemed to be an
"affiliate" of Parent, as such term is used in the Commission's Accounting
Series Releases 130 and 135, as amended, although nothing contained herein
shall be construed as an admission by Stockholder that Stockholder is in fact
an affiliate of Parent.
Now, Therefore, intending to be legally bound, the parties agree as follows:
1. Acknowledgments by Stockholder. Stockholder acknowledges and understands
that the representations, warranties and covenants made by Stockholder set
forth in this Agreement will be relied upon by the Company, Parent, and their
respective affiliates, counsel and accounting firms, and that substantial
losses and damages may be incurred by such persons if Stockholder's
representations, warranties or covenants are breached. Stockholder has
carefully read this Agreement and the Merger Agreement and has consulted with
such legal counsel and financial advisers as Stockholder has deemed appropriate
in connection with the execution of this Agreement.
2. Covenants Related to Pooling of Interests.
(a) During the period beginning on the date 30 days prior to the Closing
Date (as defined in the Merger Agreement) and ending on the day after Parent
has published (within the meaning of Section 201.01 of the Commission's
Codification of Financial Reporting Policies) financial results covering at
least 30 days of combined operations of the Company and Parent (the "Restricted
Period"), Stockholder will not sell, exchange, transfer, pledge, distribute, or
otherwise dispose of or grant any option, establish any "short" or "put"-
equivalent position with respect to or enter into any similar transaction
(through derivatives or otherwise) intended to have or having the effect,
directly or indirectly, of reducing its risk relative to any shares of Parent
Common Stock owned by Stockholder.
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<PAGE>
(b) Notwithstanding anything to the contrary contained in Section 2(a),
Stockholder will be permitted, during the Restricted Period, (i) to sell,
exchange, transfer, pledge, distribute or otherwise dispose of or grant any
option, establish any "short" or "put"-equivalent position with respect to or
enter into any similar transaction (through derivatives or otherwise) intended
to have or having the effect, directly or indirectly, of reducing its risk
relative to any shares of Parent Common Stock owned by Stockholder (a
"Transfer") equal to the lesser of (A) 10% of the Parent Common Stock owned by
Stockholder and (B) Stockholder's pro rata portion of 1% of the total number of
outstanding shares of Parent Common Stock owned by Stockholder and all other
"affiliates" of Parent (in each of clause (A) and clause (B) above as measured
as of the date of such Transfer and subject to confirmation of such calculation
by Parent), and (ii) to make bona fide charitable contributions or gifts of
such securities; provided, however, that the transferee(s) of such charitable
contributions or gifts agree(s) in writing to hold such securities for the
period specified in Section 2(a).
3. Miscellaneous.
(a) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the benefit
of and be binding upon, the parties and their respective successors and
assigns. As used in this Agreement, the term "successors and assigns" means,
where the context so permits, heirs, executors, administrators, trustees and
successor trustees, and personal and other representatives.
(c) This Agreement shall be deemed to be made in and in all respects shall
be interpreted, construed and governed by and in accordance with Delaware law
without regard to the conflict of law principles thereof, except that matters
relating to the corporate governance of the Company shall be governed by New
York law. The parties irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of the courts of the State of Delaware and of the United
States of America located in Wilmington, Delaware (the "Delaware Courts") for
any litigation arising out of or relating to this Agreement and the
transactions contemplated by this Agreement (and agree not to commence any
litigation relating thereto except in such Delaware Courts), waive any
objection to the laying of venue of any such litigation in the Delaware Courts
and agree not to plead or claim in any Delaware Court that such litigation
brought therein has been brought in an inconvenient forum.
(d) If any term, provision, covenant, or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void, or unenforceable, the remainder of
the terms, provisions, covenants, and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected,
impaired, or invalidated.
(e) Counsel to and accountants for the parties to the Merger Agreement shall
be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right waived or
any obligation excused, except by a written agreement signed by both parties.
(g) Notwithstanding any other provision contained in this Agreement, this
Agreement and all obligations under this Agreement shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
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<PAGE>
In Witness Whereof, this Agreement is executed as of the date first stated
above.
Union Carbide Corporation,
a New York corporation
By: _________________________________
Name:
Title:
Stockholder
By: _________________________________
Name:
Name of Signatory
(if different from name of
Stockholder):
_____________________________________
Title of Signatory
(if applicable): ____________________
Number of Shares Owned: _____________
Number of Shares Issuable upon
Exercise of Stock Options: __________
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<PAGE>
ANNEX B
[Letterhead of Credit Suisse First Boston Corporation]
August 3, 1999
Board of Directors
Union Carbide Corporation
39 Old Ridgebury Road
Danbury, Connecticut 06817-0001
Members of the Board:
You have asked us to advise you with respect to the fairness to the holders of
the common stock of Union Carbide Corporation ("Union Carbide") from a
financial point of view of the Exchange Ratio (as defined below) set forth in
the Agreement and Plan of Merger, dated as of August 3, 1999 (the "Merger
Agreement"), among Union Carbide, The Dow Chemical Company ("Dow Chemical") and
Transition Sub Inc., a wholly owned subsidiary of Dow Chemical ("Merger Sub").
The Merger Agreement provides for, among other things, the merger of Merger Sub
with and into Union Carbide (the "Merger") pursuant to which each outstanding
share of the common stock, par value $1.00 per share, of Union Carbide (the
"Union Carbide Common Stock") will be converted into the right to receive 0.537
(the "Exchange Ratio") of a share of the common stock, par value $2.50 per
share, of Dow Chemical (the "Dow Chemical Common Stock").
In arriving at our opinion, we have reviewed the Merger Agreement and certain
related documents, and certain publicly available business and financial
information relating to Union Carbide and Dow Chemical. We have also reviewed
certain other information relating to Union Carbide and Dow Chemical, including
financial forecasts, provided to or discussed with us by Union Carbide and Dow
Chemical, and have met with the managements of Union Carbide and Dow Chemical
to discuss the businesses and prospects of Union Carbide and Dow Chemical. We
have also considered certain financial and stock market data of Union Carbide
and Dow Chemical, and we have compared those data with similar data for other
publicly held companies in businesses similar to Union Carbide and Dow
Chemical, and we have considered, to the extent publicly available, the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. With
respect to the financial forecasts, we have been advised, and have assumed, that
such forecasts have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of Union Carbide
and Dow Chemical as to the future financial performance of Union Carbide and Dow
Chemical and the potential synergies and strategic benefits (including the
amount, timing and achievability thereof) anticipated to result from the Merger.
We also have assumed, with your consent, that the Merger will be treated as a
pooling of interests in accordance with generally accepted accounting principles
and as a tax-free reorganization for federal income tax purposes. We have
further assumed, with your consent, that in the course of obtaining the
necessary regulatory and third party consents for the proposed Merger and the
transactions contemplated thereby, no delay or restriction will be imposed that
will have a material adverse effect on the contemplated benefits of the proposed
Merger or the transactions contemplated thereby. In addition, we have not been
requested to make, and have not made, an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of Union Carbide or Dow
Chemical, nor have we been furnished with any such evaluations or appraisals.
Our opinion is
B-1
<PAGE>
Board of Directors
Union Carbide Corporation
August 3, 1999
Page 2
necessarily based upon information available to us, and financial, economic,
market and other conditions as they exist and can be evaluated, on the date
hereof. We are not expressing any opinion as to the actual value of the Dow
Chemical Common Stock when issued pursuant to the Merger or the prices at which
the Dow Chemical Common Stock will trade subsequent to the Merger. In
connection with our engagement, we were not requested to, and did not, solicit
third party indications of interest in the possible acquisition of all or a
part of Union Carbide.
We have acted as financial advisor to Union Carbide in connection with the
Merger and will receive a fee for such services, a significant portion of which
is contingent upon the consummation of the Merger. Credit Suisse First Boston
and its affiliates have in the past provided financial services to
Union Carbide and certain of its affiliates and to Dow Chemical and certain of
its affiliates unrelated to the proposed Merger, for which services we have
received compensation, and are currently providing financial services to Union
Carbide and certain of its affiliates unrelated to the proposed Merger. As you
are aware, the Chairman of the Board of Directors of Credit Suisse Group is a
director of Union Carbide and beneficially owns shares of Union Carbide Common
Stock. In the ordinary course of business, Credit Suisse First Boston and its
affiliates may actively trade the debt and equity securities of both Union
Carbide and Dow Chemical for their own accounts and for the accounts of
customers and, accordingly, may at any time hold long or short positions in
such securities.
It is understood that this letter is for the information of the Board of
Directors of Union Carbide in connection with its evaluation of the Merger,
does not constitute a recommendation to any
stockholder as to how such stockholder should vote with respect to any matter
relating to the Merger, and is not to be quoted or referred to, in whole or in
part, in any registration statement, prospectus or proxy statement, or in any
other document used in connection with the offering or sale of securities, nor
shall this letter be used for any other purposes, without our prior written
consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Exchange Ratio is fair to the holders of Union Carbide Common Stock
from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
B-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Officers and Directors
Under Article VI of its Restated Certificate of Incorporation, as amended,
Dow may indemnify its directors, officers, employees and agents to such extent
as is permitted by the laws of the State of Delaware and as Dow's bylaws may
from time to time provide. Section 145 of the General Corporation Law of the
State of Delaware empowers Dow to indemnify, subject to the standards and
limitations therein prescribed, any person in connection with any action, suit
or proceeding brought or threatened by reason of the fact that such person is
or was a director, officer, employee or agent of Dow or is or was serving in
such capacity with respect to another corporation or other enterprise at the
request of Dow. Under Section VI of Dow's bylaws, Dow is required to indemnify
its directors, officers and employees to the full extent permitted by Delaware
law whenever such a person is, or is threatened to be made, a defendant in any
threatened, pending or completed legal proceeding. Section VI also gives Dow
discretion to indemnify directors, officers, employees and agents in any
threatened, pending or completed legal proceedings to which they are, or are
threatened to be made, a party. Any indemnification of a director, officer,
employee or agent of Dow must be approved by Dow's board of directors. Dow
maintains a directors' and officers' liability insurance policy that
indemnifies Dow's directors and officers against certain losses in connection
with claims made against them for certain wrongful acts.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
See Index to Exhibits which is incorporated by reference in this item.
(b) Financial Statement Schedules:
Not Applicable
Item 22. Undertakings.
The undersigned Registrant undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment of the Registration Statement) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
II-1
<PAGE>
by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering;
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in the Registration
Statement, shall be deemed to be a new registration statement relating
to the securities offered in the Registration Statement and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering of such securities;
(5) That, prior to any public reoffering of the securities
registered under this Registration Statement through use of a
prospectus which is a part of this Registration Statement, by any
person or party who is deemed to be an underwriter within the meaning
of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration
form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other
Items of the applicable form;
(6) That every prospectus (i) that is filed pursuant to paragraph
(5) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and is
used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the Registration Statement
and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered in the
Registration Statement, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering of such
securities;
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of
this form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request; and
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved in a
transaction that was not the subject of and included in the
registration statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, The Dow Chemical
Company has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in Midland, Michigan, on October
5, 1999.
The Dow Chemical Company
/s/ J. Pedro Reinhard
By: _________________________________
J. Pedro Reinhard
Executive Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 5, 1999.
* *
_____________________________________ _____________________________________
A.A. Allemang J.K. Barton
Director and Vice President Director
* *
_____________________________________ _____________________________________
D.T. Buzzelli A.J. Carbone
Director Director and Executive Vice
President
*
_____________________________________ *
J.C. Danforth _____________________________________
Director W.D. Davis
Director
*
_____________________________________ *
E.C. Falla _____________________________________
Director B.H. Franklin
Director
*
_____________________________________ *
A.D. Gilmour _____________________________________
Director G.M. Lynch
Vice President and Controller
(principal accounting officer)
*
_____________________________________ *
M.D. Parker _____________________________________
Director and Executive Vice F.P. Popoff
President Director and Chairman of the Board
II-3
<PAGE>
* *
_____________________________________ _____________________________________
J.P. Reinhard H.T. Shapiro
Director, Executive Vice President Director
and Chief Financial Officer
(principal financial officer)
*
_____________________________________
* P.G. Stern
_____________________________________ Director
W.S. Stavropoulos
Director, President and Chief
Executive Officer (principal
executive officer)
/s/ J. Pedro Reinhard
*By:_________________________________
J. Pedro Reinhard
Attorney-in-fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of August 3, 1999 among Union
Carbide Corporation, The Dow Chemical Company and Transition Sub Inc.
(Included as Annex A to the proxy statement/prospectus included
herein.)
2.2 Stock Option Agreement dated as of August 3, 1999 between Union
Carbide Corporation and The Dow Chemical Company. (Filed as Exhibit
99.1 to Union Carbide's Current Report on Form 8-K dated August 3,
1999 (File No. 1-1463), and incorporated by reference herein.)
3.1 Restated Certificate of Incorporation of The Dow Chemical Company.
(Filed as Exhibit 3(a) to Dow Chemical's Annual Report on Form 10-K
for the year ended December 31, 1992 (File No. 1-3433), and
incorporated by reference herein.)
3.2 Bylaws of The Dow Chemical Company. (Filed as Exhibit 3(ii) to Dow
Chemical's Annual Report on Form 10-K for the year ended December 31,
1998 (File No. 1-3433), and incorporated by reference herein.)
3.3 Amended and Restated Certificate of Incorporation of Union Carbide
Corporation. (Filed as Exhibit 3 to Union Carbide's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998
(File No. 1-1463), and incorporated by reference herein.)
3.4 Bylaws of Union Carbide Corporation. (Filed as Exhibit 3.2 to Union
Carbide's Current Report on Form 8-K dated September 22, 1999 (File
No. 1-1463), and incorporated by reference herein.)
4.1 Indenture dated as of June 1, 1995 between Union Carbide and the Chase
Manhattan Bank (formerly Chemical Bank), Trustee. (Filed as Exhibit
4.1.2 to Union Carbide's Registration Statement on Form S-3 (File No.
33-60705), and incorporated by reference herein.)
Dow Chemical and Union Carbide will furnish to the Securities and
Exchange Commission upon request any other debt instrument referred to
in Item 601(b)(4)(iii)(A) of Regulation S-K.
5.1 Opinion of Mayer, Brown & Platt.
8.1 Opinion of Sullivan & Cromwell regarding certain United States federal
income tax consequences of the merger.
10.1 The Dow Chemical Company Executive Supplemental Retirement Plan.
(Filed as Exhibit 10(a) to Dow Chemical's Annual Report on Form 10-K
for the year ended December 31, 1992
(File No. 1-3433), and incorporated by reference herein.)
10.2 The Dow Chemical Company 1972 Option Plan, as amended. (Included as a
part of the Prospectus contained in Post-Effective Amendment No. 13 to
Dow Chemical's Registration Statement on
Form S-8 (File No. 2-44789), and incorporated by reference herein.)
10.3 The Dow Chemical Company 1979 Award and Option Plan, as amended.
(Included as a part of the Prospectus contained in Post-Effective
Amendment No. 4 to Dow Chemical's Registration Statement on Form S-8
(File No. 2-64560), amendment filed as Exhibit 10(ff) to Dow
Chemical's Annual Report on Form 10-K for the year ended December 31,
1984 (File No. 1-3433), amendment filed as Exhibit 10(fff) to Dow
Chemical's Annual Report on Form 10-K for the year ended
December 31, 1985 (File No. 1-3433), amendment filed as Exhibit 10(j)
to Dow Chemical's Annual Report on Form 10-K for the year ended
December 31, 1987 (File No. 1-3433), and each incorporated by
reference herein.)
10.4 The Dow Chemical Company Voluntary Deferred Compensation Plan for
Outside Directors, as amended. (Filed as Exhibit 10(f) to Dow
Chemical's Annual Report on Form 10-K for the year ended December 31,
1994 (File No. 1-3433), as amended in the manner described in the
definitive Proxy Statement for the Annual Meeting of Stockholders of
Dow Chemical held on May 14, 1998
(File No. 1-3433), and each incorporated by reference herein.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S>
10.5 The Dow Chemical Company Executive Post Retirement Life Insurance
Program. (Filed as Exhibit 10(g) to Dow Chemical's Annual Report on
Form 10-K for the year ended December 31, 1992
(File No. 1-3433), and incorporated by reference herein.)
10.6 The Dow Chemical Company Outside Directors' Pension Plan, as amended.
(Filed as Exhibit 10(h) to Dow Chemical's Annual Report on Form 10-K
for the year ended December 31, 1992
(File No. 1-3433), as amended in the manner described in the
definitive Proxy Statement for the Annual Meeting of Stockholders of
Dow Chemical held on May 14, 1998 (File No. 1-3433), and each
incorporated by reference herein.)
10.7 The Dow Chemical Company Dividend Unit Plan. (Filed as Exhibit 10(j)
to Dow Chemical's Annual Report on Form 10-K for the year ended
December 31, 1992 (File No. 1-3433), and incorporated by reference
herein.)
10.8 The Dow Chemical Company 1988 Award and Option Plan, as amended.
(Included as part of the Prospectus contained in Dow Chemical's
Registration Statement on Form S-8 (File No. 33-21748), amendment
filed as Exhibit 10(k) to Dow Chemical's Annual Report on Form 10-K
for the year ended December 31, 1997 (File No. 1-3433), amendment
filed as included as Appendix A to the definitive Proxy Statement for
the Annual Meeting of Stockholders of Dow Chemical held on
May 15, 1997 (File No. 1-3433), and each incorporated by reference
herein.)
10.9 The Dow Chemical Company Executive Split Dollar Life Insurance Plan
Agreement, as amended. (Filed as Exhibit 10(m) to Dow Chemical's
Annual Report on Form 10-K for the year ended December 31, 1995 (File
No. 1-3433), and incorporated by reference herein.)
10.10 The Dow Chemical Company 1994 Executive Performance Plan. (As included
in the definitive Proxy Statement for the Annual Meeting of
Stockholders of Dow Chemical held on May 12, 1994
(File No. 1-3433), and incorporated by reference herein.)
10.11 The Dow Chemical Company 1994 Non-Employee Directors' Stock Plan.
(Filed as Exhibit 10(o) to Dow Chemical's Annual Report on Form 10-K
for the year ended December 31, 1994
(File No. 1-3433), and incorporated by reference herein.)
10.12 A written description of the one-time grant of shares of the common
stock of Dow Chemical to new non-employee directors. (As included in
the definitive Proxy Statement for the Annual Meeting of Stockholders
of Dow Chemical held on May 11, 1995 (File No. 1-3433), and
incorporated by reference herein.)
10.13 A written description of the 1998 Non-Employee Directors' Stock
Incentive Plan. (As included in the definitive Proxy Statement for the
Annual Meeting of Stockholders of Dow Chemical held on
May 14, 1998 (File No. 1-3433), and incorporated by reference herein.)
10.14 A written description of compensation for directors of Dow Chemical.
(As included in the definitive Proxy Statement for the Annual Meeting
of Stockholders of Dow Chemical held on May 13, 1999 (File No. 1-
3433), and incorporated by reference herein.)
10.15 A written description of the manner in which compensation is set for
the executive officers of Dow Chemical. (As included in the definitive
Proxy Statement for the Annual Meeting of Stockholders of Dow Chemical
held on May 13, 1999 (File No. 1-3433), and incorporated by reference
herein.)
10.16 Resolutions adopted by the board of directors of Dow Chemical on May
5, 1971, as most recently amended on July 9, 1998, describing the
employee compensation program for decelerating directors. (Filed as
Exhibit 10(p) to Dow Chemical's Annual Report on Form 10-K for the
year ended December 31, 1998 (File No. 1-3433), and incorporated by
reference herein.)
10.17 The Dow Chemical Company Key Employee Insurance Program. (As included
in the definitive Proxy Statement for the Annual Meeting of
Stockholders of Dow Chemical held on May 13, 1999
(File No. 1-3433), and incorporated by reference herein.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S>
10.18 The Dow Chemical Company Elective Deferral Plan, as amended and
restated. (Filed as Exhibit 10(r) to Dow Chemical's Annual Report on
Form 10-K for the year ended December 31, 1998
(File No. 1-3433), and incorporated by reference herein.)
10.19 Indemnity Agreement dated as of December 8, 1997 between Union Carbide
and James F. Flynn. The Indemnity Agreement filed with the Securities
and Exchange Commission is substantially identical in all material
respects, except as to the parties thereto and dates thereof, with
Indemnity Agreements between Union Carbide and each other person who
is a director or executive officer of Union Carbide. (Filed as Exhibit
10.1 to Union Carbide's Annual Report on Form 10-K for the year ended
December 31, 1997 (File No. 1-1463), and incorporated by reference
herein.)
10.20 1988 Union Carbide Long-Term Incentive Plan. (Filed as Exhibit 10.2.1
to Union Carbide's Annual Report on Form 10-K for the year ended
December 31, 1998 (File No. 1-1463), and incorporated by reference
herein.)
10.21 Amendment to the 1988 Union Carbide Long-Term Incentive Plan effective
June 1, 1989. (Filed as Exhibit 10.14.2 to Union Carbide's Annual
Report on Form 10-K for the year ended December 31, 1994 (File No. 1-
1463), and incorporated by reference herein.)
10.22 Amendment to the 1988 Union Carbide Long-Term Incentive Plan effective
August 1, 1989. (Filed as Exhibit 10.14.3 to Union Carbide's Annual
Report on Form 10-K for the year ended December 31, 1994 (File No. 1-
1463), and incorporated by reference herein.)
10.23 Resolutions adopted by the Board of Directors of Union Carbide on
February 26, 1992 with respect to stock options granted under the 1988
Union Carbide Long-Term Incentive Plan. (Filed as
Exhibit 10.2.4 to Union Carbide's Annual Report on Form 10-K for the
year ended December 31, 1997 (File No. 1-1463), and incorporated by
reference herein.)
10.24 Resolutions adopted by the Compensation and Management Development
Committee of the Board of Directors of Union Carbide on June 30, 1992
with respect to the 1988 Union Carbide Long-Term Incentive Plan.
(Filed as Exhibit 10.2.5 to Union Carbide's Annual Report on Form 10-K
for the year ended December 31, 1997 (File No. 1-1463), and
incorporated by reference herein.)
10.25 Amendment to the 1988 Union Carbide Long-Term Incentive Plan effective
October 1, 1997. (Filed as Exhibit 10.2.6 to Union Carbide's Annual
Report on Form 10-K for the year ended December 31, 1997 (File No. 1-
1463), and incorporated by reference herein.)
10.26 1983 Union Carbide Bonus Deferral Program. (Filed as Exhibit 10.4.1 to
Union Carbide's Annual Report on Form 10-K for the year ended December
31, 1996 (File No. 1-1463), and incorporated by reference herein.)
10.27 Amendment to the 1983 Union Carbide Bonus Deferral Program effective
January 1, 1992. (Filed as Exhibit 10.3.2 to Union Carbide's Annual
Report on Form 10-K for the year ended December 31, 1997 (File No. 1-
1463), and incorporated by reference herein.)
10.28 1984 Union Carbide Cash Bonus Deferral Program. (Filed as Exhibit
10.5.1 to Union Carbide's Annual Report on Form 10-K for the year
ended December 31, 1996 (File No. 1-1463), and incorporated by
reference herein.)
10.29 Amendment to the 1984 Union Carbide Cash Bonus Deferral Program
effective January 1, 1986. (Filed as Exhibit 10.5.2 to Union Carbide's
Annual Report on Form 10-K for the year ended December 31, 1996 (File
No. 1-1463), and incorporated by reference herein.)
10.30 Amendment to the 1984 Union Carbide Cash Bonus Deferral Program
effective January 1, 1992. (Filed as Exhibit 10.4.3 to Union Carbide's
Annual Report on Form 10-K for the year ended December 31, 1997 (File
No. 1-1463), and incorporated by reference herein.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S>
10.31 Equalization Benefit Plan for Participants of the Retirement Program
Plan for Employees of Union Carbide Corporation and its Participating
Subsidiary Companies. (Filed as Exhibit 10.6.1 to Union Carbide's
Annual Report on Form 10-K for the year ended December 31, 1996 (File
No. 1-1463), and incorporated by reference herein.)
10.32 Amendment to the Equalization Benefit Plan effective as of January 1,
1994. (Filed as Exhibit 10.18.2 to Union Carbide's Annual Report on
Form 10-K for the year ended December 31, 1994
(File No. 1-1463), and incorporated by reference herein.)
10.33 Supplemental Retirement Income Plan. (Filed as Exhibit 10.7.1 to Union
Carbide's Annual Report on Form 10-K for the year ended December 31,
1996 (File No. 1-1463), and incorporated by reference herein.)
10.34 Amendment to the Supplemental Retirement Income Plan effective January
1, 1994. (Filed as Exhibit 10.19.3 to Union Carbide's Annual Report on
Form 10-K for the year ended December 31, 1994
(File No. 1-1463), and incorporated by reference herein.)
10.35 Amendment to the Supplemental Retirement Income Plan effective January
1, 1995. (Filed as Exhibit 10.18.3 to Union Carbide's Annual Report on
Form 10-K for the year ended December 31, 1995
(File No. 1-1463), and incorporated by reference herein.)
10.36 Union Carbide Non-Employee Directors' Compensation Deferral Plan
effective February 1, 1997. (Filed as Exhibit 10.7 to Union Carbide's
Annual Report on Form 10-K for the year ended December 31, 1997 (File
No. 1-1463), and incorporated by reference herein.)
10.37 Severance Compensation Agreement dated February 10, 1998 between Union
Carbide and Ron J. Cottle. The Severance Compensation Agreement filed
with the Securities and Exchange Commission is substantially identical
in all material respects, except as to the parties thereto and dates
thereof, with Severance Compensation Agreements between Union Carbide
and other officers and employees of Union Carbide. (Filed as Exhibit
10.8 to Union Carbide's Annual Report on Form 10-K for the year ended
December 31, 1997 (File No. 1-1463), and incorporated by reference
herein.)
10.38 Resolution adopted by the board of directors of Union Carbide on
November 30, 1988 with respect to an executive life insurance program
for officers and certain other employees. (Filed as Exhibit 10.9 to
Union Carbide's Annual Report on Form 10-K for the year ended December
31, 1998
(File No. 1-1463), and incorporated by reference herein.)
10.39 1997 Union Carbide Variable Compensation Plan effective July 1, 1997.
(Filed as Exhibit 10.10 to Union Carbide's Annual Report on Form 10-K
for the year ended December 31, 1997
(File No. 1-1463), and incorporated by reference herein.)
10.40 Union Carbide Corporation Benefits Protection Trust, amended and
restated effective August 29, 1997. (Filed as Exhibit 10.11.1 to Union
Carbide's Annual Report on Form 10-K for the year ended December 31,
1997 (File No. 1-1463), and incorporated by reference herein.)
10.41 Amendment to the Union Carbide Corporation Benefits Protection Trust
effective November 1, 1997. (Filed as Exhibit 10.11.2 to Union
Carbide's Annual Report on Form 10-K for the year ended December 31,
1997 (File No. 1-1463), and incorporated by reference herein.)
10.42 Resolutions adopted by the Board of Directors of Union Carbide on
February 24, 1988 with respect to the purchase of annuities to cover
liabilities of Union Carbide under the Equalization Benefit Plan for
Participants of the Retirement Program Plan for Employees of Union
Carbide Corporation and its participating Subsidiary Companies and the
Supplemental Retirement Income Plan. (Filed as
Exhibit 10.25 to Union Carbide's Annual Report on Form 10-K for the
year ended December 31, 1994 (File No. 1-1463), and incorporated by
reference herein.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S>
10.43 Resolutions adopted by the Board of Directors of Union Carbide on June
28, 1989 with respect to the purchase of annuities to cover
liabilities of Union Carbide under the Supplemental Retirement Income
Plan. (Filed as Exhibit 10.26 to Union Carbide's Annual Report on Form
10-K for the year ended December 31, 1994 (File No. 1-1463), and
incorporated by reference herein.)
10.44 1994 Union Carbide Long-Term Incentive Plan. (Filed as Exhibit 10.28
to Union Carbide's Annual Report on Form 10-K for the year ended
December 31, 1994 (File No. 1-1463), and incorporated by reference
herein.)
10.45 Amendment to the 1994 Union Carbide Long-Term Incentive Plan effective
October 1, 1997. (Filed as Exhibit 10.15.2 to Union Carbide's Annual
Report on Form 10-K for the year ended December 31, 1997 (File No. 1-
1463), and incorporated by reference herein.)
10.46 Amendment and Restatement to Union Carbide Compensation Deferral
Program effective October 1, 1995. (Filed as Exhibit 10.28 to Union
Carbide's Annual Report on Form 10-K for the year ended December 31,
1995 (File No. 1-1463), and incorporated by reference herein.)
10.47 Amendment to Union Carbide Compensation Deferral Program effective
January 1, 1995. (Filed as Exhibit 10.17.2 to Union Carbide's Annual
Report on Form 10-K for the year ended December 31, 1996 (File No. 1-
1463), and incorporated by reference herein.)
10.48 Amendment to Union Carbide Compensation Deferral Program effective
December 31, 1996. (Filed as Exhibit 10.17.3 to Union Carbide's Annual
Report on Form 10-K for the year ended December 31, 1996 (File No. 1-
1463), and incorporated by reference herein.)
10.49 Excess Long-Term Disability Plan effective January 1, 1994. (Filed as
Exhibit 10.30 to Union Carbide's Annual Report on Form 10-K for the
year ended December 31, 1994 (File No. 1-1463), and incorporated by
reference herein.)
10.50 1995 Union Carbide Performance Incentive Plan. (Included as Appendix A
to the definitive Proxy Statement for the Annual Meeting of
Stockholders of Union Carbide held on April 26, 1995
(File No. 1-1463), and incorporated by reference herein.)
10.51 1997 Union Carbide Long-Term Incentive Plan. (Included as Appendix A
to the definitive Proxy Statement for the Annual Meeting of
Stockholders of Union Carbide held on April 23, 1997
(File No. 1-1463), and incorporated by reference herein.)
10.52 Amendment to the 1997 Union Carbide Long-Term Incentive Plan effective
April 23, 1997. (Filed as Exhibit 10.19.2 to Union Carbide's Annual
Report on Form 10-K for the year ended December 31, 1997 (File No. 1-
1463), and incorporated by reference herein.)
10.53 1997 Stock Option Plan for Non-Employee Directors of Union Carbide
Corporation. (Included as Appendix B to the definitive Proxy Statement
for the Annual Meeting of Stockholders of Union Carbide held on April
23, 1997 (File No. 1-1463), and incorporated by reference herein.)
10.54 1997 Union Carbide Corporation EPS Incentive Plan. (Filed as Exhibit
10.21 to Union Carbide's Annual Report on Form 10-K for the year ended
December 31, 1997 (File No. 1-1463), and incorporated by reference
herein.)
10.55 The Mid-Career Hire Plan for Employees of Union Carbide Corporation
and Its Participating Subsidiary Companies effective December 3, 1996.
(Filed as Exhibit 10.22 to Union Carbide's Annual Report on Form 10-K
for the year ended December 31, 1997 (File No. 1-1463), and
incorporated by reference herein.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<C> <S>
10.56 Completion Guarantee dated September 15, 1996 by Union Carbide and its
partner Petrochemical Industries Company K.S.C. for the benefit of
certain banks with respect to construction of a petrochemicals complex
in Kuwait (Filed as Exhibit 10.1 to Union Carbide's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996 (File No. 1-
1463), and incorporated by reference herein.)
10.57 Definitions Agreement dated September 15, 1996 among Union Carbide and
various parties relating to Exhibit 10.56. (Filed as Exhibit 10.2 to
Union Carbide's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 (File No. 1-1463), and incorporated by reference
herein.)
21.1 Subsidiaries of The Dow Chemical Company. (Filed as Exhibit 21 to
Dow's Annual Report on Form 10-K for the year ended December 31, 1998
(File No. 1-3433), and incorporated by reference herein.)
23.1 Consent of Deloitte & Touche LLP, independent auditors of The Dow
Chemical Company.
23.2 Consent of KPMG LLP, independent auditors of Union Carbide
Corporation.
23.3 Consent of Mayer, Brown & Platt. (Included in Exhibit 5.1 hereto.)
23.4 Consent of Sullivan & Cromwell. (Included in Exhibit 8.1 hereto.)
24.1 Power of Attorney of certain directors and officers of The Dow
Chemical Company.
99.1 Forms of Proxy Cards.
99.2 Consent of Credit Suisse First Boston Corporation.
99.3 Consent of William H. Joyce as Nominee Director.
</TABLE>
<PAGE>
EXHIBIT 5.1
October 5, 1999
The Dow Chemical Company
2030 Dow Center
Midland, Michigan 48674
Re: Merger of Transition Sub Inc., a wholly owned subsidiary
of The Dow Chemical Company, with and into Union Carbide Corporation
Ladies and Gentlemen:
We have acted as special counsel to The Dow Chemical Company, a Delaware
corporation ("TDCC"), in connection with the corporate proceedings taken and to
be taken relating to the merger of Transition Sub Inc., a wholly owned
subsidiary of TDCC, with and into Union Carbide Corporation ("Union Carbide"),
with Union Carbide being the surviving corporation (the "Merger"), and
conversion of each share of Union Carbide common stock, par value $1.00 per
share, issued and outstanding at the effective time of the Merger into 0.537 of
a share of TDCC common stock, par value $2.50 per share ("TDCC Common Stock").
We have also participated in the preparation and filing with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, of a
registration statement on Form S-4 (the "Registration Statement") relating to
the Merger. In this connection, we have examined such corporate and other
records, instruments, certificates and documents as we considered necessary to
enable us to express this opinion.
Based on the foregoing, it is our opinion that the TDCC Common Stock has
been duly and validly authorized by all necessary action on the part of TDCC
and when issued pursuant to the terms of the Agreement and Plan of Merger,
dated as of August 3, 1999, will be validly issued, fully paid and non-
assessable by TDCC.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under the caption "Additional
Information--Legal Matters" therein.
Very truly yours,
/s/ Mayer, Brown & Platt
MAYER, BROWN & PLATT
<PAGE>
EXHIBIT 8.1
October 5, 1999
Union Carbide Corporation
39 Old Ridgebury Road
Danbury, CT 06617-0001
Re: Form S-4 Registration Statement
-------------------------------
Ladies and Gentlemen:
We have acted as your counsel in connection with the Registration
Statement filed by The Dow Chemical Company on Form S-4 filed with the
Securities and Exchange Commission on the date hereof (the "Registration
Statement") and hereby confirm to you that, in our opinion, the discussion under
the heading "Material Federal Income Tax Considerations" in the Registration
Statement accurately describes the material United States federal income tax
consequences of the Merger applicable to Union Carbide, Dow, Transition Sub and
the stockholders of Union Carbide, subject to the assumptions and limitations
set forth under such heading.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Registration Statement.
<PAGE>
We hereby consent to the filing with the Securities and Exchange
Commission of this letter as an exhibit to the Registration Statement, and all
amendments thereto, and the reference to us in the Registration Statement under
the heading "Material Federal Income Tax Considerations." In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933 or the rules
and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Sullivan & Cromwell
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Dow Chemical Company:
We consent to the incorporation by reference in this Registration Statement
of The Dow Chemical Company on Form S-4 of our report dated February 10, 1999,
appearing in the Annual Report on Form 10-K of The Dow Chemical Company for the
year ended December 31, 1998, and to the reference to us under the heading
"Experts" in the proxy statement/prospectus which is part of this Registration
Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Midland, Michigan
October 1, 1999
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Registration Statement.
/s/ KPMG LLP
KPMG LLP
Stamford, Connecticut
October 4, 1999
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints John
Scriven or J. Pedro Reinhard, acting severally, as his or her attorney-in-fact
and agent, to sign any registration statement on Form S-4 and any or all
amendments (including post-effective amendments) to such registration statement
in connection with the registration under the Securities Exchange Act of 1933 of
shares of common stock, par value $2.50 per share, of the Corporation to be
issued in connection with the merger of Union Carbide Corporation with and into
a subsidiary of the Corporation, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting to said attorney-in-fact and agent full power and
authority to perform any act in connection with any of the foregoing as fully to
all intents and purposes as he or she might do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof. Each attorney-in-fact and agent is hereby granted full
power of substitution and revocation with respect hereto.
Signature Title Date
- --------- ----- ----
/s/ G.M. LYNCH Vice President and Controller September 16, 1999
- -----------------
G.M. Lynch
/s/ A.A. ALLEMANG Director and Vice President September 17, 1999
- -----------------
A.A. Allemang
/s/ J.K. BARTON Director September 16, 1999
- -----------------
J.K. Barton
/s/ D.T. BUZZELLI Director September 17, 1999
- -----------------
D.T. Buzzelli
/s/ A.J. CARBONE Director and Executive Vice September 16, 1999
- ----------------- President
A.J. Carbone
/s/ J.C. DANFORTH Director September 17, 1999
- -----------------
J.C. Danforth
/s/ W.D. DAVIS Director September 17, 1999
- -----------------
W.D. Davis
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ E.C. FALLA Director September 17, 1999
- ----------------------
E.C. Falla
/s/ B.H. FRANKLIN Director September 17, 1999
- ----------------------
B.H. Franklin
/s/ A.D. GILMOUR Director September 16, 1999
- ----------------------
A.D. Gilmour
/s/ M.D. PARKER Director and Executive Vice September 18, 1999
- ---------------------- President
M.D. Parker
/s/ F.P. POPOFF Director and Chairman of the September 16, 1999
- ---------------------- Board
F.P. Popoff
/s/ J.P. REINHARD Director, Executive Vice September 16, 1999
- ---------------------- President and Chief Financial
J.P. Reinhard Officer
/s/ H.T. SHAPIRO Director September 17, 1999
- ----------------------
H.T. Shapiro
/s/ W.S. STAVROPOULOS Director, President and Chief September 18, 1999
- ---------------------- Executive Officer
W.S. Stavropoulos
/s/ P.G. STERN Director September 18, 1999
- ----------------------
P.G. Stern
<PAGE>
Union Carbide Corporation
39 Old Ridgebury Road, Danbury, CT 06817-0001
===========================
Your Control Number Is:
===========================
To Our Stockholders:
Formal notice of the December 1, 1999 Special Meeting of Stockholders is in the
enclosed proxy statement/prospectus. Please read the proxy statement/prospectus
and vote promptly. YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
By voting in accordance with this form, you will be authorizing the proxies
named below to vote all shares registered in your name and shares held for you
through the Union Carbide Dividend Reinvestment and Stock Purchase Plan
("DRISP"), if any.
For this Special Meeting, you may vote by mail, telephone, fax or the Internet.
Telephone or Internet votes must be received by 11:59 P.M. EST on the day before
the meeting or any adjournments or postponements to be counted. Mail or fax
votes must be received before the polls close. Do not mail this proxy card if
you elect to vote by telephone, fax or the Internet.
Vote 24 hours a day, 7 days a week!
- --------------------------------------------------------------------------------
Vote by Telephone Have this proxy card available when you call the toll-
free number 1-800-250-9081 using a touch-tone phone.
Enter your Control Number when asked and follow the
simple prompts.
- --------------------------------------------------------------------------------
Vote by Fax Please mark, sign and date this proxy card and fax it
to 1-412-299-9191.
- --------------------------------------------------------------------------------
Vote by the Internet Have this proxy card available when you access the
website at http://www.votefast.com, enter your Control
Number where indicated and follow the simple prompts.
- --------------------------------------------------------------------------------
Vote by Mail Please mark, sign and date this proxy card and return
it to Corporate Election Services, P.O. Box 1150,
Pittsburgh, Pennsylvania 15230 in the enclosed postage-
paid envelope.
- --------------------------------------------------------------------------------
----------------------------------------------------------------------
. Please fold and detach card here when voting by mail. .
----------------------------------------------------------------------
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF UNION CARBIDE CORPORATION
SPECIAL MEETING OF STOCKHOLDERS ON DECEMBER 1, 1999
The Board of Directors Recommends a Vote FOR the Proposal.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
To adopt the Agreement and Plan of Merger among [_] [_] [_]
Union Carbide Corporation, The Dow Chemical Company
and Transition Sub Inc., dated as of August 3, 1999,
as the same may be amended from time to time.
- --------------------------------------------------------------------------------
I or we authorize W.H. Joyce and B.D. Fitzgerald, and any one or both of them as
proxies, with full power of substitution, to vote all stock of Union Carbide
Corporation registered in my name or our names or held for me or us through the
Union Carbide DRISP on any matters that come before the Special Meeting or any
adjournments or postponements of the meeting. The proxies will vote (1) as
specified on this card; (2) as the Board of Directors recommends where no choice
is specified; and (3) as the proxies decide on any other matter.
- --------------------------------------------------------------------------------
------------------------------------
Signature
------------------------------------
Signature
------------------------------, 1999
Date
<PAGE>
Union Carbide Corporation
39 Old Ridgebury Road, Danbury, CT 06817-0001
==========================================
Your Control Number is:
==========================================
To Our Stockholders:
Formal notice of the December 1, 1999 Special Meeting of Stockholders is in the
enclosed proxy statement/prospectus. Please read the proxy statement/prospectus
and vote promptly. YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
For your convenience, we have consolidated your holdings, except shares you may
hold at a bank or brokerage house, for which you will be receiving a separate
proxy card.
By voting in accordance with this form, you will be authorizing the proxies
named below to vote all shares registered in your name, including restricted
stock, and shares held through the Dividend Reinvestment and Stock Purchase Plan
("DRISP"). You also will be instructing the applicable trustee to vote shares
held for you through the Union Carbide, UCAR, OSi or Praxair Savings Programs
(the "Savings Programs") and the Union Carbide Employee Stock Ownership Plan
("ESOP"). If you do not vote, the applicable trustee will vote your shares in
the same proportion as it votes shares for which it receives instructions.
For this Special Meeting, you may vote by mail, telephone, fax or the Internet.
Telephone or Internet votes must be received by 11:59 P.M. EST on the day before
the meeting or any adjournments or postponements to be counted. Mail or fax
votes must be received before the polls close. Do not mail this proxy card if
you vote by telephone, fax or the Internet.
Vote 24 hours a day, 7 days a week!
- --------------------------------------------------------------------------------
Vote by Telephone Have this proxy card available when you call the toll-free
number 1-800-250-9081 using a touch-tone phone. Enter your
Control Number when asked and follow the simple prompts.
- --------------------------------------------------------------------------------
Vote by Fax Please mark, sign and date this proxy card and fax it to
1-412-299-9191.
- --------------------------------------------------------------------------------
Vote by the Internet Have this proxy card available when you access the website
at http://www.votefast.com, enter your Control Number
where indicated and follow the simple prompts.
- --------------------------------------------------------------------------------
Vote by Mail Please mark, sign and date this proxy card and return it
to Corporate Election Services, P.O. Box 1150, Pittsburgh,
Pennsylvania 15230 in the enclosed postage-paid envelope.
- --------------------------------------------------------------------------------
-------------------------------------------------------------------
. Please fold and detach card here when voting by mail. .
-------------------------------------------------------------------
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF UNION CARBIDE CORPORATION
SPECIAL MEETING OF STOCKHOLDERS ON DECEMBER 1, 1999
The Board of Directors Recommends a Vote FOR the Proposal.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
To adopt the Agreement and Plan of Merger among Union [_] [_] [_]
Carbide Corporation, The Dow Chemical Company and
Transition Sub Inc., dated as of August 3, 1999, as
the same may be amended from time to time.
- --------------------------------------------------------------------------------
I authorize W. H. Joyce and B. D. Fitzgerald, and any one or both of them as
proxies, with full power of substitution, to vote all stock of Union Carbide
Corporation registered in my name or held for me through the Union Carbide DRISP
on any matters that come before the Special Meeting or any adjournments or
postponements of the meeting. The proxies will vote (1) as specified on this
card; (2) as the Board of Directors recommends where no choice is specified; and
(3) as the proxies decide on any other matter. I instruct the applicable trustee
to execute a proxy as indicated above to vote all shares held for me in the
Savings Programs or Union Carbide ESOP.
- --------------------------------------------------------------------------------
---------------------------------------
Signature
, 1999
---------------------------------
Date
<PAGE>
EXHIBIT 99.2
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
Board of Directors
Union Carbide Corporation
30 Old Ridgebury Road
Danbury, Connecticut 06817-0001
Members of the Board:
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of Union Carbide Corporation ("Union Carbide") as Annex B to the
Proxy Statement/Prospectus of Union Carbide and The Dow Chemical Company
("Dow") relating to the proposed merger transaction involving Union Carbide and
Dow and references thereto in such Proxy Statement/Prospectus under the
captions "Summary--The Merger Agreement and the Merger--Opinion of Union
Carbide's Financial Advisor" and "The Merger Agreement and the Merger--Opinion
of Union Carbide's Financial Advisor." In giving such consent, we do not admit
that we come within the category of persons whose consent is required under,
and we do not admit that we are "experts" for purposes of, the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder.
By: /s/ Credit Suisse First Boston Corporation
------------------------------------------
CREDIT SUISSE FIRST BOSTON CORPORATION
New York, New York
October 5, 1999
<PAGE>
EXHIBIT 99.3
CONSENT OF DR. WILLIAM H. JOYCE
-------------------------------
I hereby consent to being named as a person who will become a director of
The Dow Chemical Company ("Dow"), in connection with and following the
consummation of the merger (the "Merger") contemplated by the Agreement and
Plan of Merger, dated as of August 3, 1999, among Union Carbide Corporation,
Dow and Transition Sub Inc., a wholly owned subsidiary of Dow, in the
Registration Statement on Form S-4 to be filed by Dow with the Securities and
Exchange Commission in connection with the Merger and any amendments thereto to
which this consent has been filed as an exhibit.
/s/ William H. Joyce
---------------------
Dr. William H. Joyce
October 1, 1999
