EXHIBIT 10(r)

 

SEVERANCE AGREEMENT AND GENERAL RELEASE

 

This Severance Agreement and General Release (the “Agreement”) is entered into
as of February 12, 2003 (the “Effective Date”) between The Dow Chemical Company
(together with its successors and assigns, the “Company”) and Michael D. Parker
(the “Executive”).  The Company and the Executive (individually, a “Party” and
together, the “Parties”) in exchange for their mutual promises herein set forth
hereby agree to the covenants as set forth below.

 

Section 1 — Benefits

 

(a)  In General:  The Company promises that, within 15 days after the Executive
signs this Agreement, he will receive the amounts or benefits set forth in this
Section 1 that are conditioned on his having executed and not having revoked
this Agreement, twenty percent of which are being paid to induce him to release
any claims he may have under the Age Discrimination in Employment Act (ADEA). 
The Executive may revoke the waiver of ADEA claims in Section 2 of this
Agreement within 7 days after he signs this Agreement, in which case each
payment to be made pursuant to Section 1(b)(ii) and Section 1(c)(ii) below (with
respect to the U.S. Supplemental Benefit only) shall be reduced by twenty
percent.  Absent this Agreement, the Executive acknowledges that the Company is
not otherwise required to pay or provide him such amounts or benefits.

 

(b)  Payments:

 

(i)  Salary and Other Benefits:  The Executive will continue to receive his
present salary on his regular pay days, through February 12, 2003, which will be
his last day of employment, and shall continue to be eligible (together with his
eligible dependents, if applicable) to participate as an active employee under
all applicable medical, dental, life insurance, retirement and other benefit
plans of the Company in which the Executive and his eligible dependents, if
applicable, are enrolled as of the Effective Date until his or their
participation, as the case may be, terminates under the terms of those plans
following the Effective Date.

 

(ii)  Severance Payments: In exchange for this Agreement, the Executive will
receive a series of three payments totaling $5,600,000.  This series of three
payments shall occur as follows: 1) fifty percent of this amount shall be
payable within 15 days after execution of this Agreement; 2) twenty-five percent
shall be payable as soon as is administratively feasible on or after January 1,
2004 (but no later than January 20, 2004); and 3) twenty-five percent shall be
payable on July 1, 2004.  If the Executive revokes his release of ADEA claims
hereunder within the 7-day revocation period set forth in Section 6 below, each
payment due pursuant to this Section 1(b)(ii) shall be reduced by twenty
percent.

 

(c)  Compensation and Benefit Plans:  The Executive shall not be eligible to
receive future awards or benefits under any stock option, bonus, incentive
compensation, medical, dental, life insurance, fringe and other compensation or
benefit plans, policies, or programs of the Company or any entity which
controls, is controlled by, or is under common control with, the Company, and
with respect to each of them, their predecessors and successors (hereinafter,
“Affiliates”) following the Effective Date, except as follows:

 

(i) Retiree Medical Coverage:  On and following the Effective Date, the Company
will provide the Executive with a choice of participation for him and his
eligible dependents under the ongoing standard terms and conditions of either
the Dow Chemical Company Retiree Medical Care Program maintained in the United
States (or any successor thereto) or the Company’s International Medical Plan
currently provided by Cigna International (or any successor thereto), subject to
a one-time, non-changeable election of plan choice which shall be made by the
Executive no later than 30 days after the Effective Date.  Prior to the
Executive and his eligible dependents participating in any plan elected by the
Executive in accordance herewith, the Company agrees that the Executive and his
eligible dependents shall continue to participate, on the same terms and
conditions, in the medical plan or plans in which they were participating as of
the Effective Date.

 

(ii)  Pension Benefits: In addition to the Executive’s pension benefits which he
is entitled to receive under the terms and conditions of the Swiss Pension Plan
Rules I of the Dow Personalvorsorgestiftung Schweiz, Pension and Defined
Contribution Plan for Regular Employees (the “Swiss Pension Plan”) in which he
remains a participant (the “Swiss Pension Benefit”), he will receive a
supplemental monthly pension benefit, commencing in March 2003 (payable monthly
at the end of the month with first payment on March 31, 2003) under the terms
and conditions of The Dow Chemical Company Executive Supplemental Retirement
Plan (the “Supplemental Retirement Plan”) as in effect on the date of this
Agreement and applicable to him (the “U.S. Supplemental Benefit”).  This U.S.
Supplemental Benefit shall be calculated on a proration method based on the
Executive’s age and final compensation (as determined under the terms of the
Supplemental Retirement Plan) as of the date of his resignation from employment
under Section 4(a) of this Agreement and taking into account the

 

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approximately 15 years he worked for the Company while residing in the United
States and the approximately 19 years that he worked for the Company while
residing outside the United States.  This benefit will not be reduced by any
subsequent amendments or changes to the Supplemental Retirement Plan, nor will
it be reduced by any other pension benefits the Executive is entitled to receive
from the Company or its Affiliates under the terms of such plans or programs or
by any entitlements the Executive may have to government provided social
security benefits.  In addition, this benefit will not be subject to forfeiture
pursuant to any current or future provision of the Supplemental Retirement Plan.
This U.S. Supplemental Benefit shall be paid as an annuity, under the terms and
conditions of the Supplemental Retirement Plan.  The Executive may elect a
single life annuity or an annuity providing a joint and survivor benefit as
provided for in the Supplemental Retirement Plan.

 

(iii)  Long-Term Incentive Awards:  The Executive is entitled to continue his
outstanding Long-Term Incentive awards, which awards shall include without
limitation any outstanding stock option or step-stock option awards
(individually or collectively the “Stock Options”) and any outstanding
performance shares deferred stock awards (the “Performance Shares”), according
to the stated terms and conditions of the Company’s 1988 Award and Option Plan
(the “AO Plan”) and the terms of the individual grant agreements accompanying
each such award, except as follows:

 

•                                          Any outstanding Stock Options shall
continue to vest and the Executive may exercise any vested Stock Options at any
time up to ten years from the Effective Date, or the expiration of the remaining
term of such options as provided in each individual grant agreement, whichever
is shorter;

 

•                                          The value and payment of outstanding
Performance Shares (including any dividends payable thereon) shall not be
reduced or pro-rated;

 

•                                          The Executive shall not be subject to
the provisions of the AO Plan and grant agreements which permit the Company to
require him to return the value of Stock Options after he has exercised them, or
any Performance Shares (or dividends payable thereon) after the Performance
Shares have been issued and delivered to him (and the dividends paid to the
Executive thereon); and

 

•                                          The Executive will be subject to
those provisions of the AO Plan and grant agreements which permit the Company to
declare forfeiture of unexercised Stock Options or unexpired Performance Shares
(and any dividends due thereon), but only to the extent permitted by Section
8(e) of this Agreement.

 

(d)  Attorneys’ Fees:  The Company shall pay to the Executive’s attorneys their
fees of $100,000 incurred in connection with his severance arrangements,
including negotiating and drafting this Agreement.

 

(e)  Relocation Benefits.  The Company agrees that at any time prior to the time
the payments are to be made pursuant to Section 1(b)(ii)(2) and (3) above, the
Executive can elect to reduce such payments by a sum mutually agreed upon by the
Parties in exchange for the Company providing the Executive with relocation
benefits in accordance with the policy applicable to the Company’s localized
employees.

 

(f)  Change in Control Protections:  In the event that any payment or benefit
made or provided to or for the benefit of the Executive in connection with this
Agreement or his employment with the Company or the termination thereof (a
“Payment”) is determined to be subject to any excise tax (“Excise Tax”) imposed
by Section 4999 of the Internal Revenue Code (or any successor to such Section),
the Company shall pay to the Executive, prior to the time any Excise Tax is
payable with respect to such Payment (through withholding or otherwise), an
additional amount, which, after the imposition of all income, employment, excise
and other taxes thereon (including any penalties and interest assessments), is
equal to the sum of (i) the Excise Tax on such Payment plus (ii) any penalty and
interest assessments associated with such Excise Tax.  The Executive shall make
all reasonable efforts to assist the Company in rebutting any presumption that
such Payments are subject to the Excise Tax and the Executive shall promptly
notify the Company of any Internal Revenue Service notice demanding payment of
Excise Tax or alleging that the Executive is subject to such Excise Tax.

 

(g)  Treatment of Payments:  Payments made under this Agreement shall not be
included in the Executive’s compensation for purposes of calculating the
benefits to which the Executive is entitled under any employee benefit program.

 

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Section 2 — Executive Release

 

(a)  In General:  The Executive, on behalf of himself and any other Executive
Released Party (as defined in Section 3(d) below), irrevocably and
unconditionally releases all the Claims described in Section 2(b) below that he
may now have against the Company Released Parties (as defined in Section 2(d)
below), except that nothing herein shall release any Company Released Party from
any claims or damages based on (i) any right the Executive may have to enforce
this Agreement with the Company, (ii) any right or claim that arises after the
Effective Date, (iii) any right the Executive may have to vested benefits or
entitlements under the terms and conditions of any applicable plan, agreement,
program, award, policy or arrangement of the Company that is an “employee
benefit plan” under Section 3(3) of the Employee Retirement Income Security Act
of 1974 (“ERISA”), (iv) the Executive’s eligibility for indemnification (and
advance of expenses) in accordance with applicable law or the certificate of
incorporation and by-laws of the Company, or any applicable insurance policy
with respect to any liability the Executive incurs or incurred as a director,
officer or employee of the Company or any Affiliate, (v) any right the Executive
may have to obtain contribution as permitted by law in the event of entry of
judgment against the Executive as a result of any act or failure to act for
which the Executive and the Company are jointly liable, (vi) any right or claim
of a personal nature unrelated to the Executive’s employment by or relationship
with the Company or service as a director thereof or (vii) the Executive’s right
to claim interest on the $160,000 reimbursement from the Company to the
Executive to repay an inadvertent excess deduction by the Company from the
Executive’s regular compensation for contributions by the Executive to the
defined benefit portion of the Swiss Pension Plan.

 

(b)  Claims Released:  Subject only to the exceptions just noted in subclauses
(i) through (vii) in Section 2(a) above, the Executive agrees that he is
releasing all known and unknown claims, promises, causes of action, or similar
rights of any type that he may have (“Claims”) with respect to any Company
Released Party listed in Section 2(d) below.  The Executive understands that the
Claims he is releasing might arise under many different laws (including
statutes, regulations, other administrative guidance, and common law doctrines),
such as the following:

 

Anti-discrimination statutes and executive orders, such as the Age
Discrimination in Employment Act (“ADEA”) and Executive Order 11,141, which
prohibit age discrimination in employment; Title VII of the Civil Rights Act of
1964, Sections 1981 and 1983 of the Civil Rights Act of 1866, Executive Order
11,246, and the Michigan Elliott Larsen Civil Rights Act, which prohibit
discrimination based on race, color, national origin, religion, or sex; the
Equal Pay Act, which prohibits paying men and women unequal pay for equal work;
the Americans With Disabilities Act and Sections 503 and 504 of the
Rehabilitation Act of 1973, which prohibit discrimination based on disability;
and any other federal, state, or local laws prohibiting employment
discrimination.

 

Federal employment statutes, such as the WARN Act, which requires that advance
notice be given of certain work force reductions; the Employee Retirement Income
Security Act of 1974, which, among other things, protects employee benefits; the
Fair Labor Standards Act of 1938, which regulates wage and hour matters; the
Family and Medical Leave Act of 1993, which requires employers to provide leaves
of absence under certain circumstances; and any other federal laws relating to
employment, such as veterans’ reemployment rights laws.

 

Other laws, such as any international, national, federal, state, provincial or
local laws providing workers’ compensation benefits, restricting an employer’s
right to terminate employees, or otherwise regulating employment; any
international, national, federal, state, provincial or local law enforcing
express or implied employment contracts or requiring an employer to deal with
employees fairly or in good faith; any other international, national, federal,
state, or provincial or local laws providing recourse for alleged wrongful
discharge, tort, physical or personal injury, emotional distress, fraud,
negligent misrepresentation, defamation, and similar or related claims.

 

Except as otherwise provided herein, examples of released Claims include, but
are not limited to the following:  (i) Claims that in any way relate to the
Executive’s employment with the Company, or the termination of that employment,
such as Claims for compensation, bonuses, commissions, lost wages, severance, or
unused accrued vacation or sick pay; (ii) Claims that in any way relate to the
design or administration of any employee benefit or compensation policy, plan,
or program (including without limitation the Company’s U.S. Severance Plan);
(iii) Claims that the Executive has irrevocable or vested rights to severance or
to post-employment health or group insurance benefits; or (iv) any Claims to
attorneys’ fees if the Executive brings a claim with respect to Claims he is
releasing hereunder.

 

(c)  Unknown Claims:  The Executive understands that he may be releasing Claims
that he does not know about and acknowledges that this is his knowing and
voluntary intent, even though he recognizes that someday he might learn that
some or all of the facts he currently believes to be true are untrue and even
though he might then regret having signed this Agreement with the release of
Claims herein.  Nevertheless, the Executive agrees to assume that risk and
agrees that the

 

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release of Claims hereunder shall remain effective in all respects in any such
case.  The Executive expressly waives all rights he might have under any law
that is intended to protect him from waiving unknown claims and understands the
significance of doing so.

 

(d)  Company Released Parties:  The Company Released Parties are the Company and
its Affiliates and, with respect to each such entity, all of its past and
present officers, directors, employees, assigns, attorneys, insurers, employee
benefit programs (and the trustees, administrators, fiduciaries, and insurers of
such programs), and any other persons acting by, through under or in concert
with any of the persons or entities listed in this Section 2(d), and their
successors (but only to the extent any such other person’s  activities directly
relate to the business of the Company).

 

Section 3 — Company Release

 

(a)  In General:  The Company, on behalf of itself and any other Company
Released Party (as defined in Section 2(d) above), irrevocably and
unconditionally releases all the Claims described in Section 3(b) below that it
may now have against the Executive Released Parties (as defined in Section 3(d)
below), except that nothing herein shall release the Executive and any other
Executive Released Party from any claims or damages based on (i) any right the
Company may have to enforce this Agreement, (ii) any right or claim that arises
after the Effective Date, (iii) any right the Company may have to obtain
contribution as permitted by law in the event of entry of judgment against the
Company as a result of any act or failure to act for which the Executive and
Company are jointly liable, or (iv) any right or claim of an individual Company
Released Party which is of a personal nature unrelated to the Executive’s
employment by or relationship with the Company or service as a director thereof
.

 

(b)  Claims Released:  Subject only to the exceptions just noted in subclauses
(i) through (iv) in Section 3(a) above, the Company, on behalf of itself and any
other Company Released Party, agrees that it is releasing all known and unknown
claims, promises, causes of action, or similar rights of any type that the
Company or any other Company Released Party may have (“Claims”) with respect to
any Executive Released Party listed in Section 3(d) below.  The Company
understands that the Claims it is releasing hereunder might arise under many
different laws (including statutes, regulations, other administrative guidance,
and common law doctrines), such as the following:  Federal, state and local
employment law or ordinance, tort, contract or breach of trust or fiduciary
obligation or alleged violation of any other legal obligation; or any other
federal, state, or local laws providing recourse for alleged tort, physical or
personal injury, emotional distress, fraud, negligent misrepresentation,
defamation, and similar or related claims.

 

(c)  Unknown Claims:  The Company, on behalf of itself and any other Company
Released Party, understands that it may be releasing Claims that it does not
know about and acknowledges that this is its knowing and voluntary intent, even
though the Company recognizes that someday it might learn that some or all of
the facts it currently believes to be true are untrue and even though it might
then regret having signed this Agreement with the release of Claims contained
herein.  Nevertheless, the Company, on behalf of itself and any other Company
Released Party, agrees to assume that risk and agrees that the release of Claims
hereunder shall remain effective in all respects in any such case.  The Company
expressly waives all rights it might have under any law that is intended to
protect the Company from waiving unknown Claims and understands the significance
of doing so.

 

(d)  Executive Released Parties:  The Executive Released Parties are the
Executive, his dependents, heirs, administrators, agents, successors and
assigns.

 

Section 4 — Promises

 

(a)  Employment Termination:  The Executive agrees that his employment with the
Company and its Affiliates will end forever on February 12, 2003, and that he
will resign from the Board of Directors of the Company and its committees,
effective as of that date.  The Executive has voluntarily resigned in exchange
for the benefits he is receiving because he signed this Agreement.  The Company
acknowledges that as of December 13, 2002 the Executive has had no management
duties or responsibilities with respect to the business or operations of the
Company or any Affiliate.  The Executive’s termination of employment shall be
treated as a “retirement” for purposes of (i) any plan, policy, program,
arrangement of, or other agreement with, the Company or any Affiliate which is
an “employee benefit plan” within the meaning of Section 3(3) of ERISA, provided
that the Executive qualifies as a retiree under the terms and conditions of such
plan, policy, program, arrangement of or other agreement with the Company or any
Affiliate without regard to the provisions of this Agreement, or (ii) the AO
Plan.

 

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(b)  Pursuit of Released Claims:  The Parties acknowledge that they have not
filed or caused to be filed any lawsuit, complaint, or charge with respect to
any Claim released by such Party hereunder.  Each Party expressly promises never
to file or prosecute a lawsuit, complaint or charge (except to the extent
expressly permitted by the terms of clear and unequivocal law) based on such
Claims, or seek any damages, remedies, or other relief for itself or himself, as
the case may be, in connection with any Claim released by such Party hereunder
by filing or prosecuting a charge with any administrative agency with respect to
any such Claim, and as to any such Claim agrees to request any administrative
agency or other body assuming jurisdiction of any such lawsuit, complaint, or
charge to withdraw from the matter (in respect of such Claim) or dismiss the
matter with prejudice (in respect of such Claim).

 

(c)  Company Property:  Within 15 days of the Effective Date, the Executive
agrees to return to the Company all files, memoranda, documents, records, copies
of the foregoing, credit cards, keys, and any other property of the Company or
its Affiliates in his possession.  Anything to the contrary notwithstanding,
nothing in this Section 4(c) shall prevent the Executive from retaining (i)
papers and other materials of a purely personal nature, including, but not
limited to, photographs, correspondence, personal diaries, calendars and
Rolodexes, personal files and phone books, (ii) information showing his
compensation or relating to reimbursement of expenses, (iii) information that he
reasonably believes may be needed for tax purposes, (iv) a copy of the 360
degree performance feedback relating to the Executive for the past year and (v)
copies of plans, programs and agreements relating to his employment, or
termination thereof, with the Company or any Affiliate.  In addition, the
Company agrees to make arrangements for the Executive to obtain his personal
papers and effects from the Company’s offices and agrees to consider the
Executive’s reasonable request to provide the Executive with a copy of any
minutes or presentation materials from any meeting of the Board, or any
committee thereof, while the Executive was a member of such Board or committee.

 

(d)  Ownership of Claims:  Each Party represents that it or he has not  assigned
or transferred any Claim that such Party is purporting to release hereunder and
agrees that it or he shall not attempt to do so.

 

(e)  Nonadmission of Liability:  Each Party agrees not to assert that this
Agreement is an admission of guilt or wrongdoing and each Party acknowledges
that the Company Released Parties or the Executive Released Parties, as the case
may be, do not believe or admit that any of them has done anything wrong.

 

(f)  No Disparagement:  The Executive agrees not to publicly denigrate or
disparage the Company and any of its officers and directors (provided such
officer or director served in such capacity on or prior to the Effective Date)
in any way.  The Company agrees not to publicly denigrate or disparage the
Executive in any way, and to make reasonable efforts to prevent its officers and
directors from doing so as well by informing them of the Company’s obligation
and commitment under this Section 4(f).  “Publicly” means in any forum or
context in which the statements are intended to or would reasonably be expected
to be communicated or repeated to a broad audience.  The term “publicly” is not
intended to preclude purely private social conversation, but would encompass
without limitation comments in a context in which they could reasonably be
expected to gain wide or notable circulation either in Midland, Michigan or in
executive corporate ranks generally or, in the case of comments by the Company
with respect to the Executive, become known by an actual or prospective
employer.  Nothing in this Section 4(f) shall prevent any person from (i)
responding publicly to incorrect, disparaging or derogatory public statements or
reports after a request for a retraction has been made by the person responding
and refused by the Party that made such statement, to the extent reasonably
necessary to correct or refute any such public statement or report or (ii)
making any truthful statement to the extent (A) necessary with respect to any
litigation, arbitration or mediation involving this Agreement or any other
benefit plan or Long-Term Incentive award, including, but not limited to, the
enforcement of this Agreement or any such plan or award or (B) required by law
or by any court, arbitrator, mediator or administrative or legislative body
(including any committee thereof) with apparent or actual jurisdiction to order
such person to disclose or make accessible such information.  Each Party agrees
to notify the other of any statement that is intended to be made as provided in
clause (ii)(A) of the preceding sentence or is required to be made as provided
in clause (ii)(B) of the preceding sentence.  Such notice shall be given as much
in advance of the making of such statement as is reasonably possible.  The
obligation of non-disparagement by the Executive as set forth in this subsection
includes disparagement by the Executive (or an authorized agent specifically
directed by the Executive, on his behalf, to engage in activity prohibited
pursuant to this Section 4(f)) in any public form or forum, including book,
television, or other public media, creation of or use of a web site or other
internet feature, or public statements by the Executive (or an authorized agent
as defined in this sentence) in the press or any trade press. The obligation of
non-disparagement by the Company (and its commitment regarding public statements
by its officers and directors) as set forth in this subsection includes
disparagement by the Company (or such officers and directors or an authorized
agent specifically directed by the Company to engaged in activity prohibited
pursuant to this Section 4(f)) in any public form or forum, including book,
television, or other public media, creation of or use of a web site or other
internet feature, or public statements by the Company or its officers and
directors (or

 

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authorized agent as defined in this sentence) in the press or any trade press. 
The obligations set forth in this Section 4(f) survive the last severance
payment under this Agreement and have no expiration date.

 

(g)  Announcements:  The Company and the Executive have jointly developed a
public statement addressing the Executive’s employment and contributions at the
Company, which is attached hereto and incorporated herein as Exhibit A.  The
Company agrees that any internal or external public statement regarding the
Executive’s resignation as an officer or director of the Company shall be
consistent with Exhibit A.  The Company and the Executive have also jointly
developed a letter from the Executive to employees of the Company regarding his
departure, which is attached hereto and incorporated herein as Exhibit B.   This
letter shall be delivered to all Company employees in conjunction with the
Company’s announcement of the executive’s retirement and resignation as a
director in such reasonable manner as the Company shall determine consistent
with its usual process for internal announcements of this type.

 

(h)  Nondisclosure:  The Executive acknowledges that he may possess secret,
confidential, or proprietary business and technical information or trade secrets
of the Company concerning the research, operations, future plans, or customers,
suppliers, and business methods of the Company and its Affiliates obtained by
the Executive during the course of his employment by the Company or in
connection with his duties with the Company (“Confidential Information”).  The
Executive agrees that the Company and its Affiliates would be severely damaged
if he did not preserve the confidentiality of such Confidential Information.  To
prevent this harm, the Executive agrees (and acknowledges that the Company may
be irreparably harmed if he breaks such promise) that he shall not divulge to or
use on behalf of any person or entity other than the Company, without the
Company’s express written authorization, any Confidential Information.  Anything
herein to the contrary notwithstanding, the provisions of this Section 4(h)
shall not apply (i) when disclosure is required by law or by any court,
arbitrator, mediator or administrative or legislative body (including any
committee thereof) with apparent or actual jurisdiction to order the Executive
to disclose or make accessible any information, (ii) with respect to any other
litigation, arbitration or mediation involving this Agreement between the
Executive and the Company, including, but not limited to, the enforcement of
this Agreement, (iii) as to Confidential Information that becomes generally
known to the public or within the relevant trade or industry other than due to
the Executive’s violation of this Section 4(h), or (iv) in connection with any
assistance provided by the Executive pursuant to Section 4(m) below, provided
that prior to any disclosure under (i) and (ii) the Executive shall give as much
advance notice to the Company as is possible.  The Executive agrees that this
promise shall never expire.  In addition, the Parties agree that “Confidential
Information” shall not include the 360 degree performance feedback relating to
the Executive in the past year, provided that to the extent that any such
document contains Confidential Information as defined in this Section 4(h), the
Executive agrees to redact such information prior to disclosing any such
feedback to an unrelated third party.  The Executive also continues to be bound
by the terms of confidentiality agreement that he signed on May 30, 1972 (the
“Confidentiality Agreement”), provided that (i) the second paragraph of clause 3
of such agreement is superceded by this Section 4(h), and (ii) in the event of
any inconsistency between this Agreement and the Confidentiality Agreement, this
Agreement controls.

 

(i)  Non-Solicitation of Customers and Suppliers:  The Executive agrees that for
two years from the Effective Date as to any customer or supplier of the Company
with whom the Executive had direct dealings, or about whom the Executive
acquired Confidential Information, during his employment (provided that the
Executive knew or should have known such information was meant to be kept
confidential by the Company), he shall not interfere or attempt to interfere
with any ongoing or prospective business relationship with, or solicit or
attempt to solicit, any such customer or supplier in such a way as would
reasonably be expected to cause such customer or supplier to reduce its current
or prospective business with the Company (provided that with respect to any
prospective business, the Executive knew or should have known at the time of
such alleged solicitation that the Company was considering such business). 
Anything herein to the contrary notwithstanding, it shall not be a breach of
this Section 4(i) if any such customer or supplier had a relationship with any
subsequent employer or other entity using the Executive’s services that
pre-existed the Executive working for such employer or entity and the reduction
in current or prospective business with the Company occurs for reasons unrelated
to any activities prohibited by this Section 4(i).

 

(j)  Non-Solicitation of Officers, Employees and Consultants:  The Executive
agrees that for two years after the Effective Date he shall not solicit for
employment any person who is, or within the preceding 6 months was, an officer, 
employee or consultant of the Company or any Affiliate (to the extent known to
the Executive to be such after reasonable inquiry) unless the individual was
laid off or terminated his or her employment prior to any such solicitation. 
Anything herein to the contrary notwithstanding, it shall not be a violation of
this Section 4(j) for the Executive to provide a personal reference for any such
officer, employee or consultant setting forth the Executive’s personal views
about such officer, employee or consultant nor shall it be a violation of this
Section 4(j) for the Executive to solicit a consultant of the Company or any of
its Affiliates who has been paid less than $500,000 by the Company or any of its
Affiliates during the preceding 12

 

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months or who the Executive did not know (or had no reasonable basis to know)
was, at the time of such solicitation, a consultant of the Company.  In
addition, it shall not be breach of this Section 4(j) for the Executive to
solicit a consultant if such solicitation does not substantially interfere with
such consultant’s current business with, or services to, the Company or its
Affiliate, as the case may be.  The Company acknowledges that one or more of its
officers, employees or consultants or those of its Affiliates may join entities
with which the Executive is affiliated and that this event shall not constitute
a violation of this Agreement if the Executive was not involved directly or
indirectly in the recruitment or hiring of any such officer, employee or
consultant.

 

(k)  Promise Not to Engage in Certain Employment:  The Executive agrees that for
two years from the date he signs this Agreement, he will not accept any
employment (e.g., as a consultant, employee, officer, director, principal,
agent, or joint venture partner) with any of the following companies and their
respective subsidiaries and Affiliates (other than joint ventures in which such
entity owns less than 20% of the entity): BASF Aktiengesellschaft, Bayer AG, BP
p.l.c., Celanese AG, E.I. du Pont de Nemours and Company, Exxon-Mobil
Corporation, Lyondell Petrochemical Company, Millenium Chemicals Inc., Monsanto
Company, and Shell Chemicals (the “Covered Entities”).  Anything herein to the
contrary notwithstanding, it shall not be a breach of this Agreement if after
the Effective Date the Executive is employed by an entity, or provides services
to an entity, which is not a Covered Entity (the “New Employer”) and the New
Employer subsequently is acquired by, merges with, or acquires one or more of
the Covered Entities, except to the extent that the Executive knew or reasonably
should have known of such acquisition or merger at the time he accepted such
employment.   For purposes of this Section 4(k), the term “Affiliate” of a
specified entity shall mean an entity that directly or indirectly controls, is
controlled by, or is under common control with, the entity specified.

 

(l)  Representations:  The Executive understands that the provisions of Sections
4(h) through (k) of this Agreement may limit his ability to earn a livelihood in
a business similar to the business of the Company and its Affiliates but
nevertheless agrees and hereby acknowledges that, due to the Company’s
legitimate business interest in protecting its Confidential Information and due
to the uniqueness of his services and confidential nature of the Confidential
Information he possesses, the covenants set forth herein are reasonable and
necessary for the protection of the business and goodwill of the Company and its
Affiliates, and do not impose an undue burden on his ability to earn a living
generally.  The Executive waives and releases any and all claims that the
covenants are not reasonable and enforceable as written under the laws of
Michigan or any other state or nation that he resides in during the periods
covered by the restrictions.  The Executive covenants not to sue or otherwise
challenge the enforceability of these covenants, including the time limitations
or geographical scope provisions contained herein (provided that nothing herein
shall prevent the Executive from challenging in any arbitration or judicial
proceeding whether any specific activity in which he is alleged to have engaged
is encompassed by the terms of the covenants in Sections 4(h) through (k)).  The
Executive stipulates that the covenants as set forth herein are reasonable to
protect legitimate business interests of the Company, ancillary to otherwise
enforceable agreements at the time this Agreement is made, and fully enforceable
under the laws of Michigan or any other state or nation that he resides in
during the periods covered by the restrictions.

 

(m)  Cooperation Required:  For two years after the Effective Date, the
Executive agrees that, to the extent requested by the Company and subject to the
Executive’s personal and other business commitments, that the Executive shall
fully cooperate with the Company in effecting a smooth transition of his
responsibilities to others and shall provide other assistance to the Company
with respect to any matters of which the Executive has actual knowledge or for
which he had direct responsibility during his employment with the Company.  The
Parties agree that the Executive’s obligations hereunder shall not exceed 10
days (for a total of 20 days) per year during such two-year period.  To the
extent the Executive incurs out-of-pocket expenses in assisting the Company at
its request, the Company shall reimburse him.

 

(n)  Confidentiality of the Agreement:  Until the Company publicly discloses
this Agreement, the Executive shall neither discuss any aspect of the terms of
this Agreement with, nor disclose all or any portion of this Agreement to, any
person or organization.  Anything herein to the contrary notwithstanding, the
Executive may in any event discuss this Agreement with, and disclose all or any
portion of this Agreement to, (i) his legal, financial and tax advisors and
immediate family members, (ii) any prospective employer (limited to subsections
4(h),(i), (j), (k), and (l) of this Agreement), (iii) when disclosure is
required by law or by any court, arbitrator, mediator or administrative or
legislative body (including any committee thereof) with apparent or actual
jurisdiction to order the Executive to disclose or make accessible any
information or (iv) with respect to any other litigation, arbitration or
mediation involving this Agreement, including, but not limited to, the
enforcement of this Agreement.  If prior to the Company making public this
Agreement, the Executive receives a request to disclose such information
pursuant to clauses (iii) or (iv) of the preceding sentence, the Executive
agrees, unless otherwise prohibited by law, to immediately notify the Company’s
General Counsel of such request in order to permit the Company to take steps to
prevent or limit the required disclosure.

 

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(o)  Necessary Corporate Actions:  The Company represents and warrants to the
Executive that (i) all corporate action required to be taken by the Company to
fully authorize the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby (including, without
limitation, any action required to be taken by the Board, any committee of the
Board, or any other person or body to interpret or otherwise act with respect to
any Company plan, policy, program, arrangement or other agreement) has been or
will be duly and effectively taken, (ii) the officer signing this Agreement on
behalf of the Company is duly authorized to do so and (iii) upon the execution
and delivery of this Agreement by the Parties, and approval of this Agreement by
the Compensation Committee of the Board of Directors of the Company (and the
Board of Directors if deemed appropriate by the Compensation Committee), it
shall be a valid and binding obligation of the Company, enforceable against it
in accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally.  As stated above, this Agreement
shall take effect as of 6 p.m. on February 12, 2003, provided that all actions
necessary to authorize this Agreement have taken place by that date and time (in
which event, the Company guarantees unconditionally to execute this Agreement by
the time stated in this sentence and in the form executed by the Executive).  In
the event that all such actions by the Compensation Committee or the Board as
set forth herein have not occurred, this Agreement shall not take effect but
shall be considered null and void, and the Executive shall have such rights as
he would otherwise be entitled to under existing and prospective policies,
programs and plans of the Company.

 

(p)  Indemnification:  The Company shall continue to indemnify the Executive
under the terms of its current indemnification policy or policies (including any
future policy that would cover actions by other senior officers on or prior to
the Effective Date), its certificate of incorporation or its by-laws.

 

(q)  Other Representations:  In addition to any other representations in this
Agreement, the Executive has made the following representations to the Company,
on which he acknowledges it has relied in entering into this Agreement with
him:  The Executive has not suffered any discrimination on account of his age,
sex, race, national origin, marital status, sexual orientation, or any other
protected status, and none of these ever has been an adverse factor used against
him by any Released Party.  The Executive has not suffered any job-related
wrongs or injuries for which he might still be entitled to compensation or
relief, such as an injury for which he might receive a workers’ compensation
award in the future.

 

Section 5 — Injunctive and Other Relief

 

In addition to any other remedies or relief that may be available, the Executive
agrees to pay the reasonable attorneys’ fees and any damages which any Company
Released Party may incur as a result of the Executive or any other Executive
Released Party filing a claim, lawsuit or other proceeding against any Company
Released Party with respect to a Claim released by the Executive Released
Parties hereunder.  In addition to any other remedies or relief that may be
available, the Company agrees to pay the reasonable attorneys’ fees and any
damages which any Executive Released Party may incur as a result of the Company
or any other Company Released Party filing a claim, lawsuit or other proceeding
against any Executive Released Party with respect to a Claim released by the
Company Released Parties hereunder.  The Executive further agrees that the
Company would be irreparably harmed by any actual or threatened violation of
Section 4(f) (involving disparagement), 4(h) (involving disclosure or use of
confidential information or trade secrets), 4(i) (involving solicitation of
customers and suppliers), 4(j) (involving solicitation of employees) or 4(n)
(which protects the fact or terms of this Agreement from being disclosed until
it is publicly disclosed pursuant to law), and that the Company would be
entitled to seek an injunction in court prohibiting him from committing any such
violation. The Company also agrees that the Executive would be irreparably
harmed by any actual or threatened violation of Section 4(f) (involving
disparagement) and that the Executive would be entitled to seek an injunction in
court prohibiting the breaching party from committing any such violation.

 

Section 6 — Consideration of Agreement

 

The Executive acknowledges that, before signing this Agreement, he was given a
period of at least 21 days in which to consider this Agreement and the release
of Claims contained in Section 2 above.  The Executive waives any right he might
have to additional time beyond this consideration period within which to
consider this Agreement and the release of claims contained in Section 2 above. 
The Executive further acknowledges that:  (a) he took advantage of this period
to consider this Agreement and the release contained in Section 3 above before
signing it; (b) he carefully read this Agreement and the release contained in
Section 3 above; (c) he fully understands it; (d) he is entering into this
Agreement voluntarily; (e) he is receiving valuable consideration in exchange
for his execution of this Agreement that he would not otherwise be entitled to
receive; and (f) the Company, in writing, encouraged him to discuss this
Agreement with an attorney before signing it, and he did so to the extent he
deemed appropriate.

 

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The Executive acknowledges that he may revoke the waiver of ADEA claims in
Section 2 above within 7 days after the Effective Date, in which case the
payments payable to the Executive pursuant to Sections 1(b)(ii) and 1(c)(ii)
(with respect to the U.S. Supplemental Benefit only) above shall be reduced by
20 percent.

 

Section 7 — Miscellaneous

 

(a)  Entire Agreement:  This Agreement (along with any related or referenced
documents) is the entire agreement between the Executive and the Company with
respect to the subject matter hereof and, except as otherwise provided herein,
supercedes any other agreements between the Executive and the Company.  This
Agreement may not be modified or canceled in any manner except by a writing
signed by both the Executive and an authorized Company official.  Any waiver by
any person of any provision of this Agreement shall be effective only if in
writing and signed by the person against whom the waiver is sought.  For any
waiver or modification to be effective, it must specifically refer to this
Agreement and to the terms or provisions being modified or waived.  No waiver of
any provision of this Agreement shall be effective as to any other provision of
this Agreement except to the extent specifically provided in an effective
written waiver.  If any provision in this Agreement is found to be
unenforceable, all other provisions shall remain fully enforceable and the
invalid or unenforceable provisions shall be reformed so as to give maximum
legal effect to the agreements of the Parties contained herein; provided,
however, that such reformation shall be effective only if the economic or legal
substance of the transactions contemplated hereby would not thereby be affected
in any manner adverse to either Party.  In the event of any inconsistency
between Section 4(f), Section 4(h), Section 4(i), Section 4(j) or Section 4(k) 
of this Agreement and the provisions of any other plan, policy, arrangement or
program of, or other agreement with, the Company or any Affiliate, the foregoing
Sections of this Agreement shall govern.

 

(b)  Successors:  This Agreement shall be binding upon and inure to the benefit
of the Parties and their respective heirs and executors (in the case of the
Executive), administrators, representatives, successors, and assigns.  No rights
or obligation of the Company under this Agreement may be assigned or transferred
by the Company without the Executive’s prior written consent, except that such
rights or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or a sale,
liquidation or other disposition of all or substantially all of the assets of
the Company, provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and assumes the liabilities,
obligations and duties of the Company under this Agreement, either contractually
or as a matter of law.  No rights or obligations of the Executive under this
Agreement may be assigned or transferred by the Executive, without the Company’s
prior written consent, other than his rights to compensation and benefits, which
may be transferred only by will or operation of law; provided, however that the
Executive shall be entitled, to the extent permitted under applicable law or
relevant plans, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit hereunder following his death by giving the Company
written notice thereof.  In the event of the Executive’s death or a judicial
determination of his incompetence, references in this Agreement to the Executive
shall be deemed, where appropriate, to refer to his beneficiary or
beneficiaries, estate or other legal representative.

 

(c)  Withholding Taxes:  The Company may withhold from any amounts or benefits
payable under this Agreement taxes that are required to be withheld pursuant to
any applicable law or regulation.

 

(d)  Interpretation:  This Agreement shall be construed as a whole according to
its fair meaning.  It shall not be construed strictly for or against the
Executive or the Company.  Unless the context indicates otherwise, the term “or”
shall be deemed to include the term “and” and the singular or plural number
shall be deemed to include the other.  Captions are intended solely for
convenience of reference and shall not be used in the interpretation of this
Agreement.  This Agreement shall be governed by the statutes and common law of
the State of Michigan without reference to principles of conflicts of law,
except to the extent governed by United States federal law.

 

(e)  Notices:  Any notice, request or other communication given in connection
with this Agreement shall be in writing and shall be deemed to have been given,
provided that a written acknowledgement of receipt is obtained (i) when
personally delivered to the recipient or (ii) three days after being sent by
prepaid certified or registered mail, or two days after being sent by a
nationally recognized overnight courier, to the address specified in this
subsection (or such other address as the recipient shall have specified by ten
(10) days’ advance written notice given in accordance with this subsection). 
Such communication should be addressed to the Executive at his principal
residence in Midland, Michigan and to the Company at its corporate headquarters
in Midland, Michigan, addressed to the attention of the Company’s General
Counsel.

 

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(f)  Counterparts:  This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.  Signatures delivered by facsimile shall
be effective for all purposes.

 

(g)  No Offset:  Except as otherwise provided in Section 8(e) below, the
Company’s obligation to make any payment pursuant to, and otherwise to perform
its obligations under, this Agreement shall not be affected by any offset,
counterclaim or other right that the Company may have against the Executive for
any reason.

 

Section 8 — Arbitration of Disputes

 

(a)  Arbitrable Disputes:  Except as otherwise provided in Section 5 above, any
controversy, dispute or claim arising out of or relating to this Agreement
(collectively, “Covered Claims”) shall be resolved by binding arbitration.  The
Executive  also agrees to resolve in accordance with this provision any claim
between him and any other Released Party who offers or agrees to arbitrate the
claim in this manner.

 

(b)  The Arbitration:  Arbitration shall take place in Detroit, Michigan under
the employment dispute resolution rules of the American Arbitration Association
in Michigan and this Section 8 before an experienced employment arbitrator
licensed to practice law in Michigan who has been mutually agreed upon by the
Parties, provided that if the Parties cannot so agree within 30 days of the
filing of any Covered Claim hereunder, such arbitrator shall be selected in
accordance with the applicable rules of the American Arbitration Association. 
The arbitrator may not modify or change this Agreement in any way.  Judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.  This arbitration provision applies to, among other
things, disputes about the validity, interpretation, or effect of this Agreement
or alleged violations of it.  Except as set forth in Section 8(e) below, pending
the resolution of any Covered Claim, the Executive (and his beneficiaries) shall
continue to receive all pension payments and benefits due under this Agreement
or otherwise.

 

(c)  Fees and Expenses:  Each Party shall pay the fees of his or its attorneys,
the expenses of his or its witnesses, and any other expenses that the Party
incurs in connection with the arbitration, but all other costs of the
arbitration, including the fees of the arbitrator, the cost of any record or
transcript of the arbitration, administrative fees, and other fees and costs
shall be paid in equal shares by the Parties.  Neither party shall be liable for
punitive or exemplary damages.

 

(d)  Exclusive Remedy:  Arbitration in this manner shall be the exclusive remedy
for any claim that must be arbitrated pursuant to this Section.  Should the
Executive or the Company attempt to resolve such a claim by any method other
than arbitration pursuant to this Section, the responding party will be entitled
to recover from the initiating party all damages, expenses, and attorneys’ fees
incurred as a result of that breach if the other Party does not withdraw such
claim within 30 days after receiving notice from the responding party that the
filing of such claim is a breach of this Agreement.

 

(e)  Special Procedure for Long-Term Incentive Award Forfeiture Disputes: 
Forfeiture by the Executive of unexercised Stock Options or unreceived
Performance Shares provided as Long Term Incentive awards under the AO Plan
shall occur only under the following circumstances:  (A) the Compensation
Committee of the Board of Directors of the Company makes a good faith
determination based on actual evidence that the Executive has engaged in an
activity harmful to interests of the Company or any of its Affiliates; (B)
within 10 days after such determination, the Company provides the Executive with
written notice of such determination, which notice sets forth the activity and
the steps the Executive needs to take to cure the harm to the Company, and which
notice is provided to the Executive within six months of the date an officer of
the Company first becomes aware, or reasonably should have been aware, of
activity that the Company is asserting pursuant to this Section 8(e) is harmful
to the interests of the Company or its Affiliates; (C) upon receipt of such a
notice, the Executive’s right to exercise Stock Options and receive Performance
Shares shall be suspended until the conclusion of the process provided for under
this Section 8(e) (provided, however, if it is determined that the Executive has
not engaged in an activity harmful to the interests of the Company or any of its
Affiliate as defined herein, the Company agrees to pay the Executive an amount
sufficient to make him whole with respect to any lost opportunity that results
from the suspension of the Stock Options or Performance Shares hereunder); (D)
the Executive is afforded 30 days from receipt of written notice to cure such
violation and to notify the Compensation Committee in writing of the Executive’s
efforts to cure such violation or the Executive’s explanation for his belief
that no such violation has occurred; (E) if after the expiration of such 30-day
cure period, the Compensation Committee determines in good faith by a majority
vote of the members of such committee that the Executive has not cured the harm
to the Company, the Company agrees to refer the decision to whether any LTI
Award should be subject to forfeiture to an independent arbitrator selected in
accordance with this Section 8(a)-(d); and (F) if the Executive fails to timely
respond to the Company with a written response before the expiration of the
30-day cure period, the

 

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Company shall have the right to cause a forfeiture of some or all of such
outstanding Long Term Incentive awards; provided, that the Executive shall have
the right to refer such action to an independent arbitrator selected in
accordance with Section 8(b).  The term “harmful to the interests of the Company
or any of its Affiliates” as used in this Section 8(e) shall include without
limitation the Executive’s violation of Sections 4(f) (concerning
nondisparagement), 4(h) (concerning nondisclosure), 4(i) (concerning
non-solicitation of customers and suppliers), 4(j) (concerning non-solicitation
of officers, employees or consultants) and 4(k) (concerning promises not to
engage in certain employment), except that it shall not include activity that
would have been in violation of Sections 4(i), 4(j), or 4(k) that first occurs
on a date after the expiration of prohibitions contained in those Sections by
their own terms.  In addition, the Company agrees that with respect to
nondisparagement, nondisclosure, non-solicitation of customers or suppliers,
non-solicitation of officers, employees or consultants, promises not to engage
in certain employment or cooperation, that any action (or inaction) by the
Executive shall not be deemed to be “harmful to the interests of the Company or
any of its Affiliate” if such action (or inaction) is not a violation of the
applicable provisions of this Agreement (i.e., Section 4(f), Section 4(h),
Section 4(i), Section 4(j), Section 4(k) or Section 4(m)).  Except as otherwise
provided herein, the LTI Awards shall continue to be governed by the AO Plan and
the terms of the individual grant agreements accompanying each such award.

 

 

Executed at Midland, Michigan, this 10th day of February, 2003.

 

 

 

     /s/ Michael D. Parker

 

 

MICHAEL D. PARKER

 

 

Executed at Midland, Michigan, this 12th day of February, 2003.

 

 

 

     /s/ Larry J. Washington, Jr.

 

 

LARRY J. WASHINGTON, JR.

 

Corporate Vice President, Environment, Health & Safety
Human Resources and Public Affairs
The Dow Chemical Company

 

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