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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2019
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to__________
Commission File Number
Exact Name of Registrant as Specified in its Charter, Principal Office Address and Telephone Number
State of Incorporation or Organization
I.R.S. Employer Identification No.
001-38646
Dow Inc.
Delaware
30-1128146
 
2211 H.H. Dow Way, Midland, MI 48674
 
 
 
(989) 636-1000
 
 
001-03433
The Dow Chemical Company
Delaware
38-1285128
 
2211 H.H. Dow Way, Midland, MI 48674
 
 
 
(989) 636-1000
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Dow Inc. þ    Yes     ¨   No
The Dow Chemical Company þ    Yes     ¨   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Dow Inc. þ    Yes     ¨   No
The Dow Chemical Company þ    Yes     ¨   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Dow Inc.
Large accelerated filer ¨
Accelerated
filer ¨
Non-accelerated filer þ
Smaller reporting company ¨
Emerging growth company ¨
The Dow Chemical Company
Large accelerated filer ¨
Accelerated
filer ¨
Non-accelerated filer þ
Smaller reporting company ¨
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Dow Inc. ¨  
The Dow Chemical Company ¨   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Dow Inc. ¨    Yes     þ   No
The Dow Chemical Company ¨    Yes     þ   No
Securities registered pursuant to Section 12(b) of the Act:
Registrant
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Dow Inc.
Common Stock, par value $0.01 per share
DOW
New York Stock Exchange
At April 30, 2019, Dow Inc. had 748,824,164 shares of common stock outstanding. At April 30, 2019, The Dow Chemical Company had 100 shares of common stock outstanding, all of which were held by the registrant’s parent, Dow Inc.
This filing is a reduced disclosure format for The Dow Chemical Company as it meets the conditions set forth in General Instruction H(l)(a) and (b) for Form 10-Q.

Table of Contents

Dow Inc.
The Dow Chemical Company and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
For the quarterly period ended March 31, 2019
TABLE OF CONTENTS

 
 
PAGE
 
 
 
 
 
 
 
Item 1.
 
 
 
 
The Dow Chemical Company and Subsidiaries:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dow Inc. and The Dow Chemical Company and Subsidiaries:
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 

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Dow Inc.
The Dow Chemical Company and Subsidiaries

This Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, is a combined report being filed separately by Dow Inc. and The Dow Chemical Company and its consolidated subsidiaries (“TDCC” and together with Dow Inc., "Dow"). Each of Dow Inc. and TDCC is filing information included in this report on its own behalf and neither company makes any representation as to information relating to the other company.

Background
Effective August 31, 2017, pursuant to the merger of equals transaction contemplated by the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017, TDCC and E. I. du Pont de Nemours and Company and its consolidated subsidiaries (“DuPont”) each merged with subsidiaries of DowDuPont Inc. (“DowDuPont”) and, as a result, TDCC and DuPont became subsidiaries of DowDuPont (the “Merger”). Subsequent to the Merger, TDCC and DuPont engaged in a series of internal reorganization and realignment steps to realign their businesses into three subgroups: agriculture, materials science and specialty products. Dow Inc. was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business.

As a result of Dow Inc.'s Registration Statement on Form 10 becoming effective on March 12, 2019 with the U.S. Securities and Exchange Commission ("SEC"), Dow Inc. is now required to file a Quarterly Report on Form 10-Q. At March 31, 2019, Dow Inc. and TDCC were separate, wholly owned subsidiaries of DowDuPont. At March 31, 2019, Dow Inc. was a holding company that did not have subsidiaries or operations. As a result, financial statements of Dow Inc. have not been included in this Quarterly Report on Form 10-Q and, unless otherwise indicated, the unaudited interim consolidated financial statements and notes thereto relate to TDCC.

On April 1, 2019, DowDuPont completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC, owning all of the outstanding common shares of TDCC. For filings relating to the period commencing April 1, 2019 and thereafter, TDCC will be deemed the predecessor to Dow Inc. and the historical results of TDCC will be deemed the historical results of Dow Inc. for periods prior to and including March 31, 2019. As a result of the future relationship between Dow Inc. and TDCC, the companies are filing a combined report for this Quarterly Report on Form 10-Q.

FORWARD-LOOKING STATEMENTS
This presentation contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance, financial condition, and other matters, and often contain words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “project,” “seek,” “should,” “strategy,” "target," “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions, and variations or negatives of these words. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements.

Forward-looking statements include, but are not limited to, expectations as to future sales of Dow’s products; the ability to protect Dow’s intellectual property in the United States and abroad; estimates regarding Dow’s capital requirements and need for and availability of financing; estimates of Dow’s expenses, future revenues and profitability; estimates of the size of the markets for Dow’s products and services and Dow’s ability to compete in such markets; expectations related to the rate and degree of market acceptance of Dow’s products; the outcome of certain Dow contingencies, such as litigation and environmental matters; estimates of the success of competing technologies that may become available and expectations regarding the benefits and costs associated with each of the foregoing.

Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Forward-looking statements are based on certain assumptions and expectations of future events which may not be realized and speak only as of the date the statements were made. In addition, forward-looking statements also involve risks, uncertainties and other factors that are beyond Dow’s control that could cause Dow’s actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. These factors include, but are not limited to: fluctuations in energy and raw material prices; failure to develop and market new products and optimally manage product life cycles; significant litigation and environmental matters; failure to appropriately manage process safety and product stewardship issues; changes in laws and regulations or political conditions; global economic and capital markets conditions, such as inflation, market uncertainty, interest and currency exchange rates, and equity and commodity prices; business or supply disruptions; security threats, such as acts of sabotage, terrorism or war, weather events and natural disasters; ability to protect, defend and enforce Dow’s intellectual property rights; increased competition; changes in

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relationships with Dow’s significant customers and suppliers; unanticipated expenses such as litigation or legal settlement expenses; unanticipated business disruptions; Dow’s ability to predict, identify and interpret changes in consumer preferences and demand; Dow’s ability to complete proposed divestitures or acquisitions; Dow’s ability to realize the expected benefits of acquisitions if they are completed; the availability of financing to Dow in the future and the terms and conditions of such financing; and disruptions in Dow’s information technology networks and systems. Additionally, there may be other risks and uncertainties that Dow is unable to identify at this time or that Dow does not currently expect to have a material impact on its business.

Risks related to achieving the anticipated benefits of Dow's separation from DowDuPont include, but are not limited to, a number of conditions outside the control of Dow including risks related to (i) our inability to achieve some or all of the benefits that we expect to receive from the separation, (ii) certain tax risks associated with the separation, (iii) our inability to make necessary changes to operate as a stand-alone company, (iv) the failure of our pro forma financial information to be a reliable indicator of our future results, (v) our inability to enjoy the same benefits of diversity, leverage and market reputation that we enjoyed as a combined company, (vi) restrictions under the intellectual property cross-license agreements, (vii) our inability to receive third-party consents required under the separation agreement, (viii) our customers, suppliers and others' perception of our financial stability on a stand alone basis, (ix) non-compete restrictions under the separation agreement, (x) receipt of less favorable terms in the commercial agreements we will enter into with DuPont and Corteva, Inc. ("Corteva") than we would have received from an unaffiliated third party and (xi) our indemnification of DuPont and/or Corteva for certain liabilities.

Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. For a more detailed discussion of Dow’s risks and uncertainties, see the “Risk Factors” contained in the Information Statement filed as Exhibit 99.1 to Amendment No. 4 to the Registration Statement of Dow Inc. on Form 10, filed with the SEC on March 8, 2019, and Part I, Item 1A of TDCC's Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 11, 2019. Dow undertakes no obligation to update or revise publicly any forward-looking statements whether because of new information, future events, or otherwise, except as required by securities and other applicable laws.



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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


The Dow Chemical Company and Subsidiaries
Consolidated Statements of Income
 
 
Three Months Ended
In millions (Unaudited)
Mar 31,
2019
Mar 31,
2018
Net sales
$
13,582

$
14,899

Cost of sales
10,707

11,552

Research and development expenses
361

386

Selling, general and administrative expenses
701

751

Amortization of intangibles
154

159

Restructuring and asset related charges - net
232

165

Integration and separation costs
408

202

Equity in earnings of nonconsolidated affiliates
13

243

Sundry income (expense) - net
73

83

Interest expense and amortization of debt discount
247

270

Income before income taxes
858

1,740

Provision for income taxes
272

363

Net income
586

1,377

Net income attributable to noncontrolling interests
45

35

Net income available for The Dow Chemical Company common stockholder
$
541

$
1,342

 
 
 
Depreciation
$
598

$
621

Capital expenditures
$
514

$
423

See Notes to the Consolidated Financial Statements.


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The Dow Chemical Company and Subsidiaries
Consolidated Statements of Comprehensive Income
 
 
Three Months Ended
In millions (Unaudited)
Mar 31,
2019
Mar 31,
2018
Net income
$
586

$
1,377

Other comprehensive income (loss), net of tax
 
 
Unrealized gains (losses) on investments
67

(25
)
Cumulative translation adjustments
(31
)
376

Pension and other postretirement benefit plans
141

126

Derivative instruments
(75
)
6

Total other comprehensive income
102

483

Comprehensive income
688

1,860

Comprehensive income attributable to noncontrolling interests, net of tax
51

28

Comprehensive income attributable to The Dow Chemical Company
$
637

$
1,832

See Notes to the Consolidated Financial Statements.

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The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets
In millions, except share amounts (Unaudited)
Mar 31,
2019
Dec 31,
2018
Assets
 
 
Current Assets
 
 
Cash and cash equivalents (variable interest entities restricted - 2019: $109; 2018: $82)
$
2,969

$
2,669

Marketable securities
101

100

Accounts and notes receivable:
 
 
Trade (net of allowance for doubtful receivables - 2019: $109; 2018: $106)
8,428

8,246

Other
3,947

4,136

Inventories
9,508

9,260

Other current assets
708

852

Total current assets
25,661

25,263

Investments
 
 
Investment in nonconsolidated affiliates
3,321

3,823

Other investments (investments carried at fair value - 2019: $1,796; 2018: $1,699)
2,737

2,648

Noncurrent receivables
345

394

Total investments
6,403

6,865

Property
 
 
Property
61,764

61,437

Less accumulated depreciation
38,272

37,775

Net property (variable interest entities restricted - 2019: $718; 2018: $734)
23,492

23,662

Other Assets
 
 
Goodwill
13,812

13,848

Other intangible assets (net of accumulated amortization - 2019: $5,912; 2018: $5,762)
4,743

4,913

Operating lease right-of-use assets
2,584

—

Deferred income tax assets
2,183

2,031

Deferred charges and other assets
859

796

Total other assets
24,181

21,588

Total Assets
$
79,737

$
77,378

Liabilities and Equity
 
 
Current Liabilities
 
 
Notes payable
$
317

$
305

Long-term debt due within one year
2,369

340

Accounts payable:
 
 
Trade
5,103

5,378

Other
3,176

3,330

Operating lease liabilities - current
477

—

Income taxes payable
699

791

Accrued and other current liabilities
3,232

3,611

Total current liabilities
15,373

13,755

Long-Term Debt (variable interest entities nonrecourse - 2019: $43; 2018: $75)
17,160

19,254

Other Noncurrent Liabilities
 
 
Deferred income tax liabilities
721

664

Pension and other postretirement benefits - noncurrent
9,103

9,226

Asbestos-related liabilities - noncurrent
1,133

1,142

Operating lease liabilities - noncurrent
2,126

—

Other noncurrent obligations
5,975

5,368

Total other noncurrent liabilities
19,058

16,400

Stockholders’ Equity
 
 
Common stock (authorized and issued 100 shares of $0.01 par value each)
—

—

Additional paid-in capital
7,153

7,042

Retained earnings
29,701

29,808

Accumulated other comprehensive loss
(9,783
)
(9,885
)
Unearned ESOP shares
(105
)
(134
)
The Dow Chemical Company’s stockholders’ equity
26,966

26,831

Noncontrolling interests
1,180

1,138

Total equity
28,146

27,969

Total Liabilities and Equity
$
79,737

$
77,378

See Notes to the Consolidated Financial Statements.

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The Dow Chemical Company and Subsidiaries
Consolidated Statements of Cash Flows
 
 
Three Months Ended
In millions (Unaudited)
Mar 31,
2019
Mar 31,
2018
Operating Activities
 
 
Net income
$
586

$
1,377

Adjustments to reconcile net income to net cash provided by (used for) operating activities:


Depreciation and amortization
840

837

Credit for deferred income tax
(89
)
(67
)
Earnings of nonconsolidated affiliates less than dividends received
750

287

Net periodic pension benefit cost
62

110

Pension contributions
(103
)
(308
)
Net (gain) loss on sales of assets, businesses and investments
12

(33
)
Restructuring and asset related charges - net
232

165

Other net loss
39

98

Changes in assets and liabilities, net of effects of acquired and divested companies:
 
 
Accounts and notes receivable
(58
)
(1,524
)
Inventories
(266
)
(1,239
)
Accounts payable
(468
)
823

Other assets and liabilities, net
(111
)
(684
)
Cash provided by (used for) operating activities
1,426

(158
)
Investing Activities
 
 
Capital expenditures
(514
)
(423
)
Investment in gas field developments
(25
)
(28
)
Proceeds from sales of property and businesses, net of cash divested
25

17

Proceeds from sale of ownership interests in nonconsolidated affiliates
21

—

Purchases of investments
(173
)
(557
)
Proceeds from sales and maturities of investments
180

454

Proceeds from interests in trade accounts receivable conduits
—

445

Cash used for investing activities
(486
)
(92
)
Financing Activities
 
 
Changes in short-term notes payable
(17
)
293

Payments on long-term debt
(80
)
(54
)
Proceeds from issuance of parent company stock
28

63

Employee taxes paid for share-based payment arrangements
(54
)
(77
)
Distributions to noncontrolling interests
(9
)
(24
)
Dividends paid to parent
(535
)
(1,057
)
Other financing activities, net
—

3

Cash used for financing activities
(667
)
(853
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
30

100

Summary
 
 
Increase (Decrease) in cash, cash equivalents and restricted cash
303

(1,003
)
Cash, cash equivalents and restricted cash at beginning of period
2,709

6,207

Cash, cash equivalents and restricted cash at end of period
$
3,012

$
5,204

Less: Restricted cash and cash equivalents, included in "Other current assets"
43

18

Cash and cash equivalents at end of period
$
2,969

$
5,186

See Notes to the Consolidated Financial Statements.

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The Dow Chemical Company and Subsidiaries
Consolidated Statements of Equity
 
 
Three Months Ended
In millions (Unaudited)
Mar 31,
2019
Mar 31,
2018
Common Stock
 
 
Balance at beginning and end of period
$
—

$
—

Additional Paid-in Capital
 
 
Balance at beginning of period
7,042

6,553

Issuance of parent company stock
28

63

Stock-based compensation and allocation of ESOP shares
83

142

Balance at end of period
7,153

6,758

Retained Earnings
 
 
Balance at beginning of period
29,808

28,050

Net income available for The Dow Chemical Company common stockholder
541

1,342

Dividends to parent
(535
)
(1,057
)
Adoption of accounting standards (Notes 1, 2 and 6)
(111
)
(68
)
Other
(2
)
(6
)
Balance at end of period
29,701

28,261

Accumulated Other Comprehensive Loss
 
 
Balance at beginning of period
(9,885
)
(8,591
)
Other comprehensive income
102

483

Adoption of accounting standards (Note 1)
—

20

Balance at end of period
(9,783
)
(8,088
)
Unearned ESOP Shares
 
 
Balance at beginning of period
(134
)
(189
)
Allocation of ESOP shares
29

39

Balance at end of period
(105
)
(150
)
The Dow Chemical Company's stockholders' equity
26,966

26,781

Noncontrolling Interests
1,180

1,190

Total Equity
$
28,146

$
27,971

See Notes to the Consolidated Financial Statements.











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Dow Inc.
The Dow Chemical Company and Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents


NOTE 1 – CONSOLIDATED FINANCIAL STATEMENTS
Merger and Separation
Effective August 31, 2017, pursuant to the merger of equals transaction contemplated by the Agreement and Plan of Merger (the "Merger Agreement"), dated as of December 11, 2015, as amended on March 31, 2017, The Dow Chemical Company and its consolidated subsidiaries (“TDCC”) and E. I. du Pont de Nemours and Company and its consolidated subsidiaries (“DuPont”) each merged with subsidiaries of DowDuPont Inc. (“DowDuPont”) and, as a result, TDCC and DuPont became subsidiaries of DowDuPont (the “Merger”). Subsequent to the Merger, TDCC and DuPont engaged in a series of internal reorganization and realignment steps to realign their businesses into three subgroups: agriculture, materials science and specialty products. Dow Inc. (together with TDCC, “Dow”) was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business. On April 1, 2019, DowDuPont completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC. See Note 19 for additional information.

Basis of Presentation
As a result of Dow Inc.'s Registration Statement on Form 10 becoming effective on March 12, 2019 with the U.S. Securities and Exchange Commission ("SEC"), Dow Inc. is now required to file a Quarterly Report on Form 10-Q. At March 31, 2019, Dow Inc. and TDCC were separate, wholly owned subsidiaries of DowDuPont. At March 31, 2019, Dow Inc. was a holding company that did not have subsidiaries or operations. As a result, financial statements of Dow Inc. have not been included in this Quarterly Report on Form 10-Q and, unless otherwise indicated, the unaudited interim consolidated financial statements and notes thereto relate to TDCC.

Effective April 1, 2019, Dow Inc. owns all of the outstanding common shares of TDCC. TDCC is deemed the predecessor to Dow Inc. and the historical results of TDCC are deemed the historical results of Dow Inc. for periods prior to and including March 31, 2019. As a result of the future relationship between Dow Inc. and TDCC, the companies are filing a combined report for this Quarterly Report on Form 10-Q.
 

10

The unaudited interim consolidated financial statements of TDCC were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect all adjustments (including normal recurring accruals) which, in the opinion of management, are considered necessary for the fair presentation of the results for the periods presented. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in TDCC's Annual Report on Form 10-K for the year ended December 31, 2018 .

For the periods presented in the unaudited interim consolidated financial statements, TDCC's common shares were owned solely by DowDuPont. In accordance with the accounting guidance for earnings per share, the presentation of earnings per share is not required in financial statements of wholly owned subsidiaries.
 
From the Merger date through March 31, 2019, transactions between DowDuPont, TDCC and DuPont and their affiliates were treated as related party transactions. Transactions between TDCC and DuPont primarily consisted of the sale and procurement of certain feedstocks, energy and raw materials that were consumed in each company's manufacturing process. In addition, TDCC and DuPont have tolling arrangements and recognize product sales for agriculture products. See Note 18 for additional information.

From the Merger date and through March 31, 2019, TDCC’s business activities were components of DowDuPont’s business operations. TDCC’s business activities, including the assessment of performance and allocation of resources, were reviewed and managed by DowDuPont. Information used by the chief operating decision maker of TDCC related to TDCC in its entirety. Accordingly, there were no separate reportable business segments for TDCC under Accounting Standards Codification ("ASC") Topic 280 “Segment Reporting” and TDCC's business results have been reported in this Quarterly Report on Form 10-Q as a single operating segment.
 
Except as otherwise indicated by the context, the term "Union Carbide" means Union Carbide Corporation, and "Dow Silicones" means Dow Silicones Corporation, both wholly owned subsidiaries of TDCC.

Adoption of Accounting Standards
2019
In the first quarter of 2019, TDCC adopted Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)," and associated ASUs related to Topic 842. See Notes 2 and 11 for additional information. TDCC added a significant accounting policy for leases as a result of the adoption of Topic 842:

Leases
TDCC determines whether a contract contains a lease at contract inception. A contract contains a lease if there is an identified asset and TDCC has the right to control the asset.

Operating lease right-of-use (“ROU”) assets represent TDCC’s right to use an underlying asset for the lease term, and lease liabilities represent TDCC’s obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. TDCC uses the incremental borrowing rate (“IBR”) in determining the present value of lease payments, unless the implicit rate is readily determinable. If lease terms include options to extend or terminate the lease, the ROU asset and lease liability are measured based on the reasonably certain decision. Leases with a term of 12 months or less at the commencement date are not recognized on the balance sheet and are expensed as incurred.

TDCC has lease agreements with lease and non-lease components, which are accounted for as a single lease component for all classes of leased assets for which TDCC is the lessee. Additionally, for certain equipment leases, the portfolio approach is applied to account for the operating lease ROU assets and lease liabilities. In the consolidated statements of income, lease expense for operating lease payments is recognized on a straight-line basis over the lease term. For finance leases, interest expense is recognized on the lease liability and the ROU asset is amortized over the lease term.

Some leasing arrangements require variable payments that are dependent upon usage or output, or may vary for other reasons, such as insurance or tax payments. Variable lease payments are recognized as incurred and are not presented as part of the ROU asset or lease liability.

Additionally, TDCC's consolidated balance sheet reflects the impact of the adoption of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" and the associated ASUs (collectively, "Topic 606") at January 1, 2019, by certain nonconsolidated affiliates of TDCC. See Note 6 for additional information.


11

2018
In the first quarter of 2018, TDCC adopted Topic 606, ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities" and ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory." The adoption of these ASU's resulted in a net decrease of $68 million to retained earnings and a decrease of $20 million to accumulated other comprehensive loss ("AOCL") in the consolidated statements of equity at January 1, 2018.

Dividends
Effective with the Merger, TDCC no longer has publicly traded common stock. TDCC's common shares are owned solely by DowDuPont. As a result, following the Merger, TDCC’s Board of Directors ("Board") determined dividend distributions to DowDuPont. See Note 18 for additional information.


NOTE 2 – RECENT ACCOUNTING GUIDANCE
Recently Adopted Accounting Guidance
In the first quarter of 2019, TDCC adopted ASU 2016-02, "Leases (Topic 842)," and associated ASUs related to Topic 842, which requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance requires that a lessee recognize assets and liabilities for leases, and recognition, presentation and measurement in the financial statements will depend on its classification as a finance or operating lease. In addition, the new guidance requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. Lessor accounting remains largely unchanged from legacy U.S. GAAP but does contain some targeted improvements to align with the new revenue recognition guidance in Topic 606, issued in 2014. The new standard was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, and early adoption was permitted.

TDCC adopted Topic 842 using the modified retrospective transition approach, applying the new standard to leases existing at the date of initial adoption. TDCC elected to apply the transition requirements at the effective date rather than at the beginning of the earliest comparative period presented with a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption, and prior periods were not restated. In addition, TDCC elected to apply the package of practical expedients permitted under the transition guidance which does not require reassessment of prior conclusions, lease classification and initial direct lease costs. TDCC did not elect to use the hindsight practical expedient in determining the lease term or assessing impairment of ROU assets. Adoption of the new standard resulted in the recording of lease assets and liabilities of $2.7 billion at January 1, 2019. The net impact to retained earnings was an increase of $72 million and was primarily a result of the recognition of a deferred gain associated with a prior sale-leaseback transaction. The adoption of the new guidance did not have a material impact on TDCC's consolidated statements of income and had no impact on cash flows. See Note 11 for additional information.

Accounting Guidance Issued But Not Adopted at March 31, 2019
In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which is part of the FASB disclosure framework project to improve the effectiveness of disclosures in the notes to the financial statements. The amendments in the new guidance remove, modify and add certain disclosure requirements related to fair value measurements covered in Topic 820, "Fair Value Measurement." The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for either the entire standard or only the requirements that modify or eliminate the disclosure requirements, with certain requirements applied prospectively, and all other requirements applied retrospectively to all periods presented. TDCC is currently evaluating the impact of adopting this guidance.

In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract," which requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Topic 350, "Intangibles - Goodwill and Other" to determine which implementation costs to capitalize as assets or expense as incurred. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted and an entity can elect to apply the new guidance on a prospective or retrospective basis. TDCC is currently evaluating the impact of adopting this guidance.



12

NOTE 3 – REVENUE
Revenue Recognition
The majority of TDCC's revenue is derived from product sales. In the three months ended March 31, 2019 and 2018, 98  percent of TDCC's revenue related to product sales with the remaining balance primarily related to TDCC's insurance operations and licensing of patents and technologies. Product sales consist of sales of TDCC's products to manufacturers and distributors and considers order confirmations or purchase orders, which in some cases are governed by master supply agreements, to be contracts with a customer. TDCC enters into licensing arrangements in which it licenses certain rights of its patents and technology to customers. Revenue from TDCC’s licenses for patents and technology is derived from sales-based royalties and licensing arrangements based on billing schedules established in each contract.

Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to unsatisfied or partially unsatisfied performance obligations. At March 31, 2019 , TDCC had remaining performance obligations related to material rights granted to customers for contract renewal options of $100 million ( $102 million at December 31, 2018) and unfulfilled performance obligations for the licensing of technology of $519 million ( $407 million at December 31, 2018). TDCC expects revenue to be recognized for the remaining performance obligations over the next one to six years.

The remaining performance obligations are for product sales that have expected durations of one year or less, product sales of materials delivered through a pipeline for which TDCC has elected the right to invoice practical expedient, or variable consideration attributable to royalties for licenses of patents and technology. TDCC has received advance payments from customers related to long-term supply agreements that are deferred and recognized over the life of the contract, with remaining contract terms that range up to 22 years. TDCC will have rights to future consideration for revenue recognized when product is delivered to the customer. These payments are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in TDCC's consolidated balance sheets.

Disaggregation of Revenue
TDCC disaggregates its revenue from contracts with customers by principal product group and geographic region, as TDCC believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows.

Net Trade Sales by Principal Product Group
Three Months Ended
In millions
Mar 31, 2019
Mar 31, 2018
Coatings & Performance Monomers
$
904

$
954

Consumer Solutions
1,365

1,363

Crop Protection
1,124

1,122

Electronics & Imaging
625

627

Hydrocarbons & Energy
1,380

1,779

Industrial Biosciences
119

135

Industrial Solutions 1  
1,104

1,156

Nutrition & Health
152

156

Packaging and Specialty Plastics
3,410

3,854

Polyurethanes & CAV 1
2,297

2,557

Safety & Construction
424

444

Seed
323

371

Transportation & Advanced Polymers
284

304

Corporate
69

73

Other
2

4

Total
$
13,582

$
14,899

1. Beginning in the third quarter of 2018, the Construction Chemicals principal product group was combined with the Polyurethanes & CAV principal product group. Also, certain product lines associated with the oil and gas industry were realigned from the Industrial Solutions principal product group to Polyurethanes & CAV principal product group. These changes have been retrospectively reflected in the results presented.


13

Net Trade Sales by Geographic Region
Three Months Ended
In millions
Mar 31, 2019
Mar 31, 2018
U.S. & Canada
$
4,884

$
5,468

EMEA 1
4,211

4,765

Asia Pacific
3,202

3,256

Latin America
1,285

1,410

Total
$
13,582

$
14,899

1. Europe, Middle East and Africa.

Contract Balances
TDCC receives payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets include amounts related to TDCC's contractual right to consideration for completed performance obligations not yet invoiced. Contract liabilities include payments received in advance of performance under the contract and are realized when the associated revenue is recognized under the contract. "Contract liabilities - current" primarily reflects deferred revenue from prepayments from customers for product to be delivered in 12 months or less. "Contract liabilities - noncurrent" includes advance payments that TDCC has received from customers related to long-term supply agreements and royalty payments that are deferred and recognized over the life of the contract.

The increase in contract liabilities from December 31, 2018 to March 31, 2019 was due to advanced payments from a customer related to long-term product supply agreements. Revenue recognized in the first three months of 2019 from amounts included in contract liabilities at the beginning of the period was approximately $65 million (approximately $75 million in the first three months of 2018). In the first three months of 2019, the amount of contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional was $14 million (insignificant in the first three months of 2018).

The following table summarizes the contract balances at March 31, 2019 and December 31, 2018:

Contract Balances
Mar 31, 2019
Dec 31, 2018
In millions
Accounts and notes receivable - Trade
$
8,428

$
8,246

Contract assets - current 1
$
26

$
37

Contract assets - noncurrent 2
$
47

$
47

Contract liabilities - current 3
$
233

$
165

Contract liabilities - noncurrent 4
$
1,739

$
1,390

1.
Included in "Other current assets" in the consolidated balance sheets.
2.
Included in "Deferred charges and other assets" in the consolidated balance sheets.
3.
Included in "Accrued and other current liabilities" in the consolidated balance sheets.
4.
Included in "Other noncurrent obligations" in the consolidated balance sheets.


NOTE 4 – RESTRUCTURING AND ASSET RELATED CHARGES - NET
Charges for restructuring programs and other asset related charges, which includes other asset impairments, were $232 million for the three months ended March 31, 2019 ( $165 million for the three months ended March 31, 2018). These charges were recorded in "Restructuring and asset related charges - net" in the consolidated statements of income and consist primarily of the following:

Restructuring Plans
DowDuPont Agriculture Division Restructuring Program
During the fourth quarter of 2018 and in connection with the ongoing integration activities, DowDuPont approved restructuring actions to simplify and optimize certain organizational structures within the Agriculture division in preparation for its intended separation as a standalone company ("Agriculture Division Program"). For the three months ended March 31, 2019, TDCC recorded a favorable adjustment of $4 million to the severance and related benefit costs reserve. The impact of this adjustment is shown as "Restructuring and asset related charges - net" in the consolidated statements of income. TDCC expects actions related to the Agriculture Division Program to be substantially complete by mid 2019.

TDCC recorded pretax restructuring charges of $21 million inception-to-date under the Agriculture Division Program, consisting of severance and related benefit costs of $20 million and asset write-downs and write-offs of $1 million .


14

The following table summarizes the activities related to the Agriculture Division Program. At March 31, 2019 , $11 million ( $23 million at December 31, 2018 ) was included in "Accrued and other current liabilities" in TDCC's consolidated balance sheets.

DowDuPont Agriculture Division Program
Severance and Related Benefit Costs
Asset Write-downs and Write-offs
Total
In millions
2018 restructuring charges
$
24

$
1

$
25

Charges against the reserve
—

(1
)
(1
)
Cash payments
(1
)
—

(1
)
Reserve balance at Dec 31, 2018
$
23

$
—

$
23

Adjustments to the reserve
(4
)
—

(4
)
Cash payments
(8
)
—

(8
)
Reserve balance at Mar 31, 2019
$
11

$
—

$
11


DowDuPont Cost Synergy Program
In September and November 2017, DowDuPont approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the "Synergy Program") which was designed to integrate and optimize the organization following the Merger and in preparation for the business separations. For the three months ended March 31, 2019, TDCC recorded pretax restructuring charges of $224 million , consisting of severance and related benefit costs of $72 million , asset write-downs and write-offs of $100 million and costs associated with exit and disposal activities of $52 million . For the three months ended March 31, 2018, TDCC recorded pretax restructuring charges of $163 million , consisting of severance and related benefit costs of $104 million , asset write-downs and write-offs of $48 million and costs associated with exit and disposal activities of $11 million . The impact of these charges is shown as "Restructuring and asset related charges - net" in the consolidated statements of income. TDCC expects actions related to the Synergy Program to be substantially complete by the end of 2019.

TDCC recorded pretax restructuring charges of $1,462 million inception-to-date under the Synergy Program, consisting of severance and related benefit costs of $633 million , asset write-downs and write-offs of $613 million and costs associated with exit and disposal activities of $216 million .

The following table summarizes the activities related to the Synergy Program. At March 31, 2019 , $250 million was included in "Accrued and other current liabilities" ( $272 million at December 31, 2018 ) and $75 million was included in "Other noncurrent obligations" ( $55 million at December 31, 2018 ) in TDCC's consolidated balance sheets.

DowDuPont Synergy Program
Severance and Related Benefit Costs
Asset Write-downs and Write-offs
Costs Associated with Exit and Disposal Activities
Total
In millions
Reserve balance at Dec 31, 2018
$
262

$
—

$
65

$
327

2019 restructuring charges
72

100

52

224

Charges against the reserve
—

(100
)
—

(100
)
Cash payments
(97
)
—

(29
)
(126
)
Reserve balance at Mar 31, 2019
$
237

$
—

$
88

$
325


For the three months ended March 31, 2019, restructuring charges related to the write-down and write-off of assets totaled $100 million and primarily related to the impairment of leased, non-manufacturing facilities and the write-down of inventory aligned with the seed and crop protection principal product groups. The restructuring charges related to the write-down and write-off of assets for the three months ended March 31, 2018, totaled $48 million and related primarily to assets aligned with seed activities.

TDCC expects to incur additional costs in the future related to its restructuring activities. Future costs are expected to include demolition costs related to closed facilities and restructuring plan implementation costs; these costs will be recognized as incurred. TDCC also expects to incur additional employee-related costs, including involuntary termination benefits, related to its other optimization activities. These costs cannot be reasonably estimated at this time.



15

NOTE 5 – INVENTORIES
The following table provides a breakdown of inventories:

Inventories
Mar 31, 2019
Dec 31, 2018
In millions
Finished goods
$
5,703

$
5,640

Work in process
2,239

2,214

Raw materials
940

941

Supplies
891

880

Total
$
9,773

$
9,675

Adjustment of inventories to a LIFO basis
(265
)
(415
)
Total inventories
$
9,508

$
9,260



NOTE 6 – NONCONSOLIDATED AFFILIATES
TDCC's investments in companies accounted for using the equity method ("nonconsolidated affiliates"), by classification in the consolidated balance sheets, are shown in the following table:

Investments in Nonconsolidated Affiliates
Mar 31, 2019
Dec 31, 2018
In millions
Investment in nonconsolidated affiliates
$
3,321

$
3,823

Other noncurrent obligations
(870
)
(495
)
Net investment in nonconsolidated affiliates
$
2,451

$
3,328


HSC Group
The carrying value of TDCC's investments in the HSC Group, which includes Hemlock Semiconductor L.L.C. and DC HSC Holdings LLC, was adjusted as a result of the HSC Group's adoption of Topic 606. The resulting impact to TDCC's investments in the HSC Group was a reduction to "Investment in nonconsolidated affiliates" of $71 million and an increase to "Other noncurrent obligations" of $168 million , as well as an increase to "Deferred income tax assets" of $56 million and a reduction to "Retained earnings" of $183 million in the consolidated balance sheet at January 1, 2019. The following table reflects the carrying value of the HSC Group investments at March 31, 2019 and December 31, 2018:

Investment in the HSC Group
 
Investment
In millions
Balance Sheet Classification
Mar 31, 2019
Dec 31, 2018
Hemlock Semiconductor L.L.C.
Other noncurrent obligations
$
(658
)
$
(495
)
DC HSC Holdings LLC
Investment in nonconsolidated affiliates
$
485

$
535


EQUATE
In the first quarter of 2019, EQUATE Petrochemical Company K.S.C.C. ("EQUATE") paid a dividend of $440 million , reflected in "Earnings of nonconsolidated affiliates less than dividends received" in the consolidated statements of cash flows. As a result, TDCC had a negative investment balance in EQUATE of $212 million at March 31, 2019, classified as "Other noncurrent obligations" in the consolidated balance sheets. At December 31, 2018, TDCC had an investment balance in EQUATE of $131 million , classified as "Investment in nonconsolidated affiliates" in the consolidated balance sheets.



16

NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS
The following table shows the carrying amount of goodwill:

Goodwill
 
In millions
Net goodwill at Dec 31, 2018
$
13,848

Foreign currency impact
(36
)
Net goodwill at Mar 31, 2019
$
13,812


The following table provides information regarding TDCC’s other intangible assets:

Other Intangible Assets
Mar 31, 2019
Dec 31, 2018
In millions
Gross
Carrying
Amount
Accum
Amort
Net
Gross
Carrying
Amount
Accum
Amort
Net  
Intangible assets with finite lives:
 
 
 
 
 
 
Developed technology
$
3,253

$
(1,996
)
$
1,257

$
3,255

$
(1,934
)
$
1,321

Software
1,539

(900
)
639

1,529

(876
)
653

Trademarks/tradenames
680

(638
)
42

688

(631
)
57

Customer-related
4,898

(2,211
)
2,687

4,911

(2,151
)
2,760

Other
236

(167
)
69

243

(170
)
73

Total other intangible assets, finite lives
$
10,606

$
(5,912
)
$
4,694

$
10,626

$
(5,762
)
$
4,864

In-process research and development
49

—

49

49

—

49

Total other intangible assets
$
10,655

$
(5,912
)
$
4,743

$
10,675

$
(5,762
)
$
4,913


The following table provides information regarding amortization expense related to other intangible assets:

Amortization Expense
Three Months Ended
In millions
Mar 31, 2019
Mar 31, 2018
Other intangible assets, excluding software
$
154

$
159

Software, included in “Cost of sales”
$
25

$
23


Total estimated amortization expense for 2019 and the five succeeding fiscal years is as follows:

Estimated Amortization Expense
In millions
2019
$
659

2020
$
623

2021
$
594

2022
$
525

2023
$
492

2024
$
456




17

NOTE 8 – TRANSFERS OF FINANCIAL ASSETS
TDCC historically sold trade accounts receivable of select North American entities and qualifying trade accounts receivable of select European entities on a revolving basis to certain multi-seller commercial paper conduit entities ("conduits"). The proceeds received were comprised of cash and interests in specified assets of the conduits (the receivables sold by TDCC) that entitled TDCC to the residual cash flows of such specified assets in the conduits after the commercial paper was repaid. Neither the conduits nor the investors in those entities had recourse to other assets of TDCC in the event of nonpayment by the debtors.

In the fourth quarter of 2017, TDCC suspended further sales of trade accounts receivable through these facilities and began reducing outstanding balances through collections of trade accounts receivable previously sold to such conduits. In September and October 2018, the North American and European facilities, respectively, were amended and the terms of the agreements changed from off-balance sheet arrangements to secured borrowing arrangements. See Note 9 for additional information on the secured borrowing arrangements.

The following represents the cash flows between TDCC and the conduits:

Cash Proceeds
Three Months Ended
In millions
Mar 31,
2019
Mar 31,
2018
Interests in conduits 1
$
—

$
445

1.
Presented in "Investing Activities" in the consolidated statements of cash flows.


NOTE 9 – NOTES PAYABLE, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES
Notes Payable
Mar 31,
2019
Dec 31,
2018
In millions
Commercial paper
$
—

$
10

Notes payable to banks and other lenders
317

295

Total notes payable
$
317

$
305

Period-end average interest rates
12.09
%
8.61
%

Long-Term Debt
2019 Average Rate
Mar 31,
2019
2018
Average
Rate
Dec 31,
2018
In millions
Promissory notes and debentures:
 
 
 
 
Final maturity 2019
9.80
%
$
7

9.80
%
$
7

Final maturity 2020
4.46
%
1,547

4.46
%
1,547

Final maturity 2021
4.71
%
1,424

4.71
%
1,424

Final maturity 2022
3.50
%
1,372

3.50
%
1,373

Final maturity 2023
7.64
%
325

7.64
%
325

Final maturity 2024
3.50
%
896

3.50
%
896

Final maturity 2025 and thereafter
5.98
%
7,963

5.98
%
7,963

Other facilities:
 
 
 
 
U.S. dollar loans, various rates and maturities
3.52
%
4,533

3.59
%
4,533

Foreign currency loans, various rates and maturities
3.19
%
714

3.21
%
713

Medium-term notes, varying maturities through 2025
3.33
%
703

3.26
%
778

Finance lease obligations
 
369

 
369

Unamortized debt discount and issuance costs
 
(324
)
 
(334
)
Long-term debt due within one year 1
 
(2,369
)
 
(340
)
Long-term debt
 
$
17,160

 
$
19,254

1.
Presented net of current portion of unamortized debt issuance costs.


18

Maturities of Long-Term Debt for Next Five Years at Mar 31, 2019
In millions
2019 1
$
2,307

2020
$
1,839

2021 2
$
4,249

2022
$
1,507

2023
$
500

2024
$
968

1.
Includes $2.0 billion of current maturities related to the Dow Silicones term loan facility, repaid on April 5, 2019.
2.
Assumes the option to extend will be exercised for $2.5 billion of the Dow Silicones term loan facility.

2019 Activity
In the first three months of 2019, TDCC redeemed an aggregate principal amount of $72 million of International Notes ("InterNotes") at maturity.

Term Loan Facility
In connection with the ownership restructure of Dow Silicones on May 31, 2016, Dow Silicones incurred $4.5 billion of indebtedness under a certain third party credit agreement ("Term Loan Facility"). TDCC subsequently guaranteed the obligations of Dow Silicones under the Term Loan Facility and, as a result, the covenants and events of default applicable to the Term Loan Facility are substantially similar to the covenants and events of default set forth in TDCC's Five Year Competitive Advance and Revolving Credit Facility Agreement ("Revolving Credit Agreement"). In the second quarter of 2018, Dow Silicones exercised the 19-month extension option making amounts borrowed under the Term Loan Facility repayable on December 30, 2019. In addition, Dow Silicones amended the Term Loan Facility to include an additional 2-year extension option, at Dow Silicones' election, upon satisfaction of certain customary conditions precedent. On April 5, 2019, Dow Silicones voluntarily repaid $2.0 billion of principal, which was classified as "Long-term debt due within one year" in the consolidated balance sheets at March 31, 2019 . Dow Silicones also intends to exercise the 2-year extension option on the remaining principal balance of $2.5 billion .

Available Credit Facilities
The following table summarizes TDCC's credit facilities:

Committed and Available Credit Facilities at Mar 31, 2019
In millions
Committed Credit
Credit Available
Maturity Date
Interest
Five Year Competitive Advance and Revolving Credit Facility
$
5,000

$
5,000

October 2023
Floating rate
Term Loan Facility 1
2,000

—

April 2019
Floating rate
Term Loan Facility  2
2,500

—

December 2021
Floating rate
North American Securitization Facility
800

800

September 2019
Floating rate
European Securitization Facility 3
450

450

October 2020
Floating rate
Bilateral Revolving Credit Facility
100

100

October 2019
Floating rate
Bilateral Revolving Credit Facility 4
100

100

March 2020
Floating rate
Bilateral Revolving Credit Facility
100

100

March 2020
Floating rate
Bilateral Revolving Credit Facility
280

280

March 2020
Floating rate
Bilateral Revolving Credit Facility
100

100

March 2020
Floating rate
Bilateral Revolving Credit Facility
200

200

March 2020
Floating rate
Bilateral Revolving Credit Facility
200

200

May 2020
Floating rate
Bilateral Revolving Credit Facility
200

200

July 2020
Floating rate
Bilateral Revolving Credit Facility
100

100

August 2020
Floating rate
Total committed and available credit facilities
$
12,130

$
7,630

 
 
1.
Dow Silicones voluntarily repaid $2.0 billion of principal on April 5, 2019.
2.
Assumes the option to extend the Dow Silicones term loan facility will be exercised.
3.
Equivalent to Euro 400 million .
4.
On March 9, 2019, TDCC renewed a $100 million Bilateral Revolving Credit Facility agreement, which has a maturity date in March 2020 and provides for interest at floating rates, as defined in the agreement.


19

Debt Covenants and Default Provisions
Information on TDCC's debt covenants and default provisions can be found in Note 15 to the Consolidated Financial Statements included in TDCC's Annual Report on Form 10-K for the year ended December 31, 2018 . There were no material changes to the debt covenants and default provisions related to TDCC’s outstanding long-term debt and primary, private credit agreements in the first three months of 2019.

Subsequent Event
On April 1, 2019, DowDuPont completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC. In conjunction with the separation, Dow Inc. is obligated, substantially concurrently with the issuance of any guarantee in respect of outstanding or committed indebtedness under the Revolving Credit Agreement, to enter into a supplemental indenture with TDCC and the trustee under TDCC’s existing 2008 base indenture governing certain notes issued by TDCC. Under such supplemental indenture, Dow Inc. will guarantee all outstanding debt securities and all amounts due under such existing base indenture and will become subject to certain covenants and events of default under the existing base indenture.

In addition, the Revolving Credit Agreement includes an event of default which would be triggered in the event Dow Inc. incurs or guarantees third party indebtedness for borrowed money in excess of $250 million or engages in any material activity or directly owns any material assets, in each case, subject to certain conditions and exceptions. Dow Inc. may, at its option, cure the event of default by delivering an unconditional and irrevocable guarantee to the administrative agent within thirty days of the event or events giving rise to such event of default.

No such events have occurred or have been triggered at the time of the filing of this Quarterly Report on Form 10-Q.


NOTE 10 – COMMITMENTS AND CONTINGENT LIABILITIES
Environmental Matters
Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law and existing technologies. At March 31, 2019 , TDCC had accrued obligations of $813 million for probable environmental remediation and restoration costs, including $159 million for the remediation of Superfund sites. These obligations are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the consolidated balance sheets. This is management’s current estimate of the costs for remediation and restoration with respect to environmental matters for which TDCC has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to approximately two times that amount. Consequently, it is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on TDCC’s results of operations, financial condition and cash flows. It is the opinion of TDCC’s management, however, that the possibility is remote that costs in excess of the range disclosed will have a material impact on TDCC’s results of operations, financial condition and cash flows. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration. As new or additional information becomes available and/or certain spending trends become known, management will evaluate such information in determination of the current estimate of environmental liability. In the second quarter of 2019, as a result of the business separations, and change in ownership of certain sites where there are remediation activities, additional costs may be incurred to effectively manage the ongoing activities. In addition, as a result of the potential culmination of long standing negotiations with regulators and/or agencies, additional charges for environmental matters may be recorded. Management believes that it is reasonably possible that the accrued obligation for environmental matters may be increased up to $400 million as a result of this review. At December 31, 2018 , TDCC had accrued obligations of $820 million for probable environmental remediation and restoration costs, including $156 million for the remediation of Superfund sites.

Litigation
Asbestos-Related Matters of Union Carbide Corporation
A summary of Asbestos-Related Matters of Union Carbide Corporation can be found in Note 16 to the Consolidated Financial Statements included in TDCC's Annual Report on Form 10-K for the year ended December 31, 2018 .

Introduction
Union Carbide is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that Union Carbide sold in the past, alleged exposure to asbestos-containing products located on Union Carbide’s premises and Union Carbide’s responsibility for asbestos suits filed against a former Union Carbide subsidiary, Amchem Products, Inc. (“Amchem”). In many cases, plaintiffs are unable

20

to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to Union Carbide’s products.

Union Carbide expects more asbestos-related suits to be filed against Union Carbide and Amchem in the future, and will aggressively defend or reasonably resolve, as appropriate, both pending and future claims.

Estimating the Asbestos-Related Liability
Since 2003, Union Carbide has engaged Ankura Consulting Group, LLC ("Ankura"), a third party actuarial specialist, to review Union Carbide's historical asbestos-related claim and resolution activity in order to assist Union Carbide's management in estimating the asbestos-related liability. Each year, Ankura has reviewed the claim and resolution activity to determine the appropriateness of updating the most recent Ankura study.

Based on the December 2018 Ankura review and Union Carbide's own review of the data, Union Carbide's total asbestos-related liability through the terminal year of 2049, including asbestos-related defense and processing costs, was $1,260 million at December 31, 2018 , and included in “Accrued and other current liabilities” and “Asbestos-related liabilities - noncurrent” in the consolidated balance sheets.

Each quarter, Union Carbide reviews claims filed, settled and dismissed, as well as average settlement and resolution costs by disease category. Union Carbide also considers additional quantitative and qualitative factors such as the nature of pending claims, trial experience of Union Carbide and other asbestos defendants, current spending for defense and processing costs, significant appellate rulings and legislative developments, trends in the tort system, and their respective effects on expected future resolution costs. Union Carbide's management considers all these factors in conjunction with the most recent Ankura study and determines whether a change in the estimate is warranted. Based on Union Carbide's review of 2019 activity, it was determined that no adjustment to the accrual was required at March 31, 2019 .

Union Carbide’s asbestos-related liability for pending and future claims and defense and processing costs was $1,243 million at March 31, 2019 , and approximately 17 percent of the recorded liability related to pending claims and approximately 83 percent related to future claims.

Summary
TDCC's management believes the amounts recorded by Union Carbide for the asbestos-related liability (including defense and processing costs) reflect reasonable and probable estimates of the liability based upon current, known facts. However, future events, such as the number of new claims to be filed and/or received each year, the average cost of defending and disposing of each such claim, as well as the numerous uncertainties surrounding asbestos litigation in the United States over a significant period of time, could cause the actual costs for Union Carbide to be higher or lower than those projected or those recorded. Any such events could result in an increase or decrease in the recorded liability.

Because of the uncertainties described above, Union Carbide cannot estimate the full range of the cost of resolving pending and future asbestos-related claims facing Union Carbide and Amchem. As a result, it is reasonably possible that an additional cost of disposing of Union Carbide's asbestos-related claims, including future defense and processing costs, could have a material impact on TDCC's results of operations and cash flows for a particular period and on the consolidated financial position.

Dow Silicones Chapter 11 Related Matters
A summary of the Dow Silicones Chapter 11 Related Matters can be found in Note 16 to the Consolidated Financial Statements included in TDCC's Annual Report on Form 10-K for the year ended December 31, 2018.

Introduction
In 1995, Dow Silicones, then a 50:50 joint venture between TDCC and Corning Incorporated ("Corning"), voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in order to resolve Dow Silicones’ breast implant liabilities and related matters (the “Chapter 11 Proceeding”). Dow Silicones emerged from the Chapter 11 Proceeding on June 1, 2004 (the “Effective Date”) and is implementing the Joint Plan of Reorganization (the “Plan”). The Plan provides funding for the resolution of breast implant and other product liability litigation covered by the Chapter 11 Proceeding and provides a process for the satisfaction of commercial creditor claims in the Chapter 11 Proceeding. As of June 1, 2016, Dow Silicones is a wholly owned subsidiary of TDCC.

Breast Implant and Other Product Liability Claims
Under the Plan, a product liability settlement program administered by an independent claims office (the “Settlement Facility”) was created to resolve breast implant and other product liability claims. Product liability claimants rejecting the settlement program in favor of pursuing litigation must bring suit against a litigation facility (the “Litigation Facility”). Dow Silicones has an obligation

21

to fund the Settlement Facility and the Litigation Facility over a 16-year period, commencing at the Effective Date. At March 31, 2019 , Dow Silicones and its insurers have made life-to-date payments of $1,762 million to the Settlement Facility and the Settlement Facility reported an unexpended balance of $110 million .

Dow Silicones' liability for breast implant and other product liability claims ("Implant Liability") was $263 million at  March 31, 2019 and December 31, 2018 , of which $157 million at  March 31, 2019 ( $111 million at December 31, 2018 ) was included in “Accrued and other current liabilities” and $106 million at  March 31, 2019 ( $152 million at December 31, 2018 ) was included in "Other noncurrent obligations" in the consolidated balance sheets. Dow Silicones is not aware of circumstances that would change the factors used in estimating the Implant Liability and believes the recorded liability reflects the best estimate of the remaining funding obligations under the Plan; however, the estimate relies upon a number of significant assumptions, including: future claim filing levels in the Settlement Facility will be similar to those in a prior settlement program, which management uses to estimate future claim filing levels for the Settlement Facility; future acceptance rates, disease mix, and payment values will be materially consistent with historical experience; no material negative outcomes in future controversies or disputes over Plan interpretation will occur; and the Plan will not be modified. If actual outcomes related to any of these assumptions prove to be materially different, the future liability to fund the Plan may be materially different than the amount estimated. If Dow Silicones was ultimately required to fund the full liability up to the maximum capped value, the liability would be $2,148 million at March 31, 2019 .

Commercial Creditor Issues
The Plan provides that each of Dow Silicones' commercial creditors (the “Commercial Creditors”) would receive in cash the sum of (a) an amount equal to the principal amount of their claims and (b) interest on such claims. The actual amount of interest that will ultimately be paid to these Commercial Creditors is uncertain due to pending litigation between Dow Silicones and the Commercial Creditors regarding the appropriate interest rates to be applied to outstanding obligations from the 1995 bankruptcy filing date through the Effective Date, as well as the presence of any recoverable fees, costs and expenses. Upon the Plan becoming effective, Dow Silicones paid approximately $1,500 million to the Commercial Creditors, representing principal and an amount of interest that Dow Silicones considers undisputed.

On May 10, 2017, the U.S. District Court for the Eastern District of Michigan entered a stipulated order resolving pending discovery motions and established a discovery schedule for the Commercial Creditors matter. As a result, Dow Silicones and its third party consultants conducted further analysis of the Commercial Creditors claims and defenses. This analysis indicated the estimated remaining liability to Commercial Creditors to be within a range of $77 million to $260 million . No single amount within the range appeared to be a better estimate than any other amount within the range. Therefore, Dow Silicones recorded the minimum liability within the range. At March 31, 2019 , the liability related to Dow Silicones' potential obligation to its Commercial Creditors in the Chapter 11 Proceeding was $83 million and is included in "Accrued and other current liabilities" in the consolidated balance sheets ( $82 million at December 31, 2018 ). The actual amount of interest that will be paid to these creditors is uncertain and will ultimately be resolved through continued proceedings in the District Court.

Indemnifications
In connection with the June 1, 2016, ownership restructure of Dow Silicones, TDCC is indemnified by Corning for 50  percent of future losses associated with certain pre-closing liabilities, including the Implant Liability and Commercial Creditors matters described above, subject to certain conditions and limits. The maximum amount of indemnified losses which may be recovered are subject to a cap that declines over time. Indemnification assets were insignificant at March 31, 2019 ( zero at December 31, 2018).

Summary
The amounts recorded by Dow Silicones for the Chapter 11 related matters described above were based on current, known facts, which management believes reflect reasonable and probable estimates of the liability. However, future events could cause the actual costs for Dow Silicones to be higher or lower than those projected or those recorded. Any such events could result in an increase or decrease in the recorded liability.

Other Litigation Matters
In addition to the specific matters described above, TDCC is party to a number of other claims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, employment matters, governmental tax and regulation disputes, contract and commercial litigation, and other actions. Certain of these actions purport to be class actions and seek damages in very large amounts. All such claims are being contested. TDCC has an active risk management program consisting of numerous insurance policies secured from many carriers at various times. These policies may provide coverage that could be utilized to minimize the financial impact, if any, of certain contingencies described above. It is the opinion of TDCC’s management that the possibility is remote that the aggregate of all such other claims and lawsuits will have a material adverse impact on the results of operations, financial condition and cash flows of TDCC.

22

Gain Contingency - TDCC v. Nova Chemicals Corporation Patent Infringement Matter
On December 9, 2010, TDCC filed suit in the Federal Court in Ontario, Canada ("Federal Court") alleging that Nova Chemicals Corporation ("Nova") was infringing TDCC's Canadian polyethylene patent 2,106,705. Nova counterclaimed on the grounds of invalidity and non-infringement. On June 29, 2017, the Federal Court issued a Confidential Supplemental Judgment, concluding that Nova must pay $645 million Canadian dollars (equivalent to $495 million U.S. dollars) to TDCC, plus pre- and post-judgment interest, for which TDCC received payment of $501 million from Nova on July 6, 2017. Although Nova is appealing portions of the damages judgment, certain portions of it are indisputable and will be owed to TDCC regardless of the outcome of any further appeals by Nova. At March 31, 2019 , TDCC had $341 million ( $341 million at December 31, 2018 ) included in "Other noncurrent obligations" in the consolidated balance sheets related to the disputed portion of the damages judgment. TDCC is confident of its chances of defending the entire judgment on appeal, particularly the trial court's determinations on important factual issues, which will be accorded deferential review on appeal. See Note 16 to the Consolidated Financial Statements included in TDCC's Annual Report on Form 10-K for the year ended December 31, 2018 for additional information.

Guarantees
The following table provides a summary of the final expiration, maximum future payments and recorded liability reflected in the consolidated balance sheets for guarantees:

Guarantees
Mar 31, 2019
Dec 31, 2018
In millions
Final
Expiration
Maximum 
Future Payments
Recorded  
Liability  
Final
Expiration
Maximum 
Future Payments
Recorded  
Liability  
Guarantees
2023
$
4,514

$
15

2023
$
4,523

$
25


Guarantees
Guarantees arise during the ordinary course of business from relationships with customers and nonconsolidated affiliates when TDCC undertakes an obligation to guarantee the performance of others (via delivery of cash or other assets) if specified triggering events occur. With guarantees, such as commercial or financial contracts, non-performance by the guaranteed party triggers the obligation of TDCC to make payments to the beneficiary of the guarantee. The majority of TDCC’s guarantees relate to debt of nonconsolidated affiliates, which have expiration dates ranging from less than one year to less than four years, and trade financing transactions in Latin America, which typically expire within one year of inception. TDCC’s current expectation is that future payment or performance related to the non-performance of others is considered remote.

TDCC has entered into guarantee agreements ("Guarantees") related to project financing for Sadara Chemical Company ("Sadara"), a nonconsolidated affiliate. The total of an Islamic bond and additional project financing (collectively “Total Project Financing”) obtained by Sadara is approximately $12.5 billion . Sadara had $11.7 billion of Total Project Financing outstanding at March 31, 2019 ( $11.7 billion at December 31, 2018 ). TDCC's guarantee of the Total Project Financing is in proportion to TDCC's 35 percent ownership interest in Sadara, or up to approximately $4.2 billion when the project financing is fully drawn. Sadara successfully completed an extensive operational testing program in December 2018, however, the Guarantees will be released upon the satisfactory fulfillment of certain project completion conditions, which is expected by the middle of 2019, and must occur no later than December 2020.


NOTE 11 - LEASES
Operating lease ROU assets are included in "Operating lease right-of-use assets" while finance lease ROU assets are included in "Net property" in the consolidated balance sheets. With respect to lease liabilities, operating lease liabilities are included in "Operating lease liabilities - current" and "Operating lease liabilities - noncurrent," and finance lease liabilities are included in "Long-term debt due within one year" and "Long-Term Debt" in the consolidated balance sheets.

TDCC routinely leases sales and administrative offices, power plants, production facilities, warehouses and tanks for product storage, aircraft, motor vehicles, railcars, computers, office machines and equipment. Some leases contain renewal provisions, purchase options and escalation clauses and the terms for these leased assets vary depending on the lease agreement. These leased assets have remaining lease terms that currently range from 1  to 50 years . See Notes  1  and 2 for additional information on leases.

23

The components of lease cost for operating and finance leases for the three months ended March 31, 2019 were as follows:

Lease Cost
Three Months Ended
Mar 31, 2019
In millions
Operating lease cost
$
147

Finance lease cost
 
Amortization of right-of-use assets - finance
6

Interest on lease liabilities - finance
6

Total finance lease cost
$
12

Short-term lease cost
55

Variable lease cost
85

Sublease income
(1
)
Total lease cost
$
298


The following table provides supplemental cash flow information related to leases:

Other Lease Information
Three Months Ended
Mar 31, 2019
In millions
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
154

Operating cash flows from finance leases
$
6

Financing cash flows from finance leases
$
3


The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at March 31, 2019 :

Lease Position
Balance Sheet Classification
Mar 31, 2019
In millions
Right-of-use assets obtained in exchange for lease obligations:
 
 
Operating leases 1
 
$
2,714

Assets
 
 
Operating lease assets
Operating lease right-of-use assets
$
2,584

Finance lease assets
Property
437

Finance lease amortization
Accumulated depreciation
(143
)
Total lease assets
 
$
2,878

Liabilities
 
 
Current
 
 
Operating
Operating lease liabilities - current
$
477

Finance
Long-term debt due within one year
20

Noncurrent
 
 
Operating
Operating lease liabilities - noncurrent
2,126

Finance
Long-Term Debt
349

Total lease liabilities
 
$
2,972

1.
Includes $2.7 billion related to the adoption of Topic 842. See Note 2 for additional information.


24

Lease Term and Discount Rate
Mar 31, 2019
Weighted-average remaining lease term
 
Operating leases
8.7 years

Finance leases
18.7 years

Weighted-average discount rate
 
Operating leases
4.12
%
Finance leases
6.98
%

The following table provides the maturities of lease liabilities at March 31, 2019 :

Maturities of Lease Liabilities at Mar 31, 2019
Operating Leases
Finance Leases
In millions
2019
$
437

$
38

2020
515

48

2021
421

46

2022
343

44

2023
291

71

2024 and thereafter
1,157

309

Total future undiscounted lease payments
$
3,164

$
556

Less imputed interest
561

187

Total present value of lease liabilities
$
2,603

$
369


At March 31, 2019 , TDCC had additional leases of approximately $45 million , primarily for buildings and equipment, which had not yet commenced. These leases are expected to commence later in 2019, with lease terms of 10 years .

Future minimum lease payments for operating leases accounted for under ASC 840, "Leases," with remaining non-cancelable terms in excess of one year at December 31, 2018 were as follows:

Minimum Lease Commitments at Dec 31, 2018
 
In millions
 
2019
$
412

2020
369

2021
328

2022
297

2023
253

2024 and thereafter
978

Total
$
2,637


TDCC provides guarantees related to certain leased assets, specifying the residual value that will be available to the lessor at lease termination through the sale of the assets to the lessee or third parties. The following table provides a summary of the final expiration, maximum future payment and recorded liability reflected in the consolidated balance sheets for residual value guarantees at March 31, 2019 and December 31, 2018. There was no recorded liability related to these residual value guarantees at March 31, 2019 , as payment of such residual value guarantees was not determined to be probable. The lease agreements do not contain any material restrictive covenants.

Lease Guarantees
March 31, 2019
December 31, 2018
In millions
Final Expiration
Maximum Future Payments
Recorded Liability
Final Expiration
Maximum Future Payments
Recorded Liability
Residual value guarantees
2028
$
885

$
—

2028
$
885

$
130




25

NOTE 12 – STOCKHOLDERS' EQUITY
Dow Inc.
Common Stock
Dow Inc. was incorporated in 2018 with 100 authorized and issued shares of common stock, par value $0.01 per share, owned solely by its parent company, DowDuPont. In the first quarter of 2019, in connection with the separation and distribution of DowDuPont’s materials science business, the number of authorized shares of common stock was increased to 5,000,000,000 shares, par value $0.01 per share, and Dow Inc.'s 100 shares of issued common stock were recapitalized into 748,771,240 shares of common stock. Dow Inc.'s common stock continued to be solely owned by DowDuPont at March 31, 2019. See Note 19 for additional information.

TDCC
Accumulated Other Comprehensive Loss
The following table summarizes the changes and after-tax balances of each component of AOCL for the three months ended March 31, 2019 and 2018 :

Accumulated Other Comprehensive Loss
Unrealized Gains (Losses) on Investments
Cumulative Translation Adj
Pension and Other Postretire Benefits
Derivative Instruments
Total Accum Other Comp Loss
In millions
Balance at Jan 1, 2018
$
17

$
(1,481
)
$
(6,998
)
$
(109
)
$
(8,571
)
Other comprehensive income (loss) before reclassifications
(26
)
376

—

(16
)
334

Amounts reclassified from accumulated other comprehensive income (loss)
1

—

126

22

149

Net other comprehensive income (loss)
$
(25
)
$
376

$
126

$
6

$
483

Balance at Mar 31, 2018
$
(8
)
$
(1,105
)
$
(6,872
)
$
(103
)
$
(8,088
)
 
 
 
 
 
 
Balance at Jan 1, 2019
$
(51
)
$
(1,813
)
$
(7,965
)
$
(56
)
$
(9,885
)
Other comprehensive income (loss) before reclassifications
68

(13
)
—

(68
)
(13
)
Amounts reclassified from accumulated other comprehensive loss
(1
)
(18
)
141

(7
)
115

Net other comprehensive income (loss)
$
67

$
(31
)
$
141

$
(75
)
$
102

Balance at Mar 31, 2019
$
16

$
(1,844
)
$
(7,824
)
$
(131
)
$
(9,783
)

The tax effects on the net activity related to each component of other comprehensive income (loss) for the three months ended March 31, 2019 and 2018 were as follows:

Tax Benefit (Expense) 1
Three Months Ended
In millions
Mar 31, 2019
Mar 31, 2018
Unrealized gains (losses) on investments
$
(18
)
$
6

Cumulative translation adjustments
(1
)
5

Pension and other postretirement benefit plans
(25
)
(28
)
Derivative instruments
27

3

Tax expense from income taxes related to other comprehensive income (loss) items
$
(17
)
$
(14
)
1.
Prior period amounts were updated to conform with the current year presentation.


26

A summary of the reclassifications out of AOCL for the three months ended March 31, 2019 and 2018 is provided as follows:

Reclassifications Out of Accumulated Other Comprehensive Loss
Three Months Ended
Consolidated Statements of Income Classification
Mar 31, 2019
Mar 31, 2018
In millions
Unrealized (gains) losses on investments
$
(1
)
$
2

See (1) below
   Tax benefit
—

(1
)
See (2) below
   After tax
$
(1
)
$
1

 
Cumulative translation adjustments
$
(18
)
$
—

See (3) below
Pension and other postretirement benefit plans
$
166

$
154

See (4) below
   Tax benefit
(25
)
(28
)
See (2) below
   After tax
$
141

$
126

 
Derivative instruments
$
(7
)
$
27

See (5) below
   Tax benefit
—

(5
)
See (2) below
   After tax
$
(7
)
$
22

 
Total reclassifications for the period, after tax
$
115

$
149

 
1.
"Net sales" and "Sundry income (expense) - net."
2.
"Provision for income taxes."
3.
"Sundry income (expense) - net."
4.
These AOCL components are included in the computation of net periodic benefit cost of TDCC's defined benefit pension and other postretirement benefit plans. See Note 14 for additional information.
5.
"Cost of sales," "Sundry income (expense) - net" and "Interest expense and amortization of debt discount."


NOTE 13 – NONCONTROLLING INTERESTS
Ownership interests in TDCC's subsidiaries held by parties other than TDCC are presented separately from TDCC's equity in the consolidated balance sheets as "Noncontrolling interests." The amount of consolidated net income attributable to TDCC and the noncontrolling interests are both presented on the face of the consolidated statements of income.

The following table summarizes the activity for equity attributable to noncontrolling interests for the three months ended March 31, 2019 and 2018 :

Noncontrolling Interests
Three Months Ended

In millions
Mar 31, 2019
Mar 31, 2018
Balance at beginning of period
$
1,138

$
1,186

Net income attributable to noncontrolling interests
45

35

Distributions to noncontrolling interests
(9
)
(24
)
Cumulative translation adjustments
7

(6
)
Other
(1
)
(1
)
Balance at end of period
$
1,180

$
1,190





27

NOTE 14 – PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
A summary of TDCC's pension plans and other postretirement benefits can be found in Note 19 to the Consolidated Financial Statements included in TDCC’s Annual Report on Form 10-K for the year ended December 31, 2018 . The following table provides the components of TDCC's net periodic benefit cost for all significant plans:

Net Periodic Benefit Cost for All Significant Plans
Three Months Ended
In millions
Mar 31,
2019
Mar 31,
2018
Defined Benefit Pension Plans:
 
 
Service cost
$
112

$
133

Interest cost
241

218

Expected return on plan assets
(417
)
(406
)
Amortization of prior service credit
(6
)
(6
)
Amortization of net loss
132

171

Net periodic benefit cost
$
62

$
110

 
 
 
Other Postretirement Benefits:
 
 
Service cost
$
2

$
3

Interest cost
14

11

Amortization of net gain
(6
)
(6
)
Net periodic benefit cost
$
10

$
8


Net periodic benefit cost, other than the service cost component, is included in "Sundry income (expense) - net" in the consolidated statements of income.



28

NOTE 15 – FINANCIAL INSTRUMENTS
A summary of TDCC's financial instruments, risk management policies, derivative instruments and hedging activities can be found in Note 21 of the Consolidated Financial Statements included in TDCC's Annual Report on Form 10-K for the year ended December 31, 2018 . If applicable, updates have been included in the respective section below.

The following table summarizes the fair value of financial instruments at March 31, 2019 and December 31, 2018 :

Fair Value of Financial Instruments
Mar 31, 2019
Dec 31, 2018
In millions
Cost
Gain
Loss
Fair Value
Cost
Gain
Loss
Fair Value
Cash equivalents
$
345

$
—

$
—

$
345

$
566

$
—

$
—

$
566

Marketable securities
$
101

$
—

$
—

$
101

$
100

$
—

$
—

$
100

Other investments:
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
Government debt 1
$
694

$
17

$
(9
)
$
702

$
714

$
9

$
(23
)
$
700

Corporate bonds
1,051

43

(21
)
1,073

1,026

20

(63
)
983

Total debt securities
$
1,745

$
60

$
(30
)
$
1,775

$
1,740

$
29

$
(86
)
$
1,683

Equity securities 2
16

5

—

21

16

1

(1
)
16

Total other investments
$
1,761

$
65

$
(30
)
$
1,796

$
1,756

$
30

$
(87
)
$
1,699

Total cash equivalents, marketable securities and other investments
$
2,207

$
65

$
(30
)
$
2,242

$
2,422

$
30

$
(87
)
$
2,365

Long-term debt including debt due within one year 3
$
(19,529
)
$
84

$
(1,405
)
$
(20,850
)
$
(19,594
)
$
351

$
(971
)
$
(20,214
)
Derivatives relating to:
 
 
 
 
 
 
 
 
Interest rates
$
—

$
—

$
(181
)
$
(181
)
$
—

$
—

$
(64
)
$
(64
)
Foreign currency
—

86

(14
)
72

—

120

(43
)
77

Commodities 4
—

88

(147
)
(59
)
—

91

(178
)
(87
)
Total derivatives
$
—

$
174

$
(342
)
$
(168
)
$
—

$
211

$
(285
)
$
(74
)
1. U.S. Treasury obligations, U.S. agency obligations, agency mortgage-backed securities and other municipalities’ obligations.
2.
Equity securities with a readily determinable fair value.
3.
Cost includes fair value hedge adjustments of $17 million at March 31, 2019 and $18 million at December 31, 2018 on $2,290 million of debt at March 31, 2019 and December 31, 2018 .
4.
Presented net of cash collateral where master netting arrangements allow.

Debt Securities
TDCC's investments in debt securities are primarily classified as available-for-sale. The following table provides the investing results from available-for-sale securities for the three months ended March 31, 2019 and 2018 :

Investing Results
Three Months Ended
In millions
Mar 31,
2019
Mar 31,
2018
Proceeds from sales of available-for-sale securities
$
159

$
348

Gross realized gains
$
6

$
7

Gross realized losses
$
(5
)
$
(9
)

Equity Securities
TDCC’s investments in equity securities with a readily determinable fair value totaled $21 million at March 31, 2019 ( $16 million at December 31, 2018 ). The aggregate carrying value of TDCC’s investments in equity securities where fair value is not readily determinable totaled $207 million at March 31, 2019 ( $206 million at December 31, 2018 ), reflecting the carrying value of the investments. There were no adjustments to the carrying value of the not readily determinable investments for impairment or observable price changes for the three months ended March 31, 2019 and 2018 . The net unrealized gain recognized in earnings on equity securities totaled $5 million for the three months ended March 31, 2019 ( $9 million net unrealized gain for the three months ended March 31, 2018 ).


29

Derivatives
The following tables provide the fair value and balance sheet classification of derivative instruments at March 31, 2019 and December 31, 2018 :

Fair Value of Derivative Instruments
Mar 31, 2019
In millions
Balance Sheet Classification
Gross
Counterparty and Cash Collateral Netting 1
Net Amounts Included in the Consolidated Balance Sheet
Asset derivatives:
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
Foreign currency contracts
Other current assets
$
161

$
(89
)
$
72

Commodity contracts
Other current assets
31

(5
)
26

Commodity contracts
Deferred charges and other assets
57

(4
)
53

Total
 
$
249

$
(98
)
$
151

Derivatives not designated as hedging instruments:
 
 
 
 
Foreign currency contracts
Other current assets
$
29

$
(15
)
$
14

Commodity contracts
Other current assets
8

(1
)
7

Commodity contracts
Deferred charges and other assets
4

(2
)
2

Total
 
$
41

$
(18
)
$
23

Total asset derivatives
 
$
290

$
(116
)
$
174

 
 
 
 
 
Liability derivatives:
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
Interest rate swaps
Other noncurrent obligations
$
181

$
—

$
181

Foreign currency contracts
Accrued and other current liabilities
98

(89
)
9

Commodity contracts
Accrued and other current liabilities
93

(6
)
87

Commodity contracts
Other noncurrent obligations
60

(8
)
52

Total
 
$
432

$
(103
)
$
329

Derivatives not designated as hedging instruments:
 
 
 
 
Foreign currency contracts
Accrued and other current liabilities
$
20

$
(15
)
$
5

Commodity contracts
Accrued and other current liabilities
8

(4
)
4

Commodity contracts
Other noncurrent obligations
7

(3
)
4

Total
 
$
35

$
(22
)
$
13

Total liability derivatives
 
$
467

$
(125
)
$
342

1.
Counterparty and cash collateral amounts represent the estimated net settlement amount when applying netting and set-off rights included in master netting arrangements between TDCC and its counterparties and the payable or receivable for cash collateral held or placed with the same counterparty.





30

Fair Value of Derivative Instruments
Dec 31, 2018
In millions
Balance Sheet Classification
Gross
Counterparty and Cash Collateral Netting 1
Net Amounts Included in the Consolidated Balance Sheet
Asset derivatives:
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
Foreign currency contracts
Other current assets
$
98

$
(42
)
$
56

Commodity contracts
Other current assets
47

(13
)
34

Commodity contracts
Deferred charges and other assets
18

(3
)
15

Total
 
$
163

$
(58
)
$
105

Derivatives not designated as hedging instruments:
 
 
 
 
Foreign currency contracts
Other current assets
$
128

$
(64
)
$
64

Commodity contracts
Other current assets
41

(1
)
40

Commodity contracts
Deferred charges and other assets
4

(2
)
2

Total
 
$
173

$
(67
)
$
106

Total asset derivatives
 
$
336

$
(125
)
$
211

 
 
 
 
 
Liability derivatives:
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
Interest rate swaps
Other noncurrent obligations
$
64

$
—

$
64

Foreign currency contracts
Accrued and other current liabilities
46

(42
)
4

Commodity contracts
Accrued and other current liabilities
111

(18
)
93

Commodity contracts
Other noncurrent obligations
86

(9
)
77

Total
 
$
307

$
(69
)
$
238

Derivatives not designated as hedging instruments:
 
 
 
 
Foreign currency contracts
Accrued and other current liabilities
$
103

$
(64
)
$
39

Commodity contracts
Accrued and other current liabilities
7

(4
)
3

Commodity contracts
Other noncurrent obligations
8

(3
)
5

Total
 
$
118

$
(71
)
$
47

Total liability derivatives
 
$
425

$
(140
)
$
285

1.
Counterparty and cash collateral amounts represent the estimated net settlement amount when applying netting and set-off rights included in master netting arrangements between TDCC and its counterparties and the payable or receivable for cash collateral held or placed with the same counterparty.

Assets and liabilities related to forward contracts, interest rate swaps, currency swaps, options and other conditional or exchange contracts executed with the same counterparty under a master netting arrangement are netted. Collateral accounts are netted with corresponding assets or liabilities, when applicable. TDCC posted cash collateral of $20 million at March 31, 2019 ( $26 million at December 31, 2018 ). There was no counterparty cash collateral posted with TDCC at March 31, 2019 ( $34 million at December 31, 2018 ).

Net Foreign Investment Hedges
For derivative instruments that are designated and qualify as net foreign investment hedges, the effective portion of the gain or loss on the derivative is included in “Cumulative Translation Adjustments” in AOCL. TDCC had outstanding foreign-currency denominated debt designated as a hedge of net foreign investment of $181 million at March 31, 2019 ( $182 million at December 31, 2018 ). The results of hedges of TDCC’s net investment in foreign operations included in “Cumulative Translation Adjustments” in AOCL was a net loss of $36 million after tax for the three months ended March 31, 2019 (net loss of $43 million after tax for the three months ended March 31, 2018 ). For the three months ended March 31, 2019 , TDCC recognized after tax gains of $86 million related to excluded components of net foreign investment hedges included in “Cumulative Translation Adjustments” in AOCL. For the three months ended March 31, 2019 , gains of $25 million were amortized to “Sundry income (expense) - net” in the consolidated statements of income.


31

Fair Value Hedges
Subsequent to March 31, 2019 , TDCC entered into interest rate contracts designated as a fair value hedge of underlying fixed rate debt obligations with maturity dates extending through 2048.

Income Statement Effect of Derivative Instruments
Foreign currency derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency denominated assets and liabilities. The amount charged on a pretax basis related to foreign currency derivatives not designated as a hedge, which was included in “Sundry income (expense) - net” in the consolidated statements of income, was a gain of $31 million for the three months ended March 31, 2019 (loss of $17 million for the three months ended March 31, 2018 ). The income statement effects of other derivatives were immaterial.

Reclassification from AOCL
The net after-tax amounts to be reclassified from AOCL to income within the next 12 months are a $1 million gain for interest rate contracts, a $42 million loss for commodity contracts, a $11 million gain for foreign currency contracts and a $57 million gain for excluded components.


NOTE 16 – FAIR VALUE MEASUREMENTS
A summary of TDCC's recurring and nonrecurring fair value measurements can be found in Note 22 to the Consolidated Financial Statements included in TDCC's Annual Report on Form 10-K for the year ended December 31, 2018 . If applicable, updates have been included in the respective section below.

Fair Value Measurements on a Recurring Basis
The following tables summarize the bases used to measure certain assets and liabilities at fair value on a recurring basis:
Basis of Fair Value Measurements on a Recurring Basis
Mar 31, 2019
Dec 31, 2018
Quoted Prices in Active Markets for Identical Items
(Level 1)
Significant Other Observable Inputs
(Level 2)
Total  
Quoted Prices in Active Markets for Identical Items
(Level 1)
Significant Other Observable Inputs
(Level 2)
Total  
In millions
Assets at fair value:
 
 
 
 
 
 
Cash equivalents 1
$
—

$
345

$
345

$
—

$
566

$
566

Marketable securities
—

101

101

—

100

100

Equity securities 2
21

—

21

16

—

16

Debt securities: 2
 
 
 
 
 
 
Government debt 3
—

702

702

—

700

700

Corporate bonds
19

1,054

1,073

—

983

983

Derivatives relating to: 4
 
 
 
 
 
 
Foreign currency
—

189

189

—

226

226

Commodities
10

90

100

17

93

110

Total assets at fair value
$
50

$
2,481

$
2,531

$
33

$
2,668

$
2,701

Liabilities at fair value:
 
 
 
 
 
 
Long-term debt including debt due within one year 5
$
—

$
20,850

$
20,850

$
—

$
20,214

$
20,214

Derivatives relating to: 4
 
 
 
 
 
 
Interest rates
—

181

181

—

64

64

Foreign currency
—

117

117

—

149

149

Commodities
13

155

168

23

189

212

Total liabilities at fair value
$
13

$
21,303

$
21,316

$
23

$
20,616

$
20,639

1.
Treasury bills, time deposits, and money market funds included in "Cash and cash equivalents" in the consolidated balance sheets and held at amortized cost, which approximates fair value.
2.
TDCC’s investments in debt securities, which are primarily available-for-sale, and equity securities are included in “Other investments” in the consolidated balance sheets.
3.
U.S. Treasury obligations, U.S. agency obligations, agency mortgage-backed securities and other municipalities’ obligations.
4.
See Note  15 for the classification of derivatives in the consolidated balance sheets.
5.
See Note 15 for information on fair value measurements of long-term debt.

32

For equity securities calculated at net asset value per share (or its equivalent), TDCC had $121 million in private market securities and $29 million in real estate at March 31, 2019 ( $120 million in private market securities and $29 million in real estate at December 31, 2018 ). There are no redemption restrictions and the unfunded commitments on these investments were $87 million at March 31, 2019 ( $89 million at December 31, 2018 ).

Fair Value Measurements on a Nonrecurring Basis
As part of the Synergy Program, TDCC has or will shut down a number of manufacturing, R&D and corporate facilities around the world. In the first three months of 2019, inventory associated with this plan was written down to zero. In addition, impairments of leased, non-manufacturing facilities, which were classified as Level 3 measurements, resulted in a write-down of right-of-use assets to $80 million using unobservable inputs. The impairment charges related to the Synergy Program, totaling $100 million , were included in "Restructuring and asset related charges - net" in the consolidated statements of income. See Note  4  for additional information on TDCC's restructuring activities.


NOTE 17 – VARIABLE INTEREST ENTITIES
A summary of TDCC's variable interest entities ("VIEs") can be found in Note 23 to the Consolidated Financial Statements included in TDCC’s Annual Report on Form 10-K for the year ended December 31, 2018 .

Assets and Liabilities of Consolidated VIEs
TDCC's consolidated financial statements include the assets, liabilities and results of operations of VIEs for which TDCC is the primary beneficiary. The other equity holders’ interests are reflected in “Net income attributable to noncontrolling interests” in the consolidated statements of income and "Noncontrolling interests" in the consolidated balance sheets.

The following table summarizes the carrying amounts of these entities' assets and liabilities included in TDCC’s consolidated balance sheets at March 31, 2019 and December 31, 2018 :

Assets and Liabilities of Consolidated VIEs
Mar 31,
2019
Dec 31,
2018
In millions
Cash and cash equivalents
$
109

$
82

Other current assets
116

114

Net property
718

734

Other noncurrent assets
60

45

Total assets 1
$
1,003

$
975

Current liabilities
$
318

$
334

Long-term debt
43

75

Other noncurrent obligations
46

31

Total liabilities 2
$
407

$
440

1.
All assets were restricted at March 31, 2019 and December 31, 2018 .
2.
All liabilities were nonrecourse at March 31, 2019 and December 31, 2018 .

Amounts presented in the consolidated balance sheets and the table above as restricted assets or nonrecourse obligations relating to consolidated VIEs at March 31, 2019 and December 31, 2018 , are adjusted for intercompany eliminations and parental guarantees.

Subsequent Event
TDCC is a 50 percent indirect owner in a propylene oxide ("PO") manufacturing joint venture in Asia Pacific. TDCC has a variable interest in this joint venture relating to arrangements between the joint venture and TDCC, involving the majority of the output on take-or-pay terms with pricing ensuring a guaranteed return to the joint venture. On April 30, 2019, TDCC executed an agreement to acquire full ownership in the PO manufacturing joint venture for an estimated cash purchase price of $312 million , with an expected closing date in the fourth quarter of 2019.

33

Nonconsolidated VIEs
The following table summarizes the carrying amounts of assets and liabilities included in the consolidated balance sheets at March 31, 2019 and December 31, 2018 , related to variable interests in joint ventures or entities for which TDCC is not the primary beneficiary. TDCC's maximum exposure to loss is the same as the carrying amounts, unless otherwise noted below.

Carrying Amounts of Assets and Liabilities Related to Nonconsolidated VIEs
 
Mar 31,
2019
Dec 31,
2018
In millions
Description of asset or liability
Hemlock Semiconductor L.L.C.
Equity method investment 1
$
(658
)
$
(495
)
Silicon joint ventures
Equity method investments 2
$
96

$
100

AgroFresh Solutions, Inc.
Equity method investment 2
$
45

$
48

Other receivable 3
$
8

$
8

1.
Classified as "Other noncurrent obligations" in the consolidated balance sheets. TDCC's maximum exposure to loss was zero at March 31, 2019 ( zero at December 31, 2018 ).
2.
Classified as "Investment in nonconsolidated affiliates" in the consolidated balance sheets.
3.
Classified as "Accounts and notes receivable - Other" in the consolidated balance sheets.


NOTE 18 – RELATED PARTY TRANSACTIONS
From the Merger date through March 31, 2019, TDCC reported transactions with DowDuPont and DuPont and its affiliates as related party transactions.

DowDuPont
Pursuant to the Merger Agreement, TDCC committed to fund a portion of DowDuPont's dividends paid to common stockholders and certain governance expenses. In addition, share repurchases by DowDuPont were partially funded by TDCC through 2018. Funding was accomplished through intercompany loans. On a quarterly basis, TDCC's Board reviewed and determined a dividend distribution to DowDuPont to settle the intercompany loans. The dividend distribution considered the level of TDCC’s earnings and cash flows and the outstanding intercompany loan balances. For the three months ended March 31, 2019 , TDCC declared and paid dividends to DowDuPont of $535 million ( $1,057 million for the three months ended March 31, 2018). At March 31, 2019 , TDCC's outstanding intercompany loan balance was zero (insignificant at December 31, 2018 ). In addition, at March 31, 2019 , TDCC had a receivable related to a tax sharing agreement with DowDuPont of $89 million ( $89 million at December 31, 2018 ), included in "Accounts and notes receivable - Other" in the consolidated balance sheets.

DuPont and its Affiliates
TDCC sells to and procures from DuPont and its affiliates certain feedstocks, energy and raw materials that are consumed in each company's manufacturing process. In addition, TDCC and DuPont have tolling arrangements and recognize product sales for agriculture products. The following table presents amounts due to or due from DuPont and its affiliates:

Balances Due To or Due From DuPont and its Affiliates
Mar 31, 2019
Dec 31, 2018
In millions
Accounts and notes receivable - Other
$
201

$
288

Accounts payable - Other
$
112

$
201


The following table presents revenue earned and expenses incurred related to transactions with DuPont and its affiliates:

Sales to DuPont and its Affiliates
Three Months Ended
In millions
Mar 31, 2019
Mar 31, 2018
Net sales
$
106

$
43

Cost of sales
$
65

$
26


TDCC also transferred certain feedstocks and energy to DuPont at cost which totaled $82 million for the three months ended March 31, 2019 ( $79 million for the three months ended March 31, 2018), and was reflected in "Cost of sales" in the consolidated statements of income.

Purchases from DuPont and its affiliates were $115 million for the three months ended March 31, 2019 ( $44 million for the three months ended March 31, 2018).

34

NOTE 19 – SUBSEQUENT EVENT
Separation from DowDuPont
On April 1, 2019, DowDuPont completed the previously announced separation of its materials science business. The separation was effected by way of a pro rata distribution of all of the then-issued and outstanding shares of Dow Inc. common stock to DowDuPont stockholders of record as of the close of business, Eastern Time, on March 21, 2019 (the “Record Date”). The shareholders of record of DowDuPont received one share of Dow Inc. common stock, par value $0.01 per share, for every three shares of DowDuPont common stock, par value $0.01 per share, held as of the Record Date. No fractional shares of Dow Inc. common stock were issued. Instead, cash in lieu of any fractional shares was paid to DowDuPont registered shareholders. The number of shares of Dow Inc. common stock issued on April 1, 2019 was 748.8 million shares. Dow Inc. is now an independent, publicly traded company and Dow Inc. common stock is listed on the New York Stock Exchange under the symbol “DOW.” Dow Inc. common stock began regular-way trading on April 2, 2019, the first day following the distribution.

Effective April 1, 2019, TDCC became a wholly owned subsidiary of Dow Inc. As of the effective date and time of the distribution, DowDuPont does not beneficially own any equity interest in Dow and will no longer consolidate Dow and its consolidated subsidiaries into its financial results. Beginning in the second quarter of 2019, Dow’s consolidated financial results will reflect the results of Dow Inc. and its consolidated subsidiaries - that is, TDCC after giving effect to the distribution of TDCC’s agricultural sciences business (“AgCo”) and TDCC’s specialty products business (“SpecCo”) and the receipt of DuPont’s ethylene and ethylene copolymers businesses (other than its ethylene acrylic elastomers business) (“ECP”). The consolidated financial results of Dow for periods prior to April 1, 2019, will reflect the distribution of AgCo and SpecCo as discontinued operations for each period presented as well as reflect the receipt of ECP as a common control transaction from the closing of the Merger on August 31, 2017.

On April 1, 2019, Dow Inc. received a cash contribution of $2,024 million from DowDuPont as part of the internal reorganization and business realignment steps between Dow Inc., TDCC and DowDuPont.

In connection with the separation, Dow Inc. entered into certain agreements with DowDuPont and/or Corteva, a subsidiary of DowDuPont which was formed to serve as the parent company for DowDuPont’s agriculture business, including the following: Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement and Intellectual Property Cross-License Agreements. In addition to establishing the terms of the separation, these agreements provide a framework for Dow’s interaction with DowDuPont and Corteva after the separation.

For additional information on the separation of the materials science business, refer to the Current Report on Form 8-K filed by Dow Inc. with the SEC on April 2, 2019, Amendment No. 4 to the Registration Statement on Form 10 ("Form 10") filed by Dow Inc. with the SEC on March 8, 2019, and related filings with the SEC. In addition, a summary of each of the above agreements can be found in the section entitled “Dow’s Relationship with New DuPont and Corteva Following the Distribution,” contained in the information statement filed as Exhibit 99.1 to the Form 10.

Dividends
On April 11, 2019, Dow Inc.’s Board of Directors declared a dividend of $0.70 per share, payable on June 14, 2019, to shareholders of record on May 31, 2019, consistent with its March 7, 2019 action declaring that a cash dividend of $525 million would be paid effective upon separation from DowDuPont.

2019 Stock Incentive Plan
On April 1, 2019, in connection with the separation, Dow Inc. adopted the 2019 Stock Incentive Plan. Subsequent to March 31, 2019, Dow Inc. granted the following stock-based compensation awards to employees and non-employee directors:

•
1.6 million stock options with a weighted-average exercise price of $54.89 and a weighted-average fair value of $7.99  per share;
•
1.7 million restricted stock units with a weighted-average fair value of $54.89 per share; and
•
1.2 million performance stock units with a weighted-average fair value of $57.58 per share.





35

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW
Merger with DuPont
Effective August 31, 2017, pursuant to the merger of equals transaction contemplated by the Agreement and Plan of Merger (the "Merger Agreement"), dated as of December 11, 2015, as amended on March 31, 2017, The Dow Chemical Company and its consolidated subsidiaries (“TDCC”) and E. I. du Pont de Nemours and Company and its consolidated subsidiaries (“DuPont”) each merged with subsidiaries of DowDuPont Inc. (“DowDuPont”) and, as a result, TDCC and DuPont became subsidiaries of DowDuPont (the “Merger”). Subsequent to the Merger, TDCC and DuPont engaged in a series of internal reorganization and realignment steps to realign their businesses into three subgroups: agriculture, materials science and specialty products. Dow Inc. (together with TDCC, “Dow”) was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business.

As a result of Dow Inc.'s Registration Statement on Form 10 becoming effective on March 12, 2019 with the U.S. Securities and Exchange Commission ("SEC"), Dow Inc. is now required to file a Quarterly Report on Form 10-Q. At March 31, 2019, Dow Inc. and TDCC were separate wholly owned subsidiaries of DowDuPont. At March 31, 2019, Dow Inc. was a holding company that did not have subsidiaries or operations. As a result, financial statements of Dow Inc. have not been included in this Quarterly Report on Form 10-Q and, unless otherwise indicated, Management’s Discussion and Analysis of Financial Condition and Results of Operations, relate to TDCC.

From the Merger date and through March 31, 2019, TDCC’s business activities were components of DowDuPont’s business operations. TDCC’s business activities, including the assessment of performance and allocation of resources, were reviewed and managed by DowDuPont. Information used by the chief operating decision maker of TDCC related to TDCC in its entirety. Accordingly, there were no separate reportable business segments for TDCC under Accounting Standards Codification Topic 280 “Segment Reporting” and TDCC's business results have been reported in this Quarterly Report on Form 10-Q as a single operating segment.

From the Merger date and through March 31, 2019, DowDuPont owned all of the common stock of TDCC. Pursuant to General Instruction H(1)(a) and (b) for Form 10-Q “Omission of Information by Certain Wholly-Owned Subsidiaries,” Dow is filing this Quarterly Report on Form 10-Q including required TDCC disclosures with a reduced disclosure format.

Subsequent Event - Separation from DowDuPont
On April 1, 2019, DowDuPont completed the previously announced separation of its materials science business. The separation was effected by way of a pro rata distribution of all of the then-issued and outstanding shares of Dow Inc. common stock to DowDuPont stockholders of record as of the close of business, Eastern Time, on March 21, 2019 (the “Record Date”). The shareholders of record of DowDuPont received one share of Dow Inc. common stock, par value $0.01 per share, for every three shares of DowDuPont common stock, par value $0.01 per share, held as of the Record Date. No fractional shares of Dow Inc. common stock were issued. Instead, cash in lieu of any fractional shares was paid to DowDuPont registered shareholders. The number of shares of Dow Inc. common stock issued on April 1, 2019 was 748.8 million shares. Dow Inc. is now an independent, publicly traded company and Dow Inc. common stock is listed on the New York Stock Exchange under the symbol “DOW.” Dow Inc. common stock began regular-way trading on April 2, 2019, the first day following the distribution.

Effective April 1, 2019, TDCC became a wholly owned subsidiary of Dow Inc. As of the effective date and time of the distribution, DowDuPont does not beneficially own any equity interest in Dow and will no longer consolidate Dow and its consolidated subsidiaries into its financial results. Beginning in the second quarter of 2019, Dow’s consolidated financial results will reflect the results of Dow Inc. and its consolidated subsidiaries - that is, TDCC after giving effect to the distribution of TDCC’s agricultural sciences business (“AgCo”) and TDCC’s specialty products business (“SpecCo”) and the receipt of DuPont’s ethylene and ethylene copolymers businesses (other than its ethylene acrylic elastomers business) (“ECP”). The consolidated financial results of Dow for periods prior to April 1, 2019, will reflect the distribution of AgCo and SpecCo as discontinued operations for each period presented as well as reflect the receipt of ECP as a common control transaction from the closing of the Merger on August 31, 2017. As a result of the future relationship between Dow Inc. and TDCC, the companies are filing a combined report for this Quarterly Report on Form 10-Q.

For additional information on the separation of the materials science business, refer to the Current Report on Form 8-K filed by Dow Inc. with the SEC on April 2, 2019, Amendment No. 4 to the Registration Statement on Form 10 filed by Dow Inc. with the SEC on March 8, 2019, and related filings with the SEC.

36
Table of Contents

Selected Financial Data
Three Months Ended
In millions
Mar 31,
2019
Mar 31,
2018
Net sales
$
13,582

$
14,899

 
 
 
Cost of sales ("COS")
$
10,707

$
11,552

Percent of net sales
78.8
%
77.5
%
 
 
 
Research and development expenses ("R&D")
$
361

$
386

Percent of net sales
2.7
%
2.6
%
 
 
 
Selling, general and administrative expenses ("SG&A")
$
701

$
751

Percent of net sales
5.2
%
5.0
%
 
 
 
Effective tax rate
31.7
%
20.9
%
 
 
 
Net income available for common stockholder
$
541

$
1,342



RESULTS OF OPERATIONS
Net Sales
The following table summarizes sales variances by geographic region from the prior year:

Sales Variances by Geographic Region
Three Months Ended Mar 31, 2019
Local Price & Product Mix
Currency
Volume
Portfolio & Other
Total
Percentage change from prior year
U.S. & Canada
(7
)%
—
 %
(4
)%
—
 %
(11
)%
EMEA 1
(7
)
(5
)
1

(1
)
(12
)
Asia Pacific
(9
)
(2
)
9

—

(2
)
Latin America
(10
)
(1
)
2

—

(9
)
Total
(8
)%
(2
)%
1
 %
—
 %
(9
)%
1.
Europe, Middle East and Africa.

Net sales in the first quarter of 2019 were $13.6 billion , down 9 percent from $14.9 billion in the first quarter of last year, primarily due to decreased local price and the unfavorable impact of currency. Sales decreased in all geographic regions with double-digit declines in EMEA (down 12 percent) and U.S. & Canada (down 11 percent). Local price decreased 8 percent, primarily in response to lower feedstock and raw material costs. Local price decreased in all geographic regions and across most principal product groups, except Consumer Solutions, Transportation & Advanced Polymers and Industrial Biosciences. Local price was flat in Safety & Construction, Nutrition & Health and Electronics & Imaging. Currency unfavorably impacted sales 2 percent compared with the same period last year, driven primarily by EMEA (down 5 percent). Volume increased 1 percent as increases in Polyurethanes & CAV, Crop Protection, Safety & Construction, Packaging and Specialty Plastics, Consumer Solutions, Industrial Solutions and Electronics & Imaging more than offset declines in Hydrocarbons & Energy, Seed, Transportation & Advanced Polymers, Industrial Biosciences and Coatings & Performance Monomers. Volume was flat in Nutrition & Health. Volume increased in all geographic regions, except U.S & Canada (down 4 percent). Portfolio & Other was flat compared with the same period last year.

Cost of Sales
COS was $10.7 billion in the first quarter of 2019, down from $11.6 billion in the first quarter of 2018. COS decreased in the first quarter of 2019 primarily due to lower feedstock and other raw material costs, decreased planned maintenance turnaround costs, lower commissioning expenses related to U.S. Gulf Coast growth projects and cost synergies which more than offset the impact of increased sales volume, which reflected additional supply from Sadara Chemical Company (“Sadara”). COS as a percentage of net sales in the first quarter of 2019 was 78.8 percent compared with 77.5 percent in the same period last year.


37
Table of Contents

Research and Development Expenses
R&D expenses totaled $361 million in the first quarter of 2019, down $25 million (6 percent) from $386 million in the first quarter of 2018. R&D expenses decreased primarily due to cost synergies.

Selling, General and Administrative Expenses
SG&A expenses were $701 million in the first quarter of 2019, down $50 million (7 percent) from $751 million in the first quarter of last year. SG&A expenses decreased primarily due to cost synergies.

Amortization of Intangibles
Amortization of intangibles was $154 million in the first quarter of 2019 , down from $159 million in the first quarter of 2018 . See Note 7 to the Consolidated Financial Statements for additional information on intangible assets.

Restructuring and Asset Related Charges - Net
DowDuPont Agriculture Division Restructuring Program
During the fourth quarter of 2018 and in connection with the ongoing integration activities, DowDuPont approved restructuring actions to simplify and optimize certain organizational structures within the Agriculture division in preparation for its intended separation as a standalone company ("Agriculture Division Program"). For the three months ended March 31, 2019, TDCC recorded a favorable adjustment of $4 million to the severance and related benefit costs reserve. TDCC expects actions related to the Agriculture Division Program to be substantially complete by mid 2019.

DowDuPont Cost Synergy Program
In September and November 2017, DowDuPont approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the "Synergy Program") which is designed to integrate and optimize the organization following the Merger and in preparation for the business separations. For the three months ended March 31, 2019, TDCC recorded pretax restructuring charges of $224 million , consisting of severance and related benefit costs of $72 million , asset write-downs and write-offs of $100 million and costs associated with exit and disposal activities of $52 million . For the three months ended March 31, 2018, TDCC recorded pretax restructuring charges of $163 million , consisting of severance and related benefit costs of $104 million , asset write-downs and write-offs of $48 million and costs associated with exit and disposal activities of $11 million . TDCC expects actions related to the Synergy Program to be substantially complete by the end of 2019. See Note  4 to the Consolidated Financial Statements for details on TDCC's restructuring activities.

Integration and Separation Costs
Integration and separation costs, which reflect costs related to post-Merger integration and business separation activities, as well as the ownership restructure of Dow Silicones Corporation ("Dow Silicones") (through May 31, 2018), were $408 million in the first quarter of 2019 , up from $202 million in the first quarter of 2018 . The increase was due to increased costs related to business separation activities.

Equity in Earnings of Nonconsolidated Affiliates
TDCC's share of the earnings of nonconsolidated affiliates was $13 million in the first quarter of 2019 , down from $243 million in the first quarter of 2018 , primarily due to increased equity losses from Sadara and lower equity earnings from the Kuwait joint ventures (due to lower monoethylene glycol and polyethylene prices), the Thai joint ventures and the HSC Group.
 
Sundry Income (Expense) – Net
Sundry income (expense) – net includes a variety of income and expense items such as foreign currency exchange gains and losses, interest income, dividends from investments, gains and losses on sales of investments and assets, non-operating pension and other postretirement benefit plan credits or costs, and certain litigation matters. Sundry income (expense) – net in the first quarter of 2019 was income of $73 million , a decrease of $10 million compared with income of $83 million in the first quarter of 2018.

Interest Expense and Amortization of Debt Discount
Interest expense and amortization of debt discount was $247 million in the first quarter of 2019 , down from $270 million in the first quarter of 2018 , as lower interest bearing notes issued in the fourth quarter of 2018 replaced higher interest bearing notes redeemed in the fourth quarter of 2018.


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Provision for Income Taxes
TDCC's effective tax rate fluctuates based on, among other factors, where income is earned, the level of income relative to tax attributes and the level of equity earnings, since most of the earnings from TDCC's equity method investments are taxed at the joint venture level. The effective tax rate for the first quarter of 2019 was 31.7 percent , compared with 20.9 percent for the first quarter of 2018. The tax rate in the first quarter of 2019 was unfavorably impacted by non-deductible restructuring costs and tax impacts related to spin preparation activities and favorably impacted by tax benefits related to the issuance of stock-based compensation and deferred tax remeasurement in foreign jurisdictions. The tax rate in the first quarter of 2018 was favorably impacted by tax benefits related to the issuance of stock-based compensation and unfavorably impacted by non-deductible restructuring costs and certain provisions in the Tax Cuts and Jobs Act related to the taxability of foreign earnings.

Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests was $45 million in the first quarter of 2019 , up from $35 million in the first quarter of 2018 .

Net Income Available for the Common Stockholder
Net income available for the common stockholder was $541 million in the first quarter of 2019 , down from $1,342 million in the first quarter of 2018 . From the Merger date and through March 31, 2019, TDCC had no publicly traded common stock. At March 31, 2019, TDCC's common shares were owned solely by its parent company, DowDuPont. Following the separation, TDCC's common shares are owned solely by Dow Inc.

CHANGES IN FINANCIAL CONDITION
TDCC had cash and cash equivalents of $2,969 million at March 31, 2019 and $2,669 million at December 31, 2018 , of which $2,269 million at March 31, 2019 and $1,963 million at December 31, 2018 , was held by subsidiaries in foreign countries, including United States territories. For each of its foreign subsidiaries, TDCC makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States.

The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and future foreign investments. TDCC has the ability to repatriate additional funds to the U.S., which could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or U.S. state income taxes and the impact of foreign currency movements. During 2019, TDCC has and expects to continue repatriating certain funds from its non-U.S. subsidiaries that are not needed to finance local operations or separation activities; however, these particular repatriation activities have not and are not expected to result in a significant incremental tax liability to TDCC.

TDCC's cash flows from operating, investing and financing activities, as reflected in the consolidated statements of cash flows, are summarized in the following table:

Cash Flow Summary
Three Months Ended
In millions
Mar 31, 2019
Mar 31, 2018
Cash provided by (used for):
 
 
Operating activities
$
1,426

$
(158
)
Investing activities
(486
)
(92
)
Financing activities
(667
)
(853
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
30

100

Summary
 
 
Increase (Decrease) in cash, cash equivalents and restricted cash
$
303

$
(1,003
)
Cash, cash equivalents and restricted cash at beginning of period
2,709

6,207

Cash, cash equivalents and restricted cash at end of period
$
3,012

$
5,204

Less: Restricted cash and cash equivalents, included in "Other current assets"
43

18

Cash and cash equivalents at end of period
$
2,969

$
5,186

 
Cash Flows from Operating Activities
In the first three months of 2019 , cash provided by operating activities was $1,426 million , up $1,584 million compared with cash used for operating activities of $158 million in the first three months of 2018, primarily reflecting a decrease in cash used for working capital, advance payments from a customer for product supply agreements, lower pension contributions and higher dividends received from nonconsolidated affiliates which were partially offset by lower cash earnings.

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Table of Contents

Cash Flows from Operating Activities - Non-GAAP
The following table reconciles cash flows from operating activities to a non-GAAP measure regarding cash flows from operating activities excluding the impact of Accounting Standards Update ("ASU") 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" and related interpretive guidance for the three months ended March 31, 2018. Management believes this non-GAAP financial measure is relevant and meaningful as it presents cash flows from operating activities inclusive of all trade accounts receivable collection activity, which TDCC utilizes in support of its operating activities.

Cash Flows from Operating Activities Excluding Impact of ASU 2016-15 and Additional Interpretive Guidance (non-GAAP)
Three Months Ended
In millions
Mar 31, 2018
Cash flows from operating activities - Updated for impact of ASU 2016-15 and additional interpretive guidance (GAAP)
$
(158
)
Less: Impact of ASU 2016-15 and additional interpretive guidance
445

Cash flows from operating activities - Excluding impact of ASU 2016-15 and additional interpretive guidance (non-GAAP)
$
287


Cash Flows from Investing Activities
In the first three months of 2019 , cash used for investing activities was $ 486 million , primarily due to capital expenditures and purchases of investments, which were partially offset by proceeds from sales and maturities of investments. In the first three months of 2018, cash used for investing activities was $ 92 million , primarily due to purchases of investments and capital expenditures, which were partially offset by proceeds from sales and maturities of investments and proceeds from interests in trade accounts receivable conduits.

Capital spending was $514 million in the first three months of 2019, compared with $423 million in the first three months of 2018. TDCC expects full year capital spending in 2019 to be approximately $2.5 billion, below depreciation and amortization expense and inclusive of capital spending for targeted cost synergy and business separation projects.

In the first three months of 2019, TDCC waived $135 million of accounts receivable with Sadara, which was converted into equity. TDCC expects to loan up to $500 million to Sadara during the remainder of 2019. All or a portion of the loans to Sadara could potentially be converted into equity in future periods.

Cash Flows from Financing Activities
In the first three months of 2019 , cash used for financing activities decreased to $667 million compared with $853 million in the same period last year, primarily due to a decrease in dividends paid, which was partially offset by less commercial paper issued during the period.

Subsequent Event
On April 1, 2019, Dow Inc. received a cash contribution of $2,024 million from DowDuPont as part of the internal reorganization and business realignment steps between Dow Inc., TDCC and DowDuPont.

Liquidity & Financial Flexibility
TDCC’s primary source of incremental liquidity is cash flows from operating activities. The generation of cash from operations and TDCC's ability to access debt markets is expected to meet TDCC’s cash requirements for working capital, capital expenditures, debt maturities, contributions to pension plans, dividend distributions to its parent company and other needs. In addition to cash from operating activities, TDCC’s current liquidity sources also include U.S. and Euromarket commercial paper, committed credit facilities and other debt markets. Additional details on sources of liquidity are as follows:

Commercial Paper
TDCC issues promissory notes under its U.S. and Euromarket commercial paper programs. TDCC had no commercial paper outstanding at March 31, 2019 ( $10 million at December 31, 2018 ). TDCC maintains access to the commercial paper market at competitive rates. Amounts outstanding under TDCC's commercial paper programs during the period may be greater, or less than, the amount reported at the end of the period. Subsequent to March 31, 2019, TDCC issued approximately $1,650 million of commercial paper.


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Committed Credit Facilities
In the event TDCC has short-term liquidity needs and is unable to issue commercial paper for any reason, TDCC has the ability to access liquidity through its committed and available credit facilities. At March 31, 2019 , TDCC had total committed credit facilities of $12.1 billion and available credit facilities of $7.6 billion . See Note 9 to the Consolidated Financial Statements for additional information on committed and available credit facilities.

In connection with the ownership restructure of Dow Silicones on May 31, 2016, Dow Silicones incurred $4.5 billion of indebtedness under a certain third party credit agreement ("Term Loan Facility"). On April 5, 2019, Dow Silicones voluntarily repaid $2.0 billion of principal on the Term Loan Facility, which was classified as "Long-term debt due within one year" in the consolidated balance sheets at March 31, 2019 . Dow Silicones intends to exercise the 2-year extension option on the remaining principal balance of $2.5 billion . See Note  9 to the Consolidated Financial Statements for additional information on the Term Loan Facility.

Debt
As TDCC continues to maintain its strong balance sheet and financial flexibility, management is focused on net debt (a non-GAAP financial measure), as TDCC believes this is the best representation of its financial leverage at this point in time. As shown in the following table, net debt is equal to total gross debt minus "Cash and cash equivalents" and "Marketable securities." At March 31, 2019 , net debt as a percent of total capitalization decreased to 37.3 percent , compared with 38.0 percent at December 31, 2018, primarily due to an increase in cash.

Total Debt
Mar 31, 2019
Dec 31, 2018
In millions
Notes payable
$
317

$
305

Long-term debt due within one year
2,369

340

Long-term debt
17,160

19,254

Gross debt
$
19,846

$
19,899

 - Cash and cash equivalents
2,969

2,669

 - Marketable securities
101

100

Net debt
$
16,776

$
17,130

Gross debt as a percent of total capitalization
41.4
%
41.6
%
Net debt as a percent of total capitalization
37.3
%
38.0
%

TDCC's public debt instruments and primary, private credit agreements contain, among other provisions, certain customary restrictive covenant and default provisions. TDCC's most significant debt covenant with regard to its financial position is the obligation to maintain the ratio of its consolidated indebtedness to consolidated capitalization at no greater than 0.65 to 1.00 at any time the aggregate outstanding amount of loans under the Five Year Competitive Advance and Revolving Credit Facility Agreement ("Revolving Credit Agreement") equals or exceeds $500 million. The ratio of TDCC's consolidated indebtedness to consolidated capitalization as defined in the Revolving Credit Agreement was 0.41 to 1.00 at March 31, 2019 . Management believes TDCC was in compliance with all of its covenants and default provisions at March 31, 2019 . For information on TDCC's covenants and default provisions, see Note 15 to the Consolidated Financial Statements in TDCC's Annual Report on Form 10-K for the year ended December 31, 2018 . There were no material changes to the debt covenants and default provisions related to TDCC’s outstanding long-term debt and primary, private credit agreements in the first quarter of 2019.

Subsequent Event
On April 1, 2019, DowDuPont completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC. In conjunction with the separation, Dow Inc. is obligated, substantially concurrently with the issuance of any guarantee in respect of outstanding or committed indebtedness under the Revolving Credit Agreement, to enter into a supplemental indenture with TDCC and the trustee under TDCC’s existing 2008 base indenture governing certain notes issued by TDCC. Under such supplemental indenture, Dow Inc. will guarantee all outstanding debt securities and all amounts due under such existing base indenture and will become subject to certain covenants and events of default under the existing base indenture.

In addition, the Revolving Credit Agreement includes an event of default which would be triggered in the event Dow Inc. incurs or guarantees third party indebtedness for borrowed money in excess of $250 million or engages in any material activity or directly owns any material assets, in each case, subject to certain conditions and exceptions. Dow Inc. may, at its option, cure the event of default by delivering an unconditional and irrevocable guarantee to the administrative agent within thirty days of the event or events giving rise to such event of default.


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No such events have occurred or have been triggered at the time of the filing of this Quarterly Report on Form 10-Q.

Management expects that TDCC will continue to have sufficient liquidity and financial flexibility to meet all of its business obligations.

Credit Ratings
At April 30, 2019, TDCC's credit ratings were as follows:

Credit Ratings
Long-Term Rating
Short-Term Rating
Outlook
Standard & Poor’s
BBB
A-2
Stable
Moody’s Investors Service
Baa2
P-2
Stable
Fitch Ratings
BBB+
F2
Stable

Downgrades in TDCC's credit ratings will increase borrowing costs on certain indentures and could impact its ability to access debt capital markets.

Dividends
Dow Inc.
On April 11, 2019, Dow Inc.’s Board of Directors declared a dividend of $0.70 per share, payable on June 14, 2019, to shareholders of record on May 31, 2019, consistent with its March 7, 2019 action declaring that a cash dividend of $525 million would be paid effective upon separation from DowDuPont.

TDCC
Effective with the Merger, TDCC no longer has publicly traded common stock. At March 31, 2019 , TDCC's common shares were owned solely by its parent company, DowDuPont. Pursuant to the Merger Agreement, TDCC committed to fund a portion of DowDuPont's dividends paid to common stockholders and certain governance expenses. In addition, share repurchases by DowDuPont were partially funded by TDCC through 2018. Funding was accomplished through intercompany loans. On a quarterly basis, TDCC's Board of Directors reviewed and determined a dividend distribution to DowDuPont to settle the intercompany loans. The dividend distribution considered the level of TDCC’s earnings and cash flows and the outstanding intercompany loan balances. For the three months ended March 31, 2019 , TDCC declared and paid dividends to DowDuPont of $535 million ( $1,057 million for the three months ended March 31, 2018). See Note 18 to the Consolidated Financial Statements for additional information.

Share Repurchase Program
On February 25, 2019, Dow Inc. announced a new $3.0 billion share repurchase program. The program has no expiration date.

Restructuring
The activities related to the DowDuPont Agriculture Division Program and the Synergy Program are expected to result in additional cash expenditures of approximately $350 million, primarily through the end of 2019, consisting of severance and related benefit costs and costs associated with exit and disposal activities, including environmental remediation (see Note 4 to the Consolidated Financial Statements). TDCC expects to incur additional costs in the future related to its restructuring activities. Future costs are expected to include demolition costs related to closed facilities and restructuring plan implementation costs; these costs will be recognized as incurred. TDCC also expects to incur additional employee-related costs, including involuntary termination benefits, related to its other optimization activities. These costs cannot be reasonably estimated at this time.

Integration and Separation Costs
Integration and separation costs, which reflect costs related to post-Merger integration and business separation activities, as well as the ownership restructure of Dow Silicones (through May 31, 2018), were $408 million for the three months ended March 31, 2019 and $202 million for the three months ended March 31, 2018. Integration and separation costs related to post-Merger integration and business separation activities are expected to decline through the remainder of 2019, but are expected to be significant in 2019.


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Table of Contents

Contractual Obligations
Information related to TDCC’s contractual obligations, commercial commitments and expected cash requirements for interest can be found in Notes 15, 16 and 19 to the Consolidated Financial Statements in TDCC’s Annual Report on Form 10-K for the year ended December 31, 2018 . With the exception of the items noted below, there have been no material changes in TDCC’s contractual obligations since December 31, 2018 .

Contractual Obligations at Mar 31, 2019
Payments Due In
 
In millions
2019
2020-2021
2022-2023
2024 and beyond
Total
Long-term debt obligations 1
$
2,307

$
6,088

$
2,007

$
9,451

$
19,853

Expected cash requirements for interest 2
$
673

$
1,629

$
1,168

$
6,907

$
10,377

Operating leases
$
437

$
936

$
634

$
1,157

$
3,164

1.
Excludes unamortized debt discount and issuance costs of $324 million. Includes finance lease obligations of $369 million. Assumes the option to extend will be exercised for $2.5 billion of the Dow Silicones Term Loan Facility.
2.
Cash requirements for interest on long-term debt was calculated using current interest rates at March 31, 2019, and includes $4,919 million of various floating rate notes.

Off-Balance Sheet Arrangements
Off-balance sheet arrangements are obligations TDCC has with nonconsolidated entities related to transactions, agreements or other contractual arrangements. TDCC holds variable interests in joint ventures accounted for under the equity method of accounting. TDCC is not the primary beneficiary of these joint ventures and therefore is not required to consolidate these entities (see Note  17 to the Consolidated Financial Statements).

Guarantees arise during the ordinary course of business from relationships with customers and nonconsolidated affiliates when TDCC undertakes an obligation to guarantee the performance of others if specific triggering events occur. TDCC had outstanding guarantees at March 31, 2019 of $4,514 million , down from $4,523 million at December 31, 2018 . Additional information related to guarantees can be found in the "Guarantees" section of Note  10 to the Consolidated Financial Statements.

Fair Value Measurements
See Note  16 to the Consolidated Financial Statements for additional information concerning fair value measurements.

OTHER MATTERS
Recent Accounting Guidance
See Note  2 to the Consolidated Financial Statements for a summary of recent accounting guidance.

Critical Accounting Estimates
The preparation of financial statements and related disclosures in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 1 to the Consolidated Financial Statements in TDCC’s Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 10-K”) describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. TDCC’s accounting policies that are impacted by judgments, assumptions and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in TDCC’s 2018 10-K. Since December 31, 2018, there have been no material changes in TDCC’s accounting policies that are impacted by judgments, assumptions and estimates.

Asbestos-Related Matters of Union Carbide Corporation
Union Carbide Corporation ("Union Carbide") is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that Union Carbide sold in the past, alleged exposure to asbestos-containing products located on Union Carbide’s premises, and Union Carbide’s responsibility for asbestos suits filed against a former Union Carbide subsidiary, Amchem Products, Inc. (“Amchem”). In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to Union Carbide’s products.


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Table of Contents

The table below provides information regarding asbestos-related claims pending against Union Carbide and Amchem based on criteria developed by Union Carbide and its external consultants.

Asbestos-Related Claim Activity
2019
2018
Claims unresolved at Jan 1
12,780

15,427

Claims filed
1,383

1,932

Claims settled, dismissed or otherwise resolved
(1,569
)
(3,026
)
Claims unresolved at Mar 31
12,594

14,333

Claimants with claims against both Union Carbide and Amchem
(4,509
)
(5,148
)
Individual claimants at Mar 31
8,085

9,185


Plaintiffs’ lawyers often sue numerous defendants in individual lawsuits or on behalf of numerous claimants. As a result, the damages alleged are not expressly identified as to Union Carbide, Amchem or any other particular defendant, even when specific damages are alleged with respect to a specific disease or injury. In fact, there are no personal injury cases in which only Union Carbide and/or Amchem are the sole named defendants. For these reasons and based upon Union Carbide’s litigation and settlement experience, Union Carbide does not consider the damages alleged against Union Carbide and Amchem to be a meaningful factor in its determination of any potential asbestos-related liability.

For additional information, see Asbestos-Related Matters of Union Carbide Corporation in Note 10 to the Consolidated Financial Statements and Part II, Item 1. Legal Proceedings.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Omitted as to TDCC pursuant to General Instruction H of Form 10-Q.


ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, Dow Inc. and The Dow Chemical Company (the "Companies") carried out an evaluation, under the supervision and with the participation of the Companies' Disclosure Committee and the Companies' management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Companies' disclosure controls and procedures pursuant to paragraph (b) of Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Companies' disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting
There were no changes in the Companies' internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15 that was conducted during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companies' internal control over financial reporting.





44
Table of Contents

Dow Inc.
The Dow Chemical Company and Subsidiaries
PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
Asbestos-Related Matters of Union Carbide Corporation
No material developments regarding this matter occurred in the first quarter of 2019 . For a current status of this matter, see Note  10 to the Consolidated Financial Statements.

Environmental Matters
On July 7, 2018, The Dow Chemical Company (“TDCC”) received an informal notice that the U.S. Environmental Protection Agency ("EPA"), Region 6 was contemplating filing a Notice of Violation with a proposed penalty for alleged violations uncovered during a prior inspection related to the management of hazardous wastes at its Freeport, Texas, manufacturing facility, pursuant to the Risk Management Plan requirements of the Clean Air Act. On March 4, 2019, the EPA and TDCC entered into a Consent Agreement and Final Order, which TDCC agreed to pay a fine of $260,349 and certify compliance with specified regulations with the EPA.

On March 5, 2019, Union Carbide Corporation ("Union Carbide"), a wholly owned subsidiary of TDCC, received an informal notice that the EPA, Region 6 was contemplating filing a Notice of Violation with a proposed penalty for alleged violations uncovered during a prior inspection related to the management of hazardous materials at Union Carbide's Seadrift, Texas, manufacturing facility, pursuant to the Risk Management Plan requirements of the Clean Air Act. Discussions between the EPA and Union Carbide are ongoing.


ITEM 1A. RISK FACTORS
Dow Inc.’s Information Statement, dated March 12, 2019, attached as Exhibit 99.1 to the Dow Inc. Form 8-K filed with the U.S. Securities and Exchange Commission on April 1, 2019, includes a discussion of risk factors identified by Dow Inc. under the heading “Risk Factors.” There have been no material changes to such Risk Factors, which are incorporated by reference into Item 1A on this Quarterly Report on Form 10-Q.


ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.


ITEM 5. OTHER INFORMATION
Not applicable.


45

ITEM 6. EXHIBITS
 
EXHIBIT NO.
 
DESCRIPTION
 
 
Separation and Distribution Agreement, dated as of April 1, 2019, by and among Corteva, Inc., Dow Inc. and DowDuPont Inc. (incorporated by reference to Exhibit 2.1 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).
 
 
Amended and Restated Certificate of Incorporation of Dow Inc. (incorporated by reference to Exhibit 3.1 to Dow Inc.’s Current Report on Form 8-K filed with the SEC on April 2, 2019).
 
 
Amended and Restated Bylaws of Dow Inc. (incorporated by reference to Exhibit 3.2 to Dow Inc.’s Current Report on Form 8-K filed with the SEC on April 2, 2019).
 
4.3
 
Dow Inc. agrees to provide the SEC, on request, copies of all other such indentures and instruments that define the rights of holders of long-term debt of Dow Inc. and its consolidated subsidiaries, including The Dow Chemical Company, pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K.
 
 
Tax Matters Agreement, dated as of April 1, 2019, by and among DowDuPont Inc., Dow Inc., and Corteva, Inc. (incorporated by reference to Exhibit 10.1 to Dow Inc.’s Current Report on Form 8-K filed with the SEC on April 2, 2019).
 
 
Employee Matters Agreement, dated as of April 1, 2019, by and among DowDuPont Inc., Dow Inc., and Corteva, Inc. (incorporated by reference to Exhibit 10.2 to Dow Inc.’s Current Report on Form 8-K filed with the SEC on April 2, 2019).
 
 
MatCo/SpecCo Intellectual Property Cross License Agreement, dated as of April 1, 2019, by and between Dow Inc. et al and DowDuPont Inc. et al (incorporated by reference to Exhibit 10.3 to Dow Inc.’s Current Report on Form 8‑K filed with the SEC on April 2, 2019).
 
 
MatCo/AgCo Intellectual Property Cross License Agreement, dated as of April 1, 2019, by and between Dow Inc. et al and Corteva, Inc. et al (incorporated by reference to Exhibit 10.4 to Dow Inc.’s Current Report on Form 8-K filed with the SEC on April 2, 2019).
 
 
Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4 to Dow Inc.’s Registration Statement on Form S-3, filed with the SEC on April 1, 2019).
 
 
Form of Performance Stock Unit Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.1 to Dow Inc.’s Registration Statement on Form S-3, filed with the SEC on April 1, 2019).
 
 
Form of Restricted Stock Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.2 to Dow Inc.’s Registration Statement on Form S-3, filed with the SEC on April 1, 2019).
 
 
Form of Restricted Stock Unit Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.3 to Dow Inc.’s Registration Statement on Form S-3, filed with the SEC on April 1, 2019).
 
 
Form of Stock Appreciation Right Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.4 to Dow Inc.’s Registration Statement on Form S-3, filed with the SEC on April 1, 2019).
 
 
Form of Stock Option Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.5 to Dow Inc.’s Registration Statement on Form S-3, filed with the SEC on April 1, 2019).
 
 
Form of Restricted Stock Unit Award Agreement (Director) under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.6 to Dow Inc.’s Registration Statement on Form S-3, filed with the SEC on April 1, 2019).
 
 
The Dow Chemical Company Elective Deferral Plan (Pre-2005), restated and effective as of April 1, 2019.
 
 
The Dow Chemical Company Elective Deferral Plan (Post 2004), restated and effective as of April 1, 2019 (incorporated by reference to Exhibit 4.1 to The Dow Chemical Company’s Registration Statement on Form S-8 POS, filed with the SEC on April 1, 2019).
 
 
Dow Inc. Voluntary Deferred Compensation Plan for Non-Employee Directors, restated and effective as of April 1, 2019.
 
23  *
 
Ankura Consulting Group, LLC's Consent.
 
31.1  *
 
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
31.2  *
 
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
32.1  *
 
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
32.2  *
 
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
101.INS
 
XBRL Instance Document.
 
101.SCH
 
XBRL Taxonomy Extension Schema Document.
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document.
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.
* Filed herewith

46

Dow Inc.
The Dow Chemical Company and Subsidiaries
Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DOW INC.
THE DOW CHEMICAL COMPANY
Date: May 3, 2019


/s/ RONALD C. EDMONDS
Ronald C. Edmonds
Controller and Vice President
of Controllers and Tax
 

47


Exhibit 10.8


















The Dow Chemical Company
Elective Deferral Plan
(Pre-2005)
Restated and Effective as of April 1, 2019

48


TABLE OF CONTENTS
 
 
 
 
Page

ARTICLE I PURPOSE AND EFFECTIVE DATE
1

ARTICLE II DEFINITIONS
2

 
2.01

 
Administrator
2

 
2.02

 
Appeals Administrator
2

 
2.03

 
Base Salary
2

 
2.04

 
Base Salary Deferral
2

 
2.05

 
Beneficiary
2

 
2.06

 
Board
2

 
2.07

 
Change of Control
3

 
2.08

 
Common Stock
3

 
2.09

 
Company
3

 
2.10

 
Deferral Account
3

 
2.11

 
Deferral Period
3

 
2.12

 
Deferral Amount
3

 
2.13

 
Disabled
3

 
2.14

 
Eligible Compensation
4

 
2.15

 
Eligible Employee
4

 
2.16

 
ERISA
4

 
2.17

 
Fair Market Value
4

 
2.18

 
Form of Payment
4

 
2.19

 
Hardship Withdrawal
4

 
2.20

 
Hypothetical Investment Benchmark
4

 
2.21

 
Initial Claims Reviewer
5

 
2.22

 
Matching Contribution
5

 
2.23

 
Other Bonus
5

 
2.24

 
Other Deferral
5

 
2.25

 
Participant
5

 
2.26

 
Participant Agreement
5

 
2.27

 
Performance Awards
5

 
2.28

 
Performance Deferral
5

 
2.29

 
Phantom Share Units
5

 
2.30

 
Plan
6

 
2.31

 
Plan Year
6

 
2.32

 
Retirement
6

 
2.33

 
Savings Plan
6

 
2.34

 
Section 16 Participant
6

 
2.35

 
Termination of Employment
6

 
2.36

 
Unforeseeable Emergency
6

 
2.37

 
Valuation Date
6

 
2.38

 
VPHR
7

ARTICLE III ADMINISTRATION
8

 
3.01

 
Duties and Powers of the Administrator
8

 
3.02

 
Designation of Additional Administrators and Delegation of Administrative Responsibilities
8

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3.03

 
Decisions of Administrators
9

 
3.04

 
Indemnification of Administrators
9

 
3.05

 
Claim Procedure
9

 
3.06

 
Commencement of Legal Action
10

 
3.07

 
Forum Selection
11

ARTICLE IV PARTICIPATION
12

 
4.01

 
Participation
12

 
4.02

 
Contents of Participation Agreement
12

 
4.03

 
Modification or Revocation of Election by Participant
12

ARTICLE V DEFERRED COMPENSATION
13

 
5.01

 
Elective Deferred Compensation
13

 
5.02

 
Vesting of Deferral Account
13

ARTICLE VI MAINTENANCE AND INVESTMENT OF ACCOUNTS
14

 
6.01

 
Maintenance of Accounts
14

 
6.02

 
Hypothetical Investment Benchmarks
14

 
6.03

 
Statement of Accounts
16

ARTICLE VII BENEFITS
17

 
7.01

 
Time and Form of Payment
17

 
7.02

 
Changing Form of Benefit
17

 
7.03

 
Matching Contribution
18

 
7.04

 
Retirement
18

 
7.05

 
Distributions after Specific Future Year
18

 
7.06

 
Pre-Retirement Survivor Benefit
19

 
7.07

 
Post-Retirement Survivor Benefit
19

 
7.08

 
Disability
19

 
7.09

 
Termination of Employment
20

 
7.10

 
Merger, Joint Venture or Sale of Business Exception
20

 
7.11

 
Hardship Withdrawal
21

 
7.12

 
Voluntary Early Withdrawal
21

 
7.13

 
Change of Control
22

 
7.14

 
Discretionary Company Contributions
22

 
7.15

 
Withholding of Taxes
23

ARTICLE VIII BENEFICIARY DESIGNATION
24

 
8.01

 
Beneficiary Designation
24

 
8.02

 
No Beneficiary Designation
24

ARTICLE IX AMENDMENT AND TERMINATION OF PLAN
25

 
9.01

 
Amendment
25

 
9.02

 
Company's Right to Terminate
25

ARTICLE X MISCELLANEOUS
26

 
10.01

 
Unfunded Plan
26

 
10.02

 
Nonassignability
26

 
10.03

 
Validity and Severability
26

 
10.04

 
Governing Law
27

 
10.05

 
Employment Status
27



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10.06

 
Underlying Incentive Plans and Programs
27

 
10.07

 
Severance
27

 
10.08

 
Successors of Dow Inc. and the Company
27

 
10.09

 
Waiver of Breach
27

 
10.10

 
Notice
27

 
10.11

 
Successor Titles of Positions
28

APPENDIX A: Hypothetical Investment Benchmarks
29

















































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ARTICLE I

PURPOSE AND EFFECTIVE DATE

Dow Inc. sponsors The Dow Chemical Company Elective Deferral Plan ("Plan") to aid The Dow Chemical Company and its subsidiaries in retaining and attracting executive employees by providing them with tax deferred savings opportunities. The Plan provides a select group of management and highly compensated employees, within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and therefore exempt from Parts 2, 3, and 4 of Title I of ERISA, of The Dow Chemical Company with the opportunity to elect to defer receipt of specified portions of compensation, and to have these deferred amounts treated as if invested in specified Hypothetical Investment Benchmarks. The Plan shall be effective for deferral elections made hereunder on or after January 1, 2001. The benefits provided under the Plan shall be provided in consideration for services to be performed after the effective date of the Plan, but prior to the executive's retirement. Any reference to "plan document" with respect to this Plan is a reference to the document herein.

Effective December 15, 1994, The Dow Chemical Company originally adopted The Dow Chemical Company Elective Deferral Plan. Minor amendments were made to the Plan on December 11, 1997. On October 19, 2000 The Dow Chemical Company amended and restated the Plan, to be effective as of January 1, 2001, to read as set forth in this Plan document. Minor amendments to the restated Plan were made on December 11, 2000, September 10, 2001, October 4, 2001, September 9, 2002, December 2, 2002, February 3, 2003, April 7, 2003, July 7, 2003, August 4, 2003 and December 10, 2003. The Dow Chemical Company again restated the Plan on August 6, 2004, effective as of January 1, 2001, in order to clarify certain provisions of the Plan. Minor amendments to the restated Plan were made on October 7, 2004. Effective September 1, 2006 and January 1, 2007, The Dow Chemical Company amended the Plan to change the Hypothetical Investment Benchmarks. On January 1, 2010, minor amendments to the Plan were made via a Plan restatement to change the third party administrator of the Plan, to change the Hypothetical Investment Benchmarks, to clarify the valuation date used for the calculation of installment payments, and to eliminate the small balance distribution. On January 4, 2010, deferrals allocated to "The Dow Chemical Company Stock Index Fund" were converted to the "Dow Stock Fund". On January 27, 2010, the plan was amended via restatement to allow Participants with deferrals that occurred prior to January 1, 2001 to reallocate such deferrals to any of the Hypothetical Investment Benchmarks. On April 14, 2010, the Plan was amended and restated to make certain changes to the administrative provisions of the Plan. The Plan was amended through standalone amendments adopted on or after April 14, 2010 and on or before December 31, 2018.

The instant amended and restated Plan document is adopted effective as of the Spinoff Date, and is intended to, inter alia , reflect the establishment of Dow Inc. as the parent of The Dow Chemical Company and the Spinoff of Dow Inc. from the DowDuPont Inc. controlled group. For purposes of this restated Plan document, the "Spinoff" means the separation of Dow Inc. from DowDuPont Inc. by means of a pro rata distribution of all of the then-issued and outstanding shares of Common Stock to DowDuPont's stockholders and the "Spinoff Date" means April 1, 2019, the effective date of the Spinoff. Effective as of the Spinoff Date, Dow Inc. shall be the sponsor of the Plan with all the rights and obligations attendant thereto, and The Dow Chemical Company and other participating employers shall have the rights and obligations set forth herein and shall remain responsible for the contributions credited, and payments due, under the Plan.








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ARTICLE II

DEFINITIONS
For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:

2.01     Administrator

"Administrator" means the person, group of persons, or entity designated by Dow Inc. in accordance with Section 3.02 as an Administrator. An individual or entity shall be an Administrator only with respect to those administrative powers or responsibilities assigned to such individual or entity pursuant to Section 3.02. For the avoidance of doubt, more than one individual may be designated as and serve as an Administrator at any given time. For purposes of Sections 3.01, 3.03 and 3.04, the Administrator shall also include the Appeals Administrator and the Initial Claims Reviewer.
2.02     Appeals Administrator

"Appeals Administrator" means the person, group of persons, or entity designated as the Appeals Administrator pursuant to Section 3.02, or the person, group of persons, or entity to which a designated Appeals Administrator delegates its responsibility for deciding claims pursuant to Section 3.02. The Appeals Administrator is responsible for reviewing adverse benefit determinations under the Plan, as described in DOL Reg. § 2560.503-1(h).
2.03     Base Salary

"Base Salary" means the annual base rate of pay from the Company at which a Participant is employed (excluding Performance Awards, commissions, relocation expenses, and other non-regular forms of compensation) before deductions under (A) deferrals pursuant to Section 4.02 and (B) contributions made on his or her behalf to any qualified plan maintained by any Company or to any cafeteria plan under section 125 of the Internal Revenue Code maintained by any Company.
2.04     Base Salary Deferral

"Base Salary Deferral" means the amount of a Participant's Base Salary which the Participant elects to have withheld on a pre-tax basis from his Base Salary and credited to his or her Deferral Account pursuant to Section 4.02.
2.05     Beneficiary

"Beneficiary" means the person, persons or entity designated by the Participant to receive any benefits payable under the Plan pursuant to Article VIII.
2.06     Board

"Board" means the board of directors of Dow Inc.



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2.07     Change of Control

For purposes of this Plan, a "Change of Control" shall be deemed to have occurred upon: (i) the dissolution or liquidation of The Dow Chemical Company; (ii) a reorganization, merger or consolidation of The Dow Chemical Company with one or more corporations as a result of which The Dow Chemical Company is not a surviving corporation; (iii) approval by the stockholders of The Dow Chemical Company of any sale, lease, exchange, or other transfer (in one or series of transactions) of all or substantially all of the assets of The Dow Chemical Company; (iv) approval by the stockholders of The Dow Chemical Company of any merger or consolidation of The Dow Chemical Company in which the holders of the voting stock of The Dow Chemical Company immediately before the merger or consolidation will not own fifty percent (50%) or more of the outstanding voting shares of the continuing or surviving corporation immediately after such merger or consolidation, or (v) a change of fifty-one percent (51%) (rounded to the next whole person) in the membership of the Board of Directors of The Dow Chemical Company within a twenty-four (24) month period, unless the election or nomination for election by stockholders of each new director within such period was approved by the vote of eighty-five percent (85%) (rounded to the next whole person) of the directors still in office who were in office at the beginning of the twenty-four month period.
2.08     Common Stock

"Common Stock" means the common stock of Dow Inc.
2.09     Company

"Company" means The Dow Chemical Company, its successors, any subsidiary or affiliated organizations authorized by the Board or the Administrator to participate in the Plan and any organization into which or with which The Dow Chemical Company may merge or consolidate or to which all or substantially all of its assets may be transferred.
2.10     Deferral Account

"Deferral Account" means the notional account established for record keeping purposes for each Participant pursuant to Article VI.
2.11     Deferral Period

"Deferral Period" is defined in Section 4.02.
2.12     Deferred Amount

"Deferred Amount" is defined in Section 4.02.
2.13     Disabled

"Disabled" or "Disability" means eligibility for disability benefits under the terms of the Long-Term Disability Plan maintained by The Dow Chemical Company.


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2.14     Eligible Compensation

"Eligible Compensation" means any Base Salary, Performance Awards or Other Bonuses and any other monies deemed to be eligible compensation by The Dow Chemical Company.
2.15     Eligible Employee

"Eligible Employee" means a key employee of any Company who:
a.
is a United States employee or an expatriate who is paid from one of The Dow Chemical Company's U.S. entities,
b.
is a member of the functional specialist/functional leader or global leadership job families,
c.
has a job level of 1.2 or higher,
d.
is eligible for participation in the Savings Plan,
e.
is designated by the Administrator as eligible to participate in the Plan as of September 30 for deferral of Base Salary and Performance Awards, and
f.
qualifies as a member of a "select group of management or highly compensated employees" under ERISA.
 
2.16     ERISA

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
2.17     Fair Market Value

"Fair Market Value" of a share of Common Stock means the closing price of Dow Inc.'s Common Stock on the New York Stock Exchange on the most recent day on which the Common Stock was so traded that precedes the date the Fair Market Value is to be determined. The definition of Fair Market Value in this Section 2.17 shall be exclusively used to determine the value of a Participant's Deferral Account under this Plan.
2.18     Form of Payment

"Form of Payment" means payment in one lump sum or in substantially equal monthly, quarterly or annual installments not to exceed 15 years.
2.19     Hardship Withdrawal

"Hardship Withdrawal" means the early payment of all or part of the balance in a Deferral Account(s) in the event of an Unforeseeable Emergency.
2.20     Hypothetical Investment Benchmark
"Hypothetical Investment Benchmark" shall mean the phantom investment benchmarks which are used to measure the return credited to a Participant's Deferral Account.



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2.21 Initial Claims Reviewer

"Initial Claims Reviewer" means the person, group of persons or entity designated as such pursuant to Section 3.02. The Initial Claims Reviewer is responsible for deciding claims under the Plan, as described in DOL Reg. § 2560.503-1(e) ( i.e. , first level claims).
2.22     Matching Contribution

"Matching Contribution" means the amount of annual matching contribution that each Company will make to the Plan.
2.23     Other Bonus

"Other Bonus" means the amount awarded to a Participant for a Plan Year under any other incentive plan maintained by any Company that has been established and authorized as eligible for deferral.
2.24     Other Deferral

"Other Deferral" means the amount of a Participant's Other Bonus which the Participant elects to have withheld on a pre-tax basis credited to his or her account pursuant to Section 4.02.
2.25     Participant

"Participant" means any individual who is eligible and makes an election to participate in this Plan by filing a Participation Agreement as provided in Article IV.
2.26     Participation Agreement

"Participation Agreement" means an agreement filed by a Participant in accordance with Article IV.
2.27     Performance Awards

"Performance Awards" means the amount paid in cash to the Participant by any Company in the form of annual incentive bonuses for a Plan Year.
2.28     Performance Deferral

"Performance Deferral" means the amount of a Participant's Performance Award which the Participant elects to have withheld on a pre-tax basis from his or her Performance Award and credited to his or her account pursuant to Section 4.02.
2.29     Phantom Share Units

"Phantom Share Units" means units of deemed investment in shares of Common Stock as determined under Section 6.02(b).



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56


2.30     Plan

"Plan" means The Dow Chemical Company Elective Deferral Plan (Pre-2005) as set forth herein, together with any and all amendments and supplements hereto.
2.31     Plan Year

"Plan Year" means a twelve-month period beginning January 1 and ending the following December 31.
2.32     Retirement

"Retirement" means normal or early retirement of a Participant from the Companies after attaining age 65 or age 50 with at least ten years of service under the Dow Employees' Pension Plan or any other defined benefit pension plan maintained by a Company under which a Participant is eligible to receive a benefit.
2.33     Savings Plan

"Savings Plan" means The Dow Chemical Company Employees' Savings Plan as it currently exists and as it may subsequently be amended.
2.34     Section 16 Participant

"Section 16 Participant" means an officer or director of Dow Inc. required to report transactions in Dow Inc. securities to the Securities and Exchange Commission pursuant to section 16(a) of the Securities Exchange Act of 1934.
2.35     Termination of Employment

"Termination of Employment" means the cessation of a Participant's services as an employee of the Companies, whether voluntary or involuntary, for any reason other than Retirement, Disability or Death.
2.36     Unforeseeable Emergency

"Unforeseeable Emergency" means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant as determined by the Administrator.
2.37     Valuation Date

"Valuation Date" means the last day of each calendar month or such other date as the Administrator in its sole discretion may determine. Effective January 1, 2010, "Valuation Date" means the 4 th day of the month or the prior business day of each calendar month or such other date as the Administrator in its sole discretion may determine.


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57


2.38     VPHR

"VPHR" means the Vice President of The Dow Chemical Company or Dow Inc. with senior responsibility for Human Resources.
A pronoun or adjective in the masculine gender includes the feminine gender, and the singular includes the plural, unless the context clearly indicates otherwise. The title of an officer or employee when used in this Plan document shall mean the respective officer or employee of Dow Inc. or The Dow Chemical Company, except where otherwise indicated. The title for a person or entity who is assigned responsibilities under the Plan shall mean any successor title to such position as such title may be changed from time to time.









































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ARTICLE III

ADMINISTRATION
3.01     Duties and Powers of the Administrator

The Administrator shall be responsible for the administration of the Plan and shall see that the Plan is carried out in accordance with its terms.
Except as provided in Section 3.02, the responsibility and authority of the Administrator shall include, but shall not be limited to, the following duties and powers:
a.
To promulgate and enforce such rules and regulations and prescribe the use of such forms as he shall deem necessary or appropriate for the proper and efficient administration of the Plan;
b.
To interpret the Plan and to resolve any possible ambiguities, inconsistencies and omissions therein or therefrom;
c.
To decide all questions concerning the Plan;
d.
To prepare and disseminate communications to Participants and Beneficiaries as are necessary or appropriate to properly administer the Plan; and
e.
To retain third party administrators, consultants, accountants and other individuals or entities as he deems necessary or advisable to assist him in fulfilling his responsibilities under the Plan, consistent with The Dow Chemical Company's guidelines on hiring and retention of outside service providers; and monitor the performance of such individuals and entities, decide whether to discontinue the services of such individuals and entities, and make payment to such individuals and entities in accordance with the terms of the plan document.
3.02     Designation of Additional Administrators and Delegation of Administrative Responsibilities

Dow Inc., as the plan sponsor, may designate one or more persons or entities to serve as an Administrator, an Appeals Administrator or an Initial Claims Reviewer, through an action of the Board or through a written designation signed by the VPHR or the Global Benefits Director, each acting individually, or such other person as the Board shall designate. Such designation shall set forth in general or specific terms such person's or entity's responsibilities and authority.
In addition, each Administrator, Appeals Administrator and Initial Claims Reviewer may designate other persons to carry out its responsibilities under the Plan in a writing that sets forth the responsibilities assigned to the delegee and, if applicable, the period for which such delegation shall be in effect.









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3.03     Decisions of Administrators

a.
Each Administrator shall have the sole and absolute discretion to interpret the plan document, make findings of fact, operate, administer and decide any matters arising with respect to the Plan, and may adopt such rules and procedures as it deems necessary, desirable or appropriate in the administration of the Plan. All rules and decisions of such Administrators shall be conclusive and binding on all persons having an interest in the Plan.
b.
Any determination by an Administrator shall be binding on all parties. If challenged in court, such determination shall not be subject to de novo review and shall not be overturned unless proven to be arbitrary and capricious based upon the evidence presented to the Administrator at the time of its determination.
3.04     Indemnification of Administrators

Dow Inc. agrees to indemnify and to defend to the fullest extent permitted by law any employee or former employee of the Company or entity within the Company's controlled group (a controlled group of corporations within the meaning of section 414(b) or section 414(c) of the Internal Revenue Code) who is serving or has served as an Administrator or who is acting or has acted on behalf of an Administrator against all liabilities, damages, costs and expenses (including attorneys' fees and amounts paid in settlement of any claims approved by Dow Inc.) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith.

3.05     Claim Procedure

If a Participant or Beneficiary ("claimant") makes a written request alleging a right to receive payments under this Plan or alleging a right to receive an adjustment in benefits being paid under this Plan, such actions shall be treated as a claim for benefits. Benefits under this Plan shall be payable only if the Initial Claims Reviewer or the Appeals Administrator, as the case may be, determines, in its sole discretion, that a claimant is entitled to them.

a.
All initial claims for benefits under this Plan shall be sent to the Initial Claims Reviewer. If the Initial Claims Reviewer determines that any individual who has claimed a right to receive benefits, or different benefits, under this Plan is not entitled to receive all or any part of the benefits claimed, the Initial Claims Reviewer shall inform the claimant in writing of such determination and the reasons therefore in terms calculated to be understood by the claimant. The notice shall be sent within 90 days of receipt of the claim unless the Initial Claims Reviewer determines that additional time, not exceeding 90 additional days, is needed and so notifies the claimant in writing before the expiration of the initial 90 day period. Any written notice of extension for review shall include the circumstances requiring extension and date by which a decision is expected to be rendered. A written notice of denial of benefits shall (i) state specific reasons for the denial, (ii) make specific reference to the pertinent Plan provisions on which the denial is based, (iii) describe any additional material or information that is necessary to support the claimant's claim and an explanation of why such material or information is necessary, and (iv) include a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of all documents, records







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60


or other information relevant (as defined by Department of Labor Regulation section 2560.503-1(m)) to the claim. Such notice shall, in addition, inform the claimant of the procedure that the claimant should follow to take advantage of the review procedures set forth below in the event the claimant desires to contest the denial of the claim, including the right to bring a civil action under section 502(a) of ERISA following exhaustion of review procedures set forth herein.
b.
The claimant may within 60 days after notice of the denial submit, in writing, to the Appeals Administrator a notice that the claimant contests the denial of his or her claim and desires a further review by the Appeals Administrator. During the review process, the claimant has the right to submit written comments, documents, records and other information relating to the claim for benefits, which the Appeals Administrator shall consider without regard to whether the items were considered upon the initial review. The Appeals Administrator shall within 60 days thereafter review the claim and authorize the claimant to, upon request and free of charge, have reasonable access to, and copies of all documents, records or other information relevant (as defined by Department of Labor Regulation section 2560.503-1(m)) to the claim. The Appeals Administrator will render a final decision with specific reasons therefor in writing and will transmit it to the claimant within 60 days of the written request for review, unless the Appeals Administrator determines that additional time, not exceeding 60 days, is needed, and so notifies the claimant in writing before the expiration of the initial 60 day period. In no event shall the Appeals Administrator render a final decision later than the initial 60 days plus the possible additional 60 days following receipt of the claimant's appeal. Any written notice of extension for review shall include the circumstances requiring extension and date by which a decision is expected to be rendered. A written notice of denial of benefits upon review shall (i) state specific reasons for the denial, (ii) make specific reference to the pertinent Plan provisions on which the denial is based, and (iii) include a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of all documents, records or other information relevant (as defined by Department of Labor Regulation section 2560.503-1(m)) to the claim. Such notice shall, in addition, inform the claimant of the right to bring a civil action under section 502(a) of ERISA. If such determination is adverse to the claimant, it shall be binding and conclusive unless the claimant notifies the Appeals Administrator within 90 days after the mailing or delivery to him or her by the Appeals Administrator of its determination that he or she intends to institute legal proceedings challenging the determination of the Appeals Administrator, and actually institutes such legal proceeding within the applicable limitations period described in Section 3.06 below.

3.06     Commencement of Legal Action

A claim for benefits under the Plan (including a claim that the claimant is eligible to participate in the Plan) may not be filed in any court:
a.
until the claimant has exhausted the claims review procedures described in Section 3.05 above, including complying with the 90-day notice requirement in Section 3.05(b), and
b.
unless such claim is filed in a court with jurisdiction over such claim the earlier of:






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1.
180 days after the mailing or delivery of the adverse determination by the Appeals Administrator, or
2.
two (2) years after (i) the date the first benefit payment was allegedly due, or (ii) the date the Plan first repudiated its alleged obligation to provide such benefits or coverage (regardless of whether such repudiation occurred before or during the administrative review process), whichever is earlier.
This limitations period replaces and supersedes any limitation period ending at a later time that might otherwise be deemed applicable under state or federal law in the absence of this Section 3.06.

3.07     Forum Selection

To the fullest extent permitted by law, any putative class action lawsuit relating to the Plan shall be filed in the jurisdiction in which the Plan is principally administered or the jurisdiction in which the largest number of putative class members resides. If any such putative class action is filed in a different jurisdiction, or if any non-class action filed in a different jurisdiction is subsequently amended or altered to include class action allegations, then the Plan, all parties to such action that are related to the Plan (such as the Administrator) and all alleged Participants and Beneficiaries shall take all necessary steps to have the action removed to, transferred to or re-filed in a jurisdiction described in the first sentence of this Section 3.07. This forum selection provision is waived if no party invokes it within 120 days of the filing of a putative class action or the assertion of class action allegations. This provision does not relieve any putative class member from any obligation existing under the Plan or by law to exhaust administrative remedies before initiating litigation.




















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ARTICLE IV

PARTICIPATION

4.01     Participation

Participation in the Plan shall be limited to Eligible Employees who elect to participate in this Plan by filing a Participation Agreement with the Administrator. A Participation Agreement must be filed on or prior to the November 30 immediately preceding the Plan Year for which it is effective. The Administrator shall have the discretion to establish special deadlines regarding the filing of Participation Agreements for Participants. Notwithstanding the foregoing, the Retirement Board, in its sole discretion, may permit a newly eligible Participant to submit a Participation Agreement within 30 days of that employee becoming eligible, and deferrals shall commence as soon as practical thereafter. An individual shall not be eligible to elect to participate in this Plan unless the individual is a Participant for the Plan Year for which the election is made. In the event a Participant transfers to a subsidiary of any Company and such subsidiary does not participate in the Plan, the Participant's Deferred Amount shall cease, and the Participant's Deferral Account shall remain in effect until such time as the benefits are distributed as originally elected by the Participant in the Participation Agreement.
4.02     Contents of Participation Agreement

Subject to Article VII, each Participation Agreement shall set forth: (i) the amount of Eligible Compensation for the Plan Year or performance period to which the Participation Agreement relates that is to be deferred under the Plan (the "Deferred Amount"), expressed as either a dollar amount or a percentage of the Base Salary and Performance Awards for such Plan Year or performance period; provided , that the minimum Deferred Amount for any Plan Year or performance period shall not be less than 5% (in 5% increments) of Base Salary and/or 5% (in 5% increments) of Performance Award/Other Bonus; (ii) the maximum Deferred Amount for any Plan Year or performance period shall not exceed 50% of Base Salary and 85% of Performance Award/Other Bonus; (iii) the period after which payment of the Deferred Amount is to be made or begin to be made (the "Deferral Period"), which shall be (A) a specific future year, not greater than the year the Participant reaches age 70 ½ or (B) the period ending upon the Retirement or prior termination of employment of the Participant; and (iv) the form in which payments are to be made, which may be a lump sum or in substantially equal monthly, quarterly or annual installments not to exceed 15 years. Participation Agreements are to be completed in a format specified by the Administrator.
4.03     Modification or Revocation of Election by Participant

A Participant may not change the amount of his or her Deferred Amount during a Plan Year. A Participant's Participation Agreement may not be made, modified or revoked retroactively, nor may a deferral period be shortened or reduced except as expressly provided in this Plan. For deferrals to occur from Performance Awards, the Participant must be actively employed, an eligible retiree or a member of an entire class of employees identified by the Administrator as eligible under Section 7.10.



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ARTICLE V

DEFERRED COMPENSATION

5.01     Elective Deferred Compensation

Except for Section 16 Participants, the Deferred Amount of a Participant with respect to each Plan Year of participation in the Plan shall be credited to the Participant's Deferral Account as and when such Deferred Amount would otherwise have been paid to the Participant. For Section 16 Participants who elect to direct their Deferred Amount to the Hypothetical Investment Benchmark of the Dow Inc. Stock Index Fund only, the Deferred Amount of that Participant with respect to each Plan Year of participation shall be credited to the Participant's Deferral Account in the Hypothetical Investment Benchmark of 125% of Ten Year Treasury Notes as and when such Deferred Amount would otherwise have been paid to the Participant; on a quarterly basis (on the last business day of the months of March, June, September and December), such Deferred Amount shall be reallocated to the Hypothetical Investment Benchmark of the Dow Inc. Stock Index Fund. If a Participant is employed at a Company other than The Dow Chemical Company, such Company shall pay or transfer the Deferred Amounts for all such Company's Participants to The Dow Chemical Company as and when the Deferred Amounts are withheld from a Participant's Base Salary, Performance Award or Other Bonus. Such forwarded Deferred Amounts will be held as part of the general assets of The Dow Chemical Company. The earnings based on a Participant's investment selection among the Hypothetical Investment Benchmarks specified in Appendix A hereto, as amended by the VPHR, Global Benefits Director, Chief Financial Officer, or Global Director of Portfolio Investments, each acting individually, or their respective delegates, from time to time, shall be borne by The Dow Chemical Company. To the extent that any Company is required to withhold any taxes or other amounts from the Deferred Amount pursuant to any state, Federal or local law, such amounts shall be taken out of other compensation eligible to be paid to the Participant that is not deferred under this Plan.
5.02     Vesting of Deferral Account

Except as provided in Sections 7.03 and 7.15, a Participant shall be 100% vested in his or her Deferral Account as of each Valuation Date.









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ARTICLE VI

MAINTENANCE AND INVESTMENT OF ACCOUNTS

6.01     Maintenance of Accounts

Separate Deferral Accounts shall be maintained for each Participant. More than one Deferral Account may be maintained for a Participant as necessary to reflect (a) various Hypothetical Investment Benchmarks and/or (b) separate Participation Agreements specifying different Deferral Periods and/or forms of payment. A Participant's Deferral Account(s) shall be utilized solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to this Plan, and shall not constitute or be treated as a trust fund of any kind. The Administrator shall determine the balance of each Deferral Account, as of each Valuation Date, by adjusting the balance of such Deferral Account as of the immediately preceding Valuation Date to reflect changes in the value of the deemed investments thereof, credits and debits pursuant to Section 6.02 and Section 7.03 and distributions pursuant to Article VII with respect to such Deferral Account since the preceding Valuation Date.
6.02     Hypothetical Investment Benchmarks

a.
Direction of Hypothetical Investments . Each Participant shall be entitled to direct the manner in which his or her Deferral Accounts will be deemed to be invested, selecting among the Hypothetical Investment Benchmarks specified in Appendix A hereto, as amended by the VPHR, Global Benefits Director, Chief Financial Officer, or Global Director of Portfolio Investments, each acting individually, or their respective delegates, from time to time, and in accordance with such rules, regulations and procedures as the Administrator may establish from time to time. Notwithstanding anything to the contrary herein, earnings and losses based on a Participant's investment elections shall begin to accrue as of the date such Participant's Deferred Amounts are credited to his or her Deferral Accounts. Participants, except for Section 16 Participants, can reallocate among the Hypothetical Investment Benchmarks on a daily basis. Section 16 Participants can reallocate among the Hypothetical Investment Benchmarks in accordance with such rules, regulations and procedures as the Administrator may establish from time to time.
b.
Dow Inc. Stock Index Fund and DowDuPont Inc. Stock Index Fund .

i.
The Hypothetical Investment Benchmarks available for Deferral Accounts will include the "Dow Inc. Stock Index Fund." The Dow Inc. Stock Index Fund will consist of deemed investments in shares of Dow Inc. Common Stock, including reinvestment of dividends and stock splits, without brokerage fees. Deferred Amounts that are deemed to be invested in the Dow Inc. Stock Index Fund shall be converted into Phantom Share Units based upon the Fair Market Value of the Common Stock as of the date(s) the Deferred Amounts are to be credited to a Deferral Account. The portion of any Deferral Account that is invested in the Dow Inc. Stock Index Fund shall be credited, as of each dividend payment date, with additional Phantom Share Units of Common Stock with respect to cash dividends paid on the Common Stock with record




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dates during the period beginning on the day after the most recent preceding Valuation Date and ending on such Valuation Date.
ii.
When a reallocation or a distribution of all or a portion of a Deferral Account that is invested in the Dow Inc. Stock Index Fund is to be made, the balance in such a Deferral Account shall be determined by multiplying the Fair Market Value of one share of Common Stock on the most recent Valuation Date preceding the date of such reallocation or distribution by the number of Phantom Share Units to be reallocated or distributed. Upon a distribution, the amounts in the Dow Inc. Stock Index Fund shall be distributed in the form of cash having a value equal to the Fair Market Value of a comparable number of actual shares of Common Stock.
iii.
In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, or other change in the corporate structure of Dow Inc. affecting Common Stock, or a sale by Dow Inc. of all or part of its assets, or any distribution to stockholders other than a normal cash dividend, then the Administrator may make appropriate adjustments to the number of deemed shares credited to any Deferral Account. The determination of the Administrator as to such adjustments, if any, to be made shall be conclusive.
iv.
Notwithstanding any other provision of this Plan, the Administrator shall adopt such procedures as it may determine are necessary to ensure that with respect to any Participant who is actually or potentially subject to section 16(b) of the Securities Exchange Act of 1934, as amended, the crediting of deemed shares to his or her Deferral Account is deemed to be an exempt purchase for purposes of such section 16(b), including without limitation requiring that no shares of Common Stock or cash relating to such deemed shares may be distributed for six months after being credited to such Deferral Account.
v.
The Hypothetical Investment Benchmarks available for Deferral Accounts shall also include the "DowDuPont Inc. Stock Index Fund," but only to the extent that a Participant's Deferral Account is deemed to be invested in DowDuPont Inc. common stock prior to the Spinoff Date (as defined in Article I). The DowDuPont Inc. Stock Index Fund will consist of deemed investments in the common stock of DowDuPont Inc. or any successor thereto (as determined by the Administrator in its sole discretion), including stock splits but not dividends. Dividends shall be deemed to be invested in the same manner as under the Savings Plan. Similar rules and procedures as described in this Section 6.02(b) with respect to the Dow Inc. Stock Index Fund shall apply with respect to the DowDuPont Inc. Stock Index Fund and its successors, to the extent required by section 16(b) of the Securities Exchange Act of 1934, as amended, or by rules established by the Administrator. For the avoidance of doubt: (A) a Participant may not direct that any amounts allocated to his Deferral Account after the Spinoff Date will be deemed to be invested in the DowDuPont Inc. Stock Index Fund or any successor thereto; and (B) amounts deemed to be invested in the DowDuPont Inc. Stock Index Fund prior to the Spinoff Date may continue to be deemed to be so invested following the Spinoff Date in accordance with rules established by the Administrator.





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6.03     Statement of Accounts

Each Participant shall be issued quarterly statements of his or her Deferral Account(s) in such form as the Administrator deems desirable, setting forth the balance to the credit of such Participant in his or her Deferral Account(s) as of the end of the most recently completed quarter.
























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ARTICLE VII

BENEFITS
7.01     Time and Form of Payment.

At the end of the Deferral Period for each Deferral Account, The Dow Chemical Company shall pay to the Participant the balance of such Deferral Account at the time or times elected by the Participant in the applicable Participation Agreement. If the Participant is employed at a Company other than The Dow Chemical Company, such Company shall pay the balance of such Participant's Deferral Account, pursuant to the terms of the Plan, and The Dow Chemical Company shall reimburse such Company for any such payments. If the Participant has elected to receive payments from a Deferral Account in a lump sum, The Dow Chemical Company (or any other Company as described above) shall pay the balance in such Deferral Account (determined as of the most recent Valuation Date preceding the end of the Deferral Period) in a lump sum in cash on the January 31 st after the end of the Deferral Period, and/or as soon as administratively feasible in the year of the payment of the Performance Award for the Performance Award deferral. If a Participant has elected in a Participation Agreement to have a Deferral Account be distributed in installment payments, each installment payment shall equal the balance of such Deferral Account as of the most recent Valuation Date preceding the payment date, times a fraction, the numerator of which is one and the denominator of which is the number of remaining installment payments. The first such installment shall be paid on the January 31 st after the end of the Deferral Period. Each subsequent installment shall be paid on or about the succeeding anniversary of such first payment or in monthly or quarterly intervals, if selected. Each such installment shall be deemed to be made on a pro rata basis from each of the different deemed investments of the Deferral Account (if there is more than one such deemed investment).
For Participants who elect to commence distribution of benefits upon Retirement, the lump sum cash payment or the first installment shall be paid on the January 31 st after Retirement, and/or as soon as administratively feasible in the year of the payment of the Performance Award for the Performance Award deferral.
Notwithstanding any of the foregoing, Deferral Account distributions must begin no later than the April 1 st after the calendar year in which the Participant reaches age 70 ½.
7.02     Changing Form of Benefit

Participants may elect an alternative form of payout as available under Section 7.01 by written election filed with the Administrator; provided, however, that the Participant files the election in the prior tax year and at least six (6) months prior to the first day of the month in which payments are to commence. Distribution change elections for payments commencing in January must be made no later than June 30 of the prior calendar year.
Effective January 1, 2010, Participants may no longer elect to change their benefits to quarterly installments.
If the Participant files the election in the year that the benefit payments are to commence or in the prior year but less than six (6) months prior to the date of benefit commencement, the Participant will have his or her Deferral Account reduced by ten percent (10%) at the Valuation Date immediately


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prior to commencement of payments, and, for future deferrals only, all Participation Agreements previously filed by such Participant shall be null and void after such election is filed (including without limitation Participation Agreements with respect to Plan Years or performance periods that have not yet been complete, and such a Participant shall not thereafter be entitled to file any Participation Agreements under the Plan with respect to the first Plan Year that begins after such election is made.
7.03     Matching Contribution

Each Participant who elects to make deferrals of Eligible Compensation to the Plan will be credited with a Matching Contribution utilizing the same formula authorized under the Savings Plan for employer matching contributions. For purposes of calculating the match under this Plan, The Dow Chemical Company will assume each Participant is contributing the maximum allowable amount to the Savings Plan and receiving a match thereon. This assumed match from the Savings Plan will be offset from the Matching Contribution calculated under provisions of this Plan. Notwithstanding the foregoing, the sum of the Matching Contribution under the Plan plus the assumed employer matching contributions under the Savings Plan may not exceed fifteen thousand dollars ($15,000) in each Plan Year. The amount of the Matching Contribution may be based on a formula that takes into account a Participant's overall compensation and may be subject to maximum or minimum limitations. The Matching Contribution shall be credited to the Deferral Account as soon as administratively feasible within the first 60 days of the following Plan Year. The Matching Contribution shall be invested among the same Hypothetical Investment Benchmarks as defined in Section 6.02 in the same proportion as the elections made by the Participant governing the Base Salary deferrals of the Participant. The Matching Contribution shall be distributed to the Participant according to the election made by the Participant governing his or her Base Salary deferrals and will vest one hundred percent (100%) on the date credited to the Participant's account.
If a Participant is employed by a Company, other than The Dow Chemical Company, an amount equal to all Matching Contributions credited to Participants of such Company shall be paid or transferred in full by such Company to The Dow Chemical Company as of the date such Matching Contribution is credited to a Participant's Deferral Account. The Dow Chemical Company shall hold such amounts as part of the general assets of The Dow Chemical Company.
7.04     Retirement

Subject to Section 7.01 and Section 7.11 hereof, if a Participant has elected to have the balance of his or her Deferral Account distributed upon Retirement or after a Specific Future Year, the account balance of the Participant (determined as of the most recent Valuation Date preceding the end of the Deferral Period) shall be distributed in installments or a lump sum in accordance with the Plan and as elected in the Participation Agreement. Notwithstanding any of the foregoing, Deferral Account distributions must begin no later than the April 1 st after the calendar year in which the Participant reaches age 70 ½.
7.05     Distributions after Specific Future Year

Subject to Section 7.01 and Section 7.11 hereof, if a Participant has elected to defer Eligible Compensation under the Plan until a stated future year, the account balance of the Participant



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(determined as of the most recent Valuation Date preceding such Deferral Period) shall be distributed in installments or a lump sum in accordance with the Plan and as elected in the Participation Agreement. Notwithstanding any of the foregoing, Deferral Account distributions must begin no later than the April 1 st after the calendar year in which the Participant reaches age 70 ½.
7.06     Pre-Retirement Survivor Benefit

If a Participant dies prior to Retirement and prior to receiving full payment of his or her Deferral Account(s), The Dow Chemical Company shall pay the remaining balance (determined as of the most recent Valuation Date preceding such event) to the Participant's Beneficiary or Beneficiaries (as the case may be) according to the form elected by the Participant as a part of the Participation Agreement. If a Participant was employed at a Company other than The Dow Chemical Company, such Company shall pay the remaining balance of such deceased Participant's Deferral Account in accordance with the preceding sentence and The Dow Chemical Company shall reimburse the Company for such payment. In the event that installment payments are elected, The Dow Chemical Company shall continue to credit interest on the unpaid balance of the Deferral Account subject to Section 6.02(a) hereof, based on the Participant's investment elections. A Participant's Beneficiary may request acceleration of timing and form of payment by filing a written designation with the Administrator within 60 days of the death of the Participant, provided that such change shall not be effective until the January 31 st after the calendar year of the Participant's death.
7.07     Post-Retirement Survivor Benefit

If a Participant dies after Retirement and prior to receiving full payment of his or her Deferral Account(s), The Dow Chemical Company shall pay the remaining balance (determined as of the most recent Valuation Date preceding such event) to the Participant's Beneficiary or Beneficiaries (as the case may be) according to the form elected by the Participant as a part of the Participation Agreement. If a Participant was employed at a Company other than The Dow Chemical Company, such Company shall pay the remaining balance of such deceased Participant's Deferral Account in accordance with the preceding sentence, and The Dow Chemical Company shall reimburse such Company for such payments. In the event that installment payments are elected, The Dow Chemical Company shall continue to credit interest on the unpaid balance of the Deferral Account subject to Section 6.02(a) hereof, based on the Participant's investment elections. A Participant's Beneficiary may request acceleration of timing and form of payment by filing a written designation with the Administrator within 60 days of the death of the Participant, provided that such change shall not be effective until the January 31 st after the calendar year of the Participant's death.
7.08     Disability

If a Participant suffers a Disability, the Participant's Deferred Amount shall cease, and The Dow Chemical Company (or, a Company other than The Dow Chemical Company, if the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay the benefit described in Section 7.01. A Participant may request acceleration of timing and form of payment by filing a written designation with the Administrator within




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60 days of the determination of Disability of the Participant, provided that such change shall not be effective until the January 31 st after the calendar year of the Participant's Disability.
7.09     Termination of Employment
In the event of Termination of Employment which takes place prior to eligibility for Retirement, The Dow Chemical Company (or, a Company other than The Dow Chemical Company, if the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay the benefits described in Section 7.01 in a single lump sum payment as soon as practicable after the Termination of Employment.
7.10     Merger, Joint Venture or Sale of Business Exception

Notwithstanding any of the foregoing, if the Termination of Employment occurs as a direct result of a merger, joint venture or sale of a subsidiary, division, business or other unit of any Company, or as a result of transfer of the Participant to a non-participating subsidiary or joint venture, as determined by the Administrator, the Administrator may, in its sole discretion,
a.
elect to waive the lump sum distribution of benefits for an entire class of affected employees transferring to the joint venture. In cases where this election is made by the Administrator, the Participant's Base Salary Deferrals shall cease and the Participant's Deferral Account shall remain deferred, in accordance with the distribution elected in the Participation Agreement, until the Participant's termination of employment from the joint venture, provided however, the Participant is employed by the joint venture until at least age 50; in cases where the Participant is not 50 years old at the time of termination of employment from the entity, The Dow Chemical Company (or, a Company other than The Dow Chemical Company, it the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay to the Participant a lump sum termination benefit equal to the balance of the Deferral Account as of the Valuation Date. If any Company terminates its ownership interest in the joint venture, the Participant's Deferral Account shall remain deferred, in accordance with the distribution elected in the Participation Agreement, until the Participant's termination of employment from the remaining joint venture partners, provided however, the Participant is employed by the remaining joint venture partners until at least age 50; in cases where the Participant is not 50 years old at the time of termination of employment from the remaining joint venture partners, The Dow Chemical Company (or, a Company other than The Dow Chemical Company, if the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay to the Participant a lump sum termination benefit equal to the balance of the Deferral Account as of the Valuation Date.

b.
elect to waive the lump sum distribution of benefits for an entire class of affected employees of a sale. In cases where this election is made by the Administrator, the Participant's Base Salary Deferrals shall cease and the Participant's Deferral Account shall remain in effect until such time as the benefits are distributed to Participants in accordance with the distribution elected in the Participation Agreement, provided however, the Participant is employed by the









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purchaser until at least age 50; in cases where the Participant is not 50 years old at the time of termination of employment from the purchaser, The Dow Chemical Company (or, a Company other than The Dow Chemical Company, if the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay to the Participant a lump sum termination benefit equal to the balance of the Deferral Account as of the Valuation Date.

c.
elect to permit the Performance Deferral for an entire class of affected employees transferring to the joint venture. In cases where this election is made by the Administrator, the award will be credited to the Participant's Deferral Account and the Participant's Deferral Account shall remain in effect until such time as benefits are distributed to Participants as provided under Section 7.10(a).

d.
elect to permit the Performance Deferral for an entire class of affected employees of a sale. In cases where this election is made by the Administrator, the award will be credited to the Participant's Deferral Account and the Participant's Deferral Account shall remain in effect until such time as the benefits are distributed to Participants as provided under Section 7.10(b).

Participants who retire or terminate after merger, joint venture or sale of a subsidiary, division, business or other unit of any Company, or as a result of transfer of the Participant to a non-participating subsidiary or joint venture, assume the personal responsibility to notify The Dow Chemical Company of their status change. Failure to promptly notify The Dow Chemical Company may result in the loss of earnings beyond the status change date.
7.11     Hardship Withdrawals

Notwithstanding the provisions of Section 7.01 and any Participation Agreement, a Participant's on-going Deferred Amount shall cease and a Participant shall be entitled to early payment of all or part of the balance in his or her Deferral Account(s) in the event of an Unforeseeable Emergency, in accordance with this Section 7.11. A distribution pursuant to this Section 7.11 may only be made to the extent reasonably needed to satisfy the Unforeseeable Emergency need, and may not be made if such need is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant's assets to the extent such liquidation would not itself cause severe financial hardship, or (iii) by cessation of participation in the Plan. An application for an early payment under this Section 7.11 shall be made to the Administrator in such form and in accordance with such procedures as the Administrator shall determine from time to time. The determination of whether and in what amount and form a distribution will be permitted pursuant to this Section 7.11 shall be made by the Administrator.
7.12     Voluntary Early Withdrawal

Notwithstanding the provisions of Section 7.01 and any Participation Agreement, a Participant shall be entitled to elect to withdraw all or a portion of the balance in his or her Deferral Account(s) in accordance with this Section 7.12 by filing with the Administrator such form and in accordance with such procedures as the Administrator shall determine from time to time. The amount of this withdrawal must be at least twenty five percent (25%) of the balance of the Deferral Account, or $10,000.00, whichever is less. As soon as practicable after receipt of such form by the Administrator, The Dow


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Chemical Company (or, a Company other than The Dow Chemical Company, if the Participant is employed at a Company other than The Dow Chemical Company, subject to reimbursement by The Dow Chemical Company) shall pay an amount equal to ninety (90) percent of the amount elected for withdrawal (determined as of the most recent Valuation Date preceding the date such election is filed) to the electing Participant in a lump sum in cash, and the Participant shall forfeit the remaining ten percent (10%) of the amount elected for withdrawal. For future deferrals only, all Participation Agreements previously filed by a Participant who elects to make a withdrawal under this Section 7.12 shall be null and void after such election is filed (including without limitation Participation Agreements with respect to Plan Years or performance periods that have not yet been completed), and such a Participant shall not thereafter be entitled to file any Participation Agreements under the Plan with respect to the first Plan Year that begins after such election is made.
7.13    Change of Control

An Eligible Employee may, when completing a Participation Agreement during the enrollment period, elect that, if a Change of Control occurs, the Participant (or after the Participant's death the Participant's Beneficiary) shall receive a lump sum payment of the balance of the Deferral Account within thirty (30) days after the Change of Control. This election may be changed only during a 30-day period ending on November 30 of each calendar year and shall apply to the entire Deferral Account both before and after Retirement. The Deferral Account balance shall be determined as of the most recent Valuation Date preceding the month in which the Change of Control occurs. All Participation Agreements previously filed by a Participant who receives a distribution under this Section 7.13 shall be null and void (including without limitation Participation Agreements with respect to Plan Years or performance periods that have not yet been completed), and such a Participant shall not thereafter be entitled to file any Participation Agreements under the Plan with respect to the first Plan Year that begins after such distribution is made.
7.14     Discretionary Company Contributions

Any Company may at any time contribute a discretionary Company contribution. The amount of the discretionary contribution may vary from payroll period to payroll period throughout the Plan Year, may be based on a formula which takes into account a Participant's overall compensation, and otherwise may be subject to maximum or minimum limitations. The Discretionary Contribution shall be credited to the Deferral Account as soon as administratively feasible following the end of the payroll period. The discretionary contribution shall be invested among the same Hypothetical Investment Benchmarks as defined in Section 6.02 in the same proportion as the elections made by the Participant governing the deferrals of the Participant. The discretionary contribution shall be distributed to the Participant according to the election made by the Participant governing his or her deferrals. The vesting schedule shall be at the sole discretion of the Administrator. If a Participant is employed at a Company other than The Dow Chemical Company, such Company shall pay or transfer to The Dow Chemical Company any amounts designated as discretionary Company contributions for all such Participants as of the date such discretionary Company contributions are credited to a Participant's Deferral Account. The Dow Chemical Company shall hold such amounts as part of the general assets of The Dow Chemical Company.




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7.15     Withholding of Taxes

Notwithstanding any other provision of this Plan, any Company shall withhold from payments made hereunder any amounts required to be so withheld by any applicable law or regulation.

























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ARTICLE VIII

BENEFICIARY DESIGNATION

8.01     Beneficiary Designation

Each Participant shall have the right, at any time, to designate any person, persons or entity as his or her Beneficiary or Beneficiaries. A Beneficiary designation shall be made, and may be amended, by the Participant by filing a written designation with the Administrator, on such form and in accordance with such procedures as the Administrator shall establish from time to time.
8.02     No Beneficiary Designation

If a Participant or Beneficiary fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant or his or her Beneficiary, then the Participant's Beneficiary shall be deemed to be, in the following order:
a.
the spouse of such person, if any;
b.
the children of such person, if any;
c.
the beneficiary of any Company Paid Life Insurance of such person, if any;
d.
the beneficiary of the Executive Life Insurance of such person, if any;
e.
the beneficiary of any Company-sponsored life insurance policy for which any Company pays all or part of the premium of such person, if any; or
f.
the deceased person's estate.


















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ARTICLE IX

AMENDMENT AND TERMINATION OF PLAN

9.01     Amendment

The Board or its delegate may amend or modify the Plan at any time, and the President, Chief Financial Officer, VPHR, the Benefits Governance and Finance Committee of The Dow Chemical Company, or Global Benefits Director, each acting individually, may amend or modify the Plan at any time, provided, however, that no amendment shall be effective to decrease the balance in any Deferral Account as accrued at the time of such amendment, nor shall any amendment otherwise have a retroactive effect.
Notwithstanding the foregoing, an amendment that affects only Section 16(b) Participants shall not be valid unless it is adopted or approved by the Board.
The authority of the President, Chief Financial Officer, VPHR, the Benefits Governance and Finance Committee of The Dow Chemical Company, and Global Benefits Director to amend or modify the Plan under this Section 9.01 may not be delegated.
9.02     Company's Right to Terminate

The Board may at any time terminate the Plan with respect to future Participation Agreements. The Board may also terminate the Plan in its entirety at any time for any reason, including without limitation if, in its judgment, the continuance of the Plan, the tax, accounting, or other effects thereof, or potential payments thereunder would not be in the best interests of Dow Inc. or The Dow Chemical Company, and upon any such termination, The Dow Chemical Company shall pay to each Participant (or shall transfer to a Company other than The Dow Chemical Company for payment if the Participant is employed at a Company other than The Dow Chemical Company) the benefits such Participant is entitled to receive under the Plan as monthly installments over a three (3) year period commencing within ninety (90) days (determined as of the most recent Valuation Date preceding the termination date). Any Company may cease participation in the Plan for any reason by notifying Dow Inc. in writing at least 30 days prior to such Company's cessation of participation. Payments to Participants by any such Company will commence in accordance with the terms of the Plan.









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ARTICLE X

MISCELLANEOUS

10.01     Unfunded Plan

This Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of sections 201, 301 and 401 of ERISA and therefore meant to be exempt from Parts 2, 3 and 4 of Title I of ERISA. All payments pursuant to the Plan shall first be made from the general assets of The Dow Chemical Company, as the entity primarily liable for such payments, and no special or separate fund shall be established or other segregation of assets made to assure payment. As described above, if a Participant is employed at a Company other than The Dow Chemical Company, such Company shall pay such Participant's Deferral Account balance to such Participant according to the terms of the Plan, and The Dow Chemical Company shall reimburse such Company for the amount of the payment. In the event The Dow Chemical Company is insolvent or is otherwise unable to make any required payment or reimbursement to a Participant or a Company, the Company (other than The Dow Chemical Company) that employed such Participant shall be secondarily liable for such payments from the general assets of such Company. In the event such Company is also insolvent or is otherwise unable to make any required payment, Dow Inc. shall be liable for such payments from the general assets of Dow Inc. and its consolidated subsidiaries, taken as a whole. No Participant or other person shall have under any circumstances any interest in any particular property or assets of Dow Inc., The Dow Chemical Company or any other Company as a result of participating in the Plan. Notwithstanding the foregoing, The Dow Chemical Company may (but shall not be obligated to) create one or more grantor trusts, the assets of which are subject to the claims of The Dow Chemical Company's creditors, to assist it in accumulating funds to pay its obligations.
10.02     Nonassignability

Except as specifically set forth in the Plan with respect to the designation of Beneficiaries, neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency.
10.03     Validity and Severability

The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.



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10.04     Governing Law

The validity, interpretation, construction and performance of this Plan shall in all respects be governed by the laws of the State of Delaware, without reference to principles of conflict of law, except to the extent preempted by federal law.
10.05     Employment Status

This Plan does not constitute a contract of employment or impose on the Participant or any Company any obligation for the Participant to remain an employee of such Company or change the status of the Participant's employment or the policies of such Company and its affiliates regarding termination of employment.
10.06     Underlying Incentive Plans and Programs

Nothing in this Plan shall prevent any Company from modifying, amending or terminating the compensation or the incentive plans and programs pursuant to which Performance Awards are earned and which are deferred under this Plan.
10.07     Severance

Payments from the Executive Severance Supplement equal to six months' Base Salary will be credited to the Participant's Deferral Account subject to the same earnings methods and distribution elections most recently elected by the Participant governing his or her Base Salary deferrals. The Executive Severance Supplement for individuals who do not have an established Deferral Account will be deemed to be invested using the U.S. Treasury Note Hypothetical Investment Benchmark and a ten year payout distribution election.
10.08     Successors of Dow Inc. and the Company

The rights and obligations of Dow Inc. and The Dow Chemical Company shall inure to the benefit of, and shall be binding upon, the successors and assigns of Dow Inc. and The Dow Chemical Company, respectively.
10.09     Waiver of Breach

The waiver by Dow Inc. or The Dow Chemical Company of any breach of any provision of the Plan by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.
10.10     Notice

Any notice or filing required or permitted to be given to Dow Inc. or The Dow Chemical Company under the Plan shall be sufficient if in writing and hand-delivered, or sent by first class mail to the principal office of Dow Inc. or The Dow Chemical Company, as applicable, directed to the attention of the Administrator. Such notice shall be deemed given as of the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark.


27

78


10.11     Successor Titles or Positions

The title of any person or entity who is assigned responsibilities under the Plan shall include any successor title to such position as such title may be changed from time to time.



















































28

79


IN WITNESS WHEREOF , Dow Inc. has caused this amended and restated Plan document to be executed in its name and on its behalf by its officers duly authorized on this 1st day of April, 2019.


 
DOW INC.
 
 
 
/s/ KAREN S. CARTER
 
By: Karen S. Carter
 
 
 
Its: Chief Human Resources Officer









































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80


APPENDIX A: Hypothetical Investment Benchmarks

Hypothetical funds that align with the funds offered in the Savings Plan are also offered in this plan.
Ten Year U.S. Treasury Notes Plus Fund
The Angus Cash Fund is grandfathered to existing Participants. No new contributions are allowed.























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81


Exhibit 10.10


















Dow Inc.
Voluntary Deferred Compensation Plan
For Non-Employee Directors

Restated and Effective as of April 1, 2019

82


TABLE OF CONTENTS
 
 
 
 
Page

ARTICLE I PURPOSE AND EFFECTIVE DATE
1

ARTICLE II DEFINITIONS
2

 
2.01.
 
Administrator
2

 
2.02.
 
Appeals Administrator
2

 
2.03.
 
Beneficiary
2

 
2.04.
 
Board
2

 
2.05.
 
Change in Control
2

 
2.06.
 
Code
3

 
2.07.
 
Common Stock
3

 
2.08.
 
Company
3

 
2.09.
 
Deferral Account
3

 
2.10.
 
Deferral Amount
3

 
2.11.
 
Deputy Administrator
4

 
2.12.
 
Domestic Partner
4

 
2.13.
 
Eligible Compensation
5

 
2.14.
 
Eligible Director
5

 
2.15.
 
Fair Market Value
5

 
2.16.
 
Form of Payment
5

 
2.17.
 
Hardship Withdrawal
5

 
2.18.
 
Hypothetical Investment Benchmark
5

 
2.19.
 
Initial Claims Reviewer
5

 
2.20.
 
Participant
5

 
2.21.
 
Participant Agreement
5

 
2.22.
 
Phantom Share Units
6

 
2.23.
 
Plan
6

 
2.24.
 
Plan Year
6

 
2.25.
 
Section 16 Participant
6

 
2.26.
 
Separation from Board Service
6

 
2.27.
 
Section 409A
6

 
2.28.
 
Time of Payment
6

 
2.29.
 
Unforeseeable Emergency
6

 
2.30.
 
Valuation Date
7

ARTICLE III ADMINISTRATION
8

 
3.01.
 
Duties and Powers of the Administrator
8

 
3.02.
 
Designation of Additional Administrators and Delegation of Administrative Responsibilities
8

 
3.03.
 
Decisions of Administrators
9

 
3.04.
 
Indemnification
10

 
3.05.
 
Claim and Review Procedure
10

 
3.06.
 
Commencement of Legal Action
11

 
3.07.
 
Forum Selection
13

 
3.08.
 
Expenses
13


83


ARTICLE IV PARTICIPATION AGREEMENT
14

 
4.01.
 
Participation Agreement
14

 
4.02.
 
Contents of Participation Agreement
14

 
4.03.
 
Modification or Revocation of Election by Participant
14

ARTICLE V DEFERRED COMPENSATION
15

 
5.01.
 
Elective Deferred Compensation
15

 
5.02.
 
Vesting of Deferral Account
15

ARTICLE VI MAINTENANCE AND INVESTMENT OF ACCOUNTS
16

 
6.01.
 
Maintenance of Accounts
16

 
6.02.
 
Hypothetical Investment Benchmarks
16

ARTICLE VII BENEFITS
19

 
7.01.
 
Time and Form of Payment
19

 
7.02.
 
Changing Form of Benefit
19

 
7.03.
 
Survivor Benefit
19

 
7.04.
 
Hardship Withdrawal
20

 
7.05.
 
Change of Control
20

 
7.06.
 
Permitted Acceleration of Distributions
20

 
7.07.
 
Permitted Delays in Distribution
21

 
7.08.
 
Administrative Provisions Regarding Distributions
21

 
7.09.
 
Disputed Payments and Refusals to Pay
23

ARTICLE VIII BENEFICIARY DESIGNATION
24

 
8.01.
 
Beneficiary Designation
24

 
8.02.
 
No Beneficiary Designation
24

ARTICLE IX AMENDMENT AND TERMINATION OF PLAN
25

 
9.01.
 
Amendment
25

 
9.02.
 
Right to Terminate and Manner of Termination
25

ARTICLE X MISCELLANEOUS
26

 
10.01.
 
Plan is Binding
26

 
10.02.
 
Effect of Plan on Service Relationship
26

 
10.03.
 
Governing Law
26

 
10.04.
 
Tax Withholding
26

 
10.05.
 
Savings Clause
26

 
10.06.
 
Notices
26

 
10.07.
 
Waiver
27

 
10.08.
 
Reliance on Information Provided
27

 
10.09.
 
Plan Interpretation and Section 409A
27

 
10.10.
 
Scrivener's Errors
28

 
10.11.
 
Privilege
28

 
10.12.
 
Rules of Construction
28

 
10.13.
 
Unfunded Plan
29

 
10.14.
 
Nonassignability
29

 
10.15.
 
Underlying Incentive Plans and Programs
29






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ARTICLE I

PURPOSE AND EFFECTIVE DATE

The Dow Inc. Voluntary Deferred Compensation Plan for Non-Employee Directors (the “Plan,”) provides non-employee directors of Dow Inc. with the opportunity to elect to defer receipt of their compensation from Dow Inc. and to have these deferred amounts treated as if invested in specified Hypothetical Investment Benchmarks. The Plan shall be effective for deferrals made hereunder on or after January 1, 2005. Effective October 11, 2006, the Hypothetical Investment Benchmarks were changed, as reflected in Appendix A.
The instant restated Plan document is adopted effective as of April 1, 2019 and was amended and restated to (1) reflect the corporate restructuring of Dow Inc. and its subsidiaries in anticipation of, and in connection with, its spinoff from DowDuPont Inc., (2) conform certain administrative and governance provisions to corresponding provisions in other retirement plans sponsored by Dow Inc. and its subsidiaries, and (3) make certain other changes deemed desirable by Dow Inc.

85


ARTICLE II

DEFINITIONS

For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:
2.01.     Administrator

“Administrator” shall mean the person, group of persons, or entity responsible for administering the Plan, as provided in Section 3.01. The Compensation Committee of the Board of Directors of Dow Inc. is the Administrator, except to the extent a different person group of persons or entity is designated as the Administrator pursuant to Section 3.02(a) or the Administrator delegates its responsibilities to another person, group of persons, or entity pursuant to Section 3.02(d).
2.02.     Appeals Administrator

“Appeals Administrator” shall mean the person, group of persons, or entity responsible for reviewing adverse benefit determinations under the Plan. The Compensation Committee of the Board of Directors of Dow Inc. is the Appeals Administrator, except to the extent a different person, group of persons or entity is designated as the Appeals Administrator pursuant to Section 3.02(a) or the Appeals Administrator delegates its responsibility for deciding appeals to another person, group of persons or entity pursuant to Section 3.02(d).
2.03.     Beneficiary

"Beneficiary" shall mean the person, persons or entity designated by the Participant, or otherwise determined under Article VIII, to receive any benefits payable under the Plan pursuant to Article VIII.
2.04.     Board

“Board” shall mean the board of directors of Dow Inc.
2.05.     Change of Control

A “Change of Control” under the Plan shall be deemed to have occurred on:     
a.
the date that any one person, or more than one person acting as a group, acquires ownership of stock of Dow Inc. that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of Dow Inc.;
b.
the date that a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the directors before the date of the appointment or election;
c.
the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of Dow Inc. possessing 30 percent or more of




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the total voting power of the stock of Dow Inc.; or
d.
the date that any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from Dow Inc. that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of Dow Inc. immediately before such acquisition or acquisitions, provided that the following asset transfers shall not result in a Change of Control: (i) a transfer of assets to a stockholder of Dow Inc. in exchange for or with respect to its stock, (ii) a transfer to a corporation, 50 percent or more of the total value or voting power of which is owned directly or indirectly, by Dow Inc., (iii) a transfer to a person, or more than one person acting as a group, that owns 50 percent or more of the stock of Dow Inc., or (iv) a transfer to an entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a person described in clause (iii).
This definition of “Change of Control” is intended to satisfy the definition of a “change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation” as defined in Treas. Reg. § 1.409A-3(i)(5) (or any successor provision thereto), and in no circumstance shall an event be treated as a Change of Control unless this Section 2.05 complies with such requirements.
2.06.     Code

“Code” shall mean the Internal Revenue Code of 1986, as amended.
2.07. Common Stock

“Common Stock” shall mean the common stock of Dow Inc., or any successor entity or entities or other controlled group member of Dow Inc. that is listed on the New York Stock Exchange or such other publicly-traded stock exchange, as determined by the Administrator.
2.08.     Company

“Company” shall mean Dow Inc. and any other entity that is included in the Dow Controlled Group. The Dow Controlled Group for this purpose shall mean a controlled group of corporations within the meaning of section 414(b) or section 414(c) of the Code or an affiliated service group within the meaning of section 414(m) of the Code with respect to Dow Inc. and any other entity required to be aggregated with Dow Inc. under section 414(o) of the Code.
2.09.     Deferral Account

“Deferral Account” shall mean the notional account established for record keeping purposes for each Participant pursuant to Article VI.
2.10.     Deferred Amount

“Deferred Amount” shall mean the amount deferred pursuant to Section 4.02.



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2.11.     Deputy Administrator

“Deputy Administrator” shall mean the person, group of persons, or entity designated as the Deputy Administrator pursuant to Sections 3.02(a) and (d). The Deputy Administrator is responsible for performing certain administrative and ministerial functions of the Plan, as provided in Section 3.02(b).
2.12.     Domestic Partner

“Domestic Partner” shall mean shall mean the person with whom the Participant is in a Domestic Partnership on the Participant’s date of death or other determination date. For purposes of this definition, “Domestic Partnership” means two people claiming to be “domestic partners” who meet all of the requirements of paragraph 2.12(a) or all of the requirements of paragraph 2.12(b):
(a)    Requirements of paragraph (a):
a.
the two people live together on the determination date;
b.
the two people are not married to other persons;
c.
the two people are each other’s sole domestic partner in a committed relationship similar to a legal marriage and with the intent to remain in the relationship indefinitely;
d.
each of the two people is legally competent and able to enter into a contract;
e.
the two people are not related to each other in a way which would prohibit legal marriage;
f.
in entering the relationship with each other, neither of the two people is acting fraudulently or under duress;
g.
the two people are financially interdependent with each other; and
h.
both people have signed a statement acceptable to the Administrator that has been provided to the Administrator, and there has been no change in circumstances that would render such statement invalid as of the determination date.
(b)    Requirements of paragraph (b):
a.
evidence satisfactory to the Administrator is provided that the two people are registered as domestic partners or partners in a civil union in a state or municipality or country that legally recognizes such domestic partnerships or civil unions; and
b.
each of the two people has signed a statement acceptable to the Administrator and have provided it to the Administrator.










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2.13.     Eligible Compensation

“Eligible Compensation” shall mean any:
a.
annual retainers and fees paid by Dow Inc. to Eligible Directors; and
b.
other compensation related to deemed to be Eligible Compensation by the Administrator.
2.14.     Eligible Director

“Eligible Director” shall mean a member of the Board (or of the board of directors of such other Company authorized to participate in the Plan) who is not an employee of the Company.
2.15.     Fair Market Value
  
“Fair Market Value” of a share of Common Stock shall mean the closing price of Common Stock on the New York Stock Exchange on the most recent day on which the Common Stock was so traded that precedes the date the Fair Market Value is to be determined.
2.16.     Form of Payment
 
“Form of Payment” shall mean payment in a lump sum or annual installments not to exceed 10 years as set forth in Section 7.01(b).
2.17.     Hardship Withdrawal

“Hardship Withdrawal” shall mean the early payment of all or part of the balance in a Deferral Account(s) in the event of an Unforeseeable Emergency.
2.18.     Hypothetical Investment Benchmark

“Hypothetical Investment Benchmark” shall mean the phantom investment benchmarks, which are used to measure the return credited to a Participant’s Deferral Account as set forth in Section 6.02.
2.19.     Initial Claims Reviewer

“Initial Claims Reviewer” shall mean the person, group of persons or entity designated as the Initial Claims Reviewer pursuant to Sections 3.02(a) and (d). The Initial Claims Reviewer is responsible for deciding benefit claims under the Plan ( i.e. , first level claims for benefits).
2.20.     Participant

“Participant” shall mean an Eligible Director who makes an election to participate in this Plan by filing a Participation Agreement as provided in Article IV, or who no longer qualifies as an Eligible Director but still has a Deferral Account under the Plan.
2.21.     Participation Agreement

“Participation Agreement” shall mean an agreement filed by an Eligible Director in accordance with Article IV.


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89


2.22.     Phantom Share Units

“Phantom Share Units” shall mean Deferred Amounts that are deemed to be invested in the Dow Inc. Index Fund and converted into units in the manner set forth in Section 6.02.
2.23     Plan

“Plan” shall mean the Dow Inc. Voluntary Deferred Compensation Plan For Non-Employee Directors as set forth herein, together with any and all amendments and supplements hereto.
2.24.     Plan Year

“Plan Year” shall mean the twelve-month period beginning January 1 and ending December 31.
2.25.     Section 16 Participant

“Section 16 Participant” shall mean an officer or director of Dow Inc. required to report transactions in Dow Inc. securities to the Securities and Exchange Commission pursuant to section 16(a) of the Securities Exchange Act of 1934.
2.26.     Separation from Board Service

“Separation from Board Service” or “Separates from Board Service” shall mean a “separation from service” within the meaning of Section 409A.
2.27.     Section 409A

“Section 409A” means Code section 409A, as may be amended from time to time, and the regulations or other guidance issued thereunder, as may be promulgated from time to time.
2.28.     Time of Payment

“Time of Payment” shall mean (i) in the month of July following Separation from Board Service; (ii) in the month of July following the first anniversary of Separation from Board Service; or (iii) in the month of July following the Participant’s 72nd birthday. In addition, Time of Payment also may mean, in accordance with Section 7.05 of the Plan, payment within thirty (30) days after a Change of Control.
2.29.     Unforeseeable Emergency
 
“Unforeseeable Emergency” shall mean (i) severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code section 152(a)) of the Participant, (ii) loss of the Participant’s property due to casualty, or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant as determined by the Administrator. The amount of the distribution may not exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cessation of the Participant’s deferrals under the Plan.

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90


2.30.     Valuation Date

“Valuation Date” shall mean the last day of each calendar month or such other date as the Administrator in its sole discretion may determine.

























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91


ARTICLE III

ADMINISTRATION


3.01.     Duties and Powers of the Administrator

The Administrator shall be responsible for the administration of the Plan and shall have the power and authority to control and manage the operation and administration of the Plan.
The principal duty of the Administrator shall be to see that the Plan is carried out in accordance with its terms. The responsibility and authority of the Administrator shall include, but shall not be limited to, the following duties and powers:
a.
To promulgate and enforce such rules and regulations and prescribe the use of such forms as it shall deem necessary or appropriate for the proper and efficient administration of the Plan;
b.
To interpret the Plan and to resolve any possible ambiguities, inconsistencies and omissions therein or therefrom;
c.
To decide all questions of fact arising under the Plan;
d.
To prepare and disseminate communications to Participants and Beneficiaries as are necessary or appropriate to properly administer the Plan;
e.
To retain third-party administrators, consultants, accountants, actuaries, and other individuals or entities as it deems necessary or advisable to assist it in fulfilling its responsibilities under the Plan, to monitor the performance of such individuals and entities, to decide whether to discontinue the services of such individuals and entities, and to make payment to such individuals and entities in accordance with the terms of the Plan; and
f.
To settle or compromise any claim or dispute involving the Plan and enforce any release of a claim against the Plan or any covenant not to sue the Plan; and
g.
To authorize other Companies to participate in the Plan.

3.02.     Designation of Administrators and Allocation and Delegation of Administrative Responsibilities

a.
Designation of administrators . Dow Inc., as the Plan sponsor, may: (i) designate one more persons to serve as the Deputy Administrator or Initial Claims Reviewer, through an action of the Administrator or its designee; and (ii) designate one or more persons, groups of persons, or entities to serve as the Administrator or Appeals Administrator, in addition to or in lieu of the Administrator or Appeals Administrator named in the plan document, through an action of the Board or of such other person as the Board shall designate.
b.
Deputy Administrator . The Deputy Administrator shall be responsible for performing certain administrative and ministerial functions under the Plan, subject to oversight by the




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Administrator. The Deputy Administrator shall be responsible for determining in the first instance issues related to eligibility, Deferral Accounts, Hypothetical Investment Benchmarks, distribution of Deferred Amounts, determination of account balances, crediting of hypothetical earnings and debiting of hypothetical losses, withdrawals, deferral elections, and any other duties concerning the day-to-day operation of this Plan. The Administrator shall have discretion to delegate such additional duties to the Deputy Administrator as it may determine. The Deputy Administrator shall have authority to retain third-party administrators, consultants, accountants, actuaries, and other individuals or entities as he or she deems necessary to carry out his or her responsibilities under the Plan.
Notwithstanding any provision of the Plan to the contrary, the Administrator or the Board shall have exclusive responsibility for all administrative functions under the Plan to the extent necessary to prevent adverse consequences under Section 16 of the Exchange Act.
c.
Allocation of administrative responsibilities. If there is more than one Administrator, or if the Administrator consists of more than one person, group of persons, or entity, such Administrator may allocate its administrative responsibilities among such persons, group of persons, or entities. Similarly, if any of the Deputy Administrator, Initial Claims Reviewer, or Appeals Administrator consists of more than one person, group of persons or entity, such Deputy Administrator, Initial Claims Reviewer, or Appeals Administrator may allocate its administrative responsibilities among such persons, groups of persons or entities.
d.
Delegation of administrative responsibilities . The Administrator, Deputy Administrator, Initial Claims Reviewer, and Appeals Administrator may designate other persons, groups of persons or entities to carry out their responsibilities under the Plan, provided that such delegation is consistent with the terms of the Plan and the Administrator’s, Deputy Administrator’s, Initial Claims Reviewer’s, or Appeals Administrator’s duties and responsibilities under the Plan.
e.
Authority of delegees . Unless an instrument delegating authority to a delegee specifies otherwise, the delegee shall have the same discretionary powers in carrying out such delegated responsibility as the delegor would have if it had carried out the responsibility itself, and the provisions of Section 3.03 shall apply to such delegee.

3.03.     Decisions of Administrators

a.
The Administrator, Deputy Administrator, Initial Claims Reviewer, and Appeals Administrator shall have the sole and absolute discretion to interpret the Plan documents, make findings of fact and decide any matters arising with respect to their assigned duties and powers under the Plan, and may adopt such rules and procedures as they deem necessary, desirable, or appropriate to carry out their responsibilities under the Plan. In particular: (i) the Administrator and the Deputy Administrator shall have the sole and absolute discretion to decide administrative issues and to exercise the duties and powers set forth in the Plan and shall
have such discretionary power as may be necessary in order to carry out those duties and







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powers; and (ii) the Initial Claims Reviewer and Appeals Administrator shall have the sole and absolute discretion to decide claims and appeals as described in Section 3.05 and to exercise the duties and powers set forth in Section 3.05, and shall have such discretionary power as may be necessary in order to carry out those duties and powers.
b.
The determinations and rules of the Administrator, Deputy Administrator, Initial Claims Reviewer, and Appeals Administrator or other administrator upon any question of fact, interpretation, definition or procedure relating to the Plan or any other matter relating to the Plan shall be conclusive and binding on all persons having an interest in the Plan, except that (i) the determinations of the Initial Claims Reviewer are subject to review by the Appeals Administrator; (ii) the determinations of the Initial Claims Reviewer and Appeals Administrator are subject to the interpretations of the Plan document by the Administrator; and (iii) the determinations of the Deputy Administrator are subject to the interpretations of the Plan document by the Administrator. If challenged in court, the determinations of the Administrator, Deputy Administrator, Initial Claims Reviewer, and Appeals Administrator shall not be subject to de novo review and shall not be overturned unless proven to be arbitrary and capricious based upon the evidence presented to, or considered by, the Administrator, Deputy Administrator, Initial Claims Reviewer, or Appeals Administrator at the time of its determination.

3.04.     Indemnification

Dow Inc. agrees to indemnify and to defend to the fullest extent permitted by law any employee or former employee of the Company or member of the Board who is serving or has served as an Administrator, Deputy Administrator, Initial Claims Reviewer, Appeals Administrator, any delegee of each the Administrator, the Initial Claims Reviewer or the Appeals Administrator (irrespective of whether such delegation is provided in writing, orally or by action), and any Board member, officer, employee, or former employee of a Company who acts on behalf of the Administrator, Deputy Administrator, Initial Claims Reviewer, Appeals Administrator, or delegee with respect to the Plan against all liabilities, damages, costs and expenses (including attorneys’ fees and amounts paid in settlement of any claims approved by Dow Inc.) occasioned by any act or omission to act in connection with the Plan, if such act or omission is in good faith. Notwithstanding the foregoing, nothing in this indemnification provision extends any indemnification rights to any third-party service providers, except for any indemnification rights that may be provided in written contracts between Dow Inc. or the Plan and such third-party service providers.
3.05.     Claim and Review Procedure

a.
Initial Claims . If the Initial Claims Reviewer receives a written claim for benefits from a Participant or other individual, the Initial Claims Reviewer shall review such claim in accordance with this Section 3.05. If the Initial Claims Reviewer determines that such claim should be denied in whole or in part, the Initial Claims Reviewer shall, in writing, notify such claimant within 90 days of receipt of such claim that his or her claim has been denied, unless the Deputy Administrator determines that additional time, not exceeding 90 additional days, is needed and so notifies the claimant. If the claim is denied, the Initial Claims Reviewer shall set forth in writing the specific reasons for such denial and such notification shall:








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i.
state the reason why the claim is being denied;
ii.
set forth the pertinent sections of the Plan relied upon;
iii.
if applicable, set forth an explanation of any additional material or information necessary for the claimant to perfect his or her claim; and
iv.
set forth an explanation of how the claimant can obtain review of such denial under the procedures set forth below.
The claimant may submit written comments, documents, records and other information relating to the claim for benefits. Further, the claimant shall be provided, upon request, and free of charge, reasonable access to and copies of, all documents, records and other information relevant to the claimant’s claim for benefits.
b.
Appeals. Within 60 days after receipt by the claimant of such notice, such claimant may request, by mailing or delivery of written notice to the Appeals Administrator, a review by the Appeals Administrator of the decision denying the claim. If the claimant fails to request such a review within such 60-day period, it shall be conclusively determined for all purposes of this Plan that the denial of such claim by the Initial Claims Reviewer is correct. The Appeals Administrator shall notify a claimant of its determination on appeal within 90 days after receipt of such notice from the claimant, unless the Appeals Administrator determines that additional time, not exceeding 90 additional days, is needed, and so notifies the claimant. If such determination is favorable to the claimant, it shall be binding and conclusive.
If the claim is denied, the Appeals Administrator shall set forth in writing the specific reasons for such denial and such notification shall:
i.
state the reason for denial of the claim;
ii.
set forth the pertinent sections of the Plan relied upon; and
iii.
state that the claimant may bring institute legal proceedings, provided the claimant institutes such legal proceeding within the time periods provided in Section 3.06.
The claimant shall be provided, upon request, and free of charge, reasonable access to and copies of, all documents, records and other information relevant to the claimant’s claim for benefits.
A claim for a benefit under this Section 3.05 shall include any Applicable Claim as defined in Section 3.06(b).

3.06.     Commencement of Legal Action

a.
An Applicable Claim may not be filed in any court until the claimant has exhausted the claims review procedures described in Section 3.05, and unless such claim or action is filed in a














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court with jurisdiction over such claim or action no later than the earlier of (i) 180 days after the mailing or delivery of the adverse determination by the Appeals Administrator, or (ii) one year after:

i.
in the case of a claim or action to recover benefits allegedly due to a claimant under the terms of the Plan or to clarify the claimant’s rights to future benefits under the terms of the Plan, the earliest of (i) the date the first benefit payment was actually made, (ii) the date the first benefit payment was allegedly due, and (iii) the date the Plan first repudiated its alleged obligation to provide such benefits (regardless of whether such repudiation occurred before or during the administrative review process),
ii.
in the case of a claim or action to enforce an alleged right under the Plan (other than a right to benefits which are subject to Section 3.06(a)(i)), the date the Initial Claims Reviewer or Appeals Administrator first denied the claimant’s request to exercise such right, regardless of whether such denial occurred during the administrative review process,
iii.
in the case of any other claim or action described in Section 3.06(b)(iv), below, the earliest date on which the claimant knew or should have known of the material facts on which such claim or action is based, regardless of whether the claimant was aware of the legal theory underlying the claim or action,
provided that if a request for administrative review, timely made in accordance with Section 3.05, is pending before the Initial Claims Reviewer or Appeals Administrator when the period described in this Section 3.06 expires, the deadline for filing such claim or action in a court with proper jurisdiction shall be extended to the date that is 180 days after the mailing or delivery of the adverse determination by the Appeals Administrator.
The period described by this Section 3.06 is referred to as the “Applicable Limitations Period.” The Applicable Limitations Period replaces and supersedes any limitations period ending at a later time that might otherwise be deemed applicable under state or federal law in the absence of this Section 3.06. Except as provided in the following two sentences, a claim or action filed after the expiration of the Applicable Limitations Period shall be deemed time-barred. The Applicable Limitations Period may be extended by the Administrator or its designee in his sole discretion upon a showing of exceptional circumstances that, in the opinion of the Administrator or its designee, provide good cause for an extension. The exercise of this discretion is committed solely to the Administrator or its designee and is not subject to review.
b.
For purposes of this Section 3.06, an Applicable Claim is:
i.
a claim or action to recover benefits allegedly due under the provisions of the Plan or by reason of any law,
ii.
a claim or action to clarify rights to future benefits under the Plan,
iii.
a claim or action to enforce rights under the Plan, or
iv.
any other claim or action that (i) relates to the Plan, and (ii) seeks a remedy, ruling, or judgment of any kind against the Plan, the Company, the Administrator, the Initial Claims Reviewer, the Appeals Administrator or any delegee of the Administrator,




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Initial Claims Reviewer or Appeals Administrator, or any officer, employee, or former employee of the Company or other person who acts on behalf of the Plan.
c.
In the event of any Applicable Claim brought by or on behalf of two or more claimants, this Section 3.06, including the Applicable Limitations Period, shall apply separately with respect to each claimant.

3.07.     Forum Selection

a.
To the fullest extent permitted by law, any putative class action lawsuit relating to the Plan, the lawfulness of any Plan provision, the administration of the Plan, or the performance or non-performance of an Administrator, Deputy Administrator, Initial Claims Reviewer, Appeals Administrator, their delegees or any officer, employee or former employee of the Company or other persons who act on their behalf with respect to the Plan shall be filed in one of the following jurisdictions: (i) the jurisdiction in which the Plan is principally administered, which is currently within the territorial boundaries of the Northern Division of the United States District Court for the Eastern District of Michigan; or (ii) the jurisdiction in which the largest number of putative class members resides (or if that jurisdiction cannot be determined the jurisdiction in which the largest number of class members is reasonably believed to reside).
b.
If any putative class action within the scope of paragraph (a) above is filed in a jurisdiction other than one of those described in paragraph (a), or if any non-class action filed in such a jurisdiction is subsequently amended or altered to include class action allegations, then the Plan, all parties to such action that are related to the Plan, including all alleged Participants and Beneficiaries, shall take all necessary steps to have the action removed to, transferred to or re-filed in a jurisdiction described in paragraph (a). Such steps may include, but are not limited to, (i) a joint motion to transfer the action; or (ii) a joint motion to dismiss the action without prejudice to its re-filing in a jurisdiction described in paragraph (a), with any applicable time limits or statutes of limitations applied as if the suit or class action allegation had originally been filed or asserted in a jurisdiction described in paragraph (a) at the same time that it was filed or asserted in a jurisdiction not described therein.
c.
This provision does not relieve any putative class member from any obligation existing under the Plan or by law to exhaust administrative remedies before initiating litigation.

3.08.     Expenses
 
Any expense incurred by the Company, the Administrator, Deputy Administrator, Initial Claims Reviewer, and Appeals Administrator, and their delegees, relative to the administration of this Plan shall be paid by Dow Inc. and/or may be deducted from the Deferral Accounts of the Participants as determined by the Administrator or Deputy Administrator.






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ARTICLE IV

PARTICIPATION AGREEMENT

4.01.     Participation Agreement

An Eligible Director may elect to defer Eligible Compensation under the Plan by filing a Participation Agreement with the Deputy Administrator in accordance with the Plan’s enrollment procedures. An individual shall not be eligible to file a Participation Agreement unless he or she qualifies as an Eligible Director for the Plan Year to which the Participation Agreement applies.
A Participation Agreement normally must be filed on or prior to the December 15 (Eastern Standard Time) immediately preceding the Plan Year to which the Participation Agreement applies. The Administrator, in its sole discretion and to the extent permitted by Section 409A, may permit: (i) a Participation Agreement to be filed after the December 15 but on or before the December 31 (Eastern Standard Time) immediately preceding the Plan Year to which the Participation Agreement applies; and (ii) a newly-eligible Eligible Director to submit a Participation Agreement within 30 days after the date the Eligible Director becomes eligible, and deferrals shall commence as soon as practical thereafter for Eligible Compensation earned after the Deputy Administrator receives a completed and timely submitted Participation Agreement.
An individual who no longer qualifies as an Eligible Director shall continue to be a Participant in the Plan until he or she no longer has a Deferral Account under the Plan.
4.02.     Contents of Participation Agreement

Subject to Article VII, each Participation Agreement shall set forth the amount of Eligible Compensation for the Plan Year to which the Participation Agreement relates that is to be deferred under the Plan (the “Deferred Amount”). Each Participation Agreement shall also set forth a Time of Payment and a Form of Payment in accordance with the provisions of Article VII. Participation Agreements are to be completed in a format specified by the Deputy Administrator. Notwithstanding the foregoing, if a Participant files a Participation Agreement but fails to designate the Form of Payment or the Time of Payment for a Deferred Amount in the manner required by the Plan, payment of such Deferred Amount shall be made in a lump sum or in the month of July following Separation from Board Service, as applicable.
4.03.     Modification or Revocation of Election by Participant

A Participant may not change the amount of his or her Deferred Amount during a Plan Year, except as contemplated in the second to last sentence of Section 4.01 (concerning elections for newly Eligible Directors) or unless otherwise permitted under Section 409A. A Participant’s Participation Agreement may not be made, modified, or revoked retroactively.






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ARTICLE V

DEFERRED COMPENSATION

5.01.     Elective Deferred Compensation
The Deferred Amount of a Participant with respect to each Plan Year of participation in the Plan shall be credited to the Participant’s Deferral Account as and when such Deferred Amount would otherwise have been paid to the Participant. An earnings credit shall be applied to the Deferral Account under Section 6.02 based on a Participant’s investment selection among the Hypothetical Investment Benchmarks.
For Section 16 Participants who elect to direct their Deferred Amount to the Hypothetical Investment Benchmark of the Dow Inc. Stock Index Fund (as defined in Section 6.02(b), below), the Deferred Amount of that Participant with respect to each Plan Year of participation shall be credited to the Participant’s Deferral Account in the Hypothetical Investment Benchmark of 125% of Ten Year Treasury Notes as and when such Deferred Amount would otherwise have been paid to the Participant; on a quarterly basis (on the last business day of the months of March, June, September and December), such Deferred Amount shall be reallocated to the Hypothetical Investment Benchmark of the Dow Inc. Stock Index Fund.
5.02.     Vesting of Deferral Account

A Participant shall be 100% vested in his or her Deferral Account as of each Valuation Date.















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ARTICLE VI

MAINTENANCE AND INVESTMENT OF ACCOUNTS

6.01.     Maintenance of Accounts

Separate Deferral Accounts shall be maintained for each Participant. More than one Deferral Account may be maintained for a Participant as necessary to reflect (a) various Hypothetical Investment Benchmarks and/or (b) separate Participation Agreements specifying different Times of Payment and Forms of Payment. A Participant’s Deferral Account(s) shall be utilized solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to this Plan and shall not constitute or be treated as a trust fund of any kind. The Deputy Administrator shall determine the balance of each Deferral Account, as of each Valuation Date, by adjusting the balance of such Deferral Account as of the immediately preceding Valuation Date to reflect changes in the value of the deemed investments thereof, credits and debits pursuant to Section 6.02, and distributions pursuant to Article VII with respect to such Deferral Account since the preceding Valuation Date.
6.02.     Hypothetical Investment Benchmarks

e.
Direction of Hypothetical Investments . Each Participant shall be entitled to direct the manner in which his or her Deferral Accounts will be deemed to be invested, selecting among the Hypothetical Investment Benchmarks designated by the Administrator or the Deputy Administrator acting individually, or their respective delegates, from time to time, and in accordance with any such rules, regulations, and procedures as the Administrator or the Deputy Administrator may establish from time to time. Notwithstanding anything to the contrary herein, earnings and losses based on a Participant’s investment elections shall begin to accrue as of the date such Participant’s Deferred Amounts are credited to his or her Deferral Accounts. Participants, except for Section 16 Participants, can reallocate among the Hypothetical Investment Benchmarks on a daily basis. Section 16 Participants can reallocate among the Hypothetical Investment Benchmarks in accordance with such rules, regulations, and procedures as the Administrator may establish from time to time.
f.
Dow Inc. Stock Index Fund and DowDuPont Inc. Stock Index Fund .
1.
The Hypothetical Investment Benchmarks available for Deferral Accounts shall include the “Dow Inc. Stock Index Fund.” The Dow Inc. Stock Index Fund shall consist of deemed investments in shares of Common Stock, including reinvestment of dividends and stock splits. Deferred Amounts that are deemed to be invested in the Dow Inc. Index Fund shall be converted into Phantom Share Units based upon the Fair Market Value of the Common Stock as of the date(s) the Deferred Amounts are to be credited to a Deferral Account. The portion of any Deferral Account that is invested in the Dow Inc. Index Fund shall be credited, as of each dividend payment date, with additional Phantom Share Units of Common Stock with respect to cash dividends paid on the Common Stock with record dates during the period beginning on the day after the most recent preceding Valuation Date and ending on such Valuation Date.





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2.
When a reallocation or a distribution of all or a portion of a Deferral Account that is invested in the Dow Inc. Stock Index Fund is to be made, the balance in such a Deferral Account shall be determined by multiplying the Fair Market Value of one share of Common Stock on the most recent Valuation Date preceding the date of such reallocation or distribution by the number of Phantom Share Units to be reallocated or distributed. Upon a distribution, the amounts in the Dow Inc. Stock Index Fund shall be distributed in the form of cash having a value equal to the Fair Market Value of a comparable number of actual shares of Common Stock.
3.
In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, spinoff or other change in the corporate structure of Dow Inc., The Dow Chemical Company, or another Company affecting Common Stock, or a sale by Dow Inc., The Dow Chemical Company, or another Company of all or part of its assets, or any distribution to stockholders other than a normal cash dividend, then the Administrator may make appropriate adjustments to the number of Phantom Share Units credited to any Deferral Account to the extent that the Administrator deems such adjustments necessary. The determination of the Administrator as to such adjustments, if any, to be made shall be conclusive.
4.
Notwithstanding any other provision of this Plan, the Administrator shall adopt such procedures as it may determine are necessary to ensure that with respect to any Participant who is actually or potentially subject to section 16(b) of the Securities Exchange Act of 1934, as amended, the crediting of deemed shares to his or her Deferral Account is deemed to be an exempt purchase for purposes of such section 16(b), including, without limitation, requiring that no shares of Common Stock or cash relating to such deemed shares may be distributed for six months after being credited to such Deferral Account.
5.
The Hypothetical Investment Benchmarks available for Deferral Accounts shall also include the “DowDuPont Inc. Stock Index Fund,” but only to the extent that a Participant’s Deferral Account is deemed to be invested in DowDuPont Inc. common stock prior to the Spinoff. The DowDuPont Inc. Stock Index Fund shall consist of deemed investments in the common stock of DowDuPont Inc. or any successor thereto (as determined by the Administrator in its sole discretion), including stock splits but not dividends. Dividends shall be deemed to be invested in the manner determined the Administrator. Similar rules and procedures as described in this Section 6.02(b) with respect to the Dow Inc. Stock Index Fund shall apply with respect to the DowDuPont Inc. Stock Index Fund and its successors, to the extent required by section 16(b) of the Securities Exchange Act of 1934, as amended, or by rules established by the Administrator. For the avoidance of doubt: (A) a Participant may not direct that any amounts allocated to his or her Deferral Account after the Spinoff will be deemed to be invested in the DowDuPont Inc. Stock Index Fund or any successor thereto; and (B) amounts deemed to be invested in the DowDuPont Inc. Stock Index Fund prior to the Spinoff may continue to be deemed to be so invested










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following the Spinoff in accordance with rules established by the Administrator.

For purposes of this Section 6.02(b), the "Spinoff" means the separation of Dow Inc. from DowDuPont Inc. by means of a pro rata distribution of all of the then-issued and outstanding shares of Common Stock to DowDuPont's stockholders.
























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ARTICLE VII

BENEFITS
7.01.     Time and Form of Payment

a.
Time of Payment . Upon the Time of Payment elected by the Participant in the applicable Participation Agreement for each Deferral Account, Dow Inc. shall pay to the Participant the balance of such Deferral Account or commence installment payments from the Deferral Account, in each case, as determined in the manner set forth in Section 7.01(b) below.
b.
Form of Payment : Dow Inc. shall make cash payments from a Participant’s Deferral Accounts in the Form of Payment elected by the Participant in the applicable Participation Agreement for each Deferral Account. Lump sum payments shall consist of an amount equal to the balance of such Deferral Account determined as of the most recent Valuation Date preceding the payment date. Installment payments shall consist of an annual amount equal to (i) the balance of such Deferral Account as of the most recent Valuation Date preceding the applicable annual payment date times (ii) a fraction, the numerator of which is one and the denominator of which is the number of remaining installment years (including the year for the installment being paid). Each such installment shall be deemed to be made on a pro rata basis from each of the different deemed investments of the Deferral Account. Notwithstanding any election by a Participant in a Participation Agreement or provisions of the Plan to the contrary, in the event the sum of all benefits payable to the Participant is less than or equal to ten thousand dollars ($10,000), the Administrator shall pay such benefits in a single lump sum.

7.02.     Changing Time or Form of Benefit

A Participant may subsequently elect an alternative Time of Payment or Form of Payment (only to the extent permitted by the Plan at the time of such election) in a writing filed with the Deputy Administrator at the time and in the manner required by the Deputy Administrator; provided, however, that:
a.
the election must be made at least twelve (12) months prior to the date the distribution is scheduled to be made or commence;
b.
a distribution may not be made earlier than at least five (5) years following the date the distribution would have been made or commenced; and
c.
the election may not cause the payments to be accelerated.

7.03.     Survivor Benefit

Notwithstanding any election by a Participant in a Participation Agreement or provisions of the Plan to the contrary, if a Participant dies prior to receiving full payment of his or her Deferral Account(s), Dow Inc. shall pay the remaining balance (determined as of the most recent Valuation Date preceding death) to the





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Participant’s Beneficiary or Beneficiaries (as the case may be) in a lump sum in cash as soon as administratively practicable after the Participant’s death, provided that such Beneficiary or Beneficiaries shall not have the right to designate the taxable year of payment.
7.04.     Hardship Withdrawals

Notwithstanding the provisions of Section 7.01 and any elections by a Participant in a Participation Agreement, a Participant shall be entitled to early payment of all or part of the balance in his or her Deferral Account(s) in the event of an Unforeseeable Emergency, in accordance with this Section 7.04. A distribution pursuant to this Section 7.04 may only be made to the extent reasonably needed to satisfy the Unforeseeable Emergency need, and may not be made if such need is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant’s assets to the extent such liquidation would not itself cause severe financial hardship, or (iii) by cessation of participation in the Plan. An application for an early payment under this Section 7.04 shall be made to the Administrator in such form and in accordance with such procedures as the Administrator shall determine from time to time. The determination of whether and in what amount a distribution will be permitted pursuant to this Section 7.04 shall be made by the Administrator. Upon such an early payment under this Section 7.04 in a Plan Year, the Participant’s deferral election pursuant to Article IV shall be cancelled with respect to any Deferred Amounts that would otherwise be deferred for the remainder of such Plan Year.
7.05.     Change of Control

An Eligible Director may, when completing a Participation Agreement during the enrollment period, elect that, if a Change of Control occurs, the Participant shall receive a lump sum payment of the balance of the Deferral Account within thirty (30) days after the Change of Control. This election is irrevocable and shall apply to the entire Deferral Account both before and after Separation from Board Service. The Deferral Account balance shall be determined as of the most recent Valuation Date preceding the month in which Change of Control occurs. All Participation Agreements previously filed by a Participant who receives a distribution under this Section 7.05 shall be null and void (including without limitation Participation Agreements with respect to Plan Years or performance periods that have not yet been completed), and such a Participant shall not thereafter be entitled to file any Participation Agreements under the Plan with respect to the first Plan Year that begins after such distribution is made.
7.06.     Permitted Accelerations of Distribution

A Participant’s benefits shall be paid earlier than the date(s) specified in this Article VII under the following circumstances, each only to the extent permitted under Section 409A:
a.
Ethics Agreement. To the extent necessary for the Participant to comply with an ethics agreement with the Federal government, and to the extent reasonably necessary to avoid the violation of applicable Federal, state, or local ethics law or conflicts of interest law, to the extent permitted by Treas. Reg. § 1.409A-3(j)(4)(iii);
b.
Tax Obligations. To comply with state, local, or foreign tax obligations that apply to amounts deferred under the Plan before the amounts are paid or made available to the Participant, to the extent permitted by Treas. Reg. § 1.409A-3(j)(4)(xi);




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c.
Section 409A Violations. To the extent required to be included in income as a result of a violation of Section 409A, to the extent permitted by Treas. Reg. § 1.409A-3(j)(4)(vii);
d.
Debt Owed to the Company. To the extent necessary to satisfy a debt of the Participant to the Company and to the extent permitted by Treas. Reg. § 1.409A-3(j)(4)(xiii), where (i) such debt is incurred in the ordinary course of the service relationship, (ii) the entire amount used to satisfy such debt in any fiscal year of the Company does not exceed $5,000, and (iii) the offset against such debt is made at the same time and in the same amount as such debt otherwise would have been due and collected from the Participant;
e.
Disputed Amounts. To the extent of any settlement between the Company and the Participant of an arm’s length bona fide dispute as to the Participant’s right to a deferred compensation amount under the Plan, and to the extent permitted by Treas. Reg. § 1.409A-3(j)(4)(xiv), provided that such settlement amount is at least 25 percent less than the present value of the disputed amount and is not made at the same time as or proximate to a downturn in the financial health of Dow Inc.; and
f.
Other Permissible Circumstances. In the sole discretion of the Administrator, under any other circumstance permitted under Section 409A.

7.07.     Permitted Delays in Distribution

Notwithstanding any other provision of the Plan to the contrary, amounts payable hereunder may be delayed after the date(s) specified under this Article VII under the following circumstances, each to the extent permitted under Section 409A:
a.
Federal Securities Laws. Payment may be delayed if the Administrator reasonably anticipates that the making of a payment would violate Federal securities laws or other applicable law, provided that the payment is made at the earliest date at which the Administrator reasonably anticipates that the making of the payment will not cause such violation; and
b.
Other Events as Permitted by § 409A. Payment may be delayed upon such other events or conditions as may be permitted in regulations or other guidance issued under Section 409A.

7.08.     Administrative Provisions Regarding Distributions
a.
Domestic Relations Orders. Upon receipt of a valid domestic relations order, as determined by the Administrator pursuant to Treas. Reg. § 1.409A-3(j)(4)(ii) and the domestic relations order procedures applicable to the Plan (the “Procedures”), that require distribution of all or a portion of a Participant’s vested benefit under the Plan to an alternate payee, the required distribution(s) shall be paid to the alternate payee in accordance with such order, to the extent not already paid to a Participant or Beneficiary. Except as otherwise provided in the Procedures, however, a domestic relations order shall be valid with respect to the Plan: (a) only if the Administrator determines that the Plan is or will be able to, with sufficient certainty and without undue administrative burden, ascertain the amount of the benefit assigned to




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the alternate payee and the amount assigned to the Participant under the order; (b) if the order is a separate interest order, only if it can be interpreted as providing for an immediate lump sum distribution to the alternate payee of the portion of the benefit assigned to the alternate payee; and (c) if the order is a shared payment order, only if it can be interpreted to provide that upon the death of the alternate payee, the alternate payee’s interest shall revert to the Participant and not to any contingent alternate payee. In addition, an order that is approved after payment to the Participant commences shall be valid only if it is a shared payment order. References in the Plan to Participants shall include alternate payees to the extent (x) required by an applicable valid domestic relations order and (y) consistent with the Procedures and the terms of the Plan.
b.
Incompetence. If the Administrator determines that any person entitled to receive benefits hereunder is not physically or mentally capable of electing the time or form, or receiving or acknowledging receipt, of benefits under the Plan, the Administrator may make benefit payments to the court-appointed legal guardian of the such person, to an individual who has become the legal guardian of such person by operation of state law, or to another individual whom the Administrator determines is the appropriate person to receive such benefits on behalf of the person entitled to receive benefits.
c.
Unclaimed Payments and Lost or Missing Participants. Benefits that the Plan is unable to pay because a Participant, Beneficiary, spouse, Domestic Partner, or other intended recipient has not been located, and benefit payments made by checks that are not cashed or deposited or by electronic funds transfers or other payment methods that are not completed and any benefits to which such benefit payments relate, shall be forfeited if the Plan is not able to locate the intended recipient, or the payment is not completed, within one year after the Plan first attempts to make the payment. The Deputy Administrator is entitled to rely on the last address provided to the Plan by the intended recipient and has no obligation to search for or ascertain such individual’s whereabouts.
d.
Incorrect Payment of Benefits. If the Deputy Administrator determines in its sole discretion that the Plan made an overpayment of the amount of any benefits due any payee under the Plan, and that a correction is necessary or desirable under the law, then to the extent permitted by Section 409A, the Plan may recover the amounts either by requiring the payee to return the excess to the Plan, by reducing any future Plan payments to the payee, or by any other method deemed reasonable by the Deputy Administrator.
e.
Administrative Delay. The Deputy Administrator may make payment on any day later than the date specified in the Plan as a result of administrative delay to the extent that such payment is treated as being paid on the date specified in the Plan under Treas. Reg. section 1.409A-3(d), which generally permits payment to be made later within the same calendar year, or, if later, within 2½ months following the date specified in the Plan, provided that the Participant is not permitted to designate the taxable year of payment.












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7.09.     Disputed Payments and Refusals to Pay

If a Participant or Beneficiary believes he is entitled to have received a benefit but has not received payment, the Participant or Beneficiary must accept any payment made under the Plan and make prompt, reasonable, good faith efforts to collect the remaining portion of the payment, as determined under Treas. Reg. § 1.409A-3(g). For this purpose (and as determined under such regulation), efforts to collect the payment will be presumed not to be prompt, reasonable, good faith efforts unless the Participant or Beneficiary provides notice to the Administrator within 90 days of the latest date upon which the payment could have been timely made in accordance with the terms of the Plan and the regulations under Section 409A, and unless, if not paid, the Participant or Beneficiary takes further enforcement measures within 180 days after such latest date. The requirements of this Section 7.09 shall be in addition to, and shall not supersede or be superseded by, the provisions of Section 3.05.




















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ARTICLE VIII

BENEFICIARY DESIGNATION

8.01.     Beneficiary Designation

Each Participant shall have the right to designate a person, persons or entity as his or her Beneficiary or Beneficiaries. A Beneficiary designation shall be made, and may be amended, by the Participant by filing a written designation with the Deputy Administrator, on such form and in accordance with such procedures as the Deputy Administrator shall establish from time to time.
8.02.     No Beneficiary Designation

If a Participant fails to designate a Beneficiary as provided above or if all designated Beneficiaries predecease the Participant or his or her Beneficiary, then the Participant’s Beneficiary shall be deemed to be the Default Beneficiary. For purposes of this Section 8.02, “Default Beneficiary” shall mean the spouse or Domestic Partner of the Participant, if any; (ii) if there is no spouse or Domestic Partner, the child(ren) of the Participant, if any; and (iii) if there are no spouse, Domestic Partner or children, the estate of the Participant.

















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ARTICLE IX

AMENDMENT AND TERMINATION OF PLAN

9.01.     Amendment

The Board may at any time amend this Plan in whole or in part, provided, however, that no amendment shall be effective to decrease the balance in any Deferral Account as accrued at the time of such amendment, nor shall any amendment otherwise have a retroactive effect.
9.02.     Right to Terminate and Manner of Termination
  
The Board may at any time terminate the Plan with respect to future Participation Agreements. The Board may also terminate the Plan in its entirety at any time for any reason, including without limitation if, in its judgment, the continuance of the Plan, the tax, accounting, or other effects thereof, or potential payments thereunder would not be in the best interests of Dow Inc. Upon termination of the Plan, no further deferrals of Eligible Compensation shall be permitted; however, earnings, gains, and losses shall continue to be credited to Deferral Accounts in accordance with Article VI until the Deferral Account balances are fully distributed. Any termination pursuant to this Section 9.02 shall be performed in a manner consistent with the requirements of Section 409A.
















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ARTICLE X

MISCELLANEOUS

10.01.     Plan is Binding

This Plan shall be binding upon and inure to the benefit of Dow Inc., its successors, Participants, Beneficiaries, and their respective successors, assigns (to the extent such assignment is permitted under the Plan), heirs, personal representatives, executors, administrators, and legatees.
10.02.     Effect of Plan on Service Relationship

Nothing contained herein shall in any manner affect any service relationship between the Company and any Company service provider, nor shall anything contained herein be construed to enlarge upon or to add, directly or indirectly, to the rights of any individual service provider, except the right to become eligible to become an Eligible Director under the Plan subject to and as provided in the Plan document.
This Plan does not constitute a contract of employment or service or impose in the Participant or the Company any right, or obligation, for the Participant to remain on the Board or otherwise remain a service provider to the Company.
10.03.     Governing Law

The Plan shall be administered, construed and enforced under the laws of the State of Delaware, the laws of the State of Delaware shall apply, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this provision to the substantive law of another jurisdiction.
10.04.     Tax Withholding

The Company shall have the right to withhold taxes from any payments made pursuant to the Plan, or make such other provisions as it deems necessary or appropriate to satisfy any of its obligations to withhold federal, state, local or foreign income or other taxes incurred by reason of payments pursuant to the Plan. In lieu thereof, the Administrator shall have the right, to the extent permitted by Section 409A and other provisions of law, to withhold the amount of such taxes from any other sums due or to become due from the Company to the Participant or any Beneficiary, upon such terms and conditions as the Administrator may prescribe.
10.05.    Savings Clause

If any provision of the Plan should be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.
10.06.     Notices

No notice, election or communication in connection with the Plan made or submitted by any Participant, Beneficiary, claimant, or other person shall be effective unless duly executed and filed with the Deputy Administrator in the form and manner required by the Deputy Administrator.


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10.07.     Waiver

No term, condition, or provision of the Plan shall be deemed waived unless the purported waiver is in writing signed by the Administrator. No waiver signed by the Administrator shall be deemed a continuing waiver unless so specifically stated in the writing, and any such waiver shall operate only for the stated period and only as to the specific term, condition, or provision waived.
10.08.     Reliance on Information Provided

The Company, Administrator, Deputy Administrator, Initial Claims Reviewer, Appeals Administrator, and any person to whom the Plan’s operation or administration is delegated may rely conclusively on any advice, opinion, valuation, or other information furnished by any actuary, accountant, appraiser, legal counsel, or physician whom such entity or person engages or employs. A good faith action or omission based on this reliance is binding on all parties, and no liability can be incurred for it except as the law requires.
10.09.     Plan Interpretation and Section 409A

The Plan shall be construed and interpreted to comply with, or be exempt from, Section 409A, and all provisions of the Plan shall be construed in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. If the Administrator determines that any provision of the Plan is, or might be, inconsistent with the restrictions imposed by Section 409A, such provision shall be deemed to be amended to the extent that the Administrator determines it is necessary to bring it into compliance with Section 409A. Any such deemed amendment shall be effective as of the earliest date such amendment is necessary under Section 409A.
Notwithstanding the foregoing, nothing in the Plan shall be interpreted or construed to transfer any liability for any tax (including a tax or penalty due as a result of a failure to comply with Section 409A) from a Participant to the Company or to any other individual or entity. Each installment payment required under this Plan shall be considered a separate payment for purposes of Section 409A.
Notwithstanding anything in the contrary in the Plan, distributions may not be made to a Participant who is a Key Employee upon a Separation from Board Service before the date which is six months after the date of the Key Employee’s Separation from Board Service (or, if earlier, the date of the Key Employee’s death). During the period between a Key Employee’s Separation from Board Service and a distribution pursuant to this Section 10.09, the Key Employees’ Deferral Accounts shall remain invested among the same Hypothetical Investment Benchmarks as at the time of the Separation from Board Service, and the Participant shall retain the right to direct the manner in which his or her Deferral Accounts will be deemed to be invested. During this time, earnings, gains and losses shall continue to be credited to Deferral Account balances in accordance with Article VI until the Deferral Account balances are fully distributed.
For purposes of this Section 10.09,      “Key Employee” shall mean a Participant who is a key employee within the meaning of Treas. Reg. § 1.409A-1(i), as determined in accordance with the procedures adopted by the Company.




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10.10.     Scrivener’s Errors

The Plan shall be applied and interpreted without regard to any scrivener’s error in this instrument. The determination whether a scrivener’s error has occurred shall be made by the Administrator in the exercise of its best judgment and sole discretion, based on its understanding of the intent of Dow Inc. as settlor of the Plan, and taking into account such evidence, written or oral, as it deems appropriate or helpful. The Administrator is authorized to correct any scrivener’s errors discovered in this instrument, retroactively or prospectively.
10.11.     Privilege

If Dow Inc., The Dow Chemical Company, or other Company (or a person or entity acting on behalf of Dow Inc., The Dow Chemical Company, or other Company) or an Administrator, Deputy Administrator, Initial Claims Reviewer, Appeals Administrator, any delegee of the Administrator, Deputy Administrator, Initial Claims Reviewer or Appeals Administrator, or any officer, employee, or former employee of Dow Inc. The Dow Chemical Company, or any other Company (an “Advisee”) engages an attorney, accountant, actuary, consultant, or other person or entity to advise the Advisee on issues related to the Plan or the Advisee’s responsibilities under the Plan (an “Advisor”):
a.
The Advisor’s client is the Advisee and not any Participant, service provider, Beneficiary, spouse or Domestic Partner, alternate payee, claimant, service provider, or other person;
b.
The Advisee shall be entitled to preserve the attorney-client privilege and any other privilege accorded to communications with the Advisor, and all other rights to maintain confidentiality, to the full extent permitted by law; and
c.
No Participant, service provider, Beneficiary, spouse or Domestic Partner, alternate payee, claimant, or other person shall be permitted to review any communication between the Advisee and any of its or his or her Advisors with respect to whom a privilege applies, unless mandated by a court order.

10.12.     Rules of Construction

For purposes of the Plan, unless the contrary is clearly indicated by the context:
a.
the use of the masculine gender in this Plan shall also include within its meaning the feminine gender and vice versa;
b.
the use of the singular shall also include within its meaning the plural and vice versa;
c.
the word “include” shall mean to include, but not to be limited to;
d.
any reference to a statute or section of a statute shall further be a reference to any successor or amended statute or section, and any regulations or other guidance of general applicability issued thereunder;
e.
the title of an officer, employee, or entity used in this Plan (including, but not limited to, the title(s) referred to in the definitions of Administrator, Deputy Administrator, Initial Claims Reviewer, and Appeals Administrator), means the respective officer, employee, or entity of Dow Inc. or The Dow Chemical Company and means any successor title to such position as such title may be changed from time to time;



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f.
references to an Administrator, Deputy Administrator, Appeals Administrator, Initial Claims Reviewer, officer or employee of Dow Inc. or The Dow Chemical Company, or other person or entity with responsibility or authority under the Plan shall include delegees (if any) of such entity or person, with respect to such entity’s or person’s delegated responsibilities; and
g.
the captions and headings of each article, section, paragraph, and other provision of the Plan are for convenience and reference only and are not to be considered in interpreting the terms and conditions of the Plan.

10.13.     Unfunded Plan

This Plan is intended to be an unfunded plan providing deferred compensation. All payments pursuant to the Plan shall be made from the general assets of Dow Inc. and no special or separate fund shall be established or other segregation of assets made to assure payment. No Participant or other person shall have under any circumstances any interest in any particular property or assets of Dow Inc., or any other Company as a result of participating in the Plan. Notwithstanding the foregoing, Dow Inc. may (but shall not be obligated to) create one or more grantor trusts, the assets of which are subject to the claims of Dow Inc.’s creditors, to assist it in accumulating funds to pay its obligations.
10.14.     Nonassignability

Except as specifically set forth in the Plan, neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.
10.15.     Underlying Incentive Plans and Programs
Nothing in this Plan shall prevent any Company from modifying, amending or terminating the compensation or the incentive plans and programs pursuant to which amounts are earned and which are deferred under this Plan.










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IN WITNESS WHEREOF , Dow Inc. which has been designated as the sponsor of the Plan with all of the rights and obligations attendant thereto, has caused this amended and restated Plan document to be executed in its name and on its behalf by its officers duly authorized on this 1st day of April, 2019.


 
DOW INC.
 
 
 
/s/ KAREN S. CARTER
 
By: Karen S. Carter
 
 
 
Its: Chief Human Resources Officer








































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Ankura Consulting Group, LLC's Consent
EXHIBIT 23

Ankura Consulting Group, LLC (“Ankura”) hereby consents to the use of Ankura's name and the reference to Ankura's reports in this Quarterly Report on Form 10-Q of Dow Inc. and The Dow Chemical Company for the period ended March 31, 2019 , and the incorporation by reference thereof in the following Registration Statements of Dow Inc. and The Dow Chemical Company:

DOW INC.
Form S-3:
 
 
 
No.
333-230668
 
 
Form S-8:
 
 
 
Nos.
333-220352-01
 
333-230680
 
333-230681


THE DOW CHEMICAL COMPANY
Form S-4:
 
 
 
No.
333-88443
 
 
Form S-8:
 
 
 
Nos.
33-61795
 
333-40271
 
333-91027
 
333-103519
 
333-220352


/s/ B. THOMAS FLORENCE
B. Thomas Florence
Senior Managing Director
Ankura Consulting Group, LLC
May 3, 2019




115


 
 
Dow Inc.
The Dow Chemical Company and Subsidiaries
 
EXHIBIT 31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


I, Jim Fitterling, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Dow Inc. and The Dow Chemical Company;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

4.
The registrants' other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrants and have:

a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)
evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)
disclosed in this report any change in the registrants' internal control over financial reporting that occurred during the registrants' most recent fiscal quarter (the registrants' fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants' internal control over financial reporting; and

5.
The registrants' other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of registrants' board of directors (or persons performing the equivalent function):

a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants' ability to record, process, summarize and report financial information; and

b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting.

Date: May 3, 2019
 
/s/ JIM FITTERLING
Jim Fitterling
Chief Executive Officer


116


 
 
Dow Inc.
The Dow Chemical Company and Subsidiaries
 
EXHIBIT 31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


I, Howard I. Ungerleider, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Dow Inc. and The Dow Chemical Company;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

4.
The registrants' other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrants and have:

a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)
evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)
disclosed in this report any change in the registrants' internal control over financial reporting that occurred during the registrants' most recent fiscal quarter (the registrants' fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants' internal control over financial reporting; and

5.
The registrants' other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants' auditors and the audit committee of registrants' board of directors (or persons performing the equivalent function):

a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants' ability to record, process, summarize and report financial information; and

b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting.

Date: May 3, 2019
 
/s/ HOWARD I. UNGERLEIDER
Howard I. Ungerleider
President and Chief Financial Officer


117


 
 
Dow Inc.
The Dow Chemical Company and Subsidiaries
 
EXHIBIT 32.1
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Jim Fitterling, Chief Executive Officer of Dow Inc. and The Dow Chemical Company (the “Companies”), certify that:

1.
the Quarterly Report on Form 10-Q of the Companies for the quarter ended March 31, 2019 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companies.
 


/s/ JIM FITTERLING
Jim Fitterling
Chief Executive Officer
May 3, 2019


118


 
 
Dow Inc.
The Dow Chemical Company and Subsidiaries
 
EXHIBIT 32.2
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Howard I. Ungerleider, President and Chief Financial Officer of Dow Inc. and The Dow Chemical Company (the “Companies”), certify that:

1.
the Quarterly Report on Form 10-Q of the Companies for the quarter ended March 31, 2019 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companies.
 


/s/ HOWARD I. UNGERLEIDER
Howard I. Ungerleider
President and Chief Financial Officer
May 3, 2019


119