Dow Chemical and Third Point, the hedge fund that has been hounding the largest US chemical producer have settled their differences "out of court."

The chemical group has now announced plans to add four new, independent directors to its board. Along with Third Point-proposed Ray Milchovich and Steve Miller, Dow has appointed Mark Loughridge and Richard Davis as directors following the 2015 shareholders' meeting, scheduled for May.

Along with the monies they receive as Dow directors, Third Point will pay Miller and Milchovich $250,000 each plus a further $250,000 to buy Dow shares when they join the board. If elected, the hedge fund also would compensate them in line with the stock's performance.

While 13 nominees will stand for election at the 2015 agm, at least one will only serve out a year's term, as Dow has agreed to reduce the size of its board to 12 the 2016. Meeting.

The two sides had been gearing up for a proxy fight at the meeting. Under the truce, Third Point will refrain from proxy challenges, lawsuits or public disparagement of Dow and its executives for a year. Dow said the hedge fund has agreed to a one year customary standstill and voting agreement.

Third Point has also taken down a website accusing Dow and its CEO Andrew Liveris of breaking promises to shareholders.

The complete agreement between Dow and Third Point will be included as an exhibit to a Current Report on Form 8-K to be filed with the US Securities and Exchange Commission.