Jan. 26 Teleconference In Rohm & Haas Lawsuit

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE ROHM AND HAAS COMPANY, Plaintiff, v. THE DOW CHEMICAL COMPANY and RAMSES ACQUISITION CORPORATION, Defendants.

: : : : : Civil Action : No. 4309-CC : : : :

- - Chancery Court 34 The Circle Georgetown, Delaware Monday, January 26, 2009 4:04 p.m. - - BEFORE:

HON. WILLIAM B. CHANDLER III, Chancellor. - - -

TELECONFERENCE ON MOTION TO EXPEDITE PROCEEDINGS - - -

_______________________________________________________ CHANCERY COURT REPORTERS 34 The Circle Georgetown, Delaware 19947 (302) 856-5645

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APPEARANCES:

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(via telephone)

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COLLINS J. SEITZ, JR., ESQ. HENRY E. GALLAGHER, JR., ESQ. DAVID E. ROSS, ESQ. BRADLEY R. ARONSTAM, ESQ. Connolly Bove Lodge & Hutz, LLP -andMARC WOLINSKY, ESQ. ELAINE P. GOLIN, ESQ. of the New York Bar Wachtell, Lipton, Rosen & Katz for Plaintiff

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MARTIN P. TULLY, ESQ. KENNETH J. NACHBAR, ESQ. Morris, Nichols, Arsht & Tunnell, LLP -andDAVID W. BERNICK, ESQ. of the New York Bar Kirkland & Ellis, LLP for Defendants - - -

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THE COURT:

Good afternoon, counsel.

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MR. SEITZ:

Good afternoon, Your

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Honor.

This is CJ Seitz at Connelly Bove.

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MR. TULLY:

And this is Martin Tully

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and Ken Nachbar at Morris Nichols, Your Honor.

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on the line is David Bernick of the Kirkland and

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Ellis firm, and he will be speaking for Dow and its

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acquisition deal.

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MR. BERNICK:

Good afternoon, Your

Honor.

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Also

THE COURT:

Good afternoon,

MR. SEITZ:

Your Honor, with me is

Mr. Bernick.

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Marc Wolinsky from Wachtell Lipton, and he will be

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speaking on behalf of Rohm and Haas.

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me in Connelly Bove is Hank Gallagher, David Ross and

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Brad Aronstam.

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THE COURT:

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MR. WOLINKSY:

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THE COURT:

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And also with

Welcome to everyone. Thank you, Your Honor.

I have the papers that

have been filed so far.

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Mr. Wolinsky, perhaps you can begin.

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MR. WOLINKSY:

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Honor.

Sure, thank you, Your

And thank you for hearing us on such short CHANCERY COURT REPORTERS

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notice.

I'm here with one of my colleagues Elaine

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Golin, and some other attorneys here.

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As Your Honor knows, Rohm and Haas

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filed the complaint today against Dow for specific

5

performance of a merger agreement that was signed

6

back in July of 2008.

7

Haas in the merger agreement for $78 per share, plus

8

a ticking fee that started January 10th, 2009.

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the time the merger agreement was signed, the parties

Dow agreed to buy Rohm and

At

10

anticipated that there would be some delay for the

11

receipt of antitrust clearance, and that antitrust

12

clearance was received -- the last antitrust

13

clearance was received on Friday.

14

A couple of notable things about the

15

merger agreement, there is no financing condition in

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the merger agreement.

17

deal was signed, the deal was fully financed, both

18

with a bank bridge loan and equity commitments.

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covenanted in the merger agreement that it would have

20

the funds to close, and Dow agreed to a very

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restrictive Material Adverse Effect clause in which

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it essentially accepted the risk that there would be

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a further deterioration in the world economy, that

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there would further deterioration in the chemical

In addition, at the time the

CHANCERY COURT REPORTERS

Dow

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industry, and that there would be further

2

deterioration in the credit market.

3

As I said, the deal was struck on

4

July 10, 2008, you know, after Hexion Huntsman had

5

been filed and was well underway, and after a number

6

of other deals had fallen apart.

7

As I mentioned, the last condition to

8

closing was satisfied just this past Friday,

9

January 23rd, when the FTC cleared the merger.

Under

10

the merger agreement, Dow became obligated to close

11

within two business days, which would be tomorrow.

12

Prior to the receipt of that FTC

13

clearance, there had been some discussion between the

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parties about what we could anticipate on a

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closing -- nothing to my client's satisfaction --

16

prior to the receipt of the antitrust clearance.

17

over the weekend Dow told us that it would not close

18

on Tuesday, and I'm quoting the e-mail from

19

Mr. Liveris.

20

about the potential success of the combined

21

organizations.

And

He referred it to, quote, concerns

22

Dow also told us over the weekend

23

that it would not be able to determine whether it

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would be able to close the transaction or be willing CHANCERY COURT REPORTERS

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to close the transaction until June 30th, 2009.

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Today, Dow issued a release in which it stated

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that -- and I will quote again -- "Recent material

4

developments have created unacceptable uncertainties

5

on the funding and economics of the combined

6

enterprise."

7

Your Honor, a couple of notable

8

things about Dow's position.

9

it cannot close.

Dow does not say that

In fact, as I mentioned, the

10

financing is in place to close the deal.

11

fully negotiated bridge loan at this point and equity

12

commitments, and the amount of funds available under

13

those two facilities more than exceed the purchase

14

price.

15

material adverse change in Rohm and Haas' business.

16

In fact, Dow has not offered any legal justification

17

for its refusal to close.

18

Dow has a

Dow did not say that there has been a

In light of all this, Your Honor, we

19

filed our complaint today; we filed our motion.

We

20

would like to move forward on an as expeditious a

21

timetable as the Court will permit to get an order of

22

specific performance requiring Dow to close.

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The contract specifically provides

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for specific performance as a remedy for a breach; CHANCERY COURT REPORTERS

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and I think the contract speaks directly to what

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should happen here.

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speak to Mr. Bernick and his colleagues before the

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conference.

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some areas of disagreement.

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We did have an opportunity to

I think we have some areas of agreement,

I believe we have an agreement that

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we -- Rohm and Haas, we have an agreement on a motion

8

for judgment on the pleadings.

9

agreement is that Rohm and Haas -- excuse me, Dow

And I believe the

10

will answer on February 3rd.

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file its motion on February 5th.

12

opposition to the motion of Dow on February 13th.

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Rohm and Haas would reply on February 16th; and there

14

would be an argument date set by the Court, hopefully

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an early argument date.

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Rohm and Haas would So it would be an

I understand that Dow also intends

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to make a motion to disqualify my firm from

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representing Rohm and Haas, and we have agreed to a

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briefing schedule on that motion.

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motion on February 6th.

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February 13th; reply on February 16th.

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briefing schedule essentially tracks the briefing

23

schedule on the motion for judgment on the pleadings.

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Dow would file its

The opposition would be on And the

Dow obviously thinks that this case CHANCERY COURT REPORTERS

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can't be decided on a motion and that there will be

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need to be a trial, and that really gets to our area

3

of disagreement.

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position better, what we think the Court should do,

5

and what we would like the Court to do, is to set a

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schedule so that we can proceed on the briefing on

7

the motion in parallel with -- to prepare for trial

8

if the Court deems that one is necessary; and the

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principle area of difference, I think, is the speed

10

Now that we understand Dow's

at which that trial should take place.

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As the Court can appreciate, Rohm and

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Haas believes that speed is critical here.

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been running the company on the expectation that a

14

deal would close early this year.

15

taking actions and holding off on taking actions that

16

it would take if it were being run as an independent

17

company.

18

We have

The company's been

There is tremendous uncertainty in

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our employee base.

People are expecting the deal to

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close and were planning accordingly, and now there's

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uncertainty about when the deal will close and their

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personal futures, and that impacts the business.

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uncertainty also has an impact on Rohm and Haas'

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relationships with its customers.

The

They don't know

CHANCERY COURT REPORTERS

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whether they're going to be dealing with Rohm and

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Haas as an independent company or with Rohm and Haas

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as merged as part of Dow.

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Typically in cases of this type, the

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Court proceeds on an expedited basis.

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happen here.

7

deal is going to close, and it needs to do so, so it

8

can run its business and preserve the value of the

9

company.

10

That should

Rohm and Haas needs to know if this

So our proposal is that we proceed on

11

a parallel track with the motion for judgment on the

12

pleadings, with an eye toward the trial at the end of

13

February, if the Court decides it needs one.

14

think that's ample time to do whatever needs to be

15

done.

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schedule, expedited expert protocol, but if we have a

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trial date, ample counsel on both sides can work out

18

the mechanics leading to a trial at the end of

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February.

20

We

We have not discussed the specific discovery

In our motion, we suggested that the

21

trial could take -- could be held in one day.

22

listened to our colleagues and Mr. Bernick, I would

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think it's more realistic for the Court to reserve

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three days -- although, we think it can be done in CHANCERY COURT REPORTERS

Having

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two.

I think the most important thing from our

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perspective is this case to move quickly.

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The complexity in this case is less

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than in other cases.

5

adverse change.

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of warranty.

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the interpretation of the contract.

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There's no claim of material

No claim of breach of representation

To my knowledge, there is no dispute on

If the Court thinks there needs to be

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a trial, I think the focus will be on whether, as a

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matter of the Court's discretion, the Court should

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look past the parties' agreement that specific

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performance is the appropriate remedy and take into

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account other factors.

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group of issues, and I think that it can be prepared

15

for trial in the four to five-week period that we --

16

that I have laid out.

17

It's relatively a finite

So, with that, Your Honor, unless you

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have any questions -- you might have some questions,

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I'm happy to answer them.

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and that is what we would like to see come out of

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today's conference.

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THE COURT:

But that is our position,

Thank you, Mr. Wolinsky.

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I don't really have a question at this point.

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first hear from Mr. Bernick. CHANCERY COURT REPORTERS

Let me

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MR. BERNICK:

Sure.

Thank you for

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making yourself available, Your Honor.

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this is a matter of tremendous importance.

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Obviously,

What I will say by way of the

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background of the case is I think relatively simple.

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Obviously, you have the benefit -- I don't know if

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you've had the opportunity to read in detail, but you

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have had the benefit of their papers, and you

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obviously don't have the benefit of ours.

And I'm

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not going to try to take time out of this call to go

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through it in detail, but just to give the Court an

12

overview of the problem and particularly how it bears

13

upon the schedule that's been proposed, let me at

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least say this:

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big problem.

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of what this case is about is whether somehow that

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problem is going to go away if there's a forced

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merger pursuant to the terms that were originally

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agreed.

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That this deal faces a very, very

It's a huge problem.

And the essence

Our position is that, fundamentally,

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it doesn't make that problem go away.

To get a Court

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to order it doesn't make everything all of a sudden

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resolve.

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effect, which is what is a problem of varying

Indeed, it has precisely the opposite

CHANCERY COURT REPORTERS

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disagrees of magnitude for the two different

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companies becomes an overwhelming problem for the

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merged organization, and one that is now a problem

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for both entities who have now contributed to the

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merger.

6

This is not a passive investment

7

situation.

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small company is now being bought by a large company.

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Given the change in capitalization for these two

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companies, Dow, which started out being the much

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larger company at the time the transaction was

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agreed, has now actually got a market capitalization

13

that is smaller than Rohm and Haas.

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that was arranged for purposes of this transaction --

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to give the Court, again, a sense of how things have

16

changed -- that financing now exceeds the market

17

capitalization of many of the banks who are

18

participants in the financing.

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It is not a situation where a relatively

The financing

So, it is an enormous problem.

It's

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a problem that, in conversations that took place

21

between the principals in the last few days, the CEO

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of Dow characterized it's a problem such that both he

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and Mr. Patel, who is the CEO of Rohm and Haas, would

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be remembered as presiding over the creation of an CHANCERY COURT REPORTERS

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entity that ultimately lead to the deterioration of

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two of America's finest and longest standing chemical

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companies.

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for Rohm and Haas.

We don't think that that's appropriate

5

We don't think the problem is solved

6

by the forced merger.

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really wants to preside over the merged entity.

8

we don't think that the Court, at the end of the day,

9

will conclude that it wants to preside over what is a

10

forced merger that does not result in an entity which

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really is viable.

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We don't think that either CEO And

The history, again, I will not

13

recount in detail, but the history that has emerged

14

here has actually emerged through a relatively short

15

period of time.

16

credit market or the credit crisis was already known

17

in July at the time that this deal was entered into.

18

In point of fact, everybody knows that while the

19

credit crisis was known, what would be in an order of

20

magnitude was never surmised until things went south

21

in September and October.

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only the backdrop for the problem that lead Dow to

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the decision that it has taken.

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The complaint recites that the

But even then, that is

In the month of December, as I'm sure CHANCERY COURT REPORTERS

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Your Honor has probably read in the newspapers, there

2

was a very dramatic about face politically driven

3

over commercial and its impact by the Kuwaiti

4

interests that were involved in a major transaction

5

that was designed in part to provide liquidity in

6

financing for Dow.

7

a major impact.

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That is known as obviously having

But then way beyond that, the industry as a whole has seen a very, very precipitous

10

decline since December.

The earnings performance and

11

the capacity utilization for Dow, a little less than

12

at Rohm and Haas, is at all-time lows at least within

13

recent memory.

14

There will be earnings released next week by Dow.

15

can't get into the the details of it, but Your Honor

16

will have the opportunity to observe that many of the

17

same trends have continued through January.

They are dramatic, dramatic numbers. We

18

And, therefore, we're brought to a

19

situation where no matter what it is that we would

20

like to do, and no matter how it is that we have

21

viewed the strategic value of this merger, we can't

22

ignore the reality of what it is that we're dealing

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with.

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transaction now -- given the circumstances that

And that reality is the consummation of this

CHANCERY COURT REPORTERS

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presently exist, as well as the continuing

2

uncertainties -- will affect basic things like

3

liquidity, financeability, operational viability.

4

All of those things say that it will be imprudent to

5

consummate this transaction, because it simply would

6

have the effect of taking a problem that is already

7

severe and forcing the creation of a new enterprise

8

that is saddled with all those problems and perhaps

9

what you can call the synergistic problems from

10

combining two major entities.

11

So, we have initiated the dialogue

12

with Rohm and Haas, involving principals, after the

13

regulatory approvals, it was clear that they were in

14

fact going to go through.

15

of contacts and a series of meetings at very, very

16

high levels.

17

that process that more time needs to pass; that we

18

can't commit to make a closure for this deal now

19

because to do so would be imprudent.

20

continue as things evolve -- on earnings, on

21

financeability, on liquidity -- to work with Rohm and

22

Haas to see if we can't get to the finish line.

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There have been a series

And we have urged upon Rohm and Haas in

But we will

We urged them not to initiate litigation, although, obviously we understand they CHANCERY COURT REPORTERS

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had a need to do so in order to protect their

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interests, and we can't fault them for that.

3

also urged the dialogue between the companies

4

continue so that we can see if there is a way to

5

resolve this problem.

6

But we

We don't believe that litigation is

7

going to solve this problem.

It's simply going to be

8

a distraction from and a poor filter for a

9

businessman's resolution; but they have made that

10

choice and we respect that choice, and we're prepared

11

to litigate the issue.

12

So, with that comes the particular

13

proposal that has been made, and we feel about them

14

pretty much the same way; that is, that obviously

15

Rohm and Haas has decided that the contract language

16

raises an issue of law for the Court to resolve.

17

don't think that that's true.

18

We

Even their cases don't say that a

19

contract can provide for specific performance, and

20

somehow that displaces the Court to exercise

21

fundamental equitable powers over whether specific

22

performance should be granted, at best.

23

provisions regarding irreparable damages are given

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some weight by some courts, but that is only part of CHANCERY COURT REPORTERS

Contractural

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the equation; balancing equities goes way beyond

2

that.

3

So we don't think the issue of law is

4

really going to play a major role in this case

5

either.

6

germane after the Court resolves it.

7

We don't think that that's going to be

At the same time, Rohm and Haas

8

believes that that is an important threshold issue.

9

Yet, in service of moving the litigation along, we

10

have no opposition to that issue being heard first.

11

We have no opposition to it being heard on an

12

expedited basis.

13

to the schedule as Mr. Wolinsky indicates that would

14

call for that matter to be briefed and to be

15

presented before the Court on an expedited basis.

16

And for that reason, we have agreed

So, again, we don't think that it's

17

particularly important to advance the ball, but we

18

understand its importance to Rohm and Haas and we are

19

prepared to defer to that and to the Court's

20

convenience and sense about how this thing should

21

layout.

22

What that really means is that we

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have two remaining significant issues.

24

contract language is not dispositive, we have to get CHANCERY COURT REPORTERS

Yet the

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into what we believe is inevitable:

2

what is happening with specific performance and all

3

the facts that bear upon the transaction.

4

that is a very, very substantial task.

5

The reality of

We think

It's a substantial piece of, you

6

know, responsibility both for the parties and for the

7

Court when we're talking about forcing the

8

consummation of an integrated transaction involving

9

tens of thousands of people; and we think that's

10

going to take sometime to develop.

11

work promptly to get it developed on an expedited

12

basis; but we believe that when it comes to a

13

decision, which is a forever decision effecting the

14

lives of lots and lots and lots of people -- there

15

are tens of thousands of jobs that will be involved

16

in this integration process -- that prudence demands

17

that we take the time that is necessary.

18

We're prepared to

Nobody gains from having a decision

19

that is an expedited decision.

20

would, of course, be very careful, but we shouldn't

21

have a process that basically constrains the

22

development of a full record when.

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I know Your Honor

What we have said, the original proposal that was made by Mr. Wolinsky on behalf of CHANCERY COURT REPORTERS

19 1

his client, is that we would have a sequence process

2

of which the first contract issue is heard, and that

3

there is a one-day trial after the matter is

4

resolved.

5

been good enough -- Mr. Wolinsky has acknowledged

6

that maybe that's not the right idea.

They have been good -- Rohm and Haas has

7

So now they have a backup proposal,

8

which is that we not have a sequence process, but we

9

have a parallel track process thereby suggesting I

10

think inevitably, Your Honor, that the contract issue

11

is really not going to be dispositive.

12

want to have a three-day trial to take place at the

13

end of February.

14

don't think that that represents a schedule that will

15

enable us to develop a defense.

16

But they now

We think that's arbitrary.

We

What's the nature of this

17

transaction?

18

to be involved in integrating these two companies in

19

operations all the way up and down the line?

20

people factor.

21

transaction?

22

recitation that you will hear from us a fuller

23

picture?

24

I mean, in the real term, what is going

The

What is the history of this

Is their recitation accurate, or is the

What are the circumstances today, and CHANCERY COURT REPORTERS

20 1

is this transaction one that has the prospect of

2

making things feasible?

3

believe the circumstances are going to change between

4

now and June, when we believe it is appropriate that

5

this matter be finally resolved by the Court, if it

6

can't be resolved by the parties?

7

And critically, how do we

This involves a lot of evidence.

8

It's not just a financial advisor.

9

people, chemistry industry specialists, the people

10

who know the transaction, know about liquidity, and

11

one day obviously they recognized was not enough.

12

Two or three days is not enough either.

13

It's operating

Now, so that we can avoid trying to

14

have, you know, in a sense a comity, a decision in

15

the absence we believe, Your Honor, of having a paper

16

before the Court that represents Dow's views, we

17

propose that instead of having this matter resolved

18

this afternoon, that we would submit a response to

19

their motion to expedite that dealt with the second

20

part of the case; that is, the trial on the merits of

21

specific performance.

22

an opposition to that nor have they provided for it.

23

So we would propose that we have the

24

I believe that they don't have

schedule as they indicated on the briefing on the CHANCERY COURT REPORTERS

21 1

motion for judgment on the pleadings.

2

same time, we have a schedule for Dow to submit its

3

brief on what should happen with the scheduling of

4

the trial in this case.

5

that brief on the 6th of February.

6

same day that they move for judgment on the pleading.

7

We would file, now with the benefit of our answer, a

8

brief that deals with the second part of this case,

9

and why it is that we believe that more time is

10

Yet, at the

We're prepared to submit That would be the

require.

11

We're also prepared to file our

12

motion for disqualification at the same time.

13

say there that we hope that this can be resolved

14

without the need for the Court's intervention.

15

if it can't be resolved, I think we're going to have

16

to go ahead and file that.

17

have that heard on a parallel track; that is, we will

18

not assert that Wachtell has a conflict with respect

19

to the briefing on the motion for judgment on the

20

pleadings.

21

concerned with the request to rule on the

22

disqualification issue before proceeding with that

23

motion.

24

Let me

But

And we're prepared to

That way Your Honor would not have to be

So, we think that it's appropriate to CHANCERY COURT REPORTERS

22 1

do that; and we're prepared to have the motion heard,

2

only insofar as it would relate to subsequent

3

proceedings in the case after the motion for judgment

4

on the pleadings is resolved.

5 6

THE COURT: Mr. Bernick, at this point?

7 8

Is that all you have,

MR. BERNICK: indulging me.

9

Yes, and thank you for

I'm sorry to have gone on for so long. THE COURT:

No, that is quite all

10

right.

11

quite right -- I have in front of me only the matters

12

that have been submitted by Rohm and Haas, and I

13

don't have Dow Chemical's papers regarding its

14

position.

15

explanation.

16

I appreciate hearing from you.

And you are

So I have listened very carefully to your

Although, I am inclined to tell you

17

my thoughts right now, maybe I should not do that.

18

Let me first, Mr. Wolinsky, as the

19

moving party you have a right to reply.

20

MR. WOLINKSY:

21

THE COURT:

22

Sure.

If you would like to do

that before you hear from me, feel free.

23

MR. WOLINKSY:

Sure, Your Honor.

24

me be brief and just pick up on something that CHANCERY COURT REPORTERS

Let

23 1

Mr. Bernick said.

2

says what it says.

3

performance is the appropriate and agreed upon

4

remedy; and we think the Court should proceed on the

5

basis of the parties' agreement.

6

Obviously, we think the contract The contract says specific

We understand Dow's position, and I

7

think Mr. Bernick's words were that it is inevitable

8

that we're going to proceed on some alternate basis,

9

and it is inevitable that there will be a trial.

The

10

point that I want to emphasize, though, is if it is

11

inevitable that there's going to be a trial -- and

12

that's Dow's position -- it is critical to Rohm and

13

Haas that that trial be heard on an expedited basis.

14

That is the essence of the harm that Rohm and Haas

15

suffers from a delay in resolving these issues.

16

expedition is our most important consideration here.

17

So

I've heard Mr. Bernick, you know,

18

refer to the complexity of this case.

19

the day, we don't think that the evidence the Court

20

is going to need, if it decides it needs evidence, is

21

all that complicated.

22

close?

23 24

At the end of

Does Dow have the money to

Yes or no. If Dow closes, what will be the

consequences to Dow?

What steps could Dow take to

CHANCERY COURT REPORTERS

24 1

ameliorate the harm that Mr. Liveris has referred to?

2

We don't think that's very complicated.

3

think it's going to take months to pre-try it, and we

4

think it can certainly be tried within three days.

5

We don't

So, with that said, Your Honor, let

6

me conclude and ask you if you have any questions, or

7

hear Your Honor's ruling.

8 9 10

THE COURT:

Well, I have several

thoughts as I listen to both of you.

Obviously, you

both make very compelling arguments for your side.

11

One thing that sort of strikes me --

12

not knowing as much about this case as either of you

13

or your colleagues -- it strikes me that, A, there is

14

a fundamental business problem here, and it is always

15

my view that business problems are better resolved by

16

business people; and that to the extent that the

17

Court is called upon to resolve a legal issue, the

18

Court will do that, of course, and will do it as

19

promptly as possible.

20

accommodate parties who come and ask for expedited

21

proceedings or accelerated proceedings because of the

22

business necessities that a particular legal question

23

implicates.

24

This Court obviously tries to

So, with that said, and with the hope CHANCERY COURT REPORTERS

25 1

that even after we resolve this immediate problem of

2

how to go forward and in what manner to go forward,

3

with the hope and trust that you will carry back --

4

and I am sure you will -- that the view of the Court

5

is that it would be even better if the parties

6

continue to try to figure out a way to resolve this

7

business problem amongst the business people.

8 9

Of course, the other thing that I would emphasize, that everyone on the phone knows as

10

well, is that this is a court of equity.

11

extent that contracts invoke equitable remedy, there

12

is a long series of jurisprudence that emphasizes the

13

importance of the discretionary nature of equitable

14

remedy; and that the Court of Chancery always must,

15

in the end, weigh not only a party's legal

16

entitlement to a remedy, but must weigh other

17

circumstances that may bear upon whether it is

18

prudent and appropriate to deploy a particular

19

equitable remedy.

20 21 22

To the

So those are the backdrop thoughts that I have about the matter in front of me. On the particulars of the logistics

23

of how to move this forward on either one track or

24

two tracks, you probably won't be surprised to hear CHANCERY COURT REPORTERS

26 1

me say that simpler is always better, and that I have

2

found from experience that to the extent you can

3

avoid two tracks, it is better.

4

one track.

5

It is simpler to do

In contract disputes like this, my

6

experience, again, over and over, is that rather than

7

devote energies and effort and time and money into

8

briefing what appears to one side, at least, to be a

9

fairly clear legal question, sometimes discretion is

10

the better part of valor, so to speak.

11

to accept the proposition that one track, which would

12

resolve all of the issues and bring all of the

13

factors, including the circumstances surrounding the

14

appropriateness of the remedy being sought to the

15

Court at one time, might be a more efficient way of

16

doing this.

17

It is better

And so, my initial reaction is do we

18

really want to go down the path of briefing motions

19

for judgment on the pleadings and scheduling oral

20

arguments, and having the Court issue an opinion on

21

that question, while simultaneously the parties are

22

engaged in discovery and exchange of documents and

23

perhaps identifying experts in preparation for the

24

potentiality of a trial that might or might not CHANCERY COURT REPORTERS

27 1

occur.

Given Rohm and Haas' desire that, in any

2

event, this all be done on an expedited basis, my

3

initial thought is that we ought to think carefully

4

about whether the motion for judgment on the

5

pleadings ought to just be dispensed with and we

6

schedule a trial that can be three days, four days,

7

five days, and do it fairly promptly.

8 9

I am not sure when Mr. Bernick says that there are a variety of people that could explain

10

to the Court the nature of this transaction and how

11

circumstances, credit events and liquidity events

12

have all perhaps changed and would bear upon the

13

appropriateness of a specific performance remedy in

14

these unique circumstances.

15

am not trying to fault Mr. Bernick.

16

what I am supposed to draw from that about how hard

17

that would be to produce all of that information and

18

those witnesses in 30 to 45 days, if we weren't doing

19

parallel briefing on the motion for judgment on the

20

pleadings.

21

I am not sure what -- I I am not sure

So, those are my initial reactions.

22

I am not sure if I have helped you at all.

23

tell you, just as a logistical matter, that the

24

schedule you have proposed with the two motions -CHANCERY COURT REPORTERS

I can

28 1

the motion to disqualify and the motion for judgment

2

on the pleadings and the briefing dates -- the Court

3

can easily accommodate that.

4

filed on February 16th, I can give you oral argument

5

on February 16th or February 17th, and I can commit

6

to having a decision to you by the end of that week,

7

or by that day perhaps.

8 9

If the final brief is

And so, the prospect then of scheduling a trial in the event that the legal issue

10

could not be resolved in a dispositive way at that

11

stage, I can also assure you that I have time

12

available at the end of February and up through the

13

middle of March, and even throughout March is

14

available for me to schedule a trial of some length,

15

whether it is three days or five days.

16

going to go two weeks, I can still do it, but it

17

would mean moving things around.

18

commit to you that whatever it takes to do it, I

19

will, for the parties and for counsel, make that

20

possible.

21

If it is

But I want to

With that, maybe I ought to start

22

with you, Mr. Wolinsky, what about the idea of

23

dispensing with the motions, or is it your view that

24

that has to occur first? CHANCERY COURT REPORTERS

29 1

MR. WOLINKSY:

No, Your Honor.

I

2

will take your lead.

3

makes sense.

4

out, if we have a 30-day pretrial period followed by

5

a trial in 45 days, that would be something that

6

would be perfectly acceptable to Rohm and Haas.

7

I think, you know, what you say

So, if Your Honor -- let me just throw

MR. BERNICK:

Your Honor, again,

8

taking your lead, we would be, particularly if Rohm

9

and Haas is not going to press to have the matter

10

heard -- obviously, the motion to disqualify is a

11

different proposition -- we would obviously be

12

amenable to trying to schedule a trial as well.

13

don't believe that's going to be achievable in 45

14

days, the middle of March.

15

We

I have to talk to my client about how

16

much more time than that we would seek, where we

17

would be -- we would consider that in light of Your

18

Honor's guidance; that is to say that we believe that

19

actually time is very important, not only developing

20

a record, but having the external record settled to

21

some degree with respect to some of the variables

22

that drive the feasibility of this transaction.

23

So it's not simply a question from

24

our point of view about how fast people can take a CHANCERY COURT REPORTERS

30 1

bunch of depositions; it's also a question of what

2

happens to external events.

3

we're not here simply to drag our feet.

4

But with all that said,

So I'm happy to go back to my client

5

and try to figure out what would make sense to our

6

proposal to when this thing could be tried on the

7

merits and to report back to the Court.

8

report back to the Court very, very promptly.

9

we do that, it would be very important for us to know

We could But if

10

that while the Court is very familiar now with the

11

desire of Rohm and Haas to proceed, ultimately, the

12

draw on how much time we need is a judgment call on

13

our part.

14

And if we come back and very candidly

15

said, you know, within reason, this is the way we

16

think it really needs to be, that just as Rohm and

17

Haas is getting, you know, in a sense -- I won't say

18

deference, but its views on the need for expedition

19

are being accommodated by a court as prepared as you

20

are to proceed promptly, that in a sense our view of

21

the world cuts almost in the exact opposite

22

direction.

23 24

The sooner means that more uncertainty is embraced.

Greater uncertainty means

CHANCERY COURT REPORTERS

31 1

that it makes it more difficult to see the

2

feasibility of this transaction.

3

more time, both to get ready for the case and to

4

allow things to settle in the marketplace -- we're

5

not talking about a lot -- that that actually makes

6

it less uncertain what the circumstances are and

7

perhaps easier to make this transaction proceed.

8

we think that it's not simply a matter of how long it

9

takes to get the depositions done, but also on

10

Whereas if there's

So

external developments.

11

With all that said, we would be happy

12

to talk internally and report back to the Court with

13

our proposal of what that timing we think should be.

14

THE COURT:

Mr. Bernick, I hear you

15

loud and clear.

Of course, you are making a little

16

more nuance a point; that is, your point is that it

17

may be that the passage of some additional time will

18

help bring greater certainty to the business people

19

for certain business issues in question.

20

I understand that, I appreciate it, and I know where

21

you are coming from.

Believe me,

I agree with you.

22

However, our law is that when a party

23

files a lawsuit in the Court of Chancery and asks for

24

expedition -CHANCERY COURT REPORTERS

32 1

MR. BERNICK:

2

THE COURT:

3

Right. -- I have a

constitutional duty to try to move it as quickly.

4

MR. BERNICK:

5

THE COURT:

I understand.

Also, quite frankly, I

6

want you to know, tell your client that I am trying

7

to do this in a way that recognizes the business

8

interests that you are speaking for and I understand.

9

I am also trying, I hope you understand, to do this

10

in a way that is efficient, and cost efficient to

11

both sides.

12

money here for everybody.

I am trying to save a little bit of

13

MR. BERNICK:

14

THE COURT:

15

time to come back.

16

need?

17

Right.

So I will give you some

How much time do you think you

MR. BERNICK:

Well, I don't know.

I

18

would expect -- how about if we -- well, we'll talk

19

immediately following this call, and how would it be

20

if we -- if the only issue that we're going to go

21

back on here is this issue and -- I mean, I don't

22

know, and I don't mean to be presumptuous, but if the

23

Court is settled that this is the direction that we

24

should take -- that is, that we're not going to have CHANCERY COURT REPORTERS

33 1

the first motion for judgment on the pleaing, that

2

we're going to aim for a trial on the merit that is

3

on the merits that takes place on an expedited basis,

4

on a date to be determined by the Court, then if

5

that's the only matter on which we're conferring, I

6

think we'll be able to be back to the Court very,

7

very promptly.

8 9 10

I mean either -- I don't know. What time is it now?

now.

Well, it's 5:00

So I think probably tomorrow morning would

certainly be something that we could do.

11

THE COURT:

Well, that's fine,

12

Mr. Bernick.

13

something in answering me tonight.

14

suggest that.

15

noon tomorrow -- the position of Dow?

16

I was not trying to press you to do I was going to

So, if you can provide -- let's say by

MR. BERNICK:

Sure, sure.

Yes,

17

absolutely.

I think it would be -- we're not going

18

to -- just so I'm clear, we could try to put

19

something together in writing that would lay out all

20

of the reasons why, and maybe we will do that.

21

think it might -- if I could at least impose upon the

22

Court to have a short conference, we'll be prepared

23

to identify with specificity why it is that we think

24

we need the time that we need, and maybe we can have CHANCERY COURT REPORTERS

But I

34 1

a dialogue about that.

2

Again, the other side just got papers

3

and I don't want -- I don't want to stand on the

4

ceremony of having to file, being given time to file

5

a robust response to that.

6

instead the opportunity to address the Court so we

7

can explain the reasons.

But I would like to ask

8

THE COURT:

I am happy to do that,

9

and I will make myself available tomorrow,

10

Mr. Bernick.

And I am sure Mr. Wolinsky and his side

11

can -- or I hope they can.

12

dialogue and you can explain the position with

13

respect to why you think more time is better than

14

less time.

We can continue the

15

MR. BERNICK:

16

THE COURT:

Sure.

Specifically, be able to

17

tell me what is the earliest date you think it is

18

doable.

19

MR. BERNICK:

Yes, I understand that.

20

And, you know, part of our -- and this is perhaps a

21

little bit of a subtle point, but I know that Your

22

Honor has already anticipated some of our subtle

23

points, is that part of our thinking is because of

24

the extraordinary nature of the remedy, not only are CHANCERY COURT REPORTERS

35 1

the business people in better position, but the Court

2

is in a better position to be able to weigh this

3

matter if more is known rather than unknown.

4

really is kind of the hard part of our position on

5

that.

6

more specificity tomorrow, and I hope briefly

7

nonetheless so that you don't have to hear a long

8

speech.

But I will be prepared to address that with

9 10

That

THE COURT:

Thank you, Mr. Bernick.

Don't worry about that, I have plenty of time.

11

Let me see if we can clarify one

12

thing.

Are both of you in agreement then that one of

13

the motions, at least -- the disqualification

14

motion -- is going to go forward, and is there any

15

reason that it shouldn't go forward on the schedule

16

that you have already agreed to?

17

MR. BERNICK:

No, we're kind of fine

18

with that.

Our hope, again, is we can work it out.

19

But if we can't, we're happy to do that; and if Your

20

Honor would hear that on the 16th, that's fine with

21

us.

22

MR. WOLINKSY:

23

Marc Wolinsky.

24

Honor.

Your Honor, this is

That's fine with us as well, Your

CHANCERY COURT REPORTERS

36 1

THE COURT:

All right.

2

agreement on that much at least.

3

convene again tomorrow.

4

that?

5

be on the phone tomorrow?

So we have an

As I said, we can

Why don't we just talk about

What time would be a good time for everyone to

6

MR. BERNICK:

We're totally available

7

at the Court's convenience.

If 11 o'clock is

8

appropriate, or -- 11 o'clock would probably be best

9

for us because I know we'll be ready by then.

10

MR. WOLINKSY:

11

nothing more important we are doing than this.

12

you tell us what time and we will be there.

13

THE COURT:

Your Honor, there is

All right.

So

Since

14

Mr. Bernick has said 11 o'clock -- I have something

15

scheduled at 11:00, but I am going to move that.

16

MR. BERNICK:

17

THE COURT:

No, no, that's not a

18

problem.

19

another motion to expedite, but I would rather move

20

that anyway to an earlier time.

21

at 11 o'clock tomorrow.

22 23 24

I can move that.

Well --

It's an oral argument on

So we will reconvene

Can I impose on one side or the other to initiate the call to my office? MR. WOLINKSY:

Yes, Your Honor.

CHANCERY COURT REPORTERS

This

37 1

is Marc Wolinsky.

2 3

THE COURT:

All right.

Then 11

o'clock tomorrow, we will reconvene.

4 5

We will do that.

MR. BERNICK:

Great.

Thank you very

much, Your Honor.

6

MR. WOLINKSY:

7

THE COURT:

8

(The teleconference was adjourned at

9 10

Thank you, Your Honor.

Thank you to everyone.

4:48 p.m.) - - -

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38 1

CERTIFICATE

2 3

I, JENNIE L. WASHINGTON, Official Court

4

Reporter of the Chancery Court, State of Delaware,

5

do hereby certify that the foregoing pages numbered

6

3 through 37 contain a true and correct

7

transcription of the proceedings as stenographically

8

reported by me at the hearing in the above cause

9

before the Chancellor of the State of Delaware, on

10

the date therein indicated.

11

IN WITNESS WHEREOF I have hereunto set my

12

hand at Georgetown, this 27th day of January, 2009.

13 14 15

/s/Jennie L. Washington Official Court Reporter of the Chancery Court State of Delaware

16 17 18

Certification Number: 140-PS Expiration: Permanent

19 20 21 22 23 24 CHANCERY COURT REPORTERS