Jan. 27 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 Tuesday, January 27, 2009 11:04 p.m. - - BEFORE:

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

CONTINUATION OF THE 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 - - -

15 16 17 18 19 20 21 22 23 24 CHANCERY COURT REPORTERS

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THE COURT:

2

ALL COUNSEL:

3

Good morning, counsel. Good morning, Your

Honor.

4

MR. GALLAGHER:

Your Honor, this is

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Hank Gallagher on behalf of Rohm and Haas.

6

if I might just ask the Court if Your Honor has a

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court reporter there?

We thought we had made

8

arrangements for one.

My colleague, David Ross, is

9

checking right now to verify who Brad Aronstam

10

called.

11 12

THE COURT:

I have one in the office

with me.

13 14

I wonder

MR. GALLAGHER:

All right.

Thank you

very much, Your Honor.

15

THE COURT:

Rather than proceed

16

through a roll call, am I going to have the same

17

people speaking today as yesterday?

18 19 20

MR. BERNICK:

From the Dow side, yes.

David Bernick. MR. WOLINSKY:

Marc Wolinsky here,

21

yes, Your Honor.

Although I just want to mention

22

that Bob Lonergan, our general counsel, is on the

23

phone with me today, and Chuck Kilal of Dow is as

24

well, Your Honor. CHANCERY COURT REPORTERS

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THE COURT:

Thank you, gentlemen.

Welcome.

3

Mr. Bernick, maybe you ought to

4

begin, because I think we left yesterday with your

5

offering to consult with your client about the

6

schedule that the Court envisioned for this matter.

7

MR. BERNICK:

Yes.

I'm happy to do

8

that, although it's a tough thing to kind of get our

9

minds around.

You know, the bottom line is that

10

we'll make a proposal.

11

on the schedule for the reasons that the lawsuit

12

exists.

13

in the discussions that have taken place with the

14

principals and in our e-mails to them that we need

15

until June 30th to see if the transaction really can

16

proceed.

17

There's really no good answer

And we have been candid with Rohm and Haas

Those facts have not changed, and

18

follow the newspapers and you will see that every day

19

things tend to get a little bit worse.

20

the trial is set early, it simply embraces the

21

certainty that the uncertainty of the path of trial

22

will be greater, and that there will be this very

23

substantial risk that we're going to litigate about

24

what will happen if you create this entity. CHANCERY COURT REPORTERS

Therefore, if

And the

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review that we have done overnight basically confirms

2

that view.

3

So, we say, well, how do we make a

4

proposal in response to what the Court has suggested,

5

which is that we look for something that also gives

6

force to the Court's duty and obligation to conduct

7

an expedited proceeding?

8

from our point of view, fundamentally goes up to and

9

embraces the gorilla in the room, which is the risk

To make a proposal that,

10

of doing anything in a negative environment.

11

investors look for liquidity in a negative

12

environment; and we're, in a sense, metaphorically

13

looking for litigation illiquidity.

14

embrace that.

15

Most

We're going to

So we try to do two things.

One is

16

to take a look at the cases to see if they give us

17

any instruction on this.

18

looking forward in the circumstances surrounding this

19

transaction, if there's anything that is of

20

importance that might actually come to rest, either

21

pro or con, within a narrower timeframe; that is,

22

prior to June the 30th.

23

something, and I think it gives us an indication of

24

what might be a good middle course here.

And second is to see,

I think we have identified

CHANCERY COURT REPORTERS

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And I want to avoid too much detail

2

on this, Your Honor, because, you know, otherwise

3

we'd have to ask that the record be sealed.

4

see a necessity for it.

5

little bit breezy on the details, it's because I

6

would just like to keep the proceeding an open

7

proceeding.

8 9

I don't

But if I am sounding a

So what is it that we think will come into place?

The one thing we can identify is that

10

the company is in the process of trying to negotiate

11

an extension of the bridge loan that would be used in

12

large part to finance the transaction.

13

commitment for that bridge loan expires on July

14

the 9th, and we're trying to essentially get a

15

renegotiation of some of those terms.

16

You know, the

If we're unsuccessful in

17

renegotiating the bridge, there's not even -- we

18

almost don't get to the question of whether the

19

transaction can even take place at all, because it

20

really can't.

21

terms of the current bridge, while there might not be

22

an immediate event of default, it would be inevitable

23

within a very short period of time.

24

know even if the banks would close, although they're

If the deal were to close under the

We don't really

CHANCERY COURT REPORTERS

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technically obliged to close so it kind of would end

2

the thing.

3

If we are successful in this

4

negotiation, we then get to the central issue in the

5

case, which is the balancing of the equities, what

6

are the consequences of going forward or not going

7

forward in creating this merged entity.

8

all of the same factors that create the uncertainty

9

and the problems and the risks that are essential to

And there

10

our position will remain:

11

without creating so much destruction of the value,

12

the effects of the merged entity; and in particular,

13

there where the company is actively seeking to get a

14

replacement for the K-Dow transaction that didn't go

15

forward, that's not going to happen in this

16

timeframe.

17

The ability to sell assets

The question of liquidity -- we're

18

probably not going to get an answer to the question

19

of liquidity during this timeframe.

20

course, will depend on earnings.

21

get more information about earnings, no one is

22

predicting that we're going to see the light at the

23

end of the tunnel on where things are today by, you

24

know, 60, 90 days from now; and of course that also

And that, of

And while we may

CHANCERY COURT REPORTERS

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then effects the credit rating.

2

problems will still be out there.

3

So, all those other

But this one issue -- that is the

4

extension of the bridge loan and the availability at

5

least of the financing to do some thing -- will, I

6

think, have come to rest; and here's the schedule on

7

that.

8

then expect that there will be three to four weeks of

9

fairly -- very intensive negotiations with the lead

10 11

Earnings come out on the 3rd of February.

We

banks. If that negotiation is successful, we

12

then have 15 other banks to deal with.

I guess it is

13

one of the reasons why I don't envy the job of the

14

CFO, because there's a total of 19 banks that are

15

holding up the bridge.

16

reasonably, we think that we will know one way or

17

another by the latter part of March; and at that

18

point, I think that we would be in a position to at

19

least get to the central issue of the case without

20

debating, you know, in the sense of a threshold issue

21

about whether there's going to be any financing

22

available at all.

23

that timeline would tend to indicate a trial sometime

24

in the early to mid part of April.

Optimistically, but

So that would tend to indicate --

CHANCERY COURT REPORTERS

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We have taken a look at the cases.

2

The cases -- you know, Wachtell's folks did a very

3

thorough job in their footnotes to their brief, and

4

listed all of the cases and how much time they

5

involved from complaint to trial, and I think it's a

6

good list.

7

substantially in size, the size of the transactions.

8

They vary in the time allotted.

9

issues that actually get framed.

10

Obviously, those cases vary very

They vary in the

But what's really key is that none of

11

those cases took place in the context of such a

12

traumatically volatile and evolving environment,

13

where, you know, even the levers for deciding this

14

thing are uncertain.

15

very large transaction that -- integration

16

transaction where you are melding these two

17

organizations and have to think about what the

18

consequences of that melding are.

19

they're terribly instructive.

20

And none of them involve such a

So we don't think

So we come out with a basic proposal

21

that is like this, and it's just a straight up

22

proposal -- there's no other elaboration to it --

23

that we would start the trial on the 8th of April.

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Rohm and Haas people initially said that the case CHANCERY COURT REPORTERS

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would last a day, and then having heard us speak,

2

they recognized that at least our case may take some

3

more time.

4

themselves, the 8th, we would then be able to start

5

our case on the 9th, and then we could take the next

6

five days up through the 15th to try the case, the

7

rest of the case.

8

conclude the matter by the 15th of April, which is

9

less than twelve weeks after the complaint was filed.

But if they go for the whole day

And that would enable us to

10

So that would be our proposal.

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THE COURT:

12

Mr. Wolinsky?

13

MR. WOLINSKY:

14

I guess, let me start by saying you won't be

15

surprised by our reaction of that schedule.

16

constructive, it is too slow from Rohm and Haas'

17

perspective.

18

Thank you, Mr. Bernick.

Thank you, Your Honor.

Although

Your Honor, last night I spent time

19

with our client as well, and with my client this

20

morning.

21

reflected on what Dow had to say; and we reflected on

22

what made sense here.

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And we reflected on your comments; we

And I don't want to, you know, repeat myself from yesterday, but we are starting off from CHANCERY COURT REPORTERS

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the premise that the issues here are limited.

We

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thought so limited that the Court could decide them

3

on a motion for judgment on the pleadings.

4

Now, I understand your reaction to

5

our suggestion, but we do think that the Court, in

6

scheduling the case, needs to keep a couple of things

7

in mind.

8 9

First, Dow admits that it has breached the contract.

It's -- the only issue that

10

has been identified for trial is the remedy.

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have -- we don't have a formal pleading admitting

12

breach, but from what I understand from counsel's

13

presentation that they have no legal justification

14

for not closing.

15

him to be saying that today they have the ability to

16

draw down on the bridge financing.

17

We

And I also understand -- understood

What will happen in the future to the

18

bridge financing, it is, you know, frankly, not Rohm

19

and Haas' problem.

20

bargained with the bridge financing in place.

21

Dow is admitting that the bridge financing today can

22

be drawn upon.

We bargained for a closing.

We

And

23

The other things -- points that I did

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want to make, again, this contract was negotiated and CHANCERY COURT REPORTERS

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signed in July 2008, at a time when there already was

2

tremendous economic uncertainty.

3

was almost a year old.

4

Rohm and Haas had already announced a restructuring

5

because it saw a recession coming.

6

already filed suit to get out of its deal with

7

Huntsman on the ground that the combined company

8

would be insolvent.

9

The credit crisis

Bear Stearns had collapsed.

Hexion had

So, despite all of this, Dow agreed

10

to pay a very high price, arranged its financing

11

upfront, and agreed to a very restrictive MAE clause.

12

And the reason you don't hear Dow today claiming that

13

it has a legal justification for not proceeding is

14

because the contract was negotiated in that

15

context -- the context that I laid out.

16

And Dow agreed to specific

17

performance, which is not a boilerplate case --

18

boilerplate clause.

19

with the Hexion decision.

20

performance clause requiring Hexion to close.

21

that was a negotiated provision here.

22

I'm sure Your Honor is familiar There was no specific So

And one of the reasons why Rohm and

23

Haas took $78 from Dow, instead of $75 from the other

24

bidder, is because of these very favorable contract CHANCERY COURT REPORTERS

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terms that were negotiated.

2

something, Your Honor, that -- those are all things

3

that need to be taken into account in weighing the

4

ultimate equities, but also in weighing the schedule.

5

And so, that's

Dow is not saying today that it is

6

impossible for it to do the deal.

7

that it will go bankrupt if it has to do the deal.

8

And it's not saying an order of specific performance

9

would be futile.

10

It's not saying

So let me get right to the issue of

11

schedule, Your Honor.

12

suggestion to avoid motion practice and go straight

13

to trial so that we could get a faster resolution,

14

which is our objective here.

15

is constructive, but I think we can do better.

16

We went along with the Court's

Mr. Bernick's schedule

Two points -- two reasons:

One is

17

what does delay do to Rohm and Haas; and two, how

18

much time is necessary to really prepare this case

19

for trial?

20

delay and uncertainty is hurting Rohm and Haas.

21

creates uncertainty with employees who say to

22

themselves, every day, "Why should I stay at Rohm and

23

Haas if I don't know when this deal is going through,

24

and, more importantly, I don't know whether if the

I cannot overemphasize, Your Honor, that

CHANCERY COURT REPORTERS

It

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deal goes through I'm going to have a job?"

2

And the reality is, the best people,

3

the people with the most options, are the people most

4

likely to leave; and the uncertainty is hurting our

5

employee base.

6

customers, and our relationships with our customers.

7

And with the merger agreement in place, Rohm and Haas

8

has to manage the business assuming the deal will

9

close, and not as if it will remain a standalone

10

The same uncertainty is hurting our

company.

11

So, we bargained for a quick closing

12

precisely to address these issues.

13

bargained for a closing two days after the conditions

14

were satisfied precisely for those reasons.

15

is important to us.

16

the schedule Mr. Bernick proposes is just simply too

17

slow.

18

In fact, we

So speed

It was negotiated for us, and

The second thing is how much time do

19

we need to get this case ready for trial?

You know,

20

Mr. Bernick did not say that the discovery couldn't

21

be completed in the shorter period of time; and I

22

think that's true, because the issues here are

23

relatively limited.

24

there's a recession.

We're ready to stipulate that We don't have to take discovery

CHANCERY COURT REPORTERS

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on that issue.

2

To the extent that discovery is

3

needed, it's really Rohm and Haas of Dow to

4

understand why Dow claims that the sky will fall if

5

the deal that it bargained for will go through; and

6

what have they been doing to satisfy their

7

contractural commitments not only, you know,

8

post-filing lawsuit, but in pre-filing the lawsuit,

9

the contractural commitments to make sure that the

10

money would be there when the closing day came.

11

So we think that's relatively limited

12

discovery.

It's not a twenty deposition case.

13

not a multimillion document case.

14

It's

So, specifically, Your Honor, going

15

to the precedents.

16

after the complaint was filed.

17

which was a post credit crisis case, it was six weeks

18

after trial.

19

Rentals was one month after trial.

20

In IBP, the trial was six weeks In Clear Channel,

And Your Honor's handling of United

So, yesterday, I suggested 45 days,

21

which we still think is quite reasonable given the

22

scope of the issues.

23

uncertainty.

24

point that in 45 to 60 days, maybe there will be less

There will always be

You know, I understand Mr. Bernick's

CHANCERY COURT REPORTERS

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uncertainty.

2

The only thing that we are certain of

3

is that in 60 days from now, whatever uncertainties

4

resolve in the coming 60 days, there will be new

5

uncertainties in the following 60 days.

6

that a 45-day schedule is reasonable; it's

7

appropriate.

8

other side can be prepared in 45 days, and that's

9

what we believe.

10

So, we think

I know that the able lawyers on the

Just two specific points, Your Honor.

11

Mr. Bernick was -- you know, I think in terms of

12

allocating trial time, Mr. Bernick gave me one day,

13

and I think he volunteered to take six.

14

trial schedule, I would assume Your Honor would split

15

it 50/50.

Whatever

16

And then there is one other important

17

point I just do want to highlight, which is the scope

18

of the trial.

19

performance at this point.

20

grant specific performance, obviously, we would have

21

a claim for damages.

22

the parties agree, and the Court agree, that if

23

specific performance is not granted -- although we

24

think it should be -- that the Court would reserve

Our claim is only for specific If the Court does not

I would expect and suggest that

CHANCERY COURT REPORTERS

17 1

jurisdiction over the case to hear our damages, and

2

that that would be bifurcated and dealt with not as

3

part of this trial but at a later trial.

4

We think that has a lot of advantages

5

from everyone's perspective.

One is it will speed

6

things along.

7

the Court on what we think is the real issue here.

8

But, obviously, if the Court doesn't agree that we

9

are entitled to specific performance, there is a

It will avoid delay.

It will focus

10

massive damage claim that my client has, and we would

11

not want to prejudice that claim by going forward

12

only on the claim for specific performance.

13

And of course, as Your Honor knows

14

from IBP, one of the reasons the Court granted

15

specific performance was because it recognized the

16

prospect of a damage award against Tyson would be,

17

you know, worse than the specific -- then whatever

18

the consequences of specific performance would be.

19

So, with that, Your Honor, I think

20

you have our position.

21

reasonable, which really puts it to the beginning of

22

March to the middle of March.

23 24

We think 45 days is

MR. BERNICK:

Your Honor, if I could

just have a couple of moments to respond just to a CHANCERY COURT REPORTERS

18 1

couple of points, with the Court's indulgence?

2

THE COURT:

Certainly.

3

MR. BERNICK:

Yeah.

First, to be

4

clear, when Mr. Wolinsky says that Dow is not saying

5

it can't close -- Dow is saying that at this point in

6

time, with the financing in its current state, for

7

all practical purposes it cannot close because to

8

close would be putting itself into a position where

9

within a very short period of time, and just for

10

technical reasons only -- that is, it wouldn't happen

11

immediately -- for only technical reasons would there

12

been any lapse, but we would have almost a certain

13

default.

14

that Dow, under those circumstances, would be

15

responsible or it would be responsible for even Rohm

16

and Haas to embrace the certainty that you are

17

creating an entity that is in immediate default.

18

that is just an irresponsible, we would submit,

19

position.

20

financing.

21

And it would be the height of folly to say

And

So that's where we are under the current

Number two, Dow actually is very

22

sensitive to the effect of this whole process on the

23

Rohm and Haas' employees.

24

and Haas fails to appreciate that one of the central

In fact, I think that Rohm

CHANCERY COURT REPORTERS

19 1

concerns that drives this particular dispute is

2

precisely sensitivity to what Rohm and Haas'

3

employees are going to do.

4

Mr. Wolinsky talks about Rohm and

5

Haas' employees being nervous about their jobs today.

6

One of the huge, huge aspects of this case which

7

depends for its viability -- this deal depends for

8

its viability on the realization of synergy.

9

don't have the synergy, there is no way this

10

If you

transaction can work.

11

Well, who is going to produce the

12

synergies?

Well, it's going to be the employees

13

working together in the integrated transaction which

14

is why this case is such a tough case.

15

those employees going to do if they're working for a

16

company that is hobbled financially; that is

17

essentially an LBO with no light at the end of the

18

tunnel.

What are

They're not going to stick around.

19

This is what the proofs are going to

20

get into.

The very fact that Mr. Wolinsky identifies

21

and saying that there's irreparable harm every day is

22

precisely one of the main problems with the

23

transaction after it closes.

And he may say, "Well,

24

Rohm and Haas doesn't care."

But the Court, we

CHANCERY COURT REPORTERS

20 1

believe, needs to care about what is in the interest

2

of not only Dow, but the interests of Rohm and Haas,

3

the entity, that's going to become part of Dow in the

4

going forward basis.

5

So the very fact of the tenuous

6

purchase that any company has over its employees is a

7

fact that's really, really critical, that although

8

this be an expedited proceeding, that the Court get

9

it right.

That's in the interests of the employees,

10

that's in the interests of both companies -- for the

11

Court to get it right, which then gets us back to the

12

timing issue.

13

what Mr. Wolinsky had to say.

14

And I have listened very carefully to

First, with regard to the discovery,

15

discovery is going to be extensive.

16

get into all features of what this deal will look

17

like in the post closing period of time.

18

accomplished on an expedited basis?

19

It's going to

Could it be

Sure, it can.

The problem is what is the record

20

that you're creating?

Is the record that you're

21

creating after all these depositions one that is

22

going to be so incomplete that it's changing day by

23

day?

24

and then turning around and having to recommence

There's no point in having the record complete,

CHANCERY COURT REPORTERS

21 1

discovery because there's a huge element that has now

2

come into play or not come into play, which is the

3

negotiation -- renegotiation of the bridge loan.

4

can't speed that up.

5

We

It is what it is.

And I didn't hear Mr. Wolinsky say at

6

any point in time that that is not hugely impactful.

7

Indeed, it's enormously impactful.

8

the deal if you don't have the money to close the

9

deal.

10

You can't close

So we go forward and do all this

11

discovery on an expedited basis, and have lawyers

12

running all over the country taking depositions on

13

both sides -- and they will be on both sides -- only

14

then to have to continue to take more depositions

15

perhaps of the same people, as this piece of the

16

puzzle continues to evolve.

17

proposal that at least gets that piece of the puzzle

18

in place before we have this thing heard.

19

don't hear anybody saying that that's not material.

20

It certainly is material.

21

We've tried to make a

And I

So far as the timing of the trial is

22

concerned, I confess to have been mistaken.

23

thought that it was the position of Rohm and Haas

24

that this was a very limited case that would require CHANCERY COURT REPORTERS

I

22 1

very limited proof.

2

it is that they need more than a day.

3

insist that the trial be split 50/50, we are

4

certainly going to need more than a day.

5

going to need three or four, perhaps five days.

6

If that's true, I don't know why But if they

We are

Now, in order to accommodate that

7

within this schedule, which tries to get to closure

8

by the 15th of April, maybe we should be talking

9

about -- and I am now arguing contrary to my client's

10

preferred position to start the trial somewhat

11

earlier -- maybe we should start the trial sometime

12

towards the back end of the week of the 30th of

13

March, beginning of April.

14

I, unfortunately, have a criminal

15

case on the 6th and 7th.

16

indulgence with respect to that.

17

it.

18

the back end of -- the first of April, the week of

19

March the 30th.

20

imprudent to start it in March because of the bridge

21

financing situation.

22

I would ask the Court's I can't get out of

But we are prepared to start the trial towards

We think it would really be

But, you know, we're prepared to

23

start then and that will give us, you know, six days

24

from the 1st, 2nd, 3rd, 8th, 9th, 10th, 13th, 14th -CHANCERY COURT REPORTERS

23 1

you know, however long it's going to take.

2

want to go 50/50, we're prepared to start somewhat

3

earlier.

4

MR. WOLINSKY:

If they

Your Honor, this is

5

Marc Wolinsky.

6

further or would you just like to move forward?

7

Would you like to hear from me

THE COURT:

8

Mr. Wolinsky.

9

have both told me.

I appreciate the offer,

I am studying, a little bit what you I don't think that -- with all

10

due respect, I think you could probably give me more

11

reasons why I ought to schedule this, the dates you

12

have presented, and Mr. Bernick could do the same and

13

we could continue this conference call for a long

14

time.

You are both very good, and you do excellent

15

work.

I think it is just going to require me coming

16

down somewhere in the calendar.

17

It strikes me that this may be the

18

first time ever I have had a motion to expedite in a

19

case like this where the moving party has, it seems

20

to me, successfully and satisfactorily demonstrated

21

that they have both a colorable claim that they're

22

proceeding on, and that there is a risk of

23

irreparable harm or injury to that party if the

24

matter is not expedited.

While, at the same time,

CHANCERY COURT REPORTERS

24 1

the party opposing expedition has made a persuasive

2

argument that scheduling the matter on an expedited

3

basis risks imminent irreparable harm to all of the

4

parties.

5

It is a position I have not occupied

6

before, but I am square in the middle of it looks

7

like irresistible force and the immovable object; and

8

it is not a comfortable position.

9

My first reaction when I looked at

10

the complaint and looked at the motion, and when I

11

heard you yesterday, what was most striking was that

12

I didn't hear the sorts of arguments that I am

13

accustomed to hearing in resisting motions to

14

expedite regarding the difficult legal issues

15

involved, the ambiguity of the contractural language

16

that the Court's going to be asked to examine, and

17

the nature of the proof that will have to be

18

discovered and offered to the Court.

19

all of those things.

20

I didn't hear

And so, my instincts were then, as

21

they still are, to avoid motion practice in an effort

22

to try to streamline the proceeding and save expenses

23

and time and effort and go straight to a trial.

24

Frankly, it seemed to me that it could be a very CHANCERY COURT REPORTERS

25 1

abbreviated trial of one to two days, perhaps three

2

at the outside.

3

that this matter probably could be tried in February.

4

In thinking of that, it struck me

I strongly believed at the time --

5

that is yesterday -- that if I was going to schedule

6

it, I ought to schedule it the third or fourth week

7

of February.

8

days available:

9

the 23rd to hold a trial, whether it be a two-day

As I told you yesterday, I have those The week of the 16th and the week of

10

trial or a two-week trial -- I could do either one.

11

But Mr. Bernick has argued that the

12

circumstances about the economic conditions that we

13

are in, and the specific details of Dow's ability to

14

renegotiate the bridge loan with a number of banks --

15

19 in all -- is going to create factual uncertainties

16

that are going to plague any trial that I schedule,

17

until such time as those efforts to renegotiate the

18

bridge loans have been completed -- and we know

19

exactly where that situation rests.

20

Mr. Bernick's view is we should wait at least until

21

mid April, mid to late April so that we have all of

22

those circumstances fully developed so that they can

23

be presented to the Court.

24

And so,

Mr. Wolinsky's position, however, is CHANCERY COURT REPORTERS

26 1

that the contract is clear; that the obligation to

2

have financing to close the deal was part of the

3

negotiated transaction and is reflected in the

4

contract that governs the parties with respect to

5

this proposed merger; and that each day of delay is

6

another day of threatened harm to Rohm and Haas.

7

As I said, it is the immovable object

8

and the irresistible force.

My instincts, however,

9

haven't been changed much from yesterday when I still

10

believed that this was a matter that it would be

11

better, and in the interests of both companies, to

12

have this resolved sooner rather than later.

13

still am pulled in the direction of a more expedited

14

trial schedule than Mr. Bernick is asking and

15

imploring me to agree to.

So I

16

45 days out is roughly March the 9th.

17

I have that time available and can schedule the trial

18

for March the 9th.

19

schedule it for March the 23rd.

20

The other option would be to

I am reluctant to do that a bit,

21

Mr. Bernick, and it's not because I want to inflict

22

discomfort on you, but you have a criminal trial

23

coming up in April --

24

MR. BERNICK:

Actually, the truth

CHANCERY COURT REPORTERS

27 1

is -- and I hoped not to get to this -- that criminal

2

trial is starting earlier.

3

February.

4

on the 30th of March for an extended period of time.

5

I didn't want to raise it because, you know, this is

6

a very, very important matter.

7

believes that, you know, my availability is not as

8

important as the need to get into April where I

9

actually, you know, beginning in mid April would have

10

It starts in late

And we're -- we have dark days beginning

And my client

further conflicts.

11

But I would be free beginning March

12

the 30th, and going forward.

13

getting a dispensation on the two days on the 6th

14

and 7th.

15

across town.

16

Montana.

17

the lead lawyer for Dow in this case.

18

difference between the 23rd and the 30th is pretty

19

material.

20 21 22

And I am hopeful of

It's the Grace bankruptcy case which is This is a criminal trial in Montezuma,

And I am the lead lawyer for Grace as I am

THE COURT:

So the

What about the difference

between the 9th and the 23rd? MR. BERNICK:

That doesn't make it --

23

the judge requires that -- I will be in contempt of

24

court if I am not present in court those days. CHANCERY COURT REPORTERS

I

28 1

would not be able to participate in this case, which

2

would obviously have a significant impact.

3

want to overstate that.

4

world to know that not everybody gets the ideal

5

circumstance.

6

until -- I mean, I know I won't be free until

7

the 30th of March.

8 9 10

I don't

I've known enough of the

But I would not be free with certainty

THE COURT:

Well, Mr. Wolinsky, it

looks like I am being sandwiched into scheduling something the 30th of March.

11

MR. WOLINSKY:

Well, Your Honor, let

12

me just state something that maybe it goes without

13

saying, but I have the highest regard for

14

Mr. Bernick.

15

I think he was one or two years ahead of me or behind

16

me in law school; and I can certainly understand why

17

Dow would want him to be in the courtroom.

18

I have known him for a very long time.

Kirkland and Ellis is a very fine and

19

very large firm.

20

accomplished lawyers.

21

Mr. Tully and Mr. Nachbar are

There is nothing more important to my

22

client than this case.

And with deference to

23

Mr. Bernick and his schedule, you know, putting my

24

client in the face of a threat of irreparable harm CHANCERY COURT REPORTERS

29 1

because of one lawyer's -- you know, because one

2

skilled lawyer, a lawyer who is very much in demand,

3

to drive the schedule is, I think, just not the right

4

way to proceed here.

5

I think Your Honor's initial

6

reactions were appropriate.

7

was happy to hear them.

8

one lawyer is committed is, to my mind, not the right

9

way to go here.

10

Obviously, you know, I

Delaying the trial because

MR. BERNICK:

I don't really think,

11

though, that -- you know, I understand Your Honor's

12

effort here to do -- to deal with a very, very knotty

13

problem.

14

that it is unprecedented, and the fact that it is so

15

knotty, really underscores the importance of making

16

sure that it really is right.

17

But I would urge that actually the fact

I mean, you've got thousands and

18

thousands of people in both organizations that are

19

going to depend upon it.

20

the transaction that has been pinked since last July,

21

somehow it makes all the difference in the world to

22

have a couple more weeks when the company is going to

23

be in the middle -- I mean, exactly during this

24

period of time, Your Honor, day by day, in the middle

The notion that somehow if

CHANCERY COURT REPORTERS

30 1

of renegotiating the bank loan.

2

And what's then going to happen at

3

trial -- this is the other thing that just starts to

4

roll forward on the reality train -- what's going to

5

happen?

6

going to effect, potentially, the last stage -- well,

7

actually not the last stage -- but negotiating with

8

fourteen banks.

9

banks won't be paying attention to what's happening

10

Everything that happens during this trial is

Why does anybody believe that the

in trial?

11

We're going to have to assert during

12

the course of that trial the grim reality of how bad

13

things can get.

14

essence of the problems the company faces.

15

every day in court, we're going to wonder in, or

16

somebody standing in my place is going to wonder in

17

and say, "Let me tell you, Your Honor, we're going to

18

put on testimony about how bad things might get," if

19

we are persuasive on that -- we may not persuade the

20

Court, although I'm very hopeful we will -- but we

21

could well persuade the banks.

22

the world are we doing renegotiating this deal, and

23

why in the world would we want to go forward?"

24

We have to do that because of the So,

Them saying, "What in

And then in the middle of trial, CHANCERY COURT REPORTERS

31 1

we're then trying to keep that together:

2

we say in court?

3

the banks walk away, then no matter what it is, I

4

think -- with due respect to the Court -- Your Honor

5

decides, we can't make it happen.

6

"What did

Who do the banks think?"

And if

That's the difficulty of this thing,

7

is that the picture is evolving.

We tried, Your

8

Honor, in good faith.

9

through all of the other elements of this transaction

I could have taken the Court

10

and made the same speech with respect to sale of

11

assets.

12

assets where, depending upon what the market thinks

13

of our condition, the potential buyers either, A,

14

will not be there, or, B, will be demanding

15

absolutely rock bottom discounts.

16

talking about deltas of billions of dollars, again,

17

depending upon what happens in court.

18

We're talking about potential sales of

And we could be

And so, we are -- Your Honor's caught

19

between a rock and a hard place.

We're caught

20

between a rock and a hard place.

And I would venture

21

to say that Rohm and Haas, too, is caught between a

22

rock and a hard place because it's not as simple as

23

saying, "We don't care."

24

and Haas who do care ought to care.

All of the people of Rohm

CHANCERY COURT REPORTERS

32 1

So, coming back to the proposition

2

that my schedule is unfortunate, but I don't think

3

it's the real mover here.

4

here is almost the impossibility of trying to put

5

this case on when you don't even know if the

6

financing is there; to make a deal happen even if

7

there is an order; and where the very fact of putting

8

the case on potentially jinxes that financing.

9

And I think that the idea that

I think the real mover

10

somehow we've got to do this before the end of March

11

or, you know, catastrophe falls, I think, is a false

12

threat.

13

transaction for weeks.

14

newspapers.

There has been uncertainty about this

15

It has been in the

THE COURT:

Thank you, Mr. Bernick,

16

Mr. Wolinsky.

I appreciate both of you being

17

available again this morning and providing me with

18

further thoughts to consider.

19

I am going to do this:

I am going to

20

end the conference call.

I am going to give you a

21

decision in the next two or three hours, roughly

22

speaking.

23

than that time.

24

so that you will be able to share that with your

It will be within that time, not longer And I will give it to you in writing

CHANCERY COURT REPORTERS

33 1

clients and we will know where we are going from

2

there.

3 4

MR. BERNICK:

Thank you very much,

Your Honor.

5

MR. WOLINSKY:

Thank you, Your Honor.

6

We very much appreciate your prompt attention to the

7

matter.

8

THE COURT:

9

(The teleconference was adjourned at

10 11

Certainly.

11:42 p.m.) - - -

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34 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 33 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

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