Case: Doc 4516 Filed: 04/27/16 Page: 1 of 14 PAGEID 97887 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO EASTERN DIVISION IN RE: E. I. DU PONT DE NEMOURS AND CASE NO. COMPANY C-8 PERSONAL INJURY LITIGATION JUDGE EDMUND A. SARGUS, JR. Magistrate Judge Elizabeth P. Deavers This document relates to: ALL ACTIONS. SECOND SUPPLEMENT IN SUPPORT OF THIRD TO MOTION TO COMPEL I. INTRODUCTION Plaintiffs, through Co-Lead Counsel for the Plaintiffs? Steering Committee, hereby submit the following as a second supplement to their pending Third Motion to Compel N0. 4106] (?Third Mot?), pursuant to this Court?s request at the April 18, 2016 in-person status conference. (April 18, 2016, In-Person Status Conf. Tr. No. 4461] at 16.) II. BACKGROUND Plaintiffs ?led their Third Motion to Compel No. 4106] on July 20, 2015 concerning relevant and discoverable ?nancial information related to the Chemours spin-off from Defendant E. I. du Pont de Nemours and Company (?DuPont?). DuPont ?led its Opposition to Plaintiffs? Third Motion to Compel No. 4127] on August 4, 2015. In response to this Court?s rulings on this issue, in May of 2014 and July of 2015, DuPont represented to the Court through Declarations from an Associate General Counsel of DuPont that: Case: Doc 4516 Filed: 04/27/16 Page: 2 of 14 97888 The obligation of DuPont to the other parties under the Leach settlement agreement remains obligations of DuPont, regardless of the agreement by Chemours to indemnify DuPont for any payments that DuPont may be required to make related to the MDL proceedings or under the Leach settlement agreement. (Pretrial Order No. 44 No. 4381] at 3) (citation omitted). On January 26, 2016, Plaintiffs ?led a Supplement in Support of its Third Motion to Compel No. 4289]) (?-?Third Mot. Suppl.?) in response to a December 11, 2015 press release jointly issued by DuPont and Dow Chemical Company announcing that DuPont was intending to merge with Dow to form a completely new company called ?DowDuPont,? that the original DuPont and Dow entities would cease to exist, and the new ?DowDuPont? entity would then be split into three completely new companies. (Third Mot. Suppl. 1] 7) (citation omitted). DuPont refused to supply Plaintiffs with any information clarifying the merger/split?s impact on Leach class members or MDL Plaintiffs beyond what was published on publicly- accessible websites. (Id. 11 8) (citation omitted). Plaintiffs? Third Motion Supplement requested that the Court Order DuPont to produce the following: 1) A copy of any existing documentation (authenticated by a current DuPont declaration) that clarifies where the liabilities and obligations of DuPont will fall if the proposed DuPont/Dow merger and subsequent three-way split occurs; and, 2) Limited discovery into the impact of the proposed merger/three-way split on the liabilities and obligations at issue in this MDL. (Id. 11 10.) In response to Plaintiffs? request, on March 29, 2016 the Court ordered DuPont to provide a statement from a corporate representative relating to the status of the merger and allocation of the obligations and liabilities under the Leach settlement agreement. (Pretrial Order No. 44 4381] at 3-4.) In its Order, the Court ?recognized Plaintiff?s concern that any Case: DOC #2 4516 Filed: 04/27/16 Page: 3 Of14 PAGEID 97889 merger ?could be a death star.? In response to this Order, DuPont supplied to Plaintiffs and the Court a Declaration from Julie Mazza, acting General Counsel for DuPont, at the April 18, 2016 hearing. (April 18, 2016 Decl. of Julie S. Mazza) (?Mazza Decl.?) (attached hereto as Ex. A). Ms. Mazza?s Declaration stated, in relevant part, that: Currently, there has been no determination as to how the obligations of DuPont to the other parties under the Leach agreement would be allocated as part of any Post-Merger Separations. (Id 11 8.) Ms. Mazza also stated that the Merger Transaction with Dow, if successful, is not currently expected to close and become effective before July 2016. (Id. 4.) Regarding the timing of any post-merger separations, Ms. Mazza stated that DuPont and Dow currently anticipate one or more pro rata spin-off transactions that ?are not expected to occur before 12 months or more after the Merger Transaction.? (Id. 11 7.) Therefore, according to Ms. Mazza?s Declaration, the spin-offs could occur as early as July 2017. DuPont provided Ms. Mazza?s Declaration to the Court and Plaintiffs? counsel at the April 18, 2016 in?person status conference which did not allow either the Court or Plaintiffs? counsel the time to properly review the Declaration and prepare for a meaningful discussion on its contents. A quick review of the Declaration, however, revealed that it failed to supply any meaningful information regarding where the liabilities relating to the C8 litigation will end up after the proposed DuPont/Dow merger. Most importantly, the Declaration failed to provide any information regarding whether DuPont will even exist after the Merger Transaction. This is particularly troubling in light of the previous representations made by DuPont in the context of the Chemours spin?off that all liabilities relating to C-8 MDL litigation will remain with DuPont ?regardless of the agreement by Chemours to indemnify DuPont for any payments that DuPont Case: Doc 4516 Filed: 04/27/16 Page: 4 of 14 PAGEID 97890 may be required to make related to the MDL proceedings . . . (Pretrial Order No. 44 at 3) (citing Decl. of Associate General Counsel of DuPont, Justin Miller); see also Third Mot. Suppl. 1] 4 (Dupont con?rmed at Dec. 2, 2015 status conference that ?DuPont is ultimately liable? for MDL liability) (citation omitted). If DuPont fails to exist, which is likely after the impending merger, any indemni?cation agreement between Chemours and DuPont could be meaningless. Further, even if there is some, per Ms. Mazza, post-merger spin-off, those obligations are totally unknown and may in fact be the subject of legal maneuvering in such a way to extinguish the liabilities owed by DuPont, which would have now been a twice removed entity. Plaintiffs? counsel told the Court that there is great concern that there might be no defendant after both the merger and split and that companies the size of DuPont and Dow certainly must have discussed by now where these liabilities will go. (April 18, 2016, In-Person Status Conf. Tr. at 15.) Indeed, Dow recently paid $835 million to settle an antitrust lawsuit where a jury found that Dow had conspired with other chemical manufacturers to fix urethane prices. Surely, a settlement payment of this size was discussed as part of the Merger Transaction as would any lawsuit of this magnitude including the C-8 lawsuits:l Furthermore, as the Dow/DuPont March 1, 2016 Merger Update Form Highlights (?Merger Update?) document (attached hereto as Ex. C) illustrates, and which plaintiffs obtained through the public domain, Dow and DuPont have come to agreement on governance structure, including the selection of a CEO and Board of Directors, advisory committee structures and responsibilities, and executive steering teams. Merger Update at 9?13. Track 3 under the Joint Executive Steering Team is Dow/DuPont?s ?Plan for Intended Spins? where the assigned individuals are tasked to: Jef Feeley, Scalia?s Death Prompts Dow to Settle Suits for $835 Million, Bloomberg (Feb. 26, 2016), 5 (attached hereto as Ex. B). Case: Doc 4516 Filed: 04/27/16 Page: 5 of 14 PAGEID 97891 0 Determine scope and target timing of each SpinCo; 0 Deliver carve-out ?nancials; and, 0 Legal entity restructuring. Id. at 13. Moreover, Dow/DuPont have been preparing for their intended spins for almost four months and intend to ?[s]pin as soon as possible.? Id. at 12. Clearly, there is relevant information being discussed within Track 3 that is relevant to Plaintiffs? claims and which Plaintiffs deserve access to. And to this precise end, Plaintiffs have an absolute right and entitlement to know: (1) the scope and target time of each SpinCo; (2) the carve out ?nancials for each; and (3) the legal entity restructuring for which the already created Joint Executive Steering Team for Dow/DuPont?s ?Plan for Intended Spins? is already working on (and which Plaintiff?s counsel discovered on their own). As set forth below in more detail, given the gravity of the situation, including the impending merger, the impending spinoffs (and now clear plans to effectuate same), the ?nancial turmoil of Chemours, it is likely that the Plaintiffs? fear of DuPont trying to absolve itself from liability, and ?nancial obligations to the 3,500 Plaintiffs in this MDL and the 70,000 Leach class members is a very real possibility. Further, the immeasurable harm of not permitting the requested discovery is far outweighed by any prejudice or burden of DuPont (neither of which they have ever identi?ed at anytime) The information that Plaintiffs are requesting relating to the Merger Transaction is similar to the information that the Court ordered DuPont to provide to Plaintiffs relating to the Chemours spin-off. On April 24, 2014, the Court ordered DuPont to produce the following information: [D]ocuments re?ecting (1) the timing of the change; (2) which entity will retain the obligations and liabilities under the 2005 Class Action Settlement Agreement in the Leach Case; and (3) the ?nancial information for the entity retaining the obligations and liabilities, including documents re?ecting the entity?s estimated Case: Doc 4516 Filed: 04/27/16 Page: 6 of 14 PAGEID 97892 9' net worth, assets, liabilities, revenue, etc. To the extent some of the information is publically available, such as in a United States Securities and Exchange Commission Form DuPont may designate where that information has been published. (Disc. Order No. 4 247] at 11.) DuPont?s current Declaration from Ms. Mazza provides no useful information regarding where DuPont?s current assets or liabilities will ultimately reside. In fact, it raises far greater concerns. DuPont?s prior brie?ng focused on the ?nancial viability of DuPont (see DuPont?s Opp. to Pls.? Third Mot. to Compel No. 4127] at 3, 6), but none of this is relevant if DuPont fails to exist and transfers all its assets to another entity that is not a defendant in this MDL or seeks to spin?off its liabilities in the post-merger world. Furthermore, any indemnification agreement between Chemours and DuPont or any other entity that Chemours chooses to indemnify may be worthless as estimate that Chemours has a thirty-?ve percent chance of ?ling for bankruptcy2 which is in direct contrast to DuPont?s portrayal of Chemour?s as healthy, well-capitalized company. (see Id. at 6 (boasting that DuPont?s Performance Chemicals segment, now Chemours, reported $1.5 billion in net sales for the second quarter of 2015); see also Pls.? Third Mot. to Compel 4106] at 3 (citing Declaration from DuPont?s counsel that Chemours ?is expected to be well-capitalized, and this is a business segment that generated more than $6 billion in revenues in DuPont?s Mem. in Opp. to 2 At least one investor website reports that the probability of a Chemours bankruptcy ?ling is thirty??ve percent. (attached hereto as Ex. see also Dylan 718 Investing, Chemours: The Thesis to $0 (Oct. 9, 2015), cm528928 (we think Chemours is legally insolvent if they took adequate reserves to cover their contingent liabilities) (attached hereto as Ex. Meagan Parrish, In the Mix: Why DuPont?s C8 Trail Matters, Chem.Info, (?any payout over $500 million [in C-8 litigation] could send Chemours into bankruptcy.?) (attached hereto as Ex. Jeff Mordock, DuPont or Chemours? Who will pay the costs of C8 lawsuits?, The News Journal, (discussing precarious relationship between DuPont and Chemours relating to liability) (attached hereto as Ex. G). Case: Doc 4516 Filed: 04/27/16 Page: 7 01?14 PAGEID 97893 Pls.? Mot. to Compel No. 218] at 11?12 (stating that Chemours will be ?an industry leader, will be well~capitalized, a Fortune 500 company, and will be the continuation of a business segment that generated approximately $7 billion in revenues in 2012 and has an enterprise value of more than $10.1 13111101133)? Plaintiff?s Third Motion to Compel explains in detail how DuPont failed to timely provide Plaintiffs with the information the Court ordered DuPont to provide in Discovery Order No. 4 relating to the Chemours spin-off. (Third Mot. at 6-10.) Once again, but now in the context of the Dow/DuPont merger, DuPont is again unwilling to provide Plaintiffs with the necessary and relevant information they need to effectively prosecute their claims,4 preserve resources and ensure collectability from a defendant who has no insurance and who has no interest in resolving claims based upon public statements to the SEC . LEGAL ARGUMENT It is well established that a ?district court enjoys broad discretion in managing discovery,? White 12. Honda ofAm. Mtg, 2008 U.S. Dist. LEXIS 106188, at *13 (SD. Ohio 2008), and that ?the scope of discovery is within the sound discretion of the trial court.? Doe v. Lexington-Fayette Urban Cly. Gov?t., 407 F.3d 755, 760 (6th Cir. 2005) (citation omitted). A 3 Indeed, as recently as the last case management conference the members of the media in attendance were not the New York Times or Huf?ngton Post, but rather attendees from two publications that focus on ?nancial matters, including at least one which focuses on bankruptcy. While the PSC acknowledges that this is not dispositive of anything, their interest in this matter lends more credibility to Plaintiffs' arguments about some liker impending trouble rather than DuPont's feigned and unsupported claim that Chemours is a ?nancially viable company. 4 DuPont, unfortunately, has a reputation of discovery abuses. See, In re E. I. duPont de Nemours Co., 918 F. Supp. 1524, 1530 (MD. Ga. 1995) (imposing criminal sanction ?nding ?DuPont?s conduct to be the most serious abuse [this Court has seen] in its years on the bench and the most serious abuse reflected in the legal precedents?), rev remanded 99 F.3d 363, 369 (111h Cir. 1996) (reversing trial court?s imposition of criminal sanctions, because ?even though DuPont and its counsel may very well have engaged in criminal acts, we must reverse the contempt order because the district court did not afford DuPont the procedural protections the Constitution requires for the imposition of criminal contempt sanctions?); Strong. v. duPont de Nemours 968 So.2d 410, 414 (Miss. 2007) (trial court acted within its discretion by sanctioning DuPont for its ?abuse of the discovery process?); Kmvamata Farms v. United Agri. Prods, 948 P.2d 1055, 1098 (Hawaii 1997) (af?rming trial court?s $1.5 million sanction against DuPont for ?unprecedented discovery fraud (emphasis added). Case: Doc 4516 Filed: 04/27/16 Page: 8 of 14 PAGEID 97894 district court?s decision regarding the scope of discovery will not be reversed absent an abuse of discretion. Id. at 761 (citation omitted). In the instant MDL the need for this focused and limited ?nancial discovery is critical to ensure that the rights of 3,500 Ohio and West Virginia residents are being properly protected and will not be prejudiced and harmed should they not be left with a viable entity for the legal obligations or a viable entity to satisfy a judgment.5 It is also well-established that a Defendant?s ?nancial position is relevant for the purposes of a punitive damages analysis. (Disc. Order No. 4 247] at 9-10) (citing cases). In Discovery Order No. 4, this Court held that ?Plaintiffs are entitled to discover information relating to DuPont?s ?nancial condition [relating to the Chemours spin-off] in light of their non? speculative claims for punitive damages.? (Id) (citation omitted). Regarding the scope of such discovery, the Court rejected DuPont?s argument that only its current ?nancial condition is relevant and not its future condition (id. at 10-11) and that Plaintiffs were not asking DuPont to create new documents but were instead seeking ?existing information that is available about the ?nancial condition of the ?spin?off entity? (Id) (emphasis in original). The Court also rejected DuPont?s argument that representations made to the press somehow ful?ll its discovery obligations. (Id. at 11.) The Court then ordered DuPont to produce the following: [D]ocuments reflecting the timing of the change; (2) which entity will retain the obligations and liabilities under the 2005 Class Action Settlement Agreement in the Leach Case; and (3) the ?nancial information for the entity retaining the obligations and liabilities, including documents re?ecting the entity?s estimated net worth, assets, liabilities, revenue, etc. To the extent some of the information is publically available, such as in a United States Securities and Exchange Commission Form DuPont may designate where that information has been published. 5 Indeed, when this MDL commenced, there was no question or doubt that DuPont was a ?nancially healthy company that unquestionably maintained the obligations and ?nancial responsibility for the thousands of claims in this litigation. Over the past 18 months that has drastically changed ?rst from transferring indemnity to Chemours, an entity that cannot ?nancially handle indemni?cation of this litigation and whose ?nancial picture is worsening daily, to the impending Dow/DuPont merger, to the likely and planned spin-offs following the Dow/DuPont merger. Case: Doc 4516 Filed: 04/27/16 Page: 9 of 14 PAGEID 97895 Plaintiffs? Third Motion to Compel and Plaintiffs? Supplement to their Third Motion to Compel are simply asking the Court to force DuPont to provide the same information regarding its proposed Merger Transaction that the Court ordered DuPont to provide relating to the Chemours spin-off. This information is clearly relevant to punitive damages and is also relevant for future Leach class member lawsuits whose claims may be signi?cantly affected by the imminent DuPont merger and/or any spin-offs and dissolution. For example, under the common law, once a corporation was dissolved, it was dead in the eyes of the law and no claim could be maintained against it. Okla. Nat. Gas Co. v. Okla, 273 US. 257, 259-60 (1927). State corporate-survival statutes, however, allow claims to be brought for a certain number of years after a corporation?s dissolution for the limited purposes of winding up and allowing parties to bring claims they may have against the corporation, but once this period ends, the corporation expires and no longer may be sued. Chicago Title Trust Co. v. Forty-One Thirty?Six Wilcox Bldg. Corp, 302 US. 120 (1937); see also DXE Corp. v. Liquidaiing Trust v. L3 Communs. Corp, 2014 US. Dist. LEXIS 112080, at *25-26) (citing Fed. R. Civ. P. 17(b)(2) and Okla. Nat. Gas Pursuant to section 278 of Delaware Corporation Law, claims against a corporation that are brought more than three years after the corporation dissolves are time barred. Desporte v. Victory Carriers Corp, 1992 US. Dist. LEXIS 6133, at *1 (ED. Louis. 1992). If DuPont dissolves, DuPont might argue that any Leach class member whose injury does not manifest itself within three years after DuPont?s dissolution are forever barred from seeking redress for their injuries. Lastly, although Plaintiffs do not have any information in their possession at this time regarding any potential fraudulent transfers, it is Case: Doc #2 4516 Filed: 04/27/16 Page: 10 of 14 PAGEID 97896 certainly not uncommon for polluters to vigorously6 defend themselves through this type of conduct. For example, frequent stratagem employed by corporate insiders is to create a "new" corporation to which the insolvent debtor corporation transfers, frequently through a maze of transactions, substantially all of its assets. The insiders own the stock of the new corporation and operate it as they did the old corporation. Meanwhile, the debtor corporation ?les bankruptcy and its creditors are left to battle over the funds that the debtor received in exchange for its assets. John C. Heenan, Graceful Maneuvering: Corporate Avoidance of Liability through Bankruptcy and Corporate Law, 65 Montana L. Rev. 99, 119 (2004) (discussing how W.R. Grace created spinoff entities and used bankruptcy as a sword in an attempt to minimize lawsuit exposure); see also In re: Tronox, Inc, 503 BR. 239 (S.D.N.Y. 2013) (illustrating the reality that communities and individuals face when confronted by corporate pollution, which is that defendants? efforts to evade responsibility for their actions may include outright fraudulent conduct.)7 Therefore, there is a distinct possibility that under the timeline laid out and the complete lack of transparency DuPont provided by way of Declarations, there is a real uncertainty about who or what will maintain the future liability and future responsibility to the 3,500 plaintiffs before this MDL Court, and the remaining approximately 65,000 other Leach class members. Accordingly, the limited discovery that the PSC seeks DuPont to produce (and which it maintains in either memos, emails, notes correspondence, etc. and thus does not need to create 5 Plaintiffs find it coincidental that DuPont continuously uses the term ?vigorously? to describe its defense of Plaintiffs? claims because ?ghting ?vigorously? is synonymous with fighting ?for dear life? or ?for all one is worth? which is a curious choice of words considering the precarious nature of DuPont?s corporate existence in relation to the Merger Transaction and litigation. 7 See also, In re Dow Corning Corp, 86 F.3d 482, 485-87 (6th Cir. 1996) (describing history of the Dow Corning silicone breast implant bankruptcy litigation); Kane v. Johns-Manville Corp, 843 F.2d 636, 63 8-41 (2d Cir. 1988) (providing history of Johns?Manville?s bankruptcy ?ling in anticipation of future asbestos personal injury lawsuits); A.H. Robins Co. v. Piccinin, 788 F.2d 994, 996?98 (4th Cir. 1986) (providing history of AH. Robin?s bankruptcy filing relating to Dalkon Shield lawsuits). 10 Case: Doc 4516 Filed: 04/27/16 Page: 11 of 14 PAGEID 97897 from scratch) far outweighs the prejudice that the 3,500 plaintiffs and Leach class could face if/when the merger occurs and any spin-off manifests. Therefore, Plaintiffs speci?cally request under the newly developed and evolving circumstances the following information as previously sought: 1) A copy of any existing documentation (authenticated by a current DuPont declaration) that clari?es where the liabilities and obligations of DuPont will fall if the proposed DuPont/Dow merger and subsequent three-way split occurs; 2) Limited discovery into the impact of the proposed merger/three-way Split on the liabilities and obligations at issue in this MDL. 3) All documents relating to the ?nancial information for the entity retaining the obligations and liabilities, including documents re?ecting the entity?s estimated net worth, assets, liabilities, revenue, etc. including not limited to the Track 3 entity identi?ed in DuPont?s March I, 2016 Merger Update Form Highlights document. The PSC can likely conduct this limited and targeted discovery with no more than ten interrogatories and no more than ten document demands (under Federal Rules of Civil Procedure 33 and 34). The PSC should also likely need no more than two to three depositions on this topic area as well with a well-crafted Rule 30(b)(6) notice. Finally, there is a very strong Protective Order in place in this litigation that protects highly con?dential information that is maintained in both DuPont internal documents that are subject to the Protective Order as well as Plaintiffs' medical records that are subject to HIPAA protections. Any ?nancial information that is provided in response to these discovery requests would be, if marked by DuPont, subject to the same con?dentiality protections. Accordingly, given the overwhelming prejudice to Plaintiffs by withholding this critical information and lack of any burden to produce these documents, this information should be provided to the PSC Without further delay 11 Case: Doc 4516 Filed: 04/27/16 Page: 12 of 14 PAGEID 97898 IV. CONCLUSION For the reasons set forth above, Plaintiffs respectfully request an Order compelling DuPont to produce, within ?ve (5) business days, all of the requested supplemental ?nancial information described above as well as allow the PSC to propound discovery as set forth above. The Declaration ?led by Ms. Mazza clearly does not provide the type of information that is necessary for Plaintiffs to properly prosecute their claims and for Class Counsel to adequately protect the interests of the Leach class. Respectfully submitted, Michael A. London Michael London Douglas London, PC 59 Maiden Lane, 6th Floor New York, NY 10038 Telephone: 212-566-7500 Fax: 212?566-7501 Jon C. Conlin Cory Watson Crowder DeGaris 2131 Magnolia Ave., Suite 200 Birmingham, AL 35205 Telephone: 205-328-2200 Fax: 205-324-7896 Email: jconlin@cwcd.com Robert A. Bilott Taft Stettinius Hollister LLP 425 Walnut Street, Suite 1800 Cincinnati, OH 45202-3957 Telephone: 513-381?2838 Fax: 513-381?0205 Email: bilott@taftlaw.com Plainti?fs Steering Committee Co?Lead Counsel 12 Case: DOC #2 4516 Filed: 04/27/16 Page: 13 Of 14 PAGEID 97899 13 Case: DOC #2 4516 Filed: 04/27/16 Page: 14 Of 14 PAGEID 97900 CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing was electronically ?led with this Court?s on this 27th day of April, 2016, and was thus served electronically upon all counsel of record. /s/Mz'chael A. London 14 1/ Case: Doc 4516-1 Filed: 04/27/16 Page: 1 of 3 PAGEID 97901 EXHIBIT A IN THE UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO EASTERN DIVISION IN RE: E. I. DU PONT DE NEMOURS CASE NO. AND COMPANY PERSONAL INJURY LITIGATION . JUDGE EDMUND A. SARGUS, JR. MAGISTRATE JUDGE ELIZABETH P. DEAVERS This document relates to: ALL ACTIONS. DECLARATION OF JULIE s. MAZZA Julie 8. Mazza declares as follows: 1. I am Acting Associate General Counsel for E. l. du Pont de Nemours and Company (?DuPont?), and make the following statements based on my current knowledge and under penalty of perjury. 2. On December 11, 2015, DuPont and The Dow Chemical Company announced plans for an all-stock merger of equals (the ?Merger Transaction?). 3. The Merger Transaction is contingent upon the satisfaction of a number of conditions, including stockholder and regulatory approvals, that are outside of DuPont?s and/or Dow?s control, and that DuPont and/or- Dow may be unable to obtain. The process to obtain regulatory and/or shareholder approvals could prevent, or delay, the consummation of the Merger Transaction. Similarly, one or more conditions to closing of the Merger Transaction may not be satisfied, and the Merger Transaction may not be completed. -. If Irm- I Inn-o: .. . amt?many Case: DOC #2 4516?1 Filed: 04/27/16 Page: 2 01?3 PAGEID 97902 4. Even if the preconditions and all regulatory and shareholder approvals for the Merger Transaction are satisfied, the Merger Transaction is not currently expected to close and become effective before the second half of 2016. 5. if the Merger Transaction is consummated, DuPont and Dow intend to subsequently pursue the separation of the combined company?s agriculture business, specialty business, and material sciences business (the ?Post?Merger Separations?). The consummation of the Merger Transaction is not conditioned, however, on the log?Id? - . determination to proceed with the Post~Merger Separations, and any determination to proceed with any or all of the Post-Merger Separations will only be made after consummation of the Merger Transaction, if it is consummated. i 6. At any time prior to finalizing the plans for or the consummation of any of the Post-Merger Separations, the DowDuPont board may determine to abandon those transactions, and currently there is no assurance that any such transactions will occur. 7. in the event that the DowDuPont board determines, following the completion of the Merger Transaction, to proceed with any of the Post?Merger Separations, DuPont and 'Dow currently anticipate that any such Post-Merger Separations would be effectuated in the form of one or more pro-rate spin-off transactions. It is my current understanding that, even its? the other preconditions occur, the Post?Merger Separations are not expected to occur before 12 months or more after the Merger Transaction is consummated. n-o MM 1 mun-num- - Case: Doc 4516-1 Filed: 04/27/16 Page: 3 of 3 PAGEID 97903 8. Currently, there has been no determination as to how the obligations of DuPont to the other parties under the Leach settlement agreement would be allocated as part of any Post?Merger Separations. I declare under penalty of perjury that the foregoing is true and correct. Date: April18,2016 - ?le 3. Mazza - cting Associate General Counsel DuPont Legal 974 Centre Road Chestnut Run Plaza WilmingtOn DE 19805 PAGEID 97904 Scalia?s Death Prompts Dow to Settle Suits for $835 Million .lefFeeley Greg Stohr GregStohr February 26, 2016 7:1] AM EST Updated on February 26. 2016 12:14 PM EST Company cites ?political uncertainties' in statement Dow had petitioned Supreme Court over $1 billion jury award Dow Chemical Co. said it agreed to pay $835 million to settle an antitrust case pending before the U.S. Supreme Court after Justice Antonin Scalia?s death reduced its chances of overturning a jury award. Dow. the largest chemical maker by sales, said Friday the accord. will resolve its challenges to a $1.06 billion award to purchasers of compounds for urethanes, chemicals used to make foam upholstery for furniture and plastic walls in re?'igerators. The Midland, Michigan?based company disputed a jury?s ?nding it had conspired with four other chemical makers to ?x urethane prices and asked the Supreme Court to take the class?action case on appeal. Scalia, one of the court?s most conservative members, had voted to scale back the reach of such group suits. ?Growing political uncertainties due to recent events with the Supreme Court and increased likelihood for unfavorable outcomes for business involved in class-action suits have changed Dow?s risk assessment of the situation,? the company said in an e?mailed statement. Scalia?s Absence Scalia?s death is likely to make it harder for companies to get the ?live votes they need. to overturn awards or get new restrictions on class actions. He had been a key voice for companies in challenging group suits at the Supreme Court. Scalia wrote the 5-4 ruling in 2011 that said Wal?Mart Stores Inc. couldn?t be sued by potentially a million female workers. Two years later, Scalia was the author of a 5?4 ruling that freed Corneast Corp. from having to defend against an $875 million antitrust lawsuit on behalf of Philadelphia-area customers. ?Class?actions is one of the areas Where Justice Scalia?s absence is likely to have an impact,? said Gregory 1/5 4/27?201Case: PAGEID 97905 Garre, an appellate lawyer at Latham Watkins in Washington and previously President George W. Bush?s top Supreme Court lawyer. ?Companies will have to be careful what they ask for in seeking review, or at least face an added burden in prevailing at the court on class?action issues.? ?Political Philosophy? ?Companies whose positions are based more on political philosophy than on interpretation of the law worry when the majority philosophy in sway at the court changes,? said Erik Gordon, a professor at the University of Michigan?s business and law schools who teaches classes on mass torts and class-action cases. ?It is unlikely that any nominee will be as favorable to business as Justice Scalia was,? Gordon said in an e- mail. ?The anti-business wing will carry more decisions.? Nevada Governor Brian Sandoval, a Republican, bowed out of consideration Thursday as Scalia?s replacement on the court. Senate Republican leader Mitch McConnell of Kentucky has vowed that any nominee pushed forward by President Barack Obama won?t get a con?rmation vote this year. McConnell says the next president should make the appointment. ?Marginal Difference? Some appellate lawyers say the court won?t change much on class actions, regardless who makes the selection. think it?s only a marginal difference,? said Jonathan Hacker, who runs the Supreme Court practice at O?Melveny Myers in Washington. ?Overall I think mostjustices want to ensure that class?action procedures permit defendants to litigate their defenses fairly and don?t subject absent class members to unfair outcomes they can?t control or even in?uence.? The settlement in the Dow case resolves the Largeit U.S. court award for 2013. according to data compiled by Bloomberg. That year, a federalncom?tjtu'y in Kansas City, Kansas, awarded. urethane purchasers $400 million in damages over claims that Dow engaged in price fixing. Thejudge in the case tripled the award to $1.2 billion as required by antitrust law. The case started in 2005 with allegations that Dow plotted with BASF SE, Huntsman International LLC and Lyondell Chemical Co. in violation of federal law. Dow was the only company that refused to settle. The final judgment in the case was reduced to re?ect $139 million in settlements with the other defendants before trial. Dow?s Defense bl com 2/5 427001635139: apneaworsseisumamulaageqoebes 5 PAGEID 97906 Dow appealed the liability ?nding and. award to a federal appeals court in Denver, which rejected its challenges to the class-action claims in September 2014. The company asked the US. Supreme Court to review the lower court?s ruling. Dow disputes that it was part of a price~?xing cons.piracy even though it agreed to resolve the case. The jury award ?was fundamentally ?awed as a matter of class~action law," the company said in its statement. The Supreme Court has been holding Dow?s appeal while it considers similar issues in a Tyson Foods Inc. case. Tyson is seeking to overturn a $5.8 million wage award to workers at an Iowa pork?processing plant. The company argues that it was subjected to an impmper ?trial by formula? and that the class of workers included some who were fully compensated. Tyson got a skeptical audience from the justices during arguments in November. The justices suggested they might issue a narrow ruling, potentially upholding the award while limiting its reasoning to the wage- and?hour hour context. The Dow appeal raised broader questions about group lawsuits, arguing the award violated both the Constitution and the federal courtroom rules that govern class actions. In December, Dow and DuPont Co. agreed to a mer er of uals, the largest combination ever in the chemical industry. The companies have a combined market value exceeding $106 billion, based on current trading. The deal is scheduled to close by the end of this year, after which three separate companies focused on plastics, agricultural products and specialty materials will be spun off to shareholders. The antitrust case is In re Urethane Antitrust Litigation, 04-md?01616, U.S. District Court, District of Kansas (Kansas City). Before it's here, it's on the Bloomberg Terminal. - Antonin Scalia - Supreme Court Law 3/5 4/27/20163ase: PAGEID 97907 4/5 4/27?201Q3ase: PAGEID 97908 ?I?erms of Policy @201 6 Bloomberg LP. All Rights Reserved in NYCAdvertiseAd ChoicesWebsite 5/5 AS FILED WITH THE SEC ON 03/02/2016 Case: Doc 4516-3 Filed: 04/27/16 Page: 1 of 27 PAGEID 97909 EXHIBIT MERGER UPDATE - FORM 5-4 HIGHLIGHTS March 1, 2016 Case: Doc #2 4516-3 Filed: 04/27/16 Page: 2 of 27 97910 Regulation The attached charts include information that does not conform to generally accepted accounting principles (GAAP). Management of the companies believe that an analysis of this data is meaningful to investors because it provides insight with respect to comparisons of the ongoing operating results of the companies. These measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other companies. This data should be read in conjunction with previously published reports by the respective companies on Forms 10-K, 10-0,, and 8-K. These reports, along with reconciliations of measures to GAAP are available on our respective websites. Reconciliations of measures to GAAP are also included with this presentation. Cautionary Notes on Forward Looking Statements This communication contains ?forward-looking statements? within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as "expect," ?anticipate,? ?intend,? ?plan,? ?believe,? ?seek,? ?see,? ?will,? ?would,? ?target,? similar expressions, and variations or negatives of these words. Forward?looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the consummation of the proposed transaction and the anticipated benefits thereof. These and other fonNard-looking statements, including the failure to consummate the proposed transaction or to make or take any filing or other action required to consummate such transaction on a timely matter or at all, are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Important risk factors that may cause such a difference include, but are not limited to, the completion of the proposed transaction on anticipated terms and timing, including obtaining shareholder and regulatory approvals, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the new combined company's operations and other conditions to the completion of the merger, (ii) the ability of Dow and DuPont to integrate the business successfully and to achieve anticipated synergies, risks and costs and pursuit and/or implementation of the potential separations, including anticipated timing, any changes to the configuration of businesses included in the potential separation if implemented, the intended separation of the agriculture, material science and specialty products businesses of the combined company post-mergers in one or more tax efficient transactions on anticipated terms and timing, including a number of conditions which could delay, prevent or otherwise adversely affect the proposed transactions, including possible issues or delays in obtaining required regulatory approvals or clearances, disruptions in the financial markets or other potential barriers, (iv) potential litigation relating to the proposed transaction that could be instituted against Dow, DuPont or their respective directors, the risk that disruptions from the proposed transaction will harm Dow's or DuPont?s business, including current plans and operations, (vi) the ability of Dow or DuPont to retain and hire key personnel, (vii) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger, uncertainty as to the long?term value of DowDuPont common stock, (ix) continued availability of capital and financing and rating agency actions, legislative, regulatory and economic developments, (xi) potential business uncertainty, including changes to existing business relationships, during the pendency of the merger that could affect Dow?s and/or DuPont?s financial performance, (xii) certain restrictions during the pendency of the merger that may impact Dow's or DuPont?s ability to pursue certain business opportunities or strategic transactions and unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management?s response to any of the aforementioned factors. These risks, as well as other risks associated with the proposed merger, are more fully discussed in the joint proxy statement/prospectus included in the preliminary registration statement on Form 5-4 filed with the SEC in connection with the proposed merger. While the list of factors presented here is, and the list of factors presented in the preliminary registration statement on Form 5-4 are, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on Dow's or DuPont?s consolidated financial condition, results of operations, credit rating or liquidity. Neither Dow nor DuPont assumes any obligation to publicly provide revisions or updates to any forward looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. 2 Case: Doc 4516-3 Filed: 04/27/16 Page: 3 of 27 PAGEID 97911 Important Information About the Transaction and Where to Find It In connection with the proposed transaction, on March 1, 2016 DowDuPont Inc. (f/k/a Diamond?Orion HoldCo, Inc.) ("DowDuPont"), filed with the Securities and Exchange Commission a preliminary registration statement on Form 5-4 that includes ajoint proxy statement of The Dow Chemical Company and E. I. du Pont de Nemours and Company ("DuPont") and that also will constitute a prospectus of DowDuPont. These materials are not final and may be amended. Dow, DuPont and DowDuPont may also file other documents with the SEC regarding the proposed transaction. This document is not a substitute for the joint proxy statement/prospectus or definitive registration statement or any other document which Dow, DuPont or DowDuPont may file with the SEC. INVESTORS AND SECURITY HOLDERS OF DOW AND DUPONT ARE URGED TO READ THE PRELIMINARY REGISTRATION STATEMENT, THE JOINT PROXY AND THE DEFINITIVE VERSIONS THEREOF AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of the preliminary materials filed on March 1, 2016 and the definitive versions of these materials and other documents filed with the SEC (when available) by Dow, DuPont and DowDuPont through the web site maintained by the SEC at or by contacting the investor relations department of Dow or DuPont at the following: Dow DuPont 2030 Dow Center 974 Centre Road Midland, MI 48674 Wilmington, DE 19805 Attention: Investor Relations Attention: Investor Relations +1 989-636?1463 +1 302-774-4994 Partici ants in the Solicitation Dow, DuPont, DowDuPont and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding Dow?s directors and executive officers, including a description of their direct interests, by security holdings or otherwise, is contained in Dow?s Form 10-K for the year ended December 31, 2015, its proxy statement filed on March 27, 2015 and the joint proxy statement/ prospectus of Dow contained in the Form 5-4, which are filed with the SEC. Information regarding DuPont?s directors and executive officers, including a description of their direct interests, by security holdings or othen/vise, is contained in DuPont?s Form 10-K for the year ended December 31, 2015, its proxy statement filed on March 23, 2015 and the joint proxy statement/prospectus of DuPont contained in the Form 5-4, which are filed with the SEC. A more complete description will be available in the definitive registration statement on Form 5-4 and the joint proxy statement/ prospectus. No Offer or Solicitation This communication is not intended to and shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote of a pprovai, nor shall there be any sale of securities in anyjurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. -: UU Case: DOC #2 4516?3 Filed: 04/27/16 Page: 4 01?27 PAGEID #2 97912 Agenda Form S-4 Financial Highlights - Form S-4 DowDuPont Governance Highlights Timeline Key Update DowDuPont Synergies DowDuPont: Unlocking Shareholder Value Creating Three Leading Businesses Underpinned by Strong Industrial Logic Case: Doc 4516-3 Filed: 04/27/16 Page: 5 of 27 PAGEID 97913 Form 5-4 OverVIew - lnitial filing of Form Registration Statement with the Securities and Exchange Commission (SEC) - lnitial filing starts the comment and review period with the SEC Form 5?4 will become effective after the SEC has completed their review await . 5 Case: Doc 4516-3 Filed: 04/27/16 Page: 6 of 27 PAGEID 97914 Form S-4 Financial Highlights Combined 2015 proforma Net Sales of "$743 and Operating EBITDA of "$153 Proforma unaudited financial information was prepared on an as?reported basis1 Key proforma adjustments Dow is treated as the ?acquiring entity? for accounting purposes per U.S. GAAP Significant fair value adjustments were applied to DuPont's balance sheet (inventory, net property, other intangible assets, deferred income tax liabilities, deferred revenue and debt), resulting in goodwill on the combined company Income statement impact of the fair value adjustments primarily relates to additional depreciation, amortization and interest expense in connection with fair value step?u Income statement and balance sheet reclassifications In millions: except perShare amounts -?L?December 31 2015 re?ect cha nges to adjust Dupont?s ?nancial Statement Pro Forma Condensed Combined Statement of Income Data presentation to conform with that used by Dow Netsales Net income from continuing operations Net income available for DowDuPont common stockholders Earnings per common share - diluted Earnings per common share - basic 73,836 9,170 8,716 3.68 3.37 Proforma does not reflect any cost or growth synergies that the combined company may achieve as a result of the merger, or the costs to combine the operations of Dow and DuPont, or the costs necessary to achieve these cost or growth synergies Pro Forma Condensed Combined Balance Sheet Data Pro forma combined cash dividends per share is not Total assets 157 634 presented, as the dividend policy for the combined Total liabilities 77 609 company will be determined by the DowDuPont board Total equity 5 80,025 of directors following completion of the mergers 1. Certain/signi?cant items are included The summary pro forma ?nancial statements, based on the Form 5-4?led on March 1, 2016, have been presented for informational purposes only and are not necessarily indicative ofwhot the combined company's ?nancial position orresults of operations actually would have been had the mergers been completed as of the date: indicated. ln addition, the pro forma ?nancial 6 9 statements do not purport to project the future ?nancial position or operating results of the combined company Case: Doc 4516-3 Filed: 04/27/16 Page: 7 of 27 97915 DowDuPont Financial Profile Pro Forma DowDuPont1 "$493 ~$253 ~5743 Operating EBITDA $103 $53 5153 Operating EBITDA margin ?20% "20% ?20% 45% of 25-45% of Cash Consistent with Current D'v'd dP l' I en 0 Icy Net Income from Operations Policies at Both Companies Targeting an Investment . . 2 Credlt Rating A Grade Credit Rating Net Debt $8.63 $2.63 513.533 Plus Total Expected Cost Synergies of Billion Source: Based on Dow and DuPont?s financial information as reported in each company?s 2015 Form 10-K ?ling. l. The summary pro forma financial information, based on the Form 5?4 filed on March 1, 2016, is presented forillustrative purposes only and is not necessarily indicative of the future operating results or ?nancial position of the combined company. 2. and Fitch have placed DuPont?s long-term ratings on negative 7 watch and Moody?s has placed DuPont on negative outlook. 3. Numbers do not sum due to proforma adjustments based on the Form 5-4?lea' on March 1, 2016. Case: DOC 4516-3 Filed: 04/27/16 Page: 8 Of 27 PAGEID #1 97916 Agenda Form 5-4 Financial Highlights - Form DowDuPont Governance Highlights Timeline Key Update DowDuPont Synergies DowDuPont: Unlocking Shareholder Value Creating Three Leading Businesses Underpinned by Strong Industrial Logic Case: Doc #2 4516?3 Filed: 04/27/16 Page: 9 of 27 PAGEID if: 9791? Governance Highlights Andrew N. Liveris to be named Executive Chairman with focus on Material Science Edward D. Breen to be named CEO with focus on Agriculture and Specialty Products Breen and CFO are collectively responsible for DowDuPont?s financial oversight - Combined Board of Directors to have 16 directors, consisting of eight current Dow. directors and eight current DuPont directors, including Breen and Liveris Combined Board of Directors will have two independent co-lead directors I;_lntended_Separation into ThreeCompa?nie-s' Advisory Committees to be established at merger closing for each of the intended companies: Agriculture, Material Science and Specialty Products Breen to be responsible for establishment, integration and operation of Agriculture and Specialty Products - Liveris to be responsible for the establishment, integration and operation of Material Science - In these roles, both Liveris and Breen will report to the Board of Directors uUlJ?li: 9 Case: Doc 4516-3 Filed: 04/27/16 Page: 10 of 27 97918 Advisory Committees: Structure 8: Responsibilities DowDuPont board will establish Advisory Advisory Committee responsibilities: Committees for the Agriculture, Material Sole authority to approve any changes to the Science and Specialty Products businesses scope of its associated business by an affirmative vote of the majority of the members ofsuch committee; Develop capital structure in accordance with the DowDuPont bylaws; Name CEO and leadership teams; and Provide status updates to DowDuPont Board on progress of intended spins - Executive Chairman and CEO of DowDuPont will serve on each committee - Ag committee will also include certain DowDuPont board members that are DuPont continuing directors and certain DuPont directors serving ex-ot?cio - Material Science committee will also include certain DowDuPont board members that are Dow continuing directors and certain Dow directors serving ex-officio Advisory Committee decisions generally subject to override by vote of greater than 66 2/3 of DowDuPont board Committees will remain in place fora minimum of 2 years post merger or until intended separation; anticipated that committee members will become Board members ofthe separated entities - Specialty Products committee will also include certain members of the legacy Dow and DuPont boards as agreed on by the Executive Chairman and CEO of DowDuPont Case: Doc #2 4516-3 Filed: 04/27/16 Page: 11 of 27 PAGEID 97919 Agenda Form 5-4 Financial Highlights Form 5-4 DowDuPont Governance Highlights Timeline Key Update DowDuPont Synergies DowDuPont: Unlocking Shareholder Value Creating Three Leading Businesses Underpinned by Strong Industrial Logic ?i?l Case: Doc #2 4516-3 Filed: 04/27/16 Page: 12 of 27 PAGEI #2 97920 Significant Progress on Execution of Planned Merger of Equals ROW Competi? tian Filings 131.6! 5-4 Filing . 10.16 Hart~ Scott- . Radian A Filing Close 2H16 Share- holder Vote 2Q16 35013 I Each Company 2017-2018 Stand Up SpinCos1 Complete Spins1 Operation of public MergeCo Capture of cost synergies Achieve 100% run-rate <24 mo. after close Spin as soon as possible 5 Planning Teams are Making Progress to Expedite Synergy Capture Upon Merger Closing; Carve-out Financial Work Underway Case: DOC 4516-3 Filed: 04/27/16 Page: 13 Of 27 PAGEID #1 97921 Joint Implementation Planning Joint Executive Steering Team Dow Representation Andrew Liveris - CEO - Ed Breen -- CEO Jim Fitteriing COO Nick Fanandakis CFO Howard Ungerleider CFO Stacy Fox General Counsel Charles J. Kalil - General Counsel David Bills SVP Corp. Strategy Torsten Kraef? Corp. VP Strategy Linda West - VP Corp. Planning TRACK 1 TRACK 2 TRACK 3 Close MergeCo Capture Synergies Plan for Intended Spins DuPont Representation Charles Kalil Jim Fitterling Howard Ungerleider Stacy Fox . Nick Fanandakis Linda West Regulatory Clearances Pro~forma financials 5?4 filing and proxy process Shareholder votes Governance/Leadership of MergeCo Operations of MergeCo Prepare "execution~ready? plans to achieve $38 cost synergies ASAP Define operating model, org. structure and linkages to ?corporate? Financial and legal structure Determine scope and target timing of each SpinCo Deliver carve-out financials Legal entity restructuring Case: DOC #1 4516-3 Filed: 04/27/16 Page: 14 Of 27 PAGEID 97922 Agenda Form 5-4 Financial Highlights - Form S-4 DowDuPont Governance Highlights - Timeline 8: Key Update - DowDuPont Synergies DowDuPont: Unlocking Shareholder Value 8: Creating Three Leading Businesses Underpinned by Strong Industrial Logic 14 Case: DOC #2 4516-3 Filed: 04/27/16 Page: 15 0f 27 PAGEID #2 97923 Total Expected Cost Synergies of Billion Total DowDuPont Synergies Cost Synergies by Business Total Cost Synergies "$33 Total Growth Synergies "$13 [3 Specialty Products I Material Science Total Synergies "$43 Agriculture Costs to Achieve1 $3.53 - $4.13 Cost Synergies by Function I COGS El Leveraged Services I 100% of Run-Rate Cost Synergies Achieved within the First 24 Months from Transaction Closing Note: Numbers may not sum due to rounding. a? 1. One-time integration costs. 5 Case: Doc 4516-3 Filed: 04/27/16 Page: 16 of 27 PAGEID 97924 Agriculture Company Overview Credit pro?le oft-Dec; 11-, 2015 7 I A- A A Heang 'uarterS: Wilmington; Delaware g. Az?? _.J_Capi_talize on DuPont?sindustry-leadingseed 5prod_uction'processesto; A A enhance IOWerUnit prodUction costs 1.5traitegi'cfallv 39': :37} protection themistriesjto 'driVe prodUCtivity and scale ?f Agriculture Agricultural Sciences i i i i advantage for i lobal manufacturing 4o ptim iz'ati'on 'ofAsv'n'th esis and-formulation operations izeand prioritize spending; A INDUSTRY LEADERS FOCUSED Utilizingworld?class capabilities in to rational 35? re'ates table-Gama biot?CHnologV and-discovery programs OP-eratidnS: includihgcl?customer service-and Credit with mostcomprehensive, balanced and diverse AA .5: A seedandportfonowwh . . .w exceptional Opportunlty for growth z; ON CORE COMPETENCIES A A World's leading production agriculture business Streamline?bBACk-Of? 1? Robust innovation pipeline ofgermplasm, A biotechtraitsand crop protectiontechnologies A A A . A A thatenablethedelivery ofabroadersuiteof stronger products to the market - Enhance customer valu_e._propositlon throughbroader ch01ceof. offerings Enhancedscaleand multiple routes?to-market allow broader reach ofcomplementary offerings a; A Combinetechnologies and AdeveAlopAnew formulations to prowde abroad cram -- - 2 . 4 ?jj*TUtilizelDUPontis both Acompan'yis; ,A-jdistributor/ retail route55t_oimarketi.to a?CCessAlarger planted 7 A jAADrive? broader, strategies to increase'crossE 3A Jaws..me nun-u uiviL-zm-i-W A {Di . Note: Numbers may notsum due to rounding. 16 1. Based on Dow?s and DuPont's Net Sales as reported in each company?s 2015 Form 10-K ?ling. Case: DOC 4516-3 Filed: 04/27/16 Page: 17 0f 27 PAGEID 97925 Specialty Products Company Overview Credit Profile: Investment Grade Cost Synergies: l? - Integrate Dow Electronic Materials and DuPont Electronics . 'cat' a i ies no resence ~$103 Communi ions laboratoryf lit and tech logyp Electronics Consumersmu?ons: 5 Consolidate each parties Electronics organization into one streamlined Communications - DowEiectmnic business unit structure, optimizing management, sales marketing, supply Nutrition Health Materials i; chain and back office functions 5?5? 5.3 r; Industrial Biosciences I Optimize purchasing opportunities in Electronics, particularly regarding precious metals procurement and critical raw materials and indirect materials Safety Protection Growth Synergies: INDUSTRY LEADERS FOCUSED a Build a significantly broader toolkit in semiconductor and advanced ON CORE COMPETENCIES j- packagingsegments that will lead to accelerated growth in electronics end- markets A Focused on attractive secular growth end-markets Where?f?TOVat?Ve science capabilities O?eraclear I Channel DuPont?s next?generation display technologies through Dow?s competitive advantage - 5? "Asset lite/high touch?: Value added businesses Strong Sales ChannEl driven secular trends in consumers endin . . . . Leading?randsand customerintimacy?TWek? Budd upon Dow and DuPont?s products and application expertise to develop Kel?l?mt NO'T?effiiaPiofand Tedla?r?? 4 3 enhanced metallization technologies for higher?e?c?dency Si so'ar A, - cells I I. - Optimizeroute-to-market between Material Science Company and Tyvek? enterprise to drive growth in key end?markets Note: Numbers may not sum due to rounding. 1 7 1. Based on Dow?s and DuPont?s Net Sales as r?eparted in each company?s 2015 Form 10-K filing. Case: DOC #2 4516-3 Filed: 04/27/16 Page: 18 Of 27 PAGEID #2 97926 Material Science Company Overview "hfmiwidl?nd;Michigarif A. A A A- A AA Adi/Credit Pro?le; Generally consistent'with Dow pr file as of ner iesOptirnize selling administrative cOsts and eliminate redundanciesin'jmst. 'I'Rea'lize? efficiencies from applying Dow?sadVa htaged feedstock fleXibilityin the towards 4. Performance Plastics Performance Materials (lowest costiA-ipro'dfuCtion Performance Materials 8: Chemicals InfrastructureSolutions A A I, A A Pi5'M'PWfs'iworldr'class Cracker operatingexr?ell?nte 3- - - Consumer Solutions: Consumer Care - Dow Automotive Systems INDUSTRY LEADER FOCUSED 0N CORE COMPETENCIES Gr. ?errig-Ca?liiteliiei . A. A. . "Ip?rodu?cti'su ethylene?) to driVe incremental production andgrowth iiWHi??re?Spa produCtion-ca pa city is available rt'icularly. in . a A A fixed c'o'Sts A A . development andcom'mercial footp riAnt-tojlse'rvecustomers Low-cost integration 8: innovation combined with expanded customer offerings in key growth sectors - One of the world?s largest packaging materials 5 suppliers A . A j- Aleader in thermoplastics, elastomers, finished athurope . . . partsand biopolymers .Greatest breadth 01cElm/"C Chain tEChn010gies$a Al ieaderin extruded foaminsulation customers-a more throughthe for?custornerstoAja duress fuel i; - A rid?saf?ty .1 - Note: Numbers may notsum due to rounding. 1 8 1. Based on Dow?s and DuPont?s Net Sales as reported in each company?s 2015 Form 10-K ?ling. Case: Doc 4516-3 Filed: 04/27/16 Page: 19 of 27 PAGEID 97927 Estimated Corporate Leveraged Services Synergies Streamline costs by aChiE?Ving top quartile Cost Synergies by Function cost position for common corporate functions and driving substantial scale benefit by leveraging I COGS El Leveraged Services I across businesses Developing integration plans for our transactional processes Savings from consolidating IT vendor purchases by harmonizing contracts and leveraging larger buying power Aggressively reduce facilities footprint by consolidating office, lab and warehouse locations and leveraging larger buying power 011mm, ?9 Case: Doc #2 4516?3 Filed: 04/27/16 Page: 20 of 27 PAGEID 97928 Agenda Form S-4 Financial Highlights - Form 5-4 DowDuPont Governance Highlights - Timeline Key Update - DowDuPont Synergies - DowDuPont: Unlocking Shareholder Value 8: Creating Three Leading Businesses Underpinned by Strong Industrial Logic mum 20 Case: Doc 4516-3 Filed: 04/27/16 Page: 21 of 27 PAGEID 97929 A Combination Unlocking Exceptional Value Across Three Leading Businesses ?9 - Highly?synergistic merger of equals projected2 to unlock ?$30 billion of market value Intent to pursue tax-free3 separation into three independent companies: Leading Global Pure-play Agriculture Business Leading Global Pure?play Material Science Business Leading Technology and Innovation-driven Specialty Products Business Transaction creates billion in cost synergies Opportunity for potential growth synergies of billion 1. Based on Dow?s and DuPont?s Net Sales as reported in each company?s 2015 Form 10-K filing. 2. Projected $303 in market value based an assumption of an multiple of 10x on the $38 in synergies. - ?u 3. Refers to US. taxes only. Intended separation may incur taxes in other jurisdictions. c: Case: Doc 4516?3 Filed: 04/27/16 Page: 22 of 27 PAGEID 97930 Ag Co: World-Leading, Comprehensive Agriculture Business Most Comprehensive and Diverse Seed and Crop Protection Portfolio Combines Portfolios of Leading Products World?s leading prOdUCtion agriCUIture With Strong Capabilities Driving Future growth business with most comprehensive, balanced and diverse seed and crop protection portfolio with exceptional opportunity for growth Seed Brands ?aw Seeds? Bitmap.? .n .1 PROaccess?? his? (limit: Genetics Pawnee-Mgr; Rich history and sustainable commitment to production agriculture focused on delivering solutions to growers around the world 5112.11 wseidwtag Advanced Technologies Robust innovation pipeline of germplasm, biotech traits and crop protection technologies that enable the delivery of a A E) it": a broader sunte of stronger products to the 235$ng ma rket A a. Insecticides Herbicides Fungicides Enhanced scale and multiple routes-to?market allow broader reach of complementary offerings and enable deeper customer intimacy that will drive increased grower productivity and profitability globally Accent?q Other Emerging mammal; TEChrIOlOgies uomamid don DuPont" Dermacor? DuPont"Lumivia" 1. This product is fully approved in the U5. and Canada. Traits included in these 2 2 products may or may not be approved in all global markets. . Case: Doc 45162-3 Filed: 04/27/16 Page: 23 of 27 97931 Specnalty Products Co: Focused on Attractive Secular Growth End-Markets Where Innovative Science Capabilities Provide Clear Competitive Advantage - Unique businesses that share similar investment characteristics and focus on specialty products - Core in product innovation and application development: Clear capital allocation focus and strong product pipelines Strong portfolio of differentiated offerings: Highly technical, knowledge-intensive businesses with attractive margins Leading brands and customer intimacy: Tyvek?, Kevlar?, Nomex?, Corian?, Kapton?, Tedlar?, Danisco? and Genenc0r? Scale across portfolio: Global leadership in each business segment Specialty Materiais Bio-Based Soiutions Leading Solar 15* Aramid-?jbers paper cs "industrial enzymes io ti if Cultures Qie?th? garmentS- 9'7- 1" *iTe?ftL'rantS gi-ifmgr?die?f Ti- - -Lithographiqmaterials5.1;." pf 1.:Solidsurfam materials: - if I . 2' Metalliza'tionmaterials; films; _Em?ulsifiers- Flexible circuit materials; - .- Soy proteins? A I . 2 .. Advanced biofuels If: -V 11 New Di's?bllavii'echfi?logiesV?f- Polymers for Prebiot?ics'? V- 7? 'Pr'olbio'tics for Animal Nutrition, Gram Modules 3 DemandingApplicatlons ?SystemsSolLItions A . ?New EnzymES for Food, Home Opportunities Heat Water" . - HealthyOfferingsfof &'PersonalCa're{ Management in.Eiectronics . .Managem'ent? Geographies 7 i y. ,35- Markets . Key Global Consumer Needs Driving Company Growth 1-0 BUPUNE 23 Case: DOC #2 4516-3 Filed: 04/27/16 Page: 24 0f 27 PAGEID 97932 Materials Co: Low-Cost Integration 8: Value-Added Innovation Underpinned by Operational and Commercial Excellence ADVANTAGED WORLD-CLASS SCIENCE AND NARROWER, DEEPER END BACK-INTEGRATION ENGINEERING CAPABILITIES MARKET PRESENCE High-Throughput Research Formulation Sciences In 0 q- O. High-Performance Computer Modeling - A leader in thermoplastics, elastomers, ?nished parts - A leader in OEM glass bonding, aftermarket glass The greatest breadth of acrylic chain technologies, - and biopolymers bonding, structural bonding and brake fluids including industry-leading positions in acrylic binders, - One of the world's largest packaging materials - #2 position in rubber-to-metal bonding and HEUR rheology modifiers, dispersants and opaque suppliers polyurethane systems applications for tier suppliers polymers - A leading global provider to the electrical and A leader with broad portfolio of solutions, spanning - A leader in extruded foam insulation and telecommunications industry "under the hood?, exteriors and "in the car? cellulosic?based construction chemical additives A leader in lightweighting platforms for transmissions, - A leader in one-component foams in retail and acrylic- driveline and structural bonding based construction chemicals in North America 24 Case: DOC #2 4516-3 Filed: 04/27/16 Page: 25 of 27 PAGEID 97933 APPENDIX BU FUNK 25 Case: DOC #2 4516?3 Filed: 04/27/16 Page: 26 0f 27 PAGEID #2 97934 DuPont Reconciliations RECONCILIATIONS OF OPERATING EBITDA TO CONSOLIDATED INCOME STATEMENTS (dollars in millions) 2015 I ncome from continuing operations before income taxes 2,591 Add: Significant items (benefit) charge before income taxes?) 453 Add: Non-operating pension/OPEB costs 397 Operating earnings before income taxes 3,441 Less: Net income attributable to noncontrolling interests 6 Add: Interest expense 322 Add: Depreciation and amortization - 1,338 Adjusted EBITDA from operating earnings 5,095 (1) See Schedule to DuPont's earnings news release for the fourth quarter and full year 2015 as furnished to the SEC on Form 8-K on January 26, 2016. - UU Case: DOC 4516-3 Filed: 04/27/16 Page: 27 0f 27 PAGEID #2 97935 Dow Reconciliations RECONCILIATIONS 0F OPERATING EBITDA (dollars in millions) EBITDA Reconciliation 2015 Net Income Attributable to The Dow Chemical Company 7,685 Net income Attributable to Noncontrolling Interests 98 Provision for Income Taxes 2,147 Income Before Income Taxes 9,930 Depreciation and Amortization 2,521 - Interest Income 71 Interest expense and amortization of debt discount 946 Earnings before interest, income taxes, depreciation and amortization (EBITDA) 13,326 - Total Certain Items included in EBITDA1 3,730 gperating EBITDA (non- GAAP) 5 9,596 (1) For a complete list of certain items, see Dow?s quarterly earnings releases EXHIBIT Chemours Probability Of Bankruptcy (/invest/symbolDashboard/CC) SUMMARY PERFORMANCE FUNDAMENTALS Analysis Premiums Competition 4/27/20163ase: 1 of 4 PAGEID 97936 Add To Portfolio I: (/irEvth/s TECHNICALS RECOMMENDATION Upgrade to remove ads (linvest/portfolioPackages) Probability Of Bankruptcy Analysis For stocks, Probability Of Bankruptcy is normalized value of Z?Score. For funds and ETFs it is derived from a multi?factor model developed by Macroaxis.The score is used to predict probability of a firm or a fund going into bankruptcy or experiencing financial distress within next 24 months. Unlike Z-Score, Probability Of Bankruptcy is the value between 0 and 100 indicating the actual probability the firm will be distressed in the next 2 fiscal years. Chemours Probability Of Bankruptcy Normalized Z-Score About Probability Of Bankruptcy Companies or funds with Probability Of Bankruptcy above 90% are generally considered to be high risk with a good chance of bankruptcy in the next 2 years. On the other hand entities with Probability Of Bankruptcy of less than 15% will most likely experience some growth in the next 2 years. Probability Of Bankruptcy is based on Macroaxis own algorithm and can be used by auditors, accountants, money managers, financial advisers, as well as day traders to evaluate risk of a stock, fund or ETF. Compare Chemours to competition (/invest/combare/CC) Predict Chemours (/invest/n Matt Chemours Probability Of Bankruptcy Assessment Of Bankruptcy 4* (/invest/country) Probability-Of- Bankruptcy Chance of Financial DiStress The Chemours Company has less than 37 percent chance of experiencing financial distress in the next 2 years of operations. More Info assets 4.93.0 stars . BestRevieW/Q?a Nationwide - Delivery 4- Ful! Setup 4/27?201Ease: 2 of 4 97937 7 B?tg?n On 48-55 8 CC 4'3 Company] 9.19 $2.55% Chemours Specialty Chemicals BasiQM??aio/CC? (1.57) All Equities El - Sign In - -- 1 - - Benchmark Embed- -) Chemours - - (/invest/country) (/invest/blogGadgetsTour) Comparables -) operating a My Watchlist Margin (?inVest/mB/Watch List) (/invest/ratio/CC? 3.95 Based on latest financial disclosure The Chemours Company has Probability Of operating- ruRt/gg??ghoe?gghis is 23.33% lower than that of the Basic Materials sector, Margin) amatewmgatst?aaea?m Chemicals) Curran; industry, The Probability Of Bankruptcy for all stocks is 23.79% higher than the valuation cowpa?gee Tools llinvest/ratio/CC- 4.9 -Current? :3 Funds (/lnvest/ratio/filterFunds) Stocks Mil-m Filter other Stocks by Probability Of Bankruptcy Shares About Us Outstanding llinvest/ratio/CC? 181.38 Stock Market an mg) Crash2016 7- . Stock Marketrs "Day of "Ige From 34% To 63% mm Reckoning" is Fast? Shares Shorte?j 0 -Number?of- Shares-Shorted) run this filter -) Filter Other Equities Ericeto?Wg (/invest/ratio/CC? . 9 PPG Industries _price_t0_ 10'00 ?mes (/invest/market/PPG--PPG- Founrodi??teltfaitieg Probability Of Bankru; SherwinWillia Is I . I I . gPGM?p/g NYQ PPG industries Inc 1.4% NYQ The ShenNinWilliams Company 2 02F NYQ international Flavors Fragrances inc 9 (/invest/market/lFF-? VAL NYQ The Valspar Corporation 21 Fragrances-inc) ALB NYQ Albemarle Corporation 28 AXT A (/invest/market/AXT A-?Axalta-Coating?Systems-Ltd) NYQ Axalta Coating Systems 38 RPM NYQ RPM international Inc 17% WLK NYQ Westlake Chemical Corp 10 214 4/27/20163ase: 3 of 4 97938 GRA EU YOU can Check Volatility backtest this sub- set of assets as a portfolio or check its risk adjusted returns nvest/ratio/CC-- Probability-Of- Bankruptcy NYQ WR Grace Co NYQ NewMarket Corporation Net Income {Net nco?m_. 27% 7% [a --Back1 Cash and Equivalents (linvest/ratio/CG -Cash-and- Equivalents! Cash er Share (linvest/ratio/CG ?Cash?per-Sharel Total Debt (/invest/ratio/CC- ~Total-Debt) Current Ratio l/invest/ratio/CC? -Current-Ratio) Book Value Per Share l/invest/ratio/CC? Cash Flow from Operations l/invest/ratio/CC? -Cash~Flow? fr_0r& gems) sums; (/invest/ratio/CC- Short-Ratio) One Year High llinvest/ratio/CC? -One-Year-High) One Year Low (/invest/ratio/CC- -One~Yea r-Low) Earnings Per ?D_a_re (linvest/ratio/CC? -Earnings-Per? Share) Price to Earnings To Growth (/invest/ratio/CC- 366 2.02 times 3.95 1.57 times 0.70 times 0 182 (/inve 3.64 times 22.25 3.06 (0.50) times 3/4 4/271201Q3ase: 4 of 4 PAGEID 97939 'PriCE-to- times (/inve Earnings-To? Growth) Number of Eli?0w (/invest/ratio/CC? 8.1 -Number-of? . Em gloyees) Market Capitalization (linvest/ratio/CC- 1.31 -Market? Ca italization Total Asset (/invest/ratio/CC? 6.3 -Total-Asset) Retained Eaangs (/invest/ratio/CC- (115 M) ~Retained- Earnings) Working Ca Qital l/invest/ratio/CC- -Wo rking- Lam 835 Current Asset (linvest/ratio/CC? 2.3 Current Liabilities (/invest/ratio/CC- 1.47 Current- Liabilities) 2016 Macroaxis Inc. All rights reserved 1? 3V Insiders Companies (/invest/companyDirectory) Blog Feedback Widgets (/invest/blogGadgetsTour) 4/4 4/27/20163ase: Dodt?meb?WP?edtD?dawobcPage: 1 of 4 PAGEID 97940 Chemours: The Thesis To $0 EXHIBIT October 09. 2015. 01 :32:32 PM EDT By Dylan 713 investing. SeekingAlpha 9 Comment By Dylan 718 Investing Looking at Chemours CC today reminds me of the night Michael Spinks fought Mike Tyson in June of 1988. As an ., undefeated professional ?ghter. Spinks. I in theory. had a chance but the deck was stacked massively against him and, midway through the first round. the smart bet paid off. Sh utterstock photo Chemours today: Massively overlevered . Per CC's 2nd quarter earnings release. is approximately 5.2x. balance sheet is even worse per CC's June 30, 2015, 10-0. total assets of $6.085b are supported by only $405m of equity and this ?gure is most likely overstated (discussed below). - Facing massive litigation risk . From page 6 of CC's Second Quarter Earnings Presentation. CC is responsible for/engaged in: 1. 170 Environmental Remediation sites (of which they assert 65% are resolved and the remainder well understood). CC has reserved $295m. but has stated that the actual cost could be up to $650m higher. 2. 2.500 Asbestos cases alleging personal injury. against which they've reserved $38m. 3. PFOA (aka C8). Most intriguing. DuPont DD the parent of CC until June 19. 2015. knowingly (or at least negligentiy) pumped toxic chemicals into the water supply of Parkersburg. West Virginia. and surrounding communities for decades. Now CC. which indemni?ed DuPont, is about to face the music - approximately 3.500 personal injury claims have been filed. including 37 for wrongful death. if punitive damages are awarded. good estimates range from $300?700m (with upside) in total liability. If you like conspiracy novels. give this a read . So far. the company has reserved $14m. There is the potential for public policy arguments against indemnifying for punitive damages DD could be on the hook) but donthe 3,500 cases. 6 have been designated as test cases and in the ?rst. Bartlett v. DuPont. a jury found DuPont liable for $1.6m last night (in the U.S. District Court for the Southern District of Ohio). it's worth noting that DuPont selected Bartlett as a test case (each side selected 3 cases). it is expected that the 6 test cases will form the basis for a broader ln CC's favor, it appears that the jury decision last night may not result in punitive damages but each case will be put to a jury so there are plenty more bites at the apple. Note that this litigation has been in process for a very long time and is now reaching a head; in the Leach v. DuPont settlement in 2005. DuPont agreed not to contest general causation for 6 diseases linked to CB - which means the plaintiffs today carry a lesser burden of proof. - Ti02 market isn't going to get better soon .Ti02 accounts for 43% of CC's sales and 63% of Adjusted EBITDA (numbers from CC's August Investor Presentation. Adjusted EBITDA looks at the 3 operating businesses total Adj. EBITDA of $894m). The industry has a supply imbalance and Chinese producers are flooding the market with cheap product. Production cuts by major players are largely offset by upcoming new supply coming online in Mexico and China. Moody's and CC both estimate a recovery in the market won't take place until 2017. Per CC. global demand is almost perfectly correlated to GDP so unless you see a real short term turnaround there. don't expect business to earn their way out of these problems near term - or even to offset the current imbaiance. Of the other two businesses, Fluoroproducts has relatively tow cash generation and they are looking to sell Chemical Solutions - which had a 2% Adj. EBITDA margin in 2014. believe Flouroproducts may provide an incremental $200m in in 2017 from their Opteon sales in Europe as new environmental standards kick in (Mobile Directive in the EU). - 2nd Quarter Balance Sheet most likely overstates liquidity .The Separation Agreement from DuPont is reaily worth a read; it speils out exactly what liabilities CC assumed as well as 1/4 4?27/201Ease: 2 of 4 97941 de?ning a number of business principles going forward. Most interesting to me is Section 2.13. Section 2.130)) sets a post-spin cash target of $200m for CC and requires a true-up once the ?nal number is caiculated. The basis for these catculations is the June 30th ?nanciats - meaning payments aren't yet reflected in the June 30th audited ?nancials. The ?nal cash calculation was $247m - meaning CC owes DD $47m - a reduction in cash and equity (payment must be made by 12/31) from the already grossly overlevered balance sheet. But there's more - 2.13(c) is entitled "Secondary Adjustment for GCAP Cash-Comparable items". This provision requires a second true-up payment after considering changes to AR. AP. Inventory. Taxes, and Fixed Costs. This provision was written in an incredibly confusing manner - but eventually we traced this through the de?nitions and learned that the benchmark for determining whether another payment was due is found on Schedule 1.1 (139) - which was not in the filing. Comparing these items to the prior period from their 10-0 resulted in a pretty big positive number potential for another payment to DD if that were the basis for the benchmark). Again. we do not have the actual starting point to benchmark these ?gures against so this is purely conjecture. Emails to the company on this issue were not returned and a phone call to resulted in a voicemail message stating that they are in a quiet period. You have to wonder what CC's book equity looks like once they make adjustments for these payments and a reserve for the C8 cases - does Bartlett give them enough certainty around this liability that a huge reserve is now warranted? Addressing the next logical question - is this risk already priced into the stock? No. CC has performed inline vs peers since the spin (Tronox (TROX Kronos Worldwide KRO and Huntsman HUN TROX, the worst performer. has a higher exposure to Ti02 (66% of sates) than CC. but has recently exited bankruptcy (so they are completely clean from any exposures similar to CC). TROX recently did a nice deal with FMC where they acquired a highly cash generative soda ash business, has a mountain of tax attributes, continues to maintain a 15% dividend (for now), and is much less levered than CC at 3x EBITDA. That's not a plug for TROX. it's an attempt to illustrate that 00?s price decline reflects pure business fundamentals and not their other issues (although we are warming to a reiative value trade). To make matters worse. CC ?led an 8-K on September 25 ?h announcing amendments to their May 12, 2015 Credit Agreement with JPMorgan Chase (JPM) acting as administrative agent. Among other changes, they capped annual dividends for 2016 and 2017 at $22m down from $400m. Best case dividend yield for 2016 and 2017 is 1.5% (at current $8 price) in an industry where the dividend has historically been a key for investors. So what can save them? We think CC is legally insolvent today if they took adequate reserves to cover their contingent liabilities - that's not to say they are able to do so under GAAP. it's a comment about valuation and solvency. They have already announced a restructuring in which they are targeting $140m in incremental EBITDA in the 2nd half of 2016. It sounds great. but they now have $4.0b in long term debt, and approximatety S500m per annum in property, plant and equipment expenditures (See Note 14 of 10- and cash flow statement from June 30, 2015 10?0). At an average interest rate of roughly 6.75%. annual interest payments on their debt are approximately $275m (assuming the revolver is fully drawn). The amendment to the Credit Agreement referenced above also imposed interest coverage and leVerage ratios on CC that wilt most likety result in additional concessions to bondholders upon any further deterioration in the business or adverse decisions. Using numbers from their August 2015 investor presentation for the year ended June 30, 2015 the incremental $140m results in annual Adj. EBITDA of$850m for 2015 (assuming no decline in the 2nd half of 2015 which is a gift) leaving only $75m in free cash per annum in excess of interest and property, plant and equipment costs and a fraction of their contingent liabilities. Bloomberg average analyst estimated for 2015 is $666m and $863m for 2016; so the reality is probably much worse than our calculations and even with the restructuring. they have little to no excess cash flow in 2015 and no short term ability to reduce debt. Analyst reports on the name forecast severai hundred million in negative cash ?ow for each of 2015. 2016. and 2017. Reports surfaced Wednesday night that Apollo is exptoring the idea of buying CC. This seems unlikely as buyoutfunds typically look for underlevered. high cash generation businesses. not to mention the massive contingent liabilities CC faces. While we think the tax risk is low. CC has also ours-the-thesis?to?O?cm528928 214 4/27/20163ase: Dodi?m?b?wllg?ed?ezwewebc?age: 3 of 4 PAGEID 97942 agreed to indemnify DuPont if they cause the June spinoff to lose its tax free status: white pretty low risk, just not the type of thing you usually see buyout funds step into. We spoke with a senior banker at a competitor oprolto who agreed with this analysis. Moreover, if they did want to buy CC, what would they bid? idon't think you're looking at much upside from the current price; Apollo doesn't overpay often. We also think a roll-up with Troncx is unlikely - TROX just closed a nice deal, buying the soda ash business from FMC for $1.7b which will help them monetize their US. tax attributes. Triggering a change of control (per Section 382) will impose material limits in their ability to use the attributes. The bankruptcy ?lings by TROX also give you a data point here - Kerr McGee tried to sell TROX to the buyout funds and they all passed due to a comparable contingent liability situation. We need to do more work on the Inca! West ngnia and Ohio tegal issues, standard for punitive I damages, and appeals process but the numbers jumping out at us are so large 1 don't see this changing the conclusion. That leaves CC in a solvency race for its existence, walking a tightrope to limit cash payments and avoid further concessions to bondholders. We think management is acutely aware of this - when they amended the Credit Agreement and sacri?ced almost all dividends in 2016 and 2017, the trade-off was concessions on their Net Leverage Ratio covenant which requires them to reduce their multiple over the next 2 years. Can they extend litigation long enough to allow a global recovery to lift the Ti02 market out of the doidrums and return the company to solvency? In CC's favor, no major debt matures until 2023 and they may net $5-600m from the sales of Chemical Solutions (eXCluding the Cyanide business which they intend to keep). While the Chemical Solutions sale and further restructurings can help a little along the way, we think the only way they can survive without a bankruptcy ?ling is if the core business recovers. From a timing perspective, depending on how successfui they are in cutting costs and selting the chemicals business, they may limp along untii (38 litigation appeals are ?nal (think 2017). The pace could accelerate if the Ti02 business continues to deteriorate or if they are boxed into a global settlement in the CB cases. owned CC's unsecured debt, I would be spending a lot of time thinking about the waterfatl. A conspiracy theorist would bet a lot of money that inside DuPont there are many legal briefs discussing the value to DD of hiving off these contingent liabilities. Looking at CC's balance sheet, fraudulent conveyance arguments are easy to envision - all over again (although most likely in smaller size)? in short. we think CC has a puncher's chance, they might pull offa miracle but most of the time the deck is stacked this hard against you, you end up like Michael Spinks - ?at on your back after 91 seconds. See aiso CONMED (CNMD) Q3 2015 Resutts - Earnings Cali Webcast on seekingalpha.com The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. . mm. This article appears in: investing Stocks More Headiines for: CC . DD TROX . KRO HUN More from SeekingAlpha i- Citrix Systems (CTXS) Q3 2015 Results - 2? Monday Mailbag: How Do Incentive Earnings Cali Webcast Distribution Rights Work? t- Allegiant Travet (ALGT) Q3 2015 Results - Earnings Catt Webcast Related Stocks Articles Subscribe Distribution Announcement Sends Energy Transfer i- Better Buy: Exeiixls, Inc. vs. Roche Equity LP Soaring Today 4/27/2016 03:48 PM 4/27/2016 03:54 PM 528928 31'4- 4?27/201Ease: 4 of 4 PAGEID 97943 eBay, Inc. Plays ltSafe After Another Strong Quarter #2712016 03:45 PM 4/4 4/27/201t3ase: 1 of 4 PAGEID 97944 EXHIBIT In The Mix: Why DuPont's C8 Trial Matters Wed, 09/23/2015 9:45am by Meagan Parrish, Editor For decades, DuPont produced a chemical called perfluorooctanoic acid commonly known as PFOA or C8. The chemical was key for making Teflon nonstick. As far back as the 19605 DuPont knew that could be toxic. But in 1978 3M notified the company that workers exposed to C8, even at high levels, experienced no adverse health effects. Now, a woman from Ohio, says that C8 is nevertheless the reason she got kidney cancer in 2002. The woman is one of many who lived near DuPont?s Washington Works plant who allege that the company knowingly contaminated drinking water near the plant and didn?t take the proper steps to notify the public about the dangen Here are a few key implications for this case. C8 on Trial Right now, it?s notjust DuPont that?s on trial C8 is also in the hot seat. In 2004, DuPont settled a class action case that spawned this recent wave of lawsuits, which led to a study Of the potential health implications of C8 exposure. The 1/4 412790166133 2 of 4 PAGEID 97945 scientists in that panel found six diseases that could ?more likely than not? be linked to C8, including two types of cancer, high cholesterol, and thyroid disease. In light of the findings, seven companies, including DuPont, have stopped producing C8, and have - reformulated products including fabrics and food processing components. The EPA also now requires testing for the chemical although the agency has yet to set an official drinking water standard for the chemical. Will Chemours Face Bankruptcy? In July, DuPont spun off its performance chemicals segment into a new company called Chemours. Now, that company, which took over the Teflon business, will be burdened with DuPont?s legal obligations related to C8. If lawyers convince jurors that DuPont knowingly contaminated drinking water, they could weigh in favor of a settlement. And even though it may take multiple cases before DuPont faces a pact settlement, there are more cases on the way, with one scheduled for trial later this yeah According to one litigation analyst quoted in Bloomberg, based on past settlements of a similar nature, the exposure could be around $498 million and any payout over $500 million could send Chemours into bankruptcy. We?ll be following this case and the fate of C8 closely on Chem.Info, so check back for more. See you next time on In The Mix. Plant Operations RELATED READS 497001636189: 3 of 4 PAGEID 97946 Lawyer Who Exposed DuPont's Decades of Chemical Pollution Activists Demand Action Against Lawsuit Over DuPont Water Contamination Heads To Trial Group Worried DuPont Split Will Affect Health Repayments E2%80%995-c8-trial-matters 3/4 9 Comments ChemJnfo Recommend E2 Share 4?27?201Ease: 4 of 4 PAGEID 97947 Login Sort by Best Start the Bethe ?rst to comment. ALSO ON CHEMJNFO Plastic Chemical Linked To Chitdren?s Attention Deficit Disorders After 2 comments - 9 days ago YJ77 Correlation of the timing or actual causation? Often it's very hard to determine. 146 Years After Entering The Oil Business, The Rockefellers Are Moving 1 comment - a month ago Jack Watt About LBJ first spoke about the weather changes 002 emissions cause in 1968 in a speech on Chemistry Graduates Far Outnumber Available Jobs 4 comments ?a month ago deanrd In the mean time, China is building a million robots to take over jobs from uneducated workers making $172 a CDC Confirms Zika Causes Birth Defect 1 comment - 13 days ago There is all kind of doubt that Zika is a main driver causing microcephaly. recently we find 4/4 Case: DOC #2 4516-7 Filed: 04/27/16 Page: 1 Of 7 PAGEID 97948 EXHIBIT DuPont or Chemours? Who will pay thesoosts of C8 42 lawsuits? ac co Is as . DUPONT COULD HA UBLE MONEY BACK FROM CHEMOURS DuPont is facing some 3,500 lawsuits and more than $1 billion in potential liability for improperly dumping the toxic chemical 08. used in the manufacturing of Te?on, at its Washington Works plant near Parkersburg, West \?rginia. Releasing the chemical through out?ow pipes into the Ohio River. up the plant?s industrial chimneys and at two unlined company land?lls is blamed for widespread illnesses in the region. 03893 2113?md'024?t?g s??seElEbEtyRiPS ?659 #1 97949 Dow Chemical 00.. but could have dire consequences for Chemours. the performance chemical company DuPont spun off last July about six months after it left downtown Wilmington for the suburbs. Part of the separation agreement requires Chemours, which now occupies of?ces adjacent to Hotel du Pont that has stood as the parent company's headquarters for more than 100 years, to indemnify DuPont for any costs in "product liability intellectual property, commercial. environmental and anti-trust lawsuits." But Chemours, with about 1,100 employees in Delaware, may not pay, company spokeswoman Janet Smith said. STORY: Taking on DgPont: illnesses, deaths blamed on ggllution from glant awar nin ml on formlnewsIZCH I 4] ?lldu nt-ilnes es- hs- gamma STORY: In Delaware. blamed ?lgg?ghting fgam rg-g?-contaminatign- "These are DuPont liabilities." said Smith. "That means it would be DuPont's reSponsibility to pay any settlement orjudgement in these cases. Under the separation agreement, DuPont may be entitled to indemnity from Chemours." Ultimately, lawsuits brought by citizens against DuPont may lead to litigation between the two companies. "Liability is like a contagious disease," said Marie Reilly, a professor of corporate and bankruptcy law at State University Law School. "You can pass it to someone else and you still have it. it's not like a baton in a relay race where you don't have it any more." Beginning in 2017, the 3.500 lawsuits are scheduled to begin grinding through the U.S. District Court for the Southern District of Ohio at a pace of 40 cases per year. meaning it could take 90 years to resolve them all. DuPont must ?rst pay any damages awarded to plaintiffs before it pursues indemni?cation from Chemours. The volume of lawsuits makes it dif?cult to know exactly when DuPont could seek reimbursement, but it is unlikely DuPontwould wait 90 years for one large indemni?cation payment from Marie T- Professor of corporate and bankruptcy law Ch at State University LawSchool. emours. (Photo: Penn State University] And DuPont must be careful not to overwhelm Chemours with liability payment demands so that it collapses under the strain. Case: Doc 4516- Filed: 04/27/ Ra elsmger, a professor of economics at rexe University's law school. said DuPont is better off structuring the indemni?cation over a long period of time even if it means receiving less than expected from Chemours. "if DuPont is paying millions of dollars to 3.500 individuals and there is no Chemours in its back pocket to pay for that. DuPont is losing in that circumstance." he said. Chemours is in a precarious position. It's total capitalization of $1.24 billion barely exceeds the estimated liability for pain and suffering of West Virginians and Ohioans harmed by C8 exposure. The company has lost money every quarter since separating from DuPont? $18 million and $29 million Alex Geisinger. professor of economics at Drexel in the second and third quarters of (Photo: Drast University) 2015. respectively. Those loses nearly tripled in the fourth quarter. to $86 million. The company's troubles have largely been tied to weak demand for its top products ?titanium dioxide. Te?on. and sulfuric acid. All three of Chemours' product lines reported double-digit sales declines in the fourth quarter. and ovarall sales fell to $1.4 billion. a 12 percent decrease from the same quarter in 2014. For the year. Chemours' sales dropped 10 percent to $5.7 billion from $6.4 billion in 2014. Chemours has responded to the quarterly losses with an aggressive plan to eliminate $350 million from its budget by the end of 2017. Cuts include the shuttering of its Edge Moor facility just outside Vt?lmington. along with a Niagara Falls, New York plant next year and the sale of a Beaumont. Texas plan to Dow for $140 million. In addition. the company has laid off 400 employees, about 5 percent of its workforce. "If Chemours is in trouble. a DuPont lawyer will have the possibility of a bankruptcy in the back of their mind. and a Chemours attorney will use the possibility of bankruptcy as leverage with DuPont," Geisinger said. "This is a touchy situation." Case: DOC #1 4516-7 Filed: 04/27/16 Page: 4 Of 7 PAGEID #1 97951 DuPont spokesman Dan Turner would not Speak directly to whether DuPont would attempt to force Chemours to cover liabilities. In a statement. Turner said, ?DuPont remains committed to continuing to ful?ll all of its legal obligations and environmental obligations in accordance with existing local. state and federal regulatory guidelines." So far, two cases related to CB contamination have been resolved. In October, a federal jury awarded $1.6 million to Guysville. Ohio resident Carla Bartlett after ?nding DuPont?s dumping of CB into Ohio River caused her kidney caner. DuPont's appeal of thejury decision is still pending. A second case. John M. Wolf v. DuPont. was settled in February for an undisclosed amount, Chemours conceded in a Securities Exchange Commission ?ling that indemni?cation claims could "materially" affect its ?nancial condition, but noted the scope of the liability cannot be estimated because each individual plaintiff's claim is unique. The ?rst substantial payment to 0-8 plaintiffs is expected to occur sometime in 2018 or 2019, and a lot can happen between now and then. In its transformative plan. Chemours expects to liquidate its non-core chemical solutions portfolio, which could improve pro?ts by $500 million within the next two years. Wall Street say Chemours is relying upon a lot of what-ifs. "Anytime we are thinking about 2019, there has to be a lot of uncertainty on anything," said John Roberts. an analyst with UBS Global. In August. Chemours launched it Opteon line of products environmentally-friendly refrigerants used in automobile and home air conditioning units and has already doubled capacity to meet demand both in the United States and Europe. That could help Chemours weather the storm, said Lawrence A. Hamermesh, a professor of corporate law at Delaware Law School. Potter Stewart Courthouse in Cincinnati, Ohio ls home to the U.S. Southern District of Ohio District Court. "Companies can lose money still have a lot of assets (Photo: Library ofCangrass) left." Hamermesh said. "Big companies lose money all the time in any given quarter or year." Hamremesh compared the liability of CB exposure to the asbestos lawsuits which bankrupted more than 100 companies throughout the United States. if the CB liability is big enough it could bankrupt Chemours. forcing plaintiffs attorneys to settle the exposure cases on the cheap. "If you know in the long run you are looking at at bankruptcy you'll take your 40 cents on the dollar and get out.? he said. "But it is too early to think about that based on one settlement and one lawsuit Case: Doc #1 4516-7 Filed: 04/27/ DuPont Chief Executive Of?cer Ed Breen has publicly expressed con?dence in Chemours' ability to survive independently. At a recent meeting with Wall Street Breen said he is "comfortable" with Chemours' strategy and ability to manage the debt DuPont agreed in December to merge with Dow to create a massive conglomerate with holdings in chemicals. agriculture, safety products and plastics among other industries. Typically. pre-merger liability is transferred to the successor company. However. DuPont and Dow are planning to split into three separate companies roughly a year after the merger '3 complete" Lawrence A. Hamermesh, professor of corporate law at Delaware Law School The new company will be called DowDuPont. and (mm summed) its agriculture and specialty products businesses will be headquartered in Delaware. A third arm focused on material sciences will be based in Dow's hometown of Midland. Michigan. It is not known which of three new companies will be responsible for pursuing indemni?cation from Chemours. DuPont and Dow ?led an 8-4 with the SEC disclosing the assets that will be transferred to the three companies, but it did not detail the spin-off that will receive the merged DowDuPont liability. Roberts expects the specialty products company to assume the liabilities. Of the three spin- offs. the $12 billion specialty products business is comprised of four former DuPont units and only one former Dow unit. The $45 billion material sciences company will include four former Dow units and one DuPont business. and the $16 billion agriculture company is a combination of a former unit from each company. DuPont Chief Executive Of?cer Ed Breen (Photo: DuPont Co.) "The liability is a DuPont legacy issue and specialty products has the most DuPont-centric portfolio." Roberts said. However. specialty products is the smallest of three spin-offs. raising questions about whether it struggle to pay off the C8 liability. "Old DuPont didn't disclose the CB liability in its regulatory?lings because it wasn't material to them. but it is material to Chemours," Roberts said. "Specialty products will be a lot smaller than old DuPont." Hamermesh said the DowDuPont spinoff assigned the liability must also include enough assets to offset the legal costs. If a spin-off is packed with underperforming business lines and has the CB liability. it could set up a shareholder lawsuit under state and federal Fraudulent Transfer laws. Chemours received some of DuPont?s weaker products. but those assets still have value that can offset liability. Case: $95; Filed: 04/27/16 Page: a of 7 PAGEID 97953 Oklahoma City-based Kerr-McGree's spinoff of Tronox, its chemical business. After decades of mounting environmental. tort and retiree liabilities, including toxic dumping across 22 states. Kerr-McGree packed those expenses, totaling billions, into Tronox without telling investors and kept its most valuable oil and gas assets. The court ordered Kerr-McGree's parent, Andarko Petroleum. to pay damages related to the environmental cleanup. Andarko paid $5.15 billion to settle the environmental claims including $4 billion to clean up thousands of sites nationwide contaminated with uranium debris. DuPont CEO Ed Breen (left) shakes the hand ofThe Dow Chemlcal Co. CEO Andrew leeras to celebrate a merger between the two "There has to be some reasonable judgement that you ?mamas(Photo: DuPont) are not putting liabilities into a company clearly incapable of meeting them." Hamermesh said. "That's a tough judgement because you need to think about the valLIe of the liabilities and how muoh these assets are really Worth." If the spin-off obtaining the liability collapses under the weight of those costs. yet another headache emerges for plaintiffs' attorneys in the Mid-Ohio Valley. They would then become tort creditors of the bankrupt company attempting to squeeze what they can out of it. The good news. according to Penn State's Reilly. is tort creditors are ahead of other bankruptcy claimants. But tort creditors would have to push the company into bankruptcy first, something Reilly likened to a "nuclear weapon." "if you are a shareholder you have some say in the corporate decision making. but not much." she said. "If you are tort creditor you have a nuclear weapon, and that's all you have." Contact Jeff Mordook at jmordook@delawar__eonline. com or (302) 324-2786. SHARE THIS STORY Case: Doc @ge??zarggl?g: 04/27/16 Page: 7 of 7 PAGEID 97954 Thu Nonmznu wra- IIWW 2016 Copyright? 2014 All rights reserved.