Transaction ID 72586486
`
`EFiled: Mar 22 2024 11:S6PMERT
`
`Case No. 2023-1060-NAC erotsor pers
`
` ;°)'
`
`fa
`
`Exhibit C
`Exhibit C
`
`EFiled: Mar 22 2024 11:56PM EDT
`Transaction ID 72586486
`Case No. 2023-1060-NAC
`
`

`

`D1 Jasper Holdings LP, et al. v. JUUL Labs, Inc., et al. - 3/13/24 Trial Transcript Vol. I - Del. Chanc. 2023-1060-NAC
`
`Page 3
`
`APPEARANCES CONT'D:
`
` RICHARD P. ROLLO, ESQ.
` TRAVIS S. HUNTER, ESQ.
` ALEXANDER M. KRISCHIK, ESQ.
` JOHN M. O'TOOLE, ESQ.
` Richards, Layton & Finger, PA`
` -and-
` ROBERT A. WEIKERT, ESQ.
` of the California Bar
`Nixon Peabody LLP
` for Non-Party JL Tao LLC
`
`
`- - -
`
`Page 4
`THE COURT: Good morning, everyone.
`ATTORNEY MASON: Good morning, Your
`Honor. Your Honor, Dan Mason of Paul Weiss for
`plaintiffs. I would like to introduce several of my
`colleagues from Paul Weiss. Jeff Recher, Nina
`Kovalenko, and Martin Flumenbaum.
`THE COURT: Good morning. Welcome.
`Mr. Lafferty.
`ATTORNEY LAFFERTY: Good morning, Your
`Honor. Bill Lafferty on behalf of defendant JUUL
`Labs. With me at counsel table are my colleagues from
`Cleary Gottlieb: David Gelfand, Roger Cooper, Lina
`Bensman. And our client representative is here as
`well, the CEO of the company, K.C. Crosthwaite, who's
`in the back. He's going to be present for the trial,
`and he will also be testifying later in the trial as
`well, Your Honor.
`
`THE COURT: That's fine. Welcome.
`
`Thank you.
`
`ATTORNEY ROLLO: Good morning, Your
`Honor. Rich Rollo, Richards, Layton & Finger on
`behalf of defendant, JL Tao. I am rising to introduce
`Joe Perkovich from JL Tao, my partner Travis Hunter,
`Rob Weikert from Nixon Peabody, and my colleague
`
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`Page 1
`IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
`
`D1 JASPER HOLDINGS LP, D1 SPV JL :
`MASTER LP, JAY BLOCKER LTD., :
`JAY DOMESTIC LLC, GCCU II LLC, :
`TOCU XX LLC, OC II FIE VIII LP, :
`SPV HOLDINGS, LLC, EMS J-INV LLC, :
`DISRUPTIVE TECHNOLOGY SOLUTIONS :
`XIV, LLC, DISRUPTIVE TECHNOLOGY :
`SOLUTIONS XVI, LLC-SERIES A, :
`DISRUPTIVE TECHNOLOGY SOLUTIONS :
`XVI, LLC-SERIES B, and DISRUPTIVE :
`TECHNOLOGY SOLUTIONS XVI, :
`LLC-SERIES C, :
` :
`Plaintiffs, :
` :
` v. : Civil Action
` : No. 2023-1060-NAC
`JUUL LABS, INC. and JL TAO LLC, :
` :
`Defendants. :
`
`
`
` - - -
`
` Chancery Courtroom No. 12A
` Leonard L. Williams Justice Center
` 500 North King Street
` Wilmington, Delaware
` Wednesday, March 13, 2024
` 9:15 a.m.
`
`
` - - -
`
`BEFORE: HON. NATHAN A. COOK, Vice Chancellor
`
` - - -
`
`
`
`
`
`TRIAL TRANSCRIPT - VOLUME I
`
`
`Page 2
`
`APPEARANCES:
`
` DANIEL A. MASON, ESQ.
` SABRINA M. HENDERSHOT, ESQ.
` ELIZABETH WANG, ESQ.
` Paul, Weiss, Rifkind, Wharton & Garrison LLP
` -and-
` MARTIN FLUMENBAUM, ESQ.
` JEFFREY J. RECHER, ESQ.
` NINA KOVALENKO, ESQ.
` CESAR RIVIERE, ESQ.
` of the New York Bar
`Paul, Weiss, Rifkind, Wharton & Garrison LLP
` for Plaintiffs
`
` WILLIAM M. LAFFERTY, ESQ.
` ALEXANDRA M. CUMINGS, ESQ.
` GRANT E. MICHL, ESQ.
` DAVID J. TEKLITS, ESQ.
` KIRK ANDERSEN, ESQ.
` Morris, Nichols, Arsht & Tunnell LLP
` -and-
` ROGER A. COOPER, ESQ.
`LINA BENSMAN, ESQ.
` DELANY D. SISIRUCA, ESQ.
` ALEXIS BRAMHALL, ESQ.
` REGINA PAPARO, ESQ.
` BRUNO DOIG, ESQ.
` ETHAN SINGER, ESQ.
` ROMAN GIEROK, ESQ.
` JACOB GORDON, ESQ.
` ANDREW O'CONNOR, ESQ.
` AMIRA PERRYMAN, ESQ.
` of the New York Bar
` Cleary Gottlieb Steen & Hamilton LLP
` -and-
` DAVID I. GELFAND, ESQ.
` of the District of Columbia Bar
`Cleary Gottlieb Steen & Hamilton LLP
` for Defendant
`
`
` Appearances Cont'd ...
`
`CHANCERY COURT REPORTERS
`500 N. King Street, Ste 11400, Wilmington, DE (302) 255-0526
`
`(1) Pages 1 - 4
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`

`

`D1 Jasper Holdings LP, et al. v. JUUL Labs, Inc., et al. - 3/13/24 Trial Transcript Vol. I - Del. Chanc. 2023-1060-NAC
`
`R. Valani - Cross
`
`Page 111
`comments. I do think it would have been important for
`the full board to be aligned.
`Q.
`And did you say at the board meetings
`in August of 2022 that it was important that certain
`members of the board with specific knowledge about the
`company and its situation across a number of areas be
`permitted to weigh in?
`A.
`I think, actually, I do remember that
`from my deposition. And this was, I think,
`specifically with relation to Altria. And I do have a
`rich history of understanding the negotiation with
`Altria, how the contract was set up and the
`relationship there.
`THE COURT: One question. When is
`
`that from?
`
`THE WITNESS: The relationship with
`Altria? The relationship with Altria, the transaction
`was consummated in 2017. And there were some
`revisions to the contract with Altria that I had been
`helpful with.
`
`THE COURT: And it's your testimony
`that you have a rich memory and understanding of those
`discussions in 2017?
`THE WITNESS: Yes. Yes, because it
`
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`Page 109
`that in a board setting with or without me present.
`Q.
`Well, am I correct, sir, that you
`recused yourself when the board was deciding whether
`or not to accept the offer that you guys had made?
`Correct?
`I don't think I was generally present
`A.
`for a lot of discussion around the term loan
`refinancing as it relates to the entity related to me.
`Q.
`Is it your testimony that you never
`heard Mr. Crosthwaite refer to you at a board meeting
`as a board insider?
`A.
`I mean, it's super possible that's the
`case. I don't remember any specific conversation.
`Q.
`Super possible that you do remember;
`correct?
`No. Super possible that he said that.
`A.
`If I remembered, I would tell you I remembered.
`Q.
`You are not denying that he said that,
`are you?
`I'm not denying.
`A.
`And am I correct that during the
`Q.
`summer of 2022, there were also discussions about the
`governance of the board? Correct?
`A.
`Just remind me the date, please.
`
`Page 110
`
`Page 112
`
`I don't remember the specific use of
`
`was a deeply involved process and negotiation that I
`was specifically involved with.
`BY ATTORNEY FLUMENBAUM:
`Q.
`That's the transaction that closed in
`December of 2018; correct?
`A.
`Oh, yeah, that's right. Sorry.
`December of 2018. I got my dates mixed up. But yes.
`Q.
`And am I correct that you stated at a
`board meeting that forming a special committee may
`create friction?
`A.
`those words.
`Was it your position in August of 2022
`Q.
`that creating a special committee may create friction?
`A.
`I mean, it was a very fluid time at
`that moment in time and I thought that it was
`important that we would be able to act as a full board
`in real time as relates to the strategic conversations
`that were taking place.
`Q.
`Let me ask you to look at your binder,
`Exhibit 433.
`A.
`Q.
`works for you?
`
`I see this.
`And am I correct that Gwendolyn Moy
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`Yes.
`And one was a woman named Rona
`
`Summer of 2022.
`Q.
`Yeah, I don't remember specific dates
`A.
`on those discussions.
`Q.
`There were a couple of independent
`directors on that board; correct?
`A.
`There were.
`Q.
`And one was a woman named Teresa
`Sebastian?
`A.
`Q.
`Ambrose?
`Yes.
`A.
`And am I correct that at board
`Q.
`meetings you stated that you did not want to form a
`special committee and that it was important that the
`full board's voice be heard?
`A.
`On what specific topic was this?
`Q.
`Related to bankruptcy.
`A.
`I don't remember that. I do think
`that bankruptcy is a full board discussion.
`Q.
`Did you also state that you wanted the
`full board to be aligned on any decision surrounding
`Altria or Chapter 11?
`A.
`I don't remember any specific
`
`CHANCERY COURT REPORTERS
`500 N. King Street, Ste 11400, Wilmington, DE (302) 255-0526
`
`(28) Pages 109 - 112
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`

`

`D1 Jasper Holdings LP, et al. v. JUUL Labs, Inc., et al. - 3/13/24 Trial Transcript Vol. I - Del. Chanc. 2023-1060-NAC
`
`R. Valani - Cross
`
`Page 113
`
`She does.
`A.
`And am I correct, sir, that on
`Q.
`September 26th she wrote to Skadden, to lawyers at
`Skadden Arps, that "Riaz and Nick verbally confirmed
`to KC (the CEO) that they will fund"?
`Do you see that?
`I do.
`A.
`And was she accurate?
`Q.
`Yes. We did fund.
`A.
`And am I correct, sir, that on the
`Q.
`same day -- let me show you -- take a look at Exhibit
`429. It's a letter from -- excuse me.
`Before I ask you about this, Skadden
`represented you personally?
`A.
`I think me and my entities.
`Q.
`So they were your lawyers?
`A.
`Yes.
`Q.
`And they also represented Mr. Pritzker
`and his entity?
`A.
`Q.
`A.
`representation.
`Q.
`
`I think so.
`The two of you had formed a group?
`I think it's called joint
`
`But you were working in tandem;
`
`Page 115
`
`Do you see that?
`Yes, I do.
`A.
`Does that refresh your recollection
`Q.
`that JUUL was in imminent default of its loan in
`September of 2022?
`A.
`At that point in time, I think the
`company was worried about being -- as I mentioned,
`there was a minimum cash balance, and I think that
`they were worried about there being a drop in the cash
`balance below the minimum cash balance at the time.
`Q.
`Well, JUUL had not raised any money
`from any third-party investor; correct?
`A.
`You mean in terms of the debt
`refinancing?
`Yes, as of September 26th, 2022.
`Q.
`Yes. It exhausted -- it ran an
`A.
`exhaustive process to try and get a debt refinancing
`done, and it was, as I mentioned, a difficult time.
`Q.
`And there was not one third-party
`investor that offered to take over the term loan;
`correct?
`To my recollection, there was a number
`A.
`of kind of piecemeal offers, but there was no one that
`came through in that span of time.
`
`Page 116
`And Mr. Anker writes that "The Company
`Q.
`has requested that Mr. Pritzker and Mr. Valani
`consider providing a new term loan, also in the
`approximate amount of $400 million, the proceeds of
`which would be used by the Company to pay off the
`existing term loan, so that the Company will be able
`to avoid an imminent default, and have additional time
`both to explore ways to address the litigation it is
`facing and to maximize its value for the benefit of
`all constituencies."
`Do you see that, sir?
`I do.
`A.
`And was that accurate?
`Q.
`Well, you know, I think it was really
`A.
`important to us that the company not trip a minimum
`cash requirement at the time and that, yeah, that that
`not be a reason for it to default. So I think it was
`important to us that actually the term loan get
`refinanced, and it was important for us for the
`company, at that period of time, which was a difficult
`period of time, to try and find ways to see it through
`all of its issues.
`And you and Mr. Pritzker and your
`Q.
`various entities became the secured lenders to the
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`Page 114
`
`correct?
`We did work closely.
`A.
`And on September 26th, if you look at
`Q.
`Exhibit 429, there's an email to Kirkland from a
`lawyer named Phil Anker from WilmerHale.
`Do you see that?
`I do see this.
`A.
`And was WilmerHale also representing
`Q.
`you and your entities?
`A.
`Yes.
`Q.
`And was WilmerHale also representing
`Mr. Pritzker and his entities?
`A.
`I think so.
`Q.
`And he writes that he represents "Nick
`Pritzker and Riaz Valani in respect of matters
`relating to your client, Juul ...."
`Do you see that, sir?
`I do.
`A.
`And it says that "The Company[] [] has
`Q.
`advised that the Company's existing term loan, which
`we understand [] in the approximate amount of []400
`million, will likely be in imminent default and []
`could lead to an acceleration of that loan by the
`lenders."
`
`CHANCERY COURT REPORTERS
`500 N. King Street, Ste 11400, Wilmington, DE (302) 255-0526
`
`(29) Pages 113 - 116
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`

`

`D1 Jasper Holdings LP, et al. v. JUUL Labs, Inc., et al. - 3/13/24 Trial Transcript Vol. I - Del. Chanc. 2023-1060-NAC
`
`N. Pritzker - Cross
`
`Page 209
`
`Page 211
`
`And then Mr. Kim writes, "On their
`Q.
`side" -- meaning the side of the company insiders --
`"[it's] Riaz, Nick" -- that's you. Right?
`A.
`Yes.
`Q.
`"Zach" -- that's Zach Frankel?
`A.
`Yes.
`Q.
`"Skadden" -- and Skadden represented
`you and Mr. Valani, correct, in this transaction?
`A.
`Yes.
`Q.
`"[A]nd Guggenheim." Guggenheim were
`financial advisors that were also representing you and
`Mr. Valani. Right? Correct?
`A.
`I think that's who Guggenheim
`represented. I'm not 100 percent sure.
`Q.
`Okay. And did you, in fact, have this
`principals and advisors call with the company where
`you served as a principal for JL Tao, this ultimate
`signatory to the backstop agreement?
`A.
`Again, I question your use of
`"principal." And is the question did this call
`happen? Was that your question?
`Q.
`Did the call happen?
`A.
`I remember a call. I couldn't tell
`you exactly who was on the call, whether it was
`
`Page 212
`
`everyone on this list.
`Q.
`Okay. But you were involved with
`calls with the independent directors about the terms
`of the backstop agreement that would be signed in
`December of 2022?
`A.
`I do remember this call.
`Q.
`You do remember it?
`A.
`Yes.
`Q.
`Okay. And Mr. Perkovich isn't
`mentioned in this email, is he?
`A.
`Mr. who?
`Q.
`Perkovich.
`A.
`No.
`Q.
`Okay. Mr. Perkovich is an associate
`of yours?
`Yes.
`A.
`He's worked for you?
`Q.
`Yes.
`A.
`For more than ten years. Correct?
`Q.
`Yeah, I think about ten years.
`A.
`Right. He had a significant position
`Q.
`at your family office, Tao Capital Management?
`A.
`The president of the office.
`Q.
`Now --
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`Right. I think the "to/from" line got
`Q.
`cut off on the below email. But I think the top email
`shows you who is on the email. Kc@juul you know is
`Mr. Crosthwaite, the CEO. Right?
`A.
`Yes.
`Q.
`And you know who dbarse is. Right?
`That's Mr. Barse?
`A.
`I do.
`Q.
`He is one of the directors on the
`independent committee at JUUL?
`A.
`Correct.
`Q.
`Same with Mr. Aronzon?
`A.
`Yes.
`Q.
`Mr. Kim writes this group. And this
`is November 26, 2022. So this is, just to orient
`ourselves, about two weeks before the backstop
`agreement is signed. Right?
`A.
`Yes.
`Q.
`The backstop agreement is signed
`December 7, 2022. Correct?
`A.
`I believe those dates are right, yes.
`Q.
`All right. And Mr. Kim writes to this
`group and he says, "The insiders would like to have a
`principals [and] advisors call in the morning, with
`
`Page 210
`
`the goal of resolving all open items."
`Do you see that?
`Yes.
`A.
`And you were still in discussions
`Q.
`about the terms of the backstop agreement at this
`time. Right?
`I think that's right, yes.
`A.
`And there's a reference there to a
`Q.
`Sunday evening deadline.
`Do you see that in the next sentence?
`I do.
`A.
`And that was a deadline imposed by the
`Q.
`MDL plaintiffs. Correct?
`A.
`I don't know what the deadline was. I
`don't know.
`And Mr. Kim at least writes that the
`Q.
`insiders suggested Paul, David, KC, and Tyler. Right?
`Do you see that? As well as advisors?
`A.
`Sorry. I would like to read this
`whole paragraph.
`Okay. Yeah, I do see this.
`Okay. And Tyler is Tyler Mace, the
`Q.
`general counsel of the company?
`A.
`Yes.
`
`CHANCERY COURT REPORTERS
`500 N. King Street, Ste 11400, Wilmington, DE (302) 255-0526
`
`(53) Pages 209 - 212
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`

`

`D1 Jasper Holdings LP, et al. v. JUUL Labs, Inc., et al. - 3/14/24 Trial Transcript Vol. II - Del. Chanc. 2023-1060-NAC
`
`J. Monsees - Defendants' designations
`
`Page 331
`
`Page 333
`
`Question: Appreciate it.
`Answer: So, again, initially, the
`company had a lot of lawsuits hanging over its head.
`We viewed -- I and others saw the company as having
`trouble raising -- being able to raise additional
`dollars, but having a lot of legal costs and
`overhanging risk sitting over it.
`The plaintiffs in -- that were causing
`the vast majority of that challenge, ultimately, for
`the company were willing to settle. That's my --what
`I was told at the time -- but were not willing to just
`settle with the company without some sort of guarantee
`that they would be paid. Because they had concerns
`about the financial wherewithal of the company, or
`something like that. I don't know exactly.
`Later, the company had not raised
`money as a result of all of -- just had not been able
`to raise money, and someone needed to invest in the
`company for it to stay alive and hopefully grow one
`day. And I was able to participate in an investment
`to do so.
`
`Question: Do you remember having
`conversations with Mr. Bowen, Mr. Valani, and
`Mr. Pritzker at any point in the last 12 months about
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`myself and all other indemnified parties. Those were
`sort of major overhangs on the company.
`And by settling those overhanging
`legalities and pushing away a lot of those costs
`behind that, the fundamentals of the business hadn't
`changed in a lot of ways. Smoking is still the
`leading cause of preventable death and disease on
`earth. Half a million people die of smoking-related
`diseases every year in the United States.
`It's still a very, very large
`business. Smoking hadn't gone away. JUUL was still
`probably the best product on the market, seemed to
`have the best long-term consumer satisfaction and
`conversion for smokers. That's what I meant.
`Question: So the ultimate investment
`by JLI Invest was about $22 million greater than the
`amount agreed to as part of the backstop; is that
`right?
`
`Answer: So you're talking about two
`completely different things and comparing the
`differential and the quanta.
`Question: Okay. Why do you say I'm
`talking about two completely different things?
`Answer: Well, one was an agreement to
`
`Page 332
`
`Page 334
`
`what you referred to as "trying to save the company"?
`Answer: Sure.
`Question: Okay. What do you remember
`about those conversations within the last 12 months?
`Answer: Well, we had discussions
`about how a material number of dollars that were
`required for the company to survive would -- could
`ultimately come together.
`Question: All I'm looking for is your
`recollection of the conversations you had with
`Mr. Bowen, Mr. Valani, and Mr. Pritzker within the
`last 12 months about investing in JUUL.
`Answer: I didn't say investing in
`JUUL. I said specifically trying to find the funds to
`save the company.
`
`Question: Do you have an
`understanding as to whether, in July of 2023, the same
`time period that we've been talking about, Mr. Valani
`held more than 5 percent of JUUL's stock?
`The Court Reporter: 5 percent of?
`Attorney Kovalenko: Of JUUL's stock.
`Answer: I don't know. I know that
`there was a time in which he did, but I don't know how
`his trusts and estates and stuff is structured.
`
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`guarantee the backstop payment, and the other was a
`completely separate decision to make an investment
`into the company, who had failed to do what we had
`expected it to do, which was raise much money after
`the backstop cured it in certain ways.
`Question: Now, the decision to make
`an investment into the company, that resulted from the
`inability of the company to find capital from sources
`other than the backstop parties; is that right?
`Answer: No. It did not result from
`that. I'm sorry. It sounds like you're just trying
`to really misconstrue what I'm saying to you over and
`over again.
`
`It did not result from -- these two
`things were very separate occasions that were big
`decisions on my part and the part of, I assume, other
`folks as well. They did not result from that.
`Question: So why don't you tell me in
`your words what the two very separate occasions and
`big decisions were on your part that you just referred
`to in your answer.
`
`Answer: Sure. I think I've already
`done that at least once, but I'll do it again for your
`benefit here.
`
`CHANCERY COURT REPORTERS
`500 N. King Street, Ste 11400, Wilmington, DE (302) 255-0526
`
`(5) Pages 331 - 334
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`

`

`D1 Jasper Holdings LP, et al. v. JUUL Labs, Inc., et al. - 3/14/24 Trial Transcript Vol. II - Del. Chanc. 2023-1060-NAC
`
`J. Monsees - Defendants' designations
`
`Page 337
`
`case on February 8, 2024.
`Do you recall that?
`I do.
`And did you testify truthfully at that
`
`A.
`Q.
`
`time?
`
`I did.
`A.
`And, Mr. Barse, when you were
`Q.
`appointed to the board in October of 20 -- strike
`that.
`
`You were appointed to the board of
`JUUL in October of 2022, were you not?
`A.
`Yes, I was.
`Q.
`And when you were appointed to the
`board, am I correct that you were not aware that the
`beneficiary of the trust -- that Mr. Pritzker was the
`beneficiary of the trust that owned the entity JL Tao
`LLC?
`
`No, I was not.
`A.
`And am I correct, Mr. Barse, that when
`Q.
`you were asked to approve JUUL's agreement into the
`backstop purchase agreement in December of 2022, you
`were not aware that Mr. Pritzker was the beneficiary
`of the trust that owned the entity JL Tao LLC?
`A.
`No.
`
`Page 338
`
`You knew that -- you knew that
`Q.
`Mr. Pritzker was somehow related to that entity, but
`you did not know the extent of that relationship;
`correct?
`
`That's correct.
`A.
`And when you were asked to approve the
`Q.
`October 2023 financing transaction as a member of the
`board, am I correct that you were unaware that
`Mr. Pritzker had made changes to the ownership of
`JL Tao and various trusts during the period May
`through September of 2023?
`A.
`No, that's not correct.
`Q.
`So you weren't -- you knew that there
`were changes to the trusts and ownership of JL Tao in
`October of 2023?
`I believe -- sorry. Yes, I was made
`A.
`aware of that by counsel and in meetings I've had with
`counsel and advisors to the company and to the
`investing parties.
`Q.
`Now, you testified, as I said, on
`February 8, 2024?
`Yes, I did.
`A.
`Let me -- do you have a copy of your
`Q.
`deposition in front of you?
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`Page 335
`Question: You said just now you know
`there was a time in which Mr. Valani held more than
`5 percent of JUUL's stock; is that right?
`Answer: I should probably correct
`that. I -- I know that Mr. Valani, through vehicles
`that he controlled, invested enough to own more than
`5 percent of JUUL stock, but I don't know how
`his -- the ownership of his vehicles worked. It could
`have all been earmarked for charity, for all I know,
`you know.
`
`Question: Do you have an
`understanding as to whether, around the same time, in
`July of 2023, Mr. Nick Pritzker held more than
`5 percent of JUUL stock?
`Answer: Same thing. I don't know
`what the structure of Nick's trusts and estates or his
`ownership of JUUL stock works exactly.
`But, again, I do know that he invested
`enough at some time to -- or that his entities
`invested enough at some time to own more than that,
`depending on where that ownership went.
`(The video testimony was concluded.)
`ATTORNEY RECHER: Plaintiffs will now
`
`call David Barse.
`
`Page 336
`ATTORNEY LAFFERTY: I just wanted to
`briefly introduce Jacob Gordon from Cleary, as well,
`who is going to join us at counsel table.
`THE COURT: Welcome. Thank you.
`ATTORNEY LAFFERTY: Your Honor, just
`to be clear, Mr. Barse is appearing by video
`testimony. I think we're doing the technical things
`to get him on the screen.
`ATTORNEY COOPER: Yeah. He should
`already be on, Your Honor. So once we're linked into
`the court link, we should be connected. There he is.
`DAVID BARSE, having first been duly
`affirmed, was examined and testified as follows via
`Zoom:
`
`ATTORNEY FLUMENBAUM: May I proceed?
`THE COURT: Yes, please.
`CROSS-EXAMINATION
`BY ATTORNEY FLUMENBAUM:
`Q.
`Good morning, Mr. Barse.
`A.
`Good morning -- good afternoon.
`Q.
`Because of time constraints and
`because we're talking to you over Zoom, I'm going to
`be fairly brief this morning.
`You were deposed under oath in this
`
`CHANCERY COURT REPORTERS
`500 N. King Street, Ste 11400, Wilmington, DE (302) 255-0526
`
`(6) Pages 335 - 338
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`

`

`D1 Jasper Holdings LP, et al. v. JUUL Labs, Inc., et al. - 3/14/24 Trial Transcript Vol. II - Del. Chanc. 2023-1060-NAC
`
`D. Barse - Cross
`
`Page 341
`
`No. I think I just answered your
`A.
`question differently. I said in October of 2023, I
`was made aware. And this question you read back to me
`was June of '23. So October '23 --
`Q.
`Would you --
`A.
`-- October '23, we were presented with
`detailed information about JL Tao, and we were able to
`review that with counsel and with the advisors to the
`company that educated us further on what specifically
`the relationship was and who owned it and who was
`responsible for managing it.
`And in October of 2023, I became quite
`familiar with all of those specific issues.
`Q.
`Mr. Barse, in October of 2023, you
`were given a presentation by Guggenheim Partners;
`correct?
`
`And Skadden Arps.
`A.
`And they gave you -- well, you haven't
`Q.
`produced what you were -- you refused to testify as to
`what Skadden Arps told you; correct?
`A.
`No, I think I refused to testify based
`upon counsel's objection, advice I received from my
`counsel, which is Milbank.
`Q.
`Mr. Barse, you got presentations from
`
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`Page 339
`I do not, but I can see the front page
`A.
`of it on the screen.
`Q.
`Let me read to you some questions and
`answers from your deposition, on page 137.
`"Question: Are you aware that until
`June of 2023, JL Tao was owned by a trust of which
`Mr. Pritzker was the sole beneficiary?
`"Answer: No, I was not."
`Is that answer accurate?
`Yes.
`A.
`"Question: Are you aware that until
`Q.
`September of 2023, the managing member of JL Tao was
`Tao Capital Management LP?"
`"Answer: I was not."
`Was that answer accurate?
`That was my answer then, yes.
`A.
`"Question: Do you know what Tao
`Q.
`Capital Management LP is?
`"Answer: I do not."
`Was that answer accurate at the time?
`That -- that was the answer I gave,
`
`A.
`
`yes.
`
`"Question: Do you know how, if at
`Q.
`all, Tao Capital Management [] is related to
`
`Page 340
`
`Page 342
`
`Guggenheim which is an exhibit in this case; correct?
`A.
`Yes.
`Q.
`And that presentation gave you alleged
`facts as of October 2023 with respect to the structure
`of JL Tao and certain of the trusts relating to
`Mr. Pritzker; correct?
`A.
`Yeah. I'm not sure if "structure" is
`the right term, but it gave me details about that
`entity.
`
`And that was the only written
`Q.
`materials that you had received in connection with
`your work as a director; correct?
`A.
`No. That's not correct.
`Q.
`Did the materials that Guggenheim gave
`to you discuss the changes that had been made by
`Mr. Pritzker in June of 2023?
`A.
`I believe that the materials that we
`were given by Guggenheim and Skadden -- again, I say
`"Skadden" because their name was on the presentation
`document as well -- reflected only what JL Tao and the
`other financing parties listed in that presentation
`were on that day. It didn't refer to a historical
`period. It referred to that day.
`Q.
`So there was nothing in that
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`Mr. Pritzker?
`
`A.
`
`"Answer: I do not."
`Was that testimony accurate?
`That is what I said, yes.
`THE COURT: Mr. Barse, this is the
`Vice Chancellor. I think you're being asked whether
`your answer at your deposition was accurate, and your
`response is that you said the words on the page.
`Can you answer the question of whether
`your answer at the deposition was accurate or not.
`THE WITNESS: I have been able to
`refresh my recollection on a number of documents that
`were presented to me since the deposition, and have
`familiarized myself more specifically with these
`entities and their relationships to each other. So
`presently, the answer I have today is different than
`the answer I had to certain of those questions in the
`deposition.
`BY ATTORNEY FLUMENBAUM:
`Q.
`We were talking about the time when
`you were asked to approve the financing transaction in
`October of 2023.
`
`And at that time, you were not aware
`of any of these changes; correct?
`
`CHANCERY COURT REPORTERS
`500 N. King Street, Ste 11400, Wilmington, DE (302) 255-0526
`
`(7) Pages 339 - 342
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`

`

`D1 Jasper Holdings LP, et al. v. JUUL Labs, Inc., et al. - 3/14/24 Trial Transcript Vol. II - Del. Chanc. 2023-1060-NAC
`
`D. Barse - Direct
`
`Page 365
`
`were much more familiar with bankruptcy and the impact
`of bankruptcy. I believe that's the reason we were
`principally nominated to the board.
`ATTORNEY COOPER: Your Honor, I have a
`binder for you too. Would you like a hard copy?
`THE COURT: That's fine. Please.
`ATTORNEY COOPER: May I approach?
`Okay. Can we put up, please, again,
`
`JX 1108.
`BY ATTORNEY COOPER:
`Q.
`And, Mr. Barse, do you recognize, just
`from the cover of this, what this presentation is?
`A.
`Yes.
`Q.
`And this was -- this is October 13,
`2023, a meeting of the independent committee.
`What was happening at this time on the
`independent committee?
`A.
`Well, we were making a -- a
`determination as to whether to approve the financing.
`ATTORNEY COOPER: Let's go to page 7
`
`of the deck, please.
`Q.
`
`slide?
`
`Now, Mr. Barse, do you recognize this
`
`A.
`
`Yes, I do.
`
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`proposed to us. And we fought hard for that.
`ATTORNEY COOPER: Okay. We can take
`
`Page 363
`
`that down.
`So, Mr. Barse, did there come a time
`Q.
`when the independent committee considered whether to
`improve the capital-raising transaction that you had
`been negotiating?
`A.
`Q.
`A.
`
`Yes.
`And was that in October of 2023?
`It was.
`ATTORNEY COOPER: All right. Let me
`put up JX 1108, please.
`ATTORNEY FLUMENBAUM: Do you have
`copies of the exhibits that you're showing this
`witness? It will make it a lot easier if you would
`hand them out.
`
`A.
`
`ATTORNEY COOPER: I'm sorry, yeah.
`I can see it.
`ATTORNEY COOPER: One moment, please.
`THE COURT: Mr. Barse, this is the
`Vice Chancellor. While we're waiting for exhibits, I
`have a question.
`
`Going back to the time period when you
`were considering the option of settlement versus
`
`Page 364
`
`Page 366
`
`Can you explain what it's showing.
`Q.
`So this was an important slide for us
`A.
`to compare the terms of the proposed financing as
`finally negotiated with the original backstop. As I
`testified earlier, the backstop was, for us, an
`option, an insurance policy. It was the only
`financing proposal that the company had received. Had
`we not agreed to and entered into the financing, the
`final terms of that financing, this is what we would
`have had to rely on.
`It was clearly an inferior proposal.
`So this was just supporting documentation for us to
`verify that understanding that Mr. Aronzon and I had
`effectively negotiated.
`Q.
`And just so your testimony is clear,
`was the proposed financing in the right-hand column
`superior or inferior to the original backstop?
`A.
`As I -- as I testified earlier,
`significantly improved and -- and better. Superior.
`Q.
`Now, let me ask you, on this slide
`here -- oh, sorry.
`I said "superior," to use your word.
`A.
`Now, here, you're comparing the new
`Q.
`transaction to the backstop.
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`bankruptcy, did you have an understanding of whether
`the company's management supported or preferred the
`bankruptcy option versus the settlement option?
`THE WITNESS: Yes, I do. The
`management team was freaked out about the idea of
`filing for bankruptcy. I think in the face of, as I
`noted, the litigation th