Preview
FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 RECEIVED NYSCEF: 05/20/2022
Exhibit BBB
Excerpts from the Deposition of Douglas Land taken April 12, 2022
Index No. 652343/2018 Motion Sequence 11
FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
April 12, 2022
·
· · · · SUPREME COURT OF THE STATE OF NEW YORK
· · · · · · ·COUNTY OF NEW YORK
· · ·-----------------------------------------X
· · ·CRESCO LABS, NEW YORK, LLC, a New York
· · ·limited liability company,
·
· · · · · · · · · · · Plaintiff,
·
· · · · · · · · · · · · · Case no. 652343/2018
· · · · · · · · · · · vs.
· · ·FIORELLO PHARMACEUTICALS, INC.,
· · ·a New York corporation; ERIC SIROTA, an
· · ·individual; SUSAN YOSS, an individual;
· · ·and JOHN DOES 1-10,
·
· · · · · · · · · · · Defendants.
· · ·-----------------------------------------X
·
·
· · · · · · · · VIDEOTAPED DEPOSITION
· · · · · · · · · · · · · OF
· · · · · · · · · · ·DOUGLAS LAND
· · · · · · · ·TUESDAY, APRIL 12, 2022
· · · · · · · · · · HELD REMOTELY
·
·
·
· · ·Reported by:
· · ·CANDIDA BORRIELLO
· · ·JOB NO. 6124024-001
U.S. Legal Support | www.uslegalsupport.com ·
FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
April 12, 2022
·1· · · · · · · · · · ·D. Land
·2· · · · should be marked as Land Exhibit 1.
·3· · · · · · ·(Land Exhibit 1, Expert Report of
·4· · · · Douglas S. Land, was marked for
·5· · · · identification.)
·6· ·BY MS. FEDORNAK:
·7· · · · Q.· ·Could you turn to page 2 of your
·8· ·report?
·9· · · · A.· ·I have it.
10· · · · Q.· ·In the first sentence under section
11· ·Roman numeral I, the first sentence says:
12· · · · · · ·No reasonable buyer or seller in a
13· ·corporate acquisition has any expectation or
14· ·intention that failure to consummate the
15· ·transaction, for any reason including a
16· ·breach of an LOI provision by one of the
17· ·parties, would lead to replacement cost
18· ·damages.
19· · · · · · ·Did I read that correctly?
20· · · · A.· ·I think you did.
21· · · · Q.· ·What's the basis for this
22· ·statement?
23· · · · A.· ·As we discussed at the beginning of
24· ·the deposition, I've been involved in
25· ·numerous, I apologize, I couldn't give you a
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FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
April 12, 2022
·1· · · · · · · · · · ·D. Land
·2· ·more specific numbers, negotiations,
·3· ·discussions, preparation of letters of intent
·4· ·and it's very -- to me, neither party in
·5· ·those negotiations are considering that such
·6· ·a preliminary expression of a potential
·7· ·transaction would possibly lead to some form
·8· ·of exposure that could be so, kind of,
·9· ·inappropriately proportional to the value of
10· ·the transaction.· And it is also informed by
11· ·the fact that at an LOI stage, all parties
12· ·recognize that this is a preliminary
13· ·discussion regarding a proposed transaction
14· ·that they wouldn't either -- on either side
15· ·would consider that the potential exposure
16· ·associated by entering into such a
17· ·preliminary expression of interest would lead
18· ·to that kind of exposure.
19· · · · Q.· ·How do you know what all parties
20· ·recognize?
21· · · · A.· ·As part of the discussion at the
22· ·time when as a buyer presents an LOI to a
23· ·potential seller or as a seller who enters
24· ·into an LOI with a potential buyer, one of
25· ·the considerations are what is the risk, if
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FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
April 12, 2022
·1· · · · · · · · · · ·D. Land
·2· ·you will, of entering into that relationship
·3· ·with a counterparty and that's one of the
·4· ·things that you consider when you're deciding
·5· ·as a buyer to offer an LOI to a seller or as
·6· ·a seller to enter into an LOI with a buyer
·7· ·and both sides, and I represented both sides
·8· ·numerous times, consider an LOI a very low
·9· ·risk relationship and suggesting that that
10· ·document would expose either party to
11· ·replacement cost type of damages would
12· ·completely change the risk profile that any
13· ·client, any transaction that I've ever been
14· ·involved in would consider at the time of
15· ·entering an LOI.
16· · · · Q.· ·Have you reviewed any studies about
17· ·what the parties to an LOI expect at the time
18· ·they enter into that transaction?
19· · · · A.· ·I have not and I will represent
20· ·that I tried to find such studies that were
21· ·useful in actually providing real, kind of,
22· ·empirical data on private transactions
23· ·associated with letters of intent and even --
24· ·I -- so, the answer is no, but I actually did
25· ·look to see if any credible empirical
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FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
April 12, 2022
·1· · · · · · · · · · ·D. Land
·2· ·LOI, just has never been in the context of
·3· ·any deal that I've been aware of.
·4· · · · Q.· ·So, it's your view that parties to
·5· ·an LOI will never expect to be liable for
·6· ·replacement cost damages whether or not
·7· ·there's an exclusivity provision in the LOI?
·8· · · · A.· ·Yes, that's my testimony.
·9· · · · Q.· ·Why does the presence of an
10· ·exclusivity provision not make a difference?
11· · · · A.· ·My view based on my experience is
12· ·that an exclusivity provision is intended to
13· ·really keep the parties focused on the
14· ·transaction.· It isn't to fundamentally
15· ·change the risk reward -- risk exposure of
16· ·the parties.
17· · · · Q.· ·Would the parties' expectations
18· ·with respect to replacement cost damages
19· ·change if an LOI included a mutual
20· ·exclusivity provision?
21· · · · A.· ·Not at all.
22· · · · Q.· ·Why not?
23· · · · A.· ·It's exactly the same answer, that
24· ·the mutual exclusivity I saw in -- in this
25· ·particular document and in -- is, in my -- my
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FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
April 12, 2022
·1· · · · · · · · · · ·D. Land
·2· ·understanding, it was to keep the parties
·3· ·focused on the transaction, it was to give
·4· ·both parties comfort that the other was
·5· ·serious about the transaction, was gonna
·6· ·invest the time and resources, but it -- in
·7· ·my view, it didn't change the fundamental
·8· ·risk expectations of either party.
·9· · · · Q.· ·But aside from this particular
10· ·case, you've never seen a mutual exclusivity
11· ·provision before, right?
12· · · · · · ·MR. LEFTON:· Objection.· Misstates
13· · · · the testimony.
14· · · · A.· ·Yeah.· As I said, my first kind of
15· ·exposure to letters of intent are more than
16· ·35 years ago.· I can't recall, as I sit here
17· ·today, but I would not say that I never have
18· ·seen them.· I would -- but I'm not able, as I
19· ·sit here today, to recall any -- certainly
20· ·any recent transactions that have had a
21· ·mutual exclusivity provision.· If over the
22· ·course of the last 35 plus years, I don't
23· ·recall specifically, but I am not testifying
24· ·that I've never seen one.
25· · · · Q.· ·But as you sit here today, you
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FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
April 12, 2022
·1· · · · · · · · · · ·D. Land
·2· ·from that time inform you about what the
·3· ·buyer's expectations were for the
·4· ·availability of replacement cost damages?
·5· · · · A.· ·None that I recall.
·6· · · · Q.· ·What about the seller's
·7· ·expectations?
·8· · · · A.· ·None that I recall.
·9· · · · Q.· ·In forming your opinion about what
10· ·reasonable market participants expect with
11· ·respect to replacement cost damages, did you
12· ·consider any of the case law in New York or
13· ·Delaware stating that a seller could
14· ·potentially collect more than out-of-pocket
15· ·damages for breach of an exclusivity
16· ·provision?
17· · · · A.· ·No.
18· · · · Q.· ·All right.· I'm going to refer back
19· ·to your report, page 2 again.· The next
20· ·sentence from where I left off states:
21· · · · · · ·The scarcity of comparable
22· ·acquisition opportunity (both scarcity and
23· ·comparability being highly subjective
24· ·determinations) is not a factor in these
25· ·expectations and intentions.
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FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
April 12, 2022
·1· · · · · · · · · · ·D. Land
·2· · · · · · ·Did I read that correctly?
·3· · · · A.· ·Yes.
·4· · · · Q.· ·What is the basis for this
·5· ·statement?
·6· · · · A.· ·Within the general M&A world,
·7· ·scarcity, as I said in the sentence, is very
·8· ·subjective.· Most M&A transactions are based
·9· ·on some concept of scarcity.· The reason why
10· ·you choose a particular target as a buyer is
11· ·usually because it represents an asset that
12· ·isn't otherwise available to you.· So, just,
13· ·kind of, the word scarcity I felt was
14· ·somewhat ambiguous here as it was used -- as
15· ·I believe that Mr. Davidson used it, and like
16· ·I -- in the context of a -- evaluating what
17· ·your risk is associated with an LOI, whether
18· ·there is one, five, ten other companies that
19· ·you might be able to acquire, doesn't change
20· ·my view as to how buyers and sellers look at
21· ·the relative risk and exposure when they
22· ·enter into a transaction and in a preliminary
23· ·LOI, that might lead to a transaction.
24· · · · Q.· ·Did any of the contemporaneous
25· ·documents you reviewed for this case support
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FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
April 12, 2022
·1· · · · · · · · · · ·D. Land
·2· ·with other medical cannabis companies that
·3· ·are licensed in New York, correct?
·4· · · · A.· ·That's how I understand it.
·5· ·Negotiating for the acquisition of the assets
·6· ·or equity, correct.
·7· · · · Q.· ·Do you agree that Cresco was giving
·8· ·something up by an agreeing to this
·9· ·exclusivity provision?
10· · · · A.· ·Possibly.
11· · · · Q.· ·Well, it was giving up the
12· ·opportunity to negotiate for the acquisition
13· ·of another New York cannabis company, right?
14· · · · A.· ·During that 30-day period, that's
15· ·correct.
16· · · · Q.· ·I'd like to turn back to your
17· ·report, page 2.· At the very bottom of page 2
18· ·and going on to page 3, it says:
19· · · · · · ·Exclusivity provisions do not and
20· ·practically cannot preclude a seller from
21· ·receiving unsolicited offers, because that is
22· ·not something within the control of the
23· ·seller.· It is common practice, and it's not
24· ·considered a breach of exclusivity for a
25· ·seller to explain to any party making an
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FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
April 12, 2022
·1· · · · · · · · · · ·D. Land
·2· ·inquiry or unsolicited offer that they, the
·3· ·seller, are engaged with another party and
·4· ·cannot discuss the transaction at that time,
·5· ·but will let them know if that situation
·6· ·changes.
·7· · · · · · ·Did I read that correctly?
·8· · · · A.· ·Yes.
·9· · · · Q.· ·How do you know it is common
10· ·practice for a seller bound by exclusivity to
11· ·explain to parties making an inquiry or offer
12· ·that they're engaged with another party, but
13· ·will let them know if the situation changes?
14· · · · A.· ·My personal experience is I
15· ·personally had done that dozens of times,
16· ·both as a principal in companies where I've
17· ·been either on the board or an advisor to the
18· ·board where I -- Chesapeake has been the
19· ·financial advisor representing a client.· So,
20· ·I have personal experience making that
21· ·statement.· I also have significant personal
22· ·experience as does the rest of my firm in
23· ·being told that when we reach out to what we
24· ·call targets and we are told, sorry, we're
25· ·involved in a transaction and we can't speak
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FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
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·1· · · · · · · · · · ·D. Land
·2· ·with you right now, exactly those words, but
·3· ·we'll let you know if the situation changes.
·4· · · · · · ·So, this is -- I would describe it
·5· ·as significant personal experience using
·6· ·almost these exact same words over 35 years.
·7· · · · Q.· ·I'm going to present you with a few
·8· ·different hypothetical scenarios and I'd like
·9· ·you to tell me if you have significant
10· ·personal experience with any of these.
11· · · · · · ·Do you have any personal experience
12· ·where a seller, bound by exclusivity,
13· ·requests an in-person meeting with a
14· ·potential purchaser?
15· · · · A.· ·Yes.
16· · · · Q.· ·How many times?
17· · · · A.· ·I can't come up with a specific
18· ·number, but I've absolutely been aware of and
19· ·indeed have participated in those meetings.
20· · · · Q.· ·And why were those meetings taking
21· ·place while a seller was bound by
22· ·exclusivity?
23· · · · A.· ·In many instances, the dynamics of
24· ·the industry are such that you have multiple
25· ·relationships with potential buyers and
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FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
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·1· · · · · · · · · · ·D. Land
·2· ·sellers.· So, often it's just to maintain
·3· ·cordial relationships because you have,
·4· ·again, it is often the case where a -- you
·5· ·have, again, other relationships with a
·6· ·potential seller, so unless otherwise
·7· ·precluded, you -- you're not either breaching
·8· ·the agreement or otherwise, you know,
·9· ·creating any kind of issue if you're just
10· ·maintaining kind of what I would describe as
11· ·normal business relationships.
12· · · · Q.· ·So, would you say it's common
13· ·practice for a seller bound by exclusivity to
14· ·request an in-person meeting with a potential
15· ·purchaser?
16· · · · · · ·MR. LEFTON:· Object to "common
17· · · · practice."
18· · · · A.· ·Yeah, I was gonna say, I'm not sure
19· ·I would even know what common practice would
20· ·mean.· You asked whether I had experience
21· ·with it, the answer is yes.· I have no idea
22· ·what common practice -- if I would describe
23· ·it as common practice.
24· · · · Q.· ·Well, at the bottom of page 2 you
25· ·say:
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FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
April 12, 2022
·1· · · · · · · · · · ·D. Land
·2· · · · · · ·It is common practice and not
·3· ·considered a breach of exclusivity for a
·4· ·seller to explain any party making inquiry or
·5· ·unsolicited offer that they, the seller, are
·6· ·engaged with another party.
·7· · · · · · ·So, you opined on common practice
·8· ·in your report.
·9· · · · A.· ·That was specifically with regard
10· ·to, as I said, it says, specifically that --
11· ·sorry.· If you receive an inquiry with
12· ·respect to an offer or an unsolicited offer,
13· ·it is common practice and I would absolutely
14· ·describe that as common practice.· That was
15· ·not your question.
16· · · · Q.· ·So, you're not able to opine on
17· ·whether it's common practice for a seller
18· ·bound by exclusivity to request an in-person
19· ·meeting with a potential purchaser?
20· · · · A.· ·I'm not prepared to say whether
21· ·it's common practice or not, it happens.
22· · · · Q.· ·Can you give a specific example
23· ·where you've seen this happen?
24· · · · A.· ·I can -- specifically, again, my
25· ·experience is it normally happens in the
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NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
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·1· · · · · · · · · · ·D. Land
·2· ·context of an industry where you have other
·3· ·business relationships outside of the
·4· ·potential purchase and sale environment.· So,
·5· ·again, I don't think I can give any more
·6· ·specific than that.
·7· · · · Q.· ·Can you give an example of a
·8· ·specific industry where you've seen this
·9· ·happen?
10· · · · A.· ·Yeah, the tech services industry,
11· ·it happens all the time.
12· · · · Q.· ·Any other industries?
13· · · · A.· ·That's one that I'm most familiar
14· ·with with regard to that.· So, no, I can't
15· ·give any other specific industries where I'm
16· ·familiar with it.
17· · · · Q.· ·Why is this such a frequent
18· ·practice in the tech services industry?
19· · · · A.· ·That's the industry I'm familiar
20· ·with, it's largely because companies that are
21· ·in that industry typically have other
22· ·reasons, business reasons to keep in touch
23· ·with other companies in the industry, whether
24· ·they be supply chain issues, whether they be
25· ·shared resource issues.· There are -- there
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NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
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·1· · · · · · · · · · ·D. Land
·2· ·are many business reasons why it is -- even
·3· ·if they're under exclusivity, it would be
·4· ·appropriate to maintain discussions with
·5· ·other industry participants.
·6· · · · Q.· ·Would you say that it's a
·7· ·relatively large or small number of players
·8· ·in the tech services industry?
·9· · · · · · ·MR. LEFTON:· Objection.
10· · · · A.· ·Really depends on whether you're
11· ·thinking regionally, whether you're thinking
12· ·nationally, globally.· I can't answer the
13· ·question.
14· · · · Q.· ·Let's say globally.
15· · · · A.· ·Yeah, there's a fair number of
16· ·participants globally.
17· · · · Q.· ·Can you describe any specific
18· ·meeting that you've attended between a seller
19· ·bound by exclusivity and a third-party in the
20· ·industry?
21· · · · · · ·MR. LEFTON:· Objection.
22· · · · A.· ·I'm trying to think back over the
23· ·course of the last ten years where I
24· ·participated personally, no, I can't think of
25· ·any.
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NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
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·1· · · · · · · · · · ·D. Land
·2· · · · Q.· ·Can you describe a meeting that
·3· ·you've been aware of between a seller bound
·4· ·by exclusivity and a third-party?
·5· · · · A.· ·Absolutely.· Without breaching any
·6· ·client confidentiality, we have a client who
·7· ·is or was bound by exclusivity and one of its
·8· ·major clients requested a meeting with them
·9· ·and they had a fairly lengthy meeting and
10· ·subsequently interestingly that client made
11· ·an offer to purchase the company that was
12· ·bound by exclusivity.· The meeting had
13· ·nothing to do with purchase or sale, it had
14· ·to do with their ongoing business
15· ·relationship.· And this was very recent.· And
16· ·it's exactly the situation you're describing;
17· ·client was bound by exclusivity, they had a
18· ·meeting with a -- one of their clients, their
19· ·clients -- client subsequently expressed an
20· ·interest in making an unsolicited offer to
21· ·buy the company while it was under
22· ·exclusivity and was told that it wasn't an
23· ·appropriate time to have that discussion.
24· ·That's not unique.
25· · · · Q.· ·Have you ever seen a seller bound
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FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022
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·1· · · · · · · · · · ·D. Land
·2· ·by exclusivity request a meeting with a
·3· ·potential purchaser where there was not
·4· ·already an ongoing business relationship?
·5· · · · A.· ·Not that I can recall.
·6· · · · Q.· ·In your personal experience, have
·7· ·you seen a seller bound by exclusivity attend
·8· ·in-person meetings with multiple potentia
Preview
FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 RECEIVED NYSCEF: 05/20/2022 Exhibit BBB Excerpts from the Deposition of Douglas Land taken April 12, 2022 Index No. 652343/2018 Motion Sequence 11 FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 · · · · · SUPREME COURT OF THE STATE OF NEW YORK · · · · · · ·COUNTY OF NEW YORK · · ·-----------------------------------------X · · ·CRESCO LABS, NEW YORK, LLC, a New York · · ·limited liability company, · · · · · · · · · · · · Plaintiff, · · · · · · · · · · · · · · Case no. 652343/2018 · · · · · · · · · · · vs. · · ·FIORELLO PHARMACEUTICALS, INC., · · ·a New York corporation; ERIC SIROTA, an · · ·individual; SUSAN YOSS, an individual; · · ·and JOHN DOES 1-10, · · · · · · · · · · · · Defendants. · · ·-----------------------------------------X · · · · · · · · · · VIDEOTAPED DEPOSITION · · · · · · · · · · · · · OF · · · · · · · · · · ·DOUGLAS LAND · · · · · · · ·TUESDAY, APRIL 12, 2022 · · · · · · · · · · HELD REMOTELY · · · · · ·Reported by: · · ·CANDIDA BORRIELLO · · ·JOB NO. 6124024-001 U.S. Legal Support | www.uslegalsupport.com · FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· · · · should be marked as Land Exhibit 1. ·3· · · · · · ·(Land Exhibit 1, Expert Report of ·4· · · · Douglas S. Land, was marked for ·5· · · · identification.) ·6· ·BY MS. FEDORNAK: ·7· · · · Q.· ·Could you turn to page 2 of your ·8· ·report? ·9· · · · A.· ·I have it. 10· · · · Q.· ·In the first sentence under section 11· ·Roman numeral I, the first sentence says: 12· · · · · · ·No reasonable buyer or seller in a 13· ·corporate acquisition has any expectation or 14· ·intention that failure to consummate the 15· ·transaction, for any reason including a 16· ·breach of an LOI provision by one of the 17· ·parties, would lead to replacement cost 18· ·damages. 19· · · · · · ·Did I read that correctly? 20· · · · A.· ·I think you did. 21· · · · Q.· ·What's the basis for this 22· ·statement? 23· · · · A.· ·As we discussed at the beginning of 24· ·the deposition, I've been involved in 25· ·numerous, I apologize, I couldn't give you a U.S. Legal Support | www.uslegalsupport.com 40 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· ·more specific numbers, negotiations, ·3· ·discussions, preparation of letters of intent ·4· ·and it's very -- to me, neither party in ·5· ·those negotiations are considering that such ·6· ·a preliminary expression of a potential ·7· ·transaction would possibly lead to some form ·8· ·of exposure that could be so, kind of, ·9· ·inappropriately proportional to the value of 10· ·the transaction.· And it is also informed by 11· ·the fact that at an LOI stage, all parties 12· ·recognize that this is a preliminary 13· ·discussion regarding a proposed transaction 14· ·that they wouldn't either -- on either side 15· ·would consider that the potential exposure 16· ·associated by entering into such a 17· ·preliminary expression of interest would lead 18· ·to that kind of exposure. 19· · · · Q.· ·How do you know what all parties 20· ·recognize? 21· · · · A.· ·As part of the discussion at the 22· ·time when as a buyer presents an LOI to a 23· ·potential seller or as a seller who enters 24· ·into an LOI with a potential buyer, one of 25· ·the considerations are what is the risk, if U.S. Legal Support | www.uslegalsupport.com 41 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· ·you will, of entering into that relationship ·3· ·with a counterparty and that's one of the ·4· ·things that you consider when you're deciding ·5· ·as a buyer to offer an LOI to a seller or as ·6· ·a seller to enter into an LOI with a buyer ·7· ·and both sides, and I represented both sides ·8· ·numerous times, consider an LOI a very low ·9· ·risk relationship and suggesting that that 10· ·document would expose either party to 11· ·replacement cost type of damages would 12· ·completely change the risk profile that any 13· ·client, any transaction that I've ever been 14· ·involved in would consider at the time of 15· ·entering an LOI. 16· · · · Q.· ·Have you reviewed any studies about 17· ·what the parties to an LOI expect at the time 18· ·they enter into that transaction? 19· · · · A.· ·I have not and I will represent 20· ·that I tried to find such studies that were 21· ·useful in actually providing real, kind of, 22· ·empirical data on private transactions 23· ·associated with letters of intent and even -- 24· ·I -- so, the answer is no, but I actually did 25· ·look to see if any credible empirical U.S. Legal Support | www.uslegalsupport.com 42 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· ·LOI, just has never been in the context of ·3· ·any deal that I've been aware of. ·4· · · · Q.· ·So, it's your view that parties to ·5· ·an LOI will never expect to be liable for ·6· ·replacement cost damages whether or not ·7· ·there's an exclusivity provision in the LOI? ·8· · · · A.· ·Yes, that's my testimony. ·9· · · · Q.· ·Why does the presence of an 10· ·exclusivity provision not make a difference? 11· · · · A.· ·My view based on my experience is 12· ·that an exclusivity provision is intended to 13· ·really keep the parties focused on the 14· ·transaction.· It isn't to fundamentally 15· ·change the risk reward -- risk exposure of 16· ·the parties. 17· · · · Q.· ·Would the parties' expectations 18· ·with respect to replacement cost damages 19· ·change if an LOI included a mutual 20· ·exclusivity provision? 21· · · · A.· ·Not at all. 22· · · · Q.· ·Why not? 23· · · · A.· ·It's exactly the same answer, that 24· ·the mutual exclusivity I saw in -- in this 25· ·particular document and in -- is, in my -- my U.S. Legal Support | www.uslegalsupport.com 51 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· ·understanding, it was to keep the parties ·3· ·focused on the transaction, it was to give ·4· ·both parties comfort that the other was ·5· ·serious about the transaction, was gonna ·6· ·invest the time and resources, but it -- in ·7· ·my view, it didn't change the fundamental ·8· ·risk expectations of either party. ·9· · · · Q.· ·But aside from this particular 10· ·case, you've never seen a mutual exclusivity 11· ·provision before, right? 12· · · · · · ·MR. LEFTON:· Objection.· Misstates 13· · · · the testimony. 14· · · · A.· ·Yeah.· As I said, my first kind of 15· ·exposure to letters of intent are more than 16· ·35 years ago.· I can't recall, as I sit here 17· ·today, but I would not say that I never have 18· ·seen them.· I would -- but I'm not able, as I 19· ·sit here today, to recall any -- certainly 20· ·any recent transactions that have had a 21· ·mutual exclusivity provision.· If over the 22· ·course of the last 35 plus years, I don't 23· ·recall specifically, but I am not testifying 24· ·that I've never seen one. 25· · · · Q.· ·But as you sit here today, you U.S. Legal Support | www.uslegalsupport.com 52 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· ·from that time inform you about what the ·3· ·buyer's expectations were for the ·4· ·availability of replacement cost damages? ·5· · · · A.· ·None that I recall. ·6· · · · Q.· ·What about the seller's ·7· ·expectations? ·8· · · · A.· ·None that I recall. ·9· · · · Q.· ·In forming your opinion about what 10· ·reasonable market participants expect with 11· ·respect to replacement cost damages, did you 12· ·consider any of the case law in New York or 13· ·Delaware stating that a seller could 14· ·potentially collect more than out-of-pocket 15· ·damages for breach of an exclusivity 16· ·provision? 17· · · · A.· ·No. 18· · · · Q.· ·All right.· I'm going to refer back 19· ·to your report, page 2 again.· The next 20· ·sentence from where I left off states: 21· · · · · · ·The scarcity of comparable 22· ·acquisition opportunity (both scarcity and 23· ·comparability being highly subjective 24· ·determinations) is not a factor in these 25· ·expectations and intentions. U.S. Legal Support | www.uslegalsupport.com 54 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· · · · · · ·Did I read that correctly? ·3· · · · A.· ·Yes. ·4· · · · Q.· ·What is the basis for this ·5· ·statement? ·6· · · · A.· ·Within the general M&A world, ·7· ·scarcity, as I said in the sentence, is very ·8· ·subjective.· Most M&A transactions are based ·9· ·on some concept of scarcity.· The reason why 10· ·you choose a particular target as a buyer is 11· ·usually because it represents an asset that 12· ·isn't otherwise available to you.· So, just, 13· ·kind of, the word scarcity I felt was 14· ·somewhat ambiguous here as it was used -- as 15· ·I believe that Mr. Davidson used it, and like 16· ·I -- in the context of a -- evaluating what 17· ·your risk is associated with an LOI, whether 18· ·there is one, five, ten other companies that 19· ·you might be able to acquire, doesn't change 20· ·my view as to how buyers and sellers look at 21· ·the relative risk and exposure when they 22· ·enter into a transaction and in a preliminary 23· ·LOI, that might lead to a transaction. 24· · · · Q.· ·Did any of the contemporaneous 25· ·documents you reviewed for this case support U.S. Legal Support | www.uslegalsupport.com 55 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· ·with other medical cannabis companies that ·3· ·are licensed in New York, correct? ·4· · · · A.· ·That's how I understand it. ·5· ·Negotiating for the acquisition of the assets ·6· ·or equity, correct. ·7· · · · Q.· ·Do you agree that Cresco was giving ·8· ·something up by an agreeing to this ·9· ·exclusivity provision? 10· · · · A.· ·Possibly. 11· · · · Q.· ·Well, it was giving up the 12· ·opportunity to negotiate for the acquisition 13· ·of another New York cannabis company, right? 14· · · · A.· ·During that 30-day period, that's 15· ·correct. 16· · · · Q.· ·I'd like to turn back to your 17· ·report, page 2.· At the very bottom of page 2 18· ·and going on to page 3, it says: 19· · · · · · ·Exclusivity provisions do not and 20· ·practically cannot preclude a seller from 21· ·receiving unsolicited offers, because that is 22· ·not something within the control of the 23· ·seller.· It is common practice, and it's not 24· ·considered a breach of exclusivity for a 25· ·seller to explain to any party making an U.S. Legal Support | www.uslegalsupport.com 68 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· ·inquiry or unsolicited offer that they, the ·3· ·seller, are engaged with another party and ·4· ·cannot discuss the transaction at that time, ·5· ·but will let them know if that situation ·6· ·changes. ·7· · · · · · ·Did I read that correctly? ·8· · · · A.· ·Yes. ·9· · · · Q.· ·How do you know it is common 10· ·practice for a seller bound by exclusivity to 11· ·explain to parties making an inquiry or offer 12· ·that they're engaged with another party, but 13· ·will let them know if the situation changes? 14· · · · A.· ·My personal experience is I 15· ·personally had done that dozens of times, 16· ·both as a principal in companies where I've 17· ·been either on the board or an advisor to the 18· ·board where I -- Chesapeake has been the 19· ·financial advisor representing a client.· So, 20· ·I have personal experience making that 21· ·statement.· I also have significant personal 22· ·experience as does the rest of my firm in 23· ·being told that when we reach out to what we 24· ·call targets and we are told, sorry, we're 25· ·involved in a transaction and we can't speak U.S. Legal Support | www.uslegalsupport.com 69 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· ·with you right now, exactly those words, but ·3· ·we'll let you know if the situation changes. ·4· · · · · · ·So, this is -- I would describe it ·5· ·as significant personal experience using ·6· ·almost these exact same words over 35 years. ·7· · · · Q.· ·I'm going to present you with a few ·8· ·different hypothetical scenarios and I'd like ·9· ·you to tell me if you have significant 10· ·personal experience with any of these. 11· · · · · · ·Do you have any personal experience 12· ·where a seller, bound by exclusivity, 13· ·requests an in-person meeting with a 14· ·potential purchaser? 15· · · · A.· ·Yes. 16· · · · Q.· ·How many times? 17· · · · A.· ·I can't come up with a specific 18· ·number, but I've absolutely been aware of and 19· ·indeed have participated in those meetings. 20· · · · Q.· ·And why were those meetings taking 21· ·place while a seller was bound by 22· ·exclusivity? 23· · · · A.· ·In many instances, the dynamics of 24· ·the industry are such that you have multiple 25· ·relationships with potential buyers and U.S. Legal Support | www.uslegalsupport.com 70 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· ·sellers.· So, often it's just to maintain ·3· ·cordial relationships because you have, ·4· ·again, it is often the case where a -- you ·5· ·have, again, other relationships with a ·6· ·potential seller, so unless otherwise ·7· ·precluded, you -- you're not either breaching ·8· ·the agreement or otherwise, you know, ·9· ·creating any kind of issue if you're just 10· ·maintaining kind of what I would describe as 11· ·normal business relationships. 12· · · · Q.· ·So, would you say it's common 13· ·practice for a seller bound by exclusivity to 14· ·request an in-person meeting with a potential 15· ·purchaser? 16· · · · · · ·MR. LEFTON:· Object to "common 17· · · · practice." 18· · · · A.· ·Yeah, I was gonna say, I'm not sure 19· ·I would even know what common practice would 20· ·mean.· You asked whether I had experience 21· ·with it, the answer is yes.· I have no idea 22· ·what common practice -- if I would describe 23· ·it as common practice. 24· · · · Q.· ·Well, at the bottom of page 2 you 25· ·say: U.S. Legal Support | www.uslegalsupport.com 71 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· · · · · · ·It is common practice and not ·3· ·considered a breach of exclusivity for a ·4· ·seller to explain any party making inquiry or ·5· ·unsolicited offer that they, the seller, are ·6· ·engaged with another party. ·7· · · · · · ·So, you opined on common practice ·8· ·in your report. ·9· · · · A.· ·That was specifically with regard 10· ·to, as I said, it says, specifically that -- 11· ·sorry.· If you receive an inquiry with 12· ·respect to an offer or an unsolicited offer, 13· ·it is common practice and I would absolutely 14· ·describe that as common practice.· That was 15· ·not your question. 16· · · · Q.· ·So, you're not able to opine on 17· ·whether it's common practice for a seller 18· ·bound by exclusivity to request an in-person 19· ·meeting with a potential purchaser? 20· · · · A.· ·I'm not prepared to say whether 21· ·it's common practice or not, it happens. 22· · · · Q.· ·Can you give a specific example 23· ·where you've seen this happen? 24· · · · A.· ·I can -- specifically, again, my 25· ·experience is it normally happens in the U.S. Legal Support | www.uslegalsupport.com 72 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· ·context of an industry where you have other ·3· ·business relationships outside of the ·4· ·potential purchase and sale environment.· So, ·5· ·again, I don't think I can give any more ·6· ·specific than that. ·7· · · · Q.· ·Can you give an example of a ·8· ·specific industry where you've seen this ·9· ·happen? 10· · · · A.· ·Yeah, the tech services industry, 11· ·it happens all the time. 12· · · · Q.· ·Any other industries? 13· · · · A.· ·That's one that I'm most familiar 14· ·with with regard to that.· So, no, I can't 15· ·give any other specific industries where I'm 16· ·familiar with it. 17· · · · Q.· ·Why is this such a frequent 18· ·practice in the tech services industry? 19· · · · A.· ·That's the industry I'm familiar 20· ·with, it's largely because companies that are 21· ·in that industry typically have other 22· ·reasons, business reasons to keep in touch 23· ·with other companies in the industry, whether 24· ·they be supply chain issues, whether they be 25· ·shared resource issues.· There are -- there U.S. Legal Support | www.uslegalsupport.com 73 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· ·are many business reasons why it is -- even ·3· ·if they're under exclusivity, it would be ·4· ·appropriate to maintain discussions with ·5· ·other industry participants. ·6· · · · Q.· ·Would you say that it's a ·7· ·relatively large or small number of players ·8· ·in the tech services industry? ·9· · · · · · ·MR. LEFTON:· Objection. 10· · · · A.· ·Really depends on whether you're 11· ·thinking regionally, whether you're thinking 12· ·nationally, globally.· I can't answer the 13· ·question. 14· · · · Q.· ·Let's say globally. 15· · · · A.· ·Yeah, there's a fair number of 16· ·participants globally. 17· · · · Q.· ·Can you describe any specific 18· ·meeting that you've attended between a seller 19· ·bound by exclusivity and a third-party in the 20· ·industry? 21· · · · · · ·MR. LEFTON:· Objection. 22· · · · A.· ·I'm trying to think back over the 23· ·course of the last ten years where I 24· ·participated personally, no, I can't think of 25· ·any. U.S. Legal Support | www.uslegalsupport.com 74 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· · · · Q.· ·Can you describe a meeting that ·3· ·you've been aware of between a seller bound ·4· ·by exclusivity and a third-party? ·5· · · · A.· ·Absolutely.· Without breaching any ·6· ·client confidentiality, we have a client who ·7· ·is or was bound by exclusivity and one of its ·8· ·major clients requested a meeting with them ·9· ·and they had a fairly lengthy meeting and 10· ·subsequently interestingly that client made 11· ·an offer to purchase the company that was 12· ·bound by exclusivity.· The meeting had 13· ·nothing to do with purchase or sale, it had 14· ·to do with their ongoing business 15· ·relationship.· And this was very recent.· And 16· ·it's exactly the situation you're describing; 17· ·client was bound by exclusivity, they had a 18· ·meeting with a -- one of their clients, their 19· ·clients -- client subsequently expressed an 20· ·interest in making an unsolicited offer to 21· ·buy the company while it was under 22· ·exclusivity and was told that it wasn't an 23· ·appropriate time to have that discussion. 24· ·That's not unique. 25· · · · Q.· ·Have you ever seen a seller bound U.S. Legal Support | www.uslegalsupport.com 75 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 703 Douglas Land RECEIVED NYSCEF: 05/20/2022 April 12, 2022 ·1· · · · · · · · · · ·D. Land ·2· ·by exclusivity request a meeting with a ·3· ·potential purchaser where there was not ·4· ·already an ongoing business relationship? ·5· · · · A.· ·Not that I can recall. ·6· · · · Q.· ·In your personal experience, have ·7· ·you seen a seller bound by exclusivity attend ·8· ·in-person meetings with multiple potentia