1 ALLISON HUYNH, : Defendants,...on Mr. Hassan's counsel, Brandon Blevans, as well as Mr. Reed, to provide additional details on the pending transaction. Specifically, there's also

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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

ALLISON HUYNH, : :

Plaintiff, : : v : C. A. No. : 2019-0893-JTLSCOTT HASSAN, BLUE OCEAN ROBOTICS :HOLDINGS APS, BEAM ROBOTS APS, BEAM :ROBOTS US INCORPORATED, :

:Defendants, :

: and :

:SUITABLE TECHNOLOGIES, INC., :

: Nominal Defendant. :

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Chancery Court Chambers Leonard L. Williams Justice Center 500 North King Street Wilmington, Delaware Thursday, November 7, 2019 9:15 a.m.

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BEFORE: HON. J. TRAVIS LASTER, Vice Chancellor

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ORAL ARGUMENT AND RULINGS OF THE COURT ON PLAINTIFF'S MOTION FOR EXPEDITED PROCEEDINGS

------------------------------------------------------CHANCERY COURT REPORTERS

Leonard L. Williams Justice Center 500 North King Street - Suite 11400

Wilmington, Delaware 19801 (302) 255-0522

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CHANCERY COURT REPORTERS

APPEARANCES: (Via teleconference)

SRINIVAS M. RAJU, ESQ.TRAVIS S. HUNTER, ESQ.

TYLER E. CRAGG, ESQ. Richards, Layton & Finger, P.A. for Plaintiff

JOHN L. REED, ESQ. DLA Piper LLP (US) for Defendants Blue Ocean Robotics Holdings

APS, Beam Robots APS, Beam Robots US Incorporated

NICHOLAS J. ROHRER, ESQ.MAE OBERSTE, ESQ.

Young, Conaway, Stargatt & Taylor LLP for Nominal Defendant

Also Present: Brandon R. Blevans, Esq. of the California Bar Blevans & Blevans on behalf of Defendant Scott Hassan

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THE COURT: Good morning. This is

Travis Laster speaking.

MR. HUNTER: Good morning, Your Honor.

This is Travis Hunter from Richards, Layton & Finger.

I have with me my colleagues Srinivas Raju and Tyler

Cragg, and we represent the plaintiff.

THE COURT: Great. Welcome.

MR. ROHRER: Good morning, Your Honor.

Nicholas Rohrer from Young Conaway. I believe I'm

also joined on the line by Mae Oberste, my associate.

We represent the nominal defendant.

THE COURT: All right. Welcome.

MR. REED: Your Honor, John Reed from

DLA Piper on behalf of Blue Ocean and the Beam

Robotics entities.

THE COURT: All right. Great.

MR. BLEVANS: And, finally, Your

Honor, good morning. This is Brandon Blevans. I

represent Scott Hassan in his family law proceeding in

California.

THE COURT: Okay. It's good to have

you all here. Thank you, everyone. I appreciate you

getting on the line.

Mr. Hunter, why don't you go ahead.

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MR. HUNTER: Good morning, Your Honor.

Travis Hunter again. Thanks for hearing us on such an

expedited basis.

As you know, we are here this morning

on a motion to expedite. And all we are seeking

through our motion is the scheduling of a preliminary

injunction hearing on or before December 11th, and

expedited discovery, so that we can raise our

arguments seeking to enjoin the sale of Suitable

Technologies to Blue Ocean in advance of the date that

sale is scheduled to close.

As explained in our papers, based on

the information we currently have, there appear to be

serious violations of fiduciary duty in connection

with the process used to conduct the sale. For

example, as alleged in our complaint, the sale price

to Suitable appears to be substantially less than the

price the company could fetch if sold in the proper

manner. In fact, it does not even appear that

Mr. Hassan procured any valuation of any kind before

agreeing to the sale.

The sale is also tainted by

self-dealing. Specifically, an attempt by Mr. Hassan

to secure substantial tax benefits for himself, as

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opposed to the company. Better offers were simply

refused because Mr. Hassan claims not to have liked

how the company would be run after it was sold.

And, finally, the asset purchase

agreement contains unjustifiable deal protections that

basically ensure Mr. Hassan cannot meet his fiduciary

obligation to maximize value for Suitable

stockholders. In essence, Section 6.3 precludes

Mr. Hassan and Suitable from entering into discussions

with anyone concerning an acquisition proposal and

prohibits the company from accepting better offers.

Additionally, Section 3.3 essentially allows Suitable

to transfer valuable patent assets to Blue Ocean

following closing for free. And even if those patents

are not transferred, Blue Ocean is granted a royalty

free license to practice the patents. We believe that

license alone would be very valuable and is not

accounted for in the purchase price.

In light of these issues, which are

more fully described in our complaint, we believe the

transaction should be enjoined. That's why we've

requested expedited proceedings.

As we all know, the standards for

expedition are well known. A party is entitled to

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expedited proceedings if there is a colorable claim

and there is sufficient possibility of imminent

irreparable harm.

With respect to the colorable claim

standard, it's one of the most lenient standards in

our law, and we submit that it's easily met here. As

explained in our complaint, Mr. Hassan, as the sole

director of Suitable, owed, and continues to owe,

fiduciary duties to Suitable stockholders. Mr. Hassan

has breached those duties in a number of ways, as

alleged in our complaint. And as we have alleged,

such conduct is not appropriate for a fiduciary, whose

role at the corporation should be to maximize value to

all stockholders. Accordingly, we submit that our

claim is colorable.

With respect to irreparable harm,

there is sufficient threat of such harm here.

Essentially, Mr. Hassan is giving away valuable,

unique patent assets that will not be able to be

recovered if the sale is permitted to close.

Additionally, as courts have recognized, there is

irreparable harm when it would be impossible to

unscramble the eggs by attempting to unwind a sale

that has been completed. Indeed, this Court has acted

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to enjoin transactions found to embody breaches of

fiduciary duty. Moreover, in cases of self-dealing,

such as here, expedited proceedings are even more

appropriate.

For all these reasons, we respectfully

request that the Court grant our motion for expedited

proceedings, schedule a hearing for a preliminary

injunction on or before December 11, 2019, and

thereafter the parties can work out an appropriate

schedule for discovery, which, in our view, should be

quite narrow in this case.

Unless Your Honor has any questions,

that is my argument on why this case should be

expedited.

THE COURT: All right. Thank you.

Who wants to speak for the defendants?

On the one hand, I'm largely limited to the

allegations of the complaint in terms of deciding this

today. But, on the other hand, I would like to hear

what the other side of the story is. At least as

pitched, this seems like an odd transaction. So who

is best suited to give me the other side of the story?

MR. ROHRER: Good morning, Your Honor.

Nicholas Rohrer for the nominal defendant. I'm happy

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to speak first. I may lean and defer, to some extent,

on Mr. Hassan's counsel, Brandon Blevans, as well as

Mr. Reed, to provide additional details on the pending

transaction. Specifically, there's also a parallel

court proceeding in a California court that's relevant

to the instant motion to expedite that I think should

also be considered, and I might seek some of their

assistance in providing additional background details

on those aspects.

Nominal defendant's -- probably not

unexpectedly -- strong position is that the instant

motion to expedite should be denied.

As the proponent of the motion,

plaintiff carries the burden of establishing the need

for expedition and its incumbent substantial cost for

all the parties involved. We submit that plaintiff

fails, most principally by failing to demonstrate a

sufficient possibility of threatened irreparable harm.

I believe that's a very strong argument, with two

factors in support of it.

But separate from that, as to the

issue of colorable claim, submit that there's adequate

basis to challenge a colorable claim here because of

the uniqueness of the situation. And specifically, I

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note that, at the outset, there's an important

backdrop to this case, and that's that there's a

parallel divorce proceeding that's currently

proceeding in California Superior Court involving both

plaintiff and defendant Hassan. It's relevant to this

motion that against the backdrop of this divorce

proceeding, we submit the instant motion is largely an

effort to gain leverage in that pending divorce

proceeding.

THE COURT: By the same token, the

instant transaction may be an effort to gain leverage

in that divorce proceeding. So clearly there's other

stuff going on, and I really need you to focus on

that, rather than the highfalutin legal concepts that

you seem more interested in. Because, I will tell

you, based on the allegations of the complaint, this

is clearly a colorable claim.

Can you come in and say that this

could be remedied by damages because they are alleging

that he's a controller? Yes, you can say that. But

this is also a company that's going to be tough to

value, and the valuation swing here, based on what the

allegation is and what the sale price is, is massive.

So we're essentially talking, if you can think back to

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Gimble v. Signal, we're thinking about that type of

scenario.

So I will reiterate, it's not really

helpful -- I guess I wasn't clear enough on this, so

I'm not really reiterating. It's not really helpful

for you to engage with me on the colorable claim

standard or, wow, you can remedy this with money

damages or things like that.

I want somebody to tell me what's

going on. I want somebody to tell me what's going on

in California. I want to understand whether Blue

Ocean and these other folks are subject to

jurisdiction in California. Because if they're not,

it's an obvious reason why California can't handle

this. And I would like to get to the actual gist of

what's going on, rather than hear legal niceties about

colorable claim or why money damages is really the

right answer, where I don't think, based on the

complaint, it is. And maybe you can explain that to

me at the preliminary injunction stage, but that's not

an argument that's going to carry the day today.

So who can engage on the substance of

what is going on here with this transaction?

MR. ROHRER: Your Honor, I can speak a

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bit further to that point.

Setting aside the money damages point,

the secondary point is the fact of this California

proceeding. And what's relevant here is that there is

this parallel proceeding. And specifically before the

California Court is the issue of a determination of

the fairness of this pending transaction. Indeed, the

transaction itself, the asset purchase agreement, is

conditioned as a closing condition of either an

agreement to the closing of the transaction by the

plaintiff or a determination by the California Court

as to the fairness of the transaction.

And to that point, a hearing is

scheduled in the California Court on December 19th to

assess the transaction. The parties have already

submitted before the Court, I understand, declarations

of expert witnesses, including declarations of

valuation experts. And those documents and those

submissions are before the Court, and the Court is to

consider those at this pending hearing on the 19th,

which notably is before the transaction is to close.

Important, and further relevant to

that --

THE COURT: To interrupt you on that

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point again, I understood from the plaintiff that the

transaction was closing as early as December 15th. So

explain to me the divergence between that

representation and your understanding that the

December 19th hearing is pre-closing.

MR. BLEVANS: Your Honor, this is

Brandon Blevans, who represents Scott Hassan in the

divorce proceeding.

The asset purchase agreement has the

ability of the buyer and seller to extend the closing

date from the 15th. Upon the petition of Ms. Huynh,

the plaintiff's counsel, the hearing on the approval

for this transaction in the California Court was moved

from December 13th to December 19th. My client,

Mr. Hassan, has obviously agreed to extend that

closing date. And while I have not confirmed with

Blue Ocean's counsel, my understanding is that the

four-day delay to allow for the court hearing to occur

was not objectionable.

THE COURT: All right. That's

helpful.

What section of the asset purchase

agreement is the condition that Mr. Rohrer referenced?

MR. BLEVANS: Are you speaking, Your

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Honor, with respect to the condition of court approval

or consent?

THE COURT: Yes.

MR. BLEVANS: That is in 7.2(f) and

7.3(g). It is bilateral, meaning both parties have

the obligation to obtain court approval or consent, as

necessary, to effectuate the close.

MR. ROHRER: Your Honor, Nicholas

Rohrer again. My understanding further on that --

THE COURT: Hold on. I'm looking at

(f) right now. "Seller shall have obtained court

approval, which may include a decision by the court

...." Is it defined somewhere? These are lower case

terms. How do I know what court approval is?

MR. ROHRER: Your Honor, to the best

of my understanding -- I looked for the same defined

term in the asset purchase agreement, and I did not

see it defined. My understanding is it is a clear

understanding that the reference to "the court" is the

California Court, and the asset purchase agreement

makes explicit reference to plaintiff as a defined

term as the affiliated selling party, or something to

that effect. There's no other court proceeding

pending in California beyond that California court

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proceeding.

THE COURT: All right. So that's

helpful.

Mr. Hunter, let me circle back to you

now, because this may cut through this.

If I require the defendants to enter

into some type of stipulation with you confirming

their representations that these provisions operate as

they have said, that the deal is conditioned on court

approval from the California Court, including a

fairness proceeding, and won't go forward in the

absence of that, tell me why that doesn't address what

you and your client need and solve the problem.

MR. HUNTER: Sure. Let me start with

saying you raised the personal jurisdiction issue with

respect to Blue Ocean. I did want to answer your

question on that. And that also goes to this

particular issue as well. So I don't think the

California Court would have jurisdiction over Blue

Ocean. Specifically, one Blue Ocean is a Delaware

entity, and the basis for jurisdiction over the Blue

Ocean entities that we have here is the aiding and

abetting and conspiracy claims. I don't think the

California Court would have jurisdiction over those

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entities. So for that reason, we have different

parties that are at issue in both cases. Only this

Court can adjudicate the full rights of all parties

with respect to the transaction.

Now, circling back to your specific

question, Your Honor, on the difference between the

California and the Delaware proceeding, it's our

understanding that the standards that will be applied

are slightly different. Specifically, the California

proceeding is a divorce proceeding, whereby the Court

is determining whether the amount of the sale is

equitable to Mrs. Huynh and Mr. Hassan.

The standards this Court are going to

apply are much different. The fiduciary duty claims

that are at issue before Your Honor are not at issue

in California. The Court in California is merely

being asked to evaluate, in the context of a family

law proceeding, whether the sale is appropriate for

both husband and wife. That's not the case here.

And another difference here is that

this is a derivative claim, where we are seeking to

evaluate the transaction on behalf of all stockholders

of Suitable and the company itself. And that's also

not an issue that will be adjudicated in California

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but will be adjudicated here.

And with respect to the provision that

Your Honor noted, the one that I was focused on when I

was reviewing this last night was actually 7.3(g),

which is the conditions to obligations of the seller.

And that provision states that "Seller shall have

obtained court approval," but then it goes on to state

"which may include a decision by the court that no

decision is necessary ...."

So I'm not sure that the Court in

California, it may reach a decision that it doesn't

need to make a decision on the appropriateness of the

transaction, which that issue is squarely before this

Court here. So I don't think a stipulation quite gets

us there, Your Honor, and I don't think there is

enough of an overlap between the proceedings that this

action should not proceed based on the claims at issue

and the different parties in this case.

THE COURT: Tell me what you

understand about the stockholder profile. Who else is

there out there?

MR. HUNTER: Sure. My understanding

currently, Your Honor, is that Mr. Hassan and entities

controlled by him own substantially all of the stock.

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But I do believe there are other stockholders. I

don't have in front of me an exact number, but I

believe it is somewhere in the neighborhood of 30 to

40 other kind of individual stockholders that own

outstanding stock.

THE COURT: Okay. That's helpful.

Mr. Rohrer, what else do you want to

tell me?

MR. ROHRER: Yes, Your Honor. With

respect to the jurisdictional issue over Blue Ocean in

the California proceeding, I would only note that even

though -- whether or not the Court has jurisdiction

over Blue Ocean, it doesn't seem necessary or

determinative to me relative to its fairness analysis

of the transaction of actually assessing the

transaction.

With respect to the question of the

stipulation, my further understanding beyond this

representation in the contract, the asset purchase

agreement, is that there is an affirmative

indemnification representation by Mr. Hassan in the

context of the California action, where Mr. Hassan has

represented that he will indemnify plaintiff for any

unfairness or any detriment to her community property

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interest as a result of the pending asset sale. So

that indemnification representation would, by my view,

essentially provide the assurance that the plaintiff

would need that she would be made whole in the event

there was a shortfall in the asset sale valuation.

Separate and apart from that, I just,

very briefly, I just want to touch on the colorable

claim, not with respect to the allegations that have

been made, but just to a unique point relevant to this

case. And that is the fact that what we have here is

plaintiff as a spouse that holds a, quote,

co-beneficial interest in the stock.

And it's noteworthy, we were able to

locate a Court of Chancery case that I will just

direct Your Honor to. That's Capital Group v. Armour,

2004 Westlaw 2521295. That case is a Noble case. And

I understand that it found that a spouse's community

property interest in stock held by another spouse does

not itself create a beneficial interest for the other

spouse.

So the issue here that I see is until

the California Court has resolved the divorce

proceeding and made an actual determination and a

division, a true ownership division of the shares, the

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plaintiff lacks standing to assert a claim, to assert

a claim as a derivative stockholder for the reason she

is neither a stockholder of record or a stockholder of

benefit until that California proceeding is concluded.

THE COURT: I'm happy to look at that

case. That sounds wholly counterintuitive to me. But

I am happy to look at what Vice Chancellor Noble

wrote. He's a smart guy and a good jurist. But the

idea that equity would ignore a spouse's co-tenancy

interest in property that's established under a

community property state, again, it sounds

counterintuitive. But I'm happy to look at it.

Who else wants to talk to me about

this or add anything nonduplicative to what Mr. Rohrer

has told me?

MR. BLEVANS: Your Honor, this is

Brandon Blevans. I represent Scott Hassan in

California.

I would like to speak to the

representations by Mr. Hunter about what is actually

happening in the divorce action and why I believe he's

mistaken about the difference in the nature of the

claims.

The approval hearing that is set for

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this transaction in California is based on a portion

of the California family code that is entitled

"Fiduciary Duties." It is designed to ensure that my

client has satisfied his fiduciary obligations in

managing and disposing of his assets. So to say

that --

THE COURT: Let me interrupt you,

Mr. Blevans. Fiduciary in what capacity?

MR. BLEVANS: Well, in our California

family code, we have ingrafted our corporations code

fiduciary duties. So the obligations of spouses to

one another, in many respects, mirror those of

nonmarital business partners.

THE COURT: To put a fine point on it,

we're talking about his fiduciary obligation as spouse

to other spouse in terms of that analysis. True?

MR. BLEVANS: Yes, that is true.

THE COURT: You are then going to make

the further argument that that relationship should,

for all intents and purposes, parallel what his

fiduciary responsibilities would be to the company and

its stockholders as a director?

MR. BLEVANS: That's correct. And

then exactly why Ms. Huynh, in the California

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proceeding, is citing to our judge all of the Delaware

corporate fiduciary obligation jurisprudence. But I

think there's an important point --

THE COURT: Why is that? Why wouldn't

spousal obligation be California law?

MR. BLEVANS: Because of the view that

it parallels the corporations -- the same fiduciary

obligations that we have in our corporations code, and

because our corporations code also draws from Delaware

jurisprudence.

THE COURT: That's adding an

additional step. I mean, do you hear the additional

step you added? Really what you are saying is it's

fiduciary duties under the California corporation code

first; and then when California doesn't have an

answer, California looks to Delaware law. Is that

fair?

MR. BLEVANS: That's -- or in some

respects they are saying that because the language of

the two codes is so similar, that they draw on

Delaware because of its robustness of the law that it

developed in this area.

THE COURT: If there's one thing I

know, actually, California's one of the states that

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doesn't track the DGCL, and its code isn't similar.

MR. BLEVANS: Okay. That I can't

speak to, as I am not one of the corporation folks.

THE COURT: It's a bold representation

to make, then, if you can't speak to it.

MR. BLEVANS: The additional issue I

think important is the indemnification issue. Because

when Scott Hassan sought approval of this transaction

in the family law action, he informed the Court in his

filings that he wanted the transaction approved, with

the additional order that should the California Court

determine that the fair and reasonable value of these

assets is something different than the sales price,

that he will make plaintiff whole.

And while I recognize that the Court

views the delta at issue here is large, in terms of

the assets available to these parties, it is not a

significant sum. So the indemnification that Scott

has agreed to isn't illusory. He's able to make that

indemnification should the Court determine that this

transaction isn't the fair and reasonable value of

these assets.

THE COURT: What's your understanding

of the stockholder profile in terms of other folks

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being out there? And I understand that your client

has the overwhelming majority of the shares. But are

there other holders in addition to the plaintiff?

MR. BLEVANS: There are. I think my

client's total holdings, direct and indirect, are

about 58 percent. In addition to that, I think

Mr. Hunter was correct in the representation that

there are a few dozen other stockholders, maybe more

than that, because it's all through employment,

essentially. And I think the largest

non-Mr. Hassan-related ownership is 11 percent, if my

memory serves me correct.

THE COURT: All right. And what

percentage does the 600,000 shares -- I understand

there's this issue about community property ownership.

But what percentage does the plaintiff -- it's not the

plaintiff's. I get it. But what percentage does the

600,000 common shares represent?

MR. BLEVANS: It's either 6 or

7 percent, right around there.

THE COURT: All right. Anything else

you want to tell me?

MR. BLEVANS: Not from my end, Your

Honor. Thank you for your time.

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THE COURT: Great. Thank you.

Anybody else? I think I heard

somebody starting to speak up when Mr. Blevans jumped

in. Who else wants to say something?

MR. REED: Yes, Your Honor. That was

Mr. Reed. I will try to be very brief.

I just want to make some comments for

my own protection on this with regard to Blue Ocean.

Blue Ocean is a Danish company, so I don't want to

waive any personal jurisdiction with regard to I don't

believe there are minimum contacts for Blue Ocean,

certainly in Delaware.

It shouldn't matter much for Your

Honor's analysis today, because Beam USA is a party to

the APA, and Section 10.11(b) selects Delaware as a

consent to jurisdiction. So there's not a problem

with regard to that Delaware entity for purposes of

this dispute.

And service has also not been made.

So I don't want to waive anything with regard to

jurisdiction or service.

Let me just focus for a second on

irreparable harm and get back to this Section 7.2(f)

and 7.3(g). It's my understanding that, absent court

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approval, the condition also would then require the

consent of the Seller Stockholder Related Party, which

is the plaintiff here. And I don't believe -- and

that's in both -- that's a condition for both the

seller and the buyer. And I don't believe the seller

is waiving it. So absent consent by the plaintiff,

this transaction is not closing.

I know Your Honor didn't want to hear

too much about damages being an adequate remedy here.

But if you look at the complaint, we're talking about

them complaining about rejection of a million-dollar

offer in exchange for a $400,000 offer. And even

under their calculation that we're really paying

70,000 instead of 400,000, it's a $930,000 damages

claim.

There's some talk in the complaint,

without a lot of specifics, about the company having

assets valued at tens of millions of dollars. But

there is certainly no offer. The only offer out there

was for a million.

And the other issue is that there was

never any offer for this company that would have

eclipsed the $93 million in debt that the company

holds, which transitions into a second question here.

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You know, under Your Honor's ruling in Quadrant, there

is clearly dual standing here. And somebody who has a

potential community property interest of about

3 percent of the company, if a court were to

ultimately award her the 3 percent, is eclipsed by the

$93 million held by the debt holders, who ought to be

able to speak on behalf of the company in the

derivative context.

The other thing is, I do think there's

a substantial issue with regard to standing. By the

way, that was not a Vice Chancellor Noble case, at

least not the case I'm looking at. It was a Vice

Chancellor Lamb case, the Armour case. And I think

what the Court was saying there is that, you know,

while you may have a community property interest in

the stock, which would mean at some point a court

could divide it up and give it to you, that doesn't

make you a direct owner or even a beneficial owner

under Delaware law.

The problem I think we have here is

that this plaintiff is not a record holder and is not

a beneficial holder under our law because the record

holder still speaks for the stock. Until a California

court says that she owns it, I don't know how she can

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simultaneously speak for the stock while the record

holder speaks for the stock. And so we do have a dual

standing problem with regard to creditors, and we also

have this issue of whether or not she actually has any

legal standing to, you know, put the company -- put us

as the buyer through this expense when we don't know

what the California Court is going to do.

I could speak to aiding and abetting,

but I don't believe that Mr. Hunter is really

interested in his schedule in doing a lot of heavy

discovery with regard to anything like aiding and

abetting or conspiracy. I think that all goes away if

there's a resolution of the underlying breach and

whether or not the transaction should go forward. So

I will spare the Court with a presentation on that,

only to note that there's really only two paragraphs,

93 and 94, that I don't believe satisfy the knowing

participation requirement to state an aiding and

abetting claim.

And with that, Your Honor, unless Your

Honor has questions, I'm finished.

THE COURT: All right. Thank you. I

appreciate it.

Mr. Hunter, any reply?

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MR. HUNTER: Your Honor, I just want

to make one point on the standing issue that I've

heard this morning.

As Your Honor probably saw in our

complaint, specifically at Footnote 1, prior to filing

this action, we did serve a books and records demand

under 8 Delaware Code 220. In connection with that

books and records demand, we provided counsel for

Suitable evidence of Ms. Huynh's beneficial interest.

Specifically, we provided, one, a stock certificate

reflecting Mr. Hassan as the record owner of the

600,000 shares; and, two, a declaration of Mr. Hassan

in which he listed the 600,000 shares of Suitable as

communally owned by Mr. Hassan and Ms. Huynh. And in

response to that, there was no objection to

Ms. Huynh's status as a beneficial owner. In fact,

they acknowledged that she was an owner of community

property and Suitable shares owned by Mr. Hassan, and

then proceeded to give us documents.

So I'm not really sure where this

argument is coming from. I did just want to point out

those facts to the Court, though.

THE COURT: Anything else from you, or

is that it?

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MR. HUNTER: No, sir. Thank you.

THE COURT: All right. You-all have

raised a lot of interesting issues this morning.

Based on the presentation that's laid out in the

plaintiff's papers, this is something that is subject

to expedition, and it's something that warrants a fast

schedule.

That said, I am mindful of the

California proceeding. Certainly, I think that to the

extent people can avoid duplicative proceedings, or if

there can be some type of determination that everyone

can have confidence in, that's ideal.

I, however, am dealing with a

different situation than California. I'm dealing with

a Delaware entity. This is being litigated as a

derivative action. It's, therefore, being asserted in

a manner where a remedy would inure to the benefit of

all corporate constituencies. As Mr. Reed points out,

initially it may inure to the benefit of the debt

holders, but then it's going to inure to the benefit

of not just Ms. Huynh, but also to the other

stockholders.

Now, people may be cynical about

whether Ms. Huynh is doing this to serve her own

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interests and because of its implications for the

divorce action, and that's certainly something that at

some point needs to be taken into account. But for

purposes of today, the different legal posture means

that we're in a different context where there are

other interests in play.

This is also a transaction that, at

least as portrayed, is effectively a washout. And

it's a counterintuitive transaction. It's depicted as

one that is being structured to capture tax benefits

unique to the seller, the controlling stockholder, in

which really nothing inures to the benefit of the

other stockholders. If the seller didn't have that,

or the controlling stockholder didn't have that unique

interest, then there would be an incentive for him to

obtain significantly more value that would inure to

the benefit of everyone.

I'm more than happy to look at the

standing issue and think about it, but this is the

type of case where it seems to me that Ms. Huynh does

have, at least at first blush, some type of equitable

interest that it's important to protect, not only for

her benefit, but for the benefit of other folks.

My initial reaction to the $93 million

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in debt is that's an interesting point too. But at

least based on the complaint -- and people can show

otherwise -- but at least as in the complaint, the

$93 million creditor is the alleged breacher. So what

we really have here is one person -- namely,

Mr. Hassan -- who has differential interests relative

to the corporation that cause this transaction to make

sense for him and not make sense for anyone else. And

that's the basic problem we're dealing with.

The California divorce case, just to

circle back, potentially could make Ms. Huynh whole,

but what it doesn't do is solve the basic derivative

action problem, and essentially it would leave other

holders and the entity and any other creditors,

whoever they might be, out in the cold.

I don't take much solace in the

provisions of the asset purchase agreement because, at

least in the abstract, they seem to me to be

amendable. Now, you-all may be able to explain to me

or show me that, no, that is not the case. But the

people who drafted that contract and entered into that

contract are the buyer and the seller, not Ms. Huynh.

So if the buyer and seller want to amend to take these

provisions out, or do something else, they have the

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power to do that.

As a result, while these provisions

may seem like protections, and they are nice things to

cite, they are amendable. If the plaintiff was one of

the holders of the conditions, then I would be much

more receptive to the idea that those solve the

problem in terms of closing. That's why I focused on

some type of stipulation and order, because from my

standpoint, there needs to be some meaningful comfort,

not only for the plaintiff, but also for the Court,

that this isn't a situation where changes will be made

to the transaction to make it happen without there

being an opportunity for the Court to examine it.

I do take seriously -- and this will

be the third time I've touched on the California

divorce action -- I do take seriously the idea that

another court could look at this and give some

fairness indication.

Frankly, I am not, at least at first

blush, of the view that the family law fairness

evaluation is going to be comparable to what this

Court would be doing on a preliminary injunction

motion. The argument that the California family law

principles will parallel the Delaware corporate law

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analysis just doesn't sound right to me. I have great

respect for the courts of California. They do a lot

of things very well. But their statutory code is

quite different than ours. They've reached different

outcomes on some key doctrinal points. That's not to

say they are wrong and we are right. These are things

where reasonable minds can disagree.

So it's not at all clear to me that

the one maps on fully to the other. And I say that

reiterating my respect for the jurist that is

presiding over the family law case out there.

Certainly that jurist is infinitely -- and I mean

literally infinitely -- more knowledgeable than I am

about California family law and its principles,

because I know zero, and I'm sure that judge knows an

awful lot, and that ratio is infinite.

What I'm going to do as a result of

this is I am going to schedule this proceeding for a

hearing at 9:15 on the 4th of December. Actually, as

I look at it now, we can probably do it on the 4th,

5th, or 6th of December. So why don't we tentatively

say 9:15 on the 6th, and if you-all want to pick one

of the earlier days, that's fine. But that will give

you two additional days in the schedule.

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I'm not trying to get ahead of the

California Court on this. I'm doing this because of

the timeline that I've been presented with in terms of

the potential early closing date. If you-all can do

something in the form of an order to document for me

an approach that lets the California Court go first

and make whatever rulings it wants to make, I will

certainly take into account whatever factual findings

and determinations are made out there in terms of

making the rulings in front of me.

I think there's something to be said

for doing that. In other words, if this started as a

family law dispute, and there is at least some

argument that this is some type of related case,

setting aside what I've said about the other

stockholders for the moment, then I do think there's

some sense in allowing the Family Court to go first.

But what I can't do today, and what I won't do today,

is make what essentially would be a case-dispositive

ruling in the context of scheduling by saying we're

not going to go forward at all.

That's where I am in terms of this.

The technical ruling for purposes of today is the

motion to expedite is granted. The hearing date,

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subject to you-all agreeing otherwise, will be the 6th

of December at 9:15. I would hope that you-all can

come up with some type of agreement that stages things

so that you don't have to be litigating on two coasts.

But if you can't, then that's when we'll all get

together again, and I will entertain the preliminary

injunction application. At that point, I will also be

more than happy to take into account the types of

issues that the defendants have raised as to these

other matters.

Mr. Hunter, any questions from you?

MR. HUNTER: No, Your Honor. Thank

you.

THE COURT: All right. Mr. Rohrer,

any questions from you?

MR. ROHRER: Nothing further here,

Your Honor. Thank you.

THE COURT: Mr. Reed?

MR. REED: Nothing.

THE COURT: Mr. Blevans?

MR. BLEVANS: Nothing, Your Honor.

Thank you for your time.

THE COURT: All right. I'm grateful

for everyone getting on the phone today. I do hope

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you can work something out that will result in a more

measured approach to this. But if you can't, I will

look forward to seeing you-all on the 6th at 9:15.

Have a good day.

(Teleconference concluded at

9:58 a.m.)

- - -

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37


CERTIFICATE

I, DEBRA A. DONNELLY, Official Court

Reporter for the Court of Chancery of the State of

Delaware, Registered Merit Reporter, Certified

Realtime Reporter, and Delaware Notary Public, do

hereby certify that the foregoing pages numbered 3

through 36 contain a true and correct transcription of

the proceedings as stenographically reported by me at

the hearing in the above cause before the Vice

Chancellor of the State of Delaware, on the date

therein indicated, except for the rulings at pages 29

through 36, which were revised by the Vice Chancellor.

IN WITNESS WHEREOF I have hereunto set

my hand at Wilmington, this 7th day of November, 2019.

/s/ Debra A. Donnelly----------------------------

Debra A. Donnelly Official Court Reporter

Registered Merit Reporter Certified Realtime Reporter Delaware Notary Public

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Documents

1 ALLISON HUYNH, : Defendants,...on Mr. Hassan's counsel, Brandon Blevans, as well as Mr. Reed, to provide additional details on the pending transaction. Specifically, there's also