Loggerhead Tools, LLC v. Sears Holdings Corporation

Filing 456

MOTION by Defendants Apex Tool Group, LLC, Sears Holdings Corporation, Counter Claimants Apex Tool Group, LLC, Sears Holdings Corporation for judgment as a Matter of Law (Attachments: # 1 Table of Appendices, # 2 Appendix 1, # 3 Appe ndix 2-1, # 4 Appendix 2-2, # 5 Appendix 2-3, # 6 Appendix 2-4, # 7 Appendix 2-5, # 8 Appendix 2-6, # 9 Appendix 2-7, # 10 Appendix 2-8, # 11 Appendix 2-9, # 12 Appendix 2-10, # 13 Appendix 3 - PTX 1, # 14 Appendix 3 - PTX 3, # 15 Appendix 3 - PTX 4, # 16 Appendix 3 - PTX 51, # 17 Appendix 3 - PTX 119, # 18 Appendix 3 - PTX 157, # 19 Appendix 3 - PTX 175, # 20 Appendix 3 - PTX 467, # 21 Appendix 3 - PTX 503, # 22 Appendix 4 - DTX 1, # 23 Appendix 4 - DTX 2 , # 24 Appendix 4 - DTX 3, # 25 Appendix 4 - DTX 5, # 26 Appendix 4 - DTX 7, # 27 Appendix 4 - DTX 8R, # 28 Appendix 4 - DTX 9, # 29 Appendix 4 - DTX 9R, # 30 Appendix 4 - DTX 11, # 31 Appendix 4 - DTX 11R, # 32 Appendix 4 - DTX 23, # 33 Appendix 4 - DTX 24, # 34 Appendix 4 - DTX 74, # 35 Appendix 4 - DTX 75, # 36 Appendix 4 - DTX 212, # 37 Appendix 4 - DTX 213, # 38 Appendix 5)(Sernel, Marcus)

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APPENDIX 2-4 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 Scene 1 Designation 8:8 -8:10 Source Tx Duration Elapsed Whitney, Adam 2015-10-02 00:00:11 00:00:00 Remains 01:03:34 M5.1 01:03:23 Whitney_A-100215-1 M5.2 01:03:20 Whitney_A-100215-1 M5.3 01:03:08 Whitney_A-100215-1 M5.4 Whitney_A-100215-1 M5.5 Whitney_A-100215-1 M5.6 Q. Please state and spell your name for the record. 8:9 A. Adam Hopkins Whitney, A-D-A-M, space, H-O-P-K-I-N-S, 8:10 9:18 -9:19 space, W-H-I-T-N-E-Y. Whitney, Adam 2015-10-02 00:00:03 00:00:11 9:18 11:10 -11:15 Q. What's the name of your current company? 9:19 3 A. Meijer. Whitney, Adam 2015-10-02 00:00:12 00:00:14 11:10 A. I do. 11:12 Q. What school did you earn that degree from? 11:13 A. University of Michigan. 11:14 Q. What year? 11:15 16:17 -16:24 Q. Do you have an undergraduate degree? 11:11 4 A. 1998. Whitney, Adam 2015-10-02 00:00:26 00:00:26 16:17 Q. What was your title when you started at Sears? 16:18 A. I don't remember. Sears changed titles several times 16:19 when I was there. I believe when I started I was 16:20 inventory manager. It may have been senior 16:21 merchandise planner, but that was really the same role 16:22 fundamentally. 16:23 19:17 -20:5 Q. That, you said, was around 2004? 16:24 5 A. As I recall, yes. Whitney, Adam 2015-10-02 00:01:12 00:00:52 01:02:42 19:17 Q. What was your next role? 19:18 A. DMM of Sears hand tools and power tools. 19:19 Q. Was that approximately 2011? 19:20 A. To the best of my recollection, yes, approximately. 19:21 Q. What were your responsibilities in that role? 19:22 A. Really the same responsibilities as a divisional 19:23 merchandise manager, having several buyers report to 19:24 me, overall manage the financials -- financial 19:25 objectives of those categories and ultimately create 20:1 strategies to satisfy our customers. 20:2 Q. About how many buyers reported to you in that role? 20:3 A. I need to think. I don't remember. I believe four or 20:4 21:15 -22:5 five. There could be some that I'm forgetting. It's 20:5 6 been a while. Whitney, Adam 2015-10-02 21:15 Printed: 5/6/2017 1:20:47PM Barcode Whitney_A-100215-1 8:8 2 Media File 00:00:52 00:02:04 01:01:30 Q. What was your role when you began at Meijer? Page 1 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 21:16 A. DMM of toys. 21:17 Q. Is that your current role as well? 21:18 A. No. 21:19 Q. What is your current role? 21:20 A. Vice president of merchandise presentation and 21:21 21:22 pricing. Q. When did you become the vice president of merchandise 21:23 presentation and pricing? 21:24 A. In late August of last year. 21:25 Q. Did you have any titles in between GMM and VP? 22:3 A. No, but my categories of responsibility expanded from 22:4 tools -- from toys, to school, home office, and then 22:5 29:23 -30:6 A. Yes, so it's been a little over a year. 22:2 7 Q. 2014? 22:1 toys and electronics. Whitney, Adam 2015-10-02 29:23 29:24 00:00:22 00:02:56 01:00:38 Loggerhead's litigation against Sears and Apex? A. Yes. 30:5 Q. And you understand you are under oath? 30:6 A. I do. Whitney, Adam 2015-10-02 30:23 30:24 00:00:46 00:03:18 01:00:16 Q. When was the first time you started working with the Bionic Wrench product that you can recall? 30:25 A. I guess what I clearly recall is my buyer approaching 31:1 me. I didn't work directly with items, so to speak. 31:2 I had a team of buyers that reported to me. I 31:3 remember my buyer reaching out to me for help with a 31:4 vendor and that was the LoggerHead vendor and the 31:5 Bionic Wrench was one of their items. 31:6 Q. Who was that buyer? 31:7 A. Stephanie Kaleta. 31:8 Q. Approximately when did she first approach you about 31:9 31:10 33:1 33:2 33:3 1:20:48PM the vendor? A. In February of 2012, I believe. Whitney, Adam 2015-10-02 32:25 5/6/2017 M5.9 personal knowledge and involvement regarding 30:4 Printed: Whitney_A-100215-1 Q. Do you understand that you need to testify about your 30:3 32:25 -33:9 M5.8 A. Yes. 30:2 9 Whitney_A-100215-1 based on a subpoena for a deposition? 30:1 30:23 -31:10 M5.7 Q. Do you understand that you are testifying here today 29:25 8 Whitney_A-100215-1 00:00:44 00:04:04 00:59:30 Q. Prior to the time where your buyer approached you about the Bionic Wrench, did you have any contact with LoggerHead? A. No, not that I recall. Page 2 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 33:4 33:5 33:6 Q. Was it typical for you to not have any contact with the vendor unless an issue arose? A. Yes, I dealt with hundreds of vendors. So it was very 33:7 33:8 35:15 -36:16 chance to meet with, but my buyers did business with 33:9 10 common to have many vendors that I would never have a and that we bought and sold their items. Whitney, Adam 2015-10-02 00:02:03 00:04:48 00:58:46 35:15 A. I very distinctly remember that phone conversation. I 35:19 remember calling to help sort out whatever issues the 35:20 LoggerHead team had so that we could come to an 35:21 agreement. I remember Dan Brown, Jr. being shockingly 35:22 abrasive and accusatory of me. This was my first 35:23 meeting, introduction with them. I remember being 35:24 really, really caught off guard with the level of 35:25 emotional aggression from him. I remember asking to 36:1 speak to his father to try and work with them and sort 36:2 out their concerns and hear their concerns. I 36:3 remember him distinctly saying that his father was not 36:4 involved and was not going to be involved and I could 36:5 not talk to him. He owned this relationship, Dan 36:6 Brown, Jr. owned this relationship moving forward. 36:7 36:8 36:9 Q. When you say shockingly abrasive, what specifically are you referring to? A. I'm referring to my ethical nature and integrity being 36:10 called into question by somebody that I've just met 36:11 over the phone. That's, in my definition, shocking 36:12 36:13 36:14 36:15 36:16 11 37:9 -37:17 and abrasive and unprofessional. Q. What kinds of things did he say that made you feel that way? A. Well, telling me that I'm unethical without having met me is, in my mind, inappropriate and not called for. Whitney, Adam 2015-10-02 37:9 37:10 00:00:31 00:06:51 00:56:43 Q. At that point in time did you initiate the call or did LoggerHead initiate it? 37:11 A. I remember Stephanie, my buyer, approaching me and 37:14 asking for help, that she was fairly new to the desk 37:15 and she had a vendor that she was really trying to 37:16 make progress with and come to an agreement with and 37:17 1:20:48PM Q. Do you remember why you initiated it? 37:13 5/6/2017 A. I did. 37:12 Printed: M5.11 Q. What do you recall about that phone conversation? 35:18 Whitney_A-100215-1 A. I believe it was February 17. It was a Friday. 35:17 M5.10 Q. When was your first phone call with Dan Brown, Jr.? 35:16 Whitney_A-100215-1 was not able to do that and wanted my help. Page 3 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 12 37:25 -38:9 Whitney, Adam 2015-10-02 00:00:45 00:07:22 00:56:12 Whitney_A-100215-1 M5.12 00:55:27 Whitney_A-100215-1 M5.13 00:55:12 Whitney_A-100215-1 M5.14 Whitney_A-100215-1 M5.15 Whitney_A-100215-1 M5.16 Whitney_A-100215-2 M5.17 37:25 Q. Did this phone conversation resolve those issues? 38:1 A. No. 38:2 Q. Do you recall any other phone conversations after this 38:3 particular one? 38:4 A. I remember the phone conversation on, I believe it was 38:5 May 25, with Dan Brown, Jr. I believe Dan Brown 38:6 joined the call at some point during the call. 38:7 Q. What do you recall about what was discussed? 38:8 A. We were calling to communicate that we were no longer 38:9 13 38:10 -38:14 able to put the product on DRTV for Q4. Whitney, Adam 2015-10-02 38:10 38:11 38:12 00:00:15 00:08:07 Q. Do you recall anything else about that phone conversation? A. Yes. I recall Dan Brown, Sr. telling me that if that 38:13 38:14 14 38:23 -38:24 was the case then we're effectively ending our relationship. Whitney, Adam 2015-10-02 00:00:05 00:08:22 38:23 15 60:10 -60:17 Link > P462.1 Q. Was Ms. Kaleta a part of that phone conversation? 38:24 A. She was. Whitney, Adam 2015-10-02 00:00:37 00:08:27 00:55:07 60:10 60:11 5346 through Sears 5347. I would like you to turn to 60:12 the second page and take a look at that e-mail from 60:13 Link > P462.2 Q. Exhibit 5 is a document bearing the Bates number Sears Bill Kiss. 60:14 A. Mm-hmm. 60:15 Q. Who is Bill Kiss? 60:16 A. He was the marketing vice president. I don't remember 60:17 16 60:21 -61:7 Link > P462.2.2 Whitney, Adam 2015-10-02 60:21 60:22 60:23 60:24 Link > P462.1.3 his specific title. 00:00:39 00:09:04 00:54:30 Q. He asked, "Last holiday what did we move most/sell out of?" A. "What we did move most and sell out of?" And I answered, "Bionic." 60:25 Q. You answered "Bionic" in the next e-mail, right? 61:1 A. In that e-mail I answered "Bionic" and then Tom Arvia 61:2 replies, "Yep, no question." 61:3 Q. And the date of your e-mail is May 9, 2012, right? 61:4 A. Yes. 61:5 Q. So the last holiday would have been the holiday season 61:6 61:7 17 Printed: 86:14 -86:25 5/6/2017 1:20:48PM of December of 2011? A. Correct. Whitney, Adam 2015-10-02 00:00:54 00:09:43 00:53:51 Page 4 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 Link > P459.1 86:14 86:15 Q. If you would click on Exhibit 8, that is a document with the Bates stamp Sears 5246 through 5247? 86:16 86:17 Link > P459.1.1 A. Okay. Q. We are going to look at the second e-mail which is 86:18 from you dated January 6, 2012. Do you see that? 86:19 A. Yes, I do. 86:20 Q. This e-mail is directed to Dennis Carrie, right? 86:21 A. Yes. 86:22 Q. Who was Dennis Carrie? 86:23 A. He was our finance guy. I forget his title. I think 86:24 86:25 18 87:8 -87:14 he was ultimately our CFO. Again, I don't remember time frames. He was the finance guy. Whitney, Adam 2015-10-02 87:8 87:9 87:10 87:11 00:00:22 00:10:37 00:52:57 question? A. No. Technically he didn't have a role in approving contracts. I would say no. Whitney, Adam 2015-10-02 00:02:27 00:10:59 88:16 88:17 00:52:35 Q. If you would swipe at the top. Item 1 refers to an overall halo/lift/attachment to the hand tools 88:18 category overall. Do you see that? 88:19 A. Yes. 88:20 Q. What does halo refer to? 88:21 A. Give me one quick second to read this. 88:22 Q. Sure. 88:23 A. "Overall halo/lift/attachment to the hand tools 88:24 88:25 category overall, not just this one item." You asked me halo? 89:1 Q. Yes. 89:2 A. I would say that's the overall attachment to the 89:3 categories overall. I feel like I have basically 89:4 defined it right here. The halo is I'm expecting the 89:5 item to help the entire department, the entire 89:6 category, have lift, have sales lift. That's what I 89:7 would refer to as halo. 89:8 that item, then there is a higher proclivity for those 89:11 customers to buy other things. Generally in retail 89:12 there is different terminology used, but generally 89:13 some things are used to drive traffic, people into the 89:14 1:20:48PM A. Because if you can drive customers into the store with 89:10 5/6/2017 Q. Why would one item help the entire department? 89:9 Printed: M5.19 A. Approving contracts. What was the last word in your Q. In your department or for your department. 87:14 Link > P459.2.1 Whitney_A-100215-2 department? 87:13 88:16 -89:24 M5.18 Q. Did he have a role in approving contracts for your 87:12 19 Whitney_A-100215-2 stores. We measure attachment which is affinity which Page 5 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 89:15 is looking at the basket of sales in total and 89:16 understanding relationships between different items. 89:17 So it's reasonable to expect and to analyze and that 89:18 is what I'm asking for here, to understand the 89:19 benefits that this item could bring above and beyond 89:20 just looking at it individually. 89:21 Q. So the idea is a particular item would bring customers 89:22 to the store and the customers would purchase more 89:23 than just that item; is that right? 89:24 20 90:12 -91:6 A. That's right. Whitney, Adam 2015-10-02 00:01:51 00:13:26 00:50:08 90:12 90:13 should do this item. I'm looking for as many 90:17 different angles and avenues that I can have to say 90:18 let's analyze this, not just based on a very narrow 90:19 perspective, but based on an overall perspective which 90:20 is why I use the term halo. 90:21 Q. I'm asking, though, is there a difference between what 90:22 halo means and what attachment means? My next 90:23 question will be what lift means. 90:24 A. So yes. Lift specifically is sales increase. That's 90:25 how I'm using that term lift. Attachment would be do 91:1 we notice any other items in this basket that see a 91:2 sales lift related to this item in this promotion. 91:3 Halo is the overall benefit that we receive based on 91:4 that relationship. 91:5 92:25 -93:21 Q. You use the term basket. What does that refer to? 91:6 21 A. The overall customer's transaction total. Whitney, Adam 2015-10-02 92:25 Link > P459.1.2 00:01:24 00:15:17 00:48:17 Q. And towards the bottom of his -- the first paragraph 93:1 of his e-mail he says, "My primary interest is driving 93:2 traffic into the department as that is where the 93:3 success will lie." Do you see that? 93:4 A. Just bear with me. No. 93:5 Q. I'm looking at the first paragraph of Dennis's e-mail. 93:6 A. Okay. 93:7 Q. Starting where he says -- 93:8 A. "As my primary interest is driving traffic into the 93:9 department, that is where the success will lie, not 93:10 necessary" -- maybe he meant not necessarily -- "in 93:11 the success of a specific item. 93:12 Printed: 5/6/2017 1:20:48PM M5.21 asking for as much help as I can get to show that we 90:16 Whitney_A-100215-2 overall halo/lift/attachment. In this case, I'm 90:15 M5.20 A. I think it's a more general term. That's why I put 90:14 Whitney_A-100215-2 Q. Is the term halo the same thing as attachment? Q. Yes. So is he saying that driving traffic would Page 6 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 93:13 create that halo effect that we were talking about? 93:14 A. I think he is agreeing with me. I think he is saying 93:15 93:16 traffic is where the success will lie. I think he is 93:18 trying to agree and partner with me on my initial 93:19 e-mail to him which is, let's look at this from a 93:20 different perspective than just the nuts and bolts of 93:21 93:23 -94:2 assure that you will get subsidy, I agree that driving 93:17 22 I am going to support you here, Adam. As long you can this doesn't work. Whitney, Adam 2015-10-02 93:23 00:00:16 00:16:41 00:46:53 Whitney, Adam 2015-10-02 00:00:51 00:16:57 00:46:37 doesn't make us money, I'm trying build an argument 94:9 that says we need to look at this from a broader 94:10 perspective. It may be that we lose money here, but 94:11 it might create success over here. When you talk 94:12 halo, you talk about correlation and correlative 94:13 effect. It's hard in retail to prove that one thing 94:14 drove another. It is commonplace to say, let's look 94:15 at what this particular item did for this category or 94:16 for our store and make decisions based on that. It 94:17 doesn't mean that one thing in this e-mail or in the 94:18 context was more important. Whitney, Adam 2015-10-02 94:20 00:00:17 00:17:48 00:45:46 Q. In this context, though, the profits derived from the 94:21 halo of the Bionic Wrench were significant enough that 94:22 you thought it would be a plus factor supporting DRTV, 94:23 right? 94:24 94:25 A. I thought it would be a supportive case for running DRTV, yes, I did. Whitney, Adam 2015-10-02 103:7 00:00:18 00:18:05 00:45:29 Q. Let's look at the next exhibit. This is going to be 103:8 Printed: 5/6/2017 Exhibit 10 with the Bates number Sears 553 through 103:9 Link > P365.1.1 555. Whitney, Adam 2015-10-02 104:1 1:20:48PM M5.26 being challenged by finance and they're saying this 94:8 104:1 -105:8 Whitney_A-100215-2 of cases in retail, especially in this case where I'm 94:7 26 M5.25 even more important, no. What I am saying is in a lot 94:6 Link > P365.1 Whitney_A-100215-2 A. I don't know that that is exactly what I'm saying, 94:5 103:7 -103:9 M5.24 itself? 94:4 25 Whitney_A-100215-2 important than the profits from the sale of the wrench 94:2 94:20 -94:25 M5.23 deriving from the Bionic Wrench are even more 94:1 24 Whitney_A-100215-2 basically saying that the halo profits that Sears is 93:25 94:4 -94:18 M5.22 In these e-mails you and Dennis are both 93:24 23 Whitney_A-100215-2 00:01:44 00:18:23 00:45:11 Q. It says "From Whitney, Adam"? Page 7 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 104:2 104:3 Link > P365.2.1 A. I see. Okay. Q. Going on to the next page, that is the rest of that 104:4 e-mail. 104:5 A. Yes. 104:6 Q. And it's dated January 5, 2012, right? 104:7 A. Yes. 104:8 Q. In this e-mail you are addressing Dennis? 104:9 A. Yes. 104:10 Q. Asking for help? 104:11 A. Yes. 104:12 Q. The topic appears to be "Bionic Wrench DRTV on 104:13 Father's Day for 2012," right? 104:14 A. Yes, in jeopardy. 104:15 Q. Under situation you say, "Vendor is in dire need of a 104:16 commitment in order to secure production for Father's 104:17 Day," right? 104:18 A. Yes. 104:19 Q. What did you mean by that statement? 104:20 A. I meant that I needed approval to -- I meant the 104:21 104:22 literally, "Dennis, need your help, scope, Bionic 104:25 Wrench, DRTV in 2012 Father's Day." I put dash "In 105:1 jeopardy." I'm saying the vendor needs our 105:2 commitment. I'm -- they need our orders in order to 105:3 secure production for Father's Day. Ran did the 105:4 analysis attached which indicates a negative ROI, 105:5 however, Amanda and I wanted to talk this through as 105:6 we feel it is too big of an opportunity to forego. 105:7 This is me pushing the finance team to align and say 105:8 Link > Hide alignment on moving forward. I was calling out 104:24 107:17 -107:22 secure production for Father's Day. I needed Dennis's 104:23 27 vendor is in dire need of a commitment in order to yes so that we can send the vendor our orders. Whitney, Adam 2015-10-02 00:00:18 00:20:07 00:43:27 107:17 Q. Including the halo that we talked about earlier? 107:21 A. Possibly, but in and of itself a big opportunity as 107:22 Link > P399.1 well. Whitney, Adam 2015-10-02 00:00:54 00:20:25 00:43:09 126:7 Q. This is going to be Exhibit 17 with the Bates number 126:8 Sears 1169 through 1170. I'm not sure why this one 126:9 was produced with this orientation. You are 126:10 definitely -- feel free to zoom in to see better. 126:11 Printed: 5/6/2017 1:20:48PM M5.28 important for our department. 107:20 126:7 -126:16 Whitney_A-100215-2 A. Because it carried with it sales and margin that were 107:19 28 M5.27 Q. Why was it a big opportunity? 107:18 Whitney_A-100215-2 A. I have got it open here. Exhibit 17 from me to Page 8 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 126:12 Link > P399.1.1 126:13 Stephanie on February 18. Q. Looking at the e-mail at the bottom of the page from 126:14 you to Ms. Miller, you talk about an hour plus 126:15 conversation with Dan, Jr.? 126:16 29 126:17 -126:23 A. Yes. Whitney, Adam 2015-10-02 126:17 126:18 00:00:21 00:21:19 00:42:15 things." Whitney, Adam 2015-10-02 00:01:11 00:21:40 127:1 Ms. Kaleta and she is responding to your e-mail 127:3 00:41:54 Looking at the next e-mail in time, that's from 127:2 summary, right? 127:4 A. Yes. 127:5 Q. In that e-mail she says -- and I'm looking at the 127:6 second paragraph. In that she says in the third 127:7 sentence after the comma, "But assuming worse case 127:8 scenario, no subsidy, no VIR, 13.99 cost and DRTV. We 127:9 could still generate slightly better than the 127:10 2.7 million in margin we did LY for the year." Do you 127:11 see that? 127:12 A. Yes, I see that. Whitney, Adam 2015-10-02 127:14 00:01:59 00:22:51 00:40:43 Does that mean that if Sears, at this point 127:15 in time, accepted all of these particular terms that 127:16 Ms. Kaleta refers to, Sears would still make 127:17 2.7 million, at least 2.7 million in margin? 127:18 A. It appears to me as though she is saying, worse case 127:19 we could generate 2.7 million in margin, but she also 127:20 goes on to say that the margin rate with subsidy would 127:21 of course be down dramatically, 37.6 percent compared 127:22 52.2 percent. So how she is coming with up the 127:23 dollars is assuming that we would sell a significant 127:24 increase in overall unit volume, but our margin rate 127:25 would go down precipitously, a huge amount from 52.2 128:1 percent to 37.6 percent. 128:2 Q. Yes. 128:5 1:20:48PM A. How the margin rate could go down so drastically? 128:4 5/6/2017 Q. Could you explain to me how that would happen? 128:3 Printed: M5.31 Dan said that Sears is unethical among many other 126:23 127:14 -128:16 Whitney_A-100215-2 His father is not willing to speak to me about it. 126:22 31 M5.30 with Dan, Jr. from LoggerHead. It did not go well. 126:21 Link > P399.1.2 Whitney_A-100215-2 A. Yes. "Karen, I just had an hour plus conversation 126:20 127:1 -127:12 M5.29 earlier? 126:19 30 Whitney_A-100215-2 Q. Is that the conversation you were referring to A. If a cost goes up drastically. Page 9 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 128:6 Q. What's the cost that would go up here? 128:7 A. I'm looking at her note. Whatever the cost was 13.99, 128:8 I forget what it was, $9 or $11 or whatever the cost 128:9 was, it's going up to 13.99. That's a significant 128:10 cost increase and it significantly reduces our margin 128:11 rate. 128:12 Q. What exactly is a margin rate? 128:13 A. Gross margin rate and it's the percentage of margin to 128:14 your total sales. 128:15 32 128:17 -129:6 Q. Is it basically a percent profit? 128:16 A. Yes, basically. Whitney, Adam 2015-10-02 128:17 128:18 128:19 00:00:52 00:24:50 00:38:44 indications would be that we would sell a lot less at even the same retail, especially not at a higher 128:25 retail. 129:1 My response to this is, "The real question 129:2 I have is can we make that volume or any item at 129:3 better than 37 percent margin. That's not a high 129:4 margin rate for hand tools, I'm thinking, but let's 129:5 discuss Monday so that we know what our backup plan 129:6 would be." Whitney, Adam 2015-10-02 129:19 00:00:12 00:25:42 00:37:52 Q. Is it fair to say that even with all of these terms 129:20 that Ms. Kaleta refers to, Sears would still have a 129:21 129:22 -130:9 37 percent margin? Whitney, Adam 2015-10-02 129:22 00:00:42 00:25:54 00:37:40 A. Well, when you say still have a 37 percent margin, our 129:23 sales plans are based off of generally what we do a 129:24 year historically. Without knowing what my sales plan 129:25 would have been still have 2.8 million or 2.7 million, 130:1 doesn't matter if my sales plan is to continue to have 130:2 the same margin rates that I had the year before. 130:3 That's assuming a much higher volume with a much 130:4 higher retail which I don't think is a good 130:5 assumption. 130:6 1:20:48PM question is: Is it fair to say that even accepting 130:8 5/6/2017 Q. Okay. I don't think that answers my question. My 130:7 Printed: M5.34 retail which on the product life cycle, all 128:24 34 Whitney_A-100215-2 that we're going to sell this thing for a much higher 128:23 Link > Hide M5.33 based on the higher volume and retail. She's assuming 128:22 129:19 -129:21 Whitney_A-100215-2 2.7 million of profit? A. 2.7 million of profit, right, based on -- she says 128:21 33 M5.32 Q. So when she says 2.7 million in margin, is that 128:20 Link > P399.1.3 Whitney_A-100215-2 all these terms that Ms. Kaleta refers to, Sears would Page 10 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 130:9 35 130:12 -130:13 Whitney, Adam 2015-10-02 130:12 130:13 36 130:15 -130:17 have a 37 percent margin with this product? 00:00:09 00:26:36 00:36:58 Whitney, Adam 2015-10-02 00:00:09 00:26:45 00:36:49 131:8 131:9 131:10 131:11 131:12 00:00:16 00:26:54 00:36:40 M5.39 Q. What kind of backup plan were you contemplating at this point? A. A plan for us to make our sales and margin targets. 00:00:22 00:27:10 00:36:24 Q. What were the specific options that you conceived of at that time? A. I don't remember. 131:22 Q. You don't remember any of the backup plans you 131:23 131:24 considered? A. Again, on February 18, if you are asking me to say 131:25 what would you have considered a backup plan at that 132:1 time, I don't remember. Whitney, Adam 2015-10-02 132:2 132:3 132:4 00:01:09 00:27:32 00:36:02 Q. Okay. In the general time period of February of 2012, what were the backup options you were considering? A. Again, I don't remember the specific options at that 132:5 time in February. You know, you have shown me 132:6 documents that make me think that, you know, we were 132:7 talking about multiple different backup plans, but I 132:8 don't remember. I don't remember what specifics we 132:9 would have talked about then. 132:10 132:11 132:12 Q. What were the multiple different backup plans that you saw in the documents we have seen? A. I think the "Let's discuss Monday so that we know what 132:13 our backup plan would be" is a general statement that 132:14 says we need to talk about a backup plan. You are 132:15 asking me what were those backup plans and I'm saying 132:16 I don't remember. I don't remember specifically what 132:17 we talked about as a backup plan. We would have 132:18 talked about if these guys aren't going to sell us, 132:19 1:20:48PM Whitney_A-100215-2 terms. 131:21 5/6/2017 M5.38 though, right? A. Absolutely, based on the significant change of all the 131:20 Printed: Whitney_A-100215-2 Q. You thought there was a need for the backup plan, Whitney, Adam 2015-10-02 131:19 132:2 -132:21 M5.37 last year according to her note. Whitney, Adam 2015-10-02 131:7 39 Whitney_A-100215-2 A. Which would be 37.6 percent compared to 52.2 percent 131:6 131:19 -132:1 M5.36 Q. Which would be 37 percent, right? 130:17 38 Whitney_A-100215-2 that we would generate $2.7 million in margin. 130:16 131:6 -131:12 M5.35 A. Assuming worse case scenario, Stephanie is indicating 130:15 37 Whitney_A-100215-2 what else are we going to do to put on TV or to sell Page 11 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 132:20 132:21 40 133:7 -133:21 to make up the significant sales and margin that we need to generate to make our sales plan. Whitney, Adam 2015-10-02 00:00:58 00:28:41 00:34:53 Whitney_A-100215-2 M5.40 Whitney_A-100215-2 M5.41 00:33:16 Whitney_A-100215-3 M5.42 00:33:05 Whitney_A-100215-3 M5.43 Whitney_A-100215-3 M5.44 133:7 Q. What other products did you consider? 133:8 A. I remember a conversation about lighted pliers. I 133:9 don't remember the details about lighted pliers. I 133:10 remember a conversation about, you know, would that be 133:11 an item that we could substitute if these guys do as 133:12 they're threatening which is to stop production and 133:13 not send us any product. 133:14 Max Axess. I don't recall exactly when that entered 133:17 into the conversation. To be clear, I don't recall 133:18 when that entered into the conversation as it relates 133:19 to an item that we would develop versus an item that 133:20 would replace the volume of the Bionic Wrench. I 133:21 134:3 -134:13 A. At some point in time we talked about the Craftsman 133:16 41 Q. Any other products that you discussed? 133:15 think that's an important distinction. Whitney, Adam 2015-10-02 00:00:39 00:29:39 00:33:55 134:3 Q. When she says "explore another item," is that what you 134:4 were referring to in terms of considering the lighted 134:5 pliers or the Max Axess? 134:6 A. Yes, any other item. She says to explore another 134:7 item. From my point of view here on February 18, 134:8 we're discussing this is not good, we need to discuss 134:9 a backup plan. 134:10 Q. So at this point based on this e-mail, one of those 134:11 backup plans might be exploring another item for 134:12 134:13 42 156:5 -156:6 Whitney, Adam 2015-10-02 156:5 Link > P408.1 43 156:6 157:6 -157:8 Link > P408.1.1 157:6 157:8 157:25 -158:8 Link > P408.1.2 158:1 158:2 00:30:18 Exhibit 24. The Bates number is Sears 1418. 00:00:15 00:30:29 Q. That is an e-mail from Elliot Lourie to two individuals at LoggerHead Tools. Do you see that? A. Yes, I do. Whitney, Adam 2015-10-02 157:25 00:00:11 Q. Okay. Let's look at the next document. It's Whitney, Adam 2015-10-02 157:7 44 holiday DRTV; is that right? A. Yes. 00:00:30 00:30:44 00:32:50 Q. And the last sentence says that, "This forecast is subject to change pending Father's Day performance and finalization of Q4 marketing assets," right? 158:3 158:4 5/6/2017 1:20:48PM Q. So to the extent that there would be any changes to 158:5 Printed: A. That's correct. the forecast, these would be the two factors that Page 12 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 158:6 158:7 158:8 45 158:11 -158:14 would lead to that change, right? A. Those would be the biggest single influences and impacts to the change of the forecast, yes. Whitney, Adam 2015-10-02 158:11 00:00:06 00:31:14 00:32:20 00:01:22 00:31:20 00:32:14 A. No. I think we reduced our projections within a 169:17 matter of days after setting the initial forecast. 169:18 That was after our conversation with Dan Brown, Jr., 169:19 the conversation that I mentioned Dan Brown, Sr. 169:20 joined at some point. 169:21 Q. When did that conversation -- 169:22 A. That was on May 25th. 169:23 Q. Who attended that conversation? 169:24 A. Myself and Stephanie and Dan Brown, Jr. and, as I 169:25 remember, Dan Brown, Sr. was also on the call, but I 170:1 think he joined -- if I remember correctly, after the 170:2 call began. 170:3 Q. During that call, did you tell LoggerHead that you 170:4 were reducing the forecast by about 210,000 units? 170:5 A. I don't remember if we gave him a specific number. We 170:6 told him that we were no longer pursuing DRTV and it 170:7 was going to drastically reduce the forecast. We very 170:8 well may told him what the unit was. I don't know if 170:9 we knew what the new forecast was at the time. I 170:10 don't remember. Whitney, Adam 2015-10-02 172:9 00:00:24 00:32:42 00:30:52 Q. Well, when you said to them we are going to 172:10 drastically reduce the forecast, did you give them any 172:11 kind of number of how much you are planning or 172:12 reducing? 172:13 A. Again, I don't recall the specifics, so I'm not saying 172:14 we didn't, but I don't remember giving them a specific 172:15 number. I remember Dan Brown emphatically saying this 172:16 effectively ends our relationship with Sears. Whitney, Adam 2015-10-02 190:10 190:11 Printed: 5/6/2017 1:20:48PM M5.48 approximately 210,000 units; is that fair? 169:16 190:10 -191:11 Whitney_A-100215-3 June 20, 2012, Sears reduced its forecast by 169:15 48 M5.47 Q. Between May 15, 2012 and the date of this new forecast 169:14 172:9 -172:16 Whitney_A-100215-3 A. Correct. Whitney, Adam 2015-10-02 169:13 47 M5.46 right? 158:14 169:13 -170:10 Whitney_A-100215-3 e-mail that could have an impact on the forecast, 158:13 46 M5.45 There is nothing else mentioned in this 158:12 Link > Hide Whitney_A-100215-3 00:01:37 00:33:06 00:30:28 Q. Just to understand, the reason for the revised forecast you gave to them was because you didn't have Page 13 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 190:12 the funding for DRTV; is that right? 190:13 A. We were not moving forward with DRTV. 190:14 Q. What are the reasons that you weren't moving forward? 190:15 A. I don't remember all the specific reasons. I know 190:16 that funding for DRTV was a major issue and concern. 190:17 At that point I think our lack of trust in the 190:18 LoggerHead team and what they were saying had a direct 190:19 bearing in that decision. I'm sure of it. 190:20 Q. When you say "lack of trust," what happened to create 190:21 that lack of trust between the May 15th forecast and 190:22 when you decided to drop the forecast? 190:23 A. Yeah. I think the lack of trust started back in 190:24 February and before. I think it culminated in having 190:25 to make final decisions. The final decisions all had 191:1 to happen around that middle of May time frame. I 191:2 think when we sent that forecast, we believed in that 191:3 forecast. We also said very clear in writing and 191:4 verbally this forecast will change based on DRTV and, 191:5 I believe, Father's Day performance. 191:6 Q. You said it's subject to change? 191:7 A. Subject to change. It's a forecast and it's subject 191:8 to change. That's standard language in our industry. 191:9 193:14 -194:8 That's why we were working so hard to get a more 191:11 49 It means exactly that, that's it subject to change. 191:10 formalized agreement. Whitney, Adam 2015-10-02 193:14 00:01:11 00:34:43 00:28:51 wrench? 193:16 A. I don't recall. 193:17 Q. Was it during the time period you were thinking of 193:18 backup plans to selling the Bionic Wrench? 193:19 A. I don't recall. 193:20 Q. What do you recall about your involvement with the 193:21 193:22 locking wrench? A. I remember a conversation about the handle and the 193:23 size of the grip on it, that was -- we felt -- 193:24 multiple people felt that was too large and that we 193:25 wanted to make sure that it was smaller and could fit 194:1 in your hand more easily. 194:2 Q. Why were you involved in those conversations? 194:3 A. Because it was a product that was being considered for 194:4 194:5 194:6 194:7 5/6/2017 1:20:48PM M5.49 Q. When did you first learn about the Max Axess locking 193:15 Printed: Whitney_A-100215-4 development. I would give input on those sorts of things for many different products. Q. What was your understanding as to what kind of product it was? Page 14 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 194:8 50 194:10 -194:17 A. It's a locking wrench. Whitney, Adam 2015-10-02 194:10 194:11 194:12 00:00:28 00:35:54 00:27:40 Q. Including the Bionic Wrench? A. I think certainly the Bionic Wrench would compete with that item, yes. Whitney, Adam 2015-10-02 195:12 195:13 00:01:39 00:36:22 00:27:12 Q. My question was: Would you say that the Max Axess was a substitute for the Bionic Wrench in the marketplace? 195:14 A. No. 195:15 Q. Why not? 195:16 A. Because it's a different item. It's got different 195:17 features. 195:18 Q. What are the different features? 195:19 A. The single biggest feature I recall is the locking 195:20 mechanism. I don't remember specifics, but I believe 195:21 there are different specifications and standards for 195:22 it. I think it's more capable as far as having higher 195:23 standards and specifications. But I'm not an engineer 195:24 and I don't remember those specifics. 195:25 196:1 196:2 196:3 Q. Other than the locking mechanism, is there any other feature you can remember? A. The specs, the standards. It is applicable to mechanics and folks that need a higher spec tool. 196:4 Q. What do you mean by specs? 196:5 A. Again, I don't remember the specifics, but specs would 196:6 be kind of gripping force or the amount of poundage or 196:7 torque that it could handle. Again, I'm not an 196:8 engineering. I'm just vaguely recalling that the 196:9 locking wrench had those features and the Bionic 196:10 Wrench did not. You asked me about if it's a 196:11 replacement, right? 196:12 Q. Yes. 196:13 A. No. As a matter of fact, we planned on having, and I 196:14 believe did have both items out for sale at the same 196:15 time. There was never an intention to be a 196:16 replacement of those. Whitney, Adam 2015-10-02 197:9 Printed: 5/6/2017 197:10 1:20:48PM M5.52 compete with that item. 194:17 Link > P461.1 Whitney_A-100215-4 Items that we market -- a broad range of items would 194:16 197:9 -197:11 M5.51 A. I think all of our gimmick-type items would compete. 194:15 52 Whitney_A-100215-4 What products would compete with the 194:14 195:12 -196:16 M5.50 locking wrench? 194:13 51 Whitney_A-100215-4 00:00:13 00:38:01 00:25:33 Q. All right. Let's look at the next exhibit which is going to be Exhibit 29 with a Bates number Sears 5337 Page 15 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 197:11 53 197:16 -198:19 Whitney, Adam 2015-10-02 197:16 Link > P461.1.1 through 5338. 00:01:34 00:38:14 00:25:20 see that? 197:22 A. I do. 197:23 Q. Mr. Pope writes, "We have a rough prototype to show 197:24 you." Do you see that? 197:25 A. I do. 198:1 Q. If you look early -- rather later in the chain to the 198:2 latest e-mail that's from Ms. Kaleta to you, do you 198:3 see that? 198:4 A. Yes. 198:5 Q. That's dated April 17, 2012? 198:6 A. Yes. 198:7 Q. And she says, "FYI, I have the protocol of the 198:8 Craftsman Bionic Wrench to show you." Do you see 198:9 that? 198:10 A. Yes. 198:11 Q. When she says Craftsman Bionic Wrench, do you 198:12 understand that mean the Max Axess? 198:13 A. Yes, I do. 198:14 Q. Why was it referred to as the Craftsman Bionic Wrench? 198:15 A. Because we didn't have a name for it and I think that 198:16 198:17 198:18 198:19 was the closest item that we knew to compare it to. Q. As of this date, April 17, Ms. Kaleta has the prototype of the Max Axess? A. Yes. Whitney, Adam 2015-10-02 200:15 200:16 200:17 200:18 200:19 200:20 200:21 200:22 00:00:36 00:39:48 00:23:46 Q. Did you understand it to be modelled after the LoggerHead Bionic Wrench? A. No. I definitely understood it to have similarities with the LoggerHead Bionic Wrench, but modelled after, no. Q. But it was similar enough that when Ms. Kaleta says, "Craftsman Bionic Wrench," you knew what she meant? A. Absolutely. It definitely had shared characteristics. 200:23 1:20:48PM similar looking objects. The functionality of them, 200:25 5/6/2017 If you look at the two items, you would say these are 200:24 Printed: M5.55 Q. And the subject line of that e-mail is BIO II. Do you 197:21 203:4 -203:6 Whitney_A-100215-4 A. I do. 197:20 55 M5.54 that? 197:19 200:15 -200:25 Whitney_A-100215-4 the bottom of that page from Barry Pope. Do you see 197:18 54 M5.53 Q. Looking at the earliest e-mail time which starts at 197:17 Link > P461.1.3 Whitney_A-100215-4 in our opinion, was significantly different. Whitney, Adam 2015-10-02 00:00:17 00:40:24 00:23:10 Page 16 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 203:4 Link > P463.1 Q. Let's look at the next document this is going to be 203:11 -203:23 Exhibit 31 with the Bates stamp Sears 5348 through 203:6 56 203:5 5350. Whitney, Adam 2015-10-02 203:11 Link > P463.2.1 00:00:42 00:40:41 00:22:53 Whitney_A-100215-4 M5.56 Whitney_A-100215-4 M5.57 00:21:39 Whitney_A-100215-4 M5.58 00:21:34 Whitney_A-100215-4 M5.59 Q. I would like you to look first at the e-mail that 203:12 begins on very bottom of the first page from you to 203:13 Ms. Kaleta. It goes to the next page and you are 203:14 requesting the Q4 unit estimate on the Teeny Turner, 203:15 also Bionic Wrench same info from last holiday. Do 203:16 you see that? 203:17 A. Yes. 203:18 Q. So you are asking Ms. Kaleta for certain information 203:19 about the Bionic Wrench, right? 203:20 A. Yes. 203:21 Q. Then you say, "This for a Sam president meeting at 203:22 203:23 57 204:10 -204:19 2:00 p.m. today"? A. Yes. Whitney, Adam 2015-10-02 00:00:32 00:41:23 00:22:11 204:10 204:11 A. Unit estimate would be a unit forecast, that's right. 204:12 Link > P463.1.1 Q. When you say "Q4 estimate," that's a forecast? Q. Looking back on page 1, Ms. Kaleta gives you a little 204:13 chart for Bionic, right? 204:14 A. Okay. Yes. 204:15 Q. And the sales unit estimated there are presented for 204:16 2011 and 2012, right? 204:17 205:6 -205:7 Q. So at this point in time it was 374,000? 204:19 58 A. Correct. 204:18 A. Correct. Whitney, Adam 2015-10-02 205:6 Link > P464.1 59 205:7 205:12 -206:1 Link > P464.1.1 205:13 00:41:55 Q. No. I'm sorry. I sent out a new exhibit. This is Exhibit 32. Whitney, Adam 2015-10-02 205:12 00:00:05 00:01:02 00:42:00 Q. The Bates stamped Sears 5351. Your e-mail on this page, the second e-mail, is dated May 10, 2012? 205:14 A. Right, okay. 205:15 Q. I set that you talked to Sam at length about 205:16 Bionic/Apex version. 205:17 A. Okay. 205:18 Q. When you say "Apex version," you mean Apex's version 205:19 205:20 of the Bionic Wrench, right? A. Let me read this. I needed to refamiliarize myself 205:21 5/6/2017 1:20:48PM with no exclusivity and the fact that they're 205:23 Printed: with it. So I say one Bionic. Sam is uncomfortable 205:22 unwilling to work with us and recognizing we're over a Page 17 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 205:24 barrel. This reenforces that we're paying for their 205:25 60 206:2 -206:3 marketing unit. Yes, I am referring to the Apex 206:1 Max Axess. Whitney, Adam 2015-10-02 206:2 206:3 61 206:5 -206:6 206:6 62 206:8 -206:10 206:9 206:10 63 207:9 -207:15 00:20:32 Whitney_A-100215-4 M5.60 Whitney_A-100215-4 M5.61 Whitney_A-100215-4 M5.62 Whitney_A-100215-4 M5.63 Whitney_A-100215-4 M5.64 right? 00:00:09 00:43:07 00:20:27 A. I'm calling it the Apex version. Again, it's, in my opinion, a different tool and has a locking mechanism. Whitney, Adam 2015-10-02 206:8 00:43:02 Q. And you're calling it the Apex version of the Bionic, Whitney, Adam 2015-10-02 206:5 00:00:05 00:00:06 00:43:16 00:20:18 Q. But you are referring to it here as the Apex version of the Bionic, right? A. Yes. Whitney, Adam 2015-10-02 00:00:24 00:43:22 00:20:12 Link > P425.1 207:9 Q. Exhibit 33 has Bates number Sears 2075. Looking at Link > P425.1.2 207:10 the e-mail at the very top, that's from Ms. Kaleta to 207:11 you, right? 207:12 A. Yes, 5/17/2012. 207:15 207:18 -208:23 Q. And it's dated May 17, 2012? 207:14 64 A. Mm-hmm. 207:13 Q. And it says Bionic versus Max Axess, right? Whitney, Adam 2015-10-02 00:02:01 00:43:46 00:19:48 207:18 A. Yes, it does. 207:19 Q. It presents a comparison of Bionic and Max Axess for 207:20 A. Yes, it did. 207:22 Link > P425.1.3 Q4, right? 207:21 Q. If you read the comparison, she says, "The receipts 207:23 units seem much higher for Apex, but really only seem 207:24 higher because we enter Q4 of 40K units of Bionic 207:25 already on hand, and because we downtrended the Bionic 208:1 forecast by about 30K units to account for 208:2 cannibalization on the new Max Axess." Do you see 208:3 that? 208:4 A. I do. 208:5 Q. What did you understand her to mean by 208:6 208:7 cannibalization? A. I understand that to mean we will sell 30,000 less 208:8 units of the Bionic Wrench due to their being more -- 208:9 different options for the customer and in particular 208:10 the Max Axess. 208:11 208:12 208:13 208:14 Printed: 5/6/2017 1:20:48PM Q. What does the term cannibalization mean in the industry? A. In the industry cannibalization would be one item impacting another item is the simplest way to put it. Page 18 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 208:15 Q. Impacting in what way? 208:16 A. Impacting sales. 208:17 Q. So replacing sales? 208:18 A. I don't know that I would use the word replacing. 208:19 208:20 Reducing sales. Q. So in this context the introduction of the Max Axess 208:21 Link > Hide 65 would reduce the sales of the Bionic Wrench; is that 208:22 right? 208:23 213:15 -213:17 Whitney, Adam 2015-10-02 213:15 213:16 213:17 66 222:7 -222:8 67 222:8 224:17 -224:25 224:18 Link > Hide 224:19 00:45:47 00:17:47 Whitney_A-100215-4 M5.65 00:17:36 Whitney_A-100215-4 M5.66 00:17:29 Whitney_A-100215-4 M5.67 Whitney_A-100215-4 M5.68 Whitney_A-100215-4 M5.69 Whitney_A-100215-4 M5.70 Wrench other than the Max Axess? A. No. 00:00:07 00:45:58 Q. I'm going to ask to mark another exhibit. This is going to Exhibit 36. Whitney, Adam 2015-10-02 224:17 00:00:11 Q. Are you aware of any other versions of the Bionic Whitney, Adam 2015-10-02 222:7 Link > P428.1 A. Yes. 00:00:32 00:46:05 Q. You don't recall taking any steps to address that particular issue? A. I don't recall. I don't remember. I don't 224:20 224:21 I don't remember meeting with Loren. I don't 224:23 remember. 224:24 Q. Who is Loren? 224:25 225:3 -225:5 remember. I'm sure it looks like we met with Loren. 224:22 68 remember -- again, it's been so long ago, I don't A. Loren one of the attorneys that works with the Sears. Whitney, Adam 2015-10-02 225:3 225:4 225:5 69 225:13 -225:21 225:14 225:15 00:46:37 00:16:57 Q. I want to go back for a minute to something we were talking about early which was the halo sales? A. Yes. Whitney, Adam 2015-10-02 225:13 00:00:09 00:00:34 00:46:46 00:16:48 Q. So how would you go about trying to figure out what a particular product's halo is? A. Looking at that item's basket or transactional 225:16 225:17 item tends to help the sales of another item or not. 225:19 Do we see baskets go up and customers stay in the 225:20 department longer. There are many different kinds of 225:21 244:3 -244:21 compare it over time to say, hey, do we find that this 225:18 70 information to say what else was in the basket and variables that we would look at to determine that. Whitney, Adam 2015-10-02 244:3 244:4 Printed: 5/6/2017 1:20:48PM 00:01:07 00:47:20 00:16:14 Q. In the beginning of your deposition today you were recalling a conversation that you had with Dan Brown, Page 19 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 244:5 244:6 Jr. on the 17th of February. Do you recall that general discussion? 244:7 A. I do. I very distinctly remember the discussion. 244:8 Q. How is it that you very distinctly remember that 244:9 244:10 discussion? A. It was Friday evening and I was calling to understand 244:11 what these guys' concerns were and why Stephanie 244:12 having difficulty with them and what was going on. I 244:13 just remember Dan Brown, Jr. being so abrasives and 244:14 nasty. He called me unethical and he called Sears 244:15 unethical. I had not met Dan Brown in person and he 244:16 was attacking me. I think I will always remember that 244:17 conversation it was so unbelievable to me. It was 244:18 very upsetting. It was disruptive. I just very 244:19 244:20 244:21 71 244:23 -244:23 246:11 -246:19 246:12 00:00:02 00:48:27 00:15:07 Whitney_A-100215-4 M5.71 00:00:25 00:48:29 00:15:05 Whitney_A-100215-4 M5.72 Whitney_A-100215-4 M5.73 A. No, I cannot. Whitney, Adam 2015-10-02 246:11 Link > D282.1 recall having a similar discussion with a vendor? Whitney, Adam 2015-10-02 244:23 72 distinctly, whoa, what was that all about. Q. Over the course of your business career, can you Q. Mr. Whitney, you now have in front of you what has been marked as Exhibit 40 to your deposition. Is that 246:13 A. Yes, it is. 246:15 Q. Can you just identify this document for the record? 246:16 Link > D282.1.1 correct? 246:14 A. This is an e-mail communication I sent to my boss, 246:17 246:18 248:10 -249:3 just of a the conversation I had with Dan Brown, Jr. 246:19 73 Karen Miller, it looks like after the conversation -from LoggerHead. Whitney, Adam 2015-10-02 248:10 248:11 00:00:59 00:48:54 paragraph of your e-mail. 248:12 A. Okay. 248:13 Link > D282.1.2 00:14:40 Q. I'd like to direct your attention to the third Q. It says, "To clarify, that is 55 percent higher than 248:14 last year's cost, if you include the subsidy and 248:15 24 percent higher cost than last year's full invoice." 248:16 Do you see that? 248:17 A. Yes. 248:18 Q. What were you referring to in that discussion there? 248:19 A. I was referring the fact that they had said they 248:20 1:20:48PM can't move forward unless we, Sears, agree to this new 248:23 5/6/2017 which is part of also in this letter and that they 248:22 Printed: had -- they had -- they said they cannot move forward 248:21 cost every day of 13.99, which is 55 percent higher Page 20 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 248:24 248:25 249:1 than last year's costs including subsidy, 24 percent higher than the full invoice cost. Q. In your business experience, had you encountered 249:2 249:3 Link > Hide 74 249:4 -249:4 circumstances where a vendor proposed a 55 percent cost increase on you? Whitney, Adam 2015-10-02 249:4 75 249:7 -249:9 00:00:01 00:49:53 00:13:41 Whitney_A-100215-4 M5.74 00:00:08 00:49:54 00:13:40 Whitney_A-100215-4 M5.75 00:13:32 Whitney_A-100215-4 M5.76 Whitney_A-100215-4 M5.77 Whitney_A-100215-4 M5.78 A. Never. Whitney, Adam 2015-10-02 249:7 249:8 249:11 -249:22 A. That I recall. 249:9 76 Q. Was this the only time? Q. How did you react to the price increase? Whitney, Adam 2015-10-02 00:00:40 00:50:02 249:11 249:12 pressures and commodities ever day. We deal with 249:14 hundreds of requests to increase costs. We negotiate 249:15 and we talk about it and a lot of times it's related 249:16 to issues the supplier has and they're legitimate and 249:17 we want to work through those issues. Sometimes we 249:18 accept those increases. Sometimes we push back and 249:19 say we can't afford to do that. Never are we told 249:20 we're not moving forward unless and it's just a black 249:21 and white and it's a full or 55 percent or 24 percent 249:22 250:4 -250:19 it be that much of an increase. We deal with cost 249:13 77 A. I asked for an explanation of it. I asked how could with no explanation. Whitney, Adam 2015-10-02 250:4 250:5 250:6 00:00:53 00:50:42 00:12:52 Q. At this point in time, did you want to have a relationship with LoggerHead and sell their wrench? A. I would say absolutely I did. I wanted to sell their 250:7 wrench. And I feel as thought it's obviously based on 250:8 my conversations with Dennis internally and Dan 250:9 Connow. I was constantly negotiating to do work with 250:10 LoggerHead. I also feel as if we compromised in many 250:11 different ways and accepted their new demands on 250:12 multiple different occasions to try and work with 250:13 them. I feel as though we did a good job of 250:14 documenting that and trying to partner with these 250:15 250:16 guys. Q. You talked earlier in your testimony with DRTV. How 250:17 important was DRTV for this particular product, the 250:18 Bionic Wrench product? 250:19 78 251:17 -251:21 Whitney, Adam 2015-10-02 251:17 251:18 Printed: 5/6/2017 1:20:48PM A. I think it was incredibly important to this product. 00:00:18 00:51:35 00:11:59 Q. We had talked about earlier how LoggerHead had rejected the Sears vendor agreement that it had Page 21 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 251:19 251:20 252:1 -252:5 vendor agreement on this product for 2012 for the 251:21 80 proposed. Did LoggerHead and Sears ever reach a sales of the Bionic Wrench? Whitney, Adam 2015-10-02 252:1 00:00:16 00:51:53 00:11:41 00:00:33 00:52:09 00:11:25 LoggerHead multiple times with multiple compromises. 252:10 I can say that I don't feel as though there was the 252:11 same level of desire for them to come to an agreement 252:12 with us based on the multiple times they came back and 252:13 said, we're refusing to meet with you, they didn't 252:14 answer e-mails or phone calls. We would send them 252:15 terms and they would change them and add terms, change 252:16 subsidies, change their willingness to support 252:17 television, et cetera. Whitney, Adam 2015-10-02 253:10 253:11 253:12 253:13 00:00:08 00:52:42 00:10:52 Q. Mr. Whitney, you now have in front of you what's been marked as Exhibit 41 to your deposition; is that correct? A. That's correct. Whitney, Adam 2015-10-02 253:18 00:00:51 00:52:50 00:10:44 Q. Can you just identify for the record who the author 253:19 and the recipient of the e-mail are and the date it 253:20 Link > D283.1.1 was sent? 253:21 A. This is from Dan Brown, Jr. to Stephanie Kaleta on 253:22 Thursday, May 10th, 2012 at 10:58 a.m. The subject is 253:23 LoggerHead tools promotion agreement. 253:24 Q. And if you could, read into the record the first 253:25 paragraph in the e-mail that he sent to Ms. Kaleta. 254:1 A. "Hi, Stephanie, After reviewing your latest changes. 254:2 I think we should probably reschedule Friday's 254:3 meeting. LoggerHead has two main issues that need to 254:4 be 254:5 resolved before the lawyers get involved, otherwise it 254:6 will be a waste of everyone's time." 254:7 Q. What that did that tell you about LoggerHead's 254:8 5/6/2017 1:20:48PM interest in finalizing an agreement as of May 10, 254:9 Printed: M5.83 that we attempted to come to an agreement with 252:9 253:18 -254:9 Whitney_A-100215-4 A. It's an interesting question. I feel very strongly 252:8 83 M5.82 opinion on an agreement? Whitney, Adam 2015-10-02 252:7 Link > D283.1 Whitney_A-100215-4 Q. Did Sears and LoggerHead attempt to come to terms 252:5 253:10 -253:13 M5.81 contract to supply agreement or any agreement. 252:4 82 Whitney_A-100215-4 recall, we did absolutely not come to an agreement, a 252:3 252:7 -252:17 M5.80 A. Not that I'm aware of. I left Sears in 2012. That I 252:2 81 Whitney_A-100215-4 2012? Page 22 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 84 254:11 -255:2 Whitney, Adam 2015-10-02 254:11 00:01:16 00:53:41 00:09:53 credibility in the LoggerHead team as far as why they 254:19 continued to refuse to want to close this and come to 254:20 an agreement. Can I -- 254:21 BY MR. HILMERT: 254:22 Q. If you have something to add -- 254:23 A. As I read through the letter, I guess, to support my 254:24 point on why it was another example of being 254:25 disruptive, they say that, "Our offer of possible 255:1 exclusivity, to be clear LoggerHead will not be able 255:2 to offer exclusivity. In addition" -- Whitney, Adam 2015-10-02 255:14 00:00:13 00:54:57 00:08:37 Q. Is there anything else in this exhibit that was a 255:15 cause for concern for you regarding the LoggerHead 255:16 relationship at this time? Whitney, Adam 2015-10-02 255:18 00:01:00 00:55:10 00:08:24 A. Yes. 255:19 BY MR. HILMERT: 255:20 Q. What was that? 255:21 A. The comment about LoggerHead not being able to provide 255:22 exclusivity to Sears and the changes in terms on 255:23 forecast dating and that because that in order for 255:24 LoggerHead to produce product for Christmas, at that 255:25 time we need to plan and build for the product for the 256:1 fourth quarter, all these things, in my opinion, were 256:2 shifting from prior conversations that Stephanie had 256:3 had with them and again, undermine in my mind their 256:4 credibility as far as why they were cancelling this 256:5 meeting that we had thought we were going to agree to 256:6 to close the deal. It was unusual and didn't make 256:7 256:8 256:9 256:10 5/6/2017 258:5 1:20:48PM sense. Q. How confident were you in the long-term partnership with LoggerHead after receiving this e-mail? A. Not confident. Whitney, Adam 2015-10-02 258:6 Printed: M5.87 disruptive and undermined further my trust and 254:18 258:5 -258:12 Whitney_A-100215-4 agreement. So it was in my mind perplexing, 254:17 Link > D284.1 M5.86 through any legalease needed and we could come to an 254:16 87 Whitney_A-100215-4 meet and have our attorneys there so they could talk 254:15 255:18 -256:10 M5.85 meeting up was so that we could formally sit down and 254:14 86 Whitney_A-100215-4 The whole purpose of the discussion and setting that 254:13 255:14 -255:16 M5.84 A. In my opinion, it was another unusual stall tactic. 254:12 85 Whitney_A-100215-4 00:00:30 00:56:10 00:07:24 Q. This has been marked as Exhibit 42 to your deposition today. I'd like to direct your attention to the Page 23 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 258:7 middle e-mail on this page. Do you see that? 258:8 A. Yes, I do. 258:9 Q. And for the record, could you identify the author, the 258:10 Link > D284.1.1 258:11 258:12 88 258:16 -259:9 recipient, and the date of this e-mail? A. It's from Dan Brown, Jr. to Stephanie Kaleta on Thursday, May 17, 2012, at 11:08 a.m. Whitney, Adam 2015-10-02 258:16 00:00:49 00:56:40 00:06:54 258:22 working on the POs as they are key to the promotional program we have put together. In fact, as we have 258:25 previously discussed, LoggerHead is having a strong 259:1 demand for the fourth quarter. Although we have 259:2 increased our production capacity based on what you 259:3 have forecast, it appears we will be selling our 259:4 production out. In order for us to manage who gets 259:5 what and at what time, we are allocating production 259:6 and delivery according to the POs that we receive." 259:7 Q. Did the statement that LoggerHead would be selling out 259:8 259:9 its production present any concern to Sears or to you? A. Absolutely. Whitney, Adam 2015-10-02 00:00:35 00:57:29 00:06:05 259:12 Q. Why was that? 259:13 A. Because we needed this product to be able to put it on 259:14 television and make our plans which I'm held 259:15 accountable to ultimately keep my job. So it was 259:16 ultimately a concern in a major way. 259:17 Q. Can you characterize the degree of confidence that you 259:18 had as of May 17, 2012, that LoggerHead would actually 259:19 supply its product to Sears for the Christmas holiday 259:20 season? Whitney, Adam 2015-10-02 259:22 00:00:24 00:58:04 00:05:30 A. I did not feel confident at all based on the language 259:23 we were going to be provided product which is why at 259:25 some point we started talking about a backup plan. We 260:1 felt that we were going to have no product to run DRTV 260:2 1:20:48PM here and the multiple back and forths that we had that 259:24 5/6/2017 M5.91 A. We appreciate the forecast. I am hoping you are 258:24 Printed: Whitney_A-100215-4 record, please? 258:23 261:8 -261:19 M5.90 Q. Could you just read that whole paragraph into the 258:21 91 Whitney_A-100215-4 A. Yes. 258:20 259:22 -260:2 M5.89 "We appreciate the forecast." 258:19 90 Whitney_A-100215-4 last paragraph of this e-mail, the one that begins, 258:18 259:12 -259:20 M5.88 Q. I'd like to direct your attention to the second to 258:17 89 Whitney_A-100215-4 and have major millions of dollars in liability. Whitney, Adam 2015-10-02 00:00:32 00:58:28 00:05:06 Page 24 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 Link > Hide 261:8 Q. Did there come a time when you personally saw the 261:9 Bionic Wrench in competitors of Sears's retail 261:10 outlets? 261:11 A. Yes. 261:12 Q. I believe that you had mentioned in your testimony 261:13 261:14 earlier today that you saw the Bionic Wrench at the Menards? 261:15 A. I did. 261:16 Q. How would you characterize Menards with respect to 261:17 Sears business-wise; would they be competitors? 261:18 A. Direct competitors in tools, lawn and garden, several 261:19 92 261:24 -262:23 Link > D285.1 different areas. Whitney, Adam 2015-10-02 261:24 261:25 00:01:29 00:59:00 A. That's correct. Q. Once again, if you look at the bottom item in the 262:3 262:4 262:5 262:6 262:7 e-mail chain here, could you identify the sender of this e-mail, the date, and the recipient? A. The sender is me. It's to me and it's from me and it's from my iphone to my personal account and the subject is "Menards has Bionic Wrench." 262:8 Q. And what is the date of this e-mail? 262:9 A. Saturday, June 9th. 262:10 Q. Do you recall when Father's Day is? 262:11 A. It is the -- I don't remember the specific date, but I 262:12 262:13 262:14 262:15 believe it was between June 15th and June 18th. Q. Is it fair to say that you were in a Menards store in the Father's Day general shopping season? A. Generally we considered the three weeks leading up to 262:16 Father's Day being the core Father's Day spike. 262:17 Q. And is this during the period of time that Sears was 262:18 262:19 262:20 262:21 running the DRTV? A. As I recall, it would have been, but I don't remember the specific dates of DRTV. Q. Was it relevant or concerning to you in your role at 262:22 93 Sears to see the Bionic Wrench at Menards during this 262:23 262:24 -262:24 time? Whitney, Adam 2015-10-02 262:24 94 263:2 -263:11 00:00:02 01:00:29 00:03:05 Whitney_A-100215-4 M5.93 00:00:37 01:00:31 00:03:03 Whitney_A-100215-4 M5.94 A. Yes. Whitney, Adam 2015-10-02 263:2 Q. And why is that? 263:3 A. Because we were paying for direct response TV with the 263:4 Printed: 5/6/2017 1:20:48PM M5.92 front of you; is that right? 262:2 Link > Hide Whitney_A-100215-4 Q. Mr. Whitney, you now have Deposition Exhibit 43 in 262:1 Link > D285.1.1 00:04:34 understanding that we were only ones selling the item. Page 25 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 263:5 263:6 in the marketplace. So understanding what the 263:8 competition is doing and who is selling this item has 263:9 a direct relevance to our forecast and our ability to 263:10 partner and predict what we're going to need to buy 263:11 263:15 -263:19 absolutely direct correlation to our sales performance 263:7 95 If we are not the only ones selling item, there is an and sell. Whitney, Adam 2015-10-02 263:15 263:16 00:00:15 01:01:08 00:02:26 Whitney, Adam 2015-10-02 00:01:34 01:01:23 00:02:11 A. I would have expected them to tell me that they're selling it, at least if not they're going to give me 263:23 specific competitors, at least that they're going to 263:24 have the item out in a marketplace in a more material 263:25 way. Because, as I said, it has a huge impact to our 264:1 sales forecast. In a normal relationship with a 264:2 vendor, we would both want to understand what that 264:3 sales impact is so that we're not stuck with a 264:4 significant amount of product after that holiday time 264:5 frame and a huge mark down liability. It will damage 264:6 the product's image in the marketplace to have to mark 264:7 it all down and it will damage our profits and it 264:8 ultimately will damage the vendor's profits. If there 264:9 is a mutually sustainable relationship -- if not and 264:10 one party doesn't care that the retailer is stuck with 264:11 all these goods, then maybe, you know, we wouldn't 264:12 have that conversation. I would fully expect to be 264:13 advised on the general places that this item going to 264:14 be sold. 264:15 BY MR. HILMERT: 264:16 Q. Looking back at the relationship as a whole as you sit 264:17 here today three years later, can you give your 264:18 overall thoughts on your interactions with LoggerHead 264:19 as compared to other retailers, other vendors that you 264:20 have worked with over the course of your career? Whitney, Adam 2015-10-02 00:00:36 01:02:57 00:00:37 264:22 don't recall any that comes close. This is really so 264:24 far out of bounds and out of the norm. The entire 264:25 1:20:48PM A. This is really such a unique situation and vendor, I 264:23 5/6/2017 M5.97 for them to tell you that? 263:22 Printed: Whitney_A-100215-4 Q. Would you have expected as a partner with LoggerHead 263:21 264:22 -265:4 M5.96 A. No. 263:19 97 Whitney_A-100215-4 Did you ever recall LoggerHead telling you 263:18 263:21 -264:20 M5.95 that they were selling the Bionic Wrench to Menards? 263:17 96 Whitney_A-100215-4 relationship was so contentious and so, you know, Page 26 of 27 Whitney A PLAYED on 5_4 and 5_5 20151002 PA DA PC DC PCC on 5-2-17 265:1 accusatory and lacking of trust and changing terms. 265:2 It was just very, very unusual for me. I don't recall 265:3 anything else in my career that really comes close to 265:4 that. Play Time for this Script: Total time for all Scripts in this report: Printed: 5/6/2017 01:03:34 01:03:34 1:20:48PM Page 27 of 27

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