1 IN THE DISTRICT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

IN RE:

Chapter 11

COLLINS & AIKMAN CORPORATION, et al., Debtors, vs. Case No. 05-55927 (SWR) (Jointly Administered) Hon. Steven W. Rhodes ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ TRIAL

July 31, 2008 9:32 a.m.

U.S. Bankruptcy Court 211 West Fort Street Detroit, Michigan

Kathy Adkins, CSR-4697, RMR, RPR, B.A.

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Trial 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THOMAS R. NATHAN Nathan Zousmer, P.C. 260 Franklin Center 29100 Northwestern Highway Southfield, Michigan (248) 351-0099 48034 PAUL R. DeFILIPPO Wollmuth Maher & Deutsch, L.L.P. 500 Fifth Avenue New York, New York (212) 382-3300 10110 APPEARANCES:

July 31, 2008

Appearing on behalf of the Fee Applicant KZC Services, LLC, and John Boken.

Appearing on behalf of the Fee Applicant KZC Services, LLC, and John Boken.

Trial 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 SAMUEL C. DAMREN JONG-JU CHANG Dykema Gossett, P.L.L.C. 400 Renaissance Center Detroit, Michigan (313) 568-6519 Appearing on behalf of the Post-Consummation Trust. 48243-1668 ELIZABETH KARDOS General Counsel Kroll Zolfo Cooper 101 Eisenhower Parkway Roseland, New Jersey (973) 618-5172 07068 APPEARANCES CONTINUED:

July 31, 2008

In-house Counsel for Kroll Zolfo Cooper.

Trial 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 RONALD L. ROSE Dykema Gossett, P.L.L.C. 55 East Monroe Street Suite 3050 Chicago, Illinois (312) 551-4931 Appearing on behalf of the Post-Consummation Trust. 60603-5709 APPEARANCES CONTINUED:

July 31, 2008

Trial 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 REBUTTAL BY MR. DAMREN CLOSING ARGUMENTS BY MR. DAMREN BY MR. DeFILIPPO JOHN BOKEN REX-BY MR. DeFILIPPO RCX-BY MR. DAMREN JUDY O'NEILL DX-BY THE COURT CX-BY MR. DeFILIPPO CX-BY MR. DAMREN FRANK MACHER DX-BY THE COURT CX-BY MR. DeFILIPPO CX-BY MR. DAMREN WITNESS EXAMINATION INDEX

July 31, 2008

EXAMINATION

9 36 37

38 59 82

89 93

101 113

132

Trial 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NO OBJECTIONS WERE MADE OBJECTION MADE BY OBJECTION INDEX

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PAGE

Trial 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 53 EXHIBIT NOT ATTACHED NUMBER EXHIBIT INDEX

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MARKED/RECD

--/59

Trial 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 here? the fee applicant. MR. ROSE: please. MR. DeFILIPPO: Paul session. PROCEEDINGS JULY 31, 2008 COURT CLERK:

July 31, 2008

Court is in

Case Number 05-55927, Collins &

Aikman Corporation. THE COURT: Appearances,

DeFilippo on behalf of the fee applicant. MS. KARDOS: for the fee applicant. MR. NATHAN: Tom Nathan for Elizabeth Kardos

Ronald Rose of

Dykema on behalf of the Trust. MS. CHANG: behalf of the Trust. THE COURT: Is Mr. Macher Jong-Ju Chang on

Would you step forward, please, sir? FRANK MACHER, was thereupon

called as a witness herein, and after having first been duly sworn to testify to the truth, the whole truth and nothing but the truth, was examined and testified as follows: THE COURT: Please sit down

Trial 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 in the witness chair.

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First let me extend

to you my thanks and appreciation for coming down here voluntarily today, especially on such short notice. Let me just get right to

my questions for you. DIRECT EXAMINATION BY THE COURT: Q. Much of the evidence before me

in this proceeding has focused on whether the forecasts that you created for Collins & Aikman while you served as the CEO, especially early on in your tenure, were realistic or not at the time. Can you take

whatever time is necessary here and explain to the Court why you thought your forecasts were realistic and why you authorized them therefore to be published to the stakeholders in the case, and focusing especially on the plastics aspect. A. Okay. When I first arrived on

the scene, which was I believe in July -Q. A. July of '05? Yes. There was very little

information available as to the status of the company. In fact, there was no information

Trial 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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whatsoever on current performance that was reliable. We tried desperately to get to any

numbers to start a base from, but at the same time there were very few people within the staff that were available and knowledgeable about the operations of the company. The company had been decimated through firings and resignations such that at the time there were -- there was a reporting relationship of 30 to one to me. So for example my CFO had resigned the

day I walked in the door, we had no president of the plastics. We were under

this concern over let's say information that was inaccurate and misrepresented throughout the organization, so there was a great deal of reticence about sharing information and individuals being concerned about their own careers, and it became a very difficult issue of trying to get at real numbers and real issues. At the same time Ford Motor Company called me and said that Hermosillo plant, which was critical to the launch of

Trial 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the Fusion, was in disarray. So in the

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initial period, having no people, I spent a substantial amount of my time putting together a launch plan for Hermosillo in Mexico as a single activity where no one in the past was working on it. The plant manager in Hermosillo quit because she felt that the plant was unsaveable and her career would be ruined so she quit and went back to her home, so that put an extreme amount of pressure in launching the first phase of our operation. At the same time we had run out of cash and negotiations with customers were ongoing and unfortunately that was a very difficult part of my assignment and alienation of the Big Three, which I had never done before, became my forte, so that put an extreme amount of pressure. Nonetheless, I hired one person to help me put a business plan together because there were no capable people available to do so, and we started on putting a business plan together based on the

Trial 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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techniques and processes I used in the past, and those are very simply that you bring all your plant managers together, and I didn't have the time at that point to start visiting every single plant, there were 26 plants I believe in the plastics group, and if you took a day at each one and the timetable was established such that you had to have this plan done by I think it was October, something like that. So what we did is we started to question to the plant managers as to what his issues were or what her issues were and where we thought the savings were. My background is plastics, my initial background. In November I'm receiving the

Society of Plastics Engineers Lifetime Achievement Award. So my expertise within

the plastics industry is fairly substantial. So in my ability to question some of these people directly as to what issues were in front of them we could start to identify potential cost savings. There were similar cost savings to what we had done in previous

Trial 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 operations. Now, much of this is done

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without having any insight into the capability of the operations themselves, whether or not they had skilled people, engineers that were able to implement, whether the equipment was in good shape or not in good shape, whether the processes were capable. My assumption, which was wrong, was

that the people in place, once we established specific actions, would deliver on those actions. So we identified things that made a great deal of sense. Things such as

taking tooling that was in bad shape and coming up with a plan to rework and fix it, such that we could eliminate excess operations, things such as putting in an aggressive scrap reduction program or a material usage program that were very specific to what we had done before, improving the yield out of a paint facility. And as an example, we put together a fairly specific plan for Everett. Everett was the bumper plant that had horrific yield products. So I went through a

Trial 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 punch list of items that we ought to do, needed to do, I spent three days at the

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Everett plant specifically helping them put their plan together. They never once told me that the equipment was in disarray and that the building was virtually inoperable, and by that I mean I came back a bit of time later to review the plan and progress during a rainstorm. It was raining more inside the

plant than it was raining outside, because all the water was collecting on the roof and literally pouring in and creating rivers where the issues of safety became so significant that you couldn't believe that they operated under those circumstances. When I asked the plant manager why he didn't bring this up beforehand, why we didn't discuss this when we reviewed the cost reductions, he said simply that I had requested funding to improve twice and was rejected, so why bring it up? And that mentality pervaded the

entire organization. They had asked for help so

Trial 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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many times in the past and been refused that they didn't talk about it. When you talked

to them about safety or cost reductions, they would just nod their head and say we'll do it. Now, I went to Port Huron many times, in fact, Port Huron was in a difficult situation of launch and I spent many, many days there, and it took time to understand that the only person they had left from the prior regime was a quality control manager who was acting as the plant manager, the engineering manager and the quality guy, but nobody will tell you that they needed those kinds of help. So what ultimately happened is a plan was put together in the early phases not knowing some of these things, not only because of the time frame, 26 plants, having no staff, so we put the plan together consistent with what I did at Federal Mogul and ITT and Ford Motor Company, all of which worked because we had people and equipment that were capable. In this particular instance

Trial 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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plants were outrageously ill equipped, under staffed, and the skill sets that we needed were not in place. mistake. That is where I made my

The pressure of getting a business

plan together to move forward, I used the same techniques assuming the same form of resources and not really having the resources to do so. Q. What was the timing of your

understanding of the reality of these plans? A. The timing of the reality came

forward, it took about nine months to really understand -Q. A. So when would that have been? I'm going to guess that would

be probably June or July is when -- about April of the following year, April, May, when I realized how little our people were able to do and we had started to revise the projections down. We also had by that time hired a number of people in the staff and a couple of lead plant operating managers who started to participate and help assessing each of the plants and supporting them on a

Trial 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 more frequent basis. Unfortunately the

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launch started to hit us very badly at that point. We had a series of launches to do for Chrysler and they were in very, very complex processes that were ill prepared and our launch costs went through the roof, at the same time the volumes started to drop dramatically. The last straw came when I went to see Tom LaSorda, who was at the time the CEO of Chrysler, because I knew we had a plan that was dependent on improving our costs because we had put in operating leaders, but also dependent on making sure the volume stayed, and I became worried when I saw that the inventory with Chrysler had increased dramatically, yet our schedules for the fourth quarter were showing substantially consistent with prior releases, so I had a meeting with Tom and I asked him point blank, I said, Tom, my opportunity to survive in this is dependent on your schedules being held, and you represent 40 percent of my business, and Tom was very aggressive and

Trial 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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said we're keeping it and we're incenting the dealers to take the product and we're going to hold to our schedules. Well, two weeks later all hell broke out and Chrysler and Dieter Zetsche came in and raised the red flag and they cut 30 percent of their production out, at the same time it was our last straw. So

at that point we decided liquidation was the only way we could go. Q. Early on when you endorsed the

more ambitious forecasts, what was your understanding of the position of KZC regarding those forecasts? A. Well, it was -- John and I

worked reasonably well together. Q. A. John? John Boken from KZC. And we I think

worked fairly closely together.

John's position was that, we compromised on the plan we put forward, my initial one was higher, which obviously makes me look more like an idiot today. Q. recall? What was your initial if you

Trial 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 out? A. We were supposed to put a A. No, I don't. But we adjusted

July 31, 2008

back and forth quite a bit as we negotiated, but we ultimately came to a number, and that number John and I looked at all of the cost reduction improvements. John was there a

little bit longer than I, so I really didn't understand as much about the reporting system at that point as he did, and because he was so concerned about the reporting and because he was so concerned about the inability for us to finalize the prior year's performance because of all the uncertainties, and also because he had already had some indication that some of the people may not be good, but he was talking primarily in the finance end of the business, and I hadn't had a chance operationally to assess anyone, so we put together the plan and then came to a compromise somewhere between. Q. A. What was that compromise number? I wish -- I don't remember it.

I should have looked it up. Q. You don't know when that came

Trial 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 business plan together within 30 days. was the demand of me when I came in.

July 31, 2008

That It was

somewhat later than that, so I suppose it was the middle of August sometime. exactly sure, the end of August. Q. A. Q. Of '05? Yes. So your recollection is that KZC I'm not

and Mr. Boken specifically agreed with this compromise forecast number? A. Q. Yes, that's right. Did there come a time after

that when KZC's position changed about what the forecast should be? A. Well, I think because we

continued to monitor performance as well as we could, which was always a challenge because of the numbers issue, we adjusted the forecast over time a number of times together based on performance. Now, the trouble we always had was that the start point was never clear. We never really could figure out, okay, if 2005 was X or X plus Y, and then all we tried to do is do an incremental improvement

Trial 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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on top of a base that was kind of crumbly, so then you've go a crumbly base and you want to improve it by this amount and then we find out the base wasn't quite as good, and as we found that people were unable to implement the cost reductions, we found that we had a base that was unstable and a cost reduction improvement that wasn't doing what it should have done, so now you have vacillation in forecasting as you go forward. So that was the big dilemma for us, Your Honor, and interestingly what I didn't understand was how long it would take to get people into positions where we could start to see the improvement in cost reductions. Ultimately Everett made all the

improvements we said, but it took us a year longer and then it was sold. Port Huron was losing $600,000 a day and it began to break even, I'm sorry, $600,000 a month, and it began to break even six months later than it should have been. situation. Hermosillo was a similar They could not produce.

Ultimately it made its budgets, but it took

Trial 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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much more time because we had such limited resources, both human and capital, and things took three times longer than I've ever experienced in my life. Q. There's been some significant

testimony here that your disputes and disagreements with KZC, and maybe specifically with Mr. Cooper, about whether your proposed forecasts were realistic, that you actually threatened to quit at one point, or maybe more than one point unless your forecasts were the ones that were used. A. I don't think, well, there were Steve

disputes, but not for those reasons.

and I really haven't had any difficulty -Q. A. forecast. Steve Cooper? Steve Cooper, on discussing the My first dispute and threatening

to quit was at a board meeting, one of the first board meetings when I found out that there was a concern over, and I'll probably use the wrong term, corruption over misrepresentation and that there was going to be a grand jury investigation into the company, and that certain of my employees

Trial 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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were of concern, and I asked to be involved enough to know who those employees were so that I could understand who to be concerned about in the context of reports, manipulation of data, whatever it was, and of course I was advised that I would not be allowed to know, for whatever reasons, and at that point I threatened to quit. I threatened to quit because I felt it was inappropriate for a CEO not to know who his direct reports are that may be involved. very upset. That was a big hullabaloo. I was

They assured me that if anything

of substance came about they would advise me. In the interim if I decided that any of the employees that I had under my direction were not performing, advise the grand jury or through the attorneys that that would be -that they would advise me as to whether it would be acceptable to terminate or not. That was the first one. The second time was when I was negotiating with -Q. second. Let me interrupt you for a When was that first one?

Trial 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A. It wasn't very long after I

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joined, maybe a month or two. Q. A. later. Q. of that. A. I was in a discussion with the Go ahead with your description When was the second one? The second one was about a year

General Motors people and negotiating pricing and new contracts and a whole host of events. One of their top people said to me that's totally inconsistent with what Mr. Cooper said. Well, I had no idea that Mr. Cooper had his own meetings with the General Motors people and negotiated something totally out of context with what the direction of the company was. So from that standpoint we had a gap in our story and an inconsistency with which effectively made me ineffective because Steve Cooper was the chairman, so now they told me that because of that they no longer wished to negotiate with me. They

were going to negotiate with Mr. Cooper. I blew up, because if I'm

Trial 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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responsible for revenue and future product and Steve flies in one or two days a week, or one every other week and then he flies away and I'm left holding the bag, that was inconsistent, and that was the second time and the only ones I know about. Q. resolved? A. It really never did 100 percent. How did the latter one get

He apologized, said he didn't realize, but he continued to have the dialogue. Q. I take it from your testimony

that because of the operational difficulties that you ran into that you did not foresee and were not able to foresee when you issued your forecasts, you now agree with the general proposition that those forecasts were unrealistic? A. Q. I agree, yes. As you look back on the work of

Mr. Cooper and the other representatives of KZC in the case, apart from this issue with GM that you've identified, is there anything else about their work that you felt was deficient or incompetent or violated some

Trial 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that? A. duty they had or otherwise wrongful? A.

July 31, 2008

I don't think there was anything I did see

I saw wrongful, Your Honor.

certain areas of not, incompetent isn't the right word, but weakness, and the weakness primarily was in operational analysis and assisting in the development of information that would allow us to understand better the performance variations or variances, negative variances. That was not their forte. For

the most part they appeared to be more back office. Q. office? A. Putting numbers together. You John Boken is outstanding -What do you mean by back

know, accumulating data without the analytical skill to give me direction as to where to go. Q. Can you be more specific about What do you mean? Well, for example, if we missed

a forecast in a certain group of plants and we had performance-related issues, there was no real ability within the group to identify how we missed it, whether it was direct labor

Trial 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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or a specific part, whether it was because of lack of implementation, whatever it takes, and unfortunately at the same time we were so weak in the corporate structure of finance, and I might add that I pleaded with the creditors to let me hire a CFO that had the competence and operational ability, and I had one and worked for months and months to try to get him and was rejected, so I ultimately took someone from within who was primarily from the Treasury Department and made him CFO in spite of his lack of operational experience. Q. A. And who was that? Tim Trenary. He had worked for

me at Federal Mogul in treasury and bankruptcy, but he had never been an operational CFO. I had one that was perfect,

would have helped us eventually -Q. I want you to focus on KZC in

response to my question. A. KZC was extremely competent in They did a lot of work in

managing cash.

trying to resolve the tooling issues that had existed. They were very good at taking and

Trial 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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putting the numbers together to give you a how did we do, chief, kind of number at month end, but what they couldn't help me with, nor could my own staff, is where and why certain variances took place, and that was the biggest challenge we had at that time is the competency level of the plant controllers, the people that actually count in the plants was terrible. We had trouble getting people to take the jobs, we were having trouble keeping them filled, and we didn't have a reporting system in the facilities that allowed you to know how day-to-day things were going, and that's the area where neither Kroll nor my own people were capable. Q. Now, was there anything further

about Kroll you wanted to comment on? A. Well, I hate to say this, but

it's -- it has been troubling me for a long time that Kroll as your leader, as your chairman, and Kroll as your advisor makes it a bit awkward to find the right way to behave within a system like that. I'm supposed to be

Trial 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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responsible for managing costs but found my direct report is Kroll as well. So I always

felt a little bit between a rock and a hard place. Q. to anyone? A. I expressed it to the board and And did you express that concern

I expressed it to Kroll, but -Q. A. What response did you get? That this was approved prior to

my -- it was pre- -- post, what's the word? Q. A. Post petition. Post petition decision, and that

was made prior to me being there and that's the agreement. So I'm not suggesting that

anything terrible was involved with that, I'm just suggesting it makes your position a bit more difficult to operate in that kind of situation. Q. Now, you were about to make a

comment about Mr. Boken specifically when I cut you off earlier. Would you finish that

thought for us, please? A. Sure. Mr. Boken I have great

respect for.

For example, John works very

Trial 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 hard, he's very smart, and he assisted a great deal in my tenure at the company. think some of the people he had were also very good but then he had others who were weaker.

July 31, 2008

On the whole I think John Boken, I don't think you could have a better chief restructuring officer. Q. second. Let's talk about that for a Hypothetically if you had a chief

restructuring officer of Mr. Boken's skills and work ethic, you know what I mean by that. A. Q. Yes. But also had automotive

experience, would that have made a difference? A. Q. A. I think so. How? Because then he would have, he's

a quick learner, but he would have had more of the skill set that I needed at the time, which is the operational analysis skill sets, which we didn't even have in our company. Q. And you were giving me some

Trial 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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further evidence that I needed when I cut you off, and that was in regard to requests for support that you had made to the creditors or the creditors committee that were turned down, and you mentioned a CFO that you wanted to hire that was rejected, were there any other instances of requested support that was denied? A. I had great difficulty getting

people in operational positions that were necessary in the beginning, because there was great concern about the viability of the company, and that would be people like chief engineers and people of that nature, but those we could solve. solved. Unfortunately, it would take two months, three months during a critical time to get people in. The one that stands out primarily is the CFO, which was I thought my most critical position. Q. What was there about the case Most of those we

that led you to believe that their permission was required? A. I was instructed that we had to

Trial 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that? A. Q. No, I don't. Do you remember why you were

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have the approval of the credit committees by both my attorneys and by Steve Cooper. Q. Do you remember who told you

told your request was denied? A. I was told that it was

unaffordable and that in addition that the person didn't have the right skill set. Q. A. Q. And you disagreed? I do, and I still do. What's before the Court, I don't

know how much you know about what's before me, but I'll just give you the thumbnail version. What's before the Court is an objection to KZC's professional fees, not entirely by any means, but a piece of it, a significant enough piece that the parties have hired lawyers and we're having this trial, and I think a fair summary of the concern expressed in these objections is that KZC was too deferential to your forecasts in the, I don't know, approximately April, May,

Trial 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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June, July time frame, at the end of which it became clear to everyone that the only way out of the Chapter 11 would be to sell the assets, as opposed to do a standalone reorganization, and the concern is that if KZC had exercised more client control and more supervision over the forecasts the stakeholders would have known sooner, two, three months, maybe more sooner that the case could not be a standalone reorganization, and so I would like to hear your reaction to that summary of the objections to KZC's fees. A. I don't think they were ever In fact, John was always the

deferential.

devil's advocate, and we compromised on the forecasts throughout. Now, circumstances are

significantly different today and turned out to be significantly different than at that time. The fact of the matter is, there was a far greater time delay between the cost improvements being implemented and when we forecast they were, and there was a substantial issue with volumes, and a substantial issue with getting funding for

Trial 34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 some of the cost reductions. So we had pull backs by

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customers in terms of cash pull backs that we had forecast we would have to spend the money. We had an issue with coming up with We

an agreement on plastic raw materials. were negotiating aggressively with Saudi

Arabia, and I actually went and spent a week with the crown prince. We thought we were going to have a substantial reduction in costs and materials that ultimately didn't come to fruition because of resistance from various parties dealing directly with Saudi Arabia. We had a number of issues with new business that just dried up on us. We were supposed to receive from Chrysler transfer business and we had a handshake agreement with the vice president of Chrysler purchasing that he would support us and that new business by transferring, so there were a series of events that were intended to take place that did not. Were there risks? Yes, Your

Honor, there were risks in the forecast.

Trial 35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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There are always risks. Were they balanced? Probably with the exception of the Saudi Arabia thing which was really never in the forecast, but with the exception of that it was balanced, a 50/50 thing, and then we got hit with a series of events that really destroyed our future opportunity and including and most importantly the Chrysler volume reductions that we still saw that devastated the business plan that we made. John and I would sit and talk through that business plan and the issues on a very regular basis, every two weeks, to see how we're doing, and once a month to see how we could adjust and make it work, and could we have pulled it ahead a month or two? I don't know, maybe, probably,

maybe, I don't know for sure, but I had no intentions of seeing this company liquidate. I felt so obligated to try to find a way that we had so many barriers to success, including cash, including not having good information, including the resource issue that, and human resources, that by the time we finally got our arms

Trial 36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 questions I have. Counsel, any questions? MR. DeFILIPPO: moment, Your Honor? THE COURT: Yes.

July 31, 2008

around it all it was maybe too late, but the last one was when I asked LaSorda. THE COURT: That's all the

May I have a

MR. DeFILIPPO: CROSS-EXAMINATION BY MR. DeFILIPPO: Q.

One or two.

Paul DeFilippo and I represent I have only just a few

John Boken and KZC.

questions if you wouldn't mind. When you were looking to hire a CFO, was that to help you with the operational analysis of the numbers that you indicated you wanted to have done but couldn't? A. Q. Yes. And were the banks opposed to

hiring the CFO as well as the creditors committee? A. Q. Yes. You did not look to KZC for

Trial 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 not. MR. DAMREN: THE COURT: Mr. Macher. CROSS-EXAMINATION BY MR. DAMREN: Q. Mr. Macher, my name is Sam automotive industry expertise, did you? A. Q. A. No. You had all that, right? Well, I don't have all of it

July 31, 2008

but I had enough of it so that I knew that I could find the right people to help me, but KZC wasn't really skilled in that area, so that was not an area I expected them to understand. MR. DeFILIPPO: Thank you,

Damren and I represent the Post-Consummation Trust. Did you ever, when you were

conversing with the banks about the need for a CFO, did you ever tell them that Kroll lacked the capacity to provide the analytical skills in automotive that you needed to run the business? A. I don't recall whether I did or

Nothing further. All right, sir,

Trial 38 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 you may step down. Thank you very much

July 31, 2008

again for coming today. You're all set. Okay. I guess we're waiting

for Mrs. O'Neill to appear so I guess we'll take a break until she does arrive. Will

one of you let us know when she does appear? (Recess taken at 10:12 a.m.) (Back on the record at 10:25 a.m.) THE COURT: Everyone is here.

Ms. O'Neill, will you step over, please? JUDITH O'NEILL, was thereupon called as a witness herein, and after having first been duly sworn to testify to the truth, the whole truth and nothing but the truth, was examined and testified as follows: DIRECT EXAMINATION BY THE COURT: Q. A. Q. A. Your name, please. Judy Ann O'Neill. And your employment. I'm employed at Foley and

Lardner where I'm a partner. Q. And you're the court-appointed

fee examiner in this case?

Trial 39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A. Q. I am. Can you state for the record

July 31, 2008

your educational and professional experience. A. I am a graduate of Michigan

State University in 1976. I then got my J.D. from the University of Michigan in 1980. have been practicing law since then. an ABC I think it is certification in business bankruptcy. Throughout my career I have at least in the last 10 or 15 years primarily concentrated on representing debtors, large corporations in bankruptcy, and they have ranged from 60 and 70 in sales to 2 billion in sales. Q. Can you identify for us some of I

I have

those parties who you have represented. A. I represented Oxford Automotive

in the first bankruptcy; Venture Industries, and this includes affiliates, Your Honor, in their bankruptcy. I represented, currently represent Bluewater Automotive and its affiliates in bankruptcy; Intermet Corporation in its bankruptcy; Half Off Cards, the Half

Trial 40 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that? A. Well, as I represent companies

July 31, 2008

Off Card Company; Traditions, Limited, and those are the ones that come to mind. Q. Are you familiar with Section

330 of the Bankruptcy Code? A. Q. with it? A. Q. Mostly through my practice. Can you be more specific about I am. How have you become familiar

in bankruptcy I am constantly studying all sections of the code. When I get employed

and seek compensation I particularly deal with Sections 327, 328, 330. Q. In the course of your work

mostly in representing debtors in Chapter 11 cases, have you also had an opportunity to review the fee applications of other professionals in those cases? A. Q. Yes, I have. What has that review consisted

of in those other cases? A. First of all, I review my own

fee applications, I should say that first,

Trial 41 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and have become far more astute to what I look for in the last few years, having

July 31, 2008

realized that in these proceedings it's often difficult for other parties to challenge attorney fees, so I try to do my own discipline on them first. When I look at others, I try to impose that same discipline. I look for

things like time entries to make sure they're consistent, the functions that people do, the number of people employed in a task, that type of thing. Q. What was or is your

understanding of your responsibilities as fee examiner in this case? A. There were four questions posed

by the Court, and my primary responsibility was to answer those four questions. That

took me down the path of talking to various people and looking at various documents, including fee applications. Q. I'm going to ask you how you

carried out your responsibilities in a second, but I want to be sure we have an understanding here of what your ultimate

Trial 42 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 responsibilities were. A. Primarily to answer the

July 31, 2008

questions that the Court had set forth in the order and provide a report to those questions. Q. Do you remember what those

questions were? A. Definitely. The first was to

ask whether -- ask me whether or not there was a delay in the discovery of the prevalence, managerial, operational, and I can't remember what the other is, there was a third, type of problems in the plastics division, and whether there was a delay in the discovery of those in the case and how that impacted the business plan. Your Honor, I could be more specific, if you want, I could look at the actual questions. Q. If you feel that you need to

refer to some documents to refresh, you may do that, otherwise you can testify from memory. A. I would like to refresh my

memory with the report that I have in front

Trial 43 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of me. Q. Just tell us what page you are

July 31, 2008

using to refresh your recollection. A. I'm looking at page four of the

report where the questions are set forth. The first to be very specific was should the substantial operational, managerial and financial issues in the debtor's plastics division and the effect of such issues on the achievability of management's business plan goals have been discovered earlier? That was

the primary question that we spent the most time on. The second was, if so, did the delay result in either unnecessary losses or reductions in creditor recoveries. third was, were the key assumptions underlying management's business plan, the nature and substance of the debtor's operating challenges in the debtor's plastics division, and substantive development in changes in the debtor's view on future operating performance adequately and timely disclosed to the debtor's principal creditor constituencies. The

Trial 44 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The last question, Your

July 31, 2008

Honor, was once it became reasonably clear that the value of the debtor's estate was substantially diminished, or that a reorganization was unlikely, did any of the estate professionals undertake or continue work on activities that no longer were reasonably necessary under the circumstances in doing their roles. Q. Did you have assistance in

carrying out your responsibilities as fee examiner in the case, and if so, what was that assistance. A. I had two types of assistance,

the first was that I employed a business consultant, because I realized very quickly that to answer the questions I needed some financial advice. That was the DSI, Fred

Caruso in particular. The second type of assistance I had came from my own firm. I had

assistance in preparing the report and at times legal questions that I had in connection with preparing the report. Q. And what were the qualifications

Trial 45 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

July 31, 2008

of the DSI support personnel that you had? A. What I looked for and was happy

to obtain in DSI was a financial consultant who had both played the role of a CRO in other cases, and had been a financial consultant in other cases, and in addition had done that in the automotive space, so knew the automotive industry. Q. When you say in other cases, do

you mean Chapter 11 cases? A. Q. I do. And did you feel that with the

assistance you had you and your team were qualified to perform the responsibilities given to you by your appointment order? A. Q. Yes, I did. What did you and your team do

to carry out those responsibilities? A. The first thing I did was

contact all of the, what I called key constituents, and I think I defined them as such in the order, which primarily consisted of the debtor, the creditors committee, the pre-petition lender group and various people at the debtors, various professionals, their

Trial 46 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 law firm, Kroll Zolfo Cooper, different management people at the debtors.

July 31, 2008

When I contacted the key constituents, I drafted a letter that explained to them that I would come and interview them and that I wanted them to alert me to any information that they thought was pertinent to the inquiry that I was given, these four questions. Then I met with those people. We took notes at those meetings. We did not

do so on the record so that people could be very forthcoming, and they were very forthcoming, some a little reluctantly at first, but then pretty much all of them were as forthcoming as I had hoped they would be. And then after that we contacted them many times for follow-up questions, asked more things as the story unfolded and we got it from different constituents. Your Honor, I just recalled

that the customers, the three domestic customers were included in those key constituents. We then went about asking

Trial 47 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

July 31, 2008

each of them at those meetings whether or not and on the basis of those interviews they had additional information or different leads that they felt we should pursue, and we chased those leads down. We took this all very, very seriously because we knew so much was at stake, and people were very cooperative. then drafted a draft report. Q. Let me stop you there. How We

many hours do you estimate that you spent performing those interviews and those investigations before you began drafting your draft report? A. Your Honor, I would say no less

than a hundred hours. In addition, Your Honor, we read pleadings, transcripts and documents that were provided to us, and if I didn't read them all myself, then I had someone in my office read some things and summarize them, and financial information was often read by DSI and summarized for me either verbally or in writing. I would say easily a hundred hours if not more. a very labor intensive task. It was

Trial 48 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. That piece of data would be

July 31, 2008

more accurately perhaps reflected in your own fee application? A. Yes, Your Honor, and I should

say this, Your Honor, we summarized each of these interviews, and so we prepared working memoranda that were summarized of the interviews. I didn't do that myself, an

associate that went with me to the interviews was the transcriber, and I carried with me those summary notes at all times and we prepared a series of questions as well. got to know the facts well enough that I didn't use my list of questions usually. Q. A. So what was the next step then? The next step was culminating We

all of that into the draft report, and the thinking really occurred through the answering of those questions in the draft report. That took many, many hours, and a lot of discussion with DSI. While we would -- while we were gathering the facts we would share our perceptions and thoughts, but not really think through what it meant in answering

Trial 49 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

July 31, 2008

those questions until we started doing the draft report. We started with question one, We debated very many

which was the hardest.

issues in doing that, trying to give the benefit of the doubt where we thought that was appropriate and testing, you know, different theories. When that draft report was concluded, excuse me, during the draft report phase if we felt that we had facts that were not quite clear to us, then we went back and checked those facts, and we did that in two ways, one, we checked them by documents, and number two, by interview notes, and number three, if there was still a lack of clarity we went back to various constituents and asked them for fact checking. When that was done a draft report was then disseminated to all of the parties that the Court had ordered it be disseminated to, with the one exception of the U.S. Trustee because of confidentiality issues. At that time we then asked for comments, and we asked everyone to

Trial 50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 correct misstatements of fact and

July 31, 2008

misstatements or give us additional thoughts on conclusions. Q. So the draft did contain the

answers to the questions? A. It did. And we received

letters and in the case of the pre-petition lenders a markup of the report. We then

used that, we culminated that in a list of issues that were surfaced by each. We then

went back and talked to every solitary person that wrote in comments or letters and followed up with them on questions that were raised, if we hadn't considered them, and then we sat down again and rethought our conclusions. They changed slightly, I would

not say significantly, and that culminated in the final report. During that period in the final report again to the extent that things were not clear and there was further checking we followed up with people. Q. And what further work did you

do pursuant to your responsibilities after the final report was submitted?

Trial 51 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A. We talked to all of the

July 31, 2008

constituents, and this started even in the draft report stage and concluded after the submission of the final report. people about settling. We talked to

We saw issues that We came to have

were raised by the report. a feeling of what was fair.

We believe at the end of the report that the primary financial stakeholder in the reduction in fees was the pre-petition lenders, so we called the petition lenders and said what is your thinking based on the report on the reductions you would like? They were incredibly similar to our gut level response after we did this report. So then I began negotiating -- negotiations with the different parties. The first one to reach a deal, I believe, was Kirkland, and after that several other parties -Q. A. Q. Let's review those. Okay. Tell me who you negotiated with

and if you can remember the order I suppose that would be somewhat helpful, and what the

Trial 52 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ultimate settlement was for each. A.

July 31, 2008

Your Honor, I'm going to see if

I can refer to my report, because one might have been repeated here, or some may have been. Q. You're looking at the report to

refresh your recollection? A. Q. A. I am, Your Honor. What page? It begins on page 108 of the It was my

report, Your Honor, and 109.

memory, and it was refreshed by this document, Kirkland, which I do believe was the first party to fall in line agreed to reduce its fees by a million dollars. That

was acceptable to pre-petition lenders, was within the ballpark that we felt was acceptable, and so we recommended that that be accepted. I don't remember the order of these, but Lazard and Shannon also settled. Lazard's number if I recall was something like a half a million dollars. It might have been slightly higher than that. They asked,

and I was fine with this, that the number

Trial 53 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 theirs.

July 31, 2008

not be repeated in the report but rather that the total amount of fees that they were going to be paid be recited instead. to do that. I was happy

Again, that was a number,

whatever that number was, which I think was in that ballpark, was acceptable to the pre-petition lenders and that was acceptable to us. Shannon, Shannon settled I want to say for something between 2 and $300,000 in reduction. Perhaps the fees might have been a little higher on the committees, the professionals. The committees, I recall

one of the last ones to come in that we believed that there were some policy decisions that were beyond us to make, weren't within the scope of our duty, and so when the post-petition corrected it, it eventually became, and/or the pre-petition lenders agreed on those settlement amounts, we were fine with that, and they were somewhere in the 2 to $300,000 range for the committee professionals. Davis Polk also settled I don't exactly remember that

Trial 54 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 number.

July 31, 2008

That was a harder one for everyone

to settle because the Davis Polk fees were very much a source of contention by every constituent we talked to, primarily because they did not really understand what they were doing. That was pretty much held

confidential due to the government investigation, and only the audit committee was aware of all that. In that regard I did call upon my securities litigation people in my firm to help me review that and to give me their feeling. The number that Davis Polk

reduced by was something that my people were comfortable with and the bank, the pre-petition lenders were comfortable with, so that was recommended. Q. A. How much was that? I don't remember that one off I want to say 250, 200

the top of my head.

and 250, something like that. And the others, Your Honor, I don't recall, but it came down to only one that remained and that was KZC, and the parties negotiated in good faith but there

Trial 55 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 was a gap between them, we couldn't get there. Q. Did you reach a conclusion as

July 31, 2008

to under Section 330 what KZC's fee request should be reduced by, if at all, in approving their fees? A. Not really, Your Honor. I say

that because I felt the negotiations, both sides talked numbers that I could live with, and so I didn't feel like I needed to come to an independent number on my own, and I did believe, Your Honor, that there were certain policy kinds of questions that were beyond the realm of the four questions, and so I was comfortable that I didn't have to make that decision. Q. A. Like what? Like the role of a CRO versus

the board, like the role of a financial advisor versus the board, where those lines are drawn. I think this case posed numerous I felt that particularly

policy-type issues.

with respect to the committee professionals and particularly with respect to the CRO and financial advisor.

Trial 56 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 With respect to the

July 31, 2008

committee, I felt it's what do you do when you're really out of the money? What's the policy decision there? Do you behave like

you're out of the money or do you fight in the last instance for every hope and prayer when really that's all it is? And the ones

I just described as to the CRO and the financial advisor. Q. Did you come to the conclusion

that some reduction in the fee request made by KZC was appropriate under Section 330? A. Q. I did. So your testimony is that you

didn't quantify that? A. Q. A. Q. That's correct. Is that your testimony? That's correct. Why did you come to the

conclusion or on what basis did you come to the conclusion that some reduction were appropriate? A. Because I did believe there was

a delay in the discovery of the impact of those issues on the business plan in answer

Trial 57 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to question number one. Q. And why or how did you come to

July 31, 2008

that conclusion? A. I came to that conclusion, Your

Honor, because, primarily because there were a convergence of issues in this case. Those

issues were a very aggressive business plan that converged with liquidity issues. It could not be lost on me or any party that this company only cash flowed at the $255 million EBITDA number that was in the business plan. They could not meet their cap

ex needs, their interest and fees that they paid to the lenders and the professional fees to continue in bankruptcy and survive as a viable entity without those cash flow numbers. While we came to the decision after a lot of debate that it was not unreasonable to defer to the board's decision in January to say let's give this business plan a chance to take hold, because those liquidity issues were so important to the fragility of the debtor, the discipline that was later imposed in July needed to be

Trial 58 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Honor. questions I have. Counsel, any questions? MR. DeFILIPPO:

July 31, 2008

imposed earlier, at least two months earlier is what we concluded, and as a result of that we did believe that the case took a longer road than it had to, and for that reason I believe that some reduction was important. Because even after discussing the different roles that different people thought that the CRO and KZC should have here, even under the scope that KZC articulated, which was that liquidity was in their bailiwick, and the operational was in Frank Macher's bailiwick, because those issues converged, I believed that KZC was responsible for that support. THE COURT: That's all the

Yes, Your

Your Honor, the first thing would be

given Your Honor's questions to Ms. O'Neill about settlements reached, you would permit me to ask Your Honor to admit Exhibit 53, which is the chart of the fee settlements that were reached with actual numbers.

Trial 59 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Your Honor. CROSS-EXAMINATION BY MR. DeFILIPPO: Q. A. Good morning. Good morning. Honor. THE COURT: 53, sir? MR. DeFILIPPO: Honor. THE COURT: please? MR. DeFILIPPO: THE COURT:

July 31, 2008

Can I see that,

Yes, Your

You said this is

Yes, Your

Any objection to

the admission into evidence of Exhibit 53? MR. DAMREN: I did object

earlier that it's irrelevant to this thing, but this particular proceeding, but the Court asked the questions, I didn't object, I have no objection. THE COURT: The Court will

admit into evidence Exhibit 53. ADMITTED INTO EVIDENCE: EXHIBIT NUMBER 53 MR. DeFILIPPO: Thank you,

Trial 60 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. A. Q. How are you today? Good, thank you. Good. Just a couple of

July 31, 2008

questions, Ms. O'Neill.

You in the course of

preparing your report relied on people that you wrote to who voluntarily produced to you documents that they felt were important, correct? A. Q. Correct. So you did not necessarily

receive all of the important documents that were generated during the course of the case, isn't that right? A. I would not agree with --

important to the report you mean or important just in the case generally? Q. Let's start with important in

the case generally and then narrow it down. A. Q. No, not in the case generally. And in connection with

importance to the report, you did not receive, for example, board minutes from the company? A. Your question was did I receive

all the important information in the report

Trial 61 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and my answer would be yes. The reason I

July 31, 2008

would say yes is because I asked every party had every opportunity to tell me what was important, and so if they didn't bring it to my attention, then I don't believe it was relevant to the inquiry. Q. Let me ask it this way. Were

there documents that might have been relevant to the inquiry that you didn't receive before you issued the report? A. Q. Again, my answer would be no. So you don't think the board

minutes would be relevant to your inquiry? A. I think that if people did not

believe them to be relevant and therefore I don't believe they were relevant. Q. Were there documents that you

subsequently learned about after you issued the report that you thought might affect your conclusions had you had the chance to see them before the report was issued? A. People have suggested to me

since the issuance of the report that I should have -- that I maybe should have considered X, Y or Z afterwards, and I have

Trial 62 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Okay. in preparing for this testimony thought

July 31, 2008

through those suggestions and I think I had everything I needed relevant to this report. Q. The interviews that you took

were not sworn or recorded, correct? A. Q. Correct. And you relied on the notes

that were taken by others working under your direction in preparing a summary of those interviews? A. I did, as edited by me, if I

thought they were incorrect I edited them. Q. And you used those memoranda of

interviews to help you prepare the report some period of time after they were written, correct? A. I'm sorry, could you ask the

question again? Q. The interview notes, for

example, you looked -A. Q. I brought them with me. You brought them with you? So why don't we open to them.

They're Exhibit 51 I think in the exhibit binder, Your Honor.

Trial 63 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 open it up. MR. DeFILIPPO: BY MR. DeFILIPPO: Q. These are the notes of the THE COURT: they in evidence or not? MR. DeFILIPPO: THE COURT: Not. Thank you.

July 31, 2008

Are

Then I won't

Thank you.

interviews that you took? A. These are the notes of the

associates as may have been edited by me in the hard copy, but these are not the notes that I used day to day in that I wrote handwritten notes as well in some cases and didn't edit the hard copy. Q. And the interviews took place on

various dates starting about when as best you can recall? A. Q. June or July of 2007. So how long was the period of

time between the conduct of the interviews and the preparation of the draft report? A. I believe we prepared the draft

report sometime in August of 2007. Q. So at least 30 days, maybe

Trial 64 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 longer? A. Or maybe it was September,

July 31, 2008

somewhere around there. Q. It was more than a month

between the interview and -A. Q. A. Q. Yes. -- and the report, right? Yes. The interview memoranda do not

reflect verbatim what was said in the interview, do they? A. In some cases they have verbatim

statements, but in most cases they are a reasonable facsimile of the same. Q. But they don't say exactly what

a person said like a transcript would, do they? A. They are not transcripts but in

some cases they do repeat actual statements. Q. And the interview memoranda do

not contain a complete statement of what was said in each interview, do they? A. Q. No, they're a summary. If something -- strike that. Did you consider it to be

Trial 65 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 part of your job in writing the report to make determinations of credibility of the people that you interviewed? A. Q. Yes.

July 31, 2008

Would you make such credibility

determinations? A. Q. Yes. Did you make any assumptions of

fact in the course of preparing your report? A. I'm not sure what you mean by

assumptions of fact. Q. Did you make any assumptions

that certain facts were true without independently trying to verify them? A. Only in the draft, and I say

that because after the draft went out, if people had factual corrections they told me and I made them. Q. When you interviewed people you

didn't put them under oath, did you? A. Q. I did not. And the report contains all of

your conclusions that you believed were necessary to enable you to answer the four questions that you described, correct?

Trial 66 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A. Q. Yes. And all of the facts that you

July 31, 2008

believed were necessary to support the conclusions that you reached in the report are always contained in the report? A. Yes, and let me just be clear.

When you use the word conclusion, I mean the answers to the questions. Q. A. Q. Yes. Yes. The report does not contain a

conclusion that John Boken failed to perform his duties as CRO, does it? A. Q. No, it does not. And you did not conclude in the

report that Kroll Zolfo Cooper failed to perform its obligations to the debtors, did you? A. Q. No, I did not. I want to ask you about your

interview with Tim Leuliette, one of the directors? A. Q. Yes. Do you remember that interview

well enough to talk about without looking at

Trial 67 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 your notes? A. I'll try. Q. Fair enough. By the way, was

July 31, 2008

Well, depends on your question.

Mr. Leuliette considered by you to be a knowledgeable and competent automotive executive? A. Q. He was. He was a member of the board

who sat through the process in the case? A. Q. Yes. So he had firsthand knowledge of

what transpired? A. Q. A. Yes. And of course you did not? Of course, I did not. Except

that I had a local counsel role and observed a few things in the courtroom when I attended with the primary counsel. Q. And you thought that when Mr.

Leuliette spoke to you, you thought he was being credible? A. Q. I did. Okay. Did Mr. Leuliette tell

you he had no basis to criticize KZC's

Trial 68 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 performance in this case? A. Yes, but let me clarify, when

July 31, 2008

you say credible, I believe he was telling me what he believed to be true. Those opinions may or may not have been the same as mine, but yes, I believe he believed that, yes. Q. And did he tell you that the

board and Mr. Cooper in particular watched the company closely and as soon as it was tipping the wrong way the board became aware of it? A. Q. Yes. Did Mr. Leuliette tell you that

he believed that the reaction by the board to the signals of distress of the company was as fast as one could expect? A. He told me that, yes. MR. DAMREN: Your Honor, if

I might for a moment interrupt, I agree that this line of questioning will be relevant if a report is placed in evidence. If it's not

going to be placed in evidence then it's purely hearsay, unsworn, so either way the Court wants to do it, or Counsel wants to do it, I just if we're going to pursue this

Trial 69 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 respond?

July 31, 2008

line I would move for the admission of the report. MR. DeFILIPPO: May I

The witness on your questions

rendered certain opinions and described her reasons for those opinions, and all I'm trying to do is confirm whether there might be contradictory or different information available to the witness than the opinions she expressed. I don't think you need to

admit the report to allow me to question on that basis. THE COURT: Well,

unfortunately I think the law requires to draw a very fine distinction here and it's actually a difficult one. As an expert of

course the witness is entitled to rely on hearsay, but it is hearsay and the Court cannot accept what this witness says someone else said for the truth of it. MR. DeFILIPPO: THE COURT: I agree.

But it can,

however, be offered to show the information that the witness was given and to form the basis for questions about how that

Trial 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Your Honor. BY MR. DeFILIPPO: Q. information impacted her conclusion.

July 31, 2008

So for

those limited purposes the Court will permit this. MR. DeFILIPPO: Thank you,

You also interviewed Stacey Fox,

the company's general counsel? A. Q. I did. And she also was present at the

time of the events in question? A. Q. Yes. And did she tell you that in

her view the biggest impact or effect on the recoveries of the pre-petition lenders was their inability to make a deal with Wilbur Ross when they had a chance? A. question? Q. Did Ms. Fox tell you that in Can you just repeat the

her view the biggest impact or effect on the recoveries to the pre-petition lenders was their inability to make a deal with Wilbur Ross when they had a chance? A. The reason I thought that was

Trial 71 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

July 31, 2008

significant to her, but in the case of both Ms. Fox and Mr. Leuliette, they believed there was some delay in recognizing the issues; so quantifying whether that was the most significant impact versus another, I don't remember if she prioritized those. Q. You don't remember whether she

said that to you? A. I don't know if she prioritized

what factors were there, similarly to Mr. Leuliette. I don't think anyone said this is

the issue that was the biggest thing that caused the loss. I do think it was She did feel it was a

significant to her.

significant issue that they did not accept the Ross offer. Q. Do you remember when I took

your deposition in June you were unaware at that time at least that the pre-petition lenders' advisors thought the company's EBITDA in 2006 at the time in June when the four plus eight came out was going to be 120 million? A. Q. Yes. And when I told you about that,

Trial 72 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 yes. Q. Did KZC notify you after the

July 31, 2008

do you remember saying that that fact might have affected your conclusion that there was a delay? A. I remember saying that it might

have affected it, I would like to think it through. Q. Okay. You indicated to the

Court that you came to the conclusion that some reduction in KZC's fees was appropriate, but that conclusion is not contained in your report, is it? A. Q. That's correct. When did you come to that

conclusion, after you wrote the report? A. Yes, after the draft was done,

draft was done that it believed your conclusions with respect to questions A and B were not accurate? A. accurate. I don't know if I would say not They did have issues with some of

my conclusions that caused me to very much rethink those conclusions. Q. On your answers to your

Trial 73 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 questions by the Court you indicated that

July 31, 2008

there were liquidity issues that were raised as a result of any EBITDA reductions in 2006? A. Q. Correct. You do not mean to suggest that

Mr. Boken was unaware of those liquidity issues at the time, do you? A. Q. No. When you indicated that you

determined that it was appropriate for the board of directors to adopt the 2006 budget in January, did you do so in reliance upon your understanding of the business judgment rule? A. Yes, and that and some other

factors, yes. Q. And the board also adopted the

four plus eight reforecast in June? A. I don't know if the board I assume they did. That was

adopted that.

not critical to my conclusion. Q. Whether or not the board acted

with respect to the four plus eight plan was not critical so you didn't apply the business judgment analysis to the adoption of the four

Trial 74 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 plus eight plan by the board in June? A. I'm not saying that. I'm

July 31, 2008

saying it wasn't critical to my finding. Q. I see. You found the

subsidiary fact or conclusion that there was essentially no value available for the lenders, pre-petition lenders at the very beginning of the case, or very little value? A. There was not a very little,

wouldn't cover their debt, if that's what you mean. Q. Did you conclude that value

increased during the case? A. Yes, using the valuation

methodology adopted by all of the constituents, which was a five times EBITDA multiple. Q. You did not reach a conclusion

in the report or otherwise that the processes that were used in the formulation of the four plus eight reforecast were not appropriate, did you? A. Q. Could you repeat the question? Yes. You did not reach a

conclusion that the processes used in the

Trial 75 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

July 31, 2008

formulation of the four plus eight forecast were not appropriate? A. If by conclusion you mean in

answer to the question, no, to any of the questions, no. Q. Did you assume in your analysis

of delay that the company had available to it the May 2006 results before it issued the four plus eight plan? A. They certainly had -- I did

think that they had an indication of numbers. I mean, it wasn't formally issued I believe until, I can't remember a date off the top of my head, June sometime I think. Q. Well, do you know whether or

not the company had available to it the May operating results at the time the four plus eight plan was issued? A. Again, I would have to say I'm

sure they were aware of what it was likely to show, whether or not it was formally, the books were formally closed or not, I don't remember off the top of my head. was after. Q. You're sure the company was I think it

Trial 76 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

July 31, 2008

aware of what May would be likely to show? A. I'm not sure but I assumed it.

I thought your question was did I assume it. Q. No, but it's important that you

told me that, because it sounds to me like you assumed that to be a fact, correct? A. Let me say this. I inferred

from the facts that they were fairly well aware of those results. Q. So you drew an inference in

writing your report from other facts that the May results were known to the company when it wrote the four plus eight plan? A. Well, now I'm not sure what you It's

mean by in writing the report.

something I clearly inferred and thought of in writing the report if that's what you mean. Q. I'm trying to understand what

role you considered the May 2006 results to play in the company's creation of the four plus eight plan and it sounded from your last answer that you assumed the company had the May 2006 results available to it at the time it issued the four plus eight plan, isn't

Trial 77 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that what you said? A. If you'll give me a second, I

July 31, 2008

would like to check the time line.

I have a

time line in the report and that will help refresh my recollection on this. Q. A. Is that an exhibit or something? I have before me the report and

exhibits to the report and I recall that a time line's attached. MR. DAMREN: actually Exhibit 5-Z, five Zs. BY MR. DeFILIPPO: Q. though? A. I have attached as Exhibit E to I don't know if Do you have it in the report I believe it's

the report a time line.

that's the same as the exhibit to which you referred. Q. Let's use yours. THE COURT: Without telling

us what it says, because it's not in evidence, having reviewed it, what is your recollection about this timing issue? A. My memory of that is that the

time between the issuance of the four plus

Trial 78 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

July 31, 2008

eight and the June, excuse me, and the May results is about 20 days or about three weeks, so -BY MR. DeFILIPPO: Q. A. Q. Three weeks? About three weeks. That's fine, thank you. So

it's from like June 8th when the four plus eight was issued to June 29th when the May 2006 financials were issued? A. Q. Correct. So from that can we agree that

the company did not have the May 2006 financial results available -- let me finish the question. A. Q. I'm sorry. Available to it when it issued

the four plus eight plan? A. Q. Not the formally issued one. Okay. Good. And you really

don't know what the company had with respect to May results available to it when it issued the four plus eight plan, do you? A. Q. Not exactly. Did you ask Mr. Trenary what he

Trial 79 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 question. BY MR. DeFILIPPO: Q. -Q. Well, I just asked you about

July 31, 2008

had with respect to the May results available to him when he worked on the four plus eight? A. Not specifically, but I did ask

Mr. Trenary.

He was the one that prepared

the four plus eight, didn't he? A. Q. I don't recall. Didn't he supervise the

preparation of the four plus eight plan? A. I don't recall specifically. But he did I

think so but I'm not sure.

indicate to me that there came a time -MR. DeFILIPPO: Your Honor,

may I ask, I don't think there's a question pending, but -THE COURT: Wait for a

In the report is it fair to say

that you did not conclude in any respect what the appropriate standard of care or skill required by a financial advisor or a CRO is? A. That was not necessary to the

Trial 80 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 answers to the question, so no. Q. And did you -- is it also fair

July 31, 2008

to say that in the report you did not identify any individual or person responsible for the alleged delay? A. Correct. Well, except that the

question was debtors, and so I think the answer was -- give me a minute I can refresh on that. Q. A. Q. A. You mean question A? Yes. Let me read question A to you. You are correct. There was not

a person that we described who delayed. Q. And question A doesn't really

ask whether the debtors should have known earlier, it just says should the problems have been known earlier. A. You know what? I actually need I need to

a minute to answer this honestly. look back and refresh my memory. I correct myself.

Looking

back at page seven, which is a summary of the answer A, we do conclude that the debtors should have known earlier.

Trial 81 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. debtors. A. Q. Correct. Is it fair to say that your But no individual at the

July 31, 2008

conclusion that a delay occurred was based upon the company's failure to appreciate that 2006 EBITDA would be lower than 179 million in June of 2006? A. Q. Substantially lower, yes. So if there was a realization

that achievable 2006 EBITDA was substantially lower than $179 million in June 2006, that may have affected the conclusion as to delay. A. Q. Depends on by whom. By whom? So if it had been by

Mr. Nurge, would that have affected a conclusion? A. Q. No. If it had been by Mr. Boken,

would that have affected the conclusion? A. Q. Yes. Okay. MR. DeFILIPPO: nothing further, Your Honor. THE COURT: Thank you, sir. I have

Trial 82 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 questions. you there, sir. CROSS-EXAMINATION BY MR. DAMREN: Q.

July 31, 2008

Ms. O'Neill, all the assumptions

that you made and the materials that you relied upon are attached and a part of your report, aren't they? A. That's correct. MR. DAMREN: Your Honor, I

would move for the admission into evidence of the report and its exhibits. MR. DeFILIPPO: Your Honor,

one minute so I can get my research out on this, please. THE COURT: Let me shortcut

If your objection is that

it's hearsay, your objection is sustained. Is that your objection? MR. DeFILIPPO: That's one of

them, and I'll accept Your Honor's ruling on that, thank you. THE COURT: It's an out of

court statement offered to prove the truth of it, so it is sustained. MR. DAMREN: No further

Trial 83 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 second, please. THE COURT:

July 31, 2008

Stand by one

I believe you testified that you did get a response from KZC or its representatives to the draft report. A. Yes, Your Honor. THE COURT: Do you recall in

substance what that response was? A. Not particularly. I do believe

they challenged the issue of the delay, because I do think they challenged some of our conclusions and I do believe that was one of them. They did also acknowledge that the -- they believed the report was well reasoned and they believed that it was a thorough job, but they were uncomfortable with the -THE COURT: Apart from

challenging the conclusion, were there any specific facts in your report that you had relied upon in reaching your conclusions that they challenged that you recall? A. Not that I recall. And the

only fact that was, and I don't know if this

Trial 84 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 was in the draft report but before the

July 31, 2008

writing that they challenged and asked me to do follow-up on, and I did, was that Mr. Macher in our discussions with him indicated that there was a 50 percent probability of achieving the business plan and he indicated that. That was very inconsistent with what

Mr. Boken had told me and, frankly, from what I heard from others on the debtors' side. So when I brought that fact either in the draft report, which I can't recall if I footnoted that, or when I brought it to Mr. Boken's attention, he challenged that fact and asked me to pursue a couple other lines of inquiry. Mr. Trenary and Mr. I did

Masonovich were those other lines.

pursue those and decided not to include that fact, because unlike a few others where there was two sides of the coin and I noted it in the foot notes, this was so discounted by everyone that I didn't put it in. That is

one fact I believe, one statement I believe not credible enough to include it. THE COURT: Your advisor with

DSI was Mr. Caruso, is he here?

Trial 85 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to strike. Honor. MR. DAMREN: THE COURT: of the witness? MR. DeFILIPPO: A. He is. THE COURT:

July 31, 2008

Anymore questions

No, Your

No, Your Honor. Thank you very

much for coming today and for your service in this case. I do not have any questions for

Mr. Caruso, but since he's here I want to give Counsel an opportunity to ask any questions of him that he might like. MR. DAMREN: Judge, the

witness is here, there's no reason now for his deposition to have been admitted. It was

admitted because he was unavailable, he was out of our jurisdiction in Chicago, now he's here. I don't have any questions of him but

I don't see why his deposition transcript should be admitted now. THE COURT: Well, it is in

evidence unless the Court sustains a motion to strike it, which I haven't heard. MR. DAMREN: I make a motion

Trial 86 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. DeFILIPPO:

July 31, 2008

Your Honor, I

didn't know he was showing up and I didn't procure his unavailability, so I think Your Honor correctly admitted his deposition at the time it was offered. I don't think his subsequent attendance is a reason to strike his deposition. If Mr. Damren thinks that he

needs to testify to undo anything that is in his deposition designations, Mr. Damren's free to put him on the stand, but I don't think Your Honor needs to hear from him unless people have a big disagreement over what's in the deposition designation. But I certainly think it's a waste of Your Honor's time and the parties' time for me to put him on the stand and ask him if this is what you testified in your deposition. THE COURT: Can you identify

in any way in which your position is prejudiced in such a way as to require striking of the deposition from evidence at this time? MR. DAMREN: I don't believe

Trial 87 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

July 31, 2008

that there were deposition designations for him, Mr. DeFilippo, it was the entire deposition. MR. DeFILIPPO: MR. DAMREN: No.

Well, the entire

deposition should be admitted, not deposition declarations. You know, the entire

deposition should be admitted, not deposition declarations or sections of it because these are not admissions. party. Mr. Caruso is a third

The admissions, the deposition -- the

portions that you admitted earlier on the theory that my client was adverse to KZC, I understand that. I don't understand -THE COURT: Did you make

this argument at the time the deposition designations were offered into evidence? MR. DAMREN: I thought the

entire deposition was being offered at that time. MR. DeFILIPPO: I consent to

the entire deposition going in if that solves this problem here. THE COURT: notebook that you gave me? Was this in that

Trial 88 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 have that for me? MR. DeFILIPPO: copy of it here, Your Honor. THE COURT: Honor. THE COURT: second. MR. DAMREN: Judge, the Honor. THE COURT: entire deposition. THE COURT: But the MR. DeFILIPPO: Not the

July 31, 2008

designations you wanted was in that? MR. DeFILIPPO: Yes, Your

Stand by one

parties agree to have an accommodation on this issue. THE COURT: So this was the

last one in the book, Mr. Caruso, and these were the designations one through 19, so the resolution is we'll take these out and just substitute the entire deposition. MR. DeFILIPPO: Yes, Your

Does somebody

We have a

I'm going to

return this to you and we'll make that substitution. All right. So no further

Trial 89 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 as well. MR. DeFILIPPO: questions for Mr. Caruso at this time? MR. DeFILIPPO: THE COURT:

July 31, 2008

Correct.

Ms. O'Neill, Mr.

Caruso, thanks again for both of you coming today. You're both excused. Any further testimony or evidence from either side? MR. DAMREN: Your Honor, Mr.

DeFilippo and I just have to go through the exhibits, we've hardly objected to anything else, I just need to make a list and confirm that they're all admitted. THE COURT: Okay. Your Honor --

MR. DeFILIPPO: THE COURT:

I appreciate that

May we put

Mr. Boken on for one or two questions? THE COURT: All right, Mr. You

Boken, would you step forward, please?

may have a seat because you are still under oath. RE-EXAMINATION BY MR. DeFILIPPO: Q. Mr. Boken, you were present for

Trial 90 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Mr. Macher's testimony? A. Q. Yes, I was.

July 31, 2008

Did you hear his testimony about

you and he having a discussion and coming to a compromise over certain projection numbers? A. Q. Yes. Did you understand from his

testimony or could you help us understand what period of time he was speaking about? A. The period of time where we had

the debates and discussion was prior to the release of the January 2006 budget, so it would have been from October 2005 through January 2006. Q. Did you hear Mr. Macher's

testimony about his desire to hire a chief financial officer for the company? A. Q. Yes. Did you convey Mr. Macher's

desire to do so to the representatives of the pre-petition lenders? A. Q. A. Yes, I did. Who did you convey that to? Mr. Nurge from Capstone and Ms.

Kurinskas from JP Morgan.

Trial 91 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. Did you tell them why Mr.

July 31, 2008

Macher wanted a CFO? A. Q. A. Yes, I did. What did you tell them? What I told them was that Mr.

Macher felt strongly that he needed additional operational skills in the role of the CFO, as opposed to just a financial CFO. We were without a CFO at the time and he felt it was important that he had that function and that capability available to him within the management team. Q. occur? A. Those occurred in August, And when did these conversations

September, October time frame of 2005. Q. What was the response to that

request of the pre-petition lenders? A. The lenders were emphatic that

they thought that hiring a CFO and then entering into an employment contract with a CFO at that time was not something that was a prudent step. They felt that Mr. Macher

had all of the operational skills and talents that he needed with the people he was adding

Trial 92 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 further. MR. DAMREN: for an exhibit, Your Honor. THE COURT:

July 31, 2008

to the team at that time and was proposing to add to the team at that time, so they told him that they would not be prepared to approve any contract for CFO that would have to be put forth in front of the court. Q. Did he say he needed the

pre-petition lenders' approval for that contract? A. Yes, we did. MR. DeFILIPPO: Nothing

We're looking

Take your time.

While you're looking, let me ask this question. Isn't hiring a CFO something that a company like Collins & Aikman does ordinarily and usually and regularly? A. would. Yes, outside of bankruptcy it The concern that was raised by

counsel was that any senior level management team member would want an employment contract with severance and other provisions and the view from K&E was that such a contract would

Trial 93 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 require Court approval. RE-CROSS-EXAMINATION BY MR. DAMREN: Q. Did you, at the time you made

July 31, 2008

these comments to Mr. Nurge, did you tell him that it was Mr. Macher's opinion that Kroll and you lacked the analytical and organizational skills that he sought? A. No. What he said was that he

needed, he felt that he needed additional operational automotive experience and he knew that that was not something that was -- that Kroll was bringing to the table. Q. And did you tell that to Nurge,

Mr. Nurge, that in fact Kroll was not providing operational and analytical expertise? A. No. We were certainly providing

analytical expertise. What Mr. Nurge was well aware of was we were not automotive individuals and that Mr. Macher's request was for someone who was coming in to the CFO position who had automotive experience and could further add depth to his automotive analytical and operational capability.

Trial 94 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. And had Mr. Macher ever before

July 31, 2008

said in your presence what he said in court this morning, that in fact if Kroll had a weakness it was in this convergence of these areas between analytical abilities to deal with variances and help him understand what caused them? A. I think the way I heard Mr.

Macher's testimony and my recollection of discussions with him is that he pointed out that Kroll was not bringing to him specific automotive expertise which was a known fact from the outset of the case. Q. Had he ever criticized you for

being unable to assist him in understanding variances that went from the plan to actuals? A. No, he did not, because in fact

it was our team that was taking the information out of the management information system and trying to apply analytical techniques to it to help his operational people better understand the variances. Q. Who was the person that we're The proposed CFO.

talking about as the CFO? A.

I don't recall the person's

Trial 95 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the fence? A. On that particular issue I did take a position? A. I recall, Your Honor, the name. Q. I believe it -- she was a female. Do you recall what her

July 31, 2008

background was? A. Q. I don't recall. Do you recall whether you

supported bringing on this person or not? A. It was -- I recall that it was

a difficult decision and I remember having discussions with JP Morgan telling them that I understood their concerns, that it was something that I was concerned about as to whether it was appropriate to add that person at this time, but it was something that Mr. Macher was adamant that he thought was necessary. THE COURT: So you didn't

position I took was that I understood Mr. Macher's concerns but that I understood at the same time the bank's reticence to add a person at that time. THE COURT: So you sat on

Trial 96 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 not come out one way or the other. BY MR. DAMREN: Q. I'm going to direct your

July 31, 2008

attention to Exhibit JJ. A. Q. I have it. Counsel and I agreed this

morning that this and other exhibits can be admitted, but I would ask that you, if this document, which is an E-mail, refreshes your recollection about the substance of the matters that you discussed with Mr. Nurge and each of your reactions. A. I think it's consistent with

what I just testified to in that I was conveying to them what Mr. Macher's desire was for the CFO, but that I also was conflicted on which direction to go here, and that I understood their objection and that I was unclear as to whether it was worthwhile to fight on this issue one way or the other. Q. And there were a number of

factors going into this decision and your decision to sit on the fence. I mean, it's

referenced here and do you recall from Ann Kurinskas, she talks about there's a lot of

Trial 97 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 money to bring in a CFO for three to six months, what's she referring to there? A.

July 31, 2008

I believe what she was referring

to was that she at the time didn't believe that or may not have believed that there was a clear path towards a restructuring, so she thought that entering into a multi-year contract with what might only be a three- to six-month case would be an expensive proposition. Q. And on the next page of the

document is there a reference to the person's name? A. Q. Yes, Jan Birch. And does that refresh your

recollection as to this being the actual person under consideration? A. Q. Yes. And it's a three-year package More like a

with one year of severance? two-year package? A.

I believe it's a two-year

package with one year severance. Q. So the total compensation would

be over $1 million?

Trial 98 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Your Honor. THE COURT: A. Over the duration of the

July 31, 2008

contract, yes. Q. Mr. Nurge in his E-mail, the

last part of it says, he believes this person is a friend of Stacey Fox who used to be general counsel of Visteon. that to be the case? A. I knew that Stacey Fox was I couldn't say one Did you know

familiar with Jan Birch.

way or the other was to whether Ms. Birch was a friend of Ms. Fox. MR. DAMREN: Nothing further. No questions,

MR. DeFILIPPO:

Thank you, sir.

Any other testimony or evidence at this time? MR. DeFILIPPO: Honor, not from us. MR. DAMREN: the exhibits, Judge. THE COURT: closing arguments now? You want to give Just clearing up No, Your

Do you want to give Do you want to

them later this afternoon?

waive closing arguments? How do you want to deal with that issue, please?

Trial 99 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 at 1:00 then? MR. DeFILIPPO: includes rebuttal. THE COURT: side. MR. DAMREN: MR. DeFILIPPO:

July 31, 2008

Would your

Your Honor be interested in seeing post trial findings and conclusions as well as closing? THE COURT: No. Then I think

MR. DeFILIPPO:

it would be helpful to me if I could organize my thoughts a little better and give it to you right after lunch. THE COURT: Can I set a

fair, reasonable time limit for the two of you on the closing? What would you propose? I don't think

MR. DeFILIPPO:

mine is more than a half an hour, maybe 45 minutes at tops. THE COURT: 30 minutes per

So long as it

Can we reconvene

Yes, Your

Honor, can we agree that Mr. Damren goes first as in most civil cases the Plaintiff goes last? MR. DAMREN: I think the

Trial 100 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

July 31, 2008

burden is on him to sustain his fees, but I don't care. If you want me to go first,

I'll go first, it just means that I get rebuttal, so I'll be happy to do that. THE COURT: No, I think it

actually would facilitate the process here if you as the objecting party did go first. will ask you that. I

And each of you can have

rebuttal, it's just that we have to keep it to 30 minutes in total, because it turns out I have other Collins & Aikman matters at two. So they'll be coming into the courtroom at that time. In regard to exhibits, my plan is to find a date to come back in two or three weeks, four, depending on the bench here, and so I can just ask you in the mean time to file something that stipulates to what's been admitted into evidence, a joint kind of admitted exhibit list, can you do that? MR. DAMREN: Counsel to do that. I will trust

We've gotten along fine. See you at one.

THE COURT:

(Recess taken at 11:37 a.m.)

Trial 101 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 proceed. CLOSING ARGUMENT BY MR. DAMREN: Your Honor. THE COURT: And let's

July 31, 2008

(Back on the record at 1:01 p.m.) THE COURT: Everyone is here.

The answer to the question about the court reporter is yes, you may use your transcript as the official. MR. DeFILIPPO: Thank you,

I don't intend to review the evidence piece by piece, but what I would like to offer the Court is suggest some analytical frame works that might assist you in going through the testimony. In addition to the questions that the Court asked of Ms. O'Neill to look at, I would suggest four supplemental questions, and they would apply to each particular point in time as we move forward from the Kroll's engagement through the conduct of the Chapter 11. First, what did Kroll do or

Trial 102 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

July 31, 2008

not do? Actually, the first one would be what did Kroll and everyone else know at particular points in time, and then what did Kroll do or not do in response. What should

Kroll have done, what Kroll represented to parties that in fact it was doing, and those parties being stakeholders and the Court and other constituencies, and what those constituencies have a right to rely upon. I guess I came up with five questions. I would suggest that the Court divide the case into two segments. The So

first segment would be the inception or the filing of the Chapter 11 through the January 2006 budgets that were prepared, the one that was finalized on 11-22 post closing and the subsequent January budget, and then I think the second phase of the case is really from January on through the four plus eight, the six plus six and ultimately the liquidation. Everybody is in agreement that Collins & Aikman was a complete mess when the bankruptcy started. Everybody's

identified and knew what many of the outstanding problems were so that's really

Trial 103 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 not in dispute. It was a good thing that

July 31, 2008

Collins & Aikman sought out what it understood and what other stakeholders understood to be one of the preeminent financial advisors in the country, because it most definitely needed assistance. It brought in Kroll though an unusual way. Kroll wasn't just the financial advisor, Kroll wasn't just a CRO, but Kroll occupied two positions on the board of directors and was the chairman of the restructuring committee. And while at the onset this conflict at least in the fee area was at least dealt with by the appointment of a special committee, there were other problems with this conflict as the case went on. In

particular, it was never represented outside the company to the constituents or the stakeholders that the board of directors had limited Kroll's role as being, with respect to the forecasts as being supportive of management. They say they did that, it was

an internal thing, there was never a board resolution or anything, but they did that,

Trial 104 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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and it's quite unfortunate because if in fact that was the case, all of a sudden we just lost that important financial advisor that we needed from the onset in this particular matter and needed badly. Had that information been shared, another financial advisor would have come on, other financial advisors might have said, well, we've got to step in and do that work, but the world was not told about that, and there was no reason for the constituent world to have a suspicion that that was the relationship that was going on. Look at Macher's employment agreement, there's nothing about him being in charge of this. You look at Kroll's engagement letter and they basically are not just given the keys to the car, they're given the keys to the kingdom, they can make any decision they want on behalf of the company, wide ranging to say the least. So this poses initial problems and posing greater problems as the case goes on. We just have too much

cheerleading for these hopes to get EBITDA up

Trial 105 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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to high amounts, too much cheerleading and not enough specialized knowledge to bring to the table a more sober reflection on these numbers. No one in this case, no one on the witness stand, I venture no one in the world would say that the problem, the problem that everybody knew about was plastics. It was plastics. We knew it from

day one. What should have been done in that instance? What did the constituents, the

stakeholders, the Court have an expectation should be done? You ought to drive that to

the ground, you ought to find out what the problems are. You've heard testimony from Mr. Chadwick, from Mr. Nurge, that they would have expected a deep dive. would have done. That's what they

They would have gone out

there and performed that deep dive from the onset of the case. You've heard Mr. Macher

come in here today unprepared by any party, remembering things that had occurred, but remembering distinctly that my problem is in plastics, I really needed to get out to those

Trial 106 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 plants and pull those people together. really needed to find out what kind of I

July 31, 2008

foundation I had, because as the case moved on from my appointment in June, for nine months I didn't really understand in the full nature of what the problem was, the plastics. It took me about nine months to realize it's the plants, it's the people, they're not a baseline, they can't provide me with one. They can't get this done. Well, Kroll had been on the map earlier than Mr. Macher, and Kroll had extolled its expertise to all the constituents and stakeholders in this case as being a world class financial advisor. All

the constituents, all the stakeholders had every expectation that Kroll would in fact do this deep dive at the onset, and if you look at their hours, if you look at the hours on their initial fee applications, they're spending a lot of time working on these budgets. But they point to the fact that there's later on a gap with the CFO. There's no CFO here. Well, witnesses were

Trial 107 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 asked on the stand if Kroll can certainly

July 31, 2008

fulfill the functions of a CFO, and of course they could, according to Mr. Cooper they could do anything. The problem is, as we

learned today, and we may have suspected earlier, there was a gap, a weakness at Kroll, and it was precisely in the area where operations, Mr. Macher's expertise, and financial intersect. When Mr. Macher would review variances of -- from plan to actuals, when he was engaged in that kind of activity, he needed someone from the financial to help him understand the variances. weak in that area. Now, he felt as he described today in between a rock and a hard spot. He's got Kroll's office near him. He reports He said Kroll was

to the Kroll directors. We've got the Kroll independent agent reporting to the board around him. It was a difficult situation for

him, and as applies for example to the application of the business judgment rule, it's one of the most curious situations of all. Directors, board of directors certainly

Trial 108 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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has the right to rely upon the reports and to make decisions. I'm not seeing many

reports or discussions of alternatives represented to this board, but you can't be on both sides of this equation. Kroll is

sitting on the board of directors, it's the head of a restructuring committee, yet it's the independent agent that's providing information. It is actually an impossible situation. Earlier on in this case I was curious as to why I wasn't seeing any evidence other than hours of what Kroll did with respect to these budgets, with respect to vetting rigorously these things, as opposed to, or for example creating the analytical tools that Peter Chadwick demonstrated that could be prepared from the then existing documents, and with the tools just as Mr. Macher confirmed today he needed to go through direct labor, indirect labor, to analyze those variances, drill down to that level. I wondered why I didn't see

anything like that in the documents being prepared by Kroll.

Trial 109 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Well, according to Mr. Macher, it's because they're weak in that area. Those documents don't exist and

July 31, 2008

there's a reason why, they were weak in that area, but they didn't go out and say, we can't do that. They didn't do that at all.

And what happened in the case when they move into the second segment is we find that Tim Trenary comes on. Now, this man is obviously a very intelligent, skillful and hard working financial person. He's a first-time CFO. It

takes Mr. Trenary, he puts into place his routine three plus nine system, he looks at it and he's a bit taken aback at first because of some of the misses early on, and then he turns it into the four plus eight, and when there's initial misses, and remember his testimony, which is consistent with common sense, you know if you miss in the first month of a projection, you have to really wonder what your system is all about, because you shouldn't miss in the first month, maybe you miss in the 12th or the 7th, but the first, second, third? That ought

Trial 110 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to be picture clear. So that gave him grave

July 31, 2008

concern after he put together the three plus nine and turned it into the four plus eight, when in that first month after that there was a miss. problem. Well, what happened? This Plastics. Plastics was always the

first time CFO drilled down on the problem, did all the interviews that Mr. Chadwick, that Capstone, that other constituencies had an expectation should have been done long ago by Kroll. He drilled down, did those

intensity things, asked those hard questions, posed situations to the various managers and quickly that plan changed. It dropped EBITDA Kroll could

by another $80 million close to.

easily have done this had they had the expertise and the ability to do the kind of analytical analysis that Mr. Trenary was able to do. Now, I would indicate to the Court that I find it interesting in this case that the primary defense that Kroll seems to come up with is to blame everybody else.

Trial 111 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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They were perfect, everybody else was wrong, it's a hundred percent Mr. Macher's fault, if it's not his, it's my client's fault for not making a deal with Wilbur Ross. That one I find to be one of the more ironic complaints that my client in July was not sufficiently realistic in suggesting that it would only take 90 cents on the dollar of what was trading in the securities market. This coming from Kroll,

who had estimated the value of the company at $300 million in September, $260 by EBITDA, 300 million for 2006. 265 in November again, and then again in January at 265 EBITDA, and then again at 180, and now they're suggesting after they roll out all those numbers to my client, to the world, essentially because the world is filled with stakeholders, and the OEMs, now they suggest my client's being unrealistic by not dealing with this multi-page offer consistent with the negotiating tactic, okay, Mr. Ross, the market says it's a hundred cents on the dollar and we'll take 90 and we're unrealistic for that. Of course, if you look

Trial 112 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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at the offer itself you realize it's really not an offer and these are just parties engaging in negotiations. We were of course not able to do the due diligence that apparently Kroll was unable to do. We were not able to do it

because we didn't have access to the documents on a timely basis. access to the plant managers. We didn't have It's

understandable that a transparency is a good pro forma for these kind of relationships between Capstone and Kroll and financial advisors for one group as opposed to financial advisors for another, but there always has to be a lag time, and Mr. Cooper recognized that, we all recognized that. We can't have Capstone and 10 other constituencies calling up managers all the time. We can't turn over the documents

to them immediately, but there were so many red flags in this case after January, even if you grant them that maybe they should have allowed that first plan to go out and it was okay, it's high, it's high. Even though they

didn't do the deep dive, which if they had

Trial 113 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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they would have known it was way too high, but then in January, February, March, after being involved in the case since May, the variances that occurred should have been a lot more to Kroll than any outsider. They should have realized plastics is a huge problem, and Mr. Macher testified it took him nine months, June to either April or May to figure out that plastics was the problem. Well, we saw no

reaction, and I say for that that that is Kroll's fault, and that their fees should be reduced. Thank you.

CLOSING ARGUMENT BY MR. DeFILIPPO: Your Honor, thank you for your time and attention during this case. I

appreciate the opportunity to appear here and thank you for allowing me to be admitted to your Court. I want to review first the undisputed facts about the fee application and the satisfaction of all prerequisites to its allowance, because I agree this is sort of a bifurcated case.

Trial 114 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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On the other hand we have a Section 330 application and we think we've met all the standards for awarding fees under the applicable law, and 330, because the evidence is unchallenged and demonstrates that all of the work in question was done for the company, the time was accurately recorded, the services were rendered, were properly and accurately described, fees were billed in accordance with the terms and services agreement approved by the Court, the team was tightly managed by Mr. Boken, the rates are market rates and comparable to those charged by other firms in the space, the time spent was reasonable in light of the nature and complexity and importance of the issues, and in other comparable cases the vetters' advisory fees run rates were higher than $800,000 a month. The lodestar standard

has been applied in calculating the application, regularly hourly rates times hours worked. The fees charged were the same The

as those in nonbankruptcy cases.

services were either necessary to the administration of the case or reasonably

Trial 115 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 believed to be beneficial for the time rendered.

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Boken and other members of his team, Mr. Murphy, Mr. Orlofsky and Lee Smith were experienced restructuring professionals, CRA certified, CPAs in the process of being certified, et cetera. There's no contention that services were rendered that were duplicative, unnecessary or not beneficial. There's no dispute that this was a difficult and complex case that made enormous demands on the professionals who worked on it. KZC has exercised reasonable It has reduced its fees

billing judgment.

voluntarily by $2 million prior to applying, and it has clearly met its burden of proving entitlement to the fees that it seeks. The objection is based on a claim that KZC was negligent in the performance of the services, and we submit that the burden of proof in the negligence aspect of this case should be on the objector. In order to meet its burden the

objector must show that KZC owed a duty to

Trial 116 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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its client that it failed to discharge and that duty caused harm was the proximate cause of harm. There's no evidence of any breach of duty. There's no evidence that any breach of duty caused a loss. The fee

examiner's testimony does not establish that. She reached no conclusion that either Mr. Boken or KZC failed to perform in accordance with their duties. She did not identify any

person responsible for the alleged delay. She did not identify the length of the alleged delay. She admitted KZC was fully

aware of the liquidity issues which she identified converged with the operating problems which should have alerted people to the issues. She admitted the conclusion as to whether there was a delay would be affected by whether there was evidence in June of 2006 that people recognized the 2006 EBITDA would only be $120 million. She testified that all of the conclusions she reached on the four questions were in the report as were all supporting

Trial 117 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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facts, and although she testified that she reached the conclusion that some reduction in KZC's fees was warranted, she did not include that conclusion in her report. She did find that the value of this company increased during this case. Now, getting back to the point about what people knew in June of 2006, which is critical to the allegation of delay, Mr. Nurge testified that he knew in June of 2006 that EBITDA could be as low as $120 million and told that to Mr. Ross in the negotiations in July. Mr. Boken testified that he and

Mr. Nurge discussed in June the possibility that EBITDA could be as low as $120 million, which is consistent with the evidence that there was daily, sometimes more than daily, interaction between the Capstone team which was onsite at the company and the Kroll team which was doing the work as financial advisor. I think Mr. Macher's testimony is also important and I would like to review that briefly for Your Honor. He

was highly qualified operating with plastics

Trial 118 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 expertise. He was brought in to build a

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team and do the operational restructuring that every single party in this case agreed had to be done in order for there to be a successful restructuring. The company could

not restructure based upon its earnings at the beginning of the case, if there were any, and people assume there were none. In July of 2005 when he came in everybody was scrambling, including him. There were organizational and operating problems. experience. There was no CFO with operating He was not looking to KZC to

help in operations, and KZC was not hired to give him help in operations. Everybody knew as Exhibit 31 unequivocally demonstrates, Your Honor, and I take serious issue with Mr. Damren's closing in this respect, that everyone knew that the 2006 budget was Mr. Macher's budget. It says

so right in Capstone's report to its clients on that exhibit, and Mr. Nurge admitted he knew it and the evidence is overwhelming that everyone knew that this was Mr. Macher's budget that he was hired to bring it home.

Trial 119 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 He had skin in the game. He arranged his

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compensation so that if he didn't hit the plan, he wasn't making his bonus. Where Mr. Macher made his mistake as he put it was assuming that once he had identified the operational improvements that needed to be made, which Mr. Nurge identified as low hanging fruit, many, many opportunities for cost savings here, that the people in plastics would be able to take the actions necessary to deliver on them. That's where he freely acknowledged

that as the operating expert he failed. It took him nine months to understand the reality of the plants until April of '06. But the last straw was really the thing that the company had no control over. Remember that discussion about what

the company could control and what it couldn't control between Mr. Cooper and Your Honor? The company could control its cost

reduction, but couldn't control the OEM volumes, and Mr. Macher indicated that the last straw was when Chrysler said two weeks before you're going to get all the volume

Trial 120 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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we've projected and two weeks later we can't, 30 percent cuts, that's when they threw in the towel, that's when it was over. Mr. Macher testified quite clearly that Mr. Boken did what any appropriate financial advisor, chief restructuring officer should do with respect to the budgets. He and his team negotiated

them, they compromised over them, as Mr. Boken told you that the compromise was really over the $265 million number in the 2006 plan. Mr. Boken's concerns with people were made known to Mr. Macher. Mr.

Boken's concerns with the company's ability to deliver reports were made known to Mr. Macher. Mr. Macher agreed that Mr. Boken was Mr. Macher described him as If anything, Mr. Boken

not deferential.

a devil's advocate.

was aggressive in his challenging of the assumptions. So to the extent he could, he caused the initial projections of -- in excess of $300 million to be reduced down to the $265 million number that was ultimately

Trial 121 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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issued, and Mr. Macher freely admitted that what he didn't understand was how long it was going to take to get people into the right positions in the plants to implement the cost savings. Your Honor asked Mr. Macher whether because of the operational difficulties that he did not foresee, and was not able to foresee when he issued the forecasts, he agreed they were unrealistic. The key in that question of course is that he did not foresee and was not able to foresee, and he agreed, yes, with the benefit of hindsight I now know that they were unrealistic. But why would he have done an unrealistic forecast at the beginning of the case if he knew he couldn't make it? strictly strains credulity. Just like Mr. Macher's judgment, Your Honor should not use hindsight to test the validity of the KZC's fees in this case. Your Honor asked Mr. Macher whether anything about KZC's work was deficient or incompetent or violated a duty, It

Trial 122 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and he identified as -- Your Honor, or an

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area of weakness he thought was analyzing the reasons for the variances, but he knew that that was not KZC's forte, and he was not looking to KZC for that. He was looking to

hire a CFO in 2005, and the issues in this case do not turn on what happened in 2005. The issues in this case turn on what happened in 2006. So Mr. Macher got his CFO in 2006, who did issue reports which are in evidence showing the reasons for the variances. So to the extent that there was

a weakness that Mr. Macher identified in 2005, it's not relevant to Your Honor's decision here. It has nothing to do with the alleged delay or the alleged losses, because it was rectified. Remember the description by Mr. Trenary of his reporting system that was implemented in 2006 and allowed people to see the causes for the misses. That was why Mr.

Macher wanted a CFO in 2005 and why he eventually got one in 2006. I would like you to keep Mr.

Trial 123 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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Macher's description about Mr. Boken in your mind as you consider this case. This is Mr. Boken

from Mr. Macher's testimony today.

I had great respect for, he's very smart, he works very hard and he assisted a great deal. I don't think you could have a better CRO. Never deferential, always the devil's advocate. If you look at the objector's pre-trial brief, Your Honor, they identify a number of things that a CRO should do. The

evidence shows that we did every single one of them. We analyzed the feasibility of the

plan and model using our expertise, we thoroughly reviewed the historical results at the plant level. We reviewed the assumptions

for reasonableness, which led to a 40 to $50 million reduction in the initial forecast for 2006. We interviewed management to challenge

and validate the assumptions, acting as the devil's advocate. We made sure a tactical We did a

plan was tied to each assumption. bottoms up and top down analysis.

There was a model used to compare actual with projected results in '06.

Trial 124 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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There was a variance analysis performed in '06. Projections were adjusted as necessary

in light of performance and we brought professional skepticism to bear. The skepticism as I mentioned which led to a reduction in the plan of 40 to $50 million is important because, if you remember, KZC was attacked by the creditors committee for doing that in Exhibit 63, I believe it is in evidence, Your Honor, you remember the testimony in that document where the committee accused us of being overly aggressive in our attacks on the projections and here we're being accused by the banks of not vetting the projections at all. And this goes to what Mr. Cooper said, which is whether you like -whether you like the business plan depends on where you sit in the capital structure. you're high in the capital structure, you want low numbers, if you're low in the capital structure you want high numbers. The If

board was fully informed by KZC of the need for credible projections, which is in the board minutes in evidence at Exhibit 4-H on

Trial 125 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 August 18th, 2005, and it follows in many other board minutes.

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Even Capstone admitted in Exhibit 20 that the sale process wouldn't really be harmed by overly optimistic projections as long as there was a fully comprehensive sale process and buyers got a chance to do their own due diligence. Remember Trenary's testimony that it was a bottoms up process that was used in creating the budget with a top down review. It was an iterative process, which

is a very important word, which is a fancy word for being a devil's advocate, which is people sitting around arguing over the assumptions, arguing over whether something's going to work, give and take back and forth challenging the numbers. He and Mr. Boken were both focused on the plastics business and understood those issues and fixing those problems was undeniably the responsibility of operating management and not the finance people. Mr. Trenary didn't need to visit the

plants to do his work, and when he finished

Trial 126 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the four plus eight plan he had received specific action plans from the plastic division heads for gap closure and had

July 31, 2008

reached -- and had no basis to question the assumptions in that plan. In late June or early July the company told the banks that they were going to miss the four plus eight plan, also told Mr. Ross prior to that July 12th meeting. Mr. Ross still offered 80 cents in

cash and a note with a value close to 1.2 billion. The lenders wanted 90 cents in cash

and an unconditioned note. The lenders thought according to Mr. Nurge that Mr. Ross really wanted these assets, they were synergistic, they added to the rollup he was doing and they were integral to his operations. He had already bought Collins &

Aikman in Europe. Mr. Nurge argued to Mr. Ross in that meeting that the 2006 projections did not matter, they should focus on the 2007 projections. He argued to Mr. Ross, as he

testified, that the company's going to do 120 million in 2006 EBITDA, so you should tag

Trial 127 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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your purchase price adjustment to that number and you should really tag your value to the 2007 projections. Now, Mr. Ross, nobody argues he's not a smart guy. He probably knew he

was the only buyer and his offer was the best by far. You saw the two offers that

were received and Mr. Ross's was several hundred million more than Cerberus's for the same assets. So he wouldn't give the banks So the bank said okay, we

what they wanted.

have three options, the best option is obviously the sale to Mr. Ross at a price we like, which, you know, the difference was only about $75 million if you look at it carefully, plus the terms of the earnout note. The second best is a plan, and the third best is a liquidation. really don't want to do a plan. We

We don't

want to own this company the bank said to themselves, but we have to do a plan to try to keep Mr. Ross honest, to try to get back him to the table and pay us what we want. So they sent him away in

Trial 128 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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July and started the process of a bank plan. So he had competition and the company begged them to sell to Mr. Ross now in July. to him now. You've seen the E-mails Sell

summarized by Mr. Novikoff at the meeting where Mr. Cooper and Mr. LoBiondo argued strongly to the banks, you're much better off in a standalone, I'm sorry, in a sale to Ross than a standalone, don't overplay your hand, I can get Wilbur to negotiate, you know, let's do a deal with him now. They

said no. And they're entitled to do that because as we told them, as we recognized at the time, they were the fulcrum security, but knowing that 2006 EBITDA was only going to be 120 million, they sent Ross away and they decided to try to do a plan, which everyone knew had a lot of challenges at 120 million, and as we know now, that was a mistake. You asked Mr. Nurge what did KZC do wrong. He said deferring to Macher on an unrealistic plan was wrong. testimony. That was his

That was the only thing he could

identify that KZC did wrong, and we heard Mr. Macher directly refute that. KZC did not

Trial 129 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 defer to him, that they were the devil's advocate.

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I thought that the allegation of Mr. Boken or KZC's control over the company had been thoroughly refuted by the evidence, so I was surprised to hear Mr. Damren argue that we were in control of the company. If Your Honor looks at the terms

of the services agreement, and the resolution of proving it, you'll see that the services agreement in 2-B says that our work is subject to the control of the board and the resolution says the same thing. The allegation that we did not independently evaluate the protection -the projections we think has fallen apart. The allegation in closing that nobody knew that we weren't running the projection process we think falls apart when you read Exhibit 31. The allegation of negligence due

to no plant visits falls apart on several levels when you heard the testimony that there were plant visits made in 2005, that Trenary didn't need to do plant visits to do his work on the four plus eight or six plus

Trial 130 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 six, and that Mr. Macher was all over the plants from inception.

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The allegations of negligence due to the failure to appreciate management's shortcomings we think are overcome by the July 2005 situation assessment and evidence which speaks quite clearly to KCZ's perception of the deficiencies in management, including management at the plant level. projections didn't harm the sale process because as I said Capstone recognized in its September 2005 report buyers would make their own determination of value no matter what the projections said. The allegation of damage caused by a delay is unsupportable, as Ms. O'Neill said, there would be no delay if people knew in June that 2006 EBITDA was only going to be 120 million, and the uncontroverted testimony is that both Mr. Nurge and Mr. Boken discussed the likelihood in June of 2006 the 2006 EBITDA would be 120 million. The banks could have avoided these losses we believe, alleged losses by The

Trial 131 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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selling to Ross, which we argue breaks the causal chain. The evidence compels a finding

that this proceeding actually benefitted the lenders since it's also undisputed that value increased during the course of the case, so that the operation of this company in Chapter 11 improved the bank's recovery rather than harming it. And ultimately, Your Honor, the negligence aspect of this case is about choices that people made. People chose at the beginning, including the lenders, to try to turn around Collins & Aikman rather than liquidating it because they knew that that was their only chance for a significant recovery, otherwise they were facing scrap value. They chose to agree to the hiring of

Mr. Macher with very strong operating credentials and strong views of what he could do to improve the company. They chose not

to listen to us, or to the company when it begged them to sell to Mr. Ross and all of those choices we think break the causal chain from the alleged negligence to the damage. We know 44.4 million sounds

Trial 132 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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like a great deal of money, but a great deal of valuable work was done to support it and we respectfully ask Your Honor to award the application in full. THE COURT: MR. DAMREN: Thank you, sir. May I have two I only

minutes, three minutes of response? used 15 minutes of my time. REBUTTAL BY MR. DAMREN:

The focus on misses on EBITDA, while it has certain significance to the operating plans in the budgets, and in this case more than it might in others, because the expectations of the OEMs in addition to the other constituencies, and the fact that the OEMs keep these kind of companies, these suppliers on a short leash in terms of time, by that I mean they're going to come up with contracts for the following year, these things only last year to year, these contracts with the OEMs, if they don't think you're going to make it, or you're a good company, you have a year in which to prove it. So there's a risk for

Trial 133 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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them in terms of you present a budget that's way overblown, you're going to have a very short period of time to rebuild your credibility, and this was most distressful to Collins & Aikman because they were just coming off a huge accounting fraud and having their CEO canned and all those kind of things. But EBITDA misses is not just about missing the budget. The point about

them is it's more instructive of a deeper problem, and that's the true criticism of Kroll here. flags. The EBITDA misses were red

The deeper problem was they should

have done that deep dive into plastics early on. Those misses were instructive to Mr.

Trenary, they should have been instructive in the prior period, in January, February, March to Kroll, to the fact that they should have done a deep dive then. You've heard testimony that this deep dive should have occurred at the beginning of the case. It should have

occurred in January if it didn't occur then. The fact that we waited until the first time

Trial 134 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

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CFO after he conducts his routine three plus nine and turns it into a four plus eight and is astounded when it misses the first month does the deep dive that's necessary to uncover all these fundamental problems from his perspective in plastics, just tells you how important that was, and how obvious it should have been to Kroll. And yes, when Mr. Nurge testified he did say the problem was that Mr. Boken was being too deferential to Mr. Macher and others and not challenging these things, but what Mr. Nurge did not have the benefit of when he testified that way was the fact that he assumed like everyone else did that Kroll had capabilities to do the type of analysis to deal with the variances that Macher said he needed, and so now it turns out that it wasn't a question of being too deferential, it's that Mr. Boken and Kroll didn't have the tool set in this particular area to deal with these kind of intellectual, I mean operational analytics and metrics, they just didn't have it. So that's the problem. I

Trial 135 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 we will use then.

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think the evidence shows quite clearly that Ross is a red herring here. I mean, if you

followed through the Ross offer, which had a bazillion conditions to it, just follow it through in the regular course of how those matters proceed, July would have stretched into August and to September and by then the figures on the six plus six would have been out to the OEMs, and that was the death of the company. It would have -- Ross's offer would have never been concluded. had to have deals with the OEMs. He said he He put all

those contingencies in there, so it's just a red herring from the failings of Kroll. Thank you, Judge. THE COURT: I would like to

suggest to you to return for a decision here in open court August 21st at 10:00 a.m. MR. DAMREN: be in trial but Mr. Rose can. MR. DeFILIPPO: Your Honor. Thank you. THE COURT: That's the date I'm free, I'm scheduled to

The only other unfinished

Trial 136 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Your Honor. THE COURT: We'll be in piece of business is your stipulation regarding the list of exhibits which have

July 31, 2008

been admitted into evidence, so the sooner you can get that file for me, the better. Thank you. Anything else? MR. DAMREN: No, Your Honor. Thank you,

MR. DeFILIPPO:

recess before the next hearing, but I want to see Mr. Rose and Mr. DeFilippo at the side of the bench. (Proceedings adjourned at 1:45 p.m.) * * *

Trial 137 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
I , KATHY ADKINS, Certified Shorthand Reporter for the State of Michigan, CERTIFICATE OF REPORTER

July 31, 2008

do hereby certify that the foregoing was reported by stenographic and mechanical means, which matter was held on the date, and at the time and place set out on the title page hereof and that the foregoing constitutes a true and accurate transcript of same. I further certify that I am not related to any of the parties, not am I an employee of or related to any of the attorneys representing the parties, and I have no financial interest in the outcome of this matter. I have hereunder subscribed my hand on the ____ day of _____________, _______.

_____________________________________ Kathy Adkins, CSR-4697, RMR, RPR, B.A.

Trial 138 A aback 109:15 ABC 39:8 abilities 94:5 ability 12:20 26:24 27:7 110:19 120:15 able 13:5 16:18 25:15 110:20 112:4,6 119:11 121:9 121:12 about 10:6,18,19 15:2,3 16:12 16:16 19:7,9 19:10 20:13 22:8 23:4,14 24:4 25:6,24 26:19 28:18 29:20,21 30:9 31:12,22 32:14 37:17 40:9 46:25 51:5 58:22 61:18 63:17 66:20,25 69:25 71:25 77:23 78:2,2 78:6 79:6 90:3,9,16 94:24 95:11 96:10,25 101:4 104:10 104:15 105:8 106:7 109:22 113:22 117:7 119:18 121:24 123:1 127:15 131:10 133:10 133:10 accept 69:19 71:15 82:19 acceptable 23:20 52:16,18 53:6,7 accepted 52:19 access 112:7,9 accommodation 88:10 accordance 114:10 116:9 according 107:3 109:1 126:14 accounting 133:6 accumulating 26:16 accurate 72:20,22 137:9 accurately 48:2 114:7,9 accused 124:12,14 achievability 43:10 achievable 81:11 Achievement 12:18 achieving 84:6 acknowledge 83:14 acknowledged 119:12 acted 73:22 acting 15:12 123:20 action 126:2 actions 13:10,11 119:11 activities 44:7 activity 11:5 107:12 actual 42:19 58:25 64:19 97:16 123:25 actually 22:10 28:8 34:8 69:16 77:11 80:19 100:6 102:1 108:10 131:3 actuals 94:16 107:11 adamant 95:14 add 27:5 92:2 93:24 95:12 95:21 added 126:16 adding 91:25 addition 32:9 45:6 47:16 101:18 132:16 additional 47:3 50:2 91:7 93:10 adequately 43:23 adjourned 136:13 adjust

July 31, 2008

35:15 adjusted 19:1 20:18 124:2 adjustment 127:1 Adkins 1:20 137:3,22 Administered 1:8 administration 114:25 admission 59:10 69:1 82:9 admissions 87:10,11 admit 58:23 59:17 69:11 admitted 59:18 85:15,16 85:20 86:4 87:6,8,12 89:12 96:8 100:19,20 113:19 116:13 116:18 118:22 121:1 125:3 136:3 adopt 73:11 adopted 73:17,20 74:15 adoption 73:25 adverse 87:13 advice 44:18 advise 23:14,17,19 advised 23:6

Trial 139 advisor 28:22 55:20,25 56:9 79:24 84:24 103:9 104:3,7 106:15 117:21 120:6 advisors 71:20 103:5 104:8 112:13 112:14 advisory 114:18 advocate 33:15 120:19 123:8,21 125:14 129:2 affect 61:19 affected 72:2,5 81:13 81:16,20 116:20 affiliates 39:20,24 after 8:21 20:12 24:1 38:13 46:17 50:24 51:3,15,19 57:19 58:7 61:18 62:15 65:16 72:14 72:15,17 75:24 99:8 110:3,5 111:16 112:21 113:2 134:1 afternoon 98:23 afterwards 61:25 again 38:2 50:15,20 53:4 61:11 62:18 75:19 89:4 111:13 111:14,15 agent 107:20 108:8 aggressive 13:18 17:25 57:7 120:20 124:13 aggressively 34:7 ago 110:12 agree 25:16,19 60:14 68:19 69:21 78:12 88:10 99:22 113:24 131:17 agreed 20:9 52:14 53:20 96:6 118:3 120:17 121:10,13 agreement 29:15 34:6,19 102:21 104:15 114:11 129:9 129:11 ahead 24:6 35:16 Aikman 1:5 8:5 9:11 92:18 100:11 102:22 103:2 126:19 131:13 133:5 al 1:5 alert 46:7 alerted 116:16 alienation 11:18 all 12:2 14:12 15:22 18:4 19:4,12 20:24 21:16 36:1,3 37:3,4,25 38:2 40:12,24 45:20 46:15 47:6,19 48:11 48:17 49:19 51:1 54:9 55:5 56:7 58:16 60:11 60:25 65:22 66:2 69:6 74:15 82:3 88:25 89:12 89:19 91:24 104:2 106:13 106:15,16 107:25 109:6 109:22 110:10 111:16 112:16 112:18 113:23 114:3,6 116:23,25 119:25 124:15 130:1 131:22 133:7 134:5 135:13 allegation 117:9 129:3,14 129:17,20 130:15 allegations 130:3 alleged 80:5 116:11,13 122:17,17 130:25 131:24 allow 26:8 69:11

July 31, 2008

allowance 113:24 allowed 23:6 28:14 112:23 122:21 allowing 113:19 along 100:23 already 19:13 126:18 also 16:21 17:15 19:12 30:3,15 40:18 52:21 53:24 70:7,10 73:17 80:2 83:14 96:16 117:23 126:8 131:4 alternatives 108:3 although 117:1 always 20:17,21 29:2 33:14 35:1 66:5 110:6 112:15 123:7 ambitious 18:12 amount 11:3,11,20 21:3 53:2 amounts 53:20 105:1 analysis 26:6 30:23 36:17 73:25 75:6 110:20 123:23 124:1 134:17 analytical 26:17 37:19

Trial 140 93:7,16,19,25 94:5,20 101:16 108:17 110:20 analytics 134:23 analyze 108:22 analyzed 123:13 analyzing 122:2 and/or 53:19 Ann 38:20 96:24 another 71:5 104:7 110:17 112:14 answer 41:18 42:2 44:17 56:25 61:1,11 65:24 75:4 76:23 80:8,20,24 101:4 answering 48:19,25 answers 50:5 66:8 72:25 80:1 Anymore 85:2 apart 25:22 83:19 129:16,19,21 apologized 25:10 apparently 112:5 appear 38:4,6 113:18 Appearances 2:1 3:1 4:1 8:6 appeared 26:11 Appearing 2:8,17 3:17 4:9 applicable 114:4 applicant 2:8,17 8:9,11 8:13 application 48:3 107:23 113:22 114:2 114:21 132:4 applications 40:19,25 41:21 106:20 applied 114:20 applies 107:22 apply 73:24 94:20 101:21 applying 115:16 appointment 45:15 103:15 106:4 appreciate 81:6 89:15 113:18 130:4 appreciation 9:2 appropriate 49:6 56:12,22 72:9 73:10 74:21 75:2 79:23 95:12 120:6 approval 32:1 92:7 93:1 approve 92:4 approved 29:10 114:11 approving 55:5 approximately 32:25 April 16:17,17 32:25 113:9 119:15 Arabia 34:8,14 35:3 area 28:15 37:7,8 103:14 107:7 107:15 109:3 109:5 122:2 134:22 areas 26:4 94:5 argue 129:7 131:1 argued 126:20,23 128:6 argues 127:4 arguing 125:15,16 argument 87:16 101:11 113:14 arguments 5:19 98:22,24 arms 35:25 around 36:1 64:3 107:21 125:15 131:13 arranged 119:1 arrive 38:5

July 31, 2008

arrived 9:20 articulated 58:11 asked 14:17,25 17:21 23:1 36:2 46:19 49:17 49:24,25 52:24 59:14 61:2 79:6 84:2,14 101:19 107:1 110:14 121:6 121:23 128:20 asking 46:25 aspect 9:19 115:23 131:10 assess 19:17 assessing 16:24 assessment 130:6 assets 33:4 126:15 127:10 assignment 11:17 assist 94:15 101:16 assistance 44:10,13,14,20 44:22 45:13 103:6 assisted 30:1 123:5 assisting 26:7 associate 48:9 associates

Trial 141 63:11 assume 73:20 75:6 76:3 118:8 assumed 76:2,6,23 134:15 assuming 16:6 119:5 assumption 13:8 123:22 assumptions 43:17 65:8,11 65:12 82:3 120:21 123:16 123:20 125:16 126:5 assured 23:13 astounded 134:3 astute 41:1 attached 7:6 77:9,15 82:5 attacked 124:8 attacks 124:13 attendance 86:7 attended 67:18 attention 61:5 84:13 96:4 113:17 attorney 41:5 attorneys 23:18 32:2 137:13 audit 54:8 August 20:4,5 63:24 91:15 125:1 135:7,19 authorized 9:16 automotive 30:15 37:1,20 39:18,23 45:7 45:8 67:6 93:11,20,23 93:24 94:12 available 9:24 10:5 11:24 69:9 74:6 75:7,16 76:24 78:14 78:17,22 79:1 91:11 Avenue 2:5 avoided 130:24 award 12:18 132:3 awarding 114:3 aware 54:9 68:10 75:20 76:1,9 93:20 116:14 awkward 28:23 a.m 1:14 38:7,9 100:25 135:19 B B 72:19 back 11:10 14:8 19:2 25:20 26:11,13 38:8 49:11,16 50:11 80:21 80:23 100:15 101:1 117:7 125:17 127:23 background 12:15,16 95:3 backs 34:2,3 bad 13:14 badly 17:2 104:5 bag 25:4 bailiwick 58:12,13 balanced 35:1,5 ballpark 52:17 53:6 bank 54:15 127:11 127:21 128:1 bankruptcy 1:16 27:17 39:9,13,19,21 39:24,25 40:4 40:12 57:15 92:20 102:23 banks 36:21 37:17 124:14 126:7 127:10 128:7 130:24 bank's 95:21 131:7 barriers 35:21 base 10:3 21:1,2,4 21:7 based 11:25 20:20

July 31, 2008

51:12 81:5 115:19 118:6 baseline 106:9 basically 104:17 basis 17:1 35:13 47:2 56:20 67:25 69:12 69:25 112:8 126:4 bazillion 135:4 bear 124:4 became 10:20 11:19 14:14 17:16 33:2 44:2 53:19 68:10 because 11:8,23 14:11 15:19,23 17:12,14 19:8 19:9,12,13 20:15,18 22:1 23:9 24:21,22 24:25 25:13 27:1 30:20 31:11 34:13 44:16 47:7 49:22 52:3 54:2,4 55:8 56:23 57:5,5 57:22 58:7,13 61:2 65:16 76:5 77:21 83:11 84:18 85:16 87:9 89:21 94:17 100:10 103:5 104:1 106:3 109:2,16,23

Trial 142 111:17 112:7 113:24 114:4 121:7 122:17 124:7 128:13 130:11 131:14 132:15 133:5 become 40:6 41:1 before 9:8 11:19 13:20 32:13 32:14,17 47:13 61:9,21 75:8 77:7 84:1 94:1 119:25 136:10 beforehand 14:19 began 21:20,21 47:13 51:16 begged 128:2 131:22 beginning 31:11 74:8 118:7 121:17 131:12 133:23 begins 52:10 behalf 2:8,17 3:17 4:9 8:9,15,17 104:20 behave 28:24 56:4 being 10:19 17:23 29:14 33:22 67:22 87:19 94:15 97:16 102:7 103:21 103:22 104:15 106:15 108:24 111:19 113:3 115:7 124:12 124:14 125:14 134:11,19 believe 9:21 12:6 14:15 31:23 51:8,18 52:13 55:12 56:23 58:3,5 61:5 61:15,16 63:23 68:3,6 75:12 77:10 83:3,9,12 84:22,22 86:25 95:1 97:3,4,22 124:10 130:25 believed 53:15 58:14 65:23 66:3 68:4,6,14 71:2 72:18 83:15,16 97:5 115:1 believes 98:4 bench 100:16 136:12 beneficial 115:1,10 benefit 49:5 121:13 134:13 benefitted 131:3 best 63:17 127:7,12 127:18,19 better 26:8 30:7 94:22 99:7 123:6 128:7 136:4 between 19:19 29:3 33:21 53:10 55:1 63:21 64:5 77:25 94:5 107:17 112:12 117:18 119:20 beyond 53:16 55:14 bifurcated 113:25 big 11:18 21:11 23:12 86:13 biggest 28:6 70:14,21 71:12 billed 114:10 billing 115:15 billion 39:15 126:12 binder 62:25 Birch 97:14 98:9,10 bit 14:8 19:2,6 28:23 29:3,17 109:15 blame 110:25 blank 17:21 blew 24:25 Bluewater 39:23 board 22:19,20 29:7 55:19,20 60:22 61:12 67:9 68:8,10

July 31, 2008

68:14 73:11 73:17,19,22 74:1 103:10 103:20,24 107:20,25 108:4,6 124:23,25 125:2 129:12 board's 57:20 Boken 2:9,18 5:15 18:18 20:9 26:12 29:21 29:24 30:7 36:13 66:12 73:6 81:19 84:8 89:18,20 89:25 114:12 115:3 116:9 117:13 120:5 120:10,17,19 123:1,3 125:19 129:4 130:21 134:11 134:20 Boken's 30:11 84:13 120:13,15 bonus 119:3 book 88:13 books 75:22 both 22:2 32:2 45:4 55:8 71:1 89:4,5 108:5 125:19 130:20 bottoms 123:23 125:10 bought 126:18

Trial 143 breach 116:5,6 break 21:20,22 38:5 131:23 breaks 131:1 brief 123:10 briefly 117:24 bring 12:2 14:18,22 61:4 97:1 105:2 118:25 bringing 93:13 94:11 95:6 broke 18:5 brought 62:21,22 84:10 84:12 103:7 118:1 124:3 budget 73:11 90:12 102:17 118:20 118:20,25 125:11 133:1 133:10 budgets 21:25 102:15 106:22 108:14 120:8 132:13 build 118:1 building 14:7 bumper 13:24 burden 100:1 115:17 115:22,24 business 11:22,25 16:4 17:25 19:16 20:1 34:16,18 34:21 35:10 35:12 37:21 39:9 42:16 43:10,18 44:15 56:25 57:7,12,21 73:13,24 84:6 107:23 124:18 125:20 136:1 buyer 127:6 buyers 125:7 130:12 B.A 1:20 137:22 C C 3:11 calculating 114:20 call 54:10 called 8:21 10:24 38:13 45:20 51:11 calling 112:18 came 14:8 16:11 17:10 18:6 19:3,18,23 20:2 23:14 44:21 51:6 54:23 57:4,18 71:22 72:8 79:14 102:10 118:9 canned 133:7 cannot 69:19 cap 57:12 capabilities 134:16 capability 13:3 91:11 93:25 capable 11:23 13:8 15:24 28:16 capacity 37:19 capital 22:2 124:19,20 124:22 Capstone 90:24 110:11 112:12,17 117:18 125:3 130:11 Capstone's 118:21 car 104:18 Card 40:1 Cards 39:25 care 79:23 100:2 career 11:9 39:10 careers 10:20 carefully 127:16 carried 41:23 48:10 carry 45:18 carrying 44:11

July 31, 2008

Caruso 44:19 84:25 85:10 87:10 88:13 89:1,4 case 1:7 8:4 9:18 25:22 31:22 33:9 38:25 41:15 42:15 44:12 50:7 55:21 57:6 58:3 60:12,16 60:18,19 67:10 68:1 71:1 74:8,13 85:9 94:13 97:9 98:7 102:12,18 103:17 104:2 104:24 105:5 105:21 106:3 106:14 108:11 109:7 110:23 112:21 113:3 113:17,25 114:25 115:12 115:23 117:6 118:3,7 121:18,22 122:7,8 123:2 131:5,10 132:14 133:23 cases 40:18,20,23 45:5,6,9,10 63:14 64:12 64:13,19 99:23 114:17 114:23 cash 11:15 27:23 34:3 35:22 57:10,16 126:11,12 causal

Trial 144 131:2,23 cause 116:2 caused 71:13 72:23 94:7 116:2,6 120:23 130:16 causes 122:22 Center 2:13 3:14 cents 111:8,23 126:10,12 CEO 9:11 17:12 23:10 133:7 Cerberus's 127:9 certain 22:25 26:4,22 28:5 55:13 65:13 69:5 90:5 132:12 certainly 75:10 86:15 93:18 107:1 107:25 CERTIFICATE 137:1 certification 39:8 certified 115:6,7 137:3 certify 137:5,11 cetera 115:7 CFO 10:12 27:6,11 27:18 31:5,20 36:16,22 37:18 91:2,8 91:8,9,20,22 92:4,17 93:22 94:24,24 96:16 97:1 106:24,25 107:2 109:12 110:9 118:12 122:6,10,23 134:1 Chadwick 105:17 108:17 110:10 chain 131:2,23 chair 9:1 chairman 24:21 28:22 103:11 challenge 20:17 28:6 41:4 123:19 challenged 83:10,11,23 84:2,13 challenges 43:20 128:18 challenging 83:20 120:20 125:18 134:12 chance 19:16 57:22 61:20 70:17 70:24 125:8 131:15 Chang 3:12 8:16,16 changed 20:13 50:16 110:16 changes 43:22 Chapter 1:4 33:3 40:17 45:10 101:24 102:14 131:6 charge 104:16 charged 114:14,22 chart 58:24 chased 47:5 check 77:3 checked 49:12,13 checking 49:17 50:21 cheerleading 104:25 105:1 Chicago 4:7 85:17 chief 28:2 30:8,10 31:13 90:16 120:6 choices 131:11,23 chose 131:11,17,20 Chrysler 17:5,12,17 18:5 34:17,19 35:8 119:24 circumstances 14:16 33:16 44:8 civil 99:23 claim 115:20 clarify 68:2 clarity 49:15 class 106:15

July 31, 2008

clear 20:22 33:2 44:2 49:11 50:21 66:6 97:6 110:1 clearing 98:19 clearly 76:16 115:17 120:5 130:7 135:1 CLERK 8:3 client 33:6 87:13 111:6,17 116:1 clients 118:21 client's 111:3,19 close 110:17 126:11 closed 75:22 closely 18:19 68:9 closing 5:19 98:22,24 99:3,11 101:11 102:16 113:14 118:18 129:17 closure 126:3 code 40:4,13 coin 84:19 collecting 14:12 Collins 1:5 8:4 9:10 92:18 100:11

Trial 145 102:22 103:2 126:18 131:13 133:5 come 20:12 34:12 40:2 46:5 53:14 55:10 56:10,19,20 57:2 72:13 96:1 100:15 104:8 105:22 110:25 132:20 comes 109:9 comfortable 54:15,16 55:15 coming 9:2 13:15 34:5 38:2 85:8 89:4 90:4 93:22 100:12 111:10 133:6 comment 28:18 29:21 comments 49:25 50:12 93:5 committee 31:4 36:23 45:23 53:23 54:8 55:23 56:2 103:12 103:16 108:7 124:9,12 committees 32:1 53:12,13 common 109:20 companies 40:11 132:18 company 9:25 10:7,8,24 15:22 22:25 24:17 30:2,24 31:13 35:19 40:1 57:10 60:23 68:9,15 75:7,16,25 76:12,23 78:13,21 90:17 92:18 103:19 104:20 111:11 114:7 117:6,19 118:5 119:17 119:19,21 126:7 127:21 128:2 129:5,8 131:6,20,21 132:24 135:10 company's 70:8 71:20 76:21 81:6 120:15 126:24 comparable 114:13,17 compare 123:25 compels 131:2 compensation 40:14 97:24 119:2 competence 27:7 competency 28:7 competent 27:22 67:6 competition 128:2 complaints 111:6 complete 64:21 102:22 complex 17:6 115:12 complexity 114:16 comprehensive 125:7 compromise 19:19,20 20:10 90:5 120:10 compromised 18:20 33:15 120:9 concentrated 39:12 concern 10:15 22:21 23:1 29:5 31:12 32:23 33:5 92:21 110:3 concerned 10:19 19:9,10 23:3 95:11 concerns 95:10,20 120:13,15 conclude 66:15 74:12 79:22 80:24 concluded 49:9 51:3 58:2 135:12 conclusion 55:3 56:10,20 56:21 57:3,4 66:7,12 70:1 72:2,8,10,14 73:21 74:5,18 74:25 75:3 81:5,13,17,20 83:20 116:8 116:18 117:2 117:4 conclusions 50:3,16 61:20 65:23 66:4 72:19,23,24

July 31, 2008

83:12,22 99:3 116:24 conditions 135:4 conduct 63:21 101:24 conducts 134:1 confidential 54:7 confidentia... 49:22 confirm 69:7 89:11 confirmed 108:20 conflict 103:14,17 conflicted 96:17 connection 44:24 60:20 consent 87:21 consider 64:25 123:2 consideration 97:17 considered 50:14 61:25 67:5 76:20 consisted 40:22 45:22 consistent 15:21 17:20 41:10 96:13 109:19 111:21 117:16 constantly 40:12 constituencies 43:25 102:8,9 110:11 112:18 132:16

Trial 146 constituent 54:4 104:11 constituents 45:21 46:4,21 46:24 49:16 51:2 74:16 103:19 105:11 106:14,16 constitutes 137:9 consultant 44:16 45:3,6 contact 45:20 contacted 46:3,18 contain 50:4 64:21 66:11 contained 66:5 72:10 contains 65:22 contention 54:3 115:8 context 23:4 24:16 contingencies 135:14 continue 44:6 57:15 continued 3:1 4:1 20:16 25:11 contract 91:21 92:4,8 92:23,25 97:8 98:2 contracts 24:10 132:20 132:22 contradictory 69:8 control 15:11 33:6 119:17,19,20 119:21,22 129:4,7,12 controllers 28:8 converged 57:8 58:14 116:15 convergence 57:6 94:4 conversations 91:13 conversing 37:17 convey 90:19,23 conveying 96:15 Cooper 3:5,9 22:8,16 22:17 24:12 24:13,21,24 25:21 32:2 46:1 66:16 68:8 107:3 112:15 119:20 124:17 128:6 cooperative 47:8 copy 63:12,15 88:22 corporate 27:4 Corporation 1:5 8:5 39:24 corporations 39:13 correct 50:1 56:16,18 60:8,9 62:5,6 62:16 65:25 72:12 73:4 76:6 78:11 80:6,13,22 81:3 82:7 89:2 corrected 53:18 corrections 65:17 correctly 86:4 corruption 22:22 cost 12:23,24 14:20 15:3 19:4 21:6,7,15 33:22 34:1 119:9,21 121:4 costs 17:7,14 29:1 34:11 couldn't 14:15 28:3 36:19 55:1 98:9 119:20 119:22 121:18 counsel 3:4,9 36:5 58:18 67:17 67:19 68:24 70:8 85:11 92:22 96:6 98:6 100:23 count 28:8 country 103:5 couple 16:23 60:3 84:14 course 23:5 40:16 60:4,12 65:9 67:15,16

July 31, 2008

69:17 107:2 111:25 112:4 121:11 131:5 135:5 court 1:1,16 5:6,11 8:3,3,6,18,25 9:7,15 32:13 32:17 36:3,8 37:25 38:10 38:18 41:17 42:3 49:20 58:16 59:1,5 59:9,13,16,16 63:1,4 68:24 69:13,18,22 70:2 72:8 73:1 77:20 79:18 81:25 82:14,21,22 83:1,7,19 84:24 85:2,7 85:21,22 86:20 87:15 87:24 88:3,7 88:12,19,23 89:3,13,15,19 92:5,14 93:1 94:2 95:16,23 98:15,21 99:4 99:9,15,19 100:5,24 101:3,4,9,15 101:19 102:7 102:12 105:12 110:23 113:20 114:11 132:5 135:17,19,24 136:9 courtroom 67:18 100:12 court-appoi... 38:24 cover 74:10

Trial 147 CPAs 115:6 CRA 115:6 created 9:10 creating 14:13 108:16 125:11 creation 76:21 credentials 131:19 credibility 65:2,5 133:4 credible 67:22 68:3 84:23 124:24 credit 32:1 creditor 43:16,24 creditors 27:6 31:3,4 36:22 45:23 124:8 credulity 121:19 critical 10:25 31:18,21 73:21,24 74:3 117:9 criticism 133:12 criticize 67:25 criticized 94:14 CRO 45:4 55:18,24 56:8 58:9 66:13 79:24 103:9 123:6 123:11 CROSS-EXAMI... 36:10 37:12 59:22 82:1 crown 34:9 crumbly 21:1,2 CSR-4697 1:20 137:22 culminated 50:9,17 culminating 48:16 curious 107:24 108:12 current 10:1 currently 39:22 customers 11:15 34:3 46:22,23 cut 18:7 29:22 31:1 cuts 120:2 CX-BY 5:7,8,12,13 D daily 117:17,17 damage 130:15 131:24 Damren 3:11 5:8,13,17 5:20,24 37:13 37:15,24 59:11 68:18 77:10 82:2,8 82:24 85:6,13 85:24 86:8,25 87:5,18 88:9 89:8 92:12 93:3 96:2 98:12,19 99:17,22,25 100:22 101:12 129:7 132:6 132:10 135:20 136:6 Damren's 86:10 118:18 data 23:5 26:16 48:1 date 75:13 100:15 135:24 137:7 dates 63:17 Davis 53:24 54:2,13 day 10:13 12:7 21:20 63:13 63:13 105:10 137:17 days 14:2 15:9 20:1 25:2 63:25 78:2 day-to-day 28:14 deal 10:17 13:13 30:2 40:14 51:18 70:16 70:23 94:5 98:25 111:4 123:5 128:11 132:1,1 134:17,22 dealers 18:2 dealing 34:14 111:20

July 31, 2008

deals 135:13 dealt 103:15 death 135:9 debate 57:19 debated 49:3 debates 90:11 debt 74:10 debtor 45:23 57:24 debtors 1:6 39:13 40:17 45:25 46:2 66:17 80:7,16,24 81:2 84:9 debtor's 43:8,19,20,22 43:24 44:3 decided 18:9 23:15 84:17 128:17 decimated 10:9 decision 29:13 55:16 56:4 57:18,20 95:8 96:22,23 104:20 122:16 135:18 decisions 53:16 108:2 declarations 87:7,9 deep 105:18,20 106:18 112:25 133:15,20,22

Trial 148 134:4 deeper 133:11,14 defense 110:24 defer 57:20 129:1 deferential 32:24 33:14 120:18 123:7 134:11,20 deferring 128:21 deficiencies 130:8 deficient 25:25 121:25 DeFILIPPO 2:3 5:7,12,16 5:21 8:8,9 36:6,9,11,12 37:10 58:19 59:3,7,20,23 63:3,6,7 69:3 69:21 70:4,6 77:12 78:4 79:15,20 81:23 82:11 82:18 85:4 86:1 87:2,4 87:21 88:1,5 88:17,21 89:2 89:9,14,17,24 92:10 98:13 98:17 99:1,5 99:12,21 101:7 113:15 135:22 136:7 136:11 defined 45:21 definitely 42:8 103:6 delay 33:21 42:10,14 43:15 56:24 71:3 72:3 75:7 80:5 81:5,13 83:10 116:11,13,19 117:9 122:17 130:16,17 delayed 80:14 deliver 13:10 119:11 120:16 demand 20:2 demands 115:13 demonstrated 108:18 demonstrates 114:5 118:17 denied 31:8 32:7 Department 27:11 dependent 17:13,15,23 depending 100:16 depends 67:2 81:14 124:18 deposition 71:18 85:15,19 86:4,8,10,14 86:19,23 87:1 87:3,6,6,8,8 87:11,16,19 87:22 88:2,16 depth 93:24 described 56:8 65:25 69:5 80:14 107:16 114:9 120:18 description 24:6 122:19 123:1 designation 86:14 designations 86:10 87:1,17 88:4,14 desire 90:16,20 96:15 desperately 10:2 destroyed 35:7 determination 130:13 determinations 65:2,6 determined 73:10 Detroit 1:18 3:15 Deutsch 2:4 devastated 35:10 development 26:7 43:21 devil's 33:15 120:19 123:7,21 125:14 129:1 dialogue 25:11 didn't 12:3 14:18,19 15:2 19:6 21:13 25:10 28:12 30:24 32:10 34:12 47:19 48:8,14 55:10,15

July 31, 2008

56:15 59:14 61:4,9 63:15 65:20 73:24 79:8,10 84:21 86:2,2 95:16 97:4 106:5 108:23 109:5 109:6 112:7,8 112:25 119:2 121:2 125:24 129:24 130:10 133:24 134:21 134:24 Dieter 18:5 difference 30:17 127:14 different 33:17,18 46:1 46:20 47:3 49:7 51:17 58:8,8 69:8 difficult 10:20 11:17 15:8 29:18 41:4 69:16 95:8 107:21 115:12 difficulties 25:13 121:8 difficulty 22:15 31:9 dilemma 21:11 diligence 112:5 125:8 diminished 44:4 direct 9:6 23:11 26:25 29:2 38:17 96:3 108:21 direction

Trial 149 23:16 24:16 26:17 62:9 96:17 directly 12:21 34:14 128:25 directors 66:22 73:11 103:11,20 107:19,25,25 108:6 disagreed 32:11 disagreement 86:13 disagreements 22:7 disarray 11:1 14:6 discharge 116:1 discipline 41:6,8 57:24 disclosed 43:24 discounted 84:20 discovered 43:11 discovery 42:10,15 56:24 discuss 14:19 discussed 96:11 117:14 130:21 discussing 22:17 58:7 discussion 24:8 48:21 90:4,11 119:18 discussions 84:4 94:10 95:9 108:3 dispute 22:18 103:1 115:11 disputes 22:6,14 disseminated 49:19,21 distinction 69:15 distinctly 105:24 distress 68:15 distressful 133:4 DISTRICT 1:1,1 dive 105:18,20 106:18 112:25 133:15,20,22 134:4 divide 102:12 division 1:2 42:14 43:9 43:21 126:3 document 52:13 96:9 97:12 124:11 documents 41:20 42:21 47:18 49:13 60:7,11 61:8 61:17 108:19 108:24 109:3 112:8,19 doesn't 80:15 doing 21:8 35:14 44:9 49:1,4 54:6 102:6 117:20 124:9 126:17 dollar 111:9,24 dollars 52:15,23 domestic 46:22 don't 19:1,21,23 22:13 26:2 30:7 32:5,13 32:25 33:13 35:17,18 37:4 37:22 52:20 53:25 54:19 54:23 61:5,12 61:16 62:23 64:15 69:10 71:6,7,9,11 72:21 73:19 75:22 77:16 78:21 79:9,12 79:16 83:25 85:18,19 86:6 86:11,25 87:14 94:25 95:4 99:12 100:2 101:13 109:3 123:6 127:20,20 128:9 132:23 door 10:13 doubt 49:5 down 8:25 9:3 16:20 31:5 38:1 41:19 47:5 50:15 54:23 60:18 108:22 110:9,13 120:24 123:23

July 31, 2008

125:11 draft 47:9,14 48:17 48:19 49:2,8 49:9,18 50:4 51:3 63:22,23 65:15,16 72:15,18 83:5 84:1,11 drafted 46:4 47:9 drafting 47:13 dramatically 17:9,18 draw 69:15 drawn 55:21 drew 76:10 dried 34:16 drill 108:22 drilled 110:9,13 drive 105:13 drop 17:8 dropped 110:16 DSI 44:18 45:1,3 47:22 48:21 84:25 due 54:7 112:5 125:8 129:20 130:4 duly 8:22 38:14 duplicative

Trial 150 115:9 duration 98:1 during 14:9 31:18 49:9 50:19 60:12 74:13 113:17 117:6 131:5 duties 66:13 116:10 duty 26:1 53:17 115:25 116:2 116:5,6 121:25 DX-BY 5:6,11 Dykema 3:13 4:4 8:15 E E 77:15 each 12:7 16:25 47:1 48:5 50:10 52:1 64:22 96:12 100:8 101:21 123:22 earlier 29:22 43:11 58:1,1 59:12 80:17,18,25 87:12 106:12 107:6 108:11 early 9:12 15:17 18:11 109:16 126:6 133:15 earnings 118:6 earnout 127:16 easily 47:24 110:18 East 4:5 EASTERN 1:1 EBITDA 57:11 71:21 73:3 74:16 81:7,11 104:25 110:16 111:12,14 116:22 117:11 117:15 126:25 128:15 130:18 130:22 132:12 133:9,13 edit 63:15 edited 62:11,12 63:11 educational 39:3 effect 43:9 70:14,21 effectively 24:20 eight 71:22 73:18,23 74:1,21 75:1 75:9,18 76:13 76:22,25 78:1 78:9,18,23 79:3,8,11 102:19 109:17 110:4 126:1,8 129:25 134:2 Eisenhower 3:6 either 43:15 47:23 68:23 84:11 89:7 113:9 114:24 116:8 eliminate 13:16 Elizabeth 3:3 8:10 emphatic 91:19 employed 38:22 40:13 41:11 44:15 employee 137:12 employees 22:25 23:2,16 employment 38:21 91:21 92:23 104:14 enable 65:24 end 19:15 20:5 28:3 33:1 51:8 endorsed 18:11 engaged 107:12 engagement 101:23 104:17 engaging 112:3 engineering 15:13 engineers 12:17 13:5 31:14 enormous 115:13 enough 23:2 32:20 37:5 48:13 66:25 67:4 84:23 105:2 entering

July 31, 2008

91:21 97:7 entire 14:24 87:2,5,7 87:19,22 88:2 88:16 entirely 32:19 entitled 69:17 128:12 entitlement 115:18 entity 57:16 entries 41:9 equation 108:5 equipment 13:6 14:6 15:23 equipped 16:1 especially 9:3,12,18 essentially 74:6 111:17 establish 116:7 established 12:8 13:9 estate 44:3,6 estimate 47:11 estimated 111:11 et 1:5 115:7 ethic 30:12 Europe 126:19 evaluate 129:15

Trial 151 events 24:10 34:22 35:6 70:11 eventually 27:19 53:19 122:24 Everett 13:23,24 14:3 21:16 everybody 102:21 105:8 110:25 111:1 118:10,16 Everybody's 102:23 everyone 33:2 38:10 49:25 54:1 84:21 101:3 102:2 118:19 118:24 128:17 134:15 everything 62:3 evidence 9:8 31:1 59:10 59:17,18 63:2 68:21,22 77:22 82:9 85:22 86:23 87:17 89:7 98:16 100:19 101:14 108:13 114:5 116:4,5 116:20 117:16 118:23 122:12 123:12 124:10 124:25 129:6 130:6 131:2 135:1 136:3 ex 57:13 exactly 20:5 53:25 64:15 78:24 EXAMINATION 5:1,3 9:6 38:17 examined 8:24 38:16 examiner 38:25 41:15 44:12 examiner's 116:7 example 10:12 13:22 26:21 29:25 60:22 62:20 107:22 108:16 except 67:16 80:6 exception 35:2,4 49:21 excess 13:16 120:24 excuse 49:9 78:1 excused 89:5 executive 67:7 exercised 33:6 115:14 exhibit 7:1,6 58:23 59:10,17,19 62:24,24 77:6 77:11,15,17 92:13 96:4 100:20 118:16 118:22 124:9 124:25 125:4 129:20 exhibits 77:8 82:10 89:10 96:7 98:20 100:14 136:2 exist 109:3 existed 27:25 existing 108:19 expect 68:16 expectation 105:12 106:17 110:12 expectations 132:15 expected 37:8 105:18 expensive 97:9 experience 27:13 30:16 39:3 93:11,23 118:13 experienced 22:4 115:5 expert 69:16 119:13 expertise 12:18 37:1 93:17,19 94:12 106:13 107:8 110:19 118:1 123:14 explain 9:14 explained 46:5 express 29:5 expressed 29:7,8 32:23 69:10 extend 9:1 extent

July 31, 2008

50:20 120:22 122:13 extolled 106:13 extreme 11:11,20 extremely 27:22 E-mail 96:9 98:3 E-mails 128:4 F facilitate 100:6 facilities 28:13 facility 13:21 facing 131:16 facsimile 64:14 fact 9:25 15:7 33:14,20 49:17 50:1 65:9,11 72:1 74:5 76:6 83:25 84:10 84:14,18,22 93:15 94:3,12 94:17 102:6 104:1 106:17 106:23 132:17 133:19,25 134:14 factors 71:10 73:16 96:22 facts 48:13,23 49:10 49:12 65:13

Trial 152 66:2 76:8,11 83:21 113:22 117:1 factual 65:17 failed 66:12,16 116:1 116:9 119:13 failings 135:15 failure 81:6 130:4 fair 32:22 51:7 67:4 79:21 80:2 81:4 99:10 fairly 12:19 13:23 18:19 76:8 faith 54:25 fall 52:14 fallen 129:16 falls 129:19,21 familiar 40:3,6 98:9 fancy 125:13 far 33:21 41:1 127:7 fast 68:16 fault 111:2,3 113:12 feasibility 123:13 February 113:2 133:18 Federal 15:21 27:16 fee 2:8,17 8:9,11 8:13 38:25 40:19,25 41:14,21 44:11 48:3 55:4 56:11 58:24 103:14 106:20 113:22 116:6 feel 42:20 45:12 55:10 71:14 feeling 51:7 54:13 fees 32:18 33:12 41:5 51:10 52:15 53:2,11 54:2 55:6 57:13,14 72:9 100:1 113:12 114:3,9,18,22 115:15,18 117:3 121:22 felt 11:8 23:10 25:24 29:3 35:20 47:4 49:10 52:17 55:8,22 56:2 60:7 91:6,10 91:23 93:10 107:16 female 95:1 fence 95:24 96:23 few 10:4 36:13 41:2 67:18 84:18 Fifth 2:5 fight 56:5 96:20 figure 20:23 113:9 figures 135:8 file 100:18 136:4 filing 102:14 filled 28:12 111:18 final 50:18,20,25 51:4 finalize 19:11 finalized 102:16 finally 35:25 finance 19:15 27:4 125:23 financial 43:8 44:18 45:3,5 47:21 51:9 55:19,25 56:9 78:14 79:24 90:17 91:8 103:5,8 104:3,7,8 106:15 107:9 107:13 109:12 112:12,14 117:20 120:6 137:14 financials 78:10 find 21:4 28:23 35:21 37:6 100:15 105:14

July 31, 2008

106:2 109:8 110:23 111:5 117:5 finding 74:3 131:2 findings 99:3 fine 52:25 53:21 69:15 78:7 100:23 finish 29:22 78:14 finished 125:25 firings 10:9 firm 44:21 46:1 54:12 firms 114:14 first 8:22 9:1,20 11:12 22:18 22:20 23:21 23:25 38:14 39:19 40:24 40:25 41:6 42:8 43:6 44:15 45:19 46:15 51:18 52:14 58:20 99:23 100:2,3 100:7 101:25 102:1,13 109:15,21,23 109:25 110:5 110:9 112:23 113:21 133:25 134:3 firsthand 67:12 first-time

Trial 153 109:12 five 74:16 77:11 102:10 fix 13:15 fixing 125:21 flag 18:6 flags 112:21 133:14 flies 25:2,3 flow 57:16 flowed 57:10 focus 27:20 126:22 132:11 focused 9:9 125:20 focusing 9:18 Foley 38:22 follow 135:4 followed 50:13,22 135:3 following 16:17 132:21 follows 8:24 38:16 125:1 follow-up 46:18 84:3 foot 84:20 footnoted 84:12 Ford 10:23 15:22 forecast 20:10,14,19 22:18 26:22 33:23 34:4,25 35:4 75:1 121:17 123:18 forecasting 21:10 forecasts 9:10,15 18:12 18:14 22:9,12 25:16,17 32:24 33:7,16 103:22 121:10 foregoing 137:5,9 foresee 25:14,15 121:8 121:9,12,13 form 16:6 69:24 forma 112:11 formally 75:12,21,22 78:19 formulation 74:20 75:1 Fort 1:17 forte 11:19 26:10 122:4 forth 19:2 42:3 43:5 92:5 125:17 forthcoming 46:13,14,16 forward 8:19 16:5,12 18:21 21:10 89:20 101:22 found 21:5,6 22:20 29:1 74:4 foundation 106:3 four 41:16,18 43:4 46:9 55:14 65:24 71:22 73:18,23,25 74:20 75:1,9 75:17 76:13 76:21,25 77:25 78:8,18 78:23 79:2,8 79:11 100:16 101:20 102:19 109:17 110:4 116:24 126:1 126:8 129:25 134:2 fourth 17:19 Fox 70:7,20 71:2 98:5,8,11 fragility 57:24 frame 15:19 33:1 91:16 101:16 Frank 5:5 8:20 58:13 Franklin 2:13 frankly 84:8 fraud 133:6 Fred 44:18 free 86:11 135:22 freely 119:12 121:1 frequent

July 31, 2008

17:1 friend 98:5,11 front 12:22 42:25 92:5 fruit 119:8 fruition 34:13 fulcrum 128:14 fulfill 107:2 full 106:5 132:4 fully 116:13 124:23 125:6 function 91:11 functions 41:10 107:2 fundamental 134:5 funding 14:21 33:25 further 28:17 31:1 37:24 50:21 50:23 81:24 82:24 88:25 89:6 92:11 93:24 98:12 137:11 Fusion 11:1 future 25:1 35:7 43:22 G game 119:1

Trial 154 gap 24:19 55:1 106:24 107:6 126:3 gathering 48:23 gave 87:25 110:2 general 3:4 24:9,14 25:17 70:8 98:6 generally 60:16,18,19 generated 60:12 getting 16:4 28:10 31:9 33:25 117:7 give 26:17 28:1 32:15 49:4 50:2 54:12 57:21 77:2 80:8 85:11 98:21,22 99:7 118:15 125:17 127:10 given 45:15 46:9 58:21 69:24 104:18,18 giving 30:25 GM 25:23 go 18:10 21:2,10 24:6 26:18 89:9 96:17 100:2,3,7 108:21 109:5 112:23 goals 43:11 goes 99:22,24 104:24 124:16 going 16:15 18:2 22:23 24:24 28:15 34:10 41:22 52:2 53:2 68:22,25 71:22 87:22 88:23 96:3,22 101:17 104:13 119:25 121:3 125:17 126:8 126:24 128:15 130:19 132:20 132:23 133:2 gone 105:19 good 13:6,7 19:14 21:4 27:25 30:4 35:23 54:25 59:24 59:25 60:2,3 78:20 103:1 112:10 132:24 Gossett 3:13 4:4 gotten 100:23 government 54:7 graduate 39:4 grand 22:24 23:17 grant 112:22 grave 110:2 great 10:17 13:13 29:24 30:2 31:9,12 123:4 123:5 132:1,1 greater 33:21 104:23 ground 105:14 group 12:6 26:22,24 45:24 112:13 guess 16:15 38:3,4 102:10 gut 51:14 guy 15:13 127:5 H hadn't 19:16 50:14 half 39:25,25 52:23 99:13 hand 114:1 128:10 137:16 handshake 34:18 handwritten 63:14 hanging 119:8 happened 15:16 109:7 110:8 122:7,8 happy 45:2 53:3 100:4 hard 29:3 30:1 63:12,15 107:17 109:11

July 31, 2008

110:14 123:5 harder 54:1 hardest 49:3 hardly 89:10 harm 116:2,3 130:10 harmed 125:5 harming 131:8 hate 28:19 haven't 22:15 85:23 head 15:4 54:20 75:14,23 108:7 heads 126:3 hear 33:11 86:12 90:3,15 129:6 heard 84:9 85:23 94:8 105:16 105:21 128:24 129:22 133:21 hearing 136:10 hearsay 68:23 69:18,18 82:16 held 17:24 54:6 137:7 hell 18:5 help 11:22 14:25 15:15 16:24

Trial 155 28:3 36:16 37:6 54:12 62:14 77:4 90:8 94:6,21 107:13 118:14 118:15 helped 27:19 helpful 51:25 99:6 helping 14:3 her 11:9,10 12:13 69:5 70:1,14 70:21 71:1,14 95:2 117:4 hereby 137:5 herein 8:21 38:13 hereof 137:8 hereunder 137:16 Hermosillo 10:24 11:4,8 21:23 herring 135:2,15 high 105:1 112:24 112:24 113:1 124:20,22 higher 18:22 52:24 53:12 114:18 highly 117:25 Highway 2:14 him 17:21 27:9,11 79:2 84:4 85:12,18 86:11,12,17 86:18 87:2 91:11 92:3 93:5 94:6,10 94:11,15 100:1 104:15 107:13,18,21 107:22 110:2 113:8 118:10 118:15 119:14 120:18 127:24 127:25 128:4 128:11 129:1 hindsight 121:14,21 hire 27:6 31:6 36:15 90:16 122:6 hired 11:21 16:22 32:21 118:14 118:25 hiring 36:22 91:20 92:17 131:17 historical 123:15 hit 17:2 35:6 119:2 hold 18:3 57:22 holding 25:4 home 11:11 118:25 Hon 1:9 honest 127:23 honestly 80:20 Honor 21:12 26:3 34:25 36:7 39:20 42:17 44:2 46:21 47:15,17 48:4 48:5 52:2,8 52:11 54:22 55:7,12 57:5 58:20,20,23 59:4,8,21 62:25 68:18 70:5 79:15 81:24 82:8,11 83:6 85:5,6 86:1,4,12 88:6,18,22 89:8,14 92:13 95:18 98:14 98:18 99:2,22 101:8 113:16 117:24 118:17 119:21 121:6 121:20,23 122:1 123:10 124:10 129:8 131:9 132:3 135:23 136:6 136:8 Honor's 58:21 82:19 86:16 122:15 hope 56:6 hoped 46:16 hopes 104:25 horrific 13:25 host 24:10 hour 99:13

July 31, 2008

hourly 114:21 hours 47:11,16,24 48:20 106:19 106:19 108:13 114:22 however 69:23 huge 113:7 133:6 hullabaloo 23:12 human 22:2 35:24 hundred 47:16,24 111:2 111:23 127:9 Huron 15:6,7 21:19 Hypothetically 30:10 I idea 24:13 identified 13:12 25:23 102:24 116:15 119:6,8 122:1 122:14 identify 12:22 26:24 39:16 80:4 86:20 116:10 116:12 123:10 128:24 idiot 18:23 ill 16:1 17:6 Illinois 4:7 immediately

Trial 156 112:20 impact 56:24 70:14,21 71:5 impacted 42:16 70:1 implement 13:5 21:6 121:4 implementation 27:2 implemented 33:22 122:21 importance 60:21 114:16 important 57:23 58:6 60:7,11,15,15 60:17,25 61:4 76:4 91:10 104:3 117:23 124:7 125:13 134:7 importantly 35:8 impose 41:8 imposed 57:25 58:1 impossible 108:10 improve 14:22 21:3 131:20 improved 131:7 improvement 20:25 21:8,15 improvements 19:5 21:17 33:22 119:7 improving 13:21 17:13 inability 19:10 70:16,23 inaccurate 10:16 inappropriate 23:10 incenting 18:1 inception 102:13 130:2 include 84:17,23 117:3 included 46:23 includes 39:20 99:18 including 35:8,22,22,23 41:21 118:10 130:9 131:12 incompetent 25:25 26:4 121:25 inconsistency 24:19 inconsistent 24:12 25:5 84:7 incorrect 62:12 increased 17:18 74:13 117:6 131:5 incredibly 51:14 incremental 20:25 independent 55:11 107:20 108:8 independently 65:14 129:15 INDEX 5:1 6:1 7:1 indicate 79:14 110:22 indicated 36:18 72:7 73:1,9 84:4,6 119:23 indication 19:13 75:11 indirect 108:21 individual 80:4 81:1 individuals 10:19 93:21 Industries 39:19 industry 12:19 37:1 45:8 ineffective 24:20 inference 76:10 inferred 76:7,16 information 9:24,25 10:15 10:18 26:7 35:23 46:7 47:3,21 60:25 69:8,23 70:1 94:19,19 104:6 108:9 informed 124:23 initial 11:2 12:15 18:21,24 104:22 106:20 109:18 120:23 123:18 inoperable 14:7 inquiry 46:8 61:6,9,13

July 31, 2008

84:15 inside 14:10 insight 13:2 instance 15:25 56:6 105:11 instances 31:7 instead 53:3 instructed 31:25 instructive 133:11,16,17 integral 126:17 intellectual 134:22 intelligent 109:11 intend 101:13 intended 34:22 intensity 110:14 intensive 47:25 intentions 35:19 interaction 117:18 interest 57:13 137:14 interested 99:2 interesting 110:23 interestingly 21:12 interim 23:15

Trial 157 Intermet 39:24 internal 103:24 interrupt 23:24 68:19 intersect 107:9 interview 46:6 49:14 62:19 64:5,9 64:11,20,22 66:21,24 interviewed 65:3,19 70:7 123:19 interviews 47:2,12 48:6,8 48:9 62:4,10 62:14 63:9,16 63:21 110:10 into 13:2 21:14 22:24 25:14 48:17 59:10 59:17,18 82:9 87:17 91:21 96:22 97:7 100:12,19 102:12 109:8 109:13,17 110:4 121:3 133:15 134:2 135:7 136:3 inventory 17:17 investigation 22:24 54:8 investigations 47:13 involved 23:1,12 29:16 113:3 In-house 3:9 ironic 111:6 irrelevant 59:12 issuance 61:23 77:25 issue 10:20 20:18 25:22 33:24 33:25 34:5 35:24 71:12 71:15 77:23 83:10 88:11 95:25 96:20 98:25 118:18 122:11 issued 25:15 61:10,18 61:21 75:8,12 75:18 76:25 78:9,10,17,19 78:22 121:1,9 issues 10:22 12:13,13 12:21 14:14 26:23 27:24 34:15 35:13 43:8,9 49:4 49:23 50:10 51:5 55:22 56:25 57:6,7 57:8,23 58:14 71:4 72:22 73:2,7 114:17 116:14,17 122:6,8 125:21 items 14:1 iterative 125:12 ITT 15:22 J Jan 97:14 98:9 January 57:21 73:12 90:12,14 102:14,17,19 111:14 112:21 113:2 133:18 133:24 Jersey 3:7 JJ 96:4 job 65:1 83:17 jobs 28:11 John 2:9,18 5:15 18:15,17,18 19:4,5 26:12 29:25 30:6 33:14 35:11 36:13 66:12 John's 18:20 joined 24:2 joint 100:19 Jointly 1:8 Jong-Ju 3:12 8:16 JP 90:25 95:9 Judge 85:13 88:9 98:20 135:16 judgment 73:13,25 107:23 115:15 121:20

July 31, 2008

JUDITH 38:12 Judy 5:10 38:20 July 1:13 8:2 9:21 9:22 16:16 33:1 57:25 63:19 111:7 117:13 118:9 126:6,9 128:1 128:3 130:6 135:6 June 16:16 33:1 63:19 71:18 71:21 73:18 74:1 75:14 78:1,8,9 81:8 81:12 106:4 113:8 116:21 117:8,10,14 126:6 130:18 130:22 jurisdiction 85:17 jury 22:24 23:17 just 9:4 15:4 29:17 32:15 34:16 36:13 43:2 46:21 56:8 60:3,16 66:6 68:25 70:18 79:6 80:17 88:15 89:9,11 91:8 96:14 98:19 100:3,9 100:17 103:8 103:9 104:2 104:18,24 108:20 112:2 121:19 133:5

Trial 158 133:9 134:6 134:24 135:4 135:14 J.D 39:5 K Kardos 3:3 8:10,10 Kathy 1:20 137:3,22 KCZ's 130:7 keep 100:9 122:25 127:23 132:17 keeping 18:1 28:12 key 43:17 45:20 46:3,23 121:11 keys 104:18,19 kind 21:1 28:2 29:18 100:20 106:2 107:12 110:19 112:11 132:17 133:7 134:22 kinds 15:15 55:13 kingdom 104:19 Kirkland 51:19 52:13 knew 17:12 37:5 45:8 47:7 93:11 98:8 102:24 105:8 105:9 117:8 117:10 118:16 118:19,23,24 121:18 122:3 127:5 128:18 129:17 130:18 131:14 know 19:23 23:2,7 23:11 25:6 26:16 28:14 30:12 32:14 32:14,25 35:17,18 38:6 48:13 49:6 71:9 72:21 73:19 75:15 77:16 78:21 80:19 83:25 86:2 87:7 98:6 102:2 109:20 121:14 127:14 128:11 128:19 131:25 knowing 15:18 128:15 knowledge 67:12 105:2 knowledgeable 10:6 67:6 known 33:8 76:12 80:16,18,25 94:12 113:1 120:14,16 Kroll 3:5,9 28:16,18 28:21,22 29:2 29:8 37:18 46:1 66:16 93:6,13,15 94:3,11 101:25 102:2 102:4,5,5 103:7,8,9,9 106:11,12,17 107:1,7,14,19 107:19 108:5 108:13,25 110:13,17,24 111:10 112:5 112:12 113:5 117:19 133:13 133:19 134:8 134:16,20 135:15 Kroll's 101:23 103:21 104:16 107:18 113:12 Kurinskas 90:25 96:25 KZC 2:9,18 18:13 18:18 20:8 22:7 25:22 27:20,22 32:24 33:6 36:13,25 37:7 54:24 56:12 58:9,10,14 72:17 83:4 87:13 115:14 115:20,25 116:9,13 118:13,14 122:5 124:8 124:23 128:21 128:24,25 KZC's 20:13 32:18 33:12 55:4 67:25 72:9 117:3 121:21 121:24 122:4 129:4 K&E 92:25 L L 4:3

July 31, 2008

labor 26:25 47:25 108:21,21 lack 27:2,12 49:15 lacked 37:19 93:7 lag 112:15 Lardner 38:23 large 39:13 LaSorda 17:11 36:2 last 17:10 18:8 36:2 39:11 41:2 44:1 53:14 56:6 76:22 88:13 98:4 99:24 119:16,24 132:21 late 36:1 126:6 later 14:8 18:4 20:3 21:22 24:5 57:25 98:23 106:24 120:1 latter 25:7 launch 10:25 11:4 15:8 17:2,7 launches 17:4 launching 11:12 law 39:7 46:1 69:14 114:4 lawyers

Trial 159 32:21 Lazard 52:21 Lazard's 52:22 lead 16:23 leader 28:21 leaders 17:15 leads 47:3,5 learned 61:18 107:5 learner 30:21 leash 132:18 least 39:11 58:1 63:25 71:19 103:14,15 104:21 led 31:23 123:17 124:6 Lee 115:4 left 15:10 25:4 legal 44:23 lender 45:24 lenders 50:8 51:11,11 52:16 53:7,20 54:16 57:14 70:15,22 71:20 74:7,7 90:21 91:18 91:19 92:7 126:12,13 131:4,12 length 116:12 less 47:15 letter 46:4 104:17 letters 50:7,12 let's 10:15 30:9 51:21 57:21 60:17 77:19 101:9 128:11 Leuliette 66:21 67:5,21 67:24 68:13 71:2,11 level 28:7 51:14 92:22 108:23 123:16 130:9 levels 129:22 life 22:4 Lifetime 12:17 light 114:15 124:3 likelihood 130:21 likely 75:20 76:1 limit 99:10 limited 22:1 40:1 70:2 103:21 line 52:14 68:20 69:1 77:3,4 77:16 lines 55:20 84:15,16 line's 77:9 liquidate 35:19 liquidating 131:14 liquidation 18:9 102:20 127:19 liquidity 57:8,23 58:11 73:2,6 116:14 list 14:1 48:14 50:9 89:11 100:20 136:2 listen 131:21 literally 14:13 litigation 54:11 little 9:23 16:18 19:6 29:3 46:14 53:12 74:8,9 99:7 live 55:9 LLC 2:9,18 LoBiondo 128:6 local 67:17 lodestar 114:19 long 21:13 24:1 28:20 63:20 99:17 110:12 121:2 125:6 longer

July 31, 2008

19:6 21:18 22:3 24:23 44:7 58:4 64:1 look 18:22 25:20 36:25 41:2,7 41:8 42:18 80:21 101:19 104:14,16 106:18,19 111:25 123:9 127:15 looked 19:4,22 45:2 62:20 looking 36:15 41:20 43:4 52:6 66:25 80:22 92:12,15 118:13 122:5 122:5 looks 109:14 129:8 losing 21:19 loss 71:13 116:6 losses 43:15 122:17 130:25,25 lost 57:9 104:3 lot 27:23 48:20 57:19 96:25 106:21 113:5 128:18 low 117:11,15 119:8 124:21 124:21 lower

Trial 160 81:7,9,12 lunch 99:8 L.L.P 2:4 M Macher 5:5 8:18,20 37:11,14 84:4 91:2,6,23 94:1 95:14 105:21 106:12 107:10 108:20 109:2 113:7 119:4,23 120:4,14,17 120:17,18 121:1,6,23 122:10,14,23 128:21,25 130:1 131:18 134:11,18 Macher's 58:13 90:1,15 90:19 93:6,21 94:9 95:20 96:15 104:14 107:8 111:2 117:22 118:20 118:24 121:20 123:1,3 Maher 2:4 make 29:20 35:15 41:9 53:16 55:16 65:2,5 65:8,12 70:16 70:23 85:24 87:15 88:24 89:11 104:19 108:2 121:18 130:12 132:23 makes 18:22 28:22 29:17 making 17:15 111:4 119:3 man 109:10 managed 114:12 management 46:2 91:12 92:22 94:19 103:23 123:19 125:23 130:8 130:9 management's 43:10,18 130:4 manager 11:7 14:18 15:12,12,13 managerial 42:11 43:7 managers 12:3,12 16:23 110:15 112:9 112:18 managing 27:23 29:1 manipulation 23:4 many 15:1,7,9,9 35:21 46:18 47:11 48:20 48:20 49:3 102:24 108:2 112:20 119:9 119:9 125:1 map 106:12 March 113:2 133:18 MARKED/RECD 7:3 market 111:10,23 114:13 markup 50:8 Masonovich 84:16 material 13:19 materials 34:6,12 82:4 matter 33:20 104:5 126:22 130:13 137:6,15 matters 96:11 100:11 135:6 maybe 22:7,11 24:2 33:9 35:17,18 36:1 61:24 63:25 64:2 99:13 109:24 112:22 mean 14:8 26:13,20 30:12 45:10 60:15 65:10 66:7 73:5 74:11 75:3,12 76:15,18 80:10 96:23 100:17 132:19 134:23 135:2 means 32:19 100:3 137:6 meant 48:25 mechanical 137:6 meet 57:12 115:24

July 31, 2008

meeting 17:21 22:19 126:10,21 128:5 meetings 22:20 24:14 46:11 47:1 member 67:9 92:23 members 115:3 memoranda 48:7 62:13 64:9,20 memory 42:23,25 52:12 77:24 80:21 mentality 14:23 mentioned 31:5 124:5 mess 102:22 met 46:10 114:3 115:17 methodology 74:15 metrics 134:23 Mexico 11:5 Michigan 1:1,18 2:15 3:15 39:4,6 137:4 middle 20:4 million 52:15,23 57:11 71:23 81:7,12 97:25 110:17 111:12,13 115:16 116:22

Trial 161 117:11,15 120:11,24,25 123:18 124:7 126:25 127:9 127:15 128:16 128:18 130:19 130:23 131:25 mind 36:14 40:2 123:2 mine 68:5 99:13 minute 80:8,20 82:12 minutes 60:22 61:13 99:14,15 100:10 124:25 125:2 132:7,7 132:8 misrepresen... 22:23 misrepresented 10:16 miss 109:20,23,24 110:6 126:8 missed 26:21,25 misses 109:16,18 122:22 132:11 133:9,13,16 134:3 missing 133:10 misstatements 50:1,2 mistake 16:4 119:5 128:19 model 123:14,24 Mogul 15:21 27:16 moment 36:7 68:19 money 34:5 56:3,5 97:1 132:1 monitor 20:16 Monroe 4:5 month 21:21 24:2 28:3 35:15,17 64:4 109:21 109:24 110:5 114:19 134:3 months 16:12 21:22 27:8,8 31:18 31:18 33:9 58:1 97:2 106:5,7 113:8 119:14 Morgan 90:25 95:9 morning 59:24,25 94:3 96:7 most 26:11 31:15,21 35:8 43:12 64:13 71:5 99:23 103:6 107:24 133:4 mostly 40:8,17 motion 85:22,24 Motor 10:23 15:22 Motors 24:9,14 move 16:5 69:1 82:9 101:22 109:7 moved 106:3 much 9:8 13:1 19:7 22:1 32:14 38:1 46:15 47:7 54:3,6 54:18 72:23 85:8 104:24 105:1 128:7 multiple 74:17 multi-page 111:21 multi-year 97:7 Murphy 115:4 must 115:25 myself 47:19 48:8 80:22 N name 37:14 38:19 95:1 97:13 narrow 60:18 Nathan 2:11,12 8:12 8:12 nature 31:14 43:19 106:6 114:16 near 107:18 necessarily 60:10 necessary 9:14 31:11 44:8 65:24

July 31, 2008

66:3 79:25 95:15 114:24 119:11 124:2 134:4 need 37:17 42:20 69:10 80:19 80:20 89:11 124:23 125:24 129:24 needed 14:2 15:14 16:2 30:22 31:1 37:20 44:17 55:10 57:25 62:3 91:6,25 92:6 93:10,10 103:6 104:4,5 105:25 106:2 107:13 108:20 119:7 134:18 needs 57:13 86:9,12 negative 26:9 negligence 115:22 129:20 130:3 131:10 131:24 negligent 115:20 negotiate 24:23,24 128:10 negotiated 19:2 24:15 51:23 54:25 120:8 negotiating 23:23 24:9 34:7 51:16 111:22 negotiations

Trial 162 11:15 51:17 55:8 112:3 117:12 neither 28:15 never 11:19 14:5 20:22,23 25:9 27:17 35:3 103:18,24 123:7 135:12 new 2:6,6 3:7 24:10 34:16 34:21 nine 16:12 106:4,7 109:14 110:4 113:8 119:14 134:2 nobody 15:14 127:4 129:17 nod 15:4 nonbankruptcy 114:23 Nonetheless 11:21 Northwestern 2:14 note 126:11,13 127:17 notebook 87:25 noted 84:19 notes 46:11 48:11 49:14 62:7,19 63:8,10,12,14 67:1 84:20 nothing 8:23 37:24 38:15 81:24 92:10 98:12 104:15 122:16 notice 9:4 notify 72:17 November 12:16 111:13 Novikoff 128:5 number 7:3 8:4 16:22 19:3,4,20 20:10,19 28:2 34:15 41:11 49:14,14 52:22,25 53:4 53:5 54:1,13 55:11 57:1,11 59:19 96:21 120:11,25 123:11 127:1 numbers 10:3,21 20:18 26:15 28:1 36:17 55:9 57:17 58:25 75:11 90:5 105:4 111:16 124:21,22 125:18 numerous 55:21 Nurge 81:16 90:24 93:5,14,15,19 96:11 98:3 105:17 117:10 117:14 118:22 119:8 126:14 126:20 128:20 130:21 134:9 134:13 O oath 65:20 89:22 object 59:11,14 objected 89:10 objecting 100:7 objection 6:1,3 32:18 59:9,15 82:15 82:16,17 96:18 115:19 objections 6:5 32:23 33:12 objector 115:24,25 objector's 123:9 obligated 35:20 obligations 66:17 observed 67:17 obtain 45:3 obvious 134:7 obviously 18:22 109:10 127:13 occupied 103:10 occur 91:14 133:24 occurred 48:18 81:5 91:15 105:23 113:4 133:22

July 31, 2008

133:24 October 12:9 90:13 91:16 OEM 119:22 OEMs 111:19 132:15 132:17,22 135:9,13 offer 71:16 101:15 111:21 112:1 112:2 127:6 135:3,11 offered 69:23 82:22 86:5 87:17,19 126:10 offers 127:7 office 26:12,14 47:20 107:18 officer 30:8,11 90:17 120:7 official 101:6 often 41:3 47:22 okay 9:20 20:23 38:3 51:22 62:23 67:24 72:7 78:20 81:22 89:13 111:22 112:24 127:11 once 13:9 14:5 35:14 44:2 119:5 ones

Trial 163 22:12 25:6 40:2 53:14 56:7 ongoing 11:16 only 15:10,19 18:10 25:6 33:2 36:13 54:8,23 57:10 65:15 83:25 97:8 111:8 116:22 127:6,15 128:15,23 130:18 131:15 132:7,21 135:25 onset 103:13 104:4 105:21 106:18 onsite 117:19 open 62:23 63:5 135:19 operate 29:18 operated 14:16 operating 16:23 17:14 43:20,23 75:17 116:15 117:25 118:11 118:12 119:13 125:23 131:18 132:13 operation 11:13 131:6 operational 25:13 26:6 27:7,12,18 30:23 31:10 36:17 42:11 43:7 58:12 91:7,24 93:11 93:16,25 94:21 118:2 119:6 121:7 134:23 operationally 19:17 operations 10:6 13:1,3,17 107:8 118:14 118:15 126:18 opinion 93:6 opinions 68:4 69:5,6,9 opportunities 119:9 opportunity 17:22 35:7 40:18 61:3 85:11 113:18 opposed 33:4 36:21 91:8 108:16 112:13 optimistic 125:5 option 127:12 options 127:12 order 42:4 45:15,22 51:24 52:20 115:24 118:4 ordered 49:20 ordinarily 92:19 organization 10:17 14:24 organizational 93:8 118:11 organize 99:7 Orlofsky 115:4 other 25:3,21 31:7 40:19,23 41:4 42:12 45:5,6 45:9 51:19 73:15 76:11 84:15,16 92:24 96:1,7 96:20 98:10 98:16 100:11 102:8 103:3 103:16 104:8 108:13 110:11 112:18 114:1 114:14,17 115:3 125:2 132:16 135:25 others 30:4 41:7 54:22 62:8 84:9,18 132:14 134:12 otherwise 26:1 42:22 74:19 131:16 ought 14:1 105:13,14 109:25 outcome 137:15 outrageously 16:1 outset 94:13 outside 14:11 92:20 103:18 outsider 113:5 outstanding

July 31, 2008

26:12 102:25 over 10:15 20:19 22:21,22 33:7 38:11 86:13 90:5 97:25 98:1 112:19 119:18 120:3 120:9,11 125:15,16 129:4 130:1 overblown 133:2 overcome 130:5 overly 124:12 125:5 overplay 128:9 overwhelming 118:23 owed 115:25 Oxford 39:18 O'Neill 5:10 38:4,11 38:12,20 58:21 60:4 82:3 89:3 101:19 130:17 P package 97:19,21,23 page 6:3 43:2,4 52:9,10 80:23 97:11 137:8 paid 53:3 57:14 paint 13:21 Parkway

Trial 164 3:6 part 11:17 26:11 27:1 65:1 82:5 98:4 participate 16:24 particular 15:25 44:19 59:13 68:8 95:25 101:22 102:3 103:18 104:4 134:21 particularly 40:14 55:22,24 83:9 parties 32:20 34:14 39:17 41:4 49:20 51:17 51:20 54:25 86:16 88:10 102:6,7 112:2 137:12,14 partner 38:23 party 52:14 57:9 61:2 87:11 100:7 105:22 118:3 past 11:6 12:1 15:1 path 41:19 97:6 Paul 2:3 8:8 36:12 pay 127:24 pending 79:17 people 10:4 11:2,23 12:21 13:4,9 15:23 16:18 16:22 19:14 21:5,14 24:9 24:11,15 28:8 28:10,16 30:3 31:10,13,14 31:19 37:6 41:10,11,20 45:24 46:2,10 46:12 47:8 50:22 51:5 54:11,14 58:8 60:5 61:14,22 65:3,17,19 86:13 91:25 94:22 106:1,8 116:16,21 117:8 118:8 119:10 120:14 121:3 122:21 125:15,24 130:18 131:11 131:11 percent 17:24 18:7 25:9 84:5 111:2 120:2 perception 130:8 perceptions 48:24 perfect 27:18 111:1 perform 45:14 66:12,17 116:9 performance 10:1 19:11 20:16,20 26:9 43:23 68:1 115:21 124:3 performance... 26:23 performed 105:20 124:1 performing 23:17 47:12 perhaps 48:2 53:11 period 11:2 50:19 62:15 63:20 90:9,10 133:3 133:18 permission 31:23 permit 58:22 70:2 person 11:22 15:10 32:10 50:11 64:16 80:4,14 94:23 95:6,12 95:22 97:17 98:4 109:12 116:11 personnel 45:1 person's 94:25 97:12 perspective 134:6 pertinent 46:8 pervaded 14:23 Peter 108:17 petition 29:12,13 51:11 phase 11:12 49:10 102:18 phases 15:18 picture 110:1 piece

July 31, 2008

32:19,20 48:1 101:14,14 136:1 place 13:9 16:3 28:5 29:4 34:23 63:16 109:13 137:7 placed 68:21,22 Plaintiff 99:23 plan 11:4,22,25 12:9 13:15,23 14:4,9 15:17 15:20 16:5 17:13 18:21 19:18 20:1 35:10,12 42:16 43:10 43:18 56:25 57:7,12,22 73:23 74:1 75:9,18 76:13 76:22,25 78:18,23 79:11 84:6 94:16 100:15 107:11 110:16 112:23 119:3 120:12 123:14 123:22 124:6 124:18 126:1 126:5,8 127:18,20,22 128:1,17,22 plans 16:10 126:2 132:13 plant 10:25 11:7,9 12:3,5,12 13:24 14:3,11 14:17 15:12

Trial 165 16:23 28:7 112:9 123:16 129:21,23,24 130:9 plants 12:5 15:19 16:1,25 26:22 28:9 106:1,8 119:15 121:4 125:25 130:2 plastic 34:6 126:2 plastics 9:19 10:14 12:6,15,17,19 42:13 43:8,20 105:9,9,25 106:6 110:6,6 113:7,10 117:25 119:10 125:20 133:15 134:6 play 76:21 played 45:4 pleaded 27:5 pleadings 47:17 please 8:7,19,25 29:23 38:11 38:19 59:2 82:13 83:2 89:20 98:25 plus 20:24 71:22 73:18,23 74:1 74:21 75:1,9 75:17 76:13 76:22,25 77:25 78:8,18 78:23 79:2,8 79:11 102:19 102:20 109:14 109:17 110:3 110:4 126:1,8 127:16 129:25 129:25 134:1 134:2 135:8 point 12:4 17:3,21 18:9 19:8 20:22 22:10 22:11 23:7 101:22 106:23 117:7 133:10 pointed 94:10 points 102:3 policy 53:15 55:13 56:4 policy-type 55:22 Polk 53:24 54:2,13 Port 15:6,7 21:19 portions 87:12 posed 41:16 55:21 110:15 poses 104:22 posing 104:23 position 18:13,20 20:13 29:17 31:21 86:21 93:23 95:17,19 positions 21:14 31:10 103:10 121:4 possibility 117:14 post 29:11,12,13 99:2 102:16 Post-Consum... 3:18 4:10 37:15 post-petition 53:18 potential 12:23 pouring 14:13 practice 40:8 practicing 39:7 prayer 56:6 pre 29:11 precisely 107:7 preeminent 103:4 prejudiced 86:22 preparation 63:22 79:11 prepare 62:14 prepared 17:6 48:6,12 63:23 79:7 92:3 102:15 108:18,25 preparing 44:22,24 60:5 62:1,9 65:9 prerequisites 113:23 presence 94:2

July 31, 2008

present 70:10 89:25 133:1 president 10:14 34:19 pressure 11:12,20 16:4 pretty 46:15 54:6 prevalence 42:11 previous 12:25 pre-petition 45:24 50:7 51:10 52:16 53:7,19 54:16 70:15,22 71:19 74:7 90:21 91:18 92:7 pre-trial 123:10 price 127:1,13 pricing 24:9 primarily 19:15 26:6 27:10 31:20 39:12 42:2 45:22 54:4 57:5 primary 41:17 43:12 51:9 67:19 110:24 prince 34:9 principal 43:24 prior 15:11 17:20 19:11 29:10

Trial 166 29:14 90:11 115:16 126:9 133:18 prioritized 71:6,9 pro 112:11 probability 84:5 probably 16:16 22:21 35:2,17 127:5 problem 87:23 105:7,8 105:24 106:6 107:4 110:7,9 113:7,10 133:12,14 134:10,25 problems 42:13 80:17 102:25 103:16 104:23,23 105:15 116:16 118:12 125:22 134:5 proceed 101:10 135:6 proceeding 9:9 59:13 131:3 proceedings 8:1 41:3 136:13 process 67:10 100:6 115:7 125:4,7 125:10,12 128:1 129:19 130:10 processes 12:1 13:7 17:6 74:19,25 procure 86:3 produce 21:24 produced 60:6 product 18:2 25:1 production 18:7 products 13:25 professional 32:18 39:3 57:14 124:4 professionals 40:20 44:6 45:25 53:13 53:23 55:23 115:6,13 program 13:18,19 progress 14:9 projected 120:1 123:25 projection 90:5 109:21 129:18 projections 16:20 120:23 124:2,13,15 124:24 125:6 126:21,23 127:3 129:16 130:10,14 proof 115:22 properly 114:9 propose 99:11 proposed 22:9 94:24 proposing 92:1 proposition 25:17 97:10 protection 129:15 prove 82:22 132:25 provide 37:19 42:4 106:9 provided 47:18 providing 93:16,18 108:8 proving 115:17 129:10 provisions 92:24 proximate 116:2 prudent 91:23 published 9:17 pull 34:2,3 106:1 pulled 35:16 punch 14:1 purchase 127:1 purchasing 34:20 purely 68:23 purposes 70:2 pursuant 50:24 pursue 47:4 68:25 84:14,17 put

July 31, 2008

11:11,20,22 13:22 14:3 15:17,20 17:14 18:21 19:17,25 65:20 84:21 86:11,17 89:17 92:5 110:3 119:5 135:13 puts 109:13 putting 11:3,24 13:17 26:15 28:1 P.C 2:12 P.L.L.C 3:13 4:4 p.m 101:2 136:14 Q qualifications 44:25 qualified 45:14 117:25 quality 15:11,13 quantify 56:15 quantifying 71:4 quarter 17:19 question 12:12,20 27:21 43:12 44:1 49:2 57:1 60:24 62:18 67:2 69:11 70:11,19 74:23 75:4 76:3 78:15

Trial 167 79:16,19 80:1 80:7,10,12,15 92:16 101:4 114:6 121:11 126:4 134:19 questioning 68:20 questions 9:5 36:4,5,14 41:16,18 42:3 42:5,7,19 43:5 44:17,23 46:9,19 48:12 48:14,19 49:1 50:5,13 55:13 55:14 58:17 58:18,21 59:14 60:4 65:25 66:8 69:4,25 72:19 73:1 75:5 82:25 85:2,9 85:12,18 89:1 89:18 98:13 101:18,21 102:10 110:14 116:24 quick 30:21 quickly 44:16 110:16 quit 11:8,10 22:10 22:19 23:8,9 quite 19:2 21:4 49:11 104:1 120:4 130:7 135:1 R R 2:3,11 raining 14:10,11 rainstorm 14:10 raised 18:6 50:14 51:6 73:2 92:21 ran 25:14 range 53:22 ranged 39:14 ranging 104:21 rates 114:13,13,18 114:21 rather 53:1 131:7,13 raw 34:6 RCX-BY 5:17 reach 51:18 55:3 74:18,24 reached 58:22,25 66:4 116:8,24 117:2 126:4 reaching 83:22 reaction 33:11 68:14 113:11 reactions 96:12 read 47:17,19,20,22 80:12 129:19 real 10:21,21 26:24 realistic 9:13,16 22:9 111:7 reality 16:10,11 119:15 realization 81:10 realize 25:10 106:7 112:1 realized 16:18 41:3 44:16 113:6 really 16:7,12 19:6 20:23 22:15 25:9 35:3,6 37:7 48:18,24 54:5 55:7 56:3,7 78:20 80:15 102:18 102:25 105:25 106:2,5 109:22 112:1 119:16 120:10 125:5 126:15 127:2,20 realm 55:14 reason 58:5 61:1 70:25 85:14 86:7 104:11 109:4 reasonable 64:14 99:10 114:15 115:14 reasonableness 123:17 reasonably 18:16 44:2,8 114:25 reasoned 83:16 reasons

July 31, 2008

22:14 23:7 69:6 122:3,12 rebuild 133:3 rebuttal 5:23 99:18 100:4,9 132:9 recall 18:25 37:22 52:22 53:13 54:23 63:18 77:8 79:9,12 83:7,23,24 84:12 94:25 95:2,4,5,7,18 96:24 recalled 46:21 receive 34:17 60:11,22 60:24 61:9 received 50:6 126:1 127:8 receiving 12:16 recess 38:7 100:25 136:10 recited 53:3 recognized 112:16,16 116:21 128:13 130:11 recognizing 71:3 recollection 20:8 43:3 52:7 77:5,23 94:9 96:10 97:16 recommended 52:18 54:17 reconvene

Trial 168 99:19 record 38:8 39:2 46:12 101:1 recorded 62:5 114:8 recoveries 43:16 70:15,22 recovery 131:7,16 rectified 122:18 red 18:6 112:21 133:13 135:2 135:15 reduce 52:15 reduced 54:14 55:5 113:13 115:15 120:24 reduction 13:18 19:5 21:8 34:11 51:10 53:11 56:11,21 58:5 72:9 117:2 119:22 123:18 124:6 reductions 14:20 15:3 21:6,16 34:1 35:9 43:16 51:13 73:3 refer 42:21 52:3 reference 97:12 referenced 96:24 referred 77:18 referring 97:2,3 reflect 64:10 reflected 48:2 reflection 105:3 reforecast 73:18 74:21 refresh 42:21,24 43:3 52:7 77:5 80:8,21 97:15 refreshed 52:12 refreshes 96:9 refused 15:1 refute 128:25 refuted 129:5 regard 31:2 54:10 100:14 regarding 18:14 136:2 regime 15:11 regular 35:13 135:5 regularly 92:19 114:21 rejected 14:22 27:9 31:6 related 137:11,13 relationship 10:11 104:13 relationships 112:11 release 90:12 releases 17:20 relevant 61:6,8,13,15 61:16 62:3 68:20 122:15 reliable 10:2 reliance 73:12 relied 60:5 62:7 82:5 83:22 reluctantly 46:14 rely 69:17 102:9 108:1 remained 54:24 remember 19:21 32:3,6 42:6,12 51:24 52:20 53:25 54:19 66:24 71:6,7,17 72:1,4 75:13 75:23 95:8 109:18 119:18 122:19 124:8 124:11 125:9 remembering 105:23,24 Renaissance 3:14 rendered 69:5 114:8 115:2,9 reorganization 33:5,10 44:5 repeat 64:19 70:18 74:23

July 31, 2008

repeated 52:4 53:1 report 29:2 42:4,25 43:5 44:22,24 47:9,14 48:17 48:20 49:2,8 49:9,19 50:8 50:18,20,25 51:3,4,6,9,13 51:15 52:3,6 52:11 53:1 60:5,15,21,25 61:10,19,21 61:23 62:3,14 63:22,24 64:7 65:1,9,22 66:4,5,11,16 68:21 69:2,11 72:11,14 74:19 76:11 76:15,17 77:4 77:7,8,13,16 79:21 80:3 82:6,10 83:5 83:15,21 84:1 84:11 116:25 117:4 118:21 130:12 reported 137:5 reporter 101:5 137:1,4 reporting 10:11 19:7,9 28:13 107:20 122:20 reports 23:4,11 107:18 108:1,3 120:16 122:11 represent 17:24 36:12 37:15 39:23

Trial 169 40:11 representat... 25:21 83:5 90:20 represented 39:17,18,22 102:5 103:18 108:4 representing 39:12 40:17 137:13 request 32:7 55:4 56:11 91:18 93:21 requested 14:21 31:7 requests 31:2 require 86:22 93:1 required 31:24 79:24 requires 69:14 research 82:12 resignations 10:9 resigned 10:12 resistance 34:13 resolution 88:15 103:25 129:9,13 resolve 27:24 resolved 25:8 resource 35:24 resources 16:7,7 22:2 35:24 respect 29:25 55:23,24 56:1 72:19 73:23 78:21 79:1,22 103:21 108:14 108:14 118:19 120:7 123:4 respectfully 132:3 respond 69:4 response 27:21 29:9 51:15 83:4,8 91:17 102:4 132:7 responsibil... 41:14,23 42:1 44:11 45:14 45:18 50:24 responsibility 41:17 125:22 responsible 25:1 29:1 58:15 80:4 116:11 restructure 118:6 restructuring 30:8,11 97:6 103:12 108:7 115:5 118:2,5 120:7 result 43:15 58:2 73:3 results 75:8,17 76:9 76:12,20,24 78:2,14,22 79:1 123:15 123:25 rethink 72:24 rethought 50:15 reticence 10:18 95:21 return 88:24 135:18 revenue 25:1 review 14:9 40:19,22 40:24 51:21 54:12 101:13 107:10 113:21 117:24 125:12 reviewed 14:20 77:22 123:15,16 revise 16:19 rework 13:15 REX-BY 5:16 RE-CROSS-EX... 93:2 RE-EXAMINATION 89:23 Rhodes 1:9 right 9:4 20:11 26:5 28:23 32:10 37:3,6,25 60:13 64:7 88:25 89:19 99:8 102:9 108:1 118:21 121:3 rigorously 108:15 risk 132:25

July 31, 2008

risks 34:24,25 35:1 rivers 14:13 RMR 1:20 137:22 road 58:4 rock 29:3 107:17 role 45:4 55:18,19 67:17 76:20 91:7 103:21 roles 44:9 58:8 roll 111:16 rollup 126:16 Ronald 4:3 8:14 roof 14:12 17:7 Rose 4:3 8:14,14 135:21 136:11 Roseland 3:7 Ross 70:17,24 71:16 111:4,22 117:12 126:9 126:10,14,20 126:23 127:4 127:13,23 128:3,9,16 131:1,22 135:2,3 Ross's 127:8 135:11 routine 109:14 134:1 RPR

Trial 170 1:20 137:22 ruined 11:10 rule 73:14 107:23 ruling 82:19 run 11:14 37:20 114:18 running 129:18 S safety 14:14 15:3 sale 125:4,7 127:13 128:8 130:10 sales 39:14,15 Sam 37:14 SAMUEL 3:11 sat 50:15 67:10 95:23 satisfaction 113:23 Saudi 34:7,14 35:2 savings 12:14,23,25 119:9 121:5 saw 17:17 26:3 35:9 51:5 113:10 127:7 saying 72:1,4 74:2,3 says 69:19 77:21 80:17 98:4 111:23 118:20 129:11,13 scene 9:21 scheduled 135:20 schedules 17:18,23 18:3 scope 53:17 58:10 scrambling 118:10 scrap 13:18 131:16 seat 89:21 second 23:22,25 24:3 24:4 25:5 30:10 41:24 43:14 44:20 77:2 83:2 88:8 102:18 109:8,25 127:18 Section 40:3 55:4 56:12 114:2 sections 40:13,15 87:9 securities 54:11 111:10 security 128:14 see 17:11 21:15 26:3 35:14,15 52:2 59:1 61:20 74:4 85:19 100:24 108:23 122:21 129:10 136:11 seeing 35:19 99:2 108:2,12 seek 40:14 seeks 115:18 seen 128:4 segment 102:13 109:8 segments 102:12 sell 33:3 128:3,3 131:22 selling 131:1 senior 92:22 sense 13:13 109:20 sent 127:25 128:16 September 64:2 91:16 111:12 130:12 135:7 series 17:4 34:22 35:6 48:12 serious 118:18 seriously 47:7 served 9:11 service 85:8 services 2:9,18 114:8 114:11,24 115:8,21 129:9,10 session 8:4

July 31, 2008

set 30:22 32:10 38:2 42:3 43:5 99:9 134:21 137:8 sets 16:2 30:23 settle 54:2 settled 52:21 53:9,24 settlement 52:1 53:20 settlements 58:22,24 settling 51:5 seven 80:23 several 51:19 127:8 129:21 severance 92:24 97:20,23 Shannon 52:21 53:9,9 shape 13:6,7,14 share 48:23 shared 104:7 sharing 10:18 short 9:4 132:18 133:3 shortcomings 130:5 shortcut 82:14 Shorthand 137:4 shouldn't

Trial 171 109:23 show 69:23 75:21 76:1 115:25 showing 17:19 86:2 122:12 shows 123:12 135:1 side 84:9 89:7 99:16 136:11 sides 55:9 84:19 108:5 signals 68:15 significance 132:12 significant 14:15 22:5 32:20 71:1,5 71:14,15 131:15 significantly 33:17,18 50:17 similar 12:24 21:23 51:14 similarly 71:10 simply 12:2 14:21 single 11:5 12:5 118:3 123:12 sir 8:19 37:25 59:6 81:25 82:15 98:15 132:5 sit 8:25 35:11 96:23 124:19 sitting 108:6 125:15 situation 15:8 21:24 29:19 107:21 108:11 130:6 situations 107:24 110:15 six 21:22 97:1 102:20,20 129:25 130:1 135:8,8 six-month 97:9 skepticism 124:4,5 skill 16:2 26:17 30:22,23 32:10 79:23 skilled 13:4 37:7 skillful 109:11 skills 30:11 37:20 91:7,24 93:8 skin 119:1 slightly 50:16 52:24 smart 30:1 123:4 127:5 Smith 115:5 sober 105:3 Society 12:17 sold 21:18 solitary 50:11 solve 31:15 solved 31:16 solves 87:22 somebody 88:19 something's 125:16 somewhat 20:3 51:25 somewhere 19:19 53:22 64:3 soon 68:9 sooner 33:8,9 136:3 sorry 21:21 62:17 78:16 128:8 sort 113:24 sought 93:8 103:2 sounded 76:22 sounds 76:5 131:25 source 54:3 SOUTHERN 1:2 Southfield 2:15 space 45:7 114:14 speaking 90:9 speaks 130:7 special

July 31, 2008

103:16 specialized 105:2 specific 13:10,20,23 26:19 27:1 40:9 42:18 43:6 83:21 94:11 126:2 specifically 14:3 20:9 22:8 29:21 79:4,12 spend 34:4 spending 106:21 spent 11:2 14:2 15:8 34:8 43:12 47:11 114:15 spite 27:12 spoke 67:21 spot 107:17 Stacey 70:7 98:5,8 staff 10:5 15:20 16:22 28:4 staffed 16:2 stage 51:3 stake 47:8 stakeholder 51:9 stakeholders 9:17 33:8 102:7 103:3 103:20 105:12 106:14,16

Trial 172 111:18 stand 83:1 86:11,17 88:7 105:6 107:1 standalone 33:4,10 128:8 128:9 standard 79:23 114:19 standards 114:3 standpoint 24:18 stands 31:19 start 10:3 12:4,22 20:22 21:15 60:17 started 11:24 12:11 16:19,24 17:2 17:8 49:1,2 51:2 102:23 128:1 starting 63:17 state 39:2,5 137:4 statement 64:21 82:22 84:22 statements 64:13,19 STATES 1:1 status 9:24 stayed 17:16 stenographic 137:6 step 8:19 38:1,11 48:15,16 89:20 91:23 104:9 Steve 22:14,16,17 24:21 25:2 32:2 Steven 1:9 stipulates 100:18 stipulation 136:1 stop 47:10 story 24:19 46:19 strains 121:19 straw 17:10 18:8 119:16,24 Street 1:17 4:5 stretched 135:6 strictly 121:19 strike 64:24 85:23,25 86:7 striking 86:23 strong 131:18,19 strongly 91:6 128:7 structure 27:4 124:19,20 124:22 studying 40:12 subject 129:12 submission 51:4 submit 115:21 submitted 50:25 subscribed 137:16 subsequent 86:6 102:17 subsequently 61:18 subsidiary 74:5 substance 23:14 43:19 83:8 96:10 substantial 11:3 12:19 33:24,25 34:11 43:7 substantially 17:19 44:4 81:9,11 substantive 43:21 substitute 88:16 substitution 88:25 success 35:22 successful 118:5 sudden 104:2 sufficiently 111:7 suggest 73:5 101:15,20 102:11 111:19 135:18 suggested

July 31, 2008

61:22 suggesting 29:15,17 111:8 111:15 suggestions 62:2 Suite 4:6 summarize 47:21 summarized 47:22 48:5,7 128:5 summary 32:22 33:12 48:11 62:9 64:23 80:23 supervise 79:10 supervision 33:7 supplemental 101:20 suppliers 132:18 support 31:3,7 34:20 45:1 58:15 66:3 132:2 supported 95:6 supporting 16:25 116:25 supportive 103:22 suppose 20:3 51:24 supposed 19:25 28:25 34:17 sure 17:15 20:5 29:24 35:18 41:9,24 65:10

Trial 173 75:20,25 76:2 76:14 79:13 123:21 surfaced 50:10 surprised 129:6 survive 17:22 57:15 suspected 107:5 suspicion 104:12 sustain 100:1 sustained 82:16,23 sustains 85:22 sworn 8:22 38:14 62:5 SWR 1:7 synergistic 126:16 system 19:7 28:13,24 94:20 109:14 109:22 122:20 T table 93:13 105:3 127:24 tactic 111:22 tactical 123:21 tag 126:25 127:2 take 9:13 18:2 21:13 25:12 28:11 31:17 34:22 38:5 57:22 88:15 92:14 95:17 111:8,24 118:18 119:11 121:3 125:17 taken 38:7 62:8 100:25 109:15 takes 27:2 109:13 taking 13:14 27:25 94:18 talents 91:24 talk 15:2 30:9 35:12 66:25 talked 15:2 50:11 51:1,4 54:4 55:9 talking 19:15 41:19 94:24 talks 96:25 task 41:11 47:25 team 45:13,17 91:12 92:1,2,23 94:18 114:12 115:4 117:18 117:19 118:2 120:8 techniques 12:1 16:6 94:21 tell 15:14 37:18 43:2 51:23 61:3 67:24 68:7,13 70:13 70:20 91:1,4 93:5,14 telling 68:3 77:20 95:9 tells 134:6 tenure 9:12 30:2 term 22:22 terminate 23:20 terms 34:3 114:10 127:16 129:8 132:19 133:1 terrible 28:9 29:16 test 121:21 testified 8:24 38:16 83:3 86:18 96:14 113:8 116:23 117:1 117:10,13 120:4 126:24 134:10,14 testify 8:22 38:14 42:22 86:9 testimony 22:6 25:12 56:14,17 62:1 89:6 90:1,3,8 90:16 94:9 98:16 101:17 105:16 109:19 116:7 117:23 123:3 124:11 125:9 128:23

July 31, 2008

129:22 130:20 133:21 testing 49:6 thank 37:10 38:1 59:20 60:2 63:1,6 70:4 78:7 81:25 82:20 85:7 98:15 101:7 113:13,16,19 132:5 135:16 135:23 136:5 136:7 thanks 9:2 89:4 theirs 53:25 themselves 13:3 127:22 theories 49:7 theory 87:13 therefore 9:17 61:15 thereupon 8:20 38:12 thing 35:3,5 41:12 45:19 58:20 59:12 71:12 103:1,24 119:17 128:23 129:13 things 13:12,13,17 15:18 22:2 28:14 41:9 46:19 47:20 50:20 67:18 105:23 108:15 110:14 123:11

Trial 174 132:21 133:8 134:12 think 12:9 18:19 20:15 22:13 26:2 30:3,6,7 30:18 32:22 33:13 39:8 45:21 48:25 53:5 55:21 61:12,14 62:2 62:24 69:10 69:14 71:11 71:13 72:5 75:11,14,23 79:13,16 80:7 83:11 86:3,6 86:12,15 94:8 96:13 99:5,12 99:25 100:5 102:17 114:2 117:22 123:6 129:16,19 130:5 131:23 132:23 135:1 thinking 48:18 51:12 thinks 86:8 third 42:13 43:17 87:10 109:25 127:19 THOMAS 2:11 thorough 83:17 thoroughly 123:15 129:5 thought 9:15 12:14 29:23 31:20 34:10 46:7 49:5 58:9 61:19 62:1,12 67:20,21 70:25 71:20 76:3,16 87:18 91:20 95:14 97:7 122:2 126:14 129:3 thoughts 48:24 50:2 99:7 threatened 22:10 23:8,9 threatening 22:18 three 11:18 14:2 22:3 31:18 33:9 46:22 49:15 78:2,5 78:6 97:1,8 100:16 109:14 110:3 127:12 132:7 134:1 three-year 97:19 threw 120:2 throughout 10:16 33:16 39:10 thumbnail 32:15 tied 123:22 tightly 114:12 Tim 27:15 66:21 109:8 time 9:13,14 10:4 10:10,23 11:3 11:14 12:4 14:8 15:9,19 16:21 17:8,11 18:8 20:12,19 22:1 23:22 25:5 27:3 28:6,21 30:22 31:19 33:1,19 33:21 35:25 41:9 43:13 49:24 62:15 63:21 70:11 71:19,21 73:7 75:17 76:24 77:3,4,9,16 77:25 79:14 86:5,16,17,24 87:16,20 89:1 90:9,10 91:9 91:16,22 92:1 92:2,14 93:4 95:13,21,22 97:4 98:16 99:10 100:13 100:18 101:22 102:3 106:21 110:9 112:15 112:19 113:17 114:7,15 115:1 128:14 132:8,19 133:3,25 137:7 timely 43:23 112:8 times 15:1,7 20:19 22:3 44:23 46:18 48:11 74:16 114:21 timetable 12:7 timing 16:9,11 77:23 tipping 68:10 title

July 31, 2008

137:8 today 9:3 18:23 33:17 38:2 60:1 85:8 89:5 105:22 107:5,17 108:20 123:3 together 11:4,23,25 12:3 13:23 14:4 15:17,20 16:5 18:16,19 19:18 20:1,19 26:15 28:1 106:1 110:3 told 14:5 24:22 32:3,7,8 65:17 68:17 71:25 76:5 84:8 91:5 92:3 104:10 117:12 120:10 126:7,9 128:13 Tom 8:12 17:11,21 17:22,25 tool 134:21 tooling 13:14 27:24 tools 108:17,19 top 21:1 24:11 54:20 75:13 75:23 123:23 125:11 tops 99:14 total 53:2 97:24

Trial 175 100:10 totally 24:12,15 towards 97:6 towel 120:3 trading 111:9 Traditions 40:1 transcriber 48:10 transcript 64:16 85:19 101:5 137:9 transcripts 47:17 64:18 transfer 34:18 transferring 34:21 transparency 112:10 transpired 67:13 treasury 27:11,16 Trenary 27:15 78:25 79:7 84:15 109:9,13 110:20 122:20 125:24 129:24 133:17 Trenary's 125:9 trial 1:11 32:22 99:2 135:21 tried 10:2 20:25 trouble 20:21 28:10,11 troubling 28:20 true 65:13 68:4 133:12 137:9 trust 3:18 4:10 8:15 8:17 37:16 100:22 Trustee 49:22 truth 8:23,23,24 38:15,15,16 69:20 82:22 try 27:8 35:20 41:5,7 67:3 127:22,23 128:17 131:12 trying 10:21 27:24 49:4 65:14 69:7 76:19 94:20 turn 112:19 122:7,8 131:13 turned 31:4 33:17 110:4 turns 100:10 109:17 134:2,18 twice 14:22 two 18:4 24:2 25:2 31:18 33:8 35:13,17 36:9 44:14 49:12 49:14 58:1 84:19 89:18 99:10 100:11 100:15 102:12 103:10 119:24 120:1 127:7 132:6 two-year 97:21,22 type 41:12 42:13 44:20 134:16 types 44:14 U ultimate 41:25 52:1 ultimately 15:16 19:3 21:16,25 27:9 34:12 102:20 120:25 131:9 unable 21:5 94:15 112:6 unaffordable 32:9 unavailability 86:3 unavailable 85:16 unaware 71:18 73:6 uncertainties 19:12 unchallenged 114:5 unclear 96:19 uncomfortable 83:17 unconditioned 126:13 uncontroverted 130:20 uncover

July 31, 2008

134:5 undeniably 125:22 under 10:14 14:16 16:1 23:16 44:8 55:4 56:12 58:10 62:8 65:20 89:21 97:17 114:3 underlying 43:18 understand 15:10 16:13 19:7 21:13 23:3 26:8 37:9 54:5 76:19 87:14 87:14 90:7,8 94:6,22 106:5 107:14 119:14 121:2 understandable 112:10 understanding 16:10 18:13 41:14,25 73:13 94:15 understood 95:10,19,20 96:18 103:3,4 125:21 undertake 44:6 undisputed 113:22 131:4 undo 86:9 unequivocally 118:17 unfinished 135:25 unfolded

Trial 176 46:20 unfortunate 104:1 unfortunately 11:16 17:1 27:3 31:17 69:14 UNITED 1:1 University 39:5,6 unless 22:11 85:22 86:13 unlike 84:18 unlikely 44:5 unnecessary 43:15 115:9 unprepared 105:22 unrealistic 25:18 111:20 111:25 121:10 121:15,17 128:22 unreasonable 57:20 unsaveable 11:9 unstable 21:7 unsupportable 130:16 unsworn 68:23 unusual 103:8 upset 23:13 usage 13:19 use 22:22 48:14 66:7 77:19 101:5 121:20 135:25 usually 48:14 92:19 U.S 1:16 49:22 V vacillation 21:10 validate 123:20 validity 121:21 valuable 132:2 valuation 74:14 value 44:3 74:6,8,12 111:11 117:5 126:11 127:2 130:13 131:4 131:17 variance 124:1 variances 26:9,10 28:5 94:6,16,22 107:11,14 108:22 113:4 122:3,13 134:17 variations 26:9 various 34:13 41:19,20 45:24,25 49:16 63:17 110:15 venture 39:19 105:6 verbally 47:23 verbatim 64:10,12 verify 65:14 version 32:16 versus 55:18,20 71:5 vetters 114:18 vetting 108:15 124:15 viability 31:12 viable 57:16 vice 34:19 view 43:22 70:14,21 92:25 views 131:19 violated 25:25 121:25 virtually 14:7 visit 125:24 visiting 12:4 visits 129:21,23,24 Visteon 98:6 volume 17:16 35:9 119:25 volumes 17:8 33:24 119:23 voluntarily

July 31, 2008

9:3 60:6 115:16 vs 1:7 W W 1:9 Wait 79:18 waited 133:25 waiting 38:3 waive 98:24 walked 10:13 want 21:3 27:20 41:24 42:18 53:10 54:20 66:20 85:10 92:23 98:21 98:22,23,24 100:2 104:20 113:21 124:21 124:22 127:20 127:21,24 136:10 wanted 28:18 31:5 36:18 46:6 88:4 91:2 122:23 126:12 126:15 127:11 wants 68:24,24 warranted 117:3 wasn't 21:4,8 24:1 37:7 74:3 75:12 103:8,9

Trial 177 108:12 119:3 134:19 waste 86:16 watched 68:8 water 14:12 way 18:10 28:23 33:2 35:21 61:7 67:4 68:10,23 86:21,22 94:8 96:1,20 98:10 103:8 113:1 133:2 134:14 ways 49:13 weak 27:4 107:15 109:2,4 weaker 30:5 weakness 26:5,5 94:4 107:6 122:2 122:14 week 25:2,3 34:8 weeks 18:4 35:14 78:3,5,6 100:16 119:24 120:1 went 11:10 13:25 15:6 17:7,11 34:8 46:25 48:9 49:11,16 50:11 65:16 94:16 103:17 weren't 53:17 129:18 West 1:17 we'll 15:4 38:4 88:15,24 111:24 136:9 we're 18:1,1,2 32:21 35:14 38:3 68:25 92:12 94:23 111:24 124:14 we've 89:10 100:23 104:9 107:19 114:2 120:1 whatever 9:14 23:5,7 27:2 53:5 whatsoever 10:1 whether 9:9 13:4,6,7 22:8 23:19 26:25 27:1 37:22 42:9,9 42:14 47:1 69:7 71:4,7 73:22 75:15 75:21 80:16 95:5,12 96:19 98:10 116:19 116:20 121:7 121:24 124:17 124:18 125:16 whole 8:23 24:10 30:6 38:15 wide 104:21 Wilbur 70:16,23 111:4 128:10 wish 19:21 wished 24:23 within 10:4 12:18 20:1 26:24 27:10 28:24 52:17 53:17 91:12 witness 5:3 8:21 9:1 38:13 69:4,9 69:17,19,24 85:3,14 105:6 witnesses 106:25 Wollmuth 2:4 wonder 109:22 wondered 108:23 word 26:5 29:11 66:7 125:13 125:14 work 25:20,24 27:23 30:12 35:16 40:16 44:7 50:23 104:10 114:6 117:20 121:24 125:17 125:25 129:11 129:25 132:2 worked 15:23 18:16,19 27:8,15 79:2 114:22 115:14 working 11:6 48:6 62:8 106:21 109:11 works 29:25 101:16

July 31, 2008

123:5 world 104:10,12 105:7 106:15 111:17,18 worried 17:16 worthwhile 96:19 wouldn't 36:14 74:10 125:4 127:10 writing 47:23 65:1 76:11,15,17 84:2 written 62:15 wrong 13:8 22:22 68:10 111:1 128:21,22,24 wrongful 26:1,3 wrote 50:12 60:6 63:13 72:14 76:13 X X 20:24,24 61:25 Y Y 20:24 61:25 year 16:17 21:17 24:4 97:20,23 132:21,21,22 132:24 years 39:11 41:2 year's

Trial 178 19:11 yield 13:21,25 York 2:6,6 Z Z 61:25 Zetsche 18:6 Zolfo 3:5,9 46:1 66:16 Zousmer 2:12 Zs 77:11 $ $1 97:25 $120 116:22 117:11 117:15 $179 81:12 $2 115:16 $255 57:10 $260 111:12 $265 120:11,25 $300 111:12 120:24 $300,000 53:11,22 $50 123:17 124:7 $600,000 21:20,21 $75 127:15 $80 110:17 $800,000 114:19 0 05 9:22 20:6 05-55927 1:7 8:4 06 119:15 123:25 124:2 07068 3:7 1 1.2 126:11 1:00 99:20 1:01 101:1 1:45 136:14 10 39:11 112:17 10:00 135:19 10:12 38:7 10:25 38:8 100 25:9 101 3:6 5:20 10110 2:6 108 52:10 109 52:11 11 1:4 33:3 40:17 45:10 101:24 102:14 131:7 11-22 102:16 11:37 100:25 113 5:21 12th 109:24 126:9 120 71:22 126:24 128:16,18 130:19,22 132 5:24 15 39:11 132:8 179 81:7 18th 125:1 180 111:15 19 88:14 1976 39:5 1980 39:6 2 2 39:15 53:10,22 2-B 129:11 20 78:2 125:4 200 54:20 2005 20:24 90:13

July 31, 2008

91:16 118:9 122:6,7,15,23 125:1 129:23 130:6,12 2006 71:21 73:3,11 75:8 76:20,24 78:10,13 81:7 81:8,11,12 90:12,14 102:15 111:13 116:21,21 117:8,10 118:20 120:11 122:9,11,21 122:24 123:19 126:21,25 128:15 130:18 130:22,22 2007 63:19,24 126:22 127:3 2008 1:13 8:2 21st 135:19 211 1:17 212 2:7 248 2:16 250 54:20,21 26 12:5 15:19 260 2:13 265 111:13,14 29th 78:9 29100 2:14

Trial 179 3 30 10:11 18:7 20:1 63:25 99:15 100:10 120:2 300 111:13 3050 4:6 31 1:13 8:2 118:16 129:20 312 4:8 313 3:16 327 40:15 328 40:15 330 40:4,15 55:4 56:12 114:2,4 351-0099 2:16 36 5:7 37 5:8 38 5:11 382-3300 2:7 4 4-H 124:25 40 17:24 123:17 124:6 400 3:14 44.4 131:25 45 99:13 48034 2:15 48243-1668 3:15 5 5-Z 77:11 50 84:5 50/50 35:5 500 2:5 51 62:24 53 7:5 58:23 59:6 59:10,17,19 55 4:5 551-4931 4:8 568-6519 3:16 59 5:12 7:5 6 60 39:14 60603-5709 4:7 618-5172 3:8 63 124:9 7 7th 109:25 70 39:14 8 8th 78:8 80 126:10 82 5:13 89 5:16 9 9 5:6 9:32 1:14 90 111:8,24 126:12 93 5:17 973 3:8

July 31, 2008