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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. (Jointly Administered) Hon. Steven W. Rhodes ~~~~~~~~~~~~~~~~~~~~~~~~~ TRIAL Case No. 05-55927 (SWR)

July 30, 2008 10:15 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 30, 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 Appearing as in-house counsel for Kroll Zolfo Cooper. 07068 APPEARANCES CONTINUED:

July 30, 2008

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 30, 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 PETER NURGE CONTINUED CX-BY MR. DeFILIPPO RDX-BY MR. DAMREN RCX-BY MR. DeFILIPPO TIMOTHY TRENARY DX-BY MR. DAMREN CX-BY MR. DeFILIPPO PETER CHADWICK DX-BY MR. DAMREN CX-BY MR. DeFILIPPO WITNESS EXAMINATION INDEX

July 30, 2008

EXAMINATION

9 45 76

83 125

155 182

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

July 30, 2008

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 NO EXHIBITS MARKED NO EXHIBITS ATTACHED NUMBER EXHIBIT INDEX

July 30, 2008

MARKED FOR ID

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 for the Applicant. MR. ROSE: session. P R O C E E D I N G S JULY 30, 2008 COURT CLERK:

July 30, 2008

Court is in

Case Number 05-55927, Collins &

Aikman Corporation. MR. DAMREN: Samuel C. Damren

on behalf of the Trust, Your Honor. MR. DeFILIPPO: Paul

DeFilippo for the Applicant, Your Honor. MS. KARDOS: Elizabeth Kardos

Ronald Rose on

behalf of the Post-Consummation Trust. MS. CHANG: Jong-Ju Chang on

behalf of the Post-Consummation Trust. THE COURT: Yesterday

afternoon Mr. Hertzberg called my office with Mr. Macher's telephone number and so my staff called Mr. Macher and he agreed to be here tomorrow morning at 9:30 voluntarily, and I wanted to let you know that, and let's proceed. MR. DeFILIPPO: We were

examining Mr. Nurge when we broke, Your Honor.

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 A. Q. Yes. This is a report that Capstone that, sir? MR. DeFILIPPO: BY MR. DeFILIPPO: Q. Do you have it? 29. Your Honor. CONTINUED CROSS-EXAMINATION BY MR. DeFILIPPO: Q. Mr. Nurge, can you get exhibit THE COURT:

July 30, 2008

One more thing

regarding Mr. Macher, I think probably my assistant probably still has his telephone number if either of you want to call him today and chat with him before he testifies tomorrow. That's up to you. MR. DeFILIPPO: Thank you,

volume one of the numbered exhibits, please. Please turn to Exhibit 29, please, sir. THE COURT: What number was

issued to the lender group dated December 13th, 2005? A. Q. That's correct. Could you turn to page four,

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 please.

July 30, 2008

Would you read the last paragraph on

page four of that report out loud. A. paragraph? Q. A. The last paragraph on page four. The viability of a standalone Sure. I'm sorry, the last

plan and alternatively maximizing its transaction sale value will be predicated on identifying significant opportunities to rationalize the company's operations, particularly on the plastics side of the business. New management believes that there are substantial opportunities in this area. We are currently reviewing these opportunities with operating management. Q. Does that paragraph mean in

substance that an operational turnaround of the plastics division was essential to a successful restructuring? A. Q. Yes. And the 2005 EBITDA for the

company was close to zero, wasn't it? A. Ultimately, there were higher

reported numbers, but when you backed out one-time surcharges and special events, it

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 was close to zero. Q. And zero EBITDA could not

July 30, 2008

support a restructuring, could it? A. action. Q. So your firm and the company No, not without some other

and the other parties were all aware that it was necessary to generate additional EBITDA from improved operations to successfully restructure, correct? A. Q. Yes. When you used the term

rationalizing operations in the paragraph you just read, rationalize the company's operations, does that include generating EBITDA improvements from plant consolidations, material savings and other cost savings opportunities? A. Q. Yes. By the time you wrote the

report that's marked Exhibit 29, you knew pretty much what the EBITDA increases that would be generated as a result of price increases would be, correct? A. I believe we did, yes.

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 Q. So the unknown in the equation

July 30, 2008

was how much EBITDA improvement would result from cost savings and other efforts to rationalize operations? A. Q. That's correct. Now, a week after this report

you had decided that management was unable to generate the cost savings that they thought they could, correct? A. Q. Yes. And in that December 20th

meeting that you testified to yesterday, you did not present anything to the company in writing, did you? A. Q. No. Mr. Macher was generally thought

to be an operating and cost savings expert, wasn't he? A. Q. Yes. And that's the reason he was

brought into the company to effectuate the operational turnaround if necessary? A. And to -- that and to stabilize

the relationship with the OEMs, who were concerned that there were no automotive

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 experts leading the charge. Q.

July 30, 2008

Can you find that exhibit binder I think

that has letter Exhibit O in it.

it's binder number seven. Do you have that document? A. Q. Yes, I do. Is Exhibit O a report that your

firm wrote to the agent and the agent's counsel on this case on August 26th, 2005? A. Q. Yes. By the way, I noticed this

report and the last one have the word draft on them. You issued all the reports that

you've issued in this case in draft form, didn't you? A. Q. That's probably correct, yes. Just because it has draft on it

doesn't mean it wasn't issued by your firm, correct? A. It depends on -- there are some

items that obviously are unfinished among the exhibits that I've seen. Q. We shouldn't stop reading it if

it says draft though, right? A. That's correct.

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 Q.

July 30, 2008

On the second page of Exhibit O

you discuss the incentive compensation program and I want to focus you in on the CEO component of that in the middle of the page, do you see that? A. Q. Yes, I do. And the chart has total

enterprise/transaction value at the top on the line, do you see that? A. Q. Yes. What do those numbers running

across that line stand for? A. Represents at different levels

of value post confirmation for measured at and around the confirmation and emergence from bankruptcy, and if total enterprise value achieves certain values, there would be X amount of dollars, reading down the chart, put into a pool for the management team. Q. And the CEO's component is the

first line below total enterprise value? A. Q. the pool? A. That's correct. Yes. That was Mr. Macher's share of

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 Q. So at a $1 billion total

July 30, 2008

enterprise value, Mr. Macher got no incentive compensation, is that what the dash means? A. Q. Yes. At 1.2 billion at enterprise

value, he got 1.00, is that in millions? A. Q. That's in the millions. And his value is escalated the

more value he can bring to the table. A. Q. That's correct. Now, in order for him to

generate an incentive compensation payment to himself and the other members of his team, was he required do you think to bring at least $240 million in EBITDA in to hit the billion two? A. Q. Certainly around that number. Did Mr. Macher say in that

December 20th, 2005 meeting that he understood the points that you said you made? A. Q. Yes, I believe he did, yes. And nothing you said was news

to him about the risks of the plan, were they? A. No.

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 Q.

July 30, 2008

He was cognizant of those risks,

he understood them, you think? A. Q. I believe so. You and he disagreed on his

ability to execute the plan, right? A. Q. Ultimately, yes. I think you said that there

were a number of separate cost savings initiatives, something like 700 or so, right? A. Q. I think 750. 750? But they were spread over

50 or more plants, weren't they? A. They were spread over probably

50 plants, but there were certain plants that were far more needy than others. Q. And there were also some that

were going to come from home office savings, weren't there? A. Q. Yes. So it's not like there were

three or four plants that had to do 750 things for this plan to work, correct? A. Q. No. In the course of doing your

diligence on behalf of your client to try to

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 understand what was going on at Collins & Aikman, your team received everything it asked for, didn't it? A. There were some timing issues

July 30, 2008

but ultimately after some delays we did receive pretty much everything we asked for. So for instance, we asked for the reports that were being given to the board, management's discussion and analysis of the operations, and I don't think we got those until April 2006, for instance. Q. But ultimately you got

everything you asked for, right? A. Q. Yes. Now, you testified yesterday

that you believed that KZC's responsibility was to vet the plan, which I think you said was to make sure it was supportable, reasonable, and the projections were suitable for their use in marketing the plan and negotiating a plan of reorganization, marketing the company and negotiating a plan of reorganization? A. Q. Yes. You do not contend that KZC

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 failed to vet the plan, do you? A. I believe they did a lot of

July 30, 2008

work, had a lot of knowledge.

They certainly

were the ones who answered all of our questions with respect to the plan, so I believe that they had done all the work necessary in their judgment, we never quizzed them as to exactly what they had done, but I believe they were fully aware of the assumptions, they had participated in the meetings with the operating management team where the assumptions were developed and were in general on board with the plan. Q. At the end of the day it was a

disagreement over whether Macher's vision of the company's future or some other vision of the company's future was the correct one, right? A. Q. Yes or no. At the end of the day, yes. Now, Lazard was the investment

banker who was marketing the company? A. Q. That's correct. And Lazard was comfortable

including the 2006 business plan in the marketing materials, correct?

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 A. Q. They did it, so I assume yes. And they are experts in how to

July 30, 2008

market a company in distress, aren't they? A. Q. Yes, they are. And they've done so in a lot

more instances than you have, have they not? A. Q. Yes. Now, in the process of your

examination of the projections in 2005 you issued a number of reports to your clients, correct? A. Q. Yes. I would like you to turn to a

report that's Exhibit 20 in volume one of the numbered book. A. Q. Do you have it, sir?

Yes, I do. This is a report that you and

Mr. Chadwick issued on September 6th, 2005 to the secured lenders steering committee? A. Q. That's correct. That's the steering committee of

pre-petition lenders you identified yesterday? A. Q. Yes. Now, in the first paragraph you

indicate that your initial reaction to the

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

July 30, 2008

strategic plan that the company presented was that it was needlessly optimistic and will create a number of problems, do you see that? A. Q. Yes. First -- second sentence, and

the company's response you write was that Frank Macher and the board had concluded that to maximize value in a sales process, the marketing materials should paint a favorable picture of the alternatives available, and two, the potential of the company, do you see that? A. Q. Yes, I do. Is that an accurate statement of

what you were told that Frank Macher and the board concluded about the use of the projections in the marketing of the company? A. Q. Yes. And the next paragraph you share

with your clients your impression of what the impact on the sale process of the use of over optimistic projections would be, do you not? Mr. Nurge? A. say -I think what we're trying to

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 Q. question? Did you -- did you hear my

July 30, 2008

In the next paragraph you share

with your clients your view of what the impact of the use of over optimistic projections would be on the sale process, do you not? A. We say that the credible buyer I don't

would recognize the deficiencies. think I -Q.

Why don't you read the whole

first sentence there. A. "While we think that a credible

buyer will recognize the deficiencies in the forecast, as long as a comprehensive sales process is carried out, current value will be determined in that process." Q. And that's advice you gave to

your clients on December 6th, 2005, correct? A. Q. Yes. Then you made a recommendation

in the next sentence to your clients, correct? A. Q. Yes. You at that time were facing a

set of projections with an EBITDA range of

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

July 30, 2008

between 256.7 million and 311.7 million in 2006, correct? A. Based on the described plan, we

really didn't have any support for it, yes. Q. That's what you were telling

your clients was the range of EBITDA in the plan you were advising them on, correct? A. We were telling them to not to

really expect that. That's what I was advising my clients. Q. I understand. But the low end

of the range was 256 and the high end was 311, correct? A. Q. Correct. You testified yesterday that I

thought you said that the trading prices of the bank, you know, the pre-petition secured lender that were affected by the fact that there were projections in the marketplace, did you say that? A. Yes, the time frame we were

talking about was July 2006 I recall. Q. Isn't it true that the company

never publicly issued any of its projections? A. I believe that's true, yes.

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 Q. So that any projections or

July 30, 2008

business plans that the company issued were only given to persons who agreed to be restricted from trading in the company's securities, including the bank debt, right? A. We only distributed to people

who so agreed, yes, but I believe that holders of the debt who were interested in selling their debt would often sign confidentiality agreements with proposed buyers, and so the information had a way of finding its way around the investing community who specialized in distressed debt. Q. Not because anything the company

did or your firm did, right? A. Q. I believe that's true, yes. The company to your knowledge

took every available effort to make sure the projections were kept confidential, didn't they? A. Q. To my knowledge, yes. The company actually issued a

lot of warnings in the documents when it was distributing sensitive information that it should not be distributed beyond the

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

July 30, 2008

restricted group of persons entitled to see non-public information, right? A. Q. As did all of my reports. So in fairness to the company,

the projections should not really have affected the trading prices in the bank debt if the confidentiality restrictions had been scrupulously observed? A. I don't know that people were

doing anything illegal or immoral, so I don't know how to answer that question. Q. I'm not saying that. You don't

suggest that the company issued its projections at any time intending to affect the trading prices of its securities, do you? A. Q. No, I don't believe that. Let's talk about the four plus Okay? You

eight reforecast for a second. can probably close that out. find it. A.

Just need to

Do you know where it is? No. Could you give me a point

of reference? Q. I thought I had it. MR. DEFILIPPO: Your Honor, one second, please. Pardon me,

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 THE COURT: BY MR. DeFILIPPO: Q. It's Exhibit 49 in the second Sure.

July 30, 2008

volume of numbered exhibits. A. Q. A. Q. Which exhibit number again? 49. Okay. Okay. And let's just give the

Court a chance to catch up. THE COURT: BY MR. DeFILIPPO: Q. Is this the four plus eight I'm there.

reforecast that was issued by the company? A. Q. A. Q. I believe it is, yes. And that's dated June 8th, 2006? Yes. And four plus eight means four

months of actual results and eight months of projected results for the balance of 2006? A. Q. That's right. And did you get the four plus

eight reforecast on or about June 8th, 2006? A. Q. I believe we did, yes. Now, if you go to Exhibit 10,

which is in the first volume, we're back to

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 the first volume.

July 30, 2008

I hate to do this to you

but -- are you there? A. Q. Yes. Attached to the E-mail which is

the first page of Exhibit 10 is a preliminary sensitivity analysis your firm did of the four plus eight plan on June 13th, 2006, right? A. It's a sensitivity analysis that

my staff started working on and it was never issued and I never saw it before my deposition. Q. Okay. But people in your firm

did produce this document, right? A. Mr. Vizzini sent it to Mr.

Chadwick at some point. Q. Did anybody from your firm tell

you before today that they didn't think the information in here that they did was right? A. When Mr. Chadwick told me that

these were Mr. Vizzini's working thoughts, but that we never really completed this. Q. But as of June 13th your firm

recognized that there was about $50 million in risk in the EBITDA numbers in the four

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 second. up, sir. BY MR. DeFILIPPO: Q. Nurge. And turn to Exhibit 16, Mr. plus eight plan, didn't it? A. We certainly were aware there

July 30, 2008

was risk in the four plus eight plan, yes. Q. And the magnitude of the risk

ranged as great as 49.7 million, did it not? A. Based on this document, yes, but

as I said, I hadn't reviewed it in the context or the time frame. THE COURT: Excuse me, one

You really need to keep your voice

That's a report that your firm did

to both the pre-petition secured and DIP lenders on June 21st concerning the four plus eight plan, correct? A. Q. That's correct. And although it says draft it

was distributed to your clients? A. Q. To the best of my knowledge. Now, in Exhibit 16 you describe

the risks to accomplishing the four plus eight reforecast in great detail, do you not? A. Yes, we did.

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 Q. And those risks including

July 30, 2008

according to your report the possibility of lower volumes from the company's customers, correct? A. Q. Yes. They included the possibility of

lower cost savings in manufacturing inefficiencies, correct? A. Q. Yes. They included the possibility of

no Ford raw material indexing, correct? A. Q. That's correct. And they included the

possibility of the convertibles business falling apart, correct? A. Q. Yes. Now, in your temporary yesterday

you described the company's results in May and June of 2006. The May results were not

available to the company at the time the four plus eight was issued, were they? A. Q. No, they were not. And neither were the June

results, right? A. No.

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 much? A. The volume declines for the now. Q. Okay. And when you testified

July 30, 2008

about those two months, you sort of smashed them together, didn't you? A. Q. Yes, I did. Okay. Let's break them apart

So let's get the May results out and

I'll tell you where they are in a second. They are Exhibit BB in the numbered book, I mean, in the letter book, sorry. Mr. Nurge, in May the company was experiencing those volume declines that were risks in the four plus eight plan, weren't they? A. Q. Yes. And that affected EBITDA by how

North American -- the volume declines for the North American light build, the volume mix was reported as 4.2 million on page seven of the May document. Q. That's against the original

plan, right? A. Q. I believe so. What was the result against the

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 four plus eight reforecast? A. Q. exhibit? A. It appears to be on page 12 of I don't recall. You can't tell from that

July 30, 2008

the exhibit.

It's not broken down by cause

on this page at least. Q. On page 12, am I reading it

correctly if I conclude that in May the company actually exceeded its projected EBITDA in the four plus eight on a company-wide basis? A. Q. A. Q. On a company-wide basis, yes. By how much? 1.9 million. And it failed to achieve its

plastics EBITDA in the four plus eight by 1.6 million, right? A. Q. That's correct. Now, in May the company appeared

to have some success in managing the material costs in the plastics division, did it not? If you look at page five, there's a chart there that seems to indicate that it was only three tenths of one percent off in its

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 yes.

July 30, 2008

estimate of material costs as a percentage of revenue in plastics. A. I see that they reported that,

yes, but even three tenths of a percent of a multibillion dollar business is a lot of money. Q. And in May the company also

broke out on page 14 certain results comparatively between actual and budget on the cost savings, correct? A. Q. Correct. Now, company-wide, am I reading

that correctly that in May the company was 109 percent ahead on its cost savings initiative, or it was achieving 109 percent of budget? A. The number says that, although I

don't know how that kind of math would work, 523,000 savings would be 109 percent of either of those numbers. Q. Isn't 523,000 the amount by

which the company exceeded its budget for May of cost savings? A. For the items they're measuring,

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 Q. right? A. Q. A. savings. So that's how you get to 109, You divide 523 by 519.

July 30, 2008

That would be about 10 percent. 109, 110, close enough, right? I see. It's a 9 percent

They weren't exceeding by 109

percent, they're exceeding by 9 percent. Q. They were at 100 percent plus 9

percent better? A. Q. Yes. Okay. And plastics was in May

at 84 percent of its projected savings, right? A. Q. That's correct. June was a really bad month

though, correct? A. Q. As I recall, yes. But nobody knew June's results

at the time the four plus eight was built? A. Q. That's correct. I thought you said yesterday

that Wilbur Ross issued a press release after the July 12th meeting that he was discontinuing negotiations, didn't you? A. Best of my recollection, yes.

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 Q. I looked everywhere for that

July 30, 2008

press release and couldn't find it, are you sure about that? A. I'm pretty sure, because I

recall having a conversation with the -- with counsel and with the company, I believe, as to whether there was any way for the confidentiality agreements and so forth, in fact, that would be a violation, and I remember concluding that he could, or not concluding, but being told that he could do basically what he would if he wanted to. Q. I know he was threatening to

issue one, but he never actually issued a press release, did he? A. I believed he did but I'm not a

hundred percent certain. Q. Well, if he had issued a press

release, he did continue negotiations, did he not? A. There were sort of back channel

discussions for the next couple of weeks, yes. Q. And yesterday I think you said

that Mr. Ross really wanted these assets?

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 A. Q. Yes. That they were integral to his

July 30, 2008

auto parts rollup business, right? A. Q. Yes. And that he could derive

synergies from folding them into his international automotive components platform, right? A. Q. Yes, we believed that, yes. In the July 12th meeting I

think you said he wanted a purchase price adjustment based upon the acknowledged miss by the company in its four plus eight plan, right? A. My recollection is that he said

that there would have to be some kind of adjustments, yes. Q. Now, you fellows quantified the

value of his offer at the time you got it, didn't you? A. I don't know that we did it or

Lazard did it, but there was a document that quantified the value of the offer at its face and north of a billion dollars. Q. Would you turn to Exhibit 23,

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 it's in volume one.

July 30, 2008

Is that a document that

your firm prepared analyzing the Ross offer's value? A. Q. I believe it probably was, yes. Okay. And this is when the

offer was 80 percent of face amount of the bank debt in cash and the 20 percent earnout note, correct? A. It was 80 cents in cash and if

the company exceeded its projections there would be some more in the way of an earnout, yes. Q. And what did your firm conclude

the total value of the Ross offer at that time, July 6th, 2006, offer was? A. That if all the conditions were

met in the term sheet, the total implied value was about a billion 178. Q. 1.178 billion, that's TEV down

at the bottom? A. Q. Total enterprise value. So it's made up not only the

price he was paying to the banks, but other things he was paying or assuming? A. That's correct.

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 Q. And he kept that offer on the

July 30, 2008

table with knowledge that the four plus eight plan was going to miss, didn't he? A. He did not keep a 1.178 billion

offer on the table. He said it wouldn't be that number. Q. downward? A. Q. A. Q. Yes. Did he tell you how much? No. But in response to this you He said it was going to adjust

asked for more, right? A. Q. Yes. You asked for par plus accrued

essentially? A. And also asked for certainty as

to what the amount he was offering was. Q. So you asked for 100 cents on

the dollar with the banks plus elimination of contingencies? A. Q. A. No. What's certainty mean then? Certainty is you have the

conditionality in the term sheet that makes

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

July 30, 2008

it hard to gauge what you're really going to get. Q. You wanted him to drop

conditions without doing due diligence? A. What we had suggested is that

you had to look at the long-term projection potential, not solely what was going to happen in 2006, and that while we recognized that he needed to have a trigger or a threshold, we suggested that the 2006 earnings threshold could be around $120 million for EBITDA and not be a way for him to pull the plug or change the price. Q. So you were arguing that the

2007 projections were more important than the 2006 projections to a buyer, weren't you? A. Q. Yes. Did you believe that argument

when you made it? A. Q. Yes. And when he would not accede to

your group's request, you told him you would do your own plan rather than sell him the company? A. It wasn't worded that way, but

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 -Q. A. I'm not as artful as you guys.

July 30, 2008

Basically he told us to take it

or leave it, the term sheet that he provided July 6th, and that he was not in the mood to negotiate. He thought our views as to value

were too high. Q. So he told you he wasn't

raising his price, right? A. He told us not only wasn't he

raising his price, he wasn't going to negotiate any of the terms. Q. And were you informed after that

meeting that he was willing to negotiate some of the terms? A. He asked us to make a

definitive offer and that's when we came back and said we would take 90 cents on the dollar and some sort of earnout note but there had to be, you know, some trigger mechanism so that the deal couldn't be blown up, that it had more certainty with respect to it. Q. A. He never responded to that offer. Turn to Exhibit 26, please. Okay.

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 Q.

July 30, 2008

And I wanted to focus you in on

the note or E-mail that's the second E-mail in the string on that page, first page, carries over to the second. A. Q. Yes. Dated July 14th, 2006. Is that

the response from the lender group to Mr. Ross that you just described, the 90 cents in cash plus an earnout that got you to par plus accrued, or a note that got you to par plus accrued? A. Q. Yes, it is. So you were demanding at least

90 percent in cash of the bank debt with no risk of downward adjustment? A. Q. That's correct. And at that time or before that

time you had told him that if he didn't accept that you were going to go ahead with your own plan, right? A. Q. Yes, I believe we did. And you viewed your own plan,

the bank's plan, as a way to keep him honest, right? A. Yes.

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 Q. You were not hoping to wind up

July 30, 2008

as the owners of this company, were you? A. Q. No, that was not our goal. Your goal was to get Ross back

to the table and make him hit your bid, right? A. Q. Yes. So when the company told you

that the company and its advisors believed that the banks were better off selling to Ross than doing a standalone, you agreed with that, didn't you? A. Yes, at the end of the day that

was all of our objectives. Q. Did you consider, you being the

bank group, the lender group that you represented, liquidating the company in mid-July? A. Q. No. I think you said yesterday you

didn't want to think about it, right? A. We were typically not in the

business of liquidating companies and there were a lot of considerations beyond just pure recovery to doing a step like that, and it's

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 not something we would entertain likely. Q. But in mid-July, let's just

July 30, 2008

focus on the options that were facing your group, your lender group, you had, one, the Ross offer, two, you had an option of a lender plan, right? A. Q. Yes. And three, you had an option of

liquidation, right? A. Q. that time? A. Q. None that I'm aware of, no. So in terms of desirability, is It was an option, yes. Were there any other options at

it fair to say that you viewed the Ross offer if he could get to your price as most desirable? A. Yes, we still believed that --

we still believed that there was a company that could make 180 to 200 million here in the long term after it was fixed. The

problem was getting to the fix, and how long that was going to take, but we felt that ultimately there would be value. Q. And you believed that the

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

July 30, 2008

company could get to 180 to 200 million after your team at Capstone had done a tremendous amount of work tearing the company's numbers apart, right? A. Over the long-term we believed

that it would look like that for 2006, that's correct. Q. Okay. So getting back to

evaluating the alternatives that you faced, three alternatives, trying -- getting a deal done with Ross at a price you liked was best, right? A. Q. A. Yes. What was second best? Second best was likely to be

the standalone scenario, if we could finance it and get the lenders to go forward with it. Q. So you told the company in July

that you wanted to go ahead with this standalone, a lender sponsored standalone in large part to keep Ross interested and a potentially active purchaser, correct? A. That's correct. Although if

you're going to do it, you need to be

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 prepared to do it. Q. Right. And the third

July 30, 2008

alternative, liquidation, was something that was the least attractive alternative, although it was out there? A. I don't believe we had even

done a liquidation analysis to compare the numbers. Q. Did you tell anybody from the

company that you wanted to see a liquidation analysis then? A. Q. I don't think in July, no. Now, in Mr. Ross's offer, which

I think is Exhibit 69, I would like you to get that out, please. It starts about a Do you

third of the way into the exhibit. have 69? Here you go.

It's in the little

volume three. A. Q.

Do you have it?

Yes, I do. It starts with the Bates number

66682 on the bottom right. A. Q. That's correct. Okay. Now, I want you to turn

to the page number six that says conditions. Like 23 separate conditions, right?

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 A. Q. That's correct.

July 30, 2008

Some of them were more important

than others, right? A. Q. Yes, they were. But one of them was that, well,

there are a couple that involved agreements with the customers, were there not? A. Q. Yes, there were. Okay. So one thing Mr. Ross

wanted in item 15 was the OEMs agreeing to treatment of their claims the way he was offering it, right? A. Q. Yes. He wasn't offering to pay them

in full, was he? A. No, I believe for certain of

their claims that they too would get an earnout note at -- that depended on the success of the ultimate company. Q. right? Number 17 is the big one, That's looking for documented

business arrangements with six manufacturers. A. I don't know what you mean by

the big one. Q. Well, do you think that was the

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 most important thing to him, knowing that there was business going forward? A.

July 30, 2008

That would be important to every

buyer, including him, yes. Q. And Mr. Ross wanted the same

thing in his offer that the lenders wanted in their plan from the customers, right? Documented long-term business. A. We knew we couldn't compel

customers to give business on a standalone plan, so we didn't have an expectation of a written agreement with the customers that you'll give us thus and so much business, although we would have liked to have had that. Q. Well, he couldn't compel

customers either, he had to get their agreement, right? A. That's correct. MR. DeFILIPPO: nothing further, Your Honor. REDIRECT-EXAMINATION BY MR. DAMREN: Q. Exhibit 20. Could I refer you back to I assume that's in the first I have

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 binder. A. Q. I'm there. This is an assessment that Mr.

July 30, 2008

DeFillippo asked you to review in terms of the potential problems that the strategic plan presented to a potential buyer, but you identified, didn't you, in that document problems that the strategic plan presented to other constituencies, in fact, I believe in the second full sentence you reference them, the first paragraph, could you read that second sentence, starts "our initial reaction." A. "Our initial reaction to the

plan was that it is needlessly optimistic and will create problems for the company in justifying the need for full concessions from the OEMs, while creating unrealistic expectations in the unsecured creditors committee regarding the value of a standalone plan alternative." Q. You wrote -- you referenced the

OEMs, what was the problem that the strategic plan would present for the OEMs? A. As you might expect, the OEMs

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 30, 2008

wanted to pay as little and give as little in terms of price increases as is necessary to preserve their supply, and the higher the projections, the less they would feel they needed to give, or at least give on a permanent basis. So there was a delicate

balance needed there. Q. That conclusion assumes that the

strategic plan at some point in time will find its way into the hands of the OEMs. A. Yes, we assumed that the OEMs

by virtue of giving up money would be entitled to access to most of the financial information. Q. As a matter of fact, your

experience was they demanded it? A. They demanded it and they had

even more consultants than the creditors committee and the secured lenders combined. Q. The problems with respect to the

other constituency that you identified in that sentence being the unsecured creditors, what's that unrealistic expectation problem? A. If the expectation is that the

value of the enterprise is north of a billion

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

July 30, 2008

dollars basically, that it was basically then their decisions to control. different objectives. They had

Where we wanted to

sell the company, they felt that selling the company would be premature and lock in lower values to whether they would like to operate the company for the longer term, so we would have had a real tough time with the work in process and a fight about whether we should sell it if we got what we considered to be an acceptable offer. Q. Now, you were writing this

assessment on September 6, 2005, is that correct? A. Q. That's correct. And as of yet there wasn't the

revised post closing budget hadn't issued? A. We had almost no detail This was a high concept of

supporting this.

what we think we can do and even without the supporting detail we thought that was a -pretty much a crazy answer. Q. What other constituents did you

anticipate the financial, these confidential financial projections, whether it be the

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 30, 2008

strategic plan or any of the other budgets we discussed, what other constituents did you believe would secure that information ultimately? A. Buyers, people who reported the

marketing process and their consultants, the creditors committee obviously, ourselves and the OEMs. Q. And what about the individuals

who were considering buying the securities, would they ultimately get access to that? A. We wouldn't give it to them. But I

The company wouldn't get it to them.

think it was well known both by Kroll and ourselves that somehow, some way that would filter there. Q. Mr. DeFilippo then asked you to

go to Exhibit 16 and talk about the four plus eight plan that was issued almost a year later in June of 2006, and you did do the assessment that you referenced in Exhibit 16, and I would like to turn to that for a moment. A. Q. I'm there. Let's go through this document

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 in a little more detail.

July 30, 2008

In the section 1-D

on the first page you reference the fact that it's a preliminary understanding of the assumptions, but then what's your second sentence in that paragraph? A. We said we do not have all the

detail supporting the forecast, nor have we had an opportunity yet to meet with management to challenge these assumptions. Q. So what detail were you looking

for or would you ultimately be looking for and what kind of meetings and challenges would you like to conduct with the management? A. What we desired is to speak to

the operating management who would ultimately have to implement these plans about how they would implement them and some of the practical considerations of doing this in the environment that they were in, but we also needed to see the plant-by-plant rollup of where all of these changes were coming from, and see how that comported with our understanding of things. Q. But even without that detail and

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

July 30, 2008

the opportunity to challenge management, you did have a number of specific concerns that you begin to reference on the next page concerning the revised and lowered EBITDA amount from 265 to 180 essentially, and you list those. In lower revenues, would you read the last sentence and your concern that even the lower revenues, even what they predicted in the four plus eight plan may be wrong, may be too optimistic. Would you read

the last sentence and then I'll ask you questions about it. A. "The company has addressed some

of the potential volume risk in 2006; however, we think forecasted revenue of 2.5 billion may be susceptible to lower production in certain programs that are critical to C&A, including Chrysler 300, Dodge Durango and Ford Mustang." Q. What specific concerns do you

recall or information did you have that the volumes might be wrong in those three programs or at least a greater risk than the plan anticipated?

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 A. One of the things that we were

July 30, 2008

doing was monitoring dealer inventories of the key products that Collins & Aikman was producing and we noticed that there were very high levels of inventories. This was also

the time period where after coming off of a strong volume in 2005, and some of that sort of self-generated by discounts, that there were discussions about shutdowns and the need to balance inventories and that sort of thing. Q. In the next section, B, entitled

lower cost savings/manufacturing inefficiencies, in lower case I you reference the fact that there were some cost initiatives, the execution of them has resulted in, "higher scrap rates, additional labor and overtime costs, and premium freight costs in several plastics facilities," what was that, those factors, what did they warn you of? A. It indicated that it was, we

believed at the time that it was indicative that they are harder to implement these savings than originally planned and as a

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 result they were having to throw massive

July 30, 2008

amounts of labor and do rework and have scrap rates so that basically it was just tougher to get things done than they originally had allowed. Q. You indicate in the small two I

following that that even this forecast is likely optimistic, I'm sorry, referencing the $56.6 million in cost savings that the forecast contemplated securing for year 2006, and then you go on to say, even this forecast is likely optimistic. It's

approximately $40 million of the $56.6 million is achieved in the second half of the year. Why did you reach or why did you have

that concern? A. Well, all of the forecasts were

back-end loaded in that the preponderance of the savings occurred late in the year, and while it makes a certain amount of sense from the standpoint that you have to start implement and it takes a while to get the savings out, we thought that the rampup was extraordinary and would be impossible to achieve.

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 Q. You then reference programs

July 30, 2008

concerned with programs representing 330 million of take away business, with paren, the latest estimate, and then you express concerns about the transition and launch of these programs. What were your specific

concerns about the transition and launch of these programs? A. We were talking about a very

large number of programs leaving Lear and going into Collins & Aikman plants. Launches of new products are notoriously difficult, management intensive and would take up -- and almost always have overruns, and trying to move that much business, and also do all of these other things at the same time, we couldn't conceive how they could do it without having some major missteps. Q. And your final point in that

section you talk about deficiencies at management and you're talking about the plant level, and I would like you read the last two sentences. A. "The deficiencies of management

at the plant level are greater than the new

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

July 30, 2008

executive management thought at the time the original plan was prepared. While the

company has identified human resource deficiencies, changes and replacements will take some time to complete." Q. What impact did that problem

have on the projected EBITDA for 2006? A. The impact of not having all

the right people in the right places to execute the plan meant that there was a great deal of risk that the plan couldn't be executed as designed, and we knew that there were manpower deficiencies. Q. Going to ask you to turn to the

next page where you reference concerns with convertibles deterioration, and you're referencing certain pricing relief on the Pontiac Solstice program that was contained in the forecast. Why did you believe that

the -- those pricing relief was problematic? A. This convertible product was --

there was somewhat of a surprise, this was a situation where if I'm recalling correctly product line management hid the fact or didn't disclose the fact that they were --

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 done. Q. And we go on in the next

July 30, 2008

that they had not gotten approval from GM for a price increase relating to moving production out of Mexico and into a plant in the U.S., as I recall, and everybody believed they would be entitled to it, but GM never agreed to it, and apparently for a long time management didn't know about that. Q. You reference in there not just

that GM wouldn't agree to it, but you reference GM has steadily refused to negotiate on the Solstice. A. Yes, GM believed that they were

paragraph and talk about you reference to concessions from the OEMs. As the year had

gone on in 2006, what was your understanding of the ability of suppliers in the automobile business to get concessions from the OEMs? A. First of all, the OEMs believed

that they had already, you know, we gave them the office kind of thing in that they had given substantially in November, December of -- and earlier in the case to stabilize the case, and it wasn't their responsibility to

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

July 30, 2008

make sure the entire capital structure got paid, but it was their point of view, plus there were increasingly widespread problems in the supply end, and they were very concerned about what they did in company A would become a precedent for companies B through Z, and they were very concerned about us giving out handouts. Q. The next section of the

liquidity at the very bottom of D, once again you reference the need when discussing the pros and cons of the take away business contained in the plan, you talk about the need for more detail for you to be able to ultimately comment on that, and once again I'll ask you, what kind of detail were you looking for with respect to the comments you made above that with respect to the take away business? A. I believe we were looking for

program specific information and how they knew what the cost to manufacture the parts were going to be and which plants would manufacture it and making sure the cost structure sort of fit in with the costs we

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 were seeing coming out of those plants. Q. Did you have a concern that

July 30, 2008

even if they got the take away business that was contemplated that the cash benefits of it in the year 2006 were not going to be as great as contemplated in the forecast? A. Yes. We had a concern that it

probably wouldn't be profitable or very profitable as they were ramping up because of the technical difficulties of putting in this business, some of which would have even required plant floors to be re-laid out, that sort of thing. Q. On the next page you reference

once again a reference to the need for detail with respect to what you refer to as a comprehensive EBITDA bridge. What kind of

detail are you looking for there to help you build or evaluate the comprehensive EBITDA bridge? A. We were working on what I'll

call a top-down basis. You have point A and point B and we were trying to identify, well, this thing happened, so that must be one of the differences, this thing happened, that

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

July 30, 2008

must be one of the differences, and trying to see if we can explain how we got from point A to point B. If we had a plant-by-plant detail, for instance, much higher level of detail, we could actually see where the differences were coming from and track them down, rather than trying to just sort of eyeball it and do it from a high level. Q. On the next page in the section

paragraph C you talk about price downs and you reference the amount of annual price downs as being less than what were industry standards at the time. Could you explain

your concern and how that impacted the projected EBITDA for 2006 and further years? A. Over the long term, within the

industry it's customary to negotiate price downs between the OEMs and the suppliers. a situation where the suppliers had significantly increased prices, we expected that there would be more than normal pressure, particularly after the crisis was over to start giving some of that back, and indeed a lot of the cost improvements were In

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 dependent on customer approvals, and they would have tremendous leverage. Q.

July 30, 2008

In the paragraph two above there

you're talking about, talk about the OEMs, GM, Chrysler, Ford, and you talk about requirements that they were basically placing on the company to come out of bankruptcy. Can you tell us what those were? A. The OEMs were not only about

new products that were coming out, coming out down stream, but the very continuity of their supply, and they wanted to know what the plan was, when we were going to be out of bankruptcy, how it was going to be implemented so that they could assure their source of supply. Q. And specific time frames for GM,

what had they told the company? A. They had told the company by

February 2007. Q. A. Q. And Chrysler, DCX? Similar, the beginning of 2007. Now, you indicate that of the

big three, the relationship with Ford has become the most difficult, why was that?

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 A. GM and Chrysler tended to work

July 30, 2008

in tandem and Ford is always out there by themselves, it seems to me, based on my other cases. Ford is usually difficult but after

shutting down Hermosillo they became almost impossible to deal with. looking for retribution. Q. In your conclusion on page six They were just

of the exhibit you note that the revised forecast in A has delayed the sale process by several months since the lack of clarity regarding the projected 2006 and future results made it difficult for potential investors and acquirers to put forth a clean enough term sheet to become a stalking horse. Now, you used a fair amount of jargon in there, and most that I'm familiar with, but if you would explain with less reference to the jargon of your business. A. Sure. In order to accept an

offer to sell the company, we had to know what the parties were offering, and for them to make a firm offer, an offer that was measurable, demonstrable and that we could

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 get on board with, there needed to be a consensus.

July 30, 2008

We all needed to be working from

the same database of what the profitability potential of the companies were. We didn't believe the projections, so that when somebody like Wilbur Ross said we'll use the company's own numbers to box them in and gave a very attractive offer on terms that could not be achieved, the -- you can't sign up for something, you can't give somebody the $12 million breakup fee when you don't know how much you're going to get at the end of the day. So but the offers that we did originally get were highly conditioned, the plan didn't come to fruition and then the extended periods of time where new plans were issued, people did their due diligence on the new plans, and frankly all of the, to the best of my knowledge at least, all of the buyers who did due diligence came up with the same problems in the plan that we came up with. Q. And in sections D and E of your

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

July 30, 2008

conclusions, you reference problems with the new forecast would pose with exit lenders. A. Exit lenders, really runs to the

financeability of a transaction that if you're not performing up to speed, and you don't have a great deal of assets to do a collateralized financing, raising something like $450 million of term loan and a $300 million revolver on earnings in the low hundred million dollar range seemed a bit of a stretch to us. Q. And basically to book end this

conversation about these issues, you now have unrealistic value expectations referenced in E among the unsecured creditors, which now must be undone, what did you mean by that reference? A. The unsecured creditors were

demanding that they were in the money, you know, that the projections were real, even though I don't believe that their financial advisors believed that, and were demanding outrageous amounts of money in the sales process in our view. It just made yet

another set of negotiations, yet another

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

July 30, 2008

party from the Court as things went forward for people, and another party spending money who were out of money. Q. Counsel in referring to Exhibit

69, a portion of it having to do with a letter from Wilbur Ross, refers to it as an offer, did you view that item as an offer? A. Not an offer in the sense of

something that we could take to the bank, no. Q. And if in fact you had accepted

whatever this item is, this exhibit, what would have been the sale price? A. Q. I couldn't even estimate it. Now, one of his demands was

exclusivity, could you tell the Court what you perceived the difficulty with giving exclusivity of Mr. Ross would be? A. Well, exclusivity as I think he

intended it was we wouldn't talk to any other potential buyers, not that there were a lot at the time, but he didn't -- we didn't want to admit that to him, and also basically signing off that this is the plan we were going to follow. With such great

uncertainties in an offer, even if we were to

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 A.

July 30, 2008

continue with the offer, we probably would have said this is so highly contingent, we need to get a standalone plan as a backup, because we don't want to find ourselves four months down the road with no place to go. So we probably would have, had we been able to develop a framework with Ross, we might have considered making it into a standalone plan as much as we did. MR. DAMREN: Thank you. Nothing

MR. DeFILIPPO: further, Your Honor. THE COURT:

To what extent,

sir, were you involved in the objections to KZC's fees here? A. Me personally? THE COURT: Yes.

I reviewed the drafts of the

objections, we spoke with our steering committee and counsel about the frustrations that we had with KZC, and also the good things we had to say about KZC as well. I'm not in the business necessarily of fighting professionals about their fees and I find it a little

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 you think it was. A. And the deficiency is that as that.

July 30, 2008

uncomfortable, but our clients believed that the whole forecasting process was a fiasco and -THE COURT: Let's talk about

As uncomfortable as it is for you, we

have to. A. Yes. THE COURT: My question to

you is focusing on the services provided by KZC. Okay? A. Yes. THE COURT: Do you have an

opinion that they did something wrong or incompetent or deficient or in violation of their legal obligations or in violation of their contractual obligations or in violation of their professional standards, anything like that, do you have that opinion? A. deficiency. THE COURT: So tell me what I believe there was a

the experienced financial advisor, while at the end of the day the creditors need to

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 did that? A.

July 30, 2008

negotiate their plans, the debtor has to make sure everybody has all the facts and information set up on the table so that people can assess it and have a good negotiation and a plan to work together. I think throwing up a plan and saying we fully disclosed to you all of the warts and all and you can go and take your own advice as to where EBITDA really will be is actually detrimental to the process. THE COURT: You think KZC

I think that they allowed it to

happen and that one of the roles and one of the difficult roles of being a financial advisor is to get your clients realistic when they don't want to be, and frankly, we had taken great comfort, wasn't just John Boken as CRO, in fact, they had two of their most senior vets on the board, including the chairman who set the agenda. We believed Mr. Cooper would be very influential with discussions with the board and there was also a restructuring

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 '06? A. It was issued in June of '06

July 30, 2008

committee they controlled, so that's where I see the problem. THE COURT: And in connection

with which plan or plans did you experience or feel that deficiency? A. We were troubled in the 2006

plan that was ultimately issued in January of 2006. I do understand from my own personal

experience as a financial advisor that sometimes you have to give things a chance and allow them to fail, but I thought it was beyond that, but sometimes you do have to hold on to the hat, but by the time of the four plus eight plan, there was ample evidence that things were not going to come out nearly as well as, in the long-term as they were projecting, and I think that was -THE COURT: That was June of

and being worked on for the six weeks prior to that. I think that was the place where

we should have got it right. THE COURT: was ample evidence. You said there

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 A. A. Yes. THE COURT: that ample evidence? A. Well, if you were to look at,

July 30, 2008

And what was

through the end of March, for instance, at each of the plastics plants and how they were doing relative to their original budget, it wasn't one or two or five plants that were having problems, it was the great preponderance, and they weren't missing by five or 10 percent, they were missing by 100 percent, you know, 80 percent. THE COURT: Missing what?

Missing their EBITDA forecasts And I guess

for the first quarter of 2006.

when you layer on the fact that the real profit increases, the ones that drove the number up from, you know, the high hundreds into the 265's weren't even going to start occurring until the second half of the year, and you were still having these kind of deficiencies in the first quarter of the year. I think that there were ample red flags to say things aren't what they

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

July 30, 2008

appear to be at the plant. We all believed that this was about the cost improvements, and at the end of the day it proved not to be about the cost improvements, it was the plants weren't where we thought they were to begin with. THE COURT: In June of '06

when this so-called four by eight plan was issued, and a plan you claim was unrealistic, right? A. Yes. THE COURT: Were you then

aware of this evidence that you now say demonstrated that it was unrealistic? A. We were aware of the misses and

that evidence, but at that point in time we didn't have a breakdown of the four by eight plan on a plant-by-plant level so we could see what they did relative to fixing the items that were at -THE COURT: time when you got that? A. I don't recall if we ever got Did there come a

it on the four plus eight plan, but we may have, I just don't recall.

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 THE COURT:

July 30, 2008

What I'm trying

to determine, and I'll ask it directly, to what extent in June of '06 did this four by eight forecast actually mislead you? A. I think that we were aware of

certain deficiencies. Where we ended up being surprised was that it wasn't about the cost improvements, it was in fact that the plants themselves were never -- were not running on their existing business where we thought they were. That's why when I said that I was shocked in the July 12th meeting with Ross when we found out that they had missed by so much, and I knew at that point it couldn't be the cost improvements, I said, okay, what is it we're not understanding at these plants? And at that point in time I demanded, and the company acquiesced, I sent a team of guys to many of the plants to start to look and figure out what was going on. THE COURT: So when you

asked and when you investigated KZC did cooperate? A. At that time, yes, in July. By

July they had acquiesced that my clients were

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

July 30, 2008

in fact the fulcrum security and tell us what you want to do. THE COURT: So your view is

that this four by eight projection in June, what, should have contained more information that would have allowed you to identify that the problem wasn't cost savings, it was a deeper problem than that? A. Yes. I think we think that had

more time been spent at the plant level asking the hard questions about how -- their ability to actually do all the things that were done, it would have become evident that it couldn't -THE COURT: And what was

your understanding about the extent to which KZC was involved in the preparation of that forecast? A. My understanding is that it was

prepared by operating management, and financial management of the company, that KZC was typically involved in all of the meetings and all of the discussions and reviewed the output and essentially presented it along with management as, okay, here's the new

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 plan.

July 30, 2008

We never expected that they prepared it. In fact, I would have been unhappy if they prepared it. management's plan. It's got to be

But I think there was a

responsibility to make sure that when you add all the pieces up you get to a reasonable answer. THE COURT: So in conclusion,

if I can try to summarize your opinion here, KZC did not exercise proper client control in -- when it allowed this four by eight forecast to be issued that was so unrealistic or that was as unrealistic as it was. A. I think I explained it to my

clients as they were too deferential to management and perhaps the creditors committee who were loud and vocal and should have used a little more of their own initiative to get the rose colored glasses off of operating management. THE COURT: As you look back

on it now, if that four by eight plan issued in June of '06 had been realistic, what impact would that have had on the case?

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 A. It's hindsight is wonderful. THE COURT:

July 30, 2008

It's a little

bit of speculation, but this is what concerns you so I'm asking you what do you think would have happened if they had gotten it better. A. I think a couple of things.

First of all, the -- when we did get an offer from buyers, maybe it would have been something that we would have been able to get our arms around, even if we were unhappy about the answer; B, in the marketplace, as strange as it is, it would have changed -that kind of change during that 105 million from 265 million would have moved everybody, including my clients, to a more realistic expectation of the case, notwithstanding I was telling them I don't believe the numbers, it's Nurge being conservative sometimes. So and then finally I think what happened is our, the events that happened after we got, in August we got the plan that said 105 million and then we had to figure out how to finance a standalone because we didn't have an active discussion

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 that for a second. with Ross going on anymore, and we were

July 30, 2008

having trouble making ends meet and that's when we had to go to the OEMs, I think that whole process would have moved up by a couple of months, and I'm not sure that it would have changed the answer at the end of the day other than the fact that, you know, we lost money, spent professional fees and that sort of thing for probably a couple more months than we needed to. THE COURT: Let's focus on

How do you evaluate the

impact of this forecast in June of '06 which you thought was unrealistic, and still think was unrealistic, on KZC's fees? A. I think we concur with the fee

examiner in that there was a delay and that there was an extension of the period of time where we were going down the wrong path that, you know, we proposed two ways or three ways to look at it in our fee objection. The first way is you could look at the professional fees that were run during the period of time; the second way would be to look at the operating losses that

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 or two. RECROSS-EXAMINATION BY MR. DeFILIPPO: Q. Mr. Nurge, I just want to Counsel? MR. DeFILIPPO: questions. Any further questions, were incurred at the plastics division,

July 30, 2008

because all that money just came out of the ultimate recovery for my clients, or a combination of the two. And then the third way to look at it, which is often the result, is you're paying a $700 an hour for a premium service and perhaps based on the service we got that wasn't the appropriate billing rates, and we really needed and wanted more than cash management. We needed the whole panoply of services. THE COURT: I have no more

I have one

understand what you said in response to some of the Judge's questions. You said at the

end of the day it wasn't about missing cost savings, it was about more fundamental

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 saw. what? A. problems at the plant level? A. Q. Yes, I believe that's true. Did that include the need for

July 30, 2008

wholesale process reengineering at several plants? A. that, yes. Q. That's not something KZC was It would ultimately include

responsible for knowing in your view, was it? A. I had no expectation that they

would be experts in process reengineering, only that they could look at the plan and vet it and see the similar problems that we saw. THE COURT: I'm sorry, and

See the kinds of things that we

Basically what I'm trying to say is

that you may have to be an expert to figure out how to remake something in a factory, but you don't have to be that expert to look at the projections and see if they're realistic. BY MR. DeFILIPPO: Q. You do need to be an expert to

look at a factory and know whether or not

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

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what operating management is telling you it can do can be done or not, don't you? A. I don't think that's a hundred

percent true but it would help. Q. The Judge asked you a question

about the exercise of client control at the time of the four plus eight plan. A. Q. Yes. You've seen the documents

concerning KZC's retention and you know as a result of looking at those and questions I asked you in your deposition that KZC reported to the board, correct? A. Q. Yes. You also know that the board

approved the issuance of the four plus eight plan, correct? A. Q. I understand that. And you can't identify anything

that the board did wrong in approving the issuance of the four plus eight plan, can you? A. Nor can I find anything that

Kroll did to try and convince the board that the veracity or lack thereof of the plan.

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 Q. A. Q. You don't know either way? I don't know. But despite not knowing what

July 30, 2008

Kroll did or didn't do at the time of the issuance of the four plus eight plan, you formed an opinion that the company, that Kroll didn't exercise proper client control? A. I believe that they were overly

deferential when the views of management ended up outside the results of what reasonably could be expected. Q. You thought that 180 million in

EBITDA was the right number for 2006 at some point, didn't you? A. Q. some point? A. Q. A. That's right. You changed your mind when? Certainly by the June time frame Yes, I did. And you changed your mind at

we thought that it was going to be longer and more costly and tougher to implement the changes, although we still believed that the long-term profitability potential for the company was 180 or 200 million in EBITDA

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

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which would mean, you know, 800 to a billion dollars of value down the road. Q. A. Q. Just not in 2006? That's correct. You thought that EBITDA in 2006

was more like in June you thought it would be more like 120 million? A. I don't think that we were all

the way down to 120, although that would certainly be in the range of possibilities. Q. And knowing that 120 million was

a possibility, you elected to try to do a bank sponsored plan anyway, right? A. Q. That's correct. I just want to ask you a couple

more things about this whole client control issue because you yourself were unable to control your client, weren't you? A. We were unable to change the

public trading marketplace, is that what you're talking about? Q. No. I'm talking about when you

said you thought that the projections were too high and you wanted to use your power of approval in the DIP credit agreement to stop

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 down. have. Thank you. THE COURT:

July 30, 2008

them from being published, your client, the DIP lender, told you not to do that and you were unable to control them into letting you stop them from being published, right? A. Not only did I not try to

convince them, I believed from the DIP lender's perspective it was the right answer. Q. So you thought they were too

high but you didn't tell your client to let you try to stop them from being published? A. The DIP lender said, am I going I said yes.

to get my $150 million back? Q.

So you listened to what your

client told you was in its best interest and you followed their course of action? A. And then they listened to what

I told them about the best interest. Q. And that's what financial

advisors do, they take their client's views into account in advising them? A. Yes. MR. DeFILIPPO: That's all I

You may step

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 let's proceed. MR. DAMREN: Timothy Trenary, please. THE COURT: Honor. MR. DeFILIPPO: Is it THE WITNESS:

July 30, 2008

Thank you, Your

possible to take a short break at this point, Your Honor? MR. DAMREN: If I might,

we've got another witness coming at 1:00 who is not a member of either party, so -THE COURT: So we don't have

a witness at this point anyway? MR. DAMREN: I could call

Mr. Chadwick, but Mr. Trenary, who has been subpoenaed, I would like to get him done today because he's got another job. THE COURT: Let's break for

lunch now and reconvene at 1:15, please. (Recess taken at 11:58 a.m.) (Back on the record at 1:21 p.m.) THE COURT: Everyone's here,

The Trust calls

Before you sit

down, please raise your right hand.

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 TIMOTHY TRENARY, was thereupon called as a witness herein, and

July 30, 2008

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 MR. DAMREN: Q. A. Q. Please state your name. C. Timothy Trenary. Could you give us your

educational background. A. I am a graduate of Michigan

State University, an accounting degree, also a graduate of the University of Detroit, an MBA degree, certified public accountant, registered status, that's it. Q. Could you give us your work

experience after receiving those degrees leading up to the point in time when you were retained by Collins & Aikman. A. When I left school,

undergraduate school, when I left school I joined -- when I left school, Michigan State University, I joined a public accounting

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

July 30, 2008

firm, Arthur Young & Company, worked there for almost three years and then joined a communications holding company, Capital Studies Communications, where I worked for about 13 or 14 years in various finance and accounting positions, and then in the late '80's formed a partnership with two other individuals, and we raised some money and bought a number of cable television systems, and initially I was the chief financial officer of that organization and the chief operating officer. Left that limited partnership in 2000, made a career change, if you will, and joined the automotive industry, first Federal Mogul and then Collins & Aikman for two years beginning in 2005, and I left Collins & Aikman in September of 2007, joined Dura Automotive Systems, and as of about a month ago I am now with another automotive supplier, Emcon Technologies, E-M-C-O-N Technologies. Q. When you were working for

Federal Mogul, can you tell us what positions you held and what responsibilities you had?

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 A.

July 30, 2008

Initially I was the director of

reorganization, finance and administration, which was a position which in conjunction with the general counsel at the time managed the administrative affairs associated with their Chapter 11 proceedings. I basically handled the administrative matters surrounding the financial advisors and the investment bankers and general counsel managed the matters surrounding the legal counsels. I did that for directionally two to three years, was named the finance director for South America, did that for approximately a year, basically overseeing the financial matters in South America, the five manufacturing facilities in South America, and then for the last year that I was with the company I was the director of financial processes and basically was responsible for -- director of financial services and processes and was responsible for the shared service centers, the shared service finance and accounting centers that were located in North America and Europe.

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 Q.

July 30, 2008

During your business experience

at Federal Mogul, did you work closely with Frank Macher? A. I don't know that I would say I did not

that I worked closely with Frank. report to Frank.

Because of my position

initially with the company as the director of finance reorganization administration, I had frequent, very frequent access to the highest levels of the management of the company, which Frank obviously was as the CEO. So it would be, would not be fair to say that I worked closely with Frank at that time, but I certainly was before him, you know, every other week or so. Q. How did it come about that you

were engaged by Collins & Aikman? A. I made it my business while I

was at Federal Mogul to stay in touch with Frank and others that had left the company from time to time, and when I learned that he had taken a position with Collins & Aikman, I gave him a telephone call and exchanged pleasantries with him, and what came out of that was a dinner that we had

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

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and shortly thereafter I joined the company as the treasurer. Q. And when was it if you can

recall, the month and the year? A. I joined Collins & Aikman in

late September of 2005. Q. And what position did you take

at that time? A. Q. treasurer? A. My duties as treasurer were to It As the treasurer. And what were your duties as

oversee the shared services operations.

was within the scope of the treasury function at Collins & Aikman, more specifically that was the receivables and the payables function. It was to manage the liquidity of

the company in conjunction with Kroll Zolfo Cooper to manage the capital spending and to manage the risk management or the insurance matters of the company. Q. Did your duties or did you

change positions at any time after becoming treasurer? A. I was named the chief financial

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

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officer of the company in February of 2006. Q. Prior to that time who had been

the chief financial officer? A. There was no chief financial

officer during that period of time that I was with the company. Q. Do you know if anyone was

fulfilling the jobs or the various duties of a chief financial officer? A. While there was nobody in that

position as chief financial officer, the duties of that position were basically being fulfilled by myself to some extent, Pete Spears, Matti Masonovich, names I'm rattling off are all people that were in the finance function at Collins and Aikman, and to some extent by the folks at Kroll Zolfo Cooper. Q. Let's go to the duties that you

assumed when you, officially assumed when you became CFO in February, how were those duties different than your duties as treasurer? A. Well, I would say that they

were the traditional duties of a chief financial officer, you know, absent of course some extent managing the capital structure

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

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because we were in the circumstances that we were in. But aside from that the duties were, you know, managing the finance function, taken as a whole more specifically the corporate finance function, to some extent a less hands-on role with the finance folks that were in the field or the divisions. I oversaw all of the other finance function, the treasury function, corporate controller's office, and then as I said a moment ago the finance people that run the various divisions. Since there was not a treasurer at the time I was basically fulfilling both of the roles of CFO and treasurer at the time. I continued to manage

the risk management and the shared services function as well. Q. Since the position had been

absent for some time, what was your first order of business? A. Q. A. The CFO's position? Yes. Well, one of the first things

that I wanted to do was to put, my first

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

July 30, 2008

order of business frankly was to get a good controller, okay, so I was successful in doing that, and to -Q. A. Masonovich. Who was that? That person's name is Matti There were certain areas in the

finance function that to the extent I could improve the caliber of the personnel I set out to do that, and the controller's function had been vacant for probably two or three months, the fellow left shortly after I joined the company. So my first order of business was to get a good controller in place and I did have Matti Masonovich, and we made other changes in the finance function, and about the same time, and this would have been in late February, early March, we set out to put in place a process by which we could measure the financial performance of the company against its budget, its 2006 budget, and also a process by which we could cause the organization to forecast its anticipated operating performance for the remainder of the year for purposes not only of having a

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 view of where the enterprise felt it was

July 30, 2008

going to be at the end of the year, but also to identify gaps to the original budget, and to the extent we could to do gap closure, identify ways to close those gaps. Q. And this review was going to be

on a quarterly basis? A. Q. A. The forecasting process? Yes. Not necessarily. It was -- we

characterized the forecasting process as a three plus nine, a six plus six, and then to the extent necessary a nine plus three. So

you're correct, if we had done all three of those points in time it would have been a quarterly process. Let me go back first and explain what I mean by three plus nine and six plus six. When I make reference to a

three plus nine, what that means is three months of actual operating performance and then nine months of a forecasted performance, and the six plus six would be a similar sort of exercise, only this time six months of actual and six months of forecast.

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 The reason I wouldn't necessary say it was always a quarterly

July 30, 2008

process is in my experience there were times where you might not undertake the final one, which was a nine plus three, because you were getting so close to the end of the year. Q. Just go ahead and do the budget

for the next year? A. Well, that's about the time you

work on the budget for the next year, that's correct. Q. And this particular discipline

or procedure that you put in effect, had you used it at any of your prior companies? A. I had been a part of it at

Federal Mogul. Q. When you started to put together

the three plus nine, were you concerned with any of the performance for the first quarter? A. I think that it would be fair

to say that I was -- I don't know that concerned would be the right word but it would be fair to say that the performance, my recollection is that the performance for the month of January and the way February was

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

July 30, 2008

starting to take shape, and when I and others on the finance function just kind of on the back of the envelope looked at the development of the rest of the year, given January and February, we were interested to see what would come out of the three plus nine forecast. Q. And why were you interested to

see what would come out of the three plus nine forecast? A. Well, the company as you know

was in the process of -- we were trying to refinance the company as a standalone organization, and so that financing was dependent in large part on the company's financial performance, and more specifically its ability to achieve its financial objectives. So to the extent that the company was anticipating not achieving those financial objectives, it would have made the financing of the company more difficult, so that's why I, you know. Q. How did the actuals for the

first three months measure up to the

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 forecast? A. I don't have any specific

July 30, 2008

recollection of which parts of the organization were missing and by how much. Generally the -- there were basically three operating groups within the organization, the largest of which was the plastics, the second was what we refer to as the soft trim organization, and a small area called convertibles. Generally the soft trim organization was generally acknowledged as being a well-run organization, and my recollection is that generally it achieved its operating targets. That was not

necessarily the case with the plastics organization, and without looking specifically at the numbers, my recollection is that the plastics organization during that period of time was probably under achieving and soft trim organization at target or slightly above, but I would have to look at the numbers. Q. We have many documents right Did you

next to you I'll show you.

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 ultimately prepare a three plus nine? A. plus nine.

July 30, 2008

The company did prepare a three It ultimately was styled as a

four plus eight, four months of actual and eight months of forecast. That was as a

consequence of the process taking longer, forecasting process taking longer than we had initially anticipated, so by the time the company completed the forecasting process we in fact had four months of actuals instead of three, so it was characterized as the four plus eight instead of a three plus nine. Q. And I'll direct your attention

now to Exhibit 49, which I presume is in the first binder. Is that the four plus eight

which you just referred to? A. Q. Yes, it is. And who was involved both at

the company and outside the company in the preparation of the four plus eight? A. Well, within the company I mean

it's a pretty, it's quite a comprehensive process, so frankly all elements of the company, operations, finance, HR, IT, commercial, sales, et cetera, would have been

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 involved in it.

July 30, 2008

The process is run by the

finance function and as a practical matter most of the activities surrounding the process is really undertaken by finance and operations. Outside of the company we, the finance function, solicited the support of Lee Smith who was, perhaps still is, a member of Kroll Zolfo Cooper. Q. And this exercise in creating

the three plus nine or in this instance the four plus eight, this is not simply an academic exercise. What business benefit did

you and the rest of management, and anyone else, hope to realize from the preparation of these quarterly reviews or in this case the four plus eight review? A. The, as I think I mentioned a

moment ago, one of the objectives, at least from my point of view in preparing the forecast, in this case the four plus eight, is to identify gaps to the budget and to engage in a dialogue with operations, or other elements of the enterprise regarding what's causing those gaps and what the

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 company might do to close those gaps. Q. Now, you only had been a CFO

July 30, 2008

for a couple of months and my recollection from your deposition was that this was the first time you had been CFO, is that correct? A. That's correct. Actually, I was

the chief financial officer for two to three years at James Cable Partners, that's the limited partnership I spoke about earlier, but this was the first time a global automotive manufacturer, yes. Q. So as you and your team looked

at the preparation of the three plus nine, what did you do to address, identify and address operational gaps as you referred to them? A. In the course of the preparation

of the three plus nine, which became the four plus eight, we, the finance function brought together the information, we referred to it as the bridges, brought together the information that would allow management to understand what was creating the difference between the revenue, EBITDA and certain elements of the expense structures between

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 the budget and the forecast.

July 30, 2008

We were able to do that in part because the 2006 budget had been prepared at such a level that to the extent we -- there was a miss on some element of manufacturing performance, for example, direct labor or scrap, since we had identified what we thought, and this example the direct labor or the scrap should have been the budgeting process, and we could identify in the forecasting process because it was done at the same level of detail, we could identify the extent to which a forecast was different than the budget, for example, for these two elements of expense, and then since this process for both the budget and the forecasting was undertaken at the facility level, the plant levels, we knew those gaps by manufacturing facility, and then so the company would engage in a dialogue with each of those manufacturing facilities to talk about those gaps and what the company might do to close those gaps. Q. What gaps were there in

particular divisions?

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 A. Q. A. I would have to go -That's fine. Take a look. Page

July 30, 2008

There's a slide in here.

five in this forecasting document gives a bridge entitled EBITDA under performance to plan by operating metric. On page five

there's a bridge that describes the composition of the $85 million EBITDA difference in the four plus eight to the 2006 budget, and then that's on the right-hand part of the page, and then to the left of the page our major drivers of that $85 million variance, the biggest pieces of which are about $20 million of customer pricing, about 28 million of net new business, approximately $24 million of manufacturing performance, $8 million of cost reductions and then all other is about call it $10 million. Q. Was there an analysis done by

division of the -- of these various under performances in the EBITDA? A. I don't think it's in this

deck, but the way the process works is these sort of differences would have actually been

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 identified at the manufacturing facility

July 30, 2008

level and then consolidated into the three operating divisions that I spoke of earlier, and then finally consolidated into consolidated Collins & Aikman, which is what this page represents. Q. And if you would flip to, turn

to page eight, on a gross level does this chart in fact capture misses in EBITDA by division, even though it doesn't break down even further into categories of pricing materials and so on? A. What this slide indicates is

that the April year to date financial performance, EBITDA by segment, was off by $9 million, and then it describes by the three operating segments that I had mentioned earlier, and then plus includes overhead, the composition of the $9 million. Q. Now, you indicated that there

was a reforecast of EBITDA, other items for the remaining eight months of the year, so I take it you didn't just say in your three plus nine that turned into a four plus eight here's what we did in the first four months

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

July 30, 2008

and it still projected that we're going to follow the old budget, the 2006, for the remainder of the year, did you change that? A. I'm not sure I understand your

question but let me just tell you exactly what we did. Q. question. A. When we did the three plus nine That's a fine way to answer my

forecast, what the corporation was asked to do was to basically forecast the last nine months of the year. Because the process took

longer than we expected, by the time we were done with it we could overlay the actual results from April into that model, so it ended up being four months of actual and the eight months of the forecast that came out of the three plus nine. Q. And my question I guess is, if

I took the remaining eight months of the year, May, June and so on, and lined up the original 2006 budget with the now four plus eight forecast, would the last eight months be the same or would they be different under these various, these two items?

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 A. The last eight months in the

July 30, 2008

budget compared to the last eight months in the forecast? Q. A. Q. Yes. They would be different. And was there a total reduction

in the EBITDA for the year of 2006 when you compare the 2006 budget with the four plus eight? A. Yes, that's the $85 million I

referred to a moment ago, and I think it was page five. Q. You personally, what involvement

did you have in the preparation of the four plus eight? A. process. Q. Okay. And I guess by that you I was responsible for the

mentioned that there was, you secured information from the plant, from a plant level to assist you in preparing this, but was that you personally or people under your direction? A. No, I did not secure the The way this process

information directly.

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 works is my staff and I sit down and we

July 30, 2008

develop the way that we want the process to work. We provide certain assumptions to the field, the manufacturing facilities, with respect to revenues and certain elements of the cost structure. We provide a time line

or timetable to complete the activities and then provide for certain benchmark events, reviews, so on and so forth, and manage the process. The actual gathering of information really was pushed all the way down to the manufacturing facilities and they would use these templates or these guidelines that we gave them and they themselves would develop the forecasts and then within each of these divisions there were finance people that worked with the operating people, supported the operating people in the review and the modification of those budgets or forecasts that the manufacturing facilities developed, and then once the review was done at that level it rose up to the corporate level and then myself and Frank and other senior members of the management team would

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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enter into a dialogue about the gaps and how to close them. Q. Could you tell us, if you can,

what the general differences were between the 2006 budget and the four plus eight budget for all the initiatives and all the EBITDA savings that had been anticipated in 2006, how did you change the plan? A. Well, a moment ago we just

talked about a slide that gave the composition of the delta, the $85 million. think it sounds as though now you're referring to -Q. I'm referring to the future Did you I

forecast, how is that different?

just delay savings and benefits that you thought you would receive in 2006, did you push that into 2007, 2008? A. Is your question what gave rise

to the various elements of the 85 million? Q. A. Sure. I don't have -- I can't sit

here and tell you without going and doing a bunch of looking, which I'm prepared to do if you like, I guess, but the specifics behind

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what was causing those various elements of the difference, by way of example, I think on -- there was a $24 million piece of the $85 million was manufacturing performance. There is somewhere some information that probably goes down to the facility level and we could start to answer your question very specifically what is driving the elements of the manufacturing performance but I don't have any recollection of that right now, no. Q. Okay. Let's go forward then Did there

and work back, forward in time.

come a point in time when you in fact revised the four plus eight and put together the six plus six? A. Yes. The enterprise corporation

prepared a six plus six that was published, my recollection is sometime in August. Q. Okay. And were the same people

involved in the exercise to create the six plus six as were involved in the four plus eight? A. Generally the answer to that

question is yes, understanding that there is

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normal sort of attrition that occurs in the process. There was a point in time where a

senior member of the operating and finance team left. I think it was before we That

prepared the six plus six forecast.

would be two people that left that were outside the ordinary course sort of attrition. Q. Okay. What about from the

Kroll end, who had been involved from Kroll's staff in the preparation of the four plus eight? A. That was really Lee Smith to my

recollection is the only person that was really heavily involved in the four plus eight. Q. A. Q. A. And what did he do? In the four plus eight? Yeah. He supported my staff, primarily

worked with the finance function and more specifically with the plastics finance element there and assisted them in developing their analysis of the forecast, and then assisted my team with kind of bringing all

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 that up together and consolidating it. Q. Okay. And was he involved in

July 30, 2008

the preparation of the six plus six? A. I'm sure he was, but I can't

recollect the extent to which he was involved in the six plus six. I remember his

involvement was quite heavy in the four plus eight. There was a point in time where Lee

actually started to spend most of his time working with the plastics organization in the finance function. I just can't remember

exactly when that was. Q. What was the reason for the Whenever it

focus on the plastics division? was. A.

Well, as I mentioned earlier, it

was generally acknowledged within the corporation that the soft trim business, which was, you know, directionally, you know, a third of the company, almost a third of the company, was well managed. The plastics

business had experienced difficulties in the past and the management team was being changed during this period of time, and the plastics business was from a financial

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standpoint the piece of the corporation that was, that was under performing, and so I mean that's the piece that had our attention because it was under performing, so that's why we were focused on plastics instead of soft trim. Q. Would you say the preparation of If

four plus eight was pretty much routine? that's a correct term to apply to it. A. Well, it's how I, it's what I It's what I grew up with at

was used to.

Federal Mogul, if you will, and so the exercise or the process was routine to me, while it was, you know, the first time I had been associated with it with Collins & Aikman, it was a process with which I was very familiar. I'm not frankly familiar with

the process that Collins & Aikman undertook prior to my being there. Q. Okay. Now, when you undertook

the next stage in the quarterly analysis in the six plus six, were things going in accordance with the forecast for at least the next two months in the four plus eight plan? A. Speaking now specifically about

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the plastics organization, which is the one I had the most recollection of because, as you mentioned a moment ago, it was the one that had our attention, my recollection is that we published the four plus eight in late May, early June, and about the time that we published that forecast, you know, almost at the same time, or very shortly thereafter, a matter of days or weeks we closed, the company closed the books for May, and my recollection is that at the EBITDA level the plastics organization had under performed, and probably in one of these books there's one of those monthly decks that we used to do that would identify the exact magnitude of that under performance. My recollection was the magnitude of that under performance was not dramatic, but what got my attention was that we could frankly have much of a variance at all as much as we had just completed the four plus eight forecast. Said another way, the four by eight forecast was being completed about the same time the books were being closed for

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May, so I would expect the two numbers to be basically the same and they were not the same for the plastics organization. Again, not the magnitude was not, you know, dramatic but it was enough to get my attention. Then sometime around

mid-July, early to mid-July the company closed the books for the month of June and this time, again I can't remember the exact amount of the plastics shortfall at the EBITDA level, but it was rather significant, and it was frankly much greater than I would have expected. Q. Did you take any special action

as a result of that? A. What the organization did was we

had planned to do a six plus six forecast anyway, but what I did and other members of my corporate finance function did is we took a more active role in the preparation of the six plus six than I would generally expect to have done. More specifically around the middle of July with respect to the plastics organization the sorts of meetings that I had

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described to you earlier where the finance support people for the plastics organization would undertake these meetings with the manufacturing facilities to understand their forecast, normally I would not participate in those meetings myself, and other members of the corporate finance function, but in this circumstance I took it upon myself to participate in probably substantially all of those meetings, so I sat there and actually was a participant in those discussions with each of the manufacturing facilities. Q. Okay. And these discussions

were by phone I presume? A. phone. Q. So it would be you and your Yes, at that point they were by

team in the conference room discussing matters with plant managers and whoever was the plant team that was at a -A. Q. The plant controllers, right. Anyone from Kroll involved in

these discussions? A. I don't have any specific You know, they were

recollection of that.

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 always, I mean, they could have been. Q. About what time period did it

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take for you to begin the first of these discussions until you got to the last of the discussions with the plastics plant? A. Well, directionally as I said we

-- my recollection is that we started these discussions the middle of July, and again, I don't remember exactly, but we were on a, notwithstanding all of the work that we had to do to get a meaningful six plus six forecast, we were on, I wouldn't necessarily characterize it as an accelerated schedule, but we were on a schedule that we wanted to keep, and given the amount of work we had to do, we had -- we worked really frankly quite hard. We basically worked seven days a week

for three or four weeks to get it done. And it was -- I was -- I insisted on maintaining that time line because the ability of the organization to reorganize as a standalone entity as I said earlier would in a large part be a function of our ability to achieve our financial objectives, and so I wanted to understand

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 that sooner rather than later. Q. What did your discussions with

July 30, 2008

the members of each of the plastics management plants at locations, what did you learn about plastics overall? A. Let me answer your question this

way by describing the process, because I think it's -- it will answer your question. You know, let me start by saying I'm not a manufacturing person. I've never made parts. Okay? Okay?

But I've been

around the business long enough and been around in enough manufacturing facilities and feel like at Federal Mogul I had a very good opportunity to learn manufacturing, or basic finance, the financial affairs associated with manufacturing, that I know -- I believe I know what kind of questions to ask. And so the process by which myself and other elements of the corporate finance team endeavored to understand the six plus six was to, for each of the manufacturing facilities to go back and actually chart by month certain operating metrics for each of the manufacturing

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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facilities so that we could understand what had gone before. More specifically, certain elements of the cost structure behave in an anticipated manner given certain amounts of revenue. labor. By way of example, you know, direct Direct labor is expressed as a

percentage of sales, is a number that you would expect to behave in a certain way, and so if you chart the historical performance of direct labor as a percent of sales on a graph, if you will, you can understand the behavior of that cost element historically in this time over a six-month period. Then what we did was put on that same chart the forecasted operating performance for certain of these metrics by manufacturing facility for the last six months of the year. So if you can picture

in your mind's eye a graph that's direct labor as a percent of sales and the line charted on a piece of graph paper, and then the six months of forecast that's after that, to the extent the behavior of direct labor as a percent of sales changes in the future six

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months, vis-a-vis the first six months, it can give rise to questions. If the direct labor is, just to pick an example, as a percent of sales is going down, then you might ask the manufacturing facilities what specific initiatives do they have in mind to improve the performance of direct labor as a percent of sales in the future. And so, you know, if you can imagine hours and hours and hours of meetings with each of these manufacturing facilities and the plant managers and the controllers and studying these metrics and these graphs, there were just a number of questions that came from the finance team and others in which we tried to understand the future performance as forecast by these folks as opposed to the historical performance. That's how I attempted to understand the plastics organization. Long answer to your

question but I think I got there. Q. Did you come to an opinion, if

you did, as to, well, strike that. Had the problems that you

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 identified on a plant-by-plant basis as a

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result of these meetings, had they been known previously to management? A. You know, it would be fair to

say that the problems that were discussed in these meetings I'm sure, you know, many of them, perhaps most of them were the same problems that the enterprise had been, you know, had in the past. I'm sure that there I

were probably some new problems as well.

just don't remember all the specifics of the different issues or "problems." Q. That's okay. Were you aware of

any of those graphs that you created having been in management's records previously? A. Not that I'm aware of. That

doesn't mean they weren't there but I'm not aware of them. Q. Were you aware of whether or

not these kind of meetings had previously occurred anytime in 2005 or previously in 2006? A. You know, again, not that I'm

aware of, but one thing I want to say here is that, you know, as I said a moment ago,

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 unusual what? A. I considered it, normally I

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it's unusual -- I considered it unusual for me to get involved at that level. And so -THE COURT: I'm sorry, Okay?

would not expect the chief financial officer to get involved in the level that I was in the preparation of the six plus six forecast. More specifically my explanation that I actually sat at the table with the manufacturing facilities and talked about the performance of the enterprise, or the facilities. So my point to Mr. Damren is that those sorts of exercise could have been going on at the level of the plastics organization and I wouldn't have known it. If they were going on, I didn't -- I didn't know it but, you know. BY MR. DAMREN: Q. Okay. Did the result of these

meetings and your review of these matters have any impact on the forecasted amounts for the last six months under the six plus six

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 plan? A. question. Q. I'm not sure I understand your

July 30, 2008

Did these meetings and what you

learned have an impact on how you forecast the last six months of the year under the six plus six plan? A. The purpose of my participation

in this process was not for me to tell the manufacturing facilities or the enterprise what to put in the six plus six forecast, the purpose of my participation was for me to understand more specifically what was going on in the plastics organization and to satisfy myself that the process, the six plus six forecasting process was being undertaken at a very comprehensive level and it was as robust as we could make it. As I mentioned, during the conduct of these meetings I and others asked a number of questions, so I think it would be reasonable to assume that the manufacturing facilities when they would change their forecast, this was somewhat of an iterative process, when they would modify

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

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their forecast and we would review it again, I think it would be fair to say that they would perhaps take some of our inquiries under consideration and modify their forecasting accordingly. Q. A. Q. Did the forecasting change? Yes, it did change. And on a high level, what was

the amount, if you can recall, then go to the next exhibit? A. Q. A. Q. A. Q. A. I can't recall. Go to Exhibit 50, the next one. I'm sorry, which exhibit? 50. I'm in section 50. Do you recall subsequent -Is there a certain page you

want me to be on? Q. No. You've seen this particular The document.

item before, haven't you? A. Q. Yes.

And it's entitled, Presentation

to the Stakeholders, what's it a presentation of? A. This is a presentation that

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shows the differences in the revenue, certain elements of the cost structure, and EBITDA of the enterprise as forecast in the six plus six with that which was forecast in the four plus eight. Q. So this is basically a

comparison at a high level but a comparison of differences in forecast EBITDA for the last six months of the year under the six plus six plan as compared to the four plus eight plan. A. It is, but I would like to

correct what you said just a little bit. You said the last six months. It's just

really, it's the forecast that we did in July and August, which is the six plus six, which incorporates six months of actuals, that forecast compared to the forecast that was done earlier in the year, the four plus eight, which incorporated four months of actuals. Q. And would page eight of this

document be a good place to start with the overview of the differences in terms of revenue and EBITDA?

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 A. Q. Yes. Okay. Could you just explain

July 30, 2008

what is intended to be demonstrated by that page to the Court. A. In the upper left-hand section

of the slide there is a very high level income statement that builds to EBITDA, consolidated for the enterprise revenue and EBITDA, and a variance six plus six to four plus eight. In the lower left-hand corner,

and the -- and in that there is an EBITDA delta of $74 million, an unfavorable performance in the six plus six to the four plus eight. The lower left-hand corner is the composition of that $74 million shortfall by operating division or cost center in the enterprise, and on the right-hand side of the page is the composition of the $74 million at the EBITDA level by sort of cost driver or what's driving the under performance. same sort of elements of operating performance that I described previously on the four plus eight. Q. And does one division in The

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particular stick out as an under performer? A. The plastics organization is

responsible for $76 million of under performance in EBITDA, so it's more than all of the under performance. Q. Now, these meetings with the

plant level personnel, Mr. Macher wasn't part of that, was he, these telephone conferences? A. No, not the working sessions

that I had described, but there were, as I mentioned this process is all about, not all about, but a part of it is about gap closure, and as I mentioned also it's somewhat iterative, so to the extent there were a handful of manufacturing facilities that were driving most of the under performance, I don't have any specific recollection of this, but I would not be surprised if Frank didn't attend at least one meeting where those, you know, there was some discussions and the plant managers would have been probably on the telephone. Q. Okay. After you had these

meetings, did you move up the process of, not move up the process, but how did you inform

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the rest of management of the results of all these meetings and intense discussions over four weeks? A. Well, how did we inform them?

As the finance function completed the rollup of the numbers and our meetings and our discussions like we had described, we would have prepared materials to sit and discuss with Frank and other members of the senior management team. Again, I don't have any specific recollection of it but it wouldn't have, the materials wouldn't have been as nicely prepared as these because these were prepared, you know, for external use, but it would have been the same sort of raw data that gives rise to these presentation materials, and so I mean it was nothing particular. When we got done we pulled it

all together and sat down with them. THE COURT: We've been going

nearly an hour now with this witness and we spent less than a minute as far as I can tell talking about anything KZC did or didn't do. Where are we going?

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 Thank you. BY MR. DAMREN: Q. Now, what was Mr. Macher's MR. DAMREN:

July 30, 2008

I'm almost to

the end, but where we're going is this. This work, which we will be asserting to the Court, could have and should have been done by KZC a long time ago, was in fact performed by a first-time CFO, and he revealed problems that easily have been discovered long ago by KZC had they done their work. So I'm just demonstrating that

it could be done. THE COURT: All right.

reaction, if any, to the differences between the four plus eight and the six plus six? A. Frank was not happy. He was

dissatisfied with the performance. Q. Okay. What impact did the

differences between the four plus eight and the six plus six have in your view on the company's ability to reorganize as a standalone? A. When one takes the expected cash

flows resulting from the operating

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

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performance, more specifically the EBITDA in the six plus six forecast and certain other elements necessary to finance the organization, you know, capital expenditures, expenses associated with facility rationalization, expenses associated with rebuilding the book of business, if you take all of those various streams of cash flow and consolidate them, there is a cash flow stream that goes out into the future that would be used to finance from, and the, in my judgment the impact of this element of that consolidated cash flow stream, the EBITDA declining to this level was going to make that process by which we would refinance the company as a standalone organization difficult. Q. The last exhibit we looked at,

Exhibit 50, is presentation to stakeholders, were you a part of that presentation? A. Yes. I don't have any specific

recollection of it, but I'm sure I was there. MR. DAMREN: CROSS-EXAMINATION BY MR. DeFILIPPO: Your witness.

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 Q. Hi, Mr. Trenary.

July 30, 2008

Paul DeFilippo

for KZC and John Boken. questions for you.

Just have a few

When you worked at

Federal Mogul, what was Frank Macher's reputation as an operator? A. Well, I can give you my I can't give you the But I respected I

perception of Frank. perception of others.

Frank's performance at Federal Mogul. thought he did a good job there. Q. Did you think he had the

ability to run -- operate and run profitably a substantial portfolio of plants? A. Q. Mogul have? A. I don't remember the exact Yes. How many plants did Federal

number but it was substantially more than Collins & Aikman. Q. You joined in 2005 Collins &

Aikman as treasurer? A. Q. That's correct. At that time there was another

person who was responsible in the company for financial planning and analysis?

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 2005. Q. A. His name was Pete Spears? A. Actually, when I joined in

July 30, 2008

September of 2006, yes, you're right, there was another person there that was doing finance planning and analysis. Q. A. Did you say 2006? I'm sorry, I should have said

No, actually there was a person

there before Pete whose name I cannot recall. Pete joined the company about the same time I joined and he joined as the person responsible for financial planning and analysis. Q. And at that time he joined the

company was there also a separate person who was the finance head for the plastics division? A. My recollection is that there

were three -- the plastics division was grouped into approximately three groups of manufacturing facilities, each of which had an operating person overseeing them and then each of those operating people had a finance person supporting them. I don't recollect

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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that there was, I could be mistaken, but I don't recollect there was one senior finance person overseeing plastics, but my recollection there could be wrong. Q. Okay. When you became chief

financial officer you became the head of the Collins & Aikman finance function? A. Q. Yes. And one of the finance functions

responsibilities in Collins & Aikman was the issuance of projections of future operations? A. Yes, it was our responsibility

to run that process by which that came out. Q. And in that capacity you

reported to whom? A. Q. I reported to Frank Macher. You indicated while you worked

at Federal Mogul it was the practice to do regular reforecasts during the course of the year? A. Q. Yes. And that's what you were talking

about before, the three plus nine, the six plus six and maybe the nine plus three? A. That's where I was introduced to

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

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that process, yes, and that was our practice at Federal Mogul. Q. And is that the way Mr. Macher

liked it when he was CEO of Federal Mogul? A. Q. Yes. You imported that process into

Collins & Aikman when you became chief financial officer? A. Q. That's correct. And before you implemented the

regular reforecasting process that you used at Federal Mogul, did you talk to anybody about whether you should do that? A. Q. about it? A. I don't have any specific I mean, it would be No. You didn't talk to Mr. Boken

recollection of that.

reasonable to assume that I sat down and described to John, you know, what we were doing. I think John and I had a relationship whereby there was a very easy give and take of information back and forth, so I'm certain John knew what we were doing. I don't have

any specific recollection of sitting down

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

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with him and telling him I was going to do it. Q. Mr. Boken to your recollection

didn't oppose the concept of importing that regular reforecasting process from Federal Mogul, did he? A. No, he did not, not to my

recollection. Q. You had discussed in your direct

testimony that I thought you said that the 2006 budget, that's the one that was issued in January for the full year, had been prepared at a very detailed level, do you remember that? A. Q. Yes. You had a chance to look at

that budget in the course of working in the finance group at Collins & Aikman? A. I did. I didn't run that

process, but I was a part of the finance function then, yes. Q. A. Spears. Q. Pete Spears was the head of Who ran that process? The process was ran by Pete

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 financial forecasting? A. Q.

July 30, 2008

Financial planning and analysis. And he reported directly to Mr.

Macher in the process of creating the 2006 budget? A. Q. That's correct. All right. When you said it

was prepared at a very detailed level, can you give us some color on what you meant by that; what kinds of detail were available? A. When I say very detailed level,

really what I'm referring to is what I called a bottoms up forecast as opposed to a top down forecast. A bottoms up forecast is

where the, or budget is a process by which the budget or forecast begins at the manufacturing facility, or the cost center level, and it is built up and consolidated, and the way it rolls up is the number that you get, as opposed to a top down process which is basically driving the process down from the top and saying, develop a set of numbers that equals X, Y, or Z. Q. So is it -- is it in your

experience each plant is, in that process,

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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each plant is looked at as a separate profit and loss statement? A. I mean, each manufacturing

facility or cost center is a separate ledger or set of books and we treat it as a separate profit center or cost center. Q. And in that process the people

who are responsible for operating each manufacturing facility are asked what do you think your facility will do in the way of performance in the coming year? A. Q. think that? A. I don't ask them that. As I've That's correct. And are they asked why do you

said earlier, we had a certain set of assumptions and templates that we would distribute. I'm sure, although I didn't sit

in any of the meetings, the various meetings that would have gone on among the plastics personnel at the corporate level, operations and finance in the manufacturing facilities, I would expect that there would be a lot of dialogue around why the manufacturing facilities believed those were the right

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 numbers. Q. Now, when you say you

July 30, 2008

distributed a number of assumptions and templates in the process, let's talk about the kinds of assumptions that are distributed to, you distribute to the individual plants certain things that they should put into their construction of a forecast for their facility, is that what you mean? A. Yes, but I would like to

clarify that, should be in there. For example, we would give the manufacturing facilities assumptions to use with respect to what the cost of insurance would be, and the reason we would do that is because the corporate offices put the insurance in place, so there's no way for the manufacturing facilities to know that. So certain assumptions with respect to the cost of health benefits. Q. You assume, tell them, assume

this much of a percent of your revenue is going to be dedicated to these types of costs allocated to corporate? A. Not necessarily a percent of

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 revenue, but yes. Q. Okay. But in terms of the

July 30, 2008

assumptions that a certain level of manufacturing efficiency or certain number of dollars that can be generated through improvements in manufacturing processes, who generates the assumptions as to those, does it come from the top or from the bottom? A. Those assumptions are expected

to come from the bottom. Q. A. Q. A. From the plant level? That's correct. And in your experience -The plant level, the plant guys

working in conjunction with the plastics operating and finance people, but the genesis of those are typically at the manufacturing facility level. Q. And in your experience in

manufacturing businesses in general, is it customary for manufacturers to try to ring costs out of their operation on a regular basis? A. Q. Yes. Why is that the case?

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 A. In this business, in the

July 30, 2008

automotive supply business it's important to be, to the extent you can achieve this, the low cost producer of, you know, quality goods, and delivering them on time. So

there's, it's a competitive business, and so to the extent you are not a supplier that can deliver on those three elements, you know, cost, quality, and delivery, and you are the provider of the product which is a sort of commodity like product, not a product that has a lot of intellectual property in it or capital, it behooves you to always be trying to be more efficient and, to use your term, ring costs out of the manufacturing process. Q. There was no event specifically

related to the company's performance that caused you to start the reforecasting process that became the four plus eight, was there? A. I would conduct that process in

the normal course. Q. And the first forecast that you

led at Collins & Aikman was the four plus eight reforecast?

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 A. Q. That's correct.

July 30, 2008

At that time Pete Spears was no

longer head of financial planning and analysis at the company? A. When we prepared, when the

company prepared the four plus eight, Pete had moved from the position of corporate financial planning and analysis to the position of the head finance person for the entire plastics organization working next to the person who was the head operations person for plastics. Q. And what was the head operations

person's name? A. Q. His name was Dennis Profitt. Was the input of those two

individuals, Mr. Profitt and Mr. Spears, important to you in the creation of the four plus eight plan? A. Q. A. Yes. And why is that? Because Mr. Profitt ran the

plastics organization and so his views on how it was running and its performance was important to me.

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 Q. Was he expected to know the

July 30, 2008

plastics business and how it was running and what its performance was expected to be? A. Q. A. Q. He's responsible for it. Is he accountable? I would say he's accountable. Mr. Masonovich, whom you

indicated became the treasurer, reported to you? A. controller. Q. The controller. Okay. He The controller. He became the

reported to you? A. Q. Yes. And his -- he and his staff ran

the day-to-day operation that was the process of creating the four plus eight plan? A. Q. That's correct. Is it accurate to say that in

the EBITDA adjustment between the 2006 plan for the whole year and the four plus eight plan of the $85 million in reduction in EBITDA that the four plus eight represented $76 million of it was allocated to the last eight months of the year?

Trial 138 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. I think what you're probably

July 30, 2008

doing is taking the 85 and subtracting the year to date performance? Q. A. Yeah. Yeah, I think you could look at

it that way. Q. What was Mr. Macher's reaction

to the four plus eight numbers? A. We, you know, I mean, he was

disappointed. Q. were crazy? A. Q. No, he did not. He accepted your view on the Did he argue with you that you

four plus eight presentation? A. It's important that you

understand it wasn't my view. Q. A. Q. I understand. Okay. He accepted the view of the

organization as reflected in the document? A. Yeah, I think he, yes, he did

accept it and again he was, the reason he accepted it is because, as I said, this is a process in which we identify gaps and it's

Trial 139 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 somewhat iterative and he was involved in

July 30, 2008

that, and so he had an appreciation for what was driving the gaps. Q. You used the word iterative a

few times, and I want to make sure that the judge and everyone else understands what you actually mean by that. that word? A. When I say iterative, what I Could you explain

mean is in this, in the context of these forecasts, and the desire to identify gaps and close gaps, it was iterative in that the manufacturing facilities would develop their view of the remainder of the year, or the budget. It would be reviewed by, for

example, the plastics organization. I imagine that within that organization there was some give and take and back and forth, iterations, if you will. Q. A. Q. A. People speaking to each other? Right. And working together? That's correct. And once it

rose to the level of a corporate review there was at least one iteration of a review at

Trial 140 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 senior management level and then some questions that would go back and probably some changes that would have occurred.

July 30, 2008

So

when I say iterative, it's a sort of give and take and a working session if you will. Q. And is that iterative process a

process of people challenging assumptions that were being used in creating the plant level forecast and asking the operators how are you going to do this? A. Q. Yes, sometimes, yes. And your objective during that

process is I assume to get to the most reasonable set of projections you can possibly produce, right? A. It's to get to the most

reasonable set of projections that we can produce, but it's also I believe importantly to have a dialogue within the corporation about how to improve the operations. Q. A. Q. A. Q. That's the gap closure? That's correct. Process? Yes. You mentioned Lee Smith's

Trial 141 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 job. Q. In the preparation of the four work? A. Q. A. Yes. Did he do a good job? In my opinion he did a good

July 30, 2008

involvement in the preparation of the four plus eight from KZC. A. Q. Yes. Were you satisfied with his

plus eight, you didn't actually visit the plants? A. Q. I did not, no. And in the preparation of the

six plus six you didn't actually visit the plants either, did you? A. Q. I did not. It wasn't necessary for you in

either of those occasions to visit the plants to do your work, was it? A. do that. Q. Too much time on the road if It wasn't practical for me to

you did that? A. It would -- it's -- it's not

Trial 142 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 30, 2008

generally an accepted practice for the CFO to be out going to every manufacturing facility in the preparation of the budget or the forecast. Q. You mentioned on your direct

testimony that plastics was the piece of the business that had your attention, do you remember that? A. Was the piece of the business

that I was most interested in, most concerned with, yes. Q. A. And why was that? It was the piece of the

business that had the most operational issues and it was the largest piece of the enterprise. Q. And did you have occasion to

talk to John Boken or anybody else from KZC on plastics issues? A. Yes, I did. I don't have any

specific recollection of them, but we did. Q. In your discussions with Mr.

Boken, did you get the sense that he too was focused on the plastics business? A. Yes, John was focused on the

Trial 143 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 plastics business. Q. Do you think he understood the

July 30, 2008

issues that the plastics business faced? A. I think John understood the

issues, yes. Q. And who is responsible for

actually fixing the issues that the plastics business faced? A. Well, I mean, it starts at the

CEO level and, you know, it works down through the organization. So and then, you

know, basically from an operating standpoint it's the CEO, in the case of the plastics organization it was the person who was responsible for operations and plastics, Dennis Profitt, and then it goes down the level below that to the three people who ran the manufacturing facilities and then finally down to the plant managers and down to their staff, and then tangentially there are functions like the finance function and others that support those people, so are responsible as well. Q. Who was in charge of closing

the books for the plastics division on a

Trial 144 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 monthly basis? A. That was a process that was

July 30, 2008

really run by the corporate controller's office and it's a process by which there's a time line that are given to the manufacturing facilities and cost centers that load the monthly financial results into the consolidation system, Hyperion is the name of it at Collins & Aikman. So the close process is a process that's basically, it's really a combination of the corporate finance function and the finance people and the manufacturing facilities. Q. And was the company working on

trying to improve the timeliness of its delivery of financial information on a monthly basis while you were CFO? A. Q. Yes. You essentially are in the

ordinary course in preparing a forecast like the four plus eight relying to some extent to what you are being told by the people in the field, aren't you? A. Yes.

Trial 145 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. Is that a customary way to

July 30, 2008

build a forecast, to be reliant to some extent by what you're being told by people in the field? A. It's from my perspective the Now you, in

answer to that question is yes.

my judgment you have to exercise some discretion in the extent to which you rely on the people in the field, and so, you know, in part, for example, as a consequence of my loss of faith, if you will, in certain elements of the plastics organization to deliver a forecast that was achievable, I went down a level and got more involved and participated in those meetings that we've had some discussion about today. Q. In the preparation of the four

plus eight plan you relied on the people in the plastics organization to tell you what they thought they could do, right? A. point here. I did, but I want to raise one Now, remembering that I had been

the chief financial officer at this time for directionally two months, I -- I caused Dennis Profitt, and I'm sure there were

Trial 146 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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others in the room to sit, down with me and to have specific discussions surrounding a handful of manufacturing facilities that were most challenged. There were directionally five of them, and I had a dialogue with Dennis and others in his organization around the plans that he and others in the organization had to improve the manufacturing performance. In fact, my recollection is, is that there was a presentation by Dennis and other members of the senior management function to the stakeholders sometime in the spring in which Dennis actually, in a presentation, laid out his improvement plans for those, certain of those facilities. Q. So Dennis Profitt had an action

plan on how he was going to fix the known problems in plastics. A. At least with respect to those

-- those facilities, he had a piece of paper that indicated what his intentions were to fix them, yes. Q. And you said there were a

handful of problem plants that were causing

Trial 147 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 most of the miss in EBITDA in plastics? A. Q. A. Yes. Like five I think -Directionally there were five

July 30, 2008

that were the most challenged. Q. Excuse me. I just want to get a document. Can you look in one of those

books, volume one of the books with numbers on it. there? A. Q. Um-hum. This is a report issued by the Looking for Exhibit 14. Are you

company under the debtor in possession credit agreement, have you seen reports like this in the past? THE COURT: question for the witness? BY MR. DeFILIPPO: Q. My question was whether he had What was your

seen reports like this in the past. A. I'm just trying to refresh my This is -- you know, I

memory of this.

probably saw this before, but the form that this information takes is a little different than I recall, but it looks like what this

Trial 148 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 this before or no? A. I don't remember, Your Honor,

July 30, 2008

is is a compilation of information that was prepared for bankruptcy reporting purposes, the MOR, or monthly operating report, and then financial information that was probably taken from the materials that my finance function would have performed on a monthly basis and put into a format that looks like it was sent to the company's board. So I

just don't remember seeing this specific document before. Q. All right. Well, I want to ask

you about the handful of challenged plants that you talked about, so for that purpose if you would turn to the page with the Bates number on the lower right of 49107, it's page five of 17 in the MD&A. A. Q. Got it. And there's a chart there of a

number of the plastics plants with the largest variances and adjusted EBITDA as compared to the budget, do you see that? A. Yes. THE COURT: Have you seen

Trial 149 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 seeing this specific report. mean that I haven't. seeing it. MR. DeFILIPPO: brief on this, Your Honor. THE COURT:

July 30, 2008

That doesn't

I just don't remember

I'll be very

Is it proper to

ask the witness any questions about it if he's never seen it before? MR. DeFILIPPO: It's in

evidence, Your Honor, I believe I can ask him about a document in evidence, but perhaps I don't need to. Let me move on.

BY MR. DeFILIPPO: Q. You utilized in the preparation

of the four plus eight reforecast all of the information that was available to you in an effort to construct that forecast? A. I didn't reforecast it. The

corporation reforecasted it and I ran the process, yes. Q. And you ran, okay. Let me try

to put it in perspective. In the performance of your duties as CFO, was one of them to attempt to insure that the reforecast in question was

Trial 150 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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reasonable, supportable, and was constructed in accordance with the proper standards for preparation of a forecast? A. Yes, I was responsible for the

preparation of the forecast. Q. And did you believe you

performed your obligations as CFO in connection with the preparation of the four plus eight? A. I do believe I performed my Having said that, as I've

obligations.

described already, and after an understanding that I've been the chief financial officer for two months when we prepared the six plus six forecast, I felt it was necessary to go down a level and get more involved. Q. You didn't see anything or hear

anything in connection with the process of creation of the four plus eight forecast that caused you to question the validity of the assumptions on which it was based, did you? A. Q. No, I didn't. You had different and additional

information available to you at the time of creation of the six plus six forecast that

Trial 151 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 down. Honor. THE COURT: Thank you, sir. you did not have at the time of the four plus eight, correct? A. Q. That's correct.

July 30, 2008

You had two months of additional

actual results? A. Q. That's correct. Did you also have information at

that time that caused you to question the abilities of Mr. Profitt? A. I'm not sure whether Mr. Profitt

was still there when we did the six plus six. Q. Was he let go as a result of

his work being unacceptable to Mr. Macher? A. Q. Yes. And was Mr. Spears let go as a

result of his work being unacceptable to you? A. Yes. MR. DeFILIPPO: nothing further, Your Honor. MR. DAMREN: Nothing, Your I have

You may step

Let's take a break

now until ten minutes after three, please.

Trial 152 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. MR. SEABOLT:

July 30, 2008

(Off the record at 2:51 p.m.) (Back on the record at 3:13 p.m.) THE COURT: I meant to ask

earlier, what other witnesses do we have? MR. DAMREN: My last witness

that I'm calling is Peter Chadwick, but as chance would have it, a representative of Judy O'Neill, the Court's expert, is here, and wishes to know how the Court wishes to proceed with her appearance. THE COURT: Let's discuss

Your Honor,

Scott Seabolt from Foley and Lardner on behalf of Judy O'Neill, the fee examiner in this case. Ms. O'Neill is of course prepared to appear. From what I understand

as the proceedings are going, the expectation is she would appear sometime mid to late morning tomorrow, or early afternoon, we're prepared to do that. We also have her business consultant, Mr. Caruso, who also is retained

Trial 153 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 me, Your Honor? THE COURT: questions.

July 30, 2008

from DSI in town to support in any way that might be necessary for the Court to help illuminate any issues that might come up or be asked of her. The questions that we have really relate to the specifics as to how the Court anticipates the examination going and what role if any the Court expects of me as her counsel to play in that examination, if any, and it might be that I play no role, which is fine. I just would like to know

how the direct would be going in and what the expectation would be in that regard. THE COURT: All fair

Do either of you plan to call

either of those witnesses? MR. DeFILIPPO: Speaking to

Either of you. I don't plan

MR. DeFILIPPO: to call either of them. MR. DAMREN:

Your Honor, we

think the Court should consider the report of course of Ms. O'Neill that was prepared and submitted. We might have a couple of

Trial 154 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 suggestion? be here by 10:30. MR. DeFILIPPO:

July 30, 2008

questions but I did not anticipate doing a lengthy direct for a report that's already been filed with the Court. MR. DeFILIPPO: Your Honor,

for the record, we take the position the report's not admissible and would like to be heard on that before Your Honor rules. THE COURT: Just to answer

Counsel's questions, I will ask that you arrange for both of them to be here tomorrow morning. I think that the mid-morning time

frame will be fine. In terms of how the examinations will proceed, I guess I'll do the direct examination since neither of the parties are intending to do that. Any other questions? MR. SEABOLT: By mid-morning

I assume is 10:30, would that be appropriate? THE COURT: MR. SEABOLT: Sure. We'll plan to

May I make a

I would offer to Mr. Damren to

take Ms. O'Neill on direct, because I know

Trial 155 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 Peter Chadwick. Your Honor. MR. DAMREN: you want to hear from her, if you would

July 30, 2008

allow me to treat her as a hostile witness and lead, and I'm still prepared to do that. THE COURT: With all due

respect, I'll decline that offer and just ask her direct, not leading questions, so that she can testify as if on direct. MR. DeFILIPPO: Thank you,

Trust calls

PETER CHADWICK, 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 MR. DAMREN: Q. A. Q. background? A. I have a BA from Pennsylvania Please state your name. Peter Chadwick. And what's your educational

State University and an MBA from Babson College.

Trial 156 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 can you give us a brief

July 30, 2008

account of your employment history since leaving Babson? A. Yeah, immediately after

graduating, actually, undergraduate, after graduating undergrad I worked for the governor of Massachusetts for three or four years and then I transitioned to a small consulting investment group that did telecommunications investments, went back, got my MBA, graduated and worked for a firm called Booz, Allen and Hamilton, a consulting firm, subsequently worked for Policano & Manzo, which was two iterations, previously the predecessor to Capstone Advisory Group. So I worked at Policano & Manzo, their acquirer, FTI Consulting, and then Capstone Advisory Group when we left FTI. Q. What positions did you hold and

what responsibilities did they have at, when you were at Capstone and its predecessors? A. Originally at Policano & Manzo,

we've generally been known as a firm that does creditor advisory work. We've maintained

Trial 157 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 profile to some degree, we do more debtor work now than perhaps ever.

July 30, 2008

I was a

consultant when I first joined the firm, a director, a managing director, I'm now an executive director doing largely the same work we did back in 1999 when I joined Policano & Manzo. Q. And could you just give us some

of the companies whom you've worked for as either creditors or debtor. A. Sure. The only debtor work

I've done was a company called Heckingers, which ironically also liquidated. Then several manufacturing companies, Acorn Products, Alloyed Manufacturing, Western Unwovens, Via Systems, some healthcare companies, health plan services, primary health systems. Q. sector? A. Automotive. Q. What's Citation, was it a Automotive, Citation and Dura What about in the automotive

manufacturer? A. It was a manufacturer of

Trial 158 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 brackets and support structures for both aluminum and steel. Q. A. And the other company? Dura Automotive. Dura is door

July 30, 2008

systems, seating systems, cable systems for shifters. Q. When did you first begin

advising troubled companies or their creditors? A. Q. 1999. And do you have any professional

designations? A. Q. No. What was your involvement with

Collins & Aikman? A. We were retained by the

pre-petition secured lenders and then actual subsequently by the post petition debtor in possession lenders, Capstone was their financial advisor. Q. And we've heard Mr. Nurge

testify this morning about what his role was in that engagement, can you tell us what yours was? A. I worked for Peter Nurge. I

Trial 159 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 really in charge of the day-to-day

July 30, 2008

operations of the engagement, what that means is basically directing the work plan of Capstone, making sure that we focus on the issues that are most relevant to our clients, you know, liquidity, the collateral position of the company, the state of operations and in, you know, the early part of the case, you know, much of our effort quite frankly was focused on liquidity, and then the areas that were consuming huge portions of liquidity, like Canada, Europe, and U.S. plastics. Q. A. You don't live in Michigan? I do not live in Michigan. I

live in Virginia. Q. But during the period of the

C&A bankruptcy, about how many business days a month were you spending in Michigan? A. I was four to five days a week

here for probably the first two years of the case. Q. office? A. Our office was in Collins & And where did you have an

Trial 160 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 Aikman. Q. Could you just give me a

July 30, 2008

two-minute at the most explanation, kind of a day in the life of what you do. A. Sure. We typically our group We make

meets every morning at 7:00 a.m.

sure that we plot out everyone's work plan for the day so the people are focusing on the things that are most relevant. Priorities can change in cases like this. And then, you know, we divide and conquer. Typically our point of contact was Kroll Zolfo Cooper, so depending on the area of focus, if it was Canadian operations, for instance, someone would reach out to Mark Lymbery of Kroll Zolfo Cooper and talk about whatever the issues of the day were. We would regroup around 4:00 every day and create a summation of what was performed that day. We typically had a

meeting, a telephonic meeting with our client in the afternoon and report on what we knew and what we thought the next steps were. Q. How did you generally get

information about Collins & Aikman?

Trial 161 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 typically relied on Kroll

July 30, 2008

Zolfo Cooper. team.

We knew the Kroll Zolfo Cooper

They, similar to our team, had

specific areas of responsibility, and depending on the person who was in charge of a specific area of responsibility we would provide typically a written request, sometimes an E-mail request, less often a verbal request. Q. And were your requests for

information generally granted? A. Generally, yeah, after some I

period of time our requests were granted.

think one of the things perhaps to appreciate is that it's not as -- it was always a discussion as to what we were requesting. So

we would discuss exactly what we were looking for and what we were trying to accomplish and typically created a dialogue. It may have

had suggestions as another way to accomplish what we were trying to accomplish. In most cases we ended up where we wanted to end up, or with enough information that we could accomplish ultimately what we wanted to accomplish.

Trial 162 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. When did you first ask for

July 30, 2008

plant level information after you received the 2006 budget? A. Well, one of the exceptions to

what I just said would have been we first asked for plant, to do what we called a plant deep dive in, which is what we would have expected to do in any manufacturing case really early on in the case. We asked in

the summer, July or August of 2005. Q. When was the first time you got

plant level financial information? A. We got plant level financial

information during the course of the case. We didn't physically visit a plant until probably November. Q. What you just described the deep

dive, what was involved in a deep dive in a manufacturing case? A. I would typically expect in the

manufacturing case to go to the plants of greatest significance, either in earnings or revenue or both, and understand what the historic trend of operations have been, understand whether management has, you know,

Trial 163 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 30, 2008

a full grasp of its business, whether they understand what the drivers of the business are, whether they have a plan for improving their business, get a view of the plant. You don't have to be an operations person to understand what a clean plant looks like, what organized inventory looks like. In some cases bins full of

scrap, for instance, would be something that would be interesting to see. Q. When was the first chance you

got to go to a plant and ask those kind of questions and make those kind of observations with respect to Collins & Aikman? A. Well, we didn't get a chance to

really do what I would call a deep dive again until July of 2006. plants in November of 2005. Q. Could you describe briefly those We did visit

visits to the Court. A. The purpose was, the company had

issued, we call it the binder of cost savings. It was the cost savings that

ultimately became a part of the 2006 forecast, was every plant had a series of

Trial 164 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 copy? A. Q. first copy? Of course, yes. And when did you receive your

July 30, 2008

initiatives that comprised its cost savings, and we visited five plastics plants to go through really a limited agenda just of those cost savings. We weren't allowed to broaden

the analysis into again what I would have considered a much more comprehensive analysis of what was going on at the plant. Q. A. analysis. What are MD&A reports? Management discussion and It's reports that were created, at

least in part by Kroll, with the help of the finance team, and reported to the board of directors is my understanding. Q. reports? A. Q. These were monthly reports. And when did you first become Okay. And these were monthly

aware that they were being prepared? A. I first became aware in February

or March that they were being prepared. Q. And did you ask to receive a

Trial 165 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. was that? A. Q. A. Q. For February. And what about March? The end of May. The end of April I think. And which -- for which month

July 30, 2008

So there was a similar lag time

as we go forward? A. Q. Correct. What was your impression of or

understanding based on being in town for five days each business week of Kroll's involvement in vetting the 2006 budget? A. Well, I mean, we certainly knew

that Kroll was a part of the forecasting process, and by that I mean they were sitting in the meetings, the discussions of the operating assumptions. Certainly we would

have assumed, and I assumed that as the financial advisor and in particular as the chief restructuring officer that they ultimately vetted and approved the budget in some form, or approved of the budget. Q. Can you tell the Court what you

believed and understood to be the vetting

Trial 166 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 whom? A. You would expect to sit down process that would apply for a financial advisor to an operating budget? A. Sure. The -- ironically,

July 30, 2008

similar to actually what Tim Trenary ended up doing in July of 2006, you know, we would have expected to see the major cost elements historically forecast versus forecast, excuse me, and some of the other, you know, critical elements affecting any particular plant, whether they had high turnover, whether they had new program launches, some plants had other plants being consumed in them, to understand what other operating initiatives they had going on, understand obviously all the cost initiatives, and to lay all that out, which by the way none of that gives you an answer, it really only forms a basis for a discussion. Q. And the discussion would be with

with plant management and go through all those things. It's my view because any one

thing individually may make a lot of sense, when you put them all together in that

Trial 167 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 30, 2008

context, it may not seem as reasonable, the sum of all those parts. Q. Did you have the information

available to do this kind of vetting for -A. Q. A. Q. Ultimately we -Let me finish my question. Sorry. Did you have the information

available to do this vetting yourself prior to the release of the 2006 budget? A. Q. No. Did you ultimately get that kind

of information? A. Q. A. Q. Yes. When? Sometime the end of March. Now, I'm going to direct your

attention to Exhibit 6-H, do you recognize that exhibit? A. Q. Yes, I prepared this. Okay. Now, before we get into

what it demonstrates, tell us, the Court, when you prepared this. A. Q. Maybe in last four, five weeks. And the information --

Trial 168 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 COURT: five weeks before today? A. Correct.

July 30, 2008

Last four or

BY MR. DAMREN: Q. And the information that you

utilized to prepare it, at least the financial information, what was that? A. The financial information

historical comes from the company's Hyperion system, their historical financials, and the forecast comes from the original 2006 forecast on a plant basis. Q. And this information on a plant

level basis, when was it first made available to you? A. Well, the historical I'm sure I The

had at some point early in mid-2005.

forecast obviously I didn't get until late March of 2006. Q. And your purpose in preparing

this would be to demonstrate what could be accomplished at the time of the 2006 operating agreement? A. It's just the basis of which I

would expect to do, to challenge a financial

Trial 169 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 30, 2008

forecast, particularly an automotive forecast that has multiple plants. Q. Okay. And this is for one

particular plant. A. one plant. This is just an illustration for It shows the revenue from the

historical period, 2005. Q. Why don't you go through it

page by page, remembering that the Judge has never seen it before. A. Got you. The first page shows

the sales is the first trend and it shows 2005 actual sales, and then the forecast is the continuation of the trend through 2006, and really the sales we use just as a basis to illustrate the fluctuation of the variable costs against it. So for instance we'll show that EBITDA and then the EBITDA margin, noting, you know, obviously the upper trend, but because of seasonality, also noting obviously month to month, year over year changes, in other words, September 2005 being what looks like negative 5.7 percent, or 1. -- negative 1.5 million of earnings to

Trial 170 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 September of 2006 forecasted 3.6 percent EBITDA margin, or call it $500,000 of earnings. Q.

July 30, 2008

What does something that -- why

does that jump out to you and what's its significance in terms of challenging a budget? A. Well, you want to understand the

magnitude of what someone's forecasting, so in the case of Guelph, what they're showing here is before price increases so that your pro rata, your numbers as a percentage of revenue are consistent. Obviously on top of this was another 47 million of price increases forecasted in 2006. But so you want to

understand the magnitude of what the forecasted change is going to be in EBITDA, and then you would drill down into that and show what are the cost drivers that are going to, in this case it wasn't a large increase in revenue, in fact revenue was fairly static, or maybe declined a little bit, it was a change in the cost structure, but page two you see that material costs as a

Trial 171 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 30, 2008

percentage of sales are forecasted to come down somewhat moderately, but direct labor much more significantly. Q. A. Why does that jump out at you? One, it's not as simple to take

direct labor out of the process as a forecast may assume. Two, you know, particularly in a

facility like Guelph, which is a captive facility in large part to DaimlerChrysler, it has some assembly and sequencing there, which means they're not only manufacturing parts but also assembling parts and sequencing parts on behalf of other suppliers. Typically when you're -- when you're doing sequencing, you have captive labor, in other words, you have to staff to a certain volume level, whether the trucks show up or not, and so it's very hard to flex your direct labor because of that. Q. A. Okay. Go on to page three.

Similarly the indirect labor

shows a significant decline, you know, something like the direct labor which year over year was a two percent decline on Guelph sales is $200 million of sales, that's a $400

Trial 172 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 million savings just in direct labor.

July 30, 2008

Similarly indirect labor, you know, you're going to get another percentage point, so you get another $2 million in savings by presumably pulling out direct labor, and the timing of it is important too to understand how quickly they think they're going to be able to pull out the -- these costs. Q. So when you compared the 2005

actuals, which is on the left on this chart, with the 2006 budgets, you're looking for, these lines, they don't match up the same, they're quite different and then why is that? A. You are looking for the trend

and looking for the magnitude of the trend. So in other words, it's not just the fact that there is significant savings, it's also the timing of the savings that's important. Q. A. And why is timing important? Well, because, you know, the one

thing that you can never do in an auto manufacturer is compromise the delivery of production to the OEMs, and so very often it takes a fair amount of time to implement

Trial 173 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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engineering changes that produce efficiencies in the manufacturing process. Q. A. summation. Variable overhead, was that -That's really just your Your variable overhead goes from

what was a pretty high run rate to what ends up being a pretty low run rate. Q. A. And you would look to -The classic example is you look

at July, you know, year over year, where it's 18.9 percent in July of 2005, versus 14.2 percent in July of 2006. Q. A. That tells you what? Well, that tells me that, you

know, on 200 million of revenue that, you know, they think there's like $8 million of savings here, and I would want to know how their plant management intended to pull those costs out in the time frame they forecast it. Q. On the next page you've got

variable overhead. A. The next page is fixed overhead,

and they show a similar trend with fixed overhead. There's some savings forecasted in Fixed overhead, you know, is

fixed overhead.

Trial 174 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 difficult one to pull costs out of on a real dollar basis. So we would want to

July 30, 2008

understand how they're going to reduce the rent and plant management salaries, et cetera. Q. And the next chart that you

prepared deals with scrap? A. It's, again, it's just, if you

dig down in and look at individual line items, scrap for instance is sort of just a cost of life in the automotive business. The

fact that you would forecast it to go from a relatively high rate to zero, to just above zero seems an aggressive assumption that I would want to understand exactly how they intended to do that. Q. And to understand that you would

need to ask the plant level management people? A. Correct. Similar to excess Anytime

freight, which is the next schedule.

you see a cost which is seen in one year and it disappears in the next, it raises issues as to whether that's a reasonable assumption. Similar to overtime. If you're generating

Trial 175 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 30, 2008

overtime in one year and you forecast having no overtime the next year, that's an assumption you would want to drill down into. Q. And those are the next two

charts you went to, excess freight and you flipped the page to overtime, or went from a large amount to almost nothing, and now you've come to a final page, what information is set forth in that page and why would you need that information to challenge plant managers and ask questions? A. Well, like I said, you wouldn't

want to just understand what the forecast said. You would want to understand some of

the other things that were, or the financial forecasts that you want to understand some of the context of it. You would want to

understand whether there's launches. Launches by their nature, there's inefficiencies associated with launches. There's additional labor that has to get thrown into the initial part of a launch, and as you produce your initial parts off a launch you tend to have more scrap than normal.

Trial 176 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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So I would want to know how in a year we're having a launch it made sense that there would be no overtime, there would be a decline in labor and there would be no scrap or excess freight. Q. And what was the launch there

at this time? A. The Toyota Corolla. And then

similarly, you know, you would want to understand the plant management that are going -- that are charged with implementing this forecast, and you would want to know, you know, whether they're capable, whether they have a lot of experience there, whether they know the plant, and in Guelph's case I could count it for you, there was 21 managers turned over during the course of 2005. It's significant because, you know, it takes a while to understand your facility and understand what you're manufacturing. It takes a management team to The fact that these

understand one another.

guys don't have a ton of experience in the plant would be a cause for concern if they were going to try and implement significant

Trial 177 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 cost savings. Q. And the final category you

July 30, 2008

identified in this exhibit is -A. And these are the list of cost As you can

savings that they identified.

see, obviously besides $3 million of cost savings, they're forecasting an improvement that's above, well above $3 million on a pro forma basis year over year, so you would want to understand, one, whether each of these cost savings makes sense, two, whether management has the resources available to them to implement these cost savings, particularly in an environment where they have a launch, and then three, what makes up the difference between the $3 million in cost savings and the incremental improvement in earnings at Guelph. Q. This is the type of exhibit you

put together for each plant and then go out and talk to the plant people. A. Typically I would put that

together for any plant I went to talk to as really a basis for discussion. Again, I

don't draw any conclusions off of this, but I

Trial 178 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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would use it as a basis for a conversation to make sure that plant management could convince me that this made sense. Q. Do you know if anyone prepared

these type of charts and detail for the 2006 budget? A. Q. I do not know that, no. Is this the type of chart and

information that is consistent with what Mr. Trenary had prepared and done before he talked to the various plant management? A. Q. It's very consistent, yes. He talked about metrics and

those type of terms, is this the same type of thing? A. Q. It's the same type of thing. Let's discuss the 2006 and the You have the 2006

four plus eight plan.

budget, let's just go to the four plus eight. When did you learn about the results of the four plus eight and how they compared to the 2006 budget? A. The morning of July 12th we got

the, I think it was a flash report from I think John Boken provided it.

Trial 179 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. A. And your reaction? I was very shocked. Why's that?

July 30, 2008

It's unusual to miss a forecast First of

in the first couple of months.

all, you would expect that within a month or two months that -- find it extraordinary that you would build a forecast that you might actually exceed it to build some confidence in the forecast. To have missed it by 30 or

40 percent was pretty shocking on the plastics division. Q. Did you have any idea how the,

well, strike that. July 12th was what day you were involved in some meetings I take it? A. That was the day we were

meeting with Wilbur Ross, correct. Q. And that had the impact on

those discussions that Mr. Nurge talked about? A. Q. Correct. Ultimately there was after that

another change with the six plus six hidden, do you know when you received that?

Trial 180 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 hand. A. Q. Mid-August I believe. Did you have any earlier

July 30, 2008

knowledge that it might be coming out? A. Well, yeah. I mean, we talked

obviously to Tim Trenary regularly and he let us know during the course of his analysis that he thought that it was trending south of 130 and maybe like a 125 number. Q. came out? A. Q. 105. Okay. Now, after you received And the ultimate number that

the six plus six plan, I take it you were allowed to go visit plant managers? A. We actually did before that.

We started visiting with the plants after the announcement on the 12th that they had missed the plastics budget by so much. Q. A. Which ones did you visit? I don't recall all of them off Clearly we went back to Sterling We may have

Heights and Athens and Rantoul. gone back to Guelph. Q.

After you received the six plus

six plan, was there really any reason in

Trial 181 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 summary of, sir? A. This is a summary of the

July 30, 2008

creating these kind of charts that -- since Mr. Trenary had engaged in it? A. No, we weren't interested in

duplicating Mr. Trenary's work. Q. And his testimony, I think it

was this morning in response to the Judge's questions, Mr. Nurge went through his calculations and what he believed was appropriate damages. I'm just going to ask

you to identify 6-T, which is attached as an exhibit to our objections to the fee application, and which is just a breakdown of the numbers that he gave us, and I have 6-T in my hands. It's already part of the

record but I just wanted -THE COURT: BY MR. DAMREN: Q. And I'm not going to ask you to Okay.

go through the numbers, but ask that you prepared them and they're accurate, this is a summary? A. Correct. I think the -What is this a

THE COURT:

Trial 182 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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operating losses and the professional fees incurred during the course of 2006 and was the basis for the calculation of two of the ways that the complaint had proposed adjusting fees. MR. DAMREN: CROSS-EXAMINATION BY MR. DeFILIPPO: Q. Mr. Chadwick, the -- there's no Your witness.

requirement that you're aware of that a financial advisor to a company actually prepare the charts like you've prepared for Exhibit 6-I, is there? A. Q. No. It's sufficient if the financial

advisor obtains the information contained in those charts, right? A. Q. Correct. Okay. And as far as you know,

well, you don't know one way or the other whether KZC obtained the information in 6-I, do you? A. Q. No. You've heard the testimony in

this case from Mr. Boken and others that they

Trial 183 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 did? A. Q. Yes. And you have no basis to

July 30, 2008

dispute that, do you? A. Q. I do not. Could I ask you about 6-T? You

specifically, with respect to the calculation of EBITDA, 6-T is the last chart, you took the EBITDA from the plastics division and reduced it by what? A. It's not reduced. It's just

the unadjusted EBITDA. Q. A. Q. A. Q. You mean the top line is? It's unadjusted EBITDA, correct. The 61.5 million? Correct. But then in your analysis of I

think Mr. Damren asked you what appropriate damages were. A. Q. Correct. You must have reduced that 61.5

million by something, did you? A. I'm sorry, you mean the next

line item, corporate overhead allocation? Q. I guess so. My question is,

Trial 184 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 took the 61 and a half million in

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plastics EBITDA from the operating reports I assume and you took it to try to suggest your damages were made up of a loss incurred in plastics? A. Q. Correct. You then reduced 61 and a half

million by something? A. By the corporate overhead

allocated to the plastics division. Q. A. And by something else as well? And then by capital

expenditures. Q. And is there a treatise or

something that you relied upon in coming up with this theory that this is an appropriate way to calculate damages here? A. Q. No. You've never testified anywhere

as to damages, have you? A. Q. No. You're not an expert on

calculation of damages, are you? A. Q. No. You testified in direct that

Trial 185 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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6-H, if we could go there, please, you said it was the basis -- I think you said it was what Mr. Trenary did in preparing the six plus six? A. It's comparable to what Mr.

Trenary did, correct. Q. A. period. Q. Mr. Trenary said that he It's not the same thing though. No, this is for the 2005/2006

compared the first six months of 2006 with the projection for the balance of the year, right? A. Q. Correct. He didn't testify that he looked

back at 2005, did he? A. Q. No. Okay. Do you have any

experience in operating manufacturing plants? A. Q. No. Do you have any experience in

how to generate cost savings out of manufacturing plants? A. Q. Yes. Not from operating them?

Trial 186 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. advisor? A. And being a consultant in the No. Just from being a financial

July 30, 2008

business process reengineering, correct, yes. Q. And at the time of your

deposition, Exhibit 6-H wasn't produced, was it? A. Q. Correct. So you're not suggesting in any

way that KZC failed to do anything appropriately by not creating something like Exhibit 6-H, are you? A. I'm just illustrating that if

someone had done something like 6-H and then followed up with plant level kind of diligence that at least for me, if I had been able to perform that, I'm sure it would have been far more enlightening as to the unachievable of the 2006 forecast. Q. So was the answer to my

question no, you are not contending that KZC did something wrong? A. Q. Correct. And was it appropriate in your

Trial 187 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 view to have KZC manage the flow of information among the different advisors? A. Q. Yes. It was appropriate? You don't

July 30, 2008

contend that KZC performed any services in this case that were unnecessary or wasteful, do you? A. Q. No. And do you contend that --

strike that. You're not aware of any published standards anywhere that set forth the standard by which a chief restructuring officer should be judged, are you? A. Q. No. You're not aware of any

published standards anywhere that set forth the standards against which a financial advisor to a debtor should be judged? THE COURT: asking these questions? MR. DeFILIPPO: I'm not sure, Why are you

Your Honor, I don't have any further questions. THE COURT: You may step

Trial 188 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 then? MR. NATHAN: it for you. MR. ROSE: THE COURT: Thank you. Your Honor. about that. down. We will adjourn for the day and

July 30, 2008

reconvene at 9:30 tomorrow morning back in my courtroom on the 18th floor. MR. ROSE: cleaning matter, Your Honor. Just a house We are paying

for the nightly transcripts and I know this is unusual but is it possible, since we've already done this, if we use the transcripts from the visiting reporter as the official transcripts and file them in this case? THE COURT: I'm not sure

That's a very complex question

that I would have to research. MR. ROSE: It's a request,

Just save a lot of money. THE COURT: I'll check into

Anything else

Tom Nathan, I

just want to go on record as local counsel for KZC. (Proceedings adjourned at 3:57 p.m.)

Trial 189 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 30, 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.

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. (Jointly Administered) Hon. Steven W. Rhodes ~~~~~~~~~~~~~~~~~~~~~~~~~

Case No. 05-55927 (SWR)

TRIAL July 30, 2008 10:15 a.m. U.S. Bankruptcy Court 211 West Fort Street Detroit, Michigan Kathy Adkins, CSR-4697, RMR, RPR, B.A

Trial 190 A abilities 151:9 ability 16:5 56:18 72:12 93:17 112:21,24 124:22 126:12 able 57:14 65:7 74:10 98:2 172:8 186:18 about 15:23 20:16 22:22 24:17 25:22 26:24 29:2 32:3 33:3 35:18 40:21 43:15 48:9 49:9,18 50:17 51:13 52:9 54:5,7,9 54:20,21 56:7 56:15 57:5,7 57:13 59:11 60:4,4,5,9 63:13 65:20 65:22,24 66:4 70:2,4 71:7 72:11,16 74:12 76:24 76:25 78:6 80:16,21,22 81:17 84:5,19 86:16 90:16 92:9 97:9 98:22 99:14 99:15,18 104:1,10 106:9 108:25 109:6,24 112:2 113:5 117:12 122:11 122:12,12 123:24 127:11 128:23 129:13 129:16 133:4 140:20 145:16 148:12,13 149:7,11 157:19 158:22 159:18 160:16 160:25 165:5 178:13,20 179:21 183:6 188:12 above 57:18 60:3 94:22 174:13 177:8,8 absent 88:24 89:20 academic 96:13 accede 37:21 accelerated 112:13 accept 39:19 61:21 138:23 acceptable 48:11 accepted 64:10 138:14 138:20,24 142:1 access 47:13 49:11 86:9 accomplish 161:18,20,21 161:24,25 accomplished 168:22 accomplishing 27:23 accordance 108:23 150:2 according 28:2 accordingly 119:5 account 81:20 156:2 accountable 137:5,6 accountant 83:16 accounting 83:14,25 84:6 85:24 accrued 36:15 39:10,11 accurate 20:14 137:19 181:20 189:9 achievable 145:13 achieve 30:16 53:25 93:17 112:24 135:3 achieved 53:14 62:10 94:14 achieves 14:17 achieving 31:15 93:20 94:20 acknowledged 34:12 94:12 107:17 Acorn 157:14 acquiesced 71:18,25 acquirer 156:17 acquirers 61:14

July 30, 2008

across 14:12 action 11:5 81:15 110:14 146:17 active 42:23 74:25 110:20 activities 96:3 103:7 actual 25:18 31:9 91:21,25 95:4 101:14,16 103:11 151:5 158:17 169:13 actually 23:22 30:10 33:14 59:6 67:10 71:4 72:12 97:6 99:25 107:9 111:10 113:24 117:11 127:1 127:9 139:7 141:11,15 143:7 146:14 156:5 166:4 179:9 180:15 182:11 actuals 93:24 95:10 120:17,21 172:11 add 73:6 additional 11:8 52:17 150:23 151:4 175:21 address 97:14,15 addressed 51:14

Trial 191 adjourn 188:1 adjourned 188:24 adjust 36:7 adjusted 148:20 adjusting 182:5 adjustment 34:12 39:15 137:20 adjustments 34:17 Adkins 1:21 189:3,22 Administered 1:9 administration 85:2 86:8 administrative 85:5,8 admissible 154:6 admit 64:22 advice 21:17 67:9 advising 22:7,10 81:20 158:8 advisor 66:24 67:17 68:9 158:20 165:20 166:2 182:11,16 186:3 187:19 advisors 40:9 63:22 81:19 85:9 187:2 advisory 156:15,18,25 affairs 85:5 113:16 affect 24:14 affected 22:18 24:6 29:15 affecting 166:9 after 12:6 17:5 32:22 38:13 41:21 42:1 52:6 59:23 61:4 74:22 83:3,19 87:23 90:11 114:23 122:23 150:12 151:25 155:13 156:4,5 161:12 162:2 179:23 180:12 180:16,24 afternoon 8:17 152:22 160:22 again 25:5 57:10,15 58:15 110:4,9 112:8 116:23 119:1 123:11 138:23 163:17 164:5 174:8 177:24 against 29:22,25 90:21 169:17 187:18 agenda 67:22 164:3 agent 13:8 agent's 13:8 aggressive 174:14 ago 84:20 89:11 96:19 102:11 104:9 109:3 116:25 124:5 124:8 agree 56:9 agreed 8:19 23:3,7 40:11 56:6 agreeing 44:10 agreement 45:12,18 80:25 147:14 168:23 agreements 23:10 33:8 44:6 ahead 31:14 39:19 42:20 92:7 Aikman 1:6 8:5 17:2 52:3 54:11 83:21 84:16 84:18 86:17 86:23 87:5,15 88:16 100:5 108:16,18 126:19,21 128:7,10 129:7 130:18 135:24 144:9 158:15 160:1 160:25 163:14 al 1:6 all 11:7 13:13 18:4,6 24:3 35:16 40:14 50:6,22 53:17

July 30, 2008

54:15 55:8 56:20 62:2,20 62:21 67:2,7 67:8 70:1 72:12,22,23 73:7 74:8 76:2 80:8 81:22 88:15 89:8 91:14 95:23 99:18 103:12 104:6 104:6 106:25 109:21 111:9 112:10 116:11 122:4,11,11 123:1,20 124:11 125:8 131:7 148:11 149:15 153:14 155:4 166:14 166:15,22,25 167:2 179:6 180:20 Allen 156:12 allocated 133:24 137:24 184:10 allocation 183:24 allow 68:11 97:22 155:2 allowed 53:5 67:14 72:6 73:12 164:4 180:14 Alloyed 157:15 almost 48:18 49:19 54:14 61:5 84:2 107:20 109:7 124:1

Trial 192 175:7 along 72:24 already 56:21 150:12 154:2 181:14 188:8 also 16:16 31:7 36:17 50:20 52:5 54:15 64:22 65:21 67:25 78:15 83:14 90:21 91:2 122:13 127:16 140:18 151:7 152:24 152:25 157:13 169:21 171:12 172:18 alternative 43:3,4 46:21 alternatively 10:7 alternatives 20:10 42:9,10 although 27:19 31:17 42:24 43:5 45:14 79:23 80:9 132:18 aluminum 158:2 always 54:14 61:2 92:2 112:1 135:13 161:15 America 85:14,16,18,25 American 29:18,19 among 13:21 63:15 132:20 187:2 amount 14:18 31:21 35:6 36:18 42:3 51:5 53:20 59:12 61:16 110:10 112:15 119:9 172:25 175:7 amounts 53:2 63:23 114:5 117:24 ample 68:14,25 69:3 69:24 analysis 17:9 26:6,9 43:7,11 99:20 106:24 108:21 126:25 127:4 127:14 131:2 136:4,8 164:5 164:6,10 180:6 183:17 analyzing 35:2 announcement 180:17 annual 59:12 another 63:25,25 64:2 82:7,14 84:20 109:23 126:23 127:3 161:20 170:15 172:3 172:4 176:22 179:24 answer 24:11 48:22 73:8 74:12 75:6 81:7 101:7 105:7 105:24 113:6 113:8 115:21 145:6 154:8 166:17 186:21 answered 18:4 anticipate 48:24 154:1 anticipated 51:25 90:23 95:8 104:7 114:5 anticipates 153:7 anticipating 93:20 anybody 26:17 43:9 129:12 142:18 anymore 75:1 anytime 116:21 174:21 anyway 80:13 82:10 110:18 anywhere 184:19 187:12 187:17 apart 28:15 29:5 42:4 apparently 56:6 appear 70:1 152:19,21 appearance 152:11 APPEARANCES 2:1 3:1 4:1 appeared 30:20 Appearing 2:8,17 3:9,18 4:9 appears

July 30, 2008

30:5 Applicant 2:8,17 8:9,11 application 181:12 apply 108:9 166:1 appreciate 161:14 appreciation 139:2 appropriate 76:9 154:19 181:9 183:18 184:16 186:25 187:4 appropriately 186:12 approval 56:1 80:25 approvals 60:1 approved 78:16 165:22 165:23 approving 78:20 approximately 53:13 85:15 99:16 127:21 April 17:11 100:14 101:15 165:1 area 10:13 94:9 160:14 161:6 areas 90:6 159:10 161:4 argue 138:11 arguing 37:14 argument

Trial 193 37:18 arms 74:11 around 14:15 15:17 23:12 37:11 74:11 110:6 110:23 113:12 113:13 132:24 146:6 160:18 arrange 154:10 arrangements 44:22 artful 38:2 Arthur 84:1 aside 89:2 asked 17:3,6,7,13 36:13,15,17 36:19 38:16 46:4 49:17 71:22 78:5,12 101:10 118:20 132:9,13 153:4 162:6,9 183:18 asking 72:11 74:4 140:9 187:21 assembling 171:12 assembly 171:10 asserting 124:3 assess 67:4 assessment 46:3 48:13 49:21 assets 33:25 63:6 assist 102:21 assistant 9:3 assisted 106:23,25 associated 85:5 108:15 113:16 125:5 125:6 175:20 assume 19:1 45:25 118:22 129:19 133:21,21 140:13 154:19 171:7 184:3 assumed 47:11 88:19,19 165:19,19 assumes 47:8 assuming 35:24 assumption 174:14,24 175:3 assumptions 18:10,12 50:4 50:9 103:3 132:17 133:3 133:5,13,19 134:3,7,9 140:7 150:21 165:18 assure 60:15 Athens 180:22 attached 7:6 26:4 181:10 attempt 149:24 attempted 115:20 attend 122:19 attention 95:13 108:3 109:4,19 110:6 142:7 167:18 attorneys 189:13 attractive 43:4 62:9 attrition 106:1,8 August 13:9 74:22 105:19 120:16 162:10 auto 34:3 172:22 automobile 56:18 automotive 12:25 34:7 84:15,19,20 97:11 135:2 157:19,21,22 158:4 169:1 174:11 available 20:10 23:18 28:20 131:10 149:16 150:24 167:4,9 168:14 177:12 Avenue 2:5 aware 11:7 18:9 27:2 41:13 70:13 70:15 71:5 116:13,16,18

July 30, 2008

116:19,24 164:18,19 182:10 187:11 187:16 a.m 1:15 82:17 160:6 B B 52:12 57:6 58:23 59:3 74:12 BA 155:23 Babson 155:24 156:3 back 25:25 33:21 38:17 40:4 42:8 45:24 59:24 73:22 81:12 82:18 91:17 93:3 105:13 113:23 129:23 139:18 140:2 152:2 156:10 157:6 180:21,23 185:16 188:2 backed 10:24 background 83:12 155:22 backup 65:3 back-end 53:18 bad 32:15 balance 25:19 47:7 52:10 185:12 bank

Trial 194 22:17 23:5 24:6 35:7 39:14 40:16 64:9 80:13 banker 18:21 bankers 85:9 bankruptcy 1:17 14:16 60:7,14 148:2 159:18 banks 35:23 36:20 40:10 bank's 39:23 based 22:3 27:6 34:12 61:3 76:8 150:21 165:11 basic 113:15 basically 33:12 38:3 48:1,1 53:3 60:6 63:12 64:22 77:18 85:7,15,20 88:12 89:14 94:5 101:11 110:2 112:17 120:6 131:21 143:12 144:11 159:3 basis 30:12,13 47:6 58:22 91:7 116:1 134:23 144:1,18 148:7 166:17 168:12,14,24 169:15 174:2 177:9,24 178:1 182:3 183:3 185:2 Bates 43:20 148:14 BB 29:8 became 61:5 88:20 97:18 128:5,6 129:7 135:20 137:8,10 163:24 164:19 because 13:17 23:14 33:4 58:9 65:4 74:25 76:2 80:17 82:14 86:6 89:1 92:5 98:3,11 101:12 108:4 109:2 112:21 113:7 123:14 133:16 136:22 138:24 154:25 166:23 169:21 171:19 172:21 176:18 become 57:6 60:25 61:15 72:13 164:17 becoming 87:23 before 9:5 26:11,18 39:17 82:24 86:14 106:4 114:2 119:20 127:10 128:23 129:10 147:23 148:10,24 149:8 154:7 167:21 168:2 169:10 170:11 178:10 180:15 begin 51:3 70:6 112:3 158:7 beginning 60:22 84:17 begins 131:16 behalf 2:8,17 3:18 4:9 8:7,13,15 16:25 152:16 171:13 behave 114:4,9 behavior 114:13,24 behind 104:25 behooves 135:13 being 17:8 33:11 40:15 47:22 59:13 67:16 68:21 71:6 74:19 81:1,4 81:10 88:12 94:13 101:16 107:23 108:19 109:24,25 118:16 140:8 144:23 145:3 151:14,17 164:18,20 165:11 166:12 169:23 173:7 186:2,4 believe 11:25 15:21 16:3 18:2,6,9 22:25 23:7,16

July 30, 2008

24:16 25:14 25:23 29:24 33:6 35:4 37:18 39:21 43:6 44:16 46:9 49:3 55:19 57:20 62:5 63:21 66:19 74:18 77:2 79:8 113:17 140:18 149:10 150:6 150:10 180:1 believed 17:16 33:16 34:9 40:9 41:18,19,25 42:5 52:23 56:4,12,20 63:22 66:1 67:23 70:1 79:23 81:6 132:25 165:25 181:8 believes 10:12 below 14:21 143:17 benchmark 103:8 benefit 96:13 benefits 58:4 104:16 133:20 besides 177:6 best 27:21 32:25 42:12,14,15 62:21 81:14 81:17 better 32:9 40:10

Trial 195 74:6 between 22:1 31:9 59:19 97:24 97:25 104:4 124:15,20 137:20 177:16 beyond 23:25 40:24 68:12 bid 40:5 big 44:20,24 60:24 biggest 99:13 billing 76:9 billion 15:1,5,16 34:24 35:18 35:19 36:4 47:25 51:17 80:1 binder 13:2,4 46:1 95:15 163:22 bins 163:8 bit 63:10 74:3 120:13 170:23 blown 38:21 board 17:8 18:13 20:7,16 62:1 67:21,25 78:13,15,20 78:24 148:8 164:12 Boken 2:9,18 67:19 126:2 129:15 130:3 142:18 142:23 178:25 182:25 book 19:15 29:8,9 63:12 125:7 books 109:10,13,25 110:8 132:5 143:25 147:8 147:8 Booz 156:12 both 27:15 49:14 89:15 95:18 98:16 154:10 158:1 162:23 bottom 35:20 43:21 57:10 134:8 134:10 bottoms 131:13,14 bought 84:9 box 62:8 brackets 158:1 break 29:5 82:4,15 100:10 151:24 breakdown 70:17 181:12 breakup 62:12 bridge 58:17,20 99:5 99:7 bridges 97:21 brief 149:5 156:1 briefly 163:19 bring 15:9,14 bringing 106:25 broaden 164:4 broke 8:24 31:8 broken 30:6 brought 12:21 97:19,21 budget 31:9,16,22 48:17 69:7 90:21,21 91:3 92:7,10 96:22 98:1,3,14,16 99:10 101:2 101:22 102:2 102:8 104:5,5 130:11,17 131:5,15,16 139:15 142:3 148:21 162:3 165:13,22,23 166:2 167:10 170:7 178:6 178:19,22 180:18 budgeting 98:9 budgets 49:1 103:20 172:12 build 29:19 58:19 145:2 179:8,9 builds 121:7 built 32:19 131:18

July 30, 2008

bunch 104:24 business 10:12 18:24 23:2 28:14 31:5 34:3 40:23 44:22 45:2,8,10,13 54:3,15 56:19 57:12,19 58:3 58:11 61:20 65:23 71:10 86:1,18 89:21 90:1,13 96:13 99:15 107:18 107:22,25 113:12 125:7 135:1,2,6 137:2 142:7,9 142:14,24 143:1,3,8 152:24 159:18 163:1,2,4 165:12 174:11 186:5 businesses 134:20 buyer 21:7,13 37:16 45:4 46:6 buyers 23:11 49:5 62:22 64:20 74:9 buying 49:10 B.A 1:21 189:22 C C 3:12 8:1,6 59:11 83:10 cable

Trial 196 84:9 97:8 158:5 calculate 184:17 calculation 182:3 183:7 184:23 calculations 181:8 caliber 90:8 call 9:4 58:22 82:11 86:23 99:18 153:15 153:21 163:16 163:22 170:2 called 8:17,19 83:2 94:9 131:12 155:13 156:12 157:12 162:6 calling 152:7 calls 82:22 155:10 came 38:17 62:22,23 76:2 86:25 101:17 115:16 128:13 180:10 Canada 159:12 Canadian 160:14 cannot 127:10 capable 176:13 capacity 128:14 capital 57:1 84:3 87:19 88:25 125:4 135:13 184:12 Capstone 9:21 42:2 156:15,18,22 158:19 159:4 captive 171:8,15 capture 100:9 career 84:14 carried 21:15 carries 39:4 Caruso 152:25 case 1:8 8:4 13:9 13:14 52:14 56:24,25 73:25 74:17 94:16 96:16 96:21 134:25 143:13 152:17 159:8,22 162:8,9,14,19 162:21 170:10 170:21 176:15 182:25 187:6 188:10 cases 61:4 160:10 161:22 163:8 cash 35:7,9 39:9,14 58:4 76:11 124:24 125:8 125:9,13 catch 25:9 categories 100:11 category 177:2 cause 30:6 90:22 176:24 caused 135:19 145:24 150:20 151:8 causing 96:25 105:1 146:25 center 2:13 3:15 121:17 131:17 132:4,6,6 centers 85:23,24 144:6 cents 35:9 36:19 38:18 39:8 CEO 14:4 86:11 129:4 143:10 143:13 CEO's 14:20 certain 14:17 16:14 31:8 33:17 44:16 51:18 53:20 55:17 71:6 90:6 97:24 103:3,5 103:8 113:24 114:3,5,9,17 119:17 120:1 125:2 129:23 132:16 133:7 133:19 134:3 134:4 145:11 146:16 171:17 certainly 15:17 18:3 27:2 79:20

July 30, 2008

80:10 86:14 165:14,18 certainty 36:17,23,24 38:22 CERTIFICATE 189:1 certified 83:16 189:3 certify 189:5,11 cetera 95:25 174:5 CFO 88:20 89:15 97:2,5 124:6 142:1 144:18 149:24 150:7 CFO's 89:22 Chadwick 5:13 19:18 26:16,20 82:12 152:7 155:11,12,20 182:9 chairman 67:22 challenge 50:9 51:1 168:25 175:10 challenged 146:4 147:5 148:12 challenges 50:12 challenging 140:7 170:6 chance 25:9 68:10 130:16 152:8 163:11,15 Chang 3:13 8:14,14

Trial 197 change 37:13 74:14 80:19 84:14 87:23 101:3 104:8 118:24 119:6,7 160:10 170:18 170:24 179:24 changed 74:13 75:6 79:16,19 107:24 changes 50:22 55:4 79:23 90:16 114:25 140:3 169:23 173:1 channel 33:21 Chapter 1:5 85:6 characterize 112:13 characterized 91:11 95:11 charge 13:1 143:24 159:1 161:5 charged 176:11 chart 14:7,18 30:23 100:9 113:24 114:10,16 148:18 172:11 174:6 178:8 183:8 charted 114:22 charts 175:5 178:5 181:1 182:12 182:17 chat 9:5 check 188:16 Chicago 4:7 chief 84:10,11 87:25 88:3,4,9,11 88:23 97:7 117:7 128:5 129:7 145:23 150:13 165:21 187:13 Chrysler 51:19 60:5,21 61:1 circumstance 111:8 circumstances 89:1 Citation 157:21,23 claim 70:9 claims 44:11,17 clarify 133:11 clarity 61:11 classic 173:9 clean 61:14 163:6 cleaning 188:5 Clearly 180:21 CLERK 8:3 client 16:25 73:11 78:6 79:7 80:16,18 81:1 81:9,14 160:21 clients 19:10 20:20 21:3,18,21 22:6,10 27:20 66:1 67:17 71:25 73:16 74:16 76:3 159:5 client's 81:19 close 10:22 11:1 24:19 32:4 91:5 92:6 97:1 98:23 104:2 139:12 144:10 closed 109:9,10,25 110:8 closely 86:2,5,13 closing 48:17 143:24 closure 91:4 122:13 140:21 cognizant 16:1 collateral 159:6 collateralized 63:7 College 155:25 Collins 1:6 8:4 17:1 52:3 54:11 83:21 84:16 84:18 86:17 86:22 87:5,15 88:16 100:5

July 30, 2008

108:15,18 126:19,20 128:7,10 129:7 130:18 135:24 144:9 158:15 159:25 160:25 163:14 color 131:9 colored 73:20 combination 76:4 144:12 combined 47:19 come 16:17 60:7 62:17 68:15 70:21 86:16 93:6,9 105:14 115:23 134:8 134:10 153:3 171:1 175:8 comes 168:9,11 comfort 67:19 comfortable 18:23 coming 50:22 52:6 58:1 59:7 60:10,10 82:7 132:11 180:3 184:15 comment 57:15 comments 57:17 commercial 95:25 committee 19:19,21 46:20 47:19 49:7

Trial 198 65:20 68:1 73:18 commodity 135:11 communications 84:3,4 community 23:13 companies 40:23 57:6 62:4 92:14 157:9,14,17 158:8 company 10:22 11:6 12:13,21 17:22 18:21 19:3 20:1,11 20:17 22:23 23:2,14,17,22 24:4,13 25:13 28:20 29:10 30:10,20 31:7 31:13,22 33:6 34:13 35:10 37:24 40:2,8 40:9,17 41:19 42:1,19 43:10 44:19 46:16 48:4,5,7 49:13 51:14 55:3 57:5 60:7,18,19 61:22 71:18 72:21 79:6,25 84:1,3 85:19 86:7,10,20 87:1,18,21 88:1,6 90:12 90:20 93:11 93:13,20,22 95:2,9,19,19 95:21,24 96:6 97:1 98:20,22 107:20,21 109:10 110:7 125:16 126:24 127:11,16 136:4,6 144:15 147:13 157:12 158:3 159:7 163:21 182:11 company's 10:10 11:14 18:16,17 20:6 23:4 28:3,18 42:3 62:7 93:15 124:22 135:18 148:8 168:9 company-wide 30:12,13 31:12 comparable 185:5 comparatively 31:9 compare 43:7 102:8 compared 102:2 120:10 120:18 148:21 172:10 178:21 185:11 comparison 120:7,7 compel 45:9,16 compensation 14:2 15:3,12 competitive 135:6 compilation 148:1 complaint 182:4 complete 55:5 103:7 completed 26:22 95:9 109:21,24 123:5 complex 188:12 component 14:4,20 components 34:7 comported 50:23 composition 99:8 100:19 104:11 121:16 121:19 comprehensive 21:14 58:17,19 95:22 118:17 164:6 comprised 164:1 compromise 172:23 conceive 54:17 concept 48:19 130:4 concern 51:8 53:16 58:2,7 59:15 176:24 concerned 12:25 54:2 57:5,7 92:18 92:22 142:10 concerning 27:16 51:4 78:10 concerns 51:2,21 54:5,7 55:15 74:3 concessions 46:17 56:16,19 conclude

July 30, 2008

30:9 35:13 concluded 20:7,16 concluding 33:10,11 conclusion 47:8 61:8 73:9 conclusions 63:1 177:25 concur 75:16 conditionality 36:25 conditioned 62:16 conditions 35:16 37:4 43:24,25 conduct 50:13 118:20 135:21 conference 111:18 conferences 122:8 confidence 179:9 confidential 23:19 48:24 confidentia... 23:10 24:7 33:8 confirmation 14:14,15 conjunction 85:3 87:18 134:15 connection 68:3 150:8,18 conquer 160:12 cons 57:12 consensus

Trial 199 62:2 consequence 95:6 145:10 conservative 74:19 consider 40:15 153:23 consideration 119:4 considerations 40:24 50:19 considered 48:10 65:8 117:1,6 164:6 considering 49:10 consistent 170:13 178:9 178:12 consolidate 125:9 consolidated 100:2,4,5 121:8 125:13 131:18 consolidating 107:1 consolidation 144:8 consolidations 11:16 constituencies 46:9 constituency 47:21 constituents 48:23 49:2 constitutes 189:9 construct 149:17 constructed 150:1 construction 133:8 consultant 152:25 157:3 186:4 consultants 47:18 49:6 consulting 156:9,12,17 consumed 166:12 consuming 159:11 contact 160:12 contained 55:18 57:13 72:5 182:16 contemplated 53:10 58:4,6 contend 17:25 187:5,9 contending 186:22 context 27:8 139:10 167:1 175:17 contingencies 36:21 contingent 65:2 continuation 169:14 continue 33:19 65:1 continued 3:1 4:1 5:6 9:9 89:16 continuity 60:11 contractual 66:16 control 48:2 73:11 78:6 79:7 80:16,18 81:3 controlled 68:1 controller 90:2,14 137:10 137:11,12 controllers 111:21 115:13 controller's 89:10 90:9 144:3 conversation 33:5 63:13 178:1 convertible 55:21 convertibles 28:14 55:16 94:10 convince 78:24 81:6 178:3 Cooper 3:5,10 67:23 87:19 88:17 96:9 160:13 160:16 161:2 161:2 cooperate 71:23 copy 164:22,25 corner 121:10,15 Corolla 176:8 corporate 89:5,10 103:23 110:19 111:7 113:20 132:21 133:16,24 136:7 139:24 144:3,12 183:24 184:9

July 30, 2008

corporation 1:6 8:5 101:10 105:17 107:18 108:1 140:19 149:19 correct 9:24 11:10,24 12:5,9 13:16 13:19,25 14:25 15:10 16:22 18:17 18:22,25 19:11,20 21:18,22 22:2 22:7,13,14 27:17,18 28:4 28:8,11,12,15 30:19 31:10 31:11 32:14 32:16,20 35:8 35:25 39:16 42:7,23,24 43:22 44:1 45:19 48:14 48:15 78:13 78:17 80:4,14 91:14 92:11 97:5,6 108:9 120:13 126:22 129:9 131:6 132:12 134:12 136:1 137:18 139:23 140:22 151:2,3,6 165:9 168:3 174:20 179:18 179:22 181:22 182:18 183:14 183:16,20 184:6 185:6 185:14 186:5 186:9,24 correctly 30:9 31:13 55:23

Trial 200 cost 11:17 12:3,8 12:17 16:8 28:7 31:10,14 31:23 52:13 52:15 53:9 57:22,24 59:25 70:2,4 71:7,15 72:7 76:24 99:17 103:6 114:4 114:13 120:2 121:17,20 131:17 132:4 132:6 133:14 133:20 135:4 135:9 144:6 163:22,23 164:1,4 166:6 166:15 170:20 170:24 174:11 174:22 177:1 177:4,6,11,13 177:16 185:22 costly 79:22 costs 30:22 31:1 52:18,19 57:25 133:23 134:22 135:15 169:17 170:25 172:9 173:19 174:1 couldn't 33:2 38:21 45:9,16 54:17 55:11 64:13 71:14 72:14 counsel 3:4,9 13:9 33:6 64:4 65:20 76:16 85:4,10 153:9 188:22 counsels 85:11 Counsel's 154:9 count 176:16 couple 33:22 44:6 74:7 75:4,9 80:15 97:3 153:25 179:5 course 16:24 81:15 88:24 97:17 106:7 128:19 130:17 135:22 144:21 152:18 153:24 162:14 164:23 176:17 180:6 182:2 Court 1:1,17 8:3,3 8:16 9:1,14 25:1,9,10 27:9 64:1,15 65:13,17 66:4 66:8,12,21 67:12 68:3,18 68:24 69:2,13 70:7,12,21 71:1,21 72:3 72:15 73:9,22 74:2 75:11 76:13 77:15 81:24 82:9,15 82:20,24 117:4 121:4 123:21 124:4 124:11 147:16 148:23 149:6 151:23 152:4 152:10,12 153:2,7,8,14 153:19,23 154:3,8,20 155:4 163:20 165:24 167:22 168:1 181:16 181:23 187:20 187:25 188:11 188:16,19 courtroom 188:3 Court's 152:9 crazy 48:22 138:12 create 20:3 46:16 105:21 160:19 created 116:14 161:19 164:10 creating 46:18 96:10 97:23 131:4 137:17 140:8 181:1 186:12 creation 136:18 150:19 150:25 credible 21:7,12 credit 80:25 147:13 creditor 156:25 creditors 46:19 47:18,22 49:7 63:15,18 66:25 73:17 157:10 158:9 crisis 59:23 critical 51:19 166:8 CRO 67:20 CROSS-EXAMI...

July 30, 2008

9:9 125:24 182:7 CSR-4697 1:21 189:22 current 21:15 currently 10:14 customary 59:18 134:21 145:1 customer 60:1 99:14 customers 28:3 44:7 45:7 45:10,12,17 CX-BY 5:7,12,15 C&A 51:19 159:18 D D 8:1 57:10 62:25 DaimlerChry... 171:9 damages 181:9 183:19 184:4,17,20 184:23 Damren 3:12 5:8,11,14 8:6,6 45:23 65:10 82:6,11 82:22 83:8 117:15,21 124:1,13 125:23 151:21 152:6 153:22 154:24 155:10 155:18 168:4 181:17 182:6 183:18

Trial 201 dash 15:3 data 123:16 database 62:3 date 100:14 138:3 189:7 dated 9:22 25:15 39:6 day 18:14,19 40:13 62:14 66:25 70:3 75:7 76:24 160:4,8 160:17,19,20 179:15,17 188:1 189:17 days 109:9 112:17 159:18,20 165:12 day-to-day 137:16 159:1 DCX 60:21 deal 38:21 42:10 55:11 61:6 63:6 dealer 52:2 deals 174:7 debt 23:5,8,9,13 24:6 35:7 39:14 debtor 67:1 147:13 157:2,10,11 158:18 187:19 Debtors 1:7 December 9:22 12:11 15:19 21:18 56:23 decided 12:7 decisions 48:2 deck 99:24 decks 109:14 decline 155:5 171:22 171:24 176:4 declined 170:23 declines 29:11,17,18 declining 125:14 dedicated 133:23 deep 162:7,17,18 163:16 deeper 72:8 deferential 73:16 79:9 deficiencies 21:8,13 54:20 54:24 55:4,13 69:22 71:6 deficiency 66:20,23 68:5 deficient 66:14 DeFILIPPO 2:3 5:7,9,12 5:15 8:8,9,23 9:7,10,16,17 24:24 25:2,11 27:12 45:20 49:17 65:11 76:17,20 77:23 81:22 82:3 125:25 126:1 147:18 149:4,9,13 151:19 153:17 153:20 154:4 154:23 155:8 182:8 187:22 DeFillippo 46:4 definitive 38:17 degree 83:14,16 157:1 degrees 83:19 delay 75:17 104:16 delayed 61:10 delays 17:5 delicate 47:6 deliver 135:8 145:13 delivering 135:5 delivery 135:9 144:17 172:23 delta 104:11 121:12 demanded 47:16,17 71:17 demanding 39:13 63:19,22 demands 64:14 demonstrable

July 30, 2008

61:25 demonstrate 168:21 demonstrated 70:14 121:3 demonstrates 167:22 demonstrating 124:9 Dennis 136:15 143:16 145:25 146:6 146:11,14,17 depended 44:18 dependent 60:1 93:15 depending 160:13 161:5 depends 13:20 deposition 26:12 78:12 97:4 186:7 derive 34:5 describe 27:22 163:19 described 22:3 28:18 39:8 111:1 121:23 122:10 123:7 129:20 150:12 162:17 describes 99:7 100:16 describing 113:7 designations 158:12 designed 55:12 desirability 41:14

Trial 202 desirable 41:17 desire 139:11 desired 50:15 despite 79:3 detail 27:24 48:18,21 50:1,7,10,25 57:14,16 58:15,18 59:5 59:6 98:12 131:10 178:5 detailed 130:13 131:8 131:11 deterioration 55:16 determine 71:2 determined 21:16 detrimental 67:10 Detroit 1:19 3:16 83:15 Deutsch 2:4 develop 65:7 103:2,16 131:22 139:13 developed 18:12 103:22 developing 106:23 development 93:4 dialogue 96:23 98:20 104:1 132:24 140:19 146:5 161:19 didn't 13:15 17:3 22:4 23:19 26:18 27:1 29:3 32:24 34:20 36:3 39:18 40:12 40:21 45:11 46:7 55:25 56:7 62:5,17 64:21,21 70:17 74:25 79:4,7,14 81:9 100:23 117:19,19 122:19 123:24 129:15 130:4 130:19 132:18 141:11,15 149:18 150:17 150:22 162:15 163:15 168:18 185:15 difference 97:23 99:9 105:2 177:16 differences 58:25 59:1,7 99:25 104:4 120:1,8,24 124:15,20 different 14:13 48:3 88:21 98:13 101:24 102:5 104:15 116:12 147:24 150:23 172:14 187:2 difficult 54:12 60:25 61:4,13 67:16 93:22 125:17 174:1 difficulties 58:10 107:22 difficulty 64:16 dig 174:9 diligence 16:25 37:4 62:19,22 186:17 dinner 86:25 DIP 27:15 80:25 81:2,6,11 direct 83:7 95:13 98:6,8 114:6 114:7,11,20 114:24 115:3 115:8 130:9 142:5 153:12 154:2,15,25 155:6,7,17 167:17 171:2 171:6,19,23 172:1,5 184:25 directing 159:3 direction 102:23 directionally 85:12 107:19 112:6 145:24 146:4 147:4 directly 71:2 102:25 131:3 director 85:1,14,19,21 86:7 157:4,4 157:5 directors 164:13

July 30, 2008

disagreed 16:4 disagreement 18:15 disappears 174:23 disappointed 138:10 discipline 92:12 disclose 55:25 disclosed 67:7 discontinuing 32:24 discounts 52:8 discovered 124:8 discretion 145:8 discuss 14:2 123:8 152:12 161:17 178:17 discussed 49:2 116:5 130:9 discussing 57:11 111:18 discussion 17:9 74:25 145:16 161:16 164:9 166:18 166:19 177:24 discussions 33:22 52:9 67:24 72:23 111:11,13,23 112:4,5,8 113:2 122:21 123:2,7 142:22 146:2

Trial 203 165:17 179:20 dispute 183:4 dissatisfied 124:18 distress 19:3 distressed 23:13 distribute 132:18 133:6 distributed 23:6,25 27:20 133:3,5 distributing 23:24 DISTRICT 1:1,2 dive 162:7,18,18 163:16 divide 32:2 160:11 division 1:3 10:18 30:22 76:1 99:21 100:10 107:14 121:17 121:25 127:18 127:20 143:25 179:12 183:9 184:10 divisions 89:7,12 98:25 100:3 103:17 document 13:5 26:14 27:6 29:21 34:22 35:1 46:7 49:25 99:4 119:20 120:23 138:21 147:6 148:10 149:11 documented 44:21 45:8 documents 23:23 78:9 94:24 Dodge 51:20 doesn't 13:18 100:10 116:17 149:1 doing 16:24 24:10 37:4 40:11,25 50:19 52:2 69:7 90:3 104:23 127:3 129:21,24 138:2 154:1 157:5 166:5 171:15 dollar 31:5 36:20 38:19 63:10 174:2 dollars 14:18 34:24 48:1 80:2 134:5 don't 17:10 21:8,10 24:9,10,12,16 30:2 31:18 34:21 43:6,12 44:23 62:12 63:6,21 65:4 67:18 70:23 70:25 74:18 77:21 78:2,3 79:1,2 80:8 82:9 86:4 92:21 94:2 99:23 104:22 105:10 111:24 112:9 116:11 122:17 123:11 125:21 126:17 127:25 128:2 129:17,24 132:15 142:20 148:9,25 149:2,12 153:20 159:14 163:5 169:8 172:13 176:23 177:25 180:20 182:20 187:4 187:23 door 158:4 down 14:18 30:6 35:19 59:8 60:11 61:5 65:5 75:19 80:2,9 81:25 82:25 100:10 103:1,13 105:6 115:5 123:20 129:19 129:25 131:14 131:20,21 143:10,16,19 143:19 145:14 146:1 150:16 151:24 166:21 170:19 171:2 174:9 175:3 188:1 downs 59:11,13,19 downward 36:8 39:15 draft 13:12,14,17,24 27:19 drafts 65:18 dramatic

July 30, 2008

109:19 110:5 draw 177:25 drill 170:19 175:3 driver 121:20 drivers 99:12 163:2 170:20 driving 105:9 121:21 122:16 131:21 139:3 drop 37:3 drove 69:17 DSI 153:1 due 37:4 62:19,22 155:4 duly 83:3 155:14 duplicating 181:4 Dura 84:19 157:21 158:4,4 Durango 51:20 during 74:14 75:24 86:1 88:5 94:19 107:24 118:19 128:19 140:12 159:17 162:14 176:17 180:6 182:2 duties 87:10,12,22 88:8,12,18,20 88:21,23 89:2

Trial 204 149:24 DX-BY 5:11,14 Dykema 3:14 4:4 E E 8:1,1 62:25 63:15 each 69:6 98:20 103:16 111:12 113:3,22,25 115:12 127:22 127:24 131:25 132:1,3,8 139:20 165:12 177:10,20 earlier 56:24 97:9 100:3,18 107:16 111:1 112:23 120:19 132:16 152:5 180:2 early 90:18 109:6 110:7 152:22 159:8 162:9 168:17 earnings 37:11 63:9 162:22 169:25 170:3 177:18 earnout 35:7,11 38:19 39:9 44:18 easily 124:7 East 4:5 EASTERN 1:2 easy 129:22 EBITDA 10:21 11:2,8 11:16,22 12:2 15:15 21:25 22:6 26:25 29:15 30:11 30:17 37:12 51:4 55:7 58:17,19 59:16 67:9 69:14 79:13 79:25 80:5 97:24 99:5,8 99:22 100:9 100:15,21 102:7 104:6 109:11 110:11 120:2,8,25 121:7,9,11,20 122:4 125:1 125:13 137:20 137:23 147:1 148:20 169:19 169:19 170:2 170:18 183:8 183:9,12,14 184:2 educational 83:12 155:21 effect 92:13 effectuate 12:21 efficiencies 173:1 efficiency 134:4 efficient 135:14 effort 23:18 149:17 159:9 efforts 12:3 eight 24:18 25:12,17 25:18,22 26:7 27:1,3,17,24 28:21 29:12 30:1,11,17 32:19 34:13 36:2 49:19 51:10 68:14 70:8,17,24 71:4 72:4 73:12,23 78:7 78:16,21 79:5 95:4,5,12,15 95:20 96:12 96:17,21 97:19 99:9 100:8,22,24 101:17,20,23 101:23 102:1 102:2,9,15 104:5 105:15 105:23 106:12 106:16,18 107:8 108:8 108:24 109:5 109:22,24 120:5,11,20 120:22 121:10 121:14,24 124:16,20 135:20,25 136:6,19 137:17,21,23 137:25 138:8 138:15 141:2 141:11 144:22 145:18 149:15 150:9,19 151:2 178:18 178:19,21 Eisenhower 3:6

July 30, 2008

either 9:4 31:20 45:17 79:1 82:8 141:16 141:19 153:15 153:16,19,21 157:10 162:22 elected 80:12 element 98:5 106:23 114:13 125:12 elements 95:23 96:24 97:25 98:15 103:5 104:20 105:1,9 113:20 114:4 120:2 121:22 125:3 135:8 145:12 166:6 166:9 elimination 36:20 Elizabeth 3:3 8:10 Emcon 84:21 emergence 14:15 employee 189:12 employment 156:2 end 18:14,19 22:11 22:12 40:13 57:4 62:13 63:12 66:25 69:5 70:3 75:6 76:24 91:2 92:6 106:10 124:2 161:23 165:1

Trial 205 165:6 167:16 endeavored 113:21 ended 71:6 79:10 101:16 161:22 166:4 ends 75:2 173:6 engage 96:23 98:20 engaged 86:17 181:2 engagement 158:23 159:2 engineering 173:1 enlightening 186:19 enough 32:4 61:15 110:5 113:12 113:13 161:23 enter 104:1 enterprise 14:16,21 15:2 15:5 35:21 47:25 91:1 96:24 105:17 116:8 117:13 118:10 120:3 121:8,18 142:16 enterprise/... 14:8 entertain 41:1 entire 57:1 136:10 entitled 24:1 47:13 52:12 56:5 99:5 119:22 entity 112:22 envelope 93:3 environment 50:20 177:14 equals 131:23 equation 12:1 escalated 15:8 essential 10:18 essentially 36:16 51:5 72:24 144:20 estimate 31:1 54:4 64:13 et 1:6 95:25 174:4 Europe 85:25 159:12 evaluate 58:19 75:12 evaluating 42:9 event 135:17 events 10:25 74:21 103:8 everybody 56:4 67:2 74:15 everyone 139:6 everyone's 82:20 160:7 everything 17:2,6,13 everywhere 33:1 evidence 68:15,25 69:3 70:13,16 149:10,11 evident 72:13 exact 109:15 110:9 126:17 exactly 18:8 101:5 107:12 112:9 161:17 174:15 examination 5:1,3 19:9 83:7 153:7,9 154:15 155:17 examinations 154:14 examined 83:5 155:16 examiner 75:17 152:16 examining 8:24 example 98:6,8,14 105:2 114:6 115:4 133:12 139:16 145:10 173:9 exceed 179:9 exceeded 30:10 31:22 35:10 exceeding 32:6,7 exceptions 162:4 excess 174:20 175:5 176:5

July 30, 2008

exchanged 86:24 exclusivity 64:15,17,18 excuse 27:9 147:7 166:7 execute 16:5 55:10 executed 55:12 execution 52:16 executive 55:1 157:5 exercise 73:11 78:6 79:7 91:24 96:10,13 105:21 108:13 117:16 145:7 exhibit 7:2 9:11,13 11:21 13:2,3 13:7 14:1 19:14 25:3,5 25:24 26:5 27:13,22 29:8 30:4,6 34:25 38:24 43:14 43:16 45:25 49:18,21 61:9 64:4,11 95:14 119:10,12,13 125:18,19 147:9 167:18 167:19 177:3 177:19 181:11 182:13 186:7 186:13 exhibits 7:5,6 9:12 13:22 25:4 existing

Trial 206 71:10 exit 63:2,3 expect 22:9 46:25 110:1,21 114:9 117:7 132:23 162:20 166:21 168:25 179:6 expectation 45:11 47:23,24 74:17 77:10 152:20 153:13 expectations 46:19 63:14 expected 59:21 73:2 79:11 101:13 110:13 124:24 134:9 137:1,3 162:8 166:6 expects 153:8 expenditures 125:4 184:13 expense 97:25 98:15 expenses 125:5,6 experience 47:16 68:4,9 83:19 86:1 92:3 131:25 134:13,19 176:14,23 185:19,21 experienced 66:24 107:22 experiencing 29:11 expert 12:17 77:19,21 77:24 152:9 184:22 experts 13:1 19:2 77:11 explain 59:2,14 61:18 91:18 121:2 139:7 explained 73:15 explanation 117:10 160:3 express 54:4 expressed 114:7 extended 62:18 extension 75:18 extent 65:13 71:3 72:16 88:13 88:17,25 89:5 90:7 91:4,13 93:19 98:4,13 107:5 114:24 122:14 135:3 135:7 144:22 145:3,8 external 123:15 extraordinary 53:24 179:7 eye 114:20 eyeball 59:9 E-mail 26:4 39:2,2 161:8 E-M-C-O-N 84:21 F face 34:23 35:6 faced 42:9 143:3,8 facilities 52:19 85:17 98:21 103:4 103:13,21 111:4,12 113:13,23 114:1 115:6 115:12 117:12 117:14 118:10 118:23 122:15 127:22 132:22 132:25 133:13 133:18 139:13 143:18 144:6 144:14 146:3 146:16,21 facility 98:17,19 100:1 105:7 114:18 125:5 131:17 132:4,9,10 133:9 134:18 142:2 171:8,9 176:20 facing 21:24 41:3 fact 22:18 33:9 46:9 47:15 50:2 52:15 55:24,25 64:10 67:20 69:16 71:8 72:1 73:3 75:7 95:10 100:9 105:14 124:5 146:10 170:22 172:17 174:12 176:22

July 30, 2008

factors 52:20 factory 77:20,25 facts 67:2 fail 68:11 failed 18:1 30:16 186:11 fair 41:15 61:16 86:13 92:20 92:23 116:4 119:2 153:14 172:25 fairly 170:22 fairness 24:4 faith 145:11 falling 28:15 familiar 61:18 108:17 108:17 far 16:15 123:23 182:19 186:19 favorable 20:9 February 60:20 88:1,20 90:18 92:25 93:5 164:19 165:4 Federal 84:16,24 86:2 86:19 92:16 108:12 113:14 126:4,9,15 128:18 129:2

Trial 207 129:4,12 130:5 fee 2:8,17 62:12 75:16,21 152:16 181:11 feel 47:4 68:5 113:14 fees 65:15,25 75:8 75:15,23 182:1,5 fellow 90:11 fellows 34:18 felt 41:23 48:4 91:1 150:15 few 126:2 139:5 fiasco 66:2 field 89:7 103:4 144:24 145:4 145:9 Fifth 2:5 fight 48:9 fighting 65:24 figure 71:20 74:24 77:19 file 188:10 filed 154:3 filter 49:16 final 54:19 92:4 175:8 177:2 finally 74:20 100:4 143:18 finance 42:16 74:24 84:5 85:2,13 85:24 86:8 88:15 89:3,5 89:6,9,11 90:7,16 93:2 95:24 96:2,4 96:7 97:19 103:17 106:3 106:21,22 107:11 110:19 111:1,7 113:16,21 115:16 123:5 125:3,11 127:4,17,24 128:2,7,9 130:18,20 132:22 134:16 136:9 143:21 144:12,13 148:5 164:12 financeability 63:4 financial 47:13 48:24,25 63:21 66:24 67:16 68:9 72:21 81:18 84:10 85:9,16 85:20,21 87:25 88:3,4 88:9,11,24 90:20 93:16 93:17,21 97:7 100:14 107:25 112:24 113:16 117:7 126:25 127:13 128:6 129:8 131:1,2 136:3,8 144:7 144:17 145:23 148:4 150:13 158:20 162:12 162:13 165:20 166:1 168:7,8 168:25 175:15 182:11,15 186:2 187:18 189:14 financials 168:10 financing 63:7 93:14,22 find 13:2 24:20 33:2 47:10 65:4,25 78:23 179:7 finding 23:12 fine 99:2 101:7 153:11 154:12 finish 167:6 firm 11:6 13:8,18 23:15 26:6,13 26:17,23 27:14 35:2,13 61:24 84:1 156:11,13,24 157:3 first 14:21 19:24 20:5 21:11 25:25 26:1,5 39:3 45:25 46:11 50:2 56:20 69:15 69:22 74:8 75:22 83:3

July 30, 2008

84:15 89:20 89:24,25 90:13 91:17 92:19 93:25 95:15 97:5,10 100:25 108:14 112:3 115:1 135:23 155:14 157:3 158:7 159:21 162:1 162:5,11 163:11 164:17 164:19,25 168:14 169:11 169:12 179:5 179:5 185:11 first-time 124:6 fit 57:25 five 30:23 69:8,11 85:17 99:4,6 102:12 146:5 147:3,4 148:16 159:20 164:2 165:11 167:24 168:2 fix 41:22 146:18 146:23 fixed 41:21 173:22 173:23,25,25 fixing 70:19 143:7 flags 69:25 flash 178:24 flex 171:19 flip 100:7

Trial 208 flipped 175:6 floor 188:3 floors 58:12 flow 125:8,9,13 187:1 flows 124:25 fluctuation 169:16 focus 14:3 39:1 41:3 75:11 107:14 159:4 160:14 focused 108:5 142:24 142:25 159:10 focusing 66:9 160:8 folding 34:6 Foley 152:15 folks 88:17 89:6 115:18 follow 64:24 101:2 followed 81:15 186:16 following 53:7 follows 83:6 155:16 Ford 28:11 51:20 60:5,24 61:2 61:4 forecast 21:14 50:7 53:7,10,12 55:19 58:6 61:10 63:2 71:4 72:18 73:13 75:13 90:23 91:25 93:7,10 94:1 95:5 96:21 98:1,13 101:10,11,17 101:23 102:3 104:15 106:5 106:24 108:23 109:7,22,24 110:17 111:5 112:12 114:23 115:18 117:9 118:5,11,24 119:1 120:3,4 120:8,15,18 120:18 125:2 131:13,14,14 131:16 133:8 135:23 140:9 142:4 144:21 145:2,13 149:17 150:3 150:5,15,19 150:25 163:25 166:7,7 168:11,12,18 169:1,1,13 171:6 173:19 174:12 175:1 175:13 176:12 179:4,8,10 186:20 forecasted 51:16 91:22 114:16 117:24 170:1,16,18 171:1 173:24 forecasting 66:2 91:8,11 95:7,9 98:11 98:17 99:4 118:16 119:5 119:6 131:1 165:15 170:9 177:7 forecasts 53:17 69:14 103:16,21 139:11 175:16 foregoing 189:5,9 form 13:14 147:23 165:23 forma 177:9 format 148:7 formed 79:6 84:7 forms 166:17 Fort 1:18 forth 33:8 61:14 103:9 129:23 139:18 175:9 187:12,17 forward 42:17 45:2 64:1 105:12 105:13 165:8 found 71:13 four 9:25 10:2,5 16:21 24:17 25:12,17,17 25:21 26:7,25 27:3,16,23 28:20 29:12 30:1,11,17 32:19 34:13 36:2 49:18

July 30, 2008

51:10 65:4 68:14 70:8,17 70:24 71:3 72:4 73:12,23 78:7,16,21 79:5 95:4,4 95:10,11,15 95:20 96:12 96:17,21 97:18 99:9 100:24,25 101:16,22 102:8,14 104:5 105:15 105:22 106:11 106:15,18 107:7 108:8 108:24 109:5 109:22,23 112:18 120:4 120:10,19,20 121:9,13,24 123:3 124:16 124:20 135:20 135:24 136:6 136:18 137:17 137:21,23 138:8,15 141:1,10 144:22 145:17 149:15 150:8 150:19 151:1 156:7 159:20 167:24 168:1 178:18,19,21 frame 22:21 27:8 79:20 154:12 173:19 frames 60:17 framework 65:7 Frank 20:7,15 86:3,5

Trial 209 86:6,11,13,20 103:24 122:19 123:9 124:17 126:4,7 128:16 Franklin 2:13 frankly 62:20 67:18 90:1 95:23 108:17 109:20 110:12 112:16 159:9 Frank's 126:9 freight 52:18 174:21 175:5 176:5 frequent 86:9,9 fruition 62:17 frustrations 65:20 FTI 156:17,19 fulcrum 72:1 fulfilled 88:13 fulfilling 88:8 89:15 full 44:15 46:10,17 130:12 163:1 163:8 fully 18:9 67:7 function 87:14,17 88:16 89:3,5,9,9,18 90:7,9,16 93:2 96:2,7 97:19 106:21 107:11 110:19 111:7 112:23 123:5 128:7 130:21 143:21 144:12 146:13 148:6 functions 128:9 143:21 fundamental 76:25 further 45:21 59:16 65:12 76:15 100:11 151:20 187:23 189:11 future 18:16,17 61:12 104:14 114:25 115:9,17 125:10 128:11 G G 8:1 gap 91:4 122:12 140:21 gaps 91:3,5 96:22 96:25 97:1,15 98:18,22,23 98:24 104:1 138:25 139:3 139:11,12 gathering 103:11 gauge 37:1 gave 21:17 56:21 62:8 86:23 103:15 104:10 104:19 181:13 general 3:4 18:13 85:4 85:10 104:4 134:20 generally 12:16 94:5,11 94:12,14 105:24 107:17 110:21 142:1 156:24 160:24 161:11,12 generate 11:8 12:8 15:12 185:22 generated 11:23 134:5 generates 134:7 generating 11:15 174:25 genesis 134:16 getting 41:22 42:8,10 92:6 give 24:21 25:8 45:10,13 47:1 47:5,5 49:12 62:11 68:10 83:11,18 115:2 126:6,7 129:22 131:9 133:12 139:18 140:4 156:1 157:8 160:2 given 17:8 23:3 56:23 93:4 112:15 114:5 144:5 gives 99:4 123:17 166:16 giving

July 30, 2008

47:12 57:8 59:24 64:16 glasses 73:20 global 97:10 GM 56:1,5,9,10,12 60:5,17 61:1 go 25:24 39:19 42:17,20 43:17 49:18 49:25 53:11 56:14 65:5 67:8 75:3 88:18 91:17 92:7 99:1 105:12 113:23 119:9,12 140:2 150:15 151:13,16 162:21 163:12 164:2 165:8 166:22 169:8 171:20 174:12 177:20 178:19 180:14 181:19 185:1 188:22 goal 40:3,4 goes 105:6 125:10 143:16 173:5 going 16:17 17:1 36:3,7 37:1,7 38:11 39:19 41:23 42:25 45:2 54:11 55:14 57:23 58:5 60:13,14 62:13 64:24 68:15 69:19

Trial 210 71:20 75:1,19 79:21 81:11 91:2,6 101:1 104:23 108:22 115:5 117:17 117:19 118:13 123:21,25 124:2 125:14 130:1 133:23 140:10 142:2 146:18 152:20 153:7,12 164:7 166:14 167:17 170:18 170:20 172:3 172:8 174:3 176:11,25 181:9,18 gone 56:17 114:2 132:20 180:23 good 65:21 67:4 90:1,14 113:14 120:23 126:10 141:7 141:8 goods 135:5 Gossett 3:14 4:4 gotten 56:1 74:5 governor 156:7 graduate 83:13,15 graduated 156:11 graduating 156:5,6 granted 161:11,13 graph 114:12,20,22 graphs 115:14 116:14 grasp 163:1 great 27:5,24 55:10 58:6 63:6 64:24 67:19 69:9 greater 51:24 54:25 110:12 greatest 162:22 grew 108:11 gross 100:8 group 9:22 24:1 39:7 40:16,16 41:4 41:4 130:18 156:9,15,18 160:5 grouped 127:21 groups 94:6 127:21 group's 37:22 Guelph 170:10 171:8 171:24 177:18 180:23 Guelph's 176:15 guess 69:15 101:19 102:18 104:25 154:14 183:25 guidelines 103:14 guys 38:2 71:19 134:14 176:23 H hadn't 27:7 48:17 half 53:14 69:20 184:1,7 Hamilton 156:12 hand 82:25 180:21 189:16 handful 122:15 146:3 146:25 148:12 handled 85:7 handouts 57:8 hands 47:10 181:14 hands-on 89:6 happen 37:8 67:15 happened 58:24,25 74:5 74:21,22 happy 124:17 hard 37:1 72:11 112:17 171:18 harder 52:24 hat 68:13 hate 26:1 haven't 119:20 149:2 head

July 30, 2008

127:17 128:6 130:25 136:3 136:9,11,13 health 133:20 157:17 157:18 healthcare 157:16 hear 21:1 150:17 155:1 heard 154:7 158:21 182:24 heavily 106:15 heavy 107:7 Heckingers 157:12 Heights 180:22 held 84:25 189:7 help 58:18 78:4 153:2 164:11 her 152:11,24 153:4,9 155:1 155:2,6 hereby 189:5 herein 83:2 155:13 hereof 189:8 hereunder 189:16 Hermosillo 61:5 Hertzberg 8:17 Hi

Trial 211 126:1 hid 55:24 hidden 179:24 high 22:12 38:7 48:19 52:5 59:9 69:18 80:24 81:9 119:8 120:7 121:6 166:10 173:6 174:13 higher 10:23 47:3 52:17 59:5 highest 86:9 highly 62:16 65:2 Highway 2:14 him 9:4,5 15:11,23 37:3,12,22,23 39:18,23 40:5 45:1,4 64:22 82:13 86:14 86:23,24 130:1,1 149:10 himself 15:13 hindsight 74:1 historic 162:24 historical 114:10 115:19 168:9,10,16 169:7 historically 114:13 166:7 history 156:2 hit 15:15 40:5 hold 68:13 156:20 holders 23:8 holding 84:3 home 16:17 Hon 1:10 honest 39:24 Honor 8:7,9,25 9:8 24:25 45:21 65:12 82:2,5 148:25 149:5 149:10 151:20 151:22 152:14 153:18,22 154:4,7 155:9 187:23 188:5 188:15 hope 96:15 hoping 40:1 horse 61:15 hostile 155:2 hour 76:7 123:22 hours 115:11,11,11 house 188:4 however 51:16 HR 95:24 huge 159:11 human 55:3 hundred 33:17 63:10 78:3 hundreds 69:18 Hyperion 144:8 168:9 I ID 7:3 idea 179:13 identified 19:22 46:7 47:21 55:3 98:7 100:1 116:1 177:3,5 identify 58:23 72:6 78:19 91:3,5 96:22 97:14 98:10,12 109:15 138:25 139:11 181:10 identifying 10:9 illegal 24:10 Illinois 4:7 illuminate 153:3 illustrate 169:16 illustrating 186:14 illustration 169:5 imagine

July 30, 2008

115:11 139:16 immediately 156:4 immoral 24:10 impact 20:21 21:4 55:6,8 73:25 75:13 117:24 118:5 124:19 125:12 179:19 impacted 59:15 implement 50:17,18 52:24 53:22 79:22 172:25 176:25 177:13 implemented 60:15 129:10 implementing 176:11 implied 35:17 important 37:15 44:2 45:1,3 135:2 136:18,25 138:16 172:6 172:19,20 importantly 140:18 imported 129:6 importing 130:4 impossible 53:24 61:6 impression 20:20 165:10 improve 90:8 115:7 140:20 144:16 146:8

Trial 212 improved 11:9 improvement 12:2 146:15 177:7,17 improvements 11:16 59:25 70:2,4 71:8 71:15 134:6 improving 163:3 incentive 14:2 15:2,12 include 11:15 77:3,6 included 28:6,10,13 includes 100:18 including 18:24 23:5 28:1 45:4 51:19 67:21 74:16 income 121:7 incompetent 66:14 incorporated 120:20 incorporates 120:17 increase 56:2 170:21 increased 59:21 increases 11:22,24 47:2 69:17 170:11 170:15 increasingly 57:3 incremental 177:17 incurred 76:1 182:2 184:4 indeed 59:25 INDEX 5:1 6:2 7:2 indexing 28:11 indicate 19:25 30:24 53:6 60:23 indicated 52:22 100:20 128:17 137:8 146:22 indicates 100:13 indicative 52:23 indirect 171:21 172:2 individual 133:6 174:9 individually 166:24 individuals 49:9 84:8 136:17 industry 59:13,18 84:15 inefficiencies 28:8 52:14 175:20 influential 67:24 inform 122:25 123:4 information 23:11,24 24:2 26:19 47:14 49:3 51:22 57:21 67:3 72:5 97:20,22 102:20,25 103:12 105:6 129:23 144:17 147:24 148:1 148:4 149:16 150:24 151:7 160:25 161:11 161:24 162:2 162:12,14 167:3,8,13,25 168:5,7,8,13 175:8,10 178:9 182:16 182:21 187:2 informed 38:13 initial 19:25 46:12,14 175:22,23 initially 84:10 85:1 86:7 95:8 initiative 31:15 73:20 initiatives 16:9 52:16 104:6 115:7 164:1 166:13 166:15 input 136:16 inquiries 119:3 insisted 112:20 instance 17:7,11 59:5 69:5 96:11 160:15 163:9 169:18 174:10 instances 19:6 instead 95:10,12 108:5

July 30, 2008

insurance 87:20 133:15 133:17 insure 149:25 integral 34:2 intellectual 135:12 intended 64:19 121:3 173:18 174:16 intending 24:14 154:16 intense 123:2 intensive 54:13 intentions 146:22 interest 81:14,17 189:14 interested 23:8 42:22 93:5,8 142:10 181:3 interesting 163:10 international 34:7 into 12:21 14:19 34:6 43:16 47:10 54:11 56:3 65:8 69:19 81:3,20 100:2,4,11,24 101:15 104:1 104:18 125:10 127:21 129:6 133:7 144:7 148:7 164:5 167:21 170:19

Trial 213 175:3,22 188:16 introduced 128:25 inventories 52:2,5,10 inventory 163:7 investigated 71:22 investing 23:12 investment 18:20 85:9 156:9 investments 156:10 investors 61:14 involved 44:6 65:14 72:17,22 95:18 96:1 105:21,22 106:10,15 107:2,5 111:22 117:2 117:8 139:1 145:14 150:16 162:18 179:16 involvement 102:13 107:7 141:1 158:14 165:13 in-house 3:9 ironically 157:13 166:3 issuance 78:16,21 79:5 128:11 issue 33:14 80:17 issued 9:22 13:13,14 13:18 19:10 19:18 22:24 23:2,22 24:13 25:13 26:11 28:21 32:22 33:14,18 48:17 49:19 62:19 68:7,20 70:9 73:13,23 130:11 147:12 163:22 issues 17:4 63:13 116:12 142:14 142:19 143:3 143:5,7 153:3 159:5 160:17 174:23 item 44:10 64:7,11 119:20 183:24 items 13:21 31:24 70:20 100:21 101:25 174:10 iteration 139:25 iterations 139:18 156:14 iterative 118:25 122:14 139:1,4,9,12 140:4,6 J James 97:8 January 68:7 92:25 93:5 130:12 jargon 61:17,19 Jersey 3:7 job 82:14 126:10 141:7,9 jobs 88:8 John 2:9,18 67:19 126:2 129:20 129:21,24 142:18,25 143:4 178:25 joined 83:24,25 84:2 84:15,18 87:1 87:5 90:12 126:20 127:1 127:11,12,12 127:15 157:3 157:6 Jointly 1:9 Jong-Ju 3:13 8:14 judge 78:5 139:6 169:9 judged 187:14,19 Judge's 76:23 181:6 judgment 18:7 125:11 145:7 Judy 152:9,16 July 1:14 8:2 22:22 32:23 34:10 35:15 38:5 39:6 42:19 43:12 71:12 71:24,25 110:24 112:8

July 30, 2008

120:15 162:10 163:17 166:5 173:10,11,12 178:23 179:15 jump 170:5 171:4 June 25:15,22 26:7 26:23 27:16 28:19,23 32:15 49:20 68:18,20 70:7 71:3 72:4 73:24 75:13 79:20 80:6 101:21 109:6 110:8 June's 32:18 just 11:14 13:17 24:19 25:8 39:8 40:24 41:2 53:3 56:8 59:8 61:6 63:24 67:19 70:25 76:2,21 80:3 80:15 92:7 93:2 95:16 100:23 101:5 104:9,16 107:11 109:21 115:3,15 116:11 120:13 120:14 121:2 124:9 126:2 147:6,21 148:9 149:2 153:11 154:8 155:5 157:8 160:2 162:5 162:17 164:3 168:24 169:5 169:15 172:1

Trial 214 172:17 173:4 174:8,10,13 175:13 178:19 181:9,12,15 183:11 186:2 186:14 188:4 188:15,22 justifying 46:17 K Kardos 3:3 8:10,10 Kathy 1:21 189:3,22 keep 27:10 36:4 39:23 42:22 112:15 kept 23:19 36:1 key 52:3 kind 31:18 34:16 50:12 56:22 57:16 58:17 69:21 74:14 93:2 106:25 113:18 116:20 160:3 163:12 163:13 167:4 167:12 181:1 186:16 kinds 77:17 131:10 133:5 knew 11:21 32:18 45:9 55:12 57:22 71:14 98:18 129:24 160:22 161:2 165:14 know 8:21 22:17 24:9,11,20 31:18 33:13 34:21 38:20 44:23 56:7,21 60:12 61:22 62:12 63:20 69:12,18 75:7 75:20 77:25 78:10,15 79:1 79:2 80:1 86:4,15 88:7 88:24 89:3 92:21 93:11 93:23 107:19 107:19 108:14 109:7 110:5 111:25 113:9 113:17,18 114:6 115:10 116:4,6,9,23 116:25 117:20 117:20 122:20 123:15 125:4 129:20 133:18 135:4,9 137:1 138:9 143:10 143:12 145:9 147:22 152:10 153:11 154:25 159:6,8,9 160:11 162:25 166:5,8 169:20 171:7 171:22 172:3 172:21 173:10 173:15,16,17 173:25 176:1 176:9,12,13 176:15,19 178:4,7 179:25 180:6 182:19,20 188:6 knowing 45:1 77:9 79:3 80:11 knowledge 18:3 23:17,21 27:21 36:2 62:21 180:3 known 49:14 116:2 117:18 146:18 156:24 Kroll 3:5,10 49:14 78:24 79:4,7 87:18 88:17 96:9 106:10 111:22 160:13 160:16 161:1 161:2 164:11 165:15 Kroll's 106:10 165:12 KZC 2:9,18 17:25 65:21,22 66:10 67:12 71:22 72:17 72:21 73:11 77:8 78:12 123:24 124:5 124:8 126:2 141:2 142:18 182:21 186:11 186:22 187:1 187:5 188:23 KZC's 17:16 65:15 75:15 78:10 L L 4:3 labor 52:18 53:2

July 30, 2008

98:7,8 114:7 114:7,11,21 114:24 115:3 115:8 171:2,6 171:16,19,21 171:23 172:1 172:2,6 175:21 176:4 lack 61:11 78:25 lag 165:7 laid 146:15 Lardner 152:15 large 42:22 54:10 93:15 112:23 170:21 171:9 175:7 largely 157:5 largest 94:7 142:15 148:20 last 10:1,3,5 13:12 51:8,12 54:22 85:18 101:11 101:23 102:1 102:2 112:4 114:18 117:25 118:6 120:9 120:14 125:18 137:24 152:6 167:24 168:1 183:8 late 53:19 84:6 87:6 90:18 109:5 152:21 168:18 later

Trial 215 49:20 113:1 latest 54:4 launch 54:5,7 175:22 175:24 176:2 176:6 177:15 launches 54:11 166:11 175:18,19,20 lay 166:15 layer 69:16 Lazard 18:20,23 34:22 lead 155:3 leading 13:1 83:20 155:6 Lear 54:10 learn 113:5,15 178:20 learned 86:21 118:5 least 15:15 30:7 39:13 43:4 47:5 51:24 62:21 96:19 108:23 122:19 139:25 146:20 164:11 168:6 186:17 leave 38:4 leaving 54:10 156:3 led 135:24 ledger 132:4 Lee 96:8 106:13 107:8 140:25 left 83:22,23,24 84:13,17 86:20 90:11 99:11 106:4,6 156:18 172:11 left-hand 121:5,10,15 legal 66:15 85:11 lender 9:22 22:18 39:7 40:16 41:4,6 42:21 81:2,11 lenders 19:19,22 27:16 42:17 45:6 47:19 63:2,3 158:17,19 lender's 81:7 lengthy 154:2 less 47:4 59:13 61:19 89:6 123:23 161:8 letter 13:3 29:9 64:6 letting 81:3 let's 8:21 24:17 25:8 29:5,6 41:2 49:25 66:4 75:11 82:15,21 88:18 105:12 133:4 151:24 152:12 178:17 178:19 level 54:22,25 59:5 59:9 70:18 72:10 77:1 98:4,12,18 100:2,8 102:21 103:23 103:24 105:7 109:11 110:11 117:2,8,17 118:17 119:8 120:7 121:6 121:20 122:7 125:14 130:13 131:8,11,18 132:21 134:3 134:11,14,18 139:24 140:1 140:9 143:10 143:17 145:14 150:16 162:2 162:12,13 168:14 171:17 174:18 186:16 levels 14:13 52:5 86:10 98:18 leverage 60:2 life 160:4 174:11 light 29:19 liked 42:11 45:14 129:4 likely 41:1 42:15 53:8,12 limited 84:13 97:9 164:3

July 30, 2008

line 14:9,12,21 55:24 103:6 112:20 114:21 144:5 174:9 183:13,24 lined 101:21 lines 172:13 liquidated 157:13 liquidating 40:17,23 liquidation 41:9 43:3,7,10 liquidity 57:10 87:17 159:6,10,12 list 51:6 177:4 listened 81:13,16 little 43:17 47:1,1 50:1 65:25 73:19 74:2 120:13 147:24 170:23 live 159:14,15,16 LLC 2:9,18 load 144:6 loaded 53:18 loan 63:8 local 188:22 located 85:25 locations

Trial 216 113:4 lock 48:5 long 21:14 41:21,22 56:6 59:17 113:12 115:21 124:5,8 longer 48:7 79:21 95:6,7 101:13 136:3 long-term 37:6 42:5 45:8 68:16 79:24 look 30:23 37:6 42:6 69:4 71:19 73:22 75:21,23,25 76:6 77:12,21 77:25 94:22 99:2 130:16 138:5 147:7 173:8,9 174:9 looked 33:1 93:3 97:12 125:18 132:1 185:15 looking 44:21 50:10,11 57:17,20 58:18 61:7 78:11 94:17 104:24 147:9 161:17 172:12 172:15,16 looks 147:25 148:7 163:7,8 169:24 loss 132:2 145:11 184:4 losses 75:25 182:1 lost 75:8 lot 18:2,3 19:5 23:23 31:5 40:24 59:25 64:20 132:23 135:12 166:24 176:14 188:15 loud 10:2 73:18 low 22:11 63:9 135:4 173:7 lower 28:3,7 48:5 51:7,9,17 52:13,14 121:10,15 148:15 lowered 51:4 lunch 82:16 Lymbery 160:16 L.L.P 2:4 M Macher 8:19 9:2 12:16 15:2,18 20:7 20:15 86:3 122:7 128:16 129:3 131:4 151:14 Macher's 8:18 14:23 18:15 124:14 126:4 138:7 magnitude 27:4 109:15,18 110:4 170:9 170:17 172:16 Maher 2:4 maintained 156:25 maintaining 112:20 major 54:18 99:12 166:6 make 17:18 23:18 38:16 40:5 41:20 57:1 61:24 67:1 73:6 91:19 118:18 125:14 139:5 154:23 160:6 163:13 166:24 178:2 makes 36:25 53:20 177:11,15 making 57:24 65:8 75:2 159:4 manage 87:17,19,20 89:16 103:9 187:1 managed 85:4,10 107:21 management 10:12,15 12:7 14:19 18:11 50:9,14,16 51:1 54:13,21 54:24 55:1,24 56:7 72:20,21 72:25 73:17 73:21 76:11 78:1 79:9

July 30, 2008

86:10 87:20 89:17 96:14 97:22 103:25 107:23 113:4 116:3 123:1 123:10 140:1 146:12 162:25 164:9 166:22 173:18 174:4 174:18 176:10 176:21 177:12 178:2,11 management's 17:9 73:5 116:15 managers 111:19 115:13 122:21 143:19 175:11 176:16 180:14 managing 30:21 88:25 89:3 157:4 manner 114:5 manpower 55:13 manufacture 57:22,24 manufacturer 97:11 157:24 157:25 172:23 manufacturers 44:22 134:21 manufacturing 28:7 85:17 98:6,19,21 99:16 100:1 103:4,13,21 105:4,9 111:4 111:12 113:10 113:13,15,17 113:23,25 114:18 115:6

Trial 217 115:12 117:12 118:10,23 122:15 127:22 131:17 132:3 132:9,22,24 133:13,18 134:4,6,17,20 135:15 139:13 142:2 143:18 144:5,13 146:3,8 157:14,15 162:8,19,21 171:11 173:2 176:21 185:19 185:23 many 71:19 94:24 116:6 126:15 159:18 Manzo 156:14,17,23 157:7 March 69:5 90:18 164:20 165:5 167:16 168:19 margin 169:19 170:2 Mark 160:15 marked 7:3,5 11:21 market 19:3 marketing 17:20,22 18:21 18:25 20:9,17 49:6 marketplace 22:19 74:12 80:20 Masonovich 88:14 90:6,15 137:7 Massachusetts 156:7 massive 53:1 match 172:13 material 11:17 28:11 30:21 31:1 170:25 materials 18:25 20:9 100:12 123:8 123:13,18 148:5 math 31:18 matter 47:15 96:2 109:9 188:5 189:6,15 matters 85:8,10,16 87:21 111:19 117:23 Matti 88:14 90:5,15 maximize 20:8 maximizing 10:7 maybe 74:9 128:24 167:24 170:23 180:8 MBA 83:16 155:24 156:11 MD&A 148:16 164:8 mean 10:16 13:18 29:9 36:23 44:23 63:16 80:1 91:18 95:21 108:2 112:1 116:17 123:18 129:18 132:3 133:9 138:9 139:7 139:10 143:9 149:2 165:14 165:16 180:4 183:13,23 meaningful 112:11 means 15:3 25:17 91:20 159:2 171:11 189:6 meant 55:10 131:9 152:4 measurable 61:25 measure 90:19 93:25 measured 14:14 measuring 31:24 mechanical 189:6 mechanism 38:21 meet 50:8 75:2 meeting 12:12 15:19 32:23 34:10 38:14 71:12 122:20 160:21 160:21 179:18 meetings 18:11 50:12 72:22 110:25 111:3,6,10

July 30, 2008

115:11 116:2 116:6,20 117:23 118:4 118:20 122:6 122:24 123:2 123:6 132:19 132:19 145:15 165:17 179:16 meets 160:6 member 82:8 96:9 106:3 members 15:13 103:25 110:18 111:6 113:3 123:9 146:12 memory 147:22 mentioned 96:18 100:17 102:19 107:16 109:3 118:19 122:11,13 140:25 142:5 met 35:17 metric 99:6 metrics 113:25 114:17 115:14 178:13 Mexico 56:3 Michigan 1:2,19 2:15 3:16 83:13,24 159:14,15,19 189:4 mid 152:21 middle 14:4 110:24

Trial 218 112:8 Mid-August 180:1 mid-July 40:18 41:2 110:7,7 mid-morning 154:11,18 mid-2005 168:17 million 15:15 22:1,1 26:24 27:5 29:20 30:15 30:18 37:12 41:20 42:1 53:9,13,14 54:3 62:12 63:8,9,10 74:14,15,23 79:12,25 80:7 80:11 81:12 99:8,13,14,15 99:16,17,19 100:16,19 102:10 104:11 104:20 105:3 105:4 121:12 121:16,19 122:3 137:22 137:24 169:25 170:15 171:25 172:1,4 173:15,16 177:6,8,16 183:15,22 184:1,8 millions 15:6,7 mind 79:16,19 115:7 mind's 114:20 minute 123:23 minutes 151:25 mislead 71:4 miss 34:12 36:3 98:5 147:1 179:4 missed 71:13 179:10 180:17 misses 70:15 100:9 missing 69:10,11,13,14 76:24 94:4 missteps 54:18 mistaken 128:1 mix 29:19 model 101:15 moderately 171:2 modification 103:20 modify 118:25 119:4 Mogul 84:16,24 86:2 86:19 92:16 108:12 113:14 126:4,9,16 128:18 129:2 129:4,12 130:6 moment 49:23 89:11 96:19 102:11 104:9 109:3 116:25 money 31:6 47:12 63:19,23 64:2 64:3 75:8 76:2 84:8 188:15 monitoring 52:2 Monroe 4:5 month 32:15 84:20 87:4 92:25 110:8 113:24 159:19 165:2 169:22,22 179:6 monthly 109:14 144:1,7 144:18 148:3 148:6 164:14 164:16 months 25:18,18 29:2 61:11 65:5 75:5,10 90:11 91:21,22,24 91:25 93:25 95:4,5,10 97:3 100:22 100:25 101:12 101:16,17,20 101:23 102:1 102:2 108:24 114:19,23 115:1,1 117:25 118:6 120:9,14,17 120:20 137:25 145:24 150:14 151:4 179:5,7 185:11 mood 38:5

July 30, 2008

MOR 148:3 morning 8:20 152:22 154:11 158:22 160:6 178:23 181:6 188:2 most 41:16 45:1 47:13 60:25 61:17 67:20 96:3 107:9 109:2 116:7 122:16 140:13 140:16 142:10 142:10,14 146:4 147:1,5 159:5 160:3,9 161:22 move 54:15 122:24 122:25 149:12 moved 74:15 75:4 136:7 moving 56:2 much 11:22 12:2 17:6 29:16 30:14 36:10 45:13 48:22 54:15 59:5 62:13 65:9 71:14 94:4 108:8 109:20 109:21 110:12 133:22 141:23 159:9 164:6 171:3 180:18 multibillion 31:5 multiple 169:2

Trial 219 must 58:24 59:1 63:16 183:21 Mustang 51:20 myself 88:13 103:24 111:6,8 113:20 118:15 N N 8:1 name 83:9 90:5 127:8,10 136:14,15 144:8 155:19 named 85:13 87:25 names 88:14 Nathan 2:11,12 188:21 188:21 nature 175:19 nearly 68:16 123:22 necessarily 65:24 91:10 94:16 112:12 133:25 necessary 11:8 12:22 18:7 47:2 91:13 92:2 125:3 141:18 150:15 153:2 need 24:19 27:10 42:25 46:17 52:9 57:11,14 58:15 65:3 66:25 77:3,24 149:12 174:18 175:10 needed 37:9 47:5,7 50:21 62:1,2 75:10 76:10 76:11 needlessly 20:2 46:15 needy 16:15 negative 169:24,25 negotiate 38:6,12,14 56:11 59:18 67:1 negotiating 17:21,22 negotiation 67:5 negotiations 32:24 33:19 63:25 neither 28:23 154:15 net 99:15 never 18:7 22:24 26:10,11,22 33:14 38:23 56:5 71:9 73:2 113:11 149:8 169:10 172:22 184:19 new 2:6,6 3:7 10:12 54:12 54:25 60:10 62:18,20 63:2 72:25 99:15 116:10 166:11 news 15:22 nicely 123:14 nightly 188:6 nine 91:12,13,18,20 91:22 92:5,18 93:7,10 95:1 95:3,12 96:11 97:13,18 100:24 101:9 101:11,18 128:23,24 nobody 32:18 88:10 non-public 24:2 normal 59:22 106:1 135:22 175:25 normally 111:5 117:6 north 29:18,19 34:24 47:25 85:25 Northwestern 2:14 note 35:8 38:19 39:2,10 44:18 61:9 nothing 15:22 45:21 65:11 83:4 123:18 151:20 151:21 155:15 175:7 noticed 13:11 52:4 noting 169:20,21 notoriously

July 30, 2008

54:12 notwithstan... 74:17 112:10 November 56:23 162:16 163:18 number 7:3 8:4,18 9:4 9:14 13:4 15:17 16:8 19:10 20:3 25:5 31:17 36:6 43:20,24 44:20 51:2 54:10 69:18 79:13 84:9 114:8 115:15 118:21 126:18 131:19 133:3 134:4 148:15 148:19 180:8 180:9 numbered 9:12 19:15 25:4 29:8 numbers 10:24 14:11 26:25 31:20 42:3 43:8 62:8 74:18 94:18,23 110:1 123:6 131:23 133:1 138:8 147:8 170:12 181:13 181:19 Nurge 5:5 8:24 9:11 20:23 27:14 29:10 74:19 76:21 158:21 158:25 179:20 181:7 O

Trial 220 O 8:1 13:3,7 14:1 objection 6:2,3 75:21 objections 6:5 65:14,19 181:11 objective 140:12 objectives 40:14 48:3 93:18,21 96:19 112:25 obligations 66:15,16 150:7 150:11 observations 163:13 observed 24:8 obtained 182:21 obtains 182:16 obviously 13:21 49:7 86:11 166:14 168:18 169:20 169:22 170:14 177:6 180:5 occasion 142:17 occasions 141:19 occurred 53:19 116:21 140:3 occurring 69:20 occurs 106:1 OEMs 12:24 44:10 46:18,23,24 46:25 47:10 47:11 49:8 56:16,19,20 59:19 60:4,9 75:3 172:24 offer 34:19,23 35:6 35:14,15 36:1 36:5 38:17,23 41:5,16 43:13 45:6 48:11 61:22,24,24 62:9 64:7,7,8 64:25 65:1 74:9 154:24 155:5 offering 36:18 44:12,14 61:23 offers 62:15 offer's 35:2 office 8:17 16:17 56:22 89:10 144:4 159:24 159:25 officer 84:11,12 88:1 88:3,5,9,11 88:24 97:7 117:7 128:6 129:8 145:23 150:13 165:21 187:14 offices 133:16 official 188:9 officially 88:19 often 23:9 76:6 161:8 172:24 okay 24:18 25:7,8 26:13 29:1,5 32:11 35:5 38:25 42:8 43:23 44:9 66:10 71:15 72:25 90:2 102:18 105:12 105:20 106:9 107:2 108:20 111:13 113:10 113:11 116:13 117:2,22 121:2 122:23 124:19 128:5 134:2 137:12 138:19 149:21 164:14 167:21 169:3 171:20 180:12 181:16 182:19 185:18 old 101:2 once 57:10,15 58:15 103:22 139:23 ones 18:4 69:17 180:19 one-time 10:25 only 23:3,6 30:24 35:22 38:10 60:9 77:12 81:5 90:25 91:24 97:2 106:14 157:11 166:17 171:11 operate 48:6 126:12

July 30, 2008

operating 10:15 12:17 18:11 50:16 72:20 73:21 75:25 78:1 84:12 90:24 91:21 94:6,15 99:6 100:3,17 103:18,19 106:3 113:24 114:16 121:17 121:22 124:25 127:23,24 132:8 134:16 143:12 148:3 165:18 166:2 166:13 168:23 182:1 184:2 185:19,25 operation 134:22 137:16 operational 10:17 12:22 97:15 142:14 operations 10:10 11:9,13 11:15 12:4 17:10 87:13 95:24 96:5,23 128:11 132:21 136:11,13 140:20 143:15 159:2,7 160:14 162:24 163:6 operator 126:5 operators 140:9 opinion 66:13,18 73:10 79:6 115:23 141:8 opportunities

Trial 221 10:9,13,15 11:18 opportunity 50:8 51:1 113:15 oppose 130:4 opposed 115:19 131:13 131:20 optimistic 20:2,22 21:4 46:15 51:11 53:8,12 option 41:5,8,10 options 41:3,11 order 15:11 61:21 89:21 90:1,13 ordinary 106:7 144:21 organization 84:11 90:23 93:14 94:4,6 94:9,12,13,17 94:19,21 107:10 109:1 109:12 110:3 110:16,25 111:2 112:21 115:21 117:18 118:14 122:2 125:4,16 136:10,23 138:21 139:16 139:17 143:11 143:14 145:12 145:19 146:6 146:8 organized 163:7 original 29:22 55:2 69:7 91:3 101:22 168:11 originally 52:25 53:4 62:16 156:23 other 11:4,7,17 12:3 15:13 18:16 35:23 41:11 46:9 47:21 48:23 49:1,2 54:16 61:3 64:19 75:7 84:7 86:15 89:8 90:15 96:24 99:18 100:21 103:24 110:18 111:6 113:20 123:9 125:2 139:20 146:12 152:5 154:17 158:3 166:8,12,13 169:23 171:13 171:16 172:17 175:15 182:20 others 16:15 44:3 86:20 93:1 115:16 118:20 126:8 143:22 146:1,6,7 182:25 ourselves 49:7,15 65:4 outcome 189:15 output 72:24 outrageous 63:23 outside 79:10 95:19 96:6 106:7 over 16:11,13 18:15 20:22 21:4 39:4 42:5 59:17,24 114:14 123:2 169:22 171:24 173:10 176:17 177:9 overall 113:5 overhead 100:18 173:3,5 173:21,22,24 173:25,25 183:24 184:9 overlay 101:14 overly 79:8 overruns 54:14 oversaw 89:8 oversee 87:13 overseeing 85:15 127:23 128:3 overtime 52:18 174:25 175:1,2,6 176:3 overview 120:24 owners 40:2 O'Neill 152:9,16,18 153:24 154:25 P P

July 30, 2008

8:1 page 6:3 9:25 10:2 10:5 14:1,5 26:5 29:20 30:5,7,8,23 31:8 39:3,3 43:24 50:2 51:3 55:15 58:14 59:10 61:8 99:3,6 99:11,12 100:6,8 102:12 119:17 120:22 121:4 121:19 148:14 148:15 169:9 169:9,11 170:24 171:20 173:20,22 175:6,8,9 189:8 paid 57:2 paint 20:9 panoply 76:12 paper 114:22 146:21 par 36:15 39:9,10 paragraph 10:1,4,5,16 11:13 19:24 20:19 21:2 46:11 50:5 56:15 59:11 60:3 Pardon 24:24 paren 54:3 Parkway

Trial 222 3:6 part 42:22 92:15 93:15 98:3 99:11 112:23 122:7,12 125:20 130:20 145:10 159:8 163:24 164:11 165:15 171:9 175:22 181:14 participant 111:11 participate 111:5,9 participated 18:10 145:15 participation 118:8,12 particular 92:12 98:25 119:19 122:1 123:19 165:20 166:9 169:4 particularly 10:11 59:23 169:1 171:7 177:14 parties 11:7 61:23 154:16 189:12 189:14 Partners 97:8 partnership 84:7,13 97:9 parts 34:3 57:22 94:3 113:11 167:2 171:11 171:12,13 175:23 party 64:1,2 82:8 past 107:23 116:9 147:15,20 path 75:19 Paul 2:3 8:8 126:1 pay 44:14 47:1 payables 87:16 paying 35:23,24 76:7 188:5 payment 15:12 Pennsylvania 155:23 people 23:6 24:9 26:13 49:5 55:9 62:19 64:2 67:4 88:15 89:11 102:22 103:17 103:18,19 105:20 106:6 111:2 127:24 132:7 134:16 139:20 140:7 143:17,22 144:13,23 145:3,9,18 160:8 174:19 177:21 perceived 64:16 percent 30:25 31:4,14 31:15,19 32:3 32:5,7,7,8,9 32:12 33:17 35:6,7 39:14 69:11,12,12 78:4 114:11 114:21,25 115:4,8 133:22,25 169:24 170:1 171:24 173:11 173:12 179:11 percentage 31:1 114:8 170:12 171:1 172:3 perception 126:7,8 perform 186:18 performance 90:20,24 91:21 91:22 92:19 92:23,24 93:16 98:6 99:5,17 100:15 105:4 105:10 109:16 109:18 114:10 114:17 115:8 115:18,19 117:13 121:13 121:21,23 122:4,5,17 124:18 125:1 126:9 132:11 135:18 136:24 137:3 138:3 146:9 149:23 performances 99:22 performed 109:12 124:6 148:6 150:7 150:10 160:20 187:5 performer 122:1 performing

July 30, 2008

63:5 108:2,4 perhaps 73:17 76:8 96:8 116:7 119:3 149:11 157:2 161:14 period 52:6 75:18,24 88:5 94:19 107:24 112:2 114:14 159:17 161:13 169:7 185:9 periods 62:18 permanent 47:6 person 106:14 113:10 126:24 127:3 127:9,12,16 127:23,25 128:3 136:9 136:11,11 143:14 161:5 163:6 personal 68:8 personally 65:16 102:13 102:22 personnel 90:8 122:7 132:21 persons 23:3 24:1 person's 90:5 136:14 perspective 81:7 145:5 149:22 Pete 88:13 127:8,10 127:11 130:23

Trial 223 130:25 136:2 136:6 Peter 5:5,13 152:7 155:11,12,20 158:25 petition 158:18 phone 111:14,16 physically 162:15 pick 115:4 picture 20:10 114:19 piece 105:3 108:1,3 114:22 142:6 142:9,13,15 146:21 pieces 73:7 99:13 place 65:5 68:22 90:14,19 120:23 133:17 189:7 places 55:9 placing 60:6 plan 10:7 15:23 16:5,22 17:17 17:20,21,22 18:1,5,13,24 20:1 22:3,7 26:7 27:1,3 27:17 29:12 29:23 34:13 36:3 37:23 39:20,22,23 41:6 45:7,11 46:6,8,15,21 46:24 47:9 49:1,19 51:10 51:25 55:2,10 55:11 57:13 60:12 62:17 62:23 64:23 65:3,9 67:5,6 68:4,7,14 70:8,9,18,24 73:1,5,23 74:23 77:12 78:7,17,21,25 79:5 80:13 99:6 104:8 108:24 118:1 118:7 120:10 120:11 136:19 137:17,20,22 145:18 146:18 153:15,20 154:21 157:17 159:3 160:7 163:3 178:18 180:13,25 planned 52:25 110:17 planning 126:25 127:4 127:13 131:2 136:3,8 plans 23:2 50:17 62:18,20 67:1 68:4 146:7,15 plant 11:16 54:21,25 56:3 58:12 70:1 72:10 77:1 98:18 102:20,20 111:19,20,21 112:5 115:13 122:7,21 131:25 132:1 134:11,14,14 140:8 143:19 162:2,6,7,12 162:13,15 163:4,7,12,25 164:7 166:9 166:22 168:12 168:13 169:4 169:6 173:18 174:4,18 175:10 176:10 176:15,24 177:20,21,23 178:2,11 180:14 186:16 plants 16:12,14,14,21 54:11 57:23 58:1 69:6,8 70:5 71:8,17 71:19 77:5 113:4 126:13 126:15 133:6 141:12,16,19 146:25 148:12 148:19 162:21 163:18 164:2 166:11,12 169:2 180:16 185:19,23 plant-by-plant 50:21 59:4 70:18 116:1 plastics 10:11,18 30:17 30:22 31:2 32:11 52:19 69:6 76:1 94:7,16,19 106:22 107:10 107:14,21,25 108:5 109:1 109:12 110:3 110:10,24 111:2 112:5

July 30, 2008

113:3,5 115:21 117:17 118:14 122:2 127:17,20 128:3 132:20 134:15 136:10 136:12,23 137:2 139:16 142:6,19,24 143:1,3,7,13 143:15,25 145:12,19 146:19 147:1 148:19 159:13 164:2 179:12 180:18 183:9 184:2,5,10 platform 34:7 play 153:9,10 pleasantries 86:24 please 9:12,13,13 10:1 24:25 38:24 43:15 82:16,23,25 83:9 151:25 155:19 185:1 plot 160:7 plug 37:13 plus 24:17 25:12,17 25:21 26:7 27:1,3,16,23 28:21 29:12 30:1,11,17 32:8,19 34:13 36:2,15,20 39:9,10,11 49:19 51:10

Trial 224 57:2 68:14 70:24 78:7,16 78:21 79:5 91:12,12,13 91:18,19,20 91:23 92:5,18 93:6,9 95:1,3 95:4,12,12,15 95:20 96:11 96:12,17,21 97:13,18,19 99:9 100:18 100:24,24 101:9,18,22 102:8,15 104:5 105:15 105:16,18,22 105:22 106:5 106:11,15,18 107:3,6,7 108:8,22,24 109:5,22 110:17,21 112:11 113:22 117:9,25 118:7,11,15 120:3,5,10,10 120:16,19 121:9,10,13 121:14,24 124:16,16,20 124:21 125:2 128:23,24,24 135:20,24 136:6,19 137:17,21,23 138:8,15 141:2,11,15 144:22 145:18 149:15 150:9 150:14,19,25 151:2,11 178:18,19,21 179:24 180:13 180:24 185:4 point 24:21 26:16 47:9 54:19 57:2 58:22,23 59:2,3 70:16 71:14,17 79:14,17 82:4 82:10 83:20 96:20 105:14 106:2 107:8 111:15 117:15 145:22 160:12 168:17 172:4 points 15:20 91:15 Policano 156:13,16,23 157:7 Pontiac 55:18 pool 14:19,24 portfolio 126:13 portion 64:5 portions 159:11 pose 63:2 position 85:3 86:6,22 87:7 88:11,12 89:19,22 136:7,9 154:5 159:6 positions 84:6,24 87:23 156:20 possession 147:13 158:19 possibilities 80:10 possibility 28:2,6,10,14 80:12 possible 82:4 188:7 possibly 140:15 post 14:14 48:17 158:18 Post-Consum... 3:19 4:10 8:13 8:15 potential 20:11 37:7 46:5,6 51:15 61:13 62:4 64:20 79:24 potentially 42:23 power 80:24 practical 50:19 96:2 141:21 practice 128:18 129:1 142:1 precedent 57:6 predecessor 156:15 predecessors 156:22 predicated 10:8 predicted 51:10 preliminary 26:5 50:3 premature 48:5 premium 52:18 76:7 preparation

July 30, 2008

72:17 95:20 96:15 97:13 97:17 102:14 106:11 107:3 108:7 110:20 117:9 141:1 141:10,14 142:3 145:17 149:14 150:3 150:5,8 prepare 95:1,2 168:6 182:12 prepared 35:2 43:1 55:2 72:20 73:3,4 98:4 104:24 105:18 106:5 123:8,14,15 130:13 131:8 136:5,6 148:2 150:14 152:19 152:23 153:24 155:3 164:18 164:20 167:20 167:23 174:7 178:4,10 181:20 182:12 preparing 96:20 102:21 144:21 168:20 185:3 preponderance 53:18 69:10 present 12:13 46:24 presentation 119:22,23,25 123:17 125:19 125:20 138:15 146:11,15 presented 20:1 46:6,8 72:24

Trial 225 preserve 47:3 press 32:22 33:2,15 33:18 pressure 59:23 presumably 172:5 presume 95:14 111:14 pretty 11:22 17:6 33:4 48:22 95:22 108:8 173:6,7 179:11 previously 116:3,15,20,21 121:23 156:14 pre-petition 19:22 22:17 27:15 158:17 price 11:23 34:11 35:23 37:13 38:9,11 41:16 42:11 47:2 56:2 59:11,12 59:18 64:12 170:11,15 prices 22:16 24:6,15 59:21 pricing 55:17,20 99:14 100:11 primarily 106:20 primary 157:17 prior 68:21 88:2 92:14 108:19 167:9 Priorities 160:10 pro 170:12 177:8 probably 9:2,3 13:16 16:13 24:19 35:4 58:8 65:1,6 75:9 90:10 94:20 105:6 109:13 111:9 116:10 122:22 138:1 140:2 147:23 148:4 159:21 162:16 problem 41:22 46:23 47:23 55:6 68:2 72:7,8 146:25 problematic 55:20 problems 20:3 46:5,8,16 47:20 57:3 62:23 63:1 69:9 77:1,13 115:25 116:5 116:8,10,12 124:7 146:19 procedure 92:13 proceed 8:22 82:21 152:11 154:14 proceedings 85:6 152:20 188:24 process 19:8 20:8,21 21:5,15,16 48:9 49:6 61:10 63:24 66:2 67:11 75:4 77:4,11 90:19,22 91:8 91:11,16 92:3 93:12 95:6,7 95:9,23 96:1 96:4 98:10,11 98:16 99:24 101:12 102:17 102:25 103:2 103:10 106:2 108:13,16,18 113:7,19 118:9,15,16 118:25 122:11 122:24,25 125:15 128:13 129:1,6,11 130:5,20,22 130:23 131:4 131:15,20,21 131:25 132:7 133:4 135:16 135:19,21 137:16 138:25 140:6,7,13,23 144:2,4,10,11 149:20 150:18 165:16 166:1 171:6 173:2 186:5 processes 85:20,22 134:6 produce 26:14 140:15 140:18 173:1 175:23 produced 186:7 producer 135:4 producing 52:4 product

July 30, 2008

55:21,24 135:10,11,11 production 51:18 56:3 172:24 products 52:3 54:12 60:10 157:15 professional 66:17 75:8,23 158:11 182:1 professionals 65:24 profile 157:1 profit 69:17 132:1,6 profitability 62:3 79:24 profitable 58:8,9 profitably 126:12 Profitt 136:15,17,22 143:16 145:25 146:17 151:9 151:10 program 14:3 55:18 57:21 166:11 programs 51:18,24 54:1 54:2,6,8,10 projected 25:19 30:10 32:12 55:7 59:16 61:12 101:1 projecting 68:17 projection 37:6 72:4 185:12

Trial 226 projections 17:19 19:9 20:17,22 21:5 21:25 22:19 22:24 23:1,19 24:5,14 35:10 37:15,16 47:4 48:25 62:6 63:20 77:22 80:23 128:11 140:14,17 proper 73:11 79:7 149:6 150:2 property 135:12 proposed 23:10 75:20 182:4 pros 57:12 proved 70:3 provide 103:3,6,8 161:7 provided 38:4 66:9 178:25 provider 135:10 public 80:20 83:16,25 publicly 22:24 published 81:1,4,10 105:18 109:5 109:7 187:12 187:17 pull 37:13 172:8 173:18 174:1 pulled 123:19 pulling 172:5 purchase 34:11 purchaser 42:23 pure 40:24 purpose 118:8,12 148:13 163:21 168:20 purposes 90:25 148:2 push 104:18 pushed 103:12 put 14:19 61:14 89:25 90:18 92:13,17 105:15 114:15 118:11 133:7 133:16 148:7 149:22 166:25 177:20,22 putting 58:10 P.C 2:12 P.L.L.C 3:14 4:4 p.m 82:19 152:1,3 188:25 Q quality 135:4,9 quantified 34:18,23 quarter 69:15,22 92:19 quarterly 91:7,16 92:2 96:16 108:21 question 21:2 24:11 66:8 78:5 101:5,8,19 104:19 105:8 105:25 113:6 113:8 115:22 118:3 145:6 147:17,19 149:25 150:20 151:8 167:6 183:25 186:22 188:12 questions 18:5 51:13 72:11 76:14 76:15,23 78:11 113:18 115:2,15 118:21 126:3 140:2 149:7 153:5,15 154:1,9,17 155:6 163:13 175:11 181:7 187:21,24 quickly 172:7 quite 95:22 107:7 112:16 159:9 172:14 quizzed 18:7 R R 2:3,11 8:1 raise 82:25 145:21

July 30, 2008

raised 84:8 raises 174:23 raising 38:9,11 63:7 ramping 58:9 rampup 53:23 ran 130:22,23 136:22 137:15 143:17 149:19 149:21 range 21:25 22:6,12 63:10 80:10 ranged 27:5 Rantoul 180:22 rata 170:12 rate 173:6,7 174:13 rates 52:17 53:3 76:10 rather 37:23 59:8 110:11 113:1 rationaliza... 125:6 rationalize 10:10 11:14 12:4 rationalizing 11:13 rattling 88:14 raw 28:11 123:16 RCX-BY

Trial 227 5:9 RDX-BY 5:8 reach 53:15 160:15 reaction 19:25 46:13,14 124:15 138:7 179:1 read 10:1 11:14 21:10 46:11 51:8,11 54:22 reading 13:23 14:18 30:8 31:12 real 48:8 63:20 69:16 174:2 realistic 67:17 73:24 74:16 77:22 realize 96:15 really 22:4,9 24:5 26:22 27:10 32:15 33:25 37:1 63:3 67:9 76:10 96:4 103:12 106:13,15 112:16 120:15 131:12 144:3 144:11 153:6 159:1 162:9 163:16 164:3 166:17 169:15 173:4 177:24 180:25 reason 12:20 92:1 107:13 133:15 138:23 180:25 reasonable 17:19 73:7 118:22 129:19 140:14,17 150:1 167:1 174:24 reasonably 79:11 rebuilding 125:7 recall 22:22 30:2 32:17 33:5 51:22 56:4 70:23,25 87:4 119:9,11,16 127:10 147:25 180:20 recalling 55:23 receivables 87:16 receive 17:6 104:17 164:21,24 received 17:2 162:2 179:25 180:12 180:24 receiving 83:19 Recess 82:17 recognize 21:8,13 167:18 recognized 26:24 37:8 recollect 107:5 127:25 128:2 recollection 32:25 34:15 92:24 94:3,14 94:18 97:3 105:10,19 106:14 109:2 109:4,11,17 111:25 112:7 122:18 123:12 125:22 127:19 128:4 129:18 129:25 130:3 130:8 142:21 146:10 recommendation 21:20 reconvene 82:16 188:2 record 82:18 152:1,2 154:5 181:15 188:22 records 116:15 recovery 40:25 76:3 RECROSS-EXA... 76:19 red 69:25 REDIRECT-EX... 45:22 reduce 174:3 reduced 183:10,11,21 184:7 reduction 102:6 137:22 reductions 99:17 reengineering 77:4,11 186:5 refer 45:24 58:16 94:8 reference 24:22 46:10

July 30, 2008

50:2 51:3 52:14 54:1 55:15 56:8,10 56:15 57:11 58:14,15 59:12 61:19 63:1,17 91:19 referenced 46:22 49:21 63:14 referencing 53:8 55:17 referred 95:16 97:15,20 102:11 referring 64:4 104:13,14 131:12 refers 64:6 refinance 93:13 125:15 reflected 138:21 reforecast 24:18 25:13,22 27:24 30:1 100:21 135:25 149:15,18,25 reforecasted 149:19 reforecasting 129:11 130:5 135:19 reforecasts 128:19 refresh 147:21 refused 56:10 regard 153:13 regarding 9:2 46:20

Trial 228 61:12 96:24 registered 83:17 regroup 160:18 regular 128:19 129:11 130:5 134:22 regularly 180:5 relate 153:6 related 135:18 189:11 189:13 relating 56:2 relationship 12:24 60:24 129:21 relative 69:7 70:19 relatively 174:13 release 32:22 33:2,15 33:19 167:10 relevant 159:5 160:9 reliant 145:2 relied 145:18 161:1 184:15 relief 55:17,20 rely 145:8 relying 144:22 remainder 90:24 101:3 139:14 remaining 100:22 101:20 remake 77:20 remember 33:10 107:6,11 110:9 112:9 116:11 126:17 130:14 142:8 148:9,25 149:2 remembering 145:22 169:9 Renaissance 3:15 rent 174:4 reorganization 17:21,23 85:2 86:8 reorganize 112:22 124:22 replacements 55:4 report 9:21 10:2 11:21 12:6 13:7,12 19:14 19:17 27:14 28:2 86:6 147:12 148:3 149:1 153:23 154:2 160:22 178:24 reported 10:24 29:20 31:3 49:5 78:13 128:15 128:16 131:3 137:8,13 164:12 189:5 reporter 188:9 189:1,4 reporting 148:2 reports 13:13 17:7 19:10 24:3 147:14,20 164:8,10,15 164:16 184:2 report's 154:6 representative 152:8 represented 40:17 137:23 representing 54:2 189:13 represents 14:13 100:6 reputation 126:5 request 37:22 161:7,8 161:9 188:14 requesting 161:16 requests 161:10,13 required 15:14 58:12 requirement 182:10 requirements 60:6 research 188:13 resource 55:3 resources 177:12 respect 18:5 38:22 47:20 57:17 57:18 58:16 103:5 110:24 133:14,19 146:20 155:5

July 30, 2008

163:14 183:7 respected 126:8 responded 38:23 response 20:6 36:12 39:7 76:22 181:6 responsibil... 84:25 128:10 156:21 responsibility 17:16 56:25 73:6 128:12 161:4,6 responsible 77:9 85:21,22 102:16 122:3 126:24 127:13 132:8 137:4 143:6,15,23 150:4 rest 93:4 96:14 123:1 restricted 23:4 24:1 restrictions 24:7 restructure 11:10 restructuring 10:19 11:3 67:25 165:21 187:13 result 11:23 12:2 29:25 53:1 76:6 78:11 110:15 116:2 117:22 151:13 151:17 resulted

Trial 229 52:17 resulting 124:25 results 25:18,19 28:18 28:19,24 29:6 31:8 32:18 61:13 79:10 101:15 123:1 144:7 151:5 178:20 retained 83:21 152:25 158:16 retention 78:10 retribution 61:7 revealed 124:7 revenue 31:2 51:16 97:24 114:6 120:1,25 121:8 133:22 134:1 162:23 169:6 170:13 170:22,22 173:15 revenues 51:7,9 103:5 review 46:4 91:6 96:17 103:19 103:22 117:23 119:1 139:24 139:25 reviewed 27:7 65:18 72:23 139:15 reviewing 10:14 reviews 96:16 103:9 revised 48:17 51:4 61:9 105:15 revolver 63:9 rework 53:2 re-laid 58:12 Rhodes 1:10 right 13:24 16:5,9 17:13 18:18 23:5,15 24:2 25:20 26:8,14 26:19 28:24 29:23 30:18 32:2,4,13 34:3,8,14 36:13 38:9 39:20,24 40:6 40:21 41:6,9 42:4,12 43:2 43:21,25 44:3 44:12,21 45:7 45:18 55:9,9 68:23 70:10 79:13,18 80:13 81:4,7 82:25 92:22 94:24 105:11 111:21 124:11 127:2 131:7 132:25 139:21 140:15 145:20 148:11,15 182:17 185:13 right-hand 99:10 121:18 ring 134:21 135:15 rise 104:19 115:2 123:17 risk 26:25 27:3,4 39:15 51:15 51:24 55:11 87:20 89:17 risks 15:23 16:1 27:23 28:1 29:12 RMR 1:21 189:22 road 65:5 80:2 141:23 robust 118:18 role 89:6 110:20 153:8,10 158:22 roles 67:15,16 89:15 rolls 131:19 rollup 34:3 50:21 123:5 Ronald 4:3 8:12 room 111:18 146:1 rose 4:3 8:12,12 73:20 103:23 139:24 188:4 188:14,18 Roseland 3:7 Ross 32:22 33:25 35:2,14 39:8 40:4,11 41:5 41:15 42:11

July 30, 2008

42:22 44:9 45:5 62:7 64:6,17 65:8 71:12 75:1 179:18 Ross's 43:13 routine 108:8,13 RPR 1:21 189:22 rules 154:7 run 75:23 89:11 96:1 126:12 126:12 128:13 130:19 144:3 173:6,7 running 14:11 71:9 136:24 137:2 runs 63:3 S S 8:1 salaries 174:4 sale 10:8 20:21 21:5 61:10 64:12 sales 20:8 21:14 63:23 95:25 114:8,11,21 114:25 115:4 115:9 169:12 169:13,15 171:1,25,25 Samuel 3:12 8:6

Trial 230 sat 111:10 117:11 123:20 129:19 satisfied 141:4 satisfy 118:15 save 188:15 savings 11:17,17 12:3 12:8,17 16:8 16:17 28:7 31:10,14,19 31:23 32:6,12 52:25 53:9,19 53:23 72:7 76:25 104:7 104:16 163:23 163:23 164:1 164:4 172:1,5 172:18,19 173:17,24 177:1,5,7,11 177:13,17 185:22 savings/man... 52:13 saw 26:11 77:14,18 147:23 saying 24:12 67:7 113:10 131:22 says 13:24 27:19 31:17 43:24 scenario 42:16 schedule 112:13,14 174:21 school 83:22,23,23,24 scope 87:14 Scott 152:15 scrap 52:17 53:2 98:7,9 163:9 174:7,10 175:24 176:5 scrupulously 24:8 Seabolt 152:14,15 154:18,21 seasonality 169:21 seating 158:5 second 14:1 20:5 24:18,25 25:3 27:10 29:7 39:2,4 42:14 42:15 46:10 46:12 50:4 53:14 69:20 75:12,24 94:7 section 50:1 52:12 54:20 57:9 59:10 119:15 121:5 sections 62:25 sector 157:20 secure 49:3 102:24 secured 19:19 22:17 27:15 47:19 102:19 158:17 securing 53:10 securities 23:5 24:15 49:10 security 72:1 see 14:5,9 20:3,11 24:1 31:3 32:5 43:10 50:21,23 59:2 59:6 68:2 70:19 77:13 77:17,22 93:6 93:9 148:21 150:17 163:10 166:6 170:25 174:22 177:6 seeing 58:1 148:9 149:1,3 seen 13:22 78:9 119:19 147:14 147:20 148:23 149:8 169:10 174:22 segment 100:15 segments 100:17 self-generated 52:8 sell 37:23 48:4,10 61:22 selling 23:9 40:10 48:4 senior 67:21 103:25 106:3 123:9 128:2 140:1 146:12 sense

July 30, 2008

53:20 64:8 142:23 166:24 176:3 177:11 178:3 sensitive 23:24 sensitivity 26:6,9 sent 26:15 71:18 148:8 sentence 20:5 21:11,21 46:10,12 47:22 50:5 51:8,12 sentences 54:23 separate 16:8 43:25 127:16 132:1 132:4,6 September 19:18 48:13 84:18 87:6 127:2 169:23 170:1 sequencing 171:10,12,15 series 163:25 service 76:8,8 85:23 85:24 services 2:9,18 66:9 76:12 85:22 87:13 89:17 157:17 187:5 session 8:4 140:5 sessions 122:9 set

Trial 231 21:25 63:25 67:3,22 90:8 90:18 131:22 132:5,16 140:14,17 175:9 187:12 187:17 189:8 seven 13:4 29:20 112:17 several 52:19 61:11 77:4 157:14 shape 93:1 share 14:23 20:19 21:2 shared 85:23,23 87:13 89:17 sheet 35:17 36:25 38:4 61:15 shifters 158:6 shocked 71:12 179:2 shocking 179:11 short 82:4 shortfall 110:10 121:16 Shorthand 189:4 shortly 87:1 90:11 109:8 shouldn't 13:23 show 94:25 169:18 170:20 171:18 173:23 showing 170:10 shows 120:1 169:6,11 169:12 171:22 shutdowns 52:9 shutting 61:5 side 10:11 121:18 sign 23:9 62:10 significance 162:22 170:6 significant 10:9 110:11 171:22 172:18 176:18,25 significantly 59:21 171:3 signing 64:23 similar 60:22 77:13 91:23 161:3 165:7 166:4 173:23 174:20 174:25 similarly 171:21 172:2 176:9 simple 171:5 simply 96:12 sir 9:13,15 19:15 27:11 65:14 151:24 181:24 sit 82:24 103:1 104:22 123:8 132:18 146:1 166:21 sitting 129:25 165:16 situation 55:23 59:20 six 43:24 44:22 61:8 68:21 91:12,12,19 91:19,23,23 91:24,25 105:16,16,18 105:18,21,22 106:5,5 107:3 107:3,6,6 108:22,22 110:17,17,21 110:21 112:11 112:11 113:21 113:22 114:18 114:23,25 115:1 117:9,9 117:25,25,25 118:6,7,7,11 118:11,15,16 120:3,4,9,9 120:10,14,16 120:16,17 121:9,9,13,13 124:16,16,21 124:21 125:2 125:2 128:23 128:24 141:15 141:15 150:14 150:15,25,25 151:11,12 179:24,24 180:13,13,24 180:25 185:3 185:4,11 six-month 114:14 slide 99:3 100:13

July 30, 2008

104:10 121:6 slightly 94:21 small 53:6 94:9 156:8 smashed 29:2 Smith 96:8 106:13 Smith's 140:25 soft 94:8,11,20 107:18 108:6 solely 37:7 solicited 96:7 Solstice 55:18 56:11 somebody 62:6,11 somehow 49:15 someone's 170:9 somewhat 55:22 118:24 122:14 139:1 171:2 somewhere 105:5 sooner 113:1 sorry 10:3 29:9 53:8 77:15 117:4 119:13 127:6 167:7 183:23 sort 29:2 33:21 38:19 52:7,10 57:25 58:13

Trial 232 59:8 75:9 91:23 99:25 106:1,7 121:20,22 123:16 135:11 140:4 174:10 sorts 110:25 117:16 sounds 104:12 source 60:16 south 85:14,16,17 180:7 SOUTHERN 1:3 Southfield 2:15 so-called 70:8 speak 50:15 speaking 108:25 139:20 153:17 Spears 88:14 127:8 130:24,25 136:2,17 151:16 special 10:25 110:14 specialized 23:13 specific 51:2,21 54:6 57:21 60:17 94:2 111:24 115:6 122:17 123:12 125:21 129:17,25 142:21 146:2 148:9 149:1 161:4,6 specifically 87:15 89:4 93:16 94:17 105:8 106:22 108:25 110:23 114:3 117:10 118:13 125:1 135:17 183:7 specifics 104:25 116:11 153:6 speculation 74:3 speed 63:5 spend 107:9 spending 64:2 87:19 159:19 spent 72:10 75:8 123:23 spoke 65:19 97:9 100:3 sponsored 42:21 80:13 spread 16:11,13 spring 146:14 stabilize 12:23 56:24 staff 8:18 26:10 103:1 106:11 106:20 137:15 143:20 171:16 stage 108:21 stakeholders 119:23 125:19 146:13 stalking 61:15 stand 14:12 standalone 10:6 40:11 42:16,21,21 45:10 46:20 65:3,9 74:24 93:13 112:22 124:23 125:16 standard 187:13 standards 59:14 66:17 150:2 187:12 187:17,18 standpoint 53:21 108:1 143:12 start 53:21 59:24 69:19 71:19 105:7 113:9 120:23 135:19 started 26:10 92:17 107:9 112:7 180:16 starting 93:1 starts 43:15,20 46:12 143:9 state 83:9,14,24 155:19,24 159:7 189:4 statement 20:14 121:7 132:2 STATES 1:1

July 30, 2008

static 170:23 status 83:17 stay 86:19 steadily 56:10 steel 158:2 steering 19:19,21 65:19 stenographic 189:6 step 40:25 81:24 151:23 187:25 steps 160:23 Sterling 180:21 Steven 1:10 stick 122:1 stop 13:23 80:25 81:4,10 strange 74:13 strategic 20:1 46:5,8,23 47:9 49:1 stream 60:11 125:9,13 streams 125:8 Street 1:18 4:5 stretch 63:11 strike 115:24 179:14 187:10

Trial 233 string 39:3 strong 52:7 structure 57:1,25 88:25 103:6 114:4 120:2 170:24 structures 97:25 158:1 Studies 84:4 studying 115:14 styled 95:3 submitted 153:25 subpoenaed 82:13 subscribed 189:16 subsequent 119:16 subsequently 156:13 158:18 substance 10:17 substantial 10:13 126:13 substantially 56:23 111:9 126:18 subtracting 138:2 success 30:21 44:19 successful 10:19 90:2 successfully 11:9 sufficient 182:15 suggest 24:13 184:3 suggested 37:5,10 suggesting 186:10 suggestion 154:24 suggestions 161:20 suitable 17:19 Suite 4:6 sum 167:2 summarize 73:10 summary 181:21,24,25 summation 160:19 173:5 summer 162:10 supplier 84:21 135:7 suppliers 56:18 59:19,20 171:13 supply 47:3 57:4 60:12,16 135:2 support 11:3 22:4 96:7 111:2 143:22 153:1 158:1 supportable 17:18 150:1 supported 103:19 106:20 supporting 48:19,21 50:7 127:25 surcharges 10:25 sure 10:3 17:18 23:18 25:1 33:3,4 57:1 57:24 61:21 67:2 73:6 75:5 101:4 104:21 107:4 116:6,9 118:2 125:22 132:18 139:5 145:25 151:10 154:20 157:11 159:4 160:5,7 166:3 168:16 178:2 186:18 187:22 188:11 surprise 55:22 surprised 71:7 122:19 surrounding 85:8,11 96:3 146:2 susceptible 51:17 sworn 83:3 155:14 SWR 1:8 synergies 34:6 system 144:8 168:10 systems 84:9,19 157:16 157:18 158:5 158:5,5 T table 15:9 36:2,5 40:5 67:3

July 30, 2008

117:11 take 38:3,18 41:23 54:3,13 55:5 57:12,18 58:3 64:9 67:8 81:19 82:4 87:7 93:1 99:2 100:23 110:14 112:3 119:3 125:7 129:22 139:18 140:5 151:24 154:5,25 171:5 179:16 180:13 taken 67:19 82:17 86:22 89:4 148:5 takes 53:22 124:24 147:24 172:25 176:19,21 taking 95:6,7 138:2 talk 24:17 49:18 54:20 56:15 57:13 59:11 60:4,5 64:19 66:4 98:21 129:12,15 133:4 142:18 160:16 177:21 177:23 talked 104:10 117:12 148:13 178:11 178:13 179:20 180:4 talking 22:22 54:9,21 60:4 80:21,22

Trial 234 123:24 128:22 tandem 61:2 tangentially 143:20 target 94:21 targets 94:15 team 14:19 15:13 17:2 18:11 42:2 71:18 97:12 103:25 106:4,25 107:23 111:18 111:20 113:21 115:16 123:10 161:3,3 164:12 176:21 tearing 42:3 technical 58:10 Technologies 84:21,22 telecommuni... 156:10 telephone 8:18 9:3 86:23 122:8,22 telephonic 160:21 television 84:9 tell 26:17 29:7 30:3 36:10 43:9 60:8 64:15 66:21 72:1 81:9 84:24 101:5 104:3,23 118:9 123:24 133:21 145:19 158:23 165:24 167:22 telling 22:5,8 74:18 78:1 130:1 tells 173:13,14 templates 103:14 132:17 133:4 temporary 28:17 ten 151:25 tend 175:24 tended 61:1 tenths 30:25 31:4 term 11:12 35:17 36:25 38:4 41:21 48:7 59:17 61:15 63:8 108:9 135:15 terms 38:12,15 41:14 46:4 47:2 62:9 120:24 134:2 154:13 170:6 178:14 testified 12:12 17:15 22:15 29:1 83:5 155:16 184:19,25 testifies 9:5 testify 83:3 155:7,14 158:22 185:15 testimony 130:10 142:6 181:5 182:24 TEV 35:19 Thank 9:7 65:10 81:23 82:1 124:12 151:24 155:8 188:18 themselves 61:3 71:9 103:15 theory 184:16 thereafter 87:1 109:8 thereof 78:25 thereupon 83:2 155:12 thing 9:1 44:9 45:1 45:6 52:11 56:22 58:13 58:24,25 75:9 116:24 166:24 172:22 178:15 178:16 185:7 things 16:22 35:24 50:24 52:1 53:4 54:16 64:1 65:22 68:10,15 69:25 72:12 74:7 77:17 80:16 89:24 108:22 133:7 160:9 161:14 166:23 175:15 think 9:2 13:3 15:14 16:2,7,10

July 30, 2008

17:10,17 20:24 21:9,12 26:18 33:24 34:11 40:20 40:21 43:12 43:14 44:25 48:20 49:14 51:16 64:18 66:22 67:6,12 67:14 68:17 68:22 69:24 71:5 72:9,9 73:5,15 74:4 74:7,20 75:3 75:14,16 78:3 80:8 92:20 96:18 99:23 102:11 104:12 105:2 106:4 113:8 115:22 118:21 119:2 126:11 129:21 132:10,14 138:1,5,22 143:2,4 147:3 153:23 154:11 161:14 165:1 172:7 173:16 178:24,25 181:5,22 183:18 185:2 third 43:2,16 76:5 107:20,20 THOMAS 2:11 thought 12:8,16 22:16 24:23 32:21 38:6 48:21 53:23 55:1 68:11 70:5 71:10 75:14 79:12,21 80:5 80:6,23 81:8

Trial 235 98:8 104:17 126:10 130:10 145:20 160:23 180:7 thoughts 26:21 threatening 33:13 three 16:21 30:25 31:4 41:8 42:10 43:18 51:23 60:24 75:20 84:2 85:13 90:10 91:12,13,14 91:18,20,20 92:5,18 93:6 93:9,25 94:5 95:1,2,11,12 96:11 97:7,13 97:18 100:2 100:16,23 101:9,18 112:18 127:20 127:21 128:23 128:24 135:8 143:17 151:25 156:7 171:20 177:15 threshold 37:10,11 throw 53:1 throwing 67:6 thrown 175:22 Tim 166:4 180:5 time 11:20 21:24 22:21 24:14 27:8 28:20 32:19 34:19 35:15 39:17 39:18 41:12 47:9 48:8 52:6,23 54:16 55:1,5 56:6 59:14 60:17 62:18 64:21 68:13 70:16 70:22 71:17 71:24 72:10 75:18,24 78:7 79:4,20 83:20 85:4 86:14,21 86:21 87:8,23 88:2,5 89:14 89:16,20 90:17 91:15 91:24 92:9 94:20 95:8 97:5,10 101:13 103:6 105:13,14 106:2 107:8,9 107:24 108:14 109:6,8,25 110:9 112:2 112:20 114:14 124:5 126:23 127:11,15 135:5 136:2 141:23 144:5 145:23 150:24 151:1,8 154:11 161:13 162:11 165:7 168:22 172:25 173:19 176:7 186:6 189:7 timeliness 144:16 times 92:3 139:5 timetable 103:7 timing 17:4 172:6,19 172:20 Timothy 5:10 82:23 83:1,10 title 189:8 today 9:5 26:18 82:14 145:16 168:2 together 29:3 67:5 92:17 97:20 97:21 105:15 107:1 123:20 139:22 166:25 177:20,23 told 20:15 26:20 33:11 37:22 38:3,8,10 39:18 40:8 42:19 60:18 60:19 81:2,14 81:17 144:23 145:3 Tom 188:21 tomorrow 8:20 9:6 152:22 154:10 188:2 ton 176:23 top 14:8 131:13,20 131:22 134:8 170:14 183:13 top-down 58:22 total 14:7,16,21

July 30, 2008

15:1 35:14,17 35:21 102:6 touch 86:19 tough 48:8 tougher 53:3 79:22 town 153:1 165:11 Toyota 176:8 track 59:7 trading 22:16 23:4 24:6,15 80:20 traditional 88:23 transaction 10:8 63:4 transcript 189:9 transcripts 188:6,8,10 transition 54:5,7 transitioned 156:8 treasurer 87:2,9,11,12 87:24 88:21 89:14,16 126:21 137:8 treasury 87:14 89:9 treat 132:5 155:2 treatise 184:14 treatment 44:11 tremendous 42:2 60:2

Trial 236 Trenary 5:10 82:12,23 83:1,10 126:1 166:4 178:10 180:5 181:2 185:3,6,10 Trenary's 181:4 trend 162:24 169:12 169:14,20 172:15,16 173:23 trending 180:7 TRIAL 1:12 tried 115:17 trigger 37:9 38:20 trim 94:8,11,21 107:18 108:6 trouble 75:2 troubled 68:6 158:8 trucks 171:17 true 22:23,25 23:16 77:2 78:4 189:9 Trust 3:19 4:10 8:7 8:13,15 82:22 155:10 truth 83:4,4,5 155:15,15,16 try 16:25 73:10 78:24 80:12 81:5,10 134:21 149:21 176:25 184:3 trying 20:24 42:10 54:14 58:23 59:1,8 71:1 77:18 93:12 135:14 144:16 147:21 161:18 161:21 turn 9:13,25 19:13 27:13 34:25 38:24 43:23 49:22 55:14 100:7 148:14 turnaround 10:17 12:22 turned 100:24 176:17 turnover 166:10 two 15:16 20:11 29:2 41:5 53:6 54:23 60:3 67:20 69:8 75:20 76:4,18 84:7 84:17 85:13 90:10 97:7 98:14 101:25 106:6 108:24 110:1 136:16 145:24 150:14 151:4 156:14 159:21 170:25 171:7,24 175:4 177:11 179:7 182:3 two-minute 160:3 type 177:19 178:5,8 178:14,14,16 types 133:23 typically 40:22 72:22 134:17 160:5 160:12,20 161:1,7,19 162:20 171:14 177:22 U ultimate 44:19 76:3 180:9 ultimately 10:23 16:6 17:5,12 41:24 49:4,11 50:11 50:16 57:15 68:7 77:6 95:1,3 161:25 163:24 165:22 167:5,12 179:23 Um-hum 147:11 unable 12:7 80:17,19 81:3 unacceptable 151:14,17 unachievable 186:20 unadjusted 183:12,14 uncertainties 64:25 uncomfortable 66:1,5 under 94:20 99:5,21 101:24 102:22

July 30, 2008

108:2,4 109:12,16,18 117:25 118:6 119:4 120:9 121:21 122:1 122:3,5,16 147:13 undergrad 156:6 undergraduate 83:23 156:5 understand 17:1 22:11 68:8 76:22 78:18 97:23 101:4 111:4 112:25 113:21 114:1,12 115:17,20 118:2,13 138:17,18 152:19 162:23 162:25 163:2 163:6 166:13 166:14 170:8 170:17 172:7 174:3,15,17 175:13,14,16 175:18 176:10 176:19,20,22 177:10 understanding 50:3,24 56:17 71:16 72:16 72:19 105:25 150:12 164:13 165:11 understands 139:6 understood 15:20 16:2 143:2,4 165:25 undertake

Trial 237 92:4 111:3 undertaken 96:4 98:17 118:16 undertook 108:18,20 undone 63:16 unfavorable 121:12 unfinished 13:21 unhappy 73:4 74:11 UNITED 1:1 University 83:14,15,25 155:24 unknown 12:1 unnecessary 187:6 unrealistic 46:18 47:23 63:14 70:9,14 73:13,14 75:14,15 unsecured 46:19 47:22 63:15,18 unusual 117:1,1,5 179:4 188:7 Unwovens 157:16 upper 121:5 169:20 use 17:20 20:16,21 21:4 62:7 80:24 103:14 123:15 133:14 135:14 169:15 178:1 188:8 usually 61:4 utilized 149:14 168:6 U.S 1:17 56:4 159:12 V vacant 90:10 validity 150:20 value 10:8 14:8,14 14:17,21 15:2 15:6,8,9 20:8 21:15 34:19 34:23 35:3,14 35:18,21 38:6 41:24 46:20 47:25 63:14 80:2 values 14:17 48:6 variable 169:16 173:3,5 173:21 variance 99:13 109:20 121:9 variances 148:20 various 84:5 88:8 89:12 99:21 101:25 104:20 105:1 125:8 132:19 178:11 veracity 78:25 verbal 161:9 versus 166:7 173:11 vet 17:17 18:1 77:13 vets 67:21 vetted 165:22 vetting 165:13,25 167:4,9 Via 157:16 viability 10:6 view 21:3 57:2 63:24 64:7 72:3 77:9 91:1 96:20 124:21 138:14 138:17,20 139:14 163:4 166:23 187:1 viewed 39:22 41:15 views 38:6 79:9 81:19 136:23 violation 33:9 66:14,15 66:16 Virginia 159:16 virtue 47:12 vision 18:15,16 visit 141:11,15,19 162:15 163:17 180:14,19 visited

July 30, 2008

164:2 visiting 180:16 188:9 visits 163:20 vis-a-vis 115:1 Vizzini 26:15 Vizzini's 26:21 vocal 73:18 voice 27:10 volume 9:12 19:14 25:4,25 26:1 29:11,17,18 29:19 35:1 43:18 51:15 52:7 147:8 171:17 volumes 28:3 51:23 voluntarily 8:20 vs 1:8 W W 1:10 want 9:4 14:3 40:21 43:23 64:21 65:4 67:18 72:2 76:21 80:15 103:2 116:24 119:18 139:5 145:21 147:6 148:11 155:1 170:8 170:16 173:17

Trial 238 174:2,15 175:3,13,14 175:16,17 176:1,9,12 177:9 188:22 wanted 8:21 33:12,25 34:11 37:3 39:1 42:20 43:10 44:10 45:5,6 47:1 48:3 60:12 76:10 80:24 89:25 112:14 112:25 161:23 161:25 181:15 warn 52:20 warnings 23:23 warts 67:8 wasn't 10:22 12:18 13:18 37:25 38:8,10,11 44:14 48:16 56:25 67:19 69:8 71:7 72:7 76:9,24 122:7 138:17 141:18,21 170:21 186:7 wasteful 187:6 way 13:11 23:11,12 33:7 35:11 37:12,25 39:23 43:16 44:11 47:10 49:15 75:22 75:24 76:5 79:1 80:9 92:25 99:24 101:7 102:25 103:2,12 105:2 109:23 113:7 114:6,9 129:3 131:19 132:10 133:17 138:6 145:1 153:1 161:20 166:16 182:20 184:17 186:11 ways 75:20,20 91:5 182:4 week 12:6 86:15 112:17 159:20 165:12 weeks 33:22 68:21 109:9 112:18 123:3 167:24 168:2 well-run 94:13 went 64:1 145:14 156:10 175:5 175:6 177:23 180:21 181:7 weren't 16:12,18 29:13 32:6 37:16 69:10,19 70:5 80:18 116:17 164:4 181:3 West 1:18 Western 157:15 we'll 62:7 154:21 169:18 we're 20:24 25:25 71:16 101:1 124:2 152:22 176:2 we've 82:7 123:21 145:15 156:24 156:25 158:21 188:7 whatever 64:11 160:17 Whenever 107:14 whereby 129:22 whether 18:15 33:7 48:6,9,25 77:25 116:19 129:13 147:19 151:10 162:25 163:1,3 166:10,10 171:17 174:24 175:18 176:13 176:13,14 177:10,11 182:21 whoever 111:19 whole 21:10 66:2 75:4 76:11 80:16 83:4 89:4 137:21 155:15 wholesale 77:4 Why's 179:3 widespread 57:3 Wilbur 32:22 62:7

July 30, 2008

64:6 179:18 willing 38:14 wind 40:1 wishes 152:10,10 within 59:17 87:14 94:6 95:21 103:16 107:17 139:17 140:19 179:6 witness 5:3 82:1,7,10 83:2 123:22 125:23 147:17 149:7 152:6 155:2,13 182:6 witnesses 152:5 153:16 Wollmuth 2:4 wonderful 74:1 word 13:12 92:22 139:4,8 worded 37:25 words 169:23 171:16 172:17 work 16:22 18:3,6 31:18 42:3 48:8 61:1 67:5 83:18 86:2 92:10 103:3 105:13 112:10,15 124:3,9 141:5 141:20 151:14

Trial 239 151:17 156:25 157:2,6,11 159:3 160:7 181:4 worked 68:21 84:1,4 86:5,13 103:18 106:21 112:16,17 126:3 128:17 156:6,11,13 156:16 157:9 158:25 working 26:10,21 58:21 62:2 84:23 107:10 122:9 130:17 134:15 136:10 139:22 140:5 144:15 works 99:24 103:1 143:10 wouldn't 36:5 49:12,13 56:9 58:8 64:19 92:1 112:12 117:18 123:12,13 175:12 write 20:6 writing 12:14 48:12 written 45:12 161:7 wrong 51:11,23 66:13 75:19 78:20 128:4 186:23 wrote 11:20 13:8 46:22 X X 14:18 131:23 Y Y 131:23 yeah 106:19 138:4,5 138:22 156:4 161:12 180:4 year 49:19 53:10,15 53:19 56:16 58:5 69:20,23 85:15,18 87:4 90:25 91:2 92:6,8,10 93:4 100:14 100:22 101:3 101:12,21 102:7 114:19 118:6 120:9 120:19 128:20 130:12 132:11 137:21,25 138:3 139:14 169:22,22 171:23,24 173:10,10 174:22 175:1 175:2 176:2 177:9,9 185:12 years 59:16 84:2,5 84:17 85:13 97:8 156:8 159:21 yesterday 8:16 12:12 17:15 19:22 22:15 28:17 32:21 33:24 40:20 York 2:6,6 Young 84:1 yourself 80:17 167:9 Z Z 57:7 131:23 zero 10:22 11:1,2 174:13,14 Zolfo 3:5,10 87:18 88:17 96:9 160:13,16 161:2,2 Zousmer 2:12 $ $1 15:1 $10 99:18 $12 62:11 $120 37:11 $150 81:12 $2 172:4 $20 99:14 $200 171:25 $24 99:16 105:3 $240 15:15 $3

July 30, 2008

177:6,8,16 $300 63:8 $40 53:13 $400 171:25 $450 63:8 $50 26:24 $500,000 170:2 $56.6 53:9,13 $700 76:7 $74 121:12,16,19 $76 122:3 137:24 $8 99:17 173:16 $85 99:8,12 102:10 104:11 105:3 137:22 $9 100:15,19 0 05-55927 1:8 8:4 06 68:19,20 70:7 71:3 73:24 75:13 07068 3:7 1 1 169:24 1-D

Trial 240 50:1 1.00 15:6 1.178 35:19 36:4 1.2 15:5 1.5 169:25 1.6 30:17 1.9 30:15 1:00 82:7 1:15 82:16 1:21 82:18 10 25:24 26:5 32:3 69:11 10:15 1:15 10:30 154:19,22 100 32:8 36:19 69:11 101 3:6 10110 2:6 105 74:14,23 180:11 109 31:14,15,19 32:1,4,6 11 1:5 85:6 11:58 82:17 110 32:4 12 30:5,8 12th 32:23 34:10 71:12 178:23 179:15 180:17 120 80:7,9,11 125 5:12 180:8 13 84:5 13th 9:23 26:7,23 130 180:8 14 31:8 84:5 147:9 14th 39:6 14.2 173:11 15 44:10 155 5:14 16 27:13,22 49:18 49:21 17 44:20 148:16 178 35:18 18th 188:3 18.9 173:11 180 41:20 42:1 51:5 79:12,25 182 5:15 1999 157:6 158:10 2 2.5 51:16 2:51 152:1 20 19:14 35:7 45:25 20th 12:11 15:19 200 41:20 42:1 79:25 173:15 2000 84:14 2005 9:23 10:21 13:9 15:19 19:9,18 21:18 48:13 52:7 84:17 87:6 116:21 126:20 127:7 162:10 163:18 169:7 169:13,23 172:10 173:11 176:17 185:16 2005/2006 185:8 2006 17:11 18:24 22:2,22 25:15 25:19,22 26:7 28:19 35:15 37:8,10,16 39:6 42:6 49:20 51:15 53:10 55:7 56:17 58:5 59:16 61:12 68:6,8 69:15

July 30, 2008

79:13 80:3,5 88:1 90:21 98:3 99:9 101:2,22 102:7,8 104:5 104:7,17 116:22 127:2 127:5 130:11 131:4 137:20 162:3 163:17 163:24 165:13 166:5 167:10 168:11,19,22 169:14 170:1 170:16 172:12 173:12 178:5 178:17,18,22 182:2 185:11 186:20 2007 37:15 60:20,22 84:18 104:18 2008 1:14 8:2 104:18 21 176:16 21st 27:16 211 1:18 212 2:7 23 34:25 43:25 248 2:16 256 22:12 256.7 22:1 26 38:24 26th

Trial 241 13:9 260 2:13 265 51:5 74:15 265's 69:19 28 99:15 29 9:13,16 11:21 29100 2:14 3 3.6 170:1 3:13 152:2 3:57 188:25 30 1:14 8:2 179:10 300 51:19 3050 4:6 311 22:13 311.7 22:1 312 4:8 313 3:17 330 54:2 351-0099 2:16 382-3300 2:7 4 4.2 29:20 4:00 160:18 40 179:11 400 3:15 45 5:8 47 170:15 48034 2:15 48243-1668 3:16 49 25:3,6 95:14 49.7 27:5 49107 148:15 5 5.7 169:24 50 16:12,14 119:12,14,15 125:19 500 2:5 519 32:2 523 32:2 523,000 31:19,21 55 4:5 551-4931 4:8 568-6519 3:17 6 6 48:13 6th 19:18 21:18 35:15 38:5 6-H 167:18 185:1 186:7,13,15 6-I 182:13,21 6-T 181:10,13 183:6,8 60603-5709 4:7 61 184:1,7 61.5 183:15,21 618-5172 3:8 66682 43:21 69 43:14,17 64:5 7 7:00 160:6 700 16:9 750 16:10,11,21 76 5:9 8 8th 25:15,22 80 35:6,9 69:12 80's 84:7

July 30, 2008

800 80:1 83 5:11 84 32:12 85 104:20 138:2 9 9 5:7 32:5,7,8 9:30 8:20 188:2 90 38:18 39:8,14 973 3:8