Free Response - District Court of Arizona - Arizona

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Don P. Martin (AZ Bar No. 004232) [email protected] Edward A. Salanga (AZ Bar No. 020654) [email protected] QUARLES & BRADY LLP One Renaissance Square Two North Central Avenue Phoenix, Arizona 85004-2391 (602) 229-5200 Kevin A. Russell (admitted pro hac vice) David S. Foster (admitted pro hac vice) Michael J. Faris (admitted pro hac vice) Nicholas B. Gorga (admitted pro hac vice) LATHAM & WATKINS LLP Sears Tower, Suite 5800 Chicago, Illinois 60606 (312) 876-7700 Attorneys for Defendants GTCR Golder Rauner, LLC, GTCR Fund VI, LP, GTCR VI Executive Fund, LP, GTCR Associates VI, Joseph P. Nolan, Bruce V. Rauner, Daniel Yih, David A. Donnini and Philip A. Canfield UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Diane Mann, as Trustee for the Estate of LeapSource, Inc., et al., Plaintiffs, vs. GTCR Golder Rauner, L.L.C., a Delaware limited liability company, et al., Defendants. Pursuant to Local Rule 56.1, and Federal Rule of Civil Procedure Rule 56, the undersigned defendants hereby submit the following Response to Plaintiffs' Statement Of Additional Facts.1 All responses herein are solely for purposes of the current motion.
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Case No.: CIV-02-2099-PHX-RCB GTCR DEFENDANTS' RESPONSE TO PLAINTIFFS' STATEMENT OF ADDITIONAL FACTS (Assigned to the Honorable Robert C. Broomfield)

References herein to "GTCR RSOF ¶ __" are to ¶¶1-39 in GTCR Defendants' Statement Of Uncontested ICG-Related Facts In Support Of Their Renewed Motion For Summary Judgment On Remaining Claims In Counts 2 And 5, submitted with
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40. In late December of 2000 or early January 2001 Joe Nolan spoke to Makings regarding his resignation from LeapSource in December. Makings depo at 125:8-126:17. (SOAF Exhibit 2). Thus, GTCR was aware that ICG was operating without Makings at the helm.
RESPONSE:

The first sentence is undisputed, but not material to the current motion. The second sentence is disputed, but not material to the current motion. It is disputed because Makings "resigned" for a total of approximately two weeks, from December 15, 2000 through the end of the year, during much of which time LeapSource was closed for the Christmas holidays. Makings Dep. (GTCR Ex. 30) at 121-123. This brief "resignation" had no impact on ICG's customer relationships because Chris Kirk never communicated Makings' resignation with any of those customers. Instead, Kirk told Makings that she needed to "take some time" to determine how to communicate that news to clients. Id. at 121:14-122:2. As Makings put it, "what we agreed to do is I would go to ICG, that I wouldn't say anything to anybody, that we would develop a joint communication strategy, both internally and to the clients, because I was heavily involved in both Xpedior and Comsys at the time, and that it would take her some time to figure out all that, and since Christmas was coming anyway, to give her that time, and I said that I would." Id. 41. During the second week of January 2001 Dan Yih of GTCR also met with Mike Makings. Makings depo at 212:2-16. (SOAF Exhibit 2)
RESPONSE:

Undisputed, but not material to the current motion. The cited testimony GTCR's opening brief. References to GTCR's exhibits take the form "GTCR Ex. __" and refer to Exhibits 1-24 to the Declaration Of Nicholas B. Gorga submitted with GTCR's opening brief, or to Exhibits 25-33 to the Supplemental Declaration Of Nicholas B. Gorga submitted herewith. References to plaintiffs' additional statement of facts take the form "Pltfs. SOAF ¶ __" and references to plaintiffs' exhibits take the form "Pltfs. SOAF Ex. __."

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recites no relevant conversation between Makings and Yih. 42. No later than January 2001, Makings had revealed his desire to "walk away with ICG." Patti Walker testified as follows: Q. Can you tell me about every conversation you had with Mr. Makings on this issue? A. Well, in early January, the first week of January, Mike Makings asked to see me and me only for breakfast. We made a breakfast meeting. It was the first few days of January that I recall. And in that breakfast meeting, Mike Makings suggested that there was significant pressure that LeapSource was feeling from GTCR. He felt that there would be some major changes, and all he wanted was ICG back. He proceeded to tell me have I ever considered ICG, what would I do personally if these changes occurred at LeapSource, and could I take his cell phone if I wanted to discuss this in the future. Q. Discuss what in the future?

A. I got the impression what he was trying to say was ­ my understanding that he was trying to tell me the company was going down, that he had some knowledge of this, and that he was going to attempt to take ICG back, and that it could have been that there was somewhat of a job offer in that discussion. Q. Did Mr. Makings ever specifically say any of that to you or was it just your impression of the conversation? A. It was my impression and my experience that when somebody asks you would I -- have I ever considered ICG, that it was a way of telling me that the door was open, and since he gave me his cell phone, I assumed what he was telling me was I could rely on him in the future potentially. Q. Did Mr. Makings -- you said it was your impression that Mr. Makings was trying to -- I am just paraphrasing what you said here, so tell me if I am being inaccurate, but it was your impression that Mr. Makings was trying to tell you that the company was going under? Is that what you were saying? A. Either that or he was trying to walk away with ICG. And I was trying to figure out how you would do that. ICG was a component of LeapSource. And it was confusing at best. Q. Did Mr. Makings ever specifically say anything about the company, quote, unquote, going under? A. He said there were significant changes going on at LeapSource because of the increased pressure from GTCR. Q. A. Did he say anything else on that issue? All he wanted to do was walk away with ICG.
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Q. A.

Did he specifically say that? He specifically said that.

Patti Walker deposition at 39:11-41:8 (emphasis added). (SOAF Exhibit 17)
RESPONSE:

Undisputed that Patty Walker so testified, but not material to the current motion because plaintiffs cite no record evidence that Makings informed GTCR of a desire to "walk away with ICG." Whether Patty Walker believed Makings wanted to "walk away with ICG" is irrelevant to the current motion. 43. In mid-January 2001 Sean Cunningham of GTCR also met with Mike Makings, Makings depo at 211:14-23 (SOAF Exhibit 2), and on January 22, 2001 Sean Cunningham of GTCR noted the following with regard to Michael Makings:
·

Need to give him some upside on ICG and/or LeapSource.

Sean Cunningham notes, Depo. Exhibit 196 at p. GTCR 012264 (SOAF Exhibit 8).
RESPONSE:

Undisputed that Makings and Cunningham met in mid-January 2001 and that on January 22, 2001 Cunningham entered the quoted words in his notebook, but not material to the current motion. Plaintiffs cite no testimony or other record evidence (a) explaining the meaning of this note, (b) suggesting that the note reflected anything said by Makings, or (c) describing what kind of "upside" in ICG or LeapSource is being referenced. This vague note of Cunningham's does not show that Cunningham and Makings discussed the sale of ICG in January 2001. 44. Sean Cunningham's notes of a meeting in late January 2001 (the following testimony suggests on or after January 22) identified GTCR's objectives with respect to LeapSource as follows: "1. Limit downside, 2. Avoid embarrassment, 3. Protect COMSYS, other investment(s)." Notes of Sean Cunningham at Bates GTCR012260012261, Deposition Exhibit 196 (SOAF Exhibit 8): Q. Okay. The following page bears a date, "January 22, Monday," at the top of the page and, in parentheses, the names begin of Tom, Dan, Joe, Chris, and your initials; correct? A. That's correct.
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Q. Do you know whether these are notes of a meeting between those people on January 22? A. Yes, I believe that it was a meeting in person in Phoenix on January the 22nd. Q. If you could read out loud the . . . the sentence -- or, well, the words and then the three bullet points that follow -- or the three numbered points, I should say -- that follow on that page and the top of the following page. A. Yes. I -- I appear to be taking notes at a meeting about a - - a sale or merger of the business. And I write, "GTCR has one objective," colon, and then, off to the right, I appear to have three points, numbered 1 through 3, and No. 1 circled is "Limit downside." No. 2 circled is "Avoid embarrassment." And No. 3 circled on the next page says, "Protect COMSYS, comma, other investment, parentheses, S," closed parentheses. Cunningham Deposition 64:17-66:8. (SOAF Exhibit 9).
RESPONSE:

Undisputed that Cunningham attended a meeting in late-January 2001 regarding a possible sale of LeapSource and that Cunningham entered the quoted words in his notebook, but not material to the current motion. On the following page of Cunningham's deposition (which plaintiffs fail to quote or provide to the Court), Cunningham testifies that he cannot be certain whether his notes reflect his own thoughts or anything shared by anyone else at the meeting. Cunningham Dep. (GTCR Ex. 28) at 66:24-67:20. Nor do plaintiffs cite any record evidence explaining what "downside" or "embarrassment" was being referenced. Contrary to plaintiffs' contention in this lawsuit that this notation indicates GTCR might have intentionally driven LeapSource into bankruptcy to "avoid embarrassment" ­ for which speculation plaintiffs provide no record evidence ­ the uncontroverted testimony of Dan Yih established that bankruptcy of a portfolio company like LeapSource would be precisely the type of "embarrassment" that GTCR would have sought to avoid. Yih Dep. (GTCR Ex. 33) at 325:19-326:14. As Yih said "we [GTCR] don't like our companies to go bankrupt." Id. 45. On January 23, 2001 Sean Cunningham of GTCR noted the following with regard to Michael Makings: Can we do this legally?
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Mike ICG Must be totally separate (No Chris, No Tom) Otherwise, Mike's out of here Sean Cunningham notes, Depo. Exhibit 196 at p. GTCR 012268. (SOAF Exhibit 8)
RESPONSE:

Undisputed that Cunningham entered the quoted notes in his notebook, but not material to the current motion because plaintiffs have cited no testimony or other record evidence explaining what the cryptic note means, and on its face the note does not indicate that Makings wishes to buy ICG, as plaintiffs wish to insinuate. To the contrary, the note states only that Makings would exit unless ICG was "totally separate" from Chris Kirk and Tom Gilman; it says nothing about any desire to buy ICG. Plaintiffs fail to cite Makings' own testimony on this conversation, which makes clear that he was not talking about separating ICG from LeapSource, but rather separating the reporting structure of the business from Chris Kirk and Tom Gilman: "What I believe he's referencing is I wanted to have a totally separate reporting structure that did not go through Chris and Tom. I remember requesting a seat on the board. I remember wanting to report to the board directly, and that I didn't want ICG -- I mean, the separation was not for me. I mean it was still a one business thing, but I no longer wanted to be part of this management team. And this was a direct result of me not being able to communicate any of my concerns for the full year of 2000" to GTCR. Makings Dep. (GTCR Ex. 30) at 220:11-221:1. 46. Cunningham and Makings met again on January 31, 2001, Makings depo at 223:10-25 (SOAF Exhibit 9), and in his notes from January 31, 2001, Sean Cunningham recorded the following: Mike Makings' Breakfast · Mike willing to be strong COO or CEO, but wants authority to make cuts, hire, fire, etc.
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· Mike to sit down w/mw and list of employees, and Mike to fly to Chicago and to talk w/Joe · We would still need a CFO, w/Mike running the business · Mike concerned that Tom's suited and doesn't want to make cuts for fear of scaring potential investors Note · If Mike Gets 1st installment [on his note], he's willing to negotiate ­ ownership of ICG? Sean Cunningham notes, Depo. Exhibit 196 at p. GTCR 012285 (emphasis added). (SOAF Exhibit 8)
RESPONSE:

Undisputed that Cunningham and Makings met on January 31, 2001 and that Cunningham entered the quoted notes in his notebook, but not material to the current motion because plaintiffs have cited no testimony or other record evidence explaining what the cryptic note means, and on its face the note does not indicate that what is being contemplated is a sale of ICG to Makings. Instead, the note simply references discussion of Makings' willingness to be COO or CEO ­ of ICG or LeapSource is not specified ­ so long as he has "authority to make cuts." If the parties were discussing Makings buying ICG outright, this comment about "authority to make cuts" would make no sense. The last line of the note, ambiguously referring to "ownership of ICG?", does not establish that Makings was expressing interest in acquiring ICG. In fact, plaintiff Gilman's 2/24/01 memorandum says otherwise: "During December, Mike Makings offered to resign from the Company. Since Mr. Makings held a $2.5 million note from LeapSource as a result of the acquisition of ICG, GTCR felt strongly that Makings should not leave. In addition, Comsys felt comfortable with him. GTCR then began negotiating directly with Makings to determine if he would convert his note to shares in the Company [LeapSource], as well as an acceptable role he would assume within the Company [LeapSource]." Pltfs. SOAF Ex. 4 at OM-19-2811.
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47. On January 26, 2001, Mike Makings sent a "revised 2001 budget" to Dan Yih of GTCR. Depo Exhibit 183. (SOAF Exhibit 18) RESPONSE: Undisputed, but not material as the stated fact adds nothing of relevance to the current motion beyond what is already stated in GTCR's RSOF ¶12. 48. Notwithstanding their knowledge of Makings' interest in acquiring the ICG business in January 2001, its recent history of operating as a stand-alone company (before it was acquired by LeapSource in January 2000), and its operation without Makings at the helm following his "resignation" in December 2000, none of the GTCR principals who were also members of the LeapSource board made any effort to obtain an appraisal of the ICG assets or to determine the existence of other potential purchasers other than Makings: Q. Were you aware, at the time of this board meeting, March 30, 2001, that LeapSource had purchased this business, ICG, for $10 million only the previous year? A. Acutely ­

MR. FOSTER: Object to the form. A. (Continuing.) Acutely aware that it had been purchased for $10 million. I don't remember exactly when. BY MR. STIRLING: Q. Other than what you heard from Mr. Eaton, did the board of directors seek an appraisal or valuation of the ICG assets that were going to be sold to Mr. Makings? A. I don't believe that we did.

Q. Do you know whether Mr. Eaton sought an appraisal or valuation of the assets? A. Q. A. Q. I don't believe he did. Do you remember asking whether an appraisal had been done? I don't recall. Do you still have in front of you Exhibit 196?

That's Sean Cunningham's ­ A. Q. Yes. -- notebook.

A. Yes. (There followed a discussion outside the record.)
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BY MR. STIRLING: Q. If you will turn to page 12325 . . . it has page "69" in the upper right-hand corner. A. Q. Yes. Do you see that?

There is -- in the upper left-hand corner it says, "Step 1," and then it -- it looks like it says "Value of run," question mark. Is that -- maybe you can read Mr. Cunningham's writing better than I can. A. Q. That would be my best guess. Okay.

A little farther down the page, in a box, it says, "Value of ICG minus DIP --" I think that's debtor-in-possession ­ A. Q. Yes. "-- equals value to creditors."

Do you see that note? A. Yes.

Q. Below that there is a note, "Retain a valuation firm, colon, get a value of ICG stand-alone." Do you see that note? A. Q. A. Yes. Do you know why that was not done? I don't remember.

Yih Deposition 488:9-490:13 (emphasis added). (SOAF Exhibit 3) RESPONSE: Undisputed that neither management nor the LeapSource board commissioned an outside valuation of the ICG assets prior to concluding the sale to ICG Group, Inc., but not material to the current motion. Plaintiffs, who bear the burden of proof on their claims, have come forth with no competent evidence regarding the value of ICG as of March 30, 2001. The quoted testimony of Dan Yih indicates that the board
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was fully informed regarding the price paid for the assets over a year previously, and the evidentiary record contains David Eaton's presentation to the board regarding the reasonableness of the sale to ICG Group, Inc., given all the circumstances in late-March 2001. See GTCR RSOF ¶¶ 31-32; see also id. ¶¶ 16-25. 49. GTCR's own opinion of the value of the ICG assets was memorialized on February 25 as follows: 1st cut ­ ICG 2001 Free Cash Flow Excludes Changes in Working Capital At Value 5x Free Cash 3,987K 6x Free Cash 4,785K 7x " 5,582K 8x " 6,380K Facsimile from Sean Cunningham to Dan Yih, dated February 25, 2001, Deposition Exhibit 199, Bates GTCR 022535, SOAF Exhibit 35. (SOAF Exhibit 19)
RESPONSE:

Undisputed that Cunningham made this note dated February 25, 2001, but GTCR denies that this represents "GTCR's own opinion of the value of the ICG assets" because this statement is unsupported by record evidence. As shown in GTCR's opening brief and RSOFs, Cunningham's calculations of 5x to 8x times "Free Cash" are based on revenue and other projections from Makings' 2/7/01 "revitalization" budget for ICG ­ projections that were premised on a series of assumptions that were no longer valid by the end of March 2001. See GTCR RSOF ¶¶12-15, 25. As a result, this document has no bearing on the value of ICG at the time of the sale on March 30, 2001. 50. On February 24, 2001, Tom Gilman sent a memorandum to the members of LeapSource board reciting a history of questionable and wrongful acts by the representatives of GTCR. Confidential Memorandum from Tom Gilman to the LeapSource board dated February 24, 2001 (the "Gilman Memorandum"), included in Depo. Exhibit 605 (beginning at page 4 of the deposition exhibit). (SOAF Exhibit 4).
RESPONSE:

Undisputed that Gilman sent a memo to members of the LeapSource board dated February 24, 2001 which contained numerous complaints, but GTCR denies that this document, which is hearsay and not subject to any exception, is properly considered
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on this motion for summary judgment. In any event, the complaints set forth in the Gilman memo are not material to the current motion. 51. The Gilman Memorandum complained that, among other things, GTCR had been negotiating directly with Mike Makings on his $2.5 million Note that was then in default. Gilman Memorandum at pages 4-5, Depo. Exhibit 605. (SOAF Exhibit 4)
RESPONSE:

See Response to Pltfs. SOAF ¶50 above. 52. The Gilman Memorandum noted the lack of board meetings and the failure of the board to exercise its proper role both to restrain very disruptive "direct action" by GTCR and to exercise its own proper authority over LeapSource management. Gilman Memorandum at 3-4 ("Management Issues"), EX605-006 to -007.
RESPONSE:

See Response to Pltfs. SOAF ¶50 above. 53. The Gilman Memorandum also complained about the effect that GTCR's relationship with Makings was having on management's ability to run the company, as plans were being made by Makings that were not being shared with LeapSource management, or with the entire board. Gilman Memorandum, at EX605-007, second full paragraph..
RESPONSE:

See Response to Pltfs. SOAF ¶50 above. 54. The Gilman Memorandum recited the continuing possibility of selling LeapSource to other companies, potentially including EDS, Exult, Perot Systems, and ACS, and the importance of having a decision to fund the acquisition of Cargill as a new client. GTCR's mixed signals contributed to the loss of a client in Computer Horizons, and further damaging efforts to market the company to a potential purchaser. Gilman Memorandum at EX605-009 to -010 (Recent Events).
RESPONSE:

See Response to Pltfs. SOAF ¶50 above. 55. Before the end of February, GTCR was planning to put LeapSource into Bankruptcy. Mr. Cunningham's notes in Deposition Exhibit 196, after three pages redacted for attorney-client privilege, include "FILE FOR BANKRUPTCY MONDAY" (see GTCR 012333), then "TUESDAY ­ BOARD * FIRE CHRIS [Kirk] * HIRE D. EATON ­ CHIEF RESTRUCTURING OFFICER" (see GTCR 012334) (SOAF Exhibit 8). The note was obviously made before Ms. Kirk was terminated as CEO and Eaton was hired at the end of February 2001.
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RESPONSE: GTCR disputes the assertion that it was "planning to put LeapSource into Bankruptcy" before the end of February. The GTCR defendants, as members of the LeapSource board and its majority shareholder, were considering a range of available alternatives, including bankruptcy, through mid-March 2001. See GTCR RSOF ¶¶ 1624; see also 3/3/01 AEG Presentation (GTCR Ex. 13); 3/12/01 Memorandum (GTCR Ex. 27); Yih Dep. (GTCR Ex. 33) at 458-478; Nolan Dep. (GTCR Ex. 32) at 308-310, 572573; Makings Dep. (GTCR Ex. 30) at 171-174; Willis Dep. (GTCR Ex. 34) at 19-22. It was not until then, after LeapSource had failed to secure any alternative sources of funding, that GTCR notified LeapSource it would fund up to $750,00 to provide for transition of accounting operations back to LeapSources' customers. See id. and 3/19/01 Letter (GTCR Ex. 14). 56. On February 27, 2001, Cunningham also noted:

2/27 D. EATON WE SHOULD FILE IN PHOENIX DELAWARE IS TROUBLE (ALL LAWYERS DAVID HAS TALKED W/ AGREE) The notes were clearly contemplating a bankruptcy filing, as the following lines begin TIME 0 (FILE FOR BANKRUPTCY) and the rest of the notes on the page concern DIP (debtor in possession) financing, employee claims, and priority of claims to proceeds from asset sales. Notes of Sean Cunningham at Bates GTCR 012336, Depo. Exhibit 196. (SOAF Exhibit 8)
RESPONSE:

See Response to Pltfs. SOAF ¶55 above. 57. On February 26, 2001, Bruce Rauner of GTCR called Mike Making at his home and offered him the CEO position at LeapSource. Makings depo at 181:9-182-6. (SOAF Exhibit 2)
RESPONSE:

Undisputed, but not material to the current motion.
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58. GTCR has argued that the February 25 ICG value was based upon assumptions about the future of LeapSource and a "revitalization" plan based upon assumptions that did not materialize. But on March 12, 2001, after Chris Kirk was terminated and GTCR had announced that it would no longer continue to fund LeapSource under the Purchase Agreement, and after the discussions with Eaton about bankrupting LeapSource, GTCR prepared another memorandum stating that LeapSource paid $10 million for ICG, and that "LeapSource has since destroyed some of that value by using ICG internally rather than maintaining its revenue base, but a conservative estimate of the value is approximately $4-6 M [million]." March 12, 2001 Memorandum to GTCR Investment Committee, from Nolan, Yih, and Cunningham, page 1, Depo. Exhibits 430 (SOAF Exhibit 20), 429 (SOAF Exhibit 21), and see also 204 (SOAF Exhibit 22); Cunningham Depo. 139:9-147:9 (describing preparation of memorandum and explaining that "I believe I worked with Dan Yih on the first few drafts of this memorandum for the investment committee"). (SOAF Exhibit 9)
RESPONSE:

Plaintiffs' characterization of the cited documents is unsupported by the record evidence. The only documents referring to a "$4-6M" value for ICG are drafts prepared by Cunningham, drafts which bear handwritten editing questions, blanks with handwritten edits filled in and no "Recommendation" at the end. See Pltfs. SOAF Exs. 20 and 21; Cunningham Dep. (GTCR Ex. 28) at 140:14-17, 142:23-147:9; Nolan Dep. (GTCR Ex. 32) at 571:23-572:19; Yih Dep. (GTCR Ex. 33) at 466:3-16. No record evidence shows that the "$4-6M" figure reflects any further analysis beyond the rote computation in Cunningham's 2/25/01 fax. Tellingly, plaintiffs do not disclose that Cunningham's flawed "$4-6M" computation was not included in the actual memorandum provided to the GTCR Investment Committee. See GTCR Ex. 27 (correctly ordered copy of Dep. Ex. 204, which is jumbled in Pltfs. SOAF Ex. 22); Yih Dep. (GTCR Ex. 33) at 466:3-470:24; Nolan Dep. (GTCR Ex. 32) at 571:23-572:19; Cunningham Dep. (GTCR Ex. 28) at 139:23-140:17. The reason this "$4-6M" reference was eliminated in the actual Investment Committee memo is evident from Yih's assessment of the 2/25/01 Cunningham computations as "pure speculation." See Yih Dep. (GTCR Ex. 22) at 379:16-22. 59. On the very same day, Makings was in Chicago to meet with Bruce Rauner of GTCR and David Eaton. Makings depo at 171:9-22. (SOAF Exhibit 2)

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RESPONSE:

Undisputed that Makings met with Bruce Rauner and David Eaton in Chicago on March 12, 2001, but not material to the current motion. 60. By the time of this meeting, LeapSource was clearly insolvent, as David Eaton testified: Q. Okay. Based on your background, education, and experience -okay? -- at the time you were working on your LeapSource engagement, did LeapSource's obligations to its creditors change because it was insolvent? MR. HALLORAN: Same objection I've been making. THE WITNESS: Okay. A. First of all, as I said, when I got there, funding had been suspended. Without additional funding, LeapSource was insolvent. Deposition of David Eaton at 84:12-22 (emphasis added). (SOAF Exhibit 7)
RESPONSE:

Undisputed that LeapSource was insolvent by March 12, 2001, but not material to the current motion. 61. On his return to Phoenix from his meeting with Rauner and Eaton on Monday, March 12, Makings formed a new corporation for the purpose of acquiring the ICG business, and even used the name ICG for his new corporation, although ICG belonged to LeapSource and he was still an officer and director of LeapSource at the time. ICG Group, Inc. was incorporated on Friday, March 16, 2001. Q. But isn't it true, though, that as an officer and a director of LeapSource, that you had a duty and -- a fiduciary duty and an obligation to do everything in your power, and to devote your loyalty to that corporation? A. I believe I did that.

Q. But on March 16th, you were incorporating ICG Group, Inc., correct? A. Yes.

Q. Whose sole purpose of incorporating was to either start another company or to take back ICG division? A. Yes.
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RESPONSE: Undisputed that Makings formed a new corporation March 16, 2001, but GTCR denies that it was created "for the purpose of acquiring the ICG business." Plaintiffs mischaracterize the cited testimony, which actually states that the "sole purpose of incorporating was to either start another company or to take back [the] ICG division." At that point, Makings was considering the possibility that he might start a new company in competition with ICG if he was unable to negotiate acceptable terms for a repurchase of the ICG assets. See Makings Dep. (GTCR Ex. 24) at 150:9-20; Makings Dep. (GTCR Ex. 30) at 274:15-277:24. In any event, the above statement is not material to the current motion and does not preclude summary judgment. 62. By the time Makings announced his intention to acquire the ICG assets at the board meeting on the following Tuesday, March 20, 2001, his attorney was already working on the asset purchase agreement: Q. Okay. Second page, third full paragraph, first sentence. Makings informed the board he's preparing an agreement to purchase certain ICG assets. A. Q. A. Q. A. Yes. Was that underway as of the time of this meeting? Yes. And who was preparing the asset purchase agreement? Tim Ronan.

Deposition of Mike Makings at 273:14-23. (SOAF Exhibit 2).
RESPONSE:

Undisputed that Makings had his personal attorney preparing papers for a possible purchase of the ICG assets, but not material to the current motion.

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Dated: August 17, 2007

s/ Edward A. Salanga Don P. Martin Edward A. Salanga QUARLES & BRADY LLP One Renaissance Square Two North Central Avenue Phoenix, Arizona 85004-2391 (602) 229-5200 Kevin A. Russell David S. Foster Michael J. Faris Nicholas B. Gorga LATHAM & WATKINS LLP Sears Tower, Suite 5800 Chicago, Illinois 60606 (312) 876-7700 Attorneys for Defendants GTCR Golder Rauner, LLC, GTCR Fund VI, LP, GTCR VI Executive Fund, LP, GTCR Associates VI, Joseph P. Nolan, Bruce V. Rauner, Daniel Yih, David A. Donnini and Philip A. Canfield

16 Case 2:02-cv-02099-RCB Document 490 Filed 08/17/2007 Page 16 of 17

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CERTIFICATE OF SERVICE I hereby certify that on August 17, 2007, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Leo R. Beus Scot Stirling Steven Weinberger BEUS GILBERT PLLC 4800 North Scottsdale Road, Suite 6000 Scottsdale, Arizona 85251 Attorneys for Plaintiffs* Steven J. Brown STEVE BROWN & ASSOCIATES LLC 1414 E. Indian School Road, Suite 200 Phoenix, Arizona 85014 Co-Counsel for Trustee* James R. Condo Patricia Lee Refo Joseph G. Adams SNELL & WILMER LLP One Arizona Center 400 East Van Buren Phoenix, Arizona 85004 Attorneys for defendant Kirkland & Ellis Merrick B. Firestone RONAN & FIRESTONE, PLC 9300 East Raintree Drive, Suite 120 Scottsdale, Arizona 85260 Attorneys for defendant Michael Makings

s/ Edward A. Salanga A copy of the attached document was also hand-delivered to counsel for Plaintiffs and counsel for the Trustee.

Case 2:02-cv-02099-RCB

Document 490

Filed 08/17/2007

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