Free Statement - District Court of Arizona - Arizona

BEUS GILBERT PLLC
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ATTORNEYS AT LAW

4800 NORTH SCOTTSDALE ROAD SUITE 6000 SCOTTSDALE, ARIZONA 85251 TELEPHONE (480) 429-3000

Leo R. Beus/002687 [email protected] Scot C. Stirling/005757 [email protected] Steven E. Weinberger/015349 [email protected] Attorneys for Plaintiffs

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, Case No.: CIV-02-2099-PHX-RCB PLAINTIFF'S RESPONSE TO GTCR DEFENDANTS' STATEMENT OF UNCONTESTED ICG-RELATED FACTS AND PLAINTIFFS' STATEMENT OF ADDITIONAL FACTS PRECLUDING SUMMARY JUDGMENT (Assigned to the Honorable Robert C. Broomfield

Pursuant to Local Rule 56.1, and Federal Rule of Civil Procedure Rule 56, the undersigned Plaintiffs submit the following Response to GTCR's Statement of Uncontested Facts Regarding ICG Related Facts, and their Statement of Additional Facts Precluding Summary Judgment on Counts 2 and 5.

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The Exhibits 1­23 attached to this Response to Defendants' Statement of Uncontested ICG-Related Facts and Plaintiffs' Statement of Additional Facts Precluding Summary Judgment are cited herein as "SOAF Exhibit ___." STATEMENT OF UNCONTESTED FACTS LEAPSOURCE'S PURCHASE OF ICG CONSULTING, INC. IN 2000. 1. In approximately 1990, Michael Makings and John Dilenschneider founded

ICG Consulting, Inc., a consulting firm that helped large corporations improve their financial processes such as invoicing, accounts receivable/payable, taxes and human resources through technology and consolidation. Makings and Dilenschneider remained the senior officers and sole shareholders of ICG Consulting, Inc. until its sale to LeapSource in 2000. Mann v. GTCR Golder Rauner, L.L.C., 351 B.R. 708, 709 (D. Ariz. 2006) ("8/28/06 Order"); Makings Dep. (Ex. 24) at 10:15-11:25, 15:19-18:25. RESPONSE: Undisputed. 2. Effective January 1, 2000, LeapSource purchased substantially all the assets of

ICG Consulting, Inc. 8/28/06 Order, 351 B.R. at 709; ICG Purchase Agmt. (Ex. 1). RESPONSE: It is not disputed that LeapSource purchased all of the ICG assets effective January 1, 2000, although the actual closing date was February 8, 2000. Unanimous Written Consent of the Directors of LeapSource Inc., February 8, 2000, Bates LS-13-2221 to 2222, signed by Christine Kirk, Joseph Nolan, and Bruce Rauner. (SOAF Exhibit 1) 3. LeapSource paid $10 million for those assets, allocated as follows:

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a.

$5 million in cash due on closing to be distributed equally to Makings and Dilenschneider;

b.

$2.5 million in the form of a promissory note payable by LeapSource to ICG Consulting, Inc. in two installments: $2.25 million due March 31, 2000 and $250,000 due January 2, 2001, which promissory note was assigned to Dilenschneider; and

c.

$2.5 million in the form of a promissory note payable by LeapSource to ICG Consulting, Inc. with interest payable annually on the anniversary date of the note and principal payable in three equal annual installments due on the second, third and fourth anniversaries of the Effective Date or, if the holder elected to accelerate, in four annual installments due on the first, second, third and fourth anniversaries of the Closing Date, which promissory note was assigned to Makings.

8/28/06 Order, 351 B.R. at 709; ICG Purchase Agmt. (Ex. 1) at §2.2.1; Makings Note (Ex. 2); Makings Dep. (Ex. 24) at 133:22-134:14, 138:10-19. RESPONSE: Undisputed. 4. Following LeapSource's purchase of the ICG Consulting, Inc. assets,

Dilenschneider was no longer associated with the company. GTCR, as majority shareholder of LeapSource, guaranteed the $2.5 million note that had been assigned to Dilenschneider. ICG Purchase Agmt. (Ex. 1) at § 2.2.1(b); Makings Dep. (Ex. 24) at 59:1-6, 116:3-12, 133:22-134:14, 148:21-150:8.

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RESPONSE: Undisputed. 5. Following LeapSource's purchase of the ICG Consulting, Inc. assets, Makings

became an employee of LeapSource. GTCR did not guarantee the $2.5 million note that had been assigned to Makings. 8/28/06 Order, 351 B.R. at 709; Mann v. GTCR Golder Rauner, L.L.C., F. Supp. 2d , 2007 WL 968424 (D. Ariz. Mar. 30, 2007) ("3/30/07 Order") at *22; Makings Dep. (Ex. 24) at 148:17-25, 200:5-7. RESPONSE: Undisputed. However, Makings was not only an employee of the company; he was also an officer and later became a director of LeapSource. His initial position was Chief Operating Officer. Makings Depo. at 13. (SOAF Exhibit 2) In February 2001, he became CEO and a director of the company. See paragraphs 20 and 28, below. It is not disputed that GTCR did not guarantee the $2.5 million note that was assigned to Makings. II. PERFORMANCE OF THE ICG DIVISION DURING 2000. 6. In 1999, the year prior to its purchase by LeapSource, ICG Consulting, Inc.

had approximately $5.6 million in total revenue. In 2000, ICG's revenue dropped to $3.5 million. 4/24/00 Board Book (Ex. 4); Makings Dep. (Ex. 24) at 22:11- 16, 23:16-20. RESPONSE: The first sentence is undisputed. The second sentence is accurate but misleading; as was explained by Makings in the deposition testimony cited by GTCR, the $3.5 million includes ICG's consulting revenue, but does not include additional revenue received from other LeapSource clients for work performed by the ICG division. See paragraph 7, which

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explains that some of ICG's work was directed to servicing LeapSource's outsourcing clients; the $3.5 million figure was Makings' figure for what GTCR describes in paragraph 7 as ICG's "own consulting revenue" and does not include work for LeapSource clients. Q. When we were just talking about the ICG division revenue for the calendar year 2000 when it was part of LeapSource, you mentioned it was mostly Legacy clients, and that during that calendar year 2000 time frame there was no new ICG Consulting clients' business; correct? A. Correct. Q. Why was that? A. Well, a couple things. One is, our sales cycle was typically six to nine months. And in the six to nine months post purchase, our direction and our focus was totally shifted from going out and getting new consulting clients to focusing more on helping LeapSource clients drive additional margin from the operations perspective. Makings Depo. at 24:9-22. (SOAF Exhibit 2) 7. After the purchase, LeapSource management shifted the ICG division's focus

from generating its own consulting revenue to servicing LeapSource's outsourcing clients. Makings Dep. (Ex. 24) at 24:9-25, 65:2-66:13; Roche Dep. (Ex. 21) at 58:3-61:6, 63:9-64:3. RESPONSE: Disputed in part. After the purchase, ICG was doing both ­ generating its "own consulting revenue" (approximately $3.5 million in 2000 as described in paragraph 6), and servicing LeapSource's outsourcing clients. Plaintiffs agree that was a shift in focus, but ICG never stopped generating its own revenue, as GTCR apparently admits in paragraph 6 and in the following two paragraphs.

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8.

When LeapSource reported to GTCR financial results for January 2000, the

first month after the date of purchase, it reported ICG division revenue of $529,658 for the month ($6,355,896/year on an annualized basis). January 2000 LeapPak (Ex. 3). RESPONSE: It is not disputed that LeapSource reported ICG division revenue of $529,658 for the month of January 2000. However, it is misleading to "annualize" revenue by picking a single month and simply multiplying by twelve; here, the "annualized" number is GTCR's calculation, not the actual amount of reported annual revenue for any year. 9. When LeapSource reported to GTCR financial results for November 2000 (the

latest month for which LeapSource's monthly reporting included separate data for the ICG division), ICG division revenue was down to $172,635 for the month ($2,071,620/year on an annualized basis). November 2000 LeapPak (Ex. 5). RESPONSE: It is not disputed that LeapSource reported ICG division revenues $172,635 for the month for November 2000. This is the figure for ICG's "own consulting revenue" described in paragraph 7, above (part of the $3.5 million earned for the year 2000), and does not include revenue received from other LeapSource clients for work performed by the ICG division. See paragraph 7, which explains that some of ICG's work was directed to servicing LeapSource's outsourcing clients. Moreover, it is misleading to "annualize" revenue by picking a single month and simply multiplying by twelve; here, the "annualized" number is GTCR's calculation, not the actual amount of reported annual revenue for any year. The

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actual number for ICG's "own consulting revenue" for the year was approximately $3.5 million, as described in paragraphs 6 and 7, above. III. MAKINGS' 2001 "REVITALIZATION" BUDGET FOR THE ICG DIVISION. 10. Based upon GTCR's escalating concerns as to, among other things,

LeapSource's financial performance, and future prospects and management problems, GTCR sent two of its employees, Dan Yih and Sean Cunningham, to LeapSource in December 2000 and January 2001 to investigate its concerns. Yih, Cunningham and others from GTCR reviewed financial records of LeapSource and its ICG division and interviewed LeapSource and ICG employees and officers. 3/30/07 Order, 2007 WL 968424 at *16, 18-19. RESPONSE: Undisputed that this is the Court's summary of several events described in more detail in the Plaintiffs' Statement of Additional Facts in opposition to GTCR's original Motion for Summary Judgment. It is not disputed that GTCR sent two of its employees to LeapSource in December 2000 and January 2001, but it is disputed that Dan Yih and Sean Cunningham were sent to LeapSource merely to "investigate GTCR's concerns" and not for other reasons, including directly interfering with the management of the Company by its properly constituted management, and without the approval of the LeapSource board of directors. With regard to the Dan Yih interviews, those were conducted in hostile conditions and were intended to undermine and be detrimental to the management of Christine Kirk, LeapSource's CEO. As for interfering with Kirk's ability to manage the company, Dan Yih testified: She alleged that my interviewing members of her management team below her was undermining her authority, and I said, "Yes, 7 Filed 07/24/2007

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it is effectively cutting off your arms and legs within the organization." I certainly never, ever threatened her physically to cut off her arms and legs. I did agree with her that interviewing management members below her was effectively cutting off her arms and legs. Q. And what -- what -- what did you mean by that, that it was effectively cutting off her arms and legs? A. It is very disruptive for an organization for an outside investor to come in and talk to members of management without the CEO being there, and it is, she alleged, destructive to her authority and I would agree. Deposition of Daniel Yih, at 159:20 to 160:13 (emphasis added). (SOAF Exhibit 3) 11. In January 2001, Makings accelerated the entire balance owed on his note plus

interest, due to LeapSource's default. 8/28/06 Order, 351 B.R. at 709. RESPONSE: Undisputed. 12. Among the documents reviewed by GTCR was a revised 2001 budget for the

ICG division, which Makings and two ICG division employees had prepared and given to Dan Yih, Joe Nolan and Sean Cunningham on February 7, 2001. Makings' budget proposed a "revitalization" plan to restore the ICG division's revenue to its pre-LeapSource level. 2/7/01 ICG Budget (Ex. 6); Makings Dep. (Ex. 24) at 237:4-240:8. RESPONSE: Disputed if the implication is that the specific "revitalization" plan referred to here was for ICG alone, that it was focused on or contemplated the "revitalization" of ICG alone, or that the expenses or assumptions described in the document concerned ICG alone, or were necessary to return ICG's "own consulting revenues" to their prior levels. Makings testified 8 Filed 07/24/2007

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that "it was not a stand-alone ICG forecast.

It was an ongoing LeapSource joint

enterprisewide forecast with resources dedicated to ICG integration services": Q. Okay. Now, when you were planning on ramping back up ICG operations, did you provide some budgets or forecasts to GTCR? A. Yes.

Q. Okay. And those budgets or forecasts, did you have the revenue for ICG at around 5.8 to $6 million? A. Yes.

Q. So even in this depressed economic time, you honestly believed, when you provided GTCR that budget, that you could get business up to $6 million a year in revenue? A. Yes. Remember that $6 million in that forecast was as LeapSource as an ongoing entity, that we would maintain Comsys, we would maintain Xpedior, Heritage, Epoch. I had four LeapSource salesmen dedicated to ICG. I had access to current prospects that we -- if you look at my assumption page, two of those outsourcing contracts we thought we could turn into integration clients. We had other LeapSource pipeline type opportunities that we thought we could provide integration services to. So it was not a stand-alone ICG forecast. It was an ongoing LeapSource joint enterprisewide forecast with resources dedicated to ICG integration services. Makings depo pg.163:18-164:17 (Emphasis added). (SOAF Exhibit 2) 13. Makings' budget projected an increase in ICG revenues for 2001 to $5.86

million, based on the following key assumptions: a. GTCR would invest an additional $8 to $8.5 million in LeapSource to allow both LeapSource and ICG to remain in business while management attempted to reverse the negative trend in ICG revenue.

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b.

ICG would remain a division of LeapSource, which would remain an operating company with over 100 employees, a significant and experienced sales force, a stable of active outsourcing clients, a pipeline of additional outsourcing prospects and access to GTCR's portfolio companies and existing potential client relationships.

c.

All these resources would enable ICG to reduce its normal nine- or twelve-month sales cycle to three or four months, accelerating the rampup of its revenues.

Makings Dep. (Ex. 24) at 163:18-171:25, 239:3-240:8. RESPONSE: Disputed, see response to 12 above. Makings testified that ICG's "sales cycle was typically six to nine months" at Makings Depo. p. 24 (SOAF Exhibit 2), quoted in the Plaintiffs' response to paragraph 6, above. Makings' testimony does not support the

statements made by GTCR, and nowhere says or even suggests that the assumptions in the proposal for continued funding of both LeapSource and ICG were "key assumptions" necessary to maintain ICG, or to ramp up ICG's "own consulting revenues" to their prior levels. At the time, GTCR recognized that ICG revenue had declined because of a deliberate and agreed change in focus, and that it had the ability to "ramp up" its own operations again in order to return to prior revenue levels: Q Did you ever, after that, have any conversations yourself with Mike Makings about the ability to -- I think the -- the expression has been used -- ramp up ICG's revenue production in -A Yes. 10 Filed 07/24/2007

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Q -- 2001? Okay. What was your assessment of the ability of ICG to begin producing additional revenue in 2001 from customers other than LeapSource's outsourcing of F & A clients? A I don't recall specifically at this point what we thought, other than the fact that it had been doing more revenue and profits previously, it had been diverted into only LeapSource projects and lost its revenue and its profits, and that the same team was there, and it should be able to do it again. Q Was it your understanding that ICG ­ the ICG Division of LeapSource -- was still servicing its own clients, as it had before it was acquired by LeapSource? A It was still servicing some clients, that was my understanding, but certainly not to the extent it was before. Q Do you remember having any conversations with Mike Makings about his assessment of the ability to ramp up revenue for ICG? A I don't remember specific conversations. I'm sure there were some, but I don't remember them. Q Do you remember having the -- having the impression that Mike Makings thought that would be difficult or impossible to accomplish in 2001? A I don't think so. Yih Depo., 206:22-208:7. (SOAF Exhibit 3) Moreover, the second page of Deposition Exhibit 193 (attached as Exhibit 7 to GTCR's Statement of Facts) demonstrates that the expenses contemplated for ICG were much smaller than the expenses required to support LeapSource through the COMSYS transition (total ICG capital expenditures for the year are estimated at $92,000). 14. An "ICG 2001 Monthly Budget 02-25-01" spreadsheet was subsequently

prepared incorporating Makings' $5.86 million revenue projection and other numbers from 11 Filed 07/24/2007

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his "revitalization" budget. That spreadsheet projected, based on these numbers generated by Makings, ICG free cash flow of $797,465 for 2001 (excluding working capital). 2/25/01 ICG Budget (Ex. 9); 2/7/01 ICG Budget (Ex. 6). RESPONSE: Disputed, because GTCR is trying to mix two different documents and projections into one. The February 25 spreadsheet was expressly prepared (as reflected in the title in the upper left hand corner of the first page) to represent ICG on a "stand alone basis." Although it does carry forward much of the same information about ICG that was prepared by Makings, it also reflects on the following page (GTCR 08217, Exhibit 9 to GTCR's Statement of Facts) payroll changes reflecting ICG's separation from LeapSource. No deposition testimony has been cited by GTCR to support its interpretation of the document as anything other than a "stand alone" projection for ICG. 15. In a fax dated February 25, 2001, Sean. Cunningham estimated the value of the

ICG free cash at approximately $4 to $6.4 million by applying multiples ranging from 5x to 8x times the $797,465 free cash number. 2/25/01 Cunningham Fax (Ex. 10) at GTCR 11535; 2/25/01 ICG Budget (Ex. 9); 2/7/01 ICG Budget (Ex. 6); Cunningham Dep. (Ex. 19) at 18:1-26:14; Yih Dep. (Ex. 22) at 379:16-22. RESPONSE: Undisputed. IV. FAILURE OF MAKINGS' "REVITALIZATION" ASSUMPTIONS. 16. In January 2001, GTCR asked that LeapSource reduce costs by, among other

things, reducing employment levels and executive salaries, which LeapSource did by

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February 2001. 3/30/07 Order, 2007 WL 968424 at *18; 4th Am. Cmplt. (Dkt. No. 121) at ¶¶ 280-84. RESPONSE: Undisputed. 17. From October 2000 to March 2001, LeapSource management solicited

numerous prospective investors or buyers in an effort to locate another source of private capital for LeapSource. In the end, none of these efforts were fruitful. 3/30/07 Order, 2007 WL 968424 at *19. RESPONSE: It is undisputed that ultimately efforts to find investors or buyers were not brought to fruition. In response to Tom Gilman's memorandum to the LeapSource board, included in Deposition Exhibit 605 (SOAF Exhibit 4), the GTCR members of the board of directors terminated Chris Kirk and made Mike Makings the CEO of the company (see paragraph 20 below), knowing of his interest in acquiring the ICG assets and leaving LeapSource (SOAF paragraphs 42-48 below), with the inevitable result that GTCR and its principals on the LeapSource board intended when they removed Chris Kirk and brought in David Eaton to shut the company down and put it into bankruptcy. See response to paragraph 23, below. 18. During February 2001, LeapSource continued to project cash burn in excess of

$24 million and additional funding requests through 2001. 2/15/01 Projections (Ex. 7); 2/20/01 Board Minutes (Ex. 8).

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RESPONSE: This is disputed because it is misleading. The document cited as of February 15 described one scenario of many that were suggested and discussed during this time frame. It is undisputed that one of the scenarios contemplated that GTCR would fund the COMSYS transition and other commitments, which would have required substantial additional funding by GTCR. Other scenarios were also proposed, including several outlined at pages 8-10 of Tom Gilman's February 24, 2001 memorandum to the LeapSource board of directors, included in Deposition Exhibit 605. (SOAF Exhibit 4) 19. On February 27, 2001, GTCR advised LeapSource that it would cease

purchasing additional shares of its preferred stock. 3/30/07 Order, 2007 WL 968424 at *16; 2/27/01 Board Minutes (Ex. 11); 2/27/01 Letter (Ex. 12). RESPONSE: Undisputed. 20. That same day, the LeapSource board of directors voted to (1) remove Chris

Kirk as CEO, requesting that she continue efforts to find a buyer or investor for LeapSource in her continuing role as director, (2) appoint Makings as CEO, and (3) retain the financial workout experts at AEG Partners to assist the company in managing through its crisis. 2/27/01 Board Minutes (Ex. 11); Eaton Dep. (Ex. 23) at 25:2-41:4. RESPONSE: Undisputed that the LeapSource board (dominated by principals of GTCR) voted to remove Chris Kirk as CEO and replace her with Makings, and to retain David Eaton. Plaintiffs dispute that David Eaton was retained to assist the company; he was recommended

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by Kirkland & Ellis and selected by GTCR to protect GTCR's interests, and his relationship to Kirkland & Ellis was not disclosed to the non-GTCR members of the board (Kirk and Gilman) on February 27. Mr. Eaton was originally retained by GTCR to act as a "K & E kind of advisor on us that we need for GTCR's perspective, and he's going to plan on being there on Monday to talk through things with you." Yih Depo at 295:3-22. (SOAF Exhibit 3) When AEG was suggested to the board of directors on February 27, neither Kirk nor Gilman were told at the February 27, 2001 board meeting that David Eaton was AEG, or that he was "of counsel" to Kirkland & Ellis. Gilman Dep. at 90:5-13 (SOAF Exhibit 5); Kirk Dep. at 669:5-670:21 (SOAF Exhibit). (SOAF Exhibit 6) 21. In early March, as LeapSource terminated virtually all of the sales force and all

of the headquarters staff, David Eaton of AEG Partners made a presentation to the LeapSource board outlining a number of restructuring alternatives, each of which would require additional funding by GTCR or an alternative source. 3/30/07 Order, 2007 WL 968424 at *24; 4th Am. Cmplt ¶¶ 300, 303; Makings Dep. (Ex. 24) at 189:14-190:7, 287:16289:1, 311:25-312:12; 3/3/01 AEG Presentation (Ex. 13). RESPONSE: It is not disputed that LeapSource terminated virtually all of the sales force and all of the headquarters staff by March 2001. The statements made concerning Eaton's presentation to the LeapSource board with restructuring alternatives are disputed. Eaton presented his restructuring alternatives first at the meeting with GTCR. The following is what Eaton testified:

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Q. The restructuring alternative analysis document that was gone over in the meeting at GTCR, did you -- did you make that presentation on your own, or did one of your partners work with you on hat? A. It's possible that Larry Adelman was there -- oh, oh, I'm sorry. Was it -- it's possible that Larry Adelman was there at the time of the presentation, but I'm not sure. I didn't make that presentation on my own. It was made in conjunction with LeapSource management. Eaton depo at pg.154:17-155:4. (SOAF Exhibit 7) *** Q. A. How long did this presentation meeting at GTCR last? I don't recall.

Q. Would it have been longer than your first meeting at GTCR? A. Q. A. Oh, yes. Were any decisions made at that meeting? Not that I recall.

Q. Were any of the scenarios included in the restructuring alternative analysis ruled out at the meeting? A. Not that I recall.

I -- I'm sorry. I believe that 1-A, business as usual with the cash burn that the company was experiencing, was not considered to be an option and stated as such. Eaton depo pg.155:13-156:4. (SOAF Exhibit 7) *** Q. Do you recall any discussions at this meeting of the Mike Makings note? A. At this meeting?

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Q.

Yes.

A. Generally, I recall that we put the Mike Makings note aside because if Mike -- the assumption was that we were there to seek funding primarily to maintain the company as a going concern and that Makings would be at the helm and that if they -if Mike Makings was going to continue to be the chief executive officer of the company, he would have to arrive at a generally acceptable employment arrangement with GTCR, and that would have included discussions regarding his note. So it didn't - it -- it really wasn't a subject of the meeting, other than to put it out there as an issue that would have had to have been dealt with if the company were ongoing and Makings were at the helm of -- of the company as a going concern. Eaton depo pg.157:7-158:2 (emphasis added). (SOAF Exhibit 7) 22. In a March 19, 2001 letter, GTCR advised LeapSource that it would fund up to

another $750,000 "purely to allow LeapSource to provide for an orderly transition of the outsourced accounting operations back to their clients with minimal disruption." 3/30/07 Order, 2007 WL 968424 at *23; 3/19/01 Letter (Ex. 14). RESPONSE: Undisputed. 23. From that point forward, Eaton and other LeapSource officers worked to

accomplish this transition and wind down LeapSource's affairs. 3/30/07 Order, 2007 WL 968424 at *23-24; Eaton Dep. (Ex. 23) at 172:23-178:9, 185:5-12, 187:1-188:1, 194:3-24. RESPONSE: Disputed to the extent that it may be read to imply that Eaton only began to plan and accomplish the "wind down" of the company after the March 19, 2001 letter from GTCR advising that no further funding would be provided to LeapSource.

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In notes of a conversation between Sean Cunningham, a GTCR analyst, and David Eaton taken on February 27, 2001, Cunningham 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, Depo. Exhibit 196 at Bates GTCR 012336. (SOAF Exhibit 8) Mr. Cunningham testified about those notes as follows: Q. Mr. Cunningham, if we go back to the Exhibit 196, which is your - - notebook, if you'll turn to page 12336, it has the date "February 27" and the initial "D. Eaton" in the upper left hand corner. Do you see that? A. Q. A. Yes I do. Are these notes of a ­ a conversation with David Eaton? They appear to be, yes.

Q. And are these notes you took on or ­ on February 27, 2001? A. They appear to be.

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Q. Did you have a meeting with Mr. Eaton? Was this a telephone call? Do you know? A. I believe so.

Q. Okay. In talking about, quote, "We should file in Phoenix," closed quote, is that referring to filing for a petition in - - in bankruptcy? MR. FOSTER: Object to the form.

A. I ­ I don't recall, other than that's what's in the note, but bankruptcy. . . I know, during this period, was discussed, so - Cunningham Deposition 124: 9-125:15. (SOAF Exhibit 9) 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). (Depo. Exhibit 196, SOAF Exhibit 8) 24. Following the March 19, 2001 funding cessation by GTCR, LeapSource had

neither the time nor the money to engage in a lengthy search for a potential buyer of the ICG division. Eaton Dep. (Ex. 23) at 160:18-23, 167:1-14, 247:1-16; Yih Dep. (Ex. 22) at 246:214; Nolan Dep. (Ex. 20) at 545:16-547:19. RESPONSE: Disputed to the extent that the statement implies that the duty or opportunity to investigate the value of the ICG assets and to determine whether ICG could be sold for a fair price did not arise until March 19, 2001. GTCR was contemplating bankrupting LeapSource even before David Eaton was hired. The potential sale of ICG was also contemplated well before March 19, as was the need for an appraisal of ICG. See Statement of Additional Facts

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(SOAF) below, paragraphs 42-48, beginning with references to Makings' declaration of his interest in acquiring the ICG assets in January 2001. 25. By March 30, 2001, when the LeapSource board was faced with the decision

whether to sell ICG to Makings' ICG Group, Inc., it was clear that: a. GTCR would not provide any additional funding to LeapSource or ICG, and no alternative sources of funding had been found. b. Because LeapSource would not continue as an operating company, ICG could not rely on remaining a division of LeapSource. c. ICG would not have access to any of GTCR's portfolio companies or LeapSource's four outsourcing customers, whose financial functions were being transferred back by LeapSource. d. ICG would not have access to LeapSource's sales prospects, relationships or sales force because the sales force had been terminated. 3/30/01 Board Minutes (Ex. 17); Makings Dep. (Ex. 24) at 165:11-167:14, 171:7-25, 184:11185:1, 238:21-239:2, 262:11-13; 4th Am. Cmplt. ¶ 300; see also ¶¶ 17, 19, 21-23 supra. RESPONSE: Disputed that the LeapSource board (with only GTCR principals Nolan and Yih participating, because they had removed Kirk and Gilman from the board) was "faced with the decision whether to sell ICG" to Makings for the first time on March 30, 2001. The decision was made while Makings was still an officer and a member of the board of directors of LeapSource, and was an issue no later than January 2001, when Makings made it clear that he was interested in acquiring the ICG business. SOAF paragraphs 42-48. The GTCR

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defendants made no effort to appraise or market the ICG assets before giving the assets to Makings on March 30, 2001. This paragraph is also disputed to the extent that it implies what the evidence does not prove ­ that any of these factors cited by GTCR in subparagraphs a-d were critical, "key," or even important to the value of ICG on a standalone basis. ICG had been operating as a standalone company without any access to LeapSource customers or resources only one year earlier when it was purchased by LeapSource. V. LEAPSOURCE'S SALE OF ITS ICG DIVISION IN 2001. 26. Among Eaton's tasks during the wind-down period was to obtain whatever

value he could for the ICG division. Prior management had not attempted to sell the ICG division, so there were no previously identified buyers. Eaton Dep. (Ex. 23) at 160:14161:21, 164:3-165:16, 247:1-16, 249:20-250:10; 3/30/01 Board Minutes (Ex. 17). RESPONSE:

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It is not disputed that one of Eaton's duties was to obtain "whatever value" he could for the ICG assets. However, it is not correct to say that other potential buyers of the ICG assets were not known to exist, although there is no evidence in GTCR's Motion or in the record that Mr. Eaton or the GTCR members of the LeapSource board made any effort to investigate the existence of other potential buyers before giving the assets away to Makings. Instead, they have argued that there was "neither the time nor the money" to engage in a "lengthy search," after pretending that it was only in late March that "the LeapSource board was faced with the decision whether to sell ICG to Makings' ICG Group, Inc." See

paragraphs 24 and 25, above. GTCR had known about Makings' interest in acquiring the ICG assets since no later than January. SOAF, paragraphs 42-48. Moreover, LeapSource had just purchased ICG in January of 2000, and Makings had been negotiating with Unisys and with Deluxe Corporation about their interest in purchasing ICG. Makings Depo. at 53-54. (SOAF Exhibit 2) Makings put those discussions on hold while the LeapSource deal was being negotiated. Makings Depo. at 160. Id. There is no evidence in the record that Eaton or the GTCR members of the LeapSource board ever did anything to inquire about or to follow up on those previously identified potential buyers. 27. By March 20, 2001, Makings had begun negotiating with LeapSource to

reacquire the ICG division assets via a new entity called ICG Group, Inc. 3/30/07 Order, 2007 WL 968424 at *22. RESPONSE: Disputed if the implication is that Makings did not begin negotiating to reacquire the ICG division assets before March 20. Makings expressed his interest in acquiring the ICG

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assets no later than January 2001. SOAF below, paragraphs 42-48. He visited GTCR in Chicago on Monday, March 12, 2001, and formed a new corporation (ICG Group) to acquire these assets upon his return, with the new company being formed on Friday, March 16, 2001. SOAF paragraph 58. 28. On March 20, 2001, Makings formally resigned his position as CEO and

member of the LeapSource board. 3/30/07 Order, 2007 WL 968424 at *22. RESPONSE: This is disputed because, in fact, Making's resignation as a director of LeapSource was dated and purported to be effective as of March 22, 2001. Resignation letter, dated March 22, 2001, LS-91-0250. (SOAF Exhibit 10) The Unanimous Written Consent of the LeapSource Board of Directors accepting his resignation is dated March 29, 2001 and the board formally accepted his resignation effective March 22, 2001. Board minutes, depo exhibit 373. (SOAF Exhibit 11) 29. Between March 23 and March 30, 2001, Eaton on behalf of LeapSource and

Makings on behalf of ICG Group, Inc. negotiated an agreement whereby LeapSource would sell the ICG division assets to ICG Group, Inc. 3/30/07 Order, 2007 WL 968424 at *22; ICG Group Purchase Agmt. (Ex. 16). RESPONSE: Disputed that the agreement was negotiated beginning on or after March 23, 2001. Michael Makings discussed the return of the ICG Division of LeapSource, Inc. to him with Sean Cunningham of GTCR no later than January 2001. Sean Cunningham notes, Depo.

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Exhibit 196 at p. GTCR 012285: ("If Mike Gets 1st installment [on his note], he's willing to negotiate ­ ownership of ICG?." (Emphasis added.) (SOAF Exhibit 8) 30. Under this agreement to sell the ICG division assets: a. Makings cancelled the $2.5 million note (plus accrued interest) from LeapSource to Makings that was then in default and on which LeapSource had made no payments of principal or interest; b. ICG Group, Inc. assumed LeapSource's liabilities with respect to the lease of LeapSource's Phoenix, Arizona facility, which was costing LeapSource $18,000 per month; c. ICG Group, Inc. assumed all employment obligations for 21 former employees of the ICG division effective April 1, 2001, thereby reducing LeapSource's potential exposure to severance claims; d. ICG Group, Inc. reimbursed LeapSource for ICG division employee related expenses for March 26, 2001 through April 1, 2001; e. ICG Group, Inc. assumed all employment related paid time-off obligations for the former ICG division employees in the amount of approximately $40,000; f. ICG Group, Inc. assumed LeapSource accounts payable obligations in the amount of approximately $46,000; g. ICG Group, Inc. agreed to pay to LeapSource half of the net proceeds of any sale of the ICG assets to any third party within one year; and

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h.

Makings released any other claims he may have had against LeapSource.

3/30/01 Board Minutes (Ex. 17); 3/30/07 Order, 2007 WL 968424 at *22; ICG Group Purchase Agmt. (Ex. 16). RESPONSE: This is disputed in part and misleading. It is undisputed that Makings canceled the promissory note, which was uncollectible because of LeapSource's insolvency. 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) With respect to the other terms of the transaction, Makings essentially agreed to start paying the lease and payroll from the time that he acquired the ICG assets. The Purchase Agreement (attached as Exhibit 16 to the GTCR Statement of Facts) was made effective as of March 23, 2001, although the transaction actually closed on March 30, 2001. The document also shows that LeapSource actually funded the payroll for the last week of March (that is, for a period after the effective date of Makings' acquisition of the ICG assets), and that is why ICG Group "reimbursed" LeapSource for those ICG division payroll expenses; LeapSource loaned him the money to make payroll for the first week that he owned the 25 Filed 07/24/2007

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business. Moreover, the schedule of employees attached to the Asset Purchase Agreement confirms that Makings assumed the payroll only for those employees that he chose to hire for the ICG Group, and there is no evidence that any of the employees were employed on any basis other than "at will" of their employer. Makings also assumed a lease that he had originally negotiated for ICG before it was sold to LeapSource, and that he had already personally guaranteed in that transaction. (SOAF Exhibit 23) Makings not only released claims against LeapSource, but also released claims against GTCR and the GTCR members of the LeapSource board. The Plaintiffs do not dispute that Makings agreed to assume two small existing obligations of LeapSource ­ Statement of Facts paragraph 30, subparagraphs e and f ­ for a total of approximately $86,000. Every other obligation assumed by Makings was an expense of the business that he now owned, and was assumed going forward only after the time he owned it. Finally, GTCR has pointed in Statements of Facts paragraph 30, subparagraph g, to a promise to pay half of the proceeds from the sale of the ICG assets to LeapSource, if Makings sold it within one year. The terms of that provision are an admission that Makings really paid nothing of value for the ICG assets when he took them from LeapSource, and that both he and GTCR knew it. If it were true (as Makings and GTCR have argued) that Makings had just given $2.5 or more in value to LeapSource in exchange for the ICG assets, why would he agree to divide the entire proceeds of any sale of those assets with Leapsource, 50/50 (after deducting only any capital investment he might make in the business before the sale)? Makings would certainly have insisted on deducting and recovering first the "valuable consideration" he paid

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for the ICG assets before he agreed to start dividing the net proceeds with LeapSource. That is not what the agreement provides. Instead, it tacitly acknowledges that Makings has paid virtually nothing at all for the ICG assets, and provides that if he turns around and sells them within one year, he will have to split the entire proceeds (less any capital investment he makes before the sale) with LeapSource. The existence of that provision in the agreement is of absolutely no value to LeapSource, because it effectively guaranteed that Makings would not sell the assets for a period of at least twelve months, when he would have to divide the proceeds with LeapSource. The terms of the Asset Purchase Agreement only confirms that Makings paid no real consideration for the ICG assets when he took them from LeapSource just before it was put into bankruptcy by GTCR. 31. Eaton advised the board that after analyzing the proposed transaction and

having it reviewed by LeapSource's outside lawyers at Osborn Maledon, he believed it to be in the best interests of LeapSource. 3/30/01 Board Minutes (Ex. 17); 3/20/01 Board Minutes (Ex. 15); Eaton Dep. (Ex. 23) at 163:21-165:23; Yih Dep. (Ex. 22) at 244:22-245:12. RESPONSE: Disputed if the implication is that Osborn Maledon gave an opinion that the transaction was not a preference or a fraudulent transfer. See the Response to paragraph 33, below. 32. Eaton advised the board that ICG Group, Inc. was the only viable potential

buyer. This was because: a. b. there were no written contracts with ICG customers; ICG's customer relations were largely personal to Makings;

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c.

there were few hard assets to sell to a third party without Makings' cooperation; and

d.

Makings was not interested in working for anyone else.

Eaton Dep. (Ex. 23) at 161:22-162:20, 164:3-165:16; 3/30/01 Board Minutes (Ex. 17); Makings Dep. (Ex. 24) at 66:14-19, 150:9-20; Yih Dep. (Ex. 22) at 242:1-245:12. RESPONSE: Undisputed that Eaton made such statements. However, it is disputed if it is meant to suggest that the GTCR principals who were on the board did not know that these were merely rationalizations for a decision already made, or if it is meant to suggest that the GTCR principals who were on the board actually believed that the transaction was in the best interests of LeapSource, when by their own misconduct they caused Makings to believe that he could have these assets without paying a fair price for them, and created the circumstances that led to this "transaction" with Makings being rationalized as the only option remaining on March 30, 2001. The facts described in the SOAF below show that the GTCR principals themselves knew that this fraudulent transfer to Makings was not in the best interests of LeapSource. 33. The LeapSource board, following discussion with Eaton and LeapSource's

legal advisors from Osborn Maledon, approved the transaction on March 30, 2001. 3/30/07 Order, 2007 WL 968424 at *22; 3/30/01 Board Minutes (Ex. 17). RESPONSE: This is disputed if GTCR is suggesting that Osborn Maledon was provided with all the relevant information about the transaction, including GTCR's opinion about the value of

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the ICG assets, and gave an opinion that the transaction was not a preference or a fraudulent transfer, the record does not support that implication. The board minutes cited by GTCR do not say so, and the record does not support the "advice of counsel" argument implied by GTCR's description of these events: Q. BY MR. FIRESTONE: Exhibit 561, can you please tell me what that is? A. Osborn Maledon invoice to LeapSource. Q. And does it accurately represent the work performed by the Osborn Maledon lawyers, to the best of your knowledge? A. Yeah, I assume. I think so. Q. And if you look on the first page of Exhibit 561, there is a time entry on March 22, 2001, from Mr. Ashworth. Do you see that? A. Correct, yes. Q. T. Ashworth is the Taylor Ashworth we were just talking about? A. Yes. Q. Talks about strategy and how to proceed. Does that have to do with the transaction with ICG Group, Inc., if you know? A. Yeah. I am not sure whether this particular one refers to that. Q. Is that roughly the time frame in which Mr. Ashworth was brought in to review the ICG transaction? A. Yes. Michelle Matiski Depo. at 66:17- 67:13. (SOAF Exhibit 12) That invoice (and the prior invoices 559 and 568 dated March 16 and March 21, respectively, have also been attached hereto as SOAF Exhibit 13) does not reflect any time spent by Osborn Maledon reviewing

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information about the transaction before Makings announced that he was preparing to purchase the assets at the board meeting on March 20 ­ nor does the record indicate that Osborn Maledon was ever provided with all the relevant information about the proposed transaction required to determine whether the transaction was a fraudulent transfer or preference, or in the best interests of the company, such as GTCR's opinions about the value of the ICG assets. The only time entry clearly related to this transaction is dated March 30, when Ms. Matiski was apparently reviewing "final" documents for the transaction, which Mr. Makings has testified were prepared by his attorney, Mr. Ronan. Deposition of Mike Makings at 273:14-23. (SOAF Exhibit 2) Ms. Matiski also testified that she did not consider it her job to determine or opine whether the transaction was in the best interests of LeapSource: Q. As you sit here today, do you agree with Mr. Eaton that it was in the best interest of LeapSource to sell the ICG assets as set forth in the proposal and ultimate asset purchase agreement? MR. BREGER: Objection. Form. A. I don't think I ever had a strong opinion about that. I think it was a -- I think it was a responsible decision. Was it in the best interest? I -- I don't ­ I don't have that opinion. And that is not my job. Michelle Matiski Depo. at 71:22-72:5 (emphasis added). (SOAF Exhibit 12) Neither did she think that Taylor Ashworth had given such an opinion: Q. And, ultimately, he did say that this particular transaction, in his opinion, would hold up to the bankruptcy scrutiny? MR. BREGER: Objection. Form. A. I wouldn't say that. I would say that ­ law firms, by the way, don't give bankruptcy opinions, and so it wouldn't be fair to say in his opinion it would stand up in bankruptcy.
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Michelle Matiski Depo. 64:16-23. (SOAF Exhibit 12) 34. On March 30, 2001, Makings was no longer on the LeapSource board, and he

took no part in the board's decision to approve the sale. 3/30/07 Order, 2007 WL 968424 at *22; 3/30/01 Board Minutes (Ex. 17). RESPONSE: It is not disputed that Makings was not on the LeapSource board on March 30, 2001, but it is disputed that Makings took no part in the board's decision to approve the sale of ICG. The proposal was in fact discussed at a board meeting on 20 March 2001, while Makings was still a member of the board, and in Makings' presence. Makings had already formed a new corporation (on 16 March, see SOAF Exhibit 14) for the purpose of acquiring the ICG Assets. At the board meeting on 20 March, Eaton made it clear that the terms of the transaction had already been discussed, and that he was in favor of the sale. Moreover, the statements made by Eaton to the board on 20 March show that the transaction had obviously been discussed before 20 March ­ and in terms sufficiently encouraging to cause Makings to form a new corporation for the purpose of acquiring those assets on 16 March 2001. At the time ICG Group, Inc. was incorporated on March 16, 2001 Michael Makings was the CEO of LeapSource, Inc. At the time ICG Group, Inc. was incorporated on March 16, 2001 Michael Makings was a director of LeapSource, Inc. Depo exhibit 206 (SOAF Exhibit 15), Depo Exhibit 196 at pg. GTCR012285 (SOAF Exhibit 8), Depo Exhibit 368 (SOAF Exhibit 14), Makings depo at 187:11-23, 209:21-210:19 (SOAF Exhibit 2). 35. On March 31, 2001, the GTCR entities executed a written consent of the

majority shareholder approving the sale. 3/31/01 Shareholder Consent (Ex. 18).

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Undisputed. RESPONSE: 36. As of the date of ICG Group, Inc.'s incorporation, and at all times forward,

Makings has been ICG Group, Inc.'s sole shareholder and sole director. 8/28/06 Order, 351 B.R. at 709. RESPONSE: Undisputed. 37. There is no evidence that any member of the LeapSource board that approved

the sale of the ICG division to ICG Group, Inc. stood on both sides of the transaction or gained any personal benefit from the transaction. 8/28/06 Order, 351 B.R. at 709; ICG Group Purchase Agmt. (Ex. 16); 3/30/01 Board Minutes (Ex. 17). RESPONSE: Disputed in part. The GTCR shareholders and directors received a release of claims from Makings as part of the transaction (Exhibit 16 to the GTCR Statement of Facts), which released them from claims arising from their acts as the majority and controlling directors of the LeapSource board and as controlling shareholders of LeapSource, a status that no other director or shareholder held. GTCR Defendants also had interests in the transactions between LeapSource and GTCR that were not shared by other directors or shareholders. and between LeapSource and the GTCR VI Entities. Only GTCR shared some of GTCR's concerns to "(1) limit downside (2) avoid embarrassment [and] (3) protect COMSYS and other GTCR investment(s)." Sean Cunningham notes, Dep. Ex. 196 at Bates range number GTCR012260-012261. (SOAF

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Exhibit 8) GTCR and GTCR members of the LeapSource board were also considering potential deals with LeapSource assets to benefit COMSYS and GTCR Fund VI interests that no other LeapSource directors or shareholders shared: Q. If you -- if you could, I'd like you to refer to the lines that -- where you are quoted here as referring to "getting the right to convert some portion or all of our investment in COMSYS into some sort of ownership in the data center." Do you see that part of the message? A. Q. I do, yes, sir. Can you -- do you know what that is referring to?

A. I think what it says is that there might be a scenario where we finance COMSYS to take over and build the data center, which was losing money at the time, I believe, and that, as a result, we and COMSYS would be co-owners in the data center on some basis. I think that's what that's saying. Q. A. Who is the -- the "we" in that sentence? We, GTCR Fund VI.

Rauner Deposition (Emphasis added) at 194:18-195:10. (SOAF Exhibit 16) 38. There is no evidence that any of the GTCR entities that authorized the sale of

the ICG division to ICG Group, Inc. as majority shareholder stood on both sides of the transaction or gained any personal benefit not shared by other shareholders from the transaction. 8/28/06 Order, 351 B.R. at 709; 3/31/01 Shareholder Consent (Ex. 18); ICG Group Purchase Agmt. (Ex. 16). RESPONSE: Disputed in part; see the response to paragraph 37.

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VI.

SUBSEQUENT PERFORMANCE OF ICG IN 2001-2004. 39. In the four years after ICG Group, Inc. purchased the ICG division from

LeapSource, ICG's revenues never reached their pre-LeapSource levels. For the 9 months of 2001 following the March 30 purchase, ICG's revenue was $1.6 million. Revenues for 2002 were approximately $2.9 million. Revenues for 2003 were approximately $2 million. Revenues for 2004 were approximately $2.5 million. Makings Dep. (Ex. 24) at 20:20-21:18. RESPONSE: It is not disputed that ICG revenues have not returned to pre-LeapSource levels. However, the Court can take judicial notice of the fact that the Trustee asserted preference and fraudulent transfer claims against Makings with respect to his acquisition of the ICG assets; as a result, Makings has no incentive to do anything but "tread water" with the ICG business until the Trustee's claims against him are resolved. STATEMENT OF ADDITIONAL FACTS 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. 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) 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? 34 Filed 07/24/2007

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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. 35 Filed 07/24/2007

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Q. Did he say anything else on that issue? A. All he wanted to do was walk away with ICG. Q. Did he specifically say that? A. He specifically said that. Patti Walker deposition at 39:11-41:8 (emphasis added). (SOAF Exhibit 17) 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). 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 GTCR012260-012261, 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.

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. *** 36 Filed 07/24/2007

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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). 45. On January 23, 2001 Sean Cunningham of GTCR noted the following with

regard to Michael Makings: Can we do this legally? 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) 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. · 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

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o Mike concerned that Tom's suited and doesn't want to make cuts for fear of scaring potential investors · 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) 47. On January 26, 2001, Mike Makings sent a "revised 2001 budget" to Dan Yih

of GTCR. Depo Exhibit 183. (SOAF Exhibit 18) 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.
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Q. Do you know whether Mr. Eaton sought an appraisal or valuation of the assets? A. I don't believe he did.

Q. Do you remember asking whether an appraisal had been done? A. Q. I don't recall. Do you still have in front of you Exhibit 196?

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

(There followed a discussion outside the record.) 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."

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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) 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 5x Free Cash 6x Free Cash 7x 8x " " Value 3,987K 4,785K 5,582K 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) 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)

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