2011-10-26 Tessoni Answer To First Amended Consolidated Complaint

STATE OF SOUTH CAROLINA

COUNTY OF GREENVILLE

In re International Textile Group MergerLitigation

)) IN THE COURT OF COMMON PLEAS))) c.A. No. 2009-CP-23-3346

ANSWER AND DEFENSES OF DR. DANIEL TESSONI

ANSWER AND DEFENSES

Defendant, Dr. Daniel Tessoni, by and through his undersigned counsel, answers the

Amended Consolidated Complaint in this matter, as follows:,

INTRODUCTION

Defendant answers the Amended Consolidated Complaint upon his knowledge or upon

information and belief. Defendant denies each and every allegation of Plaintiffs' Amended

Consolidated Complaint not herein specifically admitted, qualified, modified, or explained.

Defendant further states in response to the allegations of Plaintiffs' Amended Consolidated

Complaint that:

1. To the extent any fiduciary duties were owed, Defendant did not breach them

with respect to merger of International Textile Group, Inc. ("FITG") and Safety Components

International, Inc. ("SCI"), or otherwise. To the contrary, a business plan was executed that was

endorsed by the textile industry, the companies' customers, the investing public, and, most

notably, SCI's minority shareholders. Indeed, Menezes and FURSA, two of SCI's largest

minority shareholders, ratified the merger of SCI and FITG in the most critical way-they

invested in it.

2. Menezes, the former CFO and interim CEO of SCI, was part of the merger

planning from the very beginning and, after he was terminated by SCI, still invested

approximately $1 million in SCI knowing that the merger was in the works. Likewise, after

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learning about the merger, FURSA-a hedge fund with more than $1.5 billion in managed

assets--eontacted Wilbur Ross to advise him that it saw "the strategic rationale for the deal" and

that "it certainly makes sense to create a larger, more diversified company by combining the two

companies." FURSA, putting its money where its mouth was, then purchased approximately

72,000 additional shares of SCI and the combined company ("NITG"), a 20% increase in

FURSA's position.

3. Why did Menezes and FURSA increase their holdings in SCI after learning about

the merger with FITG? Because the merger made good business sense and they knew Wilbur

Ross's ability to reform and reorganize poor performing companies and turn them into gold.

4. Mr. Ross, through his private equity management company, W.L. Ross & Co,

LLC ("WLR"), was enjoying a well publicized, record breaking year in 2006 thanks to the

successful implementation of WLR's investment strategy-identifying high risk, out of favor

industries and distressed companies and restructuring them to create value. For example, WLR

had taken bankrupt steel companies, restructured and reorganized them into a new entity,

International Steel Group, and made tremendous profits with this investment for his investors

and the associated portfolio companies' shareholders. At the time of the merger of SCI and

FITG, WLR Recovery Fund II, L.P. ("Fund II"), the private equity fund that controlled the

majority of shares of FITG, had an internal rate of return of over 100% and had distributed more

than $700 million to its investors. At the same time, WLR Recovery Fund III, L.P. ("Fund III"),

a $1.1 billion fund launched in June 2005 that held the majority of shares of SCI, was also off to

a strong start, posting an internal rate of return of approximately 70%.

5. On information and belief as to these matters, thanks to the success of Fund II and

the launch of Fund III, AMVESCAP PLC (n/kJa Invesco, Ltd.) ("Invesco") sought to acquire

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WLR in the Fall of 2005 and signed a definitive agreement on July 22, 2006. Invesco purchased

WLR because of its historically strong performance and good synergies that it presented. The

deal was conceived of and concluded long before-and independent from-the merger of SCI

and FITG. Invesco's purchase was shrewd. Even though SCI, FITG, and the combined entity

underperformed, WLR still raised billions of dollars in private equity as part of Invesco.

6. Before the merger, SCI faced an uncertain future, was performing poorly, and

badly needed the merger to address its ongoing financial and customer problems:

A. SCI had been continuously on the market since June 2004 and attracted

very little interest. SCI hired a financial advisor to peddle the company and, despite contacting

more than 50 strategic potential buyers, only one was interested enough to make a preliminary

offer and conduct due diligence. But that potential buyer cut its offer nearly in half after

reviewing SCI's declining financial performance and alarming loss of market share. By the end

of July 2005, SCI's EBITDA projections had declined to such an extent that SCI's CEO admitted

that subjecting the company to an auction process was not advisable. Soon, only distressed,

high-risk investors like WLR were interested in acquiring SCI.

B. SCI's EBITDA declined sharply from 2004 through 2006, falling by 50%

each year. Indeed, in the quarter before the merger closed, SCI posted an operating loss of

approximately $2.5 million, and had a 2006 year end EBITDA of about $4 million, nearly $15.5

million less than projected. In fact, an outside consultant hired by Menezes in 2006 concluded

SCI was in a "death spiral." Even more troubling, Menezes seemed to have no plan to reverse

these earnings problems.

C. SCI's market position was also eroding. SCI lost contracts not only due to

program phase outs, but was also losing market share to lower cost providers with superior

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equipment and pricing. Moreover, SCI's ongoing product quality issues created tremendous

customer relationship problems that had SCI ranked dead last in service by one of its principal

customers. Menezes exacerbated the problem while interim CEO by taking extreme positions

due to his unfamiliarity with technical issues. He so antagonized his largest customers that

Wilbur Ross had to make special trips to their CEOs to salvage the situation.

D. John Corey, the former CEO of SCI, abruptly resigned approximately two

weeks after the majority stake in SCI was purchased by Fund III. Corey's resignation was

unexpected, as he and Menezes pocketed $1.4 million and $620,000, respectively, in bonuses

that were partly designed to induce them to remain with SCI. After Corey's resignation,

Menezes was named interim CEO in addition to his CFO duties, but proved to be unsuitable for

the job and was terminated.

E. As discussed above, even with its unlevered balance sheet, SCI was

unappealing to buyers. SCI's available debt was also insufficient for its needs and could not

support meaningful acquisitions or entry into necessary growth markets, like one piece weaving

("OPW") technology. SCI's declining earnings and alienation of its customers virtually assured

that its debt availability would have shrunk over time.

7. Because of SCI's troubles, its management and minority shareholders were

undoubtedly excited about WLR's plan to merge it with FITG. In fact, I, SCI's minority

shareholder representative, agreed to the sale of SCI's majority block in part because of Mr.

Ross's track record in consolidating businesses and his intent to vertically integrate SCI. The

desired vertical integration began with the merger of SCI and FITG, and continued in 2007 with

the contribution of a third textile manufacturer, BST.

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8. In addition to vertical integration, SCI enjoyed many more benefits from the

merger. The merger provided SCI a desperately needed CEO, CFO, and other experienced

managers. FITG management, using their far greater technical know-how, solved SCI's quality

problems that were interfering with sales to Europe; improved and grew SCI's technical fabric

business; and modernized SCI's equipment. FITG management also implemented long overdue

rationalization and streamlining of SCI's Mexican and German facilities, saving millions of

dollars.

9. Through the merger, SCI realized millions of dollars in cost saving synergies that

continued to grow after BST was contributed to NITG. SCI further benefited from FITG's tax

credits and improved stop-loss insurance levels.

10. SCI also was instantly diversified by the merger. SCI became part of a much

larger company, joining well known and respected textile manufacturers Burlington Industries

and Cone Mills, and leveraged economies of scale with suppliers.

11. Simply put, SCI needed and benefited from the merger more than FITG.

12. The merger of SCI and FITG was arrived at through arm's length dealing between

two separate special committees. I was a member of the SCI special committee. Interested

directors and management were walled off from any involvement with the financial terms of the

deal. The dual special committee structure not only insured that the merger was fair, but now

requires that the special committees' collective determination be examined under the deferential

business judgment rule standard.

13. Even if the merger is subject to a more exacting standard of review, the process

still easily passes muster as the SCI special committee was independent and authoritative. I was

the longest-serving SCI director-who was appointed by SCI's previous owners and directors-

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had no relationship with WLR or its affiliates. I was also was SCI's "Continuing Director" and

expressly authorized by SCI's charter to approve interested stockholder transactions like the

merger. In fact, I had previously worked on a similar one-man special committee during SCI's

arduous sale process. As SCI's Continuing Director, I was uniquely positioned to approve,

broker, or veto the merger because under the express terms of SCI's Certificate of Incorporation,

he could not be replaced by a controlling shareholder without his own approval.

14. The SCI special committee was first brought in at the behest of Menezes and

SCI's corporate counsel when preliminary merger discussions began. The special committee's

first act was to demand that FITG sign a confidentiality agreement before reviewing any non

public SCI information. Then it imposed a 30-day time limit in which FITG was to investigate a

possible transaction with SCI and, if a transaction was to be pursued, required that the SCI Board

of Directors create a new special committee to review, evaluate, investigate, negotiate, and

approve that transaction.

15. After SCI's Board of Directors formed the merger special committee, the SCI

special committee retained its own independent advisors and worked on its own time table,

taking several weeks to make extensive revisions to the proposed merger agreement and

bargaining so aggressively that at one point it broke off negotiations. The strategy worked.

Merger negotiations resumed after WLR capitulated to the SCI's special committee's demands.

16. I with the help of my advisors negotiated down the post-merger ownership split

from FITG's special committee's unfavorable initial demands of 72% (for FITG)/28% (for SCI),

70/30%, and 67/33%. I finally extracted an exchange ratio of 65/35 while simultaneously

securing a 70% discount on the appraised value of FITG's significant off-balance sheet assets.

FITG's special committee advisors admitted afterward that they had hoped to get a better deal.

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17. I continued to exert my independence even after the exchange ratio was agreed

upon in principle, refusing to provide SCI's interested directors with its advisor's detailed

financial analysis until the merger was approved and the agreement was signed. Wilbur Ross,

who had requested these materials, respected this decision, understanding that he could not

interfere with the special committee's independent decisions concerning the merger exchange

ratio. Indeed, no one affiliated with WLR played any role negotiating the merger price.

18. I did not breach any fiduciary duties, commit corporate waste, or engage in some

vague conspiracy to harm SCI's minority shareholders. On information and belief as to these

matters, Funds II and III invested hundreds of millions of dollars in NITG in the belief that its

business model would be successful. Like Menezes, FURSA, and the other minority

shareholders, Funds II and III understood the risks involved in this investment, but hoped that

NITG would succeed and increase stockholder value. The downturn in the economy has delayed

NITG's plans, but I still expect it to correct itself and reward its shareholders' patience and faith.

Plaintiffs, on the other hand, want a guarantee for their investment, seeking to be the only

shareholders to profit from this investment. But Plaintiffs cannot avoid the risks they knowingly

took. The merger was fair, the price was fair, and Plaintiffs' Monday morning quarterbacking

does not change that fact.

GENERAL DENIAL

19. Defendant Tessoni denies any wrongdoing or improper conduct of any type as

alleged by Plaintiffs.

AFFIRMATIVE DEFENSES

FIRST DEFENSE

Defendant responds to the individual paragraphs of the Amended Consolidated

Complaint as follows:

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20. Defendant states that the section entitled "contents" is not subject to an admission

or denial. To the extent a response is possible, Defendant admits that Plaintiffs Brian P.

Menezes; FURSA Alternative Strategies LLC; FURSA Master Global Event Driven Fund, LP;

Ramius Securities, LLC; Ramius Credit Opportunities Master Fund, Ltd.; Kirk Wortman; Joseph

Asiaf; Marilyn Asiaf, and Juanita Marett are named as Plaintiffs in this action and that Brian P.

Menezes; FURSA Alternative Strategies LLC; and FURSA Master Global Event Driven Fund,

LP (collectively, "FURSA") were minority shareholders of Safety Components International,

Inc. ("SCI") before it merged with International Textile Group, Inc. ("FITG") and became a new

combined company ("NITG"). Defendant further admits that Wilbur L. Ross, Jr.; Michael 1.

Gibbons; David H. Storper; David L. Wax; Gary L. Smith, Joseph L. Gorga; Daniel D. Tessoni;

Stephen B. Duerk; WL Ross & Co. LLC ("WLR"); WLR Recovery Fund II, L.P. ("Fund II");

WLR Recovery Fund III, L.P. ("Fund III"); WLR Recovery Associates II LLC ("Associates II");

WLR Recovery Associates III LLC ("Associates III"), and RSM EquiCo Capital Markets LLC

(n/k/a McGladrey Capital Markets, LLC) ("RSM") are Defendants in this matter, and that NITG

is the nominal defendant is this matter. Defendant further admits that Wilbur L. Ross is CEO of

WLR, chairman of NITG's board, and has been chairman of the boards of SCI and FITG.

Defendant further admits that Associates II is the general partner of Fund II and that Associates

III is the general partner of Fund III. Defendant further admits that Michael 1. Gibbons is CFO

of WLR, is a director of NITG, and has been a director of SCI. Defendant further admits that

David H. Storper is a senior managing director of WLR, is a director of NITG, and has been a

director of SCI. Defendant further admits that David L. Wax is a managing director of WLR, is

a director of NITG, and has been a director of FITG. Defendant further admits that Joseph L.

Gorga is a director and CEO of NITG, was CEO of FITG, and has been a director of SCI and

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FITG. Defendant further admits that he is a director of NITG, and has been a director of SCI.

Defendant further admits that Stephen B. Duerk was President of SCI. Defendant further admits

that Gary L. Smith was a director and CFO of FITG and NITG. Defendant further admits that

RSM was the financial advisor for the SCI special committee that reviewed, investigated,

negotiated, and approved the merger of SCI and FITG. Defendant further admits that SCI

special committees waived a standstill provision so that affiliates of WLR could purchase SCI

and so that a transaction between SCI and FITG could be explored. Defendant further admits

that WLR provided the special committees of FITG and SCI with a proposal to merge those two

companies. Defendant further admits that SCI's special committee recommended approving the

merger of FITG and SCI to the SCI Board and that the Board, in reliance on that

recommendation, approved the merger. Defendant further admits that the merger of FITG and

SCI closed on October 20, 2006. Defendant denies that FITG was failing, that he was acutely

aware of it failing, or that it needed SCI's liquidity to keep FITG from failing. Defendant further

denies that they disregarded risks to SCI. Defendant further denies that there was any "co

opting" of me-whatever that means--or that there was a problematic basis for the second

standstill waiver. Defendant further denies that SCI was not authorized to conduct diligence on

FITG. Defendant further denies that Ross directed that SCI acquire FITG to avoid spending cash

to buyout SCI's minority shareholders. Defendant further denies that the SCI special committee

for the merger was fatally flawed. Defendant further denies that there was pressure on me to

select RSM as its financial advisor. Defendant further denies that the merger agreement was

unfair to SCI. Defendant further denies that FITG or WLR improperly communicated with

RSM. Defendant further denies that the value of SCI or NITG collapsed because of the merger.

Defendant further denies that the new credit facility or debt for equity swap were negative

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consequences of the merger. Except as expressly admitted and denied, Defendant states that the

remaining allegations in the section entitled "contents" are so vague and ambiguous that

Defendant is without knowledge or information to form a belief as to the truth of those

allegations.

21. Defendant admits that this is a derivative action and class action brought on

behalf of the minority stockholders of a public company formerly known as SCI that, before

October 20, 2006, was headquartered in Greenville, South Carolina. Except as expressly

admitted, Defendant denies any remaining allegations in Paragraph 1.

22. Defendant admits that FITG and SCI were combined on October 20, 2006 and

that the combined company and FITG were located in Greensboro, North Carolina at that time.

Defendant further admits that SCI was not worth $164 million and could not issue consideration

in that amount. Except as expressly admitted, Defendant denies any remaining allegations in

Paragraph 2.

23. Defendant admits that FITG merged with a subsidiary of SCI and that SCI was

renamed International Textile Group, Inc. ("NITG"). Except as expressly admitted, Defendant

denies any remaining allegations in Paragraph 3.

24. Defendant admits that the asked for price of SCI's stock on August 29, 2006

ranged between $14.00 and $14.65 per share on the Over the Counter Bulletin Board

("OTCBB"), and that SCI's stock was thinly traded and that OTCBB bid prices do not represent

SCI's actual value. Except as expressly admitted, Defendant denies any remaining allegations in

Paragraph 4.

25. Defendant denies the allegations in Paragraph 5.

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26. Defendant states that under SCRCP, Rule 8 he is not required to investigate third

party historical stock charts for more than a dozen independent companies to ascertain the

underlying accuracy of Plaintiffs' proposed trial demonstrative, and, on that basis, he is without

knowledge or information to form a belief as to the truth of the allegations in Paragraph 6, the

footnote to Paragraph 6, and the chart following Paragraph 6.

27. Defendant admits that on April 2, 2008, the asked for price of NITG' s stock was

$1.65 a share on the OTCBB, that NITG's stock was thinly traded and that OTCBB bid prices do

not represent NITG's actual value. Except as expressly admitted, Defendant denies any

remaining allegations in Paragraph 7.

28. Defendant admits that the asked for price of NTIG's stock has been less than ten

cents a share on the OTCBB, that NITG's stock is thinly traded, and that OTCBB bid prices do

not represent NITG's actual value. Except as expressly admitted, Defendant denies any


29. Defendant admits that Plaintiffs purport to paraphrase and quote from NITG's

Form lO-Q filed on November 12, 2010, this document speaks for itself, and Defendant denies

any allegations inconsistent with the content of that document. Except as expressly admitted and

stated, Defendant denies any remaining allegations in Paragraph 9.



32. Defendant states that this is a legal conclusion that is not subject to an admission

or denial. To the extent a response is possible, Defendant denies the allegations in Paragraph 12.



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41. Defendant admits that Plaintiffs were shareholders of SCI before the merger and

that Menezes and FURSA are shareholders of NITG. Defendant is without knowledge or

information to form a belief as to the truth of whether the other Plaintiffs are shareholders of

NITG. Except as expressly admitted, Defendant denies any remaining allegations in Paragraph

21.

42. Defendant admits that Wilbur Ross and W.L. Ross & Co., LLC ("WLR") are

defendants in this matter. Defendant further admits that affiliates of WLR held the majority of

shares of SCI and FITG, and the majority of shares of NITG. Except as expressly admitted,

Defendant denies any remaining allegations in Paragraph 22.

43. Defendant admits that Michael Gibbons and David Storper were directors of SCI

at the time of the merger with FITG. Defendant further admits that David Wax and Messrs.

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Gibbons and Storper are employed by WLR and are defendants in this matter, and that affiliates

of WLR owned shares in SCI and FITG. Except as expressly admitted, Defendant denies any


44. Defendant admits that he was the independent director of SCI and is a defendant

in this matter. Defendant further admits that RSM was the financial advisor for the SCI special

committee for the merger and is a defendant in this matter. Defendant further admits that Joe

Gorga was a director and the CEO of FITG, a director of SCI as of April 2006, and is a

defendant in this matter. Defendant further admits that Gary Smith was a director and the CFO

of FITG and is a defendant in this matter. Except as expressly admitted, Defendant denies any


45. Defendant admits that NITG has been named as a nominal defendant in the

derivative action. Except as expressly admitted, Defendant denies any remaining allegations in

Paragraph 25.

46. Defendant states that this is a legal conclusion tha'" is not subject to an admission


47. Defendant admits the allegations in Paragraph 27.


49. Defendant admits that Menezes is an adult individual resident of South Carolina.

Defendant further admits that shortly before the merger, Menezes exercised options and

purchased 102,000 shares of SCI stock, subsequently acquired approximately 11,000 additional

shares ofNITG, and still owned stock in NITG as of September 10,2010. Except as expressly

admitted, Defendant is without knowledge or information to form a belief as to the truth of the


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50. Defendant admits that FURSA owned 358,606 shares in SCI before the merger

with FITG, purchased approximately 72,000 additional shares in anticipation of the merger and

thereafter, and still held stock in NITG as of 2010. Except as expressly admitted, Defendant is

without knowledge or information to form a belief as to the truth of the remaining allegations in

Paragraph 30.

51. Defendant admits that at the time of the merger, Ramius Capital Group, LLC;

RCG Carpathia Master Fund ("Carpathia"); Ramius Securities, LLC; C4S & Co., LLC; Peter A.

Cohen, Morgan B. Stark, Thomas W. Strauss, and Jeffrey M. Solomon were beneficial owners of

350,671 shares of SCI held by Carpathia and Ramius Securities, LLC. Except as expressly

admitted, Defendant is without knowledge or information to form a belief as to the truth of the


52. Defendant is without knowledge or information to form a belief as to the truth of

the allegations in Paragraph 32.





55. Defendant admits that NITG is a publicly traded Delaware company. Defendant

further admits that FITG became a subsidiary of SCI and SCI was renamed NITG. Defendant

further admits that before the merger SCI had its headquarters and principal place of business in

South Carolina. Except as expressly admitted, Defendant denies any remaining allegations in

Paragraph 35.

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56. Defendant admits that on the day of the merger, NITG consolidated its

headquarters in Greensboro, North Carolina. Defendant further admits that a subsidiary ofNITG

has operations located in Greenville, South Carolina. Except as expressly admitted, Defendant


57. Defendant admits that he became a director of SCI in July 2005, Messrs. Ross,

Storper, and Gibbons were SCI directors beginning in December 2005, and Mr. Gorga was a SCI

director beginning in April 2006. Except as expressly admitted, Defendant denies any remaining

allegations in Paragraph 37.

58. Defendant admits that Plaintiffs purport to paraphrase and quote from the Joint

Proxy Statement/Prospectus of SCI and FITG, dated September 22,2006 ("Prospectus"), that the

Prospectus speaks for itself, and Defendant denies any allegations inconsistent with the content

of the Prospectus. Except as expressly admitted and stated, Defendant denies any remaining


59. Defendant admits that FITG merged with a subsidiary of SCI and that SCI was

renamed International Textile Group, Inc.. Defendant further admits that FITG was a private

company located in Greensboro, North Carolina. Except as expressly admitted, Defendant


60. Defendant admits that Plaintiffs purport to paraphrase and quote from the

Prospectus, that the Prospectus speaks for itself, and Defendant denies any allegations

inconsistent with the content of the Prospectus. Except as expressly admitted and stated,



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62. On infonnation and belief as to these matters, Defendant admits that Wilbur L.

Ross, Jr. is a Florida resident and Chainnan and CEO of WLR which he created in 2000.

Defendant further admits that Mr. Ross sold his 99% ownership interest in WLR to Invesco and

that he has a financial stake in Funds II and III. Except as expressly admitted, Defendant denies

any remaining allegations in Paragraph 42.


64. On infonnation and belief as to these matters, Defendant admits that Mr. Ross

serves or has served on the boards of Nano-Tex, LLC, International Coal Group, Inc., Clarent

Hospital Corp., and Phoenix International Holding Co. of the United States; Mittal Steel

Company, N.V. of the Netherlands; Insuratex, Ltd. of Bennuda; Nikko Electric Industry Co. Ltd.

and Ohizumi Manufacturing Company of Japan; Blue Ocean Re Holdings Ltd. and Montpelier

Re Holdings Ltd. in Bennuda; International Auto Components Group SL in Europe and Brazil;

and Wagon PLC in Europe. Except as expressly admitted, Defendant denies any remaining


65. On infonnation and belief as to these matters, Defendant admits that Mr. Ross

has appeared on Forbes magazine's various lists of wealthy individuals, that he has been labeled

a "billionaire" in the media, and that such estimates of his wealth are inflated and not based on

any earnings infonnation provided by him. Defendant further admits that some media outlets

have referred to Mr. Ross by the nickname the "King of Bankruptcy," but that Mr. Ross is

neither a monarch nor refers to himself by this name. Except as expressly admitted, Defendant


66. On infonnation and belief as to these matters, Defendant admits that Mr. Ross has

appeared on Forbes magazine's various lists of wealthy individuals and that such estimates of his

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wealth are inflated and not based on any earnings information provided by him. Except as

expressly admitted, Defendant denies any remaining allegations in Paragraph 46.

67. Defendant admits that Fund III owned approximately 72% of SCI and Fund II

owned 74% of International Textile Holdings ("ITH"), which owned 85.4% of FITG. Since the

merger, Fund II, through ITH, and Fund III own more than 85% of NITG. Except as expressly


68. Defendant admits that affiliates of WLR held four of the five seats on the SCI

Board, five of the six seats on the FITG Board, and six of the eight seats on the NITG Board.

Except as expressly admitted, Defendant denies any remaining allegations in Paragraph 48.

69. On information and belief as to these matters, Defendant admits that in July 2006,

Invesco agreed to acquire WLR for an initial payment of $100 million with additional payments

between $30 to $55 million, the payable amount depending on the achievement of annual fund

raising targets over the five years after the transaction's completion. Except as expressly


70. On information and belief as to these matters, Defendant admits that the

performance and value of portfolio companies in existing WLR affiliated funds-including

FITG and SCI-played no role in the amount paid by Invesco for WLR because the deal was

forward looking and Invesco did not purchase an interest in FITG's, SCI's, or any other portfolio

company's performance. Except as expressly admitted, Defendant denies any remaining





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74. On information and belief as to these matters, Defendant admits that the

performance and value of portfolio companies in existing WLR affiliated funds-including

FITG and SCI-played no role in the amount paid by Invesco for WLR because the deal was

forward looking and Invesco did not purchase an interest in FITG's, SCI's, or any other portfolio

company's performance. Except as expressly admitted, Defendant denies any remaining


75. On information and belief as to these matters, Defendant admits that Mr. Ross is

Chairman and CEO of WLR and that WLR does not invest in any funds or portfolio companies.


76. On information and belief as to these matters, Defendant admits that WLR

Recovery Fund IV, L.P. ("Fund IV") closed in September 2007. Except as expressly admitted,



78. On information and belief as to these matters, Defendant admits that Fund IV has

approximately $4 billion in committed capital. Except as expressly admitted, Defendant denies


79. On information and belief as to these matters, Defendant admits that during Fund

IV's investment period, which generally runs four years or until a new fund is launched, it pays

an annual management fee totaling 1.5% of the size of the Fund. Defendant further admits that

since Invesco purchased WLR, Invesco has received all management fees paid by the funds

managed by WLR. Except as expressly admitted, Defendant denies any remaining allegations in

Paragraph 59.

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Recovery Fund V, L.P. ("Fund V") was recently launched to make investments in distressed

compames. Except as expressly admitted, Defendant denies any remaining allegations in

Paragraph 60.


Recovery Funds typically pay an annual management fee totaling 1.5% of the size of the Fund

during their investment periods, which generally run four years or until a new fund is launched.

Defendant further admits that Invesco will receive all management fees paid by Fund V when it

begins paying management fees, but that the amount of the management fees to be paid by Fund

V has not been determined yet. Except as expressly admitted, Defendant denies any remaining


82. On information and belief as to these matters, Defendant admits that Mr. Ross has

received payments called for in the WLR purchase agreement. Except as expressly admitted,


83. Defendant admits the FITG's business plan in 2006 was to build Greenfield plants

located in lower cost countries closer to its customers. Except as expressly admitted, Defendant



85. On information and belief as to these matters, Defendant admits that Mr. Ross

raised billions of dollars even though FITG, SCI, and NITG have struggled to perform. Except

as expressly admitted, Defendant denies any remaining allegations in Paragraph 65.

86. Defendant states that the allegations in Paragraph 66 and its subparts A-E-

"Ross's actions at issue in this case"-are so vague and unspecified that he is not subject to

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admission or denial. Indeed, Defendant does not know what alleged actions Plaintiffs intend to

encompass with these allegations and cannot meaningfully state the capacity in which Mr. Ross

undertook these unknown alleged actions. Accordingly, Defendant is without knowledge or

information to form a belief as to the truth of any allegations in Paragraph 66 and its subparts A-

E.

87. On information and belief as to these matters, Defendant admits that WLR is an

investment firm based in New York that invests in financially distressed companies in various

ways, including leveraged buyouts and restructurings. Defendant further admits that Mr. Ross

founded WLR in April 2000. Defendant further admits that none of them are citizens of South

Carolina. Except as expressly admitted, Defendant denies any remaining allegations in

Paragraph 67 and footnote 2. 1

88. Defendant admits that, at the time of the merger, Fund II owned 241,419 shares of

SCI and Fund III owned 3,920,975 shares of SCI, which constituted approximately 75.6%

ownership. Except as expressly admitted, Defendant denies any remaining allegations in

Paragraph 68.

89. Defendant admits that four of the five SCI directors were interested in the merger

and that Messrs. Ross, Gibbons, Storper and Gorga sat on SCI's Board. Except as expressly


I As set forth in the General Denial, Defendant objects to Plaintiffs definition of WLR in the AmendedConsolidated Complaint on the grounds that it is so broad that it makes an already prolix pleading even moreburdensome, and renders many allegations vague and ambiguous. Accordingly, Defendant interprets everyreferences to WLR in the Amended Consolidated Complaint as solely meaning the entity WL Ross & Co., LLC, andDefendant denies each and every allegation in the Amended Complaint in which Plaintiffs interpret WLR to includeany Defendant other than the entity WL Ross & Co., LLC. Defendant further states that all references to WLR inthis Answer strictly mean the entity WL Ross & Co., LLC and do not encompass any WLR affiliates, including butnot limited to Associates II and III, Funds II and III, or Messrs. Ross, Storper, Gibbons, or Wax.

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90. Defendant admits that, at the time of the merger, Fund II owned 74% of ITH,

which owned 14,310,497 shares of FITG, constituting approximately 85.4% ownership. Except


91. Defendant admits that five of the six FITG directors were interested in the merger

and that Mr. Ross was Chairman and Messrs. Wax, Smith, Gorga and Ms. Wilson sat on FITG's

Board. Except as expressly admitted, Defendant denies any remaining allegations in Paragraph

71.

92. Defendant admits that Fund II, through ITH, and Fund III own approximately

22,902,280 shares of common and preferred NITG stock. Except as expressly admitted,


93. Defendant admits that affiliates of WLR hold six of the eight seats on NITG's

Board of Directors and that Mr. Ross is Chairman and Messrs. Gibbons, Storper, Wax, Gorga

and Ms. Wilson sit on NITG's Board. Except as expressly admitted, Defendant denies any


94. Defendant admits that Fund II owned 241,419 shares of SCI and that WLR is its

management company. Except as expressly admitted, Defendant denies any remaining


95. Defendant admits that Fund II valued its stockholdings in SCI at approximately

$3 million and that value was calculated on Fund II's original cost to purchase those shares.

Defendant further admits that the $3 million value of those shares remained the same after the

merger and did not change until mid-2008. Except as expressly admitted, Defendant denies any


- 21 -ATI-2491514vI

96. Defendant admits that, at the time of the merger, Fund II ovvned 74% of ITH,

which owned 14,310,497 shares ofFITG. Defendant further admits that Fund II valued its share

of FITG at approximately $111.7 million and that value was calculated based on the last equity

transaction for these shares-a sale to the Pension Benefit Guaranty Corporation in 2005.

Defendant further admits that the $111.7 million value of FITG remained the same after the

merger and did not change until mid-2008. Defendant further admits that Fund II's cost basis for

FITG was approximately $53.1 million based on the purchase of Burlington Industries and Cone

Mills in November 2003 and March 2004. Defendant further admits that as of September 30,

2006, Fund II had made four separate loans to FITG totaling approximately $56.2 million to fund

FITG's building facilities located in low cost markets that were closer to its customers. Except


97. On information and belief as to these matters, Defendant admits that Associates II

is the general partner of Fund II and that Associates II's investment advisor is WLR. Defendant

further admits that Mr. Ross was and is general manager of Associates II, which had and has

voting power over shares owned by Fund II. Except as expressly admitted, Defendant denies


98. On information and belief as to these matters, Defendant admits that Associates

II's capital balance in Fund II for the nine months ended September 30,2006 was approximately

11.3% of the total partner capital for Fund II. Except as expressly admitted, Defendant denies



employees were members of Associates II and that Mr. Ross had an approximately 54% interest,

Mr. Storper had a 12.5% interest, Mr. Wax had a 7.5% interest, and Mr. Gibbons had a 2%

- 22-ATl-2491514vl

interest in Associates II. Except as expressly admitted, Defendant denies any remammg


100. On information and belief as to these matters, Defendant admits that Fund III

owned 3,920,975 shares of SCI and that WLR is its management company. Except as expressly



valued its holdings in SCI at approximately $48.7 million and that value was calculated on Fund

Ill's original cost to purchase those shares. Defendant further admits that the $48.7 million value

of those shares and the basis for that value remained the same after the merger until mid-2008.


102. On information and belief as to these matters, Defendant admits the allegations in

Paragraph 82.


III is the general partner of Fund III and that Associates Ill's investment advisor is WLR.

Defendant further admits that Mr. Ross was and is general manager of Associates III which had

and has voting power over shares owned by Fund III. Except as expressly admitted, Defendant



Ill's capital balance in Fund III for the nine months ended September 30, 2006 was

approximately 6.75% of the total partner capital for Fund III. Except as expressly admitted,

Defendant denies any remaining allegations in the unnumbered paragraph following Paragraph

83.

- 23 -ATI-2491514vl


employees were members of Associates III and that Mr. Ross had an approximately 56%

interest, Mr. Storper had a 12.5% interest, Mr. Wax had a 7.5% interest, and Mr. Gibbons had a

2% interest in Associates III. Except as expressly admitted, Defendant denies any remaining


106. On information and belief as to these matters, Defendant admits that Michael J.

Gibbons has been the Chief Financial Officer of WLR since July 2002 and is a resident of New

York. Except as expressly admitted, Defendant denies any remaining allegations in Paragraph

85.

107. On information and belief as to these matters, Defendant admits that Mr. Gibbons

has a financial interest in the performance of WLR and certain of its affiliates. Except as


108. On information and belief as to these matters, Defendant admits allegations in

Paragraph 87.


Paragraph 88.

110. Defendant states that the allegations in Paragraph 89 and its subparts A-D

"Gibbons's actions at issue in this case"-are so vague and unspecified that he is not subject to

admission or denial. Indeed, Defendant does not know what alleged actions PlaintifTs intend to

encompass with these allegations and cannot meaningfully state the capacity in which Mr.

Gibbons undertook these unknown alleged actions. Accordingly, Defendant is without

knowledge or information to form a belief as to the truth of any allegations in Paragraph 89 and

its subparts A-D.

- 24-ATI-2491514vI

111. On information and belief as to these matters, Defendant admits that David H.

Storper has been a Senior Managing Director of WLR since April 2000 and is a resident of New

York. Except as expressly admitted, Defendant denies any remaining allegations in Paragraph

90.

112. On information and belief as to these matters, Defendant admits that Mr. Storper




Paragraph 92.

114. On information and belief as to these matters, Defendant admits that Mr. Storper,

before joining WLR, had been a Managing Director in the Restructuring Group at Rothschild

Inc. since 1996 and holds a B.S. from Columbia University's School of Engineering and Applied

Science and an M.B.A. from Columbia University. Except as expressly admitted, Defendant


115. Defendant states that the allegations In Paragraph 94 and its subparts A-D

"Storper's actions at issue in this case"-are so vague and unspecified that he is not subject to

admission or denial. Indeed, Defendant does not know what alleged actions PlaintifIs intend to

encompass with these allegations and cannot meaningfully state the capacity in which Mr.

Storper undertook these unknown alleged actions. Accordingly, Defendant is without

knowledge or information to form a belief as to the truth of any allegations in Paragraph 94 and

its subparts A-D.

- 25 -ATI-2491514vl

116. On information and belief as to these matters, Defendant admits that David L.

Wax has been Managing Director of WLR since 2000 and is a resident of Connecticut. Except


117. On information and belief as to these matters, Defendant admits that Mr. Wax




was the portfolio manager for FITG and SCI beginning in approximately February 2006, and, as

part of that role, was the contact or "point" person for inquiries concerning those portfolio

companies. Defendant further admits that, as portfolio manager for FITG and SCI, Mr. Wax was

responsible for monitoring the combination of those companies. Except as expressly admitted,



Paragraph 98.

120. On information and belief as to these matters, Defendant admits that Mr. Wax,

before joining WLR in 2000, was a Managing Director at Rothschild, Inc., an investment

banking firm, where he was active in restructuring and workouts for over 10 years, and, before

joining Rothschild, had been with Bankers Trust for 15 years. Except as expressly admitted,



"Wax's actions at issue in this case"-are so vague and unspecified that he is not subject to


encompass with these allegations and cannot meaningfully state the capacity in which Mr. Wax

- 26-ATI-2491514vI


information to form a belief as to the truth of any allegations in Paragraph 100 and its subparts

A-D.











132. On information and belief as to these matters, Defendant admits that in 2010 Mr.

Gorga's compensation totaled $688,011, and that his base salary was $660,000 for the year.



134. Defendant states that the allegations in Paragraph 113 and its subparts A-E

"Gorga's actions at issue in this case"-are so vague and unspecified that he is not subject to

admission or denial. Indeed, Defendant does not know what alleged actions PlaintifIs intend to

encompass with these allegations and cannot meaningfully state the capacity in which Mr. Gorga


- 27-ATl-2491514vl

infonnation to fonn a belief as to the truth of any allegations in Paragraph 113 and its subparts

A-E.

135. Defendant admits that he was the independent director on SCI's Board of

Directors. Except as expressly admitted, Defendant denies any remaining allegations III

Paragraph 114.


137. Defendant states that the allegations in Paragraph 116 and its subparts A-C

"Tessoni's actions at issue in this case"-are so vague and unspecified that he is not subject to


encompass with these allegations and cannot meaningfully state the capacity in which he


infonnation to fonn a belief as to the truth of any allegations in Paragraph 116 and its subparts

A-C.

138. Defendant admits that Mr. Duerk is a resident of Greenville County, South

Carolina, was President of SCI before the Merger, and was President of the Automotive Safety

Group of the combined company. Defendant further admits that Mr. Duerk executed the Merger

agreement at the direction of SCI's Board of Directors and retired from SCI effective December

31, 2007. Except as expressly admitted, Defendant denies any remaining allegations in

Paragraph 117.

139. Defendant states that the allegations in Paragraph 118 and its subparts A-C

"Duerk's actions at issue in this case"-are so vague and unspecified that he is not subject to


encompass with these allegations and cannot meaningfully state the capacity in which Mr. Duerk

- 28 -ATl-2491514vl



A-C.










"Smith's actions at issue in this case"-are so vague and unspecified that he is not subject to

admission or denial. Indeed, Defendant does not know what alleged actions PlaintifTs intend to

encompass with these allegations and cannot meaningfully state the capacity in which Mr. Smith



A-D.

149. Defendant admits that RSM is an investment banking firm that provides financial

consulting services for, among other things, mergers and acquisitions, and has multiple offices,

including offices in New York and California. Except as expressly admitted, Defendant is

without knowledge or information to form a belief as to the truth of any remaining allegations in

Paragraph 128.

- 29-ATI-2491514vl

150. Defendant admits that RSM was retained by SCI's Independent Special

Committee of the Board of Directors in July 2006 to ofTer an opinion as to the fairness, from a

financial point of view, to the stockholders of SCI other than Fund II and Fund III of the

exchange ratio in the proposed business combination of FITG and SCI's merger subsidiary.

Except as expressly admitted, Defendant is without knowledge or information to form a belief as

to the truth of the allegations in Paragraph 129.



152. Defendant states that the allegation "THE MERGER - Overview and

Consideration" preceding Paragraph 131 is so vague that Defendant is without knowledge or

information to form a belief as to the truth of that allegation.


154. Defendant admits that Plaintiff purports to quote from the Prospectus, that the

Prospectus speaks for itself: and Defendant denies any allegations inconsistent with the content



155. Defendant admits that PlaintifT purports to quote from the Prospectus, that the

Prospectus speaks for itself, and Defendant denies any allegations inconsistent with the content




157. Defendant admits that Fund III owned approximately 72% of SCI and Fund II

owned 74% of ITH, which owned 85.4% of FITG. Defendant further admits that at the time of

- 30 -ATI-2491514vl

the merger five of the six directors of FITG and four of the five directors of SCI were interested

in the merger. Except as expressly admitted, Defendant denies any remaining allegations in

Paragraph 135.

158. Defendant admits that the nature of the merger was such that only a super

majority of SCI's minority shareholders or the Continuing Director, as that term was defined in

SCI's Charter, could legally cause the merger to occur. Except as expressly admitted, Defendant



160. Defendant admits that the exchange ratio set the conversion ratio for FITG stock

into SCI stock. Except as expressly admitted, Defendant denies any remaining allegations in

Paragraph 138.

161. Defendant admits that the exchange ratio was set through independent

negotiations between FITG's and SCI's special committees and that the exchange ratio yielded a

split where SCI shareholders owned 35% of the combined company and FITG shareholders

owned the remaining amount of shares. Except as expressly admitted, Defendant denies any


162. Defendant admits that Plaintiffs purports to quote and paraphrase from the

Prospectus, that the Prospectus speaks for itself, and Defendant denies any allegations

inconsistent with the content of the Prospectus. Except as expressly admitted and stated,


163. Defendant admits that on August 29, 2006, SCI's and FITG's Boards approved

the merger. Defendant further admits that the asked for price of SCI's stock on August 29, 2006

ranged between $14.00 and $14.65 per share on the Over the Counter Bulletin Board

- 31 -ATI-2491514vl

("OTCBB"), and that SCI's stock was thinly traded and that OTCBB bid prices do not represent

SCI's actual value. Except as expressly admitted, Defendant denies any remaining allegations in

Paragraph 141.


165. Defendant admits that the merger was announced on August 30, 2006 and that on

September 22, 2006 the asked for price of SCI's stock was $14.30 a share on the OTCBB, and

that, on October 20,2006, the asked for price of SCI's stock was $13.25 a share on the OTCBB.



167. Defendant admits that, at the time of the merger, affiliates of WLR owned

14,310,497 shares of FITG constituting approximately 85.4% ownership. Except as expressly


168. On information and belief as to these matters, Defendant admits that Fund II

owned 74% ofITH, which owned 14,310,497 shares ofFITG constituting approximately 85.4%

ownership. Defendant further admits that Absolute Recovery Hedge Fund, Ltd. owned 17% of

ITH and Absolute Recovery Hedge Fund, L.P. owned 9% ofITH. Except as expressly admitted,


169. On information and belief as to these matters, Defendant admits that ITH owned

14,310,497 shares of ITG and ITH received 9,709,273 shares of SCI stock pursuant to the

exchange ratio. Except as expressly admitted, Defendant denies any remaining allegations in

Paragraph 147.



- 32 -ATI-2491514vl

172. Defendant admits that, based on the exchange ratio, 213,750 shares of FITG stock

converts into 145,023 shares of SCI stock. Except as expressly admitted, Defendant denies any




175. Defendant admits that, based on the exchange ratio, 74,375 shares of FITG stock

converts into 50,461 shares ofNITG stock. Except as expressly admitted, Defendant denies any







181. Defendant incorporates by this reference his responses to Paragraphs 195-197 as

though fully set forth herein. Defendant further states that the allegations in Paragraph 159 are

so speculative and vague, particularly as to what "it" refers to, that Defendant is without

knowledge or information to form a belief as to the truth of the allegations in Paragraph 159.

182. Defendant states that the allegation "The Real Reasons for the Merger" preceding

Paragraph 160 is so vague that Defendant is without knowledge or information to form a belief

as to the truth of that allegation.

183. Defendant admits that SCI's liquidity was insufficient to cover FITG's Greenfield

projects and that SCI's earnings and net income plummeted from 2004 through 2007. Except as

- 33 -ATI-2491514vl

expressly admitted and stated, Defendant denies the allegation "FITG was Failing and Needed

SCI's Liquidity" preceding Paragraph 160.

184. Defendant admits that Plaintiffs purport to quote and paraphrase from Gary Smith

Deposition Exhibit 17 and a document produced by Bank of America pursuant to a subpoena,

those documents speak for themselves, and Defendant denies any allegations inconsistent with

his contents. Except as expressly admitted and stated, Defendant denies any remaining


185. Defendant admits that FITG's business and business plan changed dramatically

from 2004 to 2006, and that FITG expected and publically disclosed it could have losses in 2006

while implementing its new business plan. Defendant further admits that, far from failing, FITG

was investing in its future by rationalizing domestic production plants and building new facilities

in low cost countries closer to its customers. Defendant further admits that Plaintiffs purport to

quote and paraphrase from Gary Smith Deposition Exhibit 17 and documents produced by Bank

of America pursuant to a subpoena, those documents speak for themselves, and Defendant denies

any allegations inconsistent with his contents. Except as expressly admitted and stated,


186. Defendant admits that Plaintiffs purport to quote and paraphrase from spreadsheet

contained in Gary Smith Deposition Exhibit 46. Defendant further admits that the spreadsheet

contained in Gary Smith Deposition Exhibit 46 is a duplicate of the spreadsheet contained in

Gary Smith Deposition Exhibit 39. Defendant denies any allegations inconsistent with the

contents of these spreadsheets and Gary Smith's explanatory testimony about these spreadsheets.

Except as expressly admitted and stated, Defendant denies any remaining allegations in

Paragraph 162.

- 34 -ATI-2491514vl

187. Defendant admits that Fund II issued promissory notes to FITG in May 2006 for

$15.71 million, in June 2006 for $20.5 million, in September 2006 for $20 million, and in

December 2006 for $10 million to fund international Greenfield projects consistent with FITG's

business plan that was publicly disclosed in the Prospectus. Except as expressly admitted,


188. Defendant admits that Fund II issued promissory notes to FITG in May 2006 for

$15.71 million, in June 2006 for $20.5 million, in September 2006 for $20 million, and in

December 2006 for $10 million to fund international Greenfield projects located in Nicaragua,

China, and Viet Nam. Defendant admits FITG's business plan, like virtually every business

plan, contained risk, and that those risks were publicly disclosed in the Prospectus. Except as



190. Defendant denies SCI was generating cash as of September 30, 2006, having lost

nearly $2.5 million in cash and cash equivalents since January 2006. Defendant further admits

that SCI's cash flows from operations had plummeted, going from $13.4 million in 2004, to $6.9

million for 2005, to a net loss for the first three quarters of 2006. Defendant further states that

SCI's cash on hand and the balance on its credit facility are not examples of SCI generating cash.


191. Defendant admits that SCI had excess borrowing capacity before the merger and

that Messrs. Ross and Wax did not wish to use this debt to buyout the minority shareholders of

SCI. Defendant further admits that SCI's available debt was better used for acquisitions or other

business purposes to build company value rather than buyout its minority shareholders, which

provided no benefit to SCI. Defendant further admits that FITG and SCI and, later, BST, were

- 35 -ATl-2491514vl

more valuable combined than separate, and that such a combination would increase shareholder

value and enable the combined company to be traded on an efficient, liquid market. Except as


192. Defendant admits that, far from failing, FITG was investing in its future by going

through a significant reorganization in 2006 that included rationalizing domestic plants and

building international Greenfield projects. Defendant further admits that this plan was designed

to lower FITG's costs, move it closer to its existing customers, and to expand into new

international markets. Defendant further admits that this quasi-start-up period was publicly

disclosed before the merger as was that FITG could operate at a loss to preserve market share

and technical capabilities until the Greenfield projects were completed and began producing.

Except as expressly admitted and stated, Defendant denies the allegation "The FITG and WLR

Defendants Were Acutely Aware That FITG Was Failing" preceding Paragraph 168.

193. On information and belief as to these matters, Defendant admits that, generally,

and in varying levels of specificity and detail depending on the Defendant in question, the WLR

and the FITG defendants were aware of FITG's financial performance during 2006, and that

Fund II had loaned money to FITG for Greenfield projects. Except as expressly admitted,


194. Defendant admits that Plaintiffs purport to quote and paraphrase from Storper

Deposition Exhibit 525. Defendant further admits that Storper Deposition Exhibit 525 is a

duplicate of Wax Deposition Exhibit 438 and Ross Deposition Exhibit 755. Defendant denies

any allegations inconsistent with the contents of these deposition exhibits and the explanatory

testimony about these exhibits. Except as expressly admitted and stated, Defendant denies any


- 36 -ATI-2491514vl

195. Defendant admits that Plaintiffs purport to quote and paraphrase from Wax

Deposition Exhibit 461. Defendant further admits that Wax Deposition Exhibit 461 is a

duplicate of Gorga Deposition Exhibit 216, Smith Deposition Exhibit 125, Storper Deposition

Exhibit 532, and Ross Deposition Exhibit 737. Defendant denies any allegations inconsistent

with the contents of these deposition exhibits and the explanatory testimony about these exhibits,

including the significant testimony that math calculation discussed in these exhibits was in error.


Paragraph 170.

196. Defendant admits that Plainti±Is purport to quote and paraphrase from Wax


duplicate of Gorga Deposition Exhibit 254, Gibbons Deposition Exhibit 572, and Ross

Deposition Exhibit 778. Defendant denies any allegations inconsistent with the contents of these

deposition exhibits and the explanatory testimony about these exhibits, including Ross's

comments in this exhibit that it would be a shame for people to misperceive FITG as a money

losing business and that the Prospectus should explain FITG's business strategy. Except as

expressly admitted and stated, Defendant denies any remaining allegations in Paragraph 171.



duplicate of Gorga Deposition Exhibit 254, Gibbons Deposition Exhibit 572, and Ross

Deposition Exhibit 778. Defendant denies any allegations inconsistent with the contents of these

deposition exhibits and the explanatory testimony about these exhibits. Except as expressly

admitted and stated, Defendant denies any remaining allegations in Paragraph 172.

- 37 -ATI-2491514vl

198. Defendant admits that Plaintiffs purport to quote and paraphrase from Smith

Deposition Exhibit 58. Defendant further admits that Smith Deposition Exhibit 58 is a duplicate

of Gorga Deposition Exhibit 266 and Spradling Deposition Exhibit 365. Defendant denies any

allegations inconsistent with the contents of these deposition exhibits and the explanatory

testimony about these exhibits, including Mr. Gorga's testimony rejecting that FITG lost

business. Except as expressly admitted and stated, Defendant denies any remaining allegations

in Paragraph 173.

199. Defendant admits that Plaintiffs purport to quote and paraphrase from Gorga

Deposition Exhibit 232. Defendant further admits that Gorga Deposition Exhibit 232 is a

duplicate of Gorga Deposition Exhibit 269 and Ross Deposition Exhibit 785. Defendant denies

any allegations inconsistent with the contents of these deposition exhibits and the explanatory

testimony about these exhibits. Defendant denies that Ross stated in his email that FITG

"consistently reduced their budget and ... failed to met the reduced budgets," as his email refers

to two small acquisitions and not to FITG as a whole. Except as expressly admitted and stated,




duplicate of Wax Deposition Exhibit 482, Smith Deposition Exhibit 155, Storper Deposition



including that the discouraging weekly report was based on an error, that numbers were affected

by increases in inventory due to plant rationalization, and that FITG's 2006 budget was impacted

- 38 -ATI-249 I514vl

by unexpected events. Except as expressly admitted and stated, Defendant denies any remaining




duplicate of Wax Deposition Exhibit 482, Smith Deposition Exhibit 155, Storper Deposition



including that the discouraging weekly report was based on an error, that numbers were affected

by increases in inventory due to plant rationalization, and that FITG's 2006 budget was impacted

by unexpected events. Except as expressly admitted and stated, Defendant denies any remaining




Deposition Exhibit 157. Defendant further admits that Smith Deposition Exhibit 157 is a

duplicate of Spradling Deposition Exhibit 366. Defendant denies any allegations inconsistent


including that the numbers discussed in this email solely pertain to the Carlisle Division, one of

the smaller divisions at FITG, and that cost reductions were made at that division to address

losses. Except as expressly admitted and stated, Defendant denies any remaining allegations in

Paragraph 178.


Deposition Exhibit 157. Defendant further admits that Smith Deposition Exhibit 157 is a

duplicate of Spradling Deposition Exhibit 366. Defendant denies any allegations inconsistent

- 39 -ATI-2491514vl


including that the numbers discussed in this email solely pertain to the Carlisle Division and that

cost reductions were made at that division to address losses. Except as expressly admitted and



206. Defendant admits that SCI was in a very troubled company before the merger,

lacking senior management and suffering market share loss, customer relationship problems,

technical problems, and falling earnings. Defendant further admits that not merging SCI with

FITG would have exposed SCI to extreme risk of further declines and even failure. Except as

expressly admitted and stated, Defendant denies the allegation "The WLR and FITG Defendants

Were Aware of and Disregarded the Risk to SCI" preceding Paragraph 181.

207. Defendant admits that FITG and SCI were both distressed companIes III

challenging industries and were high risk investments. Defendant further admits that the risks

associated with these companies were disclosed in public filings, and the risks of investing in

FITG, SCI, and NITG were apparent to the minority shareholders of these companies. Except as


208. Defendant admits that Plaintiffs purport to quote and paraphrase from Ross

Deposition Exhibit 783. Defendant further admits that Ross Deposition Exhibit 783 is largely a

duplicate of Ross Deposition Exhibit 784. Defendant denies any allegations inconsistent with

the contents of these deposition exhibits and the explanatory testimony about these exhibits.


Paragraph 182.

- 40-ATI-2491514vl

209. Defendant admits that Plaintiffs purport to quote and paraphrase from Ross

Deposition Exhibit 784. Defendant further admits that Ross Deposition Exhibit 784 is largely a

duplicate of Ross Deposition Exhibit 783. Defendant denies any allegations inconsistent with

the contents of these deposition exhibits and the explanatory testimony about these exhibits.


Paragraph 183.

210. Defendant admits that Plaintiffs accurately quote Wilbur Ross's deposition

testimony responding to the following question: "Did you have any -- did you have any

conversations or communications with Mr. Tessoni regarding your belief that ITG faced

tremendous execution risk?" Defendant further admits that the risks associated with FITG were

clear and disclosed before the merger. Except as expressly admitted and stated, Defendant




Deposition Exhibits 472 and 473. Defendant further admits that Wax Deposition Exhibits 472

and 473 are duplicates of Gorga Deposition Exhibit 258, Storper Deposition Exhibit 538,

Gibbons Deposition Exhibit 574, Ross Deposition Exhibit 779, Smith Deposition Exhibit 40, and

Spradling Deposition Exhibits 309-310. Defendant denies any allegations inconsistent with the

contents of these deposition exhibits and the explanatory testimony about these exhibits,

including that Wax Deposition Exhibit 473 was a draft bank model for securing credit facilities

for SCI, FITG, and BST; that Wax Deposition Exhibit 473 is not the business plan for the

combined company, and that Mr. Ross became satisfied that merging SCI and FITG was a good

- 41 -ATI-2491514vl

plan before he voted to approve the merger. Except as expressly admitted and stated, Defendant


213. Defendant denies the allegations in Paragraph 187. Defendant further states that

the allegations in Paragraph 187 grossly misstate Mr. Wax's testimony, which was as follows:

Well, I would -- I don't remember what my response was toWilbur. If I was simply reading this today, I would have said tohim that this is kind of a rhetorical question because, of course, wedid due diligence both on each component of ITG as we madecommitments to fund that component, as well as on SCI, as well ason BST. My senior partner does have a habit of sometimes askingrhetorical questions. I view that this is one of those. (Wax Depo at615:5-15.)

Between the time that we bought SCI in ... August 2006, we'ddone significant work both on ITO as a company and on SCI as acompany. The decision to put the companies together was becauseof the significant deficit in the business ofSCr. And the fact of thematter is that we didn't view SCI to have sustainability as astandalone business. And, you know, the decision to acquire BSTwas, in fact .. , part and parcel of the fact that we didn't believe thata number of SCI standalone businesses were sustainable. So thiswas an effort to create greater value out of the parts, you know. If-- so asking what due diligence did I do '" over the prior sixmonths, there had been ... significant analysis, you know, resultingin the business model that is Exhibit 473 that related to what arethe components for SCI, what are the components for ITG. Youknow, from my standpoint, I do not agree with Mr. Ross'characterization about risking SCI by putting it with ITG. The factof the matter is that I believed that SCI was not a long-termsustainable business because it was in so many little market niches.You know, it had a number of identifiable problems in terms ofhow some of those businesses were run. We learned, during thecourse of the first nine months, and certainly by the time that wewere here in August, that SCI was underperforming its budgetsignificantly. So, you know, I don't know what else to tell youother than to say that this was just not pulled out of thin air interms of answering your question, what due diligence had I done.(Wax Depo at 616:17-618:8.)

214. Defendant admits that Mr. Ross did not have concerns about the Merger and did

not mention them to Messrs. Storper or Gibbons because Mr. Wax provided satisfactory

- 42-ATI-2491514vl

explanations and details to justifY the merger: "I asked him what due diligence had he -- you see

the questions that I have asked. I have testified now quite a few times that he ultimately satisfied

me. It was my satisfaction that was needed, not some third party's satisfaction. He satisfied me."

(Ross Depo at 576:17-22.) Defendant further admits that Messrs. Storper and Gibbons

personally analyzed FITG's execution risks as they both listened to the SCI special committee's

report concerning the merger and relied on its recommendation to approve the merger.

Defendant further admits that Mr. Gibbons was informed about the written materials concerning

the merger as he listened to the SCI special committee's report concerning the merger and relied

on its recommendation to approve the merger. Except as expressly admitted and stated,


215. On information and belief as to these matters, Defendant admits that Mr. Ross's

questions about the merger were answered, that he was satisfied by the due diligence performed

before approving the merger, and that a written record of his conversation with Mr. Wax was

unnecessary:

Q: Do you have, or is there any written evidence of anycommunication from Mr. Wax or anyone else addressing thatquestion raised by you?

A: No. Nor did I care that it was in writing. What I cared was tobe satisfied that it made sense, and he ultimately satisfied me bothin the case of the SCI and in the case of the BST. (Ross Depo at574:16-23)

Defendant further admits that Plaintiffs accurately quote Mr. Ross's deposition testimony.


Paragraph 189.

- 43 -ATI-2491514vl

216. Defendant admits that SCI's Board approved the merger on August 29, 2006 in

reliance on the recommendation of the SCI Special Committee. Except as expressly admitted

and stated, Defendant denies any remaining allegations in Paragraph 190.

217. Defendant states that the allegation "The WLR and FITG Defendants' Real

Agenda" preceding Paragraph 191 is so vague that Defendant is without knowledge or


218. Defendant admits that, in general, domestic textile manufacturers were not cost

competitive with their internationally based counterparts, largely due to cheaper labor and

shipping costs. Defendant further admits that FITG planned Greenfield projects in China,

Vietnam, and Nicaragua to be closer to its customers and become more cost competitive in its

market. Defendant further admits that FITG planned to rationalize domestic plants to save

money and to transfer that production to newer, cheaper international plants. Except as expressly





222. Defendant admits that combining FITG, SCI, and BST into one company made

the combined company more diversified, larger, and more attractive to the public markets for an

IPa. Except as expressly admitted and stated, Defendant denies any remaining allegations in

Paragraph 195.

223. Defendant admits that, among other methods, selling shares on an open market is

one way III which shareholders realize value from their investments. Except as expressly


- 44-ATl-2491514vl

224. On information and belief as to these matters, Defendant admits that a standalone

FITG had revenues greater than the other comparable apparel company IPOs, and could have

achieved a necessary scale for a public offering. (Stroper Ex. 527 at 10; Gorga Ex. 208 at 10;

Wax Ex. 418 at 10.) Defendant further admits that an IPO of the combined company would have

benefited all shareholders, including the legacy minority shareholders of SCI. Defendant further

admits that Plaintiffs paraphrase and quote from a Bank of America document, that document

speaks for itself, and Defendant denies any allegations inconsistent with that document. Except

as expressly admitted and stated, Defendant denies any remaining allegations in Paragraph 197.

225. Defendant admits that FITG was a private company before the merger, its

financial performance was only disclosed as part of the merger process, and any notion that the

merger helped hide FITG's financial performance is incorrect. Except as expressly admitted and



specializes in distressed investments that are risky and may take time to realize value. Defendant

further admits that Mr. Ross and WLR have raised billions of dollars for newly established

Funds since NITG's common stock price began being offered at a low level on the OTCBB.


Paragraph 199.

227. On information and belief as to these matters, Defendant admits that Amvescap,

PLC's purchase ofWLR was agreed to long before the merger was disclosed and played no role

in that transaction. Defendant further admits that the merger had no effect on the amount of

money received by Amvescap, PLC or Mr. Ross as part of that transaction. Except as expressly


- 45 -ATI-2491514vl

228. Defendant admits that SCI's Board of Directors approved the merger in reliance

on the recommendation of the SCI Special Committee because the merger made good business

sense and addressed SCI's significant needs. Defendant further admits that, at the time of the

merger, SCI was exposed to significant performance risks as a standalone entity, and that risk

would only have grown from that point forward due to the later implosion of the automotive

market that saw SCI's market cut in half Defendant further admits that SCI's minority

shareholders did not have an interest in FITG and that FITG's minority shareholders did not have

an interest in SCI, which is why both sets of minority shareholders were represented by

independent special committees that negotiated the exchange ratio and recommend that the

merger be approved. Except as expressly admitted and stated, Defendant denies any remaining


229. Defendant admits that FITG never received a "going concern" opinion and was

never advised it was in danger of insolvency. Except as expressly admitted and stated,


230. Defendant states that the allegations "THE MERGER - Background Facts" and

"The First Standstill Waiver by Tessoni" preceding Paragraph 203 are so vague that Defendant is

without knowledge or information to form a belief as to the truth of that allegation.

231. Defendant admits that FITG was formed in 2004 when certain assets of

Burlington Industries and Cone Mills were combined. Defendant further admits that WLR is a

management company and owns no shares in FITG, SCI, or NITG. Except as expressly admitted


232. Defendant admits that Fund III purchased its controlling interest III SCI in

December 2005 from the Zapata Corporation ("Zapata"). Defendant further admits that, in the

- 46-ATI-2491514vI

Menezes deposition testimony cited in Paragraph 204, Menezes admits that he is speculating

about Zapata's motivations for selling to WLR. Defendant further states that Zapata sold its

controlling interest in SCI because it was unable to sell the entire company because there were

no interested sellers and Zapata wanted to capitalize its investment in SCI before the company

lost even more value or went bankrupt as a standalone. (See Freeman Ex. 29 (Zapata

Corporation Schedule 14C at 6-9 [explaining reasons for saleD. Except as expressly admitted


233. Defendant admits that Fund III made the far superior offer for the controlling

interest of SCI, offering more than $1.00 per share than D.E. Shaw and made many fewer

demands and revisions to the purchase agreement than D.E. Shaw. (See Freeman Ex. 29 (Zapata

Corporation Schedule 14C at 6-9). Defendant further states that there were no bidders for

Zapata's SCI shares other than Fund III, Fund II, and D.E. Shaw. (Id) Except as expressly


234. Defendant admits that WLR entered into a confidentiality agreement with SCI

before Fund III purchased its controlling interest in SCI. Defendant further admits that the

confidentiality agreement contained a "standstill provision" that, among other things, precluded

WLR or any of its affiliates from purchasing stock in SCI without its consent. Except as


235. Defendant admits that he, the lone independent director on SCI's Board and the

lone Continuing Director as defined by SCI's articles of incorporation, was named to a single

person special committee by the Zapata controlled SCI Board to consider the request to waive

the standstill provision (i.e., provide the required company consent) so that Fund III could

- 47-ATI-2491514vI

purchase its controlling interest in SCI. Except as expressly admitted and stated, Defendant



237. Defendant admits that Zapata sold 3,920,975 shares of SCI to Fund III and

241,419 shares of SCI to Fund II. Defendant further admits that Fund II and Fund III purchased

these shares for $12.30 per share. Defendant further admits that on the day of the sale,

December 2, 2005, SCI's asked for price on the OTCBB was $15.00 per share. Except as



239. Defendant admits that he was independent and adversarial while serving on the

SCI special committee, and was not improperly influenced by any of the interested directors,

officers, or managers of FITG or SCI. Defendant further admits that he testified that he was not

pressured whatsoever by an interested director, officer, or manager of FITG or SCI. (Tessoni

Depo at 815.) Except as expressly admitted and stated, Defendant denies the allegation "The

Second Standstill Waiver The Co-Opting of Tessoni" preceding Paragraph 211.


241. Defendant admits that, on December 2,2005, WLR requested an unlimited waiver

of the standstill provision in the confidentiality agreement. Defendant further admits that, on that

same date, the SCI Board created a special committee consisting of himself, the lone independent

director on SCI's Board and the lone Continuing Director as defined by SCI's articles of

incorporation, to consider that request. Except as expressly admitted and stated, Defendant



- 48-ATI-2491514vl

243. Defendant admits that, in January and February 2006, management of FITG and

SCI continued meetings that had begun in the Fall of 2005 to discuss potential synergies between

the two companies. Defendant further admits that, in February 2006, management of FITG and

SCI discussed combining the two textile companies to capitalize on synergies and other cost

savings. Except as expressly admitted and stated, Defendant denies any remaining allegations in

Paragraph 214.

244. Defendant admits that SCI corporate counsel advised Menezes, SCI's CFO and

interim CEO, to have the SCI Board of Directors appoint an independent special committee to

oversee any transaction between SCI and a WLR affiliate. Defendant further admits that all

interested parties were made aware of this fact, including Messrs. Gorga, Gibbons, and Ross.

Defendant further admits that Mr. Ross promptly agreed with SCI's corporate counsel and

directed that the process be overseen by the independent special committee created by SCI's

Board on December 2, 2005. Except as expressly admitted and stated, Defendant denies any


245. Defendant admits that the email partially quoted in Paragraph 216 reads as

follows:

I believe we need to reach out and co-opt Tessoni as we discussed.Mike, have you and WLR spoken to him? Separately, as Joe and Ihave discussed, our position is that we will address compensationissues as part of the integration, or if the decision is made to keepthe companies separate, at that time. At the appropriate time,someone needs to have a heart to heart with Tamme. (Wax Ex.410; emphasis added).

Defendant further admits that Mr. Gibbons responded to this email as follows:

I spoke to Dan Tessoni on Monday and he indicated that heappreciated the conversation, was expecting something of thisnature since we became involved, and did not see a need tobecome involved in the details until something more solid wasproposed that would affect the minority shareholders. He had

- 49-ATI-2491514vl

no issues. The conversation with him did not indicate to me thathe would have wanted to be kept in this inner loop of thediscussions. (Wax Ex. 410; emphasis added).

Defendant further admits that Mr. Wax testified that this email chain does not appear to be

talking about the standstill waiver issue. (Wax Dep. at 214:4-11). Defendant further admits that

Mr. Gibbons testified that he recalled no discussions of "co-opting" Tessoni, and that this email

chain referred to compensation issues. (Gibbons Dep. at 298: 11-22.) Except as expressly


246. Defendant admits that he testified about Tessoni Ex. 35, which is partially quoted

in Paragraph 217, as follows:

Q [Reading from Tessoni Ex. 35] "I know you mentioned in yourvoicemail message the other day that things were 'getting ugly.' Iassume you have more detailed information than I do at this point."What was that all about?

A Well, to the best of my recollection, it was about the fact thatcommunications were very, very difficult. And my ability torespond on a timely basis to everybody's inquiries wasinconsistent. So to me, that would have caused me to say, youknow, I'm traveling here, I can't get emails very consistently.The telephones, my work schedule, and everybody else'savailability is making things difficult. So I would -- if I recall - I just know it was a frustrating scenario at that time. So Imay have described it as "getting ugly." It was difficult.

QWell, did you -- in terms of getting ugly, did you -- did you feelthat you were under pressure from Ross?

A Absolutely not. (Tessoni Dep at 815:7-25; emphasis added)


Paragraph 217.

247. Defendant admits that the "principal purpose of Dave [Philip's] phone call was to

ask whether Dan had formally acted on the request to waive the standstill provision of the

Confidentiality Agreement." (Tessoni Ex. 35.) Defendant further admits that the SCI Special

- 50-ATI-2491514vl

Committee did not conditionally waive the standstill provision until more than two weeks after

Mr. Phillips made the phone call referred to in Tessoni Ex. 35. Defendant further admits that

Tessoni Ex. 35, partially quoted in Paragraph 218, speaks for itself and Defendant denies any

allegations inconsistent with the content of that document. Except as expressly admitted and


248. Defendant admits that he testified about Tessoni Ex. 38, which is partially quoted

in Paragraph 219, as follows:

QThat I -- if I can recall it, Counsel, and I can't tell you exactly,but I was concerned about the fact that I wasn't available to addressthe issues in a more timely manner, and it would be reasonable forme, given what I see here, to think that they were like, "Can we -can we get this matter addressed." And when it says "doubleteamed," all it means to me is there was more than one personon the call. (Tessoni Dep. at 824: 18-25; emphasis added.)


Paragraph 219.


250. Defendant admits that he, in his role as the member of the SCI Special

Committee, required FITG to sign a confidentiality agreement before reviewing any non-public

SCI information. Defendant further admits that the SCI Special Committee, as consideration for

conditionally waiving the standstill provision, imposed a 30-day time limit in which FITG was to

investigate a possible transaction with SCI and, if a transaction was to be pursued, required that

the SCI Board of Directors create a new special committee to review, evaluate, investigate,

negotiate, and approve that transaction. Except as expressly admitted and stated, Defendant


251. Defendant admits that the SCI Special Committee, as consideration for


- 51 -ATI-2491514vl




denies the allegation "The Problematic Basis for the Second Standstill Waiver" preceding

Paragraph 222.

252. Defendant admits that the SCI Special Committee, as consideration for






253. Defendant admits that he served on a single person special committee for SCI

before the independent special committee created by SCI's Board on December 2, 2005.

Defendant further states that before Fund III purchased a controlling interest in SCI, he served on

a single person special committee after having been appointed by Zapata affiliated directors.

Defendant further admits that Mr. Menezes found my work on that prior special committee

acceptable when Mr. Menezes received $620,000 in bonuses as a result of that special

committee's work. Defendant further incorporates his responses to Paragraphs 273-276 as

though fully set forth herein. Except as expressly admitted and stated, Defendant denies any


254. Defendant admits that Plaintiffs attempt to quote and paraphrase from certain

resolutions of the SCI Special Committee, that the term "Potential Transaction" is defined in

those resolutions and those resolutions speak for themselves, and Defendant denies any

- 52 -ATI-2491514vl

allegations inconsistent with those resolutions. Defendant further admits that SCI had gone

through a prolonged two year sale process in which it could not sell the entire company, but

could only peddle the majority interest to distressed investors. Defendant further admits that

SCI's prior Board, when selling control to Fund III, stated that SCI would benefit from vertical

integration and WLR's experience with building businesses, and the Potential Transaction was

designed toward that end. Except as expressly admitted and stated, Defendant denies any


255. Defendant incorporates his responses to Paragraphs 298-302 as though fully set

forth herein. Except as expressly admitted and stated, Defendant denies any remaining


256. Defendant admits that Plaintiffs attempt to paraphrase and quote Tessoni

Deposition Ex. 49, which are resolutions from a September 23, 2005 meeting of the a SCI

special committee in which he reported on his meeting with Mr. Ross that led to his approving

the sale of the Zapata majority of SCI. Defendant further states that Mr. Ross's earlier

statements were consistent with waiving the standstill provision, as no vertical integration or

restructuring could take place without the standstill provision first being waived. Except as


257. Defendant states that the allegation "FITG Conducts Diligence on SCI and

Recommends Buying SCI" preceding Paragraph 227 is so vague that Defendant is without

knowledge or information to form a belief as to the truth of that allegation.

258. Defendant admits that the FITG executed the confidentiality agreement on March

15, 2006, the day before the standstill provision was waived, on March 16, 2006. Compare

Smith Dep. Ex. 168 and Tessoni Dep. Ex. 40 [March 15,2006 Confidentiality Agreement] with

- 53 -ATI-2491514vl

Tessoni Dep. Ex. 41 [Resolutions waiving standstill provision]. Defendant further admits that a

prerequisite demanded by the SCI special committee for waiving the standstill provision was

that FITG execute and agree to be bound by the confidentiality agreement from September 2005.

Defendant further admits that as part of the thirty day review period imposed by the SCI special

committee, FITG performed a pre-transaction investigation of SCI to further explore a potential

transaction between FITG and SCI. Except as expressly admitted and stated, Defendant denies


259. Defendant admits that in 2005 and early 2006 FITG and SCI had undertaken a

bilateral review to identifY synergies among the companies and so that FITG management, which

had greater technical knowhow, could assist SCI with production and other manufacturing

problems. Defendant further states that Mr. Menezes did not stop "diligence" on SCI because no

transaction had been defined or discussed, and merger related diligence could not begin until

April 13, 2006 when SCI established a special committee to review, evaluate, investigate,

negotiate, and approve that potential transaction. Defendant further admits that diligence was

performed by the special committees' advisors for both companies beginning on April 13, 2006

through the end of August 2006. Except as expressly admitted and stated, Defendant denies any


260. Defendant admits that FITG personnel, pursuant to the demand made by the SCI

special committee and approved by SCI's corporate counsel, conducted a pre-transaction

investigation of SCI that included meeting with SCI management on March 24 and 25, 2006.


Paragraph 229.

- 54-ATI-249 I514vl

261. Defendant admits the Plaintiffs purport to paraphrase and quote from Wax Dep.

Ex. 414 and Smith Dep. Ex. 178, those documents speak for themselves, and Defendant denies

any allegations inconsistent with those documents. Defendant further admits that the results of

the pre-transaction investigation of SCI led FITG management to recommend that FITG and SCI

move forward with a possible merger. Except as expressly admitted and stated, Defendant


262. Defendant admits that FITG's Board agreed with management's pre-transaction

recommendation that FITG and SCI move forward with a possible merger and that FITG took

additional steps to combine with SCI. Defendant further admits that as of April 6, 2006, neither

SCI nor FITG had conducted sut1icient merger diligence, agreed to a merger structure, agreed to

(or even drafted) a merger agreement, or determined the consideration for the merger. As Mr.

Ross testified:

Q. Do you recall that being the case, that you all, to use Mr. Wax'sterminology, definitively decided to combine SCI and ITG atthat board meeting?

A No, I don't think so. We decided to go ahead with theprocess. That's all.

Q You think Mr. Wax was overstating the case?

A I do.

Q To say definitively deciding?

A Sure. We didn't have a merger document. We didn't haveanything. (Ross Depo. at 392-93.)


Paragraph 231.


was the "point person" at WLR concerning the merger and was the WLR employee responsible

- 55 -ATI-2491514vl

for overseeing the merger and providing information about the merger to other WLR personnel.

Defendant admits the Plaintiffs purport to paraphrase and quote from Wax Dep. Ex. 414, that

document speaks for itself, and denies any allegations inconsistent with its contents. Except as


264. Defendant admits that SCI conducted detailed due diligence on FITG as part of

the merger. Except as expressly admitted and stated, Defendant denies the allegation "SCI Not

Authorized to Conduct Diligence on FITG" preceding Paragraph 233.

265. Defendant admits that SCI was authorized to and, in fact, did perform due

diligence on FITG. Defendant further states that FITG, as a privately held company with a

common owner of SCI, did not have the same confidentiality concerns as SCI, a publicly held

company, that necessitated a confidentiality agreement be signed during the pre-transaction

investigative period. Defendant further admits that the advisors to the SCI special committee

signed confidentiality agreements when accessing FITG's information from the "due diligence

room" that was set up after April 13, 2006 when the merger diligence began. Except as


266. Defendant admits that Plaintiffs purport to paraphrase and quote Mr. Duerk's

deposition testimony, that testimony speaks for itself, and denies any allegations inconsistent

with it. Defendant further admits that the SCI Board exclusively delegated responsibility for

reviewing, evaluating, investigating, negotiating, and approving any transaction with FITG to the

SCI special committee and its advisors. Except as expressly admitted and stated, Defendant


267. Defendant admits that Plaintiffs purport to paraphrase and quote my deposition

testimony, that testimony speaks for itself, and denies any allegations inconsistent with it.

- 56 -ATI-2491514vl

Defendant further admits that I, on behalf of the SCI special committee, engaged advisors to

perform due diligence and consult with me concerning the merger transaction. Defendant further

admits that the advisors to the SCI special committee presented their diligence findings to me,

answered my many questions, and discussed diligence items raised by the merger. Except as


268. Defendant admits that Plaintiffs purport to paraphrase and quote Mr. Choy's


with it. Defendant further states that RSM performed due diligence on FITG, created models

testing FITG's business plan and projections, and conducted valuations of FITG. Except as


269. Defendant admits that Plaintiffs purport to paraphrase and quote Mr. Choy's


with it. Defendant further states that RSM performed due diligence on FITG, created models

testing FITG's business plan and projections, and conducted valuations of FITG. Except as


270. Defendant admits that SCI and FITG management were "interested" in the

context of the merger and could not conduct independent diligence like the advisors to the

respective special committees to whom the task of diligence was assigned. Except as expressly


271. Defendant admits that SCI and FITG were both textile weaving companies and

had significant overlap and synergies. Defendant further admits that many members of SCI

management, including Stephen Duerk, Bill Nelli, Vick Crowley, Bart Hanaway, and Uwe

- 57 -ATI-2491514vl

Zimmerman, were in favor of the merger. Except as expressly admitted and stated, Defendant


272. Defendant admits that FITG management had to make a presentation to its Board

about going forward with a potential transaction with SCI because the SCI special committee set

forth a review time period and demanded that FITG make a decision about a transaction with

SCI within thirty days. Defendant further admits that FITG made no such demands on SCI and

that a premerger investigation about a potential transaction was not necessary as SCI and FITG

would conduct further diligence on the companies as part of the merger process. Defendant

further states that Mr. Menezes was SCI's interim CEO in April 2006 and could have either

demanded an opportunity to conduct a similar pre-transaction investigation of FITG or ask the

SCI special committee to demand one. Except as expressly admitted and stated, Defendant


273. Defendant admits that SCI's minority shareholders could have sold their stock in

SCI or NITG at any time before or after the merger. Defendant further admits that taking SCI

private was not worth the cost of buying out the minority shareholders and that capital outlays

would be better spent on improving the company. Except as expressly admitted and stated,

Defendant denies the allegation "Ross Directs That SCI Acquire FITG (Instead of FITG

Acquiring SCI) To Avoid Spending Cash to Buy Out Minority Shareholders" preceding

Paragraph 241.

274. Defendant admits that Plaintiffs purport to paraphrase and quote from Wax Dep.

Ex. 414, that document speaks for itself, and denies any allegations inconsistent with it.

Defendant further admits that Wax Dep. Ex. 414 is management's recommendation concerning

the merger without regard to merger structure or any legal or tax implications arising from

- 58 -ATl-2491514vl

merger structure. Except as expressly admitted and stated, Defendant denies any remaining


275. Defendant admits that Plaintiffs purport to paraphrase and quote from Mr. Wax's

deposition, that testimony speaks for itself, and denies any allegations inconsistent with it.

Defendant further admits that Mr. Wax's testimony cited to in Paragraph 242 is Mr. Wax

agreeing to a math formula presented by Plaintiffs' counsel multiplying market cap by the

number of minority shares:

Q. Well, if the stock was trading at about 14, $14.50 at thetime and they [SCI minority shareholders] were 25percent, I think the company's market cap was roughly $80million. Does that sound about right?

A. No. Well, I can't -- you know, in the back of my mind, Ithought the market cap was more like $50 million or -- no,no. We paid $55 million for it so it was probably $80million, so yeah, it was probably $25 million plus.

Q. To buyout the minority shareholders?

A. At the current market price.

Q. At the then current market price?

A. At the then current market price. (Wax Dep. at 255-56.)


Paragraph 242

276. Defendant admits that, as set forth in Paragraph 275 of this Answer, Mr. Wax was

generally agreeing to a math formula presented by Plaintiffs' counsel where he multiplies market

cap by the number of minority shares and was not providing an opinion on the value of SCI at

the time of the merger based on his "insider information about SCI" or his expertise as a

"sophisticated buy-out professional." Except as expressly admitted and stated, Defendant denies


- 59 -ATI-249 I514vl

277. Defendant admits that no cash was paid out as part of the merger and that it was a

stock for stock transaction. Defendant further admits that a subsidiary of SCI acquired FITG and

SCI was the surviving company after the transaction, which allowed SCI's minority shareholders

to sell their shares either before or after the closing of the merger. Except as expressly admitted




Defendant further admits that Messrs. Ross and Wax did not want to use expensive capital to buy

out minority shareholders because it was not important for SCI to be a private company, Mr.

Ross had told me before SCI was purchased that he intended to keep SCI a publicly traded

company, and that capital could be better used to fund acquisitions or otherwise benefit the

company's growth. (Wax Dep. at 259-61; Ross Dep. at 395-98; Tessoni Ex. 49.) Except as


279. Defendant admits that Plaintiffs purport to paraphrase and quote from Gorga Dep.


Defendant further admits that Messrs. Ross and Wax did not want to use expensive capital to buy

out minority shareholders because it was not important for SCI to be a private company, Mr.

Ross had told me before SCI was purchased that he intended to keep SCI a publicly traded

company, and that capital could be better used to fund acquisitions or otherwise benefit the

company's growth. (Wax Dep. at 259-61; Ross Dep. at 395-98; Tessoni Ex. 49.) Except as


- 60-ATI-2491514v I

280. Defendant states that the allegation "The WLR Proposal for Merging FITG into

preceding Paragraph 247 is so vague that Defendant is without knowledge or information

to form a belief as to the truth of that allegation.


Ex. 440 and Gorga Dep. Ex. 205, that those documents speak for themselves, and denies any

allegations inconsistent with them. Defendant admits that on May 30, 2006, WLR submitted a

proposal concerning the structure of the merger to FITG's and SCI's special committees. Except


282. Defendant admits that the May 30, 2006 proposal from WLR to the FITG and SCI

special committees also included a proposed exchange ratio formula to serve as a reference point

for the special committees and that proposed exchange ratio formula was not used to calculate

the agreed upon exchange ratio for the merger. Except as expressly admitted and stated,


283. Defendant admits that FITG had significant assets that were not reflected on its

books because accounting rules required that certain assets be carried on FITG's books at zero

value due to FITG's constituent companies-Burlington Industries and Cone Mills-being

purchased out of bankruptcy. Defendant further admits that the May 30, 2006 proposal from

WLR to the FITG and SCI special committees also included a proposed exchange ratio formula

to serve as a reference point for the special committees and that proposed exchange ratio formula

was not used to calculate the agreed upon exchange ratio for the merger. Except as expressly




- 61 -ATI-2491514vl

Defendant further admits that the May 30, 2006 proposal from WLR to the FITG and SCI special

committees also included a proposed exchange ratio formula to serve as a reference point for the

special committees and that proposed exchange ratio formula was not used to calculate the

agreed upon exchange ratio for the merger. Except as expressly admitted and stated, Defendant


285. Defendant admits that the proposed exchange ratio formula, at the time the

Prospectus was filed on September 1, 2006, would have yielded an exchange ratio of FITG

shareholders owning 61.8% and SCI shareholders owning 38.2% of the combined company

because FITG's balance sheet changed between March and September 2006. Defendant further

admits that as of May 30, 2006, the proposed exchange ratio formula would have yielded an

exchange ratio of FITG shareholders owning approximately 63% and SCI shareholders owning

approximately 37% of the combined company. Except as expressly admitted and stated,




Defendant further admits that the May 30, 2006 proposal from WLR to the FITG and SCI special

committees also included a proposed exchange ratio formula to serve as a reference point for the

special committees and that proposed exchange ratio formula was not used to calculate the

agreed upon exchange ratio for the merger. Defendant further admits that the May 30, 2006

proposal stated that FITG shareholders "would own approximately 65% of the post-Merger

entity," was included for example purposes only, and was not controlling on the special

committees. Except as expressly admitted and stated, Defendant denies any remaining


- 62-ATI-2491514vl

287. Defendant admits that the SCI special committee and its advisors conducted

detailed due diligence of FITG on behalf of SCI's minority shareholders. Except as expressly


288. Defendant admits that before the merger Fund III held the majority of shares of

SCI and after the merger ITH held the majority of shares ofNITG. Defendant further admits that

the SCI special committee and its advisors conducted detailed due diligence on FITG on behalf

of SCI's minority shareholders. Defendant further admits that the May 30, 2006 proposal from

WLR to the FITG and SCI special committees also included a proposed exchange ratio formula

to serve as a reference point for the special committees and that proposed exchange ratio formula

was not used to calculate the agreed upon exchange ratio for the merger. Except as expressly


289. Defendant admits that a dividend of 1/9 of all SCI shares was issued before the

merger and that those shares were escrowed for indemnification purposes and increased the

number of SCI shares issued to SCI's legacy shareholders in NITG. Defendant further admits

that these additional escrowed shares were distributed and Plaintiffs waited for this distribution

before filing this lawsuit. Defendant further admits that SCI was the surviving company after the

merger and that SCI shareholders who did not agree with the merger or that combining FITG and

SCI was a good investment could have sold their shares at any time and received consideration

for their shares. Except as expressly admitted and stated, Defendant denies any remaining


290. Defendant admits that SCI shareholders did not have appraisal rights because they

were the surviving shareholders in the corporation and could have sold their shares at any time,

- 63 -ATI-2491514vl

unlike FITG shareholders who had no market for their shares until the merger closed. Except as


291. Defendant admits that all legacy SCI shareholders were diluted-including SCI's

majority shareholder, Fund III-as a byproduct of additional shares in NITG being issued.

Defendant further admits that SCI's public status was likely a negative factor for the merger

because it increased costs, audit fees, and the complexity of the deal. Defendant further admits

that SCI's liquidity was insufficient for FITG's long term needs, and SCI's liquidity steadily

shrank from 2004 through 2009 when the division representing legacy SCI went bankrupt during

the historic collapse of the automotive market that saw GM and Chrysler declare bankruptcy.


Paragraph 257.

292. Defendant admits that SCI was the surviving company after the merger and that

SCI shareholders who did not agree with the merger, FITG's business plan, or that combining

FITG and SCI was a good investment could have sold their shares at any time and were not

"forced" to invest in NITG. Defendant further admits that investing in NITG was patently risky

and that the risks were publicly disclosed. Except as expressly admitted and stated, Defendant


293. Defendant admits that as part of merger due diligence the SCI special committee

had access to FITG's internal forecasts, projections, budgets, and business plans, as well as any

other materials it requested or believed necessary to evaluate the merger and exchange ratio.


Paragraph 259.

- 64-ATI-2491514vl

294. Defendant admits that as part of merger due diligence the SCI special committee

had access to FITG's internal forecasts, projections, budgets, and business plans, as well as any

other materials it requested or believed necessary to evaluate the merger and accompanying

exchange ratio. Defendant further admits that with the exception of the independent directors

named to the FITG and SCI special committees, SCI's and FITG's directors, officers, and

management were interested in the transaction and could not have independently reviewed the

transaction or negotiated the exchange ratio. Defendant further admits that SCI's interested

directors approved the merger in reliance on the recommendation of the SCI special committee,

as he is entitled to do under Delaware law. Defendant further admits that the SCI directors were

familiar with FITG and, in their respective business judgment, believed in the merger made sense

for FITG and SCI. Defendant further incorporates his responses to Paragraphs 233 through 240

as though fully set forth herein. Except as expressly admitted and stated, Defendant denies any




FITG and SCI was a good investment could have sold their shares at any time. Except as


296. Defendant admits that Article Sixth of SCI's charter expressly authorized a

Continuing Director, like myself, to approve transactions like the merger. Defendant further

admits that if the merger had been put to a super majority, minority shareholder vote, it still

would have had to have been negotiated by me. Defendant further admits that institutional

investors, like FURSA and Ramius, constituted a majority of the minority and, unlike myself,

owed no fiduciary duties to the other minority shareholders and could have used that leverage to

- 65 -ATl-2491514vl

broker special deals or vote down appropriate transactions that other minority shareholders

would have approved. Defendant further admits that FURSA and Ramius contemplated filing a

lawsuit to enjoin the merger, but opted not to do so, implicitly voting in favor of the transaction.

Defendant further incorporates his responses to Paragrapns 211-221 that show I was not co-opted

or otherwise induced to approve the merger, waive the standstill provision, or to undertake any

improper act. Except as expressly admitted and stated, Defendant denies any remaining




FIIG and SCI was a good investment could have protected their interests by selling their shares.


Paragraph 263.

298. Defendant admits that the SCI special committee was expressly authorized by

SCI's Articles of Incorporation to consider transactions like the merger. Except as expressly

admitted and stated, Defendant denies the allegation "SCI Board Creates a Special Committee to

Consider the Merger but it is Fatally Flawed" preceding Paragraph 264.

299. Defendant admits that SCI formed the merger special committee on April 13,

2006, that WLR provided that committee with a proposal for the merger on May 30, 2006, and

thus it was impossible for the SCI special committee to be formed "in response" to WLR's

proposal as alleged in Paragraph 264. Defendant further admits that the SCI special committee

formed to decide on the waiver of the standstill provision in the confidentiality agreement

demanded that a merger special committee be formed if a potential transaction was sought

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between FITG and SCI. Except as expressly admitted and stated, Defendant denies any


300. Defendant admits that the SCI special committee for the merger was formed

because the prior special committee formed to review the request to waive the standstill

provision required that a merger special committee be formed if a potential transaction was

pursued by FITG and SCI. Defendant further admits that the SCI special committee for the

merger was expressly authorized by SCI's charter to approve transactions like the merger, and

would have had to negotiate the terms of the deal and the exchange ratio even if the merger was

put to a super majority vote of minority shareholders who owed no fiduciary duties to the other

minority shareholders. Defendant further states that the business judgment standard of review

applies to this matter and, in the unlikely event that it does not, Plaintiffs bear burden to show

that the transaction was not entirely fair. Except as expressly admitted and stated, Defendant


301. Defendant states that this is a legal conclusion that is not subject to admission or

denial. Defendant further states that the business judgment standard of review applies to this

matter and, in the unlikely event that it does not, Plaintiffs bear burden to show that the

transaction was not entirely fair. To the extent a response is possible, and except as expressly

admitted and stated, Defendant denies the allegations in Paragraph 266.

302. Defendant states that the allegation "Single Member Special Committee Is

Inherently Suspect Under Delaware Law" preceding Paragraph 267 is a legal conclusion not

subject to admission or denial. To the extent a response is possible, Defendant denies this

allegation. See, e.g. In re Energy, L.P. Unitholder Litig., No. 5816-VCP, 2010 WL 4273197, at

*14 (Del. Ch. Oct. 29,2010) (approving one-person committee where only one director was

- 67-ATI-2491514vl

independent: "This Court's entire fairness cases in the corporate context have recognized that it

is often preferable to create a special committee with more than one director, but that doing so is

not required to find that the special committee properly carried out its duties.").


because the prior special committee formed to review the request to waive the standstill waiver

required that a new special committee be formed if a potential transaction was pursued by FITG

and SCI. Defendant further admits that the SCI merger special committee was expressly

authorized by SCI's charter to approve transactions like the merger, and would have had to

negotiate the terms of the deal and the exchange ratio even if the merger was put to a super

majority vote of minority shareholders, shareholders who owed no fiduciary duties to the other

minority shareholders. Defendant further states that the SCI special committee for the merger

was not prospectively limited only to me. Except as expressly admitted and stated, Defendant



because the prior special committee formed to review the request to waive the standstill waiver

required that a new special committee be formed if a potential transaction was pursued by FITG

and SCI. Defendant further admits that WLR had no control or influence over the demand made

by the SCI special committee reviewing the request to waive the standstill waiver. Defendant

further admits that the SCI merger special committee was expressly authorized by SCI's charter

to approve transactions like the merger, and would have had to negotiate the terms of the deal

and the exchange ratio even if the merger was put to a super majority vote of minority

shareholders, shareholders who owed no fiduciary duties to the other minority shareholders.

Defendant further states that the SCI special committee for the merger was not prospectively

- 68 -ATl-2491514vl

limited only to me. Except as expressly admitted and stated, Defendant denies any remaining


305. Defendant incorporates his responses to Paragraphs 267-268 that show WLR and

Iessoni did not "engineer" an illicit SCI special committee, but that SCI's special committee for

the merger was expressly provided for in SCI's Articles of Incorporation. Defendant further

incorporates his responses to Paragraphs 211-221 that show that I was not co-opted or otherwise

induced to approve the merger, waive the standstill provision, or to undertake any improper act.


Paragraph 269.

306. Defendant admits that FIIO's charter differed from SCI's charter in several

respects, including a provision that special committees be made up of two independent directors.

Defendant further admits that FIIO's charter did not have anti-takeover provisions like SCI's

charter-including requiring a supermajority of minority shareholders to approve a merger

and/or limiting approvals of mergers to the Continuing Directors-provisions which had been

added by the bondholders who acquired SCI out of bankruptcy. Defendant further states that

FIIO waived its requirements concerning the number of directors of its merger special

committee because it only had one independent director and, as SCI only had one independent

director, believed that the transaction would be fairer if two single member special committees

negotiated the transaction as compared to a multi-member special committee negotiating with a

single member. Defendant further states that both special committee's single members were

advised by independent legal and financial advisors, thereby muting the concerns of single

person special committees. Except as expressly admitted and stated, Defendant denies any


- 69-ATI-2491514vl

307. Defendant incorporates his response to Paragraph 270 that shows that the

concerns about single person special committees were addressed in the transaction here.

Defendant further admits that adding additional independent directors to FITG's and SCI's board

of directors was not a viable option because of the timing of the transaction, the cumbersome

search required to find suitable candidates, and the likely unwillingness of suitable candidates to

serve as an independent director under the circumstances. Except as expressly admitted and


308. Defendant admits that adding additional independent directors to FITG's and

SCI's board of directors was not a viable option because of the timing of the transaction, the

cumbersome search required to find suitable candidates, and the likely unwillingness of suitable

candidates to serve as an independent director under the circumstances; as I explained:

A. Well, to bring somebody in at that point would have takensome diligence, I believe. We would have had to vet the person,and I was comfortable that given my advisors and theempowerment given to the committee, that could move forward,apparently, since I did.

Q. Do you recall being advised by your legal counsel that therewere I don't know how to put it, that there were issues orchallenges with a single-member special committee?

A. I didn't need to be advised by anybody, Counsel. I was quiteaware of it. (Tessoni Dep at 1092-93.)

Defendant further admits that SCI's charter bestowed all power in approvmg additional

Continuing Directors to the existing Continuing Director, myself, so that if I believed additional

Continuing Directors were needed to examine the merger transaction, I could have independently

taken steps to pursue that option. Except as expressly admitted and stated, Defendant denies any


- 70-ATI-2491514vl

309. Defendant incorporates his response to Paragraph 270 that shows that the

concerns about single person special committees were addressed in the transaction here.

Defendant further states that this is a legal conclusion that is not subject to admission or denial.

Defendam further states that single person special committees are permitted under Delaware law.

See, e.g., In re Energy, L.P. Unitholder Litig., No. 5816-VCP, 2010 WL 4273197, at *14 (Del.

Ch. Oct. 29, 2010) (approving one-person committee where only one director was independent:

"This Court's entire fairness cases in the corporate context have recognized that it is often

preferable to create a special committee with more than one director, but that doing so is not

required to find that the special committee properly carried out its duties."). To the extent a

response is possible, and except as expressly admitted and stated, Defendant denies the


310. Defendant incorporates his response to Paragraph 273 as though fully set forth

herein. Defendant further states that this is a legal conclusion that is not subject to admission or

denial and, to the extent a response is possible, denies the allegations in Paragraph 274.







313. Defendant admits that he served on multiple special committees before the

merger, was the chairman of SCI's audit committee, and had served on other Boards before SCI.

Except as expressly admitted and stated, Defendant denies the allegation "Tessoni had

- 71 -ATI-2491514vl

Inadequate Experience and Expertise to Handle Such a Role by Himself' preceding Paragraph

277.

314. Defendant states that this is a legal conclusion that is not subject to admission or

denial. Defendant further states that Delaware law does not set forth requirements of expertise to

serve as a special committee member, and that single person special committees are permitted

under Delaware law. See, e.g., In re Energy, L.P. Unitholder Litig., No. 58l6-VCP, 2010 WL

4273197, at *14 (Del. Ch. Oct. 29,2010) (approving one-person committee where only one

director was independent: "This Court's entire fairness cases in the corporate context have

recognized that it is often preferable to create a special committee with more than one director,

but that doing so is not required to find that the special committee properly carried out its

duties."). To the extent a response is possible, and except as expressly admitted and stated,

Defendant denies the allegations in Paragraph 277.

315. Defendant admits that he is a professor of accounting, hold a Ph.D. in accounting,

has served on boards of public companies, and has headed audit committees for corporations,

including SCI and NITG. Defendant further admits that he served on special committees for

SCI, including a single person special committee, before Fund III purchased its controlling

interest in SCI. Defendant further admits that I was advised by and consulted with experienced

advisors during the merger process. Except as expressly admitted and stated, Defendant denies



forth herein, and denies any remaining allegations in Paragraph 279.



-72 -ATI-2491514vl







321. Defendant admits that the acquisition of BST by Fund III was a cash purchase,

not a stock-for-stock merger, of a privately held European company. Defendant further admits

that the SCI special committee's advisors discounted FITG's projections, found them to be

aggressive, and, unlike in the BST transaction, SCI's advisors based their valuation of FITG on a

method that was not dependent on FITG's projections. Defendant further incorporates his

responses to Paragraphs 277-278, and 350 as though fully set forth herein. Except as expressly


322. Defendant states that an "earn-out" provision is not a basic concept in mergers

and acquisitions, and an "earn-out" provision was wholly inapplicable under the terms of the

transaction here. Defendant further incorporates his responses to Paragraphs 277-278 as though

fully set forth herein. Except as expressly admitted and stated, Defendant denies any remaining


323. Defendant admits that he, as college professor, co-authored a case study loosely

based on the facts of the merger years after it was completed to be used as a teaching tool for

other academics to educate their students. Defendant further states that the merger was unusual,

particularly employing the unique structure where two independent special committees were

used to segregate all interested directors, officers, and management from the transaction and

- 73 -ATI-2491514vl

negotiate the exchange ratio without any input from the controlling shareholder. Defendant

further states that the merger was unusual in that it had such strong processes in place to protect

the minority shareholders. Defendant further admits that Plaintiffs purport to quote and

paraphrase from Tessoni Depo. Ex. 80, that document speaks for itself, and Defendant denies

any allegations inconsistent with it. Except as expressly admitted and stated, Defendant denies


324. Defendant admits that Plaintiffs purport to quote and paraphrase from Tessoni

Depo. Ex. 80, that document speaks for itself: and Defendant denies any allegations inconsistent

with it. Defendant further states that while the case study that he co-authored was based on the

merger, we modified, embellished and emphasized certain features for teaching purposes.


Paragraphs 287A-G.

325. Defendant admits that the SCI Special Committee was advised by independent

legal and financial advisors, and the FITG Special Committee did not use or seek additional

experts of a more specific nature. Defendant further states that the SCI Special Committee

advisors addressed my questions and concerns about the merger, and that he had no reason to

seek additional advisors for the merger. Except as expressly admitted and stated, Defendant


326. Defendant admits that SCI had been shopped aggressively by its prior controlling

shareholder, Zapata, from 2004 to 2006 and, even with the help of a strategic marketing expert

(Wachovia), Zapata could not sell all of SCI and ultimately had to sell the controlling interest in

SCI at a discounted rate to a distressed investor. Defendant further states that he does not

understand how he could shop the minority bloc in SCI, but Defendant admits that the minority

- 74-ATI-2491514vl

shareholders were free to sell their shares at anytime. Defendant further admits that he was

aware of the previous sales efforts concerning SCI, and that those sales efforts had been

completed only a few months before the merger process began. Defendant further state that the

SCI Special Committee advisors addressed his questions and concerns about the merger, and that

he had no reason to seek additional advisors for the merger. Except as expressly admitted and


327. Defendant denies the allegation "Tessoni was not Independent or Disinterested as

to the Merger" preceding Paragraph 290.

328. Defendant admits that he was independent and insulated from inf1uence from the

interested parties. Defendant further incorporates his responses to Paragraph 270 and 273 that

show that single person special committees are permitted under Delaware law and that the

concerns about single person special committees were addressed in the transaction here. Except


329. Defendant admits that he was paid a f1at fee of $40,000 for his work on the SCI

Special Committee, and states that he would have received that payment whether or not he

approved the merger, and he was not offered or paid any additional money contingent upon the

merger's approval. Defendant further admits that he had no financial interest to approve the

merger. Defendant further incorporates his responses set forth in Paragraphs 211-221 that

evidence that I was not co-opted or otherwise induced to approve the merger, waive the standstill

provision, or to undertake any improper act. Except as expressly admitted and stated, Defendant


330. Defendant admits that Plaintiffs purport to quote and paraphrase from Tessoni

Depo. Ex. 1 and Groga Depo. Exs. 291-292, that those document speaks for themselves, and

- 75 -ATI-2491514vl

Defendant denies any allegations inconsistent with them. Defendant further admits that he was

paid a flat fee of $40,000 for his work on the SCI Special Committee, and that he would have

received that payment whether or not he approved the merger, and he was not offered or paid any

additional money contingent upon the merger's approval. Defendant further admits that had no

financial interest to approve the merger, and was paid no money by WLR, Fund II, Fund III,

Associates II, Associates III, or any individual defendant in this matter. Defendant further states

that he did not expect to be retained on the combined company's board and that no

communications were made to me about my future on NITG's board until after the merger was

approved. (Tessoni Dep at 238-239.) Defendant further states that income earned by me as a

director, head of the audit committee, and member of later special committees for NITG does not

make me interested under Delaware law. In re Walt Disney Co. Derivative Litig., 731 A.2d 342,

360 (Del. Ch. 1998), rev'd on other grounds in Brehm v. Eisner, 746 A.2d 244 (Del. 2000) (fact

that the salary a director defendant receives from her primary occupation is low compared to her

director's fees and stock options is insufficient to demonstrate that a director lacks independence;

holding otherwise would expressly overrule Delaware Supreme Court and preclude "regular

folks'" membership on corporate boards). Except as expressly admitted and stated, Defendant


331. Defendant admits that he was paid director fees for his work at SCI in 2006 that

paid him approximately $114,000, which was approximately the amount he earned as a college

professor. Defendant further admits that 2006 was a very active year for SCI's Board and for me

in particular because I served on the special committee concerning the merger, chaired many

additional audit committee meetings because of late public filings and successor auditor issues

exacerbated by Mr. Menezes while was interim CEO and CFO, and attended additional Board

- 76 -ATI-2491514vl

meetings resulting from the organizational changes in SCI. Defendant further admits that he was

paid director fees for his service on NITG's Board after the merger closed, including work on

additional special committees and as head of the audit committee. Defendant further states that

he did not know about the fees paid that would be paid to him in 2007 and after when he

approved the merger, and that these unknown fees were not why he approved the merger.

Defendant further incorporates his response to Paragraph 292 as though fully set forth herein.


Paragraph 293.

332. Defendant admits that Mr. Ross had not made any decision about retaining me

until after the merger had been reviewed and the exchange ratio was negotiated. (Gorga Depo.

Ex. 254.) Defendant states that he did not expect to be retained on the combined company's

board and that no communications were made to him about his future on NITG's board until

after the merger was approved. (Tessoni Dep at 238-239.) Defendant further incorporates his

responses to Paragraphs 292-293 as though fully set forth herein. Except as expressly admitted


333. Defendant admits that he, like Mr. Gibbons, was a Class I Director and that his

term was due to expire at SCI's 2007 annual meeting, more than a year after the merger would

have closed. Except as expressly admitted and stated, Defendant denies any remaining


334. Defendant incorporate his responses to Paragraphs 292-295 as though fully set


335. Defendant states that income earned by him as a director, head of the audit

committee, and member of later special committees for NITG does not make him interested

- 77 -ATl-2491514vl

under Delaware law. In re Walt Disney Co. Derivative Litig., 731 A.2d 342, 360 (Del. Ch.

1998), rev'd on other grounds in Brehm v. Eisner, 746 A.2d 244 (Del. 2000) (fact that the salary

a director defendant receives from her primary occupation is low compared to her director's fees

and stock options is insufficient to demonstrate that a director lacks independence; holding

otherwise would expressly overrule Delaware Supreme Court and preclude "regular folks'"

membership on corporate boards). Except as expressly admitted and stated, Defendant denies


336. Defendant states that the allegation "The SCI Special Committee was not

Allowed to Consider Other Transactions" preceding Paragraph 298 is so vague that Defendant is


337. Defendant admits that Plaintiffs purport to paraphrase and quote from Tessoni

Depo. Ex. 44, that document speaks for itself, and Defendant denies any allegations inconsistent

with it. Defendant further admits that, in response to a request from WLR to waive the standstill

provision, the SCI special committee demanded that a new merger special committee be formed

to "review, evaluate, investigate, negotiate, and approve the terms of any Potential Transaction."

Defendant further states that the SCI special committee independently made this demand

knowing that (l) SCI could not be sold after two years of aggressive marketing, (2) SCI's

controlling interest was sold at a discounted market rate to distressed investors, (3) the SCI

special committee did not have the power to shop the entire company three months after its

controlling interest was purchased by Fund III, (4) the costs of marketing SCI yet again would

have been significant, and (5) the minority shareholders were free to sell their stock at anytime

on the open market. Except as expressly admitted and stated, Defendant denies any remaining


- 78 -ATI-2491514vl

338. Defendant incorporates his response to Paragraph 298 showing that additional

marketing of SCI would have been a costly and pointless endeavor in light of the preceding two

year sales effort. Defendant further states that it is unclear how or what offers the SCI special

committee was supposed to solicit or consider in the context of the merger or outside the

controlling shareholder's purview. Except as expressly admitted and stated, Defendant denies


339. Defendant incorporate his response to Paragraph 298 showing that additional

marketing of SCI would have been a costly and pointless endeavor in light of the preceding two

year sales effort. Defendant further states that it is unclear how or what offers the SCI special

committee was supposed to solicit or consider in the context of the merger or outside the

controlling shareholder's purview. Except as expressly admitted and stated, Defendant denies


340. Defendant admits that the SCI special committee conducted an arm's length

negotiation during the merger, was not captive or beholden to the controlling shareholder during

price negotiations, and that SCI's Charter gave the SCI special committee powerful leverage

over the controlling shareholder. Defendant further admits that the interested directors, ot1icers,

and management were segregated from the exchange ratio negotiations and that the FITG and

SCI special committees engaged in independent, arm's length negotiations. Defendant further

states that during the merger SCI was valued at a higher price than what Fund III paid for it in

December 2005, and that an unat1iliated third party would have valued SCI at an even lower

level than Fund III had since SCI's earnings had eroded by approximately 70% in the time

between Fund Ill's purchase and the merger. Except as expressly admitted and stated, Defendant


- 79-ATI-2491514vl

341. Defendant admits that he testified that an alternative to the Ross transaction also

"could be discouraging" in that the open market could have yielded a lower price for SCI.

(Tessoni Depo. at 840.) Defendant further admits that marketing SCI was an expensive

proposition, and that the first sales efforts cost more than $500,000 in fees and resulted in no

serious offers. Defendant further admits that the combined company continued to pursue

additional transactions, including purchasing BST, a European based airbag manufacturer, that

provided vertical integration and other synergies for SCI. Defendant further incorporates his

response to Paragraph 298 showing that additional marketing of SCI would have been a costly

and pointless endeavor in light of the preceding two year sales effort. Except as expressly


342. Defendant states that the allegation "The SCI Special Committee was not Fully

Informed" preceding Paragraph 303 is so vague that Defendant is without knowledge or


343. Defendant admits that FITG's August 17, 2006 strategic plan ("Strategic Plan")

was provided by FITG management to the advisors to the special committees. Defendant further

admits that the Strategic Plan was FITG's management's best good faith belief and projection of

FITG's future business outlook. Defendant further admits that this Strategic Plan included

certain synergistic acquisitions that management believed were very likely and had been

previously disclosed to and discussed with the financial advisors for the special committees.

Defendant further admits that Mr. Ross testified that including potential acquisitions in a

strategic plan is not unusual. (Ross Dep. at 259-61.) Defendant further admits that SCI's

projections provided to the special committees' advisors also contained business that had neither

been obtained nor contractualized. Defendant further incorporates his responses to Paragraphs

- 80 -ATI-249 I514vl

464-478 as though fully set forth herein. Except as expressly admitted and stated, Defendant


344. Defendant admits that on or about August 28, 2006, FITG management prepared

a projection to obtain sort term bank financing ("Bank Model"), and that the Bank Model was

not intended to be, and never was, FITG's strategic plan. Except as expressly admitted and


345. Defendant admits that the Bank Model was different from the Strategic Plan in

content and purpose, and that the Bank Model had lower projected earnings with less debt

whereas the Strategic Plan had higher projected earnings with greater debt. Defendant further

states that Plaintiffs purport to paraphrase and quote from Spradling Depo. Ex. 338, that

document speaks for itself, and Defendant denies any allegations inconsistent with it. Except as


346. Defendant admits that the Bank Model was different from the Strategic Plan in

content and purpose, and that the Bank Model was not an appropriate model to use to value

FITG for the merger. Defendant further incorporates his responses to Paragraphs 433-486 as

though fully set forth herein. Except as expressly admitted and stated, Defendant denies any


347. Defendant admits that the Strategic Plan included certain synergistic acquisitions

that management believed were likely and those potential acquisitions were disclosed to and

discussed with the financial advisors for the special committees. (Choy Depo at 693-94; 753

767.) Defendant further admits that SCI's projections provided to the special committees'

advisors also contained business that had neither been obtained nor contractualized. Except as


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348. Defendant states that the allegation "The Special Committee's Financial Advisor

was Inadequate" preceding Paragraph 308 is so vague that Defendant is without knowledge or


349. Defendant denies that a "sister company" of RSM (whatever Plaintiffs mean by

that term) had "deep relationships with FITG." Except as expressly denied, Defendant is without

knowledge to admit or denies the remaining allegations in Paragraph 308.

350. Defendant states that the allegations in Paragraph 309 state a legal conclusion that

is not subject to admission or denial. To the extent a response is possible, Defendant denies the


351. Defendant admits that he testified that he did not feel any pressure from WLR.

(Tessoni Depo. at 285.) Except as expressly admitted and stated, Defendant denies the allegation

"The Pressure on Tessoni - The Selection of RSM" preceding Paragraph 310.


353. Defendant admits that Wachovia, believing it had a conflict, declined to serve as

an advisor to the SCI special committee. Defendant further admits that Raymond James was

suggested as a potential financial advisor for the SCI special committee, but that the SCI special

committee instead selected RSM. Except as expressly admitted and stated, Defendant denies any


354. Defendant admits that he testified that he did not feel any pressure from WLR.

(Tessoni Depo. at 285 ("[D]id you feel that you were under pressure from Ross? A Absolutely

not.").) Except as expressly admitted and stated, Defendant denies any remaining allegations in

Paragraph 312.

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355. Defendant admits that he testified that he was not getting daily calls and that the

remarks made in Tessoni Depo. Ex. 84 were "probably an exaggeration." (Tessoni Depo. at

1012-13.) Defendant further admits that the merger could not move forward until the SCI

special committee had a financial advisor in place, and that delays to the merger could

potentially harm SCI's business. Except as expressly admitted and stated, Defendant denies any


356. Defendant admits that he testified about Tessoni Depo. Ex. 85 as follows:

Q. Dr. Tessoni, had you been, quote, pounded uponrelentlessly by a Mr. Wax?

A Maybe, not to the extent where I felt like I needed medicalassistance. So he was very outspoken about his view of how thetransaction was proceeding per prior discussions in this deposition.

QAnd did--

A So when I moved from discussing it with him to discussing itwith counsel, I may have been prone to a bit of enhancement.


Paragraph 314.

357. Defendant admits that Mr. Wax testified about Wax Depo. Ex. 455 as follows:

Dan, I hate to plead, but you must get Nixon Peabody to start beingresponsive to someone other than themselves. I should not have to-- it should not have taken almost a month to replace Wachovia. Iam under tremendous pressure to get the S-4 tiled after the debaclewith the Q. Please persuade or order Nixon Peabody to beresponsive and timely. (Wax at 532, reading from Ex. 455.)

Defendant further admits that this email was sent after multiple requests for Nixon Peabody to

provide a revised draft of the merger agreement. Defendant further admits that the "debacle with

the Q" concerned SCI's late tiling of its 10-Q while Mr. Menezes was interim CEO and CFO.

Defendant further admits that completing the merger was important to both FITG's and SCI's

- 83 -ATl-2491514vl

businesses. Except as expressly admitted and stated, Defendant denies any remaining allegations

in Paragraph 315.

358. Defendant admits that RSM was engaged by the SCI special committee.

Defendant further admits that he testified that he did not feel any pressure from WLR. Except as

expressly admitted and stated, Defendant is without knowledge or information to form a belief as

to the truth about why RSM was engaged by the SCI special committee or the precise date of

RSM's engagement.

359. Defendant states that the allegation "RSM's Lack of Experience and Potential

Conf1ict of Interest" preceding Paragraph 317 is so vague that Defendant is without knowledge

or information to form a belief as to the truth of that allegation.







363. Defendant admits that Plaintiffs purport to quote and paraphrase from Choy Depo.

Ex. 85, that document speaks for itself, and Defendant denies any allegations inconsistent with it.

Except as expressly admitted and stated, Defendant is without knowledge or information to form

a belief as to the truth of the remaining allegations in Paragraph 320.

364. Defendant admits that Plaintiffs purport to quote and paraphrase from Choy Depo.


- 84-ATI-2491514vI



365. On information and belief as to these matters, Defendant admits that RSM bid on

additional fairness opinion work related to NITG's acquisition of BST, that RSM was not hired

to do that work, and that hiring decision was made by the NITG special committee without input

from WLR or any interested directors, officers, or managers. Except as expressly admitted and


366. Defendant admits that the fairness opinion work related to NITG's acquisition of

BST was done by SunTrust Robinson Humphrey, which had advised FITG's special committee

during the merger, and that hiring decision was made by the NITG special committee without

input from WLR or any interested directors, officers, or managers. Except as expressly admitted


367. Defendant admits that NITG's special committee made the hiring decisions about

its advisors without input from WLR or any interested directors, officers, or managers.

Defendant further admits that he had no agreement with RSM about giving it additional work

after the merger and RSM was not hired to do further fairness opinion work after the merger.


Paragraph 324.

368. On information and belief as to these matters, Defendant admits that McGladrey

& Pullen, not RSM, did certain accounting work converting accounting practices for BST

subsidiaries to comply with U.S. GAAP. Except as expressly admitted and stated, Defendant



- 85 -ATl-2491514vI




& Pullen was involved in auditing FITG's pension plan and generally advised FITG concerning

Sarbanes-Oxley compliance. Except as expressly admitted and stated, Defendant denies any



& Pullen was involved in auditing FITG's pension plan. Except as expressly admitted and







& Pullen had audited Cone Mills pension plan and had been auditing FITG's pension plan tor

approximately two years at the time of the merger. Defendant further admits that RSM did not

work for FITG before the merger, and that the SCI special committee hired RSM without input

from WLR or any interested directors, officers, or managers. Except as expressly admitted and


376. On information and belief as to these matters, Defendant admits that Mr. Smith,

while at Cone Mills and FITG, worked with various partners and employees of McGladrey &

Pullen. Defendant further admits that RSM did not work for FITG before the merger, and that

the SCI special committee hired RSM without input from WLR or any interested directors,

- 86 -ATI-2491514vI

officers, or managers. Except as expressly admitted and stated, Defendant denies any remaining



& Pullen, not RSM, did certain accounting work converting accounting practices for BST

subsidiaries to comply with U.S. GAAP. Except as expressly admitted and stated, Defendant


378. On information and belief as to these matters, Defendant admits that no one from

RSM McGladrey, Inc., McGladrey & Pullen, or RSM made any report or presentation to FITG's

Board on August 17, 2006. Defendant further admits that no one from RSM McGladrey, Inc.,

McGladrey & Pullen, or RSM ever reported to FITG's Board about the merger. Defendant

further admits that Plaintiffs purport to paraphrase and quote from Wax Depo. Ex. 465, that





380. Defendant further admits that Plaintiffs purport to paraphrase and quote from

Tessoni Depo. Ex. 16, that document speaks for itself, and Defendant denies any allegations

inconsistent with it. Except as expressly admitted and stated, Defendant is without knowledge or

information to form a belief as to the truth of the remaining allegations in Paragraph 337.


Tessoni Depo. Ex. 84, that document speaks for itself, and Defendant denies any allegations



- 87 -ATl-2491514vl





& Pullen had audited Cone Mills pension plan and had been auditing FITG's pension plan for

approximately two years at the time of the merger. Defendant further admits that Mr. Smith,

while at Cone Mills and FITG, worked with various partners and employees of McGladrey &

Pullen. Defendant further admits that RSM did not work for FITG before the merger, and that

the SCI special committee hired RSM without input from WLR or any interested directors,

officers, or managers. Except as expressly admitted and stated, Defendant is without knowledge

or information to form a belief as to the truth of the remaining allegations in Paragraph 341.

385. Defendant states that the allegation "The RSM Engagement Agreement

Limitations Rendered it of 'Questionable Reliability'" preceding Paragraph 342 is so vague that

Defendant is without knowledge or information to form a belief as to the truth of that allegation.

386. Defendant further admits that PlaintifIs purport to paraphrase and quote from

Choy Depo. Ex. 13, that document speaks for itself, and Defendant denies any allegations



387. Defendant states that the allegations in Paragraph 343 are a legal conclusion that



388. On information and belief as to these matters, Defendant admits that FITG

management provided accurate and complete information to the due diligence room and the

- 88 -ATI-2491514vl

special committee advisors. Defendant further admits that FITG management had many follow

up conversations and communications with the advisors for the special committees concerning

the information provided to them during due diligence for the merger. Defendant further admits

that Plaintiffs purport to paraphrase and quote from Choy Depo. Ex. 60, that document speaks

for itself, and Defendant denies any allegations inconsistent with it. Except as expressly


389. Defendant states that he is without knowledge or information to form a belief as

to the truth of the allegation "RSM Questioned but did not 'Vet' FITG Numbers, violating

Normal Practice" preceding Paragraph 345.

390. Defendant admits that RSM had one several hours long in person meeting with

FITG management, and many follow up communications via telephone and email. Defendant

further admits that FITG management expected the special committee advisors to test FITG's

projections, run sensitivity analyses, and reach their own independent conclusions. Defendant

further admits that Plaintiffs purport to paraphrase and quote from Mr. Choy's deposition

testimony, that testimony speaks for itself, and Defendant denies any allegations inconsistent

with it. Except as expressly admitted and stated, Defendant is without knowledge or information

to form a belief as to the truth of the remaining allegations in Paragraph 345.


herein. Defendant further admits that Plaintiffs purport to paraphrase and quote from Tessoni




- 89 -ATl-2491514vI

392. Defendant admits that Plaintiffs purport to paraphrase and quote from Mr. Choy's

deposition testimony, that testimony speaks for itself, and Defendant denies any allegations




herein. Defendant admits that Plaintiffs purport to paraphrase and quote from Mr. Choy's




394. Defendant admits that Plaintiffs purport to paraphrase and quote from Mr. Wax's


inconsistent with it. Defendant further admits that the nature, breadth, and type of diligence

performed varies from deal to deal. (Wax Depo. at 237-38.) Defendant further admits that FITG

management expected the special committee advisors to test FITG's projections, run sensitivity

analyses, and reach their own independent conclusions. Except as expressly admitted and stated,



acquired BST and that a financial advisor familiar with the automotive market was engaged as

part of that acquisition. Defendant further admits that the financial advisor for the BST

transaction conducted a sensitivity analysis of the seller's projections for BST. Defendant



further admits that RSM was hired by the SCI special committee without input from WLR or any

- 90-ATI-2491514vI

interested directors, officers, or managers. Except as expressly admitted and stated, Defendant






398. Defendant admits that FITG's Strategic Plan projected improved growth rates

based on, among other things, lower costs of operating in foreign countries, improved margins,

and increased market share. Defendant further admits that FITG's Strategic Plan was developed

in conjunction with input from its customers and market experts who supported the projections.

(Smith Depo. at 434-441.) Defendant further admits that certain business partners believed

FITG's Strategic Plan's growth rates and projections were too conservative. (Jd.) Defendant

further admits that FITG's constituent businesses previously had more than $3 billion in sales,

FITG was a preferred supplier for its customers, and FITG expected to recapture a portion of that

lost business. Defendant further admits that Plaintiffs purport to paraphrase and quote from

Choy Depo. Ex 58, that document speaks for itself, and Defendant denies any allegations

inconsistent with it. Except as expressly admitted and stated, Defendant denies any remaining



400. Defendant admits that Plaintiffs purport to paraphrase and quote from Wax Depo.

Ex 472, which is a duplicate of Ross Depo. Ex. 779, that document speaks for itself, and

Defendant denies any allegations inconsistent with it. Defendant further admits that Mr. Ross

testified about Ross Depo. Ex. 779 as follows:

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A That is not what it says here. It says to risk SCI and BST.BST was a 200-odd million dollar commitment. It's muchbigger than SCI.

Q Well, part of that statement is to risk SCI, isn't it?

A That's part of it, but it's not the whole statement, and it's nottherefore accurate the way you read it.

Q You raised it -- I'm sorry.

A What I am talking about is three things. The ITG [direct]commitment by us, and the SCI and the BST, and the context forthat, if you look up above in that paragraph, is I am still on thisquestion, is this going to work for the big IPQ. That's why I amsaying, if something like it is not achieved, no one will believe the2008 numbers, let alone put a multiple. UBS and Goldman hadindicated to us that late in '07, investors would be willing to valueit based on a multiple of2008 EBITDA. So what I am saying hereis, if we don't get to something like that, the underwriting won'twork. This is really talking as much about the underwriting as it isabout anything else.

And as I say, at the end ofthe day, he [Wax] convinced me, andyou would be able to find a fairly similar, maybe not the sameword for word, but fairly similar e-mails by me to whoever is thepoint person on whatever deal we are doing as we get to the lastminute. (Ross Depo. at 567-68.)


Paragraph 356.

401. Defendant admits that the SCI special committee negotiated the merger agreement

at arm's length and found it to be fair to SCI's minority shareholders. Defendant further admits

that the merger agreement included significant representations and warranties that were added at

the instance of the SCI special committee. Except as expressly admitted and stated, Defendant

denies the allegations "The Merger Agreement - Unfair to SCI" and "WLR Refuses to Provide

Warranties" preceding Paragraph 356.

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402. Defendant admits that Nixon Peabody, counsel for SCI's special committee,

significantly revised the draft merger agreement circulated by WLR's counsel, and that Nixon

Peabody added many provisions that were ultimately included in the final merger agreement,

including sections 3.l(g)(ii), 0), (o-z) (representations and warranties); 6.2(e) (MAC clause); and

Article VIII (established indemnities). Except as expressly admitted and stated, Defendant is

without knowledge or information to form a belief as to the truth of the remaining allegations in

Paragraph 356.

403. Defendant admits that on or about August 9, 2006, the SCI special committee cut

ofT negotiations concerning the merger agreement based on WLR's refusal to provide fair and

meaningful post-closing indemnity protections for SCI in the event there was a breach of the

representations and warranties of the merger agreement. Defendant further admits that Nixon

Peabody added many provisions that were ultimately included in the final merger agreement,

including sections 3.1 (g)(ii), (j), (o-z) (representations and warranties); 6.2(e) (MAC clause); and

Article VIII (established indemnities). Defendant further admits that since the merger agreement

was signed and the merger closed, there have been no breaches of the representations and

warranties in the merger agreement. Defendant further admits that PlaintifIs purport to

paraphrase and quote from Tessoni Depo. Ex 61, that document speaks for itself: and Defendant

denies any allegations inconsistent with it. Except as expressly admitted and stated, Defendant



Depo. Ex 61, that document speaks for itself, and Defendant denies any allegations inconsistent

with it. Except as expressly admitted and stated, Defendant denies any remaining allegations in

Paragraph 358.

- 93 -ATl-2491514vl




Paragraph 359.


Depo. Ex 61, that document speaks for itself: and Defendant denies any allegations inconsistent


Paragraph 360.




Paragraph 361.

408. Defendant admits that PlaintifIs purport to paraphrase and quote from Tessoni



Paragraph 362.




Paragraph 363.



- 94-ATI-2491514vl


Paragraph 364.




Paragraph 365.


413. Defendant admits that Plaintiffs purport to paraphrase and quote from Choy Depo.

Ex 25, that document speaks for itself: and Defendant denies any allegations inconsistent with it.

Defendant further admits that Mr. Smith testified that his phone call to RSM was to keep the

process moving in order to reduce fees and expenses associated with the merger and:

My feeling was in this particular situation, I was just mentioning tohim that he should continue progress. Did not see the offense tothe phone call that he did because I was not in -- as you can seefrom the text, wasn't trying to shape the opinion and what theopinion said in any manner and obviously was willing to provideadditional detail. So he took from a process viewpoint, he mayhave been absolutely correct; but I had no ill intent in making thephone call. Just trying to say, "Let's keep the process moving."(Smith Depo at 589-90.)

Defendant further admits that Mr. Smith testified that when Mr. Choy said "certainty of close"

that '''close' doesn't necessarily mean a successful close, but you either put an end to it one

direction or the other." (Smith Depo. at 590-91.) Except as expressly admitted and stated,


414. On information and belief as to these matters, Defendant admits that FITG was

not a client of RSM, that RSM personnel spoke to FITG management many times during the

diligence process, and that communications between RSM and FITG do not demonstrate a "long

standing close relationship with [RSM's] sister company." Defendant further incorporates his

- 95 -ATI-2491514vl

responses to Paragraphs 327-333 as though fully set forth herein. Except as expressly admitted



Ex 25, that document speaks for itselt~ and Defendant denies any allegations inconsistent with it.

Defendant further admits that that Nixon Peabody added many provisions that were ultimately

included in the final merger agreement, including sections 3.1 (g)(ii), (j), (o-z) (representations

and warranties); 6.2(e) (MAC clause); and Article VIII (established indemnities). Defendant

further admits that since the merger agreement was signed and the merger closed, there have

been no breaches of the representations and warranties in the merger agreement. Except as



herein. Except as expressly admitted and stated, Defendant denies any remaining allegations in

Paragraph 370.



with it. Defendant further admits that he and Mr. Ross discussed resolutions of the indemnity

issue, counsel for both parties negotiated a mutually acceptable resolution, and that resolution

was incorporated in the final merger agreement. Except as expressly admitted and stated,


418. Defendant admits that Plaintiffs have not brought a fraud claim against

Defendant, have not identified any fraudulent statements or actions by Defendant, and that

Delaware law creates remedies for defrauded shareholders that would be available in addition to

- 96-ATl-2491514vl

the indemnity provisions set forth in the merger agreement. Except as expressly admitted and




with it. Defendant further admits that Plaintiffs have not brought a fraud claim against









Paragraph 375.




Paragraph 376.


Depo. Ex 13, that document speaks for itselt~ and Defendant denies any allegations inconsistent

with it. Defendant further admits that he was the Stockholder Representative for SCI under the

escrow agreement. Defendant further admits that since the merger agreement was signed and the

merger closed, there have been no breaches of the representations and warranties in the merger

- 97 -ATl-2491514vl

agreement. Except as expressly admitted and stated, Defendant denies any remaining allegations

in Paragraph 377.


425. Defendant admits that Plaintiffs have not brought a fraud claim against




stated, Defendant denies the allegation "The Indemnity Did Not Exclude Fraud" preceding

Paragraph 379.

426. Defendant admits that Plaintiffs have not brought a fraud claim against him, have

not identified any fraudulent statements or actions by him, and that Delaware law creates

remedies for defrauded shareholders that would be available in addition to the indemnity

provisions set forth in the merger agreement. Except as expressly admitted and stated,


427. Defendant denies the allegation that "The Indemnity was Less Valuable the

Greater the Breach" preceding Paragraph 380.


429. Defendant denies the allegation that "The Indemnity Disproportionately

Disadvantaged SCI" preceding Paragraph 381.


431. Defendant admits that SCI was a public company and made public filings under

SEC regulations. Defendant further admits that FITG was a private company and that

- 98-ATI-2491514vl

information about FITG was made public beginning August 30, 2006. Except as expressly


432. Defendant admits that the FITG and SCI special committees conducted extensive

due diligence on FITG and SCI as part of the merger process. Except as expressly admitted and


433. Defendant admits that the SCI special committee conducted extensive due

diligence on FITG as part of the merger, had a detailed understanding of FITG and its business,

and could judge the risks associated with FITG and the provisions in the merger agreement.


Paragraph 384.

434. Defendant denies the allegation that "No Truly Independent Board Representative

Protected the SCI Minority Shareholders" preceding Paragraph 385.


436. Defendant admits that he was independent and adversarial while serving on the

SCI special committee, and was not improperly influenced by any of the interested directors,

officers, or managers of FITG or SCI. Defendant further admits that he was not pressured

whatsoever by an interested director, officer, or manager of FITG or SCI. (Tessoni Depo at

815.) Defendant further admits that he was paid a f1at fee of $40,000 for his work on the SCI

Special Committee, and that he would have received that payment whether or not he approved

the merger, and he was not offered or paid any additional money contingent upon the merger's

approval. Defendant further admits that he had no financial interest to approve the merger, and

was paid no money by WLR, Fund II, Fund III, Associates II, Associates III, or any individual

defendant in this matter. Defendant further admits that his role as director of NITG provided

- 99-ATI-2491514vl

him with detailed financial information about NITG, and allowed him to simultaneously fulfill

his role as the SCI Stockholder Representative while serving as a NITG director. Defendant

further admits that he was the Stockholder Representative for SCI under the escrow agreement.

Defendant further admits that since the merger agreement was signed and the merger closed,

there have been no breaches of the representations and warranties in the merger agreement, and

Plaintiffs have failed to identify any. Except as expressly admitted and stated, Defendant denies


437. Defendant admits that his role as director and chairman of the audit committee for

NITG provided him with detailed financial information about NITG and allowed him to

simultaneously fulfill his role as the SCI Stockholder Representative while serving as a NITG

director. Defendant further admits that he testified as follows:

Q. Did you -- what did you do to monitor and fairly administerclaims of the SCI shareholders?

A Well, on a go-forward basis, subsequent -- ... to the transaction,I was chairman of the audit committee. That certainly was abig, big part of my ability to observe what was happening. Iwas on the board of directors, and so from that perspective, itwas -- a lot of information was available for me to evaluate,monitor, if you will, on behalf of the minority shareholders.(Tessoni Depo. at 922-23 [emphasis added].)

Defendant further admits that he did not "consider" making a claim on behalf of SCI's minority

shareholders for indemnification because he determined, based on the information available to

him, that no claim was necessary:

Q. Did you consider making a claim on behalf of the minorityshareholders?

A Well, in the context of my role, I would have determinedwhether a claim was necessary. And it never came to a claim isnecessary. (Tessoni Depo. at 923.)

ATI-2491514vl

* * *

- 100 -

Q. Did you ever consider, in light ofITG's performance after themerger, that a claim could be made, might be appropriate?

A No. I mean, given the reps and warranties that I was -- thatwere in the documents, I didn't believe any of them were everbreached.

Q Did you ever consider making a claim?

A I think I constantly considered the fact that I was responsibleto determine whether any reps or warranties were breached.So when I would see what was going on, I would be aware that ifsomething that I needed to consider, if there were violations of thereps and warranties occurring, that needed to be looked into.

Q Did you ever specifically consider making a claim?

A I never saw anything that led me to believe a claim wasappropriate to consider. (Tessoni Depo. at 924-25 [emphasisadded].)


Paragraph 387.

438. Defendant states that the allegation "No Earn-Out on the Consideration to FITG"

preceding Paragraph 388 is so vague that Defendant is without knowledge or information to form

a belief as to the truth of that allegation.

439. Defendant admits that SCI failed to meet the near term (or long term) earnings

projections that it represented that it would during the merger. Defendant further admits that an

"earn-out" structure (whatever Plaintiffs mean by that term) is cumbersome and virtually

unworkable in a stock-far-stock merger. Defendant further states that the alleged "earn-out"

structure is a brainchild of Plaintiffs' counsel, was first raised after this lawsuit was filed, and is

unclear how it would operate in the context of the facts surrounding the merger. Except as


- 101 -ATI-249I5I4vI

440. Defendant denies the allegation "No Real Protection for SCI for False FITG

Information" preceding Paragraph 389.

441. Defendant admits that Plaintiffs have not identified any false or misleading

information provided by FITG. Defendant further admits that Plaintiffs have not sued Defendant

for providing false or misleading information. Defendant further admits that SCI shareholders

had significant legal remedies against Defendant for providing false or misleading information,

including raising such issues in this lawsuit, but Plaintiffs declined to do so. Except as expressly


442. Defendant states that the allegation "No Fiduciary Duty Out" preceding Paragraph

390 is so vague that Defendant is without knowledge or information to form a belief as to the

truth of that allegation.

443. Defendant admits that the merger agreement did not contain a provision that

would have allowed for the cancellation of the agreement in the event it caused a breach of

fiduciary duty. Defendant further admits that no breach of fiduciary duty occurred that would

have required the cancellation of the merger agreement. Defendant further admits that none of

the interested Defendants "controlled the transaction" because the power to approve the merger

was exclusively given to either a supermajority of minority shareholders or the Continuing

Director. Except as expressly admitted and stated, Defendant denies any remaining allegations

in Paragraph 390.

444. Defendant states that the allegation "No Go-Shop Provision" preceding Paragraph



- 102 -ATI-2491514vI

445. Defendant admits that (1) SCI could not be sold after two years of aggressive

marketing, (2) SCI's controlling interest was sold at a discounted market rate to distressed

investors, (3) the SCI special committee did not have the power to shop the entire company three

months after its controlling interest was purchased by Fund III, and (4) the minority shareholders

were free to sell their stock at anytime on the open market if they disagreed with the exchange

ratio or the merger. Defendant further admits that during the merger SCI was valued at a higher

price than what Fund III paid for SCI in December 2005, and that an unaffiliated third party

would have valued SCI at an even lower level than Fund III in a "go shop" situation since SCI's

earnings had eroded by approximately 70% in the time between Fund Ill's purchase and the

merger. Defendant further admits that undertaking a costly, time consuming, and pointless sales

effort to reaffirm the market's disinterest in purchasing SCI was unnecessary for the SCI Board

to fulfill its fiduciary duties in light of the SCI Board's inability to sell the company in the two

years before the merger. Except as expressly admitted and stated, Defendant denies any


446. Defendant denies the allegation "FITG and WLR Improperly Communicated with

RSM" preceding Paragraph 392.

447. Defendant admits that Mr. Smith testified that his phone call to RSM was to keep

the process moving in order to reduce the fees and expenses associated with the merger, and:

My feeling was in this particular situation, I was just mentioning tohim that he should continue progress. Did not see the offense tothe phone call that he did because I was not in -- as you can seefrom the text, wasn't trying to shape the opinion and what theopinion said in any manner and obviously was willing to provideadditional detail. So he took from a process viewpoint, he mayhave been absolutely correct; but I had no ill intent in making thephone call. Just trying to say, "Let's keep the process moving."(Smith Depo at 589-90.)

- 103 -ATI-2491514vl

Defendant further admits that Mr. Smith testified that when Mr. Choy said "certainty of close"

that "'close' doesn't necessarily mean a successful close, but you either put an end to it one

direction or the other." (Smith Depo. at 590-91.) Defendant further admits that this phone call

had no effect on the merger or the exchange ratio, and had no improper ramifications on the

merger. Defendant further admits that RSM personnel spoke to FITG management many times

during the diligence process, and that communications between RSM and FITG do not

demonstrate an "inappropriate relationship between Smith/FITG and RSM." Except as expressly



449. Defendant admits that Plaintiffs purport to paraphrase and quote from Ross Depo.

Ex. 740, that document speaks for itself, and Defendant denies any allegations inconsistent with

it. Defendant further admits that Mr. Ross testified that he believed that the reference to

financial advisors in Ross Depo. Ex 740 concerned the BST transaction, not the merger of SCI

and ITG. Defendant further admits that the merger financial advisors had nothing to "sign off'

on as negotiations for the exchange ratio had not begun by August 18, 2006. Defendant further

states that communications between interested parties and the financial advisors for the special

committees are not de facto inappropriate or improper. Except as expressly admitted and stated,


450. Defendant admits that Wax Depo. Ex. 468 states that Mr. Wax was "scheduled to

speak with both FA's [financial advisors] today," but does not indicate if he actually did speak

with them. Defendant further admits that Mr. Wax testified that he did not recall speaking with

them:

Q. Do you have any recollection of actually speaking to them?

A.No.

- 104-ATI-2491514vl

Q. Why would you have called them or spoken to them in person,however, you spoke to them?

A. Well, since I don't have a recollection, I don't know how toanswer your question. (Wax Depo at 589.)

Defendant further states that communications between interested parties and the financial

advisors for the special committees are not defacto inappropriate or improper. Defendant

further incorporates his response to Paragraph 394 as though fully set forth herein. Except as


451. Defendant admits that the FITG special committee opened negotiations by asking

for an exchange ratio that would provide FITG shareholders with more than 70% of the

combined company. Defendant further admits that the SCI special committee negotiated that

initial offer down by 7%. Except as expressly admitted and stated, Defendant is without

knowledge or information to form a belief as to the truth of the allegation "FITG Requests a

Higher Share of the Combined Company" preceding Paragraph 396.

452. Defendant admits that the proposed exchange ratio formula, at the time the

Prospectus was filed, would have yielded an exchange ratio of FITG shareholders owning 61.8%

and SCI shareholders owning 38.2% of the combined company because FITG's balance sheet

changed between March and September 2006. Defendant further admits that as of May 30,

2006, the proposed exchange ratio formula would have yielded an exchange ratio of FITG

shareholders owning approximately 63% and SCI shareholders owning approximately 37% of

the combined company. Defendant further admits that May 30, 2006 proposal from WLR to the

FITG and SCI special committees included a proposed exchange ratio formula to serve as a

reference point for the special committees and was not used to calculate the agreed upon

exchange ratio for the merger. Defendant further admits that the May 30, 2006 proposal stated

that FITG shareholders "would own approximately 65% of the post-Merger entity," was

- 105 -ATI-2491514v I

included for example purposes only, and was not controlling on the special committees. Except


453. Defendant admits that the May 30, 2006 proposal stated that FITG shareholders

"would own approximately 65% of the post-Merger entity," and that this was not a misprint.



Paragraph 397.




initial offer down by 7%. Defendant further incorporates his response to Paragraph 396 as

though fully set forth herein. Except as expressly admitted and stated, Defendant is without


455. Defendant admits that the negotiations for the exchange ratio were not completed

by August 22, 2006. Defendant further admits that Plaintiffs purport to paraphrase and quote

from Choy Depo. Ex. 33b, that document speaks for itself, and Defendant denies any allegations


information to form a belief as to the truth of the allegations in Paragraph 399.

456. Defendant admits that during exchange ratio negotiations the FITG special

committee stated that FITG had $100 million in assets that were not reflected on its books

because accounting rules required that certain assets be carried on FITG's books at zero value

due to FITG's constituent companies-Burlington Industries and Cone Mills-being purchased

out of bankruptcy. Defendant further admits that these off book assets were the principle basis

- 106 -ATI-2491514vI

for the FITG special committee opening negotiations with an exchange ratio that would provide

FITG shareholders with more than 70% of the combined company. Defendant admits that

Plaintiffs purport to paraphrase and quote from Tessoni Depo. Ex. 5, that document speaks for

itself, and Defendant denies any allegations inconsistent with it. Except as expressly admitted





to form a belief as to the truth of the allegations in Paragraph 401.

458. Defendant states that the allegation "RSM Document Shows FITG Not Worth

What had Already Been Proposed" preceding Paragraph 402 is so vague that Defendant is







Depo. Ex. 22, which is a duplicate of Ross Depo. Ex. 770, that document speaks for itself, and

Defendant denies any allegations inconsistent with it. Defendant further admits that Tessoni

Depo. Ex. 22 was a draft negotiating script that was later revised and used by the SCI special

committee and its advisors in negotiating the exchange ratio. Defendant further admits that Mr.

Ross testified that this draft negotiating script took the most extreme position possible to

advocate on behalfof SCI:

- 107 -ATI-2491514vl

A. Well, that's a matter of -- this, this fellow is applying this in anegotiating context to respond to some proposal that lTG'scommittee had made to him. So, this looks to me like anegotiating piece, trying to take the most extreme position hecan come up with in order to be an advocate on behalf of SCI.That's how I read this whole document.

Q Okay. Next bullet point: "lTG's current levels of earnings,EBITDA, EBIT and net income do not support the implied equityvaluation given to ITG." Would you have agreed with that?

A No. No. But again, this looks to me like him trying to list bulletpoints that they should use as negotiating topics to try to refine thedeal with ITG.

Q Did you--

A The more you read me the bullet points, the more convinced Ibecome that that is what this really is. (Ross Depo. at 507-08.)

Defendant further admits that Mr. Ross testified that his belief was that Tessoni Depo. Ex. 22

was RSM's "proposed script for negotiating with ITG" and was not "a value conclusion," but a

"sort of in argument negotiating document." (Ross Depo. at 508-09.) Except as expressly

admitted and stated, Defendant is without knowledge or information to form a belief as to the

truth of the allegations in Paragraph 403A-M.



Defendant denies any allegations inconsistent with it. Defendant further admits that Tessoni

Depo. Ex. 22 was a draft negotiating script that was later revised and used by the SCI special

committee and its advisors in negotiating the exchange ratio and took the most extreme position

possible to advocate on behalf of SCI. Except as expressly admitted and stated, Defendant is

without knowledge or information to form a belief as to the truth of the allegations in Paragraph

404.

- 108 -ATI-2491514vl



with it. Defendant further admits that Tessoni Depo. Ex. 23 was a negotiating script that was

used by the SCI special committee and its advisors in negotiating the exchange ratio and took the

most extreme position possible to advocate on behalf of SCI. Except as expressly admitted and

stated, Defendant is without knowledge or information to form a belief as to the truth of the

allegations in Paragraph 405A-F.

463. Defendant states that the allegation "Tessoni Caved and Agreed to Higher Split

for FITG" preceding Paragraph 406 is so vague that Defendant is without knowledge or














initial offer down by 7%. Defendant further incorporates his response to Paragraph 396 as

- 109-ATI-2491514vl

though fully set forth herein. Except as expressly admitted and stated, Defendant is without




with it. Defendant further admits that Tessoni Depo. Ex. 23 was a negotiating script that was

used by the SCI special committee and its advisors in negotiating the exchange ratio and took the

most extreme position possible to advocate on behalf of SCI. Except as expressly admitted and











472. Defendant admits that on August 23,2006, the FITG and SCI special committees

agreed to an exchange ratio, subject to approval by their respective advisors that it was fair to the

minority shareholders, where FITG shareholders would receive 65% of the combined company

and SCI shareholders would receive 35% of the combined company. Except as expressly


truth of the allegations in Paragraph 414.

- 110 -ATI-2491514vl

473. Defendant denies the allegation "By Agreeing to FITG's Request, Tessoni

Assured Himself a Seat on the Board of the Combined Company, Thereby Protecting his Board

Income" preceding Paragraph 415.

474. Defendant admits that an exchange ratio resulting in a 65/35 split of the combined

company's stock was agreed to on August 23, subject to the approval by the respective special

committee advisors that it was fair to the minority shareholders. Defendant further admits that

SCI's special committee did not formally approve of this exchange ratio until August 28.

Defendant further admits that Plaintiffs purport to paraphrase and quote from Tessoni Depo. Ex.

14 and Duerk Depo. Ex. 1, those document speaks for themselves, and Defendant denies any

allegations inconsistent with them. Except as expressly admitted and stated, Defendant denies


475. Defendant admits that that mutual indemnification provISIOn ill the merger

agreement and the exchange ratio were in SCI's interest. Defendant further incorporates his

response to Paragraphs 290-297 which show that he did not approve the merger in exchange for

a board position and that, under Delaware law, fees earned in his role as director of NITG after

the merger was approved does not render him interested at the time of the merger. Except as


476. Defendant incorporates his responses to Paragraphs 290-297 which show that he

did not approve the merger in exchange for a board position and that, under Delaware law, fees

earned in his role as director of NITG after the merger was approved does not render him

interested at the time of the merger. Except as expressly admitted and stated, Defendant denies


- 111 -ATI-2491514vl

477. Defendant admits that he, like Mr. Gibbons, was a Class I Director and that his

term was due to expire at SCI's 2007 annual meeting, more than a year after the merger would

have closed. Defendant further admits that he did not expect to be retained on the combined

company's board and that no communications were made to him about his future on NITG's

board until after the merger was approved. (Tessoni Dep at 238-239.) Defendant further admits

that Mr. Ross had not made any decision about retaining me until after the merger had been

reviewed and the exchange ratio was negotiated. (Gorga Depo. Ex. 254.) Except as expressly


478. Defendant states that Plaintiffs' sole basis for this allegation is that he was paid

director fees after the merger. Defendant further incorporates his response to Paragraphs 290

297 which show that he did not approve the merger in exchange for a board position and that,

under Delaware law, fees earned in my role as director of NITG after the merger was approved

does not render me interested at the time of the merger. Except as expressly admitted and stated,


479. Defendant states that Plaintiffs' sole basis for this allegation is that he remains on

NITG's board. Defendant further states that after more than two years of discovery, PlaintifIs

have no evidence that I was induced to approve the merger. Defendant further incorporates his

response to Paragraphs 290-297 which show that I did not approve the merger in exchange for a

board position and that, under Delaware law, fees earned in my role as director of NITG after

the merger was approved does not render him interested at the time of the merger. Except as


- 112 -ATI-249ISI4vI

480. Defendant states that the allegation "RSM Undervalues SCI" preceding Paragraph












Depo. Ex. 5 and that document speaks for itself. Except as expressly admitted and stated,

Defendant is without knowledge or information to form a belief as to the truth of the allegations

in Paragraph 423.


the allegation "RSM Fails to Apply Control Premium to SCI" preceding Paragraph 424.







- 113 -ATI-2491514vl







488. Defendant admits that FITG, like all businesses, faced risks and that those risks

were thoroughly disclosed in the Prospectus for the merger. Defendant further admits that SCI

faced great issues and risks before the merger. Except as expressly admitted and stated,


in Paragraph 427.


490. Defendant admits that SCI's minority shareholders were not entitled to a "control

premium" as part of the merger as they did not have control of SCI. Defendant further admits

that Fund III purchased its controlling interest in SCI for $12.30 per share when SCI's asked for

price on the OTCBB was $15.00 per share, essentially receiving a "control discount." Except as



491. Defendant states that the allegation "RSM Overvalues FITG" preceding

Paragraph 430 is so vague that Defendant is without knowledge or information to form a belief

as to the truth of that allegation.



- 114 -ATI-2491514vl



493. Defendant admits that Trenwith Valuation, LLC ("Trenwith") valued FITG as of

July 2005 for management equity plan purposes and between them and the merger circumstances

changed to increase FITG's value compared to what was calculated by Trenwith, including that

FITG acquired additional businesses, including the remaining 50% of Parras Cone, so that FITG

was a larger business in 2006 than it was in 2005. Defendant further admits that Plaintiffs

purport to paraphrase and quote from Choy Depo. Ex. 16, that document speaks for itself, and

Defendant denies any allegations inconsistent with it. Except as expressly admitted and stated,


in Paragraph 431.

494. Defendant admits that FITG management made RSM aware of the Trenwith

valuation and provided it to both special committees as part of the due diligence process.

Defendant further incorporates the response to Paragraph 431 as though fully set forth herein.


a belief as to the truth of the allegations in Paragraph 432.




the allegation "RSM Improperly Used Different Metrics for FITG than for SCI" preceding

Paragraph 434.



- 115 -ATI-2491514vI














the allegation "RSM Improperly Disregarded Negative Metrics for FITG" preceding Paragraph

438.





503. Defendant admits that FITG was going through a significant reorganization in

2006 that included rationalizing domestic plants and building international Greenfield projects.

Defendant further admits that this plan was designed to lower FITG's costs, move it closer to its

existing customers, and to expand into new international markets. Defendant further admits that

- 116 -ATl-2491514vl

this quasi-start-up period was fully disclosed before the merger and that FITG could operate at a

loss to preserve market share and technical capabilities until the Greenfield projects were

completed and began producing. Defendant further admits that FITG disclosed that the merger

would be accretive to FITG shareholders on a standalone basis for 2006 to 2008. Except as






the allegation "RSM Improperly Disregarded Execution Risks of FITG" preceding Paragraph

441.




Depo. Exs. 22 and 23, those document speaks for themselves, and Defendant denies any

allegations inconsistent with them. Except as expressly admitted and stated, Defendant is


442.





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Depo. Exs. 22 and 23, those document speaks for themselves, and Defendant denies any

allegations inconsistent with them. Except as expressly admitted and stated, Defendant is


447.

513. Defendant admits that the risks associated with FITG's plan to rationalize

domestic assets and build international Greenfield projects were patent and disclosed during due

diligence and in the Prospectus before the merger. Defendant further admits that Mr. Ross

testified:

Q Did you have any -- did you have any conversations orcommunications with Mr. Tessoni regarding your belief that ITGfaced tremendous execution risk?

A I think anybody who looked at lTG, and looked at the financialforecasts, would know that. They were phasing down severaloperations in the United States, starting up things in severaldifferent countries and planning to make a series of acquisitions.Anybody who can read and write would know there wastremendous execution risk.

Q Did you do anything to confirm that Mr. Tessoni and RSMunderstood the execution risk that ITG faced?

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A Again, I think it was obvious to anyone, number one, andnumber two, I was rebuffed in my efforts to even know what theMcGladrey firm was doing because of the counsel for the specialcommittee. So I did not introduce anything to them for fear theywould claim I was interfering. (Ross Depo. at 598-99.)

Except as expressly admitted and stated, Defendant is without knowledge or ir.formation to form




515. Defendant admits that Plaintiffs purport to paraphrase and quote from Choy

Depo. at 306-07, that testimony speaks for itself, and Defendant denies any allegations

inconsistent with it. Defendant further states that the cited testimony does not support the

allegation that RSM did not consider the effect if FITG did not achieve its projected sales and

profits. Defendant further states that the cited testimony is nothing more than Plaintiffs' counsel

claiming a proposition without providing any record evidence or getting Mr. Choy to agree with

the stated proposition. Except as expressly admitted and stated, Defendant is without knowledge

or information to form a belief as to the truth of the allegations in Paragraph 450.




the allegation "RSM Improperly Disregarded Planned Dilution of FITG" preceding Paragraph

452.



519. Defendant admits that FITG's Strategic Plan included assumptions concerning

debt and equity to support FITG's Greenfield projects and other business needs, and that the

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actual capital needs were later modified and reduced in 2007. Defendant further admits that after

the merger Fund II converted approximately $68 million in debt to preferred equity, and that

Fund 1II contributed additional equity to NITG. Except as expressly admitted and stated,


in Paragraph 453.




the allegation "RSM Improperly Disregarded FITG's Under-Funded Pension Liability"

preceding Paragraph 455





523. Defendant admits that the underfunded pension liability was included in FITG's

Strategic Plan and was disclosed to the advisors for the special committees. Except as expressly






the allegation "RSM Improperly Failed to Assess FITG's Off-Balance Sheet Assets" preceding

Paragraph 458.

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526. Defendant admits that a breakdown of FITG's off-balance sheet assets and the

accompanying appraisals of those assets were provided to the advisors of the special committees

during the diligence process. Except as expressly admitted and stated, Defendant is without




with it. Defendant further states that the agreed upon exchange ratio effectively discounted

FITG's off balance sheet assets by 70%. Except as expressly admitted and stated, Defendant is


459.




at 306-07, that testimony speaks for itself, and Defendant denies any allegations inconsistent

with it.. Defendant further admits that Mr. Wax testified:

A. I think in my prior testimony when I outlined either five or sixmethodologies of which half the value is one, I said that there werepreferred methodologies that focused more on earnings for thecompany. But that if you didn't have access to thosemethodologies or the information to undertake that analysis, thatyou could use book value. (Wax Depo at 668.)

Defendant further admits that FITG's off balance sheets assets included operating facilities,

equipment, and inventory and provided value to the combined company on a going concern

basis. Except as expressly admitted and stated, Defendant denies the remaining allegations in

Paragraph 462.


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the allegation "RSM Improperly Used FITG Projections That Included Unapproved or Uncertain

Projects" preceding Paragraph 464.

533. Defendant admits that FITG provided its Strategic Plan to the advisors for the

special committees during due diligence. Defendant further incorporates his responses to

Paragraphs 303-309 as though fully set forth herein. Except as expressly admitted and stated,

Defendant denies the remaining allegations in Paragraph 464.

534. On information and belief as to these matters, Defendant admits that the Strategic

Plan was FITG's management's best good faith belief and projection of FITG's future business

outlook. Defendant further admits that this Strategic Plan included certain synergistic

acquisitions that management believed were very likely and had been previously disclosed to and

discussed with the financial advisors for the special committees. Defendant further admits that

Mr. Ross testified that including potential acquisitions in a strategic plan is not unusual. (Ross

Dep. at 259-61.) Defendant further admits that SCI's projections provided to the special

committees' advisors also contained business that had neither been obtained nor contractualized.


Paragraph 465.

535. On information and belief as to these matters, Defendant admits that FITG was

targeting an acquisition of certain assets of Delta Woodside ("Delta"), a cotton mill and textile

manufacturer, that would have strong synergies with FITG. Defendant further admits that Delta

was on the verge of bankruptcy and that FITG had been targeting Delta's most valuable assets

since 2005 and had undergone several rounds of negotiations and bids with Delta's management

- 122 -ATI-2491514vl

and credit holders. Except as expressly admitted and stated, Defendant denies any remaining



Exs. 463 and 465, those document speak for themselves, and Defendant denies any allegations

inconsistent with them. On information and belief as to these matters, Defendant further admits

that FITG management believed that the acquisition of Delta was very likely: (l) On August 8,

2006, Mr. Gorga email Mr. Wax and advised him that Delta's Board was favoring FITG's earlier

offer; (2) on September 1,2006, Delta filed an 8-K that did not name FITG, but discussed it as a

"potential acquirer"; (3) on September 22 and October 5, FITG made revised offers to acquire

Delta; and (4) on October 11, 2006, Mr. Gorga emailed Mr. Ross that he was "cautiously

optimistic" about Delta accepting FITG's offer. Defendant further admits that Mr. Gorga

testified about Wax Depo. Ex. 463, which is contained within Gorga Depo. Ex. 220, and rejected

Plaintiffs' interpretation:

Q. And when you talk here about determining whether theacquisition of Delta is a real possibility, what did that mean?

A. You know, August 17, I mean, we were - I was telling theboard that we were going to continue to press. We felt likestrategically this was the right direction for us to go in. And inmy interactions with the advisor and with the CEO of DeltaWoodside plant, you know, I was feeling pretty confident thiswas going to be part ofITG. (Gorga Depo. at 227 [emphasisadded].)

Defendant fmiher admits that FITG was so confident in acquiring Delta's assets that it purchased

equipment from Gibbs International in reliance on acquiring Delta. (Gorga Depo. at 297-98;

Smith Depo. at 191.) Except as expressly admitted and stated, Defendant denies any remaining


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537. Defendant admits that Plaintiffs purport to paraphrase and quote from Gibbons

Depo. Ex. 569, that document speaks for itself, and Defendant denies any allegations

inconsistent with it. Defendant further incorporates his response to Paragraph 467 as though full

incorporated herein. Except as expressly admitted and stated, Defendant denies any remaining


538. On information and belief as to these matters, Defendant admits that Bank Model

referenced in Wax Ex. 428 was not intended to be, and never was, FITG's strategic plan.

Defendant further admits that the Bank Model was different from the Strategic Plan in content

and purpose, and that the Bank Model had lower projected earnings with less debt whereas the

Strategic Plan had higher projected earnings with greater debt. Defendant further admits that

Plaintiffs purport to paraphrase and quote from Wax Depo. Ex. 428, that document speaks for

itself, and Defendant denies any allegations inconsistent with it. Except as expressly admitted


539. On information and belief as to these matters, Defendant admits that Bank Model

referenced in Wax Ex. 428 was not intended to be, and never was, FITG's strategic plan.

Defendant further admits that the Bank Model was different from the Strategic Plan in content

and purpose, and that the Bank Model had lower projected earnings with less debt whereas the

Strategic Plan had higher projected earnings with greater debt. Defendant further states that

Plaintiffs purport to paraphrase and quote from Spradling Depo. Ex. 338 (the Bank Model), that



540. On information and belief as to these matters, Defendant states that, as a general

proposition, changing inputs for a model will change the results projected by that model, and that

- 124 -ATI-2491514vI

the Bank Model was different from the Strategic Plan in content and purpose. Except as















544. On information and belief as to these matters, Defendant admits that RSM had

one several hours long in person meeting with FITG management, and many follow up

communications via telephone and email. Defendant further admits that the Strategic Plan

included certain synergistic acquisitions, including the acquisition of Delta, that management

believed were likely and those potential acquisitions were disclosed to and discussed with the

financial advisors for the special committees. (Choy Depo at 693-94; 753-767.) Defendant



- 125 -ATI-2491514vl

further incorporates his response to Paragraph 467 as though full incorporated herein. Except as



545. Defendant incorporates his responses to Paragraphs 467 and 475 as though full

incorporated herein. Except as expressly admitted and stated, Defendant is without knowledge

or information to form a belief as to the truth of the allegations in Paragraph 476.

546. Defendant incorporates his responses to Paragraphs 467 and 475 as though full

incorporated herein. Defendant further admits that Plaintiffs purport to paraphrase and quote

from Wax Depo. at 354, that testimony speaks for itself, and Defendant denies any allegations



547. Defendant incorporates his responses to Paragraphs 467 and 475 which show that

the advisors to the special committees were told about Delta's impact on FITG's Strategic Plan,

that including an acquisition in a strategic plan is not unusual, and that SCI's projections also

included business that was neither agreed to nor contractualized. Except as expressly admitted



the allegation "RSM Improperly Failed to Recommend or Conduct a Market Test" preceding

Paragraph 479.

549. Defendant admits that (l) SCI could not be sold after two years of aggressive

marketing, (2) SCI's controlling interest was sold at a discounted market rate to distressed

investors, (3) the SCI special committee did not have the power to shop the entire company three

months after its controlling interest was purchased by Fund III, and (4) the minority shareholders

- 126 -ATI-2491514vl

were free to sell their stock at anytime on the open market if they disagreed with the exchange

ratio. Defendant further admits that during the merger SCI was valued at a higher price than

what Fund III paid, and that an unaffiliated third party would have valued SCI at an even lower

level than Fund Ill's purchase price in a "market test" situation since SCI's earnings had eroded

by approximately 70% in the time between Fund Ill's purchase and the merger. Defendant

further admits that undertaking a costly, time consuming, and pointless market test to reaffirm

the market's disinterest in purchasing SCI was unnecessary for the SCI Board to fulfill its

fiduciary duties in light of the SCI Board's inability to sell the company in the two years before

the merger. Except as expressly admitted and stated, Defendant is without knowledge or






551. Defendant incorporates his responses to Paragraphs 298-302 and 479 showing

that additional marketing of SCI would have been a costly and pointless endeavor in light of the

preceding two year sales effort. Except as expressly admitted and stated, Defendant is without




preceding two year sales effort. Except as expressly admitted and stated, Defendant is without


- 127 -ATI-2491514vl



preceding two year sales effort. Defendant further states that this allegation also states a legal

conclusion which is not subject to and admission or denial, but to the extent a response is

possible, Defendant denies that the SCI Board has any duties under Revlon, Inc. v. jifacAndrews

& Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986), which is inapplicable. Except as expressly




the allegation "RSM Improperly Determined FITG's Value From Discounted Cash Flow

Analysis" preceding Paragraph 484.




to form a belief as to the truth of the allegations in Paragraphs 484A-C.


the allegations in Paragraphs 485A.

557. Defendant admits that the risks associated with FITG's plan to rationalize

domestic assets and build international Greenfield projects were patent and disclosed during due

diligence and in the Prospectus before the merger. Defendant further admits that Mr. Ross

testified that the risks of FITG's business plan were clear. Except as expressly admitted and


allegations in Paragraphs 485B.

- 128 -ATI-2491514vl


at 514, that testimony speaks for itself, and Defendant denies any allegations inconsistent with it.

Defendant further admits that Mr. Wax testified that "effectively I might have gotten to the same

place because there's no question that there should be an increased risk premium for ITG at that

level, at that stage in its development," and that he also clarified that:

In discussing how they got to it and how I might get to it, I said Imight have gotten to the same number. You know, I can't tellyou, you know, what number I would have gotten to four yearsago. I acknowledge that there's significant execution risk. Idon't know if I would have gotten to the same number or not.The way they got to the that number I've already critiqued. I don'tknow what else I can tell you. (Wax Depo. at 516 [emphasisadded].)


a belief as to the truth of the allegations in Paragraphs 485C.

559. Defendant admits that Plaintiffs purport to paraphrase and quote from Gorga

Depo. Ex. 263, that document speaks for itself, and Defendant denies any allegations


information to form a belief as to the truth of the allegations in Paragraph 485D.

560. On information and belief as to these matters, Defendant incorporates his

responses to Paragraphs 464-478 which show that the advisors to the special committees were

told about Delta's impact on FITG's Strategic Plan, that including an acquisition in a strategic

plan is not unusual, and that SCI's projections also included business that was neither agreed to

nor contractualized. Defendant further admits that FITG management expected the special

committee advisors to test FITG's projections, run sensitivity analyses, and reach their own

independent conclusions. Except as expressly admitted and stated, Defendant is without

knowledge or information to form a belief as to the truth of the allegations in Paragraph 485E.

- 129-ATI-2491514vl

561. Defendant states that the allegation "The SCI Special Committee's Approval of

the Merger" preceding Paragraph 486 is so vague that Defendant is without knowledge or


562. Defendant admits that RSM found that the exchange ratio resulting in a 65/35

split of the combined company's stock was fair to the minority stockholders of SCI from a

financial point of view on or about August 28, 2006. (Prospectus Annex C.) Defendant further

admits that Plaintiffs purport to paraphrase and quote from Tessoni Depo. Exs. 22 and 23, those

document speaks for themselves, and Defendant denies any allegations inconsistent with them.

Defendant further admits that Tessoni Depo. Exs. 22 and 23 were negotiating scripts used by the

SCI special committee and its advisors in negotiating the exchange ratio and took the most

extreme position possible to advocate on behalf of SCI. Except as expressly admitted and stated,


in Paragraph 486.





564. Defendant admits that RSM found that the exchange ratio resulting in a 65/35

split of the combined company's stock was fair to the minority stockholders of SCI from a

financial point of view on or about August 28,2006. (Prospectus Annex C.) Except as expressly



- 130 -ATI-2491514vl









567. Defendant admits that the SCI special committee recommended to the SCI Board

to approve the merger using an exchange ratio that resulted in FITG stockholders receiving 65%

of the combined company's stock, and SCI stockholders receiving 35% of the combined

company's stock. Except as expressly admitted and stated, Defendant is without knowledge or


568. Defendant admits that Article Sixth of SCI's Charter contained anti-takeover

provisions that harmed SCI's value, made it more difficult to restructure, and shifted power over

transactions from directors and officers with fiduciary duties to minority shareholders who owed

no fiduciary duties. Defendant further admits that minority shareholders who disagreed with the

changes to SCI's charter were free to sell their shares in SCI before and after the merger. Except

as expressly admitted and stated, Defendant is without knowledge or information to form a belief

as to the truth of the allegations in Paragraph 492.

569. Defendant admits that Plaintiffs purport to paraphrase and quote from an August

26, 2006 email from Mr. Ross to Mr. Wax (FURSA 758291), that document speaks for itself,

and Defendant denies any allegations inconsistent with it. Defendant further admits that Article

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Sixth of SCI's Charter contained anti-takeover provisions that harmed SCI's value, made it more

difficult to restructure, and shifted power over transactions from directors and officers with

fiduciary duties to minority shareholders who owed no fiduciary duties. Except as expressly

admitted and stated, Defendant denies the remaining allegations in Paragraph 493.

570. Defendant states that the allegation "SCI Board's Approval of the Merger"



571. Defendant admits that on August 29,2006, the SCI Board unanimously approved

the merger in reliance on the recommendation of the SCI special committee. Except as expressly


572. Defendant admits that Mr. Ross asked the SCI special committee's counsel for the

RSM presentation and that request was refused. (Ross Depo. at 231-33; 450-52; 598-600.)

Defendant further admits that he presented the findings and conclusions of the SCI special

committee to the SCI Board before it voted to approve the merger. Except as expressly admitted

and stated, Defendant denies the allegation "The Board Approved the Merger Without Analyzing

the RSM Presentation" preceding Paragraph 495.


Ex. 451, which is the same as Ross Depo. Ex. 728, that document speaks for itself, and

Defendant denies any allegations inconsistent with it. Except as expressly admitted and stated,


574. On information and belief as to these matters, Defendant admits that counsel for

FITG's special committee agreed that the FITG Board was permitted to see SunTrust's

presentation to the FITG special committee. Defendant admits that Plaintiffs purport to

- 132 -ATI-2491514vl

paraphrase and quote from Wax Depo. Ex. 450, which is the same as Ross Depo. Ex. 728, that


expressly admitted and stated, Defendant denies the remaining allegations in Paragraph 496.

575. Defendant admits that Mr. Ross asked the SCI special committee's counsel for the

RSM presentation and that request was refused. Defendant further admits that Mr. Ross

testified:

A. Well, I thought it [RSM presentation] would be useful, sincewe do have some experience with financial advisors' reports, tolook at it, and be sure that I agreed with it. But the counsel saidno, so there was not very much we could do about it.

Q Did you ask to do more about it? Did you say, well, I have gotto have it before I can vote on the transaction?

A No. I had asked for it. Company counsel said it wasinappropriate. Being the adverse party in the merger, in someregards, the last thing I wanted to do was to try to get thecompany counsel overruled. (Ross Depo. at 232; emphasisadded.)

Defendant further admits that Mr. Ross did not want to interfere with the SCI special

committee's decisions or try to force it to tum over the RSM presentation:

A I don't think it was our role to try to interfere with thespecial committee. We were an interested party. Anything wewould propose by way of changing his process would surely endup being in litigation as interference.

Q At the point where he is reporting their conclusion and Dr.Tessoni is reporting their conclusion, did you have a duty in yourmind to make sure that their conclusion was fair and reasonable?

A We tried to get access to the work papers, which is whatwould have led us to make an independent evaluation of them.And counsel for the special committee, as you are aware, saidthat that was inappropriate.

Q Well, is it your belief that that ended your duty, your fiduciaryduty?

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A Well, other than going to court to try to force them to turn itover, I don't know what practical solution there was.

Q Well, were you obligated to vote in favor of the merger?

A I felt that the merger, as I have said before, was roughly inline with my own back-of-the-envelope thinking as someonewho is very familiar with both companies. So I didn't seeanything untoward in the opinion that would cause me anyalarm. (Ross Depo at 451-52; emphasis added.)

Except as expressly admitted and stated, Defendant denies the remaining allegations in

Paragraph 497.

576. Defendant admits that he presented the findings and conclusions of the SCI

special committee to the SCI Board before it voted to approve the merger. Defendant further

admits that on August 29,2006, the SCI Board unanimously approved the merger in reliance on

the recommendation of the SCI special committee. Except as expressly admitted and stated,


577. Defendant hereby responds to the allegations in Paragraph 499 by incorporating

their responses to Paragraphs 181-190 as though fully set forth herein.

578. Defendant denies the allegation "The Board Approved the Merger Even Though

the Consideration to FITG was Far in Excess of Other Valuations of FITG" preceding Paragraph

500.

579. Defendant admits that the merger was a stock-for-stock transaction and no cash

was exchanged between SCI and FITG. Defendant further admits that SCI could not issue stock

for more value than SCI was worth, SCI was not worth $164-$166 million, and did not issue

consideration in that amount. Except as expressly admitted and stated, Defendant denies the


- 134 -ATl-2491514vl

580. On information and belief as to these matters, Defendant admits that Trenwith

valued FITG as of July 2005 for management equity plan purposes and between them and the

merger circumstances changed to increase FITG's value compared to what was calculated by

Trenwith, including that FITG acquired additional businesses, including the remaining 50% of

Parras Cone, so that FITG was a larger business in 2006 than it was in 2005. Defendant further

incorporates his responses to Paragraphs 160-161 and 500 as though fully set forth herein.

Defendant further admits that Plaintiffs purport to paraphrase and quote from Choy Depo. Ex.

16, that document speaks for itself: and Defendant denies any allegations inconsistent with it.


Paragraph 501.

581. Defendant admits that after June 2005, FITG acquired additional businesses,

including the remaining 50% of Parras Cone, so that FITG was a larger business in 2006 than it

was in 2005. Defendant further admits that Plaintiffs purport to paraphrase and quote from

NixonPeabody 0000236; FURSA-653141; and the Prospectus, and those documents speak for

themselves, and Defendant denies any allegations inconsistent with them. Defendant further

incorporates his response to Paragraph 500 as though fully set forth herein. Except as expressly



FURSA-696593, that document speaks for itself, and Defendant denies any allegations

inconsistent with it. Defendant further incorporates his response to Paragraph 500 as though

fully set forth herein. Except as expressly admitted and stated, Defendant denies the remaining


- 135 -ATI-2491514vI

583. Defendant further admits that Plaintiffs purport to paraphrase and quote from an

August 23, 2006 email between Pam Wilson and Mr. Ross (FURSA 653141), that document

speaks for itself, and Defendant denies any allegations inconsistent with it. Defendant further

admits that Fund II's and Fund Ill's internal valuations of FITG and SCI were approximately

within the same ratio as, and consistent with, the merger exchange ratio. Defendant further

admits that Mr. Ross testified:

A. But it's not -- it's not that surprising that two advisors wouldcome with somewhat different absolute numbers. The realquestion in a merger for shares is the relative value of the twoentities, because cash is not changing hands, it's only shares.And it turned out that they [financial advisors] had essentiallythe same view as fairness of the share exchange ratio, and tome that was the relevant topic. (Ross Depo. at 453; emphasisadded.)



Paragraph 504.

584. Defendant admits that Plaintiffs purport to paraphrase and quote from an August

27, 2006 email between Mr. Ross and Mr. Wax (FURSA 235211), that document speaks for

itself, and Defendant denies any allegations inconsistent with it. Defendant further admits that

Mr. Wax responded to this email and informed Mr. Ross that he "misread the write-up" and that

his numbers were incorrect. (FURSA 652710.) Defendant further incorporates his response to

Paragraph 500 as though fully set forth herein. Except as expressly admitted and stated,


585. Defendant denies the allegation "The Board Approved the Merger Even Though

the SunTrust Valuation (Which Had Been Provided to Ross and Gorga) Showed that FITG was

not Worth Anything Close to the Merger Consideration" preceding Paragraph 506.

- 136-ATl-2491514vl




consideration in that amount. Defendant admits that Plaintiffs purport to paraphrase and quote

from Tessoni Depo. Ex. 7, that document speaks for itself, and Defendant denies any allegations

inconsistent with it. Except as expressly admitted and stated, Defendant denies the remaining


587. Defendant states that the allegations in Paragraph 507 state a legal conclusion that




Ex. 729, that document speaks for itself, and Defendant denies any allegations inconsistent with

it. Defendant further admits that Mr. Ross testified that SunTrust's conclusions about the merger

exchange ratio was consistent with his thinking and did not see anything untoward about

SunTrust's conclusions or the merger. (Ross Depo. at 235.) Except as expressly admitted and

stated, Defendant denies the remaining allegations in Paragraph 508.


Exs. 729 and 730, those documents speak for themselves, and Defendant denies any allegations

inconsistent with them. Defendant further incorporates his response to Paragraph 508 as though

fully set forth herein. Except as expressly admitted and stated, Defendant denies the remaining


590. Defendant admits that Plaintiffs purport to paraphrase and quote trom the

depositions of Messrs. Ross, Gorga, and Wax, their testimony speaks for itself, and Defendant

- 137 -ATI-2491514vl

denies any allegations inconsistent with it. Except as expressly admitted and stated, Defendant

denies the remaining allegations in Paragraph 510.



Defendant denies any allegations inconsistent with it.. Except as expressly admitted and stated,


in Paragraph 512.


Depo. Ex. 263, which is a duplicate of Ross Depo. Ex. 730, and Ross Depo. Ex. 735, that those

documents speak for themselves, and Defendant denies any allegations inconsistent with them.

Defendant further states that SunTrust found FITG's value ranged between $80-$235.8 million.


Paragraph 512.


Depo. Ex. 263, which is a duplicate of Ross Depo. Ex. 730, Ross Depo. Ex. 735, and the

Trenwith valuation, that those documents speak for themselves, and Defendant denies any

allegations inconsistent with them. Detendant further states that SunTrust found FITG's value

ranged between $80-$235.8 million. Defendant further states that Trenwith's valuation of FITG

was for management equity plan purposes, not a merger, and it does not stand for the proposition

alleged. Defendant further states that a net asset value is not the same as "forced liquidation

value" and the allegations include terms that are not present in the cited documents. Except as


- 138-ATI-2491514vl



Defendant denies any allegations inconsistent with it. Defendant further admits that Mr. Wax

testified that asset valuation is another way of looking at book value, but the two terms are not

identical. Except as expressly admitted and stated, Defendant denies the remaining allegations in

Paragraph 514.


at 234-35, that testimony speaks for itself, and Defendant denies any allegations inconsistent

with it. Defendant further admits that asset value can be an important metric under the correct

circumstances:

I think in my prior testimony when I outlined either five or sixmethodologies ofwhich halfthe value is one, I said that there werepreferred methodologies that focused more on earnings for thecompany. But that if you didn't have access to thosemethodologies or the information to undertake that analysis, thatyou could use book value. (Wax Depo. at 668.)


Paragraph 515.

596. Defendant admits that Plaintiffs purport to paraphrase and quote from a SunTrust

spreadsheet (STRH_for ITG_0000821.xls), that document speaks for itself, and Defendant

denies any allegations inconsistent with it. Defendant further states that this SunTrust document

found FITG's value, even when excluding FITG's net asset value, ranged between $58.1-$206.5

million. Except as expressly admitted and stated, Defendant is without knowledge or


597. Defendant admits that SCI could not issue stock for more value than SCI was

worth, SCI was not worth $164-$166 million, and did not issue consideration in that amount.

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Except as expressly admitted and stated, Defendant denies the remaining allegations III

Paragraph 517.



Depo. Ex. 263, which is a duplicate of Ross Depo. Ex. 730, and Ross Depo. Ex. 735, that those

document speaks for themselves, and Defendant denies any allegations inconsistent with them.

Defendant further states that SunTrust found FITG's value ranged between $80-$235.8 million.



600. Defendant states that SunTrust found FITG's value ranged between $80-$235.8

million, which was greater than the value SunTrust found for SCI. Defendant further admits that

SCI could not issue stock for more value than SCI was worth, SCI was not worth $164-$166

million, and did not issue consideration in that amount. Except as expressly admitted and stated,

Defendant denies the allegations in Paragraph 520.





Paragraph 521.

602. Defendant states that SunTrust found FITG's value ranged between $80-$235.8

million, which was greater than the value SunTrust found for SCI. Except as expressly admitted

and stated, Defendant denies the allegations in Paragraph 522.

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603. Defendant admits that FITG was paying its debts as they came due, was never

issued a going concern opinion by its independent auditor, was never in the zone of bankruptcy,

and never filed for bankruptcy. Except as expressly admitted and stated, Defendant denies the


604. Defendant incorporates his responses to Paragraphs 199-200 which show that the

performance and value of FITG, SCI, and/or NITG played no role in the sale of WLR to Invesco

and that WLR has raised billions of dollars while NITG's asked for price on the OTCBB has

declines. Except as expressly admitted and stated, Defendant denies the allegations in Paragraph

524.

605. Defendant admits the allegation "The Merger Closed on October 20, 2006"

preceding Paragraph 525.

606. Defendant admits that Mr. Duerk was directed by the SCI Board to execute the

merger agreement and other related documents. Defendant further admits that no interested

officers or directors, like Mr. Duerk, performed merger related due diligence and that all

diligence related to the merger was delegated by the FITG and SCI boards to their respective

special committees and advisors. Except as expressly admitted and stated, Defendant denies the



Prospectus and Merger Agreement, those documents speak for themselves, and Defendant denies

any allegations inconsistent with them. Defendant further states that the allegations in Paragraph

526 state a legal conclusion that is not subject to admission or denial. Except as expressly

admitted and stated, Defendant denies the allegations in Paragraph 526.

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608. Defendant admits that Plaintiffs purport to paraphrase and quote from the Duerk

Depo. Ex. 34 and 36 and NITG's October 26, 2006 8-K, those documents speak for themselves,

and Defendant denies any allegations inconsistent with them. Defendant further admits that

Wachovia Bank consented to amend its credit facility with SCIon or about October 11,2006 to

waive a provision that precluded SCI from merging with any company without Wachovia Bank's

consent. (10/26/06 NITG 8-K & Ex. 10.1 thereto.) Defendant further admits that SCI's existing

credit facility was due to expire on October 8, 2006 and that as of October 6, 2006, Wachovia

Bank and SCI agreed to extend the maturity date. (10/10/06 SCI 8-K.) Defendant further states

that Wachovia Bank's delay in consenting to the merger concerned its belief that a replacement

credit facility would be in place for the combined company before the existing credit facility

expired so that a consent would not be necessary. (Duerk Depo. Ex. 34.) Except as expressly



609. Defendant admits that Wachovia Bank consented to the merger and that the

merger closed on October 20, 2006. Except as expressly admitted and stated, Defendant denies


610. Defendant admits that FITG was merged with a subsidiary of SCI, SCI was

renamed International Textile Group, Inc., and the combined company's corporate headquarters

was relocated to Greensboro, NC. Except as expressly admitted and stated, Defendant denies the


611. Defendant denies the allegation "The Value of SCI (Now NITG) has Collapsed

Because of the Merger" preceding Paragraph 530.

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612. Defendant admits that the asked for bid price for NITG on the date the merger

closed was $13.25 per share and that the average asked for bid price for NITG for the remainder

of 2006 was $13.15 per share. Except as expressly admitted and stated, Defendant denies the


613. Defendant admits that on the day the merger was announced, August 30, 2006,

the asked for bid price for SCI was $14.65 per share and 1000 shares were traded that date at that

pnce. Except as expressly admitted and stated, Defendant denies the allegations in Paragraph

531.

614. Defendant admits that on the day the merger was announced, August 30, 2006,

the asked for bid price for SCI was $14.65 per share, 1000 shares were traded that date at that

price, and this transaction yielded a gross return of $14,650. Defendant further admits that SCI's

stock traded precisely ten times between August 30 and October 20, 2006 with an average

volume of 3750 shares per trade. Defendant further admits that in the time between the

announcement of the merger and its close, no one traded SCI's stock on 27 of the 37 available

trading days. Defendant further states that at least since SCI began marketing itself for sale in

2004, no one was interested in purchasing all of SCI's shares (5,507,147 shares in total), and that

the largest volume purchase during that sales effort was when Fund III purchased a controlling

interest in SCI for a $2.70 per share discount from the then asked for market price. Except as

expressly admitted and stated, Defendant denies the allegations in Paragraph 532.

615. Defendant admits that Plaintiffs purport to paraphrase and quote from RSM's

presentation to the SCI special committee, that document speaks for itself, and Defendant denies

any allegations inconsistent with it. Except as expressly admitted and stated, Defendant denies


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616. Defendant incorporates his responses to Paragraph 532-533 as though fully set

forth herein. Except as expressly admitted and stated, Defendant denies the allegations in

Paragraph 534.



Defendant further admits that NITG's market cap on the day after the merger was more than

$230 million. Except as expressly admitted and stated, Defendant denies the remaining


618. Defendant admits that NITG's stock price dropped over a long period of time and

that drop had nothing to do with the merger. Defendant incorporates his response to Paragraph

532 as though fully set forth herein. Except as expressly admitted and stated, Defendant denies

the remaining allegations in Paragraph 536.

619. Defendant states that Bear Stearns & Co. collapsed in March 2008. Defendant

further admits that on or about April 2, 2006 the asked for bid price for NITG was $1.65 per

share and approximately 1200 shares traded at the price. Except as expressly admitted and


620. Defendant hereby incorporates his responses to Paragraphs 5-9 as though fully set

forth herein. Except as expressly admitted and stated, Defendant denies the remaining


621. Defendant denies the allegation "Further Negative Consequences of the Merger"

preceding Paragraph 539.


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623. Defendant states that the allegation "New Credit Facility" preceding Paragraph



624. Defendant admits that SCI's existing credit facility was due to expire on October

8, 2006 and that as of October 6, 2006, Wachovia Bank and SCI agreed to extend the maturity

date so SCI could obtain a larger replacement credit facility for the combined company.

(10/10/06 SCI 8-K.) Defendant further states that the credit facilities of the pre-merger entities

were insufficient for the needs of the combined entity and NITG entered into a new credit facility

in December 2006, which was announced in January 2007. Except as expressly admitted and


625. Defendant states that SCI's credit facility was not comparable to NITG's credit

facility as SCI's credit facility supported a much smaller entity that did not effectively use its

debt, made virtually no investment in capital expenditures, and avoided incurring debt to

enhance efforts to sell SCI. Except as expressly admitted and stated, Defendant denies the


626. Defendant admits that Funds affiliated with WLR invested equity in NITG after

the merger to provide enough capital for the international Greenfield projects. Defendant further

admits that Funds affiliated with WLR capitalized NITG with approximately $140 million in

post-merger equity. Except as expressly admitted and stated, Defendant denies the remaining


627. Defendant admits that NITG formed an independent special committee to review,

analyze, negotiate, and, if appropriate, approve the creation of preferred shares in NITG and

certain related transactions. Defendant further states that the approval of the merger of SCI and

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FITG had nothing to do with the issuance of preferred shares, and that the preferred shares

transactions were approved by a different special committee and board and concerned different

issues. Defendant further states that providing capital to a corporation must be in the form of

either debt or equity, and equity contributions require the issuance of stock. Defendant further

admits that the preferred shares in NITG had various terms, including a conversion option and

cumulative dividend that could be paid with shares at NITG's discretion so as not to negatively

impact its cash flow. Except as expressly admitted and stated, Defendant denies the remaining



herein. Except as expressly admitted and stated, Defendant denies the remaining allegations in

Paragraph 544.



Paragraph 545.

630. Defendant incorporates his responses to Paragraphs 540-543 which show that

NITG's credit facility was far superior to SCI's old, expiring facility, and that SCI's old facility

was inadequate for the needs of the much larger combined company. Except as expressly


631. Defendant incorporates his responses to Paragraphs 540-543 which show that

NITG's credit facility was far superior to SCI's old, expiring facility, and that SCI's old facility

was inadequate for the needs of the much larger combined company. Except as expressly


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632. On information and belief as to these matters, Defendant admits that the Bank

Model was updated several times during the closing period and presented to potential lenders as

part of the process to obtain a credit facility for the combined company. Except as expressly


633. Defendant states that the allegation "Debt for Equity Swap" preceding Paragraph



634. Defendant admits that before the merger Fund II loaned FITG approximately

$56.2 million for its international Greenfield projects. Except as expressly admitted and stated,


635. Defendant admits that the $56.2 million Fund II loaned FITG before the merger

was made pursuant to unsecured notes with an interest rate of 4.78%. Except as expressly


636. Defendant admits that the $56.2 million Fund II loaned FITG was worth $56.2

million plus interest and was used by FITG to develop and build its international Greenfield

projects. Except as expressly admitted and stated, Defendant denies the remaining allegations in

Paragraph 551.

637. Defendant admits that SCI's and FITG's debts were not extinguished by the

merger and both companies brought their respective debts and other financial obligations to

NITG. Defendant further admits that the $56.2 million debt owed by NITG to Fund II was

transmuted to equity in 2007 and NITG has not had to repay that debt. Except as expressly


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638. Defendant admits that in March 2007, Fund II agreed that in lieu of cash payment

to satisfy the debt and interest owed on the notes by NITG, Fund II would accept preferred

shares in the amount owed. Defendant further states that by converting this debt to equity, NITG

was no longer required to pay back these debts and its cash flow improved. Except as expressly


639. Defendant admits that the preferred shares in NITG had various terms, including a

conversion option at a certain stock price based on a specific formula set forth in the preferred

stock certificate and cumulative dividend that could be paid with shares at NITG's discretion so

as not to negatively impact its cash flow. Except as expressly admitted and stated, Defendant


640. Defendant admits that the preferred shares in NITG had various terms, including a

conversion option at a certain stock price based on a specific formula set forth in the preferred

stock certificate and cumulative dividend that could be paid with shares at NITG's discretion so

as not to negatively impact its cash flow. Except as expressly admitted and stated, Defendant


641. Defendant admits that the new credit facility and preferred shares transactions

benefited NITG. Defendant further states that the approval of the merger of SCI and FITG had

nothing to do with the issuance of preferred shares. Defendant incorporates his responses to

Paragraphs 540-543 which show that NITG's credit facility was far superior to SCI's old,

expiring facility, and that SCI's old facility was inadequate for the needs of the much larger

combined company. Except as expressly admitted and stated, Defendant denies the allegations

in Paragraph 556.


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643. Defendant states that the allegation "Allegations as to Defendants' Knowledge"



644. Defendant admits that Messrs. Ross, Wax, Gorga, and Smith were aware of

FIIG's financial condition in 2006. Defendant further states that the remaining allegations in

Paragraph 558 are so vague and over broad that Defendant is without knowledge or information

to form a belief as to the truth of those allegations.

645. On information and belief as to these matters, Defendant admits that Messrs.

Ross, Wax, Gorga, and Smith were aware of FIIG's financial condition in 2006 before the

merger closed. Defendant further admits that Messrs. Storper, Gibbons, and Duerk were made

aware of certain facts concerning FIIG's financial condition in 2006 before the merger closed.

Defendant further admits that information concerning FIIG's financial information and business

was disclosed to the public before the merger closed, and that FIIG could operate at a loss to

preserve market share and technical capabilities until the Greenfield projects were completed and

began producing. Defendant further admits that Messrs. Ross, Wax, Gorga, Smith, Storper,

Gibbons, and Duerk were aware of NIIG's financial performance after the merger closed.




Ross, Wax, Gorga, and Smith were aware of FITG's financial condition in 2006 before the


aware of certain facts concerning FIIG's financial condition in 2006 before the merger closed.

Defendant further admits that information concerning FITG's finances and business was

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disclosed to the public before the merger closed, and that FITG could operate at a loss to


began producing. Except as expressly admitted and stated, Defendant is without knowledge or


647. Defendant admits that FITG borrowed $20 million from Fund II on September 18,

2006 to fund FITG's international Greenfield projects, and that Messrs. Ross, Wax, Gorga,

Smith, Storper, Gibbons, and Duerk were aware of these international Greenfield projects and

their funding demands, and that the September and earlier loans were publicly disclosed along

with the reasons for those loans. Except as expressly admitted and stated, Defendant is without

knowledge or information to form a belief as to the truth of the remaining allegations in

Paragraph 561.

648. Defendant incorporates his response to Paragraph 561 as thought fully set forth

herein. Except as expressly admitted and stated, Defendant is without knowledge or information


649. Defendant incorporates his response to Paragraph 561 as thought fully set forth

herein. Except as expressly admitted and stated, Defendant denies the allegations in Paragraph

563.

650. Defendant admits that information concernmg FITG's finances, borrowing

history, and business was disclosed to the public before the merger closed, and that FITG could

operate at a loss to preserve market share and technical capabilities until the Greenfield projects

were completed and began producing. Defendant further admits that NITG's finances,

borrowing history, and business history was disclosed to the public at least on a quarterly basis

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after the merger closed. Except as expressly admitted and stated, Defendant denies the


651. Defendant admits that Messrs. Ross, Wax, Gorga, Smith, Storper, Gibbons,

Tessoni, and Duerk were aware of NITG's selling of the mattress business after the merger

closed. Defendant is without knowledge or information to form a belief as to the truth of the

allegations as to RSM. Except as expressly admitted and stated, Defendant denies the allegations

in Paragraph 565.



Ross, Wax, Gorga, and Smith were aware of FITG's financial condition in 2006 before the


aware of certain facts concerning FITG's financial condition in 2006 before the merger closed.

Defendant further admits that information concerning FITG's finances and business was

disclosed to the public before the merger closed, and that FITG could operate at a loss to


began producing. Defendant further admits that Messrs. Ross, Wax, Gorga, Smith, Storper,

Gibbons, and Duerk were aware of NITG's financial performance after the merger closed.

Except as expressly admitted and stated, Defendant denies the allegations in Paragraph 567.



568.

655. Defendant admits that SCI's existing credit facility was due to expire on October

8, 2006, would have had to have been renegotiated whether or not the merger was approved, and

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that these facts were publicly disclosed in SCI's SEC filings before the merger. Defendant

further incorporates his responses to Paragraphs 540-543 which show that NITG's credit facility

was far superior to SCI's old, expiring facility, and that SCI's old facility was inadequate for the

needs of the much larger combined company. Except as expressly admitted and stated,


656. Defendant admits that SCI's and FITG's debts were not extinguished by the

merger and both companies brought their respective debts and other financial obligations to

NITG, and these facts were publicly disclosed. Defendant further admits that FITG did not

borrow money from WLR, but from Fund II. Except as expressly admitted and stated,



658. The allegations in Paragraph 572 as to Dr. Tessoni are denied.

659. The allegations in Paragraph 573 are denied.









- 152 -ATI-2491514vl



Paragraph 581.






673. Defendant admits that SCI's Board was aware of its special committee's authority

concerning the merger, and that the SCI special committee's scope of authority was publicly

disclosed before the merger closed. Defendant further admits that, in response to a request from

WLR to waive the standstill provision, the SCI special committee demanded that a new merger

special committee be formed to "review, evaluate, investigate, negotiate, and approve the terms

of any Potential Transaction." Defendant further incorporates his responses to Paragraphs 298

302 which show that additional marketing of SCI would have been a costly and pointless

endeavor in light of the preceding two year sales effort. Except as expressly admitted and stated,






678. Defendant admits that the merger benefited SCI more than FITG. Except as


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679. Defendant states that the allegation "Class Allegations" preceding Paragraph 593

is so vague that Defendant is without knowledge or infonnation to fonn a belief as to the truth of

that allegation.

680. Defendant states that the allegations in Paragraph 593 state a legal conclusion not

subject to admission or denial. To the extent a response is possible, Defendant denies the


681. Defendant denies the remaining allegations in Paragraph 594.

682. Defendant states that the allegations in Paragraphs 595A-CC state a legal

conclusion not subject to admission or denial. To the extent a response is possible, Defendant

denies the allegations in Paragraph 595A-CC.

683. Defendant states that the allegations in Paragraphs 596A-I state a legal conclusion

not subject to admission or denial. To the extent a response is possible, Defendant denies the

allegations in Paragraph 596A-I.

684. Defendant states that the allegations in Paragraphs 597 state a legal conclusion not









- 154 -ATI-2491514vI

687. Defendant states that the allegation "Derivative and Demand Excused

Allegations" preceding Paragraph 600 is so vague that Defendant is without knowledge or





689. Defendant states that Mr. Menezes did not o\vn stock in SCI until July 2006, only

purchasing shares after learning that the merger was pending. Defendant further admits that

FURSA owned stock in SCI in 2006 and purchased additional shares after the merger was

announced and after it closed. Except as expressly stated and admitted, Defendant is without

knowledge or information to form a belief as to the truth of the remaining allegations in

Paragraph 601.










subject to admission or denial. To the extent a response is possible, Defendant admits that

- 155 -ATI-2491514vI

Delaware law governs the internal affairs of NITG and that it is a Delaware corporation. Except

as expressly admitted and stated, Defendant denies the remaining allegations in Paragraph 606.





subject to admission or denial. To the extent a response is possible, Defendant states that certain

directors and officers of SCI and FITG were interested in the merger, but that these officers and

directors were segregated from the transaction by the special committee structure used to

negotiate and approve the merger on behalf of SCI and FITG. Except as expressly admitted and


697. Defendant admits that Messrs. Ross, Gibbons, and Storper were "interested" SCI

directors for the merger because they had indirect financial interests in FITG and SCI through

their investments in the general partners of Fund II, Recovery Associates II, Fund III, and

Recovery Associates III. Except as expressly admitted and stated, Defendant denies the


698. Defendant admits that Mr. Gorga was an "interested" SCI director for the merger

because he held shares in FITG and had a financial interest in the merger. Except as expressly


699. Defendant admits that Mr. Gorga was CEO of FITG, was CEO ofNITG after the

merger, and remains CEO of NITG today. On information and belief as to these matters,

Defendant further states that if the merger had not been approved, Mr. Gorga would have

remained CEO ofFITG. Defendant further states that at the time of the merger, SCI had no CEO

- 156 -ATI-2491514vl

and was in desperate need of senior management. Except as expressly admitted and stated,



subject to admission or denial. Defendant further states that the unique process of two special

committees negotiating and approving the terms and price of the merger segregated the

controlling shareholder from the merger decision and requires the application of the business

judgment rule. Except as expressly admitted and stated, Defendant denies the remaining









subject to admission or denial. Defendant further states that the unique process of two special

committees negotiating and approving the terms and price of the merger segregated the

controlling shareholder from the merger decision and requires the application of the business

judgment rule. Except as expressly admitted and stated, Defendant denies the remaining



subject to admission or denial. Defendant admits that the merger was a stock-for-stock

transaction and no cash was exchanged between SCI and FITG. Defendant further admits that

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SCI could not issue stock for more value than SCI was worth, SCI was not worth $164-$167

million, and did not issue consideration in that amount. Defendant further states that SCI needed

the merger with FITG for many reasons-including to obtain management, technical experience,

and cost saving synergies-and approving the merger was an example of sound business

judgment on the part of SCI's board. Except as expressly admitted and stated, Defendant denies



subject to admission or denial. Defendant further incorporates his response to Paragraph 616 as

though fully set forth herein. Except as expressly admitted and stated, Defendant denies the







Ross, Gibbons, Wax, and Storper and Ms. Wilson are employees and/or officers of WLR.

Defendant further admits that WLR is the management company for Funds II and III, and that

Ms. Wilson is a Senior Vice President for WLR and has been since 2000. Except as expressly





- 158 -ATI-2491514vl


subject to admission or denial. Defendant further admits that any officer of NITG, like Mr.

Gorga, could be considered an "affiliate ofWLR," but that does not make him unable to consider

a demand that NITG sue WLR. Except as expressly admitted and stated, Defendant denies the





712. Defendant states that no Defendant or employee of WLR has "profited" from the

merger (whatever Plaintiffs mean by that allegation), particularly Fund II and Fund III, which

invested hundreds of millions of dollars in NITG, but has not earned a return from that

investment. Defendant further states that no Defendant self-dealt in this transaction as the terms

and exchange ratio for the merger were arrived at by independent special committees for FITG

and SCI, not the controlling shareholder. Except as expressly admitted and stated, Defendant





consideration in that amount. Defendant further incorporates his response to Paragraph 624 as



714. Defendant states that Mr. Gorga has not "profited" from the merger (whatever

Plaintiffs mean by that allegation), and further incorporate his response to Paragraph 624 as

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715. Defendant states that Mr. Boswroth has not "profited" from the merger (whatever

Plaintiffs mean by that allegation) , and further incorporate his response to Paragraph 624 as









718. Defendant states that Plaintiffs have made certain allegations against Messrs.

Ross, Gibbons, Storper, Gorga, and me, and that these allegations are without merit. Except as



subject to admission or denial. Defendant admits that he was the single member of the SCI

special committee for the merger, and that special committee recommended the merger be

approved. Except as expressly admitted and stated, Defendant denies the remaining allegations

in Paragraph 631.

720. Defendant admits that Plaintiffs have made certain allegations against Mr. Wax

and that he is an employee of WLR. Except as expressly admitted and stated, Defendant denies


- 160 -ATl-2491514v[

721. Defendant admits that Mr. Bosworth was the single member of the FITG special

committee for the merger and, in that role and as a director of FITG, was aware of FITG's

financial condition in 2006. Defendant further states that despite Plaintiffs' intimations that Mr.

Bosworth was somehow involved in the alleged wrongdoing, Mr. Bosworth has not been sued in

this matter, the time for adding parties has lapsed, and Mr. Bosworth is not at risk of any liability

with regard to the merger or the claims in this action. Defendant further states that Mr. Bosworth

is independent and disinterested in this matter, and could have reviewed a demand to bring a

derivative lawsuit on behalf ofNITG. Except as expressly admitted and stated, Defendant denies


722. Defendant admits that Ms. Wilson is an employee of WLR and in that role and as

a director of FITG she was aware of FITG's financial condition in 2006. Defendant further

states that despite Plaintiffs' intimations that Ms. Wilson was somehow involved in the alleged

wrongdoing, she has not been sued in this matter, the time for adding parties has lapsed, and she

is not at risk of any liability with regard to the merger or the claims in this action. Defendant

further states that Ms. Wilson could have reviewed a demand to bring a derivative lawsuit on

behalf of NITG. Except as expressly admitted and stated, Defendant denies the remaining





724. In response to Paragraph 636, Defendant incorporates the foregoing paragraphs as

if fully set forth herein.


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- 162 -ATl-2491514vI


subject to admission or denial.

739. Defendant admits that Mr. Wax was on FITG's Board and was involved in

FITG's business. Except as expressly admitted and stated, Defendant denies the remaining


740. Defendant admits that Mr. Wax was familiar with the merger structure

negotiations. Except as expressly admitted and stated, Defendant denies the remaining








745. On information and belief as to these matters, Defendant admits that Mr. Smith

was familiar with the pre-merger investigation of SCI by FITG and with the merger structure








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Prospectus, that document speaks for itself, and Defendant denies any allegations inconsistent

with it. Except as expressly admitted and stated, Defendant denies the remaining allegations in

Paragraph 662.





753. Defendant admits that Mr. Ross was on the boards of SCI and FITG and was the

CEO of WLR. Defendant further admits that Mr. Ross was familiar with FITG's and SCI's

businesses. Except as expressly admitted and stated, Defendant denies the remaining allegations

in Paragraph 665.

754. Defendant admits that Mr. Ross was familiar with the merger structure







759. Defendant admits that Mr. Gorga was familiar with the pre-merger investigation

of SCI by FITG and with the merger structure negotiations. Except as expressly admitted and


- 164 -ATI-2491514vl






763. Defendant admits that Mr. Storper was a director of SCI and an employee of

WLR. Except as expressly admitted and stated, Defendant denies the remaining allegations in

Paragraph 675.







768. Defendant admits that Mr. Gibbons was a director of SCI and an employee of

WLR. Except as expressly admitted and stated, Defendant denies the remaining allegations in

Paragraph 680.







- 165 -ATI-2491514vl
















696.



Defendant further admits that NITG's market cap on the day after the merger was more than

$230 million. Except as expressly admitted and stated, Defendant denies the remaining


786. Defendant states that Bear Steams & Co. collapsed in March 2008. Defendant

further admits that on or about April 2, 2006 NITG traded at $1.65 per share on a volume of

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approximately 1200 shares. Defendant further incorporates his responses to Paragraphs 5-7 as



787. Defendant states that he has not been enriched by the merger. On information

and belief as to these matters, Defendant further states that no Defendant or employee of WLR

has earned a return from the merger, particularly Fund II and Fund III, which has yet to recoup

the hundreds of millions of dollars invested in NITG. Except as expressly admitted and stated,



789. Defendant denies the allegations in Paragraph 70l.











798. Defendant admits that PlaintifTs purport to paraphrase and quote from Tessoni

Depo. Ex. 17, that this document speaks for itself, and Defendant denies any allegations

- 167 -ATl-2491514vl




the allegations in Paragraphs 711A-W.














Depo. at 503-504, that this testimony speaks for itself, and Defendant denies any allegations





- 168 -ATI-2491514vl


subject to admission or denial. To the extent a response is possible, Defendant is without








811. Defendant hereby incorporates his responses to Paragraphs 317-341 as though

fully set forth herein. Defendant states that the allegations in Paragraphs 723 state a legal

conclusion not subject to admission or denial. To the extent a response is possible, Defendant is


723.

812. Defendant hereby incorporates his response to Paragraph 711 as though fully set

forth herein. Defendant states that the allegations in Paragraphs 724 state a legal conclusion not







- 169 -ATI-2491514vl

815. Defendant denies the allegations in the "Prayer for Relief' and the Paragraph

entitled "WHEREFORE."

816. Defendant denies any and all allegations of the Complaint not expressly admitted

herein and denies that Plaintiffs are entitled to any form of relief and that he take nothing by way

of this lawsuit and denies that Plaintiffs are entitled to trial by jury.

SECOND DEFENSE

817. Defendant repeats the relevant and consistent allegations of his prevIOUS

Defenses as if fully set forth herein.

818. The Complaint fails to state sufficient facts to constitute a claim or cause of

action.

THIRD DEFENSE



820. Plaintiff Brian Menezes' claims are barred in whole or in part because they were

released on September 28, 2006. All of the claims Mr. Menezes asserts in this lawsuit arose or

accrued before he signed the release. Attached hereto as Exhibit A is a true and correct copy of

the Confidential Settlement Agreement and Release ("Settlement Agreement") wherein Mr.

Menezes released all asserted claims against the named Defendants.

FOURTH DEFENSE



822. Mr. Menezes's claims are barred in whole or in part because there has been an

accord and satisfaction. As set forth in the Settlement Agreement, he disputed, among other

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things, the amount owed to him under his employment agreement. In satisfaction of that dispute,

including any of his disputes that were based upon or as an owner of any stock or interest, he

accepted and cashed several payments made in January, March and August 2007.

FIFTH DEFENSE



824. Plaintiffs' claims are barred in whole or in part by the doctrines of estoppel,

waiver, acquiescence, and/or ratification. Plaintiffs were aware of the claims they assert in this

lawsuit and, on information and beliet: either voted for or acquiesced to the merger at issue in

this lawsuit.

SIXTH DEFENSE



826. Plaintitfs' claims are barred in whole or in part by the business judgment rule.

Disinterested and independent special committees of SCI, FITG, and NITG, acting in good faith

and using due care and relying on independent advisors and fairness opinions, approved the

merger as a valid business decision. The Boards of Directors of the merging companies relied in

good faith on the special committees' recommendation. Any other claims Plaintiffs allege

concerning transactions where the Boards of SCI, FITG, and NITG were disinterested are also

protected by the business judgment rule.

SEVENTH DEFENSE

827. Defendant repeats the relevant and consistent allegations of his previous


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828. Some of Plaintiff's claims are barred because Plaintiffs failed to make a demand

on the Board of Directors of the combined company and failed to meet the other procedural and

substantive requirements for a derivative action as specified in Rule 23(b)(1) of the South

Carolina Rules of Civil Procedure.

EIGHTH DEFENSE

829. Defendant repeats the relevant and consistent allegations of his previous Defenses

as if fully set forth herein.

830. Plaintiffs' claims are barred in whole or in part by principles of exculpation under

Delaware law and Article VII of the Amended and Restated Certificate of Incorporation of

International Textile Group, Inc. (f1k1a Safety Components International, Inc.) and Article VII of

the Certificate of Incorporation of Safety Components International, Inc., both of which are

attached hereto as Exhibit B.

NINTH DEFENSE



832. Plaintiffs' claims are barred in whole or in part because, on information and

belief~ they lack standing and are inadequate representatives for this action.

TENTH DEFENSE

833. Defendant repeat the relevant and consistent allegations of his previous Defenses


834. Plaintiffs' claims are barred in whole or in part because the Defendant acted in

good faith, relied in good faith on the recommendation of the special committees approving the

merger and other challenged business transactions, and did no unlawful act or thing directly or

- 172 -ATI-2491514vl

indirectly. The disinterested and independent special committees of SCI, FITG, and NITG relied

in good faith on independent advisors and fairness opinions when recommending and approving

the merger and other challenged business transactions.

ELEVENTH DEFENSE



836. Plaintiffs' claims are barred in whole or in part because Plaintiffs cannot show

causation between the conduct of the Defendant and the damages alleged. Any alleged reduction

in stock price was due to independent intervening events and circumstances unrelated to the

allegations set forth in the Complaint.

TWELFTH DEFENSE



838. Plaintiffs claims are barred in whole or in part under the doctrine of laches.

Plaintiffs claims arose and accrued no later than when the merger was agreed upon, and Plaintiff

should have brought his lawsuit at that time.

839. Plaintiffs' elaims are barred in whole or in part under the doctrine of laches.

Plaintiffs' claims arose and accrued no later than when the merger was agreed upon, and they

should have brought this lawsuit at that time or within the time allotted for challenges in the

August 29, 2006 Agreement and Plan of Merger between FITG, SCI and SCI Merger Sub, Inc

("Merger Agreement").

- 173 -ATI-2491514vl

THIRTEENTH DEFENSE



841. Plaintiff's aiding and abetting claims are barred in whole or in part to the extent

that Defendant is fiduciaries, did not knowingly participate in any alleged breach, or did not owe

a duty to Plaintiff.

FOURTEENTH DEFENSE



843. Mr. Menezes' claims are barred in whole or in part because they were claims

related to those asserted by him in his earlier lawsuit captioned Menezes v. SCI, et. af. (C.A. No.:

2006-CP-23-4236), that were expressly dismissed on September 29, 2006, "with prejudice and

are hereby res judicata."

FIFTEENTH DEFENSE



845. Plaintiffs' claim for unjust enrichment is precluded by the Merger Agreement.

SIXTEENTH DEFENSE



847. Plaintiffs' claims sounding in equity are barred because they have an adequate

remedy at law.

- 174 -ATI-2491514vl

SEVENTEENTH DEFENSE



849. Plaintiff's claim for conspiracy is barred because the alleged acts are consistent

with a lawful purpose, namely the combination of the companies.

EIGHTEENTH DEFENSE



851. Plaintiffs lack standing to bring this lawsuit because, on information and belief,

they have not continuously owned stock in the necessary companies from the time of the alleged

breaches until the tiling of this lawsuit.

NINETEENTH DEFENSE



853. Plaintiffs' claims are barred because they cannot show the necessary

particularized facts that the directors acted with the requisite scienter to negate the principles of

exculpation under Delaware law and as set forth in the attached Certificates of Incorporation,

which provided that "no Director of the Corporation will be personally liable to the Corporation

or its stockholders for or with respect to any acts or omissions in the performance of his or her

duties as a Director of the Corporation."

TWENTIETH DEFENSE



- 175 -ATI-2491514vl

855. Plaintiffs' claims are barred, in whole or in part, to the extent that the Court does

not have personal jurisdiction over the non-resident Defendant and/or the claims violate South

Carolina Code section 15-5-150 by asserting claims on behalf of non-South Carolina residents.

TWENTY-FIRST DEFENSE



857. Plaintiffs' claims are barred under the applicable statute of limitations because

this lawsuit was filed more than two years after the discovery of the facts giving rise to the

causes of action asserted in the Complaint.

TWENTY-SECOND DEFENSE



859. Defendant hereby gives notice that he intends to rely upon such other and further

defenses as may become available or apparent during pretrial proceedings in this action and

hereby reserves all rights to amend this Answer and to assert all such defenses.

WHEREFORE, Defendant prays as follows:

(1) That Plaintiffs take nothing by virtue of their Complaint and that this action be

dismissed in its entirety;

(2) That Plaintiffs demand for jury be denied;

- 176 -ATI-2491514vl

(3) For costs of suit and attorneys' fees herein incurred; and

(4) For such other and further relief as the Court may deem just and proper.

Respectfully submitted,Dated: October 26, 2011

~~/Ilason A. GoldsmithLOVE, THORNTON, ARNOLD ANDTHOMASON, P,A.410 F.. Washington StreetP. O. Box 10045 (29603)Greenville, SC?HONE: 864242 6360FAX: 864 271 7972

Counsel for DefendantDaniel D. Tessoni

- 177 -

STATE OF SOUTH CAROLINA ))

COUNTY OF GREENVILLE )

"' "" -,'0 cr'I''''IN THE COURT OF COMMON l>L!E~si-'

_'.'.'_" ,', i :':,X,I:E 0

In re Int~malionaJ Textile Gro"pMerger Litigalion,

)))

10'[ n"; '!', c-. j", ,

CA. NO: 2009-CP-23-3346

r'·

CERTIFICATE OF SERVICE

PERSONAllY appeared before me, Barbara H. Temples, who first b~ing duly sworn

avers the following: that she is a legal assistant with the firm of Love, ThorntDn, Arnold &

Thoma.~on, P. A.; that she served the attached Defendant Daniel D. Tessoni's (I) ANSWER

AND DEFENSES TO AMENDED CONSOLIDATED COMPLAINT; and (2) MOTION TO

DISMISS THE FIRST AMENDED CONSOLIDATED COl\.1PLAINT IN PART by US Mail to

Russell Burk~, by HAND DELIVERY to William D. Herlong and Thomas L. Stephenson and

by EMAll to everyone listed below on the 26T11 day of October, 201 I,

William D. Herlong, EsquireThe Herlong Law Firm, LLCPosl Offiee Box 2105Greenville, SC 29602WilIiam,'a:>herlonglaw. com

Thomas L. Stephenson, E~quireChrislopher D. King, Esq.Nexsen Pruet, LLCP, 0, Drawer IOMSGreenville, SC 29603-0648tste phensoniWnexsenpTile t.eom

Michael McConnellJones Day Law firm1420 Peachtree Street, N. E.Suite 800Atlanta, GA 30309-3053mmeonncJliWjonesdav.com

W. Howard Boyd, Jr" EsquireGallivan, White & Boyd, PAPost Offiee Box 10589Greenville, SC 29603hbovd@gwbl~wlirm,cum

Arthur D. Felsenfeld, EsquireAndrews Kurt, LLP450 Lexington AvenueNewYork,NY 10017afelsenfeldiWandrcwsklU1h.eom

Phillip A. Kilgore, EsquireOgletree, Deakins, Smoak& Stewart, PC

The Oglelree Building300 North Main 5t.GreL'lwille, SC 29601Phillip.Ki Igorcliilogletrcedeakin~.com

H. Sam Mabry. 111. EsquireHaynsworth Sinkler Boyd, PAPost Office Box 2048Greenville, SC 2%02SIllabrvrwh,blaw.eo III

Russell T. Burke, Esq.Nexsen Pruet, LLC130 Main SI., Sle 700Columbia, SC 29201rburkcrwnexsenprucl.COm

Further your affiant sayeth not.

SWORN to hefore me thisUfI-_ day or Octobcr, 2011.

Af<MA d/.~.~Barbara 1-1. Temples

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2011-10-26 Tessoni Answer To First Amended Consolidated Complaint

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