P consolidate college loans

P R O C E E D I N G S







ANTHONY JOHN ADRIAN BRYAN, JR.,







EXAMINATION



BY MR. CROUCH:



Q. And would you state your full name for the



record, please.



A. Anthony John Adrian Bryan, Jr.



Q. Mr. Bryan, my name's Ron Crouch. I'm an



attorney at McGuire Woods. We represent the



Unofficial Committee of Unsecured Creditors in the



two bankruptcies that I'm sure you're familiar with.



Have you had your deposition taken before?



A. Yes, sir.



Q. On how many occasions?



A. I couldn't exactly say.



Q. Quite a few?



A. Several.



Q. All right. Since you're familiar with the



process, I'm not going to go over a lot of ground



rules.



By no means is this an endurance contest.



3

If you want to take a break at any time, please just



let us know. I'd only ask that if there's a question



pending, if you would do your best to answer the



question before we break.



And, also, I would ask if you don't



understand one of my questions, which is quite



possible, please ask me to rephrase it or reword it



or just tell me that you didn't understand it so that



we don't have any miscommunications.



Will do you that for me?



A. Yes, sir.



Q. Mr. Bryan, I've seen from the papers that



you are the CEO of Watley Group; is that correct?



A. That is correct.



Q. What is The Watley Group?



A. The Watley Group is a specialist firm that



specializes in bankruptcy and restructuring of



troubled -- troubled companies. And much of our work



relates to providing a suite of services to



Chapter 11 businesses, businesses that enter



Chapter 11, and those services include CEO services,



investment banking-related services and accounting



modeling and forensic analysis services.



Q. How large a group is the Watley Group?



How many employees are there?



4

A. We have a in-house group of approximately



six people, and we have an external team which is --



includes probably another eight to ten others.



Q. And by an "external team," you mean a



group of professionals that you would call upon from



time to time depending on the particular bankruptcy



or project you're involved with?



A. Correct. Depending upon the nature of the



type of case or business, there's a much larger



community, you know, wider community that we would go



to as well. But there's sort of an external team



that is -- that we've been working with for, you know



15 -- 15 years or more.



Q. And when you say there's six internal



people, are they all professionals?



A. No, they're not. Four of them are



professionals, and two are support staff, as I would



define professional. And I don't know if you have a



different --



Q. Fair enough.



A. -- definition.



Q. Can you give me your educational



background, beginning with college?



A. Yes, sir. I was at Boston University for



one year, playing ice hockey. Sorry for the



5

editorial.



Q. That's all right. I'm quite a fan. I'd



rather be talking about that.



A. And subsequently I went to the University



of Texas and received a degree there, a Bachelor of



Arts degree in economics with a -- essentially a



minor in accounting. And I subsequently went to



Carnegie-Melon University for half a year, doing



postgraduate mathematics, and subsequent to that I



went to the University of Pittsburgh and received my



master's in business administration from the Katz



School of Business.



Q. What year was that?



A. I look up at my degree on the wall every



day. I'll have to check.



Q. An approximation, if you can.



A. I think it was around '80, '81 that I --



sorry. I'm not sure. I can't tell you exactly.



Q. All right. When was the Watley Group



formed?



A. The Watley Group was formed around in the



mid-'80s.



Q. So it would have been shortly after you



obtained your MBA that The Watley Group was formed?



A. Correct.



6

Q. And were you a principal in forming The



Watley Group?



A. I was, yes. I was -- yes, I was. Yes, I



was.



Q. Have you --



A. And forgive me. There was a predecessor



company --



Q. And what was --



A. -- Watley -- Watley Investments Limited.



That was recreated into The Watley Group in, I



believe, '96, but for practical purposes, it started



in the mid-'80s.



Q. Was there any difference in the -- over --



over time, has there been any difference in the



services that are provided by Watley Investments or



The Watley Group?



A. There's a constant variety of which -- of



services for every individual case, and there's a



wide -- wide latitude within the descriptions that



I've given. And -- and I think that -- but for the



most part, what has been consistent is sort of the



overarching turnaround and -- turnaround-type of



business that we've been involved in.



Q. Now, prior to getting your MBA, did you



have any other employment history?



7

A. Yes.



Q. Just give us a brief -- you don't have to



go into great detail. Can you just give me a brief



overview?



A. I -- at 15 years old I was a cowboy on a



ranch.



Q. You can start with full-time employment



following your college degree.



A. Full-time employment, no. I went right to



my master's subsequent to graduating from the



University of Texas -- or right to Carnegie-Melon,



virtually, give or take.



Q. Can you approximate how many Chapter 11



bankruptcies your retention as a professional has



been approved?



A. Including all of our managing directors



and previous managing directors, very roughly -- and



I have not made a scientific count of this, but at



last count, I believe Alfred Moran had counted about



30 amongst our senior managing directors. And I



can't -- but that would be probably a rough



indication.



Q. Has there ever been a case in which you



were approved as a -- retention as a professional in



a Chapter 11 in which subsequently a trustee was



8

appointed?



A. In one case.



Q. Can you tell me about that case?



A. That case is the Sargent Ranch case in the



Southern District of California.



Q. Now, what kind of business was that?



A. Aggregates and mining.



Q. And approximately when?



A. About two weeks ago.



Q. And what was the basis of the appointment



of the trustee?



A. I stipulated and agreed to it as the CEO



of -- of the business.



Q. Can you give me a -- elaborate a little



more? Obviously I'm only looking for public



information.



A. Right.



Q. But from the standpoint of public



information, what was the --



A. From a macro point of view, it was



impossible to get the former owner and the lenders --



there was sort of a lender community which was just



emotionally unable to come to terms, and now we have



come to terms very quickly utilizing the trustee as a



positive factor in that case.



9

Q. Now, I take it in these 30 cases where



I've asked if you've been approved as appointment as



a professional you would have been either CEO, CFO or



chief restructuring officer?



A. In many cases -- in most cases I would



say -- I'd have to go back and look. I can't really



give a -- I haven't done that much of a forensic



analysis.



Q. Okay. I guess what I'm really trying to



get at, by my asking you have you been approved as --



has your retention been approved as a professional,



are there additional cases in which you served a



bankrupt estate as a financial advisor?



A. Yes. Yes. And there's additional cases



where I was not approved as a professional but



approved as the CEO, CRO.



Q. All right.



A. I would say that every variety -- every



possible way for it to be -- for me to be employed



has more or less happened.



Q. If -- if we were to look at your



bankruptcy experience, is there -- would you be able



to break down by type of business a percentage of



representation?



A. If I could break it down to not just



10

bankruptcy but restructuring --



Q. Sure.



A. -- as a whole category, I would say that



mining has been a -- I would say one-third, perhaps,



in the kind of resource-related, one-third -- or



20 percent in sort of healthcare -- and these are



very, very rough approximations to the best of my



knowledge and without having done an analysis. This



would be just a -- the way I see it looking back -- a



20 percent sort of healthcare related, and the rest a



wide variety -- no. Technology would be, I guess,



another 25 percent. I hope I haven't gone over a



hundred.



Q. No. In your -- your mining experience,



have you had occasion to deal with copper mining



before?



A. I've had occasion to deal with firms that



owned copper mines, yes.



Q. Well, now, are you drawing a distinction



between the owner as opposed to the operator?



A. When you say in many -- particularly when



it's a large -- you know, when it was -- in larger



restructurings, the amount of time spent on



operational issues is less than it would be in a case



like this.



11

Q. But you have had experience in the past in



dealing with bankruptcy involving copper mine



ownership or operations?



A. Aggregates -- aggregates would have been a



larger percentage. And in a particular case called



Beazer, which was sold to the Hanson Group, I was



involved with Lord Hanson and worked with Hanson on a



number of those transactions and worked with him for



many years. And they owned copper mines as well as



other facilities.



Q. So do I take it from that that you have



been involved with marketing copper mines or copper



mine assets?



A. No.



Q. No?



A. No, I have not personally been involved in



the marketing of a copper mine asset. Previously it



was mostly larger portfolios within which a copper



mine operation would have been -- so I don't want to



say that I marketed a copper mine. It was part of a



portfolio of 40, so, you know, it would have been a



small percentage of that.



Q. But you have been involved in sale and



marketing of mining assets?



A. Yes.



12

Q. In that experience, have you been the



person -- have you ever been the person that was



principally charged with marketing mining assets?



A. Yes.



Q. And what -- is that one occasion or more?



A. On one occasion I was principally



responsible for.



Q. Can you briefly tell me about that



experience?



A. That would have been the Sargent Ranch



case in which we brought in a -- brought in a plan of



reorganization financing.



Q. And were you successful in marketing the



assets for sale?



A. Yes. And we currently have a plan on



file, and with a bit of luck, we'll -- we will



succeed.



Q. And I think I asked you about it. What



type of mining assets was Sargent?



A. In that particular case, it's sand and



gravel and aggregates.



Q. Have you undertaken any efforts in this



bankruptcy to try and sell or market the assets?



A. On a limited basis, yes --



Q. And by "sell or market," I'm not talking



13

about financing, I'm talking about --



A. I understand.



Q. -- a sale.



A. I understand. On a limited basis, yes.



Q. What have you done?



A. We approached a number of -- we have a



database of approximately 7,500 investment funds and



investment groups globally. And we can search and we



can utilize that database to examine funds that have



been investing in particular areas and that -- that



have historically or are currently looking at



resource or commodity type of investments.



And we -- we would -- and we have -- we



started the process of examining that and going out



with our book to that -- we wrote a document which



has been filed with the court, many documents which



have been filed with the court, which we distributed



to a number of those, but again, not to the extent



that I would have liked or to the extent that needed



to be done or could have been done. Put it that way.



Q. Let me ask why, why not to the extent that



you wanted to or --



A. Because of the litigious -- what



transpired in the case and the nature of the case



was, you know, terribly frightening to the investment



14

community, and those we did have interest from



withdrew immediately as we sort of proceeded in the



August, post-August time frame. And the -- the -- so



that was an inhibition to the marketing.



Q. Was there an interest on the part of



anybody you approached?



A. Yes, a number of funds were interested,



and a number of funds scheduled visits, due



diligence, et cetera, which were subsequently



canceled when -- when things became very litigious.



Q. In your mind, is an investment group or a



hedge fund the only likely purchasers of the assets?



A. Strategic -- obviously we've looked at



strategic and -- we kind of divide them into what we



call strategic or financial investors, and we



certainly have been looking at both strategic and



financial. And your question was have we looked at



that?



Q. My question was are hedge funds or



investment funds really the only likely purchaser?



A. I think there is -- a small community of



strategic investors are interested in this type of --



of operation, but it's -- it is of a size and a scope



that limits its marketability to many of the



strategic investors, meaning that it's too small for



15

many people.



Q. Do you feel you have the experience to



enable you to answer the question of how long a due



diligence period would be required for prospective



investors in copper assets and specifically these



assets, how long would they need?



A. Yes, I think so. I think under -- under



optimal conditions, I think, you know, a process of



six weeks is an adequate -- and hopefully that can be



crammed down. You know, if -- I think one can gauge



a level of interest by how quickly someone does due



diligence.



Q. How long was the due diligence period in



the Sargent case?



A. It was, I think -- I can't give you exact



dates. I think our book was finished in the



September, August -- in August, and I had a signed



deal in late September. And I believe I'd filed the



appropriate documents for all of the financing.



That's -- I would really have to -- those are very



rough. I want to be sure that I stress that.



Q. This is probably part of the record, but I



haven't gone back to look. When did you become



involved in the -- in this case?



A. I was engaged, I believe, one day after



16

the filing for Chapter 11, so if we -- I believe we



filed on May 18th, I think, or May 19th, and I was



appointed the next day.



Q. And how -- how did the two of you find



each other?



A. I had -- the -- the executives of the



firm, which included Marcus -- I know Marcus was



included, and I -- to some extent I don't remember



the exact group that was there. They were in



Los Angeles, meeting investment groups and discussing



an investment with a company. And -- and an



investment group -- one investment group that they



met said -- said to them, Look, it's -- in the



condition you're in, I'm not -- I wouldn't be able to



do anything.



But he actually referred and recommended



that they meet us. And that was probably about seven



to ten days before I was engaged. And prior to that,



I had never met any of them, and I didn't know any of



them and had no relationship.



Again, this is to the best of my



knowledge, and I don't -- I would have to go back



into diaries and look at exact dates. I'm only



giving you a rough feel for the dates.



And I had no -- I had no -- I had never



17

met Empire prior to that either, so none of the --



(An attorney-client discussion was held



off the record.)



THE WITNESS: Okay. Well, just to save



time.



Q. (By Mr. Crouch) And have you had the --



has part of your experience been efforts to raise



financing for mining operations?



A. Yes, on --



MR. ABBOTT: I thought this was off.



Sorry.



THE WITNESS: -- raising finance maybe --



it's been within the context of larger companies and



raising finance within that context was finding a



buyer and -- and a transition out of Chapter 11.



So --



Q. (By Mr. Crouch) When you say "larger



companies," do you mean larger than Western Union



[sic] Copper?



A. Yes.



Q. Are you familiar -- well, this obviously



predated your involvement. Did you do anything to



familiarize yourself with the efforts to obtain



funding from Credit Suisse First Boston or from



Stillwater Capital?



18

A. I wasn't obviously involved. I've seen



some documents, but I can't -- I don't think I can



really -- I'm not sure what your question is. Was I



aware of it?



Q. Well, I asked you if you did anything to



familiarize yourself with those processes, what



occurred.



A. Yes. Yes.



Q. Do you feel you have the experience to



describe what kind of -- now, those were obviously --



those were substantial loans that were being looked



at to take -- take out the prior debt and commence



operations. Is that safe -- a safe summary?



A. Take out the prior debt and fund



operations.



Q. And fund operations.



A. Yes. I don't know what their actual use



of proceeds might have been, so I hate to opine on



what -- what Mark Dotson might have done with that



money. No, I'm just -- I'm being facetious. Forgive



me.



Q. This is all -- all I'm trying to lead up



up to is are you familiar with the type of due



diligence that would be necessary for a lender to



come in at this point and lend in order to --



19

A. Yes.



Q. -- not only take out debt but also fund --



A. Fund.



Q. -- an actual operations budget, capital



and operations budget?



A. Well, perhaps I can -- perhaps I can



opine -- Martin's going to just hate me.



Q. Well, my first question --



A. Are you looking for my opinion?



Q. Well, I'm actually -- first I'm asking you



do you feel you have the actual experience to give an



opinion on that? I don't know if have --



A. Yes, I do think I have -- I think I do.



Q. All right. So given that you think you



do, why don't you give us your opinion on what that



due diligence process would look like.



A. Well, I'm not sure that -- I think as



opposed to what that due diligence process would look



like, I think that quite clearly the landscape has



dramatically changed from the types of transactions



that were even being considered pre-August of 2008



and -- and I think -- or May of 2008. And I think



that the requirements in the macroeconomic scene in



which we exist now is so dramatically different than



things people might have looked at before, and I



20

think that these -- these types of transactions are



very fragile, are difficult, very, very difficult and



require a very sophisticated architecture to make



something like that happen, if I can summarize it.



Is that answering your question?



Q. In part. I take it you would agree with



me that you're not going to get a traditional lender



to come in and do that?



A. I don't believe so. That would be my



opinion at this point in time.



Q. So you would be looking at some --



A. Not under traditional -- not as a



traditional loan with traditional loan to value --



under circumstances where the loan to value existed



based on what we have as opposed to what somebody



else might be doing behind the -- behind the scenes



that made this transaction possible.



Q. All right. So given that, we would have



to be looking at an investment fund or hedge fund --



A. Or a strategic investor.



Q. Or a strategic investor.



Now, you described that process as one



that would be very fragile. I believe that's the



word you used, correct?



A. For the bank -- for -- I'm sorry.



21

Q. Well, let's stick -- let's take strategic



out for the moment. If we're looking at an



investment or a hedge fund, let's start with how long



that process would take. If you started today to try



and market, how long would it take to get through



marketing and due diligence?



A. I think that assuming today -- and I think



I -- I think this is accurate. Assuming today I have



a book that I can distribute, which I believe I do



have, and also given a landscape in which litigation



and other things are not overwhelmingly frightening



to the entire marketplace really precluding anybody



from looking, assuming that we had something that



everybody could look at, I think that, you know, a



normal process would be, you know, two weeks of



sending out books, two weeks of responding and four



weeks of due diligence. And I think that -- you



know, that would -- that would be a process that



would be a standard process.



Q. So approximately 60 days?



A. Approximately 60 days.



Q. And then as you --



A. From scratch.



Q. From scratch.



And then as you described it, the



22

architecture for any such deal would be one that



would -- let's just say it would involve some



significant negotiation. Would that be fair?



A. I think it would -- well, I think that --



I think, you know, we understand this very well. I



think the economics are quite clear. I think the --



this is really a private equity type of investment



and needs to fit within what private equity is



looking for in this -- within this macroeconomic



climate.



Q. Now, reading the papers of record, I guess



the -- one of the proclaimed successes of the debtor



has been the ability to assemble these -- was it over



600 parcels, 600 -- do you remember the number?



A. Yes, approximately -- approximately a



hundred thousand acres.



Q. But am I correct that the number of



separate parcels or claims was 600?



A. Approximately. It's not exactly, but it's



roughly.



Q. Would part of --



A. It's 636, I think.



Q. Would part of the due diligence involve



looking at each of those mining claims?



A. No, I don't think -- I don't believe --



23

you know, there's -- there is -- you know, I think



the validity of those claims an been demonstrated



amongst -- you know, within their -- within most



funds' expertise very quickly or their legal counsel.



Q. Would you expect the due diligence to



include some independent review of whatever the



reserves or available minerals might be?



A. I would expect someone to demand



communications with Tetra-Tech. That's what I would



expect.



Q. And would you -- would due diligence



typically include somebody wanting to perform their



own mineral studies?



A. Well, again, many funds have their --



that -- if they -- if they do or have invested in



mineral things, have within their structure experts



that they go to, but I would still expect, even if



they had an expert, they would -- their expert would



go to Tetra-Tech and also spend time on the property.



But I don't -- that process is really not a very



time-consuming process. And when you say --



MR. BRILL: There is no question. There's



no question pending. You don't need to answer.



(By Mr. Crouch) In your tenure at -- with the --



with the two debtors, have you sought any traditional



24

lending, either as bridge financing or DIP financing?



A. When you say have we sought it, seeking a



standard just conventional lender?



Q. Let's exclude --



A. U.S. Bank?



Q. And excluding Empire/Altus and excluding



the existing lenders. Have you sought any type of



traditional financing during the pendency of the



bankruptcy?



A. Yes. We've talked to -- we've talked to a



representative sample of many types of lenders,



equity investors and hybrids thereof, so yes. We



have, yes.



Q. And has there been any expression of



interest?



A. To some extent the -- yes, there has been



expressions of interest.



Q. Would they -- did the talks with the --



how many -- how many institutions expressed interest?



A. I think we -- it's difficult to put a



number to. I'd have a tough time giving you an exact



number without going back, but I would say that we've



talked to 15 or 20 that went beyond an initial



conversation.



Q. Were any of them interested in providing



25

any financing if they weren't primed?



MR. BRILL: Could you repeat the question?



MR. CROUCH: Sure.



(By Mr. Crouch) Were any of them interested in



providing any financing if they were not primed?



A. You mean if --



MR. BRILL: If they were not primed?



THE WITNESS: Yeah.



MR. CROUCH: If they were not primed.



MR. BRILL: If they did not receiving a



priming position?



THE WITNESS: If they did not receive a



priming --



(By Mr. Crouch) Yes.



A. No.



Q. When did you first meet Mr. Richards?



A. I believe -- I believe it was June or July



of this year, about a month or so --



MR. BRILL: Last year.



(By Mr. Crouch) Well, it can't be this year because



it hasn't happened yet.



A. Excuse me. Pardon me.



Q. That's all right.



But you had no prior exposure to



Empire/Altus or David Richards prior to this



26

bankruptcy case?



A. No.



Q. And what was the occasion on which you



first met Mr. Richards?



A. I think it might have been at one of the



hearings. I think it was maybe in the Nevada



hearing. I'd have to look to really go back to see



exactly when I first met him.



I'm assuming you're also meaning in



person?



Q. I am meaning in person?



A. Yes, not on a phone call.



I can't be exactly sure, but I believe it



was in one of the Reno hearings.



Q. Let's skip ahead for a moment to the



settlement agreement and term sheet which are the



subject of the motions currently before the court.



Were you personally involved in negotiating those?



A. I'm sorry. Can you say that again?



Q. All right. You're aware that there is a



motion to approve --



A. Yes.



Q. -- a settlement agreement?



A. Yes.



Q. -- that's been filed with the court,



27

correct?



A. Yes.



Q. And you're familiar with that settlement



agreement?



A. Yes.



Q. Were you personally involved in



negotiating that settlement agreement?



A. Yes, I was, certain parts of it. Not



every aspect, but yes.



Q. When did those negotiations begin?



A. I would say in the last week of October.



Q. And --



A. Last week of October, I believe. Again,



I'd have to look at schedules.



Q. Was that the settlement conference at



which all the constituencies --



A. That's correct. And I can't be exactly



sure what date that was, but to the best of my



recollection, it was sometime near the last week of



October.



Q. All right. Rather than me -- given that



you were involved, can you describe for me what your



involvement was in negotiating the terms of the



settlement agreement?



A. I worked with our counsel, both bankruptcy



28

counsel, litigation counsel, and with -- principally



with Dave McMullen, and -- to -- to negotiate.



Q. And there's also a term sheet with Altus,



which is attached as an exhibit to the September



agreement. Are you familiar with that term sheet?



A. Yes.



Q. Were you involved personally in the



negotiation of that term sheet?



A. Yes, I was, to -- in a similar capacity as



I was.



Q. Did you have any face-to-face meetings



with Mr. Richards to negotiate that term sheet?



A. I believe in -- we might have met -- I



believe Mr. Richards or his son came to several of



the bankruptcy hearings we had, and --



Q. And they're both David, right?



A. Yeah.



Q. All right.



A. I -- I'm fairly certain we did meet in



person, but I couldn't give you the exact dates.



Q. Well, did you have any meetings in person



that weren't in the context of some other proceeding



in the bankruptcy court, in other words, a meeting



that was scheduled where you went there or he came



here specifically for the purpose of negotiating



29

terms?



A. I -- I'd really have to look at -- I mean,



specifically for -- I mean, I consider -- there's so



many elements of this. It's very difficult to say



specifically for this we met on a date. I mean,



there's just too many moving parts and too many



issues to be -- you know, to be discussed about the



business and --



Q. Well, let me try and -- let me ask you a



different question, which might not get us any



further, but I'll try.



Do you recall any meetings with



Mr. Richards, either of them, that was not in the



context of an appearance in bankruptcy court?



MR. BRILL: During what time frame?



THE WITNESS: Yeah, during what time



frame?



(By Mr. Crouch) Since from the beginning to now.



A. To -- Mr. Richards was -- I met with



Mr. Richards --



Q. Which Mr. Richards?



A. Well, senior is the CEO.



Q. All right.



A. So I consider him to be the prime person.



I'd really have to look at my schedule to see when I



30

met with him. I did meet with Mr. Richards recently,



which was last week. He came to Los Angeles to --



and I did meet with him on that occasion.



Q. Was -- what was the subject of that



meeting?



A. A wide variety from the business issues to



the -- I believe he came to Los Angeles not to see me



but to see his investor group. So I was an ancillary



part of his trip. And I saw him for a very short



period of time.



Q. All right. Well, by last week the



settlement agreement and term sheet were already



complete?



A. Were already complete, exactly.



Q. Are there any other occasions that you



recall meeting with Mr. Richards personally outside



the context of a bankruptcy court appearance?



A. I know we have. I'd have to really go



back to my schedule and look. I know we have met,



and I believe we met in Milford one time. And



it's -- it would be very difficult for me to opinion



those down exactly -- I'm very sorry -- without



looking back at the schedule and saying these are the



specific dates.



31

MR. CROUCH: They sent me copies of



everything, but they didn't label anything.



THE WITNESS: Can I just add one thing



about the --



MR. BRILL: No, that's okay. There's no



pending question now. Wait for his question.



MR. CROUCH: This is Exhibit 1.



(EXHIBIT 1 WAS MARKED.)



(By Mr. Crouch) Mr. Bryan, I've handed you a



document which is a copy of something that's filed of



record with the bankruptcy court entitled Declaration



of A. John Bryan, Jr., In Support of Debtors' Motion



For Order Approving Settlement Agreement With Secured



Creditors, et cetera?



A. Yes, sir.



Q. Is this your declaration?



A. Yes, sir.



Q. Why don't you just flip to the back. I



don't know that this is going to assist you at all?



A. Okay.



Q. But would you just take a moment to look



over the Exhibit B which is the Settlement Buyout



Term Sheet and see if that refreshes your



recollection at all of discussing any of those terms



personally with Mr. Richards.



32

A. Okay. Sorry. Are you on Exhibit --



MR. BRILL: B.



(By Mr. Crouch) All the way in the back. It's the



last two pages.



MR. BRILL: This doesn't have it -- oh,



there it is, the last two pages.



(By Mr. Crouch) I mean, eventually we're going to



talk about a couple of these terms --



A. Sure.



Q. -- but, really, all I'd ask you to do,



just spend a moment and look over the terms of the



Buyout Term Sheet and see if that refreshes your



recollection of discussing any of these terms



personally with Mr. Richards?



A. Right. A vast majority of these



negotiations were conducted on my behalf by counsel.



Q. I would expect that to be the case?



A. And so my direct discussion of any of



these terms was extremely limited, and David



Golubchik and David Richards, Jr., conducted



virtually all of the formal negotiations.



Q. Okay. None of that is surprising to me.



I'm only asking do you recall. Take a moment to look



at the buyout sheet, the term sheet, and does that



refresh your recollection --



33

A. Oh, yeah.



Q. -- of you personally discussing with



Mr. Richards any of these terms. If it doesn't, it



doesn't?



A. Well, I discussed these terms within the



context of counsel having their discussions and --



and perhaps discussing where those discussions stood



and what issues remained to be negotiated or agreed



and -- but it -- it would not have been me



negotiating directly with Mr. Richards.



Q. All right. Were there any conference



calls in which both you and Mr. Richards were on the



telephone to discuss the terms of this term sheet?



A. Yes.



Q. Are there any items of the term sheet that



were more difficult to negotiate, for want of a



better way of putting the question?



A. That's a very relative --



Q. Sticking points, let's put it that way.



A. Maybe issued limit my editorial comments .



I think relatively speaking, all of the



points were very difficult. I don't want to try to



say anything was more difficult or less difficult.



Coming to this agreement, was excruciating, if I may



use that word.



34

Q. All right, you said the negotiations began



in October. When did -- let's go back to the



settlement agreement, which is also attached here if



you want to reference it.



A. Um-hum (affirmative).



Q. But when -- when do you recall that you



had an agreement -- you know, not necessarily that it



was all signed and done, but when do you believe that



you had an agreement in principle on the September



agreement?



A. I believe that a first draft was --



appeared in December, so if that gives you...



Q. Well, and if you look at the settlement



agreement, which is Exhibit A to your declaration --



A. Um-hum (affirmative).



Q. -- there are some signatures as early as



the first week of December and some signatures as



late as -- I think I saw one the second week of



January. Maybe it was only the first week.



But does that refresh your recollection



that by the first week of December what you felt was



an agreement?



A. Yes. Where would be the -- the earliest



settlement date is possibly -- would have been -- or



the earliest signatures on what happen date?



35

Q. I see one for -- on the first -- on page



12, I see one December 7th?



A. Yes, December 7th.



Q. Which is Bridge Loan Capital?



A. Right.



Q. Now, a lot of these are undated, but



that's the earliest -- December 7th, it was also by



Bridge Loan Capital Fund, LP?



A. Right.



Q. I don't see any before December 7th.



Does that comport with your recollection?



A. Yes, it does.



Q. Now, the settlement agreement, if you go



back to the very first page of the settlement



agreement, the very first sentence says, this



settlement agreement, the agreement, is made



effective as of November 18th.



A. Right.



Q. Do you know why, although not agreed to in



principal until around December 1 and signed



thereafter that the effective date was made



November 18th?



A. I don't recollect exactly why that date



was used.



Q. Did the parties, during the negotiation of



36

the settlement agreement, agree to do certain things



in good faith and by that -- even though there was no



agreement? And by that, I mean the withdrawal of the



motion for DIP financing, as an example?



A. Your question is did we agree to --



Q. You recall that a motion -- well, there



were several motions --



A. Right.



Q. Actually, let's take one that I think



there is only one example of, there was a motion to



substantively consolidate the bankruptcy proceedings.



Do you recall that?



A. Yes, I do.



Q. And do you recall that was withdrawn by



the debtors?



A. Yes, I do.



Q. And was the reason that that was withdrawn



by the debtors -- well, let me ask you. What was the



reason that was withdrawn by the debtors?



A. Well, that was -- you know, there were --



I consider some of the reasons to be attorney-client



privileged because they were part of work process,



and I'd rather not say what strategies that may have



implied or not implied and why --



Q. That's fair.



37

A. -- there could be good or bad things



related to that, if I may.



Q. Let me ask -- let me ask you this



question, then: Was part of the reason -- was any



part of the reason, in your mind, that even though



you didn't have a deal, that you wanted to



demonstrate good faith and -- and improve the --



improve the atmosphere for negotiations and therefore



withdrew the motion to substantively consolidate?



A. It could have been part of -- yes.



Q. And would that also be true of the



withdrawal of the motions for DIP financing and the



other motions that are --



A. I would say yes on those.



Q. All right.



A. Although --



MR. BRILL: You've answered the question.



THE WITNESS: I'd just like to qualify it



a little bit.



Not limited to that --



(By Mr. Crouch) I understand it's not the only --



A. It's not the -- it's not the reason.



There were many, many reas



ons.



We can keep going, I'm just going to get



38

Altus --



MR. CROUCH: Actually, you know what? If



it's all right with everybody, I'd like to take a



little break.



(Recess from 11:34 a.m. to 11:53 a.m.)



(By Mr. Crouch) Mr. Bryan what is your understanding



of when and how much money Altus/Empire has lent to



debtors?



A. Approximately a million dollars.



Q. When?



A. Well, the exact date -- subsequent --



Q. Well, did they lend money prepetition?



A. Oh, sorry. I thought you meant solely in



the DIP financing. Can you clarify?



Q. Sure. Did Altus -- when I say "Altus,"



I'm including Empire.



Did Altus lend money to the debtor



prepetition?



A. Yes. There was a series of transactions,



some of which were purchases, and -- and there was a



loan made as well.



Q. Do you know -- what's your understanding



of the amount of their prepetition debt?



A. I believe it was seven hundred and --



approximately a million dollars, under a million



39

dollars.



Q. And do you have any -- this all predated



you, the prepetition --



A. Correct.



Q. Do you have any understanding of how Altus



got involved in the first place?



A. Yes. In about -- I believe about June of



the previous year, Altus was approached presumably by



management or through one or another broker to look



at an investment in the company.



Q. Do you know how management found Altus?



A. I believe they somehow were introduced to



Gary Post, and Gary Post, I believe, was engaged



around May of that year. And Gary knew Empire. I'm



not exactly sure of those -- that's -- this is my



presumption.



Q. Who is Gary Post?



A. He is a former McKenzie consultant who



works on financial -- it was a financial consultant.



Q. I'm not following who -- what's Gary



Post's represent with the debtors?



A. Prepetition Gary had been working with the



debtor to seek financing, and he was working on the



Altus transaction.



Q. And you said he works for the McKenzie



40

group?



A. Yeah, he was a McKenzie consultant --



Q. I'm not familiar with them. Who are they?



A. They're the -- probably the best known,



largest consulting group in the world.



Q. Okay.



A. McKenzie.



Q. That McKenzie?



A. That McKenzie.



Q. Now, did they also lend postpetition?



A. Yes.



Q. And how did that come about?



A. We were seeking financing to -- and Altus



made an offer.



Q. Did they -- and how much did they



eventually lend?



A. In two tranches, a total of approximately



a million dollars.



Q. And what was the immediate purpose -- what



was the intended immediate purpose for the use of



those funds?



A. There was a variety that were presented to



the court in those -- in those motions, and a suspect



budget was presented.



Q. And was it intended to be short term loan



41

looking to some larger more long-term financing?



A. They -- the debtor subsequently negotiated



with them to expand that into a larger -- there was



a -- yes, they had agreed to a larger amount of



money, and we -- because of the resistance that we



got to invest in the debtor, we wound up agreeing to



smaller -- we presented smaller amounts, amended our



proposals and presented smaller amounts to the court



of emergency DIP-type financing.



Q. To your knowledge, did Altus perform any



due diligence for either that prepetition or



postpetition financing?



A. Did it perform any due diligence?



Q. Um-hum.



A. Yes.



Q. Well, describe the due diligence that they



performed that you know about?



A. Well, prepetition I can't testify to that,



and since their due diligence was done prepetition,



by the time I got there, and was -- they were ready



to invest.



Q. So they didn't do any additional due



diligence to land postpetition?



A. They certainly examined the use of



proceeds and what our plan was, and I guess they



42

extensively questioned me on what I -- what my --



what the business plan was going forward.



Q. Now leading up to the term sheet which is



attached as an exhibit to your declaration, has Altus



performed any additional due diligence?



Q. I'm not sure I understand the question.



Q. Has a data room been set up?



A. Has it what?



Q. Are you familiar with what a data room



would be?



A. Yes.



Q. Has Western Utah Copper Company set up a



data room?



A. Yes. It had all of its files in -- for



discovery and a variety things have been put into, I



believe, different data rooms for different discovery



exercises.



Q. Has Altus been there?



A. No, I don't believe they had access to



those -- I'm not certain if they would have had



access to those discovery files. I'm in the certain.



Q. Are any of the data rooms -- has there



been a data room that's been set up for purposes of



due diligence either by potential investors or



acquirers of assets?



43

A. Yes. We have -- it's not a data room as



such. We have a -- a -- an entire -- we have all the



data somebody needs to examine, which includes



historical data on the resources and historical data



on -- on the mill and things like that.



Q. Can you give us any statement of the



volume of materials that's involved. Are you talking



about one lateral filing cabinet, two lateral filing



cabinets or banker's boxes or any other estimate?



A. Well, the principal due diligence is a



group of reports that have been a variety of reports



that have been done historically on the -- on the



resources, and those include the hatch report and



other reports that were written that were written for



Credit Suisse and other investors. So there's been



an extensive consolidation of much of that



information over periods of time so that one can get



familiar with it quite quickly.



Q. Do you know if Altus has looked at that



material?



A. Yes, they have, to the best of my



knowledge.



Q. Do you have any familiarity with the SEC



requirements for estimating mineral reserves?



A. Well, there's a variety of those, and



44

those -- I have some familiarity with that, yes.



Q. Are -- is there anything that would meet



the standards required for the SEC with respect to



the mineral reserves that are the subject of this



estate?



MR. BRILL: I don't know if I understand



the question.



THE WITNESS: Yeah.



MR. BRILL: So maybe you could rephrase



that. The requirements of the SEC.



MR. CROUCH: The SEC -- maybe I'm wrong, I



don't know. The SEC as I understand it has



requirements for what would be -- has criteria for



what's necessary to identify or quantify proven



reserves.



(By Mr. Crouch) Are you familiar --



MR. BRILL: I don't think that's the SEC,



but --



THE WITNESS: Would you like me to.



MR. BRILL: But, John, answer it if you



understand the question.



THE WITNESS: I think I understand what



you -- what you want.



(By Mr. Crouch) Okay.



A. The SEC has specific formats and specific



45

reports that they would like filed when you are



reporting publicly to the general public, and



those -- that information may or may not result in



people purchasing stocks. And so they have specific



standards, there's a Canadian standard, an Australian



standard and a U.S. standard, and pretty much those



are somewhat similar.



Q. Do you have enough familiarity with those



standards to tell me whether or not the amount of



information and data that's been generated by -- in



the hatch report and by Tetra-Tech would meet those



standards?



A. We do not have what is known as a 43-101



report. Not that that's -- that's not a necessary --



that's not necessary for us too far. We're not



required to have that.



Q. And you're not required to have that



because you're not issuing public --



A. Right. We're doing a private equity



investment, and we're -- so it's not necessary. And



the -- well, I won't go into subtleties. There's no



point.



Q. I'd like to spend a little bit of time



looking at our -- at the settlement agreement.



A. Yes, sir.



46

Q. Now, again, one of the first things I



noted about the settlement agreement is that it took



over a month to obtain the signatures of all the



lenders. Was that simply a logistical issue or was



that because there were holdouts, if you know?



A. Well, I can't really testify about the --



you know, their side of the --



Q. Well, do you have any understanding as to



why it took so long to obtain all of the signatures?



A. I think they had a lot of -- there's a



large group of -- of lenders, and it's -- I really



can't say as to how or what they did on their side to



obtain all these signatures. It was -- it was --



Q. So your answer's no?



A. -- difficult, yeah. It was clearly --



MR. BRILL: John, you don't know.



THE WITNESS: I don't know.



(By Mr. Crouch) Let's start with -- do you have the



settlement agreement in front of you?



A. Yes, sir.



Q. Okay. Go to page 4, Terms and Conditions,



paragraph 3, withdrawal of DIP and consolidation



motions, do you see that heading?



A. Um-hum (affirmative).



Q. Now, we discussed that a little bit



47

earlier, do you recall?



A. Yes.



Q. So is this simply memorializing -- is it



your understanding that this simply memorializes



something that the debtor -- the debtors had already,



in fact, done, at least in part, in good faith?



A. I don't quite understand what you mean by



that. I'd already done this of about the agreement



was signed.



Q. Well, the agreement -- the agreement



wasn't signed until -- ultimately until somewhere in



January, correct, by all the parties?



A. Before all the signatures were obtained.



Q. Right.



A. So your question is?



Q. So my question is by -- before the



agreement was all signed up --



A. Right.



Q. -- the debtors had already withdrawn their



DIP and consolidation motions, right?



A. Correct.



Q. And my understanding is is that happened



even before there was an agreement in principal.



That was -- our discussion was that was something



that was done by the debtors, not solely --



48

A. Yes.



Q. -- but in part to engender good faith and



encourage an atmosphere of negotiation?



A. Yes.



Q. Is that fair?



A. I again -- I believe some of these



strategies may also be privileged, and the reasons



for part of the work product of myself and counsel.



However, I will say that it -- it might have been --



part of it might have been what you just describe, an



act of goodwill.



Q. By the time you first saw a draft of the



settlement agreement, had those motions already been



withdrawn?



A. I don't believe so, not at the first



draft.



Q. All right.



A. The date of this hearing, I believe, was



December 7th, if I'm not mistaken.



MR. BRILL: I think that's the correct



date.



THE WITNESS: The date of this actual



hearing.



(By Mr. Crouch) All right.



A. And so our first drafts were considerably



49

before that hearing.



Q. All right. So around the time that the



first signatures were being obtained is when the



motions were withdrawn?



A. Correct. Right.



Q. Paragraph 6 has some requirements with



respect to accounting, and those requirements are



dates that have already -- well, in no event later



than December 3, 2010.



Did that happen?



A. Yes, it did.



Q. All right?



A. To the best of my knowledge.



MS. HUNT: May I just ask just so we don't



have to go back to this. Was that produced as part



of the discovery that you provided to us.



THE WITNESS: I think these are filed --



these are part of our filings with -- with the



U.S. Trustee. I think we -- we filed -- I think this



was merely our U.S. Trustee filings coming up to



date. I may be incorrect about that, but -- so I



believe these are filed. This information is in our



U.S. Trustee filings. This is historical financial



information.



(By Mr. Crouch) So in your view, this is requiring



50

nothing other than the standard operating reports



that would be filed with the case?



A. Correct. I -- yes. To the best of my



knowledge, that was what they were asking for.



Q. Paragraph 7 talks about extensions of time



to assume nonresidential real property leases.



A. Um-hum (affirmative).



Q. How many of those are there?



A. I'd have to look at the exact number. I



think there's seven or eight of those. I've got a



listing of the ones. Less than ten.



Q. And have any of -- have any of -- have any



of those lessors been approached yet?



A. Yes, and these extensions were -- this



was -- this took place.



Q. Okay.



A. I don't know quite how to say it.



Q. Let's talk about the reclamation bond.



A. Um-hum (affirmative).



Q. Who -- who is the -- I'm not going to



pretend to know that much about Utah mining laws, but



who -- is there a surety on the reclamation bond?



A. I am not sure exactly in precise terms how



that's -- whether there's a surety. I couldn't be



sure. I'd have to look at the specific documents.



51

Q. Do you know what the amount of the current



bond is?



A. Yes. It's approximately $3 million.



Q. Do you know who the guarantors or



indemnitors on the bond are?



A. Reynolds Brothers Corporation provided



that bonding out of their bonding facilities.



Q. Now, have any efforts been undertaken to



replace that reclamation bond?



A. They -- they have.



Q. Who's been -- who is it that -- who do you



anticipate would be the obligors or guarantors on the



bond?



A. Well, wherever the -- whichever source of



financing or whatever plan would require this to be



treated most likely.



Q. Do you -- is it going to be required as



part -- in the documents that have been produced or



that I've seen, I haven't seen anything that -- I saw



some notice of intentions to conduct mining



operations that are now several out of date. Have



there been anything more recent than that?



A. Related to what? Could you --



Q. Mining plans that -- any mining plans that



have been filed with the state.



52

A. When you say mining plans --



Q. In order for you to --



A. -- for the bureau of oil and mining? That



what you're talking about?



Q. Well, let me ask you this: What's your



understanding of how the amount of the reclamation



bond is determined?



A. I believe -- I don't exactly know. I



believe that it's an estimate of a -- of a tear down



of a facility. It is if you abandon that facility,



there's a bond in place if you go out of business



that they can tear it down and reclaim the property.



Q. And that reclamation includes



environmental remediation, typically?



A. I don't exactly know in each specific



case. It can probably include a lot of different



things depending on -- I think it has to be very



individually looked at.



Q. And is it your understanding that the



state has to approve the amount of the reclamation



bond?



A. Yes, I think they determine it.



Q. So to replace the reclamation bond, you



have to -- can you use the old number or do you have



to go --



53

A. Can we use the number that exists today.



Q. Or do you have to go through another



process?



A. Yes, I believe so. I believe merely



replacing it would be sufficient, if that's your



question.



Q. I take it you really don't have any



operational background or knowledge with respect to



copper mining?



A. In terms of having worked in a copper



mine?



Q. No, in terms of understanding the -- the



mineralogy, the geology, the chemistry for



extracting, the processes that are required.



A. I -- I would say that I've had sufficient



background to understand mineralogy to the extent



that I -- from a technical and from a -- from a CEO's



point of view. I think as CEO I have a sufficient



knowledge and understanding to understand the



technical challenges and -- and the -- the approaches



to different mineralogies. Yes, I think I have



sufficient background in that to be able to make



judgments.



Q. Is the mill that's currently in place on



the property capable of extracting and processing and



54

producing? Let me -- let's strike that question.



Am I correct that there are essentially



two different types of copper mineral that be



extracted? Copper other?



A. If one were to create an axis, you really



have two axes, and the variety goes across four



quadrants, and so you're close to correct.



Q. All right. So the million that's



currently in place, is it capable of extracting from



all four quadrants on your axis?



A. It's specifically designed for specific --



a flotation mill specifically treats certain --



certain mineralogy.



Q. So is the answer no?



A. Would it treat all four? No. The answer



is no. It certainly could. It could treat them.



Q. But not economically or practically?



A. Economically you would not practically use



it for all four.



Q. And can we assign names to the four



quadrants?



A. Not really. It's -- I could, but they



wouldn't be what everybody else would use.



Q. All right. Would you -- would you suspect



to find resources from all four quadrants on the



55

property?



A. Yes, our properties have a wide variety of



minerals -- of mineralogies that require a variety of



tools to optimize, if I could say it that way, of



which our flotation mill is one of those tools.



Q. One. So essentially, we're getting to my



point. My point is that the mill that exists is



economically efficient for producing marketable



copper --



A. Absolutely.



Q. -- from a portion of the reference but not



all of the reserves?



A. Absolutely.



Q. And if you were to develop an actual



operation for this property, would you expect that



another type of mill would also be eventually used?



A. I would -- there's a variety of



approaches, and if I could describe those approaches



as there are surgical instruments that one might use



if one was trying to optimize the last percentage of



what is in the ground on our properties. There are



other approaches where surgical approaches are



riskier than what I would call a sledgehammer type of



approach, which can be less risky, but it produces



a -- a lower -- a -- it might have less risk



56

associated with it, but it's also going to have a



lower -- it's not optimizing those resources. And



those two approaches are both perfectly valid.



Q. I guess all I'm really trying to get at or



to understand is, to operate on the property, you



would expect that there would be substantial



additional capital expenditures beyond just that



mill?



A. Yes, I would.



Q. Do you have any -- has anybody done any



work to identify -- has the planning gone to the



point where people have identified what an



appropriate capital budget would be --



A. Yes.



Q. -- to get us up and running?



A. Yes.



Q. And how much money are we talking about?



A. Again, it's a very -- it's a very



difficult question to answer insofar as we've



identified virtually every tool that you might need



and what the cost would be of those tools. And we've



identified investor groups that would -- depending on



their own risk profile, would take -- you know, would



take a particular approach. And so, yes, I think we



have. We've certainly corralled it down to -- I



57

believe the answer more or less is yes.



Q. And how much money are we talking about?



A. Well, it -- it -- it varies. You could --



from 90 million down to -- down to 20, and.



Q. And just to make the mill that's currently



on-site operational, how much capital outlay would be



required for that?



A. We've estimated approximately 20 million,



and that would include some -- a great deal of



testing and resource work as well at the same time if



that particular approach was taken. Remember, that's



not --



Q. Right.



A. -- necessarily --



Q. And I take it your view is taking that



approach would not be maximizing the economic return



from the resources on the property?



A. Well, I think that a lot of people may



look at it as I'd rather minimize risk, and therefore



utilize the mill in somewhat of a different way. I



mean, one could say, let's leach everything. We



don't care, so get the last bit of this, that or the



other out and that's what I call the sledgehammer



previous, just leach everything, it's very --



Q. That would be the lowest risk return



58

approach?



A. It's the lowest risk but your return is



excellent. If you were Newmont Mining, you would



probably not take that approach because you feel



you're surgeons are more capable.



Q. All right. Let's take a look at paragraph



10 of the settlement agreement.



A. I want to emphasize also those were very



rough. I was giving you very rough numbers.



Q. I understand.



A. They were not meant to be precise.



10(a), is that what you asked me to look



at?



Q. Well, I'm just looking at 10 generally.



So paragraph 10 contemplates that there's going to be



a foreclosure sale that will occur on March 1st



unless one of two events occur. Is that a fair



summary, just to get us some background?



A. Yes, sir. I'm sorry. Do you mind if I go



use the men's room.



Q. No, please.



A. I should have probably done that when you



went on your break.



(Recess from 12:26 p.m. to 12:42 p.m.) .



(By Mr. Crouch) All right, Mr. Bryan, I'd asked you



59

to look at paragraph 10, and I think we essentially



agreed this -- this paragraph sets forth a



foreclosure sale can occur on or after March 1 unless



one of two things happens. I want to actually go to



the second one first. Putting aside a small -- have



you ever been involved in any other small business



cases in bankruptcy?



A. I never really distinguished -- I'm not



sure what you mean by that.



Q. All right. Well, let me just ask you



this: There's been no plan proposed in this



bankruptcy, correct?



A. No plan had been -- no disclosure



statement or plan has been filed.



Q. What is the shortest amount of time in any



bankruptcy that you've been involved from the time a



disclosure was -- a plan and disclosure statement was



filed until there was plan confirmation?



THE WITNESS: Pretty fast. October 1,



December -- November 30.



MR. BRILL: 60 days.



THE WITNESS: Yeah, 60 days. That wasn't



the fastest.



(A discussion was held off the record.)



THE WITNESS: I would say -- did you ask



60

what was the fastest time?



Q. (By Mr. Crouch) In the filing of a plan



and disclosure statement until confirmation.



A. Less than 60 days.



Q. How much less than 60 days?



A. A little.



Q. Well, the reason I ask is, of course,



because we're 49 days from March 1st. Wait. Excuse



me. We're 18 -- 18 days from March 1st.



A. Right.



Q. We're not going to confirm a plan prior to



March 1st, are we?



A. No.



Q. So B is meaningless? I mean it might have



had some meaning back in December but it has no



meaning anymore?



A. Well, I don't think it's meaningless.



Q. Well, nonetheless, you agree with me



there's no way that we're going to get a plan



confirmed by March 1?



A. No, I -- I agree with that.



Q. All right.



A. But --



Q. That's why I thought that would be the



easy one. Now let's go back to (a).



61

You keep saying but?



A. Well, I don't know that these dates are



still the dates haven't been modified by subsequent



agreement, so -- I don't think these dates are



necessarily --



MR. BRILL: Those dates were modified by



the amended agreement that was filed yesterday, if



that's what you're trying to say.



THE WITNESS: Right. So I don't think



it's really relevant.



Q. What are - what are the dates filed in



the amended agreement filed yesterday?



THE WITNESS: They're extended by 60 days.



(By Mr. Crouch) So we're now -- 60 -- 78 days away



from --



A. Right.



Q. -- the trigger date?



A. Right.



Q. Have you ever had a plan confirmed where



the plan was seriously contested in less than 60



days?



A. Yes.



Q. How --



A. In every way whatsoever --



Q. How many --



62

A. -- it was contested.



Q. How many times?



A. Twice in recent.



Q. No. I want to ask about your entire



career?



A. I can't say --



Q. Any more than two?



A. I can't say. I can't say for many of



the -- I've never examined that particular parameter,



you know, and looked at it from that parameter, so I



couldn't say. I know of two offhand.



Q. So as we sit here today, in 25 years of



doing this, you can think of two?



A. I can think of two in very recent history.



Q. All right. Tell me about those two.



A. Well, Astrata was a highly contested case



in Nevada, which was confirmed on December 1st of



2009, and we filed --



MR. BRILL: Actually, December 14th,



December 15th.



THE WITNESS: It was the effective date.



The confirmation date was the 1st of December and we



had filed our plan I think just after October 1st.



(By Mr. Crouch) What kind of business was Astrata?



A. It was a company that was in



63

mining-related technology extensively used in mining



operations globally.



Q. What were the value of its assets, if you



know?



A. The investor -- whatever value the



investor invested, about $17 million in the -- new



money was injected it would the company.



Q. And what was the other case?



A. Setlon Corp, which was --



(An attorney-witness discussion was held



off the record.)



THE WITNESS: Oh, 360 Global, which was a



highly contested case in -- again, in Nevada. And I



can't give you the date. Similar time frame,



similar -- October -- actually, very similar in that



it was probably filed in October and confirmed on



December 1st by -- in 2007 or '08.



Q. And what was the nature of that business?



A. That was in the -- it was a real estate



mining -- real estate, mining property, vacation



property, brokerage slash -- it was as conglomeration



of different things unrelated -- basically unrelated



investment company.



Q. In those two cases was the hearing on the



disclosure statement and plan consolidated?



64

A. Yes, I believe they were consolidated.



Q. Because you would agree with me that it



would be next to impossible to do it in less than 60



days if they weren't consolidated?



A. It would certainly be more difficult.



Q. You're not going to give me next to



impossible?



A. I don't know how to define those two



terms. We may be close in our definitions.



Q. Would you agree that it's unrealistic to



get a plan confirmed in less than 60 --



A. I certainly wouldn't have expected to do



that.



Q. All right. Was the funding in place



for -- in those two cases prior to the plan being



filed?



A. They were quite different in their -- in



how the plan was organized. In one of them, the



funding was in place, and in the other, the buyer was



in place.



Q. And in this case, we don't have either



funding or a buyer in place, do we?



A. I think -- well, I do think we have a --



Q. Putting aside Altus?



A. Right.



65

Q. Putting aside the deal that's on the



table?



A. Well, but that's like putting aside the



funding that's in place. I believe that that is very



close foe being the funding in lays.



Q. I'm talking about the prospects about a



party other than Altus to become involved?



A. I -- I think this process is a much



shorter process than one would expect, having been



out in the marketplace recently, I think this is a



much shorter process that I even would have expected



given the demand for these resources. Copper prices



are up 50 percent since we filed for Chapter 11, and



this is a hot commodity.



Q. So what is it in your recent experience



that tells you that this is going to be a much



shorter process. Have you had any much shorter



processes?



A. Well, I've -- I've been meeting with



potential investors. I've been meeting with funders.



You know, we've been meeting with potential funders



of the plan, aside from Altus to be sure that we have



a backup. And -- and those meetings have been



very -- have given me a lot of comfort as to what the



market looks like, and our firm is now very actively



66

marketing.



Q. Well, when you say you're very actively



marketing, what have you done in the last 30 days to



market?



A. We probably -- we've -- we've got a -- a



book that we now have developed pretty much our



base -- base case and --



Q. Is this the same book that was filed with



the court last year?



A. No.



Q. Okay.



A. No. We've really created a business



summary -- a plan of reorganization summary and



business summary such that we can seek investors who



would fund and we can approach people and give them a



good initial concept of our business and its -- and



the nature of it and the prospect the for it.



Q. All right. First of all, do we have the



book? We have the book?



MS. HUNT: I don't know about a book.



(By Mr. Crouch) Do we have the book?



A. I don't know that you -- I don't know who



has the book or not.



MS. HUNT: Well, I guess that's a question



I have is who have you given the book to?



67

MR. CROUCH: That's where I'm going. We



don't have the book. I know that.



MS. HUNT: Have you given it to the Equity



Committee?



THE WITNESS: No, I don't believe we have.



The -- and to some extent, the -- you know, the



book -- the book is a misnomer in and of itself. You



know, the variations of how to approach these



resources varies -- there's a high degree of



variability to how strategic and financial and even



amongst the financial investors how they approach



these resources, and therefore, that has some impact



on the book kind of being -- kind of going through a



metamorphosis as to its --



(By Mr. Crouch) You've been handing out material,



and the material has changed over time?



A. Correct. The material changes, as it does



in most cases.



Q. So who have you given -- who have you



given the book to that has expressed interest?



A. We've really -- we've really finished the



book in the last ten days -- or let's say, three,



four weeks, variations of the book, and we continue



to create more scenarios as they're demanded. And



I'd say it's gone out to a list of eight to ten



68

groups thus far.



Q. All right. When you say eight to ten



groups, you're talking about investment --



A. Correct, a variety of strategic and -- and



I could provide a list. I can't give you a list



right here now.



Q. And that's happened in the last ten days?



A. I'd say it's even longer than that, maybe



30.



Q. And have any --



A. First variations of the book might have



been done 30 days.



Q. And have any -- well, how did you decide



which eight or ten to send it to?



A. Well, we've been -- you know, we have a --



you know, we have sort of an extended group of



relationships in which we would -- and we have a



database, as I've said before, of firms that we would



go to to -- that have -- that have either -- invested



in this type of resource before.



Q. And is it your expectation that you're



going to be sending it to more people, or do you



think you've --



A. Yes.



Q. How many more and when?



69

A. As soon as practical. I would think



within the next week it might go to 30 more.



Q. And have any of those eight or ten that



you've already sent it to expressed any further



interest?



A. Yes, they have.



Q. And who has expressed an interest?



A. I'd have to go back and look at names.



Specifically a group, private equity group in



Hong Kong. That is why I went there. And they're



called Fortune Fund, and they have expressed an



interest immediately, and --



Q. Do you have anything in writing from them



that expresses interest?



A. Only an NDA, and I went out there the day



before Chinese New Year, and it's really just two



days ago --



Q. Right.



A. -- which is more like our Christmas



holiday. So I wanted to be sure to go there before



that period started and take a -- take the



temperature of that marketplace so that I didn't have



to wait until the 20th of February.



Q. Now, this -- I'm sorry. The name of it



was Fortune --



70

A. Fortune Fund.



Q. Fortune Fund in Hong Kong.



Had you sent the book prior to you going



out there?



A. Yes.



Q. And did they solicit or ask you to come



out --



A. Yes.



Q. -- in response to looking at the book?



A. Yes.



Q. Anybody besides them?



A. They've got a number of funds and a number



of mining groups that they specifically work with of



which two of those have expressed interest.



Q. Okay. So the Fortune Fund is -- in and of



itself, that's a group of other --



A. That's a private equity group, and their



concept is really to, you know, bring in a Chinese --



a Chinese buyer for the output of this facility and



to bring in the private equity investors that would



therefore also fund it. And they would expect to



have as one of their partners a group with very



specific mining expertise, and the groups I met with



out there were very specific copper-related and



copper-owning and copper-mining companies.



71

Q. And did you tell them that -- well, at the



time you went out there that the deadline was



March 1? What did you tell them about how quickly



they would have to move?



A. Oh, you notice, we said that they had to



move very quickly. We did -- we really at that point



in time -- we've had a pretty good understanding that



these dates would be extended. We had the -- we had



assurances that these dates would be extended so --



but I did indicate to them not that these dates



weren't the important factor, it's a competitive



marketplace that would force them to act quickly.



Q. Well, notwithstanding this competitive



marketplace, what you've got is one trip to Hong Kong



where they said they've got two groups of investors



that might be interested?



A. Well -- yeah. Okay. Yeah --



Q. I mean, that's where we are, right?



A. Right. But we're immediately reaching out



to others as well, and we will -- we will saturate.



Q. And did they say anything about whether or



not they'd be able to get a deal done in 60 days?



A. Yes. They indicated --



Q. What did they say?



A. -- that they could.



72

Q. Who was the --



A. It's an attractive asset with attractive



resources in an attractive market.



Q. Which -- who is the principal person that



you were dealing with?



A. The CEO of Fortune and --



Q. Who's name is --



A. I'd have to look.



Q. It's a Chinese name and you have



difficulty remembering it, I presume?



A. Yeah.



Q. But you have his contact information?



A. Of course. And --



Q. I guess my question is why didn't you



saturate the market 60 days ago?



A. Because we did not have enough -- we



believed that it was important to -- we really need



the materials, and also, we didn't have -- there was



no way to go to the marketplace without having, I



mean, an agreement where somebody felt like, okay, I



know what I have to pay. You can't go to a



marketplace and say it's a completely unknown number.



So we really needed -- you have to have this kind of



an agreement in place before you can even approach



the investment community.



73

Q. Okay. What is the number they would have



to pay?



A. Of -- well, you divide it into --



Q. No. I mean under your understanding of



the settlement agreement, what's the number they have



to pay?



A. Well, at least that gives you a -- it



gives you a firm knowledge of what you'd have to pay



for the secured loan portion, and that is a major --



you know, with 36 -- with as litigious and as



contentious and as difficult as this has been, that



certainly represents what I consider to be the most



difficult stumbling block to get past,



notwithstanding the fact that maybe I underestimated



how difficult the rest of the credit classes are



going to be.



Q. Well, I'm just going to come back and ask



the question, then. What is the number that they



have to pay?



A. Again, this gives a firm number for people



to buy out the secured loan portions. The -- in an



auction process, I've -- I need to -- I need to have



a number of -- I need to start an auction process --



we are starting conducting an auction process here to



see where the -- where that number actually comes out



74

as what will go towards the prepetition and



postpetition debt and what those structures would be.



I know one number now that was an extremely difficult



number to obtain, $15 million. So it -- it takes



three categories of a class -- whatever you want to



call them, three classes of creditors, and that I



know have firm -- I have a pretty firm understanding



and I've got negotiations that we're conducting with



Altus as to what they're offering other classes. And



that's my baseline and my job is to improve on that



and get the maximum value that I can can.



Q. But in addition to the $15 million, which



is 14 and a half plus an amount no greater than



500,000 for legal and other expenses -- correct?



That's where you're getting the 15?



A. Correct, exactly.



Q. There's an allowed claim. The settlement



agreement allows a claim, right?



A. In what regard? I'm sorry.



Q. Well, isn't it part --



MR. BRILL: Wait, John. Wait for him to



finish the question.



(By Mr. Crouch) The settlement agreement doesn't



provide for it, the motion that is pending to approve



the settlement agreement provides for an allowed



75

claim, correct?



A. That's correct.



MR. BRILL: In connection with the term



sheet.



THE WITNESS: Correct. Correct. So not



really related as such to this -- it's not in this



document, if that's what you want.



(By Mr. Crouch) Have you had any discussions with



Mr. Richards about whether he has any intention of



proposing a plan?



A. Yes, I have.



Q. And what has he said?



A. He has said that he does intend to propose



a plan.



Q. Has he told you what the structure of that



plan would be?



A. He's told me that he's in -- been in



negotiations with the unsecured creditor group. As



to what that -- an amount of cash and a note, how



that might be structured with that class, and he's



indicated he's been, as far as I'm concerned, doing



very, very earnest negotiations to try to put



together an agreement.



(An attorney-witness discussion was held



off the record.)



76

(By Mr. Crouch) However, there's nothing in these



documents that commits Altus to proposing a plan.



A. In this document? I don't know which



document you're referring to.



Q. In any document. I mean, Altus has not



committed to proposing a plan.



A. Well, committed to what?



Q. Committed to proposing a plan. Altus can,



if they want to, foreclose if one of these other two



events don't occur.



A. Okay. The existing lenders can foreclose.



Q. I mean, existing lenders can foreclose.



A. Yeah, the existing lenders can foreclose



if Altus does not go forward.



Q. But there's nothing that commits Altus to



going forward -- I'm sorry. I misspoke. There's



nothing that commits Altus to proposing a plan?



A. There's nothing -- well, there's --



there's -- there's no agreement in place with all the



classes from which a plan could even be written right



now, so I don't know what they could commit to today.



I think they are as committed as one can possibly be



to come in and bring -- and reorganize this debtor.



And I've had a lot of experience with a lot of



investors. Altus has been a -- has -- has been very



77

open about their intentions, and I believe that they



are -- and I believe they are committed -- I don't



know how you want to describe that -- to proposing a



plan, reorganizing this debtor and maximizing the



value of this estate. I do not believe that they are



intending on foreclosing or have indicated such to me



in any way, so I don't -- so I believe they are very



earnestly going forward to put all of their funding



in place, all the things that they require, and I am



particularly impressed with the speed and the manner



and the honesty and integrity with which they're



moving forward.



Q. Were you involved in the decision to bring



suit against Bridge Loan Capital Fund?



A. Yes, I was.



Q. And what was the -- what's the basis of



that suit, in your understanding?



A. Well, the basis of that suit is a variety



of -- of errors -- I'd rather not go into all the



details. And, again, I would like to invoke, again,



privilege with special litigation counsel not to give



too much information on that as opposed to -- because



it's --



Q. Let me ask you this: What's your



understanding of the relief that the debtors were



78

hoping to obtain in filing that suit?



A. Well --



Q. What were you trying to get?



A. If you remember, the -- these -- those



suits were the result of assignments that took place,



and those assignments were assignments from lenders.



So we signed assignment agreements with several



lenders because they really were the damaged parties,



and therefore, the amounts that the debtor itself



would have recovered in this were quite low because



they were third-party assignments, and a vast



majority of those proceeds would have gone to those



plaintiffs, if I'm -- no, they're not the plaintiff.



I guess in an assigned transaction. I don't want to



use -- try to use technical that's beyond my pay



scale.



But if you understand what I'm saying,



those -- this was considered the best business



judgment at the time that -- and this became part of



the negotiation. However, I didn't believer that the



debtor itself was giving up very much because our



actual proceeds from that litigation would have been



almost insignificant.



Q. This provision, subparagraph (a), provides



for delivery to the first lien lenders of 5 percent



79

of the voting equity interests?



A. What page are you on?



Q. I'm still right here, 10(a).



A. Um-hum (affirmative).



Q. We just talked about (v), dismissal of the



pending adversary. Now, (iv), which should really be



(vi), says, "delivery to the First Lien Lenders of 5%



of the voting equity interests in any new entity that



becomes the owner..."



A. Um-hum (affirmative)



Q. Were you involved in the negotiation of



that term?



A. To the extent that I worked with counsel



to negotiate that term.



Q. In your discussion, did this term come --



did this term come up at all in your discussions in



Hong Kong?



A. Yes. In our -- my discussions in Hong



Kong, I disclosed -- in fact, presented that there



would -- that their investment could possibly not be



for 100 percent of the company.



Q. Did they have any reaction to that?



A. Yes. Well, some investors, a majority of



them, expressed a -- a -- expressed that that was an



attractive exclusion, they would like to have some



80

U.S. participation.



Q. So they had no problem with it?



A. Not everyone has no problem -- you can't



categorically -- part of our screening process was to



make sure that anybody who's absolutely -- you know,



has limitation in their fund from loaning less than a



hundred percent, you know, we wanted to make sure



that we are targeting, you know, firms and principals



and strategic and financial investors that are



capable of having interests that are less than



100 percent.



Q. Well, I guess that's why I was asking.



There's a difference between wanting to have some



U.S. investment, for whatever reason, and being



forced into bed with the secured lenders at a



5 percent equity interest.



A. This doesn't necessarily force them into



bed with anybody. This could be placed into --



matter of fact, it would be my -- I would anticipate



that this interest would be placed in a liquidation



trust so that there would be a trust relationship,



and the beneficiaries of the trust might be the first



lien lenders. That is one possible way a plan could



be proposed such that --



Q. I'm not following that.



81

MR. BRILL: I can't follow that either.



(By Mr. Crouch) There's a difference between giving



them a 5 percent equity interest and giving them a



share of a liquidating trust. I mean, giving them --



A. This does not state specifically that they



will be the direct holders. That's all I'm saying.



Q. All right. I'm still not following you..



which could be me and not you. But as I understand



this, this says, "delivery to the First Lien Lenders



of 5% of the voting equity interests in any new



entity that becomes the owner," which to me means



they're going to hold 5 percent of the voting stock



of any new owner of the assets.



A. Right. The beneficial owners -- there can



be bifurcations -- I mean, there's no -- I don't want



to debate, you know, how one could structure a plan,



so -- because I don't think that's really material.



The point is the bottom line is this was the result



of the negotiations we had with the lender group as a



whole, and -- and this was the deal that was -- that



was done, that they would be the beneficial owners or



direct owners of 5 percent of the voting equity



interests under certain circumstances.



Q. Okay. Has the -- I'll ask the question,



but this will almost certainly -- I -- has the



82

legality of whether or not by a motion you can



require that any eventual plan provides for a



5 percent equity interest to the secured lenders come



up? In other words, is it even legal? Can you do



that? And I'm only ask if it's come up.



A. Well, obviously it's -- you know, the --



until a -- when a plan is -- this --



MR. BRILL: Johnny, just answer the



question. He asked if it's come up.



(By Mr. Crouch) Has it come up?



MR. BRILL: Has it come up?



THE WITNESS: No.



(By Mr. Crouch) All right.



A. Sorry.



Q. Paragraph 11 talks about the prospect of



extending the foreclosure deadline for the payment of



$150,000 cash. And I recognize in the context of



what we've been talking about that's not necessarily



a great deal of money, but as I understand it, the



debtor, as we sit here today, doesn't have $150,000



cash to do that, do they?



A. No.



Q. What was the -- did you have something in



mind in providing for this provision for an



extension? I mean, where would the $150,000 come



83

from?



A. Well, again, if a Altus/Empire or other



party was purchasing those and needed a -- an



extension, it could be -- to provide for such a thing



was considered to be important to counsel, and that



was their recommendation, that we at least have a



provision for that.



Q. Is your understanding of this provision



essentially if somebody needs -- if somebody can't



get this all done by the trigger date, they could



fund $150,000 --



A. Correct.



Q. -- to extend it?



A. Correct.



Q. I mean, it's not really contemplated that



the debtor would have an interest in extending it in



and of itself, I mean, outside the context of



somebody -- outside the context of a surety coming



in --



A. I can't -- well, I don't want to eliminate



the debtor. I don't want to eliminate any party from



possibly being able to do that. The unsecured



creditors could do it.



MR. CROUCH: Well, we're a couple minutes



before 1:30, and this is as good a time as any to



84

stop.



(Recess from 1:24 p.m.