Freres Lumber Co., Inc. - Page 11

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            high price contracts of the late 1970's and the early 1980's                                   
            before timber prices fell.                                                                     
            E.    Petitioner's Purchase of the Walker Entities' Assets                                     
                  1.     Events Leading to the Sale of the Walker Entities'                                
                  In 1987, D.C. Walker told Mary Walker that he was getting                                
            older and might like to do something else.  At that time, he had                               
            no plans for his future, but he was not ready to retire.  In                                   
            1987, the Freres family and D.C. Walker discussed a sale of the                                
            Walker entities, but did not agree.                                                            
                  In February 1988, D.C. Walker believed that a shortage of                                
            logs would cause trouble in the forest products industry in the                                
            future.  He believed the industry was beginning to decline and                                 
            that it would be a good time to sell the Walker entities.                                      
                  Petitioner wanted to buy the Walker entities at that time.                               
            Petitioner wanted to obtain a noncompetition agreement for D.C.                                
            Walker from the first time it expressed an interest in buying the                              
            Walker entities.  D.C. Walker handled the sale for the Walker                                  
            entities.  He had a price of $4.65 million in mind.  Petitioner                                
            agreed to that price without negotiations.  D.C. Walker did not                                
            care how the purchase price was allocated to the various assets                                
            and did not negotiate those allocations with petitioner.                                       
                  2.     Petitioner's Valuation of Assets                                                  
                  Without involvement by D.C. Walker, petitioner allocated the                             
            purchase price to the various assets.  Robert T. Freres, Robert                                

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