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On January 4, 1988, the company redeemed all of Poesch’s
common stock (the 1988 sale). The company redeemed Poesch’s
stock for $290 a share. That amount was to be paid in five equal
annual installments, with interest of 2 percent. Poesch died
prior to the trial of this case.
Redemption of Decedent’s Stock
Decedent died on July 28, 1990. Under the 1987 redemption
agreement, the company was obligated to purchase from decedent’s
estate sufficient shares to provide decedent’s executors with the
funds necessary to pay death taxes and certain other obligations.
Decedent’s assets, other than his shares in the company, had
substantially appreciated in value. To provide decedent’s
executors with the funds necessary to pay death taxes and other
expenses, the company was required to redeem all of decedent’s
shares. The company, however, was insufficiently liquid to pay
for all of those shares in a lump sum. Therefore, on April 28,
1991, the company and the estate entered into an agreement
amending the 1987 redemption agreement (the 1991 amendment). The
1991 amendment allows the company to make installment payments in
redemption of decedent’s shares.
The Sherman Appraisal
Respondent’s expert, Henry Sherman (Sherman), determined
that the aggregate value of decedent’s shares in the company on
January 28, 1991, was $4,580,000. Sherman determined that, on
that date, the value of each share of common, 4-percent
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