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FIA's assets. The proposal contemplated a purchase price premium
of $2 to $5 million above FIA's net asset value44 which, at the
time, was approximately $17.5 million. The proposal also stated
that NLI would pay FIA's $15 million intercompany debt to Federal.
By early February 1989, petitioner had decided it was willing
to pay only a $1 million premium above book value for FIA's
assets. Petitioner thereafter negotiated an additional price
reduction of $400,000 due to fluctuations in the bond market
(which increased the cost of funding the acquisition).
Finally, on March 31, 1989, Norwest Financial Resources
(NFR), another of petitioner's affiliates, entered into a purchase
agreement (the March Agreement) with FIA and Commercial in which
it agreed to acquire substantially all of FIA's receivables and
assets.45 NFR specifically agreed to acquire FIA's approximately
44 The term "net asset value" refers to the book value or
stockholders' equity of a company that appears on its balance
sheet. Net asset value is a reference for determining how much a
potential buyer might be willing to pay for assets on a going-
concern basis.
45 The March Agreement defines "Receivables" and "Assets"
as follows:
The term "Receivables" shall mean the operating leases
and the underlying equipment or other property subject
to such operating leases owned by the Company on the
Closing Date; the leasing receivables (including
leases, fair market value leases and direct finance
leases), conditional sale contracts, secured loans and
other commercial finance receivables of the Company on
(continued...)
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