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understanding of how the value of the machines was determined as
follows:
It was explained to me [by Maxfield]. How much I
understood about it I don't know, but I didn't know how
it got this valuation, how we got to this valuation,
and it was explained to me that, under this provision,
you could do this, and this provision, you could do
that.
* * * * * * *
As to the overall valuation, it didn't--I don't
think I questioned it, because to me the valuation was
based upon the projections of profit, that if you could
get this kind of profit out, the[n] a unique machine,
which is what I thought we were investing in, was worth
whatever they could [get] for it. So, I didn't analyze
the nuts and bolts of each machine.
Cohn understood that the potential economic returns were
dependent upon the price of oil. He spoke to Sann about the
price of oil after Sann had spoken to his contacts in the oil
business.
Cohn spent approximately 10 to 12 hours discussing the
investment with Maxfield, as well as Sann, Addington, Wible, and
Chuck Kellert (Kellert), another partner at Sann & Howe. He also
attended some of the firm meetings regarding the investment.
Cohn understood that Maxfield was satisfied with the offering
memorandum and tax opinion, but he could not recall Maxfield
mentioning the option of hiring an independent appraiser or
expert. He recalled that Wible spoke approvingly of his visit to
PI and that the others thought positively about the investment.
Cohn could not recall meeting Roberts. He understood that he
could expect to receive profits from the royalties in accordance
with the timetable set out in the offering memorandum.
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