Charles B. and Teresa A. Thompson, et al. - Page 20

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          a bachelor of science degree in industrial engineering from                 
          Oklahoma State University.                                                  
               Mr. Meade concludes that the covenants had, at best, a                 
          nominal value.  Mr. Meade first valued State Supply by using a              
          discounted future earnings method which calculates the present              
          value of a base level of earnings.  The starting point for Mr.              
          Meade's calculation is the base level of earnings of $850,000,              
          which he took from the initial credit memorandum prepared by the            
          bank.  The base number is not an historical earnings number but             
          simply the "base level of return * * * which was required by                
          financial institution [sic]" in order to make the acquisition               
          loan to the buyers.  Mr. Meade does not tell us why this number             
          has any significance or why it should form the basis of his                 
          calculations.  Mr. Meade concludes that State Supply's discounted           
          future earnings stream is worth $7,208,000.  He then adds to that           
          number the amount of State Supply's cash or cash equivalents in             
          excess of the amount deemed needed for this type of business                
          ($1.4 million) and arrives at a rounded value of $8.6 million as            
          the fair market value of State Supply.  Mr. Meade's entire                  
          analysis of the covenants' value is as follows:                             
               Consideration of the allocation to the covenants in                    
               regard to the fair market value of the stock [value of                 
               State Supply] when the net price paid for both stock                   
               and covenant[s] is $6.8 million [Mr. Meade's                           
               calculation of the cash required to purchase the stock                 
               and the discounted cost of the covenants] leaves, at                   
               best, a nominal value for allocation to the covenants.                 

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