Brian L. and Carole J. Nahey - Page 5

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          such damages exceeded $5 million.  In its answer to the lawsuit,            
          Xerox asserted a counterclaim that Wehr wrongfully withheld                 
          payments to Xerox and demanded damages in the amount not yet paid.          
               Sometime in 1986 while discovery proceeded, a newly appointed          
          Xerox division president visited petitioner in Milwaukee and                
          proposed to settle Wehr's claim for $1.2 million, although he               
          indicated he could go as high as $2 million.  This offer was                
          rejected by petitioner.                                                     
               Throughout the course of the litigation, petitioner, in his            
          capacity as chief executive officer at Wehr, kept the board of              
          directors and Mr. Manegold (who was chairman of the board) informed         
          about the lawsuit as well as the proposed settlement and its                
          rejection.  Petitioner also informed Mr. Manegold that he believed          
          Wehr could recover as much as $10 million from Xerox.                       
          Petitioner's Acquisition of Wehr                                            
               During the fall of 1986, Mr. Manegold contacted petitioner and         
          inquired whether he was interested in purchasing Wehr's assets.             
          (Apparently, Mr. Manegold anticipated forthcoming changes in the            
          tax laws that made it advantageous for him and his family to sell           
          Wehr prior to the end of 1986.)  Mr. Manegold's asking price was in         
          excess of $100 million, which required petitioner to seek                   
          financing.                                                                  
               Petitioner spoke with investment banks about assisting in the          
          purchase of Wehr.  The investment banks offered to finance the              





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