Shedco, Inc. - Page 13

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          that Estes Co. was in a strong financial condition, and by the              
          previous loan history between Estes Co. and the plan.  He felt              
          comfortable about the plan's making the loan because of the                 
          demand feature in the note and the Wells Fargo line of credit.              
               When the loan was authorized, Mr. Shedd believed Estes Co.             
          maintained a proper ratio of land held as inventory to land held            
          for investment, a proper ratio of assets to liabilities, and a              
          proper ratio of current assets to current liabilities.  He                  
          believed that the demand feature provided sufficient liquidity              
          for the loan.                                                               
               Mr. Shedd did not consult with counsel or with the plan's              
          actuarial firm about making the loan before the plan lent the               
          money to Estes Co.  He would not have suggested the loan to Estes           
          Co. had he suspected that it would not be repaid.  When the loan            
          was made, Mr. Shedd believed that Estes Co. was creditworthy.               
          Mrs. Shedd concurred with Mr. Shedd's opinion that the loan would           
          be a good investment for the plan.  There was no connection with            
          termination of petitioner's management contract with Estes Co.              
          and the extension of the loan by the plan to Estes Co.                      
               During 1987, after speaking with the retirement portfolio              
          department of Merrill Lynch & Co., Inc., Mr. Shedd asked Estes              
          Co. to make periodic installment payments of principal on the               
          loan so that the plan could diversify into other investments.               
          Estes Co. orally agreed to make semiannual principal payments on            
          the note in the amount of $250,000, commencing March 1988 and               



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