Claymont Investments, Inc., As Successor in Interest to New CCI, Inc. and Subsidiaries - Page 5

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          (Deluxe); Metrocolor; and CFI, a division of Republic Pictures              
               A.   The Preacquisition Review                                         
               Prior to the acquisition, Carlton hired Coopers & Lybrand              
          (C&L) to value Technicolor’s assets.  C&L allocated, pursuant to            
          section 1.338(b)-2T, Temporary Income Tax Regs., 51 Fed. Reg.               
          3591 (Jan. 29, 1986), in effect during 1988, $619,194,000 of the            
          proposed purchase price to the basis of Technicolor’s assets.               
          Section 1.338(b)-2T, Temporary Income Tax Regs., supra, required            
          that acquired assets be divided into four classes.  Class I                 
          assets are cash and cash equivalents.  Class II assets are                  
          certain liquid tangible assets including readily marketable                 
          securities.  Class III assets are all assets other than those in            
          classes I, II, and IV.  Class IV assets are intangible assets               
          (i.e., in the nature of goodwill and going concern value) not               
          allocated to class I, II, or III.  The basis allocated to each              
          successive class is based on the fair market value (FMV) of a               
          company’s assets.                                                           
               Because there were no class I or II assets, C&L allocated              
          the basis attributable to Technicolor’s assets first to class               
          III.  Class III consisted of Technicolor’s tangible assets,                 
          current assets (e.g., accounts receivable), investments in                  
          subsidiaries, and amortizable intangibles.  C&L then allocated              
          the remaining basis to class IV.                                            

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