hereinafter referred to, he will be in a position to procure, effect and cause to be executed the contract described in paragraph numbered "2" hereinafter set forth.

Said "SHAFFER" has made the aforesaid representation for the purpose of inducing the "COMPANY" to buy 2037.4 tons of newsprint of the 2,500 tons herein described at the price of One Hundred Thirty-five Dollars ($135.00) per ton, F. O. B. Sartel, Minnesota, and of procuring for the "PAPER COMPANY" a contract for the sale of newsprint upon advantageous terms suitable and agreeable to the "PAPER COMPANY."

The "COMPANY" relying upon the aforesaid representations is desirous of purchasing from "SHAFFER" said newsprint paper and an interest in said "PAPER COMPANY" upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the sum of One Dollar ($1.00) the receipt of which is hereby mutually acknowledged and in further consideration of the mutual promises of the parties hereinafter set forth, it is mutually agreed as follows:

1. Immediately upon the payment by the "COMPANY" of the sum of Two Hundred Seventy-five Thousand Dollars ($275,000.00) hereinafter stipulated, "SHAFFER" shall forthwith apply said payment in accordance with the provisions of said option agreement (Exhibit A) and do and perform such other acts and things as may be necessary to exercise said option in such manner as will secure to "SHAFFER" the full benefit of said option contract.

2. "SHAFFER" shall thereupon assume control of the management of said "PAPER COMPANY" to the end that said "PAPER COMPANY" shall immediately begin the performance of the provisions of this contract and of the contract provided for in paragraph “2” hereof.

[Here follows an agreement on the part of Shaffer to secure the sale and delivery to the Tribune Company by the Watab Pulp and Paper Company of 2,500 tons of standard white newsprint paper at an agreed price.]

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3. The "COMPANY" shall have and retain a first lien, upon "SHAFFER'S" equity in the stock of the "PAPER COMPANY" purchased under the terms of the option agreement (Exhibit A) until, (1) the newsprint paper herein contracted for to be sold and delivered to the "COMPANY" by the "PAPER COMPANY" has been completely delivered, or (2) the unearned balance, if any, of the said Two Hundred Seventy-five Thousand Dollars ($275,000.00) arising out of any failure to deliver the aforedescribed tonnage, has been refunded. 4. By way of additional and further consideration for the payment by the "COMPANY" to the said SHAFFER" of the sum of Two Hundred Seventy-five Thousand Dollars ($275,000.00) herein stipulated for, the said SHAFFER" agreed to transfer and assign to S. E. THOMASON, Business Manager of the "COMPANY", twenty-five per cent (25%) and to WARREN CURTIS, JR., President of The Ontario Paper Company, Seven and one-half per cent (72%) of his (SHAFFER'S) equity in the said "PAPER COMPANY" over and above the purchase price of its common and preferred stock and its outstanding bonds, and agrees to transfer to the said S. E. THOMASON and WARREN CURTIS, JR., respectively, stock or other securities fully aggregating and representing such equity in the said "PAPER COMPANY" after so much of said stock or other securities as are necessarily employed in financing the purchase price of the present stock and bonds of the "PAPER COMPANY" has been finally determined and paid over. 5. It is the intention of the parties that "SHAFFER" will acquire possession of the common stock, preferred stock and outstanding bonds of the mill at

a price of approximately Two Million Three Hundred Thousand Dollars ($2,300,000.00). To obtain this sum "SHAFFER" will procure securities of the "CoмPANY" to be issued and sold. It is the equity in the "COMPANY" over and above this amount, which is referred to. Said THOMASON is to assist in the financing of said securities to the best of his ability.

8. In consideration of the aforesaid representations and covenants of the said "SHAFFER", the "COMPANY" agrees to deliver to the said "SHAFFER" its check in the sum of Two Hundred Seventy-five Thousand Dollars ($275,000.00) to the order of the Continental and Commercial Trust & Savings Bank as Trustee under the terms of the option agreement (Exhibit A), and thereupon the said "SHAFFER" agrees to do and perform all acts necessary to the full and complete performance by him of the terms of the said option (Exhibit A) and the terms and conditions hereof.

Thomason assigned all of his interest under the contract to the Tribune Company. In accordance with the contract the Tribune Company advanced $275,000 to Shaffer, which, with other funds supplied by Shaffer, was applied on the 25 per cent payment of the purchase price of the stock under option due November 15, 1919. Shaffer paid $426,000 and on the same date gave his notes in the aggregate sum of $1,269,900, with interest at the rate of 6 per cent. per annum, payable on or before 4 months thereafter, in payment of the balance due on the stock. The notes, with the stock as collateral, were deposited with the Continental and Commercial Trust & Savings Bank of Chicago, Illinois, as trustee.

During his negotiations Shaffer had been assured that the remaining 15 per cent of the common stock of the old company could be purchased at $150 per share. This remaining outstanding stock consisted of 1,6462 shares of common and was owned or controlled by E. W. Decker of Minneapolis, who refused to sell for $150 a share. Shaffer, in December, 1919, purchased this block of stock for $265 a share or a total of $436,322.50. This made him the purchaser of all the outstanding capital stock of the old company except 652 shares of common stock which were held in the treasury of the corporation.

Shaffer and Town attempted to secure assistance from banks and investment houses in Chicago and made further negotiations with the Tribune Company for financing the payment of Shaffer's notes given in payment of the stock, but their efforts were unsuccessful. On account of his failure to finance the proposed deal successfully, Shaffer determined to convey his rights to his friend and associate, D. E. Town. To accomplish this, Shaffer made the following written assignment and transfer to Town:

Mr. D. E. TOWN,

CHICAGO, March 5, 1920.

DEAR SIR: I own or control the entire capital stock of the Watab Pulp & Paper Company. In payment for a portion of the stock I have given my notes for $1,269,900, plus interest, due March 15, 1920. I am unable to finance the

company at the present time. It would be exceedingly injurious to me if my notes, now with the Continental and Commercial Trust & Savings Bank, are not paid at maturity.

I will assign to you all of my stock and all of my interest in the Watab Pulp & Paper Company on condition-(1) You will see that my notes, now with the Continental and Commercial Trust and Savings Bank, aggregating $1,269,900. plus interest, are paid at maturity. (2) You will deliver to me a second security of some class of the refinanced company equivalent at par to all of the expense that I have incurred in connection with acquiring control of the Watab Company, plus an amount of the above described securities at par sufficient so that the market value of the securities I receive are equivalent to these expenses.

Yours truly,

JOHN C. SHAFFER.

For many years Town had known Lee Olwell, an official of the National City Company of New York, and on March 3, 1920, he wrote a letter to that Company presenting the proposition to it. In his letter to the National City Company, Town outlined and suggested a plan for a bond issue by the old company, secured by a first mortgage, to provide funds to retire then outstanding bonds of the old company and to liquidate in part the outstanding Shaffer notes. After investigation by the National City Company, it decided to advance the necessary funds to pay the Shaffer notes, but it was decided to organize a new corporation to take over and operate the properties of the old company, instead of financing the old company. The contract between Town and the National City Company looking to the financing of the purchase of the stock of the old company and the organization of the new company to take over its assets was in part as follows:

Whereas, Town now owns or controls $250,000 par amount of the preferred stock and $1,043,450 par amount of the common stock of the Watab Pulp & Paper Company, a corporation organized under the laws of Minnesota (hereinafter called the "Old Company "), being all of the issued and outstanding preferred and common stock of the Old Company; and

Whereas, John C. Shaffer has heretofore given his notes in the aggregate principal amount of $1,269,900 in payment of the balance of the purchase price of all of the preferred stock of the Old Company and a portion of the common stock thereof, which notes are dated November 15, 1919, and due March 15, 1920, at the Continental and Commercial Trust and Savings Bank, with interest at the rate of six per cent per annum from date. The preferred and common stock of the Old Company for which said notes are given as payment has been deposited with the Continental and Commercial Trust and Savings Bank as collateral for said notes; and

Whereas, the said John C. Shaffer has agreed to assign to Town all his interest in and to the preferred and common stock of the Old Company on condition that Town will secure the payment of the said notes of John C. Shaffer, aggregating $1,269,900 and interest, when the same mature on March 15, 1920; and Whereas, the City Company is willing to finance Town in consideration of the delivery to it of certain securities of the corporation hereinafter referred to; now, therefore,

This Agreement Witnesseth:

1. The City Company will loan to Town on March 15, 1920, in time to take up the said notes to John C. Shaffer above referred to, the sum of One Million Two Hundred Sixty-nine Thousand Nine Hundred Dollars ($1,269,900) plus interest on said sum from November 15, 1919, at six per cent per annum, being a total sum of One Million Two Hundred Ninety-five Thousand Two Hundred Ninety-eight Dollars ($1,295,298).

2. Town will give to said Company his non-negotiable note in the principal amount of One Million Two Hundred Ninety-five Thousand Two Hundred Ninety-eight Dollars ($1,295,298), payable thirty (30) days after demand, with interest at six (6) per cent per annum. Town will cause to be delivered to the City Company as collateral for his note all of the issued and outstanding preferred and common stock of the Old Company, free from any and all liens or legal or equitable claims. The City Company will cause the certificates for stock of the Old Company, so delivered to it as collateral, to be transferred into the names of nominees of Town. Town will cause the nominees to endorse the certificates in blank and redeliver them to the City Company.

3. As soon as Town is in control of the Old Company he will cause the Old Company to redeem and retire the $250,000 of its preferred stock at par, which amount shall be paid to and received by the City Company, and applied by it as a credit on Town's note for $1,295,298.

4. Town will cause to be organized under the laws of Delaware a corporation to be known as the Watab Paper Company (hereinafter called the "New Company "), which shall be capitalized as follows: [Here follows a statement of proposed capitalization.]

5. Town will cause to be transferred to the New Company all of the assets, rights, and good will of the Old Company upon the assumption by the New Company of all of the liabilities of the Old Company, including the Old Company's liability under its mortgage dated February 10, 1912, under which there are now outstanding $325,000 principal amount of bonds.

6. Upon the transfer of the property of the Old Company to the New Company, Town will cause the New Company to deliver:

(a) To the City Company $1,162,000 par amount of the First Preferred Stock, $100,000 par amount of the Second Preferred Stock, and $500,000 par amount of the Common Stock of the New Company;

(b) To John C. Shaffer $1,075,000 par amount of the Second Preferred Stock;

(c) To Town $1,000,000 par amount of the Common Stock.

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7. Upon receipt of the City Company of the securities referred to in the foregoing paragraph 6, the City Company will cancel and deliver to Town his said note for $1,295,298, together with any interest accrued thereon, and the City Company will deliver to the New Company all of the stock of the Old Company in the hands of the City Company as collateral to said note.

8. The City Company will not demand payment of Town's note for $1,295,298 or interest thereon until, in the judgment of the City Company, Town has had reasonable opportunity to perform his obligations under this contract.

*

The contract of November 15, 1919, between Shaffer and the Tribune Company, hereinbefore set out, provided that the old company would make a contract to sell and deliver to the Tribune Com

pany 2,500 tons of newsprint paper at $135 per ton, and that Shaffer would transfer to S. E. Thomason, business manager of the Tribune and Warren Curtis, Jr., certain percentages of his equity in the stock of the old company. The old company never signed the contract for the sale of the 2,500 tons of paper and no transfer of interest in the stock of the old company was made by Shaffer to Thomason and Curtis as agreed upon. Only 1,123 tons of paper were delivered to the Tribune Company and its subsidiaries, which resulted in controversies between the Tribune, and Shaffer and the old company. In order to protect Shaffer from liability and to settle further controversy, John C. Shaffer, Town and Carroll Shaffer (son of John C. Shaffer) on March 15, 1920, entered into the following written agreement:

That Whereas, John C. Shaffer has heretofore assigned to D. E. Town all of his interest in certain stock of the Watab Pulp & Paper Company, subject to the conditions mentioned in said assignment; and

Whereas, D. E. Town will control two-thirds of the issued common stock of a corporation to be organized to take over the property of the Watab Pulp & Paper Company (hereinafter called the "New Company "), now therefore This Agreement Witnesseth:

1. D. E. Town will cause to be delivered to Carroll Shaffer one-half of any common stock that D. E. Town may receive in the New Company.

2. D. E. Town and Carroll Shaffer, to the extent of the value of their ownership in the common stock of the New Company, agree to protect and save harmless John C. Shaffer against any claim by the Tribune Company, by S. E. Thomason, or by Warren Curtis, Jr., to any share in John C. Shaffer's equity in the said corporation to be organized, and against any claim of the Tribune Company under the contract between John C. Shaffer and the Tribune Company dated November 15, 1919.

On March 15, 1920, Town made a tender for John C. Shaffer to the Tribune Company of $185,895 in settlement of all claims against Shaffer. This amount represented the difference in the value of the newsprint agreed to be delivered by Shaffer and the amount which had been delivered under the Shaffer-Tribune contract. The tender was refused by the Tribune Company because there was no stock offered with it. The Tribune Company contended it was entitled to some common stock under the original agreement.

To keep the tender good the money was deposited in the Continental and Commercial Trust & Savings Bank to the credit of the Tribune Company and subject to its order. On March 29, 1920, the Tribune Company accepted the sum tendered and on April 9, 1920, the Tribune Company, the old company, John C. Shaffer, Town, and Thomason entered into a written agreement of settlement, which provided, among other things, as follows:

FIRST: Upon the execution and delivery of this agreement WATAB shall execute and deliver to THE TRIBUNE its contract with the Ontario Paper Com