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3220 Jeremiah J. Kennedy, Cross Examination.
ting abroad. The volume of business that the Executive Committee transacted in the way of the purchase of the exchange property was so large as to menace it financially, particularly as it did not have the organization to properly handle and work the property.
Q. Mr. Kleine's exchanges were acquired by the General Film Company at the time it started in business, June 6, 1910? A. They were acquired on May 27th or May 28th, 1910, at a meeting of the Board of Directors.
Q. They were the first exchanges, or among the first exchanges acquired? A. They were.
Q. And in the purchase of those exchanges, you adopted a standard or a method for determining the value of the exchange? A. We did not.
Q. Well, what was this basis which you have just testified to? A. It was a basis used in making comparisons between property acquired and property not acquired in connection with Mr. Kleine's stipulation that if any property should be purchased later at a relatively higher price than was paid to him for similar property, such higher price should apply to the property that he sold. That forced the adoption, as I have stated before, of a basis of averaging prices according to the reels, regardless of the volume of business, the territory, or any other important factors in connection with such property. But that did not have anything to do whatever with the prices paid for such property as was purchased. In each case a separate estimate was made of the property offered for sale. Its value to the General Film Company was determined. All the factors relating — or affecting such value, were carefully considered, and in that way the purchase price was arrived at.
Q. When you bought Kleine's exchanges, you adopted some method of determining the value of his exchanges? A. There was no method adopted then or at any other time, except to fix a value upon such property, the same as a real estate expert fixes a value upon a building by examining it and considering its location, its possible earning power, future development, and the various other factors which have to do with values.
Q. At the time you had this conversation with Kloine, you and he and other Directors, all knew that the General