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5. Colbert's Departure From Petitioner and Petitioner's
Prepayment of Amounts It Owed to Grecco Under the
Redemption Agreement
In the fall of 1990, Colbert decided to withdraw from
petitioner to begin doing business as Viking Bolt in direct
competition with petitioner. This was about 2-1/2 years after
Grecco's covenant not to compete was in effect. Grecco sent
petitioner a letter dated October 26, 1990, stating that she
objected to the redemption of Colbert's stock based on paragraph
14 of the redemption agreement.3
Petitioner sought to prepay at a discount the amount it
owed on Grecco's covenant not to compete. By letter dated
November 13, 1990, Grecco said that she would agree to the
prepayment if her obligation not to compete ceased on December 1,
1990, instead of June 30, 1991. Petitioner did not agree to end
the covenant early. On February 14, 1991, petitioner prepaid the
entire amount it owed to Grecco and the Grecco Trust, without
discount or early release of the covenant. About 4-1/2 months
remained on the covenant.
3 Under par. 14 of the redemption agreement, until all
payments under the agreement have been made, petitioner must have
Grecco's written consent before taking various actions, including
reorganizing its corporate structure, except in the regular
course of business.
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