Beaver Bolt Inc. - Page 4

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            shares of petitioner's stock from petitioner.  After these                                  
            transactions, Grecco, Colbert, and Tiedemann each owned 50 shares                           
            of petitioner's stock, and Grecco was president, Tiedemann was                              
            vice president, and Colbert was secretary/treasurer.                                        
            2.    The Stock Purchase Agreement                                                          
                  On November 6, 1986, Grecco, Colbert, and Tiedemann signed                            
            a stock purchase agreement with petitioner.  The agreement gave                             
            petitioner the option to repurchase its stock owned by a                                    
            terminated employee.  The agreement included a formula that set                             
            the purchase price for the stock.  If petitioner exercised the                              
            option, the employee/stockholder would transfer the stock to                                
            petitioner and would be bound by a covenant not to compete for                              
            3 years.  The agreement provided that payments would be reduced                             
            by 25 percent if a party breached the covenant.                                             
                  On February 18, 1988, Grecco transferred her stock in                                 
            petitioner to herself, as Trustee of the Grecco Trust, a                                    
            revocable living trust.  Colbert, Tiedemann, and petitioner                                 
            consented to the transfer.                                                                  
            3.    Grecco's Departure From Petitioner                                                    
                  In early June 1988, Colbert and Tiedemann told Grecco that                            
            they were concerned about her management style.  They thought                               
            that she lacked the respect of some of the employees, and that                              
            she was habitually late to work.  Colbert thought that she had                              
            become paranoid and was too critical of the other employees.  On                            





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