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June 14, 1988, Colbert and Tiedemann proposed that Grecco resign
as president, take a 6-month paid leave of absence, and, at the
end of 5 months, decide how to proceed. Grecco did not accept
the proposal.
The board of directors met on June 16, 1988. At the
meeting, the board of directors elected Tiedemann secretary,
removed Grecco as president, and elected Colbert president.
The board of directors voted to end Grecco's employment with
petitioner. Grecco contended that the covenant not to compete
contained in the 1986 stock purchase agreement was unenforceable
on the grounds that the board of directors had improperly
terminated her.
Petitioner and Grecco negotiated a financial settlement
for Grecco.1 Grecco wanted to maximize the amount of money she
would receive from petitioner. The board of directors met on
June 30, 1988. To maximize her leverage, Grecco said she would
compete with petitioner and argued that petitioner had violated
1 Petitioner's June 22, 1988, offer included the following:
5. The corporation will purchase the stock owned by
Ms. Grecco pursuant to the price determination as set forth
in the Stock Purchase Agreement * * * the purchase price
should be somewhere between $400,000 and $450,000. However,
there would be an allocation of the total purchase price so
that the amount determined to be the book value of the stock
as of June 30, 1988, would be the amount allocated to the
stock. The balance of the price should be allocated to
either a covenant not to compete or a consultants type of
agreement in order that the payments pursuant thereto would
be deductible to the corporation. * * *
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