Paul E. Hathaway and Brenda J. Hathaway - Page 6

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          which orders are to be placed with TAG, but does not describe the           
          manner in which sales representatives are to solicit sales.                 
               In 1970 or 1971, when there was a change in TAG’s ownership,           
          a sales procedure manual was given to Hathaway.  Parts of the               
          sales procedure manual were revised from time to time.  The                 
          version of the sales procedure manual that was in effect during             
          the years in issue was last revised in January 1984.  Hathaway              
          did not consult the sales procedure manual from about January               
          1984, until well after the end of the years in issue.                       
               The sales procedure manual states that sales representatives           
          are asked to submit their schedules, and must submit their                  
          vacation requests, to the national sales manager.  However, these           
          provisions were not followed by TAG’s sales representatives, nor            
          were these requirements enforced by TAG.  The sales procedure               
          manual also states that sales representatives are not authorized            
          to accept cancellations of orders or agree to returns, and that             
          TAG reserves the right to refuse any return that does not have an           
          authorized return sticker.  In practice, however, TAG accepted              
          their sales representatives’ recommendations as to cancellations            
          and returns.                                                                
                               Communication With TAG                                 
               Hathaway communicated to TAG the orders he had solicited by            
          writing these orders on a scratch pad, then forwarding the                  

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