Gustafson's Dairy, Inc. - Page 5

               From August 29, 1984, to March 31, 1988, the members of                
          petitioner's board of directors were E.S. Gustafson, Pete                   
          Gustafson, and Sherwood Gustafson.  E.S. Gustafson and Sherwood             
          Gustafson were petitioner's only board members in fiscal year               
               Sherwood Gustafson's son, E.S. (Eddie) Gustafson III, works            
          on the farm under the direction of the farm manager.  He is a               
          member of the fourth generation of the Gustafson family working             
          for petitioner.                                                             
               Petitioner's stock is wholly owned by descendants or by                
          spouses of descendants of Agnes and Frank Gustafson, or by trusts           
          of which members of the Gustafson family are the beneficiaries.             
          During the years at issue, there were no discordant shareholders.           
               4.   Stock Purchase Agreement                                          
               Gustafson family shareholders have kept control of                     
          petitioner by restricting the sale or disposition of petitioner's           
          stock to outsiders.  Beginning in 1984, petitioner held an option           
          granting it the right to redeem its preferred stock for $1,000              
          per share if a shareholder transferred his or her stock,                    
          including a transfer when a shareholder died.  Under the                    
          agreement, petitioner had 30 years to pay for the redeemed stock.           
          Petitioner's policy has been to redeem a shareholder's stock                
          under the stock purchase agreement when he or she dies to provide           

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Last modified: May 25, 2011