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new SWI stock after the transaction. It was just one
component of the overall acquisition transaction in which
Dubin Clark acquired the interests of Messrs. Jacobson
and Henochowicz in old SWI, and was not a separate arm's-
length sale reflecting the fair market value of the
specific block of stock. Accordingly, the price
established in the acquisition transaction does not
necessarily reflect the fair market value of the stock at
that time, or 6 months later when petitioner acquired the
stock at issue.
Moreover, Dubin Clark established the Share
Compensation Plan for the express purpose of attracting
talented management to SWI. One way to accomplish this
purpose was to offer prospective managers a significant
discount on the shares made available for purchase. The
language of the stock plan itself confirms that the board
of directors contemplated selling stock at less than fair
market value. Paragraph 4(a) of the stock plan provides
as follows:
The purchase price for the shares of Common
Stock to be offered and sold from time to time
by the Company pursuant to this Plan shall be
initially $60.98 per share and thereafter as
determined from time to time by the Board. The
Board is authorized to offer and sell shares of
Common Stock pursuant to this plan at less than
fair market value in order to compensate
qualified employees, directors, officers,
consultants and advisers of the Company * * *
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