William J. and Sandra D. Heitz - Page 3

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          1993, respectively; and (4) whether William and Sandra Heitz are            
          liable for accuracy-related penalties.                                      
                                  FINDINGS OF FACT3                                   
          1.  Reasonable Compensation                                                 
               Exacto was founded in 1960 by petitioner William Heitz (Mr.            
          Heitz), Kenneth Quillen (Mr. Quillen), and William Greene (Mr.              
          Greene) in Rockford, Illinois.  In 1964, Exacto was moved from              
          Rockford, Illinois, to the present site in Grafton, Wisconsin.              
               Exacto was initially operated as a partnership and was owned           
          60 percent by Mr. Heitz, 20 percent by Mr. Greene, and 20 percent           
          by Mr. Quillen.  Mr. Quillen and Mr. Greene each contributed                
          $1,000 to the partnership, and Mr. Heitz contributed $7,000.                
          Exacto was incorporated in 1962.  From incorporation through                
          1993, Exacto's common stock was owned by Mr. Heitz (60 percent),            
          Mr. Quillen (20 percent), and Mr. Greene (20 percent).  In 1993             
          and again in 1994, Mr. Heitz gave some of his Exacto stock to               
          each of his two children, reducing his ownership in Exacto to 55            
          percent.                                                                    
               Mr. Heitz obtained a bachelor of science degree in                     
          mechanical engineering from Purdue University in 1952.  In 1955,            
          Mr. Heitz was hired by Midwest Spring Co. as an engineer.  Mr.              
          Heitz left Midwest Spring Co. after 4 years and went to work at             


               3 The stipulation of facts and the attached exhibits are               
          incorporated by this reference.                                             




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