Labelgraphics, Inc. - Page 6

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          manufacturing facilities to Puerto Rico, as management believed             
          this relocation overseas might cause a reduction in petitioner's            
               Around 1987 or 1988, Intel Corp. (a customer of petitioner             
          that had recently relocated certain of its manufacturing                    
          facilities to Puerto Rico) asked whether Mr. Martin could                   
          establish a plant in Puerto Rico to supply its Puerto Rican                 
          facilities.  As a result, during 1988, Mr. Martin incorporated              
          LaserGraphics Caribe, Inc. (Caribe), to conduct a label and                 
          printing business in Puerto Rico.                                           
               Mr. Martin was Caribe's sole shareholder.  Petitioner had no           
          interest in Caribe, as the latter corporation was a personal                
          business venture of Mr. Martin that was totally separate and                
          distinct from petitioner.                                                   
               From 1988 through 1990, Mr. Martin devoted some of his time            
          to Caribe's business operations.  Caribe established a plant in             
          Puerto Rico.  Mr. Martin operated Caribe for about 2 years, then            
          sold the business after concluding that he could not operate it             
               During 1989 and 1990, petitioner successfully developed its            
          Micro Clean 100 proprietary process for producing labels meeting            
          the "clean room" production facility standards of its electronics           
          industry customers.  The process represented a significant                  
          technological innovation in the label industry.  Before its                 
          development, there were no contaminant-free labels comparable to            

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