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of David Pedigo from the board of directors in January 1996; the
actual redemption of the stock of David Pedigo’s brother, Paul
Pedigo, in April 1996; and the correspondence from Steve Pedigo
in January 1996 to the board stating: “I would hope that recent
events have not been orchestrated to force the Pedigo family to
sell.” Additionally, the Pedigo family was unable to elect David
Pedigo to the board of directors at the March 1996 annual
stockholders meeting, and the 1997 minutes reflect the opposition
of David and Sharon Pedigo to the election of the board of
directors.
Based on the facts and circumstances, we believe that
petitioner’s officers were exercising their prudent business
judgment in preparing for the redemption of stock by the Pedigo
family stockholders. We are convinced that petitioner did not
want the redemption of the stock by its stockholders to affect
the stability of its business or to threaten the management of
the business.
Petitioner’s stockholders were limited by the corporate
bylaws from selling their stock to unrelated third parties
without the unanimous consent of all of the stockholders.
Stockholders could either sell to existing stockholders or have
their stock redeemed by petitioner. The restriction on the
transfer of stock in petitioner’s bylaws served the purpose of
maintaining control over management and keeping ownership in the
hands of the stockholders who managed the company.
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