- 7 -
During March 1985, Mr. Neiman contacted Mr. Ruf. For
approximately one year thereafter, they discussed on several
occasions the possibility of Mr. Ruf's becoming responsible for
the management of petitioner. Both Mr. Neiman and Mr. Ruf
understood that Mr. Ruf would be interested in assuming that
responsibility only if Mr. Ruf were given the option to purchase
100 percent of petitioner. Acquiring such an option was Mr.
Ruf's most important consideration in determining whether to
agree to assume responsibility for the management of petitioner.
On April 1, 1986, petitioner entered into a management
agreement (management agreement) with Mulholland Funding Corp.
(MFC), which was owned by Mr. Ruf and his wife. Pursuant to the
management agreement, MFC agreed to provide petitioner with the
management services of Mr. Ruf for the period that began on April
1, 1986, and terminated on March 31, 1989.4 In return, petition-
er agreed to pay MFC fixed compensation of $8,000 per month plus
additional compensation in the nature of an "operations bonus" to
be determined at the end of each fiscal year for which the
management agreement was in effect. The operations bonus was to
be calculated at the end of each fiscal year based on the follow-
ing formula: 10 percent of the first $500,000 of petitioner's
4 The parties stipulated that Mr. Ruf became employed by peti-
tioner beginning in March 1986; however, the management agreement
provided that neither MFC nor Mr. Ruf was to be considered an
employee of petitioner. We interpret the parties' stipulation to
mean that, pursuant to the management agreement, Mr. Ruf became
petitioner's CEO in March 1986.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011