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On December 20, 1991, petitioner and his attorney met with
the Hansens and their attorney. After extended discussions,
petitioner entered into a stock purchase agreement (the
agreement) wherein he agreed to sell his interest in BCBI to the
Hansens for $1,050,000 ($300,000 in cash, payable at various
dates, and a note from the Hansens and BCBI in the amount of
$750,000). The purchase price was allocated as follows:
$575,000 for all issued and outstanding stock of BCBI; $100,000
for petitioner's covenant not to compete; $75,000 for consulting
services to be provided by petitioner as described in the
agreement; and $300,000 for the assumption of a lease and
assignment of petitioner's option to purchase certain land near
the marina.
During the meeting that took place on December 20, 1991,
Mr. Hansen learned about petitioner's outstanding advances to
BCBI, which at the time amounted to $475,000. Apparently, Mr.
Hansen was unaware that BCBI's books reflected a liability to
petitioner, and he insisted that any debt owed to petitioner be
eliminated. Petitioner and the Hansens reached an understanding
as to how the outstanding advances were to be treated, as
reflected in the following paragraphs in the agreement:
The shareholder, as the sole Shareholder and as
President of the Corporation, hereby makes the following
representations and warranties which shall survive the
Closing Date;
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Last modified: May 25, 2011