- 4 -4
After Bell and Ferguson discovered that Wood had organized a
competitor, they established a salary structure for themselves
based on a percentage of petitioner's net sales. Bell, who was
serving as petitioner's president at the time, was to receive 2.4
percent of petitioner's net sales. Ferguson, who was serving as
petitioner's vice president, was to receive 1.6 percent of
petitioner's net sales.
2. Petitioner's Operations
During most of the 1980's, Bell and Ferguson were officers
of petitioner, sharing administrative duties and acting as
commissioned salesmen. Bell had served as petitioner's president
since 1974. In 1987, Bell became ill with cancer, and he died in
January 1988. Petitioner redeemed Bell's stock pursuant to a
buy-sell agreement executed by the founders in April 1970.
After Bell's death, Ferguson became president of petitioner.
Ferguson's salary as president was set at 2.6 percent of net
sales.
In 1988, Wood filed a lawsuit against petitioner and
Ferguson in an unsuccessful attempt to gain control of
petitioner. At the time, Wood owned just over 40 percent of
petitioner's outstanding shares of stock, and Ferguson owned just
over 50 percent of petitioner's outstanding shares of stock. In
response to Wood's lawsuit, petitioner and Ferguson entered into
a 5-year employment agreement (employment agreement) to protect
Ferguson in the event that Wood gained control of petitioner.
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