Custom Chrome, Inc. and Subsidiaries - Page 9

                                        - 9 -                                         

               Because of restricted voting rights associated with many of            
          the above shares, JC Investors controlled the board of directors            
          of petitioner.  Also, after the LBO and consistent with                     
          JC Investors’ practice, petitioner's management team and senior             
          employees were asked to and did remain with petitioner.                     
               Further, consistent with JC Investors’ practice in acquiring           
          companies, Cruze, as key employee of petitioner, was requested to           
          enter into a covenant not to compete.  Under the covenant not to            
          compete that Cruze entered into with petitioner, for an                     
          additional $5 million that was paid to Cruze in 1989 upon closing           
          of the LBO, Cruze was obliged for a 3-year period of time from              
          the date of the LBO not to enter into any business contract that            
          would compete directly or indirectly with petitioner’s business.            
          JC Investors likely would not have agreed to the purchase of the            
          stock in petitioner if Cruze had not signed this covenant not to            
               On August 25, 1989, an additional $2,589,759 was paid to               
          Cruze to enable him to pay certain Federal income taxes that were           
          owed by petitioner and that related to years prior to the LBO               
          when petitioner had constituted an S corporation.                           
               The following schedule reflects total funds received by                
          Cruze on August 25, 1989, in connection with the LBO:                       

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