F. Browne Gregg, Sr., and Juanita O. Gregg - Page 4




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               During the 5 years after the acquisition, USI put some $12              
          to $14 million into petitioner's former companies and guaranteed             
          some $2 million in loans.  Initially, the operations were                    
          successful.  Petitioner received one distribution of USI stock               
          (called by the parties earn-out stock), valued at $871,484 and               
          based upon 1969 profits.  Soon, however, relations between                   
          petitioner and USI began to sour.  Petitioner's former businesses            
          became less and less successful.  USI began limiting petitioner's            
          authority, and ultimately in May 1971, removed him as president              
          and chief operating officer, and appointed him to be a salaried              
          consultant, with little work to perform.                                     
               In December 1971, petitioner pledged his USI stock to the               
          First National Bank of Leesburg (Leesburg Bank) as security for a            
          $1.5 million loan.  On April 20, 1972, petitioner failed to make             
          an installment payment on the note he had transferred to USI and             
          informed USI he was not going to pay the remaining balance on the            
          note but instead would offset it against USI’s outstanding                   
          obligations to him.  USI stopped paying his salary and requested             
          that Chemical Bank in New York, its stock transfer and dividend              
          disbursing agent, stop payment on petitioner's USI dividends.                
          Under instructions from USI, Chemical Bank delivered petitioner's            
          USI stock dividend checks to USI.  On June 15, 1972, petitioner              
          borrowed an additional $135,000 from the Leesburg Bank, assigning            
          as security all dividends from his USI stock.  Both petitioner               
          and the Leesburg Bank mailed to USI notice of the assignment.                




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