- 5 -
to the Stock Sale Agreement”. As consideration for the
obligations of Roundtree and Mr. Stinson, petitioner agreed to
pay Roundtree and Mr. Stinson $22,000 per month for 60 months.
The consideration under the noncompetition agreement was in
addition to the consideration petitioner paid to redeem its
stock. In the event petitioner defaulted on the noncompetition
agreement payments, the entire amount of the remaining payments
would immediately become due and collectible, and the covenant
not to compete would terminate 90 days after such default. If
Roundtree and Mr. Stinson breached their obligations under the
agreement, petitioner was entitled to one-half of the net profits
for 5 years of any business conducted which breached the covenant
not to compete.
Due to the GMAC loan, petitioner was leveraged with large
interest expenses. In the summer of 1994, petitioner was below
the minimum working capital requirements of its franchisor and
had to obtain a special waiver of working capital requirements in
order to continue holding its franchise. There was no known
alternative to the noncompetition agreement with Roundtree and
Mr. Stinson in order to protect petitioner from their competition
in the Billings market. Without the agreement, it would have
been difficult for petitioner to raise capital or to pay its loan
from GMAC.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011