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None of this, though, changes the fact that her compensation
and fringe benefits were fixed, and again--like the notes and
lease--not subordinated to HMI’s general creditors, and not sub-
ject to any fluctuation related to HMI’s financial performance.
Her duties, moreover, were various administrative and clerical
tasks--some of the same chores she had been doing at HMI on a
regular basis for many years. And there was no evidence whatso-
ever that Mr. Hurst used his wife in any way as a surrogate for
continuing to manage (or even advise) HMI’s new owners. Cf.
Lynch, 801 F.2d at 1179 (former shareholder himself providing
post-redemption services).
It is, however, undisputed that her employment contract had
much the same cross-default provisions that were part of the
lease and stock transfer agreements. The Commissioner questions
whether, in the ordinary course of business, there was reason to
intertwine substantial corporate obligations with the employment
contract of only one of 45 employees. He points to this special
provision as proof that the parties to this redemption contempla-
ted a continuing involvement greater than that of a mere credi-
tor.
In relying so heavily on the cross-default provisions of the
Hursts’ various agreements, though, the Commissioner ignores the
proof at trial that there was a legitimate creditor’s interest in
the Hursts’ demanding them. They were, after all, parting with a
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