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petitioner and Grecco would split the difference; thus, he
estimated that the value of the covenant was $52,669.
We disagree with Holmer's estimate for several reasons.
First, he should have used as a base amount $513,400 (total
payments to Grecco), not $421,346. Second, his basis for
reducing 25 percent of the base amount by 50 percent is
speculative. Third, petitioner and its shareholders agreed to
the liquidated damages percentage 2 years before petitioner
forced Grecco out. Fourth, the liquidated damages provision
applied to all of petitioner's shareholders, not just Grecco.
Thus, it does not necessarily take into account the value of her
covenant not to compete in particular. Fifth, the liquidated
damages amount was calculated on the price petitioner paid Grecco
for the stock and the covenant rather than being based solely on
the covenant. Sixth, the fact that petitioner paid $513,400 for
Grecco's stock (which the parties agree is worth $189,300) and
the covenant, is a much better indicator of the value of the
covenant because it is not subject to the flaws just stated.
b. Petitioner's Expert
Petitioner's appraiser, Gregory A. Gilbert (Gilbert),
concluded that the value of the covenant not to compete was
$666,200. Gilbert used estimates of lost sales provided by
Tiedemann, based on his estimate of the amount of business
petitioner would lose if Grecco and Spencer competed with
petitioner. Tiedemann exaggerated the amount of business Grecco
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