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Petitioner paid $100,000 in consideration for the right of NFR (or
its affiliates) to use the FIA name (or any similar name) for a
period of 5 years, and $290,000 for a covenant not to compete by
FIA and Commercial, also for a period of 5 years. Pursuant to an
agreement separate from the March Agreement, petitioner made a
$210,000 payment to Mr. Rafanello in consideration for his
agreement not to compete for a period of 3 years.47
Moreover, petitioner was given the opportunity to employ some
of FIA's marketing staff and equipment experts, many of whom had 15
or more years of experience in the medical equipment leasing
industry. As of June 8, 1989, 23 of FIA's 65 employees became NLI
employees. (Mr. Rafanello did not become an employee of NLI or any
of its affiliates after the acquisition.)
Petitioner intended to fund the acquisition by issuing
commercial paper. Funds so obtained were to be transferred by
petitioner to NLI as intercompany debt and to Dial as a combination
of debt and shareholder equity. Petitioner calculated that the
lease revenues would provide a 15-percent rate of return on the
amount petitioner provided to Dial as shareholders' equity, plus a
profit from the cost of money it lent to NLI and Dial as
intercompany debt. Petitioner expected the overall yield on the
47 Any amortization deductions petitioner claimed with
respect to the $100,000, the $290,000, and the $210,000 are not
in dispute.
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