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the possibility that Moses or Peterson, Inc., could
breach the employment contract or that Moses could be
terminated for cause. In either case he could, absent
a covenant not to compete, have engaged in competition.
Furthermore, the fact that the employment contract
contained its own restrictive covenant is of no moment
since Moses testified that the employment contract and
covenant not to compete were both part and parcel of
the stock-sale transaction.
We find that the noncompete agreements and the employment
agreements, which were entered into at the same time and refer to
each other, are "part and parcel of the stock-sale transaction."
We shall give the existence of the employment contracts some
weight in our considerations but, contrary to respondent's
arguments, they are not determinative in considering the
possibility of competition in the first year.
Conclusions as to Value
We found respondent's expert report to be of no assistance.
We agree with the criticisms contained in petitioners' expert
rebuttal reports6 that, among other deficiencies, Mr. Meade's
expert report (a) treated the cash equivalents in State Supply
inconsistently, including them for valuation purposes but
excluding them when calculating the net price paid by the buyers;
and (b) contains no analysis of the factors to be considered in
valuation of noncompete covenants, as detailed in respondent's
Rev. Rul. 77-403, 1977-2 C.B. 302. Moreover, Mr. Meade's
6 Mr. Mitchell prepared a rebuttal report as did Wendy E.
Sharon, a manager in the Valuation Services Group at Coopers &
Lybrand L.L.P.
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