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The Noncompete Agreement further provided that:
It is agreed that as consideration for your [Wagner's]
agreement for non-competition * * * Sharewell, Inc. will
assign to you $300,000 of the installment receivable from
Scientific Drilling, Inc. * * *
The $300,000 in accounts receivable from SDI referred to in the
Noncompete Agreement was the same consideration referred to in
the Purchase Agreement. Forest proposed, and Wagner accepted,
the allocation of $300,000 to the Noncompete Agreement; they did
not negotiate over the dollar amount before agreeing to the
allocation. Forest proposed the $300,000 figure for two reasons.
First, $300,000 represented the portion of the consideration that
had not been borrowed, but instead was accounts receivable
already owed to Sharewell. Second, Forest believed that, because
the accounts receivable would be received in installments over
time, he would be in a position to exercise some practical
control over payment to Wagner if the covenant were breached,
unlike the case with the remaining $1 million in cash being paid
out at the time of the buyout. The parties have stipulated that,
in the event the Court determines that any portion of the $1.3
million paid by petitioner to Wagner is allocable to an
amortizable covenant not to compete, the value of the Noncompete
Agreement is $300,000.
The transaction between Sharewell and Wagner was originally
recorded on Sharewell's books as a $1.3 million redemption of
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Last modified: May 25, 2011