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Sale of the Business to the Shahs
A meeting of the Little Rascals board of directors was held
on June 27, 1991. The board resolved to proceed with having the
corporation listed for sale with a business broker, subject to
the signing of the listing by the trustee owner. The brokerage
firm so engaged subsequently prepared an extensive prospectus to
market Little Rascals. This document erroneously stated that the
center “was established in 1980 by the current owner, an
architect”. One of the “TERMS” recited in the document was
“COVENANT 5 years 100 miles”.
In early 1993, this prospectus was presented to Divyesh and
Priti Shah by Art Withop, their business broker. The Shahs
understood from reading the prospectus that the current owner was
an architect and the founder of the center, and that the covenant
was being offered by him. The Shahs and their broker met with
petitioners and the listing broker in April of 1993 to discuss
the possible sale of the business. After a series of offers and
counteroffers passing between the brokers, the Shahs prepared a
“Purchase Agreement for Corporate Stock”. It was at this time
that they first learned of the existence of the trust. The
trustee had not been involved in prior meetings or in the
negotiation of the sale price. On May 24, 1993, Mr. Shah
executed the purchase agreement as “buyer”, and on May 26, 1993,
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Last modified: May 25, 2011