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2) John Jorgl and Sharon Illi are signing this document
with full understanding that competing with Little
Rascals would be a breach of contract and both John and
Sharon could be severly [sic] liable.
The Shahs discussed their reasons for the above document
during the closing, expressing concern that petitioners might
personally open another child care center, yet all sales
instruments were being signed by the bank on behalf of the trust.
Petitioners had indicated that they were leaving the area to
travel, but the Shahs perceived the possibility of petitioners’
returning and using their reputation to start another center as a
continuing threat. Petitioners were 50 and 37 years of age and
in good health at the time of the sale. Although petitioners
viewed the separate covenant as a voluntary accommodation to the
Shahs, they signed in good faith and have never engaged in
proscribed competitive activities. They departed from California
shortly after the closing and have since resided elsewhere.
The $300,000 allocated to a covenant not to compete was
never discussed. Mr. Shah calculated the value and had it
included in the closing documents. None involved objected, so no
negotiations took place. Mr. Shah prepared a document basing the
value of the covenant not to compete on tuition that would be
lost if 10 to 15 children left the center due to competition.
His computations resulted in a $600,000 figure which he then
multiplied by a 50-percent “fudge factor”. He was aware that, as
buyer, allocating value to a covenant not to compete would be
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