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On June 3 and 5, 1992, BDC, Mr. Langdon, and Bravo executed
a purchase agreement to sell all BDC's assets for $2,017,461.
The purchase agreement included the separate consulting agreement
and covenant not to compete, signed by Mr. Langdon and Bravo.
The principals of Bravo were from Hobbs, New Mexico. They had
never lived in Minnesota and had no experience either in Bemidji
or as beer distributors. In negotiations with Pohle Partners
they insisted on both a consulting contract and a strong,
enforceable covenant not to compete as conditions of the sale.
The purchase agreement allocated $817,461 to BDC's tangible
operating assets and accounts receivable, $200,000 to a 2-year
consulting agreement, and $1 million to a 5-year covenant not to
compete between Mr. Langdon and Bravo. Nothing was allocated to
any of BDC's intangible assets such as goodwill, going concern
value, and exclusive distribution rights. The purchase agreement
stated:
D. Seller's Intangible Property: No additional
consideration shall be due from Buyer to Seller for
Seller's Intangible Property, such assets to be
transferred from Seller to Buyer in consideration of
the benefits to be derived by Seller under the
remaining provisions of this Agreement.
Mr. Langdon did not negotiate with Bravo over the
allocations. He knew that Bravo's offer to purchase was
contingent upon the execution of a covenant not to compete, and
accepted Bravo's proposal that full value for the intangibles be
allocated to the consulting agreement and the covenant.
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