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respect to the redemption of [William Becker]’s stock by [BHC].”
This provision indicates that the promissory note was given for
William Becker’s stock, not for the covenant not to compete.
In an attempt to overcome the clear language of the purchase
documents, BHC raises several arguments, none of which are
persuasive. First, BHC argues that “No specific amount was
mutually allocated to the covenant”. BHC is correct in asserting
that the purchase documents do not explicitly state that zero
dollars are being allocated to the covenant not to compete.
However, the purchase documents repeatedly reflect the express
allocation of the entire $23.9 million of consideration to
William Becker’s stock. As a matter of simple arithmetic, no
portion of the consideration is left over to allocate to the
covenant not to compete.
Second, BHC argues that the “in consideration” clauses in
the redemption agreement and in the pledge and escrow agreement
are “determinative of the issue of ambiguity”. BHC cites
Patterson v. Commissioner, 810 F.2d 562 (6th Cir. 1987), affg.
T.C. Memo. 1985-53, in support of its position. In Patterson,
the Court of Appeals for the Sixth Circuit (Sixth Circuit)
declined to apply the Danielson rule because the sales agreement
did not contain an unambiguous allocation with respect to the
purchase price. The Sixth Circuit noted the following language
in the sales agreement: “As consideration for part of the
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