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deal. It was an afterthought from an accountant’s standpoint.”10
The testimony of those involved with the transaction, coupled
with the purchase documents’ explicit allocation of 100 percent
of the consideration to William Becker’s stock, as described
supra, clearly demonstrates that there was no mutual intent to
allocate a portion of the consideration to the covenant not to
compete.
Despite the testimony and the clear language of the purchase
documents, BHC raises several arguments to support its contention
that the parties mutually intended to allocate a portion of the
consideration to the covenant not to compete, none of which are
persuasive. First, BHC argues that the importance of the
covenant to BHC is evidence of the parties’ mutual intent. The
record is replete with facts establishing the importance of the
covenant not to compete to BHC and William Becker’s knowledge of
its importance to BHC. However, the importance of the covenant
not to compete does not demonstrate mutual intent to allocate a
portion of the consideration to the covenant. As stated by the
Court of Appeals for the Ninth Circuit in Annabelle Candy Co. v.
Commissioner, 314 F.2d at 7:
It is true * * * that the covenant not to compete
played a very real part in the negotiation of a final
contract between the parties, and was a valuable
10 Pursuant to Rule 81(a), Mr. Becker’s deposition to
perpetuate testimony was taken on Mar. 4 and 5, 2004. Mr. Becker
died on Mar. 29, 2005.
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