- 28 -
The APA further provided that each seller was required "to
use Seller's best efforts * * * to preserve Seller's present
business relationship with suppliers, patients and others having
business relationships with Seller" and "to cooperate with * * *
[SMF's] attempts to retain the services of the employees of
Seller's Business following the Closing to the extent that * * *
[SMF] decides to attempt to employ any such employees."
4. Houlihan and Narvco Appraisals
Houlihan issued its appraisal (Houlihan appraisal) on April
7, 1995.20 The Houlihan appraisal described SWMG as "a newly
formed group of thirty-eight physicians who have practiced in the
City of Davis for many years." Using a discounted cashflow
approach, the Houlihan appraisal concluded that, "as of November
1, 1994 and currently, the fair market value of the fixed and
intangible assets, excluding working capital, of * * * [SWMG] is
reasonably stated as $4 million."
The tangible assets of the affiliating physicians' practices
were valued separately by Narvco Enterprises, Inc. (Narvco). The
standard used by Narvco in valuing the tangible assets, namely,
"value in use", was directed by SMF and the SWMG physicians after
they had agreed that it was appropriate. Under the APAs, each
20 Respondent contends, and we agree, that the Houlihan
appraisal is hearsay. It was not offered as an expert report
under Rule 143(f). Nonetheless, it was the appraisal relied on
by petitioners in the 1994 returns, and it is relevant for
various nonhearsay purposes.
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