In general, non-competition agreements that are ancillary to the sale of a business may be modified by the court if they are found to be overly broad, but similar covenants ancillary to employment agreements may not. In this case, Gloria Smith entered into a letter of intent and an asset purchase agreement in connection with the sale of her business and her continued employment with the buyer, and the agreements contain a covenant against competition. The primary issue on appeal is whether the trial court correctly concluded that the covenant was ancillary to an employment agreement. Smith, president of Southeastern Home Mortgage Corporation “SEHM”, and Dean A. Holsapple, president of Holsapple Mortgage Lending, Inc. “HML”, negotiated the prospect of Smith selling her residential home mortgage business to HML and her continued employment by HML thereafter. On September 1, 2001, Smith, individually and in her capacity as president of SEHM, signed a “Letter of Understanding & Intent,” with HML, which Holsapple signed solely in his capacity as president of HML. The first paragraph of the five paragraph document mentions a non-competition covenant and indicates that three other agreements are contemplated: This agreement is between Holsapple Mortgage Lending, Inc. d/b/a Southeastern Home Mortgage HML and Southeastern Home Mortgage Corp., and it’s sic principle sole stockholder Gloria N. Smith. By entering into this agreement, Gloria Smith will agree to a No Compete Covenant for a period of five years as referenced in the Asset Purchase from the date of sale. Parties agree the date of sale will be September 1, 2001, and hereby agree to enter into a series of three agreements referenced as follows . . . The asterisks indicate a handwritten addition to the letter. The next three paragraphs describe three proposed agreements: 1 an asset purchase agreement; 2 an agreement whereby HML would purchase Smith’s industry knowledge, lender relationships, and the right to process 150 loans originated by Smith; and 3 a 24-month employment agreement.
The description of the employment agreement does not include reference to a non-competition agreement. It states, HML will enter into a 24-month Employment Agreement with Gloria Smith to process her Georgia loans with a commission structure of 60/40 60 to Gloria Smith. . . Compensation for the employment agreement will be $40,000.00. Half payable when 75 Gloria Smith originated loans are closed, other half payable when an additional 75 Gloria Smith originated loans are closed. This Employment agreement has a one time renewable option. In the final paragraph, the letter of intent provides that in the event that regulatory approval is not obtained “this agreement” will be null and void:
