Two years ago, Harriet Company (an unincorporated entity) developed a process for preserving doughnuts that gives the doughnuts a much longer shelf life. The process is not patented or copyrighted and only Harriet knows how it works. A conglomerate has approached Harriet with an offer to purchase the formula for the process. Specifically, the offer allows Harriet to choose between the following. Which option should Harriet accept?
• $650,000 cash for the formula and a 10-year covenant not to compete, paying Harriet $65,000 per year for 10 years.
• $650,000 cash for a 10-year covenant not to compete, and an annual $65,000 royalty for the formula payable for 10 years.