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The Sale and the Agreement
Petitioner wanted to acquire the Jeep-Eagle franchise held
by seller. Seller's business premises were located approximately
2 miles from petitioner's automall. In late 1989, Mr. Howard (on
behalf of petitioner) and Mr. Markley (on behalf of seller) began
discussions regarding the possibility of petitioner acquiring
certain assets of seller. By November 1989, Mr. Howard and Mr.
Markley agreed that petitioner would acquire the inventories (the
new cars, used cars, and parts inventory) of seller. Petitioner
did not purchase or utilize seller's location in any way.
Petitioner was prohibited from using the Markley name.
Mr. Howard and Mr. Markley contacted their attorneys, who
had not been involved in the negotiations up to that point, and
asked them to draft an agreement (the agreement) which embodied
the terms on which they had agreed. At the time they were
memorializing the agreement, the attorneys suggested to the
parties that they should allocate $10,000 to goodwill.
Accordingly, the parties allocated $490,000 to the covenant and
$10,000 to goodwill.
The final draft of the agreement provided for the purchase
of parts and new vehicle inventories based upon manufacturer's
price lists and invoices and the purchase of used car inventories
based upon the agreed value of each vehicle at date of closing.
Petitioner would not agree to purchase the fixed assets of
seller. The total consideration paid was approximately $2.5
million, allocated by buyer and seller as follows:
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