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Inventories $2,000,000
Covenant not to compete 490,000
Goodwill 10,000
Total sales price 2,500,000
Petitioner and seller signed the agreement on November 15,
1989. The form of the covenant not to compete was attached as
schedule 1 to the agreement. Section 10 of the agreement
provided:
The Buyer [petitioner] agrees that Buyer will not use
Seller's name or location in Buyer's operation. The
parties acknowledge that any goodwill to be acquired by
Buyer is nominal and have therefore agreed that the
Buyer will pay Seller Ten Thousand Dollars ($10,000)
for Seller's goodwill on the closing date.
For payment of $500,000 (over and above the agreed upon sale
price of the tangible inventories of seller's Jeep-Eagle
distributorship), petitioner received a number of benefits,
including seller's agreement to terminate its Jeep-Eagle
franchise, and seller's agreement to provide to petitioner all
sales and service records, customer lists, and other information
which might be useful to petitioner.
Seller's termination of its sales and service agreement with
Chrysler was a condition to the closing of the agreement.
Approval of petitioner's application for a Jeep-Eagle franchise
from Chrysler was also a condition to the closing of the
agreement. Petitioner could only acquire seller's Jeep-Eagle
franchise if seller would agree to terminate the franchise.
Chrysler's Franchise Policies
Standard Jeep-Eagle franchises are issued for an indefinite
term. A Jeep-Eagle franchisee can expect to retain its franchise
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Last modified: May 25, 2011