Howard Pontiac-GMC, Inc. - Page 9

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          by the franchisee, by Mr. Howard's death, or by his failure to              
          materially participate.                                                     
          Covenant Not to Compete                                                     
               The amount paid for the covenant not to compete and the term           
          of the covenant were negotiated separately from the price of the            
          other assets.  Prior to negotiating with Mr. Markley, Mr. Howard            
          intuitively calculated the value of Mr. Markley's agreeing not to           
          compete with petitioner.  Mr. Howard projected annual gross                 
          profits less variable costs for the Jeep-Eagle dealership at                
          approximately $1,996,000, as follows:                                       
               New vehicle sales                       $810,000                       
               Finance and insurance income            351,000                        
               Used vehicle sales                      222,750                        
               Parts and service                        612,000                       
               Mr. Howard believed that Mr. Markley could take 25 percent             
          of his business if Mr. Markley competed with him.                           
               At the time of the transaction, petitioner believed that Mr.           
          Markley was a significant competitive threat because:  (1)                  
          Mr. Markley had very good connections with the Jeep-Eagle factory           
          personnel; (2) Mr. Markley's name was well known in the Oklahoma            
          City metropolitan area; (3) Mr. Markley was from Oklahoma City              
          and was continuing in the automobile business in Oklahoma City              
          after the sale; (4) Mr. Markley's demonstrated sales ability was            
          very good; (5) Mr. Markley's age and background made him a                  
          competitive threat; (6) Mr. Markley had good customer relations             
          in the Oklahoma City metropolitan area; and (7) Mr. Markley had             
          superior knowledge of Chrysler and Jeep-Eagle product lines.                

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Last modified: May 25, 2011