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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
1,995,750
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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