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Respondent also argues that the likelihood of competition
from Mr. Markley is low, citing the "limited market entry" into
the Jeep-Eagle market in Oklahoma City area due to the limited
number of Jeep-Eagle franchises allowed by Chrysler in the
Oklahoma City market; that Mr. Markley showed no intention of
competing and, in fact, left Oklahoma shortly after the sale to
pursue a business opportunity in Houston, Texas; and that the
covenant allows for significant competition since it only covers
the sale of new Jeep-Eagle automobiles and does not cover an
adjacent county.
Respondent further argues that petitioner's method of
valuing the covenant, in addition to the shortcomings mentioned
above, also fails to: discount the stream of payments required
under the covenant to reflect the time value of money; and to
factor in the effect that amortizing the covenant would have on
after tax cash flow--the payments under the covenant being
deductible and thus reducing petitioner's income tax liability.
Finally, respondent argues that any amount paid by
petitioner in excess of $125,000 (of the disputed $490,000
payment) was for Mr. Markley's agreement to terminate his Jeep-
Eagle franchise. Respondent correctly points out that the sale
was contingent upon Chrysler's awarding petitioner Mr. Markley's
franchise, and petitioner could not obtain Mr. Markley's Jeep-
Eagle franchise unless he informed Chrysler that he wished to
terminate his franchise.
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Last modified: May 25, 2011