- 14 -
literature" to petitioner. Finally, the parties agreed to the
immediate transfer by wire of $2 million and $1 million for the
covenant not to compete and the secrecy agreement, respectively,
to Scherer at the closing date.
Richard Nemanick simultaneously entered into an exclusive
employment agreement, with LC Acquisition, for a period of 5
years. He also agreed, during his employment, and for a period
of 3 years thereafter, not to engage in competition with LC
Acquisition or its affiliates.
After the 1989 transaction, LC Acquisition changed its name
to the Lorvic Corp. (i.e., New Lorvic), the affiliate of Lorvic
Holdings, Inc., petitioner. The written documentation, however,
that Richard Nemanick frequently submitted to Scherer prior to
the 1989 transaction was not returned to petitioner or its
affiliates pursuant to the Purchase Agreement.
Subsequently, petitioner retained the accounting firm, Ernst
& Young, to complete a valuation of the assets, tangible and
intangible, acquired from Old Lorvic, as well as the noncompete
and secrecy agreements, respectively. This evaluation was
undertaken to meet the purchase price allocation rules delineated
in section 1060.
With respect to the agreements, petitioner claimed the
following amortization expense deductions:
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