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However, Leck was concerned about what he perceived as potential
weaknesses in Old Lorvic's substantial profit margins. In order
to protect the new company, Leck insisted on a covenant not to
compete "that had enough teeth in it," and, which would preclude
competition from Scherer. Also, Leck believed that there was a
distinct possibility that Scherer could disclose sensitive
information that it possessed regarding Old Lorvic's business
operations. Accordingly, Leck required a secrecy agreement.
Leck would not have purchased the assets of Old Lorvic without
these agreements.
After consultations with Shearson Lehman, Scherer
established a price of approximately $10 million to $12 million.
Several potential buyers considered purchasing the business. In
the process of negotiations, Leck reduced his initial offer by $1
million because of concerns that potential competitors would
obtain critical information that was being disseminated by
Shearson Lehman. Eventually, the only firm offer was that
submitted by petitioner's subsidiary, LC Acquisition, for $6.14
million for the assets of Old Lorvic (inclusive of corporate
cash), and $1 million for a secrecy agreement and $2 million for
a noncompete agreement.
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