Lorvic Holdings, Inc. - Page 11

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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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