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On December 28, 1989, LC Acquisition reached an agreement to
acquire the assets of Old Lorvic.3 The funds utilized for the
acquisition of Old Lorvic originated from petitioner's capital
contributions and third parties related to Chemical Ventures.
The acquisition documents in the foregoing transaction reflect a
purchase price of $5.14 million for the tangible assets.4 The
foregoing transaction was embodied in an Asset Purchase Agreement
(Purchase Agreement). Concomitantly, petitioner entered into a
5-year noncompete agreement with Old Lorvic, Scherer, and its
affiliates, respectively. In that regard, pursuant to the
agreements, petitioner paid $2 million for the noncompete
covenant, and $1 million for the secrecy agreement. The covenant
not to compete stated:
2. Noncompetition.
(a) For a period of five (5) years after the
Closing Date, Scherer and each of the Sellers shall
not, and shall cause any Affiliate which it Controls,
directly or indirectly, to not, directly or indirectly,
enter into, engage in, assist, give or lend funds to or
otherwise finance, be employed by or consult with, or
have a financial or other interest in, any business
which competes with the Business (or any part thereof)
3Specifically, the Purchase Agreement denominated "LC
ACQUISITION CORPORATION," as the "Purchaser," and Scherer and its
affiliates as the "Sellers". See infra p. 13.
4Subsequent to the 1989 transaction, Scherer retained and
continued to operate SAI, a business previously owned by Old
Lorvic.
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