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transfer all of the assets of its 303 products business, in
exchange for the 1,000 shares of 303 Products. The assets
included, in part, $103,000 in cash and an obligation of
petitioner Praegitzer to Ameritech in the approximate amount of
$21,000 (the Praegitzer debt). The reorganization agreement
provided that petitioner Praegitzer would transfer his 2,500
shares of Ameritech to Ameritech in exchange for the transfer by
Ameritech to petitioner Praegitzer of 1,000 shares of 303
Products.
The parties intended that the transactions under the
reorganization agreement would qualify as a tax-free
reorganization. In the reorganization agreement, petitioner
Praegitzer agreed to dismiss his appeal of the dissolution action
and also to dismiss the injunction action.
Petitioner Praegitzer and petitioner Dawes agreed that the
reorganization agreement depended, for its legal effect, upon the
execution by petitioner Praegitzer and petitioner Dawes of the
MSA entered into contemporaneously. The reorganization agreement
contained an integration clause. Petitioner Praegitzer and
petitioner Dawes agreed that the reorganization agreement was the
entire agreement between them pertaining to the subject matter
thereof and that it superseded all prior and contemporaneous
agreements, except those contemplated thereunder or not
inconsistent therewith.
A meeting of the board of directors of Ameritech was held on
January 25, 1990. On January 30, 1990, Ameritech borrowed
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