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agreement dated September 25, 1997. Pursuant to this agreement,
Knightsbridge purchased from the Harriett trust and the QTIP
trust, all of the FOH shares that were held by the trusts for
$6.90 per share. Immediately thereafter, pursuant to the merger
agreement, Knightsbridge acquired the remaining outstanding
shares of FOH from the remaining shareholders for $7.75 per
share.
On examination, respondent determined that the FOH shares
that were held by the Harriett trust and the QTIP trust should be
merged for valuation purposes, and, in the January 15, 1997,
notice of deficiency, respondent indicated that the FOH shares in
each trust should be valued at $20,820,159.39 or $8.46 per share.
Overview of FOH
Founded in 1946 by Mr. Mellinger and incorporated in
Delaware in 1962, FOH began as a small mail-order operation
selling an assortment of intimate women's apparel. In 1947, the
business was moved to Hollywood, California, opening its first
retail store there in 1952. In its beginning, FOH's name was
synonymous with risque lingerie. The company's original market
was American GI's who, after spending time abroad, were eager to
get for their wives or girlfriends the lingerie that was
fashionable in Europe. FOH pioneered many trends in the industry
including the extensive use of black, the pointy snow-cone bras
of the 1950's, and the revival of garter belts in the 1980's.
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