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the Interlake Companies and assumption by the Interlake Companies
of certain liabilities of petitioner. Petitioner would then
distribute all the shares of the Interlake Companies to Newco Sub
1. Newco Sub 1 would distribute all its assets, including the
shares of the Interlake Companies and petitioner, to Interlake
and then dissolve.
On May 29, 1986, the restructuring plan was carried out, and
the directors of Interlake met for the first time. At the
meeting, the Interlake directors approved the spinoff by which
Interlake would distribute all of petitioner’s shares pro rata to
Interlake’s shareholders. The directors also changed the name of
petitioner from Interlake, Inc., to Acme. On June 23, 1986,
pursuant to the plan, Interlake carried out the spinoff by
distributing, pro rata to its shareholders, all the issued and
outstanding shares of petitioner.
Tax Indemnification Agreement Between Petitioner and
Interlake
On May 30, 1986, petitioner and Interlake entered into a tax
indemnification agreement to memorialize their understanding
regarding certain Federal income tax matters for the years ending
on or before the effective date of the agreement. The agreement
defines the effective date as the date on which all outstanding
shares of petitioner’s common stock are distributed by Interlake
to its shareholders. Petitioner and Interlake were represented
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