Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 52

                                        -138-                                         
          due diligence on the film rights is an appraisal that Sage                  
          Entertainment conducted.  Mr. Lerner testified that approximately           
          4 to 6 weeks before the closing on the CDR transaction, he hired            
          Steve Kutner of Sage Entertainment to appraise the EBD film                 
          library, that he had a large number of discussions with him about           
          various approaches to valuation, and that Mr. Kutner appraised              
          the EBD film library at $29 million.97  Mr. Lerner testified                
          that, on the basis of Mr. Kutner’s valuation, he felt “very                 

               96(...continued)                                                       
          Schedule 1.6(b), of course, contains a listing of the EBD film              
          titles and development projects.  The exchange and contribution             
          agreement provides indemnification from CDR (capped at $2                   
          million) for any material breach of this representation and                 
          warranty.  See Exhibit 188-J, J001341, 1344.  It is patently                
          unclear what is meant by the term “good title” and whether these            
          provisions afford any meaningful rights with respect to the EBD             
          film library.  Petitioner’s representatives, Troy & Gould,                  
          acknowledged this “recitation” of good title; however, they                 
          concluded:                                                                  
               despite this recitation, we do not have documentation                  
               of the assignment [from CLIS to SMHC].  Moreover, the                  
               term ‘U.S. Video Film Rights’ is nowhere defined in the                
               Agreement, and the Agreement contains no explicit                      
               recitation that Santa Monica Holdings owns such rights.                
               Rather, this phrase appears only as the heading on the                 
               Schedule; the phrase does not appear in the body of the                
               Agreement.                                                             
               This is another significant gap in the chain of title.                 
          Despite the obvious infirmities in SMHC’s rights to the EBD film            
          titles, there is no indication that the Ackerman group ever                 
          claimed any indemnification under this provision.                           
               97 Mr. Kutner did not include in this figure the value of              
          second-cycle exploitation or other rights, which he opined could            
          increase the value of the EBD film library by as much as 40 to 50           
          percent.                                                                    





Page:  Previous  128  129  130  131  132  133  134  135  136  137  138  139  140  141  142  143  144  145  146  147  Next

Last modified: May 25, 2011