Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 83

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          provisions, CDR effectively tied up any value that might be                 
          realized on the Carolco securities.                                         
               On the other hand, the Ackerman group was primarily                    
          concerned with certain representations and warranties that they             
          wanted with respect to Generale Bank’s and CLIS’s tax basis in              
          the receivables and SMHC stock.  This concern is apparent in an             
          early draft of the letter agreement, in which the Ackerman group            
          proposed:                                                                   
                    3.  Certain Representations and Warranties of CLIS                
               and GB.  (a) CLIS hereby represents and warrants that                  
               CLIS’s basis computed under United States Federal                      
               income tax principles in the stock of Holdings is not                  
               less than $________.                                                   
                    (b) GB hereby represents and warrants that GB’s                   
               basis computed under United States Federal income tax                  
               principles in the Note [SMHC’s $1.050 billion debt                     
               obligations to Generale Bank] is not less than                         
               $________.                                                             
          Mr. Geary testified that he had never seen representations and              
          warranties like these.  He found that these items were too                  
          complicated and exposed Generale Bank and CLIS to all sorts of              
          liabilities.  Consequently, he had these open-ended                         
          representations and warranties removed.  Later, the Ackerman                
          group proposed a “Rider 12A” to the exchange and contribution               
          agreement providing the following representation and warranty:              
          SMHC “shall not have made any payment on the Holdings-CLIS Debt             
          or Holdings-GB Debt and neither the Holdings-CLIS Debt nor the              
          Holdings-GB Debt has been written down for accounting or tax                






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