Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 86

                                        -169-                                         
          Rockport Capital and CDR, Generale Bank and CLIS were relying on            
          the side letter agreement because they did not want to have to              
          wait for the conversion of their preferred interests into common            
          stock which would take 5 years.                                             
               Furthermore, as explained below, when considered in                    
          conjunction with SMP’s option to convert the banks’ preferred               
          interests into debt, it does not appear that the banks’                     
          conversion feature would have been likely to provide any                    
          meaningful inducement for the banks to remain in SMP.                       
                    c.  SMP’s Conversion Option                                       
               SMP had the option to convert the banks’ preferred                     
          interests, in whole but not in part, into debt of SMP.  SMP could           
          exercise this conversion right any time on or after December 31,            
          1997 (the last date by which the banks could exercise their put             
          option).  If the conversion right w exercised, the resulting debt           
          (so-called “preferred debt”) would have a $5 million principal              
          amount and a 5-year term; it would bear interest at an 8-percent            
          annual rate, payable annually from one year after the issuance of           
          preferred debt to the maturity thereof.  If the conversion option           
          were exercised, SMP would have the option of redeeming the                  
          preferred debt, upon 30 days’ notice, at 100 percent of the                 
          principal amount ($5 million) plus any accrued and unpaid                   
          interest.                                                                   







Page:  Previous  159  160  161  162  163  164  165  166  167  168  169  170  171  172  173  174  175  176  177  178  Next

Last modified: May 25, 2011