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these preferred distribution rights and claims that the existence
of these rights denotes some economic incentive on the part of
the banks to stay in SMP. Nonetheless, these preferred
distribution rights parallel, almost precisely, the terms of the
contingent put price for the banks’ preferred interests. They
afforded the banks no additional advantage from remaining in the
SMP partnership rather than exercising their put rights on
December 31, 1996--in either case, the banks would receive
whatever value might be realized on any liquidation of the
Carolco securities. Because we find that the banks had every
economic incentive to exercise their put rights, these preferred
distribution rights are irrelevant.
To the extent that petitioner may be suggesting that
Generale Bank and CLIS continued as partners in SMP because of
the contingent payment amount, we disagree. When Generale Bank
and CLIS exercised their put rights at the end of December 1996,
they divested themselves of whatever remaining interests they had
in SMP. The contingent payment amount was not a continuing
partnership interest; instead, that amount was part of an open
125(...continued)
capital accounts the lesser of: (i) $7 million; and (ii) the “SN
Liquidation Value.” With respect to the Carolco preferred stock,
Amendment No. 1 provided that as promptly as practicable after
the “PS Liquidation Date”, SMP would distribute to the holders of
preferred interests pro rata in accordance with their respective
preferred capital accounts the lesser of: (i) $3 million, and
(ii) the “PS Liquidation Value”.
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