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transaction which was tied to Generale Bank’s and CLIS’s exercise
of the put rights. Moreover, the fact that SMP continued to send
Generale Bank and CLIS Schedules K-1 cannot obscure that those
entities effectively exited SMP on December 31, 1996. The only
question at that point was whether Generale Bank and CLIS would
receive any additional payment for their preferred interests on
account of the Carolco securities.
Petitioner points to a document entitled “Amendment No. 3”,
which provides that Generale Bank and CLIS, as the original
holders of the preferred interests in SMP, would have continuing
interests in certain annual distributions relating to the
liquidation of the Carolco subordinated notes and the Carolco
preferred stock that SMHC held.126 These distribution rights
closely track the distribution rights that were originally
provided in Amendment No. 1 and, likewise, parallel the
contingent put price in the side letter agreement.127 Insofar as
the exercise of the put rights already established the banks’
126 Apparently, on the basis of this document, Mr. Lerner, on
behalf of SMP, continued to send Schedules K-1 to Generale Bank
and CLIS.
127 Pursuant to the side letter agreement, Generale Bank and
CLIS were entitled to receive a “Contingent Amount” on the
exercise of their put rights. This contingent amount was payable
to the banks by Rockport Capital on (1) the “SN Liquidation Date”
in an amount equal to each seller’s percentage of the lesser of
$7 million and the “SN Liquidation Value” and (2) the “PS
Liquidation Date” in an amount equal to each seller’s percentage
of the lesser of $3 million and the “PS Liquidation Value”.
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