-305-
Generale Bank and CLIS to the Ackerman group and that the banks
demanded the side letter agreement because they full intended and
planned to exit SMP as expeditiously as possible. There is no
evidence that the banks exited SMP as a result of the French
government’s intervention.
Mr. Levinton examined the operation of the partnership tax
rules, including sections 721, 722, 723, and 704(c), as well as
the regulations thereunder. He concluded that “assuming the form
of the transaction is respected, Rockport would succeed to the
position of CLIS and GB with respect to the built in loss
attributable to their contributed property.”
Mr. Levinton referred to Shearman & Sterling’s May 12, 1997,
memorandum, agreeing: “The debt will not be worthless.” Mr.
Levinton pointed out that upon the formation of SMP, the
contributed stock and debt were “valued” at $5 million in the
aggregate and that this might present an argument as to whether
the debts were nominal or “de minimis”; however, he concludes
that $5 million is not nominal or “de minimis” compared to $0.
Mr. Levinton did not discuss the value of the assets underlying
the debts and stock and assumed, without any explanation, that
the stock and debt had a value of $5 million.
Mr. Levinton alluded to Generale Bank’s and CLIS’s put
rights in the side letter agreement and observed:
Cast in its most unfavorable light, it could be argued
that, at the same time CLIS and GB were negotiating to
Page: Previous 295 296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 NextLast modified: May 25, 2011