- 45 - The draft term sheet contained a section called “Terms of Preferred Interests”, which provided: The Preferred Interests will have a liquidation value equal to $ million, will have a 6% per annum dividend preference, and will be convertible after 5 years into 51% of Newco’s common membership interests, provided that if the conversion right is exercised, Newco may redeem all of the Preferred Interests at their liquidation value plus accrued and unpaid dividends. The conversion right will be accelerated in the event Newco fails to make a dividend payment when due on the Preferred Interests, and in other pertinent circumstances. In addition to these items, the draft term sheet contained a section entitled “Conditions”, which, among other things, required Generale Bank to give satisfactory representations and warranties to Newco and Rockport Capital as to the original amount of the loans evidenced by its “Note”, the amount outstanding under those loans at the time of the contribution of the note to Newco, and the fact that MGM Group Holdings and Generale Bank continuously recorded the note as debt from the date of its creation through the date of contribution. It also provided that Rockport Capital (and its associates) would decide whether Newco should be structured as a partnership or a corporation for Federal income tax purposes. The draft term sheet did not mention any films or film business. On October 21, 1996, at the request of Mr. Lerner, Shearman & Sterling sent Mr. Geary a memorandum entitled “Draft Letter Agreement” discussing the alternative transaction alluded to inPage: Previous 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 Next
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