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4. Petitioner was the engineer who ran Elite. He believed
that he could make a profit selling specialty paint. Mr. Hargis
and his various enterprises were "siphoning off" a great deal of
Elite's profit. By 1990, petitioner "wanted out". Mr. Hargis was
financially unstable and was pressured by the financial backer to
personally repay Elite's line of credit. The new financial backer
agreed to provide financing for the corporation only if Mr. Hargis
was no longer involved in the operation. The agreements through
which petitioner acquired the remaining Elite stock was a way for
petitioner to "get rid" of Mr. Hargis by transferring real and
personal property Elite owned with a value of approximately
$150,000. Mr. Hargis received the property in return for his
remaining interest in a corporation that was not going to survive
without new working capital (which was unavailable while he was an
owner). As a result of the presence of the new financial backer,
Mr. Hargis was relieved of his personal guarantee of Elite's loans.
5. In exchange for taking over Elite's debt, the new
financial backer received a steady source of a product he needed
from a more stable company run and owned by a person he admired and
trusted. The new financial backer believed that petitioner would
be required to guarantee the new financial backer's loans to Elite
but due to a mistake, petitioner was not asked for his guarantee
until after the new financial backer came into the picture.
Petitioner then refused to become a guarantor.
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