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to F & G Corp. was paid in cash with the remainder financed
through notes. These notes provided that 10 percent of the notes
were recourse but that the recourse portion of the notes was only
due after the nonrecourse portion, 90 percent, was paid in full.
All of the monthly payments required among the entities in
the above transactions offset each other. These transactions
were done simultaneously. Although the recyclers were sold and
leased for the above amounts under the structure of simultaneous
transactions, the fair market value of a Sentinel EPE recycler in
1981 was not in excess of $50,000.
PI allegedly sublicensed the recyclers to entities that
would use them to recycle plastic scrap. The sublicense
agreements provided that the end-users would transfer to PI 100
percent of the recycled scrap in exchange for a payment from FMEC
Corp. based on the quality and amount of recycled scrap.
The six Sentinel EPE recyclers purportedly leased by
Clearwater were used infrequently and often were not in use at
all. PI failed promptly to pick up the scrap and at times, did
not pay the end-user for the scrap that it did pick up. Also, PI
sometimes failed promptly to reclaim the machines that were
rejected by prospective end-users. One of the six recyclers
bought by Clearwater, for example, was placed with four different
end-users in 4 years. The first end-user refused to accept
delivery of the recycler. The second end-user found the recycler
to be too costly and noisy. PI took 6 months to pick up the
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