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As a result, during 1983 and 1984, petitioner and W&H
discussed their possible entry into a fundraising contract. As
of March 12, 1984, petitioner estimated it would have an
operating deficit for 1984 of $13,000, without additional
fundraising income. In addition to providing the initial capital
to conduct petitioner’s direct mail fundraising campaign, W&H
offered to furnish funds with which petitioner could continue to
operate.
On June 11, 1984, petitioner and W&H entered into a “Full
Service Direct Response Fundraising Agreement” (hereinafter
sometimes referred to as the Contract) for a term ending May 30,
1989. As of the date the Contract was entered into, petitioner
was on the verge of insolvency; petitioner did not have money to
start a direct mail or other fundraising program on its own. The
Contract was amended by an addendum on April 8-9, 1987. Unless
the context indicates otherwise, references to the Contract are
to be taken as including both the Contract entered into in 1984
and the 1987 amendment. The Contract expired in May 1989, and
was not renewed.
In conjunction with the formation of the Contract, W&H
agreed to advance money to petitioner in order to cover the
initial costs of the mailings. W&H also agreed to give to
petitioner an immediate advance, or “draw”, against petitioner’s
projected future earnings from the Contract.
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