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making such a transfer.
Contrary to what is suggested in the above letter agreement,
as of December 1984, no net mailing revenues had yet been produced
from either the prospect letter mailings or housefile letter
mailings conducted. Only losses or relatively small amounts of
net mailing revenues were produced by the housefile letter
mailings up until June or July 1985. It was not until about July
1985, that the cumulative net revenue produced from housefile
letter mailings began to somewhat approach the cumulative amount
of funds W&H provided to meet petitioner’s operating expenses.
Initially, some of the funds used to meet petitioner’s operating
expenses were advanced by W&H to the Escrow Account. Also, W&H
deferred receiving payment of its fees.
Later, as the net revenue produced from mailings began to
increase, W&H authorized and permitted petitioner to “draw”
increasingly larger monthly amounts of funds from the Escrow
Account to finance petitioner’s larger annual operating budgets.
Up until about the execution on April 8-9, 1987, of an addendum to
the Contract, petitioner was fully liable to repay the draws it
had taken, to the extent the draws exceeded the 50 percent of
cumulative housefile income guaranteed to petitioner under the
Contract. The draws petitioner received were to be repaid within
6 months, regardless of the direct mailing campaign’s
profitability. The events leading up to and culminating in the
execution of the April 1987 addendum to the Contract are discussed
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