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The recourse provisions were determined without giving effect to
the deferral provisions.
Under the limited recourse promissory note and security
agreement, the leased equipment could be replaced with other
equipment not initially secured by the note. Under the limited
recourse provision of the long-term note, the seller looked
solely to the collateral for payment by the buyer, other than the
buyer's recourse obligation described earlier.
On December 31, 1980, IRA provided a letter to FS regarding
the offsetting of payments made under the promissory notes and
the leases. IRA directed FS to deduct from the monthly rent
payments owed to IRA an amount equal to the note payments owed by
IRA to Horizon and that FS pay the deducted amount directly to
Horizon for the account of IRA.
With respect to the IRA/Horizon purported purchase
agreement, FS delivered the collateral assignment of leases dated
December 31, 1980, to IRA. An agreement of lease between IRA and
FS was executed on December 31, 1980. In addition, a remarketing
agreement by and between IRA and FS was consummated.
With respect to the IRA/Horizon leasing transaction, the
total cash investment of IRA was to be $2,044,264. The total
rent due FSC was $1,978,323.79, resulting in a loss of
$65,940.21. As of January 1986, the residual value of the
equipment subject to the sale and leaseback was zero.
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