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equipment that Elmco purchased from GCC.3 Petitioner agreed to
pay $500,000 as follows: $18,500 cash; delivery of three "Equity
Promissory Notes" totaling $82,700 bearing 12.5 percent per annum
interest, and execution of a $398,800 long-term "Buyer
Acquisition Note" bearing 14 percent per annum interest.4 The
three Equity Promissory Notes were negotiable and fully recourse.
The Buyer Acquisition Note was payable as follows: $830.00 per
month for the first 36 months, then $11,716.70 per month for 72
months. All monthly payments accrued in arrears and were paid
quarterly on the first day of April, July, October, and January.
The payment schedule mirrored exactly Elmco's payment schedule
under its note to GCC. Petitioner also agreed to pay Elmco an
additional $1,240.71 on December 31, 1982, which amount
constituted interest up to that date.
The Purchase Agreement provided that petitioner would lease
the computer equipment to GCC and enter a remarketing agreement
with GCC as of the date of purchase. Pursuant to a December 22,
1982, "Security Agreement", petitioner granted Elmco a security
interest in the computer equipment, the GCC lease, and the
underlying end-user leases. The security interest, however, was
3 Petitioner owned of all the equipment involved in the
transaction for all purposes.
4 The parties agree that petitioner is at risk with respect to
the Equity Promissory Notes as well as the $18,500 cash payment.
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