Madeline Cook - Page 3

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          the performance of Cold Spring's accounts receivable after the              
               Also pursuant to the sales agreement between Cold Springs              
          and Puro, petitioner's son was offered employment with Puro,                
          which he declined.  Instead, after the sale of Cold Springs to              
          Puro, petitioner's son went into the catering business, doing               
          business as Hamilton Caterers, Inc. (Hamilton).  Petitioner's son           
          purchased Hamilton for $650,000.  He paid $100,000 in cash and              
          obtained seller financing for $550,000.  Petitioner's son was the           
          sole owner of that business.                                                
               In connection with the operation of Hamilton, petitioner’s             
          son borrowed funds from the Jerry Kaplan Company of New Jersey              
          (Kaplan) in the approximate original amount of $80,000 during               
          1992 (the Kaplan loan).  As security for the Kaplan loan,                   
          petitioner’s son pledged the income stream due to Cold Springs              
          from Puro to Kaplan.2                                                       

          2    At trial, petitioner’s son testified that he was an officer            
          and director of Cold Springs and had the capacity in that                   
          position to pledge the Cold Springs assets as security for the              
          loan from Kaplan.  As a 51-percent shareholder, petitioner                  
          appears to have had the ability to block her son from pledging              
          the income stream.  Whatever power she had to block the pledge,             
          however, she did not exercise it, as, in her words, she stated:             
          “Well, my husband and my son always took care of the business               
          affairs.  I was not knowledgeable about that.”                              

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