Donald G. and Beverly J. Oren - Page 35




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          realistic possibility of a greater than $34 million claim that              
          would have rendered one of the Dart companies insolvent and                 
          caused the circularity of payments to be broken.                            
               Petitioners also suggest that a small decline in the                   
          equipment values of HL and HS, or an economic slowdown in the               
          trucking business may have resulted in the elimination of                   
          shareholder equity.  Petitioners claim that with shareholder                
          equity gone, HL and HS may have been unable to repay Mr. Oren.              
          We disagree.  Even if all the assets of HL and HS were to become            
          worthless, those companies would still hold the notes executed by           
          Dart.  To repay its loans to Mr. Oren, HL and HS could have                 
          simply passed on the Dart notes to Mr. Oren.  Mr. Oren could then           
          offset his own obligations to Dart by canceling the Dart notes.             
          Only in a case where HL and HS were to become insolvent or                  
          bankrupt; i.e., where outside liabilities were to exceed the                
          value of existing assets in those companies, might the chain of             
          offsetting obligations be upset.  As stated above, this was                 
          highly unlikely.24                                                          




               24We also point out that Dart regained possession of the               
          funds it lent to Mr. Oren within days of the initial                        
          disbursements.  Following the return of the funds, Dart no longer           
          faced the risks normally associated with funds lent and retained            
          by third parties.  The benefit of Dart’s “repossession” of the              
          loan proceeds not only accrued to Dart, but also to Mr. Oren                
          since it would be unlikely that Dart would pursue repayment of              
          the loan proceeds if it already possessed them.                             





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