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substantial asset (the corporations), in return for what was in
essence an IOU from some business associates. Their ability to
enjoy retirement in financial security was fully contingent upon
their receiving payment on the notes, lease, and employment con-
tract. As William Gedris, one of the Hursts’ advisers, credibly
testified, it would not have been logical for Mr. Hurst to relin-
quish shares in a corporation while receiving neither payment nor
security.
The value of that security, however, depended upon the
financial health of the company. Repossessing worthless shares
as security on defaulted notes would have done little to ensure
the Hursts’ retirement. The cross-default provisions were their
canary in the coal mine. If at any point the company failed to
meet any financial obligation to the Hursts, Mr. Hurst would have
the option to retrieve his shares immediately, thus protecting
the value of his security interest instead of worrying about
whether this was the beginning of a downward spiral. This is
perfectly consistent with a creditor’s interest, and there was
credible trial testimony that multiple default triggers are
common in commercial lending.
We find that the cross-default provisions protected the
Hursts’ financial interest as creditors of HMI, for a debt on
which they had received practically no downpayment, and the
collection of which (though not “dependent upon the earnings of
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