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indebtedness to that bank.2
As a result of negotiations between Mr. Conklin and Mr.
Karns, Super Rite agreed to advance $1.5 million to petitioner
and petitioner agreed to execute the supply agreement and the
corresponding note required by Super Rite.3 In agreeing to the
$1.5 million advance to petitioner and to the terms of the supply
agreement and the corresponding note that Super Rite required of
petitioner, Super Rite had concluded, inter alia, that petitioner
would be entitled to an estimated $1.5 million rebate under such
supply agreement if petitioner did not materially breach that
agreement.4
On April 16, 1999, petitioner executed the supply agreement
(April 16, 1999 supply agreement) that Super Rite required of
petitioner as a condition to Super Rite’s advancing $1.5 million
to it. Petitioner also executed the corresponding $1.5 million
2The supply agreement between petitioner and Super Rite
(discussed below) provided that PNC Bank was to have a first
security interest in certain equipment that was described in that
agreement as collateral with respect to petitioner’s obligations
under the supply agreement.
3Prior to agreeing to enter into a supply agreement with
Super Rite, petitioner did not have a supply agreement with that
supplier.
4Prior to agreeing to enter into a supply agreement with
Super Rite, petitioner did not receive any price rebates from
Super Rite with respect to its purchase of products from that
supplier.
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Last modified: May 25, 2011