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gave petitioner a $1.5 million check drawn on Rich Foods’ check-
ing account.
During the year at issue in August 1999, SUPERVALU, Inc.
(SUPERVALU), acquired Rich Foods. SUPERVALU recorded the $1.5
million advanced to petitioner in SUPERVALU’s fixed asset ledger
as a supply rebate that was to be amortized over six years in
monthly installments of $19,230.77. Petitioner recorded the
April 15, 1999 note in its books and records as a long-term note
payable.
Petitioner expended $750,000 of the $1.5 million at issue on
capital improvements and temporarily invested the balance in
certificates of deposit (CDs). Petitioner pledged the CDs as
collateral for a $960,000 loan from PNC Bank. Petitioner used
the $960,000 in PNC Bank loan proceeds for capital improvements.
During the latter part of the year at issue, Mr. Karns
concluded that it would be desirable to relocate one of peti-
tioner’s stores. As a result, he entered into negotiations to
lease a new site for that store. The prospective lessor of that
site refused to lease it to petitioner without a guaranty of
petitioner’s lease obligations.
At all relevant times, SUPERVALU agreed to act from time to
time as a guarantor of a customer’s lease obligations where
SUPERVALU concluded that to do so would serve SUPERVALU’s busi-
ness interests. Around January 25, 2000, SUPERVALU guaranteed
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