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For many years, decedents owned and (with other members of
the Farnam family) managed Farnam Genuine Parts, Inc. (FGP), a
Minnesota corporation. Prior to its incorporation in 1981,
decedent Duane B. Farnam owned and operated the business as a
sole proprietorship.
Throughout its existence, FGP operated retail and wholesale
stores in Minnesota, North Dakota, and South Dakota that sold
automobile parts, retail and wholesale, to individuals, farms,
tire stores, automobile repair shops, gasoline service stations,
and construction and industrial companies.
Starting in 1981 and every year thereafter, members of the
Farnam family, including decedents, and entities owned by members
of the Farnam family lent funds to FGP. FGP used the borrowed
funds in its business operations. Over the years, to
substantiate and to document the loans, FGP issued promissory
notes (FGP notes) in favor of the Farnam family members and
related entities from whom the borrowed funds were received.
The FGP notes were unsecured and subordinate to claims of
FGP’s outside creditors. Initially, FGP paid principal but not
interest on the borrowed funds, but from 1984, in response to new
tax laws, FGP made annual payments of principal and interest on
the FGP notes. The parties stipulate that the FGP notes are to
be treated as legitimate and enforceable FGP debt obligations.
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Last modified: March 27, 2008