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As part of restructuring Swirl's debt, Chemical Bank
required petitioner to grant a $1 million lien on his personal
residence. Chemical Bank reduced the amount of the lien to
$450,000 in April 1987. Chemical Bank also required petitioner
and his brother to make $500,000 available to Swirl as working
capital.
2. Petitioner's Transfer of $350,000 to Swirl in
October 1986
Petitioner and his brother borrowed $500,000 from Nathan
Addelstone (Addelstone) (not identified in the record) in October
1986. They executed a second mortgage on the Easley Plant and
Ware Place as collateral. Petitioner borrowed $150,000 from Jack
Lehman (Lehman) in October 1986.
On October 27, 1986, petitioner transferred2 $350,000 to
Swirl in exchange for two promissory notes. This amount included
$250,000 from petitioner's one-half share of the Addelstone loan
and $100,000 from the Lehman loan. Swirl agreed to pay interest
of prime plus 2 � percent monthly starting on November 1, 1986,
and to make a balloon payment of the principal on April 1, 1988.
The notes were subordinated to the claims of Swirl's other
creditors. Also on October 27, 1986, petitioner's brother
transferred $250,000, the other half of the Addlestone loan, to
Swirl.
2 By using the terms "transfer" or “advance”, we do not
intend to characterize the transaction as debt or equity.
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