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On May 31, 1991, SLC, the bank, and petitioners, as
guarantors, entered into an agreement (the agreement) containing
the terms and conditions of a structured workout concerning the
repayment of the indebtedness to the bank. The agreement, in
part, provides as follows:
(1) SLC is to pay to the bank $1,100,000 (the payoff) on or
before August 2, 1991 (the settlement date);
(2) the bank will release its security interest in the
remaining collateral upon payment of the payoff by the settlement
date; and
(3) after the payoff by the settlement date, the bank will
refrain from exercising any remedies under the SLC note or
petitioners’ guarantees if bankruptcy is not filed by or for SLC
or petitioners, among others, voluntarily or involuntarily,
within 400 days after the settlement date.
SLC made the payoff by the settlement date, and the bank
released its security interests in the remaining collateral of
SLC. The other conditions of the agreement were met, and the
bank, at the expiration of the 400-day period, released SLC from
its liability as maker of the SLC note and petitioners from
petitioners’ guarantees.
At no time did the bank make any formal written request or
formal written demand for payment from petitioners pursuant to
petitioners’ guarantees.
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Last modified: May 25, 2011