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Acquisition to merge with and into Schanno immediately after the
purchase.
American agreed to lend $11 million to Schanno Acquisition
to finance the acquisition of Schanno if petitioner would
guarantee all loans personally. Petitioner was unwilling to
undertake that risk, and the parties continued negotiations.
On September 6, 1989, Schanno Acquisition executed a stock
purchase agreement (purchase agreement) wherein Schanno
Acquisition agreed to purchase all the stock of Schanno from
Transamerica for $13.9 million. On the same date, American,
Schanno Acquisition, Schanno, and petitioner entered into a
comprehensive loan agreement (loan agreement) in which American
agreed to provide the following three loans to facilitate the
purchase: (1) An $8.4-million loan to Schanno Acquisition and
Schanno (Schanno note), (2) a $2.6-million revolving credit loan
to Schanno Acquisition and Schanno (credit note), and (3) a $1.2-
million loan to petitioner (Grojean note).
The loan agreement provided:
(b) As a condition to [American’s] obligations to
make the initial disbursements under the loans
described herein, the following conditions shall have
occurred and been approved to [American’s] reasonable
satisfaction:
* * * * * * *
(iii) [American] and [petitioner] have
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