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Rides, Inc., with respect to the term note. Mr. Wood required
petitioner’s guaranty as a condition precedent to his acceptance
of the note from IBC Amusement Rides, Inc. Petitioner
reluctantly agreed to this guaranty in order to close the
purchase agreement and in recognition that the acquisition
transaction was in jeopardy without his guaranty. A resolution
by IBC’s board of directors describes the circumstances of the
guaranty and authorizes a guaranty fee be paid to petitioner:
In May 1989, at the time the acquisition of Mr. Wood’s
interests in Great Escape and Fantasy Island were in
the final stage of negotiation, NatWest requested that
Mr. Wood’s three-year promissory note be subordinated
in all respects to the obligation of the Company to
NatWest. Mr. Wood, when advised of this request,
declined to complete the transaction unless he received
adequate security for the $1,500,000 obligation of the
Company and that adequate security, in his opinion, was
the personal guarantee of Thomas K. Scallen, who was
reluctant to provide the guarantee. However, in
recognition that the transaction was in jeopardy,
Thomas K. Scallen agreed to provide the guarantee.
The Directors discussed possible alternative financing
to the guarantee or payment to Mr. Wood in order to
determine the appropriateness of fees. Mr. Denis A
Mola discussed the approach of an investment banker,
including comparisons to “bridge loans” which would
normally require 5 points over the life of the loan
taking into consideration periodicity. Mr. Mola
further advised that to obtain such a “bridge loan”
would have required the Company give a substantial
equity call on the Company. The Directors discussed
the lack of security or the subordination, and the
availability of potential alternatives for Mr. Thomas
K. Scallen’s personal guarantee; the timing of the
granting of the guarantee; the reluctance of Mr. Wood
to go forward with the transaction unless the guarantee
was provided; the comparison to the “bridge loans” and
the requirement to give up equity to provide it. After
further discussion, Mr. Lawrence Beasley moved and Mr.
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