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loan involved here is a $4 million loan2 from Provident Bank (the
bank) pursuant to a loan agreement dated July 29, 1993.
The $4 million loan consisted of three principal components,
each collateralized differently. First, there was a $750,000
equipment note that was secured by equipment Level Propane would
purchase with the loan proceeds. Second, there was a $2.5
million revolving term loan that was secured by petroleum tanks
and supply contracts Level Propane owned. Third, there was a
$750,000 demand loan that was secured by the inventory and
accounts receivable of Level Propane. As additional collateral
for the $4 million loan to Level Propane, petitioner pledged all
the shares he owned of Level Propane and a $1 million life
insurance policy on his life.
Level Propane made monthly interest payments on the $4
million loan through an account that Level Propane was required
to maintain with the bank. Petitioner made no payments on the
loan.
Level Propane defaulted on the loan and was forced into
involuntary bankruptcy. At no time did the bank demand payment
from petitioner individually or begin collection action against
petitioner regarding the $4 million loan to Level Propane.
2During his testimony, petitioner briefly referred to
approximately $60 million in loans. Petitioner failed to
introduce any evidence, however, to document any loans other than
the $4 million loan from Provident Bank.
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