Tigers to
acquire interests in several trucking companies. American
National Bank and Trust Company of Chicago (American) financed
the acquisitions.
As of 1989, Transamerica Leasing Company (Transamerica)
owned all the stock of Schanno Transportation, Inc. (Schanno), a
trucking company. Sometime prior to July 13, 1989, petitioner
and Transamerica entered negotiations for petitioner's possible
purchase of Schanno. During these negotiations, petitioner
contacted American to discuss financing for the purchase. In
August 1989, petitioner formed and became the sole shareholder of
Schanno Acquisition, Inc. (Schanno Acquisition), which he formed
for the purpose of acquiring Schanno. The plan was for Schanno - 4 -
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 - 5 -
entered into and delivered the Participation Agreement and [petitioner] has purchased, or will contemporaneously purchase, a portion of [American's] interest in the [Schanno note] in the amount of One Million Two Hundred Thousand ($1,200,000) Dollars.
Pursuant to the loan agreement, American disbursed to
Schanno Acquisition $8.4 million and $2.6 million under the
Schanno note and the credit note, respectively. Both Schanno
Acquisition and Schanno signed the Schanno note and the credit
note, and both notes identified Schanno Acquisition and Schanno
as the borrowers or "makers". American was the only party
identified as the lender on the Schanno note and the credit note,
and petitioner was not a party to these notes. Both loans were
secured by all the assets of Schanno. Transamerica financed the
remainder of the purchase price, taking back a note from Schanno
Acquisition and Schanno for $2.9 million (Transamerica loan).
Also on September 6, 1989, American advanced $1.2 million
to petitioner under the Grojean note by crediting this amount to
petitioner's checking account at American. Petitioner pledged
his stock in Schanno and Schanno Acquisition as security for the
loan. Contemporaneous with execution of the Grojean note,
petitioner and American entered into a participation agreement
wherein petitioner agreed to purchase a $1.2-million - 6 -
participation interest in