1986. (Tr. 11, 12). Thereafter he met alone with Mr. Gonzalez in a local bar-restaurant where they spoke for another 30-40 minutes over drinks. (Tr. 123, 262, 372).
At that meeting Mr. Pappas told Mr. Gonzalez that Armadora was in default of its obligations on the debt owed to ASTANO (Tr. 12, 13) and that Armadora was seeking financing of $ 9,000,000 for each Vessel for an aggregate loan of $ 18,000,000. (Tr. 422).
At this time each Vessel had a market value of $ 9,000,000; thus, Armadora was seeking financing equal to 100% of the value of each of these Vessels. (Tr. 422).
Mr. Pappas explained that in his view the market was severely depressed and that he foresaw that within the next three years the $ 9,000,000 value of each of the Vessels would appreciate by 100%. (Tr. 129, 371, 373). GECC agreed with this assessment of the market. (Tr. 372-74). Mr. Pappas further advised GECC that within the next three years he intended to sell the Vessels and capture this market rise. (Tr. 371-72, 375, 424). As an inducement to GECC for providing maximum financing, Mr. Pappas agreed to share with GECC 30% of this appreciation of the Vessels. (Tr. 222, 267). GECC concedes that this concept of speculating on the market value appreciation and a sale within the next three years was the conceptual underpinning of the profit sharing arrangement. (Tr. 13-14, 110, 127, 129, 131-32, 135, 222).
Mr. Pappas also advised Mr. Gonzalez that Armadora had entered into bareboat charters for each Vessel with Shell France. Each charter had a term of approximately three years. (Tr. 13; Exh. J1, J2). At this meeting they also discussed the basic terms of the loans concerning which there is no dispute, including the amount, regular interest rate, duration, security, etc. (Tr. 24, 262-63). The parties offer differing views on whether, in addition to the regular interest to be paid, GECC was to receive some sort of "equity" interest in the Vessels, as claimed by Mr. Gonzalez, or merely a "profit participation," as testified to by Mr. Pappas. (Tr. 18-19, 266-67, 375-76). The parties agree that the additional payment to GECC, whether characterized as an equity interest or profit participation, is described in the Loan Agreement as a Special Interest Payment.
Plaintiff asserts that Mr. Gonzalez explained to Mr. Pappas that, because of the high risk involved in this transaction, as evidenced by the request for financing equal to 100% of the current market value of the Vessels, the highly volatile shipping market, the existing default by Armadora on the then existing loans from ASTANO, and the fact that another vessel owned and operated by Mr. Pappas had been arrested by the Nigerian Government for an alleged theft of cargo, GECC would consider making this loan only if GECC received an "Equity Kicker" or "Equity Participation" in the Vessels. (Tr. 14, 17, 18).
The "Equity Kicker" or "Equity Participation" required by GECC was not interest calculated on the loan nor interest on interest, but was an additional and separate payment to GECC after the principal and interest on its loan to Armadora had been fully repaid. Plaintiff alleges that this Equity Participation was given GECC in return for the risks involved in the loan and represented GECC's interest in the transaction as a whole. The Equity Participation did not give GECC an ownership interest in or legal title to the Vessels. (Tr. 14-17, 220-22).
During that meeting Mr. Gonzalez claims that he explained to Mr. Pappas how GECC's Equity Participation would work and described several examples of an Equity Participation to Mr. Pappas. (Tr. 16-19).
1. Pre-Loan Negotiation Documents
In support of its claim, GECC contends that the provisions found in its proposal letter and commitment letter, sent before the Loan Agreement was negotiated or executed, should govern the parties' rights.
Mr. Gonzalez sent a Loan Proposal Letter, dated January 16, 1986, to Armadora. (Exh. 1). The Loan Proposal Letter memorialized the terms and conditions which had been discussed by Mr. Gonzalez and Mr. Pappas during their meeting at GECC, including GECC's Equity Participation. (Tr. 26, 27).
The Loan Proposal Letter was thereafter executed by Mr. Robert Miliaresis, an officer of Armadora, with the notation "Accepted and Agreed this 30th day of January, 1986" and returned to Mr. Gonzalez by Armadora on January 30, 1986. (Exh. 1).
Upon receipt of the Loan Proposal Letter duly executed and accepted by Armadora, Mr. Gonzalez made a presentation to the Credit Committee of GECC. The Credit Committee approved the proposal based upon the terms in the Loan Proposal Letter and authorized the issuance of a Loan Commitment Letter to Armadora. (Tr. 29).
A Loan Commitment Letter is a binding obligation by GECC to make a loan according to the terms and conditions set forth in its Loan Commitment Letter. (Tr. 29).
The Commitment Letter provided that it was not all inclusive and was subject to the negotiation of formal loan documentation satisfactory to the parties. (Exh. 2 at 4).
GECC issued a Loan Commitment Letter dated February 3, 1986 to Armadora which set forth the terms and conditions upon which GECC would lend $ 18,000,000 to Armadora. (Exh. 2). One of the enumerated terms and conditions was GECC's Equity Participation.
The Equity participation, as set forth in the Loan Commitment Letter (Exh. 2 at 2), was identical to the terms and conditions of the Equity participation set forth in the Loan Proposal Letter. (Exh. 1) (Tr. 30, 31, 431, 491-92).
The Loan Commitment Letter (Exh. 2) set forth the following relevant terms and conditions:
. A loan facility of $ 9,000,000 per Vessel, $ 18,000,000 in total;
. A loan term of three years;