Joseph Nachman - Page 6

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            Chemical Bank transferred Swirl's account to its workout division                          
            in March 1986.                                                                             
                  Swirl needed about $3.8 million to operate, but only had                             
            enough collateral to secure a $3.3 million loan.  Swirl sought                             
            debt financing from five lenders but was not successful.  No                               
            lender would lend Swirl $3.8 million without additional                                    
            collateral from Swirl or a capital infusion from Chemical Bank.                            
            In May 1986, Swirl hired Financo, Inc. (Financo), a subsidiary of                          
            Shearson Lehman Brothers, Inc., to find a buyer or investor for                            
            Swirl.  Financo found neither.                                                             
            E.    Chemical Bank and Swirl's New Financing Arrangement                                  
                  1.    The New Agreement                                                              
                  In September 1986, Chemical Bank told Swirl that it was                              
            willing to continue to lend funds to Swirl if its financing                                
            arrangement could be restructured.  Swirl and Chemical Bank                                
            executed a new financing agreement (new agreement) on October 15,                          
            1986, which gave Swirl a revolving line of credit secured by 80                            
            percent of the net amount of its receivables.  About $1.5 million                          
            of the old line of credit was replaced by two promissory notes                             
            payable to Chemical Bank.  The promissory notes required Swirl to                          
            pay eight quarterly installments of $187,500 starting on                                   
            January 15, 1987, and interest at a rate of 2 percent higher than                          
            Chemical Bank's prime rate.  The promissory notes were secured by                          
            Swirl's accounts receivables, machinery and equipment, and the                             
            cash surrender value of its officers' life insurance.                                      




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