Cascade Designs, Inc. - Page 11




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          1982, report that Lea demanded payment of the delinquent amounts,           
          and that the corporate officers considered whether Cascade could            
          make the payments.  Because the corporation required all its                
          working capital to build its inventory of goods available for               
          sale, Lea suggested that Cascade get a loan from a bank or that             
          the other officers make loans to the corporation so that Cascade            
          could pay the amounts owed to him.  The other officers rejected             
          this proposal.                                                              
               The minutes of the officers' meeting on December 1, 1982,              
          reported that $130,000 of the amount owed to Lea would be paid              
          during the month, but the balance due in April would not be paid            
          until July or August of 1983.  These minutes also report that Lea           
          had consulted a lawyer about the patent payments and intended to            
          meet with him again.  The minutes of the February 23, 1983,                 
          meeting report that $250,000 was still due Lea and could not be             
          paid.  At this meeting, the officers discussed setting up an                
          installment schedule to pay the outstanding balance over time.              
               After Lea's consultations with his lawyer, Lea and Cascade             
          agreed to renegotiate the 1979 sales agreement.  The renegotiated           
          agreement (the 1982 agreement3 or the agreement), recognized that           
          Cascade was in breach of the 1979 sales agreement, and, in                  


               3Although we refer to the agreement as "the 1982 agreement",           
          the parties spent some time negotiating its terms, and the                  
          agreement was not entered into until April or May 1983.                     






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