- 15 -
on their personal residence as additional security for the
Miller/Huntington Loan. Second, the loan agreement for the
Miller/Huntington Loan was amended to require that the market
value of the collateral securing the loan be maintained in
amounts at least one-third greater than the authorized credit
line; if not, Huntington could require Miller or the Rapp Group
to provide additional security.
The newly increased Miller/Huntington Loan line of credit
was drawn down to its full $1,500,000 authorized amount by April
8, 1994. Required monthly payments of interest were made to
Huntington, along with periodic principal payments and draws, so
that the outstanding balance on the Miller/Huntington Loan was
$1,375,000 as of December 28, 1994. On its Federal income tax
return for 1994, MMS reported $1,374,930 in loans from
shareholders as of yearend.9
On June 30, 1994, the security provided for the
Miller/Huntington Loan was again modified. The loan agreement
was amended to require the Rapp Group to pledge collateral in the
form of public securities (rather than Danek stock) with
aggregate base and call values of $2,009,450.94 and of
$1,785,385.42, respectively.
9 The $70 discrepancy between the stipulated 1994 yearend
balance of the Miller/Huntington Loan and the figure reported by
MMS as the outstanding amount of loans from shareholders is not
material, in our view. Cf. supra note 8.
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