Form 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
Washington D.C.
(X) Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1998 Commission File No. 0-26884
NETTER DIGITAL ENTERTAINMENT, INC.
(exact name of registrant as specified in charter)
Delaware 95-3392054
(State or other (I.R.S. Employer
jurisdiction of incorporation) Identification No.)
5125 Lankershim Blvd.
North Hollywood, California 91601
(Address of principal executive office)
Registrant's telephone number, including area code: 818/753-1990
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ___
As of November 9, 1998 the Registrant had 3,334,405 shares of its Common Stock,
$.01 par value, issued and outstanding.
NETTER DIGITAL ENTERTAINMENT, INC. AND SUBSIDIARIES
FORM 10-Q/A
September 30, 1998
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements (Unaudited) NUMBER
------
Consolidated Balance Sheets as of September 30, 1998
and June 30, 1998. 3
Consolidated Statements of Operations for the
three-month periods ended September 30, 1998 and
September 30, 1997. 4
Consolidated Statements of Cash Flows for the
three-month periods ended September 30, 1998 and
September 30, 1997. 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Page 2 of 11
PART 1. FINANCIAL INFORMATION
Item 1. Fiancial Statements
NETTER DIGITAL ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1998 1998
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 1,206,073 $ 1,634,809
Accounts receivable, net of allowance of $46,000 2,366,482 2,285,011
Due from officer 155,897 155,897
Inventory 1,945,119 1,631,025
Production costs, net 257,021 251,632
Other 126,686 134,537
-------------- -------------
TOTAL CURRENT ASSETS 6,057,278 6,092,911
EQUIPMENT, net 3,265,265 3,157,394
GOODWILL, net 1,912,357 1,938,434
DEPOSITS AND OTHER ASSETS 415,842 333,760
-------------- -------------
$ 11,650,742 $ 11,522,499
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and production fee advances $ 2,382,723 $ 2,304,092
Accrued expenses 271,816 265,582
Deferred revenue 852,223 1,106,957
Due to stockholder 36,497 36,497
Credit facilities 635,717 525,717
Current portion of capital lease obligations 823,328 734,329
-------------- -------------
TOTAL CURRENT LIABILITIES 5,002,304 4,973,174
-------------- -------------
CAPITAL LEASE OBLIGATIONS 1,348,606 1,337,186
MINORITY INTEREST 500 500
-------------- -------------
STOCKHOLDERS' EQUITY :
Preferred stock, $.001 par value, 2,000,000 shares
authorized; 54,550 shares issued and
outstanding 328,585 304,366
Common stock, $.01 par value, 20,000,000 shares
authorized; 3,334,405 shares issued and
outstanding 33,344 33,344
Additional paid-in capital 4,726,171 4,726,171
Retained Earnings 211,232 147,758
-------------- -------------
TOTAL STOCKHOLDERS EQUITY 5,299,332 5,211,639
-------------- -------------
$ 11,650,742 $ 11,522,499
============== ==============
<FN>
<FN1>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
Page 3 of 11
NETTER DIGITAL ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30,
---------------------------
1998 1997
---------------------------
(Unaudited) (Unaudited)
REVENUES:
Production $ 6,887,621 $ 5,844,337
Sales 999,506 929,533
------------ ------------
TOTAL REVENUES 7,887,127 6,773,870
------------ ------------
EXPENSES:
Production 5,989,455 5,114,389
Cost of goods sold 529,909 458,737
General and administrative 1,189,356 1,106,792
Amortization of goodwill 26,078 26,078
------------ ------------
TOTAL EXPENSES 7,734,798 6,705,996
------------ ------------
OPERATING INCOME 152,329 67,874
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 3,020 9,910
Interest (expense) (60,612) (53,759)
Other income 5,834 8,026
------------ ------------
TOTAL OTHER INCOME (EXPENSE) (51,758) (35,823)
------------ ------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 100,571 32,051
PROVISION FOR INCOME TAXES 23,000 18,500
------------ ------------
NET INCOME $ 77,571 $ 13,551
============ ============
Cumulative preferred stock dividend 14,097 10,611
Net Income to common shareholders $ 63,474 $ 2,940
============ ============
Net Income per common share-basic
and assuming dilution $ 0.02 $ 0.00
============ ============
Weighted average common shares outstanding 3,334,405 3,327,742
============ ============
The accompanying notes are an integral part of the
consolidated financial statements.
Page 4 of 11
NETTER DIGITAL ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended September 30,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 77,571 $ 13,551
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 208,145 108,583
Amortization 26,078 26,078
Changes in operating assets and liabilities:
(Increase) in accounts receivable (81,471) (608,447)
Decrease/(Increase) in other current assets 7,851 (32,363)
(Increase) in inventory (314,094) (226,822)
(Increase) in production costs (5,389) (10,966)
(Increase)/Decrease in deposits and other assets (82,082) 54,865
Increase/(Decrease) in accounts payable 78,631 (899,134)
Increase/(Decrease) in accrued expenses 6,234 (24,114)
Decrease in deferred revenue (254,734) (158,863)
--------------- ---------------
(410,831) (1,771,183)
--------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (333,260) 1,757,632
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (55,475) (54,345)
--------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (55,475) (54,345)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 130,000 537,259
Notes payable principal payments (20,000) (42,990)
Principal payments of capital lease obligations (150,001) (46,539)
--------------- ---------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (40,001) 447,730
--------------- ---------------
NET DECREASE IN CASH (428,736) (1,364,247)
Cash, beginning of period 1,634,809 2,574,522
--------------- -------------
Cash, end of period $ 1,206,073 $ 1,210,275
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Cash paid for interest $ 60,612 $ 53,759
Cash paid for income taxes $ 38,000 $ 9,800
Noncash activity:
Stock issued for legal fee settlement $ - $ 50,000
Stock dividend $ 14,097 $ 10,611
Purchase of equipment through leases payable $ 250,212 $ 531,531
<FN>
<FN1>
The accompanying notes are an integral part of the
consolidated financial statements.
</FN>
</TABLE>
Page 5 of 11
NETTER DIGITAL ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PREPARATION
The accompanying audited and unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial statements and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and disclosures required for annual financial statements. These financial
statements should be read in conjunction with the consolidated financial
statements and related footnotes for the year ended June 30, 1998 included in
the Form 10-KSB for the year then ended.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's financial
position as of September 30, 1998, and the results of operations and cash flows
for the three-month periods ended September 30, 1998 and 1997 have been
included.
The results of operations for the three-month period ended September 30, 1998,
are not necessarily indicative of the results to be expected for the full fiscal
year. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Form 10-KSB as filed with the
Securities and Exchange Commission for the year ended June 30, 1998.
DUE FROM OFFICER/RECEIVABLE FROM RELATED PARTY
On November 20, 1995, the Company's Chief Executive Officer entered into a
promissory note with the Company in the amount of $194,876, bearing interest at
7.25% per annum. The remaining unpaid principal balance of $155,897 and accrued
interest of $2,825 is due on May 20, 1999. The Board of Directors has agreed to
allow the note to be repaid in shares of the Company's Common stock. The stock
repayment required is 110% of the outstanding loan amount which will be priced
at the fair market value on the date of repayment.
Page 6 of 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The Company is engaged in three primary business activities:
- -Entertainment Production. The Company is engaged in the acquisition,
development and production of television series, made-for-television movies,
documentaries, theatrical motion pictures and multimedia products (collectively
and individually referred to as the "Productions" or "Projects"). The Company
specializes in combining live action film production with computer graphics and
other digital imaging in the creation of dramatic series, documentaries, and
children's programming utilizing state-of-the-art entertainment production
technology. The Company has produced the award winning series "Babylon 5" and
is currently producing a follow-on series entitled "Crusade." With its recent
work on the children's series, "Voltron: The Third Dimension" ("Voltron"), the
Company is at the forefront of the fully animated or animation intensive
production market for television. The Company's general practice has been to
sell or license its Productions under a production contract with a major
entertainment studio or distributor who is responsible for the production costs
of the Production. The Company has also established an objective to retain
greater equity participation in the projects it produces by increasing its
overhead and equity commitments for future projects (see "Liquidity and Capital
Resources" below).
- -Computer Animation and Visual Effects Production Services. As an outgrowth of
its traditional core business of developing and producing media Productions, the
Company has entered the business of providing digital media production services
to outside clients. In support of its own Productions, especially "Babylon 5"
and "Crusade," the Company has developed significant expertise in computer
graphics production, digital post-production and various other digital imaging
techniques. The quality and popularity of the Company's productions has created
industry-wide recognition of its creative and technical skills in these areas.
The Company believes that an active market exists for projects requiring
creative, high quality, cost effective digital graphics and effects. In order
to more fully exploit its strengths in these areas, the Company formed the
Netter Digital Technologies Division (or "production services") to market
computer graphics and digital post-production services to outside clients.
The Company is increasing its efforts in this area and will continue to bid on
numerous outside projects on a larger scale, including feature films, television
mini-series and commercials.
- -Videssence Lighting Products. The Company's Videssence subsidiary manufactures
and distributes media lighting products which incorporate its patented SRGB(tm)
lighting technology. These products are used for the illumination of studios,
stages and other production environments in the sound stage, motion picture,
theater and theme park industries, as well as in the video conferencing,
distant learning, and pre-press digital photography markets. With the
introduction of new technology in the middle of fiscal 1998, Videssence products
are now suitable for all media production lighting applications using either
film or video platforms. The Company's high-tech fluorescent lights consume
significantly less electricity than traditional incandescent production lighting
products while generating greatly reduced amounts of heat. Thus, these lights
are more comfortable for the talent working under them and can generate
significant electricity and air-conditioning related savings. The Company
markets its lighting products in the USA and internationally through a network
of manufacturer's representatives, distributors, dealers, and direct sales
staff.
Page 7 of 11
Results of Operations
Revenues. The Company's revenues increased to approximately $7.89 million for
the first quarter ended September 30, 1998, an increase of 16.4%, as compared to
approximately $6.77 million for for the quarter ended September 30, 1997. This
increase resulted primarily from approximately $1.35 million in additional
revenues generated from the Company's Netter Digital Technologies Division.
These revenues resulted primarily from the Company's work on "Voltron" and the
video game for "Sega," but also can be attributed to the growth of the Division
as a whole over the year. This increase was partially offset by a $350,000
decrease in revenues from the "Babylon 5," "Crusade," and related movies
productions as compared to the same period of the prior year. These variations
are the result of production timing, as total production budgets are similar.
The remaining $120,000 of increased revenues came from Videssence and the
Company's "Babylon 5" Fan Club.
Gross Margin. The Company's gross profit for the quarter ended September 30,
1998 was approximately $1.37 million, or 17.3% of revenues, as compared to
approximately $1.20 million, or 17.7% of revenues, for the quarter ended
September 30, 1997. This decrease in gross margin resulted from a decrease in
Videssence's gross margin to 47.0% during the quarter ended September 30, 1998,
as compared to 50.7% during the quarter ended September 30, 1997. This
decrease was primarily due to the expansion of the dealer network during the
sales restructuring in fiscal 1998 and a change in the product mix of sales to
incorporate the new products developed in the middle of fiscal 1998 which have
somewhat lower gross margins. This Videssence decrease was partially offset by
an increase in gross margin from the Company's entertainment production and
production services activities to 13.0% this quarter, as compared to 12.5% for
the same period in the prior year, primarily due to additional revenues from the
Netter Digital Technologies Division which realizes higher gross margins than
the entertainment production business.
General and Administrative Expenses. General and administrative expenses as a
percentage of net revenues decreased to 15.1%, or approximately $1.19 million,
during the quarter ended September 30, 1998 as compared to 16.3%, or
approximately $1.11 mllion, during the quarter ended September 30, 1997. This
decrease resulted from the economies of scale realized by the Company as it
brought in additional work in its Netter Digital Technologies Division, thereby
spreading similar general and administrative expenses over an expanded revenue
base.
Operating Income (Loss). The Company achieved operating incomes of
approximately $152,000 and $68,000 for the quarters ended September 30, 1998 and
September 30, 1997, respectively. For the quarter ended September 30, 1998,
operating income of approximately $250,000 from the Company's entertainment
production and production services activities (as compared to $191,000 in the
quarter ended September 30, 1997) offset an operating loss of approximately
$98,000 at its Videssence operation (as compared to $123,000 in the prior
period). The improvement in operating income resulted primarily from production
services for the new "Voltron" television series. The operating loss at
Videssence can be attributed to lower than expected sales.
Page 8 of 11
Other Income and Expenses. Interest income decreased to $3,020 for the quarter
ended September 30, 1998 compared to $9,910 for the same prior year period, as
proceeds from the Company's November 1995 initial public offering were fully
drawn from short term investments and used for working capital for Videssence by
the end of the Company's fiscal year ended June 30, 1998. Interest expense
increased to $60,612 for the quarter ended September 30, 1998 from $53,759 in
the same period of the previous year due to the Company's further utilization of
capital lease lines for continued expansion of its computer animation and visual
effects facilities.
Liquidity and Capital Resources
The Company has funded its operations to date primarily through cash flows from
operations, its initial public offering of Common Stock and Warrants completed
in November 1995 which generated net proceeds of approximately $3.2 million, and
a February 1997 preferred stock placement which raised $424,000 in gross
proceeds. With respect to production costs for particular entertainment
Projects, production contracts are entered into with studios, networks and
distributors who cover 100% of the production funding. Such production funds
are received by the Company during the production stage of a Project. To date,
the Company has been able to secure production financing from a major studio,
network or distributor for all of its Projects. While the Company believes that
similar financing arrangements can be made for future productions, there
can be no assurance that the Company will be successful in obtaining such
production financing. In that event, the Company would have to secure
alternative sources for financing Projects. Moreover, as the Company continues
to develop new forms of high technology production activities and projects for
new entertainment ancillary markets, it may elect to make additional overhead
and equity commitments for these new projects. These potential new financial
commitments, if pursued, could create additional risk for the Company as to
whether it will recover the costs of its investment and generate a profit.
During the quarter ended September 30, 1998 and September 30, 1997,
respectively, the Company derived approximately 79% and 90% of its
entertainment production revenues from its agreements with Warner Bros. relating
to the production of the "Babylon 5" series, "Crusade" series, and the
associated made for television movies. If the "Crusade" series is not renewed
through an additional agreement extension after the first season and the Company
is unable to replace the series with one generating comparable revenues, the
Company's financial condition and operations could be materially adversely
affected.
Cash used in operating activities was approximately $333,000 for the
three-months ended September 30, 1998. The biggest uses of cash were a build-up
of inventory at Videssence and a decrease in deferred revenue as the Company
used pre-billed funds for production.
Effective July 1997, the Company's Videssence subsidiary obtained a $750,000
line of credit with a bank, guaranteed by the Company, which required monthly
payments of interest on outstanding principal amounts at 2% above the bank's
reference rate. The loan agreement also requires the Company to comply with
certain restrictive covenants, including maintaining a minimum working capital
and specific financial ratios. As of September 30, 1998, the Company owed an
outstanding principal amount of approximately $588,000 on such line.
Management believes that its present cash position and overall liquidity will
enable the Company to meet its operating commitments for the next twelve months.
As of September 30, 1998, the Company's sources of liquidity included cash and
cash equivalents totaling approximately $1.2 million, of which approximately
$400,000 is contractually committed to fund specific Projects. The Company has
approximately $672,000 of outstanding debt and approximately $2,172,000 of
outstanding capital leases as of September 30, 1998. The Company uses capital
leases primarily for equipment additions to its in-house post-production and
graphics/animation facilities.
Year 2000
The Year 2000 issue results from the development of computer programs and
computer chips using two digits rather than four digits to define the applicable
year. Computer programs and/or equipment with time-sensitive software or
computer chips may recognize the date using "00" as the year 1900 rather than
the year 2000. This could result in system failure or miscalculations and cause
disruptions to business operations.
The Company's entertainment production and computer animation and visual effects
production operations rely heavily on computers in the development and
production of projects and in the provision of digital media production
services, but do not rely heavily on compters for operating activities such as
the processing of payroll. In contrast, the Company's Videssence subsidiary
relies heavily on computers for the processing of payroll, accounts receivable
and accounts payable, but does not rely heavily on computers in manufacturing
and distributing its products. The Company also makes use of computers for
efficient communications with employees and customers, including extensive use
of e-mail systems and the Internet. Finally, embedded technology such as
microcontrollers are commonly found in computers used throughout the Company's
operations. The complete failure of these systems could have a material
negative impact on the operations of the Company. In addition, most of the
Company's major suppliers and customers rely heavily on computer systems and
failure in such systems could disrupt their operations.
The Company has substantially completed the process of identifying and
addressing potential Year 2000 difficulties in its technological operations,
including information technology ("IT") applications, IT technology and support,
desktop hardware and software, non-IT systems and important third party
operations. Based on its assessment of these efforts, the Company believes that
Year 2000 issues will not have a material adverse effect on the Company's
business, operations or financial condition. Further, management expects that
costs which have been or will be incurred to assure Year 2000 capability will
not have a material adverse effect on the Company's financial position or
results of operations. The Company has undertaken continuing efforts to update,
modify or replace, and test systems in the ordinary course of business. Based
on such efforts, the Company does not believe that it will be required to
otherwise modify or replace significant portions of its software so that its
computer systems will function properly with respect to dates in the year 2000
and thereafter.
The Company estimates its cost to assess and achieve Year 2000 compliance will
be less than $10,000, of which less than $5,000 has been incurred through
September 30, 1998. These amounts do not include costs incurred in the
Company's replacement or upgrading of existing computer systems in the ordinary
course of business. No system replacements were made or accelerated to comply
with Year 2000 issues. These estimates are subject to revisions based on
future assessments and responses from vendors and customers. The Company
expects to continue to fund its Year 2000 costs through its cash flows from
operations and to expense modification costs as incurred.
Management believes the primary Year 2000 risks to the Company's business are
external to the Company and relate to the Year 2000 readiness of the Company's
third party suppliers and customers. Consequently, the Company's Year 2000
effort also includes communication with significant third party suppliers and
customers to determine the extent to which the Company's systems are vulnerable
to those parties' failures to reach Year 2000 compliance. The Company is
currently contacting significant suppliers of products and services to determine
that the suppliers' operations and the products and services they provide are
Year 2000 capable. Based on responses it has received to date, the Company does
not believe that the impact of Year 2000 issues on such suppliers will be
material to the Company's business, operations or financial condition. However,
there can be no assurance that another company's failure to ensure Year 2000
capability will not have an adverse effect on the Company.
Overall, the Company believes that it will complete its Year 2000 effort and
that there will not be a significant disruption to its business caused by the
failure of its own computer systems. In addition, the Company believes that,
to the extent that its entertainment production and computer animation and
visual effects production operations rely on suppliers for specialty services,
there are a variety of alternative suppliers available in the event the
Company's existing suppliers face Year 2000 problems. The Company's Videssence
subsidiary relies heavily on suppliers of parts for its lighting products.
Although there are alternative sources for these items, the Videssence
subsidiary may experience a disruption in its receipt of these parts if it is
forced to replace existing suppliers who experience Year 2000 problems.
Consequently, the Company's Videssence subsidiary could experience disruptions
in its operations as a result of failures in the computer systems of its major
vendors. Accordingly, the Company will develop contingency plans to help
mitigate the effects of such failures, if any.
Forward-Looking Statements
The foregoing discussion contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Act of 1934, as amended. There are risks and
uncertainties that could cause future events and results to differ materially
from those anticipated by managment in the forward-looking statements included
in this report. Among these risks and uncertainties are the effect of the
Year 2000 computer problem on the Company's internal systems and the effect on
the Company's business of any failures in the computer systems of the Company's
major vendors or customers.
Page 9 of 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits
Exhibit Description
------- -----------
10.1 Equipment lease with Comerica Leasing, Schedule
No. 4. (2)(3)
10.2 Equipment lease with Digital Financial Services,
Schedules No. 3 and 4. (2)(3)
10.3 Equipment lease with Lyon Credit Corporation,
Schedule No. 6. (2)(3)
27 Financial Data Schedule. (1)
----------------------
(1) Incorporated by reference to the Company's Form 10-Q for the
quarter ended September 30, 1998, filed on November 13, 1998.
(2) Certain portions of this exhibit have been redacted and are
subject to a request for confidential treatment. The entirety of
this exhibit has been filed separately with the Commission.
(3) Filed herewith.
(b.) Reports on Form 8-K
None.
Page 10 of 11
SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
NETTER DIGITAL ENTERTAINMENT, INC.
Registrant
Dated: January 20, 1999 By: /s/Chad Kalebic
-------------------
Chad Kalebic
Chief Financial Officer
Page 11 of 11
EXHIBIT INDEX
Exhibit Description
Number
10.1 Equipment lease with Comerica Leasing, Schedule
No. 4. *
10.2 Equipment lease with Digital Financial Services,
Schedules No. 3 and 4. *
10.3 Equipment lease with Lyon Credit Corporation,
Schedule No. 6 *
---------------------
* Certain portions of this exhibit have been redacted and are
subject to a request for confidential treatment. The
entirety of this exhibit has been filed separately with the
Commission.
Dated: September 24, 1998
Lease Agreement No. 9818
Schedule No. 004
COMERICA LEASING, A DIVISION OF COMERICA BANK
LEASE SCHEDULE
1. DESCRIPTION OF LEASE: Lease Agreement dated April 8,1998, by and between
COMERICA LEASING, A DIVISION OF COMERICA BANK (herein "CLCB") as Lessor, and
NETTER DIGITAL ENTERTAINMENT, INC. as Lessee (herein called "Lease Agreement").
2. DESCRIPTION OF EQUIPMENT: $250,211.68
"As further described on attached Exhibit A".
3. LOCATION: The equipment described above shall be located at 5125
Lankershim Blvd., North Hollywood. CA 91601 .
4. TERM; RENTAL: The Term of the Lease Agreement for the Equipment described
in this Schedule shall be in accordance with the provisions of the Lease
Agreement and shall continue until all rental payments are fully paid. Lessee
agrees to pay CLCB as rental payments aggregating * plus any applicable
sales and/or use taxes thereon payable in 36 monthly payments of * each,
plus any applicable sales and/or use taxes commencing October 15, 1998, and
on the same calendar day of each succeeding like period until fully paid. THE
RENTAL PAYMENTS SHALL BE REMITTED TO CLCB AT P.O. DRAWER 67-042, DETROIT,
MICHIGAN 48267, unless CLCB specifies otherwise in writing.
5. INSURANCE: Lessee agrees to maintain adequate property damage insurance in
accordance with the terms of the Lease Agreement, but in any event not less
than the sum of the payments due, protecting CLCB as a loss payee. The
minimum amount indicated above shall not be construed to imply such amount
will be or is adequate, but rather as a minimum amount.
6. UCC 2A: In accordance with Section 2A of the Michigan Uniform Commercial
Code (MCLA Section 440.3 101 et seq.) ("UCC") Lessee acknowledges either (a)
that Lessee has reviewed and approved any written Supply Contract (as defined
by UCC Section 2A- 103(i)(y)) covering the Equipment purchased from the
"Supplier" (as defined by UCC Section 2A- 103(i)(x)) thereof for lease to
Lessee or (b) that Lessor has informed or advised Lessee, in writing, either
Previously or by this Lease Schedule of the following: (i) the identity of the
supplier; (ii) that the Lessee may have rights under the Supply Contract; and
(iii) that the Lessee may contact the Supplier for a description of any such
rights lessee may have under the Supply Contract.
Lessee acknowledges that Lessee has reviewed and approved the Purchase Order,
Supply Contract or Purchase Agreement covering the Equipment purchased from
the seller or supplier thereof for lease to Lessee.
Lessee's lnitials: /s/CK
7. ADDITIONAL CONDITIONS: At the end of the Lease term, Lessee may purchase
the equipment for $ 1.00 provided no event of default shall have occurred and
been left unremedied.
LESSEE ACKNOWLEDGES THAT LESSOR IS A DIVISION OF CONERICA BANK AND NOT A
SEPARATE BODY CORPORATE.
The foregoing is hereby approved and agreed to by the undersigned as a
Schedule to and a part of the Lease Agreement, the provisions of which are
hereby incorporated herein by reference and which shall govern,
notwithstanding anything contrary or inconsistent herein.
COMERICA LEASING, A DIVISION
OF COMERICA BANK NETTER DIGITAL ENTERTAINMENT INC.
(Lessor) (Lessee)
Address: 5125 Lankershim Blvd.,
North Hollywood, CA 91601
By: /s/ Mark Freund By: /s/ Chad Kalebic
Name: Mark Freund Name: Chad Kalebic
Its: Vice President Its: Chief Financial Officer
COUNTERPART NO.___ OF___ COUNTERPARTS DIGITAL
Authorized Financial Services
Schedule A (Tax Oriented) DIGITAL FINANCIAL SERVICES
Equipment Schedule No. 004 dated as of November 19, 1998 ("Lease")
To Master Lease Agreement No. 6713377 dated as of October 23, 1997 between
Digital Financial SeRvices and Netter Digital Entertainment, Inc.("Agreement")
LESSEE: LEGAL NAME: Netter Digital Entertainment, Inc
TRADE NAME (if any):
ADDRESS: 5125 Lankershim Boulevard
North Hollywood, CA 91601
Address for Invoices:
Person to Contact Regarding Invoices:
LESSOR: NAME: Digital Financial Services,
a division of General Electric Capital Corporation
ADDRESS: 1400 Computer Drive Westborough, Massachusetts 01581
Attention: Operations Manager
A. The Latest Commencement Date for this Lease, as described in Section 7 of
the Agreement, is February 16, 1999.
B. LEASE PAYMENTS:
Lessee agrees to pay Lease Payments pursuant to and in the manner stated
in Section 3 of the Agreement. Unless Lessee has exercised the option in the
following paragraph, the first Lease Payment shall be due and paid on the
Commencement Date, and all subsequent Lease Payments shall be due and paid on
the same day of each subsequent payment period in the amounts set forth below.
Payment Amount * Payment Period Monthly
______ Option to have Lease Payments due on the first day of the month: If
the box at the beginning of this paragraph is checked, and Lessee has
initialed its agreement at the bottom of this paragraph, then Lease Payments
will be due on the first day of the month, commencing on the first day of the
month following the Commencement Date (the "First Payment Due Date). If this
option is elected, Lessee agrees to pay interim rent equal to the Lease
Payment prorated on a daily basis, for each day from the Commencement Date to
the First Payment Due Date. Such interim rent payment will be due on the
First Payment Due Date with the first Lease Payment.
________ Lessee's Initials
C. TERM:
The Initial term of this Equipment Schedule shall be for a period of Thirty-
Six (36) Months.
D. END OF TERM OPTIONS; NOTICE:
Lessee shall have the options to return the Equipment, purchase the
Equipment or renew this Lease at the end of the Initial Term and each renewal
period, if any, subject to the conditions described in this Lease. Lessee
must provide Lessor with notice, at least ninety (90) days prior to the
expiration of the Initial Term or then current renewal term (as applicable),
of its intention to exercise an option to purchase or renew, or to return the
Equipment in accordance with Section 10 of the Agreement ("Notice of Intent).
If such Notice of Intent is not provided to the Lessor at least ninety (90)
days prior to the expiration of such term, Lessee shall continue to pay Lease
Payments to Lessor in the amount and at the times specified during the
Initial Term or such renewal term until the later of (i) the expiration of
ninety days following Lessor's receipt of Lessee's Notice of Intent ("Notice
Period), or (ii) the purchase of the Equipment pursuant to Paragraph F of
this Equipment Schedule or the return of the Equipment in accordance with
Section 10 of the Agreement. If an option to renew is exercised, the renewal
term shall commence upon the later of the expiration of the Notice Period or
the expiration of the Initial Term or then current renewal term, if any.
E. RENEWAL OPTIONS:
Lessee shall have the right to renew this Lease as to all, but not less
than all, of the Equipment and Software listed herein for three (3) successive
periods of one (1) year each, upon the same terms and conditions contained
herein, except that Lease Payments shall be the then fair market rental value
thereof. Fair market rental value shall be determined by mutual agreement
between Lessor and Lessee or if a dispute arises, then by an independent
appraiser selected by Lessor, at Lessee's expense. Fair market rental value
shall be paid on a monthly or yearly basis as directed by Lessor.
Lessee's renewal options are contingent upon the following: (i) Lessee
shall provide Lessor with Lessee's Notice of Intent to renew not less than
ninety (90) days prior to the expiration of the Initial Term or the renewal
term, as the case may be, and (ii) at the time of the giving of such notice
and the commencement of said renewal term, no default or Event of Default
hereunder or under the Agreement or any other agreement between Lessor and
Lessee shall have occurred and be continuing, in Lessor's sole determination.
Failure to exercise a preceding option shall preclude Lessee from exercising
any subsequent options.
F. PURCHASE OPTION:
Subject to the conditions stated herein, Lessor hereby grants to Lessee a
non-assignable option to purchase all, but not less than all, of the
Equipment described in this Lease at the expiration of the Initial Term or
any renewal hereof for an amount equal to the then fair market value of the
Equipment (herein the "Option Price). The fair market value of the Equipment
shall be determined by mutual agreement between the parties or if a dispute
arises, then by an independent appraiser selected by Lessor, at Lessee's
expense.
Lessee's right to purchase said Equipment is contingent upon all of the
following:
(i) no default or Event of Default on the part of Lessee under this Lease,
the Agreement or any other agreement between Lessor and Lessee shall
have occurred and be continuing in Lessor's sole determination; and
(ii) Lessor shall have received Lessee's Notice of Intent to purchase at
least ninety (90) days prior to the date upon which the Initial Term or
renewal term expires, as the case may be; and
(iii) at least thirty (30) days prior to the expiration date of the Initial
Term or renewal term, as the case may be, Lessor shall have received in
cash a sum equal to (i) the Option Price and (ii) all taxes, whether
currently in existence or hereafter enacted, which shall be or become
due and payable directly or indirectly as a result of the sale or
transfer of the Equipment, except Lessee may provide Lessor with a
certificate of exemption or other similar document with respect to such
taxes.
It is expressly understood by the parties hereto that any purchase hereunder
SHALL BE WITHOUT REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, on the
part of Lessor and that Lessor sells the Equipment hereunder on a "AS IS,"
"WHERE IS" basis.
G. TAX INDEMNIFICATION
This Lease has been entered into on the assumption that Lessor shall be
entitled to certain deductions, credits, and other tax benefits as are
provided in the Internal Revenue Code of 1986, including amendments as may
occur (the "Code"), to an owner or property including without limitation,
depreciation deductions and interest deductions with respect to any debt
incurred to finance the purchase of the Equipment. If, as a result of any
acts or omissions by Lessee or as a result of any changes in the Code
(including any changes in the marginal corporate income tax rate), the
regulations issued thereunder or the administrative or judicial
interpretations thereof, Lessor's projected after-tax economic return
resulting from ownership and lease of the Equipment hereunder is reduced,
then Lessee's Lease Payments shall be increased in an amount (based on
Lessor's reasonable calculations) sufficient to provide the same net
after-tax economic return as if such acts or omissions or changes had not
occurred. Appropriate increases shall also be made in any applicable
Stipulated Loss Value Rider to this Lease.
H. ADDITIONAL TERMS:
The terms contained on the Riders listed herein and attached hereto shall
be applicable and constitute a part of this Lease: Rider No. 1 TPOptions.
I. MODIFICATIONS:
In the event that additions and/or deletions to the Equipment and/or
Software listed herein are made prior to the Commencement Date as a result
of a written direction or change order issued by Lessee and accepted by
Lessor, Lessee authorizes Lessor to modify the Equipment and Software
listed in herein to reflect such additions or deletions and to adjust the
Lease Payment amount and any other affected terms accordingly. Lessor will
deliver to Lessee a written notice containing any final terms that differ
from those set forth in this Equipment Schedule.
J. MASTER LEASE AGREEMENT:
This Lease is entered into pursuant to the Agreement identified above.
Except to the extent expressly modified hereby, the parties hereto by thei
execution and delivery hereof, reaffirm and incorporate herein by
reference all of the terms, covenants and conditions of said Agreement as
if such terms, covenants and conditions were fully set forth in this
Equipment Schedule. All of the capitalized words used herein or in the
Riders annexed hereto shall have the meanings ascribed to them in the
Agreement unless otherwise expressly stated herein or therein.
K. EQUIPMENT AND SOFTWARE:
Equipment:
Quantity Model No./Description Equipment Cost
1 SmartSwitch Router Intro Pack w/ peripherals per
attached Quotation from Wyle Electronics dated 9/2/98
Reference No. SSR-8999WL2007 $30,612.50
4 DEGPA-SA 32/64bit, 33-66MHz Universal w/ peripherals
per attached Quotation from Wyle Electronics dated
9/24/98, Reference No. 999WL20060 $11,722.35
Total Equipment Costs: $42,334.85
Software:
Quantity Model No./Description Software License Fee
Total Software License Fees:
Total Equipment Costs and Software License Fees: $42,334.85
L. LOCATION OF EQUIPMENT ADDRESS: 5125 Lankershim Boulevard
COUNTY: Los Angeles County
CITY, STATE & ZIP: North Hollywood, CA 91601
M. COUNTERPARTS:
This Equipment Schedule may be executed in any number of counterparts,
each of which shall be sequentially numbered. No security interest in this
Lease may be created through the transfer or possession of any counterpart
other than Counterpart No. 1 of this Equipment Schedule, but no transfer or
possession of the Agreement will be required to create a security interest
in the Lease evidenced by this Equipment Schedule.
LESSEE: Netter Digital Entertainment, Inc. LESSOR: Digital Financial Services,
a division of General
Electric Capital
Corporation
By: /s Chad Kalebic By:/s/Diane T.O'Kane-McEntee
Name: Chad Kalebic Name: Diane T.O'Kane-McEntee
Its: Chief Financial Officer Its: Sr. Lease Administrator
COUNTERPART NO. 2 OF 2 COUNTERPARTS DIGITAL
Authorized Financial Services
Schedule A (Tax Oriented) Digital Financial Services
Equipment Schedule No. 003 dated as of September 02, 1998 ("Lease")
To Master Lease Agreement No. 6713377 dated as of October 23 , 1997 between
Digital Financial Services and Netter Digital Entertainment, Inc.("Agreement")
LESSEE: LEGAL NAME: Netter Digital Entertainment, Inc.
TRADE NAME (if any):
ADDRESS: 5125 Lankershim Boulevard
North Hollywood, CA 91601
Address for Invoices:
Person to Contact Regarding Invoices:
LESSOR: NAME: Digital Financial Services,
a division of General Electric Capital Corporation
ADDRESS: 1400 Computer Drive Westborough, Massachusetts 01581
Attention: Operations Manager
A. The Latest Commencement Date for this Lease, as described in Section 7 of
the Agreement, is November 30, 1998.
B. LEASE PAYMENTS:
Lessee agrees to pay Lease Payments pursuant to and in the manner state
in Section 3 of the Agreement. Unless Lessee has exercised the option in the
following paragraph, the first Lease Payment shall be due and paid on the
Commencement Date, and all subsequent Lease Payments shall be due and paid on
the same day of each subsequent payment period in the amounts set forth below.
Payment Amount * Payment Period Monthly
______ Option to have Lease Payments due on the first day of the month: If
the box at the beginning of this paragraph is checked, and Lessee has
initialed its agreement at the bottom of this paragraph, then Lease Payments
will be due on the first day of the month, commencing on the first day of the
month following the Commencement Date (the "First Payment Due Date"). If this
option is elected, Lessee agrees to pay interim rent equal to the Lease
Payment prorated on a daily basis, for each day from the Commencement Date to
the First Payment Due Date. Such interim rent payment will be due on the
First Payment Due Date with the first Lease Payment.
___________ Lessee's Initials
C. TERM:
The Initial term of this Equipment Schedule shall be for a period of
Thirty-Six (36) Months.
D. END OF TERM OPTIONS; NOTICE:
Lessee shall have the options to return the Equipment, purchase the
Equipment or renew this Lease at the end of the Initial Term and each
renewal period, if any, subject to the conditions described in this Lease.
Lessee must provide Lessor with notice, at least ninety (90) days prior to the
expiration of the Initial Term or then current renewal term (as applicable),
of its intention to exercise an option to purchase or renew, or to return the
Equipment in accordance with Section 10 of the Agreement("Notice of Intent").
If such Notice of Intent is not provided to the Lessor at least ninety (90)
days prior to the expiration of such term, Lessee shall continue to pay Lease
Payments to Lessor in the amount and at the times specified during the
Initial Term or such renewal term until the later of (i) the expiration of
ninety days following Lessor's receipt of Lessee's Notice of Intent ("Notice
Period"), or (ii) the purchase of the Equipment pursuant to Paragraph F of
this Equipment Schedule or the return of the Equipment in accordance with
Section 10 of the Agreement. If an option to renew is exercised, the renewal
term shall commence upon the later of the expiration of the Notice Period
or the expiration of the Initial Term or then current renewal term, if any.
E. RENEWAL OPTIONS:
Lessee shall have the right to renew this Lease as to all, but not less
than all, of the Equipment and Software listed herein for three (3) successive
periods of one (1) year each, upon the same terms and conditions contained
herein, except that Lease Payments shall be the then fair market rental
value thereof. Fair market rental value shall be determined by mutual
agreement between Lessor and Lessee or if a dispute arises, then by an
independent appraiser selected by Lessor, at Lessee's expense. Fair market
rental value shall be paid on a monthly or yearly basis as directed by
Lessor.
Lessee's renewal options are contingent upon the following: (i) Lessee
shall provide Lessor with Lessee's Notice of Intent to renew not less than
ninety (90) days prior to the expiration of the Initial Term or the renewal
term, as the case may be, and (ii) at the time of the giving of such notice
and the commencement of said renewal term, no default or Event of Default
hereunder or under the Agreement or any other agreement between Lessor and
Lessee shall have occurred and be continuing, in Lessor's sole determination.
Failure to exercise a preceding option shall preclude Lessee from exercising
any subsequent options.
F. PURCHASE OPTION:
Subject to the conditions stated herein, Lessor hereby grants to Lessee a
non-assignable option to purchase all, but not less than all, of the
Equipment described in this Lease at the expiration of the Initial Term or
any renewal hereof for an amount equal to the then fair market value of the
Equipment (herein the "Option Price"). The fair market value of the Equipment
shall be determined by mutual agreement between the parties or if a dispute
arises, then by an independent appraiser selected by Lessor, at Lessee's
expense.
Lessee's right to purchase said Equipment is contingent upon all of the
following:
(i) no default or Event of Default on the part of Lessee under this Lease,
the Agreement or any other agreement between Lessor and Lesse shall have
occurred and be continuing in Lessor's sole determination; and
(ii) Lessor shall have received Lessee's Notice of Intent to purchase at
least ninety (90) days prior to the date upon which the Initial Term or
renewal term expires, as the case may be; and
(iii) least thirty (30) days prior to the expiration date of the Initial
Term or renewal term, as the case may be, Lessor shall have received in
cash a sum equal to (i) the Option Price and (ii) all taxes, whether
currently in existence or hereafter enacted, which shall be or become due
and payable directly or indirectly as a result of the sale or transfer of
the Equipment, except Lessee may provide Lessor with a certificate of
exemption or other similar document with respect to such taxes.
It is expressly understood by the parties hereto that any purchase hereunder
SHALL BE WITHOUT REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, on the
part of Lessor and that Lessor sells the Equipment hereunder on a "AS IS,"
"WHERE IS" basis.
G. TAX INDEMNIFICATION
This Lease has been entered into on the assumption that Lessor shall be
entitled to certain deductions, credits, and other tax benefits as are
provided in the Internal Revenue Code of 1986, including amendments as may
occur (the "Code"), to an owner or property including without limitation,
depreciation deductions and interest deductions with respect to any debt
incurred to finance the purchase of the Equipment. If, as a result of any
acts or omissions by Lessee or as a result of any changes in the Code
(including any changes in the marginal corporate income tax rate), the
regulations issued thereunder or the administrative or judicial
interpretations thereof, Lessor's projected after-tax economic return
resulting from ownership and lease of the Equipment hereunder is reduced,
then Lessee's Lease Payments shall be increased in an amount (based on
Lessor's reasonable calculations) sufficient to provide the same net after-
tax economic return as if such acts or omissions or changes had not occurred.
Appropriate increases shall also be made in any applicable Stipulated Loss
Value Rider to this Lease.
H. ADDITIONAL TERMS:
The terms contained on the Riders listed herein and attached hereto shall
be applicable and constitute a part of this Lease: Rider No. 1 TPOptions.
I. MODIFICATIONS:
In the event that additions and/or deletions to the Equipment and/or
Software listed herein are made prior to the Commencement Date as a result
of a written direction or change order issued by Lessee and accepted by
Lessor, Lessee authorizes Lessor to modify the Equipment and Software listed
in herein to reflect such additions or deletions and to adjust the Lease
Payment amount and any other affected terms accordingly. Lessor will deliver
to Lessee a written notice containing any final terms that differ from those
set forth in this Equipment Schedule.
J. MASTER LEASE AGREEMENT:
This Lease is entered into pursuant to the Agreement identified above.
Except to the extent expressly modified hereby, the parties hereto by their
execution and delivery hereof, reaffirm and incorporate herein by reference
all of the terms, covenants and conditions of said Agreement as if such
terms, covenants and conditions were fully set forth in this Equipment
Schedule. All of the capitalized words used herein or in the Riders annexed
hereto shall have the meanings ascribed to them in the Agreement unless
otherwise expressly stated herein or therein.
K. EQUIPMENT AND SOFTWARE:
Equipment:
Quantity Model No./Description Equipment Cost
2 CT-RENDT-WC Render Tower System WNT 7300/533
with 4-533 Mhz CPU, 1 GB RAM, see peripherals per
attached Quotation No. 999WL20029-01, dated 8/14/98 $272,000.00
from Wyle Electronics
Total Equipment Costs: $272,000.00
Software:
Quantity Model No./Description Software License Fee
Total Software License Fees:
Total Equipment Costs and
Software License Fees: $272,000.00
LOCATION OF EQUIPMENT ADDRESS: 5125 Lankershim Boulevard
COUNTY: Los Angeles County
CITY, STATE & ZIP: North Hollywood, CA 91601
M. COUNTERPARTS:
This Equipment Schedule may be executed in any number of counterparts, each
of which shall be sequentially numbered. No security interest in this Lease
may be created through the transfer or possession of any counterpart other
than Counterpart No. 1 of this Equipment Schedule, but no transfer or
possession of the Agreement will be required to create a security interest
in the Lease evidenced by this Equipment Schedule.
LESSEE: Netter Digital Entertainment, Inc LESSOR: Digital Financial Services,
a division of General
Electric Capital
Corporation
By:/s/ Chad Kalebic By: /s/ Diane T.O'Kane-McEntee
Name: Chad Kalebic Name: Diane T.O'Kane-McEntee
Its: Chief Financial Officer Its: Sr. Lease Administrator
SCHEDULE TO MASTER LEASE AGREEMENT
Exhibit A to
Master Lease Agreement No.: 30-000-49
Master Lease Agreement Date: August 7, 1997
Schedule No.:0210-006
Schedule Date: ,1998
Name and Address of Lessee:
Netter Digital Entertainment, Inc.
5125 Lankershim Blvd.
North Hollywood, CA 91601
Description of Items of Equipment: See Schedule "A" attached hereto and made
a part hereof.
Lessor's Cost of Items of Equipment $311,554.22
Equipment to be located at:
5125 Lankershim Blvd. And 360 Beach Blvd.
North Hollywood, CA 91601 Burlingame, CA 94101
Commencement date of Lease: ..................
Term of Lease Schedule: Thirty-six (36) months
Rent payments will be due in advance commencing December 01, 1998 and
subsequently on the same date of each month.
A. Total rent (excluding taxes) ............................. *
B. Rent per (month, quarter, etc.) .......................... *
C. Advance rental ........................................... *
D. Security deposit, (if applicable) ........................ N/A
All of the terms and provisions of the Lease are hereby incorporated by
reference in this Schedule to the same extent as if fully set forth herein.
Lessee and Lessor hereby agree to be bound by the terms and provisions of,
and hereby make, as if made as of the date hereof, the representations and
warranties contained in the Lease as each relates to the Lease created hereby.
Lessee hereby irrevocably authorizes Lessor to insert (as provided above) in
this Schedule the commencement date of the Lease and the due date of the first
rental payment. Lessee and Lessor hereby agree that upon delivery of the Items
of Equipment described herein, Lessee will cause an authorized representative
of Lessee to inspect the Items and, if the Items are found to be in proper
operating order and appearance conforming to the specifications and
requirements of Lessee, such Items will be subjected to the terms of the
Lease by Lessee's acceptance of such Items by execution and delivery of a
Delivery and Acceptance Certificate in the form annexed hereto as Appendix
1.
Additional Provisions:
Security Deposit applicable? NO
Include if applicable:
Security deposit shall be due in the amount specified above upon the
execution and delivery of this Schedule. Security deposit shall be security
for the full payment and performance of all terms, conditions, and obligations
of the Lessee hereunder and under Master Lease Agreement No. 3G,00049. Such
deposit shall not excuse the performance at the time and in the manner
prescribed of any obligation of Lessee or prevent default thereof. Lessor may,
but shall not be required to, apply such security deposit towards discharge of
any overdue obligation of Lessee. The balance, if any, of that portion of the
security deposit received by Lessor, provided that Lessee has fully complied
with and performed all its obligations under Master Lease Agreement No.
30-00049, this Schedule and any Delivery and Acceptance Certificate applicable
hereto and Lessee is not and has not been in default thereunder or hereunder,
shall be refunded to Lessee upon expiration of the Lease term, including any
applicable renewal berm.
Purchase option applicable? YES
Include if applicable:
Provided that the Lease has not been terminated and that no default has
occurred and is continuing under the Lease, Lessee shall have the option to
purchase, at the expiration of the term of the Lease provided above, upon not
less than 180 days prior irrevocable notice to Lessor, all, but not less than
all, of Lessor's right, title and interest in the Equipment then subject to
the Lease for a purchase price equal to $1.00.
Purchase Agreement Applicable? NO
Provided that the Lease has not been terminated, and that no default has
occured and is continuing under the Lease, Lessee must purchase, at the
expiration of the term of the Lease provided above, all, but not less than
all, of the Equipment then subject to the Lease for a purchase price equal to
$
Renewal term applicable? NO
Include if applicable:
If Lessee shall not elect to purchase the Equipment pursuant to any
applicable purchase option set forth above, the Lease has not been terminated
and no default has occurred and is continuing under the Lease, Lessee may,
upon not less than 90 days irrevocable notice prior to, renew the Lease for a
renewal term from MONTH through MONTHLY and at the renewal rent of 0 due Jul
in advance, commencing MONTH, 19 and subsequently on the same date of each 28.
Further, at the expiration of the renewal term of the Lease provided for in
the immediately preceding sentence upon not less than 180 days prior
irrevocable notice to Lessor and provided that the Lease has not been
terminated and that no default has occurred and is continuing under the Lease,
Lessee shall have the option to purchase all, but not less than all, of
Lessor's right, title and interest in the Equipment then subject to the Lease
for a purchase price equal to 0.
Stipulated Loss Value Appendix applicable? YES
Include if applicable:
This Schedule has, as a part thereof, the Stipulated Loss Value Appendix
2 annexed hereto or otherwise identified as a part hereof or applicable
hereto.
Amendment to Lease applicable? NO
Include if applicable:
Lessee and Lessor hereby amend the terms of the Lease as follows:
IN WITNESS WHEREOF, the parties hereto have executed this Schedule as of the
______________________ day of ___________, 1998.
Netter Digital Entertainment, Inc.
As Lessee
By:/s/ Chad Kalebic
Name: Chad Kalebic
Title: CFO
Attest/Witness
By:/s/ Douglas Netter
Name: Douglas Netter
Title: President/CEO
(Corporate Seal)
LYON CREDIT CORPORATION, as Lessor
By:/s/ Stephen Peterson
Name: Stephen Peterson
Title: Assistant Vice President
