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UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-21322
OUT-TAKES, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4363944
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 116
1419 Peerless Place 90035
Los Angeles, California (Zip Code)
(Address of principal executive
offices)
(310) 788-9440
(Registrant's telephone number including area code)
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 ___
The number of shares outstanding of the registrant's common
stock as of November 4, 1996 was 12,175,726.
<PAGE>
OUT-TAKES, INC.
FORM 10-Q QUARTERLY REPORT FOR
QUARTERLY PERIOD ENDING SEPTEMBER 30, 1996
TABLE OF CONTENTS
Page
PART I FINANCIAL INFORMATION 1
ITEM FINANCIAL STATEMENTS 1
1.
Balance Sheets
As of September 30, 1996 and March 31, 1996 [Unaudited] 1
Statements of Operations
[Unaudited] -- for the three and six month periods ended 2
September 30, 1996 and 1995
Statements of Stockholders' Equity
[Unaudited] -- for the six months ended September 30, 1996 3
Statements of Cash Flows
[Unaudited] -- for the six months ended September 30, 1996 and 4
1995
Notes to Financial Statements
[Unaudited] 5
ITEM MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
2. RESULTS OF OPERATION 8
Overview 8
Results of Operations 9
Liquidity and Capital Resources 13
Other Matters 13
PART II OTHER INFORMATION 14
ITEM EXHIBITS AND REPORTS ON FORM 8-K 14
6.
SIGNATURE 15
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3
PART I
ITEM 1. FINANCIAL STATEMENTS
OUT-TAKES, INC.
BALANCE SHEETS
[Unaudited] As of As of
Assets September 30, March 31,
1996 1996
------------ -----------
Current Assets:
Cash and Cash Equivalents $ $
119,960 61,672
Prepaid Royalties 2,706 4,969
Inventory 30,099 36,598
Other Current Assets 31,205 15,701
------------ -----------
Total Current Assets 183,970 118,940
Non-Current Assets:
Property, Plant & Equipment - Net 1,074,652 1,252,100
Deposits 39,377 38,712
------------ -----------
Total Non-Current Assets 1,114,029 1,290,812
============ -----------
Total Assets $ $
1,297,999 1,409,752
============ ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable $ $
122,025 88,923
Accrued Payroll 31,593 218,291
Accrued Expenses 210,101 203,928
Notes Payable 15,036
-
Accrued Interest - Related Parties 5,329 29,975
Accrued Management Fee - Related Party 226,000 130,000
Loan Payable - Related Parties 160,545
-
Loan from Related Party 519,500 649,500
------------ -----------
Total Current Liabilities 1,275,093 1,335,653
Non-Current Liabilities:
Notes Payable 48,000 48,000
Loan Payable - Related Parties 65,957
-
---------- -----------
Total Non-Current Liabilities 113,957 48,000
Commitments
- -
Stockholders' Equity (Deficit):
Preferred Stock, par value $.01 per share;
5,000,000 shares
authorized; none issued - -
Common Stock, par value $.01 per share;
35,000,000 shares
authorized (March 31,1996: 25,000,000); 124,682 111,682
12,468,122 shares issued
(March 31, 1996: 11,168,122) of which 292,396
shares are in Treasury
Capital in excess of par value 9,318,180 9,071,180
Accumulated deficit (includes $6,990,000 in
accumulated losses during (9,281,507) (8,904,357)
the development stage and a $722,000 loss on
impairment of assets)
--------- -----------
Total 161,355 278,505
Less: Treasury Stock, at cost (108,406) (108,406)
Deferred Compensation (144,000) (144,000)
------------ -----------
Total Stockholders' Equity (Deficit) (91,051) 26,099
------------ -------
--------- ---------
Total Liabilities and Stockholders' Equity $ $
1,297,999 1,409,752
============ ===========
The Accompanying Notes are an Integral Part of These Financial Statements
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<PAGE>
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OUT-TAKES, INC.
STATEMENTS OF OPERATIONS
[UNAUDITED]
Three Months Ended Six Months Ended
------------------------- --------------------------
September September September September
30, 30, 30, 30,
1996 1995 1996 1995
------------ ------------ ------------ -------------
------------ --------- ----------- -------------
Revenues $ $ $ $
657,643 444,838 1,125,830 802,064
------------ ------------ ------------ -------------
Cost of Revenues:
Compensation and 208,922 133,836 378,030 269,657
Related Benefits
Depreciation and 80,618 34,970 160,195 118,381
Amortization
Rent 85,125 52,628 151,930 99,627
Other Cost of 156,242 85,072 290,514 143,788
Revenues
------------ ------------ ------------ -------------
Total Cost of 530,907 306,506 980,669 631,453
Revenues
-------- ------------ ------------ -------------
Gross Income 126,736 138,332 145,161 170,611
General and
Administrative
Expenses:
Compensation and 137,983 63,653 240,584 113,609
Related Benefits
Professional Fees 25,248 29,188 41,282 160,490
Management Fee - 65,000 50,000 96,000 50,000
Related Party
Rent of Offices 10,671 4,350 21,111 11,030
Loss on Disposal of 997
Plant and Equipment - - -
Depreciation and 22,736 24,117 45,472 77,542
Amortization
Loss on Impairment 722,000
of Long-Lived Assets - - -
Other G & A Expenses 20,940 48,412 43,215 65,603
------------ ------------- ------------ ------------
Total Expenses 282,578 219,720 487,664 1,201,271
------------ ------------ ------------ -------------
Loss from (155,842 ) (81,388 ) (342,503 ) (1,030,660 )
Operations
------------ ------------ ------------ -------------
Other Income (Expense)
Interest Income 2,110 141 2,110
-
Interest Expense (1,280 ) (1,280 )
- -
Interest Expense - (15,460 ) (33,508 )
Related Parties - -
------------ ------------ ------------ -------------
Total Other Income (16,740 ) 2.110 (34,647 ) 2,110
(Expense)
------------ ------------ ------------ -------------
Net Loss
( 172,582) ( 79,278 ) ( 377,150 ) ( 1,028,550 )
============ =========== ============= ===========
Net Loss per Share ($ 0.01 ) ($ 0.01 ) ( $ 0.03 ) ( $ 0.12 )
============ ============ ============ =============
Weighted Average
Common Shares 12,175,726 10,875,726 11,919,986 8,397,433
Outstanding
============ ============ ============= ============
The Accompanying Notes are an Integral Part of These Financial Statements
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<PAGE>
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<TABLE>
OUT-TAKES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
[UNAUDITED]
Capital
Common Stock in Excess Retained
----------------------
Number of of Par Earnings Treasury Deferred
Shares Amount Value (Deficiency) Stock Compensation Total
----------- --------- ---------- ------------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -- March 31, 11,168,122 111,682 9,071,180 ( 8,904,357) (108,406) (144,000) 26,099
1996
Cash proceeds from
issuance of
stock (see 650,000 6,500 123,500 - - - 130,000
Note [4A])
Stock issued upon
conversion of
debt (see Note 650,000 6,500 123,500 - - - 130,000
[4B])
Net Loss for the
six months - - - (377,150) - - (377,150)
ended
September 30, 1996
=========== ========= ========== ============= ========= ============== ===========
Balance as of September
30, 1996 12,468,122 124,682 9,318,180 (9,281,507) (108,406) ( 144,000 ) (91,051)
=========== ========= ========== ============= ========= ============== ===========
The Accompanying Notes are an Integral Part of These Financial Statements
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</TABLE>
<PAGE>
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<TABLE>
5
OUT-TAKES, INC.
STATEMENTS OF CASH FLOWS
[UNAUDITED]
Six Months Ended
------------------------
OPERATING ACTIVITIES: September September
30, 30,
1996 1995
---------- ------------
Net Loss
<S> <C> <C>
( 377,150 ) ( 1,028,550 )
---------- ------------
Adjustments to Reconcile Net Loss to
Net Cash Used in Operating Activities:
Depreciation and Amortization $ $
205,667 195,923
Loss on Impairment of Long-Lived 722,000
assets -
Loss on Disposal of Plant and 997
Equipment -
Change in Assets and Liabilities:
(Increase) Decrease in:
Prepaid Royalties 2,263 (1,956 )
Accounts Receivable (1,572 )
-
Deposits (665 ) -
Inventory 6,499 (15,841 )
Due from Officers 3,500
-
Other Current Assets (15,504 ) (3,561 )
Increase (Decrease) in:
Accounts Payable 33,102 (120,261 )
Accrued Payroll (186,698 ) 10,530
Accrued Expenses 6,173 2,000
Notes Payable (15,036 ) (61,000 )
Accrued Interest -Related Parties (24,646 ) -
Accrued Management Fee-Related Party 96,000 50,000
Loan Payable - Related Parties 226,502 -
---------- ------------
Total Adjustments $ $
333,657 780,759
---------- ------------
Net Cash used in Operating Activities
( 43,493 ) ( 247,791 )
---------- ------------
INVESTING ACTIVITIES:
Acquisition of Equipment and Leasehold
Improvements ( 28,219 ) ( 66,982 )
Proceeds on Disposal of Plant and Equipment 1,050
-
---------- ------------
Net Cash Used in Investing Activities
( 28,219 ) (65,932 )
---------- ------------
FINANCING ACTIVITIES:
Proceeds from the Issuance of Stock $ $
130,000 510,000
---------- ------------
Net Cash Provided by Financing Activities $ $
130,000 510,000
---------- ------------
Net Increase in Cash and Cash Equivalents $ $
58,288 196,277
Cash and Cash Equivalents - Beginning of 61,672 53,970
Periods
---------- ------------
Cash and Cash Equivalents - End of Periods $ $
119,960 250,247
========== ============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
On May 7, 1996, the majority stockholder, Photo Corporation Group Pty.
Ltd., converted $130,000 of its $649,500 loan payable into 650,000 shares
of the Company's Common Stock.
The Accompanying Notes are an Integral Part of These Financial
Statements
</TABLE>
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<PAGE>
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OUT-TAKES, INC.
NOTES TO FINANCIAL STATEMENTS
[UNAUDITED]
[1] Summary of Significant Accounting Policies
Basis of Presentation - The accompanying interim financial statements are
unaudited and have been prepared in accordance with the requirements of
Regulation S-K and Form 10-Q and, therefore, do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. However, in the opinion of the management of the Company,
all adjustments consisting only of normal recurring adjustments necessary for a
fair presentation of financial position, results of operations and cash flows
for the three and six month periods ended September 30, 1996 and 1995 have been
made. The results of operations for any interim period are not necessarily
indicative of the results for the full year. These financial statements should
be read in conjunction with the financial statements and notes thereto contained
in the annual report on Form 10-KSB for the year ended March 31, 1996.
Property, Plant and Equipment and Depreciation - The Company's property,
plant and equipment is shown net of accumulated depreciation of $1,536,767 as of
September 30, 1996, and $1,331,100 as of March 31, 1996.
[2] Net Loss Per Share
Net loss per share was calculated based on the weighted average number of
shares outstanding during the periods. Neither the 292,396 shares held in
Treasury nor the 750,000 shares held in escrow pursuant to an escrow agreement
between the founding stockholders and the Company have been included in the
weighted average shares outstanding during the year as their inclusion would be
anti-dilutive. The effect of outstanding stock warrants and options was not
included in the calculations as their effect would also be anti-dilutive.
[3] Notes Payable
Notes payable of $15,036 at March 31,1996 represented the remaining
outstanding balance of a Promissory Note of $173,425 due to the former corporate
counsel to the Company pursuant to an agreement dated May 1, 1995. The balance
has been repaid in full and the Promissory Note has been discharged as of
September 30, 1996.
A note payable of $48,000 is due to a former financial consultant to the
Company pursuant to a settlement agreement dated August 17, 1994. The note is
non-interest bearing and payment is subject to availability of future cash flows
from the Company's operations.
[4] Capital Stock Transactions
A. Stock Subscription
On April 24, 1996, the Board of Directors authorized the issuance of up to
3 million shares of the Company's Common Stock for a price of $0.20 per share,
which represented the fair market value of the stock on April 24, 1996.
On May 6 and 7, 1996, the Company received stock subscriptions from six
investors totaling $130,000 for 650,000 shares of Common Stock. The Company had
received total payment on these subscriptions as of June 6, 1996.
OUT-TAKES, INC.
NOTES TO FINANCIAL STATEMENTS
[UNAUDITED, CONTINUED]
B. Debt to Equity Conversion
On May 7, 1996, the majority stockholder, Photo Corporation Group Pty.
Ltd. ("PCG"), converted $130,000 of its $649,500 loan payable into 650,000
shares of the Company's Common Stock. This represented a value of $0.20 per
share of Common Stock, which was the fair market value on this date and the same
price paid by the six independent investors (See Capital Stock Transactions,
Note [4A]).
C. Increase in Authorized Number of Shares
On July 24, 1996, at the Annual Meeting of Stockholders of the Company,
the stockholders approved an amendment to the Company's certificate of
incorporation to increase the authorized number of shares of Common Stock of the
Company from 25,000,000 to 35,000,000.
[5] Going Concern
The Company incurred a net loss of $6,990,000 for the cumulative period
from March 18, 1992 (inception) to December 31, 1994, the period during which
the Company was considered to be a development stage enterprise. The Company
commenced commercial operations on May 24, 1993 and the revenues generated by
such operations have been insufficient to cover all of the Company's
non-operating overhead.
The accompanying financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the satisfaction
of liabilities and commitments in the normal course of business. The
continuation of the Company as a going concern is dependent upon its ability to
have a successful commercial operating history.
[6] Impairment of Long Lived Assets
During the fiscal year ended June 30, 1995, the Company adopted Statement
of Financial Accounting Standard (SFAS) No. 121, Accounting for the Impairment
of Long-Lived Assets.
As a result of the Company's continuing operating losses and the
information obtained during research and the development of the studio at The
Entertainment Center at Irvine Spectrum located in Irvine, Orange County,
California (the "Irvine Studio"), the Company reviewed the carrying value of the
assets at its studio at MCA/Universal CityWalk (the "CityWalk Studio") for
impairment in the June 1995 quarter. Management determined that an impairment
loss of $722,000 should be recognized. This loss was determined as the excess of
carrying value over fair value. Fair value was determined by reference to costs
for similar assets for the Irvine Studio.
As a result of the significant technical and operating difficulties
associated with its travelling studio, the Company reviewed the carrying value
of the asset for impairment in the March 1996 quarter. Management determined
that an impairment loss of $40,129 should be recognized to reduce the carrying
value of the asset to its fair value of zero. Fair value was determined to be
zero as the asset is not able to be placed into production in its present form.
<PAGE>
OUT-TAKES, INC.
NOTES TO FINANCIAL STATEMENTS
[UNAUDITED, CONTINUED]
[7] Related Party Transactions
Robert Shelton, Vice President Development and a Director of the Company,
and Leah Peterson Shelton, Vice President Operations, ceased employment with the
Company and Mr. Shelton also ceased as a director of the Company from and
effective September 1, 1996.
Deferred salaries owing to Mr. Shelton and Mrs. Peterson Shelton, accrued
interest on deferred salaries, accrued vacation pay and amounts payable on
termination totaling $274,373 were consolidated into a loan on September 1, 1996
which is being repaid over the period through April 17, 1998. The loan is
presented on the balance sheet as "Loan Payable - Related Parties". The loan is
secured by the assets of the Company pursuant to the Settlement and Mutual
Release Agreement as of September 1, 1996 between the Company, Mr. Shelton, Mrs.
Peterson Shelton and PCG. Interest expense is incurred at the prime rate of
interest (approximately 8.25%) and in the three months ended September 30, 1996
was $1,280. As of September 30, 1996, interest of $482 was accrued.
The Settlement and Mutual Release Agreement inter alia provides for
Mr. Shelton and Mrs. Peterson Shelton to act as consultants to the Company
as requested by the Company and as agreed to by them.
Management fees of $226,000 payable to Photo Corporation of Australia Pty.
Ltd., a subsidiary of PCG, were accrued pursuant to the Personnel Consulting
Agreement with the Company dated June 28, 1995. These charges cover the period
from July 1, 1995 through September 30, 1996. Management fees for the three
months ended September 30, 1996 were $65,000.
The Loan from Related Party of $519,500 ($649,500 as of March 31, 1996)
was advanced by PCG. The proceeds of the loan were used predominantly to fund
the construction of the Irvine Studio and to upgrade the technology in relation
to the studio's operation. The loan is unsecured and is payable on demand.
Interest expense is incurred at a rate of 10% per annum and in the three months
ended September 30, 1996 was $13,853. As of September 30, 1996, interest of
$5,329 was accrued.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the historical
financial statements of the Company and notes thereto included elsewhere in this
Form 10-Q.
Overview
The Company currently operates two photographic portrait studios, the
first of which was opened on May 24, 1993 at the MCA/Universal CityWalkSM
project in Los Angeles, California ("the CityWalk Studio"). The second studio
opened on December 9, 1995 at The Entertainment Center at Irvine Spectrum
located in Irvine, Orange County, California ("the Irvine Studio"). The
following table summarizes the Company's results for the three and six month
periods ended September 30, 1996 and September 30, 1995.
3 months ended 6 months ended
-------------------------- -------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
Gross Sales Revenue $ $ $ $
657,643 444,838 1,125,830 802,064
Gross Income 126,736 138,332 145,161 170,611
Adjusted Net Loss for (121,332 )1 (79,278 ) (325,900 )1 (196,550 )2,3
the Period
Adjusted Net Loss per
Share ( 0.01 ) ( 0.01 ) ( 0.03 ) ( 0.02 )
Closing Bid Price per
Share of Common $ $ $ $
Stock 0.10 0.15 0.10 0.15
- -------------------------------------------------------------------------------
As indicated in the following notes, the figures have been adjusted in order
to facilitate comparison:
1 The net loss for the three and six month periods ended Sept. 30,
1996 excludes termination payments totaling $51,250 paid to
2 officers of the Company.
The net loss for the six month period ended Sept. 30, 1995
3 excludes $110,000 of non-recurring professional costs
associated with closing the Photo Corporation Group Pty.
Ltd. ("PCG") transaction.
The net loss for the six month period ended Sept. 30, 1995 also
excludes a $722,000 non-recurring loss on impairment of
long-lived assets, a non-cash accounting adjustment pursuant to
the adoption of SFAS No. 121.
---------------------------------------------------------------------
As noted in the table presented above, the Company continues to operate at
a net loss. This is predominantly due to the poor performance of the Irvine
Studio and to the Company's historically high overhead costs.
Management's focus is on improving revenues from the Irvine Studio by
developing marketing programs to attract more customers and creating a
background image portfolio suitable for the market in which the Irvine Studio is
located. There is no assurance that this program for the Irvine Studio will be
successful.
The Company is committed to continuing to minimize overheads to reduce the
cash outflow from operations.
The Company's short term objectives are to increase the revenues of the
Irvine Studio, reduce operating expenses further and as a consequence improve
cash flows to reduce liabilities and to enable additional studios to be opened
in the future. Net losses (which include depreciation expenses of approximately
$103,000 per quarter) are expected to continue until the Company opens
additional studios or revenues from the two existing studios, especially the
Irvine Studio, increase substantially.
The Company's cash position has stabilized with the injection of further
capital during the fiscal quarter ended June 30, 1996. On April 24, 1996 the
Board of Directors authorized the issuance of up to 3 million shares of the
Company's Common Stock for a price of $0.20 per share, which represented the
fair market value of the stock on April 24, 1996 as determined by the Company's
Board of Directors. On May 6 and 7, 1996, the Company received stock
subscriptions from six investors totaling $130,000 for 650,000 shares of Common
Stock with all of the subscription price being paid by June 6, 1996. On May 7,
1996, PCG converted $130,000 of its $649,500 loan payable into 650,000 shares of
Common Stock. This represented a value of $0.20 per share of Common Stock, which
was the fair market value on this date and the same price paid by the six
independent investors.
Results of Operations
Three Months Ended September 30, 1996 Compared to Three Months Ended September
30, 1995.
The following table shows Revenues, Cost of Revenues and Gross Income /
(Loss) during the three months ended September 30, 1996 and 1995, by studio.
Fiscal Quarter Ended Sept. Fiscal Quarter Ended Sept.
30, 1996 30, 1995
-----------------------------
----------------------------- ----------------------------
CityWalk Irvine CityWalk Irvine
Studio Studio Studio Studio
(Opened (Not Open)
12/9/95)
-------------- ------------- ------------- -------------
Revenues $ $ $ -
510,916 146,727 444,838
Cost of Revenues:
Compensation & -
Related 128,049 80,873 133,836
Benefits
Depreciation &
Amortization 35,948 44,670 34,970
Rent 62,189 22,936 52,628 -
Other Cost of 92,964 63,278 85,072 -
Revenues
-------------- ------------- ------------- -------------
Total Cost
of
319,150 211,757 306,506 -
Revenues
-------------- ------------- ------------- -------------
Gross $ ($ ) $ -
Income/(Loss) 191,766 65,030 138,332
============== ============= ============= =============
In the fiscal quarter ended September 30, 1996, the Company generated
$657,643 in revenues, compared to revenues of $444,838 during the same period
last year, a net increase of $212,805. CityWalk Studio revenues increased by
$66,078 to $510,916, an increase of 15%. Revenues from the Irvine Studio in the
fiscal quarter ended September 30, 1996 were $146,727.
Cost of revenues increased to $530,907 overall during the fiscal quarter
ended September 30, 1996, compared to $306,506 for the same period last year.
Cost of revenues for the CityWalk Studio increased by $12,644, or 4% in
the fiscal quarter ended September 30, 1996 to $319,150 as compared to $306,506
in the same period last year. Compensation and related benefits for the CityWalk
studio were $5,787 lower than in the fiscal quarter ended September 30, 1995,
despite the increase in revenues, as a result of a combination of tighter
control over the number of hours worked in the studio and the entire costs
associated with the Vice President Operations and the Vice President Development
being classified under general and administrative expenses in the fiscal quarter
ended September 30, 1996. Depreciation for the CityWalk Studio was higher by
$978 as a result of the purchase, and consequent depreciation, of additional
equipment. Rent for the CityWalk Studio was higher as a result of the Company
paying rent based on a percentage of revenues, such revenues being higher than
in the previous period by $66,078. Other cost of revenues for the CityWalk
Studio increased by $7,892 due to the increase in variable costs resulting from
the higher revenues. The CityWalk Studio earned gross income of $191,766 during
the fiscal quarter ended September 30, 1996 compared to gross income of $138,332
for the same period last year, an improvement of $53,434, or 39%.
Cost of revenues for the Irvine Studio was $211,757 resulting in a gross
loss of $65,030. Included in cost of revenues was $44,670 of depreciation, a
non-cash expense. The Irvine Studio is performing well below expectation and the
Company is continuing to develop the portfolio of products available at the
Irvine Studio as well as pursuing business opportunities through corporate
accounts and marketing activities to consumers in the greater Orange County area
in an endeavor to improve its revenues.
Overall, the Company earned gross income of $126,736 during the fiscal
quarter ended September 30, 1996 compared to gross income of $138,332 for the
same period last year. The reduction in gross income of $11,596 comprises the
gross loss of $65,030 incurred by the Irvine Studio, offset by the increase in
gross income of $53,434 earned by the CityWalk Studio.
General and administrative expenses increased by $62,858 to $282,578 in
the quarter ended September 30, 1996 from $219,720 in the same period last year,
an increase of 29%. Compensation and related benefits increased by $74,330 to
$137,983 as compared to $63,653 for the same period last year. This increase was
the result of termination payments totaling $51,250 made to the Vice President
Operations and the Vice President Development, the full allocation of costs of
the Vice President Operations and the Vice President Development to general and
administrative expenses up until the time of their cessation of employment, and
the appointment of a part-time Accounting Assistant. Professional fees decreased
in the fiscal quarter ended September 30, 1996 to $25,248 from $29,188 in the
same period last year. General and administrative expenses for the fiscal
quarter ended September 30, 1996 include $65,000 of management fees payable to
Photo Corporation of Australia Pty. Ltd. ("PCA"), a subsidiary of PCG, pursuant
to the Personnel Consulting Agreement dated June 28, 1995 as compared to $50,000
for the same period last year, an increase of $15,000. Depreciation and
amortization costs were lower as a result of previously non-producing assets
being put into production in the Irvine Studio and the consequential
depreciation charge being reported in cost of revenues. Other general and
administrative expenses decreased by $27,472 to $20,940 for the fiscal quarter
ended September 30, 1996, compared to $48,412 for the same period last year due
to tighter cost controls and the allocation of costs to the studios which
previously had been classified as general and administrative expenses.
The loss from operations of the Company for the three month period ended
September 30, 1996 was $155,842, compared with a loss from operations for the
three month period ended September 30, 1995, of $81,388.
Interest charges totaling $16,740 were incurred on the loan from PCG and
on the deferred salaries accrual owing to former executives of the Company.
There were no such charges in the prior year.
The net loss of the Company for the fiscal quarter ended September 30,
1996 was $172,582 as compared to a net loss of $79,278 incurred in the
same period last year.
Six Months Ended September 30, 1996 Compared to Six Months Ended September 30,
1995.
The following table shows Revenues, Cost of Revenues and Gross Income /
(Loss) during the six months ended September 30, 1996 and 1995, by studio.
Six Months Ended Sept. 30, Six Months Ended Sept. 30,
1996 1995
-----------------------------
----------------------------- ----------------------------
CityWalk Irvine CityWalk Irvine
Studio Studio Studio Studio
(Opened (Not Open)
12/9/95)
-------------- ------------- ------------- -------------
Revenues $ $ $ -
844,213 281,617 802,064
Cost of Revenues:
Compensation & -
Related 237,135 140,895 269,657
Benefits
Depreciation &
Amortization 71,782 88,413 118,381
Rent 106,138 45,792 99,627 -
Other Cost of 170,794 119,720 143,788 -
Revenues
-------------- ------------- ------------- -------------
Total Cost
of
585,849 394,820 631,453 -
Revenues
-------------- ------------- ------------- -------------
Gross $ $ -
Income/(Loss) 258,364 (113,203 ) 170,611
============== ============= ============= =============
In the six months ended September 30, 1996, the Company generated
$1,125,830 in revenues, compared to revenues of $802,064 during the same period
last year, for a net increase of $323,766. CityWalk Studio revenues increased by
$42,149 to $844,213, an increase of 5%. Revenues from the Irvine Studio in the
six months ended September 30, 1996 were $281,617.
Cost of revenues increased by 55% to $980,669 overall during the six
months ended September 30, 1996, compared to $631,453 for the same period last
year.
Cost of revenues for the CityWalk Studio decreased by $45,604, or 7% in
the six months ended September 30, 1996 to $585,849 as compared to $631,453 in
the same period last year. Compensation and related benefits for the CityWalk
studio were, despite the increase in revenues, $32,522 lower than in the six
months ended September 30, 1995 as a result of the combination of tighter
control over the number of hours worked in the studio and the entire costs
associated with the Vice President Operations and the Vice President Development
being classified under general and administrative expenses in the six months
ended September 30, 1996. Depreciation for the CityWalk Studio was lower by
$46,599 as a result of the adoption in June 1995 of SFAS No. 121 and the
recognition pursuant thereto of a $722,000 loss on impairment of CityWalk Studio
assets. Rent for the CityWalk Studio was higher as a result of the Company
paying rent based on a percentage of revenues, such revenues being higher than
in the previous period by $42,149. Other cost of revenues for the CityWalk
Studio increased by $27,006 as a result of the allocation of costs to the studio
which in the six months ended September 30, 1995 had been classified as general
and administrative expenses. The CityWalk Studio earned gross income of $258,364
during the six months ended September 30, 1996 compared to a gross income of
$170,611 for the same period last year, an improvement of $87,753, or 51%.
Cost of revenues for the Irvine Studio was $394,820, resulting in a gross
loss of $113,203. Included in cost of revenues was $88,413 of depreciation, a
non-cash expense. The Irvine Studio is performing well below expectation and the
Company is continuing to develop the portfolio of products available at the
Irvine Studio as well as pursuing business opportunities through corporate
accounts and marketing activities to consumers in the greater Orange County area
in an endeavor to improve its revenues.
Overall, the Company earned gross income of $145,161 during the six months
ended September 30, 1996 compared to gross income of $170,611 for the same
period last year. The reduction in gross income of $25,450 comprises the gross
loss of $113,203 incurred by the Irvine Studio, offset by the increase in gross
income of $87,753 earned by the CityWalk Studio.
General and administrative expenses for the six months ended September 30,
1995 includes a $722,000 non-cash loss on impairment of long-lived assets and
$110,000 of non-recurring professional cost expenses relating to the PCG
transaction. General and administrative expenses for the six months ended
September 30, 1996 include $96,000 of management fees payable to Photo
Corporation of Australia Pty. Ltd. ("PCA"), a subsidiary of PCG, pursuant to the
Personnel Consulting Agreement dated June 28, 1995 (as compared to $50,000 for
the same period last year) and termination payments to former officers of the
Company totaling $51,250. After adjusting for the above items, the Company's
general and administrative expenses increased by $21,143 to $340,414 in the six
months ended September 30, 1996 from $319,271 in the same period last year, an
increase of 7%. Compensation and related benefits, excluding the termination
payments to former officers of the Company totaling $51,250, increased by
$75,725 to $189,334 as compared to $113,609 for the same period last year. This
increase was the result of the full allocation of costs of the Vice President
Operations and the Vice President Development to general and administrative
expenses up until the time of their cessation of employment and the appointment
of a part-time Accounting Assistant. Professional fees decreased in the six
months ended September 30, 1996 to $41,282 from $50,490 (excluding the $110,000
non-recurring professional costs referred to above) in the same period last
year. Depreciation and amortization costs were lower as a result of previously
non-producing assets being put into production in the Irvine Studio and the
consequential depreciation charge being reported in cost of revenues and as a
result of the impact of the Company's adoption of SFAS No. 121. Other general
and administrative expenses decreased by $22,388 to $43,215 for the six months
ended September 30, 1996, compared to $65,603 for the same period last year due
to tighter cost controls and the allocation of costs to the studios which
previously had been classified as general and administrative expenses.
During the months of July through November, 1995, the Company designed and
constructed the Irvine Studio. In connection with this work and the Company's
continuing operating losses, the Company adopted SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets. In this regard, the Company reviewed the
carrying value of its CityWalk Studio assets for impairment and determined that
an impairment loss of $722,000 should be recognized in June 1995. This loss was
reflected in the Company's statement of operations for the six months ended
September 30, 1995. The loss was calculated as the excess of carrying value over
fair value, the latter determined by reference to prices for the Irvine Studio
assets. This adjustment did not affect the Company's working capital.
After adjusting for non-recurring items as described above, the loss from
operations of the Company for the six months ended September 30, 1996 was
$291,253, compared with a loss from operations for the six month period ended
September 30, 1995, of $198,660, an increase in the loss of $92,593 over the
same period last year.
Interest charges totalling $34,788 were incurred on the loan from PCG and
on the deferred salaries accrual owing to former officers of the Company. There
were no such charges in the prior year.
The net loss of the Company for the six months ended September 30, 1996
was $377,150 as compared to a net loss of $1,028,550 incurred in the same
period last year.
As of September 30, 1996, the Company has net operating loss carry
forwards of approximately $9.3 million. The ability to utilize $8.3 million of
these losses to be offset against future taxable income is restricted as a
result of the change in control arising from the PCG transaction. The losses
will expire in June, 2011.
Liquidity and Capital Resources
On September 30, 1996, the Company had a working capital deficit of
$1,091,123 as compared to a working capital deficit on March 31, 1996 of
$1,216,713. The reduction in working capital deficit of $125,590 was primarily
attributable to the cash proceeds of stock subscriptions received in the fiscal
quarter ended June 30, 1996 from six investors totaling $130,000 for 650,000
shares of Common Stock.
On April 24, 1996, the Board of Directors authorized the issuance of up to
3 million shares of the Company's Common Stock for a price of $0.20 per share,
which represented the fair market value of the stock on April 24, 1996. On May 6
and 7, 1996, the Company received stock subscriptions from six investors
totaling $130,000 for 650,000 shares of Common Stock with the subscription price
being received in the fiscal quarter ended June 30, 1996. On May 7, 1996, PCG
converted $130,000 of its $649,500 loan payable into 650,000 shares of Common
Stock. This represented a value of $0.20 per share of Common Stock and was the
same price paid by the six investors.
Net cash used in operating activities was $43,493 for the six months ended
September 30, 1996, compared to $247,791 for the same period last year. This
decrease was a result of the Company having virtually completed the previously
agreed repayments over time of certain long outstanding trade payables and
accrued liabilities, agreements entered into in fiscal 1995. The Company
currently has no commitments for capital expenditure.
The Company does not currently have any established, external sources of
funding. To the extent that the Company requires additional funds, it would
currently seek to raise such funds through the sale of securities or through new
borrowings from PCG. However, no assurance can be given that additional funds
can be obtained from such sources.
Other Matters
On August 31, 1996, Michael C. Roubicek, Vice President of the Company,
was elected to the Board of Directors of the Company to fill the vacancy created
by Mr. Shelton's cessation as a director of the Company.
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.30 Settlement and Mutual Release Agreement with two former
officers of the Company, as of September 1, 1996.
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Out-Takes, Inc.
Dated: November 4, 1996 By:
-----------------------------------
Peter C. Watt, President and
Principal Financial Officer
<PAGE>
SETTLEMENT AND MUTUAL RELEASE AGREEMENT
This Settlement and Mutual Release Agreement is made the thirty-first day
of August, 1996 between Out-Takes, Inc., a Delaware corporation ("Company"), and
Robert H. Shelton ("RHS") and Leah R. Peterson Shelton ("LPS"), and Photo
Corporation Group Pty. Ltd., an Australian incorporated company ("PCG"),
Whereas, the parties have reached agreement in relation to the cessation
of employment of RHS and LPS with the Company from and effective September 1,
1996 and it is intended that this agreement detail the terms and conditions
related thereto.
Now, in consideration of the conditions, covenants and other obligations
set forth in this agreement and other good and valuable consideration the
receipt of which is hereby acknowledged, the Parties agree as follows:
1. Definitions and Interpretations.
1.1 In this agreement the following terms have the meanings stated:
a. "PCG Group" shall mean PCG and its subsidiaries and each and all
of their officers, directors, employees, shareholders, owners, representatives,
past employees, attorneys, agents, predecessors, successors, assigns, subsidiary
corporations, parent corporations, joint venturers, sibling corporations and
affiliates and each and all of their respective related or affiliated persons,
firms, corporations, associations, partnerships and/or other entities related
thereto of each and every kind or nature whatsoever, regardless of the name or
names under which any of them may now or in the future be known and/or do
business.
b. "Business Day" shall mean Monday to Friday inclusive,
excepting any public or bank holiday in Los Angeles, California.
c. "Claim" shall mean any and all claims, demands, rights, disputes,
controversies, causes of action, rights of actions, rights of subrogation,
rights of indemnity, rights to reimbursement, rights to payment, liens and
remedies of each and every kind or nature whether civil, at law, in equity,
vested, contingent, accrued or unaccrued, or known or unknown to the parties or
any of them.
d. "Company Group" shall mean the Company and each and all of their
officers, directors, employees, shareholders, owners, representatives, past
employees, attorneys, agents, predecessors, successors, insurers, assigns,
subsidiary corporations, parent corporations, joint venturers, sibling
corporations and affiliates and each and all of their respective related or
affiliated persons, firms, corporations, associations, partnerships and/or other
entities related thereto of each and every kind or nature whatsoever, regardless
of the name or names under which any of them may now or in the future be known
and/or do business.
e. "Default" shall mean:
(i) in respect to an obligation pursuant to this agreement to
pay money such amount due is not paid within five (5) Business Days of receipt
of a written notice from the Party to whom the amount is due detailing the
amount payable and requesting payment;
(ii) in respect to any other obligation, performance of such
obligation has not occurred within fifteen (15) Business Days of receipt of a
notice detailing the obligation not performed and requesting performance; and
(iii) in respect to the Company, an Event of Default (as that
expression is defined in the Security Agreement) has occurred by the Company
pursuant to the Security Agreement.
f. "De Nur" shall mean Mr. and Mrs. Amnon De Nur and Jack B.
De Nur.
g. "Employees" shall mean RHS and LPS, jointly and severally.
h. "Excluded Claims" shall mean any rights that may accrue to the
Employees based upon their status as stockholders of the Company or any claim
that is covered by workers compensation legislation to the extent only of the
amount payable to the Employees pursuant to such workers compensation
legislation.
i. "Irvine Studio" shall mean the photographic studio operated by
the Company at the Entertainment Center at Irvine Spectrum,Irvine, California.
j. "LPS Put Price" shall mean the LPS Remaining Shares multiplied
by twenty cents ($0.20) per share.
k. "LPS Put Notice" shall mean the notice referred to in
paragraph 11.1.
l. "LPS Remaining Shares" shall mean the number of Shares
beneficially owned by LPS less the number of Shares
purchased
by LPS after the date of this agreement.
m. "Month" shall mean calendar month.
n. "Obligation" shall mean any and all obligations, duties,
liabilities, damages, costs, fees, expenses and debts of each and every kind or
nature whatsoever, vested or contingent, accrued or unaccrued, whether known or
unknown to the parties or either of them.
o. "Option Window" shall mean
(i) the period September 1, 1998 to November 30, 1998;
(ii) at any time the Company is in Default and PCG is the
beneficial owner of twenty-five percent (25%) or more of the issued and
outstanding Shares;
(iii) for a period of three (3) months after PCG provides
written notice to the Employees that PCG has reduced its beneficial ownership of
Shares below twenty-five percent (25%) of the issued and outstanding Shares
provided that such disposal is at an average price equal to or in excess of
thirteen cents ($0.13) per Share;
(iv) for a period of three (3) months after PCG becomes
insolvent or makes an assignment for the
benefit of creditors; or
(v) for a period of three (3) months after any proceedings by
or against PCG is commenced under any bankruptcy, reorganization, management,
readjustment of debt or moratorium law or statute or for PCG dissolution or
liquidation and is not withdrawn or stayed within 28 days of commencement.
p. "Parties" shall mean RHS, LPS, the Company and PCG.
q. "Party" shall mean any of Employees, PCG or the Company.
r. "Prime Rate" shall mean the prime rate of interest announced
by the Bank of America applicable on the first Business Day of
each month.
s. "RHS Put Notice" shall mean the notice referred to in
paragraph 10.1.
t. "RHS Put Price" shall mean the RHS Remaining Shares
multiplied by twenty cents ($0.20) per share.
u. "RHS Remaining Shares" shall mean the number of Shares
beneficially owned by RHS and De Nur less the number of shares purchased by RHS
and/or De Nur after the date of this agreement.
v. "Security Agreement" shall mean the security
agreement as set out in the First Schedule attached
hereto and made a part hereof.
w. "Studios" shall mean the photographic studios operated
by the Company at Universal City Walk, Los
Angeles, California and the Irvine Studio.
x. "Shares" shall mean shares of common stock of the Company.
y. "Third Persons" means any and all persons, firms,
corporations, associations, partnerships and/or
other entities of each and every kind or nature whatsoever, other than the
Parties.
1.2 Reference to clauses, paragraphs and schedules shall mean references
to clauses, paragraphs and schedules of this agreement.
1.3 The singular shall include the plural and vice versa.
2. Termination of Employment and Payment to RHS.
2.1 The employment of RHS with the Company shall cease from and effective
September 1, 1996 and until such date the terms of the existing employment
agreement between RHS and the Company (including the obligation to pay
reimbursable expenses) shall remain in full force and effect.
2.2 The Company shall pay to RHS the sum of $198,654.86
("RHS Settlement Amount") representing:
a. Accrued but unpaid salary of $107,033.00;
b. Accrued but unutilized vacation salary of $23,076.00;
c. A voluntary severance payment of $60,000.00;
d. Interest on the after-tax amount referred in
sub-paragraph 2.2 a from July 29, 1995 to August 31,
1996 of $8,545.00.
2.3 The RHS Settlement Amount shall be paid to RHS by Company check in the
amounts and at the time set forth in the Third Schedule attached hereto and made
a part hereof.
2.4 If the Company is not in Default , the Company shall be entitled to
pay only the amounts listed as "Discounted Obligations" in the Third Schedule
and such amount shall be accepted in full satisfaction by RHS. For the purpose
of clarification if the Company is in Default after some of the amounts referred
to as Discounted Obligations in the Third Schedule have been paid, RHS shall not
be entitled to recover the difference between the Discounted Obligations and the
Contract Obligations as set out in the Third Schedule for any given period for
any of the payments made prior to Default.
2.5 The amounts payable pursuant to paragraph 2.3 shall be paid after tax
and the Company shall pay to the Internal Revenue Service ("IRS") and the
California Franchise Tax Board ("FTB") the amount of tax so deducted in
accordance with the Company's usual remittance and shall provide at the end of
each year the usual statement as to the gross amount received by RHS and the tax
paid to the IRS and the FTB.
2.6 RHS may advise the rate of deduction to be applied for the purpose of
clause 2.5 and in the absence of any such advice the rate of deduction shall be
35% for IRS purposes only.
2.7 Provided that the Company is not in Default interest calculated at
the Prime Rate on the after-tax portion of the Discounted Obligations as set out
in the Third Schedule (assuming a tax deduction rate of 35%) outstanding from
time to time from September 1, 1996 shall be paid to RHS by Company check on
each fourth Friday commencing on September 6, 1996 and if the Company is in
Default such calculation shall be made on the Contract Obligations as set out in
the Third Schedule from the time that the Company is in default.
3. Termination of Employment and Payment to LPS.
3.1 The employment of LPS with the Company shall cease from and effective
September 1, 1996 and until such date the terms of the existing employment
agreement with LPS (including the obligation to pay reimbursable expenses) shall
remain in full force and effect.
3.2 The Company shall pay to LPS the sum of $126,968.00
("LPS Settlement Amount") representing:
a. Accrued but unpaid salary of $62,513.00;
b. Accrued but unutilized vacation salary of $16,346.00;
c. A voluntary severance payment of $42,500.00;
d. Interest on the after-tax amount referred to in
sub-paragraph 3.2 a from July 29, 1995 to August 31,
1996 of $5,609.00.
3.3 The LPS Settlement Amount shall be paid to LPS by Company check in the
amounts and at the terms set forth in the Third Schedule attached hereto and
made a part hereof.
3.4 If the Company is not in Default the Company shall be entitled to pay
only the amounts listed as "Discount Obligations" in the Third Schedule and such
amount shall be accepted in full satisfaction by LPS. For the purpose of
clarification if the Company is in Default after some of the amounts referred to
as Discounted Obligations in the Third Schedule have been paid, LPS shall not be
entitled to recover the difference between the Discounted Obligations and the
Contract Obligations as set out in the Third Schedule for any given period for
any of the payments made prior to Default.
3.5 The amounts payable pursuant to paragraph 3.3 shall be paid net of
tax and the Company shall pay to the IRS and the FTB the amount of tax so
deducted in accordance with the Company's usual remittance and shall provide at
the end of each year the usual statement as to the gross amount received by RHS
and the tax paid to the IRS and the FTB.
3.6 LPS may advise the rate of deduction to be applied for the purpose of
clause 3.5 and in the absence of any such advice the rate of deduction shall be
35% for IRS purposes only.
3.7 Provided that the Company is not in Default interest calculated at
the Prime Rate on the after-tax portion of the Discounted Obligations as set out
in the Third Schedule (assuming a tax deduction rate of 35%) outstanding from
time to time from September 1, 1996 shall be paid to LPS by Company check on
each fourth Friday commencing on September 6, 1996 and if the Company is in
Default such calculation shall be made on the Contract Obligations as set out in
the Third Schedule from the time that the Company is in default.
4. Security to Employees.
4.1 Contemporaneously with the execution of this agreement by the Parties
the Company shall execute the Security Agreement and do all acts and things
necessary to register a UCC-1 filing in respect of the Security Agreement.
4.2 Forthwith upon payment of all amounts required pursuant to clauses 2
and 3 of this agreement, the Employees shall execute and deliver to the Company
a UCC-2 filing releasing in its entirety the UCC-1 filing referred to in
paragraph 4.1.
4.3 If the Employees default in the execution of the UCC-2 filing referred
to in paragraph 4.2, the Employees hereby grant to the Company their power of
attorney for the sole purpose of executing and filing such UCC-2 filing.
5. Non-Competition and Other Covenants.
5.1 The Employees shall not, until September 1, 1998 directly or
indirectly by ownership of securities or otherwise engage in any business which
is competitive with the Company or become associated with, or render services to
any person, business or enterprise so engaged. Mere ownership as an investor of
not more than five percent (5%) of the securities of a corporation or other
business enterprise which is not directly or indirectly involved in the portrait
photography industry shall not be deemed an association with such corporation or
enterprise.
5.2 For the purpose of clause 5.1 the term "engaged in any business
which is in competition with the Company" shall mean:
a. Negotiating or entering into agreements in relation to the
operation of a retail digital photographic portrait studio
with:
(i) any current landlord (or any of their related entities)
of the Company relating to the Studios;
(ii) any Third Person relative to the markets of Las Vegas,
Orlando or within a ten (10) mile radius
of the Studios;
b. Negotiating or entering into agreements with any current licensor
to the Company of photographic images for the purpose of incorporating such
images into the operation of a retail digital photographic portrait studio;
and/or
c. Development of computer programs or other processes which are
used by retail digital photographic portrait studios in the markets of Las
Vegas, Orlando or within a ten (10) mile radius of the Studios.
5.3 The Employees shall not, until September 1, 1998, directly or
indirectly employ, cause others to employ, or attempt to induce others to employ
any employees of the Company or attempt to induce said employees to gain or seek
other employment.
5.4 The Employees shall not at any time communicate or disclose, or use
for the Employees' own account, any of the data, information, written materials,
computer coding, records, notes, reports, letters, processes, equipment,
techniques or products of the Company, customer lists, or other information
concerning its business or affairs obtained during the Employees' employment
with the Company, provided that these obligations shall not apply in the event
and to the extent that such confidential information becomes generally known to
and available for use by the public other than by the Employees' act or
omission.
5.5 The Employees shall, to the extent requested by the Company, do all
things, including giving of evidence in suits and other proceedings, which the
Company reasonably deems necessary to obtain, maintain, defend or assert rights
accruing to the Company during the Employees' period of employment with the
Company and in connection with which the Employees have knowledge, information
and expertise. All reasonable expenses incurred by the Employees in fulfilling
the duties set forth in this paragraph, shall be reimbursed by the Company to
the full extent legally appropriate, including, without limitation, a reasonable
payment for the Employees' time unless the Employees' duties arise from his or
her prior actions which were not authorized by the Company and which were
outside the scope of his or her employment.
6. Medical Insurance.
6.1 At the request of the Employees, the Company shall execute all such
documents and use all reasonable endeavors to permit the Employees to remain a
participant under the Company's current health plan until March 31, 1998.
6.2 The Employees shall be responsible for all payments, fees, and dues
necessary to retain membership pursuant to the Company's current health plan.
6.3 The Company retains the right to modify its current health plan,
provided that such modification does not have a material adverse effect on the
Employees.
7. Consultancy.
7.1 To the extent requested by the Company and to the extent agreed by the
Employees, the Employees shall render such services and perform such duties for
the Company as it may reasonably request ("Consultancy Services").
7.2 Unless otherwise agreed in advance, the Company shall:
a. Reimburse the Employees for reasonable expenses incurred in
performing the Consultancy Services.
8.
(OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION)
(OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION)
9. Release.
9.1 The Employees release, acquit, and forever discharge the Company Group
and the PCG Group from any and all claims and obligations of each and every kind
whatsoever, that the Employees have or may hereafter obtain or accrue in
relation to their employment or cessation of their employment with the Company,
including, but without limiting the generality of the foregoing, any fact,
matter, incident, claim, injury, event, circumstance, happening, occurrence
and/or thing of any kind, or nature whatsoever which arose or occurred at any
time prior to the date of execution of this agreement including, but not limited
to claims for wrongful discharge, breach of implied or expressed employment
contract, negligent or intentional infliction of emotional distress, fraud,
malicious prosecution, abuse of process, unlawful discrimination based upon age,
race, sex, marital status, religion, national origin, medical condition,
disability, handicap or otherwise, breach of any implied covenants of good of
faith and fair dealing, violation of any section of the labor code of the State
of California, the California Fair Employment Housing Act ("FEHA"), Title VII of
the Civil Rights Act of 1964 ("Title VII"), the Age Discrimination in Employment
Act of 1967 as amended ("ADEA"), the Americans With Disabilities Act ("ADA"), or
any other federal, state or local laws or regulations, unpaid wages, salary,
bonuses, commissions, or other compensation, any damages of any nature,
including compensatory, general, special or punitive and/or costs, fees or other
expenses, including attorneys fees incurred in any of these matters.
9.2 The Employees specifically agree that this agreement is made by them
with their full, complete, unrestricted and informed knowledge and consent that
this agreement covers any and all possible Claim and Obligation relating to the
Employees' employment or cessation of employment with the Company; and that the
consideration stated in this agreement is all that the Employees and/or any of
their heirs, assigns, agents, attorneys, representatives and/or affiliates
and/or any other natural or fictitious person affiliated or in privity with them
in any manner are ever to receive from the Company Group and the PCG Group for
any and all Claim and Obligation of any kind or nature on account of the
employment and the cessation of employment with the Company and/or any fact,
matter, incident, claim, injury, event, circumstance, happening, occurrence
and/or thing of any kind or nature, which arose or occurred at any time prior to
the date of the Employees' execution of this agreement.
9.3 The Company and PCG hereby release, remise, acquit and forever
discharge the Employees of and from any and all Claim and Obligation of each and
every kind or nature whatsoever which the Company has or may hereafter obtain or
accrue on account of the employment, or cessation of employment of the Employees
with the Company and/or any fact, matter, incident, claim, injury, event,
circumstance, happening, occurrence and/or thing of any kind or nature
whatsoever which arose or occurred at any time prior to the date of the
Company's and PCG's execution of this agreement.
9.4 The Company specifically agrees that this agreement is made by it with
its full, complete, unrestricted and informed knowledge and consent that this
agreement covers any and all possible Claim and Obligation; and that the
consideration stated in this agreement is all that it and/or any of its assigns,
agents, attorneys, representatives and/or affiliates and/or any other natural or
fictitious person affiliated or in privity with it in any manner are ever to
receive from the Employees for any and all Claim and Obligation of any kind or
nature on account of the employment and cessation of employment by the Employees
with the Company, and/or any fact, matter, incident, claim, injury, event,
circumstance, happening, occurrence and/or thing of any kind or nature, which
arose or occurred at any time prior to the date of the Company's execution of
this agreement.
9.5 The Parties specifically agree that their release of the other set
forth in this agreement extends to all Claim and/or Obligation of any kind or
nature whatsoever, including but not limited to any and all Claims and/or
Obligations which might be cognizable before any federal and/or state agency
and/or federal and/or state court, and they expressly, knowingly and voluntarily
waive all rights under Section 1542 of the Civil Code of the State of
California. Said Section 1542 provides as follows:
1542. General Release - Claims Extinguished.
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his
settlement with the debtor.
For all purposes of this Agreement, the term "creditor" as used and
referred to in Section 1542 of the Civil Code of the State of California means
and refers to RHS, LPS, the Company, PCG and each of them.
9.6 For the consideration described in this agreement, the Parties agree
that they will not file against the other or permit to be filed on their behalf
against the other, any claim, grievance, charge, complaint, lawsuit, legal
action, or other process of any kind, including, without limitation,
discrimination in employment and/or for any benefits under any or all benefit
plans, whether formal or informal, with any court, board, panel, agency,
commission, department, organization or other entity concerning the employment,
or the termination of employment of the Employees with the Company and/or any
fact, matter, incident, claim, injury, event, circumstance, happening,
occurrence and/or thing of any kind or nature which arose or occurred at any
time prior to the date of the execution of this agreement.
9.7 Notwithstanding anything to the contrary in this agreement, the
provisions included in this clause 9 shall not apply to any Excluded Claims.
10. RHS Put Option.
10.1 At any time during the Option Window, RHS may require PCG to purchase
the RHS Remaining Shares at the time of the RHS Put Notice for the RHS Put Price
by providing written notice thereof to PCG ("RHS Put Option").
10.2 Within seven (7) Business Days of the receipt by PCG of the RHS Put
Notice, at a place in Los Angeles, California and time notified by PCG to RHS,
not less than 24 hours after such notification, PCG shall in exchange for the
stock certificates for the RHS Remaining Shares and a signed transfer by the
beneficial owner thereof (confirming inter alia that the RHS Remaining Shares
are not the subject of any mortgage, pledge, lien, hypothecation, change, option
or other encumbrance whatsoever) pay to RHS by bank check, the RHS Put Price.
10.3 RHS may not give an RHS Put Notice if at any time prior to
giving of the RHS Put Notice:
a. The bid price for the Company's Shares reflected on the share
market where the Shares are listed has equalled or exceeded twenty cents ($0.20)
for a period of one Business Day and RHS has not within five (5) Business Days
of receipt of a written notice from PCG advising of such occurrence given a
standing sell order to a stock broker requesting that the stock broker sell all
the RHS Remaining Shares for at least twenty cents ($0.20) per share; or
b. RHS does not accept and complete an unconditional offer to
purchase all the RHS Remaining Shares at a price equal to or exceeding twenty
cents ($0.20) per share with payment by bank check in exchange for the Share
certificates for the RHS Remaining Shares and a signed transfer by the
beneficial owner thereof (confirming inter alia that the RHS Remaining Shares
are not the subject of any mortgage, pledge, lien, hypothecation, change, option
or other encumbrance whatsoever) to occur within seven (7) Business Days of the
date of the offer at a stated time and place in Los Angeles, California.
10.4 RHS warrants that the RHS Remaining Shares at the date of this
agreement, does not exceed 692,889.
10.5 RHS shall have the right to pledge, sell, mortgage or otherwise
dispose of all or any part of the RHS Remaining Shares and/or the RHS Put Option
set forth in this clause.
11. LPS Put Option.
11.1 At any time during the Option Window LPS may require PCG to purchase
the LPS Remaining Shares at the time of the LPS Put Notice for the LPS Put Price
by providing written notice thereof to PCG ("LPS Put Option").
11.2 Within seven (7) Business Days of the receipt by PCG of the LPS Put
Notice, at a place in Los Angeles, California and time notified by PCG to LPS,
not less than 24 hours after such notification, PCG shall in exchange for the
stock certificates for the LPS Remaining Shares and a signed transfer by the
beneficial owner thereof (confirming inter alia that the LPS Remaining Shares
are not the subject of any mortgage, pledge, lien, hypothecation, change, option
or other encumbrance whatsoever) pay to LPS by bank check, the LPS Put Price.
11.3 LPS may not give an LPS Put Notice if at any time prior to giving
of the LPS Put Notice:
a. The bid price for the Company's Shares reflected on the Share
market where the Shares are listed has equalled or exceeded twenty cents ($0.20)
for a period of one Business Day and LPS has not within five (5) Business Days
of receipt of a written notice from PCG advising of such occurrence given a
standing sell order to a stock broker requesting that the stock broker sell all
the LPS Remaining Shares for at least twenty cents ($0.20) per share; or
b. LPS does not accept and complete an unconditional offer to
purchase all the LPS Remaining Shares at a price equal to or exceeding twenty
cents ($0.20) per share with payment by bank check in exchange for the stock
certificates for the LPS Remaining Shares and a signed transfer by the
beneficial owner thereof (confirming inter alia that the LPS Remaining Shares
are not the subject of any mortgage, pledge, lien, hypothecation, change, option
or other encumbrance whatsoever) to occur within seven (7) Business Days of the
date of the offer at a stated time and place in Los Angeles, California.
11.4 LPS warrants that the LPS Remaining Shares at the date of this
agreement, does not exceed 192,389.
11.5 LPS shall have the right to pledge, sell, mortgage or otherwise
dispose of all or any part of the LPS Remaining Shares and/or the LPS Put Option
set forth in this clause.
12. Directorship.
12.1 RHS shall, on or before the date of execution of this agreement,
resign as a director of the Company.
13. Attorneys' Fees and No Admission of Liability.
13.1 The Parties agree that each Party to this agreement shall bear his,
her or its own attorneys' fees and costs incurred in connection with the
preparation and negotiation of this agreement. The Parties agree that no Party
to this agreement shall have any Obligation whatsoever in connection with the
compensation of any other parties respective attorneys in connection with the
preparation and negotiation of this agreement. The Parties also agree that they
are solely responsible for compensating their respective attorneys and each of
them in connection with the preparation and negotiation of this agreement.
13.2 The Parties agree that neither this agreement, their participation in
this agreement, anything contained in this agreement, nor the fulfillment by the
Parties of their Obligation pursuant to this agreement shall ever be construed
to be an admission of any liability by any Party to any other Party and/or to
any Third Person.
13.3 The Parties and each of the them specifically agree that no Party
shall be considered, for any purpose whatsoever or by any person whomsoever, to
have been the "prevailing Party" with respect to any allegations, charges or
causes of action which could have been alleged in any Claim or Obligation
covered by this agreement within the meaning of any statute, rule, regulation,
judicial decision, ordinance or other provision of law or any other definition
or meaning of any kind or nature which is or may be in any manner applicable to
this agreement and/or any of the paragraphs, terms and/or provisions of this
agreement.
14. Indemnification.
14.1 Each Party agrees that they will indemnify, defend, protect and hold
the other parties harmless from and against any and all Claim and Obligation,
including without limitation, reasonable attorneys' fees and costs of suit, on
account of any breach by that Party and/or any agent, representative, attorney,
heir and/or assign of that Party of any paragraph, term or provision of this
agreement and/or in the event that it ever becomes necessary for any Party to
defend against any Claim of any kind or nature whatsoever released by any other
Party in this agreement.
14.2 The Company acknowledges that as a director RHS and LPS were entitled
to certain indemnification from the Company (pursuant to Delaware Law, the
articles of association or the by-laws of the Company or otherwise) in relation
to claims brought against RHS and LPS in their capacity as directors, officers
and employees of the Company.
14.3 The Company agrees to continue to provide to RHS and LPS after the
execution of this agreement the same indemnification for actions brought against
them in their capacity as directors, officers and employees of the Company as
specified in paragraph 23.1 for the period during which they were directors,
officers and employees of the Company notwithstanding that they are not
directors, officers or employees of the Company after the execution of this
Agreement.
15. Successors and Assigns.
15.1 All agreements and Obligation made and undertaken by the Parties
pursuant to this agreement apply to and bind the Parties and each and all of
his, her or its heirs, assigns, agents, attorneys and/or representatives.
15.2 PCG shall not without the written consent of the Employees (which
consent shall not be unreasonably be withheld), assign its obligations pursuant
to this agreement.
16. No Other Filings .
16.1 The Parties agree that there is not pending between them any
lawsuits, actions, grievances, Claim, complaints, petitions, appeals, or
accusatory pleadings against any of the other Parties with any court, other
governmental agency, or any other public or private tribunal or forum prior to
their respective execution of this agreement.
<PAGE>
17. Taxes.
17.1 The Employees acknowledge that they are or may be liable to one or
more governmental taxing authorities or other entities for taxes and/or other
payments on the consideration to be paid by the Company and/or PCG under this
agreement. The Employees agree that they will pay any and all taxes and/or other
payments which may be or become due on account of the consideration to be
received pursuant to this agreement and that the Company and/or PCG are not and
shall never be liable for any portion of any of the taxes and/or other payments,
provided that the Company shall continue to be obligated to pay any portion of
social security taxes as required by law. Other than is provided in the previous
sentence, the Employees agree that they will indemnify, defend and hold the
Company and PCG harmless from and for any and all Claims and/or Obligation
assessed against either of them on account of any and all taxes and/or other
payments which may be due to any and all taxing authorities on account of the
consideration to be received pursuant to this agreement.
18. Arbitration.
18.1 Any Claim between the Parties on account of this agreement; the
meaning, application and/or interpretation of this agreement, employment or
cessation of employment by the Employees with the Company including any and all
Claims pursuant to the FEHA, ADEA, ADA and/or Title VII; and/or any breach or
claimed breach of this agreement shall be settled solely by binding arbitration
in accordance with the Employment Dispute Rules of the American Arbitration
Association and the Federal Arbitration Act, or as the Parties otherwise agree.
Judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof.
18.2 It is further agreed that the hearing for the arbitration shall take
place in Los Angeles County, California. The provisions of this clause 20 are
intended by the Parties to be absolutely exclusive for any and all purposes and
fully applicable to each and every Claim.
19. Ownership of Claims.
19.1 Other than to the extent that the Employees have transferred
beneficial ownership of certain Shares to De Nur, the Parties agree that they
have not heretofore assigned or transferred any of the Claim released by them in
this agreement, or any portion thereof or interest therein, to any Third Person
and that they have the full, complete and unrestricted right to release each and
all of the Claim and Obligation released by them in this agreement. The Parties
agrees to indemnify, defend, and hold each other harmless from and for any and
all Claim released by them in this agreement, on account of any such transfer or
assignment of any such Claim or any portion thereof or interest therein.
20. Acknowledgments.
20.1 Each Party has at all pertinent times and for all purposes in
connection with their Claim and this agreement had the unrestricted right and
opportunity to have, the full and complete benefit and advice of independent and
competent legal counsel chosen and retained solely by them and has had, and/or
has had the unrestricted right and opportunity to have, such legal counsel fully
explain to them the meaning of each and every paragraph, term and/or provision
of this agreement and the entire meaning and each and all of the consequences of
execution of this agreement.
20.2 This agreement is entered into by the Parties without any reliance
upon any agreement, statement, representation, promise, covenant, understanding
and/or other inducement of any kind or nature other than the express terms of
this agreement, and this agreement contains the entire, full and complete
agreement of the Parties without any exceptions or limitations whatsoever.
20.3 Each and all of the clauses, paragraphs, terms and/or provisions of
this agreement are contractual and not mere recitals, and each and every such
clause, paragraph, term and/or provision is of the essence of the entire
agreement contained in this agreement.
20.4 This agreement shall not ever, in any manner or for any purpose, by
any person whomsoever or based upon any foreseen or unforeseen facts, events,
circumstances, occurrences, happenings or things of any kind or nature, be
subject to any claim of mistake of fact or mistake of law by the Parties.
20.5 The headings in this agreement are inserted for convenience only; are
not part of this agreement; shall not in any manner affect the meaning of this
agreement or any clause, paragraph, term and/or provision of this agreement; and
shall not be deemed or interpreted to be a part of this agreement for any
purpose.
20.6 This agreement shall be interpreted solely pursuant to the laws of
the State of California without any regard or consideration for any conflicts of
laws principles.
20.7 The language of this agreement shall, for any and all purposes, be
construed as a whole, according to its fair meaning, not strictly for or against
any Party and without regard to the identity or status of any person or persons
who drafted all or any part of this agreement.
20.8 If any provision of this agreement is declared invalid by any court
of competent jurisdiction or rendered invalid by any other process of federal or
state law, the remaining provisions of this agreement shall remain in full force
and effect.
20.9 No waiver of any breach or condition of this agreement shall be
construed for any purpose as a waiver of any other breach or condition of this
agreement, regardless of the similarity or dissimilarity of the breaches or
conditions involved.
20.10 This agreement may be executed in multiple copies and after all of
the Parties have executed their respective copies, each copy will have the
effect of an original.
20.11 This agreement constitutes the sole and entire agreement between the
Employees and the Company Group and the PCG Group concerning the employment, and
the cessation of employment by the Employees with the Company and each and every
other aspect of the employment relationship of each and every kind or nature
whatsoever between the Employees and the Company Group and the PCG Group. This
agreement supersedes any and all prior agreements, contracts, representations,
understandings, discussions and/or negotiations, if any, whether oral or
written, and cannot be modified, altered or amended in any manner or respect
whatsoever except in a subsequent writing executed by the Parties.
21. Company Property/Employee Property.
21.1 On or before August 31, 1996 the Employees shall return to the
Company all property of the Company in the care, custody or control of the
Employees or reimburse the Company a reasonable amount for any lost or damaged
property.
21.2 On or before August 31, 1996 the Company shall return to the
employees all property of the Employees in the care, custody or control of the
Company or reimburse the Employees a reasonable amount for any lost or damaged
property.
22. Older Worker Benefit Protection Act Disclosure.
22.1 Employees further agree that: (1) They have been advised to consult
with an attorney of their choice concerning their employment and their cessation
of employment with the Company, this agreement and each and all of the results
and consequences of their execution of this agreement; (2) they had ample time
to consult with an attorney entirely of their own choice, concerning their
employment and their cessation of employment with the Company, this agreement
and each and all of the results and consequences of their execution of this
agreement; (3) they had not less than twenty-one (21) calendar days, and/or have
had the full, complete and unrestricted opportunity to have at least twenty-one
(21) calendar days, in which to consider their employment and their cessation of
employment with the Company, this agreement and each and all of the results and
consequences of their execution of this agreement; and (4) this agreement shall
not be effective until seven (7) calendar days after the execution of this
agreement by the Employees, provided that the Employees have not within that
seven (7) calendar day period, exercised the right to revoke their Employees
consent to this agreement by giving notice to their decision to revoke.
23. Notices.
23.1 All notices, requests, demands, directions and other communications
provided for hereunder shall be in writing and mailed, certified mail, return
receipt requested, transmitted by telecopier, or personally delivered, as
elected by the Party giving such notice, to the applicable Party at the address
indicated below:
If to Out-Takes, Inc.:
Out-Takes, Inc.
1419 Peerless Avenue, Suite 116
Los Angeles, California 90035
Telecopier Number: (310) 788-0160
Attention: President
And with a copy to:
Mr. Hillel T. Cohn
Graham & James LLP
801 South Figueroa Street
14th Floor
Los Angeles, California 90017-5554
Telecopier Number: (213) 623-4581
If to Robert H. Shelton and/or Leah R. Peterson Shelton:
Robert H. Shelton and Leah R. Peterson
30 Via Lucca
Apt. F-102
Irvine, California 92712
Telecopier Number: (714) 851-1297
And with a copy to:
Mr. William D. Ellis
Morgan Lewis & Bockius LLP
801 South Grand Avenue
Los angeles, California 90017-4615
Telecopier Number: (213) 612-2554
If to Photo Corporation Group Pty. Ltd.:
Photo Corporation Group Pty. Ltd.
Suite 1A Jordon Centre
802-808 Pacific Highway
Gordon Sydney N5W 2072
Australia
Attention: Chief Executive Officer
Telecopier Number: 612-9499-2085
And with a copy to:
Mr. Hillel T. Cohn
Graham & James LLP
801 South Figueroa Street
14th Floor
Los Angeles, California 90017-5554
Telecopier Number: (213) 623-4581
or, as to each Party, at such other address as shall be designated by such Party
in a written notice to each other Party complying as to delivery with the terms
of this Paragraph. All such notices, requests, demands, directions and other
communications shall be effective (i) When mailed, five (5) days after being
deposited in the mails addressed as aforesaid with postage prepaid, (ii) when
delivered personally, upon delivery pursuant to this Paragraph, or (iii) on the
next business day after transmission if transmitted by telecopier (and
appropriate answerbacks have been received).
24.
(OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION)
25.
(OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION)
Executed this 28th day of August, 1996.
/s/ Robert H. Shelton
Robert H. Shelton
Executed this 28th day of August, 1996.
/s/ Leah Peterson-Shelton
Leah R. Peterson-Shelton
<PAGE>
SIGNATURE PAGE CONTINUED
Executed this 28th day of August, 1996.
/s/ Peter C. Watt
Out-Takes, Inc.
Executed this 28th day of August, 1996.
/s/ Peter C. Watt
Photo Corporation Group Pty., Ltd.
<PAGE>
================================================================================
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-48-
FIRST SCHEDULE
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made and entered into as of this __ day of
August, 1996 by and between OUT-TAKES, INC. (hereinafter called "Debtor"), a
Delaware corporation, with offices at 1419 Peerless Avenue, Los Angeles,
California 90035, and Robert H. Shelton and Leah R. Peterson-Shelton
(hereinafter collectively called "Creditor"), both of 30 Via Lucca, Apt. F-102,
Irvine, California 92712.
1. As used herein, the following terms shall have the following meanings.
Terms not otherwise defined herein shall have the meanings ascribed to them, if
any, under the California Commercial Code.
a. "Accounts" shall mean any and all rights now existing or
hereafter arising to payment for merchandise, goods, or commodities sold or
leased or to be sold or leased or for services rendered or to be rendered, no
matter how evidenced, including accounts, accounts receivable, general
intangibles, instruments, documents, purchase orders, notes, drafts,
acceptances, chattel paper and other forms of obligations owing to Debtor, all
guaranties and security therefor, all merchandise, goods, or commodities
returned to or reclaimed by Debtor and all of Debtor's Books (as that term is
defined below) relating to any of the foregoing.
b. "Books" shall mean all of Debtor's books and records, including,
without limitation: ledgers; records indicating, summarizing, or evidencing
Debtor's assets, Accounts, business operations or financial condition; computer
programs; computer discs or tape files; computer runs and other computer
printouts; and any other computer prepared information of any kind.
c. "Chattel Paper" shall mean a writing or writings of whatever
sort which evidence a monetary obligation and a security interest in or lease
of specific goods.
d. "Collateral" shall mean those items in which a security
interest is granted hereunder pursuant to
Paragraph 2 below.
e. "Deposit Accounts" shall mean any demand, time, savings, passbook
or like accounts maintained with a bank, savings and loan association, credit
union or like organization and any renewals, extensions and/or replacements
thereof, and all proceeds and accretions, including, without limitation,
interest and other property at any time and from time to time receivable or
otherwise entitled to be received on account thereof.
f. "Documents" shall mean any and all documents of title, bills of
lading, dock warrants, dock receipts, and warehouse receipts and shall include,
without limitation, other documents which purport to be issued by a bailee and
purport to cover goods in the bailee's possession which are either identified or
are fungible portions of an identified mass.
g. "Equipment" shall mean any and all things moveable or which are
fixtures which are used or bought for use primarily in the business of Debtor,
wherever located, now or hereafter existing, including, but not limited to all
software applications, photography rigs, computer network systems, computer
hardware, printers, and office furniture and all parts thereof and all additions
and accessions thereto and replacements thereof.
h. "Event of Default" shall mean any of those events described
in Paragraph 9 below.
i. "Fixtures" shall mean all plant fixtures, business fixtures, and
other fixtures and storage, office facilities, wherever located, now or
hereafter existing, and all additions and accessions thereto and replacements
therefor and products thereof.
j. "Instruments" shall mean any and all negotiable instruments,
securities (certificated and uncertificated) and every other
writing which evidences a right to the payment of money.
k. "Insurance" shall mean any and all policies of Insurance and
the proceeds thereof on or covering any or all of the Collateral.
l. "Inventory" shall mean any and all of Debtor's goods, merchandise
and other personal property, wherever located, now or hereafter existing,
including, without limitation, those held for display or demonstration or out on
lease or consignment or to be furnished under a contract of service or are raw
materials, work in process, finished materials, or materials used or consumed,
or to be used or consumed, in Debtor's business, and shall include, without
limitation, all packing and shipping materials, wherever located; and all other
items hereafter acquired by Debtor by way of substitution, replacement, return,
repossession or otherwise, and all additions and accessions thereto, and the
resulting product or mass, and any documents of title representing any of the
above.
m. "Obligations" shall mean any and all liabilities, debts, and
obligations of Debtor to Creditor pursuant to clauses 2 and 3 of the Settlement
and Mutual Release Agreement between the Debtor, the Creditor and Photo
Corporation Group Pty., Ltd. dated August __, 1996.
n. "Other Property" shall mean all of Debtor's personal property
other than Accounts, Chattel Paper, Deposit Accounts, Documents, Equipment,
Instruments and Inventory, including, without limitation, patents, service
marks, trademarks, trade names, copyrights and proprietary rights, and general
intangibles.
2. As security for the payment by Debtor to Creditor of the Obligations,
Debtor hereby grants to Creditor a continuing security interest in all of the
following: Inventory, Accounts, Documents, Equipment, Deposit Accounts,
Instruments, Fixtures, Chattel Paper, Other Property, and goods and commodities,
whether now held or hereafter acquired (including all returns, rejections and
repossessions and whether raw materials, work in progress, or materials used or
consumed in Debtor's business), whether or not such be in the actual or
constructive possession of Debtor, and together with all proceeds arising from
any of the foregoing, and all Insurance proceeds of any and all of the
foregoing.
3. Debtor represents and warrants to Creditor that:
a. Debtor is duly organized and existing in good standing in the
jurisdiction of its incorporation without limit as to the duration of its
existence, and is duly qualified and in good standing in each jurisdiction in
which the character of the properties owned by it therein or in which the
transaction of its business makes such qualification necessary;
b. The execution, delivery and performance of this Security
Agreement are within Debtor's powers, have been duly authorized and are not in
conflict with applicable law or the terms of any charter, bylaws or other
incorporation papers;
c. Any and all financial information, including any and all Books,
records, Documents and other information relating to the Collateral, submitted
by Debtor to Creditor, whether previously or in the future, is or will be
genuine, true and correct and prepared in accordance with generally accepted
accounting principles, consistently applied, and no such financial information
omits or will omit any material facts necessary to make such information not
misleading;
d. All Accounts are and will, at all times pertinent hereto, be bona
fide existing obligations created by sale and delivery of merchandise or
rendition of services to customers in the ordinary course of business, free of
liens and security interests and unconditionally owed to Debtor without
defenses, disputes, offsets, counterclaims, rights of return or cancellation,
and Debtor has no knowledge of any fact, including, without limitation, any
imminent or threatened bankruptcy, insolvency, or financial embarrassment of any
account debtor, which would impair the validity or collectibility of any of the
Accounts or Instruments, and each obligor liable upon the Accounts or
Instruments has and will have capacity to contract;
e. Debtor shall keep Inventory at locations under its control.
f. Debtor's federal taxpayer number is 95-4363944;
g. The name of Debtor appearing in the first paragraph of this
Security Agreement is the true, complete and correct name of Debtor; and Debtor
conducts business only under the following trade names and styles:
Out-Takes
h. Debtor will not, without the prior written consent of Creditor
(which consent shall not be unreasonably withheld), sell, lease, or otherwise
dispose of, move or transfer, any of Debtor's assets, including, without
limitation, the Collateral, except in the ordinary course of business;
i. Debtor will not, without the prior written consent of Creditor
(which consent shall not be unreasonably withheld), change its name, business
structure, corporate identity or structure; add any new fictitious or trade
names; liquidate; merge or consolidate with or into any other business
organization;
j. Debtor will not, without the prior written consent of Creditor,
incur any debts outside the ordinary course of business, except renewals or
extensions of existing debts and interest thereon, nor make any advances or
loans except in the ordinary course of business as presently conducted;
k. Debtor does now keep and hereafter at all times shall keep and
furnish to Creditor on demand upon an Event of Default correct and accurate
records itemizing and describing the kind, type, quality and quantity of the
Inventory and Accounts, including, without limitation, the age and amount of
each account, the name and address of each account debtor, and the merchandise
giving rise to such account;
l. Inventory is not now and hereafter shall not be, without the
prior written consent of Creditor, stored with a bailee, warehouseman or similar
party, or in the event of such storage, Debtor will concurrently therewith cause
any such bailee, warehouseman or similar party to issue and deliver to Creditor,
in form and substance acceptable to Creditor, warehouse receipts in Creditor's
name evidencing the storage of such inventory;
m. There are no actions or proceedings pending by or against Debtor
or any guarantor of Debtor before any court or administrative agency, and Debtor
has no knowledge of any pending, threatened, or imminent litigation,
governmental investigations or claims, complaints, actions or prosecutions
involving Debtor or any guarantor of Debtor, except as heretofore specifically
disclosed in writing to Creditor or reflected in the Books.
n. The Debtor shall not allow any UCC-1 financing statement
whether now existing or hereafter filed to have priority over the
UCC-1 financing statement contemplated by the terms of the Settlement and
Mutual Release Agreement between the Debtor, the Creditor and Photo
Corporation Group Pty. Ltd. dated August __, 1996.
4. Until Creditor exercises its rights to collect proceeds and amounts
with respect to the Collateral, Debtor will collect with diligence any and all
proceeds with respect to the Collateral, at its own expense. Upon the occurrence
and continuance of any Event of Default, upon Creditor's written request, any
collection of proceeds with respect to the Collateral by Debtor, whether in the
form of cash, checks, notes or other instruments for the payment of money
(properly endorsed or assigned where required to enable Creditor to collect
same) or otherwise, shall be in trust for Creditor, and Debtor shall keep all
such collections separate and apart from all other funds and property so as to
be capable of identification as the property of Creditor and shall deliver them
together with the proceeds of all cash sales, daily to Creditor in the identical
form received.
5. Until Creditor exercises its rights to collect the Accounts, Inventory
and Instrument proceeds pursuant to Paragraph 8, Debtor may continue its
respective present policies with respect to returned merchandise and
adjustments. However upon an Event of Default and, upon request by Creditor,
Debtor shall immediately notify Creditor of all cases involving returns,
rejections, repossessions and loss or damage of or to merchandise represented by
the Accounts or Instruments or constituting Inventory and of any credits,
adjustments or disputes arising in connection with the goods or services
represented by the Accounts or Instruments or constituting Inventory in excess
of $5,000 and, in any of such events, Debtor will immediately pay to Creditor
from its own funds (and not from the proceeds of Accounts, Inventory or
Instruments) for application to any Obligation, the amount of any credit for
such returned or repossessed merchandise and adjustments made.
6. Anything herein to the contrary notwithstanding:
a. Debtor shall remain liable under the contracts and agreements
included in the Collateral to perform all of its duties and obligations
thereunder to the same extent as if this Security Agreement had not been
executed.
b. The exercise by Creditor of any of the rights hereunder shall
not release Debtor from any of its duties or obligations under the contracts
and agreements included in the Collateral; and
c. Creditor shall not have any obligation or liability under the
contracts and agreements included in the Collateral by reason of this Security
Agreement, nor shall Creditor be obligated to perform any of the obligations or
duties of Debtor thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder.
7. Debtor shall upon an Event of Default (i) permit representatives of
Creditor to inspect the Collateral and the respective Books and records relating
to the Collateral and make extracts therefrom at any reasonable time and to
arrange for verification of the Accounts, under reasonable procedures,
acceptable to Creditor, directly with the account debtors or otherwise at
Debtor's expense; (ii) promptly notify Creditor of any attachment or other legal
process levied against any of the Collateral and any information received by
Debtor relative to the Collateral, the account debtors or other persons
obligated in connection therewith, which may in any way affect the value of the
Collateral or the rights and remedies of Creditor in respect thereto; (iii)
reimburse Creditor upon demand for any and all legal costs, including reasonable
attorney's fees and accountants' fees, and other expenses incurred in collecting
any sums payable by Debtor under any Obligation secured hereby, enforcing any
term or provision of this Security Agreement or otherwise or in the checking,
handling and collection of the Collateral and the preparation and enforcement of
any agreement relating thereto, whether by nonjudicial or judicial action; (iv)
promptly notify Creditor of each location at which the Collateral is or will be
kept, other than for temporary processing, storage or similar purposes, and of
any removal thereof to a new location, including, without limitation, each
office of Debtor at which Books or records relating to the Accounts are kept;
(v) maintain policies of Insurance insuring the Collateral against loss or
damage by such risks and in such amounts and forms as are reasonably determined
prudent by the Debtor; (vi) do all acts necessary to maintain, preserve and
protect all Collateral, keep all Collateral in good condition and repair and
prevent any waste or unusual or unreasonable depreciation thereof; and (vii)
execute and deliver to Creditor further documents and instruments and such other
acts and things as Creditor may reasonably request in order to effectuate fully
the purpose and intent of this Security Agreement. In the event of a failure by
the Debtor so to do, the Debtor hereby irrevocably makes and appoints Creditor
(and any of Creditor's officers, employees, or agents) as Debtor's true and
lawful attorney-in-fact with power to sign on behalf of Debtor on any financing
statements, continuation statements, security agreement, mortgage, assignment,
certificate of title, affidavit, letter of authority, notice or similar document
which must be executed and/or filed in order to perfect or continue perfected
Creditor's security interest in the Collateral. Debtor hereby recognizes and
agrees that the power of attorney herein granted is coupled with an interest and
shall not be revocable until the Obligations are fully repaid at which time such
Power of Attorney shall immediately cease.
8. Creditor may at any time, without prior notice to Debtor, collect
proceeds and amounts in respect of the Collateral and may give notice of
assignment to any and all account debtors, and Debtor hereby irrevocably
constitutes and appoints Creditor (and any of Creditor's officers, employees or
agents) its irrevocable, true and lawful attorney-in-fact to enforce in Debtor's
name or in Creditor's name or otherwise all rights of Debtor in the Collateral
and to do any and all things necessary and proper to carry out the purpose of
this Security Agreement, provided, however, that Creditor may exercise said
collection rights and its rights and powers as said attorney-in-fact only upon
the occurrence and continuance of an Event of Default. Debtor hereby recognizes
and agrees that the power of attorney herein granted is coupled with an interest
and shall not be revocable until the Obligations are fully repaid at which time
such Power of Attorney shall immediately cease.
9. Any one or more of the following events shall constitute an Event
of Default under this Security Agreement;
a. If any representation, statement, report or certificate made
or delivered by Debtor or any of its officers, directors, employees, or
agents or any guarantor of Debtor to Creditor is not materially true and
correct;
b. If Debtor fails to pay when due and payable, or within seven (7)
calendar days of receipt of a written notice from the Creditor to the Debtor
detailing the amount payable and requesting payment, or otherwise fails to
perform when due, any of the Obligations;
c. If Debtor becomes insolvent or makes an assignment for the
benefit of creditors (whether with respect to Creditor or otherwise);
d. If any proceeding by or against Debtor or any guarantor of Debtor
is commenced under any bankruptcy, reorganization, arrangement, readjustment of
debt or moratorium law or statute, or for Debtor's dissolution or liquidation
and is not withdrawn or stayed within 28 days of commencement;
e. Other than in respect of those accounts payable referred to in
Appendix 1, if any writ of attachment, garnishment, execution or other legal
process is issued against any property of Debtor or any guarantor of the
Obligations and is not timely and diligently contested, provided that (i) such
contest is permitted by law, (ii) such contest has the effect of staying any
further action against any property of Debtor or any guarantor of the
Obligations, (iii) Debtor posts any security required by law which security
shall be reasonably satisfactory to Creditor, and (iv) said contest does not
subject Creditor to civil or criminal penalties;
f. Other than in respect of those accounts payable referred to in
Appendix 1, if any assessment is made against Debtor or any guarantor of Debtor
for any taxes, other than on real property, by any federal or state government,
or any department thereof, and is not timely and diligently contested, provided
that such contest is permitted by law, has the effect of staying any further
action against Debtor or any guarantor of the Obligations, Debtor posts any
security required by law which security shall be reasonably satisfactory to
Creditor, and said contest does not subject Creditor to civil or criminal
penalties;
g. If Debtor is enjoined, restrained or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs, and Debtor does not timely and diligently contest the same, provided
that (i) such contest is permitted by law, (ii) such contest has the effect of
staying any further action against the Debtor's business affairs, (iii) Debtor
posts any security required by law which security shall be reasonably
satisfactory to Creditor, and (iv) said contest does not subject Creditor to
civil or criminal penalties;
h. Other than in respect of those accounts payable referred to in
Appendix 1, if there is a default in any agreement between Debtor and third
parties and such third parties accelerate the maturity of any of Debtor's
indebtedness;
i. If Debtor makes any payment on account of indebtedness which has
been subordinated to Debtor's Obligations to Creditor other than pay accounts
payable arising in the ordinary course of business consistent with past
practices; and
j. Unless otherwise specified above in this Paragraph 9, if Debtor
otherwise fails or neglects to perform, keep or observe in any material respect,
any term, condition, agreement, warranty or representation contained in this
Security Agreement or any other presently existing or future agreement between
Debtor and Creditor, within twenty one (21) days after written notice from
Creditor of such failure or neglect.
10. Upon the occurrence of any Event of Default, Creditor may, at its
election, without notice of its election and without demand, do any one or more
of the following, successively or concurrently, all of which are authorized by
Debtor:
a. Declare all of Debtor's Obligations for payment of money, whether
evidenced by installment notes, demand notes or otherwise, immediately due and
payable.
b. Cease advancing money or extending credit to Debtor under any
agreement between Debtor and Creditor, and terminate any agreement for financial
accommodation to or for the benefit of Debtor.
c. Immediately or from time to time enter the premises where the
Collateral is located, take possession of all or any part of the Collateral,
wherever it may be found, using all necessary force to do so, and Debtor waives
all claims for damages due to or arising from or connected with any such taking.
d. Require Debtor to assemble the Collateral, or any part of it,
at a place designated by Creditor which is reasonably convenient to Debtor
and Creditor.
e. Pay, purchase, contest or compromise any encumbrance, charge or
lien which in the opinion of Creditor appears to be prior or superior to its
security interest and to pay all expenses incurred therewith. Any payment or
expense so incurred shall become part of Debtor's Obligations to Creditor,
payable on demand, and secured hereby.
f. Do such other acts as Creditor deems reasonable to protect its
interest in the Collateral, including, without limitation, repairing or
reconditioning, finishing, maintaining, preparing for sale, or storing such
Collateral. Any expenses thereof shall become part of Debtor's Obligations,
payable on demand, and secured hereby.
g. From time to time, by way of one or more contracts or
transactions, proceed in the foreclosure of Creditor's security interest and
sale of the Collateral or any part of it, in any manner permitted by law or
provided for herein.
h. Sell, lease, or otherwise dispose of the Collateral or any part
of it, with or without having the Collateral, or any part of it, at the place of
sale, upon terms and in such manner as Creditor may determine, and Creditor may
purchase same at any such sale. Any notice of sale, disposition or other
intended action sent to Debtor at least fourteen (14) days prior to such action
shall constitute reasonable notice.
i. Apply to a court of competent jurisdiction for appointment of
a receiver of Debtor to take possession of, operate, manage, maintain, and
preserve Debtor's business and assets for the benefit of Creditor;
j. Apply to a court of competent jurisdiction for a writ of
possession or attachment against any of Debtor's assets notwithstanding the
existence or value of any security for the Obligations.
k. Exercise any remedies of a secured party under the California
Commercial Code, and any other remedies available at law, in equity, or by
separate agreement with the Debtor.
11. If sufficient sums are not realized upon any disposition of the
Collateral to pay all Obligations to Creditor and any expenses, including
reasonable attorneys' fees, of such disposition, Debtor hereby promises to pay
immediately any resulting deficiency.
12. Creditor shall in no way or manner be liable or responsible for: (a)
the safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in value
thereof; or (d) any act of default of any carrier, warehouseman, bailee,
forwarding agency, or any other person whomsoever. All risk or loss, damage or
destruction of inventory shall be borne by Debtor.
13. No failure or delay on the part of Creditor in exercising any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law, in equity, or by separate agreement with Debtor.
14. No amendment, modification, termination, or waiver of any provision of
this Security Agreement nor consent to any departure by Debtor therefrom shall
in any event be effective unless the same shall be in writing and signed by
Creditor and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No notice to or demand on
Debtor in any case shall entitle Debtor to any other or further notice or demand
in similar or other circumstances.
15. All notices, requests, demands, directions and other communications
provided for hereunder shall be in writing and mailed, certified mail return
receipt requested, transmitted by telecopier, or personally delivered, as
elected by the party giving such notice, to the applicable party at the address
indicated below:
If to Debtor:
Out-Takes, Inc.
1419 Peerless Avenue, Suite 116
Los Angeles, California 90035
Telecopier Number: (310) 788-0160
Attn: President
And with a copy to:
Mr. Hillel T. Cohn
Graham & James LLP
801 South Figueroa Street
14th Floor
Los Angeles, California 90017-5554
Telecopier Number: (213) 623-4581
If to Creditor:
Robert H. Shelton and Leah R. Peterson
30 Via Lucca,
Apt. F-102, Irvine, California 92712
Telecopier Number: (714) 851-1297
and with a copy to:
William D. Ellis
Morgan Lewis & Bockius LLP
801 South Grand Avenue
Los Angeles, California 90017-4615
Telecopier Number: (213) 612-2554
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this Paragraph. All such notices, requests, demands, directions and other
communications shall be effective (i), when mailed, five (5) days after being
deposited in the mails addressed as aforesaid with postage prepaid, (ii) when
delivered personally, upon delivery pursuant to this Paragraph, or (iii) on the
next business day after transmission if transmitted by telecopier (and
appropriate answerbacks have been received).
16. Any provision of this Security Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
17. Debtor waives the right to plead the statute of limitations as a
defense to any and all obligations contained in this Security Agreement or
secured by it to the full extent permissible by law. Time and exactitude of each
of the terms, obligations, covenants and conditions are declared to be of the
essence of this Security Agreement.
18. This Security Agreement shall take effect immediately upon the
execution by Debtor, and the execution hereof by Creditor shall not be required
as a condition to the effectiveness of this Security Agreement. The provision
for execution of this Security Agreement by Creditor is only for purposes of
filing a Memorandum of this Security Agreement under the Uniform Commercial
Code, if execution hereof by Creditor is required for purposes of such filing.
19. Nothing herein shall in any way limit the effect of the conditions set
forth in any other security or other agreement executed by Debtor, but each and
every condition hereof shall be in addition thereof.
20. This Security Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties. Creditor may assign
this Security Agreement and its rights and duties hereunder without prior notice
to or consent of the Debtor.
21. DEBTOR AND CREDITOR HEREBY AGREE TO WAIVE THEIR RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SECURITY
AGREEMENT. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this Security Agreement, including, without limitation, contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Debtor and Creditor each acknowledge that this waiver is a
material inducement to enter into a business relationship, that each has already
relied on the waiver in entering into this Security Agreement and that each will
continue to rely on the waiver in their related future dealings. Debtor and
Creditor further warrant and represent that each has reviewed this waiver with
its legal counsel, and that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS SECURITY AGREEMENT. In the event of litigation, this Security Agreement
may be filed as a written consent to a trial by the court.
22. This Security Agreement is and shall be governed by and construed in
accordance with the laws of the state of California, except to the extent that
the validity or perfection of the security interests hereunder or remedies
hereunder in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the state of California.
23. Creditor and Debtor agree to file any action arising out of, or
relating to, this Security Agreement with the Superior Court of the State of
California for the County of Los Angeles, Central District (the "Court") and
waive all objections to personal jurisdiction and venue of the Court for such
purposes, except that Creditor and Debtor may file any action relating to the
disposition of any Collateral located beyond the territorial jurisdiction of the
Court with any court of competent jurisdiction.
24. Debtor hereby consents to service of process in any action, wherever
filed, arising out of, or relating to, this Security Agreement by first class
United States mail, postage prepaid, to the address of Debtor set forth in, or
that which Debtor designates pursuant to, Paragraph 15 of this Security
Agreement.
<PAGE>
25. In the event either party files an action to enforce or interpret the
terms of this Security Agreement, the prevailing party shall be entitled to
receive its reasonable attorneys' fees and costs from the losing party.
IN WITNESS WHEREOF, the parties have executed this Security Agreement,
effective as of the date first written above.
<PAGE>
==============================================================================
DEBTOR:
==============================================================================
Out-Takes, Inc.
By:
Name:
Title:
CREDITOR:
Robert H. Shelton and
Leah R. Peterson-Shelton
- ----------------- --------------
<PAGE>
================================================================================
APPENDIX 1
================================================================================
Nil
<PAGE>
===============================================================================
================================================================================
ATTACHMENT TO UCC-1 FINANCING STATEMENT
Debtor's Name: OUT-TAKES, INC.
Continuation of Item 6: DESCRIPTION OF COLLATERAL
This financing statement covers all right, title and interest in, to and
under the following, in each case whether now or hereafter existing and whether
now owned or hereafter acquired and regardless of where located (all of which
being hereinafter collectively called the "Collateral"):
Inventory, Accounts, Documents, Equipment, Deposit Accounts,
Instruments, Fixtures, Chattel Paper, Other Property, and goods and commodities,
whether now held or hereafter acquired (including all returns, rejections and
repossessions and whether raw materials, work in progress, or materials used or
consumed in Debtor's business), whether or not such be in the actual or
constructive possession of Debtor, and together with all proceeds arising from
any of the foregoing, and all Insurance proceeds of any and all of the
foregoing.
As used herein, the following terms shall have the following meanings.
Terms not otherwise defined herein shall have the meanings ascribed to them, if
any, under the California Commercial Code.
a. "Accounts" shall mean any and all rights now existing or hereafter
arising to payment for merchandise, goods, or commodities sold or leased or to
be sold or leased or for services rendered or to be rendered, no matter how
evidenced, including accounts, accounts receivable, general intangibles,
instruments, documents, purchase orders, notes, drafts, acceptances, chattel
paper and other forms of obligations owing to Debtor, all guaranties and
security therefor, all merchandise, goods, or commodities returned to or
reclaimed by Debtor and all of Debtor's Books (as that term is defined below)
relating to any of the foregoing.
b. "Books" shall mean all of Debtor's books and records,
including, without limitation: ledgers; records indicating, summarizing, or
evidencing Debtor's assets, Accounts, business operations or financial
condition; computer programs; computer discs or tape files; computer runs and
other computer printouts; and any other computer prepared information of any
kind.
<PAGE>
==============================================================================
===============================================================================
-54-
c. "Chattel Paper" shall mean a writing or writings of whatever
sort which evidence a monetary obligation and a security
interest in or lease of specific goods.
d. "Collateral" shall mean those items in which a security
interest is granted hereunder pursuant to Paragraph 2 of
the Security Agreement.
e. "Deposit Accounts" shall mean any demand, time, savings,
passbook or like accounts maintained with a bank, savings and loan association,
credit union or like organization and any renewals, extensions and/or
replacements thereof, and all proceeds and accretions, including, without
limitation, interest and other property at any time and from time to time
receivable or otherwise entitled to be received on account thereof.
f. "Documents" shall mean any and all documents of title, bills of
lading, dock warrants, dock receipts, and warehouse receipts and shall include,
without limitation, other documents which purport to be issued by a bailee and
purport to cover goods in the bailee's possession which are either identified or
are fungible portions of an identified mass.
g. "Equipment" shall mean any and all things moveable or which are
fixtures which are used or bought for use primarily in the business of Debtor,
wherever located, now or hereafter existing, including, but not limited to all
software applications, photography rigs, computer network systems, computer
hardware, printers, and office furniture and all parts thereof and all additions
and accessions thereto and replacements thereof,
h. "Fixtures" shall mean all plant fixtures, business fixtures,
and other fixtures and storage, office facilities, wherever located, now or
hereafter existing, and all additions and accessions thereto and replacements
therefor and products thereof.
i. "Instruments" shall mean any and all negotiable
instruments, securities (certificated and uncertificated) and every other
writing which evidences a right to the payment of money.
j. "Insurance" shall mean any and all policies of Insurance
and the proceeds thereof on or covering any or all of the Collateral.
k. "Inventory" shall mean any and all of Debtor's goods,
merchandise and other personal property, wherever located, now or hereafter
existing, including, without limitation, those held for display or demonstration
or out on lease or consignment or to be furnished under a contract of service or
are raw materials, work in process, finished materials, or materials used or
consumed, or to be used or consumed, in Debtor's business, and shall include,
without limitation, all packing and shipping materials, wherever located; and
all other items hereafter acquired by Debtor by way of substitution,
replacement, return, repossession or otherwise, and all additions and accessions
thereto, and the resulting product or mass, and any documents of title
representing any of the above.
l. "Obligations" shall mean any and all liabilities, debts,
and obligations of Debtor to Creditor pursuant to clauses 2 and 3 of the
Settlement and Mutual Release Agreement between the Debtor, the
Creditor and Photo Corporation Group Pty. Ltd. dated August __, 1996.
m. "Other Property" shall mean all of Debtor's personal property
other than Accounts, Chattel Paper, Deposit Accounts, Documents, Equipment,
Instruments and Inventory, including, without limitation, patents, service
marks, copyrights, proprietary rights, and general intangibles.
<PAGE>
SECOND SCHEDULE
(OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION)
<PAGE>
<TABLE>
============================================================================
================================================================================
THIRD SCHEDULE
- ------------------------------------------------------------------------------
Payment Date _________________________ _________________________
Contract Obligations Discounts Obligations
- -------------------------------------------------------------------------------
- ----- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contractual Pmt (Excludes benefit of discount available if there RHS LRS
Date Due # has been no Default) 15.1020% 16.7365% Total Cum Total
RHS LRS Total CUM TOTAL
- --------------------------------------------------------------------------------
6-Sep-96 1 29,447.10 18,015.10 47,462.20 47,462.20 25,000.00 15,000.00 40,000.00 40,000.00
20-Sep-96 2 5,698.31 3,641.75 9,340.06 56,802.26 4,837.75 3,032.25 7,870.00 47,870.00
4-Oct-96 3 5,698.31 3,641.75 9,340.06 66,142.32 4,837.75 3,032.25 7,870.00 55,740.00
18-Oct-96 4 5,698.31 3,641.75 9,340.06 75,482.38 4,837.75 3,032.25 7,870.00 63,610.00
1-Nov-96 5 5,698.31 3,641.75 9,340.06 84,822.44 4,837.75 3,032.25 7,870.00 71,480.00
15-Nov-96 6 5,698.31 3,641.75 9,340.06 94,162.50 4,837.75 3,032.25 7,870.00 79,350.00
29-Nov-96 7 5,698.31 3,641.75 9,340.06 103,502.56 4,837.75 3,032.25 7,870.00 87,220.00
13-Dec-96 8 5,698.31 3,641.75 9,340.06 112,842.62 4,837.75 3,032.25 7,870.00 95,090.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
27-Dec-96 9 5,698.31 3,641.75 9,340.06 122,182.68 4,837.75 3,032.25 7,870.00 102,960.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
10-Jan-97 10 9,776.44 6,245.23 16,021.67 138,204.35 8,300.00 5,200.00 13,500.00 116,460.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
24-Jan-97 11 9,776.44 6,245.23 16,021.67 154,226.02 8,300.00 5,200.00 13,500.00 129,960.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
7-Feb-97 12 3,332.23 2,145.00 5,477.23 159,703.25 2,829.00 1,786.00 4,615.00 134,575.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
21-Feb-97 13 3,332.23 2,145.00 5,477.23 165,180.49 2,829.00 1,786.00 4,615.00 139,190.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
7-Mar-97 14 3,332.23 2,145.00 5,477.23 170,657.72 2,829.00 1,786.00 4,615.00 143,805.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
21-Mar-97 15 3,332.23 2,145.00 5,477.23 176,134.95 2,829.00 1,786.00 4,615.00 148,420.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
4-Apr-97 16 3,332.23 2,145.00 5,477.23 181,612.18 2,829.00 1,786.00 4,615.00 153,035.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
18-Apr-97 17 3,332.23 2,145.00 5,477.23 187,089.41 2,829.00 1,786.00 4,615.00 157,650.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
2-May-97 18 3,332.23 2,145.00 5,477.23 192,566.64 2,829.00 1,786.00 4,615.00 162,265.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
16-May-97 19 3,332.23 2,145.00 5,477.23 198,043.87 2,829.00 1,786.00 4,615.00 166,880.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
30-May-97 20 3,332.23 2,145.00 5,477.23 203,521.11 2,829.00 1,786.00 4,615.00 171,495.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
13-Jun-97 21 3,332.23 2,145.00 5,477.23 208,998.34 2,829.00 1,786.00 4,615.00 176,110.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
27-Jun-97 22 3,332.23 2,145.00 5,477.23 214,475.57 2,829.00 1,786.00 4,615.00 180,725.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
11-Jul-97 23 3,332.23 2,145.00 5,477.23 219,952.80 2,829.00 1,786.00 4,615.00 185,340.00
- ------------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------
-56-
- ------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------------------------------------------
Payment Date Contract Discounted
Obligations Obligations
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Contractual Pmt (Excludes benefit of discount available if there RHS LRS
Date Due # has been no Default 15.0000% 15.0000% Total Cum Total
RHS LRS Total CUM TOTAL
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
25-Jul-97 24 3,332.23 2,145.00 5,477.23 225,430.03 2,829.00 1,786.00 4,615.00 189,955.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
8-Aug-97 25 3,332.23 2,145.00 5,477.23 230,907.26 2,829.00 1,786.00 4,615.00 194,570.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
22-Aug-97 26 3,332.23 2,145.00 5,477.23 236,384.50 2,829.00 1,786.00 4,615.00 199,185.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
5-Sep-97 27 3,332.23 2,145.00 5,477.23 241,861.73 2,829.00 1,786.00 4,615.00 203,800.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
19-Sep-97 28 3,332.23 2,145.00 5,477.23 247,338.96 2,829.00 1,786.00 4,615.00 208,415.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
3-Oct-97 29 3,332.23 2,145.00 5,477.23 252,816.19 2,829.00 1,786.00 4,615.00 213,030.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
17-Oct-97 30 3,332.23 2,145.00 5,477.23 258,293.42 2,829.00 1,786.00 4,615.00 217,645.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
31-Oct-97 31 3,332.23 2,145.00 5,477.23 263,770.65 2,829.00 1,786.00 4,615.00 222,260.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
14-Nov-97 32 3,332.23 2,145.00 5,477.23 269,247.88 2,829.00 1,786.00 4,615.00 226,875.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
28-Nov-97 33 3,332.23 2,145.00 5,477.23 274,725.12 2,829.00 1,786.00 4,615.00 231,490.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
12-Dec-97 34 3,332.23 2,145.00 5,477.23 280,202.35 2,829.00 1,786.00 4,615.00 236,105.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
26-Dec-97 35 3,332.23 2,145.00 5,477.23 285,679.58 2,829.00 1,786.00 4,615.00 240,720.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
9-Jan-98 36 3,332.23 2,145.00 5,477.23 291,156.81 2,829.00 1,786.00 4,615.00 245,335.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
23-Jan-98 37 3,332.23 2,145.00 5,477.23 296,634.04 2,829.00 1,786.00 4,615.00 249,950.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
6-Feb-98 38 3,332.23 2,145.00 5,477.23 302,111.27 2,829.00 1,786.00 4,615.00 254,565.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
20-Feb-98 39 3,332.23 2,145.00 5,477.23 307,588.50 2,829.00 1,786.00 4,615.00 259,180.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
6-Mar-98 40 3,332.23 2,145.00 5,477.23 313,065.74 2,829.00 1,786.00 4,615.00 263,795.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
20-Mar-98 41 3,332.23 2,145.00 5,477.23 318,542.97 2,829.00 1,786.00 4,615.00 268,410.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
3-Apr-98 42 3,332.23 2,145.00 5,477.23 324,020.20 2,829.00 1,786.00 4,615.00 273,025.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
17-Apr-98 43 769.16 833.50 1,602.66 325,622.86 653.00 694.00 1,347.00 274,372.00
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Total of 198,654.86 126,968.00 325,622.86 168,654.00 105,718.00 274,372.00
Above
- ------------------------------------------------------------------------------------------------------------------
NOTE: All amounts shown exclude interest and payroll tax withholdings, which will be computed as provided for in the
Settlement Agreement.
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
-
- ------------------------------------------------------------------------------------------------------------------------------
THIRD SCHEDULE
- ----------------------------------------------------------------------------------------------------------
Payment Date Contract Obligations (Required if any payment is ever in default)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
(Excludes benefit of discount available Total
Contractual Pmt if there has been no Default) Withholdings Interest Interest Anticipated
Date Due # Tax @ at Payment Payment
35% 8.25%
-------------------------------------------
-------------------------------------------
RHS LRS Pre-Tax Cum Total
Total
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6-Sep-96 1 29,447.10 18,015.10 47,462.20 47,462.20 16,611.77 204.33 204.33 31,054.76
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
20-Sep-96 2 5,698.31 3,641.75 9,340.06 56,802.26 3,269.02 552.92 6,071.04
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
4-Oct-96 3 5,698.31 3,641.75 9,340.06 66,142.32 3,269.02 533.71 6,071.04
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
18-Oct-96 4 5,698.31 3,641.75 9,340.06 75,482.38 3,269.02 514.50 6,071.04
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
1-Nov-96 5 5,698.31 3,641.75 9,340.06 84,822.44 3,269.02 495.29 2,096.43 8,167.47
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
15-Nov-96 6 5,698.31 3,641.75 9,340.06 94,162.50 3,269.02 476.08 6,071.04
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
29-Nov-96 7 5,698.31 3,641.75 9,340.06 103,502.56 3,269.02 456.87 6,071.04
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
13-Dec-96 8 5,698.31 3,641.75 9,340.06 112,842.62 3,269.02 437.66 6,071.04
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
27-Dec-96 9 5,698.31 3,641.75 9,340.06 122,182.68 3,269.02 418.45 1,789.05 7,860.09
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
10-Jan-97 10 9,776.44 6,245.23 16,021.67 138,204.35 5,607.58 385.49 10,414.09
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
24-Jan-97 11 9,776.44 6,245.23 16,021.67 154,226.02 5,607.58 352.54 10,414.09
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
7-Feb-97 12 3,332.23 2,145.00 5,477.23 159,703.25 1,917.03 341.27 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
21-Feb-97 13 3,332.23 2,145.00 5,477.23 165,180.49 1,917.03 330.01 1,409.31 4,969.51
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
7-Mar-97 14 3,332.23 2,145.00 5,477.23 170,657.72 1,917.03 318.74 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
21-Mar-97 15 3,332.23 2,145.00 5,477.23 176,134.95 1,917.03 307.47 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
4-Apr-97 16 3,332.23 2,145.00 5,477.23 181,612.18 1,917.03 296.21 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
18-Apr-97 17 3,332.23 2,145.00 5,477.23 187,089.41 1,917.03 284.94 1,207.36 4,767.57
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
2-May-97 18 3,332.23 2,145.00 5,477.23 192,566.64 1,917.03 273.68 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
16-May-97 19 3,332.23 2,145.00 5,477.23 198,043.87 1,917.03 262.41 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
30-May-97 20 3,332.23 2,145.00 5,477.23 203,521.11 1,917.03 251.14 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
13-Jun-97 21 3,332.23 2,145.00 5,477.23 208,998.34 1,917.03 239.88 1,027.11 4,587.31
- ----------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------
Payment Date
Contract Obligations (continued from previous page)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
(Excludes benefit of discount available Total
Contractual Pmt if there has been no Default) Withholdings Interest Interest Anticipated
Date Due # Tax @ at Payment Payment
35% 8.25%
-------------------------------------------
-------------------------------------------
RHS LRS Pre-Tax Cum Total
Total
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
27-Jun-97 22 3,332.23 2,145.00 5,477.23 214,475.57 1,917.03 228.61 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
11-Jul-97 23 3,332.23 2,145.00 5,477.23 219,952.80 1,917.03 217.35 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
25-Jul-97 24 3,332.23 2,145.00 5,477.23 225,430.03 1,917.03 206.08 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
8-Aug-97 25 3,332.23 2,145.00 5,477.23 230,907.26 1,917.03 194.82 846.86 4,407.06
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
22-Aug-97 26 3,332.23 2,145.00 5,477.23 236,384.50 1,917.03 183.55 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
5-Sep-97 27 3,332.23 2,145.00 5,477.23 241,861.73 1,917.03 172.28 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
19-Sep-97 28 3,332.23 2,145.00 5,477.23 247,338.96 1,917.03 161.02 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
3-Oct-97 29 3,332.23 2,145.00 5,477.23 252,816.19 1,917.03 149.75 666.60 4,226.80
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
17-Oct-97 30 3,332.23 2,145.00 5,477.23 258,293.42 1,917.03 138.49 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
31-Oct-97 31 3,332.23 2,145.00 5,477.23 263,770.65 1,917.03 127.22 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
14-Nov-97 32 3,332.23 2,145.00 5,477.23 269,247.88 1,917.03 115.95 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
28-Nov-97 33 3,332.23 2,145.00 5,477.23 274,725.12 1,917.03 104.69 486.35 4,046.55
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
12-Dec-97 34 3,332.23 2,145.00 5,477.23 280,202.35 1,917.03 93.42 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
26-Dec-97 35 3,332.23 2,145.00 5,477.23 285,679.58 1,917.03 82.16 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
9-Jan-98 36 3,332.23 2,145.00 5,477.23 291,156.81 1,917.03 70.89 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
23-Jan-98 37 3,332.23 2,145.00 5,477.23 296,634.04 1,917.03 59.63 306.10 3,866.30
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
6-Feb-98 38 3,332.23 2,145.00 5,477.23 302,111.27 1,917.03 48.36 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
20-Feb-98 39 3,332.23 2,145.00 5,477.23 307,588.50 1,917.03 37.09 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
6-Mar-98 40 3,332.23 2,145.00 5,477.23 313,065.74 1,917.03 25.83 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
20-Mar-98 41 3,332.23 2,145.00 5,477.23 318,542.97 1,917.03 14.56 125.84 3,686.04
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
3-Apr-98 42 3,332.23 2,145.00 5,477.23 324,020.20 1,917.03 3.30 3,560.20
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
17-Apr-98 43
769.16 833.50 1,602.66 325,622.86 560.93 0.0 1045.02
0.00
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Total of 198,654.86 126,968.00 325,622.86 113,968.00 10,168.64 10,168.64 221,823.50
Above
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Payment Date Discounted Obligations (Applicable so long as payments are made in a
timely manner)
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Contractual Pmt RHS LRS WithholdingsInterest Interest Total
Date Due # 15.1020% 16.7365% Total Cum Total Tax @ 35% at Payment Anticipated
8.25% Payment
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6-Sep-96 1 25,000.00 15,000.00 40,000.00 40,000.00 14,000.00 172.17 172.17 26,172.17
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
20-Sep-96 2 4,837.75 3,032.25 7,870.00 47,870.00 2,754.50 465.88 5,115.50
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
4-Oct-96 3 3,032.25 7,870.00 2,754.50 5,115.50
4,837.75 55,740.00 449.69
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
18-Oct-96 4 3,032.25 7,870.00 2,754.50 5,115.50
4,837.75 63,610.00 433.51
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
1-Nov-96 5 3,032.25 7,870.00 2,754.50 1,766.40 6,881.90
4,837.75 71,480.00 417.32
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
15-Nov-96 6 3,032.25 7,870.00 2,754.50 5,115.50
4,837.75 79,350.00 401.13
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
29-Nov-96 7 3,032.25 7,870.00 2,754.50 5,115.50
4,837.75 87,220.00 384.94
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
13-Dec-96 8 3,032.25 7,870.00 2,754.50 5,115.50
4,837.75 95,090.00 368.76
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
27-Dec-96 9 3,032.25 7,870.00 102,960.00 2,754.50 1,507.40 6,622.90
4,837.75 352.57
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
10-Jan-97 10 5,200.00 13,500.00 116,460.00 4,725.00 8,775.00
8,300.00 324.80
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
24-Jan-97 11 5,200.00 13,500.00 129,960.00 4,725.00 8,775.00
8,300.00 297.03
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
7-Feb-97 12 1,786.00 4,615.00 134,575.00 1,615.25 2,999.75
2,829.00 287.54
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
21-Feb-97 13 1,786.00 4,615.00 139,190.00 1,615.25 1,187.43 4,187.18
2,829.00 278.05
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
7-Mar-97 14 1,786.00 4,615.00 143,805.00 1,615.25 2,999.75
2,829.00 268.56
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
21-Mar-97 15 1,786.00 4,615.00 148,420.00 1,615.25 2,999.75
2,829.00 259.06
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
4-Apr-97 16 1,786.00 4,615.00 153,035.00 1,615.25 2,999.75
2,829.00 249.57
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
18-Apr-97 17 1,786.00 4,615.00 157,650.00 1,615.25 1,017.27 4,017.02
2,829.00 240.08
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
2-May-97 18 1,786.00 4,615.00 162,265.00 1,615.25 2,999.75
2,829.00 230.59
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
16-May-97 19 1,786.00 4,615.00 166,880.00 1,615.25 2,999.75
2,829.00 221.09
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
30-May-97 20 1,786.00 4,615.00 171,495.00 1,615.25 2,999.75
2,829.00 211.60
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
13-Jun-97 21 1,786.00 4,615.00 176,110.00 1,615.25 865.39 3,865.14
2,829.00 202.11
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
27-Jun-97 22 1,786.00 4,615.00 180,725.00 1,615.25 2,999.75
2,829.00 192.62
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
11-Jul-97 23 1,786.00 4,615.00 185,340.00 1,615.25 2,999.75
2,829.00 183.13
- --------------------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------------------
Payment Date Discounted Obligations (continued from previous page)
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Contractual Pmt RHS LRS WithholdingsInterest Interest Total
Date Due # 15.1020% 16.7365% Total Cum Total Tax @ 35% at Payment Anticipated
8.25% Payment
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
25-Jul-97 24 1,786.00 4,615.00 189,955.00 1,615.25 2,999.75
2,829.00 173.63
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
8-Aug-97 25 1,786.00 4,615.00 194,570.00 1,615.25 713.52 3,713.27
2,829.00 164.14
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
22-Aug-97 26 1,786.00 4,615.00 199,185.00 1,615.25 2,999.75
2,829.00 154.65
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
5-Sep-97 27 1,786.00 4,615.00 203,800.00 1,615.25 2,999.75
2,829.00 145.16
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
19-Sep-97 28 1,786.00 4,615.00 208,415.00 1,615.25 2,999.75
2,829.00 135.66
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
3-Oct-97 29 1,786.00 4,615.00 213,030.00 1,615.25 561.64 3,561.39
2,829.00 126.17
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
17-Oct-97 30 1,786.00 4,615.00 217,645.00 1,615.25 2,999.75
2,829.00 116.68
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
31-Oct-97 31 1,786.00 4,615.00 222,260.00 1,615.25 2,999.75
2,829.00 107.19
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
14-Nov-97 32 1,786.00 4,615.00 226,875.00 1,615.25 2,999.75
2,829.00 97.69
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
28-Nov-97 33 1,786.00 4,615.00 231,490.00 1,615.25 409.76 3,409.51
2,829.00 88.20
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
12-Dec-97 34 1,786.00 4,615.00 236,105.00 1,615.25 2,999.75
2,829.00 78.71
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
26-Dec-97 35 1,786.00 4,615.00 240,720.00 1,615.25 2,999.75
2,829.00 69.22
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
9-Jan-98 36 1,786.00 4,615.00 245,335.00 1,615.25 2,999.75
2,829.00 59.72
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
23-Jan-98 37 1,786.00 4,615.00 249,950.00 1,615.25 257.88 3,257.63
2,829.00 50.23
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
6-Feb-98 38 1,786.00 4,615.00 254,565.00 1,615.25 2,999.75
2,829.00 40.74
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
20-Feb-98 39 1,786.00 4,615.00 259,180.00 1,615.25 2,999.75
2,829.00 31.25
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
6-Mar-98 40 1,786.00 4,615.00 263,795.00 1,615.25 2,999.75
2,829.00 21.76
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
20-Mar-98 41 1,786.00 4,615.00 268,410.00 1,615.25 106.01 3,105.76
2,829.00 12.26
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
3-Apr-98 42 1,786.00 4,615.00 273,025.00 1,615.25 2,999.75
2,829.00 2.77
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
17-Apr-98 43 694.00 1,347.00 274,372.00 471.45 2.77 878.32
653.00 0.00
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Total of 168,654.00 105,718.00 274,372.00 96,030.20 8,567.63 8,567.63 186,909.43
Above
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 119,960
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 30,099
<CURRENT-ASSETS> 183,970
<PP&E> 1,074,652
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,297,999
<CURRENT-LIABILITIES> 1,275,093
<BONDS> 0
0
0
<COMMON> 124,682
<OTHER-SE> (215,733)
<TOTAL-LIABILITY-AND-EQUITY> 1,297,999
<SALES> 657,643
<TOTAL-REVENUES> 657,643
<CGS> 530,907
<TOTAL-COSTS> 282,578
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,470
<INCOME-PRETAX> (172,582)
<INCOME-TAX> 0
<INCOME-CONTINUING> (172,582)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (172,582)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
