Wally Findlay Galleries International, Inc. and Subsidiaries - Page 10

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          in the minutes, it was decided that the subsidiary should                   
          continue business in spite of its losses.  In October the                   
          officers of WFGI traveled to Paris, where they discussed the                
          French subsidiary's situation with its accountants and legal                
          counsel.  Upon their return, acting in their capacity as the                
          executive committee of the board of directors of WFGI, they                 
          adopted a resolution canceling the outstanding indebtedness of              
          the French subsidiary reflected in the intercompany account as of           
          September 30, 1984, $1,061,425. The resolution was made                     
          retroactive to the last day of FY 1984.  In support of their                
          action, they cited the subsidiary's disappointing sales during              
          the year and its present insolvency; the parent's intervention to           
          maintain the subsidiary's line of credit at Banque de la Cite;              
          the defalcations of the local manager; the warnings they had                
          received from the subsidiary's accountants and counsel that its             
          capital must be increased in order to avert involuntary                     
          liquidation under French law; and the threat that Selene's                  
          lawsuit would lead to insolvency proceedings.  They concluded:              
               the French Subsidiary is not now able to pay its                       
               indebtedness to its parent corporation, * * * that                     
               there is no basis for believing that such indebtedness                 
               will be paid within the foreseeable future, and that                   
               the only realistic way to deal with the potential                      
               problems regarding other creditors and with the French                 
               Government is for the French Subsidiary's indebtedness                 
               to the parent corporation to be cancelled.                             
               The subsidiary's financial statements for FY 1984 were                 
          available by December 1984.  They showed a heavy loss for the               

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