Wally Findlay Galleries International, Inc. and Subsidiaries - Page 13

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          March 1985 it declined to provide the required annual                       
          certification to the French government that it would support the            
          capital of its subsidiary.  As a result, under French law the               
          subsidiary would automatically liquidate after 2 years.  When the           
          letter of credit furnished to Banque de la Cite expired in                  
          July 1985, WFGI did not renew it.                                           
               There were a number of reasons why WFGI chose not to                   
          terminate the subsidiary, even at the risk of continued losses.             
          During and after FY 1984 the officers of WFGI were actively                 
          soliciting offers for the purchase of the French subsidiary,                
          either alone or as a part of the entire Wally Findlay Group.                
          They evidently continued to believe that the French subsidiary              
          contributed to the market value of the group, and they received             
          expressions of interest in the French subsidiary from some                  
          prospective buyers.  It would not have made sense to liquidate              
          the subsidiary so long as selling it as a going concern was a               
          realistic possibility.  On the other hand, if the subsidiary were           
          to be liquidated, the amount that could be realized from                    
          assignment of the premium lease immediately after FY 1984 would             
          probably be less than its potential value.  In the fall of 1984             
          the lease was in the third trimester of its second 9-year term.             
          Whoever held the lease thereafter would have to renegotiate it on           
          or before June 30, 1987, when the term expired.  WFGI had been              
          advised by French counsel that a third party who acquired the               

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