M.I.C. Limited - Page 7

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               The City purchased an option from Alexander in December 1983           
          to buy the Flick for $300,000 within the next 4 years.  The                 
          option stated that the purchase price would increase to $750,000            
          if the City "adopts an ordinance which regulates adult                      
          entertainment and prohibits such activity outside an area having            
          a new zoning classification enacted specifically for such                   
          purposes, and which ordinance grants or has granted a non-                  
          conforming use or "grandfather" status to the current use of the            
          Optioned Property at the time of the exercise of the Option".               
          The City exercised its option to purchase the Flick on or before            
          the December 1987 expiration date, and, following extensive                 
          litigation that prolonged the 4-year period in which the City               
          would have otherwise had to purchase the Flick, purchased the               
          Flick in or about the summer of 1989 for $300,000.  When the City           
          exercised its option to buy the Flick, the City had not yet                 
          passed the type of ordinance that would have increased the                  
          purchase price to $750,000.  In mid-1988, the City passed such an           
          ordinance.  At that time, the City amended its zoning code to               
          include distance restrictions from other adult uses, residential            
          property, day care, churches, libraries, parks, hotels, and fire            
          stations.  The amendments also prohibited additional multiplexing           
          of adult entertainment uses at one site.  The Property was                  
          "grandfathered" from these amendments, and this grandfathered               
          status ran with the land in that it was transferable to any owner           
          of the Property.  Following these amendments, the Faust was the             




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