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about 5 or 6 miles from Epic Productions’ offices. At this
location, film materials were stored on metal racks along with
other materials, including reels of film, posters, publicity
materials, cardboard cassette boxes, cassette inventory, old
files, an ambulance, and an old Cadillac convertible. Unlike
regular film laboratories and facilities, the Epic warehouse was
not a temperature- and humidity-controlled facility; it was not
bonded; and it did not have good inventory control.
At one time, Epic Productions had a full-time employee who
supervised and provided security at the Epic warehouse; however,
as of sometime before 1996, Epic Productions had no supervision
or security at the Epic warehouse. For this and other reasons,
Epic Productions stored no film materials in the Epic warehouse
that it regarded as highly valuable or irreplaceable. If Epic
Productions had master film material for valuable films, it
stored them in secure laboratories with temperature and humidity
controls.
VII. Due Diligence for the CDR Transaction
A. James Rhodes
Sometime in 1996, Mr. Lerner hired an attorney, James
Rhodes, to assist with some of the due diligence on the
“corporate side” for the transaction between Rockport Capital and
CDR. Mr. Rhodes continued his work into 1997, tying up loose
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