AMENDED MANAGEMENT AGREEMENT

 

THIS AGREEMENT is made as of the first day of October, 1986 by and between MOTO
PHOTO, INC., a Delaware corporation ("Moto"), and NATIONAL PHOTO LABS II, INC.,
a Texas corporation ("NPL"), under the following circumstances:

A.

NPL previously entered into a Management Agreement with Foto Fair International,
Inc., an Ohio corporation ("FFI").

B.

FFI later merged into Moto.

C.

By operation of law, Moto succeeded to and assumed all of FFI's rights and
obligations under the Management Agreement.

D. The parties now desire to amend the terms of the Management Agreement.

Appointment.
NPL hereby acknowledges and agrees that Moto shall continue as

manager of the Properties (as defined in the Management Agreement) until
December 31, 1993 unless extended as herein provided, upon the terms and
conditions hereinafter set forth. 1.2 NPL acknowledges that Moto is in the
business of franchising and retailing photofinishing services and related
products. It is hereby expressly agreed that Moto and its affiliates may
continue to engage in such activities; may manage facilities other than those
presently managed by it (whether or not such other facilities may be in direct
or indirect competition with NPL); and may in the future engage in other
businesses which may compete directly or indirectly with activities of NPL. 1.3
In the performance of its duties under this Agreement, Moto shall occupy the
position of an independent contractor with respect to NPL. Nothing contained
herein shall be construed as making the parties hereto partners or joint
venturers, nor, except as expressly otherwise provided for herein, construed as
making Moto Photo Inc.
an agent of NPL.

2.

Duties and Authority of of Moto.

2.1
General Duties and Authority.
Subject only to the restrictions and
limitations provided in paragraphs 2.14 and 2.15,
Moto shall have the sole and
exclusive authority to fully and completely supervise and direct the business
and
affairs associated or related to the daily operation thereof, and to that end to
cause
or direct NPL to execute such documents or instruments, hire or discharge
employees,
and take other appropriate actions, as, in the sole judgment of Moto may be
deemed
necessary or advisable.
Such duties and authority shall include but not be limited
to those set forth as follows, which are not in limitation of the foregoing.
2.2
Marketing.
Moto shall establish policies and procedures for directing the
marketing activities of personnel engaged by or on behalf of NPL.
Such activities
shall include,
but not be limited to, determining the services offered, establishing
prices, producing advertising, conducting promotions, running sales contests,
etc.
Moto shall have the sole discretion, which discretion shall be exercised in good
faith, to establish the terms, conditions and locations of occupancy of the
Properties
and Moto is hereby authorized to direct and control employees in entering into
leases on behalf, in the name, and for the account of NPL with Lessors.
2.3
Repair, Maintenance and Improvements.
Moto shall make and execute, or
supervise and have control over the making and executing, of all decisions
concerning
the acquisition of equipment, fixtures and supplies for the Properties, and the
purchase lease or other acquisition of the same on behalf, in the name, and for
the
account of NPL.
Moto shall make and execute or supervise and have control over
the making and executing,
of all decisions concerning the maintenance of the
properties; all cost incurred in connection therewith shall be on behalf, in the
name
and for the account of NPL.

 

 

2.4

Personnel and Suppliers.
Moto, or personnel engaged on behalf of Moto
acting pursuant to Moto direction, shall select all vendors, suppliers,
contractors
subcontractors and employees with respect to the Properties and shall hire,
discharge
and supervise all labor and employees required for the operation and maintenance
of the Properties, including attorneys, accountants and consultants.
All such acts
shall be on behalf, in the name of, and for the account of NPL and any employees
so hired shall be carried on the payroll of either NPL or a corporation
organized
to employ such personnel and shall not be deemed to be employees of Moto.
Employees
of NPL will include but will not be limited to, on-site managers, on-site
assistant
managers, and other lab personnel.
Where appropriate, Moto may hire or use
employees of Moto or an affiliate to perform necessary work for the account and
expense of NPL.

Moto and its employees shall be responsible for the disbursement of NPL's
funds in payment of all expenses incurred in connection with the operation of
the
Properties and NPL shall not be required to employ personnel to assist in such
disbursement.
Moto shall not be separately reimbursed for the cost of furnishing
such service and shall not be reimbursed for the time of its executive officers
devoted to NPL affairs or for other overhead expenses.

2.5 Agreements.
Moto shall negotiate and execute on behalf and in the name
of NPL such agreements which Moto deems necessary or advisable for the
furnishing
of utilities, services, concessions and suppliers, for the maintenance, repair
and
operation of the Properties and such other agreements which may benefit the
Properties or be incidental to the matters for which Moto is responsible
hereunder.
2.6
Other Decisions.
Moto shall make all policy decisions and shall have
control over the making of all of the more routine decisions in connection with
the
daily operation of the Properties.

 

 

2.7
Regulations and Permits.
Moto shall use its best efforts to cause all
things to be done on behalf, in the name, and for the account of NPL on the
Properties necessary to comply with any statute, ordinance, law, rule,
regulation or
order of any governmental or regulatory body, having jurisdiction over the
Properties,
respecting the use of the Properties or the construction, maintenance, or
operation
thereof, and with all orders and requirements of the local Board of Fire
Underwriters
Moto shall cause
or any other body which may hereafter exercise similar functions.
NPL to apply for and attempt to obtain and maintain, on behalf, in the name, and
for the account of NPL, all licenses and permits required or advisable (in
Moto's
sole judgment) in connection with the management and operation of the
Properties.

2.8
Accounting.
Moto shall establish, supervise, direct and maintain the
operation of an accounting system and shall cause to be prepared and delivered
to
NPL, at Moto expense, financial statements as follows:

(i) On or before thirty (30) days after the close of each month a statement of
operations showing the results of operation of the Properties for the next
preceding month and of the fiscal year to date having annexed thereto a

computation of the Management Fee, as such fee is defined in this Agreement, for
such month.

         (ii) On or before seventy-five (75) days after the close of the fiscal
year, a balance sheet and related statement of operations showing the results of
the operations of the Properties during said fiscal year (if desired, NPL may
have both examined and reported on by an independent certified public accounting
firm retained on behalf, in the name and for the account of NPL) and having
annexed thereto a computation of the Management, Annual Incentive and Additional
Management Fees for such fiscal year.

2.9 Deposits and Disbursements.
Moto shall cause the establishment of bank
accounts in the name of NPL and shall deposit or cause personnel engaged by or
on behalf of NPL to deposit therein all receipts and monies arising from the
operation
of the Properties or otherwise received for and on behalf of NPL.
Moto shall
disburse NPL funds from said accounts on behalf and in the name of NPL in such
amounts and at such times as disbursement of such revenues for payment of
payroll

 

 

and other obligations of NPL as required.

Moto shall establish and be responsible
for administering a policy for specifying the identity of signatories to the NPL
bank
accounts and establishing the number of signatories required for checks of
various
amounts.
Moto shall have discretion over making temporary investment of NPL
funds, for the account and benefit of NPL.
Moto shall advance funds,
if needed ,
to NPL for temporary working capital needs as may be required by NPL, but in no
event shall the outstanding advances exceed $50,000 and such advances shall be
repaid from the first sums available, and Moto shall have the discretion to make
repayments.
NPL will pay Moto interest on the amounts outstanding from time to
time at the prime rate of the First National Bank of Dayton, Ohio.

2.10
Collection.
Moto shall supervise and direct personnel engaged by or on
behalf of NPL in the collection and billing of all accounts receivable due to
NPL
with respect to the Properties and shall be responsible for establishing
policies and
procedures to minimize the amount of bad debts.
2.11
Legal Actions.
Moto shall cause to be instituted, on behalf and in the
name of NPL any and all legal actions or proceedings Moto deems necessary or
advisable to collect charges or other income due NPL with respect to the
Properties.
The costs of all such legal actions or proceeding shall be borne by NPL.
2.12 Insurance. Moto shall use its best efforts to assure that there is obtained
and kept in force, at the expense of NPL, fire, comprehensive, liability and
other
insurance policies in amounts generally carried with respect to similar
facilities.
2.13
Taxes.
Moto shall disburse from NPL funds all taxes and assessments
properly levied on NPL with respect to its business and Properties, on behalf,
in
the name and for the account of NPL.
2.14 Restrictions.
Notwithstanding anything to the contrary set forth in this
Section 2, Moto shall not be required to do, or cause to be done, anything for
the
account of NPL (i) which may make Moto liable to third parties, (ii) which may
not
be commenced, undertaken or completed because of insufficient funds available in
the accounts established pursuant to this Section, or (iii) which may, under
applicable
law, constitute an impermissible delegation of NPL's duties and
responsibilities,
including, but not limited to, the purchase or construction of capital
improvement,
the sale or disposition of all or substantially all of the corporation's assets,
and any
action which may result in a change in NPL's primary business.
2.15 Limitations on Motors Authority. Notwithstanding anything to the contrary
be commenced, undertaken or completed because of insufficient funds available in
set forth in this Section 2, Moto shall not, without obtaining the prior written
consent of NPL, make any capital expenditure in excess of $5,000 per location
per
calendar year.
However, permission is expressly granted for Moto to make all
expenditures necessary to construct, install and make operational each mini-lab,
including making all necessary improvements.
Moto shall not make any agreement
on NPL's behalf which exceeds one year except for leases.
2.16
General.
NPL acknowledges and agrees that the Properties will be
operated as any other franchise of Moto in accordance with the standard
franchise
rules and regulations, except that compensation payable to Moto shall be as
provided
for in Section 4.
3.
Duties of NPL.

NPL hereby agrees to cooperate with Moto in the performance of its duties
under this Agreement and to that end, upon the request of Moto, to execute all
documents or instruments and hire and discharge such employees as Moto in its
sole
judgment deems necessary or advisable to enable it to fulfill its duties under
this
Agreement.
Such employees shall include, but not necessarily be limited to on-site
personnel.
It is understood and acknowledged that some or all of such employees
may be employed by Moto and loaned to NPL, in which case NPL will bear the
hourly cost, including fringes, of such employees.

 

 

4.
Compensation to Moto.

4.1
Monthly Management Fee.
NPL shall pay to Moto for the services herein
provided a Management Fee equal to five percent (5%) of the net sales of NPL, as
defined by generally accepted accounting principles, derived from or connected
with
each Property. The Management Fee for each month shall be paid promptly at the
end of such month and shall be calculated on the basis of the net sales for such
month.
Notwithstanding the foregoing, in no event will the fee for each Property
be less than $1,000 per month.
4.2
Annual Incentive Fee.
Within 60 days after the end of each fiscal year
of NPL, NPL shall pay Moto an Annual Incentive Fee which shall be an amount
equal
to 33-1/3% of Cash Generated.
For purposes of the Annual Incentive Fee, "Cash
Generated" means, and is calculated for each fiscal year of NPL, as follows:
Net Revenues, less all operating expenses exclusive of depreciation, less
principal and interest payments, whether paid or accrued.
4.3
Additional Management Fee.
As an additional inducement to Moto and
as compensation for services rendered by Moto in the refinancing of the
Properties,
NPL shall pay Moto an Additional Management Fee in the amount of $50,000.00,
payable as follows:
         4.3.1 Interest shall accrue on the unpaid Fee at the rate of 9% per
annum and shall be payable monthly on the first day of each calendar month.

         4.3.2 The Additional Management Fee shall be payable in 84 equal
monthly installments of principal and interest in the amount of $804.45 each,
due and payable monthly on the first day of each calendar month until paid in
full.

5. Use of Trademarks, Service Marks and Related Items.

It is understood and agreed that the name, trademark and service mark, "Moto"
and related marks, slogans, caricatures, designs and other trade or service
items
shall be utilized for the non-exclusive benefit of NPL on the Properties, and in

comparable operations elsewhere.
It is further understood and agreed that this name
and all such marks, slogans, caricatures, designs and other trade or service
items
shall remain and be at all times the property of Moto and its affiliates, and
that,
except during the term hereof, NPL shall have no right whatsoever therein.
Upon
termination of this Agreement at any time for any reason, all such use by and
for
the benefit of NPL of any such name, mark, slogan, caricature, design or other
trade
or service item in connection with the Properties shall, in any event, be
terminated
and any signs bearing any of the foregoing shall be removed from view and no
longer
used by NPL. It is understood and agreed that Moto will use and shall be
unrestricted
in its use of such name, mark, slogan, caricature, design or other trade or
service
items in the management and operation of other facilities both during and after
the
expiration or termination of the term of this Agreement.
6.
Indemnification.

NPL hereby agrees to indemnify and hold Moto, all companies affiliated with
Moto, all officers, directors and employees of Moto and any affiliated companies
harmless from any and all costs, expenses, attorney's fees, suits, liabilities,
judgments,
damages and claims in connection with the management of the Properties
(including
the loss of use thereof following any damage, injury or destruction), arising
from
any cause except for the willful misconduct, negligence, or negligent omissions
on
Moto, all persons affiliated
with Moto, all officers, directors and employees of Moto, and any affiliated
persons
also shall not be liable for any error of judgment or for any mistake of fact or
law
or for anything which it may do or refrain from doing hereinafter, except in
cases
of wilful misconduct or negligence.
Moto hereby agrees to indemnify and hold NPL
harmless from any and all costs, expenses, attorneys' fees, suits, liabilities,
judgments,
damages and claims in connection with the management of the Properties arising
from the willful misconduct or negligence of Moto or any of its affiliates.

 

 

7. Extension.

This Agreement may only be extended upon the written agreement of Moto
and NPL.
8.
Termination.

Upon termination of this Agreement or any extension thereof, all funds advanced
by Moto to or for the benefit of NPL, whether due or not, shall become
immediately
due and payable by NPL to Moto.
9. Assignment.

A

Neither this Agreement nor any right hereunder shall be assigned by NPL and
any attempt to do so shall be void ab initio. Moto shall have the right to
assign
this Agreement to an affiliate or a wholly or majority owned subsidiary;
provided,
however, any such assignee must assume all obligations of Moto hereunder.
NPL's
rights hereunder will be enforceable against any such assignee and Moto shall
not
be released from its liabilities hereunder unless NPL shall expressly agree
thereto
in writing.

10.
Headings.

The headings contained are for convenience of reference only and are not
intended to define, limit or describe the scope or intent of any provision of
his Agreement.

11. Governing Law. The

validity of this Agreement,
the construction of
its terms and the
interpretation of the rights and duties of the parties shall be governed by the
laws
of the State of Ohio.
12.
Notices.

Any notice required or permitted to be given shall be given in writing and shall
be
personally delivered or mailed, first class postage prepaid, to the respective
addresses of the parties set forth below their signatures on the signature page

 

hereof, or to such other address as any party may give to the other in writing.

13.
Severability.

Should any term or provision hereof be deemed invalid, void or unenforceable
either in its entirety or in a particular application, the remainder of this
Agreement
shall nonetheless remain in full force and effect and, if the subject term or
provision
is deemed to be invalid, void or unenforceable only with respect to a particular
application, such term or provision shall remain in full force and effect with
respect
to all other applicat ions.
The parties recognize that broad discretionary authority
has been granted by NPL to Moto in the management and direction of NPL's
business
and financial affairs and it is their intent that such authority be fully
exercisable
by Moto within the limitations imposed by applicable law.
If, however, any court
of competent jurisdiction should render a final judgment that the authority
granted
to Moto herein exceeds the bounds of permissible delegation under applicable
law,
the parties agree that this Agreement shall be deemed amended, modified and
reformed
to the extent necessary to reduce the scope of authority delegated by NPL to
Moto
so as to limit such authority to that permissible under applicable law as
evidenced
by the written legal opinion of counsel to Moto.
The parties agree that in no event
shall any determination that the discretion and authority granted to Moto
hereunder
exceeds permissible bounds result in this Agreement being declared or adjudged
invalid, void or unenforceable in its entirety; rather, the parties request that
any
court examining such issue employ great latitude in reforming this Agreement so
as
to make the same, as reformed, valid and unenforceable.

14. Successors.

This Agreement shall be binding upon and inure to the benefit of the respective
parties hereto and their permitted assigns and successors in interest.

15. Attorneys' Fees.

If it shall become necessary for either party hereto to engage attorneys to

 

 

institute legal action for the purpose of enforcing its rights hereunder or for
the
purpose of defending legal action brought by the other party hereto, the party
or
parties prevailing in such litigation shall be entitled to receive all costs,
expenses
and fees (including reasonable attorney's fees) incurred by it in such
litigation
( including appeals ).

16.
Arbitration.
Any claim or controversy arising out of, or relating to this Agreement or any
modification or extension thereof, between the parties shall be settled by final
and
binding arbitration in Dayton, Ohio in accordance with the rules then obtaining
of
the American Arbitration Association.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
NATIONAL PHOTO LABS II, INC.

 

 

By _______________________________

David A. Mason, President

   
MOTO PHOTO, INC.
   
By _______________________________

Michael F. Adler, President