As filed with the Securities and Exchange Commission on June 29, 1998
Registration No. 333-51893
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Hollywood Productions, Inc.
(Exact name of Registrant as specified in Charter)
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Delaware 5130 13-3871821
(State of (Primary standard industrial I.R.S. employer
Incorporation) classification code) identification No.
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14 East 60th Street
New York, NY 10022
(Address and telephone number of Principal Offices)
Harold Rashbaum, President
14 East 60th Street
New York, NY 10022
(212) 688-9223
(Name, Address and Telephone Number of Agent for Service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box: [
]
If any of the securities being registered on this Form S-3 are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. [ ]
If delivery of a prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of each class Proposed maximum Proposed maximum aggregate Amount of
of securities Amount to be Registered Offering price Offering price(1) registration fee
to be registered Per Share (1)
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Common Stock, 1,280,350 $3.375 4,321,181 $1,490.00
$.01 par value
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Totals........... 4,321,181 $1,490.00
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(1) Total estimated solely for the purpose of determining the
registration fee, based on the closing price ($3.375) reported by a market maker
on April 24, 1998.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
-ii-
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CROSS REFERENCE SHEET
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Item in Form S-3 Prospectus Caption
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1. Forepart of the Registration Cover Page and Cover Page of Registration
Statement and Outside Front Statement
Cover Page of Prospectus
2. Inside Front and Outside Continued Front Page
Back Cover Pages of
Prospectus
3. Summary Information, Risk Prospectus Summary, Risk Factors
Factors and Ratio of Earnings
to Fixed Charges
4. Use of Proceeds Summary
5. Determination of Offering Plan of Distribution, Cover Page, Risk
Price Factors
6. Dilution Risk Factors
7. Selling Security-Holders Selling Stockholders
8. Plan of Distribution Cover Page, Plan of Distribution
9. Description of Securities Incorporation of Certain Documents by
to be Registered Reference
10. Interests of Named Experts Legal Opinions, Experts
and Counsel
11. Material Changes Prospectus Summary
12. Incorporation of Certain Incorporation of Certain Documents by
Information by Reference Reference
13. Disclosure of Commission Position Item 15. Indemnification of
on Securities Act Liabilities Officers and Directors
-iii-
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Subject to Completion Dated June 29, 1998
PROSPECTUS
1,280,350 SHARES
Hollywood Productions, Inc.
COMMON STOCK
This Prospectus covers the sale of up to 1,280,350 shares (the
"Shares") of common stock, par value $.01 per share (the "Common Stock"), of
which 980,350 shares are being offered by the Company's principal stockholder,
European Ventures Corp. and 300,000 shares are being offered by investors in
the Company's private placement offering in February 1998, sometimes referred
to herein as the "Selling Stockholders". The shares may be sold from time to
time in negotiated transactions, at fixed prices, which may be changed, and at
market prices prevailing at the time of sale, or a combination thereof. The
Company will not receive any of the proceeds from the sale of any securities
sold by the Selling Stockholders. See "Plan of Distribution."
The Company's Common Stock and Warrants is quoted on the Nasdaq
SmallCap Stock Market ("Nasdaq") under the symbols "FILM" and "FILMW",
respectively. Quotation on Nasdaq does not imply that there is a meaningful
sustained market for the Common Stock or that if one is developed that it will
be sustained for any period of time. In the absence of a listing on Nasdaq,
the Common Stock will be available for trading in the over-the-counter market
on the OTC Bulletin Board. See "Market for Common Equity."
THE SECURITIES INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is June 29, 1998.
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The Selling Stockholders will be required to represent that they have
knowledge of Rule 10b-6 and 10b-7 promulgated under the Exchange Act of 1934, as
amended (the "Exchange Act"), which proscribe certain manipulative and deceptive
practices in connection with a distribution of securities.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports and other information
with the Securities and Exchange Commission (the "Commission"). Reports, proxy
and information statements and other information filed by the Company with the
Commission pursuant to the informational requirements of the Exchange Act may be
inspected and copies at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
material may be obtained from the public reference section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a World Wide Web site that contains reports, proxy, and
information statements, and other information regarding registrants, including
the Company, that file electronically with the Commission. The address of the
site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997, as filed on April 10, 1998, and the amendment to Form 10-KSB
for the fiscal year ended December 31, 1997, as filed on April 15, 1998; and
2. The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1998, as filed on April 16, 1998; and
3. A description of the Company's securities is contained in the Company's
registration statement on Form 8-A filed July 29, 1996.
4. All other reports filed by the Registrant pursuant to Section 13(a) or
15(d) of the Exchange Act, since the end of the fiscal year covered by the
Annual Report referred to in (1) above, are incorporated herein by reference.
2
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Each document filed subsequent to the date of this Prospectus pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering shall be deemed to be incorporated by reference in
this Prospectus and shall be a part hereof from the date of filing of such
document.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any document described above (other than exhibits). Requests
for such copies should be directed to Hollywood Productions, Inc., 14 East 60th
Street, New York, NY 10022, telephone (212) 688-9223.
3
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SUMMARY
The following summary is intended to set forth certain pertinent facts and
highlights from material contained in the body of this Prospectus. The summary
is qualified in its entirety by the detailed information and financial
statements appearing elsewhere in this Prospectus. Unless otherwise indicated,
the information in this Prospectus gives effect to the 1-for-3 reverse stock
split in February 1998. Statements contained in this registrations statement
which are not historical facts may be considered forward looking information
with respect to plans, projections, or future performance of the Company as
defined under the Private Securities Litigation Reform Act of 1995. These
forward looking statements are subject to risks and uncertainties which could
cause actual results to differ materially from those projected.
Hollywood Productions, Inc. (the "Company") is a Delaware Corporation,
which was organized in December, 1995. The Company was formed for (i) the
purpose of acquiring screen plays and producing independent motion pictures with
budgets ranging between $1,000,000 to $3,000,000, thought it has and may produce
and pursue the production of motion pictures with budgets of less than
$1,000,000, using named talent and (ii) to acquire Breaking Waves, Inc., a New
York corporation ("Breaking Waves"). The Company consummated a public offering
of its securities in September 1996 at which time it sold 800,000 shares of
Common Stock and 1,600,000 Warrants and received net proceeds of $3,813,294.
Unless the context otherwise requires, all references to the "Company" include
its wholly owned subsidiary, Breaking Waves.
The Film "Dirty Laundry"
The Company formed a wholly-owned subsidiary, DL Production, Inc. in
April 1996 to finance, produce, and distribute a motion picture based on the
"Dirty Laundry" screen play. In March 1996, the Company entered into a property
acquisition agreement and a co-production agreement with Rogue Features, Inc.,
an unaffiliated entity, to acquire the rights to and co-produce a motion picture
of the Dirty Laundry screenplay "Dirty Laundry". Pursuant to the terms of the
purchase agreement and production agreement, the Company provided all but
$100,000 of the financing for the production of Dirty Laundry. The Company
completed the filming of Dirty Laundry in June, 1996 and completed the editing
in December, 1996. The Company is presently seeking to obtain distribution for
Dirty Laundry and has entered into an agreement with Trident Licensing Inc.,
with respect to its distribution abroad. D.L. Production, Inc., was dissolved in
November 1997, at which time all rights title and interest in Dirty Laundry was
transferred to the Company. As of March 31, 1998, the Company has incurred costs
of $1,926,023, earned revenues of $164,875, and amortized costs of $163,392, in
connection with the production of "Dirty Laundry."
In June 1998 the Company entered into a six-month agreement with
Artistic License Films, as agent, for the theatrical distribution of the film.
The agreement provides that the distributor shall seek to have the film premiere
in a limited distribution in New York and Los Angeles within the next six
months. The distributor shall have the right to 25% of gross receipts received
by the Company from the theatrical exploitation of the film during the term of
the agreement. The Company and the distributor are seeking to have the film
premiere during the fourth quarter of the 1998 calendar year. Revenues to the
Company shall be based on attendance at the showings of the film. After its
theatrical distribution the Company shall seek to further distribute the film
through cable television including pay-per-view, premium channels and standard
channels, public television and through the sale of video tapes.
The Film "Battle Studies"
In April 1998 the Company entered into a co-production agreement with
Norfolk Films, Inc. ("Norfolk") for the production of a new film entitled Battle
Studies. The Company and Norfolk have agreed to form a limited liability company
to finance, produce and distribute the film, which commenced production on April
20, 1998. The film was written and is being directed and co-produced by Efraim
Horowitz. The film is a contemporary ghost story about power, greed, love and
Leornardo Da Vinci's lost notebook. The estimated budget is approximately
$440,000 of which the Company has committed to fund 50%. In accordance with the
terms of the co-production agreement the proceeds of the film will be
distributed first to reimburse 135% of the costs of the picture and the
remaining proceeds shall be distributed 60%, 40% to Norfolk and the Company,
respectively. The principal photography of the picture was completed in May,
1998 at a cost of $265,000. The film is currently being edited.
Breaking Waves
Simultaneously with the closing of the Company's initial public
offering in September 1996 the Company acquired Breaking Waves, pursuant to a
stock purchase agreement, dated May 31, 1996 (the "Agreement") entered into
between Hollywood Productions, Inc. and the prior stockholders of Breaking
Waves. Breaking Waves designs, manufactures and distributes a line of private
label girls swimwear and accessory items, including "Breaking Waves," "All
Waves," "Making Waves," "Small Waves" and a line of a brand name label called
"Daffy Waterwear." The Daffy Waterwear label is used pursuant to a licensing
agreement between the Company and Beach Patrol, Inc. The Company sells its
swimwear and accessory items through its showroom sales staff and through
independent sales representatives. The Company's customers include the Dillard
and Federated department store groups as well as Kids R Us, Sears, Wal-Mart,
T.J. Maxx and Marshalls.
The Company has also entered into a licensing agreement with Kawasaki to
use the trademark "Jet Ski" for a line of girl's, boy's and men's swimwear. "Jet
Ski" is the brand name used for all of Kawasaki's personal watercraft though out
the world. The license agreement commenced July 1, 1997 and shall continue
through May 31, 1999. In addition, the Company has the right to extend the
agreement for an additional one-year period. Under the terms of the agreement,
the Company shall pay to Kawasaki 5% of the net sales price of the goods sold
under this line.
As of March 31, 1998, the Company's total assets were $6,280,186 and
stockholders' equity was $5,674,329. For the year ended December 31, 1997, the
Company had a net loss of $423,467. For the quarter ended March 31, 1998, the
Company had net income of $566,988.
The Company's executive offices are located at 14 East 60th Street, Suite
402, New York, New York 10022. Breaking Waves has a showroom is located at 112
West 34th Street, New York, New York 10016 and leases an office at 8410 N.W.
53rd Terrace, Miami, Florida 33166. The Company's telephone number at its
principal office is (212) 688-9223.
4
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The Offering
Securities Outstanding:
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Common Stock(1) 2,336,944 Shares
Warrants 1,466,667
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Risk Factors
This offering involves a high degree of risk. See "Risk
Factors" on page 7.
Use of Proceeds
All of the proceeds of this Offering will be paid to
the respective Selling Stockholders and none of the proceeds
will be received by the Company. All the expenses of this
Offering will be paid by the Company.
NASDAQ Symbols (2) Common Stock - FILM
Warrants - FILMW
(1) Does not give effect to the issuance of: (i) 1,466,667 shares of Common
Stock reserved for issuance upon the exercise of the Warrants, exercisable at
$3.00 per warrant. Each warrant grants the warrantholder the right to purchase
one third of a share at the exercise price. Thus, three warrants at an aggregate
exercise price of $9.00 are required to purchase one share of Common stock. (ii)
83,333 shares of Common Stock reserved for issuance under the Company's 1996
Senior Management Incentive Plan, of which 50,000 currently underlie granted
options which have an exercise price of $2.93. Or (iii) 50,000 shares of Common
Stock reserved for issuance upon the grant of options underlying the
Non-Executive Director Stock Option Plan. No options have been granted under
this plan as of the date of this Prospectus.
(2) Quotation on Nasdaq does not imply that there is a meaningful market
for the Company's securities or that if a market develops, that it will be
sustained for any period of time. In the absence of a listing on Nasdaq, the
Company's securities will be available for trading on the OTC Bulletin Board.
5
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RISK FACTORS
An investment in the securities offered hereby are speculative and
involve a high degree of risk. In addition to the other information contained in
this Prospectus, the following factors should be carefully considered before
purchasing the securities offered by this Prospectus. The purchase of the
securities offered hereby should not be considered by anyone who cannot afford
the risk of loss of their entire investment.
Statements contained in this registrations statement which are not
historical facts may be considered forward looking information with respect to
plans, projections, or future performance of the Company as defined under the
Private Securities Litigation Reform Act of 1995. These forward looking
statements are subject to risks and uncertainties which could cause actual
results to differ materially from those projected.
Risks Associated with the Company's Film Business
1. No Significant Operating History; Accumulated Deficit; Limited
Experience of Management. Prior to the acquisition and production of Dirty
Laundry and the acquisition of Breaking Waves the Company, had limited
operations, consisting primarily of its formation and the consummation of its
initial public offering. The Company's officers had limited experience, prior to
the production of Dirty Laundry of assessing the potential of a screenplay,
producing a motion picture, or in distributing and marketing a motion picture.
The lack of experience of management may adversely affect the operations of the
Company and ultimately, the value of an investment in the Company. In addition,
the likelihood of success of the Company must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with a business with a limited operating history and
the competitive environment in which the Company operates. Further, there can be
no assurances that the Company's management will be able to successfully
implement its business plan or that unanticipated result in increased costs,
material delays in its implementation or ability to implement such plan. As of
March 31, 1998 the Company had an accumulated deficit of $78,461, which could
adversely affect the Company's ability to conduct its operations.
2. No Guarantee of Return of Initial Investment; No Assurances of the
Receipt of Revenues; Need for Additional Capital. The co-production agreements
for Dirty Laundry and Battle Studies provide that the Company and the
co-producer shall have the right to recover 100% and 135%, respectively, of
their investment with respect to the production costs of the films from
revenues, if any, from the release, distribution and exploitation of the films.
The Dirty Laundry agreement requires the first proceeds to be paid $50,000 to
each of Jay Thomas and Tess Harper pursuant to their participation agreements.
Additional proceeds received shall be distributed pursuant to the terms of the
agreements.
As of March 31, 1998, the Company has incurred costs of $1,926,023 and
earned revenues of $164,875 in connection with the production of "Dirty
Laundry." As of May 31, 1998, the Company and the film's co-producer have
incurred costs of $265,000 in connection with the production of "Battle
Studies." As of the date of this Prospectus, the production of "Battle Studies"
was in the editing phase and accordingly, no revenues have been earned in
connection with this production. The Company can not assess whether its
investment or future investments in either film will be recouped by the Company
or that a profit will be obtained.
The production release of a motion picture is subject to numerous
uncertainties, and there can be no assurance that the Company's strategy will be
successful, that its release schedule will be met or that it will achieve its
financial goals. There can be no assurance that any additional revenues will be
realized from the distribution of the Dirty Laundry or revenues from Battle
Studies, or any other motion picture produced by the Company in the future. Even
in the event revenues are generated from the distribution of a film, there can
be no assurances that the Company will receive any of such revenues, due to
revenue sharing rights of artists and creative personnel in additional to
arrangements with other investors. In addition, in the event that the Company
receives revenues from the distribution of a film, there can be no assurances
that such revenues will be sufficient to return to the Company the full amount
of its investment in the Dirty Laundry or Battle Studies or that future motion
pictures acquired, produced and released by the Company will earn sufficient
revenues to repay any investment or cost incurred in their production. Though
aggregate revenues in the film industry from all markets are substantial, the
costs of producing films are also substantial. The combination of these and
other factors has caused a large portion of films produced to be unprofitable.
3. High Costs of Motion Picture Production; Likelihood of Going Over
Budget. The Company anticipates that the motion pictures it produces will cost
between $1,000,000 and $3,000,000, depending on the film, though it has and may
in the future produce films with budgets below $1,000,000. The likelihood of the
success of each film and the Company's ability to stay on budget and on schedule
for each film must be considered in light of the problems, expenses,
difficulties, complications and delays frequently encountered in connection with
the production of a motion picture. Dirty Laundry went approximately $250,000
over budget. Due to unforeseen problems and delays including; illness, weather,
technical difficulty and human error, most films go over budget. In addition,
the lack of experience of management in this industry, the limited operating
history and capital of the Company, and the competitive environment in which the
Company operates, may cause increased expenses due to mistakes and delays in the
production of the films.
4. Need for Additional Funding. The Company currently has produced two
films, one of which it is seeking distribution and sale for and the other which
is in post filming production, which will take another 12 weeks. The Company
estimates that between 36 and 52 weeks will elapse between the commencement of
expenditures by the Company in the acquisition of a screenplay, the production
of a motion picture and the release of such film. Additionally, it is
anticipated that no revenues will be received from the exploitation of such film
for an additional period of between 16 weeks and 36 weeks thereafter, if at all.
Therefore, the Company may not have the capital needed, at times, for production
or distribution costs of additional films due to the delay in the receipt of
revenues from its prior investments. Presently, the Company does not have the
funding to commence the purchase and production of any additional films. In the
event it desire to produce another film prior to receiving revenues, if any,
from its current films, it will have to seek additional capital.
The Company believes that it currently has sufficient funds to meet its
anticipated cash requirements for the next 12 months, notwithstanding its desire
within such period to produce an additional film. There can be no assurance that
it is correct in such belief or that, if necessary, it will be able to obtain
any funding or if available that it will be on terms acceptable to the Company.
5. Inability to Obtain Distribution of the Films; Consumer Preferences.
The success of a film in theatrical distribution, television, home video and
other ancillary markets is dependent upon public taste which is unpredictable
and susceptible to change. The theatrical success of a film may also be
significantly affected by the number and popularity of other films then being
distributed. Accordingly, it is impossible for anyone to predict accurately the
success of any film at the time it enters production. The production of a motion
picture requires the expenditure of funds based largely on a pre-production
evaluation of the commercial potential of the proposed project. The Company has
spent approximately $300,000 for the costs of marketing and distribution of
Dirty Laundry and has only recouped approximately $160,000 in distribution
revenues.
There is intense competition within the film industry for exhibition
time at theaters, as well as for distribution in other media, and for the
attention of the movie-going public and other viewing audiences. Competition for
distribution in other media is as intense as the competition for theatrical
distribution and not all films are licensed in other media. There are numerous
production companies and numerous motion pictures produced, all of which are
seeking full distribution and exploitation. Despite the large number of films
produced, only a small number of films receive widespread consumer acceptance,
and thereby account for a large percentage of total box office receipts.
6. Labor disputes in Film Industry. Most screenwriters, performers,
directors and technical personnel who will be involved in the films are members
of guilds or unions which bargain collectively with producers on an
industry-wide basis from time to time. Any work stoppages or other labor
difficulties could delay the production of the films, resulting in increased
production costs and delayed return of investments.
7. Competition in Film Industry. The Company will be in competition with
other which produce, distribute and exploit and finance films, some of which
have substantial financial and personnel resources, which are greater and more
extensive than the Company's. These companies include the major film studios,
including Disney, Universal, MGM, and Sony as well as the television networks.
There is substantial competition in the industry for a limited number of
producers, directors, actors and properties, which are able to attract major
distribution in all media and all markets throughout the world.
Risks Associated with the Company's Swimwear Business
8. Cyclical Apparel Industry; Dependence on Single Product Line. The
apparel industry is a cyclical industry, with consumer purchases of swimwear and
accessory items and related goods tending to decline during recessionary periods
when disposable income is low. Accordingly, a prolonged recession would in all
likelihood have an adverse effect on the operations of the Company. Some of the
Company's customers, including large retail department store chains, have in
recent years experienced financial difficulties and some have filed for
protection under Chapter XI of the federal bankruptcy laws. The Company is
unable to predict what effect, if any, the financial difficulties encountered by
such retailers and other customers will have on the Company's future business.
Additionally, the Company currently operates in only one segment of the apparel
industry, girl's swimwear and is therefore dependent on the demand for such
goods. Decreases in the demand for swimwear products would have a material
adverse affect on the Company's business. The Company it is in the process of
expanding its operations and market segment to include boy's and men's swimwear.
9. Uncertain Fashion Trends; Inability to Keep Pace with Consumer's
Changing Preferences. The Company believes that its success depends in
substantial part on its ability to anticipate, gauge and respond to changing
consumer demands and fashion trends in a timely manner. The Company designs its
swimwear lines during the months from January to March each year for delivery of
products between November and May of the following year. The Company is
anticipating in advance consumer preferences for the following year. There can
be no assurance, however, that the Company will be successful in this regard. If
the Company misjudges the market for any of its products, it may be faced with
unsold finished goods, inventory and work in process, which could have an
adverse effect on the Company's operations.
10. Entrance into New Market Segment and New Product Line. The Company
presently operates in only one segment of the apparel industry, specifically
girl's swimwear, in which it has operated for many years. The Company entered
into a licensing agreement with Kawasaki to use the trademark "Jet Ski" for a
line of girl's, boy's, and men's swimwear. The Company's production and
marketing of boy's and men's swimwear is an entrance into a new market segment
for its products. In addition, the Company has not previously marketed any of
its products under the Jet Ski name. There can be no assurance that the Company
will be successful in this market segment or with this new line. If the Company
misjudges the market for this market segment or new line, it may be faced with
unsold finished goods, inventory and work in process, which could have an
adverse effect on the Company's operations.
11. Dependence on Suppliers. The swimwear designs are principally sent to a
manufacturer, Zone Company, Ltd., in Korea, which Company provides the knitting
and printing for approximately 65% of the fabrics ordered by the Company.
Previously during fiscal 1997 and 1996 this company provided approximately 19%
and 95% knitting and printing. Once the fabrics are produced, they are
principally shipped to P.T. Kizone International, Inc., a company in Indonesia
which company sews the garments into finished products. This company provided
95% and 71% of the Company's sewing needs for the years ended December 31, 1997
and 1996, respectively. Although the management of Breaking Waves is of the
opinion that there are numerous manufacturers of fabrics and companies which
provide sewing on similar terms and prices, there can be no assurances that
management is correct in such belief. The unavailability of fabrics or the
sewing thereof at current price levels could adversely affect the operations of
the Company.
12. Risks Associated with Concentration of Customers. For the years ended
December 31, 1997 and 1996, Breaking Waves has two and two customers which
comprise 36% and 12%, and 16% and 12% of net sales, respectively. For the three
months ended March 31, 1998 and 1997, Breaking Waves had four and two customers
which comprise 16%, 15%, 11%, and 10%; and 23% and 14% of net sales,
respectively. Some of the Company's customers, including large retail department
store chains, have recently experienced financial difficulties and some have
filed for protection under the federal bankruptcy laws. The Company is unable to
predict what effect, if any, the financial difficulties encountered by such
retailers and other customers will have on the Company's future business. The
loss of either customer or any group of customers could have a material adverse
affect on the Company's results of operations.
13. Seasonality of Business Operations. The Company believes that its
business may be considered seasonal with a large portion of its revenues and
profits being derived between December and June for shipments being made between
November and May. Each year from June to November the Company engages in the
process of designing and manufacturing the following seasons swimwear lines,
during which time the Company incurs the majority of its expenses, with limited
revenues. There can be no assurances that revenues received during December to
June will support the Company's operations for the rest of the year.
14. Competition in Swimwear Industry. The Company's business is highly
competitive, with relatively insignificant barriers to entry and with numerous
firms competing for the same customers. The Company is in direct competition
with local, regional, national and international swimwear manufacturers, many of
which have greater resources and more extensive distribution and marketing
capabilities than the Company. Competitive factors include quality, price,
style, design, creativity, originality and service at the wholesale level. In
addition, many large retailers have recently commenced sales of "store brand"
products, which compete with those sold by the Company. Management believes that
the Company's market share is insignificant in the markets in which it sells.
15. Protection of Intellectual Property. The Company relies on common law
trademarks for use of its private label swimwear lines. In addition, the Company
has entered into a licensing agreements with Beach Patrol, Inc. and Kawasaki, to
use the trademarks "Daffy's Waterwear and "Jet Ski", respectively." In the event
the Company, Beach Patrol, Inc. or Kawasaki, breaches their licensing agreement
and the Company is unable to continue to use the trademarks, the loss thereof
may adversely affect the Company's operations. The Company has also filed to
register additional trademarks in the United States, which applications are
currently pending. There can be no assurance that such additional trademarks
will be registered or if registered, that such marks, as well as the Company's
registered mark or marks licensed by the Company will be adequately protect
against infringement. In addition, there can be no assurance that the Company
will not be found to be infringing on another company's trademark. In the event
the Company finds another party infringing upon its trademark, if registered, or
is found by another company to be infringing upon such company's trademark,
there can be no assurances that the Company will have the financial means to
litigate such matters.
Risks Relating to the Offering
16. Non-U.S. Residence of Principal Stockholder May Result in Special
Risks. Ilan Arbel, is the sole officer and director of European Ventures Corp.
("EVC"), a British Virgin Island corporation, a Selling Securityholder and the
majority stockholder of the Company. Substantially all of the assets of EVC are
or may be located outside of the United States. As a result, it may be difficult
for investors to effect service of process within the United States upon any of
such persons or affiliates, or to enforce against any of them any judgments that
may be obtained in the United States courts predicated upon the civil liability
provisions of the Act, or the Exchange Act. In addition, there can be no
assurance that foreign courts would enforce such judgments, either predicated
upon the civil liability provisions of the federal securities laws or otherwise.
17. Indemnification of Officers and Directors. As permitted under the
Delaware General Corporation Law, the Company's Certificate of Incorporation
provides for the indemnification and elimination of the personal liability of
the directors to the Company or any of its shareholders for damages for breaches
of their fiduciary duty as directors. As a result of the inclusion of such
provision, shareholders may be unable to recover damages against directors for
actions taken by them which constitute negligence or gross negligence or that
are in violation of their fiduciary duties. The inclusion of this provision in
the Company's Certificate of Incorporation may reduce the likelihood of
derivative litigation against directors and other types of shareholder
litigation.
18. Limited Public Market for Securities. At present there is a limited
public market for the Company's Securities. There is no assurance that a regular
trading market will develop, or if one does develop, that it will be sustained
for any period of time. Therefore, purchasers of the Company's securities may be
unable to resell such securities at or near their original offering price or at
any price. Furthermore, it is unlikely that a lending institution will accept
the Company's securities as pledged collateral for loans even if a regular
trading market develops. The underwriter of the Company's public offering, was a
dominant influence and the principal market maker for the Company's securities
until February 1997. In February 1997, Euro-Atlantic's clearing firm WS Clearing
Corp., ceased operations, which froze all the accounts of Euro-Atlantic
including its client's accounts and firm trading account. Euro-Atlantic ceased
operations immediately thereafter. Immediately with Euro-Atlantic's ceasing
operations the market for the Company's securities and its share price were
significantly adversely affected and may continue to be adversely affected. The
loss of Euro-Atlantic's market making activities of the Company's securities has
decreased significantly the liquidity of an investment in such securities and
was the cause for the significant decline in the Company's stock price.
19. No Dividends and None Anticipated. The Company has not paid any
dividends nor, because of its present financial status and its contemplated
financial requirements, does it contemplate or anticipate paying any dividends
upon its Common Stock in the foreseeable future.
20. Increase Public Float Through Shares Available for Resale. A total of
2,336,944 shares of Common Stock have been issued by the Company of which
1,367,294 shares may be deemed "restricted securities" (as such term is defined
in Rule 144 issued under the Act) and, in the future, may be publicly sold only
if registered under the Act or pursuant to an exemption from registration. Of
the restricted shares 1,280,350 shares are being registered for resale in
accordance with this Registration Statement and all but 14,444 of the remaining
restricted shares have been held for in excess of one year and therefore are
eligible for resale in accordance with Rule 144. Any sales under Rule 144 or
pursuant to this registration statement would, in all likelihood, have a
depressive effect on the market price for the Company's Common Stock and
Warrants.
21. Possible Future Dilution. The Company has authorized capital stock of
20,000,000 shares of Common Stock, par value $.001 per share. Inasmuch as the
Company may use authorized but unissued shares of Common Stock without
stockholder approval in order to acquire businesses, to obtain additional
financing or for other corporate purposes, there may be further dilution of the
stockholders' interests.
22. Restrictions on Exercise of Warrants; Necessity for Updating
Registration Statement. The Warrants offered hereby are not exercisable unless,
at the time of the exercise, the Company has a current prospectus covering the
shares of Common Stock issuable upon exercise of the Warrants and such shares
have been registered, qualified or deemed to be exempt under the securities laws
of the state of residence of the exercising holder of the Warrants. The Company
has filed a post-effective amendment, which was declared effective on September
24, 1997, whereby the Warrants may be exercised. The Company has undertaken to
use its best efforts to have all of the shares of Common Stock issuable upon
exercise of the Warrants registered or qualified on or before the exercise date
and to maintain a current prospectus relating thereto until the expiration of
the Warrants, there is no assurance that it will be able to do so. The Company
will notify all Warrantholders and its transfer agent that the Warrants may not
be exercised in the event there is no current prospectus.
23. Possible delisting of Securities from NASDAQ System; Risks of Low
Priced Stocks. In August 1997 Nasdaq increased its maintenance whereby in order
to continue to be listed on Nasdaq, the Company is required to maintain (i) net
tangible assets of at least $2,000,000, (ii) a minimum bid price of $1.00, (iii)
two market makers, (iv) 300 stockholders, (v) at least 500,000 shares in the
public float and (vi) a minimum market value for the public float of $200,000.
In the event the Company's Securities are delisted from Nasdaq, trading, if any,
in the Securities would thereafter be conducted in the over-the-counter market
on the OTC Bulletin Board. Consequently, an investor may find it more difficult
to dispose of, or to obtain accurate quotations as to the price of the Company's
Securities. The Company has applied for a listing on Nasdaq of the Securities
being offered hereby. Quotation on Nasdaq does not imply that a meaningful,
sustained market for the Company's Securities will develop or if developed, that
it will be sustained for any period of time. As of the date of this Prospectus,
the Company meets all of the maintenance items listed in (i) - (vi) above.
24. Penny Stock Regulation. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on Nasdaq provided
that current price and volume information with respect to transactions in such
securities is provided by the exchange or system). The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in connection with the transaction, and monthly account statements
showing the market value of each penny stock held in the customer's account. In
addition, the penny stock rules generally require that prior to a transaction in
a penny stock, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for a stock that becomes subject to the penny stock rules. If the
Company's securities become subject to the penny stock rules, investors in this
Offering may find it more difficult to sell their securities.
6
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information at March 31, 1998 and as
adjusted to reflect the sale of the shares of Common Stock by the Selling
Stockholders.
<TABLE>
<CAPTION>
Shares of
Common Stock Shares Percentage of
Name & Address of Owned Prior Shares Owned After Shares Owned
Stockholder to the Offering Offered Offering After Offering (1)
- ----------------- ---------------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
European Ventures Corp. (2) 980,350 980,350 0 0
P.O. Box 47
Road Town, Tortola, British
Virgin Islands
Full Moon Development, Inc. 105,000 105,000 0 0
c/o Valorinvest SA
Via Contonale, #16
Lugano, Switzerland
Volcano Trading, Inc. 95,000 95,000 0 0
c/o Valorinvest SA
Via Contonale, #16
Lugano, Switzerland
American Telecom Corp. 100,000 100,000 0 0
448 West 16th Street
New York, NY 10048
- ------------------------------------------
</TABLE>
(1) Does not give effect to the issuance of (i) 1,466,667 shares of Common
Stock reserved for issuance upon the exercise of the Warrants; (ii) 83,333
shares of Common Stock reserved for issuance under the Company's 1996 Senior
Management Incentive Plan; or (iii) 50,000 shares of Common Stock reserved for
issuance upon the grant of options underlying the Non-Executive Director Stock
Option Plan.
(2) Harold Rashbaum is the father-in-law of Ilan Arbel, the sole officer
and director of EVC, and Alain Le Guillou.
Plan of Distribution for the Securities of the Selling Securityholders
This Prospectus covers the offering of 1,280,350 shares of Common
Stock owned by the Selling Stockholders. See "Selling Stockholders." This
Prospectus shall be delivered by said Selling Securityholders upon the sale of
any securities by said holders. The shares of Common Stock and the shares of
Common Stock issuable upon the exercise of such Options, may be sold, from time
to time by the Selling Securityholders. Sales of such securities or even the
potential of such sales at any time may have an adverse effect on the market
prices of the Securities offered hereby. See "Risk Factors."
The sale of the securities by the Selling Securityholders may be
effected from time to time in negotiated transactions, at fixed prices which may
be changed, and at market prices prevailing at the time of sale, or a
combination thereof. The Selling Securityholders may effect such transactions by
selling directly to purchasers or to or through broker-dealers which may act as
agents or principals, including in a block trade transaction in which the broker
or dealer will attempt to sell the securities as agent but may position and
resell a portion of the block as principal to facilitate the transactions or
purchases by a broker or dealer as principal and resale by such broker or dealer
for its own account pursuant to this Prospectus, or in ordinary brokerage
transactions and transactions in which the broker solicits purchasers. In
effecting sales, brokers or dealers engaged by the Selling Securityholders may
arrange for other brokers or dealers to participate. Such broker-dealers may
receive compensation in the form of discounts, concessions, or commissions from
the Selling Securityholders and/or the purchasers of the securities, as
applicable, for which such broker-dealers may act as agents or to whom they sell
as principal, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions). The Selling Securityholders and any
broker-dealers that act in connection with the sale of the shares of Common
Stock and/or by the Selling Securityholders might be deemed to be "underwriters"
within the meaning of Section 2(11) of the Act. In that connection, the Company
has agreed to indemnify the Selling Securityholders and the Selling
Securityholders has agreed to indemnify the Company, against certain civil
liabilities including liabilities under the Act.
At the time a particular offer of its securities is made by or on
behalf of the Selling Securityholders, to the extent required, a prospectus
supplement will be distributed which will set forth the number of shares of
Common Stock being offered and the terms of the offering, including the name or
names of any underwriters, dealers or agents, the purchase price paid by any
underwriter for shares purchased from the Selling Securityholders and any
discounts, commission or concessions allowed or re-allowed or paid to dealers,
and the proposed selling price to the public.
Under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder, any person engaged in a
distribution of Company's Securities offered by this Prospectus may not
simultaneously engage in market-making activities with respect to such Company
securities during the applicable "cooling off" period (nine days) prior to the
commencement of such distribution. In addition, and without limiting the
foregoing, the Selling Securityholders will be subject to applicable provisions
of the Exchange Act and rules and regulations thereunder, including without
limitation, Rules 10b-6 and 10b-7, in connection with transactions in such
securities, which provisions may limit the timing of purchases and sales of
Company securities by the Selling Securityholders.
Reports to Shareholders
The Company has adopted December 31 as its fiscal year end. The Company
will furnish annual reports to its shareholders containing audited consolidated
financial statements, together with an opinion by independent certified public
accountants. In addition, the Company may, in its discretion, furnish to
shareholders interim quarterly reports containing unaudited financial
information.
LEGAL OPINIONS
Legal matters relating to Shares of Common Stock offered hereby will be
passed on for the Company by its counsel, David S. Klarman, Esq.
EXPERTS
The consolidated financial statements of the Company for the years
ended December 31, 1997 and 1996 included in Form 10-KSB for the Company's
fiscal year ended December 31, 1997, incorporated by reference in this
Prospectus, have been audited by Scarano & Tomaro PC, Independent Certified
Public Accountants, to the extent and for the periods set forth in their report
incorporated herein by reference, and are incorporated herein in reliance upon
such report given upon the authority of said firm as experts in auditing and
accounting.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-3 under the Securities Act of 1933, as amended
with respect to the shares of Common Stock to which this Prospectus relates. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all of the information set forth in the Registration Statement, some
of which is incorporated by reference from prior filings of the Company. For
further information with respect to the Company and the shares offered hereby,
reference is made to the Registration Statement and all reports incorporated
herein by reference, including the exhibits thereto, which may be copied and
inspected at the Public Reference Section of the Commission at its principal
office at 450 Fifth Street, N.W., Washington, D.C., 20549.
7
<PAGE>
II-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
<TABLE>
<CAPTION>
<S> <C>
Registration Fee $ 1,490.00
Accounting Fees 2,500.00 (1)
Legal Fees 10,000.00 (1)
Printing Fees 2,500.00 (1)
Miscellaneous 36,490 (1)
---------------
Total $ 20,000.00 (1)
</TABLE>
(1) Estimated.
Item 15. Indemnification of Directors and Officers.
As permitted under the Delaware Corporation Law, the Company's Certificate
of Incorporation and By-laws provide for indemnification of a director or
officer under certain circumstances against reasonable expenses, including
attorneys fees, actually and necessarily incurred in connection with the defense
of an action brought against him by reason of his being a director or officer.
In addition, the Company's charter documents provide for the elimination of
directors' liability to the Company or its shareholders for monetary damages
except in certain instances of bad faith, intentional misconduct, a knowing
violation of law or illegal personal gain.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to any charter, provision, by-law, contract, arrangement,
statute or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer, or controlling person of the Company in the successful
defense of any such action, suit or proceeding) is asserted by such director,
officer or controlling person of the Company in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
Item 16. Exhibits.
The following exhibits are hereby filed with the Commission with this
Company's Amendment No. 1 to the Registration Statement on Form S-3, dated June
__, 1998.
<TABLE>
<CAPTION>
<S> <C>
5.0 - Opinion of David S. Klarman, Esq.
10.27 - Co-Production Agreement for Battle Studies
10.28 - Artistic License Films Agreement
23(a) - Consent of Scarano & Tomaro, PC
23(b) - Consent of David S. Klarman, Esq. is included in the opinion filed as Exhibit 5.0
</TABLE>
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
Post-Effective Amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent Post-Effective
Amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement, including but
not limited to any addition or deletion of a managing Underwriter.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, as amended, each such Post-Effective Amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at the time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of Post-Effective Amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) That, for the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE>
(5) For purposes of determining any liability under the Securities Act of
1933, each filing of the Company's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company,
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, on the 18th day of
June, 1998.
Hollywood Productions, Inc.
By: \s\ Harold Rashbaum
Harold Rashbaum
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
\s\ Harold Rashbaum Chief Executive Officer 06/18/98
Harold Rashbaum President and director Date
\s\ Robert DiMilia Vice President and Director 06/18/98
Robert DiMilia Date
\s\ James Frakes Director 06/18/98
James Frakes Date
\s\ Alain A. Le Guillou, M.D. Director 06/18/98
Alain A. Le Guillou, M.D. Date
</TABLE>
II-4
Exhibit 5.0
Opinion of David S. Klarman, Esq.
Klarman & Associates
Attorneys at Law
2303 Camino Ramon, Suite 200
San Ramon, California 94583
(925) 327-6200
--------
Facsimile
(925) 830-8821
David S. Klarman* 14 East 60th Street, Suite 402
------- New York, New York 10022
Marie Elena Cocchiaro** (212) 688-1797 (fax)
*Licensed also in NY
**Licensed in NY, NJ, PA, and MD only
June 22, 1998
Securities and Exchange Commission
Washington DC 20549
Re: Hollywood Productions, Inc.
Registration Statement on Form S-3
File No. 333-
Ladies and Gentlemen:
As counsel to Hollywood Productions, Inc. (the "Registrant") with
respect to the above Registration Statement on Form S-3 relating to the
registration of up to an aggregate 1,280,350 shares of Common Stock to be sold
by certain Selling Stockholders, I have examined the Certificate of
Incorporation and By-Laws of the Registrant, as amended through the date hereof,
and such other materials as I deemed pertinent. It is my opinion that:
The 1,280,350 shares of Common Stock have been duly issued, and are
fully paid and non-assessable.
I consent to the use of this opinion as an exhibit to said Registration
Statement on Form S-3, and further consent to the use of my name wherever
appearing in said Registration Statement, including the Prospectus constituting
a part thereof, and in any amendment thereto.
Very truly yours,
\s\ David S. Klarman
David S. Klarman, Esq.
Exhibit 23(a) Consent of Scarano & Tomaro, P.C.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Hollywood Productions, Inc.
14 East 60th Street, 4th Floor
New York, NY 10022
As independent certified public accountants, we consent to the
incorporation by reference in this Amendment No. 1 to Form S-3 Registration
Statement of our report dated March 9, 1998, appearing in the Annual Report on
Form 10-KSB of Hollywood Productions, Inc. and Subsidiaries for the year ended
December 31, 1997 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ Scarano & Tomaro, P.C.
Scarano & Tomaro, P.C.
Syosset, New York
June 18, 1998
Exhibit 10.27
CO-PRODUCTION AGREEMENT
This Agreement (this "Agreement") is to acknowledge the interest of Hollywood
Productions, Inc. ("HP") and North Folk Films, Inc. ("NFF") and the terms by
which the parties would agree to co-produce and co-finance the motion picture
feature currently entitled Battle Studies (the "Picture") which to be
co-produced, directed and based on a screenplay by Ephraim Horowitz
("Horowitz"). The parties acknowledge and agree that the title of the Picture
shall remain as stated herein unless NFF and/or Horowitz shall agree otherwise
in writing. The parties further acknowledge and agree that the first choice for
an alternative title for the Picture shall be Machiavelli Rises.
1. CAPITALIZATION: HP and NFF shall invest the sum of Two Hundred Thousand
($200,000) Dollars each in the Picture. The parties acknowledge and agree that
the Picture's budget provides for a Ten (10%) Percent contingency fund. If the
initial capitalization by the parties has been expended, then each party shall
invest promptly an amount up to an additional Twenty Thousand ($20,000) Dollars
in compliance with such contingency fund. Further, the parties acknowledge and
agree that if such contingency funds have been expended completely, then each
party shall be responsible for investing up to an additional Twenty Thousand
($20,000) Dollars as an "overcall." However, any use of the "overcall" that is
attributable to NFF and/or Horowitz that would be attributable to NFF and/or
Horowitz if the parties had entered into an agreement with a completion bond
company (e.g., overages in film stock, scheduling changes which shall increase
the Picture's budget, film developing, printing, picture editing), shall be
deducted from the NFF portion of the "overcall." HP's portion of the "overcall"
shall be for such uses which include, but are not limited to, marketing,
festivals, distribution and other expenditures that are not directly
attributable to NFF and/or Horowitz.
2. LLC: HP and NFF acknowledge and agree that a New York State limited
liability company (LLC) shall be formed by HP and NFF solely for the purposes of
financing, producing and generally exploiting this Picture and any and all
allied, subsidiary and ancillary rights as stated herein. The proposed name of
the LLC shall be BATTLE STUDIES PRODUCTIONS, LLC with an alternative name of
MACHIAVELLI RISES PRODUCTIONS, LLC. If the first name shall not be available. HP
and NFF shall be co-managers of the LLC and shall own interests in the LLC on a
50/50 basis subject to the terms stated herein.
3. CONTRIBUTIONS OF PARTIES:
(a) NFF and Horowitz shall provide exclusive services in such areas which
shall include, but not be limited to, consulting regarding the development,
production, marketing, distribution and general exploitation of the Picture and
engaging in co-managing the operations of the LLC with HP.
(b) HP shall provide non-exclusive services in such areas which shall
include, but not be limited to, consulting regarding the development,
production, marketing, distribution and general exploitation of the Picture
and engaging in co-managing the operations of the LLC with NFF. 4. COPYRIGHT
AND OTHER RIGHTS:
(a) The copyright to the Picture and the screenplay that is the basis for
the Picture, and any ancillary, subsidiary rights, including but not limited to,
prequels, sequels, remakes and merchandising, shall be owned in the name of the
LLC. The parties shall be entitled to share equally in all proceeds derived from
such aforementioned markets and rights except as otherwise stated herein.
(b) Although the copyright in any play or book written by Eprhaim Horowitz
or a third party (mutually agreed upon by the parties) would be owned jointly by
the LLC, the authorship of such play or novel shall be attributed to Horowitz or
such third party mutually agreed upon by the parties.
(i) Until the parties receive a recoupment of One Hundred and Thirty
Five (135%) Percent of their own respective investments, the monies derived by
HP and NFF, Horowitz or an affiliate, subsidiary, successor or related entity to
the parties, shall share equally in all proceeds from any and all rights,
whether now known or hereafter devised, derived in connection with such play or
novel.
(ii) After the parties receive a recoupment of One Hundred and Thirty
Five (135%) Percent of their own respective investments, the monies derived by
HP and NFF, Horowitz or an affiliate, subsidiary, successor or related entity to
the parties, shall share in all proceeds from any and all rights, whether now
known or hereafter devised, derived in connection with such play or novel in the
following proportions: NFF (or Horowitz) or an affiliate, subsidiary, successor
or related entity to the partie -60%; HP--40%.
(c) The parties acknowledge and agree that the copyright to the Picture and
any novel or play based on the Picture shall be owned solely by Horowitz or an
affiliate, subsidiary, successor or related entity (which shall be bound by the
terms of this Agreement) after a period of Ten (10) years from the completion of
principal photography of the Picture in the case of the copyright to the Picture
and after Twelve (12) years from the completion of principal photography of the
Picture in the case of the copyright in any play or novel based on the Picture.
However, Horowitz or an affiliate, subsidiary, successor or related entity
(which shall be bound by the terms of this Agreement) shall assume the
responsibilities and the costs for maintaining the copyright in the Picture and
any play or novel based on the Picture and bringing any action or defending any
claim or action arising from the copyright of the Picture and/or any play or
novel based on the Picture and such exploitation of the Picture and/or any play
or novel based on the Picture. If Horowitz or an affiliate, subsidiary,
successor or related entity (which shall be bound by the terms of this
Agreement) is unable or unwilling to assume such responsibilities and costs,
then HP or an affiliate, subsidiary, successor or related entity (which shall be
bound by the terms of this Agreement) shall have the right but not the
obligation to assume such responsibilities and costs and shall be the sole owner
of the copyright of the Picture and/or any play or novel based on the Picture.
5. WARRANTIES AND REPRESENTATIONS:
(a) NFF warrants and represents that it is the sole and exclusive
owner to the rights stated herein with rights that are free and clear of any
encumbrances, liens, charges or claims of every kind and that HP has not and
shall not convey, grant, transfer or pledge such rights to a third party. NFF
shall provide the required documentation regarding "chain of title" regarding
the screenplay, its author, Horowitz and NFF.
(b) HP shall contribute its non-exclusive services in such areas which
shall include, but not be limited to, the development, producing and
post-production, marketing, distribution and general exploitation of the Picture
as well as co-managing the operations of the LLC with NFF.
(c) The parties warrant and represent that each has the right, power
and authority to enter into this Agreement and, that to the best of each Party's
knowledge and belief, such a LLC shall not violate, conflict with or impair the
rights of any other person or entity.
6. CREATIVE AND BUSINESS DECISIONS:
(a) All creative decisions of the LLC concerning the development and
production which do not affect the financing or scheduling of the Picture shall
be decided by NFF in consultation with HP.
(b) All business decisions of the LLC concerning the development,
production, post-production, marketing, distribution and general exploitation of
the Picture, including, but not limited to, any and all ancillary or subsidiary
rights, shall be mutually agreed upon by NFF and HP.
(c) All decisions concerning the LLC itself shall be mutually agreed
upon by the Parties.
(d) All agreements entered into by the LLC shall be signed by both
parties unless they agree to the contrary. Neither party may enter into any
agreement on behalf of the LLC with any third party without the express written
permission of both parties, not to be unreasonably withheld. Each party shall
indemnify and hold the other party harmless from any and all claims,
liabilities, or damages (including reasonable attorneys' fees) arising out of
any breach of the provisions of this Agreement.
(e) The parties acknowledge and agree that Horowitz' "Director's Cut"
(as such term is commonly understood within the entertainment industry) shall be
the version submitted to potential sales agents, distributors and other
licensees and in any initial preview of the Picture in the New York and Los
Angeles markets. However, the parties further acknowledge and agree that the use
of the 'Director's Cut" in any initial preview of the Picture in the New York
and Los Angeles markets shall be subject to any negotiations between the parties
and any potential sales agents, distributors or other licensees. Notwithstanding
the preceding statement, HP promises to use "best efforts" to have such
"Director's Cut" utilized by any potential sales agents, distributors or other
licensees in any initial preview of the Picture in the New York and Los Angeles
markets.
7. BANK ACCOUNT: Upon mutual consent of the parties, the parties shall open
a bank account in the LLC's name and deposit their investments concurrently.
Each party shall designate in writing on the bank's signatory card Three (3)
signatories to the bank account; however, this bank account shall require only
One (1) signature from each of the parties. All funds received by the LLC shall
be deposited in the LLC's account.
8. CREDITS: The parties hereby agree that the following described credits
shall be accorded on the screen (in the main titles) on all positive prints of
the Picture and in all promotional and advertising materials and paid
advertisements, when practicable, in which one Party is or both parties are
mentioned in connection with the Picture or the LLC.
(a) Buddy Rashbaum shall receive an Executive Producer credit which
may be shared with other executive producers as agreed upon by the parties.
Robert E. DiMilia shall receive a Producer credit which may be shared with other
producers as agreed upon by the parties. Ephraim Horowitz shall receive a credit
in substantially the following form: "Produced, Written ad Directed by Ephraim
Horowitz."
(b) The credits "HOLLYWOOD PRODUCTIONS, INC." and "NORTH FOLK FILMS,
INC." as well as an "AN EPHRAIM HOROWITZ FILM" credit or any other appropriate
production credits shall appear on separate title cards (either in the opening
or closing credit sequences) on all positive prints of the Picture. Such credits
shall also appear in any promotional and publicity materials and in paid
advertisements, when practicable, in the same positions in which one Party is or
both parties are mentioned in connection with the Picture or the LLC.
(c) This provision shall not restrict the addition of third parties to
said credits and shall not restrict the parties' discretion in placing the order
of said credits which may include third parties.
(d) Decisions regarding size and style of said credits and any
additions or changes in such credits (when there is the presence of third
parties), shall be decided by the parties through mutual consent. However, in
the event of a disagreement, such issues shall be decided by NFF in consultation
with HP. However, this provision shall not contradict any stated provisions in
sections (a), (b) and (c) of this paragraph unless there is the written consent
of both parties.
(e) All other decisions concerning the form and names to be included
in other credits shall be decided by the Parties through their mutual consent.
However, in the event of a disagreement, such issues shall be decided by NFF in
consultation with HP.
9. LLC DISTRIBUTION: Cash funds that are not required to meet the operation
of the business of the LLC (including any reserves mutually agreed upon by the
Parties for operational expenses) shall be distributed in the following order:
(a) First, for the payment and satisfaction of loans and liens (if
any);
(b) Second, for the recoupment of the monies invested by the parties
until the parties receive One Hundred and Thirty Five (135%) Percent of each
party's respective investment. In the event that the Picture shall run
overbudget and the contingencies and the "overcall" have been spent, then NFF
shall provide or cause to be provided additional funding in an arrangement that
shall not diminish or otherwise affect HP's percentage of "Net Proceeds." If NFF
is unable or unwilling to provide or arrange for such additional funding, HP
shall have the right but not the obligation to provide such additional funds. In
such an event, HP shall receive One (1%) Percent of the "Net Proceeds" from
NFF's share for every Ten Thousand ($10,000) Dollars contributed by HP. (Such
points shall be pro rated if so required.) [Solely for the purposes of
illustration, if HP shall invest an additional $15,000, then HP would be
entitled to receive an additional One and One-Half (1-1/2) Percent of the "Net
Proceeds" from NFF's share of such "Net Proceeds." Again, solely for the
purposes of illustration, if HP shall invest an additional $5,000, then HP would
be entitled to receive an additional One-Half (1/2) Percent of the "Net
Proceeds" from NFF's share of such "Net Proceeds."]
In addition, HP shall be entitled to the repayment of such additional monies at
an interest rate of 13.5% per annum prior to the repayment of monies to NFF;
(c) Third, the payment of development costs incurred or to be
incurred by NFF in the sum of Twenty Five Thousand ($25,000) Dollars and
incurred or to be incurred by HP in the sum of Ten Thousand ($10,000) Dollars as
well as for the payment of deferments to the crew and any other persons or
entities which provide goods and/or services in connection with the Picture on a
pro rata pari passu basis. The parties acknowledge and agree to the deferments
that have been negotiated with the crew and Pat McCorkle for her services as a
Casting Director (See Schedule "A"). Any other deferments shall require the
prior written approval of both parties; and
(d) Forth, Fifty (50%) Percent of any and all "Net Proceeds" to each
party. The term "Net Proceeds" or any equivalent term shall be defined and
calculated as stated herein or in accordance with any sales, licensing or
distribution agreement(s) entered into by the Parties and any sale agent,
licensee or distributor in connection with the Picture. Any crew profit
participation shall be allocated from the parties' "Net Proceeds."
(i) The parties' contingent compensation shall be derived from One
Hundred (100%) Percent of the LLC's share of the "Net Proceeds" derived from the
Picture and any and all ancillary, subsidiary or derivative rights based on the
Picture. The parties shall share equally the LLC's share of the "Net Proceeds,"
subject to any terms to the contrary stated herein.
(ii) For the purposes of this Agreement, the definition of "Net
Proceeds" or any similar term under this Agreement shall be in accordance with
any similar definition of such term in any distribution, sales agent or
licensing agreement entered into by the LLC and a distributor, sales agent or
licensee. If there is no such definition in such agreements, then the Parties
agree that such "Net Proceeds" shall be defined in accordance with any financing
agreement(s) entered into by the LLC and any financing sources or after
repayment of all loans and to all investment sources and the payment of any and
all deferments.
(iii) Concerning the Otto Kahn Mansion Location Agreement dated March
30, 1998 between North Fork Films, Inc. and the Oheka Management Corporation, it
shall be clarified that the Oheka Management Corporation or the entity which it
represents shall be entitled solely to a percentage of the "Net Proceeds" which
shall be deducted equally from both parties' shares of such "Net Proceeds" and
that the Oheka Management Corporation or the entity which it represents shall
have no ownership rights to the Picture or any aspect of the Picture. The
parties agree that they shall enter into a more formal Location Agreement with
the Oheka Management Corporation.
(iv) The parties acknowledge and agree that Ten (10%) Percent of the
first One Million ($1,000,000) Dollars which the parties shall receive as "Net
Proceeds" shall be distributed to members of the crew based on the number of
days and weeks worked on the Picture.
10. TAX ALLOCATION: For tax purposes, the taxable income and loss of the
LLC shall be allocated in the following order:
(a) Tax gains and losses shall first be allocated to the LLC; and
(b) Additional tax gains and losses, if any, shall thereafter be
allocated Fifty (50%) Percent to each party.
11. TRANSFER OF INTERESTS: Neither party may transfer or assign its
interests in the LLC without the written consent of the other party.
12. COMPENSATION: The parties agree to the following compensation to be
paid on a deferred basis pro rate pari passu as all other deferments as stated
in paragraph 9(c) of this Agreement:
<TABLE>
<CAPTION>
<S> <C> <C>
Buddy Rashbaum (Executive Producer) $25,000
Robert E. DiMilia (Producer) $25,000
Ephraim Horowitz (Director) $25,000
(Screenwriter) $25,000
(Producer) $25,000
</TABLE>
Rashbaum's and DiMilia's compensation shall be paid to HP.
13. RESIGNATION/TERMINATION:
(a) If Horowitz shall resign or be discharged from this Picture for
cause (i.e., illegal or fraudulent acts or gross negligence), Horowitz shall be
entitled to all monies due until the time of resignation or discharge and shall
not be entitled to any deferments.
(b) If NFF shall exceed the budget of the Picture (including any
contingencies and "overcalls") by Thirty Five (35%) Percent or more, HP shall
have the right but not the obligation to "take over" the Picture. However,
subject to the terms stated herein, the rights of NFF shall be unaffected.
14. DISSOLUTION AND TERMINATION:
(a) Events of Dissolution: The LLC shall be dissolved and terminated
and its business wound up upon the first to occur of the following:
(1) the expiration of the stated term of the LLC; or
(2) the mutual consent of both parties to dissolve; or
(3) by operation of law.
(b) Distributions: If the LLC shall be dissolved for any reason, no
further business shall be conducted, except for the taking of such actions as
shall be necessary for the winding up of the affairs of the LLC, the sale of its
assets and the distribution of its assets in the following order:
(1) First, for the payments of all of the LLC's debts and
expenses, valid and existing claims of third parties and indebtedness against
the LLC's assets, or for which adequate provisions shall be made therefore; and
(2) Second, to the parties in accordance with paragraph 8 of this
Agreement.
(c) No party shall have the right to cause a voluntary or involuntary
liquidation of the LLC without the written consent of both parties.
15. ACCOUNTING: Each party shall have the right to examine the books and
records (and make copies and extracts thereof) of the LLC during reasonably
business hours and upon Five (5) business days notice to the other party. The
books and records of the LLC shall be located at a site to be mutually agreed
upon by the parties. Such examination of the books and records of the LLC shall
occur no more than once per year. A production accountant and an accountant for
the LLC shall be mutually selected by the parties for such purposes which shall
include, but not be limited to, the preparation of an annual report for all
revenues and expenditures in connection with the LLC as well as quarterly
accounting statements from the time the LLC begins to generate revenue.
16. CHOICE OF LAW: This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of New York applicable to
agreements executed and to be performed wholly within the State of New York.
17. ARBITRATION: Any controversy or dispute arising out of or relating to
this Agreement shall be subject to binding arbitration in New York City in
accordance with the Rules of the American Arbitration Association (AAA) as
decided by One (1) arbiter to be mutually approved by the Parties with a
background and experience in the entertainment industry and whose decision shall
be final, binding and non-appealable and may be entered in a court of competent
jurisdiction. The prevailing party shall be entitled to recovery of reasonable
costs and attorneys' fees.
18. OTHER EPHRAIM HOROWITZ PROJECTS AND OTHER HP LLCS: HP shall have the
right of first negotiation and final refusal regarding the next Two (2) projects
that Horowitz shall write, produce and/or direct, provided that HP shall contact
Horowitz within Thirty (30) business days after submission of such a project and
within Seven (7) business days after the final negotiation by the parties
concerning such a project. Subject to the preceding statement, each of the
parties may engage in other business LLCs or make investments exclusively for
such Party's own account, whether or not involving the ownership, production or
exploitations of entertainment projects or LLCs, and neither party shall have
any interest in the business LLCs or investments by the other party.
Notwithstanding the foregoing, the parties agree that each party shall devote
sufficient time as shall be reasonably necessary to fulfill its duties and
obligations in connection with the LLC.
19. VIDEOCASSETTE COPY AND FILM PRINT: Each party shall be entitled to
receive at the LLC's expense, One (1) high quality videocassette copy of the
Picture for private personal use and the right to purchase a print of the
Picture at personal expense and at cost. It is agreed that the receipt and use
of any copy of the Picture shall be for personal and/or non-competitive use by
the parties which shall not interfere with any of the distribution agreements or
other contracts entered into by the LLC.
20. AMENDMENT: This Agreement may not be modified except by a written
instrument signed by the parties.
21. ENTIRE AGREEMENT: The parties acknowledge and agree that HP dos approve
the agreement entered into by NFF prior to the execution of this Agreement
subject to the execution of more formal location agreement concerning the Otto
Kahn Mansion. Subject to final approval of the budget by the parties, this
Agreement constitutes the sole and entire understanding between the parties. Any
prior agreements, promises, understandings or negotiations not expressly set
forth in this Agreement are of no force or effect whatsoever. The parties
acknowledge and agree that in the absence of executed originals of this
Agreement, the execution of this Agreement by the facsimile signatures of the
parties shall be binding on the parties and their successors and assignees.
IN WITNESS THEREOF, the parties acknowledge their assent to the terms and
conditions stated herein and indicate such assent in the space below.
ACKNOWLEDGED AND AGREED:
By: /s/ Robert DiMilia
HOLLYWOOD PRODUCTIONS, INC.
Its: Vice President
By: /s/ Ephraim Horowitz
NORTH FOLK FILMS, INC.
Its:
the day of April, 1998
Exhibit 10.28
Artistic License Films
250 West 57th Street
Suite 606
New York, New York 10107
June 3, 1998
Harold Rashbaum
Hollywood Productions, Inc
14 East 60th Street, Suite 402
New York, NY 10022
RE:"DIRTY LAUNDRY"
Dear Mr. Rashbaum:
The following shall constitute a binding agreement between Hollywood
Productions Inc. ("Client") and Artistic License Films ("Distributor")
concerning the U.S. theatrical distribution of the feature film "DIRTY LAUNDRY".
1. DEFINITIONS:
For the purposes of this Agreement, the following terms shall have the
following meanings:
(a) The "Film" means "DIRTY LAUNDRY" which was directed by Robert Sherwin
and Michael Normand. .
(b) The "Territory" means New York and Los Angeles. Distributor shall use
best efforts to book the "Film" in three theatres in New York and two in Los
Angeles.
(c) The "Term" means the period of time commencing on the date hereof and
continuing up to (6) months.
(d) "Distribution Expenses" means all of the actual, direct costs and
expenses incurred or caused to be incurred by Distributor in connection with
prints, videotapes and other materials, advertising, promotion, exploitation and
distribution of the Film inclusive of the expenses described in paragraph 3
herein. Where Distribution Expenses are incurred by Distributor in connection
with more than one film, one of which is the Film, the allocation of
Distribution Expenses to the Film shall be in good faith and shall be reasonable
for the Film.
(e) "Gross Receipts" means the aggregate of all monies actually collected
by Distributor from the theatrical exploitation of the Film in the Territory
during the Term hereof. Advances and guarantees in respect of such theatrical
exploitation shall be included in Gross Receipts at such time as they have been
collected by Distributor (as agent for Client), and are nonrefundable. Gross
Receipts shall be net of refunds, credits, discounts, allowances and adjustments
granted by Distributor, and agreed to by Client, to exhibitors. Such Gross
Receipts shall be deposited in a bank account under the joint control of
Distributor and Client (Joint Account).
2. CREATION OF A DISTRIBUTION AGENCY RELATIONSHIP:
Client agrees to retain Distributor, and Distributor agrees to act as
the agent for Client in the Territory during the Term of this Agreement for the
exclusive theatrical, promotion and exploitation of the Film. In regular
consultation with Client, Distributor will provide, among other services,
supervision and advice with respect to the promotion and advertising of the
Film; consultation with respect to the development of key artwork; development
of a release strategy; booking of the Film into theaters; and collection of
Gross Receipts, as agent of Client. Distributor is authorized to act on Client's
behalf as an agent to a disclosed principal solely in a limited capacity and
only to the extent of Distributor to perform under this Agreement; however,
nothing herein shall permit the Distributor to bind the Client or incur any
liability on behalf of Client except as provided in this agreement.
Notwithstanding anything contained in this agreement to the contrary,
Distributor shall have no rights in the copyright of the Film or any materials,
prints, advertisements, imaging or other products thereof. Each of the Parties
to this Agreement shall perform its obligations hereunder as an independent
contractor, and nothing herein shall be construed to create any relationship
among the Parties other than one among independent contractors.
3. MATERIALS TO BE FURNISHED TO DISTRIBUTOR:
Within thirty (30) days following Client's execution of this agreement,
Client shall furnish Distributor with the following:
(a) Four (4) of prints of the Film;
(b) At least twenty-five (25) videotape cassette copies (VHS) of the Film;
(c) Between fifty (50) and one hundred (100) production still photographs
from the Film; and
(d) At least one (1) master press kit.
4. CLIENT'S LIABILITY FOR DISTRIBUTION EXPENSES:
Distributor shall be permitted to incur reasonable Distribution Expenses on
behalf of Client in performing its duties hereunder, as per the annexed budget
of which the items to be furnished as per paragraph 3 is included therein, and
Client shall , as necessary, advance to Distributor or the appropriate agency,
all Distribution Expenses to be incurred on its behalf by Distributor.
Distributor and Client hereby acknowledge and agree that such Distribution
Expenses shall not exceed sixty-five thousand and twenty-five ($65,025) dollars,
unless otherwise authorized by Client in writing prior to being incurred by
Distributor.
5. DISTRIBUTOR'S FEE:
Distributor's fee for providing the services described herein shall be
twenty-five percent (25%) of the Gross Receipts (the "Distributor Fee") from the
theatrical distribution of the Film. Upon execution hereof Client shall pay
Distributor a nonreturnable retainer, provided Distributor renders in good faith
those services, in the amount of twenty thousand ($20,000) dollars (the
Retainer") which shall constitute an advance against the Distributor Fee.
6. DISPOSITION OF GROSS RECEIPTS:
Gross Receipts shall be allocated, applied, and paid on a cumulative basis
in the following order of priority:
(a1) First, 75% to the recoupment by Client of its Distribution Expenses
and any direct and verifiable distribution expenses incurred by Distributor and
not covered in Client's distribution expenses and approved by Client.
(a2) 25% to the repayment to Client of the Retainer.
(b) Third, to the payment to Distributor of the Distributor Fee set forth
in paragraph 5 above.
(c) The remaining Gross Receipts shall be deemed "Net Proceeds" to be
retained by Client.
7. STATEMENTS AND PAYMENTS:
Distributor shall account to Client weekly during the Term. A statement
shall be rendered in Distributor's customary itemized form, accompanied by
payment of the amounts, if any, stated to be due thereupon, within seven (7)
days of the end of each weekly accounting period. If any such statement reflects
Distribution Expense expenditures by Distributor which have remained
unreimbursed for thirty (30) days, Client shall thereupon pay Distributor the
amount of such unreimbursed Distribution Expenses. Distributor shall have the
right to suspend its performance hereunder if Client fails to make any such
payments. Upon thirty (30) days written notice, Client shall have the right to
inspect the books and records of Distributor in order to verify the accuracy of
said statements.
8. CLIENT'S APPROVALS:
Any artwork, the choice of a press agent, release strategy and marketing
plan shall be subject to Client's prior written approval.
9. VERSION OF THE FILM:
Distributor shall not edit or in any way alter the Film without the prior
written approval of Client; provided, however, that Distributor shall have the
right to add its name and logo to the Film.
10. REPRESENTATIONS AND WARRANTIES:
(a) Distributor has and will continue to have the right to enter into and
perform this Agreement.
(b) Client has and will continue to have the right to enter into and to
perform this Agreement and to grant to Distributor all of the rights and
licenses granted herein in accordance with the terms hereof, without any
additional payment by Distributor to any third party. Client further warrants
that neither the Film nor any part thereof, nor the exercise of any right,
license of privilege granted herein, violates or will violate or infringe the
rights of any person or other entity whatsoever.
11. INDEMNIFICATION:
Client shall indemnify and save harmless Distributor, its successors,
licensees and assigns, and any representatives thereof, against any and all
claims and expenses (including without limitation reasonable legal fees and
expenses) incurred by any of them by reason of the breach of any warranty,
undertaking, representation or agreement made or entered into herein or
hereunder by Client.
Distributor shall indemnify and save harmless Client, its successors,
licensees and assigns, and any representatives thereof, against any and all
claims and expenses (including without limitation reasonable legal fees and
expenses) incurred by any of them by reason of the breach of any warranty,
undertaking, representation or agreement made or entered into herein or
hereunder by Distributor.
12. NOTICES:
All notices and payments hereunder, as applicable, shall be given in
writing to Client and Distributor at their respective addresses set forth above,
or to such other addresses as Client of Distributor shall specify by notice as
herein provided. Copies of all notices to Distributor shall be sent
simultaneously to W. Wilder Knight, II, Esq., Pryor, Cashman, Sherman & Flynn,
410 Park Avenue, New York, New York 10022.
13. MISCELLANEOUS:
This letter shall serve as a complete and binding agreement, to be
interpreted in accordance with the internal laws of the State of New York. It is
the intent of the parties that there shall be no prejudice toward, or negative
constructions or interpretations applied toward, either party by reason of the
fact that this letter agreement is drafted as a letter from Distributor to
Client.
<PAGE>
If the foregoing accurately reflects our understanding, please countersign
and return one copy of this letter to us.
Sincerely yours,
ARTISTIC LICENSE FILMS
By: Sande Zeig
/s/ Sande Zeig
TITLE: President
ACCEPTED AND AGREED TO:
By: Hollywood Productions, Inc.
/s/ Harold Rashbaum 6/9/98
TITLE: President