As filed with the Securities and Exchange Commission on August 28, 1998
Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 11-3871821
(State of Incorporation) (Primary Standard Industrial (IRS Employer Identification No.)
Classification Code)
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14 East 60th Street, Suite 402, New York, New York 10022
(Address and Telephone Number of Principal Offices)
Harold Rashbaum, President
14 East 60th Street, Suite 402
New York, New York 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: [ ]
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
====================================================================================================================================
Proposed Proposed Maximum Aggregate
Title of Each Class Amount to be Registered Maximum Offering Price(1) Amount of
of Securities Offering Price Registration Fee
to be Registered Per Share(1)
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Common Stock 2,686,944 -- -- --
Purchase Warrants(2)
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Common Stock, 2,686,944 $4.00 $10,747,776 $3705.83
$.01 par value (3)
- ------------------------------------------------------------------------------------------------------------------------------------
Totals........... $10,747,776 $3705.83
====================================================================================================================================
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(1) Total estimated solely for the purpose of determining the registration
fee, based on the exercise price of the Distribution Warrants ($4.00).
(2) Represents Warrants being distributed to the Company's sharesholders.
(3) Represents shares of Common Stock issuable upon exercise of the
Warrants, together with such indeterminate number of securities as may be
issuable by reason of anti-dilution provisions contained therein
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 Statement Covero Page and Cover Page of Registration Statement
and Outside Front Cover of Prospectus
2 Inside Front and Outside Back Cover Pages Continued Front Page, Table of Contents
3 Summary Information, Risk Factors and Ratio
of Earnings to Fixed charges Prospectus Summary, Risk Factors
4 Use of Proceeds The Offering
5 Determination of Offering Price Plan of Distribution, Cover Page, Risk Factors
6 Dilution Risk Factors
7 Selling Securityholders Selling Stockholders
8 Plan of Distribution Cover Page, Plan of Distribution
9 Description of Securities to be Registered Incorporation of Certain Documents by Reference
10 Interests of Named Experts and Counsel Legal Opinions, Experts
11 Material Changes Prospectus Summary
12 Incorporation of Certain Information by Reference Incorporation of Certain Information by Reference
13 Disclosure of Commission Position on Securities Act Liabilities Item 15. Indemnification of Officers and Directors
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-iii-
<PAGE>
Subject to Completion, dated August 28, 1998
PROSPECTUS 2,686,944 REDEEMABLE DISTRIBUTION WARRANTS
Hollywood Productions, Inc.
This Prospectus covers the sale of 2,686,944 redeemable common stock
purchase warrants (the "Distribution Warrants"), issued in connection with a
distribution (the "Distribution") to the shareholders of Hollywood Productions
Inc. (the "Company") and 2,686,944 shares of common stock, par value $.01 per
share (the "Common Stock") issuable upon the exercise of the Distribution
Warrants. Each shareholder of record on May 8, 1998 (the "Shareholders") is
entitled to receive one Distribution Warrant for each share of Common Stock
owned. The Distribution Warrants and shares of Common Stock issuable upon the
exercise thereof (collectively referred to hereinafter as the "Securities"),
shall be in registered form when issued and delivered to the Company's
shareholders, in accordance with a warrant agreement between the Company and
its registrar, whereby, upon receipt the Distribution Warrants may be sold or
transferred. The Distribution Warrants are redeemable by the Company at any
time, commencing one year from issuance, upon 30 days' prior notice, at a
redemption price of $.05 each, provided that the closing bid quotation of the
Common Stock for at least 20 consecutive trading days, ending on the third day
prior to the date on which the Company gives notice, has been at least $6.00.
The Distribution Warrants will remain exercisable during the 30 day notice
period.
Each Distribution Warrant entitles the holder thereof to purchase one
share of Common Stock at an exercise price of $4.00 for a period of three years,
commencing one year after issuance. The issuance date shall be the date of this
Prospectus. The Company shall use its best efforts to distribute the
Distribution Warrants within 14 days of the effective date of this Prospectus.
The Company's Common Stock and existing warrants (the "Warrants") are
quoted on the Nasdaq SmallCap Stock Market ("Nasdaq") under the symbols "FILM"
and "FILMW", respectively. The Company has applied for the listing of the
Distribution Warrants on Nasdaq, though no assurances can be given that they
will be listed. 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 Company's securities will be available for trading in the over-the-counter
market on the OTC Bulletin Board.
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 August 28, 1998.
<PAGE>
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 quarters ended
March 31, 1998 and June 30, 1998, as filed on April 16, 1998 and August 14,
1998, respectively; 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; and
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.
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.
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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, and should be read in conjunction with,
the detailed information and financial statements appearing elsewhere in this
Prospectus and the Company's annual report on Form 10-KSB for the fiscal year
ended December 31, 1997, quarterly report on Form 10-QSB for the quarter ended
June 30, 1998 and other reports incorporated by reference herein. Unless
otherwise indicated, the share and per share information in this Prospectus
gives effect to the 1-for-3 reverse stock split in February 1998. Statements
contained in this Prospectus which are not historical facts are forward looking
statements as defined under the Private Securities Litigation Reform Act of
1995. These forward looking statements include statements with respect to plans,
projections or future performance of the Company and are subject to risks and
uncertainties which could cause actual results to differ materially from those
projected.
General
Hollywood Productions, Inc. (the "Company") is a Delaware Corporation,
which was organized in December 1995. The Company was formed for the purpose of
acquiring screen plays and producing independent motion pictures using named
talent with smaller budgets, typically ranging between $1,000,000 to $3,000,000,
though it has and may produce and pursue the production of motion pictures with
budgets of less than $1,000,000 or more than $3,000,000.
In addition to its motion picture business the Company acquired
Breaking Waves, Inc., a New York corporation ("Breaking Waves") in accordance
with a stock purchase agreement dated May 1996, which acquisition was contingent
on and simultaneously consummated with the Company's initial public offering in
September 1996. Unless the context otherwise requires, all references to the
"Company" include its wholly owned subsidiary, Breaking Waves and each of its
films, "Dirty Laundry" and "Battle Studies".
As of June 30, 1998, the Company's total assets were $5,914,084 and
stockholders' equity was $5,815,972. For the year ended December 31, 1997, the
Company had a net loss of $423,467. For the six months ended June 30, 1998, the
Company had net income of $148,631.
Motion Picture Business
The Film - Dirty Laundry
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 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. In August, 1997
the Company entered into a licensing agreement with Trident Licensing Inc.
In June 1998 the Company entered into a six-month agreement with
Artistic License Films, as agent, for the theatrical distribution of the film in
the United States. The agreement provides that the distributor shall seek to
have the film premiere in a limited distribution in New York and Los Angeles
within six months of the agreement. The distributor is to receive 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 planning
to have the film premiere on September 25, 1998. 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. As of June 30, 1998, the
Company has incurred costs of $1,957,042, earned revenues of $164,875, and
amortized costs of $163,392, in connection with the production of "Dirty
Laundry."
<PAGE>
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 film entitled "Battle
Studies". The Company and Norfolk formed a limited liability company to finance,
produce, and distribute the film, which commenced production in April 1998 and
the principal photography of the film was completed in May 1998 at a total cost
of $265,000. The film was written, directed and co-produced by Efraim Horowitz.
The film is a contemporary ghost story about power, greed, love, and Leonardo Da
Vinci's lost notebook. The estimated production 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% to Norfolk and 40% to the Company. The film is currently
being edited. Presently, the Company does not have any distribution agreement
for the exploitation of the film, however, the Company plans on submitting the
film for critical review in upcoming film festivals.
Business of Breaking Waves, Inc.
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. In addition, commencing
with the 1999 season the Company has commenced the offering of a line of
swimwear using the "Jet Ski" trademark, for girl's, boy's and men's swimwear.
The Company entered into a licensing agreement with Kawasaki Motors
Corp., USA ("Kawasaki") to use the Jet Ski trademark. 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.
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.
Private Placements
The Company has consummated the raising of approximately $750,000 in
additional equity. In February 1998, the Company completed a private placement
of 300,000 shares of its Common Stock at a price of $.65 per share raising
approximately $195,000. In April 1998, the Company completed a private placement
of 350,000 shares of the Company's Common Stock at a price of $1.60 per share
raising approximately $560,000.
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.
<PAGE>
The Offering
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Securities Outstanding:
Prior to Distribution:
Common Stock(1) 2,686,944 Shares
Warrants 1,280,000
Distribution Warrants 0
After Distribution:
Common Stock(1) 2,686,944 Shares
Warrants 1,280,000
Distribution Warrants 2,686,944
Risk Factors This Distribution involves a high degree of risk. See "Risk Factors."
Use of Proceeds The proceeds from the exercise of the Distribution Warrants will be applied
to general working capital of the Company, if and when the Distribution
Warrants are exercised. All the expenses of this Distribution will be paid
by the Company.
NASDAQ Symbols (2) Common Stock - FILM
Warrants - FILM
Distribution Warrants - FILMZ
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<PAGE>
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
Prospectus 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.
General Business Risks
1. Losses from Operations; Accumulated Deficit. Since formation in 1995
the Company has had losses of $423,467 and $221,982 for the years ended December
31, 1996 and 1997, respectively, though the Company's sales had increased to
$5,307,115 from $4,814,134 for the same period. For the six months ended June
30, 1998, the Company has a net profit of $148,631 verse a loss of $181,159 for
the same period in 1997, and sales increased approximately 21% to $4,092,491
from $3,372,285 for the same period. As of June 30, 1998 the Company had an
accumulated deficit of $496,818, which could adversely affect the Company's
ability to conduct its operations. There can be no assurance that the Company's
revenues or results of operations will not decline further in the future, that
the Company will not continue to have losses, or that the Company will be able
to continue funding such losses if they continue.
2. Limited Experience of Management. 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. In addition, prior to purchasing Breaking Waves management had
limited experience in operating a apparel company. The lack of experience of
management may adversely affect the operations of the Company and ultimately,
the value of an investment in the Company. The likelihood of success of the
Company must be considered in light of management's inexperience, together with
the problems, expenses, difficulties, complications, and delays frequently
encountered in connection with a business with a limited operating history and
the competitive industries 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 it will not encounter unanticipated result,
increased costs, or material delays in its implementation or ability to
implement its business plans.
Risks Associated with the Company's Film Business
3. No Guarantee of any Return on its Investment in Producing Motion
Pictures; 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 film. The Dirty Laudry 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 June 30, 1998, the Company had incurred costs of $1,957,042 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.
<PAGE>
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 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.
4. 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.
5. Need for Additional Funding for Movie Operations. 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.
6. 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.
7. 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.
<PAGE>
8. 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
9. 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 is in the process of
expanding its operations and market segment to include boy's and men's swimwear.
10. 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.
11. 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.
12. 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.
<PAGE>
13. 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 six
months ended June 30, 1998 and 1997, Breaking Waves had three and one customers
which comprised 14%, 14%, and 11%; and 18% 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.
14. 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.
15. 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.
16. 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
17. 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, 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.
<PAGE>
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
the principle market maker and a dominant influence in the market 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
2,686,944 shares of Common Stock have been issued by the Company of which
1,717,294 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, (i) 1,280,350 shares were registered for resale in
accordance with a registration statement declared effective by the Commission on
July 30, 1998, (ii) 350,000 shares are planned to be registered for resale in
accordance with a registration statement currently being prepared by the
Company, and (iii) 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 the
registration statement would, in all likelihood, have a depressive effect on the
market price for the Company's Common Stock, Warrants, and Distribution
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 and Distribution Warrants;
Necessity for Updating Registration Statement. The Distribution Warrants offered
hereby, and the Warrants, 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 Distribution Warrants and 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
Distribution Warrants and Warrants. The Company has undertaken to use its best
efforts to have all of the shares of Common Stock issuable upon exercise of the
Distribution Warrants and Warrants registered or qualified on or before the
exercise date and to maintain a current prospectus relating thereto until the
expiration of the Distribution Warrants and 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 Distribution Warrants and Warrants may not be exercised
in the event there is no current prospectus.
<PAGE>
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 or a market capitalization of $35,000,000
or net income of $500,000 (during the last fiscal year or the two years previous
to the last fiscal year), (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 $1,000,000. 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,
thought the bid price for the Company's Common Stock has been at $1.00, whereby,
in the event it decreases the Company would be out of compliance.
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
Distribution may find it more difficult to sell their securities.
25. 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.
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>
DESCRIPTION OF DISTRIBUTION WARRANTS AND PLAN OF DISTRIBUTION
On April 15, 1998 the Company's Board of Directors has approved the
issuance of a Common Stock purchase warrant dividend (the "Distribution
Warrants") to its stockholders, whereby, for each share of Common Stock held by
shareholders of record on May 8, 1998, the Company shall issue one warrant to
purchase one share of the Company's Common Stock at a exercise price of $4.00.
This Prospectus covers the distribution of 2,686,944 Distribution Warrants and
the shares of Common Stock issuable upon exercise thereof.
The Distribution Warrants and the underlying shares of Common Stock, in
accordance with this Prospectus, will be in registered form upon issuance,
whereby, they may be sold, transferred, or assigned pursuant to the terms of a
warrant agreement (the "Warrant Agreement") between the Company and Continental
Stock Transfer & Trust Company, as "Warrant Agent" and the holders of
Distribution Warrants shall receive upon exercise, unrestricted shares of Common
Stock. The following statements are summaries of certain provisions of the
Warrant Agreement, copies of which may be examined at the principal corporate
offices of the Warrant Agent and a form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The following
statements are subject to the detailed provisions of the Warrant Agreement.
The Distribution Warrants will be exercisable for a period of three years
commencing twelve months from the date of issuance. Unexercised Warrants will
automatically expire at the end of such three-year period. The Distribution
Warrants are redeemable by the Company at any time, commencing one year from the
issuance, upon 30 days' prior notice, at a redemption price of $.05 each,
provided that the closing bid quotation of the Common Stock for at least 20
consecutive trading days, ending on the third day prior to the date on which the
Company gives notice, has been at least $6.00. The Distribution Warrants will
remain exercisable during the 30 day notice period. In the event that the
Company decides to redeem the Warrants, it will notify all warrantholders
thereof by mail and will additionally publish a notice of redemption in the Wall
Street Journal as to the date of redemption. Redemption of the Distribution
Warrants could cause the holders to exercise the Distribution Warrants and pay
the exercise price at a time when it may be disadvantageous for the holders to
do so, to sell the Distribution Warrants at the then current market price when
they might otherwise wish to continue to hold the Distribution Warrants, or to
accept the redemption price, which is likely to be substantially less than the
market value of the Distribution Warrants at the time of redemption. The Company
will not redeem the Distribution Warrants at any time in which its registration
statement is not current, enabling investors to exercise their Distribution
Warrants during the 30 day notice period in the event of a warrant redemption by
the Company.
Although the Company has no current intention of reducing the exercise
price or extending the exercise period of the Distribution Warrants, it is
possible that either or both of such changes may be effected by resolution of
the Board of Directors in the future. In the event that the exercise price of
the Distribution Warrants is reduced, or the exercise period of the Distribution
Warrants is extended, the Company will be required to have a post-effective
amendment filed and declared effective before the Distribution Warrants could be
exercised. The exercise price and the number of shares or other securities
purchasable upon exercise of any Distribution Warrants are subject to adjustment
upon the occurrence of certain events, including the issuance of shares of
Common Stock as a dividend and any recapitalization, reclassification, or
split-up or reverse split of the Common Stock. No adjustment in the exercise
price will be required to be made with respect to the Distribution Warrants
until cumulative adjustments amount to $0.01 or more per warrant; however, any
such adjustment not required to be made at any given time due to such exception
will be carried forward and taken into account in any subsequent adjustment.
In the event of any reclassification, capital reorganization, or other
similar change of outstanding Common Stock, any consolidation or merger
involving the Company (other than a consolidation or merger which does not
result in any reclassification, capital reorganization or other similar change
in the outstanding Common Stock), or a sale or conveyance to another corporation
of the property of the Company as, or substantially as, an entirety, each
Distribution Warrant will thereupon become exercisable only for the kind and
number of shares of stock or other securities, assets, or cash to which a holder
of the number of shares of Common Stock purchasable (at the time of such
reclassification, reorganization, consolidation, merger, or sale) upon exercise
of such Warrant would have been entitled upon such reclassification,
reorganization, consolidation, merger, or sale. In the case of a cash merger of
the Company into another corporation or any other cash transaction of the type
mentioned above, the effect of these provisions would be that the holder of a
Distribution Warrant would thereafter be limited to exercising such Distribution
Warrant at the exercise price in effect at such time for the amount of cash per
share that a Distribution Warrant holder would have received had such holder
exercised such Distribution Warrant and received shares of Common Stock
immediately prior to the effective date of such cash merger or transaction.
Depending upon the terms of such cash merger or transaction, the aggregate
amount of cash so received could be more or less than the exercise price of the
Distribution Warrant.
<PAGE>
The Distribution Warrant Agreement contains provisions permitting the
Company and the Warrant Agent to supplement the Warrant Agreement in order to
cure any ambiguity, to correct any provision contained therein which may be
defective or inconsistent with any other provisions therein, or to make other
provisions which the Company and the Warrant Agent may deem necessary or
desirable and which do not adversely affect the interests of the warrantholders.
Warrantholders, by virtue of their ownership of Distribution Warrants alone,
have no right to vote on matters submitted to the Company's stockholders and
have no right to receive dividends. The holders of Distribution Warrants also
are not entitled to share in the Company's assets in the event of dissolution,
liquidation or winding up.
In order for a warrantholder to be able to exercise his warrant, the
Company must have a current Registration Statement on file with the Securities
and Exchange Commission and, unless otherwise exempt, the State Securities
Commission of the State in which the warrantholder resides. Accordingly, the
Company would be required to file post-effective amendments to its Registration
Statement when subsequent events require such amendments in order to continue
the registration of the Common Stock underlying the Distribution Warrants.
Although the Company has undertaken and intends to keep its Registration
Statement current, there can be no assurance that the Company will keep its
Registration Statement current and, if for any reason it is not kept current,
the Distribution Warrants will not be exercisable and will lose all value. The
Company's Transfer Agent has also been appointed as its Warrant Agent
responsible for all record keeping and administrative functions in connection
with the Distribution Warrants.
Reports to Shareholders
The Company has adopted December 31st 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 Securities 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, P.C., 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.
<PAGE>
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 Securities 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 Securities 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. 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.
<PAGE>
II-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<TABLE>
<CAPTION>
Item 14. Other Expenses of Issuance and Distribution.
<S> <C>
Registration Fee $ 3706
Accounting Fees 2,500 (1)
Legal Fees 12,500 (1)
Printing Fees 2,500 (1)
Miscellaneous 2,500 (1)
----------
Total $ 23,706 (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 the
Company's Registration Statement on Form S-3, dated August __, 1998.
<TABLE>
<CAPTION>
<S> <C>
5.0 - Opinion of David S. Klarman, Esq.
4.5 - Form of Distribution Warrant Agreement between the Company and Continental Stock Transfer
& Trust Company.
23(a) - Consent of Scarano & Tomaro, P.C.
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 distribution of such securities at the time shall be deemed to be the
initial bona fide distribution thereof.
(3) To remove from registration by means of Post-Effective Amendment any of
the shares of Common Stock underlying the Distribution Warrants being registered
which remain unissued at the expiration of the Distribution Warrants.
(4) 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 25th day of
August, 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 08/25/98
Harold Rashbaum President and director Date
\s\ Robert DiMilia Vice President and Director 08/25/98
Robert DiMilia Date
\s\ James Frakes Director 08/25/98
James Frakes Date
\s\ Alain A. Le Guillou, M.D. Director 08/25/98
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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
David S. Klarman* 14 East 60th Street, Suite 402
------- New York, New York 10022
Marie Elena Cocchiaro** (212) 750-7500 (phone)
*Licensed also in NY (212) 688-1797 (fax)
**Licensed in NY, NJ, PA, and MD only
</TABLE>
August 27, 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 2,686,944 warrants to be distributed to the shareholders of
record on May 8, 1998, and 2,686,944 shares of Common Stock underlying the
warrants. 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 2,686,944 warrants 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 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
August 26, 1998
II-4
Exhibit 4.5
HOLLYWOOD PRODUCTIONS, INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
REDEEMABLE COMMON STOCK PURCHASE WARRANT
WARRANT AGREEMENT
Dated as of ________, 1998
AGREEMENT dated as of ___________, 1998, HOLLYWOOD
PRODUCTIONS, INC., a Delaware corporation (hereinafter "the Company"), and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, a New York corporation, as Warrant
and Transfer Agent (hereinafter "the Warrant Agent").
WHEREAS, the Company proposes to issue as a distribution to its
shareholders of record as of May 8, 1998, 2,686,944 Redeemable Common Stock
Purchase Warrants ("the Warrants"), each to purchase one share of Common Stock
at a purchase price of $4.00 per share for a period of three years commencing on
____________, one year from the date the Warrants are issued. The Warrants are
redeemable by the Company at any time, commencing one year from issuance, upon
30 days' prior notice, at a redemption price of $.05 each, provided that the
closing bid quotation of the Common Stock for at least 20 consecutive trading
days, ending on the third day prior to the date on which the Company gives
notice, has been at least $6.00. The Warrants will remain exercisable during the
30 day notice period, and;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act for the Company in accordance with the instructions
hereinafter in this Agreement set forth, and the Warrant Agent hereby accepts
such appointment.
Section 2. Form of Warrants. The text of the Warrants and of the form of
election to purchase shares as is printed on the reverse thereof as now
outstanding, is substantially as set forth respectively in Appendix A attached
hereto. The per share Warrant Price and the number of shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events, all as hereinafter provided. The Warrants shall be executed on
behalf of the Company by the manual or facsimile signature of the present or any
future President or Vice President of the Company, under its corporate seal,
affixed or in facsimile, attested by the manual or facsimile signature of the
present or any future Secretary or Assistant Secretary of the Company.
The Warrants will be dated as of the date of issuance by the Warrant Agent
either upon initial issuance or upon transfer or exchange.
Section 3. Countersignature and Registration. The Warrant Agent shall
maintain books for the transfer and registration of Warrants. Upon the initial
issuance of the Warrants, the Warrant Agent shall issue and register the
Warrants in the names of the respective holders thereof. The Warrants shall be
countersigned manually or by facsimile by the Warrant Agent (or by any successor
to the Warrant Agent then acting as Warrant Agent under this Agreement) and
shall not be valid for any purpose unless so countersigned. Warrants may be so
countersigned, however, by the Warrant Agent (or by its successor as warrant
agent) and be delivered by the Warrant Agent, notwithstanding that the persons
who manual or facsimile signatures appear thereon as proper officers of the
Company shall have ceased to be such officers at the time of such
countersignature or delivery.
<PAGE>
Section 4. Transfers and Exchanges. The Warrant Agent shall transfer, from
time to time, any outstanding Warrants upon the books to be maintained by the
Warrant Agent for that purpose, upon surrender thereof for transfer properly
endorsed or accompanied by appropriate instructions for transfer. Upon any such
transfer, a new Warrant shall be issued to the transferee and the surrendered
Warrant shall be delivered by the Warrant Agent. Warrants so canceled shall be
delivered by the Warrant Agent to the Company from time to time upon request.
Warrants may be exchanged at the option of the holder thereof, when surrendered
at the office of the Warrant Agent, for another Warrant, or other Warrants of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of Common Shares.
Section 5. Rights of Redemption by Company. The Warrants are redeemable by
the Company at any time, commencing one year from issuance, upon 30 days' prior
notice, at a redemption price of $.05 each, provided that the closing bid
quotation of the Common Stock for at least 20 consecutive trading days, ending
on the third day prior to the date on which the Company gives notice, has been
at least $6.00. The Warrants will remain exercisable during the 30 day notice
period. The holder of any Warrants so called, and not either converted or
tendered back to the Company by the end of the date specified in the Notice of
Call, will be entitled only to the redemption price of such Warrant, if
redeemed, and will forfeit his right to so exercise.
Section 6. Exercise of Warrants. Subject to the provisions of this
Agreement, each registered holder of a Warrant shall have the right to purchase
one (1) share of Common Stock at a price of $4.00 for a period of three years,
commencing on _____________. The Company shall issue and sell to such registered
holder of Warrants the number of fully paid and non-assessable shares of Common
Stock specified in such Warrants, upon surrender to the Company at the office of
the Warrant Agent of such Warrants, with the form of election to purchase duly
filled in and signed, and upon payment to the order of the Company for the
Warrant exercise price, determined in accordance with Sections 10 and 11 herein,
for the number of shares in respect of which such Warrants are then exercised.
Payment of such Warrant Price shall be made in cash or by certified check or
bank draft or postal or express money order, payable in United States Dollars to
the order of the Company. No adjustment shall be made for any dividends on any
Common Shares issuable upon exercise of an Warrant. Subject to Section 7, upon
such surrender of Warrants, and payment of the Warrant Price as aforesaid, the
Company shall issue and cause to be delivered with all reasonable dispatch to or
upon the written order of the registered holder of such Warrants and in such
name or names as such registered holder may designate, a certificate or
certificates for the largest number of whole Common Shares so purchased upon the
exercise of such Warrants. The Company shall not be required to issue any
fraction of a Share of Common Stock or make any cash or other adjustment as
provided in Section 12 herein, in respect of any fraction of a Common Share
otherwise issuable upon such surrender. Such certificate or certificates shall
be deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record of such Shares as of the date
of the surrender of such Warrants and payment of the Warrant Price as aforesaid
and provided, however, that if at the date of surrender of such Warrants and
payment of such Warrant Price, the transfer books for the Common Shares or other
class of stock purchasable upon the exercise of such Warrants shall be closed,
the certificates for the Shares in respect of which such Warrants are then
exercised shall be issuable as of the date on which such books shall be opened
and until such date the Company shall be under no duty to deliver any
certificate for such shares; provided further, however, that the aforesaid
transfer books, unless otherwise required by law or by applicable rule of
national securities exchange, shall not be closed at any one time for a period
longer than 20 days. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the registered holders thereof, either as an
entirety or from time to time for part only of the Shares specified therein and,
in the event that any Warrant is exercised in respect of less than all of the
Shares specified therein at any time prior to the date of expiration of the
Warrant, a new Warrant or Warrants will be issued to such registered holder for
the remaining number of shares specified in the Warrant so surrendered, and the
Warrant Agent is hereby irrevocably authorized to countersign and to deliver the
required new Warrants pursuant to the provisions of this Section during the
warrant exercise period, and the Company, whenever requested by the Warrant
Agent, will supply the Warrant Agent with Warrants duly executed on behalf of
the Company for such purpose.
<PAGE>
Section 7. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Common Shares issuable upon the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue or delivery of any certificates for Common Shares in a name other
than that of the registered holder of Warrants in respect of which such Shares
are issued, and in such case, neither the Company nor the Warrant Agent shall be
required to issue or deliver any certificate for Common Shares or any Warrant
until the person requesting the same has paid to the Company the amount of such
tax or has established to the Company's satisfaction that such tax has been
paid.
Section 8. Mutilated or Missing Warrants. In case any of the Warrants shall
be mutilated, lost, stolen or destroyed, the Company may, it its discretion,
issue and the Warrant Agent shall countersign and deliver in exchange and
substitution for and upon cancellation of the mutilated Warrant(s), or in lieu
of substitution for the Warrant lost, stolen or destroyed, a new Warrant of like
tenor and representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company and the Warrant Agent of such loss, theft
or destruction of such Warrant, and indemnity, if requested, also satisfactory
to them. Applicants for such substitute Warrants shall also comply with such
other reasonable regulations and pay such reasonable charges as the Company or
the Warrant Agent may prescribe.
Section 9. Reservation of Common Shares. There have been reserved, and the
Company shall at all times keep reserved, out of the authorized and unissued
Common Shares, a number of Shares sufficient to provide for the exercise of the
rights of purchase represented by the Warrants, and the Transfer Agent for the
Common Shares and every subsequent transfer for any Shares of the Company's
capital stock issuable upon the exercise of any of the rights of purchase
aforesaid are hereby irrevocably authorized and directed at all times to reserve
such number of authorized and unissued Shares as shall be requisite for such
purpose. The Company agrees that all Common Shares issued upon exercise of the
Warrants shall be, at the time of delivery of the certificates for such Common
Shares, validly issued and outstanding, fully paid and non-assessable and listed
on any national security exchange upon which the other Common Shares are then
listed. The Company will file such Registration Statement pursuant to the
Securities Act of 1933, as amended with respect to the Common Shares as may be
necessary to permit it to deliver to each person exercising a Warrant, a
Prospectus meeting the requirements of Section 11(a)(3) of such Securities Act
and otherwise complying therewith, and will deliver such a Prospectus to each
such person. The Company will keep a copy of this Agreement on file with the
Transfer Agent for the Common Shares and with every subsequent transfer a for
any Shares of the Company's capital stock issuable upon the exercise of the
rights of purchase represented by the Warrants. The Warrant Agent is hereby
irrevocably authorized to requisition from time to time such Transfer for stock
certificates required to honor outstanding Warrants. The Company will supply
such Transfer Agent with duly executed stock certificates for such purpose. All
Warrants surrendered in the exercise of the rights thereby evidenced shall be
canceled by the Warrant Agent and shall thereafter be delivered to the Company,
and such canceled Warrants shall constitute sufficient evidence of the number of
Common Shares which have been issued upon the exercise of such Warrants.
Promptly after the date of expiration of the Warrants, the Warrant Agent shall
certify to the Company the total aggregate amount of Warrants then outstanding,
and thereafter no Common Shares shall be subject to reservation in respect to
such Warrants which shall have expired.
Section 10. Warrant Price. Each Warrant shall allow the holder thereof to
purchase one share of Common Stock at a price of $4.00 per whole Share. No
fractional Shares shall be issued for the Warrants.
Section 11. Adjustments. Subject and pursuant to the provisions of this
Section 11, the Warrant Price and number of Common Shares subject to this
Warrant shall be subject to adjustment from time to time as hereinafter set
forth.
<PAGE>
(A) If the Company shall at any time subdivide its outstanding Common
Shares by recapitalization, reclassification, split-up thereof, or other such
issuance without additional consideration, the Warrant Price immediately prior
to such subdivision shall be proportionately decreased and, if the Company shall
at any time combine the outstanding Common Shares by recapitalization,
reclassification or combination thereof, the Warrant Price immediately prior to
such combination shall be proportionately increased. Any such adjustment to the
Warrant Price shall become effective at the close of business on the record date
for such subdivision or combination.
(B) In the event that prior to any Warrant's expiration date the Company
adopts a resolution to merge, consolidate, or sell all or substantially all of
its assets, each Warrant holder upon the exercise of his Warrant will be
entitled to receive the same treatment as the holder of any other Share of
Common Stock. In the event the Company adopts a resolution for the liquidation,
dissolution, or winding up of the Company's business, the Company will give
written notice of such adoption of a resolution to the registered holders of the
Warrants. Thereupon, all liquidation and dissolution rights under the Warrants
will terminate at the end of thirty (30) days from the date of the notice to the
extent not exercised within those thirty (30) days.
(C) If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, cash, or assets with respect to or in
exchange for Common Stock, then as a condition of such reorganization,
reclassification, consolidation, merger or sale, the Company or such successor
or purchasing corporation, as the case may be, shall execute with the Warrant
Agent a Supplemental Warrant Agreement providing that each registered holder of
a Warrant shall have the right thereafter and until the expiration date to
exercise such Warrant for the kind and amount of stock securities, cash, or
assets receivable upon such reorganization, reclassification, consolidation,
merger or sale by a holder of the number of Shares of Common Stock for the
purchase of which such Warrant might have been exercised immediately prior to
such reorganization, reclassification, consolidation, merger or sale, subject to
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 11.
(D) In case at any time the Company shall declare a dividend or make any
other distribution upon any stock of the Company payable in Common Stock, then
such Common Stock issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(E) Upon any adjustment of the Warrant Price as hereinabove provided, the
number of Common Shares issuable upon exercise of this Warrant shall be changed
to the number of Shares determined by dividing (i) the aggregate Warrant Price
payable for the purchase of all Shares issuable upon exercise of this Warrant
immediately prior to such adjustment by (ii) the Warrant Price per Share in
effect immediately after such adjustment.
(F) Anything hereinabove to the contrary notwithstanding, no adjustment of
the Warrant Price of in the number of Common Shares subject to this Warrant
shall be made upon the issuance or sale by the Company of any Common Shares
pursuant to the exercise of any Underwriter's Warrants which may be issued by
the Company pursuant to any Underwriting Agreement between the Company and
Underwriter or pursuant to the issuance of Shares of Common Stock upon exercise
of any of the Warrants or pursuant to a stock option plan which may be adopted
by the Company.
(G) No adjustment in the Warrant Price shall be required under Section 11
hereof, unless such adjustment would require an increase or decrease in such
price of at least $.01 provided, however, that any adjustments which by reason
of the foregoing are not required at the time to be made shall be carried
forward and taken into account and included in determining the amount of any
subsequent adjustment; and provided further, however, that in case the Company
shall at any time subdivide or combine the outstanding Common Shares or issue
any additional Common Shares as a dividend, said amount of $.01 per Share shall
forthwith be proportionately increased in the case of a combination or decreased
in the case of a subdivision or stock dividend so as to appropriately reflect
the same.
<PAGE>
(H) On the effective date of any new Warrant Price the number of Shares as
to which any Warrant may be exercised shall be increased or decreased so that
the total sum payable to the Company on the exercise of such Warrant shall
remain constant.
(I) The form of Warrant need not be changed because of any change pursuant
to this Article, and Warrants issued after such change may state the same
Warrant Price and the same number of shares as is stated in the Warrants
initially issued pursuant to this Agreement. However, the Company may at any
time in its sole discretion (which shall be conclusive) make any change in the
form of Warrant that the Company may deem appropriate and that does not affect
the substance thereof; and any Warrant thereafter issued or countersigned,
whether in exchange or substitution for an outstanding Warrant or otherwise, may
be in the form as so changed.
Section 12. Fractional Interest. The Company shall not be required to issue
fractions of Common Shares on the exercise of Warrants or any cash or other
adjustment in respect of such fractions of Common Shares. If any fraction of a
Common Share would, except for the provisions of this Section 12, be issuable on
the exercise of any Warrant (or specified portions thereof), the Company shall
issue the largest number of whole shares of Common Stock to which the Warrant
Certificate is entitled. All calculations under this Section 12 shall be made to
the nearest whole Share.
Section 13. Notices to Warrantholders.
(A) Upon any adjustment of the Warrant Price and the number of Shares
issuable on exercise of a Warrant, then and in each such case the Company shall
give written notice thereof to the Warrant Agent, which notice shall state the
Warrant Price resulting from such adjustment and the increase of decrease, if
any, in the number of Shares purchasable at such price upon the exercise of a
Warrant, setting forth in reasonable detail the method of calculations and the
facts upon which such calculation is based. The Company shall also publish such
notice once in two Authorized Newspapers. For the purpose of this Agreement, an
Authorized Newspaper shall mean a newspaper customarily published on each
business day, in one or more morning editions or one or more evening editions,
or both (and whether or not it shall be published in Saturday and Sunday
editions or on holidays), printed in the English language and of general
circulation in the Borough of Manhattan, City and State of New York. Failure to
give or publish such notice, or any defect therein, shall not affect the
legality or validity of the subject adjustments.
(B) In case at any time:
(a) the Company shall pay any dividends payable in stock upon its Common
Stock or make any distribution (other than regular cash dividends) to the
holders of its Common Stock;
(b) the Company shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or other rights;
(c) there shall be any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with, or
sale of all or substantially all of its assets to, another corporation; or
(d) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any one or more of such cases, the Company shall give written notice
and publish the same in the manner set forth in Section 13 of the date on which
(i) the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights, or (ii) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale dissolution,
liquidation or winding up, as the case may be. Such notice shall be given and
published at least 30 days prior to the action in question and not less than 30
days prior to the record date or the date on which the Company's transfer books
are closed in respect thereof. Failure to give or publish such notice, or any
defect therein, shall not affect the legality or validity of any of the matters
set forth in this Section 13 inclusive.
<PAGE>
(C) Upon any redemption of the Warrants pursuant to Section 5 hereof, then
and in each such case, the Company shall give written notice thereof to the
Warrant Agent, with directions that the Warrant Agent send a copy of each such
notice to each registered holder of Warrants by first class mail, postage
prepaid, at his address appearing on the Warrant register as of the record date
for the determination of the Warrantholders entitled to such documents, which
notice shall state the terms for such redemption, setting forth in reasonable
detail the procedure for redemption and the effect thereof. The Company shall
also publish such notice once in two Authorized Newspapers, one of which shall
be the Wall Street Journal. Failure to give or publish such notice, or any
defect therein, shall not affect the legality or validity of the subject
redemption.
(D) The Company shall cause copies of all financial statements and reports,
proxy statements and other documents as it shall send to its stockholders to be
sent by first class mail, postage prepaid, on the date of mailing to such
stockholders, to each registered holder of Warrants at his address appearing on
the Warrant register as of the record date for the determination of the
stockholders entitled to such documents.
Section 14. Disposition of Proceeds on Exercise of Warrants.
(A) The Warrant Agent shall forward promptly to the Company, with respect
to Warrants exercised, the funds which will be deposited in a special account in
a bank designated by the Company for the benefit of the Company, for the
purchase of Common Shares through the exercise of such Warrants.
(B) The Warrant Agent shall keep copies of this Agreement available for
inspection by holders of Warrants during normal business hours.
Section 15. Merger or Consolidation or Change of Name of Warrant Agent. Any
corporation or company which may succeed to the business of the Warrant Agent by
any merger or consolidation or otherwise to which the Warrant Agent shall be a
party, shall be the successor to the Warrant Agent hereunder without the
execution or filing of nay paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor Warrant Agent under the provisions of Section 17 of this
Agreement. In case at the time such successor to the Warrant Agent shall succeed
to the agency created by this Agreement, any of the Warrants shall have been
countersigned but not delivered, any such successor to the Warrant Agent may
adopt the countersignature of the original Warrant Agent and deliver such
Warrants so countersigned; and in case at that time any of the Warrants shall
not have been countersigned, any successor to the Warrant Agent may countersign
such Warrants either in the name of the predecessor Warrant Agent or in the name
of the successor Warrant Agent; and in all such cases such Warrants shall have
the full force provided in the Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrants so countersigned; and in case at that time any of the
Warrants shall have not been countersigned, the Warrant Agent may countersign
such Warrants either in its prior name or in its changed name; and in all such
cases such Warrants shall have the full force provided in the Warrants and in
this Agreement.
Section 16. Duties of Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:
(A) The statements of fact and recitals contained herein and in the
Warrants shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrants
except as herein expressly provided.
<PAGE>
(B) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrants to be complied with by the Company.
(C) The Warrant Agent may consult at any time with counsel satisfactory to
it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any holder of any Warrant in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with opinion or the advice of such counsel.
(D) The Warrant Agent shall incur no liability or responsibility to the
Company or to the holder of any Warrant for any action taken in reliance on any
notice, resolution, waiver, consent, order, certificate or other papers,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.
(E) The Company agrees to pay to the Warrant Agent reasonable compensation
for all services rendered by the Warrant Agent in the execution of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and reasonable counsel fees, for anything done or omitted by the Warrant
Agent in the execution of this Agreement except as a result of the Warrant
Agent's negligence, willful misconduct or bad faith.
(F) The Warrant Agent shall be under no obligation to institute any action,
suit or legal proceeding or to take any other action likely to involve expense
unless the Company or one or more registered holders of Warrants shall furnish
the Warrant Agent with reasonable security and indemnity for any costs and
expenses which may be incurred, but this provision shall not affect the power of
the Warrant Agent to take such action as the Warrant Agent may consider proper,
whether with or without any such security or indemnity. All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any of the Warrants or the production thereof at
any trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the ratable benefit of
the registered holders of the Warrants, as their respective rights or interests
may appear.
(G) The Warrant Agent and any stockholder, director, officer, partner or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and free as though it were not Warrant Agent
under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(H) The Warrant Agent shall act hereunder solely as and not in a
ministerial capacity, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence, willful misconduct or bad faith.
(I) The Warrant Agent may execute and exercise any of the rights or powers
hereby vested in it or perform nay duty hereunder, either itself or by or
through its attorneys, s or employees, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys, officers or employees or for any loss to the Company resulting
from such neglect or misconduct, provided reasonable care had been exercised in
the selection and continued employment thereof.
(J) Any request, direction, election, order or demand of the Company shall
be sufficiently evidenced by an instrument signed in the name of the Company by
its president or a vice president, or its secretary or an assistant secretary or
its treasurer or an assistant treasurer (unless other evidence in respect
thereof be herein specifically prescribed); and any resolution of the Board of
Directors may be evidenced to the Warrant Agent by a copy thereof certified by
the secretary or an assistant secretary of the Company.
<PAGE>
Section 17. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company notice
in writing, and to the holders of the Warrants notice by mailing such notice to
holders at their addresses appearing on the Warrant register, of such
resignation, specifying a date when such resignation will take effect. The
Warrant Agent may be removed by like notice to the Warrant Agent from the
Company and by like mailing of notice to the holders of the Warrants. If the
Warrant Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Warrant Agent. If the
Company shall fail to make such appointment within a period of 30 days after
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Warrant Agent or by the registered
holder of a Warrant (who shall, with such notice, submit his Warrant for
inspection by the Company), then the registered holder of any Warrant may apply
to any court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Any successor Warrant Agent, whether appointed by the Company or
by such a court, shall be a bank or trust company or an active transfer Agent,
in good standing, incorporated under the laws of the State of New York or of the
United States of America. After appointment, the successor Warrant Agent shall
be vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent without further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor Warrant Agent
all canceled Warrants, records and property at the time held by it hereunder,
and execute and deliver any further assurance, conveyance, act or deed necessary
for the purpose. Failure to file or mail any notice provided for in this Section
17 however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Warrant Agent or the appointment of the
successor Warrant Agent, as the case may be.
Section 18. Identity of Transfer Agent. Forthwith upon the appointment of
any Transfer Agent for the Common Shares or of any subsequent transfer Agent for
Common Shares or other shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrants, the Company will
file with the Warrant Agent a statement setting forth the name and address of
such Transfer Agent. The Warrant Agent hereby acknowledges that it is, at the
time of execution hereof, the Transfer Agent, and waives any statement required
herein with respect thereto.
Section 19. Notices. Any notice pursuant to this Agreement to be given or
made by the Warrant Agent or by the registered holder of any Warrant to the
Company shall be sufficiently given or made if sent by first class mail, postage
prepaid, addressed (until another address is filed in writing by the Company
with the Warrant Agent) as follows:
Hollywood Productions, Inc.
14 East 60th Street, Room 402
New York, NY 10022
Copy to:
Klarman & Associates
2303 Camino Ramon, Suite 200
San Ramon, California 94583
Any notice pursuant to this Agreement to be given or made by the Company or
by the registered holder of any Warrant to or on the Warrant Agent shall be
sufficiently given or made if sent by first class mail, postage prepaid,
addressed (until another address is filed in writing by the Warrant Agent with
the Company) as follows:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10002
Attn: Compliance Department
<PAGE>
Section 20. Supplements and Amendments. The Company and the Warrant Agent
may from time to time supplement or amend this Agreement without the approval of
any holders of Warrants in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company and the Warrant Agent
may deem necessary or desirable and which shall not be inconsistent with the
provisions of the Warrants and which shall not adversely affect the interests of
the holders of Warrants.
Section 21. Successors. All the covenants and provisions of this Agreement
by and for the benefit of the Company or the Warrant Agent shall bind and inure
to the benefit of their respective successors and assigns hereunder.
Section 22. New York Contract. This Agreement shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with the laws of said State.
Section 23. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrants, any legal or equitable
right, remedy or claim under this Agreement, but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrants.
Section 24. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall be considered an original.
Section 25. Effectiveness. This Agreement shall be deemed binding and
therefore in effect as of, and subject to, _________________.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
HOLLYWOOD PRODUCTIONS, INC.
By:
Harold Rashbaum, President
(Seal)
Attest:
Robert DiMilia, Secretary
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY.
By:
II-4
<PAGE>
Appendix A
VOID AFTER , 1998
REDEEMABLE WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK
No.
HOLLYWOOD PRODUCTIONS, INC.
This certifies that FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number
of Redeemable Common Stock Purchase Warrants ("Warrants") specified above. Each
Warrant initially entitles the Registered Holder to purchase subject to the
terms and conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and non-assessable share of Common Stock,
$.001 par value, of Hollywood Productions, Inc., a Delaware corporation (the
"Company"), at any time between the date hereof and the Expiration Date (as
hereinafter defined), upon the presentation and surrender of this Warrant
certificate with the Subscription From on the reverse hereof duly executed, at
the corporate office of Continental Stock Transfer & Trust company as Warrant
Agent, or its successor (the "Warrant Agent"), accompanied by payment of $4.00
(the "Purchase Price") in lawful money of the United States of America in cash
or by official bank or certified check made payable to the order of the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated , 1998, by and
among the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on , 2002,
or such earlier date as the Warrants shall be redeemed. If such date shall in
the State of New York be a holiday or a day on which the banks are authorized to
close, then the Expiration Date shall mean 5:00 p.m. (New York time) the next
following day which in the State of New York is not a holiday or a day on which
banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of the Warrants represented by this Warrant Certificate unless a
registration statement under the Securities Act of 1933, as amended, with
respect to such securities is effective. The Company has covenanted and agreed
that it will file post effective amendments to the registration statement (when
events require such amendments) and will use its best efforts to cause the same
to become effective and to keep such registration statement current. The
Warrants represented hereby shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.
<PAGE>
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment together with any service charge in
addition to any tax or other governmental charge imposed in connection
therewith, for registration of transfer of this Warrant Certificate at such
office, a new Warrant Certificate or Warrant Certificates representing an equal
aggregate number of Warrant will be issued to the transferee in exchange
therefor, subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Warrants represented by this Warrant Certificate may be redeemed at the
option of the company upon at a redemption price of $.05 per warrant, provided
that the closing bid quotation of the Common Stock for at least 20 consecutive
trading days, ending on the third day prior to the date on which the Company
gives notice, has been at least $6.00. Notice of redemption shall be given upon
not less than thirty days nor more than sixty prior to the date fixed for
redemption as provided in the Warrant Agreement. On and after the date fixed for
redemption, the Registered Holder shall have no rights with respect to the
Warrants represented by this Warrant Certificate except to receive the $.05 per
Warrant upon surrender of this Certificate.
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: BY
(Facsimile Signature)
COUNTERSIGNED President
CONTINENTAL STOCK TRANSFER & BY
TRUST COMPANY, as Warrant Agent Secretary
BY
Authorized Officer
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<PAGE>
SUBSCRIPTION FORM
To Be executed by the Registered Holder in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
________________ Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name
of______________________________.
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
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(please print or type name and address)
and be delivered to
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(please print or type name and address)
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered, to, the Registered Holder
at the address stated below.
The undersigned represents that the exercise of the within Warrant was
solicited by a member of the National Association of Securities Dealers, Inc. if
not solicited by an NASD member, please write "unsolicited" in the space below.
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(Name of NASD Member)
Dated:________________________ X_______________________________________
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Address
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Taxpayer Identification Number
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Signature Guaranteed
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ASSIGNMENT
To Be Executed by the Registered Holder in Order to Assign Warrants
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
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(Please print or type name and address)
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of the Warrants represented by this Warrant Certificate, and hereby
irrevocably constitutes and appoints
<PAGE>
____________________________________________________________________Attorney to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.
Dated: ___________________
X____________________________________________
Signature Guaranteed
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THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO
THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST
BE GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN RULE 17Ad-15 UNDER THE
SECURITIES EXCHANGE ACT OF 1934) WHICH MAY INCLUDE A COMMERCIAL BANK, TRUST
COMPANY OR SAVINGS ASSOCIATION, CREDIT UNION OR MEMBER FIRM OF THE AMERICAN
STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR MIDWEST STOCK
EXCHANGE.
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