U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
(Amendment No. 2)
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS
ISSUERS UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT
OF 1934.
ECLIPSE ENTERTAINMENT GROUP, INC.
(Name of Small Business Issuer in its charter)
Nevada 91-1766849
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
10900 N.E. 8th Street, Suite 900, Bellevue, Washington 98004
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (425) 990-5969
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None. None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
None
(Title of Class)
PART I.
ITEM 1. DESCRIPTION OF BUSINESS.
(a) Business Development.
Eclipse Entertainment Group, Inc. ("Company") was
incorporated on January 27, 1997 in the State of Nevada with the
objective of satisfying a worldwide demand for quality,
American entertainment that is developed under carefully
managed budgets. Company will work to establish a network of
foreign and domestic buyers to produce or acquire programming
that directly meets their needs in terms of content and cost.
The Company currently has no employees, other than the officers
and directors, but anticipates adding. Therefore, the
business activities of the Company are handled by these
individuals.
(b) Business of the Company.
The Business objectives of the Company, as developed by its Board
of Directors, are strongly focused on the production and
acquisition of action oriented feature films with strong domestic
and universal appeal that have been developed and/or produced
within well managed low to medium budgets. The Company intends
to develop a well integrated portfolio of these feature films by
producing or co-producing one or two action feature films each
year and by acquiring the rights to other similar films which are
available at attractive prices.
The Company has entered into a distribution agreement with Westar
Entertainment, Inc. on January 1, 1998 pursuant to which this
firm markets the Company's products both domestically and
worldwide (attached as Exhibit 10.1 to this Form 10-KSB) (thus,
the Company will be obligated to distribute its films exclusively
through this company). Under this agreement, the Company and
Westar Entertainment, Inc. will share distribution revenues on a
50-50 basis. Working with Westar Entertainment, Inc., the
Company is working toward establishing a strong network of
domestic and foreign buyers and will produce and/or acquire
motion pictures that meet their needs in terms of content and
cost. The Company intends to develop its portfolio to respond
quickly and effectively to market needs, and has attended and
will continue to attend the major film markets in order to stay
in touch with the dictates of the domestic and international
markets. The major markets include the American Film Market
("AFM") in Santa Monica, California, the Cannes Film Market
(Marche du Film de Cannes) in Cannes, France, and MIFED ("E.P.
Fiera Internazionale Di Milano") in Milan, Italy.
The Company has acquired the worldwide distribution rights to the
action/adventure films Beretta's Island and Double Cross through
a distribution agreement dated September 2, 1997, with Franco
Columbu, an officer and director of the Company (this agreement
also covered another film to be called Assault of the Lost
Goddess, which was not produced) (see Exhibit 10.2 of this Form
10-SB). The Company paid the sum of $75,000 for the rights to
Beretta's Island and $150,000 for the rights to Double Cross; the
gross receipts from the distribution from each film are to be
shared equally.
In addition, the Company has entered into a distribution
agreement dated January 30, 1997 with Pinoy Productions, Inc.
covering the martial arts film The Process (Arthur Birzneck, an
officer and director of the Company, is also President of that
company) (see Exhibit 10.3 to this Form 10-SB). The Company paid
the sum of $100,000 for the rights to The Process; the gross
receipts are to be shared as follows: (a) on gross receipts to
$250,000 U.S.: 100% to the Company; (b) on gross receipts between
$250,000 U./S. and $1,000,000 U.S.: 75% to the Company and 25% to
the licensor; (c) on gross receipts between $1,000,000 U.S. and
$2,500,000 U.S.: 80% to the Company and 20% to the licensor; and
(d) on gross receipts above $2,500,000 U.S.: 85% to the Company
and 15% to the licensor. As yet, the Company has not made any
actual distribution of these films.
Beretta's Island stars Franco Columbu (MR. OLYMPIA) and Ken
Kercheval with a special appearance by Arnold Schwartzenegger.
Double Cross stars Franco Columbu, William Smith (Conan), Frank
Stallone and Barbara Niven. The Process stars and is directed by
Ernie Reyes, Jr. (Red Sonja, Ninja Turtles I & II), Cori Nemec
(Drop Zone) and Ernie Reyes, Sr. (Surf Ninjas).
Although the Company is, at the moment, focused on the
production, co-production and acquisition of low to medium budget
action films, it is also within its mandate to branch out into
similar genres of television programming as well as documentaries
and docudramas within budgetary constraints. Longer-range
projects include the acquisition of a movie studio project in
Sardinia, Italy, the formation or acquisition of a domestic video
label, and acquisition of a music division. However, such
projects are only possibilities and may not be realized. The
Company does not currently have any agreements, commitments, or
understandings to make any acquisitions.
(1) The Motion Picture Industry.
The business of the motion picture industry may be broadly
divided into two major segments: production, involving the
development, financing and making of motion pictures, and
distribution, involving the promotion and exploitation of
completed motion pictures in a variety of media.
Historically, the largest companies, the so-called "Majors" and
"mini-Majors," have dominated the motion picture industry by both
producing and distributing a majority of the motion pictures
which generate significant box office receipts. Over the past
decade, however, "Independents" or smaller film production and
distribution companies, such as the Company, have played an
increasing role in the production and distribution of motion
pictures to fill the increasing worldwide demand for filmed
entertainment product.
The Majors (and mini-Majors) include Universal Pictures, Warner
Bros. Pictures, Metro-Goldwyn-Mayer Inc., Twentieth Century Fox
Film Corporation, Paramount Pictures Corporation, Sony Pictures
Entertainment (including Columbia Pictures, TriStar Pictures and
Triumph Releasing) and The Walt Disney Company (Buena Vista
Pictures, Touchstone Pictures and Hollywood Pictures). Generally,
the Majors own their own production studios (including lots,
sound stages and post-production facilities), have nationwide or
worldwide distribution organizations, release pictures with
direct production costs generally ranging from $25,000,000 to
$75,000,000, and provide a continual source of pictures to film
exhibitors. In addition, some of the Majors have divisions which
are promoted as "independent" distributors of motion pictures.
These "independent" divisions of Majors include Miramax Films (a
division of The Walt Disney Company), Sony Classics (a division
of Sony Pictures), The Samuel Goldwyn Company (a division of
Metro-Goldwyn-Mayer), October Films (a division of Universal),
New Line (a division of Time Warner) and its Fine Line
distribution label, and Republic Pictures (a division of Viacom).
In addition to the Majors, the Independents engaged primarily in
the distribution of motion pictures produced by companies other
than the Majors include, among others, Trimark Holdings and
Artisan Entertainment. The Independents typically do not own
production studios or employ as large a development or production
staff as the Majors.
The Process, Beretta's Island, and Double Cross are
termed "independent feature films". This means that the movies
were produced without the initial backing of a major studio.
During the past decade independents enjoyed cash support from
major studios. With the resurgence of independent filmmaking,
production companies are gearing up again and independent
distributors are returning to the market.
The motion picture industry recently completed its second
straight record-breaking year both in the US and overseas. In
1999, U.S. ticket sales totaled $7.5 billion, up from $6.95
billion in 1998 (Associated Press, Dec. 28, 1999). 1999 ticket
sales of roughly 1.5 billion were the highest in 40 years.
Domestic box office totals for the first quarter of 2000 have
already exceeded the same period last year by 10.1% or $135
million (AC Neilsen EDI, Inc.).
In the US, sixteen new releases surpassed the $100 million mark
led by the latest "Star Wars" episode, "The Phantom Menace"
(Variety). Also, topped by "The Phantom Menace", 18 films
scored more than $100 million at the overseas box office during
1999 (Hollywood Reporter).
It was a good year for smaller films as the independent feature
"The Blair Witch Project" led the way with domestic box office
receipts of $141 million and an international box office of $79
million (Variety). Other low budget features such as "American
Beauty", "Being John Malkovich" and "Boys Don't Cry" left their
mark both at the box office and at the Academy Awards.
This strong performance has been felt at all levels of the film
industry, especially this year's American Film Market in Santa
Monica, California. For an increasing number of international
buyers and sellers at this year's AFM, there is a feeling that
countries around the globe are again hungry for product and
actually buying it (Variety, March 1,2000). Although the movie
industry has experienced substantial recent growth, there is no
assurance that the Company will participate in any future growth
in this industry.
(2) Motion Picture Production And Financing.
The production of a motion picture usually involves four steps:
development, pre-production, production and post-production. The
development stage includes developing a concept internally, or
obtaining an original screenplay or a screenplay based on a pre-
existing literary work, or acquiring and rewriting a screenplay.
Creative personnel may be contacted to determine availability and
for planning the timing of the project, or in some cases actually
hired. In pre-production, a budget is prepared, the remaining
creative personnel, including a director, actors and various
technical personnel are hired, shooting schedules and locations
are planned and other steps necessary to prepare for principal
photography are completed. Production is the principal
photography of the project and generally continues for a period
of not more than three months. In post-production, the film is
edited and synchronized with music and dialogue and, in certain
cases, special effects are added. The final edited synchronized
product, the negative, is used to manufacture release prints
suitable for public exhibition.
The production of a motion picture requires the financing of the
direct and indirect overhead costs of production. Direct
production costs include film studio rental, cinematography,
post-production costs and the compensation of creative and other
production personnel. Distribution costs (including costs of
advertising and release prints) are not included in direct
production costs.
The Majors generally have sufficient cash flow from their motion
picture and related activities, or in some cases, from unrelated
businesses (e.g., theme parks, publishing, electronics, and
merchandising) to pay or otherwise provide for their production
costs. Overhead costs are, in substantial part, the salaries and
related costs of the production staff and physical facilities
which the Majors maintain on a full-time basis. The Majors often
enter into contracts with writers, producers and other creative
personnel for multiple projects or for fixed periods of time.
Independents generally avoid incurring substantial overhead costs
by hiring creative and other production personnel and retaining
the other elements required for pre-production principal
photography and post-production activities only on a project-by-
project basis. Unlike the Majors, Independents also typically
finance their production activities from various sources,
including bank loans, "pre-sales," equity offerings and joint
ventures. Independents generally attempt to complete their
financing of a motion picture production prior to commencement of
principal photography, at which point substantial production
costs begin to be incurred and require payment.
"Pre-sales" are often used by Independents to finance all or a
portion of the direct production costs of a motion picture. Pre-
sales consist of fees or advances paid or guaranteed to the
producer by third parties in return for the right to exhibit the
completed motion picture in theatres or to distribute it in home
video, television, international or other ancillary markets.
Independents with distribution capabilities may retain the right
to distribute the completed motion picture either domestically or
in one or more international markets. Other independents may
separately license theatrical, home video, television,
international and other distribution rights among several
licensees. Payment commitments in a pre-sale are typically
subject to delivery and to the approval of a number of
prenegotiated factors, including script, production budget, cast
and director.
Both Majors and Independents often acquire motion pictures for
distribution through an arrangement known as a negative pickup"
under which the Major or Independent agrees to acquire from
another production company some or all rights to a film upon its
completion. The Independent often finances production of the
motion picture pursuant to financing arrangements with banks or
other lenders wherein the lender obtains a security interest in
the film and in the Independent's rights under its distribution
arrangement. When the Major or Independent "picks up" the
completed motion picture, it may assume some or all of the
production financing indebtedness incurred by the production
company in connection with the film. In addition, the Independent
is often paid a production fee and is granted a participation in
the profits from distribution of the motion picture.
Both Majors and Independents often grant third-party
participations in connection with the distribution and production
of a motion picture. Participations are contractual rights of
actors, directors, screenwriters, producers, owners of rights and
other creative and financial contributors entitling them to share
in revenues or profits (as defined in the respective agreements)
from a particular motion picture. Except for the most sought-
after talent, participations are generally payable only after all
distribution and marketing fees and costs, direct production
costs (including overhead) and financing costs are recouped by
the producer in full.
(3) Motion Picture Distribution.
Distribution of a motion picture involves the domestic and
international licensing of the picture for (i) theatrical
exhibition, (ii) home video, (iii) presentation on television,
including pay-per-view, video-on-demand, satellites, pay cable,
network, basic cable and syndication, (iv) non-theatrical
exhibition, which includes airlines, hotels, armed forces
facilities and schools and (v) marketing of the other rights in
the picture, which may include books, CD-ROMs, merchandising and
soundtrack recordings.
Theatrical Distribution and Exhibition. Motion pictures are often
exhibited first in theatres open to the public where an admission
fee is charged. Theatrical distribution involves the manufacture
of release prints; licensing of motion pictures to theatrical
exhibitors; and promotion of the motion picture through
advertising and promotional campaigns. The size and success of
the promotional and advertising campaign may materially affect
the revenues realized from its theatrical release, generally
referred to as "box office gross." Box office gross represents
the total amounts paid by patrons at motion picture theatres for
a particular film, as determined from reports furnished by
exhibitors. The ability to exhibit films during summer and
holiday periods, which are generally considered peak exhibition
seasons, may affect the theatrical success of a film. Competition
among distributors to obtain exhibition dates in theatres during
these seasons is significant. In addition, the costs incurred in
connection with the distribution of a motion picture can vary
significantly depending on the number of screens on which the
motion picture is to be exhibited and the ability to exhibit
motion pictures during peak exhibition seasons. Similarly, the
ability to exhibit motion pictures in the most popular theatres
in each area can affect theatrical revenues. Exhibition
arrangements with theatre operators for the first run of a film
generally provide for the exhibitor to pay the greater of 90% of
ticket sales in excess of fixed amounts relating to the theatre's
costs of operation and overhead, or a minimum percentage of
ticket sales which varies from 40% to 70% for the first week of
an engagement at a particular theatre, decreasing each subsequent
week to 25% to 30% for the final weeks of the engagement. The
length of an engagement depends principally on the audience
response to the film.
Home Video. The home video distribution business involves the
promotion and sale of videocassettes and videodiscs to video
retailers (including video specialty stores, convenience stores,
record stores and other outlets), which then rent or sell the
videocassettes and videodiscs to consumers for private viewing.
The home video marketplace now generates total revenues greater
than the domestic theatrical exhibition market.
Major feature films are usually scheduled for release in the home
video market four to six months after theatrical release to
capitalize on the recent theatrical advertising and publicity for
the film. Promotion of new home video releases is generally
undertaken during the nine to twelve weeks before the home video
release date. Videocassettes of feature films are generally sold
to domestic wholesalers on a unit basis. Unit-based sales
typically involve the sales of individual videocassettes to
wholesalers or distributors at $50.00 to $60.00 per unit and
generally are rented by consumers for fees ranging from $1.00 to
$5.00 per day (with all rental fees retained by the retailer).
Wholesalers who meet certain sales and performance objectives may
earn rebates, return credits and cooperative advertising
allowances. Selected titles including certain made-for-video
programs, are priced significantly lower to encourage direct
purchase by consumers. The market for direct sale to consumers is
referred to as the "priced-for-sale" or "sell-through" market.
Technological developments, including videoserver and compression
technologies which regional telephone companies and others are
developing, and expanding markets for DVD and laser discs, will
make competing delivery systems economically viable and will
significantly impact the home video market generally and, as a
consequence, the Company's home video revenues.
Pay-per-view. Pay-per-view television allows cable television
subscribers to purchase individual programs, primarily recently
released theatrical motion pictures, sporting events and music
concerts, on a "per use" basis. The fee a subscriber is charged
is typically split among the program distributor, the pay- per-
view operator and the cable operator.
Pay Cable. The domestic pay cable industry (as it pertains to
motion pictures) currently consists primarily of HBO/Cinemax,
Showtime/The Movie Channel, Encore/Starz and a number of regional
pay services. Pay cable services are sold to cable system
operators for a monthly license fee based on the number of
subscribers receiving the service. These pay programming services
are in turn offered by cable system operators to subscribers for
a monthly subscription fee. The pay television networks generally
acquire their film programming by purchasing the distribution
rights from motion picture distributors.
Non-Theatrical Markets. In addition to the distribution media
described above, a number of sources of revenue exist for motion
picture distribution through the exploitation of other rights,
including the right to distribute films to airlines, schools,
libraries, hotels, armed forces facilities and hospitals.
International Markets. The worldwide demand for motion pictures
has expanded significantly as evidenced by the development of new
international markets and media. This growth is primarily driven
by the overseas privatization of television stations,
introduction of direct broadcast satellite services, growth of
home video and increased cable penetration.
(4) Motion Picture Acquisition.
In addition to its own production activities, the Company
continually seeks to acquire rights to films and other
programming from Independent film producers, distribution
companies and others in order to maximize the number of films it
can distribute in the emerging new delivery systems. To be
successful, the Company must locate and track the development and
production of numerous independent feature films.
Types of Motion Pictures Acquired. The Company generally seeks to
produce or acquire motion pictures of the action and
action/adventure genres which will individually appeal to a
targeted audience. The Company will be very selective in
acquiring higher budget (over $10,000,000) films because of the
interest that the Majors have shown in acquiring such films, and
the associated competition and higher production advances,
minimum guarantees and other costs. The Company will acquire
projects when it believes it can limit its financial risk on such
projects through, for example, significant presales, and when it
believes that a project has significant marketability. In most
cases, the Company will attempt to acquire rights to motion
pictures with a recognizable marquis "name" personality with
public recognition, thereby enhancing promotion of the motion
pictures in the home video or international markets. The Company
believes that this approach increases the likelihood of producing
a product capable of generating positive cash flow, ancillary
rights income and the possibility of a theatrical release.
Methods of Acquisition. The Company will typically acquires films
on either a "pick-up" basis or a "pre-buy" basis. The "pick-up"
basis refers to those films in which the Company acquires
distribution rights following completion of most or all of the
production and post-production process. These films will
generally be acquired after management of the Company has viewed
the film to evaluate its commercial viability.
The "pre-buy" basis refers to films in which the Company will
acquire distribution rights prior to completion of a substantial
portion of production and post-production. Management's
willingness to acquire films on a pre-buy basis is based upon
factors generally including the track record and reputation of
the picture's producer, the quality and commercial value of the
screenplay, the "package" elements of the picture, including the
director and principal cast members, the budget of the picture
and the genre of the picture. Before making an offer to acquire
rights in a film on a pre-buy basis, the Company may work with
the producer to modify certain of these elements. Once the
modifications are considered acceptable, the Company's obligation
to accept delivery and make payment will be conditioned upon
receipt of a finished film conforming to the script reviewed by
the Company and other specifications considered important by the
Company.
Sources of Distribution Rights. Typically, projects will be
submitted directly to the Company for consideration. The Company
will rely upon the personal contacts of its senior officers which
have been generated through their prior business and personal
dealings with Majors, other Independents, legal and accounting
firms, business management firms, talent agencies, production
lenders and personal managers who are actively involved in the
production community.
Acquisition Process. If the Company locates a motion picture
project which it believes satisfies its criteria, the Company may
pay an advance or a guaranteed minimum payment conditioned upon
delivery of a completed film ("minimum guarantee") against a
share or participation in the revenue actually received by the
Company from the exploitation of a film in each licensed media.
The minimum guarantee is generally paid prior to the film's
release. Typically, the Company will recoup the minimum guarantee
and certain other amounts from the distribution revenues realized
by the Company prior to paying any additional revenue
participation to the production company.
Film Library. The Company's distribution rights, which may
include either worldwide, foreign, or domestic rights, will
generally range from an initial licensing cycle of seven to 21
years to perpetuity.
(5) Feature Film Production.
The Company intends to produce one or more low-budget films each
year. The Company generally intends to retain distribution
rights for licensing to third parties internationally. The
Company's films generally will be distributed by third parties
domestically or are limited to international distribution. In
unique circumstances, the Company may undertake limited domestic
distribution or co-distribution activities.
The Company's feature film strategy generally will be to develop
and produce feature films when the production budgets for the
films are expected to be substantially covered through a
combination of pre-sales, output arrangements, equity
arrangements and production loans with "gap" financing. To
further limit the Company's financing risk or to obtain
production loans, the Company often intends to purchase
completion bonds to guarantee the completion of production.
ITEM 2. PLAN OF OPERATION.
(a) Twelve Month Plan of Operation.
The following discussion should be read in conjunction with the
financial statements of the Company and notes thereto contained
elsewhere in this report. Also, please refer to the subsequent
section entitled Risk Factors Connected with Plan of Operation.
For the period from the Company's inception through
December 31, 1999, there were no revenues and operating
activities related primarily to establishing the management
and operating infrastructure. The Company created the ability
to acquire and license worldwide or sell distribution rights
to independently produced feature films. The Company can
obtain rights to motion pictures at various stages of completion
(either completed, in production or in development) and licenses
distribution rights (including video, pay television, free
television, satellite and other ancillary rights) of motion
pictures to various sub-distributors in the United States and in
foreign markets.
The Company has a limited operating history. The
Company must establish and maintain distribution on current
rights to motion pictures, implement and successfully execute
its business and marketing strategy, provide superior
distribution of motion pictures, anticipate and respond
to competitive developments and attract and retain qualified
personnel. There is no assurance that the Company will be
successful in addressing these needs.
Film costs represent a major component of the Company's
assets. Film costs represent those costs incurred in the
acquisition and distribution of motion pictures or in the
acquisition of distribution rights to motion pictures. This
includes minimum guarantees paid to producers or other
owners of film rights, recoupable distribution and production
costs. The Company will amortize film costs using the
individual film forecast method under which film costs are
amortized for each film in the ratio that revenue earned in the
current period for such film bears to management's estimate of
the total revenue to be realized from all media and markets for
such film. The Company currently has not generated revenues
from such film costs, however, management believes that
distribution will commence in the early part of the year 2000.
Net income in future years is in part dependent upon the
Company's amortization of its film costs and may be
significantly affected by periodic adjustments in such amortization.
The Company typically acquires distribution rights in a
motion picture for a specified term in one or more
territories and media. In some circumstances, the Company
also acquires the copyright to the motion picture. The
arrangements the Company enters into to acquire rights may
include the Company agreeing to pay an advance or minimum
guarantee for the rights acquired and/or agreeing to advance
print and advertising costs, obligations which are independent
of the actual financial performance of the motion picture
being distributed. The risks incurred by the Company
dramatically increase to the extent the Company takes such
actions.
The Company also incurs significant risk to the
extent it engages in development or production activities
itself. The Company may, in certain circumstances, reduce
some of the foregoing risks by sub-licensing certain
distribution rights in exchange for minimum guarantees from
sub-licensees such as foreign sub-distributors. The investment
by the Company in a motion picture includes the cost of
acquisition of the distribution rights (including any
advance or minimum guarantee paid to the producer), the amount of
the production financed, and the marketing and distribution costs
borne.
General and administrative expenses consist of related general
corporate functions, including marketing expenses, professional service
expenses and travel. The Company expects general and administrative
expenses to increase as it commences to promote and market its motion picture
distribution rights.
Since inception, the Company has financed operations
primarily through private placements of common stock. The
Company has significant ongoing liquidity needs to support
its existing business and continued growth. The Company may
seek additional funding through public or private financing or
other arrangements prior to such time. Adequate funds may not be
available when needed or may not be available on favorable
terms. If funding is insufficient at any time in the future,
the Company may be unable to develop or enhance its service
offering, take advantage of business opportunities or respond
to competitive pressures, any of which could have a negative
impact on the business, operating results and financial
condition.
Net cash used in operating activities for the year ended
December 31, 1999 was approximately $113,000. The net cash used
in operating activities can be substantially attributed to the
net loss incurred to date. Net cash provided by financing
activities was approximately $115,000 for the year ended
December 31, 1999 resulting from the issuance of common stock
through private placements.
Over the next 12 months the Company will continue to attend all
major sales markets to sell its film products. The Company's
existing capital will not be sufficient to meet the Company's
cash needs, including costs of its registration and complying
with its continuing reporting obligations under the Securities
Act of 1934. Accordingly, additional capital will be required.
(b) Risk Factors Connected with Plan of Operation.
Limited Operations.
The Company has only limited operations and is subject to all the
risks inherent in the creation of a new business. Since the
Company's principal activities to date have been limited to
organizational activities and prospect development, it has no
record of any revenue-producing operations. Consequently, there
is only a limited operating history upon which to base an
assumption that the Company will be able to achieve its business
plans. In addition, the Company has only limited assets. As a
result, there can be no assurance that the Company will generate
significant revenues in the future; and there can be no assurance
that the Company will operate at a profitable level. If the
Company is unable to obtain customers and generate sufficient
revenues so that it can profitably operate, the Company's
business will not succeed.
Adequacy of Funding.
Current funds available to the Company will not be adequate for
it to be competitive in the areas in which it intends to operate.
Therefore, the Company will need to raise additional funds in
order to fully implement its business plan. The Company will
attempt to raise approximately $1.5 million in additional funds
over the next 12 months through a private placement for
production of its next feature film. However, there can be no
assurance that the Company will be successful in raising such
additional funds. Regardless of whether the Company's cash
assets prove to be inadequate to meet the Company's operational
needs, the Company might seek to compensate providers of
services by issuance of stock in lieu of cash.
The Company's continued operations therefore will depend upon its
ability to raise additional funds through bank borrowings, equity
or debt financing. There is no assurance that the Company will
be able to obtain additional funding when needed, or that such
funding, if available, can be obtained on terms acceptable to the
Company. If the Company cannot obtain needed funds, it may be
forced to curtail or cease its activities. If additional shares
were issued to obtain financing, current shareholders may suffer
a dilutive effect on their percentage of stock ownership in the
Company.
Competition.
The Company may experience substantial competition in its
efforts to locate and attract customers for its products. Many
competitors in the motion picture industry have greater
experience, resources, and managerial capabilities than the
Company and may be in a better position than the Company to
obtain access to attractive products. There are a number of
larger companies which will directly compete with the Company.
Such competition could have a material adverse effect on the
Company' profitability or viability.
Influence of Other External Factors.
The motion picture industry in general is a speculative venture
necessarily involving some substantial risk. There is no certainty
that the expenditures to be made by the Company will result in
commercially profitable business. The marketability of its
products will be affected by numerous factors beyond the control
of the Company. These factors include market fluctuations, and
the general state of the economy (including the rate of
inflation, and local economic conditions), which can affect
peoples' discretionary spending. Factors which leave less money
in the hands of potential customers of the Company will likely
have an adverse effect on the Company. The exact effect of these
factors cannot be accurately predicted, but the combination of
these factors may result in the Company not receiving an adequate
return on invested capital.
Regulatory Factors.
Possible future consumer legislation, regulations and actions
could cause additional expense, capital expenditures, restrictions
and delays in the activities undertaken in connection with the
business of the Company, the extent of which cannot be predicted.
The exact affect of such legislation cannot be predicted until it
is proposed.
Reliance on Management.
The Company's success is dependent upon the hiring and retention
of key personnel. None of the officers or directors has any
employment or non-competition agreement with the Company.
Therefore, there can be no assurance that these personnel will
remain employed by the Company. Should any of these individuals
cease to be affiliated with the Company for any reason before
qualified replacements could be found, there could be material
adverse effects on the Company's business and prospects.
In addition, all decisions with respect to the management of
the Company will be made exclusively by the officers and
directors of the Company. Investors will only have rights
associated with minority ownership interest rights to make
decision which effect the Company. The success of the Company,
to a large extent, will depend on the quality of the directors
and officers of the Company. Accordingly, no person should
invest in the Shares unless he is willing to entrust all aspects
of the management of the Company to the officers and directors.
Conflicts of Interest.
The officers and directors have other interests to which they
devote time, either individually or through partnerships and
corporations in which they have an interest, hold an office, or
serve on boards of directors, and each will continue to do so
notwithstanding the fact that management time may be necessary to
the business of the Company. As a result, certain conflicts of
interest may exist between the Company and its officers and/or
directors which may not be susceptible to resolution.
In addition, conflicts of interest may arise in the area of
corporate opportunities which cannot be resolved through arm's
length negotiations. All of the potential conflicts of interest
will be resolved only through exercise by the directors of such
judgment as is consistent with their fiduciary duties to the
Company. It is the intention of management, so as to minimize
any potential conflicts of interest, to present first to the
Board of Directors to the Company, any proposed investments for
its evaluation.
Forward-Looking Statements.
The foregoing Plan of Operation "forward looking statements"
within the meaning of Rule 175 under the Securities Act of 1933,
as amended, and Rule 3b-6 under the Securities Act of 1934, as
amended, including statements regarding, among other items, the
Company's business strategies, continued growth in the Company's
markets, projections, and anticipated trends in the Company's
business and the industry in which it operates. The words
"believe," "expect," "anticipate," "intends," "forecast,"
"project," and similar expressions identify forward-looking
statements. These forward-looking statements are based largely
on the Company's expectations and are subject to a number of
risks and uncertainties, certain of which are beyond the
Company's control. The Company cautions that these statements
are further qualified by important factors that could cause
actual results to differ materially from those in the forward
looking statements, including, among others, the following:
reduced or lack of increase in demand for the Company's products,
competitive pricing pressures, changes in the market price of
ingredients used in the Company's products and the level of
expenses incurred in the Company's operations. In light of these
risks and uncertainties, there can be no assurance that the
forward-looking information contained herein will in fact
transpire or prove to be accurate. The Company disclaims any
intent or obligation to update "forward looking statements."
Uncertainty Due to Year 2000 Problem.
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date
sensitive systems may recognize the year 2000 as 1900 or some
other date, resulting in errors when information using the year
2000 date is processed. In addition, similar problems may arise
in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue
may be experienced after January 1, 2000, and if not addressed,
the impact on operations and financial reporting may range from
minor errors to significant system failure which could affect the
Company's ability to conduct normal business operations. This
creates potential risk for all companies, even if their own
computer systems are Year 2000 compliant. It is not possible to
be certain that all aspects of the Year 2000 issue affecting the
Company, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
The Company currently believes that its systems are Year 2000
compliant in all material respects. The Company estimates that
it has incurred minimal costs of less than $10,000 related to its
Year 2000 initiative. Although management is not aware of any
material operational issues or costs associated with preparing
its internal systems for the Year 2000, the Company may
experience serious unanticipated negative consequences (such as
significant downtime for one or more of its suppliers) or
material costs caused by undetected errors or defects in the
technology used in its internal systems. Furthermore, the
purchasing patterns of customers may be affected by Year 2000
issues. The Company does not currently have any information
about the Year 2000 status of its potential material suppliers.
The Company's Year 2000 plans are based on management's best
estimates.
ITEM 3. DESCRIPTION OF PROPERTY.
The Registrant maintains executive offices at 10900 NE 8th
Street, Suite 900, Bellevue, Washington, 98004.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information regarding the
beneficial ownership of shares of the Company's common stock as
of March 31, 2000 (12,016,140 issued and outstanding) by (i) all
stockholders known to the Company to be beneficial owners of more
than 5% of the outstanding common stock; and (ii) all directors
and executive officers of the Company as a group:
Title of Name and Address of Amount of Percent of
Class Beneficial Owner Beneficial Class
Ownership (1)
Common Northwest Capital 2,605,520 21.68&
Stock Partners, L.L.C.
10900 N.E. 8th Street
Bellevue, WA 98004
Common Arthur Birzneck 424,500 3.53%
Stock 16766 16th Avenue
Surrey, British Columbia
V4P 2P7
Common Brent Nelson 165,750 1.38%
Stock 10900 N.E. 8th Street
Bellevue, WA 98004
Common Franco Columbu 68,750 0.57%
Stock 1732 South Sepulveda Blvd.
Los Angeles, CA 90025
Common David Gideon Thomas 0 0.00%
Stock 1732 South Sepulveda Blvd.
Los Angeles, CA 90025
Common John G. Smith 0 0.00%
Stock 1185 West Georgia Street
Suite 910
Vancouver, British Columbia
V6E 4E6
Common Shares of all directors and 3,264,520 27.17%
Stock executive officers as a
group (5 persons)
(1) Except as noted in footnote 2 below, each person has sole
voting power and sole dispositive power as to all of the shares
shown as beneficially owned by them
(2) This figure also includes the 2,605,520 shares owned by
Northwest Capital Partners, L.L.C. since Mr. Nelson is the
managing director of this firm.
ITEM 5. DIRECTORS, OFFICERS, PROMOTERS, AND CONTROL PERSONS.
The names, ages, and respective positions of the directors and
officers of the Company are set forth below. The Directors named
below will serve until the next annual meeting of the Company's
stockholders or until their successors are duly elected and have
qualified. Directors will be elected for a one-year term
at the annual stockholders' meeting. Officers will hold their
positions at the will of the board of directors, absent any
employment agreement, of which none currently exist or are
contemplated. There are no arrangements, agreements or
understandings between non-management shareholders and management
under which non-management shareholders may directly or
indirectly participate in or influence the management of the
Company's affairs. Messrs. Thomson, Columbu, and Smith joined
the Company as directors on May 1, 1999.
David Gideon Thomson, Chairman of the Board.
Mr. Gideon Thomson, age 62, is a British entertainment
consultant, executive and producer. He has been semi-retired for
the last five years. Prior to that, he held top management
positions including Managing Director of Polytel (Polygram's
film and TV division), Deputy Chairman of the Robert
Stigwood Organization and Chairman of Charisma Records and
Films. During his tenure at Polytel and Robert Stigwood, Mr.
Gideon Thomson was involved with many award-winning films
and television programs, including such films as Saturday Night
Fever and Grease; the stage production of Evita; McVicar;
and the acclaimed film, Too Far To Go for NBC New York. He
was also the executive producer of the feature film
Quadrophenia. He has been an advisor to many US, UK and other
European film and TV production and distribution companies.
Franco Columbu, Chief Executive Officer/Director.
Dr. Columbu, age 58, oversees all film and television activities
of the Company. Dr. Columbu's extensive career in
bodybuilding and powerlifting has earned him every major title
including the prestigious Mr. Olympia, Mr. World and Mr.
Universe titles. His connections in the film industry are
extensive, having appeared in film such as Pumping Iron, Stay
Hungry, Conan the Barbarian, Running Man, and Terminator. He has
produced two feature films, Beretta's Island and Doublecross,
through his production company Franco Columbu Productions, Inc.
He also has been featured in several national commercials and
been a guest on numerous talk shows. In addition to his
industry experience, Dr. Columbu maintains an active
chiropractic practice and consults with private individuals on
health concerns for over five years. From October 1997 to the
present, Mr. Columbu has also served as a Director of Westar
Arthur Birzneck, President/Director.
Mr. Birzneck, age 31, has been with the Company since its
inception and is responsible for overseeing all operating
activities and the development of its domestic and international
ventures. He is an executive producer of Westar's current
feature film, The Process. Prior to Eclipse, Mr. Birzneck spent
three years as president of Bask Entertainment Inc., a
Vancouver, Canada based production company. He has
participated financially in several film projects, most
recently as an investor in Canadian-based HPP Production's
Hero of the Planet. Mr. Birzneck also has been involved in
promoting numerous Hip-Hop music groups. As a principal of MB
Productions, his clients included Hip Hop artists Candy Man,
Lighter Shade of Brown and the Rascalz. From October 1997 to the
present, Mr. Birzneck has also served as a Director of Westar
John G. Smith, Vice President Legal Affairs/Director.
Mr. Smith is a Cambridge, England-educated lawyer, who has
practiced corporate and commercial law in Western Canada for more
than 30 years, with a specialization in entertainment and
communications law. He is a principal, co-owner, and
corporate counsel of The Beacon Group of Companies that manages
the production, marketing, distribution and financing of
motion pictures, studio projects and entertainment software.
He is a member of the Canadian Bar Association and the Law
Society of British Columbia; and was previously a governor of
the Canadian Tax Foundation and a director of the BC Motion
Picture Foundation, as well as a variety of performing
arts organizations. From January 1998 to the present, Mr. Smith
has also served as a Director of Westar
Brent Nelson, Director.
Mr. Nelson, age 38, has been with the Company since its
inception. He has more than 15 years experience in corporate
and project financing and serves on the boards of several
companies in the United States and abroad: Palmworks, Inc.,
CybeRecord, Inc., Interactive Objects, Inc., International
Digital Technology, Inc., Mobile PET Systems, Inc. and Polar
Cargo Systems, Inc. Mr. Nelson has participated financially
in several film and music industry projects, including
MB Productions and the Canadian Hip Hop label Masiv Music.
Approximately 5 years ago, he founded and became Managing
Director of Northwest Capital Partners, L.L.C. a Bellevue,
Washington based venture capital company. Northwest Capital is
very active in both private and public financing on an
international basis. Mr. Nelson also is executive producer of
the Company's current feature film The Process. During 1997, Mr.
Nelson also served as a Director of Westar.
ITEM 6. EXECUTIVE COMPENSATION.
(a) The current officers and directors have not received
any compensation to date. They will not be remunerated until the
Company turns profitable.
(b) There are no annuity, pension or retirement benefits
proposed to be paid to officers, directors, or employees of the
Company in the event of retirement at normal retirement date as
there is no existing plan provided for or contributed to by the
Company.
(c) No remuneration is proposed to be paid in the future
directly or indirectly by the Company to any officer or director
since there is no existing plan which provides for such payment,
including a stock option plan.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Other than as set forth below, there are no relationships,
transactions, or proposed transactions to which the Company was
or is to be a party, in which any of the named persons set forth
previously had or is to have a direct or indirect material
interest.
There was a promissory note for $442,285 payable to
Northwest Capital Partners, L.L.C., a shareholder of the Company
controlled by Brent Nelson, a Director of the Company. The note
was unsecured and payable on demand. In October 1999 the Company
issued 2,305,520 shares of Common Stock pursuant to Rule 504
Regulation D of the Securities Act of 1933 in satisfaction of
that note.
Northwest Capital Partners, L.L.C. has advanced the Company
the sum of $51,165. There are no specific repayment terms on
this advance.
The Company entered into a marketing agreement with Westar
Entertainment, Inc., on January 1, 1998 under which this firm is
providing marketing for the Company's products both domestically
and worldwide (see Exhibit 10.1 to this Form 10-SB). At the time
this agreement was entered, and to this date, Messrs. Columbu,
Birzneck, and Nelson are directors of Westar Entertainment, Inc.;
Mr. Smith became a director at a later time. Currently, Messrs.
Birzneck and Columbu each own approximately 40% of the issued and
outstanding shares of Westar Entertainment, Inc.; Messrs. Smith
and Nelson each currently own approximately 10% of such shares.
The Company has entered into distribution agreement with Mr.
Columbu, an officer and director of the Company, covering the
films Beretta's Island and Double Cross (see Exhibit 10.2 to this
Form 10-SB). In addition, the Company has entered into a
distribution agreement with Pinoy Productions, Inc. covering the
film The Process (Mr. Birzneck, an officer and director of the
Company, is also President of that company) (see Exhibit 10.3 to
this Form 10-SB).
Certain of the officers and directors of the Company are engaged
in other businesses, either individually or through partnerships
and corporations in which they have an interest, hold an office,
or serve on a board of directors. As a result, certain conflicts
of interest may arise between the Company and its officers and
directors. The Company will attempt to resolve such conflicts of
interest in favor of the Company. The officers and directors of
the Company are accountable to it and its shareholders as
fiduciaries, which requires that such officers and directors
exercise good faith and integrity in handling the Company's
affairs. A shareholder may be able to institute legal action on
behalf of the Company or on behalf of itself and other similarly
situated shareholders to recover damages or for other relief in
cases of the resolution of conflicts is in any manner prejudicial
to the Company.
ITEM 8. DESCRIPTION OF SECURITIES.
General Description.
The authorized capital stock of the Company consists of
50,000,000 shares of common stock, par value $0.001 per
share, and 10,000,000 shares of preferred stock, par value
$0.001. The holders of the Shares: (a) have equal ratable rights
to dividends from funds legally available therefore, when, as,
and if declared by the Board of Directors of the Company; (b) are
entitled to share ratably in all of the assets of the Company
available for distribution upon winding up of the affairs of the
Company; and (c) are entitled to one non-cumulative vote per
share on all matters on which shareholders may vote at all
meetings of shareholders. These securities do not have any of the
following rights: (a) cumulative or special voting rights; (b)
preemptive rights to purchase in new issues of shares; (c)
preference as to dividends or interest; (d) preference upon
liquidation; or (e) any other special rights or preferences. In
addition, the Shares are not convertible into any other security.
There are no restrictions on dividends under any loan other
financing arrangements or otherwise. See a copy of the Articles
of Incorporation, and an amendment thereto, and Bylaws of the
Company, attached as Exhibits to this Form 10-SB. As of the date
of this Form 10-SB, the Company had 12,016,140 shares of common
stock issued and outstanding. No preferred stock has been issued
to date.
Non-Cumulative Voting.
The holders of Shares of Common Stock of the Company do not have
cumulative voting rights, which means that the holders of more
than 50% of such outstanding Shares, voting for the election of
directors, can elect all of the directors to be elected, if they
so choose. In such event, the holders of the remaining Shares
will not be able to elect any of the Company's directors.
Dividends.
The Company does not currently intend to pay cash dividends. The
Company's proposed dividend policy is to make distributions of
its revenues to its stockholders when the Company's Board of
Directors deems such distributions appropriate. Because the
Company does not intend to make cash distributions, potential
shareholders would need to sell their shares to realize a return
on their investment. There can be no assurances of the projected
values of the shares, nor can there be any guarantees of the
success of the Company.
A distribution of revenues will be made only when, in the
judgment of the Company's Board of Directors, it is in the best
interest of the Company's stockholders to do so. The Board of
Directors will review, among other things, the investment quality
and marketability of the securities considered for distribution;
the impact of a distribution of the investee's securities on its
customers, joint venture associates, management contracts, other
investors, financial institutions, and the company's internal
management, plus the tax consequences and the market effects of
an initial or broader distribution of such securities.
Possible Anti-Takeover Effects of Authorized but Unissued Stock.
The Company's authorized but unissued capital stock consists
of 37,983,860 Shares of common stock. One effect of the existence
of authorized but unissued capital stock may be to enable the
Board of Directors to render more difficult or to discourage an
attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest, or otherwise, and thereby to protect
the continuity of the Company's management. If, in the due
exercise of its fiduciary obligations, for example, the Board of
Directors were to determine that a takeover proposal was not in
the Company's best interests, such shares could be issued by the
Board of Directors without stockholder approval in one or more
private placements or other transactions that might prevent, or
render more difficult or costly, completion of the takeover
transaction by diluting the voting or other rights of the
proposed acquiror or insurgent stockholder or stockholder group,
by creating a substantial voting block in institutional or other
hands that might undertake to support the position of the
incumbent Board of Directors, by effecting an acquisition that
might complicate or preclude the takeover, or otherwise.
Transfer Agent.
The Company has engaged the services of Liberty Transfer Company,
191 New York Avenue, Huntington Station, New York 11743, to act
as transfer agent and registrar for the Company.
PART II.
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) Market Information.
From June 27, 1997 to November 5, 1999, the Registrant's common
stock was traded on the Over the Counter Bulletin Board. After
the latter date, the shares have been traded in the National
Quotation Bureau's Pink Sheets (symbol ECLE) and the range of
closing prices shown below is reported while trading on the
Bulletin Board and the Pink Sheets. The quotations shown reflect
inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ending on December 31, 2000
High Low
Quarter Ended March 31, 2000 1.37 0.47
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ending on December 31, 1999
High Low
Quarter Ended March 31, 1999 0.48 0.25
Quarter Ended June 30, 1999 0.37 0.25
Quarter Ended September 30, 1999 0.69 0.50
Quarter Ended December 31, 1999 * 1.00 0.19
* The shares only traded for 13 days in the fourth quarter.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended December 31, 1998
High Low
Quarter Ended March 31, 1998 0.75 0.50
Quarter Ended June 30, 1998 1.31 0.64
Quarter Ended September 30, 1998 1.50 0.38
Quarter Ended December 31, 1998 0.81 0.37
In order to qualify for relisting on the Bulletin Board, the
Registrant must comply with the new eligibility rules of the
Bulletin Board (that is, all listed companies must be reporting
companies), and accordingly the Registrant filed its Form 10-SB
Registration Statement with the Securities and Exchange
Commission on November 19, 1999. The Registrant is anticipating
that this Form 10-SB will clear all comments in the near future
and thereafter be promptly relisted on the Bulletin Board.
(b) Holders of Common Equity.
As of March 31, 2000, there were approximately 60 shareholders of
record of the Registrant's common stock.
(c) Dividends.
The Registrant has not declared or paid a cash dividend to
stockholders since it became a "C" corporation. The Board of
Directors presently intends to retain any earnings to finance
Registrant operations and does not expect to authorize cash
dividends in the foreseeable future. Any payment of cash
dividends in the future will depend upon the Registrant's
earnings, capital requirements and other factors.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Company has been threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Not Applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On April 11, 1997, the Company sold 2,000,000 (post reverse
split) shares to the 15 founding shareholders of the Company for
$0.01 per share (post reverse split), resulting in total proceeds
of $20,000.
On May 28, 1997, the Company sold 1,000,000 (post reverse
split) shares to 39 individual for $0.10 per share, (post reverse
split) resulting in total proceeds of $100,000. The shares did
not commence trading on the Bulletin Board until June 27, 1997.
Between November 19, 1998 and December 31, 1998, the Company
sold 215,000 (post reverse split) shares to 2 individuals for
$1.51 per share (post reverse split), resulting in total proceeds
of $325,407. This per share price was above the highest public
trading price of $0.87 during this period.
On January 1, 1999, the Registrant sold 24,125 (post reverse
split) shares of its common stock to 4 non-affiliates for $0.79
per share (post reverse split), resulting in total proceeds of
$19,000. The public trading price for the shares on this date
was $0.37.
On January 11, 1999, the Registrant sold 150,000 (post reverse split) shares
of its common stock to 2 non-affiliates for $1.00 per share (post reverse
split), for a total consideration of $150,000, and issued 15,000 (post
reverse split) shares of its common stock to a non-affiliate in
consideration of $15,000 for legal services rendered. The public trading
price of the shares on this date was $0.40.
On January 18, 1999, the Registrant issued 8,995
(post reverse split) shares of its common stock to a non-
affiliate in consideration of $8,995 for legal services rendered.
The public trading price of the shares on the last trading date
prior to this date was $0.50.
On April 4, 1999, the Registrant issued 7,500 (post reverse
split) shares of its common stock to 2 non-affiliates in
consideration of legal services rendered. The public trading
price of the shares on the last trading date before this date was
$0.44.
On April 5, 1999, the Registrant sold 6,000,000 (post
reverse split) shares of its common stock to 10 non-affiliates
for $0.01 per share (post reverse split), for a total
consideration of $60,000. This sale was done to being needed
capital into the Company, and the pricing of the shares was done
with a view to attracting this capital. The public trading price
of the shares on this date was $0.37.
On April 6, 1999, the Registrant issued 40,000 shares
of its common stock to a non-affiliate in consideration for legal
services rendered. The public trading price of the shares on
this date was $0.25.
On October 27, 1999, the Registrant issued 2,305,520
shares of restricted common stock to an affiliate in
consideration of cancellation of a promissory note in the amount
of $442,285. The public trading price of the share on the
nearest trading date was $0.25.
No commissions or fees were paid in connection with these
sales. All of the above sales, except for the last one, were
undertaken pursuant to the limited offering exemption from
registration under the Securities Act of 1933 as provided in Rule
504 under Regulation D as promulgated by the U.S. Securities and
Exchange Commission, and all the offerings were made to
sophisticated investors; that is, the investor either alone or
with his purchaser representative(s) has such knowledge and
experience in financial and business matters that he is capable
of evaluating the merits and risks of the prospective investment,
or the issuer reasonably believes immediately prior to making any
sale that such purchaser comes within this description (the last
sale was made under Rule 506 of Regulation D).
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
No director of the Company will have personal liability to the
Company or any of its stockholders for monetary damages for
breach of fiduciary duty as a director involving any act or
omission of any such director since provisions have been made in
the Articles of Incorporation limiting such liability (see
Exhibit 3.1 to this Form 10-SB). The foregoing provisions shall
not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or,
which involve intentional misconduct or a knowing violation of
law, (iii) under applicable Sections of the Nevada Revised
Statutes, (iv) the payment of dividends in violation of Section
78.300 of the Nevada Revised Statutes or, (v) for any transaction
from which the director derived an improper personal benefit.
The Articles of Incorporation and By-laws provide for
indemnification of the directors, officers, and employees of the
Company in most cases for any liability suffered by them or
arising out of their activities as directors, officers, and
employees of the Company if they were not engaged in willful
misfeasance or malfeasance in the performance of his or her
duties; provided that in the event of a settlement the
indemnification will apply only when the Board of Directors
approves such settlement and reimbursement as being for the best
interests of the Corporation (see Exhibit 3.2 to this Form 10-
SB). The Bylaws, therefore, limit the liability of directors to
the maximum extent permitted by Nevada law (Section 78.751).
The officers and directors of the Company are accountable to the
Company as fiduciaries, which means they are required to exercise
good faith and fairness in all dealings affecting the Company.
In the event that a shareholder believes the officers and/or
directors have violated their fiduciary duties to the Company,
the shareholder may, subject to applicable rules of civil
procedure, be able to bring a class action or derivative suit to
enforce the shareholder's rights, including rights under certain
federal and state securities laws and regulations to recover
damages from and require an accounting by management..
Shareholders who have suffered losses in connection with the
purchase or sale of their interest in the Company in connection
with such sale or purchase, including the misapplication by any
such officer or director of the proceeds from the sale of these
securities, may be able to recover such losses from the Company.
PART F/S.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Eclipse Entertainment Group, Inc.
Bellevue, Washington
We have audited the accompanying balance sheet of Eclipse
Entertainment Group, Inc. as of December 31, 1999, and the
related statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1999 and 1998. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Eclipse Entertainment Group, Inc. as of December 31, 1999, and
the results of its activities and cash flows for the years ended
December 31, 1999 and 1998 in conformity with generally accepted
accounting principles.
/s/ L.L. Bradford & Company
L.L. Bradford & Company
March 24, 2000
Las Vegas, Nevada
ECLIPSE ENTERTAINMENT GROUP, INC.
BALANCE SHEET
December 31, 1999
ASSETS
Cash $ 2,336
Film costs 1,109,895
Fixed assets, net 633
Other assets 685
Total assets $1,113,549
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities $ 89,312
Due to related parties 173,165
Total liabilities 262,477
Stockholders' equity
Preferred stock - $.001 par value,
10,000,000 shares authorized, no shares
issued -
Common stock - $.001 par value, 50,000,000
shares authorized, 12,016,140
shares issued and outstanding 12,016
Additional paid in capital 1,320,131
Accumulated deficit (481,075)
Total stockholders' equity 851,072
Total liabilities and stockholders' equity $1,113,549
The accompanying notes are an integral part of these financial
statements
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENTS OF OPERATIONS
For the For the
Year Ended Year Ended
December 31 December 31
1999 1998
Revenues $ - $ -
General and administrative
Expenses 142,227 268,786
Loss from operations (142,227) (268,786)
Provision for income taxes - -
Net loss $ (142,227) $ (268,786)
Basic and diluted loss per
common share $ (0.01) $ (0.08)
Weighted average number of
Common shares used in per share
Calculation $12,016,140 $3,465,000
The accompanying notes are an integral part of these financial
statements
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
Common Stock Additional Total
Accumu Stockholders
Number Paid-In lated Equity
of Amount Capital Deficit
Shares
Balance at
January 1, 1998 3,250,000 $ 3,250 $ 404,063 $ (70,062) $ 337,251
Issuance of
common stock
$1.51 weighted
average price
per share 215,000 215 325,407 - 325,622
Met loss - - - (268,786) (268,786)
Balance at
December 31, 1998 3,465,000 3,465 729,470 (338,848) 394,087
Issuance of
common stock
$0.02 weighted
average price
per share 6,205,620 6,206 109,219 - 115,425
Issuance of
common stock for
past services
1.04 40,000 40 41,462 - 41,502
Issuance of
common stock in
satisfaction of
a $442,285
promissory note 2,305,520 2,305 439,980 - 442,285
Net loss - - - (142,227) (142,227)
Balance at
December 31
1999 12,016,140 12,016 1,320,131 (481,075) 851,072
The accompanying notes are an integral part of these financial
statement
ECLIPSE ENTERTAINMENT GROUP, INC.
STATEMENTS OF CASH FLOWS
For the For the
Year Ended Year Ended
December 31 December 31
1999 1998
Cash flows from operating activities:
Net loss $ (142,227) $ (268,786)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 421 703
Services paid with common stock 41,502 -
Changes in operating assets and
liabilities:
Increase in film costs (133,420) (561,625)
Increase (decrease) in accounts
Payable and accrued liabilities 16,835 56,527
Increase in due to related
Parties 103,800 447,500
Net cash used by operating
Activities (113,089) (325,681)
Cash flows from financing
activities:
Proceeds from issuance of common
Stock 115,425 325,622
Net cash provided by financing
activities 115,425 325,622
Net increase (decrease) in cash 2,336 (59)
Beginning balance - 59
Ending balance 2,336 -
Noncash financing activities:
2,305,520 shares of common stock
issued in satisfaction
of promissory note 442,285 -
The accompanying notes are an integral part of these financial
statements
1. Organization and summary of significant accounting policies.
Organization - Eclipse Entertainment Group, Inc. (hereinafter
referred to as the "Company") was incorporated in the state of
Nevada in January 1997 to engage in the business of developing,
producing and marketing films for worldwide distribution. The
fiscal year ends on December 31.
Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Film costs and amortization - Film costs represent costs incurred
in the acquisition of distribution rights to motion pictures
which include advances, minimum guarantees paid to producers,
recoupable distribution and production costs, legal expenses,
interest and overhead costs. These costs have been capitalized in
accordance with Statement of Financial Accounting Standards No.
53 (SFAS 53). Film costs are amortized using the individual film
forecast method whereby expense is recognized in proportion to
current year revenues based upon management's estimate of future
revenues. Film costs are valued at the lower of unamortized cost
or estimated net realizable value. Revenue and cost forecasts
for films are regularly reviewed by management and revised when
warranted by changing conditions. When estimates of total
revenues and costs indicate that a film will result in an overall
loss, additional amortization will be provided to fully recognize
such loss.
Fixed assets - Fixed assets are stated at cost less accumulated
depreciation. Depreciation is provided principally on the
straight-line method over the estimated useful lives of the
assets, which are generally 5 to 7 years. The cost of repairs
and maintenance is charged to expense as incurred. Expenditures
for property betterments and renewals are capitalized. Upon sale
or other disposition of a depreciable asset, cost and accumulated
depreciation are removed from the accounts and any gain or loss
is reflected in other income (expense).
The Company periodically evaluates whether events and
circumstances have occurred that may warrant revision of the
estimated useful lives of fixed assets or whether the remaining
balance of fixed assets should be evaluated for possible
impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the fixed
assets in measuring their recoverability.
Loss per share - Primary and fully-diluted loss per share is
based on the weighted-average number of outstanding common shares
during the applicable period.
Comprehensive income - The Company has no components of other
comprehensive income. Accordingly, net income equals
comprehensive income for all periods.
See accompanying Report of Independent Certified Public Accountants
Advertising costs - Advertising costs incurred in the normal
course of operations are expensed accordingly. No advertising
costs were incurred for the years ended December 31, 1999 and
1998.
Income taxes - The Company accounts for its income taxes in
accordance with Statement of Financial Accounting Standards No.
109, which requires recognition of deferred tax assets and
liabilities for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment
date.
Impairment of long-lived assets to be disposed - The Company
continually monitors events and changes in circumstances that
could indicate carrying amounts of long-lived assets may not be
recoverable. When such events or changes in circumstances are
present, the Company assesses the recoverability of long-lived
assets by determining whether the carrying value of such assets
will be recovered through undiscounted expected future cash
flows. If the total of the future cash flows is less than the
carrying amount of those assets, the Company recognizes an
impairment loss based on the excess of the carrying amount over
the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or the fair value
less costs to sell.
2. Film costs.
Film costs totalling $1,109,895 at December 31, 1999 consist of
completed but not released films. As of December 31, 1999 and
1998, amortization expenses have not been recorded since revenues
have been not recognized for these periods. Management believes
that these capitalized film costs will provide future revenue
benefits. Accordingly, these costs will be amortized in the
related periods when such revenues are generated in accordance
with SFAS 53 as discussed in Note 1.
3. Fixed assets.
Fixed assets consist primarily of office equipment with a
historical cost of $2,196 and accumulated depreciation of $1,564
at December 31, 1999.
4. Related party transactions.
Due to related parties at December 31, 1999 consist of the
following:
See accompanying Report of Independent Certified Public Accountants
Advances payable to an entity controlled by
an officer and shareholder of the Company represent
advances, unsecured, bearing no interest, and due on
demand $ 51,165
Promissory note payable to a shareholder, unsecured,
bearing interest at 8%, and due on demand 115,000
Total due to related parties $ 173,165
5. Common stock.
On April 5, 1999, the Company's Board of Directors adopted a
resolution whereby it approved a 1 for 4 reverse stock split of
the issued and outstanding shares of common stock. Accordingly,
the accompanying financial statements have been retroactively
restated to reflect the 1-for-4 reverse stock split as if such
reverse stock split occurred as of the Company's date of
inception.
6. Income taxes.
The Company did not record any current or deferred income tax
provision or benefit for any of the periods presented due to
continuing net losses and nominal differences.
7. Fair value of financial instruments.
The carrying amounts of cash, accounts payable, accrued
liabilities, and due to related parties approximate fair value
because of the short-term maturity of these instruments.
8. Common stock.
In October 1999, the Company issued 125,000 shares of common
stock in error to an unrelated company. The Company has since
placed a stop on the 125,000 shares issued. Accordingly, the
12,016,140 shares of common stock issued and outstanding as of
December 31, 1999 does not reflect the 125,000 shares since these
shares were issued in error and a stop has been placed.
See accompanying Report of Independent Certified Public Accountant
PART III.
ITEMS 1 and 2. INDEX TO EXHIBITS; DESCRIPTION OF EXHIBITS.
The Exhibits required by Item 601 of Regulation S-B, and an index
thereto, are attached.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Company caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized.
ECLPISE ENTERTAINMENT GROUP, INC.
Date: April 26, 2000 By: /s/ Arthur Birzneck
Arthur Birzneck, President
Special Power of Attorney
The undersigned constitute and appoint Arthur Birzneck their true
and lawful attorney-in-fact and agent with full power of
substitution, for him and in his name, place, and stead, in any
and all capacities, to sign any and all amendments, including
post-effective amendments, to this Form 10-SB Registration
Statement, and to file the same with all exhibits thereto, and
all documents in connection therewith, with the U.S. Securities
and Exchange Commission, granting such attorney-in-fact the full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorney-in-fact may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this registration statement has been signed below by the
following persons on behalf of the Company and in the capacities
and on the dates indicated:
Signature Title Date
/s/ David Gideon Thomson Chairman of the Board April 26, 2000
David Gideon Thomson
/s/ Franco Columbu Chief Executive Officer/ April 26, 2000
Franco Columbu Director
/s/ Arthur Birzneck President/Director April 26, 2000
Arthur Birzneck
/s/ John G. Smith Vice President Legal April 26, 2000
John G. Smith Affairs/Director
/s/ Brent Nelson Director April 26, 2000
Brent Nelson
EXHIBIT INDEX
Exhibit Method of
Number Description Filing
3.1 Articles of Incorporation See Below
3.2 Bylaws See Below
10.1 Distribution Agreement with Westar
Entertainment, Inc. (see Exhibit 10 to the
Form 10-KSB filed on April 11, 2000) Incorporated
by Reference
10.2 Agreement (Franco Columbu) See Below
10.3 Distribution Agreement See Below
24 Special Power of Attorney See Signature
Page
27 Financial Data Schedule See Below
ARTICLES OF INCORPORATION
OF
ECLIPSE ENTERTAINMENT GROUP, INC.
The undersigned, to form a Nevada corporation, CERTIFIES
THAT:
I. NAME: The name of the corporation is: ECLIPSE ENTERTAINMENT
GROUP, INC.
II. REGISTERED OFFICE; RESIDENT AGENT: The location of
the registered office of this Corporation within the State of
Nevada is 1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509;
this Corporation may maintain an office or offices in such other
place within or without the State of Nevada as may be from time
to time designated by the Board of Directors or by the By-
Laws of the Corporation; and this Corporation may conduct all
corporation business of very kind or nature, including the
holding of any meetings of directors or shareholders, inside or
outside the State of Nevada, as well as without the State of
Nevada.
The Resident Agent for the Corporation shall be Michael J.
Morrison, Esq., 1025 Ridgeview Drive, Suite 400, Reno, Nevada
89509.
III. PURPOSE: The purpose for which this Corporation is
formed is: To engage in any lawful activity.
IV. AUTHORIZATION OF CAPITAL STOCK: The amount of the
total authorized capital stock of the Corporation shall be SIXTY
THOUSAND Dollars ($60,000.00), consisting of FIFTY MILLION
(50,000,000) shares of Common Stock, par value $.001 per share
and TEN MILLION (10,000,000) shares of Preferred Stock, par
value $.001 per share.
V. INCORPORATOR: The name and post office address of the
Incorporator signing these Articles of Incorporation is as
follows:
NAME POST OFFICE ADDRESS
Rita S. Dickson 1025 Ridgeview Drive #400
Reno, Nevada 89509
VI. DIRECTORS: The governing board of this Corporation
shall be known as directors, and the first Board shall consist of
two (2) directors.
So long as all of the shares of this Corporation are owned
beneficially and of record by either one or two shareholders,
the number of Directors may be fewer than three, but not fewer
than the number of shareholders.
The number of directors may, pursuant to the By-Laws, be
increased or decreased by the Board of Directors, provided there
shall be no less than one (1) nor more than nine (9) Directors.
The name and post office address of the director
constituting the first Board of Directors is as follows:
NAME POST OFFICE ADDRESS
ARTHUR BIRZNECK 10900 N.E. 8th Street Ste. #900
Bellevue, WA 98004
BRENT NELSON 10900 N.E. 8th Street Ste. #900
Bellevue, WA 98004
VII. STOCK NON-ASSESSABLE: The capital stock, or the holders
thereof, after the amount of the subscription price has been paid
in, shall not be subject to any assessment whatsoever to pay the
debts of the Corporation.
VIII. TERM OF EXISTENCE: This Corporation shall have
perpetual existence.
IX. CUMULATIVE VOTING: No cumulative voting shall be
permitted in the election of directors.
X. PREEMPTIVE RIGHTS: Shareholders shall not be entitled
to preemptive rights.
XI. LIMITED LIABILITY: No officer or director of the
Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty
as an officer or director, except for liability (i) for any
breach of the officer or director's duty of loyalty to the
Corporation or its Stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, or (iii) for any transaction from
which the officer or director derived any improper personal
benefit. If the Nevada General Corporation Law is amended
after the date of incorporation to authorize corporate action
further eliminating or limiting the personal liability of
officers or directors, then the liability of an officer or
director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Nevada General Corporation Law,
or amendments thereto. No repeal or modification of this
paragraph shall adversely affect any right or protection of an
officer or director of the Corporation existing at the time of
such repeal or modification.
XII. INDEMNIFICATION: Each person who was or is made a
party or is threatened to be made a party to or is involved in
any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person for whom he or she
is the legal representative, is or was an officer or director of
the Corporation or is or was serving at the request of the
Corporation as an officer or director of another corporation or
of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans whether
the basis of such proceeding is alleged action in an official
capacity as an officer or director or in any other capacity
while serving as an officer or director shall be indemnified and
held harmless by the Corporation to the fullest extent authorized
by the Nevada General Corporation Law, as the same exists or may
hereafter be amended, (but, in the case of any such amendment,
only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said
law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, excise taxes or penalties
and amounts to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to
be an officer or director and shall inure to the benefit of
his or her heirs, executors and administrators; provided,
however, that except as provided herein with respect to
proceedings seeking to enforce rights to indemnification, the
Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or
part thereof) was authorized by the Board of Directors of the
Corporation. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to
be paid by the Corporation the expenses incurred in defending
any such proceeding in advance of its final disposition;
provided however, that, if the Nevada General Corporation Law
requires the payment of such expenses incurred by an officer or
director in his or her capacity as an officer or director (and
not in any other capacity in which service was or is rendered by
such person while an officer or director, including, without
limitation, service to an employee benefit plan) in advance of
the final disposition of a proceeding, payment shall be made only
upon delivery to the Corporation of an undertaking, by or on
behalf of such officer or director, to repay all amounts so
advanced if it shall ultimately be determined that such officer
or director is not entitled to be indemnified under this Section
or otherwise.
If a claim hereunder is not paid in full by the Corporation
within ninety days after a written claim has been received by
the Corporation, the claimant may, at any time thereafter,
bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful, in whole or in part, the
claimant shall be entitled to be paid the expense of prosecuting
such claim. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, is
required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it
permissible under the Nevada General Corporation Law for the
Corporation to indemnify the claimant for the amount claimed, but
the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to
have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable standard
of conduct set forth in the Nevada General Corporation Law, nor
an actual determination by the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders)
that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of
any other right which any person may have or hereafter acquire
under any statute, provision of the Certificate of
Incorporation, By-Law, agreement, vote of Stockholders or
disinterested directors or otherwise.
The Corporation may maintain insurance, at its expense, to
protect itself and any officer, director, employee or agent of
the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability
or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss
under the Nevada General Corporation Law.
The Corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification
to any employee or agent of the Corporation to the fullest extent
of the provisions of this section with respect to the
indemnification and advancement of expenses of officers and
directors of the Corporation or individuals serving at the
request of the Corporation as an officer, director, employee or
agent of another corporation or of a partnership, joint venture,
trust or other enterprise.
THE UNDERSIGNED, being the Incorporator hereinbefore named
for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Nevada, does make and file these
Articles of Incorporation, hereby declaring and certifying the
facts herein stated are true, and, accordingly, has hereunto set
her hand this 21st day of January, 1997.
/s/ Rita S. Dickson
Rita S. Dickson
STATE OF NEVADA )
)ss.
COUNTY OF WASHOE )
On this 21st day of January, 1997, before me, a Notary
Public, personally appeared Rita S. Dickson, who acknowledged to
me that she executed the above instrument.
/s/ Willett Y. Smith
Willett Y. Smith
Notary Public State of Nevada
CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT BY RESIDENT AGENT
In the matter of ECLIPSE ENTERTAINMENT GROUP, INC., I,
Michael J. Morrison, with address at1025 Ridgeview Drive, Suite
400, Reno, Nevada 89509, hereby accept the appointment as
Resident Agent of the above-entitled corporation in accordance
with NRS 78.090. Furthermore, that the mailing address for the
above registered office is 1025 Ridgeview Drive, Suite 400, Reno,
Nevada 89509.
IN WITNESS WHEREOF, I hereunto set my hand this 21st day of
January, 1997.
Michael J. Morrison
Michael J. Morrison,
Resident Agent
BYLAWS
OF
ECLIPSE ENTERTAINMENT GROUP, INC.
ARTICLE 1.
OFFICES
1.1 Business Office
The principal business office ("principal office") of the
corporation shall be located at any place either within or
without the State of Nevada as designated in the corporation's
most current Annual Report filed with the Nevada Secretary of
State. The corporation may have such other offices, either
within or without the State of Nevada, as the Board of Directors
may designate or as the business of the corporation may require
from time to time. The corporation shall maintain at its
principal office a copy of certain records, as specified in
Section 2.14 of Article 2.
1.2 Registered Office
The registered office of the corporation shall be located within
Nevada and may be, but need not be, identical with the principal
office, provided the principal office is located within Nevada.
The address of the registered office may be changed from time to
time by the Board of Directors.
ARTICLE 2.
SHAREHOLDERS
2.1 Annual Shareholder Meeting
The annual meeting of the shareholders shall be held on the 30th
day of January, each year, beginning with the year 1998, at the
hour of 10:00 o'clock a.m., or at such other time on such other
day within such month as shall be fixed by the Board of
Directors, for the purpose of electing directors and for the
transaction of such other business as may come before the
meeting. If the day fixed for the annual meeting shall be a
legal holiday in the State of Nevada, such meeting shall be held
on the next succeeding business day. If the election of
directors shall not be held on the day designated herein for any
annual meeting of the shareholders, or at any subsequent
continuation after adjournment thereof, the Board of Directors
shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as convenient.
2.2 Special Shareholder Meetings.
Special meetings of the shareholders, for any purpose or purposes
described in the notice of meeting, may be called by the
president, or by the Board of Directors, and shall be called by
the president at the request of the holders of not less than one-
tenth of all outstanding shares of the corporation entitled to
vote on any issue at the meeting.
2.3 Place of Shareholder Meetings
The Board of Directors may designate any place, either within or
without the State of Nevada, as the place for any annual or any
special meeting of the shareholders, unless by written consent,
which may be in the form of waivers of notice or otherwise, all
shareholders entitled to vote at the meeting designate a
different place, either within or without the State of Nevada, as
the place for the holding of such meeting. If no designation is
made by either the Board of Directors or unanimous action of
the voting shareholders, the place of meeting shall be the
principal office of the corporation in the State of Nevada.
2.4 Notice of Shareholder Meeting
(a) Required Notice. Written notice stating the place, day and
hour of any annual or special shareholder meeting shall be
delivered not less than 10 nor more than 60 days before the
date of the meeting, either personally or by mail, by or at the
direction of the president, the Board of Directors,
or other persons calling the meeting, to each shareholder of
record entitled to vote at such meeting and to any other
shareholder entitled by the laws of the State of Nevada
governing corporations (the "Act") or the Articles of
Incorporation to receive notice of the meeting. Notice shall be
deemed to be effective at the earlier of: (1) when deposited in
the United States mail, addressed to the shareholder at his
address as it appears on the stock transfer books of
the corporation, with postage thereon prepaid; (2) on the date
shown on the return receipt if sent by registered or certified
mail, return receipt requested, and the receipt is signed by or
on behalf of the addressee; (3) when received; or (4) 5 days
after deposit in the United States mail, if mailed postpaid and
correctly addressed to an address, provided in writing by the
shareholder, which is different from that shown in the
corporation's current record of shareholders.
(b) Adjourned Meeting. If any shareholder meeting is adjourned
to a different date, time, or place, notice need not be given of
the new date, time, and place if the new date, time, and place is
announced at the meeting before adjournment. But if a new
record date for the adjourned meeting is, or must be fixed (see
Section 2.5 of this Article 2) then notice must be given pursuant
to the requirements of paragraph (a) of this Section 2.4, to
those persons who are shareholders as of the new record date.
(c) Waiver of Notice. A shareholder may waive notice of the
meeting (or any notice required by the Act, Articles of
Incorporation, or Bylaws), by a writing signed by the shareholder
entitled to the notice, which is delivered to the corporation
(either before or after the date and time stated in the notice)
for inclusion in the minutes of filing with the corporate records.
A shareholder's attendance at a meeting:
(1) waives objection to lack of notice or defective notice
of the meeting unless the shareholder, at the beginning of the
meeting, objects to holding the meeting or transacting business
at the meeting; and
(2) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder
objects to consideration of the matter when it is presented.
(d) Contents of Notice. The notice of each special shareholder
meeting shall include a description of the purpose or purposes
for which the meeting is called. Except as provided in this
Section 2.4(d), or as provided in the corporation's articles, or
otherwise in the Act, the notice of an annual shareholder meeting
need not include a description of the purpose or purposes for which the
meeting is called.
If a purpose of any shareholder meeting is to consider
either: (1) a proposed amendment to the Articles of
Incorporation (including any restated articles requiring
shareholder approval); (2) a plan of merger or share exchange;
(3) the sale, lease, exchange or other disposition of all, or
substantially all of the corporation's property; (4) the
dissolution of the corporation; or (5) the removal of a director,
the notice must so state and be accompanied by, respectively, a
copy or summary of the: (a) articles of amendment; (b) plan of
merger or share exchange; and (c) transaction for disposition of
all, or substantially all, of the corporation's property. If the
proposed corporate action creates dissenters' rights, as provided
in the Act, the notice must state that shareholders are, or may
be entitled to assert dissenters' rights, and must be
accompanied by a copy of relevant provisions of the Act. If the
corporation issues, or authorizes the issuance of shares for
promissory notes or for promises to render services in the
future, the corporation shall report in writing to all the
shareholders the number of shares authorized or issued, and the
consideration received with or before the notice of the next
shareholder meeting. Likewise, if the corporation indemnifies
or advances expenses to an officer or a director, this shall be
reported to all the shareholders with or before notice of the
next shareholder meeting.
2.5 Fixing of Record Date
For the purpose of determining shareholders of any voting group
entitled to notice of or to vote at any meeting of shareholders,
or shareholders entitled to receive payment of any distribution
or dividend, or in order to make a determination of shareholders
for any other proper purpose, the Board of Directors may fix in
advance a date as the record date. Such record date shall not be
more than 70 days prior to the date on which the particular
action requiring such determination of shareholders entitled to notice
of, or to vote at a meeting of shareholders, or shareholders entitled to
receive a share dividend or distribution. The record date for determination
of such shareholders shall be at the close of business on:
(a) With respect to an annual shareholder meeting or any
special shareholder meeting called by the Board of Directors or
any person specifically authorized by the Board of Directors or
these Bylaws to call a meeting, the day before the first notice
is given to shareholders;
(b) With respect to a special shareholder meeting demanded by
the shareholders, the date the first shareholder signs the
demand;
(c) With respect to the payment of a share dividend, the date the
Board of Directors authorizes the share dividend;
(d) With respect to actions taken in writing without a meeting
(pursuant to Article 2, Section 2.12), the first date any
shareholder signs a consent; and
(e) With respect to a distribution to shareholders, (other than
one involving a repurchase or reacquisition of shares), the date
the Board of Directors authorizes the distribution
When a determination of shareholders entitled to vote at any
meeting of shareholders has been made, as provided in this
section, such determination shall apply to any adjournment
thereof unless the Board of Directors fixes a new record date,
which it must do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting. If no
record date has been fixed, the record date shall be the date
the written notice of the meeting is given to shareholders.
2.6 Shareholder List
The officer or agent having charge of the stock transfer books
for shares of the corporation shall, at least ten (10) days
before each meeting of shareholders, make a complete record
of the shareholders entitled to vote at each meeting of
shareholders, arranged in alphabetical order, with the address
of and the number of shares held by each. The list must be
arranged by class or series of shares. The shareholder list must
be available for inspection by any shareholder, beginning two
business days after notice of the meeting is given for which the
list was prepared and continuing through the meeting. The
list shall be available at the corporation's principal office
or at a place in the city where the meeting is to be held, as set
forth in the notice of meeting. A shareholder, his agent, or
attorney is entitled, on written demand, to inspect and, subject
to the requirements of Section 2.14 of this Article 2, to copy
the list during regular business hours and at his expense,
during the period it is available for inspection. The corporation
shall maintain the shareholder list in written form or in another
form capable of conversion into written form within a reasonable
time.
2.7 Shareholder Quorum and Voting Requirements
A majority of the outstanding shares of the corporation entitled
to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of shareholders. If less than a majority of
the outstanding shares are represented at a meeting, a majority
of the shares so represented may adjourn the meeting from time to
time without further notice. At such adjourned meeting at which
a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly
organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting, unless a new
record date is or must be set for that adjourned meeting. If a
quorum exists, a majority vote of those shares present and voting
at a duly organized meeting shall suffice to defeat or enact any
proposal unless the Statutes of the State of Nevada, the
Articles of Incorporation or these Bylaws require a greater-
than-majority vote, in which event the higher vote shall be
required for the action to constitute the action of the corporation.
2.8 Increasing Either Quorum or Voting Requirements
For purposes of this Section 2.8, a "supermajority" quorum is a
requirement that more than a majority of the votes of the voting
group be present to constitute a quorum; and a supermajority
voting requirement is any requirement that requires the vote of
more than a majority of the affirmative votes of a voting group
at a meeting. The shareholders, but only if specifically
authorized to do so by the Articles of Incorporation, may adopt,
amend, or delete a Bylaw which fixes a "supermajority" quorum or
"supermajority" voting requirement. The adoption or amendment
of a Bylaw that adds, changes, or deletes a "supermajority"
quorum or voting requirement for shareholders must meet the same
quorum requirement and be adopted by the same vote required to
take action under the quorum and voting requirement then if
effect or proposed to be adopted, whichever is greater. A Bylaw
that fixes a supermajority quorum or voting requirement for
shareholders may not be adopted, amended, or repealed by the
Board of Directors.
2.9 Proxies
At all meetings of shareholders, a shareholder may vote in
person, or vote by written proxy executed in writing by the
shareholder or executed by his duly authorized attorney-in fact.
Such proxy shall be filed with the secretary of the corporation
or other person authorized to tabulate votes before or at the
time of the meeting. No proxy shall be valid after eleven (11)
months from the date of its execution unless otherwise
specifically provided in the proxy or coupled with an interest.
2.10 Voting of Shares
Unless otherwise provided in the articles, each outstanding share
entitled to vote shall be entitled to one vote upon each matter
submitted to a vote at a meeting of shareholders. Shares held by
an administrator, executor, guardian or conservator may be voted
by him, either in person or by proxy, without the transfer of
such shares into his name. Shares standing in the name of a
trustee may be voted by him, either in person or by proxy, but
no trustee shall be entitled to vote shares held by him without
transfer of such shares into his name. Shares standing in the
name of a receiver may be voted by such receiver, and shares
held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if
authority to do so is contained in an appropriate order of the
Court by which such receiver was appointed. A shareholder whose
shares are pledged shall be entitled to vote such shares until
the shares are transferred into the name of the pledgee, and
thereafter, the pledgee shall be entitled to vote the shares so
transferred. Shares of its own stock belonging to the
corporation or held by it in a fiduciary capacity shall not be
voted, directly or indirectly, at any meeting, and shall not be
counted in determining the total number of outstanding shares at
any given time. Redeemable shares are not entitled to vote
after notice of redemption is mailed to the holders and a sum
sufficient to redeem the shares has been deposited with a bank,
trust company, or other financial institution under an
irrevocable obligation to pay the holders the redemption price on
surrender of the shares.
2.11 Corporation's Acceptance of Votes
(a) If the name signed on a vote, consent, waiver, or proxy
appointment corresponds to the name of a shareholder, the
corporation, if acting in good faith, is entitled to accept the
vote, consent, waiver, or proxy appointment and give it effect
as the act of the shareholder.
(b) If the name signed on a vote, consent, waiver, or proxy
appointment does not correspond to the name of its shareholder,
the corporation, if acting in good faith, is nevertheless
entitled to accept the vote, consent, waiver, or proxy
appointment and give it effect as the act of the shareholder if:
(1) the shareholder is an entity, as defined in the Act, and the
name signed purports to be that of an officer or agent of the
entity;
(2) the name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder
and, if the corporation requests, evidence of fiduciary status
acceptable to the corporation has been presented with respect to
the vote, consent, waiver, or proxy appointment;
(3) the name signed purports to be that of a receiver or trustee
in bankruptcy of the shareholder and, if the corporation
requests, evidence of this status acceptable to the corporation
has been presented with respect to the vote, consent, waiver or
proxy appointment;
(4) the name signed purports to be that of a pledgee, beneficial
owner, or attorney-in-fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation of
the signatory's authority to sign for the shareholder has been
presented with respect to the vote, consent, waiver, or proxy
appointment; or
(5) the shares are held in the name of two or more persons as
co-tenants or fiduciaries and the name signed purports to be the
name of at least one of the co-owners and the person signing
appears to be acting on behalf of all the co-owners.
(c) The corporation is entitled to reject a vote, consent,
waiver, or proxy appointment if the secretary or other officer
or agent authorized to tabulate votes, acting in good faith, has
reasonable basis for doubt about the validity of the signature on
it or about the signatory's authority to sign for the
shareholder.
(d) The corporation and its officer or agent who accepts or
rejects a vote, consent, waiver, or proxy appointment in good
faith and in accordance with the standards of this Section 2.11
are not liable in damages to the shareholder for the consequences
of the acceptance or rejection.
(e) Corporation action based on the acceptance or rejection of a
vote, consent, waiver, or proxy appointment under this section
is valid unless a court of competent jurisdiction determines
otherwise.
2.12 Informal Action by Shareholders
Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting if one or more
written consents, setting forth the action so taken, shall be
signed by shareholders holding a majority of the shares entitled
to vote with respect to the subject matter thereof, unless a
"supermajority" vote is required by these Bylaws, in which case
a "supermajority" vote will be required. Such consent shall be
delivered to the corporation secretary for inclusion in the
minute book. A consent signed under this Section has the effect
of a vote at a meeting and may be described as such in any
document.
2.13 Voting for Directors
Unless otherwise provided in the Articles of Incorporation,
directors are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a
quorum is present.
2.14 Shareholders' Rights to Inspect Corporate Records
Shareholders shall have the following rights regarding inspection
of corporate records:
(a) Minutes and Accounting Records - The corporation shall
keep, as permanent records, minutes of all meetings of its
shareholders and Board of Directors, a record of all actions
taken by the shareholders or Board of Directors without a
meeting, and a record of all actions taken by a committee of the
Board of Directors in place of the Board of Directors on behalf
of the corporation. The corporation shall maintain appropriate
accounting records.
(b) Absolute Inspection Rights of Records Required at
Principal Office -If a shareholder gives the corporation written
notice of his demand at least five business days before the date
on which he wishes to inspect and copy, he, or his agent or
attorney, has the right to inspect and copy, during regular
business hours, any of the following records, all of which the
corporation is required to keep at its principal office:
(1) its Articles or restated Articles of Incorporation and all
amendments to them currently in effect;
(2) its Bylaws or restated Bylaws and all amendments to them
currently in effect;
(3) resolutions adopted by its Board of Directors creating one
or more classes or series of shares, and fixing their relative
rights, preferences and limitations, if shares issued pursuant to
the resolutions are outstanding;
(4) the minutes of all shareholders' meetings, and records of
all action taken by shareholders without a meeting, for the past
three years;
(5) all written communications to shareholders within the past
three years, including the financial statements furnished for the
past three years to the shareholders;
(6) a list of the names and business addresses of its
current directors and officers; and
(7) its most recent annual report delivered to the Nevada
Secretary of State.
(c) Conditional Inspection Right - In addition, if a shareholder
gives the corporation a written demand, made in good faith and
for a proper purpose, at least five business days before the date
on which he wishes to inspect and copy, describes with reasonable
particularity is purpose and the records he desires to inspect,
and the records are directly connected to his purpose, a
shareholder of a corporation, or his duly authorized agent or
attorney, is entitled to inspect and copy, during regular
business hours at a reasonable location specified by the
corporation, any of the following records of the corporation:
(1) excerpts from minutes of any meeting of the Board of
Directors; records of any action of a committee of the Board of
Directors on behalf of the corporation; minutes of any meeting
of the shareholders; and records of action taken by the
shareholders or Board of Directors without a meeting, to the
extent not subject to inspection under paragraph (a) of this
Section 2.14;
(2) accounting records of the corporation; and
(3) the record of shareholders (compiled no earlier than the
date of the shareholder's demand)
(d) Copy Costs - The right to copy records includes, if
reasonable, the right to receive copies made by photographic,
xerographic, or other means. The corporation may impose a
reasonable charge, to be paid by the shareholder on terms set
by the corporation, covering the costs of labor and material
incurred in making copies of any documents provided to the
shareholder.
(e) "Shareholder" Includes Beneficial Owner - For purposes of
this Section 2.14, the term shareholder shall include a
beneficial owner whose shares are held in a voting trust or by a
nominee on his behalf.
2.15 Financial Statements Shall Be Furnished to the Shareholders.
(a) The corporation shall furnish its shareholders annual
financial statements, which may be consolidated or combined
statements of the corporation and one or more of its
subsidiaries, as appropriate, that include a balance sheet as
of the end of the fiscal year, an income statement for that year,
and a statement of changes in shareholders' equity for the year,
unless that information appears elsewhere in the financial
statements. If financial statements are prepared for the
corporation on the basis of generally accepted accounting
principles, the annual financial statements for the shareholders
must also be prepared on that basis.
(b) If the annual financial statements are reported upon by a
public accountant, his report must accompany them. If not, the
statements must be accompanied by a statement of the president or
the person responsible for the corporation's accounting records:
(1) stating his reasonable belief that the statements were
prepared on the basis of generally accepted accounting
principles and, if not, describing the basis of preparation; and
(2) describing any respects in which the statements were not
prepared on a basis of accounting consistent with the statements
prepared for the preceding year.
(c) A corporation shall mail the annual financial statements to
each shareholder within 120 days after the close of each fiscal
year. Thereafter, on written request from a shareholder who was
not mailed the statements, the corporation shall mail him the
latest financial statements.
2.16 Dissenters' Rights.
Each shareholder shall have the right to dissent from and obtain
payment for his shares when so authorized by the Act, Articles of
Incorporation, these Bylaws, or a resolution of the Board of
Directors.
2.17 Order of Business.
The following order of business shall be observed at all meetings
of the shareholders, as applicable and so far as practicable:
(a) Calling the roll of officers and directors present and
determining shareholder quorum requirements;
(b) Reading, correcting and approving of minutes of previous
meeting;
(c) Reports of officers;
(d) Reports of Committees;
(e) Election of Directors;
(f) Unfinished business;
(g) New business; and
(h) Adjournment.
ARTICLE 3.
BOARD OF DIRECTORS
3.1 General Powers.
Unless the Articles of Incorporation have dispensed with or
limited the authority of the Board of Directors by describing who
will perform some or all of the duties of a Board of Directors,
all corporate powers shall be exercised by or under the
authority of, and the business and affairs of the corporation
shall be managed under the direction of the Board of Directors.
3.2 Number, Tenure and Qualification of Directors.
Unless otherwise provided in the Articles of Incorporation, the
authorized number of directors shall be not less than 1 (minimum
number) nor more than 9 (maximum number). The initial number
of directors was established in the original Articles of
Incorporation. The number of directors shall always be within
the limits specified above, and as determined by resolution
adopted by the Board of Directors. After any shares of this
corporation are issued, neither the maximum nor minimum number of
directors can be changed, nor can a fixed number be substituted
for the maximum and minimum numbers, except by a duly adopted
amendment to the Articles of Incorporation duly approved by a
majority of the outstanding shares entitled to vote. Each
director shall hold office until the next annual meeting of
shareholders or until removed. However, if his term expires, he
shall continue to serve until his successor shall have been
elected and qualified, or until there is a decrease in the number
of directors. Unless required by the Articles of Incorporation,
directors do not need to be residents of Nevada or shareholders
of the corporation.
3.3 Regular Meetings of the Board of Directors.
A regular meeting of the Board of Directors shall be held
without other notice than this Bylaw immediately after, and at
the same place as, the annual meeting of shareholders. The Board
of Directors may provide, by resolution, the time and place for
the holding of additional regular meetings without other
notice than such resolution (if permitted by Section 3.7, any
regular meeting may be held by telephone).
3.4 Special Meeting of the Board of Directors.
Special meetings of the Board of Directors may be called by or
at the request of the president or any one director. The person
or persons authorized to call special meetings of the Board of
Directors may fix any place, either within or without the State
of Nevada, as the place for holding any special meeting of the
Board of Directors or, if permitted by Section 3.7, any special
meeting may be held by telephone.
3.5 Notice of, and Waiver of Notice of, Special Meetings
of the Board of Directors.
Unless the Articles of Incorporation provide for a longer or
shorter period, notice of any special meeting of the Board of
Directors shall be given at least two days prior thereto, either
orally or in writing. If mailed, notice of any director meeting
shall be deemed to be effective at the earlier of: (1) when
received; (2) five days after deposited in the United States
mail, addressed to the director's business office, with postage
thereon prepaid; or (3) the date shown on the return receipt,
if sent by registered or certified mail, return receipt
requested, and the receipt is signed by or on behalf of the
director. Notice may also be given by facsimile and, in such
event, notice shall be deemed effective upon transmittal thereof
to a facsimile number of a compatible facsimile machine at the
director's business office. Any director may waive notice of any
meeting. Except as otherwise provided herein, the waiver must
be in writing, signed by the director entitled to the notice,
and filed with the minutes or corporate records. The attendance
of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business
and at the beginning of the meeting, or promptly upon his
arrival, objects to holding the meeting or transacting business
at the meeting, and does not thereafter vote for or assent to
action taken at the meeting. Unless required by the Articles of
Incorporation or the Act, neither the business to be transacted
at, nor the purpose of, any special meeting of the Board of
Directors need be specified in the notice or waiver of notice of
such meeting.
3.6 Director Quorum.
A majority of the number of directors fixed, pursuant to Section
3.2 of this Article 3, shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors,
unless the Articles of Incorporation or the Act require a
greater number for a quorum. Any amendment to this quorum
requirement is subject to the provisions of Section 3.8 of this
Article 3. Once a quorum has been established at a duly
organized meeting, the Board of Directors may continue to
transact corporate business until adjournment, notwithstanding
the withdrawal of enough directors to leave less than a quorum.
3.7 Actions By Directors.
The act of the majority of the directors present at a meeting at
which a quorum is present when the vote is taken shall be the
act of the Board of Directors, unless the Articles of
Incorporation or the Act require a greater percentage. Any
amendment which changes the number of directors needed to take
action is subject to the provisions of Section 3.8 of this
Article 3. Unless the Articles of Incorporation provide
otherwise, any or all directors may participate in a regular or
special meeting by, or conduct the meeting through the use of,
any means of communication by which all directors participating
may simultaneously hear each other during the meeting. Minutes
of any such meeting shall be prepared and entered into the
records of the corporation. A director participating in a meeting
by this means is deemed to be present in person at the meeting.
A director who is present at a meeting of the Board of
Directors or a committee of the Board of Directors when
corporate action is taken is deemed to have assented to the
action taken unless: (1) he objects at the beginning of the
meeting, or promptly upon his arrival, to holding it or
transacting business at the meeting; or (2) his dissent or
abstention from the action taken is entered in the minutes of the
meeting; or (3) he delivers written notice of his dissent or
abstention to the presiding officer of the meeting before its
adjournment or to the corporation within 24 hours after
adjournment of the meeting. The right of dissent or abstention
is not available to a director who votes in favor of the action
taken.
3.8 Establishing a "Supermajority" Quorum or Voting Requirement for the
Board of Directors.
For purposes of this Section 3.8, a "supermajority" quorum is a
requirement that more than a majority of the directors in office
constitute a quorum; and a "supermajority" voting requirement is
one which requires the vote of more than a majority of those
directors present at a meeting at which a quorum is present to be
the act of the directors. A Bylaw that fixes a supermajority
quorum or supermajority voting requirement may be amended or
repealed:
(1) if originally adopted by the shareholders, only by the
shareholders (unless otherwise provided by the shareholders); or
(2) if originally adopted by the Board of Directors, either by
the shareholders or by the Board of Directors. A Bylaw adopted
or amended by the shareholders that fixes a supermajority quorum
or supermajority voting requirement for the Board of Directors
may provide that it may be amended or repealed only by a
specified vote of either the shareholders or the Board of
Directors. Subject to the provisions of the preceding
paragraph, action by the Board of Directors to adopt, amend, or
repeal a Bylaw that changes the quorum or voting requirement for
the Board of Directors must meet the same quorum requirement and
be adopted by the same vote required to take action under the
quorum and voting requirement then in effect or proposed to be
adopted, whichever is greater.
3.9 Director Action Without a Meeting.
Unless the Articles of Incorporation provide otherwise, any
action required or permitted to be taken by the Board of
Directors at a meeting may be taken without a meeting if all the
directors sign a written consent describing the action taken.
Such consents shall be filed with the records of the corporation.
Action taken by consent is effective when the last director
signs the consent, unless the consent specifies a different
effective date. A signed consent has the effect of a vote at a
duly noticed and conducted meeting of the Board of Directors and
may be described as such in any document.
3.10 Removal of Directors.
The shareholders may remove one or more directors at a meeting
called for that purpose if notice has been given that a purpose
of the meeting is such removal. The removal may be with or
without cause unless the Articles of Incorporation provide that
directors may only be removed for cause. If cumulative voting
is not authorized, a director may be removed only if the number
of votes cast in favor of removal exceeds the number of votes
cast against removal.
3.11 Director Vacancies.
Unless the Articles of Incorporation provide otherwise, if a
vacancy occurs on the Board of Directors, excluding a vacancy
resulting from an increase in the number of directors, the
director(s) remaining in office shall fill the vacancy. If the
directors remaining in office constitute fewer than a quorum of
the Board of Directors, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining in
office. If a vacancy results from an increase in the number of
directors, only the shareholders may fill the vacancy. A
vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date) may be filled by the Board
of Directors before the vacancy occurs, but the new director may
not take office until the vacancy occurs. The term of a
director elected to fill a vacancy expires at the next
shareholders meeting at which directors are elected; however, if
his term expires, he shall continue to serve until his successor
is elected and qualifies or until there is a decrease in the
number of directors.
3.12 Director Compensation.
Unless otherwise provided in the Articles of Incorporation, by
resolution of the Board of Directors, each director may be paid
his expenses, if any, of attendance at each meeting of the Board
of Directors, and may be paid a stated salary as director or a
fixed sum for attendance at each meeting of the Board of
Directors, or both. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving
compensation therefore.
3.13 Director Committees.
(a) Creation of Committees. Unless the Articles of
Incorporation provide otherwise, the Board of Directors may
create one or more committees and appoint members of the Board of
Directors to serve on them. Each committee must have two or more
members, who serve at the pleasure of the Board of Directors.
(b) Selection of Members. The creation of a committee and
appointment of members to it must be approved by the greater of
(1) a majority of all the directors in office when the action is
taken, or (2) the number of directors required by the Articles of
Incorporation to take such action.
(c) Required Procedures. Sections 3.4, 3.5, 3.6, 3.71 3.8 and
3.9 of this Article 3 apply to committees and their members.
(d) Authority. Unless limited by the Articles of Incorporation
or the Act, each committee may exercise those aspects of the
authority of the Board of Directors which the Board of
Directors confers upon such committee in the resolution creating
the committee. Provided, however, a committee may not:
(1) authorize distributions to shareholders;
(2) approve or propose to shareholders any action that
the Act requires be approved by shareholders;
(3) fill vacancies on the Board of Directors or on any
of its committees;
(4) amend the Articles of Incorporation;
(5) adopt, amend, or repeal Bylaws;
(6) approve a plan of merger not requiring shareholder approval;
(7) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the Board of
Directors; or
(8) authorize or approve the issuance or sale, or contract for
sale of shares, or determine the designation and relative rights,
preferences, and limitations of a class or series of shares;
except that the Board of Directors may authorize a committee to
do so within limits specifically prescribed by the Board of
Directors.
ARTICLE 4.
OFFICERS
4.1 Designation of Officers.
The officers of the corporation shall be a president, a
secretary, and a treasurer, each of whom shall be appointed by
the Board of Directors. Such other officers and assistant
officers as may be deemed necessary, including any vice-
presidents, may be appointed by the Board of Directors. The same
individual may simultaneously hold more than one office in the
corporation.
4.2 Appointment and Term of Office.
The officers of the corporation shall be appointed by the Board
of Directors for a term as determined by the Board of Directors.
If no term is specified, they shall hold office until the first
meeting of the directors held after the next annual meeting of
shareholders. If the appointment of officers is not made at such
meeting, such appointment shall be made as soon thereafter as
is convenient. Each officer shall hold office until his
successor has been duly appointed and qualified, until his
death, or until he resigns or has been removed in the manner
provided in Section 4.3 of this Article 4. The designation of a
specified term does not grant to the officer any contract
rights, and the Board of Directors can remove the officer at any
time prior to the termination of such term. Appointment of an
officer shall not of itself create any contract rights.
4.3 Removal of Officers.
Any officer may be removed by the Board of Directors at any time,
with or without cause. Such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
4.4 President.
The president shall be the principal executive officer of the
corporation and, subject to the control of the Board of
Directors, shall generally supervise and control all of the
business and affairs of the corporation. He shall, when present,
preside at all meetings of the shareholders. He may sign, with
the secretary or any other proper officer of the corporation
thereunto duly authorized by the Board of Directors, certificates
for shares of the corporation and deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of
Directors or by these Bylaws to some other officer or agent of
the corporation, or shall be required by law to be otherwise
signed or executed. The president shall generally perform
all duties incident to the office of president and such other
duties as may be prescribed by the Board of Directors from time
to time.
4.5 Vice-President.
If appointed, in the absence of the president or in the event of
the president's death, inability or refusal to act; the vice-
president (or in the event there be more than one vice-
president, the vice-presidents in the order designated at the
time of their election, or in the absence of any designation,
then in the order of their appointment) shall perform the duties
of the president, and when so acting, shall have all the powers
of and be subject to all the restrictions upon the president. If
there is no vice-president, then the treasurer shall perform such
duties of the president. Any vice-president may sign, with the
secretary or an assistant secretary, certificates for shares of
the corporation the issuance of which have been authorized by
resolution of the Board of Directors. A vice-president shall
perform such other duties as from time to time may be assigned to
him by the president or by the Board of Directors.
4.6 Secretary.
The secretary shall (a) keep the minutes of the proceedings of
the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the corporate records
and of any seal of the corporation and, if there is a seal of the
corporation, see that it is affixed to all documents, the
execution of which on behalf of the corporation under its seal
is duly authorized; (d) when requested or required,
authenticate any records of the corporation; (e) keep a register
of the post office address of each shareholder, as provided to
the secretary by the shareholders; (f) sign with the president,
or a vice-resident, certificates for shares of the corporation,
the issuance of which has been authorized by resolution of the
Board of Directors; (g) have general charge of the stock transfer
books of the corporation; and (h) generally perform all duties
incident to the office of secretary and such other duties as from
time to time may be assigned to him by the president or by the
Board of Directors.
4.7 Treasurer
The treasurer shall (a) have charge and custody of and be
responsible for all funds and securities of the corporation; (b)
receive and give receipts for moneys due and payable to the
corporation from any source whatsoever, and deposit all such
moneys in the name of the corporation in such banks, trust
companies, or other depositaries as may be selected by the Board
of Directors; and (c) generally perform all of the duties
incident to the office of treasurer and such other duties as from
time to time may be assigned to him by the president or by the
Board of Directors. If required by the Board of Directors, the
treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board
of Directors shall determine.
4.8 Assistant Secretaries and Assistant Treasurers.
The assistant secretaries, when authorized by the Board of
Directors, may sign with the president, or a vice-president,
certificates for shares of the corporation, the issuance of which
has been authorized by a resolution of the Board of Directors.
The assistant treasurers shall respectively, if required by the
Board of Directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the Board of
Directors shall determine. The assistant secretaries and
assistant treasurers, generally, shall perform such duties as may
be assigned to them by the secretary or the treasurer,
respectively, or by the president or the Board of Directors.
4.9 Salaries.
The salaries of the officers, if any, shall be fixed from time
to time by the Board of Directors.
ARTICLE 5.
INDEMNIFICATION OF DIRECTORS, OFFICERS,
AGENTS, AND EMPLOYEES
5.1 Indemnification of Officers. Directors Employees and Agents.
Unless otherwise provided in the Articles of Incorporation, the
corporation shall indemnify any individual made a party to a
proceeding because he is or was an officer, director, employee or
agent of the corporation against liability incurred in the
proceeding, all pursuant to and consistent with the provisions of
NRS 78.751, as amended from time to time.
5.2 Advance Expenses for Officers and Directors.
The expenses of officers and directors incurred in defending
a civil or criminal action, suit or proceeding shall be paid by
the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, but only after
receipt by the corporation of an undertaking by or on behalf of
the officer or director on terms set by the Board of Directors,
to repay the expenses advanced if it is ultimately determined by
a court of competent jurisdiction that he is not entitled to be
indemnified by the corporation.
5.3 Scope of Indemnification.
The indemnification permitted herein is intended to be to the
fullest extent permissible under the laws of the State of Nevada,
and any amendments thereto.
ARTICLE 6.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 Certificates for Shares.
(a) Content. Certificates representing shares of the
corporation shall at minimum, state on their face the name of
the issuing corporation; that the corporation is formed under the
laws of the State of Nevada; the name of the person to whom
issued; the certificate number; class and par value of shares;
and the designation of the series, if any, the certificate
represents. The form of the certificate shall be as determined
by the Board of Directors. Such certificates shall be signed
(either manually or by facsimile) by the president or a vice-
president and by the secretary or an assistant secretary and may
be sealed with a corporate seal or a facsimile thereof. Each
certificate for shares shall be consecutively numbered or
otherwise identified.
(b) Legend as to Class or Series. If the corporation is
authorized to issue different classes of shares or different
series within a class, the designations, relative rights,
preferences, and limitations applicable to each class and the
variations in rights, preferences, and limitations determined
for each series (and the authority of the Board of Directors to
determine variations for future series) must be summarized on
the front or back of the certificate indicating that the
corporation will furnish the shareholder this information on
request in writing and without charge.
(c) Shareholder List. The name and address of the person to
whom the shares are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the
corporation.
(d) Transferring Shares. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate
shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except that in
case of a lost, destroyed, or mutilated certificate, a new one
may be issued therefore upon such terms as the Board of Directors
may prescribe, including indemnification of the corporation and
bond requirements.
6.2 Registration of the Transfer of Shares.
Registration of the transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation.
In order to register a transfer, the record owner shall surrender
the share certificate to the corporation for cancellation,
properly endorsed by the appropriate person or persons with
reasonable assurances that the endorsements are genuine and
effective. Unless the corporation has established a procedure
by which a beneficial owner of shares held by a nominee is to be
recognized by the corporation as the owner, the person in whose
name shares stand on the books of the corporation shall be deemed
by the corporation to be the owner thereof for all purposes.
6.3 Restrictions on Transfer of Shares Permitted.
The Board of Directors may impose restrictions on the transfer or
registration of transfer of shares, including any security
convertible into, or carrying a right to subscribe for or acquire
shares. A restriction does not affect shares issued before the
restriction was adopted unless the holders of the shares are
parties to the restriction agreement or voted in favor of the
restriction. A restriction on the transfer or registration of
transfer of shares may be authorized:
(a) to maintain the corporation's status when it is dependent on
the number or identity of its shareholders;
(b) to preserve exemptions under federal or state securities
law; or
(c) for any other reasonable purpose.
A restriction on the transfer or registration of transfer of
Shares may:
(a) obligate the shareholder first to offer the corporation or
other persons (separately, consecutively, or simultaneously)
an opportunity to acquire the restricted shares;
(b) obligate the corporation or other persons (separately,
consecutively, or simultaneously) to acquire the restricted
shares;
(c) require the corporation, the holders or any class of its
shares, or another person to approve the transfer of the
restricted shares, if the requirement is not manifestly
unreasonable; or
(d) prohibit the transfer of the restricted shares to
designated persons or classes of persons, if the prohibition is
not manifestly unreasonable.
A restriction on the transfer or registration of transfer of
shares is valid and enforceable against the holder or a
transferee of the holder if the restriction is authorized by
this Section 6.3 and its existence is noted conspicuously on the
front or back of the certificate. Unless so noted, a restriction
is not enforceable against a person without knowledge of the
restriction.
6.4 Acquisition of Shares.
The corporation may acquire its own shares and unless otherwise
provided in the Articles of Incorporation, the shares so
acquired constitute authorized but unissued shares. If the
Articles of Incorporation prohibit the reissue of shares acquired
by the corporation, the number of authorized shares is reduced
by the number of shares acquired, effective upon amendment of the
Articles of Incorporation, which amendment shall be adopted by
the shareholders, or the Board of Directors without shareholder
action (if permitted by the Act). The amendment must be
delivered to the Secretary of State and must set forth:
(a) the name of the corporation;
(b) the reduction in the number of authorized shares, itemized by class
and series; and
(c) the total number of authorized shares, itemized by class and
series, remaining after reduction of the shares.
ARTICLE 7.
DISTRIBUTIONS
7.1 Distributions.
The Board of Directors may authorize, and the corporation may
make, distributions (including dividends on its outstanding
shares) in the manner and upon the terms and conditions provided
by law.
ARTICLE 8.
CORPORATE SEAL
8.1 Corporate Seal
The Board of Directors may adopt a corporate seal which may be
circular in form and have inscribed thereon any designation,
including the name of the corporation, Nevada as the state of
incorporation, and the words "Corporate Seal."
ARTICLE 9.
EMERGENCY BYLAWS
9.1 Emergency Bylaws.
Unless the Articles of Incorporation provide otherwise, the
following provisions shall be effective during an emergency,
which is defined as a time when a quorum of the corporation's
directors cannot be readily assembled because of some
catastrophic event. During such emergency:
(a) Notice of Board Meetings. Any one member of the Board of
Directors or any one of the following officers: president, any
vice-president, secretary, or treasurer, may call a meeting of
the Board of Directors. Notice of such meeting need be given
only to those directors whom it is practicable to reach, and may
be given in any practical manner, including by publication
and radio. Such notice shall be given at least six hours prior
to commencement of the meeting.
(b) Temporary Directors and Quorum. One or more officers of the
corporation present at the emergency board meeting, as is
necessary to achieve a quorum, shall be considered to be
directors for the meeting, and shall so serve in order of rank,
and within the same rank, in order of seniority. In the event
that less than a quorum (as determined by Section 3.6 of
Article 3) of the directors are present (including any officers
who are to serve as directors for the meeting), those directors
present (including the officers serving as directors) shall
constitute a quorum.
(c) Actions Permitted To Be Taken. The Board of Directors, as
constituted in paragraph (b), and after notice as set forth in
paragraph (a), may:
(1) Officers' Powers. Prescribe emergency powers to any officer
of the corporation;
(2) Delegation of Any Power. Delegate to any officer or
director, any of the powers of the Board of Directors;
(3) Lines of Succession. Designate lines of succession of
officers and agents, in the event that any of them
are unable to discharge their duties;
(4) Relocate Principal Place of Business. Relocate the
principal place of business, or designate successive or
simultaneous principal places of business;
(5) All Other Action. Take any other action which is
convenient, helpful, or necessary to carry on the
business of the corporation.
ARTICLE 10.
AMENDMENTS
10.1 Amendments
The Board of Directors may amend or repeal the corporation's
Bylaws unless:
(a) the Articles of Incorporation or the Act reserve this power
exclusively to the shareholders, in whole or part; or
(b) the shareholders, in adopting, amending, or repealing a
particular Bylaw, provide expressly that the Board of Directors
may not amend or repeal that Bylaw; or
(c) the Bylaw either establishes, amends or deletes a
"supermajority" shareholder quorum or voting requirement, as
defined in Section 2.8 of Article 2.
Any amendment which changes the voting or quorum requirement for
the Board of Directors must comply with Section 3.8 of
Article 3, and for the shareholders, must comply with Section 2.8
of Article 2. The corporation's shareholders may also amend or
repeal the corporation's Bylaws at any meeting held pursuant to
Article 2.
CERTIFICATE OF THE SECRETARY
I hereby certify that I am the Secretary of ECLIPSE
ENTERTAINMENT GROUP, INC. and that the foregoing Bylaws,
consisting of twenty-nine (29) pages, constitutes the Code of
ECLIPSE ENTERTAINMENT GROUP, INC. as duly adopted by the Board of
Directors of the corporation on this 29th day of January, 1997.
IN WITNESS WHEREOF, I have hereunto subscribed my name this
29th day of January, 1997.
/s/
Secretary of the Corporation
ECLIPSE ENTERTAINMENT GROUP, INC.
10900 N.E. 8th Street, Suite 900
Bellevue, WA 98004
September 2, 1997
Attn: Franco Columbu
Franco Columbu Productions Inc.
1732 S. Sepulveda Blvd.
Los Angeles, CA 90025
By Fax: 310 477 6690
Re: Agreement between Franco Columbu and Eclipse Entertainment
Group, Inc. ("Eclipse")
The following, when signed by you ("Columbu") will confirm the
terms of your Agreement with Eclipse regarding the provision of
your personal services as a producer of the films, "Beretta's
Island", "Double Cross", and "Assault of the Lost Goddess", and
of your involvement with Eclipse on the following terms and
conditions:
Employment
1. Engagement. Eclipse hereby engages you as a producer and as
Vice President of Distribution to assist in developing, selling
and promoting films for Eclipse. You will be engaged as an
independent contractor and not as an employee.
2. Term and Exclusivity. From the date of signing this
agreement to September 1, 1998, you shall devote all required
time and energies to the business and affairs of Eclipse, subject
to a reasonable time allowance for personal business, and shall
use your best efforts, skill and abilities to promote this interest.
Office Facilities
3. From the date of signing this agreement to September 1,
1998, Eclipse shall have the right to use all of the
facilities in your office which is located at 1732 S. Sepulveda
Blvd., Los Angeles, California, including use of photocopy, fax,
and telephones. Eclipse shall reimburse you for any long
distance charges incurred and for office supplies which are
used by Eclipse. Eclipse has the right to install its own
telephone and fax in the office at its own cost.
Right of First Refusal
4. Eclipse shall have a Right of First Refusal for a term of
five years from the date of signing this Agreement to meet any
bona fide offer or offers to produce, finance or develop any film
project which you are developing as a producer, and which you
are ready and willing to accept. Prior to entering into an
agreement with someone else, you will first communicate the terms
of such offer or proposed agreement, including a copy of the
written agreement accepted in writing by you containing a subject
clause, subject to a Right of First Refusal, and Eclipse shall
have a right for a period of 23 days from the receipt of the
written agreement to exercise its right to enter into an
agreement with you on the same terms.
5. As compensation for your personal services, for provision of
office facilities, and for the Right of First Refusal you shall
receive 25,000 shares of the common stock of Eclipse with a one
year trading restriction, and such other amounts as are set out
in this agreement.
"Beretta's Island"
6. You and Eclipse shall each own 50% of "Beretta's Island" and
all rights attached to the picture. Eclipse has the right
to purchase any portion of Columbu's percentage up to 100%, at a
mutually agreed upon price at any time.
7. You assign to Eclipse the sole and exclusive right and
license to exhibit, distribute and license under copyright the
exhibition of "Beretta's Island" theatrically and non-
theatrically, on television and other media, in all forms whether
known or unknown without limitation, and all other intellectual
property rights and ancillary rights in the picture for a period
of seven years.
In consideration for assigning the above rights and licenses to
Eclipse, you shall receive 100,000 shares of common stock of
Eclipse with a one year trading restriction, and such other
amounts as are set out in this agreement.
8. In consideration for the transfer of all rights, licenses
and privileges attached to "Beretta's Island" Eclipse shall pay
you US$75,000, payable as follows:
(a) $25,000 on September 12, 1997;
(b) $25,000 on October 29, 1997;
(c) $25,000 on November 29, 1997.
9. All Revenues from "Beretta's Island" shall be divided as
follows:
(a) Eclipse - 50%
(b) Columbu - 50%
10. Revenues shall be defined as the gross income actually
received by either party out of or in connection with the
picture.
11. Eclipse shall be entitled to a front single screen credit,
and a credit in all marketing and advertising as follows:
"Eclipse Entertainment Group Presents". Eclipse has the right to
substitute any other name for Eclipse Entertainment Group in
the credits.
"Double Cross"
12. You and Eclipse shall co-produce "Double Cross". You shall
carry out the duties and functions of producer of a feature
film suitable for theatrical or cable release, as the duties of
that position are commonly understood and rendered in the film
production industry. Eclipse shall name one or more producers to
work with you and you will work together, and in consultation
with each other in all aspects of the remainder of production.
13. You and Eclipse shall both participate in all related
promotional activities for the picture. The key personnel
participating in the production of the Pilot shall each receive
individual credit and Eclipse shall receive a front single screen
credit and advertising print credit under the name of its choice.
14. Eclipse shall contribute the amount of US$150,000 to the
production of "Double Cross" which is the budgeted cost of
completing "Double Cross" not including promotion and
distribution expenses. You covenant and agree that all of these
monies be used in completing the production of the film and none
of these monies are paid to you as any type of compensation.
Eclipse shall make the funds available for production as follows:
a) $50,000 on September 8, 1997;
b) $50,000 on September 16, 1997;
c) $50,000 on September 23, 1997.
15. You and Eclipse shall each own 50% of "Double Cross" and all
rights attached to the picture. Eclipse has the right to
purchase any portion of Columbu's percentage up to 100%, at a
mutually agreed upon price at any time.
16. You assign to Eclipse the sole and exclusive right and
license to exhibit, distribute and license under copyright the
exhibition of "Double Cross" theatrically and non-theatrically,
on television and other media, in all forms whether known or
unknown without limitation, and all other intellectual property
rights and ancillary rights in the picture for a period of seven
years.
17. In consideration for the transfer of all rights, licenses
and privileges attached to "Double Cross", and for producing the
picture, Eclipse shall pay you 150,000 shares of common stock in
Eclipse, with a one year trading restriction.
18. The Revenues of "Double Cross" shall be divided as follows:
(a) Eclipse - 50%
(b) Columbu - 50%
19. Revenues shall be defined as the gross income actually
received by either party out of or in connection with the
picture.
"Assault of the Lost Goddess"
20. You and Eclipse shall co-produce "Lost Goddess". You shall
carry out the duties and functions of producer of a feature film
suitable for theatrical or cable release, as the duties of that
position are commonly understood and rendered in the film
production industry. Eclipse shall name one or more producers to
work with you and you will work together and in consultation with
each other in all aspects of production. In the event of any
disagreement, the party which contributes the majority of the
production financing shall have final say.
21. You and Eclipse shall both participate in all related
promotional activities for the picture. The key personnel
participating in the production of the Pilot shall each receive
individual credit and Eclipse shall receive a front single screen
credit and advertising print credit under the name of its choice.
22. Eclipse shall contribute the amount of US$100,000 to the
production of "Assault of the Lost Goddess" towards the
budgeted cost of completing the picture. You covenant and
agree that all of these monies be used in completing the
production of the film and none of these monies are paid to you
as any type of compensation. Eclipse shall make the funds
available for the production as follows:
(a) $20,000 on September 16, 1997; and
(b) $80,000 when required for production.
23. You and Eclipse shall each own a percentage of "Assault of
the Lost Goddess" which is equivalent to the percentage of the
cost of producing and distributing the film which each party
contributes. Eclipse reserves the right to invest up to one
hundred percent of the total budget. Budget to be approved by
Eclipse.
24. You assign to Eclipse the sole and exclusive right and
license to exhibit, distribute, and license under copyright the
exhibition of "Assault of the Lost Goddess" theatrically and non-
theatrically and on television in all forms whether known or
unknown without limitation, and all other intellectual property
rights and ancillary rights in the picture for a period in
perpetuity.
25. Before any profits from "Assault of the Lost Goddess" are
distributed to the parties, each party shall first recoup their
expenses in the production and distribution of the picture pari-
passu.
26. The Net Profits of "Assault of the Lost Goddess" shall be
divided in accordance with the division of ownership which is
calculated by the percentage of the cost of producing and
distributing the film which each party contributes.
27. Net Profits of "Assault of the Lost Goddess" shall be
defined as the gross income actually received by either party out
of or in connection with the picture less all costs as disclosed
in the Budget, less all third party distribution, exhibition,
promotion and other like fees and expenses and less any legal and
administrative fees and expenses incurred in connection with the
picture.
Distribution
28. Franco Columbu will provide to Eclipse, at his expense, a
master print of "Beretta's Island" and "Double Cross". Any costs
for copies or prints required by buyers or sub-distributors of
the films will be incurred by the buyer or sub-distributor and
not by Eclipse.
29. Eclipse will pay only for costs directly related to
marketing, advertising, promotion, film markets and related
travel expenses of "Beretta's Island", "Double Cross", "Assault
of the Lost Goddess", and any future projects. All expenses must
be approved by Eclipse.
30. Eclipse will have final authority over any matters relating
to the distribution of "Beretta's Island", "Double Cross",
"Assault of the Lost Goddess", and any future projects.
All Pictures
31. Eclipse shall have the right to use and to license the use
of your name, sobriquet, photography, likeness, voice and
caricature in connection with Eclipse and all of the pictures.
32. You shall make available to Eclipse all physical elements of
the pictures "Beretta's Island", "Double Cross" and "Assault of
the Lost Goddess" and all documents and accounting information
related to the picture including all title and other reports and
searches, insurance policies, rights transfers and other
contracts, copyright and trademark searches and
registrations, legal or their expert opinions, all draft and
final budgets, accounting books, general ledger, receipts, and
all drafts and versions of the screenplays
33. You make the following representations and warranties
relating to each of the pictures "Beretta's Island", "Double
Cross", and "Assault of the Lost Goddess":
(a) you represent and warrant that you do know of any
claims or legal proceedings against you or any production
company owned by you, and any of its agents or employees,
related to the production or distribution of any of the pictures;
(b) you have clear title to the script and underlying ideas and characters
in each of the pictures, and you have written agreements with the creators
authors, writers and owners of all material in the pictures, and you have
registered, or are capable of registering copyright in the screenplays of the
pictures;
(c) you have releases from all persons who appear in the
pictures;
(d) you have written releases and authorization to use Arnold
Schwartzenegger's name and likeness in connections with
"Beretta's Island";
(e) you have synchronization and performance licenses from
the composers or copyright owners of all music used in
the pictures; and
(f) none of the pictures or their screenplays contain any
material which constitutes defamation or invasion of privacy.
34. If at any time Eclipse or its assignees or licensees are
alleged to be in breach or default of any provision of this
agreement, you shall be limited to a claim for damages in an
action at law and you specifically covenant and agree that you
will not be entitled to seek, obtain or enforce an injunctive or
other equitable relief unfettered exercise by Eclipse of all
rights, interests, licenses and property granted herein.
35. Eclipse shall have the right to assign this agreement and
any of the rights granted herein, in whole or in part, to any
person, firm, corporation or entity, and nothing contained
therein shall imply anything to the contrary. Upon the
assignee's assumption of the obligations of Eclipse with respect
to the rights so assigned, Eclipse shall be relieved of all such
obligations.
36. Writer agrees to sign a long form of this Agreement, and all
other documents which are required to carry out the terms of this
Agreement.
Agreed to and Accepted:
ECLIPSE ENTERTAINMENT GROUP, INC.
By: /s/ Arthur Birzneck
Arthur Birzneck, President
/s/ Franco Columbu
Franco Columbu
DISTRIBUTION AGREEMENT
This Distribution Agreement is made as of the 30th day of January
1997.
BETWEEN:
PINOY PRODUCTIONS INC., a company duly incorporated
under the laws of the Province of British Columbia with an office
at 7527 Kingway, in the City of Burnaby, in the Province of
British Columbia.
("Licensor")
PARTY OF THE FIRST PART
AND:
ECLIPSE ENTERTAINMENT GROUP, INC., a company duly
incorporated under the laws of the State of Nevada with an office
at 10900 N.E> 8th Street, Suite 900, in the City of Bellevue, in
the State of Washington, U.S.A., 98004
("Distributor")
PARTY OF THE SECOND PART
WHEREAS:
1. Licensor represents that it owns the rights granted to
Distributor; and
2. Distributor has agreed to accept such grant upon the terms
and conditions hereinafter set forth.
NOW THEREFORE WITNESS that in consideration of the covenants and
conditions hereinafter contained and other good and valuable
consideration, the parties agree as follows:
A. BASIC LICENSE TERMS
1. Elements
Title: Tentatively called "The Process."
Director: Ernie Reyes Jr.
In addition, to the foregoing, Distributor shall have approval of
the final script, music composer, editor, and final edit of the
Picture.
2. Licensed Rights/Territory/Language
Grant of Rights: Licensor hereby grants to Distributor the sole
and exclusive right and license to exhibit, distribute, and
license under copyright in the Territory, the exhibition of a
certain motion picture entitles "The Process" (the "Picture")
theatrically and non-theatrically and on television in all forms
whether now or hereafter known or hereafter known, including free
network television, syndicated television, pay television, pay
cable and by home video cassette, and all other devices whether
now or hereinafter known, without limitation or without
reservation in the original language version and in any other
language version in which the Picture will become available.
Territory: The territory shall consist of all of the Universe
(the "Territory").
3. Term
Starting on execution of this Agreement and ending 50 years after
delivery of the initial physical materials to Distributor.
4. Delivery Date
March 30, 1997.
B. FINANCIAL TERMS
In consideration of the rights, licenses and privileges herein
granted to Distributor, it is agreed that Distributor shall pay
to Licensor $100,000 U.S. to assist Licensor to complete the
Picture (the "Advance"). The Advance is payable once this
Agreement is signed and executed. The Gross Receipts derived
from the exhibition, distribution and exploitation of the Picture
in all media in the Territory shall be apportioned and paid as
follows:
1. On Gross Receipts to $250,000 U.S.: 100% to Distributor.
2. On Gross Receipts between $250,000 U/S/ and $1,000,000 U.S.:
75% to Distributor and 25% to Licensor.
3. On Gross Receipts between $1,000,000 U.S. and $2,500,000
U.S.: 80% to Distributor and 20% to Licensor.
4. On Gross Receipts above $2,500,000 U.S.: 85% to Distributor
and 15% to Licensor.
For purposes of this Agreement, "Gross Receipts" shall mean and
include all gross sums actually received by Distributor out of or
in connection with the exercise of the rights granted herein. In
no event shall the receipts of any exhibitor or other licensee of
Distributor be included in the Gross Receipts. Advance payments,
guarantees, and/or security deposits shall not be included in
Gross Receipts until earned by the exhibition of the Picture or
applied by Distributor to the Picture.
Once Distributor has paid Licensor $100,000 U.S. for completion
of the Picture, Licensor shall be irrevocably obligated to
transfer all rights in the Picture to Distributor, free and clear
of all liens and encumbrances. At that time, all rights to the
Picture shall be owned exclusively by Distributor.
C. RECOUPMENT OF EXPENSES.
The Distributor shall be entitled to deduct from the Gross
Receipts all reasonable expenses of distribution of the Picture
made by Distributor, up to a maximum of $150,000 U.S.
All of such expenses shall be recouped by Distributor prior to
payment of any monies to either party pursuant to paragraph B of
this Agreement.
D. ACCOUNTING AND PAYMENT
1. Distributor shall account and make payments to Licensor on a
quarterly basis within thirty days following the close of each
calendar quarter commencing on the initial release of the Picture
hereunder, and continuing until two years following such initial
release. Thereafter, accounting statements and payments shall be
made semi-annually for each semi-annual period during which the
Picture is in release hereunder. Accounting shall reflect Gross
Receipts and permitted deductions and shall be accompanied by
payment of such amount, if any, as may be payable to Licensor
hereunder. Notwithstanding anything to the contrary contained
herein, Distributor shall not be required to furnish statements
of account of any period in which there are no Gross Receipts or
Distribution Expenses after the date that is two years after the
initial release of the Picture. Licensor shall reimburse
Distributor on demand for any overpayments and Distributor may
deduct the amount thereof from any monies payable to Licensor
hereunder or under any other agreement between Licensor and
Distributor.
E. REPRESENTATION AND WARRANTIES OF LICENSOR
Licensor represents, warrants and covenants as follows:
1. Distributor shall have the right throughout the Term to
utilize, reproduce, transmit, broadcast, exploit, and publicize
the names, likenesses and voices of all persons appearing in or
rendering services, or contributing rights to the production of
the Picture.
2. Licensor will own or control all music in the Picture and
will have valid and subsisting synchronization, performing, and
other applicable licenses respecting such music as my be
necessary in connection with the full exercise by Distributor of
the rights.
3. The Picture shall be duly registered and otherwise protected
by copyright throughout the Territory prior to the date of
delivery hereunder and at all times during the Term.
F. DISTRIBUTOR'S DUTY
Distributor accepts the license herein granted to it and will in
good faith endeavor to distribute and exploit the Picture within
the Territory consistent with sound business policy. Subject to
the provisions of this Agreement, Distributor shall have full and
complete charge and control of the manner in which, and the terms
upon which, the Picture shall be marketed and distributed.
Nothing herein shall be construed as a representation of
Distributor as to the amount of Gross Receipts to be realized
pursuant to the distribution activities of Distributor.
G. INDEMNITY
1. Each of the parties hereto agrees to and does indemnify and
hold the other and the other's officers, employees, attorneys,
agents, principals, affiliates, successors, licensees, and
assigns harmless from and against any and all claims, losses,
liabilities, costs, expenses, and damages (including reasonable
legal fees and costs of suit) resulting from the breach or
alleged breach of any representation, warranty, or agreement
herein contained.
2. The rights and remedies of Licensor (or any person or entity
transferring rights or rendering services in connection with this
Picture), in the event of any breach of any provision of this
Agreement by Distributor, shall be limited to the right to
recover damages, if any, in an action at law, and in no event
shall Licensor or any such person or entity be entitled to enjoin
or restrain or otherwise interfere with the production,
distribution, or exhibition of the Picture or any part or element
thereof or the use, publication, or dissemination of any
advertising issued in connection with the Picture or to rescind
or terminate this Agreement.
H. DEFAULT
If Distributor shall fail to perform any of its material
obligations hereunder, or if Distributor shall breach any
material representation, warranty, or agreement contained herein,
Licensor's remedy shall be limited to an action or damages, and
in no event shall Licensor have the right whatsoever to terminate
or rescind this Agreement, interfere in any way with the
distribution of the Picture or seek to enjoin the distribution
and exploitation of the Picture, nor shall the rights acquired by
Distributor under this Agreement be subject to revocation or
rescission.
I. ASSIGNMENT
Licensor shall not have the right to any or all of its rights or
delegate any or all of its obligations hereunder to any person or
entity without the prior written consent of Distributor, which
consent shall not be unreasonably withheld or delayed.
Distributor may assign its rights or delegate its obligations to
any person or entity without restriction.
Notwithstanding anything to the contrary, this Agreement is
binding upon and shall enure to the benefit of the parties hereto
and their respective successors and assigns.
J. NO PARTNERSHIP
Nothing in this Agreement shall be construed to make Distributor
a partner, joint venturer, representative or agent of Licensor,
and neither Licensor not Distributor shall so hold itself out by
advertising or otherwise, nor shall either party be lawfully
bound by any representation, act or omission of the other.
K. ENTIRE AGREEMENT
This Agreement cannot be changed or terminated orally and no
amendments, modifications or assignments hereof shall be binding
upon either party until accepted in writing by a duly authorized
agent or officer of the other party. The titles of the
paragraphs of this Agreement are for convenience of reference
only and shall not in any way affect the interpretation of any
paragraph.
L. GOVERNING LAW
This Agreement is governed by the laws of the State of Nevada.
IN WITNESS WHEREOF the Licensor and Distributor have executed
this Agreement on the date first above written.
ECLIPSE ENTERTAINMENT GROUP, INC.
By: /s/ Arthur Birzneck
Arthur Birzneck, President
PINOY PRODUCTIONS INC.
/s/ Arthur Birzneck
Arthur Birzneck, President
<TABLE> <S> <C>
<S> <C>
<PAGE>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S AUDITED FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,236
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,236
<PP&E> 633
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,113,549
<CURRENT-LIABILITIES> 262,477
<BONDS> 0
0
0
<COMMON> 12,016
<OTHER-SE> 851,072
<TOTAL-LIABILITY-AND-EQUITY> 1,113,549
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 142,227
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (142,227)
<INCOME-TAX> 0
<INCOME-CONTINUING> (142,227)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (142,227)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
