<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ X ] Preliminary Proxy Statement [ ] Confidential, for use of the
Commission Only (as Permitted
[ ] Definitive Proxy Statement by Rule 14-a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or
(S) 240.14a-12
Hollywood Trenz, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Shareholders Committee of Hollywood Trenz, Inc.
----------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ X ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
(i) Title of each class of securities to which transaction applies:
(ii) Aggregate number of securities to which transaction applies:
(iii) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
(iv) Proposed maximum aggregate value of transaction:
(v) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
THE SHAREHOLDERS COMMITTEE
OF HOLLYWOOD TRENZ, INC.
c/o Victor L. Zimmermann, Jr.
O'Rourke O'Hanlan & Zimmermann
27 Pine Street
New Canaan, CT 06840
(203) 966-6664
SOLICITATION OF PROXIES IN OPPOSITION
TO MANAGEMENT
Consent Solicitation and/or Annual Meeting of Shareholders
July 1, 1996
Hollywood Trenz, Inc.
3471 North Federal Highway
Ft. Lauderdale, Florida 33306
Copies of this proxy statement and form or proxy
are being mailed on or about ____________, 1996
to shareholders of record as of ___________, 1996
---------------------------------------------------------------------------
---------------------------------------------------------------------------
<PAGE>
Dear Fellow Hollywood Trenz Shareholders:
The Shareholders Committee of Hollywood Trenz, Inc. (the "Committee")
believes that the time has come to seek new shareholder representation on the
Board of Directors of Hollywood Trenz, Inc. (the "Company"). Through these
changes, the Committee believes that the Company's Board of Directors and
management will be more able to accomplish the corporate purpose of the Company,
including the completion of the Company's entertainment center in Phoenix,
Arizona, and expansion and development of other theme parks, both domestically
and abroad, and resultant maximization of the value of the Company's shares. To
accomplish this goal, the Committee needs your support and your proxy. The proxy
will be used to execute a consent to action by shareholders without a meeting
whereby new directors will be elected. The proxy may also be used to elect
directors at an annual meeting of shareholders of the Company to be held as soon
as the Committee is able to require the Company to hold an annual meeting of
shareholders.
Unless otherwise indicated, the person named in the accompanying BLUE
proxy will execute a consent to action without a meeting and/or will vote
properly executed and duly returned proxies FOR the following purposes:
1. FOR the removal of any bylaw amendments adopted by the Board of
Directors of the Company on or after March 31, 1996, which
restrict the rights of shareholders to nominate and/or elect
persons for election to the Board of Directors of the Company,
and to raise matters for consideration of the shareholders at the
Company's annual shareholders' meeting.
2. FOR the removal of the following directors of the Company:
Edward R. Showalter
Robert E. Burton, Jr.
Gregory D. Smith
3. FOR the election of the Committee's nominees for Director.
Should other proposals be brought before the next scheduled annual
meeting of shareholders, the person named in the BLUE Proxy shall have
discretionary authority to vote in accordance with what they consider to be the
best interests of the Company's shareholders.
If, after reading the Proxy Statement and the accompanying letter, you
want to join us in seeking achievement of the corporate purposes of the Company:
MARK the enclosed BLUE Proxy to indicate your vote.
SIGN the enclosed BLUE Proxy
DATE the enclosed BLUE Proxy
RETURN the enclosed BLUE Proxy in the postage prepaid envelope.
<PAGE>
YOUR VOTE IS IMPORTANT TO US NO MATTER HOW MANY OR HOW FEW SHARES YOU
OWN. PLEASE MARK THE BLUE PROXY, SIGN, DATE, AND RETURN IT PROMPTLY IN THE
ENCLOSED, SELF-ADDRESSED, STAMPED ENVELOPE. BLUE PROXIES WHICH ARE SIGNED, BUT
UNMARKED, WILL BE COUNTED AS VOTES IN FAVOR OF THE ACTIONS DESCRIBED ABOVE.
YOU may be receiving a WHITE PROXY from the Company opposing the efforts
of the Committee. WE URGE YOU NOT TO SIGN ANY WHITE PROXY CARD YOU MAY RECEIVE
FROM THE COMPANY.
Any proxy may be revoked at any time before the proxy is exercised by
either a later dated proxy, written notice of revocation to the Secretary of the
Company at its principal office, or a vote in person at the Meeting. THE ONLY
PROXY THAT COUNTS IS THE LATEST, DATED ONE. IF YOUR SHARES OF THE COMPANY'S
STOCK ARE HELD IN THE NAME OF YOUR BROKER, BANK, OR THEIR NOMINEE, YOU WILL NEED
TO CONTACT YOUR BROKER OR BANK TO GIVE INSTRUCTIONS AS TO THE VOTING OF YOUR
STOCK.
As more fully described elsewhere in the Proxy Statement, the Committee
and its nominees are not members of the Company's current management.
If you have any questions or require any assistance in completing your
BLUE Proxy, please call Michael Noveilli at (212) 983-1060.
WHY THE COMMITTEE IS SOLICITING PROXIES
Michael Noveilli, Eric Landis, Scott MacCaugheran, and Kenneth Callison,
who as of June 30, 1996, owned, of record or beneficially, in the aggregate
1,622,975 shares or approximately 5.2% of the outstanding shares of the Company,
decided to form the Committee and make this proxy solicitation after they came
to believe, as described below, that current management's policies were not
directed towards achieving the corporate purpose of the Company and allowing
shareholders to exercise their legitimate rights as shareholders. Mr. Noveilli,
Mr. Landis and Mr. MacCaugheran are all members of the securities industry, and
have purchased shares of the common stock of the Company for themselves and for
their customers, after being convinced by the Company's President, Edward R.
Showalter ("Showalter"), of his vision for the Company and the concrete steps
which were allegedly being taken to realize the corporate purpose. Mr. Callison
is a shareholder who has made a substantial investment in the Company.
The Committee, which consists of the foregoing persons, has recently
become increasingly dissatisfied with the Board of Directors and management of
the Company. The Committee's primary concerns regarding the Company are:
. Waste of corporate assets.
. Inability to fulfill the corporate purpose of the Company.
. Dilution of shareholder value
. Inadequate strategic planning.
. Failure to hold an annual shareholders' meeting the entire
period the Company has been a public company.
Showalter for all intents and purposes, is Hollywood Trenz. The
shareholders exist in name and on paper only, since there has been no annual or
other meeting of
<PAGE>
shareholders in the Company's existence. There is currently no oversight
available to control Showalter and prevent continued dilution of shareholder
value, waste of corporate assets, and the continued inability to fulfill the
corporate purposes of the Company. To date, the shareholders have stood by and
watched without ability to vote or be heard, as Showalter has issued 29,680,000
shares of the Company's common stock over the last two and one-half years, all
for purported services rendered and most, if not all, without bringing needed
capital to the Company. These issuances have substantially diluted shareholder
value without any resulting benefit to the Company. As recently as October 31,
1994, there were 1,486,495 shares outstanding as opposed to approximately
30,555,544 which it is believed the Company maintains are outstanding as of this
date. As a result of Showalter's mismanagement, the price of the Company's
common stock has deteriorated from a value of approximately $4.00 per share on
March 31, 1995 (after a one-for-ten reverse stock split in 1994) to the current
level of approximately $.10.
Currently, creditors, contractors, vendors, and former employees are in
litigation with the Company. Construction has stopped on the Company's
entertainment center in Phoenix, Arizona, and the Company has never begun
meaningful construction on its site in Denver, Colorado.
The Committee believes that Showalter has continued to mislead investors
as to what is really going on at the Company. The Committee believes that
Showalter has in fact personally benefited by the issuance of stock to others,
allegedly for bona fide services and has been able to finance an extravagant
lifestyle as a result.
The Committee has learned that Showalter has had a prior background of
business mismanagement and criminal conduct. As a result of his ownership of a
garment company, America's Favorite Clothing, in the mid-1980s, Showalter ceased
business without paying his creditors and was sued for over $200,000.00 and
faced criminal charges for his conduct. Showalter plead no contest to grand
theft and was placed on a fifteen year probationary term in order to make
restitution. Showalter also declared personal bankruptcy in 1990. None of
these events were ever disclosed to shareholders, events which the Committee
considers clearly material to the shareholders' decision to vote with respect to
the election of directors and to a shareholders' decision to buy, sell, or
continue to hold one's shares.
In the Committee's opinion, new management is needed immediately if the
Company is going to survive. As a result of what the Committee has learned, the
Committee has decided to take action and a legal action was recently filed
against Showalter and the other members of the Board in the Court of Chancery of
the State of Delaware, on behalf of one of the Committee's members. This
action seeks to enjoin the continued fraud, mismanagement, and improper dilution
of stock ownership by the current directors of the Company. The Complaint in
this action is annexed hereto as Appendix B.
The Committee believes that the Company's management and management
policy should be subject to independent and objective review and that new
directors are required, bringing a fresh and open perspective to the direction
of the Company.
For these reasons, the Committee has resolved to make this solicitation,
in an effort to ensure that all shareholders of the Company have the choice of
electing new, independent directors to the Board who are committed to the
pursuit of corporate purposes and the maximization of shareholder value. If
action by the shareholders of the Company results in the election of a new Board
of Directors nominated by the Committee, the new directors will initiate an
aggressive reorganization and institute a construction plan to complete the
Company's first entertainment center in Phoenix, Arizona, which has been
<PAGE>
beset by problems since construction commenced in July, 1995. In addition, the
new Board of Directors will recommend closing the current's non-essential
headquarters location in Ft. Lauderdale, Florida, effective immediately, and
move into space at the Company's entertainment center in Phoenix. This will
result in obvious cost savings to the Company and also result in greater
management oversight of the Company's initial center, especially during its
embryonic stage. Also upon election, the new Board of Directors will install an
interim management committee whose sole responsibility will be to direct the
completion of the project in a timely and expeditious fashion. The search for a
legitimate, well-seasoned, high-profile CEO with an established industry track
record will begin immediately. Through a joint venture agreement with Sunkyong
Securities Ltd. of Seoul, Korea, and Hollywood Trenz together, have anticipated
opening the first international Hollywood Trenz center in Seoul, Korea, within
12 months. Sunkyong Securities is the brokerage and investment banking division
of the Sunkyong Group ("SKG"), the fifth largest conglomerate in Korea. With
revenues of over $24 billion, SKG ranks among the top 100 of the Fortune Global
500. One of the Committee's nominees is currently a consultant with the Sunkyong
Group, and had previously been employed by the Sunkyong Group for some time.
This nominee has acted as the contact in facilitating the current agreement
between SKG and the Company.
The new Board of Directors is well diversified and represents highly
ethical and competent individuals in industries well suited to guide Hollywood
Trenz through this critical stage. The strategy of combining a strong management
team, well defined corporate goals, and an unbridled focus on the exponential
growth of earnings per share, will ultimately lead to maximizing shareholder
value, and enable all of us to participate in the success of this exciting
endeavor. Reference is made to the table under "PRINCIPAL SHAREHOLDERS" below
and Appendix "A" attached for further information about the members of the
Committee.
We believe that corporate democracy depends on the voice of the
shareholders, as reflected in your vote. We urge you to take an active part in
ensuring shareholder democracy at the Company and in choosing the directors of
your Company.
REMOVAL OF DIRECTORS
For the reasons set forth above, the Committee believes that the
Company's Board of directors has not been acting in a manner which is consistent
with the best interests of the Company and its shareholders. Under Delaware
corporate law, the Company's shareholders are permitted to remove directors of
the Company with or without cause. The Committee believes that the removal of
the following persons from the Company's Board of Directors is in the best
interest of the Company and its shareholders:
Edward R. Showalter
Robert E. Burton, Jr.
Gregory D. Smith
The persons named in the BLUE Proxy or their substitutes will execute a
consent to action without a meeting on your behalf and with the shares owned by
you and/or may vote the shares represented by such proxy at the next annual
meeting of shareholders, or at the adjournment of the meeting for the removal of
the above-referenced persons from the Company's Board of Directors unless you
withheld authority to so vote with respect to one or more Directors by marking
the appropriate space in the BLUE Proxy.
<PAGE>
ELECTION OF DIRECTORS
According to the Company's bylaws, the term of office of each director
expires every one year. The number of directors is currently fixed at three. All
directors are supposed to be elected each year.
The Committee has proposed removal of all of the Company's three current
directors. The committee has assembled nominees for directors whom it believes
are highly qualified and have the talent, vision and experience necessary to
maximize shareholder value while overseeing the Company's business. Any person
so appointed will serve until his successor is elected and qualified.
The persons named in the BLUE Proxy or their substitutes will execute a
consent to action without a meeting which action will result in the election of
the Committee's nominees listed below (the "Committee's Nominees") as directors
unless you withhold authority by marking the appropriate space on the BLUE
Proxy. If the consent procedure is not effective the person named in the BLUE
Proxy will use the proxy to cast your votes at an annual meeting of
shareholders, whenever one can be held.
Each of the Committee's Nominees has agreed to serve as a director if
elected. If any of the Committee's Nominees should become unavailable for
election (which contingency is not now expected), the shares represented by the
BLUE Proxy will be voted for such substitute nominees(s) as the Committee may
name.
If elected as directors of the Company, each of the Committee's Nominees
will devote such portion of his time as he deems appropriate to serve as a
director of the Company. If elected, the nominees will suggest that the Board of
Directors initially meet monthly with additional Board meetings held as needed.
Except as set forth in this Proxy Statement, as of the date hereof, none
of the committee's members and nominees, nor any of their respective affiliates
have or intend to have any arrangement or understanding with any person with
respect to any future employment by the Company or with respect to any future
transaction to which the Company or any of its affiliates will or may be a
party. None of the Committee's nominees have had any business relationships with
the Company during its last fiscal year nor are any of the Committee's nominees
employed by the Company or any of its subsidiaries or affiliates.
To the extent practicable, the Committee desires to be able, through the
election of its slate, to direct the policies of the Board of Directors of the
company with the least possible disruption to the Company's business and
employees. There can be no assurance, however, that all key personnel will
remain in the employ of the Company even if requested to do so. None of the
committee members has any current intention of making a proposal with respect to
any merger or similar transaction involving the Company.
<PAGE>
THE COMMITTEE'S NOMINEES
The following table sets forth certain information concerning the Committee's
Nominees:
Name Age Principal Business Occupation
- ---- --- For the Last Five Years
-----------------------
Joseph B. LaRocco 37 Attorney, Stamford, Connecticut
since 1982. Mr. LaRocco
represents securities firms,
investment funds, investment
banks, and corporate finance
firms.
Alfred Hahnfeldt 50 Founder and Chief Executive
Officer of the NetStar Company,
a company specializing in the
design, development and
installation of interactive
voice response systems which
enable companies to provide
services for customers on the
Internet. Also founder and Chief
Executive Officer of Spinneret
Financial Systems, Ltd., a
financial consulting firm.
Formerly Vice President and
Chief Financial Officer for HO
Penn Machinery Company, Inc. at
$180 million Caterpillar
dealership. B.A. Yale University
1968.
Gregory F. Witchel 36 Mr. Witchel has served as the
President of a corporate finance
and investor relations firm
since 1994. He served as Vice-
President of the firm from 1985
to 1994. Mr. Witchel received a
Bachelor of Arts degree from
Ithaca College and a Masters of
Business Administration from
Baruch College of the City
University of New York.
Ronald D. Olsen 60 President, Human Resources
International. Formerly Managing
Director of Sunkyong Group of
Korea, a major multinational
conglomerate, from 1987-1996.
Executive with IBM corporation
from 1958-1987.
Except as indicated in the foregoing table, none of the Committee members own
any shares of the Company solely of record but not beneficially. Appendix "A"
hereto lists all purchases and sales of securities of the Company made within
the past two years by members of the Committee, the Nominees and their
associates.
No member of the Committee or Nominee is or has been within the past year a
party to any contracts, arrangements or understandings with any person with
respect to any securities of the Company including, but not limited to, joint
ventures, loan or option arrangements, puts or calls, guarantees against loss or
guaranties of profit, division of
<PAGE>
losses or profits or the giving or withholding of proxies except as noted
below./1/ None of the members of the Committee or the Nominees has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors during the last ten years).
Except as indicated in the foregoing table, no associates of members of the
committee or associates of Nominees to the Board of Directors holds any common
stock of the Company.
SOLICITATION OF PROXIES
The Committee expects to solicit proxies by mail, telephone, telegram and
personal interview. The Committee will also request brokers, custodians, and
other nominees to forward solicitation materials to the beneficial owners of the
voting securities of the Company, and they will be reimbursed for their
reasonable out-of-pocket expenses.
All of the expenses of this solicitation will be borne by the Committee. It
is estimated that the total costs incurred to date in connection with this
solicitation have been approximately $15,000 and that it is estimated that a
total of approximately $100,000 (including legal fees) will be expended in
connection therewith. It is the Committee's beliefs that this solicitation will
enhance the value of all shareholders' is in the Company. Accordingly, the
Committee intends to seek reimbursement from the Company of the costs of this
solicitation in the event that it is successful in removing Edward R. Showalter
as a director and then only to the extent cash flow permits and such
reimbursement does not materially affect the Company's ability to complete
construction on its Phoenix site. The Committee will submit the question of
such reimbursement to a vote of the shareholders.
- -----------------------------
/1/ Michael Noveilli, a member of the Committee, executed a consulting agreement
in April, 1996 whereby he agreed to attempt to find sources of capital for the
Company. Pursuant to this agreement, Mr. Noveilli was to receive shares of the
Company's common stock to be issued immediately, the purpose of which was to
compensate him for his efforts to locate sources of capital as well as to
recognize his assistance in locating market makers for the Company's stock and
negotiating an agreement with Sunkyong Securities Ltd.. The shares were not
issued and Mr. Noveilli thereafter decided he could no longer continue to work
with Mr. Showalter and decided to assist in forming the Committee. Mr. Noveilli
has agreed to waive any claim pursuant to this agreement, which he may have
against the Company, in the event the Committee's nominees are elected.
<PAGE>
[Front of the proxy]
THIS PROXY IS BEING SOLICITED BY THE SHAREHOLDERS
COMMITTEE OF HOLLYWOOD TRENZ, INC.
To Be Used At Next Annual Meeting of Stockholders and/or to Act by
Written Consent Without A Meeting
July 1, 1996
The undersigned hereby revokes all prior proxies given by the undersigned and he
hereby appoints Eric T. Landis, Michael Noveilli and Scott MacCaugheren, or any
one of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them and each of them to represent the undersigned either to
act by written consent without a meeting for the purposes set forth below and/or
to vote at the next annual meeting of shareholders, and at any adjournment
thereof, with all powers which the undersigned would possess if personally
present, all of the shares of Hollywood Trenz, Inc., standing in the name of the
undersigned, upon such business as may properly come before the meeting as
follows:
1. Amend the Company's Bylaws to remove amendments after April 1, 1996, (if
any), which impose certain requirements upon shareholders who wish to
nominate a person to the Company's Board of Directors or bring any other
business before an annual meeting of the shareholders of the Company.
[ ] For [ ] Against [ ] Abstain
2. Remove the following Directors:
Edward R. Showalter
Robert E. Burton, Jr.
Gregory A. Smith
[ ] For [ ] Against [ ] For the Removal of All Except
INSTRUCTIONS: To withhold authority to vote for the removal of any director,
mark the "For All Except" box and write the name(s) of the director(s) as to
whom your vote is to be withheld in the space provided below.
- --------------------------------------------------------------------------------
------------
3. Elect the following Directors for a one-year term:
Ronald D. Olsen
Gregory F. Witchel
Joseph B. LaRocco
Alfred Hahnfeldt
[ ] For [ ] Against [ ] For All Except
INSTRUCTIONS: To withhold authority to vote for any nominee, mark the "For All
Except" box and write the name(s) of the nominee(s) for whom your vote is to be
withheld in the space provided below.
<PAGE>
- --------------------------------------------------------------------------------
- ------------
4. In their discretion, the Proxies are authorized to vote upon such other
business as may be properly presented to the meeting or any adjournment or
adjournments thereof.
[This is the back of the proxy]
THIS PROXY IS SOLICITED ON BEHALF OF THE SHAREHOLDERS COMMITTE OF HOLLYWOOD
TRENZ, INC. THE COMMITTE RECOMMENDS AFFIRMATIVE VOTES ON PROPOSALS ONE, TWO,
AND THREE. SHARES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE
SHARES REPRESENTED WILL BE VOTED IN FAVOR OF PROPOSALS ONE, TWO, THREE, AND
FOUR.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
- ----------------------------------
RECORD DATE SHARES
(signature) X: Date:
---------------------------- -------------------
(signature) X: Date:
---------------------------- -------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
<PAGE>
APPENDIX "A"
------------
INFORMATION ABOUT THE COMMITTEE AND THE NOMINEES
------------------------------------------------
All securities of the Company set forth in this Appendix are owned
beneficially by the persons indicated in the table below, except as described in
the table. No funds were borrowed to acquire such shares. No member of the
Committee or Nominee is or has been within the past year a party to any
contracts, arrangements or understandings with any person with respect to any
securities of the Company including, but not limited to joint ventures, loan or
option arrangement, puts or calls, guarantees against loss or guaranties of
profit, division of losses or profits or the giving or withholding of proxies
except the agreement with Michael Noveilli previously set forth above.
Names and Business Addresses of Committee
-----------------------------------------
Michael Noveilli Kenneth Callison
Scharff, Witchel & Company Allied Health Association
60 East 42nd Street 7936 East Arapahoe Court
Suite 763 Suite 2300
New York, NY 10165 Englewood, CO 80112
Scott MacCaughern Eric T. Landis
Round Hill Securities Merit Capital Associates, Inc.
5263 Heather Lane 1221 Post Road East
Park City, UT 84060 Westport, CT 06880
Names and Business Addresses of Nominees
----------------------------------------
Gregory F. Witchel Ron Olsen
Scharff, Witchel & Company c/o Merit Capital Associates,
Inc.
60 East 42nd Street 1221 Post Road East
Suite 763 Westport, CT 06880
New York, NY 10164
Alfred Hahnfeldt Joseph B. LaRocco
Spinneret Financial Systems, Ltd. 1055 Washington Boulevard
One Marshall Street Stamford, CT 06901
Suite 206
South Norwalk, CT 06854
Purchases and Sales of Shares of Company Common Stock, No Par Value
-------------------------------------------------------------------
Committee Member Date Buy/Sell Number of Shares
- ---------------- ---- -------- ----------------
Eric Landis 7/11/95 B 45,000
7/14/95 B 5,000
7/31/95 B 100
9/28/95 B 15,000
10/2/95 B 6,450
<PAGE>
10/3/95 B 5,000
10/16/95 B 20,000
11/15/95 B 20,000
12/14/95 B 50,000
12/14/95 B 50,000
12/20/95 B 50,000
2/9/96 B 20,000
2/12/96 B 20,000
2/23/96 B 50,000
2/26/96 B 50,000
3/6/96 B 9,000
3/7/96 B 14,000
3/8/96 B 30,450
3/11/96 B 3,000
3/11/96 B 5,000
3/12/96 B 4,000
3/12/96 B 3,000
3/13/96 B 5,000
3/18/96 B 10,000
3/26/96 B 7,000
3/27/96 B 33,000
3/27/96 B 30,000
3/29/96 B 97,000
4/22/96 B 57,000
4/29/96 B 3,000
5/31/96 B 7,000
7/11/95 S 20,000
2/16/96 S 55,000
3/13/96 S 45,000
3/26/96 S 7,000
3/28/96 S 30,000
5/31/96 S 7,000
6/10/96 S 60,000
William Landis 8/11/95 B 20,000
(father) 11/7/95 B 5,000
11/13/95 B 15,000
12/14/95 B 50,000
12/20/95 B 100,000
1/31/96 B 135,000
3/13/96 B 45,000
3/26/96 B 70,000
3/27/96 B 30,000
3/28/96 B 10,000
3/29/96 B 100,000
4/30/96 B 5,000
4/30/96 B 20,000
5/1/96 B 85,000
5/2/96 B 30,000
5/3/96 B 20,000
<PAGE>
5/6/96 B 14,000
5/6/96 B 30,000
5/7/96 B 20,000
5/7/96 B 30,000
5/8/96 B 10,000
5/8/96 B 10,000
5/9/96 B 15,000
6/10/96 S 19,000
Ronald D. Olsen/2/ 7/24/95 B 6,550
2/9/96 B 25,000
Scott MacCaughern (owner of record or beneficially owned)
Eileen MacCaughern 4/5/95 B 1,000
(mother) 4/6/95 B 100
4/6/95 B 2,000
8/30/95 B 17,400
Barbara Pires 4/25/85 B 2,000
(sister) 5/2/95 B 1,475
Linda Lee 10/18/96 B 2,450
(sister-in-law)
Michael Noveilli 4/6/96/3/ B 79,000
(individually) 5/6/96 S 10,000
5/8/96 S 10,000
Mr./Mrs. Michael 8/22/95 B 10,000
Noveilli, Sr. 1/18/96 B 10,000
(father and mother)
Kenneth Callison 9/27/94 B 30,000
9/28/94 B 20,000
11/7/94 B 5,000
12/15/94 B 2,650
12/16/94 B 2,350
6/11/96 B 25,000
6/12/96 B 51,000
- ----------------------------------
/2/ Also a Nominee for director
/3/ Shares journaled from Allied Capital on April 6, 1996.
<PAGE>
Nominees for Director
---------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Alfred Hahnfeldt 1/26/95 B 10,000
2/17/95 S 7,000
2/24/95 S 3,000
3/13/95 B 3,500
3/30/95 S 3,500
Joseph B. LaRocco 8/19/95 B 10,000
1/5/96 B 15,000
2/9/96 B 25,000
</TABLE>
<PAGE>
APPENDIX "B"
------------
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
KENNETH CALLISON, )
)
Plaintiff, )
)
v. )
)
EDWARD R. SHOWALTER, )
ROBERT E. BURTON, JR., )
GREGORY D. SMITH, ) C.A. No. 15036
)
Defendants, )
)
and )
)
HOLLYWOOD TRENZ, INC., )
a Delaware corporation, )
)
Nominal Defendant. )
FIRST AMENDED INDIVIDUAL AND
DERIVATIVE COMPLAINT FOR INJUNCTIVE RELIEF
------------------------------------------
Plaintiff Kenneth Callison, by his undersigned attorneys, brings this
action individually and derivatively on behalf of Hollywood Trenz, Inc., a
Delaware corporation ("Hollywood Trenz," "HTZI", or the "Company") to enjoin the
continued fraud, mismanagement and improper dilution of stock ownership by the
current directors of the Company. Plaintiff alleges as follows:
Introduction
------------
1. Edward Showalter ("Showalter"), for all intents and purposes,
is Hollywood Trenz. The Board of Directors of Hollywood Trenz exists in name and
on paper only. There is no managerial entity available to rein in Showalter's
massive, sustained, and debilitating fraud on the public, the corporation or its
shareholders. This Court's unequivocal intervention is needed to salvage the
dire circumstance this company faces and to stop a fraud upon the investing
public.
2. Showalter, the Chairman of the Board of Directors and
President of Hollywood Trenz, a sophisticated con artist who has concealed his
past and current misdeeds from the investing public. Among the more glaring
deficiencies in the management and operation of Hollywood Trenz is the fact that
it has never held an annual meeting of shareholders -- a circumstance that
plaintiff seeks to remedy through a separate action pursuant to 8 Del. C. (S)
---- --
211 filed on June 6, 1996. But until the stockholders can hold an honest
election of directors,
<PAGE>
plaintiff needs this Court's intervention to stop the unlawful conduct by
Showalter -- conduct undertaken with the apparent knowledge and acquiescence of
the remaining two directors.
THE PARTIES
-----------
3. Plaintiff Kenneth Callison is and, since June of 1994, has
been a shareholder of Hollywood Trenz, currently holding approximately 24,000
shares.
4. Defendant Hollywood Trenz is a Delaware corporation. It was
initially known as Dimension Capital, Inc. ("Dimension"), and existed as a
publicly traded shell corporation. In 1993, Dimension acquired all of the stock
of Interstate Finance and Trust Co. ("Interstate"), a private company owned and
operated by Edward Showalter. In the acquisition by Dimension, Showalter
obtained control of a publicly traded entity through a transaction that did not
have to withstand scrutiny by the SEC or underwriters' counsel, a process he
would not likely have withstood given his background. Showalter then changed
the name of Dimension to Hollywood Trenz.
5. Defendant Showalter is the Chairman of the Board of Directors,
President and CEO of Hollywood Trenz. He is also a convicted felon (grand
theft), a tax cheat, and a check kiter who declared personal bankruptcy in 1990
to avoid paying legal judgements against him.
6. Defendant Robert Burton ("Burton") is Vice Chairman of the
Board, Chief Operating Officer and Secretary of the Company. Formerly a partner
in the Ohio law firm of Squire, Sanders & Dempsey, Burton was induced by
Showalter to participate both as an investor and as part of the management of
Hollywood Trenz. Burton has lost over $400,000, including his retirement
savings, as a result of his relationship with Showalter, and he has apparently
determined that he is now in too deep and his only hope of recouping his money
is to aid and abet Showalter. He has actively and knowingly assisted Showalter
in his illegal schemes to issue stock.
7. Defendant Gregory Smith ("Smith") is a director of the company
and also owns a separate company involved in aircraft charters. Smith has
actively participated with Showalter and Burton to authorize corporate waste,
gross mismanagement, and fraud.
SHOWALTER'S BACKGROUND
----------------------
8. Showalter's entreprenuerial career began with his formation of
America's Favorite Clothing, a garment company. It failed in the mid 1980's and
would be unremarkable except for one fact: Showalter ceased business without
paying his creditors. One of them sued him for over $200,000. Facing criminal
charges for his conduct, Showalter pled no contest to grand theft and was placed
on a 15-year probationary term and ordered to make restitution. Showalter has
never disclosed his conviction for grand theft in any public filings with the
SEC relating to Hollywood Trenz, despite having a legal obligation under
applicable SEC rules and regulations to make such disclosure.
9. Also not disclosed to the SEC -- or the investing public --
was the fact that as a consequence of numerous bad business deals, Showalter was
<PAGE>
so deeply in debt that in 1990 he declared personal bankruptcy. As a director of
a publicly traded company, Showalter is required to disclose in appropriate SEC
filings the fact of his personal bankruptcy.
10. Each of the above factors -- all certainly relevant to any
investor considering whether to entrust his money to a business controlled by
Showalter -- were concealed from the SEC, which is presumably one reason the SEC
has launched an investigation into Showalter's activities at Hollywood Trenz.
HOLLYWOOD TRENZ -- BUSINESS BACKGROUND
--------------------------------------
11. Hollywood Trenz began as a T-shirt and memorabilia store in
Sarasota, Florida. This effort has since closed down completely with,
predictably, a judgment by creditors against Showalter for $81,682.
Nonetheless, Showalter has been successful in actively promoting Hollywood Trenz
as a company that will establish family theme parks to include arcades, laser
tag, a toddler's play area, a retail store and theme restaurant. To date,
despite issuing millions of shares of stock and raising millions of dollars from
investors, development of this idea consists of little more than one shell in a
strip shopping center in Phoenix, Arizona.
12. As Showalter began to raise capital for his scheme, he
announced that he would open theme parks in Denver and Phoenix. After spending
$1.2 million on the Denver effort, Showalter has abandoned it while failing to
pay the landlord even the security deposit on the land. At the Phoenix site,
there have been some site improvements which have also been abandoned with,
again, lawsuits and mechanic's liens in their wake. The company is functionally
bankrupt and is being propped up financially only by Showalter's continued
fraudulent stock sales to the public.
SHOWALTER'S SCHEME
------------------
13. As described above, the method by which Showalter came to
control a publicly traded corporation enabled him to avoid an initial public
offering with the attendant review by the SEC and due diligence investigations
by underwriters' counsel. By simply merging with an existing publicly traded
company, Showalter was able to begin marketing his scheme to the public through
the public entity, renamed Hollywood Trenz.
14. Whether the concept marketed by Showalter would have succeeded
under different managers remains unresolved. It is clear enough, however, that
under Showalter's tutelage, Hollywood Trenz has been an unmitigated disaster for
all but Showalter. Shareholders have seen the value of their investment drop
like a stone from $17.00 per share in April of 1994 to $.14 currently due to
mismanagement and fraudulent dilution of the stock. Creditors, contractors,
vendors and former employees all are in some form of litigation with the
company. Showalter, meanwhile, routinely rides in limousines, rented Lear jets
charged to the Company by Director Greg Smith and resides in an $800,000 house
in Florida, all financed for his benefit by the Company with funds derived from
the fraudulent registration and sales of stock.
15. Publicly traded companies such as Hollywood Trenz are
permitted to register securities that are offered to employees on SEC Form S-8.
Under SEC rules applicable to Form S-8 registrations, the term "employee"
<PAGE>
includes independent contractors working under a written contract. Unlike other
registrations, a Form S-8 registration statement is not reviewed by the SEC and
is effective immediately upon filing. The issuer -- which must be a publicly
trading entity already subject to SEC filing requirements -- benefits from the
streamlined registration process while the recipient of the stock benefits from
the fact that the stock is freely tradeable and thus can be reduced to cash by a
sale on the open market. The use of Form S-8 is restricted by law in one respect
explicitly: it may not be used by an issuer to raise capital.
------------------------------------------------
16. Unfortunately, the Form S-8 procedure affords an opening for
the unscrupulous. Shares can be registered using Form S-8 and issued to a
willing independent contractor/employee/co-conspirator who never performs the
services that were to be rendered, keeps only a fraction of the shares for
him/herself and "kicks back" the remainder to the issuer or his nominee. The
nominee then sells the shares in the public market and turns the proceeds over
to the issuer or to insiders for their personal benefit.
17. This is precisely the scheme that Showalter has hit upon.
Since October of 1993, Showalter has been to the well of Form S-8 no less than
12 times, causing Hollywood Trenz to issue over 17 million shares of stock to
purported "consultants," many of whom never performed services .
18. The scheme has been outlined in some detail by Timothy Brannon
("Brannon"), a former Hollywood Trenz insider who has come forward to explain
the fraudulent activity to the SEC and others in his affidavit filed on June 6,
1996 in this case.
19. Brannon was initially hired by Showalter to be a manager.
Shortly after his hiring, however, and on four subsequent occasions, Brannon was
asked directly by Showalter to sign overlapping consulting agreements with
Hollywood Trenz for millions of shares of Hollywood Trenz stock. Brannon was
told by Showalter and Burton that he was signing for large blocks of stock to be
registered on Form S-8 but that only a tiny fraction of the stock would actually
go to him for his personal benefit. Showalter would cause the rest to be issued
in the name of various other individuals and entities. Thereafter, with the
assistance of Brannon, Showalter would find persons to buy the stock at a
discount from the current market price. In other instances, Showalter simply had
stock issued to his personal creditors, who could then sell the stock on the
open market to satisfy Showalter's obligations to them.
20. For example, based on his personal experience and
conversations with Showalter, Brannon has testified under oath that:
shares are being issued as a result of the S-8 offerings to individuals
and/or entities who have not been the bona fide provider of services to
the Company. I believe that Mr. Showalter has continued to use the Form
S-8 to register shares of Hollywood Trenz which are then transferred to
individuals or entities with whom he has a close personal relationship
and who have an arrangement with him to let him participate in the
proceeds received by the subsequent sale of the stock. I know
<PAGE>
that shares registered to Euro International Designs [Showalter's
wife's company] have then been issued to companies who have helped
Showalter with personal services such as secure financing for his
personal residence. I am specifically aware that 300,000 shares
registered in the name of his wife's company were then transferred to
Stevco Inc. in December, 1995 in exchange for personal services
rendered to Showalter.
21. Although the stock registered on Form S-8 was ostensibly for
issuance over a period of time as services were rendered under consulting
agreements, the fact is that in each instance all of the stock was issued almost
immediately upon the filing of the applicable Form S-8.
22. Brannon has personal knowledge that at least one so-called
"consultant" in fact performed minimal services for Hollywood Trenz, but
nonetheless received several large blocks of stock. That consultant was
Showalter's wife, Tracey Braime, doing business as Euro-International Designs.
During Brannon's employment with Hollywood Trenz, Showalter's wife admitted to
Brannon that she had performed minimal services for Hollywood Trenz.
23. Support for Tracey Braime's comment to Brannon can be found
in the fact that the contracts she signed with the company are almost patently a
sham. She has signed three separate overlapping consulting agreements with the
company to design some of the interior decor of the Phoenix entertainment
center, consisting of movie memorabilia. The market price of the stock she was
to receive under the contracts had a combined value of some $1.4 million. Braime
is a full time college student, majoring in drama.
24. Braime had already contracted to perform interior decorating
under contract with the company for three years for a fee/stock equivalent of
$960,000 when, without any additional consideration, the company fortuitously
signed another three-year contract with Braime to perform exactly the same
service, this time for a fee/stock equivalent of $190,000. Braime received yet a
third three-year contract only one month later, again agreeing to perform
exactly the same services, this time for a fee/stock equivalent of $216,000.
25. Whatever else can be said about Tracey Braime, it is simply not
possible that a responsible Board, acting within the scope of its fiduciary
responsibilities, could have hired a 24-year-old drama student, who is the wife
of the CEO, to be paid well over a million dollars to do decorating.
SHOWALTER FRAUDULENTLY LAUNDERS
HIS FRAUDULENTLY REGISTERED STOCK
---------------------------------
26. Once Showalter has slipped past the SEC by impermissibly
registering stock pursuant to a Form S-8 that he actually plans to use to
finance ongoing operations, he still has to bring the stock to market. Since no
underwriter would even consider underwriting a Showalter stock offering, he has
no legal means to move the stock to an unsuspecting public. Undaunted, Showalter
has yet another scheme to move the stock into the market.
<PAGE>
27. Showalter directs his "consultants," the recipients of the
stock, to direct, in turn, transfers to various nominees of Showalter who own
brokerage accounts. In the case of Euro-International Designs, for example, his
wife owns an account at D.E. Frey in Denver, Colorado. This account has by far
been the one used most often.
28. The "consultant" is instructed by Showalter to direct the
transfer agent to transfer the shares. The transfer could be directed
anywhere -- to a creditor, a potential investor, a promoter, a personal
creditor of Showalter, Showalter's personal accounts or the brokerage of account
of Showalter's wife. In many such cases, the recipient of the transferred shares
then places the shares in the transferee's brokerage account and lodges "sell"
orders on the stock, resulting in cash proceeds to the transferee. Once the
proceeds are reduced to cash, Showalter is free to make whatever use of the
money he wishes without accountability to the corporation.
USING FRAUDULENTLY REGISTERED STOCK TO
FINANCE PERSONAL AND CORPORATE BUSINESS
---------------------------------------
29. Showalter has no source of income beyond what he makes in
connection with his activities with HTZI yet his lifestyle would make a Fortune
500 corporate president jealous. He owns an $800,000 home in Florida, sleeps in
only the best hotels when he travels, uses private jets, rides in limousines and
routinely dines in four star restaurants. Spencer Finseth, a construction
project manager lured to work for Showalter, reports that even as a single man
he could not keep up with Showalter's pace of late night partying and estimates
that it was routine for Showalter to go through at least $1,000 per day in
spending money alone. All of that money came from investors who thought they
were capitalizing an up-and-coming business. Not only that: approximately three
quarters of all issued and outstanding shares of stock of HTZI was registered
using the Form S-8 scheme.
30. Each of the Form S-8 registration statements was signed by
all three directors of the Company. Each director was obligated to exercise due
diligence in connection with the execution and filing of the Form S-8
registration statements to assure that such registration statements were
truthful and contained no materially false or misleading information. Each
director had knowledge of the fraudulent scheme for which the registration
statements were filed, knowledge that each purported consulting agreement was a
sham, and knowledge that the stock being registered would be issued to persons
other than the purported consultants with no valid consideration being paid to
the Company.
THE THREAT OF IMMEDIATE AND IRREPARABLE HARM
--------------------------------------------
A. Showalter's violation of securities laws.
31. It is difficult to assess just how deep a hole Showalter has
dug for the company. The fraudulent registrations and fraudulent sales of stock
are only part of the total picture of liabilities likely to emerge from a full
understanding of Showalter's manipulation of this company. It thus makes little
sense to leave the corporation -- on whose behalf this suit is brought -- to
successive damage suits against the directors when their stated intent is to
continue to break the law.
<PAGE>
32. Showalter has exposed the corporation to liability from the SEC for
fraudulent registration of the stock. His practice of floating shares into the
market through secret brokerage accounts of accomplices also subjects the
corporation to potentially enormous liabilities under Section 10(b) and
Regulation 10b-5 and various other provisions of both the Securities Act of 1933
and the Securities Exchange Act of 1934. Such exposure constitutes irreparable
harm to the company.
B. The availability of money damages is doubtful.
33. Defendant Showalter has limited, if any, resources to pay the kind
of monetary damages he has caused in this case. Defendant Burton, a prestigious
attorney at one time, has been broken on the wheel of Showalter's connivances
and has lost his entire financial nest egg. Each of them is liable for breaches
of their duties of loyalty to the shareholders under Delaware law and for
violation of the federal securities laws, yet is without means to pay a
substantial money damages award.
34. Defendant Greg Smith, while a man of more substantial means than the
others, has also often been absent from important decisions that breach
fiduciary duties. Plaintiff is comfortable with his allegations of liability
against this defendant but is realistic that the probability of a holding of
liability on his part so as to give rise to substantial money damages is less
than for the other defendants.
C. Without an injunction, the Court
will be unable to fashion a remedy on
behalf of the corporation.
35. There can be no serious doubt about defendants' current plans for
raising capital if they are not enjoined: they will continue to register shares
fraudulently and sell them to the public fraudulently.
36. If defendants are not enjoined, the shares offered to the public
will, most assuredly, enter the market and become indistinguishable from
legitimately issued shares. Once this occurs, it will be quite impossible for
this Court to rescind the issuances or "unscramble the eggs." In addition, bona
fide purchasers for value will have no notice that Showalter is selling stock
fraudulently.
D. Apart from the securities laws, defendants
have violated the Delaware General
Corporation Law and intend to do so again.
37. Defendants stated intent to continue to capitalize the company by
the use of the consulting agreements registered with the SEC requires that the
Court consider the consulting agreements themselves. These agreements, dubious
on their face and by their frequency, are deeply suspect in light of the
description of Showalter's scheme supplied by Tim Brannon.
38. To the extent these consulting agreements authorize the receipt of
stock prior to the rendition of services, they violate both the Delaware General
Corporation Law and the Delaware Constitution.
<PAGE>
39. To the extent that these agreements grant to the consultant shares
of stock that bear no relationship to the services actually rendered, they also
violate the Delaware General Corporation Law.
E. Issuance of large blocks of stock for
little or no consideration violates
the rights of existing shareholders.
40. The Company and all bona fide stockholders of the Company, including
plaintiff, have been and will continue to be injured by the impermissible
issuance of massive amounts of stock for no consideration, the effect of which
is the material dilution of the value of the Company's stock.
41. Stockholders of Hollywood Trenz, including plaintiff, have been and
will be further injured by the immediate and substantial dilution in the voting
power of their stock each time that Showalter succeeds in issuing stock for no
or completely inadequate consideration.
42. Plaintiff has no adequate remedy at law.
DERIVATIVE ALLEGATIONS
----------------------
43. Plaintiff brings Counts I, III, IV, V and VI derivatively on behalf
of Hollywood Trenz pursuant to Chancery Court Rule 23.1 and 8 Del. C. (S)327.
44. Plaintiff is and at all times relevant to the matters complained of
herein has been a stockholder of the Company.
45. With respect to causes of action that may be derivative in nature,
plaintiff has made no demand on the board of directors.
46. Demand on the board of directors would be futile and therefore is
excused because all members of the board of directors are active participants in
and have personally benefitted from the acts alleged in this First Amended
Complaint.
47. The acts complained of herein constitute waste of corporate assets
and were not the product of an exercise of good faith business judgment by the
board of directors of Hollywood Trenz.
Count I. Breach of Fiduciary Duties
------------------------------------
48. Paragraphs 1 through 47 are incorporated herein by reference.
49. As directors, each defendant owed to plaintiff a duty of care with
respect his position as manager of the affairs of the company. Defendants have
breached their duty of care by:
(a) failing to investigate the appropriateness of naming Showalter
CEO and president of the company in light of his criminal history, bankruptcy,
and gross mismanagement;
<PAGE>
(b) failing to investigate the legality of registering stock for
resale by using SEC Form S-8;
(c) causing the company to violate the federal securities laws by:
(1) filing incomplete disclosure information with respect to
Showalter and the company's financial condition,
(2) filing Form S-8 registration statements containing false
and misleading consulting agreements, and
(3) permitting Showalter to sell stock through the secret use
of brokerage accounts in the names of others;
(d) failing to ensure that the accounting practices of the
corporation would prevent conduct such as Showalter's writing checks on
insufficient funds;
(e) failing to hold board of directors meetings or annual meetings
of stockholders;
(f) failing to review the consulting agreements to ensure that the
corporation in fact received the services provided therein prior to the issuance
of the stock consideration;
(g) failing to ensure that the corporation received fair
consideration for the stock that it was issuing in return for the consulting
agreements; and
(h) failing to demand an accounting of the proceeds of the sale of
the stock registered by Form S-8.
50. The directors owed to the shareholders a duty of loyalty. Defendants
have breached their duty of loyalty by:
(a) offering company stock for sale to the public and retaining for
themselves and not for the company some or, occasionally, all, of the proceeds
from such sale;
(b) causing the corporation to enter into written consulting
agreements with Showalter's wife's company under circumstances in which she was
neither qualified to render the services nor able to render them even if
qualified,
(c) causing the corporation to pay, impermissibly, Showalter's
personal living and entertainment expenses; and
(d) converting assets of the corporation to their personal use.
51. The directors owed to the shareholders a duty of oversight of the
officers and management of the company. Defendants failed to oversee the
<PAGE>
books and records of the company or the behavior of its officers, including
bouncing checks, breaking promises and ignoring legal obligations of the
company. To the extent that defendants ignored or remained unaware of these
facts, defendants have breached their duty of oversight.
Count II. Unlawful Dilution of Voting Power
-------------------------------------------
52. Paragraphs 1 through 51 are incorporated herein by reference.
53. The conduct described above has unlawfully diluted the individual
voting rights of plaintiff in that shares of stock of the Company have been
fraudulently issued for no consideration to the Company.
Count III. Issuance of Stock Without Consideration
---------------------------------------------------
54. Paragraphs 1 through 53 are incorporated herein by reference.
55. The issuance of stock to the "consultants" as set forth above is
without consideration, or with consideration so far below its real value to the
corporation as to constitute fraud, in violation of both the Constitution of the
State of Delaware and Section 152 of the General Corporation Law, 8 Del. C. 152.
-------
56. Such illegal issuance of stock inflicts direct harm on the plaintiff
by fraudulently diluting plaintiff's voting power and direct harm on the company
and its stockholders by diluting the value of the company's stock and
artificially depressing the market for the stock.
Count IV. Violation of Federal Securities Laws
----------------------------------------------
57. Paragraphs 1 through 56 are incorporated herein by reference.
58. The abusive and fraudulent manipulation of SEC Form S-8 and the open
market manipulation by secretly offering newly issued stock through the
brokerage accounts of confederates violates multiple provisions of the
Securities Act of 1933 and The Securities Exchange Act of 1934 and rules and
regulations promulgated thereunder. Such conduct jeopardizes the company's
ability to raise capital and materially threatens its continued corporate
existence.
Count V. Unlawful Conversion
-----------------------------
59. Paragraphs 1 through 58 are incorporated herein by reference.
60. Upon information and belief, Showalter has used substantial sums of
the money raised through the illegal sale of stock to finance directly or
indirectly his personal style of living and otherwise to benefit personally
members of the board of directors and not for any proper corporate purposes.
Such conversion has been accomplished, upon information and belief, with the
knowledge and assent of all of the individual defendants.
Count VI. Waste of Corporate Assets
-----------------------------------
<PAGE>
61. Paragraphs 1 through 60 are incorporated herein by reference.
62. The stock of the company is one of the few assets it has.
Defendants have wasted that asset by offering stock to others for substantially
less than its fair value.
<PAGE>
WHEREFORE, plaintiff prays that this Court:
a. exercise its powers to temporarily, preliminarily, and permanently
enjoin Hollywood Trenz, the individual defendants, and their respective
employees, agents, attorneys and all other persons acting in concert with them
from issuing any stock pending the convening of an annual meeting for the
purpose of electing directors, and
b. grant such other relief as the Court may deem appropriate under
the circumstances.
Respectfully submitted,
SMITH, KATZENSTEIN & FURLOW
--------------------------------------------
Craig B. Smith I.D. # 472
Charles E. Butler I.D. #2349
Anne E. Bookout I.D. #2273
The Corporate Plaza, 7th Floor
800 Delaware Avenue
P.O. Box 410
Wilmington, DE 19899
(302) 652-8400
OF COUNSEL:
- -----------
Victor L. Zimmermann, Jr.
O'Rourke O'Hanlan & Zimmermann
27 Pine Street
New Canaan, CT 06840
(203) 966-6664
Dated: June 26, 1996
