EXHIBIT C
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
KENNETH CALLAISON, )
)
Plaintiff, )
) C.A. No._____
v. )
)
EDWARD R. SHOWALTER, )
ROBERT E. BURTON, JR. )
GREGORY D. SMITH, )
)
Defendants, )
)
and )
)
HOLLYWOOD TRENZ )
a Delaware Corporation )
)
Nominal Defendant. )
AFFIDAVIT
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STATE OF COLORADO )
: ss.: Denver
COUNTY OF DENVER )
TIMOTHY BRANNON, being duly sworn, deposes and says:
1. I was employed by Hollywood Trenz, Inc. ("Hollywood Trenz" and/or the
"Company") from August 1994 through May 9, 1996. I was first introduced to the
Company in April, 1993 when I was working as a stockbroker with Strategic
Research in Denver, Colorado. Showalter had come to our firm after merging the
Company into a public shell and wanted our assistance in obtaining a listing on
the National Association of Securities Dealers "Bulletin Board" so that there
would be a public market for the Company's stock.
2. After assisting Showalter in obtaining a listing, I began to get more
involved in the Company by performing certain public relations and other
services on the Company's behalf. At various times Showalter offered to sell
registered stock of the Company at a discount if I could find buyers. I assisted
in these efforts and did in fact find buyers of the Company's stock. I was
always assured by Showalter and Robert Burton, a key executive with the Company
and former law partner with a prestigious firm, that there was nothing improper
with this procedure. I did not know at the time that I had been finding buyers
for stock that had been registered on Form S-8. I subsequently became aware of
this fact after being employed by the Company.
3. After attending the opening of the Company's first retail outlet in
Sarasota, Florida in February, 1994, I was approached by Showalter as to whether
I would be interested in coming to work for the Company full time at a salary of
$10,000 per month. After further discussions I agreed and went to work for the
Company full time in August, 1994.
4. My job from the outset was as General Manager, in charge of
operations. I had responsibility for the day to day operations of the Company.
Within approximately three weeks after starting the job, it was obvious the
Company was not in a position to continue my agreed upon salary and I was
promised stock as compensation.
5. Within a month after my arrival at Hollywood Trenz, I was told that
Hollywood Trenz would be filing a Form S-8 to
register the issuance of common stock. I was told by Showalter that it would be
necessary to register the stock in my name. I was informed by Messrs. Showalter
and Robert Burton that this was proper and legal to register the stock in the
name of someone who was associated with Hollywood Trenz, even though it was
intended that the stock would be parceled out to various individuals and
entities after it was registered and even though some of these individuals would
not have performed services for their stock. I was aware that some of the
ultimate recipients would not have performed services since I was asked by
Showalter to find individuals who would be willing to buy the stock at a
discount to the market price.
6. On September 14, 1994, a Form S-8 was filed to register the issuance
of 1.2 million shares in my name. A consulting agreement between myself and the
Company was attached as an exhibit stating that the shares were being registered
in my name for services performed or to be performed by me. Although I knew that
the stock would not be retained by me and would be transferred to various other
individuals, I was assured by Showalter and Burton that there was nothing wrong
with this arrangement.
7. Immediately following the registration of the shares in September of
1994, and before the shares had been issued in my name Showalter requested that
I find individuals who would buy the stock at a discount. After being assured by
Showalter and Burton that this was legal I did so. Showalter
then instructed an officer of Hollywood Trenz, Tonya Hickman, to have the
transfer agent of Hollywood Trenz transfer virtually all of the shares to other
individuals and entities rather than to me. Ms. Hickman was a corporate officer
at the time in the Florida office. I was aware that she was so instructed since
she would send me copies of her correspondence to the transfer agent. At the
time, I did not know who the individuals and entities (to whom the stock was
transferred) were or why they were receiving shares other than the individuals I
had convinced to buy the stock.
8. On November 22, 1994, I was again told that a Form S-8 had been filed
and 300,000 shares were registered in my name. A Consulting Agreement between
myself and Hollywood Trenz was again filed as an exhibit to the S-8. Again, I
was assured by Showalter and Burton that this was perfectly legal even though I
knew I would not be retaining the shares and that in fact they would never be
issued in my name.
9. Immediately following the registration of the shares in November of
1994, Showalter again instructed Tonya Hickman to have the transfer agent of
Hollywood Trenz transfer virtually all of the shares to other individuals and
entities. Again I had helped sell some of the stock after being assured by
Burton and Showalter that the procedure was legal. I believe that it may have
been at this point that Showalter asked me to deal with the transfer agent
directly since they would no longer accept the request of others to
issue the Form S-8 stock but wanted the representations of the individual in
whose name it had been registered.
10. On July 15, 1995, a Form S-8 was filed registering 1.8 million
shares in my name. A Consulting Agreement was again attached between myself and
the Company and again I was assured by Showalter and Burton that this procedure
was proper and legal.
11. Immediately following the registration of the shares in July of
1995, Showalter instructed me to have the transfer agent of Hollywood Trenz
transfer virtually all of the shares to other individuals and entities. Again I
had helped find some buyers of the shares at a discount, after assurances from
Showalter and Burton and they were issued shares although they had not performed
services for those shares.
12. Shortly after that date, in August or September of 1995, I was again
told that 3.5 million shares would be registered in my name under a Form S-8. At
or about that time, I decided to seek legal advice concerning the propriety of
this practice and I consulted with an attorney by the name of Samuel Wing. After
discussing the situation with Mr. Wing, including the use of my name on prior
filings of the Form S-8, I declined to execute a Consulting Agreement which had
been drawn between Hollywood Trenz and myself and informed Showalter and Burton
I would no longer allow the use of my name for these arrangement. Thereafter, I
was aware that the Form S-8 was filed in the name of Euro-International
Designs. I am personally aware that Euro-International Designs is a company that
is owned by Mr. Showalter's wife, Tracy Braime.
13. I have become aware that Hollywood Trenz has recently filed another
S-8 which registers shares in the name of several individuals or entities,
including Euro International Designs. I was informed by Showalter's wife, Tracy
Braime, the owner of Euro International Designs, on or about May 4, 1996, that
the only services which she had provided to the Company were limited to
inserting some photos of Hollywood celebrities into glass table tops and picture
frames. This was in direct response to a question from me intended to find out
what she or her company was doing in exchange for being issued shares.
14. I have reason to believe, based on my own personal experience and my
conversations with Ed Showalter, 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 that shares
registered to Euro International Designs 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.
/s/Signature appears here.
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Timothy Brannon
Sworn to before me this
___ day of June, 1996.
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Notary Public