New York Codes, Rules and Regulations
Title 13 - DEPARTMENT OF LAW
Chapter III - THEATRICAL SYNDICATION FINANCING
Part 50 - THEATRICAL FINANCING
Section 50.3 - Contents of offering literature for a particular specified production filed pursuant to section 50.1(n)(1) of this Part in connection with an offer to fund a particular specified production

Universal Citation: 13 NY Comp Codes Rules and Regs § 50.3

Current through Register Vol. 46, No. 39, September 25, 2024

(a) There shall be set forth on the outside front cover page the following:

(1) a statement in capital letters printed in boldface roman type at least as large as 10-point modern type and at least two points leaded (or if typed, with underlining):

THE ATTORNEY GENERAL OF THE STATE OF NEW YORK DOES NOT PASS ON THE MERITS OF THIS OFFERING.

There shall be no other reference to filing with the Attorney General or the Department of Law anywhere in the offering literature:

(2) the name or proposed name of the theatrical production company and its proposed purpose;

(3) the name of the issuer or other offeror;

(4) the maximum and minimum amount of the offering;

(5) the amount of overcall, if any;

(6) the proposed site of the production, such as Broadway, off-Broadway, bus and truck, regional theatre; and the seating capacity of the theatre for which the production is geared;

(7) if a portion of the funds is to be used to pay for the costs of a "workshop" or other developmental production, this fact must be disclosed immediately after the proposed site of the production, in a box which shall contain the following or substantially similar language:

$__ of the total amount to be raised pursuant to this offering will be used to pay for the costs of a "workshop" production (if other form of developmental production, so state).Depending upon the outcome of that venture, there is a possibility that a subsequent full-scale production may never take place. Investors who authorize the use of their contributions prior to the completion of the offering, in particular, should note that their contributions may have been expended for the "workshop" production and may not be returned to them even if the production which is the subject of this offer is never presented.

If the "workshop" or other developmental production has already been produced, the second sentence of the legend, above, may be deleted and the body of the offering literature shall include the information required by section 50.3(d)(25) of this Part.

(8) the date of the offering literature (leave blank until notified of acceptance for filing by Department of Law), followed by a statement that the offering literature may not be used for a period of more than nine months thereafter. Such statement shall not eliminate the need to amend the offering literature during said nine-month period as provided herein.

(b) Table of contents.

Immediately following the cover page, there shall be included a table of contents showing the location in the offering literature of the information required to be included pursuant to this section.

There shall be set forth in the forepart of the offering literature, under an appropriate caption, a carefully organized series of short, concise paragraphs summarizing the principal factors that make the offering speculative or one of high risk. Included shall be a paragraph containing the following or substantially similar language: The issuer (or other offeror) may abandon this venture at any time for any reason whatsoever. If such abandonment occurs after all the interests offered hereunder have been purchased and before the opening of any production financed by the company, the investors must be prepared for the loss of all or substantially all of the amount of their investment.

(d) Body.

Where applicable, the following facts should be set forth with respect to the proposed or contemplated production:

(1) The nature of the production, i.e., drama, comedy, musical, revue. A brief description of the plot is not required but may be set forth if desired.

(2) The form of business organization of the theatrical production company.

(3) The principal address of the theatrical production company.

(4) The date or proposed date of the formation of the theatrical production company (if the form of business organization is a limited partnership, whether it will be formed before it is fully subscribed or upon completion of the offering); the date or proposed date of the production.

(5) The type of investment unit being offered, i.e., limited partnership, corporate stock, promissory note; the minimum amount of each investment unit; the maximum amount of capital being raised and the minimum amount of capital that must be raised to complete the offering, which may be no less than 75 percent of the maximum amount of capital that may be raised, including any overcall.

(6) The time when subscriptions are due and payable and the amount and terms of the overcall, if any. In the event additional funds are required for the business of the theatrical production company above the amount being offered, including any overcall, set forth the responsibility, if any, on the part of the producers to make such funds available.

(7) The names and residence addresses of the producers and a short, concise, factual description of their relevant background and theatrical business experience for the past five years. Such description should be used to aid the investor in evaluating the relevance of the producer's experience to the present undertaking. For example, if a Broadway production is contemplated, Broadway experience or the lack of it should be cited. The use of adjectives and undefined terms should be avoided. If prior productions are cited, provide data regarding the return to investors in said productions. If any of the producers are partnerships or corporations, the names and residence addresses of all principals and a short, concise, factual description of their relevant background and theatrical business experience for the past five years. If the producing corporation is owned or controlled by another corporation, the above stated information is required for such corporation or any other corporation ultimately in control of the producer. Additionally, where the producer is a corporation owned or controlled by another corporation, state who will control the management and affairs of the theatrical production company. Identify any executive producer or individual with a similar title and state what his functions will be.

(8) A brief description of all contracts or agreements entered into by the theatrical production company, or which it is intended will be assigned to or acquired by the theatrical production company. This description should include the name of the party or entity with which the contract has been made, the nature of the transaction or services involved and the terms thereof. Creative personnel who have committed themselves to the production may be described briefly and factually with respect to their background as it is relevant to the function they will perform. With respect to any agreement respecting the right to produce, develop or invest in the theatrical production, include also the expiration date, provisions for the extension of such date, a description of the subsidiary rights and disclose any disputes or claims regarding the production rights. In the event that a theatre owner, an electrical or scenery contractor or other such contractor has committed himself to an investment in the theatrical production company, the possible lack of competition resulting therefrom, with regard to such services, should be disclosed. In the event a series of contracts has been entered into of a similar nature with such parties as players who will not be in a starring role, musicians, etc., such contracts may be summarized in one category.

(9) Use of proceeds of the offering, including an itemization in reasonable detail of proposed preproduction expenses. The budget should reflect that there will be sufficient funds available to produce the play if the minimum capitalization is raised. Sufficient funds should be provided for the certification of financial reports by an independent public accountant. If any of the proceeds of the offering are to be used to pay for travel, lodging, meals or any other expenses of the producer or any other individual, the amount, the nature and the reasons for such proposed expenditures must be fully set forth. If the production is expected to open "out of town," the budget may include a total allocation for the per diem expenditures of production personnel. Itemize and state the total amount of all expenses that have currently been advanced, indicating the payors of such advance, the time and conditions of repayment thereof, and how such funds were used. Fully set forth the reasons for any expenditure of funds, including expenditures for travel, lodging and meals and identify the individuals who incurred such expenses. Such expenditures must be for the particular production which is the subject of the offering.

(10) The date on which all funds must be returned to investors in the event the offering is not completed, which date may not be more than 18 months from the commencement of the offering. State that all monies raised by the offering shall be held in a special bank account in trust until actually employed for preproduction or production purposes of the particular theatrical production company or returned to the investors therein. The name and address of the bank in which the account is located must be specified.

(11) If investors may authorize the use of their contribution for preproduction or production purposes prior to the completion of the offering or prior to the time when refunds to investors may be required, set forth a description of the risks to the investor resulting from such authorization and use, including:

(i) that if insufficient funds are raised to complete the offering, or if the offering is not completed for any other reason, the investors may lose part or all of their contribution without a production having been presented;

(ii) that such investors who do not waive their right to refund, must rely solely on the ability of the producer to reimburse them for the contributions so expended which might exceed the producer's assets, in which case such investors might never be reimbursed;

State that an investor obtains no advantage, unless such advantage has been negotiated with the general partner, but incurs a distinct risk by authorizing the use of his contribution prior to the completion of the offering. No authorization for the use of contributions prior to the completion of the offering shall be effective unless and until the signature of the investor has been obtained on the separate signature page of the investment agreement as set forth in section 50.2(a)(4) of this Part. If any contributions may be so used, set forth whether or not the producer is personally obligated to return funds which have been expended in the event the offering is abandoned. The conditions under which the offering will be deemed abandoned shall be indicated.

(12) If advance interests for the contribution of front money have been or are to be offered upon different terms than investment units, such advance interests should be described. The description should include the total dollar amount of all such advance interests which have been or are to be offered; whether such interests are to be repaid out of the proceeds of the offering; whether such interests may be converted into investment units and the terms and conditions of such convertibility; the extent, if any, by which purchasers of advance interests will receive a portion of the producer's share of net profits; whether the proceeds of such interests may be expended for preproduction purposes prior to the completion of the offering; the personal obligation, if any, on the part of the producers to return any proceeds which have been so expended in the event the offering is abandoned; and all other material terms of the advance interests being offered. With respect to advance interests previously sold, state the total amount of funds obtained through such sales and how such funds were used.

(13) Set forth the plan of distribution of the syndication units being offered, including the names and addresses of underwriters or sales distributors, if any; selling or underwriting commissions, if any; and the source of payment of all such commissions.

(14) State the conditions upon which original investments are to be returned to investors.

(15)

(i) State the conditions upon which net profits of the venture are to be distributed and at what intervals such distributions are to be made. Specifically state the share of such profits to be distributed to investors and the share to the producer or producers. State the method by which the computation of the amount of net profits available for distribution is to be determined. If, at the date of filing the offering literature with the Department of Law, there is an agreement to make payments based on a percentage of net profits, refer to the percentage of net profits which will remain for distribution to the investors after the deduction of such payments as "adjusted net profits" and explain what percentage of net profits this represents. For example, if an actor in a starring role is to receive payments equaling 10 percent of the net profits, explain that the investors will share in a percentage of the "adjusted net profits" and that such "adjusted net profits" are 90 percent of the net profits. This disclosure must be made in connection with each reference to the distribution of profits. Whether or not there are any present agreements to make such payments, if the producer has reserved the right to make payments calculated as a percentage of net profits, state that the producer has the right to reduce the amount of the funds available for distribution to investors by making arrangements providing for payments based on a percentage of net profits and state the maximum percentage by which the funds may be reduced.

(ii) Define all terms which will determine adjusted net profits, such as gross receipts, running expenses, other.

(iii) State the potential gross weekly box office receipts and set forth all persons, by name or function, who are to receive a percentage of the gross receipts and the total percentage of the gross receipts so allocated. On the basis of such total percentage, and other fixed expenditures, set forth the weekly fixed operating costs. Using such figures, state how long the show would have to run before net profits can accrue. If the producer has reserved the right to make payments calculated as a percentage of gross box office receipts in addition to those specifically set forth in the offering literature, state that the producer has such right and that such payments would further increase the amount of time the show would have to run before net profits can accrue. If the producers have the right to accumulate funds for any purpose prior to making distributions of either return of contributions or share of net profits, set forth the purposes for which such accumulation may be made.

(16) If the offeror or other issuer or any other person is either obligated to or may supply additional funds necessary to the theatrical production company, or to the theatrical production over the amount being offered (including overcall), set forth whether such additional investment is to receive any priority in distributions over that of the original investors.

(17) State the extent to which the share of losses of the theatrical production company is to be borne by the investors and by the producers.

(18)

(i) Set forth the circumstances, if any, under which investors are obligated to repay profits which have been distributed to them or capital which has been previously returned to them. If such obligation exists, indicate if such repayment is to be made with interest.

(ii) State the extent, if any, to which investors are personally liable for debts of the theatrical production company in excess of their capital contributions. If the venture is to be a limited partnership and if investors' funds are to be used for preproduction or production purposes prior to the time when the legal requirement for the formation of a limited partnership has been met, a specific statement should be made as to whether investors whose funds are so used may be personally liable for all debts of the venture occurring prior to the formation of the limited partnership.

(19) State the time at which the assets of the theatrical production company are to be liquidated and set forth the method of distribution of all proceeds of such liquidation.

(20) In the event the investors' rights to receive either return of contributions or share of net profits resulting from any interest which the theatrical production company retains in the play (including all subsidiary rights) are to be terminated at any time, this must be clearly stated.

(21)

(i) State whether the issuer or other offeror shall have sole control over the management and affairs of the theatrical production company. Set forth whether the issuer or other offeror, his affiliates, relatives or entities in which he has any interest, will engage in transactions with the theatrical production company or any production or supply goods and services to it. Such disclosure should include, but not necessarily be limited to, such transactions as agreements to pay or payments of management or producers' fees; the furnishing of office facilities, commonly referred to as "cash office charge"; the supplying of theatre facilities, electrical equipment, drapes and props; transactions in regard to the publication or sale of souvenir programs or show albums, as well as the furnishing of personal services such as those of stage director, press agent, etc.; and the purchasing or leasing from the production company of subsidiary rights in the play or road and second company rights.

(ii) The furnishing of office facilities by the issuer or other offeror or any other person may be charged to the theatrical production company as a weekly lump sum under the heading "cash office charge" for a period commencing two weeks prior to rehearsals and ending two weeks after the close of the theatrical production; provided, however, that only one lump sum fee for maintaining an office may be charged. Additional office payments may be charged to the production only if set forth in the proposed budget in a specific line in the budget which identifies the particular purpose for which the funds will be used.

(iii) In the event that the producer, his affiliates, relatives, or entities in which he has an interest have an intent to enter into any transactions referred to in subparagraph (i) of this paragraph, such intention should be specifically stated and the terms upon which the transaction is to be made should be set forth. Where no intention has been formed as to whether the producer will engage in such transactions, there should be a statement as to the producer's right to enter into such transactions with the theatrical production company and a statement that no intention has yet been formed as to whether or not such transactions shall actually take place, and a further statement of whether or not the terms of such transaction shall be reasonable and reflect prevailing industry norms. There need not be a statement as to the producer's right to acquire subsidiary, road or second company rights in the play if all investors are to be offered an opportunity to participate in such acquisition on terms at least as favorable and in the same proportionate interest as they have in the theatrical production company.

(22) The conditions upon which the venture is to be terminated should be set forth. If the venture is to terminate upon conditions such as the death, insanity or retirement of any of the producers, there should be a statement regarding the rights and obligations of the parties remaining.

(23)

(i) State that the theatrical production company will comply with the financial reporting requirements set forth in subdivision 2 of section 23.03 of article 23 of the Arts and Cultural Affairs Law, and accounting regulations issued by the Attorney General.

(ii) If the producer may apply for an accounting exemption pursuant to section 51.6 of this Title, theatrical accounting regulations, it should be stated that annual financial statements may not be certified by independent public accountants. The fact that the financial statements of the theatrical production company may not be certified should also be stated in the risk factor section of the offering literature.

(24) State whether any person, corporation, partnership or other entity listed in paragraph (7) of this subdivision has been convicted of any crime under any State or Federal law, signed any consent decrees or had adverse final judgments involving the sale of securities or the subject matter of article 23 or its predecessor, article 26-A of the General Business Law, or the regulations thereunder. Explain fully.

(25) If a portion of the funds raised by the offering is to be used to pay the costs of a "workshop" or other developmental production which has already taken place, describe the prior production (including where and when it took place) and explain why and to whom such sums must be paid. Also, include a statement of income and expenditures of the prior production.

(26) Other information material to the offering.

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