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BROKEN APRIL ALABAMA RAIN AN INDEPENDENT MOTION PICTURE BUSINESS PLAN

VANGUARD PRODUCTIONS 12111 Beatrice St., Culver City, CA 90230 Tel 310-306-4910 Fax 310-306-491 [email protected]

This document and the information contained herein is provided solely for the purpose of acquainting the reader with Vanguard Productions and the proposed film Broken April/Alabama Rain. It is proprietary information to the Company. By accepting this document, the recipient agrees to keep the contents in strictest confidence and not to reproduce or further distribute it without the express consent of Vanguard Productions. This document is solely a business plan covering aspects of the motion picture industry and the proposed film Broken April/Alabama Rain and is not to be construed as an offering of securities.

Table of Contents

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CATEGORY STATEMENT OF RISK

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EXECUTIVE SUMMARY

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THE COMPANY

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THE PROJECT

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THE INDUSTRY

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THE MARKETPLACE

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MARKETING STRATEGY

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THE DISTRIBUTION PROCESS

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DISTRIBUTION STRATEGIES

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INVESTMENT OPPORTUNITY

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FINANCIAL PROJECTIONS

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FOREIGN SALES PROJECTIONS

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APPENDIX “A” LETTER OF INTEREST: KRIS KRISTOFFERSON

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APPENDIX “B” LETTER OF INTEREST: STARZ! ENCORE

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APPENDIX “C” LETTER OF INTEREST: LIONS GATE FILMS

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APPENDIX “D” LETTER OF INTEREST: MAC RELEASING

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APPENDIX “E” BOND LETTER: FILM FINANCE

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APPENDIX “F” BUDGET

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Broken April Business Plan

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Statement of Risk Investment in the film industry is highly speculative and inherently risky. There can be no assurance of the economic success of any motion picture since the revenues derived from the production and distribution of a motion picture depend primarily upon its acceptance by the public, which cannot be predicted. The commercial success of a motion picture also depends upon the quality and acceptance of other competing films released into the marketplace at or near the same time, general economic factors and other tangible and intangible factors, all of which can change and cannot be predicted with certainty. The entertainment industry in general, and the motion picture industry in particular, are continuing to undergo significant changes, primarily due to technological developments. Although these developments have resulted in the availability of alternative and competing forms of leisure time entertainment, such technological developments have also resulted in the creation of additional revenue sources through licensing of rights to such new media, and potentially could lead to future reductions in the costs of producing and distributing motion pictures. In addition, the theatrical success of a motion picture remains a crucial factor in generating revenues in other media such as videocassettes and television. Due to the rapid growth of technology, shifting consumer tastes, and the popularity and availability of other forms of entertainment, it is impossible to predict the overall effect these factors will have on the potential revenue from and profitability of feature-length motion pictures. In order to prosper, the success of the motion picture Broken April/Alabama Rain will depend upon the ability of management to produce a film of exceptional quality that can compete with higherbudgeted films of the same genre. In order to minimize this risk, management will participate heavily throughout the process and will mitigate financial risks wherever possible. The success of the Company and its motion picture depends upon securing investor financing and obtaining distribution contracts with satisfactory terms—as well as the continued participation of management.

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Executive Summary The Company Mr. O’Keefe formed Vanguard Productions in 1986 to establish a production company with a vision of making high quality independent films for the global market. The Project Broken April/Alabama Rain is a motion picture budgeted for production at $3.5 million dollars, for theatrical exhibition in the United States and abroad. In the spirit of character dramas such as Memento, Leaving Las Vegas and Sling Blade, Broken April/Alabama Rain is the story of a journeyman Nashville songwriter resorting to running drugs to make ends meet, who gets a chance to redeem his music career and his failed relationship with his daughter. Historically, the low-budget character drama is a genre proven to attract theatrical audiences, and by featuring ‘name’ actors in the lead roles, Broken April/Alabama Rain’s potential for audience appeal and commercial value should be outstanding. The Industry Hollywood has once again proven that the movie business is a stalwart through good times and bad. Despite the difficulties that other sectors of the economy experienced in 2001, especially after the events of 9/11, the U.S. theatrical box office rose to a record $8.41 billion, a climb of almost 10% over 2000, with 1.49 billion tickets sold, a 5% increase from 2000 and the largest ticket-buying audience since 1959.1 Of that $8.41 billion, $3.2 billion (40%) was derived from independent film. Although there are many successful examples, one film that’s performed incredibly is My Big Fat Greek Wedding, which at a budget of $5 million is still in worldwide release with a total box office to date of over $356 million dollars. The Market The strategy of making films in well-established genres has proven itself to be the sound choice for independent production, since a well-made, intriguing film within such genres will almost always find a theatrical audience if marketed correctly. Knowing that this gives their films a greater chance for domestic and international theatrical release, independent filmmakers have responded by embracing genres that the major studios largely ignore, such as the character drama genre. As mass-marketed studio films increasingly focus on spectacular visual effects and graphic content, the current marketplace demands—and commercially rewards—films in the character drama genre that can engage an audience artistically. The Strategy Because the motion picture industry is highly competitive, the success of a film largely depends upon its marketing and distribution strategy. Therefore as an independent producer, Vanguard Productions plans to work with the mini-major studios such as Miramax, Focus Features, Lions Gate, and Sony Pictures Classics who have long track records marketing and distributing independent films. Distribution negotiations will begin as early as possible prior to production, in order to maximize both bargaining power and the film’s potential profit by collaborating early with the mini-major studios on marketing. The Opportunity Vanguard Productions seeks capital to fund the Limited Liability Company formed for the purpose of producing the motion picture Broken April/Alabama Rain. The Company proposes to secure $3.5 million in production funding from private equity investors and secure a distribution agreement with a mini-major studio. The Company’s revenue projections predict a 90% return above the original investment, which amounts to a $3.15 million total return on investment, after recouping the original $3.5 million.

The Hollywood Reporter, March 6, 2002. Broken April Business Plan

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The Company Vanguard Productions With Vanguard Productions Mr. O’Keefe is offering a new approach to international film production to capitalize on the economic pressures and expanding opportunities in the global entertainment industry. The “Vanguard Productions” plan is built on a foundation of established relationships in the United States, Europe, and Asia to assure a broad based opportunity of long term success for all involved. This coproduction “blue-print” provides the most efficient, cost-effective working environment possible to meet the challenge of providing quality entertainment. Vanguard Productions first co-production was with Showcase Entertainment for the feature film “The Bad Pack,” starring Robert Davi, Roddy Piper and Ralf Moeller, a $2 million dollar action adventure. Mr. O'Keefe's next venture was with Image Organization and World International Network on the $1.5 million dollar coming of age drama, "Wanted," which Mr. O'Keefe also served as writer/director. Talented Leadership Mr. O’Keefe is an award winning filmmaker who has worked in the film industry for over fifteen years and this is the seasoned experience he draws upon to make his film productions so successful. Mr. O’Keefe is a member of the Academy Of Television Arts and Sciences, a member of the Producer Guild of America (PGA), a member of the Screen Actors Guild (SAG), a member of the Independent Film Project West (IFP), and serves on the board of directors of The Educational Media Workshop of Southern California. World-Class Projects Vanguard Productions currently has one feature film in post production and two feature films in development and their first feature, “We The People,” debuted at the 1995 Cannes Film Festival and was one of only two American films selected to be screen at the 1995 Moscow Film Festival. Mr. O’Keefe completed “We The People” on time and within budget. But, more importantly, he produced a feature film with a production value that rivals most studio pictures, proving once again that low budget does not mean low quality. The relationships formed in conjunction with these projects not only have paved the way for Broken April/Alabama Rain but also will continue to pay dividends in the years to come. Poised for Success In addition to the above projects, Vanguard Productions is developing the TV series “They Also Served” an hour-long show about famous people who have served in the armed forces with Merv Griffin and Christian Moore. Roger Moore will host the series and the pilot episode will feature such celebrities as Sean Connery, Michael Caine, Peter O’Toole, Ernest Borgnine and many more. Vanguard Productions is also developing the TV series “Sea Of Demons – A Year Under The Sea Of Cortez” with the National Geographic Channel and author and marine expert, Scott Cassell. On the feature side Vanguard Productions is developing Border Lords with writer, director Robby Henson. Border Lords is a western starring Kris Kristofferson, Randy Travis, and Richard Tyson.

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The Project Story Synopsis A man with hard years stamped on his weathered face wakes up alone in a motel in Pikeville, Kentucky. His money is gone and his memory is foggy. When the local sheriff approaches, the stranger flinches fearing arrest, but the sheriff shakes his hand and says, “it’s an honor to meet you, sir, you wrote some great songs.” The man is HOYT COLLINS, a Nashville journeyman singer/songwriter who has penned several big hits and barely lived to tell about it. Years of alcohol and substance abuse may have beaten him down, but Hoyt still possesses a streak of honest integrity. He doesn’t want to stick HELEN, who runs the motel, with his bill and makes a collect call to his long-suffering manager to figure out how to pay her and get himself back to Nashville. Hoyt also makes another call, this one revealing why he’s here—he’s running Methamphetamine for a biker in Nashville in order to make ends meet. A young woman with tattoos and an attitude arrives to drive Hoyt back. She could be an angry lover, but it quickly becomes apparent that KATY ROSE is Hoyt’s wayward daughter, a river of troubled water between them. Their bickering is enough to drive Katy to the local bar, where she makes the acquaintance of ROBIN THOMPSON, the owner. Katy rebuffs his flirting at first, but soon she gives in. When Hoyt arrives at the bar to make his ‘drop’, he discovers his contact is none other than Robin himself, the man who has gone to the parking lot to enjoy the affections of Hoyt’s daughter. Broken April/Alabama Rain is the story of an estranged father and daughter fighting to overcome the past. As Hoyt struggles to clean himself up, Katy Rose falls farther down, jealous of the new friendships Hoyt has found. The river of the past finally breaks its dam, and both Katy Rose and Hoyt find themselves drowning. As Hoyt tries to rescue his daughter and revive his music career, he’s confronted with the same painful choices he made long ago—choices that have haunted him since. Will Hoyt find reconciliation and redemption, or is he doomed to repeat the past? Key Personnel Robby Henson, Writer/Director: Robby received his M.F.A. from New York University, his thesis film winning the Student Academy Award. His films have been seen on PBS, the BBC, at Lincoln Center, the Museum of Modern Art, The Georges Pompidou Center in Paris, and at festivals all over the world. Robby began his career with five award-winning PBS documentaries, including Spalding Gray: A Life In Progress and Trouble Behind, a film about a Southern race riot that screened at the Sundance Film Festival. Switching gears to narrative, Robby’s first feature Pharaoh’s Army starred Chris Cooper, Patricia Clarkson, and Kris Kristofferson and was released by Lions Gate theatrically and by Orion on home video. He then collaborated with Norman Jewison on the screenplay Thirteen Rising for Mike Medavoy’s Phoenix Pictures. Most recently, he wrote and directed The Badge, a Southern crime drama starring Billy Bob Thornton, Patricia Arquette, and Sela Ward, for Starz! Pictures and Lions Gate Films. The Badge was nominated for a Gay and Lesbian Alliance Media Award, won Best Drama at the Breckinridge Film Festival, and won Best Feature Film at the Texas Film Festival. Robby Henson is a visionary filmmaker who possesses an uncanny knack for collaboration, a tireless enthusiasm for pursuing creative excellence and an innate ability to create unforgettable characters. Broken April Business Plan

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Terence M. O'Keefe, Producer: Mr. O’Keefe has worked in the film industry for over fifteen years and this is the seasoned experience he draws upon to make his film productions so successful. He graduated from Northeastern University with a Bachelor of Science Degree in Public Communications and received his Masters Degree in Film Production from Loyola Marymount University. Mr. O’Keefe served as Director of Multimedia for one of the largest mortgage bank company in the United States, Countrywide Funding Company. While there, he was responsible for the design and implementation of the new Multimedia department, which used CD-ROM and the latest interactive technology. He also wrote, produced and directed many of their industrial films and television commercials, including “The 60 second Refinance” commercial, which won a Telly Award for best regional spot. Mr. O’Keefe formed Vanguard Productions to establish a production company with a vision of making high quality independent films for the global market. Vanguard Productions first feature, “We The People,” debuted at the 1995 Cannes Film Festival and was one of only two American films selected to screen at the 1995 Moscow Film Festival. Along with partners Kevin Reem and Drew Stotesbery, Mr. O’Keefe formed United Film Partners, Inc. to acquire, develop, and package outstanding and diverse motion picture and television properties for domestic and international distribution. After taking UFP public O’Keefe and his partners sold the company to a Korean company in 2004. Some of O’Keefe’s past producing credits include: “The Bad Pack,” starring Robert Davi, Roddy Piper and Ralf Moeller; “Closing The Deal,” starring Ray Wise, James Wilder, and Michael Bergin; “Route 666” for Lions Gate Films, starring Lou Diamond Philips and Lori Petty; and “Wanted,” which O’Keefe also wrote and directed, starring Timothy Busfield, Robert Culp, Michael Sutton, and Tracy Gold, “Dead Rail” for the Sci Fi Channel, starring Lou Diamond Philips, Barry Corbin, and Steven Brand. Mr. O’Keefe has served as Blue Ribbon panel Judge for the 2004 Academy of Television Arts & Sciences Animation Awards and the 2003 Academy of Television Arts & Sciences Music Video Awards. He has served as Blue Ribbon panel Judge for the 2000 International Emmy Awards and for the 19th. Annual CableACE Awards. Mr. O’Keefe also serves on the board of directors of the Educational Media Workshop of Southern California and is a SAG Signatory Producer whom is listed in “Who’s Who In Entertainment” and in “Who’s Who In California.” Currently Mr. O’Keefe is developing the TV series “Sea Of Demons” with The National Geographic Channel and on the feature side Mr. O’Keefe and Robby Henson are developing the western “Border Lords” starring Kris Kristofferson, Randy Travis, and Richard Tyson.

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Project Package Several important factors distinguish Broken April/Alabama Rain from the many independent motion picture projects competing for deals with the mini-major distributors. These factors include: Commercial Potential—Successful independent films such as You Can Count On Me, Sling Blade, The Apostle, and Monster’s Ball demonstrate that the character driven dramas can perform well at the box office. A very high percentage of ‘breakout’ independent films—those that earn at least triple their production budgets at the box office—have been character-driven dramas. The engaging and potentially lucrative musical component of Broken April/Alabama Rain also should reinforce the film’s commercial appeal. Director’s Experience—Writer/director Robby Henson has proven to be a bankable director with his films Pharaoh’s Army and The Badge. Both films garnered top name talent and prominent distribution engagements, a tribute to Robby’s abilities as a filmmaker. Producer Experience—Via his many years working in the entertainment business as a producer, Terence M. O'Keefe has relationships with executives, agents, and actors that will differentiate Broken April/Alabama Rain from other independent projects. In addition, O’Keefe’s relationships with vendors, unions, and government film liaisons will facilitate production and minimize the budget. Talent Appeal—Writer/director Robby Henson’s reputation and a script offering roles with award potential have attracted major Hollywood talent to the project. Two prominent actor/musician/singers, Kris Kristofferson and Randy Travis, are already attached and there’s interest from Sissy Spacek and Christina Applegate, both are awaiting offers from the Producers. Given the strength of the script, an established director, and the caliber of talent he attracts, Broken April/Alabama Rain will be very attractive to talent. KRIS KRISTOFFERSON as HOYT COLLINS This multi-talented former Rhodes Scholar and West Point professor began making history in the 1970s writing hit song after hit song, including Sunday Mornin' Comin' Down for Johnny Cash and Me & Bobby McGee for Janis Joplin. He enjoyed a successful recording career of his own as well as acclaim as a leading man, winning a Best Actor Golden Globe starring opposite Barbara Streisand in A Star is Born. He also was nominated for a Best Original Score Oscar for his work on the film Songwriter. Mr. Kristofferson has acted in dozens of films, including Convoy, the Blade franchise, John Sayles’ Lone Star, Payback with Mel Gibson, and Tim Burton’s Planet of the Apes. He also appeared in writer/director Robby Henson’s first picture Pharaoh’s Army alongside Oscar-winner Chris Cooper.

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CHRISTINA APPLEGATE as KATY ROSE This popular actress is the daughter of a record producer and a singer. She landed her breakout role as Kelly Bundy on TV’s long running hit Married...With Children. During her time on the show, Christina also appeared in several features, most notably starring in Don't Tell Mom The Babysitter's Dead. The series Jesse also was created as a starring vehicle for her, cementing her status as a bankable actress. Ms. Applegate recently refocused her career on film and has since taken off with strong performances in The Sweetest Thing with Cameron Diaz and View From the Top with Gwyneth Paltrow. She also stars in the upcoming Surviving Christmas with Ben Affleck and the upcoming Wonderland with Val Kilmer.

RANDY TRAVIS as PURIFY

Randy Travis to date has Recorded 18 Country & Western Albums of which 6 went to #1 on the charts, 10 were in the top 10 and 14 were in the top 20 and all were in the top 50. So far his 18 Albums generated 46 single of which 22 were #1 on the charts, 16 were in the top 10 and 33 were in the top 20, and all reached the top 100. Randy has appeared in over 20 Television series and Television Specials for networks such as CBS, ABC, NBC, HBO, FOX, A&E, and TNN, just to name a few. He has guest starred in such series as Sabrina the Teenage Witch, King of the Hill and has a reoccurring role on the hit series Touched by an Angel. Randy has starred in over 25 feature films and Television movies. He has starred opposite such stars as Jon Voight, Matt Damon, and Danny DeVito in The Rainmaker; Bill Paxton and Rob Lowe in Frank and Jesse; Steven Segal in Fire Down Below; Patrick Swayze and Meatloaf in Black Dog; Antonio Banderas, Ellen Barkin, Lily Tomlin, and Bob Hoskins in White River Kid; James Van Der Beek, Dylan McDermott, and Usher in the Miramax film Texas Rangers.

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RICHARD TYSON as ROBIN Richard Tyson’s break out roles was starring in the indie cult classic “Three O’Clock High” directed by Phil Joanou. Tyson has been busy ever since starring in such films as “Kindergarten Cop,” “Battle Field Earth,” and “Black Hawk Down” just to name a few. Tyson is a perennial favorite of the Farrelly Brothers, turning in outstand performances in their quirky ensemble comedies: “Kingpin,” “There’s Something About Mary,” “Me, Myself & Irene.”

Should Vanguard Productions be unable to sign the above actors to contracts due to schedule conflicts or other unforeseen circumstances, the Company will sign a cast that is creatively and financially equivalent. In order to keep the film’s financial prospects attractive to investors and distributors, the Company will negotiate with the talent to work at reduced rates and receive as compensation a percentage of the back-end net profits. The talent often is agreeable to such terms when offered potentially award-winning roles in independent films. This strategy will enable producing the film at a significant budget savings and thereby reduce the risk to investors.

The Industry The Major Studios The global motion picture industry encompasses the production of feature-length motion pictures and the subsequent distribution of such pictures to theatrical exhibitors, home video, and other ancillary markets. Business activity therefore falls into two categories: production and distribution. Production involves developing, financing, shooting, and editing motion pictures. Distribution involves marketing, licensing, promoting, reproducing, and exhibiting completed motion pictures. The industry is dominated by the major studios: The Walt Disney Company, Warner Brothers, DreamWorks SKG, Universal Pictures, Twentieth Century Fox, Sony Pictures Entertainment, Paramount Pictures, and MGM. The ‘majors’ historically produce and distribute the majority of theatrical motion pictures released annually in the United States. They generally own their production studios, have worldwide distribution organizations, create films with production costs ranging from $10 million to in excess of $100 million, and release films with distribution costs that typically equal or exceed production costs. The Mini-Majors In recent years, most of the major studios also have acquired once-independent production and distribution companies, infused them with capital, and formed smaller versions of the major studios. The Walt Disney Company has Miramax, Warner Brothers has New Line Cinema and Fine Line Features, Universal Pictures has Focus Features (Formerly USA Films), Twentieth Century Fox has Fox 2000 and Fox Searchlight, Sony Pictures Entertainment has Screen Gems and Sony Pictures Classics, Paramount Pictures has Paramount Classics, and MGM has United Artists. These ‘mini-majors’ generally have worldwide distribution organizations but do not own production studios. They are the primary distributors of ‘independent’, ‘specialty’, or ‘art-house’ films targeted to urban audiences with production costs typically ranging from $1 million to $10 million and with proportionately smaller distribution costs. Because they do not produce the majority of films that they release, the mini-majors rely on a number of small, independent production companies like Vanguard Productions to supply their distribution pipeline with quality motion pictures. With a budget of approximately $3.5 million, Broken April/Alabama Rain is a perfect example of such a film. The Niche Distributors A third segment of truly independent distributors continues to survive without the backing of the major studios. This handful of small companies releases ‘art-house’ or ‘niche’ films, true ‘low-budget’ projects with total production costs typically under $1M and very low distribution costs. These films often contain challenging material with limited market appeal that—without the benefit of ‘name’ actors—would not benefit from the marketing muscle of the mini-majors. Unable to diversify their annual output among over twenty films, these ‘niche’ distributors struggle even as the mini-majors flourish. In recent years, as the independent motion picture business has matured, several small but high profile niche distributors have folded. There are clear and significant differences, however, in the marketability of projects released by niche distributors and those released by the mini-majors. In terms of story, genre, budget, and presence of ‘name’ talent, Broken April/Alabama Rain is completely consistent with the caliber of motion picture released by the mini-majors and bears little resemblance to those historically released by the niche distributors.

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The Marketplace Market Overview The motion picture business is a proven stalwart in both good and bad economic times. Despite the difficulties that other sectors of the economy have experienced after the events of 9/11, the U.S. theatrical box office rose to a record $8.4 billion in 2001, a climb of almost 10% over 2000, with 1.49 billion tickets sold, a 5% increase over 2000 and the largest ticket-buying audience since 1959.2 2002 also is turning out to be another recordbreaking year at the box office. Mini-Major Growth The market segment served by the mini-majors—which Broken April/Alabama Rain targets—continues to grow. In 2001, all but one of the mini-majors saw significant revenue growth. Miramax, Focus Features, Sony Classics, Lions Gate, Fox Searchlight, and Paramount Classics each enjoyed gains ranging from 39% to 425%, together comprising 40% of the U.S. box office.3 Worldwide, the market segment served by the mini-majors is a $7 Billion business. 2001 Motion Picture Industry Statistics Total US Box Office - $8.4 Billion Indie Share of US Box Office - $3.2 Billion - 40% Indie Share of International Box Office - $2.6 Billion Indie Share of Ancillary Revenues - $1.2 Billion Total Worldwide Indie Film Revenue - $7 Billion

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Two interrelated factors account for the steady growth of the mini-majors. One is the increase in the number of films they distribute in the commercial genres of thriller, family, romance, and horror, which feeds into the other factor, the increase in the number of screens showing films from the mini-majors. Historically, these films have received limited initial releases in ‘specialty’ theatres targeting urban and collegiate audiences. These films stayed in the specialty theatres, appearing on only 250 to 500 screens nationwide. Now, however, an increasing number become ‘crossover hits’ able to garner screens in the mainstream multiplexes after successful initial releases. In some cases these films appear on 1500 to 3000 screens, comparable to a major studio release.4 Crossover Hits In recent years, examples of such ‘crossover hits’ abound. In 1999, The Blair Witch Project became the most successful independent film of all time, grossing $140 million in the U.S. alone on a budget of under $1 million. Then in October 2002, My Big Fat Greek Wedding raised the bar yet again. This $5 million film is still in release, yet has a total U.S. box office gross of over $246 million. While these films are the rare exceptions, they illustrate how far this market segment has come in recent years. More relevant examples include The Deep End (2001), with a budget of $3 million and a U.S. gross of $9 million; Memento (2000)—budget $5 million, U.S. gross $25 million; Billy Elliot (2000)—budget $5 million, U.S. gross $22 million; One Hour Photo (2002)—budget $12 million, U.S. gross $32 million; and Crouching Tiger, Hidden Dragon (2000)—budget $15 million, gross $128 million. These recent examples show that independent films now can achieve both critical acclaim and commercial success with high-quality, character-driven storytelling like that found in Broken April/Alabama Rain.

2

The Hollywood Reporter, March 6, 2002. “Year End Wrap 2001 – The Indies”. Staff, The Hollywood Reporter, January 4-6, 2002 4 “Two sides of a coin: sellers”, David E. Williams, The Hollywood Reporter, Sundance Special Report, Jan. 09, 2002. 3

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Marketing Strategy Strategy Overview Because the possibility now exists for independent films to garner wide distribution and become ‘crossover hits’, new opportunities abound in the current marketplace for producers to create films with broad appeal via classic genre-based rather than visual effects-based storytelling. This contrasts with the major studio approach of achieving broad appeal via large budgets for visual effects and ‘saturation’ marketing.5 Independent producers can take advantage of the box office potential of high-quality films in the character drama genre— such as Broken April/Alabama Rain—that can be made for smaller budgets and potentially achieve wide commercial appeal. The producers also plan to take advantage of the project’s story and talent ties to country music by producing a soundtrack featuring legendary recording artists performing traditional country songs. Such a revival of the traditional country sound is similar to the approach used with great success on the Coen Brothers’ O Brother, Where art Thou? That maximized the film’s marketing potential. As a side note, the O Brother, Where Art Thou? traditional bluegrass soundtrack won an Album of the Year Grammy in 2001. Marketing Scenarios The Company believes that, despite being an independent production, Broken April/Alabama Rain has the artistic and commercial elements necessary for broad audience appeal: high-quality screenplay, characterdriven story, name talent, experienced filmmakers and a commercially-viable musical hook. If these elements are marketed properly to the mini-majors, the film has an excellent chance of garnering distribution and the marketing power to build momentum for its release. The following three sample marketing campaigns illustrate how Broken April/Alabama Rain targets the film’s primary, secondary, and tertiary audiences. Scenario 1: Primary Audience

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Audience

Adults 18-49 ‘Specialty’ or ‘art-house’ audience Top 20 media markets Middle/upper-middle class Educated professionals and university students

Marketing Hooks

Challenging character-driven drama Marketable actors Unique story setting Universal themes of hope and redemption

Campaign Elements

Focus on the dramatic character relationships between a father and his daughter and the challenges they face Promote the actors’ performances, since reviews and word-ofmouth are critical in this genre and audience demographic Associate the film with those previously released by the distributor to build awareness with audiences who saw them

“Scrappy days are here again”, Dana Harris. Variety.com, The Independents, posted Wed., Jul. 25, 2001, 2:55pm PT

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Scenario 2: Secondary Audience Audience

Females 18-49 General mainstream audience All U.S. markets All socio-economic classes All adult movie-going females

Marketing Hooks

Character-driven drama where the lead female is integral Lead actress popular with critics and female audiences Themes of hope and redemption appeal to females

Campaign Elements

Focus on the dramatic dilemmas of the female lead Promote the lead actress’ strong performance Target release dates containing few films with female leads

Scenario 3: Tertiary Audience Audience

Country Music Enthusiasts - Adults 18-65 General country music audience All U.S. markets All socio-economic classes All adult moviegoers with an affinity for country music

Marketing Hooks

Marketable actors with ties to the country music business Legendary country music stars providing to soundtrack. Soundtrack released and marketed simultaneously to promote the film – “A revival of traditional country music”

Campaign Elements

Focus on the legendary country music artists who contributed to the soundtrack for the film Promote the actors’ and filmmakers’ historical ties to the country music industry. Associate the film with those previously released by the distributor to build awareness with country music audiences

The above sample marketing scenarios illustrate the opportunities for the mini-major distributors to attract audiences to Broken April/Alabama Rain. Proactively communicating an independent film’s marketable elements to the distributors is essential. Unfortunately, because many independent producers focus only on the story and not how to sell it, many independent films fail because they cannot be marketed cost-effectively. Vanguard Productions, however, has focused on building a story with marketable hooks that distributors can exploit to reach audiences. The Company is confident that its careful and consistent efforts in development, production, and promotion will allow Broken April/Alabama Rain to compete effectively within our market niche and stand out as a film that audiences will embrace, generating a prosperous showing at the box office.

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The Distribution Process Overview The distribution process involves licensing the motion picture to a distributor (the acquisition) in order to pursue revenue streams in all markets. The distributor acquires the rights to the following markets: domestic theatrical (US and Canada), international theatrical; and non-theatrical or ancillary. The ancillary markets are home video (VHS and DVD), network TV, cable TV (HBO, Showtime), and cable video services (pay-perview and video-on-demand). Additional ancillary markets include schools, museums, airlines, merchandising (games, toys, and clothing), and music soundtracks. The following chart shows a typical distribution timeline over a film’s release life: Acquisition Producers screen films for distributors in private executive meetings, at public theatres, and at public film festivals. During screenings the distributors decide whether or not to bid to acquire the film and immediately begin negotiating with the producers, creating an opportunity for competition. Recent examples include Tadpole (2002) and Swingers (1996), both produced for under $1 million and the subject of heated competition at the Sundance Film Festival. Miramax ended up paying $5 million for all distribution rights to Swingers and $6 million for Tadpole. These are rare exceptions, however, as the producers of both films adopted the very risky strategy of screening to distributors at festivals. Theatrical Release Once the film is acquired, distributors license it to exhibitors for domestic and foreign theatrical release in return for a percentage of the ‘box office gross’ or revenue from ticket purchases. The distributor’s share is called the ‘film rentals’ and is roughly 50% of the box office gross. It is important to note that the domestic theatrical release and foreign theatrical release generate separate revenue streams. Ancillary Release After the film’s theatrical run, distributors license it for ancillary release to a host of companies, such as Blockbuster for home video, AT&T for video-on-demand, HBO for cable, and NBC for television. Equally important for a music-themed project is the soundtrack release and promotion by a major record label, which Vanguard Productions intends to use as a major marketing tool for the film. Typically, the higher the box office gross during theatrical release, the higher the ancillary revenues. Although theatrical performance drives ancillary demand, with the recent popularity of DVD home video, ancillary often approaches and can even surpass theatrical revenues. Distributor Expenses Distributor expenses are all costs incurred in the distribution and marketing of the film. Although every film’s distribution agreement is unique, most follow a similar pattern: the distributor receives a fee as a percentage (30% to 40%) of the gross revenue and also recoups marketing and distribution expenses separately. The remaining net profit goes to the producers and investors. Although distributors occasionally will overspend on marketing and distribution, the much-publicized Hollywood accounting’ measures of the past are uncommon among the mini-majors. Producer Advances To prevent distributor fees from squeezing net profits, producers can negotiate an advance against revenues. The distributor ‘advances’ a portion of the future revenues to the producers and investors upfront, insuring that they at least recoup the production budget and in some cases earn a profit before the distributor releases the film. Swingers and Tadpole negotiated such deals, receiving prior to theatrical release $5 and $6 million, respectively, on $1 million budgets. While most distributors are reluctant to pay advances, they are an important negotiating strategy.

Broken April Business Plan

14

Another option for producers is the ‘negative pick-up’ in which a distributor pays for (or ‘picks up’) the actual cost of the film ‘negative’, covering the entire budget for development, pre-production, production, and postproduction. Depending on the agreement, the relationship can end there with the distributor buying out the producer, or the producer can share in net profits once the distributor recoups the negative pick-up price, marketing and distribution expenses, and its distribution fee. Summary Despite their financial success depending upon it, most independent producers do not plan for distribution prior to production. Instead, they raise financing and produce the film, postponing the process of selling to distributors until the film screens at festivals like Sundance. Vanguard Productions, however, believes this lack of preparation puts unacceptable risk on the investors, even if it does occasionally lead to a distributor bidding war and a handsome acquisition deal. Because Vanguard Productions’ primary concern is investor profit via theatrical distribution, the producers already have begun talks with distributors to obtain a distribution commitment prior to production. Although such a deal cannot be guaranteed, this approach minimizes investor risk and offers the greatest opportunity for profitability because it financially involves the distributor in the production of the film, thereby balancing the risk among producers, investors, and the distributor.

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Distribution Strategy Overview The Company’s goal is to minimize investor risk by obtaining a distribution deal prior to production of Broken April/Alabama Rain. Vanguard Productions has built relationships with executives at all of the mini-major distributors and feels they will respond positively to the project. Vanguard Productions plans to approach executives at Miramax, Artisan, Samuel Goldwyn, Focus Features, Sony Classics, Fine Line, Fox Searchlight, Screen Gems and United Artists. Vanguard Productions already has received interest from Lions Gate due to the success of Robby Henson and Terence O’Keefe’s previous working relationship on their past films. Evaluation By continuing to follow a sound approach to distribution, Vanguard Productions will avoid the situation many independent producers face: producing a film that neither garners theatrical distribution nor profits its investors. The producers are confident their approach will succeed because Broken April/Alabama Rain is strong in areas distributors focus on when deciding amongst competing projects, as follows: Distributor Criteria Screenplay Quality Cast Appeal Director Experience Producer Experience Special Audiences Financing Attached Marketing Tie-Ins

Evaluation of Broken April/Alabama Rain Strong—The screenplay is a unique example of a successful genre. Strong—A cast featuring the equivalent of Kris Kristofferson, Christina Applegate, and Sissy Spacek will appeal to general audiences. Several smaller roles also offer cameos for name talent. Strong—Robby Henson’s directing abilities are proven. His previous films have been successes after garnering top name talent and distributors. Strong—The producers have extensive experience with films in this budget range and a history of being on time and on budget. Strong—The film appeals to female and country music audiences. Strong—$3.5 million in financing attached will be valuable to distributors. Strong—The film’s soundtrack will both assist in marketing the film and stand alone as a viable traditional country music album.

Conclusions ⎟ Artistic integrity—a quality story that will resonate with general audiences ⎟ Strong cast—talent considering project even before receiving monetary offers ⎟ 100% financing in place—low production investment for high production value in return ⎟ Strong appeal to target audiences—enables efficient marketing expenditures ⎟ Experienced producers attached—Terence M. O'Keefe ⎟ Successful, proven director attached—Robby Henson ⎟ Budget prepared and clearly defined—tax credits available, and low-budget union agreements available to minimize budget costs and maximize production value ⎟ Shooting schedule complete—production ready to begin

Broken April Business Plan

16

Investment Opportunity Risk Statement Investment in the motion picture industry is highly speculative and inherently risky. Vanguard Productions, Inc. can offer no assurance of the economic performance of Broken April/Alabama Rain since the revenues derived from the production and distribution of the film depend primarily upon its acceptance by the public—which cannot be predicted. The commercial success of Broken April/Alabama Rain also depends upon the quality and acceptance of competing films with a presence in the marketplace at the same time Broken April/Alabama Rain is released—which also cannot be predicted. Furthermore, commercial success depends upon domestic and international economic conditions as well as other tangible and intangible factors—all of which cannot be predicted. The Offering Despite the impossibility of guaranteeing the profitability of any film—and the possibility that Broken April/Alabama Rain may never generate a profit for either the distributor, the producers, or the investors— this plan has outlined how the Company is doing everything in its power to increase the odds of the film's success, including developing a solid plan consistent with the genre, identifying box office opportunities, and building the relationships necessary for the film to reach its potential. Vanguard Productions therefore seeks $3.5 million in equity capital (in blocks of $100 thousand) to finance the entire production budget of the motion picture Broken April/Alabama Rain, thereby funding the Limited Liability Company formed solely for the film’s production. Investor Returns Vanguard Productions understands that, as an investor, the only thing more important than the return on an investment is the return of an investment. Although it cannot guarantee Broken April/Alabama Rain will be profitable—or for that matter break even—the Company is fully committed to securing the most beneficial distribution deal possible for investors. The Company is confident that distributors and audiences will enjoy Broken April/Alabama Rain and that the financial rewards will follow. Vanguard Productions proposes to repay investors in the following manner: Investors—Initial investment plus a pre-negotiated percentage of return (typically 20%), and will be paid pro rata to investors proportionate to their individual investments. Payments will be disbursed pari passu to all investors simultaneously. Deferments—From net profits, the producers will pay outstanding expenses contained in the production budget but not paid during production, such as deferred pay of talent or crew salaries. Net Profit—Any additional net profits will be split evenly between the producers and investors. Any additional profit participation (i.e. actors, directors, composers) will be paid from the producer’s share of the net profit. Distributors typically produce accounting statements on a quarterly basis for the first two years of a distribution agreement and thereafter twice annually for a period of two years. Thereafter, statements are produced annually. The distributor typically is responsible for providing statements and paying sums due the production company within sixty days of the quarter close. Vanguard Productions will deliver investors accounting statements and payments within sixty days of receipt from the distributor.

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Financial Projections Overview Although many factors affect the financial performance of a motion picture, the most critical are the audience appeal and the distribution agreement terms. Partnering with private investors maximizes the film’s appeal by enabling producers to control its budget and quality, and it enriches the terms of the distribution agreement by strengthening the negotiating power producers have with distributors. Below are Comparable Films, Income Projections, and Investor Projections for the motion picture Broken April/Alabama Rain. Comparable Films The comparable films table below details the performance history and profitability of films with budgets, genres, and quality similar to that of Broken April/Alabama Rain. While there can be no guarantee of the success the film will have in the marketplace, a thorough evaluation shows that historically films comparable to Broken April/Alabama Rain have performed well for investors, producers, and distributors. Notes:

* Amounts in millions of dollars * Domestic Totals from Kagan/Baseline & Variety * Foreign Totals from Kagan/Baseline & Variety * P&A Totals from Kagan/Baseline * Total Net Profits do not represent returns to specific investors. * This chart is intended solely to convey information about the profitability of these films.

Broken April Business Plan

18

Income Projections The income projections table below details the predicted performance and profitability of Broken April/Alabama Rain during its three years of release, the time typically required for distribution into all possible markets. The projections detail three possible scenarios: ‘Low’ is breakeven performance, ‘Medium’ is a likely profit outcome, and ‘High’ is the ‘All Films Average’ from the comparable films table, a conservative best-case result. These projections should be taken as reasonable estimations only. Footnotes for both Tables: 1 Box Office Gross—Gross revenue generated from theater ticket sales. 2 Ancillary Revenue—Gross revenue generated from all ancillary markets: home video, cable, video-on-demand, television, etc. 3 Negative Cost—Total film production budget, those expenses incurred to create the master film print. Does not include deferred salaries. Does not include marketing expenses, which fall under prints & advertising (P&A). 4 Prints & Advertising—Expenses incurred to reproduce and deliver film prints plus all advertising and marketing expenses. 5 Exhibitor Share—The exhibitor’s (theater owner’s) share of the box office gross when split with the distributor. The projections assume domestic exhibitor share is 53% (distributor 47%) and foreign exhibitor share is 45% (distributor 55%). 6 Gross Film Rentals—The distributor’s share of the box office gross when split with the exhibitor (theater owner). The projections assume domestic gross film rentals are 47% (exhibitor 53%) and foreign gross film rentals are 55% (exhibitor 45%). 7 Distributor Fees—The fees a distributor retains from the gross film rentals and gross ancillary revenues. The projections assume domestic distributor fees are 35% and foreign distributor fees are 40% because they include P&A. 8 Total Producer’s Gross—The total received from the distributors (domestic & foreign) after all fees and costs incurred in distribution and marketing have been deducted. 9 Total Net Profit—The Total Producer’s Gross (the sum of domestic theatrical, domestic ancillary, foreign theatrical and foreign ancillary net profits) less the Negative Cost.

Notes:

* Amounts in millions of dollars * Domestic Totals from Kagan/Baseline & Variety * Foreign Totals from Kagan/Baseline & Variety * P&A Totals from Kagan/Baseline

Broken April Business Plan

19

Investor Projections The investor projections table below details the predicted performance and profitability of Broken April/Alabama Rain during its three years of release. It explains how producers and investors divide the total net profit that the distributor remits from release into all markets. The projections detail three possible scenarios: ‘Low’ is breakeven performance, ‘Medium’ is a likely profit outcome, and ‘High’ is the ‘All Films Average’ from the comparable films table, a conservative best-case result. These projections should be taken as reasonable estimations only. Additional Footnotes: 10 Investor ‘Priority’ Return—Before producers see any profits, investors first recoup a ‘priority’ return (typically 20% of their total investment). 11 Investor/Producer Profit— The total amount producers and investors divide as profit, before deferrals. 12 Adjusted Investor/Producer Return— The total amount producers and investors divide as profit. 13 Investor 50% Split—After investors recoup their 20% ‘priority’ return, they split the profit, if any, evenly with producers after deferrals are paid. 14 Total Investor Return—The total return above the initial investment. Includes the 20% ‘priority’ return and the 50% split with producers. 15 Return Per Unit— The total return above and beyond the initial investment on a single unit of $100,000. Note that this amount IS NOT in millions. 16 Percent ROI— The total return above and beyond the initial investment of a single $100,000 unit, expressed as a percentage.

Summary of Projections An analysis of the above projections and assumptions reveals opportunity for investors in Broken April/Alabama Rain to enjoy considerable financial success. The projected three-year return on investment (ROI) for each block of $100,000 is approximately 90% or $90000 per block, above and beyond the initial investment. This corresponds to a $450000 return on a $500,000 investment (5 blocks); $900000 on $1 million (10 blocks); and $3.15 million on the total $3.5 million (all 35 blocks), above and beyond the initial investment. Although successful films generate revenues for many years and sometimes decades after their release, after three years all distribution channels have had approximately a year to market the film and return the vast majority of their revenues.

Broken April Business Plan

20

Foreign Sales Estimates for Broken April / Alabama Rain COUNTRY TERRITORY ARGENTINA / URU / PAR AUSTRALIA /NZ BENELUX BRAZIL BULGARIA CENTRAL AMERICA CHILE CHINA COLUMBIA CZECHOSLOVAKIA EAST AFRICA ECUADOR/PER/BOLIVIA ENGLAND / UK FORMER YUGOSLOVIA FRANCE GERMANY / AUSTRIA GREECE HUNGARY ICELAND INDIA INDONESIA ISREAL ITALY JAPAN KOREA MALASIA MEXICO MIDDLE EAST NETHERLANDS PAKASTAN PHILIPPINES POLAND PORTUGAL ROMANIA RUSSIA SCANDINAVIA SINGAPORE SOUTH AFRICA SPAIN TAIWAN THAILAND TURKEY VENEZUELA WEST AFRICA ASIA PAY/SATELITE TV TOTALS

Broken April Business Plan

21

FEE MAXIMUM $40,000.00 $80,000.00 $80,000.00 $75,000.00 $3,000.00 $5,000.00 $50,000.00 $20,000.00 $40,000.00 $15,000.00 $5,000.00 $50,000.00 $300,000.00 $15,000.00 $300,000.00 $500,000.00 $20,000.00 $15,000.00 $5,000.00 $15,000.00 $15,000.00 $15,000.00 $250,000.00 $400,000.00 $50,000.00 $15,000.00 $250,000.00 $25,000.00 $150,000.00 $3,000.00 $15,000.00 $35,000.00 $20,000.00 $5,000.00 $60,000.00 $100,000.00 $20,000.00 $30,000.00 $250,000.00 $20,000.00 $20,000.00 $25,000.00 $40,000.00 $5,000.00 $50,000.00

FEE MINIMUM $20,000.00 $40,000.00 $40,000.00 $40,000.00 $2,000.00 $1,000.00 $25,000.00 $10,000.00 $20,000.00 $6,000.00 $2,000.00 $20,000.00 $150,000.00 $6,000.00 $200,000.00 $250,000.00 $10,000.00 $6,000.00 $2,000.00 $7,000.00 $10,000.00 $8,000.00 $150,000.00 $200,000.00 $25,000.00 $10,000.00 $100,000.00 $10,000.00 $75,000.00 $1,000.00 $10,000.00 $15,000.00 $10,000.00 $3,000.00 $35,000.00 $50,000.00 $10,000.00 $15,000.00 $150,000.00 $15,000.00 $10,000.00 $10,000.00 $20,000.00 $2,000.00 $25,000.00

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"Broken April/

Alabama Rain" Vanguard Productions

Director:Robby Henson Producer:TerenceM. O'Keefe Writer: Robby Henson Accfil

11 0 0 1200 1300 r 1400 1500 1600

Locations: Louisiana Based on 6 Day Week 13 hour Day ShootingRatio : g:1

CategoryTitle Story& OtherRights i Producers Unit Directors Unit Talent 4{{ Travel/Living

Page 1 1 1

2 2 4

3200

3300 3400 3500 3600 3700 3800 3900 4000

5200 5300 5400 5500

9

PropertyDepartment

10

Camera Operations

11

$105,749

ElectricOperations

12 13 14 15 16

$87,315

5 I

GripOperations ProductionSound MechanicalEffects

i SetOperations WardrobeDepartment Makeup& Hair LocationDepartment

Transportation Department Atmosphere ProductionFilm & Lab

I GeneralExpenses BTL Travel/Living Loss & Damage

6100 6200 6300 6400

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Editing Post-ProductionFilm/Lab

Post-Production Sound Music iOpticalsffitles TOTALPOSTPRODUCTION Insurance LegalCosts Publicity Miscellaneous TOTAL OTHER CompletionBond: 2.500o/o

I Contingency: 5.00% PackagingFees : 5.00%

TOTALABOVE.THE.LINE TOTALBELOW.THE.LINE TOTALABOVE& BELOW.THE-LINE GRANDTOTAL

"BrokenApril"

$69.836 $711,859

Set Decoration

ProductionStaff

Production Design SetConstruction

9

16 17 17 19

21 21 22 22 22

TOTAL PRODUCTION

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$5,500 $58,235 $249,509

$70,250 $1,165,199 $176,506 $84,390 $28,228 $66,905 $36,834

TOTALABOVE.THE-LINE 2100 2200 2300 2400 2500 2600 2700 2800 2900 3000 3100

Total

$81,403 $46,034 $3,874

$25,593 $47,29A $42,778

$156,361 $148,959 $21,618 $106,975

$25,505 $131,500 $10,000 $1.433.818

23 24 24 24 25

$99.177 $48,787 $76,370 $144,862

$20,000 $389,196

25 25 25 25

$20,000 $20,000 $37,000 $1,500 $78_500

$76,668 $153,335 $153,335 $1,165,199 $1,901,514 $3,066,702 $3,450,040

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