<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 3, 1996
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE MARQUEE GROUP, INC.
(Name of Small Business Issuer in Its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 7941 13-3878295
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
150 EAST 58 STREET, 19TH FLOOR
NEW YORK, NEW YORK 10155
(212) 407-9130
(Address and Telephone Number of Principal Executive Offices and Principal
Place of Business)
ROBERT M. GUTKOWSKI, PRESIDENT
150 EAST 58 STREET, 19TH FLOOR
NEW YORK, NEW YORK 10155
(212) 407-9130
(Name, Address and Telephone Number of Agent for Service)
COPIES TO:
John J. Hentrich, Esq. Jill M. Cohen, Esq.
Michael S. Novins, Esq. Bachner, Tally, Polevoy & Misher LLP
Baker & McKenzie 380 Madison Avenue
805 Third Avenue New York, New York 10017
New York, New York 10022 (212) 687-7000
(212) 751-5700
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE
AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING
BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT
OF 1933, CHECK THE FOLLOWING BOX. [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT (1) PRICE (1) REGISTRATION FEE
- --------------------------------------------- -------------- ------------------ ------------------ ----------------
<S> <C> <C> <C> <C>
Units, each consisting of one share of Common
Stock, $.01 par value, and one Warrant ..... 3,450,000(2) $5.00 $17,250,000 $ 5,948.28
- --------------------------------------------- -------------- ------------------ ------------------ ----------------
Common Stock, $.01 par value ................. 3,450,000(3) 7.50 25,875,000 8,922.41
- --------------------------------------------- -------------- ------------------ ------------------ ----------------
Unit Purchase Option (4) ..................... 300,000 .001 300 .10
- --------------------------------------------- -------------- ------------------ ------------------ ----------------
Units, each consisting of one share of Common
Stock, $.01 par value, and one Warrant (5) . 300,000 6.00 1,800,000 620.69
- --------------------------------------------- -------------- ------------------ ------------------ ----------------
Common Stock, $.01 par value (5) ............. 300,000 7.50 2,250,000 775.86
- --------------------------------------------- -------------- ------------------ ------------------ ----------------
Units, each consisting of one share of Common
Stock, $.01 par value, and one Warrant (6) . 1,250,000 5.00 6,250,000 2,155.17
- --------------------------------------------- -------------- ------------------ ------------------ ----------------
Common Stock, $.01 par value (7) ............. 1,250,000 7.50 9,375,000 3,232.76
- --------------------------------------------- -------------- ------------------ ------------------ ----------------
Total ...................................... $62,800,300 $21,655.27
- --------------------------------------------- -------------- ------------------ ------------------ ----------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Includes 450,000 Units subject to the Underwriter's over-allotment
option.
(3) Issuable upon exercise of the Warrants.
(4) To be issued to the Underwriter.
(5) Issuable upon exercise of the Unit Purchase Option and/or the Warrants
issuable thereunder.
(6) Registered for resale by selling securityholders.
(7) Issuable upon exercise of the Warrants registered for resale by the
selling securityholders.
Pursuant to Rule 416 under the Securities Act of 1933, as amended, there
are also being registered such additional shares of Common Stock as may
become issuable pursuant to the anti-dilution provisions of the Warrants and
the Unit Purchase Option.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
EXPLANATORY NOTE
This Registration Statement covers the registration of (i) up to 3,450,000
Units, including 450,000 Units to cover over-allotments, if any, each Unit
consisting of one share of Common Stock, par value $.01 per share ("Common
Stock"), of The Marquee Group, Inc., a Delaware corporation (the "Company"),
and one redeemable warrant ("Warrant"), for sale by the Company in an
underwritten public offering and (ii) an additional 1,250,000 Units (the
"Selling Securityholder Units") for sale by the holders thereof (the "Selling
Securityholders") and 1,250,000 shares of Common Stock underlying the
Warrants (the "Selling Securityholder Warrants") included in the Selling
Securityholder Units, all for resale from time to time by the Selling
Securityholders subject to the contractual restriction that the Selling
Securityholders may not sell such securities for a period of 90 days after
the closing of the underwritten offering. The Selling Securityholder Units
and the shares of Common Stock underlying the Selling Securityholder Warrants
are sometimes referred to collectively herein as the "Selling Securityholder
Securities."
The complete Prospectus relating to the underwritten offering follows
immediately after this Explanatory Note. Following the Prospectus for the
underwritten offering are pages of the Prospectus relating solely to the
Selling Securityholder Securities, including alternative front and back pages
and sections entitled "Concurrent Public Offering," "Plan of Distribution"
and "Selling Securityholders" to be used in lieu of the sections entitled
"Concurrent Offering" and "Underwriting" in the Prospectus relating to the
underwritten offering. Certain sections of the Prospectus for the
underwritten offering will not be used in the Prospectus relating to the
Selling Securityholder Securities such as "Use of Proceeds" and "Dilution."
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION --DATED SEPTEMBER 3, 1996
PROSPECTUS
- ----------
THE MARQUEE GROUP, INC.
3,000,000 UNITS CONSISTING OF 3,000,000 SHARES OF COMMON STOCK
AND 3,000,000 WARRANTS
Each unit ("Unit") offered by The Marquee Group, Inc., a Delaware
corporation (the "Company"), consists of one share of common stock, par value
$.01 per share ("Common Stock"), and one redeemable warrant ("Warrants"). The
components of the Units will not be transferable separately until
, 1997 or such earlier date (the "Separation Date") as Royce
Investment Group, Inc. (the "Underwriter") shall determine. Each Warrant
entitles the holder to purchase one share of Common Stock at an exercise
price of $7.50, subject to adjustment, at any time from the Separation Date
until the fifth anniversary of the date of this Prospectus. Commencing one
year from the date hereof, the Warrants are subject to redemption by the
Company at a redemption price of $.05 per Warrant on 30 days' written notice,
provided the closing bid price of the Common Stock averages in excess of
$11.50, subject to adjustment, for any 20 consecutive trading days ending
within five days of the notice of redemption. See "Description of
Securities."
Prior to this Offering, there has been no public market for the Units, the
Common Stock or the Warrants and there can be no assurance that such a market
will develop. The Company has applied for quotation of the Units, the Common
Stock and the Warrants on the Nasdaq SmallCap Market ("Nasdaq") under the
symbols MRQEU, MRQE and MRQEW, respectively, and for listing of the Common
Stock on the Boston Stock Exchange under the symbol . It is
anticipated that the initial public offering price will be $5.00 per Unit.
See "Underwriting" for a discussion of factors considered in determining the
initial public offering price.
Concurrently with this Offering, the Company has registered for resale
(the "Concurrent Offering") by certain securityholders (the "Selling
Securityholders") 1,250,000 units (the "Selling Securityholder Units"), each
Selling Securityholder Unit consisting of one share of Common Stock and one
warrant ("Selling Securityholder Warrants"), and 1,250,000 shares of Common
Stock underlying the Selling Securityholder Warrants. The Selling
Securityholder Units and the securities underlying such units are sometimes
referred to collectively herein as the "Selling Securityholder Securities."
The Selling Securityholder Units are issuable upon the closing of this
Offering to the Selling Securityholders upon the automatic conversion of
$1,250,000 principal amount of debentures acquired by them in the Company's
private placement (the "Private Placement") in August 1996 of $2,000,000
principal amount of debentures (the "Debentures"). The Selling
Securityholders have agreed not to sell any of the Selling Securityholder
Securities for a period of 90 days after the closing date of this Offering.
Sales of the Selling Securityholder Securities, or the potential of such
sales, may have an adverse effect on the market price of the securities
offered hereby.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS," WHICH BEGIN ON PAGE 7, AND
"DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
- -------------- ------------ -------------------------- ---------------
<S> <C> <C> <C>
Per Unit ...... $ $ $
- -------------- ------------ -------------------------- ---------------
Total (3) ..... $ $ $
- -------------- ------------ -------------------------- ---------------
</TABLE>
(1) Does not include additional compensation to be received by the
Underwriter in the form of (i) a non-accountable expense allowance of
$ , or $ per Unit ($ if the over-allotment option is exercised in
full) and (ii) an option, exercisable over a period of three years
commencing two years from the date of this Prospectus, to purchase up
to 300,000 Units at $ per Unit (the "Unit Purchase Option"). In
addition, the Company has agreed to indemnify the Underwriter against
certain liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting estimated expenses of $ payable by the Company,
including the Underwriter's non-accountable expense allowance.
(3) The Company has granted to the Underwriter a 45-day option to purchase
up to 450,000 additional Units on the same terms and conditions as set
forth above, solely to cover over-allotments, if any. If the
over-allotment option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
The Units are being offered on a "firm commitment" basis by the
Underwriter when, as and if delivered and accepted by the Underwriter,
subject to its right to reject orders in whole or in part and subject to
certain other conditions. It is expected that delivery of the certificates
representing the Units will be made against payment at the offices of Royce
Investment Group, Inc., 199 Crossways Park Drive, Woodbury, New York 11797 on
or about , 1996.
ROYCE INVESTMENT GROUP, INC.
The date of this Prospectus is , 1996
<PAGE>
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by its independent public
accountants.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE THE MARKET PRICE OF THE UNITS, COMMON STOCK
AND/OR WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and
financial statements (including the notes thereto) appearing elsewhere in
this Prospectus. Except as otherwise noted, all information in this
Prospectus (i) reflects the Stock Split (as defined under "Certain
Transactions") effected by the Company in August 1996 and the issuance of
2,261,538 shares of Common Stock in connection with the Acquisitions (as
defined below) upon the closing of this offering (the "Offering"), (ii)
assumes an initial public offering price of $5.00 per Unit and no exercise of
the Underwriter's over-allotment option, the Warrants or the Unit Purchase
Option and (iii) gives effect to the automatic conversion, on the closing of
this Offering, of the Debentures into 2,000,000 Units. Unless the context
otherwise requires, the "Company" refers to The Marquee Group, Inc. and its
subsidiaries after giving effect to the mergers of Athletes and Artists, Inc.
(the "A&A Acquisition") and Sports Marketing & Television International, Inc.
(the "SMTI Acquisition") into wholly-owned subsidiaries of the Company upon
the closing of this Offering. The consummation of this Offering is
conditioned upon the closing of the acquisition of each of Athletes and
Artists, Inc. and Sports Marketing & Television International, Inc.
(collectively, the "Acquisitions") concurrently with the closing of this
Offering. Investors should consider carefully the information set forth under
"Risk Factors."
THE COMPANY
The Marquee Group, Inc. ("Marquee" or the "Company") was organized in July
1995 to provide comprehensive management, marketing, sales, consulting and
production services to sports and entertainment-related businesses, events,
athletes, broadcasters, journalists and executives. In recent years,
significant developments in mass media, including the growth of satellite
communications and cable television, have resulted in increased national and
global exposure for sports personalities and the events and projects in which
they participate, and have created national and international audiences for
sports personalities, products and events. In addition, the recent
proliferation of sports-related television and radio stations has created an
increased demand for sports-related programming. As a result, the promotion
and sponsorship of sports events has become a major area of corporate
advertising and product development. The Company believes that the successful
exploitation of this market by sports personalities and corporations requires
integrated marketing and management services.
Marquee was organized by Robert M. Gutkowski, the Company's President and
Chief Executive Officer, who has more than 20 years of experience in the
television, sports and entertainment industries and who served as President
of Madison Square Garden Corporation from November 1991 until September 1994,
and The Sillerman Companies, Inc. ("TSC"), which provides financial advisory,
marketing and consulting services to media companies and sports-related
businesses. TSC is controlled by Robert F.X. Sillerman, Chairman of the
Company, whose principal occupation is Chief Executive Officer of SFX
Broadcasting, Inc. ("SFX").
The Company was formed primarily to acquire Sports Marketing & Television
International, Inc. ("SMTI"), which provides production and marketing
services to sporting events, sports television shows and professional and
collegiate leagues and organizations, and Athletes and Artists, Inc. ("A&A"),
a sports and media representation firm, to integrate these businesses and to
expand into related areas in sports and events programming and promotion.
In conjunction with SMTI's production and marketing services, SMTI
develops and implements corporate sponsorship campaigns which are designed to
promote an event, team or sponsor. SMTI's current and recently completed
principal projects include production and marketing of The Breeders' Cup
Championship, implementation of the balloting campaign for Major League
Baseball's 1996 All-Star Game and development of corporate sponsorship
campaigns. The Company has agreed to acquire SMTI, which was formed in 1984
by Michael Trager and Michael Letis, upon the closing of this Offering for an
aggregate cash purchase price payable to Messrs. Trager and Letis of
$8,000,000, of which $6,500,000 is
3
<PAGE>
payable at closing and $1,500,000 is payable in five equal annual
installments, and the issuance of an aggregate of 1,292,307 shares of Common
Stock to Messrs. Trager and Letis, each of whom will be an executive officer
and director of the Company upon completion of this Offering.
A&A, which was founded in 1977 by Arthur C. Kaminsky, is a sports and
media representation firm whose roster of clients includes broadcasters
(including Al Michaels -ABC Sports, Forrest Sawyer -ABC News, Christiane
Amanpour -CNN and CBS News, Dan Dierdorf -ABC Sports, and Chris Berman -ESPN
and ABC Sports), athletes (including Brian Leetch -New York Rangers, Eric
Heiden -U.S. Olympic five-time gold medalist in speed skating, and Nick
Lowery -New York Jets), authors (including Dick Schaap -author of Bo Knows Bo
and Instant Replay, Rick Reilly -author of The Boz and Missing Links and a
writer for Sports Illustrated, and John Powers -author of One Goal and Mary
Lou! and a sportswriter for The Boston Globe) and media executives (including
Terry O'Neil -a sports and news executive producer, Curt Gowdy, Jr. -ABC
Sports, and John Faratzis -a sports programming producer who has worked with
ABC, CBS and NBC). The Company has also agreed to acquire A&A upon the
closing of this Offering for an aggregate cash purchase price payable to Mr.
Kaminsky and Louis J. Oppenheim, each of whom will be an executive officer
and director of the Company upon completion of this Offering, of $3,500,000,
of which $2,500,000 is payable at closing and $1,000,000 is payable in five
equal annual installments, and the issuance to Messrs. Kaminsky and Oppenheim
of an aggregate of 969,231 shares of Common Stock.
Marquee has agreed to provide production and promotional services
including agreements with ESPN to produce professional and amateur boxing
events and with the Outdoor Life Network to produce The National Lumberjack
Championships.
The Company believes that the combination of its business with those of
SMTI and A&A will provide opportunities to provide enhanced services to
clients and will enable it to construct comprehensive packages of sports
events and sports personality endorsements.
The Company was incorporated in Delaware in July 1995. The Company's
executive offices are located at 150 East 58th Street, 19th Floor, New York,
New York 10155 and its telephone number is (212) 407-9130.
THE OFFERING
Securities Offered ..... 3,000,000 Units, each Unit consisting of one
share of Common Stock and one Warrant. Each
Warrant entitles the holder to purchase one
share of Common Stock at an exercise price
of $7.50, subject to adjustment, at any time
from the Separation Date until the fifth
anniversary of the date of this Prospectus.
The Warrants are subject to redemption in
certain circumstances. See "Description of
Securities."
Securities Offered
Concurrently by Selling
Securityholders ........ 1,250,000 shares of Common Stock and
1,250,000 Warrants, as well as 1,250,000
shares of Common Stock issuable upon
exercise of such Warrants. See "Concurrent
Offering."
4
<PAGE>
Common Stock Outstanding:
<TABLE>
<CAPTION>
ESCROW
NON-ESCROW SHARES SHARES(2)
------------------------------ --------------
<S> <C> <C>
Before this Offering .. 1,400,000 shares (1) 588,462
To be issued in
connection with the
Acquisitions ......... 1,575,000 shares 686,538
To be issued upon the
conversion of the
Debentures ............ 2,000,000 shares (3) --
To be issued in
connection with this
Offering .............. 3,000,000 shares (4) --
Total Common Stock
Outstanding After
this Offering ...... 7,975,000 shares (1) (3) (4) 1,275,000
Use of Proceeds ........ To fund the initial cash portion of the
purchase price of the Acquisitions, for
working capital and general corporate
purposes and capital expenditures. See "Use
of Proceeds."
Proposed Symbols Nasdaq Boston Stock Exchange
Units ................. MRQEU
Common Stock .......... MRQE
Warrants .............. MRQEW
Risk Factors ........... This Offering involves a high degree of risk
and immediate substantial dilution. See
"Risk Factors" and "Dilution."
</TABLE>
- ------------
(1) Excludes 500,000 shares of Common Stock reserved for issuance under the
Company's 1996 Stock Option Plan (the "Plan"). See "Management--1996
Stock Option Plan."
(2) In connection with this Offering, the existing stockholders have
deposited 588,462 shares of Common Stock into escrow and the persons to
receive shares of Common Stock in connection with the Acquisitions have
agreed to deposit 686,538 shares of Common Stock into escrow
(collectively, the "Escrow Shares"). The Escrow Shares are subject to
cancellation and will be contributed to the capital of the Company if
the Company does not attain certain earnings levels or the market price
of the Common Stock does not achieve certain levels. If such earnings
or market price levels are met, the Company will record a substantial
non-cash charge to operations, for financial reporting purposes, as
compensation expense relating to the value of the Escrow Shares
released to the Company's officers, directors, employees and
consultants. See "Risk Factors--Future Charges to Operations," "Certain
Transactions" and "Principal Stockholders--Escrow Shares."
(3) Excludes 2,000,000 shares of Common Stock issuable upon exercise of the
Warrants issuable upon conversion of the Debentures.
(4) Excludes up to (i) 900,000 shares of Common Stock issuable upon
exercise of the Underwriter's over-allotment option (and the Warrants
included therein), (ii) 3,000,000 shares of Common Stock issuable upon
exercise of the Warrants which are components of the Units offered
hereby and (iii) 600,000 shares of Common Stock issuable upon exercise
of the Unit Purchase Option and the Warrants contained therein.
5
<PAGE>
SUMMARY FINANCIAL DATA
The Summary Financial Data of the Company as of June 30, 1996 and for the
six-month period ended June 30, 1996 have been derived from the unaudited
financial statements of Marquee appearing elsewhere in this Prospectus.
Marquee had no operations during the period from inception (July 11, 1995)
through December 31, 1995 and, accordingly, only pro forma financial
information relating to this Offering and the Acquisitions as if they had
occurred on January 1, 1995 is presented in the Summary Financial Data.
Operating results for the six-month period ended June 30, 1996 are not
necessarily indicative of the results that may be achieved for the fiscal
year ending December 31, 1996. The pro forma financial data gives effect to
the following transactions and adjustments for the periods and at the dates
presented: the Acquisitions and the related contractually agreed to
reductions in officers' salaries and employee benefits, the Private Placement
and the completion of this Offering at an assumed initial public offering price
of $5.00 per Unit and the application of the net proceeds therefrom to complete
the Acquisitions. The Acquisitions have been reflected in the Unaudited Pro
Forma Condensed Combined Financial Statements as a consolidation at historical
cost due to the significance of the equity interests to be held by the
stockholders of A&A and SMTI. The following data should be read in
conjunction with the notes thereto and the audited and unaudited financial
statements and notes thereto contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995 SIX MONTHS ENDED JUNE 30, 1996
----------------- --------------------------------
PRO FORMA FOR PRO FORMA FOR
OFFERING AND OFFERING AND
ACQUISITIONS HISTORICAL ACQUISITIONS
----------------- -------------- ----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ............................. $10,341,827 $ 800,895 $7,329,177
Operating expenses ................... 5,549,887 666,796 4,662,385
General and administrative expenses . 3,129,710 707,600 2,553,385
Operating income (loss) .............. 1,662,230 (573,501) 113,407
Net income (loss) .................... 789,773 (573,501) 31,522
Net income (loss) per share .......... $ .10 $ (.17) $ --
================= ============== ================
Weighted average common stock and
common stock equivalents outstanding 7,975,000(1) 3,400,000(2) 7,975,000(1)
================= ============== ================
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1996
-------------------------------------------
PRO FORMA FOR PRO FORMA FOR
PRIVATE OFFERING AND
BALANCE SHEET DATA: ACTUAL PLACEMENT(2) ACQUISITIONS(3)
----------- ------------- ---------------
<S> <C> <C> <C>
Current assets ................ $ 103,979 $1,388,594 $7,239,651
Current liabilities ........... 535,385 70,000 2,281,916
Total assets .................. 103,979 1,638,594 7,394,181
Long-term debt ................ -- 2,121,615 1,697,615
Stockholders' equity (deficit) (553,021) (553,021) 3,414,650
</TABLE>
- ------------
(1) Excludes 1,275,000 Escrow Shares. See "Principal Stockholders--Escrow
Shares" and Note 4 of the Notes to Financial Statements of The Marquee
Group, Inc.
(2) Gives effect to the issuance of $2,000,000 aggregate principal amount
of Debentures subsequent to June 30, 1996 which are convertible into
2,000,000 shares of Common Stock and 2,000,000 Warrants. See
"Capitalization--Private Placement."
(3) Adjusted to give effect to the sale of the 3,000,000 Units offered
hereby at an assumed offering price of $5.00 per Unit, the application
of the net proceeds therefrom to complete the Acquisitions and a
non-cash compensation charge to operations estimated at approximately
$1,500,000 associated with the Private Placement. See "Risk
Factors--Future Charges to Operations," "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
6
<PAGE>
RISK FACTORS
The securities offered hereby are speculative in nature and an investment
in the Units offered hereby involves a high degree of risk, including
substantial competition, the dependence of the Company upon third parties and
risks associated with the integration of the businesses of A&A and SMTI.
Prospective investors are cautioned that the statements in this Prospectus
that are not historical facts may be forward-looking statements that are
subject to risks and uncertainties. In addition to the other information
contained in this Prospectus, prospective investors should carefully consider
the following risk factors before purchasing the Units offered hereby.
Competition. The sports and entertainment businesses are highly
competitive and are affected by changes in consumer taste. The profitability
of projects in these industries is dependent upon subjective market appeal to
the general public and cannot be predicted with any degree of certainty.
There is a high risk that the production and sale of sports and entertainment
projects contemplated by the Company will not yield sufficient revenues to
enable the Company to compete successfully. Several competitors, such as
International Management Group, ProServ, Inc. and Advantage International
Inc. in the sports industry and the William Morris Agency, Inc. and Creative
Artists Agency, Inc. in the entertainment industry, are well-known companies
with substantially greater financial, technical and marketing resources than
the Company. Additionally, many smaller entities are involved in each of the
Company's lines of business. See "Business--Competition."
No Prior History of and Risks Associated with Combined Operations. The
Company has no operating history as a combined entity. A&A and SMTI have
operated as independent businesses with independent management since 1977 and
1984, respectively, and there can be no assurance that the businesses of such
companies will not be adversely affected as a consequence of being combined
into a larger entity. There can be no assurance that the Company will be able
to implement its business plans or achieve profitable operations.
Dependence on Key Personnel. The Company's success depends upon the
contributions of its current executive officers and those persons expected to
become executive officers of the Company upon completion of the Acquisitions,
including Robert M. Gutkowski, the President and Chief Executive Officer of
the Company, Arthur C. Kaminsky, Louis J. Oppenheim, Michael Trager and
Michael Letis. Each of Messrs. Kaminsky, Oppenheim, Trager and Letis will
receive cash proceeds from this Offering and will become principal
stockholders of the Company in connection with the Acquisitions. See "--Use
of Proceeds and Offering to Benefit Insiders." There can be no assurance that
these individuals will continue to devote sufficient time to the Company's
combined business following the Acquisitions or will effectively operate as a
coherent management team. The loss of services of, or a material reduction in
the amount of time devoted to the Company by, certain of such individuals
could adversely affect the business of the Company. In addition, SMTI's
agreement with the Breeders' Cup Limited, which has historically accounted
for a substantial portion of SMTI's revenues, may be terminated by the
Breeders' Cup Limited if SMTI's employment of Mr. Letis is terminated or Mr.
Letis becomes unavailable to perform the service's necessary to enable SMTI
to comply with the terms of such agreement, which would have a material
adverse effect on the business and operations of the Company. The Company
intends to obtain key-man insurance for its benefit in the amount of
$2,000,000 on the life of Mr. Gutkowski. See "Business--Events Production and
Corporate Sponsorship," "Management" and "Certain Transactions."
Dependence Upon Corporate Sponsors and Personalities. The Company expects
that a substantial portion of its revenues will be derived from its
representation of sports and entertainment personalities and from fees and/or
commissions paid by corporate sponsors. The Company's representation
agreements with its clients are generally terminable annually on 30 days'
notice and the Company's corporate sponsorship projects are generally on a
short-term basis and may not be evidenced by a written agreement in advance
of Company expenditures or at all, which the Company believes is common in
its industry. The expiration or termination of a significant amount of the
Company's contracts with certain clients would have a material adverse effect
on the Company's operations. During the years ended December 31, 1994 and
1995 and the six-month period ended June 30, 1996, the agreement with the
Breeders' Cup Limited accounted for approximately 78%, 75% and 55%,
respectively, of SMTI's revenues and, on a pro forma basis, giving effect to
the Acquisitions as if they had occurred on January 1, 1995, would have
accounted
7
<PAGE>
for approximately 47% and 36% of the Company's revenues for the year ended
December 31, 1995 and the six-month period ended June 30, 1996, respectively.
The Breeders' Cup Championship occurs in the fourth calendar quarter and,
accordingly, SMTI's operations have been seasonal and the Company may
continue to experience quarterly fluctuations in its operating results. The
agreement between SMTI and the Breeders' Cup Limited provides for termination
on December 31, 1997, unless earlier terminated in accordance with the
provisions set forth in the agreement, including the termination, for any
reason, of SMTI's employment of Michael Letis or the unavailability of Mr.
Letis to perform the services necessary to enable SMTI to comply with the
terms of the agreement. The termination or expiration of SMTI's agreement
with the Breeders' Cup Limited would have a material adverse effect on the
business and operations of the Company. Because a limited number of customers or
projects may continue to provide a significant portion of the Company's
revenues, the Company's business, operating results and financial condition
could be materially adversely affected by the failure of anticipated projects to
materialize or by cash flow requirements to implement projects prior to receipt
of related fees. In addition, there can be no assurance that the Company will be
able to enter into additional contracts with sports personalities or corporate
sponsors. See "Business--Events Production and Corporate Sponsorship."
Use of Proceeds and Offering to Benefit Insiders. In connection with the
Acquisitions, upon the closing of this Offering, the sole stockholders of
SMTI (Messrs. Letis and Trager) and of A&A (Messrs. Kaminsky and Oppenheim)
will receive (i) cash payments aggregating $9,000,000, (ii) an aggregate of
2,261,538 shares of Common Stock (representing approximately 24.4% of shares
of Common Stock to be outstanding upon completion of this Offering), (iii)
rights to installment payments aggregating $2,500,000 payable over five years
and (iv) employment agreements providing for annual salaries aggregating
$1,075,000. In addition, the Company has entered into a six-year consulting
agreement with Sillerman Communications Management Corporation ("SCMC"),
which is controlled by Robert F.X. Sillerman, the Chairman of the Company and
the controlling stockholder of TSC, a principal stockholder of the Company,
pursuant to which the Company has agreed to pay to SCMC a consulting fee of
$30,000 per month commencing nine months from the completion of this Offering
and to pay certain transaction-based fees to SCMC. In addition, the Company
has agreed to pay to Robert M. Gutkowski, the Company's President and a
principal stockholder of the Company, minimum annual compensation of
$475,000. Substantially all of the net proceeds of this Offering will be used
to make the initial purchase price payments in connection with the
Acquisitions and, to the extent funds generated from operations are not
sufficient, such installment payments, compensation and fees. Each of such
individuals and TSC purchased Debentures in the Private Placement in August
1996 which will convert into Units upon the completion of this Offering at a
conversion price of $1.00 per Unit. See "Use of Proceeds," "Management" and
"Certain Transactions."
Control by Existing Stockholders; Potential Anti-takeover Provisions. Upon
completion of this Offering, the Company's existing stockholders and those
persons who will become stockholders in connection with the Acquisitions,
each of whom is or will become an executive officer and/or director of the
Company, will control 54.1% of the total voting power of the Company. As a
result, such stockholders will effectively be able to elect all of the
Company's directors and otherwise control the Company's operations. The
Company and each of its principal stockholders (including the stockholders of
A&A and SMTI, each of whom will become a principal stockholder of the Company
upon completion of the Acquisitions) have entered into a stockholders'
agreement (the "Stockholders' Agreement") which places certain restrictions
on the sale of shares by such stockholders and grants to such stockholders
certain rights with respect to matters affecting corporate governance,
including an agreement by such stockholders to vote for the current members
of the Board of Directors of the Company or nominees of such stockholders.
The existence of such restrictions and rights will solidify the control over
the Company by its existing stockholders. The Company is also subject to a
Delaware statute regulating business combinations, which could discourage,
hinder or preclude an unsolicited acquisition of the Company and could make
it less likely that stockholders receive a premium for their shares as a
result of any such attempt. See "Certain Transactions," "Principal
Stockholders" and "Description of Securities."
Future Charges to Operations. In May 1996, the Company issued 50,000
shares of Common Stock to an officer of the Company in partial consideration
of such officer's entering into an employment agreement with the Company. The
Company expects that it will recognize non-cash compensation expense
estimated at approximately $118,750 over the 15-month period commencing June
30, 1996 equal to the estimated fair market value of such shares on the date
of issuance. In connection with the issuance of $750,000 principal amount of
Debentures to affiliates of the Company, the Company also expects to
8
<PAGE>
incur non-cash compensation charges to operations estimated at approximately
$1,500,000 during the quarter in which the closing of this Offering occurs.
See "Capitalization--Private Placement" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Immediate and Substantial Dilution; Recent Issuances of Securities at
Prices Substantially Below Public Offering Price. All of the shares of Common
Stock outstanding prior to this Offering were acquired for a purchase price
of approximately $.01 per share. Investors participating in this Offering
will incur immediate and substantial dilution in net tangible book value of
approximately $4.57 per share, assuming an initial public offering price of
$5.00 per Unit and giving effect to the conversion of the Debentures into
Units. See "Dilution." In August 1996, the Company completed the Private
Placement pursuant to which it sold $2,000,000 aggregate principal amount of
Debentures, of which $750,000 principal amount are held by officers,
directors and principal stockholders of the Company. The Debentures will
automatically convert upon completion of this Offering into 2,000,000 Units,
which are identical to the Units offered hereby, resulting in a conversion
rate of $1.00 per Unit. See "Capitalization--Private Placement."
Limited Indemnification in Connection with the Acquisitions. Pursuant to
the SMTI Acquisition Agreement (as defined below) and the A&A Acquisition
Agreement (as defined below), the sellers of each of SMTI and A&A have made
certain representations and warranties to the Company. The SMTI Acquisition
Agreement and the A&A Acquisition Agreement both provide that the
representations and warranties contained therein shall survive for a period
of six months following the closing of the Acquisitions, after which time the
indemnification obligations for breaches of representations and warranties
will be limited to claims asserted during such six-month period. Moreover,
the indemnity from Messrs. Trager and Letis in connection with the SMTI
Acquisition is limited each to $1,000,000, and the indemnity from Messrs.
Kaminsky and Oppenheim in connection with the A&A Acquisition is limited to
$500,000 and $250,000, respectively. See "Certain Transactions."
Expansion Strategy; Need for Additional Financing. The Company's growth
strategy may include the acquisition of additional businesses in the fields
of sports management, marketing, consulting, representation and production.
However, with the exception of the SMTI Acquisition and the A&A Acquisition,
the Company has no agreements or understandings regarding future acquisitions
and there can be no assurance that the Company will be able to identify
additional businesses to acquire or obtain financing necessary to complete
such acquisitions. Any such acquisitions are likely to involve debt
financing, which would require payments of principal and interest on such
indebtedness and would adversely impact the Company's cash flow, and/or the
issuance of equity securities, which may be dilutive to the ownership
interests of the Company's then existing stockholders. In addition, any such
acquisitions may result in charges to operations relating to interest expense
or the recognition and amortization of goodwill, which would have the effect
of increasing the Company's loss or reducing or eliminating earnings, if any.
There can be no assurance that any future acquisitions will be successfully
integrated into the operations of the Company. The Company anticipates that
the proceeds of this Offering will be sufficient only to fund its operations
for approximately 12 months. Accordingly, in the event cash flow generated
from operations is not sufficient to fund ongoing operations, the Company
will require additional financing. The Company has no commitments to obtain
additional financing and there can be no assurance that such financing will
be available.
Charge to Earnings in the Event of Release of Escrow Shares. Following
completion of this Offering, the Company will have outstanding 1,275,000
Escrow Shares which will be released from escrow if the Company attains
certain earnings levels over the next one to three years or if the Common
Stock trades at certain levels during the period from , 1998 until
December 31, 1999. The Escrow Shares will not be deemed to be outstanding for
the purpose of calculating earnings per share until either of such conditions
is probable of being met. The position of the Securities and Exchange
Commission (the "Commission") with respect to such escrow arrangements
provides that in the event any shares are released from escrow to the
stockholders of the Company who are officers, directors, employees or
consultants of the Company, a non-cash compensation expense will be recorded
for financial reporting purposes. Accordingly, in the event of the release of
the Escrow Shares, the Company will recognize during the period in which the
earnings thresholds are probable of being met or such stock levels
9
<PAGE>
achieved, a substantial non-cash charge to operations, which will not be
deductible for income tax purposes, equal to the then fair value of such
shares, which would have the effect of significantly increasing the Company's
loss or reducing or eliminating earnings, if any, at such time. The
recognition of such compensation expense may have a depressive effect on the
market price of the Company's securities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations" and "Principal Stockholders--Escrow Shares." Notwithstanding the
foregoing discussion, there can be no assurance that the Company or its stock
price will attain the targets that would enable the Escrow Shares to be
released from escrow.
No Public Market for Securities; Possible Volatility of Market Price;
Arbitrary Determination of Offering Price. Prior to this Offering, there has
been no market for any of the Company's securities, and there can be no
assurance that an active trading market will develop or be sustained after
this Offering. The initial public offering price of the Units and the
exercise price and other terms of the Warrants have been determined by
negotiation between the Company and the Underwriter and are not necessarily
related to the Company's asset value, net worth, results of operations or any
other criteria of value and may not be indicative of the prices that may
prevail in the public market. The market prices of the Units, Common Stock
and Warrants could also be subject to significant fluctuations in response to
variations in the Company's quarterly operating results, general trends in
the industry, market conditions and other factors. See "Underwriting."
Outstanding Warrants and Options. Upon completion of this Offering, the
Company will have outstanding (i) the Warrants which are components of the
Units offered hereby to purchase an aggregate of 3,000,000 shares of Common
Stock, (ii) the Warrants issuable upon conversion of the Debentures to
purchase 2,000,000 shares of Common Stock and (iii) the Unit Purchase Option
to purchase an aggregate of 600,000 shares of Common Stock, assuming exercise
of the underlying Warrants. In addition, the Company has 500,000 shares of
Common Stock reserved for issuance under the Plan. Holders of such warrants
and options are likely to exercise them when, in all likelihood, the Company
could obtain additional capital on terms more favorable than those provided
by the warrants and options. Further, while these warrants and options are
outstanding, the Company's ability to obtain additional financing on
favorable terms may be adversely affected. See "Description of Securities"
and "Underwriting."
Potential Adverse Effect of Redemption of Warrants. Commencing one year
from the date of this Prospectus, the Warrants may be redeemed by the Company
at a redemption price of $.05 per Warrant upon not less than 30 days' prior
written notice if the closing bid price of the Common Stock shall have
averaged in excess of $11.50 per share for 20 consecutive trading days ending
within five days of the notice. Redemption of the Warrants could force the
holders to exercise the Warrants and pay the exercise price therefor at a
time when it may be disadvantageous for the holders to do so, to sell the
Warrants at the then current market price when they might otherwise wish to
hold the Warrants or to accept the nominal redemption price which, at the
time the Warrants are called for redemption, is likely to be substantially
less than the market value of the Warrants. See "Description of
Securities--Warrants."
Current Prospectus and State Registration to Exercise Warrants. Holders of
Warrants will only be able to exercise the Warrants if (i) a current
prospectus under the Securities Act relating to the securities underlying the
Warrants is then in effect and (ii) such securities are qualified for sale or
exempt from qualification under the applicable securities laws of the states
in which the various holders of Warrants reside. Although the Company has
undertaken and intends to use its best efforts to maintain a current
prospectus covering the securities underlying the Warrants following
completion of this Offering to the extent required by Federal securities
laws, there can be no assurance that the Company will be able to do so. The
value of the Warrants may be greatly reduced if a prospectus covering the
securities issuable upon the exercise of the Warrants is not kept current or
if the securities are not qualified, or exempt from qualification, in the
states in which the holders of Warrants reside. If and when the Warrants
become redeemable by the terms thereof, the Company may exercise its
redemption right even if it is unable to qualify the underlying securities
for sale under all applicable state securities laws. As indicated above,
holders of Warrants called for redemption residing in states where the
underlying securities have not been qualified for sale would generally still
be able to sell their Warrants at the then market price thereof. See
"Description of Securities--Warrants."
10
<PAGE>
Possible Restrictions on Market-Making Activities in Company's
Securities. The Underwriter has advised the Company that it intends to make a
market in the Company's securities. Rule 10b-6 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), may
prohibit the Underwriter from engaging in any market-making activities with
regard to the Company's securities for the period from nine business days (or
such other applicable period as Rule 10b-6 may provide) prior to such
solicitation by the Underwriter of the exercise of Warrants until the later
of the termination of such solicitation activity or the termination (by
waiver or otherwise) of any right that the Underwriter may have to receive a
fee for the exercise of Warrants following such solicitation. As a result,
the Underwriter may be unable to provide a market for the Company's
securities during certain periods while the Warrants are exercisable. In
addition, under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution, as defined in Rule 10b-6, of the Selling
Securityholder Securities may not simultaneously engage in market-making
activities with respect to any securities of the Company for a period of at
least two (and possibly nine) business days prior to commencement of such
distribution. Accordingly, in the event the Underwriter is engaged in such a
distribution of the Selling Securityholder Securities, it will not be able to
make a market in the Company's securities during the applicable restrictive
period. Any temporary cessation of such market-making activities could have
an adverse effect on the market price of the Company's securities. See
"Underwriting."
Possible Delisting of Securities from the Nasdaq Stock Market. While the
Company's Units, Common Stock and Warrants meet the current Nasdaq listing
requirements and are expected to be initially included on the Nasdaq SmallCap
Market, there can be no assurance that the Company will meet the criteria for
continued listing. Continued inclusion on Nasdaq generally requires that (i)
the Company maintain at least $2,000,000 in total assets and $1,000,000 in
capital and surplus, (ii) the minimum bid price of the Common Stock be $1.00
per share, (iii) there be at least 100,000 shares in the public float valued
at $1,000,000 or more, (iv) the Common Stock have at least two active markets
makers and (v) the Common Stock be held by at least 300 holders.
If the Company is unable to satisfy Nasdaq's maintenance requirements, its
securities may be delisted from Nasdaq. In such event, trading, if any, in
the Units, Common Stock and Warrants would thereafter be conducted in the
over-the-counter market in the so called "pink sheets" or the NASD's
"Electronic Bulletin Board." Consequently, the liquidity of the Company's
securities could be impaired, not only in the number of securities which
could be bought and sold, but also through delays in the timing of
transactions, reduction in security analysts' and the news media's coverage
of the Company and lower prices for the Company's securities than might
otherwise be attained.
Risks of Low-Priced Stock. If the Company's securities were delisted from
Nasdaq (see "--Possible Delisting of Securities from the Nasdaq Stock
Market"), they could become subject to Rule 15g-9 under the Exchange Act,
which imposes additional sales practice requirements on broker-dealers which
sell such securities to persons other than established customers and
"accredited investors" (generally, individuals with net worths in excess of
$1,000,000 or annual incomes exceeding $200,000, or $300,000 together with
their spouses). For transactions covered by this rule, a broker-dealer must
make a special suitability determination for the purchaser and have received
the purchaser's written consent to the transaction prior to sale.
Consequently, such rule may adversely affect the ability of broker-dealers to
sell the Company's securities and may adversely affect the ability of
purchasers in this Offering to sell any of the securities acquired hereby in
the secondary market.
Commission regulations define a "penny stock" to be any non-Nasdaq equity
security that has a market price (as therein defined) of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require delivery, prior to any transaction in a penny
stock, of a disclosure schedule prepared by the Commission relating to the
penny stock market. Disclosure is also required to be made about commissions
payable to both the broker-dealer and the registered representative and
current quotations for the securities. Finally, monthly statements are
required to be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Company's securities if such securities are listed on Nasdaq and have certain
price and volume information provided on a current and
11
<PAGE>
continuing basis or meet certain minimum net tangible assets or average
revenue criteria. There can be no assurance that the Company's securities
will qualify for exemption from these restrictions. In any event, even if the
Company's securities were exempt from such restrictions, it would remain
subject to Section 15(b)(6) of the Exchange Act, which gives the Commission
the authority to prohibit any person that is engaged in unlawful conduct
while participating in a distribution of a penny stock from associating with
a broker-dealer or participating in a distribution of a penny stock, if the
Commission finds that such a restriction would be in the public interest. If
the Company's securities were subject to the rules on penny stocks, the
market liquidity for the Company's securities could be severely adversely
affected.
Dividend Policy. The Company has never declared or paid a cash dividend on
its Common Stock. The Company intends to retain its earnings, if any, for use
in its business and does not anticipate paying cash dividends in the
foreseeable future. See "Dividend Policy."
Shares Eligible for Future Sale. Future sales of Common Stock by existing
stockholders (including those persons who are to receive shares of Common
Stock in connection with the Acquisitions) pursuant to Rule 144 under the
Securities Act or otherwise could have an adverse effect on the price of the
Company's securities. Pursuant to the Concurrent Offering, 1,250,000 Selling
Securityholder Units and the underlying securities have been registered for
resale concurrently with this Offering subject to a contractual restriction
that the Selling Securityholders not sell any of such securities for at least
90 days from the closing of this Offering. None of the 5,000,000 shares of
Common Stock held by existing stockholders (including shares issuable upon
conversion of the Debentures and shares issuable in connection with the
Acquisitions) are eligible for sale under Rule 144 until July 1997 and
1,275,000 of such shares are Escrow Shares. In addition, the existing
stockholders (including those persons who will become stockholders upon
completion of the Acquisitions) have agreed not to sell 4,250,000 shares of
Common Stock for a period of two years from the date of this Prospectus
without the prior written consent of the Underwriter and not to sell any of
the securities issuable upon conversion of the Debentures for a period of two
years from the closing of this Offering. In addition, the Company's principal
stockholders (including those persons who will become principal stockholders
upon completion of the Acquisitions) have agreed in the Stockholders'
Agreement not to sell more than one-third of the number of shares of Common
Stock held by such person on the date of the closing of this Offering during
the two-year period from the closing date. The existing stockholders
(including those persons who will become stockholders upon completion of the
Acquisitions) have demand and "piggyback" registration rights covering the
securities included in the Units issuable upon conversion of the Debentures,
which registration rights are not exercisable until two years from the date
of the closing of this Offering, and the Underwriter has demand and
"piggyback" registration rights covering the securities underlying the Unit
Purchase Option. Sales of Common Stock, or the possibility of such sales, in
the public market may adversely affect the market price of the securities
offered hereby. See "Concurrent Offering" and "Shares Eligible for Future
Sale."
Possible Adverse Effects of Authorization of Preferred Stock. The
Company's Amended and Restated Certificate of Incorporation (the "Certificate
of Incorporation") authorizes the issuance of 5,000,000 shares of preferred
stock, par value $.01 per share ("Preferred Stock"), on terms which may be
fixed by the Company's Board of Directors without further stockholder action.
The terms of any series of Preferred Stock, which may include priority claims
to assets and dividends and special voting rights, could adversely affect the
rights of holders of the Common Stock. The issuance of the Preferred Stock,
while providing flexibility in connection with possible acquisitions,
financing transactions and other corporate transactions, could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring capital stock of the Company. The
Company has no present plans to issue shares of Preferred Stock. See
"Description of Capital Stock--Preferred Stock."
12
<PAGE>
USE OF PROCEEDS
The net proceeds of this Offering to the Company, after deducting
underwriting discounts and commissions and other estimated expenses of this
Offering payable by the Company, are estimated to be approximately
$12,650,000 (approximately $14,607,500 if the Underwriter's over-allotment
option is exercised in full), assuming an initial public offering price of
$5.00 per Unit. The Company intends to use the net proceeds as follows:
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE
AMOUNT OF NET OF NET
PROCEEDS PROCEEDS
--------------- ------------
<S> <C> <C>
Initial cash portion of acquisition price for SMTI $ 6,500,000(1) 51.4%
Initial cash portion of acquisition price for A&A . 2,500,000(2) 19.7
Working capital .................................... 3,150,000(3) 24.9
Capital expenditures ............................... 500,000 4.0
--------------- ------------
Total .............................................. $12,650,000 100.0%
=============== ============
</TABLE>
- ------------
(1) Does not include $1,500,000 to be paid in equal annual installments
during the five-year period commencing on April 1, 1997. See "Certain
Transactions--SMTI Acquisition Agreement."
(2) Does not include $1,000,000 to be paid in equal annual installments
during the five-year period commencing on April 1, 1997. See "Certain
Transactions--A&A Acquisition Agreement."
(3) To the extent funds generated from operations are not sufficient, the
Company will use proceeds from this Offering to pay compensation to its
executive officers, consulting fees to SCMC and the initial installment
payments referred to in footnotes (1) and (2) above. See "Management"
and "Certain Transactions."
The foregoing represents the Company's best estimate of the allocation of
the net proceeds of this Offering based on the current status of its
business. Future events, including changes in competitive conditions, the
ability of the Company to identify appropriate acquisition candidates and the
status of the Company's business from time to time, may make changes in the
allocation of the net proceeds of this Offering necessary or desirable,
except with respect to the Acquisitions, the consummation of which is a
condition to the completion of this Offering. Pending application, the net
proceeds will be invested in short-term, interest-bearing investments. The
Company estimates that the net proceeds from this Offering will be sufficient
to fund its working capital requirements for a period of approximately 12
months from the closing of this Offering. The Company expects that any
proceeds received upon exercise of the Underwriter's over-allotment option or
the Warrants will be added to working capital.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain all earnings, if any, for use in the expansion of
the Company's business. The declaration and payment of future dividends, if
any, will be at the sole discretion of the Board of Directors and will depend
upon the Company's profitability, financial condition, cash requirements and
other factors deemed relevant by the Board of Directors.
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
June 30, 1996, (ii) pro forma as of June 30, 1996 to reflect the Private
Placement and (iii) pro forma as of June 30, 1996 to reflect the sale of the
Units offered hereby at an assumed initial public offering price of $5.00 per
Unit and the Acquisitions. This table should be read in conjunction with the
Financial Statements and the Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------------------------
PRO FORMA FOR PRO FORMA FOR
PRIVATE OFFERING AND
ACTUAL PLACEMENT ACQUISITIONS
------------- ------------- ---------------
<S> <C> <C> <C>
Debentures (1) ................................ $ 0 $ 2,000,000 $ 0
Acquisition indebtedness--selling
stockholders, net (2) ........................ 1,576,000
Loan payable to related party ................. 121,615 121,615 121,615
Stockholders' Equity:
Preferred Stock, $.01 par value; 5,000,000
shares authorized; no shares issued and
outstanding ................................. 0 0 0
Common Stock, $.01 par value; 25,000,000
shares authorized; 1,988,462 shares issued
and outstanding actual and pro forma for
Private Placement; 9,250,000 shares issued
and outstanding pro forma for Offering and
Acquisitions (3)(4) ......................... 19,885 19,885 92,500
Additional paid-in capital .................... 595 595 5,395,651
Accumulated deficit ........................... (573,501) (573,501) (2,073,501)
------------- ------------- ---------------
Total stockholders' equity (deficit) ......... (553,021) (553,021) 3,414,650(5)
------------- ------------- ---------------
Total capitalization .......................... $ (431,406) $1,568,594 $ 5,112,265
============= ============= ===============
</TABLE>
- ------------
(1) Represents Debentures issued in connection with the Company's Private
Placement completed in August 1996, which will automatically convert
into Units upon completion of this Offering. See "--Private Placement."
(2) Represents the installment payments payable to the stockholders of SMTI
and A&A, net of imputed interest ($530,000) and the current installment
payment ($394,000). See Note 4 to the Company's Notes to Financial
Statements.
(3) Excludes (i) up to 900,000 shares of Common Stock issuable upon
exercise of the Underwriter's over-allotment option (and the Warrants
included therein), (ii) 3,000,000 shares of Common Stock issuable upon
exercise of the Warrants which are components of the Units offered
hereby, (iii) 600,000 shares of Common Stock issuable upon exercise of
the Unit Purchase Option and the Warrants contained therein, (iv)
2,000,000 shares of Common Stock issuable upon exercise of the Warrants
to be issued upon conversion of the Debentures and (v) 500,000 shares
of Common Stock reserved for issuance under the Plan. See
"Management--1996 Stock Option Plan" and "Underwriting."
(4) Includes 1,275,000 Escrow Shares. See "Principal Stockholders--Escrow
Shares."
(5) Includes a non-cash compensation charge to operations and a
corresponding credit to paid-in capital estimated to be $1,500,000
relating to the Private Placement. See "--Private Placement."
PRIVATE PLACEMENT
In August 1996, the Company completed the Private Placement of $2,000,000
principal amount of Debentures in which it received net proceeds of
approximately $1,362,396. The amount of net proceeds
14
<PAGE>
reflects the issuance of $445,103 in principal amount of Debentures to the
Company's principal stockholders (including persons who are to become
stockholders upon completion of the Acquisitions), which were purchased
through cancellation of the Company's promissory notes to such stockholders
in such aggregate principal amount. See "Certain Transactions--Private
Placement and Corporate Indebtedness." The Debentures bear interest at the
rate of 6% per annum commencing one year from the date of issuance (provided
that if the closing of this Offering occurs prior to February 15, 1997,
accrued interest on the Debentures will be deemed waived) and are payable,
together with accrued and unpaid interest thereon, on June 30, 1999, unless
previously converted. The Debentures will automatically convert upon
completion of this Offering into 2,000,000 Units (resulting in a conversion
rate of $1.00 per Unit), each of which will be identical to the Units offered
hereby, and which include 1,250,000 Selling Securityholder Units.
The Selling Securityholder Securities have been registered for resale in
the Registration Statement of which this Prospectus forms a part, subject to
the contractual restriction that the Selling Securityholders have agreed not
to sell the Selling Securityholder Units or the components thereof for a
period of 90 days after the closing of this Offering. The holders of the
750,000 remaining Units issuable upon conversion of the Debentures are held
by executive officers, directors and/or principal stockholders, or persons
who will become such upon completion of the Acquisitions, and such persons
have agreed not to sell any of such Units or the underlying securities for a
period of two years from the closing of this Offering. All of the holders of
the Debentures have agreed not to exercise the Warrants issuable upon the
automatic conversion thereof for a period of one year from the closing of
this Offering. See "Concurrent Offering" and "Shares Eligible for Future
Sale."
15
<PAGE>
DILUTION
The negative net tangible book value of Marquee as of June 30, 1996 was
$(553,201), or $(.40) per share. Net tangible book value per share represents
the amount of the Company's total tangible assets less its total liabilities
divided by the total number of shares of Common Stock outstanding (exclusive
of the Escrow Shares). After giving effect to the automatic conversion of the
Debentures into Units and the completion of the Acquisitions, the negative
pro forma net tangible book value as of June 30, 1996 would have been
$(9,235,350), or $(1.86) per share. After giving effect to the sale of the
Units offered hereby at an assumed initial public offering price of $5.00 per
Unit, the pro forma net tangible book value would have been $3,414,650 or
$.43 per share. This represents an immediate increase in net tangible book
value of $.83 per share to existing stockholders, including the Selling
Securityholders, and an immediate dilution of $4.57 per share to persons
purchasing shares at the initial public offering price (the "New Investors").
The following table illustrates this per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price of the Units ................... $ 5.00 (1)
Marquee negative net tangible book value per share at June 30, 1996 . $ (.40)
Increase in negative net tangible book value per share attributable
to the Acquisitions and the conversion of Debentures (2) ........... (1.46)
Increase in net tangible book value per share attributable to
purchase by the New Investors ....................................... 2.29
--------
Pro forma net tangible book value per share after this Offering ..... .43
----------
Dilution per share to New Investors .................................. $ 4.57
==========
</TABLE>
- ------------
(1) Assumes no allocation of the offering price to the Warrants included in
the Units.
(2) Does not reflect the completion of this Offering, which will occur
simultaneously with these transactions.
If the over-allotment option is exercised in full, the pro forma net
tangible book value after this Offering would be $.64 per share, which would
result in dilution to New Investors of $4.36 per share.
The following table summarizes the differences between the original
stockholders, the stockholders who are to receive shares of Common Stock in
connection with the Acquisitions, the stockholders who are to receive shares
of Common Stock upon the conversion of the Debentures and the New Investors
(at an assumed initial public offering price of $5.00 per share) with respect
to the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------------------------------------- ------------------------
NON-ESCROW ESCROW AVERAGE PRICE
SHARES SHARES TOTAL NUMBER PERCENT AMOUNT (1) PERCENT PER SHARE
------------ ----------- -------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Original stockholders 1,400,000 588,462 1,988,462 21.5% $ 20,000 0.1% $0.01
SMTI and A&A
stockholders ......... 1,575,000 686,528 2,261,538 24.5 --(2) -- --(2)
Stockholders resulting
from conversion of
the Debentures ....... 2,000,000 -- 2,000,000 21.6 2,000,000 11.8 $1.00(3)
New Investors ......... 3,000,000 -- 3,000,000 32.4 15,000,000 88.1 $5.00(3)
------------ ----------- -------------- --------- ------------- ---------
Total ................. 7,975,000 1,275,000 9,250,000 100.0% $17,020,000 100.0%
============ =========== ============== ========= ============= =========
</TABLE>
- ------------
(1) Prior to deduction of costs of issuance.
(2) Exclusive of the consideration provided in connection with the
Acquisitions.
(3) Assumes no allocation of the offering price to the Warrants included in
the Units.
16
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Balance Sheet at June
30, 1996 and the Unaudited Pro Forma Condensed Combined Statement of
Operations for the six months ended June 30, 1996 give effect to the
following transactions and adjustments as if they had occurred as of June 30,
1996 and January 1, 1995, respectively: (i) the Private Placement, (ii) the
Acquisitions and related contractually required reductions in salaries and
benefits and (iii) the completion of this Offering at an assumed initial
public offering price of $5.00 per Unit and the application of the net
proceeds therefrom to complete the Acquisitions.
The following Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 1995 gives effect to the following
transactions and adjustments as if they had occurred as of January 1, 1995:
(i) the Acquisitions and related contractually required reductions in
salaries and benefits, (ii) the Private Placement and (iii) the completion of
this Offering at an assumed initial public offering price of $5.00 per Unit
and the application of the net proceeds therefrom to complete the
Acquisitions.
The Acquisitions have been reflected in the Unaudited Pro Forma Condensed
Combined Financial Statements as a consolidation at historical cost due to
the significance of the equity interests to be held by the stockholders of
SMTI and A&A following the completion of the Acquisitions. The Unaudited Pro
Forma Condensed Combined Financial Statements are based on the historical
audited and unaudited financial statements of the Company, SMTI and A&A and
give effect to the assumptions and adjustments in the accompanying notes
thereto. This pro forma information may not be indicative of the results of
operations or financial position that would have occurred or existed if the
transactions described above had been consummated on the date assumed and do
not purport to project the Company's financial position or results of
operations for any future date or period. In the opinion of management, all
adjustments considered necessary for a fair presentation of the Unaudited Pro
Forma Condensed Combined Financial Statements have been included. The
Unaudited Pro Forma Condensed Combined Financial Statements should be read in
conjunction with the notes thereto, the audited and unaudited financial
statements and notes thereto of the Company, SMTI and A&A contained elsewhere
in this Prospectus and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
17
<PAGE>
THE MARQUEE GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1996
<TABLE>
<CAPTION>
PRO FORMA FOR
HISTORICAL PRO FORMA PRIVATE
MARQUEE ADJUSTMENTS (1) PLACEMENT
<S> <C> <C> <C>
ASSETS
Current assets ....... $ 103,979 $1,284,615 $1,388,594
Noncurrent assets ... 250,000 250,000
------------ --------------- -------------
Total assets ....... $ 103,979 $1,534,615 $1,638,594
============ =============== =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities . 535,385 (465,385) 70,000
Long-term debt ....... 121,615 2,000,000 2,121,615
Stockholders' equity (553,021) -- (553,021)
(deficit) ...........
Total liabilities and
------------ --------------- -------------
stockholders' equity $ 103,979 $1,534,615 $1,638,594
============ =============== =============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PRO FORMA FOR
PRO FORMA THE OFFERING AND
SMTI A&A ADJUSTMENTS (2) ACQUISITIONS
<S> <C> <C> <C> <C>
ASSETS
Current assets ....... $2,067,442 $468,615 $ 3,315,000 $7,239,651
Noncurrent assets ... 75,548 78,982 (250,000) 154,530
------------ ---------- --------------- ----------------
Total assets ....... $2,142,990 $547,597 $ 3,065,000 $7,394,181
============ ========== =============== ================
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities . 1,382,392 435,524 394,000 2,281,916
Long-term debt ....... -- -- (2,000,000) 1,697,615
1,576,000
Stockholders' equity 760,598 112,073 $ 3,315,000 3,414,650
(deficit) ...........
$ 1,750,000
(1,970,000)
Total liabilities and
------------ ---------- --------------- ----------------
stockholders' equity $2,142,990 $547,597 $ 3,065,000 $7,394,181
============ ========== =============== ================
</TABLE>
- ------------
(1) The pro forma adjustments give effect to the following: (i) the
$2,000,000 Private Placement, (ii) deferred financing costs of $250,000
comprised of fees and expenses incurred in connection with the Private
Placement and (iii) the exchange of stockholder loans of $445,103
($340,385 at June 30, 1996) for the Debentures and the repayment of
$125,000 to a stockholder of the Company from the proceeds of the
Private Placement.
(2) The pro forma adjustments gives effect to the following: (i) the
receipt of $12,650,000 (net of estimated expenses of $2,350,000) from
the sale of the 3,000,000 Units offered hereby at an assumed initial
public offering price of $5.00 per Unit, (ii) the payments of
$6,500,000 and $2,500,000 to the stockholders of SMTI and A&A,
respectively, and the indebtedness of $1,500,000 and $1,000,000, less
imputed interest of $530,000, payable to such stockholders in
connection with the Acquisitions, (iii) the issuance of 2,000,000 Units
upon the conversion of the Debentures and the related non-cash
compensation charge to operations estimated to be $1,500,000, relating
to 750,000 of these Units issued to affiliates of the Company and the
write-off of $250,000 of deferred financing costs and (iv) the payment
of an S Corporation distribution to the SMTI stockholders ($335,000 at
June 30, 1996) representing 40% of the taxable earnings of SMTI prior
to this Offering.
18
<PAGE>
THE MARQUEE GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
PRO FORMA FOR
PRO FORMA THE OFFERING AND
MARQUEE SMTI A&A ADJUSTMENTS THE ACQUISITIONS
------------ ------------ ------------ -------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues ............................. $ 800,895 $4,734,836 $1,793,446 $7,329,177
Operating expenses ................... 666,796 3,229,525 766,064 4,662,385
General and administrative expenses . 707,600 692,428 1,153,357 2,553,385
------------ ------------ ------------ -------------- ----------------
Income (loss) from operation ......... (573,501) 812,883 (125,975) 113,407
Interest income (expense) ............ -- 4,938 490 $(53,000)(1) (47,572)
------------ ------------ ------------ -------------- ----------------
Income (loss) before income taxes ... (573,501) 817,821 (125,485) (53,000) 65,835
Income taxes (provision) benefit .... -- (94,000) 57,687 2,000 (2) (34,313)
------------ ------------ ------------ -------------- ----------------
Net income (loss) .................... $ (573,501) $ 723,821 $ (67,798) $ (51,000) $ 31,522
============ ============ ============ ============== ================
Net income (loss) per share .......... $ (.17) $ --
============ ================
Weighted average common stock and
common stock equivalents outstanding 3,400,000 7,975,000
============ ================
</TABLE>
- ------------
(1) To record imputed interest expense on the indebtedness to the
stockholders of SMTI and A&A incurred in connection with the
Acquisitions.
(2) To record income taxes as if SMTI had not been an S corporation
($239,000), to record the income tax benefit of the adjustments set
forth in footnote (1) above ($25,000) and the pro forma tax benefit for
the separate net loss of Marquee ($216,000).
19
<PAGE>
THE MARQUEE GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
SMTI A&A ADJUSTMENTS COMBINED
------------ -------------- -------------
<S> <C> <C> <C> <C>
Commissions and fee income .......... $6,263,892 $3,846,487 -- $10,110,379
Income from joint venture ........... 231,448 -- -- 231,448
------------ ------------ -------------- -------------
6,495,340 3,846,487 -- 10,341,827
Operating expenses .................. 4,080,477 1,469,410 5,549,887
General and administrative expenses 2,331,393 2,308,317 (1,510,000)(1) 3,129,710
------------ ------------ -------------- -------------
Operating income (loss) ............. 83,470 68,760 1,510,000 1,662,230
Interest income (expense) ........... 9,972 7,571 (106,000)(2) (88,457)
------------ ------------ -------------- -------------
Income before taxes ................. 93,442 76,331 1,404,000 1,573,773
Income taxes (provision) benefit ... (9,000) (77,172) (697,828) (3) (784,000)
------------ ------------ -------------- -------------
Net income (loss) ................... $ 84,442 $ (841) $ 706,172 $ 789,773
============ ============ ============== =============
Net income per share ................ $ .10
=============
Weighted average number of common
stock and common stock equivalents
outstanding ........................ 7,975,000
</TABLE>
- ------------
(1) Reflects contractually agreed to reductions in officers' salaries
and employee benefits ($1,370,000) and in benefits ($140,000) which
commenced during the six-month period ended June 30, 1996.
(2) To record imputed interest expense on the indebtedness to the
stockholders of SMTI and A&A incurred in connection with the
Acquisitions.
(3) To record income taxes as if SMTI had not been an S corporation
($46,000) and to record the income tax effect of the adjustments set
forth in footnotes (1) and (2) above ($651,828).
20
<PAGE>
SELECTED FINANCIAL DATA
The Selected Financial Data of the Company as of June 30, 1996 and for the
six-month period ended June 30, 1996 have been derived from the unaudited
financial statements of Marquee appearing elsewhere in this Prospectus.
Marquee had no operations during the period from inception (July 11, 1995)
through December 31, 1995 and, accordingly, only pro forma financial
information relating to this Offering and the Acquisitions as if they had
occurred on January 1, 1995 is presented in the Selected Financial Data.
Operating results for the six-month period ended June 30, 1996 are not
necessarily indicative of the results that may be achieved for the fiscal
year ending December 31, 1996. The pro forma financial data gives effect to
the following transactions and adjustments for the periods and at the dates
presented: the Acquisitions and the related contractually agreed to
reductions in officers' salaries, the Private Placement and the completion of
this Offering at an assumed initial public offering price of $5.00 per Unit
and the application of the net proceeds therefrom to complete the
Acquisitions. The Acquisitions have been reflected in the Unaudited Pro Forma
Condensed Combined Financial Statements as a consolidation at historical cost
due to the significance of the equity interests to be held by the
stockholders of A&A and SMTI. The following data should be read in
conjunction with the notes thereto and the audited and unaudited financial
statements and notes thereto contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995 SIX MONTHS ENDED JUNE 30, 1996
----------------- --------------------------------
PRO FORMA FOR PRO FORMA FOR
OFFERING AND OFFERING AND
ACQUISITIONS HISTORICAL ACQUISITIONS
----------------- -------------- ----------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ............................. $10,341,827 $ 800,895 $7,329,177
Operating expenses ................... 5,549,887 666,796 4,662,385
General and administrative expenses . 3,129,710 707,600 2,553,385
Operating income (loss) .............. 1,662,230 (573,501) 113,407
Net income (loss) .................... 789,773 (573,501) 31,522
Net income (loss) per share .......... $ .10 $ (.17) $ --
================= ============== ================
Weighted average common stock and
common stock equivalents outstanding 7,975,000(1) 3,400,000(2) 7,975,000(1)
================= ============== ================
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1996
-------------------------------------------
PRO FORMA FOR PRO FORMA FOR
PRIVATE OFFERING AND
BALANCE SHEET DATA: ACTUAL PLACEMENT(2) ACQUISITIONS(3)
----------- ------------- ---------------
<S> <C> <C> <C>
Current assets ................ $ 103,979 $1,388,594 $7,239,651
Current liabilities ........... 535,385 70,000 2,281,916
Total assets .................. 103,979 1,638,594 7,394,181
Long-term debt ................ -- 2,121,615 1,697,615
Stockholders' equity (deficit) (553,021) (553,021) 3,414,650
</TABLE>
- ------------
(1) Excludes 1,275,000 Escrow Shares. See "Principal Stockholders--Escrow
Shares" and Note 4 of the Notes to Financial Statements of The Marquee
Group, Inc.
(2) Gives effect to the issuance of $2,000,000 aggregate principal amount
of Debentures subsequent to June 30, 1996 which are convertible into
2,000,000 shares of Common Stock and 2,000,000 Warrants. See
"Capitalization--Private Placement."
(3) Adjusted to give effect to the sale of the 3,000,000 Units offered
hereby at an assumed offering price of $5.00 per Unit, the application
of the net proceeds therefrom to complete the Acquisitions and a
non-cash compensation charge to operations estimated at approximately
$1,500,000 associated with the Private Placement. See "Risk
Factors--Future Charges to Operations," "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Marquee was formed in July 1995 for the purpose of providing comprehensive
management, marketing, sales, consulting and production services to sports
and entertainment related businesses, events, athletes, broadcasters,
journalists and executives. Marquee has had limited activities since it
commenced operations in January 1996, primarily consisting of negotiating the
SMTI Acquisition Agreement and the A&A Acquisition Agreement and limited
sports marketing and consulting activities. The Company will use a
significant portion of the proceeds from this Offering to make initial
payments of $9,000,000 to the stockholders of SMTI and A&A in connection with
the Acquisitions. See "Use of Proceeds."
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Unaudited
Pro Forma Condensed Combined Financial Statements, the Selected Financial
Data and the financial statements and notes thereto appearing elsewhere in
this Prospectus. For all periods presented, the discussion of the combined
results of operations on a pro forma basis for the Company include the
activities of Marquee, SMTI and A&A, as if they had always been members of
the same operating group.
The following discussion contains certain forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those
discussed under "Risk Factors."
The primary sources of the Company's revenues are commissions from the
representation of sports and entertainment personalities and fees from
providing marketing, sales and event development, production, and consulting
services in the sports and entertainment industry. Commissions from the
Company's personal representation services are recognized as revenue when
they become payable to the Company under the terms of the Company's
agreements with its clients. Generally, such commissions are payable by
clients upon their receipt of payments for performance of services or upon
the delivery or use of material created by them. Commissions on profit or
gross receipt participations are recorded upon determination of such amounts.
Revenue from production services (television and video) is recognized when
the programs are available for broadcast. Licensing sponsorship and
merchandise revenues are recognized for guaranteed amounts when contractual
obligations thereunder are met.
The Company's most significant costs and expenses are salaries and
promotional expenditures. Historically, selling, general and administrative
expenses were impacted by the amount of compensation and related benefits
that the stockholders of A&A and SMTI received from their respective
businesses during the periods the companies were entrepreneurially managed.
Pursuant to the agreements relating to the Acquisitions, such persons have
agreed to certain reductions in their salaries which were given effect to as
of January 1, 1996. Reductions of $1,370,000 are reflected in the Unaudited
Pro Forma Condensed Combined Financial Statements for 1995. Additionally, the
Unaudited Pro Forma Condensed Combined Financial Statements are adjusted to
reflect annual reductions of $140,000 related to the termination of employee
benefit plans.
Marquee has entered into employment agreements with two officers,
providing for aggregate annual compensation in the first year of $700,000, of
which $260,000 (based upon the date employment commenced) has been charged to
Marquee's operations for the six-month period ended June 30, 1996. In
addition, the Company intends to enter into a new lease for office space
which requires no payments until one year after occupancy. The annual minimum
charge to operations for rent will be $488,000 per year commencing with
occupancy. Marquee has also entered into a six-year consulting agreement with
SCMC that provides for a monthly fee of $30,000 commencing nine months from
the closing of this Offering. The annual charge to operations for the
consulting arrangement will be $315,000. These costs are not included in the
pro forma condensed combined financial statements for 1995.
Since it commenced operations, Marquee has also entered into several
contracts to provide sports production and management services. Revenues
generated from these contracts are reflected only in Marquee's operations for
the six-month period ended June 30, 1996 and are not included in the pro
forma condensed combined financial statements for 1995.
As a result of the seasonal nature of sporting events, the Company's
revenues vary throughout the year. The Company's first quarter generally
produces the lowest revenues whereas the fourth calendar quarter generally
produces the highest revenues for the year.
22
<PAGE>
In May 1996, the Company issued 50,000 shares of Common Stock to an
officer in partial consideration of such officer entering into an employment
agreement with the Company. The Company expects that it will recognize
non-cash compensation expense estimated at approximately $118,750 over the
15-month period commencing June 30, 1996 equal to the estimated fair market
value of such shares on the date of issuance. In connection with the issuance
of $750,000 principal amount of Debentures to affiliates of the Company, the
Company also expects to incur non-cash compensation charges to operations
estimated at approximately $1,500,000 during the quarter in which the closing
of this Offering occurs. See "Capitalization--Private Placement" and Note 3
to the Company's Financial Statements.
The Company contemplates that the release of the Escrow Shares to
officers, directors, employees and consultants of the Company, should it
occur, will result in a substantial non-cash compensation charge to
operations, based on the then fair market value of the shares. Such charge
could substantially increase the Company's loss or reduce or eliminate the
Company's net income, if any, for financial reporting purposes for the period
during which such shares are or become probable of being released from
escrow. Although the amount of compensation expense recognized by the Company
will not affect the Company's total stockholders' equity, it may have a
depressive effect on the market price of the Company's securities. See
"Principal Stockholders--Escrow Shares."
RESULTS OF OPERATIONS
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Marquee began operations in January 1996, and since such time its
activities have primarily consisted of negotiating the A&A Acquisition
Agreement and the SMTI Acquisition Agreement and engaging in limited sports
marketing and consulting activities.
For the six-month period ended June 30, 1996, Marquee generated revenues
of approximately $801,000, principally from Marquee's performance under
contract for production and tabulation of ballots for the Major League
Baseball All-Star Balloting Program. Revenues were also derived from
production of boxing programs broadcast on ESPN and ESPN2 and miscellaneous
other productions.
Marquee's total operating expenses for the six-month period ended June 30,
1996 was approximately $667,000 and consisted of production expenses for the
Major League Baseball All-Star Balloting Program and ESPN boxing. General and
administrative expenses of $708,000 included salary and other employee
benefits expense of approximately $475,000, legal and professional fees of
$75,000, office expenses of approximately $85,000 and all other expenses of
approximately $90,000. Marquee's operating loss for the six-month period
ended June 30, 1996 was approximately $574,000.
On a pro forma basis, as if the Acquisitions had occurred on January 1,
1995, the Company would have had revenues of $7,329,000 for the six-month
period ended June 30, 1996, compared to revenues of $4,844,000 for the six
month period ended June 30, 1995, an increase of $2,485,000 or 51.3%. The
increase was primarily due to the addition of the Major League Baseball All
Star Balloting Program, which was conducted by Marquee and SMTI. New
production clients included boxing events broadcast on ESPN and ESPN2. Media
representation fees increased as a result of the representation of new
broadcast personalities as well as increased fees from the existing client
base. The increased revenue was partially offset by the cancellation of the
Baseball Network and the expiration of the Cotton Bowl representation
agreement. On a pro forma basis, for the six-month period ended June 30,
1996, each of the Breeders' Cup Limited and the Major League Baseball
All-Star Balloting Program accounted for in excess of 10% of the Company's
revenues and three clients accounted for approximately 60% of such revenues.
On a pro forma basis, as if the Acquisitions had occurred on January 1,
1995, the Company incurred operating expenses for the six-month period ended
June 30, 1996 of $4,662,000, compared to operating expenses of $2,802,000 for
the same period in 1995, an increase of approximately $1,860,000 or 66.4%.
The increase was primarily the result of increased expenses resulting from
the Company's new business ventures for the Major League Baseball All-Star
Balloting Program and the production of ESPN and ESPN2 boxing. On a pro forma
basis for the six-month period ended June 30, 1996, general and
administrative expenses increased $942,000 or 58.5% principally related to
costs and expenses associated with Marquee's operations, as described above.
The pro forma adjustments for the six-month period ended June 30, 1995
reflect contractually required reductions in salaries and benefits of
approximately $480,000. See "--Introduction."
For the six-month period ended June 30, 1996, the Company's pro forma
income before taxes was $66,000 as compared to a $384,000 for the same period
in 1995. Pro forma net income for the six-month period ended June 30, 1996
was $32,000 after provision for taxes of $34,000. Pro forma net income for
the 1995 period was $195,000 after provision for taxes of $188,000.
23
<PAGE>
Year ended December 31, 1995 Compared to Year Ended December 31, 1994
Marquee began its operations in January 1996 and therefore the pro forma
results of operations for 1995 and 1994 include only the results of
operations of SMTI and A&A.
On a pro forma basis, revenue for the year ended December 31, 1995 was
$10,342,000, an increase of $740,000, or 7.7% over revenues for the year
ended December 31, 1994. The increase was primarily the result of an increase
in commissions earned on talent representations ($562,000) while production
and consulting revenue increases contributed an additional $216,000. Media
representation fees increased as a result of the representation of new
broadcast personalities as well as increased fees from the existing client
base. Sports representation fees increased in part to a full National Hockey
League season in 1995 compared to the strike-shortened 1994 season.
Production and consulting fees increased as a result of increased fees from
the Breeder's Cup and the addition of revenues from a consulting agreement
pursuant to which the Company handled sports marketing and advertising for
the True Value hardware stores. These revenue increases were partially offset
by the cancellation of the Baseball Network, for which the Company provided
consulting services, and $31,000 in reduced revenue from the Celebrity Golf
Championship Tournament.
Total expenses after pro forma adjustments were $8,680,000 in 1995 as
compared to $9,182,000 for 1994. Pro forma adjustments reflect the reductions
in salaries and benefits required by the agreement relating to the
Acquisitions ($1,510,000 in 1995 and $529,000 in 1994). The decrease of
$502,000 or 5.5% was principally the result of decreases in production costs
applicable to the Breeders Cup ($278,000), reduction in travel and
entertainment expenses of ($95,000) and salary costs of ($101,000). See
"--Introduction."
For the year ended December 31, 1995, the Company's pro forma income
before taxes was $1,574,000 as compared to $323,000 for the year ended
December 31, 1994. Income tax expense for the year ended December 31, 1995
was $784,000 as compared to $158,000 in 1994. Pro forma net income was
$790,000 in 1995 and $165,000 in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Marquee's principal sources of working capital has been the $1,305,000 of
net proceeds from the Private Placement and advances by shareholders
aggregating $692,000. Of the shareholder advances, promissory notes
evidencing approximately $445,000 of shareholder indebtedness were exchanged
for Debentures in the Private Placement, $125,000 was repaid from the
proceeds of the Private Placement and $122,000 is payable January 1, 1998.
The net proceeds of the Private Placement reflect the cancellation of the
notes referred to above and expenses of the Private Placement and are being
used for working capital and certain expenses of this Offering. The Private
Placement consisted of $2,000,000 principal amount of Debentures which
automatically convert into 2,000,000 Units upon the closing of this Offering.
The principal source of funding for SMTI and A&A has been from operations. SMTI
generally is required to fund implementation of projects for its customers prior
to receipt of related fees and accordingly has, and may in the future,
experienced cash flow shortages.
The net proceeds from this Offering are estimated at approximately
$12,650,000, of which $9,000,000 will be paid to the stockholders of SMTI and
A&A. In addition, the Company agreed to pay such stockholders installment
payments aggregating $2,500,000 over the five-year period commencing April 1,
1997. Further, the SMTI Acquisition Agreement provides that immediately prior
to the closing of the SMTI Acquisition, SMTI will distribute to its
shareholders, by means of a dividend, an amount equal to 40% of the
accumulated adjustments account of SMTI. SMTI has advised the Company that as
of June 30, 1996, the distribution would be approximately $335,000. The
Company will also enter into five-year employment agreements with each of
such stockholders providing for salaries aggregating $1,075,000 per annum.
Following completion of this Offering, the Company intends to incur
capital expenditures of approximately $500,000 to furnish its new office
space, complete leasehold improvements, and install television edit
facilities. See "Use of Proceeds" and "Business--Properties."
Marquee has also entered into employment agreements with two officers that
provide for an annual compensation aggregating $725,000 per year. The Company
has also entered into a six-year consulting agreement with SCMC that provides
for a monthly fee of $30,000 commencing nine months from the closing of this
Offering. Such monthly fee increases annually by the percentage increase in
the consumer price index. The Company is also in negotiations with respect to
a lease for new facilities which is expected to require initial annual rent
of $537,000, commencing one year after occupancy, subject to certain
increases.
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BUSINESS
GENERAL
The Company was organized in July 1995 to provide comprehensive
management, marketing, sales, consulting and production services to sports
and entertainment-related businesses, events, athletes, broadcasters,
journalists and executives. In recent years, significant developments in mass
media, including the growth of satellite communications and cable television,
have resulted in increased national and global exposure for sports
personalities and the events and projects in which they participate, and have
created national and international audiences for sports personalities,
products and events. In addition, the recent proliferation of sports-related
television and radio stations has created an increased demand for
sports-related programming. As a result, the promotion and sponsorship of
sports events has become a major area of corporate advertising and product
development. The Company believes that the successful exploitation of this
market by sports personalities and corporations requires integrated marketing
and management services.
Marquee was organized by Robert M. Gutkowski, the Company's President and
Chief Executive Officer, who has more than 20 years of experience in the
television, sports and entertainment industries and who served as President
of Madison Square Garden Corporation from November 1991 until September 1994,
and TSC, which provides financial advisory, marketing and consulting services
to media companies and sports-related businesses. TSC is controlled by Robert
F.X. Sillerman, Chairman of the Company, whose principal occupation is Chief
Executive Officer of SFX.
The Company was formed primarily to acquire SMTI, which provides
production and marketing services to sporting events, sports television shows
and professional and collegiate leagues and organizations, and A&A, a sports
and media representation firm, to integrate these businesses and to expand
into related areas in sports and events programming and promotion.
In conjunction with SMTI's production and marketing services, SMTI
develops and implements corporate sponsorship campaigns which are designed to
promote an event, team or sponsor. SMTI's current and recently completed
principal projects include production and marketing of The Breeders' Cup
Championship, implementation of the balloting campaign for Major League
Baseball's 1996 All-Star Game and development of corporate sponsorship
campaigns. The Company has agreed to acquire SMTI, which was formed in 1984
by Michael Trager and Michael Letis, upon the closing of this Offering for an
aggregate cash purchase price payable to Messrs. Trager and Letis of
$8,000,000, of which $6,500,000 is payable at closing and $1,500,000 is
payable in five equal annual installments, and the issuance of an aggregate
of 1,292,307 shares of Common Stock to Messrs. Trager and Letis, each of whom
will be an executive officer and director of the Company upon completion of
this Offering.
A&A, which was founded in 1977 by Arthur C. Kaminsky, is a sports and
media representation firm whose roster of clients includes broadcasters
(including Al Michaels -ABC Sports, Forrest Sawyer -ABC News, Christiane
Amanpour -CNN and CBS News, Dan Dierdorf -ABC Sports, and Chris Berman -ESPN
and ABC Sports), athletes (including Brian Leetch -New York Rangers, Eric
Heiden -U.S. Olympic five-time gold medalist in speed skating, and Nick
Lowery -New York Jets), authors (including Dick Schaap -author of Bo Knows Bo
and Instant Replay, Rick Reilly -author of The Boz and Missing Links and a
writer for Sports Illustrated, and John Powers -author of One Goal and Mary
Lou! and a sportswriter for The Boston Globe) and media executives (including
Terry O'Neil -a sports and news executive producer, Curt Gowdy, Jr. -ABC
Sports, and John Faratzis -a sports programming producer who has worked with
ABC, CBS and NBC). The Company has also agreed to acquire A&A upon the
closing of this Offering for an aggregate cash purchase price payable to Mr.
Kaminsky and Louis J. Oppenheim, each of whom will be an executive officer
and director of the Company upon completion of this Offering, of $3,500,000,
of which $2,500,000 is payable at closing and $1,000,000 is payable in five
equal annual installments, and the issuance to Messrs. Kaminsky and Oppenheim
of an aggregate of 969,231 shares of Common Stock.
Marquee has agreed to provide production and promotional services,
including agreements with ESPN to produce professional and amateur boxing
events and with the Outdoor Life Network to produce The National Lumberjack
Championships.
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The Company believes that the combination of its business with those of
SMTI and A&A will provide opportunities to provide enhanced services to
clients and will enable it to construct comprehensive packages of sports
events and sports personality endorsements.
EVENTS PRODUCTION AND CORPORATE SPONSORSHIP
Through SMTI, the Company intends to provide production and promotion
services to major sporting events, sports television shows and professional
and collegiate leagues and organizations. In conjunction with its production
and marketing services, SMTI develops and implements corporate sponsorship
campaigns which are designed to promote an event, team or sponsor.
Although it may vary from event to event, events production includes site
selection, recruitment of athletes or personalities, procurement of
television coverage, merchandising and administration of concessions, sale of
corporate sponsorship, creation of corporate hospitality programs and general
administrative duties, including contract negotiation and scheduling. For
each client, the Company will generally receive a fixed fee and/or commission
generally ranging from 15% to 40% of the contracted amount, although these
fees and commissions are negotiated between the parties on an event-by-event
basis and the amount of fees and/or commissions the Company will receive
depends to a large extent upon its performance. The Company's corporate
sponsorship projects are generally on a short-term basis and may not be
evidenced by written agreements in advance of Company expenditures or at all,
which the Company believes is common in its industry.
The Company anticipates that its events management and corporate
sponsorship businesses will be primarily conducted by SMTI, under the
direction of Michael Trager, the Chairman of SMTI, and Michael Letis, the
President of SMTI. See "Management" and "Certain Transactions--SMTI
Acquisition Agreement."
SMTI provides events management services for the following events:
o The Breeders' Cup Championship --In 1984, SMTI, together with the
Thoroughbred Racing Association and NBC Sports, created The Breeders'
Cup Championship, an annual series of thoroughbred horse races held at
a rotating series of racetracks, including Churchill Downs, Santa Anita
and Belmont Park. In July 1994, SMTI entered into a marketing agreement
(the "Breeders' Cup Agreement") with the Breeders' Cup Limited ("BCL"),
pursuant to which SMTI was granted the right to provide general
marketing consultation, broadcast and sponsorship rights sales,
advertising production and media placement, publicity and public
relations, television and video production, production of promotional
materials and merchandising and licensing of BCL in connection with The
Breeders' Cup Championship. SMTI also supervises the televising of the
event and has sold the television rights to NBC-TV, with which it works
to create a four-hour broadcast with broad appeal.
The Breeders' Cup Agreement terminates on December 31, 1997, unless
terminated earlier in accordance with the terms of the agreement,
including the termination, for any reason, of SMTI's employment of
Michael Letis or the unavailability of Mr. Letis to perform the
services necessary to enable SMTI to comply with the terms of the
Breeders' Cup Agreement.
o Major League Baseball --SMTI represents Major League Baseball in its
negotiations with potential corporate sponsors and in creating
sponsorship campaigns. SMTI also implemented Major League Baseball's
All-Star Balloting Program for the 1996 All-Star Game.
o Celebrity Golf Association --In January 1995, SMTI and NBC formed
Celebrity Golf Championship, LLC ("CGC") to conduct the annual golfing
tournament known as the Celebrity Golf Championship, an annual
celebrity professional golf tournament, where the competitors include
well-known sports, entertainment and media personalities. In connection
therewith,
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SMTI organized and conducted the 1996 Celebrity Golf Championship held
in Lake Tahoe, Nevada. SMTI also supervised the televising of the
tournament and arranged for the tournament to be televised on NBC and
ESPN.
o The Hambletonian --In July 1995, SMTI entered into an agreement with
The Hambletonian Society to act as exclusive television agent for The
Hambletonian, a premier event in harness racing held annually at The
Meadowlands, which agreement, unless renewed by mutual agreement, will
terminate in March 1998.
o The Big 12 Conference --In September 1995, SMTI agreed with The Big 12
Conference to represent this athletic conference, which includes
universities such as The University of Texas, The University of
Oklahoma and The University of Nebraska, in negotiations with broadcast
and cable television networks of the conference's basketball games.
A significant portion of SMTI's revenues have been derived from a small
number of clients or one-time events. During the years ended December 31,
1994 and 1995 and the six-month period ended June 30, 1996, the Breeders'
Cup Agreement accounted for approximately 78%, 75% and 55%, respectively,
of SMTI's revenues and, on a pro forma basis, giving effect to the
Acquisitions as if they had occurred on January 1, 1995, would have
accounted for approximately 47% and 36% of the Company's revenues for
the year ended December 31, 1995 and the six-month period ended June
30, 1996, respectively. On a pro forma basis, for the six-month period
ended June 30, 1996, three clients accounted for approximately 60% of the
Company's revenues. The Company may continue to be dependent upon a
limited number of customers or projects for a significant portion of its
revenues in future periods.
PERSONAL REPRESENTATION
Through A&A, the Company intends to provide personal representation
services for well-known and up-and-coming sports and entertainment
personalities, which services will encompass the negotiation of primary
employment agreements and evaluation of business, promotional and endorsement
opportunities for such personalities. Fees for services can be fixed but
ordinarily will represent a percentage of income realized by the Company's
clients through its efforts, typically ranging from three to ten percent. The
Company's representation agreements with its clients are generally terminable on
30 days' notice.
The Company anticipates that its personal representation services will be
primarily overseen by Arthur C. Kaminsky, the President and Chief Executive
Officer of A&A, and Louis J. Oppenheim, the Vice President of A&A. See
"Management" and "Certain Transactions--A&A Acquisition Agreement."
At August 31, 1996, A&A's client roster included 79 national broadcasters,
consisting of the following persons:
Al Michaels -ABC Sports
Forrest Sawyer -ABC News
Christiane Amanpour -CNN and CBS News
Dan Dierdorf -ABC Sports
Sean McDonough -CBS Sports and WABU-TV(Boston)
Chris Berman -ESPN and ABC Sports
Len Berman -NBC Sports and WNBC-TV (New York)
Jim Lampley -NBC Sports and
Home Box Office
John Hockenberry -NBC News and MSNBC
Bill Geist -CBS News
Robert Krulwich -ABC News
Hannah Storm -NBC Sports
Al Trautwig -MSG and Class Sports Network
Fred Hickman -CNN
Mark Jones -ABC Sports and ESPN
Andrea Joyce -CBS Sports
Bob McKeown -NBC News
Craig James -CBS Sports
Dick Vermeil -ABC Sports
Willow Bay -ABC News and NBC Sports
Dick Schaap -ABC News and ESPN
Russ Mitchell -CBS News
Brad Nessler -ESPN
Bill Walton -NBC Sports
Antonio Mora -ABC News
John Spagnola -ABC Sports
Thom Brennaman -Fox Sports
Bob Carpenter -ESPN
John Naber -Television analyst (U.S. Olympic gold
medalist in swimming)
Jane Whitney -Nationally-syndicated
talk-show host
Bud Collins -NBC Sports
Kevin Harlan -Fox Sports
Vince Cellini -CNN and TNT Sports
Bill Clement -ESPN
Mike Emrick -Fox Sports and SportsChannel
Craig Masback -NBC Sports
Todd Blackledge -ABC Sports
Len Dawson -Home Box Office
John Dockery -NBC Sports
Terry Gannon -ABC Sports
Ken Albert -Fox Sports
Jim Gray -NBC Sports
Paul Crane -CNN
Kevin Kiley -TNT Sports
Marty Liquori -ABC Sports
Mike Tirico -ESPN
Joe Micheletti -Fox Sports
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Anthony Munoz -Television analyst (formerly Fox
Sports)
Jimmy Roberts -ESPN
Ted Robinson -CBS Sports and USA Network
Danny Sheridan -CBS Sports
Dwight Stones -NBC Sports
Reggie Theus -TNT Sports and NBC Sports
Eric Clemons -Fox Sports
Leon Harris -CNN
Regina Blakely -CBS News
Madeline McFadden -Inside Edition
Robyn Carter -Day & Date
Elizabeth Kaledin -CBS News
Mark Litke -ABC News
Matt Meagher -Inside Edition
Beth Nissen -ABC News
Diana Olick -CBS News
Janice Lieberman -CNBC
Brian Holloway -ABC Sports
Steve Melnyk -ABC Sports
Frank Hannigan -ABC Sports
Larry Beil -ESPN
Gary Miller -ESPN
Lisa Kim -MSNBC
Dan Lothian -NBC News
Jim Axelrod -CBS News
Jody Davis -CNNfn
Craig Miller -MSNBC
Gary Matsumoto -NBC News
Scott Engler -CNN
Kathy Wolff -Fox News
Michael Kim -ESPN
Bill Mass -Fox Sports
At August 31, 1996, A&A's client roster included 33 professional athletes,
consisting of the following persons:
Brian Leetch -New York Rangers
Eric Heiden -U.S. Olympic five-time gold medalist
in speed skating
Nick Lowery -New York Jets
Ken Dryden -Montreal Canadiens (retired) and member
of the Hockey Hall of Fame
Sergei Zubov -Dallas Stars
Adam Oates -Boston Bruins
Rico Brogna -New York Mets
Keith Elias -New York Giants
William Gaines -Washington Redskins
Darren Turcotte -San Jose Sharks
Jeff Blatnick -U.S. Olympic gold medalist in
Greco-Roman wrestling
Sean Jones -Green Bay Packers
Mike Remlinger -Cincinnati Reds
Beth Heiden -U.S. Olympic gold medalist in speed
skating
Joe Grahe -Montreal Expos
Tommy John -Former Major League Baseball player and
television analyst for the Minnesota Twins
Quinn Buckner -Former National Basketball
Association player and coach and CBS Sports
commentator
Calle Johansson -Washington Capitals
Harry Carson -Former New York Giants
linebacker and analyst for the MSG Network
Bernard King -Former National Basketball
Association player and broadcaster on WFAN-FM (New
York)
Tim Daggett -U.S. Olympic gold medalist in
gymnastics and NBC Sports commentator
Jody Hull -Florida Panthers
Tommy Albelin -Calgary Flames
Jozef Stumpel -Boston Bruins
Nikolai Khabibulin -Phoenix Coyotes
Willie Jackson -Jacksonville Jaguars
Kris King -Phoenix Coyotes
Dainius Zubrus -Philadelphia Flyers
Andrei Zyuzin -San Jose Sharks
Alexander Volchkov -Washington Capitals
Sergei Samsonov -Detroit Vipers (International
Hockey League) and projected top-pick in the 1997
National Hockey League draft
Jerry Bailey -Jockey and member of the Horse Racing
Hall of Fame
Mike Golic -Former National Football League player
and ESPN analyst
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At August 31, 1996, A&A's client roster included 37 local broadcasters,
consisting of the following persons:
Dave Jennings -WFAN-AM and MSG
(New York)
Trish Brown -WMOV-TV (St. Louis)
Mike Harris -SportsChannel and WCBS-TV (New
York)
Celeste Ford -WABC-TV (New York)
Eric Thomas -KGO-TV (San Francisco)
Paul Olden -WFAN-AM and WPIX-TV
(New York)
Dr. Jay Adlersberg -WABC-TV (New York)
Tracey Neale -WTTG-TV (Washington, D.C.)
Carolyn Gusoff -WNBC-TV (New York)
Leo Alexander -WRC-TV (Washington)
Bob Papa -WOR-AM (New York), ESPN and NBC
Sports
Tony Segreto -WTVJ-TV (Miami)
Roseanne Colletti -WCBS-TV (New York)
Monica Kaufman -WSB-TV (Atlanta)
Lara Spencer -WABC-TV (New York)
Vic Carter -WJZ-TV (Baltimore)
Sean Mooney -WWOR-TV (New York)
Kelly Ring -WTVT-TV (Tampa)
Tim Fleischer -WABC-TV (New York)
Beverly Burke -WUSA-TV (Washington, D.C.)
Krista Bradford -WWOR-TV (New York)
Bebe Emerman -KCAL-TV (Los Angeles)
Corey McPherrin -WFLD-TV (Chicago)
Walter Richards -KTLA-TV (Los Angeles)
Ukee Washington -KYW-TV (Philadelphia)
Ileana Varela -WFOR-TV (Miami)
Mike Bush -KSDK-TV (St. Louis)
Angela Davis -KSTP-TV (Minneapolis)
Marion Brooks -WSB-TV (Atlanta)
Randy Paige -KCAL-TV (Los Angeles)
Shern-Min Chow -KPRC-TV (Houston)
Noel Cisneros -KRON-TV (San Francisco)
Sonja Gantt -WGN-TV (Chicago)
Lyanne Melendez -KGO-TV (San Francisco)
Lila Orbach -WDIV-TV (Detroit)
Gretchen Carlson -WOIO-TV (Cleveland)
Michael Barkann -WLVI-TV (Boston), USA
Network and CBS Sports
At August 31, 1996, A&A's client roster included six authors, consisting
of the following persons:
Dick Schaap -author of Bo Knows Bo and Instant Replay
Rick Reilly -author of The Boz and Missing Links and a writer for Sports
Illustrated
John Powers -author of One Goal and Mary Lou! and a sportswriter for The
Boston Globe
Gene Wojociechowski -author of Nothing but Net and I Love Being the Enemy
and a sportswriter for The Chicago Tribune
Ken Dryden -author of The Game and Home Game
Michael Silver -author of Sports with an Attitude and currently working with
Jerry Rice on a project for Sports Illustrated
At August 31, 1996, A&A's client roster included nine television producers
and directors, consisting of the following persons:
Terry O'Neil -executive producer of both sports and news programming
Curt Gowdy, Jr. -ABC Sports
John Faratzis -a sports-programming producer who has worked with ABC, CBS
and NBC
Craig Silver -CBS Sports
Andy Kindle -Fox Sports
Larry Cavolina -ESPN and NBC Sports
Rick Paiva -ESPN
Joel Feld -a sports-programming producer who has worked with ABC Sports and
Fox Sports
Michael Ireland -ESPN and KTLA-TV (Los Angeles), which broadcasts Los
Angeles Dodgers baseball games
COMMUNICATIONS
The Company intends to expand the businesses of SMTI and A&A by providing
services relating to television production, sale of television rights,
program packaging and video production and distribution, through which it may
derive revenue from commissions on sales of broadcast rights to television
networks and cable stations, commissions for packaging an event for a
particular corporate sponsor, fees for production of television programs or
videos and royalties for video distribution.
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Marquee is engaged in the following projects in the communications area:
o In March 1996, the Company entered into a one-year agreement with ESPN
to produce approximately 30 televised boxing matches which are to be
broadcast on ESPN and ESPN2. The Company's production services in
connection with these boxing matches consist of site reviewal,
arranging for television cameras, lighting, audio and video equipment
and technical facilities and coordinating the use of on-air
broadcasters.
o In December 1995, the Company entered into an oral joint venture
program development arrangement with Cosette Productions, which has
developed television, theatrical and movie productions such as The
Grammy Awards, The Will Rogers Follies, television specials starring
Harry Connick Jr. and Kathie Lee Gifford, made-for-TV movies starring
Valerie Bertinelli and Rick Schroeder and the television mini-series
Alcatraz.
o The Company has agreed with The Outdoor Life Network, LLC ("OLN") to
produce 22 half-hour episodes of Ironjack --The National Lumberjack
Championships for OLN, a new cable network devoted to outdoor
programming. The Company is currently producing the series, which it
expects will be available for televising in 1997.
OPERATING STRATEGY
The Company intends to seek to maximize the performance of its events
production and corporate sponsorship, personal representation and
communications businesses. The Company believes that the combination of its
business with those of SMTI and A&A will enable it to construct comprehensive
packages of sports events and sports personality endorsements. In addition,
as a means to reduce operating costs, the Company intends to engage the
services of independent contractors or "stringers" to perform certain
services in connection with the Company's business, which may enable the
Company to limit the number of its employees. The Company believes that the
experience of its management team will provide access to qualified
independent contractors, although there can be no assurance that the Company
will be able to obtain such services on commercially reasonable terms or at
all.
COMPETITION
Events production, corporate sponsorship and personal representation are
highly-competitive industries which are dominated by a few large companies,
such as International Management Group, ProServ, Inc. and Advantage
International Inc. in the sports industry and the William Morris Agency, Inc.
and Creative Artists Agency, Inc. in the entertainment industry, which have
substantially greater financial and other resources than the Company. In
addition, the Company will compete with many smaller entities. The success of
the Company will be dependent upon its ability to obtain event, client and
production opportunities and to generate revenues from such activities. The
Company believes that it will compete with other companies primarily on the
basis of the experience of its management and the breadth of the services
that the Company will be able to offer, including events production and
corporate sponsorship, personal representation and communications services.
There can be no assurance, however, that the Company will be able to compete
successfully in the sports management and representation industry.
PROPERTIES
The Company's executive offices are currently located at 150 East 58th
Street, 19th Floor, New York, New York and are occupied pursuant to a
month-to-month lease with TSC providing for a monthly rent of approximately
$4,000. See "Certain Transactions--Consulting Agreement with Sillerman
Communications Management Corporation." The Company is currently in
negotiations with respect to a lease for new facilities located at 888
Seventh Avenue, New York, New York. The lease is expected to provide for an
initial annual rent, commencing on the first anniversary of the date on which
the landlord delivers the premises to the Company (the "Commencement Date"),
of approximately $537,000, subject to certain increases, and is expected to
expire on the eleventh anniversary of the Commencement Date. The Company
intends to perform certain capital improvements to the premises prior to
taking possession
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thereof and the landlord is expected to reimburse the Company for such costs
in an amount not to exceed $750,000. The Company believes that its current
facility or the new facility, in the event that it relocates to such
premises, will be sufficient for its planned operations for the foreseeable
future.
EMPLOYEES
Following completion of the Acquisitions, the Company will have 44
full-time employees, none of whom will be covered by a collective bargaining
agreement. Each of the Company, A&A and SMTI considers its relations with its
employees to be good. In addition, the Company intends to engage independent
contractors to provide many of the services required by its business.
LEGAL PROCEEDINGS
Neither the Company, A&A nor SMTI is a party to any material legal
proceedings.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth the names, ages and positions of the
executive officers and directors of the Company and the persons expected to
become executive officers or directors of the Company upon completion of this
Offering:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------- ----- -----------------------------------------------
<S> <C> <C>
Robert M. Gutkowski .. 48 President, Chief Executive Officer and Director
Robert F.X. Sillerman 48 Chairman
Arthur C. Kaminsky ... 49 Director and Executive Vice President
Michael Letis ......... 55 Director and Executive Vice President
Louis J. Oppenheim ... 38 Director and Executive Vice President
Michael Trager ........ 54 Director and Executive Vice President
James E. Sileo ........ 43 Chief Financial Officer
Howard J. Tytel ....... 50 Director
Kraig G. Fox .......... 28 Secretary
</TABLE>
ROBERT M. GUTKOWSKI has served as President, Chief Executive Officer and
Director of the Company since December 1995. Mr. Gutkowski has more than 20
years of experience in the television, sports and entertainment industries.
From September 1994 until December 1995, Mr. Gutkowski was a consultant to
sports-related businesses. From November 1991 to September 1994, he served as
President and Chief Executive Officer of Madison Square Garden Corporation,
where he oversaw the operations of the New York Knicks, the New York Rangers,
the MSG Entertainment Group, the MSG Cable Network, Madison Square Garden and
the Paramount Theater. From July 1990 to November 1991, Mr. Gutkowski served
as President of MSG Communications Group, having served as Executive Vice
President thereof from September 1987 to July 1990. From October 1985 to
September 1987, he served as President of Madison Square Garden Network.
Prior to his tenure at Madison Square Garden, Mr. Gutkowski was Vice
President-Sales for Paramount Television Domestic Distribution. From February
1981 to September 1983, Mr. Gutkowski was Vice President-Programming for
ESPN. Mr. Gutkowski earned a B.A. from Hofstra University.
ROBERT F.X. SILLERMAN has been Chairman of the Company since July 1995.
Mr. Sillerman has been Chief Executive Officer of SFX, a publicly-traded
company which owns and operates radio stations, since June 1996, and from
1992 through June 1996 he served as Executive Chairman, Chairman and/or Chief
Executive Officer of SFX. Since 1985, Mr. Sillerman has been Chairman of the
Board and Chief Executive Officer of SCMC, a private investment company which
makes investments in and provides financial consulting services to companies
engaged in media and sports-related businesses, including the Company, and,
through privately-held entities, he controls the general partner of Sillerman
Communications Partners, L.P. ("SCP"), an investment partnership. Since 1985,
he has been Chairman and Chief Executive Officer of TSC, a private investment
company which provides financial advisory, marketing, consulting and
investment banking services to media companies and which is a principal
stockholder of the Company. See "Certain Transactions" and "Principal
Stockholders." Mr. Sillerman earned a B.A. from Brandeis University. In 1993,
Mr. Sillerman became the Chancellor of the Southampton campus of Long Island
University.
ARTHUR C. KAMINSKY has been a Director of the Company since March 1996 and
will become an Executive Vice President of the Company concurrently with the
completion of the A&A Acquisition. Mr. Kaminsky has served as President and
Chief Executive Officer of A&A since 1977, and he is expected to continue in
that position following the A&A Acquisition. From 1974 to 1990, Mr. Kaminsky
was a partner with the law firm of Taft & Kaminsky. Mr. Kaminsky earned a
B.A. from Cornell University and a J.D. from Yale University.
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MICHAEL LETIS will become a Director and Executive Vice President of the
Company concurrently with the SMTI Acquisition. Mr. Letis has served as
President of SMTI since 1984, and he is expected to continue in that position
following the SMTI Acquisition. Mr. Letis earned a B.A. from Dartmouth
College.
LOUIS J. OPPENHEIM will become a Director and Executive Vice President of
the Company concurrently with the A&A Acquisition. Mr. Oppenheim has served
as Vice President of A&A since 1985, and he is expected to continue in that
position following the A&A Acquisition. From 1981 to 1985, he served as a
talent representative for A&A. Mr. Oppenheim earned a B.A. from The
University of Pennsylvania and a J.D. from Fordham University.
MICHAEL TRAGER has been a Director of the Company since March 1996 and
will become an Executive Vice President of the Company concurrently with the
completion of the SMTI Acquisition. Mr. Trager has served as Chairman of SMTI
since 1984, and he is expected to continue in that position following the
SMTI Acquisition. From November 1994 to December 1995, Mr. Trager served as a
Director of Select Media Communications, Inc., which filed a petition under
the federal bankruptcy laws in October 1995. Mr. Trager earned a B.A. and
M.S. from Bucknell University.
JAMES E. SILEO has served as the Chief Financial Officer of the Company
since November 1995. From November 1994 to December 1995, Mr. Sileo served as
Chief Financial Officer and a Director of Select Media Communications, Inc.,
which filed a petition under the federal bankruptcy laws in October 1995.
From June 1985 to November 1994, Mr. Sileo held various positions at Madison
Square Garden Corporation, including Vice President-Finance and Network
Operations from April 1992 to November 1994, Vice President-Finance,
Communications Group from June 1988 to March 1992 and Director of Financial
Planning for the MSG Communications Group. Mr. Sileo earned a B.B.A. in
accounting from Bernard M. Baruch College.
HOWARD J. TYTEL has served as a Director of the Company since July 1995.
Mr. Tytel has been a Director, Executive Vice President and Secretary of SFX
since 1992. Mr. Tytel has also been Executive Vice President and General
Counsel of SCMC since 1985, a Director of SCMC since 1989, and Executive Vice
President and General Counsel of TSC since 1985. Since March 1995, Mr. Tytel
has been a director of Interactive Flight Technologies, Inc., a company
providing computer-based in-flight entertainment. Mr. Tytel is Of Counsel to
the law firm of Baker & McKenzie, which represents the Company, SFX, SCMC and
TSC. Mr. Tytel earned a J.D. from Washington University.
KRAIG G. FOX has served as Secretary of the Company since July 1995. Since
December 1993, Mr. Fox has been the Manager-Business and Legal Affairs for
TSC. Since April 1995 and July 1996, Mr. Fox has been the Secretary of
Multi-Market Radio, Inc. and Triathlon Broadcasting Company, respectively,
both of which are publicly-traded companies engaged in the ownership and
operation of radio stations. Mr. Fox earned a J.D. from Hofstra University.
Directors serve until the next annual meeting or until their successors
are elected and qualified subject to the provisions of the Stockholders'
Agreement. See "Certain Transactions--Stockholders' Agreement." Officers
serve at the discretion of the Board of Directors, subject to rights, if any,
under contracts of employment with the Company.
The Underwriter has the right to appoint an observer to be present at the
Company's Board of Directors meetings for a period of five years from the
completion of this Offering, although it has not yet selected any such
observer. Such observer may be a director, officer, partner, employee or
affiliate of the Underwriter. In addition, the Company has agreed with the
Underwriter that prior to the date of this Prospectus, and for a period of
five years thereafter, it will have at least two non-affiliated independent
directors on its Board of Directors.
The General Corporation Law of the State of Delaware permits a corporation
through its Certificate of Incorporation to eliminate the personal liability
of its directors to the corporation or its stockholders for monetary damages
for breach of fiduciary duty of loyalty and care as a director, with certain
exceptions. The exceptions include a breach of fiduciary duty of loyalty,
acts or omissions not in good faith or which involve intentional misconduct
or knowing violation of law, improper declarations of dividends,
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and transactions from which the directors derived an improper personal
benefit. The Company's Certificate of Incorporation exonerates its directors
from monetary liability to the fullest extent permitted by this statutory
provision but does not restrict the availability of non-monetary and other
equitable relief. The Company has been advised that it is the position of the
Commission that insofar as the foregoing provision may be invoked to disclaim
liability for damages arising under the Securities Act, that provision is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
Executive Compensation
During the period from inception (July 11, 1995) through December 31,
1995, the Company had no operations and no officer of the Company received
compensation from the Company. In March 1996, the Company and Mr. Gutkowski
entered into an employment agreement pursuant to which Mr. Gutkowski receives
an annual base salary of $325,000 and an annual bonus of at least $150,000.
See "--Employment Agreements."
Employment Agreements
The Company and Robert M. Gutkowski have entered into an employment
agreement dated as of March 21, 1996 pursuant to which Mr. Gutkowski agreed
to serve as the Company's President and Chief Executive Officer for an
initial term of five years. The employment agreement also provides that Mr.
Gutkowski shall serve as a director of each of A&A and SMTI at such time as
the Company causes his election to such positions. The employment agreement
provides that Mr. Gutkowski shall receive an annual base salary of $325,000
plus an annual bonus of at least $150,000 (which bonus may be increased in
the discretion of the Board of Directors of the Company).
The employment agreement provides that the Company may terminate Mr.
Gutkowski's employment agreement prior to the expiration of its term in the
event of his death, disability for a period of 26 consecutive weeks or for
"cause," which, for purposes of the employment agreement, is defined as the
conviction of a felony, the commission of an act of fraud or embezzlement
upon the Company, a material breach by Mr. Gutkowski of his agreement not to
compete with the Company or the wilful malfeasance or gross negligence by Mr.
Gutkowski in the performance of his duties under the employment agreement or
his failure to perform his duties thereunder, which malfeasance, negligence
or failure has a material adverse effect on the business of the Company and
which shall remain uncured for a period of 15 days following written notice
from the Company.
Pursuant to his employment agreement, Mr. Gutkowski has agreed not to
compete with the Company or solicit any of the Company's clients or employees
(the "Prohibited Activities") during the term of the agreement. In addition,
the employment agreement provides that Mr. Gutkowski is prohibited from
engaging in the Prohibited Activities for certain periods of time in the
event he voluntarily terminates his employment agreement, the Company
terminates his employment agreement or the employment agreement is not
extended on substantially similar terms.
The Company will enter into employment agreements upon the closing of this
Offering with each of Messrs. Kaminsky, Letis, Oppenheim and Trager, on
substantially the same terms and conditions as Mr. Gutkowski's employment
agreement with the Company, pursuant to which each such person has agreed to
serve as an Executive Vice President of the Company for an initial term of
five years. In addition, pursuant to such agreements, the Company has agreed
to cause Messrs. Letis and Trager to be elected to the Board of Directors of
SMTI, has agreed to cause Messrs. Kaminsky and Oppenheim to be elected to the
Board of Directors of A&A, and has agreed to use its best efforts to cause
each of such persons to be nominated to serve as a member of the Board of
Directors of the Company. The employment agreements provided that each of
Messrs. Kaminsky, Letis and Trager will receive an annual base salary of
$300,000 and the employment agreement with Mr. Oppenheim provides that he
will receive an annual base salary of $175,000.
1996 STOCK OPTION PLAN
The Company's Board of Directors has adopted and the stockholders have
approved the Company's 1996 Stock Option Plan (the "Plan"). The Plan, which
provides for a grant of non-qualified and incentive
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stock options to purchase up to 500,000 shares of Common Stock to eligible
employees and consultants, is designed to attract and retain the best
available personnel for the positions of substantial responsibility, to
provide additional incentive to key employees, officers, and consultants of
the Company and its subsidiaries and to promote the success of the Company's
business. To date, no options have been granted under the Plan.
Each option granted pursuant to the Plan is designated at the time of
grant as either an "Incentive Stock Option" or as a "Non-Qualified Stock
Option." Grants to executive officers may be made only at the fair market
value of the underlying stock on the date of issuance. The issuance of
options at fair market value on grant date constitutes a performance goal
under Section 162(m) of the Internal Revenue Code. The following summary
description of the Plan is qualified in its entirety by reference to the Plan
itself, which is filed as an exhibit to the registration statement of which
this Prospectus is a part.
Administration of the Plan. The Plan is administered by the Board of
Directors or a Stock Option Committee (the "Committee") which is appointed by
the Board of Directors. Only independent directors may serve on the
Committee. The Committee determines who among those eligible will be granted
options, the time or times at which options will be granted, the number of
shares to be subject to options, the duration of options, any conditions to
the exercise of options and the manner in and price at which options may be
exercised.
The Plan may be amended without stockholder approval, except stockholder
approval is required to (i) decrease the exercise price; (ii) extend the term
of the Plan beyond ten years; (iii) extend the maximum terms of the options
granted thereunder beyond ten years; (iv) withdraw the administration of the
Plan from the Committee; (v) expand the class of eligible participants; (vi)
increase the aggregate number of shares of Common Stock which may be issued
pursuant to the provisions of the Plan and (vii) otherwise materially
increase the benefits accruing to participants under the Plan.
Unless the Plan is terminated earlier by the Board of Directors, it will
terminate on the earlier of (i) the date when all shares of the Common Stock
reserved for issuance under the Plan have been acquired through the exercise
of options granted thereunder and (ii) July 2006.
Shares Subject to the Plan. The Plan provides that options may be granted
with respect to a total of 500,000 shares of Common Stock. Under certain
circumstances involving a change in the number of Common Stock without
receipt by the Company of any consideration therefor, such as a stock split,
stock consolidation or payment of a stock dividend, the class and aggregate
number of shares subject to each outstanding option and the option price per
share will be proportionately adjusted. In addition, if the Company is
involved in a merger, consolidation, dissolution or liquidation, the options
granted under the Plan will be adjusted. If any option expires or terminates
for any reason without having been exercised in full, the unpurchased shares
subject to such option will be available again for the purposes of the Plan.
Participation. Grants under the Plan may be granted to employees and any
other individual who in the judgment of the Committee performs valuable and
important services for the Company. All employees are eligible to participate
in the Plan. Non-employee directors are not eligible to participate in the
Plan.
Option Price. The exercise price of each option will be determined by the
Committee, but in the case of an incentive stock option may not be less than
100% of the fair market value of the shares of Common Stock covered by the
option on the date the option is granted. If an incentive stock option is to
be granted to an employee who owns over 10% of the total combined voting
power of all classes of the Company's stock, then the exercise price may not
be less than 110% of the fair market value of the Common Stock covered by the
option on the date the option is granted. The exercise price of non-qualified
stock options may be any price determined by the Committee; provided that the
exercise price of any grant to any executive officer shall not be lower than
the fair market value of the underlying Common Stock on the date of grant.
The issuance of options at fair market value on the date of grant constitutes
a performance goal under Section 162(m) of the Internal Revenue Code.
Accordingly, grants under the Plan should qualify as performance-based
compensation.
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Terms of Options. The Committee shall fix the term of each option,
provided that the maximum term of each option shall be ten years. Incentive
stock options granted to an employee who owns 10% of the total combined
voting power of all classes of stock of the Company shall expire not more
than five years after the date of grant. The Plan will provide for the
earlier expiration of options of a participant in the event of certain
terminations of employment. The options must be paid for in United States
currency, or, at the Company's discretion, in shares of the Company's Common
Stock which the optionee already owns.
Restrictions on Grant and Exercise. An option may not be transferred other
than by will or the laws of descent and distribution and, during the lifetime
of the option holder, may be exercised solely by him. The aggregate fair
market value (determined at the time the option is granted) of the shares as
to which an employee may first exercise incentive stock options in any one
calendar year may not exceed $100,000. The Committee may impose any other
conditions to exercise it deems appropriate.
Federal Income Tax Consequences.
Incentive Stock Options ("ISOs"): Options granted under the Plan which
constitute ISOs will, in general, be subject to the following Federal income
tax treatment:
(i) The grant of an ISO will give rise to no Federal income tax
consequences to either the Company or the participant.
(ii) A participant's exercise of an ISO will result in no Federal income
tax consequences to the Company.
(iii) A participant's exercise of an ISO will not result in ordinary
Federal taxable income to the participant, but may result in the
imposition of an increase in the alternative minimum tax. If shares
acquired upon exercise of an ISO are not disposed of within the same
taxable year the ISO is exercised, the excess of the fair market value of
the shares at the time the ISO is exercised over the option price is
included in the participant's computation of alternative minimum taxable
income.
(iv) If shares acquired upon the exercise of an ISO are disposed of
within two years of the date of the option grant, or within one year of
the date of the option exercise, the participant will realize ordinary
Federal taxable income at the time of the disposition to the extent that
the fair market value of the shares at the time of exercise exceeds the
option price, but not in an amount greater than the excess, if any, of the
amount realized on the disposition over the option price.
Short-term or long-term capital gain will be realized by the participant
at the time of such a disposition to the extent that the amount of proceeds
from the sale exceeds the fair market value at the time of the exercise of
the ISO. Short-term or long-term capital loss will be realized by the
participant at the time of such a disposition to the extent that the option
price exceeds the amount of proceeds from the sale. If a disposition is made
as described in this section, the Company will be entitled to a Federal
income tax deduction in the taxable year in which the disposition is made in
an amount equal to the amount of ordinary Federal taxable income realized by
the participant. If shares acquired upon the exercise of an ISO are disposed
of after the later of two years from the date of the option grant or one year
from the date of the option exercise, the participant will realize long-term
capital gain or loss in an amount equal to the difference between the amount
realized by the participant on the disposition and the participant's Federal
income tax basis in the shares, usually the option exercise price. In such
event, the Company will not be entitled to any Federal income tax deduction
with respect to the ISO.
Non-Qualified Stock Options ("NQSOs"): Options granted under the Plan
which constitute NQSOs will, in general, be subject to the following Federal
income tax treatment:
(i) The grant of a NQSO will give rise to no Federal income tax
consequences to either the Company or the participant.
(ii) The exercise of an Option will generally result in ordinary Federal
taxable income to the participant in an amount equal to the excess of the
fair market value of the shares at the time of exercise over the option
price.
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(iii) A deduction from Federal taxable income will be allowed to the
Company in an amount equal to the amount of ordinary income recognized by
the participant, provided the Company deducts and withholds all
appropriate Federal withholding tax.
(iv) Upon a subsequent disposition of shares, a participant will
recognize a short-term or long-term capital gain or loss equal to the
difference between the amount received and the tax basis of the shares,
usually fair market value at the time of exercise.
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CERTAIN TRANSACTIONS
FOUNDERS' STOCK
In connection with the organization of the Company, in July 1995 the
Company sold 333 shares of Common Stock and in August 1995 the Company sold
666 shares of Common Stock, respectively, to Robert M. Gutkowski, the
Company's President and Chief Executive Officer, and to TSC, which is
controlled by Robert F.X. Sillerman, the Company's Chairman, for an aggregate
purchase price of $19,980, or approximately $.01 per share (on a post-Stock
Split basis). In May 1996, the Company sold one share of Common Stock to
Martin C. Ehrlich, Senior Vice-President-Programming of the Company, for a
purchase price of $500 or $.01 per share (on a post-Stock Split basis). In
August 1996, the Company increased by means of a stock split (the "Stock
Split") the number of shares held by Mr. Gutkowski to 646,154 shares, TSC to
1,292,308 shares and Mr. Ehrlich to 50,000 shares.
PRIVATE PLACEMENT AND CORPORATE INDEBTEDNESS
From January 3, 1996 through June 30, 1996, Robert M. Gutkowski made loans
to the Company in the aggregate principal amount of $362,000, which loans
accrued interest at the rate of 12% per annum and which interest was waived
by Mr. Gutkowski. The funds advanced by Mr. Gutkowski were used by the
Company for working capital purposes. In August 1996, the Company repaid
$125,000 of such amount to Mr. Gutkowski from the proceeds of the Private
Placement and Mr. Gutkowski purchased $115,385 in principal amount of
Debentures through the cancellation of a portion of such indebtedness, which
Debentures will automatically convert upon the completion of this Offering
into 115,385 Units. The Company will repay the balance of such indebtedness
plus accrued interest at the rate of 12% per annum to Mr. Gutowski on January
1, 1998. The investment by Mr. Gutkowski in the Private Placement was on the
same terms as the investments by the non-affiliated investors, except that
Mr. Gutkowski's Units have not been registered for resale in the Concurrent
Offering and he has agreed not to sell such Units or the components thereof
during the two-year period from the closing of this Offering.
From May 15, 1996 through July 1, 1996, TSC incurred expenses and made
loans to the Company in the aggregate principal amount of $196,385, which
indebtedness accrued interest at the rate of 12% per annum and which interest
was waived by TSC, and which were used by the Company for working capital
purposes, including rent payable to TSC. See "Business--Properties." In
August 1996, TSC purchased $230,768 in principal amount of Debentures through
the payment of $34,383 and the cancellation of such indebtedness, which
Debentures will automatically convert upon the completion of this Offering
into 230,768 Units. The investment by TSC in the Private Placement was on the
same terms as the investments by the non-affiliated investors, except that
TSC's Units have not been registered for resale in the Concurrent Offering
and TSC has agreed not to sell such Units or the components thereof during
the two-year period from the closing of this Offering.
On May 30, 1996, Michael Trager, the Chairman of SMTI and a Director of
the Company, and Michael Letis, the President of SMTI, each of whom will be
an Executive Vice President and Director of the Company upon completion of
the SMTI Acquisition, made a loan to the Company in the aggregate principal
amount of $100,000, which loan accrued interest at the rate of 12% per annum
and which interest was waived by Messrs. Trager and Letis, and which was used
by the Company for working capital purposes. In August 1996, Messrs. Trager
and Letis each purchased $115,385 in principal amount of Debentures through
the payment of an aggregate of $130,770 and the cancellation of such
indebtedness, which Debentures will automatically convert upon the completion
of this Offering into an aggregate of 230,770 Units. The investment by
Messrs. Trager and Letis in the Private Placement was on the same terms as
the investments by the non-affiliated investors, except that Messrs. Trager's
and Letis' Units have not been registered for resale in the Concurrent
Offering and they have each agreed not to sell such Units or the components
thereof during the two-year period from the closing of this Offering.
On August 6, 1996, Louis J. Oppenheim, the Vice President of A&A and who
will become an Executive Vice President and Director of the Company upon
completion of the A&A Acquisition, made a loan to the Company in the
aggregate principal amount of $33,334, which loan accrued interest at the
rate of 12% per annum and which interest was waived by Mr. Oppenheim, and
which was used by the
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Company for working capital purposes. In August 1996, Mr. Oppenheim purchased
$57,692 in principal amount of Debentures through the payment of $24,358 and
the cancellation of such indebtedness, which Debentures will automatically
convert upon the completion of this Offering into 57,692 Units. The
investment by Mr. Oppenheim in the Private Placement was on the same terms as
the investments by the non-affiliated investors, except that Mr. Oppenheim's
Units have not been registered for resale in the Concurrent Offering and he
has agreed not to sell the Units or the components thereof during the
two-year period from the closing of this Offering.
In August 1996, Arthur C. Kaminsky, the President and Chief Executive
Officer of A&A and a Director of the Company and who will become an Executive
Vice President of the Company upon completion of the A&A Acquisition,
purchased $115,385 principal amount of Debentures, which Debentures will
automatically convert upon the completion of this Offering into 115,385
Units. The investment by Mr. Kaminsky in the Private Placement was on the
same terms as the investments by the non-affiliated investors, except that
Mr. Kaminsky's Units have not been registered for resale in the Concurrent
Offering and he has agreed not to sell the Units or the components thereof
during the two-year period from the closing of this Offering.
SMTI ACQUISITION AGREEMENT
The Company, SMTI, Michael Trager, Michael Letis, Robert M. Gutkowski and
TSC have entered into an acquisition agreement amended and restated as of
March 21, 1996 (the "SMTI Acquisition Agreement"), pursuant to which SMTI has
agreed to be merged into a wholly-owned subsidiary of the Company on the date
of closing of this Offering on the terms and conditions set forth in such
agreement. The aggregate purchase price to be paid by the Company to Messrs.
Trager and Letis, the sole stockholders of SMTI, is (i) $8,000,000 cash, of
which $6,500,000 is payable at the closing and an aggregate of $1,500,000 of
which is payable in five equal annual installments commencing April 1, 1997
and (ii) the issuance to each of Messrs. Trager and Letis of 646,154 shares
of Common Stock. The Company also agreed to enter into five-year employment
agreements with each of Messrs. Trager and Letis. See "Use of Proceeds" and
"Management--Employment Agreements."
The SMTI Acquisition Agreement provides that the representations and
warranties contained therein shall survive for a period of six months
following the closing, after which time the indemnification obligations for
breaches of representations and warranties will be limited to claims asserted
during such six-month period. Each of Messrs. Trager and Letis has agreed to
indemnify the Company from losses, claims and damages which the Company may
suffer or incur and which arise out of the breach by SMTI or Messrs. Trager
or Letis of any representation, warranty, covenant or agreement in the SMTI
Acquisition Agreement, provided, however, that the amount of each of Messrs.
Trager's and Letis' indemnity shall be limited to $1,000,000. Each of Mr.
Gutkowski and TSC have agreed to indemnify each of Messrs. Trager and Letis
and SMTI from any losses, claims or damages which either such party shall
suffer or incur and which arise out of the breach by Mr. Gutkowski, TSC or
the Company of any representation, warranty, covenant or agreement in the
SMTI Acquisition Agreement, provided that each of Mr. Gutkowski's and TSC's
indemnity shall be limited to $250,000.
From its inception until immediately prior to the completion of the SMTI
Acquisition, SMTI has been treated as a closely-held corporation under
Subchapter S of the Internal Revenue Code of 1986, as amended (the "Code"),
and, therefore, did not pay federal income taxes on amounts earned during
such period. Accordingly, SMTI distributed through dividends to its
shareholders substantially all of its earnings during such period. The SMTI
Acquisition Agreement provides that immediately prior to the closing of the
SMTI Acquisition, SMTI will distribute to Messrs. Trager and Letis by means
of a dividend, an amount equal to 40% of the increase in SMTI's accumulated
adjustments account, as defined in the Code, which amount approximates the
amount the shareholders of SMTI would be expected to pay personally for
income taxes based on such earnings. As of June 30, 1996, the amount of such
distribution would be approximately $335,000.
SMTI has agreed, until the closing of the SMTI Acquisition, not to pay to
either of Messrs. Trager and Letis an annual salary in excess of $300,000 and
not to amend any employment agreement requiring SMTI to pay a salary or bonus
in excess of $50,000 per year. In addition, at the Company's direction, SMTI
has agreed to terminate any employee benefit plans it may maintain.
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The closing of the SMTI Acquisition is subject to certain closing
conditions, including (i) the Company completing an initial public offering
or similar private financing providing gross proceeds of at least
$13,800,000, (ii) the employment agreements between each of Messrs. Trager
and Letis and the Company, on the terms set forth under "Business--Employment
Agreements," shall have been entered into and (iii) a legal opinion shall
have been delivered to the effect that the SMTI Acquisition will be
considered a tax-free reorganization to the extent of the receipt of Common
Stock under Section 368(a) of the Code.
A&A ACQUISITION AGREEMENT
The Company, A&A, Arthur C. Kaminsky, Louis J. Oppenheim, Robert M.
Gutkowski and TSC have entered into an acquisition agreement amended and
restated as of March 21, 1996 (the "A&A Acquisition Agreement"), pursuant to
which A&A has agreed to be merged into a wholly-owned subsidiary of the
Company on the date of closing of this Offering on the terms and conditions
set forth in such agreement. The aggregate purchase price to be paid by the
Company to Messrs. Kaminsky and Oppenheim, the sole stockholders of A&A, is
(i) $3,500,000 cash, of which $2,500,000 is payable at the closing and an
aggregate of $1,000,000 of which is payable in five equal annual installments
commencing April 1, 1997 and (ii) the issuance to Messrs. Kaminsky and
Oppenheim of an aggregate of 969,231 shares of Common Stock, 646,154 of which
will be issued to Mr. Kaminsky and 323,077 of which will be issued to Mr.
Oppenheim. The Company also agreed to enter into five-year employment
agreements with each of Messrs. Kaminsky and Oppenheim. See "Use of Proceeds"
and "Management--Employment Agreements."
The A&A Acquisition Agreement provides that the representations and
warranties contained therein shall survive for a period of six months
following the closing, after which time the indemnification obligations for
breaches of representations and warranties will be limited to claims asserted
during such six-month period. Each of Messrs. Kaminsky and Oppenheim has
agreed to indemnify the Company from losses, claims and damages which the
Company may suffer or incur and which arise out of the breach by A&A or
Messrs. Kaminsky or Oppenheim of any representation, warranty, covenant or
agreement in the A&A Acquisition Agreement, provided, however, that the
amount of Messrs. Kaminsky's and Oppenheim's indemnity shall be limited to
$500,000 and $250,000, respectively. Each of Mr. Gutkowski and TSC have
agreed to indemnify each of Messrs. Kaminsky and Oppenheim and A&A from any
losses, claims or damages which either such party shall suffer or incur and
which arise out of the breach by Mr. Gutkowski, TSC or the Company of any
representation, warranty, covenant or agreement in the A&A Acquisition
Agreement, provided that each of Mr. Gutkowski's and TSC's indemnity shall be
limited to $250,000.
A&A has agreed, until the closing of the A&A Acquisition, not to pay to
either of Messrs. Kaminsky and Oppenheim an annual salary in excess of
$300,000 and $175,000, respectively, and not to amend any employment
agreement requiring A&A to pay a salary or bonus in excess of $50,000 per
year, except in certain circumstances. In addition, at the Company's
direction, A&A has agreed to terminate any employee benefit plans it may
maintain.
Prior to the closing of the A&A Acquisition, Messrs. Kaminsky and
Oppenheim may withdraw from A&A an aggregate amount of $100,000 if such
amount shall have been recovered from pending lawsuits of A&A. In the event
that such sum shall not have been withdrawn prior to the closing, then
Messrs. Kaminsky and Oppenheim shall be entitled to withdraw such sum as
salary from A&A following the closing from amounts recovered from such
lawsuits.
The closing of the A&A Acquisition is subject to certain closing
conditions, including (i) the Company completing an initial public offering
or similar private financing providing gross proceeds of at least
$13,800,000, (ii) the employment agreements between each of Messrs. Kaminsky
and Oppenheim and the Company, on the terms set forth under
"Business--Employment Agreements," shall have been entered into and (iii) a
legal opinion shall have been delivered to the effect that the A&A
Acquisition will be considered a tax-free reorganization to the extent of the
receipt of Common Stock under Section 368(a) of the Code.
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CONSULTING AGREEMENT WITH SILLERMAN COMMUNICATIONS MANAGEMENT CORPORATION
The Company has entered into a Financial Consulting Agreement with SCMC,
dated as of August 1, 1996 (the "SCMC Agreement"), pursuant to which SCMC has
agreed to serve for a period of six years as the Company's financial
consultant to provide customary financial and advisory services, which
agreement may be renewed by mutual agreement of the Company and SCMC for an
additional period of four years. Robert F.X. Sillerman, the Chairman and a
principal stockholder of the Company, is the Chairman, Chief Executive
Officer and controlling stockholder of SCMC. The Company has agreed to pay to
SCMC as compensation for its services under the SCMC Agreement the sum of
$30,000 per month from the date commencing nine months from the closing of
this Offering, which amount shall be increased annually by a percentage
amount equal to the percentage increase in the Consumer Price Index for New
York, New York. Under the SCMC Agreement, SCMC has agreed to perform, or
assist the Company in, among other things (i) production of financial reports
and other data for the Company's lenders and investors and as required under
the Securities Act and the Exchange Act, (ii) assistance with the preparation
of the Company's books and records, (iii) the maintenance of relationships
with financial institutions participating in Company financings, (iv) the
design and implementation of the Company's accounting systems, (v) the
purchase, installation and implementation of computer hardware and software
for the Company's accounting systems, (vi) the implementation of a cash
management system, (vii) the establishment of regularized procedures for the
accumulation of cash balances available for interest and other required debt
service payments, (viii) the engagement of bookkeeping, accounting and other
personnel necessary for the implementation of the Company's accounting
systems and (ix) placement of financing. The SCMC Agreement also provides for
the payment to SCMC of certain fees in the event of any financings or mergers
and acquisitions, whether or not such transactions are originated by SCMC,
although such fees are subject to the approval of the Company's independent
directors. The Company will not, however, make any such payment to SCMC in
connection with this Offering or the Acquisitions and did not make any such
payment to SCMC in connection with the Private Placement. The Company has
also agreed to reimburse SCMC for all reasonable out-of-pocket disbursements
incurred by SCMC in connection with the performance of services under the
SCMC Agreement and to indemnify SCMC and its affiliates for losses, claims,
damages or liabilities arising out of SCMC's performance of its obligations
under the SCMC Agreement.
Howard J. Tytel, a Director of the Company, is Of Counsel to the law firm
of Baker & McKenzie, which is counsel in certain matters, including this
Offering, to the Company, SCMC, TSC and certain other affiliates of Mr.
Sillerman, the Chairman of the Company. Baker & McKenzie compensates Mr.
Tytel based upon the fees it receives for providing legal services to the
Company and other clients introduced by Mr. Tytel. Mr. Tytel's primary
employment is as an officer of SCMC.
In January 1996, the Company entered into a month-to-month lease with TSC
providing for a monthly rent of approximately $4,000. See
"Business--Properties."
STOCKHOLDERS' AGREEMENT
In March 1996, the Company entered into a stockholders' agreement with
each of TSC, Robert M. Gutkowski, Arthur C. Kaminsky, Louis J. Oppenheim,
Michael Trager and Michael Letis (the "Stockholders' Agreement"). The
Stockholders' Agreement generally covers certain corporate governance
matters. Pursuant to the Stockholders' Agreement, TSC is entitled to nominate
two directors, Messrs. Kaminsky and Oppenheim are entitled to nominate one
director until the completion of this Offering and two directors thereafter,
Messrs. Trager and Letis are entitled to nominate one director until the
completion of this Offering and two directors thereafter, and Mr. Gutkowski
is entitled to nominate one director. Each of the stockholder parties to the
Stockholders' Agreement (a "Stockholder") has agreed to vote all of the
shares of Common Stock owned by such person for the election of the directors
so nominated and not to take any action to remove any director so elected
(except for the director(s) nominated by such Stockholder).
Each Stockholder has agreed, that for a period of two years from the
closing of this Offering, not to dispose of more than one-third of the shares
of Common Stock owned by such person on such date, subject to certain limited
exceptions. The Stockholders' Agreement will terminate upon the mutual
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consent of the parties to such agreement, when there is only one Stockholder
bound thereby or March 21, 2004. In addition, the Stockholders' Agreement
will terminate with respect to a Stockholder if he dies or a guardian is
appointed to oversee his affairs or he holds less than 65% of the shares of
Common Stock beneficially owned by him on the date of the closing of this
Offering, provided that such Stockholder shall remain obligated to vote his
shares of Common Stock in accordance with the terms of the Stockholders'
Agreement.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Robert M.
Gutkowski, and intends to enter into employment agreements with each of
Messrs. Kaminsky, Letis, Oppenheim and Trager concurrently with the
completion of this Offering. See "Management--Employment Agreements."
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding ownership of
Common Stock, including the Escrow Shares, by (i) each person known by the
Company to own beneficially more than five percent of the outstanding Common
Stock, (ii) each director and each nominee for director of the Company and
(iii) all executive officers and directors of the Company as a group, prior
to this Offering and as adjusted to give effect to the sale of the 3,000,000
Units offered hereby, the completion of the Acquisitions and the conversion
of the Debentures into Units upon the closing of this Offering.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
--------------------------- ----------------------
NAME AND ADDRESS BEFORE BEFORE AFTER
OF BENEFICIAL OWNER (1) OFFERING AFTER OFFERING OFFERING OFFERING
- ------------------------------------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
Robert F.X. Sillerman (2) .................. 1,292,308 1,523,076(2) 65.0% 16.5%
Robert M. Gutkowski ........................ 646,154 761,539(3) 32.5 8.2
Arthur C. Kaminsky ......................... -- 761,539(4) -- 8.2
Louis J. Oppenheim ......................... -- 380,768(5) -- 4.1
Michael Letis .............................. -- 761,539(6) -- 8.2
Michael Trager ............................. -- 761,539(7) -- 8.2
Howard J. Tytel ............................ -- -- -- --
All executive officers and directors of the
Company as a group (four persons before
Offering and eight persons after Offering) 1,988,462 5,000,000 100.0% 54.1%
</TABLE>
- ------------
(1) The address of each beneficial owner is c/o The Marquee Group, Inc.,
150 East 58th Street, 19th Floor, New York, New York. Unless otherwise
noted, the Company believes that all persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock beneficially owned by them.
(2) Robert F.X. Sillerman, the Chairman of the Company, is the Chairman,
Chief Executive Officer and controlling stockholder of TSC, which
beneficially owns 1,292,308 shares of Common Stock and $230,768
principal amount of Debentures, which will automatically convert into
230,768 Units upon completion of this Offering. Excludes 230,768 shares
of Common Stock issuable upon exercise of an equal number of Warrants,
which are not exercisable until one year from the closing of this
Offering. See "Capitalization--Private Placement."
(3) Mr. Gutkowski is the beneficial owner of $115,385 principal amount of
Debentures, which will automatically convert into 115,385 Units upon
completion of this Offering. Excludes 115,385 shares of Common Stock
which are issuable upon exercise of an equal number of Warrants, which
are not exercisable until one year from the closing of this Offering.
See "Capitalization--Private Placement."
(4) The Company will issue 646,154 shares of Common Stock to Mr. Kaminsky
in connection with the A&A Acquisition. Mr. Kaminsky is the beneficial
owner of $115,385 principal amount of Debentures, which will
automatically convert into 115,385 Units upon completion of this
Offering. Excludes 115,385 shares of Common Stock which are issuable
upon exercise of an equal number of Warrants, which are not exercisable
until one year from the closing of this Offering. See
"Capitalization--Private Placement" and "Certain Transactions--A&A
Acquisition Agreement."
(5) The Company will issue 323,076 shares of Common Stock to Mr. Oppenheim
in connection with the A&A Acquisition. Mr. Oppenheim is the beneficial
owner of $57,692 principal amount of Debentures, which will
automatically convert into 57,692 Units upon completion of this
Offering. Excludes 57,692 shares of Common Stock issuable upon exercise
of an equal number of Warrants, which are not exercisable until one
year from the closing of this Offering. See "Capitalization--Private
Placement" and "Certain Transactions--A&A Acquisition Agreement."
(6) The Company will issue 646,154 shares of Common Stock to Mr. Letis in
connection with the SMTI Acquisition. Letis is the beneficial owner of
$115,385 principal amount of Debentures, which will automatically
convert into 115,385 Units upon completion of this Offering. Excludes
115,385 shares of Common Stock which are issuable upon exercise of an
equal number of Warrants, which are not exercisable until one year from
the closing of this Offering. See "Capitalization--Private Placement"
and "Certain Transactions--SMTI Acquisition Agreement."
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<PAGE>
(7) The Company will issue 646,154 shares of Common Stock to Mr. Trager in
connection with the SMTI Acquisition. Mr. Trager is the beneficial
owner of $115,385 principal amount of Debentures, which will
automatically convert into 115,385 Units upon completion of this
Offering. Excludes 115,385 shares of Common Stock which are issuable
upon exercise of an equal number of Warrants, which are not exercisable
until one year from the closing of this Offering. See
"Capitalization--Private Placement" and "Certain Transactions--SMTI
Acquisition Agreement."
ESCROW SHARES
The 1,275,000 Escrow Shares are not assignable or transferable. Of the
Escrow Shares, 425,000 (the "1997 Escrow Shares") will be released from
escrow if, and only if, the Company's net income before provision for income
taxes and exclusive of any extraordinary charges (all as audited by the
Company's independent public accountants) (the "Minimum Pretax Income")
amounts to at least $1,400,000 for the fiscal year ending December 31, 1997.
An additional 425,000 Escrow Shares, plus the 1997 Escrow Shares to the
extent they have not previously been released from escrow, will be released
from escrow if, and only if, the Minimum Pretax Income amounts to at least
$2,400,000 for the fiscal year ending December 31, 1998.
All of the Escrow Shares will be released from escrow if, and only if, one
or more of the following conditions is/are met:
(a) the Minimum Pretax Income amounts to at least $3,400,000 for the
fiscal year ending December 31, 1999;
(b) the Closing Price (as defined) of the Company's Common Stock averages
in excess of $15.00 per share for 20 consecutive business days during the
period from , 1998 until December 31, 1999; or
(c) during the period specified in (b) above, the Company is acquired by
or merged into another entity in a transaction in which the value of the
per share consideration received by the stockholders of the Company on the
date of such transaction or at any time during the period set forth in (b)
above equals of exceeds $15.00 per share.
The Minimum Pretax Income amounts set forth above shall (i) be calculated
exclusive of any extraordinary earnings including, but not limited to, any
charge to income resulting from release of the Escrow Shares and (ii) be
derived solely from the businesses owned and operated by the Company
following completion of the Acquisitions and shall not give effect to any
operations relating to businesses or assets acquired after such date, if any.
The Closing Price amount set forth above is subject to adjustment in the
event of any stock splits, reverse stock splits or other similar events.
Any money, securities, rights or property distributed in respect of the
Escrow Shares, including any property distributed as dividends or pursuant to
any stock split, merger, recapitalization, dissolution or total or partial
liquidation of the Company, shall be held in escrow until release of the
Escrow Shares. If the applicable Minimum Pretax Income levels set forth above
have not been met by March 31, 2000 or the applicable Closing Price level set
forth above has not been met by December 31, 1999, the Escrow Shares, as well
as any dividends or other distributions made with respect thereto, will be
canceled and contributed to the capital of the Company. The Company expects
that the release of the Escrow Shares to officers, directors, employees and
consultants of the Company will be deemed compensatory and, accordingly, will
result in a substantial charge to operations, which would equal the then fair
market value of such shares. Such charge could substantially increase the
loss or reduce or eliminate the Company's net income for financial reporting
purposes for the period during which such shares are, or become probable of
being, released from escrow. Although the amount of compensation expense
recognized by the Company will not affect the Company's total stockholders'
equity, it may have a negative effect on the market price of the Company's
securities. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Note 4 of Notes to the Company's Financial
Statements.
The Minimum Pretax Income and Closing Price levels set forth above were
determined by negotiation between the Company and the Underwriter and should
not be construed to imply or predict any future earnings by the Company or
any increase in the market price of its securities.
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<PAGE>
CONCURRENT OFFERING
The Registration Statement of which this Prospectus forms a part also
includes a prospectus with respect to an offering by the Selling
Securityholders of 1,250,000 Selling Securityholder Units, comprised of
1,250,000 shares of Common Stock and 1,250,000 Warrants, and 1,250,000 shares
of Common Stock issuable upon exercise of the Selling Securityholder Warrants
included in the Selling Securityholder Units, which may be sold in the open
market, in privately negotiated transactions or otherwise directly by the
holders thereof, subject to the following contractual restriction: Each
Selling Securityholder has agreed not to exercise the Selling Securityholder
Warrants for a period of one year from the closing of this Offering and each
Selling Securityholder has agreed not to sell, transfer or otherwise dispose
publicly of the Selling Securityholder Units for a period of 90 days from the
completion of this Offering.
An aggregate of $1,250,000 principal amount of Debentures were originally
issued to the Selling Securityholders in connection with the Private
Placement. The Debentures will automatically convert into 1,250,000 Selling
Securityholder Units on the closing of this Offering. See
"Capitalization--Private Placement."
The Company will not receive any proceeds from the sale of any of the
Selling Securityholder Securities. Sales of the Selling Securityholder
Securities or the potential of such sales may have an adverse effect on the
market price of the Units offered hereby.
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<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred
Stock, par value $.01 per share.
UNITS
Each Unit consists of one share of Common Stock and one Warrant. Each
Warrant entitles the holder thereof to purchase one share of Common Stock.
The Common Stock and Warrants comprising the Units are not transferable
separately until , 1997 or such earlier date (the "Separation Date") as
the Underwriter shall determine.
COMMON STOCK
Holders of Common Stock have the right to cast one vote for each share
held of record on all matters submitted to a vote of the stockholders,
including the election of directors. Holders of Common Stock are entitled to
receive such dividends, pro rata, based on the number of shares held, when,
as and if declared by the Board of Directors, from funds legally available
therefor, subject to the rights of holders of any outstanding Preferred
Stock. In the event of the liquidation, dissolution or winding up of the
affairs of the Company, all assets and funds of the Company remaining after
the payment of all debts and other liabilities, subject to the rights of the
holders of any outstanding Preferred Stock, shall be distributed, pro rata,
among the holders of the Common Stock. Holders of Common Stock are not
entitled to preemptive, subscription, cumulative voting or conversion rights,
and there are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are, and the shares of
Common Stock included in the Units offered hereby will be, when issued, fully
paid and non-assessable.
WARRANTS
Each Warrant entitles the registered holder to purchase one share of
Common Stock at an exercise price of $7.50 at any time from the Separation
Date until 5:00 P.M., New York City time, on , 2001. Commencing one year
from the date of this Prospectus, the Warrants are redeemable by the Company
on 30 days' written notice at a redemption price of $.05 per Warrant if the
"closing price" of the Common Stock for any 20 consecutive trading days
ending within five days of the notice of redemption averages in excess of
$11.50 per share. "Closing price" shall mean the closing bid price if listed
in the over-the-counter market on Nasdaq or otherwise or the closing sale
price if listed on the Nasdaq National Market or a national securities
exchange. All Warrants must be redeemed if any are redeemed.
The Warrants will be issued pursuant to a warrant agreement (the "Warrant
Agreement") among the Company, the Underwriter and Continental Stock Transfer
& Trust Company, as warrant agent, and will be evidenced by warrant
certificates in registered form. The Warrants provide for adjustment of the
exercise price and for a change in the number of shares issuable upon
exercise to protect holders against dilution in the event of a stock
dividend, stock split, combination or reclassification of the Common Stock or
upon issuance of shares of Common Stock at prices lower than the market price
of the Common Stock, with certain exceptions.
The exercise price of the Warrants was determined by negotiation between
the Company and the Underwriter and should not be construed to be predictive
of or to imply that any price increases in the Company's securities will
occur.
A Warrant may be exercised upon surrender of the Warrant certificate on or
prior to its expiration date (or earlier redemption date) at the offices of
Continental Stock Transfer & Trust Company, the warrant agent, with the form
of "Election to Purchase" on the reverse side of the Warrant certificate
completed and executed as indicated, accompanied by payment of the full
exercise price (by certified or bank check payable to the order of the
Company) for the number of shares with respect to which the Warrant is being
exercised. Shares issued upon exercise of Warrants and payment in accordance
with the terms of the Warrants will be fully paid and non-assessable.
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<PAGE>
The Warrants do not confer upon the Warrantholder any voting or other
rights of a stockholder of the Company. Upon notice to the Warrantholders,
the Company has the right to reduce the exercise price or extend the
expiration date of the Warrants.
UNIT PURCHASE OPTION
Upon the closing of this Offering, the Company has agreed to grant to the
Underwriter or its designees the Unit Purchase Option to purchase up to
300,000 Units. These Units will be identical to the Units offered hereby
except that the Warrants included in the Unit Purchase Option will not be
subject to redemption by the Company unless, at the time the Warrants are
called for redemption, the Unit Purchase Option has been exercised and the
underlying warrants are outstanding. The Unit Purchase Options cannot be
transferred, sold, assigned or hypothecated for two years, except to any
officer of the Underwriter or members of the selling group or their officers.
The Unit Purchase Option is exercisable during the three-year period
commencing two years from the date of this Prospectus at an exercise price of
$ per Unit (130% of the initial public offering price) subject to
adjustment in certain events to protect against dilution. The holders of the
Unit Purchase Option have certain demand and piggyback registration rights.
See "Underwriting."
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock. The Board of Directors has the authority to issue this Preferred Stock
in one or more series and to fix the number of shares and the relative
rights, conversion rights, voting rights and terms of redemption (including
sinking fund provisions) and liquidation preferences, without further vote or
action by the stockholders. If shares of Preferred Stock with voting rights
are issued, such issuance could affect the voting rights of the holders of
the Company's Common Stock by increasing the number of outstanding shares
having voting rights, and by the creation of class or series voting rights.
If the Board of Directors authorizes the issuance of shares of Preferred
Stock with conversion rights, the number of shares of Common Stock
outstanding could potentially be increased by up to the authorized amount.
Issuances of Preferred Stock could, under certain circumstances, have the
effect of delaying or preventing a change in control of the Company and may
adversely affect the rights of holders of Common Stock. Also, Preferred Stock
could have preferences over the Common Stock (and other series of preferred
stock) with respect to dividend and liquidation rights. The Company currently
has no plans to issue any Preferred Stock.
TRANSFER AGENT
Continental Stock Transfer & Trust Company, New York, New York, serves as
Transfer Agent for the shares of Common Stock and Warrant Agent for the
Warrants.
BUSINESS COMBINATION PROVISIONS
The Company is subject to the "business combination" statute of the
Delaware Law, an anti-takeover law enacted in 1988. In general, Section 203
of the Delaware Law prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an "interested stockholder," unless (a) prior to such date the board
of directors of the corporation approved either the "business combination" or
the transaction which resulted in the stockholder becoming an "interested
stockholder," (b) upon consummation of the transaction which resulted in the
stockholder becoming an "interested stockholder," the "interested
stockholder" owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (i) by
persons who are directors and also officers and (ii) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer, or (c) on or subsequent to such date the "business
combination" is approved by the board of directors and authorized at an
annual
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<PAGE>
or special meeting of stockholders by the affirmative vote of at least 66
2/3% of the outstanding voting stock which is not owned by the "interested
stockholder." A "business combination" includes mergers, stock or asset sales
and other transactions resulting in a financial benefit to the "interested
stockholders." An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more
of the corporation's voting stock. Although Section 203 permits the Company
to elect not to be governed by its provisions, the Company to date has not
made this election. Upon closing of this Offering and the registration of its
shares of Common Stock under the Exchange Act, the restrictions imposed by
such statute will apply to the Company and, as a result of the application of
Section 203, potential acquirers of the Company may be discouraged from
attempting to effect an acquisition transaction with the Company, thereby
possibly depriving holders of the Company's securities of certain
opportunities to sell or otherwise dispose of such securities at above-market
prices pursuant to such transactions.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
9,250,000 shares of Common Stock, of which 1,275,000 are Escrow Shares. Of
these shares, the 3,000,000 shares of Common Stock included in the Units
offered hereby and the 1,250,000 shares of Common Stock included in the
Selling Securityholder Units will be freely transferable without restriction
or further registration under the Securities Act, unless purchased by
affiliates of the Company as that term is defined in Rule 144 under the
Securities Act ("Rule 144") described below and except that the shares of
Common Stock included in the Selling Securityholder Units will be subject to
the contractual restrictions on resale set forth below. The 4,250,000 shares
of Common Stock currently outstanding (including the shares to be issued in
connection with the Acquisitions) and the 750,000 shares of Common Stock
included in the Units issuable upon conversion of the Debentures which are
held by executive officers (or persons who will become executive officers of
the Company following completion of the Acquisitions) are "restricted
securities" and may not be sold publicly unless they are registered under the
Securities Act or are sold pursuant to Rule 144 or another exemption from
registration. None of such shares will be eligible for sale in the public
market pursuant to Rule 144 until July 1997, subject to the escrow
conditions. In addition, holders of the outstanding shares of Common Stock
have agreed not to sell or otherwise dispose of any shares of Common Stock,
except to affiliates of such stockholder who agree to be bound by the terms
of the lock-up agreement, for a period of two years after the date hereof and
the Company's principal stockholders have agreed in the Stockholders'
Agreement not to sell more than one-third of the number of shares of Common
Stock held by such person on the date of the closing of this Offering during
the two year period from the closing date. See "Principal
Stockholders--Escrow Shares," "Certain Transactions--Stockholders' Agreement"
and "Underwriting."
In general under Rule 144, a person (or persons whose shares are
aggregated), including persons who may be deemed to be "affiliates" of the
Company as that term is defined under the Securities Act, is entitled to sell
within any three-month period a number of restricted shares beneficially
owned for at least two years that does not exceed the greater of (i) one
percent of the then outstanding shares of Common Stock or (ii) the average
weekly trading volume in the Common Stock during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain
requirements as to the manner of sale, notice and the availability of current
public information about the Company. However, a person who is not an
affiliate and has beneficially owned such shares for at least three years is
entitled to sell such shares without regard to the volume or other resale
requirements.
Pursuant to registration rights acquired in the Private Placement, the
Company has, concurrently with this Offering, registered for resale on behalf
of the Selling Securityholders, the Selling Securityholder Securities subject
to the contractual restriction that the Selling Securityholders agreed (i)
not to exercise the Selling Securityholder Warrants for a period of one year
for the closing of this Offering and (ii) the Selling Securityholders have
agreed not to sell, transfer or otherwise dispose publicly of the Selling
Securityholder Units for a period of 90 days from the completion of this
Offering.
The Company's existing stockholders (including those persons who will
become stockholders upon completion of the Acquisitions) have demand and
"piggyback" registration rights covering the securities included in the Units
issuable upon conversion of the Debentures, which registration rights are not
exercisable until two years from the date of the closing of this Offering. In
addition, the Underwriter also has demand and piggyback registration rights
with respect to the securities underlying the Unit Purchase Option. See
"Underwriting."
Prior to this Offering, there has been no market for any securities of the
Company, and no predictions can be made of the effect, if any, that sales of
Common Stock or the availability of Common Stock for sale will have on the
market price of such securities prevailing from time to time. Nevertheless,
sales of substantial amounts of Common Stock in the public market could
adversely affect prevailing market prices.
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<PAGE>
UNDERWRITING
Royce Investment Group, Inc., the Underwriter, has agreed, subject to the
terms and conditions of the Underwriting Agreement between the Company and
the Underwriter (the "Underwriting Agreement"), to purchase from the Company
the 3,000,000 Units offered hereby on a "firm commitment" basis, if any are
purchased.
The Underwriter has advised the Company that it proposes to offer the
Units to the public at the public offering price set forth on the cover page
of this Prospectus and to certain dealers who are members of the National
Association of Securities Dealers, Inc. (the "NASD"), at such price less a
concession of not in excess of $ per Unit, of which a sum not in excess
of $ may in turn be reallowed to other dealers who are members of the
NASD. After the commencement of the Offering, the public offering price, the
concession and the reallowance may be changed by the Underwriter.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay to the Underwriter a non-accountable expense allowance
equal to 3% of the gross proceeds derived from the sale of the Units offered
hereby, including any Units purchased pursuant to the Underwriter's
over-allotment option, $50,000 of which has been paid to date.
The Company has granted to the Underwriter an option exercisable during
the 45-day period commencing on the date of this Prospectus, to purchase from
the Company at the public offering price set forth on the cover page of this
Prospectus less underwriting discounts and commissions, up to 450,000
additional Units for the purpose of covering over-allotments, if any, made in
connection with the sale of the Units.
The Company's executive officers, directors and principal stockholders
have agreed not to sell, assign, transfer or otherwise dispose publicly of
4,250,000 of their shares of Common Stock for a period of two years from the
date of this Prospectus without the prior written consent of the Underwriter.
The Underwriter has the right to appoint an observer to be present at the
Company's Board of Directors meetings for a period of five years from the
completion of this Offering, although it has not yet selected any such
observer. Such observer may be a director, officer, partner, employee or
affiliate of the Underwriter.
The Company has agreed not to solicit Warrant exercises other than through
the Underwriter. Upon any exercise of the Warrants after the first
anniversary of the date of this Prospectus, the Company will pay the
Underwriter a fee of 5% of the aggregate Warrant exercise price, if (i) the
market price of the Company's Common Stock on the date the Warrants are
exercised is greater than the then exercise price of the Warrants, (ii) the
exercise of the Warrants was solicited by a member of the NASD, (iii) the
Warrants are not held in a discretionary account, (iv) disclosure of
compensation arrangements was made both at the time of the offering and at
the time of exercise of the Warrants and (v) the solicitation of exercise of
the Warrant was not in violation of Rule 10b-6 promulgated under the Exchange
Act. Rule 10b-6 may prohibit the Underwriter from engaging in any
market-making activities with regard to the Company's securities for the
period from nine business days (or such other applicable period as Rule 10b-6
may provide) prior to any solicitation by the Underwriter of the exercise of
Warrants until the later of the termination of such solicitation activity or
the termination (by waiver or otherwise) of any right that the Underwriter
may have to receive a fee for the exercise of Warrants following such
solicitation. As a result, the Underwriter may be unable to provide a market
for the Company's securities during certain periods while the Warrants are
exercisable.
The Company has agreed to sell to the Underwriter and its designees, for
nominal consideration, the Unit Purchase Option to purchase up to 300,000
Units, substantially identical to the Units offered hereby, except that the
Warrants included therein are not subject to redemption by the Company
unless, on the redemption date, the Unit Purchase Option has been exercised
and the underlying warrants are outstanding. The Unit Purchase Option will be
exercisable during the three-year period commencing two years from the date
of this Prospectus at an exercise price of $ per Unit, subject to
adjustment in certain events, and is not transferable for a period of two
years from the date of this Prospectus except
50
<PAGE>
to officers of the Underwriter or to members of the selling group. The
Company has agreed to register during the four-year period commencing one
year from the date of this Prospectus, on two separate occasions, the
securities issuable upon exercise thereof under the Securities Act, the
initial such registration to be at the Company's expense and the second at
the expense of the holders. The Company has also granted certain "piggyback"
registration rights to holders of the Unit Purchase Option.
The Underwriter has informed the Company that it does not intend to
confirm sales to any accounts over which it exercises discretionary
authority.
The Underwriter acted as placement agent for the Private Placement in
August 1996 for which it received a placement agent fee of $155,000 and a
non-accountable expense allowance of $37,500 and was issued warrants to
purchase $200,000 aggregate principal amount of Debentures at an exercise
price of $200,000, which warrants will be canceled upon the completion of
this Offering. In connection with the Private Placement, the Underwriter also
received a right of first refusal for future financings by the Company, which
right will terminate at the closing of this Offering.
In connection with the Private Placement, the Company entered into an
agreement with the Underwriter which provides that during the period from the
completion of the Private Placement until the fifth anniversary of the date
of this Prospectus, in the event the Underwriter originates a merger,
acquisition, joint venture, strategic introduction or other similar
transaction to which the Company is a party, the Underwriter will be entitled
to receive a finder's fee in consideration for origination of such
transaction. The fee is based on a percentage of the consideration paid in
the transaction ranging from 7% of the first $1,000,000 to 2-1/2% of any
consideration in excess of $9,000,000.
Prior to this Offering, there has been no public market for any of the
securities offered hereby. Accordingly, the offering price of the Units
offered hereby and the terms of the Warrants have been determined by
negotiation between the Company and the Underwriter and are not necessarily
related to the Company's asset value, net worth or other established criteria
of value. Factors considered in determining such prices and terms, in
addition to prevailing market conditions, include the history of and the
prospects for the industry in which the Company competes, the present state
of the Company's development and its future prospects, an assessment of the
Company's management, the Company's capital structure, the general condition
of the securities markets and such other factors as were deemed relevant.
51
<PAGE>
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Baker & McKenzie, New York, New York. Howard J. Tytel, a Director
of the Company and Executive Vice President and General Counsel of TSC, a
principal stockholder of the Company, is Of Counsel to Baker & McKenzie. See
"Management," "Principal Stockholders" and "Certain Transactions." Certain
legal matters related to this Offering will be passed upon for the
Underwriter by Bachner, Tally, Polevoy & Misher LLP, New York, New York.
EXPERTS
The financial statements of The Marquee Group, Inc. as of December 31,
1995 and for the period from July 11, 1995 (Inception) to December 31, 1995,
the financial statements of Sports Marketing & Television International, Inc.
as of December 31, 1995 and for the year then ended and the financial
statements of Athletes and Artists, Inc. as of December 31, 1995 and for the
year then ended, each appearing in this Prospectus and Registration
Statement, have been audited by Ernst & Young LLP, independent auditors, as
set forth in their reports thereon, appearing elsewhere herein and are
included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
The financial statements of Sports Marketing & Television International,
Inc. for the year ended December 31, 1994 and the financial statements of
Athletes and Artists, Inc. for the year ended December 31, 1994, each
appearing in this Prospectus and Registration Statement, have been audited by
Scott Gildea & Company, LLP, independent auditors, as set forth in their
reports thereon, appearing elsewhere herein, and are included in reliance
upon such reports given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company is not a reporting company under the Exchange Act. The Company
has filed a Registration Statement on Form SB-2 under the Securities Act with
the Commission in Washington, D.C. with respect to the Units offered hereby.
This Prospectus, which is part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and
the exhibits thereto. For further information with respect to the Company and
the Units offered hereby, reference is hereby made to the Registration
Statement and such exhibits, which may be inspected without charge at the
office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and at 500 West Madison (Suite
1400), Chicago, Illinois 60661. Copies of such material may also be obtained
at prescribed rates from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a
Web site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding issuers that file electronically
with the Commission. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
52
<PAGE>
THE MARQUEE GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
THE MARQUEE GROUP, INC.
Report of Independent Auditors ............................................................ F-2
Balance Sheets as of December 31, 1995 and June 30, 1996 (unaudited) ...................... F-3
Statements of Operations for the period from July 11, 1995 (inception)
to December 31, 1995 and the six months ended June 30, 1996 (unaudited) ................. F-4
Statements of Stockholders' Equity for period from July 11, 1995 (inception)
to December 31, 1995 and the six months ended June 30, 1996 (unaudited) ................. F-5
Statements of Cash Flows for the period from July 11, 1995 (inception)
to December 31, 1995 and the six months ended June 30, 1996 (unaudited) ................. F-6
Notes to Financial Statements ............................................................. F-7
SPORTS MARKETING & TELEVISION INTERNATIONAL, INC.
Report of Independent Auditors ............................................................ F-12
Report of Independent Auditors ............................................................ F-13
Balance Sheets as of December 31, 1995 and June 30, 1996 (unaudited) ...................... F-14
Statements of Operations and Retained Earnings (Accumulated Deficit) for the years ended
December 31, 1994 and 1995 and for the six months ended
June 30, 1995 and 1996 (unaudited) ....................................................... F-15
Statements of Cash Flows for the years ended December 31, 1994 and 1995 and for the six
months ended June 30, 1995 and 1996 (unaudited) .......................................... F-16
Notes to Financial Statements ............................................................. F-17
ATHLETES AND ARTISTS, INC.
Report of Independent Auditors ............................................................ F-20
Report of Independent Auditors ............................................................ F-21
Balance Sheets as of December 31, 1995 and June 30, 1996 (unaudited) ...................... F-22
Statements of Operations and Retained Earnings (Accumulated Deficit) for the years ended
December 31, 1994 and 1995 and for the six months ended
June 30, 1995 and 1996 (unaudited) ....................................................... F-23
Statements of Cash Flows for the years ended December 31, 1994 and 1995 and for the six
months ended June 30, 1995 and 1996 (unaudited) .......................................... F-24
Notes to Financial Statements ............................................................. F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of
The Marquee Group, Inc.
We have audited the accompanying balance sheet of The Marquee Group, Inc.
(the "Company") as of December 31, 1995, and the related statements of
operations and cash flows for the period from July 11, 1995 (Inception) to
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Marquee Group, Inc.
at December 31, 1995 and the results of its operations and its cash flows for
the period from July 11, 1995 (Inception) to December 31, 1995, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
July 23, 1996
F-2
<PAGE>
THE MARQUEE GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
----------------- ------------------------------------------------
PRO FORMA FOR
PRO FORMA FOR OFFERING AND
HISTORICAL PRIVATE PLACEMENT ACQUISITIONS
------------ ----------------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(NOTE 3) (NOTES 3 AND 4)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash ..................................... $19,980 $ 103,979 $1,388,594 $ 4,979,435
Accounts receivable ...................... -- -- -- 2,095,851
Other current assets ..................... -- -- -- 164,365
----------------- ------------ ----------------- ---------------
Total current assets .................... 19,980 103,979 1,388,594 7,239,651
Deferred financing costs .................. -- -- 250,000 --
Property and equipment, net ............... -- -- -- 141,678
Other assets .............................. -- -- -- 12,852
----------------- ------------ ----------------- ---------------
$19,980 $ 103,979 $1,638,594 $ 7,394,181
================= ============ ================= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses payable to related party
and accounts payable .................... $ -- $ 70,000 $ 70,000 $ 1,771,447
Loans payable to related parties ........ -- 465,385 -- --
Acquisition indebtedness --current
portion ................................. -- -- -- 394,000
Other current liabilities ................ -- -- -- 116,469
----------------- ------------ ----------------- ---------------
Total current liabilities ............... 535,385 70,000 2,281,916
Debentures --net .......................... -- -- 2,000,000 --
Loan payable to related party ............. -- 121,615 121,615 121,615
Acquisition indebtedness --selling
stockholders, net ........................ -- -- -- 1,576,000
Stockholders' equity:
Preferred stock, $.01 par value;
5,000,000 shares authorized, none issued -- -- -- --
Common stock, $.01 par value; 25,000,000
shares authorized, 1,938,462 (1995) and
1,988,462 (1996) shares issued and
outstanding (Note 4) .................... 19,385 19,885 19,885 92,500
Additional paid-in capital ............... 595 595 595 5,395,651
Accumulated deficit ...................... -- (573,501) (573,501) (2,073,501)
----------------- ------------ ----------------- ---------------
19,980 (553,021) (553,021) 3,414,650
----------------- ------------ ----------------- ---------------
$19,980 $ 103,979 $1,638,594 $ 7,394,181
================= ============ ================= ===============
</TABLE>
See accompanying notes.
F-3
<PAGE>
THE MARQUEE GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 SIX MONTHS ENDED JUNE 30, 1996
-------------------------------- ------------------------------
FOR THE PERIOD
FROM JULY 11,
1995
(INCEPTION) TO PRO FORMA FOR PRO FORMA FOR
DECEMBER 31, OFFERING AND OFFERING AND
1995 ACQUISITIONS HISTORICAL ACQUISITIONS
--------------- --------------- ------------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(NOTE 3) (NOTE 3)
<S> <C> <C> <C> <C>
Revenues .............................
Commissions and fee income .......... $ -- $10,110,379 $ 800,895 $7,329,177
Income from joint ventures .......... -- 231,448 - -
--------------- --------------- ------------- ---------------
-- 10,341,827 800,895 7,329,177
Operating expenses ................... -- 5,549,887 666,796 4,662,385
General and administrative expenses . -- 3,129,710 707,600 2,553,385
--------------- --------------- ------------- ---------------
Income (loss) from operations ....... -- 1,662,230 (573,501) 113,407
Interest income/(expense) ............ -- (88,457) - (47,572)
--------------- --------------- ------------- ---------------
Income (loss) before income taxes ... -- 1,573,773 (573,501) 65,835
Income tax provision ................. -- 784,000 - (34,313)
Net income (loss) .................... $ -- $ 789,773 $ (573,501) $ 31,522
--------------- --------------- ------------- ---------------
Net income (loss) per share .......... $ -- $ .10 $ (.17) $ --
=============== =============== ============= ===============
Weighted average common stock and
common stock equivalents outstanding 3,400,000 7,975,000 3,400,000 7,975,000
=============== =============== ============= ===============
</TABLE>
See accompanying notes.
F-4
<PAGE>
THE MARQUEE GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF COMMON ADDITIONAL ACCUMULATED
SHARES STOCK PAID-IN CAPITAL DEFICIT TOTAL
----------- ---------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock ............ 1,938,462 $ 19,385 $ 595 -- $ 19,980
----------- ---------- --------------- ------------- ------------
Balance -December 31, 1995 .......... 1,938,462 $ 19,385 $ 595 -- $ 19,980
Issuance of common stock ............ 50,000 500 -- -- 500
Net loss for the six months ended
June 30, 1996 ...................... -- -- -- (573,501) (573,501)
----------- ---------- --------------- ------------- ------------
Balance -June 30, 1996 (unaudited) . 1,988,462 $ 19,885 $ 595 $(573,501) $ (553,021)
=========== ========== =============== ============= ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
THE MARQUEE GROUP, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JULY 11, 1995
(INCEPTION) TO DECEMBER SIX MONTHS ENDED
31, 1995 JUNE 30, 1996
----------------------- ----------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ............................................ $ -- $ (573,501)
Adjustment to reconcile net loss to net cash used in
operating activities:
Non-cash compensation .............................. -- 500
Changes in operating assets and liabilities:
Accrued expenses payable to related party ......... -- 70,000
----------------------- ----------------
Net cash (used in) operating activities .......... -- (503,001)
FINANCING ACTIVITIES:
Proceeds from loans payable to related parties ..... -- 587,000
Proceeds from issuance of common stock .............. 19,980 --
----------------------- ----------------
Net cash provided by financing activities ........ 19,980 587,000
Net increase in cash ................................ 19,980 83,999
Cash at beginning of period ......................... -- 19,980
----------------------- ----------------
Cash at end of period ............................... $ 19,980 $ 103,979
======================= ================
</TABLE>
See accompanying notes.
F-6
<PAGE>
THE MARQUEE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX-MONTH PERIOD
ENDED JUNE 30, 1996 IS UNAUDITED)
NOTE 1 --ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS AND ORGANIZATION
The Marquee Group, Inc. (the "Company"), which began operations in 1996,
was organized in the State of Delaware on July 11, 1995 for the purpose of
providing comprehensive management, marketing, consulting and production
services to the sports and entertainment industries.
INCOME TAXES
The Company accounts for income taxes using the liability method.
STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). SFAS 123 requires compensation
expense to be recorded (i) using the new fair value method or (ii) using
existing accounting rules prescribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations with pro forma disclosure of what net income and earnings per
share would have been had the Company adopted the new fair value method. The
Company intends to continue to account for its stock based compensation plans
in accordance with the provisions of APB 25.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
EARNINGS PER SHARE
Earnings per share is based on the average number of shares of common
stock and common stock equivalents outstanding during the year. Shares of
common stock to be placed in escrow upon completion of the proposed public
offering described in Note 4, which are common stock equivalents, have been
excluded from the calculation of earnings per share. Common stock issued
within a one year period prior to the initial filing of a registration
statement relating to an initial public offering at amounts substantially
below the public offering price, principally the shares of common stock to be
issued upon the automatic conversion of the Debentures (see Note 3), is
considered outstanding for all periods presented. In addition, all shares
have been adjusted to give effect to the stock split discussed in Note 2. The
supplemental pro forma average number of shares of common stock and common
stock equivalents outstanding include, in addition to the average number of
shares of common stock outstanding as described above, the shares issuable
upon the completion of the proposed public offering.
INTERIM FINANCIAL INFORMATION
Financial information as of and for the six months ended June 30, 1996 is
unaudited. In the opinion of management, all adjustments necessary for a fair
presentation of the results for such period have been included; all
adjustments are of a normal and recurring nature. Interim results are not
necessarily indicative of results for a full year.
F-7
<PAGE>
THE MARQUEE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 --STOCKHOLDERS' EQUITY
COMMON STOCK
On July 17, 1996, the Board of Directors and stockholders of the Company
approved an increase in the authorized capitalization of the Company to
25,000,000 shares of common stock, par value $.01 per share, and 5,000,000
shares of preferred stock, par value $.01 per share. Furthermore, in August
1996 the Board of Directors and stockholders of the Company approved a stock
split whereby 999 shares of the 1,000 shares of common stock outstanding at
that time were split on the basis of approximately 1,940-for-1 and the
remaining one share of common stock outstanding at that time was split on the
basis of 50,000-for-1. All share information in the financial statements has
been restated to reflect such stock split.
NOTE 3 --PRIVATE PLACEMENT (UNAUDITED)
In August 1996, the Company issued debentures (the "Debentures"), in the
aggregate principal amount of $2,000,000, each Debenture consisting of
$50,000 principal amount of 6% Convertible Debentures due June 30, 1999. The
Debentures shall, upon completion of the initial public offering of the
Company's securities (the "IPO"), be automatically converted into Units (see
Note 4) identical in all respects to those offered in the IPO at a rate of
one Unit for each $1.00 principal amount of Debentures plus, if applicable,
accrued interest.
Stockholders of the Company and stockholders of SMTI and A&A (the
"Stockholder Purchasers") (see Note 4) purchased an aggregate of $750,000
principal amount of Debentures, of which $445,103 was in exchange for
existing indebtedness of the Company to such stockholders ($340,385 was
outstanding at June 30, 1996). In addition, the Company repaid $125,000 to
one of the stockholders from the proceeds of the private placement.
In connection with the issuance of $750,000 principal amount of the
Debentures to the Stockholder Purchasers, the Company will record a non-cash
compensation charge estimated to be $1,500,000 which represents the
difference between the fair value of the Units issuable to the Stockholder
Purchasers upon the automatic conversion of the Debentures, as estimated by
management, and the principal amount of such indebtedness.
The pro forma balance sheet at June 30, 1996, as adjusted for the private
placement, gives effect to the following:
o The $2,000,000 private placement;
o Deferred financing costs of $250,000, comprised of fees and expenses in
connection with the private placement (to be amortized over the period
that the debentures are outstanding); and
o The exchange of stockholder loans of $340,385 (from the Stockholder
Purchasers) for Debentures and the repayment of $125,000 to a
stockholder of the Company from the proceeds of the private placement.
NOTE 4 --PROPOSED PUBLIC OFFERING AND ACQUISITIONS (UNAUDITED)
In June 1996, the Company entered into a letter of intent for the initial
public offering of 3,000,000 units (the "IPO Units"), each unit consisting of
one share of common stock and one redeemable warrant, at an assumed initial
public offering price of $5.00 per IPO Unit, less applicable discounts and
commissions. Each warrant will entitle the holder to purchase one share of
common stock at an exercise price of $7.50, subject to adjustment, for a
period up to five years from the date the common stock and warrants are
separately transferable. The warrants are redeemable by the Company under
certain circumstances at a redemption price of $.05 per warrant.
F-8
<PAGE>
THE MARQUEE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 --PROPOSED PUBLIC OFFERING AND ACQUISITIONS (UNAUDITED) (Continued)
The Company has granted the underwriter of the initial public offering an
option to purchase up to an additional 450,000 IPO Units at the offering
price, solely to cover over-allotment in the sale of the IPO Units.
The Company has also agreed to grant to the underwriter or its designees
an option (the "Unit Purchase Option") to purchase up to 300,000 units. The
units purchasable upon exercise of the Unit Purchase Option are identical to
the units described above, except that the underlying warrants are redeemable
only by the Company under limited circumstances. The Unit Purchase Option is
exercisable during a three-year period commencing two years from the date of
the public offering at an exercise price of 130% of the initial public
offering price, subject to adjustment in certain events.
The Company has also entered into an agreement with the underwriter
whereby the underwriter will be paid a fee in connection with various types
of financial transactions entered into by the Company for a period of five
years from the date of the public offering.
Pursuant to an agreement with the underwriter, certain of the Company's
stockholders and the stockholders of SMTI and A&A have placed or have agreed
to place an aggregate of 1,275,000 of their shares of common stock in escrow.
These shares will not be assignable or transferable (but may be voted) until
such time as they are released from escrow based upon the Company meeting
certain annual earnings levels or the common stock attaining certain price
levels. All reserved shares remaining in escrow on March 31, 2000 will be
forfeited and contributed to the Company's capital. In the event the Company
attains any of the earnings thresholds or stock prices providing for the
release of the escrow shares to the stockholders, the Company will recognize
compensation expense at such time based on the fair market value of the
shares.
On March 21, 1996 the Company entered into agreements with Sports
Marketing & Television International, Inc. ("SMTI") and Athletes and Artists,
Inc. ("A&A"), pursuant to which the Company agreed to acquire by merger SMTI
and A&A concurrently with the completion of the IPO. The SMTI stockholders
will receive cash of $6,500,000 from the offering, an additional $1,500,000
payable over five years and 1,292,307 shares of the Company's common stock.
The A&A stockholders will receive cash of $2,500,000 from the offering, an
additional $1,000,000 payable over five years and 969,231 shares of the
Company's common stock.
The acquisition by merger of each of SMTI and A&A will be accounted for as
a consolidation at historical cost due to the significance of the equity
interests in the Company to be held by the stockholders of these companies.
Accordingly, the acquired assets and liabilities of SMTI and A&A will be
recorded at their historical amounts. The capital stock of SMTI and A&A will
be included in additional paid-in capital. The cash to be paid to the SMTI
and A&A stockholders will be recorded as a reduction to additional paid-in
capital.
The pro forma balance sheet at June 30, 1996 as adjusted for the proposed
initial public offering, conversion of the Debentures and acquisitions gives
effect to the following:
o The receipt of $12,650,000 (net of expenses of $2,350,000) from the
sale of 3,000,000 IPO Units at an assumed initial public offering price
of $5 per IPO Unit;
o The June 30, 1996 assets and liabilities and equity of SMTI and A&A at
their historical amounts as follows:
F-9
<PAGE>
THE MARQUEE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 --PROPOSED PUBLIC OFFERING AND ACQUISITIONS (UNAUDITED) (Continued)
<TABLE>
<CAPTION>
SMTI A&A
------------- -----------
<S> <C> <C>
Current assets ....... $ 2,067,000 $ 469,000
Non current assets .. 76,000 79,000
------------- -----------
$ 2,143,000 $ 548,000
============= ===========
Current liabilities . $ 1,382,000 $ 436,000
Stockholders' equity 761,000 112,000
------------- -----------
$ 2,143,000 $ 548,000
============= ===========
</TABLE>
o The payments of $6,500,000 and $2,500,000 to the stockholders of SMTI
and A&A, respectively, and the indebtedness of $1,500,000 and
$1,000,000 (including imputed interest of $530,000) to such
stockholders in connection with the acquisitions;
o The issuance of 2,000,000 Units, each consisting of one share of common
stock and one warrant, upon the conversion of the Debentures, the
write-off of $250,000 of deferred financing costs and the estimated
non-cash compensation charge to operations of $1,500,000; and
o The payment of an S Corporation distribution ($335,000 at June 30,
1996) to the SMTI stockholders representing 40% of the taxable earnings
of SMTI prior to the proposed initial public offering.
The pro forma statements of operations for the year ended December 31,
1995 and for the six months ended June 30, 1996 as adjusted for the proposed
public offering and acquisitions include adjustments for the following
transactions as if they had each occurred on January 1, 1995.
o The merger of Marquee's results with the revenues and expenses of SMTI
and A&A for the year ended December 31, 1995 and for the six months
ended June 30, 1996
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996
----------------------------
SMTI A&A
------------- -------------
<S> <C> <C>
Revenues ....................... $ 4,735,000 $ 1,793,000
Costs and expenses ............. (3,917,000) (1,919,000)
------------- -------------
Income (loss) before taxes .... 818,000 (126,000)
Income tax (provision) benefit (94,000) 58,000
------------- -------------
Net income (loss) .............. $ 724,000 $ (68,000)
============= =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------
SMTI A&A
<S> <C> <C>
Revenues ............... $ 6,495,000 $ 3,846,000
Costs and expenses .... (6,402,000) (3,770,000)
------------- -------------
Income before taxes ... 93,000 76,000
Income tax (provision) (9,000) (77,000)
------------- -------------
Net income (loss) ...... $ 84,000 $ (1,000)
============= =============
</TABLE>
o The terms of new employment contracts with key executives of SMTI and
A&A which provide for salaries which are $1,370,000 less than their
historical salaries for the year ended December 31, 1995 and the
reduction of benefit expenses of $140,000 for the termination of the
employee benefit plans. Pursuant to the acquisition agreements, the key
executives of SMTI and A&A have reduced their salaries and committed to
terminate the employee benefit plans for the six-month period ended
June 30, 1996 (therefore no pro forma adjustment is required); and
F-10
<PAGE>
THE MARQUEE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 --PROPOSED PUBLIC OFFERING AND ACQUISITIONS (UNAUDITED) (Continued)
o Upon the proposed public offering, the status of SMTI as an S
Corporation will be terminated and accordingly, SMTI will be subject
to federal and local income taxes. The pro forma statement of
operations reflect income taxes based upon the income of SMTI as if
SMTI had not been an S Corporation.
NOTE 5 --STOCK OPTION PLAN
The Company's Board of Directors has adopted and the stockholders have
approved the Company's 1996 Stock Option Plan (the "Plan"). The Plan provides
for the grant, at the discretion of the Board of Directors, of (i) options
that are intended to qualify as incentive stock options ("ISOs") within the
meaning of Section 422A of the Internal Revenue Code to certain employees and
consultants and (ii) options not intended to so qualify ("NQSOs") to
employees and consultants. The total number of shares of common stock for
which options may be granted under the Plan is 500,000 shares. No options
have been granted under the Plan.
The Plan is to be administered by the Board of Directors or a committee
appointed by the Board of Directors, which will determine the terms of the
options, including the exercise price, the number of shares subject to the
options and the terms and conditions of exercise.
In connection with the stock option plan, the Company has reserved 500,000
shares of common stock for future issuance.
NOTE 6 --RELATED PARTY TRANSACTIONS
At June 30, 1996, the Company has loans payable of $465,385 to
stockholders and stockholders of SMTI which are due on demand with interest
at 12% per annum (see Note 3) and $121,615 to a stockholder which is due on
January 1, 1998 with interest at 12% per annum, as well as accrued rent and
other expenses of $70,000 payable to The Sillerman Companies, Inc.
NOTE 7 --COMMITMENTS
During March 1996, the Company entered into a five-year employment
agreement with a key executive that provides for an annual base salary plus
bonus aggregating $475,000 per year.
During May 1996, the Company entered into a three-year employment
agreement with a key executive that provides for an annual base salary
ranging from $250,000 to $350,000 per year. Upon entering into the employment
agreement, the Company issued one share of common stock to this employee.
Furthermore, the Company agreed that prior to the proposed public offering
(see Note 4), the employee's one share would be converted into 50,000 shares
of common stock, contingent upon the employee remaining with the Company for
fifteen months subsequent to the public offering. The Company will recognize
non-cash compensation expense of approximately $118,750 over the vesting
period.
During August 1996, the Company entered into a six-year consulting
agreement with Sillerman Communications Management Corporation, which is
controlled by Robert F.X. Sillerman, the Chairman of the Company and the
controlling stockholder of The Sillerman Companies, Inc., a principal
stockholder of the Company, that provides for a monthly fee of $30,000
commencing nine months from the closing of the proposed public offering. The
monthly fee shall be increased annually by the percentage increase in the
consumer price index.
F-11
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of
Sports Marketing & Television International, Inc.
We have audited the accompanying balance sheet of Sports Marketing &
Television International, Inc. (the "Company") as of December 31, 1995 and
the related statement of operations and retained earnings (accumulated
deficit) and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sports Marketing &
Television International, Inc. at December 31, 1995 and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
April 3, 1996
F-12
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of
Sports Marketing & Television International, Inc.
We have audited the accompanying statements of operations and retained
earnings (accumulated deficit) and cash flows of Sports Marketing &
Television International, Inc. (the "Company") for the year ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations, changes in retained
earnings (accumulated deficit) and cash flows of Sports Marketing &
Television International, Inc. for the year ended December 31, 1994 in
conformity with generally accepted accounting principles.
SCOTT GILDEA & COMPANY, LLP
New York, New York
January 24, 1996
F-13
<PAGE>
SPORTS MARKETING & TELEVISION INTERNATIONAL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
-------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash ............................................ $ -- $ 253,920
Accounts receivable ............................. 391,352 1,740,091
Due from Celebrity Golf Championship, LLC ...... 186,500 --
Due from stockholders ........................... 56,909 56,909
Employee loan receivable ........................ 5,000 5,000
Prepaid expenses ................................ 17,987 11,522
-------------- ------------
Total current assets ......................... 657,748 2,067,442
Property and equipment, net ...................... 39,674 74,563
Deposits ......................................... 985 985
-------------- ------------
$698,407 $2,142,990
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft .................................. $ 438,651 $ --
Accounts payable and accrued liabilities ....... 141,044 1,209,499
Accrued pension payable ......................... 76,298 73,256
Income taxes payable ............................ 5,637 99,637
-------------- ------------
Total current liabilities .................... 661,630 1,382,392
Stockholders' equity:
Common stock, no par value, 5,000 shares
authorized, 4,000 shares issued and outstanding 1,000 1,000
Retained earnings ................................ 35,777 759,598
-------------- ------------
36,777 760,598
-------------- ------------
$698,407 $2,142,990
============== ============
</TABLE>
See accompanying notes.
F-14
<PAGE>
SPORTS MARKETING & TELEVISION INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------- --------------------------
1994 1995 1995 1996
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Fee income ..................................... $6,047,789 $6,263,892 $3,143,157 $4,734,836
Income from joint venture companies ............ 262,715 231,448 -- --
------------ ------------ ------------ ------------
6,310,504 6,495,340 3,143,157 4,734,836
Operating expenses .............................. 4,322,942 4,080,477 2,169,507 3,229,525
General and administrative expenses ............. 1,101,451 911,393 361,468 479,928
------------ ------------ ------------ ------------
Income from operations before officers' salaries 886,111 1,503,470 612,182 1,025,383
Officers' salaries .............................. 988,533 1,420,000 710,000 212,500
Interest income, net ............................ 8,035 9,972 5,543 4,938
------------ ------------ ------------ ------------
Income (loss) before income taxes ............... (94,387) 93,442 (92,275) 817,821
Income tax (provision) benefit .................. (250) (9,000) 8,000 (94,000)
------------ ------------ ------------ ------------
Net income (loss) ............................... (94,637) 84,442 (84,275) 723,821
Retained earnings (accumulated deficit) at
beginning of period ............................ 45,972 (48,665) (48,665) 35,777
------------ ------------ ------------ ------------
Retained earnings (accumulated deficit) at end
of period ...................................... $ (48,665) $ 35,777 $ (132,940) $ 759,598
============ ============ ============ ============
</TABLE>
See accompanying notes.
F-15
<PAGE>
SPORTS MARKETING & TELEVISION INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------- ----------------------------
1994 1995 1995 1996
------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ............................ $ (94,637) $ 84,442 $ (84,275) $ 723,821
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization .............. 13,300 31,667 7,918 9,411
Equity in earnings of joint venture
companies ................................. (262,715) (231,448) -- --
Changes in operating assets and liabilities:
Accounts receivable ......................... (5,490) (188,858) (1,405,062) (1,348,738)
Due from Celebrity Golf Championship, LLC . -- -- -- 186,500
Prepaid expenses ............................ 10,900 (9,832) -- 6,464
Accounts payable and accrued liabilities ... (185,303) 63,029 1,826,885 1,068,455
Due to Celebrity Golf Championship, LLC .... -- -- 150,000 --
Deferred income ............................. (31,250) -- -- --
Accrued pension payable ..................... 2,007 (4,088) -- (3,042)
Income taxes payable ........................ -- 5,637 (8,000) 94,000
------------ ------------ ------------- -------------
Net cash provided by (used in) operating
activities .................................. (553,188) (249,451) 487,466 736,871
INVESTING ACTIVITIES:
Distribution received from joint venture
companies ................................... 263,417 53,338 3,038 -
Purchase of property and equipment ........... (37,281) (25,448) (20,447) (44,300)
------------ ------------ ------------- -------------
Net cash (used in) provided by
investing activities ........................ 226,136 27,890 (17,409) (44,300)
Net increase (decrease) in cash .............. (327,052) (221,561) 470,057 692,571
(Bank overdraft) cash at beginning of period 109,962 (217,090) (217,090) (438,651)
------------ ------------ ------------- -------------
Cash (bank overdraft) at end of period ...... $(217,090) $(438,651) $ 252,967 $ 253,920
============ ============ ============= =============
</TABLE>
See accompanying notes.
F-16
<PAGE>
SPORTS MARKETING & TELEVISION INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX-MONTH PERIODS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 1 --SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
Sports Marketing & Television International, Inc. ("SMTI" or the
"Company") was organized in the State of Connecticut on January 1, 1984. The
Company provides marketing, production and consulting services in the sport
and entertainment industry.
REVENUE RECOGNITION
The Company recognizes income from marketing and consulting services,
principally related to production and other promotional services. Fee revenue
from production services (television, broadcast and video) is recognized when
the program is available for broadcast. Licensing, sponsorship and
merchandise revenues are recognized for guaranteed amounts when contractual
obligations thereunder are met (subsequent royalties are recorded when
received). Fee revenue from advertising services is recognized in the month
the advertisement is broadcast or printed.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of furniture,
fixtures and office equipment is computed using an accelerated method over
estimated useful lives ranging from five to seven years. Leasehold
improvements are amortized using the straight-line method over the life of
the lease.
INCOME TAXES
The Company has elected to be taxed as an S Corporation. Accordingly, all
items of income, losses and credits are reported by the stockholders on their
respective personal income tax returns. Accordingly, no provision for federal
income taxes has been made in the accompanying financial statements. A
provision for state income taxes has been provided for the jurisdiction in
which S Corporation status is not recognized.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INTERIM FINANCIAL INFORMATION
The unaudited interim information as of June 30, 1996 and for the six
months ended June 30, 1995 and 1996 has been prepared on the same basis as
the annual financial statements and, in the opinion of the Company's
management, reflects normal recurring adjustments necessary for a fair
presentation of the information for the periods presented. Interim results
are not necessarily indicative of results for a full year.
F-17
<PAGE>
SPORTS MARKETING & TELEVISION INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 --PROPERTY AND EQUIPMENT
The major components of property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
----------------- ---------------
(UNAUDITED)
<S> <C> <C>
Furniture, fixtures and office equipment . $ 169,681 $ 213,981
Leasehold improvements .................... 15,000 15,000
----------------- ---------------
184,681 228,981
Accumulated depreciation and amortization (145,007) (154,418)
----------------- ---------------
$ 39,674 $ 74,563
================= ===============
</TABLE>
NOTE 3 --LOANS TO STOCKHOLDERS
At December 31, 1995 and June 30, 1996, SMTI has loans receivable from the
stockholders of SMTI in the aggregate amount of $56,909. The loans are due on
demand and are noninterest-bearing.
NOTE 4 --PENSION PLAN
The Company has a noncontributory target benefit plan. The plan is
administered as a defined contribution plan in that each participant is
limited to a defined contribution amount annually. The contributions are
calculated on a target basis for a retirement benefit in a manner similar to
a defined benefit plan. Pension expense was $84,474, $80,386 and $28,750 for
the years ended December 31, 1994 and 1995 and the six month period ended
June 30, 1995, respectively. There was no pension expense for the six months
ended June 30, 1996. In accordance with the acquisition agreement (see Note
7), it is the Company's intention to terminate such noncontributory target
benefit plan.
NOTE 5 --COMMITMENTS
SMTI rents office space on a month-to-month basis. Total office rent
expense was $65,300, $61,000, $27,450 and $ 28,750 for the years ended
December 31, 1994 and 1995 and the six-month periods ended June 30, 1995 and
1996, respectively. The Company also rents automobiles under various
noncancellable personal property leases. All leases are accounted for as
operating leases. The aggregate minimum rental commitment for these leases
subsequent to December 31, 1995 is $22,194.
NOTE 6 --INVESTMENT IN JOINT VENTURE COMPANIES
During 1990, SMTI invested $10,000 for a 16.667% interest in Celebrity
Golf Associates ("CGA"), a general partnership which produces celebrity golf
events. The Company recorded its investment in the partnership on the equity
method and, accordingly, the Company's investment was increased or decreased
by its proportionate share of the partnership's income or losses,
respectively.
On July 6, 1995, SMTI and NBC, another general partner, withdrew from CGA.
In connection with the withdrawal agreement, NBC became the exclusive and
sole owner of the Celebrity Golf Championship Tournament. NBC and SMTI were
released from all liability of the original partnership effective January 1,
1995. As such, SMTI's investment in the partnership was liquidated.
Subsequent to the withdrawal, effective as of January 1, 1995, NBC and
SMTI formed a limited liability corporation, Celebrity Golf Championship, LLC
("CGC"). The purpose of the CGC is to conduct the annual golfing tournament
currently known as The Celebrity Golf Championship. Earnings are allocated to
each party based on specified profit/loss allocation percentages in the LLC
agreement. All profits from each event will be distributed.
F-18
<PAGE>
SPORTS MARKETING & TELEVISION INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 --INVESTMENT IN JOINT VENTURE COMPANIES (Continued)
Condensed financial information of the CGC and CGA is as follows:
<TABLE>
<CAPTION>
CGC
------------------------------------
DECEMBER 31, 1995
------------------------------------
<S> <C>
Due from NBC Sports Ventures $ 186,500
------------------------------------
Due to SMTI .................. $ (186,500)
====================================
</TABLE>
<TABLE>
<CAPTION>
CGA CGC
----------------- -----------------
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1995
----------------- -----------------
<S> <C> <C>
Revenues ..................... $ 4,863,068 $ 2,975,600
Costs and expenses ........... (3,153,120) (2,028,300)
----------------- -----------------
Net income ................... $ 1,709,948 $ 947,300
================= =================
</TABLE>
The celebrity golf events are held in July and, therefore, results of CGA
and CGC for the six-month periods ended June 30, 1995 and 1996 are not
significant.
NOTE 7 --OTHER MATTERS
One client accounted for 78% and 75% of the Company's revenue for the
years ended December 31, 1994 and 1995, respectively.
On March 21, 1996, the stockholders of the Company agreed to be acquired
by The Marquee Group, Inc., ("Marquee"), subject to, among other matters, the
completion of an initial public offering of Marquee's securities.
F-19
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of
Athletes and Artists, Inc.
We have audited the accompanying balance sheet of Athletes and Artists,
Inc. (the "Company") as of December 31, 1995 and the related statement of
operations and retained earnings and cash flows for the year then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Athletes and Artists,
Inc. at December 31, 1995 and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted
accounting principles.
Ernst & Young LLP
New York, New York
April 3, 1996
F-20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of
Athletes and Artists, Inc.
We have audited the accompanying statements of operations and retained
earnings and cash flows of Athletes and Artists, Inc. (the "Company") for the
year ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations, changes in retained
earnings and cash flows of Athletes and Artists, Inc. for the year ended
December 31, 1994 in conformity with generally accepted accounting
principles.
Scott Gildea & Company, LLP
New York, New York
March 7, 1996
F-21
<PAGE>
ATHLETES AND ARTISTS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
-------------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash ............................................. $ -- $ 21,921
Accounts receivable .............................. 866,452 355,760
Advances ......................................... 62,948 52,434
Prepaid expenses ................................. 56,691 38,500
Prepaid taxes .................................... 8,280 --
-------------- -----------
Total current assets .............................. 994,371 468,615
Property and equipment, net ......................... 47,950 67,115
Deposits ............................................ 11,867 11,867
-------------- -----------
$1,054,188 $547,597
============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft ................................... $ 272,429 $ --
Accounts payable and accrued liabilities ......... 208,821 125,118
Income taxes payable ............................. -- 140,128
Accrued profit sharing expense ................... 53,809 53,809
Due to stockholders .............................. 1,377 617
Deferred income taxes payable .................... 337,881 115,852
-------------- -----------
Total current liabilities ......................... 874,317 435,524
Stockholders' equity:
Common stock, $1 par value, 20,000 shares
authorized, 15 shares issued and outstanding ..... 15 15
Retained earnings ................................... 179,856 112,058
-------------- -----------
Total stockholders' equity .......................... 179,871 112,073
-------------- -----------
Total liabilities and stockholders' equity ......... $1,054,188 $547,597
============== ===========
</TABLE>
See accompanying notes.
F-22
<PAGE>
ATHLETES AND ARTISTS, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------- --------------------------
1994 1995 1995 1996
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues ................................ $3,291,077 $3,846,487 $1,701,110 $1,793,446
Operating expenses ...................... 1,236,562 1,469,410 632,460 766,064
General and administrative expenses .... 2,060,918 2,308,317 1,020,129 1,153,357
------------ ------------ ------------ ------------
Operating (loss) income ................. (6,403) 68,760 48,521 (125,975)
Interest and dividend income ............ 590 7,571 -- 490
------------ ------------ ------------ ------------
(Loss) income before income taxes ...... (5,813) 76,331 48,521 (125,485)
Income tax benefit (provision) .......... (28,203) (77,172) (49,006) 57,687
------------ ------------ ------------ ------------
Net loss ................................ (34,016) (841) (485) (67,798)
Retained earnings --beginning of period 214,713 180,697 180,697 179,856
------------ ------------ ------------ ------------
Retained earnings --end of period ...... $ 180,697 $ 179,856 $ 180,212 $ 112,058
============ ============ ============ ============
</TABLE>
See accompanying notes.
F-23
<PAGE>
ATHLETES AND ARTISTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
-------------------------- ------------------------
1994 1995 1995 1996
------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss ..................................... $ (34,016) $ (841) $ (485) $ (67,798)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization ............... 11,094 12,719 6,400 6,400
Deferred income taxes payable ............... 15,286 77,172 49,003 (222,029)
------------ ------------ ----------- -----------
Changes in operating assets and liabilities:
Accounts receivable ....................... (15,386) (288,730) 402,588 510,692
Advances .................................. (9,474) (42,160) 861 10,514
Prepaid taxes ............................. 1,591 159 160 8,280
Prepaid expenses .......................... -- (56,691) (12,843) 18,191
Security deposits ......................... (496) -- -- --
Accounts payable and accrued liabilities .. (18,290) 182,241 56,882 (83,703)
Income taxes payable ...................... 160 (160) (160) 140,128
Accrued profit sharing expense ............ (53,002) 811 (26,100) --
Due to stockholders ....................... -- 1,377 -- (760)
------------ ------------ ----------- -----------
Net cash provided by (used in) operating
activities .................................. (102,533) (114,103) 476,306 319,915
INVESTING ACTIVITIES:
Due from stockholders ........................ 150,587 12,287 (110,678) --
Purchases of property and equipment ......... (11,056) (18,441) (14,025) (25,565)
------------ ------------ ----------- -----------
Net cash (used in) investing activities ..... (139,531) (6,154) (124,703) (25,565)
------------ ------------ ----------- -----------
Net increase (decrease) in cash .............. 36,998 (120,257) 351,603 294,350
Bank overdraft beginning of period ........... (189,170) (152,172) (152,172) (272,429)
------------ ------------ ----------- -----------
Cash (bank overdraft) end of period ......... $(152,172) $(272,429) $ 199,431 $ 21,921
============ ============ =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes ................................ $ 17,416 $ 3,662 $ 2,000 $ 15,934
</TABLE>
See accompanying notes.
F-24
<PAGE>
ATHLETES AND ARTISTS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE
SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
NOTE 1 --SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
Athletes and Artists, Inc. (the "Company") was organized in the State of
New York on June 27, 1977, and derives substantially all of its income from
commissions as a sports and entertainment talent agency.
REVENUE RECOGNITION
Commissions are recorded as income when they become due to the Company
under terms of the Company's representation agreements with its clients.
Generally, commissions are payable by clients upon their receipt of payments
for performance of services or upon the delivery or use of material created
by them. Commissions on profit or gross receipt participations are recorded
upon determination of the amounts.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated on a
straight-line basis over their estimated useful lives. Leasehold improvements
are amortized over the shorter of their estimated useful lives or the
remaining lease term.
INCOME TAXES
The Company accounts for income taxes using the liability method.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INTERIM FINANCIAL INFORMATION
The unaudited interim information as of June 30, 1996 and for the six
months ended June 30, 1995 and 1996 has been prepared on the same basis as
the annual financial statements and, in the opinion of the Company's
management, reflects normal recurring adjustments necessary for a fair
presentation of the information for the periods presented. Interim results
are not necessarily indicative of results for a full year.
F-25
<PAGE>
ATHLETES AND ARTISTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 --PROPERTY AND EQUIPMENT
The major components of property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
----------------- ---------------
(UNAUDITED)
<S> <C> <C>
Furniture and fixtures .................... $ 191,339 $ 191,339
Leasehold improvements .................... 8,776 8,776
Vehicles .................................. 36,230 61,795
----------------- ---------------
236,345 261,910
Accumulated depreciation and amortization (188,395) (194,795)
----------------- ---------------
$ 47,950 $ 67,115
================= ===============
</TABLE>
NOTE 3 --INCOME TAXES
The Company has deferred tax assets of $110,509 and $58,179 and deferred
tax liabilities of $436,605 and $174,031 at December 31, 1995 and June 30,
1996, respectively. For federal and state income tax purposes, the Company
had net operating loss carryforwards of approximately $34,598 at December 31,
1995 which expire in the years 2006 to 2008. The benefit of the net operating
loss carryforwards has been offset in full by a valuation allowance of
$11,785.
Deferred income tax assets and liabilities result from temporary
differences which are differences between the income tax basis of assets and
liabilities and their reported amounts in the financial statements. The
Company's temporary differences result solely from the use of the cash basis
of accounting for income tax purposes.
The effective tax rate on pre-tax income for the years ended December 31,
1994 and 1995 and the six months ended June 30, 1995 and 1996 differs from
the statutory rate primarily due to certain non-deductible expenses and the
effect of state and local income taxes.
NOTE 4 --RELATED PARTY TRANSACTIONS
At December 31, 1995 and June 30, 1996 the Company had loans payable to
its stockholders in the aggregate amount of $1,377 and $617, respectively.
The loans are due on demand and are non-interest bearing.
NOTE 5 --PENSION PLAN
The Company has a defined contribution pension plan that covers full-time
employees over 21 years old having at least one year of service.
Contributions to the plan are based on wages of eligible employees. Pension
expense was $52,998, $53,811 and $26,898 for the years ended December 31,
1994 and 1995 and for the six months ended June 30, 1995, respectively. There
was no pension expense for the six months ended June 30, 1996. In accordance
with the acquisition agreement (see Note 7), it is the Company's intention to
terminate such defined contribution pension plan.
F-26
<PAGE>
ATHLETES AND ARTISTS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 --COMMITMENTS AND CONTINGENCIES
The Company has lease commitments for office and equipment rentals which
expire through 2003. These operating leases provide for basic annual rents
plus escalation charges. Rent expense amounted to $135,000, $138,000, $55,000
and $60,000 for the years ended December 31, 1994 and 1995 and for the six
months ended June 30, 1995 and 1996, respectively. At June 30, 1996, the
future minimum lease commitments excluding escalation charges, are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1997 ........ $ 135,000
1998 ........ 135,000
1999 ........ 135,000
2000 ........ 135,000
2001 ........ 135,000
Thereafter . 375,000
-----------
$1,050,000
===========
</TABLE>
The Company is subject to certain legal proceedings and claims which have
arisen in the ordinary course of its business and have not been finally
adjudicated. In the opinion of management, settlement of these actions, when
ultimately concluded, will not have a material adverse effect on the results
of operations, cash flows or the financial condition of the Company.
NOTE 7 --OTHER MATTERS
On March 21, 1996, the stockholders of the Company agreed to be acquire by
The Marquee Group, Inc. ("Marquee"), subject to, among other matters, the
completion of an initial public offering of Marquee's securities.
F-27
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OFFERED HEREBY BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, OR SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 7
Use of Proceeds ............................ 13
Dividend Policy ............................ 13
Capitalization ............................. 14
Dilution ................................... 16
Unaudited Pro Forma Condensed Combined
Financial Statements ...................... 17
Selected Financial Data .................... 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................ 22
Business ................................... 25
Management ................................. 32
Certain Transactions ....................... 38
Principal Stockholders ..................... 43
Concurrent Offering ........................ 46
Description of Securities .................. 47
Shares Eligible for Future Sale ............ 50
Underwriting ............................... 51
Legal Matters .............................. 53
Experts .................................... 53
Additional Information ..................... 53
Index to Financial Statements .............. F-1
</TABLE>
- -----------------------------------------------------------------------------
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS AN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
THE MARQUEE
GROUP, INC.
3,000,000 UNITS
CONSISTING OF 3,000,000 SHARES OF
COMMON STOCK AND 3,000,000 WARRANTS
----------------
PROSPECTUS
----------------
ROYCE INVESTMENT
GROUP, INC.
, 1996
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to theses securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy not shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
[ALTERNATE PAGE]
SUBJECT TO COMPLETION --DATED SEPTEMBER 3, 1996
PROSPECTUS
THE MARQUEE GROUP, INC.
1,250,000 UNITS CONSISTING OF 1,250,000 SHARES OF COMMON STOCK
AND 1,250,000 WARRANTS AND 1,250,000 SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF THE WARRANTS
This Prospectus relates to 1,250,000 Units (the "Selling Securityholder
Units" or the "Units") of The Marquee Group, Inc., a Delaware corporation
(the "Company"), held by three holders, each Unit consisting of one share of
Common Stock, par value $.01 per share ("Common Stock"), and one redeemable
warrant ("Selling Securityholder Warrants" or the "Warrants"), and 1,250,000
shares of Common Stock issuable upon exercise of the Selling Securityholder
Warrants. The Selling Securityholder Units and the shares of Common Stock
issuable upon exercise of the Selling Securityholder Warrants are sometimes
referred to collectively herein as the "Selling Securityholder Securities."
The Selling Securityholder Units were issued to the Selling Securityholders
upon conversion of debentures they received in a private placement from the
Company in August 1996 (the "Debentures"). See "Selling Securityholders" and
"Plan of Distribution." Each Selling Securityholder Warrant entitles the
holder to purchase, at an exercise price of $7.50, subject to adjustment, one
share of Common Stock. The Warrants are exercisable at any time commencing on
the date the Common Stock and the Warrants become separately transferable
through the fifth anniversary of the date of this Prospectus provided that
the Selling Securityholders have agreed not to exercise the Selling
Securityholder Warrants for a period of one year from the date of this
Prospectus and the Selling Securityholders have agreed not to sell the
Selling Securityholder Securities for a period of 90 days from the date
hereof. Commencing one year from the date hereof the Warrants are subject to
redemption by the Company for $.05 per Warrant, upon 30 days' written notice,
provided the closing bid price of the Common Stock averages in excess of
$11.50, subject to adjustment, for any 20 consecutive trading days ending
within five days of the notice of redemption. See "Description of
Securities."
The securities offered by the Selling Securityholders by this Prospectus
may be sold from time to time by the Selling Securityholders or their
transferees. The distribution of the Units, Common Stock or Warrants offered
hereby by the Selling Securityholders may be effected in one or more
transactions that may take place on the over-the-counter market, including
ordinary brokers' transactions, privately negotiated transactions or through
sales to one or more dealers for resale of such securities as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the
Selling Securityholders.
The Selling Securityholders, and intermediaries through whom such
securities are sold, which may include the Underwriter of the Offering
referred to below, may be deemed underwriters within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), with respect to
the securities offered, and any profits realized or commissions received may
be deemed underwriting compensation. The Company has agreed to indemnify the
Selling Securityholders against certain liabilities, including liabilities
under the Securities Act.
The Company will not receive any of the proceeds from the sale of
securities by the Selling Securityholders. In the event the Selling
Securityholder Warrants are exercised, the Company will receive gross
proceeds of $9,375,000. See "Selling Securityholders" and "Plan of
Distribution."
On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering by the Company
(the "Offering") of 3,000,000 Units, each Unit consisting of one share of
Common Stock and one Warrant, was declared effective by the Securities and
Exchange Commission (the "Commission"). The Company will receive
approximately $ in net proceeds from such Offering (assuming no exercise
of the Underwriter's over-allotment option) after payment of underwriting
discounts and commissions and estimated expenses of such Offering.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS," WHICH BEGIN ON PAGE , AND
"DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF HIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is , 1996
<PAGE>
[ALTERNATE PAGE]
SELLING SECURITYHOLDERS
An aggregate of up to 1,250,000 Units, consisting of 1,250,000 shares of
Common Stock and 1,250,000 Warrants, and 1,250,000 shares of Common Stock
issuable upon exercise of such Warrants may be offered for resale by
investors who received their Units upon conversion of debentures purchased in
the Private Placement.
The following table sets forth certain information with respect to each
Selling Securityholder for whom the Company is registering the Selling
Securityholder Securities for resale to the public. The Company will not
receive any of the proceeds from the sale of such securities. To the
Company's knowledge there are no material relationships between any of the
Selling Securityholders and the Company, nor have any such material
relationships existed within the past three years.
<TABLE>
<CAPTION>
NUMBER OF UNITS BENEFICIALLY OWNED
SELLING SECURITYHOLDERS AND MAXIMUM NUMBER TO BE SOLD(1)
- ----------------------- ------------------------------------
<S> <C>
Elono Portfolio, S.A. . 450,000
Jesse Greenfield IRA .. 400,000
Noord Holdings Ltd. ... 400,000
</TABLE>
- ------------
(1) Each Unit consists of one share of Common Stock and one Warrant. Does not
include shares of Common Stock issuable upon exercise of the Warrants.
The Selling Securityholders have agreed not to exercise the Warrants
being offered hereby for a period of one year from the date hereof. After
giving effect to the sale of the shares of Common Stock offered hereby,
none of the Selling Securityholders beneficially owns in excess of 1% of
the Common Stock, without giving effect to the shares of Common Stock
underlying Warrants held by the Selling Securityholders.
ALT-1
<PAGE>
[ALTERNATE PAGE]
PLAN OF DISTRIBUTION
The sale of the securities by the Selling Securityholders may be effected
from time to time in transactions (which may include block transactions by or
for the account of the Selling Securityholders) in the over-the-counter
market or in negotiated transactions, through the writing of options on the
securities, a combination of such methods of sale or otherwise. Sales may be
made at fixed prices which may be changed, at market prices prevailing at the
time of sale or at negotiated prices.
The Selling Securityholders may effect such transactions by selling their
securities directly to purchasers, through broker-dealers acting as agents
for Selling Securityholders or to broker-dealers who may purchase securities
as principals and thereafter sell the securities from time to time in the
over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders or the purchasers
for whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer
may exceed customary commissions).
Each Selling Securityholder has agreed not to exercise the Selling
Securityholder Warrants for a period of one year after the closing of this
offering and each Selling Securityholder has agreed not to sell, transfer, or
otherwise dispose publicly the Selling Securityholder Securities for a period
of 90 days from the date hereof.
Under applicable rules and regulations under the Securities Exchange Act
of 1934 (the "Exchange Act"), any person engaged in the distribution of the
Selling Securityholder Securities may not simultaneously engage in
market-making activities with respect to any securities of the Company for a
period of at least two (and possibly nine) business days prior to the
commencement of such distribution. Accordingly, in the event the Underwriter
of the Company's initial public offering is engaged in a distribution, as
defined in Rule 10b-6 promulgated under the Exchange Act, of the Selling
Securityholder Securities, such firm will not be able to make a market in the
Company's securities during the applicable restrictive period. However, the
Underwriter has not agreed to nor is such firm obliged to act as
broker/dealer in the sale of the Selling Securityholder Securities and the
Selling Securityholders will likely be required to sell such securities
through another broker/dealer. In addition, each Selling Securityholder
desiring to sell Selling Securityholder Securities will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation, Rules 10b-6 and 10b-7, which
provisions may limit the timing of the purchases and sales of the Company's
securities by such Selling Securityholders.
The Selling Securityholders and broker-dealers, if any, acting in
connection with such sale might be deemed to be underwriters within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of the securities might be deemed to be
underwriting discounts and commissions under the Securities Act.
ALT-2
<PAGE>
[ALTERNATE PAGE]
CONCURRENT PUBLIC OFFERING
On the date of this Prospectus, a Registration Statement was declared
effective under the Securities Act with respect to an underwritten public
offering by the Company of 3,000,000 Units and up to 450,000 additional Units
to cover over-allotments, if any.
ALT-3
<PAGE>
[ALTERNATE PAGE]
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OFFERED HEREBY BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, OR SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 7
Dividend Policy ............................ 13
Capitalization ............................. 14
Dilution ................................... 16
Unaudited Pro Forma Condensed Combined
Financial Statements ...................... 17
Selected Financial Data .................... 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................ 22
Business ................................... 25
Management ................................. 32
Certain Transactions ....................... 38
Principal Stockholders ..................... 43
Selling Securityholders .................... ALT-1
Plan of Distribution ....................... ALT-2
Concurrent Public Offering ................. ALT-3
Description of Securities .................. 47
Shares Eligible for Future Sale ............ 50
Legal Matters .............................. 53
Experts .................................... 53
Additional Information ..................... 53
Index to Financial Statements .............. F-1
</TABLE>
- -----------------------------------------------------------------------------
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS AN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
THE MARQUEE
GROUP, INC.
1,250,000 UNITS CONSISTING OF
1,250,000 SHARES OF COMMON STOCK AND
1,250,000 WARRANTS AND 1,250,000
SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THE WARRANTS
----------------
PROSPECTUS
----------------
, 1996
<PAGE>
PART II --INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation and By-Laws of the Registrant provide
that the Registrant shall indemnify any person to the full extent permitted
by the General Corporation Law of the State of Delaware (the "GCL"). Section
145 of the GCL, relating to indemnification, is hereby incorporated herein by
reference.
In accordance with Section 102(a)(7) of the GCL, the Certificate of
Incorporation of the Registrant eliminates the personal liability of
directors to the Registrant or its stockholders for monetary damages for
breach of fiduciary duty as a director with certain limited exceptions set
forth in Section 102(a)(7).
Reference is made to Section 6 of the Underwriting Agreement (Exhibit 1.1)
which provides for indemnification by the Underwriter of the Registrant and
its directors.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered (other than
underwriting discounts and commissions and the Underwriter's non-accountable
expense allowance of $ ) are as follows:
<TABLE>
<CAPTION>
AMOUNT
------------
<S> <C>
SEC Registration Fee .............. $21,655.27
NASD Filing Fee ................... 6,780.03
Nasdaq Filing Fees ................ *
Printing and Engraving Expenses .. *
Accounting Fees and Expenses ..... *
Legal Fees and Expenses ........... *
Blue Sky Fees and Expenses ........ *
Transfer Agent's Fees and Expenses *
Miscellaneous Expenses ............ *
------------
Total ......................... $ *
============
</TABLE>
- ------------
* To be completed by amendment
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following discussion gives retroactive effect to the Stock Split
effected by the Company in August 1996. Since its organization in July 1995,
the Registrant has sold and issued the following unregistered securities:
In July 1995 and August 1995, respectively, the Registrant sold 1,292,308
and 646,154 shares of Common Stock to The Sillerman Companies, Inc. and
Robert M. Gutkowski, respectively. In May 1996, the Registrant sold 50,000
shares of Common Stock to Martin C. Ehrlich.
In August 1996, the Registrant issued $2,000,000 principal amount of
debentures bearing interest at 6% per annum commencing one year from the date
of issuance, to nine accredited investors for an aggregate purchase price of
$2,000,000, of which $445,103 was purchased through the cancellation of
promissory notes. The units were issued pursuant to an exemption from
registration provided by Regulation D promulgated under Section 4(2) of the
Securities Act. The Underwriter acted as the Registrant's placement agent in
connection with this private placement. In connection therewith, the
Registrant paid sales commissions in the amount of $155,000 and a
non-accountable expense allowance in the aggregate amount of $37,500.
The above transactions were private transactions not involving a public
offering and were exempt from the registration provisions of the Securities
Act of 1933, as amended, pursuant to Section 4(2) thereof. The sale of
securities was without the use of an underwriter, and the certificates
evidencing the shares bear a restrictive legend permitting the transfer
thereof only upon registration of the shares or an exemption under the
Securities Act of 1933, as amended.
II-1
<PAGE>
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
<S> <C> <C>
1.1 -- Form of Underwriting Agreement
2.1* -- Certificate of Merger between A&A Acquisition Corp. and Athletes and Artists, Inc.
2.2* -- Certificate of Merger between SMTI Acquisition Corp. and Sports Marketing & Television
International, Inc.
3.1 -- Amended and Restated Certificate of Incorporation of the Registrant
3.2 -- By-laws of the Registrant
4.1 -- Form of Warrant Agreement
4.2 -- Form of Underwriter's Unit Purchase Option
5.1* -- Opinion of Baker & McKenzie
10.1 -- 1996 Stock Option Plan
10.2 -- Employment Agreement between Registrant and Robert M. Gutkowski dated as of March 21,
1996
10.3 -- Form of Employment Agreement between Registrant and Michael Trager
10.4 -- Form of Employment Agreement between Registrant and Michael Letis
10.5 -- Form of Employment Agreement between Registrant and Arthur Kaminsky
10.6 -- Form of Employment Agreement between Registrant and Louis J. Oppenheim
10.7 -- Stockholders' Agreement by and among The Sillerman Companies, Inc., Robert M.
Gutkowski, Arthur Kaminsky, Louis J. Oppenheim, Michael Trager, Michael Letis and
Registrant dated as of March 21, 1996
10.8 -- Escrow Agreement by and between the Registrant, Continental Stock Transfer & Trust
Company, The Sillerman Companies, Inc., Robert M. Gutkowski, Arthur Kaminsky, Louis J.
Oppenheim, Michael Trager and Michael Letis dated August 15, 1996
10.8A* -- Amendment to Escrow Agreement
10.9 -- Financial Consulting Agreement between the Registrant and Sillerman Communications
Management Corporation
10.10 -- Amended and Restated Acquisition Agreement by and among the Registrant, Athletes and
Artists, Inc., Arthur C. Kaminsky, Louis J. Oppenheim, Robert M. Gutkowski and The
Sillerman Companies, Inc.
10.11 -- Amended and Restated Acquisition Agreement by and among the Registrant, Sports
Marketing & Television International, Inc., Michael Trager, Michael Letis, Robert M.
Gutkowski and The Sillerman Companies, Inc.
10.12* -- Marketing Agreement by and between Sports Marketing & Television International, Inc.
and Breeders' Cup Limited
10.13 -- Form of Subscription Agreement
10.14* -- Promissory Note from the Registrant to Robert M. Gutkowski
21.1 -- List of Subsidiaries of Registrant
23.1* -- Consent of Baker & McKenzie --Included in Exhibit 5.1
23.2 -- Consent of Ernst & Young, LLP
23.3 -- Consent of Scott Gildea & Company, LLP
23.4 -- Consent of Michael Letis
23.5 -- Consent of Louis J. Oppenheim
24.1 -- Power of Attorney --Included on Page II-4
27.1 -- Financial Data Schedule
</TABLE>
- ------------
* To be filed by amendment.
II-2
<PAGE>
ITEM 28. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes that it will:
(a) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) The undersigned registrant hereby undertakes to provide to the
Underwriter at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required
by the Underwriter to permit prompt delivery to each purchaser.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(4) The undersigned Registrant hereby undertakes that it will:
(a) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4),
or 497(h) under the Securities Act as part of this registration statement
as of the time it was declared effective.
(b) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and the offering of the securities at that time as the initial
bona fide offering of those securities.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned in the
City of New York, State of New York on the 30th of August, 1996.
THE MARQUEE GROUP INC.
By: /s/ ROBERT M. GUTKOWSKI
-----------------------------------
Robert M. Gutkowski, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below under the heading "Signature" constitutes and appoints Robert M.
Gutkowski and James E. Sileo, or either of them, his true and lawful
attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any or all amendments to this registration statement, and
to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, each acting alone, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully for all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------- ------------------------------------------- -------------------
<S> <C> <C>
/s/ROBERT F.X. SILLERMAN
----------------------------
Robert F.X. Sillerman Chairman of the Board of Directors August 30, 1996
/s/ROBERT M. GUTKOWSKI
---------------------------- President, Chief Executive Officer and
Robert M. Gutkowski Director (Principal Executive Officer) August 30, 1996
/s/ARTHUR C. KAMINSKY
----------------------------
ARTHUR C. KAMINSKY Director August 30, 1996
/s/HOWARD J. TYTEL
----------------------------
Howard J. Tytel Director August 30, 1996
/s/MICHAEL TRAGER
----------------------------
Michael Trager Director August 30, 1996
/s/JAMES E. SILEO
---------------------------- Chief Financial Officer (Principal
James E. Sileo Accounting and Financial Officer) August 30, 1996
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- --------------- ----- ------------------------------------------------------------------------------------ --------
<S> <C> <C> <C>
1.1 -- Form of Underwriting Agreement
2.1* -- Certificate of Merger between A&A Acquisition Corp. and Athletes and Artists, Inc.
2.2* -- Certificate of Merger between SMTI Acquisition Corp. and Sports Marketing & Television
International, Inc.
3.1 -- Amended and Restated Certificate of Incorporation of the Registrant
3.2 -- By-laws of the Registrant
4.1 -- Form of Warrant Agreement
4.2 -- Form of Underwriter's Unit Purchase Option
5.1* -- Opinion of Baker & McKenzie
10.1 -- 1996 Stock Option Plan
10.2 -- Employment Agreement between Registrant and Robert M. Gutkowski dated as of March 21,
1996
10.3 -- Form of Employment Agreement between Registrant and Michael Trager
10.4 -- Form of Employment Agreement between Registrant and Michael Letis
10.5 -- Form of Employment Agreement between Registrant and Arthur Kaminsky
10.6 -- Form of Employment Agreement between Registrant and Louis J. Oppenheim
10.7 -- Stockholders' Agreement by and among The Sillerman Companies, Inc., Robert M. Gutkowski,
Arthur Kaminsky, Louis J. Oppenheim, Michael Trager, Michael Letis and Registrant dated
as of March 21, 1996
10.8 -- Escrow Agreement by and between the Registrant, Continental Stock Transfer & Trust Company,
The Sillerman Companies, Inc., Robert M. Gutkowski, Arthur Kaminsky, Louis J. Oppenheim,
Michael Trager and Michael Letis dated August 15, 1996
10.8A* -- Amendment to Escrow Agreement
10.9 -- Financial Consulting Agreement between the Registrant and Sillerman Communications Management
Corporation
10.10 -- Amended and Restated Acquisition Agreement by and among the Registrant, Athletes and Artists,
Inc., Arthur C. Kaminsky, Louis J. Oppenheim, Robert M. Gutkowski and The Sillerman Companies,
Inc.
10.11 -- Amended and Restated Acquisition Agreement by and among the Registrant, Sports Marketing
& Television International, Inc., Michael Trager, Michael Letis, Robert M. Gutkowski and
The Sillerman Companies, Inc.
10.12* -- Marketing Agreement by and between Sports Marketing & Television International, Inc. and
Breeders' Cup Limited
10.13 -- Form of Subscription Agreement
10.14* -- Promissory Note from the Registrant to Robert M. Gutkowski
21.1 -- List of Subsidiaries of Registrant
23.1* -- Consent of Baker & McKenzie --Included in Exhibit 5.1
23.2 -- Consent of Ernst & Young, LLP
23.3 -- Consent of Scott Gildea & Company, LLP
23.4 -- Consent of Michael Letis
23.5 -- Consent of Louis J. Oppenheim
24.1 -- Power of Attorney --Included on Page II-4
27.1 -- Financial Data Schedule
</TABLE>
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* To be filed by amendment.
<PAGE>
3,000,000 Units
(each Unit consisting of one share of Common Stock, par
value $.01 per share and one redeemable warrant to purchase
one share of Common Stock)
THE MARQUEE GROUP, INC.
UNDERWRITING AGREEMENT
Royce Investment Group, Inc. , 199
As Representative of the Several Underwriters
199 Crossways Park Drive
Woodbury, New York 11797
The Marquee Group, Inc., a Delaware corporation ( "Marquee"
or the "Company"), proposes to issue and sell to the underwriters named in
Schedule A (the "Underwriters") of this Underwriting Agreement (the
"Agreement"), for whom you are acting as representative (the "Representative"),
an aggregate of 3,000,000 Units, each unit being hereinafter referred to as a
"Unit" and consisting of one share of Common Stock, par value $.01 per share,
("Shares") and one redeemable warrant ("Warrants") to purchase one share of
Common Stock at a price of $7.50 from , 199 to , 200 . The
Warrants are subject to redemption, in certain instances commencing one year
from the date of this Agreement. In addition, Marquee proposes to grant to the
Underwriters (or, at its option, the Representative, individually) the option
referred to in Section 2(b) to purchase all or any part of an aggregate of
450,000 additional Units. Unless the context otherwise indicates, the term
"Units" shall include the 450,000 additional Units referred to above.
The aggregate of 3,000,000 Units to be sold by Marquee,
together with all or any part of the 450,000 Units which the Underwriters have
the option to purchase, and the Shares and the Warrants comprising such Units,
are herein called the "Units." The Common Stock of Marquee to be outstanding
after giving effect to the sale of the Shares is herein called the "Common
Stock." The Shares and Warrants included in the Units (including the Units
which the Underwriters have the option to purchase) are herein collectively
called the "Securities."
You have advised Marquee that you and the other Underwriters
desire to purchase, severally, the Units, and that you have been authorized by
the Underwriters to execute this agreement on their behalf. Marquee confirms
the agreements made by it with respect to the purchase of the Units by the
several Underwriters on whose behalf you are signing this Agreement, as
follows:
<PAGE>
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters that:
(a) A registration statement (File No. 333- ) on
Form SB-2 relating to the public offering of the Units, including a form of
prospectus subject to completion, copies of which have heretofore been
delivered to you, has been prepared by Marquee in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission under the Act and one or more amendments to such registration
statement may have been so filed. After the execution of this Agreement,
Marquee will file with the Commission either (i) if such registration
statement, as it may have been amended, has been declared by the Commission to
be effective under the Act, either (A) if Marquee relies on Rule 434 under the
Act, a Term Sheet (as hereinafter defined) relating to the Units that shall
identify the Preliminary Prospectus (as hereinafter defined) that it
supplements containing such information as is required or permitted by Rules
434, 430A and 424(b) under the Act or (B) if Marquee does not rely on Rule 434
under the Act a prospectus in the form most recently included in an amendment
to such registration statement (or, if no such amendment shall have been filed,
in such registration statement), with such changes or insertions as are
required by Rule 430A under the Act or permitted by Rule 424(b) under the Act
and in the case of either clause (i)(A) or (i)(B) of this sentence, as have
been provided to and approved by the Representative prior to the execution of
this Agreement, or (ii) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under the Act,
an amendment to such registration statement, including a form of prospectus, a
copy of which amendment has been furnished to and approved by the
Representative prior to the execution of this Agreement.
As used in this Agreement, the term "Registration Statement"
means such registration statement, as amended at the time when it was or is
declared effective, including all financial schedules and exhibits thereto and
including any information omitted therefrom pursuant to Rule 430A under the Act
and included in the Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); the term
"Prospectus" means (A) if Marquee relies on Rule 434 under the Act, the Term
Sheet relating to the Units that is first filed pursuant to Rule 424(b)(7)
under the Act, together with the Preliminary Prospectus identified therein that
such Term Sheet supplements; (B) if Marquee does not rely on Rule 434 under the
Act, the prospectus first filed with the Commission pursuant to Rule 424(b)
under the Act or (C) if Marquee does not rely on Rule 434 under the Act and if
no prospectus is required to be filed pursuant to said Rule 424(b), such term
means the prospectus included in the Registration Statement; except that if
such registration statement or prospectus is amended or such prospectus is
supplemented, after the effective date of such registration statement and prior
to the Option Closing Date (as hereinafter defined), the terms "Registration
Statement" and "Prospectus" shall include such registration statement and
-2-
<PAGE>
prospectus as so amended, and the term "Prospectus" shall include the
prospectus as so supplemented, or both, as the case may be; and the term "Term
Sheet" means any term sheet that satisfies the requirements of Rule 434 under
the Act. Any reference to the "date" of a Prospectus that includes a Term Sheet
shall mean the date of such Term Sheet.
(b) The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus. At the time the
Registration Statement becomes effective and at all times subsequent thereto up
to and on the Closing Date (as hereinafter defined) or the Option Closing Date,
as the case may be, (i) the Registration Statement and Prospectus will in all
respects conform to the requirements of the Act and the Rules and Regulations;
and (ii) neither the Registration Statement nor the Prospectus will include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make statements therein not misleading;
provided, however, that Marquee makes no representations, warranties or
agreements as to information contained in or omitted from the Registration
Statement or Prospectus in reliance upon, and in conformity with, written
information furnished to Marquee by or on behalf of the Underwriters
specifically for use in the preparation thereof. It is understood that the
statements set forth in the Prospectus on page 2 with respect to stabilization,
under the heading "Underwriting" and the identity of counsel to the
Underwriters under the heading "Legal Matters" constitute the only information
furnished in writing by or on behalf of the several Underwriters for inclusion
in the Registration Statement and Prospectus, as the case may be.
(c) Each of Marquee and the Merger Subsidiaries (as
herein defined) have been duly incorporated and are validly existing as a
corporation in good standing under the laws of the jurisdiction of their
incorporation, with full power and authority (corporate and other) to own their
properties and conduct their business as described in the Prospectus and are
duly qualified to do business as a foreign corporation and are in good standing
in all other jurisdictions in which the nature of their business or the
character or location of their properties requires such qualification, except
where failure to so qualify will not materially affect Marquee's or any of the
Merger Subsidiaries' business, properties or financial condition.
(d) The authorized, issued and outstanding capital
stock of Marquee as of June 30, 1996 is as set forth in the Prospectus under
"Capitalization"; the shares of issued and outstanding capital stock of Marquee
set forth thereunder have been duly authorized, validly issued and are fully
paid and non-assessable; except as set forth in the Prospectus, no options,
warrants, or other rights to purchase, agreements or other obligations to
issue, or agreements or other rights to convert any obligation into, any shares
of capital stock of Marquee have been granted or entered into by Marquee; and
the capital stock conforms to all statements relating thereto contained in the
Registration Statement and Prospectus.
(e) The Units and the Shares are duly authorized,
and when issued and delivered pursuant to this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights of any security holder of Marquee. Neither the filing of the
Registration Statement nor the offering or sale of the Units as contemplated in
this
-3-
<PAGE>
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any shares of Common Stock,
except as described in the Registration Statement.
The Warrants have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of Marquee
enforceable in accordance with their terms and entitled to the benefits
provided by the warrant agreement pursuant to which such Warrants are to be
issued (the "Warrant Agreement"), which will be substantially in the form filed
as an exhibit to the Registration Statement. The shares of Common Stock
issuable upon exercise of the Warrants have been reserved for issuance upon the
exercise of the Warrants and when issued in accordance with the terms of the
Warrants and Warrant Agreement, will be duly and validly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights and no
personal liability will attach to the ownership thereof. The Warrant Agreement
has been duly authorized and, when executed and delivered pursuant to this
Agreement, will have been duly executed and delivered and will constitute the
valid and legally binding obligation of Marquee enforceable in accordance with
its terms. The Warrants and the Warrant Agreement conform to the respective
descriptions thereof in the Registration Statement and Prospectus.
The Shares and the Warrants contained in the Unit Purchase
Option have been duly authorized and, when duly issued and delivered, such
Warrants will constitute valid and legally binding obligations of Marquee
enforceable in accordance with their terms and entitled to the benefits
provided by the Unit Purchase Option. The Shares included in the Unit Purchase
Option (and the shares of Common Stock issuable upon exercise of such Warrants)
when issued and sold, will be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights and no personal liability will
attach to the ownership thereof.
(f) This Agreement, the Unit Purchase Option, the
Warrant Agreement and the Escrow Agreement have been duly and validly
authorized, executed and delivered by Marquee. Marquee has full power and
lawful authority to authorize, issue and sell the Units to be sold by it
hereunder on the terms and conditions set forth herein, and no consent,
approval, authorization or other order of any governmental authority is
required in connection with such authorization, execution and delivery or with
the authorization, issue and sale of the Units or the Unit Purchase Option,
except such as may be required under the Act or state securities laws.
(g) Marquee does not own, directly or indirectly,
any capital stock or other equity ownership or proprietary interests in any
other corporation, association, trust, partnership, joint venture or other
entity other than the subsidiaries (the "Merger Subsidiaries") into which each
of Athletes and Artists, Inc. ("A&A") and Sports Management & Television
International, Inc. ("SMTI") will merge simultaneously with on the First
Closing Date (hereinafter defined), both of which are corporations duly
organized and validly existing under the laws of the State of Delaware. Marquee
owns all of the capital stock of each such Merger Subsidiary free and clear of
all liens, security interests and encumbrances. Marquee has entered into
acquisition
-4-
<PAGE>
agreements (the "Acquisition Agreements") with each of A&A and SMTI pursuant to
which, upon completion of financings aggregating at least $13,800,000 in gross
proceeds to Marquee, A&A and SMTI have each agreed to merge with a Merger
Subsidiary.
(h) Except as described in the Prospectus, neither
Marquee nor any of the Merger Subsidiaries is in violation, breach or default
of or under, and consummation of the transactions herein contemplated and the
fulfillment of the terms of this Agreement will not conflict with, or result in
a breach or violation of, any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of Marquee or any the Merger
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which Marquee or any the
Merger Subsidiaries is a party or by which Marquee or any of the Merger
Subsidiaries may be bound or to which any of the property or assets of Marquee
or any of the Merger Subsidiaries is subject (including the Acquisition
Agreements), nor will such action result in any violation of the provisions of
the articles of incorporation or the by-laws of Marquee or any of the Merger
Subsidiaries, as amended, or any statute or any order, rule or regulation
applicable to Marquee or any of the Merger Subsidiaries of any court or of any
regulatory authority or other governmental body having jurisdiction over
Marquee or any of the Merger Subsidiaries.
(i) Subject to the qualifications stated in the
Prospectus, Marquee and each of the Merger Subsidiaries has good and marketable
title to all properties and assets described in the Prospectus as owned by it,
free and clear of all liens, charges, encumbrances or restrictions, except such
as are not materially significant or important in relation to its business; all
of the material leases and subleases under which Marquee or any of the Merger
Subsidiaries is the lessor or sublessor of properties or assets or under which
Marquee or any of the Merger Subsidiaries hold properties or assets as lessee
or sublessee as described in the Prospectus are in full force and effect, and,
except as described in the Prospectus, Marquee and each of the Merger
Subsidiaries is not in default in any material respect with respect to any of
the terms or provisions of any of such leases or subleases, and no claim has
been asserted by anyone adverse to rights of Marquee or any of the Merger
Subsidiaries as lessor, sublessor, lessee or sublessee under any of the leases
or subleases mentioned above, or affecting or questioning the right of Marquee
or any of the Merger Subsidiaries to continued possession of the leased or
subleased premises or assets under any such lease or sublease except as
described or referred to in the Prospectus; and Marquee and each of the Merger
Subsidiaries owns or leases all such properties described in the Prospectus as
are necessary to their operations as now conducted and, except as otherwise
stated in the Prospectus, as proposed to be conducted as set forth in the
Prospectus.
(j) Ernst & Young LLP, who have given their reports
on certain financial statements filed and to be filed with the Commission as a
part of the Registration Statement, which are incorporated in the Prospectus,
are with respect to the Company, independent public accountants as required by
the Act and the Rules and Regulations.
-5-
<PAGE>
(k) The financial statements, together with related
notes, set forth in the Prospectus (or if the Prospectus is not in existence,
the most recent Preliminary Prospectus) present fairly the financial position
and results of operations and changes in cash flow position of Marquee on the
basis stated in the Registration Statement, at the respective dates and for the
respective periods to which they apply. Said statements and related notes have
been prepared in accordance with generally accepted accounting principles
applied on a basis which is consistent during the periods involved. The
information set forth under the captions "Dilution", "Capitalization", and
"Selected Financial Data" in the Prospectus fairly present, on the basis stated
in the Prospectus, the information included therein. The pro forma financial
information filed as part of the Registration Statement or included in the
Prospectus (or such preliminary prospectus) has been prepared in accordance
with the Commission's rules and guidelines with respect to pro forma financial
statements, and includes all adjustments necessary to present fairly the pro
forma financial condition and results of operations at the respective dates and
for the respective periods indicated and all assumptions used in preparing such
pro forma financial statements are reasonable.
(l) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
neither Marquee nor any of the Merger Subsidiaries has incurred any liabilities
or obligations, direct or contingent, not in the ordinary course of business,
or entered into any transaction not in the ordinary course of business, which
is material to the business of Marquee or any of the Merger Subsidiaries, and
there has not been any change in the capital stock of, or any incurrence of
short-term or long-term debt by, the Company or any issuance of options,
warrants or other rights to purchase the capital stock of the Company or any
adverse change or any development involving, so far as the Company can now
reasonably foresee a prospective adverse change in the condition (financial or
other), net worth, results of operations, business, key personnel or properties
of it which would be material to the business or financial condition of Marquee
or any of the Merger Subsidiaries and neither Marquee nor any of the Merger
Subsidiaries has become a party to, and neither the business nor the property
of Marquee or any of the Merger Subsidiaries has become the subject of, any
material litigation whether or not in the ordinary course of business.
(m) Except as set forth in the Prospectus, there is
not now pending or, to the knowledge of the Company, threatened, any action,
suit or proceeding to which Marquee or any of the Merger Subsidiaries is a
party before or by any court or governmental agency or body, which might result
in any material adverse change in the condition (financial or other), business
prospects, net worth, or properties of Marquee or any the Merger Subsidiaries,
nor are there any actions, suits or proceedings related to environmental
matters or related to discrimination on the basis of age, sex, religion or
race; and no labor disputes involving the employees of Marquee or any of the
Merger Subsidiaries exist or are imminent which might be expected to adversely
affect the conduct of the business, property or operations or the financial
condition or results of operations of Marquee or any of the Merger
Subsidiaries.
-6-
<PAGE>
(n) Except as disclosed in the Prospectus, Marquee
and each of the Merger Subsidiaries have filed all necessary federal, state and
foreign income and franchise tax returns and has paid all taxes shown as due
thereon; and there is no tax deficiency which has been or to the knowledge of
the Company might be asserted against Marquee or any of the Merger
Subsidiaries.
(o) Marquee and each of the Merger Subsidiaries have
sufficient licenses, permits and other governmental authorizations currently
required for the conduct of their business or the ownership of their properties
as described in the Prospectus and are in all material respects complying
therewith and owns or possesses adequate rights to use all material patents,
patent applications, trademarks, service marks, trade-names, trademark
registrations, service mark registrations, copyrights and licenses necessary
for the conduct of such business and had not received any notice of conflict
with the asserted rights of others in respect thereof. To the best knowledge of
the Company, none of the activities or business of Marquee or any of the Merger
Subsidiaries are in violation of, or cause Marquee or any of the Merger
Subsidiaries to violate, any law, rule, regulation or order of the United
States, any state, county or locality, or of any agency or body of the United
States or of any state, county or locality, the violation of which would have a
material adverse impact upon the condition (financial or otherwise), business,
property, prospective results of operations, or net worth of Marquee or any of
the Merger Subsidiaries.
(p) Neither Marquee nor any of the Merger
Subsidiaries have, directly or indirectly, at any time (i) made any
contributions to any candidate for political office, or failed to disclose
fully any such contribution in violation of law or (ii) made any payment to any
state, federal or foreign governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments or
contributions required or allowed by applicable law. The Company's internal
accounting controls and procedures are sufficient to cause the Company to
comply in all material respects with the Foreign Corrupt Practices Act of 1977,
as amended.
(q) On the Closing Dates (hereinafter defined) all
transfer or other taxes, (including franchise, capital stock or other tax,
other than income taxes, imposed by any jurisdiction) if any, which are
required to be paid in connection with the sale and transfer of the Units to
the several Underwriters hereunder will have been fully paid or provided for by
Marquee and all laws imposing such taxes will have been fully complied with.
(r) All contracts and other documents of Marquee or
any of the Merger Subsidiaries which are, under the Rules and Regulations,
required to be filed as exhibits to the Registration Statement have been so
filed.
(s) Neither Marquee nor any of the Merger
Subsidiaries has taken nor will take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Units hereby.
-7-
<PAGE>
(t) Neither Marquee nor any of the Merger
Subsidiaries have entered into any agreement pursuant to which any person is
entitled either directly or indirectly to compensation from Marquee for
services as a finder in connection with the proposed public offering.
(u) Except as previously disclosed in writing by
Marquee to the Representative, no officer, director or stockholder of Marquee
or any of the Merger Subsidiaries has any affiliation or association with any
member of the National Association of Securities Dealers Inc. ("NASD").
(v) Neither Marquee nor any of the Merger
Subsidiaries is, nor upon receipt of the proceeds from the sale of the Units
will be, an "investment company" within the meaning of the Investment Company
Act of 1940, as amended, and the rules and regulations thereunder.
(w) Neither Marquee nor any of he Merger
Subsidiaries have distributed nor will they distribute prior to the First
Closing Date any offering material in connection with the offering and sale of
the Units other than the Preliminary Prospectus, Prospectus, the Registration
Statement or the other materials permitted by the Act, if any.
(x) The conditions for use of Form SB-2, as set
forth in the General Instructions thereto, have been satisfied.
(y) There are no business relationships or
related-party transactions of the nature described in Item 404 of Regulation
S-K involving Marquee or any of the Merger Subsidiaries and any person
described in such Item that are required to be disclosed in the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary Prospectus)
and that have not been so disclosed.
(z) Marquee and each of the Merger Subsidiaries have
complied with all provisions of Section 517.075 Florida Statutes relating to
doing business with the government of Cuba or with any person or affiliate
located in Cuba.
2. Purchase, Delivery and Sale of the Units.
(a) Subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties, and
agreements herein contained, Marquee agrees to issue and sell to the
Underwriters, and each such Underwriter agrees, severally and not jointly, to
buy from Marquee at $ per Unit, at the place and time hereinafter
specified, the number of Units set forth opposite the names of the Underwriters
in Schedule A attached hereto (the "First Units") plus any additional Units
which such Underwriters may become obligated to purchase pursuant to the
provisions of Section 9 hereof. The First Units shall consist of 3,000,000
Units to be purchased from Marquee.
-8-
<PAGE>
Delivery of the First Units against payment therefor
shall take place at the offices of Royce Investment Group, Inc., 199 Crossways
Park Drive, Woodbury, N.Y. (or at such other place as may be designated by
agreement between you and Marquee) at 10:00 a.m., New York time, on , 199 , or
at such later time and date as you may designate, such time and date of payment
and delivery for the First Units being herein called the "First Closing Date."
(b) In addition, subject to the terms and conditions
of this Agreement, and upon the basis of the representations, warranties and
agreements herein contained, Marquee hereby grants an option to the several
Underwriters (or, at its option, to the Representative, individually) to
purchase all or any part of an aggregate of an additional 450,000 Units at the
same price per Unit as the Underwriters shall pay for the First Units being
sold pursuant to the provisions of subsection (a) of this Section 2 (such
additional Units being referred to herein as the "Option Units"). This option
may be exercised within 45 days after the effective date of the Registration
Statement upon notice by the Representative to Marquee advising as to the
amount of Option Units as to which the option is being exercised, the names and
denominations in which the certificates for such Option Units are to be
registered and the time and date when such certificates are to be delivered.
Such time and date shall be determined by the Representative but shall not be
earlier than four nor later than ten full business days after the exercise of
said option, nor in any event prior to the First Closing Date, and such time
and date is referred to herein as the "Option Closing Date." Delivery of the
Option Units against payment therefor shall take place at the offices of Royce
Investment Group, Inc., 199 Crossways Park Drive, Woodbury, N.Y. The number of
Option Units to be purchased by each Underwriter, if any, shall bear the same
percentage to the total number of Option Units being purchased by the several
Underwriters pursuant to this subsection (b) as the number of Units such
Underwriter is purchasing bears to the total number of the First Units being
purchased pursuant to subsection (a) of this Section 2, as adjusted, in each
case by the Representative in such manner as the Representative may deem
appropriate. The Option granted hereunder may be exercised only to cover
overallotments in the sale by the Underwriters of First Units referred to in
subsection (a) above. In the event Marquee declares or pays a dividend or
distribution on its Common Stock, whether in the form of cash, shares of Common
Stock or any other consideration, prior to the Option Closing Date, such
dividend or distribution shall also be paid on the Option Units on the Option
Closing Date.
(c) Marquee will make the certificates for the
securities comprising the Units to be purchased by the Underwriters hereunder
available to you for checking at least two full business days prior to the
First Closing Date or the Option Closing Date (which are collectively referred
to herein as the "Closing Dates"). The certificates shall be in such names and
denominations as you may request, at least two full business days prior to the
Closing Dates. Time shall be of the essence and delivery at the time and place
specified in this Agreement is a further condition to the obligations of each
Underwriter.
Definitive certificates in negotiable form for the
Units to be purchased by the Underwriters hereunder will be delivered by
Marquee to you for the accounts of the several Underwriters against payment of
the respective purchase prices by the several Underwriters, by
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<PAGE>
certified or bank cashier's checks in New York Clearing House funds, payable to
the order of Marquee.
In addition, in the event the Underwriters (or the
Representative, individually) exercise the option to purchase from Marquee all
or any portion of the Option Units pursuant to the provisions of subsection (b)
above, payment for such Units shall be made to or upon the order of Marquee by
certified or bank cashier's checks payable in New York Clearing House funds at
the offices of Royce Investment Group, Inc., at the time and date of delivery
of such Units as required by the provisions of subsection (b) above, against
receipt of the certificates for such Units by the Representative for the
respective accounts of the several Underwriters registered in such names and in
such denominations as the Representative may request.
It is understood that you, individually and not as
Representative of the several Underwriters, may (but shall not be obligated to)
make any and all payments required pursuant to this Section 2 on behalf of any
Underwriters whose check or checks shall not have been received by the
Representative at the time of delivery of the Units to be purchased by such
Underwriter or Underwriters. Any such payment by you shall not relieve any such
Underwriter or underwriters of any of its or their obligations hereunder. It is
also understood that you individually rather than all of the Underwriters may
(but shall not be obligated to) purchase the Option Units referred to in
subsection (b) of this Section 2, but only to cover overallotments.
It is understood that the several Underwriters
propose to offer the Units to be purchased hereunder to the public upon the
terms and conditions set forth in the Registration Statement, after the
Registration Statement becomes effective.
3. Covenants of the Company. The Company covenants and agrees
with the several Underwriters that:
(a) Marquee will use its best efforts to cause the
Registration Statement to become effective as promptly as possible. If
required, Marquee will file the Prospectus or any Term Sheet that constitutes a
part thereof and any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rules 434 and 424(b) under the
Act. Upon notification from the Commission that the Registration Statement has
become effective, Marquee will so advise you and will not at any time, whether
before or after the effective date, file the Prospectus, Term Sheet or any
amendment to the Registration Statement or supplement to the Prospectus of
which you shall not previously have been advised and furnished with a copy or
to which you or your counsel shall have objected in writing or which is not in
compliance with the Act and the Rules and Regulations. At any time prior to the
later of (A) the completion by all of the Underwriters of the distribution of
the Units contemplated hereby (but in no event more than nine months after the
date on which the Registration Statement shall have become or been declared
effective) and (B) 25 days after the date on which the Registration Statement
shall have become or been declared effective, Marquee will prepare and file
with the Commission, promptly upon your request, any amendments or supplements
to the Registration
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Statement or Prospectus which, in your opinion, may be necessary or advisable
in connection with the distribution of the Units.
As soon as Marquee is advised thereof, Marquee will
advise you, and confirm the advice in writing, of the receipt of any comments
of the Commission, of the effectiveness of any post-effective amendment to the
Registration Statement, of the filing of any supplement to the Prospectus or
any amended Prospectus, of any request made by the Commission for amendment of
the Registration Statement or for supplementing of the Prospectus or for
additional information with respect thereto, of the issuance by the Commission
or any state or regulatory body of any stop order or other order or threat
thereof suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Units for offering in any jurisdiction,
or of the institution of any proceedings for any of such purposes, and will use
its best efforts to prevent the issuance of any such order, and, if issued, to
obtain as soon as possible the lifting thereof.
Marquee has caused to be delivered to you copies of
each Preliminary Prospectus, and Marquee has consented and hereby consents to
the use of such copies for the purposes permitted by the Act. Marquee
authorizes the Underwriters and dealers to use the Prospectus in connection
with the sale of the Units for such period as in the opinion of counsel to the
several Underwriters the use thereof is required to comply with the applicable
provisions of the Act and the Rules and Regulations. In case of the happening,
at any time within such period as a Prospectus is required under the Act to be
delivered in connection with sales by an underwriter or dealer of any event of
which Marquee has knowledge and which materially affects the Company or the
securities of Marquee, or which in the opinion of counsel for the Company or
counsel for the Underwriters should be set forth in an amendment of the
Registration Statement or a supplement to the Prospectus in order to make the
statements therein not then misleading, in light of the circumstances existing
at the time the Prospectus is required to be delivered to a purchaser of the
Units or in case it shall be necessary to amend or supplement the Prospectus to
comply with law or with the Rules and Regulations, the Company will notify you
promptly and forthwith prepare and furnish to you copies of such amended
Prospectus or of such supplement to be attached to the Prospectus, in such
quantities as you may reasonably request, in order that the Prospectus, as so
amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material facts necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which
they are made, not misleading. The preparation and furnishing of any such
amendment or supplement to the Registration Statement or amended Prospectus or
supplement to be attached to the Prospectus shall be without expense to the
Underwriters, except that in case any Underwriter is required, in connection
with the sale of the Units to deliver a Prospectus nine months or more after
the effective date of the Registration Statement, Marquee will upon request of
and at the expense of the Underwriter, amend or supplement the Registration
Statement and Prospectus and furnish the Underwriter with reasonable quantities
of prospectuses complying with Section 10(a)(3) of the Act.
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<PAGE>
The Company will comply with the Act, the Rules and
Regulations and the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations thereunder in connection with the offering
and issuance of the Units.
(b) Marquee will use its best efforts to qualify to
register the Units for sale under the securities or "blue sky" laws of such
jurisdictions as the Representative may designate and will make such
applications and furnish such information as may be required for that purpose
and to comply with such laws, provided Marquee shall not be required to qualify
as a foreign corporation or a dealer in securities or to execute a general
consent of service of process in any jurisdiction in any action other than one
arising out of the offering or sale of the Units. Marquee will, from time to
time, prepare and file such statements and reports as are or may be required to
continue such qualification in effect for so long a period as the Underwriters
may reasonably request.
(c) If the sale of the Units provided for herein is
not consummated for any reason caused by the Company, Marquee shall pay all
costs and expenses incident to the performance of Marquee's obligations
hereunder, including but not limited to, all of the expenses itemized in
Section 8, including the accountable expenses of the Representative.
(d) Marquee will use its best efforts to (i) cause a
registration statement under the Exchange Act to be declared effective
concurrently with the completion of this offering and will notify the
Representative in writing immediately upon the effectiveness of such
registration statement, and (ii) if requested by the Representative, to obtain
a listing on the Pacific Stock Exchange and to obtain and keep current a
listing in the Standard & Poors or Moody's Industrial OTC Manual.
(e) For so long as Marquee is a reporting company
under either Section 12(g) or 15(d) of the Exchange Act, Marquee, at its
expense, will furnish to its stockholders an annual report (including financial
statements audited by independent public accountants), in reasonable detail and
at its expense, will furnish to you during the period ending five (5) years
from the date hereof, (i) as soon as practicable after the end of each fiscal
year, a balance sheet of Marquee and any of its subsidiaries as at the end of
such fiscal year, together with statements of income, surplus and cash flow of
Marquee and any subsidiaries for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
accountants; (ii) as soon as practicable after the end of each of the first
three fiscal quarters of each fiscal year, consolidated summary financial
information of Marquee for such quarter in reasonable detail; (iii) as soon as
they are available, a copy of all reports (financial or other) mailed to
security holders; (iv) as soon as they are available, a copy of all
non-confidential reports and financial statements furnished to or filed with
the Commission or any securities exchange or automated quotation system on
which any class of securities of Marquee is listed; and (v) such other
information as you may from time to time reasonably request.
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<PAGE>
(f) In the event Marquee has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above
will be on a consolidated basis to the extent the accounts of Marquee and its
subsidiary or subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) Marquee will deliver to you at or before the
First Closing Date two signed copies of the Registration Statement including
all financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to the several Underwriters such number of conformed
copies of the Registration Statement, including such financial statements but
without exhibits, and of all amendments thereto, as the several Underwriters
may reasonably request. Marquee will deliver to or upon the order of the
several Underwriters, from time to time until the effective date of the
Registration Statement, as many copies of any Preliminary Prospectus filed with
the Commission prior to the effective date of the Registration Statement as the
Underwriters may reasonably request. Marquee will deliver to the Underwriters
on the effective date of the Registration Statement and thereafter for so long
as a Prospectus is required to be delivered under the Act, from time to time,
as many copies of the Prospectus, in final form, or as thereafter amended or
supplemented, as the Underwriters may from time to time reasonably request.
Marquee, not later than (i) 5:00 p.m., New York City time, on the date of
determination of the public offering price, if such determination occurred at
or prior to 12:00 noon, New York City time, on such date or (ii) 6:00 p.m., New
York City time, on the business day following the date of determination of the
public offering price, if such determination occurred after 12:00 noon, New
York City time, on such date, will deliver to the Underwriters, without charge,
as many copies of the Prospectus and any amendment or supplement thereto as the
Underwriters may reasonably request for purposes of confirming orders that are
expected to settle on the First Closing Date.
(h) Marquee will make generally available to its
security holders and to the registered holders of its Warrants and deliver to
you as soon as it is practicable to do so but in no event later than 90 days
after the end of twelve months after its current fiscal quarter, an earnings
statement (which need not be audited) covering a period of at least 12
consecutive months beginning after the effective date of the Registration
Statement, which shall satisfy the requirements of Section 11(a) of the Act.
(i) Marquee will apply the net proceeds from the
sale of the Units for the purposes set forth under "Use of Proceeds" in the
Prospectus, and will file such reports with the Commission with respect to the
sale of the Units and the application of the proceeds therefrom as may be
required pursuant to Rule 463 under the Act.
(j) Marquee will, promptly upon your request,
prepare and file with the Commission any amendments or supplements to the
Registration Statement, Preliminary Prospectus or Prospectus and take any other
action, which in the reasonable opinion of Bachner, Tally, Polevoy & Misher
LLP, counsel to the several Underwriters, may be reasonably necessary
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<PAGE>
or advisable in connection with the distribution of the Units, and will use its
best efforts to cause the same to become effective as promptly as possible.
(k) Marquee will reserve and keep available that
maximum number of its authorized but unissued securities which are issuable
upon exercise of the Unit Purchase Option outstanding from time to time.
(l) For a period of 24 months from the First Closing
Date, no officer, director or stockholder of Marquee (other than "Outside
Stockholders" (as herein defined)) (such officers, directors and stockholders
being herein referred to as the "Principal Stockholders"), will directly or
indirectly, offer, sell (including any short sale), grant any option for the
sale of, acquire any option to dispose of, or otherwise dispose of any
securities of Marquee. In order to enforce this covenant, Marquee shall impose
stop-transfer instructions with respect to the securites owned by the Principal
Stockholders until the end of such period. For a period of 90 days from the
First Closing Date, stockholders of Marquee who were not designees of Marquee
in the private placement in which the Representative acted as placement agent
(the "Outside Stockholders") will not directly or indirectly, offer, sell
(including any short sale), grant any option for the sale of, acquire any
option to dispose of, or otherwise dispose of any securities of Marquee. In
order to enforce this covenant, Marquee shall impose stop-transfer instructions
with respect to the securities owned by the Outside Stockholders until the end
of such period.
(m) During the five year period from the date of
this Agreement, you, individually, and not as Representative of the
Underwriters, shall have the right of first refusal (the "Right of First
Refusal") to purchase for your own account or to act as underwriter or agent
for any and all public or private offerings of the securities of Marquee, or
any successor to or subsidiary of Marquee or other entity in which Marquee has
an equity interest, (collectively referred to herein as the "Company") by the
Company (the "Subsequent Company Offering") or any secondary offering of the
Company's securities by the Principal Stockholders (the "Secondary Offering").
Accordingly, if during such period the Company intends to make a Subsequent
Company Offering or the Company receives notification from any of such
Principal Stockholders of its securities of such holder's intention to make a
Secondary Offering, the Company shall notify you in writing of such intention
and of the proposed terms of the offering. The Company shall thereafter
promptly furnish you with such information concerning the business, condition
and prospects of the Company as you may reasonably request. If within thirty
(30) business days of the receipt of such notice of intention and statement of
terms you do not accept in writing such offer to act as underwriter or agent
with respect to such offering upon the terms proposed, the Company and each of
the Principal Stockholders shall be free to negotiate terms with other
underwriters with respect to such offering and to effect such offering on such
proposed terms within six months after the end of such 30 business days. Before
the Company and/or any of the Principal Stockholders shall accept any modified
proposal from such underwriter, your preferential right shall be reinstated and
the same procedure with respect to such modified proposal as provided above
shall be adopted. The failure by you to exercise your Right of First Refusal in
any particular instance shall not affect in any way such right with respect to
any other
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<PAGE>
Subsequent Company Offering or Secondary Offering. By execution of this
Agreement, each of the Principal Stockholders agrees to be bound by the terms
of this Section 3(m) concerning any proposed Secondary Offering of the
Company's securities.
(n) Prior to completion of this offering, Marquee
will make all filings required, including registration under the Exchange Act,
to obtain the listing of the Units, Common Stock, and Warrants on the Nasdaq
Small Cap Market (or a listing on such other market or exchange as the
Underwriters consent to), and will effect and maintain such listing for at
least five years from the date of this Agreement.
(o) Marquee and each of the Principal Stockholders
represents that it or he has not taken and agree that it or he will not take,
directly or indirectly, any action designed to or which has constituted or
which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Units, Shares or the Warrants or to facilitate
the sale or resale of the Securities.
(p) On the Closing Date and simultaneously with the
delivery of the Units, Marquee shall execute and deliver to you, individually
and not as representative of the Underwriters, the Unit Purchase Option. The
Unit Purchase Option will be substantially in the form of the Representative's
Unit Purchase Option filed as an Exhibit to the Registration Statement.
(q) During the 18 month period commencing on the
date of this Agreement, Marquee will not, without the prior written consent of
the Representative, grant options to purchase shares of Common Stock at an
exercise price less than the greater of (i) the initial public offering price
of the Units (without allocating any value to the Warrants) or (ii) the fair
market value of the Common Stock on the date of grant. During the six month
period commencing on the date of this Agreement, Marquee will not, without the
prior written consent of the Representative, grant options to any current
officer of Marquee, or to any individual who will become an officer of Marquee
upon the First Closing Date. During the three year period from the First
Closing Date, Marquee will not, without the prior written consent of the
Representative, offer or sell any of its securities pursuant to Regulation S
under the Act.
(r) Marquee will not, without the prior written
consent of the Representative, grant registration rights to any person which
are exercisable sooner than 13 months from the First Closing Date.
(s) Robert Gutkowski shall be President of Marquee
on the Closing Dates. Marquee has obtained key person life insurance in an
amount of not less than $2 million on the life of Robert M. Gutkowski and such
other individuals as designated by the Representative, and will use its best
efforts to maintain such insurance during the three year period commencing with
the First Closing Date. In the event that Robert Gutkowski's employment with
Marquee is terminated prior to three years following the First Closing Date,
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<PAGE>
Marquee will obtain a comparable policy on the life of his sucessor for the
balance of the three year period. For a period of thirteen months from the
First Closing Date, the compensation of the executive officers of Marquee shall
not be increased from the compensation levels disclosed in the Prospectus.
(t) So long as any Warrants are outstanding, Marquee
shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act and
without any lapse of time between the effectiveness of any such post-effective
amendments and cause a copy of each Prospectus, as then amended, to be
delivered to each holder of record of a Warrant and to furnish to each
Underwriter and dealer as many copies of each such Prospectus as such
Underwriter or dealer may reasonably request. Marquee shall not call for
redemption any of the Warrants unless a registration statement covering the
securities underlying the Warrants has been declared effective by the
Commission and remains current at least until the date fixed for redemption. In
addition, for so long as any Warrant is outstanding, Marquee will promptly
notify the Representative of any material change in the business, financial
condition or prospects of Marquee or any of the Merger Subsidiaries.
(u) Upon the exercise of any Warrant or Warrants
after , 19 , Marquee will pay Royce Investment Group, Inc., in its
individual capacity and not as representative of the underwriters, a fee of 5%
of the aggregate exercise price of the Warrants, of which % may be
reallowed to the dealer who solicited the exercise (which may also be Royce
Investment Group, Inc.) if (i) the market price of Marquee's Common Stock is
greater than the exercise price of the Warrants on the date of exercise; (ii)
the exercise of the Warrant was solicited by a member of the National
Association of Securities Dealers, Inc., (iii) the Warrant is not held in a
discretionary account; (iv) the disclosure of compensation arrangements has
been made in documents provided to customers, both as part of the original
offering and at the time of exercise, and (v) the solicitation of the Warrant
was not in violation of Rule 10b-6 promulgated under the Securities Exchange
Act of 1934, as amended. Marquee agrees not to solicit the exercise of any
Warrants other than through Royce Investment Group, Inc. and will not authorize
any other dealer to engage in such solicitation without the prior written
consent of Royce Investment Group, Inc.
(v) For a period of five (5) years from the
Effective Date Marquee (i) at its expense, shall cause its regularly engaged
independent certified public accountants to review (but not audit) Marquee's
financial statements for each of the first three (3) fiscal quarters prior to
the announcement of quarterly financial information, the filing of Marquee's
10-Q quarterly report and the mailing of quarterly financial information to
stockholders and (ii) shall not change its accounting firm without the prior
written consent of the Chairman or the President of the Representative.
(w) As promptly as practicable after the Closing
Date, Marquee will prepare, at its own expense, hard cover "bound volumes"
relating to the offering, and will
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<PAGE>
distribute at least four of such volumes to the individuals designated by the
Representative or counsel to the Underwriters.
(x) For a period of five years from the First
Closing Date (i) the Representative shall have the right, but not the
obligation, to designate an adivsor to the Board of Directors of Marquee and
(ii) Marquee shall engage a public relations firm acceptable to the
Underwriter.
(y) Marquee shall, for a period of six years after
date of this Agreement, submit which reports to the Secretary of the Treasury
and to stockholders, as the Secretary may require, pursuant to Section 1202 of
the Internal Revenue Code, as amended, or regulations promulgated thereunder,
in order for Marquee to qualify as a "small business" so that stockholders may
realize special tax treatment with respect to their investment in Marquee.
(z) On the Closing Date, Marquee shall cause and
take no action to prevent each of the merger of A&A and a Merger Subsidiary of
Marquee and the merger of SMII and a Merger Subsidiary of Marquee,
substantially on the terms and conditions set forth in the Acquisition
Agreements, subject to such changes therein as agreed to by the Underwriter.
4. Conditions of Underwriters' Obligation. The obligations of
the several Underwriters to purchase and pay for the Units which they have
respectively agreed to purchase hereunder, are subject to the accuracy (as of
the date hereof, and as of the Closing Dates) of and compliance with the
representations and warranties of the Company herein, to the performance by the
Company of its obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become
effective and you shall have received notice thereof not
later than 10:00 A.M., New York time, on the date on which
the amendment to the registration statement originally filed
with respect to the Units or to the Registration Statement,
as the case may be, containing information regarding the
initial public offering price of the Units has been filed
with the Commission, or such later time and date as shall
have been agreed to by the Representative; if required, the
Prospectus or any Term Sheet that constitutes a part thereof
and any amendment or supplement thereto shall have been filed
with the Commission in the manner and within the time period
required by Rule 434 and 424(b) under the Act; on or prior to
the Closing Dates no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no
proceedings for that or a similar purpose shall have been
instituted or shall be pending or, to your knowledge or to
the knowledge of Marquee, shall be contemplated by the
Commission; any request on the part of the Commission for
additional information shall have been complied with to the
reasonable satisfaction of Bachner, Tally, Polevoy & Misher
LLP, counsel to the several Underwriters;
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<PAGE>
(b) At the First Closing Date, you shall have
received the opinion, together with copies of such opinion
for each of the other several Underwriters, dated as of the
First Closing Date, of Baker & McKenzie, counsel for the
Company, in form and substance satisfactory to counsel for
the Underwriters, to the effect that:
(i) Marquee and each of the Merger
Subsidiaries has been duly incorporated and is
validly existing as a corporation in good standing
under the laws of the State of Delaware, with full
corporate power and authority to own its properties
and conduct its business as described in the
Registration Statement and Prospectus and is duly
qualified or licensed to do business as a foreign
corporation and is in good standing in each
jurisdiction in which the ownership or leasing of
its properties or conduct of its business requires
such qualification;
(ii) to the best knowledge of such counsel,
(a) Marquee and each of the Merger Subsidiaries has
obtained, or is in the process of obtaining, all
licenses, permits and other governmental
authorizations necessary to the conduct of its
business as described in the Prospectus, (b) such
licenses, permits and other governmental
authorizations obtained are in full force and
effect, and (c) Marquee and each of the Merger
Subsidiaries is in all material respects complying
therewith;
(iii) the authorized capitalization of Marquee
as of June 30, 1996 is as set forth under
"Capitalization" in the Prospectus; all shares of
Marquee's outstanding stock requiring authorization
for issuance by Marquee's board of directors have
been duly authorized, validly issued, are fully paid
and non-assessable and conform to the description
thereof contained in the Prospectus; the outstanding
shares of Common Stock of Marquee have not been
issued in violation of the preemptive rights of any
shareholder and the shareholders of Marquee do not
have any preemptive rights or other rights to
subscribe for or to purchase, nor are there any
restrictions upon the voting or transfer of any of
the Stock; the Common Stock, the Warrants, the Unit
Purchase Option and the Warrant Agreement conform to
the respective descriptions thereof contained in the
Prospectus; the Shares have been, and the shares of
Common Stock to be issued upon exercise of the
Warrants and the Unit Purchase Option, upon issuance
in accordance with the terms of such Warrants, the
Warrant Agreement and Unit Purchase Option have been
duly authorized and, when issued and delivered, will
be duly and validly issued, fully paid,
non-assessable, free of preemptive rights and no
personal liability will attach to the ownership
thereof; all prior sales by Marquee of Marquee's
securities have been made in compliance with or
under an exemption from registration under the Act
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<PAGE>
and applicable state securities laws and no
shareholders of Marquee have any rescission rights
with respect to Company securities; a sufficient
number of shares of Common Stock has been reserved
for issuance upon exercise of the Warrants and Unit
Purchase Option and to the best of such counsel's
knowledge, neither the filing of the Registration
Statement nor the offering or sale of the Units as
contemplated by this Agreement gives rise to any
registration rights or other rights, other than
those which have been waived or satisfied for or
relating to the registration of any shares of Common
Stock;
(iv) this Agreement, the Unit Purchase Option,
the Warrant Agreement and the Escrow Agreement have
been duly and validly authorized, executed and
delivered by Marquee and, assuming due execution by
each other party hereto or thereto, each constitutes
a legal, valid and binding obligation of Marquee
enforceable against Marquee in accordance with its
respective terms (except as such enforceability may
be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application relating to or affecting enforcement of
creditors' rights and the application of equitable
principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be
limited by applicable law);
(v) the certificates evidencing the shares of
Common Stock are in valid and proper legal form; the
Warrants will be exercisable for shares of Common
Stock of Marquee in accordance with the terms of the
Warrants and at the prices therein provided for; at
all times during the term of the Warrants the shares
of Common Stock of Marquee issuable upon exercise of
the Warrants have been duly authorized and reserved
for issuance upon such exercise and such shares,
when issued upon such exercise in accordance with
the terms of the Warrants and at the price provided
for, will be duly and validly issued, fully paid and
non-assessable;
(vi) such counsel knows of no pending or
threatened legal or governmental proceedings to
which either Marquee or any of the Merger
Subsidiaries is a party which could materially
adversely affect the business, property, financial
condition or operations of either Marquee or any of
the Merger Subsidiaries; or which question the
validity of the Securities, this Agreement, the
Warrant Agreement, the Unit Purchase Option or the
Escrow Agreement, or of any action taken or to be
taken by either Marquee or any of the Merger
Subsidiaries pursuant to this Agreement, the Warrant
Agreement, the Unit Purchase Option or the Escrow
Agreement; and no such proceedings are known to such
counsel to be contemplated against either Marquee or
any of the Merger Subsidiaries; there are no
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<PAGE>
governmental proceedings or regulations required to
be described or referred to in the Registration
Statement which are not so described or referred to;
(vii) Neither Marquee nor the Merger
Subsidiaries is in violation of or default under,
nor will the execution and delivery of this
Agreement, the Unit Purchase Option, the Warrant
Agreement or the Escrow Agreement, and the
incurrence of the obligations herein and therein set
forth and the consummation of the transactions
herein or therein contemplated, result in a breach
or violation of, or constitute a default under the
certificate or articles of incorporation or by-laws,
in the performance or observance of any material
obligations, agreement, covenant or condition
contained in any bond, debenture, note or other
evidence of indebtedness or in any contract,
indenture, mortgage, loan agreement, lease, joint
venture or other agreement or instrument to which
Marquee or any of the Merger Subsidiaries is a party
or by which Marquee's or any of the Merger
Subsidiaries' properties may be bound (including the
Acquisition Agreements) or in violation of any
material order, rule, regulation, writ, injunction,
or decree of any government, governmental
instrumentality or court, domestic or foreign;
(viii) the Registration Statement has become
effective under the Act, and to the best of such
counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement is in
effect, and no proceedings for that purpose have
been instituted or are pending before, or threatened
by, the Commission; the Registration Statement and
the Prospectus (except for the financial statements
and other financial data contained therein, or
omitted therefrom, as to which such counsel need
express no opinion) comply as to form in all
material respects with the applicable requirements
of the Act and the Rules and Regulations;
(ix) such counsel has participated in the
preparation of the Registration Statement and the
Prospectus and nothing has come to the attention of
such counsel to cause such counsel to have reason to
believe that the Registration Statement or any
amendment thereto at the time it became effective or
as of the Closing Dates contained any untrue
statement of a material fact required to be stated
therein or omitted to state any material fact
required to be stated therein or necessary to make
the statements therein not misleading or that the
Prospectus or any supplement thereto contains any
untrue statement of a material fact or omits to
state a material fact necessary in order to make
statements therein, in light of the circumstances
under which they were made, not misleading (except,
in the case of both the Registration Statement and
any amendment thereto and
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<PAGE>
the Prospectus and any supplement thereto, for the
financial statements, notes thereto and other
financial information and schedules contained
therein, as to which such counsel need express no
opinion);
(x) all descriptions in the Registration
Statement and the Prospectus, and any amendment or
supplement thereto, of contracts and other documents
are accurate and fairly present the information
required to be shown, and such counsel is familiar
with all contracts and other documents referred to
in the Registration Statement and the Prospectus and
any such amendment or supplement or filed as
exhibits to the Registration Statement, and such
counsel does not know of any contracts or documents
of a character required to be summarized or
described therein or to be filed as exhibits thereto
which are not so summarized, described or filed;
(xi) no authorization, approval, consent, or
license of any governmental or regulatory authority
or agency is necessary in connection with the
authorization, issuance, transfer, sale or delivery
of the Units by Marquee, in connection with the
execution, delivery and performance of this
Agreement by Marquee or any of the Merger
Subsidiaries or in connection with the taking of any
action contemplated herein, or the issuance of the
Unit Purchase Option or the Securities underlying
the Unit Purchase Option, other than registrations
or qualifications of the Units under applicable
state or foreign securities or Blue Sky laws and
registration under the Act;
(xii) the statements in the Registration
Statement under the captions "Business", "Use of
Proceeds", "Management", and "Description of
Securities" have been reviewed by such counsel and
insofar as they refer to descriptions of agreements,
statements of law, descriptions of statutes,
licenses, rules or regulations or legal conclusions,
are correct in all material respects;
(xiii) the Units, the Common Stock and the
Warrants have been duly authorized for quotation on
the Nasdaq SmallCap Market and for listing on the
Boston Stock Exchange; and
(xiv) to such counsel's knowledge, there are no
business relationships or related-party transactions
of the nature described in Item 404 of Regulation
S-K involving Marquee or any of the Merger
Subsidiaries and any person described in such Item
that are required to be disclosed in the Prospectus
and which have not been so disclosed.
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Such opinions shall also cover such matters incident to the
transactions contemplated hereby as the Representative or counsel for the
Underwriters shall reasonably request. In rendering such opinion, such counsel
may rely upon certificates of any officer of the Company or public officials as
to matters of fact; and may rely as to all matters of law other than the law of
the United States or of the State of New York upon opinions of counsel
satisfactory to you, in which case the opinion shall state that they have no
reason to believe that you and they are not entitled to so rely.
(c) All corporate proceedings and other legal
matters relating to this Agreement, the Registration Statement, the Prospectus
and other related matters shall be satisfactory to or approved by Bachner,
Tally, Polevoy & Misher LLP, counsel to the several Underwriters, and you shall
have received from such counsel a signed opinion, dated as of the First Closing
Date, together with copies thereof for each of the other Underwriters, with
respect to the validity of the issuance of the Units, the form of the
Registration Statement and Prospectus (other than the financial statements and
other financial data contained therein), the execution of this Agreement and
other related matters as you may reasonably require. Marquee and each of the
Merger Subsidiaries shall have furnished to counsel for the several
Underwriters such documents as they may reasonably request for the purpose of
enabling them to render such opinion.
(d) You shall have received a letter prior to the
effective date of the Registration Statement and again on and as of the First
Closing Date from Ernst & Young LLP, independent public accountants for the
Company, substantially in the form approved by you, and including estimates of
the Company's revenues and results of operations for the period ending at the
end of the month immediately preceding the effective date and results of the
comparable period during the prior fiscal year.
(e) At the Closing Dates, (i) the representations
and warranties of the Company contained in this Agreement shall be true and
correct with the same effect as if made on and as of the Closing Dates and
Marquee and each of the Merger Subsidiaries shall have performed all of its
obligations hereunder and satisfied all the conditions on its part to be
satisfied at or prior to such Closing Date; (ii) the Registration Statement and
the Prospectus and any amendments or supplements thereto shall contain all
statements which are required to be stated therein in accordance with the Act
and the Rules and Regulations, and shall in all material respects conform to
the requirements thereof, and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(iii) there shall have been, since the respective dates as of which information
is given, no material adverse change, or any development involving a
prospective material adverse change, in the business, properties, condition
(financial or otherwise), results of operations, capital stock, long-term or
short-term debt or general affairs of Marquee or any of the Merger Subsidiaries
from that set forth in the Registration Statement and the Prospectus, except
changes which the Registration Statement and Prospectus indicate might occur
after the effective
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date of the Registration Statement, and Marquee and each of the Merger
Subsidiaries shall not have incurred any material liabilities or entered into
any agreement not in the ordinary course of business other than as referred to
in the Registration Statement and Prospectus; and (iv) except as set forth in
the Prospectus, no action, suit or proceeding at law or in equity shall be
pending or threatened against Marquee or any of the Merger Subsidiaries which
would be required to be set forth in the Registration Statement, and no
proceedings shall be pending or threatened against Marquee or any of the Merger
Subsidiaries before or by any commission, board or administrative agency in the
United States or elsewhere, wherein an unfavorable decision, ruling or finding
would materially and adversely affect the business, property, condition
(financial or otherwise), results of operations or general affairs of Marquee
or any of the Merger Subsidiaries, and (v) you shall have received, at the
First Closing Date, a certificate signed by each of the Chairman of the Board
or the President and the principal financial or accounting officer of Marquee,
dated as of the First Closing Date, evidencing compliance with the provisions
of this subsection (e).
(f) Upon exercise of the option provided for in
Section 2(b) hereof, the obligations of the several Underwriters (or, at its
option, the Representative, individually) to purchase and pay for the Option
Units referred to therein will be subject (as of the date hereof and as of the
Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain
effective at the Option Closing Date, and no stop
order suspending the effectiveness thereof shall
have been issued and no proceedings for that purpose
shall have been instituted or shall be pending, or,
to your knowledge or the knowledge of Marquee, shall
be contemplated by the Commission, and any
reasonable request on the part of the Commission for
additional information shall have been complied with
to the satisfaction of Bachner, Tally, Polevoy &
Misher LLP, counsel to the several Underwriters.
(ii) At the Option Closing Date there shall
have been delivered to you as Representative the
signed opinion of Baker & McKenzie, counsel for the
Company, dated as of the Option Closing Date, in
form and substance satisfactory to Bachner, Tally,
Polevoy & Misher LLP, counsel to the several
Underwriters, together with copies of such opinion
for each of the other several underwriters, which
opinion shall be substantially the same in scope and
substance as the opinion furnished to you at the
First Closing Date pursuant to Section 4(b) hereof,
except that such opinion, where appropriate, shall
cover the Option Units.
(iii) At the Option Closing Date there shall
have been delivered to you a letter in form and
substance satisfactory to you from Ernst & Young
LLP, dated the Option Closing Date and addressed to
the Underwriters confirming the information in their
letter referred to in Section 4(d) hereof and
stating that nothing has come to their attention
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during the period from the ending date of their
review referred to in said letter to a date not more
than five business days prior to the Option Closing
Date, which would require any change in said letter
if it were required to be dated the Option Closing
Date.
(iv) At the Option Closing Date there shall
have been delivered to you a certificate of the
Chairman of the Board or the President and the
principal financial or accounting officer of
Marquee, dated the Option Closing Date, in form and
substance satisfactory to Bachner, Tally, Polevoy &
Misher LLP, counsel to the several Underwriters,
substantially the same in scope and substance as the
certificate furnished to you at the First Closing
Date pursuant to Section 4(e) hereof.
(v) All proceedings taken at or prior to the
Option Closing Date in connection with the sale and
issuance of the Option Units shall be satisfactory
in form and substance to you, and you and Bachner,
Tally, Polevoy & Misher LLP, counsel to the several
Underwriters, shall have been furnished with all
such documents, certificates, and opinions as you
may request in connection with this transaction in
order to evidence the accuracy and completeness of
any of the representations, warranties or statements
of Marquee and each of the Merger Subsidiaries or
its compliance with any of the covenants or
conditions contained herein.
(g) No action shall have been taken by the
Commission or the NASD the effect of which would make it improper, at any time
prior to the Closing Date, for members of the NASD to execute transactions (as
principal or agent) in the Units, Common Stock or the Warrants and no
proceedings for the taking of such action shall have been instituted or shall
be pending, or, to the knowledge of the Representative or Marquee, shall be
contemplated by the Commission or the NASD. Marquee represents that at the date
hereof it has no knowledge that any such action is in fact contemplated by the
Commission or the NASD. Marquee and each of the Merger Subsidiaries shall have
advised the Underwriters of any NASD affiliation of any of its officers,
directors, stockholders or their affiliates.
(h) The estimated revenues and earnings of the
Company for the year ending December 31, 1996 will be greater than those of the
year ended December 31, 1995.
(i) Marquee shall have caused and taken no action to
prevent each of the merger of A&A and a Merger Subsidiary of Marquee and the
merger of SMII and a Merger Subsidiary of Marquee, substantially on the terms
and conditions set forth in the Acquisition Agreements, subject to such changes
therein as agreed to by the Underwriter.
(j) If any of the conditions herein provided for in
this Section shall not have been fulfilled as of the date indicated, this
Agreement and all obligations of the several
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Underwriters under this Agreement may be cancelled at, or at any time prior to,
each Closing Date by the Representative. Any such cancellation shall be without
liability of the Underwriters to the Company.
5. Conditions of the Obligations of Marquee. The obligation
of Marquee to sell and deliver the Units is subject to the condition that at
the Closing Dates, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued under the Act or any proceedings
therefor initiated or threatened by the Commission.
If the condition to the obligations of Marquee provided for
in this Section have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of Marquee to sell and deliver the Units on exercise
of the option provided for in Section 2(b) hereof shall be affected.
6. Indemnification.
(a) Marquee agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and all
attorneys' fees), to which such Underwriter or such controlling person may
become subject, under the Act or otherwise, and will reimburse, as incurred,
such Underwriters and such controlling persons for any legal or other expenses
reasonably incurred in connection with investigating, defending against or
appearing as a third party witness in connection with any losses, claims,
damages or liabilities, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in (A) the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, (B) any blue sky application or other document
executed by the Company or any of the Merger Subsidiaries specifically for that
purpose or based upon written information furnished by the Company or any
Merger Subsidiaries filed in any state or other jurisdiction in order to
qualify any or all of the Units under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus,
Prospectus, or any amendment or supplement thereto, or in any Blue Sky
Application, a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that Marquee will not
be liable in any such case to the extent, but only to the extent, that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company or any Merger Subsidiaries by or on behalf of the Underwriters
specifically for use in the preparation of the Registration Statement or any
such amendment or supplement thereof or any such Blue Sky Application or any
such preliminary Prospectus or the
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<PAGE>
Prospectus or any such amendment or supplement thereto. This indemnity will be
in addition to any liability which Marquee may otherwise have.
(b) Each Underwriter severally, but not jointly,
will indemnify and hold harmless Marquee, each of its directors, each nominee
(if any) for director named in the Prospectus, each of its officers who have
signed the Registration Statement, and each person, if any, who controls
Marquee within the meaning of the Act, against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement, include, but not
be limited to, all costs of defense and investigation and all attorneys' fees)
to which Marquee or any such director, nominee, officer or controlling person
may become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto (i) in reliance upon and in
conformity with written information furnished to Marquee by you or by any
Underwriter through you specifically for use in the preparation thereof and
(ii) relates to the transactions effected by the Underwriters in connection
with the offer and sale of the Units contemplated hereby. This indemnity
agreement will be in addition to any liability which the Underwriters may
otherwise have.
(c) Promptly after receipt by an indemnified party
under this Section of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section, notify in writing the indemnifying party
of the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, subject
to the provisions herein stated, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that if the indemnified party is an Underwriter or a person who controls such
Underwriter within the meaning of the Act, the fees and expenses of such
counsel shall be at the
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expense of the indemnifying party if (i) the employment of such counsel has
been specifically authorized in writing by the indemnifying party or (ii) the
named parties to any such action (including any impleaded parties) include both
such Underwriter or such controlling person and the indemnifying party and in
the judgment of the Representative, it is advisable for the Representative or
such Underwriters or controlling persons to be represented by separate counsel
(in which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of such Underwriter or such controlling
person, it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys for all such Underwriters and
controlling persons, which firm shall be designated in writing by you). No
settlement of any action against an indemnified party shall be made without the
consent of the indemnifying party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnifying party.
7. Contribution.
In order to provide for just and equitable contribution under
the Act in any case in which (i) any Underwriter makes claim for
indemnification pursuant to Section 6 hereof but it is judicially determined
(by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case,
notwithstanding the fact that the express provisions of Section 6 provide for
indemnification in such case, or (ii) contribution under the Act may be
required on the part of any Underwriter, then Marquee and each person who
controls Marquee, in the aggregate, and any such Underwriter shall contribute
to the aggregate losses, claims, damages or liabilities to which they may be
subject (which shall, for all purposes of this Agreement, include, but not be
limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees) in either such case (after contribution from
others) in such proportions that all such Underwriters are responsible in the
aggregate for that portion of such losses, claims, damages or liabilities
represented by the percentage that the underwriting discount per Unit appearing
on the cover page of the Prospectus bears to the public offering price
appearing thereon, and Marquee shall be responsible for the remaining portion,
provided, however, that (a) if such allocation is not permitted by applicable
law then the relative fault of Marquee and the Underwriters and controlling
persons, in the aggregate, in connection with the statements or omissions which
resulted in such damages and other relevant equitable considerations shall also
be considered. The relative fault shall be determined by reference to, among
other things, whether in the case of an untrue statement of a material fact or
the omission to state a material fact, such statement or omission relates to
information supplied by the Company or any of the Merger Subsidiaries, or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission.
Marquee and the Underwriters agree that it would not be just and equitable if
the respective obligations of Marquee and the Underwriters to contribute
pursuant to this Section 7 were to be determined by pro rata or per capita
allocation of the aggregate damages (even if the Underwriters in the aggregate
were
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treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
first sentence of this Section 7 and (b) that the contribution of each
contributing Underwriter shall not be in excess of its proportionate share
(based on the ratio of the number of Units purchased by such Underwriter to the
number of Units purchased by all contributing Underwriters) of the portion of
such losses, claims, damages or liabilities for which the Underwriters are
responsible. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. As used in this
paragraph, the word "Company" includes any officer, director, or person who
controls Marquee within the meaning of Section 15 of the Act. If the full
amount of the contribution specified in this paragraph is not permitted by law,
then any Underwriter and each person who controls any Underwriter shall be
entitled to contribution from Marquee, its officers, directors and controlling
persons to the full extent permitted by law. The foregoing contribution
agreement shall in no way affect the contribution liabilities of any persons
having liability under Section 11 of the Act other than Marquee and the
Underwriters. No contribution shall be requested with regard to the settlement
of any matter from any party who did not consent to the settlement; provided,
however, that such consent shall not be unreasonably withheld in light of all
factors of importance to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective
or the sale of the Units to the Underwriters is consummated, Marquee will pay
all costs and expenses incident to the performance of this Agreement by the
Company including, but not limited to, the fees and expenses of counsel to the
Company (which fees shall not exceed $150,000) and of the Company's
accountants; the costs and expenses incident to the preparation, printing,
filing and distribution under the Act of the Registration Statement (including
the financial statements therein and all amendments and exhibits thereto),
Preliminary Prospectus and the Prospectus, as amended or supplemented, or the
Term Sheet, the fee of the NASD in connection with the filing required by the
NASD relating to the offering of the Units contemplated hereby; all expenses,
including reasonable fees and disbursements of counsel to the Underwriters, in
connection with the qualification of the Units under the state securities or
blue sky laws which the Representative shall designate; the cost of printing
and furnishing to the several Underwriters copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus, this Agreement, the
Agreement Among Underwriters, Selling Agreement, Underwriters' Questionnaire,
Underwriters' Power of Attorney and the Blue Sky Memorandum, any fees relating
to the listing of the Units, Common Stock and Warrants on the Nasdaq SmallCap
Market or any other securities exchange, the cost of printing the certificates
representing the securities comprising the Units, the fees of the transfer
agent and warrant agent the cost of publication of at least three "tombstones"
of the offering (at least one of which shall be in national business newspaper
and one of which shall be in a major New York newspaper) and the cost of
preparing at least four hard cover "bound volumes" relating to the offering, in
accordance with the Underwriters' request. Marquee shall pay any and all taxes
(including any transfer, franchise, capital stock or other tax imposed by any
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jurisdiction) on sales to the Underwriters hereunder. Marquee will also pay all
costs and expenses incident to the furnishing of any amended Prospectus or of
any supplement to be attached to the Prospectus as called for in Section 3(a)
of this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses Marquee
shall at the First Closing Date pay to Royce Investment Group, Inc., in its
individual rather than representative capacity, a non-accountable expense
allowance of $ of which $ has been paid. In the event the
overallotment option is exercised, Marquee shall pay to Royce Investment Group,
Inc. at the Option Closing Date an additional amount equal to 3% of the gross
proceeds received upon exercise of the overallotment option. In the event the
transactions contemplated hereby are not consummated by reason of any action by
the Representative (except if such prevention is based upon a breach by the
Company or any Merger Subsidiary of any covenant, representation or warranty
contained herein or because any other condition to the Underwriters'
obligations hereunder required to be fulfilled by the Company or any of the
Merger Subsidiaries is not fulfilled) Marquee shall be liable for the
accountable expenses of the Representative, including legal fees up to a
maximum of $ . In the event the transactions contemplated hereby are not
consummated by reason of any action of the Company or any Merger Subsidiary or
because of a breach by the Company or any Merger Subsidiary of any covenant,
representation or warranty herein, Marquee shall be liable for the accountable
expenses of the Representative, including legal fees, up to a maximum of
$ .
(c) No person is entitled either directly or
indirectly to compensation from the Company, from the Representative or from
any other person for services as a finder in connection with the proposed
offering, and Marquee agrees to indemnify and hold harmless the Representative
and the other Underwriters, against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all costs of defense and investigation and all attorneys'
fees), to which the Representative or such other Underwriter or person may
become subject insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon the claim of any
person (other than an employee of the party claiming indemnity) or entity that
he or it is entitled to a finder's fee in connection with the proposed offering
by reason of such person's or entity's influence or prior contact with the
indemnifying party.
9. Substitution of Underwriters.
If any Underwriters shall for any reason not permitted
hereunder cancel their obligations to purchase the First Units hereunder, or
shall fail to take up and pay for the number of First Units set forth opposite
their respective names in Schedule A hereto upon tender of such First Units in
accordance with the terms hereof, then:
(a) If the aggregate number of First Units which
such Underwriter or Underwriters agreed but failed to purchase does not exceed
10% of the total number of First
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Units, the other Underwriters shall be obligated severally, in proportion to
their respective commitments hereunder, to purchase the First Units which such
defaulting Underwriter or Underwriters agreed but failed to purchase.
(b) If any Underwriter or Underwriters so default
and the agreed number of First Units with respect to which such default or
defaults occurs is more than 10% of the total number of First Units, the
remaining Underwriters shall have the right to take up and pay for (in such
proportion as may be agreed upon among them) the First Units which the
defaulting Underwriter or Underwriters agreed but failed to purchase. If such
remaining Underwriters do not, at the First Closing Date, take up and pay for
the First Units which the defaulting Underwriter or Underwriters agreed but
failed to purchase, the time for delivery of the First Units shall be extended
to the next business day to allow the several Underwriters the privilege of
substituting within twenty-four hours (including nonbusiness hours) another
underwriter or underwriters satisfactory to Marquee. If no such underwriter or
underwriters shall have been substituted as aforesaid, within such twenty-four
hour period, the time of delivery of the First Units may, at the option of
Marquee, be again extended to the next following business day, if necessary, to
allow Marquee the privilege of finding within twenty-four hours (including
nonbusiness hours) another underwriter or underwriters to purchase the First
Units which the defaulting Underwriter or Underwriters agreed but failed to
purchase. If it shall be arranged for the remaining Underwriters or substituted
Underwriters to take up the First Units of the defaulting Underwriter or
Underwriters as provided in this Section, (i) Marquee or the Representative
shall have the right to postpone the time of delivery for a period of not more
than seven business days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and Marquee agrees promptly to file any amendments
to the Registration Statement or supplements to the Prospectus which may
thereby be made necessary, and (ii) the respective numbers of First Units to be
purchased by the remaining Underwriters or substituted Underwriters shall be
taken at the basis of the underwriting obligation for all purposes of this
Agreement.
If in the event of a default by one or more Underwriters and
the remaining Underwriters shall not take up and pay for all the First Units
agreed to be purchased by the defaulting Underwriters or substitute another
underwriter or underwriters as aforesaid, Marquee shall not find or shall not
elect to seek another underwriter or underwriters for such First Units as
aforesaid, then this Agreement shall terminate.
If, following exercise of the option provided in Section 2(b)
hereof, any Underwriter or Underwriters shall for any reason not permitted
hereunder cancel their obligations to purchase Option Units at the Option
Closing Date, or shall fail to take up and pay for the number of Option Units,
which they become obligated to purchase at the Option Closing Date upon tender
of such Option Units in accordance with the terms hereof, then the remaining
Underwriters or substituted Underwriters may take up and pay for the Option
Units of the defaulting Underwriters in the manner provided in Section 9(b)
hereof. If the remaining Underwriters or substituted Underwriters shall not
take up and pay for all such Option Units, the
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Underwriters shall be entitled to purchase the number of Option Units for which
there is no default or, at their election, the option shall terminate, the
exercise thereof shall be of no effect.
As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. In the event of
termination, there shall be no liability on the part of any nondefaulting
Underwriter to Marquee, provided that the provisions of this Section 9 shall
not in any event affect the liability of any defaulting Underwriter to Marquee
arising out of such default.
10. Effective Date.
The Agreement shall become effective upon its execution
except that you may, at your option, delay its effectiveness until 11:00 A.M.,
New York time on the first full business day following the effective date of
the Registration Statement, or at such earlier time after the effective date of
the Registration Statement as you in your discretion shall first commence the
initial public offering by the Underwriters of any of the Units. The time of
the initial public offering shall mean the time of release by you of the first
newspaper advertisement with respect to the Units, or the time when the Units
are first generally offered by you to dealers by letter or telegram, whichever
shall first occur. This Agreement may be terminated by you at any time before
it becomes effective as provided above, except that Sections 3(c), 6, 7, 8, 13,
14, 15 and 16 shall remain in effect notwithstanding such termination.
11. Termination.
(a) This Agreement, except for Sections 3(c), 6, 7,
8, 13, 14, 15 and 16 hereof, may be terminated at any time prior to the First
Closing Date, and the option referred to in Section 2(b) hereof, if exercised,
may be cancelled at any time prior to the Option Closing Date, by you if in
your judgment it is impracticable to offer for sale or to enforce contracts
made by the Underwriters for the resale of the Units agreed to be purchased
hereunder by reason of (i) the Company or any of the Merger Subsidiaries having
sustained a material loss, whether or not insured, by reason of fire,
earthquake, flood, accident or other calamity, or from any labor dispute or
court or government action, order or decree; (ii) trading in securities on the
New York Stock Exchange, the American Stock Exchange, the Nasdaq SmallCap
Market or the Nasdaq National Market having been suspended or limited; (iii)
material governmental restrictions having been imposed on trading in securities
generally (not in force and effect on the date hereof); (iv) a banking
moratorium having been declared by federal or New York state authorities; (v)
an outbreak of international hostilities or other national or international
calamity or crisis or change in economic or political conditions having
occurred; (vi) a pending or threatened legal or governmental proceeding or
action relating generally to Marquee's or any of the Merger Subsidiaries'
business, or a notification having been received by either Marquee or any of
the Merger Subsidiaries of the threat of any such proceeding or action, which
could materially adversely affect Marquee or any of the Merger Subsidiaries;
(vii) except as contemplated by the Prospectus, Marquee or any of the Merger
Subsidiaries is merged or consolidated into or acquired
-31-
<PAGE>
by another company or group or there exists a binding legal commitment for the
foregoing or any other material change of ownership or control occurs; (viii)
the passage by the Congress of the United States or by any state legislative
body or federal or state agency or other authority of any act, rule or
regulation, measure, or the adoption of any orders, rules or regulations by any
governmental body or any authoritative accounting institute or board, or any
governmental executive, which is reasonably believed likely by the
Representative to have a material impact on the business, financial condition
or financial statements of the Company or the market for the securities offered
pursuant to the Prospectus; (ix) any adverse change in the financial or
securities markets beyond normal market fluctuations having occurred since the
date of this Agreement, or (x) any material adverse change having occurred,
since the respective dates of which information is given in the Registration
Statement and Prospectus, in the earnings, business prospects or general
condition of Marquee or any of its Merger Subsidiaries, financial or otherwise,
whether or not arising in the ordinary course of business.
(b) If you elect to prevent this Agreement from
becoming effective or to terminate this Agreement as provided in this Section
11 or in Section 10, Marquee shall be promptly notified by you, by telephone or
telegram, confirmed by letter.
12. Unit Purchase Option.
At or before the First Closing Date, Marquee will sell to
Royce Investment Group, Inc. (for its own account and not as Representative of
the several Underwriters), or its designees for a consideration of $ , and upon
the terms and conditions set forth in the form of Unit Purchase Option annexed
as an exhibit to the Registration Statement, a Unit Purchase Option to purchase
an aggregate of 300,000 Units. In the event of conflict in the terms of this
Agreement and the Unit Purchase Option, the language of the Unit Purchase
Option shall control.
13. Representations, Warranties and Agreements to
Survive Delivery.
The respective indemnities, agreements, representations,
warranties and other statements of the Company or its Principal Stockholders,
where appropriate, and the undertakings set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Underwriters, the Company or any of its officers or
directors or any controlling person and will survive delivery of and payment of
the Units and the termination of this Agreement.
14. Notice.
Any communications specifically required hereunder to be in
writing, if sent to the Underwriters, will be mailed, delivered and confirmed
to them at Royce Investment Group, Inc., 199 Crossways Park Drive, Woodbury,
New York 11797, with a copy sent to Bachner, Tally, Polevoy & Misher LLP, 380
Madison Avenue, New York, New York 10017, attention: Jill M.
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<PAGE>
Cohen, Esq., or if sent to Marquee, will be mailed, delivered and confirmed to
it at 150 East 58th Street, 19th Floor, New York, New York 10155.
15. Parties in Interest.
The Agreement herein set forth is made solely for the benefit
of the several Underwriters, the Company and, to the extent expressed, the
Principal Stockholders, any person controlling the Company or any of the
several Underwriters, and directors of Marquee, nominees for directors (if any)
named in the Prospectus, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors, assigns
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser,
as such purchaser, from any of the several Underwriters of the Units. All of
the obligations of the Underwriters hereunder are several and not joint.
16. Applicable Law.
This Agreement will be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements
made and to be entirely performed within New York.
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return this agreement, whereupon it will become
a binding agreement between Marquee and the several Underwriters in accordance
with its terms.
Very truly yours,
THE MARQUEE GROUP, INC.
By:____________________________________
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
ROYCE INVESTMENT GROUP, INC.
By:____________________________________
For itself and as Representative
of the several Underwriters
-33-
<PAGE>
We hereby agree to be bound by the provisions of Sections
3(l), (m), and (o) and 13 hereof.
- ------------------------------
The Sillerman Companies, Inc.
- ------------------------------
Robert M. Gutkowski
- ------------------------------
Arthur C. Kaminsky
- ------------------------------
Michael Trager
- ------------------------------
Michael Letis
- ------------------------------
Louis J. Oppenheim
- ------------------------------
James E. Sileo
- ------------------------------
Martin Ehrlich
- ------------------------------
Howard J. Tytel
- ------------------------------
Kraig G. Fox
<PAGE>
SCHEDULE A
Underwriter Number of Units to be Purchased
- ----------- -------------------------------
[UNDERWRITER]
Total:________
Units
=========
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
THE MARQUEE GROUP, INC.
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
The Marquee Group, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify:
1. The name of the Corporation was formerly C.I.C. Group,
Inc. The date of filing of the original Certificate of Incorporation of the
Corporation with the Secretary of State of the State of Delaware was July 11,
1995.
2. The Corporation subsequently amended the original
Certificate of Incorporation to change the name of the Corporation to The
Marquee Group, Inc. and filed such Certificate of Amendment with the Secretary
of State of the State of Delaware on March 7, 1996.
3. Such amendments and additions made by this Amended and
Restated Certificate of Incorporation are set forth herein and have been duly
adopted pursuant to the provisions of Sections 242 and 245 under the General
Corporation Law of the State of Delaware by obtaining a written consent of
stockholders holding a majority of each class of outstanding common stock and
having provided written notice to those stockholders who did not consent in
writing in accordance with Section 228.
4. The Certificate of Incorporation of the Corporation is
hereby amended and restated in its entirety to read as follows:
"ARTICLE ONE
The name of the Corporation is The Marquee Group, Inc. (the
"Corporation").
ARTICLE TWO
The address of the registered office of the Corporation in
the State of Delaware is c/o The Prentice-Hall Corporation System, Inc., 1013
Centre Road, City of Wilmington, County of New Castle, Delaware 19805.
<PAGE>
ARTICLE THREE
The purpose for which the Corporation is organized is to
engage in any and all lawful acts and activity for which corporations may be
organized under the General Corporation Law of Delaware. The Corporation will
have perpetual existence.
ARTICLE FOUR
The total number of shares of capital stock which the
Corporation shall have authority to issue is 30,000,000 shares, of which
25,000,000 shares shall be Common Stock, par value $.01 per share, and
5,000,000 shares shall be Preferred Stock, par value $.01 per share.
The Preferred Stock may be issued from time to time in one
or more series. The Board of Directors of the Corporation is hereby expressly
authorized to provide, by resolution or resolutions duly adopted by it prior
to issuance, for the creation of each such series and to fix the designation
and the powers, preferences, rights, qualifications, limitations and
restrictions relating to the shares of each such series. The authority of the
Board of Directors with respect to each series of Preferred Stock shall
include, but not be limited to, determining the following:
(a) the designation of such series, the number of shares to
constitute such series and the stated value if different from the par
value thereof;
(b) whether the shares of such series shall have voting
rights, in addition to any voting rights provided by law, and, if so,
the terms of such voting rights, which may be general or limited;
(c) the dividends, if any, payable on such series, whether
any such dividends shall be cumulative, and, if so, from what dates,
the conditions and dates upon which such dividends shall be payable,
and the preference or relation which such dividends shall bear to the
dividends payable on any shares of stock of any other class or any
other series of Preferred Stock;
(d) whether the shares of such series shall be subject to
redemption by the Corporation, and, if so, the times, prices and
other conditions of such redemption;
(e) the amount or amounts payable upon shares of such series
upon, and the rights of the holders of such series in, the voluntary
or involuntary liquidation, dissolution or winding up, or upon any
distribution of the assets, of the Corporation;
(f) whether the shares of such series shall be subject to
the operation of a retirement or sinking fund and, if so, the extent
to and the manner in which any such retirement or sinking fund shall
be applied to the purchase or redemption of the shares of
- 2 -
<PAGE>
such series for retirement or other corporate purposes and the terms
and provisions relating to the operation thereof;
(g) whether the shares of such series shall be convertible
into, or exchangeable for, shares of stock of any other class or any
other series of Preferred Stock or any other securities and, if so,
the price or prices or the rate or rates of conversion or exchange
and the method, if any, of adjusting the same, and any other terms
and conditions of conversion or exchange;
(h) the limitations and restrictions, if any, to be
effective while any shares of such series are outstanding upon the
payment of dividends or the making of other distributions on, and
upon the purchase, redemption or other acquisition by the Corporation
of, the Common Stock or shares of stock of any other class or any
other series of Preferred Stock;
(i) the conditions or restrictions, if any, upon the
creation of indebtedness of the Corporation or upon the issue of any
additional stock, including additional shares of such series or of
any other series of Preferred Stock or of any other class; and
(j) any other powers, preferences and relative,
participating, optional and other special rights, and any
qualifications, limitations and restrictions, thereof.
The powers, preferences and relative, participating,
optional and other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series any time outstanding. All shares of any one
series of Preferred Stock shall be identical in all respects with all other
shares of such series, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereof shall
be cumulative.
ARTICLE FIVE
No director of the Corporation shall be personally liable to
the Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director; provided, however, that nothing contained in
this ARTICLE FIVE shall eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware or (iv) for any
transaction from which the director derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is
hereafter amended to authorize the further elimination or limitation of the
liability of a director, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended.
- 3 -
<PAGE>
This ARTICLE FIVE may not be amended or modified to increase
the liability of a director, or repealed, except upon the affirmative vote of
the holders of 75% or more of the outstanding shares of Common Stock. No such
amendment, modification, or repeal shall apply to or have any effect on the
liability or alleged liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring prior to such
amendment, modification, or repeal.
ARTICLE SIX
The Corporation shall indemnify any person who was, is, or
is threatened to be made a party to a proceeding (as hereinafter defined) by
reason of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent permitted under the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended. Such right shall be
a contract right and as such shall run to the benefit of any director or
officer who is elected and accepts the position of director or officer of the
Corporation or elects to continue to serve as a director or officer of the
Corporation while this ARTICLE SIX is in effect. Any repeal or amendment of
this ARTICLE SIX shall be prospective only and shall not limit the rights of
any such director or officer or the obligations of the Corporation with
respect to any claim arising from or related to the services of such director
or officer in any of the foregoing capacities prior to any such repeal or
amendment to this ARTICLE SIX. Such right shall include the right to be paid
by the Corporation expenses incurred in defending any such proceeding in
advance of its final disposition to the maximum extent permitted under the
General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended. If a claim for indemnification or advancement of
expenses hereunder is not paid in full by the Corporation within sixty (60)
days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim, and if successful in whole or in part, the
claimant shall also be entitled to be paid the expenses of prosecuting such
claim. It shall be a defense to any such action that such indemnification or
advancement of costs of defense are not permitted under the General
Corporation Law of the State of Delaware, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors or any committee thereof, independent legal
counsel, or stockholders) to have made its determination prior to the
commencement of such action that indemnification of, or advancement of costs
of defense to, the claimant is permissible in the circumstances nor an actual
determination by the Corporation (including its Board of Directors or any
committee thereof, independent legal counsel, or stockholders) that such
indemnification or advancement is not permissible shall be a defense to the
action or create a presumption that such indemnification or advancement is not
permissible. In the event of the death of any person having a right of
indemnification under the foregoing provisions, such right shall inure to the
benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above
- 4 -
<PAGE>
shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, by-law, resolution of stockholders or
directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or
agent of the Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such an action,
suit or proceeding, and any inquiry or investigation that could lead to such
an action, suit, or proceeding.
ARTICLE SEVEN
The following provisions relate to the management of the
business and the conduct of the affairs of the Corporation and are inserted
for the purpose of creating, defining, limiting, and regulating the powers of
the Corporation and its directors and stockholders:
(a) The business and affairs of the Corporation shall be
managed by and under the direction of the Board of Directors.
(b) The number of directors which shall constitute the whole
Board of Directors shall be fixed in accordance with the by-laws of
the Corporation (the "By-laws"), but in no event shall the number of
directors be less than two.
(c) The Board of Directors shall have the power to adopt,
amend, and repeal the By-laws.
(d) All corporate powers and authority of the Corporation
(except as at the time otherwise provided by statute, by this Amended
and Restated Certificate of Incorporation, or the By-laws) shall be
vested in and exercised by the Board of Directors.
(e) The stockholders and directors shall have the power, if
the By-laws so provide, to hold their respective meetings within or
without the State of Delaware and may (except as otherwise required
by statute) keep the Corporation's books outside the State of
Delaware, at such places as from time to time may be designated by
the By-laws or the Board of Directors.
(f) Directors of the Corporation need not be elected by
written ballot unless the By-laws otherwise provide.
- 5 -
<PAGE>
ARTICLE EIGHT
No contract or transaction between the Corporation and one
or more of its directors, officers, or stockholders or between the Corporation
and any person (as used herein "person" means other corporation, partnership,
association, firm, trust, joint venture, political subdivision, or
instrumentality) or other organization in which one or more of its directors,
officers, or stockholders are directors, officers or stockholders, or have a
financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the board or committee which authorizes the contract or
transaction, or solely because his, her, or their votes are counted for such
purpose, if: (i) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (ii) the material facts as to his or her
relationship or interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved, or ratified by the
Board of Directors, a committee thereof, or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at
a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction."
I, the undersigned, a duly authorized officer of the
Corporation, for the purpose of amending and restating the Certificate of
Incorporation of the Corporation under the laws of the State of Delaware, do
make, file, and record this Amended and Restated Certificate of Incorporation
and do certify that this is my act and deed properly authorized by the Board
of Directors and stockholders of the Corporation and that the facts stated
herein are true and, accordingly, I do hereunto set my hand on this 12th day
of August, 1996.
THE MARQUEE GROUP, INC.
By: /s/ Robert M. Gutkowski
----------------------------
Name: Robert M. Gutkowski
Title: President
- 6 -
<PAGE>
BY-LAWS
OF
THE MARQUEE GROUP, INC.
(organized under the General Corporation Law
of the State of Delaware)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates
representing stock in the Corporation shall be signed by, or in the name of,
the Corporation by the Chairman or Vice-Chairman of the Board of Directors, if
any, or by the President or a Vice President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation. Any or all of the signatures on any such certificate may be a
facsimile. In the event any officer, transfer agent, or registrar of the
corporation who has signed or whose facsimile signature has been placed upon
such a certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue.
Whenever the Corporation shall be authorized to issue more
than one class of stock or more than one series of any class of stock, and
whenever the Corporation shall issue any shares of its stock as partly paid
stock, the certificates representing shares of any such class or series or of
any such partly paid stock shall set forth thereon the statements prescribed
by the General Corporation Law. Any restrictions on the transfer or
registration of transfer of any shares of stock of any class or series of the
Corporation shall be noted conspicuously on the certificate representing such
shares.
The Corporation may issue a new certificate of stock or
uncertificated shares in place of any certificate theretofore issued by it,
alleged to have been lost, stolen, or destroyed, and the Board of Directors
may require the owner of the lost, stolen, or destroyed certificate, or his
legal representative, to give the Corporation a bond sufficient to indemnify
the Corporation against any claim that may be made against it on account of
the alleged loss, theft, or destruction of any such certificate or the
issuance of any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed
by the General Corporation Law, the Board of Directors may provide by
resolution or resolutions that some or all of any or all classes or series of
the stock of the Corporation shall be uncertificated shares. Within a
reasonable time after the issuance or transfer of any uncertificated shares,
the Corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
<PAGE>
3. FRACTIONAL SHARE INTERESTS. The Corporation may, but
shall not be required to, issue fractions of a share. If the Corporation does
not issue fractions of a share, it shall (1) arrange for the disposition of
fractional interests by those entitled thereto, (2) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined, or (3) issue scrip or warrants in registered form
(either represented by a certificate or uncertificated) or bearer form
(represented by a certificate) which shall entitle the holder to receive a
full share upon the surrender of such scrip or warrants aggregating a full
share. A certificate for a fractional share or an uncertificated fractional
share shall (but, unless otherwise provided therein, scrip or warrants shall
not) entitle the holder to exercise voting rights, to receive dividends
thereon, and to participate in any of the assets of the Corporation in the
event of liquidation. The Board of Directors may cause scrip or warrants to be
issued subject to the conditions that such scrip or warrants shall become void
if not exchanged for certificates representing the full shares or
uncertificated full shares before a specified date, or subject to the
conditions that the shares of the Corporation's stock for which scrip or
warrants are exchangeable may be sold by the Corporation and the proceeds
thereof distributed to the holders of scrip or warrants, or subject to any
other conditions which the Board of Directors may impose.
4. STOCK TRANSFERS. Upon compliance with provisions
restricting the transfer or registration of transfer of shares of stock, if
any, transfers or registration of transfers of shares of stock of the
Corporation shall be made only on the stock ledger of the Corporation by the
registered holder thereof, or by such holder's attorney thereunto authorized
by power of attorney duly executed and filed with the Secretary of the
Corporation or with a transfer agent or a registrar, if any, and, in the case
of shares represented by certificates, upon surrender of the certificate or
certificates for such shares of stock, which certificate or certificates shall
have been properly endorsed, and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. For the purpose of
determining the stockholders entitled to notice of or to vote at any meeting
of stockholders of the Corporation or any adjournment thereof, or to express
consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or the allotment of any
rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance,a record date, which record date
shall not be more than sixty (60) days nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
If no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders of the Corporation shall apply to any adjournment of
such meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting. In order that the Corporation may
determine the stockholders entitled to consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors, and which date shall not be more
than ten (10) days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. If no record date has been fixed by
the Board of Directors, the record date for determining the stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is required by the General Corporation
Law, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the Corporation by
delivery to its registered office in
<PAGE>
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the Corporation 's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by the General Corporation
Law, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of
business on the day on which the Board of Directors adopts the resolution
taking such prior action. In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion, or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted, and which record date shall be not more than sixty
(60) days prior to such action. If no record date is fixed, the record date
for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of
the right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock"
or "shares of stock" or "stockholder" or "stockholders" refers to an
outstanding share or shares of stock of the Corporation and to a holder or
holders of record of such outstanding shares of stock when the Corporation is
authorized to issue only one class of shares of stock. Said reference also is
intended to include any outstanding share or shares of stock and any holder or
holders of record of outstanding shares of stock of any class upon which or
upon whom the Certificate of Incorporation of the Corporation confers such
rights where there are two or more classes or series of shares of stock or
upon which or upon whom the General Corporation Law confers such rights
notwithstanding that the Certificate of Incorporation may provide for more
than one class or series of shares of stock, one or more of which are limited
or denied such rights thereunder; provided, however, that no such right shall
vest in the event of an increase or a decrease in the authorized number of
shares of stock of any class or series which is otherwise denied voting rights
under the provisions of the Corporation's Certificate of Incorporation, except
as any provision of law may otherwise require.
7. MEETINGS OF STOCKHOLDERS.
(a) Time. The annual meeting of the stockholders of the
Corporation shall be held on the date and at the time fixed, from time to
time, by the Board of Directors, provided that the first annual meeting of the
stockholders of the Corporation shall be held on a date within thirteen (13)
months after the organization of the Corporation, and each successive annual
meeting shall be held on a date within thirteen (13) months after the date of
the preceding annual meeting. A special meeting of the stockholders of the
Corporation shall be held on the date and at the time fixed by the Board of
Directors.
(b) Place. Annual meetings and special meetings of the
stockholders of the Corporation shall be held at such place, within or without
the State of Delaware, as the Board of Directors may, from time to time, fix.
Whenever the Board of Directors shall fail to fix such place, the meeting
shall be held at the registered office of the Corporation in the State of
Delaware.
<PAGE>
(c) Call. Annual meetings and special meetings of the
stockholders of the Corporation may be called by the Board of Directors or by
any officer of the Corporation instructed by the Board of Directors to call
such meeting.
(d) Notice or Waiver of Notice. Written notice of all
meetings of the stockholders of the Corporation shall be given and shall set
forth the place, the date, and the hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the Corporation may be examined. The notice of an annual
meeting of the stockholders of the Corporation shall state that the meeting is
called for the election of Directors and for the transaction of any other
business which may properly come before the meeting, and shall (if any other
action which could be taken at a special meeting is to be taken at such annual
meeting) state the purpose or purposes. The notice of a special meeting shall
in all instances state the purpose or purposes for which the meeting is
called. The notice of any meeting of the stockholders of the Corporation also
shall include, or be accompanied by, any additional statements, information,
or documents prescribed by the General Corporation Law of the State of
Delaware. Except as otherwise provided by the General Corporation Law, a copy
of the notice of any meeting shall be given, personally or by mail, not less
than ten (10) days nor more than sixty (60) days before the date of the
meeting, unless the lapse of the prescribed period of time shall have been
waived, and directed to each stockholder at such stockholder's record address
or at such other address which the stockholder may have furnished by request
in writing to the Secretary of the Corporation. Notice by mail shall be deemed
to be given when deposited, with postage thereon prepaid, in the United States
Mail. If a meeting is adjourned to another time, not more than thirty (30)
days hence, and/or to another place, and if an announcement of the adjourned
time and/or place is made at the meeting, it shall not be necessary to give
notice of the adjourned meeting unless the Board of Directors, after
adjournment, fix a new record date for the adjourned meeting. Notice need not
be given to any stockholder who submits a written waiver of notice signed by
him before or after the time stated therein. Attendance of a stockholder at a
meeting of stockholders of the Corporation shall constitute a waiver of notice
of such meeting, except when the stockholder attends the meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders of the Corporation need be
specified in any written waiver of notice.
(e) Stockholder List. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders of the Corporation, a complete list of
the stockholders, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either (i) at a place
within the city or other municipality or community where the meeting is to be
held, which place shall be specified in the notice of the meeting, or (ii) if
not so specified, at the place where the meeting is to be held. The list of
stockholders also shall be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
of the Corporation who is present at the meeting. The stock ledger shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by this subsection (e) or the books of the
Corporation, or to vote at any meeting of stockholders of the Corporation.
(f) Conduct of Meeting. Meetings of the stockholders of
the Corporation shall be presided over by one of the following officers in the
order of seniority and if present and acting:
<PAGE>
(i) the Chairman of the Board of Directors (if any); (ii) the Vice-Chairman of
the Board (if any); (iii) the President of the Corporation; (iv) a Vice
President; or (v) if none of the foregoing officers is in office and present
and acting, by a chairman of the meeting to be chosen by the stockholders. The
Secretary of the Corporation, or, in his absence, an Assistant Secretary,
shall act as secretary of every meeting; however, if neither the Secretary nor
an Assistant Secretary is present the person presiding at the meeting shall
appoint a secretary of the meeting.
(g) Proxy Representation. Every stockholder of the
Corporation may authorize another person or persons to act for him by proxy in
all matters in which a stockholder is entitled to participate, whether by
waiving notice of any meeting, voting or participating at a meeting, or
expressing consent or dissent without a meeting. Every proxy must be signed by
the stockholder or by his attorney-in-fact. No proxy shall be voted or acted
upon after three years from its date unless such proxy provides for a longer
period. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally.
(h) Inspectors. The Board of Directors, in advance of any
meeting of the stockholders of the Corporation, may, but need not, appoint one
or more inspectors of election to act at the meeting of stockholders or any
adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In the event any person who may be appointed as an inspector fails
to appear or act at the meeting, the vacancy may be filled by appointment made
by the Board of Directors in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, if any, before entering upon the
discharge of his duties, shall take and sign an oath to faithfully execute the
duties of inspector at such meeting with strict impartiality and according to
the best of his ability. The inspector or inspectors, if any, shall determine
(i) the number of shares of stock outstanding as of the record date and the
voting power of each, (ii) the shares of stock represented at the meeting,
(iii) the existence of a quorum, and (iv) the validity and effect of proxies,
and shall (x) receive votes, ballots, or consents, (y) hear and determine all
challenges and questions arising in connection with the right to vote, (z)
count and tabulate all votes, ballots, or consents, (xx) determine the result,
and (yy) do such acts as are proper to conduct the election or vote with
fairness to all stockholders. At the request of the person presiding at the
meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question, or matter determined by him or them, and shall
execute a certificate of any fact found by him or them. Except as otherwise
required by subsection (e) of Section 231 of the General Corporation Law, the
provisions of that Section shall not apply to the Corporation.
(i) Quorum. The holders of a majority of the outstanding
shares of stock of the Corporation shall constitute a quorum at a meeting of
stockholders for the transaction of any business. The stockholders present at
such meeting may adjourn the meeting despite the absence of a quorum.
(j) Voting. Each share of stock shall entitle the holder
thereof to one vote. Directors shall be elected by a plurality of the votes of
the shares present in person or represented by proxy and entitled to vote on
the election of Directors. Any other action shall be authorized by a majority
of the votes cast except where the General Corporation Law prescribes a
different percentage of votes and/or a different exercise of voting power, and
except as may be otherwise prescribed by the provisions of the Certificate of
Incorporation of the Corporation and these By-Laws. In the election of
Directors and for any other action voting need not be by ballot.
<PAGE>
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required
by the General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special
meeting of stockholders, may be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. Action taken pursuant to this
paragraph 8 shall be subject to the provisions of Section 228 of the General
Corporation Law.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
Corporation shall be managed by or shall be under the direction of the Board
of Directors. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board"
herein refers to the total number of Directors which the Corporation would
have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A Director need not be a
stockholder of the Corporation, a citizen of the United States, or a resident
of the State of Delaware. The initial Board of Directors shall consist of
three (3) persons. Thereafter, the number of Directors constituting the whole
Board of Directors shall be at least one. Subject to the foregoing limitation
and except for the initial Board of Directors, such number of Directors may be
fixed from time to time by action of the stockholders or of the Board of
Directors, or, if the number is not fixed, the number shall be three (3).
The number of Directors may be increased or decreased by action of the
stockholders or of the Board of Directors.
3. ELECTION AND TERM. The initial Board of Directors (unless
the members thereof shall have been named in the Certificate of Incorporation
of the Corporation) shall be elected by the incorporator or incorporators, and
the members thereof shall hold office until the first annual meeting of the
stockholders of the Corporation and until their successors are elected and
qualified or until their earlier resignation or removal from the initial Board
of Directors. Thereafter, Directors who are elected at an annual meeting of
stockholders of the Corporation, and Directors who are elected in the interim
to fill vacancies and newly created directorships, shall hold office until the
next annual meeting of stockholders of the Corporation and until their
successors are elected and qualified or until their earlier resignation or
removal. Except as the General Corporation Law may otherwise require, in the
interim between annual meetings of the stockholders or of special meetings of
the stockholders called for the election of Directors and/or for the removal
of one or more Directors and for the filling of any vacancy on the Board of
Directors in that connection, newly created directorships and any vacancies in
the Board of Directors, including unfilled vacancies resulting from the
removal of Directors for cause or without cause, may be filled by the vote of
a majority of the remaining Directors then in office, although less than a
quorum, or by the sole remaining Director. Any Director may resign at any
time, upon written notice to the Corporation.
<PAGE>
4. MEETINGS OF THE BOARD OF DIRECTORS
(a) Time. Meetings shall be held at such time as the
Board of Directors shall fix, except that the first meeting of a newly elected
Board shall be held as soon after its election as the members thereof may
conveniently assemble.
(b) Place. Meetings of the Board of Directors shall be
held at such place within or without the State of Delaware as shall be fixed
by the Board of Directors.
(c) Call. No call shall be required for regular meetings
for which the time and place have been fixed. Special meetings may be called
by or at the direction of either the Chairman of the Board (if any), the
Vice-Chairman of the Board (if any), or the President of the Corporation, or
by or at the direction of a majority of the Directors then in office.
(d) Notice or Actual or Constructive Waiver. No notice of
a meeting of the Board of Directors shall be required for regular meetings for
which the time and place have been fixed. Written, oral, or any other mode of
notice of the time and place shall be given for special meetings in sufficient
time for the convenient assembly of the Directors thereat. Notice need not be
given to any Director or to any member of any committee of the Board of
Directors who submits a written waiver of notice signed by him before or after
the time stated therein. Attendance of any Director or committee member at a
meeting shall constitute a waiver of notice of such meeting, except when such
Director or committee member attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
Directors needs be specified in any written waiver of notice.
(e) Quorum and Action. A majority of the whole Board of
Directors shall constitute a quorum except when a vacancy or vacancies
prevents such majority, whereupon a majority of the Directors then in office
shall constitute a quorum, provided, that such majority shall constitute at
least one-third of the entire Board of Directors. A majority of the Directors
present at a meeting, whether or not a quorum is present, may adjourn such
meeting to another time and place. Except as herein otherwise provided, and
except as otherwise provided by the General Corporation Law, the vote of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. The quorum and voting provisions
herein stated shall not be construed as conflicting with any provisions of the
General Corporation Law and these By-Laws which govern a meeting of Directors
held to fill vacancies in and newly created directorships on the Board of
Directors or an action of disinterested Directors.
(f) Chairman of the Meeting. The Chairman of the Board,
if any and if present and acting, shall preside at all meetings of the Board
of Directors. Otherwise, the Vice-Chairman of the Board, if any and if present
and acting, or the President, if present and acting, or any other Director
chosen by the whole Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided
by the General Corporation Law, any Director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of Directors.
<PAGE>
6. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees,
each committee to consist of one or more of the Directors of the Corporation.
The Board of Directors may designate one or more Directors as alternate
members of any committee, which alternate committee member may replace any
absent or disqualified member at any meeting of the committee. In the absence
or disqualification of any member of any such committee or committees, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors designating such
committee, shall have and may exercise the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
with the exception of any authority the delegation of which is prohibited by
Section 141 of the General Corporation Law, and may authorize the seal of the
Corporation to be affixed to all papers which may require it.
7. INFORMAL ACTION. Any member or members of the Board of
Directors or of any committee designated by such Board may participate in a
meeting of the Board of Directors or any such committee, as the case may be,
by means of conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other.
8. WRITTEN ACTION. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
ARTICLE III
OFFICERS
1. DESIGNATION. The officers of the Corporation shall
consist of a President, a Secretary, a Treasurer, and, if deemed necessary,
expedient, or desirable by the Board of Directors, a Chairman of the Board, a
Vice-Chairman of the Board, an Executive Vice President, one or more Vice
Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers with such titles as the resolution of the
Board of Directors choosing them shall designate.
2. QUALIFICATION. Except as may otherwise be provided in the
resolution of the Board of Directors choosing him, no officer other than the
Chairman or Vice-Chairman of the Board, if any, need be a Director. Any number
of offices may be held by the same person, as the Board of Directors may
determine.
3. TERM OF OFFICE. Unless otherwise provided in the
resolution or instrument appointing him, each officer of the Corporation shall
be chosen for a term which shall continue until the meeting of the Board of
Directors following the next annual meeting of stockholders and until his
successor shall have been appointed and qualified.
<PAGE>
Any officer of the Corporation may be removed, with or
without cause by the Board of Directors, and any subordinate or junior officer
not appointed by the Board of Directors, but appointed under duly constituted
authority conferred by the Board of Directors, may be removed, with or without
cause, by the officer or officers who appointed him.
Any vacancy in any office may be filled by the Board of
Directors. A vacancy in any junior or subordinate office not filled by the
Board of Directors may be filled by the officer or officers duly vested with
the authority to appoint the person to fill such office.
4. APPOINTMENT OF OFFICERS. The Board of Directors shall
appoint the President, the Secretary, the Treasurer, the Chairman of the Board
(if any), the Vice Chairman of the Board (if any) and the Executive Vice
President (if any), and one or more additional Vice Presidents (if any), and
such other officers as may be designated by it, and may confer upon any
executive officer or executive officers the authority to appoint junior or
subordinate officers.
5. DUTIES AND AUTHORITY. In addition to those duties that
may from time to time be delegated to them by the Board of Directors, the
officers of the Corporation shall have the following duties:
(a) Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the stockholders of the Corporation and of
the Board of Directors at which he is present; shall be ex officio a member of
all committees formed by the Board of Directors; shall be an active
participant in the management of the business of the Corporation; shall have
authority to do anything the President may do; and shall have such other
duties and powers as the Board of Directors may prescribe.
(b) President. The President shall be the chief executive
officer of the Corporation, shall; together with the Chairman of the Board,
have general and active management of the business of the Corporation; shall
see that all orders and resolutions of the Board of Directors are carried into
effect; and, in the absence or non-election of the Chairman of the Board,
shall preside at all meetings of the stockholders of the Corporation and the
Board of Directors at which he is present if he is also a Director. The
President also shall execute bonds, mortgages and other contracts requiring a
seal under the seal of the Corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be delegated expressly by the Board of Directors to
some other officer or agent of the Corporation, and shall have such other
powers and duties and the Board of Directors may prescribe.
(c) Vice President. The Vice President or Vice President
(if any) shall have such duties and powers as the Board of Directors or the
President may prescribe. In the absence of the President or in the event of
his inability or refusal to act, the Vice President (if any) or, if there be
more than one, the Vice Presidents, in the order designated by the Board of
Directors, or, in the absence of such designation, then in the order of their
appointment, shall perform the duties and exercise the powers of the
President.
(d) Secretary and Assistant Secretary. The Secretary
shall record the proceedings of all meetings and actions in writing of the
stockholders of the Corporation and the Board of Directors in books to be kept
for that purpose; shall perform like duties for the standing committees of the
Board of Directors when required; and shall give, or cause to be given, calls
and/or notices of all meetings
<PAGE>
of the stockholders of the Corporation and meetings of the Board of Directors
in accordance with these By-Laws. The Secretary also shall have custody of the
corporate seal and shall attest thereto when authorized by the Board of
Directors or the President; and shall have such other duties and powers as the
Board of Directors may prescribe.
The Assistant Secretary (if any) or, if there be more
than one, the Assistant Secretaries, in the order designated by the Board of
Directors, or, in the absence of such designation, then in the order of their
appointment, shall, in the absence of the Secretary or in the event of the
Secretary's inability or refusal to act, perform the duties and exercise the
powers of the Secretary; and shall have such other duties and powers as the
Board of Directors may prescribe. Any officer of the Corporation may be
removed, with or without cause, by the Board of Directors. Any vacancy in any
office may be filled by the Board of Directors.
In the absence of the Secretary or an Assistant Secretary
, or in the event of the inability or refusal of such officer to give or cause
to be given any call and or notice required by law or these By-Laws, any such
all and/or notice may be given by any person so directed by the Board of
Directors, the President or stockholders of the Corporation upon whose
requisition the meeting is called in accordance with these By-Laws.
(e) Treasurer and Assistant Treasurer. The Treasurer
shall have custody of the corporate funds and securities of the Corporation;
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation; and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories
as may be designated by the Board of Directors. The Treasurer also shall
disburse such funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements; shall render the
Board of Directors, when the Board of Directors so requires, an account of all
such officer's transactions and of the financial condition of the Corporation;
and shall have such other duties and powers as the Board of Directors may
prescribe. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond, which instrument shall be renewed every six years, in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of such officer's death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the Corporation.
The Assistant Treasurer (if any) or if there be more than
one, the Assistant Treasurers, in the order designated by the Board of
Directors, or, in the absence of such designation, then in the order of their
appointment, shall, in the absence of the Treasurer or in the event of the
Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer; and shall have such other duties and powers as the
Board of Directors may prescribe.
(f) Other Officers. Any other officer of the Corporation
shall have such powers and duties as the Board of Directors may prescribe.
6. RESOLUTIONS AND INSTRUMENTS; EFFECT. The Secretary of the
Corporation shall keep, or cause to be kept, with these By-Laws a copy of
every resolution or instrument designation and appointing officers and
prescribing their qualifications, tenure, authority, duties, compensation and
other appropriate incidents and attributes of office; and each such resolution
or
<PAGE>
instrument shall be deemed to be a component part of these By-Laws.
ARTICLE IV
INDEMNIFICATION
The Corporation shall indemnify its officers, Directors,
employees and agents to the full extent permitted by the General Corporation
Law.
Expenses incurred by a Director in defending a civil or
criminal action, suit or proceeding by reason of the fact that he is was a
Director (or was serving at the Corporation's request as a director or officer
of another corporation) shall be paid by the Corporation in advance of the
final disposition of such actin, suit or proceeding upon receipt of an
undertaking by or on behalf of such Director to repay such amount if it
ultimately shall be determined that such Director is not entitled to be
indemnified by the Corporation as authorized by relevant sections of the
General Corporation Law.
The indemnification and advancement of expenses provided by
this Bylaw shall not be deemed exclusive of any other rights provided by any
agreement, vote of stockholders or disinterested Directors or otherwise.
ARTICLE VI
GENERAL PROVISIONS
1. DIVIDENDS. Dividends upon the capital stock of the
Corporation may be declared by the Board of Directors in any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in property
or in shares of capital stock. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors, from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purposes as the Board of Directors shall think
conducive to the interests of the Corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
2. CHECKS. All checks or demand for money and notes of the
Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
3. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed, and shall be subject to change, by the Board of Directors.
4. CORPORATE SEAL. The corporate seal shall be in such form
as the Board of Directors shall prescribe.
<PAGE>
ARTICLE VII
CONTROL OVER BY-LAWS
Subject to the provisions of the Certificate of
Incorporation of the Corporation and the provisions of the General Corporation
Law, the power to amend, alter, or repeal these By-Laws and to adopt new
by-laws may be exercised by the Board of Directors or by the stockholders.
<PAGE>
WARRANT AGREEMENT
AGREEMENT, dated as of this th day of , 199 ,
by and among The Marquee Group, Inc., a Delaware corporation ("Company"),
Continental Stock Transfer & Trust Company, as Warrant Agent (the "Warrant
Agent"), and Royce Investment Group, Inc., a New York corporation ("Royce").
W I T N E S S E T H
WHEREAS, in connection with a public offering of up to
3,000,000 units ("Units"), each unit consisting of one (1) share of the
Company's Common Stock, $.01 par value ("Common Stock") and one (1) redeemable
Warrant ("Warrants") pursuant to an underwriting agreement (the "Underwriting
Agreement") dated , 199 between the Company and Royce, (ii) the
issuance to Royce or its designees of Unit Purchase Options to purchase an
aggregate of 300,000 additional Units, to be dated as of , 199 (the
"Unit Purchase Options"), and (iii) the issuance of 2,000,000 Warrants to
certain securityholders of the Company upon conversion of debentures (the
"Debentures") acquired by them in a private placement in August 1996, the
Company may issue up to 5,330,000 Warrants; and
WHEREAS, each Warrant initially entitles the Registered
Holder thereof to purchase one (1) share of Common Stock; and
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to so act, in
connection with the issuance, registration, transfer exchange and redemption of
the Warrants, the issuance of certificates representing the Warrants, the
exercise of the Warrants, and the rights of the Registered Holders thereof;
NOW THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth and for the purpose of defining the
terms and provisions of the Warrants and the certificates representing the
Warrants and the respective rights and obligations thereunder of the Company,
the holders of certificates representing the Warrants and the Warrant Agent,
the parties hereto agree as follows:
SECTION 1. Definitions. As used herein, the following terms
shall have the following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean stock of the Company of any
class, whether now or hereafter authorized, which has the right to participate
in the distribution of earnings and assets of the Company without limit as to
amount or percentage, which at the date hereof consists of 25,000,000 shares of
Common Stock, $.01 par value.
-1-
<PAGE>
(b) "Corporate Office" shall mean the office of the Warrant
Agent (or its successor) at which at any particular time its principal business
shall be administered, which office is located at the date hereof at Two
Broadway, 19th Floor, New York, NY 10004.
(c) "Exercise Date" shall mean, as to any Warrant, the date
on which the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, and (b)
payment in cash, or by official bank or certified check made payable to the
Company, of an amount in lawful money of the United States of America equal to
the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean as to each
Warrant the Separation Date (as herein defined).
(e) "Purchase Price" shall mean the purchase price to be paid
upon exercise of each Warrant in accordance with the terms hereof, which price
shall be $7.50, subject to adjustment from time to time pursuant to the
provisions of Section 9 hereof, and subject to the Company's right to reduce
the Purchase Price upon notice to all Registered Holders of Warrants.
(f) "Redemption Price" shall mean the price at which the
Company may, at its option in accordance with the terms hereof, redeem the
Warrants, which price shall be $0.05 per Warrant.
(g) "Registered Holder" shall mean as to any Warrant and as
of any particular date, the person in whose name the certificate representing
the Warrant shall be registered on that date on the books maintained by the
Warrant Agent pursuant to Section 6.
(h) "Transfer Agent" shall mean Continental Stock Transfer &
Trust Company, as the Company's transfer agent, or its authorized successor, as
such.
(i) "Warrant Expiration Date" shall mean 5:00 P.M. (New York
time) on or, with respect to Warrants which are outstanding as of the
applicable Redemption Date (as defined in Section 8) and specifically excluding
Warrants issuable upon exercise of Unit Purchase Options if the Unit Purchase
Options have not been exercised, the Redemption Date, whichever is earlier;
provided that if such date shall in the State of New York be a holiday or a day
on which banks are authorized or required to close, then 5:00 P.M. (New York
time) on the next following day which in the State of New York is not a holiday
or a day on which banks are authorized or required to close. Upon notice to all
Registered Holders, the Company shall have the right to extend the Warrant
Expiration Date.
-2-
<PAGE>
SECTION 2. Warrants and Issuance of Warrant
Certificates.
(a) A Warrant initially shall entitle the Registered Holder
of the Warrant Certificate representing such Warrant to purchase one share of
Common Stock upon the exercise thereof, in accordance with the terms hereof,
subject to modification and adjustment as provided in Section 9.
(b) The Warrants included in the offering of Units will not
be detachable or separately transferable from the shares of Common Stock
constituting part of such Units until six months following the closing of the
offering of the Units, or such earlier date as Royce, in its sole discretion,
may determine (the "Separation Date").
(c) Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants sold pursuant to the Underwriting Agreement
and issuable upon conversion of the Debentures shall be executed by the Company
and delivered to the Warrant Agent. Upon written order of the Company signed by
its President or Chairman or a Vice President and by its Secretary or an
Assistant Secretary, the Warrant Certificates shall be countersigned, issued
and delivered by the Warrant Agent as part of the Units and as issuable upon
conversion of the Debentures.
(d) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing up to an aggregate of 5,330,000 shares
of Common Stock, subject to adjustment as described herein, upon the exercise
of Warrants in accordance with this Agreement.
(e) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in required
whole number denominations to the persons entitled thereto in connection with
any transfer or exchange permitted under this Agreement; provided that no
Warrant Certificates shall be issued except (i) those initially issued
hereunder, (ii) those issued on or after the Initial Warrant Exercise Date,
upon the exercise of fewer than all Warrants represented by any Warrant
Certificate, to evidence any unexercised Warrants held by the exercising
Registered Holder, (iii) those issued upon any transfer or exchange pursuant to
Section 6; (iv) those issued in replacement of lost, stolen, destroyed or
mutilated Warrant Certificates pursuant to Section 7; (v) those issued pursuant
to the Unit Purchase Option; and (vi) at the option of the Company, in such
form as may be approved by the its Board of Directors, to reflect any
adjustment or change in the Purchase Price, the number of shares of Common
Stock purchasable upon exercise of the Warrants or the Target Price(s) therefor
made pursuant to Section 9 hereof.
(f) Pursuant to the terms of the Unit Purchase Options, Royce
may purchase up to 300,000 Units, which include up to 300,000 Warrants.
Notwithstanding anything to the contrary contained herein, the Warrants
underlying the Unit Purchase Option shall not be subject
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to redemption by the Company except under the terms and conditions set forth in
the Unit Purchase Options.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the
form annexed hereto as Exhibit A (the provisions of which are hereby
incorporated herein) and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Warrants may be listed, or to conform to usage or to the requirements of
Section 2(d). The Warrant Certificates shall be dated the date of issuance
thereof (whether upon initial issuance, transfer, exchange or in lieu of
mutilated, lost, stolen, or destroyed Warrant Certificates) and issued in
registered form. Warrant Certificates shall be numbered serially with the
letter W on Warrants of all denominations.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President and by
its Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be an officer of the Company or to hold the
particular office referenced in the Warrant Certificate before the date of
issuance of the Warrant Certificates or before countersignature by the Warrant
Agent and issue and delivery thereof, such Warrant Certificates may
nevertheless be countersigned by the Warrant Agent, issued and delivered with
the same force and effect as though the person who signed such Warrant
Certificates had not ceased to be an officer of the Company or to hold such
office. After countersignature by the Warrant Agent, Warrant Certificates shall
be delivered by the Warrant Agent to the Registered Holder without further
action by the Company, except as otherwise provided by Section 4(a) hereof.
SECTION 4. Exercise.
(a) Each Warrant may be exercised by the Registered Holder
thereof at any time on or after the Initial Exercise Date, but not after the
Warrant Expiration Date, upon the terms and subject to the conditions set forth
herein and in the applicable Warrant Certificate. A Warrant shall be deemed to
have been exercised immediately prior to the close of business on the Exercise
Date and the person entitled to receive the securities deliverable upon such
exercise shall be treated for all purposes as the holder of those securities
upon the exercise of the Warrant as of the close of business on the Exercise
Date. As soon as practicable on or after the Exercise Date, the Warrant Agent
shall deposit the proceeds received from the exercise of a Warrant and shall
notify the Company in writing of the exercise of the Warrants. Promptly
following, and in any
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event within five days after the date of such notice from the Warrant Agent,
the Warrant Agent, on behalf of the Company, shall cause to be issued and
delivered by the Transfer Agent, to the person or persons entitled to receive
the same, a certificate or certificates for the securities deliverable upon
such exercise, (plus a Warrant Certificate for any remaining unexercised
Warrants of the Registered Holder) unless prior to the date of issuance of such
certificates the Company shall instruct the Warrant Agent to refrain from
causing such issuance of certificates pending clearance of checks received in
payment of the Purchase Price pursuant to such Warrants. Notwithstanding the
foregoing, in the case of payment made in the form of a check drawn on an
account of Royce or such other investment banks and brokerage houses as the
Company shall approve in writing to the Warrant Agent, certificates shall
immediately be issued without prior notice to the Company or any delay. Upon
the exercise of any Warrant and clearance of the funds received, the Warrant
Agent shall promptly remit the payment received for the Warrant (the "Warrant
Proceeds") to the Company or as the Company may direct in writing, subject to
the provisions of Sections 4(b) and 4(c) hereof.
(b) If, at the Exercise Date in respect of the exercise of
any Warrant after , 199 , (i) the market price of the Company's Common
Stock is greater than the then Purchase Price of the Warrant, (ii) the exercise
of the Warrant was solicited by a member of the National Association of
Securities Dealers, Inc. ("NASD") as designated in writing on the Warrant
Certificate Subscription Form, (iii) the Warrant was not held in a
discretionary account, (iv) disclosure of compensation arrangements was made
both at the time of the original offering and at the time of exercise; and (v)
the solicitation of the exercise of the Warrant was not in violation of Rule
10b-6 (as such rule or any successor rule may be in effect as of such time of
exercise) promulgated under the Securities Exchange Act of 1934, then the
Warrant Agent, simultaneously with the distribution of the Warrant Proceeds to
the Company shall, on behalf of the Company, pay from the Warrant Proceeds, a
fee of five percent (5%) (the "Royce Fee") of the Purchase Price to Royce (of
which a portion may be reallowed by Royce to the dealer who solicited the
exercise). In the event the Royce Fee is not received within five days of the
date on which the Company receives Warrant Proceeds, then the Royce Fee shall
begin accruing interest at an annual rate of prime plus four percent (4%),
payable by the Company to Royce at the time Royce receives the Royce Fee.
Within five days after exercise the Warrant Agent shall send to Royce a copy of
the reverse side of each Warrant exercised. Royce shall reimburse the Warrant
Agent, upon request, for its reasonable expenses relating to compliance with
this Section 4(b). In addition, Royce and the Company may at any time during
business hours, examine the records of the Warrant Agent, including its ledger
of original Warrant Certificates returned to the Warrant Agent upon exercise of
Warrants. The provisions of this paragraph may not be modified, amended or
deleted without the prior written consent of Royce.
(c) In order to enforce the provisions of Section 4(b) above,
in the event there is any dispute or question as to the amount or payment of
the Royce Fee, the Warrant Agent is hereby expressly authorized to withhold
payment to the Company of the Warrant Proceeds unless and until the Company
establishes an escrow account for the purpose of depositing the entire amount
of the Royce Fee, which amount will be deducted from the net Warrant Proceeds
to be
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paid to the Company. The funds placed in the escrow account may not be released
to the Company without a written agreement from Royce that the required Royce
Fee has been received by Royce.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes;
etc.
(a) The Company covenants that it will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose
of issue upon exercise of Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Warrants. The
Company covenants that all shares of Common Stock which shall be issuable upon
exercise of the Warrants shall, at the time of delivery, be duly and validly
issued, fully paid, nonassessable and free from all taxes, liens and charges
with respect to the issue thereof, (other than those which the Company shall
promptly pay or discharge) and that upon issuance such shares shall be listed
on each national securities exchange, on which the other shares of outstanding
Common Stock of the Company are then listed or shall be eligible for inclusion
in the Nasdaq National Market or the Nasdaq SmallCap Market if the other shares
of outstanding Common Stock of the Company are so included.
(b) The Company covenants that if any securities to be
reserved for the purpose of exercise of Warrants hereunder require registration
with, or approval of, any governmental authority under any federal securities
law before such securities may be validly issued or delivered upon such
exercise, then the Company will in good faith and as expeditiously as
reasonably possible, endeavor to secure such registration or approval. The
Company will use reasonable efforts to obtain appropriate approvals or
registrations under state "blue sky" securities laws. With respect to any such
securities, however, Warrants may not be exercised by, or shares of Common
Stock issued to, any Registered Holder in any state in which such exercise
would be unlawful.
(c) The Company shall pay all documentary, stamp or similar
taxes and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares upon exercise
of the Warrants; provided, however, that if the shares of Common Stock, are to
be delivered in a name other than the name of the Registered Holder of the
Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to
requisition the Company's Transfer Agent from time to time for certificates
representing shares of Common Stock issuable upon exercise of the Warrants, and
the Company will authorize the Transfer Agent to comply with all such proper
requisitions. The Company will file with the Warrant Agent a statement setting
forth the name and address of the Transfer Agent of the Company for shares of
Common Stock issuable upon exercise of the Warrants.
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SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred, in whole or in part, subject to the provisions of
Section 2(b) herein. Warrant Certificates to be exchanged shall be surrendered
to the Warrant Agent at its Corporate Office, and upon satisfaction of the
terms and provisions hereof, the Company shall execute and the Warrant Agent
shall countersign, issue and deliver in exchange therefor the Warrant
Certificate or Certificates which the Registered Holder making the exchange
shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in
which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof in accordance with its
regular practice. Upon due presentment for registration of transfer of any
Warrant Certificate at such office, the Company shall execute and the Warrant
Agent shall issue and deliver to the transferee or transferees a new Warrant
Certificate or Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder or
his attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for
any exchange or registration of transfer of Warrant Certificates. In addition,
the Company may require payment by such holder of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly cancelled
by the Warrant Agent and thereafter retained by the Warrant Agent until
termination of this Agreement or resignation as Warrant Agent, or, with the
prior written consent of Royce, disposed of or destroyed, at the direction of
the Company.
(f) Prior to due presentment for registration of transfer
thereof, the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof and of each
Warrant represented thereby (notwithstanding any notations of ownership or
writing thereon made by anyone other than a duly authorized officer of the
Company or the Warrant Agent) for all purposes and shall not be affected by any
notice to the contrary. The Warrants, which are being publicly offered in Units
with shares of Common Stock pursuant to the Underwriting Agreement, will be
immediately detachable from the Common Stock and transferable separately
therefrom.
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<PAGE>
SECTION 7. Loss or Mutilation. Upon receipt by the Company
and the Warrant Agent of evidence satisfactory to them of the ownership of and
loss, theft, destruction or mutilation of any Warrant Certificate and (in case
of loss, theft or destruction) of indemnity satisfactory to them, and (in the
case of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall ( in the absence of notice to the Company
and/or Warrant Agent that the Warrant Certificate has been acquired by a bona
fide purchaser) countersign and deliver to the Registered Holder in lieu
thereof a new Warrant Certificate of like tenor representing an equal aggregate
number of Warrants. Applicants for a substitute Warrant Certificate shall
comply with such other reasonable regulations and pay such other reasonable
charges as the Warrant Agent may prescribe.
SECTION 8. Redemption.
(a) Subject to the provisions of paragraph 2(g) hereof, on
not less than thirty (30) days notice given at any time after , (the
"Redemption Notice"), to Registered Holders of the Warrants being redeemed at
any time after , the Warrants may be redeemed, at the option of the Company, at
a redemption price of $0.05 per Warrant, provided the Market Price of the
Common Stock receivable upon exercise of such Warrants shall exceed $11.50 with
respect to the Warrants (the "Target Price"), subject to adjustment as set
forth in Section 8(f), below. Market Price shall mean (i) the average closing
bid price of the Common Stock, for twenty (20) consecutive business days ending
on the Calculation Date as reported by Nasdaq, if the Common Stock is traded on
the Nasdaq SmallCap Market, or (ii) the average last reported sale price of the
Common Stock, for thirty (30) consecutive business days ending on the
Calculation Date, as reported by the primary exchange on which the Common Stock
is traded, if the Common Stock is traded on a national securities exchange, or
by Nasdaq, if the Common Stock is traded on the Nasdaq National Market. All
Warrants of a class must be redeemed if any of that class are redeemed,
provided that the Warrants underlying the Unit Purchase Option may only be
redeemed in compliance with and subject to the terms and conditions of the Unit
Purchase Option. For purposes of this Section 8, the Calculation Date shall
mean a date within 5 days of the mailing of the Redemption Notice. The date
fixed for redemption of the Warrants is referred to herein as the "Redemption
Date".
(b) If the conditions set forth in Section 8(a) are met, and
the Company desires to exercise its right to redeem the Warrants, it shall
request Royce to mail a Redemption Notice to each of the Registered Holders of
the Warrants to be redeemed, first class, postage prepaid, not later than the
thirtieth day before the date fixed for redemption, at their last address as
shall appear on the records maintained pursuant to Section 6(b). Any notice
mailed in the manner provided herein shall be conclusively presumed to have
been duly given whether or not the Registered Holder receives such notice.
(c) The Redemption Notice shall specify (i) the redemption
price, (ii) the Redemption Date, (iii) the place where the Warrant Certificates
shall be delivered and the redemption price paid, (iv) that Royce will assist
each Registered Holder of a Warrant in
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<PAGE>
connection with the exercise thereof and (v) that the right to exercise the
Warrant shall terminate at 5:00 P.M. (New York time) on the business day
immediately preceding the Redemption Date. No failure to mail such notice nor
any defect therein or in the mailing thereof shall affect the validity of the
proceedings for such redemption except as to a Registered Holder (a) to whom
notice was not mailed or (b) whose notice was defective. An affidavit of the
Warrant Agent or of the Secretary or an Assistant Secretary of Royce or the
Company that notice of redemption has been mailed shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00
P.M. (New York time) on the business day immediately preceding the Redemption
Date. On and after the Redemption Date, Registered Holders of the Warrants
shall have no further rights except to receive, upon surrender of the Warrant,
the Redemption Price.
(e) From and after the Redemption Date, the Company shall, at
the place specified in the Redemption Notice, upon presentation and surrender
to the Company by or on behalf of the Registered Holder thereof of one or more
Warrant Certificates evidencing Warrants to be redeemed, deliver or cause to be
delivered to or upon the written order of such Registered Holder a sum in cash
equal to the Redemption Price of each such Warrant. From and after the
Redemption Date and upon the deposit or setting aside by the Company of a sum
sufficient to redeem all the Warrants called for redemption, such Warrants
shall expire and become void and all rights hereunder and under the Warrant
Certificates, except the right to receive payment of the Redemption Price,
shall cease.
(f) If the shares of the Company's Common Stock are
subdivided or combined into a greater or smaller number of shares of Common
Stock, the Target Prices shall be proportionally adjusted by the ratio which
the total number of shares of Common Stock outstanding immediately prior to
such event bears to the total number of shares of Common Stock to be
outstanding immediately after such event.
SECTION 9. Adjustment of Exercise Price and Number of Shares
of Common Stock or Warrants.
(a) Subject to the exceptions referred to in Section 9(g)
below, in the event the Company shall, at any time or from time to time after
the date hereof, sell any shares of Common Stock for a consideration per share
less than the Market Price of the Common Stock (as defined in Section 8, except
that for purposes of Section 9, the Calculation Date shall mean the date of the
sale or other transaction referred to in this Section 9) on the date of the
sale or issue any shares of Common Stock as a stock dividend to the holders of
Common Stock, or subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares (any such sale, issuance, subdivision
or combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Purchase Price in effect immediately
prior to such Change of Shares shall be changed to a price (including any
applicable fraction of a cent) determined by multiplying the Purchase Price in
effect immediately prior thereto by a fraction, the
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numerator of which shall be the sum of the number of shares of Common Stock
outstanding immediately prior to the issuance of such additional shares and the
number of shares of Common Stock which the aggregate consideration received
(determined as provided in subsection 9(f)(F) below) for the issuance of such
additional shares would purchase at the Market Price and the denominator of
which shall be the sum of the number of shares of Common Stock outstanding
immediately after the issuance of such additional shares. Such adjustment shall
be made successively whenever such an issuance is made.
Upon each adjustment of the Purchase Price pursuant
to this Section 9, the total number of shares of Common Stock purchasable upon
the exercise of each Warrant, shall (subject to the provisions contained in
Section 9(b) hereof) be such number of shares (calculated to the nearest tenth)
purchasable at the Purchase Price in effect immediately prior to such
adjustment multiplied by a fraction, the numerator of which shall be the
Purchase Price in effect immediately prior to such adjustment and the
denominator of which shall be the Purchase Price in effect immediately after
such adjustment.
(b) The Company may elect, upon any adjustment of the
Purchase Price hereunder, to adjust the number of Warrants outstanding, in lieu
of the adjustment in the number of shares of Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Warrant held of record prior to such adjustment of
the number of Warrants shall become that number of Warrants (calculated to the
nearest tenth) determined by multiplying the number one by a fraction, the
numerator of which shall be the Purchase Price in effect immediately prior to
such adjustment and the denominator of which shall be the Purchase Price in
effect immediately after such adjustment. Upon each adjustment of the number of
Warrants pursuant to this Section 9, the Company shall, as promptly as
practicable, cause to be distributed to each Registered Holder of Warrant
Certificates on the date of such adjustment Warrant Certificates evidencing,
subject to Section 10 hereof, the number of additional Warrants to which such
Holder shall be entitled as a result of such adjustment or, at the option of
the Company, cause to be distributed to such Holder in substitution and
replacement for the Warrant Certificates held by him prior to the date of
adjustment (and upon surrender thereof, if required by the Company) new Warrant
Certificates evidencing the number of Warrants to which such Holder shall be
entitled after such adjustment.
(c) In case of any reclassification, capital reorganization
or other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock), or in
case of any sale or conveyance to another corporation of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then outstanding shall
have the right thereafter, by exercising such Warrant, to purchase the kind and
number of shares of stock or
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other securities or property (including cash) receivable upon such
reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
that might have been purchased upon exercise of such Warrant immediately prior
to such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance. Any such provision shall include
provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 9. The Company
shall not effect any such consolidation, merger or sale unless prior to or
simultaneously with the consummation thereof the successor (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing assets or other appropriate corporation or entity shall assume, by
written instrument executed and delivered to the Warrant Agent, the obligation
to deliver to the holder of each Warrant such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holders may be
entitled to purchase and the other obligations of the Company under this
Agreement. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and other changes of outstanding
shares of Common Stock and to successive consolidations, mergers, sales or
conveyances.
(d) Irrespective of any adjustments or changes in the
Purchase Price or the number of shares of Common Stock purchasable upon
exercise of the Warrants, the Warrant Certificates theretofore and thereafter
issued shall, unless the Company shall exercise its option to issue new Warrant
Certificates pursuant to Section 2(f) hereof, continue to express the Purchase
Price per share, the number of shares purchasable thereunder and the Redemption
Price therefor as the Purchase Price per share, and the number of shares
purchasable and the Redemption Price therefor were expressed in the Warrant
Certificates when the same were originally issued.
(e) After each adjustment of the Purchase Price pursuant to
this Section 9, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Purchase Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant after such adjustment and, if the
Company shall have elected to adjust the number of Warrants, the number of
Warrants to which the Registered Holder of each Warrant shall then be entitled,
and the adjustment in Redemption Price resulting therefrom, and (iii) a brief
statement of the facts accounting for such adjustment. The Company will
promptly file such certificate with the Warrant Agent and cause a brief summary
thereof to be sent by ordinary first class mail to Royce and to each Registered
Holder of Warrants at his last address as it shall appear on the registry books
of the Warrant Agent. No failure to mail such notice nor any defect therein or
in the mailing thereof shall affect the validity thereof except as to the
holder to whom the Company failed to mail such notice, or except as to the
holder whose notice was defective. The affidavit of an officer of the Warrant
Agent or the Secretary or an Assistant Secretary of the Company that such
notice has been mailed shall, in the absence of fraud, be prima facie evidence
of the facts stated therein.
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(f) For purposes of Section 9(a) and 9(b) hereof, the
following provisions (A) to (F) shall also be applicable:
(A) The number of shares of Common Stock outstanding
at any given time shall include shares of Common Stock owned
or held by or for the account of the Company and the sale or
issuance of such treasury shares or the distribution of any
such treasury shares shall not be considered a Change of
Shares for purposes of said sections.
(B) No adjustment of the Purchase Price shall be
made unless such adjustment would require an increase or
decrease of at least $.10 in the Purchase Price; provided
that any adjustments which by reason of this clause (B) are
not required to be made shall be carried forward and shall be
made at the time of and together with the next subsequent
adjustment which, together with any adjustment(s) so carried
forward, shall require an increase or decrease of at least
$.10 in the Purchase Price then in effect hereunder.
(C) In case of (1) the sale by the Company for cash
(or as a component of a unit being sold for cash) of any
rights or warrants to subscribe for or purchase, or any
options for the purchase of, Common Stock or any securities
convertible into or exchangeable for Common Stock without the
payment of any further consideration other than cash, if any
(such securities convertible, exercisable or exchangeable
into Common Stock being herein called "Convertible
Securities"), or (2) the issuance by the Company, without the
receipt by the Company of any consideration therefor, of any
rights or warrants to subscribe for or purchase, or any
options for the purchase of, Common Stock or Convertible
Securities, in each case, if (and only if) the consideration
payable to the Company upon the exercise of such rights,
warrants or options shall consist of cash, whether or not
such rights, warrants or options, or the right to convert or
exchange such Convertible Securities, are immediately
exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the
minimum aggregate consideration payable to the Company upon
the exercise of such rights, warrants or options, plus the
consideration, if any, received by the Company for the
issuance or sale of such rights, warrants or options, plus,
in the case of such Convertible Securities, the minimum
aggregate amount of additional consideration, other than such
Convertible Securities, payable upon the conversion or
exchange thereof, by (y) the total maximum number of shares
of Common Stock issuable upon the exercise of such rights,
warrants or options or upon the conversion or exchange of
such Convertible Securities issuable upon the exercise of
such rights, warrants or options) is less than the Market
Price of the Common Stock on the date of the issuance or sale
of such rights, warrants or options, then the total maximum
number of shares of Common Stock issuable
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upon the exercise of such rights, warrants or options or upon
the conversion or exchange of such Convertible Securities (as
of the date of the issuance or sale of such rights, warrants
or options) shall be deemed to be outstanding shares of
Common Stock for purposes of Sections 9(a) and 9(b) hereof
and shall be deemed to have been sold for cash in an amount
equal to such price per share.
(D) In case of the sale by the Company for cash of
any Convertible Securities, whether or not the right of
conversion or exchange thereunder is immediately exercisable,
and the price per share for which Common Stock is issuable
upon the conversion or exchange of such Convertible
Securities (determined by dividing (x) the total amount of
consideration received by the Company for the sale of such
Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange thereof,
by (y) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of such Convertible
Securities) is less than the Market Price of the Common Stock
on the date of the sale of such Convertible Securities, then
the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of such Convertible
Securities (as of the date of the sale of such Convertible
Securities) shall be deemed to be outstanding shares of
Common Stock for purposes of Sections 9(a) and 9(b) hereof
and shall be deemed to have been sold for cash in an amount
equal to such price per share.
(E) In case the Company shall modify the rights of
conversion, exchange or exercise of any of the securities
referred to in (C) or (D) above or any other securities of
the Company convertible, exchangeable or exercisable for
shares of Common Stock, for any reason other than an event
that would require adjustment to prevent dilution, so that
the consideration per share received by the Company after
such modification is less than the Market Price on the date
prior to such modification, the Purchase Price to be in
effect after such modification shall be determined by
multiplying the Purchase Price in effect immediately prior to
such event by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding on the date
prior to the modification plus the number of shares of Common
Stock which the aggregate consideration receivable by the
Company for the securities affected by the modification would
purchase at the Market Price and of which the denominator
shall be the number of shares of Common Stock outstanding on
such date plus the number of shares of Common Stock to be
issued upon conversion, exchange or exercise of the modified
securities at the modified rate. Such adjustment shall become
effective as of the date upon which such modification shall
take effect. On the expiration of any such right, warrant or
option or the termination of any such right to convert or
exchange any such Convertible Securities referred to in
Paragraph (C) or (D) above, the Purchase Price then in effect
hereunder shall forthwith be readjusted to
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<PAGE>
such Purchase Price as would have obtained (a) had the
adjustments made upon the issuance or sale of such rights,
warrants, options or Convertible Securities been made upon
the basis of the issuance of only the number of shares of
Common Stock theretofore actually delivered (and the total
consideration received therefor) upon the exercise of such
rights, warrants or options or upon the conversion or
exchange of such Convertible Securities and (b) had
adjustments been made on the basis of the Purchase Price as
adjusted under clause (a) for all transactions (which would
have affected such adjusted Purchase Price) made after the
issuance or sale of such rights, warrants, options or
Convertible Securities.
(F) In case of the sale for cash of any shares of
Common Stock, any Convertible Securities, any rights or
warrants to subscribe for or purchase, or any options for the
purchase of, Common Stock or Convertible Securities, the
consideration received by the Company therefore shall be
deemed to be the gross sales price therefor without deducting
therefrom any expense paid or incurred by the Company or any
underwriting discounts or commissions or concessions paid or
allowed by the Company in connection therewith.
(g) No adjustment to the Purchase Price of the Warrants or to
the number of shares of Common Stock purchasable upon the exercise of each
Warrant will be made, however,
(i) upon the exercise of any of the options
presently outstanding under the Company's 1996 Stock Option
Plan (the "Plan") for officers, directors and certain other
key personnel of the Company; or
(ii) upon the issuance or exercise of any other
securities which may hereafter be granted or exercised under
the Plan or under any other employee benefit plan of the
Company; or
(iii) upon the sale or exercise of the Warrants,
including without limitation the sale or exercise of any of
the Warrants comprising the Unit Purchase Option or upon the
sale or exercise of the Unit Purchase Option; or
(iv) upon the sale of any shares of Common Stock or
Convertible Securities in a firm commitment underwritten
public offering, including, without limitation, shares sold
upon the exercise of any overallotment option granted to the
underwriters in connection with such offering; or
(v) upon the issuance or sale of Common Stock or
Convertible Securities upon the exercise of any rights or
warrants to subscribe for or purchase, or any options for the
purchase of, Common Stock or Convertible Securities, whether
or not such rights, warrants or options were outstanding on
the date of the original sale of the Warrants or were
thereafter issued or sold; or
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<PAGE>
(vi) upon the issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether
or not any adjustment in the Purchase Price was made or
required to be made upon the issuance or sale of such
Convertible Securities and whether or not such Convertible
Securities were outstanding on the date of the original sale
of the Warrants or were thereafter issued or sold.
(h) As used in this Section 9, the term "Common Stock" shall
mean and include the Company's Common Stock authorized on the date of the
original issue of the Units and shall also include any capital stock of any
class of the Company thereafter authorized which shall not be limited to a
fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends and in the distribution of assets upon the voluntary
liquidation, dissolution or winding up of the Company; provided, however, that
the shares issuable upon exercise of the Warrants shall include only shares of
such class designated in the Company's Certificate of Incorporation as Common
Stock on the date of the original issue of the Units or (i), in the case of any
reclassification, change, consolidation, merger, sale or conveyance of the
character referred to in Section 9(c) hereof, the stock, securities or property
provided for in such section or (ii), in the case of any reclassification or
change in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or consisting of a change
in par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the
Purchase Price in effect hereunder is required pursuant to Section 9, or as to
the amount of any such adjustment, if required, shall be binding upon the
holders of the Warrants and the Company if made in good faith by the Board of
Directors of the Company.
(j) If and whenever the Company shall grant to the holders of
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into or
exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company shall concurrently therewith grant to each Registered Holder
as of the record date for such transaction of the Warrants then outstanding,
the rights, warrants or options to which each Registered Holder would have been
entitled if, on the record date used to determine the stockholders entitled to
the rights, warrants or options being granted by the Company, the Registered
Holder were the holder of record of the number of whole shares of Common Stock
then issuable upon exercise (assuming, for purposes of this Section 9(j), that
exercise of Warrants is permissible during periods prior to the Initial Warrant
Exercise Date) of his Warrants. Such grant by the Company to the holders of the
Warrants shall be in lieu of any adjustment which otherwise might be called for
pursuant to this Section 9.
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<PAGE>
SECTION 10. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon
the exercise of each Warrant is adjusted pursuant to Section 9 hereof, the
Company nevertheless shall not be required to issue fractions of shares, upon
exercise of the Warrants or otherwise, or to distribute certificates that
evidence fractional shares. With respect to any fraction of a share called for
upon the exercise of any Warrant, the Company shall pay to the Holder an amount
in cash equal to such fraction multiplied by the current market value of such
fractional share, determined as follows:
(1) If the Common Stock is listed on a national
securities exchange or admitted to unlisted trading
privileges on such exchange or is traded on the Nasdaq
National Market, the current market value shall be the last
reported sale price of the Common Stock on such exchange or
market on the last business day prior to the date of exercise
of this Warrant or if no such sale is made on such day, the
average of the closing bid and asked prices for such day on
such exchange or market; or
(2) If the Common Stock is not listed or admitted to
unlisted trading privileges on a national securities exchange
or is not traded on the Nasdaq National Market, the current
market value shall be the mean of the last reported bid and
asked prices reported by the Nasdaq SmallCap Market or, if
not traded thereon, by the National Quotation Bureau, Inc. on
the last business day prior to the date of the exercise of
this Warrant; or
(3) If the Common Stock is not so listed or admitted
to unlisted trading privileges and bid and asked prices are
not so reported, the current market value shall be an amount
determined in such reasonable manner as may be prescribed by
the Board of Directors of the Company.
SECTION 11. Warrant Holders Not Deemed Stockholders. No
holder of Warrants shall, as such, be entitled to vote or to receive dividends
or be deemed the holder of Common Stock that may at any time be issuable upon
exercise of such Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Warrants, as such,
any of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue or reclassification of stock, change
of par value or change of stock to no par value, consolidation, merger or
conveyance or otherwise), or to receive notice of meetings, or to receive
dividends or subscription rights, until such holder shall have exercised such
Warrants and been issued shares of Common Stock in accordance with the
provisions hereof.
SECTION 12. Rights of Action. All rights of action with
respect to this Agreement are vested in the respective Registered Holders of
the Warrants, and any Registered
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<PAGE>
Holder of a Warrant, without consent of the Warrant Agent or of the holder of
any other Warrant, may, in his own behalf and for his own benefit, enforce
against the Company his right to exercise his Warrants for the purchase of
shares of Common Stock in the manner provided in the Warrant Certificate and
this Agreement.
SECTION 13. Agreement of Warrant Holders. Every holder of a
Warrant, by his acceptance thereof, consents and agrees with the Company, the
Warrant Agent and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books
of the Warrant Agent by the Registered Holder thereof in person or by his
attorney duly authorized in writing and only if the Warrant Certificates
representing such Warrants are surrendered at the office of the Warrant Agent,
duly endorsed or accompanied by a proper instrument of transfer satisfactory to
the Warrant Agent and the Company in their sole discretion, together with
payment of any applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the
person in whose name the Warrant Certificate is registered as the holder and as
the absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by
any notice or knowledge to the contrary, except as otherwise expressly provided
in Section 7 hereof.
SECTION 14. Cancellation of Warrant Certificates. If the
Company shall purchase or acquire any Warrant or Warrants, the Warrant
Certificate or Warrant Certificates evidencing the same shall thereupon be
delivered to the Warrant Agent and cancelled by it and retired. The Warrant
Agent shall also cancel the Warrant Certificate or Warrant Certificates
following exercise of any or all of the Warrants represented thereby or
delivered to it for transfer or exchange.
SECTION 15. Concerning the Warrant Agent. The Warrant Agent
acts hereunder as agent and in a ministerial capacity for the Company, and its
duties shall be determined solely by the provisions hereof. The Warrant Agent
shall not, by issuing and delivering Warrant Certificates or by any other act
hereunder be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented thereby
or of any securities or other property delivered upon exercise of any Warrant
or whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
The Warrant Agent shall not at any time be under any
duty or responsibility to any holder of Warrant Certificates to make or cause
to be made any adjustment of the Purchase Price or the Redemption Price
provided in this Agreement, or to determine whether any fact exists which may
require any such adjustments, or with respect to the nature or extent of any
such adjustment, when made, or with respect to the method employed in making
the same. It shall not
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<PAGE>
(i) be liable for any recital or statement of facts contained herein or for any
action taken, suffered or omitted by it in reliance on any Warrant Certificate
or other document or instrument believed by it in good faith to be genuine and
to have been signed or presented by the proper party or parties, (ii) be
responsible for any failure on the part of the Company to comply with any of
its covenants and obligations contained in this Agreement or in any Warrant
Certificate, or (iii) be liable for any act or omission in connection with this
Agreement except for its own negligence or wilful misconduct.
The Warrant Agent may at any time consult with
counsel satisfactory to it (who may be counsel for the Company) and shall incur
no liability or responsibility for any action taken, suffered or omitted by it
in good faith in accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request,
direction, order or demand of the Company shall be sufficiently evidenced by an
instrument signed by the Chairman of the Board, President, any Vice President,
its Secretary, or Assistant Secretary, (unless other evidence in respect
thereof is herein specifically prescribed). The Warrant Agent shall not be
liable for any action taken, suffered or omitted by it in accordance with such
notice, statement, instruction, request, direction, order or demand believed by
it to be genuine.
The Company agrees to pay the Warrant Agent
reasonable compensation for its services hereunder and to reimburse it for its
reasonable expenses hereunder; it further agrees to indemnify the Warrant Agent
and save it harmless against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for anything done or omitted by
the Warrant Agent in the execution of its duties and powers hereunder except
losses, expenses and liabilities arising as a result of the Warrant Agent's
negligence or wilful misconduct.
The Warrant Agent may resign its duties and be
discharged from all further duties and liabilities hereunder (except
liabilities arising as a result of the Warrant Agent's own negligence or wilful
misconduct), after giving 30 days' prior written notice to the Company. At
least 15 days prior to the date such resignation is to become effective, the
Warrant Agent shall cause a copy of such notice of resignation to be mailed to
the Registered Holder of each Warrant Certificate at the Company's expense.
Upon such resignation, or any inability of the Warrant Agent to act as such
hereunder, the Company shall appoint a new warrant agent in writing. If the
Company shall fail to make such appointment within a period of 15 days after it
has been notified in writing of such resignation by the resigning Warrant
Agent, then the Registered Holder of any Warrant Certificate may apply to any
court of competent jurisdiction for the appointment of a new warrant agent. Any
new warrant agent, whether appointed by the Company or by such a court, shall
be a bank or trust company having a capital and surplus, as shown by its last
published report to its stockholders, of not less than $10,000,000 or a stock
transfer company that is a registered transfer agent under the Securities
Exchange Act of 1934. After acceptance in writing of such appointment by the
new warrant agent is received by the Company, such new warrant agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally
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<PAGE>
named herein as the Warrant Agent, without any further assurance, conveyance,
act or deed; but if for any reason it shall be necessary or expedient to
execute and deliver any further assurance, conveyance, act or deed, the same
shall be done at the expense of the Company and shall be legally and validly
executed and delivered by the resigning Warrant Agent. Not later than the
effective date of any such appointment the Company shall file notice thereof
with the resigning Warrant Agent and shall forthwith cause a copy of such
notice to be mailed to the Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any
new warrant agent may be converted or merged or any corporation resulting from
any consolidation to which the Warrant Agent or any new warrant agent shall be
a party or any corporation succeeding to the trust business of the Warrant
Agent shall be a successor warrant agent under this Agreement without any
further act, provided that such corporation is eligible for appointment as
successor to the Warrant Agent under the provisions of the preceding paragraph.
Any such successor warrant agent shall promptly cause notice of its succession
as warrant agent to be mailed to the Company and to the Registered Holder of
each Warrant Certificate.
The Warrant Agent, its subsidiaries and affiliates,
and any of its or their officers or directors, may buy and hold or sell
Warrants or other securities of the Company and otherwise deal with the Company
in the same manner and to the same extent and with like effects as though it
were not Warrant Agent. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
SECTION 16. Modification of Agreement. Subject to the
provisions of Section 4(b), the parties hereto and the Company may by
supplemental agreement make any changes or corrections in this Agreement (i)
that they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or manifest mistake or error herein
contained; (ii) to reflect an increase in the number of Warrants which are to
be governed by this Agreement resulting from a subsequent public offering of
Company securities which includes Warrants having the same terms and conditions
as the Warrants, respectively, originally covered by or subsequently added to
this Agreement under this Section 16; or (iii) that they may deem necessary or
desirable and which shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, that this Agreement shall not
otherwise be modified, supplemented or altered in any respect except with the
consent in writing of the Registered Holders of Warrant Certificates
representing not less than 50% of the Warrants then outstanding; and provided,
further, that no change in the number or nature of the securities purchasable
upon the exercise of any Warrant, or the Purchase Price therefor, or the
acceleration of the Warrant Expiration Date, shall be made without the consent
in writing of the Registered Holder of the Warrant Certificate representing
such Warrant, other than such changes as are specifically prescribed by this
Agreement as originally executed or are made in compliance with applicable law.
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<PAGE>
SECTION 17. Notices. All notices, requests, consents and
other communications hereunder shall be in writing and shall be deemed to have
been made when delivered or mailed first class registered or certified mail,
postage prepaid as follows: if to the Registered Holder of a Warrant
Certificate, at the address of such holder as shown on the registry books
maintained by the Warrant Agent; if to the Company, at 150 East 58th Street,
19th Floor, New York, NY 10155, attention: Robert M. Gutkowski, President, or
at such other address as may have been furnished to the Warrant Agent in
writing by the Company; if to the Warrant Agent, at its Corporate Office; if to
Royce, at Royce Investment Group, Inc., 199 Crossways Park Drive, Woodbury, NY
11797.
SECTION 18. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws.
SECTION 19. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the Company and, the Warrant Agent and their
respective successors and assigns, and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law,
or to impose upon any other person any duty, liability or obligation.
SECTION 20. Termination. This Agreement shall terminate at
the close of business on the earlier of the Warrant Expiration Date or the date
upon which all Warrants (including the warrants issuable upon exercise of the
Unit Purchase Options) have been exercised, except that the Warrant Agent shall
account to the Company for cash held by it and the provisions of Section 15
hereof shall survive such termination.
-20-
<PAGE>
SECTION 21. Counterparts. This Agreement may be executed in
several counterparts, which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
THE MARQUEE GROUP, INC.
By:________________________
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By:________________________
Authorized Officer
ROYCE INVESTMENT GROUP,
INC.
By:________________________
Authorized Officer
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<PAGE>
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
No. W Warrants
VOID AFTER
WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
The Marquee Group, Inc.
This certifies that FOR VALUE RECEIVED or
registered assigns (the "Registered Holder") is the owner of the number of
Warrants ("Warrants") specified above. Each Warrant represented hereby
initially entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Warrant Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock,
$.01 value ("Common Stock"), of The Marquee Group, Inc., a Delaware corporation
(the "Company") at any time between the Separation Date (as defined in the
Warrant Agreement), and the Expiration Date (as hereinafter defined), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the corporate office of
Continental Stock Transfer & Trust Company as Warrant Agent, or its successor
(the "Warrant Agent"), accompanied by payment of $7.50 (the "Purchase Price")
in lawful money of the United States of America in cash or by official bank or
certified check made payable to The Marquee Group, Inc.
This Warrant Certificate and each Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
, by and among the Company, the Warrant Agent and Royce
Investment Group, Inc.
In the event of certain contingencies provided for in the
Warrant Agreement, the Purchase Price or the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby are
subject to modification or adjustment.
Each Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Common Stock will be
issued. In the case of the exercise of less than all the Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate or Warrant
A-1
<PAGE>
Certificates of like tenor, which the Warrant Agent shall countersign, for the
balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York
time) on , or such earlier date as the Warrants shall be
redeemed. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall mean 5:00
P.M. (New York time) the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close.
The Company shall not be obligated to deliver any securities
pursuant to the exercise of the Warrants represented hereby unless a
registration statement under the Securities Act of 1933, as amended, with
respect to such securities is effective. The Company has covenanted and agreed
that it will file a registration statement and will use its best efforts to
cause the same to become effective and to keep such registration statement
current while any of the Warrants are outstanding. The Warrants represented
hereby shall not be exercisable by a Registered Holder in any state where such
exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender
hereof by the Registered Holder at the corporate office of the Warrant Agent,
for a new Warrant Certificate or Warrant Certificates of like tenor
representing an equal aggregate number of Warrants, each of such new Warrant
Certificates to represent such number of Warrants as shall be designated by
such Registered Holder at the time of such surrender. At any time after the
Separation Date, upon due presentment with a $ transfer fee per
certificate in addition to any tax or other governmental charge imposed in
connection therewith, for registration of transfer of this Warrant Certificate
at such office, a new Warrant Certificate or Warrant Certificates representing
an equal aggregate number of Warrants will be issued to the transferee in
exchange therefor, subject to the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
The Warrants represented hereby may be redeemed at the
option of the Company, at a redemption price of $.05 per Warrant at any time
after , provided the Market Price (as defined in the Warrant
Agreement) for the Common Stock shall exceed $11.50 per share. Notice of
redemption shall be given not later than the twentieth day before the date
fixed for redemption, all as provided in the Warrant Agreement. On and after
the date fixed for redemption, the Registered Holder shall have no rights with
respect to the Warrants represented hereby except to receive the $.05 per
Warrant upon surrender of this Warrant Certificate.
Prior to due presentment for registration of transfer hereof,
the Company and the Warrant Agent may deem and treat the Registered Holder as
the absolute owner hereof and of
A-2
<PAGE>
each Warrant represented hereby (notwithstanding any notations of ownership or
writing hereon made by anyone other than a duly authorized officer of the
Company or the Warrant Agent) for all purposes and shall not be affected by any
notice to the contrary.
The Company has agreed to pay a fee of 5% of the Purchase
Price upon certain conditions as specified in the Warrant Agreement upon the
exercise of the Warrants represented hereby.
This Warrant Certificate shall be governed by and construed
in accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by
the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed, manually or in facsimile, by two of its
officers thereunto duly authorized and a facsimile of its corporate seal to be
imprinted hereon.
THE MARQUEE GROUP, INC.
Dated: By:________________________
By:________________________
[seal]
Countersigned:
_________________________________
as Warrant Agent
By ______________________________
Authorized Officer
A-3
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects
to exercise Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
_______________________________
_______________________________
_______________________________
_______________________________
[please print or type name and address]
and be delivered to
_______________________________
_______________________________
_______________________________
_______________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
A-4
<PAGE>
The undersigned represents that the exercise of the Warrants
evidenced hereby was solicited by a member of the National Association of
Securities Dealers, Inc. If not solicited by an NASD member, please write
"unsolicited" in the space below. Unless otherwise indicated by listing the
name of another NASD member firm, it will be assumed that the exercise was
solicited by Royce Investment Group, Inc.
____________________________________
(Name of NASD Member)
Dated: X ____________________________
____________________________________
____________________________________
Address
____________________________________
Taxpayer Identification Number
____________________________________
Signature Guaranteed
____________________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
(INSERT THE FOLLOWING ON BOTH CERTIFICATES) ONLY IF FCC OR OTHER
REGULATIONS LIMIT OWNERSHIP BY NON-U.S. PERSONS ("ALIENS"):
A-5
<PAGE>
RESTRICTION ON EXERCISE: The Corporation's Certificate of
Incorporation provides that, except as otherwise provided by law, no shares of
capital stock, shall be transferred to or for the account of an "alien" if such
transfer would increase the aggregate number of shares of capital stock voted
or owned of record by or for the account of "aliens" to more than twenty-five
percent (25%) of the aggregate number of outstanding shares of capital stock.
As used herein, "alien" means aliens and their representatives, foreign
governments and their representatives and corporations or other entities
organized under the laws of foreign countries. Pursuant to a resolution adopted
by the Board of Directors, the transfer agent has been authorized not to permit
any transfer of the Company's outstanding capital stock if such transfer would
result in "aliens" owning or having the right to vote more than 20% thereof.
Exercise of this Warrant is subject to compliance with all applicable
restrictions of the Federal Communications Commission, including but not
limited to its alien ownership restrictions and, accordingly, no exercise of
this Warrant shall be permitted if such exercise would result in "aliens"
owning or having the right to vote more than 20% of the Company's common stock.
THE FOLLOWING MUST BE EXECUTED UPON EXERCISE OF THIS CERTIFICATE BEFORE SHARES
OF COMMON STOCK MAY BE ISSUED BY THE CORPORATION:
The undersigned hereby certifies that the holder of this
Warrant Certificate is
- a citizen of the United States
- an alien
and that, if the holder is a corporation or other entity, the percentage of
such corporation or other entity owned by aliens is ; and that, if any
other person can vote or control the right to vote the shares of Common Stock
issuable upon exercise of the Warrants represented by this Certificate, such
other person is
- a citizen of the United States
- an alien
and that, if such other person is a corporation or other entity, the percentage
of such corporation or other entity owned by aliens is .
A-6
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
OF TRANSFEREE
_______________________________
_______________________________
_______________________________
_______________________________
[please print or type name and address]
of the Warrants represented by this Warrant Certificate, and
hereby irrevocably constitutes and appoints
Attorney to transfer this Warrant Certificate on the books of the Company,
with full power of substitution in the premises.
Dated:________________ X _________________________
Signature Guaranteed
___________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
A-7
<PAGE>
Option to Purchase
300,000 Units
The Marquee Group, Inc.
Unit Purchase Option
Dated: .
THIS CERTIFIES THAT Royce Investment Group, Inc. (herein
sometimes called the "Holder") is entitled to purchase from The Marquee Group,
Inc., a Delaware corporation (hereinafter called the "Company"), at the prices
and during the periods as hereinafter specified, up to three hundred thousand
(300,000) Units ("Units"), each Unit consisting of one share of the Company's
Common Stock, $.01 par value, as now constituted ("Common Stock") and one
warrant ("Warrants"). Each Warrant is exercisable to purchase one share of
Common Stock at an exercise price of $7.50 from , 1996 to ,
2001.
The Units have been registered under a Registration Statement
on Form SB-2, (File No. 333- ) declared effective by the Securities and
Exchange Commission on (the "Registration Statement"). This Option,
together with options of like tenor, constituting in the aggregate options (the
"Options") to purchase 300,000 Units, subject to adjustment in accordance with
Section 8 of this Option (the "Option Units"), was originally issued pursuant
to an underwriting agreement between the Company and Royce Investment Group,
Inc., as underwriter (the "Underwriter") in connection with a public offering
(the "Offering") of 3,000,000 Units (the "Public Units") through the
Underwriter, in consideration of $ received for the Options.
Except as specifically otherwise provided herein, the Common
Stock and the Warrants issued pursuant to the option herein granted (the
"Option") shall bear the same terms and conditions as described under the
caption "Description of Securities" in the Registration Statement, and the
Warrants shall be governed by the terms of the Warrant Agreement dated as of
, 1996 executed in connection with such public offering (the "Warrant
Agreement"), except that (i) the holder shall have registration rights under
the Securities Act of 1933, as amended (the "Act"), for the Option, the Common
Stock and the Warrants included in the Option Units, and the shares of Common
Stock underlying the Warrants, as more fully described in Section 6 of this
Option and (ii) the Warrants issuable upon exercise of the Option will be
subject to redemption by the Company pursuant to the Warrant Agreement at any
time after the Option has been exercised and the Warrants underlying the Option
Units are outstanding. Any such redemption shall be on the same terms and
conditions as the Warrants included in the Public Units (the "Public
Warrants"). The Company will list the Common Stock underlying this Option and,
at the Holder's request the Warrants, on the Nasdaq National Market, the Nasdaq
SmallCap Market or such other exchange or market as the Common Stock or Public
Warrants may then be listed or quoted. In the event of any extension of the
expiration date or reduction of the exercise price of
<PAGE>
the Public Warrants, the same changes to the Warrants included in the Option
Units shall be simultaneously effected.
1. The rights represented by this Option shall be exercised
at the prices, subject to adjustment in accordance with Section 8 of this
Option ("the "Exercise Price"), and during the periods as follows:
(a) During the period from , 1996 to
, 1998 inclusive, the Holder shall have no
right to purchase any Option Units hereunder, except
that in the event of any merger, consolidation or
sale of all or substantially all the capital stock
or assets of the Company or in the case of any
statutory exchange of securities with another
corporation (including any exchange effected in
connection with a merger of another corporation into
the Company) subsequent to , the Holder shall
have the right to exercise this Option and the
Warrants included herein at such time and receive
the kind and amount of shares of stock and other
securities and property (including cash) which a
holder of the number of shares of Common Stock
underlying this Option and the Warrants included in
this Option would have owned or been entitled to
receive had this Option been exercised immediately
prior thereto.
(b) Between , 1998 and ,2001
inclusive, the Holder shall have the option to
purchase Option Units hereunder at a price of $
per Unit. For purposes of the adjustments under
Section 8 hereof, the Per Share Exercise Price shall
be deemed to be $ , subject to further adjustment
as provided in such Section 8.
(c) After , 2001 the Holder shall
have no right to purchase any Units hereunder.
2. (a) The rights represented by this Option may be exercised
at any time within the period above specified, in whole or in part, by (i) the
surrender of this Option (with the purchase form at the end hereof properly
executed) at the principal executive office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to the
Holder at the address of the Holder appearing on the books of the Company); and
(ii) payment to the Company of the exercise price then in effect for the number
of Option Units specified in the above-mentioned purchase form together with
applicable stock transfer taxes, if any. This Option shall be deemed to have
been exercised, in whole or in part to the extent specified, immediately prior
to the close of business on the date this Option is surrendered and payment is
made in accordance with the foregoing provisions of this Section 2, and the
person or persons in whose name or names the certificates for shares of Common
Stock and Warrants shall be issuable upon such exercise shall become the holder
or holders of record of such Common Stock and Warrants at that time and date.
The certificates for the Common Stock and Warrants
-2-
<PAGE>
so purchased shall be delivered to the Holder as soon as practicable but not
later than ten (10) days after the rights represented by this Option shall have
been so exercised.
(b) At any time during the period above specified,
during which this Option may be exercised, the Holder may, at its option,
exchange this Option, in whole or in part (an "Option Exchange"), into the
number of Option Units determined in accordance with this Section (b), by
surrendering this Option at the principal office of the Company or at the
office of its stock transfer agent, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of Option Units into which
this Option is to be exchanged and the date on which the Holder requests that
such Option Exchange occur (the "Notice of Exchange"). The Option Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares of Common Stock and Warrants issuable upon
such Option Exchange and, if applicable, a new Option of like tenor evidencing
the balance of the Option Units remaining subject to this Option, shall be
issued as of the Exchange Date and delivered to the Holder within seven (7)
days following the Exchange Date. In connection with any Option Exchange, this
Option shall represent the right to subscribe for and acquire the number of
Option Units (rounded to the next highest integer) equal to (x) the number of
Option Units specified by the Holder in its Notice of Exchange up to the
maximum number of Option Units subject to this option (the "Total Number") less
(y) the number of Option Units equal to the quotient obtained by dividing (A)
the product of the Total Number and the existing Exercise Price by (B) the Fair
Market Value. "Fair Market Value" shall mean first, if there is a trading
market as indicated in Subsection (i) below for the Units, such Fair Market
Value of the Units and if there is no such trading market in the Units, then
Fair Market Value shall have the meaning indicated in Subsections (ii) through
(v) below for the aggregate value of all shares of Common Stock and Warrants
which comprise a Unit:
(i) If the Units are listed on a national securities
exchange or listed or admitted to unlisted trading privileges
on such exchange or listed for trading on the Nasdaq National
Market or the Nasdaq SmallCap Market, the Fair Market Value
shall be the average of the last reported sale prices or the
average of the means of the last reported bid and asked
prices, respectively, of the Units on such exchange or market
for the twenty (20) business days ending on the last business
day prior to the Exchange Date; or
(ii) If the Common Stock or Warrants are listed on a
national securities exchange or admitted to unlisted trading
privileges on such exchange or listed for trading on the
Nasdaq National Market or the Nasdaq SmallCap Market, the
Fair Market Value shall be the average of the last reported
sale prices or the average of the means of the last reported
bid and asked prices, respectively, of Common Stock or
Warrants, respectively, on such exchange or market for the
twenty (20) business days ending on the last business day
prior to the Exchange Date; or
-3-
<PAGE>
(iii) If the Common Stock or Warrants are not so
listed or admitted to unlisted trading privileges, the Fair
Market Value shall be the average of the means of the last
reported bid and asked prices of the Common Stock or
Warrants, respectively, for the twenty (20) business days
ending on the last business day prior to the Exchange Date;
or
(iv) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked
prices are not so reported, the Fair Market Value shall be an
amount, not less than book value thereof as at the end of the
most recent fiscal year of the Company ending prior to the
Exchange Date, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company; or
(v) If the Warrants are not so listed or admitted to
unlisted trading privileges, and bid and asked prices are not
so reported for Warrants, then Fair Market Value for the
Warrants shall be an amount equal to the difference between
(i) the Fair Market Value of the shares of Common Stock and
Warrants which may be received upon the exercise of the
Warrants, as determined herein, and (ii) the Warrant Exercise
Price.
3. Neither this Option nor the underlying securities shall be
transferred, sold, assigned, or hypothecated for a period of two years
commencing on the effective date of the Registration Statement except that they
may be transferred to successors of the Holder, and may be assigned in whole or
in part to any person who is an officer of the Holder, any member participating
in the selling group relating to the Offering or any officer of such selling
group member. Any such assignment shall be effected by the Holder (i) executing
the form of assignment at the end hereof and (ii) surrendering this Option for
cancellation at the office or agency of the Company referred to in Section 2
hereof, accompanied by a certificate (signed by an officer of the Holder if the
Holder is a corporation), stating that each transferee is a permitted
transferee under this Section 3 hereof; whereupon the Company shall issue, in
the name or names specified by the Holder (including the Holder) a new Option
or Options of like tenor and representing in the aggregate rights to purchase
the same number of Option Units as are purchasable hereunder.
4. The Company covenants and agrees that all shares of Common
Stock which may be issued as part of the Option Units purchased hereunder and
the Common Stock which may be issued upon exercise of the Warrants will, upon
issuance, be duly and validly issued, fully paid and nonassessable and no
personal liability will attach to the holder thereof. The Company further
covenants and agrees that during the periods within which this Option may be
exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
this Option and that it will have authorized and reserved a sufficient number
of shares of Common Stock for issuance upon exercise of the Warrants included
in the Option Units.
-4-
APITAL PRINTING SYSTEMS]
<PAGE>
5. This Option shall not entitle the Holder to any voting
rights or any other rights, or subject to the Holder to any liabilities, as a
stockholder of the Company.
6. (a) The Company shall advise the Holder or its transferee,
whether the Holder holds the Option or has exercised the Option and holds
Option Units or any of the securities underlying the Option Units, by written
notice at least four weeks prior to the filing of any post-effective amendment
to the Registration Statement or of any new registration statement or
post-effective amendment thereto under the Act covering any securities of the
Company, for its own account or for the account of others, and will for a
period of seven years from the effective date of the Registration Statement,
upon the request of the Holder, include in any such post-effective amendment or
registration statement, such information as may be required to permit a public
offering of the Option, all or any of the Option Units, the Common Stock or
Warrants included in the Option Units or the Common Stock issuable upon the
exercise of the Warrants (the "Registrable Securities").
(b) If any 50% holder (as defined below) shall give
notice to the Company at any time to the effect that such holder desires to
register under the Act this Option, the Option Units or any of the underlying
securities contained in the Option Units under such circumstances that a public
distribution (within the meaning of the Act) of any such securities will be
involved then the Company will promptly, but no later than two weeks after
receipt of such notice, file a post-effective amendment to the current
Registration Statement or a new registration statement on Form S-1 or such
other form as the 50% holder requests pursuant to the Act, to the end that the
Option, the Option Units and/or any of the securities underlying the Option
Units may be publicly sold under the Act as promptly as practicable thereafter
and the Company will use its best efforts to cause such registration to become
and remain effective (including the taking of such steps as are necessary to
obtain the removal of any stop order); provided, that such 50% holder shall
furnish the Company with appropriate information in connection therewith as the
Company may reasonably request in writing. The 50% holder may, at its option,
request the filing of a post-effective amendment to the current Registration
Statement or a new registration statement under the Act on one occasion during
the four year period beginning one year from the effective date of the
Registration Statement. The 50% holder may, at its option request the
registration of the Option and/or any of the securities underlying the Option
in a registration statement made by the Company as contemplated by Section 6(a)
or in connection with a request made pursuant to this Section 6(b) prior to
acquisition of the Option Units issuable upon exercise of the Option and even
though the 50% holder has not given notice of exercise of the Option. The 50%
holder may, at its option, request such post-effective amendment or new
registration statement during the described period with respect to the Option,
the Option Units as a unit, or separately as to the Common Stock and/or
Warrants included in the Option Units and/or the Common Stock issuable upon the
exercise of the Warrants, and such registration rights may be exercised by the
50% holder prior to or subsequent to the exercise of the Option.
Within ten days after receiving any such notice pursuant to
this Section 6(b), the Company shall give notice to the other holders of the
Options, advising that the Company is
-5-
<PAGE>
proceeding with such post-effective amendment or registration statement and
offering to include therein the securities underlying the Options of the other
holders, provided that they shall furnish the Company with such appropriate
information (relating to the intentions of such holders) in connection
therewith as the Company shall reasonably request in writing. In the event the
registration statement is not filed within the period specified herein and in
the event the registration statement is not declared effective under the Act
prior to , 2001, then, at the holders' request, the Company shall
purchase the Options from the holder for a per option price equal to the
difference between (i) the Fair Market Value of the Common Stock on the date of
notice multiplied by the number of shares of Common Stock issuable upon
exercise of the Option and the underlying Warrants and (ii) the average per
share purchase price of the Option and each share of Common Stock underlying
the Option. All costs and expenses of the first such post-effective amendment
or new registration statement under this paragraph 6(b) shall be borne by the
Company, except that the holders shall bear the fees of their own counsel and
any underwriting discounts or commissions applicable to any of the securities
sold by them. If the Company determines to include securities to be sold by it
in any registration statement originally requested pursuant to this Section
6(b), such registration shall instead be deemed to have been a registration
under Section 6(a) and not under this Section 6(b).
The Company will maintain such registration statement or
post-effective amendment current under the Act for a period of at least six
months (and for up to an additional three months if requested by the Holder)
from the effective date thereof.
(c) The term "50% holder" as used in this Section 6
shall mean the holder of at least 50% of the Common Stock and the Warrants
underlying the Options (considered in the aggregate) and shall include any
owner or combination of owners of such securities, which ownership shall be
calculated by determining the number of shares of Common Stock held by such
owner or owners as well as the number of shares then issuable upon exercise of
the Warrants.
(d) Whenever pursuant to Section 6 a registration
statement relating to any Registrable Securities is filed under the Act,
amended or supplemented, the Company shall (i) supply prospectuses and such
other documents as the Holder may request in order to facilitate the public
sale or other disposition of the Registrable Securities, (ii) use its best
efforts to register and qualify any of the Registrable Securities for sale in
such states as such Holder designates, (iii) furnish indemnification in the
manner provided in Section 7 hereof, (iv) notify each Holder of Registrable
Securities at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and, at the request of any such Holder, prepare and
furnish to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not included an untrue statement of a material fact or
-6-
<PAGE>
omit to state material fact required to be stated therein or necessary to make
the statements therein not misleading and (v) do any and all other acts and
things which may be necessary or desirable to enable such Holders to consummate
the public sale or other disposition of the Registrable Securities, The Holder
shall furnish appropriate information in connection therewith and
indemnification as set forth in Section 7.
(e) The Company shall not permit the inclusion of
any securities other than the Registrable Securities to be included in any
registration statement filed pursuant to Section 6(b) hereof without the prior
written consent of the 50% holder.
(f) The Company shall furnish to each Holder
participating in the offering and to each underwriter, if any, a signed
counterpart, addressed to such Holder or underwriter, of (i) an opinion of
counsel to the Company, dated the effective date of such registration statement
(or, if such registration includes an underwritten public offering, an opinion
dated the date of the closing under the underwriting agreement), and (ii) if
such registration includes an underwritten public offering, a "cold comfort"
letter dated the effective date of such registration statement and dated the
date of the closing under the underwriting agreement signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
(g) The Company shall deliver promptly to each
Holder participating in the offering requesting the correspondence and
memoranda described below and to the managing underwriter copies of all
correspondence between the Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the Commission or its staff with
respect to the registration statement and permit each Holder and underwriter to
do such investigation, upon reasonable advance notice, with respect to
information contained in or omitted from the registration statement as it deems
reasonable necessary to comply with applicable securities laws or rules of the
National Association of Securities Dealers, Inc. ("NASD"). Such investigation
shall include access to non-confidential books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable
times as any such Holder shall reasonably request.
7. (a) Whenever pursuant to Section 6 a registration
statement relating to the Registrable Securities is filed under the Act,
amended or supplemented, the Company will indemnify and hold harmless each
holder of the Registrable Securities covered by such registration statement,
amendment or supplement (such holder being hereinafter called the "Distributing
Holder"), and each person, if any, who controls (within the meaning of the Act)
the Distributing Holder, and each underwriter (within the meaning of the Act)
of such securities and each person,
-7-
<PAGE>
if any, who controls (within the meaning of the Act) any such underwriter,
against any losses, claims, damages or liabilities, joint or several, to which
the Distributing Holder, any such controlling person or any such underwriter
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any such registration statement or any preliminary prospectus
or final prospectus constituting a part thereof or any amendment or supplement
thereto, or arise out of or are based upon the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and will reimburse the Distributing Holder and each
such controlling person and underwriter for any legal or other expenses
reasonably incurred by the Distributing Holder or such controlling person or
underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus or said amendment or
supplement in reliance upon and in conformity with written information
furnished by such Distributing Holder specifically for use in the preparation
thereof.
(b) If requested by the Company prior to the filing
of any registration statement covering the Registrable Securities, each
Distributing Holder will agree, severally but not jointly, to indemnify and
hold harmless the Company against any losses, claims, damages or liabilities to
which the Company may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in said
registration statement, said preliminary prospectus, said final prospectus or
said amendment or supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder specifically for use in the
preparation thereof; except that the maximum amount which may be recovered from
the Distributing Holder pursuant to this Section 7 or otherwise shall be
limited to the amount of net proceeds received by the Distributing Holder from
the sale of the Registrable Securities.
(c) Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party, give the indemnifying party notice of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this Section 7.
(d) In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be
-8-
<PAGE>
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to
such indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
(8) In addition to the provisions of Section 1(a) of this
Option, the Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Options shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend
or make a distribution on its outstanding shares of Common
Stock in shares of Common Stock, (ii) subdivide or reclassify
its outstanding shares of Common Stock into a greater number
of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for
such dividend or distribution or of the effective date of
such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by
multiplying the Exercise Price by a fraction, the denominator
of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such action. Such
adjustment shall be made successively whenever any event
listed above shall occur.
(b) Whenever the Exercise Price payable upon
exercise of each Option is adjusted pursuant to Subsection
(a) above, (i) the number of shares of Common Stock included
in an Option Unit shall simultaneously be adjusted by
multiplying the number of shares of Common Stock included in
Option Unit immediately prior to such adjustment by the
Exercise Price in effect immediately prior to such adjustment
and dividing the product so obtained by the Exercise Price,
as adjusted and (ii) the number of shares of Common Stock or
other securities issuable upon exercise of the Warrants
included in the Option Units and the exercise price of such
Warrants shall be adjusted in accordance with the applicable
terms of the Warrant Agreement.
(c) No adjustment in the Exercise Price shall be
required unless such adjustment would require an increase or
decrease of at least five cents ($0.05) in such price;
provided, however, that any adjustments which by reason of
this Subsection (c)(i) are not required to be made shall be
carried forward and taken into account in any subsequent
adjustment required to be made hereunder. All calculations
under this Section 8 shall be made to the nearest cent or to
the nearest
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<PAGE>
one-hundredth of a share, as the case may be. Anything in
this Section 8 to the contrary notwithstanding, the Company
shall be entitled, but shall not be required, to make such
changes in the Exercise Price, in addition to those required
by this Section 8, as it shall determine, in its sole
discretion, to be advisable in order that any dividend or
distribution in shares of Common Stock, or any subdivision,
reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal Income
tax liability to the holders of Common Stock or securities
convertible into Common Stock (including Warrants issuable
upon exercise of this Option).
(d) Whenever the Exercise Price is adjusted, as
herein provided, the Company shall promptly but no later than
10 days after any request for such an adjustment by the
Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Option Units issuable upon
exercise of each Option and, if requested, information
describing the transactions giving rise to such adjustments,
to be mailed to the Holders, at the address set forth herein,
and shall cause a certified copy thereof to be mailed to its
transfer agent, if any. The Company may retain a firm of
independent certified public accountants selected by the
Board of Directors (who may be the regular accountants
employed by the Company) to make any computation required by
this Section 8, and a certificate signed by such firm shall
be conclusive evidence of the correctness of such adjustment.
(e) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (a) above, the Holder
of this Option thereafter shall become entitled to receive
any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon
exercise of this Option shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common
Stock contained in Subsections (a) to (d), inclusive above.
(f) In case any event shall occur as to which the
other provisions of this Section 8 or Section 1(a) hereof are
not strictly applicable but as to which the failure to make
any adjustment would not fairly protect the purchase rights
represented by this Option in accordance with the essential
intent and principles hereof then, in each such case, the
Holders of Options representing the right to purchase a
majority of the Option Units may appoint a firm of
independent public accountants reasonably acceptable to the
Company, which shall give their opinion as to the adjustment,
if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the
purchase rights represented by the Options. Upon receipt of
such opinion, the Company will promptly mail a copy thereof
to the Holder of this Option and shall make the adjustments
described therein. The fees and expenses of such independent
public accountants shall be borne by the Company.
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<PAGE>
9. This Agreement shall be governed by and in accordance with
the laws of the State of New York, without giving effect to the principles of
conflicts of law thereof.
IN WITNESS WHEREOF, The Marquee Group, Inc. has caused this
Option to be signed by its duly authorized officers under its corporate seal,
and this Option to be dated , 1996.
THE MARQUEE GROUP, INC.
By:______________________________
Robert M. Gutkowski, President
(Corporate Seal)
Attest:
__________________________
Kraig Fox, Secretary
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<PAGE>
PURCHASE FORM
(To be signed only upon exercise of option)
The undersigned, the holder of the foregoing Option, hereby
irrevocably elects to exercise the purchase rights represented by such Option
for, and to purchase thereunder, Units of The Marquee Group, Inc., each Unit
consisting of one share of $.01 Par Value Common Stock and one Warrant to
purchase one share of Common Stock and herewith makes payment of $
thereof
Dated: , 19 . Instructions for Registration of Stock and Warrants
___________________________________________________
Print Name
___________________________________________________
Address
___________________________________________________
Signature
<PAGE>
OPTION EXCHANGE
The undersigned, pursuant to the provisions of the foregoing
Option, hereby elects to exchange its Option for Units of The Marquee
Group, Inc., each Unit consisting of one share of $.01 Par Value Common Stock
and one Warrant to purchase one share of Common Stock, pursuant to the Option
Exchange provisions of the Option.
Dated: , 19 .
___________________________________________________
Print Name
___________________________________________________
Address
___________________________________________________
Signature
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns,
and transfers unto the right to purchase Units represented by the foregoing
Option to the extent of Units , and appoints attorney to
transfer such rights on the books of The Marquee Group, Inc., with full power
of substitution in the premises.
Dated: , 19
ROYCE INVESTMENT GROUP, INC.
By: _____________________________________
_________________________________________
Address
In the presence of:
<PAGE>
Exhibit 10.1
MARQUEE GROUP, INC.
1996 STOCK OPTION PLAN
1. Purpose. The purposes of the Marquee Group, Inc.'s (the
"Company") 1996 Stock Option Plan (the "Plan") are to attract and retain the
best available personnel for positions of substantial responsibility, to
provide additional incentive to key employees, officers, and consultants of the
Company and its subsidiaries and to promote the success of the Company's
business.
2. The Plan. Two types of stock options may be granted under
the Plan: incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and the regulations promulgated
thereunder ("ISOs"), and options that do not qualify as incentive stock options
("NQSOs"). All options shall be exercisable to purchase shares of
Common Stock, $.01 par value (the "Common Stock") of the Company.
Collectively, ISOs and NQSOs are referred to herein as "Options".
Subject to Section 6(a), ISOs may be awarded only to
employees of the Company and its subsidiaries, within the meaning of Code
Section 424(f), including employees who may serve as officers and directors.
NQSOs may be awarded only to employees who may serve as
officers and directors, and anyone other than non-employee Directors whom the
Committee administering the Plan pursuant to Section 3 determines provides
substantial service to the Company.
To the extent that any Option is not designated as an ISO, or
even if so designated it does not qualify as an ISO, it shall be treated as a
NQSO.
3. Administration. The Plan shall be administered by a
committee (the "Committee") selected by the Board of Directors (the "Board").
The Committee shall act by a majority of its members at the time in
office and eligible to vote on any particular matter, and such action
may be taken either by a vote at a meeting or in writing without a
meeting. Subject to the provisions of the Plan, the Committee shall from time
to time and at its discretion (i) grant Options, (ii) determine which employees
and other individuals performing substantial services ("Grantees") may be
granted Options under the Plan; (iii) determine whether any Option shall be an
ISO or NQSO; (iv) determine the number of shares subject to each Option: (v)
determine the term of each Option granted under the Plan; (vi) determine the
date or dates on which the Option shall be exercisable; (vii) determine the
exercise price of
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any Option; (viii) determine the fair market value of the Common Stock
subject to the Options; (ix) determine the terms of any agreement pursuant to
which Options are granted; (x) amend any such agreement with the consent of the
Grantee; (xi) establish such procedures as it deems appropriate for a recipient
of an award hereunder to designate a beneficiary to whom any benefits payable
in the event of his or here death are to be made; and (xii) determine any other
matters specifically delegated to it under the Plan or necessary for the proper
administration of the Plan.
The Committee shall also have the final authority to
interpret and construe the terms of the Plan and of any Option and such
interpretation and construction by the Committee shall be final, binding and
conclusive upon all persons including, without limitation, the Company,
shareholders of the Company, the Plan, and all persons claiming an interest in
the Plan.
No member of the Committee or Director shall be liable for
any action, interpretation or construction made in good faith with respect to
the Plan or any Option granted hereunder.
4. Effectiveness and Termination of Plan. This Plan shall
terminate on the earliest of:
(a) The tenth anniversary of the effective date as
determined under this Section 4;
(b) The date when all shares of the Common Stock
reserved for issuance under the Plan, shall have been acquired through exercise
of Options granted under the Plan; or
(c) Such earlier date as the Board of Directors may
determine. This Plan shall become effective as of the date of adoption thereof
by the Board of Directors of the Company, or the date this Plan is approved by
the stockholders, whichever is earlier. Any Option outstanding under the Plan
at the time of its termination shall remain in effect in accordance with its
terms and conditions and those of the Plan.
5. The Stock. The aggregate number of shares of
Common Stock which may be issued under the Plan shall be 500,000 shares. Such
number of shares may be set aside out of the authorized but unissued shares of
Common Stock not reserved for any other purpose or out of shares of
Common Stock held in or acquired for the treasury of the Company. All
or any shares of Common Stock subject under this Plan to an Option
which, for any reason, terminates unexercised as to such shares, may again be
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subjected to an Option under the Plan. No Grantee may receive
grants in respect of more than 125,000 shares of Common Stock.
6. Grant Terms and Conditions of Options. Options may be
granted by the Committee at any time and from time to time prior to the
termination of the Plan. Each Option granted under the Plan shall be evidenced
by an agreement in a form approved by the Committee. The terms and conditions
of such Option agreement need not be identical with respect to each Grantee,
but each Option agreement will evidence on its face whether it is an ISO or a
NQSO. For purposes of this Section, an Option shall be deemed granted on the
date the Committee selects an individual to be a Grantee, determines the number
of shares to be issued pursuant to such Option and specifies the terms and
conditions of the Option. Except as hereinafter provided, Options granted
pursuant to the Plan shall be subject to the following terms and conditions:
(a) Grantee. Subject to Section 2 hereof, the Grantees
of any Options hereunder shall be such key employees of the Company and its
subsidiaries, within the meaning of-Code Section 424(f), as determined by the
Committee, who have substantial responsibility in the direction of the Company
and its subsidiaries, and any other person or entity whom the Committee
determines provides substantial and important services to the Company except
that in no event shall a non-employee Director of the Company be a Grantee
under this Plan.
(b) Price and Exercise. The purchase price of the shares
of Common Stock upon exercise of an ISO shall be no less than the fair
market value of the shares at the time of grant of an ISO; provided, however,
if an ISO is granted to a person owning stock of the Company possessing more
than 10% of the total combined voting power of all classes of stock of the
Company as defined in Code Section 422 ("10% Shareholder"), the purchase price
shall be equal to 110% of the fair market value of the shares. The fair market
value of the Common Stock shall be the closing price of publicly traded
Common Stock on the national securities exchange on which the Common
Stock is listed (if the Common Stock is so listed) or on the
NASDAQ Small Cap Market System (if the Common Stock is regularly quoted
on the NASDAQ Small Cap Market System), or, if not so listed or regularly
quoted, the mean between the closing bid and asked prices of publicly traded
Common Stock in the over-the-counter market, or, if such bid and asked
prices shall not be available, as reported by any nationally recognized
quotation service selected by the Company, or as determined by the Committee in
a manner consistent with the provisions of the Code.
The purchase price of the shares of Common Stock upon
exercise of a NQSO may be any price set by the Committee; provided that the
exercise price of any grant to an employee required to be named on the Summary
Compensation Table of the Company's annual proxy statement under the rules and
regulations promulgated under the Securities Exchange Act of 1934, as amended,
shall not be lower than the fair market value of the
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underlying Common Stock on the date of grant. This shall constitute a
performance goal under Section 162(m) of the Internal Revenue Code of 1986, as
amended.
The notice of the exercise of any Option shall be accompanied
by payment in full of the Option price. The purchase price shall be paid in
United States dollars in cash or by certified or cashier's check payable to the
order of the Company at the time to purchase. At the discretion of the
Committee, the purchase price may be paid with: (i) stock of the Company
(Common Stock already owned by, and in the possession of, the Grantee); or
(ii) any combination of United States dollars or stock of the Company. Anything
contained herein to the contrary notwithstanding, any required withholding tax
shall be paid by the Grantee in full in United States dollars in cash or by
certified or cashier's check at the time of exercise of the Option. Shares of
stock of the Company used to satisfy the exercise price of an Option shall be
valued at their fair market value as determined by the Committee, as of the
close of business on the day immediately preceding the date of exercise.
If required by the Company, such notice of exercise of an
Option shall be accompanied by the Grantee's written representation that the
shares being acquired are purchased for investment and not for distribution;
acknowledging that such shares have not been registered under the Securities
Act of 1933, as amended (the "1933 Act"); and agreeing that such shares may not
be sold or transferred unless there is an effective Registration Statement for
them under the 1933 Act, or, in the opinion of counsel, such sale or transfer
is not in violation of the 1933 Act.
The purchase price shall be subject to adjustment but only
as provided in Section 7 hereof.
(c) Vesting. Options shall vest in accordance with the
schedule established for each Grantee; provided, however, an Option may be
immediately exercisable in accordance with Section 6(g) below.
(d) Forfeiture. Notwithstanding anything contained
herein to the contrary, the right (whether or not vested) of a Grantee to
exercise his or her outstanding Options, if any, shall be forfeited if (i) the
Grantee shall enter into a business or employment which the Committee
determines to be detrimentally competitive with the Company or substantially
injurious to the Company's financial interests; or (ii) the Grantee is
discharged from employment with the Company for cause; (iii) the Grantee
performs acts of willful malfeasance or gross negligence in a matter of
material importance to the Company.
(e) Additional Restrictions on Exercise of an ISO. The
aggregate fair market value of Common Stock (determined at the time an
ISO is granted) for which an ISO is exercisable for the first time by a Grantee
during any calendar year (under all plans of the Company and its subsidiaries
or parent) shall not exceed $100,000.
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<PAGE>
(f) Duration of Options. Options may be granted for
terms of up to but not exceeding ten (10) years from the effective date the
particular Option is granted; provided, however, that ISOs granted to a 10%
Shareholder may be for a term of up to but not exceeding five (5) years from
the effective date the particular ISO is granted.
If the stockholders of the Company have not approved the
adoption of the Plan prior to the end of one (l) year from the date the Plan is
approved by the Board of Directors of the Company, any ISOs granted under the
Plan prior to such date shall be null and void and the Company shall rescind
the issuance of any shares of Common Stock issued upon the exercise of
such ISOs by a Grantee prior to such date. In the event of such rescission, the
Company shall refund the price paid per share of Common Stock by the
Grantee upon exercise of the ISO upon receipt of the certificate representing
such shares.
(g) Termination of Employment. Upon the termination of a
Grantee's employment with the Company, his or her rights to exercise an Option
then held by such Grantee shall be only as follows:
(i) Retirement. If the Grantee's
employment is terminated because he or she
has attained the age which the Company may
from time to time establish as the
retirement age for any class of its
employees, or in accordance with the age
specified in an employment agreement with a
Grantee he or she may, with the consent of
the Company within three months following
such termination, exercise the Option with
respect to all or any part of the shares
subject thereto, regardless of whether the
Grantee had the right to purchase such
shares at the time of termination of
employment. However, in the event of his or
her death prior to the end of the
three-month period after the aforesaid
termination of his or here employment, his
or her estate shall have the right to
exercise the Option within one (1) year
following such termination with respect to
all or any part of the shares subject
thereto, regardless of whether the Grantee
had the right to purchase such shares at
the time of termination of employment.
(ii) Death. In the case of a
Grantee who dies while employed by the
Company, his or her estate shall have the
right for a period of one (1) year
following the date of such death to
exercise the Option to the extent the
Grantee had the right to purchase such
shares on the day immediately prior to his
or her death.
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(iii) Disability. In the case of a
Grantee whose employment with the Company
is terminated by disability, as defined in
Code Section 22(e)(3), he or she shall have
the right for a period of one (1) year of
the disability to exercise the Option to
the extent the right had occurred prior to
the date of his or her disability.
(iv) Other Reasons. In the case of
a Grantee whose employment is terminated
for any reason other than those provided
above under "Retirement", "Death", or
"Disability", the Grantee or his or her
estate (in the event of his or her death
after such termination) may, within the
30-day period following such termination,
exercise the Option to the extent the right
to exercise had occurred prior to such
termination. Notwithstanding the foregoing,
the Committee shall have the authority, on
a case by case basis, with respect to any
Grantee whose employment is terminated for
any reason whatsoever, to accelerate the
vesting of any options outstanding on the
date employment is terminated and to permit
the Grantee to exercise any such Options
during the remaining term of such options.
For purposes of this Section 6(g), "termination of
employment" shall mean the termination of a Grantee's employment with the
Company or a subsidiary or a parent. A Grantee employed by a subsidiary shall
also be deemed to have a termination of employment if the subsidiary ceases to
be a subsidiary of the Company and the Grantee does not immediately thereafter
become an employee of the Company or of a subsidiary or the parent. Any other
Grantee who is not otherwise an employee of the Company shall be considered to
have terminated employment when substantial services, as determined by the
Committee, are no longer provided to the Company by the Grantee.
Also for purposes of this Section 6(g), a Grantee's "estate"
shall mean his or her legal representatives upon his or her death or any person
who acquires the right to exercise an Option by reason of the Grantee's death.
The Committee may in its discretion require the transferee of a Grantee to
supply it with written notice of the Grantee's death or disability and to
supply it with a copy of the will (in the case of the Grantee's death) or such
other evidence as the Committee deems necessary to establish the validity of
the transfer of an Option.
(h) Transferability of Option and Shares Acquired Upon
Exercise of Option. Options shall be transferable only by will or the laws of
descent and distribution and shall be exercisable during the Grantee's lifetime
only by the Grantee or by the guardian or legal representative of the Grantee.
Except as limited by applicable securities laws and the provisions of Sections
6(b), 6(j), 8 and 14 hereof, shares of Common Stock acquired upon
exercise of Options hereunder shall be freely transferable.
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(i) Modifications, Extension and Renewal of Options.
Subject to the terms and conditions and within the limitations of the Plan the
Committee may modify, extend or renew outstanding Options granted under the
Plan, or accept the surrender or outstanding Options (up to the extent not
theretofore exercised) and authorize the granting of new Options in
substitution therefor (to the extent not theretofore exercised). The Committee
shall not, however, with respect to ISOs, modify any outstanding Options so as
to specify a lower Option price or accept the surrender of outstanding Options
and authorize the granting of new Options in substitution therefor specifying a
lower price. Notwithstanding the foregoing, no modification of an Option shall,
without the consent of the Grantee, alter or impair any rights or obligations
under any Option theretofore granted under the Plan.
(j) Shares Held for Investment. Each Option agreement
may contain an undertaking that, upon demand by the Committee for such a
representation, the Grantee, or any person acting under Section 6(g), shall
deliver to the Committee at the time of any exercise of an Option a written
representation that the shares to be acquired upon such exercise are to be
acquired for investment and not for resale or with a view to the distribution
thereof. Upon such demand, delivery of such representation prior to the
delivery of any shares issued upon exercise of an option shall be a condition
precedent to the right of the Grantee or such other person to purchase any
shares of Common Stock.
(k) Other Terms and Conditions. Options may contain such
other provisions, which shall not be inconsistent with any of the foregoing
terms, as the Committee shall deem appropriate.
7. Adjustment for Changes in the Stock.
(a) In the event the shares of Common Stock, as
presently constituted, shall be changed into or exchanged for a different
number or kind of shares of stock or other securities of the Company or of
another corporation (whether by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of
shares, or otherwise) or if the number of such shares of Common Stock
shall be increased through the payment of a stock dividend, then there shall be
substituted for or added to each share of Common Stock theretofore
appropriated or thereafter subject or which may become subject to an Option
under this Plan, the number and kind of shares of stock or other securities
into which each outstanding share of Common Stock shall be so changed,
or for which each such share shall be exchanged, or to which each such share
shall be entitled, as the case may be. Outstanding Options shall also be
appropriately amended as to price and other terms as may be necessary to
reflect the foregoing events. In the event there shall be any other change in
the number or kind of the outstanding shares of the Common Stock, or of
any stock or other securities into which such Common Stock shall have
been changed, or for which it shall have been exchanged, then, if the Board of
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Directors shall, in its sole discretion, determine that such change equitably
requires as adjustment in any Option theretofore granted or which may be
granted under the Plan, such adjustments shall be made in accordance with such
determination.
(b) Fractional shares resulting from any adjustment in
Options pursuant to Section 7 may be settled in cash or otherwise as the
Committee shall determine. Notice of any adjustment shall be given by the
Company to each holder of an Option which shall have been so adjusted and such
adjustment (whether or not such notice is given) shall be effective and binding
for all purposes of the Plan.
8. Securities Law Requirements. No Option granted pursuant to
this Plan shall be exercisable in whole or in part, nor shall the Company be
obligated to sell any shares of Class A Common Stock subject to any such
Option, if such exercise and sale would, in the opinion of counsel for the
Company, violate the Securities Act of 1933 (or other Federal or State statutes
having similar requirements), as it may be in effect at that time. In this
regard, the Committee may demand the representations described in Section 6(b)
and Section 6(j).
Each Option shall be subject to the further requirement that,
if at any time the Committee shall determine in its discretion that the listing
or qualification of the shares of Class A Common Stock subject to such Option
under any securities exchange requirements or under any applicable law, or the
consent or approval of any governmental regulatory body, is necessary as a
condition of, or in connection with, the granting of such Option or the issue
of shares thereunder, such Option may not be exercised in whole or in part,
unless such listing, qualification, consent or approval shall have been
affected or obtained free of any conditions not acceptable to the Board of
Directors.
No person who acquires shares of Common Stock under
the Plan may, during any period of time that such person is an affiliate of the
Company within the meaning of the rules and regulations of the Securities and
Exchange Commission under the Securities Act of 1933, sell such shares of
Common Stock, unless such offer and sale is made (i) pursuant to an effective
registration statement under the Securities Act of 1933, which is current and
includes the shares to be sold, or (ii) pursuant to an appropriate exemption
from the registration requirement of the Securities Act of 1933, such as that
set forth in Rule 144 promulgated under the Securities Act of 1933.
9. Amendment of the Plan.
The Board of Directors may amend the Plan at any time, except
that approval of the holders of a majority of the outstanding voting stock of
the Company is required for amendments which:
(i) decrease the minimum Option price for ISOs;
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(ii) extent the term of the Plan beyond ten years;
(iii) extend the maximum terms of the Options granted
hereunder beyond ten years;
(iv) withdraw the administration of the Plan from the
Committee appointed pursuant to Section 3;
(v) expand the class of eligible employees, and other
Grantees;
(vi) increase the aggregate number of shares of
Common Stock which may be issued pursuant to the
provisions of the Plan; or
(vii) otherwise materially increase the benefits
accruing to participants under the Plan.
Notwithstanding the foregoing, the Board of Directors may,
without the need for stockholders' approval, amend the Plan in any respect to
qualify ISOs as incentive stock options under Code Section 422.
10. No Obligation to Exercise Option. The granting of an
Option shall impose no obligation upon the Grantee (or upon a transferee of a
Grantee) to exercise such Option.
11. No Limitation on Rights of the Company. The grant of any
Option shall not in any way affect the right or power of the Company to make
adjustments, reclassification, or changes in its capital or business structure
or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
12. Plan Not a Contract of Employment. The Plan is not a
contract of employment, and the terms of employment of any recipient of any
award hereunder shall not be affected in any way by the Plan or related
instruments except as specifically provided therein. The establishment of the
Plan shall not be construed as conferring any legal rights upon any recipient
of any award thereunder for a continuation of employment, nor shall it
interfere with the right of the Company or any subsidiary to discharge any
recipient of any
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<PAGE>
award hereunder and to treat him or her without regard to the effect which such
treatment might have upon him or her as the recipient of any award hereunder.
13. Expenses of the Plan. All of the expenses of the Plan
shall be paid by the Company.
14. Compliance with Applicable Law. Notwithstanding anything
herein to the contrary, the Company shall not be obligated to cause to be
issued or delivered any certificates for shares of Common Stock
pursuant to the exercise of an Option, unless and until the Company is advised
by its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of any exchange upon which shares of Common Stock are
traded. The Company shall in no event be obligated to register any securities
pursuant to the Securities Act of 1933 (as now in effect or as hereinafter
amended) or to take any other action in order to cause the issuance and
delivery of such certificates to comply with any such law, regulation or
requirement. The Committee may require, as a condition of the issuance and
delivery of such certificates and in order to ensure compliance with such law,
regulations and requirements, that the recipient of any award hereunder make
such covenants, agreements and representations as the Committee, in its sole
discretion, deems necessary or desirable, including, without limitation, a
written representation from a stockholder that the shares are being purchased
for investment and not for distribution, acknowledging that such shares have
not been registered under the Securities Act of 1933, as amended and agreeing
that such shares may not be sold or transferred unless there is an effective
Registration Statement for them under the 1933 Act, or, in the opinion of
counsel to the Company, that such sale or transfer is not in violation of the
Securities Act of 1933.
15. Effect Upon Other Compensation. Nothing contained herein
shall prevent the Company or any subsidiary from adopting other or additional
compensation arrangements for its employees or directors.
16. Grantee to Have No Rights as a Stockholder. No Grantee of
any Option shall have any rights as a stockholder with respect to any shares
subject to his or her Option prior to the date on which he or she is recorded
as the holder of such shares on the records of the Company. No Grantee of any
Option shall have the rights of a stockholder until he or she has paid in full
the Option price.
17. Notice. Notice to the Committee shall be deemed given if
in writing and mailed to the Secretary of the Company at its principal
executive offices by first class, certified mail at the then principal office
of the Company.
18. Governing Law. Except to the extent preempted by Federal
law, this Plan and all Option agreements entered into pursuant thereto shall be
construed and enforced
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in accordance with, and governed by, the laws of the State of Delaware,
determined without regard to its conflict of interest rules.
11
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EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") made and entered into as
of March 21, 1996, by and between THE MARQUEE GROUP INC, a Delaware
corporation having a place of business at 152 West 57th Street, New York, New
York 10019 ("Employer"), and ROBERT M. GUTKOWSKI, an individual having a place
of business at 152 West 57th Street, New York, New York 10019 ("Executive").
WHEREAS, Employer has been established to engage in the
business of providing management, licensing, sponsorship sales, marketing,
consulting and production services to sports related businesses and talent;
and
WHEREAS, Employer desires to employ Executive as its
President and Chief Executive Officer, and Executive is willing to be employed
in such capacity;
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises and covenants contained herein, it is agreed as follows:
1. EMPLOYMENT; DUTIES.
(a) Employer hereby agrees to employ Executive, and
Executive hereby agrees to accept employment during the term hereof on a
full-time basis, as President and Chief Executive Officer, and shall perform
such services in accordance with the standards observed by senior executives
in comparable businesses, subject at all times to the direction of the Board
of Directors of Employer (the "Board").
(b) During the term of this Agreement, Employer agrees to
cause Executive to be elected to the Board of Directors of both Sports
Marketing & Television International, Inc. ("SMTI") and Athletes and Artists,
Inc. ("A&A"), each a wholly-owned subsidiary of Employer, and to use its best
efforts to cause Executive to be nominated to the Board. Executive agrees to
serve in such capacities upon appointment on the same terms and conditions as
the other executive officer/directors serving on the respective Board of
Directors.
(c) In addition to any obligations Executive may have to
vote his shares of Employer in the manner set forth in that certain
Shareholders' Agreement (the "Shareholders' Agreement"), dated as of March __,
1996, by and among The Sillerman Companies, Inc., Executive, Arthur Kaminsky,
Louis J. Oppenheim, Michael Trager, Michael Letis and Employer, Executive
<PAGE>
agrees that, during the Employment Term, as hereinafter defined, he will vote
his shares of Employer in the manner set forth in Section 3.01(d) of the
Shareholders' Agreement.
2. TERM OF EMPLOYMENT. Executive's employment hereunder
shall commence on the date of this Agreement and shall continue for a period
of five (5) years therefrom (the "Employment Term").
3. COMPENSATION.
(a) As consideration for all of the services performed by
Executive under this Agreement, Employer shall pay Executive, as an annual
salary payable in accordance with Employer's ordinary payroll practices, the
sum of three hundred and twenty five thousand dollars ($325,000).
(b) Employer shall pay Executive an annual bonus in an
amount of at least one hundred fifty thousand dollars ($150,000), which bonus
shall be paid in respect of each twelve-month period ending on March 31st,
commencing with the twelve-month period beginning April 1, 1996. In addition,
the Board may, in its discretion, pay Executive an additional annual bonus.
(c) Employer shall reimburse Executive for all ordinary,
reasonable and necessary expenses incurred by Executive in connection with his
duties hereunder upon presentation by Executive of the details of and vouchers
for such expenses. During the term of this Agreement, Executive shall be
entitled to participate in all pension, group insurance, hospitalization,
medical, health, accident and disability plans of Employer and shall be
eligible to be granted options and other benefits under stock option and
similar incentive plans maintained by Employer (it being understood that the
foregoing is not a guarantee that Executive will be granted options or other
benefits under such plans).
4. NON-COMPETITION.
(a) As used herein, the term "Competitive Activities"
means any attempt by Executive, without the prior written consent of Employer,
directly or indirectly, for his own account or as an employee, officer,
director, partner, joint venturer, shareholder, investor (except that
Executive may purchase up to five percent of the outstanding capital stock of
any publicly-traded corporation) or otherwise to engage or participate in the
business of providing management, licensing, sponsorship sales, marketing,
consulting and production services to sports related businesses and talent, in
any area. As used herein, the term "Client Solicitation" means any attempt by
Executive, without the prior written consent of Employer, directly or
indirectly, for his own account or as an employee, officer, director, partner,
joint venturer, shareholder, investor or otherwise to interfere with, disrupt,
or attempt to disrupt, any past, present or prospective relationship,
contractual or otherwise, between Employer and any client, customer, vendor or
supplier of Employer. As used herein, the term "Employee Solicitation" means
any attempt by
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<PAGE>
Executive, without the prior written consent of Employer, directly or
indirectly, for his own account or as an employee, officer, director, partner,
joint venturer, shareholder, investor or otherwise to employ or solicit the
employment or engagement by others of any employee of Employer who was an
employee as of the date of the termination of this Agreement or within six (6)
months prior thereto.
(b) (i) During the term of this Agreement,
Executive will not engage in any Competitive Activities,
Client Solicitation or Employee Solicitation.
(ii) If Executive voluntarily terminates
this Agreement during the first three (3) years hereof, he
will not engage in any Competitive Activities for a period
of one hundred and eighty (180) days after such termination
or engage in any Client Solicitation or Employee
Solicitation for a period of eighteen (18) months after such
termination.
(iii) If Executive voluntarily terminates
this Agreement after the first three (3) years hereof, he
will not engage in any Competitive Activities for a period
of ninety (90) days after such termination or engage in any
Client Solicitation or Employee Solicitation for a period
one (1) year after such termination.
(iv) If Employer terminates this Agreement
for "Cause" (as hereinafter defined), Executive will not
engage in any Competitive Activities for a period of ninety
(90) days after such termination or engage in any Client
Solicitation or Employee Solicitation for a period of one
(1) year after such termination.
(v) If Employer terminates this Agreement
without Cause, Executive will not be subject to any
prohibitions (other than those, if any, provided under
applicable law) regarding Competitive Activities, Client
Solicitation or Employee Solicitation.
(vi) If, after the end of the Employment
Term, Executive refuses a good faith offer of Employer to
extend Executive's employment on terms substantially similar
to those set forth herein (other than those terms relating
to the length of employment), Executive will not, for a
period of eighteen (18) months after the end of the
Employment Term, engage in any Client Solicitation or
Employee Solicitation.
(vii) If, after the end of the Employment
Term, Employer does not make a good faith offer to Executive
to extend Executive's employment on terms substantially
similar to those set forth herein (other than those terms
relating to the length of employment), Executive will not
(A) for a period of one (1) year after the end of the
Employment Term, engage in any Client Solicitation, or (B)
for a period
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<PAGE>
of ninety (90) days after the end of Employment Term, engage
in any Employee Solicitation.
(viii) For purposes of paragraphs (vi) and
(vii) of this Section 4(b), "employment on terms
substantially similar to those set forth herein" shall
include employment with a salary and bonus at least as great
as the greater of (A) those set forth in Section 3(a) hereof
and the first sentence of Section 3(b) hereof or (B) those
then payable pursuant to an amendment (whether oral or
written) to the salary and bonus provisions set forth in
Section 3(a) hereof and the first sentence of Section 3(b)
hereof. Notwithstanding the foregoing, if, at the end of the
Employment Term, each of the other parties to the
Shareholders' Agreement who then has an employment agreement
with the Company (the "Other Employees") agrees, or has
previously agreed, to a reduction in the salary and/or bonus
then payable to him by Employer, then "employment or terms
substantially similar to those set forth herein" shall
include employment with a salary and bonus at least as great
as the greater of clause (A) or (B) above, reduced by the
same percentage amount by which the Other Employees agree,
or have previously agreed, to a reduction in their salary
and bonus; provided, however, that such salary and bonus
will not be less than that specified in clause (A) above.
(ix) Nothing in paragraphs (ii) or (iii)
of this Section 4(b) is intended to confer upon Executive
any right to terminate this Agreement other than for the
reasons set forth in Section 7(c) hereof.
(c) In the event that Executive breaches any provisions
of this Section 4 or there is a threatened breach, then, in addition to any
other rights which Employer may have, Employer shall be entitled to injunctive
relief to enforce the restrictions contained herein. In the event that an
actual proceeding is brought in equity to enforce the provisions of this
paragraph, Executive shall not argue as a defense that there is an adequate
remedy at law nor shall Employer be prevented from seeking any other remedies
which may be available.
5. CONFIDENTIALITY. During the term of this Agreement and
thereafter, Executive agrees to hold in strictest confidence, and not to use,
except for the benefit of Employer, or to disclose to any person, firm or
corporation, without the prior written authorization of the Board, any trade
secrets, confidential knowledge, data or other proprietary information of
Employer.
6. VACATION; BENEFITS. Executive shall be entitled to paid
vacation time at the rate of not less than four (4) weeks per calendar year
during the term of his employment hereunder. In addition, Executive will be
permitted to observe religious holidays as personal days and such days off
will not be applied against Executive's vacation time. During the term of this
Agreement, Employer shall maintain a medical insurance plan similar in scope
and coverage to those maintained by comparable businesses and Executive shall
be entitled to participate in such plan. In
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<PAGE>
addition, if and when Employer maintains a dental insurance plan, Executive
will be entitled to participate in such plan.
7. TERMINATION.
(a) Anything to the contrary notwithstanding, this
Agreement shall terminate before the expiration of the term hereof in the
event of Executive's (i) death or (ii) at the discretion of Employer, upon
Executive's disability for a period of twenty six (26) consecutive weeks. For
the purposes of this Agreement, "disability" shall mean the incapacitation or
disablement by accident, sickness or otherwise so as to render Executive
mentally or physically incapable of performing the services required to be
performed by him under this Agreement. If, in the discretion of Employer,
Executive has recovered from a disability for which he was terminated and the
Employment Term has not expired, then Employer may, at its option, rehire
Executive on the terms of this Agreement for the period that ends with the
expiration of the Employment Term. If Executive declines such offer to rehire
him, he shall do so without any liability or obligation to Employer, except as
set forth in the next two (2) sentences. If Executive declines such offer to
rehire him, then, if such offer to rehire is extended on or prior to the third
(3rd) anniversary of the date of this Agreement, Executive will not engage in
any Competitive Activities for a period of one hundred and eighty (180) days
after such offer to rehire is extended or engage in any Client Solicitation or
Employee Solicitation for a period of eighteen (18) months after such offer to
rehire is extended. If Executive declines such offer to rehire him, then, if
such offer to rehire is extended after the third (3rd) anniversary of the date
of this Agreement, Executive will not engage in any Competitive Activities for
a period of ninety (90) days after such offer to rehire is extended or engage
in any Client Solicitation or Employee Solicitation for a period of one (1)
year after such offer to rehire is extended.
(b) Executive's employment hereunder may also be
terminated by Employer before the expiration of the Employment Term only for
Cause, as herein defined. "Cause" shall mean only one or more of the following
occurrences:
(i) Executive's conviction of a felony by
a court of competent jurisdiction (which conviction, through
lapse of time or otherwise, is not subject to appeal);
(ii) Executive's commission of an act of
fraud or embezzlement upon Employer;
(iii) the material breach by Executive of
Section 4(b)(i) hereof; or
(iv) in the event of the wilful
malfeasance or gross negligence in the performance of
Executive's duties hereunder or the wilful failure of
Executive to perform his duties hereunder, which
malfeasance, negligence or failure has a material adverse
effect on the business of Employer and continues for a
period of fifteen (15)
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<PAGE>
days after written notice is given to Executive specifying
such malfeasance, negligence or failure.
(c) Executive may terminate his employment hereunder
only if:
(i) at two (2) consecutive annual meetings
of the stockholders of Employer, or in written consents in
lieu thereof, Executive fails to win election to the Board;
(ii) at two (2) consecutive annual
meetings of the stockholders of SMTI, or in written consents
in lieu thereof, Executive fails to win election to the
Board of Directors of SMTI;
(iii) at two (2) consecutive annual
meetings of the stockholders of A&A, or in written consents
in lieu thereof, Executive fails to win election to the
Board of Directors of A&A;
(iv) Employer fails to pay Executive's
salary for a period of sixty (60) consecutive days; or
(v) Employer materially breaches any other
covenant by Employer herein contained and such breach
continues for a period of fifteen (15) days following
written notice by Executive to Employer of such breach.
In the event of any termination by Executive of his
employment hereunder pursuant to this Section 7(c), all of Executive's
obligations to Employer set forth herein shall terminate; provided, however,
that Employer shall remain liable for all salary accrued hereunder up to the
date of such termination and the ratable portion of the bonus set forth in the
first sentence of Section 3(b) hereof accrued up to the date of such
termination, which shall be payable no later than thirty (30) days after the
date of such termination. The foregoing shall not be deemed to restrict
Executive's rights at law or in equity in the event of any breach of this
Agreement by Employer.
8. NOTICES. All notices hereunder shall be in writing and
shall be delivered in person or given by registered or certified mail, postage
prepaid, and sent to the parties at the respective addresses above set forth.
Either party may designate any other address to which notice shall be given by
giving notice to the other of such change of address in the manner herein
provided.
9. SEVERABILITY OF PROVISIONS. If any provision of this
agreement shall be declared by a court of competent jurisdiction to be
invalid, illegal or incapable of being enforced in whole or in part, the
remaining conditions and provisions or portions thereof shall nevertheless
remain in full force and effect and enforceable to the extent they are valid,
legal and enforceable, and no provision shall be deemed dependent upon any
other covenant or provision unless so expressed herein.
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<PAGE>
10. GOVERNING LAW. This Agreement shall be construed and
governed by the internal laws of the State of New York.
11. NON-WAIVER. The failure of either party to insist upon
the strict performance of any term or condition in this Agreement shall not be
considered a waiver or relinquishment of future compliance therewith.
12. ATTORNEY'S FEES. In the event of a dispute arising
hereunder, each party shall bear its own fees and expenses (including legal
fees and expenses).
13. ENTIRE AGREEMENT; MODIFICATION. This Agreement contains
the entire agreement between the parties relating to the subject matter
hereof. No modification of this Agreement shall be valid unless it is made in
writing and signed by the parties hereto and, if such modification takes
effect within one (1) year from the date of the A&A Merger and the SMTI
Merger, the other Shareholders who are employed by Employer as of the date of
such modification. For purposes hereof, the "A&A Merger," the "SMTI Merger"
and "Shareholders" shall have the meanings ascribed to them in the
Shareholders' Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE MARQUEE GROUP INC.
By: /s/ Robert F.X. Sillerman
----------------------------
Name: Robert F.X. Sillerman
Title: Chairman
/s/ Robert M. Gutkowski
-------------------------------
ROBERT M. GUTKOWSKI
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<PAGE>
EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") made and entered into as
of ____________, 1996, by and between THE MARQUEE GROUP INC., a Delaware
corporation having a place of business at 150 East 58th Street, New York, New
York 10155 ("Employer"), and MICHAEL TRAGER, an individual having a place of
business at 410 Greenwich Avenue, Greenwich, Connecticut 06830 ("Executive").
WHEREAS, Employer has been established to engage in the
business of providing management, licensing, sponsorship sales, marketing,
consulting and production services to sports related businesses and talent;
and
WHEREAS, Employer desires to employ Executive as its
Executive Vice President, and Executive is willing to be employed in such
capacity;
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises and covenants contained herein, it is agreed as follows:
1. EMPLOYMENT; DUTIES.
(a) Employer hereby agrees to employ Executive, and
Executive hereby agrees to accept employment during the term hereof, as
Executive Vice President, and shall perform such services in accordance with
the standards observed by senior executives in comparable businesses, subject
at all times to the direction of the Board of Directors of Employer (the
"Board").
(b) During the term of this Agreement, Employer agrees to
cause Executive to be elected to the Board of Directors of Sports Marketing &
Television International, Inc. ("SMTI"), a wholly-owned subsidiary of
Employer, and to use its best efforts to cause Executive to be nominated to
the Board. Executive agrees to serve in such capacities upon appointment on
the same terms and conditions as the other executive officer/directors serving
on the respective Board of Directors.
(c) In addition to any obligations Executive may have to
vote his shares of Employer in the manner set forth in that certain
Shareholders' Agreement (the "Shareholders' Agreement"), dated as of March 21,
1996, by and among The Sillerman Companies, Inc., Robert M. Gutkowski, Arthur
Kaminsky, Louis J. Oppenheim, Executive, Michael Letis and Employer, Executive
agrees that, during the Employment Term, as hereinafter defined, he will vote
his shares of Employer in the manner set forth in Section 3.01(d) of the
Shareholders' Agreement.
2. TERM OF EMPLOYMENT. Executive's employment hereunder
shall commence on the date of this Agreement and shall continue for a period
of five (5) years therefrom (the "Employment Term").
<PAGE>
3. COMPENSATION.
(a) As consideration for all of the services performed by
Executive under this Agreement, Employer shall pay Executive, as an annual
salary payable in accordance with Employer's ordinary payroll practices, the
sum of three hundred thousand dollars ($300,000).
(b) Employer shall reimburse Executive for all ordinary,
reasonable and necessary expenses incurred by Executive in connection with his
duties hereunder upon presentation by Executive of the details of and vouchers
for such expenses. During the term of this Agreement, Executive shall be
entitled to participate in all pension, group insurance, hospitalization,
medical, health, accident and disability plans of Employer and shall be
eligible to be granted options and other benefits under stock option and
similar incentive plans maintained by Employer (it being understood that the
foregoing is not a guarantee that Executive will be granted options or other
benefits under such plans).
4. NON-COMPETITION.
(a) As used herein, the term "Competitive Activities"
means any attempt by Executive, without the prior written consent of Employer,
directly or indirectly, for his own account or as an employee, officer,
director, partner, joint venturer, shareholder, investor (except that
Executive may purchase up to five percent of the outstanding capital stock of
any publicly-traded corporation) or otherwise to engage or participate in the
business of providing management, licensing, sponsorship sales, marketing,
consulting and production services to sports related businesses and talent, in
any area. As used herein, the term "Client Solicitation" means any attempt by
Executive, without the prior written consent of Employer, directly or
indirectly, for his own account or as an employee, officer, director, partner,
joint venturer, shareholder, investor of otherwise to interfere with, disrupt,
or attempt to disrupt, any past, present or prospective relationship,
contractual or otherwise, between Employer and any client, customer, vendor or
supplier of Employer. As used herein, the term "Employee Solicitation" means
any attempt by Executive, without the prior written consent of Employer,
directly or indirectly, for his own account or as an employee, officer,
director, partner, joint venturer, shareholder, investor or otherwise to
employ or solicit the employment or engagement by others of any employee of
Employer who was an employee as of the date of the termination of this
Agreement or within six (6) months prior thereto.
(b) (i) During the term of this Agreement,
Executive will not engage in any Competitive Activities,
Client Solicitation or Employee Solicitation.
(ii) If Executive voluntarily terminates
this Agreement during the first three (3) years hereof, he
will not engage in any Competitive Activities for a period
of one hundred and eighty (180) days after such termination
or engage in any Client Solicitation or Employee
Solicitation for a period of eighteen (18) months after such
termination.
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<PAGE>
(iii) If Executive voluntarily terminates
this Agreement after the first three (3) years hereof, he
will not engage in any Competitive Activities for a period
of ninety (90) days after such termination or engage in any
Client Solicitation or Employee Solicitation for a period
one (1) year after such termination.
(iv) If Employer terminates this Agreement
for "Cause" (as hereinafter defined), Executive will not
engage in any Competitive Activities for a period of ninety
(90) days after such termination or engage in any Client
Solicitation or Employee Solicitation for a period of one
(1) year after such termination.
(v) If Employer terminates this Agreement
without Cause, Executive will not be subject to any
prohibitions (other than those, if any, provided under
applicable law) regarding Competitive Activities, Client
Solicitation or Employee Solicitation.
(vi) If, after the end of the Employment
Term, Executive refuses a good faith offer of Employer to
extend Executive's employment on terms substantially similar
to those set forth herein (other than those terms relating
to the length of employment), Executive will not, for a
period of eighteen (18) months after the end of the
Employment Term, engage in any Client Solicitation or
Employee Solicitation.
(vii) If, after the end of the employment
term, Employer does not make a good faith offer to Executive
to extend Executive's employment on terms substantially
similar to those set forth herein (other than those terms
relating to the length of employment), Executive will not
(A) for a period of one (1) year after the end of the
Employment Term, engage in any Client Solicitation, or (B)
for a period of ninety (90) days after the end of Employment
Term, engage in any Employee Solicitation.
(viii) For purposes of paragraphs (vi) and
(vii) of this Section 4(b), "employment on terms
substantially similar to those set forth herein" shall
include employment with a salary and bonus at least as great
as the greater of (A) those set forth in Section 3(a) hereof
and the first sentence of Section 3(b) hereof or (B) those
then payable pursuant to an amendment (whether oral or
written) to the salary and bonus provisions set forth in
Section 3(a) hereof and the first sentence of Section 3(b)
hereof. Notwithstanding the foregoing, if, at the end of the
Employment Term, each of the other parties to the
Shareholders' Agreement who then has an employment agreement
with the Company (the "Other Employees") agrees, or has
previously agreed, to a reduction in the salary and/or bonus
then payable to him by Employer, then "employment on terms
substantially similar to those set forth herein" shall
include employment with a salary and bonus at least as great
as the greater of clause (A) or (B) above, reduced by the
same percentage amount by which the Other Employees agree,
or have previously agreed, to a reduction in their salary
and bonus;
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<PAGE>
provided, however, that such salary and bonus will not be
less than that specified in clause (A) above.
(ix) Nothing in paragraphs (ii) or (iii)
of this Section 4(b) is intended to confer upon Executive
any right to terminate this Agreement other than for the
reasons set forth in Section 7(c) hereof.
(c) In the event that Executive breaches any provisions
of this paragraph or there is a threatened breach, then, in addition to any
other rights which Employer may have, Employer shall be entitled to injunctive
relief to enforce the restrictions contained herein. In the event that an
actual proceeding is brought in equity to enforce the provisions of this
paragraph, Executive shall not argue as a defense that there is an adequate
remedy at law nor shall Employer be prevented from seeking any other remedies
which may be available.
5. CONFIDENTIALITY. During the term of this Agreement and
thereafter, Executive agrees to hold in strictest confidence, and not to use,
except for the benefit of Employer, or to disclose to any person, firm or
corporation, without the prior written authorization of the Board, any trade
secrets, confidential knowledge, data or other proprietary information of
Employer.
6. VACATION; BENEFITS. Executive shall be entitled to paid
vacation time at the rate of not less than four (4) weeks per calendar year
during the term of his employment hereunder. In addition, Executive will be
permitted to observe religious holidays as personal days and such days off
will not be applied against Executive's vacation time. During the term of this
Agreement, Employer shall maintain medical and dental insurance plans similar
in scope and coverage to those maintained by comparable businesses and
Executive shall be entitled to participate in such plans.
7. TERMINATION.
(a) Anything to the contrary notwithstanding, this
Agreement shall terminate before the expiration of the term hereof in the
event of Executive's (i) death or (ii) at the discretion of Employer, upon
Executive's disability for a period of twenty six (26) consecutive weeks. For
the purposes of this Agreement, "disability" shall mean the incapacitation or
disablement by accident, sickness or otherwise so as to render Executive
mentally or physically incapable of performing the services required to be
performed by him under this Agreement. If, in the discretion of Employer,
Executive has recovered from a disability for which he was terminated and the
Employment Term has not expired, then Employer may, at its option, rehire
Executive on the terms of this Agreement for the period that ends with the
expiration of the Employment Term. If Executive declines such offer to rehire
him, he shall do so without any liability or obligation to Employer, except as
set forth in the next two (2) sentences. If Executive declines such offer to
rehire him, then, if such offer to rehire is extended on or prior to the third
(3rd) anniversary of the date of this Agreement, Executive will not engage in
any Competitive Activities for a period of one hundred and eighty (180) days
after such offer to rehire is extended or engage in any Client Solicitation or
Employee Solicitation for a period of eighteen (18) months after such offer to
rehire is extended. If Executive declines such offer to rehire him, then, if
such offer to rehire is extended after the third
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<PAGE>
(3rd) anniversary of the date of this Agreement, Executive will not engage in
any Competitive Activities for a period of ninety (90) days after such offer
to rehire is extended or engage in any Client Solicitation or Employee
Solicitation for a period of one (1) year after such offer to rehire is
extended.
(b) Executive's employment hereunder may also be
terminated by the Employer before the expiration of the Employment Term only
for Cause, as herein defined. "Cause" shall mean only one or more of the
following occurrences:
(i) Executive's conviction of a felony by
a court of competent jurisdiction (which conviction, through
lapse of time or otherwise, is not subject to appeal);
(ii) Executive's commission of an act of
fraud or embezzlement upon the Employer;
(iii) the material breach by Executive of
Section 4(b)(i) hereof; or
(iv) in the event of the wilful
malfeasance or gross negligence in the performance of
Executive's duties hereunder or the wilful failure of
Executive to perform his duties hereunder, which
malfeasance, negligence or failure has a material adverse
effect on the business of Employer and continues for a
period of fifteen (15) days after written notice is given to
Executive specifying such malfeasance, negligence or
failure.
(c) Executive may terminate his employment hereunder
only if:
(i) at two (2) consecutive annual meetings
of the stockholders of Employer, or in written consents in
lieu thereof, Executive fails to win election to the Board;
(ii) at two (2) consecutive annual
meetings of the stockholders of SMTI, or in written consents
in lieu thereof, Executive fails to win election to the
Board of Directors of SMTI;
(iii) Employer fails to pay Executive's
salary for a period of sixty (60) consecutive days; or
(iv) Employer materially breaches any
other covenant by Employer herein contained and such breach
continues for a period of fifteen (15) days following
written notice by Executive to Employer of such breach.
In the event of any termination by Executive of his
employment hereunder pursuant to this Section 7(c), all of Executive's
obligations to Employer set forth herein shall
- 5 -
<PAGE>
terminate; provided, however, that Employer shall remain liable for all salary
accrued hereunder up to the date of such termination which shall be payable no
later than thirty (30) days after the date of such termination. The foregoing
shall not be deemed to restrict Executive's rights at law or in equity in the
event of any breach of this Agreement by Employer.
8. NOTICES. All notices hereunder shall be in writing and
shall be delivered in person or given by registered or certified mail, postage
prepaid, and sent to the parties at the respective addresses above set forth.
Either party may designate any other address to which notice shall be given by
giving notice to the other of such change of address in the manner herein
provided.
9. SEVERABILITY OF PROVISIONS. If any provision of this
agreement shall be declared by a court of competent jurisdiction to be
invalid, illegal or incapable of being enforced in whole or in part, the
remaining conditions and provisions or portions thereof shall nevertheless
remain in full force and effect and enforceable to the extent they are valid,
legal and enforceable, and no provision shall be deemed dependent upon any
other covenant or provision unless so expressed herein.
10. GOVERNING LAW. This Agreement shall be construed and
governed by the internal laws of the State of New York.
11. NON-WAIVER. The failure of either party to insist upon
the strict performance of any term or condition in this Agreement shall not be
considered a waiver or relinquishment of future compliance therewith.
12. ATTORNEY'S FEES. In the event of a dispute arising
hereunder, each party shall bear its own fees and expenses (including legal
fees and expenses).
13. ENTIRE AGREEMENT; MODIFICATION. This Agreement contains
the entire agreement between the parties relating to the subject matter
hereof. No modification of this Agreement shall be valid unless it is made in
writing and signed by the parties hereto and, if such modification takes
effect within one (1) year from the date hereof, the other Shareholders (as
such term is defined in the Shareholders' Agreement) who are employed by
Employer as of the date of such modification.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE MARQUEE GROUP INC.
By:
-----------------------------------
Robert M. Gutkowski
President and Chief Executive Officer
--------------------------------------
MICHAEL TRAGER
- 6 -
<PAGE>
EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") made and entered into as
of ____________, 1996, by and between THE MARQUEE GROUP INC., a Delaware
corporation having a place of business at 150 East 58th Street, New York, New
York 10155 ("Employer"), and MICHAEL LETIS, having a place of business at 410
Greenwich Avenue, Greenwich, Connecticut 06830 ("Executive").
WHEREAS, Employer has been established to engage in the
business of providing management, licensing, sponsorship sales, marketing,
consulting and production services to sports related businesses and talent;
and
WHEREAS, Employer desires to employ Executive as its
Executive Vice President, and Executive is willing to be employed in such
capacity;
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises and covenants contained herein, it is agreed as follows:
1. EMPLOYMENT; DUTIES.
(a) Employer hereby agrees to employ Executive, and
Executive hereby agrees to accept employment during the term hereof, as
Executive Vice President, and shall perform such services in accordance with
the standards observed by senior executives in comparable businesses, subject
at all times to the direction of the Board of Directors of Employer (the
"Board").
(b) During the term of this Agreement, Employer agrees to
cause Executive to be elected to the Board of Directors of Sports Marketing &
Television International, Inc. ("SMTI"), a wholly-owned subsidiary of
Employer, and to use its best efforts to cause Executive to be nominated to
the Board. Executive agrees to serve in such capacities upon appointment on
the same terms and conditions as the other executive officer/directors serving
on the respective Board of Directors.
(c) In addition to any obligations Executive may have to
vote his shares of Employer in the manner set forth in that certain
Shareholders' Agreement (the "Shareholders' Agreement"), dated as of March 21,
1996, by and among The Sillerman Companies, Inc., Robert M. Gutkowski, Arthur
Kaminsky, Louis J. Oppenheim, Michael Trager, Executive and Employer,
Executive agrees that, during the Employment Term, as hereinafter defined, he
will vote his shares of Employer in the manner set forth in Section 3.01(d) of
the Shareholders' Agreement.
2. TERM OF EMPLOYMENT. Executive's employment hereunder
shall commence on the date of this Agreement and shall continue for a period
of five (5) years therefrom (the "Employment Term").
<PAGE>
3. COMPENSATION.
(a) As consideration for all of the services performed by
Executive under this Agreement, Employer shall pay Executive, as an annual
salary payable in accordance with Employer's ordinary payroll practices, the
sum of three hundred thousand dollars ($300,000).
(b) Employer shall reimburse Executive for all ordinary,
reasonable and necessary expenses incurred by Executive in connection with his
duties hereunder upon presentation by Executive of the details of and vouchers
for such expenses. During the term of this Agreement, Executive shall be
entitled to participate in all pension, group insurance, hospitalization,
medical, health, accident and disability plans of Employer and shall be
eligible to be granted options and other benefits under stock option and
similar incentive plans maintained by Employer (it being understood that the
foregoing is not a guarantee that Executive will be granted options or other
benefits under such plans).
4. NON-COMPETITION.
(a) As used herein, the term "Competitive Activities"
means any attempt by Executive, without the prior written consent of Employer,
directly or indirectly, for his own account or as an employee, officer,
director, partner, joint venturer, shareholder, investor (except that
Executive may purchase up to five percent of the outstanding capital stock of
any publicly-traded corporation) or otherwise to engage or participate in the
business of providing management, licensing, sponsorship sales, marketing,
consulting and production services to sports related businesses and talent, in
any area. As used herein, the term "Client Solicitation" means any attempt by
Executive, without the prior written consent of Employer, directly or
indirectly, for his own account or as an employee, officer, director, partner,
joint venturer, shareholder, investor or otherwise to interfere with, disrupt,
or attempt to disrupt, any past, present or prospective relationship,
contractual or otherwise, between Employer and any client, customer, vendor or
supplier of Employer. As used herein, the term "Employee Solicitation" means
any attempt by Executive, without the prior written consent of Employer,
directly or indirectly, for his own account or as an employee, officer,
director, partner, joint venturer, shareholder, investor or otherwise to
employ or solicit the employment or engagement by others of any employee of
Employer who was an employee as of the date of the termination of this
Agreement or within six (6) months prior thereto.
(b) (i) During the term of this Agreement,
Executive will not engage in any Competitive Activities,
Client Solicitation or Employee Solicitation.
(ii) If Executive voluntarily terminates
this Agreement during the first three (3) years hereof, he
will not engage in any Competitive Activities for a period
of one hundred and eighty (180) days after such termination
or engage in any Client Solicitation or Employee
Solicitation for a period of eighteen (18) months after such
termination.
- 2 -
<PAGE>
(iii) If Executive voluntarily terminates
this Agreement after the first three (3) years hereof, he
will not engage in any Competitive Activities for a period
of ninety (90) days after such termination or engage in any
Client Solicitation or Employee Solicitation for a period
one (1) year after such termination.
(iv) If Employer terminates this Agreement
for "Cause" (as hereinafter defined), Executive will not
engage in any Competitive Activities for a period of ninety
(90) days after such termination or engage in any Client
Solicitation or Employee Solicitation for a period of one
(1) year after such termination.
(v) If Employer terminates this Agreement
without Cause, Executive will not be subject to any
prohibitions (other than those, if any, provided under
applicable law) regarding Competitive Activities, Client
Solicitation or Employee Solicitation.
(vi) If, after the end of the Employment
Term, Executive refuses a good faith offer of Employer to
extend Executive's employment on terms substantially similar
to those set forth herein (other than those terms relating
to the length of employment), Executive will not, for a
period of eighteen (18) months after the end of the
Employment Term, engage in any Client Solicitation or
Employee Solicitation.
(vii) If, after the end of the Employment
Term, Employer does not make a good faith offer to Executive
to extend Executive's employment on terms substantially
similar to those set forth herein (other than those terms
relating to the length of employment), Executive will not
(A) for a period of one (1) year after the end of the
Employment Term, engage in any Client Solicitation or (B)
for a period of ninety (90) days after the end of Employment
Term, engage in any Employee Solicitation.
(viii) For purposes of paragraphs (vi) and
(vii) of this Section 4(b), "employment on terms
substantially similar to those set forth herein" shall
include employment with a salary and bonus at least as great
as the greater of (A) those set forth in Section 3(a) hereof
and the first sentence of Section 3(b) hereof or (B) those
then payable pursuant to an amendment (whether oral or
written) to the salary and bonus provisions set forth in
Section 3(a) hereof and the first sentence of Section 3(b)
hereof. Notwithstanding the foregoing, if, at the end of the
Employment Term, each of the other parties to the
Shareholders' Agreement who then has an employment agreement
with the Company (the "Other Employees") agrees, or has
previously agreed, to a reduction in the salary and/or bonus
then payable to him by Employer, then "employment on terms
substantially similar to those set forth herein" shall
include employment with a salary and bonus at least as great
as the greater of clause (A) or (B) above, reduced by the
same percentage amount by which the Other
- 3 -
<PAGE>
Employees agree, or have previously agreed, to a reduction
in their salary and bonus; provided, however, that such
salary and bonus will not be less than that specified in
clause (A) above.
(ix) Nothing in paragraphs (ii) or (iii)
of this Section 4(b) is intended to confer upon Executive
any right to terminate this Agreement other than for the
reasons set forth in Section 7(c) hereof.
(c) In the event that Executive breaches any provisions
of this Section 4 or there is a threatened breach, then, in addition to any
other rights which Employer may have, Employer shall be entitled to injunctive
relief to enforce the restrictions contained herein. In the event that an
actual proceeding is brought in equity to enforce the provisions of this
paragraph, Executive shall not argue as a defense that there is an adequate
remedy at law nor shall Employer be prevented from seeking any other remedies
which may be available.
5. CONFIDENTIALITY. During the term of this Agreement and
thereafter, Executive agrees to hold in strictest confidence, and not to use,
except for the benefit of Employer, or to disclose to any person, firm or
corporation, without the prior written authorization of the Board, any trade
secrets, confidential knowledge, data or other proprietary information of
Employer.
6. VACATION; BENEFITS. Executive shall be entitled to paid
vacation time at the rate of not less than four (4) weeks per calendar year
during the term of his employment hereunder. In addition, Executive will be
permitted to observe religious holidays as personal days and such days off
will not be applied against Executive's vacation time. During the term of this
Agreement, Employer shall maintain medical and dental insurance plans similar
in scope and coverage to those maintained by comparable businesses and
Executive shall be entitled to participate in such plans.
7. TERMINATION.
(a) Anything to the contrary notwithstanding, this
Agreement shall terminate before the expiration of the term hereof in the
event of Executive's (i) death or (ii) at the discretion of Employer, upon
Executive's disability for a period of twenty six (26) consecutive weeks. For
the purposes of this Agreement, "disability" shall mean the incapacitation or
disablement by accident, sickness or otherwise so as to render Executive
mentally or physically incapable of performing the services required to be
performed by him under this Agreement. If, in the discretion of Employer,
Executive has recovered from a disability for which he was terminated and the
Employment Term has not expired, then Employer may, at its option, rehire
Executive on the terms of this Agreement for the period that ends with the
expiration of the Employment Term. If Executive declines such offer to rehire
him, he shall do so without any liability or obligation to Employer, except as
set forth in the next two (2) sentences. If Executive declines such offer to
rehire him, then, if such offer to rehire is extended on or prior to the third
(3rd) anniversary of the date of this Agreement, Executive will not engage in
any Competitive Activities for a period of one hundred
- 4 -
<PAGE>
and eighty (180) days after such offer to rehire is extended or engage in any
Client Solicitation or Employee Solicitation for a period of eighteen (18)
months after such offer to rehire is extended. If Executive declines such
offer to rehire him, then, if such offer to rehire is extended after the third
(3rd) anniversary of the date of this Agreement, Executive will not engage in
any Competitive Activities for a period of ninety (90) days after such offer
to rehire is extended or engage in any Client Solicitation or Employee
Solicitation for a period of one (1) year after such offer to rehire is
extended.
(b) Executive's employment hereunder may also be
terminated by Employer before the expiration of the Employment Term only for
Cause, as herein defined. "Cause" shall mean only one or more of the following
occurrences:
(i) Executive's conviction of a felony by
a court of competent jurisdiction (which conviction, through
lapse of time or otherwise, is not subject to appeal);
(ii) Executive's commission of an act of
fraud or embezzlement upon Employer;
(iii) the material breach by Executive of
Section 4(b)(i) hereof; or
(iv) in the event of the wilful
malfeasance or gross negligence in the performance of
Executive's duties hereunder or the wilful failure of
Executive to perform his duties hereunder, which
malfeasance, negligence or failure has a material adverse
effect on the business of Employer and continues for a
period of fifteen (15) days after written notice is given to
Executive specifying such malfeasance, negligence or
failure.
(c) Executive may terminate his employment hereunder
only if:
(i) at two (2) consecutive annual meetings
of the stockholders of Employer, or in written consents in
lieu thereof, Executive fails to win election to the Board;
(ii) at two (2) consecutive annual
meetings of the stockholders of SMTI, or in written consents
in lieu thereof, Executive fails to win election to the
Board of Directors of SMTI;
(iii) Employer fails to pay Executive's
salary for a period of sixty (60) consecutive days; or
(iv) Employer materially breaches any
other covenant by Employer herein contained and such breach
continues for a period of fifteen (15) days following
written notice by Executive to Employer of such breach.
- 5 -
<PAGE>
In the event of any termination by Executive of his
employment hereunder pursuant to this Section 7(c), all of Executive's
obligations to Employer set forth herein shall terminate ; provided, however,
that Employer shall remain liable for all salary accrued hereunder up to the
date of such termination which shall be payable no later than thirty (30) days
after the date of such termination. The foregoing shall not be deemed to
restrict Executive's rights at law or in equity in the event of any breach of
this Agreement by Employer.
8. NOTICES. All notices hereunder shall be in writing and
shall be delivered in person or given by registered or certified mail, postage
prepaid, and sent to the parties at the respective addresses above set forth.
Either party may designate any other address to which notice shall be given by
giving notice to the other of such change of address in the manner herein
provided.
9. SEVERABILITY OF PROVISIONS. If any provision of this
agreement shall be declared by a court of competent jurisdiction to be
invalid, illegal or incapable of being enforced in whole or in part, the
remaining conditions and provisions or portions thereof shall nevertheless
remain in full force and effect and enforceable to the extent they are valid,
legal and enforceable, and no provision shall be deemed dependent upon any
other covenant or provision unless so expressed herein.
10. GOVERNING LAW. This Agreement shall be construed and
governed by the internal laws of the State of New York.
11. NON-WAIVER. The failure of either party to insist upon
the strict performance of any term or condition in this Agreement shall not be
considered a waiver or relinquishment of future compliance therewith.
12. ATTORNEY'S FEES. In the event of a dispute arising
hereunder, each party shall bear its own fees and expenses (including legal
fees and expenses).
13. ENTIRE AGREEMENT; MODIFICATION. This Agreement contains
the entire agreement between the parties relating to the subject matter
hereof. No modification of this Agreement shall be valid unless it is made in
writing and signed by the parties hereto and, if such modification takes
effect within one (1) year from the date hereof, the other Shareholders (as
such term is defined in the Shareholders' Agreement) who are employed by
Employer as of the date of such modification.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE MARQUEE GROUP INC.
By:
-----------------------------------
Robert M. Gutkowski
President and Chief Executive Officer
--------------------------------------
MICHAEL LETIS
- 7 -
<PAGE>
EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") made and entered into as
of ____________, 1996, by and between THE MARQUEE GROUP INC., a Delaware
corporation having a place of business at 150 East 58th Street, New York, New
York 10155 ("Employer"), and ARTHUR KAMINSKY, an individual having a place of
business at 421 Seventh Avenue, Suite 1410, New York, New York 10001
("Executive").
WHEREAS, Employer has been established to engage in the
business of providing management, licensing, sponsorship sales, marketing,
consulting and production services to sports related businesses and talent;
and
WHEREAS, Employer desires to employ Executive as its
Executive Vice President, and Executive is willing to be employed in such
capacity;
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises and covenants contained herein, it is agreed as follows:
1. EMPLOYMENT; DUTIES.
(a) Employer hereby agrees to employ Executive, and
Executive hereby agrees to accept employment during the term hereof, as
Executive Vice President, and shall perform such services in accordance with
the standards observed by senior executives in comparable businesses, subject
at all times to the direction of the Board of Directors of Employer (the
"Board").
(b) During the term of this Agreement, Employer agrees to
cause Executive to be elected to the Board of Directors of Athletes and
Artists, Inc. ("A&A"), a wholly-owned subsidiary of Employer, and to use its
best efforts to cause Executive to be nominated to the Board. Executive agrees
to serve in such capacities upon appointment on the same terms and conditions
as the other executive officers/directors serving on the respective Board of
Directors.
(c) In addition to any obligations Executive may have to
vote his shares of Employer in the manner set forth in that certain
Shareholders' Agreement (the "Shareholders' Agreement"), dated as of March 21,
1996, by and among The Sillerman Companies, Inc., Robert M. Gutkowski,
Executive, Louis J. Oppenheim, Michael Trager, Michael Letis and Employer,
Executive agrees that, during the Employment Term, as hereinafter defined, he
will vote his shares of Employer in the manner set forth in Section 3.01(d) of
the Shareholders' Agreement.
<PAGE>
2. TERM OF EMPLOYMENT. Executive's employment hereunder
shall commence on the date of this Agreement and shall continue for a period
of five (5) years therefrom (the "Employment Term").
3. COMPENSATION.
(a) As consideration for all of the services performed by
Executive under this Agreement, Employer shall pay Executive, as an annual
salary payable in accordance with Employer's ordinary payroll practices, the
sum of three hundred thousand dollars ($300,000).
(b) Employer shall reimburse Executive for all ordinary,
reasonable and necessary expenses incurred by Executive in connection with his
duties hereunder upon presentation by Executive of the details of and vouchers
for such expenses. During the term of this Agreement, Executive shall be
entitled to participate in all pension, group insurance, hospitalization,
medical, health, accident and disability plans of Employer and shall be
eligible to be granted options and other benefits under stock option and
similar incentive plans maintained by Employer (it being understood that the
foregoing is not a guarantee that Executive will be granted options or other
benefits under such plans).
4. NON-COMPETITION.
(a) As used herein, the term "Competitive Activities"
means any attempt by Executive, without the prior written consent of Employer,
directly or indirectly, for his own account or as an employee, officer,
director, partner, joint venturer, shareholder, investor (except that
Executive may purchase up to five percent of the outstanding capital stock of
any publicly-traded corporation) or otherwise to engage or participate in the
business of providing management, licensing, sponsorship sales, marketing,
consulting and production services to sports related businesses and talent, in
any area. As used herein, the term "Client Solicitation" means any attempt by
Executive, without the prior written consent of Employer, directly or
indirectly, for his own account or as an employee, officer, director, partner,
joint venturer, shareholder, investor or otherwise to interfere with, disrupt,
or attempt to disrupt, any past, present or prospective relationship,
contractual or otherwise, between Employer and any client, customer, vendor or
supplier of Employer. As used herein, the term "Employee Solicitation" means
any attempt by Executive, without the prior written consent of Employer,
directly or indirectly, for his own account or as an employee, officer,
director, partner, joint venturer, shareholder, investor or otherwise to
employ or solicit the employment or engagement by others of any employee of
Employer who was an employee as of the date of the termination of this
Agreement or within six (6) months prior thereto.
(b) (i) During the term of this Agreement,
Executive will not engage in any Competitive Activities,
Client Solicitation or Employee Solicitation.
- 2 -
<PAGE>
(ii) If Executive voluntarily terminates
this Agreement during the first three (3) years hereof, he
will not engage in any Competitive Activities for a period
of one hundred and eighty (180) days after such termination
or engage in any Client Solicitation or Employee
Solicitation for a period of eighteen (18) months after such
termination.
(iii) If Executive voluntarily terminates
this Agreement after the first three (3) years hereof, he
will not engage in any Competitive Activities for a period
of ninety (90) days after such termination or engage in any
Client Solicitation or Employee Solicitation for a period
one (1) year after such termination.
(iv) If Employer terminates this Agreement
for "Cause" (as hereinafter defined), Executive will not
engage in any Competitive Activities for a period of ninety
(90) days after such termination or engage in any Client
Solicitation or Employee Solicitation for a period of one
(1) year after such termination.
(v) If Employer terminates this Agreement
without Cause, Executive will not be subject to any
prohibitions (other than those, if any, provided under
applicable law) regarding Competitive Activities, Client
Solicitation or Employee Solicitation.
(vi) If, after the end of the Employment
Term, Executive refuses a good faith offer of Employer to
extend Executive's employment on terms substantially similar
to those set forth herein (other than those terms relating
to the length of employment), Executive will not, for a
period of eighteen (18) months after the end of the
Employment Term, engage in any Client Solicitation or
Employee Solicitation.
(vii) If, after the end of the Employment
Term, Employer does not make a good faith offer to Executive
to extend Executive's employment on terms substantially
similar to those set forth herein (other than those terms
relating to the length of employment), Executive will not
(A) for a period of one (1) year after the end of the
Employment Term, engage in any Client Solicitation, or (B)
for a period of ninety (90) days after the end of Employment
Term, engage in any Employee Solicitation.
(viii) For purposes of paragraphs (vi) and
(vii) of this Section 4(b), "employment on terms
substantially similar to those set forth herein" shall
include employment with a salary and bonus at least as great
as the greater of (A) those set forth in Section 3(a) hereof
and the first sentence of Section 3(b) hereof or (B) those
then payable pursuant to an amendment (whether oral or
written) to the
- 3 -
<PAGE>
salary and bonus provisions set forth in Section 3(a) hereof
and the first sentence of Section 3(b) hereof.
Notwithstanding the foregoing, if, at the end of the
Employment Term, each of the other parties to the
Shareholders' Agreement who then has an employment agreement
with the Company (the "Other Employees") agrees, or has
previously agreed, to a reduction in the salary and/or bonus
then payable to him by Employer, then "employment on terms
substantially similar to those set forth herein" shall
include employment with a salary and bonus at least as great
as the greater of clause (A) or (B) above, reduced by the
same percentage amount by which the Other Employees agree,
or have previously agreed, to a reduction in their salary
and bonus; provided, however, that such salary and bonus
will not be less than that specified in clause (A) above.
(ix) Nothing in paragraphs (ii) or (iii)
of this Section 4(b) is intended to confer upon Executive
any right to terminate this Agreement other than for the
reasons set forth in Section 7(c) hereof.
(c) In the event that Executive breaches any provisions
of this Section 4 or there is a threatened breach, then, in addition to any
other rights which Employer may have, Employer shall be entitled to injunctive
relief to enforce the restrictions contained herein. In the event that an
actual proceeding is brought in equity to enforce the provisions of this
paragraph, Executive shall not argue as a defense that there is an adequate
remedy at law nor shall Employer be prevented from seeking any other remedies
which may be available.
5. CONFIDENTIALITY. During the term of this Agreement and
thereafter, Executive agrees to hold in strictest confidence, and not to use,
except for the benefit of Employer, or to disclose to any person, firm or
corporation, without the prior written authorization of the Board, any trade
secrets, confidential knowledge, data or other proprietary information of
Employer.
6. VACATION; BENEFITS. Executive shall be entitled to paid
vacation time at the rate of not less than four (4) weeks per calendar year
during the term of his employment hereunder. In addition, Executive will be
permitted to observe religious holidays as personal days and such days off
will not be applied against Executive's vacation time. During the term of this
Agreement, Employer shall maintain medical and dental insurance plans similar
in scope and coverage to those maintained by comparable businesses and
Executive shall be entitled to participate in such plans.
7. TERMINATION.
(a) Anything to the contrary notwithstanding, this
Agreement shall terminate before the expiration of the term hereof in the
event of Executive's (i) death or (ii) at the discretion of Employer, upon
Executive's disability for a period of twenty six (26) consecutive weeks. For
the purposes of this Agreement, "disability" shall mean the incapacitation or
- 4 -
<PAGE>
disablement by accident, sickness or otherwise so as to render Executive
mentally or physically incapable of performing the services required to be
performed by him under this Agreement. If, in the discretion of Employer,
Executive has recovered from a disability for which he was terminated and the
Employment Term has not expired, then Employer may, at its option, rehire
Executive on the terms of this Agreement for the period that ends with the
expiration of the Employment Term. If Executive declines such offer to rehire
him, he shall do so without any liability or obligation to Employer, except as
set forth in the next two (2) sentences. If Executive declines such offer to
rehire him, then, if such offer to rehire is extended on or prior to the third
(3rd) anniversary of the date of this Agreement, Executive will not engage in
any Competitive Activities for a period of one hundred and eighty (180) days
after such offer to rehire is extended or engage in any Client Solicitation or
Employee Solicitation for a period of eighteen (18) months after such offer to
rehire is extended. If Executive declines such offer to rehire him, then, if
such offer to rehire is extended after the third (3rd) anniversary of the date
of this Agreement, Executive will not engage in any Competitive Activities for
a period of ninety (90) days after such offer to rehire is extended or engage
in any Client Solicitation or Employee Solicitation for a period of one (1)
year after such offer to rehire is extended.
(b) Executive's employment hereunder may also be
terminated by Employer before the expiration of the Employment Term only for
Cause, as herein defined. "Cause" shall mean only one or more of the following
occurrences:
(i) Executive's conviction of a felony by
a court of competent jurisdiction (which conviction, through
lapse of time or otherwise, is not subject to appeal);
(ii) Executive's commission of an act of
fraud or embezzlement upon Employer;
(iii) the material breach by Executive of
Section 4(b)(i) hereof; or
(iv) in the event of the wilful
malfeasance or gross negligence in the performance of
Executive's duties hereunder or the wilful failure of
Executive to perform his duties hereunder, which
malfeasance, negligence or failure has a material adverse
effect on the business of Employer and continues for a
period of fifteen (15) days after written notice is given to
Executive specifying such malfeasance, negligence or
failure.
(c) Executive may terminate his employment hereunder
only if:
(i) at two (2) consecutive annual meetings
of the stockholders of Employer, or in written consents in
lieu thereof, Executive fails to win election to the Board;
- 5 -
<PAGE>
(ii) at two (2) consecutive annual
meetings of the stockholders of A&A, or in written consents
in lieu thereof, Executive fails to win election to the
Board of Directors of A&A;
(iii) Employer fails to pay Executive's
salary for a period of sixty (60) consecutive days; or
(iv) Employer materially breaches any
other covenant by Employer herein contained and such breach
continues for a period of fifteen (15) days following
written notice by Executive to Employer of such breach.
In the event of any termination by Executive of his
employment hereunder pursuant to this Section 7(c), all of Executive's
obligations to Employer set forth herein shall terminate; provided, however,
that Employer shall remain liable for all salary accrued hereunder up to the
date of such termination which shall be payable no later than thirty (30) days
after the date of such termination. The foregoing shall not be deemed to
restrict Executive's rights at law or in equity in the event of any breach of
this Agreement by Employer.
8. NOTICES. All notices hereunder shall be in writing and
shall be delivered in person or given by registered or certified mail, postage
prepaid, and sent to the parties at the respective addresses above set forth.
Either party may designate any other address to which notice shall be given by
giving notice to the other of such change of address in the manner herein
provided.
9. SEVERABILITY OF PROVISIONS. If any provision of this
agreement shall be declared by a court of competent jurisdiction to be
invalid, illegal or incapable of being enforced in whole or in part, the
remaining conditions and provisions or portions thereof shall nevertheless
remain in full force and effect and enforceable to the extent they are valid,
legal and enforceable, and no provision shall be deemed dependent upon any
other covenant or provision unless so expressed herein.
10. GOVERNING LAW. This Agreement shall be construed and
governed by the internal laws of the State of New York.
11. NON-WAIVER. The failure of either party to insist upon
the strict performance of any term or condition in this Agreement shall not be
considered a waiver or relinquishment of future compliance therewith.
12. ATTORNEY'S FEES. In the event of a dispute arising
hereunder, each party shall bear its own fees and expense (including legal
fees and expenses).
- 6 -
<PAGE>
13. ENTIRE AGREEMENT; MODIFICATION. This Agreement contains
the entire agreement between the parties relating to the subject matter
hereof. No modification of this Agreement shall be valid unless it is made in
writing and signed by the parties hereto and, if such modification takes
effect within one (1) year from the date hereof, the other Shareholders (as
such term is defined in the Shareholders' Agreement) who are employed by
Employer as of the date of such modification.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE MARQUEE GROUP INC.
By:
----------------------------------
Robert M. Gutkowski
President and Chief Executive Officer
-------------------------------------
ARTHUR KAMINSKY
- 7 -
<PAGE>
EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") made and entered into as
of ____________, 1996, by and between THE MARQUEE GROUP INC., a Delaware
corporation having a place of business at 150 East 58th Street, New York, New
York 10155 ("Employer"), and LOUIS J. OPPENHEIM, an individual having a place
of business at 421 Seventh Avenue, Suite 1410, New York, New York 10001
("Executive").
WHEREAS, Employer has been established to engage in the
business of providing management, licensing, sponsorship sales, marketing,
consulting and production services to sports related businesses and talent;
and
WHEREAS, Employer desires to employ Executive as its
Executive Vice President, and Executive is willing to be employed in such
capacity;
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises and covenants contained herein, it is agreed as follows:
1. EMPLOYMENT; DUTIES.
(a) Employer hereby agrees to employ Executive, and
Executive hereby agrees to accept employment during the term hereof, as
Executive Vice President, and shall perform such services in accordance with
the standards observed by senior executives in comparable businesses, subject
at all times to the direction of the Board of Directors of Employer (the
"Board").
(b) During the term of this Agreement, Employer agrees to
cause Executive to be elected to the Board of Directors of Athletes and
Artists, Inc. ("A&A"), a wholly-owned subsidiary of Employer, and to use its
best efforts to cause Executive to be nominated to the Board. Executive agrees
to serve in such capacities upon appointment on the same terms and conditions
as the other executive officer/directors serving on the respective Board of
Directors.
(c) In addition to any obligations Executive may have to
vote his shares of Employer in the manner set forth in that certain
Shareholders' Agreement (the "Shareholders' Agreement"), dated as of March 21,
1996, by and among The Sillerman Companies, Inc., Robert M. Gutkowski, Arthur
Kaminsky, Executive, Michael Trager, Michael Letis and Employer, Executive
agrees that, during the Employment Term, as hereinafter defined, he will vote
his shares of Employer in the manner set forth in Section 3.01(d) of the
Shareholders' Agreement.
2. TERM OF EMPLOYMENT. Executive's employment hereunder
shall commence on the date of this Agreement and shall continue for a period
of five (5) years therefrom (the "Employment Term").
<PAGE>
3. COMPENSATION.
(a) As consideration for all of the services performed by
Executive under this Agreement, Employer shall pay Executive, as an annual
salary payable in accordance with Employer's ordinary payroll practices, the
sum of one hundred and seventy five thousand dollars ($175,000).
(b) Employer shall reimburse Executive for all ordinary,
reasonable and necessary expenses incurred by Executive in connection with his
duties hereunder upon presentation by Executive of the details of and vouchers
for such expenses. During the term of this Agreement, Executive shall be
entitled to participate in all pension, group insurance, hospitalization,
medical, health, accident and disability plans of Employer and shall be
eligible to be granted options and other benefits under stock option and
similar incentive plans maintained by Employer (it being understood that the
foregoing is not a guarantee that Executive will be granted options or other
benefits under such plans).
4. NON-COMPETITION.
(a) As used herein, the term "Competitive Activities"
means any attempt by Executive, without the prior written consent of Employer,
directly or indirectly, for his own account or as an employee, officer,
director, partner, joint venturer, shareholder, investor (except that
Executive may purchase up to five percent of the outstanding capital stock of
any publicly-traded corporation) or otherwise to engage or participate in the
business of providing management, licensing, sponsorship sales, marketing,
consulting and production services to sports related businesses and talent, in
any area. As used herein, the term "Client Solicitation" means any attempt by
Executive, without the prior written consent of Employer, directly or
indirectly, for his own account or as an employee, officer, director, partner,
joint venturer, shareholder, investor or otherwise to interfere with, disrupt,
or attempt to disrupt, any past, present or prospective relationship,
contractual or otherwise, between Employer and any client, customer, vendor or
supplier of Employer. As used herein, the term "Employee Solicitation" means
any attempt by Executive, without the prior written consent of Employer,
directly or indirectly, for his own account or as an employee, officer,
director, partner, joint venturer, shareholder, investor or otherwise to
employ or solicit the employment or engagement by others of any employee of
Employer who was an employee as of the date of the termination of this
Agreement or within six (6) months prior thereto.
(b) (i) During the term of this Agreement,
Executive will not engage in any Competitive Activities,
Client Solicitation or Employee Solicitation.
(ii) If Executive voluntarily terminates
this Agreement during the first three (3) years hereof, he
will not engage in any Competitive Activities for a period
of one hundred and eighty (180) days after such termination
or engage in any Client Solicitation or Employee
Solicitation for a period of eighteen (18) months after such
termination.
- 2 -
<PAGE>
(iii) If Executive voluntarily terminates
this Agreement after the first three (3) years hereof, he
will not engage in any Competitive Activities for a period
of ninety (90) days after such termination or engage in any
Client Solicitation or Employee Solicitation for a period
one (1) year after such termination.
(iv) If Employer terminates this Agreement
for "Cause" (as hereinafter defined), Executive will not
engage in any Competitive Activities for a period of ninety
(90) days after such termination or engage in any Client
Solicitation or Employee Solicitation for a period of one
(1) year after such termination.
(v) If Employer terminates this Agreement
without Cause, Executive will not be subject to any
prohibitions (other than those, if any, provided under
applicable law) regarding Competitive Activities, Client
Solicitation or Employee Solicitation.
(vi) If, after the end of the Employment
Term, Executive refuses a good faith offer of Employer to
extend Executive's employment on terms substantially similar
to those set forth herein (other than those terms relating
to the length of employment), Executive will not for a
period of eighteen (18) months after the end of the
Employment Term, engage in any Client Solicitation or
Employee Solicitation.
(vii) If, after the end of the Employment
Term, Employer does not make a good faith offer to Executive
to extend Executive's employment on terms substantially
similar to those set forth herein (other than those terms
relating to the length of employment), Executive will not
(A) for a period of one (1) year after the end of the
Employment Term, engage in any Client Solicitation, or (B)
for a period of ninety (90) days after the end of Employment
Term, engage in any Employee Solicitation.
(viii) For purposes of paragraphs (vi) and
(vii) of this Section 4(b), "employment on terms
substantially similar to those set forth herein" shall
include employment with a salary and bonus at least as great
as the greater of (A) those set forth in Section 3(a) hereof
and the first sentence of Section 3(b) hereof or (B) those
then payable pursuant to an amendment (whether oral or
written) to the salary and bonus provisions set forth in
Section 3(a) hereof and the first sentence of Section 3(b)
hereof. Notwithstanding the foregoing, if, at the end of the
Employment Term, each of the other parties to the
Shareholders' Agreement who then has an employment agreement
with the Company (the "Other Employees") agrees, or has
previously agreed, to a reduction in the salary and/or bonus
then payable to him by Employer, then "employment or terms
substantially similar to those set forth herein" shall
include employment with a salary and bonus at least as great
as the greater of clause (A) or (B) above, reduced by the
same percentage amount by which the Other Employees agree,
or have previously agreed, to a reduction in their salary
and bonus;
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<PAGE>
provided, however, that such salary or bonus will not be
less than that specified in clause (A) above.
(ix) Nothing in paragraphs (ii) or (iii)
of this Section 4(b) is intended to confer upon Executive
any right to terminate this Agreement other than for the
reasons set forth in Section 7(c) hereof.
(c) In the event that Executive breaches any provisions
of this Section 4 or there is a threatened breach, then, in addition to any
other rights which Employer may have, Employer shall be entitled to injunctive
relief to enforce the restrictions contained herein. In the event that an
actual proceeding is brought in equity to enforce the provisions of this
paragraph, Executive shall not argue as a defense that there is an adequate
remedy at law nor shall Employer be prevented from seeking any other remedies
which may be available.
5. CONFIDENTIALITY. During the term of this Agreement and
thereafter, Executive agrees to hold in strictest confidence, and not to use,
except for the benefit of Employer, or to disclose to any person, firm or
corporation, without the prior written authorization of the Board, any trade
secrets, confidential knowledge, data or other proprietary information of
Employer.
6. VACATION; BENEFITS. Executive shall be entitled to paid
vacation time at the rate of not less than four (4) weeks per calendar year
during the term of his employment hereunder. In addition, Executive will be
permitted to observe religious holidays as personal days and such days off
will not be applied against Executive's vacation time. During the term of this
Agreement, Employer shall maintain medical and dental insurance plans similar
in scope and coverage to those maintained by comparable businesses and
Executive shall be entitled to participate in such plans.
7. TERMINATION.
(a) Anything to the contrary notwithstanding, this
Agreement shall terminate before the expiration of the term hereof in the
event of Executive's (i) death or (ii) at the discretion of Employer, upon
Executive's disability for a period of twenty six (26) consecutive weeks. For
the purposes of this Agreement, "disability" shall mean the incapacitation or
disablement by accident, sickness or otherwise so as to render Executive
mentally or physically incapable of performing the services required to be
performed by him under this Agreement. If, in the discretion of Employer,
Executive has recovered from a disability for which he was terminated and the
Employment Term has not expired, then Employer may, at its option, rehire
Executive on the terms of this Agreement for the period that ends with the
expiration of the Employment Term. If Executive declines such offer to rehire
him, he shall do so without any liability or obligation to Employer, except as
set forth in the next two (2) sentences. If Executive declines such offer to
rehire him, then, if such offer to rehire is extended on or prior to the third
(3rd) anniversary of the date of this Agreement, Executive will not engage in
any Competitive Activities for a period of one hundred and eighty (180) days
after such offer to rehire is extended or engage in any Client Solicitation or
Employee Solicitation for a period of eighteen (18) months after such offer to
rehire is extended. If Executive declines such offer to rehire him, then, if
such offer to rehire is extended after the third
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<PAGE>
(3rd) anniversary of the date of this Agreement, Executive will not engage in
any Competitive Activities for a period of ninety (90) days after such offer
to rehire is extended or engage in any Client Solicitation or Employee
Solicitation for a period of one (1) year after such offer to rehire is
extended.
(b) Executive's employment hereunder may also be
terminated by Employer before the expiration of the Employee Term only for
Cause, as herein defined. "Cause" shall mean only one or more of the following
occurrences:
(i) Executive's conviction of a felony by
a court of competent jurisdiction (which conviction, through
lapse of time or otherwise, is not subject to appeal);
(ii) Executive's commission of an act of
fraud or embezzlement upon the Employer;
(iii) the material breach by Executive of
Section 4(b)(i) hereof; or
(iv) in the event of the wilful
malfeasance or gross negligence in the performance of
Executive's duties hereunder or the wilful failure of
Executive to perform his duties hereunder, which
malfeasance, negligence or failure has a material adverse
effect on the business of Employer and continues for a
period of fifteen (15) days after written notice is given to
Executive specifying such malfeasance, negligence or
failure.
(c) Executive may terminate his employment hereunder
only if:
(i) at two (2) consecutive annual meetings
of the stockholders of Employer, or in written consents in
lieu thereof, Executive fails to win election to the Board;
(ii) at two (2) consecutive annual
meetings of the stockholders of A&A, or in written consents
in lieu thereof, Executive fails to win election to the
Board of Directors of A&A;
(iii) Employer fails to pay Executive's
salary for a period of sixty (60) consecutive days; or
(iv) Employer materially breaches any
other covenant by Employer herein contained and such breach
continues for a period of fifteen (15) days following
written notice by Executive to Employer of such breach.
In the event of any termination by Executive of his
employment hereunder pursuant to this Section 7(c), all of Executive's
obligations to Employer set forth herein shall terminate;
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<PAGE>
provided, however, that Employer shall remain liable for all salary accrued
hereunder up to the date of such termination which shall be payable no later
than thirty (30) days after the date of such termination. The foregoing shall
not be deemed to restrict Executive's rights at law or in equity in the event
of any breach of this Agreement by Employer.
8. NOTICES. All notices hereunder shall be in writing and
shall be delivered in person or given by registered or certified mail, postage
prepaid, and sent to the parties at the respective addresses above set forth.
Either party may designate any other address to which notice shall be given by
giving notice to the other of such change of address in the manner herein
provided.
9. SEVERABILITY OF PROVISIONS. If any provision of this
agreement shall be declared by a court of competent jurisdiction to be
invalid, illegal or incapable of being enforced in whole or in part, the
remaining conditions and provisions or portions thereof shall nevertheless
remain in full force and effect and enforceable to the extent they are valid,
legal and enforceable, and no provision shall be deemed dependent upon any
other covenant or provision unless so expressed herein.
10. GOVERNING LAW. This Agreement shall be construed and
governed by the internal laws of the State of Delaware.
11. NON-WAIVER. The failure of either party to insist upon
the strict performance of any term or condition in this Agreement shall not be
considered a waiver or relinquishment of future compliance therewith.
12. ATTORNEY'S FEES. In the event of a dispute arising
hereunder, each party shall bear its own fees and expenses (including legal
fees and expenses).
13. ENTIRE AGREEMENT; MODIFICATION. This Agreement contains
the entire agreement between the parties relating to the subject matter
hereof. No modification of this Agreement shall be valid unless it is made in
writing and signed by the parties hereto and, if such modification takes
effect within one (1) year from the date hereof, the other Shareholders (as
such term is defined in the Shareholders' Agreement) who are employed by
Employer as of the date of such modification.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE MARQUEE GROUP INC.
By:
----------------------------------
Robert M. Gutkowski
President and Chief Executive Officer
-------------------------------------
LOUIS J. OPPENHEIM
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<PAGE>
SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT ("Agreement"), entered into as of
March 21, 1996, by and among, THE SILLERMAN COMPANIES, INC., a corporation
having an address at 150 East 58th Street, New York, New York 10155 ("TSC"),
ROBERT M. GUTKOWSKI, an individual having and address at 152 West 57th Street,
New York, New York 10019 ("Gutkowski"), ARTHUR KAMINSKY, an individual having
an address at 421 Seventh Avenue, Suite 1410, New York, New York 10001
("Kaminsky"), LOUIS J. OPPENHEIM, an individual having an address at 421
Seventh Avenue, Suite 1410, New York, New York 10001 ("Oppenheim"), MICHAEL
TRAGER, an individual having an address at 410 Greenwich Avenue, Greenwich,
Connecticut 06830 ("Trager"), MICHAEL LETIS, an individual having an address
at 410 Greenwich Avenue, Greenwich, Connecticut 06830 ("Letis") (Kaminsky and
Oppenheim are sometimes referred to herein as the "A&A Shareholders," Trager
and Letis are sometimes referred to herein as the "SMTI Shareholders" and TSC,
Gutkowski, Kaminsky, Oppenheim, Trager and Letis are sometimes collectively
referred to herein as the "Shareholders" or individually as a "Shareholder"),
and THE MARQUEE GROUP INC., a Delaware corporation (the "Company").
WHEREAS, TSC and Gutkowski have formed the Company, which
proposes to acquire each of Sports Marketing & Television International, Inc.,
a Connecticut corporation ("SMTI") and Athletes and Artists, Inc., a New York
corporation ("A&A"), and have been issued founders stock in connection with
such formation;
WHEREAS, TSC and Gutkowski currently own all of the issued
and outstanding stock of the Company;
WHEREAS, upon the consummation of the acquisition of A&A by
Company (the "A&A Merger"), Kaminsky and Oppenheim will become shareholders of
the Company, and upon the consummation of the acquisition of SMTI by the
Company (the "SMTI Merger"), Trager and Letis will become shareholders of the
Company; and
WHEREAS, the A&A Merger and the SMTI Merger will occur
simultaneously;
WHEREAS, the Shareholders desire to promote a harmonious
relationship among themselves with respect to the conduct of the business and
affairs of the Company;
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises and
undertakings set forth below and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
OBJECTIVES OF THE COMPANY
1.01 Objectives of the Company. The Company has been established to
engage in the business of providing management, licensing, sponsorship sales,
marketing, consulting and production services to sports related businesses and
talent.
ARTICLE II
CAPITALIZATION
2.01 Initial Capitalization. The authorized capital of the Company
consists of 1,000 shares of common stock, $.01 par value per share (the
"Common Stock"), all of which are currently outstanding, 666 of which are
owned by TSC, 333 of which are owned by Gutkowski and one of which is owned by
Martin Ehrlich.
2.02 Post-Merger Capitalization. Upon the consummation of the A&A
Merger and the SMTI Merger (a) the shareholders of A&A and SMTI will be issued
shares of Common Stock in accordance with the relevant merger documents and
(b) the shares of Common Stock held by the A&A Shareholders, the SMTI
Shareholders (assuming no option to purchase shares of Common Stock are issued
to designees of the SMTI Shareholders, as provided for in the Acquisition
Agreement relating to the SMTI Merger), TSC and Gutkowski (collectively the
"Management Stock") shall be adjusted to that (i) the A&A Shareholders will
own three-thirteenths (3/13) of the shares of Management Stock, (ii) the SMTI
Shareholders will own four-thirteenths (4/13) of the shares of Management
Stock, (iii) Gutkowski will own two-thirteenths (2/13) of the shares of
Management Stock and (iv) TSC will own four-thirteenths (4/13) of the shares
of Management Stock.
2.03 Certificate of Incorporation and By-laws. If there should be a
conflict between the provisions of this Agreement and provisions of either the
Certificate of Incorporation or the Bylaws of the Company, the Shareholders
shall promptly upon the receipt of written notice exercise their voting powers
so as to amend the Certificate of Incorporation and the By-laws to conform to
this Agreement, and the Shareholders further agree that they shall not
exercise their voting powers to modify or amend the Certificate of
Incorporation or By-laws except in accordance with the terms and provisions
hereof.
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<PAGE>
ARTICLE III
DIRECTORS
3.01 Corporate Governance.
(a) Number of Directors. The management of the Company shall
be entrusted to a Board of Directors initially consisting of five (5)
individuals (hereinafter collectively referred to as the "Board", and each
individually as a "Director") each having one vote, which number shall be
increased to nine (9) upon the consummation of the initial public offering by
the Company in accordance with the terms of this Agreement. Thereafter, the
parties hereto agree that they will not take any action to increase or
decrease the number of Directors.
(b) Nomination of Directors at Annual Meeting. Among the
Shareholders, the following procedures shall govern the nomination of
Directors of the Company: (i) TSC shall be entitled to nominate two Directors;
(ii) the A&A Shareholders shall initially be entitled to nominate one Director
and, upon the consummation of the initial public offering by the Company,
shall be entitled to nominate two Directors; (iii) the SMTI Shareholders shall
initially be entitled to nominate one Director and, upon the consummation of
the initial public offering by the Company, shall be entitled to nominate two
Directors; and (iv) Gutkowski shall be entitled to nominate one Director. Upon
the consummation of the initial public offering, the Shareholders shall use
their best efforts to select mutually acceptable non-affiliated outside
directors and the Board shall appoint two non-affiliated outside directors,
who thereafter shall be subject to election in accordance with the Company's
Certificate of Incorporation.
(c) Qualification. No nominee for Director will be presented
to the shareholders of the Company at any meeting of shareholders of the
Company called for the purpose of voting on the election of directors or by
consensual action of shareholders with respect to the election of directors
unless such nominee (i) shall have completed a questionnaire substantially
similar to that completed by the other Directors and, except for nominees who
are Shareholders, such nominee is reasonably acceptable to the Company and
(ii) such nominee shall have agreed in writing to serve as a Director on terms
no more favorable to such nominee than the terms pursuant to which the
Company's non-affiliated outside Directors shall have agreed to serve.
(d) Covenant to Vote. Each of the Shareholders agrees to
vote, in person or by proxy, all of the shares of Common Stock owned by such
Shareholder, at any meeting of shareholders of the Company called for the
purpose of voting on the election of directors or by consensual action of
shareholders with respect to the election of directors, in favor of the
election of the directors nominated in accordance with section 3.01(b) above
and, where applicable, qualified in accordance with Section 3.01(c) above.
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<PAGE>
(e) Removal of Directors. Except as otherwise provided in
this Section, each Shareholder agrees not to take any action to remove,
without cause, any of the Directors. Notwithstanding the foregoing, each of
the Shareholders shall at all times have the right to recommend the removal,
with or without cause, of any of the Directors which such Shareholders have
nominated.
3.02 Board Action.
(a) The quorum for meetings of the Board shall be a majority
of the Directors then in office, provided that written notice shall have been
given to the Directors in accordance with the provisions of the General
Corporation Law of the State of Delaware, which notice requirement may be
waived in writing or by attendance at the meeting. Attendance by live
telephone conference call will constitute attendance for purposes of this
section.
(b) Meetings of the Board shall be presided over by a
Chairman. The Chairman may be elected annually by a majority of all the
Directors of the Company. In the absence of the Chairman at a meeting, the
Directors in attendance may elect an acting chairman for that meeting.
3.03 Board Responsibilities.
(a) Except as otherwise provided by law, decisions shall be
made by the affirmative vote of a majority of the Directors then in office. A
provision to such effect will be added to the By-laws of the Company. The
By-laws shall further state that such provision may not be amended without the
affirmative vote of two-thirds of the Directors then in office.
(b) Whenever necessary the Board may adopt written
resolutions to be signed by all members of the Board. A telex, telegram, cable
or other mechanically transmitted form of written communication concurring to
the written resolution shall be effective for this purpose so long as it is
permitted by the Delaware General Corporation Law.
ARTICLE IV
COVENANTS
4.01 Each of the Shareholders hereby covenants to each of the
other Shareholders and to the Company that:
(a) Such Shareholder will use his best efforts to effectuate the
bridge loan and initial public offering (or private offering in lieu thereof)
by the Company substantially on the terms and conditions set forth in the
letter agreement dated December 7, 1995 by and between TSC, the Company, SMTI
and A&A (the "Letter Agreement"), the terms of which, to the extent that they
are not inconsistent with the provisions of this Agreement, are hereby adopted
by each Shareholder;
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<PAGE>
(b) Such Shareholder will cause the employment agreements described
in the Letter Agreement between such Shareholder, as the case may be, and the
Company, to be entered into concurrently with the execution of this Agreement;
or concurrently with the consummation of the A&A Merger and the SMTI Merger,
as the case may be;
(c) Such Shareholder will use his best efforts to cause each of the
merger of A&A and a wholly-owned subsidiary of the Company and the merger of
SMTI and a wholly-owned subsidiary of the Company to be effectuated,
substantially on the terms and conditions set forth in the Letter Agreement
and in that certain Acquisition Agreement, dated as of March 21, 1996, by and
among the Company, A&A, Kaminsky, Oppenheim, Gutkowski and TSC or that certain
Acquisition Agreement, dated as of March 21,1996, by and among the Company,
SMTI, Trager, Letis, Gutkowski and TSC; and
(d) In the event that the A&A Merger or the SMTI Merger is terminated
in accordance with the terms of the relevant Acquisition Agreement, the
parties hereto agree (i) that any business of A&A or SMTI generated by such
entity between the date of the relevant Acquisition Agreement and the date of
its termination and performed by such entity shall become the client of and
remain with the entity that generated such business, (ii) that the parties
hereto shall negotiate in good faith the disposition and treatment of any
business (and the related client) of SMTI or A&A generated by the Company,
TSC, Gutkowski, A&A (in the case of SMTI business) or SMTI (in the case of A&A
business) between the date of the relevant Acquisition Agreement and the date
of its termination and performed by SMTI or A&A and with respect to which a
timely Designation, as defined below, was delivered by the Company, TSC,
Gutkowski, A&A (in the case of SMTI business) or SMTI (in the case of A&A
business), and (iii) that any business of the Company generated by SMTI, A&A,
the Company, TSC or Gutkowski between the date of the relevant Acquisition
Agreement and the date of its termination and performed by the Company shall
become the client of and remain with the Company, and that the net income from
any business described in this clause (iii) shall be allocated as follows:
(A) fifty percent of the net income of the Company derived
from business generated by either the Company, TSC or Gutkowski between the
date of the relevant Acquisition Agreement and its termination shall be
retained by or paid to the Company, with the balance to be paid equally and on
at least a quarterly basis to A&A and SMTI;
(B) fifty percent of the net income of the Company derived
from business generated by A&A between the date of the relevant Acquisition
Agreement and its termination and with respect to which a timely Designation
was delivered by A&A shall be retained by or paid to A&A on at least a
quarterly basis, with the balance to be paid equally and on at least a
quarterly basis to the Company and SMTI; and
(C) fifty percent of the net income of the Company derived
from business generated by SMTI between the date of the relevant Acquisition
Agreement and the date of its termination and with respect to which a timely
Designation was delivered by SMTI shall be retained
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<PAGE>
by or paid to SMTI on at least a quarterly basis, with the balance to be paid
equally and on at least a quarterly basis to the Company and A&A.
For purposes of this Section 4.01(d), business shall be deemed to be business
of the entity (the Company, A&A or SMTI) that entered into a contract with the
third party client in connection with such business. Business shall be
presumed to be generated by the entity that entered into the contract with the
third party client unless another of such entities or Gutkowski or TSC
notifies in writing (a "Designation") the others within fifteen (15) days of
the date such contract was entered into that it is disputing such presumption.
Such Designation disputing such presumption shall be deemed accepted by such
other entities unless it is disputed by any such other entities within fifteen
(15) days thereafter, at which point the parties shall arrange a meeting to
resolve the dispute.
(e) (i) All Shareholders agree that their shares of the stock of the
Company will be subject to such lock-up as the underwriter of an initial
public offering of shares of the stock of the Company may require of all
Shareholders.
(ii) Thereafter, stock of the Company may be sold in "on the
market" transactions without any restriction (other than as may be required by
law). Common Stock may be otherwise sold or transferred (such as in a private
sale) only if the transferee thereof agrees in writing to be bound by the
provisions of this Agreement without benefit of any of the transferor's rights
thereunder. Notwithstanding the above, each Shareholder agrees that for a
period of two years after the closing date of the initial public offering, he
may only sell up to one/third of the shares of Common Stock held by him at the
time of such closing.
(iii) Notwithstanding (i) and (ii) above, a Shareholder may
at any time transfer shares of stock of the Company to his spouse, children or
other family members (or trusts for their benefit) provided that such
transferee agrees in writing to be bound by the provisions of this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Each of the Shareholders hereby represents and warrants to
each of the other Shareholders and to the Company that:
(a) This Agreement and the agreements contemplated herein,
when executed, will be legal, valid and binding on such Shareholder,
enforceable in accordance with their respective terms; and
(b) The execution, delivery and performance of this
Agreement and the agreements contemplated herein by such Shareholder will not
constitute a breach or violation of any law, rule, regulation, judgment, order
or other decree by which the Shareholder may be
6
<PAGE>
bound, or of any agreement, trust, indenture, mortgage, loan agreement or
other instrument to which the Shareholder is a party or by which such
Shareholder may be bound.
ARTICLE VI
NON-COMPETITION AND NON-DISCLOSURE
6.01 Each Shareholder hereby agrees to be bound by the
prohibitions against competition with the Company and employee and client
solicitation contained in his employment agreement, if any, with the Company.
6.02 Except as may be required by law or except on behalf of the
Company, no Shareholder, while he is a shareholder of the Company and
thereafter, shall disclose or disseminate, directly or indirectly, to any
person, firm, corporation or other organization, any confidential or
proprietary information or documents pertaining to the business of the
Company.
6.03 Each Shareholder, at such time as he ceases to be a
shareholder, officer or Director of the Company, shall deliver to the Company
all confidential and proprietary documents pertaining to the business of the
Company in such Shareholder's possession or control.
ARTICLE VII
MISCELLANEOUS
7.01 Term.
(a) This Agreement shall be effective and binding upon the
parties hereto and their respective successors and permitted assigns as of the
date of this Agreement, and shall continue in force until the occurrence of
any of the following events, at which time this Agreement shall automatically
terminate.
(i) Upon the mutual consent in writing of all of the
parties hereto;
(ii) When there is only one Shareholder bound hereby;
(iii) Upon the termination of the Letter Agreement for
any of the reasons specified therein, including, without limitation, the
failure by the Company to consummate the Bridge Loan (as defined in the Letter
Agreement) within the period specified in the Letter Agreement; provided,
however, that this provision will not apply in respect of breaches of
provisions of the Letter Agreement relating to the Bridge Loan that exist on
the date of this Agreement;
(iv) On December 8, 1996, if, prior to such date, the
Company has not acquired A&A and SMTI; or
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<PAGE>
(v) Eight (8) years from the date hereof.
(b) This Agreement shall terminate as to any Shareholder at
such time as
(i) He dies or a guardian is appointed to oversee his
affairs; or
(ii) He holds less than 65% of the shares of Common
Stock held or controlled by him either directly or indirectly on the closing
date of the initial public offering (or private offering in lieu thereof) of
the Company referred to in Section 4.01(a) hereof. Upon such event, such
Shareholder shall still have all of his obligations under this Agreement with
respect to the remaining shares held by him. For purposes of this paragraph a
Shareholder shall be deemed to hold any shares held by his spouse or children.
7.02 Governing Law, Arbitration and Choice of Forum. This
Agreement shall be governed by and construed in accordance with the internal
law of the State of Delaware. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the commercial arbitration rules of the
American Arbitration Association, and judgment upon the award rendered by the
Arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitration shall be held in a locale reasonably determined by the party
instituting the arbitration. Each party in any arbitration shall bear its own
legal fees and expenses.
7.03 Notices. All notices hereunder shall be in writing and shall
be delivered in person or given by registered or certified mail, postage
prepaid, and sent to the parties at the respective addresses set forth above.
Any party may designate any other address to which notice shall be given by
giving notice to the others of such change of address in the manner herein
provided.
7.04 Waiver. No waiver of any breach of this Agreement or of any
objection to any act or omission connected therewith shall be claimed by any
Shareholder (absent a writing signed by the party to be charged) or deemed to
constitute a consent to any continuation of such breach, act or omission.
7.05 Severability. If any provision of this Agreement is
invalidated in any jurisdiction for any reason whatsoever, this Agreement
shall remain binding among the Shareholders and in full force and effect
except that, in such jurisdiction, the invalid provision shall be deemed
separable to the extent of such contravention and shall not affect any other
provision of this Agreement.
7.06 Section Headings. The section headings in this Agreement are
solely for the purpose of convenience and shall neither be deemed a part of
this Agreement, nor used in any interpretation thereof.
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<PAGE>
7.07 Counterparts. This Agreement, and any other documents signed
pursuant hereto, may be executed in one or more counterparts, each of which
shall be deemed an original, and all of which shall constitute one and the
same instrument.
7.08 Entire Agreement. This Agreement constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings of the
parties in connection therewith.
7.09 Benefit of Agreement. This Agreement shall be binding upon
and shall inure to the benefit of and be enforceable by the parties and their
respective successors.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Shareholders Agreement as of the date first above written.
The Sillerman Companies, Inc.
By: /s/ Robert F.X. Sillerman /s/ Michael Letis
---------------------------- ----------------------------
Name: Robert F.X. Sillerman Michael Letis
Title: Chairman and Chief Executive
/s/ Robert M. Gutkowski /s/ Arthur Kaminsky
---------------------------- ----------------------------
Robert M. Gutkowski Arthur Kaminsky
/s/ Michael Trager /s/ Louis J. Oppenheim
---------------------------- ----------------------------
Michael Trager Louis J. Oppenheim
The Marquee Group Inc.
By: /s/ Robert Gutkowski
----------------------------
Name: Robert Gutkowski
Title: President
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PAGE 1
ESCROW AGREEMENT
AGREEMENT, dated as of the 15th day of August, 1996, by and
among Continental Stock Transfer & Trust Company, a New York corporation
(hereinafter referred to as the "Escrow Agent"), The Marquee Group, Inc., a
Delaware corporation (the "Company"), and the individuals and entities listed
on Exhibit A who have executed this agreement (hereinafter collectively called
the "Stockholders").
WHEREAS, the Company contemplates a public offering ("Public
Offering") of Units ("Units"), each Unit consisting of one share of its Common
Stock, par value $.01 per share (the "Common Stock"), and one redeemable
Warrant (the "Warrant") through Royce Investment Group, Inc. as underwriter
(the "Underwriter") pursuant to a Registration Statement on Form SB-2 to be
filed with the Securities and Exchange Commission (the "Registration
Statement");
WHEREAS, simultaneously with the closing of the Public
Offering, the Company has agreed to consummate the acquisitions (the
"Acquisitions") of Athletes and Artists, Inc. and Sports Marketing & Television
International, Inc.; and
WHEREAS, in connection with the Public Offering, the
Stockholders have agreed to deposit in escrow an aggregate of 1,275,000 shares
of Common Stock, upon the terms and conditions set forth herein.
In consideration of the mutual covenants and promises herein
contained, the parties hereto agree as follows:
1. The Stockholders and the Company hereby appoint
Continental Stock Transfer & Trust Company as Escrow Agent and agree that the
Stockholders will, prior to the earlier of (i) the initial closing of a private
placement for which the Underwriter is acting as placement agent or (ii) the
filing of the Registration Statement, deliver to the Escrow Agent to hold in
accordance with the provisions hereof (x) certificates by existing Stockholders
or (y) irrevocable instructions to the Company to deliver certificates, and an
agreement by the Company to deliver certificates, by Stockholders acquiring
Common Stock in connection with the Acquisitions, representing an aggregate of
1,275,000 shares of Common Stock owned and, as a result of the Acquisitions, to
be owned of record by the Stockholders in the respective amounts set forth on
Exhibit A hereto (the "Escrow Shares"), together with stock powers executed in
blank. The Escrow Agent, by its execution and
<PAGE>
PAGE 2
delivery of this Agreement hereby acknowledges receipt of the Escrow Shares or
irrevocable instructions and accepts its appointment as Escrow Agent to hold
the Escrow Shares in escrow, upon the terms, provisions and conditions hereof.
2. This Agreement shall become effective upon the date on
which the Securities and Exchange Commission declares effective the
Registration Statement (the "Effective Date") and shall continue in effect
until the earlier of (i) the date specified in paragraph 4(d) hereof or (ii)
the distribution by the Escrow Agent of all of the Escrow Shares in accordance
with the terms hereof (the "Termination Date"). The period of time from the
Effective Date until the Termination Date is referred to herein as the "Escrow
Period."
3. During the Escrow Period, the Escrow Agent shall receive
all of the money, securities, rights or property distributed in respect of the
Escrow Shares then held in escrow, including any such property distributed as
dividends or pursuant to any stock split, merger, recapitalization,
dissolution, or total or partial liquidation of the Company, such property to
be held and distributed as herein provided and hereinafter referred to
collectively as the "Escrow Property."
4. (a) The Escrow Shares are subject to release to the
Stockholders to the extent and only in the event the conditions set forth
herein are met. The Escrow Agent, upon notice to such effect from the Company
as provided in paragraph 5 hereof, shall deliver the Escrow Shares, together
with stock powers executed in blank, and the Escrow Property deposited in
escrow with respect to such Escrow Shares, to the respective Stockholders, only
if, and to the extent that, one of the following conditions is met:
(i) 425,000 Escrow Shares shall be released if, for the
fiscal year ending December 31, 1997, the Company's
income before interest, depreciation, amortization
and taxes (the "Minimum EBITDA Income") equals or
exceeds $1,500,000 or the Company's income before
provision for taxes ("Minimum Pretax Income") equals
or exceeds $1,000,000;
(ii) 425,000 Escrow Shares (or, if the conditions set
forth in (i) above were not met, 850,000 Escrow
Shares) shall be released if, for the fiscal year
ending December 31, 1998, the Minimum EBITDA Income
equals or exceeds $3,000,000 or the Minimum Pretax
Income equals or exceeds $2,000,000;
(iii) 425,000 Escrow Shares (or, if the conditions set
forth in either (i) or (ii) were not met, the
remaining Escrow Shares) shall be released if, for
the fiscal year ending December 31, 1999, the
Minimum EBITDA Income equals or exceeds $4,500,000
or the Minimum Pretax Income equals or exceeds
$3,000,000;
(iv) All of the Escrow Shares shall be released if the
Closing Price (as defined herein) of the Common
Stock shall average in excess of $15.00 per share
for any 20 consecutive trading days during the
period commencing 24 months after the Effective Date
and ending December 31, 1999; or
<PAGE>
PAGE 3
(v) All of the Escrow Shares shall be released if the
Company is acquired by or merged into another entity
in a transaction in which stockholders of the
Company receive per share consideration at least
equal to the amount set forth in (iv) above.
(b) As used in this Section 4, the term "Closing
Price" shall be subject to adjustments in the event of any stock dividend,
stock distribution, stock split or other similar event and shall mean:
(1) If the principal market for the
Common Stock is a national
securities exchange or the Nasdaq
National Market, the closing sales
price of the Common Stock as
reported by such exchange or
market, or on a consolidated tape
reflecting transactions on such
exchange or market; or
(2) if the principal market for the
Common Stock is not a national
securities exchange or the Nasdaq
National Market and the Common
Stock is quoted on the Nasdaq
SmallCap Market, the closing bid
price of the Common Stock as quoted
on the Nasdaq SmallCap Market; or
(3) if the principal market for the
Common Stock is not a national
securities exchange or the Nasdaq
National Market and the Common
Stock is not quoted on the Nasdaq
SmallCap Market, the closing bid
for the Common Stock as reported by
the National Quotation Bureau, Inc.
("NQB") or at least two market
makers in the Common Stock if
quotations are not available from
NQB but are available from market
makers.
(c) The determination of Minimum EBITDA Income or
Minimum Pretax Income shall be (i) calculated exclusive of any extraordinary
earnings or charges (including any charges incurred in connection with the
release from escrow of the Escrow Shares and any Escrow Property in respect
thereof pursuant to the provisions of this paragraph 4); (ii) derived solely
from the businesses owned and operated by the Company as of the closing date of
the Public Offering and upon consummation of the Acquisitions and shall not
give effect to any operations relating to businesses or assets acquired after
such date; and (iii) audited by the Company's independent public accountants.
(d) If the Escrow Agent has not received the notice provided
for in Paragraph 5 hereof and delivered all of the Escrow Shares and related
Escrow Property in accordance with the provisions of this Paragraph 4 on or
prior to March 31, 2000, the Escrow Agent shall deliver the certificates
representing all or the remaining Escrow Shares, together with stock powers
executed in blank, and any related Escrow Property to the Company to be placed
in the Company's treasury for cancellation thereof as a contribution to
capital. After such
<PAGE>
PAGE 4
date, the Stockholders shall have no further rights as a stockholder of the
Company with respect to any of the cancelled Escrow Shares.
5. Upon the occurrence or satisfaction of any of the events
or conditions specified in Paragraph 4 hereof, the Company shall promptly give
appropriate notice to the Escrow Agent, the Underwriter (and if the transfer
agent of the Company's Common Stock is different from the Escrow Agent, such
transfer agent) and present such documentation as is reasonably required by the
Escrow Agent to evidence the satisfaction of such conditions.
6. It is understood and agreed by the parties to this
Agreement as follows:
(a) The Escrow Agent is not and shall not be deemed to be
a trustee for any party for any purpose and is merely acting as a depository
and in a ministerial capacity hereunder with the limited duties herein
prescribed.
(b) The Escrow Agent does not have and shall not be deemed
to have any responsibility in respect of any instruction, certificate or notice
delivered to it or of the Escrow Shares or any related Escrow Property other
than faithfully to carry out the obligations undertaken in this Agreement and
to follow the directions in such instruction or notice provided in accordance
with the terms hereof.
(c) The Escrow Agent is not and shall not be deemed to be
liable for any action taken or omitted by it in good faith and may rely upon,
and act in accordance with, the advice of its counsel without liability on its
part for any action taken or omitted in accordance with such advice. In any
event, its liability hereunder shall be limited to liability for gross
negligence, willful misconduct or bad faith on its part.
(d) The Escrow Agent may conclusively rely upon and act in
accordance with any certificate, instruction, notice, letter, telegram,
cablegram or other written instrument believed by it to be genuine and to have
been signed by the proper party or parties.
(e) The Company agrees (i) to pay the Escrow Agent's
reasonable fees and to reimburse it for its reasonable expenses including
attorney's fees incurred in connection with duties hereunder and (ii) to save
harmless, indemnify and defend the Escrow Agent for, from and against any loss,
damage, liability, judgment, cost and expense whatsoever, including counsel
fees, suffered or incurred by it by reason of, or on account of, any
misrepresentation made to it or its status or activities as Escrow Agent under
this Agreement except for any loss, damage, liability, judgment, cost or
expense resulting from gross negligence, willful misconduct or bad faith on the
part of the Escrow Agent. The obligation of the Escrow Agent to deliver
<PAGE>
PAGE 5
the Escrow Shares to either the Stockholders or the Company shall be subject to
the prior satisfaction upon demand from the Escrow Agent, of the Company's
obligations to so save harmless, indemnify and defend the Escrow Agent and to
reimburse the Escrow Agent or otherwise pay its fees and expenses hereunder.
(f) The Escrow Agent shall not be required to defend any
legal proceeding which may be instituted against it in respect of the subject
matter of this Agreement unless requested to do so by the Stockholders and
indemnified to the Escrow Agent's satisfaction against the cost and expense of
such defense by the party requesting such defense. If any such legal proceeding
is instituted against it, the Escrow Agent agrees promptly to give notice of
such proceeding to the Stockholders and the Company. The Escrow Agent shall not
be required to institute legal proceedings of any kind.
(g) The Escrow Agent shall not, by act, delay, omission or
otherwise, be deemed to have waived any right or remedy it may have either
under this Agreement or generally, unless such waiver be in writing, and no
waiver shall be valid unless it is in writing, signed by the Escrow Agent, and
only to the extent expressly therein set forth. A waiver by the Escrow Agent
under the term of this Agreement shall not be construed as a bar to, or waiver
of, the same or any other such right or remedy which it would otherwise have on
any other occasion.
(h) The Escrow Agent may resign as such hereunder by
giving 30 days written notice thereof to the Stockholders and the Company.
Within 20 days after receipt of such notice, the Stockholders and the Company
shall furnish to the Escrow Agent written instructions for the release of the
Escrow Shares and any related Escrow Property (if such shares and property, if
any, have not yet been released pursuant to Paragraph 4 hereof) to a substitute
Escrow Agent which (whether designated by written instructions from the
Stockholders and the Company jointly or in the absence thereof by instructions
from a court of competent jurisdiction to the Escrow Agent) shall be a bank or
trust company organized and doing business under the laws of the United States
or any state thereof. Such substitute Escrow Agent shall thereafter hold any
Escrow Shares and any related Escrow Property received by it pursuant to the
terms of this Agreement and otherwise act hereunder as if it were the Escrow
Agent originally named herein. The Escrow Agent's duties and responsibilities
hereunder shall terminate upon the release of all shares then held in escrow
according to such written instruction or upon such delivery as herein provided.
This Agreement shall not otherwise be assignable by the Escrow Agent without
the prior written consent of the Company.
7. The Stockholders shall have the sole power to vote the
Escrow Shares and any securities
<PAGE>
PAGE 6
deposited in escrow under this Agreement while they are being held pursuant
to this Agreement.
8. (a) Each of the Stockholders agrees that during the term
of this Agreement he will not sell, transfer, hypothecate, negotiate, pledge,
assign, encumber or otherwise dispose of any or all of the Escrow Shares set
forth opposite his name on Exhibit A hereto, unless and until the Company shall
have given the notice as provided in Paragraph 5. This restriction shall not be
applicable to transfers upon death, by operation of law, to family members of
the Stockholders or to any trust for the benefit of the Stockholders, provided
that such transferees agree to be bound by the provisions of this Agreement.
(b) The Stockholders will take any action necessary or
appropriate, including the execution of any further documents or agreements, in
order to effectuate the transfer of the Escrow Shares to the Company if
required pursuant to the provisions of this Agreement.
9. Each of the certificates representing the Escrow Shares will bear
legends to the following effect, as well as any other legends required by
applicable law:
(a) "The sale, transfer, hypothecation, negotiation, pledge,
assignment, encumbrance or other disposition of the shares
evidenced by this certificate are restricted by and are subject
to all of the terms, conditions and provisions of a certain
Escrow Agreement entered into among Continental Stock Transfer &
Trust Company, The Marquee Group, Inc. and its Stockholders,
dated as of , 1996, a copy of which may be obtained
from the Secretary of The Marquee Group, Inc. No transfer, sale
or other disposition of these shares may be made unless specific
conditions of such agreement are satisfied."
(b) "The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended. No
transfer, sale or other disposition of these shares may be made
unless a registration statement with respect to these shares has
become effective under said act, or the Company is furnished
with an opinion of counsel satisfactory in form and substance to
it that such registration is not required."
Upon execution of this Agreement, the Company shall direct the
transfer agent for the Company to place stop transfer orders with respect to
the Escrow Shares and to maintain such orders in effect until the transfer
agent and the Underwriter shall have received written notice from the Company
as provided in Paragraph 5.
10. Each notice, instruction or other certificate required or
permitted by the terms hereof shall be in writing and shall be communicated by
personal delivery, fax or registered or certified mail, return receipt
requested, to the parties hereto at the addresses set forth below, or at such
other address as any of them may designate by notice to each of the others:
(i) If to the Company, to:
The Marquee Group, Inc.
150 East 58th Street
New York, New York 10019
<PAGE>
PAGE 7
Attn: Robert Gutkowski
(ii) If to the Stockholders to their respective
addresses as set forth on Exhibit A hereto.
(iii) If to the Escrow Agent, to:
Continental Stock Transfer & Trust Company
Two Broadway, 19 Floor
New York, New York 10004
Att:
(iv) If to Royce, to:
Royce Investment Group, Inc.
199 Crossways Park Drive
Woodbury, New York 11797
Att: John Higgins
All notices, instructions or certificates given hereunder to the Escrow Agent
shall be effective upon receipt by the Escrow Agent. All notices given
hereunder by the Escrow Agent shall be effective and deemed received upon
personal delivery or transmission by fax or, if mailed, five (5) calendar days
after mailing by the Escrow Agent.
A copy of all communications sent to the Company, the
Stockholders or the Escrow Agent shall be sent by ordinary mail to Baker &
McKenzie, 805 Third Avenue, New York, New York 10022, Attention: Michael
Novins, Esq. A copy of all communications sent to the Underwriter shall be sent
by ordinary mail to Bachner, Tally, Polevoy & Misher LLP, 380 Madison Avenue,
New York, NY 10017, Attention: Jill Cohen, Esq.
11. Except as set forth in paragraph 12 hereof, this
Agreement may not be modified, altered or amended in any material respect or
cancelled or terminated except with the prior consent of the holders of all of
the outstanding shares of Common Stock of the Company.
12. In the event that the Public Offering is not consummated
within twenty-five (25) days of the Effective Date of the Registration
Statement, this Agreement shall terminate and be of no further force and effect
and the Escrow Agent, upon written notice from both the Company and the
Underwriter in accordance with paragraph 10 hereof of such termination, will
return the Escrow Shares and any Escrow Property in respect thereof to the
Stockholders.
<PAGE>
PAGE 8
13. This Agreement shall be governed by and construed in
accordance with the laws of New York and shall be binding upon and inure to the
benefit of all parties hereto and their respective successors in interest and
assigns.
14. This Agreement may be executed in several counterparts,
which taken together shall constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers on the day and year
first above written.
THE MARQUEE GROUP, INC.
By: /s/ Robert M. Gutkowski
---------------------------------
Robert M. Gutkowski, President
and Chief Executive Officer
Continental Stock Transfer & Trust Company
By: /s/
---------------------------------
STOCKHOLDERS:
The Sillerman Companies, Inc.
By: /s/ Robert F.X. Sillerman
---------------------------------
Robert F.X. Sillerman
/s/ Robert M. Gutkowski
---------------------------------
Robert M. Gutkowski
/s/ Arthur C. Kaminsky
---------------------------------
Arthur C. Kaminsky
/s/ Louis J. Oppenheim
---------------------------------
Louis J. Oppenheim
<PAGE>
PAGE 9
/s/ Michael Letis
---------------------------------
Michael Letis
/s/ Michael Trager
---------------------------------
Michael Trager
<PAGE>
PAGE 10
EXHIBIT A
STOCKHOLDERS' LIST
Name and Address Stock Certificate Nos.
of Stockholder (1) [3 certificates each] Number of Escrow Shares
- -------------------- --------------------- -----------------------
The Sillerman Companies 392,308
150 East 58th Street
New York, New York 10155
Robert M. Gutkowski 196,154
150 East 58th Street
New York, New York 10155
Arthur C. Kaminsky 196,154
421 Seventh Ave.
New York, NY 10001
Louis J. Oppenheim 98,076
421 Seventh Ave.
New York, NY 10001
Michael Letis 196,154
410 Greenwich Ave.
Greenwich, CT 06830
Michael Trager 196,154
410 Greenwich Ave.
Greenwich, CT 06830
<PAGE>
FINANCIAL CONSULTING AGREEMENT
Financial Consulting Agreement ("Agreement") made and
entered into as of this 1st day of August, 1996, by and between SILLERMAN
COMMUNICATIONS MANAGEMENT CORPORATION, a New York corporation having an office
at 150 East 58th Street, New York, New York 10155 ("SCMC"), and THE MARQUEE
GROUP, INC., a Delaware corporation having an office at 150 East 58th Street,
19th Floor, New York, New York 10155 (the "Company").
W I T N E S S E T H:
WHEREAS, SCMC has been providing financial consulting
services to the Company pursuant to that certain letter agreement dated as of
December 7, 1995 by and between The Sillerman Companies, the Company, Athletes
and Artists, Inc. and Sports Marketing & Television International, Inc.; and
WHEREAS, SCMC and the Company have agreed that SCMC shall
hereafter be engaged by the Company to continue to perform financial
consulting services for the Company upon the terms and conditions hereinafter
set forth;
NOW, THEREFORE, the Company and SCMC hereby agree as
follows:
1. Engagement. The Company agrees to and hereby engages
SCMC, and SCMC hereby accepts the engagement and agrees to serve the Company,
as its financial consultant to provide customary financial and advisory
services.
2. Term. The term (the "Term") of this Agreement shall
commence on the date hereof and shall continue for a period of six (6) years.
SCMC and the Company may mutually agree to extend the Term of this Agreement
for a period of four (4) additional years.
3. Services. During the Term of this Agreement, SCMC shall
perform, or assist the Company in performing, the following services: (i) the
placement of financing; (ii) the generation of financial reports and other
data for the Company that are required for presentation to the lenders of the
Company under the Company's senior credit agreements, if any, and to the
Company's investors as required under the Securities and Exchange Act of 1934,
as amended (the "Exchange Act"); (iii) assistance with the preparation of the
Company's regular books and records for audit by the Company's independent
public accountants; (iv) the maintenance of relationships and connections with
financial institutions participating in the financing of the Company; (v) the
design and implementation of accounting systems appropriate and necessary for
the operation of the Company; (vi) the purchase, installation, and
implementation of hardware and software appropriate to the accounting system
to be utilized by the Company; (vii) the implementation of a cash management
system to facilitate the collection of revenues for the Company and to
maximize the investment income available from cash balances; (viii) the
establishment of regularized procedures for the accumulation of cash balances
available for interest and other debt service payments as they
1
<PAGE>
come due; and (ix) the engagement of bookkeeping, accounting, and other
personnel necessary to the implementation of the Company's accounting systems.
SCMC shall be permitted to engage in any business and
perform any services for its own account or for other parties, including
financial consulting services for entities or persons other than the Company
4. Compensation. As compensation for the services to be
rendered by SCMC pursuant to this Agreement as well as SCMC's agreement to
perform such services, the Company shall pay to SCMC a consulting fee of
$30,000 per month from the date commencing on the nine month anniversary of
the completion of its initial public offering or similar financing the net
proceeds of which to the Company are $10,000,000 (the "Consulting Fees"). The
Consulting Fees shall be payable in advance in monthly installments on the
first day of each and every month of the Term hereof. The Consulting Fees
shall be increased annually by a percentage amount equal to the percentage
increase in the Consumer Price Index for New York City.
5. Investment Banking Services. With respect to any
investment banking services required by the Company, the Board of Directors of
the Company, including the independent Directors, shall consider the
appropriateness of utilizing the services of SCMC. In such consideration, the
Board shall evaluate the transaction as a transaction with an affiliate as to
whether such services are comparable to other services available to the
Company and the fairness of the fees to be charged by SCMC. Such fees shall
not in any event exceed: (i) 1 1/2% of the total acquisition price as to any
transaction in which SCMC provides merger and acquisition service; (ii)1 1/2%
of the principal amount of any senior credit facility obtained by the Company;
(iii) 4% of the proceeds to the Company from the issuance of any subordinated
debt; and (iv) 7% of the proceeds to the Company of any sale of equity
securities. For the purposes of this Agreement, proceeds to the Company shall
be defined to be cash proceeds prior to the deduction of expenses and fees.
Notwithstanding anything contained herein to the contrary, SCMC shall not be
entitled to any investment banking fees in connection with the Company's
initial public offering or any bridge financing prior thereto.
6. Expenses. In addition to the Consulting Fees, SCMC shall
be reimbursed by the Company for all reasonable out-of-pocket disbursements
incurred by SCMC in connection with the performance of its services under this
Agreement, including but not limited to travel and entertainment expenses and
legal and accounting fees.
7. Indemnification. The Company shall indemnify and hold
SCMC harmless in accordance with the Indemnification Agreement set forth as
Exhibit A to this Agreement, which Indemnification Agreement shall be executed
and delivered to SCMC simultaneously with the execution and delivery of this
Agreement.
2
<PAGE>
8. Notices. All notices, requests, demands and other
communications provided for by this Agreement shall be made by regular mail
addressed to the parties at their offices first listed above unless a change
of address is indicated by a party hereto.
9. Successors and Assigns. All right, title and interest of
SCMC in and under this Agreement shall be freely transferable and assignable
and may be sold, transferred or assigned by SCMC to any other corporation,
entity or person or persons selected by SCMC (the "Assignee"), provided that
Robert F.X. Sillerman is a principal of the Assignee.
10. Governing Law. This Agreement and the rights of the
parties hereto shall be governed as to validity, construction, enforcement and
in all other respects by the laws of the State of New York.
11. Termination. This Agreement may be terminated by written
notice given by the Company in the event that SCMC has willfully committed
malfeasance in the performance of its services hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
SILLERMAN COMMUNICATIONS
MANAGEMENT CORPORATION
By /s/ Robert F.X. Sillerman
---------------------------------
Robert F.X. Sillerman, President
THE MARQUEE GROUP, INC.
By /s/ Robert M. Gutkowski
---------------------------------
Robert M. Gutkowski, President
3
<PAGE>
EXHIBIT A
INDEMNIFICATION AGREEMENT
In connection with the Financial Consulting Agreement between
SILLERMAN COMMUNICATIONS MANAGEMENT CORPORATION ("SCMC") and The MARQUEE
GROUP, INC. (the "Company") dated August 1, 1996(the "Agreement"), the Company
agrees to indemnify and hold harmless SCMC and its directors, officers,
employees, affiliates and agents, and any person controlling SCMC and its
directors, officers, employees, affiliates and agents (each of such persons
being herein called an "Indemnified Party"), against any and all losses,
claims, damages or liabilities, joint or several, to which any such
Indemnified Party may become subject under any statute or the common law or
otherwise, any amount paid in settlement of any claim, action or proceeding
commenced or threatened, and any and all expenses incurred in connection with
any such claim, action or proceedings, insofar as such losses, claims,
damages, liabilities, actions, proceedings or expenses arise out of or are
based upon any of the matters which are the subject of the Agreement, except
that no Indemnified Party shall be so indemnified to the extent that it is
finally judicially determined that any such losses, claims, damages,
liabilities, actions, proceedings or expenses arise out of such Indemnified
Party's recklessness or willful misconduct in connection with the performance
of such Indemnified Party's services thereunder.
The Company also agrees separate and apart from the indemnification
and contribution referred to above to reimburse on a quarterly basis any
Indemnified Party for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action or
proceeding, regardless of whether the payment of such expenses might later be
held improper. To the extent any such payment is ultimately held to be
improper or any such Indemnified Party is found to have been guilty of
recklessness or willful misconduct in connection with the performance of such
Indemnified Party's services under the Agreement, such Indemnified Party will
promptly refund to the Company any amounts so reimbursed.
In addition, if any representative of SCMC gives testimony or renders
any other services
<PAGE>
requested or required in connection with any actual or potential claim, action
or proceeding related to the subject matter of the Agreement, SCMC shall be
paid a fee of $1,000 per day, plus reasonable fees and expenses of counsel, in
connection with any such testimony or services.
If the foregoing is in accordance with your understanding, please
confirm your acceptance by signing and returning to us the duplicate copies of
the letter attached hereto.
Very truly yours,
SILLERMAN COMMUNICATIONS
MANAGEMENT CORPORATION
By: /s/ Robert F. X. Sillerman
--------------------------------
Robert F.X. Sillerman, President
Accepted and Agreed to
as of this 1st day of August, 1996:
THE MARQUEE GROUP, INC.
By: /s/ Robert M. Gutkowski
-------------------------------
Robert M. Gutkowski, President
<PAGE>
AMENDED AND RESTATED ACQUISITION AGREEMENT
Amended and Restated Acquisition Agreement, dated as of the
21st day of March, 1996, by and among The Marquee Group, Inc., a Delaware
corporation, having an office at 150 East 58th Street, New York, New York
10155 ("Marquee"); Athletes and Artists, Inc., a New York corporation, having
an office at 421 Seventh Avenue, Suite 1410, New York, New York 10001
("Athletes"); Arthur Kaminsky ("Kaminsky") and Louis J. Oppenheim
("Oppenheim"), individuals having an address at 421 Seventh Avenue, New York,
New York 10001 (Kaminsky and Oppenheim are collectively referred to herein as
the "Sellers" and individually as a "Seller"); Robert Gutkowski ("Gutkowski"),
an individual having an address at 152 West 57th Street, New York, New York
10019; and The Sillerman Companies, Inc. ("TSC"), a corporation having an
address at 150 East 58th Street, New York, New York 10155.
Whereas, Marquee and Athletes have entered into a letter
agreement dated December 7, 1995 (the "Letter Agreement"), whereby Marquee has
agreed to acquire Athletes, and Athletes has agreed to be acquired by Marquee,
on the terms and conditions hereinafter set forth;
Whereas, the boards of directors and stockholders of Marquee
and Athletes each have adopted resolutions declaring advisable the acquisition
of Athletes by Marquee on the terms and conditions hereinafter set forth,
whereby the outstanding Common Stock of Athletes will be converted into Common
Stock of Marquee and cash in a transaction which is intended to qualify as a
tax-free reorganization to the extent of the receipt of stock under Sections
368(a)(1)(A) and 368(a)(2)(D) of the United States Internal Revenue Code of
1986, as amended (the "Code"); and
Whereas, the parties hereto have entered into an Acquisition
Agreement dated as of March 21, 1996, which was subsequently amended on April
5, 1996, and such parties deem it to be in their respective best interests to
amend and restate certain provisions in such agreement and, to that end, the
parties hereby amend and restate such agreement.
Now, Therefore, the parties to this Agreement agree as
follows:
Section 1 -- Merger
1.1 Agreement to Merger. Subject to the terms and conditions
herein set forth, Athletes and Marquee agree to effect a merger (the "Merger")
of Athletes with and into a wholly-owned subsidiary of Marquee to be formed
for the purpose of effecting the Merger (the "Subsidiary"), with Subsidiary as
the surviving corporation, in accordance with the Agreement and Plan of Merger
attached hereto as Exhibit A (the "Merger Agreement").
1.2 Purchase Price. The aggregate purchase price for all of
the issued and outstanding shares of capital stock of Athletes shall be
$3,500,000, which shall be payable in
<PAGE>
accordance with the provisions set forth in Section 10.3 hereof, and that
number of shares of the Common Stock, par value $.01 per share (the "Common
Stock"), of Marquee as is equal to three-thirteenths (3/13) of the total
number of shares of Common Stock of Marquee held by (i) the shareholders of
Athletes, (ii) the shareholders of SMTI (as defined in Section 4.3 hereof),
(iii) Gutkowski and (iv) TSC in the aggregate (collectively, the "Management
Stock") immediately after the Closing Date (as defined in Section 10.1
hereof). If necessary, on or prior to the Closing Date, Marquee will make
whatever adjustments in its issued and outstanding shares of Common Stock as
are required so that, immediately after the Closing Date, the shareholders of
Athletes will own, in the aggregate, that number of shares of Common Stock of
Marquee equal to three-thirteenths (3/13) of the total number of shares of
Management Stock.
1.3 Marquee Common Stock. Marquee will make available to
Subsidiary a sufficient number of shares of Common Stock of Marquee and a
sufficient amount of cash in order to effect the Merger pursuant to the Merger
Agreement.
1.4 Per Share Purchase Price. The number of shares of Common
Stock of Marquee to be received for each issued and outstanding share of
capital stock of Athletes, as set forth in Section 2.2 of the Merger
Agreement, shall be calculated on or prior to the Closing Date.
Section 2 -- Conversion of Stock of Athletes
2.1 Conversion of Shares. The manner of converting the
shares of Athletes into shares of Common Stock of Marquee and cash shall be as
set forth in Section 2 of the Merger Agreement.
Section 3 -- Representations and Warranties of the Sellers and Athletes
The Sellers and Athletes jointly and severally represent and
warrant to Marquee that:
3.1 Organization and Good Standing. Athletes is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of New York and has corporate power to own its property and
to carry on its business as it is now being conducted. Copies of Athletes'
Certificate of Incorporation and Bylaws (certified to be correct by the
Secretary of Athletes) have been delivered to Marquee and are complete and
correct as at the date hereof. Athletes' minute books contain a complete and
accurate record of all meetings and other corporate action of its shareholders
and board of directors.
3.2 Capitalization. Athletes' authorized capital stock
consists of 20,000 shares of Common Stock, par value $1.00 per share, 15 of
which are issued and outstanding. No shares are held in Athletes' treasury.
All of the outstanding shares of Common Stock of Athletes are validly issued,
fully paid, and nonassessable. There are no outstanding options, agreements,
contracts, calls, or commitments of any character which would require the
issuance by Athletes of any capital stock. All of the issued and outstanding
Common Stock of Athletes are owned by Kaminsky and
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Oppenheim, free and clear of any liens, claims or encumbrances of any nature.
Their ownership of shares of Common Stock of Athletes is as set forth below:
Name No. of Shares
---- -------------
Arthur Kaminsky 10
Louis J. Oppenheim 5
3.3 Subsidiaries. Athletes has no subsidiaries, nor does it
have an ownership interest in any partnership, corporation, association or
other business entity.
3.4 Financial Statements. Athletes has delivered to Marquee
copies of the following financial statements, all of which have been prepared
in accordance with generally accepted accounting principles consistently
applied throughout the periods indicated:
(1) 1995 Financial Statements. Balance sheet of Athletes
as of December 31, 1995 (the "Athletes Balance Sheet"), together with the
related statement of operations, which present fairly as of their date the
financial condition of Athletes and its results of operations for the period
indicated and which are unaudited. The parties hereto acknowledge their
understanding that the retained earnings, if any, of Athletes have been paid
out as compensation prior to the date hereof.
(2) 1993 and 1994 Financial Statements. Balance sheet of
Athletes as of December 31, 1993 and 1994, together with the related
statements of operations, which present fairly as of their date the financial
condition of Athletes and its results of operations for the periods indicated
and which have been audited by independent certified public accountants.
3.5 Absence of Undisclosed Liabilities. Athletes did not
have at the date of the Athletes Balance Sheet any liabilities or obligations,
secured or unsecured (whether accrued, absolute, contingent, or otherwise), of
a nature that would be reflected or reserved against in a corporate balance
sheet or disclosed in the notes thereto prepared in accordance with generally
accepted accounting principles that are not reflected or reserved against in
the Athletes Balance Sheet or disclosed in the notes thereto.
3.6 Absence of Certain Changes. There have not been since
the date of the Athletes Balance Sheet any changes of the following nature:
(1) Business, properties and financial condition. Any
material adverse change in Athletes' properties, business, financial
condition, or results of operations.
(2) Capital stock: options, dividends and so forth. Any
change in the authorized, issued, or outstanding capital stock of Athletes;
any granting of any stock option or right to purchase shares of capital stock
or any issuance of any security convertible into shares of capital stock of
Athletes; any purchase, redemption, retirement, or other acquisition of any
shares of capital
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stock by Athletes; any agreement to do any of the foregoing; or any
declaration, setting aside, or payment of any dividend or other distribution
in respect of the capital stock of Athletes.
(3) Sales, leases, borrowings and so forth. Any sale or
lease of Athletes' property or assets with an original cost in excess of
$10,000 for any single item or any mortgage or pledge of any properties or
assets of Athletes, or any borrowing incurred, assumed, or guaranteed by
Athletes.
(4) Employee benefit plans and certain salaries. Any
employment contract in excess of $50,000 per year, bonus, stock option, profit
sharing, pension, retirement, incentive, medical, health, disability, other
employee benefits or similar arrangement or plan instituted, agreed to, or
amended, nor any contributions or other payments made (nor contribution or
other obligations incurred) with respect to existing arrangements and plans of
the aforementioned types, except in accordance with past practices (and no
such plans have any unfunded liability).
3.7 Litigation and so forth. Except as set forth on Schedule
13 described in Section 3.8(13) hereof, there is no litigation, proceeding, or
governmental investigation pending or, to the knowledge of Athletes,
threatened against or relating to Athletes, its properties or business or the
transactions contemplated by this Agreement; nor, to the knowledge of
Athletes, is there any reasonable basis for any such actions or for any
claims; and Athletes is not a party to or subject to the provisions of any
judicial decree or judgment or any order of any governmental agency.
3.8 Lists of properties, contracts and so forth. Athletes
has delivered to Marquee lists or summary descriptions (certified as correct
to the best of their knowledge by authorized officers of Athletes), each of
which is complete and accurate in all material respects as of the date hereof,
of the following:
(1) Real property. All real property owned of record or
beneficially or leased by Athletes ("Schedule 1"), accompanied by copies of
the deeds, title insurance policies, and leases relating thereto.
(2) Other property. Inventories and tangible fixed
assets, as shown on Athletes' books, showing, with respect to inventories, the
amounts of raw materials, work-in-process, and finished goods, and with
respect to fixed assets, the total of each of the following categories:
leasehold improvements, machinery and equipment, furniture and fixtures, and
automotive equipment ("Schedule 2").
(3) Insurance policies. All policies of insurance with
respect to Athletes' properties, buildings, machinery, equipment, furniture,
fixtures, operations, and the lives of its directors, officers, and employees
("Schedule 3").
(4) Certain leases and contracts. Each existing lease,
contract, or other commitment of Athletes involving an aggregate payment by
Athletes of more than $25,000 or to
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Athletes of more than $50,000 other than leases, contracts, or commitments
furnished pursuant to other paragraphs of this Section 3.8 ("Schedule 4").
(5) Certain salaried employees. The names and 1995
annual compensation of Athletes' directors, officers, employees, and agents
whose annual rate of compensation for 1995 was $50,000 or more ("Schedule 5").
(6) Labor contracts. Each existing labor contract to
which Athletes is a party ("Schedule 6").
(7) Intellectual property. All of Athletes' patents,
trademarks, trade names, service marks, service names, copyrights, and
registrations and applications therefor; and all patent, trademark, trade
name, service mark, service name, or copyright licenses, assignments, or
royalty agreements to which Athletes is a party ("Schedule 7").
(8) Profit sharing plans and so forth. All employment
contracts, bonus, stock option, profit sharing, pension, retirement,
incentive, medical, health, disability or other employee benefit plans or
arrangements of Athletes ("Schedule 8").
(9) Banks. The name of each bank in which Athletes has
an account or safe deposit box, and the names of all persons authorized to
draw thereon or having access thereto ("Schedule 9").
(10) Powers of attorney. The names of all persons, if
any, holding powers of attorney from Athletes ("Schedule 10").
(11) Loan and credit agreements and so forth. All
mortgages, indentures, promissory notes, deeds of trust, loan or credit
agreements, or similar instruments to which Athletes is a party, and all
amendments or modifications of any thereof ("Schedule 11"), with a statement
of any as to which there is any existing default by Athletes.
(12) Employee stock options. The names of all persons
holding employee stock options to purchase shares of capital stock of Athletes
and, with respect to each, the date of grant or issue, the expiration date,
the number and class of shares subject thereto, and the purchase price
("Schedule 12").
(13) Litigation. Each lawsuit, administrative
proceeding, or arbitration to which Athletes is a party (whether as plaintiff,
defendant, or otherwise), including the damages or relief sought therein, the
name of counsel for Athletes in charge of such matter, and its current status
("Schedule 13").
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(14) Material assets. A list of every material asset
used by Athletes in the conduct of its business that is not either owned by
Athletes or leased by or licensed to it under an agreement listed on Schedules
1 through 13 ("Schedule 14").
(15) Other contracts and commitments. Every contract and
commitment (not listed on other schedules delivered to Marquee pursuant to
this Section 3.8) that Athletes would be required to file or describe in a
Registration Statement on Form S-1 filed by Athletes under the Securities Act
of 1933 Act, as amended ("Schedule 15").
3.9 Title. With respect to the property listed in Schedules
1 and 2, Athletes has good and marketable title to the real property stated to
be owned by it, has good title to the leasehold interests in real property
stated to be held by it, and good title to all of the tangible property stated
to be owned by it, in each case free and clear of all liens and encumbrances,
except for (1) liens and encumbrances disclosed in Schedules 1 and 2; (2) the
lien of current taxes not yet due and payable; and (3) such liens by operation
of law and such imperfections of title, and other liens and encumbrances, if
any, as are not substantial in character, amount, or extent and do not
interfere with the present or future use by Athletes of the properties subject
thereto or affected thereby.
Athletes has received no notice of violation of any
applicable zoning regulation, ordinance, or other law, order, regulation, or
requirement relating to its operations or its properties and, so far as is
known to Athletes (1) there is no such violation of a material nature and (2)
all buildings and structures used by Athletes substantially conform with all
applicable ordinances, codes, and regulations.
Except as stated in Schedule 7, Athletes (1) has clear
record title to the patents, trademarks, trade names, service marks, service
names, and copyrights, and registrations and applications therefor, and
copyright registrations listed in Schedule 7 as owned by it; (2) has not
entered into any agreements, contracts, or licenses that would impair free and
unencumbered use by Marquee of the patents, trademarks, trade names, service
marks, service names, or copyrights enumerated in Schedule 7; (3) does not
know of any asserted infringement by it of any patent, trademark, trade name,
service mark, service name, or copyright of another; and (4) does not believe
that it is infringing a patent, trademark, trade name, service mark, service
name, or copyright of another.
3.10 Tax Returns. Except for liabilities with respect to
taxes and interest thereon, to which reference is made in notes to the
Athletes Balance Sheet, the provision for taxes therein is sufficient for the
payment of all accrued and unpaid federal, state, county, and local taxes of
Athletes (including any penalties or interest payable in respect of such
taxes), whether or not disputed, for the period ended December 31, 1995, and
for all fiscal years prior thereto.
3.11 No Violation. The execution of this Agreement and
the Merger Agreement does not, and performance hereof and thereof will not,
violate the provisions of Athletes' Certificate of Incorporation, Bylaws, or
any indenture, agreement, or other instrument to which Athletes is a
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party, except insofar as any such instrument may require consent by a lender,
mortgagee, lessor, or other party to such actions, whose consent Athletes
agrees to obtain before the Closing Date.
3.12 Authorization. The execution, delivery, and performance
of this Agreement and the Merger Agreement have been duly authorized and
approved by Athletes' board of directors and by all of Athletes' shareholders;
this Agreement and the Merger Agreement and the consummation of the
transactions contemplated herein and therein have been duly and validly
authorized by all necessary corporate action on the part of Athletes; and this
Agreement is, and (upon execution and delivery as provided herein) the Merger
Agreement will be, binding upon and enforceable against Athletes in accordance
with their respective terms.
3.13 General. None of the representations or warranties made
by the Sellers or Athletes in this Agreement are false or misleading with
respect to any material fact or omit to state any material fact necessary in
order to make the statements therein contained not misleading.
Section 4 -- Representations, Warranties, Covenants, and
Agreements of Gutkowski, TSC and Marquee
Gutkowski, TSC and Marquee jointly and severally represent
and warrant to, and covenant and agree with, Athletes and the Sellers that:
4.1 Organization and Good Standing. Marquee is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has corporate power to own its property and to carry on
its business as it is now being conducted. At the Closing Date Subsidiary will
be a corporation duly organized, validly existing and in good standing under
the laws of the State of New York and have corporate power to own its property
and to carry on its business as it is then being conducted. Copies of
Marquee's Certificate of Incorporation and Bylaws (certified to be correct by
the Secretary of Marquee) have been delivered to Athletes and are complete and
correct as of the date hereof. Marquee's minute books contain a complete and
accurate record of all meetings and other corporate action of its shareholders
and board of directors. On or prior to the Closing Date Marquee will deliver
to Athletes copies of Subsidiary's Certificate of Incorporation and Bylaws
(certified to be correct by an officer of Subsidiary), which shall be complete
and correct as of the date of such delivery. On the Closing Date Subsidiary's
minute books will contain a complete and accurate record of all meetings and
other corporate action of its shareholders and board of directors.
4.2 Capitalization. Marquee's authorized capital stock
consists of 1,000 shares of Common Stock, par value $.01 per share, all of
which are issued and outstanding. No shares are held in Marquee's treasury.
All of the outstanding shares of Common Stock of Marquee are validly issued,
fully paid, and nonassessable. All of the shares of capital stock of
Subsidiary to be issued will be validly issued, fully paid and nonassessable.
Other than Marquee's pending agreements regarding a private placement as
described in Marquee's Confidential Term Sheet dated July 30,1996, and its
initial public offering, there are no outstanding options, agreements,
contracts, calls,
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or commitments of any character which would require the issuance by Marquee or
Subsidiary of any capital stock (it being understood that Marquee may, prior
to the Closing Date, issue stock, options or warrants to key employees of or
advisors to Marquee (other than Gutkowski, TSC or any of their affiliates)).
All of the issued and outstanding Common Stock of Marquee is owned by
Gutkowski, TSC and Martin Ehrlich. Their ownership of shares of Common Stock
of Marquee is as set forth below:
Name No. of Shares
---- -------------
Robert Gutkowski 333
The Sillerman Companies, Inc. 666
Martin Ehrlich 1
All of Subsidiary's outstanding shares of Common Stock will be owned by
Marquee.
4.3 Subsidiaries. Marquee has no subsidiaries, nor does it
have an ownership interest in any partnership, corporation, association, or
other business entity (it being understood that prior to the Closing Date
Marquee (a) will form and own two wholly-owned subsidiaries, Subsidiary and a
wholly-owned subsidiary to be formed for the purpose of effecting the
acquisition of Sports Marketing & Television International, Inc., a
Connecticut corporation ("SMTI"), by Marquee by the merger of SMTI with and
into such subsidiary and (b) may acquire all of the outstanding capital stock
of The Marquee Group, a Sports, News and Entertainment Company, Inc., a New
York corporation ("Marquee NY") for a purchase price not to exceed $1,000).
Subsidiary will not have any subsidiaries, nor will it have an ownership
interest in any partnership, corporation, association, or other business
entity. Marquee NY does not have any subsidiaries, nor does it have any
ownership interest in any partnership, corporation, association, or other
business entity.
4.4 Financial Statements. Marquee has delivered to Athletes
a copy of an unaudited operating income statement of Marquee as of December
31, 1995 (the "Marquee Balance Sheet") and an unaudited operating income
statement of Marquee NY as of December 31, 1995 (the "Marquee NY Balance
Sheet"), together with the related balance sheet, which present fairly as of
their date the financial condition of Marquee and Marquee NY and their results
of operations for the periods indicated. On or prior to the Closing Date
Marquee will deliver to Athletes a copy of a balance sheet of Subsidiary as of
a date no more than ninety (90) days prior thereto (the "Subsidiary Balance
Sheet"), together with the related statement of operations, which shall
present fairly as of their date the financial condition of Subsidiary and its
results of operations for the period indicated.
4.5 Absence of Undisclosed Liabilities. Marquee did not
have at the date of the Marquee Balance Sheet, Marquee NY did not have at the
date of the Marquee NY Balance Sheet, and Subsidiary will not have at the date
of the Subsidiary Balance Sheet, any liabilities or
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obligations, secured or unsecured (whether accrued, absolute, contingent, or
otherwise), of a nature that would be reflected or reserved against in a
corporate balance sheet or disclosed in the notes thereto prepared in
accordance with generally accepted accounting principles that are not
reflected or reserved against in such balance sheets or disclosed in the notes
thereto.
4.6 Absence of Certain Changes. There have not been since
the date of the Marquee Balance Sheet and the Marquee NY Balance Sheet, and at
the Closing Date there will not have been since the date of the Subsidiary
Balance Sheet, any changes of the following nature:
(1) Business, properties and financial condition. Any
material adverse change in Marquee's, Marquee NY's or Subsidiary's properties,
business, financial condition, or results of operations.
(2) Capital stock: options, dividends and so forth. Any
change in the authorized, issued, or outstanding capital stock of Marquee,
Marquee NY or Subsidiary; any granting of any stock option or right to
purchase shares of capital stock or any issuance of any security convertible
into shares of capital stock by Marquee, Marquee NY or Subsidiary (except as
contemplated by Section 4.6(4) hereof and as described on Schedule A (as
defined in Section 4.8(1) hereof)); any purchase, redemption, retirement, or
other acquisition of any shares of capital stock by Marquee, Marquee NY or
Subsidiary; other than Marquee's agreements regarding a private placement as
described in Marquee's Confidential Term Sheet dated July 30, 1996, and its
initial public offering, any agreement to do any of the foregoing; or any
declaration, setting aside, of payment of any dividend or other distribution
in respect of the capital stock of Marquee, Marquee NY or Subsidiary.
(3) Sales, leases, borrowings and so forth. Any sale or
lease of Marquee or Subsidiary's property or assets with an original cost in
excess of $10,000 for any single item or any mortgage or pledge of any
properties or assets of Marquee or Subsidiary, or any borrowing incurred,
assumed, or guaranteed by Marquee or Subsidiary.
(4) Employee benefit plans and certain salaries. Except
for Marquee's employment agreement, dated March 21, 1996, with Gutkowski and
Marquee's employment agreement, dated May 9, 1996, with Martin Ehrlich, any
employment contract in excess of $50,000 per year, bonus, stock option, profit
sharing, pension, retirement, incentive, medical, health, disability, other
employee benefit or similar arrangement or plan instituted, agreed to, or
amended (it being understood that Marquee may, prior to the Closing Date, (a)
issue stock, options or warrants to key employees of or advisors to Marquee
(other than Gutkowski, TSC or any of their affiliates) and (b) to the extent
it has not already done so obtain medical and dental insurance of the type
required by Section 6 of the employment agreements contemplated by Section 8.6
and 9.6 hereof); nor any contributions or other payments made (nor
contributions or other obligations incurred) with respect to existing
arrangements and plans of the aforementioned types, except in accordance with
past practices (and no such plans have any unfunded liability).
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4.7 Litigation and so forth. There is no litigation,
proceeding, or governmental investigation pending or, to the knowledge of
Marquee, threatened against or relating to Marquee or Marquee NY or any of
their properties or businesses or the transactions contemplated by this
Agreement; nor, to the knowledge of Marquee, is there any reasonable basis for
such actions or for any claims; and neither Marquee nor Marquee NY is a party
to or subject to the provisions of any judicial decree or judgment or any
order of any governmental agency.
4.8 List of Properties, Contracts and So Forth. Marquee has
delivered to Athletes lists or summary descriptions with respect to Marquee
and Marquee NY, and on or prior to the Closing Date Marquee will deliver to
Athletes lists or summary descriptions with respect to Subsidiary (in each
case certified as correct to the best of their knowledge by authorized
officers of the relevant entity), each of which is or will be complete and
correct in all material respects as of the date set out therein, of the
following:
(1) Certain leases and contracts. Each lease, contract
or other commitment of Marquee, Marquee NY or Subsidiary involving an
aggregate payment by any of them of more than $25,000 or to any of them of
more than $50,000 or extending beyond twelve (12) .months from the date of
delivery of such lists or summary descriptions (whether or not terminable at
the option of any party at an earlier date) other than leases, contracts, or
commitments furnished pursuant to other paragraphs of this Section 4.8
("Schedule A").
(2) Certain salaried employees. The names and annual
salary rates as of the date of this Agreement of Marquee's, Marquee NY's and
Subsidiary's directors, officers, employees, and agents whose annual rate of
compensation at such date was $50,000 or more ("Schedule B").
(3) Loan and credit agreements and so forth. All
mortgages, indentures, promissory notes, deeds of trust, loan or credit
agreements, or similar agreements to which Marquee, Marquee NY or Subsidiary
is a party, and all amendments or modifications of any thereof ("Schedule C"),
with a statement of any as to which there is any existing default by Marquee,
Marquee NY or Subsidiary.
(4) Employee stock options. The names of all persons
holding employee stock options to purchase shares of capital stock of Marquee,
Marquee or Subsidiary and, with respect to each, the date of grant or issue,
the expiration date, the number and class of shares subject thereto, and the
purchase price ("Schedule D").
(5) Litigation. Each lawsuit, administrative proceeding,
or arbitration to which Marquee, Marquee NY or Subsidiary is a party (whether
as plaintiff, defendant or otherwise), including the damages or relief sought
therein, the name of counsel for Marquee, Marquee NY or Subsidiary in charge
of such matter, and its current status ("Schedule E").
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(6) Other contracts and commitments. Every contract and
commitment (not listed on other schedules delivered to Athletes pursuant to
this Section 4.8) that Marquee, Marquee NY or Subsidiary would be required to
file or describe in a Registration Statement on Form S-1 filed by Marquee or
Subsidiary under the Securities Act of 1933, as amended ("Schedule F").
4.9 Tax Returns. Marquee and Marquee NY have, and prior to
the Closing Date Subsidiary will have, timely filed all tax returns required
to be filed by them and paid all taxes required to be paid for all fiscal
periods prior hereto (in the case of Marquee or Marquee NY) or prior to the
Closing Date (in the case of Subsidiary).
4.10 No Violation. Marquee's execution of this Agreement
does not and Subsidiary's execution of the Merger Agreement will not, and the
performance hereof and thereof will not, violate the provisions of Marquee's
or Subsidiary's Certificate of Incorporation, Bylaws or any indenture,
agreement, or other instrument to which Marquee is or Subsidiary will be a
party, except insofar as any such instrument may require consent by a lender,
mortgagee, lessor, or other party to such actions, whose consent Marquee or
Subsidiary agree to obtain before the Closing Date.
4.11 Authorization. The execution, delivery, and performance
of this Agreement have been duly authorized and approved by Marquee's board of
directors and by all of its shareholders and the Merger Agreement will be
approved by Subsidiary's board of directors and all of its shareholders; this
Agreement and the consummation of the transactions contemplated herein have
been duly and validly authorized by all necessary corporate action on the part
of Marquee; the Merger Agreement and the consummation of the transactions
contemplated therein will be duly and validly authorized by all necessary
corporate action on the part of Subsidiary; and this Agreement is, and, with
respect to Subsidiary, the Merger Agreement (upon execution and delivery as
provided herein) will be, binding upon and enforceable against Marquee or
Subsidiary, as the case may be, in accordance with their terms.
4.12 General. None of the representations or warranties made
by Marquee, Gutkowski or TSC in this Agreement are false or misleading with
respect to any material fact or omit to state any material fact necessary in
order to make the statements therein contained not misleading.
Section 5 -- [Intentionally Left Blank]
Section 6 -- Conduct of Athletes Pending the Closing Date
The Sellers and Athletes covenant and agree that between the
date of this Agreement and the Closing Date:
6.1 Certificate of Incorporation and Bylaws. Athletes
will not change its Certificate of Incorporation or Bylaws.
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6.2 Capitalization and so forth. Athletes will not make any
change in its authorized, issued, or outstanding capital stock; grant any
stock option or right to purchase shares of its capital stock; issue any
security convertible into shares of its capital stock; purchase, redeem,
retire, or otherwise acquire any shares of its capital stock; or agree to do
any of the foregoing; or declare, set aside, or pay any dividend or other
distribution in respect of its capital stock.
6.3 Business in Ordinary Course. Athletes will conduct its
business in its customary course and will (1) use its reasonable efforts to
preserve its business organization intact, to keep available to Marquee the
services of its present officers and employees, and to preserve the goodwill
of suppliers, customers, and others having business relations with it; (2)
maintain its properties in customary repair, working order, and condition,
reasonable wear and tear and damage by casualty excepted; (3) keep in force at
no less than their present limit all policies of insurance listed in Schedule
3; and (4) make no material change in the customary terms and conditions on
which it extends credit to customers; provided, however, that nothing in this
Section 6.3 shall prohibit compliance by Athletes with, or Athletes' borrowing
or repayment of funds pursuant to, any agreements or other commitments
disclosed by Athletes to Marquee on any Schedule furnished in accordance with
Section 3.8 hereof.
6.4 Employee Compensation. Athletes will pay Kaminsky a
salary at the rate of $300,000 per year and Oppenheim a salary at the rate of
$175,000 per year, plus any amounts distributable pursuant to Section 6.9
hereof. Other than the possible renewal of Michael Glantz's employment
agreement on terms reasonably acceptable to Marquee, Athletes will not
institute, agree to, or amend any employment contract requiring the payment by
Athletes of a salary or bonus in excess of $50,000 per year, or any bonus,
stock option, profit sharing, pension, retirement, incentive, medical, health,
disability, other employee benefit or similar arrangement or plan, except to
grant normal individual increases in compensation in accordance with
established agreements or procedures and except as may be necessary to comply
with Section 6.8 hereof.
6.5 Banking Arrangements; Powers of Attorney. Athletes will
not make any change in its banking and safe deposit arrangements and will not
grant any powers of attorney.
6.6 Accounting Practices. Except as required by generally
accepted accounting principles, Athletes will not make any changes in its
accounting methods or practices.
6.7 Merger. Athletes will not merge or consolidate with any
other corporation; sell or lease all or substantially all of its assets and
business; acquire all or substantially all of the stock of the business or
assets of any other person, corporation, or business organization; or agree to
do any of the foregoing.
6.8 Termination of Employee Benefit Plans. At Marquee's
option and on such date or dates (but in no event earlier than two (2)
business days prior to the Closing Date) and in such manner as Marquee shall
direct, Athletes will terminate some or all bonus, stock option, profit
sharing, pension, retirement, incentive, medical, health, disability and other
employee benefit plans
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or arrangements it maintains or sponsors or to which it is obligated to
contribute, including, without limitation, the Athletes and Artists Profit
Sharing Plan. Any such termination will be made in accordance with all
applicable laws, including, without limitation, the Employee Retirement Income
Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as
amended.
6.9 Prosecution of Lawsuits. Athletes shall use reasonable
efforts to prosecute to a successful conclusion all of the lawsuits listed on
Schedule 13. Notwithstanding anything else herein contained, prior to the
Closing Date Kaminsky and Oppenheim may withdraw from Athletes, as a dividend
or salary or otherwise, an aggregate of up to $100,000 of the amounts
recovered by Athletes from the lawsuits listed on Schedule 13. In the event
that Kaminsky and Oppenheim have not withdrawn the sum of $100,000 from
Athletes prior to the Closing Date as provided above, then Kaminsky and
Oppenheim shall be entitled to withdraw from Athletes as salary the amounts
recovered from said lawsuits after the Closing Date, as received by Athletes,
until Kaminsky and Oppenheim have so withdrawn prior to and after Closing Date
the aggregate sum of $100,000.
6.10 Delivery of Certain Documents. Within sixty (60) days
of the date hereof, Athletes will deliver to Marquee a balance sheet of
Athletes as of December 31, 1995, together with the related statement of
operations, which shall present fairly the financial condition of Athletes and
its results of operations for the period indicated and which shall be audited
by independent certified public accountants. Within fourteen (14) days of the
date hereof, Athletes will deliver a list or summary description (certified as
correct to the best of their knowledge by authorized officers of Athletes),
which shall be complete and accurate in all material respects as of the date
thereof, of each existing lease, contract, or other commitment of Athletes
extending beyond twelve (12) months, from the date hereof (whether or not
terminable at the option of any party thereto at an earlier date) other than
leases, contracts or commitments furnished pursuant to Section 3.8 hereof.
Section 6A -- Conduct of Marquee Pending the Closing Date
Gutkowski, TSC and Marquee covenant and agree that between
the date of this Agreement and the Closing Date:
6A.1 Capitalization and so forth. Marquee will not purchase,
redeem, retire, or otherwise acquire any shares of its capital stock; issue to
Gutkowski or TSC or any of their affiliates any shares of its capital stock or
any option or right to purchase shares of its capital stock; or agree to do
any of the foregoing; or declare, set aside, or pay any dividend or other
distribution in respect of its capital stock.
6A.2 Business in Ordinary Course. Marquee will conduct its
business in its customary course (it being understood that, notwithstanding
anything else herein contained, Marquee may discharge the liabilities listed
on the Marquee NY Balance Sheet) and will (1) use its reasonable efforts to
preserve its business organization intact and to preserve the goodwill of
suppliers, customers, and others having business relations with it; (2)
maintain its properties in customary repair, working order, and condition,
reasonable wear and tear and damage by casualty excepted; and
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(3) make no material change in the customary terms and conditions on which it
extends credit to customers; provided, however, that nothing in this Section
6A.2 shall prohibit compliance by Marquee with, or Marquee's borrowing or
repayment of funds pursuant to, any agreements or other commitments disclosed
by Marquee to Athletes on any Schedule furnished in accordance with Section
4.8 hereof.
6A.3 Employee Compensation. Marquee will pay Gutkowski a
salary at the rate of $325,000 per year. Marquee will not amend or agree to
amend any employment contract, or any proposed employment contract, with
Gutkowski, Michael Trager ("Trager") or Michael Letis ("Letis").
6A.4 Banking Arrangements; Powers of Attorney. Marquee will
not make any change in its banking and safe deposit arrangements and will not
grant any powers of attorney.
6A.5 Accounting Practices. Except as required by generally
accepted accounting principles, Marquee will not make any changes in its
accounting methods or practices.
6A.6 Merger. Except as contemplated by this Agreement,
Marquee will not merge or consolidate with any other corporation; sell or
lease all or substantially all of its assets and business; acquire all or
substantially all of the stock of the business or assets of any other person,
corporation, or business organization; or agree to do any of the foregoing.
Section 7 -- Access
From the date hereof to the Closing Date, Marquee and
Athletes shall provide each other with such information and permit each
other's officers and representatives such access to its properties and books
and records as the other may from time to time reasonably request. If the
transactions contemplated by this Agreement and the Merger Agreement are not
consummated, all documents furnished in connection with this Agreement shall
be returned to the party furnishing the same, and all information so received
shall be treated as confidential.
Section 8 -- Conditions Precedent to Obligations of Marquee
The obligation of Marquee to consummate the Merger and to
cause Subsidiary to consummate the Merger shall be subject to the fulfillment
on or before the Closing Date of each of the following conditions, unless
waived in writing by Marquee:
8.1 Representations and Warranties. The representations and
warranties of Athletes and the Sellers set forth in Section 3 hereof shall be
true and correct at the Closing Date as if made at and as of that date, except
as affected by the transactions contemplated hereby.
8.2 Shareholder Approval. This Agreement shall have been
unanimously adopted by the shareholders of Athletes.
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8.3 Covenants. Athletes and the Sellers shall have performed
all covenants and agreements set forth in Sections 6 and 7 hereof to be
performed by them on or before the Closing Date.
8.4 Financing. Marquee shall have previously or
simultaneously effected an initial public offering of its capital stock or
completed a similar private financing where the gross proceeds from such
offering are at least $13,800,000 (the "Financing") by December 7, 1996.
8.5 Shareholders' Agreement. The Shareholders' Agreement,
dated as of March 21, 1996, by and among TSC, Gutkowski, Kaminsky, Oppenheim,
Trager, Letis and Marquee shall be in full force and effect.
8.6 Employment Agreements. On the Closing Date, Kaminsky and
Marquee shall execute an employment agreement in the form attached hereto as
Exhibit C. On the Closing Date, Oppenheim and Marquee shall execute an
employment agreement in the form attached hereto as Exhibit D.
8.7 Agreement with Athletes' Stockholders. On or before the
Closing Date, Marquee, Subsidiary, Athletes, and all of the stockholders of
Athletes shall have executed and delivered an agreement in the form attached
hereto as Exhibit B.
8.8 Legal Opinion. On or before the Closing Date, Marquee
and Subsidiary shall have received an opinion of Baker & McKenzie that the
Merger will be considered a tax-free reorganization to the extent of the
receipt of stock under Section 368(a) of the Code.
8.9 Certificate. On the Closing Date, Athletes and the
Sellers shall deliver a certificate to Marquee and Subsidiary, in form and
substance reasonably acceptable to Marquee and Subsidiary, to the effect that
all of the representations and warranties of Athletes and the Sellers set
forth in Section 3 hereof are true and correct at the Closing Date as if made
at and as of that date, except as affected by the transactions contemplated
hereby, and that all of the covenants and agreements of Athletes and the
Sellers set forth in Section 6 hereof have been performed.
Section 9 -- Conditions Precedent to Obligations of Athletes
The obligation of Athletes to consummate the Merger shall be
subject to the fulfillment on or before the Closing Date of each of the
following conditions, unless waived in writing by Athletes:
9.1 Representations and Warranties. The representations and
warranties of Gutkowski, TSC and Marquee set forth in Section 4 hereof shall
be true and correct at the Closing Date as if made at and as of that date,
except as affected by the transactions contemplated hereby.
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9.2 Shareholder Approval. This Agreement shall have been
unanimously adopted by the shareholders of Marquee and Subsidiary.
9.3 Covenants. Marquee, Gutkowski, and TSC shall have
performed all covenants and agreements set forth in Sections 4, 6A and 7
hereof to be performed by them on or before the Closing Date.
9.4 Financing. Marquee shall have previously or
simultaneously effected an initial public offering of its capital stock or
completed a similar private financing where the gross proceeds from such
offering are at least $13,800,000 by December 7, 1996.
9.5 Shareholders' Agreement. The Shareholders' Agreement,
dated as of March 21, 1996, by and among TSC, Gutkowski, Kaminsky, Oppenheim,
Trager, Letis and Marquee shall be in full force and effect.
9.6 Employment Agreements. On the Closing Date, Kaminsky and
Marquee shall execute an employment agreement in the form attached hereto as
Exhibit C. On the Closing Date, Oppenheim and Marquee shall execute an
employment agreement in the form attached hereto as Exhibit D.
9.7 Legal Opinion. On or before the Closing Date, Athletes
shall have received an opinion of Baker & McKenzie, in form and substance
reasonably acceptable to Athletes, that the Merger will be considered a
tax-free reorganization to the extent of the receipt of stock under Section
368(a) of the Code.
9.8 Certificate. On the Closing Date, Marquee, Gutkowski and
TSC shall deliver a certificate to Athletes and the Sellers, in form and
substance reasonably acceptable to Athletes and the Sellers, to the effect
that all of the representations and warranties of Marquee, Gutkowski and TSC
set forth in Section 4 hereof are true and correct at the Closing Date as if
made at and as of that date, except as affected by the transactions
contemplated hereby, and that all of the covenants and agreements of Marquee,
Gutkowski and TSC set forth in Sections 4 and 6A hereof have been performed.
Section 10 -- Closing Date and Effective Date of the Merger
10.1 Closing Date. The closing date of the transactions
contemplated by this Agreement (the "Closing Date") shall be the date of
consummation of the Financing.
10.2 Effective Date. On the Closing Date, an executed
counterpart of the Merger Agreement shall be filed with the Secretary of State
of the State of New York and the Merger shall become effective upon the
completion of such filing. The date of completion of such filing shall be the
"Effective Date."
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10.3 Payment of Purchase Price. On the Closing Date, Marquee
shall pay to the Sellers an aggregate amount equal to $2,500,000 and on each
April 1 following the Closing Date, until and including April 1, 2001, Marquee
shall pay $150,000 to Kaminsky and $50,000 to Oppenheim.
Section 11 -- Termination
11.1 Circumstances of Termination. This Agreement may be
terminated (notwithstanding approval by the shareholders of any party hereto):
(1) By the mutual consent in writing of the boards of
directors of Marquee and Athletes.
(2) By the board of directors of Marquee if any condition
provided in Section 8 hereof has not been satisfied or waived on or before the
Closing Date.
(3) By the board of directors of Athletes if any condition
provided in Section 9 hereof has not been satisfied or waived on or before the
Closing Date.
(4) By the board of directors of either Marquee or Athletes
if the Closing Date has not occurred by December 7, 1996, unless the closing
of the transactions contemplated hereby shall not have occurred by such date
due to the action or failure to act of such party.
(5) By the board of directors of either Marquee or Athletes
if that certain Acquisition Agreement, dated March 21, 1996, by and among
Marquee, SMTI, Trager, Letis, Gutkowski and TSC is terminated or the merger
contemplated thereby does not occur simultaneously with the Merger.
11.2 Effect of Termination. In the event of a termination of
this Agreement pursuant to Section 11.1 hereof, each party shall pay the costs
and expenses incurred by it in connection with this Agreement and, except only
as provided in the following sentence with respect to Athletes and Marquee, no
party (or any of its officers, directors or shareholders) shall be liable to
any other party for any costs, expenses, damage or loss of anticipated profits
resulting from such termination. In the event that the transactions
contemplated herein fail to be consummated as a result of a wilful breach by
Athletes or Marquee of this Agreement or the Merger Agreement, or the gross
negligence of Athletes or Marquee in performing their obligations hereunder or
thereunder, nothing herein contained shall be deemed to limit the rights and
remedies at law or equity available to Athletes or Marquee against each other
on account of such wilful breach or gross negligence.
11.3 Allocation of Business and Net Income Following
Termination. In the event that this Agreement is terminated in accordance with
the terms hereof, Marquee and Athletes agree (i) that any business of Athletes
or SMTI generated by such entity between the date hereof and the date of
termination of this Agreement and performed by such entity shall become the
client of and
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remain with the entity that generated such business, (ii) that the parties
hereto shall negotiate in good faith the disposition and treatment of any
business (and the related client) of SMTI or Athletes generated by Marquee,
TSC, Gutkowski, Athletes (in the case of SMTI business) or SMTI (in the case
of Athletes business) between the date hereof and the date of termination of
this Agreement and performed by SMTI or Athletes and with respect to which a
timely Designation, as defined below, was delivered by Marquee, TSC,
Gutkowski, Athletes (in the case of SMTI business) or SMTI (in the case of
Athletes business), and (iii) that any business of Marquee generated by
Athletes, SMTI, Marquee, TSC or Gutkowski between the date hereof and the date
of termination of this Agreement and performed by Marquee shall become the
client of and remain with Marquee, and that the net income from any business
described in this clause (iii) shall be allocated as follows:
(a) fifty percent of the net income of Marquee derived from
business generated by either Marquee, TSC or Gutkowski between the date hereof
and the date of termination of this Agreement shall be retained by or paid to
Marquee, with the balance to be paid equally and on at least a quarterly basis
to Athletes and SMTI;
(b) fifty percent of the net income of Marquee derived from
business generated by Athletes between the date hereof and the date of
termination of this Agreement and with respect to which a timely Designation
was delivered by Athletes shall be retained by or paid to Athletes on at least
a quarterly basis, with the balance to be paid equally and on at least a
quarterly basis to Marquee and SMTI; and
(c) fifty percent of the net income of Marquee derived from
business generated by SMTI between the date hereof and the date of termination
of this Agreement and with respect to which a timely Designation was delivered
by SMTI shall be retained by or paid to SMTI on at least a quarterly basis,
with the balance to be paid equally and on at least a quarterly basis to
Marquee and Athletes.
For purposes of this Section 11.3, business shall be deemed to be business of
the entity (Marquee, Athletes or SMTI) that entered into a contract with the
third party client in connection with such business. Business shall be
presumed to be generated by the entity that entered into the contract with the
third party client unless another of such entities or Gutkowski or TSC
notifies in writing (a "Designation") the others within fifteen (15) days of
the date such contract was entered into that it is disputing such presumption.
Such Designation disputing such presumption shall be deemed accepted by such
other entities unless it is disputed by any such other entities within fifteen
(15) days thereafter, at which point the parties shall arrange a meeting to
resolve the dispute.
Section 12 -- General Provisions
12.1 Further Assurances and Co-Operation. At any time, and
from time to time, after the Effective Date, each party will execute such
additional instruments and take such action as may be reasonably requested by
the other party to confirm or perfect title to any property transferred
hereunder or otherwise to carry out the intent and purposes of this Agreement.
At any time, and
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from time to time, during the period commencing on the date hereof and ending
on the third (3rd) anniversary of the Effective Date, Athletes agrees to use
its best efforts to cause its independent certified public accountants to
audit Athletes' financial statements in accordance with generally accepted
auditing standards and to furnish such financial statements to Marquee in
proper form to be included in a Registration Statement filed under the
Securities Act of 1933, as amended, and to furnish all necessary reports and
consents as may be required to be included in such Registration Statement or
offering memorandum.
12.2 Indemnity. (a) The Sellers hereby jointly and severally
agree to indemnify and hold each of Marquee and Subsidiary harmless from any
and all losses, claims and damages which Marquee and Subsidiary may suffer or
incur and which arise out of the breach by Athletes or the Sellers of any
representation, warranty, covenant or agreement set forth in Section 3 or 6
hereof, including, but not limited to, Section 6.8 hereof. The amount of
Kaminsky's indemnity hereunder shall be limited to $500,000 and the amount of
Oppenheim's indemnity hereunder shall be limited to $250,000.
(b) Gutkowski and TSC hereby jointly and severally agree to
indemnify and hold each of the Sellers and Athletes harmless from any and all
losses, claims and damages (including, but not limited to, reasonable
attorneys' fees) which the Sellers or Athletes may suffer or incur and which
arise out of the breach by Gutkowski, TSC or Marquee of any representation,
warranty, covenant or agreement set forth in Sections 4 or 6A hereof. The
amount of each of Gutkowski's and TSC's indemnity hereunder shall be limited
to $250,000.
12.3 Survival of Representations and Warranties. The parties
hereto agree that all representations and warranties made in this Agreement or
in any Schedule delivered pursuant to this Agreement shall survive the Closing
Date for a period of six (6) months and that any actions in respect of
breaches thereof, including any action under Section 12.2 hereof, must be
commenced within such period.
12.4 Waiver. Any failure on the part of either party hereto
to comply with any of its obligations, agreements, or conditions hereunder may
be waived in writing by the party to whom such compliance is owed.
12.5 Brokers. Each party represents to the other parties
that no broker or finder has acted for it in connection with this Agreement
and agrees to indemnify and hold harmless the other parties against any fee,
loss, or expense arising out of claims by brokers or finders employed or
alleged to have been employed by it.
12.6 Notices. All notices hereunder shall be in writing and
shall be delivered in person or given by registered or certified mail, postage
prepaid, and sent to the parties at the respective addresses above set forth.
Any party may designate any other address to which notice shall be given by
giving notice to the others of such change of address in the manner herein
provided.
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12.7 Entire Agreement. This Agreement and the Letter
Agreement constitute the entire agreement between the parties and supersede
and cancel any other agreement, representation, or communication, whether oral
or written, between the parties hereto relating to the transactions
contemplated herein or the subject matter hereof. In the event there is any
inconsistency between the terms of this Agreement and the terms of the Letter
Agreement, the terms of this Agreement shall govern.
12.8 Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
12.9 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York.
12.10 Assignment. This Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and their successors and assigns;
provided, however, that any assignment by any party of its rights under this
Agreement without the written consent of the other parties shall be void.
12.11 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
12.12 Amendment. This Agreement may only be amended by a
written instrument which is executed by the parties hereto and Trager and
Letis.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date set forth above.
THE MARQUEE GROUP INC.
By: /s/ Robert M. Gutkowski
-----------------------------
Name: Robert M. Gutkowski
Title: President
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ATHLETES AND ARTISTS, INC.
By: /s/ Arthur C. Kaminsky
--------------------------------------------
Name: Arthur C. Kaminsky
Title: President and Chief Executive Officer
Arthur Kaminsky and Louis J. Oppenheim
hereby agree to the provisions of
Sections 3, 6, 8 and 12 hereof
/s/ ARTHUR KAMINSKY
- ---------------------------------
/s/ LOUIS J. OPPENHEIM
- ---------------------------------
The undersigned hereby agree to the
amendment and restatement of the foregoing
agreement.
/s/ MICHAEL TRAGER
- ---------------------------------
/s/ MICHAEL LETIS
- ---------------------------------
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AMENDED AND RESTATED ACQUISITION AGREEMENT
Amended and Restated Acquisition Agreement, dated as of the
21st day of March, 1996, by and among The Marquee Group Inc., a Delaware
corporation, having an office at 150 East 58th Street, New York, New York
10155 ("Marquee"); Sports Marketing & Television International, Inc., a
Connecticut corporation, having an office at 410 Greenwich Avenue, Greenwich,
Connecticut 06830 ("SMTI"); Michael Trager ("Trager") and Michael Letis
("Letis"), individuals having an address at 410 Greenwich Avenue, Greenwich,
Connecticut 06830 (Trager and Letis are collectively referred to herein as the
"Sellers" and individually as a "Seller"); Robert Gutkowski ("Gutkowski"), an
individual having an address at 152 West 57th Street, New York, New York
10019; and The Sillerman Companies, Inc. ("TSC"), a corporation having an
address at 150 East 58th Street, New York, New York 10155.
Whereas, Marquee and SMTI have entered into a letter
agreement dated December 7, 1995 (the "Letter Agreement"), whereby Marquee has
agreed to acquire SMTI, and SMTI has agreed to be acquired by Marquee, on the
terms and conditions hereinafter set forth;
Whereas, the boards of directors and stockholders of Marquee
and SMTI each have adopted resolutions declaring advisable the acquisition of
SMTI by Marquee on the terms and conditions hereinafter set forth, whereby the
outstanding Common Stock of SMTI will be converted into Common Stock of
Marquee and cash in a transaction which is intended to qualify as a tax-free
reorganization to the extent of the receipt of stock under Sections
368(a)(1)(A) and 368(a)(2)(D) of the United States Internal Revenue Code of
1986, as amended (the "Code"); and
Whereas, the parties hereto have entered into an Acquisition
Agreement dated as of March 21, 1996, which was subsequently amended on April
5, 1996, and such parties deem it to be in their respective best interests to
amend and restate such agreement and, to that end, hereby amend and restate
such agreement.
Now, Therefore, the parties to this Agreement agree as
follows:
Section 1 -- Merger
1.1 Agreement to Merger. Subject to the terms and conditions
herein set forth, SMTI and Marquee agree to effect a merger (the "Merger") of
SMTI with and into a wholly-owned subsidiary of Marquee to be formed for the
purpose of effecting the Merger (the "Subsidiary"), with Subsidiary as the
surviving corporation, in accordance with the Agreement and Plan of Merger
attached hereto as Exhibit A (the "Merger Agreement").
1.2 Purchase Price. The aggregate purchase price for all of
the issued and outstanding shares of capital stock of SMTI shall be
$8,000,000, which shall be payable in
<PAGE>
accordance with the provisions set forth in Section 10.3 hereof, and that
number of shares of the Common Stock, par value $.01 per share (the "Common
Stock") of Marquee as is equal to four-thirteenths (4/13) of the total number
of shares of Common Stock of Marquee held by (i) the shareholders of SMTI,
(ii) the shareholders of Athletes (as defined in Section 4.3 hereof), (iii)
Gutkowski and (iv) TSC in the aggregate (collectively, the "Management Stock")
immediately after the Closing Date (as defined in Section 10.1 hereof). If
necessary, on or prior to the Closing Date, Marquee will make whatever
adjustments in its issued and outstanding shares of Common Stock as are
required so that, immediately after the Closing Date, the shareholders of SMTI
will own, in the aggregate, that number of shares of Common Stock of Marquee
equal to four-thirteenths (4/13) of the total number of shares of Management
Stock.
1.3 Marquee Common Stock. Marquee will make available to
Subsidiary a sufficient number of shares of Common Stock of Marquee and a
sufficient amount of cash in order to effect the Merger pursuant to the Merger
Agreement.
1.4 Per Share Purchase Price. The number of shares of Common
Stock of Marquee to be received for each issued and outstanding share of
capital stock of SMTI, as set forth in Section 2.2 of the Merger Agreement,
shall be calculated on or prior to the Closing Date.
Section 2 -- Conversion of Stock of SMTI
2.1 Conversion of Shares. The manner of converting the
shares of SMTI into shares of Common Stock of Marquee and cash shall be as set
forth in Section 2 of the Merger Agreement.
2.2 Issuance of Cash to Certain Individuals. On the Closing
Date, Marquee will distribute to designees of Trager and Letis an aggregate of
$325,000 and the amount paid to Trager and Letis will be reduced by such
amount. Such amount will be considered part of the purchase price for the
issued and outstanding shares of capital stock of SMTI.
Section 3 -- Representations and Warranties of the Sellers and SMTI
The Sellers and SMTI jointly and severally represent and
warrant to Marquee that:
3.1 Organization and Good Standing. SMTI is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Connecticut and has corporate power to own its property and to carry
on its business as it is now being conducted. SMTI is qualified to do business
in the State of New York. Copies of SMTI's Certificate of Incorporation and
Bylaws (certified to be correct by the Secretary of SMTI) have been delivered
to Marquee and are complete and correct as at the date hereof. SMTI's minute
books contain a complete and accurate record of all meetings and other
corporate action of its shareholders and board of directors.
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3.2 Capitalization. SMTI's authorized capital stock consists
of 5,000 shares of Common Stock, no par value per share, 4,000 of which are
issued and outstanding. No shares are held in SMTI's treasury. All of the
outstanding shares of Common Stock of SMTI are validly issued, fully paid, and
nonassessable. There are no outstanding options, agreements, contracts, calls,
or commitments of any character which would require the issuance by SMTI of
any capital stock. All of the issued and outstanding Common Stock of SMTI are
owned by Trager and Letis, free and clear of any liens, claims or charges of
any nature. Their ownership of shares of Common Stock of SMTI is as set forth
below:
Name No. of Shares
---- -------------
Michael Trager 2,000
Michael Letis 2,000
3.3 Subsidiaries. SMTI has no subsidiaries, nor does it have
an ownership interest in any partnership, corporation, association or other
business entity.
3.4 Financial Statements. SMTI has delivered to Marquee
copies of the following financial statements, all of which have been prepared
in accordance with generally accepted accounting principles consistently
applied throughout the periods indicated:
(1) 1995 Financial Statements. Balance sheet of SMTI as
of December 31, 1995 (the "SMTI Balance Sheet"), together with the related
statement of operations, which present fairly as of their date the financial
condition of SMTI and its results of operations for the period indicated.
(2) 1993 and 1994 Financial Statements. Balance sheet of
SMTI as of December 31, 1993 and 1994, together with the related statements of
operations, which present fairly as of their date the financial condition of
SMTI and its results of operations for the periods indicated.
3.5 Absence of Undisclosed Liabilities. SMTI did not have at
the date of the SMTI Balance Sheet any liabilities or obligations, secured or
unsecured (whether accrued, absolute, contingent, or otherwise), of a nature
that would be reflected or reserved against in a corporate balance sheet or
disclosed in the notes thereto prepared in accordance with generally accepted
accounting principles that are not reflected or reserved against in the SMTI
Balance Sheet or disclosed in the notes thereto.
3.6 Absence of Certain Changes. There have not been
since the date of the SMTI Balance Sheet any changes of the following nature:
(1) Business, properties and financial condition. Any
material adverse change in SMTI's properties, business, financial condition,
or results of operations.
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(2) Capital stock: options, dividends and so forth. Any
change in the authorized, issued, or outstanding capital stock of SMTI; any
granting of any stock option or right to purchase shares of capital stock or
any issuance of any security convertible into shares of capital stock of SMTI;
any purchase, redemption, retirement, or other acquisition of any shares of
capital stock by SMTI; any agreement to do any of the foregoing; or any
declaration, setting aside, or payment of any dividend or other distribution
in respect of the capital stock of SMTI.
(3) Sales, leases, borrowings and so forth. Any sale or
lease of SMTI's property or assets with an original cost in excess of $10,000
for any single item or any mortgage or pledge of any properties or assets of
SMTI, or any borrowing incurred, assumed, or guaranteed by SMTI.
(4) Employee benefit plans and certain salaries. Any
employment contract in excess of $50,000 per year, bonus, stock option, profit
sharing, pension, retirement, incentive, medical, health, disability, other
employee benefit or similar arrangement or plan instituted, agreed to, or
amended, nor any contributions or other payments made (nor contribution or
other obligations incurred) with respect to existing arrangements and plans of
the aforementioned types, except in accordance with past practices (and no
such plans have any unfunded liability).
3.7 Litigation and so forth. Except as set forth in Schedule
13 described in Section 3.8(13) hereof, there is no litigation, proceeding, or
governmental investigation pending or, to the knowledge of SMTI, threatened
against or relating to SMTI, its properties or business or the transactions
contemplated by this Agreement; nor, to the knowledge of SMTI, is there any
reasonable basis for any such actions or for any claims; and SMTI is not a
party to or subject to the provisions of any judicial decree or judgment or
any order of any governmental agency.
3.8 Lists of properties, contracts and so forth. SMTI has
delivered to Marquee lists or summary descriptions (certified as correct to
the best of their knowledge by authorized officers of SMTI), each of which is
complete and accurate in all material respects as of the date hereof, of the
following:
(1) Real property. All real property owned of record or
beneficially or leased by SMTI ("Schedule 1"), accompanied by copies of the
deeds, title insurance policies, and leases relating thereto.
(2) Other property. Inventories and tangible fixed
assets, as shown on SMTI's books, showing, with respect to inventories, the
amounts of raw materials, work-in-process, and finished goods, and with
respect to fixed assets, the total of each of the following categories:
leasehold improvements, machinery and equipment, furniture and fixtures, and
automotive equipment ("Schedule 2").
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(3) Insurance policies. All policies of insurance with
respect to SMTI's properties, buildings, machinery, equipment, furniture,
fixtures, operations, and the lives of its directors, officers, and employees
("Schedule 3").
(4) Certain leases and contracts. Each existing lease,
contract, or other commitment of SMTI involving an aggregate payment by SMTI
of more than $25,000 or to SMTI of more than $50,000 or extending beyond
twelve (12) months from the date hereof (whether or not terminable at the
option of any party thereto at an earlier date) other than leases, contracts,
or commitments furnished pursuant to other paragraphs of this Section 3.8
("Schedule 4").
(5) Certain salaried employees. The names and annual
salary rates as of the SMTI Balance Sheet date of SMTI's directors, officers,
employees, and agents whose annual rate of compensation at such date was
$50,000 or more ("Schedule 5").
(6) Labor contracts. Each existing labor contract to
which SMTI is a party ("Schedule 6").
(7) Intellectual property. All of SMTI's patents,
trademarks, trade names, service marks, service names, copyrights, and
registrations and applications therefor; and all patent, trademark, trade
name, service mark, service name, or copyright licenses, assignments, or
royalty agreements to which SMTI is a party ("Schedule 7").
(8) Profit sharing plans and so forth. All employment
contracts, bonus, stock option, profit sharing, pension, retirement,
incentive, medical, health, disability or other employee benefit plans or
arrangements of SMTI ("Schedule 8").
(9) Banks. The name of each bank in which SMTI has an
account or safe deposit box, and the names of all persons authorized to draw
thereon or having access thereto ("Schedule 9").
(10) Powers of attorney. The names of all persons, if
any, holding powers of attorney from SMTI ("Schedule 10").
(11) Loan and credit agreements and so forth. All
mortgages, indentures, promissory notes, deeds of trust, loan or credit
agreements, or similar instruments to which SMTI is a party, and all
amendments or modifications of any thereof ("Schedule 11"), with a statement
of any as to which there is any existing default by SMTI.
(12) Employee stock options. The names of all persons
holding employee stock options to purchase shares of capital stock of SMTI
and, with respect to each, the date of grant or issue, the expiration date,
the number and class of shares subject thereto, and the purchase price
("Schedule 12").
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(13) Litigation. Each lawsuit, administrative
proceeding, or arbitration to which SMTI is a party (whether as plaintiff,
defendant, or otherwise), including the damages or relief sought therein, the
name of counsel for SMTI in charge of such matter, and its current status
("Schedule 13").
(14) Material assets. A list of every material asset
used by SMTI in the conduct of its business that is not either owned by SMTI
or leased by or licensed to it under an agreement listed on Schedules 1
through 13 ("Schedule 14").
(15) Other contracts and commitments. Every contract and
commitment (not listed on other schedules delivered to Marquee pursuant to
this Section 3.8) that SMTI would be required to file or describe in a
Registration Statement on Form S-1 filed by SMTI under the Securities Act of
1933 Act, as amended ("Schedule 15").
3.9 Title. With respect to the property listed in Schedules
1 and 2, SMTI has good and marketable title to the real property stated to be
owned by it, has good title to the leasehold interests in real property stated
to be held by it, and good title to all of the tangible property stated to be
owned by it, in each case free and clear of all liens and encumbrances, except
for (1) liens and encumbrances disclosed in Schedules 1 and 2; (2) the lien of
current taxes not yet due and payable; and (3) such liens by operation of law
and such imperfections of title, and other liens and encumbrances, if any, as
are not substantial in character, amount, or extent and do not interfere with
the present or future use by SMTI of the properties subject thereto or
affected thereby.
SMTI has received no notice of violation of any applicable
zoning regulation, ordinance, or other law, order, regulation, or requirement
relating to its operations or its properties and, so far as is known to SMTI
(1) there is no such violation of a material nature and (2) all buildings and
structures used by SMTI substantially conform with all applicable ordinances,
codes, and regulations.
Except as stated in Schedule 7, SMTI (1) has clear record
title to the patents, trademarks, trade names, service marks, service names,
and copyrights, and registrations and applications therefor, and copyright
registrations listed in Schedule 7 as owned by it; (2) has not entered into
any agreements, contracts, or licenses that would impair free and unencumbered
use by Marquee of the patents, trademarks, trade names, service marks, service
names, or copyrights enumerated in Schedule 7; (3) does not know of any
asserted infringement by it of any patent, trademark, trade name, service
mark, service name, or copyright of another; and (4) does not believe that it
is infringing a patent, trademark, trade name, service mark, service name, or
copyright of another.
3.10 Tax Returns. Except for liabilities with respect to
taxes and interest thereon, to which reference is made in notes to the SMTI
Balance Sheet, the provision for taxes therein is sufficient for the payment
of all accrued and unpaid federal, state, county, and local taxes of SMTI
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(including any penalties or interest payable in respect of such taxes),
whether or not disputed, for the period ended December 31, 1995, and for all
fiscal years prior thereto.
3.11 No Violation. The execution of this Agreement and the
Merger Agreement does not, and performance hereof and thereof will not,
violate the provisions of SMTI's Certificate of Incorporation, Bylaws, or any
indenture, agreement, or other instrument to which SMTI is a party, except
insofar as any such instrument may require consent by a lender, mortgagee,
lessor, or other party to such actions, whose consent SMTI agrees to obtain
before the Closing Date.
3.12 Authorization. The execution, delivery, and performance
of this Agreement and the Merger Agreement have been duly authorized and
approved by SMTI's board of directors and by all of SMTI's shareholders; this
Agreement and the Merger Agreement and the consummation of the transactions
contemplated herein and therein have been duly and validly authorized by all
necessary corporate action on the part of SMTI; and this Agreement is, and
(upon execution and delivery as provided herein) the Merger Agreement will be,
binding upon and enforceable against SMTI in accordance with their respective
terms.
3.13 General. None of the representations or warranties made
by the Sellers or SMTI in this Agreement are false or misleading with respect
to any material fact or omit to state any material fact necessary in order to
make the statements therein contained not misleading.
Section 4 -- Representations, Warranties, Covenants, and Agreements of
Gutkowski, TSC and Marquee
Gutkowski, TSC, and Marquee jointly and severally represent
and warrant to, and covenant and agree with, SMTI and the Sellers that:
4.1 Organization and Good Standing. Marquee is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has corporate power to own its property and to carry on
its business as it is now being conducted. At the Closing Date Subsidiary will
be a corporation duly organized, validly existing and in good standing under
the laws of the State of Connecticut and have corporate power to own its
property and to carry on its business as it is then being conducted. Copies of
Marquee's Certificate of Incorporation and Bylaws (certified to be correct by
an officer of Marquee) have been delivered to SMTI and are complete and
correct as of the date hereof. Marquee's minute books contain a complete and
accurate record of all meetings and other corporate action of its shareholders
and board of directors. On or prior to the Closing Date Marquee will deliver
to SMTI copies of Subsidiary's Certificate of Incorporation and Bylaws
(certified to be correct by the Secretary of Subsidiary), which shall be
complete and correct as of the date of such delivery. On the Closing Date
Subsidiary's minute books will contain a complete and accurate record of all
meetings and other corporate action of its shareholders and board of
directors.
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4.2 Capitalization. Marquee's authorized capital stock
consists of 1,000 shares of Common Stock, par value $.01 per share, all of
which are issued and outstanding. No shares are held in Marquee's treasury.
All of the outstanding shares of Common Stock of Marquee are validly issued,
fully paid, and nonassessable. All of the shares of capital stock of
Subsidiary to be issued will be validly issued, fully paid and nonassessable.
Other than Marquee's pending agreements regarding a private placement as
described in Marquee's Confidential Term Sheet dated July 30, 1996, and its
initial public offering, there are no outstanding options, agreements,
contracts, calls, or commitments of any character which would require the
issuance by Marquee or Subsidiary of any capital stock (it being understood
that Marquee may, prior to the Closing Date, issue stock, options or warrants
to key employees of or advisors to Marquee (other than Gutkowski, TSC or any
of their affiliates)). All of the issued and outstanding Common Stock of
Marquee is owned by Gutkowski, TSC and Martin Ehrlich. Their ownership of
shares of Common Stock of Marquee is as set forth below:
Name No. of Shares
---- -------------
Robert Gutkowski 333
The Sillerman Companies, Inc. 666
Martin Ehrlich 1
All of Subsidiary's outstanding shares of Common Stock will be owned by
Marquee.
4.3 Subsidiaries. Marquee has no subsidiaries, nor does it
have an ownership interest in any partnership, corporation, association, or
other business entity (it being understood that prior to the Closing Date
Marquee (a) will form and own two wholly-owned subsidiaries, Subsidiary and a
wholly-owned subsidiary to be formed for the purpose of effecting the
acquisition of Athletes and Artists, Inc., a New York corporation ("A&A"), by
Marquee by the merger of A&A with and into such subsidiary, and (b) may
acquire all of the outstanding capital stock of The Marquee Group, a Sports,
News and Entertainment Company, Inc., a New York corporation ("Marquee NY")
for a purchase price not to exceed $1,000). Subsidiary will not have any
subsidiaries, nor will it have an ownership interest in any partnership,
corporation, association, or other business entity. Marquee NY does not have
any subsidiaries, nor does it have an ownership interest in any partnership,
corporation, association, or other business entity.
4.4 Financial Statements. Marquee has delivered to SMTI a
copy of an unaudited operating income statement of Marquee as of December 31,
1995 (the "Marquee Balance Sheet") and an unaudited operating income statement
of Marquee NY as of December 31, 1995 (the "Marquee NY Balance Sheet"),
together with the related balance sheets, which present fairly as of their
date the financial condition of Marquee and Marquee NY and their results of
operations for the periods indicated. On or prior to the Closing Date Marquee
will deliver to SMTI a copy of a balance
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sheet of Subsidiary as of a date no more than ninety (90) days prior thereto
(the "Subsidiary Balance Sheet"), together with the related statement of
operations, which shall present fairly as of their date the financial
condition of Subsidiary and its results of operations for the period
indicated.
4.5 Absence of Undisclosed Liabilities. Marquee did not have
at the date of the Marquee Balance Sheet, Marquee NY did not have at the date
of the Marquee NY Balance Sheet, and Subsidiary will not have at the date of
the Subsidiary Balance Sheet, any liabilities or obligations, secured or
unsecured (whether accrued, absolute, contingent or otherwise), of a nature
that would be reflected or reserved against in a corporate balance sheet or
disclosed in the notes thereto prepared in accordance with generally accepted
accounting principles that are not reflected or reserved against in such
balance sheets or disclosed in the notes thereto.
4.6 Absence of Certain Changes. There have not been since
the date of the Marquee Balance Sheet and the Marquee NY Balance Sheet, and at
the Closing Date there will not have been since the date of the Subsidiary
Balance Sheet, any changes of the following nature:
(1) Business, properties and financial condition. Any
material adverse change in Marquee's, Marquee NY's or Subsidiary's properties,
business, financial condition, or results of operations.
(2) Capital stock: options, dividends and so forth. Any
change in the authorized, issued, or outstanding capital stock of Marquee,
Marquee NY or Subsidiary; any granting of any stock option or right to
purchase shares of capital stock or any issuance of any security convertible
into shares of capital stock by Marquee, Marquee NY or Subsidiary (except as
contemplated by Section 4.6(4) hereof and as described on Schedule A (as
defined in Section 4.8(1) hereof)); any purchase, redemption, retirement, or
other acquisition of any shares of capital stock by Marquee, Marquee NY or
Subsidiary; other than Marquee's pending agreements regarding a private
placement as described in Marquee's Confidential Term Sheet dated July 30,
1996, and its initial public offering, any agreement to do any of the
foregoing; or any declaration, setting aside, of payment of any dividend or
other distribution in respect of the capital stock of Marquee, Marquee NY or
Subsidiary.
(3) Sales, leases, borrowings and so forth. Any sale or
lease of Marquee, Marquee NY's or Subsidiary's property or assets with an
original cost in excess of $10,000 for any single item or any mortgage or
pledge of any properties or assets of Marquee or Subsidiary, or any borrowing
incurred, assumed, or guaranteed by Marquee or Subsidiary.
(4) Employee benefit plans and certain salaries. Except
for Marquee's employment agreement, dated March 21, 1996, with Gutkowski and
Marquee's employment agreement, dated May 9, 1996, with Martin Ehrlich, any
employment contract in excess of $50,000 per year, bonus, stock option, profit
sharing, pension, retirement, incentive, medical, health, disability, other
employee benefit or similar arrangement or plan instituted, agreed to, or
amended (it being understood that Marquee may, prior to the Closing Date, (a)
issue stock, options or warrants
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to key employees of or advisors to Marquee (other than Gutkowski, TSC or any
of their affiliates) and (b) to the extent it has not already done so, obtain
medical and dental insurance of the type required by Section 6 of the
employment agreements contemplated by Sections 8.6 and 9.6 hereof); nor any
contributions or other payments made (nor contributions or other obligations
incurred) with respect to existing arrangements and plans of the
aforementioned types, except in accordance with past practices (and no such
plans have any unfunded liability).
4.7 Litigation and so forth. There is no litigation,
proceeding, or governmental investigation pending or, to the knowledge of
Marquee, threatened against or relating to Marquee or Marquee NY or any of
their properties or businesses or the transactions contemplated by this
Agreement; nor, to the knowledge of Marquee, is there any reasonable basis for
such actions or for any claims; and neither Marquee nor Marquee NY is a party
to or subject to the provisions of any judicial decree or judgment or any
order of any governmental agency.
4.8 List of Properties, Contracts and So Forth. Marquee has
delivered to SMTI lists or summary descriptions with respect to Marquee and
Marquee NY, and on or prior to the Closing Date Marquee will deliver to SMTI
lists or summary descriptions with respect to Subsidiary (in each case
certified as correct to the best of their knowledge by authorized officers of
the related entity), each of which is or will be complete and correct in all
material respects as of the date set out therein, of the following:
(1) Certain leases and contracts. Each lease, contract
or other commitment of Marquee, Marquee NY or Subsidiary involving an
aggregate payment by any of them of more than $25,000 or to any of them of
more than $50,000 or extending beyond twelve months (12) from the date hereof
(whether or not terminable at the option of any party at an earlier date)
other than leases, contracts, or commitments furnished pursuant to other
paragraphs of this Section 4.8 ("Schedule A").
(2) Certain salaried employees. The names and annual
salary rates as of the date of this Agreement of Marquee's, Marquee NY's and
Subsidiary's directors, officers, employees, and agents whose annual rate of
compensation at such date was $50,000 or more ("Schedule B").
(3) Loan and credit agreements and so forth. All
mortgages, indentures, promissory notes, deeds of trust, loan or credit
agreements, or similar agreements to which Marquee, Marquee NY or Subsidiary
is a party, and all amendments or modifications of any thereof ("Schedule C"),
with a statement of any as to which there is any existing default by Marquee,
Marquee NY or Subsidiary.
(4) Employee stock options. The names of all persons
holding employee stock options to purchase shares of capital stock of Marquee,
Marquee NY or Subsidiary and, with respect to each, the date of grant or
issue, the expiration date, the number and class of shares subject thereto,
and the purchase price ("Schedule D").
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(5) Litigation. Each lawsuit, administrative proceeding,
or arbitration to which Marquee, Marquee NY or Subsidiary is a party (whether
as plaintiff, defendant or otherwise), including the damages or relief sought
therein, the name of counsel for Marquee, Marquee NY or Subsidiary in charge
of such matter, and its current status ("Schedule E").
(6) Other contracts and commitments. Every contract and
commitment (not listed on other schedules delivered to SMTI pursuant to this
Section 4.8) that Marquee, Marquee NY or Subsidiary would be required to file
or describe in a Registration Statement on Form S-1 filed by Marquee, Marquee
NY or Subsidiary under the Securities Act of 1933, as amended ("Schedule F").
4.9 Tax Returns. Marquee and Marquee NY have, and prior to
the Closing Date Subsidiary will have, timely filed all tax returns required
to be filed by them and paid all taxes required to be paid for all fiscal
periods prior hereto (in the case of Marquee and Marquee NY) or prior to the
Closing Date (in the case of Subsidiary).
4.10 No Violation. Marquee's execution of this Agreement
does not and Subsidiary's execution of the Merger Agreement will not, and the
performance hereof and thereof will not, violate the provisions of Marquee's
or Subsidiary's Certificate of Incorporation, Bylaws or any indenture,
agreement, or other instrument to which Marquee is or Subsidiary will be a
party, except insofar as any such instrument may require consent by a lender,
mortgagee, lessor, or other party to such actions, whose consent Marquee or
Subsidiary agree to obtain before the Closing Date.
4.11 Authorization. The execution, delivery, and performance
of this Agreement have been duly authorized and approved by Marquee's board of
directors and by all of its shareholders and the Merger Agreement will be
approved by Subsidiary's board of directors and shareholders; this Agreement
and the consummation of the transactions contemplated herein have been duly
and validly authorized by all necessary corporate action on the part of
Marquee; the Merger Agreement and the consummation of the transactions
contemplated therein will be duly and validly authorized by all necessary
corporate action on the part of Subsidiary; and this Agreement is, and, with
respect to Subsidiary, the Merger Agreement (upon execution and delivery as
provided herein) will be, binding upon and enforceable against Marquee or
Subsidiary, as the case may be, in accordance with their terms.
4.12 General. None of the representations or warranties made
by Marquee, Gutkowski or TSC in this Agreement are false or misleading with
respect to any material fact or omit to state any material fact necessary in
order to make the statements therein contained not misleading.
Section 5 -- S Corporation Matters
Immediately prior to the Closing Date, SMTI will declare a
dividend to its shareholders equal to forty percent (40%) of the increase in
its accumulated adjustments account,
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as defined in Section 1368(e) of the Code, for the period from the date hereof
until the Closing Date, which dividend shall be paid not later than the last
day of SMTI's post-termination period, as defined in Section 1377(b) of the
Code.
Section 6 -- Conduct of SMTI Pending the Closing Date
The Sellers and SMTI covenant and agree that between the
date of this Agreement and the Closing Date:
6.1 Certificate of Incorporation and Bylaws. SMTI will
not change its Certificate of Incorporation or Bylaws.
6.2 Capitalization and so forth. SMTI will not make any
change in its authorized, issued, or outstanding capital stock; grant any
stock option or right to purchase shares of its capital stock; issue any
security convertible into shares of its capital stock; purchase, redeem,
retire, or otherwise acquire any shares of its capital stock; or agree to do
any of the foregoing; or declare, set aside, or pay any dividend or other
distribution in respect of its capital stock.
6.3 Business in Ordinary Course. SMTI will conduct its
business in its customary course and will (1) use its reasonable efforts to
preserve its business organization intact, to keep available to Marquee the
services of its present officers and employees, and to preserve the goodwill
of suppliers, customers, and others having business relations with it; (2)
maintain its properties in customary repair, working order, and condition,
reasonable wear and tear and damage by casualty excepted; (3) keep in force at
no less than their present limit all policies of insurance listed in Schedule
3; and (4) make no material change in the customary terms and conditions on
which it extends credit to customers; provided, however, that nothing in this
Section 6.3 shall prohibit compliance by SMTI with, or SMTI's borrowing or
repayment of funds pursuant to, any agreements or other commitments disclosed
by SMTI to Marquee on any Schedule furnished in accordance with Section 3.8
hereof.
6.4 Employee Compensation. SMTI will pay Trager a salary at
the rate of $300,000 per year and Letis a salary at the rate of $300,000 per
year. SMTI will not institute, agree to, or amend any employment contract
requiring the payment by SMTI of a salary or bonus in excess of $50,000 per
year, or any bonus, stock option, profit sharing, pension, retirement,
incentive, medical, health, disability, other employee benefit or similar
arrangement or plan, except to grant normal individual increases in
compensation in accordance with established agreements or procedures and
except as may be necessary to comply with Section 6.8 hereof.
6.5 Banking Arrangements; Powers of Attorney. SMTI will not
make any change in its banking and safe deposit arrangements and will not
grant any powers of attorney.
6.6 Accounting Practices. Except as required by generally
accepted accounting principles, SMTI will not make any changes in its
accounting methods or practices.
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6.7 Merger. SMTI will not merge or consolidate with any
other corporation; sell or lease all or substantially all of its assets and
business; acquire all or substantially all of the stock of the business or
assets of any other person, corporation, or business organization; or agree to
do any of the foregoing.
6.8 Termination of Employee Benefit Plans. At Marquee's
option and on such date or dates (but in no event earlier than two (2)
business days prior to the Closing Date) and in such manner as Marquee shall
direct, SMTI will terminate some or all bonus, stock option, profit sharing,
pension, retirement, incentive, medical, health, disability and other employee
benefit plans or arrangements it maintains or sponsors or to which it is
obligated to contribute, including, without limitation, the Sports Marketing
and Television, Inc. Target Plan. Any such termination will be made in
accordance with all applicable laws, including, without limitation, the
Employee Retirement Income Security Act of 1974, as amended, and the Internal
Revenue Code of 1986, as amended.
6.9 Delivery of Financial Statements. Within sixty (60) days
of the date hereof, SMTI will deliver to Marquee a balance sheet of SMTI as of
December 31, 1995, together with the related statement of operations, which
shall present fairly the financial condition of SMTI and its results of
operations for the period indicated and which shall be audited by independent
certified public accountants.
Section 6A -- Conduct of Marquee Pending the Closing Date
Gutkowski, TSC and Marquee covenant and agree that between
the date of this Agreement and the Closing Date:
6A.1 Capitalization and so forth. Marquee will not purchase,
redeem, retire, or otherwise acquire any shares of its capital stock; issue to
Gutkowski or TSC or any of their affiliates any shares of its capital stock or
any option or right to purchase shares of its capital stock; or agree to do
any of the foregoing; or declare, set aside, or pay any dividend or other
distribution in respect of its capital stock.
6A.2 Business in Ordinary Course. Marquee will conduct its
business in its customary course (it being understood that, notwithstanding
anything else herein contained, Marquee may discharge the liabilities listed
on the Marquee NY Balance Sheet) and will (1) use its reasonable efforts to
preserve its business organization intact and to preserve the goodwill of
suppliers, customers, and others having business relations with it; (2)
maintain its properties in customary repair, working order, and condition,
reasonable wear and tear and damage by casualty excepted; and (3) make no
material change in the customary terms and conditions on which it extends
credit to customers; provided, however, that nothing in this Section 6A.2
shall prohibit compliance by Marquee with, or Marquee's borrowing or repayment
of funds pursuant to, any agreements or other commitments disclosed by Marquee
to SMTI on any Schedule furnished in accordance with Section 4.8 hereof.
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6A.3 Employee Compensation. Marquee will pay Gutkowski a
salary at the rate of $325,000 per year. Marquee will not amend or agree to
amend any employment contract, or any proposed employment contract, with
Gutkowski, Arthur Kaminsky ("Kaminsky") or Louis Oppenheim ("Oppenheim").
6A.4 Banking Arrangements; Powers of Attorney. Marquee will
not make any change in its banking and safe deposit arrangements and will not
grant any powers of attorney.
6A.5 Accounting Practices. Except as required by generally
accepted accounting principles, Marquee will not make any changes in its
accounting methods or practices.
6A.6 Merger. Except as contemplated by this Agreement,
Marquee will not merge or consolidate with any other corporation; sell or
lease all or substantially all of its assets and business; acquire all or
substantially all of the stock of the business or assets of any other person,
corporation, or business organization; or agree to do any of the foregoing.
Section 7 -- Access
From the date hereof to the Closing Date, Marquee and SMTI
shall provide each other with such information and permit each other's
officers and representatives such access to its properties and books and
records as the other may from time to time reasonably request. If the
transactions contemplated by this Agreement and the Merger Agreement are not
consummated, all documents furnished in connection with this Agreement shall
be returned to the party furnishing the same, and all information so received
shall be treated as confidential.
Section 8 -- Conditions Precedent to Obligations of Marquee
The obligation of Marquee to consummate the Merger and to
cause Subsidiary to consummate the Merger shall be subject to the fulfillment
on or before the Closing Date of each of the following conditions, unless
waived in writing by Marquee:
8.1 Representations and Warranties. The representations and
warranties of SMTI and the Sellers set forth in Section 3 hereof shall be true
and correct at the Closing Date as if made at and as of that date, except as
affected by the transactions contemplated hereby.
8.2 Shareholder Approval. This Agreement shall have been
unanimously adopted by the shareholders of SMTI.
8.3 Covenants. SMTI and the Sellers shall have performed all
covenants and agreements set forth in Sections 6 and 7 hereof to be performed
by them on or before the Closing Date.
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8.4 Financing. Marquee shall have previously or
simultaneously effected an initial public offering of its capital stock or
completed a similar private financing where the gross proceeds from such
offering are at least $13,800,000 (the "Financing") by December 7, 1996.
8.5 Shareholders' Agreement. The Shareholders' Agreement,
dated as of March 21, 1996, by and among TSC, Gutkowski, Kaminsky, Oppenheim,
Trager, Letis and Marquee shall be in full force and effect.
8.6 Employment Agreements. On the Closing Date, Trager and
Marquee shall execute an employment agreement in the form attached hereto as
Exhibit C. On the Closing Date, Letis and Marquee shall execute an employment
agreement in the form attached hereto as Exhibit D.
8.7 Agreement with SMTI's Stockholders. On or before the
Closing Date, Marquee, Subsidiary, SMTI and all of the stockholders of SMTI
shall have executed and delivered an agreement in the form attached hereto as
.
8.8 Legal Opinion. On or before the Closing Date, Marquee
and Subsidiary shall have received an opinion of Baker & McKenzie that the
Merger will be considered a tax-free reorganization to the extent of the
receipt of stock under Section 368(a) of the Code.
8.9 Certificate. On the Closing Date, SMTI and the Sellers
shall deliver a certificate to Marquee and Subsidiary, in form and substance
reasonably acceptable to Marquee and Subsidiary, to the effect that all of the
representations and warranties of SMTI and the Sellers set forth in Section 3
hereof are true and correct at the Closing Date as if made at and as of that
date, except as affected by the transactions contemplated hereby, and that all
of the covenants and agreements of SMTI and the Sellers set forth in Section 6
hereof have been performed.
Section 9 -- Conditions Precedent to Obligations of SMTI
The obligation of SMTI to consummate the Merger shall be
subject to the fulfillment on or before the Closing Date of each of the
following conditions, unless waived in writing by SMTI:
9.1 Representations and Warranties. The representations and
warranties of Gutkowski, TSC and Marquee set forth in Section 4 hereof shall
be true and correct at the Closing Date as if made at and as of that date,
except as affected by the transactions contemplated hereby.
9.2 Shareholder Approval. This Agreement shall have been
unanimously adopted by the shareholders of Marquee and Subsidiary.
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9.3 Covenants. Marquee, Gutkowski, and TSC shall have
performed all covenants and agreements set forth in Sections 4, 6A and 7
hereof to be performed by them on or before the Closing Date.
9.4 Financing. Marquee shall have previously or
simultaneously effected an initial public offering of its capital stock or
completed a similar private financing where the gross proceeds from such
offering are at least $13,800,000 by December 7, 1996.
9.5 Shareholders' Agreement. The Shareholders' Agreement,
dated as of March 21, 1996, by and among TSC, Gutkowski, Kaminsky, Oppenheim,
Trager, Letis and Marquee shall be in full force and effect.
9.6 Employment Agreements. On the Closing Date, Trager and
Marquee shall execute an employment agreement in the form attached hereto as
Exhibit C. On the Closing Date, Letis and Marquee shall execute an employment
agreement in the form attached hereto as Exhibit D.
9.7 Legal Opinion. On or before the Closing Date, SMTI shall
have received an opinion of Baker & McKenzie, in form and substance reasonably
acceptable to SMTI, that the Merger will be considered a tax-free
reorganization to the extent of the receipt of stock under Section 368(a) of
the Code.
9.8 Certificate. On the Closing Date, Marquee, Gutkowski and
TSC shall deliver a certificate to SMTI and the Sellers, in form and substance
reasonably acceptable to SMTI and the Sellers, that all of the representations
and warranties of Marquee, Gutkowski and TSC set forth in Section 4 hereof are
true and correct at the Closing Date as if made at and as of that date, except
as affected by the transactions contemplated hereby, and that all of the
covenants and agreements of Marquee, Gutkowski and TSC set forth in Sections 4
and 6A hereof have been performed.
Section 10 -- Closing Date and Effective Date of the Merger
10.1 Closing Date. The closing date of the transactions
contemplated by this Agreement (the "Closing Date") shall be the date of
consummation of the Financing.
10.2 Effective Date. On the Closing Date, an executed
counterpart of the Merger Agreement shall be filed with the Secretary of State
of the State of Connecticut and the Merger shall become effective upon the
completion of such filing. The date of completion of such filing shall be the
"Effective Date."
10.3 Payment of Purchase Price. On the Closing Date, Marquee
shall pay to the Sellers an aggregate amount equal to $6,500,000 and on each
April 1 following the Closing Date, until and including April 1, 2001, Marquee
shall pay $150,000 to each of Letis and Trager.
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Section 11 -- Termination
11.1 Circumstances of Termination. This Agreement may be
terminated (notwithstanding approval by the shareholders of any party hereto):
(1) By the mutual consent in writing of the boards of
directors of Marquee and SMTI.
(2) By the board of directors of Marquee if any condition
provided in Section 8 hereof has not been satisfied or waived on or before the
Closing Date.
(3) By the board of directors of SMTI if any condition
provided in Section 9 hereof has not been satisfied or waived on or before the
Closing Date.
(4) By the board of directors of either Marquee or SMTI if
the Closing Date has not occurred by December 7, 1996, unless the closing of
the transactions contemplated hereby shall not have occurred by such date due
to the action or failure to act of such party.
(5) By the board of directors of either Marquee or SMTI if
that certain Acquisition Agreement, dated March 21, 1996, by and among
Marquee, A&A, Kaminsky, Oppenheim, Gutkowski and TSC is terminated or the
merger contemplated thereby does not occur simultaneously with the Merger.
11.2 Effect of Termination. In the event of a termination of
this Agreement pursuant to Section 11.1 hereof, each party shall pay the costs
and expenses incurred by it in connection with this Agreement and, except only
as provided in the following sentence, no party (or any of its officers,
directors or shareholders) shall be liable to any other party for any costs,
expenses, damage or loss of anticipated profits resulting from such
termination. In the event that the transactions contemplated herein fail to be
consummated as a result of a wilful breach by SMTI or Marquee of this
Agreement or the Merger Agreement, or the gross negligence of SMTI or Marquee
in performing their obligations hereunder or thereunder, nothing herein
contained shall be deemed to limit the rights and remedies at law or equity
available to SMTI or Marquee against each other on account of such wilful
breach or gross negligence.
11.3 Allocation of Business and Net Income Following
Termination. In the event that this Agreement is terminated in accordance with
the terms hereof, Marquee and SMTI agree (i) that any business of SMTI or A&A
generated by such entity between the date hereof and the date of termination
of this Agreement and performed by such entity shall become the client of and
remain with the entity that generated such business, (ii) that the parties
hereto shall negotiate in good faith the disposition and treatment of any
business (and the related client) of SMTI or A&A generated by Marquee, TSC,
Gutkowski, A&A (in the case of SMTI business) or SMTI (in the case of A&A
business) between the date hereof and the date of termination of this
Agreement and performed by SMTI or A&A and with respect to which a timely
Designation, as defined below, was delivered by
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Marquee, TSC, Gutkowski, A&A (in the case of SMTI business) or SMTI (in the
case of A&A business), and (iii) that any business of Marquee generated by
SMTI, A&A, Marquee, TSC or Gutkowski between the date hereof and the date of
termination of this Agreement and performed by Marquee shall become the client
of and remain with Marquee, and that the net income from any business
described in this clause (iii) shall be allocated as follows:
(a) fifty percent of the net income of Marquee derived from
business generated by either Marquee, TSC or Gutkowski between the date hereof
and the date of termination of this Agreement shall be retained by or paid to
Marquee, with the balance to be paid equally and on at least a quarterly basis
to A&A and SMTI;
(b) fifty percent of the net income of Marquee derived from
business generated by A&A between the date hereof and the date of termination
of this Agreement and with respect to which a timely Designation was delivered
by A&A shall be retained by or paid to A&A on at least a quarterly basis, with
the balance to be paid equally and on at least a quarterly basis to Marquee
and SMTI; and
(c) fifty percent of the net income of Marquee derived from
business generated by SMTI between the date hereof and the date of termination
of this Agreement and with respect to which a timely Designation was delivered
by SMTI shall be retained by or paid to SMTI on at least a quarterly basis,
with the balance to be paid equally and on at least a quarterly basis to
Marquee and A&A.
For purposes of this Section 11.3, business shall be deemed to be business of
the entity (Marquee, A&A or SMTI) that entered into a contract with the third
party client in connection with such business. Business shall be presumed to
be generated by the entity that entered into the contract with the third party
client unless another of such entities or Gutkowski or TSC notifies in writing
(a "Designation") the others within fifteen (15) days of the date such
contract was entered into that it is disputing such presumption. Such
Designation disputing such presumption shall be deemed accepted by such other
entities unless it is disputed by any such other entities within fifteen (15)
days thereafter, at which point the parties shall arrange a meeting to resolve
the dispute.
Section 12 -- General Provisions
12.1 Further Assurances and Co-Operation. At any time, and
from time to time, after the Effective Date, each party will execute such
additional instruments and take such action as may be reasonably requested by
the other party to confirm or perfect title to any property transferred
hereunder or otherwise to carry out the intent and purposes of this Agreement.
At any time, and from time to time, the period commencing on the date hereof
and ending on the third (3rd) anniversary of the Effective Date, SMTI agrees
to use its best efforts to cause its independent certified public accountants
to audit SMTI's financial statements in accordance with generally accepted
auditing standards and to furnish such financial statements to Marquee in
proper form to be included in a Registration Statement filed under the
Securities Act of 1933, as amended, and to
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furnish all necessary reports and consents as may be required to be included
in such Registration Statement or offering memorandum.
12.2 Indemnity. (a) The Sellers hereby jointly and severally
agree to indemnify and hold each of Marquee and Subsidiary harmless from any
and all losses, claims and damages which Marquee and Subsidiary may suffer or
incur and which arise out of the breach by SMTI or the Sellers of any
representation, warranty, covenant or agreement set forth in Section 3 or 6
hereof, including, but not limited to Section 6.8 hereof. The amount of each
Seller's indemnity hereunder shall be limited to $1,000,000.
(b) Gutkowski and TSC hereby jointly and severally agree to
indemnify and hold each of the Sellers and SMTI harmless from any and all
losses, claims and damages (including, but not limited to, reasonable
attorneys' fees) which the Sellers or SMTI may suffer or incur and which arise
out of the breach by Gutkowski, TSC or Marquee of any representation,
warranty, covenant or agreement set forth in Sections 4 or 6A hereof. The
amount of each of Gutkowski's and TSC's indemnity hereunder shall be limited
to $250,000.
12.3 Survival of Representations and Warranties. The parties
hereto agree that all representations and warranties made in this Agreement or
in any Schedule delivered pursuant to this Agreement shall survive the Closing
Date for a period of six (6) months and that any action in respect of breaches
thereof, including any action under Section 12.2 hereof, must be commenced
within such period.
12.4 Waiver. Any failure on the part of either party hereto
to comply with any of its obligations, agreements, or conditions hereunder may
be waived in writing by the party to whom such compliance is owed.
12.5 Brokers. Each party represents to the other parties
that no broker or finder has acted for it in connection with this Agreement
and agrees to indemnify and hold harmless the other parties against any fee,
loss, or expense arising out of claims by brokers or finders employed or
alleged to have been employed by it.
12.6 Notices. All notices hereunder shall be in writing and
shall be delivered in person or given by registered or certified mail, postage
prepaid, and sent to the parties at the respective addresses above set forth.
Any party may designate any other address to which notice shall be given by
giving notice to the others of such change of address in the manner herein
provided.
12.7 Entire Agreement. This Agreement and the Letter
Agreement constitute the entire agreement between the parties and supersede
and cancel any other agreement, representation, or communication, whether oral
or written, between the parties hereto relating to the transactions
contemplated herein or the subject matter hereof. In the event there is any
inconsistency between
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the terms of this Agreement and the terms of the Letter Agreement, the terms
of this Agreement shall govern.
12.8 Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
12.9 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of
Connecticut.
12.10 Assignment. This Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and their successors and assigns;
provided, however, that any assignment by any party of its rights under this
Agreement without the written consent of the other parties shall be void.
12.11 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
12.12 Amendment. This Agreement may only be amended by a
written instrument which is executed by the parties hereto and Kaminsky and
Oppenheim.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date set forth above.
THE MARQUEE GROUP INC.
By: /s/ Robert M. Gutkowski
---------------------------
Name: Robert M. Gutkowski
Title: President
SPORTS MARKETING & TELEVISION
INTERNATIONAL, INC.
By: /s/ Michael Trager
---------------------------
Name: Michael Trager
Title: Chairman
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Michael Trager and Michael Letis
hereby agree to the provisions of
Sections 3, 6, 8 and 12 hereof
/s/ MICHAEIL TRAGER
- -----------------------------------
MICHAEL TRAGER
/s/ MICHAEL LETIS
- -----------------------------------
MICHAEL LETIS
The undersigned hereby agree to the amendment and restatement of the foregoing
agreement.
/s/ ARTHUR C. KAMINSKY
- -----------------------------------
ARTHUR C. KAMINSKY
/s/ LOUIS OPPENHEIM
- -----------------------------------
LOUIS OPPENHEIM
Robert Gutkowski and The Sillerman
Companies, Inc. hereby agree to the
provisions of Sections 4, 6A, 9 and 12 hereof
/s/ ROBERT GUTKOWSKI
- -----------------------------------
ROBERT GUTKOWSKI
THE SILLERMAN COMPANIES, INC.
By: /s/ ROBERT F.X. SILLERMAN
-------------------------------
Name: ROBERT F.X. SILLERMAN
Title: Chairman and Chief Executive
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THE MARQUEE GROUP, INC.
SUBSCRIPTION AGREEMENT made as of this 15th day of August,
1996 between The Marquee Group, Inc., a Delaware corporation with its principal
offices at 150 East 58th Street, New York, New York 10155 (the "Company") and
the undersigned (the "Subscriber").
WHEREAS, the Company desires to issue a minimum of
twenty-five (25) and a maximum of forty (40) units ("Units") in a private
placement, each Unit consisting of $50,000 principal amount 6% convertible
debentures of the Company due and payable on June 30, 1999, subject to earlier
conversion in certain circumstances (the "Debentures") in the form attached
hereto as Exhibit A, on the terms and conditions hereinafter set forth and the
Subscriber desires to acquire the number of Units set forth on the signature
page hereof;
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants hereinafter set forth, the parties hereto do hereby agree
as follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY AND
COVENANTS OF SUBSCRIBER
1.1 Subject to the terms and conditions set forth
herein and in the Confidential Term Sheet dated July 30, 1996 (the "Term
Sheet"), the Subscriber hereby subscribes for and agrees to purchase from the
Company such number of Units as is set forth upon the signature page hereof at
a price equal to $50,000 per Unit, and the Company agrees to sell such Units to
the Subscriber for said purchase price subject to the Company's right to sell
to the Subscriber such lesser number of Units as it may, in its sole
discretion, deem necessary or desirable. The purchase price is payable by
certified or bank check made payable to Continental Stock Transfer & Trust
Company, as Escrow Agent, contemporaneously with the execution and delivery of
this Subscription Agreement. The Debentures will be delivered by the Company
within ten (10) days following the consummation of this offering as set forth
in Article III hereof. The Subscriber understands however, that this purchase
of Units is contingent upon the Company making sales of a minimum of
twenty-five (25) Units ($1,250,000 principal amount of Debentures) (the
"Minimum Offering") prior to the Termination Date as defined in Article III
hereof.
1.2 The Subscriber recognizes that the purchase of
Units involves a high degree of risk in that (i) the Company has commenced only
minimal operations and its planned business requires the consummation of
acquisitions which are subject to the Company's receipt of financing in
addition to the proceeds of this private placement and other conditions and
there can be no assurance such financing or acquisitions will be consummated;
(ii) the Company requires substantial funds in addition to the proceeds of this
private placement; (iii) an investment in the Company is highly speculative and
only investors who can afford the loss of their entire investment should
consider investing in the Company and the Units; (iv) he may not be able
<PAGE>
to liquidate his investment; (v) transferability of the securities comprising
the Units is extremely limited; and (vi) in the event of a disposition, an
investor could sustain the loss of his entire investment, as well as other risk
factors as more fully set forth in the Term Sheet.
1.3 The Subscriber represents that he is an
"accredited investor" as such term in defined in Rule 501 of Regulation D
promulgated under the United States Securities Act of 1933, as amended (the
"Act"), as indicated by his responses to the Confidential Purchaser
Questionnaire, and that he is able to bear the economic risk of an investment
in the Units.
1.4 The Subscriber acknowledges that he has prior
investment experience, including investment in non-listed and non-registered
securities, or he has employed the services of an investment advisor, attorney
or accountant to read all of the documents furnished or made available by the
Company both to him and to all other prospective investors in the Units and to
evaluate the merits and risks of such an investment on his behalf, and that he
recognizes the highly speculative nature of this investment.
1.5 The Subscriber acknowledges receipt and careful
review of the Term Sheet and the attachments thereto (the "Offering Documents")
and hereby represents that he has been furnished by the Company during the
course of this transaction with all information regarding the Company which he
had requested or desired to know; that all documents which could be reasonably
provided have been made available for his inspection and review; and that such
information and documents have, in his opinion, afforded the Subscriber with
all of the same information that would be provided him in a registration
statement filed under the Act; that he has been afforded the opportunity to ask
questions of and receive answers from duly authorized officers or other
representatives of the Company concerning the terms and conditions of the
offering, and any additional information which he had requested.
1.6 The Subscriber acknowledges that this offering
of Units may involve tax consequences, including but not limited to the
possible need to recognize interest income and that the contents of the
Offering Documents do not contain tax advice or information. The Subscriber
acknowledges that he must retain his own professional advisors to evaluate the
tax and other consequences of an investment in the Units.
1.7 The Subscriber acknowledges that this offering
of Units has not been reviewed by the United States Securities and Exchange
Commission ("SEC") because of the Company's representations that this is
intended to be a nonpublic offering pursuant to Sections 4(2) or 3(b) of the
Act. The Subscriber represents that the Debentures comprising his Units, and
the securities issuable upon conversion of the Debentures, are being purchased
for his own account, for investment and not for distribution or resale to
others. The Subscriber agrees that he will not sell or otherwise transfer such
securities unless they are registered under the Act or unless an exemption from
such registration is available.
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<PAGE>
1.8 The Subscriber understands that the Debentures
comprising the Units, and the securities issuable upon conversion of the
Debentures, have not been registered under the Act by reason of a claimed
exemption under the provisions of the Act which depends, in part, upon his
investment intention. In this connection, the Subscriber understands that it is
the position of the SEC that the statutory basis for such exemption would not
be present if his representation merely meant that his present intention was to
hold such securities for a short period, such as the capital gains period of
tax statutes, for a deferred sale, for a market rise, assuming that a market
develops, or for any other fixed period. The Subscriber realizes that, in the
view of the SEC, a purchase now with an intent to resell would represent a
purchase with an intent inconsistent with his representation to the Company,
and the SEC might regard such a sale or disposition as a deferred sale to which
such exemptions are not available.
1.9 The Subscriber understands that there is no
public market for the securities comprising the Units. The Debentures provide
that, in the event the Company completes an initial public offering ("IPO") of
its securities, the Debentures will automatically convert into units (the
"Debenture Units") of the Company, on the terms and conditions set forth in the
form of Debenture attached hereto as Exhibit A, identical in all respects to
the units offered in the IPO, subject to the provisions of Section 1.10 hereof,
and expected to be comprised of one share of the Company's common stock, $.01
par value (the "Common Stock") and one warrant (the "Public Warrants"). The
Subscriber understands that, if the Debentures have not been converted pursuant
to the preceding sentence, commencing nine months from the initial closing of
the private placement contemplated herein, on the terms and conditions set
forth in the Debentures, the Subscriber may elect to convert the Debentures
into shares of Common Stock and warrants (the "Bridge Warrants"). The
Subscriber understands that even if a public market develops for the Common
Stock, the Public Warrants or the Bridge Warrants, Rule 144 (the "Rule")
promulgated under the Act requires, among other conditions, a two year holding
period prior to the resale (in limited amounts) of securities acquired in a
non-public offering without having to satisfy the registration requirements
under the Act. The Subscriber understands that the Company makes no
representation or warranty regarding its fulfillment in the future of any
reporting requirements under the Securities Exchange Act of 1934, as amended,
or its dissemination to the public of any current financial or other
information concerning the Company, as is required by the Rule as one of the
conditions of its availability. The Subscriber understands and hereby
acknowledges that the Company is under no obligation to register the securities
comprising the Units under the Act, except as set forth in Article IV herein.
The Subscriber consents that the Company may, if it desires, permit the
transfer of the securities comprising the Units or issuable upon conversion
thereof out of his name only when his request for transfer is accompanied by an
opinion of counsel reasonably satisfactory to the Company that neither the sale
nor the proposed transfer results in a violation of the Act or any applicable
state "blue sky" laws (collectively "Securities Laws") and subject to the
provisions of Section 1.10 hereof. The Subscriber agrees to hold the Company
and its directors, officers and controlling persons and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of any
misrepresentation made by
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him contained herein or in the Confidential Purchaser Questionnaire or any sale
or distribution by the undersigned Subscriber in violation of any Securities
Laws.
1.10 In the event that the Subscriber is a Company
Designee (as defined herein), or is (or, following the Acquisitions, as defined
herein, will be) an officer or director of the Company, the Subscriber agrees
not to publicly sell, assign, transfer or otherwise dispose the Debentures or
the securities issuable upon conversion of the Debentures, without the prior
written consent of Royce Investment Group, Inc. (the "Placement Agent"), for a
period of two years from the effective date ("Effective Date") of the
registration statement relating to the Company's IPO. In the event that the
Subscriber is neither an officer or director of the Company, or a Company
Designee, the Subscriber agrees, if so requested by the Company after the
Company and the Placement Agent shall have determined it necessary for
regulatory reasons, not to sell, transfer or otherwise dispose publicly the
securities issuable upon conversion of the Debentures for a period of one year
after the Effective Date. Each Subscriber also agrees not to exercise the
Public Warrants for a period of one year after the Effective Date.
1.11 The Subscriber consents to the placement of a
legend on any certificate or other document evidencing the Debentures
comprising his Units and the securities issuable upon conversion of the
Debentures stating that they have not been registered under the Act and setting
forth or referring to the restrictions on transferability and sale thereof.
1.12 The Subscriber understands that the Company
will review this Subscription Agreement and the Confidential Purchaser
Questionnaire and the Company is hereby given authority by the undersigned to
call his bank or place of employment or otherwise review the financial standing
of the Subscriber; and it is further agreed that the Company reserves the
unrestricted right to reject or limit any subscription and to close the offer
at any time.
1.13 The Subscriber hereby represents that the
address of Subscriber furnished by him at the end of this Subscription
Agreement is the undersigned's principal residence if he is an individual or
its principal business address if it is a corporation or other entity.
1.14 The Subscriber acknowledges that if he is a
Registered Representative of an NASD member firm, he must give such firm the
notice required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm on the signature page hereof.
1.15 The Subscriber hereby represents that, except
as set forth in the Offering Documents, no representations or warranties have
been made to the Subscriber by the Company or any agent, employee or affiliate
of the Company and in entering into this transaction, the Subscriber is not
relying on any information, other than that contained in the Offering Documents
and the results of independent investigation by the Subscriber.
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1.16 The Subscriber acknowledges that at such time,
if ever, as the securities issuable upon conversion of the Debentures are
registered, sales of such securities will be subject to state securities laws,
including those of New Jersey which require any securities sold in New Jersey
to be sold through a registered broker-dealer or in reliance upon an exemption
from registration.
II. REPRESENTATIONS BY THE COMPANY
The Company represents and warrants to the
Subscriber that prior to the consummation of this offering and at the closing
date, except with regard to the provisions of paragraph II(d) herein for which
the Company represents and warrants to the Subscriber that at the closing date:
(a) The Company is a corporation duly organized,
existing and in good standing under the laws of the State of Delaware and has
the corporate power to conduct the business which it conducts and proposes to
conduct and is qualified to do business in New York.
(b) The execution, delivery and performance of this
Subscription Agreement by the Company will have been duly approved by the Board
of Directors of the Company and all other actions required to authorize and
effect the offer and sale of the Units and the securities contained therein
will have been duly taken and approved.
(c) The Debentures comprising the Units have been
duly and validly authorized and when issued and paid for in accordance with the
terms hereof, will be valid and binding obligations of the Company enforceable
in accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors' rights,
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefore may be brought.
(d) The Company will at all times during the term of
the Debentures (including the debentures issuable upon exercise of the Agent's
Warrants, as defined herein) have authorized and reserved a sufficient number
of shares of Common Stock to provide for conversion of the Debentures as well
as exercise of the warrants issuable upon such conversion. The warrants have
been duly authorized and, when issued and delivered upon conversion of the
Debentures (including the debentures issuable upon exercise of the Agent's
Warrants), will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms. The shares of Common Stock issuable upon exercise
of the warrants issuable upon conversion of the Debentures (including the
debentures issuable upon exercise of the Agent's Warrants) have been reserved
for issuance upon the exercise of the Warrants and when issued in accordance
with the terms of the Warrants will
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be duly and validly authorized, validly issued, fully paid and non-assessable
and free of preemptive rights and no personal liability will attach to the
ownership thereof.
(e) The Company has obtained, or is in the process
of obtaining, all material licenses, permits and other governmental
authorizations necessary to the conduct of its business; such licenses, permits
and other governmental authorizations obtained are in full force and effect;
and the Company is in all material respects complying therewith.
(f) The Company knows of no pending or threatened
legal or governmental proceedings to which the Company is a party which could
materially adversely affect the business, property, financial condition or
operations of the Company.
(g) The Company is not in violation of or default
under, nor will the execution and delivery of this Subscription Agreement, the
issuance of the Debentures, and the incurrence of the obligations herein and
therein set forth and the consummation of the transactions herein or therein
contemplated, result in a violation of, or constitute a default under, the
certificate of incorporation or by-laws, any material obligations, agreement,
covenant or condition contained in any bond, debenture, note or other evidence
of indebtedness or in any material contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or instrument to which the
Company is a party or by which it or any of its properties may be bound or in
violation of any material order, rule, regulation, writ, injunction, or decree
of any government, governmental instrumentality or court, domestic or foreign.
(h) The Company has entered into acquisition
agreements, each of which are in full force and effect, with each of Athletes
and Artists, Inc. and Sports Management & Television International, Inc.
pursuant to which, among other things, simultaneously with the closing of
financings aggregating at least $13,800,000 in gross proceeds to the Company,
each of such entities has agreed to merge with a separate wholly-owned
subsidiary to be formed by the Company (the "Acquisitions"), subject to the
fulfillment or satisfaction of closing conditions contained in the agreements
for such acquisitions.
III. TERMS OF SUBSCRIPTION
3.1 The subscription period will begin as of July
30, 1996 and will terminate at 11:59 PM Eastern time on August 30,1996, unless
extended by the Company and the Placement Agent for up to an additional sixty
(60) days (the "Termination Date"). Of the Units, 25 will be offered on a "best
efforts-all-or-none" basis, and the remaining 15 Units will be offered on a
"best-efforts" basis, as more particularly set forth in the Term Sheet. The
minimum subscription per Subscriber shall be one Unit ($50,000), provided,
however, that smaller investments may be accepted at the discretion of the
Placement Agent and the Company. A maximum of 15 Units may be subscribed to by
designees of the Company, provided that such Subscribers (the "Company
Designees") are accredited investors and otherwise meet applicable regulatory
requirements and are reasonably satisfactory to the Placement Agent, and
provided the
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Company notifies the Placement Agent in writing as to those subscribers who are
Company Designees prior to the Initial Closing.
3.2 Placement of the Units will be made by the
Placement Agent, which will receive (i) a placement fee in the amount of 10% of
the purchase price of the Units placed (4% with respect to Units sold to
Company Designees); (ii) a non-accountable expense allowance of 3% of the
purchase price of the Units (except Units sold to Company Designees); (iii)
warrants (the "Agent's Warrants) to purchase 10% of the Debentures sold in the
private placement; and (iv) other compensation as summarized in the Term Sheet.
3.3 Pending the sale of the Minimum Offering, all
funds paid hereunder shall be deposited by the Company in escrow with
Continental Stock Transfer & Trust Company, Two Broadway, New York, NY 10004.
If the Company shall not have obtained subscriptions (including this
subscription) for purchases of twenty-five (25) Units ($1,250,000 principal
amount of Debentures) for an aggregate purchase price of $1,250,000 on or
before the Termination Date, then this subscription shall be void and all funds
paid hereunder by the Subscriber, without interest, shall be promptly returned
to the Subscriber, subject to paragraph 3.5 hereof. If twenty-five (25) Units
are sold at or prior to the Termination Date, then all subscription proceeds
shall be paid over to the Company at a closing ( the "Initial Closing") to be
held within ten days thereafter. In such event, placements of additional Units
may continue until the Termination Date, with subsequent releases of funds to
be at the mutual consent of the Company and the Placement Agent. The date of
the final release of funds is referred to herein as the "Final Closing Date".
3.4 The Subscriber hereby authorizes and directs the
Company to deliver the securities to be issued to such Subscriber pursuant to
this Subscription Agreement either (a) to the residential or business address
indicated in the Confidential Purchaser Questionnaire or (b) directly to the
Subscriber's account maintained by the Placement Agent, if any. (If the
Subscriber does not desire the securities to be delivered to such account, the
Subscriber should delete subsection (b) of this Section 3.4.)
3.5 The Subscriber hereby authorizes and directs the
Company to return any funds for unaccepted subscriptions to the same account
from which the funds were drawn, including any customer account maintained with
the Placement Agent.
3.6 The Subscriber hereby authorizes and directs the
Company to deliver the securities issuable upon conversion of the Debentures by
delivering such securities directly to the Subscriber's account maintained by
the Placement Agent, if any, or to the Subscriber's residential or business
address indicated in the Confidential Purchaser Questionnaire, if no account is
maintained by the Subscriber with the Placement Agent.
IV. REGISTRATION RIGHTS
7
<PAGE>
4.1 The Company hereby agrees with the holders of
the Units or their transferees (collectively, the "Holders") to use its best
efforts to ensure that the securities comprising the Debenture Units, including
the shares of Common Stock issuable upon exercise of the Public Warrants (the
"Registrable Securities"), shall be registered for resale under the Act,
subject to the lock-up provisions of Section 1.10 hereof, as part of the
Company's registration of securities in the IPO. In the event that Holders
holding 51% of the principal amount of Debentures sold in the private placement
contemplated hereby shall exercise their Alternative Conversion Rights (as
defined in the Debenture), pursuant to the terms set forth in the Debenture,
the Company hereby agrees with such Holders to use its best efforts to ensure
that the securities then issuable upon conversion of the Debentures (the
"Debenture Securities"), shall be registered for resale under the Act (the
"Alternative Registration") as set forth below.
4.2 Alternative Registration Rights. In the event
the IPO is not consummated within one year from the Final Closing Date, if the
Company shall determine to proceed with the actual preparation and filing of a
registration statement under the Act in connection with the proposed offer and
sale of any of its securities by it or any of its security holders (other than
a registration statement on Form S-4, S-8 or other limited purpose form), the
Company will give written notice of its determination to all record holders of
the Debenture Securities. Upon the written request from any record holder or
holders of an aggregate of more than 50% of the Units (the "Requesting
Holders"), within twenty (20) days after receipt of any such notice from the
Company, the Company will, except as herein provided, cause all such Debenture
Securities to be included in such registration statement, all to the extent
requisite to permit the sale or other disposition by the prospective seller or
sellers of the Debenture Securities to be so registered; provided, further,
that nothing herein shall prevent the Company from, at any time, abandoning or
delaying any registration. If any registration pursuant to this Section 4.2
shall be underwritten in whole or in part, the Company may require that the
Debenture Securities requested for inclusion pursuant to this Section 4.2 be
included in the underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters. In the event that the Debenture
Securities requested for inclusion pursuant to this Section 4.2 together with
any other shares which have similar piggyback registration rights (such shares
and the Debenture Securities being collectively referred to as the "Requested
Stock") would constitute more than 15% of the total number of shares to be
included in a proposed underwritten public offering, and if in the good faith
judgment of the managing underwriter of such public offering the inclusion of
all of the Requested Stock originally covered by a request for registration
would reduce the number of shares to be offered by the Company or interfere
with the successful marketing of the shares of stock offered by the Company,
the number of shares of Requested Stock otherwise to be included in the
underwritten public offering may be reduced pro rata (by number of shares)
among the holders thereof requesting such registration or excluded in their
entirety if so required by the underwriter. To the extent only a portion of the
Requested Stock is included in the underwritten public offering, those shares
of Requested Stock which are thus excluded from the underwritten public
offering shall be withheld from the market by the holders thereof for a period,
not to exceed 120 days, which the managing underwriter reasonably determines is
necessary in order to effect the underwritten public offering.
8
<PAGE>
The obligation of the Company under this Section 4.2
shall be limited to two registration statements.
4.3 Registration Procedures. If and whenever the
Company is required by the provisions of Section 4.1 or 4.2 to effect the
registration of Registrable Securities or Debenture Securities under the Act,
the Company will:
(a) prepare and file with the SEC a
registration statement with respect to such securities, and use its best
efforts to cause such registration statement to become and remain effective
until the earlier of the disposition of all of the Registrable Securities or
Debenture Securities, as applicable, in accordance with the intended method of
distribution set forth in such registration statement or until they are freely
salable without the volume limitations of Rule 144;
(b) prepare and file with the SEC such
amendments to such registration statement and supplements to the prospectus
contained therein as may be necessary to keep such registration statement
effective until the earlier of the disposition of all of the Registrable
Securities in accordance with the intended method of distribution set forth in
such amendments to such registration statement and supplements to the
prospectus contained therein or until they are freely salable without the
volume limitations of Rule 144;
(c) furnish to the security holders
participating in such registration and to the underwriters of the securities
being registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other documents as
such underwriters may reasonably request in order to facilitate the public
offering of such securities;
(d) use its best efforts to register or
qualify the securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating holders
may reasonably request in writing within twenty (20) days following the
original filing of such registration statement, except that the Company shall
not for any purpose be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(e) notify the security holders
participating in such registration, promptly after it shall receive notice
thereof, of the time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
(f) notify such holders promptly of any
request by the SEC for the amending or supplementing of such registration
statement or prospectus or for additional information;
9
<PAGE>
(g) prepare and file with the SEC, promptly
upon the request of any such holders, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel for such
holders (and concurred in by counsel for the Company), is required under the
Act or the rules and regulations thereunder in connection with the distribution
of Common Stock by such holder;
(h) prepare and promptly file with the SEC
and promptly notify such holders of the filing of such amendment or supplement
to such registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading; and
(i) advise such holders, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the SEC suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
4.4 Expenses.
(a) With respect to each registration
requested pursuant to Section 4.1 hereof, and with respect to each inclusion of
Registrable Securities or Debenture Securities in a registration statement
pursuant to Section 4.2 hereof, all fees, costs and expenses of and incidental
to such registration, inclusion and public offering (as specified in paragraph
(b) below) in connection therewith shall be borne by the Company, provided,
however, that any security holders participating in such registration shall
bear their pro rata share of the underwriting discount and commissions and
transfer taxes.
(b) The fees, costs and expenses of
registration to be borne by the Company as provided in paragraph (a) above
shall include, without limitation, all registration, filing, and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for the
Company, and all legal fees and disbursements and other expenses of complying
with state securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered and qualified (except as provided
in 4.4(a) above). Fees and disbursements of counsel and accountants for the
selling security holders and any other expenses incurred by the selling
security holders not expressly included above shall be borne by the selling
security holders.
10
<PAGE>
4.5 Indemnification.
(a) The Company will indemnify and hold
harmless each holder of Registrable Securities or Debenture Securities, as
applicable, which are included in a registration statement pursuant to the
provisions of Sections 4.1 or 4.2 hereof, its directors and officers, and any
underwriter (as defined in the Act) for such holder and each person, if any,
who controls such holder or such underwriter within the meaning of the Act,
from and against, and will reimburse such holder and each such underwriter and
controlling person with respect to, any and all loss, damage, liability, cost
and expense to which such holder or any such underwriter or controlling person
may become subject under the Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, damage, liability, cost or expenses
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information
furnished by such holder, such underwriter or such controlling person in
writing specifically for use in the preparation thereof.
(b) Each holder of Registrable Securities
or Debenture Securities, as applicable, included in a registration pursuant to
the provisions of Sections 4.1 or 4.2 hereof will indemnify and hold harmless
the Company, its directors and officers, any controlling person and any
underwriter from and against, and will reimburse the Company, its directors and
officers, any controlling person and any underwriter with respect to, any and
all loss, damage, liability, cost or expense to which the Company or any
controlling person and/or any underwriter may become subject under the Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by or on behalf of such
holder specifically for use in the preparation thereof.
(c) Promptly after receipt by an
indemnified party pursuant to the provisions of paragraph (a) or (b) of this
Section 4.5 of notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions such indemnified party will, if a
claim thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (a) or (b), promptly notify the indemnifying party
of the commencement thereof;
11
<PAGE>
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party,
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or in addition to those
available to the indemnified party, or if there is a conflict of interest which
would prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties have the right to select
separate counsel to participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the provisions
of the preceding sentence, (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the notice of the commencement of the
action or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party.
V. MISCELLANEOUS
5.1 Any notice or other communication given
hereunder shall be deemed sufficient if in writing and sent by registered or
certified mail, return receipt requested, addressed to the Company, at its
registered office, 150 East 58th Street, New York, New York 10155, Attention:
Robert M. Gutkowski, President and Chief Executive Officer and to the
Subscriber at his address indicated on the last page of this Subscription
Agreement. Notices shall be deemed to have been given on the date of mailing,
except notices of change of address, which shall be deemed to have been given
when received.
5.2 This Subscription Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Subscription Agreement may not be discharged except by
performance in accordance with its terms or by a writing signed by the party to
be charged.
5.3 This Subscription Agreement shall be binding
upon and inure to the benefit of the parties hereto and to their respective
heirs, legal representatives, successors and assigns. This Subscription
Agreement, together with the Term Sheet dated July 30, 1996, sets forth the
entire agreement and understanding between the parties as to the subject matter
thereof
12
<PAGE>
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
5.4 Notwithstanding the place where this
Subscription Agreement may be executed by any of the parties hereto, the
parties expressly agree that all the terms and provisions hereof shall be
construed in accordance with and governed by the laws of the State of New York.
The parties hereby agree that any dispute which may arise between them arising
out of or in connection with this Subscription Agreement shall be adjudicated
before a court located in New York City and they hereby submit to the exclusive
jurisdiction of the courts of the State of New York located in New York, New
York and of the federal courts in the Southern District of New York with
respect to any action or legal proceeding commenced by any party, and
irrevocably waive any objection they now or hereafter may have respecting the
venue of any such action or proceeding brought in such a court or respecting
the fact that such court is an inconvenient forum, relating to or arising out
of this Subscription Agreement or any acts or omissions relating to the sale of
the securities hereunder, and consent to the service of process in any such
action or legal proceeding by means of registered or certified mail, return
receipt requested, in care of the address set forth below or such other address
as the undersigned shall furnish in writing to the other.
5.5 This Subscription Agreement may be executed in
counterparts. Upon the execution and delivery of this Subscription Agreement by
the Subscriber, this Subscription Agreement shall become a binding obligation
of the Subscriber with respect to the purchase of Units as herein provided;
subject, however, to the right hereby reserved to the Company to enter into the
same agreements with other subscribers and to add and/or to delete other
persons as subscribers.
5.6 The holding of any provision of this
Subscription Agreement to be invalid or unenforceable by a court of competent
jurisdiction shall not affect any other provision of this Subscription
Agreement, which shall remain in full force and effect.
5.7 It is agreed that a waiver by either party of a
breach of any provision of this Subscription Agreement shall not operate, or be
construed, as a waiver of any subsequent breach by that same party.
5.8 The parties agree to execute and deliver all
such further documents, agreements and instruments and take such other and
further action as may be necessary or appropriate to carry out the purposes and
intent of this Subscription Agreement.
13
<PAGE>
VI. BLUE SKY LEGENDS
Connecticut
The undersigned acknowledges that the Securities
have not been registered under the Connecticut Uniform Securities Act, as
amended (the "Act") and are subject to restrictions on transferability and sale
of securities as set forth herein. The undersigned hereby agrees that such
Securities will not be transferred or sold without registration under the Act
or exemption therefrom.
Maine
These securities are being sold pursuant to an
exemption from registration with the bank superintendent of the State of Maine
under Section 10502(2)(r) of Title 32 of the Maine revised statutes. These
securities may be deemed restricted securities and as such the holder may not
be able to resell the securities unless pursuant to registration under state or
federal securities laws or unless an exemption under such laws exists.
Missouri
The undersigned acknowledges that the Securities
have not been registered under the Missouri Uniform Securities Act, as amended
(the "Act") and are subject to restrictions on transferability and sale of
securities as set forth herein. The undersigned hereby acknowledges that such
Securities may be disposed of only through a licensed broker-dealer. It is a
felony to sell securities in violation of the Missouri Securities Act.
Pennsylvania
The undersigned hereby acknowledges that the Issuer
is relying upon the exemption from registration of securities set forth in
Section 203(d) of the Pennsylvania Securities Act of 1972, as amended (the
"Pennsylvania Act") in connection with the sale of the Securities to the
undersigned.
In accordance with the requirements of Section
203(d) of the Pennsylvania Act, the undersigned hereby agrees not to sell his
Securities within twelve (12) months from the date of purchase except pursuant
to Section 204.01 of the Blue Sky Regulations of the Pennsylvania Securities
Act of 1972. Additionally, the undersigned is aware of the right of withdrawal
under Section 207(m) of the Act described in the cover pages of the Memorandum.
Texas
The undersigned hereby acknowledges that the
Securities cannot be sold unless they are subsequently registered under the
Securities Act of 1933, as amended, and the
14
<PAGE>
Texas Securities Act, or an exemption from registration is available. The
undersigned further acknowledges that because the Securities are not readily
transferable, he must bear the economic risk of his investment for an
indefinite period of time.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year first written above.
- ------------------------------ ------------------------------------
Signature of Subscriber(s)
- ------------------------------ ------------------------------------
Name of Subscriber(s)
[please print]
- ------------------------------ ------------------------------------
Address of Subscriber(s)
- ------------------------------ ------------------------------------
Social Security or Taxpayer
Identification Number of Subscriber(s)
- ------------------------------
Subscriber's Account Number
at Royce Investment Group, Inc., if any.
- ------------------------------
Number of Units Subscribed For
*IF SUBSCRIBER IS A REGISTERED REPRESENTATIVE
WITH AN NASD MEMBER FIRM, HAVE THE FOLLOWING
ACKNOWLEDGEMENT SIGNED BY THE APPROPRIATE PARTY:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Article 3, Sections 28(a) Subscription Accepted:
and (b) of the Rules of Fair Practice.
THE MARQUEE GROUP, INC.
- ------------------------------
Name of NASD Member Firm By: ______________________________
Robert M. Gutkowski, President and
Chief Executive Officer
By ______________________________
Authorized Officer Date: _________________________
16
<PAGE>
LIST OF SUBSIDIARIES
1. A&A Acquisition Corp. (Delaware Corporation)
2. SMTI Acquisition Corp. (Delaware Corporation)
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the reference to our firm under the caption "Experts" and
to the use of our reports dated July 23, 1996 relating to the financial
statements of The Marquee Group, Inc., April 3, 1996 relating to the financial
statements of Sports Marketing and Television International, Inc. and April 3,
1996, relating to the financial statements of Athletes and Artists, Inc.
included in the Registration Statement (Form SB-2) and related Prospectus of
The Marquee Group, Inc. for the registration of shares of its common stock.
ERNST & YOUNG LLP
New York, New York
September 3, 1996
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the reference to our firm under the caption "Experts" and
to the use of our reports dated January 24, 1996, relating to the financial
statements of Sports Marketing and Television International, Inc. and March 7,
1996, relating to the financial statements of Athletes and Artists, Inc. in the
Registration Statement (Form SB-2) and related Prospectus of The Marquee Group,
Inc. for the registration of shares of its common stock.
/s/ Scott Gildea & Company, LLP
Scott Gildea & Company, LLP
New York, New York
September 3, 1996
<PAGE>
CONSENT
The undersigned hereby consents, pursuant to Rule 438 promulgated under
the Securities Act of 1933, as amended, to his being named as about to become
a director of The Marquee Group, Inc. in such company's Registration Statement
on Form SB-2.
/s/ Michael Letis
------------------------
Michael Letis
<PAGE>
CONSENT
The undersigned hereby consents, pursuant to Rule 438 promulgated under
the Securities Act of 1933, as amended, to his being named as about to become
a director of The Marquee Group, Inc. in such company's Registration Statement
on Form SB-2.
/s/ Louis J. Oppenheim
------------------------
Louis J. Oppenheim
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
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