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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
--------------- TO
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COMMISSION FILE NUMBER 0-21631
TICKETMASTER GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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ILLINOIS 36-3597489
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
8800 SUNSET BOULEVARD 90069
WEST HOLLYWOOD, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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(310) 360-6000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, NO PAR VALUE PER SHARE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
As of April 20, 1998, there were 26,251,440 shares of the registrant's
common stock outstanding. The aggregate market value of the registrant's voting
stock that was held by non-affiliates on such date was $785,915,611, based on
the closing sale price of the registrant's common stock on such date as reported
on the Nasdaq National Market.
The exhibit index is located on page 31.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive proxy statement for its annual
meeting of shareholders is tentatively scheduled to be held on June 30, 1998 are
expected to be incorporated by reference into Part III of this Form 10-K, as
indicated, or this Form 10-K will be amended to include Part III.
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PART I
ITEM 1. BUSINESS
As used in this Annual Report on Form 10-K, references to a "fiscal" year
refer to the 12-month period ending on January 31 of each year (e.g., "fiscal
1998" shall mean the Company's fiscal year ended January 31, 1998). Unless the
context otherwise requires, references to "Ticketmaster" or the "Company"
include Ticketmaster Group, Inc., its predecessors and its subsidiaries.
References to the "Managed Businesses" include the Company's wholly and majority
owned subsidiaries (the "Consolidated Businesses") together with the Company's
interest in unconsolidated businesses (the "Unconsolidated Businesses").
GENERAL
Ticketmaster, through the Managed Businesses, is the leading provider of
automated ticketing services in the world with over 3,750 domestic and over 550
foreign clients, including many of the foremost entertainment facilities and
promoters and over 200 professional and semi-professional sports franchises. The
Company has established its market position by providing these clients with
comprehensive ticket inventory control and management, a broad distribution
network and dedicated marketing and support services. Ticket orders are received
and fulfilled through operator-staffed call centers, independent sales outlets
remote to the facility box office and the Company's Web site, Ticketmaster
Online. Revenue is generated principally from convenience charges received by
the Company for tickets sold on its clients' behalf. The Company generally
serves as an exclusive agent for its clients and typically has no financial risk
for unsold tickets. The Company, through its Managed Businesses, sold 70.2
million tickets in fiscal 1998, while generating revenues of $376.5 million.
Based upon recent trends in the entertainment, sporting and leisure
industries, the Company believes that its principal business, live entertainment
ticketing, will experience increased revenues under existing venue contracts.
The Company believes that significant opportunities exist through continued
penetration of this principal market. Additionally, the Company believes that
further ticketing opportunities will arise from the construction of new and
larger facilities, the increase in the number of professional sports teams and
the development of new sports leagues. Furthermore, the Company plans to
continue to broaden its client base to include such venues as museums, amusement
parks, state and county fairs and golf courses.
Although the Company, through its Managed Businesses, has recently expanded
its operations into territories outside of the U.S., it has already experienced
significant growth in these markets as ticket sales have increased from 3.4
million to 14.0 million from fiscal 1996 to fiscal 1998, while revenues from
ticket sales have increased from $15.7 million to $61.6 million for the same
periods, respectively. Accordingly, ticket sales and revenues from international
markets represented 20% and 19% of total ticket sales and revenues in fiscal
1998, up from approximately 6% and 7% in fiscal 1996, respectively.
The Company believes that there are additional significant opportunities
which exist in international markets to attract existing and new venues in a
historically under-penetrated market for automated ticketing services for live
entertainment events. In addition, the continued enthusiasm for soccer and
growing popularity of major American sports such as football, baseball and
basketball should lead to increased utilization of these international venues
and provide additional revenue opportunities. To be in a position to capitalize
on these trends in fiscal 1999, the Company has expanded its existing operations
in the U.K., Australia and Mexico, has entered into new markets in Canada,
Argentina and Ireland, and is exploring further opportunities in Europe, the
Pacific Rim and Central and South America.
The Company, through its Managed Businesses, has also expanded its ticket
distribution capabilities through the development and launch of Ticketmaster
Online (http://www.ticketmaster.com), its site on the World Wide Web designed to
promote ticket sales for live events, disseminate event information and offer
transactional and merchandising services. Since the launch of Ticketmaster
Online in September 1996, the Company has experienced significant growth in
ticket sales through its World Wide Web site and expects this trend to continue
during the next several fiscal years. Monthly ticket sales through the Internet
have steadily increased since the Website became transactional in November 1996,
rising from $100,000 to more than $7.2 million in March 1998. For the quarter
ended January 31, 1998, online ticket sales accounted for
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approximately 2.5% of the Company's fourth quarter ticketing business with
ticket sales of approximately 400,000 having a gross dollar value of over $16.1
million. Online ticketing sales for the fiscal year ended January 31, 1998 were
approximately 1.0 million tickets with a gross dollar value of over $39.1
million.
The Company is continuing to leverage its widely recognized brand name and
extensive distribution capabilities by developing new opportunities in related
areas, such as entertainment information and publishing, merchandising,
advertising, promotional services and direct marketing. Specific examples of its
efforts include offering integrated brand management and marketing services to
strategic partners, such as MasterCard International, Intel, Cendant Membership
Services, Inc., Sprint Communications, First USA and United Parcel Service,
through sponsorship and advertising opportunities during live events, during
telephone ticketing services, on its ticket stock and envelopes, on event
promotional material and in additional media outlets which the Company is
developing. In addition, in February 1996, the Company launched Live!, a monthly
entertainment magazine and event guide which the Company believes is a natural
extension of its existing distribution channels. These efforts to create new
promotional, marketing and distribution opportunities by utilizing and
integrating the Company's traditional principal ticketing services and brand
name have formed the basis for new growth opportunities in the future.
The Company also believes that significant opportunities exist through its
current call center capacity to become a provider of outsourced telephone-based
sales, marketing and customer management services. The Company's client base is
currently comprised of large organizations with growing needs for cost-effective
means of contacting and servicing current and prospective customers. The
Company's current client base includes organizations such as the American Red
Cross, Cendant Membership Services, Inc. and TVN Enterprises Corporation.
The Company believes that the Ticketmaster System and its extensive
distribution capabilities provide a competitive advantage that enhances the
Company's ability to attract new clients and maintain its existing client base.
The Ticketmaster System, which includes both hardware and software, is typically
installed in a client's facility box office and provides a single centralized
inventory control management system capable of tracking total ticket inventory
for all events, whether sales are made on a season, subscription, group or
individual ticket basis. The Ticketmaster System is capable of processing over
100,000 tickets per hour in certain regions, and each of its 26 computer systems
can support 32,000 users per system, of which as many as 4,000 can be online at
any one time.
Through its Managed Businesses, Ticketmaster has a comprehensive domestic
distribution system that includes approximately 2,800 remote sales outlets in 44
states covering many of the major metropolitan areas in the U.S. and 15 domestic
call centers with approximately 1,525 operator positions. The foreign
distribution system includes approximately 300 remote sales outlets in 7
countries and 14 call centers with over 600 operator positions. The Company
provides the public with convenient access to tickets and information regarding
live entertainment events. Ticket purchasers are assessed a convenience charge
for each ticket sold offsite by the Company on behalf of its clients. These
charges are negotiated and included in the Company's contracts with its clients.
The versatility of the Ticketmaster System allows it to be customized to satisfy
a full range of client requirements.
From fiscal 1996 through 1998, the number of tickets sold and revenues for
the Managed Businesses have grown from 53.1 million tickets and $241.3 million
of revenues to 70.2 million tickets and $376.5 million of revenues, which
reflects annual compounded growth rates for ticketing and revenues of
approximately 15.0% and 24.9%, respectively.
CLIENT RELATIONSHIPS
The Company's clients include many of the most well known arenas, stadiums,
theaters, sports teams and promoters in the U.S. The Company currently provides
service to clients ranging in size from large stadiums with more than 60,000
seats to smaller theaters with seating in the hundreds, and from multi-event
promoters to one-time single event promoters.
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Representative of the Company's clients are the following:
ARENAS, STADIUMS AND THEATERS
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Alamodome, San Antonio, TX Madison Square Garden, New York, NY
Arie Crown Theater, Chicago, IL Miami Arena, Miami, FL
Astrodome, Houston, TX Nassau Coliseum, Uniondale, NY
Blossom Amphitheatre, Cleveland, OH Nederlander New York Broadway Theatres,
Bradley Center, Milwaukee, WI New York, NY
Cajundome, Lafayette, LA The New World Music Theatre, Tinley Park, IL
Centrum, Worcester, MA New Amsterdam Theatre, New York, NY
Charlotte Coliseum, Charlotte, NC Orlando Arena and Centroplex, Orlando, FL
Chicago Theater, Chicago, IL The Palace at Auburn Hills, Auburn Hills, MI
Coral Sky Amphitheatre, West Palm Beach, FL Pine Knob Music Theatre, Clarkston, MI
Crown Center, Cincinnati, OH The Pond, Anaheim, CA
Deer Creek Music Center, Indianapolis, IN Pontiac Stadium, Detroit, MI
Fargo Dome, Fargo, ND Pro Player Stadium, Miami, FL
Fleet Center, Boston, MA Pyramid, Memphis, TN
Ford Center for the Performing Arts, Radio City Music Hall, New York, NY
New York, NY RCA Dome, Indianapolis, IN
Freedom Hall, Louisville, KY Rosemont Horizon, Rosemont, IL
Garden State Arts Center, Holmdel, NJ Rupp Arena, Lexington, KY
The Georgia Dome, Atlanta, GA San Jose Arena, San Jose, CA
The Grand Center, Grand Rapids, MI Seattle Center, Seattle, WA
Great Western Forum, Inglewood, CA Sun Dome, Tampa, FL
Greek Theatre, Los Angeles, CA Star Lake Amphitheatre, Pittsburgh, PA
Gund Arena, Cleveland, OH The Summit, Houston, TX
Ice Palace, Tampa, FL Tacoma Dome, Tacoma, WA
Irvine Meadows Amphitheatre, Costa Mesa, CA Target Center, Minneapolis, MN
Joe Louis Arena, Detroit, MI Tennessee Performing Arts Center, Nashville,
John G. Shedd Aquarium and Oceanarium, TN
Chicago, IL Turner Field, Atlanta, Georgia
Jones Beach Theatre, Wantagh, NY The United Center, Chicago, IL
Los Angeles Memorial Coliseum, Los Angeles, The Wang Center for the Performing Arts,
CA Boston, MA
Louisiana Superdome, New Orleans, LA
PROMOTERS GENERAL
Avalon Attractions American Music Festival
Belkin Productions Beale Street Music Festival
Cellar Door Concerts Chicago International Film Festival
Jam Productions Del Mar Fair
Livent The 500 Festival Parade
Pace Management Houston Exposition and Rodeo
Sunshine Promotions New Orleans Jazz and Heritage Festival
Universal Concerts U.S. Hotrod Nationals
Electric Factory Walt Disney Company
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The Company's clients also include 82 professional sports franchises in the
U.S., including 16 Major League Baseball teams, 20 National Football League
teams, 20 National Basketball Association teams, 13 National Hockey League
teams, 6 Major League Soccer teams and 7 Women's National Basketball Association
teams.
The Company generally enters into written agreements with its clients
pursuant to which it agrees to provide the Ticketmaster System and to serve as
the client's exclusive ticket sales agent for all sales of individual tickets
sold outside of the facility's box office, including any tickets sold at remote
sales outlets, over the phone or through other media, for a specified period,
typically three to five years. Pursuant to an agreement with a facility, the
Company generally is granted the right to sell tickets for all events presented
at that facility, and as part of such arrangement the Company installs the
Ticketmaster System in the facility's box office. An agreement with a promoter
generally grants the Company the right to sell tickets for all events presented
by that promoter at any facility, unless the facility is covered by an exclusive
agreement with Ticketmaster or another automated ticketing service company. The
terms of the agreements with clients are
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negotiated on a contract-by-contract basis. In the case of contracts subject to
public bid (e.g., by facilities owned or managed by municipalities or
governmental agencies), the terms are defined, to a material degree, by the
specifications and conditions set forth in the formal requests for bid.
Clients are routinely required by contract to include the Ticketmaster name
in print, radio and television advertisements for entertainment events sponsored
by such clients. The Ticketmaster name and logo are also prominently displayed
on printed tickets and ticket envelopes.
The Company generally does not buy tickets from its clients for resale to
the public and has no financial risk for unsold tickets. In the U.K., the
Company may from time to time buy tickets from its clients for resale to the
public in an amount typically not exceeding (LOGO)600,000 in the aggregate. All
ticket prices are determined by the Company's clients. The Company's clients
also generally determine the scheduling of when tickets go on sale to the public
and what tickets will be available for sale through the Company. Facilities and
promoters, for example, often handle group sales and season tickets in-house.
The Company only sells a portion of its clients' tickets, the amount of which
varies from client to client and varies as to any single client from year to
year.
Among the primary benefits derived by the Company's clients by use of the
Ticketmaster System are (1) centralized control of total ticket inventory as
well as accounting information and market research data, (2) centralized
accountability for ticket proceeds, (3) manageable and predictable transaction
costs, (4) broader and expedited distribution of tickets, (5) wide dissemination
of information about upcoming events through Ticketmaster's call centers, the
Company's Web site and other media platforms, (6) the ability to easily add
additional performances if warranted by demand and (7) marketing and promotional
support.
The Ticketmaster System also provides the Company's clients with
flexibility in processing season, subscription and group ticketing. For example,
a sports team may want to give priority to season tickets, mini-ticket plans and
group sales, permitting those ticket purchasers to have first choice of tickets
before their sale to the general public. In addition, clients have the ability
to structure single or multiple events, including season events, in almost any
number and type of pricing and discount plans.
In general, the Company negotiates a contract with each client. Pursuant to
these contracts, Ticketmaster is granted the right to collect from ticket
purchasers a per ticket convenience charge on all tickets sold at remote sales
outlets, by telephone, through the Company's web site and other media. There is
an additional per order handling charge on all tickets sold by the Company at
other than remote sales outlets to partially offset the cost of fulfillment. The
amount of the convenience charge is determined during the contract negotiation
process, and typically varies based upon numerous factors, including the
services to be rendered to the client, the amount and cost of equipment to be
installed at the client's box office and the amount of advertising and/or
promotional allowances to be provided, as well as the type of event and whether
the ticket is purchased at a remote sales outlet, by telephone, through the
Company's Web site or otherwise. Any deviations from those amounts for any event
are negotiated and agreed upon by the Company and its client prior to the
commencement of ticket sales. During fiscal 1998, the convenience charges
generally ranged from $1.50 to $7.00 per ticket. Convenience charges from ticket
sales at outlets, through call centers and via the internet (inclusive of per
order handling charges added for sales through call centers and via the
internet) when added together averaged $4.49 per ticket in fiscal 1998.
Generally, the agreement between the Company and a client will also establish
the amounts and frequency of any increases in the convenience charge and
handling charges during the term of the agreement.
The agreements with certain of the Company's clients may provide for a
client to participate in the convenience and/or handling charges paid by ticket
purchasers for tickets bought through the Company for that client's events. The
amount of such participation, if any, is determined by negotiation with clients.
Some agreements also may provide for the Company to make participation advances
to the client, generally recoupable by the Company out of the client's future
right to participations. In isolated instances, the Company may make an upfront,
non-recoupable payment to a client for the right to sell tickets for that
client.
If an event is canceled, the Company's current policy is to refund the per
ticket convenience charges (but not the handling charge which is payable with
respect to transactions by telephone and online orders).
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Refunds of the ticket price for a canceled event are funded by the client. To
the extent that funds then being held by Ticketmaster on behalf of the client
are insufficient to cover all refunds, the client is obligated to provide
Ticketmaster with additional amounts within a specified period of time
(typically 24 to 72 hours) after a request by Ticketmaster. Clients have
historically fulfilled these obligations.
During fiscal 1998, no single client accounted for more than 4.0% of the
Managed Businesses total revenues and no single facility accounted for more than
1.5% of the Company's total revenues. Historically, approximately 15% to 20% of
the Company's contracts are subject to renewal each fiscal year. The Company has
experienced substantial success in renewing its contracts with clients on an
annual basis.
DISTRIBUTION SYSTEM
The Company's distribution system is principally comprised of remote sales
outlets, call centers and the Company's Web site, Ticketmaster Online
(http://www.ticketmaster.com). During fiscal 1998, ticket sales at the remote
sales outlets, at call centers and on the Internet accounted for approximately
50.0%, 48.5% and 1.5%, respectively, of ticket sales for the Company.
Remote Sales Outlets. Through its Managed Businesses, the Company has
approximately 3,100 remote sales outlets worldwide with 2,800 in the U.S. and
approximately 300 in foreign territories, up from approximately 2,500 worldwide
at the end of fiscal 1996. The Company has emphasized the establishment of
retail outlets in high visibility chain stores with existing name recognition,
significant customer traffic and customer profiles consistent with the type of
events sold through the Ticketmaster System. The majority of remote sales
outlets are located in major department, grocery, and music stores. Among the
retailers that serve as remote sales outlets are Carson Prairie Scott,
Dayton/Hudson, Foley's and Robinsons-May department stores, Dominick's, Fiesta
and Kroger food stores, Coconuts and Tower Records music stores. The specific
stores within each chain that will serve as remote sales outlets is negotiated
by the Company with each chain.
The Company is responsible for installation and maintenance of the hardware
and software necessary to operate the Ticketmaster System at the remote sales
outlets. The Company also trains the remote sales outlet's employees in the use
of the Ticketmaster System, provides support and oversight in connection with
the sale of tickets and furnishes the remote sales outlets with promotional
materials relative to the Ticketmaster System and events for which tickets are
available. The remote sales outlets are responsible for the staffing of the
stores and their daily operation. The remote sales outlets generally are paid a
commission of approximately 20% to 25% of the convenience charge, typically
subject to a maximum amount per ticket. A majority of sales at remote sales
outlets are for cash, although some department stores also accept their own
charge cards (in which case the cost of the charge card and payment risk are
borne by the department stores). Ticket purchasers are delivered their tickets
at the point of sale. The remote sales outlets generally deliver sales proceeds
and convenience charges to Ticketmaster on a schedule ranging from daily to
weekly depending on the financial condition of the particular remote sales
outlets and other factors. The Company has not suffered any material loss with
respect to funds collected by its remote sales outlets for remittance to the
Company.
Call Centers. Through its Managed Businesses, the Company currently
operates 29 call centers worldwide, up from 19 at the end of fiscal 1996. Ticket
purchasers seeking a greater degree of convenience than is afforded at facility
box offices or remote sales outlets can purchase tickets by telephone seven days
a week, up to 14 hours per day, using a major credit card. Sales agents for the
Managed Businesses, staffing up to approximately 1,525 telephone positions
domestically and over 600 in foreign markets, take the caller's credit card
order and mail the tickets directly to the ticket purchasers. Tickets that are
purchased by telephone can also be picked up at the appropriate facility's "will
call" ticket window. A per order handling charge typically is assessed in
addition to the per ticket convenience charge. The ticket sales proceeds and
convenience and handling charges from telephone credit card transactions are
generally received by the Company within two business days after submission to
the credit card company. The call centers also respond to large numbers of
informational calls relative to events, including requests for facility
characteristics, directions, telephone numbers, disability access and seating
and local hotels and restaurants. Concurrently with the sale of tickets to
entertainment events, the Company's call centers offer other products for sale
related
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to the events for which tickets are being sold. The Company fulfills these sales
by ordering the products from a third party. The Company's domestic call centers
are located in Atlanta, Chicago, Cleveland, Columbus, Dallas, Denver, Detroit,
Houston, Los Angeles, Minneapolis, Orlando, Pittsburgh, San Diego, Seattle and
Virginia Beach. The Company also operates call centers in London, England, in
Calgary, Edmonton, Ottawa, Toronto, Vancouver and Winnipeg, Canada, in Dublin,
Ireland, in Buenos Aires, Argentina, in Santiago, Chile, in Melbourne and
Sydney, Australia, and in Mexico City and Monterey, Mexico.
An important feature of the Company's domestic telephone system is the
ability to channel all or a portion of incoming calls from any city to a
selected call center. Accordingly, the number of telephone positions available
to receive telephone orders in a given region is capable of being increased in
advance of the commencement of sales activity for a major event. Similarly, the
ability to network call centers affords the Company backup capabilities in the
event that a call center experiences operating difficulties.
Online Services. The Company has recently expanded its distribution network
through the addition of online services, which permit consumers to purchase
tickets and access information on their personal computers via the internet.
Currently, retail transactions for the Company and ticketing transactions for
the Company's entire ticketing clientele are capable of being processed through
the Company's Web site, Ticketmaster Online. The Company expects online to
become an important distribution channel as more consumers engage in
transactions over the internet. Additionally, this medium provides the Company
with a cost efficient way to disseminate information and cross-promote, which
may help reduce costs for these services across the Company's other distribution
channels.
THE TICKETMASTER SYSTEM
The Company's proprietary operating system and application software, and
its computer and telephone systems, were specifically developed for the live
event ticketing industry. The Ticketmaster System provides clients with the
means to maintain and control their ticket inventory efficiently. Users of the
Ticketmaster System can effect a range of functions from the most basic to the
most complex, including individual advanced ticket sales, season and
subscription ticketing, day of show walk-up ticket sales and group ticket sales.
The Ticketmaster System software is maintained in-house, eliminating any
reliance upon outside software companies. Consequently, the Company is able to
adapt to its clients' needs, changing market conditions and advances in hardware
and other technologies. The Ticketmaster System communicates directly with bank
processing centers for instantaneous online credit card authorization and
electronic deposit of credit card receipts. All of the Ticketmaster System's
online terminals at the call centers and at selected facility box offices have
access to the authorization network.
Significant measures are taken to prevent system failure in each computer
center. Each system has a live backup standing ready in the event of a primary
system failure. The rooms housing the computer-related equipment are protected
by computer-safe fire protection systems. Dual custom air conditioning units
provide constant climate control. To guard against power outages, the Company
employs uninterruptable power supplies. High capacity back-up generators
eliminate the dependency on public electric sources. Moreover, all data is
continually recorded on a back-up hard copy and the Company maintains an online
disaster recovery site in one of its principal offices. Historically, the
Ticketmaster System has experienced minimal downtime.
The Company's proprietary software is a product of over 20 years of
continual enhancement by a team of in-house software and system professionals
currently numbering over 80. The Company's research and development staff has
produced significant enhancements to the Ticketmaster System, including
proprietary ticket printers and data telecommunications multiplexors, and
regularly upgrades its software. In January of 1998, the Company acquired the
software capabilities of Distributed System Architects, Inc. ("DSA") which
provides software and service products for automated ticketing systems.
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INDUSTRY OVERVIEW
The Company believes that since a small percentage of all tickets for live
entertainment events sold in the U.S. during fiscal 1998 were sold through
retail outlet networks, call centers and online services operated by automated
ticketing service companies, the domestic market represents a growth
opportunity.
The use of automated ticketing is generally in an earlier stage of
development outside of the U.S., although the actual level of use varies greatly
from country to country. While the Company believes that there is substantial
potential for international growth, the timing and rate of penetration within
each international market will vary.
The supply of tickets, both domestically and internationally, has increased
in recent years by virtue of, among other factors, increases in the number of
facilities (e.g., construction of amphitheaters), facility size and seating
capacity, event expansion into new market areas (e.g., the increase in the
number of professional sports teams and the development of new sports leagues)
and increases in the number of performances of an event (e.g., the adoption of
lengthened regular season play and expanded post-season play by sporting leagues
and associations). Ticket supply has also been enhanced by the desire of, and
necessity for, facilities to continually present as many revenue-producing
events as possible in order to meet their financial and other obligations. In
recent years, the public's increased demand for tickets to certain live
entertainment events has been evidenced by its willingness to pay higher ticket
prices to attend these events and the spread of public interest in certain types
of events beyond customary boundaries (e.g., increased worldwide interest in
football, baseball and basketball). In addition to live entertainment events
held at arenas, amphitheaters, stadiums and performing arts venues, automated
ticketing for live events has expanded into servicing ticket issuing facilities
that do not generally have seats (e.g., museums, amusement parks, state and
county fairs and golf courses).
The success of automated ticket service companies depends on their ability
to develop and maintain relationships with facilities, sports teams and
promoters by providing high quality service as well as the availability of, and
public demand for, tickets for all types of events, including sports, family
entertainment, concerts, fine arts and cultural attractions.
COMPANY HISTORY
Ticketmaster Corporation, the Company's principal subsidiary, was organized
in 1976 for the primary purpose of developing stand-alone automated ticketing
systems for sale to individual facilities. Ticketmaster Corporation initially
derived its revenues solely from the sale and installation of equipment and
ongoing royalties and service fees, but was not involved in the actual process
of selling tickets to the public. In the fall of 1982, Ticketmaster Corporation
began its transformation from a seller of stand-alone systems to a service
provider. Ticketmaster Corporation's growth and success resulted from combining
an integrated ticket inventory control management system (which permitted
season, subscription, group and individual tickets to be handled on one system)
with extensive distribution capabilities. In addition, by establishing revenue
sharing arrangements similar to those employed by food service and other
concessionaires to the facilities, Ticketmaster Corporation provided the
facilities with a new source of revenue.
Historically, the Company expanded both internally and through joint
ventures and acquisitions. During the 1980s and the early 1990s, the Company
formed four principal domestic joint ventures covering all or parts of Alabama,
Arkansas, Georgia, Indiana, Kentucky, Mississippi, North Carolina, Ohio, Oregon,
South Carolina, Tennessee, Washington and West Virginia to operate ticket
selling services in those states. In addition, the Company selectively licensed
its name and technology to other entities for use in certain regions, including
Northern California, Washington, D.C., Philadelphia and parts of Canada and
Mexico.
During the early 1990s, the Company continued to expand both through
acquisitions and strategic alliances with joint venture partners, including, in
1991, the acquisition of certain assets (principally client contracts) of
Ticketron, which previously had been one of the Company's major competitors; in
1992, the formation of a joint venture with an affiliate of Warner Music Group,
Inc. to pursue automated ticketing opportunities in European markets; and in
1994, the formation of a joint venture with an affiliate of Wembley plc to
provide advance ticketing for movie theaters worldwide and to market general
admission ticket selling
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and concession control systems to various clients, including movie theaters,
stadiums, arenas and amusement parks. During the past three years, the Company
has begun to reacquire certain of the rights to use the Company's name and the
Ticketmaster System that had previously been granted to joint ventures and to
licensees.
JOINT VENTURES AND LICENSEES
In addition to the ticketing operations performed directly by the Company,
the Ticketmaster System is operated in certain territories through joint
ventures and licensees. Included among the Company's current and proposed joint
ventures and strategic alliances are the following:
Australian Joint Ventures. On December 1, 1995, the Company and the
Victorian Arts Centre Trust formed joint ventures (the "Australian Joint
Ventures") for the purpose of conducting the Company's live entertainment
ticketing business in Australia and, possibly, in New Zealand. The Company has a
50% interest in and serves as the managing partner of the Australian Joint
Ventures. The Australian Joint Ventures' clients include the Victorian Arts
Centre, the Australian Football League, the Melbourne Cricket Grounds and the
Australian Chamber Orchestra.
Ireland Joint Venture. On July 31, 1997, the Company acquired 50% of the
capital stock of the Ticket Shop Limited and, through this company, conducts its
live entertainment ticketing business in Ireland. The Company serves as the
managing partner of the joint venture.
Latin American Development Arrangement. The Company and Corporacion
Interamericana de Entretenimiento, S.A. de C.V. ("CIE") have entered into a
development arrangement (the "Latin American Venture") for the purpose of
marketing and operating the Ticketmaster System throughout Central and South
America. CIE is currently the owner of a 50.01% equity interest in the Company's
Mexico licensee with the Company owning the remaining 49.99% equity interest in
this licensee. The Company will have a 50.01% interest in and serve as the
manager of each operating entity which is organized pursuant to the Latin
American Venture. To date, the Latin American Venture has commenced operations
in Argentina and Chile.
Domestic Licensees. The Company has selectively licensed its name and
technology to third parties for use in Oklahoma, Oregon, parts of Washington and
Maryland and in Washington, D.C. and certain other cities (see Item 3 -- "Legal
Proceedings"). The Company derives revenues from the licensees in the form of
license fees and/or ongoing per ticket royalties. Less than 1% of the Company's
total revenues during fiscal 1998 were derived from these license arrangements.
Some of the Company's license agreements continue indefinitely while others have
scheduled expirations through May 2001. Certain of the license agreements are
renewable at the option of the licensee.
COMPETITION
Not all facilities, promoters and other potential clients use the services
of an automated ticketing company, choosing instead to distribute their tickets
through their own internal box offices or other distribution channels.
Accordingly, the Company competes with the facilities, promoters and other
potential clients for the right to distribute their tickets at retail outlets,
by telephone and on the Internet. Among those who perform their own ticketing
are The Shubert Organization (Telecharge), New York Mets, Contemporary
Productions, a wholly owned subsidiary of SFX Entertainment, Inc. and Don Law
Presents (Next Ticketing).
For those facilities and promoters which decide to utilize the services of
an automated ticketing company, the Company competes with many international,
national and regional ticketing systems, such as Telecharge Systems, which is a
division of The Schubert Organization, Inc. and licenses the Ticketron software,
Dillards Ticketing Systems, which is a division of Dillard's Department Stores,
Inc. (which uses its own department stores as ticket outlets), Advantix and ETM.
Several of the Company's competitors have operations in multiple locations
throughout the U.S., while others compete principally in one specific geographic
location. One or more of these regional ticketing systems could expand into
other regions or nationally. Other companies compete with the Company by selling
stand-alone automated ticketing systems to enable the
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<PAGE> 10
facilities to do their own ticketing, including companies that sell systems
under the names Prologue, Artsoft and Lasergate in the U.S., Bocs in the U.K.
and Softix in Australia, New Zealand and Pacific Rim countries. The Company has
experienced substantial competition for new accounts, such as 1994 World Cup
soccer (which became a client of the Company) and the National and California
Park Systems and the 1996 Summer Olympics (all of which became clients of one of
the Company's competitors). Accordingly, there can be no assurance that
prospective clients will enter into contracts with the Company rather than the
Company's competitors. The Company believes that it competes on the basis of
service provided, capability of the ticketing system, distribution network,
reliability and price.
As an alternative to purchasing tickets through the Company, ticket
purchasers generally may purchase tickets from the facility's box office at
which an event will be held or by season, subscription or group sales directly
from the venue or promoter of the event. Although processed through the
Ticketmaster System, the Company derives no convenience charge revenue from the
ticket purchasers with respect to those ticket purchases.
TRADEMARKS AND PATENTS
The Company owns a number of registered trademarks in various countries
relating to, among other things, the name Ticketmaster and its related logo. The
Company believes that such trademarks are widely recognized throughout North
America and other parts of the world and have considerable value. The Company is
not aware of any actions against its trademarks used in the ticketing business
and has not received any notice or claim of infringement in respect of such
trademarks.
The Company also acquired the rights to the name Ticketron in connection
with the Company's purchase of certain assets of Ticketron.
The Company presently has no patents pertaining to the Ticketmaster System.
Although the Company may in the future file for patent protection on products
developed or to be developed by it, there can be no assurance that any patents
will be issued or, if issued, that such patents will provide the Company with
meaningful protection. Further, the technology used by the Company in many of
its products is likely to be within the state-of-the-art and may not be more
advanced than the technology used by or available to certain of its present or
potential competitors. The Company may be unable to prevent its competitors and
others from incorporating features of the Company's products into their own
products.
REGULATION
The Company is regulated by certain state and local regulations, including,
but not limited to, a law in Georgia that establishes maximum convenience
charges on tickets for certain sporting events. Other bills that could affect
the way the Company does business, including bills that would regulate the
amount of convenience charges and handling charges, are introduced from time to
time in federal, state and local legislative bodies. The Company is unable to
predict whether any such bills will be adopted and, if so, the impact thereof on
its business.
In addition, increasing concern over consumer privacy has led to the
introduction from time to time of proposed legislation which could impact the
direct marketing and market research industries. The Company does not know when
or whether any such proposed legislation may pass or whether any such
legislation would relate to the types of services currently provided by the
Company or which the Company intends to develop. Accordingly, the Company cannot
predict the effect, if any, that any such future regulation may have on its
business.
Because the Company's current business consists primarily of responding to
inbound telephone calls, it is not highly regulated. However, in the event that
the Company decides to expand its outbound telemarketing services to improve
off-peak call center utilization, such rules and regulations would apply to a
larger percentage of the Company's business. Accordingly, the Company must
comply with the Federal Communications Commission's rules under the Federal
Telephone Consumer Protection Act of 1991 and the Federal Trade Commission's
regulations under the Federal Telemarketing and Consumer Fraud and Abuse
Prevention Act of 1994, both of which govern telephone solicitation. The Company
believes that it currently is, and will continue to be, in compliance with such
statutes. Furthermore, there may be additional federal or state
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<PAGE> 11
legislation, or changes in regulatory implementation, that limit the activities
of the Company or its clients in the future or significantly increase the cost
of compliance.
EMPLOYEES
As of January 31, 1998, the Company employed approximately 1,465 domestic
and 550 foreign full-time employees, approximately 285 domestic part-time
administrative employees and approximately 3,660 domestic and 395 foreign
part-time telephone sales agents.
The telephone sales agents in Chicago and Ontario, Canada and the telephone
sales agents employed by the Australian Joint Venture (approximately 15% of the
Company's telephone sales agents) are the only employees of the Company covered
by collective bargaining agreements. The collective bargaining agreements
covering the telephone sales agents in Canada and Chicago are scheduled to
expire on March 31, 2000 and December 31, 2000, respectively. The collective
bargaining agreement covering the telephone sales agents in Australia expired on
December 1, 1997, however, the Company is continuing to operate under the terms
of the preexisting agreement until a new agreement is finalized. The Company
believes that its relations with its employees are good.
ITEM 2. PROPERTIES
The Company owns its principal offices in West Hollywood, California, and
an operating office in Vancouver, Canada, while leasing office space in various
cities throughout the U.S., the U.K., Germany, France, Singapore, Canada, Chile
and Argentina. The Company currently has approximately 562,000 square feet of
space under lease, with scheduled expirations ranging from May 1998 to May 2008.
The Company's corporate offices are housed in a 70,000 square foot
building. The building was purchased in October 1996 and also serves as the
principal offices for Live! magazine and Ticketmaster Online. The Company
currently occupies approximately 55,000 square feet of the building, with
tenants occupying a majority of the remaining space.
ITEM 3. LEGAL PROCEEDINGS
During 1994, the Company was named as a defendant in 16 federal class
action lawsuits filed in United States District Courts purportedly on behalf of
consumers who were alleged to have purchased tickets to various events through
the Company. These lawsuits alleged that the Company's activities violated
antitrust laws. On December 7, 1994, the Judicial Panel on Multidistrict
Litigation transferred all of the lawsuits to the United States District Court
for the Eastern District of Missouri (the "District Court") for coordinated and
consolidated pretrial proceedings. After an amended and consolidated complaint
was filed by the plaintiffs, the Company filed a motion to dismiss and, on May
31, 1996, the District Court granted that motion ruling that the plaintiffs had
failed to state a claim upon which relief could be granted. On June 12, 1996,
the plaintiffs appealed the District Court's decision to the Court of Appeals
for the Eighth Circuit. Oral argument on the appeal was held on February 14,
1997.
On April 10, 1998, the Court of Appeals issued an opinion affirming the
district court's ruling that the plaintiffs in the consolidated consumer class
action lawsuit lack standing to pursue their claims for damages under the
antitrust laws. However, the Appellate Court held that the plaintiffs' status as
indirect purchasers of Ticketmaster's services did not bar them from seeking
injunctive relief against the Company.
The Company believes that the Court's affirmance of the decision
prohibiting plaintiffs from obtaining monetary damages against Ticketmaster
eliminates the substantial portion of plaintiffs' claims. With respect to
injunctive relief, the Antitrust Division of the United States Department of
Justice had previously investigated Ticketmaster for in excess of 15 months and
closed its investigation with no suggestion of any form of injunctive relief or
modification of the manner in which Ticketmaster does business.
On July 23, 1997, a three-member tribunal of the American Arbitration
Association issued an Award in favor of the claimant MovieFone, Inc., Promofone,
Inc. and the Teleticketing Co. LP (the "MovieFone Entities") and against the
respondent, Pacer Cats Corporation, a wholly owned subsidiary of Wembley plc and
now known as "PCC Management, Inc.". The Award provides, among other things, (i)
that the respondent shall pay to the claimant damages aggregating $22,751,250
and (ii) for injunctive relief relating to certain
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<PAGE> 12
conduct of the respondent and its successors and assigns with respect to the
MovieFone Entities' business for a specified period of time. The foregoing only
summarizes certain provisions of the Award, and reference is made to the full
text thereof filed as Exhibit 99.3.
No entity owned by the Company, including, but not limited to,
Pacer/CATS/CCS, was a party to the arbitration proceeding. Nonetheless, counsel
for Wembley plc, WIL, Incorporated, PCC Management, Inc. and Wembley, Inc.
(collectively the "Wembley Entities"), by letter dated August 4, 1997, advised
Pacer/ CATS/CCS, Ticketmaster Corporation, Ticketmaster Cinema Group, Ltd. and
Cinema Acquisition Corporation (collectively, the "Ticketmaster Entities"), that
the Wembley Entities intend to look to the Ticketmaster Entities to be made
whole with respect to the costs of the arbitration, including attorneys' fees
incurred in connection therewith, and all or part of any monetary damages
assessed against the respondent.
The Ticketmaster Entities in turn have advised counsel for the Wembley
Entities that they believe that there is no validity to any claim by the Wembley
Entities against any of the Ticketmaster Entities. In this regard, by agreement
dated July 2, 1996 ("the Agreement"), the Wembley Entities released and
covenanted not to sue the Ticketmaster Entities in connection with any claims
arising out of the arbitration proceeding; however, the Wembley Entities
retained certain limited indemnification rights under the Agreement, solely with
respect to Pacer/CATS/CCS and its operations from and after April 15, 1994. In
the event any of the alleged claims are pursued by the Wembley Entities, the
Ticketmaster Entities intend to vigorously oppose them. No determination,
adverse or otherwise, can presently be made as to the effect, if any, this
matter may have on the Company.
On April 18, 1997, Ticketmaster Group Limited Partnership ("TGLP"), the
Company's licensee in Maryland, Washington, D.C. and parts of Virginia, filed an
amended complaint against Ticketmaster Corporation, a wholly-owned subsidiary of
the Company, in the United States District Court for the Northern District of
Illinois. Plaintiff alleges that Ticketmaster Corporation has undertaken a
course of conduct designed to force plaintiff to sell its operations or
relinquish management control to Ticketmaster Corporation by intentionally
withholding access codes and enhancements to the Ticketmaster System. Plaintiff
alleges that Ticketmaster Corporation, by its conduct, has breached the license
agreement between the parties and has engaged in tortious and unfair business
practices. Ticketmaster Corporation has filed an answer denying the material
allegations contained in the complaint and has asserted a counter claim for the
breach of the license agreement against TGLP on May 5, 1997. Discovery is
currently in process and no determination, adverse or otherwise, can presently
be made as to the effect, if any, this matter may have on the Company.
On April 28, 1997, Ticketmaster Corporation filed a complaint against
Microsoft Corporation ("Microsoft") in the United States District Court for the
Central District of California. Plaintiff alleges that Microsoft wrongfully
appropriated and misused Ticketmaster's worldwide web site by unlawfully linking
its own web site to and associating it with the Ticketmaster web site. Plaintiff
seeks declaratory judgment in its favor, seeks to permanently enjoin Microsoft
from making any commercial use of Ticketmaster's web site and seeks unspecified
damages. On February 12, 1998, Ticketmaster filed a second amended complaint
against Microsoft. In addition to the allegations in its original complaint
which remain substantially intact, copyright infringement allegations were added
in the amended complaint. Microsoft has answered the second amended complaint,
asserted various affirmative defenses and a counter claim for declaratory
relief.
The Company and, as indicated below, certain of its current and former
directors have been named as defendants in the following six purported class
action lawsuits (one of which has since been dismissed):
O Natalee Klein and Martin Lubow v. Ticketmaster Group, Inc., Home Shopping
Network Inc., Paul G. Allen, Peter Barton, Barry Diller, Jonathan Dolgen,
James Held, John A. Pritzker, Fredric D. Rosen, and William D. Savoy,
Circuit Court of Cook County, Illinois, Chancery Division, No. 97 CH
13392 [DISMISSED]
O Mary E. O'Donnell v. HSN Inc., Barry Diller, Paul G. Allen, Fredric D.
Rosen, Charles Evans Gerber, David E. Liddle, John A. Pritzker, William
D. Savoy, Terence M. Strom, and Ticketmaster Group, Inc. Circuit Court of
Cook County, Illinois, Chancery Division, No. 97 CH 13411
O Ari Parnes v. Ticketmaster Group, Inc., Home Shopping Network Inc., Paul
G. Allen, Peter Barton, Barry Diller, Jonathan Dolgen, James Held, John
A. Pritzker, Fredric D. Rosen, and William D. Savoy, Circuit Court of
Cook County, Illinois, Chancery Division, No. 97 CH 14086
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O Brickell Partners, a Florida Partnership v. Paul G. Allen, Fredric D.
Rosen, Jonathan Dolgen, Peter Barton, John A. Pritzker, William D. Savoy,
and HSN, Inc., Circuit Court of Cook County, Illinois, Chancery Division,
No. 97 CH 13537
O Tiger Options, LLC v. Ticketmaster Group, Inc., Barry Diller, Paul Allen,
David E. Liddle, William D. Savoy, Fredric D. Rosen, John A. Pritzker,
Terence M. Strom, James Held, and Home Shopping Network, Inc., Superior
Court of the State of California, County of Los Angeles, No. BC 180045
O Curt C. Bender, Trustee, On Behalf of Himself and All Other Similarly
Situated v. Ticketmaster Group, Inc., Barry Diller, Paul Allen, David E.
Liddle, William D. Savoy, Fredric Rosen, John A. Pritzker, Terence M.
Strom, James Held, and Home Shopping Network, Inc. Does 1-25, Superior
Court of the State of California, County of Los Angeles, No. BC 181006
The complaints, all of which are substantially similar, challenge the offer
by USA Networks, Inc. ("USAi") (formerly Home Shopping Network, Inc.) to acquire
the remaining shares in the Company which it does not already own and allege
that the consideration offered by USAi is inadequate and that the defendants
have breached their fiduciary duties to the plaintiffs and the class of
shareholders of the Company which they claim to represent. The cases seek to
enjoin the proposed transaction and ask for unspecified damages. The three
pending Illinois cases have been consolidated, and the plaintiffs in one of the
California cases have agreed to stay proceedings in that case pending the
outcome of the Illinois cases. The Company believes that all the lawsuits are
without merit and intends to vigorously defend the claims asserted.
From time to time, federal, state and local authorities commence
investigations or inquiries with respect to the Company's compliance with
applicable antitrust, consumer protection, deceptive advertising, unfair
business practice and other laws. The Company has historically cooperated in and
satisfactorily resolved each such investigation or inquiry.
The Company believes that it has conducted its business in substantial
compliance with all applicable laws, including federal and state antitrust laws.
In the opinion of the Company's management, none of the Company's legal
proceedings will have a material adverse effect on the Company's financial
position or results of operation. The Company has incurred significant legal
expenses in connection with these and other investigations and lawsuits and may
incur additional significant legal expenses in the future should investigations
or lawsuits be instituted.
The Company is involved in various other litigation and claims arising out
of or related to the normal conduct of its business, including but not limited
to, claims alleging violations of the antitrust laws. In the opinion of the
Company, none of these proceedings will have a material adverse effect on its
results of operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of its fiscal year ended January 31, 1998.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
In November 1996, the Company completed the Initial Public Offering at an
initial price to the public of $14.50 per share. The market price of the Common
Stock is likely to be highly volatile and could be subject to wide fluctuations
in response to quarterly variations in operating results, announcements of new
contracts or contract cancellations, announcements of technological innovations
or new products or services by the Company or its competitors, changes in
financial estimates by securities analysts or other events or factors. The
market price of the Common Stock also may be affected by the Company's ability
to meet analysts' expectations, and any failure to meet such expectations, even
if minor, could have a material adverse effect on the market price of the Common
Stock.
The Common Stock is traded on the Nasdaq National Market under the symbol
"TKTM." The following table sets forth the range of the high and low closing
sale prices of the Common Stock, for the fiscal quarter indicated, as reported
on the Nasdaq National Market:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1997
Fourth Quarter (from November 18, 1996)................... $15 $10 1/4
Fiscal 1998
First Quarter............................................. 14 5/8 11 3/4
Second Quarter............................................ 17 3/4 11 5/8
Third Quarter............................................. 25 16
Fourth Quarter............................................ 24 1/2 20 7/8
</TABLE>
As of April 20, 1998, there were 26,251,440 shares of Common Stock
outstanding, held by approximately shareholders of record.
Since November 17, 1993, the Company has not declared or paid any dividends
upon its Common Stock. The Company presently intends to retain earnings during
the foreseeable future for general corporate purposes, including business
expansion and capital expenditures. The declaration and payment of future
dividends will be at the sole discretion of the Board of Directors and will
depend on the Company's profitability, financial condition, capital needs,
future prospects and other factors deemed relevant by the Board of Directors.
Furthermore, the Company's Credit Agreement, as amended (the "Credit
Agreement"), imposes restrictions and limitations on the making of dividends and
distributions to the Company's shareholders. Accordingly, the future ability of
the Company to declare and pay dividends on its Common Stock will be limited by
virtue of the restrictions under the Credit Agreement.
In addition, the separate credit agreement pertaining to the Company's
Pacer/CATS/CCS operations restricts the ability of that entity to transfer funds
to the Company in the form of cash dividends, loans or advances.
On March 20, 1998, USAi and Ticketmaster entered into a definitive merger
agreement pursuant to which USAi will acquire each share of Ticketmaster not
owned by USAi at the time of the merger for .563 of a USAi common share (1.126
shares after giving effect to the USAi 2-for-1 stock split paid to USAi
shareholders on March 26, 1998). The transaction is subject to approval by
Ticketmaster shareholders.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and the Consolidated Financial Statements and the related notes
appearing elsewhere in this Report.
SELECTED FINANCIAL DATA
HISTORICAL AND PRO FORMA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
FISCAL YEAR
YEAR ENDED JANUARY 31, ENDED
-------------------------------------------------------------- JANUARY 31,
1994 1995 1996 1997 1998 1998
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Businesses
Revenue....................................... $ 146,640 $ 182,950 $ 161,250 $ 230,961 $ 340,980 $ 361,697
Operating income.............................. 7,763 4,045 2,710 13,663 29,525 32,140
Net income (loss)............................. 40 (6,678) (8,095) 1,792 8,147 9,582
Basic earnings (loss) per share............... $ .01 $ (.44) $ (.53) $ .10 $ .32 $ .37
Diluted earnings (loss) per share............. .01 (.44) (.53) .10 .31 .36
Unconsolidated Businesses
Revenue....................................... $ 41,812 $ 69,269 $ 80,053 $ 67,541 $ 35,511 $ 20,587
Operating income.............................. 3,845 4,712 8,690 9,398 4,247 929
Pretax income................................. 3,738 3,632 7,443 8,859 4,648 531
Ticketmaster's share of net income (loss)..... 1,577 1,360 1,458 3,605 1,240 (302)
SUPPLEMENTAL INFORMATION:
Number of tickets sold:
Consolidated Businesses......................... 38,655 42,458 37,619 45,530 61,890 66,397
Unconsolidated Businesses....................... 12,194 13,156 15,497 14,491 8,297 4,396
---------- ---------- ---------- ---------- ---------- ----------
Managed Businesses.............................. 50,849 55,614 53,116 60,021 70,187 70,793
========== ========== ========== ========== ========== ==========
Gross dollar value of ticket sales:
Consolidated Businesses......................... $1,001,098 $1,308,310 $1,116,660 $1,370,709 $2,055,702 $2,196,499
Unconsolidated Businesses....................... 282,274 345,491 414,918 409,646 234,465 122,035
---------- ---------- ---------- ---------- ---------- ----------
Managed Businesses.............................. $1,283,372 $1,653,801 $1,531,578 $1,780,355 $2,290,167 $2,318,534
========== ========== ========== ========== ========== ==========
Total revenues:
Consolidated Businesses......................... $ 146,640 $ 182,950 $ 161,250 $ 230,961 $ 340,980 $ 361,697
Unconsolidated Businesses....................... 41,812 69,269 80,053 67,541 35,511 20,587
---------- ---------- ---------- ---------- ---------- ----------
Managed Businesses.............................. $ 188,452 $ 252,219 $ 241,303 $ 298,502 $ 376,491 $ 382,284
========== ========== ========== ========== ========== ==========
EBITDA(1)
Consolidated Businesses......................... $ 15,585 $ 15,986 $ 10,577 $ 22,602 $ 52,581 $ 58,832
Unconsolidated Businesses....................... 8,671 9,774 13,091 13,426 6,910 2,247
---------- ---------- ---------- ---------- ---------- ----------
Managed Businesses.............................. $ 24,256 $ 25,760 $ 23,668 $ 36,028 $ 59,491 $ 61,079
========== ========== ========== ========== ========== ==========
Attributable EBITDA(2).......................... $ 18,235 $ 19,503 $ 15,222 $ 28,299 $ 55,310 $ 58,329
Net cash provided by (used in) operating
activities:
Consolidated Businesses......................... $ 14,571 $ 12,309 $ (3,068) $ 15,585 $ 34,147 $ 39,193
Unconsolidated Businesses....................... 6,439 15,761 17,658 11,806 13,158 7,745
---------- ---------- ---------- ---------- ---------- ----------
Managed Businesses.............................. $ 21,010 $ 28,070 $ 14,590 $ 27,391 $ 47,305 $ 46,938
========== ========== ========== ========== ========== ==========
Net cash used in investing activities:
Consolidated Businesses......................... $ (6,250) $ (14,553) $ (9,452) $ (43,752) $ (52,627) $ (51,443)
Unconsolidated Businesses....................... (4,654) (1,772) (6,508) (4,775) (9,948) (3,900)
---------- ---------- ---------- ---------- ---------- ----------
Managed Businesses.............................. $ (10,904) $ (16,325) $ (15,960) $ (48,527) $ (62,575) $ (55,343)
========== ========== ========== ========== ========== ==========
Net cash provided by (used in) financing
activities:
Consolidated Businesses......................... $ (2,732) $ 15,086 $ 7,772 $ 55,096 $ 35,920 $ 36,555
Unconsolidated Businesses....................... (5,406) (9,133) (5,011) (4,810) (1,373) (2,008)
---------- ---------- ---------- ---------- ---------- ----------
Managed Businesses.............................. $ (8,138) $ 5,953 $ 2,761 $ 50,286 $ 34,547 $ 34,547
========== ========== ========== ========== ========== ==========
</TABLE>
- ---------------
(1) Defined as revenue less operating costs before interest, taxes, depreciation
and amortization, ("EBITDA"). Managed Business EBITDA does not represent
cash flows from operations, as defined by generally accepted accounting
principles, and should not be considered to be an alternative to net income
as an indicator of operating performance or to cash flows from operations as
a measure of liquidity. Management believes that an EBITDA presentation is
an important factor in evaluating the amount of cash available for repayment
of debt, future investments and dividends and in determining cash available
for future distributions.
(2) Defined as Ticketmaster's pro rata share in the results of its Consolidated
Businesses and Unconsolidated Businesses' revenue less operating costs
before interest, taxes, depreciation and amortization. EBITDA does not
represent cash flows from operations, as defined by generally accepted
accounting principles, and should not be considered to be an alternative to
net income as an indicator of operating performance or to cash flows from
operations as a measure of liquidity. Management believes that an EBITDA
presentation is an important factor in evaluating the amount of cash
available for repayment of debt, future investments and dividends and in
determining cash available for future distributions.
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<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Management's discussion and analysis of the results of operations and
financial condition of the Company should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The Company has made forward-looking statements in this document that are
subject to risks and uncertainties. Forward-looking statements include
information concerning possible or assumed future results of operations, and
include statements preceded by, followed by or that otherwise include the words
"believes," "expects," "anticipates," "intends," "estimates" or similar
expressions. For those statements, the Company claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. The following important factors, in addition to
those discussed elsewhere in this document and in the documents which are
incorporated by reference, and in other public filings, press releases and
discussions with Company management, could affect the future results and could
cause these results to differ materially from those expressed in our
forward-looking statements: material adverse changes in economic conditions
generally or in the markets served by the Company; material changes in
inflation; future regulatory and legislative actions affecting the company's
industry; competition from others; product demand and market acceptance; the
ability to protect proprietary information and technology or to obtain necessary
licenses on commercially reasonable terms; the ability to expand into and
successfully operate in foreign markets; and obtaining and retaining skilled
workers.
GENERAL
The Company seeks to optimize the performance of each of the Managed
Businesses regardless of its percentage ownership. The Company provides the same
scope of ticket inventory control and management, distribution and dedicated
marketing and support services to its unconsolidated businesses as it does to
its wholly and majority owned operating subsidiaries. Consequently, certain
aspects of the performance of the Managed Businesses are better understood by
measuring their performance as a whole without regard to the Company's ownership
interest. Where relevant, certain aspects of the performance of the Managed
Businesses are also discussed with regard to the Consolidated Businesses and
Unconsolidated Businesses separately.
The Company believes that a meaningful measure of its operating results, in
addition to those of the Company on a historical consolidated basis, is a period
to period comparison of the results of the Managed Businesses. Furthermore, in
order to obtain a better understanding of the factors affecting the Company's
performance, additional operating data is presented to show the Company's
attributable beneficial interest in (i.e., its pro rata share of the results of)
the Managed Businesses regardless of whether or not fully consolidated.
During fiscal 1998, the Company made several acquisitions of third party
interests in certain of the Company's joint ventures and licensees. Comparisons
of results of operations have been significantly affected by these acquisitions.
REVENUES
Historically, ticket operation revenues are primarily comprised of
convenience charges which the Company generates by providing clients with access
to the Company's extensive distribution capabilities including Company-owned
call centers, an independent network of sales outlets remote to the client's box
office and non-traditional distribution channels such as the Internet. Other
components of ticket operations revenue include handling fees attributed to the
sale and distribution of tickets through channels other than remote sales
outlets and licensing fees. Supplemental revenues are generated through the
development of integrated marketing programs designed to provide a strategic
partner with access to the Company's extensive distribution capabilities and
media assets such as Live! magazine and Ticketmaster Online. Additional
sponsorship and promotion opportunities exist through call center music on hold,
ticketbacks, inserts and ticket envelopes. The Company also generates revenues
from the sale of ticketing systems to licensees and
15
<PAGE> 17
other third party users, which revenues historically have averaged between 1%
and 2% of total revenues on an annual basis.
The Company generally contracts with each client to be its exclusive agent
for ticket distribution for a specified period, typically three to five years,
and has experienced a high contract renewal rate. In contracts with clients, the
Company is granted the right to collect from ticket purchasers a per ticket
convenience charge on all tickets sold by the Company and an additional per
order handling charge on those tickets sold by the Company at other than remote
sales outlets.
Fluctuations in ticket operation revenues occur largely as a result of
changes in the number of tickets sold and changes in the Company's average
revenue per ticket. The number of tickets sold by the Company can vary as a
result of (i) additions or deletions to the list of client facilities serviced
by the Company; (ii) fluctuations in the scheduling of events, particularly for
popular performers; (iii) overall consumer demand for live entertainment events;
and (iv) the percentage of tickets for events which are sold directly by the
Company's clients and not through the Company's distribution system.
The average revenue per ticket will vary as a result of the amount of
convenience charges earned on each ticket. The amount of the convenience charge
typically varies based upon numerous factors, including the type of event and
whether the ticket is purchased at a retail sales outlet, through call centers,
or via the Internet, as well as the services to be rendered to the client, the
amount and cost of equipment to be installed at the client's facility and the
amount of advertising and/or promotional allowances to be provided by the
Company. Generally, contracts with clients provide for scheduled increases in
convenience charges during the term of the contract.
The sale of tickets for an event often commences several months prior to
the date of the event. The Company recognizes ticket operation revenue when the
ticket is sold. If an event is likely to be canceled, an allowance is
established in the financial statements for potential convenience charge
refunds. Except for major league sports' work stoppages, the losses attributable
to cancellations have been very limited because most events are postponed and
rescheduled rather than canceled.
Additional revenue is generated through the sale of automated concession
inventory control systems which are manufactured by Pacer/CATS/CCS and marketed
to movie theatres, stadiums, arenas and general admission facilities. Revenue is
principally recognized from the sale of software and hardware.
The Company has generated revenue through the sale of subscriptions to the
Ticketmaster Entertainment Guides, which were produced and distributed by the
Company to provide the ticket buying public with regional information regarding
future live entertainment events. Significant growth in the number of
subscribers to the Entertainment Guide led, in part, to the creation of Live!
magazine, a monthly entertainment publication whose first edition was published
in February 1996. Each edition of Live! contains a supplemental regional
Entertainment Guide inserted for the reader's benefit.
The Company also operates Entertainment To Go ("ETG"), a merchandising
business designed to leverage the Company's inbound call center traffic, its
database of consumers and its relationships with the music and entertainment
industries to sell generally at retail prices music, tour and entertainment
related merchandise products to consumers.
OPERATING COSTS
The Company records ticket operations costs specifically associated with
the distribution of tickets sold through its system. The largest components of
these operating costs are payroll, telecommunication charges, data communication
costs and commissions paid on tickets distributed through outlets away from the
box office, along with the clients' share of convenience and handling charges,
and other expenses with lesser components including ticket stock and postage.
These costs are primarily variable in nature. Direct payroll costs relate to the
Company's call centers, which are located throughout the U.S., and in the U.K.,
Canada, Australia, Mexico, Argentina, Chile and Ireland. Outlet commissions are
paid to grocery store/supermarkets, department stores, music chains and other
independent retail locations in exchange for their providing space
16
<PAGE> 18
and personnel to service ticket purchases. The participation, if any, by clients
in the Company's revenues from convenience and handling charges and other
revenues is set forth in the Company's contracts with its clients.
Costs incurred from the manufacturing and distribution of automated
concession inventory control systems include research and development, inventory
procurement, payroll and distribution expenses. These costs are primarily
variable in nature and fluctuate based upon the number of systems installed on
an annual basis.
Costs associated with the production and fulfillment of Live! magazine
include production (paper and printing), editorial and distribution costs. These
costs are primarily variable in nature and fluctuate based upon the number of
copies produced and the number of pages in each edition.
The costs recorded by the Company for its merchandising operations are
directly related to the procurement of products which are ultimately sold and
distributed to consumers. The Company acquires its products through licensees of
major touring acts and other copyright owners and does not generally invest in
or hold inventory prior to sale; consequently, operations are designed to
quickly access product inventory to fulfill orders.
Because many operating expenses such as those attributable to technology
support, sales and marketing, human resources management and other
administrative functions are not allocable to specific businesses, they are
recorded as corporate general and administrative expenses. These cost
characteristics of maintaining the Company's Consolidated Businesses differ from
the cost characteristics of the Unconsolidated Businesses; consequently,
Consolidated Businesses have higher costs of services as a percentage of revenue
than Unconsolidated Businesses.
OTHER
Although the Company collects ticket receipts, representing the full ticket
sale price, on behalf of its clients, it only records as revenue the convenience
charges and handling fees included in the ticket sales price. The remainder of
the ticket sales price constitutes funds being held on behalf of clients, which
the Company is obligated to remit to its clients at times specified by contracts
with each client. As a result, a significant portion of the Company's cash,
accounts receivable and accounts payable relates to funds received and held on
behalf of clients. Accounts payable clients primarily represent the ticket
proceeds payable to its clients, which are paid according to the terms specified
in each contract, typically weekly. Accounts receivable ticket proceeds
primarily represent the portion of ticket proceeds, including the convenience
charges, due the Company from its independent outlets and from credit card
companies. The Company's contracts with outlets set forth payment terms,
generally ranging from daily to weekly, which together with other collection
procedures virtually eliminate losses from these receivables.
PRO FORMA FINANCIAL INFORMATION
As described in Note 4 of the Consolidated Financial Statements, the
Company acquired ownership interests in Ticketmaster operating entities from
certain joint venture partners, minority shareholders and licensees during
fiscal 1998. Accordingly, the following pro forma financial information has been
prepared to illustrate the effects of these acquisitions. The pro forma
financial information does not purport to represent what the Company's results
of operations actually would have been assuming the acquisitions had been made
as of February 1, 1997. The pro forma adjustments are based on currently
available information and upon certain assumptions that management believes are
reasonable under certain circumstances. The pro forma financial information and
accompanying notes should be read in conjunction with the Consolidated Financial
Statements and related Notes thereto.
17
<PAGE> 19
TICKETMASTER GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED JANUARY 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
TICKETMASTER ACQUIRED
CONSOLIDATED TICKETING PRO FORMA COMBINED
BUSINESSES BUSINESSES ADJUSTMENTS PRO FORMA
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Ticketing operations........................ $ 295,419 $20,796 $ (79)(1) $ 316,136
Concession control systems.................. 30,036 30,036
Publications................................ 13,067 13,067
Merchandising............................... 2,458 2,458
----------- ------- ------- -----------
340,980 20,796 (79) 361,697
Operating costs, expenses and other items:
Ticketing operations........................ 169,007 10,839 (79)(1) 179,767
Ticketing selling, general and 49,957 3,706 53,663
administrative...........................
Concession control systems operations....... 16,900 16,900
Concession control systems selling, general 10,911 10,911
and administrative.......................
Publications.................................. 17,753 17,753
Merchandising................................. 2,375 2,375
Corporate general and administrative.......... 21,496 21,496
Depreciation.................................. 10,561 505 11,066
Amortization of goodwill...................... 4,692 14 496(2) 5,202
Amortization of other......................... 9,220 465 428(2) 10,113
Equity in net (income) loss of unconsolidated (1,417) 1,728 311
affiliates..................................
----------- ------- ------- -----------
Operating income............................ 29,525 3,539 (924) 32,140
Other expenses:
Interest expense, net....................... 9,560 (45) 690(3) 10,205
Minority interests.......................... (65) (240) (305)
----------- ------- ------- -----------
Income before income taxes............... 20,030 3,824 (1,614) 22,240
Income tax provision........................ 11,883 484 291(4) 12,658
----------- ------- ------- -----------
Net income............................... $ 8,147 $ 3,340 $(1,905) $ 9,582
=========== ======= ======= ===========
Basic earnings per share.................... 0.32 $ 0.37
=========== ===========
Diluted earnings per share............... $ 0.31 $ 0.36
=========== ===========
Basic weighted average number of common shares 25,846,344 25,939,305
outstanding (5).............................
=========== ===========
Diluted Weighted average number of common 26,284,555 26,377,516
shares outstanding (5)......................
=========== ===========
Supplemental Financial Information:
EBITDA(6)............................................................................ $ 58,832
Attributable EBITDA(7)............................................................... 58,329
Net cash provided by operating activities............................................ 39,193
Net cash used in investing activities................................................ (51,443)
Net cash provided by financing activities............................................ 36,555
</TABLE>
18
<PAGE> 20
TICKETMASTER GROUP, INC.
NOTES TO JANUARY 31, 1998 PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
- ---------------
(1) Represents the elimination of license fees paid by Canada to Ticketmaster
during the year.
(2) Represents amortization arising from the purchased user agreements and
excess purchase price paid for the net assets of a joint venture partner's
50% equity interest in Ticketmaster-Northwest and Synchro Systems, joint
venture partners' 67% equity interest in Ticketmaster-Southeast and a
licensee's 100% equity interest in the Canadian licensee. The purchased user
agreements are being amortized using a discounted cash flow method through
the expiration date of the underlying contracts, generally ranging from 3 to
10 years. The cost in excess of net assets acquired is being amortized over
a 30-year period.
(3) Represents the interest expense resulting from additional borrowings under
the Company's Credit Agreement incurred by the Company as if the
acquisitions had taken place on February 1, 1997, at rates of interest
incurred by the Company during the year, approximately 7.0%.
(4) Represents the related income tax effect of the pro forma adjustments
utilizing a statutory Federal rate of 34% and a statutory rate for state and
foreign taxes based on the rate in the applicable jurisdiction.
(5) Includes the pro forma effect of 1,115,531 common stock equivalents issued
in connection with the acquisition of the Canadian licensee for one
additional month.
(6) Defined as revenue less operating costs before interest, taxes, depreciation
and amortization. EBITDA does not represent cash flows from operations, as
defined by generally accepted accounting principles, and should not be
considered to be an alternative to net income as an indicator of operating
performance or to cash flows from operations as a measure of liquidity.
Management believes that an EBITDA presentation is an important factor in
evaluating the amount of cash available for repayment of debt, future
investments and dividends and in determining cash available for future
distributions.
(7) Defined as Ticketmaster's pro rata share of its Consolidated Businesses and
Unconsolidated Businesses' revenue less operating costs before interest,
taxes, depreciation and amortization. EBITDA does not represent cash flows
from operations, as defined by generally accepted accounting principles, and
should not be considered to be an alternative to net income as an indicator
of operating performance or to cash flows from operations as a measure of
liquidity. Management believes that an EBITDA presentation is an important
factor in evaluating the amount of cash available for repayment of debt,
future investments and dividends and in determining cash available for
future distributions.
19
<PAGE> 21
RESULTS OF OPERATIONS
The following tables set forth operating results for the Managed Businesses
showing the results of the Consolidated Businesses and the Unconsolidated
Businesses as a percentage of total revenues. The percentages shown for the
Unconsolidated Businesses represent the full balance for each line item and are
not reduced by the joint venture ownership interests held by entities other than
the Company.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
I. CONSOLIDATED BUSINESSES
Revenue:
Ticketing operations................................... 96.1% 88.9% 86.7%
Concession control systems............................. 0.0 5.4 8.8
Publications........................................... 2.6 4.7 3.8
Merchandising.......................................... 1.3 1.0 0.7
----- ----- -----
100.0 100.0 100.0
----- ----- -----
Operating Costs:
Ticketing operations................................... 60.2 52.9 49.5
Ticketing selling, general and administrative.......... 17.2 15.5 14.6
Concession control systems operations.................. 0.0 3.2 5.0
Concession control systems selling, general and
administrative........................................ 0.0 2.6 3.2
Publications........................................... 5.7 7.8 5.2
Merchandising.......................................... 1.2 0.9 0.7
Corporate general and administrative................... 9.2 7.3 6.3
Depreciation........................................... 3.0 2.9 3.1
Amortization of goodwill............................... 1.2 1.0 1.4
Amortization of other.................................. 1.6 1.7 2.7
Equity in net income of unconsolidated affiliates...... (0.9) (1.8) (0.4)
----- ----- -----
Operating income.................................. 1.6 6.0 8.7
Other (income) expenses:
Interest expense, net.................................. 7.9 5.0 2.8
Minority interests..................................... 0.2 0.1 0.0
Gain on sale of unconsolidated affiliate............... 0.0 (1.4) 0.0
----- ----- -----
Income (loss) before income taxes................. (6.5) 2.3 5.9
Income tax provision (benefit)............................ (1.4) 1.4 3.5
----- ----- -----
Net income (loss)................................. (5.1)% 0.9% 2.4%
===== ===== =====
II. UNCONSOLIDATED BUSINESSES:
Revenue:
Ticketing operations................................... 68.9% 80.5% 99.9%
Concession control systems............................. 28.7 19.2 0.0
Publications........................................... 2.4 0.3 0.1
----- ----- -----
100.0 100.0 100.0
----- ----- -----
Operating costs:
Ticketing operations................................... 38.5 45.1 56.2
Ticketing selling, general and administrative.......... 11.5 15.4 24.3
Concession control systems operations.................. 19.9 12.5 0.0
Concession control systems selling, general and
administrative........................................ 12.3 6.9 0.0
Publications........................................... 1.4 0.2 0.0
Depreciation........................................... 3.2 3.0 4.6
Amortization of goodwill............................... 0.5 0.2 0.0
Amortization of other.................................. 1.8 2.8 2.9
----- ----- -----
Operating income.................................. 10.9 13.9 12.0
Other (income) expenses:
Interest expense and other............................. 1.2 1.4 (0.2)
----- ----- -----
Income before income taxes........................ 9.7% 12.5% 12.2%
===== ===== =====
</TABLE>
20
<PAGE> 22
FISCAL YEAR 1998 COMPARED WITH FISCAL YEAR 1997
The following tables set forth operating results for the Consolidated
Businesses and the Unconsolidated Businesses, collectively, the Managed
Businesses. The amounts shown for the Unconsolidated Businesses represent the
full balance for each line item and do not give effect to the joint venture
ownership interests held by entities other than the Company.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, 1997 YEAR ENDED JANUARY 31, 1998
------------------------------------------ ------------------------------------------
CONSOLIDATED UNCONSOLIDATED MANAGED CONSOLIDATED UNCONSOLIDATED MANAGED
BUSINESSES BUSINESSES BUSINESSES BUSINESSES BUSINESSES BUSINESSES
------------ -------------- ---------- ------------ -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Ticketing operations........ $205,491 $54,401 $259,892 $295,419 $35,476 $330,895
Concession Control
Systems................... 12,401 12,964 25,365 30,036 -- 30,036
Publications................ 10,769 176 10,945 13,067 35 13,102
Merchandising............... 2,300 -- 2,300 2,458 -- 2,458
-------- ------- -------- -------- ------- --------
Total Revenues....... 230,961 67,541 298,502 340,980 35,511 376,491
-------- ------- -------- -------- ------- --------
Operating costs:
Ticketing operations........ 122,243 30,472 152,715 169,007 19,974 188,981
Ticketing selling, general
and administrative........ 35,789 10,366 46,155 49,957 8,627 58,584
Concession control systems
operations................ 7,377 8,462 15,839 16,900 -- 16,900
Concession control systems
selling, general and
administrative............ 5,995 4,687 10,682 10,911 -- 10,911
Publications................ 17,965 128 18,093 17,753 -- 17,753
Merchandising............... 2,141 -- 2,141 2,375 -- 2,375
Corporate general and
administrative............ 16,849 -- 16,849 21,496 -- 21,496
Depreciation................ 6,714 2,012 8,726 10,561 1,647 12,208
Amortization of goodwill.... 2,356 142 2,498 4,692 -- 4,692
Amortization of other....... 3,923 1,874 5,797 9,220 1,016 10,236
-------- ------- -------- -------- ------- --------
Total operating
costs.............. 221,352 58,143 279,495 312,872 31,264 344,136
-------- ------- -------- -------- ------- --------
9,609 $ 9,398 $ 19,007 28,108 $ 4,247 $ 32,355
======= ======== ======= ========
Equity in net income of
unconsolidated
affiliates................ (4,054) (1,417)
-------- --------
Operating income............ 13,663 29,525
Interest expense and
other..................... 11,808 9,495
Gain on sale of
unconsolidated
affiliate................. (3,195) --
Income tax provision........ 3,258 11,883
-------- --------
Net income........... $ 1,792 $ 8,147
======== ========
Supplemental information:
EBITDA...................... $ 22,602 $13,426 $ 36,028 $ 52,581 $ 6,910 $ 59,491
======== ======= ======== ======== ======= ========
Attributable EBITDA......... $ 28,299 $ 55,310
======== ========
Net cash provided by
operating activities...... $ 15,585 $11,806 $ 27,391 $ 34,147 $13,158 $ 47,305
Net cash used in investing
activities................ (43,752) (4,775) (48,527) (52,627) (9,948) (62,575)
Net cash provided by (used
in) financing
activities................ 55,096 (4,810) 50,286 35,920 (1,373) 34,547
</TABLE>
21
<PAGE> 23
CONSOLIDATED BUSINESSES
Revenues from ticketing operations increased by $89.9 million, or 44%, to
$295.4 million for fiscal 1998 from $205.5 million for fiscal 1997. The increase
is primarily attributed to an increase of 36% in the number of tickets sold
(from 45.5 million to 61.9 million tickets), and a 6% increase in average per
ticket operations revenue (from $4.23 to $4.49). The increase in the number of
tickets sold is largely attributed to the acquisition of the Company's Canadian
licensee effective March 1997 and acquisitions of joint venture partners'
interests in (and subsequent consolidation of) Ticketmaster-Northwest in June
1997 and Ticketmaster-Southeast in August 1997. In addition, the effect of
consolidating a full year of operations rather than partial years for each of
the fiscal 1997 acquisitions (Delaware Valley, Europe and Indiana) has
contributed to the increase in tickets sold.
Revenues generated from the sales of concession and control systems for the
year ended January 31, 1998 and the six months ended January 31, 1997 are
included in the results from Consolidated Businesses, while revenues generated
for the six months ended July 31, 1996 are included in the Unconsolidated
Businesses due to the acquisition of the joint venture partners' interest on
July 29, 1996. Accordingly, the discussion and analysis included herein is based
upon the increase in combined revenues of the Consolidated Businesses and the
Unconsolidated Businesses of $4.7 million, or 18%, to $30.0 million from $25.4
million for the prior year. The increase in revenue is primarily attributed to
increased sales from the release of new products to major theatre chains in the
United States, Europe and South America.
Publications revenues increased by $2.3 million, or 21%, to $13.1 million
for fiscal 1998 from $10.8 million for fiscal 1997. The increase is primarily
attributed to increased subscription revenues resulting from increases in annual
subscription rates. In addition, advertising revenue increased resulting from an
increase in the aggregate number of advertising pages in the issues of Live!
Magazine published during 1998 which were 373 from 351 in 1997 combined with a
modest increase in the revenue earned for each advertising page.
Ticketing operations costs increased by $46.8 million, or 38%, to $169.0
million in fiscal 1998 from $122.2 million in fiscal 1997. This increase is
attributed to the increase in ticketing operations revenues as these costs are
primarily variable in nature. Ticketing operations costs decreased as a
percentage of ticketing operations revenues to 57% in fiscal 1998 from 59% in
fiscal 1997. Much of this decrease is attributed to increased revenue per
ticket, which is primarily related to increased sponsorship and promotion
activities that yields higher margins, combined with an increase in the number
of tickets sold along with operating efficiencies resulting from investments in
technological developments inclusive of new digital phone switches and upgrades
of computer hardware and software in the call centers.
Ticketing selling, general and administrative costs increased by $14.2
million, or 40%, to $50.0 million in fiscal 1998 from $35.8 million in fiscal
1997. This increase is primarily attributed to the increase in territories
serviced by Consolidated Businesses resulting from the acquisitions of its joint
venture partners' interest in (and subsequent consolidation of) the
Ticketmaster-Europe operations in June 1996, Ticketmaster-Indiana operations in
November 1996, Ticketmaster-Northwest operations in June 1997 and
Ticketmaster-Southeast operations in August and December of 1997 and the
acquisitions of the Company's Delaware Valley (Philadelphia) licensee in October
1996 and the Canadian licensee effective March 1997. Lastly, the increase is
partly attributed to cost incurred for start up operations in South American
territories. Ticketing selling, general and administrative costs remained
consistent at 17% as a percentage of ticketing operations revenue from year to
year.
The operating costs of concession and control systems increased by $1.1
million, or 7%, to $16.9 million for fiscal 1998 from $15.8 million for fiscal
1997. As a percentage of revenue, these expenses decreased from 62% to 56%,
which is attributed to a combination of product mix and improvements in the
quotation, assembly and delivery process and a reduction in research and
development costs. The selling, general and administrative costs of concession
and control systems remained relatively constant from fiscal 1997 to fiscal
1998.
Corporate general and administrative costs increased by $4.7 million, or
28%, to $21.5 million in fiscal 1998 from $16.8 million in fiscal 1997. Much of
the increase resulted from increased expenses associated with
22
<PAGE> 24
growth in administrative functions necessary to support the development of the
Company's principal businesses, inclusive of recent acquisitions, formation of
new joint ventures, additional costs associated with being a publicly traded
company and increased activity designed to create integrated marketing
opportunities with strategic partners.
Depreciation increased by $3.9 million, or 58%, to $10.6 million in fiscal
1998 from $6.7 million in fiscal 1997. The increase is attributed to
acquisitions (and subsequent consolidation) of interests previously owned by
third parties in Ticketmaster's operations in Canada, Ticketmaster-Northwest and
Ticketmaster-Southeast. Additionally, the effect of including a full year of
depreciation rather than partial years for each of the fiscal 1997 acquisitions
(Pacer/CATS/CCS, Delaware Valley, Europe and Indiana) has contributed to the
increase.
Amortization of goodwill increased by $2.3 million, or 96%, to $4.7 million
in fiscal 1998 from $2.4 million in fiscal 1997. The increase is attributed to
acquisitions (and subsequent consolidation) of interests previously owned by
third parties in Ticketmaster's operations in Canada, Ticketmaster-Northwest and
Ticketmaster-Southeast. Additionally, the effect of including a full year of
amortization rather than partial years for each of the fiscal 1997 acquisitions
(Pacer/CATS/CCS, Delaware Valley, Europe and Indiana) has contributed to the
increase.
Other amortization increased by $5.3 million, or 135%, to $9.2 million in
fiscal 1998 from $3.9 million in fiscal 1997. The increase is attributed to the
acquisitions (and subsequent consolidation) of interests previously owned by
third parties in Ticketmaster's operations in Canada, Ticketmaster-Northwest and
Ticketmaster-Southeast. Additionally, the effect of including a full year of
amortiziation rather than partial years for each of the fiscal 1997 acquisitions
(Delaware Valley, Europe and Indiana) has contributed to the increase.
Consolidated interest expense net of interest income and other expense
decreased by $2.3 million, or 20%, to $9.5 million in fiscal 1998 versus $11.8
million in fiscal 1997. The decrease is primarily attributed to lower borrowing
levels and further offset by an increase in interest income resulting from
higher cash balances invested during the 1998 fiscal year.
In the prior year, the Company recognized a gain from the sale of its
interest in an unconsolidated affiliate of $3.2 million.
Income tax expense, measured as a percentage of pre-tax income, decreased
from 65% in fiscal 1997 to 59% in fiscal 1998. The high effective tax rate is
primarily attributed to non-deductible amortization resulting from acquisitions
and effective international tax rates, which are higher than those in the U.S.
As a result of the foregoing, the Company's net income increased by $6.4
million, or 355%, to $8.1 million in fiscal 1998 from $1.8 million in fiscal
1997.
UNCONSOLIDATED BUSINESSES
Revenues from ticket operations decreased by $18.9 million, or 35%, to
$35.5 million in fiscal 1998 from $54.4 million in fiscal 1997. This decrease is
primarily attributed to a decrease of 43% in the number of tickets sold (from
14.5 million to 8.3 million tickets) offset by an increase in average per ticket
operation revenue of 14% (from $3.75 to $4.28). The decrease in the number of
tickets sold by Unconsolidated Businesses is attributed to the acquisition by
the Company of its partners' joint venture interests (and thus inclusion of
operating results in Consolidated Businesses rather than Unconsolidated
Businesses) in the Ticketmaster-Northwest and Ticketmaster-Southeast operations
during fiscal 1998. In addition, during fiscal 1997, the Company acquired its
interests in the Ticketmaster Europe and Indiana operations; thus there were
partial years of operations included in the fiscal 1997 results; whereas, the
operating results of those two business are included in Consolidated Businesses
for the full year of fiscal 1998.
The discussion and analysis with respect to results of operations from
concession control systems is included in Consolidated Businesses.
23
<PAGE> 25
Ticketing operations costs decreased by $10.5 million, or 34%, to $20.0
million in fiscal 1998 from $30.5 million in fiscal 1997. This decrease is
attributed to the decrease in ticketing operations revenues of 35%, as these
costs are primarily variable in nature.
Ticketing selling, general and administrative costs decreased by $1.7
million, or 17%, to $8.6 million in fiscal 1998 from $10.4 million in fiscal
1997. This decrease is primarily attributed to the acquisition by the Company of
its partners' joint venture interest (and this inclusion of operating results in
Consolidated Businesses rather than Unconsolidated Businesses) in the
Ticketmaster-Europe and Indiana operations in June and November 1996,
respectively, and in the Ticketmaster-Northwest and Southeast operations in June
and August 1997, respectively.
Depreciation decreased by $0.4 million, or 18%, to $1.6 million in fiscal
1998 from $2.0 million in fiscal 1997. The decrease is attributed to the
acquisition by the Company of its partners' Joint Venture interests (and thus
inclusion of operating results in Consolidated Businesses rather than
Unconsolidated Businesses) in the Ticketmaster-Northwest and Southeast
operations during fiscal 1998. In addition, during fiscal 1997, the Company
acquired its interests in the Pacer/CATS/CCS and in Ticketmaster Europe and
Indiana operations; thus, there were partial years of operations included in the
fiscal 1997 results; whereas, the operating results of those three businesses
are included in Consolidated Businesses for the full year of fiscal 1998.
Other amortization decreased by $0.9 million, or 46%, to $1.0 million in
fiscal 1998 from $1.9 million in fiscal 1997. The decrease is attributed to the
acquisition by the Company of its partners' joint venture interests (and thus
inclusion of operating results in Consolidated Businesses rather than
Unconsolidated Businesses) in the Ticketmaster-Northwest and
Ticketmaster-Southeast operations during fiscal 1998. In addition, during fiscal
1997, the Company acquired its interests in the Ticketmaster Europe and Indiana
operations; thus there were partial years of operations included in the fiscal
1997 results; whereas, the operating results of those two businesses are
included in Consolidated Businesses for the full year of fiscal 1998.
MANAGED BUSINESSES
Aggregate revenues for the Managed Businesses increased by $78.0 million,
or 26%, to $376.5 in fiscal 1998 from $298.5 million in fiscal 1997, principally
as a result of an increase of $71.0 million, or 27%, to $330.9 million in ticket
operations revenue.
EBITDA for the Managed Businesses increased by $23.5 million, or 65%, to
$59.5 million in fiscal 1998 from $36.0 million in fiscal 1997, principally as a
result of an increase of $22.3 million in ticketing operations income net of
ticketing operations and selling, general and administrative costs.
24
<PAGE> 26
FISCAL YEAR 1997 COMPARED WITH FISCAL YEAR 1996
The following tables set forth operating results for the Consolidated
Businesses and the Unconsolidated Businesses, collectively, the Managed
Businesses. The amounts shown for the Unconsolidated Businesses represent the
full balance for each line item and do not give effect to the joint venture
ownership interests held by entities other than the Company.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31, 1996 YEAR ENDED JANUARY 31, 1997
------------------------------------------ ------------------------------------------
CONSOLIDATED UNCONSOLIDATED MANAGED CONSOLIDATED UNCONSOLIDATED MANAGED
BUSINESSES BUSINESSES BUSINESSES BUSINESSES BUSINESSES BUSINESSES
------------ -------------- ---------- ------------ -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Ticketing operations....... $154,851 $55,129 $209,980 $205,491 $54,401 $259,892
Concession Control
Systems................. -- 22,985 22,985 12,401 12,964 25,365
Publications............... 4,198 1,939 6,137 10,769 176 10,945
Merchandising.............. 2,201 -- 2,201 2,300 -- 2,300
-------- ------- -------- -------- ------- --------
Total Revenues..... 161,250 80,053 241,303 230,961 67,541 298,502
-------- ------- -------- -------- ------- --------
Operating costs, expenses and
other items:
Ticketing operations....... 97,147 30,836 127,983 122,243 30,472 152,715
Ticketing selling, general
and administrative...... 27,748 9,232 36,980 35,789 10,366 46,155
Concession control
systems operations...... -- 15,912 15,912 7,377 8,462 15,839
Concession control
systems selling, general
and administrative...... -- 9,834 9,834 5,995 4,687 10,682
Publications............... 9,129 1,148 10,277 17,965 128 18,093
Merchandising.............. 1,891 -- 1,891 2,141 -- 2,141
Corporate general and
administrative.......... 14,758 -- 14,758 16,849 -- 16,849
Depreciation............... 4,868 2,599 7,467 6,714 2,012 8,726
Amortization of goodwill... 1,925 380 2,305 2,356 142 2,498
Amortization of other...... 2,595 1,422 4,017 3,923 1,874 5,797
-------- ------- -------- -------- ------- --------
Total operating
costs............ 160,061 71,363 231,424 221,352 58,143 279,495
-------- ------- -------- -------- ------- --------
1,189 $ 8,690 $ 9,879 9,609 $ 9,398 $ 19,007
======= ======== ======= ========
Equity in net income of
unconsolidated
affiliates.............. (1,521) (4,054)
-------- --------
Operating income........... 2,710 13,663
Interest expense and
Other................... 13,055 11,808
Gain on sale of
unconsolidated
affiliate............... -- (3,195)
Income tax provision
(benefit)............... (2,250) 3,258
-------- --------
Net (loss) income.......... $ (8,095) $ 1,792
======== ========
Supplemental Information:
EBITDA.................. $ 10,577 $13,091 $ 23,668 $ 22,602 $13,426 $ 36,028
======== ======= ======== ======== ======= ========
Attributable EBITDA..... $ 15,222 $ 28,299
======== ========
Net cash provided by
(used in) operating
activities............ $ (3,068) $17,658 $ 14,590 $ 15,585 $11,806 $ 27,391
Net cash used in
investing
activities............ (9,452) (6,508) (15,960) (43,752) (4,775) (48,527)
Net cash provided by
(used in) financing
activities............ 7,772 (5,011) 2,761 55,096 (4,810) 50,286
</TABLE>
25
<PAGE> 27
CONSOLIDATED BUSINESSES
Revenues from ticketing operations increased by $50.6 million, or 33%, to
$205.5 million for fiscal 1997 from $154.9 million for fiscal 1996. The increase
is attributed to an increase of 21% in the number of tickets sold (from 37.6
million to 45.5 million tickets), a 5% increase in average per ticket revenue
(from $4.01 to $4.23) and an increase in sponsorship and promotions revenue. The
increase in the number of tickets sold is largely attributed to the acquisition
of the Company's Nashville and Delaware Valley (Philadelphia) licensees in
February 1996 and October 1996, respectively, acquisitions of Joint Venture
partners' interests in (and subsequent consolidation of) the Ticketmaster Europe
operations in June 1996 and Ticketmaster Indiana operations in November 1996,
and an overall increase in the number of events made available for sale to the
consumer and subsequent demand for live entertainment events. Increased
sponsorship and promotions revenue is primarily attributed to an increase in
activity with strategic marketing partners resulting from the Company's efforts
to create integrated marketing opportunities around live events, its call
centers, ticket stock and envelopes and event promotional material and in
additional media outlets such as Ticketmaster Online and Ticketmaster Travel.
Publications revenues increased by $6.6 million, or 157%, to $10.8 million
for fiscal 1997 from $4.2 million for fiscal 1996. The increase is attributed to
Ticketmaster Publications' launch of Live! magazine, a monthly consumer oriented
entertainment magazine, which distributed its first issue in February of 1996.
Live! was created as an extension of the Entertainment Guide which was published
and distributed without significant advertising revenue as a stand-alone
publication by the Company through fiscal 1996. With the February 1996 launch of
Live! magazine, the subscription base has remained relatively constant with the
increase in revenues resulting from increases in annual subscription rates and
advertising revenues.
Revenues generated by concession and control systems for the six months
ended January 31, 1997 are included in Consolidated Businesses while the
revenues generated for the first six months ended July 31, 1996 are included in
Unconsolidated Businesses due to the acquisition of the joint venture partner's
interest on July 29, 1996. Accordingly, the discussion and analysis included
herein is based upon the increase in combined revenues of the Consolidated
Businesses and the Unconsolidated Businesses of $2.4 million, or 10%, to $25.4
million from $23.0 million for the prior year. The increase is primarily
attributed to increased sales from the release of new products. The combined
operating costs of concession and control systems remained consistent at $15.9
million in both years. As a percentage of revenue, these expenses decreased from
69% to 62%, which decrease is attributed to a combination of product mix and
improvements in the quotation, assembly and delivery processes. The combined
selling, general and administrative costs of concession and control systems
increased by $0.8 million, or 9%, to $10.7 million in fiscal 1997 from $9.8
million in fiscal 1996. The increase is attributed to legal costs associated
with the MovieFone complaint. See Item 3 -- "Legal Proceedings."
Ticketing operations costs increased by $25.1 million, or 26%, to $122.2
million in fiscal 1997 from $97.1 million in fiscal 1996. This increase is
attributed to the increase in ticketing operations revenues as these costs are
primarily variable in nature. Ticketing operations costs decreased as a
percentage of ticketing operations revenues to 59% in fiscal 1997 from 63% in
fiscal 1996. Much of this decrease is attributed to operating efficiencies and
increased revenues generated from sponsorship and promotions activities in
fiscal 1997.
Publications costs increased by $8.8 million, or 97%, to $18.0 million in
fiscal 1997 from $9.1 million in fiscal 1996. This increase is attributed to the
increased production costs resulting from the launch of Live! magazine.
Corporate general and administrative costs increased by $2.1 million, or
14%, to $16.8 million in fiscal 1997 from $14.8 million in fiscal 1996. Much of
the increase resulted from increased compensation expense associated with growth
in administrative functions necessary to support the development of the
Company's principal business, and more recent development efforts in
Ticketmaster Publications, Ticketmaster Online and Ticketmaster Travel. The
increase in compensation expense was partially offset by decreases in legal
fees.
26
<PAGE> 28
Depreciation increased by $1.8 million, or 38%, to $6.7 million in fiscal
1997 from $4.9 million in fiscal 1996. The increase is attributed to
acquisitions (and subsequent consolidation) of interests previously owned by
third parties in Ticketmaster's operations in Europe, Delaware Valley and
Indiana.
Amortization of goodwill increased by $0.4 million, or 22%, to $2.4 million
in fiscal 1997 from $1.9 million in fiscal 1996. The increase is attributed to
acquisitions (and subsequent consolidation) of interests previously owned by
third parties in Ticketmaster's operations in Europe, Delaware Valley, Indiana,
Florida and Texas. Amortization of goodwill is expected to increase in
subsequent years over 1997 because 1997 amortization is computed from the dates
of acquisition which occurred in mid to late 1997.
Other amortization increased by $1.3 million, or 51%, to $3.9 million in
fiscal 1997 from $2.6 million in fiscal 1996. The increase is attributed to the
acquisitions (and subsequent consolidation) of interests previously owned by
third parties in Ticketmaster's operations in Europe, Delaware Valley, Indiana,
Florida and Texas.
The income tax provision of $3.3 million in fiscal 1997, compared to an
income tax benefit of $2.2 million for the prior year, is primarily attributed
to taxes on the gain of the sale of an unconsolidated affiliate and state income
taxes.
As a result of the foregoing, the Company had net income of $1.8 million in
the current year compared to net losses of $8.1 million in the prior year.
UNCONSOLIDATED BUSINESSES
Revenues from ticket operations decreased by $0.7 million, or 1%, to $54.4
million in fiscal 1997 from $55.1 million in fiscal 1996. This decrease is
primarily attributed to a decrease of 6% in the number of tickets sold (from
15.5 million to 14.5 million tickets) offset by an increase in average per
ticket operation revenue of 6% (from $3.56 to $3.75). The decrease in the number
of tickets sold by Unconsolidated Businesses is largely attributed to the
reacquisition by the Company of its partners' joint venture interests (and thus
inclusion of operating results in Consolidated Businesses rather than
Unconsolidated Businesses) in the Ticketmaster Europe and Indiana operations in
June and November 1996, respectively, offset by the acquisition of 50% of the
business of the Company's Australian licensee in December 1995. The 6% increase
in average revenue per ticket is comparable to the 6% increase in average gross
price per ticket of tickets sold (from $26.77 to $28.27), which is the result of
both inflation and varying ticket prices between markets.
The discussion and analysis with respect to results of operations from
concession control systems is included in Consolidated Businesses.
Ticketing operations costs decreased by $0.4 million, or 1%, to $30.5
million in fiscal 1997 from $30.8 million in fiscal 1996. This decrease is
attributed to the decrease in ticketing operations revenues as these costs are
primarily variable in nature. As a percentage of ticket operations revenues
these expenses totaled 56% in both periods.
Depreciation decreased by $0.6 million, or 23%, to $2.0 million in fiscal
1997 from $2.6 million in fiscal 1996. The decrease is attributed to the
reacquisition by the Company of its partners' joint venture interests (and thus
inclusion of operating results in Consolidated Businesses rather than
Unconsolidated Businesses) in the Ticketmaster Europe and Indiana operations in
June and November 1996, respectively, which was partially offset by the
acquisition of 50% of the business of the Company's Australian licensee,
achieved through the formation of Joint Ventures in December 1995.
Amortization of goodwill decreased by $0.2 million, or 63%, to $0.1 million
in fiscal 1997 from $0.4 million in fiscal 1996. The decrease is attributed to
the reacquisition by the Company of its partners' Joint Venture interests (and
thus inclusion of operating results in Consolidated Businesses rather than
Unconsolidated Businesses) in the Ticketmaster Europe and Indiana operations in
June and November 1996, respectively, which was partially offset by the
acquisition of 50% of the business of the Company's Australian licensee,
achieved through the formation of Joint Ventures in December 1995.
27
<PAGE> 29
Other amortization increased by $0.5 million, or 32%, to $1.9 million in
fiscal 1997 from $1.4 million in fiscal 1996. The increase is attributed to the
acquisition of 50% of the business of the Company's Australian licensee,
achieved through the formation of Joint Ventures in December 1995 (2 months of
operations in fiscal 1996 versus 12 months of operations in fiscal 1997).
MANAGED BUSINESSES
Aggregate revenues for the Managed Businesses increased by $57.2 million,
or 24%, to $298.5 in fiscal 1997 from $241.3 million in fiscal 1996, principally
as a result of an increase of $49.9 million, or 24%, to $259.9 million in ticket
operations revenue.
EBITDA for the Managed Businesses increased by $12.4 million, or 52%, to
$36.0 million in fiscal 1997 from $23.7 million in fiscal 1996, principally as a
result of an increase of $16.0 million in ticketing operations income net of
ticketing operations and selling, general and administrative costs, offset by a
decrease of $3.0 million in Publications income net of Publications costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flows from operations
and available credit under its revolving bank credit facilities. Management
believes that these sources adequately provide for its working capital, capital
expenditures and debt service needs.
Net cash provided by operating activities was $34.1 million in fiscal 1998
compared with $15.6 million in fiscal 1997. This change primarily reflects an
increase in operating income.
As of January 31, 1998, the Company had cash and cash equivalents of $26.1
million for its own account, separate from funds held in accounts on behalf of
venues and promoters and working capital of $9.4 million.
Net cash used in investing activities was $52.6 million in fiscal 1998
compared with $43.8 million in fiscal 1997. This change primarily reflects cash
used to fund the acquisition and formation of new ventures net of cash acquired
of $35.7 million (as described in Notes 3 and 4 to the Consolidated Financial
Statements) and investments in equipment and improvements of $16.7 million.
Excluding the acquisitions and formations of new venture investment
activity, the Company expects its capital expenditures to approximate $20.0
million in fiscal 1999. These expenditures are designed to take advantage of
technological developments which enhance productivity and contain costs,
expansion of existing capacity and additional growth opportunities which
management determines as necessary in order to maintain the Company's
competitive position or otherwise achieve its business strategies. The Company
plans on investing some of these funds to develop new markets in the U.S.,
Australia and South America, and in developing new business opportunities,
specifically in becoming a provider of outsourced telephone-based call center
services.
Net cash provided by financing activities was $35.9 million in fiscal 1998
compared to $55.1 million in fiscal 1997. This change primarily reflects
proceeds received in fiscal 1997 from the Company's Initial Public Offering net
of amounts used to reduce a portion of the outstanding indebtedness under the
Company's bank lending facilities and other long term debt versus net borrowings
from the Company's bank lending facilities in fiscal 1998 to partially fund
acquisitions. The change also reflects proceeds of $5.2 million from the
exercise of stock options.
Amounts available under the Credit Agreement are limited to the lower of
the commitment amount or a borrowing base calculated as a multiple of cash flows
as defined in the Credit Agreement. As of January 31, 1998, the Company had $142
million in outstanding bank borrowings under its $165 million revolving bank
credit line. Amounts available under the credit line decrease to $150 million as
of December 31, 1998. As of January 31, 1998, the borrowing base calculation did
not restrict the Company's availability under the Credit Agreement. The
Company's Credit Agreement contains other covenants and restrictions as to which
the Company was in compliance or obtained necessary waivers at January 31, 1998.
28
<PAGE> 30
Also as of January 31, 1998, Pacer/CATS/CCS had indebtedness of $7.5
million outstanding under a bank term loan. The loan agreement is secured by all
of Pacer/CATS/CCS's assets and contains certain restrictions and covenants with
which Pacer/CATS/CCS is in full compliance.
The Company anticipates that funds from operations and from its bank
lending facilities will be sufficient to meet its working capital, capital
expenditure and debt service requirements through the expiration of the Credit
Agreement (December 31, 1999) and the Pacer/CATS/CCS Credit Agreement (June 30,
1999). However, to the extent that such funds are insufficient, the Company may
need to incur additional indebtedness and/or refinance existing indebtedness.
The Company's ability to do so may be restricted by borrowing base calculations
and other financial covenants described in the Credit Agreement.
SEASONALITY
The Company's ticketing operations results for its Managed Businesses are
occasionally impacted by fluctuations in the availability of events for sale to
the public, which varied depending upon scheduling by clients. This, together
with the general practice of scheduling the commencement of ticket sales several
months prior to event dates, historically tends to benefit the Company's first
two fiscal quarters; however, this was not the case in fiscal 1998, due to an
increase in live events scheduled for the last two quarters of the fiscal year.
Set forth below are quarterly ticket quantities and gross sales for the Managed
Businesses for the past three fiscal years:
NUMBER OF TICKETS SOLD
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL YEAR QUARTER QUARTER QUARTER QUARTER TOTAL
----------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
1996.................................................. 13,509 13,667 12,759 13,181 53,116
1997.................................................. 15,268 15,135 14,936 14,682 60,021
1998.................................................. 17,564 16,759 18,147 17,717 70,187
</TABLE>
GROSS DOLLAR VALUE OF TICKET SALES
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL YEAR QUARTER QUARTER QUARTER QUARTER TOTAL
----------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
1996....................................... $383,564 $389,791 $379,741 $378,482 $1,531,578
1997....................................... 425,382 444,612 453,232 457,129 1,780,355
1998....................................... 538,985 527,575 622,880 600,727 2,290,167
</TABLE>
INFLATION RISK
General economic inflation has not had a significant impact on the
Company's operations during the periods covered by the accompanying Consolidated
Financial Statements.
FOREIGN CURRENCY RISK
As the Company increases its operations in international markets it becomes
increasingly exposed to volatile movements in currency exchange rates. The
economic impact of currency exchange rate movements on the Company could become
complex because such changes are often linked to variability in real growth,
inflation, interest rates, governmental actions and other factors. These
changes, if material, could cause the Company to adjust its financing and
operating strategies.
As currency exchange rates change, translation of the income statements of
our international businesses into U.S. dollars affects year-over-year
comparability of operating results. The Company does not hedge translation risks
because cash flows from international operations are generally reinvested
locally. Further, the
29
<PAGE> 31
Company does not enter into hedges to minimize volatility of reported earnings
because the Company does not believe it is justified by the attendant cost.
Foreign exchange gains and losses were not material to the Company's
earnings for the last three years.
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income"
("SFAS 130") effective for fiscal years beginning after December 15, 1997. The
new rules establish standards for the reporting of comprehensive income and its
components in financial statements. Comprehensive income consists of net income
and other gains and losses affecting shareholders' equity that, under generally
accepted accounting principles, are excluded from net income, such as unrealized
gains and losses on investments available for sale, foreign currency translation
gains and losses and minimum pension liability. The Company will adopt SFAS 130
in fiscal 1999 and does not expect that the adoption will have a material effect
on its financial statements.
In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131") effective for fiscal years
beginning after December 15, 1997. The new rules establish revised standards for
public companies relating to the reporting of financial and descriptive
information about their operating segments in financial statements. The Company
continues to assess the impact these revised standards will have on existing
segment disclosures; however, it does not expect that the adoption in fiscal
1999 will have a material effect on its financial statements.
YEAR 2000
The widespread use of computer programs that rely on two-digit dates to
perform computations and decision-making functions may cause computer systems to
malfunction prior to or in the year 2000 and lead to significant business delays
and disruptions in the U.S. and internationally. Each of the Company's business
units has developed a plan to minimize the impact of this "year 2000 problem"
and periodically reports on the status of its efforts to the Company's corporate
officers and ultimately the Board of Directors. Pursuant to such plans, each
business unit is engaged in the process of identifying programs used by its
computer systems that may require modification as a result of the use of such
two-digit dates, and has initiated programs to rectify any problems, including
upgrading existing software packages, implementing new year 2000 compliant
systems or repairing existing software. Each business unit has also begun
communications with its significant suppliers to determine the extent to which
the Company's operations are vulnerable to those third parties' failure to solve
their own year 2000 issues and in this regard, the plan includes vendor
compliance certification and selection of secondary sources of supply.
Management believes that the costs of resolving potential year 2000 issues will
not be material and that the necessary revisions or replacements of material
computer systems will be accomplished in a timely manner.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The index to Consolidated Financial Statements and supplementary data
required by this item are located on page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On August 5, 1997, the Company engaged Ernst & Young LLP as its independent
accountant to audit the financial statements of the Company and its subsidiaries
for the fiscal year ending January 31, 1998.
Disagreements with accountants on accounting and financial disclosure:
None.
30
<PAGE> 32
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information to appear in
Ticketmaster's definitive proxy statement for its 1998 Annual Meeting of
Shareholders (the "1998 Proxy Statement") under the captions "Information
Concerning Nominees for Election as Directors," "Section 16(a) Beneficial
Ownership Reporting Compliance" and "Executive Officers."
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information to appear under
the caption "Compensation of Executive Officers" in the 1998 Proxy Statement
provided, however, that neither the Report of the Compensation Committee on
Executive Compensation nor the Performance Graph set forth therein shall be
incorporated by reference herein or in any of Ticketmaster's previous or future
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information to appear under
the caption "Security Ownership of Certain Beneficial Owners and Management" in
the 1998 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
There is hereby incorporated by reference the information to appear under
the caption "Related Party Transactions" in the 1998 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) CONSOLIDATED FINANCIAL STATEMENTS:
The Index to Consolidated Financial Statements and Supplementary Data
is set forth on page F-1 of this report.
(2) FINANCIAL STATEMENT SCHEDULES:
Valuation and Qualifying Accounts
(3) EXHIBITS:
<TABLE>
<CAPTION>
NUMBER
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
2.1 Agreement of Purchase and Sale of Stock, dated May 13, 1997,
among the Company and Ticketmaster Canada Holdings Ltd. and
certain parties (5)
3.1 Amended and Restated Articles of Incorporation of the
Company (1)
3.2 Amended and Restated Bylaws of the Company (1)
4.1 Specimen of Stock Certificate for Common Stock (1)
10.1 Credit Agreement dated as of November 18, 1994 among the
Company, its lenders and Wells Fargo Bank, National
Association, as agent (the "Credit Agreement") (1)
10.2 First Amendment to Credit Agreement dated as of January 6,
1995 (1)
10.3 Second Amendment to Credit Agreement dated as of January 30,
1995 (1)
10.4 Third Amendment and Limited Waiver to Credit Agreement dated
as of April 7, 1995 (1)
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
NUMBER
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
10.5 Fourth Amendment and Limited Waiver to Credit Agreement
dated as of August 28, 1995 (1)
10.6 Waiver to Credit Agreement dated as of April 30, 1996 (1)
10.7 Fifth Amendment to Credit Agreement dated as of June 6, 1996
(1)
10.9 First Amended and Restated Credit Agreement dated as of July
31, 1996 between Pacer/CATS/ CCS and U.S. Bank of
Washington, National Association (1)
10.10 Employment Agreement dated as of December 15, 1993 between
the Company and Fredric D. Rosen (1, 7)
10.11 Employment Agreement dated as of February 1, 1994 between
the Company and Marc Bension (1, 7)
10.12 Amendment to Employment Agreement dated as of January 31,
1996 between the Company and Marc Bension (1, 7)
10.13 Employment Agreement dated as of February 1, 1994 between
the Company and Ned S. Goldstein (1, 7)
10.14 Employment Agreement dated as of February 1, 1994 between
the Company and Peter B. Knepper (1, 7)
10.15 Employment Agreement dated as of February 1, 1994 between
the Company and Ann Mooney (1, 7)
10.16 Employment Agreement dated as of November 1, 1995 between
the Company and Stuart W. DePina (1, 7)
10.17 Employment Agreement dated as of March 1, 1995 between the
Company and Judy A. Black (1, 7)
10.18 Employment Agreement dated as of December 1994 between the
Company and Alan Citron (1, 7)
10.19 Employment Agreement dated as of May 31, 1995 between the
Company and Claire Rothman (1, 7)
10.20 Employment Agreement dated as of February 1995 between the
Company and Carole Ference (1, 7)
10.21 Employment Agreement dated as of January 3, 1995 between the
Company and Annie Gilbar (1, 7)
10.22 Stock Option Agreement, dated December 15, 1993 between the
Company and Fredric D. Rosen (1, 7)
10.23 Ticketmaster 401 (k) Savings Plan and Trust Agreement, as
Amended and Restated Effective October 1, 1994 (1, 7)
10.24 Ticketmaster Stock Plan (as amended and restated) (1, 7)
10.25 Covenant Not to Compete, dated November 19, 1993 between the
Company and Fredric D. Rosen (1)
10.26 Covenant Not to Compete, dated November 19, 1993 between the
Company and Robert A. Leonard (1)
10.27 Registration Rights Agreement dated as of December 15, 1993
between the Company and Paul Allen (1)
10.28 Registration and Exchange Rights Agreement dated as of
December 15, 1993 among the Company, HG, Inc., Wells Fargo &
Company, Rockwood & Co., Richard L. Schulze, Harold S.
Handelsman and Fredric D. Rosen (1)
10.29 Covenant Not to Compete dated December 15, 1993 among HG
Inc., the Company and Paul Allen (1)
10.30 Covenant Not to Compete dated December 15, 1993 among
Fredric D. Rosen, the Company and Paul Allen (1)
</TABLE>
32
<PAGE> 34
<TABLE>
<CAPTION>
NUMBER
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
10.31 Covenant Not to Compete dated December 15, 1993 among Robert
A. Leonard, the Company and Paul Allen (1)
10.32 Covenant Not to Compete dated December 15, 1993 among
Fredric D. Rosen and TM Movie Tix, Inc. (1)
10.33 Shareholders' Agreement dated as of December 15, 1993 among
the shareholders of the Company (1)
10.34 Form of Indemnity Agreement between the Company and each of
its officers and directors (1)
10.35 Development and Services Agreement dated June 29, 1996 by
and between Ticketmaster Multimedia Holdings, Inc. and
Starwave Corporation (1)
10.36 Sixth Amendment to Credit Agreement dated as of September
27, 1996 (1)
10.37 Seventh Amendment and Limited Waiver to Credit Agreement and
Release of Third Party Pledge Agreement dated as of October
24, 1996 (1)
10.38 First Amendment to First Amended and Restated Credit
Agreement dated as of November 14, 1996(2)
10.39 Employment Agreement dated as of October 18, 1996 between
the Company and Layne Britton (3, 7)
10.40 Employment Agreement dated as of January 1, 1997 between the
Company and Michael Mischler (3, 7)
10.41 Employment Agreement dated as of February 1, 1997 between
the Company and Eugene L. Cobuzzi (3, 7)
10.42 Employment Agreement dated as of March 21, 1997 between the
Company and John Ruscin (3, 7)
10.43 Waiver and Amendment to Credit Agreement dated as of April
4, 1997 (3)
10.44 Promissory Note Secured by Deed of Trust between TMC Realty
Holdings Co. and Wells Fargo, National Association (3)
10.45 Employment Agreement dated as of May 2, 1997 between the
Company and Terry Barnes (4, 7)
10.46 Amendment No. 1 to Employment Agreement dated as of May 15,
1997 between the Company and Alan Citron (4, 7)
10.47* Employment Agreement dated February 1, 1997 between the
Company and Robert Perkins (7)
10.48* Employment Agreement dated July 1, 1997 between the Company
and Tony Tolbert (7)
10.49* Amendment No. 1 dated September 1997 to Employment Agreement
dated March 1, 1997 between the Company and Judy Black (7)
10.50* Amendment No. 1 dated December 1997 to Employment Agreement
dated January 3, 1995 between the Company and Annie Gilbar
(7)
10.51* Amendment No. 2 dated February 1, 1998 to Employment
Agreement dated February 1, 1994 between the Company and
Marc Bension (7)
10.52* Amendment No. 1 dated February 1, 1998 to Employment
Agreement dated February 1, 1994 between the Company and Ann
Mooney (7)
10.53* Amendment No. 1 dated February 28, 1998 to Employment
Agreement dated February 1995 between the Company and Carole
Ference (7)
10.54* Employment Agreement dated January 13, 1997 between the
Company and Daniel R. Goodman (7)
10.55* Termination Agreement dated October 29, 1997 between the
Company and Layne Britton (7)
10.56* Ninth Amendment to Credit Agreement dated as of March 6,
1998
10.57* Cooperation, Non-Competition and Confidentiality Agreement
between the Company and Fredic D. Rosen dated March 9, 1998
(7)
</TABLE>
33
<PAGE> 35
<TABLE>
<CAPTION>
NUMBER
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
10.58* Agreement and Plan of Merger By and Among USA Networks,
Inc., Brick Acquisition Corp. and the Company dated as of
March 20, 1998
11.1* Computation of earnings per share
21.1* Subsidiaries of the Registrant
23.1* Consent of KPMG Peat Marwick LLP
23.2* Consent of Ernst &Young LLP
27.1* Financial Data Schedule
99.1 Release, dated July 5, 1995, of the Antitrust Division of
the United States Department of Justice (1)
99.2 Press release dated May 15, 1997 (5)
99.3 Award with respect to the MovieFone arbitration (6)
99.4* Appeals from the United States District Court with respect
to alleged antitrust violations dated April 10, 1998
</TABLE>
- ---------------
* Filed herewith.
(1) Incorporated by reference to the correspondingly numbered exhibit to the
Registration Statement (File No. 333-12413) on Form S-1, as amended, filed
by Ticketmaster Group, Inc. under the Securities Act of 1933, as amended.
(2) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
October 31, 1996 (File No. 0-21631).
(3) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Form 10-K for the fiscal year ended January 31, 1997 (File No.
0-21631).
(4) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended April
30, 1997 (File No. 0-21631).
(5) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Form 8-K on May 28, 1997 (File No. 0-21631).
(6) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended July
31, 1997 (File No. 0-21631).
(7) Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
None.
34
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of West
Hollywood, State of California, on April 24, 1998.
TICKETMASTER GROUP, INC.,
an Illinois corporation
/s/ FREDRIC D. ROSEN
--------------------------------------
By: Fredric D. Rosen
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on April 24, 1998 by the following persons on behalf of
the registrant and in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ PAUL G. ALLEN Chairman of the Board
- -----------------------------------------------------
Paul G. Allen
/s/ FREDRIC D. ROSEN President, Chief Executive Officer and
- ----------------------------------------------------- Director (Principal Executive Officer)
Fredric D. Rosen
/s/ PETER B. KNEPPER Senior Vice President and Chief Financial
- ----------------------------------------------------- Officer
Peter B. Knepper (Principal Financial and Accounting Officer)
/s/ BARRY DILLER Director
- -----------------------------------------------------
Barry Diller
/s/ PETER BARTON Director
- -----------------------------------------------------
Peter Barton
/s/ JONATHAN DOLGEN Director
- -----------------------------------------------------
Jonathan Dolgen
/s/ JAMES HELD Director
- -----------------------------------------------------
James Held
/s/ JOHN A. PRITZKER Director
- -----------------------------------------------------
John A. Pritzker
/s/ WILLIAM D. SAVOY Director
- -----------------------------------------------------
William D. Savoy
/s/ TERENCE M. STROM Director
- -----------------------------------------------------
Terence M. Strom
</TABLE>
35
<PAGE> 37
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Reports............................... F-2
Consolidated Balance Sheets -- January 31, 1997 and 1998.... F-4
Consolidated Statements of Operations -- Years ended January
31, 1996, 1997 and 1998................................... F-5
Consolidated Statements of Shareholders' Equity -- Years
ended January 31, 1996, 1997 and 1998..................... F-6
Consolidated Statements of Cash Flows -- Years ended January
31, 1996, 1997 and 1998................................... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>
F-1
<PAGE> 38
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Ticketmaster Group, Inc.:
We have audited the accompanying consolidated balance sheet of Ticketmaster
Group, Inc. and subsidiaries at January 31, 1998 and the related consolidated
statements of operations, shareholders' equity, and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ticketmaster Group,
Inc. and subsidiaries at January 31, 1998, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Los Angeles, California
February 24, 1998, except for Note 13
as to which the date is April 10, 1998
F-2
<PAGE> 39
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Ticketmaster Group, Inc.:
We have audited the accompanying consolidated balance sheet of Ticketmaster
Group, Inc. and subsidiaries as of January 31, 1997 and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
years in the two year period ended January 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ticketmaster Group,
Inc. and subsidiaries as of January 31, 1997, and the results of their
operations and their cash flows for each of the years in the two year period
ended January 31, 1997 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Los Angeles, California
March 12, 1997
F-3
<PAGE> 40
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
JANUARY 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 60,880 $ 76,323
Accounts receivable, ticket sales......................... 12,014 23,374
Accounts receivable, other................................ 8,884 14,448
Inventory................................................. 4,093 4,813
Prepaid expenses.......................................... 8,079 11,471
-------- --------
Total current assets.............................. 93,950 130,429
Property, equipment and leasehold improvements, net......... 32,923 45,419
Investments in and advances to affiliates................... 5,305 3,434
Cost in excess of net assets acquired, net.................. 65,074 113,166
Purchased user agreements, net.............................. 22,323 29,850
Other assets................................................ 5,711 5,152
Deferred income taxes, net.................................. 3,948 3,428
-------- --------
$229,234 $330,878
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 190 $ 335
Accounts payable, trade................................... 10,767 11,148
Accounts payable, clients................................. 35,842 73,549
Accrued expenses.......................................... 18,721 23,325
Deferred revenue and other................................ 12,439 12,640
-------- --------
Total current liabilities......................... 77,959 120,997
Long-term debt, net of current portion...................... 127,514 158,561
Deferred rent and other..................................... 2,336 1,919
Minority interests.......................................... 80 493
Shareholders' equity:
Preferred stock, no par value, authorized and unissued
20,000,000 shares..................................... -- --
Common stock, no par value, authorized 80,000,000
shares, issued and outstanding 24,739,715 and
26,057,215 shares at January 31, 1997 and 1998,
respectively.......................................... -- --
Exchangeable, Class B common stock of a subsidiary,
non-voting,
non-participating, no par value, authorized, issued
and outstanding 99,935 shares at January 31, 1998..... -- 1,449
Additional paid-in capital............................. 127,466 147,430
Cumulative currency translation adjustment............. (53) (2,050)
Accumulated deficit.................................... (106,068) (97,921)
-------- --------
Total shareholders' equity........................ 21,345 48,908
-------- --------
$229,234 $330,878
======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 41
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Ticketing operations.............................. $ 154,851 $ 205,491 $ 295,419
Concession control systems........................ -- 12,401 30,036
Publications...................................... 4,198 10,769 13,067
Merchandising..................................... 2,201 2,300 2,458
----------- ----------- -----------
161,250 230,961 340,980
----------- ----------- -----------
Operating costs, expenses and other items:
Ticketing operations.............................. 97,147 122,243 169,007
Ticketing selling, general and administrative..... 27,748 35,789 49,957
Concession control systems operations............. -- 7,377 16,900
Concession control systems selling, general and
administrative................................. -- 5,995 10,911
Publications...................................... 9,129 17,965 17,753
Merchandising..................................... 1,891 2,141 2,375
Corporate general and administrative.............. 14,758 16,849 21,496
Depreciation...................................... 4,868 6,714 10,561
Amortization of goodwill.......................... 1,925 2,356 4,692
Amortization of other............................. 2,595 3,923 9,220
Equity in net income of unconsolidated
affiliates..................................... (1,521) (4,054) (1,417)
----------- ----------- -----------
Operating income.................................. 2,710 13,663 29,525
Other (income) expenses:
Interest expense, net............................. 12,782 11,508 9,560
Minority interests................................ 273 300 (65)
Gain on sale of unconsolidated affiliate.......... -- (3,195) --
----------- ----------- -----------
Income (loss) before income taxes................. (10,345) 5,050 20,030
Income tax provision (benefit)...................... (2,250) 3,258 11,883
----------- ----------- -----------
Net income (loss)................................. $ (8,095) $ 1,792 $ 8,147
=========== =========== ===========
Basic earnings (loss) per share..................... $ (.53) $ .10 $ .32
=========== =========== ===========
Diluted earnings (loss) per share................... $ (.53) $ .10 $ .31
=========== =========== ===========
Basic weighted average number of common shares
outstanding....................................... 15,310,405 17,222,459 25,846,344
=========== =========== ===========
Diluted weighted average number of common shares
outstanding....................................... 15,310,405 17,222,459 26,284,555
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 42
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
PREFERRED
STOCK
NO PAR
(NUMBER (NUMBER OF SHARES) CUMULATIVE
OF SHARES) -------------------------------- ADDITIONAL CURRENCY
REDEEMABLE/ COMMON EXCHANGEABLE EXCHANGEABLE PAID-IN TRANSLATION
CONVERTIBLE STOCK, NO PAR CLASS B, NO PAR CLASS B CAPITAL ADJUSTMENT
----------- -------------- --------------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 31, 1995............ -- 15,310,405 -- $ -- $ -- $ --
Net loss............................... -- -- -- -- -- --
---------- ---------- ---------- -------- -------- -------
BALANCE AT JANUARY 31, 1996............ -- 15,310,405 -- -- -- --
Foreign currency translation
adjustment........................... -- -- -- -- -- (53)
Preferred Stock issued................. 1 -- -- -- 27,000 --
Preferred Stock converted.............. (1) 1,862,069 -- -- -- --
Dividends on Preferred Stock........... -- -- -- -- -- --
Public sale of Common Stock at $14.50
per share (IPO Price), net of
expenses............................. -- 7,250,000 -- -- 95,866 --
Issuance of Common Stock for a Minority
Interest............................. -- 317,241 -- -- 4,600 --
Net income............................. -- -- -- -- -- --
---------- ---------- ---------- -------- -------- -------
BALANCE AT JANUARY 31, 1997............ -- 24,739,715 -- -- 127,466 (53)
Issuance of Exchangeable Class B common
stock issued for Canadian
acquisition.......................... -- -- 1,115,531 16,175 -- --
Class B Conversion..................... -- 1,015,596 (1,015,596) (14,726) 14,726 --
Exercise of Options.................... -- 301,904 -- -- 4,378 --
Tax Benefit on Stock Option Gain....... -- -- -- -- 860 --
Foreign currency translation
adjustment........................... -- -- -- -- -- (1,997)
Net income............................. -- -- -- -- -- --
---------- ---------- ---------- -------- -------- -------
BALANCE AT JANUARY 31, 1998............ -- 26,057,215 99,935 $ 1,449 $147,430 $(2,050)
========== ========== ========== ======== ======== =======
<CAPTION>
TOTAL
SHAREHOLDERS'
ACCUMULATED EQUITY
DEFICIT (DEFICIENCY)
----------- -------------
<S> <C> <C>
BALANCE AT JANUARY 31, 1995............ $(99,698) $ (99,698)
Net loss............................... (8,095) (8,095)
-------- ---------
BALANCE AT JANUARY 31, 1996............ (107,793) (107,793)
Foreign currency translation
adjustment........................... -- (53)
Preferred Stock issued................. -- 27,000
Preferred Stock converted.............. -- --
Dividends on Preferred Stock........... (67) (67)
Public sale of Common Stock at $14.50
per share (IPO Price), net of
expenses............................. -- 95,866
Issuance of Common Stock for a Minority
Interest............................. -- 4,600
Net income............................. 1,792 1,792
-------- ---------
BALANCE AT JANUARY 31, 1997............ (106,068) 21,345
Issuance of Exchangeable Class B common
stock issued for Canadian
acquisition.......................... -- 16,175
Class B Conversion..................... -- --
Exercise of Options.................... -- 4,378
Tax Benefit on Stock Option Gain....... -- 860
Foreign currency translation
adjustment........................... -- (1,997)
Net income............................. 8,147 8,147
-------- ---------
BALANCE AT JANUARY 31, 1998............ $(97,921) $ 48,908
======== =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 43
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------
1996 1997 1998
--------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ (8,095) $ 1,792 $ 8,147
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization......................... 9,388 12,993 24,473
Income (loss) attributable to minority interests...... 273 300 (65)
Equity in net income of unconsolidated affiliates..... (1,521) (4,054) (1,417)
Gain on sale of unconsolidated affiliate.............. -- (3,195) --
Deferred income taxes................................. (1,830) 1,252 520
Changes in operating assets and liabilities net of effects
from purchase of Joint Venturers' and licensees
interests:
Accounts receivable, ticket sales..................... 3,385 (299) (7,863)
Accounts receivable, other............................ (1,693) (216) (361)
Inventory............................................. (223) 424 71
Prepaid expenses...................................... 393 (1,196) (2,113)
Accounts payable, trade............................... 1,783 457 (1,715)
Accounts payable, clients............................. (5,876) (2,981) 14,242
Accrued expenses...................................... (3,432) 5,511 1,068
Deferred revenue and other............................ 3,090 5,355 (218)
Deferred rent and other............................... 1,290 (558) (622)
--------- --------- --------
Net cash provided by (used in) operating
activities.......................................... (3,068) 15,585 34,147
--------- --------- --------
Cash flows from investing activities:
Proceeds from sale of unconsolidated affiliate............ -- 6,600 --
Purchase of property, equipment and leasehold
improvements............................................ (3,644) (21,796) (16,727)
Payments for investments in affiliates.................... (7,736) (6,312) (2,156)
Cash distributions received from affiliates............... 5,760 3,240 1,947
Cost in excess of net assets acquired..................... (2,225) -- --
Purchased user agreements and other assets................ (1,607) 1,698 51
Purchase of minority interest for cash.................... -- (6,000) (1,134)
Payment for acquisitions of venturers' and licensees
interests, net of cash acquired......................... -- (21,182) (34,608)
--------- --------- --------
Net cash used in investing activities............... (9,452) (43,752) (52,627)
--------- --------- --------
Cash flows from financing activities:
Net proceeds from IPO..................................... -- 95,866 --
Proceeds from long-term debt.............................. 136,339 70,999 55,102
Reduction of long-term debt............................... (128,029) (111,401) (24,628)
Exercise of stock options including tax benefits.......... -- -- 5,238
Distributions (to) from minority shareholders............. (538) (368) 208
--------- --------- --------
Net cash provided by financing activities........... 7,772 55,096 35,920
--------- --------- --------
Effect of exchange rate on cash and cash-equivalents........ -- (53) (1,997)
--------- --------- --------
Net increase (decrease) in cash and
cash-equivalents.................................... (4,748) 26,876 15,443
Cash and cash equivalents, beginning of year................ 38,752 34,004 60,880
--------- --------- --------
Cash and cash equivalents, end of year...................... $ 34,004 $ 60,880 $ 76,323
========= ========= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest................................................ $ 12,913 $ 12,623 $ 10,487
========= ========= ========
Income taxes............................................ $ 997 $ 2,738 $ 10,592
========= ========= ========
</TABLE>
Supplemental schedule of noncash investing and financing activities:
During the fiscal year ended January 31, 1998, the Company acquired its
licensees' equity interest in the Canadian operation, the 50% interest of its
partners in Ticketmaster-Northwest, the 67% interest of its partners in
Ticketmaster-Southeast, 50% interest in Synchro Systems and 100% interest in
Distributed System Architects. In conjunction with the acquisitions, liabilities
were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired............................. $111,146
Cash paid for venturers' and licensee's interests......... 59,370
Stock issued for venturer's interest...................... 16,175
--------
Liabilities assumed....................................... $ 35,601
========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 44
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Ticketmaster Group, Inc. and subsidiaries (the Company) is the leading
provider of automated ticketing services in the United States with clients
including the country's foremost entertainment facilities, promoters and
professional sports franchises. The Company provides automated ticketing
services to organizations that sponsor events which enable patrons alternatives
to purchasing tickets through operator-staffed call centers, the Internet and
independent sales outlets remote to the facility box office.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Ticketmaster
Group, Inc., its wholly owned subsidiaries and majority owned companies and
joint ventures. Investments in companies and joint ventures, which ownership
interests range from 20-50% and in which the Company exercises significant
influence over operating and financial policies, are accounted for using the
equity method at cost plus advances, increased or decreased by the Company's
share of earnings or losses, less dividends received. All significant
intercompany balances and transactions have been eliminated.
REVENUE RECOGNITION
Revenue from ticket operations is recognized as tickets are sold. The
Company also licenses software under noncancellable license agreements and
provides services including maintenance, training, installation, consulting and
support services. License fee revenues are generally recognized when a
noncancellable license agreement has been signed, the product has been shipped,
there are no uncertainties surrounding product acceptance, the fees are fixed
and determinable and collection is considered probable. Revenues from
maintenance agreements for maintaining, supporting and providing periodic
upgrades are recognized ratably over the maintenance period, which in most
instances is one year. Revenues for training and consulting services are
recognized as services are performed. Revenue and profits under contracts
requiring significant customization are recognized using the
percentage-of-completion method of contract accounting based on the ratio of
incurred costs to total estimated costs. Revenue from all other sources are
recognized either upon delivery or when the service is provided.
CASH AND CASH EQUIVALENTS
The Company classifies all highly liquid debt instruments purchased with an
original maturity of three months or less as cash equivalents.
ACCOUNTS RECEIVABLE, TICKET SALES
Accounts receivable, ticket sales are principally from ticketing outlets
and credit card processors and represent the face value of the tickets sold plus
convenience charges, generally net of outlet commissions. The Company performs
credit evaluations of new ticket outlets, which are reviewed and updated
periodically, requiring collateral as circumstances warrant.
ACCOUNTS RECEIVABLE, OTHER
Accounts receivable, other, consists primarily of amounts due from
licensees in connection with software sales and other services including
maintenance and installation.
F-8
<PAGE> 45
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INVENTORY
Inventory, consisting primarily of systems hardware, maintenance parts and
supplies, is stated at the lower of cost (first-in, first out) or market.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements are stated at cost.
Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the related assets of three to forty years or, for
leasehold improvements, the term of the lease, if shorter. When assets are
retired or otherwise disposed of, the cost is removed from the asset account and
the corresponding accumulated depreciation is removed from the related allowance
account and any gain or loss is reflected in results of operations.
COST IN EXCESS OF NET ASSETS ACQUIRED
The cost in excess of net assets acquired represents amounts allocated to
goodwill through the purchase of other businesses, ticketing operations and
minority interests and is being amortized by the straight-line method
principally over terms ranging from five to thirty years. Accumulative
amortization was $11.1 million and $6.4 million at January 31, 1998 and 1997,
respectively.
ACCOUNTS PAYABLE, CLIENTS
Accounts payable, clients represents contractual amounts due to clients for
tickets sold by the Company on behalf of the organizations that sponsor events.
DEFERRED REVENUE AND OTHER
Deferred revenue primarily consists of subscription revenue related to
publications, maintenance revenue related to Concession Control Systems and
sponsorship revenue related to ticketing operations. Deferred publications
revenue is recognized pro rata on a monthly basis, over the life of the
subscriptions. Costs in connection with the procurement of the subscriptions are
charged to expense pro rata on a monthly basis, over the life of the
subscriptions. Deferred maintenance revenue is recognized over the term
(generally one year) of the agreements on a straight-line basis. Deferred
sponsorship revenue and the related costs are recognized over the term of the
agreements on a straight-line basis or as earned ratable based upon delivery.
INCOME TAXES
Deferred tax assets and liabilities are recognized with respect to the tax
consequences attributable to the differences between the financial statement
carrying values and tax bases of assets and liabilities. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which these temporary differences are expected to be
recovered or settled. Further, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the
enactment date.
FOREIGN CURRENCY TRANSLATION
The Company has determined that the functional currency of each foreign
operation is the local currency. The effects of translation rate changes related
to assets and liabilities located outside the United States are included as a
component of shareholders' equity. Foreign currency transaction gains and losses
are included in Interest Expense, net on the Consolidated Statements of
Operations through 1998; such gains and losses have not been significant.
F-9
<PAGE> 46
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONCENTRATION OF CREDIT RISK
The Company places its temporary cash investments principally in commercial
paper with large domestic and international companies and limits the amount of
credit exposure in any one company.
EARNINGS PER SHARE
Effective in fiscal year 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128") and related
interpretations. SFAS No. 128 requires dual presentation of Basic Earnings per
Share ("Basic EPS") and Diluted Earnings per Share ("Diluted EPS"). Basic EPS
excludes dilution and is computed by dividing net income by the weighted average
number of common shares outstanding during the reported period. Diluted EPS
reflects the potential dilution that could occur if stock options and other
commitments to issue common stock were exercised using the treasury stock
method. Earnings per share for all prior periods have been restated to reflect
the adoption of SFAS No. 128.
The composition of Basic EPS and Diluted EPS is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------------------
1996 1997 1998
----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE INFORMATION)
<S> <C> <C> <C>
Net income (loss)........................... $ (8,095) $ 1,792 $ 8,147
Weighted average shares..................... 15,310,405 17,222,459 25,846,344
Basic earnings (loss) per share............. $ (.53) $ .10 $ .32
=========== =========== ===========
Weighted average shares including the
dilutive effect of stock options.......... 15,310,405 17,222,459 26,284,555
Diluted earnings (loss) per share........... $ (.53) $ .10 $ .31
=========== =========== ===========
</TABLE>
FINANCIAL INSTRUMENTS
The estimated fair values of cash, accounts receivable, notes receivable,
accounts payable, accrued expenses, and income taxes payable approximate their
carrying value because of the short term maturity of these instruments or the
stated interest rates are indicative of market interest rates.
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 at the
date of financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company adopted the disclosure requirements of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS
No. 123") in fiscal 1996. As permitted by SFAS No. 123, the Company continues to
measure compensation cost in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25") but provides pro
forma disclosures of net income and earnings per share as if the fair value
method (as defined in SFAS No. 123) had been applied beginning in 1996.
F-10
<PAGE> 47
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company adopted the disclosure requirements of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" in fiscal 1996. This Statement requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future net cash flows (on an
undiscounted basis) expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130") effective for fiscal years beginning after December 15,
1997. The Company will adopt SFAS No. 130 in fiscal 1999 and does not expect
that the adoption will have a material effect on its financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", ("SFAS No. 131") effective for fiscal
years beginning after December 15, 1997. The new rules establish revised
standards for public companies relating to the reporting of financial and
descriptive information about their operating segments in financial statements.
The Company continues to assess the impact these revised standards will have on
existing segment disclosures; however, it does not expect that the adoption in
fiscal 1999 will have a material effect on its financial statements.
RECLASSIFICATIONS
Certain reclassifications have been made to prior years financial
information to conform with the current year presentation.
2. PROPERTY, EQUIPMENT & LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements consisted of the following
(in thousands):
<TABLE>
<CAPTION>
JANUARY 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Land........................................... $ 1,980 $ 2,409
Building....................................... 10,804 13,923
Computer equipment............................. 28,287 29,925
Telephone equipment and furnishings............ 11,611 16,582
Transportation equipment....................... 1,124 1,704
Leasehold improvements, net.................... 2,937 5,193
-------- --------
56,743 69,736
Less accumulated depreciation.................. (23,820) (24,317)
-------- --------
$ 32,923 $ 45,419
======== ========
</TABLE>
F-11
<PAGE> 48
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS IN AND ADVANCES TO AFFILIATES
Investments in Joint Ventures, which the Company refers to also as
affiliates or "affiliated companies", consisted of the following (in thousands):
<TABLE>
<CAPTION>
JANUARY 31,
----------------
1997 1998
------ ------
<S> <C> <C>
Investments in Ticketing Joint Ventures............ $4,652 $2,400
Other investments.................................. 653 1,034
------ ------
$5,305 $3,434
====== ======
</TABLE>
All of the above investments are accounted for under the equity method.
Ticketing Joint Ventures
At January 31, 1998, the Company's investments in Ticketing Joint Ventures
consist of a 50% interest in Ticketmaster-Australia, Ticketmaster Ireland and
Ticketmaster Golf and a 27% interest in Ticketmaster-Mexico. During fiscal 1998,
the Company acquired controlling interests in Ticketmaster-Northwest and
Southeast and Synchro Systems (see Note 4). Prior to the fiscal 1998 acquisition
dates, the Company had a 50%, 33% and 50% interest in these Joint Ventures
respectively and, accordingly, classified these investments as affiliates and
accounted for them using the equity method of accounting. In fiscal 1997, the
Company acquired controlling interests in Ticketmaster-Indiana, Ticketmaster-UK
Limited and TM-Europe Group.
On July 31, 1997 the Company acquired 50% of the capital stock of The
Ticket Shop Limited for a purchase price of approximately Irish punts L1,517,000
(approximately US $2,200,000). This acquisition (Ireland acquisition) has been
recorded as a purchase transaction; accordingly, the purchase price was
allocated to the net assets acquired based on their estimated fair market
values. Approximately $0.8 million was allocated to purchased user agreements;
the excess of the estimated fair value of net assets acquired amounted to
approximately $1.4 million, which has been accounted for as goodwill and is
being amortized over 30 years using the straight line method.
On October 10, 1996, the Company acquired a 27% equity interest in the
Company's Mexican licensee from a third party for $1.8 million in cash and 5% of
net distributions (as defined) received with respect to such 27% equity interest
from the Mexican operation.
Summarized financial information of the unconsolidated Ticketing Joint
Ventures is presented below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1997 1998
-------- --------
<S> <C> <C>
COMBINED RESULTS OF OPERATIONS:
Revenues....................................... $54,577 $38,905
Operating income............................... 10,087 5,567
Pre-tax income................................. 10,032 5,293
</TABLE>
F-12
<PAGE> 49
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
JANUARY 31,
--------------------
1997 1998
------- -------
<S> <C> <C>
COMBINED FINANCIAL POSITION:
Total assets................................... $24,739 $30,021
Total liabilities.............................. 12,551 18,941
Venturers' capital............................. 12,188 11,080
</TABLE>
4. ACQUISITIONS
All acquisitions have been accounted for under the purchase method. The
results of operations of the acquired businesses are included in the
consolidated financial statements from the dates of acquisition.
On February 12, 1996 the Company completed the acquisition of certain
assets of Tennessee Performing Arts Center Management Corporation, which managed
a ticket selling business within the State of Tennessee, for a purchase price of
$1.6 million.
On June 7, 1996, the Company acquired the minority interests held by its
joint venture partner in Ticketmaster UK Limited and Ticketmaster Europe Group.
The purchase consideration was $6 million in cash and an Exchangeable Promissory
Note (the Note) in the principal amount of $5 million, bearing interest at the
prime rate. The Note plus interest was paid in full in November 1996.
On August 31, 1996, the Company purchased certain assets of its
Albuquerque, New Mexico licensee, which managed a ticket distribution business
in Albuquerque, New Mexico, for a purchase price of $150,000.
On October 3, 1996, the Company acquired the license rights and related
assets of its Delaware Valley (Philadelphia) licensee, which manages a ticket
distribution business primarily in Philadelphia, Pennsylvania for $19 million in
cash.
On November 22, 1996, the Company completed the acquisition of the 50%
equity interest of its partner in Ticketmaster-Indiana. In connection with this
transaction, the Company issued 1,862,069 shares of Common Stock having an
aggregate value of $27 million based on the Initial Public Offering ("IPO")
price per share.
On November 25, 1996, the Company acquired the 20% equity interest of the
minority shareholder in Southwest Ticketing, Inc., the Company's consolidated
operating subsidiary in Texas, for $6 million in cash. With the acquisition, the
Company increased its ownership interest to 100%.
Also, on November 25, 1996, the Company acquired the 20% equity interest of
the minority shareholder in Ticketmaster-Florida, Inc., the Company's
consolidated operating subsidiary in Florida. In connection with the
acquisition, the Company issued 317,241 shares of Common Stock (having a value
of $4.6 million based upon the IPO price per share). With the acquisition, the
Company increased its ownership interest to 100%.
On July 29, 1996, the Company acquired the 50% interest held by its joint
venture partner in Pacer/ CATS/CCS -- a Wembley/Ticketmaster Joint Venture (the
Pacer Joint Venture) which business is to develop, design and service
stand-alone computer tickets systems, as well as other management information
systems to be used in various venues, including motion picture theaters,
stadiums, arenas and amusement parks. With the acquisition, the Company
increased its ownership interest to 100%.
Consideration paid by the Company in connection with its initial 50%
interest in the Pacer Joint Venture and the subsequent 50% interest purchased
from WIL, Incorporated ("WIL") aggregated approximately $16 million in cash and
the assumption of $7.5 million of debt. WIL's contribution to the Pacer Joint
Venture included certain ticketing technology in development and employment
contracts with covenants-not-to-
F-13
<PAGE> 50
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
compete, for which the Company paid $7.5 million and $3.75 million,
respectively. The technology in development was expensed as research and
development cost by the Company. During the year ended January 31, 1995, the
covenants-not-to-compete were charged to expense, as it was determined that this
intangible had no future value to the Company. The remaining $3.25 million of
the Company's excess investment over the underlying equity in the Pacer Joint
Venture has been recorded as cost in excess of net assets acquired and is being
amortized using the straight line method over a period of seven and a half
years.
Pursuant to an Agreement of Purchase and Sale of Stock, dated as of May 13,
1997 (with effect from March 1, 1997), the Company acquired all of the issued
and outstanding shares of capital stock of its Canadian licensees for a purchase
price of Canadian $44,650,000 (approximately US $32,350,000), consisting of
approximately Canadian $22,325,000 in cash and 1,115,531 non-voting,
non-participating Class B Shares of the Company's new Canadian subsidiary
(Exchangeable Common Stock). The Class B Shares have certain protective rights
but have no rights with respect to profits on losses of the Canadian subsidiary.
Further, these shares have no redemption features other than for Ticketmaster
Group, Inc. common stock. Holders of the Class B Shares have the right, at any
time, to exchange such Class B Shares for shares of the Company's Common Stock
on a one-for-one basis, subject to adjustment. In addition, the Company has the
right to require such exchange to occur at any time on or after January 1, 2001,
or earlier if certain specified events occur. This acquisition has been recorded
as a purchase transaction; accordingly, the purchase price was allocated to the
net assets acquired based on their estimated fair market values. Approximately
$6.4 million was allocated to purchased user agreements; the excess of the
estimated fair value of net assets acquired amounted to approximately $19.7
million, which has been accounted for as goodwill and is being amortized over 30
years using the straight line method. The accompanying condensed consolidated
statements of operations include the results of operations since the effective
date of the acquisition. Upon the occurrence or satisfaction, as applicable, of
certain specified events and conditions relating to operations in Canada, the
purchase price will be increased by approximately 12.3%, payable on May 1, 1998,
50% in cash and 50% in additional Class B Shares of the Canadian subsidiary. If
increased, the purchase price will be allocated between purchased user
agreements and goodwill.
On June 30, 1997, the Company acquired the 50% interest held by its joint
venture partner in Ticketmaster-Northwest for $12.8 million in cash, including
expenses. This acquisition has been recorded as a purchase transaction;
accordingly, the purchase price was allocated to the net assets acquired based
on their estimated fair market values. Approximately $1.5 million was allocated
to purchased user agreements; the excess of the estimated fair value of net
assets acquired amounted to approximately $10.6 million, which has been
accounted for as goodwill and is being amortized over 30 years using the
straight line method. The accompanying condensed consolidated statements of
operations include the results of operations since the effective date of the
acquisition.
On July 31, 1997, the Company acquired the 20% minority interest held by
its joint venture partner in Ticketmaster-Tennessee for $1.1 million in cash.
This acquisition has been recorded as a purchase transaction; accordingly, the
purchase price was allocated to the net assets acquired based on their estimated
fair market values. Approximately $0.3 million was allocated to purchased user
agreements; the excess of the estimated fair value of net assets acquired
amounted to approximately $0.8 million, which has been accounted for as goodwill
and is being amortized over 30 years using the straight line method.
On August 31 and December 17, 1997, the Company acquired the 33% interest
held by each of its two joint venture partners in Ticketmaster-Southeast for
$19.0 million in cash, resulting in a 100% ownership interest in this Joint
Venture. This acquisition has been recorded as a purchase transaction;
accordingly, the purchase price was allocated to the net assets acquired based
on their estimated fair market values. Approximately $4.5 million was allocated
to purchased user agreements; the excess of the estimated fair value of net
assets acquired amounted to approximately $12.3 million, which has been
accounted for as goodwill and
F-14
<PAGE> 51
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
is being amortized over 30 years using the straight line method. The
accompanying condensed consolidated statements of operations include the results
of operations since the effective date of the acquisition.
On September 30, 1997 the Company acquired all of the equity interests of
the minority shareholders in Synchro Systems Limited for a purchase price of
approximately UK L2,000,000 (approximately US $3,300,000). This acquisition has
been recorded as a purchase transaction; accordingly, the purchase price was
allocated to the net assets acquired based on their estimated fair market
values. The excess of the estimated fair value of net assets acquired amounted
to approximately $0.9 million, which has been accounted for as goodwill and is
being amortized over 30 years using the straight line method.
On January 2, 1998, the Company acquired 100% of the capital stock of
Distributed System Architects Inc., ("DSA") which provides software and service
products for automated ticketing systems, for a purchase price of $8 million.
This acquisition has been recorded as a purchase transaction; accordingly, the
purchase price was allocated to the net assets acquired based on their estimated
fair market values. The excess of the estimated fair value of net assets
acquired amounted to approximately $7.9 million, which has been accounted for as
goodwill and is being amortized over 15 years using the straight-line method.
Proforma Financial Results
The following pro forma information presents a summary of consolidated
results of the Company, the Ticketmaster-Europe, Indiana, Northwest, Southeast
and Pacer/CATS/CCS Joint Ventures, the Delaware Valley (Philadelphia), Canadian
and Mexico licensees, the Texas and Florida operating subsidiaries and Synchro
Systems for the years ended January 31, 1997 and 1998 assuming the acquisitions
had been made as of February 1, 1996, with pro forma adjustments to give affect
to amortization of goodwill and purchased user agreements, interest on the debt
incurred on these acquisitions and the related income tax effect utilizing a
statutory rate for Federal taxes equal to 34%, for state and foreign taxes equal
to the rate applicable in each jurisdiction. Also, the following pro forma
information has been prepared to illustrate the effects of the application of
the proceeds of an Initial Public Offering completed on November 22, 1996. The
pro forma financial information is not necessarily indicative of the results of
operations as they would have been had the transactions been effective on
February 1, 1996. The Pro Forma Financial Information and accompanying notes
should be read in conjunction with the Consolidated Financial Statements and
related Notes thereto.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31
----------------------------
1997 1998
----------- -----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Total revenue................................ $324,709 $361,697
Net income................................... 2,738 9,582
Diluted earnings per share................... .11 .36
</TABLE>
Pro forma results of operations have not been presented for the
Ticketmaster-Ireland, Ticketmaster-Tennessee and DSA acquisitions because the
pro forma effects of these acquisitions are not significant.
5. PURCHASED USER AGREEMENTS, NET
Net purchased user agreements consisted of the following (in thousands):
<TABLE>
<CAPTION>
JANUARY 31,
----------------------
1997 1998
-------- --------
<S> <C> <C>
Purchased user agreements.................... $ 42,643 $ 57,441
Accumulated amortization..................... (20,320) (27,591)
-------- --------
$ 22,323 $ 29,850
======== ========
</TABLE>
F-15
<PAGE> 52
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The purchased user agreements are being amortized generally in accordance
with the contract terms, primarily on a straight-line basis, including any
annual minimum guarantees specified by the contract. The lives of the contracts
generally range from 2 to 10 years.
6. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
JANUARY 31,
--------------------
1997 1998
-------- --------
<S> <C> <C>
Notes payable to bank on revolving loan ($175 million at
January 31, 1997, $165 million at January 31, 1998,
respectively), collateralized by substantially all of the
Company's assets, payable on December 31, 1999; bearing
interest at the London Inter-Bank Offering Rate (5.4% and
5.6% at January 31, 1997 and 1998, respectively) plus the
applicable margin, as defined (1.625% and 1.000% at
January 31, 1997 and 1998, respectively).................. $120,000 $142,000
Promissory note secured by a Deed of Trust on the Company's
Headquarters' building; bearing interest at a rate of
9.2%; principal and interest payable monthly, based on a
twenty-five year term, with the balance due on April 25,
2007. On the maturity date, all unpaid principal and
accrued but unpaid interest will be due................... -- 8,928
Notes payable to bank on term loan collateralized by
substantially all of Pacer/ CATS/CCS's assets, interest at
prime (8.25% and 8.5% at January 31, 1997 and 1998,
respectively) plus 0.25% or at the Inter-Bank Offering
Rate plus 225 basis points; interest payable monthly;
principal payable monthly beginning July 31, 1997 (to the
extent Pacer/CATS cash flows exceed certain amounts) with
the balance due on June 30, 1999.......................... 7,500 7,500
Other....................................................... 204 468
-------- --------
127,704 158,896
Less current portion........................................ 190 335
-------- --------
$127,514 $158,561
======== ========
</TABLE>
Annual principal payments due subsequent to January 31, 1998 are as follows
(in thousands):
<TABLE>
<S> <C>
Year ending January 31:
1999.............................................. $ 335
2000.............................................. 149,851
2001.............................................. 125
2002.............................................. 137
2003.............................................. 150
Thereafter........................................ 8,298
--------
$158,896
========
</TABLE>
Interest expense incurred was approximately $13.6 million, $13.0 million
and $11.4 million for the years ended January 31, 1996, 1997 and 1998,
respectively.
The aggregate bank group commitment under the terms of the Company's
revolving loan agreement currently equals $165 million reducing to $150 million
at December 31, 1998.
F-16
<PAGE> 53
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company's revolving credit and term loans borrowing agreements with its
lenders are subject to certain restrictive covenants relating to, among other
things, net worth, cash flows and capital expenditures. The Company was in
compliance with its restrictive covenants or has obtained the necessary waivers
from its bank for the fiscal years ended January 31, 1996, 1997 and 1998. In
addition, the Company's credit agreements impose certain restrictions on the
payment of dividends to the Company's shareholders.
The Company has issued standby letters of credit totaling $0.1 million on
January 31, 1998.
7. INCOME TAXES
Deferred income taxes result from temporary differences in the tax and
financial reporting bases of certain assets and liabilities. The sources of
these differences and the tax effect of each were as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 31,
----------------
1997 1998
------ ------
<S> <C> <C>
Deferred tax assets:
Investments in affiliates due to equity in net loss and
amortization period differences.......................... $3,305 $3,020
Deferred revenue........................................... 1,545 1,110
Contributions.............................................. 630 --
State and local taxes...................................... 45 --
------ ------
Total deferred tax assets........................ 5,525 4,130
Deferred tax liabilities:
Other intangible assets, principally due to amortization... 600 400
Equipment and leasehold improvements, principally due to
depreciation............................................. 265 240
Cost in excess of net assets acquired, principally due to
amortization............................................. 415 35
Other...................................................... 297 27
------ ------
Total deferred tax liabilities................... 1,577 702
------ ------
Net deferred tax assets.................................... $3,948 $3,428
====== ======
</TABLE>
In assessing the realizability of the net deferred tax assets, management
considers whether it is more likely than not that some or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax assets
depends upon the generation of future taxable income during the periods in which
those temporary differences become deductible. As of January 31, 1998, the
Company had not provided a valuation allowance to reduce the net deferred tax
assets due to the Company's expectation of future taxable income against which
the deferred tax asset will be realized.
F-17
<PAGE> 54
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The provision/(benefit) for income taxes consisted of the following (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
----------------------------
1996 1997 1998
------- ------ -------
<S> <C> <C> <C>
Current:
Federal...................................... $(1,500) $ 545 $ 7,475
State........................................ 1,080 1,330 1,925
Foreign...................................... -- 130 1,855
------- ------ -------
(420) 2,005 11,255
------- ------ -------
Deferred:
Federal...................................... (1,595) 1,092 550
State........................................ (235) 161 78
------- ------ -------
(1,830) 1,253 628
------- ------ -------
Total income tax provision (benefit)........... $(2,250) $3,258 $11,883
======= ====== =======
</TABLE>
The following is a reconciliation of the statutory Federal income tax rate
to the Company's effective income tax rate:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
-----------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Statutory Federal income tax expense.................... (34)% 34% 35%
State income taxes, net of Federal benefit.............. 5 20 8
Effect of foreign operations............................ (3) (7) 4
Non-deductible amortization of excess cost over fair
market value of net assets acquired................... 5 10 11
Meals and entertainment limitation...................... 2 5 1
Other................................................... 3 3 0
--- -- --
(22)% 65% 59%
=== == ==
</TABLE>
Federal income tax returns of the Company for all fiscal years through 1989
and 1992 and 1993 fiscal years have been closed and all matters have been
resolved. The Federal income tax returns for the 1990 and 1991 fiscal years have
been audited by the Internal Revenue Service and the Company received a Notice
of Proposed Adjustment. A response to the proposed adjustments has been filed.
Management believes that the resolution of the proposed adjustments will not
have a material adverse effect on the Company's financial position or results of
operations.
8. STOCK OPTIONS
The Company adopted the Ticketmaster Stock Plan (the Plan), under which
3,750,000 shares of common stock have been reserved for issuance upon exercise
of incentive stock options, nonqualified stock options, restricted stock, stock
appreciation rights or phantom stock awards.
F-18
<PAGE> 55
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The table below summarizes stock option activity under the Plan over the
past three years consisting solely of the non-qualified stock options:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE NUMBER OF AVERAGE
NUMBER EXERCISE SHARES REMAINING
OF SHARES PRICE EXERCISABLE LIFE (YEARS)
--------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Options outstanding at
January 31, 1995........... 265,111 $14.14 82,511 9.0
Granted.................... --
Exercised.................. --
Canceled................... --
--------- ------ --------- ----
Options outstanding at
January 31, 1996........... 265,111 $14.14 165,022 8.0
Granted.................... 2,801,700 $14.50
Exercised.................. --
Canceled................... (9,900) $14.50
--------- ------ --------- ----
Options outstanding at
January 31, 1997........... 3,056,911 $14.47 247,437 9.48
Granted.................... 145,000 $15.66
Exercised.................. (301,904) $14.50
Canceled................... (107,471) $14.50
--------- ------ --------- ----
Options outstanding at
January 31, 1998........... 2,792,536 $14.53 2,772,536 8.50
========= ====== ========= ====
</TABLE>
Options are granted at prices not less than the market value of the common
stock at grant date and become exercisable over a period of 48 months. Options
expire not later than 10 years after the date of grant, or earlier, in certain
cases, if the individual is no longer employed by the Company. The range of
exercise price for options outstanding at January 31, 1998 range from $13.88 to
$20.00. On January 31, 1998, the Company's underlying stock closed on the NASDAQ
National Market at a price of $24.31 per share.
On December 15, 1993, the Company granted, in addition to the Plan, options
to acquire 1,331,340 shares of common stock at an exercise price of $14.14 per
share. At January 31, 1998, 1,331,340 options were exercisable. The options
expire on December 15, 2003. No options were exercised as of January 31, 1998.
The stock options outstanding on July 17, 1997 became fully vested as a
result of the change in the controlling ownership of the Company.
F-19
<PAGE> 56
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net income would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 31,
----------------
1997 1998
------ ------
<S> <C> <C>
Net income as reported..................................... $1,792 $8,147
Pro forma................................................ 902 560
Diluted earnings per share as reported..................... .10 .31
Pro forma................................................ .05 .02
</TABLE>
Pro forma net income reflects only options granted in fiscal 1998 and
fiscal 1997 that became vested in fiscal 1998. Therefore, the full impact of
calculating compensation cost for stock options under SFAS No. 123 is not
reflected in the pro forma net income amounts presented above because
compensation cost is reflected over the options' vesting period of 4 years and
compensation cost for options granted prior to January 31, 1996 is not
considered.
The weighted average fair value of options granted during the year was
$15.10 in 1998. The fair value of each option grant was estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 31,
------------
1997 1998
---- ----
<S> <C> <C>
Dividend yield.............................................. 0% 0%
Annualized volatility....................................... 27% 43%
Risk free interest.......................................... 7.2% 5.69%
Expected terms (years)...................................... 4 4
</TABLE>
The impact of outstanding unvested stock options granted prior to 1997 has
been excluded from the pro forma calculations. Accordingly, the 1996 and 1995
pro forma adjustments are not indicative of future period pro forma adjustments,
when the calculation will apply to all applicable stock options.
9. 401(K) PLAN
The Company has a 401(k) plan covering all eligible employees, which
contains an employer matching feature of 25% up to a maximum of 6% of the
employee's compensation. The Company's contribution for the plan years ended
December 31, 1995, 1996 and 1997 was approximately $310,000, $410,000 and
$455,000, respectively.
F-20
<PAGE> 57
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
The Company leases office space and equipment under various operating
leases that expire at various dates through 2008. Renewal options exist for a
substantial portion of the leases. Additional rental payments may be required
for the Company's pro rata share of certain operating expenses associated with
office space leases. Future minimum lease payments are as follows as of January
31, 1998 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING JANUARY 31, AMOUNT
----------------------- -------
<S> <C>
1999.......................................... $ 7,885
2000.......................................... 5,879
2001.......................................... 4,054
2002.......................................... 3,160
2003.......................................... 1,790
Thereafter....................................... 1,020
-------
$23,788
=======
</TABLE>
Rental expense charged to operations for operating leases was approximately
$4.9 million, $5.9 million and $6.9 million for the years ended January 31,
1996, 1997 and 1998, respectively.
11. RELATED PARTY TRANSACTIONS
At January 31, 1997 and 1998, an affiliate of a primary lender to the
Company held 196,370 shares of Common Stock, which represents less than 1% of
the shares outstanding.
On June 28, 1996, the Company entered into an agreement expiring on
December 31, 2003, with an affiliate of its then majority shareholder, whereby
in exchange for services rendered in connection with the development of the
Company's web site, the Company will pay royalties ranging from 5 - 10% of
ticket convenience charges and merchandise sold through its web site (net of
defined deductions). The agreement calls for an annual minimum royalty payment
of $100,000 per year (pro-rated for calendar 1996). Royalty payments incurred
for the years ended January 31, 1997 and 1998 amounted to $50,000 and $100,000,
respectively.
During fiscal years 1997 and 1998 the Company earned revenues of
approximately $9.2 million and $13.8 million, respectively, from contracts with
certain venues which are managed by an entity controlled through trusts for the
benefit of members of the Pritzker family, one of whom is on the Company's Board
of Directors.
12. LITIGATION AND GOVERNMENT INVESTIGATION
The Company and several of its subsidiaries were named as defendants in
several federal and state antitrust consumer class action lawsuits. The federal
cases, consolidated by the Judicial Panel on Multi-District Litigation, asserted
among other things violations of Sections 1 and 2 of the Sherman Act. On May 31,
1996, these cases were dismissed for failure to state a claim. On June 12, 1996,
plaintiffs appealed the court's decision. Oral argument was held on February 14,
1997. The Court of Appeals rendered its opinion on April 10, 1998 (see
Subsequent Events Footnote, No. 13).
On July 23, 1997, an Award was issued in favor of MovieFone, Inc.,
Promofone, Inc. and Teleticketing Co. LP (the "MovieFone Entities") as a result
of arbitration proceeding against the Pacer Cats Corporation, a wholly owned
subsidiary of Wembley plc and now known as "PCC Management, Inc.". The Award
provides, among other things, (i) that Pacer Cats Corporation shall pay to the
MovieFone Entities damages aggregating $22,751,250 and (ii) for injunctive
relief relating to certain conduct of Pacer Cats
F-21
<PAGE> 58
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Corporation and its successors and assigns with respect to the MovieFone
Entities' business for a specified period of time.
No entity owned by the Company, including, but not limited to,
Pacer/CATS/CCS, was a party to the arbitration proceeding. Nonetheless, counsel
for Wembley plc, WIL, Incorporated, PCC Management, Inc. and Wembley, Inc.
(collectively the "Wembley Entities"), by letter dated August 4, 1997, advised
Pacer/ CATS/CCS, Ticketmaster Corporation, Ticketmaster Cinema Group, Ltd. and
Cinema Acquisition Corporation (collectively, the "Ticketmaster Entities"), that
the Wembley Entities intend to look to the Ticketmaster Entities to be made
whole with respect to the costs of the arbitration, including attorneys' fees
incurred in connection therewith, and all or part of any monetary damages
assessed against Pacer Cats Corporation.
The Ticketmaster Entities in turn have advised counsel for the Wembley
Entities that they believe that there is no validity to any claim by the Wembley
Entities against any of the Ticketmaster Entities. In this regard, by agreement
dated July 2, 1996 ("the Agreement"), the Wembley Entities released and
covenanted not to sue the Ticketmaster Entities in connection with any claims
arising out of the arbitration proceeding; however, the Wembley Entities
retained certain limited indemnification rights under the Agreement, solely with
respect to Pacer/CATS/CCS and its operations from and after April 15, 1994. In
the event any of the alleged claims are pursued by the Wembley Entities, the
Ticketmaster Entities intend to vigorously oppose them.
The Company and certain of its current and former directors have been named
as defendants in several purported class action lawsuits: The complaints, all of
which are substantially similar, challenge the offer by USAi (formerly HSN,
Inc.) to acquire the remaining shares in the Company which it does not already
own and allege that the consideration offered by USAi is inadequate and that the
defendants have breached their fiduciary duties to the plaintiffs and the class
of shareholders of the Company which they claim to represent. The cases seek to
enjoin the proposed transaction and ask for unspecified damages. The three
pending Illinois cases have been consolidated, and the plaintiffs in one of the
California cases have agreed to stay proceedings in that case pending the
outcome of the Illinois cases. The Company believes that all the lawsuits are
without merit and intends to vigorously defend the claims asserted.
The Company also is involved in various other investigations, lawsuits and
claims arising in the normal conduct of its business, including but not limited
to, allegations of antitrust violations. The Company has also at times responded
to inquiries from various government and state authorities. In the opinion of
the Company's management, based on current information and on advice from legal
counsel, none of the Company's legal proceedings will have a material adverse
effect on the Company's financial position, results of operation or cash flows.
13. SUBSEQUENT EVENTS
On March 13, 1998, the Company and the majority owner of its Mexican
licensee, Corporacion Interamericana de Entretenimiento, S.A. de C.V. ("CIE")
entered into a series of agreements designed to jointly market and operate the
Company's trademark and technology in Mexico and Central and South America.
Pursuant to the terms of these agreements, the Company received an additional
equity interest in its Mexican licensee of 22.99% (for an aggregate ownership
interest of 49.99%) and agreed that the Company will have a 50.01% interest in
and serve as the manager of each operating entity organized in Central and South
America.
On March 20, 1998, the Company and USA Networks, Inc. (USAi) entered into a
merger agreement subject to Company shareholder approval, wherein USAi will
acquire in a tax free exchange the remaining Company common stock not owned by
USAi for .563 of a share of USAi common stock (1.126 shares after giving effect
to a two-for-one stock split paid to USAi shareholders on March 26, 1998).
F-22
<PAGE> 59
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On April 10, 1998, the Court of Appeals issued an opinion affirming the
district court's ruling that the plaintiffs in the consolidated consumer class
action lawsuit lack standing to pursue their claims for damages under the
antitrust laws. However, the Appellate Court held that the plaintiffs' status as
indirect purchasers of Ticketmaster's services did not bar them from seeking
injunctive relief against the Company. The Company believes that the Court's
affirmance of the decision prohibiting plaintiffs from obtaining damages against
Ticketmaster eliminates the substantial portion of plaintiffs' claims.
14. QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30 JULY 31 OCTOBER 31 JANUARY 31
-------- ------- ---------- ----------
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED JANUARY 31, 1998
Revenue......................................... $77,003 $81,695 $89,047 $93,235
Operating income................................ 6,844 6,922 9,145 6,614
Net income...................................... 1,881 1,979 2,972 1,315
Basic earnings per share........................ $ .07 $ .08 $ .11 $ .05
Diluted earnings per share...................... $ .07 $ .08 $ .11 $ .05
FISCAL YEAR ENDED JANUARY 31, 1997
Revenue......................................... $46,741 $53,218 $62,578 $68,424
Operating income................................ 427 3,069 4,745 5,422
Net income (loss)............................... (1,979) (439) 2,849 1,361
Basic earnings (loss) per share................. $ (.13) $ (.03) $ .19 $ .06
Diluted earnings (loss) per share............... $ (.13) $ (.03) $ .19 $ .06
</TABLE>
F-23
<PAGE> 60
SCHEDULE II
TICKETMASTER GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
ADDITIONS
BALANCE AT -----------------------------
BEGINNING CHARGED TO DEDUCTIONS BALANCE AT
DESCRIPTION OF YEAR OTHER(A) COSTS AND EXPENSES FROM RESERVES END OF YEAR
----------- ---------- -------- ------------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended January 31,1998...... $989 $ 301 $240 $707 $823
Allowance for doubtful accounts:
Year ended January 31,1997...... 0 1,215 0 226 989
</TABLE>
- ---------------
Note A -- Represents amounts related to the Pacer and Synchro Joint Ventures on
the date of acquisition (consolidation).
<PAGE> 61
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
10.47 Employment Agreement dated February 1, 1997 between the
Company and Robert Perkins
10.48 Employment Agreement dated July 1, 1997 between the Company
and Tony Tolbert
10.49 Amendment No. 1 dated September 1997 to Employment Agreement
dated March 1, 1997 between the Company and Judy Black
10.50 Amendment No. 1 dated December 1997 to Employment Agreement
dated January 3, 1995 between the Company and Annie Gilbar
10.51 Amendment No. 2 dated February 1, 1998 to Employment
Agreement dated February 1, 1994 between the Company and
Marc Bension
10.52 Amendment No. 1 dated February 1, 1998 to Employment
Agreement dated February 1, 1994 between the Company and Ann
Mooney
10.53 Amendment No. 1 dated February 28, 1998 to Employment
Agreement dated February 1995 between the Company and Carole
Ference
10.54 Employment Agreement dated January 13, 1997 between the
Company and Daniel R. Goodman
10.55 Termination Agreement dated October 29, 1997 between the
Company and Layne Britton
10.56 Ninth Amendment to Credit Agreement dated as of March 6,
1998
10.57 Cooperation, Non-Competition and Confidentiality Agreement
between the Company and Fredic D. Rosen dated March 9, 1998
10.58 Agreement and Plan of Merger By and Among USA Networks,
Inc., Brick Acquisition Corp. and the Company dated as of
March 20, 1998
11.1 Computation of earnings per share
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Ernst &Young LLP
27.1 Financial Data Schedule
99.4 Appeals from the United States District Court with respect
to alleged antitrust violations dated April 10, 1998
</TABLE>
<PAGE> 1
EXHIBIT 10.47
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of February 1, 1997 between Ticketmaster
Corporation, an Illinois corporation (the "Company"), and Robert Perkins
("Executive").
W I T N E S S E T H:
WHEREAS, prior to the date hereof, Executive has been employed by the
Company and/or certain of its subsidiaries or affiliates in various management
positions; and
WHEREAS, the Company is desirous of continuing to employ Executive, and
Executive is desirous of continuing to be employed by the Company, on the terms
and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, the parties
hereto agree as follows:
1. DEFINITIONS. The following terms shall have the indicated meanings
when used in this Agreement, unless the context requires otherwise:
(a) "BASE SALARY AMOUNT" shall mean $155,000 during the first
Contract Year, $165,000 during the second Contract Year, $175,000 during
the third Contract Year and $185,000 during the fourth Contract Year.
(b) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company.
(c) "CAUSE" shall have the meaning ascribed to that term in
Section 7.
(d) "CONSULTING PERIOD" shall have the meaning ascribed to that
term in Section 9(a).
<PAGE> 2
(e) "CONTRACT YEAR" shall mean each year during the term hereof
commencing February 1 and ending on the immediately following January
31, except that the first Contract Year shall commence on the date
hereof and end on January 31, 1998.
(f) "CUSTOMER" shall have the meaning ascribed to that term in
Section 9(d).
(g) "DISABILITY" shall have the meaning ascribed to that term in
Section 6(a).
(h) "DISABILITY PERIOD" shall have the meaning ascribed to that
term in Section 6(a).
(i) "PROPRIETARY INFORMATION OF THE COMPANY" shall have the
meaning ascribed to that term in Section 10(a).
(j) "TICKETMASTER BUSINESSES" shall have the meaning ascribed to
that term in Section 9(b).
2. EMPLOYMENT. The Company hereby employs Executive, and Executive
hereby accepts employment with the Company, on the terms and subject to the
conditions set forth herein.
3. TERM OF EMPLOYMENT. The term of employment hereunder shall commence
on the date hereof and end on January 31, 2001, subject to early termination as
herein provided.
4. POSITION AND DUTIES. Executive shall serve as a Vice President of the
Company. Subject to the authority of the Board of Directors and the Chief
Executive Officer of the Company, the Executive shall have all of the powers and
duties incident to the office of Vice President and such other powers and duties
as may from time to time be prescribed by the Board of Directors or the Chief
Executive Officer of the Company. Executive agrees to serve without further
compensation, if elected or appointed thereto, as an officer or a director of
any of the Company's domestic and foreign subsidiaries and affiliates.
5. EXCLUSIVE DUTIES. During Executive's employment by the Company,
Executive shall devote his entire working time, attention and energies to the
business of the Company and will not take any actions of the kind described in
Sections 9(b), 9(c) and 9(d).
-2-
<PAGE> 3
6. COMPENSATION AND OTHER BENEFITS.
(a) BASE SALARY. During each Contract Year of the term hereof,
the Company shall pay to Executive the Base Salary Amount. The Base
Salary Amount shall be paid to Executive in accordance with the
Company's regular payroll practices with respect to senior management
compensation.
In the event that Executive shall become disabled as a result of
bodily injury or physical or mental illness (whether or not
occupational) to such extent that in the sole opinion of the Board of
Directors, based upon competent medical advice, he can no longer perform
the duties of Vice President of the Company (a "Disability"), the
Company shall only be obligated to continue to pay the Base Salary
Amount to Executive for the 120-day period immediately following the
date of Disability (the "Disability Period"). The right to receive
salary payments during the Disability Period, if applicable, shall
survive any termination of employment by virtue of Disability pursuant
to Section 7.
(b) ANNUAL PERFORMANCE BONUSES. During each Contract Year, the
Company shall pay Executive an annual performance bonus as determined by
the Board of Directors or its Compensation Committee in its sole
discretion, the determination of which shall be based upon such
standards, guidelines and factual circumstances as the Board of
Directors or its Compensation Committee deems relevant, including,
without limitation, the operating results for the Company during such
Contract Year, the importance of the efforts of Executive in achieving
such operating results and the achievement by the Company and/or
Executive of performance goals previously established by the Board of
Directors or its Compensation Committee for such Contract Year;
provided, however, that in no event shall the bonus for any full
Contract Year of the term hereof be less than $27,000 for the first
Contract Year, $27,000 for the second Contract Year, $30,000 for the
third Contract Year and $30,000 for the fourth Contract Year.
(c) EXPENSES. Executive shall be entitled to receive prompt
reimbursement from the Company for all documented business expenses
incurred by him in the performance of his
-3-
<PAGE> 4
duties hereunder, provided that Executive properly accounts therefor in
accordance with the Company's reimbursement policy, including, without
limitation, the submission of supporting evidence as reasonably
requested by the Company.
(d) FRINGE BENEFITS. During the term hereof, Executive shall be
entitled (i) to participate in and receive benefits substantially
similar to what Executive is currently receiving from the Company so
long as such benefits are provided by the Company to similar level
management employees, (ii) to continue to receive his existing
automobile allowance so long as he continues to use the automobile being
used by him as of the date of this Agreement, and (iii) at such time as
Executive ceases to use the automobile being used by him as of the date
of this Agreement, to receive an automobile allowance in the amount of
$600.00 per month.
(e) VACATIONS. During the term hereof, Executive shall be
entitled to sick leave and paid holidays consistent with the Company's
sick leave and holiday policy for senior management and up to three
weeks paid vacation during each Contract Year (or such other vacation
time as is consistent with the Company's policy for senior management).
7. TERMINATION. The Company or Executive may terminate the employment of
Executive hereunder upon the occurrence of a Disability (as defined in Section
6(a)) for a period of no less than 120 days during any consecutive twelve-month
period. The Company may also terminate the employment of Executive hereunder
upon Executive's death or for Cause. For purposes hereof, "Cause" shall mean (i)
fraud, theft, misappropriation of funds or conviction of a felony, (ii)
Executive's engagement in illegal conduct tending to place Executive or the
Company in disrepute, (iii) dereliction or gross misconduct in Executive's
performance of his duties as an employee of the Company or the failure of
Executive to perform his duties in a manner consistent with the instructions of
the Board of Directors or the Chief Executive Officer of the Company or (iv)
violation by Executive of any of his material covenants contained in this
Agreement, including, without limitation, Section 10.
-4-
<PAGE> 5
8. DEVELOPMENTAL RIGHTS. Executive agrees that any developments by way
of invention, design, copyright, trademark or other matters which may be
developed or perfected by him during the term hereof, and which relate to the
business of the Company or its subsidiaries or affiliates, shall be the property
of the Company without any interest therein by Executive, and he will, at the
request and expense of the Company, apply for and prosecute letters patent
thereon in the United States or in foreign countries if the Company so requests,
and will assign and transfer the same to the Company together with any letters
patent, copyrights, trademarks and applications therefor; provided, however,
that the foregoing shall not apply to an invention that Executive develops
entirely on his own time without using the Company's equipment, supplies,
facilities or trade secret information, except for those inventions that either:
(a) relate at the time of conception or reduction to practice of
the invention to the Company's business, or actual or demonstrably
anticipated research or development of the Company; or
(b) result from any work performed by Executive for the Company.
-5-
<PAGE> 6
9. CONSULTING.
(a) CONSULTING SERVICES. During the six-month period commencing
immediately upon the termination of Executive's employment for any
reason (other than Executive's death) (the "Consulting Period"),
Executive shall be available, as an independent consultant, for
consultation with the Company and its subsidiaries and affiliates
concerning their general operations and the industries in which they
engage in business. In addition, during the Consulting Period,
consultant will aid, assist and consult with the Company and its
subsidiaries and affiliates with respect to their dealings with clients
and the enhancement of their recognition and reputation. During the
Consulting Period, Executive shall devote such time and energies to the
affairs of the Company as may be reasonably required to carry out his
duties hereunder without jeopardizing Executive's then full-time,
non-Ticketmaster Business employment opportunities; provided, however,
that Executive shall not be obligated to devote more than 50 hours to
the performance of such duties. In consideration of Executive's
consulting services, and in consideration of Executive's covenants
contained in this Section 9, the Company shall pay to Executive $15,000
during the Consulting Period, payable in equal monthly installments. The
Company further agrees to reimburse Executive for all reasonable and
necessary business expenses incurred by Executive in the performance of
his consulting services in accordance with the Company's reimbursement
policy, including, without limitation, the submission of supporting
evidence as reasonably required by the Company.
(b) COVENANT NOT TO COMPETE. During the Consulting Period,
Executive shall not, without the prior written consent of the Company,
directly or indirectly engage in or assist any activity which is the
same as, similar to or competitive with the Ticketmaster Businesses
(other than on behalf of the Company or any of its subsidiaries or
affiliates) including, without limitation, whether such engagement or
assistance is as an officer, director, proprietor, employee, partner,
investor (other than as a holder of less than 5% of the outstanding
capital stock of a publicly traded corporation), guarantor, consultant,
advisor, agent, sales representative or other participant, anywhere in
the world that the Company or
-6-
<PAGE> 7
any of its subsidiaries or affiliates has been engaged, including,
without limitation, the United States, Canada, Mexico, England, Ireland,
Scotland, Europe and Australia. Nothing herein shall limit Executive's
ability to own interests in or manage entities which sell tickets as an
incidental part of their primary businesses (e.g. cable networks,
on-line computer services, sport teams, arenas, hotels, cruise lines,
theatrical and movie productions and the like) and which do not hold
themselves out generally as competitors of the Company and its
subsidiaries and affiliates. The "Ticketmaster Businesses" shall mean
the computerized sale of tickets for sporting, theatrical, cinematic,
live theatrical, musical or any other events on behalf of various venues
and promoters through distribution channels currently being utilized by
the Company or any of its subsidiaries or affiliates (as such term is
defined in Rule 405 of Regulation C promulgated under the Securities Act
of 1933, as amended).
(c) SOLICITATION OF EMPLOYEES. During the Consulting Period,
Executive shall not (i) directly or indirectly induce or attempt to
induce (regardless of who initiates the contact) any person then
employed (whether part-time or full-time) by the Company or any of its
subsidiaries or affiliates, whether as an officer, employee, consultant,
adviser or independent contractor, to leave the employ of the Company or
to cease providing or otherwise alter the services then provided to the
Company or to any of its subsidiaries or affiliates or (ii) in any other
manner seek to engage or employ any such person (whether or not for
compensation) as an officer, employee, consultant, adviser or
independent contractor in connection with the operation of any business
which is the same as or similar to any of the Ticketmaster Businesses.
(d) NON-SOLICITATION OF CUSTOMERS. During the Consulting Period,
Executive shall not solicit any Customers of the Company or any of its
subsidiaries or affiliates or encourage (regardless of who initiates the
contact) any such Customers to use the facilities or services of any
Competitor of the Company or any of its subsidiaries or affiliates.
"Customer" shall mean any person who engages the Company or any of its
subsidiaries or affiliates to sell, on its behalf as agent, tickets to
the public.
-7-
<PAGE> 8
10. CONFIDENTIALITY. Executive shall not at any time during or after
termination of employment disclose (except as may be required by law) or use,
except in the pursuit of the business of the Company or any of its subsidiaries
or affiliates, any Proprietary Information of the Company. "Proprietary
Information of the Company" means all information known or intended to be known
only to employees of the Company or any of its subsidiaries or affiliates in a
confidential relationship with the Company or any of its subsidiaries or
affiliates relating to technical matters pertaining to the Ticketmaster
Businesses, but shall not include any information within the public domain.
Executive agrees not to remove any documents, records or other information from
the premises of the Company or any of its subsidiaries or affiliates containing
any such Proprietary Information, except in the pursuit of the business of the
Company or any of its subsidiaries or affiliates, and acknowledges that such
documents, records and other information are the exclusive property of the
Company or its subsidiaries or affiliates. Upon termination of Executive's
employment, Executive shall immediately return all Proprietary Information of
the Company and all copies thereof to the Company.
11. GENERAL PROVISIONS.
(a) EXPENSES. All costs and expenses incurred by either of the
parties in connection with this Agreement and any transactions
contemplated hereby shall be paid by that party.
(b) NOTICES. All notices, demands and other communications
hereunder shall be in writing and shall be given or made (and shall be
deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service, by cable, by telecopy, by
telegram, by telex or by registered or certified mail to the respective
parties at the following addresses (or at such other address for a party
as shall be specified in a notice given in accordance with this Section
11(b)):
-8-
<PAGE> 9
(i) If to the Company:
Ticketmaster Corporation
8800 Sunset Boulevard
West Hollywood, California 90069
Attention: Chairman of the Board
Telecopy No.: (310) 360-6505
With a copy to:
Neal, Gerber & Eisenberg
Two North LaSalle Street
Chicago, Illinois 60602
Attention: Charles Evans Gerber
Telecopy No.: (312) 269-1747
(ii) If to Executive:
Robert Perkins
3017 Patricia Avenue
Los Angeles, California 90069
Telecopy No.: (___) ________________
(c) HEADINGS. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
(d) SUCCESSORS; BINDING AGREEMENT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, devisees, legatees, executors, administrators,
successors and personal or legal representatives. If Executive is
domiciled in a community property state or a state that has adopted the
Uniform Marital Property Act or equivalent or if Executive is domiciled
in a state that grants to his spouse any other marital rights in
Executive's assets (including, without limitation, dower rights or a
right to elect against Executive's will or to claim a forced share of
Executive's estate), this Agreement shall also inure to the benefit of,
and shall also be binding upon, his spouse. If Executive should die
while any amounts would still be payable to his hereunder if he had
continued to live, all such amounts, unless otherwise provided herein,
-9-
<PAGE> 10
shall be paid in accordance with the terms of this Agreement to
Executive's designee or, if there be no such designee, to Executive's
heirs, devisees, legatees or executors or administrators of Executive's
estate, as appropriate.
(e) SEVERABILITY. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under existing or future laws
effective during the term of this Agreement, such provisions shall be
fully severable, the Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a
part of this Agreement, and the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from
this Agreement. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of
this Agreement a provision as similar in terms to such illegal, invalid
or unenforceable provision as may be possible and be legal, valid and
enforceable.
(f) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, both
written and oral, between the Company and Executive with respect to the
subject matter hereof.
(g) ASSIGNMENT. This Agreement and the rights and duties
hereunder are not assignable by Executive. This Agreement and the rights
and duties hereunder may not be assigned by the Company without the
express written consent of Executive (which consent may be granted or
withheld in the sole discretion of Executive), except that such consent
shall not be required in order for the Company to assign this Agreement
or the rights or duties hereunder to an affiliate (as such term is
defined in Section 9(b)) of the Company or to a third party in
connection with the merger or consolidation of the Company with, or the
sale of all or substantially all of the assets or business of the
Company to, that third party.
(h) AMENDMENT; WAIVER. This Agreement may not be amended or
modified except by an instrument in writing signed by, or on behalf of,
the Company and Executive. Either party
-10-
<PAGE> 11
to this Agreement may (a) extend the time for the performance of any of
the obligations or other acts of the other party or (b) waive compliance
with any of the agreements or conditions of the other party contained
herein. Any such extension or waiver shall be valid only if set forth in
an instrument in writing signed by the party to be bound thereby. Any
waiver of any term or condition shall not be construed as a waiver of
any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of any such rights.
(i) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Illinois,
applicable to contracts executed in and to be performed entirely within
that state.
(j) JURISDICTION AND VENUE. The parties hereto agree that all
actions or proceedings initiated by either party hereto and arising
directly or indirectly out of this Agreement which are brought pursuant
to judicial proceedings shall be litigated in a Federal or state court
located in the State of Illinois. The parties hereto expressly submit
and consent in advance to such jurisdiction and agree that service of
summons and complaint or other process or papers may be made by
registered or certified mail addressed to the relevant party at the
address to which notices are to be sent pursuant to Section 11(b) of
this Agreement. The parties hereto waive any claim that a Federal or
state court located in the State of Illinois is an inconvenient forum or
an improper forum based on lack of venue.
(k) EQUITABLE RELIEF. Executive acknowledges that the covenants
contained in Sections 9 and 10 are reasonable and necessary to protect
the legitimate interests of the Company, that in the absence of such
covenants the Company would not have entered into this Agreement, that
any breach or threatened breach of such covenants will result in
irreparable injury to the Company and that the remedy at law for such
breach or threatened breach would be inadequate. Accordingly, the
Executive agrees that the Company, in addition to any other rights or
remedies which it may have, shall be entitled
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to seek such equitable and injunctive relief as may be available from
any court of competent jurisdiction to restrain the Executive from any
breach or threatened breach of such covenants.
(l) ATTORNEYS' FEES. If any legal action or other proceeding is
brought for the enforcement of this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief
to which it may be entitled.
(m) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original while all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement as of the date and year first written above.
TICKETMASTER CORPORATION
By:
---------------------------------
Title:
------------------------------
-----------------------------------
Robert Perkins
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<PAGE> 1
EXHIBIT 10.48
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July 1, 1997, between Ticketmaster Corporation,
an Illinois Corporation (the "Company"), and Anthony J. Tolbert ("Executive").
W I T N E S S E T H:
WHEREAS, the Company is desirous of employing Executive, and Executive
is desirous of being employed by the Company, on the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, the parties
hereto agree as follows:
1. DEFINITIONS. The following terms shall have the indicated meanings
when used in this Agreement, unless the context requires otherwise:
(a) "BASE SALARY AMOUNT" shall mean $200,000 during the first
Contract Year and $210,000 during the second Contract Year.
(b) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company.
(c) "CAUSE" shall have the meaning ascribed to that term in
Section 7.
(d) "CONTRACT YEAR" shall mean each year during the term hereof
commencing on August 7 and ending on the immediately following August 6.
(e) "CUSTOMER" shall have the meaning ascribed to that term in
Section 9(d).
(f) "PROPRIETARY INFORMATION OF THE COMPANY" shall have the
meaning ascribed to that term in Section 10(a).
(g) "TICKETMASTER BUSINESSES" shall have the meaning ascribed to
that term in Section 9(b).
<PAGE> 2
2. EMPLOYMENT. The Company hereby employs Executive, and Executive
hereby accepts employment with the Company, on the terms and subject to the
conditions set forth herein.
3. TERM OF EMPLOYMENT. The term of employment hereunder shall commence
on the date hereof and end on August 6, 1999, subject to early termination as
herein provided.
4. POSITION AND DUTIES. Executive shall serve as the Vice President and
Assistant General Counsel of the Company. He shall report directly to the
Company's Senior Vice President and General Counsel. Subject to the authority of
the Board of Directors and the Chief Executive Officer of the Company, the
Executive shall have all of the powers and duties incident to the office of Vice
President and such other powers and duties as may from time to time be
prescribed by the Board of Directors or the Chief Executive Officer of the
Company. Executive agrees to serve without further compensation, if elected or
appointed thereto, as an officer or a director of any of the Company's domestic
and foreign subsidiaries and affiliates. During Executive's employment by the
Company, he will be entitled to indemnification as an officer of the Company
(and, if so elected, as an officer or director of any of the Company's domestic
and foreign subsidiaries or affiliates) in the manner provided by the Illinois
Business Corporation Act of 1983, as amended, and the Company's Articles of
Incorporation and By-Laws.
5. EXCLUSIVE DUTIES. During Executive's employment by the Company,
Executive shall devote his entire working time, attention and energies to the
business of the Company and will not take any actions of the kind described in
Sections 9(b), 9(c) and 9(d).
6. COMPENSATION AND OTHER BENEFITS.
(a) BASE SALARY. During each Contract Year of the term hereof,
the Company shall pay to Executive the Base Salary Amount. The Base
Salary Amount shall be paid to Executive in accordance with the
Company's regular payroll practices with respect to senior management
compensation.
In the event that Executive shall become disabled as a result of
bodily injury or physical or mental illness (whether or not
occupational) to such extent that in the sole opinion of the Board of
Directors, based upon competent medical
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<PAGE> 3
advice, he can no longer perform the duties of Vice President of the
Company (a "Disability"), the Company shall only be obligated to
continue to pay the Base Salary Amount to Executive for the 120-day
period immediately following the date of Disability (the "Disability
Period"). The right to receive salary payments during the Disability
Period, if applicable, shall survive any termination of employment by
virtue of Disability pursuant to Section 7.
(b) ANNUAL PERFORMANCE BONUSES. During each Contract Year, the
Company shall pay Executive such annual performance bonus as determined
by the Chief Executive Officer, in his sole discretion; provided,
however, in no event shall any such annual bonus be less than $15,000
during the first Contract Year and $20,000 during the second Contract
Year.
(c) EXPENSES. Executive shall be entitled to receive prompt
reimbursement from the Company for all documented business expenses
incurred by him in the performance of his duties hereunder, provided
that Executive properly accounts therefor in accordance with the
Company's reimbursement policy, including, without limitation, the
submission of supporting evidence as reasonably requested by the
Company. While traveling on Company business, Executive shall be
entitled to transportation and accommodations consistent with other
senior executives of the Company.
(d) FRINGE BENEFITS. During the term hereof, Executive shall be
entitled to receive the following benefits: (i) participation in the
Company's standard medical, dental, life and disability insurance plans
(in accordance with the terms of said plans), (ii) participation in the
company's ExecuCare insurance plan consistent with participation in said
plan by other senior management of the Company, and (iii) participation
in the Company's IRS Section 401(k) plan (in accordance with the terms
of said plan). Additionally, during the term hereof, Executive shall be
entitled to receive an automobile allowance in the amount of $7800 per
year, payable monthly, in advance.
(e) VACATIONS. During the term hereof, Executive shall be
entitled to sick leave and paid holidays consistent with the Company's
sick leave and holiday policy for senior
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<PAGE> 4
management and up to three weeks paid vacation during each Contract Year
(or such other vacation time as is consistent with the Company's policy
for senior management).
(f) LIFE INSURANCE. The Company agrees to maintain in effect
during the term hereof insurance on Executive's life payable to his
estate or his named beneficiary or beneficiaries in the amount of
$500,000; provided, however, that Executive shall reimburse the Company
for any and all premiums paid by the Company with respect to such
insurance in excess of the preferred or select premium rate for
non-smokers.
7. TERMINATION. The Company or Executive may terminate the employment of
Executive hereunder upon the occurrence of a Disability (as defined in Section
6(a)) for a period of no less than 120 days during any consecutive twelve-month
period. The Company may also terminate the employment of Executive hereunder
upon Executive's death or for Cause. For purposes hereof, "Cause" shall mean (i)
fraud, theft, misappropriation of funds or conviction of a felony, (ii)
Executive's engagement in illegal conduct tending to place Executive or the
Company in disrepute, (iii) dereliction or gross misconduct in Executive's
performance of his duties as an employee of the Company or the failure of
Executive to perform his duties in a manner consistent with the instructions of
the Board of Directors or the Chief Executive Officer of the Company or (iv)
violation by Executive of any of his material covenants contained in this
Agreement, including, without limitation, Section 10. Notwithstanding the
foregoing, before the Company may terminate the employment of Executive for
Cause, the Company shall deliver to Executive not less than ten business days
prior written notice of the Company's intention to terminate Executive's
employment together with a statement of the basis for such termination, and
Executive shall be afforded (i) an opportunity to respond to the Company during
such ten-business day period and (ii) in the event that the basis for such
termination is clause (iii) or (iv) above, and the situation resulting in the
Company's determination to terminate for cause is non-repetitive in nature, the
right to remedy such situation so that such termination is no longer effective.
Upon the termination of Executive's employment for any reason, Executive shall
be entitled to receive all compensation for the then current Contract Year
through the date of such termination plus all accrued but unreimbursed
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<PAGE> 5
expenses. In addition, upon the termination of Executive's employment for any
reason other than for or by virtue of Cause, death, disability or Executive's
voluntary termination of employment, the Company shall continue to be
responsible for the payment of the Base Salary Amount for the remainder of the
term hereof; provided, however, that Executive shall have a duty to mitigate
commencing on the first anniversary of the date of termination; and, further
provided that Executive shall perform his covenants, duties and obligations
under Sections 9(b), 9(c) and 9(d) during the remainder of the term hereof.
Termination of Executive's employment for any reason whatsoever shall not affect
Executive's ability to exercise stock options that have vested prior to the date
of termination.
8. DEVELOPMENTAL RIGHTS. Executive agrees that any developments by way
of invention, design, copyright, trademark or other matters which may be
written, developed, or perfected by him during the term hereof, and which relate
to the business of the Company or its subsidiaries or affiliates, shall be the
property of the Company without any interest therein by Executive, and he will,
at the request and expense of the Company, apply for and prosecute letters
patent thereon in the United States or in foreign countries, and any renewals
thereof, if the Company so requests, and will assign and transfer the same to
the Company together with any letters patent, copyrights, trademarks or other
ownership rights therein or applications therefor or renewals thereof and any
revenues or rights to revenues arising therefrom; provided, however, that the
foregoing shall not apply to an invention that Executive develops entirely on
his own time without using the Company's equipment, supplies, facilities or
trade secret information except for those inventions that either:
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<PAGE> 6
(a) relate at the time of conception or reduction to practice of
the invention to the Company's business, or actual or demonstrably
anticipated research or development of the Company; or
(b) result from any work performed by Executive for the Company.
9. CONSULTING.
(a) CONSULTING SERVICES. During the one-year period commencing
immediately upon the termination of Executive's employment for any
reason (other than Executive's death) (the "Consulting Period"),
Executive shall be available for consultation with the Company and its
subsidiaries and affiliates concerning their general operations and the
industries in which they engage in business. In addition, during the
Consulting Period, consultant will aid, assist and consult with the
Company and its subsidiaries and affiliates with respect to their
dealings with clients and the enhancement of their recognition and
reputation. During the Consulting Period, Executive shall devote such
time and energies to the affairs of the Company as may be reasonably
required to carry out his duties hereunder without jeopardizing
Executive's then full-time, non-Ticketmaster Business employment
opportunities; provided, however, that Executive shall not be obligated
to devote more than 50 hours per year to the performance of such duties.
In consideration of Executive's consulting services, and in
consideration of Executive's covenants contained in this Section 9, the
Company shall pay to Executive $10,000 during each full year of the
Consulting Period, payable in equal monthly installments. The Company
further agrees to reimburse Executive for all reasonable and necessary
business expenses incurred by Executive in the performance of his
consulting services in accordance with the Company's reimbursement
policy, including, without limitation, the submission of supporting
evidence as reasonably required by the Company.
(b) COVENANT NOT TO COMPETE. During the Consulting Period,
Executive shall not, without the prior written consent of the Company,
directly or indirectly engage in or assist any activity which is the
same as, similar to or competitive with
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<PAGE> 7
the Ticketmaster Businesses (other than on behalf of the Company or any
of its subsidiaries or affiliates) including, without limitation,
whether such engagement or assistance is as an officer, director,
proprietor, employee, partner, investor (other than as a holder of less
than 5% of the outstanding capital stock of a publicly traded
corporation), guarantor, consultant, advisor, agent, sales
representative or other participant, anywhere in the world that the
Company or any of its subsidiaries or affiliates has been engaged,
including, without limitation, the United States, Canada, Mexico,
England, Ireland, Scotland, Europe and Australia. Nothing herein shall
limit Executive's ability to own interests in, advise, consult with, be
employed by, perform legal services for or manage entities which sell
tickets as an incidental part of their primary businesses (e.g. cable
networks, on-line computer services, sport teams, arenas, hotels, cruise
lines, theatrical and movie productions and the like) and which do not
hold themselves out generally as competitors of the Company and its
subsidiaries and affiliates. The "Ticketmaster Businesses" shall mean
the computerized sale of tickets for sporting, theatrical, cinematic,
live theatrical, musical or any other events on behalf of various venues
and promoters through distribution channels currently being utilized by
the Company or any of its subsidiaries or affiliates (as such term is
defined in Rule 405 of Regulation C promulgated under the Securities Act
of 1933, as amended).
(c) SOLICITATION OF EMPLOYEES. During the Consulting Period,
Executive shall not (i) directly or indirectly induce or attempt to
induce (regardless of who initiates the contact) any person then
employed (whether part-time or full-time) by the Company or any of its
subsidiaries or affiliates, whether as an officer, employee, consultant,
adviser or independent contractor, to leave the employ of the Company or
to cease providing or otherwise alter the services then provided to the
Company or to any of its subsidiaries or affiliates or (ii) in any other
manner seek to engage or employ any such person (whether or not for
compensation) as an officer, employee, consultant, adviser or
independent contractor in connection with the operation of any business
which is the same as or similar to any of the Ticketmaster Businesses.
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<PAGE> 8
(d) NON-SOLICITATION OF CUSTOMERS. During the Consulting Period,
Executive shall not solicit any Customers of the Company or any of its
subsidiaries or affiliates or encourage (regardless of who initiates the
contact) any such Customers to use the facilities or services of any
Competitor of the Company or any of its subsidiaries or affiliates.
"Customer" shall mean any person who engages the Company or any of its
subsidiaries or affiliates to sell, on its behalf as agent, tickets to
the public.
10. CONFIDENTIALITY. Executive shall not at any time (during or for a
period of sixty (60) months after termination of employment) disclose (except as
may be required by law) or use, except in the pursuit of the business of the
Company or any of its subsidiaries or affiliates, any Proprietary Information of
the Company. "Proprietary Information of the Company" means all information
known or intended to be known only to employees of the Company or any of its
subsidiaries or affiliates in a confidential relationship with the Company or
any of its subsidiaries or affiliates relating to technical matters pertaining
to the business of the Company or any of its subsidiaries or affiliates, but
shall not include any information within the public domain. Executive agrees not
to remove any documents, records or other information from the premises of the
Company or any of its subsidiaries or affiliates containing any such proprietary
information, except in the pursuit of the business of the Company or any of its
subsidiaries or affiliates, and acknowledges that such documents, records and
other information are the exclusive property of the Company or its subsidiaries
or affiliates. Upon termination of Executive's employment, Executive shall
immediately return all Proprietary Information of the Company and all copies
thereof to the Company.
11. GENERAL PROVISIONS.
(a) EXPENSES. All costs and expenses incurred by either of the
parties in connection with this Agreement and any transactions
contemplated hereby shall be paid by that party.
(b) NOTICES. All notices, demands and other communications
hereunder shall be in writing and shall be given or made (and shall be
deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier
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<PAGE> 9
service, by cable, by telecopy, by telegram, by telex or by registered
or certified mail to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice
given in accordance with this Section 11(b)):
(i) If to the Company:
Ticketmaster Corporation
8800 Sunset Boulevard
West Hollywood, California 90069
Attention: Chief Executive Officer
Telecopy No.: (310) 360-6505
With a copy to:
Neal Gerber & Eisenberg
Two North LaSalle Street
Chicago, Illinois 60602
Attention: Charles Evans Gerber
Telecopy No.: (312) 269-1747
(ii) If to Executive:
Anthony J. Tolbert
9012 David Avenue
Los Angeles, California 90034
Telecopy No.: (310) 836-4940
(c) HEADINGS. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
(d) SUCCESSORS; BINDING AGREEMENT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, devisees, legatees, executors, administrators,
successors and personal or legal representatives. If Executive is
domiciled in a community property state or a state that has adopted the
Uniform Marital Property Act or equivalent or if Executive is domiciled
in a state that grants to his spouse any other marital rights in
Executive's assets (including, without limitation, dower
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<PAGE> 10
rights or a right to elect against Executive's will or to claim a forced
share of Executive's estate), this Agreement shall also inure to the
benefit of, and shall also be binding upon, his spouse. If Executive
should die while any amounts would still be payable to him hereunder if
he had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to
Executive's designee or, if there be no such designee, to Executive's
heirs, devisees, legatees or executors or administrators of Executive's
estate, as appropriate.
(e) SEVERABILITY. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under existing or future laws
effective during the term of this Agreement, such provisions shall be
fully severable, the Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a
part of this Agreement, and the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from
this Agreement. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of
this Agreement a provision as similar in terms to such illegal, invalid
or unenforceable provision as may be possible and be legal, valid and
enforceable.
(f) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter
hereof and thereof and supersedes all prior agreements and
understandings, both written and oral, between the Company and Executive
with respect to the subject matter hereof and thereof.
(g) ASSIGNMENT. This Agreement and the rights and duties
hereunder are not assignable by Executive. This Agreement and the rights
and duties hereunder may not be assigned by the Company without the
express written consent of Executive (which consent may be granted or
withheld in the sole discretion of Executive), except that such consent
shall not be required in order for the Company to assign this Agreement
or the rights or duties hereunder to an affiliate (as such term is
defined in Section 9(b)) of the Company or to
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<PAGE> 11
a third party in connection with the merger or consolidation of the
Company with, or the sale of all or substantially all of the assets or
business of the Company to, that third party.
(h) AMENDMENT; WAIVER. This Agreement may not be amended or
modified except by an instrument in writing signed by, or on behalf of,
the Company and Executive. Either party to this Agreement may (a) extend
the time for the performance of any of the obligations or other acts of
the other party or (b) waive compliance with any of the agreements or
conditions of the other party contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing
signed by the party to be bound thereby. Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or
a subsequent waiver of the same term or condition, or a waiver of any
other term or condition, of this Agreement. The failure of any party to
assert any of its rights hereunder shall not constitute a waiver of any
such rights.
(i) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Illinois,
applicable to contracts executed in and to be performed entirely within
that state.
(j) JURISDICTION AND VENUE. The parties hereto agree that all
actions or proceedings initiated by either party hereto and arising
directly or indirectly out of this Agreement which are brought pursuant
to judicial proceedings shall be litigated in a Federal or state court
located in the State of California. The parties hereto expressly submit
and consent in advance to such jurisdiction and agree that service of
summons and complaint or other process or papers may be made by
registered or certified mail addressed to the relevant party at the
address to which notices are to be sent pursuant to Section 11(b) of
this Agreement. The parties hereto waive any claim that a Federal or
state court located in the State of California is an inconvenient forum
or an improper forum based on lack of venue.
(k) EQUITABLE RELIEF. Executive acknowledges that the covenants
contained in Sections 9 and 10 are reasonable and necessary to protect
the legitimate interests of the Company,
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<PAGE> 12
that in the absence of such covenants the Company would not have entered
into this Agreement, that any breach or threatened breach of such
covenants will result in irreparable injury to the Company and that the
remedy at law for such breach or threatened breach would be inadequate.
Accordingly, the Executive agrees that the Company, in addition to any
other rights or remedies which it may have, shall be entitled to seek
such equitable and injunctive relief as may be available from any court
of competent jurisdiction to restrain the Executive from any breach or
threatened breach of such covenants.
(l) ATTORNEYS' FEES. If any legal action or other proceeding is
brought for the enforcement of this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief
to which it may be entitled.
(m) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original while all of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement as of the date and year first written above.
TICKETMASTER CORPORATION
By:
---------------------------------
Title:
-------------------------------
------------------------------------
ANTHONY J. TOLBERT, an individual
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<PAGE> 1
EXHIBIT 10.49
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
AMENDMENT, dated as of September ___, 1997, between Ticketmaster
Corporation (the "Company"), and Judy A. Black ("Executive").
W I T N E S S E T H:
WHEREAS, the Company and Executive are parties to that certain
Employment Agreement, dated as of March 1, 1995 (the "Agreement"), relative to
Executive's employment by the Company; and
WHEREAS, the Company and Executive have agreed to make certain
amendments to the Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, the parties
hereto agree as follows:
1. DEFINITIONS. Terms defined in the Agreement shall have the same
meaning when used in this Amendment, unless the context requires otherwise.
2. EXTENSION OF THE TERM. The term of the Agreement is hereby extended
for a period of three (3) additional years, commencing on March 1, 1998 and
ending on February 28, 2001 (the "Extension Period").
3. BASE SALARY AMOUNT DURING EXTENSION. The Base Salary Amount during
the first, second and third Contract Years of the Extension Period shall be
$275,000, $285,000 and $300,000, respectively, per annum.
4. CONTINUED EFFECTIVENESS OF AGREEMENT. Except as expressly set forth
herein, the Agreement shall continue in full force and effect in accordance with
its terms and provisions thereof.
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement effective as of the date and year first written above.
By: Ticketmaster Corporation,
a Illinois corporation
<PAGE> 2
By:
----------------------------------
Title:
-------------------------------
-----------------------------------
Judy A. Black, an individual
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<PAGE> 1
EXHIBIT 10.50
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
AMENDMENT, dated as of December ___, 1997, between Ticketmaster
Publishing, Inc. (the "Company"), and Annie Gilbar ("Executive").
W I T N E S S E T H:
WHEREAS, the Company and Executive are parties to that certain
Employment Agreement, dated as of January 3, 1995 (the "Agreement"), relative to
Executive's employment by the Company; and
WHEREAS, the Company and Executive have agreed to make certain
amendments to the Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, the parties
hereto agree as follows:
1. DEFINITIONS. Terms defined in the Agreement shall have the same
meaning when used in this Amendment, unless the context requires otherwise.
2. EXTENSION OF THE TERM. The term of the Agreement is hereby extended
for a period of two (2) additional years, commencing on January 1, 1998 and
ending on December 31, 1999 (the "Extension Period"), subject to early
termination as provided herein.
3. BASE SALARY AMOUNT DURING EXTENSION. The Base Salary Amount during
each Contract Year of the Extension Period shall be $220,000, per annum.
4. TERMINATION.
(a) Termination for Any Reason. The Company or Executive may
terminate the employment of Executive effective as of January 1, 1999 for any
reason upon notice to the other party at any time prior to January 1, 1999.
<PAGE> 2
(b) Severance. In the event that Company terminates Executive's
employment under Section 4(a) above, then Company shall as severance and full
and final settlement and release of all its obligations to Executive (i) pay
Executive one-half of her Base Salary (i.e., $110,000) on or before January 31,
1999, and (ii) keep in force and effect the insurance benefits set forth in
Sections 6(d)(i) and (ii) and 6(e) of the Agreement for a period equal to the
lesser of the full 1999 calendar year or until Executive obtains full time
employment. Additionally, in such event Company shall pay Executive all expenses
incurred but not yet reimbursed and accrued vacation, if any.
5. CONTINUED EFFECTIVENESS OF AGREEMENT. Except as expressly set forth
herein, the Agreement shall continue in full force and effect in accordance with
its terms and provisions thereof; provided, however, Subsections 6(g) and (h) of
the Agreement are hereby deleted in their entirety.
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement effective as of the date and year first written above.
By: Ticketmaster Publishing, Inc.,
a Delaware corporation
By:
-----------------------------------------
Title:
--------------------------------------
-------------------------------------------
Annie Gilbar, an individual
<PAGE> 1
EXHIBIT 10.51
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT ("Amendment") is entered
into this 1st day of February, 1998, by and between Ticketmaster Corporation, an
Illinois corporation ("Ticketmaster") and Marc Bension, an individual
("Executive"), with reference to the following facts:
WHEREAS, Ticketmaster and Executive entered into that certain Employment
Agreement dated as of February 1, 1994, as amended by that certain Amendment to
Employment Agreement dated as of January 31, 1996 (collectively, the "Employment
Agreement").
WHEREAS, Ticketmaster and Executive hereby desire to amend the
Employment Agreement in the manner set forth herein.
NOW, THEREFORE, in consideration of the mutual premises and covenants
set forth herein, the parties hereby agree as follows:
1. DEFINED TERM(S). All capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to them in the Employment Agreement.
2. EXTENSION OF THE TERM. The term of the Employment Agreement is hereby
extended for a period of three (3) additional years, commencing on February 1,
1999 and ending on January 31, 2002 (the "Extension Period"), subject to early
termination as provided in the Employment Agreement.
3. BASE SALARY AMOUNT DURING EXTENSION PERIOD. The Base Salary Amount
during each Contract Year of the Extension Period shall be $525,000, $525,000
and $550,000 per annum, respectively.
4. MODIFICATION OF TERMS.
(a) Section 4 of the Employment Agreement is hereby deleted in its
entirety and replaced with the following provision:
"4. POSITION AND DUTIES. Executive shall serve as the Executive Vice
President of the Company and President and CEO of its subsidiary joint venture,
Pacer/Cats/CCS. Subject to the authority of the Board of Directors and the Chief
Executive Officer of the Company, the Executive shall have such powers and
duties as may from time to time be prescribed by the Board of Directors or the
Chief Executive Officer of the Company. Executive agrees to serve without
further compensation, if elected or appointed thereto, as an officer or a
director of any of the Company's subsidiaries and affiliates. During Executive's
employment by the Company, he will be entitled to indemnification as an officer
of the Company (and, if so elected, as an officer or director of any of the
Company's subsidiaries or affiliates) in the manner provided by the Illinois
Business Corporation Act of 1983, as amended, and the Company's Articles of
Incorporation and By-Laws, as amended."
5. CONTINUED EFFECTIVENESS OF AGREEMENT. Except as expressly set forth
herein, the Employment Agreement shall continue in full force and effect in
accordance with the terms and provisions thereof.
<PAGE> 2
-2-
IN WITNESS WHEREOF, the parties have executed this Second Amendment as
of the date first written above.
TICKETMASTER CORPORATION,
an Illinois corporation
By:
---------------------------------- -------------------------------
Marc Bension, an individual
Title:
-------------------------------
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<PAGE> 1
EXHIBIT 10.52
AMENDMENT, dated as of February 1, 1998, between Ticketmaster Ticketing
Co., Inc. (the "Company"), and Ann Mooney ("Executive").
W I T N E S S E T H:
WHEREAS, Ticketmaster Group, Inc. ("Group") and Executive are parties to
that certain Employment Agreement, dated as of February 1, 1994 (the
"Agreement"), relative to Executive's employment by the Company; and
WHEREAS, Group assigned the Agreement to Company, an affiliate of Group,
pursuant to Section 11(g) of the Agreement and the Company and Executive have
agreed to make certain amendments to the Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, the parties
hereto agree as follows:
1. DEFINITIONS. Terms defined in the Agreement shall have the same
meaning when used in this Amendment, unless the context requires otherwise.
2. EXTENSION OF THE TERM. The term of the Agreement is hereby extended
for a period of three (3) additional years, commencing on February 1, 1999 and
ending on January 31, 2002 (the "Extension Period"), subject to early
termination as provided in the Agreement.
3. BASE SALARY AMOUNT DURING EXTENSION. The Base Salary Amount during
each of the first, second and third Contract Years of the Extension Period shall
be $175,000, $182,500 and $190,000 per annum, respectively.
4. ANNUAL PERFORMANCE BONUSES. The $30,000 minimum bonus set forth in
the last sentence of Section 6(b) of the Agreement shall be increased to $35,000
for each Contract Year of the Extension Period.
5. POSITION AND DUTIES. As of the date hereof, Executive's position and
duties shall be changed from Vice President-Administration to Executive Vice
President/Office of the President of the Company and General Manager of Northern
California Operations for Ticketmaster-California. Such change shall be made in
all relevant places where Executive's title and position are stated in the
Agreement.
6. CONTINUED EFFECTIVENESS OF AGREEMENT. Except as expressly set forth
herein, the Agreement shall continue in full force and effect in accordance with
its terms and provisions thereof; provided, however, Section 3 and Subsection
6(g) of the Agreement are hereby deleted in their entirety.
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement effective as of the date and year first written above.
By: Ticketmaster Ticketing Co., Inc.,
a Delaware corporation
By:
----------------------------------
Title:
-------------------------------
------------------------------------
Ann Mooney, an individual
<PAGE> 1
EXHIBIT 10.53
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
AMENDMENT, dated as of February 28, 1998, between Ticketmaster
Publishing, Inc. (the "Company"), and Carole Ference ("Executive").
W I T N E S S E T H:
WHEREAS, the Company and Executive are parties to that certain
Employment Agreement, dated as of February, 1995 (the "Agreement"), relative to
Executive?s employment by the Company; and
WHEREAS, the Company and Executive have agreed to make certain
amendments to the Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, the parties
hereto agree as follows:
1. DEFINITIONS. Terms defined in the Agreement shall have the same
meaning when used in this Amendment, unless the context requires otherwise.
2. EXTENSION OF THE TERM. The term of the Agreement is hereby extended
for a period of two (2) additional years, commencing on March 1, 1998 and ending
on the last day of February, 2000 (the ?Extension Period?), subject to early
termination as provided herein.
3. BASE SALARY AMOUNT DURING EXTENSION PERIOD. The Base Salary Amount
during each Contract Year of the Extension Period shall be $250,000, per annum.
4. ANNUAL PERFORMANCE BONUS DURING EXTENSION PERIOD. Notwithstanding
anything to the contrary in Subsection 6(b) of the Agreement, Employee?s minimum
annual performance bonus shall be $25,000.
5. TERMINATION.
(a) Termination for Any Reason. The Company or Executive may
terminate the employment of Executive effective as of March 1, 1999 for any
reason upon notice to the other party at any time prior to January 1, 1999.
<PAGE> 2
(b) Severance. In the event that Company terminates Executive?s
employment under Section 5(a) above, then Company shall as severance and full
and final settlement and release of all its obligations to Executive (i) pay
Executive one-half of her Base Salary (i.e., $125,000) on or before March 31,
1999, and (ii) keep in force and effect the insurance benefits set forth in
Sections 6(d)(i) and (ii) and 6(e) of the Agreement for a period equal to the
lesser of the full 1999 calendar year or until Executive obtains full time
employment. Additionally, in such event Company shall pay Executive all expenses
incurred but not yet reimbursed and accrued vacation, if any.
6. CONTINUED EFFECTIVENESS OF AGREEMENT. Except as expressly set forth
herein, the Agreement shall continue in full force and effect in accordance with
its terms and provisions thereof; provided, however, Subsections 6(g),(h) and
(i) of the Agreement are hereby deleted in their entirety.
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement effective as of the date and year first written above.
By: Ticketmaster Publishing, Inc.,
a Delaware corporation
By:
----------------------------------
Title:
------------------------------
-----------------------------------
Carole Ference, an individual
<PAGE> 1
EXHIBIT 10.54
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January 13, 1997, between Ticketmaster
Corporation, an Illinois Corporation (the "Company"), and Daniel Reid Goodman
("Executive").
W I T N E S S E T H:
WHEREAS, the Company is desirous of employing Executive, and Executive
is desirous of being employed by the Company, on the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, the parties
hereto agree as follows:
A. DEFINITIONS. The following terms shall have the indicated meanings
when used in this Agreement, unless the context requires otherwise:
1. "BASE SALARY AMOUNT" shall mean $190,000 during the first
Contract Year, $210,000 during the second Contract Year and $230,000
during the third Contract Year.
2. "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company.
3. "CAUSE" shall have the meaning ascribed to that term in
Section 7.
4. "CONTRACT YEAR" shall mean each year during the term hereof
commencing on January 1 and ending on the immediately following December
31.
5. "CUSTOMER" shall have the meaning ascribed to that term in
Section 9(d).
6. "PROPRIETARY INFORMATION OF THE COMPANY" shall have the
meaning ascribed to that term in Section 10(a).
7. "TICKETMASTER BUSINESSES" shall have the meaning ascribed to
that term in Section 9(b).
B. EMPLOYMENT. The Company hereby employs Executive, and Executive
hereby accepts employment with the Company, on the terms and subject to the
conditions set forth herein.
C. TERM OF EMPLOYMENT. The term of employment hereunder shall commence
on the date hereof and end on December 31, 1999, subject to early termination as
herein provided. The Company and Executive shall negotiate in good faith an
extension to the term of this Agreement during the first sixty (60) days of the
third Contract Year hereof.
<PAGE> 2
D. POSITION AND DUTIES. Executive shall serve as the Vice President and
Assistant General Counsel of the Company. He shall report directly to the
Company's Senior Vice President and General Counsel. Subject to the authority of
the Board of Directors and the Chief Executive Officer of the Company, the
Executive shall have all of the powers and duties incident to the office of Vice
President and such other powers and duties as may from time to time be
prescribed by the Board of Directors or the Chief Executive Officer of the
Company. Executive agrees to serve without further compensation, if elected or
appointed thereto, as an officer or a director of any of the Company's domestic
and foreign subsidiaries and affiliates. During Executive's employment by the
Company, he will be entitled to indemnification as an officer of the Company
(and, if so elected, as an officer or director of any of the Company's domestic
and foreign subsidiaries or affiliates) in the manner provided by the Illinois
Business Corporation Act of 1983, as amended, and the Company's Articles of
Incorporation and By-Laws.
E. EXCLUSIVE DUTIES. During Executive's employment by the Company,
Executive shall devote his entire working time, attention and energies to the
business of the Company and will not take any actions of the kind described in
Sections 9(b), 9(c) and 9(d).
F. COMPENSATION AND OTHER BENEFITS.
1. BASE SALARY. During each Contract Year of the term hereof, the
Company shall pay to Executive the Base Salary Amount. The Base Salary
Amount shall be paid to Executive in accordance with the Company's
regular payroll practices with respect to senior management
compensation.
In the event that Executive shall become disabled as a result of
bodily injury or physical or mental illness (whether or not
occupational) to such extent that in the sole opinion of the Board of
Directors, based upon competent medical advice, he can no longer perform
the duties of Vice President of the Company (a "Disability"), the
Company shall only be obligated to continue to pay the Base Salary
Amount to Executive for the 120-day period immediately following the
date of Disability (the "Disability Period"). The right to receive
salary payments during the Disability Period, if applicable, shall
survive any termination of employment by virtue of Disability pursuant
to Section 7.
2. ANNUAL PERFORMANCE BONUSES. During each Contract Year, the
Company shall pay Executive such annual performance bonus as determined
by the Chief Executive Officer, in his sole discretion; provided,
however, in no event shall any such annual bonus be less than $20,000.
3. EXPENSES. Executive shall be entitled to receive prompt
reimbursement from the Company for all documented business expenses
incurred by him in the performance of his duties hereunder, provided
that Executive properly accounts therefor in accordance with the
Company's reimbursement policy, including, without limitation, the
submission of supporting evidence as reasonably requested by the
Company. While traveling on Company business, Executive shall be
entitled to transportation and accommodations consistent with other
senior executives of the Company.
4. FRINGE BENEFITS. During the term hereof, Executive shall be
entitled to receive the following benefits: (i) participation in the
Company's standard medical, dental, life and disability insurance plans
(in accordance with the terms of said plans),(ii) participation in the
Company's IRS Section 401(k) plan (in accordance with the terms of said
plan)and (iii) life insurance in accordance with Subsection 6(f) below.
Additionally, during the term hereof, Executive shall be entitled to
receive an automobile allowance in the amount of $8400 per year, payable
monthly, in advance.
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<PAGE> 3
5. VACATIONS. During the term hereof, Executive shall be entitled
to sick leave and paid holidays consistent with the Company's sick leave
and holiday policy for senior management and up to three weeks paid
vacation during each Contract Year (or such other vacation time as is
consistent with the Company's policy for senior management).
(f) LIFE INSURANCE. The Company agrees to maintain in effect
during the term hereof insurance on Executive's life payable to his
estate or his named beneficiary or beneficiaries in the amount of
$500,000; provided, however, that Executive shall reimburse the Company
for any and all premiums paid by the Company with respect to such
insurance in excess of the preferred or select premium rate for
non-smokers.
(g) STOCK OPTIONS. Executive shall be entitled to receive such
options, if any, to purchase the Company's stock, as the Chief Executive
Officer of the Company shall determine, in his sole discretion.
G. TERMINATION. The Company or Executive may terminate the employment of
Executive hereunder upon the occurrence of a Disability (as defined in Section
6(a)) for a period of no less than 120 days during any consecutive twelve-month
period. The Company may also terminate the employment of Executive hereunder
upon Executive's death or for Cause. For purposes hereof, "Cause" shall mean (i)
fraud, theft, misappropriation of funds or conviction of a felony, (ii)
Executive's engagement in illegal conduct tending to place Executive or the
Company in disrepute, (iii) dereliction or gross misconduct in Executive's
performance of his duties as an employee of the Company or the failure of
Executive to perform his duties in a manner consistent with the instructions of
the Board of Directors or the Chief Executive Officer of the Company or (iv)
violation by Executive of any of his material covenants contained in this
Agreement, including, without limitation, Section 10. Notwithstanding the
foregoing, before the Company may terminate the employment of Executive for
Cause, the Company shall deliver to Executive not less than ten business days
prior written notice of the Company's intention to terminate Executive's
employment together with a statement of the basis for such termination, and
Executive shall be afforded (i) an opportunity to respond to the Company during
such ten-business day period and (ii) in the event that the basis for such
termination is clause (iii) or (iv) above, and the situation resulting in the
Company's determination to terminate for cause is non-repetitive in nature, the
right to remedy such situation so that such termination is no longer effective.
Upon the termination of Executive's employment for any reason, Executive shall
be entitled to receive all compensation for the then current Contract Year
through the date of such termination plus all accrued but unreimbursed expenses.
In addition, upon the termination of Executive's employment for any reason other
than for or by virtue of Cause, death, disability or Executive's voluntary
termination of employment, the Company shall continue to be responsible for the
payment of the Base Salary Amount for the remainder of the term hereof;
provided, however, that Executive shall have a duty to mitigate commencing on
the first anniversary of the date of termination; and, further provided that
Executive shall perform his covenants, duties and obligations under Sections
9(b), 9(c) and 9(d) during the remainder of the term hereof. Termination of
Executive's employment for any reason whatsoever shall not affect Executive's
ability to exercise stock options that have vested prior to the date of
termination.
H. DEVELOPMENTAL RIGHTS. Executive agrees that any developments by way
of invention, design, copyright, trademark or other matters which may be
written, developed, or perfected by him during the term hereof, and which relate
to the business of the Company or its subsidiaries or affiliates, shall be the
property of the Company without any interest therein by Executive, and he will,
at the request and expense of the Company, apply for and prosecute letters
patent thereon in the United States or in foreign countries, and any renewals
thereof, if the Company so requests, and will assign and transfer the same to
the Company together with any letters patent, copyrights, trademarks or other
ownership rights therein or applications therefor or renewals thereof and any
revenues or rights to revenues arising therefrom; provided, however, that the
foregoing shall not apply to an invention that Executive develops entirely on
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<PAGE> 4
his own time without using the Company's equipment, supplies, facilities or
trade secret information except for those inventions that either:
1. relate at the time of conception or reduction to practice of
the invention to the Company's business, or actual or demonstrably
anticipated research or development of the Company; or
2. result from any work performed by Executive for the Company.
I. CONSULTING.
1. CONSULTING SERVICES. During the one-year period commencing
immediately upon the termination of Executive's employment for any
reason (other than Executive's death) (the "Consulting Period"),
Executive shall be available for consultation with the Company and its
subsidiaries and affiliates concerning their general operations and the
industries in which they engage in business. In addition, during the
Consulting Period, consultant will aid, assist and consult with the
Company and its subsidiaries and affiliates with respect to their
dealings with clients and the enhancement of their recognition and
reputation. During the Consulting Period, Executive shall devote such
time and energies to the affairs of the Company as may be reasonably
required to carry out his duties hereunder without jeopardizing
Executive's then full-time, non-Ticketmaster Business employment
opportunities; provided, however, that Executive shall not be obligated
to devote more than 50 hours per year to the performance of such duties.
In consideration of Executive's consulting services, and in
consideration of Executive's covenants contained in this Section 9, the
Company shall pay to Executive $10,000 during each full year of the
Consulting Period, payable in equal monthly installments. The Company
further agrees to reimburse Executive for all reasonable and necessary
business expenses incurred by Executive in the performance of his
consulting services in accordance with the Company's reimbursement
policy, including, without limitation, the submission of supporting
evidence as reasonably required by the Company.
2. COVENANT NOT TO COMPETE. During the Consulting Period,
Executive shall not, without the prior written consent of the Company,
directly or indirectly engage in or assist any activity which is the
same as, similar to or competitive with the Ticketmaster Businesses
(other than on behalf of the Company or any of its subsidiaries or
affiliates) including, without limitation, whether such engagement or
assistance is as an officer, director, proprietor, employee, partner,
investor (other than as a holder of less than 5% of the outstanding
capital stock of a publicly traded corporation), guarantor, consultant,
advisor, agent, sales representative or other participant, anywhere in
the world that the Company or any of its subsidiaries or affiliates has
been engaged, including, without limitation, the United States, Canada,
Mexico, England, Ireland, Scotland, Europe and Australia. Nothing herein
shall limit Executive's ability to own interests in, advise, consult
with, be employed by, perform legal services for or manage entities
which sell tickets as an incidental part of their primary businesses
(e.g. cable networks, on-line computer services, sport teams, arenas,
hotels, cruise lines, theatrical and movie productions and the like) and
which do not hold themselves out generally as competitors of the Company
and its subsidiaries and affiliates. The "Ticketmaster Businesses" shall
mean the computerized sale of tickets for sporting, theatrical,
cinematic, live theatrical, musical or any other events on behalf of
various venues and promoters through distribution channels currently
being utilized by the Company or any of its subsidiaries or affiliates
(as such term is defined in Rule 405 of Regulation C promulgated under
the Securities Act of 1933, as amended).
3. SOLICITATION OF EMPLOYEES. During the Consulting Period,
Executive shall not (i) directly or indirectly induce or attempt to
induce (regardless of who initiates the contact) any person then
employed (whether part-time or full-time) by the Company or any of its
subsidiaries or affiliates, whether as an officer, employee, consultant,
adviser or independent contractor, to leave the employ of the Company or
to cease providing or otherwise alter the services then provided to
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<PAGE> 5
the Company or to any of its subsidiaries or affiliates or (ii) in any
other manner seek to engage or employ any such person (whether or not
for compensation) as an officer, employee, consultant, adviser or
independent contractor in connection with the operation of any business
which is the same as or similar to any of the Ticketmaster Businesses.
4. NON-SOLICITATION OF CUSTOMERS. During the Consulting Period,
Executive shall not solicit any Customers of the Company or any of its
subsidiaries or affiliates or encourage (regardless of who initiates the
contact) any such Customers to use the facilities or services of any
Competitor of the Company or any of its subsidiaries or affiliates.
"Customer" shall mean any person who engages the Company or any of its
subsidiaries or affiliates to sell, on its behalf as agent, tickets to
the public.
J. CONFIDENTIALITY. Executive shall not at any time (during or for a
period of sixty (60) months after termination of employment) disclose (except as
may be required by law) or use, except in the pursuit of the business of the
Company or any of its subsidiaries or affiliates, any Proprietary Information of
the Company. "Proprietary Information of the Company" means all information
known or intended to be known only to employees of the Company or any of its
subsidiaries or affiliates in a confidential relationship with the Company or
any of its subsidiaries or affiliates relating to technical matters pertaining
to the business of the Company or any of its subsidiaries or affiliates, but
shall not include any information within the public domain. Executive agrees not
to remove any documents, records or other information from the premises of the
Company or any of its subsidiaries or affiliates containing any such proprietary
information, except in the pursuit of the business of the Company or any of its
subsidiaries or affiliates, and acknowledges that such documents, records and
other information are the exclusive property of the Company or its subsidiaries
or affiliates. Upon termination of Executive's employment, Executive shall
immediately return all Proprietary Information of the Company and all copies
thereof to the Company.
K. GENERAL PROVISIONS.
1. EXPENSES. All costs and expenses incurred by either of the
parties in connection with this Agreement and any transactions
contemplated hereby shall be paid by that party.
2. NOTICES. All notices, demands and other communications
hereunder shall be in writing and shall be given or made (and shall be
deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service, by cable, by telecopy, by
telegram, by telex or by registered or certified mail to the respective
parties at the following addresses (or at such other address for a party
as shall be specified in a notice given in accordance with this Section
11(b)):
(i) If to the Company:
Ticketmaster Corporation
3701 Wilshire Boulevard
7th Floor
Los Angeles, California 90010
Attention: Chief Executive Officer
General Counsel
Telecopy No.: (213) 382-1146
With a copy to:
Neal Gerber & Eisenberg
Two North LaSalle Street
Chicago, Illinois 60602
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<PAGE> 6
Attention: Charles Evans Gerber
Telecopy No.: (312) 269-8000
(ii) If to Executive:
Daniel R. Goodman
----------------------------------
----------------------------------
Telecopy No.: (____) _____________
3. HEADINGS. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
4. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
heirs, devisees, legatees, executors, administrators, successors and
personal or legal representatives. If Executive is domiciled in a
community property state or a state that has adopted the Uniform Marital
Property Act or equivalent or if Executive is domiciled in a state that
grants to his spouse any other marital rights in Executive's assets
(including, without limitation, dower rights or a right to elect against
Executive's will or to claim a forced share of Executive's estate), this
Agreement shall also inure to the benefit of, and shall also be binding
upon, his spouse. If Executive should die while any amounts would still
be payable to him hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's designee or, if there be
no such designee, to Executive's heirs, devisees, legatees or executors
or administrators of Executive's estate, as appropriate.
5. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under existing or future laws
effective during the term of this Agreement, such provisions shall be
fully severable, the Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a
part of this Agreement, and the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from
this Agreement. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as part of
this Agreement a provision as similar in terms to such illegal, invalid
or unenforceable provision as may be possible and be legal, valid and
enforceable.
6. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter
hereof and thereof and supersedes all prior agreements and
understandings, both written and oral, between the Company and Executive
with respect to the subject matter hereof and thereof.
7. ASSIGNMENT. This Agreement and the rights and duties hereunder
are not assignable by Executive. This Agreement and the rights and
duties hereunder may not be assigned by the Company without the express
written consent of Executive (which consent may be granted or withheld
in the sole discretion of Executive), except that such consent shall not
be required in order for the Company to assign this Agreement or the
rights or duties hereunder to an affiliate (as such term is defined in
Section 9(b)) of the Company or to a third party in connection with the
merger or consolidation of the Company with, or the sale of all or
substantially all of the assets or business of the Company to, that
third party.
8. AMENDMENT; WAIVER. This Agreement may not be amended or
modified except by an instrument in writing signed by, or on behalf of,
the Company and Executive. Either party to
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<PAGE> 7
this Agreement may (a) extend the time for the performance of any of the
obligations or other acts of the other party or (b) waive compliance
with any of the agreements or conditions of the other party contained
herein. Any such extension or waiver shall be valid only if set forth in
an instrument in writing signed by the party to be bound thereby. Any
waiver of any term or condition shall not be construed as a waiver of
any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of any such rights.
9. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Illinois,
applicable to contracts executed in and to be performed entirely within
that state.
10. JURISDICTION AND VENUE. The parties hereto agree that all
actions or proceedings initiated by either party hereto and arising
directly or indirectly out of this Agreement which are brought pursuant
to judicial proceedings shall be litigated in a Federal or state court
located in the State of California. The parties hereto expressly submit
and consent in advance to such jurisdiction and agree that service of
summons and complaint or other process or papers may be made by
registered or certified mail addressed to the relevant party at the
address to which notices are to be sent pursuant to Section 11(b) of
this Agreement. The parties hereto waive any claim that a Federal or
state court located in the State of California is an inconvenient forum
or an improper forum based on lack of venue.
11. EQUITABLE RELIEF. Executive acknowledges that the covenants
contained in Sections 9 and 10 are reasonable and necessary to protect
the legitimate interests of the Company, that in the absence of such
covenants the Company would not have entered into this Agreement, that
any breach or threatened breach of such covenants will result in
irreparable injury to the Company and that the remedy at law for such
breach or threatened breach would be inadequate. Accordingly, the
Executive agrees that the Company, in addition to any other rights or
remedies which it may have, shall be entitled to seek such equitable and
injunctive relief as may be available from any court of competent
jurisdiction to restrain the Executive from any breach or threatened
breach of such covenants.
12. ATTORNEYS' FEES. If any legal action or other proceeding is
brought for the enforcement of this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief
to which it may be entitled.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original while all of
which taken together shall constitute one and the same instrument.
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<PAGE> 8
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement as of the date and year first written above.
TICKETMASTER CORPORATION
By:
----------------------------------
Title:
------------------------------
------------------------------------
DANIEL R. GOODMAN, an individual
-8-
<PAGE> 1
EXHIBIT 10.55
October 29, 1997
Layne Leslie Britton
3677 Boise
Los Angeles, CA 90066
RE: RESIGNATION; MUTUAL RELEASE
Dear Layne:
Reference is made to that certain Employment Agreement (the "Employment
Agreement") dated as of October 18, 1996, by and between you and Ticketmaster
Group, Inc. (the "Company"). This letter sets forth details of our understanding
and mutual agreement concerning the termination of your Employment Agreement
with the Company.
1. SEVERANCE. Upon your execution of a copy of this letter, we will
continue to pay you your Base Salary and minimal annual performance bonus for
the Second Contract Year (as defined in your Employment Agreement) at such times
as are provided in Sections 6(a) and (b) of the Employment Agreement. Effective
as of your resignation date, all benefits previously provided to you in
connection with your employment with us shall cease commencing as of the date
hereof; provided, however, we will pay for COBRA, should you elect the same, for
a period equal to the shorter of (a) the time at which you are covered by an
employee medical plan of another entity or (b) thirty (30) days. The vested
portion of your stock Options (as defined in your Non-Qualified Stock Option
Agreement) is 12,500 shares. Your right to exercise the vested portion of your
Options (subject to your Option Agreement and law) shall cease and terminate in
full on April 30, 1998. You and we further agree that upon your execution of a
copy of this letter, the Employment Agreement shall be declared terminated,
null, and void, and shall be of no further force or effect, except that Section
10 (Confidentiality) and Section 11(1) (Attorney's Fees), shall all remain in
full force and effect.
2. MUTUAL RELEASE. In consideration of the foregoing terms, you and we
hereby waive, release and forever discharge each other from any and all claims,
obligations and liabilities which either of us may have had, may now have or may
in the future have against each other resulting from, arising out of or in
connection with any event, act, omission or circumstance occurring or prevailing
up and to and including October __, 1997. You and we hereby waive, release and
forever discharge each other, from any claim of any kind, whether known or
unknown, suspected or unsuspected, arising out of or in any way related to your
employment with Ticketmaster, and/or severance of such employment from
Ticketmaster including, but not limited to, any claims based on lost wages, lost
benefits, and/or any allegations of discrimination under Title VII of the Civil
Rights Act of 1964, as amended, 42 U.S.C. Section 2000e, et seq., the Age
Discrimination in Employment Act, as amended by the Older Workers Benefit
Protective Act of 1990, 29 U.S.C. Section 621, et seq., the Americans with
Disabilities Act, 42 U.S.C. Section 12101, et seq., any and all other state
discrimination statues, any contract, tort, wage and hour law, and/or any
federal, state or local fair employment practice of civil rights law, ordinance
or executive order, or any other wrongdoing or improper conduct whatsoever,
including but not limited to, any claims for violation of any state or federal
law or regulations, or for breach of contract breach of the implied covenant of
good faith and fair dealing, wrongful discharge, misrepresentation, defamation,
fraud, fraudulent inducement, or emotional distress, and any and all other
claims or torts
<PAGE> 2
whatsoever, all to the fullest extent permitted by law. However, nothing herein
shall release or waive any claims that you may have, if any, to any benefits
that you are entitled to pursuant to Ticketmaster's 401-K Plan or to any rights
you may have to indemnification from the Company for any of your acts on behalf
of the Company during your employment solely to the extent the same may
exist under applicable law.
3. RELEASE OF AGE DISCRIMINATION CLAIMS. This Agreement as it
relates to a release of age discrimination claims is revocable by you for a
period of seven (7) calendar days following your execution of this agreement.
The revocation must be in writing, must specifically revoke this agreement, and
must be directed to Ned Goldstein, at facsimile number (310) 360-6512.
4. RELEASE OF KNOWN AND UNKNOWN CLAIMS. In executing this
agreement, you and we waive and relinquish all rights and benefits afforded by
California Civil Code Section 1542 and do so understanding and acknowledging the
significance and consequences of the specific waiver of Section 1542. Section
1542 states as follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
Thus, notwithstanding the provisions of Section 1542, you and we
expressly acknowledge that paragraph 2, above, is also intended to include in
its effect, without limitation, all such claims which you or we do not know or
suspect to exist at the time of the execution of this agreement, and that this
agreement contemplates the extinguishment of those claims. You and we
acknowledge and agree that either of us may later discover facts different from
or in addition to those you or we now know or believe to be true in entering
into this agreement. You and we agree to assume the risk of the possible
discovery of additional or different facts, including facts which may have been
concealed or hidden, and agree that this agreement shall remain effective
regardless of such additional or different facts.
Upon our receipt of a signed copy of this letter agreement, we will
forward to you under separate cover such information as is required by law
pertaining to Continuation of Group Health Plan Coverage (COBRA) and California
Unemployment Insurance.
If the foregoing meets with your approval, please indicate your
acceptance by executing an original of this letter agreement and returning it to
us.
Very truly yours,
TICKETMASTER GROUP, INC.
By:
-----------------------------------------
Ned S. Goldstein
Acknowledged and Agreed to By:
- --------------------------------
Layne Leslie Britton
<PAGE> 1
EXHIBIT 10.56
TICKETMASTER GROUP, INC.
NINTH AMENDMENT TO CREDIT AGREEMENT
This NINTH AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is
dated as of March 6, 1998 and entered into by and among Ticketmaster Group,
Inc., an Illinois corporation ("BORROWER"), the financial institutions listed on
the signature pages hereof ("LENDERS"), Wells Fargo Bank, National Association,
as agent for Lenders ("AGENT"), and the undersigned Guarantors (for purposes of
Section 4 hereof only), and is made with reference to that certain Credit
Agreement, dated as of November 18, 1994, as amended by the First Amendment to
Credit Agreement, dated as of January 6, 1995, the Second Amendment to Credit
Agreement, dated as of January 30, 1995, the Third Amendment and Limited Waiver
to Credit Agreement and Amendment to Guarantor Pledge Agreement, dated as of
April 7, 1995, the Fourth Amendment and Limited Waiver to Credit Agreement,
Amendment to Guarantor Pledge Agreement and Amendment to Third Party Pledge
Agreement, dated as of August 28, 1995, the Waiver Dated as of April 30, 1996 to
Credit Agreement, the Fifth Amendment to Credit Agreement, dated as of June 6,
1996, the Sixth Amendment and Limited Waiver to Credit Agreement dated as of
September 27, 1996, the Seventh Amendment and Limited Waiver to Credit Agreement
dated as of October 24, 1996 and the Eighth Amendment to Credit Agreement dated
as of June 23, 1997 (as so amended, the "CREDIT AGREEMENT"), by and among
Borrower, the Lenders and Agent. Capitalized terms used herein without
definition shall have the same meanings herein as set forth in the Credit
Agreement.
RECITALS
A. Borrower has requested that Lenders waive Borrower's
compliance with the limitation on capital expenditures set forth in Section 6.2
of the Credit Agreement for the fiscal year ending January 31, 1998 and amend
such limitation for the fiscal year ending January 31, 1999.
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
SECTION I. AMENDMENTS WAIVERS TO THE CREDIT AGREEMENT
1
<PAGE> 2
1.1 WAIVER TO SECTION 6.2.
Requisite Lenders hereby waive Borrower's compliance with Section
6.2 for the Fiscal Year ending January 31, 1998.
1.2 AMENDMENT TO SECTION 6.2.
Section 6.2 of the Credit Agreement is amended by deleting the
reference therein to "$12,000,000" and substituting "$20,000,000"
therefore.
SECTION 2. CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective only upon the satisfaction
of all of the following conditions precedent (the date of satisfaction of such
conditions being referred to herein as the "NINTH AMENDMENT EFFECTIVE DATE"):
A. Borrower shall deliver to Agent for Lenders this Amendment executed
by Borrower and each Guarantor.
B. Agent shall have received from Required Lenders by telecopy or other
delivery an executed copy of this Amendment.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment, Borrower
represents and warrants to each Lender that the following statements are true,
correct and complete:
A. CORPORATE POWER AND AUTHORITY. Borrower has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "AMENDED AGREEMENT") and the other
Loan Documents.
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment have been duly authorized by all necessary corporate action on
the part of Borrower and each Guarantor.
C. NO CONFLICT. The execution, delivery and performance by
Borrower and each Guarantor of this Amendment do not violate any provision of
any law or regulation applicable to Borrower or any Guarantor, the violation of
which could reasonably be expected to have a Material Adverse Effect, or
contravene any provision of Borrower's or any Guarantor's articles of
incorporation or by-laws, or result in or constitute a Defined Default under any
contract, obligation, indenture or other instrument to which Borrower or any
Guarantor is a party or by which Borrower or any Guarantor may be bound which
default could reasonably be expected to have a Material Adverse Effect.
2
<PAGE> 3
D. GOVERNMENTAL CONSENTS. No Governmental Approval is required in
connection with the execution, delivery and performance by Borrower or any
Guarantor of this Amendment or the performance by Borrower or any Guarantor of
the Amended Agreement or to ensure the legality, validity or enforceability
hereof or thereof that have not been obtained on or prior to the Ninth Amendment
Effective Date.
E. BINDING OBLIGATION. This Amendment has been duly executed and
delivered by Borrower and each Guarantor (as applicable), and this Amendment and
the Amended Agreement are the legally valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 4 of the
Credit Agreement and in the other Loan Documents are and will be true, correct
and complete in all material respects on and as of the Ninth Amendment Effective
Date to the same extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to an earlier
date, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. Upon giving effect to this Amendment, no
event has occurred and is continuing that would constitute an Event of Default
or a Potential Event of Default.
SECTION 4. ACKNOWLEDGEMENT AND CONSENT
Guarantors are parties to the Guaranty, the Guarantor Pledge
Agreement (in the case of certain Guarantors), the Security Agreement dated as
of March 31, 1995 and as the same has been and may be amended from time to time
(the "SECURITY AGREEMENT") by the Guarantors named therein (in the case of
certain Guarantors) and the Second Amended and Restated Trademark Mortgage
Agreement dated as of March 31, 1995 (as amended, the "TRADEMARK AGREEMENT")
between Ticketmaster Corporation and Agent (in the case of Ticketmaster
Corporation) pursuant to which each Guarantor has guarantied the Obligations on
the terms (and to the extent) set forth in the Guaranty and certain Guarantors
have created Liens in favor of Agent on certain Collateral to secure the
Obligations on the terms (and to the extent) set forth in the Guarantor Pledge
Agreement, the Security Agreement and the Trademark Agreement. The Guaranty, the
Guarantor Pledge Agreement, the Security Agreement and the Pledge Agreement are
collectively referred to herein as the "GUARANTOR DOCUMENTS."
Each Guarantor hereby acknowledges that it has reviewed the terms
and provisions of the Credit Agreement and this Amendment and consents to the
amendment of the Credit Agreement effected pursuant to this Amendment. Each
Guarantor hereby confirms that each Guarantor Document to which it is a party or
otherwise bound and all Collateral encumbered thereby will continue to guaranty
or secure, as the case may be, to the fullest extent
3
<PAGE> 4
possible in accordance with the applicable provisions of the Guarantor Documents
the payment and performance of all guarantied or secured obligations.
Each Guarantor acknowledges and agrees that any of the Guarantor
Documents to which it is a party or otherwise bound shall continue in full force
and effect and that all of its obligations thereunder shall be valid and
enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment. Each Guarantor represents and warrants that all
representations and warranties contained in the Guarantor Documents to which it
is a party or otherwise bound are true, correct and complete in all material
respects on and as of the Ninth Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
Each Guarantor acknowledges and agrees that (i) notwithstanding
the conditions to effectiveness set forth in this Amendment, such Guarantor is
not required by the terms of the Credit Agreement or any other Loan Document to
consent to the amendments to the Credit Agreement effected pursuant to this
Amendment and (ii) nothing in the Credit Agreement, this Amendment or any other
Loan Document shall be deemed to require the consent of such Guarantor to any
future amendments to the Credit Agreement.
SECTION 5. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS. On and after the Ninth Amendment Effective Date, each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Credit Agreement, and each reference in
the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean and be a
reference to the Amended Agreement. Except as specifically amended by this
Amendment, the Credit Agreement and the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed. The execution,
delivery and performance of this Amendment shall not, except as expressly
provided herein, constitute a waiver of any provision of, or operate as a waiver
of any right, power or remedy of Agent or any Lender under, the Credit Agreement
or any of the other Loan Documents.
B. FEES AND EXPENSES. Borrower acknowledges that all reasonable
cost, fees and expenses as described in subsection 9.3 of the Credit Agreement
incurred by Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of the
Borrower.
C. HEADINGS. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
4
<PAGE> 5
INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
E. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWER:
TICKETMASTER GROUP, INC.,
an Illinois corporation
By:
---------------------------------
Title:
-----------------------------
GUARANTORS (FOR THE PURPOSES OF
SECTION 4 ONLY):
TICKETMASTER CORPORATION,
AN ILLINOIS CORPORATION
TICKETMASTER-CALIFORNIA, INC.,
A CALIFORNIA CORPORATION
TICKETMASTER-ARIZONA, INC., AN
ARIZONA CORPORATION
TICKETMASTER CORPORATION OF
WASHINGTON, A WASHINGTON
CORPORATION
TICKETMASTER-COLORADO, INC., A
COLORADO CORPORATION
TICKETMASTER-INDIANA, INC., AN
INDIANA CORPORATION
TICKETMASTER-GEORGIA, INC., A
GEORGIA CORPORATION
TICKETMASTER-CHICAGO, INC., AN
ILLINOIS CORPORATION
TICKETMASTER-MIDWEST, INC., A
MINNESOTA CORPORATION
By:
---------------------------------
Peter B. Knepper
Its: Senior Vice President and
Chief Financial Officer
TICKETMASTER ADVERTISING
COMPANY, AN ILLINOIS CORPORATION
S-1
<PAGE> 7
TMC CONSULTANTS, INC., AN
ILLINOIS CORPORATION
TICKETMASTER-TENNESSEE, INC., A
TENNESSEE CORPORATION
TICKETMASTER-LAS VEGAS, INC., A
NEVADA CORPORATION
TMNY HOLDINGS, INC., A NEW YORK
CORPORATION
TICKETMASTER-NEW YORK, INC., A
DELAWARE CORPORATION
TICKETMASTER-MICHIGAN, INC., A
MICHIGAN CORPORATION
TICKETMASTER FLORIDA
MANAGEMENT CORPORATION, A
FLORIDA CORPORATION
TICKETMASTER EUROPE, INC.,
A DELAWARE CORPORATION
TICKETMASTER-TEXAS MANAGEMENT
CORPORATION, A DELAWARE
CORPORATION
ENTERTAINMENT STRATEGIES, LTD.,
A CALIFORNIA CORPORATION
TICKETMASTER-NEW ORLEANS, INC.,
A LOUISIANA CORPORATION
TICKETMASTER CORPORATION,
A DELAWARE CORPORATION
TICKETMASTER TICKETING CO., INC., A
DELAWARE CORPORATION
TM OVERSEAS, INC., A
DELAWARE CORPORATION
TICKETMASTER EUROPE GROUP, A
DELAWARE JOINT VENTURE
TICKETMASTER D.V., INC.,
A DELAWARE CORPORATION
By:
---------------------------------
Peter B. Knepper
Authorized Officer
S-2
<PAGE> 8
LENDERS:
WELLS FARGO BANK, NATIONAL ASSOCIATION,
individually as a Lender and as Agent
By:
-----------------------------------------
Title:
--------------------------------------
BANQUE NATIONALE DE PARIS,
as a Lender
By:
-----------------------------------------
Title:
--------------------------------------
U.S. BANK NATIONAL ASSOCIATION,
By:
-----------------------------------------
Title:
--------------------------------------
CITY NATIONAL BANK,
as a Lender
By:
-----------------------------------------
Title:
--------------------------------------
SEAFIRST NATIONAL BANK,
as a Lender
By:
-----------------------------------------
Title:
--------------------------------------
S-3
<PAGE> 9
FUJI BANK, LTD., LOS ANGELES AGENCY,
as a Lender
By:
-----------------------------------------
Title:
--------------------------------------
SUMITOMO BANK OF CALIFORNIA,
as a Lender
By:
-----------------------------------------
Title:
--------------------------------------
S-4
<PAGE> 1
EXHIBIT 10.57
[CONFORMED COPY]
COOPERATION, NON-COMPETITION
AND CONFIDENTIALITY AGREEMENT
THIS COOPERATION, NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
(the "Agreement") is made and entered into this 9th day of March, 1998, by and
between USA Networks, Inc., a Delaware corporation ("USAi"), and Fredric D.
Rosen ("Executive"), with reference to the following facts;
A. USAi has offered to acquire all of the issued and outstanding capital
stock (the "Stock") of Ticketmaster Group, Inc., an Illinois corporation (the
"Company"), specifically including all of the issued and outstanding shares of
Stock owned directly or indirectly by Executive.
B. Executive is the chief executive officer of the Company.
C. It is a condition to USAi's willingness to agree to proceed with the
acquisition of the Stock and the related goodwill of the Company that USAi and
Executive enter into this Agreement.
D. Executive acknowledges and agrees that this Agreement is supported by
adequate independent consideration and does not replace or supercede the terms
and conditions of that certain Employment Agreement between Executive and the
Company dated December 15, 1993 (the "Employment Agreement") (and the parties'
compliance therewith), except as specifically provided herein.
NOW, THEREFORE, in consideration of the premises, mutual
covenants, and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. COOPERATION: Executive agrees to cooperate with the Company
and USAi to provide for an orderly transition in the leadership of the Company,
including but not limited to working with a designated successor to Executive as
Chief Executive Officer of the Company ("Successor") should such Successor be
<PAGE> 2
selected during the term of Executive's Employment Agreement. Executive
acknowledges and agrees that such an action by USAi (and by the Company) would
not constitute a breach of the Employment Agreement, and would not constitute
Good Reason for Executive to terminate his employment pursuant to said
Agreement, and Executive hereby waives any such claim; provided, however, that
any partial or complete assumption of Executive's duties and responsibilities by
Successor (as determined by Executive in his sole good faith discretion) shall
not be deemed to be, or constitute, a breach of the Employment Agreement by
Executive; and provided, further, that any compensation payable to Successor,
whether in cash, securities (including options) or otherwise, shall be excluded
in computing Executive's Performance Bonus under the Employment Agreement.
Except as expressly provided in this paragraph, the Company's and Executive's
respective rights, duties and obligations under the Employment Agreement, which
are separate and apart herefrom, shall not otherwise be affected hereby,
including, without limitation, the Company's obligation upon request by
Executive to repurchase Stock (including USAi securities issued in exchange
therefor or replacement thereof) from Executive, the Rosen Family Foundation and
their respective transferees, to the extent applicable; provided, however, that
Executive must provide a 30-day notice to the Company for such repurchase and
such repurchase obligation of the Company may be satisfied by USAi causing the
Company to arrange to place Executive's Stock (including USAi securities issued
in exchange therefor or replacement thereof) with a third party; provided,
further, that USAi will cause the Company to pay Executive the excess, if any,
of the amount of cash Executive would have received with respect to such
repurchase obligation, over the amount received by Executive in such placement.
The parties agree that prior to the effective time of the merger involving the
Company and USAi, Executive may elect with respect to his outstanding stock
options (i) to have such options assumed by USAi at the effective time pursuant
to the terms of the merger agreement and/or (ii) to the extent such assumption
is not elected, have USAi cause the Company to provide Executive at the
effective time of the merger with an amount (the "spread") equal to the product
of (A) the excess of the "merger consideration" per share in such merger over
the exercise price per share of the option, times (B) the number of shares
subject to such option with respect to which Executive elects this clause (ii).
To the extent Executive elects to receive the spread for all or a
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<PAGE> 3
portion of his option, the Company may elect to provide the spread in cash
and/or shares of USAi stock; provided, that, if requested by Executive at the
effective time of the merger, USAi shall cause the Company to arrange to place
any such shares with a third party and USAi shall cause the Company to pay
Executive the excess, if any, of the amount of cash Executive would have
received for such portion of the spread, over the amount received by Executive
in such placement. Executive hereby agrees not to exercise any election under
Section 9 of his December 15, 1993 option agreement with the Company, and waives
the application of such section.
2. COVENANT NOT TO COMPETE: For the period extending from the
date hereof through and including January 31, 2001, Executive will not, without
the prior written consent of USAi, directly or indirectly engage in or assist
any activity which is the same as, similar to, or competitive with the
Ticketmaster Businesses (other than on behalf of the Company or any of its
subsidiaries) including, without limitation, whether such engagement or
assistance is as an officer, director, proprietor, employee, partner, investor
(other than as a holder of less than 5% of the outstanding capital stock of a
publicly traded corporation), guarantor, consultant, advisor, agent, sales
representative or other participant, in any of the following geographic areas in
which the Company does business: the United States, Canada, Mexico, England,
Ireland, Scotland, Australia, Japan, Argentina, Brazil, Chile, New Zealand,
China, Singapore, France, Germany and the rest of Europe. Nothing herein shall
limit Executive's ability to own interests in or manage entities which sell
tickets as an incidental part of their primary businesses (e.g., cable networks,
on-line computer services, sports teams, arenas, hotels, cruise lines,
theatrical and movie productions and the like) and which do not hold themselves
out generally as competitors of the Company and its subsidiaries. The
"Ticketmaster Businesses" shall mean the computerized sale of tickets for
sporting, theatrical, cinematic, live theatrical, musical or any other events on
behalf of various venues and promoters through distribution channels currently
being utilized by the Company or any of its subsidiaries or affiliates (as
defined in Rule 405 of Regulation C promulgated under the Securities Act of
1933, as amended).
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<PAGE> 4
3. SOLICITATION OF EMPLOYEES: For the period extending from the
date hereof through and including January 31, 2001, Executive shall not (i)
directly or indirectly induce or attempt to induce any person then employed
(whether part-time or full-time) by the Company or any of its subsidiaries or
affiliates (other than Andi Stevens) whether as an officer, employee,
consultant, adviser or independent contractor, to leave the employ of the
Company or to cease providing or otherwise alter the services then provided to
the Company or any of its subsidiaries or affiliates; or (ii) in any other
manner seek to engage or employ any such person (whether or not for
compensation) as an officer, employee, consultant, adviser or independent
contractor in connection with the operation of any business which is the same as
or similar to any Ticketmaster Businesses.
4. NON-SOLICITATION OF CUSTOMERS: For the period extending from
the date hereof through and including January 31, 2001, Executive shall not
solicit any customers of the Company or any of its subsidiaries or affiliates or
encourage any such customers to use the facilities or services of any competitor
of the Company or any of its subsidiaries or affiliates. "Customer" shall mean
any person who engages the Company or any of its subsidiaries or affiliates to
sell, on its behalf as an agent, tickets to the public.
5. PROPRIETARY INFORMATION: Executive will not at any time,
during the period extending from the date hereof through and including January
31, 2004, disclose or use, except in the pursuit of the business of the Company
or any of its subsidiaries or affiliates, any proprietary information of the
Company or other Ticketmaster Entity. "Proprietary information of the Company or
other Ticketmaster Entity" means all information known or intended to be known
only to employees of the Company or any of its subsidiaries or affiliates in a
confidential relationship with the Company or any of its subsidiaries or
affiliates relating to technical matters pertaining to the business of the
Company or any of its subsidiaries or affiliates. Executive agrees not to remove
any documents, records or other information from the premises of the Company or
any of its subsidiaries or affiliates containing any such proprietary
information, except in the pursuit of the business of the Company or any of its
subsidiaries or affiliates, and acknowledges that such
-4-
<PAGE> 5
documents, records and other information are the exclusive property of the
Company or its subsidiaries or affiliates.
6. EQUITABLE RELIEF: Executive acknowledges that the covenants
contained in Paragraphs 1 through 5 hereof are reasonable and necessary to
protect the legitimate interests of USAi and the Company, that in the absence of
such covenants USAi would not agree to proceed with the acquisition of the
Stock, that any breach or threatened breach of such covenants will result in
irreparable injury to USAi, and that the remedy at law for such breach or
threatened breach would be inadequate. Accordingly, the Executive agrees that
USAi, in addition to any other rights or remedies which it may have, shall be
entitled to seek such equitable and injunctive relief as may be available from
any court of competent jurisdiction to restrain the Executive from any breach or
threatened breach of such covenants.
7. COMPLETE AGREEMENT; MODIFICATIONS: Except as specifically
provided herein, this Agreement and any documents referred to herein constitute
the parties' entire agreement with respect to the subject matter hereof and
supersede all agreements, representations, warranties, statements, promises, and
understandings, whether oral or written, with respect to the subject matter
hereof. This Agreement may be executed in counterparts and may not be amended,
altered, or modified except by a writing signed by the parties.
8. GOVERNING LAW; JURISDICTION: All questions with respect to
this Agreement and the rights and liabilities of the parties will be governed by
the laws of the State of Illinois. Any and all disputes between the parties
which may arise pursuant to this Agreement will be heard and determined before
an appropriate federal court in the Northern District of Illinois, or, if not
maintainable therein, then in an appropriate Illinois State Court in Cook
County, Illinois, other than any dispute which may arise pursuant to this
Agreement with respect to payments due to Executive under Section 1 which shall
be heard and determined in the Superior Court of Los Angeles, California or an
appropriate federal court in the Southern District of California. The parties
hereto acknowledge that such courts, as applicable, have jurisdiction to
interpret and enforce the provisions of this Agreement, and the parties consent
to, and waive
-5-
<PAGE> 6
any and all objections that they may have as to, personal jurisdiction and/or
venue in any such court.
9. SEVERABILITY: The validity, legality or enforceability of the
remainder of this Agreement will not be affected even if one or more of the
provisions of this Agreement is held invalid, illegal, or unenforceable in any
respect. Further, if the period of time, the extent of the geographic area, or
the scope of the proscribed activities covered by this Agreement should be
deemed unenforceable, then this Agreement shall be construed to cover the
maximum period of time, geographic area or scope of prescribed activities (not
to exceed the maximum time, geographic area or scope set forth herein) as may be
valid under the applicable law, and each of the parties hereto shall request any
court considering the enforceability of this Agreement to construe and/or reform
it so as to render it enforceable to the maximum extent as provided above.
10. TERMINATION: In the event that the Company and USAi terminate
negotiations without execution of a definitive acquisition or merger agreement
relating to the Stock or such agreement is terminated without consummation of
the contemplated transaction, this Agreement shall promptly terminate.
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<PAGE> 7
IN WITNESS WHEREOF, USAi and Executive have executed this
Agreement as of the date and year first written above.
USA NETWORKS, INC.
By: /s/ Thomas J. Kuhn
--------------------------------
Title: Senior Vice President and
General Counsel
/s/ Fredric D. Rosen
------------------------------------
Fredric D. Rosen
-7-
<PAGE> 1
[EXECUTION COPY]
EXHIBIT 10.58
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
USA NETWORKS, INC.,
BRICK ACQUISITION CORP.
AND
TICKETMASTER GROUP, INC.
AS OF MARCH 20, 1998
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TABLE OF CONTENTS
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ARTICLE 1 THE MERGER..................................................... 2
Section 1.1. The Merger.............................................. 2
Section 1.2. Effective Time of the Merger............................ 2
Section 1.3. Closing................................................. 2
Section 1.4. Effects of the Merger................................... 2
Section 1.5. Certificate of Incorporation and Bylaws of Surviving
Corporation........................................... 2
ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES ........................ 3
Section 2.1. Effect of Merger on Capital Stock....................... 3
(a) Capital Stock of Sub............................... 3
(b) Treatment of Certain Shares of Company Common
Stock......... .................................. 3
(c) Exchange Ratio for Company Common Stock............ 3
(d) Adjustment of Exchange Ratio for Dilution and Other
Matters.......................................... 3
Section 2.2. Exchange of Certificates................................ 4
(a) Exchange Agent..................................... 4
(b) Exchange Procedures................................ 4
(c) Distributions with Respect to Unsurrendered
Certificates..................................... 5
(d) No Further Ownership Rights in Company Common
Stock......... .................................. 5
(e) No Issuance of Fractional Shares................... 5
(f) Termination of Exchange Fund....................... 6
(g) No Liability....................................... 7
(h) Lost, Stolen or Destroyed Certificates............. 7
Section 2.3. Stock Options........................................... 7
Section 2.4. Taking of Necessary Action; Further Action.............. 7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 8
Section 3.1. Organization and Qualification; Subsidiaries............ 8
Section 3.2. Certificate of Incorporation and Bylaws................. 9
Section 3.3. Capitalization.......................................... 9
Section 3.4. Authority Relative to this Agreement; Board Approval.... 10
Section 3.5. No Conflict; Required Filings and Consents.............. 10
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Section 3.6. Compliance; Permits..................................... 11
Section 3.7. SEC Filings; Financial Statements....................... 12
Section 3.8. Absence of Certain Changes or Events.................... 13
Section 3.9. Absence of Litigation................................... 13
Section 3.10. Registration Statement; Proxy Statement................. 13
Section 3.11. Brokers................................................. 14
Section 3.12. Opinion of Financial Advisor............................ 14
Section 3.13. Employee Benefit Plans.................................. 14
Section 3.14. Tax Matters............................................. 15
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB............... 15
Section 4.1. Organization and Qualification; Subsidiaries............ 15
Section 4.2. Certificate of Incorporation and Bylaws................. 16
Section 4.3. Capitalization.......................................... 16
Section 4.4. Authority Relative to this Agreement; Board Approval.... 17
Section 4.5. No Conflict; Required Filings and Consents.............. 18
Section 4.6. Compliance; Permits..................................... 18
Section 4.7. SEC Filings; Financial Statements....................... 19
Section 4.8. Absence of Certain Changes or Events.................... 20
Section 4.9. Absence of Litigation................................... 20
Section 4.10. Registration Statement; Proxy Statement................. 20
Section 4.11. Brokers................................................. 21
Section 4.12. Opinion of Financial Advisor............................ 21
Section 4.13. Interim Operations of Sub............................... 21
Section 4.14. Employee Benefit Plans.................................. 21
Section 4.15. Tax Matters............................................. 22
ARTICLE 5 CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL
AGREEMENTS..................................................... 22
Section 5.1. Information and Access.................................. 22
Section 5.2. Conduct of Business of the Company...................... 22
Section 5.3. Conduct of Business of Parent........................... 24
Section 5.4. Preparation of S-4 and Proxy Statement; Other Filings... 25
Section 5.5. Letter of Independent Auditors.......................... 26
Section 5.6. Shareholders Meeting.................................... 26
Section 5.7. Agreements to Take Reasonable Action.................... 27
Section 5.8. Consents................................................ 27
Section 5.9. NASDAQ Quotation........................................ 28
Section 5.10. Affiliates.............................................. 28
Section 5.11. Indemnification and Insurance........................... 28
Section 5.12. Notification of Certain Matters......................... 28
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Section 5.13. Employee Agreements..................................... 28
Section 5.14. Reorganization.......................................... 29
ARTICLE 6 CONDITIONS PRECEDENT........................................... 29
Section 6.1. Conditions to Each Party's Obligation to Effect the
Merger................................................ 29
(a) Shareholder Approval............................... 29
(b) Effectiveness of the S-4........................... 29
(c) Governmental Entity Approvals...................... 29
(d) No Injunctions or Restraints; Illegality........... 29
(e) NASDAQ Quotation................................... 29
Section 6.2. Conditions of Obligations of Parent and Sub............. 30
(a) Representations and Warranties..................... 30
(b) Performance of Obligations of the Company.......... 30
(c) Consents........................................... 30
(d) Tax Opinion........................................ 30
Section 6.3. Conditions of Obligations of the Company................ 30
(a) Representations and Warranties..................... 30
(b) Performance of Obligations of Parent and Sub....... 31
(c) Consents........................................... 31
(d) Tax Opinion........................................ 31
(e) Officer of Parent.................................. 31
ARTICLE 7 TERMINATION................................................... 31
Section 7.1. Termination............................................. 31
Section 7.2. Effect of Termination................................... 33
Section 7.3. Fees and Expenses....................................... 33
ARTICLE 8 GENERAL PROVISIONS............................................. 33
Section 8.1. Amendment............................................... 33
Section 8.2. Extension; Waiver....................................... 33
Section 8.3. Nonsurvival of Representations, Warranties and
Agreements........ ................................... 33
Section 8.4. Entire Agreement........................................ 34
Section 8.5. Severability............................................ 34
Section 8.6. Notices................................................. 34
Section 8.7. Headings................................................ 35
Section 8.8. Counterparts............................................ 35
Section 8.9. Benefits; Assignment.................................... 35
Section 8.10. Governing Law........................................... 36
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EXHIBIT A Form of Company Affiliate Letter
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INDEX OF DEFINED TERMS
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Term Section
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"Agreement"............................................................. Preamble
"Approvals"............................................................. Section 3.1
"Approved Matter"....................................................... Section 3.1
"Blue Sky Laws"......................................................... Section 4.5(b)
"Business Day".......................................................... Section 1.3
"Certificates".......................................................... Section 2.2(b)
"Closing"............................................................... Section 1.3
"Closing Date".......................................................... Section 1.3
"Code".................................................................. Recitals
"Common Shares Trust"................................................... Section 2.2(e)(iii)
"Commonly Controlled Entity"............................................ Section 3.13(a)
"Company"............................................................... Preamble
"Company Banker"........................................................ Section 3.11
"Company Benefit Plans"................................................. Section 3.13(a)
"Company Common Stock".................................................. Recitals
"Company Disclosure Letter"............................................. Section 3.3
"Company Option"........................................................ Section 2.3
"Company Permits"....................................................... Section 3.6(b)
"Company SEC Reports"................................................... Section 3.7(a)
"Confidentiality Agreement"............................................. Section 5.1
"Constituent Corporations".............................................. Section 1.1
"Cooperation Agreement" ................................................ Recitals
"Effective Time"........................................................ Section 1.2
"ERISA"................................................................. Section 3.13(a)
"ERISA Plan"............................................................ Section 3.13(a)
"Excess Shares"......................................................... Section 2.2(e)(ii)
"Exchange Act".......................................................... Section 3.5(b)
"Exchange Agent"........................................................ Section 2.2(a)
"Exchange Fund"......................................................... Section 2.2(a)
"Exchange Ratio"........................................................ Section 2.1(c)
"GAAP".................................................................. Section 3.7(b)
"Governmental Entity"................................................... Section 3.5(b)
"Illinois Articles of Merger"........................................... Section 1.2
"Illinois Certificate of Merger"........................................ Section 1.2
"Illinois Statute"...................................................... Recitals
"Investment Agreement".................................................. Section 5.3
"Liberty"............................................................... Section 5.3
"Material Adverse Effect"............................................... Section 3.1, 4.1
"Merger"................................................................ Recitals
"Multiemployer Plan".................................................... Section 3.13(a)
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"NASD".................................................................. Section 2.2(e)(iii)
"Ordinary Venue Contracts".............................................. Section 5.2
"Other Filings"......................................................... Section 5.4
"Parent"................................................................ Preamble
"Parent Banker"......................................................... Section 4.11
"Parent Benefit Plans".................................................. Section 4.14(a)
"Parent Class B Common Stock"........................................... Section 4.3
"Parent Common Shares".................................................. Section 4.3
"Parent Common Stock"................................................... Section 2.1(c)
"Parent Disclosure Letter".............................................. Section 4.3
"Parent ERISA Plan"..................................................... Section 4.14(a)
"Parent Permits"........................................................ Section 4.6(b)
"Parent Preferred Stock"................................................ Section 4.3
"Parent Proxy Statement"................................................ Section 4.3
"Parent SEC Reports".................................................... Section 4.7(a)
"Proxy Statement"....................................................... Section 3.5(b)
"Rosen Option".......................................................... Section 2.3
"S-4"................................................................... Section 3.10
"SEC"................................................................... Section 3.1
"Securities Act"........................................................ Section 3.7(a)
"Shareholders Meeting".................................................. Section 3.10
"Special Committee"..................................................... Recitals
"Stock Plan"............................................................ Section 2.3
"Sub"................................................................... Preamble
"Sub Common Stock"...................................................... Section 2.1(a)
"subsidiary"............................................................ Section 3.1
"Surviving Corporation"................................................. Section 1.1
"Surviving Corporation Common Stock".................................... Section 2.1(a)
"Transactions".......................................................... Recitals
"Universal"............................................................. Section 5.3
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as
of March 20, 1998, by and among USA NETWORKS, INC., a Delaware corporation
("Parent"), BRICK ACQUISITION CORP., an Illinois corporation and a wholly owned
subsidiary of Parent ("Sub"), and TICKETMASTER GROUP, INC., an Illinois
corporation (the "Company").
RECITALS:
A. The Boards of Directors of Parent, Sub and the Company have
each approved the terms and conditions of the business combination between
Parent and the Company to be effected by the merger (the "Merger") of Sub with
and into the Company, pursuant to the terms and subject to the conditions of
this Agreement and the Business Corporation Act of the State of Illinois (the
"Illinois Statute"), and each deems the Merger advisable and in the best
interests of each corporation. A Special Committee of the Board of Directors of
the Company (the "Special Committee") has determined that the Merger is fair to,
and in the best interests of, the holders of shares of common stock, no par
value, of the Company ("Company Common Stock"), other than Parent and its
subsidiaries, and has recommended to the Board of Directors of the Company that
it approve the terms and conditions of the Merger, including this Agreement. The
Disinterested Directors (as defined in Section 5/7.85 of the Illinois Statute)
of the Company have approved the terms and conditions of the Merger.
B. Each of Parent, Sub and the Company desires to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
C. For federal income tax purposes, it is intended that the
Merger and the transactions contemplated thereby qualify as a reorganization
under the provisions of Section 368(a) of the United States Internal Revenue
Code of 1986, as amended (the "Code").
D. It was a condition, which condition was satisfied, to the
willingness of Parent and Sub to enter into this Agreement and to consummate the
transactions contemplated hereby (the "Transactions"), including the acquisition
of the stock of the Company in the Merger from the Company's shareholders,
including the Chief Executive Officer, that the Chief Executive Officer of the
Company entered into that certain agreement with Parent, dated March 9, 1998
(the "Cooperation Agreement"), pursuant to which, among other things, such
individual agreed not to compete with, or to solicit customers of, the Company
from and after the expiration of his current employment agreement with the
Company and to cooperate with the Company and Parent to provide for an orderly
transition to a new Chief Executive Officer of the Company.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements contained in this Agreement, the parties agree as
follows:
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ARTICLE 1
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions of this
Agreement and in accordance with the Illinois Statute, at the Effective Time,
Parent shall cause Sub to be merged with and into the Company. Following the
Merger, the Company shall continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of Sub shall cease. Sub and
the Company are collectively referred to as the "Constituent Corporations."
SECTION 1.2. EFFECTIVE TIME OF THE MERGER. Subject to the
provisions of this Agreement, the Merger shall become effective (the "Effective
Time") upon the filing of properly executed articles of merger (the "Illinois
Articles of Merger") with, and the issuance of a certificate of merger (the
"Illinois Certificate of Merger") by, the Secretary of State of the State of
Illinois in accordance with the Illinois Statute. The Effective Time shall be
the time of the Closing as set forth in Section 1.3.
SECTION 1.3. CLOSING. Unless this Agreement shall have been
terminated pursuant to Section 7.1, the closing of the Merger (the "Closing")
will take place at 10:00 a.m. on a date (the "Closing Date") to be mutually
agreed upon by the parties, which date shall be no later than the third Business
Day after satisfaction of the latest to occur of the conditions set forth in
Sections 6.1 (other than Section 6.1(d)), 6.2(b) (other than the delivery of the
officers' certificate referred to therein), 6.2(c), 6.3(b) (other than the
delivery of the officers' certificate referred to therein), and 6.3(c), unless
another date is agreed to in writing by the parties. The Closing shall take
place at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New
York, New York 10019, unless another place is agreed to in writing by the
parties. As used in this Agreement, "Business Day" shall mean any day, other
than a Saturday, Sunday or legal holiday on which banks are permitted to close
in the City and State of New York, the State of Delaware or the State of
Illinois.
SECTION 1.4. EFFECTS OF THE MERGER. At the Effective Time: (a)
the separate existence of Sub shall cease and Sub shall be merged with and into
the Company, with the result that the Company shall be the Surviving
Corporation, and (b) the Merger shall have all of the effects provided by the
Illinois Statute.
SECTION 1.5. CERTIFICATE OF INCORPORATION AND BYLAWS OF SURVIVING
CORPORATION. At the Effective Time, (a) the certificate of incorporation of Sub
shall be the certificate of incorporation of the Surviving Corporation until
altered, amended or repealed as provided in the Illinois Statute; (b) the bylaws
of Sub shall become the bylaws of the Surviving Corporation until altered,
amended or repealed as provided in the Illinois Statute or in the certificate of
incorporation or bylaws of the Surviving Corporation; (c) the directors of Sub
shall become the initial directors of the Surviving Corporation, such directors
to hold office from the Effective Time until their respective successors are
duly elected or appointed as provided in the certificate of incorporation and
bylaws of the Surviving Corporation; and (d) the officers of the Company
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shall continue as the officers of the Surviving Corporation until such time as
their respective successors are duly elected as provided in the bylaws of the
Surviving Corporation.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 EFFECT OF MERGER ON CAPITAL STOCK. At the Effective Time, subject
and pursuant to the terms of this Agreement, by virtue of the Merger and without
any action on the part of the Constituent Corporations or the holders of any
shares of capital stock of the Constituent Corporations:
(a) Capital Stock of Sub. Each issued and outstanding share of
the common stock, $.01 par value per share, of Sub ("Sub Common Stock")
shall be converted into one validly issued, fully paid and nonassessable
share of common stock, $.01 par value per share, of the Surviving
Corporation ("Surviving Corporation Common Stock"). Each stock
certificate of Sub evidencing ownership of any such shares shall
continue to evidence ownership of such shares of Surviving Corporation
Common Stock.
(b) Treatment of Certain Shares of Company Common Stock. Each
share of Company Common Stock that is owned by the Company as treasury
stock and each share of Company Common Stock that is owned by Parent,
Sub or any other wholly owned subsidiary of Parent shall not be
cancelled and retired and shall be treated as provided in Section
2.1(c).
(c) Exchange Ratio for Company Common Stock. Each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Company Common Stock held by
shareholders who properly demand dissenters' rights in accordance with
Section 5/11.70 of the Illinois Statute), shall, subject to Section
2.1(d), be converted into the right to receive 1.126 of a fully paid and
nonassessable share of common stock, $.01 par value per share, of Parent
("Parent Common Stock") (the "Exchange Ratio"). At the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding,
and shall automatically be cancelled and retired and cease to exist, and
each holder of a certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to receive the
shares of Parent Common Stock to be issued in consideration therefor
upon the surrender of such certificate in accordance with Section 2.2,
without interest. No fractional shares of Parent Common Stock shall be
issued; and, in lieu thereof, a cash payment shall be made pursuant to
Section 2.2(e).
(d) Adjustment of Exchange Ratio for Dilution and Other Matters.
If, between the date of this Agreement and the Effective Time, the
outstanding shares of Parent Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, stock dividend, stock
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combination, exchange of shares, readjustment or otherwise, then the
Exchange Ratio, as the case may be, shall be correspondingly adjusted.
Without otherwise limiting the foregoing, the Exchange Ratio of 1.126
set forth in paragraph (c) above gives effect to the two-for-one stock
split declared by the Company on February 20, 1998, with respect to the
Parent Common Shares (as defined in Section 4.3).
SECTION 2.2. EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. Prior to the Closing Date, Parent shall
select a bank or trust company reasonably acceptable to the Company to act as
exchange agent (the "Exchange Agent") in the Merger. Prior to the Effective
Time, Parent shall deposit with the Exchange Agent, for the benefit of the
holders of shares of Company Common Stock, for exchange in accordance with this
Article 2, certificates representing the shares of Parent Common Stock (such
shares of Parent Common Stock, together with any dividends or distributions with
respect thereto, the "Exchange Fund") issuable pursuant to Section 2.1(c) at the
Effective Time in exchange for outstanding shares of Company Common Stock, which
shall include such shares of Parent Common Stock to be sold by the Exchange
Agent pursuant to Section 2.2(e).
(b) Exchange Procedures. As soon as practicable after the
Effective Time, Parent shall instruct the Exchange Agent to mail to each holder
of record (other than the Company, Parent, Sub and any wholly owned subsidiary
of the Company) of a certificate or certificates which immediately prior to the
Effective Time represented issued and outstanding shares of Company Common Stock
(collectively, the "Certificates") whose shares were converted into the right to
receive Parent Common Stock pursuant to Section 2.1(c), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing Parent Common Stock and any cash in lieu of
fractional shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with a duly executed letter of
transmittal and such other documents as may be reasonably required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Parent Common Stock which such holder has the right to receive pursuant to the
provisions of this Article 2 and any cash in lieu of fractional shares of Parent
Common Stock, and the Certificate so surrendered shall forthwith be cancelled.
In the event of a transfer of ownership of shares of Company Common Stock which
is not registered on the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock and any cash in
lieu of fractional shares of Parent Common Stock may be issued and paid to a
transferee if the Certificate representing such Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.2, each Certificate shall be deemed, on and after the Effective Time, to
represent only the right to receive upon such surrender the certificate
representing shares of Parent Common Stock and cash in lieu of any fractional
shares of Parent Common Stock as contemplated by this Article 2 and the Illinois
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Statute. The consideration to be issued in the Merger will be delivered by the
Exchange Agent as promptly as practicable following surrender of a Certificate
and any other required documents. No interest will be payable on such
consideration regardless of any delay in making payments.
(c) Distributions with Respect to Unsurrendered Certificates. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby, and no cash payment in lieu
of fractional shares shall be paid to any such holder pursuant to Section 2.2(e)
until the holder of record of such Certificate shall surrender such Certificate.
Subject to the effect, if any, of applicable laws, following surrender of any
such Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Parent Common Stock issued in exchange therefor or
such holder's transferee pursuant to Section 2.2(e), without interest, (i) at
the time of such surrender, the amount of any cash payable in lieu of a
fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 2.2(e) and the amount of dividends or other distributions on
Parent Common Stock with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions on
Parent Common Stock with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of shares
of Company Common Stock in accordance with the terms of this Article 2 (plus any
cash paid pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been
issued (and paid) in full satisfaction of all rights pertaining to such shares
of Company Common Stock. From and after the Effective Time, the stock transfer
books of the Company shall be closed with respect to the shares of Company
Common Stock, and there shall be no further registration of transfers on the
stock transfer books of the Company or the Surviving Corporation of the shares
of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be cancelled and exchanged as
provided in this Article 2.
(e) No Issuance of Fractional Shares.
(i) No certificates or scrip for fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a shareholder of Parent.
(ii) As promptly as practicable following the Effective
Time, the Exchange Agent shall determine the excess of (A) the number of
full shares of Parent Common Stock delivered to the Exchange Agent by
Parent pursuant to Section 2.2(a) over (B) the aggregate number of full
shares of Parent Common Stock to be distributed to holders
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of Company Common Stock pursuant to Section 2.2(b) (such excess, the
"Excess Shares"). As soon after the Effective Time as practicable, the
Exchange Agent, as agent for the holders of Company Common Stock, shall
sell the Excess Shares at then prevailing prices in the over-the-counter
market, all in the manner provided in clause (iii) of this
Section 2.2(e).
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed in the over-the-counter market through one or more
member firms of the National Association of Securities Dealers, Inc.
(the "NASD") and shall be executed in round lots to the extent
practicable. Until the net proceeds of such sale or sales have been
distributed to the holders of Company Common Stock, the Exchange Agent
will hold such proceeds in trust for the holders of Company Common Stock
(the "Common Shares Trust"). Parent shall pay all commissions, transfer
taxes and other out-of-pocket transaction costs, including the expenses
and compensation of the Exchange Agent incurred in connection with such
sale of the Excess Shares. The Exchange Agent shall determine the
portion of the Common Shares Trust to which each holder of Company
Common Stock shall be entitled, if any, by multiplying the amount of the
aggregate net proceeds comprising the Common Shares Trust by a fraction,
the numerator of which is the amount of the fractional share interest to
which such holder of Company Common Stock is entitled and the
denominator of which is the aggregate amount of fractional share
interests to which all holders of Company Common Stock are entitled.
(iv) As soon as practicable after the determination of the
amount of cash, if any, to be paid to the holders of Company Common
Stock in lieu of any fractional share interests and subject to clause
(v) of this Section 2.2(e), the Exchange Agent shall make available such
amounts to such holders of Company Common Stock.
(v) Parent or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of shares of Company Common Stock such
amounts as Parent or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code, or
any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by Parent or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Common Stock in respect
of which such deduction and withholding was made by Parent or the
Exchange Agent.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund and Common Shares Trust which remains undistributed to the shareholders of
the Company for 12 months after the Effective Time shall be delivered to Parent,
upon demand, and any former shareholders of the Company who have not theretofore
complied with this Article 2 shall thereafter look only to Parent for payment of
their claim for Parent Common Stock, any cash in lieu of fractional shares of
Parent Common Stock and any dividends or distributions with respect to Parent
Common Stock.
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(g) No Liability. Neither the Exchange Agent, Parent, Sub nor the
Company shall be liable to any holder of shares of Company Common Stock or
Parent Common Stock, as the case may be, for shares (or dividends or
distributions with respect thereto) from the Exchange Fund or cash from the
Common Shares Trust delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, the holder of such lost, stolen or destroyed Certificate(s)
shall execute an affidavit of that fact upon request. The holder of any such
lost, stolen or destroyed Certificate(s) shall also deliver a reasonable
indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the Certificate(s) alleged to have been lost, stolen or
destroyed. The affidavit and any indemnity which may be required hereunder shall
be delivered to the Exchange Agent, who shall be responsible for making payment
for such lost, stolen or destroyed Certificate(s).
SECTION 2.3. STOCK OPTIONS. At the Effective Time, the Company's
obligation with respect to each outstanding option (each, a "Company Option") to
purchase shares of Company Common Stock issued pursuant to the Company's Stock
Plan (the "Stock Plan") and (unless otherwise elected by the optionee pursuant
to the terms of an individual agreement) pursuant to the Stock Option Agreement,
dated as of December 15, 1993, between the Company and Fredric D. Rosen (the
"Rosen Option"), as amended in the manner described in the following sentence,
shall be assumed by Parent. The Company Options so assumed by Parent shall
continue to have, and be subject to, the same terms and conditions as set forth
in the Stock Plan and the Rosen Option and the agreements pursuant to which such
Company Options were issued as in effect immediately prior to the Effective
Time, which plan, agreements and Rosen Option shall be assumed by Parent, except
that (in accordance with the applicable provisions of such plan and Rosen Option
and subject to any other rights that a holder of Company Options may have) (a)
each such Company Option shall be exercisable for that number of whole shares of
Parent Common Stock equal to the product of that number of shares of Company
Common Stock covered by such Company Option immediately prior to the Effective
Time multiplied by the Exchange Ratio and rounded up to the nearest whole number
of shares of Parent Common Stock, and (b) the exercise price per share of Parent
Common Stock shall equal the exercise price per share of Company Common Stock in
effect immediately prior to the Effective Time divided by the Exchange Ratio.
The adjustment provided herein with respect to any Company Options which are
"Incentive Stock Options" (as defined in Section 422 of the Code) shall be and
is intended to be effected in a manner which is consistent with Section 424(a)
of the Code. Parent shall reserve for issuance the number of shares of Parent
Common Stock that will become issuable upon the exercise of such Company Options
pursuant to this Section 2.3.
SECTION 2.4. TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at
any time after the Effective Time, any such further action is necessary or
desirable to carry out the purposes of this Agreement or to vest, perfect or
confirm of record or otherwise establish in the Surviving Corporation full
right, title and interest in, to or under any of the assets, property, rights,
privileges, powers and franchises of the Company and Sub, the officers and
directors of the
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Surviving Corporation are fully authorized in the name and on behalf of each of
the Constituent Corporations or otherwise to take all such lawful and necessary
or desirable action.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
SECTION 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the Company
and its "Significant Subsidiaries" (as such term is defined in Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC")) is a
corporation or other entity duly incorporated or organized, validly existing
and, as applicable, in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite corporate or other power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each of the Company and its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders
("Approvals") necessary to own, lease and operate the properties it purports to
own, operate or lease and to carry on its business as it is now being conducted,
except where the failure to have such Approvals would not, individually or in
the aggregate, have a Material Adverse Effect (as defined below). Each of the
Company and its subsidiaries is, as applicable, duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate, have a
Material Adverse Effect. When used in this Article 3 or elsewhere in this
Agreement in connection with the Company or any of its subsidiaries, the term
"Material Adverse Effect" means any change, event or effect that is materially
adverse to the business, financial condition or results of operations of the
Company and its subsidiaries taken as a whole, excluding (i) any changes or
effects resulting from any matter, which matter was expressly approved by the
Board of Directors of the Company following the date hereof unless, with respect
to such matter, both directors of the Company who are also executive officers of
Parent either voted against or abstained from voting (such matter and related
contemplated transactions, an "Approved Matter") and (ii) changes in general
economic conditions in the economy as a whole. Other than wholly owned
subsidiaries and except as disclosed in the Company SEC Reports or Section 3.1
of the Company Disclosure Letter, the Company does not directly or indirectly
own any equity or similar interest in, or any interest convertible or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, limited liability company, joint venture or other
business, association or entity. As used in this Agreement, "subsidiary" with
respect to any person shall mean any entity which such person has the ability to
control the voting power thereof, either through ownership of equity interests
or otherwise, provided that under no circumstances shall the Company and its
subsidiaries be deemed to be subsidiaries of Parent.
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SECTION 3.2. CERTIFICATE OF INCORPORATION AND BYLAWS. The Company
has previously furnished or made available to Parent a complete and correct copy
of its Articles of Incorporation and Bylaws as amended to date. Such Articles of
Incorporation and bylaws are in full force and effect. Neither the Company nor
any of its Significant Subsidiaries is in violation of any of the provisions of
its certificate of incorporation or bylaws or equivalent organizational
documents.
SECTION 3.3. CAPITALIZATION. The authorized capital stock of the
Company consists of 80,000,000 shares of Company Common Stock and 20,000,000
shares of Company Preferred Stock. At the close of business on March 9, 1998,
(a) 26,176,265 shares of Company Common Stock were issued and outstanding, all
of which are validly issued, fully paid and nonassessable, and not subject to
preemptive rights, (b) of the amount referred to in clause (a) above, no shares
of Company Common Stock were held in treasury by the Company or by wholly owned
subsidiaries of the Company, (c) options to purchase 2,658,086 and 1,331,340
shares of Company Common Stock were outstanding under the Stock Plan and the
Rosen Option, and (d) 237,346 shares of Company Common Stock were reserved for
issuance to the former owners of the Company's Canadian subsidiary. As of the
date hereof, no shares of Company Preferred Stock were issued or outstanding. No
change in such capitalization has occurred between March 9, 1998 and the date
hereof, except (i) the issuance of shares of Company Common Stock pursuant to
the exercise of outstanding options and (ii) as contemplated by this Agreement.
Except as set forth in this Section 3.3 or as disclosed in Section 3.3 of the
disclosure letter delivered by the Company to Parent (the "Company Disclosure
Letter"), as of the date of this Agreement, there are no options, warrants or
other rights, agreements, or commitments, in each case to which the Company or
any of its subsidiaries is a party, of any character relating to the issued or
unissued capital stock of the Company or any of its subsidiaries or obligating
the Company or any of its subsidiaries to issue or sell any shares of capital
stock of, or other equity interests in, the Company or any of its subsidiaries.
All shares of Company Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. Except as set forth in
Section 3.3 of the Company Disclosure Letter, there are no obligations,
contingent or otherwise, of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
the capital stock of any subsidiary or to provide funds to or make any material
investment (in the form of a loan, capital contribution or otherwise) in any
such subsidiary or any other entity other than guarantees of obligations of
subsidiaries entered into in the ordinary course of business. All of the
outstanding equity interests of each of the Company's subsidiaries are duly
authorized, validly issued, and, where applicable, fully paid and nonassessable,
and, except as set forth in Section 3.3 of the Company Disclosure Letter or (in
the case of subsidiaries of the Company only) for such matters as would not,
individually or in the aggregate, have a Material Adverse Effect, all such
shares are owned by the Company or another subsidiary free and clear of all
security interests, liens, claims, pledges, agreements, limitations in the
Company's voting rights, charges or other encumbrances of any nature whatsoever.
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SECTION 3.4. AUTHORITY RELATIVE TO THIS AGREEMENT; BOARD
APPROVAL.
(a) The Company has all necessary corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder
and, subject to obtaining the approval of the shareholders of the Company of
this Agreement, to consummate the Transactions. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
Transactions have been duly and validly authorized by all necessary corporate
action on the part of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
Transactions so contemplated (other than, with respect to the Merger, the
approval and adoption of this Agreement by the vote of shareholders of the
Company owning at least a majority of the outstanding shares of Company Common
Stock in accordance with the Illinois Statute and the Company's Articles of
Incorporation and Bylaws, which vote is the only vote required to consummate the
Transactions under the Company's Articles of Incorporation and the Illinois
Statute). This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by Parent
and Sub, constitutes the legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to creditors rights generally and (ii) the availability of
injunctive relief and other equitable remedies. The Company has taken all
appropriate actions so that the restrictions on business combinations contained
in Section 5/11.75 of the Illinois Statute will not apply to Parent or Sub and
their respective affiliates and associates with respect to or as a result of
this Agreement or the Transactions.
(b) The Board of Directors of the Company based on the
recommendation of the Special Committee (which recommendation was a condition to
the approval of the Company's Board of Directors set forth in clause (i) of this
sentence) has, prior to this Agreement, (i) approved this Agreement and the
Transactions (including for purposes of the Illinois Statute), (ii) determined
that the Transactions are fair to and in the best interests of the shareholders
of the Company and (iii) recommended that the shareholders of the Company
approve this Agreement and the Transactions. This Agreement and the Transactions
have been approved by the vote of at least two-thirds of the Disinterested
Directors (as defined in Section 5/7.85 of the Illinois Statute), and no vote of
Company shareholders pursuant to Section 5/7.85 of the Illinois Statute is
required in connection with the Transactions.
SECTION 3.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Company
do not, and the performance of its obligations hereunder and the consummation of
the Transactions by the Company will not, (i) conflict with or violate the
certificate of incorporation, bylaws or equivalent organizational documents of
the Company or any of its subsidiaries; (ii) subject to obtaining the approval
of the Company's shareholders of this Agreement in accordance with the Illinois
Statute and the Company's Articles of Incorporation and Bylaws and compliance
with the requirements set forth in Section 3.5(b), conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Company or
any of its subsidiaries or by which any of their
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<PAGE> 17
respective properties is bound or affected; or (iii) except as set forth in
Section 3.5 of the Company Disclosure Letter, result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or alter the rights or obligations of any third
party or the Company or its subsidiaries under, or give to others any rights of
termination, amendment, acceleration, increased payments or cancellation of, or
result in the creation of a lien or other encumbrance on any of the properties
or assets of the Company or any of its subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or any of their
respective properties are bound or affected, except, in the case of clauses (ii)
and (iii) above, for any such conflicts, violations, breaches, defaults or other
alterations or occurrences that would not prevent or delay consummation of the
Merger in any material respect, or otherwise prevent the Company from performing
its obligations under this Agreement in any material respect, and would not
have, individually or in the aggregate, a Material Adverse Effect. Section 3.5
of the Company Disclosure Letter lists all material consents, waivers and
approvals under any agreements, contracts, licenses or leases required to be
obtained by the Company or its subsidiaries in connection with the consummation
of the Transactions.
(b) The execution and delivery of this Agreement by the Company
do not, and the performance of its obligations hereunder and the consummation of
the Transactions by the Company will not, require any consent, approval,
authorization or permit of, or registration or filing with or notification to,
any court, administrative agency, commission, governmental or regulatory
authority, domestic or foreign (a "Governmental Entity"), except (i) the filing
of documents to satisfy the applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and state takeover laws,
(ii) the filing with the SEC of a proxy statement and prospectus in definitive
form relating to the Shareholders Meeting (the "Proxy Statement"), (iii) the
filing of the Illinois Articles of Merger with, and the issuance of the Illinois
Certificate of Merger by, the Secretary of State of the State of Illinois, (iv)
filings under the rules and regulations of the NASD, or (v) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications (A) would not prevent or delay consummation of the
Merger in any material respect or otherwise prevent or delay in any material
respect the Company from performing its obligations under this Agreement or (B)
would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.6. COMPLIANCE; PERMITS.
(a) Except as set forth in Section 3.6 or 3.9 of the Company
Disclosure Letter, neither the Company nor any of its subsidiaries is in
conflict with, or in default or violation (i) of, any law, rule, regulation,
order, judgment or decree applicable to the Company or any of its subsidiaries
or by which any of their respective properties is bound, or (ii) whether after
the giving of notice or passage of time or both, of, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or any of their
respective properties is bound, except for any conflicts, defaults or violations
which do not and would not have, individually or in the aggregate, a Material
Adverse Effect.
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<PAGE> 18
(b) The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from Governmental Entities which are
material to operation of the business of the Company and its subsidiaries taken
as a whole (collectively, the "Company Permits"). The Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
where the failure to so comply would not, individually or in the aggregate, have
a Material Adverse Effect.
SECTION 3.7. SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has made available to Parent a correct and
complete copy of each report, schedule, registration statement (but only such
registration statements that have become effective prior to the date hereof) and
definitive proxy statement filed by the Company with the SEC on or since the
date of its initial public offering and prior to the date of this Agreement (the
"Company SEC Reports"), which are all the forms, reports and documents required
to be filed by the Company with the SEC since such date. As of their respective
dates, the Company SEC Reports and any forms, reports and other documents filed
by the Company with the SEC after the date of this Agreement (i) complied or
will comply in all material respects with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable thereto, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement then on the date of such filing) or
will not at the time they are filed contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading,
provided, however, that no representation is made with respect to information
included in the Company SEC Reports that was provided in writing by Parent or
Sub. None of the Company's subsidiaries is required to file any reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company SEC Reports
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, had been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-Q or the Exchange Act
regulations promulgated by the SEC), and each fairly presented the consolidated
financial position of the Company and its consolidated subsidiaries in all
material respects as at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated (subject, in
the case of the unaudited interim financial statements, to normal audit
adjustments which were not and are not expected, individually or in the
aggregate, to be material in amount).
(c) Neither the Company nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
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condition of the Company and its subsidiaries taken as a whole, except
liabilities (i) set forth in Section 3.7 of the Company Disclosure Letter or the
Company SEC Reports filed with the SEC prior to the date of this Agreement or
provided for in the Company's balance sheet (and related notes thereto) as of
January 31, 1997 filed in the Company SEC Reports, or (ii) incurred since
January 31, 1997 in the ordinary course of business, none of which are material
to the business, results of operations or financial condition of the Company and
its subsidiaries, taken as a whole or (iii) arising out of or incurred in
connection with (x) this Agreement or the transactions contemplated hereby or
(y) an Approved Matter.
SECTION 3.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth in Section 3.8 of the Company Disclosure Letter, contemplated by this
Agreement or disclosed in the Company SEC Reports, since January 31, 1997, (a)
the Company and its subsidiaries have, in all material respects, conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and have not taken any of the actions set forth in Section
5.2(b)(i)-(iv), (vii), (x), (xi), (xii) (but with respect to this clause, only
since October 31, 1997) and (xiii), and (b) there has not been (i) any
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of business),
individually or in the aggregate, having or which could reasonably be expected
to have a Material Adverse Effect, or (ii) any material change by the Company in
its accounting methods, principles or practices except as required by concurrent
changes in GAAP.
SECTION 3.9. ABSENCE OF LITIGATION. Except as disclosed in the
Company SEC Reports or Section 3.9 of the Company Disclosure Letter, there are
no claims, actions, suits, investigations or proceedings pending or, to the best
knowledge of the Company, threatened against the Company or any of its
subsidiaries, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, that, individually or in the
aggregate, would, or reasonably could be expected to, have a Material Adverse
Effect, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company or any of its
subsidiaries (a) having or which would, or reasonably could be expected to, have
a Material Adverse Effect or (b) which seeks to restrain, enjoin or delay
consummation of any of the Transactions.
SECTION 3.10. REGISTRATION STATEMENT; PROXY STATEMENT. None of
the information supplied or to be supplied by the Company for inclusion or
incorporation by reference in (a) the registration statement on Form S-4 to be
filed with the SEC by Parent in connection with the issuance of the Parent
Common Stock in or as a result of the Merger (the "S-4") will, at the time the
S-4 is filed with the SEC and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading; and (b) the Proxy Statement will, at the date the Proxy
Statement is mailed to the shareholders of the Company, at the time of the
shareholders meeting of the Company (the "Shareholders Meeting") in connection
with the Transactions and as of the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements made, in light of the circumstances under which they are made,
not misleading, provided, however, that no
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<PAGE> 20
representation is made with respect to information included in the Proxy
Statement that was provided in writing by Parent or Sub. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations promulgated by the SEC thereunder.
SECTION 3.11. BROKERS. Except as set forth in Section 3.11 of the
Company Disclosure Schedule, no broker, finder or investment banker (other than
Salomon Smith Barney (f/k/a Salomon Brothers Inc) (the "Company Banker")) is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger and the Transactions based upon arrangements made by or on
behalf of the Company. The Company has heretofore furnished to Parent a complete
copy of all agreements between the Company and the Company Banker pursuant to
which such firm would be entitled to any payment relating to the Merger and the
Transactions.
SECTION 3.12. OPINION OF FINANCIAL ADVISOR. The Special Committee
and the Company's Board of Directors have received the written opinion, dated
March 9, 1998, of the Company Banker that, as of March 9, 1998, the Exchange
Ratio is fair to the holders of Company Common Stock (other than Parent or any
subsidiary of Parent) from a financial point of view, a copy of which opinion
will be delivered to Parent.
SECTION 3.13. EMPLOYEE BENEFIT PLANS.
(a) The Company has delivered or made available to Parent prior
to the execution of this Agreement true and complete copies (or, in the case of
bonus or other incentive plans, summaries thereof) of all material pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus or other material incentive plans, all
other material written employee programs, arrangements or agreements, whether
arrived at through collective bargaining or otherwise, all material medical,
vision, dental or other health plans, all life insurance plans and all other
material employee benefit plans or fringe benefit plans, including, without
limitation, all "employee benefit plans" as that term is defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by the Company or any entity required to be aggregated with the
Company pursuant to Section 414 of the Code (each, a "Commonly Controlled
Entity") for the benefit of current or former employees, retirees, dependents,
spouses, directors, independent contractors or other beneficiaries and under
which current or former employees, retirees, dependents, spouses, directors,
independent contractors or other beneficiaries are eligible to participate
(collectively, the "Company Benefit Plans"). Any of the Company Benefit Plans
which is an "employee pension benefit plan," as that term is defined in Section
3(2) of ERISA, is referred to herein as an "ERISA Plan." No Company Benefit Plan
is or has been a multiemployer plan within the meaning of Section 3(37) of ERISA
(a "Multiemployer Plan").
(b) All Company Benefit Plans are in compliance with the
applicable terms of ERISA and the Code and any other applicable laws, rules and
regulations the breach or violation of which could result in a Material Adverse
Effect.
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<PAGE> 21
(c) No ERISA Plan is subject to Title IV or Section 302 of ERISA,
and no circumstances exist that could result in material liability to the
Company under Title IV or Section 302 of ERISA.
(d) Except as set forth in Section 3.13 of the Company Disclosure
Letter, as described in any Company SEC Reports or as provided under the Stock
Plan or any related agreement and the Rosen Option, neither the execution and
delivery of this Agreement nor the consummation of the Transactions (or any
termination of employment in connection with the Transactions) will (i) result
in any material payment becoming due to any current or former director or
employee of the Company or any of its affiliates from the Company or any of its
affiliates under any Company Benefit Plan or otherwise, (ii) materially increase
any benefits otherwise payable under any Company Benefit Plan or (iii) result in
any acceleration of the time of payment or vesting of any such benefits to any
material extent.
SECTION 3.14. TAX MATTERS. Neither the Company nor any of its
subsidiaries has taken or agreed to take any action (including in connection
with the Transactions) that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the
Company, as follows:
SECTION 4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Parent and
its Significant Subsidiaries is a corporation or other entity duly organized,
validly existing and, as applicable, in good standing under the laws of the
jurisdiction of its incorporation or organization and has the requisite
corporate or other power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each of
Parent and its subsidiaries is in possession of all Approvals necessary to own,
lease and operate the properties it purports to own, operate or lease and to
carry on its business as it is now being conducted, except where the failure to
have such Approvals would not, individually or in the aggregate, have a Material
Adverse Effect (as defined below). Each of Parent and its subsidiaries is, as
applicable, duly qualified or licensed as a foreign corporation or other entity
to do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would
not, either individually or in the aggregate, have a Material Adverse Effect.
When used in this Article 4 or elsewhere in connection with Parent or any of its
subsidiaries, the term "Material Adverse Effect" means any change, event or
effect that is materially adverse to the business, financial condition or
results of operations of Parent and its subsidiaries (including USANi LLC, a
Delaware limited liability company) taken as a whole, excluding changes in
general economic conditions in the economy as a whole. Other than wholly owned
subsidiaries and except as disclosed in the Parent
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SEC Reports (as defined in Section 4.7(a)) or Section 5.3 of the Parent
Disclosure Letter, Parent does not directly or indirectly own any equity or
similar interest in, or any interest convertible or exchangeable or exercisable
for any equity or similar interest in, any corporation, partnership, limited
liability company, joint venture or other business, association or entity.
SECTION 4.2. CERTIFICATE OF INCORPORATION AND BYLAWS. Parent has
previously furnished to the Company a complete and correct copy of its
Certificate of Incorporation and Bylaws as amended to date. Such certificate of
incorporation and bylaws are in full force and effect. Neither Parent nor any of
its Significant Subsidiaries is in violation of any of the provisions of its
certificate of incorporation or bylaws or equivalent organizational documents.
SECTION 4.3. CAPITALIZATION. In each case without giving effect
to the 2-for-1 stock split declared by Parent on February 20, 1998, as of the
date hereof, the authorized capital stock of Parent consists of (a) 800,000,000
shares of Parent Common Stock and 200,000,000 shares of Class B common stock,
par value $.01 per share, of Parent ("Parent Class B Common Stock" and, together
with the Parent Common Stock, the "Parent Common Shares") and (b) 15,000,000
shares of preferred stock, par value $.01 per share, of Parent ("Parent
Preferred Stock"), none of which have been designated as to class or series. At
the close of business on March 11, 1998, (i) 51,089,631 shares of Parent Common
Stock were issued and outstanding and 16,006,808 shares of Parent Class B Common
Stock were issued and outstanding, all of which Parent Common Stock and Parent
Class B Common Stock are validly issued, fully paid and nonassessable and,
except as disclosed in the Parent proxy statement dated January 12, 1998 (the
"Parent Proxy Statement"), not subject to any preemptive rights, (ii) no shares
of Parent Common Stock were held in treasury by Parent or by subsidiaries of
Parent, (iii) shares of USANi LLC exchangeable into 54,327,175 Parent Common
Shares were outstanding, and (iv) Home Shopping Network, Inc. shares
exchangeable into 7,905,016 shares of Parent Common Stock and 399,136 shares of
Parent Class B Common Stock were outstanding. At the close of business on March
2, 1998, options to purchase 17,499,297 shares of Parent Common Stock were
outstanding under Parent's 1997 Stock and Annual Incentive Plan, 1995 Stock
Incentive Plan, 1992 Stock Option and Restricted Stock Plan, Stock Option Plan
for Outside Directors, other Company stock option plans described in documents
incorporated by reference in the Parent SEC Reports, and under equity
compensation arrangements. Except as set forth in Section 4.3 of the Parent
Disclosure Letter, no change in such capitalization has occurred between March
2, 1998 and the date hereof, except for issuances of Parent Common Stock upon
exercise, conversion or exchange of the outstanding securities referenced in
this Section 4.3. As of the date hereof, no shares of Parent Preferred Stock
were issued or outstanding. The authorized capital stock of Sub consists of
100,000,000 shares of Sub Common Stock. As of the date hereof, 1,000 shares of
Sub Common Stock are issued and outstanding. All of the outstanding shares of
Parent's and Sub's respective capital stock have been duly authorized and
validly issued and are fully paid and nonassessable. Except as set forth in this
Section 4.3, the Parent Proxy Statement or as disclosed in the disclosure letter
delivered by Parent to the Company (the "Parent Disclosure Letter"), as of the
date of this Agreement, there are no options, warrants or other rights,
agreements, or commitments, in each case, to which Parent or any of its
subsidiaries is a party, of any character relating to the issued or unissued
capital stock of Parent or any of its subsidiaries or obligating Parent or any
of its subsidiaries to issue or sell any shares of capital stock of, or other
equity interests in,
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Parent or any of its subsidiaries. All shares of Parent Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, shall, and the shares of
Parent Common Stock to be issued pursuant to the Merger will be, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights, except as set forth in the Parent Proxy Statement. Except as
set forth in the Parent Proxy Statement or Section 4.3 of the Parent Disclosure
Letter, there are no obligations, contingent or otherwise, of Parent or any of
its subsidiaries to repurchase, redeem or otherwise acquire any shares of Parent
Common Stock or the capital stock of any subsidiary or to provide funds to or
make any material investment (in the form of a loan, capital contribution or
otherwise) in any such subsidiary or any other entity other than guarantees of
obligations of subsidiaries entered into in the ordinary course of business. All
of the outstanding equity interests (other than directors' qualifying shares) of
each of Parent's subsidiaries are duly authorized, validly issued, and, where
applicable, fully paid and nonassessable and, except as set forth in the Parent
Proxy Statement or for such matters as would not, individually or in the
aggregate, have a Material Adverse Effect, all such shares (other than
directors' qualifying shares) are owned by Parent or another subsidiary. The
shares of Surviving Corporation Common Stock to be issued in the Merger will,
upon issuance, be validly issued, fully paid, nonassessable and free and clear
of all security interests, liens, claims, pledges, agreements, limitations in
the holder's voting rights, charges or other encumbrances of any nature
whatsoever (in each case to which the Surviving Corporation is a party).
SECTION 4.4. AUTHORITY RELATIVE TO THIS AGREEMENT;
BOARD APPROVAL.
(a) Each of Parent and Sub has all necessary corporate power and
authority to execute and deliver this Agreement, and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Parent and Sub and the consummation by Parent
and Sub of the Transactions have been duly and validly authorized by all
necessary corporate action on the part of Parent and Sub and no other corporate
proceedings on the part of Parent or Sub are necessary to authorize this
Agreement, or to consummate the Transactions (other than the approval of the
NASD listing application with respect to the issuance of shares of Parent Common
Stock in the Merger). This Agreement has been duly and validly executed and
delivered by Parent and Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes the legal and binding obligations of Parent
and Sub, enforceable against Parent and Sub in accordance with its terms,
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to creditors rights generally and (ii) the
availability of injunctive relief and other equitable remedies.
(b) The Board of Directors of Parent has (i) approved this
Agreement and the Transactions and (ii) determined that the Transactions are
fair to and in the best interests of the shareholders of Parent. No vote of
Parent shareholders is required in connection with the Transactions.
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SECTION 4.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and
Sub do not, and the performance of their respective obligations hereunder and
the consummation of the Transactions by Parent and Sub will not, (i) conflict
with or violate the certificate of incorporation, bylaws or equivalent
organizational documents of Parent or any of its subsidiaries; (ii) subject to
compliance with the requirements set forth in Section 4.5(b), conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Parent or any of its subsidiaries or by which their respective properties are
bound or affected; or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or alter the rights or obligations of any third party or Parent or its
subsidiaries under, or give to others any rights of termination, amendment,
acceleration, increased payments or cancellation of, or result in the creation
of a lien or other encumbrance on any of the properties or assets of Parent or
any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by which
Parent or any of its subsidiaries or any of their respective properties are
bound or affected, except in the cases of clauses (ii) and (iii) above, for any
such conflicts, violations, breaches, defaults or other alterations or
occurrences that would not prevent or delay consummation of the Merger in any
material respect, or otherwise prevent Parent and Sub from performing their
respective obligations under this Agreement in any material respect, and would
not have, individually or in the aggregate, a Material Adverse Effect. Section
4.5(a) of the Parent Disclosure Letter lists all material consents, waivers and
approvals under any agreements, contracts, licenses or leases required to be
obtained by Parent or its subsidiaries in connection with the consummation of
the Transactions.
(b) The execution and delivery of this Agreement by Parent and
Sub do not, and the performance of their respective obligations hereunder and
the consummation of the Transactions by Parent and Sub will not, require any
consent, approval, authorization or permit of, or registration or filing with or
notification to, any Governmental Entity except (i) the filing of documents to
satisfy the applicable requirements, if any, of the Exchange Act and state
takeover laws, (ii) the filing with the SEC of the Proxy Statement and the
declaration of effectiveness of the S-4 by the SEC, (iii) the filing of the
Illinois Articles of Merger with, and the issuance of the Illinois Certificate
of Merger by, the Secretary of State of the State of Illinois, (iv) filings
under the rules and regulations of the NASD, (v) filings under state securities
laws ("Blue Sky Laws"), and (vii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications
(A) would not prevent or delay consummation of the Merger in any material
respect or otherwise prevent or delay in any material respect Parent or Sub from
performing their respective obligations under this Agreement or (B) would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.6. COMPLIANCE; PERMITS.
(a) Except as disclosed in Section 4.6 or Section 4.9 of the
Parent Disclosure Letter, neither Parent nor any of its subsidiaries is in
conflict with, or in default or violation (i) of, any law, rule, regulation,
order, judgment or decree applicable to Parent or any of its
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subsidiaries or by which any of their respective properties is bound, or (ii)
whether after the giving of notice or passage of time or both, of, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or any of
their respective properties is bound, except for any such conflicts, defaults or
violations which do not and would not have, individually or in the aggregate, a
Material Adverse Effect.
(b) Parent and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from Governmental Entities which are
material to the operation of the business of Parent and its subsidiaries taken
as a whole (collectively, the "Parent Permits"). Parent and its subsidiaries are
in compliance with the terms of the Parent Permits, except where the failure to
so comply would not, individually or in the aggregate, have a Material Adverse
Effect.
SECTION 4.7. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has made available to the Company a correct and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by Parent with the SEC on or after January 1, 1997 and
prior to the date of this Agreement (the "Parent SEC Reports"), which are all
the forms, reports and documents required to be filed by Parent with the SEC
since January 1, 1997. As of their respective dates, the Parent SEC Reports and
any forms, reports and other documents filed by Parent and Sub after the date of
this Agreement (i) complied or will comply in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable thereto, and (ii) did
not at the time they were filed (or if amended or superseded by a filing prior
to the date of this Agreement then on the date of such filing) or will not at
the time they are filed contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading, provided,
however, that no representation is made with respect to information included in
the Parent SEC Reports that was provided in writing by the Company. None of
Parent's subsidiaries is required to file any reports or other documents with
the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Parent SEC Reports
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, had been prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Form 10-Q or the Exchange Act regulations promulgated by the SEC) and each
fairly presented the consolidated financial position of Parent and its
consolidated subsidiaries in all material respects as at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated (subject, in the case of the unaudited interim financial
statements, to normal audit adjustments which were not and are not expected,
individually or in the aggregate, to be material in amount).
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(c) Except as disclosed in Section 4.7 of the Parent Disclosure
Letter, neither Parent nor any of its subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Parent and its subsidiaries taken as a whole, except liabilities
(i) set forth in the Parent SEC Reports filed with the SEC prior to the date of
this Agreement or provided for in Parent's balance sheet (and related notes
thereto) as of December 31, 1996 filed in the Parent SEC Reports or (ii)
incurred since December 31, 1996 in the ordinary course of business, none of
which are material to the business, results of operations or financial condition
of Parent and its subsidiaries, taken as a whole.
SECTION 4.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Parent SEC Reports or in Section 4.8 of the Parent Disclosure
Letter or as contemplated by this Agreement, since December 31, 1996, (a) Parent
and its subsidiaries have, in all material respects, conducted their businesses
only in the ordinary course and in a manner consistent with past practice and
have not taken any of the actions set forth in Section 5.3(b)(i)-(iv), and (b)
there has not been (i) any transaction, commitment, dispute or other event or
condition (financial or otherwise) of any character (whether or not in the
ordinary course of business), individually or in the aggregate, having or which
could reasonably be expected to have a Material Adverse Effect or (ii) any
material change by Parent in its accounting methods, principles or practices
except as required by concurrent changes in GAAP.
SECTION 4.9. ABSENCE OF LITIGATION. Except as disclosed in
Section 4.9 of the Parent Disclosure Letter or the Parent SEC Reports, there are
no claims, actions, suits, investigations or proceedings pending or, to the best
knowledge of Parent, threatened against Parent or any of its subsidiaries before
any court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign, that, individually or in the aggregate, would, or
could reasonably be expected to, have a Material Adverse Effect, nor is there
any judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Parent or any of its subsidiaries (a) having or
which would, or could reasonably be expected to, have a Material Adverse Effect
or (b) which seeks to restrain, enjoin or delay consummation of any of the
Transactions.
SECTION 4.10. REGISTRATION STATEMENT; PROXY STATEMENT. None of
the information supplied or to be supplied by Parent for inclusion or
incorporation by reference in the S-4 will, at the time the S-4 is filed with
the SEC and at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, provided, however, that no representation is made with respect to
information included in the S-4 that was provided in writing by the Company. The
Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated by the
SEC thereunder, and the S-4 will comply as to form in all material respects with
the provisions of the Securities Act and the rules and regulations promulgated
by the SEC thereunder.
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SECTION 4.11. BROKERS. No broker, finder or investment banker
(other than Allen & Company Incorporated ("Parent Banker")) is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger and
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Parent or Sub.
SECTION 4.12. OPINION OF FINANCIAL ADVISOR. In connection with
its March 13, 1998 approval of the Transactions, Parent's Board of Directors has
received the oral opinion of Parent Banker that, as of March 13, 1998, the
Exchange Ratio for each share of Company Common Stock (other than shares owned
by Parent and its subsidiaries) is fair to Parent from a financial point of
view, which opinion will be confirmed in writing, a copy of which will be
delivered to the Company.
SECTION 4.13. INTERIM OPERATIONS OF SUB. Sub is a direct wholly
owned subsidiary of Parent and was formed solely for the purpose of engaging in
the Transactions, has engaged in no other business activities and has conducted
its operations only as contemplated hereby.
SECTION 4.14. EMPLOYEE BENEFIT PLANS.
(a) Parent will deliver or make available to the Company as soon
as practicable after the execution of this Agreement true and complete copies
(or, in the case of bonus or other incentive plans, summaries thereof) of all
material pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus or other
material incentive plans, all other material written employee programs,
arrangements or agreements, whether arrived at through collective bargaining or
otherwise, all material medical, vision, dental or other health plans, all life
insurance plans and all other material employee benefit plans or fringe benefit
plans, including, without limitation, all "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by Parent or any Commonly Controlled
Entity of Parent for the benefit of current or former employees, retirees,
dependents, spouses, directors, independent contractors or other beneficiaries
and under which current or former employees, retirees, dependents, spouses,
directors, independent contractors or other beneficiaries are eligible to
participate (collectively, the "Parent Benefit Plans"). Any of the Parent
Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "Parent ERISA
Plan." Except as set forth in Section 4.14 of the Parent Disclosure Letter, no
Parent Benefit Plan is or has been a Multiemployer Plan within the meaning of
Section 3(37) of ERISA.
(b) All Parent Benefit Plans are in compliance with the
applicable terms of ERISA and the Code and any other applicable laws, rules and
regulations the breach or violation of which could result in a Material Adverse
Effect.
(c) No parent ERISA Plan is subject to Title IV or Section 302 of
ERISA and no circumstances exist that could result in material liability to
Parent under Title IV or Section 302 of ERISA.
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(d) Neither the execution and delivery of this Agreement nor the
consummation of the Transactions (or any termination of employment in connection
with the Transactions) will (i) result in any material payment becoming due to
any current or former director or employee of Parent or any of its affiliates
from Parent or any of its affiliates under any Parent Benefit Plan or otherwise,
(ii) materially increase any benefits otherwise payable under any Parent Benefit
Plan, or (iii) result in any acceleration of the time of payment or vesting of
any such benefits to any material extent.
SECTION 4.15. TAX MATTERS. Neither Parent nor any of its
affiliates has taken or agreed to take any action (including in connection with
the Transactions) that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
ARTICLE 5
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; ADDITIONAL AGREEMENTS
SECTION 5.1. INFORMATION AND ACCESS. From the date of this
Agreement and continuing until the Effective Time, the Company and Parent each
agrees as to itself and its subsidiaries that it shall afford and, with respect
to clause (b) below, shall cause its independent auditors to afford, (a) to the
officers, independent auditors, counsel and other representatives of the other
reasonable access to its and its subsidiaries' properties, books, records
(including tax returns filed and those in preparation) and executives and
personnel in order that the other may have a full opportunity to make such
investigation as it reasonably desires to make of the other, and, in the case of
access to the Company's executives and personnel, to plan and provide for the
Merger and for the future direction of the Company, and (b) to the independent
auditors of the other, reasonable access to the audit work papers and other
records of its independent auditors. No investigation pursuant to this Section
5.1 shall affect or otherwise obviate or diminish any representations and
warranties of any party or conditions to the obligations of any party. Promptly
following the date hereof, the Company will deliver to Parent a complete copy of
its current operating budget. Except as required by law or stock exchange or
NASD regulation, any information furnished pursuant to this Section 5.1 shall be
treated confidentially by such party, its officers, independent accountants and
other representatives and advisors (except for such information as has otherwise
been made public (other than by reason of a violation of this Section 5.1)),
subject, in the case of information furnished to Parent, to any limitations in
the letter agreement, dated as of February 9, 1998, between Parent and the
Company (the "Confidentiality Agreement").
SECTION 5.2. CONDUCT OF BUSINESS OF THE COMPANY. Except as
contemplated by this Agreement (including Section 5.2 of the Company Disclosure
Letter) or with respect to Approved Matters, and excluding transactions between
the Company and its wholly owned subsidiaries or between such subsidiaries,
during the period from the date of this Agreement and continuing until the
Effective Time or until the termination of this Agreement pursuant to Section
7.1, (a) the Company and its subsidiaries shall conduct their respective
businesses in the
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ordinary and usual course consistent with past practice (including, without
limitation, with respect to the terms of any new arena or venue contracts or
renewals of existing arena or venue contracts (such contracts, "Ordinary Venue
Contracts"), or financial expenditures), and (b) neither the Company nor any of
its subsidiaries shall without the prior written consent of Parent:
(i) declare, set aside or pay any dividends on or make any other
distribution in respect of any of its capital stock, except dividends or
distributions declared and paid by a subsidiary of the Company only to
the Company or another subsidiary of the Company;
(ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance or authorization of any other
securities in respect of, in lieu of, or in substitution for shares of
its capital stock or repurchase, redeem or otherwise acquire any shares
of its capital stock;
(iii) issue, deliver, pledge, encumber or sell, or authorize or
propose the issuance, delivery, pledge, encumbrance or sale of, or
purchase or propose the purchase of, any shares of its capital stock or
securities convertible into, or rights, warrants or options to acquire,
any such shares of capital stock or other convertible securities (other
than the issuance of such capital stock to the Company or a wholly owned
subsidiary of the Company, or upon the exercise or conversion of
outstanding options or warrants in accordance with the Stock Plan or the
Rosen Option in effect on the date of this Agreement or other
convertible or exchangeable securities outstanding on the date hereof,
in each case in accordance with its present terms), authorize or propose
any change in its equity capitalization, or amend any of the financial
or other economic terms of such securities or the financial or other
economic terms of any agreement relating to such securities;
(iv) amend its Articles of Incorporation or Bylaws in any manner;
(v) take any action that would or could reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being untrue or in any of the conditions to the Merger set
forth in Article not being satisfied;
(vi) merge or consolidate with any other person, or acquire any
assets or capital stock of any other person, other than acquisitions of
assets in the ordinary course of business, such as for inventory or
relating to the ordinary operations of the Company;
(vii) incur any indebtedness or guarantee any indebtedness of
another person or increase the indebtedness outstanding under any
current agreement relating to indebtedness, other than trade payables,
or as disclosed on Section 5.2 of the Company Disclosure Letter, in each
case in the ordinary course of business;
(viii) make or authorize any capital expenditures of the Company
and its subsidiaries taken as a whole, other than capital expenditures
permitted pursuant to Section 5.2 of Company Disclosure Letter;
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(ix) except as may be required by changes in applicable law or
GAAP, change any method, practice or principle of accounting;
(x) enter into any new employment agreements, or increase the
compensation of any employee or officer of the Company or any of its
subsidiaries (including entering into any bonus, severance or consulting
agreement or other employee benefits arrangement or agreement pursuant
to which such person has the right to any form of compensation from the
Company or any of its subsidiaries), other than (A) with the prior
consent of Parent, which consent will not be unreasonably withheld, or
(B) as required by law or by written agreements in effect on the date
hereof with such person, or otherwise amend in any material respect any
existing agreements with any such person or use its discretion to
materially amend any Company Benefit Plan or accelerate the vesting or
any payment under any Company Benefit Plan;
(xi) enter into any transaction with any officer or director of
the Company or its subsidiaries, other than as provided for in the terms
of any agreement in effect on or prior to the date hereof and described
in the Company Disclosure Letter;
(xii) enter into, amend in any material respect or waive any
material rights under or terminate any material agreement to which the
Company or any of its subsidiaries is a party, it being agreed that any
Ordinary Venue Contract with less than $2,000,000 in financial
commitments or guarantees by the Company or its subsidiaries over five
years shall not be deemed material with respect to the entering into of
a new or amending or extending an existing agreement;
(xiii) settle or otherwise compromise any material litigation,
arbitration or other judicial or administrative dispute or proceeding
relating to the Company or any of its subsidiaries; or
(xiv) authorize or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing.
With respect to any matter requiring the consent of Parent under
this Section 5.2, the Company shall provide Parent with a summary of the deal
terms, and Parent shall have five business days to discuss the matter with
representatives of the Company and to indicate whether it consents to such
matter. If Parent does not respond by the close of business on the fifth
business day after it receives the notice hereunder, then such matter shall be
deemed to have been consented to, and the Company may proceed on the basis of
the terms described to Parent in the notice. If Parent advises the Company that
it does not consent to such matter in such time period, the Company shall not
take such action.
SECTION 5.3. CONDUCT OF BUSINESS OF PARENT. Except as
contemplated by this Agreement (including the Parent Disclosure Letter), and the
Parent Proxy Statement or the Investment Agreement, as amended and restated as
of December 18, 1997, among Parent, Universal Studios, Inc. ("Universal"), Home
Shopping Network, Inc., and Liberty Media Corporation ("Liberty") (the
"Investment Agreement") and excluding transactions between
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Parent and its wholly owned subsidiaries or between such subsidiaries, during
the period from the date of this Agreement and continuing until the Effective
Time or until the termination of this Agreement pursuant to Section 7.1, (a)
Parent and its subsidiaries shall conduct their respective businesses in the
ordinary and usual course consistent with past practice, and (b) neither Parent
nor any of its subsidiaries shall without the prior written consent of the
Company:
(i) declare, set aside or pay any dividends on or make any other
distribution in respect of any of its capital stock, except the 2-for-1
stock split declared by Parent on February 20, 1998, or dividends or
distributions declared and paid by a subsidiary of Parent only to Parent
or another subsidiary of Parent;
(ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance or authorization of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock, except for the 2-for-1 stock split declared by Parent
on February 20, 1998 or repurchase, redeem or otherwise acquire any
shares of its capital stock;
(iii) except for the 2-for-1 stock split declared by Parent on
February 20, 1998, issue, deliver, pledge, encumber or sell, or
authorize or propose the issuance, delivery, pledge, encumbrance or sale
of, or purchase or propose the purchase of, any shares of its capital
stock or securities convertible into, or rights, warrants or options to
acquire, any such shares of capital stock or other convertible
securities (other than (A) the issuance of such capital stock to Parent
or another wholly owned subsidiary of Parent, or upon the exercise or
conversion of options or other convertible or exchangeable securities
outstanding on the date of this Agreement or which Parent is obligated
to issue pursuant to the Investment Agreement and related agreements
with Universal and Liberty, or (B) the granting of options or stock to
employees in the ordinary course of business and the issuance of Parent
Common Stock upon exercise thereof) or authorize or propose any change
in its equity capitalization;
(iv) amend its Certificate of Incorporation in any manner or
amend its Bylaws in any material respect; (v) take any action that would
or could reasonably be expected to result in any of its representations
and warranties set forth in this Agreement being untrue or in any of the
conditions to the Merger set forth in Article 6 not being satisfied; or
(vi) authorize or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing.
SECTION 5.4. PREPARATION OF S-4 AND PROXY STATEMENT; OTHER
FILINGS. As promptly as practicable after the date of this Agreement, Parent and
the Company shall prepare and file with the SEC a preliminary Proxy Statement in
form and substance reasonably satisfactory to each of Parent and the Company and
Parent shall prepare and file with the SEC the S-4, in which the Proxy Statement
(or portion thereof) will be included as part of a prospectus. Each of Parent
and the Company shall use its reasonable best efforts to respond to any comments
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of the SEC, to have the S-4 declared effective under the Securities Act as
promptly as practicable after such filing and to cause the Proxy Statement
approved by the SEC to be mailed to the Company's shareholders at the earliest
practicable time. As promptly as practicable after the date of this Agreement,
Parent and the Company shall prepare and file any other filings required under
the Exchange Act, the Securities Act or any other federal or Blue Sky Laws
relating to the Merger and the Transactions, including, without limitation or
under state takeover laws (the "Other Filings"). The Company and Parent will
notify the other party promptly of the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the S-4, the Proxy Statement or any
Other Filing or for additional information, and will supply the other with
copies of all correspondence between it or any of its representatives, on the
one hand, and the SEC, or its staff or any other government officials, on the
other hand, with respect to the S-4, the Proxy Statement, the Merger or any
Other Filing. The Proxy Statement, the S-4 and the Other Filings shall comply in
all material respects with all applicable requirements of law. Whenever any
event occurs which is required to be set forth in an amendment or supplement to
the Proxy Statement, the S-4 or any Other Filing, Parent or the Company, as the
case may be, shall promptly inform the other party of such occurrence and
cooperate in filing with the SEC or its staff or any other government officials,
and/or mailing to shareholders of the Company, such amendment or supplement. The
Proxy Statement shall include, subject to applicable fiduciary duties (based on
advice of outside counsel to the Special Committee), the recommendations of the
Board of Directors of the Company in favor of approval of this Agreement and the
Transactions; provided, that the Board of Directors of the Company will not
recommend approval of this Agreement and the Transactions without the
recommendation of the Special Committee. The Company and Parent each shall
promptly provide the other (or its counsel) copies of all filings made by it
with any Governmental Entity in connection with this Agreement and the
Transactions. Parent shall take all necessary actions to cause the shares of
Parent Common Stock issuable in connection with the Stock Plan and the Rosen
Option (to the extent not exercised at or prior to the Effective Time) to be
registered under the Securities Act. Prior to the Effective Time, the Company
shall take appropriate action so that Parent's assumption of the Stock Plan as
of the Effective Time shall be effective.
SECTION 5.5. LETTER OF INDEPENDENT AUDITORS. The Company and
Parent shall use all reasonable efforts to cause to be delivered to the other
"comfort" letters of Ernst & Young LLP, the Company's independent auditors, and
KPMG Peat Marwick LLP, the Company's previous independent auditors, and of Ernst
& Young LLP, Parent's independent auditors, in each case dated and delivered the
date on which the S-4 shall become effective and as of the Effective Time, and
addressed to the Boards of Directors of the Company and Parent, in form and
substance reasonably satisfactory to the other and customary in scope and
substance for letters delivered by independent auditors in connection with
registration statements similar to the S-4.
SECTION 5.6. SHAREHOLDERS MEETING. The Company shall call its
Shareholders Meeting to be held as promptly as practicable for the purpose of
voting upon this Agreement. The Company shall use its reasonable best efforts to
hold the Shareholders Meeting on the date as soon as practicable after the date
on which the S-4 becomes effective. At the Shareholders
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Meeting, Parent agrees to vote, or cause to be voted, all shares of Company
Common Stock beneficially owned by it in favor of the Transactions and approval
of this Agreement.
SECTION 5.7. AGREEMENTS TO TAKE REASONABLE ACTION.
(a) The parties shall take, and shall cause their respective
subsidiaries to take, all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on them with respect to the Merger
and shall take all reasonable actions necessary to cooperate promptly with and
furnish information to the other parties in connection with any such
requirements imposed upon them or any of their subsidiaries in connection with
the Merger. Each party shall take, and shall cause its subsidiaries to take, all
reasonable actions necessary (i) to obtain (and will take all reasonable actions
necessary to promptly cooperate with the other parties in obtaining) any
clearance, consent, authorization, order or approval of, or any exemption by,
any Governmental Entity, or other third party, required to be obtained or made
by it (or by the other parties or any of their respective subsidiaries) in
connection with the Transactions or the taking of any action contemplated by
this Agreement; (ii) to lift, rescind or mitigate the effect of any injunction
or restraining order or other order adversely affecting its ability to
consummate the Transactions; (iii) to fulfill all conditions applicable to the
parties pursuant to this Agreement; and (iv) to prevent, with respect to a
threatened or pending temporary, preliminary or permanent injunction or other
order, decree or ruling or statute, rule, regulation or executive order, the
entry, enactment or promulgation thereof, as the case may be; provided, however,
that with respect to clauses (i) through (iv) above, the parties will take only
such curative measures (such as licensing and divestiture) as the parties
determine to be reasonable.
(b) Subject to the terms and conditions of this Agreement, each
of the parties shall use all reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
as promptly as practicable the Transactions, subject to the appropriate approval
of the shareholders of the Company. Upon the request of Parent, the Company
will, and will use its reasonable efforts to cause its officers to, cooperate
with a designated search committee of officers and/or directors of Parent
appointed by Parent to identify an appropriate successor Chief Executive Officer
for the Company in connection with the Merger. In the event that Parent believes
that the Company is not in compliance with the foregoing, Parent shall provide
written notice to the non-employee directors of the Company so that the Company
may so comply by taking such action as such directors deem appropriate in their
good faith judgment.
SECTION 5.8. CONSENTS. Parent, Sub and the Company shall each use
all reasonable efforts to obtain the consent and approval of, or effect the
notification of or filing with, each person or authority whose consent or
approval is required in order to permit the consummation of the Merger and the
Transactions and to enable the Surviving Corporation to conduct and operate the
business of the Company and its subsidiaries substantially as presently
conducted and as contemplated to be conducted.
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SECTION 5.9. NASDAQ QUOTATION. Parent shall use its reasonable
best efforts to cause the shares of Parent Common Stock issuable to the
shareholders of the Company in the Merger to be eligible for quotation on the
NASD National Market (or other national market or exchange on which Parent
Common Stock is then traded or quoted) prior to the Effective Time.
SECTION 5.10. AFFILIATES. At least ten Business Days prior to the
date of the Shareholders Meeting, the Company shall deliver to Parent a list of
names and addresses of those persons who were, at the record date for the
Company Shareholders Meeting, "affiliates" of the Company within the meaning of
Rule 145 under the Securities Act. The Company shall use its reasonable efforts
to deliver or cause to be delivered to Parent, prior to the Effective Time, from
each of the affiliates of the Company identified in the foregoing list,
agreements substantially in the form attached to this Agreement as Exhibit A.
SECTION 5.11. INDEMNIFICATION AND INSURANCE. Parent shall cause
the Surviving Corporation to maintain in effect, for a period of six years after
the Effective Time, the current provisions regarding indemnification of officers
and directors (including with respect to advancement of expenses) contained in
the Articles of Incorporation and Bylaws of the Company. Upon the Effective
Time, Parent shall assume all of the obligations of the Company under the
Company's existing indemnification agreements with each of the existing and
former directors and officers of the Company, as such agreements relate to the
indemnification of such persons for expenses and liabilities arising from facts
or events which occurred on or before the Effective Time or relating to the
Merger or Transactions. In addition, Parent agrees to provide to the current
directors and officers of the Company the maximum indemnification protection
(including with respect to advancement of expenses) permitted under the Illinois
Statute. Parent agrees to cause the Company to have in effect, as of the
Effective Time and covering the six-year period following the Effective Time,
for the benefit of the Company's current and former directors and officers,
insurance in the same amount and on substantially the same terms as the
Company's current directors' and officers' policies with respect to acts or
omissions occurring on or prior to the Effective Time.
SECTION 5.12. NOTIFICATION OF CERTAIN MATTERS. Each of the
Company, Parent and Sub shall give prompt notice to the other such parties of
the occurrence, or failure to occur, of any event, which occurrence or failure
to occur would be likely to cause (a) any representation or warranty contained
in this Agreement to be untrue or inaccurate in any material respect at any time
from the date of this Agreement to the Effective Time, or (b) any material
failure of the Company, Parent, or Sub as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement. Notwithstanding the foregoing, the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 5.13. EMPLOYEE AGREEMENTS. From and after the Effective
Time, Parent shall cause the Surviving Corporation to fulfill all written
employment, severance, termination, consulting and retirement agreements, as in
effect on the date hereof, to which the Company or any of its subsidiaries is a
party, pursuant to the terms thereof and applicable law.
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SECTION 5.14. REORGANIZATION. From and after the date hereof,
each of Parent and the Company and their respective subsidiaries shall not, and
shall use reasonable efforts to cause their affiliates not to, take any action,
or fail to take any action, that would jeopardize qualification of the Merger as
a reorganization within the meaning of Section 368(a) of the Code or enter into
any contract, agreement, commitment or arrangement that would have such effect.
ARTICLE 6
CONDITIONS PRECEDENT
SECTION EXCHANGE 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO
EFFECT THE MERGER. The respective obligations of each party to effect the Merger
are subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Shareholder Approval. This Agreement shall have been approved
and adopted by the requisite vote of the shareholders of the Company, in
accordance with all applicable provisions of the Illinois Statute.
(b) Effectiveness of the S-4. The S-4 shall have been declared
effective by the SEC under the Securities Act and shall not be the
subject of any stop order or proceeding by the SEC seeking a stop order.
(c) Governmental Entity Approvals. All other material
authorizations, consents, orders or approvals of, or declarations or
filings with, or expiration of waiting periods imposed by, any
Governmental Entity necessary for the Merger and the consummation of the
Transactions shall have been filed, expired or been obtained, other than
those that, individually or in the aggregate, the failure to be filed,
expired or obtained would not, in the reasonable opinion of Parent, have
a Material Adverse Effect on the Company or Parent.
(d) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint
or prohibition preventing the consummation of the Merger or the other
Transactions shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be
pending or threatened; and there shall not be any action taken, or any
statute, rule, regulation or order (whether temporary, preliminary or
permanent) enacted, entered or enforced which makes the consummation of
the Merger or the other Transactions illegal or prevents or prohibits
the Merger or the other Transactions.
(e) NASDAQ Quotation. The shares of Parent Common Stock issuable
to the holders of the Company Common Stock pursuant to the Merger shall
have been authorized for quotation on the NASD National Market (or other
national market or
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exchange on which Parent Common Stock is then traded or quoted), upon
official notice of issuance.
SECTION 6.2. CONDITIONS OF OBLIGATIONS OF PARENT AND SUB. The
obligations of Parent and Sub to effect the Merger are subject to the
satisfaction of the following additional conditions, unless waived in writing by
Parent:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and
correct or, in the case of representations and warranties not containing
any materiality qualifier, including, without limitation, "Material
Adverse Effect," shall be true and correct in all material respects (i)
as of the date hereof and (ii) as of the Closing Date, as though made on
and as of the Closing Date (provided, that in the cases of clauses (i)
and (ii), any such representation and warranty made as of a specific
date shall be true and correct as of such specific date), and Parent
shall have received certificates to such effect signed by the Chief
Executive Officer or the Chief Financial Officer of the Company with
respect to Company matters.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all of its respective
obligations and covenants, taken as a whole, required to be performed by
it under this Agreement prior to or as of the Closing Date, and Parent
shall have received a certificate to such effect signed by the Chief
Executive Officer or the Chief Financial Officer of the Company.
(c) Consents. Parent and Sub shall have received duly executed
copies of all material third-party consents and approvals contemplated
by this Agreement or the Company Disclosure Letter to be obtained by the
Company in form and substance reasonably satisfactory to Parent and Sub,
except those consents the failure to so receive would not, individually
or in the aggregate, have a Material Adverse Effect on the Company.
(d) Tax Opinion. Parent and Sub shall have received the opinion,
dated the Closing Date, of Wachtell, Lipton, Rosen & Katz, special
counsel to Parent, based upon customary representations, to the effect
that (i) the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and
that each of the Company, Sub and Parent will be a party to that
reorganization within the meaning of Section 368(b) of the Code, and
(ii) no taxable gain or loss will be recognized, for federal income tax
purposes, by shareholders of the Company who exchange Company Common
Stock for shares of Parent Common Stock pursuant to the Merger (except
with respect to cash received in lieu of fractional shares).
SECTION 6.3. CONDITIONS OF OBLIGATIONS OF THE COMPANY. The obligation of
the Company to effect the Merger is subject to the satisfaction of the following
conditions, unless waived in writing by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub set forth in this Agreement shall be true
and correct or, in the case of
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representations and warranties not containing any materiality qualifier,
including, without limitation, "Material Adverse Effect," shall be true
and correct in all material respects (i) as of the date hereof and (ii)
as of the Closing Date, as though made on and as of the Closing Date
(provided, that in the cases of clauses (i) and (ii), any such
representation and warranty made as of a specific date shall be true and
correct as of such specific date), and the Company shall have received
certificates to such effect signed by a senior executive officer of
Parent and of Sub to such effect with respect to Parent matters and Sub
matters, respectively.
(b) Performance of Obligations of Parent and Sub. Each of Parent
and Sub shall have performed in all material respects all of their
respective obligations and covenants, taken as a whole, required to be
performed by such party under this Agreement prior to or as of the
Closing Date, and the Company shall have received certificates to such
effect signed by a senior executive officer of Parent and of Sub with
respect to Parent and Sub matters, respectively.
(c) Consents. The Company shall have received duly executed
copies of all material third-party consents and approvals contemplated
by this Agreement and the Parent Disclosure Letter to be obtained by
Parent in form and substance reasonably satisfactory to the Company,
except those consents the failure to so receive, would not, individually
or in the aggregate, have a Material Adverse Effect on Parent.
(d) Tax Opinion. The Company shall have received the opinion,
dated the Closing Date, of Shearman & Sterling, special counsel to the
Company, based upon customary representations, to the effect that (i)
the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and
that each of the Company, Sub and Parent will be a party to that
reorganization within the meaning of Section 368(b) of the Code, and
(ii) no taxable gain or loss will be recognized, for federal income tax
purposes, by shareholders of the Company who exchange Company Common
Stock for shares of Parent Common Stock pursuant to the Merger (except
with respect to cash received in lieu of fractional shares).
(e) Officer of Parent. Mr. Barry Diller shall continue to be the
Chief Executive Officer of Parent.
ARTICLE 7
TERMINATION
SECTION 7.1. TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time of the Merger, whether before or after approval of the Merger
by the shareholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company based on the recommendation of the
Special Committee;
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(b) by either Parent or the Company if the Merger shall not have
been consummated by December 31, 1998 (provided, that the right to
terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been the cause
of or resulted in the failure of the Merger to occur on or before such
date and such action or failure to act constitutes a breach of this
Agreement);
(c) by either Parent or the Company, if (i) a court of competent
jurisdiction or other Governmental Entity shall have issued an order,
decree or ruling or taken any other action, in any case having the
effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree or ruling is final and nonappealable or
(ii) a governmental, regulatory or administrative agency or commission
shall seek to enjoin the Merger and the terminating party reasonably
believes that the time period required to resolve such governmental
action and the related uncertainty is reasonably likely to have a
Material Adverse Effect on either Parent or the Company;
(d) by either Parent or the Company, if the required approvals of
the shareholders of the Company contemplated by this Agreement shall not
have been obtained by reason of the failure to obtain the required vote
upon a vote taken at a Shareholders Meeting or at any adjournment
thereof (provided, that the right to terminate this Agreement under this
Section 7.1(d) shall not be available to any party where the failure to
obtain shareholder approval of such party shall have been caused by the
action or failure to act of such party in breach of this Agreement);
(e) by Parent, if the Board of Directors of the Company acting on
the recommendation of the Special Committee shall have withdrawn or
modified its recommendation concerning the Merger in accordance with
Section 5.4 hereof;
(f) by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent shall have
become untrue, in either case such that the conditions set forth in
Section 6.3(a) or Section 6.3(b) would not be satisfied as of the time
of such breach or as of the time such representation or warranty shall
have become untrue, provided, that if such inaccuracy in Parent's
representations and warranties or breach by Parent is curable by Parent
through the exercise of its reasonable efforts and for so long as Parent
continues to exercise such reasonable efforts, the Company may not
terminate this Agreement under this Section 7.1(f); or
(g) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall
have become untrue, in either case such that the conditions set forth in
Section 6.2(a) or Section 6.2(b) would not be satisfied as of the time
of such breach or as of the time such representation or warranty shall
have become untrue, provided, that if such inaccuracy in the Company's
representations and warranties or breach by the Company is curable by
the Company through the exercise of its
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reasonable efforts and for so long as the Company continues to exercise
such reasonable efforts, Parent may not terminate this Agreement under
this Section 7.1(g).
SECTION 7.2. EFFECT OF TERMINATION. In the event of the termination of
this Agreement as provided in Section 7.1, this Agreement shall be of no further
force or effect, except (a) as set forth in the last sentence of Section 5.1,
this Section 7.2, Section 7.3, and Article 8, each of which shall survive the
termination of this Agreement, and (b) nothing herein shall relieve any party
from liability for any breach of this Agreement.
SECTION 7.3. FEES AND EXPENSES. All fees and expenses incurred in
connection with this Agreement and the Transactions shall be paid by the party
incurring such expenses, whether or not the Merger is consummated.
ARTICLE 8
GENERAL PROVISIONS
SECTION 8.1 AMENDMENT. This Agreement (including the Exhibits and disclosure
letters hereto) may be amended prior to the Effective Time by Parent, Sub and
the Company, by action taken by the Board of Directors of Parent and the Board
of Directors of the Company (provided, that no amendment shall be approved by
the Board of Directors of the Company unless such amendment shall have been
recommended by the Special Committee and, if required by law, approved by the
disinterested directors of the Company), at any time before or after approval of
the Merger by the shareholders of the Company but, after any such approval, no
amendment shall be made which by law requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties.
SECTION 8.2. EXTENSION; WAIVER. At any time prior to the Effective Time
(whether before or after approval of the shareholders of the Company), Parent
and the Company may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement and (c) waive compliance with any
of the agreements or conditions contained in this Agreement. Any extension or
waiver on behalf of the Company shall be taken only upon the recommendation of
the Special Committee (and, if required by law, by the disinterested directors
of the Company). Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
SECTION 8.3. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
All representations, warranties and agreements in this Agreement or in any
instrument or certificate delivered pursuant to this Agreement shall be deemed
to be conditions to the Merger and shall not survive the Merger, except for the
agreements contained in Sections 2.2 (exchange of Certificates), 2.3 (Company
Options), 2.4 (further assurances), 5.11 (indemnification), 5.13 (employee
agreements) and 5.14 (reorganization), each of which shall survive the Merger.
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SECTION 8.4. ENTIRE AGREEMENT. This Agreement (including the Exhibits
and disclosure letters hereto) and the Confidentiality Agreement contain the
entire agreement among all of the parties with respect to the subject matter
hereof and supersede all prior arrangements and understandings, both written and
oral, with respect thereto, but shall not supersede any agreements among any
group of the parties hereto entered into on or after the date hereof. In this
regard, the breach of the Cooperation Agreement in and of itself shall not be
deemed to be a breach of this Agreement.
SECTION 8.5. SEVERABILITY. It is the desire and intent of the parties
that the provisions of this Agreement be enforced to the fullest extent
permissible under the law and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, in the event that any provision of
this Agreement would be held in any jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision in any other
jurisdiction. Notwithstanding the foregoing, if such provision could be more
narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 8.6. NOTICES. All notices and other communications pursuant to
this Agreement shall be in writing and shall be deemed to be sufficient if
contained in a written instrument and shall be deemed given if delivered
personally, telecopied, sent by nationally recognized, overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
USA Networks, Inc.
152 West 57th Street
New York, NY 10019
Attention: General Counsel
Telecopier: (212) 582-9291;
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019-5150
Attention: Pamela S. Seymon, Esq.
Telecopier: (212) 403-2000
(b) if to the Company, to:
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Ticketmaster Group, Inc.
8800 Sunset Boulevard
West Hollywood, CA 90069
Attention: Ned S. Goldstein, General Counsel
Telecopier: 310-360-6512;
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Faith Grossnickle, Esq.
Telecopier: (212) 848-7179;
and to:
Neal, Gerber & Eisenberg
2 North LaSalle Street
Chicago, IL 60602
Attention: Charles E. Gerber, Esq.
Telecopier: (312) 269-1747
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a telecopy, when the party receiving such telecopy shall have confirmed
receipt of the communication, (c) in the case of delivery by nationally
recognized overnight courier, on the Business Day following dispatch and (d) in
the case of mailing, on the third Business Day following such mailing.
SECTION 8.7. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 8.9. BENEFITS; ASSIGNMENT. This Agreement is not intended to
confer upon any person other than the parties any rights or remedies hereunder
and shall not be assigned by operation of law or otherwise; provided, however,
that the officers and directors of the Company are intended beneficiaries of the
covenants and agreements contained in Section 5.11, the Company employees having
the agreements described in Section 5.13 and the holders of Company Options
described in Section 2.3, provided, that such assignment shall not alter the
treatment of the Merger under the Code for Company shareholders, and the Company
shall
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execute any amendment to this Agreement necessary to provide the benefits of
this Agreement to any such assignee.
SECTION 8.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed therein, without giving effect to laws that
might otherwise govern under applicable principles of conflicts of law, provided
that any matter relating to the fiduciary matters affecting the Company and its
board of directors or to the mechanics and legal consequences of the Merger
shall be governed by Illinois law.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their respective officers thereinto duly authorized, as of the date
first written above.
USA NETWORKS, INC.
By:
---------------------------------
Name: Thomas J. Kuhn
Title: Senior Vice President
and General Counsel
BRICK ACQUISITION CORP.
By:
---------------------------------
Name: Thomas J. Kuhn
Title: President
TICKETMASTER GROUP, INC.
By:
---------------------------------
Name:
Title:
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
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EXHIBIT A
FORM OF COMPANY AFFILIATE LETTER
USA Networks, Inc.
152 West 57th Street
New York, NY 10019
Gentlemen:
I have been advised that as of the date of this letter I may be
deemed to be an "affiliate" of Ticketmaster Group, Inc., an Illinois corporation
(the "Company"), as the term "affiliate" is defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger dated as of March 20, 1998 (the "Agreement"), by
and among USA Networks, Inc., a Delaware corporation ("Parent"), Brick
Acquisition Corp., an Illinois corporation ("Sub"), and the Company, Sub will be
merged with and into the Company (the "Merger").
As a result of the Merger, I may receive shares of common stock,
par value $.01 per share, of Parent ("Parent Securities"). I would receive such
shares in exchange for shares (or options for shares) owned by me of common
stock, no par value per share, of the Company.
I represent, warrant and covenant to Parent that in the event I
receive any Parent Securities as a result of the Merger:
1. I shall not make any sale, transfer, assignment or other
disposition of the Parent Securities in violation of the Act or the
Rules and Regulations.
2. I have carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer, assign or otherwise
dispose of Parent Securities, to the extent I felt necessary, with my
counsel or counsel for the Company.
3. I have been advised that the issuance of Parent Securities to
me pursuant to the Merger has been registered with the Commission under
the Act on a Registration Statement on Form S-4. However, I have also
been advised that, because at the time the Merger is submitted for a
vote of the shareholders of the Company, (a) I may be deemed to be an
affiliate of the Company and (b) the distribution by me of the Parent
Securities has not been registered under the Act, I may not sell,
transfer, assign or otherwise dispose of Parent Securities issued to me
in the Merger unless (i) such sale, transfer, assignment or other
disposition is made in conformity with the volume and other limitations
of Rule 145 promulgated by the Commission under the Act, (ii) such sale,
transfer, assignment or other disposition has been registered under the
Act or (iii) in the opinion of counsel reasonably acceptable to Parent,
such sale, transfer, assignment or other disposition is otherwise exempt
from registration under the Act.
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<PAGE> 45
4. I understand that Parent is under no obligation to register
the sale, transfer, assignment or other disposition of Parent Securities
by me or on my behalf under the Act or to take any other action
necessary in order to make compliance with an exemption from such
registration available solely as a result of the Merger.
5. I also understand that there will be placed on the
certificates for the Parent Securities issued to me or any substitutions
therefor, a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, APPLIED. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS
OF AN AGREEMENT DATED [ ] BETWEEN THE REGISTERED HOLDER
HEREOF AND USA NETWORKS, INC., A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF USA NETWORKS, INC.
6. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a
registration statement, Parent reserves the right to put the following
legend on certificates issued to any transferee:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, APPLIED. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT
WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED.
It is understood and agreed that the legends set forth in
paragraphs 5 and 6 above shall be removed by delivery of substitute certificates
without such legend if the undersigned shall have delivered to Parent a copy of
a letter from the staff of the Commission, or an opinion of counsel reasonably
satisfactory to Parent in form and substance reasonably satisfactory to Parent,
to the effect that such legend is not required for purposes of the Act.
A-2
<PAGE> 46
Execution of this letter should not be considered an admission on
my part that I am an "affiliate" of the Company as described in the first
paragraph of this letter, or as a waiver of any rights I may have to object to
any claim that I am such an affiliate on or after the date of this letter.
Very truly yours,
-----------------------------------
Name:
Accepted this ____ day of
_____________, 1998, by
USA NETWORKS, INC.
By
----------------------------------
Name:
Title:
A-3
<PAGE> 1
EXHIBIT 11.1
TICKETMASTER GROUP, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
-----------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Basic weighted average number of common shares
outstanding....................................... 15,310,405 17,222,459 25,846,344
Common stock equivalents from outstanding stock
options........................................... n/a n/a 438,211
----------- ----------- -----------
Weighted average shares including the dilutive
effect of stock options........................... 15,310,405 17,222,459 26,284,555
=========== =========== ===========
Net income (loss)................................... $ (8,095) $ 1,792 $ 8,147
=========== =========== ===========
Basic earnings (loss) per share..................... $ (.53) $ .10 $ .32
=========== =========== ===========
Diluted earnings (loss) per share................... $ (.53) $ .10 $ .31
=========== =========== ===========
</TABLE>
<PAGE> 1
EXHIBIT 21.1
<TABLE>
<CAPTION>
State or Other
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
<S> <C>
Ticketmaster Ventures, Inc. Illinois
Ticketmaster Leisure Services, Inc. Delaware
Ticketmaster - DV, Inc. Delaware
Ticketmaster - Florida Management Corporation Florida
Ticketmaster - Florida, Inc. Florida
Ticketmaster Corporation Delaware
Ticketmaster Texas Management Corporation Delaware
Southwest Ticketing, Inc. Texas
Ticketmaster Ticketing Co., Inc. Delaware
Ticketmaster Direct Software Acquisitions, Inc. Delaware
Distributed Systems Architects, Inc. Virginia
Ticketmaster - Colorado, Inc. Colorado
Ticketmaster - Chicago, Inc. Illinois
Ticketmaster - Midwest, Inc. Minnesota
Ticketmaster - New Orleans, Inc. Louisiana
Ticketmaster - Las Vegas, Inc. Nevada
Ticketmaster - Nashville, Inc. Tennessee
Ticketmaster - New Mexico, Inc. New Mexico
Ticketmaster - Technologies, Inc. Arizona
Entertainment Strategies, Ltd. California
Ticketmaster - Ohio, Inc. Ohio
TMNY Holdings, Inc. New York
Ticketmaster - Michigan, Inc. Michigan
Ticketmaster - New York, Inc. Delaware
Ticketmaster California, Inc. California
Ticketmaster - Arizona, Inc. Arizona
Ticketmaster - Tennessee, Inc. Tennessee
Ticket Hub Inc. Tennessee
Ticketmaster - Tennessee Tennessee
Ticketmaster Corporation of Washington Washington
Ticketmaster Washington Ticketing Inc. Washington
Ticketmaster - Northwest Washington
Ticketmaster Georgia, Inc. Georgia
Ticketmaster Georgia Holdings, Inc. Georgia
Ticketmaster - Southeast Georgia
Ticketmaster - Indiana, Inc. Indiana
Ticketmaster Indiana Holdings Corp. Indiana
Ticketmaster Indiana Indiana
Ticketmaster - Europe, Inc. Delaware
Ticketmaster - Europe Group Delaware
Ticketmaster International, Inc. Delaware
Ticketmaster Overseas, Inc. Delaware
Ticketmaster - Number One Limited United Kingdom
Ticketmaster - UK Limited United Kingdom
FC1013 Limited United Kingdom
Synchro Systems Limited United Kingdom
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
State or Other
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
<S> <C>
Ticketmaster New Venture Holdings, Inc. Delaware
Ticketmaster New Ventures, Ltd. Cayman Islands
Venta de Boletas Por Compudoras Mexico
Ticketmaster New Ventures Argentina, Ltd. Cayman Islands
Ticketmaster Argentina, SA Argentina
Ticketmaster New Ventures Chile, Ltd. Cayman Islands
Ticketmaster Chile, SA Chile
Ticketmaster South America Holding, Ltd. Cayman Islands
Ticketmaster Australasia Holding, Inc. Delaware
Ticketmaster Administration Inc. Delaware
Ticketmaster Australasia Holdings Pty. Ltd. Australia
Ticketmaster Australasia Australia
Ticketmaster Bass Victorian Pty. Ltd. Australia
Ticketmaster Australasia Investments Pty. Ltd. Australia
Ticketmaster Australasia Australia
Ticketmaster Bass Australasia Pty. Ltd. Australia
Ticketmaster Administration Australasia Inc. Delaware
Ticketmaster Pacific Acquisitions, Inc. Delaware
Ticketmaster Canada Holding Corp. Delaware
Ticketmaster Canada Ltd. Canada
Worldwide Ticket Systems, Inc. Washington
Ticketmaster Ireland Holdings Corp. Delaware
The Ticketshop Limited Ireland
Ticketline Limited Ireland
Ticketline (NI) Limited Northern Ireland
TMC Realty Holdings Co. California
TMC Realty Co. California
Ticketmaster Multimedia Holdings, Inc. Delaware
Ticketmaster Publications Inc. Delaware
Ticketmaster Travel Corporation Delaware
TM/Video International, Inc. Delaware
Ticketmaster Advertising, Inc. Illinois
TMC Consultants, Inc. Illinois
Ticketmaster Corporation Delaware
Ticketmaster Tell Ltd. Delaware
Ticketmaster-Direct, Inc. Delaware
Cinema Acquisition Corporation Delaware
Ticketmaster Cinema Group, Ltd. Delaware
Pacer/CATS/CCS Delaware
CCS Cinema Computer Systems Co. Delaware
CCS/CATS Ptd Ltd. Singapore Sinagapore
CCS Computel Computer Systems GmbH Germany
CCS Computer-Systemes Verwaltungsgesellschaft GmbH Germany
T.E.D. Computer-Systems GmbH Germany
CC Cinema Concepts GmbH Germany
CCS Cinema Computer Sustems GmbH Germany
Cinema Computer Systems S.A.R.L. France
TM Movie Tix Holdings, Inc. Delaware
TM Movie Tix, Inc. Delaware
The Movie Ticket Co. Delaware
TM Marketing Inc. Illinois
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
State or Other
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
<S> <C>
Ticketmaster Merchandising Corporation California
TM Merchandising Consultants, Inc. Illinois
TM Merchandising Services, Inc. Illinois
Ticketmaster - Golf, Inc. Illinois
TM Golf Delaware
MFG Management Corporation Illinois
Rexford Ventures Ltd. Illinois
TM Flowers California
TM National Flora, LLC Oregon
</TABLE>
3
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Ticketmaster Group, Inc.:
The audits referred to in our report dated March 12, 1997, included the related
financial statement schedule as of January 31, 1997, and for the year then
ended, included in the Annual Report on Form 10-K of Ticketmaster Group, Inc.
for the fiscal year ended January 31, 1998. This financial statement schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
We consent to the incorporation by reference in the registration statement on
Form S-8 (No. 333-31299) of Ticketmaster Group, Inc. of our reports included
herein.
KPMG Peat Marwick, LLP
Los Angeles, California
April 24, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-31299) of Ticketmaster Group, Inc. of our report dated
February 24, 1998 (except for Note 13, as to which the date is April 10, 1998)
with respect to the consolidated financial statements of Ticketmaster Group,
Inc. included in the Annual Report on Form 10-K for the year then ended.
Our audit also included the financial statement schedule of Ticketmaster
Group, Inc. listed in Item 14(a) in this Annual Report on Form 10-K. This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audit. In our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
Ernst & Young LLP
Los Angeles, California
April 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS OF TICKETMASTER GROUP, INC. FOR
THE FISCAL YEAR ENDED JANUARY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 76,323
<SECURITIES> 0
<RECEIVABLES> 37,822
<ALLOWANCES> 0
<INVENTORY> 4,813
<CURRENT-ASSETS> 130,429
<PP&E> 69,736
<DEPRECIATION> (24,317)
<TOTAL-ASSETS> 330,878
<CURRENT-LIABILITIES> 120,997
<BONDS> 0
1,449
0
<COMMON> 0
<OTHER-SE> 47,459
<TOTAL-LIABILITY-AND-EQUITY> 330,878
<SALES> 340,980
<TOTAL-REVENUES> 340,980
<CGS> 288,399
<TOTAL-COSTS> 288,399
<OTHER-EXPENSES> 23,056
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,560
<INCOME-PRETAX> 20,030
<INCOME-TAX> 11,883
<INCOME-CONTINUING> 8,147
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,147
<EPS-PRIMARY> 0.32<F1>
<EPS-DILUTED> 0.31
<FN>
<F1>For purposes of this exhibit, Primary means Basic.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.4
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
-----------
No. 96-2883
-----------
ALEX CAMPOS; DANIA CAMPOS;
ALBERT ALFONSO, Individually
and on behalf of all others
similarly situated;
Plaintiffs/
Appellants,
v.
TICKETMASTER CORPORATION;
Appeals from the United States
District Court for the
Defendant/Appellee.
Eastern District of Missouri.
--------------------
STEPHEN HINES; DIRK SCHNABLE;
TODD VICSIK; JAMIE SALTZMAN; MIKE ELLIS;
BRAD CHESKES; SUZANNE CRAWFORD,
on behalf of themselves and on behalf
of a class of persons similarly situated;
Plaintiffs/Appellants,
v.
TICKETMASTER CORPORATION;
Defendant/Appellee.
<PAGE> 2
JOSEPH CROWLEY, Individually
and on behalf of all others
similarly situated;
Plaintiff/Appellant;
v.
TICKETMASTER CORPORATION;
Defendant/Appellee;
--------------------
TONY STEPHENS, Individually
and on behalf of all others
similarly situated;
Plaintiff/Appellant;
v.
TICKETMASTER CORPORATION;
Defendant/Appellee;
--------------------
EBON PETTY; ARLEAN AZZO;
JOHN AZZO; SCOTT HENRY
BUETTNER; SCOTT J. FREEDLAND;
BRIAN HOMER; ROGER HUTTON;
GARRETT PFETZING;
CHRISTOPHER W. QUINN;
THOMAS ROCKOV; JAMES
STEWART; HILARY TOMPKINS, on
behalf of themselves and
others, in a class to be certified;
-2-
<PAGE> 3
Plaintiffs/Appellants,
v.
TICKETMASTER CORPORATION;
Defendant/Appellee
----------
Submitted: February 14, 1997
Filed: April 10, 1998
-----------
Before HANSEN and MORRIS SHEPPARD ARNOLD, Circuit Judges, and
MELLOY,(1) Chief District Judge.
-----------
MELLOY, Chief District Judge.
The plaintiffs, individually and as a proposed class of
popular music fans, sued Ticketmaster Corporation ("Ticketmaster")
for damages and injunctive relief. Sixteen cases, originally filed
in various districts, were consolidated for pretrial proceedings in
the Eastern District of Missouri. Eleven of the cases were
dismissed. The plaintiffs in the remaining five cases then filed
a consolidated complaint superseding the individual complaints.
The consolidated complaint alleged that Ticketmaster violated 1
of the Sherman Act by engaging in price fixing with various concert
venues and promoters and by boycotting the band Pearl Jam; that
Ticketmaster violated 2 of the Sherman Act by monopolizing, or
attempting to monopolize, the market for ticket
- ----------
(1) The Honorable Michael J. Melloy, Chief Judge, United States
District Court for the Northern District of Iowa, sitting by
designation.
-3-
<PAGE> 4
distribution services; and that Ticketmaster violated 7 of the
Clayton Act by acquiring its competitors. See 15 U.S.C. 1 et
seq. The plaintiffs claimed standing to sue based on their payment
of monopoly overcharges, in the form of service and handling fees,
for Ticketmaster's ticket distribution services.
The district court dismissed the suit, holding that the
plaintiffs lacked standing to sue because they were indirect
purchasers within the meaning of Illinois Brick Co. v. Illinois,
431 U.S. 720 (1977) and its progeny. The district court also held
that, even if the plaintiffs were not indirect purchasers, they
were nevertheless inappropriate plaintiffs under the standards set
forth by the Supreme Court in Associated General Contractors of
California, Inc. v. California State Council of Carpenters, 459
U.S. 519 (1983). Finally, the district court held that three of
the consolidated cases had been improperly venued, and dismissed
the cases originally filed in Georgia, Washington, and Michigan.
The plaintiffs contend that the court erred in all of these
holdings. We affirm in part, reverse in part, and remand for
further proceedings.
I.
Since the case was dismissed on the pleadings, we treat all
factual allegations of the complaint as true. See Haberthur v.
City of Raymore, 119 F.3d 720 (8th Cir. 1997). We may affirm a
dismissal on the pleadings "only if it is clear that no relief
could be granted under any set of facts that could be proved
consistent with the allegations." Hishon v. King & Spalding, 467
U.S. 69, 73 (1984); see also Associated General
-4-
<PAGE> 5
Contractors, 459 U.S. at 526 ("[W]e must assume that the
[plaintiff] can prove the facts alleged in its amended
complaint.").
According to the complaint, Ticketmaster is a monopoly
supplier of ticket distribution or ticket delivery services to
large-scale popular music shows. The complaint alleges that
Ticketmaster has long-term exclusive contracts with almost every
promoter of concerts in the United States. These exclusive
contracts ensure that Ticketmaster will have the right to handle
the vast majority of ticket sales for almost every large-scale
popular music concert in the United States, regardless of whether
or not Ticketmaster has exclusive contracts with the particular
venues where those concerts are held.
Ticketmaster's exclusive contracts with almost every promoter
of concerts in the United States give it the right to distribute
tickets over the telephone, at outlets such as retail stores, and
at the venue where the promoter is presenting an event. According
to plaintiffs, Ticketmaster therefore has ironclad control over
ticketing for any large-scale popular music concert at major venues
in the United States.
Ticketmaster uses that control, according to the complaint, to
extract from the plaintiffs supracompetitive fees for ticket
distribution services. Those fees can be as high as twenty dollars
per ticket. By paying those fees, the plaintiffs contend that they
suffer injury to their property within the meaning of Section 4 of
the Clayton Act, 15 U.S.C. 15, and so have standing to sue. See
Reiter v. Sonotone Corp., 442 U.S. 330 (1979). The district court,
while not questioning the allegation that the plaintiffs pay some
increased price for concert tickets as a result of Ticketmaster's
monopoly,
-5-
<PAGE> 6
nonetheless held that such injury did not give the plaintiffs
standing under 4.
II.
In Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), the
Supreme Court held that only the "direct purchaser" from a monopoly
supplier could sue for treble damages under 4 of the Clayton
Act. See 15 U.S.C. 15; Hovenkamp, The Indirect-Purchaser Rule
and Cost-Plus Sales, 103 Harv. L. Rev. 1717 (1990). "Indirect
purchasers" generally lack standing under the antitrust laws and so
cannot bring suits for damages. See Sports Racing Services, Inc.
v. Sports Car Club of America, Inc., 131 F.3d 874,883 (10th Cir.
1997)("The Supreme Court has consistently held that only direct
purchasers suffer injury within the meaning of 4 of the Clayton
Act.").
The Supreme Court has defined an indirect purchaser as one who
is not the "immediate buyer from the alleged antitrust violator[],"
Kansas v. Utilicorp United, Inc., 497 U.S. 199, 207 (1990), or one
who "[does] not purchase [the monopolized product] directly from
the [antitrust] defendant[.]" California v. ARC America Corp., 490
U.S. 93, 96 (1989). Some commentators have offered definitions of
their own. See, e.g., Werden & Schwartz, Illinois Brick and the
Deterrence of Antitrust Violations A An Economic Analysis, 35
Hastings L.J. 629, 668 n. 4 (1984)("The term `indirect
purchaser'... means any party that purchases a product from any
party in the vertical supply chain other than the party suspected
of the antitrust violation, i.e., from a direct purchaser or
another indirect purchaser -- with the ultimate consumer being the
last indirect purchaser."); Hovenkamp, The Indirect-Purchaser Rule
and Cost-Plus Sales, 103 Harv.L.Rev. 1717 (1990)("`Indirect'
purchaser[s] [are] those who bought an
-6-
<PAGE> 7
illegally monopolized or cartelized product or service through the
agency of a dealer, distributor, or some other independent reseller
who was not a participant in the antitrust violation."). Other
courts and commentators have given examples to explain the content
of the indirect purchaser concept. See, e.g., McCarthy v. Recordex
Service, Inc., 80 F.3d 842, 852 n. 16 (3rd Cir.)(homeowner an
indirect purchaser of paint used by housepainter), cert. denied,
117 S.Ct. 86 (1996); Landes & Posner, Should Indirect Purchasers
Have Standing to Sue Under the Antitrust Laws? An Economic
Analysis of the Rule in Illinois Brick, 46 U.Chi.L.Rev. 602
(1979)(bread buyer an indirect purchaser of flour and oven used by
bread baker).(2)
A common concept unites these various definitions and
examples: An indirect purchaser is one who bears some portion of a
monopoly overcharge only by virtue of an antecedent transaction
between the monopolist and another, independent purchaser. Such
indirect purchasers may not sue to recover damages for the portion
of the overcharge they bear. The right to sue for damages rests
with the direct purchasers, who participate in the antecedent
transaction with the monopolist.
Some review of the economic assumptions underlying the direct
purchaser rule is necessary to understand the justification for the
direct purchaser rule. For purposes of antitrust analysis, courts
assume that a firm generally wishes to "minimize its input
- ----------
(2) Although direct purchaser issues usually involve a chain of
distribution in which a tangible good passes from one purchaser to
another, that is not always so. An indirect purchaser can bear some
part of the monopoly overcharge for a product even when that product
does not pass from the direct to the indirect purchaser. For example,
in Landes and Posner's example of the bread buyer, the bread buyer pays
a higher price for bread because the baker passes along some part of
the monopoly overcharge paid for the oven.
-7-
<PAGE> 8
costs[.]" Olympia Equipment Leasing Co. v. Western Union Telegraph
Co., 797 F.2d 370, 374 (7th Cir. 1986), cert. denied, 480 U.S. 934
(1987); Stamatakis Industries, Inc. v. King, 965 F.2d 469, 472 (7th
Cir. 1992). Consequently, when a firm buys its inputs from a
monopolist at a monopoly price, we may be fairly certain that it
had little choice in the matter.(3) The indirect purchaser, in turn,
pays some portion of the monopoly overcharge only because the
previous purchaser was unable to avoid that overcharge. The
homeowner in the example given by the Third Circuit pays some part
of the monopoly overcharge for paint only because the housepainter
was unable to obtain his paint at a competitive price, just as the
bread buyer in Landes and Posner's example pays some part of the
monopoly overcharge for the oven only because the baker was unable
to obtain a competitively priced oven. The breakdown in
competitive conditions occurs in transactions at least once removed
from the indirect purchaser.
The monopoly overcharge exacted by the monopolist generally
injures both those who deal directly and those who deal
derivatively with the monopolist. As Judge Posner has explained,
"The optimal adjustment by an unregulated firm to the increased
cost of the input [i.e., the monopoly overcharge] will always be a
price increase smaller than the increase in input cost[.]" State
of Illinois ex rel. Hartigan v. Panhandle Eastern Pipe Line Co.,
852 F.2d 891, 894 (7th Cir. 1988)(en banc), cert. denied, 488 U.S.
986 (1988), overruled on other grounds by Illinois v. Panhandle
Eastern Pipe Line Co., 935 F.2d 1469 (7th Cir. 1991); Stamatakis,
965 F.2d at 472. Only rarely will a firm be able
(3) The situation may be different when the firm is party to the
antitrust violation. Cf. In re Midwest Milk Monopolization Litigation,
730 F.2d 528, 529 - 30 (8th Cir. 1984), cert. denied, 469 U.S. 924
(1984); In re Beef Industry Antitrust Litigation, 600 F.2d 1148, 1163
(5th Cir. 1979), cert. denied, 449 U.S. 905 (1980); McCarthy, 80 F.3d
at 854.
-8-
<PAGE> 9
to pass on the entire amount of a monopoly overcharge to its
customers. See Panhandle Eastern, supra. In the usual case, both
the firm and its customers will bear some portion of the
overcharge, and thus both will suffer injury from the antitrust
violation. See Hanover Shoe, Inc. v. United Shoe Machinery Corp.,
392 U.S. 481, 489 - 93 (1968); Illinois Brick, 431 U.S. at 731 -
33.
Precisely what part of the overcharge will be borne by the
direct purchaser, and what part will be borne by the indirect
purchaser, is "an example of what is called `incidence analysis,'
and is famously difficult." In re Brand Name Prescription Drugs
Litigation, 123 F.3d 599, 605 (7th Cir. 1997), cert. denied, 118
S.Ct. 1178 (1998); see also Illinois Brick, 431 U.S. at 740 - 44;
Utilicorp United, Inc., 497 U.S. at 206 - 209; Landes & Posner,
Economic Analysis of Illinois Brick, 46 U.Chi.L.Rev. at 619 - 20.
If both direct and indirect purchasers were allowed to sue for
damages, the courts would be faced with the "famously difficult"
task of apportioning the payment of overcharges between direct and
indirect purchasers. The alternative is to allow duplicative
recovery, which the Supreme Court also disapproves of and the
avoidance of which constitutes another rationale for the direct
purchaser rule. See Utilicorp United, 497 U.S. at 212;
Southwestern Bell Telephone Co. v. FCC, 116 F.3d 593, 597 (D.C.Cir.
1997).
The Supreme Court has declined to involve the federal courts
in such an analysis, except in very limited circumstances,
explaining that "[t]he direct purchaser rule serves, in part, to
eliminate the complications of apportioning overcharges between
direct and indirect purchasers." Utilicorp United, 497 U.S. at
208; see also In re Brand Name Prescription Drugs Litigation, 123
F.3d at 605; In re Midwest Milk Monopolization
-9-
<PAGE> 10
Litigation, 730 F.2d at 530. While the Supreme Court has
recognized that the "economic assumptions underlying the Illinois
Brick rule might be disproved in a specific case," 497 U.S. at 217,
the Court also has made it plain that it considers it an
"unwarranted and counterproductive enterprise to litigate a series
of exceptions." 497 U.S. at 217.
None of the limited circumstances that might warrant avoidance
of the direct purchaser rule exist here. There is no "cost-plus"
contract, see Hanover Shoe, 392 U.S. at 494, no allegation that the
indirect purchasers own or control the direct purchasers, see In re
Brand Name Prescription Drugs Litigation, 123 F.3d at 605, and no
proper allegation that the direct purchasers have conspired with or
otherwise been party with Ticketmaster to any antitrust violation.(4)
Since the direct purchaser rule applies in this case, the question
becomes whether the plaintiffs are direct or indirect purchasers of
Ticketmaster's services.
(4) The plaintiffs do characterize the venues as beneficiaries of and
participants in Ticketmaster's unlawful activity, but the plaintiffs
have not joined the venues as defendants. In this circuit, an antitrust
plaintiff cannot avoid the Illinois Brick rule by characterizing a
direct purchaser as a party to the antitrust violation, unless the
direct purchaser is joined as a defendant. See In re Midwest Milk
Monopolization Litigation, 730 F.2d at 529 - 31. These consolidated
cases are controlled by the law of this circuit, rather than that of
the various circuits in which they were first filed. See
Temporomandibular Joint (TMJ) Implant Recipients v. E.I. DuPont de
Nemours & Co., 97 F.3d 1050, 1055 (8th Cir. 1996) ("When analyzing
questions of federal law, the transferee court should apply the law of
the circuit in which it is located."); see also In re Korean Air Lines
Disaster, 829 F.2d 1171 (D.C.Cir. 1987), aff'd sub nom Chan v. Korean
Air Lines, Ltd., 490 U.S. 122 (1989); but see Cooper, The Korean Air
Disaster: Choice of Law in Federal Multidistrict Litigation, 57
Geo.Wash.L.Rev. 1145 (1989).
-10-
<PAGE> 11
III.
The plaintiffs contend that they are direct purchasers of
"ticket distribution services" from Ticketmaster, primarily because
they pay directly to Ticketmaster distinct service and convenience
fees. However, like the Third Circuit, we do not find billing
practices to be determinative of indirect purchaser status. See
McCarthy, 80 F.3d at 853 n. 18 (noting that "even if a separate
charge for gasoline were assessed [to a taxi passenger], the taxi
passenger still could not be considered a direct purchaser [of
gasoline] in any sense."). As the plaintiffs' complaint makes
clear, Ticketmaster's exclusive contracts with almost every
promoter of concerts in the United States require venues wishing to
host concerts to use Ticketmaster for ticket distribution to those
concerts. Just like the housepainter and the baker, the complaint
alleges that the venues are unable to obtain a necessary input A
ticket delivery services A in a competitive market. The
plaintiffs' inability to obtain ticket delivery services in a
competitive market is simply the consequence of the antecedent
inability of venues to do so. Cf. Note, Beyond Economic Theory: A
Model for Analyzing the Antitrust Implications of Exclusive Dealing
Arrangements, 45 Duke L.J. 1009,1015 (1996)("Ticketing service
companies do not compete directly for consumers' business.
Instead, [those companies] compete to secure contracts with venues
and event promoters for the right to sell tickets to various
entertainment events."). As the plaintiff's complaint makes clear,
ticket buyers only buy Ticketmaster's services because concert
venues have been required to buy those services first. As we
explained above, such derivative dealing is the essence of indirect
purchaser status, and it constitutes a bar under the antitrust laws
to the plaintiffs' suit for damages.
-11-
<PAGE> 12
Nor do we agree with the plaintiffs' contention that
Ticketmaster's monopoly power is benign, so far as the venues are
concerned, simply because Ticketmaster's service fees are collected
immediately from ticket buyers. Although the plaintiffs describe
these fees as separate from what they call the actual purchase
price of concert tickets, it appears clear that the actual purchase
price and the cost of the service fees amount to the single cost of
attending the concert, regardless of how that cost is divided into
actual purchase price and service fees. See Eastman Kodak Co. v.
Image Technical Services, Inc., 504 U.S. 451, 495 (1992)(Scalia,
J., dissenting).(5) Since the price of the ticket (that is, the
actual purchase price plus the service fees) is obviously a price
that the market will bear, see U.S. Football League v. National
Football League, 842 F.2d 1335, 1357 - 58 n. 19 (2nd Cir. 1988), a
venue free from Ticketmaster's domination of ticket distribution
would be able to charge that price itself, without having to cede
to Ticketmaster a portion of that price in the form of
supracompetitive service fees. Cf. Hanover Shoe, 392 U.S. at 492
(noting, in the course of disapproving a passing-on defense to
antitrust suits, the "nearly insuperable difficulty of
demonstrating that the particular plaintiff could not or would not
have raised his prices absent the overcharge or maintained the
higher price had the overcharge been discontinued."); Utilicorp
United, 497 U.S. at 209 (same).
Consequently, we affirm the district court's order dismissing
the individual plaintiff's claims for monetary damages under 4
of the Clayton Act.
- ----------
(5) We note that, unlike in the Eastman Kodak case, there are no
information costs here that may prevent the plaintiffs from separating
out from the total purchase price the actual purchase price and service
fee components. See Eastman Kodak, 504 U.S.
at 473 - 74.
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IV.
Indirect purchaser status does not bar the plaintiffs from
seeking injunctive relief under 16 of the Clayton Act. The
concerns of the direct purchaser rule have mainly to do with the
complexities of incidence analysis, complexities that do not arise
when the courts must consider the propriety of injunctive relief.
As Professors Areeda and Hovenkamp explain, "An equity suit neither
threatens duplicative recoveries nor requires complex tracing
through the distribution chain. There are no damages to be traced,
and a defendant can comply with several identical injunctions as
readily as with one. Illinois Brick has not therefore barred an
indirect purchaser's suit for an injunction." Phillip E. Areeda and
Herbert Hovenkamp, Antitrust Law 371d, at 259 (1995); see also
McCarthy, 80 F.3d at 856 (holding that "plaintiffs need not satisfy
Illinois Brick's "direct purchaser" requirement in order to seek
injunctive relief[.]").
The case relied on by Ticketmaster as support for its
contention that injunctive relief is unavailable to the plaintiffs,
Cargill, Inc. v. Monfort of Colorado, 479 U.S. 104 (1986), does not
apply to the facts of this case. The Court denied standing to seek
injunctive relief to the plaintiff in Cargill because the injury
alleged by the plaintiff was nothing more than a reduction in
profit resulting from increased competition. See 479 U.S. at 114 -
15 ("Monfort's [] claim is that ... Excel would lower its prices to
some level at or slightly above its costs in order to compete with
other packers for market share....To remain competitive, Monfort
would have to lower its prices; as a result, Monfort would suffer
a loss in profitability[.]"). The Cargill decision reflects the
principle that antitrust law provides no remedies for those injured
by competition; it does not, as Ticktemaster contends, establish an
inflexible rule that no antitrust plaintiff
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may seek injunctive relief unless he may also seek damages. In
fact, footnote six of the Cargill decision explains the different
standing requirements under 16 and 4 of the Clayton Act,
cites to Illinois Brick, and concludes that a party who lacks
standing under 4 may still have standing to seek injunctive
relief under 16. See 479 U.S. at 111 n. 6.
In this case, the pleadings establish anti-trust standing to
seek injunctive relief. All of the plaintiffs claim to have
purchased tickets from Ticketmaster and claim to have paid the
monopolistic service fees. The payment of those fees establishes
standing to pursue a claim for injunctive relief.
V.
Finally, the plaintiffs appeal the portion of the district
court's order that found that Ticketmaster was not transacting
business in Georgia, Washington, or Michigan within the meaning of
12 of the Clayton Act, the Act's venue provision. See 15 U.S.C.
22; U.S. ex rel. Thistlethwaite v. Dowty Woodville Polymer, Ltd.,
110 F.3d 861, 865 (2nd Cir. 1997). Relying on O.S.C. Corp. v.
Toshiba America, 491 F.2d 1064 (9th Cir. 1974) and San Antonio Tel.
Co. v. American Tel. & Tel. Co., 499 F.2d 349 (5th Cir. 1974), the
district court held that Ticketmaster was not transacting business
within those judicial districts because it did not exercise "day to
day" control over the operations of its subsidiaries located in
those districts. We conclude that the district court applied the
wrong legal standard for venue under the Clayton Act.
Section 12 of the Clayton Act provides in pertinent part that
"[a]ny suit, action,
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or proceeding under the antitrust laws against a corporation may be
brought not only in the judicial district whereof it is an
inhabitant, but also in any district wherein it may be found or
transacts business[.]" 15 U.S.C. 22. In U.S. v. Scophony Corp.
of America, 333 U.S. 795 (1948), the Supreme Court held that the
"transacts business" language of 12 was intended to make "[t]he
practical, everyday business or commercial concept of doing or
carrying on business `of any substantial character' [] the test of
venue." 333 U.S. at 807. The "highly technical distinctions" that
had characterized venue determinations under the previous venue
provision, 7 of the Sherman Act, were to be "sloughed off" by the
"practical and broader business conception" embodied in 12. 333
U.S. at 807; Reynolds Metal Co. v. Columbia Gas System, Inc., 669
F. Supp. 744, 747 (E.D.Va. 1987)("[T]he `transacts business'
language of the Clayton Act enlarged the more limited `found'
standard of the Sherman Act.").
When venue is asserted over a parent corporation on the basis
of a subsidiary's business activities, the question is whether the
parent "exercise[s] sufficient control over its [] subsidiary to
cause the parent to `transact business' [in the judicial district]
within the special venue provision of the Clayton Act." Tiger
Trash v. Browning-Ferris Industries, Inc., 560 F.2d 818, 822 (7th
Cir. 1977), cert. denied, 434 U.S. 1034 (1978). Sufficient control
over the operations of a subsidiary renders the subsidiary the
instrument, rather than merely the investment, of the parent, and
supports the conclusion that the parent is transacting business in
a district, despite the formal separation of corporate entities.
See Lakota Girl Scout Council, Inc. v. Harvey Fund-Raising
Management, Inc., 519 F.2d 634, 637 (8th Cir. 1975). Sufficient
control does not require that the subsidiary be controlled to an
ultimate degree by its parent, 560
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<PAGE> 16
F.2d at 824, although something more than mere passive investment
by the parent is required. 560 F.2d at 823; see also Phone
Directories Co., Inc. v. Contel Corp., 786 F. Supp. 930, 939 (D.
Utah 1992); Reynolds, 669 F. Supp. at 749. The parent must have
and exercise control and direction, 560 F.2d at 823, over the
affairs of its subsidiary in order for venue to be proper under
12.
Day-to-day control of the activities of the subsidiary is not
required in order for a parent to be carrying on business of any
substantial character within a judicial district. Scophony, 333
U.S. at 807. It is enough if the parent exercises continuing
supervision of and intervention in the subsidiaries' affairs, see
Chrysler Corp. v. General Motors Corp., 589 F. Supp. 1182, 1200
(D.D.C. 1984), especially if the parent exercises its "ability ...
to influence major decisions of the subsidiary which lead or could
lead to violations of the antitrust laws." Grappone, Inc. v.
Subaru of America, Inc., 403 F. Supp. 123, 131 (D.N.H. 1975);
Scophony, 333 U.S. at 814 (holding that venue was proper for
British corporation in Southern District of New York when British
corporation demonstrated a "continuing exercise of supervision over
and intervention in [American subsidiary's] affairs.").
In reaching the conclusion that Ticketmaster was not
transacting business in Georgia, Washington, or Michigan, the
district court relied on the affidavit of Ned Goldstein, Senior
Vice President and General Counsel of Ticketmaster, who affirmed
that Ticketmaster owns no property and has no bank accounts or
offices in Georgia, Washington, or Michigan. Goldstein further
affirmed that all the day-to-day operations of the subsidiaries
were under the control of the officers of those subsidiaries.
While these affirmations may have been enough to resolve the venue
issue under the standard
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<PAGE> 17
applied by the district court, they do not resolve the question
under the standard we have explained here. Accordingly, we vacate
the district court's venue ruling so that the district court may
allow further discovery on the venue issue, as may be appropriate,
and reconsider the issue under the appropriate standard.
VI.
In conclusion, we affirm the district court's judgment that
the plaintiffs lack standing to pursue their claims for damages
under 4 of the Clayton Act. We reverse the district court's
ruling that the plaintiffs lack standing to seek injunctive relief
under 16, and we vacate and remand for further proceedings on
the issue of proper venue.
MORRIS SHEPPARD ARNOLD, Circuit Judge, dissenting.
The court holds that Illinois Brick Co. v. Illinois, 431 U.S.
720 (1977), precludes these plaintiffs from bringing an antitrust
action against Ticketmaster under Section 4 of the Clayton Act, see
15 U.S.C. 15(a) . I respectfully disagree.
The court begins its opinion by attempting to clarify the
meaning of the phrase "indirect purchaser" in the antitrust
context. Citing Illinois Brick itself, numerous other cases, and
several law review articles, the court concludes that "[a]n
indirect purchaser is one who bears some portion of a monopoly
overcharge only by virtue of an antecedent transaction between the
monopolist and [a direct purchaser]." The phrase "antecedent
transaction," however, appears nowhere in the authorities relied
on, and,
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in fact, a mere "antecedent transaction" will not turn all
purchasers of a monopolized product into indirect purchasers for
the purposes of Illinois Brick.
Illinois Brick, 431 U.S. at 727, uses the term "indirect
purchaser" to mean someone in a vertical supply chain who purchases
a monopolized product from someone other than a monopolist. Both
the direct and the indirect purchaser will usually suffer some
injury as both ordinarily will have to absorb a portion of the
monopolist's overcharge. See id. at 746. Because the Supreme
Court in Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392
U.S. 481, 494 (1968), had rejected the argument that monopolists
could avoid liability to direct purchasers to the extent that those
direct purchasers had "passed on" any or all of their markups to
indirect purchasers, without Illinois Brick, both direct and
indirect purchasers would have standing to sue for the same
antitrust injury. Illinois Brick, 431 U.S. at 746, in the
interests of economic and administrative efficiency, holds that
only parties who are directly injured may sue for antitrust
violations, thus avoiding the need to apportion damages among
direct and indirect purchasers, and preventing double recovery (or
sextuple recovery under Section 4 of the Clayton Act) when both
indirect and direct purchasers sue.
Thus Illinois Brick requires more than a mere antecedent
transaction for an antitrust defendant to avoid suit from an
"indirect purchaser" under Section 4. Instead, the antecedent
transaction must have been one in a direct vertical chain of
transactions and it must have resulted in the "passing on" of
monopoly costs from the direct purchaser to the indirect purchaser.
Illinois Brick, 431 U.S. at 746. In this case, neither of these
conditions is met.
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<PAGE> 19
The monopoly product at issue in this case is ticket
distribution services, not tickets. Ticketmaster supplies the
product directly to concert-goers; it does not supply it first to
venue operators who in turn supply it to concert-goers. It is
immaterial that Ticketmaster would not be supplying the service but
for its antecedent agreement with the venues. But it is quite
relevant that the antecedent agreement was not one in which the
venues bought some product from Ticketmaster in order to resell it
to concert-goers. More important, and more telling, is the fact
that the entirety of the monopoly overcharge, if any, is borne by
concert-goers. In contrast to the situations described in Illinois
Brick and the literature that the court cites, the venues do not
pay any portion of the alleged monopoly overcharge -- in fact, they
receive a portion of that overcharge from Ticketmaster.
An unhappy result of the holding in this case is that it is
now likely that no one can bring a Section 4 suit against
Ticketmaster in this circuit. The plaintiffs in this appeal (and
other similarly situated "indirect purchasers") are the only
parties who are actually injured by Ticketmaster's alleged illegal
price-fixing, if any. The venues themselves, the parties whom the
court seems to favor as candidates for bringing this Section 4
suit, are not injured, and therefore cannot bring an action at all.
For the reasons indicated, I dissent from the judgment in this
case.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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