<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment #1)
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
February 9, 1995
- --------------------------------------------------------------------------------
Date of Report (Date of earliest event reported)
HANDLEMAN COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 1-7923 38-1242806
- -------------------------------------- ------------ ------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
500 Kirts Boulevard, Troy, Michigan 48084
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (810) 362-4400
-----------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Page 1 of 53 Pages
Exhibit Index is on Page 19
<PAGE>
FORM 8-K
Item 7. Financial Statements and Exhibits.
- ------------------------------------------
(a) Financial Statements.
-------------------------
Financial Statements of Madacy Music Group, Inc.
Pages
Report of Independent Accountants 3
Consolidated Financial Statements:
Balance Sheet 4
Statement of Income 5
Statement of Changes in Stockholder's Equity 6
Statement of Cash Flows 7
Notes to Financial Statements 8-12
Page 2 of 53 Pages
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Madacy Music Group, Inc.:
We have audited the accompanying consolidated balance sheet of Madacy Music
Group, Inc. as of December 31, 1994 and the related consolidated statements of
income, changes in stockholder's 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 consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
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 consolidated financial position of Madacy
Music Group, Inc. as of December 31, 1994 and the consolidated results of their
operations and their cash flows for the year then ended, in accordance with
generally accepted accounting principles.
Detroit, Michigan
March 15, 1995
Page 3 of 53 Pages
<PAGE>
<TABLE>
<CAPTION>
MADACY MUSIC GROUP, INC.
CONSOLIDATED BALANCE SHEET
December 31, 1994
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 355,748
Accounts receivable (Notes 4 & 5) 12,672,690
Inventories (Notes 4 & 5) 6,875,023
Prepaid expenses 80,191
-----------
Total current assets 19,983,652
Equipment and improvements, net (Note 3) 463,109
Licenses, net of accumulated amortization of $414,865 939,945
Goodwill, net of accumulated amortization of $98,473 1,275,308
-----------
Total assets $22,662,014
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable (Note 4) $ 2,104,981
Accounts payable 7,092,393
Income taxes payable 729,458
Customer deposits, current portion (Note 7) 2,608,912
Long-term debt, current portion 980,937
-----------
Total current liabilities 13,516,681
Customer deposits (Note 7) 1,956,684
Long-term debt, less current portion 849,912
-----------
Total liabilities 16,323,277
-----------
Commitments
Stockholder's equity:
Common stock (Note 9) 121
Paid-in capital 2,236,530
Foreign currency translation adjustment (332,896)
Retained earnings 4,434,982
-----------
Total stockholder's equity 6,338,737
-----------
Total liabilities and stockholder's equity $22,662,014
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 4 of 53 Pages
<PAGE>
MADACY MUSIC GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
for the year ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Net sales $41,262,301
Cost of sales 23,616,718
-----------
Gross profit 17,645,583
Selling, general and administrative expenses 8,689,333
Interest expense 700,495
Other income, net 84,230
-----------
Net income before income taxes 8,171,525
Provision for income taxes 3,246,654
-----------
Net income $ 4,924,871
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 5 of 53 Pages
<PAGE>
MADACY MUSIC GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
for the year ended December 31, 1994
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY TOTAL
COMMON PAID-IN TRANSLATION RETAINED STOCKHOLDER'S
STOCK CAPITAL ADJUSTMENT EARNINGS EQUITY
------ ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1994 $121 $2,236,530 $ (3,118) $ 1,931,123 $4,164,656
Foreign currency translation (329,778) (329,778)
Net income 4,924,871 4,924,871
Dividends paid (2,421,012) (2,421,012)
---- ---------- ---------- ----------- ----------
Balance, December 31, 1994 $121 $2,236,530 $ (332,896) $ 4,434,982 $6,338,737
==== ========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 6 of 53 Pages
<PAGE>
MADACY MUSIC GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net income $ 4,924,871
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 398,914
Changes in operating assets and liabilities:
Accounts receivable (497,911)
Inventories (2,270,853)
Prepaid expenses and deposits 73,942
Accounts payable 2,640,627
Income taxes payable (617,433)
-----------
Net cash provided by operating activities 4,652,157
-----------
Cash flows from investing activities:
Acquisition of equipment and improvements (369,327)
Acquisition of licenses (647,850)
Acquisition of Mediaphon, net of cash acquired (1,029,575)
-----------
Net cash used in investing activities (2,046,752)
-----------
Cash flows from financing activities:
Net repayments of customer deposits (2,705,416)
Net proceeds of long-term debt 705,236
Other changes in stockholder's equity (329,778)
Proceeds from notes payable 2,104,981
Dividends paid (2,421,012)
-----------
Net cash used in financing activities (2,645,989)
-----------
Net decrease in cash and cash equivalents (40,584)
Cash and cash equivalents, beginning of year 396,332
-----------
Cash and cash equivalents, end of year $ 355,748
===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 695,041
===========
Income taxes $ 3,792,859
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 7 of 53 Pages
<PAGE>
MADACY MUSIC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. BUSINESS: Madacy Music Group, Inc. (the "Company"), based in Quebec,
operates principally in one business segment, selling prerecorded music
and video products primarily to mass merchants, and also to specialty
chain stores, drug stores and supermarkets. Approximately 87 percent of
the Company's sales in 1994 were to customers in the United States.
b. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of the Company and its majority owned subsidiaries.
All material intercompany accounts and transactions have been eliminated.
c. CASH AND CASH EQUIVALENTS: The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
d. INVENTORIES: Inventories are valued at the lower of cost or market. Cost
is determined on a first-in, first-out basis.
e. EQUIPMENT AND IMPROVEMENTS: Equipment and furniture and fixtures are
recorded at cost less accumulated depreciation. The Company provides for
depreciation of equipment, furniture and fixtures and assets under capital
leases using the following methods and annual rates:
<TABLE>
<CAPTION>
METHOD RATE
----------------- ----
<S> <C> <C>
Equipment Declining balance 20%
Furniture and fixtures Declining balance 20
Computer equipment Declining balance 30
Leasehold improvements Straight-line 20
Machinery and equipment under capital leases Declining balance 20
Computer equipment under capital leases Declining balance 30
</TABLE>
f. LICENSES: Licenses consist of fees paid for the right to use master
recordings. Licenses are recorded at cost and amortized over the term of
the licenses but not exceeding the useful life of the recording.
Amortization expense for 1994 was $216,907.
g. GOODWILL: Goodwill is carried at cost less related accumulated
amortization. Amortization is calculated using the straight-line method
over 15 years. Amortization expense for 1994 was $82,424.
h. FOREIGN CURRENCY TRANSLATION: The Company uses the Canadian dollar as its
functional currency. The Company follows the provisions of Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation," to
convert the balance sheet and operations to United States dollars.
Page 8 of 53 Pages
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
i. RECOGNITION OF REVENUE AND FUTURE RETURNS: Revenues are recognized upon
shipment of merchandise. The Company reduces gross sales and cost of
sales for expected returns at the time the merchandise is sold.
j. INCOME TAXES: The Company employs the method required by Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Under this method, deferred taxes arise from differences between financial
reporting and tax reporting.
2. ACQUISITION:
In 1994, Madacy Europa Inc., a wholly owned subsidiary, acquired all of the
issued and outstanding shares of Mediaphon Musik Produktin and Verlag GmbH
("Mediaphon"), a foreign corporation, for a total cash consideration of
U. S. $1 million and DM 325,560.72. The Company has guaranteed debts of
Mediaphon for an amount of $350,000. The operating results of Mediaphon were
not material to the Company's consolidated results.
3. EQUIPMENT AND IMPROVEMENTS:
Equipment and improvements consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Equipment $104,909
Furniture and fixtures 75,144
Computer equipment 199,373
Leasehold improvements 310,863
Machinery and equipment under capital leases 19,830
Computer equipment under capital leases 47,256
--------
757,375
Less accumulated depreciation and amortization 294,266
--------
$463,109
========
</TABLE>
Depreciation and amortization expense for 1994 amounted to $99,583.
Page 9 of 53 Pages
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. NOTES PAYABLE:
The Company has a Cdn $6,000,000 line of credit available, bearing interest
at the prime rate (8.5 percent at December 31, 1994) plus 1/4 percent, to
fund working capital needs. The line of credit is collateralized by the
Company's inventory and accounts receivable and a second mortgage on all the
assets of the Company. The amount outstanding at December 31, 1994 was U.S.
$1,906,501. The weighted average interest rate on this line of credit was
7.34 percent during 1994.
The Company also has a DM 400,000 line of credit available, bearing interest
at 7.25 percent, to fund working capital needs of its German operations and
is collateralized by a letter of credit. The amount outstanding at
December 31, 1994 was $198,480.
5. LONG-TERM DEBT:
<TABLE>
<CAPTION>
Long-term debt is comprised of the following:
<S> <C>
Bank term loan, bearing interest at prime plus .75 percent, payable in monthly
installments of $40,277 in principal plus interest until the loan is repaid in full $1,006,953
Bank term loan, bearing interest at prime plus .75 percent, payable in monthly
installments of $7,692 in principal plus interest until the loan is repaid in full 184,615
Bank term loan, bearing interest at prime plus .75 percent, payable in monthly
installments of Cdn $41,667 in principal plus interest, with a final payment due in 1996 536,363
Federal Business Development Bank ("FBDB") loan, bearing interest at 10.7 percent, payable
in monthly installments of Cdn $4,000 in principal plus interest, with a final
payment due in 1997 79,897
Obligations under capital leases (Note 6) 23,021
----------
1,830,849
Less current portion 980,937
----------
$ 849,912
==========
</TABLE>
The bank loans are collateralized by accounts receivable and inventories and a
second mortgage on all assets of the Company in the amount of Cdn $6,000,000.
The FBDB loan is collateralized by specific assets now owned and to be acquired,
a $500,000 first mortgage bond collateralized by a trust deed, a mortgage on all
other assets and a personal guarantee from the ultimate stockholder for the full
amount of the loan.
Page 10 of 53 Pages
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. LONG-TERM DEBT, CONTINUED:
Scheduled maturities of long-term debt are as follows: 1995 - $966,398;
1996 - $790,533, and 1997 - $50,897.
6. OBLIGATIONS UNDER CAPITAL AND OPERATING LEASES:
The following is a schedule of future minimum lease payments under capital
leases:
<TABLE>
<CAPTION>
<S> <C>
1995 $17,851
1996 10,414
-------
Total minimum lease payments 28,265
Less amount representing interest at 18.6 percent 5,244
-------
Present value of minimum lease payments 23,021
Less current portion 14,539
-------
$ 8,482
=======
</TABLE>
The Company leases two facilities under operating lease agreements which
expire on June 30, 1995 and February 28, 1998. Future minimum lease payments
required under these operating leases are as follows: 1995 - Cdn $217,817;
1996 - Cdn $199,794; 1997 - Cdn $199,794, and 1998 - Cdn $33,298.
7. CUSTOMER DEPOSITS:
During 1993, the Company entered into a product distribution agreement with a
major customer, Handleman Company. With the execution of the agreement, the
customer provided a prepayment to the Company against future purchases. The
Company will in turn provide monthly credits of U. S. $177,778 and Cdn
$55,556 against purchases by the customer over the period remaining in the
agreement. The deposits will be applied as follows:
<TABLE>
<CAPTION>
<S> <C>
Customer deposits $4,565,596
Less current portion 2,608,912
----------
$1,956,684
==========
</TABLE>
Page 11 of 53 Pages
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. INCOME TAXES:
Deferred taxes are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse. The
Company's deferred taxes are immaterial because there were no significant
differences between the financial statement bases and tax bases of the
Company's assets and liabilities.
9. COMMON STOCK:
<TABLE>
<CAPTION>
<S> <C>
Common stock consists of the following:
Authorized:
Class A, voting common stock, no par value
Class B, nonvoting common stock
Class C preferred stock, voting, redeemable at the paid-in value, noncumulative preferred
dividend, nonparticipating
Class D preferred stock, nonvoting, redeemable at the paid-in value, noncumulative
preferred dividend, nonparticipating
Class E preferred stock, voting, redeemable at the paid-in value, noncumulative
preferred dividend, nonparticipating
Class F preferred stock, nonvoting, redeemable at the paid-in value, noncumulative
preferred dividend, nonparticipating
Class G preferred stock, nonvoting, redeemable at $1 per share, noncumulative
preferred dividend, nonparticipating
Issued:
100 Class A common stock, no par value $121
=====
</TABLE>
10. COMMITMENTS:
The Company has entered into several forward exchange contracts to sell a
total of U. S. $19,000,000 at prices ranging from Cdn $1.3415 to Cdn $1.4108
maturing during 1995. The unrealized loss of approximately U. S. $382,000
at December 31, 1994 has been recorded in the accompanying consolidated
statement of income.
11. SUBSEQUENT EVENT:
Effective January 1, 1995, the Company's parent corporation, Amos
Entertainment, Inc., sold an 80 percent interest in Madacy Music Group, Inc.
to Handleman Company for approximately $23 million.
Page 12 of 53 Pages
<PAGE>
(b) Pro Forma Financial Information.
-------------------------------------
Pro Forma Consolidated Income
Pages
Handleman Company and Madacy Music Group Pro Forma Consolidated
Income Statement for the year ended April 30, 1994 14
Handleman Company and Madacy Music Group Pro Forma Consolidated
Income Statement for the nine months ended January 31, 1995 15
Notes to the Pro Forma Consolidated Income Statements 16-17
Page 13 of 53 Pages
<PAGE>
<TABLE>
<CAPTION>
HANDLEMAN COMPANY
PRO FORMA CONSOLIDATED INCOME STATEMENT (UNAUDITED)
YEAR ENDED APRIL 30, 1994
(stated in U. S. dollars)
Madacy Handleman Proforma
Year Ended Year Ended Pro Forma Handleman
April 30, 1994 April 30, 1994 Adjustments and Madacy
-------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C>
Net sales $35,572,408 $1,066,566,000 ($10,170,852 (d) $1,091,967,556
Direct product costs 20,720,509 818,517,000 (10,170,852)(d) 829,066,657
----------- -------------- ------------ --------------
Gross profit 14,851,899 248,049,000 0 262,900,899
Selling, general and administrative
expenses 7,488,051 186,161,000 0 193,649,051
Provision for facility realignment 0 2,000,000 0 2,000,000
Amortization of acquisition costs 0 7,536,000 1,239,873 (b) 8,775,873
Interest expense, net 552,496 6,211,000 1,177,987 (c) 7,941,483
----------- -------------- ------------ -------------
Income before income taxes
and minority interest 6,811,352 46,141,000 (2,417,860) 50,534,492
Income taxes 2,555,846 18,485,000 (969,562) 20,071,284
Minority interest 0 0 (851,101) (e) (851,101)
----------- -------------- ------------ -------------
Net income $4,255,506 $27,656,000 ($2,299,399) $29,612,107
=========== ============== ============ =============
Earnings per average common share
outstanding during the period $0.83 $0.89
Average number of shares outstanding
during the period 33,389,000 33,389,000
See notes to the pro forma consolidated income statement for a description of the assumptions and adjustments.
</TABLE>
Page 14 of 53 Pages
<PAGE>
<TABLE>
<CAPTION>
HANDLEMAN COMPANY
PRO FORMA CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE NINE MONTHS ENDED JANUARY 31,1995
(stated in U. S. dollars)
Handleman
Madacy Nine Months Proforma
May 1, 1994 - Ended Pro Forma Handleman
Dec 31, 1994 Jan 31, 1995 Adjustments and Madacy
------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
Net sales $29,624,812 $922,535,000 ($5,910,193) (d) $946,249,619
Direct product costs 16,931,583 709,200,000 (5,910,193) (d) 720,221,390
----------- ------------ ----------- ------------
Gross profit 12,693,229 213,335,000 0 226,028,229
Selling, general and administrative
expenses 6,243,104 157,973,000 0 164,216,104
Amortization of acquisition costs 75,625 4,956,000 826,582 (b) 5,858,207
Interest expense, net 539,709 4,838,000 1,000,904 (c) 6,378,613
---------- ------------ ------------ ------------
Income before income taxes
and minority interest 5,834,791 45,568,000 (1,827,486) 49,575,305
Income taxes 2,389,445 18,091,000 (725,512) 19,754,933
Minority interest 0 0 (689,069) (e) (689,069)
---------- ------------ ------------ ------------
Net income $3,445,346 $27,477,000 ($1,791,043) $29,131,303
=========== ============ =========== ============
Earnings per average common share
outstanding during the period $0.82 $0.87
Average number of shares outstanding
during the period 33,512,000 33,512,000
See notes to the pro forma consolidated income statement for a description of the assumptions and adjustments.
</TABLE>
Page 15 of 53 Pages
<PAGE>
Handleman Company
Notes to Pro Forma Consolidated Income Statements
(Unaudited)
Two majority-owned subsidiaries of Handleman Company ("Handleman"), a Michigan
corporation, purchased certain assets of Madacy Music Group, Inc. ("Madacy"), a
Canadian corporation. In accordance with the terms and conditions of an Asset
Purchase Agreement dated as of January 1, 1995, Madacy Music Group, Inc.
("Madacy US"), a Michigan corporation, acquired the assets of Madacy used in its
business of licensing, duplicating, marketing, packaging and supplying music and
video products outside of Canada. In accordance with the terms and conditions
of an Asset Contribution Agreement dated as of January 1, 1995, 3100448 Canada
Inc. ("Madacy Canada"), a Canadian corporation, acquired the assets of Madacy
used in its business of licensing, duplicating, marketing, packaging and
supplying music and video products within Canada. The assets acquired by Madacy
US and Madacy Canada include machinery, equipment, tools, supplies, inventory,
packaging, accounts receivable, certain license and distribution rights,
purchase orders, customer commitments and goodwill. Madacy US and Madacy Canada
will use the assets acquired to conduct the businesses previously conducted by
Madacy.
Presented are pro forma consolidated income statements for the fiscal year ended
April 30, 1994 (May 2, 1993 - April 30, 1994) and for the nine months ended
January 31, 1995 (May 1, 1994 - January 31, 1995). The pro forma statements
combine Handleman with Madacy U.S. and Madacy Canada as if the acquisition had
taken place May 1, 1993.
The purchase of assets from Madacy was effective January 1, 1995 and the results
of operations for Madacy U.S. and Madacy Canada for the period of January 1-31,
1995 are included in Handleman's third quarter and nine month results filed on
March 17, 1995 with the Securities and Exchange Commission in Form 10-Q.
Therefore, in presenting the pro forma consolidated income statement for the
nine months ended January 31, 1995, the Madacy financial results for the eight
months ended December 31, 1994 are added.
The following pro forma adjustments are based on available information and
certain estimates and assumptions. Handleman believes that such assumptions
provide a reasonable basis for presenting all of the significant effects of this
acquisition. Further, Handleman believes that the pro forma adjustments give
appropriate effect to those assumptions and that they are properly applied in
the pro forma consolidated income statements.
Below is a list of the assumptions and adjustments used in preparing the pro
forma consolidated income statements:
(a) The exchange rates used to convert Canadian dollars into U.S. dollars:
(i) the average rate for the year ended April 30, 1994 was used to
convert the income statement for this period. This average rate
was Canadian $1 = U.S. $.7554.
(ii) the average rate for the eight months ended December 31, 1994 was
used to convert the income statement for this period. This
average rate was Canadian $1 = U.S. $.7296.
(iii) the rate at May 1, 1993 was used to convert the purchase price
and goodwill. This rate was Canadian $1 = U.S. $.7878.
Page 16 of 53 Pages
<PAGE>
-2-
(b) For pro forma purposes, the acquisition was assumed to have taken place
May 1, 1993. Goodwill resulting from the acquisition was assumed to be
the same Canadian dollar amount whether the acquisition had taken place
on May 1, 1993 or January 1, 1995. However, the total purchase price
assumed as of May 1, 1993 was slightly lower due to a lower level of
net assets acquired. Amortization of goodwill was computed using the
straight line method over fifteen years.
(c) Handleman's acquisition of Madacy was financed using amounts available
under its revolving credit arrangements. In the pro forma consolidated
income statements presented, interest expense on the purchase price was
based on the following:
(i) For the year ended April 1994, Handleman's weighted average
interest rate for the same period was used.
(ii) For the nine months ended January 31, 1995, Handleman's weighted
average interest rate for the same period was used.
(d) For the pro forma periods presented, Madacy was a supplier to
Handleman. Madacy sales to Handleman, and the related cost of sales,
were eliminated in the pro forma consolidated income statements
presented.
(e) The pro forma consolidated income statements reflect the minority
shareholder's interest.
The pro forma consolidated income statements are not necessarily indicative of
what actual results would have been had the acquisition occurred on May 1, 1993.
In addition, the pro forma consolidated income statements should not be
interpreted as an indication of future operating results.
Page 17 of 53 Pages
<PAGE>
(c) Exhibits.
--------------
2.1 Asset Purchase Agreement, dated as of January 1, 1995, between
Madacy Music Group, Inc., a Canadian corporation, and Madacy Music Group, Inc.,
a Michigan corporation.
2.2 Asset Contribution Agreement, dated as of January 1, 1995,
between Madacy Music Group, Inc., a Canadian corporation, and 3100448 Canada
Inc., a Canadian corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Amendment No. 1 to Report to be
signed on its behalf by the undersigned hereunto duly authorized.
HANDLEMAN COMPANY
By:_________________________________________
Stephen Strome
President and Chief Executive Officer
Dated: April 25, 1995
Page 18 of 53 Pages
<PAGE>
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Page No.
- ------- ------- --------
<C> <S> <C>
2.1 Asset Purchase Agreement, dated as of January 1, 1995,
between Madacy Music Group, Inc., a Canadian corporation,
and Madacy Music Group, Inc., a Michigan corporation 20
2.2 Asset Contribution Agreement, dated as of January 1, 1995,
between Madacy Music Group, Inc., a Canadian corporation,
and 3100448 Canada Inc., a Canadian corporation 38
</TABLE>
Page 19 of 53 Pages
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT (this "Agreement") is made effective as of
the 1st day of January, 1995 (the "EFFECTIVE DATE"), by and between MADACY MUSIC
GROUP, INC., a Canadian corporation incorporated under the Canada Business
Corporations Act (the "CORPORATION"), and MADACY MUSIC GROUP, INC., a Michigan
corporation ("MAI").
RECITALS:
--------
1. The Corporation's business operations consist of licensing, duplicating,
marketing, packaging and supplying music and video products and related
activities in Canada, in the United States and in other countries.
2. MAI wishes to acquire from the Corporation, and the Corporation desires to
sell to MAI, the assets and business of the Corporation related to the
Corporation's sales of products in the United States and in all other
jurisdictions outside of Canada (the "US BUSINESS").
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the sufficiency and receipt of
which is hereby acknowledged, the parties do hereby bind themselves and their
successors and assigns, and agree as follows:
Section l. SALE OF ASSETS. The Corporation hereby conveys, transfers,
sells, assigns and delivers to MAI the following assets (the "ASSETS"):
(a) All machinery, equipment, parts, furniture, tools, supplies, and other
miscellaneous personal property owned by the Corporation and used in
the US Business;
(b) All inventories of raw materials, work in process, finished goods,
product packaging and other items held for sale in the ordinary course
of the US Business, as designated on EXHIBIT 1.B attached hereto;
(c) All accounts receivable, notes receivable and other rights to receive
monies from customers, vendors or others in the ordinary course of the
US Business, as designated on EXHIBIT 1.C attached hereto;
(d) All licenses, sublicenses, distribution contracts or other agreements
or arrangements to manufacture, use, distribute or sell products in
any jurisdiction outside of Canada, except for those which the
Corporation is not permitted to assign and except to the extent that
any does not relate to the US Business;
(e) The Corporation's interest in all customer purchase orders, customer
commitments and customer arrangements related to the US Business;
Page 20 of 53 Pages
<PAGE>
(f) All of the outstanding shares of (and all of the Corporation's rights
to acquire any shares of or other interests in) Mediaphon GmbH and in
Madacy USA, Inc., and 80% of the outstanding shares of (and 100% of
the Corporation's rights to acquire any additional shares of or other
interests in) American Sterling Corp.;
(g) All of the goodwill and going concern relating to the US Business, all
of the Corporation's rights in and to its patents, trademarks,
tradenames, copyrights and proprietary rights except the Corporation's
rights to use such patents, trademarks, tradenames, copyrights and
proprietary rights in Canada, and all records and books of account
which relate to the US Business.
Section 2. CONSIDERATION FOR ASSETS. The purchase price to be paid for
the Assets (the "PURCHASE PRICE") shall be $31,698,086.60 (Canadian). The
purchase price is being paid as follows: upon the execution of this Agreement,
MAI is paying the Corporation the sum of $24,698,086.60 (Canadian), by check or
by wire transfer of immediately available funds, and MAI is paying the balance
of sale in 12 installments of $333,333 (Canadian) each on the last day of each
month in 1995, and one installment of $3,000,004 (Canadian) on February 29,
1996, each such payment to be accompanied by interest at the rate of 7% per
annum. To evidence the balance of sale, MAI is delivering to the Corporation
its $7,000,000 (Canadian) promissory note in the form attached as EXHIBIT 2.
The consideration for the Assets shall be allocated first to those Assets other
than the Corporation's licenses, second to goodwill, and third and finally to
the Corporation's licenses.
Section 3. ASSUMPTION OF LIABILITIES. MAI hereby assumes the liabilities
of the Corporation entered into in the ordinary course of its business, related
to the US Business and exhaustively described on EXHIBIT 3 attached hereto. MAI
shall assume no other liabilities of the Corporation except as expressly
provided herein.
Section 4. THE CORPORATION'S REPRESENTATIONS. The Corporation hereby
represents and warrants to MAI as follows:
(a) The Corporation is a corporation incorporated as a close company (as
defined under Securities Act [Quebec]), validly existing and in
standing under the laws of Canada. The Corporation has the corporate
power and authority to own and hold its properties, to carry on its
business as currently conducted and to execute, deliver and perform
this Agreement. The execution, delivery and performance of this
Agreement have been duly approved by the Corporation's Board of
Directors and this Agreement constitutes the valid and legally binding
obligation of the Corporation.
(b) The Corporation has the corporate power and authority to sell and
deliver the Assets, and neither the execution and delivery of this
Agreement, the consummation by the Corporation of the transactions
contemplated hereby, nor the sale or delivery of the Assets requires
any authorization, consent or approval of
Page 21 of 53 Pages
<PAGE>
any governmental or regulatory authority (except for those which have
been obtained, and except to the extent that any license, sublicense
or distribution contract is not assignable without consent) or of any
other person or entity or conflicts with, accelerates any obligation
under, violates or breaches any provision of, constitutes a default
under, results in creation of any lien or security interest under or
results in the termination of, any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, registration, or other
authorization, lease, contract, agreement, or other instrument,
commitment or obligation to which it is a party or by which any of its
property may be bound, or violates any order, writ, injunction,
decree, judgment, arbitration award, statute, regulation, or ruling
applicable to it or to its properties. The execution, delivery and
performance of this Agreement have been duly approved by the
Corporation's shareholders.
(c) The Corporation owns the Assets free and clear of any lien, security
interest, pledge, charge, encumbrance, or restriction of any kind or
nature.
(d) Upon consummation of the transactions contemplated hereby, MAI shall
own the Assets free and clear of any lien, security interest, pledge,
charge, encumbrance, or restriction of any kind or nature or any
ownership interest of any other person or entity, other than those
arising out of the activities of MAI.
(e) EXHIBIT 4.E, attached hereto contains a true and complete listing of
all products of the Corporation ("Products") owned by, used by or
subject to license agreements of the Corporation in connection with
the US Business. Copies of all license and other agreements relating
to the Products have heretofore been delivered to MAI. Such license
and other agreements are valid and binding on the Corporation, and
there are no breaches or facts or events that with the giving of
notice or the passage of time or both could result in a breach of such
license and other agreements. EXHIBIT 4.E and such licenses and other
agreements accurately describe the Corporation's rights with respect
to the Products. There are no claims pending or, to the best of the
Corporation's knowledge, threatened against the Corporation which
involve the Products or the materials embodied therein. Neither the
Products nor the materials embodied therein nor any use thereof by the
Corporation will violate or infringe upon the rights of any third
parties, and, to the best of the Corporation's knowledge, no third
party is infringing on the Corporation's rights in and to the
Products.
(f) Except as set forth on EXHIBIT 4.F attached hereto, the Corporation
does not own or control, directly or indirectly, any corporation,
association, joint venture, partnership, or other business entity.
(g) Except for that certain Common Stock Option Agreement dated as of
November 1, 1993 by and among Amos Entertainment, Inc., the
Corporation and Handleman Company, the Corporation is not a party to
any agreement, arrangement or
Page 22 of 53 Pages
<PAGE>
understanding relating to the sale of its stock or relating to the
sale of any of its assets outside of the ordinary course of the
Corporation's business.
Section 5. MAI'S REPRESENTATIONS. MAI hereby represents and warrants to
the Corporation as follows:
(a) MAI is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Michigan. MAI has the
corporate power and authority: (i) to own and hold its properties and
to carry on its business as currently conducted; (ii) to execute,
deliver and perform this Agreement; and (iii) to purchase the Assets
in accordance with the terms hereof. This Agreement constitutes the
valid and legally binding obligation of MAI.
(b) MAI has the corporate power and authority to purchase, own and operate
the Assets, and neither the execution and delivery of this Agreement,
the consummation by MAI of the transactions contemplated hereby, nor
the purchase or ownership of the Assets requires any authorization,
consent or approval of any governmental or regulatory authority or of
any other person or entity or conflicts with, accelerates any
obligation under, violates or breaches any provision of, constitutes a
default under, results in creation of any lien or security interest
under or results in the termination of, any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, registration, or
other authorization, lease, contract, agreement, or other instrument,
commitment or obligation to which it is a party or by which any of its
property may be bound, or violates any order, writ, injunction,
decree, judgment, arbitration award, statute, regulation, or ruling
applicable to it or to its properties. The execution, delivery and
performance of this Agreement have been duly approved by MAI's
shareholders.
Section 6. INDEMNIFICATION; PRORATIONS.
6.1 SURVIVAL OF REPRESENTATIONS. All of the representations and
warranties and the covenants and agreements contained or referred to in this
Agreement shall survive the consummation of the transactions contemplated
hereby. The liability of any of the parties by reason of its covenants,
representations and warranties shall not be affected by any investigation made
by or on behalf of any other party.
6.2 INDEMNIFICATION. MAI hereby indemnifies and holds harmless the
Corporation from and against any and all losses or liabilities (including
without limitation, reasonable counsel fees and disbursements in respect
thereof) arising out of any breach of any covenant, warranty, representation or
agreement made by MAI herein or in any document delivered pursuant thereto. The
Corporation hereby indemnifies and holds harmless MAI from and against all
losses or liabilities (including without limitation, reasonable counsel fees and
disbursements in respect thereof) arising out of any breach of any covenant,
warranty, representation or agreement made by the Corporation herein or in any
document delivered pursuant hereto or arising out of
Page 23 of 53 Pages
<PAGE>
ownership or operation of the Assets or the business herein conveyed if such
losses or liabilities arise in whole or in part out of acts of the Corporation
prior to the Effective Date, or facts existing prior to the Effective Date, if
such liabilities are not assumed by MAI.
6.3 NOTICE OF CLAIMS. Each party hereto shall give to the other party
hereto prompt notice of the assertion of any claim or demand or the institution
of any legal process for which such other party might be liable under the
foregoing indemnity or any other provision of this Agreement. The indemnifying
party shall be entitled, at its own option and expense, to conduct or
participate in any such legal proceedings or the negotiation and settlement of
any such claim or demand. The indemnified party will not make any settlement
thereof without the prior consent of the indemnifying party, which shall not be
unreasonably withheld.
6.4 BULK SALES LAWS. The parties recognize that, if the bulk transfer
provisions of the Michigan Uniform Commercial Code or of any other jurisdiction
shall be applicable to this transaction (the parties, however, do not
acknowledge that such provisions are applicable hereto), it would be impractical
to comply with such provisions and, accordingly, the Corporation agrees to
indemnify and to hold MAI harmless from any claims and demands of the
Corporation's creditors, which are not assumed by MAI, arising out of failure to
comply with such bulk transfer provisions, if such provisions are applicable,
including any loss, damages, liability, cost or expense of any kind whatsoever
(including reasonable counsel fees) which MAI may incur, sustain, suffer, or
become subject to as a result of non-compliance by the Corporation with such
bulk transfer provisions.
6.5 PRORATIONS. Following the date hereof, the parties shall prorate, as
of the Effective Date, (i) all ordinary operating costs under any contracts,
agreements or licenses assigned to MAI by the Corporation, (ii) all applicable
utilities, (iii) all applicable real estate taxes, calculated on a fiscal year
basis, and (iv) all other ongoing operating costs of the US Business.
Section 7. MISCELLANEOUS.
7.1 NOTICES. Any and all notices, requests or other communications
hereunder shall be given in writing and delivered by regular mail, overnight
mail, hand delivery or by registered or certified mail, return receipt
requested, with first class postage prepaid. Such notices shall be addressed:
(a) if to the Corporation, to the principal office of the Corporation; and (b)
if to MAI, to 500 Kirts Blvd., Troy, Michigan 48084, attn: President, with a
copy to Honigman Miller Schwartz and Cohn, 2290 First National Building,
Detroit, Michigan 48226, attn: Donald J. Kunz, unless notice of a change of
address is furnished to the other parties in the manner provided in this Section
7.1. Any notice which is required to be made hereunder shall be deemed made on
the date such notice is received by the party to whom it is directed.
7.2 INVALID OR UNENFORCEABLE PROVISIONS. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted.
Page 24 of 53 Pages
<PAGE>
7.3 BENEFIT AND BURDEN. This Agreement shall inure to the benefit of, and
shall be binding upon, the parties hereto and their successors and permitted
assigns.
7.4 AMENDMENTS AND WAIVER. No amendment, modification, change,
supersession, or cancellation of this Agreement shall be valid unless the same
is in writing and signed by the parties hereto. No waiver of any provision of
this Agreement shall be valid unless in writing and signed by the person against
whom that waiver is sought to be enforced. The failure of any party at any time
to insist upon strict performance of any condition, promise, agreement, or
understanding set forth herein shall not be construed as a waiver or
relinquishment of the right to insist upon strict performance of the same or any
other condition, promise, agreement, or understanding at a future time.
7.5 ENTIRE AGREEMENT. This Agreement sets forth all of the promises,
agreements, conditions, understandings, warranties, and representations between
the Corporation and MAI with respect to the transactions contemplated hereby,
and supersedes all prior agreements, arrangements and understandings among all
or some of the parties hereto, whether written, oral or otherwise. There are no
promises, agreements, conditions, understandings, warranties, or
representations, oral or written, express or implied, among the parties except
as set forth herein.
7.6 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Quebec, Canada, except that if any
provision of this Agreement would be illegal, void, invalid, or unenforceable
under such laws in connection with a suit or proceeding validly instituted in
another jurisdiction, then the laws of such other jurisdiction shall govern
insofar as is necessary to sustain the validity or enforceability of the terms
of this Agreement.
7.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and together which
shall constitute one instrument.
7.8 ATTORNEYS' FEES. If any party commences an action against any other
party to enforce any of the terms, covenants, conditions, or provisions of this
Agreement or because of a default by a party under this Agreement, any
prevailing party in any such action shall be entitled to recover its reasonable
attorneys' fees, costs and expenses incurred in connection with the prosecution
or defense of such action from the losing party or parties.
7.9 NO THIRD PARTY RIGHTS. Nothing in this Agreement shall be deemed to
create any right in any creditor or other person or entity not a party hereto
and this Agreement shall not be construed in any respect to be a contract in
whole or in part for the benefit of any third party.
7.10 FURTHER DOCUMENTS. All of the parties agree to execute any and all
bills of sale, assignments, instruments or other documents, and to perform any
and all other acts, reasonably necessary to accomplish the purposes of this
Agreement, including but limited to the execution and delivery of any or all
assignments or licenses of any patents, trademarks, copyrights or other
proprietary rights of the Corporation.
Page 25 of 53 Pages
<PAGE>
7.11 NUMBER AND GENDER OF WORDS. All pronouns, nouns and other terms used
in this Agreement shall include the masculine, feminine, neuter, singular, and
plural forms thereof, wherever appropriate to the context.
7.12 CAPTIONS. The captions or headings contained in this Agreement are
inserted and included solely for convenience and shall not be considered or
given any effect in construing the provisions hereof if any question of intent
should arise.
7.13 CONSTRUCTION. The parties acknowledge that each of them has had the
benefit of legal counsel of its own choice and has been afforded an opportunity
to review this Agreement with its legal counsel and that this Agreement shall be
construed as if jointly drafted by the parties hereto.
7.14 ARBITRATION. Any Disputes (as hereinafter defined) between the
parties under this Agreement shall be resolved by binding arbitration according
to the rules of the American Arbitration Association ("AAA"), at the location of
the AAA in or nearest to Troy, Michigan. Upon the occurrence of any Dispute,
the parties subject to such Dispute shall each promptly appoint one (l)
arbitrator, each of whom shall be experienced in the subject matter of the
Dispute. A third arbitrator, who shall also be experienced in the subject
matter of the Dispute, shall be promptly selected by such appointed arbitrators;
provided, however, that if such appointed arbitrators cannot agree on the
selection of a third arbitrator, then either arbitrator, on behalf of both such
arbitrators, may request that the third arbitrator be appointed by a presiding
judge of the United States District Court for the Eastern District of Michigan.
Each of the parties subject to the Dispute shall bear one-half (1/2) of the
expense of the arbitration. The resolution of the Dispute, as determined by the
majority vote of the three (3) arbitrators: (a) shall be binding upon the
parties; and (b) shall have the effect of an arbitration pursuant to Michigan
Compiled Laws Annotated Section 600.5001. In addition, a judgment of any Quebec
or Michigan circuit court may be rendered upon such resolution of the
arbitrators. For purposes of this Agreement, a "DISPUTE" means any disagreement
under this Agreement between any of the parties hereto which dispute remains
unresolved for a period of thirty (30) days from the date of its inception
despite the good faith efforts of the parties to resolve such dispute.
Page 26 of 53 Pages
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.
MADACY MUSIC GROUP, INC., A
MICHIGAN CORPORATION
By: /s/ LOUIS A. KIRCOS
---------------------------------------
Printed Name: Louis A. Kircos
Title: Chairman of the Board of Directors
MADACY MUSIC GROUP, INC., A
CANADIAN CORPORATION
By: /s/ AMOS ALTER
----------------------------------------
Printed Name: Amos Alter
Title: President
Page 27 of 53 Pages
<PAGE>
INDEX TO EXHIBITS
-----------------
1.b - Inventories of Raw Materials
1.c - Receivables
2 - Promissory Note
3 - Assumed Liabilities
4.e - Products
4.f - Subsidiaries
Page 28 of 53 Pages
<PAGE>
EXHIBIT 1.B INVENTORIES
MADACY MUSIC GROUP INC.
DECEMBER 31, 1994
INVENTORY
Inventory per list December 16, 1994 $8,161,736.00
Less inventory regarding sales December 16/December 31, 1994
per Schedule (463,337.00)
Plus inventory purchases December 16/December 31, 1994 411,076.60
Inventory adjustment regarding Musicland 462,583.00
Inventory adjustment regarding Musicland 157,718.00
Inventory adjustment regarding sales cut-off 45,348.00
Inventory regarding Sun Rise 111,723.00
Reserve for Slow Moving items (50,000.00)
-------------
$8,836,847.60
=============
Page 29 of 53 Pages
<PAGE>
EXHIBIT 1.C ACCOUNTS RECEIVABLE
MADACY MUSIC GROUP INC.
DECEMBER 31, 1994
ACCOUNTS RECEIVABLE - U.S.
Accounts Receivable - U.S. $18,927,262.22
GST - TUQ Net Receivable 235,625.52
Allowance for doubtful A/C (103,009.64)
Accounts Payable - Refco U.S. (1,539,423.10)
------------
$17,520,455.00
Page 30 of 53 Pages
<PAGE>
EXHIBIT 1.C ACCOUNTS RECEIVABLE
MADACY MUSIC GROUP INC.
DECEMBER 31, 1994
Reconciliation of Accounts Receivable - Subsidiary ledger and G/L
A/R - U.S. A/C 1110
Balance per Subsidiary Ledger 14,772,106.97/US/
Less: Best Buy Company December 20, 1994
Invoice #58380 Entered in December 1994 A/R
Subsidiary but delivered January 1, 1995 (428,400.00)
14,343,706.97/US/
To Convert to ledger 5,763,301.00
--------------
Balance per G/L December 31, 1994 $20,107,007.97
AJE #21 To set-up allowance for doubtful accounts
per schedule (23,105.64)
AJE #31 To accrue credit notes and R.A. (80,300.00)
AJE #37 To reverse Musicland (722,786.47)
AJE #55 To reverse Musicland additional (246,434.00)
AJE #43 To reverse December sales shipped January '95 (75,579.64)
AJE #41 Best Buy (31,540.00)
--------------
$18,927,262.22
==============
Page 31 of 53 Pages
<PAGE>
EXHIBIT 2
PROMISSORY NOTE
Amount: $7,000,000.00 (Cnd.) Dated: January 1, 1995
FOR VALUE RECEIVED, the undersigned, MADACY MUSIC GROUP, INC., a
Michigan corporation ("Maker") hereby promises to pay to the order of MADACY
MUSIC GROUP, INC., a Canadian corporation incorporated under the Canadian
Business Corporation Act, and its successors and assigns ("Payee"), the sum of
Seven Million Dollars ($7,000,000.00) (Canadian) (the "Principal Sum").
1. Maker shall pay the Principal Sum in the following installments.
The sum of Three Hundred Thirty-Three Thousand, Three Hundred Thirty-Three
Canadian Dollars ($333,333.00 Canadian) will be due and payable on the last day
of each month during 1995. The sum of Three Million Four Canadian Dollars
($3,000,004.00 Canadian) will be due and payable on February 29, 1996.
2. Interest shall accrue at the rate of seven percent (7%) per annum
and will be payable on each date upon which a principal payment is due.
3. The Principal Sum and interest thereon shall be payable in lawful
money of Canada at the offices of the Payee, or at such other place as Payee or
any other holder of this Promissory Note may direct Maker in writing.
4. The payment required hereunder shall, in all events, be made
timely but shall be subject to set-off or reduction to the extent that the Maker
or 3100448 CANADA Inc. has claims under that certain Indemnification Agreement
dated as of January 1, 1995, by and among Amos Entertainment, Inc., Amos Alter,
3100448 CANADA Inc. and Maker which remain unsatisfied 30 days after notice
thereof has been provided to Payee by Maker; provided, however, that Maker may
prepay the Principal Sum, and interest thereon, at any time, without penalty.
5. Maker and every endorser, surety, guarantor, and any other person
liable for payment of the indebtedness evidenced by this Promissory Note hereby
severally waive demand for payment, presentment for payment, protest, notice of
protest, notice of dishonor, and any other notice to which such person or
persons might otherwise be entitled.
6. If Maker or any other person liable under this Promissory Note
defaults in its obligations hereunder, including, but not limited to, the
failure to promptly pay all monies due hereunder, Maker or such other person
liable shall pay all the costs and expenses of Payee or any other holder hereof
incurred in the collection of the amount due hereunder, including reasonable
attorneys' fees and court costs, whether or not litigation is commenced. The
rights and remedies of Payee or any other holder of this Promissory Note under
this paragraph 6 shall be cumulative
Page 32 of 53 Pages
<PAGE>
and shall be in addition to any other rights and remedies that Payee or such
other holder of this Promissory Note may have under this Promissory Note, any
other agreement, or at law or in equity.
7. No extension of time for payment of any amounts payable
hereunder, or alteration, amendment, or waiver of any provision of this
Promissory Note, shall release, modify, or otherwise affect the liability of any
endorser, surety, guarantor, or any other person liable for payment of the
indebtedness evidenced by this Promissory Note.
8. Payee or any other holder hereof may negotiate, transfer or
assign this Promissory Note without the consent of Maker or any other person.
This Promissory Note shall be binding upon Maker and his heirs, devisees,
executors, personal representatives, and administrators.
9. This Promissory Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of Michigan, except that if
any provision of this Promissory Note or any part of any such provision would be
illegal, invalid, or unenforceable under such laws in connection with a suit or
proceedings validly instituted in another jurisdiction, then the laws of such
other jurisdiction shall govern insofar as is necessary to sustain the legality,
validity, or enforceability of such provision or any part of such provision.
10. It is the desire and intent of Maker and Payee that the terms,
provisions, conditions, covenants, remedies and other obligations contained in
this Promissory Note shall be enforceable to the fullest extent permitted by
law. If any term, provision, condition, covenant, remedy, or other obligation of
this Promissory Note or the application thereof to any person or circumstances
shall, to any extent, be construed to be illegal, invalid, or unenforceable in
whole or in part, then such term, provision, condition, covenant, remedy, or
other obligation shall be construed in a manner so as to permit its
enforceability under the applicable law to the fullest extent permitted by law.
In any case, the remaining terms, provisions, conditions, covenants, remedies
and obligations of this Promissory Note or the application thereof to any person
or circumstance, except those to which they have been held illegal, invalid, or
unenforceable, shall remain in full force and effect.
MADACY MUSIC GROUP, INC.
By______________________________
Louis A. Kircos, Chairman
of the Board of Directors
Page 33 of 53 Pages
<PAGE>
EXHIBIT 3 ASSUMED LIABILITIES
MADACY MUSIC GROUP INC.
DECEMBER 31, 1994
Accounts Payable - per schedule $8,283,702.32
Transfer to Canco (limited)
LITHO MILLES ILES (753,871.43)
-------------
Total Accounts Payable $7,529,830.89
=============
Bank Loan U.S. 1,670,340.38
=============
Customer Deposit Handleman U.S. $5,233,386.45
=============
Page 34 of 53 Pages
<PAGE>
EXHIBIT 3 ASSUMED LIABILITIES
MADACY MUSIC GROUP INC.
DECEMBER 31, 1994
ACCOUNTS PAYABLE
Accounts payable per list $5,738,156.85
AJE #8 Accrue royalties 919,035.00
AJE #26 Professional fees 55,000.00
AJE #32 To accrue Cdn A/P 62,889.56
AJE #33 To accrue U.S. A/P 1,389,336.59
AJE #35 To accrue U.S. A/P 8,634.00
AJE #36 To accrue additional royalties 178,290.49
AJE #39 To accrue tax on capital 72,000.00
AJE #47 To reduce accrual discount to Handleman (57,752.00)
AJE #48 To readjust A/P (161,318.17)
AJE #51 Additional Accrual A/P 102,670.00
AJE #62 Reduce Accrual of Royalties (23,240.00)
-------------
$8,283,702.32
=============
Page 35 of 53 Pages
<PAGE>
EXHIBIT 4.E
ATTACHED AS EXHIBIT 1.A TO THE INDEMNIFICATION
AGREEMENT DATED AS OF JANUARY 1, 1995 BY AND
BETWEEN AMOS ENTERTAINMENT, INC., AMOS ALTER,
3100448 CANADA INC. AND MADACY MAGIC GROUP, INC.,
A MICHIGAN CORPORATION.
Page 36 of 53 Pages
<PAGE>
EXHIBIT 4.F
MADACY MUSIC GROUP INC.
SUBSIDIARIES
1. Mediaphon Gmbh
2. American Sterling Corp.
3. Madacy U.S.A. Inc.
Page 37 of 53 Pages
<PAGE>
ASSET CONTRIBUTION AGREEMENT
----------------------------
This ASSET CONTRIBUTION AGREEMENT (this "Agreement") is made effective as
of the 1st day of January, 1995 (the "EFFECTIVE DATE"), by and between MADACY
MUSIC GROUP, INC., a Canadian corporation incorporated under the Canada Business
Corporations Act (the "CORPORATION"), and 3100448 CANADA INC., a Canadian
corporation incorporated under the Canada Business Corporations Act ("CANCO").
RECITALS:
--------
1. The Corporation's business operations consist of licensing, duplicating,
marketing, packaging and supplying music and video products and related
activities in Canada, in the United States and in other countries.
2. Canco wishes to acquire from the Corporation, and the Corporation desires
to contribute to Canco, the assets and business of the Corporation related
to the Corporation's sales of products in Canada (the "CANADIAN BUSINESS").
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the sufficiency and receipt of
which is hereby acknowledged, the parties do hereby bind themselves and their
successors and assigns, and agree as follows:
Section 1. CONTRIBUTION OF ASSETS. The Corporation hereby conveys,
transfers, contributes, assigns and delivers to Canco the following assets (the
"ASSETS"):
(a) All machinery, equipment, parts, furniture, tools, supplies, and other
miscellaneous personal property owned by the Corporation and used in
the Canadian Business;
(b) All inventories of raw materials, work in process, finished goods,
product packaging and other items held for sale in the ordinary course
of the Canadian Business, as designated on EXHIBIT 1.B attached
hereto;
(c) All accounts receivable, notes receivable and other rights to receive
monies from customers, vendors or others in the ordinary course of the
Canadian Business, as designated on EXHIBIT 1.C attached hereto;
(d) All licenses, sublicenses, distribution contracts or other agreements
or arrangements to manufacture, use, distribute or sell products in
any jurisdiction outside of Canada, except for those which the
Corporation is not permitted to assign and except to the extent that
any does not relate to the Canadian Business, and those leases
designated on EXHIBIT 1.D attached hereto;
Page 38 of 53 Pages
<PAGE>
(e) The Corporation's interest in all customer purchases orders, customer
commitments and customer arrangements related to the Canadian Business;
(f) All of the goodwill and going concern relating to the Canadian
Business, all of the Corporation's rights in and to its patents,
trademarks, tradenames, copyrights and propriety rights except the
Corporation's rights to use such patents, trademarks, tradenames,
copyrights and proprietary rights outside of Canada, and all records
and books of account which relate to the Canadian Business;
(g) All of the issued and outstanding capital shares of Madacy Publishing,
Inc. and Maryart Marketing, Inc., and all of the Corporation's rights
to acquire any additional capital shares of either;
(h) The sum of $2,000 (Canadian).
Section 2. CONSIDERATION FOR ASSETS. In return for the Assets, the
Corporation shall receive 20 shares (100%) of Canco's issued and outstanding
Class "A" Common Shares and 799 shares (100%) of Canco's issued and outstanding
Class "B" preferred shares. The parties intend that the Assets referred to in
section 1(c), that are "eligible property" as defined in the Income Tax Act, be
transferred on a tax-free basis to Canco under Section 85 of the Income Tax Act.
The Corporation and Canco agree to file jointly elections pursuant to subsection
85(1) of the Income Tax Act in the prescribed form and within the prescribed
time whereby the proceeds of disposition of each of such Assets to the
Corporation and the cost thereof to Canco shall be the cost amount of that
Asset, subject to paragraphs 85(1)(c), (c.1) and (e) of the Act. In no event
shall the elected amount in respect of an Asset be less than $1.00. The
Corporation and Canco agree to file corresponding elections under the
corresponding provisions of any applicable provincial income tax legislation.
Section 3. ASSUMPTION OF LIABILITIES. Canco hereby assumes the liabilities
of the Corporation entered into in the ordinary course of its business, related
to the Canadian Business and exhaustively described on EXHIBIT 3 attached
hereto. Canco shall assume no other liabilities of the Corporation except as
expressly provided herein.
Section 4. THE CORPORATION'S REPRESENTATIONS. The Corporation hereby
represents and warrants to Canco as follows:
(a) The Corporation is a corporation incorporated as a close company (as
defined under Securities Act [Quebec]), validly existing and in
standing under the laws of Canada. The Corporation has the corporate
power and authority to own and hold its properties, to carry on its
business as currently conducted and to execute, deliver and perform
this Agreement. The execution, delivery and performance of this
Agreement have been duly approved by the Corporation's Board of
Directors and this Agreement constitutes the valid and legally binding
obligation of the Corporation.
Page 39 of 53 Pages
<PAGE>
(b) The Corporation has the corporate power and authority to contribute
and deliver the Assets, and neither the execution and delivery of
this Agreement, the consummation by the Corporation of the transactions
contemplated hereby, nor the contribution or delivery of the Assets
requires any authorization, consent or approval of any governmental or
regulatory authority (except for those which have been obtained, and
except to the extent that any license, sublicense or distribution
contract is not assignable without consent) or of any other person or
entity or conflicts with, accelerates any obligation under, violates
or breaches any provision of, constitutes a default under, results in
creation of any lien or security interest under or results in the
termination of, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, registration, or other authorization,
lease, contract, agreement, or other instrument, commitment or
obligation to which it is a party or by which any of its property may
be bound, or violates any order, writ, injunction, decree, judgment,
arbitration award, statute, regulation, or ruling applicable to it or
to its properties. The execution, delivery and performance of this
Agreement have been duly approved by the Corporation's shareholders.
(c) The Corporation owns the Assets free and clear of any lien, security
interest, pledge, charge, encumbrance, or restriction of any kind or
nature.
(d) Upon consummation of the transactions contemplated hereby, Canco shall
own the Assets free and clear of any lien, security interest, pledge,
charge, encumbrance, or restriction of any kind or nature or any
ownership interest of any other person or entity, other than those
arising out of the activities of Canco.
(e) EXHIBIT 4.e, attached hereto contains a true and complete listing of
all products of the Corporation ("Products") owned by, used by or
subject to license agreements of the Corporation in connection with
the Canadian Business. Copies of all license and other agreements
relating to the Products have heretofore been delivered to Canco. Such
license and other agreements are valid and binding on the Corporation,
and there are no breaches or facts or events that with the giving of
or the passage of time or both could result in a breach of such license
and other agreements. EXHIBIT 4.e and such licenses and other
agreements accurately describe the Corporation's rights with respect to
the Products. There are no claims pending or, to the best of the
Corporation's knowledge, threatened against the Corporation which
involve the Products or the materials embodied therein. Neither the
Products nor the materials embodied therein nor any use thereof by the
Corporation will violate or infringe upon the rights of any third
parties, and, to the best of the Corporation's knowledge, no third
party is infringing on the Corporation's rights in and to the Products.
(f) Except as set forth on EXHIBIT 4.f attached hereto, the Corporation
does not own or control, directly or indirectly, any corporation,
association, joint venture, partnership, or other business entity.
Page 40 of 53 Pages
<PAGE>
(g) Except for that certain Common Stock Option Agreement dated as of
November 1, 1993 by and among Amos Entertainment, Inc., the
Corporation and Handleman Company, the Corporation is not a party to
any agreement, arrangement or understanding relating to the sale of
its stock or relating to the sale of any of its assets outside of the
ordinary course of the Corporation's business.
Section 5. CANCO'S REPRESENTATIONS. Canco hereby represents and warrants to
the Corporation as follows:
(a) Canco is a corporation duly incorporated as a close company (as defined
under Securities Act [Quebec]), validly existing and in standing under
the laws of Canada. Canco has the corporate power and authority: (i) to
own and hold its properties and to carry on its business as currently
conducted; (ii) to execute, deliver and perform this Agreement; and
(iii) to acquire the Assets in accordance with the terms hereof. This
Agreement constitutes the valid and legally binding obligation of
Canco.
(b) Canco has the corporate power and authority to acquire, own and operate
the Assets, and neither the execution and delivery of this Agreement,
the consummation by Canco of the transactions contemplated hereby, nor
the acquisition or ownership of the Assets requires any authorization,
consent or approval of any governmental or regulatory authority or of
any other person or entity or conflicts with, accelerates any
obligation under, violates or breaches any provision of, constitutes a
default under, results in certain or any lien or security interest
under or results in the termination of, any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, registration, or
other authorization, lease, contract, agreement, or other instrument,
commitment or obligation to which it is a party or by which any of its
property may be bound, or violates any order, writ, injunction, decree,
judgment, arbitration award, statute, regulation, or ruling applicable
to it or to its properties. The execution, delivery and performance of
this Agreement have been duly approved by Canco's shareholders.
Section 6. INDEMNIFICATION; PRORATIONS.
6.1 SURVIVAL OF REPRESENTATIONS. All of the representations and warranties
and the covenants and agreements contained or referred to in this Agreement
shall survive the consummation of the transactions contemplated hereby. The
liability of any of the parties by reason of its covenants, representations and
warranties shall not be affected by any investigation made by or on behalf of
any other party.
6.2 INDEMNIFICATION. Canco hereby indemnifies and holds harmless the
Corporation from and against any and all losses or liabilities (including
without limitation, reasonable counsel fees and disbursements in respect
thereof) arising out of any breach of any covenant, warranty, representation
or agreement made by Canco herein or in any document delivered pursuant
thereto.
Page 41 of 53 Pages
<PAGE>
The Corporation hereby indemnifies and holds harmless Canco from and against all
losses or liabilities (including without limitation, reasonable counsel fees and
disbursements in respect thereof) arising out of any breach of any covenant,
warranty, representation or agreement made by the Corporation herein or in any
document delivered pursuant hereto or arising out of ownership or operation of
the Assets or the business herein conveyed if such losses or liabilities arise
in whole or in part out of acts of the Corporation prior to the Effective Date,
or facts existing prior to the Effective Date, if such liabilities are not
assumed by Canco.
6.3 NOTICE OF CLAIMS. Each party hereto shall give to the other party hereto
prompt notice of the assertion of any claim or demand or the institution of any
legal process for which such other party might be liable under the foregoing
indemnity or any other provision of this Agreement. The indemnifying party shall
be entitled, at its own option and expense, to conduct or participate in any
such legal proceedings or the negotiation and settlement of any such claim or
demand. The indemnified party will not make any settlement thereof without the
prior consent of the indemnifying party, which shall not be unreasonably
withheld.
6.4 BULK SALES LAWS. The parties recognize that, if the bulk transfer
provisions of any jurisdiction shall be applicable to this transaction (the
parties, however, do not acknowledge that such provisions are applicable
hereto), it would be impractical to comply with such provisions and,
accordingly, the Corporation agrees to indemnify and to hold Canco harmless from
any claims and demands of the Corporation's creditors, which are not assumed by
Canco, arising out of failure to comply with such bulk transfer provisions, if
such provisions are applicable, including any loss, damages, liability, cost or
expense of any kind whatsoever (including reasonable counsel fees) which Canco
may incur, sustain, suffer, or become subject to as a result of non-compliance
by the Corporation with such bulk transfer provisions.
6.5 PRORATIONS. Following the date hereof, the parties shall prorate, as of
the Effective Date, (i) all ordinary operating costs under any contracts,
agreements or licenses assigned to Canco by the Corporation, (ii) all applicable
utilities, (iii) all applicable real estate taxes, calculated on a fiscal year
basis, and (iv) all other ongoing operating costs of the Canadian Business.
Section 7. MISCELLANEOUS.
7.1 NOTICES. Any and all notices, requests or other communications
hereunder shall be given in writing and delivered by regular mail, overnight
mail, hand delivery or by registered or certified mail, return receipt
requested, with first class postage prepaid. Such notices shall be addressed:
(a) if to the Corporation, to the principal office of the Corporation; and (b)
if to Canco, to 500 Kirts Blvd., Troy, Michigan 48084, attn: President, with a
copy to Honigman Miller Schwartz and Cohn, 2290 First National Building,
Detroit, Michigan 48226, attn: Donald J. Kunz, unless notice of a change of
address is furnished to the other parties in the manner provided in this Section
7.1. Any notice which is required to be made hereunder shall be deemed made on
the date such notice is received by the party to whom it is directed.
Page 42 of 53 Pages
<PAGE>
7.2 INVALID OR UNENFORCEABLE PROVISIONS. The invalidity or unenforceability
of any particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects as if
such invalid or unenforceable provision were omitted.
7.3 BENEFIT AND BURDEN. This Agreement shall inure to the benefit of, and
shall be binding upon, the parties hereto and their successors and permitted
assigns.
7.4 AMENDMENTS AND WAIVER. No amendment, modification, change,
supersession, or cancellation of this Agreement shall be valid unless the same
is in writing and signed by the parties hereto. No waiver of any provision of
this Agreement shall be valid unless in writing and signed by the person against
whom that waiver is sought to be enforced. The failure of any party at any time
to insist upon strict performance of any condition, promise, agreement, or
understanding set forth herein shall not be construed as a waiver or
relinquishment of the right to insist upon strict performance of the same or any
other condition, promise, agreement, or understanding at a future time.
7.5 ENTIRE AGREEMENT. This Agreement sets forth all of the promises,
agreements, conditions, understandings, warranties, and representations between
the Corporation and Canco with respect to the transactions contemplated hereby,
and supersedes all prior agreements, arrangements and understandings among all
or some of the parties hereto, whether written, oral or otherwise. There are no
promises, agreements, conditions, understandings, warranties, or
representations, oral or written, express or implied, among the parties except
as set forth herein.
7.6 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Quebec, Canada, except that if any
provision of this Agreement would be illegal, void, invalid, or unenforceable
under such laws in connection with a suit or proceeding validly instituted in
another jurisdiction, then the laws of such other jurisdiction shall govern
insofar as is necessary to sustain the validity or enforceability of the terms
of this Agreement.
7.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and together which
shall constitute one instrument.
7.8 ATTORNEYS' FEES. If any party commences an action against any other
party to enforce any of the terms, covenants, conditions, or provisions of this
Agreement or because of a default by a party under this Agreement, any
prevailing party in any such action shall be entitled to recover its reasonable
attorneys' fees, costs and expenses incurred in connection with the prosecution
or defense of such action from the losing party or parties.
7.9 NO THIRD PARTY RIGHTS. Nothing in this Agreement shall be deemed to
create any right in any creditor or other person or entity not a party hereto
and this Agreement shall not be construed in any respect to be a contract in
whole or in part for the benefit of any third party.
Page 43 of 53 Pages
<PAGE>
7.10 FURTHER DOCUMENTS. All of the parties agree to execute any and all
bills of sale, assignments, instruments or other documents, and to perform any
and all other acts, reasonably necessary to accomplish the purposes of this
Agreement, including but limited to the execution and delivery of any or all
assignments or licenses of any patents, trademarks, copyrights or other
proprietary rights of the Corporation.
7.11 NUMBER AND GENDER OF WORDS. All pronouns, nouns and other terms used
in this Agreement shall include the masculine, feminine, neuter, singular, and
plural forms thereof, wherever appropriate to the context.
7.12 CAPTIONS. The captions or headings contained in this Agreement are
inserted and included solely for convenience and shall not be considered or
given any effect in construing the provisions hereof if any question of intent
should arise.
7.13 CONSTRUCTION. The parties acknowledge that each of them has had the
benefit of legal counsel of its own choice and has been afforded an opportunity
to review this Agreement with its legal counsel and that this Agreement shall be
construed as if jointly drafted by the parties hereto.
7.14 ARBITRATION. Any Disputes (as hereinafter defined) between the parties
under this Agreement shall be resolved by binding arbitration according to the
rules of the American Arbitration Association ("AAA"), at the location of the
AAA in or nearest to Troy, Michigan. Upon the occurrence of any Dispute, the
parties subject to such Dispute shall each promptly appoint one (1) arbitrator,
each of whom shall be experienced in the subject matter of the Dispute. A third
arbitrator, who shall also be experienced in the subject matter of the Dispute,
shall be promptly selected by such appointed arbitrators; provided, however,
that if such appointed arbitrators cannot agree on the selection of a third
arbitrator, then either arbitrator, on behalf of both such arbitrators, may
request that the third arbitrator be appointed by a presiding judge of the
United States District Court for the Eastern District of Michigan. Each of the
parties subject to the Dispute shall bear one-half (1/2) of the expense of the
arbitration. The resolution of the Dispute, as determined by the majority vote
of the three (3) arbitrators: (a) shall be binding upon the parties; and (b)
shall have the effect of an arbitration pursuant to Michigan Compiled Laws
Annotated Section 600.5001. In addition, a judgment of any Quebec or Michigan
circuit court may be rendered upon such resolution of the arbitrators. For
purposes of this Agreement, a "DISPUTE" means any disagreement under this
Agreement between any of the parties hereto which dispute remains unresolved for
a period of thirty (30) days from the date of its inception despite the good
faith efforts of the parties to resolve such dispute.
7.15 LANGUAGE. The parties hereto have expressly required that this
Agreement and all deeds, documents and notices relating hereto be drafted in
the English language. Les parties aux presentes ont expressement exige que la
presente convention et tous les autres contrats, documents ou avis qui y sont
afferents soient rediges en langue anglaise.
* * * *
Page 44 of 53 Pages
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.
3100448 CANADA INC., A
CANADIAN CORPORATION
By: /s/ LOUIS A. KIRCOS
---------------------------------------
Printed Name: Louis A. Kircos
Title: Chairman of the Board of Directors
MADACY MUSIC GROUP, INC., A
CANADIAN CORPORATION
By: /s/ AMOS ALTER
---------------------------------------
Printed Name: Amos Alter
Title: President
Page 45 of 53 Pages
<PAGE>
INDEX TO EXHIBITS
-----------------
1.b - Inventories of Raw Materials
1.c - Receivables
1.d - Licenses and Distribution Contracts
3 - Assumed Liabilities
4.c - Products
4.f - Subsidiaries
Page 46 of 53 Pages
<PAGE>
EXHIBIT 1.b
INCLUDED ON EXHIBIT 1.b TO ASSET PURCHASE
AGREEMENT BY AND BETWEEN MADACY MUSIC
GROUP, INC., A CANADIAN CORPORATION AND MADACY
MUSIC GROUP, INC., A MICHIGAN CORPORATION.
Page 47 of 53 Pages
<PAGE>
EXHIBIT 1.C ACCOUNTS RECEIVABLE
Madacy Music Group Inc.
December 31, 1994
<TABLE>
<CAPTION>
ACCOUNTS RECEIVABLE - (CDN) G.L.
- --------------------------- ----
<S> <C> <C>
Accounts Receivable - CDN 1100 $2,487,981.56
Accounts Receivable 1116 (27,450.94)
Travel Advances 1130 2,034.17
1135 2,427.00
Allowance For Doubtful Accounts (60,919.00)
-------------
$2,404,072.79
=============
</TABLE>
Page 48 of 53 Pages
<PAGE>
Madacy Music Group Inc.
December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Reconciliation of A/R - Subsidiary and G/L
A/R - CDN G/L 1100
Balance per Subsidiary Ledger Dec. 31, 1994 $3,205,944.74
Adjustments:
Add: Waterlily NSF payment Nov. 30, 1994 3,100.00
Less: Intertape payment Dec. 29, 1994
For Invoice #50663 Sept. 16, 1994 (38,997.91)
-------------
$3,170,046.83
Unaccorded small difference 137.63
-------------
Balance per G/L Dec. 31, 1994 $3,170,184.46
AJE #21 To set up allowance for doubtful accounts
per schedule 37,254.06
AJE #37 To reverse Sunrise A/R 186,204.84
AJE #31 To accrue C/N & R.P. 458,774.00
-------------
$2,487,981.56
=============
</TABLE>
Page 49 of 53 Pages
<PAGE>
EXHIBIT 1.D
LOCATION: 2020 ST. REGIS
LANDLORD: BORNEO REALTIES
LOCATION: 1865 TRANS CANADA HWY.
LANDLORD: ETINVEST HOLDINGS
Page 50 of 53 Pages
<PAGE>
EXHIBIT 3 ASSUMED LIABILITIES
Madacy Music Group Inc.
December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
Accounts Payable - Canco (LIMITED)
LIT001 LITHO MILLES ILES $ 450,541.20
LITSPE LITHO MILLES ILES 303,330.24
----------
Accounts Payable, before D.A.S. $ 753,871.43
D.A.S
=====
D.A.S Federal $ 41,427.84
D.A.S Quebec 47,141.02
Accrued Payroll 58,879.00
Employee RRSP Payable 260.00
----------
Accounts Payable $ 901,579.29
=============
Bank Loan $ 751,873.40
=============
Bank Loan F.B.D.B. $ 112,000.00
=============
Customer Deposit Handleman $1,166,666.75
=============
Lease Obligations $ 31,271.40
=============
Corporate Income Taxes Payable $1,475,337.00
=============
</TABLE>
Page 51 of 53 Pages
<PAGE>
EXHIBIT 4.E PRODUCTS OF MADACY
ATTACHED AS EXHIBIT 1.A TO THE
INDEMNIFICATION AGREEMENT DATED AS
OF JANUARY 1, 1995 BY AND BETWEEN
AMOS ENTERTAINMENT, INC., AMOS
ALTER, 3100448 CANADA INC. AND
MADACY MAGIC GROUP, INC., A
MICHIGAN CORPORATION.
Page 52 of 53 Pages
<PAGE>
EXHIBIT 4.F
MADACY MUSIC GROUP LIMITED
SUBSIDIARIES
1. MARYART MARKETING INC.
2. MADACY EUROPA INC.
3. MADACY MUSIC PUBLISHING INC.
Page 53 of 53 Pages
