As filed with the Securities and Exchange Commission on October 1, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MAGICWORKS ENTERTAINMENT INCORPORATED
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7922 87-0425513
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
BRAD KRASSNER
MAGICWORKS ENTERTAINMENT INCORPORATED
930 WASHINGTON AVENUE 930 WASHINGTON AVENUE
MIAMI BEACH, FLORIDA 33139 MIAMI BEACH, FLORIDA 33139
(305) 532-1566 (305) 532-1566
(ADDRESS, INCLUDING ZIP CODE, AND (NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, OF TELEPHONE NUMBER, INCLUDING AREA CODE,
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) OF AGENT FOR SERVICE)
COPY OF COMMUNICATIONS TO:
GARY EPSTEIN, ESQ.
GREENBERG, TRAURIG, HOFFMAN,
LIPOFF, ROSEN & QUENTEL, P.A.
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
(305) 579-0500
(FACSIMILE) (305) 579-0717
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Approximate Date of Commencement of Proposed Sale to the Public: From
time to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box: [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration number of the earlier
effective registration statement for the same offering.[_]
---------------
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
AGGREGATE OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES REGISTERED PRICE(1) REGISTRATION FEE
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Common Stock, $.001 par value........ $80,896,124 $27,909
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Common Stock, $.001 par value(2)..... $ 5,185,750 $ 1,981
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Redeemable Warrants(3)............... $ 5,185,750 $ 1,789
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Common Stock, $.001 par value(4)..... $ 5,185,750 $ (5)
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Placement Agent Warrants(6).......... $ 1,500,000 $ 517
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Common Stock, $.001 par value(7)..... $ 1,500,000 $ (5)
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Total................................ $99,453,374 $32, 196
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933 on the basis
of the average of the bid and asked sales prices of the Company's Common
Stock on September 26, 1996, as reported on the OTC Bulletin Board.
(2) Represents shares of Common Stock issuable upon the conversion outstanding
convertible notes ("Notes"), together with such indeterminate number of
shares as may be issuable pursuant to the anti-dilution provisions
contained therein.
(3) Represents Redeemable Warrants that may be issued upon the prepayment of the
Notes under certain circumstances.
(4) Represents shares of Common Stock issuable upon the exercise of Redeemable
Warrants that may be issued upon conversion of the Notes in certain
circumstances, together with such indeterminate number of shares as may be
issuable pursuant to the anti-dilution provisions contained therein.
(5) Pursuant to Rule 457(i), no fee is being paid.
(6) Represents outstanding warrants issued to the Placement Agent named herein.
(7) Represents shares of Common Stock issuable upon the exercise of 500,000
outstanding Placement Agent Warrants exercisable for into an aggregate of
500,000 shares of Common Stock, together with such indeterminate number of
shares as may be issuable pursuant to the anti-dilution provisions contained
therein.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
MAGICWORKS ENTERTAINMENT INCORPORATED
(CROSS REFERENCE SHEET PURSUANT TO ITEM 501 OF REGULATION S-K)
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ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS
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1. Forepart of the Registration Statement
and Outside Front Cover Page of Prospectus...... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus................................... Inside Front and Outside Back Cover Pages
3. Summary Information and Risk Factors............ Prospectus Summary; Risk Factors
4. Use of Proceeds................................. Use of Proceeds
5. Determination of Offering Price................. Cover Page; Plan of Distribution
6. Dilution........................................ *
7. Selling Security Holders........................ Selling Securityholders
8. Plan of Distribution............................ Cover Page; Plan of Distribution
9. Description of Securities to be Registered...... Description of Securities; Dividend Policy
10. Interests of Named Experts and Counsel.......... *
11. Information With Respect to the Registrant...... Prospectus Summary; Risk Factors;
Consolidation Transactions and S Corporation
Distributions; Dividend Policy; Capitalization;
Selected Combined Financial Data; Pro Forma
Selected Combined Pro Forma Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business; Management; Principal Shareholders;
Certain Transactions; Description of Securities;
Shares Eligible for Future Sale; Combined
Financial Statements
12. Disclosure of Commission Position
on Indemnification for Securities Act
Liabilities.................................... *
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* Omitted because response is negative or inapplicable.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS
SUBJECT TO COMPLETION, OCTOBER 1, 1996
26,226,465 SHARES
MAGICWORKS ENTERTAINMENT INCORPORATED
COMMON STOCK
This Prospectus relates to the offer and sale from time to
time of 26,226,465 shares of Common Stock, $.001 par value (the "Shares"), along
with 1,481,643 redeemable warrants ("Redeemable Warrants") that may be issued
upon prepayment of the Notes (as defined below) in certain circumstances and
500,000 warrants issued in connection with the Private Placement, as defined
below ("Placement Agent Warrants," and together with the Redeemable Warrants,
the "Warrants") of Magicworks Entertainment Incorporated, a Delaware corporation
(the "Company"), by certain securityholders of the Company (collectively, the
"Selling Securityholders"). Of the 26,226,465 Shares offered hereby, 2,074,300
Shares were issued in connection with the Private Placement and 1,481,643 Shares
are issuable upon conversion of outstanding Notes ("Note Shares") issued in
connection with the Company's private placement (the "Private Placement") of
414.86 of its Units ("Units"), each Unit consisting of (a) an unsecured senior
convertible note (collectively, the "Notes") in the principal amount of $12,500
and (b) 5,000 shares of Common Stock. Also included in the Shares of Common
Stock offered hereby are 1,481,643 Shares underlying certain Redeemable Warrants
("Redeemable Warrant Shares") which may be issued in the future, as described
below, and Shares underlying Placement Agent Warrants to purchase an aggregate
of 500,000 Shares of Common Stock ("Placement Agent Warrant Shares") that expire
in July, 2001 and have an exercise price of $3.50 per share which are held by
Capital Growth International, L.L.C., the Company's placement agent in the
Private Placement, and its designees ("Capital Growth"). The Shares, the
Redeemable Warrants and the Placement Agent Warrants are sometimes referred to
herein collectively as the "Securities." See "Description of Securities," and
"Certain Transactions."
The Company will not receive any proceeds from this offering;
however, the maximum gross proceeds payable to the Company from the exercise of
all of the Warrants, if exercised in full, would be $6,935,751. The Company has
agreed to bear the expenses of registration of the Securities under federal and
state securities laws.
Currently there is no active trading market for the Common
Stock. The Common Stock is quoted on the NASD over-the-counter market (the "OTC
Bulletin Board") under the trading symbol "MAJK." The Company has applied for
the listing of its Common Stock on the Nasdaq National Market ("NMS"). On
September 4, 1996, the last reported bid price of the Common Stock was $3.50 per
share. See "Price Range of Common Stock." Currently there is no public market
for the Warrants, nor is one expected to develop.
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SEE "RISK FACTORS" ON PAGES 7 THROUGH 10 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The Company has been advised by the Selling Securityholders
that the Securities offered hereby may be sold from time to time on the
over-the-counter market or, after final approval is received from NASDAQ, on
NMS, through brokers, dealers, underwriters or agents on terms to be determined
at the times of such sales. The Company is registering the Securities pursuant
to the Company's obligations under certain registration rights agreements and
pursuant to requests by certain Selling Securityholders, but the registration of
the Securities does not necessarily mean that any of the Securities will be
offered or sold hereunder. To the extent required, the specified Securities to
be sold, the names of the Selling Securityholders, the respective purchase
prices and public offering prices, the names of any such broker, dealer,
underwriter or agent, and any applicable commissions or discounts with respect
to a particular offer will be set forth in an accompanying Prospectus Supplement
or, if appropriate, a post-effective amendment to the Registration Statement of
which this Prospectus is a part. See "Plan of Distribution."
The Selling Securityholders and any dealers or agents that
participate in the distribution of the Securities offered hereby may be deemed
to be "underwriters" as defined in the Securities Act of 1933, as amended (the
"Securities Act"), and any profit on the sale of such Securities offered hereby
by them and any discounts, commissions or concessions received by any such
dealers or agents might be deemed to be underwriting discounts and commissions
under the Securities Act.
THE DATE OF THIS PROSPECTUS IS __________________ __, 1996
<PAGE>
AVAILABLE INFORMATION
The Company intends to furnish to its stockholders annual
reports containing financial statements audited by independent accountants, and
such other periodic reports as it may determine to furnish or be required by
law, including Sections 13(a) and 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
The Company has filed with the Commission a Registration
Statement on Form S-1 (the "Registration Statement") under the Securities Act
with respect to the Securities offered hereby. This Prospectus, which is a part
of the Registration Statement, does not contain all the information set forth
in, or annexed as exhibits to, such Registration Statement, certain portions of
which have been omitted pursuant to rules and regulations of the Commission. For
further information with respect to the Company and the Securities, reference is
hereby made to such Registration Statement, including the exhibits thereto.
Copies of the Registration Statement, including exhibits, may be obtained from
the aforementioned public reference facilities of the Commission upon payment of
the fees prescribed by the Commission, or may be examined without charge at such
facilities. Statements contained herein concerning any document filed as an
exhibit are not necessarily complete and, in each instance, reference is made to
the copy of such document filed as an exhibit to the Registration Statement.
Each such statement is qualified in its entirety by such reference. The
Registration Statement and the exhibits thereto may be inspected and copied (at
prescribed rates) at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at
the regional offices of the Commission located at Seven World Trade Center,
Suite 1300, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. In addition, the Registration Statement can be obtained
from the Commission's web site athttp://www.sec.gov. Quotations relating to the
Company's Common Stock are expected, subject to customary conditions, to appear
on NMS, and reports, proxy statements and other information concerning the
Company can also be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MORE DETAILED INFORMATION AND COMBINED FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EACH
PROSPECTIVE INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY. UNLESS
OTHERWISE NOTED, THE INFORMATION IN THIS PROSPECTUS GIVES EFFECT TO THE
CONSUMMATION OF THE CONSOLIDATION AND THE MERGER.
THE COMPANY
Magicworks Entertainment Incorporated (the "Company") acquires
domestic and international stage and ancillary rights to theatrical productions,
produces and promotes live entertainment, manages and books performances and
shows, and merchandises a broad range of products associated with its
productions and performers. The Company is also involved in the management of
performing arts facilities. The Company has experienced significant growth over
the past several years. Revenues and pre-tax income have increased from $7.5
million and $1.0 million, respectively, in 1992 to $42.7 million and $3.7
million, respectively, in 1995.
The Company's strategy has been to integrate the financing,
production, booking and ancillary exploitation of live entertainment, which
allows the Company to exercise control over all aspects of its productions,
including theatrical production, booking, marketing and merchandising. Prior to
1992, the Company focused primarily on, and derived the majority of its profits
from, the worldwide production of "The Magic of David Copperfield," as well as
its management and booking agency and its merchandising business, and was not
involved in other large scale productions. However, because artists and
producers wishing to gauge the market's receptivity to their productions
typically approached the Company in its capacity as booking agent early in a
show's development process, the Company perceived an opportunity to participate
in additional roles beyond its traditional management, booking agency and
merchandising operations.
In 1992, the Company began to act as producer and co-producer
of productions for which the Company believed market demand was strong, based on
the responses to its booking inquiries. In some cases, in addition to production
rights, the Company obtained other rights associated with the show, such as the
ability to present the show in certain venues.
The Company's successful productions since 1992 have included
"Ken Hill's The Phantom of the Opera" and "South Pacific," starring Robert
Goulet, and its major current productions include "Jesus Christ Superstar," "The
Magic of David Copperfield," "Hello, Dolly!" starring Carol Channing and
"Deathtrap," starring Elliot Gould and Mariette Hartley. Further, the Company
has the rights to produce and anticipates producing "Singin' in the Rain,"
"Gershwin on Ice" and "The Hunchback of Notre Dame."
The Company plans to continue to seek to acquire touring
rights for well-established star musicals, and to utilize its management and
booking division to determine the demand for live entertainment productions.
Since the determination of demand is made in advance of any significant
commitment by the Company, the Company believes that its success has been
related in part to its ability to produce only those shows which appear
prospectively to have limited risk and the potential for significant reward.
After obtaining the production rights to a show, the Company
typically casts the lead role with recognized talent, and then solicits
commitments from promoters in various locations in which the show could be
presented. The promoters guarantee the Company a minimum amount of weekly
revenues (which guarantee is often secured by a letter of credit) as well as a
share of any profits above the guaranteed amount. The Company frequently
receives a deposit from the local promoters, the amount of which is based on the
Company's past relationship with the individual promoter. For foreign
productions, the deposit is generally equivalent to the total amount of the
guarantee. In this manner, the Company seeks to further minimize its production
risk.
In addition to its production business, the Company acts as
the management and booking agent for a variety of live entertainment events. As
management and booking agent, the Company is retained by producers to arrange
bookings for the tours of various theatrical presentations, musical acts and one
person shows. The Company then markets the productions to presenters throughout
the world, and is paid either a fixed fee or a percentage of
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proceeds for such bookings. These arrangements preclude the need for the Company
to invest any of its own capital in its capacity as management and booking
agent.
The Company currently acts as exclusive management and booking
agent for over 23 shows, including "The Magic of David Copperfield," "Nutcracker
on Ice," "Jesus Christ Superstar," by Andrew Lloyd Webber and Tim Rice, "The
Pointer Sisters' Ain't Misbehavin'," "Hello, Dolly!" starring Carol Channing,
"Three Tall Women," "She Loves Me," "Deathtrap," "Mame" and the national touring
company of "A Chorus Line;" musical acts such as the Newport Jazz All-Stars and
the Preservation Hall Jazz Band; and one-person shows such as Hal Holbrook in
"Mark Twain Tonight," James Whitmore in "Will Rogers USA," Amanda Plummer in
"The Belle of Amherst" and Kevin McCarthy in "Give 'Em Hell Harry!" Further, the
Company has recently entered into an exclusive agreement to represent the
musical "Big" for all U.S. and Canadian tour bookings (excluding New York, Los
Angeles and Toronto).
The Company plans to continue to exploit its experience and
contacts with performers, venues, presenters and sponsors by expanding its
operations, as opportunities arise, in the areas of sports, speakers' bureaus,
music, movies and television. Further, the Company believes that its
relationships in the entertainment industry will facilitate its expansion into
other areas, particularly with respect to facility management, production and
presentation opportunities.
In addition, the Company perceives an opportunity to grow
through the acquisition of local and regional entertainment producers,
presenters, facilities owners and management companies. The Company believes
that there are significant acquisition opportunities available due to the highly
fragmented nature of the live entertainment industry.
In keeping with its strategy to further broaden its own
business by acquiring entertainment related businesses, on August 28, 1996, the
Company acquired all of the issued and outstanding capital stock of Movietime
Entertainment, Inc. ("Movietime") in exchange for 1,199,999 shares of Common
Stock. Movietime has developed and implemented an interactive telecommunications
service that provides digital telephone delivery systems to movie theaters.
Movietime's digital-based delivery system replaces the analog recording machines
now in use at movie theaters with an interactive digital voicemail system that
provides customized, site specific theater information such as show times,
ticket prices, location and travel directions. The Company believes that the
Movietime system enables a theater to increase ticket sales through improved
customer service by significantly increasing the number of telephone calls able
to reach the theater simultaneously. If Movietime achieves significant market
penetration, the Company hopes to generate revenues by selling advertising time
on the recorded announcements.
COMPANY BACKGROUND
The Company was incorporated under the laws of the State of
Utah in February 1985 under the name "Marino Investments, Inc." In April 1988,
the Company changed its name to "Rattlesnake Gold, Inc." and changed its state
of domicile from Utah to Delaware. In June 1995, the Company changed its name to
Shadow Wood Corporation. The Company was formed for the purpose of raising
capital and acquiring suitable property, assets or business by means of
completing a merger with, or acquisition of, any privately-held business
enterprise. The Company had no material operations until July 1996. In July
1996, Magicworks Entertainment Incorporated, a Florida corporation ("MEI"), was
merged (the "Merger") into the Company and the Company changed its name to
"Magicworks Entertainment Incorporated."
MEI was formed in June 1996 as a holding company to facilitate
the consolidation of the operations of each of Diamond Bullet Merchandising,
Inc., a Florida corporation, Touring Artists Group, Inc., an Ohio corporation,
Touring Artists Group, Inc., a Florida corporation, Performing Arts Management
of North Miami, Inc., a Florida corporation, Magic Promotions, Inc., a Florida
corporation, and Magic Promotion, Inc., an Ohio corporation, all of which shared
common control, but which had operated previously as independent corporations
(the foregoing corporations are referred to herein collectively as the
"Constituent Corporations"). Concurrently with the initial closing of the
Private Placement, 100% of the capital stock of each of the Constituent
Corporations was acquired by the Company (the "Consolidation").
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The Company was the surviving corporation in the Merger.
Pursuant to the Merger, each outstanding share of common stock, $.001 par value
per share, of MEI was converted into the right to receive one share of Common
Stock. The Board of Directors and management of MEI were elected to
corresponding positions with the Company. Simultaneously with the consummation
of the Merger, the Company issued and sold 400.06 Units in connection with which
it received net proceeds of $8,919,350. On September 27, 1996, the Company
issued and sold an additional 14.8 Units pursuant to the Private Placement in
connection with which it received additional net proceeds of $333,000.
Subsequent to the Merger, on August 28, 1996, the Company
acquired (the "Movietime Acquisition") all of the outstanding capital stock of
Movietime, pursuant to the merger (the "Movietime Merger") of MT Acquisition Sub
Inc. ("MT Sub"), a newly-formed, wholly-owned subsidiary of the Company, with
and into Movietime. The Movietime Acquisition was consummated pursuant to that
certain Agreement and Plan of Merger dated August 28, 1996 (the "Movietime
Agreement") among the Company, MT Sub, Movietime and all of the stockholders of
Movietime (the "Movietime Stockholders"). Movietime was the surviving
corporation in the Movietime Merger. Pursuant to the Movietime Merger, each
share of Movietime common stock, par value $1.00 per share, was converted into
the right to receive 2,962.96 shares of common stock, $.001 par value ("Common
Stock"), of the Company rounded to the nearest whole number, resulting in the
issuance of 1,199,999 shares of Common Stock to the Movietime Stockholders.
Unless the context requires otherwise, all references in this
Prospectus to the Company shall mean the Company as successor by merger to the
business of MEI and shall include its wholly-owned subsidiaries. The Company's
executive offices are located at 930 Washington Avenue, Miami Beach, Florida
33139 and its telephone number is (305) 532-1566.
THE OFFERING
Securities Offered.................... 26,226,465 shares of Common Stock,
including 22,763,179 outstanding shares
of Common Stock which may be sold by
Selling Securityholders and up to
3,463,286 Note Shares, Placement Agent
Warrant Shares and Redeemable Warrant
Shares which may be sold by the holders,
respectively, of outstanding Notes,
outstanding Placement Agent Warrants and
Redeemable Warrants which may be issued
in the future.
1,981,643 Warrants, including 500,000
Placement Agent Warrants which may be
sold by the Selling Securityholders and
up to 1,481,643 Redeemable Warrants that
may be issued upon the prepayment of the
Notes in certain circumstances.
Quotation............................ The Common Stock is quoted on the NASD
Over-the-Counter market and the Company
has applied for the listing of its
Common Stock on NMS.
Trading Symbol....................... "MAJK"
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SUMMARY COMBINED FINANCIAL DATA
The summary combined financial information set forth below has
been derived from the audited combined financial statements of Magic Promotion,
Inc., an Ohio corporation ("MPIO") and Magic Promotions, Inc., each of which is
a wholly-owned subsidiary of the Company, and should be read in conjunction with
such financial statements and the notes thereto appearing elsewhere in this
Prospectus. MPIO was deemed to be the acquiring entity in the Consolidation.(1)
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SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
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1991 1992 1993 1994 1995 1995 1996
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STATEMENT OF OPERATIONS DATA:
Revenues:
Production ........ $ 494,197 $ 580,222 $18,151,149 $23,313,026 $31,638,078 $14,721,453 $ 16,361,156
Promotion ......... 3,915,582 3,700,157 10,009,734 6,268,273 6,668,672 4,573,186 5,126,007
Total revenues.............. 4,995,934 4,881,175 29,513,253 31,142,086 40,704,395 20,025,887 22,142,488
Total operating expenses.... 3,832,519 4,341,893 25,580,228 28,119,157 36,102,025 16,309,408 19,702,695
Income from operations...... 1,163,415 539,282 3,933,025 3,022,929 4,602,370 3,716,479 2,439,793
Net income.................. 1,130,917 955,347 2,176,676 1,916,991 3,380,457 2,354,440 1,801,737
Pro forma net income(2) .... 689,859 582,762 1,327,772 1,169,365 2,062,079 1,436,208 1,099,060
</TABLE>
SUMMARY COMBINED PRO FORMA FINANCIAL DATA
The following table summarizes certain selected unaudited
pro forma financial data for the Company, giving effect to (i) the Consolidation
and (ii) the Merger. The summary pro forma financial information set forth below
has been derived from the combined financial statements of the Company, and
should be read in conjunction with such financial statements, including the
notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
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YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------------------- -------------------------------------
1993 1994 1995 1995 1995 1996 1996
----------- ---------- ---------- ----------- ---------- ---------- -----------
STATEMENT OF OPERATIONS DATA: AS ADJUSTED(3) AS ADJUSTED(3)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Production .................. $18,250,149 $23,346,244 $31,638,078 $31,638,078 $14,721,453 $16,361,156 $16,361,156
Promotion ................... 10,009,734 6,268,273 6,668,672 6,668,672 4,573,186 5,126,007 5,126,007
Total revenues........................ 32,167,251 33,416,193 42,734,099 42,734,099 21,001,970 23,719,454 23,731,091
Total operating expenses.............. 27,610,205 30,239,412 38,042,127 38,601,926 17,266,699 21,094,524 21,572,457
Income from operations................ 4,557,046 3,176,781 4,691,972 4,132,173 3,735,271 2,624,930 2,158,634
Net income............................ 3,020,557 2,128,198 3,684,808 2,601,604 2,597,327 2,601,604 1,256,939
Pro forma net income(2) .............. 1,842,540 1,298,201 2,247,733 1,586,978 1,584,369 1,586,978 766,733
</TABLE>
JUNE 30, 1996
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BALANCE SHEET DATA:
Working capital.............. $ 263,026
Total assets................. 8,844,771
Total liabilities............ 5,571,967
Total shareholders' equity... 3,272,804
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(1) The Consolidation complies with the requirements of Staff Accounting
Bulletin No. 48 ("SAB 48") and has therefore been accounted for at the
historical cost bases of the transferors. The Movietime Acquisition
has been accounted for as a pooling-of-interests in accordance with
APB 16. See Note 1 to the Historical Supplemental Pooled Financial
Statements of Magic Promotion, Inc. and Movietime Entertainment, Inc.
(2) Reflects the effect of an adjustment for income taxes on historical
statement of operations data, assuming the Constituent Corporations
had been treated as C corporations for income tax purposes, and
assuming an effective income tax rate of 39% for the periods presented.
See "Consolidation Transactions and S Corporation Distributions."
(3) As adjusted to give effect to (i) the Private Placement and the initial
application of the net proceeds therefrom and (ii) the Movietime
Acquisition.
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RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A
HIGH DEGREE OF RISK, INCLUDING, BUT NOT NECESSARILY LIMITED TO, THE RISK FACTORS
DESCRIBED BELOW. EACH PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS INHERENT IN AND AFFECTING THE BUSINESS OF THE COMPANY
BEFORE MAKING AN INVESTMENT DECISION. THIS PROSPECTUS CONTAINS CERTAIN
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") WHICH REPRESENT THE COMPANY'S
EXPECTATION OR BELIEFS, INCLUDING, BUT NOT LIMITED TO, STATEMENTS REGARDING
GROWTH IN REVENUES FROM THE COMPANY'S PRODUCTION AND PROMOTION ACTIVITIES AND
THE SUFFICIENCY OF THE COMPANY'S CASH FLOW FOR ITS FUTURE LIQUIDITY AND CAPITAL
RESOURCE NEEDS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED IN THIS PROSPECTUS
THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING
STATEMENTS. WITHOUT LIMITING THE FOREGOING, WORDS SUCH AS "MAY," "WILL,"
"EXPECT," "BELIEVE," "ANTICIPATE," "INTEND," "ESTIMATE" OR "CONTINUE" OR THE
NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE
SUBSTANTIAL RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY
DEPENDING ON A VARIETY OF FACTORS, INCLUDING THOSE DESCRIBED BELOW.
SIGNIFICANT REVENUES DERIVED FROM ONE SHOW. The Company
derives a significant percentage of its total profits from "The Magic of David
Copperfield" worldwide tours. The Company has a contract with Mr. Copperfield
that expires on December 31, 1999. A termination of the Company's relationship
with Mr. Copperfield, the inability of "The Magic of David Copperfield" to
remain successful in the future, or the retirement or withdrawal of Mr.
Copperfield from the entertainment business would have a material adverse effect
on the Company's business.
AVAILABILITY OF THEATRICAL PRODUCTION RIGHTS. The success of
the Company is dependent in part on the availability of production rights to
quality theatrical properties and its ability to procure such rights. There can
be no assurance that the Company will be able to secure the production rights to
quality theatrical properties in sufficient numbers or on terms acceptable to
the Company in the future.
RECOUPMENT OF PRODUCTION COSTS. The costs of producing,
marketing and presenting live theatrical presentations are substantial and have
increased in recent years. Creative and artistic personnel participate in the
earnings, if any, of a production and reduce the amount realized by the Company.
The success of any theatrical presentation is dependent on a number of factors
outside the control of the Company, including public taste, which is
unpredictable and subject to change, the existence and popularity of other
theatrical presentations and other competing entertainment, price and weather
conditions. There can be no assurance that the Company will be able to stage
theatrical presentations in the future or that it will be able to recoup the
costs associated with any such presentations.
AVAILABILITY OF FINANCING. The Company depends on a variety of
financing sources, including credit facilities and limited partnerships or joint
ventures on a show-by-show basis, in addition to funds generated from
operations. The Company also has relied upon the guarantee of certain of its
debts by certain of its executive officers. The Company anticipates that no
further personal guarantees of the Company's indebtedness by its executive
officers will be made. There can be no assurance that financing to fund the
Company's future operations will be available on commercially reasonable terms,
or at all. If financing is not available, the Company could be limited in its
ability to compete favorably for attractive productions. Additionally, to the
extent that the Company elects to utilize its own capital to finance theatrical
productions, it will assume a greater degree of the financial risk associated
with such productions.
FLUCTUATIONS IN OPERATING RESULTS. The Company's operating
results have fluctuated significantly from year to year, primarily as a result
of the number of its shows or events in production, the timing and staging of
its productions, and its involvement in promotion as well as production in
certain instances. In addition, the season for most of the Company's theatrical
productions runs from September to June. Consequently, the Company's
-7-
<PAGE>
operating results have fluctuated significantly from year to year and also from
quarter to quarter, and are expected to continue to do so in the future. It is
likely that the Company's operating results will continue to fluctuate until
such time, if ever, that the Company has a sufficient number of productions or
diversifies sufficiently to eliminate such fluctuations. There can be no
assurance that the Company will ever have a sufficient number of productions or
will diversify sufficiently to produce a steady stream of revenues and earnings
or that the Company's operating results will not continue to fluctuate.
COMPETITION. The Company competes for its audiences with other
theatrical producers, some of whom may have greater financial and other
resources than the Company, as well as with a wide range of other entertainment
alternatives, including movies, sporting events and others. In addition, there
is competition within the theatrical entertainment industry for directors,
actors and rights to theatrical works. There are also significant competitors in
the management and booking industry, and the merchandising industry ancillary to
theatrical productions and concerts. There can be no assurance that the Company
will be able to compete successfully.
LABOR RELATIONS. Many individuals associated with the
Company's productions, including actors and directors, as well as the employees
of the theaters in which the Company's presentations are presented, are members
of guilds or unions which bargain collectively with producers on an
industry-wide basis from time to time. The Company's operations are dependent on
its ability to maintain harmonious relations with these guilds and unions.
DEPENDENCE ON MANAGEMENT AND OTHER KEY PERSONNEL. The Company
is largely dependent on its executive officers and, in particular, Brad
Krassner, its Co-Chairman of the Board and Chief Executive Officer, Joe Marsh,
its Co-Chairman of the Board, and Lee Marshall, its President and Chief
Operating Officer, all of whom were instrumental in the formation of the
Company's management, booking and merchandising operations. Management of the
Company will have substantial discretion in the selection, acquisition,
production, marketing and management of the Company's productions. The success
of the Company will depend upon the ability of its management to identify
commercially viable theatrical productions, accurately estimate the costs of
producing such properties, successfully negotiate for the allocation of
associated profits, if any, and effectively administer the production and
marketing of its theatrical properties. The loss of the services of any of the
Company's executive officers or other key personnel could have a material
adverse effect on the Company's business and prospects.
CONTROL BY MANAGEMENT. The Company's officers and directors
own approximately 82.4% of the Company's outstanding Common Stock. Accordingly,
they will be able to control the Company, elect all of the Company's directors,
increase the authorized capital, dissolve, merge, sell the assets of the Company
and generally direct the affairs of the Company.
LIMITED EXPERIENCE IN FACILITY MANAGEMENT; PROPOSED EXPANSION.
The Company recently became engaged in facility management, in which it has
limited experience. Furthermore, the Company may use a portion of the proceeds
of the Private Placement to expand its operations and acquire companies in the
live entertainment business. There can be no assurance that the Company will be
successful in any or all of these endeavors. See "Business."
RISKS ASSOCIATED WITH ACQUISITION OF MOVIETIME ENTERTAINMENT,
INC. There are a number of risks associated with Movietime: (a) the potential
inability of the Company to expand Movietime's operations, for which expansion
the Company expects to invest significant capital, (b) a decline in movie
theater attendance, (c) the Company's potential inability to maintain favorable
relations with Octel Communications Corporation ("Octel"), with which Movietime
has a contract to provide equipment and services related to the provision of its
MovieTime service to movie theaters, or Octel's inability to continue to provide
satisfactory service under its agreement with the Company, (d) Movietime's
potential inability to negotiate contracts to provide its MovieTime service to
theaters, or to sell advertising time with respect to such service and (e) the
interruption of telephone services. Movietime has commenced the servicing of
contracts to provide its Movietime service with a number of movie theaters,
although to date Movietime has incurred significant losses without generating
meaningful revenues. Any or all of such risks could adversely affect the
Company's operating results and financial condition.
-8-
<PAGE>
AUTHORIZATION OF PREFERRED STOCK. The Company's Certificates
of Incorporation authorizes the issuance of 5,000,000 shares of "blank check"
preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of the holders of the Common
Stock. In the event of issuance, the preferred stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. Although the Company has no present intention
to issue any shares of its preferred stock, the Company may do so in the future.
NO PAYMENT OF CASH DIVIDENDS. The Company does not intend to
declare any cash dividends with respect to its Common Stock in the foreseeable
future. Instead, the Company intends to retain future earnings, if any, for use
in its business operations. Furthermore, the Company is prohibited from paying
cash dividends while the Notes are outstanding.
PAYMENT OF THE NOTES. The Notes are direct, senior obligations
of the Company. The Company is required to pay interest and principal on the
Notes, including amounts with respect to the mandatory sinking fund provisions
contained therein, regardless of the Company's profitability at the time any
such payments are due. The payment of such principal and interest could
materially and adversely affect the Company's ability to meet its other
obligations. If the Company is unable to make principal and interest payments on
the Notes when due, or to make required sinking fund payments when due, the
consequences to the Company would be material and adverse.
EXERCISE OF THE WARRANTS AND/OR THE CONVERSION OF THE NOTES
INTO COMMON STOCK WILL HAVE DILUTIVE EFFECT. The Warrants will provide an
opportunity for the holders thereof to profit from a rise in the market price of
the Common Stock, of which there is no assurance, with resulting dilution in the
ownership interest in the Company held by the then present shareholders. Holders
of the Warrants or the Notes most likely would exercise such Warrants or convert
the Notes and purchase the Common Stock underlying such securities at a time
when the Company may be able to obtain capital by a new offering of securities
on terms more favorable than those provided by such Warrants or Notes, in which
event the terms on which the Company may be able to obtain additional capital
would be affected adversely.
NO PRIOR TRADING MARKET; DISCLOSURE RELATING TO LOW PRICED
STOCKS. The Common Stock presently has no active trading market. The Common
Stock is expected to be approved for quotation on NMS; however, there can be no
assurance that a trading market will develop or, if developed, that it will be
maintained. In addition, there can be no assurance that the Company will in the
future meet the maintenance criteria for continued quotation of the Common Stock
on NMS. If the Company were removed from NMS, trading, if any, in the Common
Stock might thereafter have to be conducted in the over-the-counter market in
the so-called "pink sheets" or, if then available, the Nasdaq SmallCap Market or
NASD's OTC Electronic Bulletin Board. As a result, an investor might find it
more difficult to dispose of, or to obtain accurate quotations as to the value
of the Common Stock.
In addition, if the Common Stock is delisted from trading on
an active trading market and the trading price of the Common Stock is less than
$5.00 per share, trading in the Common Stock would also be subject to the
requirements of Rule 15g-9 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Under such rule, broker/dealers who
recommend such low-priced securities to persons other than established customers
and accredited investors must satisfy special sales practice requirements,
including a requirement that they make an individualized written suitability
determination for the purchase and receive the purchaser's written consent prior
to the transaction. The Securities Enforcement Remedies and Penny Stock Reform
Act of 1990 also requires additional disclosure in connection with any trades
involving a stock defined as a penny stock (generally, according to recent
regulations adopted by the Securities and Exchange Commission, any equity
security not traded on an exchange or quoted on Nasdaq that has a market price
of less than $5.00 per share, subject to certain exceptions), including the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith. Such
requirements could severely limit the market liquidity of
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<PAGE>
the Common Stock and the ability of purchasers in this offering to sell their
securities in the secondary market. There can be no assurance that the Common
Stock will not be delisted or treated as a penny stock.
SHARES ELIGIBLE FOR FUTURE SALE. 22,763,179 of the Company's
23,074,299 currently outstanding shares of Common Stock are "restricted
securities" and, in the future, may be sold upon compliance with Rule 144,
adopted under the Act. Rule 144 provides, generally, that a person holding
"restricted securities" for a period of two years may sell only an amount every
three months equal to the greater of (a) one percent of the Company's issued and
outstanding Common Stock, or (b) the average weekly volume of sales during the
four calendar weeks preceding the sale. The amount of "restricted securities"
which non-affiliates of the Company may sell is not so limited, since
non-affiliates may sell without volume limitation their shares held for three
years if there is adequate current public information available concerning the
Company. All of the Shares held by the former shareholders of MEI (a total of
19,000,000 Shares) and the former shareholders of Movietime (a total of
1,199,999 Shares), all of the Shares issued to the investors in the Private
Placement (a total of 2,074,300 Shares), all of the Shares issued to the
placement agent in the Private Placement (a total of 488,820 Shares) and all of
the Common Stock underlying the Notes, the Placement Agent Warrants and the
Redeemable Warrants are being registered in the registration statement of which
this Prospectus forms a part. However, the former shareholders of both MEI and
Movietime have agreed not to resell their Shares (a total of 20,199,999 Shares)
or any portion thereof for a period ending on August 30, 1997.
After reserving a total of 5,213,243 shares of Common Stock
for issuance upon (i) the exercise of the Placement Agent Warrants, (ii) the
conversion of the Notes and/or upon redemption of the Redeemable Warrants, and
(iii) the exercise of options to purchase up to an aggregate of 1,750,000 shares
of Common Stock under the Company's 1996 Employee Stock Option Plan (the "Stock
Option Plan") and Directors Stock Option Plan (the "Directors Plan" and together
with the Stock Option Plan, the "Plans"), the Company will have at least
21,712,458 shares of authorized but unissued capital stock available for
issuance without further stockholder approval. As a result, any issuance of
additional shares of Common Stock may cause current shareholders of the Company
to suffer significant dilution which may adversely affect the market for the
securities of the Company. See "Description of Securities."
Prospective investors should be aware that the possibility of
sales of shares of Common Stock in the future may depress the price of the
Common Stock in any market which may develop and, therefore, the ability of any
investor to market shares may be dependent directly upon the number of shares
that are offered and sold. Affiliates of the Company may sell their shares
during a favorable movement in the market price of the Common Stock which may
have a negative effect on its price per share. See "Description of Securities."
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<PAGE>
THE MERGER
GENERAL
In conjunction with the initial closing of the Private
Placement on July 30, 1996, the Company consummated the Merger. The Company was
the surviving entity in the Merger. Pursuant to the Merger, the Company issued
one share of Common Stock for each share of common stock of MEI then
outstanding, and changed its name from Shadow Wood Corp. to "Magicworks
Entertainment Incorporated." In addition, the Company amended its Certificate of
Incorporation to increase the number of authorized shares of Common Stock to
50,000,000 and to authorize 5,000,000, to shares of preferred stock, $.001 par
value, to be issued in such series and with such rights, preferences and
designations as determined by the Company's Board of Directors.
By virtue of the Merger, the Company has succeeded to all of
the rights, duties and obligations of MEI, including, but not limited to, the
contractual rights, duties and obligations arising under the Notes, the
Placement Agent Warrants and all other obligations incurred in connection with
the Private Placement. See "Certain Transactions."
Prior to the consummation of the Merger, the Company
effectuated a reverse stock split on a 1 for 12.5 basis which reduced its issued
and outstanding shares of common stock to 311,180 shares. All fractional shares
were rounded up to the nearest whole share.
CONSOLIDATION TRANSACTIONS AND S CORPORATION DISTRIBUTIONS
CONSOLIDATION TRANSACTIONS
MEI was formed in June 1996 as a holding company to facilitate
the consolidation of the operations of each of Diamond Bullet Merchandising,
Inc., a Florida corporation, Touring Artists Group, Inc., an Ohio corporation,
Touring Artists Group, Inc., a Florida corporation, Performing Arts Management
of North Miami, Inc., a Florida corporation, Magic Promotions, Inc., a Florida
corporation, and Magic Promotion, Inc., an Ohio corporation, all of which shared
common control, but which had operated previously as independent corporations
(the foregoing corporations are referred to herein collectively as the
"Constituent Corporations"). Concurrently with the initial closing of the
Private Placement on July 30, 1996, 100% of the outstanding capital stock of
each of the Constituent Corporations was acquired by the Company (the
"Consolidation").
The Consolidation complies with the requirements of SAB 48
and has therefore been accounted for at the historical cost bases of the
transferors.
On August 28, 1996, the Company consummated the Movietime
Acquisition in accordance with the terms of the Movietime Agreement. As a result
of the Movietime Acquisition, Movietime became a wholly-owned subsidiary of the
Company. Brad Krassner, Lee Marshall and Joe Marsh, the Co-Chairman of the Board
and Chief Executive Officer, President and Chief Operating Officer and
Co-Chairman of the Board of the Company, respectively, and Glenn Bechdel, a
principal stockholder of the Company, owned an aggregate of approximately 44.4%
of the common stock of Movietime outstanding immediately prior to the
Acquisition. See "Certain Transactions."
The Movietime Acquisition has been accounted for as a
pooling-of-interests in accordance with APB No. 16.
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<PAGE>
S CORPORATION DISTRIBUTIONS
Prior to the consummation of the Consolidation, MEI and the
Constituent Corporations elected to be treated as S corporations for federal and
state income tax purposes. As a result, MEI and the Constituent Corporations
paid no federal or state income tax, and all earnings of MEI and the Constituent
Corporations were subject to federal and state taxation directly at the
shareholder level. The practice of MEI and the Constituent Corporations was to
pay cash distributions to shareholders equal to the excess operating cash flow
generated by the operations of the Constituent Corporations.
In the fiscal year ended December 31, 1995, the Constituent
Corporations had retained undistributed earnings aggregating $5,625,113, of
which $3,816,129 was distributed to the shareholders of the Constituent
Corporations.
At July 30, 1996, the Company had retained and undistributed
earnings of $1,340,043. During 1996, the Company made S corporation
distributions aggregating $2,509,445 to the shareholders of MEI (including all
of the shareholders of the Constituent Corporations). No further S corporation
distributions will be made. Effective upon the consummation of the
Consolidation, the Company ceased to be treated as an S corporation, and,
accordingly, is now fully subject to federal and state income tax.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of
the Securities offered hereby. Management estimates that the aggregate expenses
of this offering will be approximately $1.9 million, all of which will be borne
by the Company.
PRICE RANGE OF COMMON STOCK
The Company has applied for the listing of the Common Stock on
NMS. The Company's Common Stock is currently quoted on the OTC Bulletin Board
under the symbol "MAJK". The following table sets forth the high and low bid
prices of the Common Stock for the period indicated in 1996. Prior to the
Merger, there was no active trading market for the Common Stock.
1996 HIGH LOW
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Third Quarter (July 30 through September 26) $4.25 $3.50
On September 4, 1996, the last reported bid price of the
Common Stock was $3.50 per share. As of that date, there were 235 holders of
record of the Common Stock.
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<PAGE>
DIVIDEND POLICY
Holders of Common Stock are entitled to dividends when, as and
if declared by the Board of Directors out of funds legally available therefor.
Prior to the Consolidation, the Constituent Corporations had elected to be
treated as S Corporations for federal and state income tax purposes, and paid
cash distributions to their shareholders equal to their excess operating cash
flow from operations. No further S Corporation distributions will be made. See
"Consolidation Transactions and S Corporation Distributions." The Company does
not anticipate the payment of any dividends in the foreseeable future. The
Company intends to retain future earnings, if any, to finance the development
and expansion of its business. Future dividend policy will be subject to the
discretion of the Board of Directors and will be contingent upon future
earnings, if any, the Company's financial condition, capital requirements,
general business conditions and other factors. Therefore, there can be no
assurance that any dividends of any kind will ever be paid. Further, the Notes
provide that the Company will not (i) declare or pay any dividend or make any
other distribution to the stockholders of the Company, except dividends or
distributions payable in equity securities of the Company, or (ii) purchase,
redeem or otherwise acquire or retire for value any equity securities of the
Company, except (a) an equity security acquired upon conversion thereof into
other equity securities of the Company and (b) any equity security issued to
employees, directors or other performing services in accordance with agreements
providing for such repurchase at original cost upon termination of employment,
membership on the Board of Directors or other affiliation with the Company.
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<PAGE>
CAPITALIZATION
The following table sets forth, as of June 30, 1996, the
capitalization of the Company and the pro forma capitalization to give effect to
the Consolidation and the Merger and the pro forma capitalization as adjusted to
reflect (i) the consummation of the Private Placement and the receipt and
application of the net proceeds therefrom and (ii) the Movietime Acquisition.
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------------------------------
PRO FORMA, AS
ACTUAL PRO FORMA(1) ADJUSTED(2)
------------- --------------- --------------
<S> <C> <C> <C>
Short-term debt................................. $1,726,213 $2,438,474 $ 2,438,474
------------- --------------- --------------
Long-term debt.................................. 565,500 $ 565,500 $ 5,751,250
------------- --------------- --------------
Stockholders' Equity:
Preferred Stock par value $.001 per
share, 5,000,000 shares authorized,
no shares issued and outstanding.... -- -- --
Common Stock par value $.001 per
share, 50,000,000 shares authorized,
21,874,300 shares issued and
outstanding(3); 23,074,299 shares
issued and outstanding as
adjusted(3)(4)...................... $ 100 $ 1,189 $ 23,074
Additional paid in capital...................... 889,377 1,175,926 5,197,118
Retained earnings............................... 1,890,296 1,370,093 1,400,114
------------- --------------- --------------
Total stockholders' equity ..................... 2,779,773 2,547,208 6,620,306
------------- --------------- --------------
Total capitalization............................ $5,071,486 $5,551,182 $14,810,030
============= =============== ==============
</TABLE>
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(1) Includes the results of each of the Constituent Corporations,
Movietime and Shadow Wood.
(2) As adjusted to give effect to the Private Placement and the
initial application of the net proceeds therefrom. Costs of
$778,186 associated with the Notes will be amortized over the
life of the Notes. If the Notes are retired prior to maturity
the unamortized costs will be (a) charged to operations if
the Notes are retired for cash or (b) charged against the
Common Stock if the Notes are converted to Common Stock.
(3) Does not include shares issuable upon the conversion of the
Notes, the exercise of the Placement Agent Warrants or the
exercise of Redeemable Warrants that may be issued upon
prepayment of the Notes in certain circumstances.
(4) As adjusted amount includes 1,199,999 Shares issued to the
Movietime Stockholders in connection with the Movietime
Acquisition.
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<PAGE>
SELECTED COMBINED FINANCIAL DATA
The selected combined financial data set forth below has been
derived from the combined financial statements of Magic Promotion, Inc., an Ohio
corporation ("MPIO"), and Magic Promotions, Inc., a Florida corporation, each of
which is a wholly-owned subsidiary of the Company. MPIO was deemed to be the
acquiring entity in the Consolidation. See Footnote 1, below. The combined
financial statements as of and for the years ended December 31, 1995, 1994 and
1993 have been audited by Ernst & Young LLP, independent certified public
accountants, and such combined financial statements and the report thereon are
included in this Prospectus. See Note 1 to the Combined Financial Statements.
The combined financial statements as of and for the years ended December 31,
1992 and 1991 and the six month periods ended June 30, 1995 and 1996 are derived
from the unaudited combined financial statements of MPIO, which in the opinion
of management, include all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the information set forth
therein. Interim results are not necessarily indicative of results for the
entire year. The following data does not include any pro forma adjustments for
the Consolidation, the Merger or the acquisition of Movietime, but represents
the actual combined operating results of MPIO. Pro forma financial data that
includes financial information with respect to (i) the Consolidation, (ii) the
Merger, and (iii) the acquisition of Movietime as though it had occurred at
Movietime's commencement in June 1995 appears elsewhere herein.
The selected financial data information set forth below should
be read in conjunction with the combined financial statements appearing
elsewhere in this Prospectus, including the notes thereto.(1)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------------- -------------------------
1991 1992 1993 1994 1995 1995 1996
------------- ---------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (unaudited) (unaudited)
Revenues:
Production........................... $ 494,197 $ 580,222 $18,151,149 $23,313,026 $31,638,078 $14,721,453 $16,361,156
Promotion............................ 3,915,582 3,700,157 10,009,734 6,268,273 6,668,672 4,573,186 5,126,007
Merchandising........................ 191,067 293,938 876,740 687,755 1,160,519 518,745 297,632
Other ............................... 395,088 306,858 475,630 873,032 1,237,126 212,503 357,693
------------- ---------- ------------ ----------- ----------- ----------- ------------
Total revenues............................ 4,995,934 4,881,175 29,513,253 31,142,086 40,704,395 20,025,887 22,142,488
Operating expenses:
Talent and other show................ 2,789,278 3,307,594 23,561,001 25,871,621 33,346,544 14,922,179 17,974,772
Salaries, wages and benefits......... 325,064 391,598 877,983 975,400 1,185,911 474,335 647,698
Cost of goods sold................... 189,621 193,797 589,356 470,775 408,697 306,811 249,937
General and administrative........... 528,556 448,904 551,888 801,361 1,160,873 606,083 830,288
------------- --------- ----------- ----------- ----------- ----------- ------------
Total operating expenses.................. 3,832,519 4,341,893 25,580,228 28,119,157 36,102,025 16,309,408 19,702,695
------------- --------- ----------- ----------- ----------- ----------- ------------
Income from operations.................... 1,163,415 539,282 3,933,025 3,022,929 4,602,370 3,716,479 2,439,793
Other income (expense):
Interest income ..................... 0 0 3,835 32,076 108,427 30,148 4,786
Interest expense..................... (32,498) (24,898) (16,369) (19,590) (60,488) (8,394) (156,870)
From investments in noncombining
productions...................... 0 440,963 364,976 417,071 418,679 270,812 27,165
Minority interests................... 0 0 (2,108,791) (1,535,495) (1,688,531) (1,654,605) (513,137)
------------- ---------- ---------- ---------- ----------- ----------- ------------
Net income................................ 1,130,917 955,347 2,176,676 1,916,991 3,380,457 2,354,440 1,801,737
Pro forma adjustment for income taxes(2).. (441,058) (372,585) (848,904) (747,626) (1,318,378) (918,232) (702,677)
------------- ---------- ---------- ---------- ----------- ----------- ---------
Pro forma net income(2)................... $ 689,859 $ 582,762 $ 1,327,772 $ 1,169,365 $ 2,062,079 $ 1,436,208 $ 1,099,060
============= ========== =========== =========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AS OF JUNE 30,
---------------------------------------------- ----------------------
1992 1993 1994 1995 1995 1996
---------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............. $1,006,052 $519,621 $1,310,604 $1,220,852 $1,210,079 $557,894
Total assets................. 2,122,955 2,056,353 5,366,157 6,020,468 4,781,645 6,973,445
Total liabilities............ 1,510,042 1,015,389 3,765,103 4,531,993 2,395,529 4,193,672
Total shareholders' equity... 612,913 1,040,964 1,601,054 1,488,475 2,386,116 2,779,773
</TABLE>
- ------------------------------
(1) The Consolidation complies with the requirements of SAB 48 and has
therefore been accounted for at the historical cost bases of the
transferors. The Movietime Acquisition has been accounted for as a
pooling-of-interests in accordance with APB No. 16.
(2) Reflects the effect of an adjustment for income taxes on historical
statement of operations data, assuming the Constituent Corporations
had been treated as C corporations rather than S corporations for
income tax purposes, and assuming an effective income tax rate of 39%
for the periods presented. See "Consolidation Transactions and S
Corporation Distributions."
-15-
<PAGE>
SELECTED COMBINED PRO FORMA FINANCIAL DATA
The selected combined pro forma financial data of the Company
set forth below shows the pro forma effect of (i) the Consolidation and (ii) the
Merger. The combined financial statements as of and for the six month period
ended June 30, 1996 are derived from the unaudited financial statements of the
Company, which, in the opinion of management, include all adjustments
(consisting of only normal recurring adjustments) necessary for a fair
presentation of the information set forth therein. The selected pro forma
combined financial information is not necessarily indicative of the operating
results or financial position that would have occurred had the events referred
to above been consummated on the dates for which the consummation of such events
is being given effect, nor is it necessarily indicative of future operating
results or financial position.
The selected financial data set forth below should be read in
conjunction with the combined financial statements of the Company appearing
elsewhere in this Prospectus, including the notes thereto.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------------- ----------- -------------------------
1993 1994 1995 1995 1995 1996 1996
----------- ----------- ---------- ----------- ----------- ----------- -------------
AS ADJUSTED(1) AS ADJUSTED(1)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Production.............................. $18,250,149 $23,346,244 $31,638,078 $31,638,078 $14,721,453 $16,361,156 $16,361,156
Promotion............................... 10,009,734 6,268,273 6,668,672 6,668,672 4,573,186 5,126,007 5,126,007
Merchandising........................... 2,461,577 2,338,619 2,474,214 2,474,214 1,211,935 1,134,213 1,134,213
Other................................... 1,445,791 1,463,057 1,953,135 1,953,135 495,396 1,098,078 1,109,715
----------- ------------ ---------- ----------- ----------- ----------- -----------
Total revenues 32,167,251 33,416,193 42,734,099 42,734,099 21,001,970 23,719,454 23,731,091
Operating expenses:
Talent and other show running expenses.. 23,254,751 25,449,871 32,945,744 32,945,744 14,698,421 17,925,381 17,925,381
Salaries, wages and benefits............ 1,333,330 1,529,300 1,890,938 2,056,339 819,250 1,032,670 1,132,383
Cost of goods sold...................... 1,860,777 1,824,102 1,462,364 1,462,364 847,952 876,917 876,917
General and other operating expenses.... 1,161,347 1,436,139 1,743,081 2,137,479 901,076 1,259,556 1,637,786
----------- ----------- ---------- ----------- ----------- ----------- -----------
Total operating expenses..................... 27,610,205 30,239,412 38,042,127 38,601,926 17,266,699 21,094,524 21,572,457
Income from operations....................... 4,557,046 3,176,781 4,691,972 4,132,173 3,735,271 2,624,930 2,158,634
Other income (expense):
Interest income......................... 6,579 14,801 109,060 109,060 30,516 5,187 5,187
Interest expense........................ (79,686) (20,011) (88,015) (611,420) (21,490) (168,911) (455,499)
From investments in noncombined
productions........................... 364,976 417,071 418,679 418,679 270,812 27,165 27,165
Minority interests...................... (1,828,358) (1,460,444) (1,446,888) (1,446,888) (1,417,782) (488,548) (488,548)
Net income before taxes...................... 3,020,557 2,128,198 3,684,808 2,601,604 2,597,327 1,999,823 1,256,939
Pro forma adjustment for income taxes(2)..... (1,178,017) (829,997) (1,437,075) (1,014,626) (1,012,958) (779,931) (490,206)
Pro forma net income......................... 1,842,540 1,298,201 2,247,733 1,586,978 1,584,369 1,219,892 766,733
Weighted average common shares and
common stock equivalents outstanding....... 23,074,299 23,074,299
Pro forma net income per share............... $0.07 $0.03
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------- -------------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................. $ 10,735 $1,039,416 $ 144,174 $1,065,209 $ 263,026
Total assets.................... 3,270,656 6,206,271 7,610,297 5,448,114 8,844,771
Total liabilities............... 1,881,671 4,305,966 5,801,313 2,842,953 5,571,967
Total shareholders' equity...... 1,388,985 1,900,305 1,808,984 2,605,161 3,272,804
</TABLE>
- ------------------------------
(1) Includes the results of each of the Constituent Corporations, as adjusted
to give effect to (i) the Private Placement and the initial application of
the net proceeds therefrom and (ii) the Movietime Acquisition.
(2) Reflects the effect of an adjustment for income taxes on historical
statement of operations data, assuming the Constituent Corporations had
been treated as C corporations rather than S corporations for income
tax purposes, and assuming an effective income tax rate of 39% for the
periods presented. See "Consolidation Transactions and S Corporation
Distributions."
-16-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MEI, the predecessor by merger to the Company, was formed in
June 1996 as a holding company to facilitate the consolidation of the operations
of each of the Constituent Corporations. Concurrently with the initial closing
of the Private Placement, MEI consummated the Consolidation.
The Consolidation complies with the requirements of SAB No. 48
and has therefore been accounted for at the historical cost bases of the
transferors. The Movietime Acquisition has been accounted for as a
pooling-of-interests in accordance with APB No. 16.
The following discussion is based upon the combined financial
statements of the Company. See the Combined Financial Statements of the Company.
GENERAL
The Company's revenues are derived principally from its
production and promotion activities, which, in 1995, accounted for approximately
74.0% and 15.6%, respectively, of the Company's total revenues. Additional
revenues are generated through the Company's merchandising division and its
management and booking operations, which in 1995 accounted for 5.8% and 1.8% of
revenues, respectively.
The Company's operating results have fluctuated significantly
from quarter to quarter and year to year, primarily as a result of the number of
shows or events in production, the timing and staging of productions, and the
Company's involvement in promotion as well as production in certain instances.
In addition, the season for most of the Company's theatrical productions runs
from September to June. While the Company engages in other businesses and
productions, including summer music tours, during the rest of the year, its
operating results have fluctuated significantly from quarter to quarter and year
to year, and may be expected to continue to do so in the future. Production
revenue results from the sale to local promoters of shows produced by the
Company in exchange for a guaranteed weekly fee, plus a percentage of box office
receipts and other revenue. In cases where the Company participates in the
promotion of a show it is producing, it becomes involved in the local
presentation, enhancing its opportunity for profits and exposing itself to
greater risk. In addition, the Company has derived a significant percentage of
its revenues and profits to date from one production, "The Magic of David
Copperfield." Although the percentage of revenues has decreased as the number of
the Company's other productions has increased, "David Copperfield" remains the
most significant component of the Company's earnings. This situation results in
part from the successful expansion of the "David Copperfield" production in
Europe and Asia, where the Company participates as a producer and a non-managing
promoter. With respect to its share of promotion receipts when it is the
non-managing promoter, the Company records its share of the net profits, but
does not record the corresponding revenues or expenses.
The majority of the Company's operating expenses consist of
preproduction and operating costs of its theatrical productions. Preproduction
costs include pre-opening advertising, publicity and promotions, set
construction, props, costumes, and salaries and fees paid to the cast, crew and
musicians and creative participants during rehearsals. Preproduction costs
incurred prior to the opening performance are capitalized to the balance sheet,
net of amounts received from investors. These costs are then amortized over the
guaranteed terms of the respective shows, which range from 12 to 24 months.
Operating costs are expensed as incurred. As discussed above, with respect to
revenues from promotions, when the Company participates in the promotion of a
profitable production, the managing promoter remits to the Company its share of
the net profits; accordingly, the Company's revenues are enhanced without any
charge to expenses. When the Company is the managing promoter, it records both
the associated revenues and expenses.
-17-
<PAGE>
As is typical in the industry, the Company generally
capitalizes its shows on an individual basis through limited partnerships and
joint ventures. Of the principal Company productions discussed below, the
Company owns a 50.0% interest in "Jesus Christ Superstar," a 57.1% interest in
"Hello Dolly!," a 72.3% interest in "Man of La Mancha," a 77.9% interest in "She
Loves Me," and a 33.3% interest in "Ain't Misbehavin'." The Company includes the
accounts of the entities that own those productions in its consolidated
financial statements, because the Company exercises significant control over
their operating and financial policies. The portions not owned by the Company
are presented as minority interests in the consolidated financial statements of
the Company.
The following table sets forth the shows that the Company
either produced or co-produced in each year from 1992 through 1995:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1992 1993 1994 1995
<S> <C> <C> <C>
Phantom of the Opera Phantom of the Opera Jesus Christ Superstar Jesus Christ Superstar
David Copperfield David Copperfield Man of La Mancha Hello, Dolly!
Jesus Christ Superstar Hello, Dolly! David Copperfield
Man of La Mancha David Copperfield Nutcracker on Ice
Nutcracker on Ice She Loves Me
Ain't Misbehavin'
Total for 1992: 2 Total for 1993: 4 Total for 1994: 5 Total for 1995: 6
- ----------------------------------------------------------------------------------------------------------
</TABLE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Total revenues increased by $2.7 million, or 12.9%, to $23.7
million in the six months ended June 30, 1996, from $21.0 million in the six
months ended June 30, 1995, primarily because of an increase in production
revenue as discussed below. Revenues from production increased 11.1%, from $14.7
million to $16.4 million, largely as a result of the production revenues
generated by the Styx/Lynyrd Skynyrd concert tour, which commenced in the six
months ended June 30, 1996, and an increase in production revenues attributable
to "Ain't Misbehavin'" and to "She Loves Me," as compared to the corresponding
period in 1995, offset in part by the reduction in production revenues from each
of "Jesus Christ Superstar," which had generated significant production revenues
in the 1995 period in connection with certain dates played at Madison Square
Garden, and "Hello Dolly!." In addition, promotional revenues increased by $6.5
million or 12.1% from $4.6 million to $5.1 million, largely as a result of the
commencement of concert promotional activity on the part of the Company which
did not exist in the prior period. The increase was also attributable in part to
increased promotional revenue from David Copperfield as compared to the prior
period and from the "Jesus Christ Superstar" dates played at Madison Square
Garden.
Merchandising revenues decreased by $0.1 million, or 6.4%, to
$1.1 million in the six months ended June 30, 1996 from $1.2 million in the six
months ended June 30, 1995. The Company's merchandising revenue is largely
dependent on the number of productions for which it has acquired merchandising
rights. The Company maintains such rights for all its own productions and
negotiates for merchandising rights to other touring shows. However, while the
Company handled as many shows in the 1996 period, the increased revenue did not
replace the unusually high level of sales for the New York production of "Jesus
Christ Superstar" in the six months ended June 30, 1995.
-18-
<PAGE>
As a percentage of revenues, operating expenses increased to
88.9% in the period 1996 from 82.2% in the corresponding period of 1995,
primarily because of a reduction of revenues that was not accompanied by a
corresponding reduction in expenses. The "Jesus Christ Superstar" production
converted to a lower operating cost production on February 12, 1996, but the
production was burdened by the higher costs of the original production for the
first 6 weeks of the period, despite the fact that it was not running in "Class
A" venues. Talent and other show running expenses increased $3.2 million, or
22.0%, to $17.9 million in the 1996 period from $14.7 million in the
corresponding period in 1995, primarily because of the addition of the
Styx/Lynyrd Skynyrd concert tour in the 1996 period, partially offset by the
change in the "Jesus Christ Superstar" production during the last half of the
first quarter of 1996, as discussed above. As a percentage of revenues, talent
and other show expenses increased to 75.5% for the period ended June 30, 1996,
from 70.0% in the corresponding 1995 period primarily as a result of the
expenses incurred in connection with "The Pointer Sisters Ain't Misbehavin'" and
"She Loves Me," neither of which was playing in the six month period ended June
30, 1995.
Salaries, wages and benefits during the six months ended June
30, 1996 increased by $0.2 million, or 26.1%, to $1.0 million from $0.8 million
during the corresponding period in 1995 due to the hiring of five additional
tour bus drivers, two additional promoters and five additional administrative
employees. As a percentage of revenues, salaries, wages and benefits remained
constant at 4% the six months ended June 30, 1995 and 1996.
Cost of goods sold relates to expenses involved in the
generation of merchandising revenue, including costs of merchandise, producer,
venue and vendor commissions, and shipping and other similar costs. As a
percentage of merchandising revenue, the costs of goods sold rose slightly to
77.3% in the six months ended June 30, 1996 from 70.0% in the corresponding
period in 1995, primarily because of increased vendor commissions paid in
connection with "Jesus Christ Superstar." General and other operating expenses
increased by $0.4 million, or 39.8%, to $1.3 million in the 1996 period from
$0.9 million in the corresponding prior period. The primary reason for the
increase was additional depreciation on the Company's buses, five of which were
acquired in late 1995.
The Company incurred net interest expense of $163,724 in 1996
compared to net interest income of $9,026 in 1995, primarily as a result of its
borrowings under a line of credit to support the operations of MovieTime and
preproduction expenses in connection with the "She Loves Me," Styx/Kansas Tour,
Lynyrd Skynyrd/Doobie Brothers Tour and "Deathtrap" productions and the
writedown of accrued interest receivable during the period.
Expenses in respect of minority interests were significantly
higher in the six months ended June 30, 1995, as compared to the six months
ended June 30, 1996, as a result of the higher profit level in the relevant
productions. In the six months ended June 30, 1995, the Company had $1.4 million
of expense in respect of minority interests, and in the corresponding period in
1996, the Company only recorded $0.5 million of such expense. The Company
records the portions of its productions which are not owned by the Company as
minority interests.
As a result of the foregoing, net income decreased by $0.6
million, or 23.0%, to $2.0 million in the six months ended June 30, 1996 from
$2.6 million in the corresponding period of 1995. Pro forma net income decreased
$0.4 million to $1.2 million in the 1996 period, from $1.6 in the 1995 period.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues increased by $9.3 million, or 27.9%, to $42.7 million
in 1995 from $33.4 million in 1994, primarily because the Company produced more
shows in 1995, including "Jesus Christ Superstar," "David Copperfield," "Hello
Dolly!," "She Loves Me" and "Ain't Misbehavin'." In 1994, the Company realized
production revenues from full seasons of "David Copperfield" and "Jesus Christ
Superstar" but only partial seasons of "Hello, Dolly!" and "Man of La Mancha."
While revenue from promotion stayed relatively constant ($6.7
million in 1995 compared to $6.3 million in 1994) as a result of the Company
promoting approximately the same number of shows in both years, production
revenue increased by $8.3 million (35.5%), from $23.3 million to $31.6 million.
The increase resulted primarily
-19-
<PAGE>
from the addition of revenues from "Hello, Dolly!" (which opened at the end of
1994 and ran through January 1996), "She Loves Me" and "Ain't Misbehavin'" to
the existing productions of "David Copperfield" and "Jesus Christ Superstar,"
partially offset by the loss of revenues from "Man of La Mancha." Revenue from
"Hello, Dolly!" increased from $7.9 million in 1994 to $16.4 million in 1995,
which offset the reduction in revenue from "Jesus Christ Superstar" from $14.7
million in 1994 to $10.4 million in 1995.
Merchandising revenues increased by $0.2 million, or 5.8%, to
$2.5 million in 1995 from $2.3 million in 1994. The Company's merchandising
revenue is largely dependent on the number of productions for which it has
acquired merchandising rights. The Company maintains such rights for all its own
productions and negotiates for merchandising rights to other touring shows. In
1995, the Company provided merchandising for eight shows, as opposed to nine
shows in 1994. It was able to increase revenue, however, by increasing the
number of tour dates for David Copperfield in 1995.
As a percentage of revenues, operating expenses decreased to
89.0% in 1995 from 90.5% in 1994, primarily because the 1995 results included
revenues, but no expenses, from promotions in which the Company was not the
managing promoter. Talent and other show running expenses increased $7.5
million, or 29.5%, to $32.9 million in 1995 from $25.4 million in 1994,
primarily as a result of the significant increase in expenses for "Hello,
Dolly!," from $7.3 million in 1994 to $14.6 million in 1995, reflecting the
increased period of operation. As a percentage of revenues, talent and other
show expenses remained relatively constant, at 77.1% in 1995 and 76.2% in 1994.
Salaries, wages and benefits increased by $.4 million, or
23.6%, to $1.9 million in 1995 from $1.5 million in 1994. The increase resulted
from additional personnel, primarily in the booking operation, and additional
personnel to oversee the "David Copperfield" tour. As a percentage of revenues,
salaries, wages and benefits decreased to 4.4% as compared to 4.6% in 1994.
As a percentage of merchandising revenue, the costs of goods
sold declined to 59.1% in 1995 from 78.0% in 1994, primarily because of a
decrease in the unit cost of the merchandise in 1995. General and other
operating expenses increased by $0.3 million, or 21.4%, to $1.7 million in 1995
from $1.4 million in 1994. The primary reason for the increase related to
increased maintenance and repairs for tour buses and additional costs associated
with the leasing of buses as compared to costs associated with Company-owned
buses purchased in 1995.
Income from investments in limited partnership productions not
produced by the Company remained stable at $0.4 million in 1995 and 1994.
The Company had net interest income of $21,045 in 1995
compared to net interest expense of $5,210 in 1994. The increase was primarily
attributable to increased loans to affiliates.
Minority interest expense was constant at $1.5 million in 1995
and 1994. In 1995, the expense related primarily to the portions of "Hello,
Dolly!," "She Loves Me," "Jesus Christ Superstar" and "Ain't Misbehavin'" not
owned by the Company. In 1994, the expenses related to such interests in "Jesus
Christ Superstar," "Hello, Dolly!" and "Man of La Mancha."
Net income increased by $1.6 million (73.1%) as a result of
the foregoing, to $3.7 million in 1995 from $2.1 million in 1994. Pro forma net
income increased by $0.9 million (73.1%) to $2.2 in 1995 from $1.3 in 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Revenues increased by $1.2 million, or 3.9%, to $33.4 million
in 1994 from $32.2 million in 1993, primarily because the Company produced more
shows in 1994, including "Jesus Christ Superstar," "David Copperfield," "Hello
Dolly!" and "Man of La Mancha." In 1993, the Company realized production
revenues from "David Copperfield," "Jesus Christ Superstar," "Man of La Mancha"
and "Ken Hill's Phantom of the Opera."
-20-
<PAGE>
While revenues from production increased from $18.3 million in
1993 to $23.3 million in 1994 as a result of the Company producing more
performances in 1994, including $7.9 million in revenues from "Hello, Dolly!"
which opened at the end of 1994, promotion revenues decreased by $3.7 million
(37.4%), from $10.0 million to $6.3 million. The decrease resulted primarily
from the fact that the Company promoted a successful subscription series in
Mexico City during 1993, including "Man of La Mancha," "David Copperfield" and
"Ken Hill's Phantom of the Opera," as well as certain first-class presentations
of "Jesus Christ Superstar." During 1994, as a result of uncertainty involving
the devaluation of the peso, the Company declined to present a series in Mexico
City. It also did not recognize the same level of promotion revenues from its
ongoing presentation of "Jesus Christ Superstar" in 1994.
Merchandising revenues remained relatively constant,
decreasing by $0.1 million, or 5.0%, to $2.3 million in 1994 from $2.4 million
in 1993. The Company's merchandising revenue is largely dependent on the number
of productions for which it has acquired merchandising rights. The Company
maintains such rights for all its own productions and negotiates for
merchandising rights to other touring shows. In each of 1994 and 1993, the
Company provided merchandising for nine shows.
As a percentage of revenues, operating expenses increased to
90.5% in 1994 from 85.8% in 1993, primarily because the 1993 results included
revenues, but not expenses, from promotions in which the Company was not the
managing promoter. Talent and other show running expenses increased $2.2
million, or 9.4%, to $25.5 million in 1994 from $23.3 million in 1993, primarily
as a result of the inclusion of expenses for "Hello, Dolly!" of $7.3 million in
1994, reflecting its opening in late 1994. For the same primary reason, talent
and other show expenses as a percentage of revenues increased from 72.3% in 1993
to 76.2% in 1994. The increase also reflected production costs related to "Hello
Dolly!" in 1994.
Salaries, wages and benefits increased by $0.2 million, or
14.7%, to $1.5 million in 1994 from $1.3 million in 1993. The increase resulted
from additional personnel. As a percentage of revenues, salaries, wages and
benefits increased slightly to 4.6% in 1994 from 4.1% in 1993.
As a percentage of merchandising revenues, the costs of goods
sold increased slightly to 78.0% in 1994 from 75.6% in 1993. General and other
operating expenses increased by $0.3 million, or 23.7%, to $1.4 million in 1994
from $1.1 million in 1993.
Expenses in respect of minority interests decreased from $1.8
million in 1993 to $1.5 million in 1994. In 1993, the additional expense related
primarily to the significant portions of "Jesus Christ Superstar" not owned by
the Company in light of the significant contribution of that production to
profits for that year. In 1994, the expenses related to such interests in "Jesus
Christ Superstar," "Hello, Dolly!" and "Man of La Mancha."
As a result of the foregoing, net income decreased by $0.9
million (29.5%) to $2.1 million in 1994 from $3.0 million in 1993. Pro forma net
income decreased by $0.5 million (29.5%) to $1.3 million in 1994 from $1.8
million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had working capital of $0.3
million compared to $1.1 million at December 31, 1995. Since inception, the
Company has financed its operations primarily through borrowings, cash flow from
operations and limited partnerships and joint ventures. In July 1996, the
Company received net proceeds of $8,919,350 from the sale of the Units in the
Private Placement, and in September 1996 it received additional net proceeds of
$333,000 from the sale of 14.8 additional Units in the Private Placement. The
Company's principal sources of liquidity are the net proceeds from the Private
Placement and its cash flow from operating activities, which was $3.3 million
for the year ended December 31, 1995. The Company believes that its positive
cash flow, together with availability under its credit lines and the proceeds of
the Private Placement, will be sufficient to satisfy its financial operating
requirements for at least the next 12 months.
-21-
<PAGE>
The Company has made significant distributions to its
principals in prior periods ($3.8 million in 1995 in addition to salaries), a
portion of which was distributed in respect of the tax liabilities of such
individuals for the Company's operations as an S corporation. At July 30, 1996,
the Company had retained and undistributed earnings of $1,340,043. During 1996,
the Company made S corporation distributions aggregating $2,509,445 to the
shareholders of MEI (including all of the shareholders of the Constituent
Corporations). No further S corporation distributions will be made.
As is typical in the industry, the Company generally
capitalizes its shows on an individual basis through limited partnerships and
joint ventures. The limited partners or joint venturers invest funds to defray
the production costs in exchange for which they are entitled to a portion of the
profits, if any, from the production. Frequently, the Company selects limited
partners from among participants in the presentation of a production. The
Company also occasionally invests as a limited partner in its own and in other
productions.
The Company has two lines of credit and other short term
borrowings which expire at various times during 1996 (the "Credit Lines"). The
Credit Lines provide for short-term borrowings of up to $1.6 million in the
aggregate, with interest ranging from prime plus 3/4% to prime plus 1%. The
Credit Lines are collateralized by substantially all of the Company's assets and
are guaranteed by certain executive officers of the Company. At September 23,
1996, no amount was outstanding under the Credit Lines and the full amount
thereof was available for borrowing. The Company's remaining indebtedness
relates primarily to loans, in the approximate aggregate principal amount of
$0.7 million, collateralized by buses used in the Company's business.
The Company has royalty and employment agreements with certain
authors, actors, directors and choreographers and their respective unions. These
agreements generally have terms of between one and three years, and provide for
minimum compensation levels. Certain of such agreements also provide for
incentive bonuses based upon specified goals. The aggregate commitment for
future salaries and royalties, excluding bonuses, as of December 31, 1995 was
approximately $2.3 million, all of which will be paid during 1996.
The Company's principal anticipated capital expenditures over
the next several years will relate to investments in equipment for Movietime,
possible acquisitions, if suitable opportunities arise, and the production of
additional theatrical productions, including "The Hunchback of Notre Dame." The
aggregate amount of such capital expenditures is expected to approximate $10.0
million.
-22-
<PAGE>
BUSINESS
GENERAL
The Company acquires domestic and international stage and
ancillary rights to theatrical productions, produces and promotes live
entertainment, manages and books performances and shows, and merchandises a
broad range of products associated with its productions and performers. Prior to
1992, the Company focused primarily on, and generated the majority of its
revenue from, the worldwide production of "The Magic of David Copperfield," as
well as its management and booking agency and merchandising businesses and was
not involved in other large scale productions. In 1992, the Company began to act
regularly as producer and co-producer in cases in which the Company determined,
based on the responses to its booking inquiries, that the demand for a
production was strong. In some cases, the Company also obtained additional
rights associated with the show, such as the ability to present the show in
certain venues.
In keeping with its strategy to further broaden its own
business by acquiring entertainment related businesses. On August 28, 1996 the
Company acquired all of the issued and outstanding capital stock of Movietime.
Movietime has developed and implemented an interactive telecommunications
service that provides digital telephone delivery systems to movie theaters.
GROWTH STRATEGY
The Company has recently experienced significant growth,
primarily as a result of the success of its productions as well as its continued
diversification. The Company's strategy has been to integrate the financing,
production, booking and ancillary exploitation of live entertainment. The
Company believes that its integrated approach enables it to exercise control
over the significant aspects of its productions--theater management, theatrical
production and promotion, marketing and merchandising.
The Company believes that the touring live entertainment
industry is a high-growth industry. The Company seeks to acquire touring rights
for well-established, popular musicals. The Company's strategy is to use its
management and booking division to determine the demand for live entertainment
productions prior to financing such productions. The Company plans to exploit
its experience and contacts with performers, venues, presenters and sponsors by
expanding its operations, as opportunities arise, in the areas of sports,
management speakers bureaus, fashion management, corporate sponsorship, music,
movies and television. The Company believes that its relationships in the
entertainment industry will facilitate its expansion into other areas,
particularly with respect to facility management, production and presentation
opportunities.
The Company also perceives an opportunity to grow through
acquisitions of regional, national and international entertainment producers and
presenters and related businesses. Consistent with its growth strategy, the
Company will also seek to expand its operations, as opportunities arise, by
acquiring local and regional companies with market niches in the entertainment
industry. The Company believes that there are significant acquisition
opportunities available due to the highly fragmented nature of the live
entertainment industry.
THE THEATRICAL PRODUCTION BUSINESS
The development and production of musical stage productions
requires a substantial investment of time and capital. A period of one to 24
months typically elapses between the time a producer acquires the theatrical
stage rights and the date on which the production is first performed before the
public. The production budgets for the Company's major touring musical
productions, including pre-opening advertising costs, typically range from
approximately $1 million to $3 million, depending on the nature of the
production. By comparison, dramatic
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productions, musical acts and one-person shows generally have smaller production
budgets, shorter preproduction periods and lower operating costs, and tend to
occupy smaller theaters for shorter runs.
Initially, the producer acquires the theatrical stage rights
in a musical work created by a composer, lyricist and book writer (collectively
the "Authors"). In consideration for these rights, the Authors typically receive
royalties calculated as a percentage of box office receipts and occasionally a
share of production profits. The producer then assembles all of the elements
necessary to mount the production, first engaging a director. The producer and
director, in collaboration with the Authors, select other key creative personnel
who are then engaged by the producer. The contractual arrangements with key
creative personnel (other than principal performers except in rare
circumstances) usually include royalties and, less commonly, production profit
participation.
Following auditions, performers are customarily engaged by
negotiations with talent agents. During a production's preproduction phase, the
producers arrange for or coordinate set construction, costume preparation,
lighting and sound equipment (leased or purchased), rehearsal and theater
bookings and generally develop the production to the point where it is ready to
be performed before an audience. Well in advance of the opening, the producer
develops and begins to execute a marketing plan for the production.
A producer typically finances a theatrical production at least
in part with project financing from third parties. A limited partnership or
joint venture often is created for that purpose, with the limited partners or
joint venturers investing funds to defray the production costs in order to earn
a negotiated portion of any production profits. Limited partnerships and joint
ventures are common in the theater and motion picture industries and enable
producers to limit risk and conserve working capital for other productions.
Investors in limited partnerships frequently bear substantially all of the
financial risk associated with a production and typically receive approximately
50% of the profits, if any, after their initial investment is recouped.
Expenses of developing a production that are incurred prior to
the first performance of that production are usually described as preproduction
costs or production costs. Preproduction costs include expenses for pre-opening
advertising, publicity and promotions, set construction, props, costumes, and
salaries and fees paid to the cast, crew, musicians and other creative personnel
during rehearsals. In the case of a touring production, preproduction costs also
include all expenses associated with moving the production from venue to venue.
Expenses incurred after a production's first performance are
termed operating costs or running costs. Operating costs include post-opening
advertising, publicity and promotions, salaries of the cast, crew and musicians,
equipment rental, theater rental, royalties payable to creative personnel and,
after the recovery of all production costs, third-party profit participation, if
any.
For touring productions presented in a series of venues, the
allocation between preproduction costs and operating costs is more complicated.
For example, for a production that is to tour in four cities, advertising
expenses incurred after the first performance in the first city may be operating
costs (if incurred in the first city) or preproduction costs (if incurred in any
of the other cities before the first performance in that city). Similarly,
moving costs typically are accounted for as preproduction costs. As a result,
unrecouped preproduction costs of a touring production may fluctuate upward,
even if the tour is generating operating profits, depending upon the levels of
advertising, moving and other costs incurred during the tour.
A production's revenues are only recognized as each
performance is presented. While tickets are usually sold well in advance of the
performance date, the revenue from each advance ticket is offset by the
potential liability that may arise if the performance is not presented and the
ticket price must be refunded. The arrangements for investing advance box office
receipts and the allocation of interest earned on those funds prior to the
performance by which such funds have been generated are often complex and the
subject of negotiations among the producer, the theater owner or manager, and
any ticket-selling agency engaged for the particular production.
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Royalties payable to the Authors, to creative production
personnel and to producers are generally calculated as a percentage (typically
8% to 16% in total) of box office receipts (gross ticket sales revenues, net
only of taxes, credit card charges and other agreed deductions). Alternatively,
Authors and creative talent can be remunerated on a profit pool basis whereby
they receive an agreed percentage of weekly operating profits (box office
receipts net of operating costs).
The point at which aggregate operating profits from the
production are equivalent to the preproduction costs is called recoupment and
operating profits earned by the production thereafter are called production
profits. Some royalty arrangements provide that recoupment triggers an increase
in the percentage of royalties to which creative personnel are entitled. Of
course, for an unsuccessful production recoupment may not occur.
THE COMPANY'S THEATRICAL AND CONCERT PRODUCTIONS
GENERAL
After the Company or one of its co-producers acquires the
right to produce a show, typically by paying a fee to the owner of the rights to
the show, the Company secures written offers from local presenters who guarantee
the Company minimum levels of weekly revenues. When the Company has secured
enough guaranteed contracts, it then finances the show. As is typical in the
industry, the Company finances its shows on an individual basis by selling
limited partnership interests to investors who assume much of the financial risk
associated with the show. The Company acts as general partner and attempts to
solicit as limited partners entities that will have a stake in the success of
the show, such as presenters and theater owners, as well as other investors. In
addition, the Company itself will occasionally have a limited partnership
interest in its productions, thereby assuming a greater portion of the risk
itself. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- General."
Since 1992, the Company has acted as producer or co-producer
for seven major productions in addition to "The Magic of David Copperfield:" the
national tour of "Jesus Christ Superstar," by Andrew Lloyd Webber and Tim Rice,
"Man of La Mancha," "Hello, Dolly!" starring Carol Channing, "South Pacific"
starring Robert Goulet, "Nutcracker on Ice" starring Olympic gold medal figure
skater Oksana Baiul (as well as Olympic figure skaters Brian Boitano and Viktor
Petrenko), "The Pointer Sisters Ain't Misbehavin'" and "She Loves Me." In the
year ended December 31, 1995, the Company produced or co-produced five
productions: "Jesus Christ Superstar," by Andrew Lloyd Webber and Tim Rice, "The
Magic of David Copperfield," "She Loves Me," "Hello, Dolly!" and "Nutcracker on
Ice." The Company currently is producing or has the rights to produce six
additional productions: "Deathtrap," "A Chorus Line," "Gershwin on Ice," "The
Pointer Sisters Ain't Misbehavin'," a concert tour of Styx together with Lynyrd
Skynyrd and "The Hunchback of Notre Dame."
The Company's revenues from its production activities have
increased significantly, from $18.2 million in the year ended December 31, 1993
to $31.6 million in the year ended December 31, 1995. For the years ended
December 31, 1994 and 1995, production activities accounted for approximately
69.9% and 74.0%, respectively, of the Company's revenues.
MAJOR PRODUCTIONS
The following is a summary discussion of the major productions
that the Company is currently producing or co-producing:
"JESUS CHRIST SUPERSTAR"
Since the opening of the Company's production of "Jesus Christ
Superstar" by Andrew Lloyd Webber and Tim Rice in December 1992, the tour has
generated revenues for the Company in excess of $75.5 million. Total
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pre-production costs for this show were approximately $1.1 million, of which the
Company's total capital investment was approximately $0.5 million. The
production stars Ted Neeley and Carl Anderson, the original stars from the
motion picture, and is currently booked through February, 1997.
"DAVID COPPERFIELD"
"The Magic of David Copperfield" has been produced by the
Company on a continuous basis since 1982, and is presently booked through 1997.
The Company's contract with David Copperfield runs through December 2000.
"HELLO, DOLLY!"
The Company launched a tour of "Hello, Dolly!" starring Carol
Channing, in July 1994. The show is expected to tour the United States through
the middle of 1997 and to date has generated ticket sales in excess of $35.0
million. Total preproduction costs for this show were approximately $2.5
million, of which the Company's total capital investment was approximately $1.0
million.
"AIN'T MISBEHAVIN'"
The Company co-owns the North American touring rights for
"Ain't Misbehavin'" formerly starring the Pointer Sisters and currently starring
Martha Reeves and the Vandellas. The show opened in September 1995 and is
scheduled to run through 1996 after which time the Company expects to restage
the show to tour smaller markets. To date the show has generated revenues of
$7.0 million for the Company and is scheduled to run through February, 1997.
Total preproduction costs for this show were approximately $1.2 million, of
which the Company's total capital investment was approximately $0.4 million.
"DEATHTRAP"
The Company is currently co-producing a revival of
"Deathtrap," Ira Levin's comedy thriller, and one of the longest running
non-musical plays in Broadway history. The Company's revival, which stars
Elliott Gould and Mariette Hartley, is the first major touring revival of this
show. Preproduction costs associated with this show were approximately $0.8
million, of which the Company's total capital investment aggregated
approximately $0.5 million. The show's tour commenced in September 1996.
"SINGIN' IN THE RAIN"
The Company expects to co-produce a touring production of
"Singin' in the Rain," which is based on the movie of the same name. This stage
production will feature the original Comden and Green book and is expected to
include all of the song-and-dance numbers associated with the cinematic
production, such as SINGIN' IN THE RAIN. Preproduction costs associated with
this show are expected to aggregate approximately $0.4 million, of which the
Company's total capital investment is expected to aggregate approximately $0.2
million. The Company anticipates that the show's tour will commence in January
1997 and has generated approximately 20 weeks in guaranteed bookings to date.
"GERSHWIN ON ICE"
The Company expects to co-produce "Gershwin on Ice," a tribute
celebrating the music of George and Ira Gershwin. The production features 26
Gershwin classics, including RHAPSODY IN BLUE, AN AMERICAN IN PARIS and SOMEONE
TO WATCH OVER ME, as well as a cast of thirteen Olympic, World and National
Champion skaters, and was conceived to combine grace and athleticism, music and
dance, art and sport. The tour is expected to feature some of the most
recognizable names in professional figure skating, including Dorothy Hamill and
Nancy Kerrigan.
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Preproduction costs associated with this show are expected to
aggregate approximately $0.3 million, of which the Company's total capital
investment is expected to aggregate approximately $0.1 million. The Company
anticipates that the show's tour will commence in January 1997.
"THE HUNCHBACK OF NOTRE DAME"
The Company expects to co-produce this new musical which is
based on Victor Hugo's classic novel of the same name. The Company's production
was written by Dennis DeYoung (the lead singer and songwriter of Styx). The show
is currently in the workshop stage and is expected to be ready for production in
1997. Preproduction costs associated with this show are expected to aggregate
approximately $3.0 million, of which the Company's total capital investment is
expected to aggregate approximately $1.5 million. The Company anticipates that
the show's tour will commence in September 1997.
VARIETY SERIES
The Company is currently co-producing a variety series in
Chicago, Illinois. The series is expected to feature performances by such
artists as Wayne Newton, Barry Manilow, the Righteous Brothers, Mannheim
Steamroller Christmas Show and David Copperfield.
SUMMER MUSIC TOURS
The Company has recently completed co-producing two major
summer tours in 1996: a 65-city summer tour of the musical group Styx, which is
expected to feature all of the band's original members (headed by
singer/songwriter Dennis DeYoung), together with Kansas, as well as a
coast-to-coast amphitheater tour featuring Lynyrd Skynyrd together with the
Doobie Brothers. The Company's total capital investment in these shows is
expected to aggregate approximately $0.4 million and $0.3 million, respectively.
MANAGEMENT AND BOOKING
The Company acts as the management and booking agent for a
variety of live entertainment events. As management and booking agent, the
Company is retained by producers to arrange bookings for the tours of various
theatrical presentations, musical acts and one person shows. The Company then
markets the productions to presenters throughout the world, and is paid a fixed
fee or a percentage of proceeds, without investing any of its own capital. The
Company currently acts as exclusive management and booking agent for over 23
shows, including "Three Tall Women," "She Loves Me" and the national touring
company of "A Chorus Line;" musical acts such as the Newport Jazz All-Stars and
the Preservation Hall Jazz Band; and one-person shows such as Hal Holbrook in
"Mark Twain Tonight," James Whitmore in "Will Rogers USA," Amanda Plummer in
"The Belle of Amherst," Kevin McCarthy in "Give 'Em Hell Harry!" and comedian
George Carlin. In addition, the Company's booking division has recently signed
an exclusive agreement to represent the new musical "Big," which is now playing
on Broadway, for all touring bookings in the U.S. and Canada except for New
York, Los Angeles and Toronto.
The Company's revenues from its management and booking
activities have increased from $0.5 million in the year ended December 31, 1992
to $1.2 million in the year ended December 31, 1995. In 1992, the Company
successfully booked and managed "Jesus Christ Superstar" by Andrew Lloyd Webber
and Tim Rice. This success was followed by the Company's booking of "Hello
Dolly!" starring Carol Channing in 1994 and "She Loves Me" and "The Pointer
Sisters Ain't Misbehavin'" in 1995. The Company is currently acting as exclusive
booking agent for "Blue Suede Shoes." As a result of these and other successes
of its booking and management activities, the Company believes it has become a
significant factor in the industry in bringing first class touring Broadway
shows to secondary U.S. and major foreign markets. The management and booking
division continues to book the Company's touring production of "Jesus Christ
Superstar" and has generated $2.0 million in guaranteed bookings for the "Hello,
Dolly!" tour. The Company has continued to book long-term clients such as David
Copperfield and
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Hal Holbrook and the Company's management and booking division has continued to
expand the Company's international booking power by booking profitable tours
overseas. The management and booking division generated booking guarantees for
its clients aggregating in excess of $27.0 million in 1995.
VENUE OPERATIONS
The Company is involved in the operation, management and
development of venues for the presentation of a wide variety of live
entertainment. The Company believes that its relationships in the entertainment
industry will facilitate the expansion of its venue operations. As part of its
growth strategy, the Company intends to continue to expand its venue operations.
NORTH MIAMI PERFORMING ARTS AMPHITHEATER
The Company has a long term management contract with the City
of North Miami, Florida to develop, construct, manage and operate the City's
proposed $2.0 million Amphitheater. The project is planned to be constructed on
Biscayne Bay, 15 miles south of Fort Lauderdale and 15 miles north of downtown
Miami. The project is currently in the permitting stage, and in addition to
permitting, is subject to substantial contingencies relating to environmental
concerns.
With a planned open air capacity in excess of 25,000 people
and an under-roof capacity ranging from 3,000 to 15,000 people, the facility is
expected to be capable of accommodating at least one million people per year. If
construction were to begin and proceed on schedule, the facility would be
expected to open during 1998; however, construction has been delayed as a result
of the inability of the City to obtain certain permits and, consequently, the
Company is unable to predict when construction will commence.
The 30-year term of the Company's management contract with the
City of North Miami will commence on the date of occupancy. Pursuant to the
agreement, the Company has agreed to pay to the City: (i) an annual minimum
return of $0.2 million, which amount will be adjusted annually to reflect
changes in the consumer price index but will not exceed $0.5 million per annum,
(ii) a use fee charge equal to 5% of revenues from box office ticket sales for
productions presented at the facility and (iii) 5% of the gross revenues
received by the Company from concessions and parking. In addition, the Company
has agreed to remit a refundable deposit to the City in the sum of $1.5 million
(upon the receipt of all governmental approvals required for construction of the
facility and approval of a financing package acceptable to the Company), to be
applied toward the payment of construction, operation and monitoring costs
related to the facility.
BUCKEYE LAKE AMPHITHEATER
The Company has a long-term oral agreement to manage and book
the Buckeye Lake Amphitheater, an outdoor facility located in Columbus, Ohio.
The facility accommodates over 50,000 people and is designed to handle
large-scale rock music productions. In 1996 the facility booked, among other
events, Jimmy Buffet's Margaritaville show. In addition, the Company owns an
option to buy 40% of the equity in the real estate and facilities that comprise
the Buckeye Lake Amphitheater. The Company intends to invest approximately
$500,000 in this facility to modernize its staging area and to refurbish certain
of its common areas.
TRANSPORTATION
The Company owns ten custom-built sleeper tour buses which it
leases to touring productions under long and short term contracts for use in
transporting entertainers and crews during a show's tour. In addition, the
Company leases various show related equipment to touring productions (i.e.,
sound systems, rigging and musical equipment). The Company has serviced all of
the tours of its own production tours of "The Magic of David Copperfield,"
"Jesus Christ Superstar" as well as others, with a variety of rentals.
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MERCHANDISING AND CONCESSIONS
The Company offers merchandise in connection with most of the
productions with which it is involved as a producer and/or a promoter, and also
in connection with certain other productions on a contract basis. The Company
merchandises cast recordings, videos, t-shirts and other memorabilia related to
a given show or client. The Company also sells food and beverages at its venues.
The Company's merchandising and concession clients in 1995 included tours of
"Fiddler on the Roof," "Hello, Dolly!," "Stomp," "A Chorus Line," "Carousel,"
"Tap Dogs," "Funny Girl", "Applause," "Kerri Strug's U.S. Gymnastics Tour,"
"Ain't Misbehavin'," "The Magic of David Copperfield" and "Jesus Christ
Superstar." In addition, the Company expects to acquire the merchandising rights
to an upcoming tour of "Annie."
ADVERTISING, MARKETING AND SPONSORSHIPS
The Company's marketing, promotion and sponsorship division
oversees diverse production projects for the Company. The division is
responsible for advertising and promotion of the Company's various productions.
Every television spot, radio spot and print advertisement relating to the
Company's productions is produced under the supervision of the Company's
in-house marketing staff. Sales figures are monitored on a daily basis so that
any marketing mix changes necessary for a production are made promptly.
In 1995, the advertising division oversaw the marketing of
such diverse events as a Jimmy Buffet Margaritaville concert, the Akron Rib and
Music Festival, "Jesus Christ Superstar" and "The Magic of David Copperfield."
MOVIETIME
On August 28, 1996, the Company completed the Movietime
Merger. Movietime has developed and implemented an interactive
telecommunications service called "MovieTime" that provides digital telephone
delivery systems to movie theaters. Movietime's digital-based delivery system
replaces the analog recording machines now in use at many movie theaters with an
interactive digital voicemail system that provides customized, site specific,
theater information such as show times, ticket prices, location and travel
directions.
The Company believes that the MovieTime system enables a
theater to increase ticket sales through improved customer service by
significantly increasing the number of telephone calls able to reach the theater
simultaneously.
In connection with its MovieTime service, Movietime enters
into contracts with theaters, pursuant to which it currently receives minimal or
no service charges, and sells advertising time on the opening announcement of
the recorded message. Although the Company anticipates that such sale of
advertising time will be the primary source of revenue to be derived from the
MovieTime service, the Company believes that additional revenues can be
generated through related services, such as advance ticketing and database
sales. Movietime has generated only minimal revenues to date.
To date, Movietime has entered into service agreements for its
MovieTime service with four major theater chains: Cineplex Odeon, Pacific
Theaters, Sony Theaters and United Artists. In addition, it is in active
negotiations with over 40 independent theaters to provide such service.
Movietime's digital network is presently utilized at 60 theaters in nine major
markets and has systems in place for operation in an additional 17 markets.
The Company believes that there may be significant
opportunities for Movietime's interactive telemedia network. The Company intends
to pursue a strategy of growth and will seek to penetrate new geographic markets
and expand the range of its services. The Company intends to commence a rollout
of its network to approximately 200 theaters by February 1997.
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COMPETITION
The Company competes with a wide range of other entertainment
alternatives, including movies, theatrical presentations, sporting events,
concerts, and others. Within its own industry segment, the Company competes with
other producers and other booking agencies for attractive theatrical properties
and artistic talent.
The Company's merchandising division services the
merchandising needs of the in-house productions, venues and clients represented
by the Company, but competes for contracts for other productions with a number
of other companies.
The Company believes that there is currently only one other
company, MovieFone, offering services similar to Movietime's MovieTime service.
Like Movietime, MovieFone provides information regarding show times and sells
advertising time on the recorded message. MovieFone's service differs in that it
serves all theaters in each of its markets with only one central phone number,
whereas Movietime's service is theater specific.
PROPERTIES
The Company's principal executive offices are located in
approximately 2,700 square feet of leased office space in Miami Beach, Florida.
The Company leases such space from a corporation owned by Messrs. Krassner and
Marsh, the Company's Co-Chairman of the Board and Chief Executive Officer and
Co-Chairman of the Board, respectively, pursuant to a lease that expires in 2001
and which provides for an annual rent of $39,000. The Company also leases
approximately 3,500 square feet of office space in Aurora, Ohio pursuant to a
lease expiring in November 2002. The Company leases such space from Lee
Marshall, the Company's President and Chief Operating Officer, for an annual
rent of approximately $41,000. See "Certain Transactions."
EMPLOYEES
As of August 31, 1996, the Company employed 45 full time
employees, including 20 employees engaged in production activities, 12 employees
engaged in booking activities and three engaged in venue management and ten in
the transportation and leasing division. The Company employs additional
personnel as needed on a production-by-production basis.
LEGAL PROCEEDINGS
An arbitration proceeding (the "Statement of Claim") has been
instituted by Diamond Bullet Corporation, an affiliate of the Company ("DBC"),
against Robert L. Ferman ("Ferman"), a former financial advisor to certain of
the Constituent Corporations. DBC's claim is for rescission, fraud and breach of
fiduciary duty in connection with a consulting agreement (the "Consulting
Agreement") under which DBC agreed to pay Ferman a monthly retainer fee of
$2,500 and an equity position in DBC in the event that Ferman was successful in
locating an acceptable underwriter for a proposed initial public offering of the
securities of the Company or its affiliates. The proceeding originated as a
state court action between DBC and Ferman. That claim sought the enforcement of
a settlement agreement reached by the Company and Ferman pursuant to which DBC
agreed to pay a monthly retainer fee of $2,500 and $200,000 in the event DBC or
its affiliates were successful in consummating a public offering of any of their
securities. Ferman has responded to the Statement of Claim by filing an answer,
affirmative defenses and counterclaim (the "Answer"). Ferman's counterclaim
seeks damages for fraud in the inducement, anticipatory breach of contract and
malicious prosecution. After DBC responded to the Answer, Ferman amended his
counterclaim to seek damages relating to the Private Placement. DBC has denied
all such claims. The Company intends to seek to recover all compensation paid to
Ferman and to rescind Consulting Agreement due to, among other things, Ferman's
failure to be properly licensed and his failure to disclose past to DBC NASD
administrative proceedings against him which resulted in his suspension from
securities trading. Ferman's claims are believed by
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the Company to approximate $1.0 million. The Company intends to vigorously
defend Ferman's counterclaim and to pursue its arbitration proceeding.
In October 1994, a former independent contractor filed a
complaint against the limited partnership that produces "Jesus Christ Superstar"
in the Common Pleas Court of Philadelphia County seeking consequential damages
of $5,000,000 arising from the termination of an employment contract by such
limited partnership. A court date has not been set. Management believes, based
on the advice of counsel, that the lawsuit is without merit, and that the
outcome of this suit will not have a material adverse effect on its financial
condition or results of operations.
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MANAGEMENT
The directors, executive officers and key employees of the
Company are as follows:
NAME AGE POSITION
- ---------------------- --- ------------------------------------------------
Brad Krassner......... 44 Co-Chairman of the Board and Chief
Executive Officer
Joe Marsh............. 43 Co-Chairman of the Board
Lee Marshall.......... 39 President, Chief Operating Officer and
Director
Steven Chaby.......... 30 Chief Financial Officer
H. Yale Gutnick....... 54 Director
Glenn Bechdel......... 52 Vice President, Magic Promotions
Larry Turk............ 49 President and Chief Operating Officer,
Diamond Bullet Merchandising
Michel Vega........... 29 President, Touring Artists Group
Ronald J. Korn........ 56 Director
BRAD KRASSNER co-founded MEI and has been the Company's
Co-Chairman of the Board and Chief Executive Officer since the consummation of
the Merger. Mr. Krassner has had a diversified career in the production,
promotion, marketing and merchandising of live entertainment. He has been in the
entertainment business since 1974, when he was employed by the marketing
department of Ringling Brothers Barnum & Bailey Circus. Over the past 20 years,
Mr. Krassner has produced and/or presented a variety of touring shows, including
"Ice Capades," "Moscow Circus," "Swatch Watch NYC Fresh Festival" and "The Kool
Jazz Festivals." Mr. Krassner is responsible for all of the Company's strategic
planning and development and oversees corporate expansion activities.
JOE MARSH co-founded MEI and has been the Company's
Co-Chairman of the Board since the consummation of the Merger. Mr. Marsh has
been the president of Magic Promotions, Inc. since 1988, and is primarily
responsible for the production of the tour of "The Magic of David Copperfield."
He also oversees the theatrical division, which includes such shows as "Hello,
Dolly!" starring Carol Channing, "Jesus Christ Superstar," "Man of La Mancha,"
"Ken Hill's The Phantom of the Opera," "South Pacific" starring Robert Goulet
and "Elvis, a Musical Celebration."
LEE MARSHALL co-founded MEI and has been the Company's
President, Chief Operating Officer and a director since the consummation of the
Merger. Mr. Marshall is responsible for the day-to-day operations of Magic
Promotions, Inc., the Company's theatrical production division. He is
responsible for supervision of the production and promotion of such shows as
"Hello, Dolly!" starring Carol Channing, "Jesus Christ Superstar," "Man of La
Mancha," "Ken Hill's The Phantom of the Opera," "South Pacific" starring Robert
Goulet and "Elvis, a Musical Celebration." Mr. Marshall also oversees the
Company's booking agency division. Mr. Marshall has also served as the secretary
and treasurer of Magic Promotions since 1984, and has been the president of
Touring Artists Group since 1992.
STEVEN CHABY has been Chief Financial Officer and Treasurer of
MEI since May 1996 and has held the same positions with the Company since the
consummation of the Merger. Mr. Chaby is a certified public accountant in the
State of Florida. From 1994 to 1996, Mr. Chaby was an accountant with Ernst &
Young/Kenneth Leventhal Real Estate
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Group LLP, certified public accountants, in Miami, Florida. From 1991 to 1994,
Mr. Chaby worked as an accountant with the certified public accounting firm
James and Surman in Boca Raton, Florida.
H. YALE GUTNICK has been a director of MEI since May 1996 and
has held the same position with the Company since the consummation of the
Merger. Mr. Gutnick is the senior shareholder/member of the law firm of
Strassburger McKenna Gutnick & Potter, which has offices in Pittsburgh,
Pennsylvania and Greensburg, Pennsylvania. Mr. Gutnick graduated with honors
from Ohio Wesleyan University in 1964 and from the University of Pittsburgh Law
School in 1967. He began his legal career in the Honors Program with the United
States Department of Justice in Washington, D.C., where he was a trial and
appellate lawyer from 1967 through 1969, when he entered private practice in
Pittsburgh, Pennsylvania. In the 25 years he has been in private practice, Mr.
Gutnick has specialized in complex civil and criminal litigation and
entertainment and media law.
RONALD J. KORN, a certified public accountant and an
attorney-at-law, has been a director of the Company since September 1996. Since
July 1991 Mr. Korn has served as President of Ronald Korn Consulting, a business
consulting firm, and as Chairman of the Board of Carole Korn Interiors, Inc., an
interior design firm. Since March 1995, Mr. Korn has also served as Executive
Distributor of Interior Design Nutritionals, a company engaged in the
distribution and marketing of personal care and nutritional products. From 1961
to 1991, Mr. Korn was a partner with the certified public accounting firm of
KPMG Peat Marwick, including six years in which Mr. Korn served as Managing
Partner of KPMG Peat Marwick's Miami, Florida office. Mr. Korn serves as a
director of each of Engle Homes, Inc. and Vacation Break U.S.A., Inc., the
common stock of each of which is publicly traded.
GLENN BECHDEL, Vice President of Magic Promotions, has been an
officer of MEI since 1983. Mr. Bechdel's primary responsibility since
co-founding Magic Promotions in 1983 has been to act as operations officer of
the transportation and merchandising division of such corporation. Throughout
his 13 years with the Company, Mr. Bechdel has been active in all Company
business and productions such as "The Magic of David Copperfield," "Elvis, a
Musical Celebration," "Jesus Christ Superstar," and "South Pacific," among
others.
LARRY TURK, the President and Chief Operating Officer of
Diamond Bullet Merchandising has been an officer of MEI since 1988, acting from
1988-1993 as the Vice President and Chief Operating Officer of Diamond Bullet
Merchandising, and since that date in the offices he now holds.
MICHEL VEGA, the President of the Touring Artists Group, has
been an officer of MEI since March 1992. Mr. Vega has also served as Vice
President and Senior Vice President of Touring Artists Group. Prior to joining
the Company, Mr. Vega was the tour director for NAMCO Booking, a theatrical
booking agency.
The Company's officers are elected annually by the Board of
Directors and serve at the discretion of the Board. The Company's directors hold
office until the next annual meeting of shareholders and until their successors
have been duly elected and qualified. The Company will reimburse all directors
for their expenses in connection with their activities as directors of the
Company. Directors of the Company who are not employees also receive an annual
stipend and a grant of an option to purchase 2,000 shares of Common Stock upon
election as a director, and an option to purchase 2,000 shares of Common Stock
upon re-election as a director, under the Directors' Stock Option Plan. All such
options are required to have an exercise price equal to not less than the fair
market value of the Common Stock at the date of grant. Directors of the Company
who are also employees of the Company do not receive additional compensation for
their services as directors.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or
accrued by the Company, for services rendered during 1995 to the Company's Chief
Executive Officer and each of the Company's other executive officers whose total
1995 salary and bonus exceeded $100,000 (collectively the "Named Officers"). The
Company did not grant any stock awards or stock appreciation rights in 1995.
-33-
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION COMPENSATION(1)(2)
- -------------------------------------------------- -------- --------- ------------ ------------------
<S> <C> <C> <C> <C>
Brad Krassner..................................... -0- ___ ___ $ 471,000
Chief Executive Officer and Co-Chairman of
the Board
Joe Marsh......................................... $300,000 ___ ___ $2,081,057
Co-Chairman of the Board
Lee Marshall...................................... $130,000 ___ ___ $ 760,044
President and Chief Operating Officer
Glenn Bechdel..................................... $130,000 ___ ___ $ 701,839
Vice President, Magic Promotions, Inc.
Michel Vega....................................... $104,000 ___ ___ $ 38,905
President, Touring Artists Group, Inc.
</TABLE>
- -----------------------------
(1) The aggregate amount of perquisites and other personal benefits provided
to each Named Officer is less than 10% of the total annual salary and
bonus of such officer.
(2) Each of the Named Officers in the past have received S Corporation
distributions based on their interests in certain of the Constituent
Corporations. The aggregate of such distributions received by Messrs.
Krassner, Marsh, Marshall, Bechdel and Vega in 1995 were $223,210,
$2,081,057, $760,044, $701,839 and $38,905, respectively. In addition,
Mr. Krassner received additional compensation aggregating $247,790 as a
result of royalty payments received pursuant to certain contractual rights
with respect to certain of the Company's productions ($194,572), and
management fees paid by Diamond Bullet Merchandising, Inc. ($53,218).
See "Certain Transactions" and "Consolidation Transactions and S
Corporation Distributions."
EMPLOYMENT AGREEMENTS
In July 1996, the Company entered into five-year employment
agreements with each of Messrs. Krassner, Marsh, Marshall and Bechdel, which
provide for annual base salaries of $150,000, $250,000, $250,000 and $150,000,
respectively, with automatic annual increases of $25,000. If any of these
executives is terminated for cause, as defined in his employment agreement, the
executive is not entitled to receive severance pay. If the executive is
terminated without cause, he is entitled to receive his then current salary for
the remaining term of the employment agreement but in no event less than two
years of such salary. Each of the employment agreements contains a provision
that the executive will not compete or engage in a business competitive with the
current or anticipated business of the Company for the term of the agreement and
for one year thereafter if the executive is terminated for cause or the
executive terminates his employment. In addition, each executive agreed not to
disclose confidential information of the Company during the term of his
employment or thereafter.
STOCK OPTION PLANS
Under the Company's 1996 Employee Stock Option Plan (the
"Stock Option Plan") and Directors Stock Option Plan (the "Directors Plan", and
together collectively with the Stock Option Plan, the "Plans"), 1,700,000 shares
of Common Stock and 50,000 shares of Common Stock, respectively, are reserved
for issuance upon exercise of options. The Plans are designed to serve as an
incentive for retaining qualified and competent employees and directors.
The Company's Board of Directors, or a committee thereof,
administers and interprets the Stock Option Plan and is authorized, in its
discretion, to grant options thereunder to all eligible employees of the Company
(currently 45 individuals), including officers and directors (whether or not
employees) of the Company. The Stock Option Plan provides for the granting of
both "incentive stock options" (as defined in Section 422A of the Internal
-34-
<PAGE>
Revenue Code) and nonstatutory stock options. Options can be granted under the
Stock Option Plan on such terms and at such prices as determined by the Board,
or a committee thereof, except that the per share exercise price of options will
not be less than the fair market value of the Common Stock on the date of grant,
and, in the case of an incentive stock option granted to a 10% shareholder, the
per share exercise price will not be less than 110% of such fair market value.
The aggregate fair market value of the shares covered by incentive stock options
granted under the Plans that become exercisable by a grantee for the first time
in any calendar year is subject to a $100,000 limit.
Only nonemployee directors are eligible to receive options
under the Directors Plan. The Directors Plan provides for an automatic grant of
options to purchase 2,000 shares of Common Stock upon a person's election as a
director of the Company and an automatic grant of options to purchase 2,000
shares of Common Stock upon such person's re-election as a director of the
Company. All such options are required to have an exercise price equal to not
less than the fair market value of the Common Stock at the date of grant.
Options granted under the Stock Option Plan will be
exercisable after the period or periods specified in the option agreement
relating to such grant, and options granted under the Directors Plan are
exercisable immediately. Options granted under the Plans are not exercisable
after the tenth anniversary of the date of grant and are not transferable other
than by will or by the laws of descent and distribution. The Plans also
authorize the Company to make loans to optionees to enable them to exercise
their options.
As of the date of this Prospectus, the Company has not granted
any options pursuant to the Plans.
401(K) PLAN
The Company plans to implement a 401(k) pension plan in the
fourth quarter of 1996. The Company currently intends to match employee
contributions at a rate to be determined, subject to the availability of funds.
The Company is not required to match employee contributions in the future. The
plan will be administered by, and offer the funds of, a national mutual fund
company which has yet to be selected. The Company match may be made in the
Company's Common Stock.
-35-
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the date of this
Prospectus, information with respect to the beneficial ownership of the Common
Stock by (i) each person known by the Company to be the owner of more than 5% of
the outstanding Common Stock, (ii) each director, (iii) each of the Named
Officers, and (iv) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
AMOUNT AND NATURE OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP OWNED(2)
- --------------------------------------- -------------------- -------------
<S> <C> <C>
Joe Marsh........................................................ 8,465,480 36.7%
Brad Krassner................................................... 3,270,102(3) 15.0%
Lee Marshall..................................................... 3,450,338 15.0%
Glenn Bechdel.................................................... 3,228,846 14.0%
H. Yale Gutnick.................................................. 7,000 *
Michel Vega...................................................... 385,069 1.7%
Larry Turk....................................................... 238,624 1.0%
Ronald J. Korn................................................... 2,000 *
All directors and executive officers as a group (8 persons)...... 19,231,569 82.4%
<FN>
- -------------------------------------
* Less than 1%.
(1) Each beneficial owner has an address in care of Magicworks Entertainment Incorporated, 930 Washington Avenue,
Miami Beach, Florida 33139.
(2) Based on a total of 23,074,299 shares outstanding.
(3) Excludes 184,110 shares of Common Stock held by Mr. Krassner as nominee on behalf of certain members of his
family and as to which Mr. Krassner disclaims beneficial ownership.
</FN>
</TABLE>
- 36 -
<PAGE>
SELLING SECURITYHOLDERS
The shares of Common Stock offered hereby are owned by the
Selling Shareholders. The following table sets forth certain information with
respect to the ownership of the Common Stock by each Selling Shareholder.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
OWNED PRIOR TO OF COMMON STOCK NUMBER OF
NAME AND ADDRESS OF OFFERING(1)(2) HELD PRIOR SHARES OFFERED
SELLING SHAREHOLDER (3)(4) TO OFFERING HEREBY
- ------------------------------------------------------------- ---------------- ----------------- --------------
<S> <C> <C> <C>
Abraxas Partners, Ltd. 3,000 * 3,000
Windermere House
404 East Bay Street
P.O. Box SS-6238
Nassau, The Bahamas
Philip Altheim 5,000 * 5,000
270 Pond Crossing
Lawrence, NY 11559
Apec Arc, Inc. 10,000 * 10,000
c/o Clifford Spelke
2001 Marcus Avenue, Su. N-215
Lake Success, NY 11042
Arbinter-Omnivalor, S.A. 80,000 * 80,000
4 Cours De Rive
1211 Geneve 3
Switzerland
Jack Balter and Deborah Balter, JTWROS 5,000 * 5,000
8919 Atwell
Houston, TX 77096
Banca Del Gottardo 100,000 * 100,000
Viale Stefano Franscini 8
6901 Lugano, Switzerland
Attn: Diego Lucchini (MFTB)
Banque de Patrimoines Prives Geneve BPG SA 5,000 * 5,000
Attn: Mr. Dan Caropiche
20-22, Avenue de Miremont
CH-1211 Geneve 25
Switzerland
Banque Populaire Suisse Geneva 20,000 * 20,000
Attn: Mr. Laurent Perrin
Case Postale 2054
1211 Geneve 2
Switzerland
Banque Privee Endmond de Rothschild S.A. 55,000 * 55,000
Geneva
Attn: Mrs. Lisiane Spicher
18 rue de Hesse
1204 Geneva, Switzerland
Beatrice Barnett 5,000 * 5,000
Attn: Ian Barnett
c/o 7A Albert Br. Road
London SW11 4PX
England
Gary Barnett 5,000 * 5,000
621 South Saltair Avenue
Los Angeles, CA 90049
Banque De Financement & D'Investissement Geneve 25,000 * 25,000
Mr. Marcel Cerutti
2, rue Jean-Petitot
Case postale 5710
1211 Geneve 11, Switzerland
Glenn Bechdel 3,228,846 14.0% 3,228,846
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Brad Leigh Benjamin 240,000 1.0% 240,000
3410 B. 21st Court
Olympia, WA 98501
Oystein Bjorge 5,000 * 5,000
Bastadruggen 21
1370 Asker, Norway
George L. Black Trust 5,000 * 5,000
11401 Highway 301 North
Thonotosassa, FL 33592
Ronald L. Book, P.A. Employees Profit Sharing Trust 5,000 * 5,000
2999 N.E. 191 Street
Penthouse 6
Aventura, FL 33180
</TABLE>
- 37 -
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
OWNED PRIOR TO OF COMMON STOCK NUMBER OF
NAME AND ADDRESS OF OFFERING(1)(2) HELD PRIOR SHARES OFFERED
SELLING SHAREHOLDER (3)(4) TO OFFERING HEREBY
- ------------------------------------------------------------- ---------------- ----------------- --------------
<S> <C> <C> <C>
Erling U. Borg 5,000 * 5,000
P.B. 1128
2601 Lillehammer, Norway
Bostar A/S 20,000 * 20,000
Parkveien 55
P.O.B. 2416, Solli
N-0201, Oslo
Norway
Attn: Ove Hoegh
5,000 * 5,000
Harvey R. Brice BSSC Master Defined Contribution M/P Pension Plan
70 Bethone Street
New York, NY 10014-1758
Attn: Harvey R. Brice
Norman Brooks 60,000 * 60,000
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Michael J. Brown 133,333 * 133,333
216 E. 95th Street
New York, NY 10128
Lawrence Burstein 5,000 * 5,000
114 East 90th Street
Apt. 3-B
New York, NY 10128
C.N. Limited 5,000 * 5,000
c/o the Company Secretary
P.O. Box 316, Jardine House No. 1
Wesley Street
St. Helier, Jersey Channel Islands
U.K.
Caco A/S 5,000 * 5,000
Apalveien 30
0371 Oslo
Norway
Attn: Ole J. Gjerpen
Cameo Trust Corporation Limited 22,000 * 22,000
c/o Chris Bateson
Cameo House, 18 Hope Street
Douglas, Isle of Man
British Isles IM1 1AQ
Jeffrey Capas and Katherine Capas, JTWROS 5,000 * 5,000
2808 Palamore Drive
Tampa, FL 33618
Capital Growth International, L.L.C.(5) 291,615 1.2% 291,615
666 Steamboat Road
Greenwich, CT 06830-7150
Attn: Michael Jacobs
Casita Linda Corp. 5,000 * 5,000
c/o 7A Albert Br. Road
London SW11 4PX
England
Clariden Bank 5,000 * 5,000
Clariden Street, 26
CH-8002 Zurich
Switzerland
Attn: Karl Wiedmer
Rona Coty 5,000 * 5,000
7612 Mar Della Terrace
Boca Raton, FL 33433
Crescent Capital Company, LLC 25,000 * 25,000
135 Wood Road
Braintree, MA 02184-2503
Attn: Richard W. Brown
Philip Datlof, M.D. 5,000 * 5,000
17867 Lake Estates Drive
Boca Raton, FL 33496
Delaware Charter Guarantee & Trust Co. 2,500 * 2,500
TTEE FBO Robert Zelinka IRA
c/o Bear Sterns & Co.
Acct. #686-747-31-1-5 (R. Zelinka IRA)
1 Metro Tech Center
Brooklyn, NY 11021-2859
</TABLE>
- 38 -
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
OWNED PRIOR TO OF COMMON STOCK NUMBER OF
NAME AND ADDRESS OF OFFERING(1)(2) HELD PRIOR SHARES OFFERED
SELLING SHAREHOLDER (3)(4) TO OFFERING HEREBY
- ------------------------------------------------------------- ---------------- ----------------- --------------
<S> <C> <C> <C>
Edgeport Nominees Ltd. 44,000 * 44,000
44 Worship Street
London, EC2A 2JT
England
Attn: Ian Goldbart
Emanon Partners, L.P. 47,000 * 47,000
237 Park Avenue
Suite 901
New York, NY 10017
Attn: Michael Schaenen
David Ettinger & Beth Ettinger, JTWROS 5,000 * 5,000
21873 Town Place Drive
Boca Raton, FL 33433
Attn: Mr. and Mrs. D. Ettinger
Falcon Management Corporation 10,000 * 10,000
James Leitner - President
c/o Anne-Lee Shachian
795 B. Franklin Avenue
Franklin Lakes, NJ 07417
Leonard Frankel 60,000 * 60,000
3686 N.W. 195 Lane
Aventura, FL 33180
Jonathan Fryd 45,000 * 45,000
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Mitchell Fullerton 240,000 1.0% 240,000
3410 B. 21st Court
Olympia, WA 98501
Galaxy Investments, Inc. 10,000 * 10,000
1280 Terminal Way Suite
Reno, NV 89502
Attn: Gladys Greene, President
Goran Enterprises Limited 10,000 * 10,000
Rea Brothers (Guernsey) Limited
Attn: G. D'Arcy
Commerce House
Les Banques, St. Peter Port
Guernsey, GY1 3EZ, Channel Islands
G.P.S. Fund Ltd. 10,000 * 10,000
International Trade Center TM 126
Piscadera Bay
Curacao
Netherlands Antilles
Charles L. Greenberg and Donna Greenberg, JTWROS 10,000 * 10,000
120 S.E. 5th Avenue
Apartment #333
Boca Raton, FL 33432
Attn: Mr. and Mrs. Charles L. Greenberg
Greenberg and Panish, APC, Defined Benefit Pension Plan Dated 2/1/88 5,000 * 5,000
3832 Wilshire Boulevard
Los Angeles, CA 90010
Attn: Mr. David Greenberg
Bear, Stearns Securities Corp. 5,000 * 5,000
Custodian David Greenberg
IRA Rollover #402-95170-1-0-353
245 Park Avenue
New York, NY 10167
Susan Greenberg 5,000 * 5,000
1185 Corsica Drive
Los Angeles, CA 90272
Donald Gross 5,000 * 5,000
474 Fulton Avenue
Hempstead, NY 11550
H. Yale Gutnick 5,000 * 5,000
1000 Grandview Avenue, #501
Pittsburgh, PA 15211
Edward Haymes 10,000 * 10,000
7108 Queenferry Circle
Boca Raton, FL 33496
Heptagon Investments Limited 20,000 * 20,000
c/o FSC Summit Trust
5 Rue Cesar Soulie
1260 Nyon
Switzerland
</TABLE>
- 39 -
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
OWNED PRIOR TO OF COMMON STOCK NUMBER OF
NAME AND ADDRESS OF OFFERING(1)(2) HELD PRIOR SHARES OFFERED
SELLING SHAREHOLDER (3)(4) TO OFFERING HEREBY
- ------------------------------------------------------------- ---------------- ----------------- --------------
<S> <C> <C> <C>
Herald Investment Trust PLC 300,000 1.3% 300,000
c/o Brown Brothers Harriman & Co.
69 Wall Street
New York, NY 10005
Attn: OSG Dept.
Heritage Finance & Trust Co. (Geneva) 20,000 * 20,000
Acct No.: 4608840
c/o Brown Brothers Harriman, NY
Attn: OSG Dept.
69 Wall Street
New York, NY 10005
Stanley Hollander IRA 10,000 * 10,000
c/o Cowen & Co.
IRA Dept., A/C 58-03120-1-7-44
(S. Hollander IRA)
Financial Square
New York, NY 10005
Intergalactic Growth Fund, Inc. 10,000 * 10,000
c/o Peter B. Evans
P.O. Box N-341
Charlotte House, Charlotte Street
Nassau, Bahamas
Alan Jacobs 97,205 * 97,205
c/o 122 East 42nd Street
New York, New York 10168
Alan D. Jacobson, IRA 10,000 * 10,000
6840 Lion's Head
Boca Raton, FL 33496
Lenard E. Jacobson, M.D. 5,000 * 5,000
150 East 69th Street
New York, NY 10021
Christopher D. Jennings 7,500 * 7,500
1431 Warnall Avenue
Los Angeles, CA 90024
Kamdex International Limited 5,000 * 5,000
Celtic House
Victoria Street
Douglas, Isle of Man
UK 1M1 2SJ
Attn: Martin Neville
A/S Kapitalutvikling 5,000 * 5,000
Strandveien 20
N-1324 Lysaker
Norway
Attn: Knut W. Wang
Kensington Partners L.P. 40,000 * 40,000
c/o Keim Wilson Associates
237 Park Avenue, 9th Floor
New York, NY 10017
Attn: Richard Keim
Peter Barrington Kirk 15,000 * 15,000
Overbergum 22B
1315 Nesoya
Norway
Ronald Koenig 10,000 * 10,000
Capital Growth International
660 Steamboat Road, 2nd Floor
Greenwich, CT 06830
Kirsti M.B. Kolbeinsen 5,000 * 5,000
Holger Lysto, 23C
0280 Oslo
Norway
Stephen Kornfeld IRA 10,000 * 10,000
719 North Ocean Boulevard
Delray Beach, FL 33483
Brad L. Krassner(6) 3,454,212 15.0% 3,454,212
c/o Magicworks Entertainment Incorporated
930 Washington Ave., 5th Floor
Miami Beach, FL 33139
KTB Enterprises, Ltd. 5,000 * 5,000
c/o 7A Albert Br. Road
London SW11 4PX
England
Attn: Ian Barnett
William Kunzweiler 20,000 * 20,000
5420 LBJ Freeway, Suite 515
Dallas, TX 75240
</TABLE>
- 40 -
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
OWNED PRIOR TO OF COMMON STOCK NUMBER OF
NAME AND ADDRESS OF OFFERING(1)(2) HELD PRIOR SHARES OFFERED
SELLING SHAREHOLDER (3)(4) TO OFFERING HEREBY
- ------------------------------------------------------------- ---------------- ----------------- --------------
<S> <C> <C> <C>
Legong Investments, N.V. 50,000 * 50,000
International Trade Center TM 126
Piscadera Bay
Curacao
Netherlands Antilles
Joel Lewis and Patricia Lewis JTWROS 5,000 * 5,000
11501 N.W. 4th Street
Plantation, FL 33325
Larry Magrid and Barbara Magrid, JTWROS 5,000 * 5,000
1231 Vine Street
Philadelphia, PA 19107
Attn: Larry Magrid
Dr. Mannie Magrid and Jeanette Magrid, JTWROS 5,000 * 5,000
8111 Meadow Crest
Houston, TX 77071
William P. Marino 5,000 * 5,000
1041 4th Street N.E.
New Philadelphia, OH 44663
Brian W. Marsh 5,000 * 5,000
6167 Harmony Valley Road
Newcomerstown, OH 43832
Joe Marsh 8,465,480 36.8% 8,465,480
2040 North Bay Road
Miami Beach, FL
John J. Marsh, Jr. 5,000 * 5,000
217 Gooding Avenue, N.W.
New Philadelphia, OH 44663
Lee Marshall 3,450,338 15.0% 3,450,338
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Gordon R. Miller, M.D. 5,000 * 5,000
10250 Collins Avenue, #304
Bal Harbor, FL 33154
Morgan Steel Ltd. 20,000 * 20,000
c/o P. Kevin Perry
One Sydney Mount, Circular Rd.
Douglas, Isle of Man, U.K.
Napier Brown Holdings Ltd. 15,000 * 15,000
International House
1 St. Katherine's Way
London E1 9UN
England
Attn: A.S.P. Drake
Ronald L. Nilsen and Carolyn M. Nilsen, JTWROS 5,000 * 5,000
22 Candlestick Road
Clementon, NJ 08021
Attn: Ronald L. Nilsen
Panache Partnership 20,000 * 20,000
c/- Azzurra
P.O. Box 12075
Penrose Auckland, New Zealand
Sid Paterson 5,000 * 5,000
1385 York Avenue
New York, NY 10021
Sherry E. Perrupato 5,000 * 5,000
2635 South Holbrook Street
Philadelphia, PA 19142
Pictet & Cie 5,000 * 5,000
29 bd Georges-Favon
1204 Geneva
Switzerland
Attn: Claude-Alain Cherubini
Cowen & Company 2,500 * 2,500
IRA Dept. Asher Plaut
IRA #58-03134
Financial Square
New York, NY 10005
Pyramid Partners, LP 11,300 * 11,300
c/o Steven Blatt
Tanner Mainstain Hoffer
10866 Wilshire Blvd., 10th Floor
Los Angeles, CA 90024
</TABLE>
- 41 -
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
OWNED PRIOR TO OF COMMON STOCK NUMBER OF
NAME AND ADDRESS OF OFFERING(1)(2) HELD PRIOR SHARES OFFERED
SELLING SHAREHOLDER (3)(4) TO OFFERING HEREBY
- ------------------------------------------------------------- ---------------- ----------------- --------------
<S> <C> <C> <C>
David Rees 20,000 * 20,000
22B Stafford Court
174 Kensington High Street
London W8 7DJ
England
P.G. Ridgwell 15,000 * 15,000
c/o Napier Brown Holdings Ltd.
International House
1 St. Katherine's Way
London E1 9UN
England
Republic National Bank of NY (Luxembourg) SA 65,000 * 65,000
32, Boulevard Royal
L-2449 Luxembourg
Attn: Jean-Louis Thill
Trond Ronning 5,000 * 5,000
Revesporet 9B
N-1347
Hosle, Norway
Rosebud Capital Growth Fund Ltd. 168,000 * 168,000
Charlotte House
Charlotte Street
Nassau, Bahamas
Attn: Dawn E. Davies
Cheryl Lynn Rubin 5,000 * 5,000
Billingstadaasen 20
Billingstad 1362, Norway
Bear, Stearns Securities Corp. 5,000 * 5,000
Custodian Allan Rudnick
IRA Rollover #402-95158-1-6-300
245 Park Avenue
New York, NY 10167
Rush & Co. 160,000 * 160,000
c/o European Stockbrokers, Ltd.
20 Conduit Street
London W1R 9TD
England
Attn: Philip Gould
Saracen International Incorporated 15,000 * 15,000
Celtic House, 3rd Floor
Victoria Street
Douglas, Isle of Man
UK 1M1 2SJ
Attn: Luay Allawi
Albert Schmier 5,000 * 5,000
17879 Lake Estates Drive
Boca Raton, FL 33496
Seth H. Schreiber 5,000 * 5,000
460 West 34th Street
New York, NY 10001
SEIF Limited 15,000 * 15,000
c/o Barings (Guernsey) Ltd.
Arnold House, St. Julian's Ave.
St. Peter Port
Guernsey, GY1 3DA, Channel Islands
Attn: Shaun Baker
Richard Shack 112,650 * 112,650
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Hy Shapiro
2400 South Dixie Highway
Miami, FL 33133
Walter Shealy 20,000 * 20,000
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Steven Simon 53,333 * 53,333
Autolend
930 Washington Avenue
Miami Beach, FL 33139
Skips A/S Canopus 5,000 * 5,000
c/o Knut W. Wang
Standveien 20
1324 Lysaker Norway
</TABLE>
- 42 -
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
OWNED PRIOR TO OF COMMON STOCK NUMBER OF
NAME AND ADDRESS OF OFFERING(1)(2) HELD PRIOR SHARES OFFERED
SELLING SHAREHOLDER (3)(4) TO OFFERING HEREBY
- ------------------------------------------------------------- ---------------- ----------------- --------------
<S> <C> <C> <C>
Skips A/S Lodd 5,000 * 5,000
P.O. Box 2472 Solli
0202 Oslo, Norway
Fred Snitzer 5,000 * 5,000
75 Henry Street
Brooklyn, NY 11201
Daniel Sokoloff and Deena Sokoloff, as Tenants by the Entirety 5,000 * 5,000
10230 Seagrape Way
Palm Beach Gardens, FL 33418
Attn: Daniel Sokoloff
Clifford W. Spelke 10,000 * 10,000
2001 Marcus Avenue, Su. N-215
Lake Success, NY 11042
Adam Spivak 5,000 * 5,000
136 Chinaberry Drive
Lafayette, PA 19444
Allen Spivak 5,000 * 5,000
713 Waverly Road
Bryn Mawr, PA 19010
Merrill Lynch Acct. #53M 13719 (R. Spivak) 10,000 * 10,000
Suite 210A
794 Pennllyn Pike
Bluebill, PA 19422
Attn: Adam Goldman
Orrin S. Stern and Jeffrie K. Stern TBE 5,000 * 5,000
2409 N.W. 64th Street
Boca Raton, FL 33496
Attn: Orrin S. Stern
Sylvaner Corporation 5,000 * 5,000
c/o 7A Albert Br. Road
London SW11 4PX
England
James D. Tate 73,114 * 73,114
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Larry Turk 238,624 1.0% 238,624
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Matias A. Vega and Carmella K. Vega JTWROS 5,000 * 5,000
31 Gedney Way
Chappaqua, NY 10510
Attn: Matias A. Vega
Michel Vega 385,069 1.7% 385,069
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Vital Miljo AS 5,000 * 5,000
Raadfhusgaten 7B
0151 Oslo, Norway
Attn: Bjarne Odegaard
W&P Bank & Trust Company Ltd. 30,000 * 30,000
Cumberland House
27 Cumberland Street
Nassau, Bahamas
Attn: Pascal Cristiano
Dr. Lawrence S. Weisman IRA 20,000 * 20,000
c/o Bear Sterns Corp.
IRA Acct #: 689-95590-14-E73
245 Park Avenue
New York, NY 10167
Dr. Lawrence S. Weisman 5,000 * 5,000
12216 134th Way
Scottsdale, AZ 85259-2235
Mark L. Weiss and Tobi Weiss, JTWROS 5,000 * 5,000
12926 Cherry Road
North Miami, FL 33181
Attn: Mark L. Weiss
Joel S. Weissglass 5,000 * 5,000
14 Takolusa Drive
Holmdel, NJ 07733-1232
Lago Wernstedt and Mi Wernstedt 10,000 * 10,000
Fritiofsy 5
S-18264 Djursholm
430908-0838
Attn: Lago Wernstedt
</TABLE>
- 43 -
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
OWNED PRIOR TO OF COMMON STOCK NUMBER OF
NAME AND ADDRESS OF OFFERING(1)(2) HELD PRIOR SHARES OFFERED
SELLING SHAREHOLDER (3)(4) TO OFFERING HEREBY
- ------------------------------------------------------------- ---------------- ----------------- --------------
<S> <C> <C> <C>
Ruth Zelinka 2,500 * 2,500
200 E. 57th Street
Apt. 11-B
New York, NY 10022
<FN>
- ------------------------------------
* Less than 1%.
(1) Unless otherwise indicated, each shareholder has sole voting and
investment power with respect to the Common Stock indicated as
beneficially owned thereby.
(2) In accordance with Rule 13d-2 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), shares that are not outstanding, but
that are issuable pursuant to (i) the exercise of outstanding Warrants
and (ii) the conversion of the Notes, all of which are exercisable or
convertible within 60 days of the date of this Prospectus, have been
deemed to be outstanding for the purpose of computing the percentage of
outstanding shares owned by the individual having such right, but have
not been deemed outstanding for the purpose of computing the percentage
for any other person. These amounts do not include the exercise of
certain warrants to purchase an aggregate of 500,000 shares of Common
Stock. See "Description of Securities."
(3) These share amounts include up to an aggregate of 1,481,643 shares
which may be issued to certain Selling Shareholders either upon (i) the
conversion of the Notes or (ii) upon the exercise of the Redeemable
Warrants which may be issued, in certain circumstances, upon the
prepayment of the Notes.
(4) With respect to the Selling Shareholders, it has been assumed that all
their shares so offered will be sold. Further, these amounts include
shares which may be issued to certain Selling Shareholders upon
conversion of accrued interest payable upon their Notes.
(5) Does not include the shares owned of record by various officers and/or
employees of Capital Growth International, LLC, including Messrs. R.
Koenig and A. Jacobs, whose share totals are included elsewhere in this
table.
(6) Includes 184,110 Shares held by Mr. Krassner as nominee on behalf of
certain members of his family and as to which Mr. Krassner disclaims
beneficial ownership.
</FN>
</TABLE>
PLACEMENT AGENT WARRANTS
The following table sets forth certain information with
respect to the beneficial ownership of the Company's outstanding Placement Agent
Warrants as of August 30, 1996, and as adjusted to reflect the sale of such
Warrants offered by the holder thereof.
<TABLE>
<CAPTION>
BEFORE OFFERING
----------------------------
NAME AND ADDRESS WARRANTS PERCENT WARRANTS OFFERED
- ------------------------------------- ------------ ------------- ----------------
<S> <C> <C> <C>
Capital Growth International, L.L.C. 500,000 100% 500,000
666 Steamboat Road
Greenwich, CT 06830-7150
Attn: Michael Jacobs
</TABLE>
RELATIONSHIP BETWEEN THE COMPANY AND CERTAIN SELLING SHAREHOLDERS
Capital Growth International, LLC acted as the placement agent
in connection with the Private Placement and received compensation therefor in
the form of cash and securities. See "Certain Transactions." The following
Selling Shareholders may be deemed affiliates of Capital Growth: Ronald Koenig,
Alan L. Jacobs and Stanley Hollander IRA.
- 44 -
<PAGE>
CERTAIN TRANSACTIONS
MEI was formed in June 1996 for the purpose of combining the
operations of the Constituent Corporations. Effective at the closing of the
Private Placement, MEI issued shares of Common Stock to the shareholders of each
of the Constituent Corporations in exchange for their respective interests in
the Constituent Corporations, as a result of which each of the Constituent
Corporations became a wholly-owned subsidiary of the Company. The number of
shares of Common Stock issued to each such shareholder was determined by mutual
agreement, based on their respective ownership interests in the Constituent
Corporations.
Prior to being consolidated with MEI, the Constituent
Corporations operated as S corporations under the applicable provisions of the
Code. In connection therewith, the Constituent Corporations declared and paid
distributions during 1995 in the amounts of $223,210, $2,081,057 and $760,041
and $701,839 to Messrs. Krassner, Marsh, Marshall and Bechdel, respectively. In
1996, the Company declared and paid distributions to Messrs. Krassner, Marsh,
Marshall and Bechdel in the respective amounts of $82,839, $1,410,300, $470,100
and $470,100. Such distributions were in addition to the salaries paid to
Messrs. Marsh, Marshall and Bechdel.
In May 1996, the Company entered into a lease agreement with
respect to its Miami Beach office with a corporation that is owned by Messrs.
Krassner and Marsh. The agreement calls for monthly lease payments of $3,250 for
a five-year term. The agreement further provides for annual increases of $200
per month during its term. The Company paid rent pursuant to a prior lease for
such property for the year ended December 31, 1995 in the amount of $39,000.
In November 1994, the Company entered into a lease for its
Ohio office, which is owned by Mr. Marshall. The agreement calls for monthly
rental payments of approximately $3,417, and expires in November 2002. The
Company paid rent pursuant to such lease during 1995 in the aggregate amount of
$33,000.
In November 1995, one of the Constituent Corporations issued
to an individual its convertible promissory note in the amount of $100,000
exchangeable into shares of common stock of such Constituent Corporation. Such
individual assigned such convertible promissory note to Mr. Krassner in exchange
for 75,167 shares of the Company owned by Mr. Krassner. Mr. Krassner then
canceled the note, and, as a result, the Company extinguished an $89,235 of a
$100,000 debt owed by Mr. Krassner to the Company, leaving a balance owing from
the Company to Mr. Krassner of $10,765 with respect to such debt.
In July and September 1996, the Company closed the Private
Placement in which it received gross proceeds of $10,371,500. A total of 120
investors purchased Units in the Private Placement. Brad Krassner, Joe Marsh,
Lee Marshall and H. Yale Gutnick, a director of the Company, also invested in
the Private Placement (purchasing 11,000, 22,000, 11,000 and 5,000 Shares of
Common Stock and $25,500, $51,000, $25,500 and $12,500 of principal amount of
Notes, respectively.
All of the Company's indebtedness under its existing lines of
credit has been personally guaranteed by Messrs. Krassner, Marsh, Marshall and
Bechdel. The Company anticipates that no further personal guarantees of the
Company's indebtedness by its executive officers will be made.
The Company has paid management fees for accounting, general
management, office and other administrative services to Diamond Bullet
Corporation, an entity controlled by Mr. Krassner. Such fees aggregated $53,218
and $75,378 in 1995 and 1994, respectively.
As of June 30, 1996, Movietime was indebted to the Company in
the amount of $459,398 plus accrued interest. The Company obtained such funds
under a credit line with Merrill Lynch. As a result of the Company's acquisition
of Movietime, the indebtedness to the Company was eliminated in consolidation
and the Company became indebted to Merrill Lynch.
- 45 -
<PAGE>
Messrs. Krassner, Marsh, Marshall and Bechdel owned 31.1%,
6.7%, 3.9% and 2.7%, respectively, of the issued and outstanding common stock of
Movietime immediately prior to the Company's acquisition of Movietime, which
ownership interests were exchanged for 373,333, 80,827, 47,268 and 31,905 shares
of the Company, respectively. See "Principal Shareholders".
In connection with the Private Placement, the Company paid
Capital Growth (as the placement agent for such Private Placement) an aggregate
cash commission of $790,120 and a nonaccountable expense allowance of $172,530.
In addition, the Company issued to Capital Growth and its
designees an aggregate of 488,820 shares of the Company's Common Stock and an
aggregate of 500,000 Placement Agent Warrants. These Shares and the Shares
underlying the Placement Agent Warrants are included in this offering.
The Company has agreed to indemnify Capital Growth against
certain liabilities in connection with the Private Placement, including
liabilities under the Securities Act.
The Company has retained Capital Growth for a period of
twenty-four months at a fee of $2,500 per month, to render various financial
advisory services thereto, and specified fees for additional financings and
other transactions.
FUTURE TRANSACTIONS
The Company will require that any future transactions between
the Company and its officers, directors, principal shareholders and the
affiliates of the foregoing persons be on terms no less favorable to the Company
than could be reasonably obtained in arm's length transactions with independent
third parties, and that any transactions not in the ordinary course of business
also be approved by a majority of the Company's outside independent directors
who are disinterested in the transaction.
DESCRIPTION OF SECURITIES
COMMON STOCK - The Company is authorized to issue 50,000,000
shares of Common Stock, par value $.001 per share. Each holder of Common Stock
is entitled to one vote for each share held of record on all matters to be voted
on by shareholders. There is no cumulative voting with respect to the election
of directors, with the result that the holders of more than 50 percent of the
shares voted for the election of directors can elect all of the directors. The
holders of Common Stock are entitled to receive dividends when as and if
declared by the Board of Directors out of funds legally available therefor. In
the event of liquidation, dissolution or winding up of the Company, the holders
of Common Stock are entitled to share ratably in all assets remaining available
for distribution to them after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the Common
Stock. Holders of shares of Common Stock, as such, have no conversion,
preemptive or other subscription rights, and there are no redemption provisions
applicable to the Common Stock. All of the outstanding shares of Common Stock
are, and the shares of Common Stock offered hereby when issued will be, fully
paid and nonassessable. To vary the rights of the Common Stock the approval of
holders of a majority of the outstanding shares of Common Stock is required.
PREFERRED STOCK - The Company's Articles of Incorporation
authorize the issuance of 5,000,000 shares of Preferred Stock, $.001 par value.
The Preferred Stock may be issued in series from time to time with such
designation, rights, preferences and limitations as the Board of Directors may
determine. The rights, preferences and limitations of separate series of
Preferred Stock may differ with respect to such matters as may be determined by
the Board of Directors, including, without limitation, the rate of dividends,
method and nature of payment of dividends, terms of redemption, amounts payable
on liquidation, sinking fund provisions (if any), conversion rights
- 46 -
<PAGE>
(if any) and voting rights. The potential exists, therefore, that preferred
stock might be issued which would grant dividend preferences and liquidation
preferences to preferred shareholders over common shareholders. Unless the
nature of a particular transaction and applicable statute require such approval,
the Board of Directors has the authority to issue these shares without
shareholder approval. The issuance of Preferred Stock may have the effect of
delaying or preventing a change in control of the Company without any further
action by shareholders.
NOTES
The following is a brief summary of certain provisions of the
Notes, but such summary does not purport to be complete and is qualified in all
respects by reference to the actual text of the Notes, a copy of which has been
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part.
MATURITY; INTEREST - The principal amount of the Notes,
together with any accrued but unpaid interest thereon, is due and payable July
30, 2001 (the "Maturity Date") unless converted by the holder or prepaid by the
Company. The Notes bear interest at a rate of 10% per annum. Interest shall be
paid semi-annually on June 30 and December 31, commencing December 31, 1996.
CONVERSION OPTION - All, but not less than all, of the
principal amount and accrued but unpaid interest on each Note may be converted
at the option of the holder at any time prior to the Maturity Date or prepayment
at a conversion price of $3.50 per share (subject to adjustment for stock
splits, combinations and reclassifications).
PREPAYMENT - All, but not less than all, of the outstanding
principal amount of the Notes, together with accrued but unpaid interest, may be
prepaid at the option of the Company (a) provided that the Circumstances (as
defined below) exist, or (b) at any time, provided that for each $3.50 (subject
to adjustment under certain circumstances) in principal amount of each Note that
is prepaid, the Company shall issue to the holder thereof one Redeemable
Warrant. Each Redeemable Warrant entitles the holder thereof to purchase one
share of Common Stock (the "Redeemable Warrant Shares") at an exercise price of
$3.50 per share (subject to adjustment for stock splits, combinations and
reclassifications). The Redeemable Warrants may be redeemed by the Company at
$.10 per Redeemable Warrant, provided that the Circumstances exist.
The "Circumstances" shall exist if (i) the Securities are
registered under the Act and applicable state "blue sky" law, (ii) a current
prospectus is then available for the sale of the Securities, and (iii) the
closing bid price of the Common Stock as reported by Nasdaq, the OTC Bulletin
Board, or such other market on which the Common Stock is then traded, equals or
exceeds the Threshold Price for the twenty consecutive trading days ending on
the fifth trading day prior to the date of the notice of redemption or
prepayment, as the case may be. The Threshold Price with respect to the
prepayment of the Notes and the redemption of the Redeemable Warrants is $5.00
per share.
COVENANTS - The Company has covenanted so long as the Notes
are outstanding, to: (a) punctually pay principal and interest, when due; (b)
maintain its corporate existence and the corporate existence of each of MPIO and
Magic Promotions, Inc., each of which is a wholly-owned subsidiary of the
Company (the "Specified Subsidiaries") and keep its various rights and
franchises and those of the Specified Subsidiaries in good standing; (c) pay or
discharge all taxes, assessments and governmental charges; (d) comply in all
material respects with all applicable federal, state and local laws and
regulations; (e) refrain from paying dividends or redeeming equity securities;
(f) refrain from creating or incurring liens on its assets or properties unless
incurred in connection with business purposes; and (g) limit "insider" or
affiliate transactions with the Company to those which are on terms which are
fair to the Company and which are reasonably similar to, or more beneficial to
the Company than terms available from third parties.
EVENTS OF DEFAULT - The following events shall constitute
events of default under the Notes: (a) if the Company defaults in the payment or
performance of its obligations under the Notes or the Note Escrow Agreement
executed in connection with the Private Placement; (b) if the Company or a
Specified Subsidiary is dissolved or
- 47 -
<PAGE>
liquidated or fails to maintain its corporate existence; (c) if the Company or a
Specified Subsidiary is the subject of bankruptcy, insolvency or reorganization
proceedings; (d) if the Company or a Specified Subsidiary ceases its usual
business; (e) if the Company's warranties, representations or statements of fact
in the Notes or the Note Escrow Agreement were false or misleading when made; or
(f) if a receiver or trustee is sought against the Company, or a Specified
Subsidiary or any of their property, which is not dismissed within 60 days.
REDEEMABLE WARRANTS
The following is a brief summary of certain provisions of the
Redeemable Warrants, but such summary does not purport to be complete and is
qualified in all respects by reference to the actual text of the Redeemable
Warrant Certificates, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
Upon prepayment of the Notes under certain circumstances, the
Company will deliver to the subject noteholder a Redeemable Warrant for each
$3.50 in principal amount of the Note that is prepaid. Warrant certificates for
the Redeemable Warrants may be exchanged for new certificates of different
denominations, and may be exercised or transferred by presenting them at the
appropriate office described in the certificates representing the Redeemable
Warrants.
Each Redeemable Warrant entitles the registered holder to
purchase one share of Common Stock (the "Warrant Shares") at an exercise price
of $3.50 per Warrant Share (subject to adjustment for stock splits, combinations
and reclassifications) at any time prior to redemption from the date of issuance
until the Maturity Date. The exercise price of the Redeemable Warrants bears no
relationship to any objective criteria of value and should in no event be
regarded as an indication of any future market price of the Securities offered
hereby. Redeemable Warrants may be redeemed by the Company at $.10 per share on
thirty days' notice at any time, if the Circumstances exist.
Each Redeemable Warrant may be exercised by surrendering the
warrant certificate, with the subscription form attached to the warrant
certificate properly completed and executed, together with payment of the
exercise price to the warrant agent. The Redeemable Warrants may be exercised in
whole or from time to time in part. If less than all of the Redeemable Warrants
evidenced by a warrant certificate are exercised, a new warrant certificate will
be issued for the remaining number of Redeemable Warrants.
The Redeemable Warrants do not confer upon the holders thereof
any voting, dividend or other rights as shareholders of the Company.
The Redeemable Warrants are not exercisable or redeemable
unless, at the time of the exercise or redemption, the Company has a current
prospectus covering the shares of Common Stock issuable upon the exercise of
such warrants, or such shares have been registered, qualified or deemed to be
exempt under the securities laws of the state of residence of the exercising
holder of such warrants.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is
Interwest Transfer & Trust Company.
- 48 -
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus covers the sale of Shares by the Selling
Shareholders. See "Principal and Selling Shareholders." Any distribution of the
Shares by the Selling Shareholders, or by their pledgees, donees, transferees or
other successors in interest may be effected from time to time in one or more of
the following transactions: (a) to underwriters who will acquire securities for
their own account and resell them in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale (any public offering price and any discount or
concessions allowed or reallowed or paid to dealers may change from time to
time); (b) through brokers, acting as principal or agent, in transactions (which
may involve block transactions) on NMS or on one or more exchanges on which the
securities are then listed, in special offerings, exchange distributions
pursuant to the rules of the applicable exchanges or in the over-the-counter
market, or otherwise, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices or at fixed
prices; (c) directly or through brokers or agents in private sales at negotiated
prices; or (d) by any other legally available means.
The Company will not receive any proceeds from the sale of the
Shares offered hereby. The aggregate proceeds to the Selling Shareholders from
the securities offered hereby will be the offering price less applicable
commissions or discounts, if any. There is no assurance that the Selling
Shareholders will sell any of the securities offered hereby.
The Selling Shareholders and such underwriters, brokers,
dealers or agents, upon effecting a sale of securities, may be considered
"underwriters" as that term is defined in the Securities Act. Sales effected
through agents, brokers or dealers will ordinarily involve payment of customary
brokerage commissions although some brokers or dealers may purchase such shares
as agents for others or as principals for their own account. The Selling
Shareholders will pay any sales commissions or other sellers' compensation
applicable to such transactions. A portion of any proceeds of sales and
discounts, commissions or other sellers' compensation may be deemed to be
underwriting compensation for purposes of the Securities Act.
Pursuant to applicable rules and regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), any person
engaged in the distribution of the securities offered hereby may not
simultaneously engage in market making activities for the Common Stock for a
period of two business days prior to the commencement of such distribution. In
addition, each Selling Shareholder and any other person who participates in a
distribution of the securities will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Rules 10b-2,
10b-6 and 10b-7, which provisions may limit the timing of purchases and may
affect the marketability of the securities and the ability of any person to
engage in market making activities for the Common Stock.
At the time a particular offering of securities is made, to
the extent required, a Prospectus supplement will be distributed which will set
forth the number of securities being offered and the terms of the offering,
including the purchase price or the public offering price, the name or names of
any underwriters, dealers or agents, the purchase price paid by any underwriters
for securities purchased from the Selling Shareholders, any discounts,
commissions and other items constituting compensation from the Selling
Shareholders and any discounts, commissions or concessions allowed or reallowed
or paid to dealers.
In order to comply with the securities laws of certain states,
if applicable, the securities will be sold in such jurisdictions, if required,
only through registered or licensed brokers or dealers. In addition, in certain
states the securities may not be sold unless the securities have been registered
or qualified for sale in such state or an exemption from registration or
qualification is available and the conditions of such exemption have been
satisfied.
The Company has agreed that it will bear all costs, expenses
and fees in connection with the registration or qualification of the securities
under federal and state securities laws. The Company and each Selling
Shareholder
- 49 -
<PAGE>
have agreed to indemnify each other and certain other persons against certain
liabilities in connection with the offering of the securities, including
liabilities arising under the Securities Act.
SHARES ELIGIBLE FOR FUTURE SALE
As of August 31, 1996, the Company had 23,000,299 shares of
Common Stock outstanding. Of these shares, 22,689,179 shares being registered
pursuant to the registration statement of which this Prospectus forms a part
will be freely tradeable without restriction or further registration under the
Securities Act, except for any shares purchased by an "affiliate" of the Company
(in general, a person who has a control relationship with the Company) which
will be subject to the limitations of Rule 144 adopted under the Securities Act.
In general, under Rule 144 as currently in effect, subject to
the satisfaction of certain other conditions, a person, including an affiliate
of the Company (or other persons whose shares are aggregated), who has owned
restricted shares of Common Stock beneficially for at least two years is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of one percent of the total number of outstanding shares
of the same class or the average weekly trading volume during the four calendar
weeks preceding the sale. A person who has not been an affiliate of the Company
for at least the three months immediately preceding the sale and who has
beneficially owned shares of Common Stock for at least three years is entitled
to sell such shares under Rule 144 without regard to any of the limitations
described above.
In connection with the Private Placement, all of the Company's
officers and directors, the MEI Shareholders and the shareholders of Movietime
have agreed not to sell or otherwise dispose of any of their shares of Common
Stock for a period ending December 30, 1997.
No prediction can be made as to the effect, if any, that
market sales of shares of Common Stock or the availability of such shares for
sale will have on the market prices prevailing from time to time. Nevertheless,
the possibility that substantial amounts of Common Stock may be sold in the
public market may adversely affect prevailing market prices for the Common Stock
and could impair the Company's ability to raise capital through the sale of its
equity securities.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed
upon for the Company by Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel,
P.A., Miami, Florida.
EXPERTS
The combined financial statements of Magicworks Entertainment
Incorporated at December 31, 1995 and 1994, and for each of the three years in
the period ended December 31, 1995; the combined financial statements of Magic
Promotion, Inc. as of December 31, 1995 and 1994 and for each of the three years
in the period ended December 31, 1995; the financial statements of Diamond
Bullet Merchandising as of December 31, 1995 and for the year then ended; the
financial statements of Movietime Entertainment, Inc. as of December 31, 1995
and for the period from May 24, 1995 (inception) to December 31, 1995; the
historical supplemental pooled financial statements of Magic Promotion, Inc. and
Movietime Entertainment, Inc. as of December 31, 1995 and 1994 and for each of
the three years in the period ended December 31, 1995, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent certified public accountants, as set forth in their reports thereon
appearing elsewhere herein, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
- 50 -
<PAGE>
<TABLE>
<CAPTION>
MAGICWORKS ENTERTAINMENT INCORPORATED
INDEX TO FINANCIAL STATEMENTS
PAGE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
MAGIC PROMOTION, INC. CONDENSED COMBINED FINANCIAL
STATEMENTS
Independent Auditors' Report--Ernst & Young, LLP............................................................. F-3
Condensed Combined Balance Sheets for the Years Ended December 31, 1995, 1994
and 1993.................................................................................................. F-4
Condensed Combined Statements of Income for the Years Ended December 31, 1995,
1994 and 1993............................................................................................. F-5
Condensed Combined Statements of Changes in Stockholders' Equity Ended Decemmber
31, 1995, 1994, 1993 and 1992............................................................................. F-6
Condensed Combined Statements of Cash Flows for the Years Ended December 31,
1995, 1994 and 1993....................................................................................... F-7
Notes to Condensed Combined Financial Statements .............................................................F-9
DIAMOND BULLET MERCHANDISING CONDENSED FINANCIAL STATEMENTS
Independent Auditors' Report - Ernst & Young..................................................................F-19
Condensed Balance Sheets for the Year Ended December 31, 1995.................................................F-20
Condensed Statements of Income for the Year Ended December 31, 1995...........................................F-21
Condensed Statements of Stockholders' Deficit.................................................................F-22
Condensed Statements of Cash Flows for the Year Ended December 31, 1995.......................................F-23
Notes to Condensed Financial Statements.......................................................................F-24
MOVIETIME ENTERTAINMENT, INC. CONDENSED FINANCIAL STATEMENTS
Independent Auditors' Report - Ernst & Young LLP..............................................................F-27
Condensed Balance Sheets - June 30, 1996 and December 31, 1995................................................F-28
Condensed Statement of Operation..............................................................................F-29
Condensed Statements of Stockholders' Deficit.................................................................F-30
Condensed Statements of Cash Flows............................................................................F-31
Notes to Condensed Financial Statements.......................................................................F-32
F-1
<PAGE>
MAGIC PROMOTION, INC. AND MOVIETIME ENTERTAINMENT, INC.
HISTORICAL CONDENSED SUPPLEMENTAL POOLED FINANCIAL
STATEMENTS
Independent Auditors' Report - Ernst & Young, LLP.............................................................F-35
Historical Condensed Supplemental Pooled Balance Sheets ......................................................F-36
Historical Condensed Supplemental Pooled Statements of Income - for the Years Ended
December 31, 1995, 1994 and 1993...........................................................................F-37
Historical Supplemental Pooled Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1995, 1994 and 1993......................................................F-38
Historical Condensed Supplemental Pooled Statements of Cash Flows - for the Years
Ended December 31, 1995, 1994 and 1993.....................................................................F-39
Notes to Historical Condensed Supplemental Pooled Financial Statements .......................................F-41
MAGICWORKS ENTERTAINMENT INCORPORATED CONDENSED COMBINED
FINANCIAL STATEMENTS
Independent Auditors' Report--Ernst & Young, LLP..............................................................F-53
Condensed Combined Balance Sheet - for the Years Ended December 31, 1995, 1994
and 1993..................................................................................................F-54
Condensed Combined Statements of Income - for the Years Ended December 31, 1995,
1994 and 1993.............................................................................................F-55
Condensed Combined Statements of Changes in Capital - for the Years Ended December 31,
1995, 1994 and 1993.......................................................................................F-56
Condensed Combined Statements of Cash Flows - for the Years Ended December 31,
1995, 1994 and 1993.......................................................................................F-57
Notes to Condensed Combined Financial Statements..............................................................F-58
Condensed Combined Balance Sheets for the Six Month Period Ended June 30, 1996
and the Year Ended Deecember 31, 1995(Unaudited)...........................................................F-71
Condensed Combined Statements of Income for the Six Month Period Ended June 30,
1996 and 1995 (Unaudited)................................................................................. F-72
Condensed Combined Statements of Cash Flows for the Six Month Period ended
June 30, 1996 and 1995 (Unaudited)........................................................................ F-73
Notes to Condensed Combined Financial Statements .............................................................F-74
MAGICWORKS ENTERTAINMENT INCORPORATED PRO FORMA COMBINED FINANCIAL
STATEMENTS
Magicworks Entertainment Incorporated Pro Forma Combined Financial Statements.................................P-1
Pro Forma Combined Balance Sheet (Unaudited) as of June 30, 1996 .............................................P-2
Pro Forma Combined Statements of Income (Unaudited) for the Six Month Period Ended
June 30, 1996 ............................................................................................P-3
Pro Forma Combined Statements of Income (Unaudited) for the Year Ended
December 31, 1995.........................................................................................P-4
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Magic Promotion, Inc.
We have audited the accompanying combined balance sheets of Magic Promotion,
Inc. (the Company) as of December 31, 1995 and 1994, and the related combined
statements of income, changes in stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Magic Promotion, Inc.
at December 31, 1995 and 1994, and the combined results of its operations and
its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
Ernst & Young LLP
September 13, 1996
Miami, Florida
F-3
<PAGE>
MAGIC PROMOTION, INC.
COMBINED BALANCE SHEETS
DECEMBER 31
1995 1994
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 734,945 $1,903,936
Accounts receivable 1,107,451 525,172
Preproduction costs, net 1,508,314 1,058,681
Notes receivable from affiliates 159,520 460,057
Other current assets 353,463 71,128
---------- ----------
Total current assets 3,863,693 4,018,974
Property and equipment, net 1,091,010 195,233
Investments in partnerships 199,677 452,336
Advances and deposits 293,850 219,318
Deferred costs 207,823 94,462
Management agreements, net 364,415 385,834
========== ==========
Total assets $6,020,468 $5,366,157
========== ==========
LIABILITIES AND CAPITAL
Current liabilities:
Accounts payable and accrued liabilities $1,111,590 $2,063,931
Current maturities of long-term debt 137,870 97,882
Short-term debt 1,128,138 --
Due to affiliates 265,243 86,500
---------- ----------
Total current liabilities 2,642,841 2,248,313
Long-term debt, less current maturities 392,699 94,484
Commitments and contingencies
Minority interests 1,496,453 1,422,306
Stockholders' equity:
Common stock, $1 par value; 100 shares
authorized; 100 shares issued and
outstanding 100 100
Additional paid-in capital 50,174 50,174
Retained earnings 1,438,201 1,550,780
---------- ----------
Total stockholders' equity 1,488,475 1,601,054
========== ==========
Total liabilities and stockholders' equity $6,020,468 $5,366,157
========== ==========
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
<TABLE>
<CAPTION>
MAGIC PROMOTION, INC.
COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Production $ 31,638,078 $ 23,313,026 $ 18,151,149
Promotion 6,668,672 6,268,273 10,009,734
Merchandising 1,160,519 687,755 876,740
Other 1,237,126 873,032 475,630
------------ ------------ ------------
40,704,395 31,142,086 29,513,253
Operating expenses:
Talent and other show 33,346,544 25,871,621 23,561,001
Salaries, wages and benefits 1,185,911 975,400 877,983
Cost of goods sold 408,697 470,775 589,356
General and administrative 1,160,873 801,361 551,888
------------ ------------ ------------
36,102,025 28,119,157 25,580,228
Income from operations 4,602,370 3,022,929 3,933,025
Other income (expense):
Interest income 108,427 32,076 3,835
Interest expense (60,488) (19,590) (16,369)
From investments in noncombined
productions
418,679 417,071 364,976
Minority interests (1,688,531) (1,535,495) (2,108,791)
------------ ------------ ------------
Net income 3,380,457 1,916,991 2,176,676
Pro forma adjustment for income taxes (1,318,378) (747,626) (848,904)
------------ ------------ ------------
Pro forma net income $ 2,062,079 $ 1,169,365 $ 1,327,772
============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
<TABLE>
<CAPTION>
MAGIC PROMOTION, INC.
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balances, December 31, 1992 $ 100 $ 50,174 $ 562,640 $ 612,914
Distributions -- -- (1,748,626) (1,748,626)
Net income -- -- 2,176,676 2,176,676
----------- ----------- ----------- -----------
Balances, December 31, 1993 100 50,174 990,690 1,040,964
Distributions -- -- (1,356,901) (1,356,901)
Net income -- -- 1,916,991 1,916,991
----------- ----------- ----------- -----------
Balances, December 31, 1994 100 50,174 1,550,780 1,601,054
Distributions -- -- (3,493,036) (3,493,036)
Net income -- -- 3,380,457 3,380,457
=========== =========== =========== ===========
Balances, December 31, 1995 $ 100 $ 50,174 $ 1,438,201 $ 1,488,475
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
<TABLE>
<CAPTION>
MAGIC PROMOTION, INC.
COMBINED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,380,457 $ 1,916,991 $ 2,176,676
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,367,598 707,464 1,492,077
Write-down of investment in partnerships 101,994 16,500 --
Minority interests 1,688,531 1,535,495 2,108,791
(Increase) decrease in:
Accounts receivable (582,279) 63,655 (402,868)
Other current assets (282,335) (35,601) (25,427)
Preproduction costs (2,690,538) (1,676,245) (389,540)
Advances and deposits (74,532) (230) (10,136)
Increase (decrease) in:
Accounts payable and accrued liabilities (952,341) 1,595,421 240,946
----------- ----------- -----------
Net cash provided by operating activities 2,956,555 4,123,450 5,190,519
INVESTING ACTIVITIES
Purchase of property and equipment (959,137) (41,227) (184,009)
Investments in partnerships 150,665 (153,342) (234,000)
Notes receivable from affiliates 300,537 (78,289) (169,552)
Investment in management agreements (41,914) (130,000) --
----------- ----------- -----------
Net cash used by investing activities (549,849) (402,858) (587,561)
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
MAGIC PROMOTION, INC.
COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)
YEAR ENDED DECEMBER 31
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Due to affliates $ 178,743 $ 52,600 $ (80,000)
Proceeds of borrowings 1,731,326 239,909 115,320
Repayment of borrowings (264,985) (413,979) --
Payment of deferred costs (113,361) (94,462) --
Distributions to minority interests (2,740,158) (1,950,932) (2,949,710)
Capital contributions from minority
interests 1,125,774 1,691,200 70,000
Distributions (3,493,036) (1,356,901) (1,748,626)
----------- ----------- -----------
Net cash used by financing activities (3,575,697) (1,832,565) (4,593,016)
----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents (1,168,991) 1,888,027 9,942
Cash and cash equivalents at
beginning of year 1,903,936 15,909 5,967
=========== =========== ===========
Cash and cash equivalents at
end of year $ 734,945 $ 1,903,936 $ 15,909
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during the year for interest $ 60,488 $ 19,590 $ 16,369
=========== =========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES
Distribution of notes receivable
from Stockholders $ 809,563 $ -- $ --
=========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-8
<PAGE>
MAGIC PROMOTION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS OF COMBINED SUBSIDIARIES
Magic Promotion, Inc. and Magic Promotions Inc. (collectively, Magic or the
Company) were formed in 1984 and 1993, in the states of Ohio and Florida,
respectively, as S-Corporations to produce and promote live theatrical
entertainment and to provide ancillary services including merchandising and
transportation. Magic is owned by Messrs. Marsh, Marshall and Bechdel
(collectively, the Stockholders). Magic owns a 50.0% interest in The Judas
Company (Judas), a 57.1% interest in Dolliko and a 77.88% interest in the
Impossible Touring Company (Impossible) and a 33.33% interest in the Ain't
Misbehavin' Company (Ain't Misbehavin), each of which is a general partnership
involved in equity and non-equity theatrical production which commenced
operations during 1993 and 1994. In October 1995, Impossible commenced a new
show with Magic owning a 77.88% interest. The Company has included the accounts
of Judas, Dolliko, Ain't Misbehavin and Impossible in its combined financial
statements as the Stockholders exercise significant control over operating and
financial policies of these general partnerships. The interests of Ain't
Misbehavin, Judas, Dolliko and Impossible not owned by Messrs. Marsh, Marshal
and Bechdel are presented as minority interests in the combined financial
statements. Promotion revenues from Ain't Misbehavin, Judas, Dolliko and
Impossible included in the combined statements of income were $4,930,471,
$3,075,627, and $5,081,851 in 1995, 1994 and 1993, respectively. All significant
intercompany balances and transactions have been eliminated in the combined
financial statements.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and investments in short-term highly
liquid financial instruments, primarily time deposits and money market accounts,
with original maturities of three months or less. Due to the short maturity
period of the cash equivalents, the carrying amount of these instruments
approximates their fair values.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated depreciation.
Property and equipment are depreciated using the straight-line method over the
estimated useful lives of 10 years for leasehold improvements, 3 to 7 years for
furniture and equipment and 10 years for vehicles.
F-9
<PAGE>
MAGIC PROMOTION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
PROPERTY AND EQUIPMENT (CONTINUED)
Repairs of property and equipment and minor replacements and renewals are
charged to maintenance expense, which is included in general and administrative
expenses, as incurred.
PREPRODUCTION COSTS
Preproduction costs consist mainly of rehearsal salaries, set design and
construction expenditures incurred prior to the first performance of the
theatrical productions. These costs are amortized over the terms of the
respective shows, which range from 12 to 24 months.
DEFERRED COSTS
Deferred costs consist mainly of professional fees incurred in connection with
the proposed private offering of securities by the Company (see Note 10). The
costs associated with the private offering which totaled $207,823 and $94,462 at
December 31, 1995 and 1994, respectively, will be deducted from the net proceeds
of the private securities offering or accounted for as deferred financing costs
based on the types of securities sold.
MANAGEMENT AGREEMENTS
Management and booking agreements consist primarily of the cost to acquire
certain booking rights. Those costs are being amortized over the terms of the
respective agreements. Amortization expense related to these agreements amounted
to $63,333, $29,166 and $7,500, for 1995, 1994 and 1993, respectively.
Accumulated amortization was $99,999 and $36,666 at December 31, 1995 and 1994,
respectively.
REVENUES
Revenues are recognized when earned, which is generally at the time of the
theatrical performance or entertainment events. Cash received in advance of a
performance is reflected in other current liabilities in the accompanying
balance sheets.
F-10
<PAGE>
MAGIC PROMOTION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
REVENUES (CONTINUED)
The Company provides an allowance for losses on accounts receivable based on a
monthly review of the outstanding receivables and evaluation of their
collectibility.
The Company's revenues are primarily derived from the production and promotion
of live theater throughout the United States, Canada and Mexico. Changes in the
entertainment preferences of the general populations could affect the Company's
future revenues.
INCOME TAXES
The Company and its shareholders have elected to be treated as either
S-Corporations under Subchapter S of the Internal Revenue Code or are general
partnerships. As such, the stockholders or partners include their proportionate
share of the Company's income in their respective tax returns.
Upon completion of the transaction discussed in Note 10, the Company will become
subject to state and U.S. corporate income tax.
The accompanying combined statements of income include pro forma adjustments for
income taxes which would have been recorded had the Company been subject to
federal and state corporate income taxes, based on the tax laws in effect during
those periods and statutory rates applied to pre-tax accounting income.
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 amounts reported in the combined financial statements and
accompanying notes. Actual results could differ from those estimates.
F-11
<PAGE>
MAGIC PROMOTION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and short-term debt - the carrying amounts of these items are a
reasonable estimate of their fair value.
Long-term debt - interest rates currently available to the Company either
fluctuate with the prime rate of the lending institution or are comparable to
current market rates, and thus the carrying value of long-term debt
approximates fair value.
INVESTMENTS IN PARTNERSHIPS
The Company has limited partnership and joint venture interests, ranging from 1%
to 10%, in various theatrical productions. Because the Company does not exercise
significant influence over the operating and financial policies of these
productions, these investments are carried in the accompanying combined balance
sheets at cost and income is only recognized when received in the form of
distributions.
The Company has four joint venture interests ranging from 25% to 35%, in various
seasonal productions. Because of the short-term nature of these productions, the
investments are carried in the accompanying combined balance sheets at cost and
revenue is recognized using the cost recovery method, whereby no income is
recognized until the investment is recouped.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. The Company incurred
approximately $5,200,000, $4,000,000 and $8,100,000 in advertising expense for
the years ended December 31, 1995, 1994 and 1993, respectively, which is
included in talent and other show expenses in the accompanying combined
statements of income.
F-12
<PAGE>
MAGIC PROMOTION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1994 consist of the following:
1995 1994
---------- ----------
Leasehold improvements $ 64,444 $ 64,444
Furniture and equipment 48,898 44,949
Vehicles 1,254,646 299,458
Vehicle under capital lease 198,500 198,500
---------- ----------
1,566,488 607,351
Less accumulated depreciation 475,478 412,118
========== ==========
Property and equipment, net $1,091,010 $ 195,233
========== ==========
3. SHORT-TERM DEBT
Short-term debt consists of the following at December 31, 1995:
$350,000 unsecured demand promissory note,
interest at prime rate charged by
Society National Bank plus 3/4%,
interest due monthly. Guaranteed by
certain Stockholders of the Company. $ 340,982
$500,000 unsecured commercial demand note,
interest at prime rate charged by
National City Bank plus 1.0%, interest
due quarterly. Guaranteed by certain
Stockholders of the Company. 435,156
$400,000 note payable, interest at 10%,
interest due monthly, collateralized
by vehicles. 352,000
----------
Total short-term debt $1,128,138
==========
The weighted average interest rate on the short-term debt was 9.58% as of
December 31, 1995.
F-13
<PAGE>
MAGIC PROMOTION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT
Long-term debt consists of the following at December 31:
1995 1994
-------- --------
10.90% note payable, principal and interest
due monthly through May 2000.
Collateralized by vehicle. $120,627 $ --
10.75% note payable, principal and interest
due monthly through August 1999 .
Collateralized by vehicle. 148,610 --
10.75% note payable, principal and interest
due monthly through October 2000.
Collateralized by vehicle. 166,807 --
7.5% unsecured note payable, principal and
interest due monthly through December
1994. Guaranteed by certain Stockholders
of the Company. -- 50,000
9.0% note payable, principal and interest
due monthly through October 1997.
Collateralized by a vehicle. 53,747 81,286
Capital lease obligation payable in monthly
installments through September 1997
including interest imputed at a rate of
10%, collateralized by a vehicle. 40,778 61,080
-------- --------
530,569 192,366
Less current maturities 137,870 97,882
======== ========
Total long-term debt $392,699 $ 94,484
======== ========
F-14
<PAGE>
MAGIC PROMOTION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
Scheduled maturities of long-term debt are as follows:
Year Ending December 31:
1996 $137,870
1997 136,874
1998 105,710
1999 100,275
2000 49,840
--------
Total maturities of long-term debt $530,569
========
5. MANAGEMENT AGREEMENTS
The Company entered into management agreements with Niko Associates (Niko) for
daily general operations management during the entire periods of production of
Dolliko, Judas and Impossible. Management fees are calculated based on fixed
weekly fees ranging from $2,000 to $5,000 per performance week plus the
reimbursement of certain overhead related costs. Management fees paid by the
Company to Niko amounted to $309,498, $238,408 and $191,300 in 1995, 1994 and
1993, respectively, and are reflected in talent and other show expenses in the
accompanying statements of income.
6. EMPLOYEE BENEFIT PLANS
Effective January 1, 1988, Magic initiated a Money Purchase Plan and Trust (the
Plan) for all full-time employees who have completed one year of service and are
at least 21 years of age. Magic contributes an amount not to exceed 25% of the
participating employee's compensation or $30,000. In addition, the Plan permits
Magic to make additional discretionary contributions to the Plan. Total
contributions to the Plan by Magic were $65,000, $66,446, and $20,268 in 1995,
1994 and 1993, respectively. Employees vest in the Company's discretionary
contributions at the rate of 20% per year upon completion of two years of
service.
F-15
<PAGE>
MAGIC PROMOTION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
7. LEASES
The Company leases office space from affiliated (See Note 8) and non-affiliated
entities under operating lease agreements which extend through December 31,
1997. The following is a schedule of approximate future minimum lease payments
required under such non-cancelable operating leases at December 31, 1995:
Year Ending December 31:
1996 $37,515
1997 37,515
=======
Total minimum lease payments $75,030
=======
Rent expense amounted to $41,111, $36,914 and $21,676 for the years ended
December 31, 1995, 1994 and 1993, respectively, and is included in general and
administrative expenses in the accompanying combined statements of income.
8. RELATED PARTY TRANSACTIONS
In the normal course of its business, the Company conducts business with
entities related through common ownership.
The Company has entered into two three-year noncancellable operating leases for
office space with related entities. The Company is required to pay taxes,
maintenance, insurance and utility costs. Payments under these leases totaled
$41,111, $36,914 and $21,676 in 1995, 1994 and 1993, respectively.
The Company has notes receivable from entities controlled by certain
Stockholders with an outstanding balance, including accrued interest, of
$159,520 and $460,057 at December 31, 1995 and 1994, respectively. Interest
income related to these receivables totaled $84,520, $28,589 and $-0- in 1995,
1994 and 1993, respectively. These unsecured notes, which bear interest at prime
plus 2.9%, are due on demand.
The Company has payables due to certain Stockholders with an outstanding balance
(including accrued interest), of approximately $265,243 and $86,500 at December
31, 1995 and 1994, respectively. These payables bear no interest and have no
stated repayment terms.
F-16
<PAGE>
MAGIC PROMOTION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
8. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company has entered into an agreement with an entity controlled by certain
Stockholders which provided for the exclusive booking during the entire periods
of production of Judas, Impossible, Dolliko and Ain't Misbehavin. Booking
expense related to these agreements was approximately $400,800, $403,000 and
$306,250 for 1995, 1994 and 1993, respectively, and is reflected in talent and
other show expenses in the accompanying statement of income.
9. COMMITMENTS AND CONTINGENCIES
The Company has royalty and employment agreements with certain authors, actors,
directors and choreographers and their respective unions. These agreements are
generally one to three years in length and provide for minimum compensation
levels. These agreements may include incentive bonuses based upon specified
goals. The aggregate commitment for future salaries and royalties, excluding
bonuses, as of December 31, 1995 was approximately $2,288,000, which will be
paid during 1996.
In October 1994, a former independent contractor filed a complaint against Judas
in the Common Pleas Court of Philadelphia County seeking consequential damages
of $5,000,000 arising from the termination of an employment contract by Judas. A
court date has not been set. Management of Judas believes that the lawsuit is
without merit, and that the outcome of this suit will not have a material
adverse effect on the Company's combined financial condition or results of
operations.
Litigation has been threatened by a former financial advisor to the Company with
respect to an alleged contract with the Company that provided that such
individual would receive the right to purchase 5% of the equity in the Company
at a discount upon consummation of a public financing. The Company believes that
it was fraudulently induced to enter into such contract, and that, in any event
the alleged contract was terminated under circumstances in which the individual
is not entitled to any compensation. The Company believes that if the individual
commences an action, his claims will be without merit. The Company intends to
vigorously defend any suit that the defendant might bring in the future based on
the contract and the Company may pursue its own action for declaratory judgment.
F-17
<PAGE>
MAGIC PROMOTION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
10. SUBSEQUENT EVENTS
On July 30, 1996, the Company, along with other entities affiliated through
common ownership, became wholly-owned subsidiaries of Magicworks Entertainment
Incorporated (Magicworks) through a stock exchange transaction. Contemporaneous
with this transaction, Magicworks consummated a $10 million private placement
offering of units consisting of unsecured senior convertible notes and common
stock. Also, contemporaneous with these transactions, Magicworks merged with and
into Shadow Wood Corporation, an inactive public company.
F-18
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Diamond Bullet Merchandising, Inc.
We have audited the accompanying balance sheet of Diamond Bullet Merchandising,
Inc. (the Company) as of December 31, 1995, and the related statements of
income, stockholders' deficit and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Diamond Bullet Merchandising,
Inc. at December 31, 1995, and the results of its operations and its cash flows
for the year the ended, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
September 11, 1996
Miami, Florida
F-19
<PAGE>
DIAMOND BULLET MERCHANDISING, INC.
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
Current assets:
Cash $ 58,331
Accounts receivable 11,290
Inventories 160,930
Other current assets 44,781
---------
Total current assets 275,332
Furniture and equipment, net of accumulated
depreciation of $34,701 4,858
Due from affiliates 827,571
----------
Total assets $1,107,761
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 315,645
Short-term debt 792,351
Due to stockholders 95,338
----------
Total current liabilities 1,203,334
Contingency
Stockholders' deficit:
Common stock, $1 par value;
100 shares authorized; 100 shares issued and outstanding 100
Additional paid-in capital 900
Accumulated deficit (96,573)
----------
Total stockholders' deficit (95,573)
==========
Total liabilities and stockholders' deficit $1,107,761
==========
SEE ACCOMPANYING NOTES.
F-20
<PAGE>
DIAMOND BULLET MERCHANDISING, INC.
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
Merchandising revenues $1,313,695
Operating expenses:
Cost of goods sold 1,053,667
Salaries, wages and benefits 85,795
General and administrative 140,036
-----------
1,279,498
-----------
Income from operations 34,197
Interest expense (6,417)
-----------
Net income 27,780
Pro forma adjustment for income taxes (10,834)
-----------
Pro forma net income $ 16,946
===========
SEE ACCOMPANYING NOTES.
F-21
<PAGE>
<TABLE>
<CAPTION>
DIAMOND BULLET MERCHANDISING, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
YEAR ENDED DECEMBER 31, 1995
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1994
$ 100 $ 900 $(124,353) $(123,353)
Net income -- -- 27,780 27,780
--------- --------- --------- ---------
Balance at December 31, 1995
$ 100 $ 900 $ (96,573) $ (95,573)
========= ========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES.
F-22
<PAGE>
DIAMOND BULLET MERCHANDISING, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
OPERATING ACTIVITIES
Net income $ 27,780
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 107,913
Increase in:
Accounts receivable (11,290)
Inventories (16,289)
Other current assets (100,000)
Increase in:
Accounts payable and accrued liabilities 51,455
---------
Net cash provided by operating activities 59,569
INVESTING ACTIVITIES
Purchase of equipment (4,893)
Notes receivable from affiliates (715,620)
---------
Net cash used in investing activities (720,513)
FINANCING ACTIVITIES
Proceeds of borrowings 792,351
Repayments of advances from stockholders (78,684)
---------
Net cash provided by financing activities 713,667
---------
Net increase in cash 52,723
Cash at beginning of year 5,608
---------
Cash at end of year $ 58,331
=========
SEE ACCOMPANYING NOTES.
F-23
<PAGE>
DIAMOND BULLET MERCHANDISING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Diamond Bullet Merchandising, Inc. (DBM) was formed in 1988 in the state of
Florida to sell souvenir related merchandise to theatrical productions produced
by an affiliate and to third parties throughout the United States.
INVENTORIES
Inventories consist of goods held for sale which are valued at the lower of
cost, determined on a first-in first-out basis, or net realizable value.
FURNITURE AND EQUIPMENT
Furniture and equipment are carried at cost less accumulated depreciation.
Furniture and equipment are depreciated using the straight-line method over the
estimated useful lives of 3 to 7 years.
Repairs and minor replacements and renewals are charged to maintenance expense,
which is included in general and other administrative expenses, as incurred.
INCOME TAXES
The Company has elected to be treated as an S-Corporation under Subchapter S of
the Internal Revenue Code. As such, the stockholders include their proportionate
share of the Company's income in their respective tax returns.
Upon completion of the transaction discussed in Note 5, the Company will become
subject to state and U.S. corporate income tax.
The accompanying statement of income includes a pro forma adjustment for income
taxes which would have been recorded had the Company been subject to federal and
state corporate income taxes, based on the tax laws in effect during the year
and statutory rates applied to pre-tax accounting income.
F-24
<PAGE>
DIAMOND BULLET MERCHANDISING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's cash, short term debt, due from affiliates
and due to stockholders approximate their fair market values.
2. SHORT-TERM DEBT
Short-term debt consisted of a $750,000 revolving credit line, of which $692,351
was outstanding at December 31, 1995. The line of credit accrued interest at a
30-day commercial paper rate charged by Merrill Lynch plus 2.9% (8.7% at
December 31, 1995) payable monthly through August 31, 1996, at which time the
principal balance was due. The line of credit was collateralized by certain
assets of the Company and was guaranteed by certain stockholders of the Company.
On August 5, 1996 the Company repaid the entire outstanding balance of this
revolving credit line with proceeds from the private placement as discussed in
Note 5.
Short-term debt also includes a $100,000 unsecured convertible note payable to
one of the Company's stockholders which accrues interest at 8.5% and matures in
November 1996. On January 1, 1996 the stockholder exercised his option to
convert the outstanding balance of the note to 10 shares of the Company's common
stock.
3. RELATED PARTY TRANSACTIONS
In the normal course of its business, the Company conducts business with its
stockholders and their respective affiliates.
The Company has amounts due to certain stockholders with an aggregate
outstanding balance, including accrued interest, of approximately $95,338 at
December 31, 1995. These amounts bear interest at 8.5% and have no stated
repayment terms.
F-25
<PAGE>
3. RELATED PARTY TRANSACTIONS (CONTINUED)
Fees paid by the Company for accounting, general management, office and other
administrative services to affiliates were $53,218 and are included in general
and administrative expenses in the accompanying statement of income.
The Company has advanced $552,772 of proceeds received from the Company's
revolving credit line to certain affiliates. The Company allocated interest
expense to these affiliates related to these advances of $6,417 in 1995.
Additionally, the Company has advanced funds aggregating $274,799 to certain
affiliates. These advances do not bear interest and have no stated repayment
terms.
4. CONTINGENCY
Litigation has been threatened by a former financial advisor to the Company with
respect to an alleged contract with the Company that provided that such
individual would receive the right to purchase 5% of the equity in the Company
at a discount upon consummation of a public financing. The Company believes that
it was fraudulently induced to enter into such contract, and that, in any event
the alleged contract was terminated under circumstances in which the individual
is not entitled to any compensation. The Company believes that if the individual
commences an action, his claims will be without merit. The Company intends to
vigorously defend any suit that the defendant might bring in the future based on
the contract and the Company may pursue its own action for declaratory judgment.
5. SUBSEQUENT EVENTS
On July 30, 1996, the Company, along with other companies affiliated through
common ownership, became wholly-owned subsidiaries of Magicworks Entertainment
Incorporated, (Magicworks) through a stock exchange transaction. Contemporaneous
with this transaction, Magicworks consummated a $10 million private placement
offering of units consisting of unsecured senior convertible notes and the
Company's common stock. Also, contemporaneous with these transactions,
Magicworks merged with and into Shadow Wood Corporation, an inactive public
company.
F-26
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Movietime Entertainment, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of Movietime Entertainment, Inc.
(A Development Stage Company) as of December 31, 1995, and the related
statements of operations, stockholders' deficit and cash flows for the period
from May 24, 1995 (inception) through December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Movietime Entertainment, Inc.
(A Development Stage Company) at December 31, 1995, and the results of its
operations and its cash flows for the period from May 24, 1995 (inception)
through December 31, 1995, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
September 13, 1996
Miami, Florida
F-27
<PAGE>
MOVIETIME ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
Current assets:
Cash $ 4,477
Equipment, net of accumulated depreciation of $13,292 146,208
=========
Total assets $ 150,685
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 1,152
Due to affiliates and stockholder 430,158
---------
Total current liabilities 431,310
Commitments
Stockholders' deficit:
Common stock, $1 par value; 500 shares authorized;
405 shares issued and outstanding 405
Additional paid-in capital 122,176
Subscriptions receivable (243)
Deficit accumulated during the development stage (402,963)
---------
Total stockholders' deficit (280,625)
---------
Total liabilities and stockholders' deficit $ 150,685
=========
SEE ACCOMPANYING NOTES.
F-28
<PAGE>
MOVIETIME ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
For the Period from May 24, 1995 (inception) through December 31, 1995
Expenses:
Salaries, wages and benefits $ 165,401
General and administrative 232,732
---------
398,133
Interest expense 4,830
---------
Net loss $(402,963)
=========
SEE ACCOMPANYING NOTES.
F-29
<PAGE>
<TABLE>
<CAPTION>
MOVIETIME ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIT
DEFICIT
ACCUMULATED
SHARES OF ADDITIONAL DURING THE
COMMON COMMON PAID-IN SUBSCRIPTIONS DEVELOPMENT
STOCK STOCK CAPITAL RECEIVABLE STAGE TOTAL
--------- --------- ---------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Common stock subscriptions 243 $ 243 $ -- $(243) $ -- $ --
Contribution of net assets for
common stock 162 162 122,176 -- -- 122,338
Net loss (402,963) (402,963)
-------- --------- -------- ----- --------- ---------
BALANCE AT DECEMBER 31, 1995 405 $ 405 $122,176 $(243) $(402,963) $(280,625)
======== ========= ======== ===== ========= =========
</TABLE>
SEE ACCOMPANYING NOTES.
F-30
<PAGE>
MOVIETIME ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
For the Period from May 24, 1995 (inception) through December 31, 1995
OPERATING ACTIVITIES
Net loss $(402,963)
Adjustment to reconcile net loss to net cash used in
operating activities:
Depreciation 13,292
Decrease in:
Accounts payable and accrued liabilities (36,010)
----------
Net cash used in operating activities (425,681)
FINANCING ACTIVITIES
Proceeds from borrowings from affiliates and stockholder 430,158
----------
Net cash provided by financing activities 430,158
----------
Net increase in cash at December 31, 1995 $ 4,477
=========
SEE ACCOMPANYING NOTES.
F-31
<PAGE>
MOVIETIME ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Movietime Entertainment, Inc. (Movietime or the Company) was formed on May 24,
1995, in the state of Florida, to develop and operate interactive digital phone
systems that provide telephone advertising, information and ticketing services
to the motion picture industry.
On August 10, 1995, certain stockholders contributed equipment with an estimated
fair market value of $159,500 and accounts payable of $37,162 to the Company in
exchange for 162 shares of common stock.
DEVELOPMENT STAGE
The Company has operated as a development stage enterprise since its inception
by devoting substantially all of its efforts to financial planning, raising
capital, research and development and markets for its products. Accordingly, the
financial statements of the Company have been prepared in accordance with the
accounting and reporting principles prescribed by Statement of Financial
Accounting Standards (SFAS) No. 7 ACCOUNTING AND REPORTING BY DEVELOPMENT STAGE
ENTERPRISE, issued by the Financial Accounting Standards Board. During 1996, the
Company commenced its planned principal operations.
EQUIPMENT
Equipment is carried at cost less accumulated depreciation. Equipment is
depreciated using the straight-line method over its estimated useful life of 5
years.
Repairs and minor replacements and renewals are charged to maintenance expense,
which is included in general and administrative expenses, as incurred.
ADVERTISING COSTS
Advertising costs are expensed as incurred. The Company incurred approximately
$19,000 in advertising costs for the period ending December 31, 1995.
F-32
<PAGE>
MOVIETIME ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company and its stockholders have elected to be treated as an S-Corporation
under Subchapter S of the Internal Revenue Code. As such, the stockholders
include their proportionate share of the Company's income or loss in their
respective tax returns.
Upon completion of the transaction discussed in Note 4, the Company will be a
wholly owned subsidiary of a company that is subject to state and U.S. corporate
income tax.
Since the Company has incurred losses during its development stage and the
utilization of such losses on a carry-forward basis is not ascertainable, no pro
forma benefit for income taxes has been provided.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and due to affiliates and stockholder approximate
their fair values.
2. RELATED PARTY TRANSACTIONS
The Company has amounts payable to companies affiliated by common ownership with
an aggregate outstanding balance, including accrued interest, of $405,158 at
December 31, 1995. These amounts bear interest at prime plus 2.9% and are due
upon demand. Interest expense related to these borrowings totaled $4,830 for the
period ended December 31, 1995. No interest was paid during the period.
The Company received a non-interest bearing advance in the amount of $25,000
from a stockholder. The advance is due upon demand.
F-33
<PAGE>
MOVIETIME ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. COMMITMENTS
The Company has two employment agreements which expire on May 25, 1997. The
agreements provide for incentive bonuses based upon specified goals. The
aggregate commitment for future salaries, excluding bonuses, as of December 31,
1995 was approximately $192,000.
On December 20, 1995, the Company entered into a service contract with a vendor
(the Vendor) to supply voice mail information services. The agreement calls for
an initial fee of $34,950 payable on or before January 31, 1996. The agreement
also requires a minimum subscription of thirty movie theaters to each of the
vendor's fifteen service centers. If the Company does not satisfy such
obligation, Movietime shall pay the vendor $175 per subscriber under the minimum
requirement as defined in the agreement.
4. SUBSEQUENT EVENT
On August 28, 1996, the Company entered into a merger agreement with Magicworks
Entertainment Incorporated (Magicworks) whereby Magicworks issued 1,199,999
shares of its common stock in exchange for all issued and outstanding common
shares of Movietime. As a result, Movietime became a wholly owned subsidiary of
Magicworks.
F-34
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Magic Promotion, Inc. and
Movietime Entertainment, Inc.
We have audited the accompanying historical supplemental pooled balance sheets
of Magic Promotion, Inc. and Movietime Entertainment, Inc. (the Company) as of
December 31, 1995 and 1994, and the related historical supplemental pooled
statements of income, changes in stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company' management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the historical supplemental pooled financial position of
Magic Promotion, Inc. and Movietime Entertainment, Inc. at December 31, 1995 and
1994, and the historical supplemental pooled results of their operations and
their cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
Ernst & Young LLP
September 13, 1996
Miami, Florida
F-35
<PAGE>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
HISTORICAL SUPPLEMENTAL POOLED BALANCE SHEETS
DECEMBER 31
1995 1994
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 739,422 $1,903,936
Accounts receivable 1,107,451 525,172
Notes receivable from affiliates 159,520 460,057
Preproduction costs, net 1,508,314 1,058,681
Other current assets 353,463 71,128
--------- ---------
Total current assets 3,868,170 4,018,974
Property and equipment, net 1,237,218 195,233
Investments in partnerships 199,677 452,336
Advances and deposits 293,850 219,318
Deferred costs 207,823 94,462
Management agreements, net 364,415 385,834
--------- ---------
Total assets $6,171,153 $5,366,157
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $1,112,742 $2,063,931
Short-term debt 1,128,138 --
Due to affiliates 695,401 86,500
Current maturities of long-term debt 137,870 97,882
--------- ---------
Total current liabilities 3,074,151 2,248,313
Long-term debt, less current maturities 392,699 94,484
Minority interests 1,496,453 1,422,306
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value:100 shares
authorized; 100 shares issued and outstanding 100 100
Additional paid-in capital 172,512 50,174
Retained earnings 1,035,238 1,550,780
--------- ---------
Total stockholders' equity 1,207,850 1,601,054
--------- ---------
Total liabilities and stockholders' equity $6,171,153 $5,366,157
========= =========
SEE ACCOMPANYING NOTES.
F-36
<PAGE>
<TABLE>
<CAPTION>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
HISTORICAL SUPPLEMENTAL POOLED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Production $ 31,638,078 $ 23,313,026 $ 18,151,149
Promotion 6,668,672 6,268,273 10,009,734
Merchandising 1,160,519 687,755 876,740
Other 1,237,126 873,032 475,630
------------ ------------ ------------
40,704,395 31,142,086 29,513,253
Operating expenses:
Talent and other show 33,346,544 25,871,621 23,561,001
Salaries, wages and benefits 1,351,312 975,400 877,983
Cost of goods sold 408,697 470,775 589,356
General and administrative 1,393,605 801,361 551,888
------------ ------------ ------------
36,500,158 28,119,157 25,580,228
Income from operations 4,204,237 3,022,929 3,933,025
Other income (expense):
Interest income 108,427 32,076 3,835
Interest expense (65,318) (19,590) (16,369)
From investments in noncombined
productions 418,679 417,071 364,976
Minority interests (1,688,531) (1,535,495) (2,108,791)
------------ ------------ ------------
Net income 2,977,494 1,916,991 2,176,676
Pro forma adjustment for income taxes (1,318,378) (747,626) (848,904)
------------ ------------ ------------
Pro forma net income $ 1,659,116 $ 1,169,365 $ 1,327,772
============ ============ ============
</TABLE>
F-37
SEE ACCOMPANYING NOTES.
<PAGE>
<TABLE>
<CAPTION>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
HISTORICAL SUPPLEMENTAL POOLED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balances, December 31, 1992 $ 100 $ 50,174 $ 562,640 $ 612,914
Distributions -- -- (1,748,626) (1,748,626)
Net income -- -- 2,176,676 2,176,676
----------- ----------- ----------- -----------
Balances, December 31, 1993 $ 100 50,174 990,690 1,040,964
Distributions -- -- (1,356,901) (1,356,901)
Net income -- -- 1,916,991 1,916,991
----------- ----------- ----------- -----------
Balances, December 31, 1994 $ 100 50,174 1,550,780 1,601,054
Contribution of net assets -- 122,338 -- 122,338
Distributions -- -- (3,493,036) (3,493,036)
Net income -- -- 2,977,494 2,977,494
----------- ----------- ----------- -----------
Balances, December 31, 1995 $ 100 $ 172,512 $ 1,035,238 $ 1,207,850
=========== =========== =========== ===========
</TABLE>
F-38
SEE ACCOMPANYING NOTES.
<PAGE>
<TABLE>
<CAPTION>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
HISTORICAL SUPPLEMENTAL POOLED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,977,494 $ 1,916,991 $ 2,176,676
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,380,890 707,464 1,492,077
Write-down of investment in
partnerships
101,994 16,500 --
Minority interests 1,688,531 1,535,495 2,108,791
(Increase) decrease in:
Accounts receivable (582,279) 63,655 (402,868)
Other current assets (282,335) (35,601) (25,427)
Preproduction costs (2,690,538) (1,676,245) (389,540)
Advances and deposits (74,532) (230) (10,136)
Increase (decrease) in:
Accounts payable and accrued
liabilities (988,351) 1,595,421 240,946
----------- ----------- -----------
Net cash provided by operating activities 2,530,874 4,123,450 5,190,519
INVESTING ACTIVITIES
Purchase of property and equipment (959,137) (41,227) (184,009)
Investments in partnerships 150,665 (153,342) (234,000)
Notes receivable from affiliates 300,537 (78,289) (169,552)
Investment in management and booking
agreements (41,914) (130,000) --
----------- ----------- -----------
Net cash used by investing activities (549,849) (402,858) (587,561)
</TABLE>
F-39
<PAGE>
<TABLE>
<CAPTION>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
HISTORICAL SUPPLEMENTAL POOLED STATEMENTS OF CASH FLOWS (CONTINUED)
YEAR ENDED DECEMBER 31
1995 1994 1993
----------- ----------- -----------
FINANCING ACTIVITIES
<S> <C> <C> <C>
Due to affiliates $ 608,901 $ 52,600 $ (80,000)
Proceeds of borrowings 1,731,326 239,909 115,320
Repayment of borrowings (264,985) (413,979) --
Payment of deferred costs (113,361) (94,462) --
Distributions to minority interests (2,740,158) (1,950,932) (2,949,710)
Capital contributions from minority
interests 1,125,774 1,691,200 70,000
Distributions (3,493,036) (1,356,901) (1,748,626)
----------- ----------- -----------
Net cash used by financing activities (3,145,539) (1,832,565) (4,593,016)
----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents (1,164,514) 1,888,027 9,942
Cash and cash equivalents at
beginning of year 1,903,936 15,909 5,967
=========== =========== ===========
Cash and cash equivalents at
end of year $ 739,422 $ 1,903,936 $ 15,909
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during the year for interest $ 60,488 $ 19,590 $ 16,369
=========== =========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES
Contribution of assets, net of liabilities
assumed of $ 37,162 $ 122,338 $ --
=========== =========== ===========
Distribution of notes receivable
from affiliates $ 809,563 $ -- $ --
=========== =========== ===========
</TABLE>
F-40
SEE ACCOMPANYING NOTES.
<PAGE>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
NOTES TO HISTORICAL SUPPLEMENTAL POOLED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The historical supplemental pooled financial statements include the assets,
liabilities and operations of Magic Promotion, Inc. and Movietime Entertainment,
Inc. (collectively, the Company). All significant intercompany balances and
transactions have been eliminated in the historical supplemental pooled
financial statements.
The historical supplemental pooled financial statements have been prepared for
purposes of presenting the historical pooled results of Magic Promotion, Inc.
and Movietime Entertainment, Inc., as a result of the acquisition of Movietime
by Magicworks Entertainment Incorporated, as discussed in Note 10.
NATURE OF OPERATIONS OF CONSOLIDATED SUBSIDIARIES
Magic Promotion, Inc. and Magic Promotions, Inc. (collectively Magic) were
formed in 1984 and 1993, in the states of Ohio and Florida, respectively, as
S-Corporations to produce and promote live theatrical entertainment and to
provide ancillary services including merchandising and transportation. Magic is
owned by Messrs. Marsh, Marshall and Bechdel. Magic owns a 50.0% interest in The
Judas Company (Judas), a 57.1% interest in Dolliko and a 77.88% interest in the
Impossible Touring Company (Impossible) and a 33.33% interest in the Ain't
Misbehavin' Company (Ain't Misbehavin), four general partnerships involved in
equity and non-equity theatrical production which commenced operations during
1993 and 1994. In October 1995, Impossible commenced a new show with Magic
owning a 77.88% interest. The Company has included the accounts of Judas,
Dolliko and Impossible in its combined financial statements as the stockholders
exercise significant control over operating and financial policies of these
general partnerships. The interests of Ain't Misbehavin, Judas, Dolliko and
Impossible not owned by Magic are presented as minority interests in the
combined financial statements. Promotion revenues from Ain't Misbehavin, Judas,
Dolliko and Impossible included in the supplemental pooled statements of income
were $4,930,471, $3,075,627, and $5,081,851 in 1995, 1994 and 1993,
respectively.
F-41
<PAGE>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
NOTES TO HISTORICAL SUPPLEMENTAL POOLED FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
NATURE OF OPERATIONS OF CONSOLIDATED SUBSIDIARIES (CONTINUED)
Movietime Entertainment, Inc. (Movietime) was formed on May 24, 1995 in the
state of Florida as an S-Corporation to develop and operate interactive phone
systems that provide telephone advertising information and ticketing services to
the motion picture industry. Movietime has operated as a development stage
enterprise since its inception by devoting substantially all of its efforts to
financial planning, raising capital, research and development and markets for
its products. During 1996, Movietime commenced its planned principal operations.
On August 10, 1995, certain stockholders contributed equipment with an
agreed-upon market value of $159,500 and accounts payable of $37,162 to
Movietime in exchange for shares of common stock.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and investments in short-term highly
liquid financial instruments, primarily time deposits and money market accounts,
with original maturities of three months or less. Due to the short maturity
period of the cash equivalents, the carrying amount of these instruments
approximates their fair values.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated depreciation.
Property and equipment are depreciated using the straight-line method over the
estimated useful lives of 10 years for leasehold improvements, 3 to 7 years for
furniture and equipment and 10 years for vehicles.
F-42
<PAGE>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
NOTES TO HISTORICAL SUPPLEMENTAL POOLED FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
PROPERTY AND EQUIPMENT (CONTINUED)
Repairs of property and equipment and minor replacements and renewals are
charged to maintenance expense, which is included in general and administrative
expenses, as incurred.
PREPRODUCTION COSTS
Preproduction costs consist mainly of rehearsal salaries, set design and
construction expenditures incurred prior to the first performance of the
theatrical productions. These costs are amortized over the terms of the
respective shows, which range from 12 to 24 months.
DEFERRED COSTS
Deferred costs consist mainly of professional fees incurred in connection with
the proposed private offering of debt and equity securities by the Company (see
Note 10). The costs associated with the private offering which totaled $207,823
and $94,462 at December 31, 1995 and 1994, respectively, will be deducted from
the net proceeds of the private offering or accounted for as deferred financing
costs based on the types of securities sold.
MANAGEMENT AGREEMENTS
Management agreements consist primarily of the cost to acquire certain booking
rights and the rights. Those costs are being amortized over the terms of the
respective agreements. Amortization expense related to these agreements amounted
to $63,333, $29,166 and $7,500, for 1995, 1994 and 1993, respectively.
Accumulated amortization was $99,999 and $36,666 at December 31, 1995 and 1994,
respectively.
REVENUES
Revenues are recognized when earned, which is generally at the time of the
theatrical performance or entertainment events. Cash received in advance of a
performance is reflected in other current liabilities in the accompanying
balance sheets.
F-43
<PAGE>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
NOTES TO HISTORICAL SUPPLEMENTAL POOLED FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
REVENUES (CONTINUED)
The Company provides an allowance for losses on accounts receivable based on a
monthly review of the outstanding receivables and evaluation of their
collectibility.
The Company's revenues are primarily derived from the production and promotion
of live theater throughout the United States, Canada and Mexico. Changes in the
entertainment preferences of the general populations could affect the Company's
future revenues.
INCOME TAXES
The Company and its shareholders have elected to be treated as either
S-Corporations under Subchapter S of the Internal Revenue Code or are general
partnerships. As such, the stockholders or partners include their proportionate
share of the Company's income in their respective tax returns.
Upon completion of the transaction discussed in Note 10, the Company will become
subject to state and U.S. corporate income tax.
The accompanying combined statements of operations include pro forma adjustments
for income taxes which would have been recorded had the Company been subject to
federal and state corporate income taxes, based on the tax laws in effect during
those periods and statutory rates applied to pre-tax accounting income.
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 amounts reported in the combined financial statements and
accompanying notes. Actual results could differ from those estimates.
F-44
<PAGE>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
NOTES TO HISTORICAL SUPPLEMENTAL POOLED FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and short-term debt - carrying amounts of these items are a reasonable
estimate of their fair value.
Long-term debt - interest rates currently available to the Company either
fluctuate with the prime rate of the lending institution or are comparable to
current market rates, and thus their carrying value approximates fair value.
INVESTMENTS IN PARTNERSHIPS
The Company has limited partnership and joint venture interests, ranging from 1%
to 10%, in various theatrical productions. Because the Company does not exercise
significant influence over the operating and financial policies of these
productions, these investments are carried in the accompanying combined balance
sheets at cost and income is only recognized when received in the form of
distributions.
The Company has four joint venture interests ranging from 25% to 35%, in various
seasonal productions. Because of the short-term nature of these productions, the
investments are carried in the accompanying combined balance sheets at cost and
revenue is recognized using the cost recovery method, whereby no income is
recognized until the investment is recouped.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. The Company incurred
approximately $5,200,000, $4,000,000 and $8,100,000 in advertising expense for
the years ended December 31, 1995, 1994 and 1993, respectively, which is
included in talent and other show operating expenses in the accompanying
supplemental pooled statements of income.
F-45
<PAGE>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
NOTES TO HISTORICAL SUPPLEMENTAL POOLED FINANCIAL STATEMENTS (CONTINUED)
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1994 consist of the following:
1995 1994
---------- ----------
Leasehold improvements $ 64,444 $ 64,444
Furniture and equipment 208,398 44,949
Vehicles 1,254,646 299,458
Vehicle under capital lease 198,500 198,500
---------- ----------
1,566,488 607,351
Less accumulated depreciation and
amortization 488,770 412,118
---------- ----------
Property and equipment, net $1,237,218 $ 195,233
========== ==========
3. SHORT-TERM DEBT
Short-term debt consists of the following at December 31, 1995:
$350,000 unsecured demand promissory
note, interest at prime rate charged
by Society National Bank plus 3/4%,
principal and interest due monthly.
Guaranteed by certain stockholders
of the Company. $ 340,982
$500,000 unsecured commercial demand
note, interest at prime rate
charged by National City Bank plus
1.0%, principal and interest due
quarterly. Guaranteed by certain
stockholders of the Company. 435,156
$400,000 note payable, principal and
interest due at 10%, principal and
interest due monthly, collateralized
by vehicles.
352,000
---------
Total short-term debt $1,128,138
=========
The weighted average interest rate on the short-term debt was 9.58% as of
December 31, 1995.
F-46
<PAGE>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
NOTES TO HISTORICAL SUPPLEMENTAL POOLED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT
Long-term debt consists of the following at December 31:
1995 1994
-------- --------
10.90% note payable, principal and interest
due monthly through May 2000
Collateralized by vehicle $120,627 $ --
10.75% note payable, principal and interest
due monthly through August 1999
Collateralized by vehicle 148,610 --
10.75% note payable, principal and interest
due monthly through October 2000
Collateralized by vehicle 166,807 --
7.5% unsecured note payable, principal and
interest due monthly through December
1994. Personally guaranteed by certain
stockholders of the Company -- 50,000
9.0% note payable, principal and interest
due monthly through October 1997
Collateralized by a vehicle 53,747 81,286
Capital lease obligation payable in monthly
installments through September 1997
including interest imputed at a rate of
10%, collateralized by a vehicle 40,778 61,080
-------- --------
530,569 192,366
Less current maturities 137,870 97,882
======== ========
Total long-term debt $392,699 $ 94,484
======== ========
F-47
<PAGE>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
NOTES TO HISTORICAL SUPPLEMENTAL POOLED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
Scheduled maturities of long-term debt are as follows:
Year Ending December 31:
1996 $137,870
1997 136,874
1998 105,710
1999 100,275
2000 49,840
--------
Total maturities of long-term debt $530,569
========
5. MANAGEMENT AGREEMENTS
The Company entered into management agreements with Niko Associates (Niko) for
daily general operations management during the entire periods of production of
Dolliko, Judas and Impossible. Management fees are calculated based on fixed
weekly fees ranging from $2,000 to $5,000 per performance week plus the
reimbursement of certain overhead related costs. Management fees paid by the
Company to Niko amounted to $309,498, $238,408 and $191,300 in 1995, 1994 and
1993, respectively, and are reflected in talent and other show expenses in the
accompanying statements of income.
6. EMPLOYEE BENEFIT PLANS
Effective January 1, 1988, Magic initiated a Money Purchase Plan and Trust (the
Plan) for all full-time employees who have completed one year of service and are
at least 21 years of age. Magic contributes an amount not to exceed 25% of the
participating employee's compensation or $30,000. In addition, the Plan permits
Magic to make additional discretionary contributions to the Plan. Total
contributions to the Plan by Magic were $65,000, $66,446 and $20,268 in 1995,
1994 and 1993, respectively. Employees vest in the Company's discretionary
contributions at the rate of 20% per year upon completion of two years of
service.
F-48
<PAGE>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
NOTES TO HISTORICAL SUPPLEMENTAL POOLED FINANCIAL STATEMENTS (CONTINUED)
7. LEASES
The Company leases office space from affiliated (See Note 8) and non-affiliated
entities under operating lease agreements which extend through December 31,
1997. The following is a schedule of approximate future minimum lease payments
required under such non-cancelable operating leases at December 31, 1995:
Year Ending December 31:
1996 $37,515
1997 37,515
-------
Total minimum lease payments $75,030
=======
Rent expense amounted to $41,111, $36,914 and $21,676 for the years ended
December 31, 1995, 1994 and 1993, respectively, and is included in general and
administrative expenses in the accompanying combined statements of income.
8. RELATED PARTY TRANSACTIONS
In the normal course of its business, the Company conducts business with
entities related through common ownership.
The Company has entered into two three-year noncancelable operating leases for
office space with related entities. The Company is required to pay taxes,
maintenance, insurance and utility costs. Payments under these leases totaled
$41,111, $36,914 and $21,676 in 1995, 1994 and 1993, respectively.
The Company has notes receivable from entities controlled by certain
Stockholders with an outstanding balance, including accrued interest, of
$159,520 and $460,057 at December 31, 1995 and 1994, respectively. Interest
income related to these receivables totaled $84,520, $28,589 and $-0- in 1995,
1994 and 1993, respectively. These unsecured notes, which can be extended with
prior written notice, bear interest at prime plus 2.9% and are due in 1996.
F-49
<PAGE>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
NOTES TO HISTORICAL SUPPLEMENTAL POOLED FINANCIAL STATEMENTS (CONTINUED)
8. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company has payables due to companies affiliated by common ownership with an
aggregate outstanding balance, including accrued interest, of $405,158 at
December 31, 1995. These amounts bear interest at prime plus 2.9% and are due
upon demand. Interest expense related to these borrowings totaled $4,830 for the
year ended December 31, 1995.
The Company has payables due to certain stockholders with an outstanding balance
(including accrued interest), of approximately $265,243 and $86,500 at December
31, 1995 and 1994, respectively. These payables bear no interest and have no
stated repayment terms.
The Company received a noninterest bearing advance in the amount of $25,000 from
a stockholder. The advance is due upon demand.
The Company has entered into an agreement with an entity controlled by certain
stockholders which provided for the exclusive booking during the entire periods
of production of Judas, Impossible, Dolliko and Ain't Misbehavin. Booking
expense related to these agreements was $400,800, $403,000 and $306,250 for
1995, 1994 and 1993, respectively, and is reflected in talent and other show
expenses in the accompanying statement of income.
9. COMMITMENTS AND CONTINGENCIES
The Company has royalty and employment agreements with certain authors, actors,
directors and choreographers and their respective unions. These agreements are
generally one to three years in length and provide for minimum compensation
levels. These agreements may include incentive bonuses based upon specified
goals. The aggregate commitment for future salaries and royalties, excluding
bonuses, as of December 31, 1995 was approximately $2,480,000, which will be
paid during 1996.
In October 1994, a former independent contractor filed a complaint against Judas
in the Common Pleas Court of Philadelphia County seeking consequential damages
of $5,000,000 arising from the termination of an employment contract by Judas. A
court date has not been set. Management of Judas believes that the lawsuit is
without merit, and that the outcome of this suit will not have a material
adverse effect on the Company's combined financial condition or results of
operations.
F-50
<PAGE>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
NOTES TO HISTORICAL SUPPLEMENTAL POOLED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Litigation has been threatened by a former financial advisor to the Company with
respect to an alleged contract with the Company that provided that such
individual would receive the right to purchase 5% of the equity in the Company
at a discount upon consummation of a public financing. The Company believes that
it was fraudulently induced to enter into such contract, and that, in any event,
the alleged contract was terminated under circumstances in which the individual
is not entitled to any compensation. The Company believes that if the individual
commences an action, his claims will be without merit. The Company intends to
vigorously defend any suit that the defendant might bring in the future based on
the contract and the Company may pursue its own action for declaratory judgment.
The Company has employment agreements with two of its executives which expire on
May 25, 1997. The agreements provide for incentive bonuses based upon specified
goals. The aggregate commitment for future salaries, excluding bonuses, as of
December 31, 1995 was approximately $192,000.
On December 20, 1995, the Company entered into a service agreement with a vendor
(the Vendor) to supply voice mail information services. The agreement calls for
an initial fee of $34,950 payable on or before January 31, 1996. The agreement
also requires a minimum subscription of thirty movie theaters to each of the
Vendor's fifteen service centers. If the Company does not satisfy such
obligation, Movietime shall pay the Vendor $175 per subscriber under the minimum
requirement, as defined in the agreement.
10. SUBSEQUENT EVENTS
On July 30, 1996, the Company, along with other entities affiliated through
common ownership, became wholly-owned subsidiaries of Magicworks Entertainment,
Incorporated, (Magicworks), through a stock exchange transaction.
Contemporaneous with this transaction, Magicworks consummated a $10 million
private placement offering of units consisting of unsecured senior convertible
notes and common stock. Also, contemporaneous with these transactions,
Magicworks merged with and into Shadow Wood Corporation, an inactive public
company.
F-51
<PAGE>
MAGIC PROMOTION, INC. AND
MOVIETIME ENTERTAINMENT, INC.
NOTES TO HISTORICAL SUPPLEMENTAL POOLED FINANCIAL STATEMENTS (CONTINUED)
10. SUBSEQUENT EVENTS (CONTINUED)
On August 28, 1996, Magicworks entered into a merger agreement with Movietime
whereby Magicworks issued 1,999,999 shares of its common stock in exchange for
all issued and outstanding common stock of Movietime. As a result, Movietime
became a wholly-owned subsidiary of Magicworks. This transaction has been
accounted for as a pooling of interests.
F-52
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Principals of
Magicworks Entertainment
We have audited the accompanying combined balance sheets of the entities listed
in Note 1 (Magicworks Entertainment) as of December 31, 1995 and 1994, and the
related combined statements of income, changes in capital and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the entities' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Magicworks
Entertainment at December 31, 1995 and 1994, and the combined results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Ernst & Young LLP
April 11, 1996
Miami, Florida
F-53
<PAGE>
MAGICWORKS ENTERTAINMENT
COMBINED BALANCE SHEETS
DECEMBER 31
1995 1994
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 862,127 $1,955,315
Accounts receivable 1,196,297 615,073
Inventories 160,930 144,641
Preproduction costs, net 1,508,314 1,058,681
Other current assets 354,663 72,328
---------- ----------
Total current assets 4,082,331 3,846,038
Property and equipment, net 1,153,096 259,373
Investments in partnerships 347,783 502,220
Advances and deposits 343,194 281,089
Notes receivable from affiliates 665,419 460,057
Deferred costs 564,032 319,373
Management and booking agreements, net 454,442 538,121
---------- ----------
$7,610,297 $6,206,271
========== ==========
LIABILITIES AND CAPITAL
Current liabilities:
Current maturities of long-term debt $ 137,870 $ 97,882
Accounts payable and accrued liabilities 1,480,979 2,223,060
Short-term debt 1,920,489 --
Due to affiliates 398,819 485,680
---------- ----------
Total current liabilities 3,938,157 2,806,622
Long-term debt, less current maturities 392,699 94,484
Minority Interests 1,470,457 1,404,860
Commitments and contingencies
Capital:
Common stock 8,000 8,000
Partners' capital/retained earnings 1,800,984 1,892,305
---------- ----------
1,808,984 1,900,305
---------- ----------
$7,610,297 $6,206,271
========== ==========
SEE ACCOMPANYING NOTES
F-54
<PAGE>
<TABLE>
<CAPTION>
MAGICWORKS ENTERTAINMENT
COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Production $ 31,638,078 $ 23,346,244 $ 18,250,149
Promotion 6,668,672 6,268,273 10,009,734
Merchandising 2,474,214 2,338,619 2,461,577
Other 1,953,135 1,463,057 1,445,791
----------- ----------- -----------
42,734,099 33,416,193 32,167,251
Operating expenses:
Talent and other show 32,945,744 25,449,871 23,254,751
Salaries, wages and benefits 1,890,938 1,529,300 1,333,330
Cost of goods sold 1,462,364 1,824,102 1,860,777
General and administrative 1,743,081 1,436,139 1,161,347
----------- ----------- -----------
38,042,127 30,239,412 27,610,205
Income from operations 4,691,972 3,176,781 4,557,046
Other income (expense):
Interest income 109,060 14,801 6,579
Interest expense (88,015) (20,011) (79,686)
From investments in productions 418,679 417,071 364,976
Minority interests (1,446,888) (1,460,444) (1,828,358)
----------- ----------- -----------
Net income 3,684,808 2,128,198 3,020,557
Pro forma adjustment for
income taxes (1,437,075) (829,997) (1,178,017)
----------- ----------- -----------
Pro forma net income $ 2,247,733 $ 1,298,201 $ 1,842,540
=========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES
F-55
<PAGE>
MAGICWORKS ENTERTAINMENT
COMBINED STATEMENTS OF CHANGES IN CAPITAL
PARTNERS'
CAPITAL/
COMMON RETAINED
STOCK EARNINGS TOTAL
------ ----------- -----------
Balance at December 31, 1992 $8,000 $ 646,748 $ 654,748
Capital contributions -- 2,682 2,682
Distributions -- (2,289,002) (2,289,002
Net income -- 3,020,557 3,020,557
------ ---------- ----------
Balance at December 31, 1993 8,000 1,380,985 1,388,985
Distributions -- (1,616,878) (1,616,878)
Net income -- 2,128,198 2,128,198
------ ---------- ----------
Balance at December 31, 1994 8,000 1,892,305 1,900,305
Capital contributions -- 40,000 40,000
Distributions -- (3,816,129) (3,816,129)
Net income -- 3,684,808 3,684,808
------ ---------- ----------
Balance at December 31, 1994 $8,000 $ 1,800,984 $ 1,808,984
====== ========== ==========
SEE ACCOMPANYING NOTES
F-56
<PAGE>
<TABLE>
<CAPTION>
MAGICWORKS ENTERTAINMENT
COMBINED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $3,684,808 $2,128,198 $3,020,557
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 219,894 163,391 141,870
Write-down of investment in partnerships 101,994 68,715 -
Minority interests 1,446,888 1,460,444 1,828,358
(Increase) decrease in:
Accounts receivable (581,224) 15,032 (478,661)
Inventories (16,289) 2,598 29,217
Other current assets (282,335) (35,601) (11,064)
Preproduction costs (449,633) (1,058,681) 1,038,426
Advances and deposits (62,105) 76,344 34,958
Increase (decrease) in:
Accounts payable and accrued liabilities (742,081) 1,315,195 468,588
--------- --------- ---------
Net cash provided by operating activities 3,319,917 4,135,635 6,072,249
INVESTING ACTIVITIES
Investment in cultural facility (82,634) (20,054) (51,894)
Due to affiliates (86,861) 24,247 38,296
Notes receivable from affiliates (205,362) (57,464) (66,756)
Purchase of property and equipment (966,024) (46,260) (216,292)
Investments in partnerships 52,443 (132,941) (309,500)
Investment in management and
booking agreements (63,914) (160,289) -
--------- --------- ---------
Net cash used by investing activities (1,352,352) (392,761) (606,146)
FINANCING ACTIVITIES
Proceeds of borrowings 2,523,677 142,027 -
Repayment of borrowings (264,985) (326,054) (331,608)
Increase in public offering costs (162,025) (94,462) -
Distributions to minority interests (2,507,065) (1,882,764) (2,675,110)
Capital contributions from minority interests 1,125,774 1,691,200 70,000
Distributions (3,816,129) (1,616,878) (2,289,002)
Capital contributions 40,000 - 2,682
--------- --------- ---------
Net cash used by financing activities (3,060,753) (2,086,931) (5,223,038)
--------- --------- ---------
Net (decrease) increase in cash and
cash equivalents (1,093,188) 1,655,943 243,065
Cash and cash equivalents at
beginning of year 1,955,315 299,372 56,307
--------- --------- ---------
Cash and cash equivalents at end of year $ 862,127 $1,955,315 $ 299,372
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 66,905 $ 28,726 $ 58,200
========= ========= =========
NON-CASH INVESTING AND FINANCING ACTIVITIES
Distribution of notes receivable to affiliates $ 666,288 $ - $ -
========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES
F-57
<PAGE>
MAGICWORKS ENTERTAINMENT
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of certain wholly-owned
and majority-owned partnerships, joint ventures and corporations owned by
Messrs. Marsh, Marshall, Krassner, Turk and Bechdel (collectively the
"Principals"). The principal businesses include Magic Promotion Inc., Diamond
Bullet Merchandising, Inc., Touring Artists Group, Inc., Performing Arts
Management of North Miami, Inc., The Judas Company, Dolliko, The Impossible
Touring Company and certain affiliated entertainment production and promotion
related entities (collectively "Magicworks Entertainment" or the "Company"). The
Company's fiscal year ends on December 31. All significant intercompany balances
and transactions have been eliminated in the combined financial statements.
These entities have been combined for purposes of ultimately consummating a
financing transaction.
NATURE OF OPERATIONS OF CONSOLIDATED SUBSIDIARIES
Magic Promotion Inc. and Magic Promotions Inc. (collectively "Magic") were
formed in 1984 and 1993, in the states of Ohio and Florida, respectively, as
S-Corporations to produce and promote live theatrical entertainment and to
provide ancillary services including merchandising and transportation. Magic is
wholly-owned by the Principals. Magic owns a 50.0% interest in The Judas Company
("Judas"), a 57.1% interest in Dolliko, a 77.88% interest in the Impossible
Touring Company ("Impossible") and a 33.33% interest in the Ain't Misbehavin'
Company ("Ain't Misbehavin"), four general partnerships involved in equity and
non-equity theatrical production which commenced operations during 1993 and
1994. In October 1995, the Impossible Touring Company commenced a new show with
Magic owning a 77.88% interest. The Company has included the accounts of Judas,
Dolliko and Impossible in its combined financial statements as the Principals
exercise significant control over operating and financial policies of these
general partnerships. The interests of Ain't Misbehavin, Judas, Dolliko and
Impossible not owned by Magic are presented as minority interests in the
combined financial statements. Promotion revenues from Ain't Misbehavin, Judas,
Dolliko and Impossible included in the combined statements of income were
$4,930,471, $3,075,627 and $5,081,851 in 1995, 1994 and 1993, respectively.
F-58
<PAGE>
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
NATURE OF OPERATIONS (CONTINUED)
Touring Artists Group, Inc. ("TAG") was formed in 1993, in the states of Ohio
and Florida as an S-Corporation to promote live theatrical performances and
other entertainment related events throughout the United States on behalf of the
Company and third parties. TAG is wholly-owned by the Principals.
In March 1992, TAG, acquired certain assets and assumed certain liabilities of
National Artists Management Company, Inc. ("NAMCO"). The acquisition has been
accounted for by the purchase method of accounting. The purchase price of
$395,000 approximated the fair value of the net assets acquired, which primarily
consisted of management contracts. The operating results of this acquisition are
included in the Company's combined results of operations from the date of
acquisition.
Performing Arts Management of North Miami, Inc. ("PAM") was formed in January
1991 in the state of Florida as an S-Corporation to operate, manage and engage
in the business of development, management and promotion of cultural performance
centers. The Principals own 59.5% of PAM.
Diamond Bullet Merchandising, Inc. ("DBM") was formed in 1988 in the state
of Florida as an S-Corporation to sell souvenir related merchandise for Company
produced and third party theatrical productions. DBM is wholly-owned by the
Principals.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and investments in short-term highly
liquid financial instruments, primarily time deposits and money market accounts,
with original maturities of three months or less. Due to the short maturity
period of the cash equivalents, the carrying amount of these instruments
approximates their fair values.
INVENTORIES
Inventories are valued at the lower of cost, determined on a first-in first-out
basis, or net realizable value.
F-59
<PAGE>
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated depreciation.
Property and equipment are depreciated using the straight-line method over the
estimated useful lives of 10 years for leasehold improvements, 3 to 7 years for
furniture and equipment and 10 years for buses.
Repairs of property and equipment and minor replacements and renewals are
charged to maintenance expense, which is included in general and administrative
expenses, as incurred.
PREPRODUCTION COSTS
Preproduction costs consist mainly of rehearsal salaries, set design and
construction expenditures incurred prior to the first performance of the
theatrical productions. These costs are amortized over the terms of the
respective shows, which range from 12 to 24 months.
DEFERRED COSTS
Deferred costs consist mainly of pre-opening legal and professional fees
incurred in connection with The Performing Art Center of North Miami (see Note
5) and the proposed private offering by the Company discussed in Note 10. The
costs relating to the Performing Arts Center which totaled $307,545 and $224,911
at December 31, 1995 and 1994, respectively, will be amortized over a maximum
period of three years, upon commencement of the facility's operations which is
anticipated to be in late 1997. The costs associated with the private offering
which totaled $256,487 and $94,462 at December 31, 1995 and 1994, respectively,
will be deducted from the net proceeds of the private offering which is
anticipated to occur in 1996.
F-60
<PAGE>
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
MANAGEMENT AND BOOKING AGREEMENTS
Management and booking agreements consist primarily of the cost to acquire
certain booking rights and the rights to develop, construct, manage and operate
a cultural facility, as discussed in Note 5. Those costs are being amortized
over the terms of the respective agreements. Amortization expense related to
these agreements amounted to $147,593, $93,951 and $69,761, for 1995, 1994 and
1993, respectively. Accumulated amortization was $359,067 and $233,473 at
December 31, 1995 and 1994, respectively.
REVENUES
Revenues are recognized when earned, which is generally at the time of the
theatrical performance or entertainment events. Cash received in advance of a
performance is reflected in other current liabilities in the accompanying
balance sheets.
The Company provides an allowance for losses on accounts receivable based on a
monthly review of the outstanding receivables and evaluation of their
collectibility.
A substantial portion of the Company's revenues are derived from the production
and promotion of live theater throughout the United States, Canada and Mexico.
Changes in the entertainment preferences of the general populations could affect
the Company's future revenues.
INCOME TAXES
The Company and its shareholders have elected to be treated as either
S-Corporations under Subchapter S of the Internal Revenue Code or are general
partnerships. As such, the stockholders or partners include their proportionate
share of the Company's income in their respective tax returns.
Upon completion of the transaction discussed in Note 10, the Company will become
subject to state and U.S. corporate income tax.
F-61
<PAGE>
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME TAXES (CONTINUED)
The accompanying combined statements of operations include pro forma adjustments
for income taxes which would have been recorded had the Company been subject to
federal and state corporate income taxes, based on the tax laws in effect during
those periods and statutory rates applied to pre-tax accounting income.
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 amounts reported in the combined financial statements and
accompanying notes. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash, receivables, accounts payable, accrued liabilities and short-term debt
- carrying amounts of these items are a reasonable estimate of their fair
value.
Long-term debt - interest rates currently available to the Company either
fluctuate with the prime rate of the lending institution or are comparable to
current market rates, and thus their carrying value approximates fair value.
INVESTMENTS IN PARTNERSHIPS
The Company has limited partnership and joint venture interests, ranging from 1%
to 10%, in various theatrical productions. Because the Company does not exercise
significant influence over the operating and financial policies of these
productions, these investments are carried in the accompanying combined balance
sheets at cost and income is only recognized when received in the form of
distributions.
F-62
<PAGE>
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INVESTMENTS IN PARTNERSHIPS (CONTINUED)
The Company has four joint venture interests ranging from 25% to 35%, in various
seasonal productions. Because of the short-term nature of these productions, the
investments are carried in the accompanying combined balance sheets at cost and
revenue is recognized using the cost recovery method, whereby no income is
recognized until the investment is recouped.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. The Company incurred
approximately $5,200,000, $4,000,000 and $8,100,000 in advertising expense for
the years ended December 31, 1995, 1994 and 1993, respectively, which is
included in talent and other show operating expenses in the accompanying
combined statements of income.
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1994 consist of the following:
1995 1994
--------- -------
Leasehold improvements $ 65,868 $ 65,868
Furniture and equipment 176,092 80,115
Vehicles 1,254,646 384,600
Vehicle under capital lease 198,500 198,500
--------- -------
1,695,106 729,083
Less accumulated depreciation
and amortization 542,010 469,710
--------- -------
Property and equipment, net $1,153,096 $259,373
========= =======
F-63
<PAGE>
3. SHORT-TERM DEBT
Short-term debt consists of the following at December 31, 1995:
$750,000 revolving credit line, interest at
30-day commercial paper rate charged
by Merrill Lynch plus 2.9% payable monthly
through August 31, 1996 at which time the
principal balance is due. Outstanding
borrowings are collateralized by certain
assets of the Company and are guaranteed
by certain Principals of the Company. $ 692,351
$350,000 unsecured demand promissory note,
interest at prime rate charged by
Society National Bank plus 3/4%,
interest due monthly. Personally
guaranteed by certain Principals
of the Company. 340,982
$500,000 unsecured commercial demand note,
interest at prime rate charged by
National City Bank plus 1.0%, payment
of interest to be paid quarterly.
Personally guaranteed by certain
Principals of the Company. 435,156
$400,000 note payable, interest at 10%
principal due monthly, collateralized
by vehicles. 352,000
$100,000 unsecured convertible note,
interest at 8.5%, principal and
interest convertible to 24% of stock
in DBM, due in November, 1996. 100,000
------------
Total short-term debt $ 1,920,489
============
F-64
<PAGE>
4. LONG-TERM DEBT
Long-term debt consists of the following at December 31:
1995 1994
-------- ---------
10.90% note payable, principal due monthly
through May 2000. Collateralized by vehicle $120,627 $ --
10.75% note payable, principal due monthly
through August 1999. Collateralized by
vehicle 148,610 --
10.75% note payable, principal due monthly
through October 2000. Collateralized
by vehicle
166,807 --
7.5% unsecured note payable, principal due
monthly through December 1994
Personally guaranteed by certain
Principals of the Company
-- 50,000
9.0% note payable, principal due monthly
through October 1997. Collateralized
by a vehicle 53,747 81,286
Capital lease obligation payable in
monthly installments through
September 1997 including interest
imputed at a rate of 10%,
collateralized by a vehicle
40,778 61,080
-------- --------
530,569 192,366
Less current maturities 137,870 97,882
-------- --------
Total long-term debt $392,699 $ 94,484
======== ========
F-65
<PAGE>
4. LONG-TERM DEBT (CONTINUED)
Scheduled maturities of long-term debt are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ --------
1996 $ 137,870
1997 136,874
1998 105,710
1999 100,275
2000 49,840
--------
Total maturities of long-term debt $ 530,569
========
5. MANAGEMENT AGREEMENTS
GENERAL MANAGER AGREEMENTS
The Company entered into management agreements with Niko Associates ("Niko") for
daily general operations management during the entire periods of production of
Dolliko, Judas and Impossible. Management fees are calculated based on fixed
weekly fees ranging from $2,000 to $5,000 per performance week plus the
reimbursement of certain overhead related costs. Management fees paid by the
Company to Niko amounted to $309,498, $238,408, and $191,300 in 1995, 1994 and
1993, respectively, and are reflected in talent and other show expenses in the
accompanying statements of income.
MANAGEMENT OPERATING AGREEMENT
In May 1992, the Company and the City of North Miami, Florida (the "City")
entered into an agreement to develop, construct, manage and operate a cultural
facility for the performing and visual arts exclusively on behalf of the City.
The project will be owned by the City and is expected to be funded through the
issuance of 40 year industrial development revenue bonds without recourse to the
City. The term of the agreement will commence on the date of occupancy (expected
to be November 1997) and will continue for a period of 30 years.
F-66
<PAGE>
5. MANAGEMENT AGREEMENTS (CONTINUED)
Pursuant to the agreement, the Company will receive gross revenues, as defined,
generated by the facility and has agreed to pay to the City; (i) an annual
minimum return of $200,000 adjusted annually to reflect changes in the consumer
price index, but not to exceed $500,000 per annum, (ii) a use fee charge
equivalent to 5% of box office ticket sale revenue, and (iii) 5% of the gross
monies actually received by the Company for concessions and parking. In
addition, the Company has agreed to deposit with the City upon the approval by
all federal, state, county and local regulatory and administrative agencies with
jurisdiction over the project the refundable sum of $1,500,000, which is to be
applied toward the payment of construction, operation and monitoring costs of
the facility. In the event the cash flow generated by the facility is not
sufficient to pay the interest and principal on the bonds, the management rights
will revert to the City.
The Company's investment in this project which includes legal, feasibility and
architectural costs and the cost related to acquiring the management agreement
totaled approximately $600,000 and $500,000 at December 31, 1995 and 1994,
respectively. The recoverability of these costs is dependent on the resolution
of certain entitlement and permitting issues which have prevented development
and construction of the project.
6. EMPLOYEE BENEFIT PLANS
Effective January 1, 1988, Magic initiated a Money Purchase Plan and Trust (the
"Plan") for all full-time employees who have completed one year of service and
are at least 21 years of age. Magic contributes an amount not to exceed 25% of
the participating employee's compensation or $30,000. In addition, the Plan
permits Magic to make additional discretionary contributions to the Plan. Total
contributions to the Plan by Magic were $69,000, $70,446, and $68,815 in 1995,
1994 and 1993, respectively. Employees vest in the Company's discretionary
contributions at the rate of 20% per year upon completion of two years of
service.
F-67
<PAGE>
7. LEASES
The Company leases a bus under a capital lease. Future minimum rentals under
this capital lease at December 31, 1995 are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
1996 $ 25,497
1997 19,123
----------
Total minimum lease payments 44,620
Less amount representing interest 3,842
----------
Net obligation 40,778
Less current portion 22,428
----------
Long-term portion $ 18,350
==========
The capital lease obligation is included in long-term debt in the accompanying
balance sheets.
The Company leases office space from affiliated (See Note 8) and non-affiliated
entities under operating lease agreements which extend through December 31,
1997. The following is a schedule of approximate future minimum lease payments
required under such non-cancelable operating leases at December 31, 1995:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
1996 $ 86,032
1997 37,515
----------
Total minimum lease payments $ 123,547
==========
Rent expense amounted to $137,200, $137,021 and $98,250 for the years ended
December 31, 1995 , 1994 and 1993, respectively, and is included in general and
administrative expenses in the accompanying combined statements of income.
F-68
<PAGE>
8. RELATED PARTY TRANSACTIONS
In the normal course of its business, the Company conducts business with its
Principals and their respective affiliates.
Fees paid by the Company for accounting, general management, office and other
administrative services to entities controlled by the Principals were $53,218,
$75,378, and $78,984 in 1995, 1994 and 1993, respectively, and are reflected in
general and administrative expenses in the accompanying combined statements of
income.
In 1991 and 1993, the Company entered into two three-year noncancellable
operating leases for office space with related entities. The Company is required
to pay taxes, maintenance, insurance and utility costs. Payments under these
leases totalled $71,824, $74,726, and $59,488 in 1995, 1994 and 1993,
respectively.
The Company has notes receivable from entities controlled by certain Principals
with an outstanding balance, including accrued interest, of $665,419 and
$460,057 at December 31, 1995 and 1994, respectively. Interest income related to
these receivables totaled $84,520, $28,589 and $-0- in 1995, 1994 and 1993,
respectively. These unsecured notes bear interest at prime plus 2.9% and are due
in 1996.
The Company has payables due to certain Principals with an outstanding balance,
including accrued interest, of approximately $398,819 and $485,680 at December
31, 1995 and 1994, respectively. Interest expense related to these payables
totaled $83,518, $62,408 and $45,200 in 1995, 1994 and 1993, respectively. These
payables have no stated repayment terms.
9. COMMITMENTS AND CONTINGENCIES
The Company has royalty and employment agreements with certain authors, actors,
directors and choreographers and their respective unions. These agreements are
generally one to three years in length and provide for minimum compensation
levels. These agreements may include incentive bonuses based upon specified
goals. The aggregate commitment for future salaries and royalties, excluding
bonuses, as of December 31, 1995 was approximately $2,288,000, which will be
paid during 1996.
F-69
<PAGE>
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In October 1994, a former independent contractor filed a complaint against Judas
in the Common Pleas Court of Philadelphia County seeking consequential damages
of $5,000,000 arising from the termination of an employment contract by Judas. A
court date has not been set. Management of Judas believes that the lawsuit is
without merit, and that the outcome of this suit will not have a material
adverse effect on the Company's combined financial condition or results of
operations.
Litigation has been threatened by a former financial advisor to the Company with
respect to an alleged contract with the Company that provided that such
individual would receive the right to purchase 5% of the equity in the Company
at a discount upon consummation of a public financing. The Company believes that
it was fraudulently induced to enter into such contract, and that, in any event
the alleged contract was terminated under circumstances in which the individual
is not entitled to any compensation. The Company believes that if the individual
commences an action, his claims will be without merit. The Company intends to
vigorously defend any suit that the defendant might bring in the future based on
the contract and the Company may pursue its own action for declaratory judgment.
10. SUBSEQUENT EVENTS
The Company intends to consummate a $10 million private placement offering of
units consisting of unsecured senior convertible notes and the Company's common
stock. Management expects to use the proceeds from the offering, after deducting
offering expenses, to repay certain loans and to provide working capital for
expanding the Company's operations and for general corporate purposes.
Immediately after the closing of the offering, the Company intends to merge with
and into a corporation whose stock is publicly tradeable.
F-70
<PAGE>
<TABLE>
<CAPTION>
MAGICWORKS ENTERTAINMENT
CONDENSED COMBINED BALANCE SHEETS
JUNE 30 DECEMBER 31
1996 1995
------------------------------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,415,718 $ 862,127
Accounts receivable 2,109,007 1,196,297
Inventories 159,497 160,930
Preproduction costs, net 227,164 1,508,314
Due from affiliates 653,127 665,419
Other current assets 104,009 354,663
------------------------------------
Total current assets 4,668,522 4,747,750
Property and equipment, net 1,126,158 1,153,096
Investments in partnerships 801,603 347,783
Advances and deposits 1,048,041 343,194
Deferred costs 783,730 564,032
Intangible assets, net 416,717 454,442
------------------------------------
Total assets $8,844,771 $7,610,297
====================================
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $1,463,447 $1,480,979
Current maturities of long-term 208,080 137,870
debt
Short-term debt 2,230,394 1,920,489
Due to affiliates 503,575 398,819
------------------------------------
Total current liabilities 4,405,496 3,938,157
------------------------------------
Long-term debt, less current
maturities 565,500 392,699
Commitments and contingencies
Minority interest 600,971 1,470,457
Stockholders' equity:
Common stock,, $1 par value; 100
shares authorized; 100 share
issued and outstanding 800 800
Additional paid-in capital 59,974 59,974
Retained earnings 3,212,030 1,748,210
------------------------------------
Total stockholders' equity 3,272,804 1,808,984
------------------------------------
Total liabilities and stockholders' equity 8,844,771 $7,610,297
====================================
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by GAAP for complete financial
statements
SEE ACCOMPANYING NOTES
F-71
<PAGE>
MAGICWORKS ENTERTAINMENT, INC.
CONDENSED COMBINED STATEMENTS OF INCOME
JUNE 30
1996 1995
--------------------------------------
(Unaudited)
Revenues:
Production $ 16,361,156 $ 14,721,453
Promotion 5,126,007 4,573,186
Merchandising 1,134,213 1,211,935
Other 1,098,078 495,396
--------------------------------------
Total revenues 23,719,454 21,001,970
--------------------------------------
Operating expenses:
Talent and other show 17,925,381 14,698,421
Salaries, wages and benefits 1,032,670 819,250
Cost of goods sold 876,917 847,952
General and other operating expenses 1,259,556 901,076
--------------------------------------
21,094,524 17,266,699
--------------------------------------
Income from operations 2,624,930 3,735,271
Other income (expense):
Interest income 5,187 30,516
Interest expense (168,911) (21,490)
From investments in noncombining
productions 27,165 270,812
Minority interests (488,548) (1,417,782)
--------------------------------------
Net income 1,999,823 2,597,327
Pro forma adjustments for income taxes (779,931) (1,012,958)
--------------------------------------
Pro forma net income $ 1,219,892 $ 1,584,369
======================================
SEE ACCOMPANYING NOTES.
F-72
<PAGE>
<TABLE>
<CAPTION>
MAGICWORKS ENTERTAINMENT, INC
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30
1996 1995
----------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,999,823 $ 2,597,327
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,456,740 717,583
Write-down of investment in partnerships -- 49,994
Minority interest 488,548 1,417,782
(Increase) decrease in:
Accounts receivable (912,710) 192,981
Inventories 1,433 92,904
Other current assets 250,654 (193,764)
Preproduction costs -- (399,685)
Advances and deposits (704,847) (14,191)
(Decrease) in:
Accounts payable and accrued liabilities (17,532) (1,024,317)
----------------------------------------
Net cash provided from operating activitie 2,562,109 3,436,614
INVESTING ACTIVITIES
Investment in cultural facility (21,714) (16,452)
Due to affiliates 104,756 (67,401)
Notes receivable from affilates 12,292 (246,682)
Purchase of property and equipment (39,098) (138,443)
Investments in partnerships (453,820) 85,958
Investments in management and
booking agreements (71,829) (25,000)
----------------------------------------
Net cash used in investment activities (469,413) (408,020)
FINANCING ACTIVITIES
Proceeds of borrowings 879,905 301,608
Repayment of borrowings (326,989) (74,989)
Increase in offering costs (197,984) (118,076)
Distributions to minority interests (1,358,034) (2,015,696)
Distributions (536,003) (1,892,471)
----------------------------------------
Net cash used by financing activities (1,539,105) (3,799,624)
----------------------------------------
Net increase (decrease) in cash
and cash equivalents 553,591 (771,030)
Cash and cash equivalents at
beginning of period 862,127 1,955,315
----------------------------------------
Cash and cash equivalents at
end of period $ 1,415,718 $ 1,184,285
========================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for inte$est 78,843 $ 17,705
========================================
</TABLE>
SEE ACCOMPANYING NOTES
F-73
<PAGE>
MAGICWORKS ENTERTAINMENT, INC.
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 1996
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1996.
2. CONTINGENCIES
In October 1994, a former independent contractor filed a complaint against Judas
in the Common Pleas Court of Philadelphia County seeking consequential damages
of $5,000,000 arising from the termination of an employment contract by Judas. A
court date has not been set. Management of Judas believes that the lawsuit is
without merit, and that the outcome of this suit will not have a material
adverse effect on Judas' financial condition or results of operations.
Litigation has been threatened by a former financial advisor to the Company with
respect to an alleged contract with the Company threat provided that such
individual would receive the right to purchase 5% of the equity in the Company
at a discount upon consummation of a public financing. The Company believes that
it was fraudulently induced to enter into such contract, and that, in any event
the alleged contract was terminated under circumstances in which the individual
is not entitled to any compensation. The Company believes that if the individual
commences an action, his claims will be without merit. The Company intends to
vigorously defend any suit that the defendant might bring in the future based on
the contract and the Company may pursue its own action for declaratory judgment.
F-74
<PAGE>
MAGICWORKS ENTERTAINMENT INCORPORATED
PRO FORMA COMBINED FINANCIAL STATEMENTS
The Consolidation complies with the requirements of SAB Topic 5:G (SAB 48)
and should therefore be accounted for at the historical cost basis of the
transferors. The following unaudited pro forma condensed combined financial
statements present the Consolidation accounted for as a purchase at book value
by MPIO, which will begin to consolidate the other Constituent Corporations.
The pro forma condensed combined financial statements also present the
Movietime Acquisition accounted for as a pooling of interests in accordance
with APB No. 16. The pro forma information assumes that the Consolidation and
Movietime Acquisition had occurred as of the beginning of the respective periods
presented in the Pro Forma Condensed Combined Statements of Operations.
The pro forma condensed combined financial statements also give effect to
the Merger and the Private Placement as if these transactions occurred as of the
beginning of the respective periods presented in the Pro Forma Condensed
Combined Statements of Operations.
The unaudited pro forma condensed combined financial information as set
forth is derived from, and should be read in conjunction with, the combined
financial statements of the Company. The following pro forma financial data is
presented for informational purposes only and is not necessarily indicative of
the results of the future operations of the Company or the actual results that
would have been achieved had the transactions been consummated prior to the
periods presented.
P-1
<PAGE>
<TABLE>
<CAPTION>
MAGICWORKS ENTERTAINMENT INCORPORATED
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
AS OF JUNE 30, 1996
MAGIC/ DIAMOND TOURING PERFORMING
MOVIETIME SHADOW WOOD BULLET ARTISITS ARTS
POOLED (G) CORPORATION MERCHANDISING GROUP MANAGEMENT SUBTOTAL(A) TOTAL(B)
---------- ----------- ------------- -------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents $1,149,294 $0 $38,485 $234,815 $379 $273,679 $1,422,973
Accounts receivable 2,016,018 0 10,958 87,987 0 98,945 2,114,963
Preproduction
costs, net 227,164 0 0 0 0 0 227,164
Inventories 0 0 159,497 0 0 159,497 159,497
Notes receivable
from affiliates 75,000 0 899,177 0 0 899,177 974,177
Other current assets 102,809 0 46,200 0 0 46,200 149,009
--------------------------------------------------------------------------------------
Total current assets 3,570,285 0 1,154,317 322,802 379 1,477,498 5,047,783
Property and
equipment, net 1,174,674 0 24,048 57,694 0 81,742 1,256,416
Investments in
partnerships 691,382 0 0 110,221 0 110,221 801,603
Advances and deposits 997,278 0 0 5,763 0 5,763 1,003,041
Deferred costs, net 341,040 0 12,722 50,973 378,995 442,690 783,730
Management and booking
agreements, net 342,255 0 0 74,462 0 74,462 416,717
--------------------------------------------------------------------------------------
$7,116,914 $0 $1,191,087 $621,915 $379,374 $2,192,376 $9,309,290
======================================================================================
Liabilities and Equity
Current liabilities:
Accounts payable and
accrued liabilities $1,111,785 $21,047 $332,593 $52,646 $108,026 $514,312 $1,626,097
Current maturities of
long-term debt 208,080 0 0 0 0 0 208,080
Short-term debt 1,518,133 0 712,261 0 0 712,261 2,230,394
Due to affiliates 979,179 0 177,389 45,330 301,121 523,840 1,503,019
--------------------------------------------------------------------------------------
Total current liabilities 3,817,177 21,047 1,222,243 97,976 409,147 1,750,413 5,567,590
--------------------------------------------------------------------------------------
Long-term debt, less
current maturities 565,500 0 0 0 0 0 565,500
Minority interests 628,992 0 0 0 0 0 628,992
Commitments and
contingencies 0 0 0 0 0 0 0
Capital:
Common stock 100 389 100 100 500 1,089 1,189
Preferred stock 0 0 0 0 0 0 0
Additional paid-in-
capital 1,056,489 117,637 900 900 0 119,437 1,175,926
Partners' capital/
retained earnings 1,048,656 (139,073) (32,156) 522,939 (30,273) 321,437 1,370,093
--------------------------------------------------------------------------------------
2,105,245 (21,047) (31,156) 523,939 (29,773) 441,963 2,547,208
--------------------------------------------------------------------------------------
$7,116,914 $0 $1,191,087 $621,915 $379,374 $2,192,37 $9,309,290
======================================================================================
0 0 0 0 0 0 0
<CAPTION>
PROFORMA
ADJUSTMENTS COMBINED
----------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash
equivalents $8,919,350 (F)$10,319,461
333,000 (J)
($355,862)(K)
Accounts receivable 2,114,963
Preproduction
costs, net 227,164
Inventories 159,497
Notes receivable
from affiliates (321,050)(I) 653,127
Other current assets (45,000)(I) 104,009
-------------------------
Total current assets 8,530,438 13,578,221
Property and
equipment, net 1,256,416
Investments in
partnerships 801,603
Advances and deposits 45,000 (I) 1,048,041
Deferred costs, net 1,082,150 (F) 1,116,069
(768,311)(F)
37,000 (J)
(18,500)(J)
Management and booking
agreements, net 416,717
-------------------------
$8,907,777 $18,217,067
=========================
Liabilities and Equity
Current liabilities:
Accounts payable and
accrued liabilities ($91,066)(I) $1,535,031
Current maturities of
long-term debt 208,080
Short-term debt 2,230,394
Due to affiliates (231,984)(I) 1,271,035
-------------------------
Total current liabilities (323,050) 0 5,244,540
-------------------------
Long-term debt, less
current maturities 5,000,750 (F) 5,751,250
185,000 (J)
Minority interests (28,021)(I) 600,971
Commitments and
contingencies 0
Capital:
Common stock 19,000 (C) 23,074
2,000 (H)
811 (E)
74 (I)
Preferred stock 0 (D) 0
Additional paid-in-
capital 4,998,750 (F) 5,197,118
(19,000)(C)
(768,311)(F)
(811)(E)
184,926 (K)
(355,862)(J)
(18,500)(I)
Partners' capital/
retained earnings 30,021 (I) 1,400,114
-------------------------
4,073,098 6,620,306
-------------------------
$8,907,777 $18,217,067
=========================
0 0
</TABLE>
Pro Forma Adjustments
---------------------
(A) Total of ShadowWood, Diamond Bullet Merchandising, Touring Artists
Group, and Performing Arts Management.
(B) Total of (A) and (G).
(C) To record the effect of the reverse merger agreement between,
Magic Promotions, Diamond Bullet Merchandising, Touring Artists Group,
and Performing Arts Management and ShadowWood Corporation which
transpired on July 30, 1996. The transaction has been accounted for as
a reverse acquisition using the purchase method of accounting.
(D) After the merger, 5,000,000 shares of preferred stock will be
authorized, par value $.001 per share, no shares issued and outstanding.
(E) After the reverse merger, acquistion of Movietime and the private
placements, 50,000,000 shares of common stock authorized, par value
$.001 per share, 23,074,299 shares issued and outstanding.
(F) To record the effect of the private placement transaction which sold
400.06 units at a price per unit of $25,000 ($12,500 debt and $12,500
stock at $2.50/share). The transaction, which closed on 07/30/96,
grossed $10,001,500 less $1,082,150 in commissions and closing costs. In
addition, 50% of the closing costs relating to the private placement
have been netted against additional paid-in capital and 50% have been
capitalized as deferred financing costs to be amortized over five years.
(G) Magic Promotions, Inc. and Movietime Entertainment, Inc. combined using
the pooling method of accounting.
(H) To record the effect of the Movietime merger with Magic Promotions which
transpired on August 26, 1996. The transaction has been accounted for
as an acquisition using the pooling method of accounting.
(I) To eliminate intercompany transactions between Magic, TAG, DBM, and PAM.
(J) To record the effect of the private placement transaction which sold
14.8 units at a price per unit of $25,000 ($12,500 debt and $12,500
stock at $2.50/share). The transaction, which closed on 09/27/96,
grossed $370,000 less $37,000 in commissions and closing costs.In
addition, 50% of the closing costs relating to the private placement
have been netted against additional paid-in capital and 50% have been
capitalized as deferred financing costs to be amortized over five years.
(K) To record aditional costs relating to the registering of the stock.
All costs are to be netted against additional paid-in capital.
P-2
<PAGE>
<TABLE>
<CAPTION>
MAGICWORKS ENTERTAINMENT, INC.
PRO FORMA COMBINED STATEMENTS OF INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
MAGIC/ DIAMOND TOURING PERFORMING
MOVIETIME SHADOW WOOD BULLET ARTISITS ARTS
POOLED (G) CORPORATION MERCHANDISING GROUP MANAGEMENT SUBTOTAL(A) TOTAL(B)
---------- ----------- ------------- -------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Production $16,361,156 $0 $0 $0 $0 $0 $16,361,156
Promotion 5,126,007 0 0 0 0 0 5,126,007
Merchandising 297,632 0 836,581 0 0 836,581 1,134,213
Other 369,330 0 0 1,070,885 0 1,070,885 1,440,215
-----------------------------------------------------------------------------------------
22,154,125 0 836,581 1,070,885 0 1,907,466 24,061,591
Operating Expenses:
Talent and
other show 17,974,772 0 0 175,459 0 175,459 18,150,231
Salaries, wages
and benefits 747,411 0 63,120 329,011 0 392,131 1,139,542
Cost of goods sold 249,937 0 626,980 0 0 626,980 876,917
General and
administrative 1,118,815 11,874 75,571 452,188 0 539,633 1,658,448
-----------------------------------------------------------------------------------------
20,090,935 11,874 765,671 956,658 0 1,734,203 21,825,138
Income from operations 2,063,190 (11,874) 70,910 114,227 0 173,263 2,236,453
Other income(expense):
Interest income 4,786 0 0 401 0 401 5,187
Interest expense (174,170) 0 (6,493) 0 (5,548) (12,041) (186,211)
From investments
in production 27,165 0 0 0 0 0 27,165
Minority interests (513,137) 0 0 0 0 0 (513,137)
---------------------------------------------------------------------------------------
Net income 1,407,834 (11,874) 64,417 114,628 (5,548) 161,623 1,569,457
Pro forma adjustment
for income (702,677) 4,631 (25,123) (44,705) 2,164 (63,033) (612,088)
---------------------------------------------------------------------------------------
Pro forma net
income (loss) $705,157 ($7,243) $39,294 $69,923 ($3,384) $98,590 $957,369
=======================================================================================
Per share data:
Primary earnings
per share
Weighted average
common shares
outstanding
Fully dilutive
earnings per share
Weighted average
common shares &
common stock
equivalents
outstanding
<CAPTION>
PROFORMA
ADJUSTMENTS COMBINED
----------- ---------
<S> <C> <C>
Revenues:
Production $16,361,156
Promotion 5,126,007
Merchandising 1,134,213
Other (330,500)(E) 1,109,715
-----------------------
(330,500) 23,731,091
Operating Expenses:
Talent and
other show (224,850)(E) 17,925,381
Salaries, wages
and benefits (7,159)(E) 1,132,383
Cost of goods sold 876,917
General and
administrative 77,819 (B) 1,637,776
(98,491)(E)
-----------------------
(252,681) 21,572,457
Income from operations (77,819) 2,158,634
Other income(expense):
Interest income 5,187
Interest expense (259,288)(C) (445,499)
From investments
in production 27,165
Minority interests 24,589 (E) (488,548)
-----------------------
Net income (312,518) 1,256,939
Pro forma adjustment
for income 121,882 (D) (490,206)
------------------------
Pro forma net
income (loss) ($190,636) $766,733
=======================
Per share data:
Primary earnings
per share $0.03
Weighted average
common shares
outstanding 23,074,299
Fully dilutive
earnings per share $0.04
Weighted average
common shares &
common stock
equivalents
outstanding 25,055,942
</TABLE>
(A) Includes the historical financial information of Magicworks Entertainment,
Inc. and Movietime Entertainment, Inc.
(B) To reflect amortization of deferred finance costs for the six months
ended June 30, 1996.
(C) To reflect interest expense on the debt portion of the securities issued
in the private placement for the six month period ended June 30, 1996.
(D) Tax adjustment due to (B) and (C).
(E) To eliminate the intercompany transactions between Magic, TAG, DBM and PAM.
P-3
<PAGE>
<TABLE>
<CAPTION>
MAGICWORKS ENTERTAINMENT, INC.
PRO FORMA COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
MAGIC/ DIAMOND TOURING PERFORMING
MOVIETIME SHADOW WOOD BULLET ARTISITS ARTS
POOLED(G) CORPORATION MERCHANDISING GROUP MANAGEMENT SUBTOTAL(A) TOTAL(B)
---------- ----------- ------------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Production $31,638,078 $0 $0 $0 $0 $0 $31,638,078
Promotion 6,668,672 0 0 0 0 0 6,668,672
Merchandising 1,160,519 0 1,313,695 0 0 1,313,695 2,474,214
Other 1,237,126 0 0 1,186,809 0 1,186,809 2,423,935
-------------------------------------------------------------------------------------------------
40,704,395 0 1,313,695 1,186,809 0 2,500,504 43,204,899
Operating Expenses:
Talent and other show 33,346,544 0 0 0 0 0 33,346,544
Salaries, wages and benefits 1,351,312 0 85,795 627,294 0 713,089 2,064,401
Cost of goods sold 408,697 0 1,053,667 0 0 1,053,667 1,462,364
General and administrative 1,393,605 6,029 140,036 504,110 0 650,175 2,043,780
-------------------------------------------------------------------------------------------------
36,500,158 6,029 1,279,498 1,131,404 0 2,416,931 38,917,089
Income from operations 4,204,237 (6,029) 34,197 55,405 0 83,573 4,287,810
Other income(expense):
Interest income 108,427 0 0 633 0 633 109,060
Interest expense (65,318) 0 (6,417) 0 (21,110) (27,527) (92,845)
From investments in production 418,679 0 0 0 0 0 418,679
Minority interests (1,688,531) 0 0 0 0 0 (1,688,531)
-------------------------------------------------------------------------------------------------
(1,226,743) 0 (6,417) 633 (21,110) (26,894) (1,253,637)
Net income 2,977,494 (6,029) 27,780 56,038 (21,110) 56,679 3,034,173
Pro forma adjustment for income (1,318,378) 2,351 (10,834) (21,855) 8,233 (22,105) (1,183,327)
-------------------------------------------------------------------------------------------------
Pro forma net income (loss) $1,659,116 ($3,678) $16,946 $34,183 ($12,877) $34,574 $1,850,846
=================================================================================================
Primary earnings per share
Weighted average common shares outstanding
Fully dilutive earnings per share
Weighted average common shares & common stock equivalents outstanding
<CAPTION>
PROFORMA
ADJUSTMENTS COMBINED
----------- --------
<S> <C> <C>
Revenues:
Production $31,638,078
Promotion 6,668,672
Merchandising 2,474,214
Other (470,800)(E) 1,953,135
-----------------------
(470,800) 42,734,099
Operating Expenses:
Talent and other show (400,800)(E) 32,945,744
Salaries, wages and benefits (8,062)(E) 2,056,339
Cost of goods sold 1,462,364
General and administrative 155,637 (B) 2,137,479
(61,938)(E)
-----------------------
(315,163) 0 38,601,926
Income from operations (155,637) 4,132,173
Other income(expense):
Interest income 109,060
Interest expense (518,575)(C) (611,420)
From investments in production 418,679
Minority interests 241,643 (E) (1,446,888)
-----------------------
(276,932) (1,530,569)
Net income (432,569) 2,601,604
Pro forma adjustment for income 168,702 (D) (1,014,626)
-----------------------
Pro forma net income (loss) ($263,867) $1,586,978
=======================
Per share data:
Primary earnings per share $0.07
Weighted average common shares 23,074,299
Fully dilutive earnings per share $0.08
Weighted average common shares &
common stock equivalents outstanding 25,055,942
</TABLE>
(A) Includes the historical financial information of Magicworks Entertainment,
Inc. and Movietime Entertainment, Inc.
(B) To reflect deferred private placement cost amortization through
December 31, 1995, as if the acquistion took place on January 1, 1995.
(C) To reflect interest expense on the debt portion of the securities issued
in the private placement for the period ended December 31, 1995.
(D) Tax adjustment due to (B) and (C).
(E) To eliminate the intercompany transactions between Magic, TAG, DBM and PAM.
P-4
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITIES BY ANY
JURISDICTION IN WHICH SUCH OFFER TO OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, IMPLY THAT THE INFORMATION HEREIN CONTAINED IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
Available Information.............................................. 2
Prospectus Summary................................................. 3
Risk Factors....................................................... 7
The Merger......................................................... 11
Consolidation Transactions and S Corporation Distributions......... 11
Use of Proceeds.................................................... 12
Price Range of Common Stock........................................ 12
Capitalization..................................................... 14
Selected Combined Financial Data................................... 15
Selected Combined Pro Forma Financial Data......................... 16
Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 17
Business........................................................... 23
Management......................................................... 32
Principal Shareholders............................................. 36
Selling Securityholders............................................ 37
Certain Transactions............................................... 45
Description of Securities.......................................... 46
Plan of Distribution............................................... 49
Shares Eligible for Future Sale.................................... 50
Legal Matters...................................................... 50
Experts............................................................ 50
Index to Financial Statements..................................... F-1
------------------------
26,226,465 SHARES
MAGICWORKS
ENTERTAINMENT
INCORPORATED
------------------------
PROSPECTUS
------------------------
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses in connection
with the offering described in this registration statement will be as follows:
Securities and Exchange Commission registration fee............. $
NASD filing fee.................................................
Printing expenses............................................... $77,000
Accounting fees and expenses.................................... $305,027
Legal fees and expenses......................................... $488,306
Listing fees....................................................
Fees and expenses (including legal fees) for qualifications
under state securities laws..................................... $15,000
Transfer agent's fees and expenses..............................
Miscellaneous...................................................
------------
Total........................................................... $
============
All amounts except the Securities and Exchange
Commission registration fee and the NASD filing fee are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under Section 607.0850 of
the Florida Business Corporation Act to indemnify its directors and officers to
the extent provided for in such statute. The Registrant's Articles of
Incorporation provide that the Registrant shall indemnify and may insure its
officers and directors to the fullest extent not prohibited by law. The
Registrant has also entered into an agreement (the form of which is filed as
Exhibit 10.___ hereto) with each of its directors and executive officers wherein
it has agreed to indemnify each of them to the fullest extent permitted by law.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
No securities that were not registered under the 1933
Act have been issued or sold by the Registrant within the past three years
except as follows:
<TABLE>
<CAPTION>
CASH
AMOUNT AND TYPES OF SECURITIES DATE OF SALE PURCHASER(S) CONSIDERATION
- ------------------------------------------------------- ------------------- --------------------------- -------------
<S> <C> <C> <C>
414.86 Units(1) July 30, 1996 and Various private placement $10,371,500
(2,074,300 shares of common stock, and $5,185,750 September 27, 1996 "accredited" investors and
(principal amount) unsecured senior convertible notes) foreign investors
______ Units(1) July 30, 1996 Capital Growth International, --(2)
488,820 shares of Common Stock and 500,000 Warrants LLC
<FN>
- --------------------------
(1) Each unit consisted of (a) an unsecured senior convertible note in the
principal amount of $12,500, which bears interest at the rate of 10%
per annum, and (b) 5,000 shares of the Company's Common Stock, $.001
par value. A total of ________ units sold in the Private Placement were
sold without registration in reliance upon Regulation S under the
Securities Act. Capital Growth International, L.L.C., acted as
placement agent for the Private Placement for which it was paid a
non-accountable expense allowance of $207,430 and sales commissions of
$829,720.
(2) Issued as consideration pursuant to a Placement Agent Agreement dated
June 16, 1996 between MEI and Capital Growth International, L.L.C.
</FN>
</TABLE>
The aforementioned issuances and sales were made in
reliance upon the exemption from the registration provisions of the 1933 Act
afforded by Section 4(2) thereof and/or Regulation D promulgated thereunder, as
transactions by an issuer not involving a public offering. The purchasers of the
securities described above acquired them for their own account and not with a
view to any distribution thereof to the public. The certificates evidencing the
securities bear legends stating that the securities may not be offered, sold or
transferred other than pursuant to an effective registration statement under the
1933 Act, or an exemption from such registration requirements. The Company will
place stop transfer instructions with its transfer agent with respect to all
such securities.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C> <C>
3.1 Registrant's Articles of Incorporation
4.2 Form of Redeemable Common Stock Purchase Warrant
4.3 Form of Unsecured Senior Convertible Note
10.1 Registrant's Stock Option Plan
10.2 Registrant's Directors Stock Option Plan
10.3 Form of Indemnification Agreement between Registrant and each of Registrant's
Directors and Executive Officers
10.4 Employment Agreement, dated as of July 22, 1993, between Touring Artists Group Inc.
and Michel Vega
10.5 Employment Agreement dated June 30, 1996 but effective as of August 1, 1996 between
the Registrant and Joe Marsh
10.6 Employment Agreement dated June 30, 1996 but effective as of August 1, 1996 between
the Registrant and Brad L. Krassner
10.7 Employment Agreement dated June 30, 1996 but effective as of August 1, 1996 between
the Registrant and Lee Marshall
10.8 Employment Agreement dated June 30, 1996 but effective as of August 1, 1996 between
Magic Promotions, Inc. and Glenn Bechdel
10.9 Note Escrow Agreement dated as of July 30, 1996 by and among the Registrant Capital
Growth International, L.L.C. and Sterling National Bank and Trust Company of New York
10.10 Equipment Lease dated August, 1994 by and between Magic Promotions, Inc. and Star
Trax, Inc.
21.1 Subsidiaries of Registrant
23.2 Consents of Ernst & Young LLP
<FN>
- ---------------------
* To be filed by amendment
</FN>
</TABLE>
(b) Financial Statement Schedules:
Schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable, and therefore
have been omitted.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby
undertakes:
(1) To file, during any period
in which offers or sales are being made, a post-effective amendment to this
registration statement:
(i) To include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in
the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any
additional or changed material information with respect to the plan of
distribution not previously disclosed in the registration statement. and
(2) That, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration
by means of a post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
II-3
<PAGE>
(b) The undersigned registrant hereby
undertakes to provide to the Underwriter at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
(c) Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby
undertakes that:
(1) For purposes of determining
any liability under the Securities Act of 1933, the information omitted from the
form of prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of the registration statement as of the time it was declared effective.
(2) For the purpose of
determining any liability under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Miami
Beach, State of Florida, on September 27, 1996.
MAGICWORKS ENTERTAINMENT INCORPORATED
By: /s/ BRAD KRASSNER
---------------------------------------
Brad Krassner, Co-Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Brad Krassner and Lee Marshall
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each said attorneys- in-fact and agents or any
of them or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ BRAD KRASSNER Co-Chairman of the Board and September 27, 1996
- -------------------- Chief Executive Officer
Brad Krassner (Principal Executive Officer)
/s/ JOE MARSH Co-Chairman of the Board September 27, 1996
- --------------------
Joe Marsh
/s/ LEE MARSHALL President, Chief Operating Officer September 27, 1996
- -------------------- and Director
Lee Marshall
/s/ STEVEN CHABY Chief Financial Officer and September 27, 1996
- -------------------- Treasurer (Principal Financial and
Steven Chaby Accounting Officer)
/s/ H. YALE GUTNICK Director September 27, 1996
- --------------------
H. Yale Gutnick
/s/ RONALD J. KORN Director September 27, 1996
- --------------------
Ronald J. Korn
II-5
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
RATTLESNAKE GOLD, INC.
ARTICLE I
NAME
The name of the corporation hereby created shall be RATTLESNAKE GOLD,
INC. (hereinafter referred to as the "Corporation").
ARTICLE II
DURATION
The Corporation shall continue in existence perpetually unless sooner
dissolved according to law.
ARTICLE III
PURPOSES
The purposes for which this Corporation is organized are:
(a) To seek, investigate, acquire interest(s) in, dispose of
and operate rushes for gold and all other minerals, and engage in
natural resource development and exploration; to own and operate any
lawful enterprise(s) whatsoever; to acquire, hold, and dispose of real
or personal properties of any kind or nature whether tangible or
intangible; and generally to do or perform any act necessary or
desirable in connection with the foregoing.
(b) To acquire by purchase or otherwise, own, hold, lease,
rent, mortgage, or otherwise, to trade with and deal in real estate
lands, mining claims and mineral interests, interests in lands of every
description and all other property of every kind and nature.
(c) To acquire, sell, and otherwise, dispose of, deal in
stocks, bonds, mortgages, securities, notes, and commercial paper for
corporations and individuals.
(d) to borrow money and to execute notes and obligations and
security contracts therefor, and to lend any of monies or funds of the
Corporation and to take evidence of indebtedness therefor, and also to
negotiate loans; to carry on a general mining and natural resource
development business and to purchase, sell, and deal in such goods and
supplies as are necessary or desirable in connection therewith.
<PAGE>
(e) To guarantee the payment of dividends or interest on any
other contract or obligation of any corporation whenever proper or
necessary for the business of the Corporation in the judgment of its
directors.
(f) To do all and everything necessary, suitable,
convenient, or proper for the accomplishment of any of purposes of the
attainment of any one or more of the objects herein enumerated, or
incidental to the powers therein named, or which shall at any time
appear conclusive or expedient for the protection or benefit of the
Corporation, either as holders of or interested in any property, or
otherwise; with all the powers hereafter conferred by the laws under
which this Corporation is organized.
(g) To engage in any and all other lawful purposes,
activities, and pursuits, whether similar or dissimilar to the
foregoing, and the Corporation shall have all powers allowed or
permitted by the laws of the State of Delaware.
ARTICLE IV
CAPITALIZATION
The Corporation shall have authority to issue 250,000,000 shares of
common stock having a par value of $.0001 per share (the "Common Stock.)All
shares of Common Stock shall be of the same class and shall have the same rights
and preferences. A statement of the designations and the powers, preferences,
and rights, and the qualifications, limitations, or restrictions thereof, of the
shares of Common Stock which the Corporation shall be authorized to issue, is as
follows:
(a) COMMON STOCK. The Common Stock shall be non-assessable
and shall not have cumulative voting rights or pre-emotive rights. In
addition, the Common Stock shall have the following powers,
preferences, rights, qualifications, limitations, and restrictions:
(i) After the requirements with respect to preferential
dividends of preferred stock, if any, shall have been met and after
this Corporation shall comply with all the requirements, if any, with
respect to the setting aside of funds as sinking funds or redemption or
purchase accounts and subject further to any other conditions which may
be required by the General Corporation Law of Delaware, then, but not
otherwise, the holders Common Stock shall be entitled to receive such
dividends, if any, as may be declared from time to time by the board of
directors without distinction as to series.
(ii) After distribution in full of any preferential amount to
be distributed to the holders of preferred stock, if any, in the event
of a voluntary or involuntary liquidation, distribution or sale of
assets, dissolution, or winding up of this Corporation, the holders of
the Common Stock shall be entitled to receive all the remaining assets
of this Corporation, tangible and intangible, of whatever kind
available for distribution to stockholders, ratably in proportion to
the number of shares of the Common Stock held by each without
distinction as to series, if any.
2
<PAGE>
(iii) Except as may otherwise be required by law or this
Certificate of Incorporation, in all matters as to which the vote or
consent of stockholders of the Corporation shall be required or be
taken, including, any vote to amend this Certificate of Incorporation,
to increase or decrease the par value of any class of stock, effect a
stock split or combination of shares, or alter or change the powers,
preferences, or special rights of any class or series of stock, the
holders of the Common Stock shall have one vote per share of Common
Stock on all such matters.
(b) OTHER PROVISIONS.
(i) Shares of the Common Stock or any series thereof may be
issued from time to time as the board of directors shall determine and
on such terms and for such consideration as shall be fixed by the board
of directors:
(ii) No holder of any of the shares of any class or series of
stock or of options, warrants, or other rights to purchase shares of
any class or series of stock or of other securities of the Corporation
shall have any pre-emptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of any
class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series, or
bonds, certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock of the Corporation of any
class or series, or carrying any rights to purchase stock of any class
or series, but any such unissued stock, additional authorized issue of
shares of any class or series of stock or securities convertible into
or exchangeable for stock, or carrying any right to purchase stock, may
be issued and disposed of pursuant to resolution of the board of
directors to such persons, firms, corporations, or associations,
whether such holders or others, and on such terms as may be deemed
advisable by the board of directors in the exercise of its sole
discretion.
ARTICLE V
BYLAWS
In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, alter, or
repeal the bylaws of the Corporation.
ARTICLE VI
MEETINGS AND RECORDS
Meetings of stockholders may be held within or without State Of
Delaware, as the bylaws may provide The books of Corporation may be kept
(subject to any provision contained the statutes) outside the State of Delaware
at such place or places as may be designated from time to time by the board of
directors or in the bylaws of the Corporation Elections of directors need not be
by written ballot unless the bylaws of the Corporation shall so provide.
3
<PAGE>
ARTICLE VII
NO PRE-EMPTIVE RIGHTS
Shareholders of all classes of the securities of the Corporation shall
not have pre-emptive rights to subscribe for or acquire additional shares of the
Corporation, whether such shares be hereby or hereafter authorized.
ARTICLE VIII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Corporation shall indemnify any and all persons who may serve or
who have served at any time as directors or officers, or who, at the request of
the board of directors of the Corporation, may serve, or at any time have served
as directors or officers of another corporation in which the Corporation at such
time owned or may own shares of stock, or which it was or may be a creditor, and
their respective heirs, administrators, successors, and assigns, against any and
all expenses, including amounts paid on judgment, counsel fees, and amounts paid
in settlement (before or after suit is commenced), actually or necessarily
incurred by such persons in connection with the defense or settlement of any
claim, action, suit, or proceeding in which they, or any of them, are made
parties, or a party, or which may be assessed against them or any of them, by
reason of being or having been directors or officers of the Corporation, or such
other corporation, except in relation to matters as to which any such director
or officer of the Corporation, or such other corporation, or former director or
officer shall be adjudged in any action, suit, or proceeding to be liable for
his own negligence of misconduct in the performance of his duties. Such
indemnification shall be in addition to any other rights to which those
indemnified may be entitled under any law, bylaw, agreement, vote of
stockholders, or otherwise.
ARTICLE IX
LIMITED LIABILITY OF DIRECTORS
A director of the Corporation shall have no personal liability to the
Corporation or its stockholders for monetary damages for a breach of fiduciary
duty as a director, except (i) for any breach of a director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under section 174 of the General Corporation Law of Delaware as it may
from time to time be amended or any successor provision thereto, or (iv) for any
transaction from which a director derived an improper persona! benefit.
4
<PAGE>
ARTICLE X
OFFICERS AND DIRECTORS CONTRACTS
No contract or other transaction between this Corporation and any
other firm or corporation shall be affected by the fact that a director or
officer of this Corporation has an interest in, or is a director or officer of
this Corporation or any other corporation. Any officer or director individually
or with others, may be a party to, or may have an interest in, any transaction
of this Corporation. or any transaction in which this Corporation is a party or
has an interest. Each person who is now or may become an officer or director of
this Corporation is hereby relieved from liability he might otherwise obtain in
the event such officer or director contracts with this Corporation for the
benefit of himself or any firm or other corporation in which he may have an
interest, provided such officer or director acts in good faith.
ARTICLE XI
REGISTERED OFFICE AND AGENT
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle,
19801. The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE XII
AMENDMENT
The Corporation reserves the right to amend, alter, change, or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred on stockholders
herein are granted subject to this reservation.
5
<PAGE>
DIRECTORS
The Corporation shall have not less than two nor more than nine
directors as determined, from time to time, by the board of directors. The
original board of directors shall consist of the following persons who shall
each serve until the first annual meeting of the stockholders or until a
successor is elected and qualified:
NAME MAILING ADDRESS
---- ---------------
Harry F. Nelson 3615 Wolf Creek
Eden, Utah 84310
Garth Showalter 650 West 800 South
Salt Lake City, Utah
84104
INCORPORATOR
The name and mailing address of the sole incorporator of this
Corporation is as follows:
Harry F. Nelson 3615 Wolf Creek
Eden, Utah 84310
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do hereby make this certificate, hereby declaring and
certifying that this is my act and deed and the facts herein stated are true,
and accordingly have hereunto set my hand this _____ day of April, 1988.
--------------------------
6
<PAGE>
STATE OF UTAH )
) :ss.
COUNTY OF SALT LAKE )
I, VALERIE J. SHAW , a notary public, hereby certify that on the 12th
day of April, 1988, personally appeared before me Harry F. Nelson who being by
me first duly sworn, declared that he is the person who signed the foregoing
Certificate of Incorporation as sole incorporator of Rattlesnake Gold, Inc., and
that the statements therein contained are true.
WITNESS MY HAND AND OFFICIAL SEAL.
________________________________
Notary Public
Residing in Salt Lake City, UT.
My Commission Expires:
________________________________-
<PAGE>
CERTIFICATE OF MERGER
OF
MARINO INVESTMENTS, INC., A UTAH CORPORATION
INTO
RATTLESNAKE GOLD, INC., A DELAWARE CORPORATION
Pursuant to the provisions of Section 252 of the Delaware General
Corporation Law, the undersigned Rattlesnake Gold, Inc., a Delaware corporation
(sometimes herein referred to as the "Surviving Corporation"), hereby adopts the
following Certificate of Merger:
1. The names and states of incorporation of each of the
constituent corporations are:
(a) Marino Investments, Inc., a Utah corporation.
(b) Rattlesnake Gold, Inc., a Delaware corporation.
2. An Agreement and Plan of Merger dated as of April 12, 1988 (the
"Agreement of Merger") has been approved, adopted, certified, executed and
acknowledged by each of the constituent corporations in accordance with
subsection (c) of Section 252 of the Delaware General Corporation Law.
3. The name of the surviving or resulting corporation is
Rattlesnake Gold, Inc., a Delaware corporation.
4. The executed Agreement of Merger is on file at the principal
place of business of the Surviving Corporation at the address below:
3615 Wolf Creek
Eden, Utah 84310
5. A copy of the Agreement of Merger will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of
either constituent corporation.
6. The authorized capital stock existing before the Agreement of Merger
is 250,000,000 shares of Common Stock, par value $.0001, constituting a total
authorized capital of $25,000.
<PAGE>
EXECUTED as of this 20th day of April, 1988.
SURVIVING CORPORATION:
Rattlesnake Gold, Inc., a
Delaware corporation
By:_______________________________
Harry F. Nelson
By:_______________________________
Garth Showalter, Secretary
STATE OF UTAH )
ss.
COUNTY OF SALT LAKE )
Harry F. Nelson, having been first duly sworn, hereby declares,
certifies and acknowledges that (a) he executed the foregoing Certificate of
Merger as President of Rattlesnake Gold, Inc. and that such execution is the act
and deed of Rattlesnake Gold, Inc.; (b) he has read the foregoing certificate
and knows the contents thereof; and (c) the statements and facts contained
therein are true and correct.
EXECUTED this 20th day of April, 1988.
___________________________________
Harry F. Nelson
SUBSCRIBED AND SWORN to before me this 20th day of April, 1988.
___________________________________
Notary Public
My Commission Expires: Residing at: ______________________
_______________________________ ___________________________________
2
<PAGE>
AGREEMENT AND PLAN OF MERGER
BETWEEN RATTLESNAKE GOLD, INC.
AND
MARINO INVESTMENTS, INC.
This Agreement and Plan of Merger is entered into between Rattlesnake
Gold, Inc., a Delaware corporation (herein "Surviving Corporation"), and Marino
Investments, Inc. a Utah corporation (herein "Merging Corporation"). Surviving
Corporation and Merging Corporation are referred to herein collectively as the
"Constituent Corporations."
W I T N E S S E T H:
WHEREAS, Merging Corporation is a corporation duly organized and
existing under the laws of the State of Delaware, having an authorized capital
stock of 50,000,000 shares of common stock, (herein "Marino Common Stock"), of
which 7,775,000 shares are issued and outstanding; and
WHEREAS, Surviving Corporation is a corporation duly organized and
existing under the laws of the State of Utah, having an authorized capital stock
of 250,000,000 shares of common stock, of which 1,000 shares are issued and
outstanding and owned by Merging Corporation; and
WHEREAS, Merging Corporation and Surviving Corporation propose to merge
for the purpose of changing the domicile of Merging Corporation and effecting
the amendment of its Articles of Incorporation; and
WHEREAS, the respective Boards of Directors of Surviving Corporation
and Merging Corporation have deemed it advisable and in the best interests of
such corporations that (i) Merging Corporation be merged with and into Surviving
Corporation as authorized by the statutes of the States of Utah and Delaware
under and pursuant to the terms and conditions hereinafter set forth, and (ii)
Surviving Corporation be the surviving corporation.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for the purpose of setting forth
the terms and conditions of such Merger, and such other details and provisions
as are deemed necessary or desirable, the parties hereto have agreed and do
hereby agree, subject to the approval or adoption of this Agreement by the
shareholders of Merging Corporation, and subject to the conditions hereinafter
set forth, as follows:
ARTICLE I
Merging Corporation shall be merged into Surviving Corporation.
ARTICLE II
The terms and conditions of the Merger are as follows:
<PAGE>
(a) On the Effective Date of Merger:
(1) The separate existence of Merging Corporation shall
cease.
(2) The Surviving Corporation shall upon the Effective Date
of the Merger and thereafter possess all the rights, privileges, powers
and franchises, of a public as well as of a private nature, and be
subject to all the restrictions, disabilities and duties of both
Merging Corporation and Surviving Corporation, and all real, personal
and mixed property and all debts due on whatever account, including
subscriptions to shares and all other choses in action, and all and
every other interest, of or belonging to each Constituent Corporation
shall be transferred to and vested in the Surviving Corporation; and
all property, rights, privileges, power, franchises, and all and every
other interest shall thereafter be the property of the Surviving
Corporation as effectually as they were of the respective Constituent
Corporation, and the title to any real estate vested by deed or
otherwise in either Constituent Corporation shall not revert or be in
any way impaired by reason of the Merger. All rights of creditors and
all liens upon any property of either Constituent Corporation shall be
preserved unimpaired, and all debts, liabilities and duties of the
respective Constituent Corporation shall thenceforth attach to the
Surviving Corporation and may be enforced against it to the same extent
as if said debts, liabilities and duties had been incurred or
contracted by it. Specifically, but not by way of limitation, the
Surviving Corporation shall be responsible and liable to any dissenting
shareholders of Merging Corporation who perfect their rights under Utah
law; and any action or proceeding, whether civil, criminal or
administrative, pending by or against either Constituent Corporation
shall be prosecuted as if the Merger had not taken place, or the
Surviving Corporation may be substituted in any such action or
proceeding.
(3) All corporate acts, plans, policies contracts, approvals
and authorizations of Merging corporation and its shareholders, its
board of Directors, committees elected or appointed by the Board of
Directors, officers and agents which were valid and effective
immediately prior to the Effective Date of the Merger shall be taken
for all purposes as the acts, plans, policies, contracts, approvals and
authorizations of the Surviving Corporation and shall be as effective
and binding thereon as the same were with respect to Merging
Corporation.
(b) The officers and Board of Directors of Surviving Corporation
immediately prior to the Effective Date of the Merger shall be and constitute
the officers and Board of Directors of the Surviving Corporation to serve in
accordance with the Bylaws of the Surviving Corporation until their respective
successors shall have been duly elected and qualified.
2
<PAGE>
ARTICLE III
ARTICLES OF INCORPORATION AND BYLAWS
(a) The Articles of Incorporation of Surviving Corporation as existing
and constituted immediately prior to the Effective Date of the Merger shall,
from and after the Effective Date of the Merger, be and constitute the Articles
of Incorporation of the Surviving Corporation.
(b) The Bylaws of Surviving Corporation as existing and constituted
immediately prior to the Effective Date of the Merger shall, from and after the
Effective Date of the Merger, be and constitute the Bylaws of the Surviving
Corporation until amended in the manner provided by law.
ARTICLE IV
CONVERSION AND EXCHANGE OF SHARES
The manner of converting or exchanging the shares of Marino Common
Stock shall be as follows:
(a) On the Effective Date of the Merger, each share of Marino Common
Stock issued and outstanding immediately prior to the Effective Date of the
Merger shall, upon the Merger and without further action on the part of the
holder thereof, be automatically cancelled and converted to the right to receive
in exchange therefore one (1) share of the Common Stock, $.0001 par value, of
Surviving Corporation, which shall be fully paid and nonassessable.
(b) On or after the Effective Date of the Merger, each holder of an
outstanding certificate representing shares of Marino Common Stock shall be
entitled, upon surrender of such certificate at the offices of an exchange agent
appointed by the Surviving Corporation to receive a certificate representing the
number of shares of Surviving Corporation's common stock into which the shares
of Marino Common Stock shall have been converted in accordance with Article
IV(a) above. Until so surrendered, each such outstanding certificate which prior
to the Effective date of the Merger represented shares of Marino Common Stock
shall be deemed for all corporate purposes to evidence ownership of the number
of shares of Surviving Corporation's common stock into which such shares of
Marino Common Stock shall have been so converted. No certificates or scripts for
fractional shares shall be issued.
(c) All of the presently outstanding shares of the Surviving
Corporation shall be cancelled.
3
<PAGE>
ARTICLE V
OTHER PROVISIONS WITH RESPECT TO THE MERGER
(a) This Agreement shall be submitted to the shareholders of each of
the Constituent Corporations as provided by the applicable laws of the State of
Utah. After the approval or adoption thereof by the shareholders of each
Constituent Corporation in accordance with the requirements of the laws of the
States of Utah and Delaware, all required documents shall be executed, verified,
certified, filed and recorded and all required acts shall be done in order to
accomplish the Merger under the provisions of the applicable statutes of the
States of Utah and Delaware.
(b) This Agreement may be terminated by either of the Constituent
Corporations at any time prior to the Effective Date of the Merger.
(c) Merging Corporation shall from time to time, as and when requested
by Surviving Corporation, execute and deliver such documents or take such other
action as is necessary or desirable to vest, perfect or confirm in the Surviving
Corporation the title to any property or rights of the Merging Corporation
acquired or to be acquired by or as a result of the Merger. Each of the
Constituent Corporation and Surviving Corporations will pay all costs and
expenses incident to the transactions contemplated herein equally.
(d) Merging Corporation and Surviving Corporation, by mutual consent
of their respective Boards of Directors and to the extent permitted by law, may
amend, modify, or supplement this Agreement in such manner as may be mutually
agreed upon by them in writing at any time before or after adoption thereof by
their respective shareholders; provided, however, that after adoption by the
shareholders no such amendment, modification, or supplement shall adversely
affect the rights of any shareholder in any manner.
ARTICLE VI
APPROVAL AND EFFECTIVE DATE OF THE MERGER
(a) The Merger shall be carried out in the following manner (1) this
Agreement shall be adopted and approved on behalf of each Constituent
Corporation in accordance with the Utah Business Corporation Act, and (2) this
Agreement as so adopted and so approved, when executed, certified and verified
in accordance with the Utah Business Corporation Act, and Articles of Merger as
provided by Utah law, shall be filed in the Division of Corporations and
Commercial Code of the State of Utah and the Secretary of State of the State of
Delaware. The effect of the Merger and the effective date of the Merger are as
prescribed by law. (The particular time and date of the filing with the
Secretary of State of Delaware being herein referred to as the "Effective of the
Merger").
4
<PAGE>
(b) For the convenience of the parties and to facilitate the filing
and recording of this Agreement, this Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
(c) Merging Corporation shall from time to time, as and when requested
by Surviving Corporation, execute and deliver all such documents and instruments
and take all such action necessary or desirable to evidence or carry out this
merger.
(d) This Agreement may not be altered or amended except pursuant to an
instrument in writing signed on behalf of the parties hereto.
IN WITNESS WHEREOF, each of the corporations named below, pursuant to
the authority duly given to them by their respective Board of Directors, have
caused this Agreement and Plan of Merger to be executed on their behalf by their
respective President and Secretary, all as of the _____ day of April, 1988.
ATTEST: RATTLESNAKE GOLD, INC.
(a Delaware corporation)
By:___________________________________ By:_______________________________
Garth Showalter,
Secretary
ATTEST: MARINO INVESTMENTS, INC.
(a Utah corporation)
By:___________________________________ By:_______________________________
Garth Showalter, Harry F. Nelson, President
Secretary
5
<PAGE>
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CHARTER
RATTLESNAKE GOLD, INC. ________________________________, a
corporation organized under the laws of Delaware, the charter of which was
voided for non-payment of taxes, now desires to procure a restoration, renewal
and revival of its charter, and hereby certifies as follows:
1. The name of this corporation is RATTLESNAKE GOLD, INC.
. 2. Its registered office in the State of Delaware is located
at 1209 Orange Street , City of Wilmington, Zip Code 19801, County of New
Castle, the name and address of its registered agent is The Corporation Trust
Company. Corporation Trust Center, 1209 Orange Street, Wilmington. Delaware.
19801.
3. The date of filing of the original Certificate of Incorporation
in Delaware was April 13, 1988.
4. The date when restoration, renewal, and revival of the charter
of this company is to commence is the 28th day of February, 1990, same being
prior to the date of the expiration of the charter. This renewal and revival of
the charter of this corporation is to be perpetual.
5. This corporation was duly organized and carried on the business
authorized by its charter until the First day of March A.D. l990 at which time
its charter became inoperative and void for non-payment of taxes and this
certificate for renewal and revival is filed by authority of the duly elected
directors of the corporation in accordance with the laws of the State of
Delaware.
IN TESTIMONY WHEREOF and in compliance with the provisions of Section
312 of the General Corporation Law of the State of Delaware as amended.
providing for the renewal. extension and restoration of charters, Edward Dallin
Bagley, the last and acting President and Edward Dallin Bagley, the last and
acting Secretary of Rattle snake Gold. Inc. . have hereunto set their hands to
this certificate this 16th day of May 1995.
----------------------------------------
Last and Acting President and Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO CERTIFICATE OF INCORPORATION
OF
RATTLESNAKE GOLD, INC.
(CHANGED HEREIN TO "SHADOW WOOD CORPORATION")
In accordance with Section 242 of the Delaware Corporation Law
Annotated, as a mended, Rattlesnake Gold, Inc. (the "Corporation"), a Delaware
corporation, does hereby adopt the following Certificate of Amendment (the
"Amendment") to the Certificate of Incorporation.
1. The Certificate of Incorporation of the Corporation is hereby
amended by deleting Article I in its entirety and inserting the following in
lieu thereof:
ARTICLE I
NAME
The name of the Corporation hereby created shall be:
SHADOW WOOD CORPORATION
2. Except as specifically provided herein, the provisions of the
Corporation's Certificate of Incorporation shall remain unamended and shall
continue in full force and effect.
3. By execution of this Certificate of Amendment to the Certificate
of Incorporation, the president and secretary of the Corporation do hereby
certify that the foregoing amendment to the Certificate of Incorporation was
adopted as amendments to the original Certificate of Incorporation of the
Corporation by the shareholders of said Corporation at a special meeting of the
shareholders of the Corporation in accordance with Section 242, Delaware
Corporation Law Annotated.
IN WITNESS WHEREOF, the foregoing Certificate of Amendment to the
Certificate of Incorporation of Rattlesnake Gold, Dunce, has been executed this
____ day of August, 1995.
ATTEST: RATTLESNAKE GOLD, INC.
___________________________________ By:_______________________________
Mark Archibald
<PAGE>
STATE OF UTAH )
):ss
COUNTY OF DAVIS )
On this ___ day of August, 1995, personally appeared before me Edward
Dalton Bagley and Mark Archibald, who being by me duly sworn did say, each for
themselves, that he, the said Edward Dallin Bagley, is the president, and he,
the said Mark Archibald, is the secretary, respectively, of Rattlesnake Gold,
Inc., and that they are the persons who executed the foregoing Certificate of
Amendment to the Certificate of Incorporation for and on behalf of Rattlesnake
Gold, Inc., and that the statements contained therein are true.
WITNESS MY HAND AND OFFICIAL SEAL
NOTARY PUBLIC
Residing in ____________________
My Commission Expires:
<PAGE>
CERTIFICATE AND ARTICLES OF MERGER
OF
MAGICWORKS ENTERTAINMENT INCORPORATED
A FLORIDA CORPORATION
INTO
SHADOW WOOD CORPORATION
A DELAWARE CORPORATION
THE UNDERSIGNED CORPORATIONS DO HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations (the "Constituent Corporations") of the merger (the
"Merger') is as follows:
NAME STATE OF INCORPORATION
---- ----------------------
Magicworks Entertainment Incorporated Florida
Shadow Wood Corporation Delaware
SECOND: That an Agreement and Plan of Merger between the Constituent
Corporations has been approved, adopted, certified, executed and acknowledged by
each of the Constituent Corporations in accordance with Section 252 of the
Delaware General Corporation Law and the requirements of Florida law and that
upon filing this document with the Secretary of State of Florida and the
Secretary of State of Delaware, the Merger shall be effective (the "Effective
Time").
THIRD: Shadow Wood Corporation ("SWC" or the "Surviving Corporation")
has an authorized capitalization consisting of 250,000,000 shares of $.0001 par
value common stock ('SWC Common Stocks), of which 3,889,750 shares are issued
and outstanding as of the date of execution hereof; and Magicworks Entertainment
Incorporated ("MEI") has an authorized capitalization consisting of 50,000,000
shares of common stock, $.001 par value ("M EI Common Stock"), of which
19,000,000 shares are issued and outstanding as of the date hereof.
FOURTH: The surviving corporation of the Merger is Shadow Wood
Corporation, a Delaware corporation.
FIFTH: The Plan of Merger and the terms and conditions of the Merger
and the manner and basis of converting the shares of the Constituent
Corporations is as follows:
1
<PAGE>
(a) Corporate Existence
(1) From and after the Effective Time, the Surviving
Corporation shall continue its corporate existence as a Delaware
corporation and (i) it shall thereupon and thereafter possess all
rights, privileges, powers, franchises and property (real, personal and
mixed) of each of the Constituent Corporations; (ii) all debts due to
either of the Constituent Corporations, on whatever account, all causes
in action and all other things belonging to either of the Constituent
Corporations shall be taken and deemed to be transferred to and shall
be vested in the Surviving Corporation by virtue of the Merger without
further act or deed; (iii) the title to any real estate vested by deed
or otherwise, under the laws of any jurisdiction, in either of the
Constituent Corporations, shall not revert or be in any way impaired by
reason of the Merger; and (iv) all rights of creditors and all liens
upon any property of any of the Constituent Corporations shall be
preserved unimpaired, and all debts, liabilities and duties of the
Constituent Corporations shall thenceforth attach to the Surviving
Corporation and may be enforced against it to the same extent as if
such debts, liabilities and duties had been incurred or contracted by
the Surviving Corporation.
(2) From and after the Effective Time, (i) the Certificate of
Incorporation and By-laws of SWC, as existing immediately prior to the
Effective Time, shall be the Certificate of Incorporation and By-Laws
of the Surviving Corporation subject to amendments adopted herein and
any subsequent amendments; (ii) the members of the Board of Directors
of MEI holding office immediately prior to the Effective Time shall
become the members of the Board of Directors of the Surviving
Corporation, each to serve subject to the Surviving Corporation's
Bylaws; (iii) the Surviving Corporation shall change its name to
Magicworks Entertainment Incorporated; (iv) all persons who hold
executive offices of MEI at the Effective Time shall be elected by the
board of directors of the Surviving Corporation to hold the same
offices of the Surviving Corporation, each to serve subject to the
Surviving Corporation's By-laws.
(b) Conversion of Securities
As of the Effective Time and without any action on the part of the
Constituent Corporations or the holders of any of the securities of either of
these corporations each of the events set forth below shall occur. All
capitalized terms are defined in the Agreement and Plan of Merger referred to in
the EIGHTH article hereof:
(1) Each of the MEI Historical Shares issued and outstanding
immediately prior to the Effective Time shall be converted into one
share of SWC Common Stock. All such shares of MEI Common Stock will no
longer be outstanding and shall automatically be canceled and shall
cease to exist, and each certificate previously evidencing any such
shares shall thereafter represent the right to receive certificates
evidencing such number of shares of SWC Common Stock into which such
shares of MEI Common Stock were converted. The holders of such
certificates previously evidencing shares of MEI Common Stock
outstanding immediately prior to the Effective Time shall cease to have
any rights
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with respect to such shares of MEI Common Stock except as otherwise
provided herein or by applicable law;
(2) Any shares of MEI Common Stock held in the treasury of
MEI immediately prior to the Effective Time shall automatically be
canceled and extinguished without any conversion thereof and no payment
shall be made with respect thereto;
(3) In fulfillment of the obligation of MEI to issue
securities underlying Units sold in its Private Placement to purchasers
in the Private Placement, SWC shall issue on the terms and subject to
the conditions set forth in the Memorandum: (a) shares of SWC Common
Stock on the basis of one share for each share of MEI Common Stock sold
in the Private Placement, (b) an unsecured senior convertible note
("Note" or Notes") in the principal amount of $12,500 for each Note
sold in the Private Placement. The terms of the Notes shall be as
described in the Memorandum and in the form as attached to the
Memorandum as an exhibit, and SWC hereby agrees to assume all
responsibility, upon Closing, to implement the sinking fund and other
arrangements as defined and contemplated in the Memorandum, including,
without limitation, the obligation to issue SWC Common Stock in the
event of conversion of the Notes or the obligation to issue redeemable
common stock purchase warrants in the event of prepayment of the Notes
under certain circumstances;
(4) Subject to completion of the sale of at least $10,000,000
in Units in the Private Placement, SWC shall issue to Capital Growth
International, LLC ("CGI") or its designees, after giving effect to the
SWC reverse stock split, 488, 820 shares of SWC Common Stock and
Warrants to purchase 500,000 shares of SWC Common Stock under the terms
and conditions of the Placement Agent Agreement between MEI and CGI
dated June 14, 1996, and as described in the Memorandum.
(5) The 311,180 shares of SWC Common Stock previously issued
and outstanding prior to the Merger will remain issued and
outstanding;
(6) At Closing, there shall be no securities convertible into
or exercisable or exchangeable for shares of SWC or MEI Common Stock
except as described in the Memorandum.
SIXTH: Voting results for the Merger are as follows:
(a) Shadow Wood Corporation. The Agreement and Plan of Merger (the
"Plan") was submitted to certain stockholders of Shadow Wood Corporation by
the board of directors on July 2, 1996, and out of 3,889,750 shares of common
stock entitled to vote on the Plan, 3,490,250 (89%) shares approved the plan
by written consent, resulting in approval of the Plan.
(b) Magicworks Entertainment Incorporated. The Plan was submitted to
certain stockholders of Magicworks Entertainment Incorporated by the board of
directors
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on June 22, 1996, and out of 19,000,000 shares of common stock entitled to vote
on the Plan, 19,000,000 (100%) shares approved the Plan by written consent,
resulting in approval of the Plan.
(c) GENERAL. The number of votes cast for the Plan by each group was
sufficient under Florida and Delaware law for approval by that voting group.
SEVENTH: The Certificate of Incorporation of Shadow Wood Corporation
shall be the Certificate of Incorporation of the Surviving Corporation and is
hereby amended as follows:
1. Article I is amended to read as follows:
ARTICLE I
NAME
The name of the corporation is Magicworks Entertainment
Incorporated.
2. Article IV is amended to read as follows:
ARTICLE IV
CAPITALIZATION
The aggregate number of shares which this Corporation shall
have authority to issue is:
(a) Common Stock. The Corporation shall have authority to
issue 50,000,000 shares of common stock having a par value of $.001 per
share. All shares of common stock shall have the same rights and shall
not be liable to any further call or assessment and shall have no
pre-emptied rights.
(b) Preferred Stock. The Corporation shall have authority to
issue 5,000,000 shares of preferred stock, $.001 par value, which may
be issued in one or more series and with such rights, preferences and
designations as determined by the Corporation's board of directors. All
shares of any one series shall be alike in every particular.
EIGHTH: The Agreement and Plan of Merger dated July 24, 1996, between
SWC and MEI is on file at the principal place of business of SWC at 1258 E.
Malvern Avenue, Salt Lake City, Utah 84117 and will be furnished on request
without cost to any stockholder of either of the Constituent Corporations.
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NINTH: Upon this Merger becoming effective, the Surviving Corporation
acknowledges that it is deemed, under Florida law:
(c) To appoint the Secretary of State as its agent for
service of process in a proceeding to enforce any obligation or the
rights of dissenting shareholders of each domestic corporation party to
the merger or share exchange; and
(d) To agree that it will promptly pay to the dissenting
shareholders of each domestic corporation party to the merger or share
exchange the amount, if any, to which they are entitled under Section
607.1302, Florida Statutes.
SHADOW WOOD CORPORATION
By______________________________
Robert L. Wright, President
By______________________________
Mark Archibald, Secretary
MAGICWORKS ENTERTAINMENT INCORPORATED
By______________________________
Lee Marshall, President
By______________________________
Larry Turk, Secretary
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EXHIBIT 4.2
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR
TRANSFERRED EXCEPT (I) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT WHICH
HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (II)
PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY UPON A
HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE
COMPANY, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, THAT THE
PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS
WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR STATE SECURITIES LAW.
__________ ____, 1996
MAGICWORKS ENTERTAINMENT, INC.
REDEEMABLE COMMON STOCK PURCHASE WARRANT
The Transferability of this Warrant is
Restricted as Provided in SECTION 3 hereof.
___________ Warrants
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by MAGICWORKS ENTERTAINMENT, INC., a
Florida corporation and its successor by merger (the "Company"), is hereby
granted the right to purchase, subject to redemption hereof in accordance with
SECTION 7 hereof, at the initial exercise price of three dollars and fifty cents
($3.50) per share (subject to adjustment as set forth herein), ________ (____)
shares of common stock of the Company (the "Shares"). Each Redeemable Common
Stock Purchase Warrant ("Warrant") may be exercised from the date hereof until
July 30, 2001.
Each Warrant initially is exercisable at a price of three
dollars and fifty cents ($3.50) per Share payable in cash or by certified or
official bank check in New York Clearing House funds, subject to adjustments as
provided in SECTION 6 hereof. Upon surrender of this Warrant, with the annexed
Subscription Form duly executed, together with payment of the Purchase Price (as
hereinafter defined) for the Shares purchased at the offices of the Company, the
registered holder of this Warrant (the "Holder") shall be entitled to receive a
certificate or certificates for the Shares so purchased.
<PAGE>
1. EXERCISE OF WARRANT.
The purchase rights represented by this Warrant are
exercisable at the option of the Holder, in whole or in part (but not as to
fractional Shares underlying this Warrant), during any period in which this
Warrant may be exercised as set forth above. In the case of the purchase of less
than all the Shares purchasable under this Warrant, the Company shall cancel
this Warrant upon the surrender hereof and shall execute and deliver a new
Warrant of like tenor for the balance of the Shares purchasable hereunder.
2. ISSUANCE OF CERTIFICATES.
Upon the exercise of this Warrant and payment in full for the
Shares, the issuance of certificates for Shares underlying this Warrant shall be
made forthwith (and in any event within five (5) business days thereafter)
without charge to the Holder, including, without limitation, any tax which may
be payable in respect of the issuance thereof, and such certificates shall
(subject to the provisions of SECTION 3 hereof) be issued in the name of, or in
such names as may be directed by, the Holder; PROVIDED, HOWEVER, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid. The certificates representing the Shares underlying this
Warrant shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future Chairman or Co-Chairman of the Board of
Directors, President or Vice President and Secretary, Assistant Secretary,
Treasurer or Assistant Treasurer of the Company.
3. RESTRICTION ON TRANSFER.
Neither this Warrant nor any Share issuable upon exercise
hereof has been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and none of such securities may be offered, sold, pledged,
hypothecated, assigned or transferred except (i) pursuant to a registration
statement under the Securities Act which has become effective and is current
with respect to such securities, or, (ii) pursuant to a specific exemption from
registration under the Securities Act but only upon a Holder hereof first having
obtained the written opinion of counsel to the Company, or other counsel
reasonably acceptable to the Company, that the proposed disposition is
consistent with all applicable provisions of the Securities Act as well as any
applicable "Blue Sky" or similar state securities law. Upon exercise, in part or
in whole, of this Warrant, each certificate issued representing the Shares
underlying this Warrant shall bear a legend to the effect of the legend on the
first page of this Warrant.
4. REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED.
4.1 THE COMPANY'S REGISTRATION. As soon as practicable
after July 30, 1996, and in any event not later than 30 days thereafter (the
date of the consummation of the merger
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of Magicworks Entertainment, Inc., a Florida corporation, with and into Shadow
Wood Corporation, a Delaware corporation (the "Merger")), the Company shall
prepare and file with the Securities and Exchange Commission (the "Commission"),
one or more registration statements and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for Capital Growth International, L.L.C. (the "Placement Agent") and
the holders (collectively, the "Registration Rights Holders") of the Common
Stock, the Note Shares, the Placement Agent Shares and the Placement Agent
Warrant Shares (as each such terms are defined in the Confidential Private
Placement Memorandum dated June 6, 1996 of the Company as well as the Shares
(collectively, the "Registration Rights Securities"), in order to comply with
the provisions of the Securities Act, so as to permit a public offering and sale
of the Registration Rights Securities for a consecutive period (the
"Registration Period") ending on the earlier of (i) July 30, 2001 and (ii) such
time as, in the written opinion of counsel for the Company, all of the
Registration Rights Securities are eligible for public resale without
registration under the Securities Act.
4.2 DEMAND REGISTRATION.
(a) In the event a registration statement referred to in
Section 4.1 does not become effective within six months after the Merger or the
effectiveness thereof is not maintained for the duration of the Registration
Period, or if for any reason the Registration Rights Securities may not be
resold without the availability of an exemption from registration under the
Securities Act, Registration Rights Holders representing a Majority (as defined
in Section 4.4(g)) of the Registration Rights Securities shall have the right,
exercisable by written notice to the Company, to have the Company prepare and
file with the Commission, one or more registration statements and such other
documents, including a prospectus, as may be necessary in the opinion of both
counsel for the Company and counsel for the Placement Agent and the Registration
Rights Holders in order to comply with the provisions of the Securities Act, so
as to permit a public offering and sale of the Registration Rights Securities by
such Registration Rights Holders and any other Registration Rights Holders who
notify the Company within ten (10) days after receiving notice from the Company
of such registration request (as set forth below), for the Registration Period.
(b) The Company covenants and agrees to give written notice of
any registration request under this SECTION 4.2 by any Registration Rights
Holder to all other Registration Rights Holders within ten (10) days from the
date of the receipt of any such registration request.
(c) The Company shall use its best efforts to file a
registration statement within thirty (30) days of receipt of any demand therefor
and to have any registration statement declared effective at the earliest
possible time. The Company shall furnish each Registration Rights Holder
desiring to sell Registration Rights Securities such number of prospectuses as
shall reasonably be requested.
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4.3 PIGGYBACK REGISTRATION.
(a) If, in the event the registration statement referred to in
Section 4.1 does not become effective within six months after the date of the
consummation of the Merger or the effectiveness thereof is not maintained for
the duration of the Registration Period, or if for any reason the Registration
Rights Securities may not be resold without the availability of an exemption
from registration under the Securities Act, the Company proposes to register any
of its securities under the Securities Act (other than in connection with a
merger, acquisition or exchange offer on Form S-4 or pursuant to Form S-8 or
successor forms) it will give written notice by registered or certified mail, at
least thirty (30) days prior to the filing of each such registration statement,
to the Registration Rights Holders of its intention to do so. Upon the written
request of any Registration Rights Holder given within ten (10) days after
receipt of any such notice of his or her desire to include any Registration
Rights Securities in such proposed registration statement, the Company shall
afford the Registration Rights Holders the opportunity to have any such
Registration Rights Securities registered under such registration statement.
(b) In connection with any offering involving an underwriting
of shares of the Company's capital stock, the Company shall not be required
under Section 4.3(a) to include any Registration Rights Securities in such
underwriting unless such Registration Rights Holder accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters), and then only in
such quantity as the underwriters determine in their sole discretion will not
materially adversely affect the offering by the Company. If the total amount of
securities, including Registration Rights Securities, requested by stockholders
to be included in such offering exceeds the amount of securities sold other than
by the Company that the underwriters determine in their sole discretion will
materially adversely affect the offering, then the Company shall be required to
include in the offering only that number of such securities, including
Registration Rights Securities, which the underwriters determine in their sole
discretion will not materially adversely affect the offering (the securities so
included to be apportioned pro rata among the Registration Rights Holders
according to the total amount of Registration Rights Securities entitled to be
included therein owned by each Registration Rights Holder or in such other
proportions as shall mutually be agreed to by the Registration Rights Holders);
provided that the number of Registration Rights Securities to be included in
such underwriting shall not be so reduced unless the securities of other selling
stockholders are first entirely excluded from the underwriting.
(c) Notwithstanding the provisions of this Section 4.3, the
Company shall have the right at any time after it shall have given written
notice pursuant to this Section 4.3 (irrespective of whether a written request
for inclusion of any such securities shall have been made) to elect not to file
any such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof.
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4.4 COVENANTS WITH RESPECT TO REGISTRATION. In connection with
any registration under any of Sections 4.1, 4.2 and 4.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall pay all costs (excluding fees and
expenses of Registration Rights Holder(s)' counsel and any underwriting or
selling commissions or other charges of any broker-dealer acting on behalf of
Registration Rights Holder(s)), fees and expenses in connection with all
registration statements filed pursuant to any of Sections 4.1, 4.2 and 4.3
hereof including, without limitation, the Company's legal and accounting fees,
printing expenses and blue sky fees and expenses.
(b) The Company will take all necessary action which may be
required in qualifying or registering the securities included in a registration
statement for offering and sale under the securities or blue sky laws of such
states as reasonably are requested by the Registration Rights Holder(s),
provided that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such jurisdiction.
(c) The Company shall indemnify the Registration Rights
Holder(s), each of their directors and officers and each person, if any, who
controls such Registration Rights Holder(s) within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Securities and Exchange Act of 1934
(the "Exchange Act"), against all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Securities Act, the Exchange Act or any other statute, common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in such registration statement executed
by the Company or based upon written information furnished by the Company filed
in any jurisdiction in order to qualify the Registration Rights Securities under
the securities laws thereof or filed with the Commission, any state securities
commission or agency, the National Association of Securities Dealers, Inc., The
Nasdaq Stock Market or any securities exchange, or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements contained therein not misleading, unless such statement
or omission was made in reliance upon and in strict conformity with written
information furnished to the Company by the Registration Rights Holder(s)
expressly for use in such registration statement, any amendment or supplement
thereto or any application, as the case may be. If any action is brought against
the Registration Rights Holder(s) or any controlling person of the Registration
Rights Holder(s) in respect of which indemnity may be sought against the Company
pursuant to this Section 4.4(c), the Registration Rights Holder(s) or such
controlling person shall, within thirty (30) days after the receipt of a summons
or complaint, notify the Company in writing of the institution of such action
and the Company shall assume the defense of such action, including the
employment and payment of reasonable fees and expenses of counsel (which counsel
shall be reasonably satisfactory to the Registration Rights Holder(s) or such
controlling person), but the failure to give such notice shall not affect such
indemnified person's right to indemnification hereunder except to the extent
that the Company's defense of such action was materially adversely affected
thereby. The Registration Rights Holder(s) or such controlling person shall have
the right to employ its or
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their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of the Registration Rights Holder(s) or such controlling
person unless the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action, or the
Company shall not have employed counsel to have charge of the defense of such
action or such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to the Company (in which case the Company shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events the fees and expenses of
not more than one additional firm of attorneys for all of the Registration
Rights Holder(s) and/or such controlling person shall be borne by the Company.
Except as expressly provided in the previous sentence, in the event that the
Company shall have assumed the defense of any such action or claim, the Company
shall not thereafter be liable to the Registration Rights Holder(s) or such
controlling person in investigating, preparing or defending any such action or
claim. The Company agrees to notify promptly the Registration Rights Holder(s)
of the commencement of any litigation or proceedings against the Company or any
of its officers, directors or controlling persons in connection with the resale
of any of the Registration Rights Securities in connection with such
registration statement. The Company further agrees that upon demand by an
indemnified person, at any time or from time to time, it will promptly reimburse
such indemnified person for any loss, claim, damage, liability, cost or expense
actually and reasonably paid by the indemnified person as to which the Company
has indemnified such person pursuant hereto. Notwithstanding the foregoing
provisions of this Section 4.4(c), any such payment or reimbursement by the
Company of fees, expenses or disbursements incurred by an indemnified person in
any proceeding in which a final judgment by a court of competent jurisdiction
(after all appeals or the expiration of time to appeal) is entered against any
Registration Rights Holder or such indemnified person as a direct result of any
Registration Rights Holder or such person's gross negligence or willful
misfeasance will be promptly repaid to the Company.
(d) The Registration Rights Holder(s), and their successors
and assigns, shall severally, and not jointly, indemnify the Company, its
officers and directors and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the Securities Act,
the Exchange Act or any other statute, common law or otherwise, arising from
written information furnished by or on behalf of such Registration Rights
Holder(s), or their successors or assigns, expressly for use in such
registration statement. The Registration Rights Holder(s) further agree(s) that
upon demand by an indemnified person, at any time or from time to time, they
will promptly reimburse such indemnified person for any loss, claim, damage,
liability, cost or expense actually and reasonably paid by the indemnified
person as to which the Registration Rights Holder(s) have indemnified such
person pursuant hereto. Notwithstanding the foregoing provisions of this Section
4.4(d), any such payment or reimbursement by the Registration Rights Holder(s)
of fees, expenses or disbursements incurred by an indemnified person in any
proceeding in which a final judgment by a court of competent jurisdiction (after
all appeals or the expiration of time to appeal) is entered against the Company
or such indemnified person as
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a direct result of the Company or such person's gross negligence or willful
misfeasance will be promptly repaid to the Registration Rights Holder(s).
(e) Nothing contained in this Agreement shall be construed as
requiring the Registration Rights Holder(s) to convert, exchange or exercise any
securities convertible, exchangeable or exercisable for Common Stock prior to
the initial filing of any registration statement or the effectiveness thereof.
(f) With respect to any registration under SECTION 4.2 hereof,
the Company shall enter into an underwriting agreement with the managing
underwriter, if any, selected for such underwriting by Registration Rights
Holders holding a Majority of the securities requested to be included in such
underwriting. Such agreement shall be satisfactory in form and substance to the
Company a Majority of Registration Rights Holders and such managing underwriter,
and shall contain such representations, warranties and covenants by the Company
and such other terms as are customarily contained in agreements of that type
used by the managing underwriter. The Registration Rights Holders shall be
parties to any underwriting agreement relating to an underwritten sale of their
securities and may, at their option, require that any or all of the
representations, warranties and covenants of the Company to or for the benefit
of such underwriters shall also be made to and for the benefit of such
Registration Rights Holders. Such Registration Rights Holders shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters except as they may relate to such Registration
Rights Holders and their intended methods of distribution.
(g) For purposes of this Agreement, the term "Majority" in
reference to the Registration Rights Holders shall mean in excess of fifty
percent (50%) of the then outstanding Registration Rights Securities (assuming
the exercise of all outstanding warrants, if not yet exercised) that (i) are not
held by the Company, an affiliate, officer, creditor, employee or agent thereof
or any of their respective affiliates, members of their family, persons acting
as nominees or in conjunction therewith and (ii) have not been resold to the
public pursuant to a registration statement filed with the Commission under the
Securities Act.
5. PRICE.
5.1 INITIAL AND ADJUSTED PURCHASE PRICE. The initial purchase
price shall be three dollars and fifty cents ($3.50) per Share. The adjusted
purchase price shall be the price which shall result from time to time from any
and all adjustments of the initial purchase price in accordance with the
provisions of SECTION 6 hereof.
5.2 PURCHASE PRICE. The term "Purchase Price" herein
shall mean the initial purchase price or the adjusted purchase price, depending
upon the context.
6. ADJUSTMENT OF PURCHASE PRICE AND THRESHOLD PRICE.
(a) If the Company at any time or from time to time while this
Warrant is issued and outstanding shall declare or pay, without consideration,
any dividend on the Common
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Stock payable in Common Stock, or shall effect a subdivision of the outstanding
shares of Common Stock into a greater number of shares of Common Stock (by stock
split, reclassification or otherwise than by payment of a dividend in Common
Stock or in any right to acquire Common Stock), or if the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Purchase
Price and Threshold Price in effect immediately before such event shall,
concurrently with the effectiveness of such event, be proportionately decreased
or increased, as appropriate. If the Company shall declare or pay, without
consideration, any dividend on the Common Stock payable in any right to acquire
Common Stock for no consideration, then the Company shall be deemed to have made
a dividend payable in Common Stock in an amount of shares equal to the maximum
number of shares issuable upon exercise of such rights to acquire Common Stock.
(b) If the Shares issuable upon exercise hereof shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for in
SECTION 6(a)), the Purchase Price then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the Shares shall be convertible into, in lieu of the number of
shares of Common Stock which the Holder would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock equivalent
to the number of Shares that would have been subject to receipt by the Holder
upon exercise hereof immediately before that change. The Threshold Price shall
likewise be adjusted in accordance with this Section 6(b).
(c) Upon the occurrence of each adjustment or readjustment of
any Purchase Price pursuant to this Section 6, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to the Holder a notice setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based.
7. REDEMPTION OF THE WARRANTS.
(a) The Company may, on 30 days' prior written notice redeem
all the Warrants at ten cents ($.10) per Warrant, provided, however, that before
any such call for redemption of Warrants can take place, (i) the Shares are
registered under the Securities Act and applicable "Blue Sky" laws, (ii) a
current prospectus is then available for the resale of the Shares and (iii) the
closing bid price of the Common Stock as reported by Nasdaq, the OTC Bulletin
Board, or such other market on which the Common Stock is then traded, exceeds
$5.00 per share for the 20 consecutive trading days ending on the fifth trading
day prior to the date of the notice of redemption contemplated by (b) and (c)
below is given (subject to adjustment in the event of any stock splits or other
similar events as provided herein).
(b) In case the Company shall exercise its right to redeem all
of the Warrants, it shall give or cause to be given notice to the Registered
Holders of the Warrants, by mailing to such Registered Holders a notice of
redemption, first class, postage prepaid, at their last
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address as shall appear on the records of the Company. Any notice mailed in the
manner provided herein shall be conclusively presumed to have been duly given
whether or not the Registered Holder receives such notice. Not less than five
business days prior to the mailing to the Registered Holders of the Warrants of
the notice of redemption, the Company shall deliver or cause to be delivered to
Capital Growth International, L.L.C. a similar notice telephonically and
confirmed in writing together with a list of the Registered Holders (including
their respective addresses and number of Warrants beneficially owned) to whom
such notice of redemption has been or will be given.
(c) The notice of redemption shall specify (i) the redemption
price, (ii) the date fixed for redemption, which shall in no event be less than
thirty (30) days after the date of mailing of such notice, (iii) the place where
the Warrant Certificate shall be delivered and the redemption price shall be
paid, and (iv) that the right to exercise the Warrant shall terminate at 5:00
p.m. (New York time) on the business day immediately preceding the date fixed
for redemption. The date fixed for the redemption of the Warrants shall be the
Redemption Date. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity of the proceedings for such redemption
except as to a holder (a) to whom notice was not mailed or (b) whose notice was
defective. An affidavit of the Secretary or Assistant Secretary of the Company
that notice of redemption has been mailed shall, in the absence of fraud, be
prima facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00
p.m. (New York time) on the business day immediately preceding the Redemption
Date. The redemption price payable to the Registered Holders shall be mailed to
such persons at their addresses of record.
8. MERGER OR CONSOLIDATION.
In case of any consolidation of the Company with, or merger of
the Company with, or merger of the Company into, another corporation (other than
a consolidation or merger which does not result in any reclassification or
change of the outstanding common stock of the Company), the corporation formed
by such consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement providing that the Holder shall have the right
thereafter (until the expiration of such Warrant) to receive, upon exercise of
his Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger by a holder of the number
of shares of common stock of the Company for which his Warrant might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in SECTION 6. The above provisions of this
SECTION 8 shall similarly apply to successive consolidations or mergers.
9
<PAGE>
9. EXCHANGE AND REPLACEMENT OF WARRANT.
This Warrant is exchangeable without expense, upon the
surrender hereof by the registered Holder at the principal executive office of
the Company for a new Warrant of like tenor and date representing in the
aggregate the right to purchase the same number of Shares as are purchasable
hereunder in such denominations as shall be designated by the Holder hereof at
the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu of this Warrant.
10. ELIMINATION OF FRACTIONAL INTERESTS.
The Company shall not be required to issue certificates
representing fractions of Shares on the exercise of this Warrant, nor shall it
be required to issue scrip or pay cash in lieu of fractional interests, it being
the intent of the parties that all fractional interests shall be eliminated.
11. RESERVATION OF SECURITIES.
The Company shall at all times reserve and keep available out
of its authorized common stock, solely for the purpose of issuance upon the
exercise of this Warrant, such number of Shares as shall be issuable upon the
exercise hereof. The Company covenants and agrees that, upon exercise of this
Warrant and payment of the Purchase Price therefor, all Shares issuable upon
such exercise shall be duly and validly issued, fully paid and nonassessable.
12. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Warrant shall be construed as
conferring upon the Holder hereof the right to vote or to consent or to receive
notice as a stockholder in respect of any meetings of stockholders for the
election of directors or any other matter, or as having any rights whatsoever as
a stockholder of the Company.
13. NOTICES.
All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be delivered
personally, telegraphed or sent by certified, registered, or express mail,
postage prepaid, and shall be deemed given when so delivered personally,
telegraphed or, if mailed, five days after the date of deposit in the United
States mails, as follows:
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(a) If to the Company, to:
Magicworks Entertainment, Inc.
930 Washington Avenue
5th Floor
Miami Beach, Florida 33139
Attention: Brad Krassner, Co-Chairman
(b) If to the Holder, to the address of such Holder
as shown on the books of the Company.
14. SUCCESSORS.
All the covenants, agreements, representations and warranties
contained in this Warrant shall bind the parties hereto and their respective
heirs, executors, administrators, distributees, successors and assigns.
15. HEADINGS.
The headings in this Warrant are inserted for purposes of
convenience only and shall have no substantive effect.
16. LAW GOVERNING.
This Warrant shall be construed and enforced in accordance
with, and governed by, the laws of the State of New York, without giving effect
to conflicts of law, rules or principles.
11
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed in its corporate name by, and such signature to be attested to by, a duly
authorized officer on the date first above written.
MAGICWORKS ENTERTAINMENT, INC.
By:
----------------------------------
Name:
Title:
Attest:
- ------------------------------------
Name:
Title:
12
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SUBSCRIPTION FORM
(To be Executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the
right to purchase Shares represented by this Warrant in accordance to the
conditions hereof and herewith makes payment of the Purchase Price of such
Shares in full.
--------------------------------------
Signature
--------------------------------------
Address
---------------------------------------
Social Security Number or Taxpayer's
Identification Number
EXHIBIT 4.3
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (I) PURSUANT TO A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND
IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (II) PURSUANT TO A SPECIFIC
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON A HOLDER
HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE ISSUER, OR
OTHER COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER, THAT THE PROPOSED DISPOSITION
IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS
ANY APPLICABLE "BLUE SKY" OR OTHER SIMILAR SECURITIES LAW.
MAGICWORKS ENTERTAINMENT INCORPORATED
UNSECURED SENIOR CONVERTIBLE NOTE
$__________ July ____, 1996
New York, New York
FOR VALUE RECEIVED, Magicworks Entertainment Incorporated, a Florida
corporation, and its successor by merger (the "Company"), promises to pay to the
order of __________ (the "Holder"), the principal amount of __________ DOLLARS
($__________), and to pay interest (computed on the basis of a 360-day year of
30-day months) ("Interest") (a) on the unpaid principal amount at the rate of
ten percent (10%) semiannually on June 30th and December 31st, commencing on
December 31, 1996 (each, an "Interest Payment Date") and (b) to the extent
permitted by law on any overdue payment of the principal amount at the rate of
twelve percent (12%) per annum. Principal and accrued but unpaid Interest
hereunder shall be due and payable on demand on or after the Maturity Date (as
defined in SECTION 5 hereof), unless prepaid by the Company in accordance with
SECTION 4 hereof or converted by the Holder in accordance with SECTION 6 hereof.
Payments of principal and Interest shall be made in lawful money of the
United States of America by check and mailed to the address designated by the
Holder in the subscription agreement (the "Subscription Agreement") for the
subscription hereof.
This Note is one of several unsecured senior convertible notes
(collectively, the "Notes") offered by the Company (the "Offering") to several
holders (collectively, the "Holders") in the form of units along with shares
(the "Unit Shares") of common stock of the Company (the
<PAGE>
"Common Stock"), pursuant to a Confidential Private Placement Memorandum dated
June , 1996, together with all amendments thereof and supplements and exhibits
thereto (the "Memorandum"). The Unit Shares, the Warrant Shares (as defined in
SECTION 4 hereof) and the Note Shares (as defined in SECTION 6 hereof) are
sometimes referred to herein collectively as the "Securities." This Note may be
held by Capital Growth International, L.L.C. ("CGI"), the Company's placement
agent in connection with the Offering, its officers, employees and affiliates.
This Note is subject to the following terms and conditions:
1. SINKING FUND PAYMENTS. The Company shall irrevocably deposit in trust (the
"Principal Escrow Account") with Sterling National Bank & Trust Company of New
York (the "Note Escrow Agent") pursuant to an escrow agreement (the "Note Escrow
Agreement") on or before each of the following dates (the "Principal Escrow
Payment Dates"), the following cash amounts (the "Principal Escrow Payments") to
secure the Company's obligation to pay the principal amount of the Notes
outstanding on the Maturity Date:
<TABLE>
<CAPTION>
PRINCIPAL ESCROW PAYMENTS DUE
(REPRESENTED AS A PERCENT OF THE
AGGREGATE PRINCIPAL AMOUNT OF
NOTES OUTSTANDING ON SUCH PRINCIPAL
PRINCIPAL ESCROW PAYMENT DATES ESCROW PAYMENT DATE)
<S> <C>
Seven payment dates commencing on the first business day following the third
anniversary of the first closing of the Offering and every ninety days
thereafter, provided that such day is a business day, otherwise on the first
business day
following each such date......................................... 10.714286%
</TABLE>
The Company's obligations under the Notes and the Note Escrow Agreement shall
survive until the Notes are no longer outstanding. The Note Escrow Agreement
shall provide that the Note Escrow Agent shall, from the Principal Escrow
Account, make payments of principal on the Notes when due directly to the
respective Holders at each such Holder's respective address as set forth in the
respective Subscription Agreements, which addresses shall be delivered to the
Escrow Agent by the Company within five (5) business days of each closing of the
Offering and updated thereafter by the Company. The Escrow Agent will have no
obligations or duties with respect to the Principal Escrow Account other than
those set forth in the Note Escrow Agreement.
2. DEFAULT
(a) DEFAULT. The occurrence of any one or more of the following
events shall constitute an event of default (an "Event of Default") hereunder:
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<PAGE>
(i) if the Company shall default in the punctual payment
of any sum payable with respect to, or in the
observance or performance of any of the agreements,
promises, covenants, terms and conditions of any of
the Notes or the Note Escrow Agreement;
(ii) if any warranty, representation or statement of fact
made herein or in the or the Note Escrow Agreement by
the Company is false or misleading in any material
respect when made;
(iii) if Magic Promotions, Inc., a Florida Corporation,
Magic Promotion, Inc., an Ohio corporation (each, a
"Significant Subsidiary") or the Company shall be
dissolved or liquidated or any proceeding for
dissolution or liquidation of the Company or any
Significant Subsidiary is commenced or the Company or
any Significant Subsidiary fails to maintain its
corporate existence;
(iv) if the Company or any Significant Subsidiary becomes
insolvent (however defined or evidenced) or makes an
assignment for the benefit of creditors;
(v) if there shall be filed by or against the Company or
any Significant Subsidiary any petition for any relief
under the bankruptcy laws of the United States now or
hereafter in effect or any proceeding shall be
commenced with respect to the Company or any
Significant Subsidiary under any insolvency,
readjustment of debt, reorganization, dissolution,
liquidation or similar law or statute of any
jurisdiction now or hereafter in effect (whether at
law or in equity), provided that in the case of any
involuntary filing or the commencement of any
involuntary proceeding against the Company or any
Significant Subsidiary such proceeding or petition
shall have continued undismissed and unvacated for at
least 60 days;
(vi) if the usual business of the Company or any
Significant Subsidiary shall cease or be terminated or
suspended; or
(vii) if any petition or application to any court or
tribunal, at law or in equity, be filed by or against
the Company or any Significant Subsidiary for the
appointment of any receiver or trustee for the
Company or any Significant Subsidiary or any part of
the property of the Company or any Significant
Subsidiary, provided that in the case of any
involuntary filing against the Company or any
Significant Subsidiary, such proceeding or
appointment shall have continued undismissed and
unvacated for at least 60 days.
(b) REMEDIES UPON DEFAULT. If any Event of Default shall occur for any
reason, then and in any such event, in addition to all rights and remedies of
the Holder under applicable law or otherwise, all such rights and remedies being
cumulative, not exclusive and enforceable alternatively, successively and
concurrently, the Holder may, at its option, declare any or all of
3
<PAGE>
the Company's obligations, liabilities and indebtedness owing to the Holder
under this Note, to be due and payable, whereupon the then unpaid balance
hereof, together with all interest accrued thereon, shall forthwith become due
and payable, together with interest accruing thereafter at the then applicable
interest rate stated above until the indebtedness evidenced by this Note is paid
in full, plus the costs and expenses of collection hereof, including, but not
limited to, attorney's fees and legal expenses.
(c) THE COMPANY'S WAIVERS. The Company (i) waives diligence, demand,
presentment, protest and notice of any kind, (ii) agrees that it will not be
necessary for the Holder to first institute suit in order to enforce payment of
this Note and (iii) consents to any one or more extensions or postponements of
time of payment, release, surrender or substitution of collateral security, or
forbearance or other indulgence, without notice or consent. The pleading of any
statute of limitations as a defense to any demand against the Company is hereby
expressly waived by the Company.
(d) CERTAIN OBLIGORS. The Holder may proceed against the
Company and any guarantors or endorsees hereof in such order and manner as the
Holder may choose. None of the rights of the Holder shall be waived or
diminished by any failure or delay in the exercise thereof.
3. COVENANTS. The Company covenants and agrees that, so long as this
Note is outstanding and unpaid:
(a) PAYMENT OF NOTE. The Company will punctually pay or cause to be
paid the principal, premium, if any, and Interest on this Note at the dates and
places and in the manner specified herein. Any sums required to be withheld from
any payment of principal, premium, if any, or Interest on this Note by operation
of law or pursuant to any order, judgment, execution, treaty, rule or regulation
may be withheld by the Company and paid over in accordance therewith. In the
event any restriction is placed upon payment of principal, premium, if any, or
Interest by virtue of a currency or monetary control law, rule or regulation of
the United States Federal Government, as set forth in a written notice delivered
to the Holder within thirty (30) days after the imposition of such a
restriction, such payments shall be deposited to the account of the payee in a
bank, trust company or other financial institution, as directed by the payee.
Such payment or deposit will be deemed payment to the Holder.
Nothing in this Note or in any other agreement between the Holder and
the Company shall require the Company to pay, or the Holder to accept, interest
in an amount which would subject the Holder to any penalty or forfeiture under
applicable law. In the event that the payment of any charges, fees or other sums
due under this Note or provided for in any other agreement between the Company
and the Holder are or could be held to be in the nature of interest and would
subject the Holder to any penalty or forfeiture under applicable law, then IPSO
FACTO the obligations of the Company to make such payment to the Holder shall be
reduced to the highest rate authorized under applicable law and, in the event
that the Holder shall have ever received, collected, accepted or applied as
interest any amount in excess of the maximum rate of interest permitted to be
charged by applicable law, such amount which would be excess interest under
applicable law shall be applied first to the reduction of principal then
outstanding,
4
<PAGE>
and, second, if such principal amount is paid in full, any remaining excess
shall forthwith be returned to the Company.
(b) MAINTENANCE OF CORPORATE EXISTENCE; MERGER AND CONSOLIDATION. The
Company will at all times cause to be done all things necessary or appropriate
to preserve and keep in full force and effect its corporate existence and the
corporate existence of each of the Significant Subsidiaries and all of its
rights and franchises and shall not consolidate with or merge into any other
corporation or transfer all or substantially all of its assets to any person
unless (i) the corporation formed by such consolidation or into which the
Company is merged or to which the assets of the Company are transferred is a
corporation that expressly assumes all of the obligations of the Company under
this Note and (ii) after giving effect to such transaction, no Event of Default
and no event which, after notice or lapse of time, or both, would become an
Event of Default, shall have occurred and be continuing.
(c) PAYMENT OF TAXES. The Company will use its best efforts to pay or
discharge or cause to be paid, set aside for payment or discharge, before the
same shall become delinquent, all taxes, assessments and governmental charges
levied or imposed upon the Company on a consolidated basis or upon its income,
profits or property; provided, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount or validity is being contested in good faith by appropriate
proceedings.
(d) COMPLIANCE WITH STATUTES. The Company will, and will cause its
subsidiaries to, comply in all material respects with all applicable statutes
and regulations of the United States of America and of any state or
municipality, and of any agency thereof, in respect of the conduct of business
and the ownership of property by the Company and its subsidiaries; provided,
that nothing contained in this SECTION 3(d) shall require the Company and its
subsidiaries to comply with any such statute or regulations so long as its
legality or applicability shall be contested in good faith.
(e) RESTRICTIONS ON DIVIDENDS, REDEMPTIONS, ETC. Neither the Company
nor any of its subsidiaries' will (i) declare or pay any dividend or make any
other distribution, except, with respect to the Company, dividends or
distributions payable in equity securities of the Company, or (ii) purchase,
redeem or otherwise acquire or retire for value any equity securities, except
(A) with respect to the Company, equity securities acquired upon conversion
thereof into other equity securities of the Company and (B) with respect to the
Company, any equity security issued to employees, directors of others performing
services in accordance with agreements providing for such repurchase at original
cost upon termination of employment, membership on the Board of Directors or
other affiliation with the Company.
(f) TRANSACTIONS WITH AFFILIATES. Neither the Company nor any of its
subsidiaries will itself, and will not permit any officer, director or holder of
5% or more of the Company's Common Stock, to engage in any transaction of any
kind or nature with any affiliate of the Company or any of its subsidiaries,
other than transactions with any wholly-owned subsidiary of the Company or any
of its subsidiaries or pursuant to the terms of any agreement existing as of the
date hereof between the Company or any of its subsidiaries and any affiliate of
the
5
<PAGE>
Company, unless such transaction, or in the case of a course of related or
similar transactions or continuing transactions, such course of transactions or
continuing transactions is or are upon terms which are fair to the Company and
any of its subsidiaries and which are reasonably similar to, or more beneficial
to the Company and any of its subsidiaries than the terms deemed likely to occur
in similar transactions with unrelated persons under the same circumstances.
(g) LIENS. Neither the Company nor any of its subsidiaries will create,
incur or suffer to exist any future liens, claims, or encumbrances of any kind
whatsoever upon any of its assets or properties which have priority over the
Notes, except those incurred in connection with business purposes.
4. OPTIONAL PREPAYMENT
(a) If this Note has not been converted by the Holder in accordance
with SECTION 6 hereof, all, but not less than all, of the outstanding principal
amount and accrued but unpaid interest on the Notes, may be prepaid by the
Company in accordance with the terms hereof.
(b) The prepayment price shall equal the outstanding principal amount
of this Note together with accrued but unpaid interest (the "Prepayment Price"),
provided that the Prepayment Circumstances exist on the date of the notice of
prepayment. The "Prepayment Circumstances" shall exist if (i) the Securities are
registered under the Securities Act and applicable "Blue Sky" laws, (ii) a
current prospectus is then available for the resale of the Securities and (iii)
the closing bid price of the Common Stock as reported by Nasdaq, the OTC
Bulletin Board, or such other market on which the Common Stock is then traded,
equals or exceeds $5.00 per share (subject to adjustment as provided in SECTION
6(e) hereof) for the 20 consecutive trading days ending on the fifth trading day
prior to the date of the notice of prepayment.
(c) If the Prepayment Circumstances do not exist on the date of the
notice of prepayment, in addition to payment of the Prepayment Price, the
Company shall issue to the Holder one redeemable common stock purchase warrant
("Redeemable Warrants") for each $3.50 (subject to adjustment under certain
circumstances) in principal amount of this Note that is to be prepaid. The
Redeemable Warrants shall be subject to the terms and conditions set forth in
the Memorandum and in the form of Redeemable Warrant attached hereto as EXHIBIT
B.
(d) At least 30 days but not more than 60 days before a prepayment
date, the Company shall mail a notice of prepayment to each Holder of the Notes.
The notice shall state (i) the prepayment date, (ii) the Prepayment Price, (iii)
whether or not the Prepayment Circumstances existed on the date of such notice
of prepayment and, if not, the number of Redeemable Warrants to be issued to the
Holder upon prepayment, (iv) that the Notes may be converted in accordance with
SECTION 6 hereof at any time before the close of business on the prepayment
date, (v) the Conversion Price, (vi) that such Holder's Notes must be
surrendered to the Company to collect the Prepayment Price and (vii) that
interest on the Notes called for prepayment will cease to accrue on and after
the prepayment date.
6
<PAGE>
(e) Once proper notice of prepayment is mailed to the proper address of
a Holder, such Holder's Note shall become due and payable on the prepayment date
unless converted in accordance with SECTION 6 hereof.
5. MATURITY
If this Note is not prepaid by the Company as provided in SECTION 4
hereof, or converted at the option of the Holder in accordance with SECTION 6
hereof, the principal amount of this Note, together with accrued but unpaid
interest, shall be due and payable on demand on ___________________________ ,
2001 [60 months from the date of the closing of the Offering] (the "Maturity
Date").
6. CONVERSION
Subject to the Company's prepayment option in SECTION 4 hereof, all,
but not less than all, of the principal amount of this Note, together with
accrued but unpaid interest, may be converted into shares of Common Stock (the
"Note Shares"), at the option of the Holder, at any time on or prior to the
Maturity Date, subject to the terms and conditions set forth in this SECTION 6.
Upon conversion into Note Shares, the principal amount and accrued but unpaid
interest on this Note shall be discharged.
(a) CONVERSION PRICE. The number of Note Shares into which this Note
may be converted shall be determined by dividing the aggregate amount of
principal and accrued but unpaid interest outstanding on this Note on the
Conversion Date (as defined below) by three dollars and fifty cents ($3.50)
(subject to adjustment under certain circumstances) (the "Conversion Price";
which term shall be deemed, for the purposes of SECTION 6(e), to include the
rate at which Redeemable Warrants shall be issued to the Holder under certain
circumstances pursuant to SECTION 4 hereof).
(b) METHOD OF CONVERSION. Before the Holder shall be entitled to
receive Note Shares upon the conversion of this Note, the Holder shall surrender
this Note and deliver a Notice of Conversion (in the form attached hereto as
EXHIBIT A) to the office of the Company or its designated agent. The Notice of
Conversion shall state therein the amount(s) in which the certificate(s) for
Note Shares are to be issued. The time of conversion (the "Conversion Date")
shall be the close of business on the first business day following the date on
which the Company receives the Notice of Conversion. Interest on Notes converted
ceases to accrue on and after the date of the Notice of Conversion.
(c) ISSUANCE OF NOTE SHARES. The Company shall, as soon as practicable
after surrender of this Note and receipt of the Notice of Conversion, but in no
event more than three (3) business days thereafter, issue and deliver to the
Holder, a certificate(s) for the number of Note Shares to which the Holder shall
be entitled as aforesaid.
(d) NO FRACTIONAL SHARES. No fractional Note Shares shall be
issuable upon conversion of this Note. If the conversion of this Note would
result in the issuance of a
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<PAGE>
fractional share of Common Stock, such fractional share shall be rounded up to
the nearest whole share and issued to the Holder.
(e) ADJUSTMENT OF CONVERSION PRICE AND THRESHOLD PRICE; MERGER.
(i) If the Company at any time or from time to time while this
Note is issued and outstanding shall declare or pay, without consideration, any
dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock split, reclassification or otherwise than by
payment of a dividend in Common Stock or in any right to acquire Common Stock),
or if the outstanding shares of Common Stock shall be combined or consolidated,
by reclassification or otherwise, into a lesser number of shares of Common
Stock, then the Conversion Price and Threshold Price in effect immediately
before such event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. If the Company shall
declare or pay, without consideration, any dividend on the Common Stock payable
in any right to acquire Common Stock for no consideration, then the Company
shall be deemed to have made a dividend payable in Common Stock in an amount of
shares equal to the maximum number of shares issuable upon exercise of such
rights to acquire Common Stock.
(ii) If the Common Stock shall be changed into the same or a
different number of securities of any other class or classes of securities,
whether by capital reorganization, reclassification or otherwise (other than a
subdivision or combination of shares provided for in SECTION 6(e)(i)), the
Conversion Price then in effect shall, concurrently with the effectiveness of
such reorganization or reclassification, be proportionately adjusted so that the
Note Shares shall be convertible into, in lieu of the number of securities which
the Holder would otherwise have been entitled to receive, a number of securities
of such other class or classes of securities equivalent to the number of
securities of Note Shares that would have been subject to receipt by the Holder
upon payment of Note Shares on this Note immediately before that change. The
Threshold Price shall likewise be adjusted in accordance with this SECTION
6(e)(ii).
(iii) In case of any consolidation or merger of the Company
with any other corporation, limited liability company or any other entity (each
such transaction, a "Merger"), the corporation formed by the Merger shall
succeed to the covenants, stipulations, promises and the agreements contained in
this Note. In the event of a Merger, the Company shall make appropriate
provisions so that the Holder shall have the right thereafter to convert this
Note into the kind and amount of securities receivable upon such Merger by a
Holder of the number of securities into which this Note might have been
converted immediately prior to a Merger. The above provisions shall similarly
apply to successive Mergers.
(iv) NOTICE OF ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of any Conversion Price or the Threshold Price
pursuant to this SECTION 6(e), the Company at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and prepare
and furnish to the Holder a notice setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based.
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<PAGE>
(f) RESERVATION OF STOCK. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of this Note into Note Shares, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Notes; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all of the Notes then, the Company will take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose,
including without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to its charter documents.
(g) ISSUE TAXES. The Company shall pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of Note Shares;
provided, that the Company shall not be obligated to pay any transfer taxes
resulting from any transfer requested by the Holder in connection with any such
conversion.
7. OTHER PROVISIONS RELATING TO RIGHTS OF THE HOLDER OF THIS NOTE
(a) RIGHTS OF THE HOLDER OF THIS NOTE. This Note shall not entitle the
Holder to any of the rights of a shareholder of the Company, including, without
limitation, the right to vote, to receive dividends and other distributions, or
to receive any notice of, or to attend, meetings of shareholders or any other
proceedings of the Company. This SECTION 7(a) shall not affect the rights of the
Holder in its capacity as a shareholder of the Company upon conversion of this
Note and issuance to the Holder of Note Shares pursuant to SECTION 6 hereof.
(b) LOST, STOLEN, MUTILATED OR DESTROYED NOTE. If this Note shall be
mutilated, lost, stolen, or destroyed, the Company shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated Note, or in
lieu of or in substitution for a lost, stolen, or destroyed Note, a new Note for
the principal amount of this Note so mutilated, lost, stolen, or destroyed but
only upon receipt of evidence (which may consist of a signed affidavit of the
Holder), of such loss, theft, or destruction of such Note, and of the ownership
thereof, and indemnity, if requested, all reasonably satisfactory to the
Company.
8. SECURITIES LAW COMPLIANCE
(a) RESTRICTIONS ON TRANSFER. The Holder and the Company understand
that each of (i) the Holder's right to convert this Note and (ii) the ability of
the Company to issue Redeemable Warrants is subject to full compliance with the
provisions of all applicable securities laws and the availability thereunder of
an exemption from registration, and that the certificates evidencing the Note
Shares, the Redeemable Warrants and the Warrant Shares shall bear a legend to
the effect of the legend on the first page of this Note.
(b) COMPLIANCE WITH LAWS. The Holder agrees to comply with all
applicable laws, rules and regulations of all federal and state securities
regulators, including but not limited to, the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc.,
9
<PAGE>
and applicable state securities regulators with respect to disclosure, filings
and any other requirements resulting in any way from the issuance of this Note.
9. OTHER MATTERS
(a) BINDING EFFECT; ASSIGNMENT. The provisions of this Note
shall be binding upon and inure to the benefit of the parties hereto and the
successors and assigns of the Company.
(b) FURTHER ACTIONS. At any time and from time to time, the Company and
the Holder agree, without further consideration, to take such actions and to
execute and deliver such documents as the other may reasonably request to
consummate the transactions contemplated in this Note.
(c) MODIFICATION; WAIVER. This Note, the Note Escrow Agreement and the
certificates representing the Redeemable Warrants set forth the entire
understanding of the Company and the Holder with respect to the subject matter
hereof and supersede all existing agreements between them concerning such
subject matter. This Note may be amended, modified, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by the Company and Holders of at least fifty-one percent (51%)
in principal amount of the Notes at the time outstanding; provided, however,
that the consent of a Holder shall be required to modify the terms of this Note
affecting the payment of principal amount of, or Interest on, such Holder's Note
or the term of such Holder's Note. Any waiver by the Company or the Holder of a
breach of any provision of this Note shall not operate as or be construed to be
a waiver of any other breach of such provision or of any breach of any other
provision of this Note. The failure of the Company or the Holder to insist upon
strict adherence to any term of this Note on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Note. No delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof or hereof, nor shall any waiver on the part of any
party of any right, power or privilege hereunder preclude any other or further
exercise hereof or the exercise of any other right, power or privilege
hereunder. Any waiver must be in writing. The rights and remedies provided
herein are cumulative and are not exclusive of any rights or remedies which any
party may otherwise have at law or in equity.
(d) NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt if to (i) the Company, to
Magicworks Entertainment Incorporated, 930 Washington Avenue, 5th Floor, Miami
Beach, Florida 33139 and (ii) the Holder to such Holder at her last address as
shown on the books of the Company (or to such other address as the party shall
have furnished in writing in accordance with the provisions of this SECTION
9(d)). Any notice or other communication given by certified mail or delivered
against receipt shall be deemed given at the time of certification or
recordation of receipt thereof, except for a notice changing a party's address
which shall be deemed given at the time of receipt thereof.
(e) SEVERABILITY. If any provision of this Note is invalid,
illegal, or unenforceable, the balance of this Note shall remain in effect, and
if any provision is inapplicable to any person
10
<PAGE>
or circumstance, it shall nevertheless remain applicable to all other persons
and circumstances. The rate of interest on this Note is subject to any
limitations imposed by applicable usury laws.
(f) HEADINGS. The headings in this Note are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Note.
(g) GOVERNING LAW. This Agreement shall be governed by and construed in
all respects under the laws of the State of New York, without reference to its
conflict of laws rules or principles. Any suit, action, proceeding or litigation
arising out of or relating to this Agreement shall be brought and prosecuted in
such federal or state court or courts located within the State of New York as
provided by law. The parties hereby irrevocably and unconditionally consent to
the jurisdiction of each such court or courts located within the State of New
York and to service of process by registered or certified mail, return receipt
requested, or by any other manner provided by applicable law, and hereby
irrevocably and unconditionally waive any right to claim that any suit, action,
proceeding or litigation so commenced has been commenced in an inconvenient
forum.
(h) DUE AUTHORIZATION. The execution and delivery of this Note
and the consummation of the transactions contemplated herein have been
authorized by the Board of Directors of the Company and by any necessary vote or
with the consent of the shareholders of the Company.
11
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be executed on
its behalf by its Co-Chairman of the Board of Directors thereunto duly
authorized.
MAGICWORKS ENTERTAINMENT
INCORPORATED
By:
-----------------------------------
Brad Krassner
Co-Chairman of the Board and
Chief Executive Officer
Attest:
- -----------------------------------
Larry Turk
Secretary
12
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
The undersigned being the holder of the attached Unsecured Senior
Convertible Note (the "Note") due the Maturity Date (as defined in the Note) of
Magicworks Entertainment Incorporated (the "Corporation"), hereby exercises the
option to convert the Note into Note Shares (as defined in the Note) in
accordance with the terms of the Note.
The undersigned directs that the Note Shares be issued in the name of
the holder of the attached note and delivered as soon as practicable and in
accordance with the provisions of the Note to:
Full address: __________________________________________
__________________________________________
__________________________________________
__________________________________________
Date:________________________________
_____________________________________
Name: [HOLDER]
EXHIBIT 10.1
MAGICWORKS ENTERTAINMENT INCORPORATED
-------------------------------------
1996 STOCK OPTION PLAN
-------------------------------------
1. PURPOSE. The purpose of this Plan is to advance the interests of
MAGICWORKS ENTERTAINMENT INCORPORATED, a Florida corporation (the "Company"), by
providing an additional incentive to attract and retain qualified and competent
persons who are key employees of the Company, and upon whose efforts and
judgment the success of the Company is largely dependent, through the
encouragement of stock ownership in the Company by such persons.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean the stock option committee appointed by
the Board pursuant to Section 13 hereof or, if not appointed, the Board.
(c) "Common Stock" shall mean the Company's Common Stock, par value
$.001 per share.
(d) "Director" shall mean a member of the Board.
(e) "Disinterested Person" shall mean a Director who is not, during
the one year prior to his or her service as an administrator of this Plan, or
during such service, granted or awarded equity securities pursuant to this Plan
or any other plan of the Company or any of its affiliates, except that:
(i) participation in a formula plan meeting the conditions in
paragraph (c)(2)(ii) of Rule 16b-3 promulgated under the Securities Exchange Act
shall not disqualify a Director from being a Disinterested Person;
(ii) participation in an ongoing securities acquisition plan
meeting the conditions in paragraph (d)(2)(i) of Rule 16b-3 promulgated under
the Securities Exchange Act shall not disqualify a Director from being a
Disinterested Person; and
(iii) an election to receive an annual retainer fee in either
cash or an equivalent amount of securities, or partly in cash and partly in
securities, shall not disqualify a Director from being a Disinterested Person.
(f) "Fair Market Value" of a Share on any date of reference shall be
the "Closing Price" (as defined below) of the Common Stock on the business day
immediately preceding such date, unless the Committee in its sole discretion
shall determine otherwise in a fair and uniform manner. For the purpose of
determining Fair Market Value, the "Closing Price"
<PAGE>
of the Common Stock on any business day shall be (i) if the Common Stock is
listed or admitted for trading on any United States national securities
exchange, or if actual transactions are otherwise reported on a consolidated
transaction reporting system, the last reported sale price of Common Stock on
such exchange or reporting system, as reported in any newspaper of general
circulation, (ii) if the Common Stock is quoted on the National Association of
Securities Dealers Automated Quotations System ("NASDAQ"), or any similar system
of automated dissemination of quotations of securities prices in common use, the
mean between the closing high bid and low asked quotations for such day of
Common Stock on such system, or (iii) if neither clause (i) or (ii) is
applicable, the mean between the high bid and low asked quotations for the
Common Stock as reported by the National Quotation Bureau, Incorporated if at
least two securities dealers have inserted both bid and asked quotations for
Common Stock on at least five of the ten preceding days.
(g) "Incentive Stock Option" shall mean an incentive stock option as
defined in Section 422 of the Internal Revenue Code.
(h) "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(i) "Non-Statutory Stock Option" shall mean an Option which is not
an Incentive Stock Option.
(j) "Officer" shall mean the Company's president, principal
financial officer, principal accounting officer and any other person who the
Company identifies as an "executive officer" for purposes of reports or proxy
materials filed by the Company pursuant to the Securities Exchange Act.
(k) "Option" (when capitalized) shall mean any option granted under
this Plan.
(l) "Optionee" shall mean a person to whom a stock option is granted
under this Plan or any person who succeeds to the rights of such person under
this Plan by reason of the death of such person.
(m) "Plan" shall mean this Stock Option Plan for the Company.
(n) "Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(o) "Share(s)" shall mean a share or shares of the Common Stock.
3. SHARES AND OPTIONS. The Company may grant to Optionees from time to
time Options to purchase an aggregate of up to One Million Seven Hundred
Thousand (1,700,000) Shares from Shares held in the Company's treasury or from
authorized and unissued Shares. If any Option granted under the Plan shall
terminate, expire, or be canceled or surrendered as to any Shares, new Options
may thereafter be granted covering such Shares. An Option granted hereunder
shall be either an Incentive Stock Option or a Non-Statutory Stock Option as
deter-
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<PAGE>
mined by the Committee at the time of grant of such Option and shall clearly
state whether it is an Incentive Stock Option or Non-Statutory Stock Option. All
Incentive Stock Options shall be granted within ten years from the effective
date of this Plan.
4. DOLLAR LIMITATION. Options otherwise qualifying as Incentive Stock
Options hereunder will not be treated as Incentive Stock Options only to the
extent that the aggregate fair market value (determined at the time the Option
is granted) of the Shares, with respect to which Options meeting the
requirements of Internal Revenue Code Section 422(b) are exercisable for the
first time by any individual during any calendar year (under all plans of the
Company), exceeds $100,000.
5. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option agreement that may
contain any term deemed necessary or desirable by the Committee, provided such
terms are not inconsistent with this Plan or any applicable law. Optionees shall
be those persons selected by the Committee from the class of all regular
employees of the Company, including employees who are also Directors or
Officers. Any person who files with the Committee, in a form satisfactory to the
Committee, a written waiver of eligibility to receive any Option under this Plan
shall not be eligible to receive any Option under this Plan for the duration of
such waiver.
(b) In granting Options, the Committee may take into consideration
the contribution the person has made to the success of the Company and such
other factors as the Committee shall determine. The Committee shall also have
the authority to consult with and receive recommendations from officers and
other personnel of the Company with regard to these matters. The Committee may
from time to time in granting Options under the Plan prescribe such other terms
and conditions concerning such Options as it deems appropriate, including,
without limitation, (i) prescribing the date or dates on which the Option
becomes exercisable, (ii) providing that the Option rights accrue or become
exercisable in installments over a period of years, or upon the attainment of
stated goals or both, or (iii) relating an Option to the continued employment of
the Optionee for a specified period of time, provided that such terms and
conditions are not more favorable to an Optionee than those expressly permitted
herein.
(c) The Options granted to employees under this Plan shall be in
addition to regular salaries, pension, life insurance or other benefits related
to their employment with the Company. Neither the Plan nor any Option granted
under the Plan shall confer upon any person any right to employment or
continuance of employment by the Company.
(d) Notwithstanding any other provision of this Plan, and in
addition to any other requirements of this Plan, Options may not be granted to a
Director or Officer unless the grant of such Options is authorized by, and all
of the terms of such Options are determined by, a Committee that is appointed in
accordance with Section 13 of this Plan and all of whose members are
Disinterested Persons.
6. OPTION PRICE. The option price per Share of any Option shall be any
price determined by the Committee but shall not be less than the par value per
Share; provided, how-
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<PAGE>
ever, that in no event shall the option price per Share of any Incentive Stock
Option be less than the Fair Market Value of the Shares underlying such Option
on the date such Option is granted.
7. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i)
the Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Committee in its sole discretion have been made for
the Optionee's payment to the Company of the amount that is necessary for the
Company employing the Optionee to withhold in accordance with applicable Federal
or state tax withholding requirements. Unless further limited by the Committee
in any Option, the option price of any Shares purchased shall be paid in cash,
by certified or official bank check, by money order, with Shares or by a
combination of the above; provided further, however, that the Committee in its
sole discretion may accept a personal check in full or partial payment of any
Shares. If the exercise price is paid in whole or in part with Shares, the value
of the Shares surrendered shall be their Fair Market Value on the date the
Option is exercised. The Company in its sole discretion may, on an individual
basis or pursuant to a general program established by the Committee in
connection with this Plan, lend money to an Optionee to exercise all or a
portion of an Option granted hereunder. If the exercise price is paid in whole
or part with an Optionee's promissory note, such note shall (i) provide for full
recourse to the maker, (ii) be collateralized by the pledge of the Shares that
the Optionee purchases upon exercise of such Option, (iii) bear interest at a
rate no less than the rate of interest payable by the Company to its principal
lender, and (iv) contain such other terms as the Committee in its sole
discretion shall require. No Optionee shall be deemed to be a holder of any
Shares subject to an Option unless and until a stock certificate or certificates
for such Shares are issued to such person(s) under the terms of this Plan. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
expressly provided in Section 10 hereof.
8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals and upon such terms as the Committee shall
provide in such Option, except as otherwise provided in this Section 8.
(a) The expiration date of an Option shall be determined by the
Committee at the time of grant, but in no event shall an Option be exercisable
after the expiration of ten years from the date of grant of the Option.
(b) Unless otherwise provided in any Option, each outstanding Option
shall become immediately fully exercisable:
(i) if there occurs any transaction (which shall include a
series of transactions occurring within 60 days or occurring pursuant to a
plan), that has the result that shareholders of the Company immediately before
such transaction cease to own at least 51 percent of the voting stock of the
Company or of any entity that results from the participation of the Company in a
reorganization, consolidation, merger, liquidation or any other form of
corporate transaction;
- 4 -
<PAGE>
(ii) if the shareholders of the Company shall approve a plan
of merger, consolidation, reorganization, liquidation or dissolution in which
the Company does not survive (unless the approved merger, consolidation,
reorganization, liquidation or dissolution is subsequently abandoned); or
(iii) if the shareholders of the Company shall approve a plan
for the sale, lease, exchange or other disposition of all or substantially all
the property and assets of the Company (unless such plan is subsequently
abandoned).
(c) The Committee may in its sole discretion accelerate the date on
which any Option may be exercised and may accelerate the vesting of any Shares
subject to any Option or previously acquired by the exercise of any Option.
(d) Options granted to Officers and Directors shall not be
exercisable until the expiration of a period of at least six months following
the date of grant.
9. TERMINATION OF OPTION PERIOD.
(a) Unless otherwise determined by the Committee in its sole
discretion upon the grant of any Non-Statutory Stock Option, the unexercised
portion of any Option shall automatically and without notice terminate and
become null and void at the time of the earliest to occur of the following:
(i) three months after the date on which the Optionee's
employment is terminated or, in the case of a Non-Statutory Stock Option, and
unless the Committee shall otherwise determine in writing in its sole
discretion, the date on which the Optionee's employment is terminated, in either
case for any reason other than by reason of (A) Cause, which, solely for
purposes of this Plan, shall mean the termination of the Optionee's employment
by reason of the Optionee's wilful misconduct or gross negligence, (B) a mental
or physical disability as determined by a medical doctor satisfactory to the
Committee, or (C) death;
(ii) immediately upon the termination of the Optionee's
employment for Cause;
(iii) one year after the date on which the Optionee's
employment is terminated by reason of a mental or physical disability (within
the meaning of Internal Revenue Code Section 22(e)) as determined by a medical
doctor satisfactory to the Committee; or
(iv) (A) twelve months after the date of termination of the
Optionee's employment by reason of death of the employee, or (B) three months
after the date on which the Optionee shall die if such death shall occur during
the one year period specified in Subsection 9(a)(iii) hereof.
(b) The Committee in its sole discretion may by giving written
notice ("cancellation notice") cancel, effective upon the date of the
consummation of any corporate transaction described in Subsections 8(b)(ii) or
(iii) hereof, any Option that remains unexercised
- 5 -
<PAGE>
on such date. Such cancellation notice shall be given a reasonable period of
time prior to the proposed date of such cancellation and may be given either
before or after approval of such corporate transaction.
10. ADJUSTMENT OF SHARES.
(a) If at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum
number of Shares available for grant under the Plan, so that the same percentage
of the Company's issued and outstanding Shares shall continue to be subject to
being so optioned; and
(ii) appropriate adjustment shall be made in the number of
Shares and the exercise price per Share thereof then subject to any outstanding
Option, so that the same percentage of the Company's issued and outstanding
Shares shall remain subject to purchase at the same aggregate exercise price.
(b) Subject to the specific terms of any Option, the Committee may
change the terms of Options outstanding under this Plan, with respect to the
option price or the number of Shares subject to the Options, or both, when, in
the Committee's sole discretion, such adjustments become appropriate by reason
of a corporate transaction described in Subsections 8(b)(ii) or (iii) hereof.
(c) Except as otherwise expressly provided herein, the issuance by
the Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection with
direct sale or upon the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to the number of or exercise price of Shares
then subject to outstanding Options granted under the Plan.
(d) Without limiting the generality of the foregoing, the existence
of outstanding Options granted under the Plan shall not affect in any manner the
right or power of the Company to make, authorize or consummate (i) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (ii) any merger or consolidation of
the Company; (iii) any issue by the Company of debt securities, or preferred or
preference stock that would rank above the Shares subject to outstanding
Options; (iv) the dissolution or liquidation of the Company; (v) any sale,
transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
- 6 -
<PAGE>
11. TRANSFERABILITY OF OPTIONS. Each Option shall provide that such
Option shall not be transferable by the Optionee otherwise than by will or the
laws of descent and distribution, and each Option shall be exercisable during
the Optionee's lifetime only by the Optionee.
12. ISSUANCE OF SHARES. As a condition of any sale or issuance of
Shares upon exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any such law or regulation including, but not limited to, the
following:
(i) a representation and warranty by the Optionee to the
Company, at the time any Option is exercised, that he is acquiring the Shares to
be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) a representation, warranty and/or agreement to be bound
by any legends that are, in the opinion of the Committee, necessary or
appropriate to comply with the provisions of any securities law deemed by the
Committee to be applicable to the issuance of the Shares and are endorsed upon
the Share certificates.
13. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Committee, which shall
consist of not less than two Directors, each of whom shall be Disinterested
Persons to the extent required by Section 5(d) hereof. The Committee shall have
all of the powers of the Board with respect to the Plan. Any member of the
Committee may be removed at any time, with or without cause, by resolution of
the Board and any vacancy occurring in the membership of the Committee may be
filled by appointment by the Board.
(b) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of the Plan. The Committee's
determinations and its interpretation and construction of any provision of the
Plan shall be final and conclusive.
(c) Any and all decisions or determinations of the Committee shall
be made either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the unanimous written approval of the
members of the Committee.
14. INCENTIVE OPTIONS FOR 10% SHAREHOLDERS. Notwithstanding any other
provisions of the Plan to the contrary, an Incentive Stock Option shall not be
granted to any person owning directly or indirectly (through attribution under
Section 424(d) of the Internal Revenue Code) at the date of grant, stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (or of its subsidiary (as defined in Section 424 of the
Internal Revenue Code) at the date of grant) unless the option price of such
Option is at least 110% of the Fair Market Value of the Shares subject to such
Option on the date the Option is granted, and such Option by its terms is not
exercisable after the expiration of five years from the date such Option is
granted.
- 7 -
<PAGE>
15. INTERPRETATION.
(a) The Plan shall be administered and interpreted so that all
Incentive Stock Options granted under the Plan will qualify as Incentive Stock
Options under section 422 of the Internal Revenue Code. If any provision of the
Plan should be held invalid for the granting of Incentive Stock Options or
illegal for any reason, such determination shall not affect the remaining
provisions hereof, but instead the Plan shall be construed and enforced as if
such provision had never been included in the Plan.
(b) This Plan shall be governed by the laws of the State of
Delaware.
(c) Headings contained in this Plan are for convenience only and
shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender shall
be a reference to such other gender as is appropriate.
16. AMENDMENT AND DISCONTINUATION OF THE PLAN. Either the Board or the
Committee may from time to time amend the Plan or any Option; provided, however,
that, except to the extent provided in Section 10, no such amendment may,
without approval by the shareholders of the Company, (a) materially increase the
benefits accruing to participants under the Plan, (b) materially increase the
number of securities which may be issued under the Plan, or (c) materially
modify the requirements as to eligibility for participation in the Plan; and
provided further, that, except to the extent provided in Section 9, no amendment
or suspension of the Plan or any Option issued hereunder shall substantially
impair any Option previously granted to any Optionee without the consent of such
Optionee.
17. EFFECTIVE DATE AND TERMINATION DATE. The effective date of the Plan
is the date on which the Board adopts this Plan, and the Plan shall terminate on
the 10th anniversary of the effective date.
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EXHIBIT 10.2
MAGICWORKS ENTERTAINMENT INCORPORATED
-----------------------------------
DIRECTORS STOCK OPTION PLAN
-----------------------------------
1. PURPOSE. The purpose of this Plan is to advance the interests of
MAGICWORKS ENTERTAINMENT INCORPORATED, a Florida corporation, by providing an
additional incentive to attract and retain nonemployee directors through the
encouragement of stock ownership in the Company by such persons.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Annual Meeting Date" shall mean the date of the annual meeting
of the Company's shareholders at which the Directors are elected.
(b) "Board" shall mean the Company's Board of Directors.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" shall mean the Common Stock, par value $.001 per
share, of the Company.
(e) "Company" shall refer to MAGICWORKS ENTERTAINMENT INCORPORATED,
a Florida corporation.
(f) "Director" shall mean a member of the Board.
(g)"Eligible Director" means any person who is a member of the Board
and who is not an employee, full time or part time, of the Company. For purposes
of this Plan, a director who does not receive regular compensation from the
Company or its subsidiaries, other than directors' fees and reimbursement for
expenses, shall not be considered to be an employee of the Company, even if such
director is an officer of a subsidiary of the Company.
(h) "Fair Market Value" of the Common Stock on any date of reference
shall be the Closing Price on the business day immediately preceding such date
of the Common Stock; provided, that for purposes of grants made on the Initial
Grant Date to persons who are Eligible Directors on the Effective Date, the term
"Fair Market Value" shall mean the initial public offering price per share of
Common Stock. For this purpose, the Closing Price of the Common Stock on any
business day shall be (i) if such Common Stock is listed or admitted for trading
on any United States national securities exchange, or if actual transactions are
otherwise reported on a consolidated transaction reporting system, the last
reported sale price of Common Stock on such exchange or reporting system, as
reported in any newspaper of general circulation, (ii) if the
<PAGE>
Common Stock is quoted on the National Association of Securities Dealers
Automated Quotations System, or any similar system of automated dissemination of
quotations of securities prices in common use, the mean between the closing high
bid and low asked quotations for such day of the Common Stock on such system, or
(iii) if neither clause (i) or (ii) is applicable, the mean between the high bid
and low asked quotations for the Common Stock as reported by the National
Quotation Bureau, Incorporated if at least two securities dealers have inserted
both bid and asked quotations for the Common Stock on at least 5 of the 10
preceding days.
(i) "Initial Grant Date" means (i) in the case persons who are or
become Eligible Directors of the Company on the effective date of the Company's
Registration Statement on Form S-1 (the "Effective Date") to be filed with the
Securities and Exchange Commission in connection with the merger of the Company
with and into Shadow Wood Corporation, the Effective Date and (ii) in all other
cases, the date on which a person is elected as a member of the Board.
(j) "Option" (when capitalized) shall mean any option granted under
this Plan.
(k) "Option Agreement" means the agreement between the Company and
the Optionee for the grant of an option.
(l) "Optionee" shall mean a person to whom a stock option is granted
under this Plan or any person who succeeds to the rights of such person under
this Plan by reason of the death of such person.
(m) "Parent" means a "parent corporation" as defined in Section
425(e) and (g) of the Code.
(n) "Plan" shall mean this Directors Stock Option Plan for the
Company.
(o) "Share(s)" shall mean a share or shares of the Common Stock.
(p) "Subsidiary" shall mean any corporation (other than the Company)
in any unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
3. SHARES AND OPTIONS. Subject to Section 9 of this Plan, the Company
may grant to Optionees from time to time Options to purchase an aggregate of up
to Fifty Thousand (50,000) Shares from authorized and unissued Shares. If any
Option granted under the Plan shall terminate, expire, or be canceled or
surrendered as to any Shares, new Options may thereafter be granted covering
such Shares.
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<PAGE>
4. GRANTS OF OPTIONS.
(a) On the Initial Grant Date, each Eligible Director shall receive
the grant of an Option to purchase 2,000 Shares.
(b) Each Eligible Director shall receive an annual grant of an
Option to purchase 1,000 Shares on each Annual Meeting Date subsequent to his
election as a director of the Company or commencement of the Plan, beginning
with the first Annual Meeting Date after the Initial Grant Date for each such
Eligible Director.
(c) Upon the grant of each Option, the Company and the Eligible
Director shall enter into an Option Agreement, which shall specify the grant
date and the exercise price and shall include or incorporate by reference the
substance of this Plan and such other provisions consistent with this Plan as
the Board may determine.
5. EXERCISE PRICE. The exercise price per Share of any Option shall be
the Fair Market Value of the Shares underlying such Option at the close of
business on the date such Option is granted.
6. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i)
the Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate exercise price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Board in its sole discretion have been made for the
Optionee's payment to the Company of the amount that is necessary for the
Company or Subsidiary employing the Optionee to withhold in accordance with
applicable Federal or state tax withholding requirements. The exercise price of
any Shares purchased shall be paid in cash, by certified or official bank check
or personal check, by money order, with Shares or by a combination of the above.
If the exercise price is paid in whole or in part with Shares, the value of the
Shares surrendered shall be their Fair Market Value on the date the Option is
exercised. No Optionee shall be deemed to be a holder of any Shares subject to
an Option unless and until a stock certificate or certificates for such Shares
are issued to such person(s) under the terms of the Plan. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as expressly provided
in Section 9 hereof.
7. EXERCISE SCHEDULE FOR OPTIONS. Each Option granted hereunder shall
not be exercisable until after six months following its grant to an eligible
director. Thereafter, such option shall be exercisable in full. The expiration
date of an Option shall be 10 years from the date of grant of the Option.
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<PAGE>
8. TERMINATION OF OPTION PERIOD.
(a) The unexercised portion of any Option shall automatically and
without notice terminate and become null and void at the time of the earliest to
occur of the following:
(i) three months after the date on which the Optionee ceases
to be a Director for any reason other than by reason of (A) "Cause" (which, for
purposes of this Plan, shall mean the removal of the Optionee as a Director by
reason of any act of (a) fraud or intentional misrepresentation, or (b)
embezzlement, misappropriation, or conversion of assets or opportunities of the
Company or any Subsidiary), or (B) death;
(ii) immediately upon the removal of the Optionee as a
Director for Cause;
(iii) one year after the date the Optionee ceases to be a
Director by reason of death of the Optionee;
(b) The Board in its sole discretion may, by giving written notice
("Cancellation Notice"), cancel any Option that remains unexercised on the date
of the consummation of any corporate transaction:
(i) if the shareholders of the Company shall approve a plan
of merger, consolidation, reorganization, liquidation or dissolution in which
the Company does not survive (unless the approved merger, consolidation,
reorganization, liquidation or dissolution is subsequently abandoned); or
(ii) if the shareholders of the Company shall approve a plan
for the sale, lease, exchange or other disposition of all or substantially all
the property and assets of the Company (unless such plan is subsequently
abandoned).
Any Cancellation Notice shall be given a reasonable period of time prior to the
proposed date of such cancellation and may be given either before or after
shareholder approval of such corporate transaction.
9. ADJUSTMENT OF SHARES.
(a) If at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum
number of Shares available for grant under the Plan, so that the same percentage
of the Company's issued and outstanding Shares shall continue to be subject to
being so optioned; and
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(ii) appropriate adjustment shall be made in the number of
Shares and the exercise price per Share thereof then subject to any outstanding
Option, so that the same percentage of the Company's issued and outstanding
Shares shall remain subject to purchase at the same aggregate exercise price.
(b) Subject to the specific terms of any Option, the Board may
change the terms of Options outstanding under this Plan, with respect to the
exercise price or the number of Shares subject to the Options, or both, when, in
the Board's sole discretion, such adjustments become appropriate by reason of a
corporate transaction described in Subsections 8(b)(i) or (ii) hereof.
(c) Except as otherwise expressly provided herein, the issuance by
the Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection with
a direct sale or upon the exercise of rights or warrants to subscribe therefor,
or upon conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or exercise price of the
Shares then subject to outstanding Options granted under the Plan.
(d) Without limiting the generality of the foregoing, the existence
of outstanding Options granted under the Plan shall not affect in any manner the
right or power of the Company to make, authorize or consummate (i) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (ii) any merger or consolidation of
the Company; (iii) any issue by the Company of debt securities, or preferred or
preference stock that would rank above the Shares subject to outstanding
Options; (iv) the dissolution or liquidation of the Company; (v) any sale,
transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
10. TRANSFERABILITY OF OPTIONS. Each Option shall provide that such
Option shall not be transferable by the Optionee otherwise than by will or the
laws of descent and distribution, and each Option shall be exercisable during
the Optionee's lifetime only by the Optionee.
11. ISSUANCE OF SHARES. As a condition of any sale or issuance of
Shares upon exercise of any Option, the Board may require such agreements or
undertakings, if any, as the Board may deem necessary or advisable to assure
compliance with any such law or regulation including, but not limited to, the
following:
(i) a representation and warranty by the Optionee to the
Company, at the time any Option is exercised, that he is acquiring the Shares to
be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
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<PAGE>
(ii) a representation, warranty and/or agreement to be bound
by any legends that are, in the opinion of the Board, necessary or appropriate
to comply with the provisions of any securities law deemed by the Board to be
applicable to the issuance of the Shares and are endorsed upon the Share
certificates.
12. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board, which shall have the authority to adopt such rules and regulations and to
make such determinations as are not inconsistent with the Plan and as are
necessary or desirable for the implementation and administration of the Plan.
13. INTERPRETATION. If any provision of the Plan should be held invalid
or illegal for any reason, such determination shall not affect the remaining
provisions hereof, but instead the Plan shall be construed and enforced as if
such provision had never been included in the Plan. The determinations and the
interpretation and construction of any provision of the Plan by the Board shall
be final and conclusive. This Plan shall be governed by the laws of the State of
Delaware. Headings contained in this Plan are for convenience only and shall in
no manner be construed as part of this Plan. Any reference to the masculine,
feminine, or neuter gender shall be a reference to such other gender as is
appropriate.
14. TERM OF PLAN; AMENDMENT AND TERMINATION OF THE PLAN.
(a) This Plan shall become effective upon its adoption by the Board,
and shall continue in effect until all Options granted hereunder have expired or
been exercised, unless sooner terminated under the provisions relating thereto.
No Option shall be granted after 10 years from the date of the Board's adoption
of this Plan.
(b) The Board may from time to time amend the Plan or any Option;
PROVIDED, HOWEVER, that, without approval by the Company's shareholders, no such
amendment shall (i) materially increase the benefits accruing to participants
under the Plan, (ii) materially increase the number of Shares or other
securities reserved for issuance upon the exercise of Options, (iii) materially
modify the requirements as to eligibility for participation under the Plan or
(iv) otherwise involve any other change or modification requiring shareholder
approval under Rule 16b-3 of the Securities Act of 1933, as amended; and,
PROVIDED, FURTHER, that, except to the extent otherwise specifically provided in
Section 8, no amendment or suspension of the Plan or any Option issued hereunder
shall substantially impair any Option previously granted to any Optionee without
the consent of such Optionee.
(c) Notwithstanding anything else contained herein, the provisions
of this Plan which govern the number of Options to be awarded to nonemployee
directors, the exercise price per share under each such Option, when and under
what circumstances an Option will be granted and the period within which each
Option may be exercised, shall not be amended more than once every six months
(even with shareholder approval), other than to conform to changes to the Code,
or the rules promulgated thereunder, and under the Employee Retirement Income
Security Act
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of 1974, as amended, or the rules promulgated thereunder, or with rules
promulgated by the Securities and Exchange Commission.
(d) The Board, without further approval of the Company's
shareholders, may at any time terminate or suspend this Plan. Any such
termination or suspension of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if this Plan had not
been terminated or suspended. No Option may be granted while the Plan is
suspended or after it is terminated. The rights and obligations under any Option
granted to any Optionee while this Plan is in effect shall not be altered or
impaired by the suspension or termination of this Plan without the consent of
such Optionee.
15. RESERVATION OF SHARES. The Company, during the term of the Plan,
will at all times reserve and keep available a number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
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EXHIBIT 10.3
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, dated as of the __ day of September,
1996, between Magicworks Entertainment Incorporated, a Delaware corporation (the
"Company"), and __________________ (the "Indemnitee").
RECITALS
A. The Company desires to retain the services of the Indemnitee as
[Title] of the Company.
B. As a condition to the Indemnitee's agreement to continue to serve as
in such capacity, the Indemnitee requires that he be indemnified from liability
to the fullest extent permitted by law.
C. The Company is willing to indemnify the Indemnitee to the fullest
extent permitted by law in order to retain the services of the Indemnitee.
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants contained herein, the Company and the Indemnitee agree as follows:
SECTION 1. MANDATORY INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS
OTHER THAN THOSE BY OR IN THE RIGHT OF THE COMPANY. Subject to Section 4 hereof,
the Company shall indemnify and hold harmless the Indemnitee from and against
any and all claims, damages, expenses (including attorneys' fees), judgments,
fines (including excise taxes assessed with respect to an employee benefit
plan), amounts paid in settlement and all other liabilities actually and
reasonably incurred by him in connection with the investigation, defense,
prosecution, settlement or appeal of any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) and to
which the Indemnitee was or is a party or is threatened to be made a party by
reason of the fact that the Indemnitee is or was an officer, director,
stockholder, employee or agent of the Company, or is or was serving at the
request of the Company as an officer, director, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise, or by reason of anything done or not done by
the Indemnitee in any such capacity or capacities, provided that the Indemnitee
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
SECTION 2. MANDATORY INDEMNIFICATION IN ACTIONS OR SUITS BY OR IN THE
RIGHT OF THE COMPANY. Subject to Section 4 hereof, the Company shall indemnify
and hold harmless the Indemnitee from and against any and all expenses
(including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him in connection with the investigation, defense,
settlement or appeal of any threatened, pending or completed action or suit by
or in the right of the Company to procure a judgment in its favor and to which
the Indemnitee was or is a party or is threatened to be made a party by reason
of the fact that the Indemnitee is or was an officer, director, stockholder,
employee or agent of the Company, or is or was serving at the request of the
Company as an officer, director, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by the Indemnitee in such
capacity or capacities, provided that (i) the Indemnitee acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Company, (ii) indemnification for amounts paid in settlement shall not
exceed the estimated expense of litigating the proceeding to
<PAGE>
conclusion, and (iii) no indemnification shall be made in respect of any claim,
issue or matter as to which the Indemnitee shall have been adjudged to be liable
for misconduct in the performance of his duty to the Company unless and only to
the extent that the court in which such action or suit was brought (or any other
court of competent jurisdiction) shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
the Indemnitee is fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper.
SECTION 3. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION OF
NEGLIGENCE. The Company shall reimburse the Indemnitee for any expenses
(including attorney's fees) and amounts paid in settlement actually and
reasonably incurred by him in connection with the investigation, defense,
settlement or appeal of any action or suit described in Section 2 hereof that
results in an adjudication that the Indemnitee was liable for negligence, gross
negligence or recklessness (but not willful misconduct) in the performance of
his duty to the Company; provided, however, that the Indemnitee acted in good
faith and in a manner he believed to be in the best interests of the Company.
SECTION 4. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
Sections 1 and 2 hereof (unless ordered by a court) and any reimbursement made
under Section 3 hereof shall be made by the Company only as authorized in the
specific case upon a determination (the "Determination") that indemnification or
reimbursement of the Indemnitee is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct set forth in Section 1, 2
or 3 hereof, as the case may be. Subject to Sections 5.6, 5.7, 5.8 and 8 of this
Agreement, the Determination shall be made in the following order of preference:
(1) first, by the Company's Board of Directors (the "Board")
by majority vote or consent of a quorum consisting of directors ("Disinterested
Directors") who are not, at the time of the Determination, named parties to such
action, suit or proceeding; or
(2) next, if such a quorum of Disinterested Directors cannot
be obtained, by majority vote or consent of a committee duly designated by the
Board (in which designation all directors, whether or not Disinterested
Directors, may participate) consisting solely of two or more Disinterested
Directors; or
(3) next, if such a committee cannot be designated, by any
independent legal counsel (who may be the outside counsel regularly employed by
the Company); or
(4) next, if such legal counsel determination cannot be
obtained, by vote or consent of the holders of a majority of the Company's
common stock that are represented in person or by proxy and entitled to vote at
a meeting called for such purpose.
4.1 NO PRESUMPTIONS. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO
CONTENDERE or its equivalent, shall not, of itself, create a presumption that
the Indemnitee did not act in good faith and in a manner that he reasonably
believed to be in or not opposed to the best interests of the Company, and with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
4.2 BENEFIT PLAN CONDUCT. The Indemnitee's conduct with
respect to an employee benefit plan for a purpose he reasonably believed to be
in the interests of the participants in and beneficiaries of the plan shall be
deemed to be conduct that the Indemnitee reasonably believed to be not opposed
to the best interests of the Company.
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<PAGE>
4.3 RELIANCE AS SAFE HARBOR. For purposes of any Determination
hereunder, the Indemnitee shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, or, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
on (i) the records or books of account of the Company or another enterprise,
including financial statements, (ii) information supplied to him by the officers
of the Company or another enterprise in the course of their duties, (iii) the
advice of legal counsel for the Company or another enterprise, or (iv)
information or records given or reports made to the Company or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Company or another enterprise.
The term "another enterprise" as used in this Section 4.3 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which the Indemnitee is or was serving at the request of the
Company as an officer, director, partner, trustee, employee or agent. The
provisions of this Section 4.3 shall not be deemed to be exclusive or to limit
in any way the other circumstances in which the Indemnitee may be deemed to have
met the applicable standard of conduct set forth in Sections 1, 2 or 3 hereof,
as the case may be.
4.4 SUCCESS ON MERITS OR OTHERWISE. Notwithstanding any other
provision of this Agreement, to the extent that the Indemnitee has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described in Section 1 or 2 hereof, or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal thereof. For purposes of this
Section 4.4, the term "successful on the merits or otherwise" shall include, but
not be limited to, (i) any termination, withdrawal, or dismissal (with or
without prejudice) of any claim, action, suit or proceeding against the
Indemnitee without any express finding of liability or guilt against him, (ii)
the expiration of 120 days after the making of any claim or threat of an action,
suit or proceeding without the institution of the same and without any promise
or payment made to induce a settlement, or (iii) the settlement of any action,
suit or proceeding under Section 1, 2 or 3 hereof pursuant to which the
Indemnitee pays less than $25,000.
4.5 PARTIAL INDEMNIFICATION OR REIMBURSEMENT. If the
Indemnitee is entitled under any provision of this Agreement to indemnification
and/or reimbursement by the Company for some or a portion of the claims,
damages, expenses (including attorneys' fees), judgments, fines or amounts paid
in settlement by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action specified in Section 1, 2 or 3 hereof, but
not, however, for the total amount thereof, the Company shall nevertheless
indemnify and/or reimburse the Indemnitee for the portion thereof to which the
Indemnitee is entitled. The party or parties making the Determination shall
determine the portion (if less than all) of such claims, damages, expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement for
which the Indemnitee is entitled to indemnification and/or reimbursement under
this Agreement.
SECTION 5. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS HAVE BEEN
SATISFIED.
5.1 COSTS. All costs of making the Determination required by
Section 4 hereof shall be borne solely by the Company, including, but not
limited to, the costs of legal counsel, proxy solicitations and judicial
determinations. The Company shall also be solely responsible for paying (i) all
reasonable expenses incurred by the Indemnitee to enforce this Agreement,
including, but not limited to, the costs incurred by the Indemnitee to obtain
court-ordered indemnification pursuant to Section 8 hereof, regardless of the
outcome of any such application or proceeding, and (ii) all costs of defending
any suits or proceedings challenging payments to the Indemnitee under this
Agreement.
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<PAGE>
5.2 TIMING OF THE DETERMINATION. The Company shall use its
best efforts to make the Determination contemplated by Section 4 hereof
promptly. In addition, the Company agrees:
(a) if the Determination is to be made by the Board or a
committee thereof, such Determination shall be made not later than 15 days after
a written request for a Determination (a "Request") is delivered to the Company
by the Indemnitee;
(b) if the Determination is to be made by independent
legal counsel, such Determination shall be made not later than 30 days after a
Request is delivered to the Company by the Indemnitee; and
(c) if the Determination is to be made by the stockholders
of the Company, such Determination shall be made not later than 120 days after a
Request is delivered to the Company by the Indemnitee.
The failure to make a Determination within the above-specified time period shall
constitute a Determination approving full indemnification or reimbursement of
the Indemnitee. Notwithstanding anything herein to the contrary, a Determination
may be made in advance of (i) the Indemnitee's payment (or incurring) of
expenses with respect to which indemnification or reimbursement is sought,
and/or (ii) final disposition of the action, suit or proceeding with respect to
which indemnification or reimbursement is sought.
5.3 REASONABLENESS OF EXPENSES. The evaluation and finding as
to the reasonableness of expenses incurred by the Indemnitee for purposes of
this Agreement shall be made (in the following order of preference) within 15
days of the Indemnitee's delivery to the Company of a Request that includes a
reasonable accounting of expenses incurred:
(a) first, by the Board by a majority vote of a quorum
consisting of Disinterested Directors; or
(b) next, if a quorum cannot be obtained under subdivision
(a), by majority vote or consent of a committee duly designated by the Board (in
which designation all directors, whether or not Disinterested Directors, may
participate), consisting solely of two or more Disinterested Directors; or
(c) next, if a finding cannot be obtained under either
subdivision (a) or (b), by vote or consent of the holders of a majority of the
Company's Common Stock that are represented in person or by proxy at a meeting
called for such purpose.
All expenses shall be considered reasonable for purposes of this Agreement if
the finding contemplated by this Section 5.3 is not made within the prescribed
time. The finding required by this Section 5.3 may be made in advance of the
payment (or incurring) of the expenses for which indemnification or
reimbursement is sought.
5.4 PAYMENT OF INDEMNIFIED AMOUNT. Immediately
following a Determination that the Indemnitee has met the applicable standard of
conduct set forth in Section 1, 2 or 3 hereof, as the case may be, and the
finding of reasonableness of expenses contemplated by Section 5.3 hereof, or the
passage of time prescribed for making such determination(s), the Company shall
pay to the Indemnitee in cash the amount to which the Indemnitee is entitled to
be indemnified and/or reimbursed, as the case may be, without further
authorization or action by the Board; provided, however, that the expenses for
which indemnification or reimbursement is sought have actually been incurred by
the Indemnitee.
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<PAGE>
5.5 STOCKHOLDER VOTE ON DETERMINATION. The
Indemnitee and any other stockholder who is a party to the proceeding for which
indemnification or reimbursement is sought shall be entitled to vote on any
Determination to be made by the Company's stockholders, including a
Determination made pursuant to Section 5.7 hereof. In addition, in connection
with each meeting at which a stockholder Determination will be made, the Company
shall solicit proxies that expressly include a proposal to indemnify or
reimburse the Indemnitee. The Company proxy statement relating to the proposal
to indemnify or reimburse the Indemnitee shall not include a recommendation
against indemnification or reimbursement.
5.6 SELECTION OF INDEPENDENT LEGAL COUNSEL. If the
Determination required under Section 4 is to be made by independent legal
counsel, such counsel shall be selected by the Indemnitee with the approval of
the Board, which approval shall not be unreasonably withheld. The fees and
expenses incurred by counsel in making any Determination (including
Determinations pursuant to Section 5.8 hereof) shall be borne solely by the
Company regardless of the results of any Determination and, if requested by
counsel, the Company shall give such counsel an appropriate written agreement
with respect to the payment of their fees and expenses and such other matters as
may be reasonably requested by counsel.
5.7 RIGHT OF DIRECTOR TO APPEAL AN ADVERSE DETERMINATION BY
BOARD. If a Determination is made by the Board or a committee thereof that the
Indemnitee did not meet the applicable standard of conduct set forth in Section
1, 2 or 3 hereof, upon the written request of the Indemnitee and the
Indemnitee's delivery of $500 to the Company, the Company shall cause a new
Determination to be made by the Company's stockholders at the next regular or
special meeting of stockholders. Subject to Section 8 hereof, such Determination
by the Company's stockholders shall be binding and conclusive for all purposes
of this Agreement.
5.8 RIGHT OF DIRECTOR TO SELECT FORUM FOR
DETERMINATION. If, at any time subsequent to the date of this Agreement,
"Continuing Directors" do not constitute a majority of the members of the Board,
or there is otherwise a change in control of the Company (as contemplated by
Item 403(c) of Regulation S-K), then upon the request of the Indemnitee, the
Company shall cause the Determination required by Section 4 hereof to be made by
independent legal counsel selected by the Indemnitee and approved by the Board
(which approval shall not be unreasonably withheld), which counsel shall be
deemed to satisfy the requirements of clause (3) of Section 4 hereof. If none of
the legal counsel selected by the Indemnitee are willing and/or able to make the
Determination, then the Company shall cause the Determination to be made by a
majority vote or consent of a Board committee consisting solely of Continuing
Directors. For purposes of this Agreement, a "Continuing Director" means either
a member of the Board at the date of this Agreement or a person nominated to
serve as a member of the Board by a majority of the then Continuing Directors.
5.9 ACCESS BY INDEMNITEE TO DETERMINATION. The
Company shall afford to the Indemnitee and his representatives ample opportunity
to present evidence of the facts upon which the Indemnitee relies for
indemnification or reimbursement, together with other information relating to
any requested Determination. The Company shall also afford the Indemnitee the
reasonable opportunity to include such evidence and information in any Company
proxy statement relating to a stockholder Determination.
5.10 JUDICIAL DETERMINATIONS IN DERIVATIVE SUITS.
In each action or suit described in Section 2 hereof, the Company shall cause
its counsel to use its best efforts to obtain from the Court in which such
action or suit was brought (i) an express adjudication whether the Indemnitee is
liable for negligence or misconduct in the performance of his duty to the
Company, and, if the Indemnitee is so liable, (ii) a determination whether and
to what extent, despite the adjudication of liability but in view of all
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<PAGE>
the circumstances of the case (including this Agreement), the Indemnitee is
fairly and reasonably entitled to indemnification.
SECTION 6. SCOPE OF INDEMNITY. The actions, suits and proceedings
described in Sections 1 and 2 hereof shall include, for purposes of this
Agreement, any actions that involve, directly or indirectly, activities of the
Indemnitee both in his official capacities as a Company director or officer and
actions taken in another capacity while serving as director or officer,
including, but not limited to, actions or proceedings involving (i) compensation
paid to the Indemnitee by the Company, (ii) activities by the Indemnitee on
behalf of the Company, including actions in which the Indemnitee is plaintiff,
(iii) actions alleging a misappropriation of a "corporate opportunity," (iv)
responses to a takeover attempt or threatened takeover attempt of the Company,
(v) transactions by the Indemnitee in Company securities, and (vi) the
Indemnitee's preparation for and appearance (or potential appearance) as a
witness in any proceeding relating, directly or indirectly, to the Company. In
addition, the Company agrees that, for purposes of this Agreement, all services
performed by the Indemnitee on behalf of, in connection with or related to any
subsidiary of the Company, any employee benefit plan established for the benefit
of employees of the Company or any subsidiary, any corporation or partnership or
other entity in which the Company or any subsidiary has a 5% ownership interest,
or any other affiliate of the Company, shall be deemed to be at the request of
the Company.
SECTION 7. ADVANCE FOR EXPENSES.
7.1 MANDATORY ADVANCE. Expenses (including
attorneys' fees, court costs, judgments, fines, amounts paid in settlement and
other payments) incurred by the Indemnitee in investigating, defending, settling
or appealing any action, suit or proceeding described in Section 1 or 2 hereof
shall be paid by the Company in advance of the final disposition of such action,
suit or proceeding. The Company shall promptly pay the amount of such expenses
to the Indemnitee, but in no event later than 10 days following the Indemnitee's
delivery to the Company of a written request for an advance pursuant to this
Section 7, together with a reasonable accounting of such expenses.
7.2 UNDERTAKING TO REPAY. The Indemnitee hereby
undertakes and agrees to repay to the Company any advances made pursuant to this
Section 7 if and to the extent that it shall ultimately be found that the
Indemnitee is not entitled to be indemnified by the Company for such amounts.
7.3 MISCELLANEOUS. The Company shall make the
advances contemplated by this Section 7 regardless of the Indemnitee's financial
ability to make repayment, and regardless whether indemnification of the
Indemnitee by the Company will ultimately be required. Any advances and
undertakings to repay pursuant to this Section 7 shall be unsecured and
interest-free.
SECTION 8. COURT-ORDERED INDEMNIFICATION. Regardless whether the
Indemnitee has met the standard of conduct set forth in Sections 1, 2 or 3
hereof, as the case may be, and notwithstanding the presence or absence of any
Determination whether such standards have been satisfied, the Indemnitee may
apply for indemnification (and/or reimbursement pursuant to Section 3 or 12
hereof) to the court conducting any proceeding to which the Indemnitee is a
party or to any other court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court considers necessary,
may order indemnification (and/or reimbursement) if it determines the Indemnitee
is fairly and reasonably entitled to indemnification (and/or reimbursement) in
view of all the relevant circumstances (including this Agreement).
SECTION 9. NONDISCLOSURE OF PAYMENTS. Except as expressly required by
Federal securities laws, neither party shall disclose any payments under this
Agreement unless prior approval of the other party is obtained. Any payments to
the Indemnitee that must be disclosed shall, unless
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<PAGE>
otherwise required by law, be described only in Company proxy or information
statements relating to special and/or annual meetings of the Company's
stockholders, and the Company shall afford the Indemnitee the reasonable
opportunity to review all such disclosures and, if requested, to explain in such
statement any mitigating circumstances regarding the events reported.
SECTION 10. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND RELEASE OF
CLAIMS. No legal action shall be brought and no cause of action shall be
asserted by or on behalf of the Company (or any of its subsidiaries) against the
Indemnitee, his spouse, heirs, executors, personal representatives or
administrators after the expiration of 2 years from the date the Indemnitee
ceases (for any reason) to serve as either director or an executive officer of
the Company, and any claim or cause of action of the Company (or any of its
subsidiaries) shall be extinguished and deemed released unless asserted by
filing of a legal action within such 2-year period.
SECTION 11. INDEMNIFICATION OF INDEMNITEE'S ESTATE. Notwithstanding any
other provision of this Agreement, and regardless whether indemnification of the
Indemnitee would be permitted and/or required under this Agreement, if the
Indemnitee is deceased, the Company shall indemnify and hold harmless the
Indemnitee's estate, spouse, heirs, administrators, personal representatives and
executors (collectively the "Indemnitee's Estate") against, and the Company
shall assume, any and all claims, damages, expenses (including attorneys' fees),
penalties, judgments, fines and amounts paid in settlement actually incurred by
the Indemnitee or the Indemnitee's Estate in connection with the investigation,
defense, settlement or appeal of any action described in Section 1 or 2 hereof.
Indemnification of the Indemnitee's Estate pursuant to this Section 11 shall be
mandatory and not require a Determination or any other finding that the
Indemnitee's conduct satisfied a particular standard of conduct.
SECTION 12. REIMBURSEMENT OF ALL LEGAL EXPENSES. Notwithstanding any
other provision of this Agreement, and regardless of the presence or absence of
any Determination, the Company promptly (but not later than 30 days following
the Indemnitee's submission of a reasonable accounting) shall reimburse the
Indemnitee for all attorneys' fees and related court costs and other expenses
incurred by the Indemnitee in connection with the investigation, defense,
settlement or appeal of any action described in Section 1 or 2 hereof
(including, but not limited to, the matters specified in Section 6 hereof).
SECTION 13. MISCELLANEOUS.
13.1 NOTICE PROVISION. Any notice, payment, demand or
communication required or permitted to be delivered or given by the provisions
of this Agreement shall be deemed to have been effectively delivered or given
and received on the date personally delivered to the respective party to whom it
is directed, or when deposited by registered or certified mail, with postage and
charges prepaid and addressed to the parties at the addresses set forth above
their signatures to this Agreement.
13.2 ENTIRE AGREEMENT. Except for the Company's
Articles of Incorporation, this Agreement constitutes the entire understanding
of the parties and supersedes all prior understandings, whether written or oral,
between the parties with respect to the subject matter of this Agreement.
13.3 SEVERABILITY OF PROVISIONS. If any provision
of this Agreement is held to be illegal, invalid, or unenforceable under present
or future laws effective during the term of this Agreement, such provision shall
be fully severable; this 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 each
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<PAGE>
such illegal, invalid, or unenforceable provision there shall be added
automatically as a 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.
13.4 APPLICABLE LAW. This Agreement shall be governed by and
construed under the laws of the State of Florida.
13.5 EXECUTION IN COUNTERPARTS. This Agreement and
any amendment may be executed simultaneously or in two or more counterparts,
each of which together shall constitute one and the same instrument.
13.6 COOPERATION AND INTENT. The Company shall
cooperate in good faith with the Indemnitee and use its best efforts to ensure
that the Indemnitee is indemnified and/or reimbursed for liabilities described
herein to the fullest extent permitted by law.
13.7 AMENDMENT. No amendment, modification or
alteration of the terms of this Agreement shall be binding unless in writing,
dated subsequent to the date of this Agreement, and executed by the parties.
13.8 BINDING EFFECT. The obligations of the Company
to the Indemnitee hereunder shall survive and continue as to the Indemnitee even
if the Indemnitee ceases to be a director, officer, employee and/or agent of the
Company. Each and all of the covenants, terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the successors to the Company
and, upon the death of the Indemnitee, to the benefit of the estate, heirs,
executors, administrators and personal representatives of the Indemnitee.
13.9 GENDER AND NUMBER. Wherever the context shall
so require, all words herein in the male gender shall be deemed to include the
female or neuter gender, all singular words shall include the plural and all
plural words shall include the singular.
13.10 NONEXCLUSIVITY. The rights of indemnification
and reimbursement provided in this Agreement shall be in addition to any rights
to which the Indemnitee may otherwise be entitled by statute, bylaw, agreement,
vote of stockholders or otherwise.
13.11 EFFECTIVE DATE. The provisions of this
Agreement shall cover claims, actions, suits and proceedings whether now pending
or hereafter commenced and shall be retroactive to cover acts or omissions or
alleged acts or omissions which heretofore have taken place.
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<PAGE>
Executed as of the date first above written.
THE COMPANY:
MAGICWORKS ENTERTAINMENT
INCORPORATED
BY:-------------------------------
NAME:
TITLE:
MAGICWORKS ENTERTAINMENT INCORPORATED
930 WASHINGTON AVENUE
MIAMI BEACH, FLORIDA 33139
THE INDEMNITEE:
-------------------------------
PRINT ADDRESS
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-------------------------------
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made as of the 22nd day of
July, 1993, by and between Touring Artists Group, Inc., a Florida Corporation
having it's office at 1117 Floridian Court, Cape Coral, FL 33904 (the "Company")
and Michel Vega, an individual residing at 305 East 24th Street, Apartment 2J,
New York, New York, 10010 (the "Employee").
WHEREAS, the Company, through its Booking Agency Division, is engaged
in, among other things, the business of booking tours and theatrical events
("Agency Business").
WHEREAS, the Company desires to retain the services of Employee in
connection with the Agency Business;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, and with the intent to be legally bound hereby, the parties
agree as follows:
ARTICLE I.
TERM OF EMPLOYMENT
1.01 Company hereby employs Employee and Employee hereby accepts
employment with the Company for a period of five (5) years ("Term"), unless
sooner terminated as set forth herein.
ARTICLE II.
DUTIES OF EMPLOYEE
2.01 Employee shall be employed in the Company Booking Agency
Division as the Senior Vice President, and shall work at the branch office of
the Company known as Touring Artists Group at 1560 Broadway Suite 306, New York,
NY 10036. As Senior Vice President of the Booking Agency Division the Employee's
duties shall include overseeing, in a supervisory capacity, the touring portion
of the Agency's business. Further, the Employee's responsibilities shall
include, but not be limited to,
(i) supervision of all Agency personnel with an emphasis on
sales and marketing efforts;
(ii) direct interaction with clients of the Agency's business;
(iii) acquisition of new clients for the Agency's business
(including the necessary research to identify new clients
and contacting the identified prospective new clients
regarding the Agency Business);
(iv) acting as a sales agent;
<PAGE>
(v) acting as a responsible agent for clients; and
(vi) development of Company interests in Latin America.
Employee will be based in the New York Metropolitan area and will not
be required to relocate outside of such area during the Term. Employee will be
obligated to travel as required by the Agency's Business to see performances,
visit clients and attend conventions and similar meetings. Employee shall devote
the Employee's full business time exclusively to the Agency's Business and the
affairs of the Agency's Business and shall use his best efforts, skills and
abilities to promote the interests of the Agency's Business. As used in this
agreement, the term Company shall mean and include subsidiaries or affiliates of
the Company, including without limitation, Touring Artists Group Productions,
Inc. and Touring Artists Productions International, Inc.
2.02 Company hereby appoints Lee Marshall as the officer to whom the
Employee shall report. This, however, does not preclude meaningful discussion of
the Agency business as may be necessary from time to time between Employee and
over principals of the Company.
ARTICLE III.
COMPENSATION
3.01 BASE SALARY. Company shall pay and Employee shall
accept a base salary computed at the annual rate of Sixty Thousand Dollars
($60,000.00) for the first year of the Term. For each year thereafter, the base
salary shall be adjusted upwards according to the percentage change in the U.S.
Consumer Price Index for the prior calendar year. Employee's salary shall be
payable bi-weekly in accordance with the Company's prevailing salary payroll
practices, subject to such deductions as then required by law and such further
deductions as may be agreed to by the Employee.
3.02 ADVANCE. Company hereby agrees to advance
Employee Fifteen Thousand Dollars ($15,000.00) per year of the Term, which shall
be added to the base salary payable under paragraph 3.01 above, making the
initial bi-weekly payroll based on the annual total of Seventy- Five Thousand
Dollars ($75,000.00). This Fifteen Thousand Dollars ($15,000.00) shall be an
advance against the income to be credited to Employee as a result of his
ownership of common stock of the Company as set forth in Article IV below.
Employee and Company agree that the common stock to be acquired by Employee
shall be "S" Corporation stock and that the advance set forth herein shall be
credited against all net income credited to Employee from the common stock. To
the extent that in any year the amount credited to the Employee in respect to
the stock referred to in Article IV is less than the Fifteen Thousand Dollars
($15,000.00) referenced above, Employee shall be entitled to retain the amount
of the shortfall.
3.03 EQUITY SHOWS. In the event that the Company or its
affiliates produces shows which utilize personnel who are members of the Actor's
Equity Association, Employee shall be entitled to four percent (4%) of the
pretax profits earned by the Company from such shows for each year during the
Term of this Agreement. The amount of pretax profit earned
<PAGE>
in each year of the Term shall be determined by the Company's accountant and the
four percent (4%) shall be paid within fifteen (15) days after the date that the
Company's accountant has determined the pretax profit from such shows for the
Company.
3.04 In the event that the Company opts against the distribution
of profits pertaining to Equity Shows and/or all entities referred to in Article
IV, the Employee shall receive at least enough profit earning to cover the
amount due for taxes.
ARTICLE IV.
ACQUISITION OF COMMON STOCK
4.01 Touring Artists Group, Inc., a theatrical booking agency, hereby
grants Employee the right to purchase shares of its common stock so that upon
issuance of such shares, Employee shall own ten percent (10%) of the issued and
outstanding shares of common stock of the Touring Artists Group, Inc. The
purchase price for this ownership interest shall be One Dollar ($1.00). Employee
acknowledge and agrees that Touring Artists Group, Inc. is an "S" Corporation
for federal income tax purposes and for some state income tax purposes and that
the advances set forth in Section 3.02 above are part of the "S" Corporation
income to be allocated to the Employee pursuant to the rules and regulations of
the Internal Revenue Service.
4.02 The Company shall cause Touring Jeriko Productions, Inc.,
which produces Non Equity shows, to agree to sol Employee sufficient shares of
common stock so that upon completion of the sale Employee will own five percent
(5%) of the issued and outstanding shares of common stock. The purchase price
for this common stock shall be One Dollar ($1.00).
4.03 The Company shall cause Touring Artists Productions
International, Inc., which produces shows in Latin America, to agree to sell
Employee sufficient shares of common stock so that upon completion of the sale
Employee will own ten percent (10%) of the issued and outstanding shares of
common stock. The purchase price for this common stock shall be One Dollar
($1.00).
ARTICLE V.
VACATIONS AND OTHER BENEFITS
5.01 VACATION. The Employee shall be entitled to two
(2) weeks of paid vacation each year and two (2) "long weekends" each year
during the term of this Agreement. "Long weekends" shall be defined as a Friday
and a Monday. The vacation weeks and the "long weekends" are to be taken
non-consecutively, subject to reasonable approval of the Company, which approval
shall not be unreasonably withheld.
5.02 MEDICAL BENEFITS. The Employee shall be entitled to major
medical, disability and hospitalization insurance as normally provided by the
Company to its employees.
<PAGE>
5.03 EXPENSES. The Company shall promptly reimburse Employee
for all reasonable and necessary out of pocket expenses incurred by the Employee
in the conduct of the Agency's Business against presentation of such receipts or
other documentation as shall be required by the Company.
5.04 AUTOMOBILE. The Company shall provide the Employee
with eight (8) weekend automobile rentals annually. These rentals are not
transferrable to other years if not utilized. Should the Employee move his
residency out of the borough of Manhattan, he will no longer be provided with
weekend rentals but shall instead receive from the Company an automobile stipend
of $300.000 per month.
ARTICLE VI.
DISABILITY, DEATH, TERMINATION
6.01 This agreement shall terminate immediately upon the death of the
Employee.
6.02 If during the Term, the Employee is unable to perform the
services required to be performed by the Employee pursuant to the terms of this
Agreement for a consecutive period of more than Sixty (60) business days or if
the Employee contracts and illness or other injury which prevents performance by
him of the services required hereunder for a consecutive period of Sixty (60)
business days or more, then the Company may terminate the Employee's employment
under this Agreement by giving Employee ten (10) day's prior written notice of
the date of termination and Employee's employment under this Agreement shall
terminate on such date; provided however, that if, prior to the date specified
in such notice, the Employee's illness or incapacity shad have abated and he is
physically and mentally able to perform the services required hereunder and
shall have taken up and be performing such duties, he shall be entitled to
resume employment hereunder as though such notice had not been given.
6.03 If Employee breaches this Agreement or fails to perform the
services which the Employee has agreed to provide hereunder or engages in
willful misconduct or gross negligence with respect to the Employee's
obligations to the Company, then the Company may, at its option, terminate this
Agreement immediately by giving notice of termination to the Employee without
prejudice to any other remedy to which the Company may be entitled.
6.04 Employee shall have the right to terminate his services
pursuant to this Agreement at any time upon thirty (30) days notice to the
Company; provided, however, such termination, if without cause arising from
actions of the Company in violation of this Agreement, shall be without
prejudice to the Company's rights to recover damages caused by the early
termination.
6.05 If the Employee is terminated from his position pursuant to
Section 6.03 or 6.04 above, or in the event of the Employee's death or
disability under Section 6.02 above, all of his stock ownership in Touring
Artists Group, Inc., Touring Jeriko Productions, Inc., and Touring Artists
Productions International, Inc. shall be repurchased by the respective companies
for a purchase price of One Dollar ($1.00) per company.
<PAGE>
6.06 If the Employee is terminated from his position pursuant to
Section 6.03 or 6.04 above, or in the event of the Employee's death or
disability under Section 6.02 above, the four percent (4%) pretax profit
percentage compensation for Equity shows specified in 3.03 will immediately
return to the Dive producers.
ARTICLE VII.
RESTRICTIVE COVENANTS
7.01 Employee acknowledges that he has been involved with the
theatrical industry/agency business for many years and that he has and will
obtain knowledge of business matters and affairs of the Company not available to
others, and that the work performed by him in the past and to be performed by
him has and will place him in a position of prominence and trust with respect to
the clients and business operations of the Company. Employee acknowledges that
such information is a valuable trade secret and the sole property of the
Company. Accordingly, Employee will not during the Term or at any time
thereafter, directly or indirectly, reveal, divulge, or otherwise make known
such information to any person other than and officer or employee of the Company
or such other person as the Board of Directors of the Company may designate, or
use such information for Employee's benefit to the detriment of the Company. In
connection therewith, Employee shall not at any time divulge the contents of, or
remove or retain, any publication, technique, process, business or industry
analysis, work in progress, research, business trade secret, customer list, data
or copies of any client of the Company unless the same is generally available to
the public.
7.02 During the Term and for a period of one (1) year after the
expiration or prior termination of the Term, in consideration of this Agreement
and the Company's obligations hereunder, Employee shall not, directly or
indirectly, without the express prior written consent of the Company:
(i) solicit or accept employment related to the Agency
Business or be retained by any party who, at any time
during such period, has been or shall have become a client
of the Company, or for whom the Company has performed
services;
(ii) be engaged in, or be employed by, or furnish any services
to, or have an interest in, any party who directly or
indirectly is engaged in a business competitive with the
Agency Business; or
(iii) solicit or accept any business of any customer, client or
other person or entity doing business with the Company, or
solicit or induce any employee of the Company to leave the
employ of the Company, or to hire for any purpose any
employee of the Company who is engaged in creative activity
or holds an executive position.
<PAGE>
In the event that Employee shall violate the restrictions in Sermon 7.02, then
in addition to all other remedies available to the Company, the Employee shall
be obligated to pay the Company the amount of the fee or other consideration
that the Company would have received had the Company been the booking agency.
7.03 During the Term and for a period of one (1) year after its
expiration or earlier termination, Employee shall first offer to Company any
business opportunity in any way related to the type of business conduced by the
Company or the business of any of its subsidiaries or affiliates; provided that
such business opportunity must have arisen (or Employee must become aware of it)
during the Term.
7.04 The Employee agrees that, in addition to the rights of the
Company at law, He Company may seek injunction relief for any violation of this
Article VII.
ARTICLE VIII.
MISCELLANEOUS
8.01 This Agreement shall be binding upon and inure tot he
benefit of Employee and Employee's heirs, executors, administrators and (where
the context permits) assigns, and shall be binding upon and inure to the benefit
of the Company and it's subsidiaries and affiliates and their successors and
assigns.
8.02 This Agreement and all obligations hereunder are personal
to the Employee, subject to the further terms of this paragraph and shall not be
assignable by either party, and any purported assignment in violation thereof
shall be null and void. Any person, firm, or corporation succeeding to the
business of the Company in its entirety by merger, consolidation, purchase of
assets or otherwise shall acquire that rights of the company hereunder only with
the express written consent of Employee.
8.03 The invalidity or enforceability of any provisions hereof shall
in no way affect the validity or enforceability of any other provision.
8.04 It being the intent of the parties that this Agreement be
enforceable to the minimum extent permitted by law, if any of the restrictions
or over of the provisions contained in this Agreement shall for any reason be
held too broad as to duration, geographical scope, activity or subject, such
provision shall be construed by limiting and reducing it, so as to be
enforceable to the extent compatible with the applicable law as it shall then
appear, the parties hereby agreeing that said restrictions and other provisions
of this Agreement are fair and reasonable as at the date hereof.
8.05 This Agreement constitutes the entire agreement between the
parties hereto with respect to the terms and conditions of Employee's employment
by the Company, and this element supersedes and renders null and void all other
prior oral or written agreements, understandings, or commitments pertaining to
Employee's employment with the Company. No variation shall by deemed valid
unless in writing and signed by the parties hereto. No waiver
<PAGE>
by either party of any provision or condition of this Agreement shall be deemed
a waiver of any similar or dissimilar provisions and conditions at the same time
or any prior or subsequent time.
8.06 Any notice, statement, report, request or demand required or
permitted to be given by this Agreement shall be in writing, and shall be
sufficient if delivered in person or addressed and sent by certified mail,
return receipt requested, to the parties at the addresses set forth above, or at
such other place that either party may designate by notice in the foregoing
manner to the other.
8.07 This agreement has been made in, and shall be governed by
and interpreted according to the laws of the State of Florida without regard to
its conflicts of laws provisions. All actions to be brought by either party
hereunder against the other party which arise, directly or indirectly, out of
this Agreement, shall be brought in the state courts of the State of Florida or
in the federal district courts located within the State of Florida. Both parties
hereto agree to the jurisdiction or venue of the aforesaid courts and agree that
any action in any other state court or federal district court shall, upon
request of the other party, be transferred to one of the aforesaid courts within
the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.
THE TOURING ARTISTS GROUP, INC.
By: -------------------------------
By: -------------------------------
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 30th day of June, 1996 but is effective as of August 1, 1996 (the "Effective
Date") by and between Magicworks Entertainment Incorporated, a Florida
corporation (hereinafter called the "Company"), and Joe Marsh (hereinafter
called the "Executive").
RECITALS
A. The Executive is currently serving as the Co-Chairman of the Board
of Directors and a director of the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Board of Directors of the Company (the "Board") recognizes that
the Executive's contribution to the growth and success of the Company has been
substantial and desires to retain the services of the Executive and to
compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the Company.
E. The Executive is willing to continue to make his services available
to the Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. TERMINATION OF PRIOR AGREEMENTS. Any and all prior agreements
relative to the rendering of services by the Executive to the Company shall
automatically terminate upon the execution of this Agreement, and the provisions
of this Agreement alone shall govern the relationship between the parties. Upon
the execution of this Agreement, each of the parties hereto shall thereupon and
thereby, without any further action, release and forever discharge the other
from any and all liabilities and obligations of any nature arising out of or in
connection any and all such prior employment and/or consulting agreements,
understandings or arrangements.
<PAGE>
2. EMPLOYMENT.
2.1 EMPLOYMENT AND TERM. The Company shall employ the Executive and
the Executive shall serve the Company, on the terms and conditions set forth
herein, for the period commencing on the Effective Date and expiring August 1,
2001 (the "Term"), unless extended or sooner terminated as hereinafter set
forth.
2.2 DUTIES OF EXECUTIVE. The Executive shall serve as the
Co-Chairman of the Board of Directors of the Company and shall have such powers
and authority commensurate with such position, shall diligently perform all
services as may be reasonably assigned to him by the Board and shall exercise
such power and authority as may from time to time be delegated to him by the
Board. The Executive shall devote substantially all of his working time and
attention to the affairs of the Company.
2.3 PLACE OF PERFORMANCE. In connection with his employment by the
Company, the Executive shall be based at any one of the Company's corporate
offices except for required travel on the Company's business to an extent
substantially consistent with his present travel obligations.
3. COMPENSATION.
3.1 BASE SALARY.
(a) Commencing on the Effective Date, the Executive shall
receive a base salary at a rate equal to $250,000 per annum (the "Base Salary")
during the Term, such Base Salary to be payable in substantially equal
installments consistent with the Company's normal payroll schedule (the "Payment
Schedule" and each day upon which such a payment is made, a "Payment Date"),
PROVIDED, HOWEVER, that on the first Payment Date the Company shall pay to
Executive the Base Salary for the period from August 1, 1996 through such date,
and thereafter in accordance with the Payroll Schedule, subject to applicable
withholding and other taxes.
(b) On August 1, 1997 and on each August 1 thereafter during the
Term, the Base Salary shall be increased by $25,000. Effective upon each such
increase, the term "Base Salary" shall be modified to mean such increased amount
without further action by the Company.
3.2 ADDITIONAL COMPENSATION. In addition to the Base Salary,
Executive may also receive bonuses in such amounts and at such times as may be
determined in the sole discretion of the Board (or the Compensation Committee
thereof).
2
<PAGE>
4. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
4.1 EXPENSE REIMBURSEMENT. During the Term, the Company, upon the
submission of supporting documentation by the Executive, shall reimburse the
Executive for all reasonable expenses actually paid or incurred by the Executive
in the course of and pursuant to the business of the Company, including expenses
for first class travel and entertainment. In addition, the Company shall provide
the Executive with a corporate credit card to be used for business related
expenses.
4.2 OTHER BENEFITS. The Executive shall be entitled to receive such
benefits of employment as are described on Exhibit A attached hereto. In
addition, during the Term, the Company shall, upon receipt of proper
documentation relating thereto, reimburse Executive for amounts expended for a
disability policy (with maximum benefits payable under such policy to be
determined by the Board) and a life insurance policy (with benefits payable
thereunder to be in the amount of no more than $1,000,000) for the Executive
(collectively, the "Policies"). Nothing paid to the Executive under any plan or
arrangement presently in effect or made available in the future shall be deemed
to be in lieu of the Base Salary and/or Bonus payable to the Executive pursuant
to this Agreement.
4.3 CONTINUING BENEFITS. In the event that the Executive's
employment is terminated other than for "Cause" (as defined in Section 5.1
below) the Company shall continue to provide to the Executive, for a period of
two years following such termination, health and dental insurance substantially
similar to that in effect at the time of such termination.
4.4 WORKING FACILITIES. The Company shall furnish the Executive with
an executive office, a personal secretary and such other facilities and services
suitable to his position and adequate for the performance of his duties
hereunder.
4.5 AUTOMOBILE ALLOWANCE. The Company shall pay the Executive an
automobile allowance of $750 per month during the Term.
4.6 VACATION. The Company shall allow Executive six (6) weeks of
paid leave time each year for vacation or other similar purposes.
5. TERMINATION.
5.1 TERMINATION FOR CAUSE. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated by the Company
for Cause. As used in this Agreement, "Cause" shall only mean (i) subject to the
following sentences, any action or omission of the Executive which constitutes a
willful and material breach of this Agreement which is not cured or as to which
diligent attempts to cure have not commenced within thirty (30) business days
after receipt by the Executive of notice of same, which notice specifies the
conduct necessary to cure such breach, (ii) a finding by a court of law that the
Executive has committed fraud, embezzlement or misappropriation as against the
Company or (iii) the conviction of the
3
<PAGE>
Executive for any criminal act which is a felony. Any termination for Cause
shall be made in writing to the Executive, which notice of termination shall set
forth in detail all acts or omissions upon which the Company is relying for such
termination. The Executive shall have the right to address the Company's Board
regarding the acts set forth in the notice of termination. Upon any termination
pursuant to this Section 5.1, the Company shall pay to the Executive any unpaid
Base Salary accrued through the effective date of termination specified in such
notice. Except as provided above, the Company shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 4.1).
5.2 DISABILITY. Notwithstanding anything contained in this Agreement
to the contrary, the Company, by written notice to the Executive, shall at all
times have the right to terminate this Agreement, and the Executive's employment
hereunder, if the Executive shall, as the result of mental or physical
incapacity, illness or disability, fail to perform his duties and
responsibilities provided for herein for a consecutive period of more than one
hundred eighty (180) days in any 12-month period. Upon any termination pursuant
to this Section 5.2, the Company shall pay to the Executive any unpaid Base
Salary accrued through the effective date of termination. Except as provided
above, the Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however to the provisions of Section 4.1).
5.3 DEATH. In the event of the death of the Executive during the
term of his employment hereunder, the Company shall pay to the personal
representative of the estate of the deceased Executive any unpaid Base Salary
accrued through the date of his death. Except as provided above, the Company
shall have no further liability hereunder (other than for reimbursement for
reasonable business expenses incurred prior to the date of the Executive's
death, subject, however to the provisions of Section 4.1).
5.4 TERMINATION WITHOUT CAUSE. The Company shall have the right to
terminate the Executive's employment hereunder for any reason other than as set
forth in Sections 5.1, 5.2 or 5.3 upon thirty (30) days written notice to the
Executive; PROVIDED, HOWEVER, that upon any such termination pursuant to this
Section 5.4, the Company shall (i) pay to the Executive any unpaid Base Salary
through the effective date of termination specified in such notice, (ii)
continue to pay the Executive's Base Salary throughout the remainder of the
Term, PROVIDED, HOWEVER, that in no event shall the Company pay to Executive
less than two years Base Salary at the rate in effect on the date of termination
pursuant to this Section 5.4 and (iii) make a payment to the Executive equal to
one years Base Salary at the rate in effect on the date of termination pursuant
to this Section 5.4 for each year or portion of a year served hereunder prior to
such termination, which amount shall be paid within ten (10) days of such
termination.
5.5 VOLUNTARY RESIGNATION. In the event the Executive resigns as an
employee of the Company, the Company shall pay to the Executive any unpaid Base
Salary accrued through the effective date of resignation. Except as provided
above, the Company shall have no further
4
<PAGE>
liability hereunder (other than for reimbursement for reasonable business
expenses incurred prior to the date of resignation, subject, however, to the
provisions of Section 4.1).
6. RESTRICTIVE COVENANTS.
6.1 NON-COMPETITION. The Executive shall not, during the Term of
this Agreement and, unless the Company terminates the Executive's employment
hereunder other than pursuant to Section 5.1, for a one (1) year period
thereafter, serve as or be a consultant to or employee, officer, agent director
or owner of more than five percent of another corporation, partnership or other
entity which competes in any manner with or detracts from any business in which
the Company or its subsidiaries or affiliates then engages (the "Business").
6.2 NONDISCLOSURE. The Executive shall not, during the Term of this
Agreement and for a period ending on the third anniversary of the expiration of
the Term, divulge, communicate, use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any way, any Confidential
Information (as hereinafter defined) pertaining to the business of the Company.
Any Confidential Information or data now or hereafter acquired by the Executive
with respect to the business of the Company (which shall include, but not be
limited to, non-public information concerning the Company's productions,
processes, know-how, financial condition, prospects, technology, customers,
methods of doing business and marketing and promotion of the Company's
productions) shall be deemed a valuable, special and unique asset of the Company
that is received by the Executive in confidence and as a fiduciary, and the
Executive shall remain a fiduciary to the Company with respect to all of such
information. For purposes of this Agreement, "Confidential Information" means
information disclosed to the Executive or known by the Executive as a
consequence of or through his employment by the Company (including information
conceived, originated, discovered, invented or developed by the Executive) prior
to or after the date hereof, and not generally known about the Company or its
business. Notwithstanding the foregoing, nothing herein shall be deemed to
restrict the Executive from disclosing Confidential Information to the extent
required by law.
6.3 NONSOLICITATION. The Executive shall not, during the Term of
this Agreement and, unless the Company terminates the Executive's employment
hereunder other than pursuant to Sections 5.1 or 5.2, for a one (1) year period
thereafter, directly or indirectly, (i) solicit for employment or endeavor in
any way to entice away from employment with the Company or its affiliates any
employee of the Company or its affiliates; nor (ii) solicit or accept business
competitive with the Business from any customers or clients of the Company or
its affiliates, from any prospective customers or clients whose business the
Company or any affiliate of the Company is in the process of soliciting at the
time the Executive's employment with the Company terminated or ceased, or from
any former customers or clients which had been doing business with the Company
or its affiliates within one (1) year prior to the time the Executive's
employment with the Company terminated or ceased.
6.4 BOOKS AND RECORDS. All books, records, manuals, notations,
applications, accounts and similar repositories of Confidential Information of
the Company, whether created,
5
<PAGE>
used, received or otherwise coming into the Executive's possession during the
course of the Executive's employment hereunder, shall be the exclusive property
of the Company and shall be immediately returned to the Company upon termination
of this Agreement or at the Board's request at any time provided, however, that
Executive's personal rolodex and any other property of the Executive, on the
Company's premises which is not and does not contain Confidential Information
shall not be deemed Company property and shall not be subject to this Section 6.
7. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Section 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to any conflict
of law rule or principle that would give effect to the laws of another
jurisdiction. In the event that any dispute shall arise with respect to this
Agreement, then such dispute shall be submitted for resolution to arbitration in
Miami, Florida in accordance with the rules of the American Arbitration
Association then in effect. The non-prevailing party in such arbitration shall
pay all reasonable fees and expenses of the prevailing party, including fees and
expenses of counsel for the prevailing party.
9. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: Magicworks Entertainment Incorporated
930 Washington Avenue
Miami, Florida 33139
Attention: President
If to the Executive: Joe Marsh
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami, Florida 33139
Attention: President
6
<PAGE>
or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
its effectiveness, shall supersede all prior agreements, understandings and
arrangements, both oral and written, between the Executive and the Company with
respect to such subject matter. This Agreement may not be modified in any way
unless by a written instrument which specifically refers to this Agreement which
is signed by both the Company and the Executive.
11. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns. Notwithstanding the foregoing, neither party may assign its rights or
benefits hereunder without the prior written consent of the other party hereto.
12. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by duration, geographic scope or
both, the otherwise invalid provision will be considered to be reduced to a
period or area which would cure such invalidity.
13. WAIVERS. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
14. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement.
15. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
(other than the parties hereto and, in the case of the Executive, his heirs,
personal representative(s) and/or legal representative) any rights or remedies
under or by reason of this Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
MAGICWORKS ENTERTAINMENT
INCORPORATED
By:
-----------------------------------
Lee Marshall, President and Chief
Operating Officer
-----------------------------------
Joe Marsh
8
<PAGE>
EXHIBIT A
1. Attach health plans, dental plans, etc. pursuant to Section 4.2.
2. 401K Plan of the Company.
3. Pension Plan of the Company.
9
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 30th day of June, 1996 but is effective as of August 1, 1996 (the "Effective
Date") by and between Magicworks Entertainment Incorporated, a Florida
corporation (hereinafter called the "Company"), and Brad L. Krassner
(hereinafter called the "Executive").
RECITALS
A. The Executive is currently serving as the Co-Chairman of the Board
of Directors, Chief Executive Officer and a director of the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Board of Directors of the Company (the "Board") recognizes that
the Executive's contribution to the growth and success of the Company has been
substantial and desires to retain the services of the Executive and to
compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the Company.
E. The Executive is willing to continue to make his services available
to the Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. TERMINATION OF PRIOR AGREEMENTS. Any and all prior agreements
relative to the rendering of services by the Executive to the Company shall
automatically terminate upon the execution of this Agreement, and the provisions
of this Agreement alone shall govern the relationship between the parties. Upon
the execution of this Agreement, each of the parties hereto shall thereupon and
thereby, without any further action, release and forever discharge the other
from any and all liabilities and obligations of any nature arising out of or in
connection any and all such prior employment and/or consulting agreements,
understandings or arrangements.
<PAGE>
2. EMPLOYMENT.
2.1 EMPLOYMENT AND TERM. The Company shall employ the Executive and
the Executive shall serve the Company, on the terms and conditions set forth
herein, for the period commencing on the Effective Date and expiring August 1,
2001 (the "Term"), unless extended or sooner terminated as hereinafter set
forth.
2.2 DUTIES OF EXECUTIVE. The Executive shall serve as the
Co-Chairman of the Board of Directors and Chief Executive Officer of the Company
and shall have such powers and authority commensurate with such position, shall
diligently perform all services as may be reasonably assigned to him by the
Board and shall exercise such power and authority as may from time to time be
delegated to him by the Board. The Executive shall devote substantially all of
his working time and attention to the affairs of the Company.
2.3 PLACE OF PERFORMANCE. In connection with his employment by the
Company, the Executive shall be based at any one of the Company's corporate
offices except for required travel on the Company's business to an extent
substantially consistent with his present travel obligations.
3. COMPENSATION.
3.1 BASE SALARY.
(a) Commencing on the Effective Date, the Executive shall
receive a base salary at a rate equal to $150,000 per annum (the "Base Salary")
during the Term, such Base Salary to be payable in substantially equal
installments consistent with the Company's normal payroll schedule (the "Payment
Schedule" and each day upon which such a payment is made, a "Payment Date"),
PROVIDED, HOWEVER, that on the first Payment Date the Company shall pay to
Executive the Base Salary for the period from August 1, 1996 through such date,
and thereafter in accordance with the Payroll Schedule, subject to applicable
withholding and other taxes.
(b) On August 1, 1997 and on each August 1 thereafter during the
Term, the Base Salary shall be increased by $25,000. Effective upon each such
increase, the term "Base Salary" shall be modified to mean such increased amount
without further action by the Company.
3.2 ADDITIONAL COMPENSATION. In addition to the Base Salary,
Executive may also receive bonuses in such amounts and at such times as may be
determined in the sole discretion of the Board (or the Compensation Committee
thereof).
2
<PAGE>
4. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
4.1 EXPENSE REIMBURSEMENT. During the Term, the Company, upon the
submission of supporting documentation by the Executive, shall reimburse the
Executive for all reasonable expenses actually paid or incurred by the Executive
in the course of and pursuant to the business of the Company, including expenses
for first class travel and entertainment. In addition, the Company shall provide
the Executive with a corporate credit card to be used for business related
expenses.
4.2 OTHER BENEFITS. The Executive shall be entitled to receive such
benefits of employment as are described on Exhibit A attached hereto. In
addition, during the Term, the Company shall, upon receipt of proper
documentation relating thereto, reimburse Executive for amounts expended for a
disability policy (with maximum benefits payable under such policy to be
determined by the Board) and a life insurance policy (with benefits payable
thereunder to be in the amount of no more than $1,000,000) for the Executive
(collectively, the "Policies"). Nothing paid to the Executive under any plan or
arrangement presently in effect or made available in the future shall be deemed
to be in lieu of the Base Salary and/or Bonus payable to the Executive pursuant
to this Agreement.
4.3 CONTINUING BENEFITS. In the event that the Executive's
employment is terminated other than for "Cause" (as defined in Section 5.1
below) the Company shall continue to provide to the Executive, for a period of
two years following such termination, health and dental insurance substantially
similar to that in effect at the time of such termination.
4.4 WORKING FACILITIES. The Company shall furnish the Executive with
an executive office, a personal secretary and such other facilities and services
suitable to his position and adequate for the performance of his duties
hereunder.
4.5 AUTOMOBILE ALLOWANCE. The Company shall pay the Executive an
automobile allowance of $750 per month during the Term.
4.6 VACATION. The Company shall allow Executive six (6) weeks of
paid leave time each year for vacation or other similar purposes.
5. TERMINATION.
5.1 TERMINATION FOR CAUSE. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated by the Company
for Cause. As used in this Agreement, "Cause" shall only mean (i) subject to the
following sentences, any action or omission of the Executive which constitutes a
willful and material breach of this Agreement which is not cured or as to which
diligent attempts to cure have not commenced within thirty (30) business days
after receipt by the Executive of notice of same, which notice specifies the
conduct necessary to cure such breach, (ii) a finding by a court of law that the
Executive has committed fraud, embezzlement or misappropriation as against the
Company or (iii) the conviction of the
3
<PAGE>
Executive for any criminal act which is a felony. Any termination for Cause
shall be made in writing to the Executive, which notice of termination shall set
forth in detail all acts or omissions upon which the Company is relying for such
termination. The Executive shall have the right to address the Company's Board
regarding the acts set forth in the notice of termination. Upon any termination
pursuant to this Section 5.1, the Company shall pay to the Executive any unpaid
Base Salary accrued through the effective date of termination specified in such
notice. Except as provided above, the Company shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 4.1).
5.2 DISABILITY. Notwithstanding anything contained in this Agreement
to the contrary, the Company, by written notice to the Executive, shall at all
times have the right to terminate this Agreement, and the Executive's employment
hereunder, if the Executive shall, as the result of mental or physical
incapacity, illness or disability, fail to perform his duties and
responsibilities provided for herein for a consecutive period of more than one
hundred eighty (180) days in any 12-month period. Upon any termination pursuant
to this Section 5.2, the Company shall pay to the Executive any unpaid Base
Salary accrued through the effective date of termination. Except as provided
above, the Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however to the provisions of Section 4.1).
5.3 DEATH. In the event of the death of the Executive during the
term of his employment hereunder, the Company shall pay to the personal
representative of the estate of the deceased Executive any unpaid Base Salary
accrued through the date of his death. Except as provided above, the Company
shall have no further liability hereunder (other than for reimbursement for
reasonable business expenses incurred prior to the date of the Executive's
death, subject, however, to the provisions of Section 4.1).
5.4 TERMINATION WITHOUT CAUSE. The Company shall have the right to
terminate the Executive's employment hereunder for any reason other than as set
forth in Sections 5.1, 5.2 or 5.3 upon thirty (30) days written notice to the
Executive; PROVIDED, HOWEVER, that upon any such termination pursuant to this
Section 5.4, the Company shall (i) pay to the Executive any unpaid Base Salary
through the effective date of termination specified in such notice, (ii)
continue to pay the Executive's Base Salary throughout the remainder of the
Term, PROVIDED, HOWEVER, that in no event shall the Company pay to Executive
less than two years Base Salary at the rate in effect on the date of termination
pursuant to this Section 5.4, and (iii) make a payment to the Executive equal to
one years Base Salary at the rate in effect on the date of termination pursuant
to this Section 5.4 for each year or portion of a year served hereunder prior to
such termination, which amount shall be paid within ten (10) days of such
termination.
5.5 VOLUNTARY RESIGNATION. In the event the Executive resigns as an
employee of the Company, the Company shall pay to the Executive any unpaid Base
Salary accrued through the effective date of resignation. Except as provided
above, the Company shall have no further
4
<PAGE>
liability hereunder (other than for reimbursement for reasonable business
expenses incurred prior to the date of resignation, subject, however, to the
provisions of Section 4.1).
6. RESTRICTIVE COVENANTS.
6.1 NON-COMPETITION. The Executive shall not, during the Term of
this Agreement and, unless the Company terminates the Executive's employment
hereunder other than pursuant to Section 5.1, for a one (1) year period
thereafter, serve as or be a consultant to or employee, officer, agent director
or owner of more than five percent of another corporation, partnership or other
entity which competes in any manner with or detracts from any business in which
the Company or its subsidiaries or affiliates then engages (the "Business").
6.2 NONDISCLOSURE. The Executive shall not, during the Term of this
Agreement and for a period ending on the third anniversary of the expiration of
the Term, divulge, communicate, use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any way, any Confidential
Information (as hereinafter defined) pertaining to the business of the Company.
Any Confidential Information or data now or hereafter acquired by the Executive
with respect to the business of the Company (which shall include, but not be
limited to, non-public information concerning the Company's productions,
processes, know-how, financial condition, prospects, technology, customers,
methods of doing business and marketing and promotion of the Company's
productions) shall be deemed a valuable, special and unique asset of the Company
that is received by the Executive in confidence and as a fiduciary, and the
Executive shall remain a fiduciary to the Company with respect to all of such
information. For purposes of this Agreement, "Confidential Information" means
information disclosed to the Executive or known by the Executive as a
consequence of or through his employment by the Company (including information
conceived, originated, discovered, invented or developed by the Executive) prior
to or after the date hereof, and not generally known about the Company or its
business. Notwithstanding the foregoing, nothing herein shall be deemed to
restrict the Executive from disclosing Confidential Information to the extent
required by law.
6.3 NONSOLICITATION. The Executive shall not, during the Term of
this Agreement and, unless the Company terminates the Executive's employment
hereunder other than pursuant to Sections 5.1 or 5.2, for a one (1) year period
thereafter, directly or indirectly, (i) solicit for employment or endeavor in
any way to entice away from employment with the Company or its affiliates any
employee of the Company or its affiliates; nor (ii) solicit or accept business
competitive with the Business from any customers or clients of the Company or
its affiliates, from any prospective customers or clients whose business the
Company or any affiliate of the Company is in the process of soliciting at the
time the Executive's employment with the Company terminated or ceased, or from
any former customers or clients which had been doing business with the Company
or its affiliates within one (1) year prior to the time the Executive's
employment with the Company terminated or ceased.
6.4 BOOKS AND RECORDS. All books, records, manuals, notations,
applications, accounts and similar repositories of Confidential Information of
the Company, whether created,
5
<PAGE>
used, received or otherwise coming into the Executive's possession during the
course of the Executive's employment hereunder, shall be the exclusive property
of the Company and shall be immediately returned to the Company upon termination
of this Agreement or at the Board's request at any time provided, however, that
Executive's personal rolodex and any other property of the Executive on the
Company's premises which is not and does not contain Confidential Information
shall not be deemed Company property and shall not be subject to this Section
6.4.
7. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Section 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio without regard to any conflict of
law rule or principle that would give effect to the laws of another
jurisdiction. In the event that any dispute shall arise with respect to this
Agreement, then such dispute shall be submitted for resolution to arbitration in
_____________, Ohio in accordance with the rules of the American Arbitration
Association then in effect. The non-prevailing party in such arbitration shall
pay all reasonable fees and expenses of the prevailing party, including fees and
expenses of counsel for the prevailing party.
9. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: Magicworks Entertainment Incorporated
930 Washington Avenue
Miami, Florida 33139
Attention: President
If to the Executive: Brad L. Krassner
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami, Florida 33139
Attention: President
6
<PAGE>
or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
its effectiveness, shall supersede all prior agreements, understandings and
arrangements, both oral and written, between the Executive and the Company with
respect to such subject matter. This Agreement may not be modified in any way
unless by a written instrument which specifically refers to this Agreement which
is signed by both the Company and the Executive.
11. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns. Notwithstanding the foregoing, neither party may assign its rights or
benefits hereunder without the prior written consent of the other party hereto.
12. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by duration, geographic scope or
both, the otherwise invalid provision will be considered to be reduced to a
period or area which would cure such invalidity.
13. WAIVERS. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
14. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement.
15. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
(other than the parties hereto and, in the case of the Executive, his heirs,
personal representative(s) and/or legal representative) any rights or remedies
under or by reason of this Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
MAGICWORKS ENTERTAINMENT
INCORPORATED
By:
-------------------------------------
Lee Marshall, President and Chief
Operating Officer
-------------------------------------
Brad L. Krassner
8
<PAGE>
EXHIBIT A
1. Attach health plans, dental plans, etc. pursuant to Section 4.2.
2. 401K Plan of the Company.
3. Pension Plan of the Company.
9
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 30th day of June, 1996 but is effective as of August 1, 1996 (the "Effective
Date") by and between Magicworks Entertainment Incorporated, a Florida
corporation (hereinafter called the "Company"), and Lee Marshall (hereinafter
called the "Executive").
RECITALS
A. The Executive is currently serving as the President and Chief
Operating Officer and a director of the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Board of Directors of the Company (the "Board") recognizes that
the Executive's contribution to the growth and success of the Company has been
substantial and desires to retain the services of the Executive and to
compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the Company.
E. The Executive is willing to continue to make his services available
to the Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. TERMINATION OF PRIOR AGREEMENTS. Any and all prior agreements
relative to the rendering of services by the Executive to the Company shall
automatically terminate upon the execution of this Agreement, and the provisions
of this Agreement alone shall govern the relationship between the parties. Upon
the execution of this Agreement, each of the parties hereto shall thereupon and
thereby, without any further action, release and forever discharge the other
from any and all liabilities and obligations of any nature arising out of or in
connection any and all such prior employment and/or consulting agreements,
understandings or arrangements.
<PAGE>
2. EMPLOYMENT.
2.1 EMPLOYMENT AND TERM. The Company shall employ the Executive and
the Executive shall serve the Company, on the terms and conditions set forth
herein, for the period commencing on the Effective Date and expiring August 1,
2001 (the "Term"), unless extended or sooner terminated as hereinafter set
forth.
2.2 DUTIES OF EXECUTIVE. The Executive shall serve as the President
and Chief Operating Officer of the Company and shall have such powers and
authority commensurate with such position, shall diligently perform all services
as may be reasonably assigned to him by the Board and shall exercise such power
and authority as may from time to time be delegated to him by the Board. The
Executive shall devote substantially all of his working time and attention to
the affairs of the Company.
2.3 PLACE OF PERFORMANCE. In connection with his employment by the
Company, the Executive shall be based at any one of the Company's corporate
offices except for required travel on the Company's business to an extent
substantially consistent with his present travel obligations.
3. COMPENSATION.
3.1 BASE SALARY.
(a) Commencing on the Effective Date, the Executive shall
receive a base salary at a rate equal to $250,000 per annum (the "Base Salary")
during the Term, such Base Salary to be payable in substantially equal
installments consistent with the Company's normal payroll schedule (the "Payment
Schedule" and each day upon which such a payment is made, a "Payment Date"),
PROVIDED, HOWEVER, that on the first Payment Date the Company shall pay to
Executive the Base Salary for the period from August 1, 1996 through such date,
and thereafter in accordance with the Payroll Schedule, subject to applicable
withholding and other taxes.
(b) On August 1, 1997 and on each August 1 thereafter during the
Term, the Base Salary shall be increased by $25,000. Effective upon each such
increase, the term "Base Salary" shall be modified to mean such increased amount
without further action by the Company.
3.2 ADDITIONAL COMPENSATION. In addition to the Base Salary,
Executive may also receive bonuses in such amounts and at such times as may be
determined in the sole discretion of the Board (or the Compensation Committee
thereof).
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4. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
4.1 EXPENSE REIMBURSEMENT. During the Term, the Company, upon the
submission of supporting documentation by the Executive, shall reimburse the
Executive for all reasonable expenses actually paid or incurred by the Executive
in the course of and pursuant to the business of the Company, including expenses
for first class travel and entertainment. In addition, the Company shall provide
the Executive with a corporate credit card to be used for business related
expenses.
4.2 OTHER BENEFITS. The Executive shall be entitled to receive such
benefits of employment as are described on Exhibit A attached hereto. In
addition, during the Term, the Company shall, upon receipt of proper
documentation relating thereto, reimburse Executive for amounts expended for a
disability policy (with maximum benefits payable under such policy to be
determined by the Board) and a life insurance policy (with benefits payable
thereunder to be in the amount of no more than $1,000,000) for the Executive
(collectively, the "Policies"). Nothing paid to the Executive under any plan or
arrangement presently in effect or made available in the future shall be deemed
to be in lieu of the Base Salary and/or Bonus payable to the Executive pursuant
to this Agreement.
4.3 CONTINUING BENEFITS. In the event that the Executive's
employment is terminated other than for "Cause" (as defined in Section 5.1
below) the Company shall continue to provide to the Executive, for a period of
two years following such termination, health and dental insurance substantially
similar to that in effect at the time of such termination.
4.4 WORKING FACILITIES. The Company shall furnish the Executive with
an executive office, a personal secretary and such other facilities and services
suitable to his position and adequate for the performance of his duties
hereunder.
4.5 AUTOMOBILE ALLOWANCE. The Company shall pay the Executive an
automobile allowance of $750 per month during the Term.
4.6 VACATION. The Company shall allow Executive six (6) weeks of
paid leave time each year for vacation or other similar purposes.
5. TERMINATION.
5.1 TERMINATION FOR CAUSE. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated by the Company
for Cause. As used in this Agreement, "Cause" shall only mean (i) subject to the
following sentences, any action or omission of the Executive which constitutes a
willful and material breach of this Agreement which is not cured or as to which
diligent attempts to cure have not commenced within thirty (30) business days
after receipt by the Executive of notice of same, which notice specifies the
conduct necessary to cure such breach, (ii) a finding by a court of law that the
Executive has committed fraud, embezzlement or misappropriation as against the
Company or (iii) the conviction of the
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Executive for any criminal act which is a felony. Any termination for Cause
shall be made in writing to the Executive, which notice of termination shall set
forth in detail all acts or omissions upon which the Company is relying for such
termination. The Executive shall have the right to address the Company's Board
regarding the acts set forth in the notice of termination. Upon any termination
pursuant to this Section 5.1, the Company shall pay to the Executive any unpaid
Base Salary accrued through the effective date of termination specified in such
notice. Except as provided above, the Company shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 4.1).
5.2 DISABILITY. Notwithstanding anything contained in this Agreement
to the contrary, the Company, by written notice to the Executive, shall at all
times have the right to terminate this Agreement, and the Executive's employment
hereunder, if the Executive shall, as the result of mental or physical
incapacity, illness or disability, fail to perform his duties and
responsibilities provided for herein for a consecutive period of more than one
hundred eighty (180) days in any 12-month period. Upon any termination pursuant
to this Section 5.2, the Company shall pay to the Executive any unpaid Base
Salary accrued through the effective date of termination. Except as provided
above, the Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however to the provisions of Section 4.1).
5.3 DEATH. In the event of the death of the Executive during the
term of his employment hereunder, the Company shall pay to the personal
representative of the estate of the deceased Executive any unpaid Base Salary
accrued through the date of his death. Except as provided above, the Company
shall have no further liability hereunder (other than for reimbursement for
reasonable business expenses incurred prior to the date of the Executive's
death, subject, however, to the provisions of Section 4.1).
5.4 TERMINATION WITHOUT CAUSE. The Company shall have the right to
terminate the Executive's employment hereunder for any reason other than as set
forth in Sections 5.1, 5.2 or 5.3 upon thirty (30) days written notice to the
Executive; PROVIDED, HOWEVER, that upon any such termination pursuant to this
Section 5.4, the Company shall (i) pay to the Executive any unpaid Base Salary
through the effective date of termination specified in such notice, (ii)
continue to pay the Executive's Base Salary throughout the remainder of the
Term, PROVIDED, HOWEVER, that in no event shall the Company pay to Executive
less than two years Base Salary at the rate in effect on the date of termination
pursuant to this Section 5.4, and (iii) make a payment to the Executive equal to
one years Base Salary at the rate in effect on the date of termination pursuant
to this Section 5.4 for each year or portion of a year served hereunder prior to
such termination, which amount shall be paid within ten (10) days of such
termination.
5.5 VOLUNTARY RESIGNATION. In the event the Executive resigns as an
employee of the Company, the Company shall pay to the Executive any unpaid Base
Salary accrued through the effective date of resignation. Except as provided
above, the Company shall have no further
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liability hereunder (other than for reimbursement for reasonable business
expenses incurred prior to the date of resignation, subject, however, to the
provisions of Section 4.1).
6. RESTRICTIVE COVENANTS.
6.1 NON-COMPETITION. The Executive shall not, during the Term of
this Agreement and, unless the Company terminates the Executive's employment
hereunder other than pursuant to Section 5.1, for a one (1) year period
thereafter, serve as or be a consultant to or employee, officer, agent director
or owner of more than five percent of another corporation, partnership or other
entity which competes in any manner with or detracts from any business in which
the Company or its subsidiaries or affiliates then engages (the "Business").
6.2 NONDISCLOSURE. The Executive shall not, during the Term of this
Agreement and for a period ending on the third anniversary of the expiration of
the Term, divulge, communicate, use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any way, any Confidential
Information (as hereinafter defined) pertaining to the business of the Company.
Any Confidential Information or data now or hereafter acquired by the Executive
with respect to the business of the Company (which shall include, but not be
limited to, non-public information concerning the Company's productions,
processes, know-how, financial condition, prospects, technology, customers,
methods of doing business and marketing and promotion of the Company's
productions) shall be deemed a valuable, special and unique asset of the Company
that is received by the Executive in confidence and as a fiduciary, and the
Executive shall remain a fiduciary to the Company with respect to all of such
information. For purposes of this Agreement, "Confidential Information" means
information disclosed to the Executive or known by the Executive as a
consequence of or through his employment by the Company (including information
conceived, originated, discovered, invented or developed by the Executive) prior
to or after the date hereof, and not generally known about the Company or its
business. Notwithstanding the foregoing, nothing herein shall be deemed to
restrict the Executive from disclosing Confidential Information to the extent
required by law.
6.3 NONSOLICITATION. The Executive shall not, during the Term of
this Agreement and, unless the Company terminates the Executive's employment
hereunder other than pursuant to Sections 5.1 or 5.2, for a one (1) year period
thereafter, directly or indirectly, (i) solicit for employment or endeavor in
any way to entice away from employment with the Company or its affiliates any
employee of the Company or its affiliates; nor (ii) solicit or accept business
competitive with the Business from any customers or clients of the Company or
its affiliates, from any prospective customers or clients whose business the
Company or any affiliate of the Company is in the process of soliciting at the
time the Executive's employment with the Company terminated or ceased, or from
any former customers or clients which had been doing business with the Company
or its affiliates within one (1) year prior to the time the Executive's
employment with the Company terminated or ceased.
6.4 BOOKS AND RECORDS. All books, records, manuals, notations,
applications, accounts and similar repositories of Confidential Information of
the Company, whether created,
5
<PAGE>
used, received or otherwise coming into the Executive's possession during the
course of the Executive's employment hereunder, shall be the exclusive property
of the Company and shall be immediately returned to the Company upon termination
of this Agreement or at the Board's request at any time provided, however, that
Executive's personal rolodex and any other property of the Executive on the
Company's premises which is not and does not contain Confidential Information
shall not be deemed Company property and shall not be subject to this Section
6.4.
7. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Section 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to any conflict
of law rule or principle that would give effect to the laws of another
jurisdiction. In the event that any dispute shall arise with respect to this
Agreement, then such dispute shall be submitted for resolution to arbitration in
Miami, Florida in accordance with the rules of the American Arbitration
Association then in effect. The non-prevailing party in such arbitration shall
pay all reasonable fees and expenses of the prevailing party, including fees and
expenses of counsel for the prevailing party.
9. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: Magicworks Entertainment Incorporated
930 Washington Avenue
Miami, Florida 33139
Attention: President
If to the Executive: Lee Marshall
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami, Florida 33139
Attention: President
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or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
its effectiveness, shall supersede all prior agreements, understandings and
arrangements, both oral and written, between the Executive and the Company with
respect to such subject matter. This Agreement may not be modified in any way
unless by a written instrument which specifically refers to this Agreement which
is signed by both the Company and the Executive.
11. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns. Notwithstanding the foregoing, neither party may assign its rights or
benefits hereunder without the prior written consent of the other party hereto.
12. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by duration, geographic scope or
both, the otherwise invalid provision will be considered to be reduced to a
period or area which would cure such invalidity.
13. WAIVERS. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
14. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement.
15. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
(other than the parties hereto and, in the case of the Executive, his heirs,
personal representative(s) and/or legal representative) any rights or remedies
under or by reason of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
MAGICWORKS ENTERTAINMENT
INCORPORATED
By:
----------------------------------
Brad Krassner, Co-Chairman of the
Board and Chief Executive Officer
----------------------------------
Lee Marshall
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EXHIBIT A
1. Attach health plans, dental plans, etc. pursuant to Section 4.2.
2. 401K Plan of the Company.
3. Pension Plan of the Company.
9
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 30th day of June, 1996 but is effective as of August 1, 1996 (the "Effective
Date") by and between Magic Promotions Inc. (the "Company"), a Florida
corporation and a wholly-owned subsidiary of Magicworks Entertainment
Incorporated (hereinafter called the "Parent"), and Glenn Bechdel (hereinafter
called the "Executive").
RECITALS
A. The Executive is currently serving as the Vice President of the
Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Board of Directors of the Company (the "Board") recognizes that
the Executive's contribution to the growth and success of the Company has been
substantial and desires to retain the services of the Executive and to
compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the Company.
E. The Executive is willing to continue to make his services available
to the Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:
1. TERMINATION OF PRIOR AGREEMENTS. Any and all prior agreements
relative to the rendering of services by the Executive to the Company shall
automatically terminate upon the execution of this Agreement, and the provisions
of this Agreement alone shall govern the relationship between the parties. Upon
the execution of this Agreement, each of the parties hereto shall thereupon and
thereby, without any further action, release and forever discharge the other
from any and all liabilities and obligations of any nature arising out of or in
connection any and all such prior employment and/or consulting agreements,
understandings or arrangements.
<PAGE>
2. EMPLOYMENT.
2.1 EMPLOYMENT AND TERM. The Company shall employ the Executive and
the Executive shall serve the Company, on the terms and conditions set forth
herein, for the period commencing on the Effective Date and expiring August 1,
2001 (the "Term"), unless extended or sooner terminated as hereinafter set
forth.
2.2 DUTIES OF EXECUTIVE. The Executive shall serve as the Vice
President of the Company and shall have such powers and authority commensurate
with such position, shall diligently perform all services as may be reasonably
assigned to him by the Board and shall exercise such power and authority as may
from time to time be delegated to him by the Board. The Executive shall devote
substantially all of his working time and attention to the affairs of the
Company.
2.3 PLACE OF PERFORMANCE. In connection with his employment by the
Company, the Executive shall be based at any one of the Company's corporate
offices except for required travel on the Company's business to an extent
substantially consistent with his present travel obligations.
3. COMPENSATION.
3.1 BASE SALARY.
(a) Commencing on the Effective Date, the Executive shall
receive a base salary at a rate equal to $150,000 per annum (the "Base Salary")
during the Term, such Base Salary to be payable in substantially equal
installments consistent with the Company's normal payroll schedule (the "Payment
Schedule" and each day upon which such a payment is made, a "Payment Date"),
PROVIDED, HOWEVER, that on the first Payment Date the Company shall pay to
Executive the Base Salary for the period from August 1, 1996 through such date,
and thereafter in accordance with the Payroll Schedule, subject to applicable
withholding and other taxes.
(b) On August 1, 1997 and on each August 1 thereafter during the
Term, the Base Salary shall be increased by $25,000. Effective upon each such
increase, the term "Base Salary" shall be modified to mean such increased amount
without further action by the Company.
3.2 ADDITIONAL COMPENSATION. In addition to the Base Salary,
Executive may also receive bonuses in such amounts and at such times as may be
determined in the sole discretion of the Board (or the Compensation Committee
thereof).
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4. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
4.1 EXPENSE REIMBURSEMENT. During the Term, the Company, upon the
submission of supporting documentation by the Executive, shall reimburse the
Executive for all reasonable expenses actually paid or incurred by the Executive
in the course of and pursuant to the business of the Company, including expenses
for first class travel and entertainment. In addition, the Company shall provide
the Executive with a corporate credit card to be used for business related
expenses.
4.2 OTHER BENEFITS. The Executive shall be entitled to receive such
benefits of employment as are described on Exhibit A attached hereto. In
addition, during the Term, the Company shall, upon receipt of proper
documentation relating thereto, reimburse Executive for amounts expended for a
disability policy (with maximum benefits payable under such policy to be
determined by the Board) and a life insurance policy (with benefits payable
thereunder to be in the amount of no more than $1,000,000) for the Executive
(collectively, the "Policies"). Nothing paid to the Executive under any plan or
arrangement presently in effect or made available in the future shall be deemed
to be in lieu of the Base Salary and/or Bonus payable to the Executive pursuant
to this Agreement.
4.3 CONTINUING BENEFITS. In the event that the Executive's
employment is terminated other than for "Cause" (as defined in Section 5.1
below) the Company shall continue to provide to the Executive, for a period of
two years following such termination, health and dental insurance substantially
similar to that in effect at the time of such termination.
4.4 WORKING FACILITIES. The Company shall furnish the Executive with
an executive office, a personal secretary and such other facilities and services
suitable to his position and adequate for the performance of his duties
hereunder.
4.5 AUTOMOBILE ALLOWANCE. The Company shall pay the Executive an
automobile allowance of $750 per month during the Term.
4.6 VACATION. The Company shall allow Executive six (6) weeks of
paid leave time each year for vacation or other similar purposes.
5. TERMINATION.
5.1 TERMINATION FOR CAUSE. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated by the Company
for Cause. As used in this Agreement, "Cause" shall only mean (i) subject to the
following sentences, any action or omission of the Executive which constitutes a
willful and material breach of this Agreement which is not cured or as to which
diligent attempts to cure have not commenced within thirty (30) business days
after receipt by the Executive of notice of same, which notice specifies the
conduct necessary to cure such breach, (ii) a finding by a court of law that the
Executive has committed fraud, embezzlement or misappropriation as against the
Company or (iii) the conviction of the
3
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Executive for any criminal act which is a felony. Any termination for Cause
shall be made in writing to the Executive, which notice of termination shall set
forth in detail all acts or omissions upon which the Company is relying for such
termination. The Executive shall have the right to address the Company's Board
regarding the acts set forth in the notice of termination. Upon any termination
pursuant to this Section 5.1, the Company shall pay to the Executive any unpaid
Base Salary accrued through the effective date of termination specified in such
notice. Except as provided above, the Company shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 4.1).
5.2 DISABILITY. Notwithstanding anything contained in this Agreement
to the contrary, the Company, by written notice to the Executive, shall at all
times have the right to terminate this Agreement, and the Executive's employment
hereunder, if the Executive shall, as the result of mental or physical
incapacity, illness or disability, fail to perform his duties and
responsibilities provided for herein for a consecutive period of more than one
hundred eighty (180) days in any 12-month period. Upon any termination pursuant
to this Section 5.2, the Company shall pay to the Executive any unpaid Base
Salary accrued through the effective date of termination. Except as provided
above, the Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however to the provisions of Section 4.1).
5.3 DEATH. In the event of the death of the Executive during the
term of his employment hereunder, the Company shall pay to the personal
representative of the estate of the deceased Executive any unpaid Base Salary
accrued through the date of his death. Except as provided above, the Company
shall have no further liability hereunder (other than for reimbursement for
reasonable business expenses incurred prior to the date of the Executive's
death, subject, however to the provisions of Section 4.1).
5.4 TERMINATION WITHOUT CAUSE. The Company shall have the right to
terminate the Executive's employment hereunder for any reason other than as set
forth in Sections 5.1, 5.2 or 5.3 upon thirty (30) days written notice to the
Executive; PROVIDED, HOWEVER, that upon any such termination pursuant to this
Section 5.4, the Company shall (i) pay to the Executive any unpaid Base Salary
through the effective date of termination specified in such notice, (ii)
continue to pay the Executive's Base Salary throughout the remainder of the
Term, PROVIDED, HOWEVER, that in no event shall the Company pay to Executive
less than two years Base Salary at the rate in effect on the date of termination
pursuant to this Section 5.4 and (iii) make a payment to the Executive equal to
one years Base Salary at the rate in effect on the date of termination pursuant
to this Section 5.4 for each year or portion of a year served hereunder prior to
such termination, which amount shall be paid within ten (10) days of such
termination.
5.5 VOLUNTARY RESIGNATION. In the event the Executive resigns as an
employee of the Company, the Company shall pay to the Executive any unpaid Base
Salary accrued through the effective date of resignation. Except as provided
above, the Company shall have no further
4
<PAGE>
liability hereunder (other than for reimbursement for reasonable business
expenses incurred prior to the date of resignation, subject, however, to the
provisions of Section 4.1).
6. RESTRICTIVE COVENANTS.
6.1 NON-COMPETITION. The Executive shall not, during the Term of
this Agreement and, unless the Company terminates the Executive's employment
hereunder other than pursuant to Section 5.1, for a one (1) year period
thereafter, serve as or be a consultant to or employee, officer, agent director
or owner of more than five percent of another corporation, partnership or other
entity which competes in any manner with or detracts from any business in which
the Company or its subsidiaries or affiliates then engages (the "Business").
6.2 NONDISCLOSURE. The Executive shall not, during the Term of this
Agreement and for a period ending on the third anniversary of the expiration of
the Term, divulge, communicate, use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any way, any Confidential
Information (as hereinafter defined) pertaining to the business of the Company
or the Parent. Any Confidential Information or data now or hereafter acquired by
the Executive with respect to the business of the Company or the Parent (which
shall include, but not be limited to, non-public information concerning the
Company's productions, processes, know-how, financial condition, prospects,
technology, customers, methods of doing business and marketing and promotion of
the Company's or the Parent's productions) shall be deemed a valuable, special
and unique asset of the Company or the Company that is received by the Executive
in confidence and as a fiduciary, and the Executive shall remain a fiduciary to
the Company and the Parent with respect to all of such information. For purposes
of this Agreement, "Confidential Information" means information relating to the
Company and its affiliates disclosed to the Executive or known by the Executive
as a consequence of or through his employment by the Company (including
information conceived, originated, discovered, invented or developed by the
Executive) prior to or after the date hereof, and not generally known about the
Company or its affiliates or its business. Notwithstanding the foregoing,
nothing herein shall be deemed to restrict the Executive from disclosing
Confidential Information to the extent required by law.
6.3 NONSOLICITATION. The Executive shall not, during the Term of
this Agreement and, unless the Company terminates the Executive's employment
hereunder other than pursuant to Sections 5.1 or 5.2, for a one (1) year period
thereafter, directly or indirectly, (i) solicit for employment or endeavor in
any way to entice away from employment with the Company or its affiliates any
employee of the Company or its affiliates; nor (ii) solicit or accept business
competitive with the Business from any customers or clients of the Company or
its affiliates, from any prospective customers or clients whose business the
Company or any affiliate of the Company is in the process of soliciting at the
time the Executive's employment with the Company terminated or ceased, or from
any former customers or clients which had been doing business with the Company
or its affiliates within one (1) year prior to the time the Executive's
employment with the Company terminated or ceased.
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<PAGE>
6.4 BOOKS AND RECORDS. All books, records, manuals, notations,
applications, accounts and similar repositories of Confidential Information of
the Company, whether created, used, received or otherwise coming into the
Executive's possession during the course of the Executive's employment
hereunder, shall be the exclusive property of the Company and shall be
immediately returned to the Company upon termination of this Agreement or at the
Board's request at any time provided, however, that Executive's personal rolodex
and any other property of the Executive, on the Company's premises which is not
and does not contain Confidential Information shall not be deemed Company
property and shall not be subject to this Section 6.4.
7. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Section 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to any conflict
of law rule or principle that would give effect to the laws of another
jurisdiction. In the event that any dispute shall arise with respect to this
Agreement, then such dispute shall be submitted for resolution to arbitration in
Miami, Florida in accordance with the rules of the American Arbitration
Association then in effect. The non-prevailing party in such arbitration shall
pay all reasonable fees and expenses of the prevailing party, including fees and
expenses of counsel for the prevailing party.
9. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or when deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company: Magicworks Entertainment Incorporated
930 Washington Avenue
Miami, Florida 33139
Attention: President
If to the Executive: Glenn Bechdel
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami, Florida 33139
Attention: President
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or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
its effectiveness, shall supersede all prior agreements, understandings and
arrangements, both oral and written, between the Executive and the Company with
respect to such subject matter. This Agreement may not be modified in any way
unless by a written instrument which specifically refers to this Agreement which
is signed by both the Company and the Executive.
11. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns. Notwithstanding the foregoing, neither party may assign its rights or
benefits hereunder without the prior written consent of the other party hereto.
12. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by duration, geographic scope or
both, the otherwise invalid provision will be considered to be reduced to a
period or area which would cure such invalidity.
13. WAIVERS. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
14. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement.
15. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
(other than the parties hereto and, in the case of the Executive, his heirs,
personal representative(s) and/or legal representative) any rights or remedies
under or by reason of this Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
MAGIC PROMOTIONS, INC.
By:
-----------------------------------
Joe Marsh, President
----------------------------------
Glenn Bechdel
8
<PAGE>
EXHIBIT A
1. Attach health plans, dental plans, etc. pursuant to Section 4.2.
2. 401K Plan of the Company.
3. Pension Plan of the Company.
9
EXHIBIT 10.9
NOTE ESCROW AGREEMENT
AGREEMENT made as of the 30th day of July, 1996, by and among
MAGICWORKS ENTERTAINMENT INCORPORATED and its successor by merger (the
"Issuer"), CAPITAL GROWTH INTERNATIONAL, L.L.C. (the "Placement Agent"), as
agent for the holders of the Notes (as defined below) and STERLING NATIONAL BANK
& TRUST COMPANY OF NEW YORK, a national banking association with offices at 355
Lexington Avenue, New York, New York 10017, or any successor escrow agent
appointed in accordance with the terms hereof (the "Note Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Issuer proposes to offer (the "Offering") for sale,
through the Placement Agent and pursuant to a Confidential Private Placement
Memorandum dated June 6, 1996 (as may be supplemented or amended from time to
time), certain securities of the Issuer in the form of units (the "Units"),
which Units will include, among other securities, an unsecured senior
convertible note (each, a "Note");
WHEREAS, the Notes provide that, on each of the Principal Escrow
Payment Dates (as defined in the Note), the Issuer shall irrevocably deposit
into escrow an amount equal to the Principal Escrow Payments due on such
Principal Escrow Payment Date as provided in the Note and summarized in the
Information Sheet attached hereto; and
WHEREAS, the Issuer and the Placement Agent propose to establish an
escrow account with the Note Escrow Agent in connection with the Offering and
the Note Escrow Agent is willing to establish such escrow account on the terms
and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. INFORMATION SHEET. Each capitalized term not otherwise defined in
this Agreement shall have the meaning set forth for such term on the information
sheet which is attached to this Agreement and is incorporated by reference
herein and made a part hereof (the "Information Sheet").
<PAGE>
2. ESTABLISHMENT OF THE PRINCIPAL ESCROW ACCOUNT.
2.1 The parties hereto shall establish an interest bearing escrow
account at the Trust Department of the Note Escrow Agent bearing the designation
"Principal Escrow Account".
2.2 On or before each of the following dates (the "Principal Escrow
Payment Dates"), the Company shall (a) send a notice, substantially in the form
attached hereto as EXHIBIT A, to the Note Escrow Agent, with a copy to the
Placement Agent, of the principal amount of each Note then outstanding and the
amount of the Principal Escrow Payment due on such Principal Escrow Payment Date
and (b) irrevocably deposit in the Principal Escrow Account the following cash
amounts (the "Principal Escrow Payments") to secure the Company's obligation to
pay principal on the Notes outstanding on July 30, 2001 (the "Maturity Date"):
<TABLE>
<CAPTION>
PRINCIPAL ESCROW PAYMENTS DUE
(REPRESENTED AS A PERCENT OF THE
AGGREGATE PRINCIPAL AMOUNT OF
NOTES OUTSTANDING ON SUCH PRINCIPAL
PRINCIPAL ESCROW PAYMENT DATES ESCROW PAYMENT DATE)
<S> <C>
Seven payment dates commencing on the first business day following the third
anniversary of the first closing of the Offering and every ninety days
thereafter, provided that such day is a business day, otherwise on the first
business day
following each such date......................................... 10.714286%
</TABLE>
The Company's obligations under this Section 2 shall survive until the Notes are
no longer outstanding. The Note Escrow Agent shall not be required to accept any
amounts for deposit in such Escrow Account prior to its receipt of the notice
described in this Section 2.2.
3. DEPOSITS IN THE ESCROW ACCOUNT.
3.1 All amounts received from the Company shall be deposited in the
Principal Escrow Account, which amount will be in the form of checks, cash, or
wire transfers representing the payment of money.
3.2 Amounts deposited in the Principal Escrow Account which have
cleared the banking system and have been collected by the Note Escrow Agent for
the payment of principal are sometimes referred to herein as the "Principal
Funds."
2
<PAGE>
4. DISBURSEMENTS FROM THE PRINCIPAL ESCROW ACCOUNT.
4.1. The Note Escrow Agent will hold the Principal Escrow Payments in
the Principal Escrow Account until the Maturity Date, on which date, the Note
Escrow Agent shall use the Principal Funds in the Principal Escrow Account to
make payments of principal in accordance with the terms of the Notes. Not later
than three (3) business days before the Maturity Date, the Company will deliver
to the Note Escrow Agent, with a copy to the Placement Agent, an Officers'
Certificate signed by the Chairman or a Co-Chairman of the Board of Directors,
the President or the Chief Executive Officer and by the Chief Financial Officer
of the Company specifying the respective principal amounts due on the Notes
outstanding on the Maturity Date. The Escrow Agent shall, without any further
authorization by the Company, subject to Section 5 hereof, make such payments of
principal on the Notes directly to the respective Holders at each such Holder's
respective address, which addresses, and such other information as is necessary
to satisfy any reporting requirements, shall be delivered to the Escrow Agent by
the Company within five (5) business days after each closing of the Offering and
updated promptly thereafter by the Company. The Note Escrow Agent may rely upon
such certification and shall have no responsibility to verify the contents
thereof.
4.2. Upon disbursement of the Principal Funds in the Principal Escrow
Account pursuant to the terms of this Section 4, the Note Escrow Agent shall be
relieved of all further obligations and released from all liability under this
Agreement with respect to its obligation under this Section 4. It is expressly
agreed and understood that in no event shall the aggregate amount of payments
made by the Note Escrow Agent with respect to the Principal Funds exceed the
amount of such Principal Funds.
5. EVENTS OF PREPAYMENT OR CONVERSION.
5.1. Except for Notes previously converted in accordance with the terms
thereof, all, but not less than all, of the outstanding principal amount of the
Notes, together with accrued but unpaid interest thereon, may be prepaid by the
Company in accordance with Section 4 thereof. Within three (3) business days
after the Company mails a notice of prepayment to the holders of the Notes, the
Company shall send such prepayment notice to the Note Escrow Agent, with a copy
to the Placement Agent, which notice shall include the Prepayment Price (as
defined in the Notes) payable to each of such holders. Not later than five (5)
business days before the prepayment date, the Company shall deposit in the
Principal Escrow Account cash equal to the amount sufficient to prepay all of
the then outstanding Notes, considering that any amounts in the Principal Escrow
Account may, at the direction of the Company, be applied toward the Prepayment
Price. The Note Escrow Agent shall, on the prepayment date set forth in the
Company's notice of prepayment, use the Principal Funds to pay to each Holder of
outstanding Notes their respective Prepayment Price in accordance with the terms
of the notice of prepayment.
5.2. If the Notes are not prepaid by the Company in accordance with
Section 5.1 above and Section 4 of the Notes, each Holder has the option, at any
time prior to the Maturity Date, to convert all, but not less than all, of the
principal amount of such Holder's
3
<PAGE>
Notes and accrued but unpaid interest thereon into shares of the Company's
Common Stock, pursuant to Section 6 of the Notes. Within five (5) business days
after conversion of any Note, the Company shall send a notice to the Note Escrow
Agent, with a copy to the Placement Agent, together with a copy of the Notice of
Conversion sent by the holder. The notice shall state the name of the holder of
the Note and the amount of principal and interest converted. The Note Escrow
Agent shall be entitled to rely on such notice without independent verification
thereof. The Company's obligation to pay the principal amount and accrued but
unpaid interest on each Note converted shall, upon conversion, be discharged;
and, unless the Note Escrow Agent shall have received a notice from the
Placement Agent as agent for the Noteholders that an Event of Default under the
Notes has occurred and is continuing, any Principal Funds attributable to such
converted Note shall be applied by the Note Escrow Agent, first, to reduce the
next due Principal Escrow Payment pursuant to Section 2.2 hereof, which
reduction shall be set forth on the notice delivered to the Note Escrow Agent
pursuant to Section 2.2 hereof and, second, if any Principal Funds remain after
all the Notes are either prepaid or converted in accordance with their terms,
such remaining Principal Funds shall be returned to the Company provided that no
outstanding amounts hereunder are due to the Note Escrow Agent.
6. EVENTS OF DEFAULT. If an Event of Default shall occur and be
continuing under Section 2 of the Notes, the Placement Agent shall promptly give
notice to the Note Escrow Agent and upon receipt of such notice, the Note Escrow
Agent shall be entitled to hold the Principal Funds, or a portion thereof, in
the Principal Escrow Account pending the resolution of any uncertainty as to the
proper disbursement of the Principal Funds to the Note Escrow Agent's sole
satisfaction, by final judgment of a court of competent jurisdiction or
otherwise, provided, however, that the Note Escrow Agent shall be entitled to
rely without independent verification on any instructions received with respect
to the Principal Funds that is executed by the Company and by or on behalf of
the holders of at least 50% of the aggregate principal amount of the Notes then
outstanding; or the Note Escrow Agent, at its sole option, may deposit the
Principal Funds (and any other amounts that thereafter become part of the
Principal Funds) with the Clerk of a court of competent jurisdiction in a
proceeding to which all parties in interest are joined. Upon the deposit by the
Note Escrow Agent of the Principal Funds with the Clerk of any court, the Note
Escrow Agent shall be relieved of all further obligations and released from all
liability hereunder.
7. RIGHTS, DUTIES AND RESPONSIBILITIES OF NOTE ESCROW AGENT.
It is understood and agreed that the duties of the Note Escrow Agent are purely
ministerial in nature, and that:
7.1 The Note Escrow Agent shall not be responsible for or be required
to enforce any of the terms or conditions of the Notes or of any agreement
between the Placement Agent and the Issuer nor shall the Note Escrow Agent be
responsible for the performance by the Issuer of its obligations under the
Notes, or by the Placement Agent or the Issuer of their respective obligations
under this Agreement.
7.2 The Note Escrow Agent shall be under no duty or responsibility to
enforce collection of any check delivered to it hereunder.
4
<PAGE>
7.3 The Note Escrow Agent shall be entitled to rely upon the accuracy,
act in reliance upon the contents, and assume the genuineness, of any notice,
instruction, certificate, signature, instrument or document which is given to
the Note Escrow Agent pursuant to this Agreement whether containing original or
facsimile signatures without the necessity of the Note Escrow Agent verifying
the truth or accuracy thereof, including, without limitation, the accuracy of
the Issuer's calculations of interest and principal payments and the addresses
of the holders of the Notes as furnished by the Issuer. The Note Escrow Agent
shall not be obligated to make any inquiry as to the authority, capacity,
existence or identity of any person purporting to give any such notice or
instruction or to execute any such certificate, instrument or document.
7.4 In the event that the Note Escrow Agent shall be uncertain as to
its duties or rights hereunder or shall receive instructions with respect to the
Principal Escrow Account or the Principal Funds which, in its sole
determination, are in conflict either with other instructions received by it or
with any provisions of this Agreement, it shall be entitled to hold the
Principal Funds, or a portion thereof, in such Principal Escrow Account pending
the resolution of such uncertainty to the Note Escrow Agent's sole satisfaction,
by final judgment of a court of competent jurisdiction or otherwise; or the Note
Escrow Agent, at its sole option, may deposit the Principal Funds (and any other
amounts that thereafter become part of the Principal Funds) with the Clerk of a
court of competent jurisdiction in a proceeding to which all parties in interest
are joined. Upon the deposit by the Note Escrow Agent of the Principal Funds
with the Clerk of any court, the Note Escrow Agent shall be relieved of all
further obligations and released from all liability hereunder.
7.5. The Note Escrow Agent shall not be liable for any action taken or
omitted hereunder, or for the misconduct of any employee, agent or attorney
appointed by it, except in the case of gross negligence or willful misconduct.
The Note Escrow Agent shall be entitled to consult with counsel of its own
choosing and shall not be liable for any action taken, suffered or omitted by it
in accordance with the advice of such counsel.
7.6. The Note Escrow Agent shall have no responsibility at any time to
ascertain whether or not any security interest exists in the Principal Funds or
any part of the Principal Funds or to file any financing statement under the
Uniform Commercial Code with respect to the Principal Funds or any part of the
Principal Funds.
7.7. The Note Escrow Agent shall be relieved from its obligations
hereunder to make any payment of principal on the Notes if the Issuer shall have
defaulted on its obligations to deposit funds with the Note Escrow Agent
sufficient to make such payments pursuant to Sections 2 and 5 hereof until such
default is cured.
8. AMENDMENT; RESIGNATION; TERMINATION. This Agreement may be altered
or amended only with the written consent of the Issuer, the Placement Agent and
the Note Escrow Agent. The Note Escrow Agent may resign and be discharged from
its duties and obligations hereunder by giving notice of such resignation to the
Issuer and the Placement Agent, specifying the date upon which such resignation
shall take effect; provided, however, that such date shall be not less than 20
days from the date of such notice and provided
5
<PAGE>
further, that in the event a successor Note Escrow Agent shall not have been
appointed by such resignation date, the Note Escrow Agent shall deposit the
Principal Funds (and any other amounts that thereafter become part of the
Principal Funds) with the Clerk of any New York State or federal court sitting
in New York County, New York (any such court a "New York Court") in a proceeding
to which all parties in interest are joined. Upon the deposit by the Note Escrow
Agent of the Principal Funds a New York Court, the Note Escrow Agent shall be
relieved of all further obligations and released from all liability hereunder.
The Issuer and the Placement Agent shall also have the right, by mutual
agreement, to terminate the appointment of the Note Escrow Agent hereunder by
giving to it notice of such termination, specifying the date upon which such
termination shall take effect and designating a successor Note Escrow Agent. In
any such event, the Issuer and the Placement Agent shall, by mutual agreement,
reasonably approve and designate a successor Note Escrow Agent to such resigning
or terminated Note Escrow Agent. Upon demand of a successor Note Escrow Agent,
all property in the Principal Escrow Account shall be turned over and delivered
to such successor Note Escrow Agent who shall, thereupon, be bound by all of the
provisions hereof. Without limiting the provisions of Section 10 hereof, the
resigning Note Escrow Agent upon submission of proper documentation, shall be
entitled to be reimbursed by the Issuer for any expenses incurred in connection
with its resignation, transfer of the Principal Funds to a successor escrow
agent or distribution of the Principal Funds pursuant to this Section 8.
9. REPRESENTATIONS AND WARRANTIES. The Issuer hereby represents
and warrants to the Note Escrow Agent that:
9.1 To the best of its knowledge, no party other than the parties
hereto and the Noteholders have, or shall have, any lien, claim or security
interest in the Principal Funds or any part of the Principal Funds.
9.2 To the best of its knowledge, no financing statement under the
Uniform Commercial Code is on file in any jurisdiction claiming a security
interest in or describing (whether specifically or generally) the Principal
Funds or any part of the Principal Funds.
9.3 All of the information contained in the Information Sheet is, as of
the date hereof, and will be, at the time of any disbursement of the Principal
Funds, true and correct in all material respects.
9.4 The information contained in any notice given pursuant to Sections
2.2, 5.1 or 5.2 hereof shall be true and correct in all material respects on the
date such notice is given and on the date any funds are disbursed pursuant to
such notice, and that all of the information contained in any certificate given
under this Agreement shall be true and correct in all material respects on the
date such certificate is given and on the date any funds are disbursed pursuant
to such certificate.
10. FEES AND EXPENSES. The Note Escrow Agent shall be entitled
to the Note Escrow Agent Fee set forth on the Information Sheet, payable upon
execution of this Agreement. In addition, the Issuer agrees to reimburse, upon
submission of proper
6
<PAGE>
documentation, the Note Escrow Agent for any reasonable expense incurred in
connection with this Agreement.
11. INDEMNIFICATION AND CONTRIBUTION.
11.1 The Issuer (the "Indemnitor") agrees to indemnify the Note Escrow
Agent and its officers, directors, employees, agents and shareholders (jointly
and severally the "Indemnitees") against, and hold them harmless of and from,
any and all loss, liability, cost, damage and expense, including without
limitation, reasonable counsel fees, which the Indemnitees may suffer or incur
by reason of any action, claim or proceeding brought against the Indemnitees
arising out of or relating in any way to this Agreement or any transaction to
which this Agreement relates, unless such action, claim or proceeding is the
result of the willful misconduct or gross negligence of the Indemnitees.
11.2 If the indemnification provided for in this Section 11 is
applicable, but for any reason is held to be unavailable, the Indemnitor shall
contribute such amounts as are just and equitable to pay, or to reimburse the
Indemnitees for, the aggregate of any and all losses, liabilities, costs,
damages and expenses, including reasonable counsel fees, actually incurred by
the Indemnitees as a result of or in connection with, any amount paid in
settlement of, any action, claim or proceeding arising out of or relating in any
way to any actions or omission of the Indemnitor.
11.3 The provisions of this Section 11 shall survive any termination of
this Agreement, whether by disbursement of the Principal Funds, resignation of
the Note Escrow Agent or otherwise.
12. GOVERNING LAW AND ASSIGNMENT. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York and shall be
binding upon the parties hereto and their respective successors and assigns;
provided, however, that any assignment or transfer by any party of its rights
under this agreement or with respect to the Principal Funds shall be void as
against the Note Escrow Agent unless:
(a) written notice thereof shall be given to the Note
Escrow Agent; and
(b) the Note Escrow Agent shall have consented in
writing to such assignment or transfer.
The Note Escrow Agent hereby acknowledges notice of the merger (the
"Merger") of the Issuer with and into Shadow Wood Corporation, a Delaware
corporation ("Shadow Wood"), pursuant to which Shadow Wood will succeed to all
the rights and obligations of the Issuer, including those under the Notes and
under this Agreement. The Note Escrow Agent hereby consents to the Merger and is
authorized to accept and act upon any and all notices, certificates and other
communications from Shadow Wood, which will be renamed Magicworks Entertainment
Incorporated, as if such notices, certificates and communications were submitted
by the Issuer.
7
<PAGE>
13. NOTICES. All notices required to be given in connection with this
Agreement shall be sent by registered or certified mail, return receipt
requested, or by hand delivery with receipt acknowledged, or by the Express Mail
service offered by the United States Post Office, or by any overnight delivery
service, or by facsimile if confirmation of such transmission is received by the
sender thereof, and addressed, if to the Issuer or the Placement Agent, at their
respective addresses set forth on the Information Sheet, and if to the Note
Escrow Agent, at its address set forth above, to the attention of the Trust
Department.
14. SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of this Agreement or the application of
such provision to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
15. EXECUTION IN SEVERAL COUNTERPARTS. This Agreement may be
executed in several counterparts or by separate instruments and all of such
counterparts and instruments shall constitute one agreement, binding on all of
the parties hereto.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings (written or oral) of the
parties in connection herewith.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Note Escrow
Agreement as of the day and year first above written.
STERLING NATIONAL BANK & TRUST
COMPANY OF NEW YORK
By:
-------------------------------------
Name:
Title:
MAGICWORKS ENTERTAINMENT
INCORPORATED
By:
-----------------------------------
Brad Krassner
Co-Chairman of the Board and
Chief Executive Officer
By:
------------------------------------
Lee Marshall
President and Chief Operating Officer
CAPITAL GROWTH INTERNATIONAL,
L.L.C., as agent for the holders of the Notes
By:
-------------------------------------
Michael S. Jacobs
Senior Vice President
9
<PAGE>
STERLING NATIONAL BANK & TRUST COMPANY OF NEW YORK
ESCROW AGREEMENT INFORMATION SHEET
1. THE ISSUER
Name: Magicworks Entertainment Incorporated and its
successor by merger
Address: 930 Washington Avenue, 5th Floor
Miami Beach, Florida 33139
State of incorporation or organization: Florida
2. THE PLACEMENT AGENT
Name: Capital Growth International, L.L.C.
Address: 666 Steamboat Road, 2nd Floor, Greenwich,
Connecticut 06830
State of incorporation or organization: Delaware
3. THE NOTES
Rate of Interest: 10% per annum
Maturity Date: July 30, 2001
Principal Escrow Payment Dates: July 30, 1999 and every
ninety days thereafter,
provided that such day is
a business day
Principal Escrow Payments: 10.714286% of the aggregate
principal amount of Notes
outstanding on each such
Principal Escrow Payment
Date.
4. THE PRINCIPAL ESCROW ACCOUNT
Title of the Principal Escrow Account: "SNB f/b/o Magicworks
Entertainment Incorporated Note Holders' Principal Account"
Branch address where the Escrow Accounts are to be
established: New York
5. NOTE ESCROW AGENT FEE
Principal Account Escrow Fee:
(a) $2,500 upon execution of this Agreement; and
(b) $4,000 on the Maturity Date.
10
<PAGE>
EXHIBIT A
For Principal Escrow Payment Date: ____________________________ , 199_
<TABLE>
<CAPTION>
NOTEHOLDER NAME AND ADDRESS PRINCIPAL AMOUNT OUTSTANDING PRINCIPAL ESCROW PAYMENT
<S> <C> <C>
TOTALS $____________________
Less principal previously
deposited with Note Escrow
Agent with respect to any
converted Note: $(___________________)
Total $____________________
====================
</TABLE>
Dated: ________________________ , 19_
MAGICWORKS ENTERTAINMENT INCORPORATED
By:
------------------------------------
Name:
Title:
11
EXHIBIT 10.10
EQUIPMENT LEASE
THIS AGREEMENT made and entered this ____ day of August, 1994, by and
between STAR TRAX, INC., a __________________ corporation, having its principal
business address at 8 Christo Drive, Hilton Head, South Carolina 29926,
(hereinafter referred to an "Lessor"), and MAGIC PROMOTIONS, INC., a
_________________ corporation, having its principal business address at 4589
Bassett Road, Atwater, Ohio 44201, (hereinafter referred to an "leesee"), and is
for the commercial use and lease of certain personal property more fully
described herein.
WHEREAS, Lessor owns, holds, and lawfully possesses a motor vehicle
commonly known an a bus, more fully described as a 1991 Eagle, VIN
lEUBN8B12LB070371 and a motor vehicle commonly known a bus, more fully described
an a 1987 MCI, VIN lM8FDM9A2HP04168, which buses, together with any replacement
parts, additions, repairs and accessories incorporated therein and/or affixed
thereto, are hereinafter collectively referred to as the "Equipment"; and
WHEREAS, Lessor desires to lease the Equipment to Lessor on
the terms and conditions net out herein; and
WHEREAS, Lessee desires to lease the Equipment from Lessor on the terms
and conditions set forth herein.
NOW, THEREFORE, Lessee agrees that upon Lessor's acceptance hereof,
Lessee shall be bound by and shall comply with all the "Terms and Conditions of
Lease" set out below.
TERMS AND CONDITIONS OF LEASE
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor,
the Equipment on the following terms:
1. DISCLAIMER OF WARRANTIES. LESSEE ACKNOWLEDGES THAT THE
EQUIPMENT IS OF A SIZE, DESIGN, TYPE AND MANUFACTURER SELECTED BY LESSEE, THAT
LESSOR IS NOT A MANUFACTURER THEREOF OR A DEALER THEREIN, NOR IS LESSOR AN AGENT
OF A MANUFACTURER THEREOF NOR A DEALER THEREIN, THAT LESSEE LEASES THE EQUIPMENT
AS-IS AND THAT LESSOR HAS NOT MADE AND DOES NOT HEREBY MAKE ANY AGREEMENT,
REPRESENTATION OR WARRANTY WITH RESPECT TO THE MERCHANTABILITY, CONDITION,
QUALITY OR SUITABILITY OF THE EQUIPMENT IN ANY CONNECTION THEREWITH, OR FOR THE
PURPOSES AND USES OF LESSEE OR ANY OTHER AGREEMENT, REPRESENTATION OR WARRANTY
OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT, IT
BEING AGREED THAT ALL SUCH RISKS ARE TO BORNE BY LESSEE. LESSEE FURTHER
ACKNOWLEDGES AND AGREES THAT LESSOR SHALL NOT ASSUME ANY LIABILITY FOR ANY
REPRESENTATION OR WARRANTY OF ANY KIND OR CHARACTER EXPRESS OR IMPLIED, WITH
RESPECT TO THE EQUIPMENT, MADE AT ANY TIME BY THE MANUFACTURER OR SUPPLIER
THEREOF.
2. TERM OF LEASE. This Lease shall become effective on the execution
hereof by Lessor and the term of this Lease shall be for a period of twelve (12)
months commencing September __, 1994, and ending at Midnight on September __,
1995.
<PAGE>
3. PAYMENT OF RENT. Lessee shall pay to Lessor the total rental
amount of One Hundred Eight Thousand Eight Hundred Fifty-two and 00/100 Dollars
($108,852.00) on the following schedule: First and last month' Q rent of
Eighteen Thousand One Hundred Forty-two and 00/100 Dollars ($18,142.00) shall be
due upon the acceptance of this Lease by Lessor. Thereafter, and commencing on
October 1, 1994, Lessee shall pay to Lessor the monthly rental of Nine Thousand
Seventy-one and 00/100 Dollars ($9,071.00) plus all other charges due under this
Lease, on the first day of each month until all rent due hereunder has been
paid. Lessor shall deliver the Equipment to Lessee at the open of business on
September 1, 1994.
4. NON-CANCELABLE LEASE. This Lease cannot be canceled or terminated
except as expressly provided herein.
5. UNIFORM COMMERCIAL CODE FINANCING STATEMENTS. At the request of
Lessor, Lessee will join Lessor in executing Financing Statements pursuant to
the Uniform Commercial Code. Lessee authorizes Lessor and Lessor's assignee and
each subsequent assignee to file a Financing Statement signed only by Lessor or
such assignee in all places where Lessor or maid assignee deems it necessary to
protect its interests.
6. OPTION TO PURCHASE EQUIPMENT. So long as Lessee shall not be in
default hereunder, Lessee "hall have the option to purchase the Equipment hereby
leased at the expiration of this Lease for the sum of Three Hundred Twelve
Thousand Three Hundred Forty-seven and 88/100 Dollars ($312,347.88), plus
applicable taxes, if any. To exercise maid option, Lessee shall notify Lessor,
in writing, thirty (30) days prior to the expiration of the term of this Lease
of its intention to so purchase. Lessee shall also have the option to purchase
the Equipment during the first thirty (30) days of this Agreement for the price
of Three Hundred Ninety Thousand and 00/100 Dollars ($390,000.00). In the event
of such a purchase, this Lease shall be canceled and the rent due hereunder
shall be pro-rated. The purchase price shall be paid in clear funds upon the
expiration of this Lease.
7. MAINTENANCE OF CLEAR TITLE. Lessee may do nothing to encumber or
jeopardize Lessor's title in the equipment, including, but not limited to, any
pledging or encumbrance, or hypothecation of any Equipment to any bank, lender,
or other entity.
8. SURRENDER. At the expiration of this Lease if Lessor does not
exercise its option to buy the Equipment, or upon demand by Lessor made pursuant
to Paragraph 18 hereof (DEFAULT), Lessee at its expense shall return the
Equipment to Lessor in good working condition and repair, reasonable wear and
tear excepted, by delivering it to such place or on board such carrier as Lessor
may specify.
9. LESSOR'S INSPECTIONS; LABELS. Lessor shall have the right to label
or identify the Equipment in a conspicuous manner indicating Lessor's ownership
of the Equipment. Lessor shall have the right to inspect Equipment at any time,
with reasonable notice to the Lessee.
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10. REPAIRS AND MAINTENANCE; USE; ALTERATIONS. Lessee, at its sole
expense, shall keep Equipment in good working condition, repair, maintenance,
and furnish all labor, parts, mechanisms and devices required therefor. Lessee
shall use Equipment in a careful and lawful manner. Lessee shall not make any
alterations, additions or improvements to Equipment without Lessor's prior
written consent. All additions and improvements made to Equipment shall belong
to Lessor and shall not be removed without Lessor's prior written consent;
provided, however, that Lessor consent shall not be required for repairs or
routine maintenance to the Equipment by Lessee.
11. INSURANCE. Lessee shall, during the term of this Lease, purchase,
maintain and pay all premiums for (a) insurance against lose, theft, destruction
or damages of the Equipment, and all items thereof, in an amount not lens than
the full costs of replacement or cost of new or comparable Equipment; and (b)
insurance against any liability for harm to property or human life or liability
in an amount of no less than Five Million and 00/100 Dollars ($5,000,000.00).
All insurance shall be with companies and in a form acceptable to Lessor. The
proceeds under thin insurance shall be payable to the Lessor under Raid policy
or policies of insurance, and Lessee shall deliver the policies of insurance to
Lessor.
Upon the signing of this lease, Lessee shall instruct his insurance
agent, broker or company to confirm to the Lessor in writing that the necessary
insurance has been bound, and inform the Lessor of the names of the insurance
company binding this insurance, the amount of insurance and the full description
of coverage; and within thirty (30) days after the delivery date forward to the
Lessor the insurance policy or policies.
If the Lessee faire to purchase and maintain insurance in accordance
with the terms of this Lease, the Lessor shall have the right, but shall not be
obligated, to effect such insurance and to pay the premiums for name. On Lessees
failure to procure such insurance or provide evidence of same to Lessor, Lessor
has the right but not the obligation to procure insurance at Lessee's expense.
12. RISK OF LOSS. Lessee shall bear the entire risk of loss, theft,
destruction or damage of the Equipment, or any item thereof, (herein "Loss or
Damage") from any cause whatsoever. In the event of Loss or Damage, Lessee shall
notify Lessor of said Lose or Damage in writing, certified mail, return receipt
requested, within ten (10) days from the date of said Loss or Damage. Further,
in the event of such Loss or Damage to any item of Equipment, Lessee shall
replace the name with like Equipment in good condition and repair and with clear
title thereto in Lessor.
13. LIENS; TAXES. Lessee shall pay as directed by Lessor or reimburse
Lessor upon demand for all taxes, including but not limited to Bales and use
taxes (exclusive of Federal and State taxes based on Lessor's net income, unless
such net income taxes are in substitution for or relieve Lessee from any taxes
which Lessee would otherwise be obligated to pay under the terms of this
paragraph 13), fees, charges and assessments, whatsoever, however
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<PAGE>
designated, whether based on the rent or levied, assessed or imposed upon the
Equipment or upon or in respect of the manufacture, purchase, delivery,
ownership, leasing, use, return or other disposition of the Equipment, now or
hereafter levied, assessed or imposed under the authority of a federal, state or
local taxing jurisdiction, regardless of when and by whom payable. Lessor may,
in its discretion, prepare and file any and all returns required in connection
with the obligations which Lessee has assumed under this paragraph 13. Lessor
shall upon request furnish Lessee a copy of any much filing or any governmental
invoice issued covering such obligations.
14. LESSOR'S PAYMENT. Lessee agrees to reimburse, in full,
Lessor for the cost of maintaining said insurance referred to in paragraph 11,
in the event that Lessor consents to advance any insurance premium, as provided
in paragraph 11, and Lessee further agrees to reimburse, in full, Lessor for the
cost of discharging said taxes, referred to in paragraph 13, in the event that
Lessor consents to advancing such taxes, in cash within fifteen (15) days
following the date of actual payment of said insurance premiums or taxes.
15. INDEMNITY. Lessee shall indemnify Lessor and save Lessor
harmless from any and all liability, loss, damage, expense, causes of action,
suite, claims or judgments arising from injury to person or property resulting
from or based upon the actual or alleged use or operation of any and all of the
Equipment or its location or condition; and shall, at Lessee's own cost and
expense, defend any and all suits which may be brought against Lessor, either
alone or in conjunction with others, upon any such liability or claim or claims.
Lessee shall satisfy, pay and discharge any and all judgments and fines that may
be recovered against Lessor in any such action or actions, provided, however,
that Lessor shall give Lessee written notice of any such claim or demand.
16. ASSIGNMENT; OFFSET. Without Lessor's prior written consent,
Lessee shall not (a) assign, transfer, pledge, hypothecate, or otherwise dispose
of this leasehold interest in said Equipment or any item thereof, or (b) sublet
or lend said Equipment or permit it to be used by anyone other than Lessee or
Lessee's employees.
All rights of Lessor hereunder may be assigned, pledged, mortgaged,
transferred or otherwise disposed of, either in whole or in part, without notice
to Lessee but always, however, subject to the rights of Lessee under this Lease.
If Lessee is given notice of such assignment, it agrees to acknowledge receipt
thereof in writing. Lessee agrees that Lessor's interest in the Equipment may be
made subject to a security interest and that the secured party' e right, title
and interest in thin Lease to the rental payments provided herein in and to the
Equipment, shall be free from all defenses, set-offs or counter-claims of any
kind or character which Lessee may be entitled to assert against Lessor.
Notwithstanding any such assignment, Lessor warrants that Lessee shall quietly
enjoy use of the Equipment subject to the terms and conditions of this
Agreement. Subject to the foregoing, this lease inures to the benefit of and is
binding upon the heirs, legatees, personal representatives, successors and
assigns of the parties hereto.
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17. DELINQUENCY CHARGE. Should Lessee fail to pay any part of the rent
herein reserved or any other amount required to be paid to Lessor by Lessee
within three (3) days after the due date thereof, Lessee shall pay to Lessor a
late charge for internal collection costs as a service charge and interest on
such delinquent payment at the rate of five percent (5%) of such payments as are
late, but in no event shall the service charge and interest for such delinquency
be less than twenty-five dollars ($25.00).
18. DEFAULT. If Lessee shall fail to pay any rent or any other amount
herein provided for within three (3) days after the same becomes due and
payable, or if Lessee fails to perform any other provision hereof within three
(3) days after Lessor shall have demanded in writing performance thereof, or if
Lessee shall abandon the Equipment, or if any proceeding in bankruptcy,
receivership, or insolvency shall be commenced by or against the Lessee, or its
property, voluntary or involuntary, or if Lessee makes an assignment for the
benefit of creditors or if Lessee makes any misrepresentation or false statement
as to Lessees credit or financial standing in connection with the execution of
this Lease, or if an attachment or execution be levied upon any of Lessee' B
property, or if Lessee permits any other entity or person to use the said
Equipment without the prior written consent of Lessor or if Lessee defaults
under any term or condition of any other lease or contract subsequently entered
into between the parties hereto, all such events described in this paragraph are
hereinafter referred to as "default". Lessor shall have the right, but shall not
be obligated to exercise any one or more of the following remedies, which
remedies or any of them may be exercised by lessor without notice to Lessee:
(A) ACCELERATION. To declare all rent and other amounts then due or to
become due hereunder immediately due and payable and pursuant to such
acceleration to immediately recover all of such rents or other amounts then due
or to become due hereunder.
(B) RECOVERY OF SUMS DUE OR TO BECOME DUE. In lieu of acceleration,
Lessor may recover all rents and other amounts due as of the date of such
default and recover all rents and other sums that may accrue thereafter up to
and including the date of trial or judgment.
(C) REPOSSESSION. In the event of default under this Lease, as
described in Paragraph 18 above; Lessor shall be entitled to take immediate
possession of the Equipment. Lessor may enter upon Lessee's premises and may
take possession of any or all of the Equipment wherever it may be located,
without demand or notice, without any court order or other process of law and
without incurring any liability to Lessee for any damages occasioned by such
taking of possession. Any such repossession shall not constitute a termination
of this Lease unless Lessor so notifies Lessee writing. Lessor may require
Lessee in such event to assemble the Equipment and return it to Lessor at a
place to be designated by Lessor which is reasonably convenient to lessor or
Lessee. Lessor shall attempt to use reasonable means to release said Equipment
at such rental and upon such terms and conditions as Lessor's sole discretion
deems reasonable, or may sell or attempt
5
<PAGE>
to sell the Equipment at public or private sale for cash or on credit at such
price and upon such terms as Lessor in it sole discretion deems reasonable. Any
attempts on the part of Lessor to release or sell the Equipment shall not be
deemed either a waiver of or the exercises of Lessors right to accelerate all
sums due or to become due under this Lease as provided for above.
(D) LESSEE'S LIABILITY FOR REMAINING UNPAID RENTS. In the event of such
releasing of the Equipment, or any item thereof, and/or the sale of the
Equipment, or any item thereof, Lessee shall forthwith pay to Lessor any unpaid
rents remaining, which unpaid rent be shall be computed as follows:
The total of the rent for all items of Equipment which were released from date
of release to "Expiration Date of Lease", and the total of the rent for all
items of Equipment which were sold, from date of sale to "Expiration Date of
Leases; PLUS any other sums due pursuant to any other provisions of this Lease;
PLUS all costs of collection, including but not limited to repossessing,
transporting, and storing said Equipment; PLUS reasonable attorneys fees if
services of an attorney are utilized hereunder; PLUS all costs of repairing,
reconditioning, reselling or selling the Equipment; PLUS an other costs of
collection, including but not limited to reasonable commissions paid or payable
to Lessor's employees or agents for releasing or selling the Equipment; PLUS any
other costs of collection; LESS: (a) the total rentals to be received under any
lease covering the releasing of the Equipment during the balance of the existing
term of this lease; and (b) the proceeds from said sold Equipment less the
Lessor's anticipated value of said Equipment estimated as of the date of
expiration of this Lease. In the event the Equipment is disposed of by any
installment Agreement or by any releasing of the Equipment, or by successive
purchasers or lessees, none of such resales or releases shall release Lessee
from liability under this Lease, including Lessee's liability for any unpaid
rents as computed under this Lease.
(E) NO TERMINATION. Any repossession of the Equipment by Lessor or any
other action by Lessor under this paragraph shall not constitute a termination
of Lessee's obligations under this Lease unless Lessor so notifies Lessee in
writing and unless Lessor so terminates this Lease. Lessee shall remain liable
for the full performance of any and all of its obligations hereunder, including
but not limited to Lessee's obligation to pay rent and other amounts required
under this Lease.
19. WHERE MORE THAN ONE LESSEE HAS SIGNED THIS AGREEMENT. Whether as
co-lessee, guarantor or otherwise, liability hereunder shall be joint and
several and Lessor or its assigns may with the consent of any one of the Lessees
hereof, modify, extend or change any of the terms hereof without the consent or
knowledge of the others, without in any way releasing, waiving or impairing any
rights granted Lessor against such others.
20. LESSOR'S GENERAL RIGHT OF SET OFF. Lessor may hold and apply any
money, property or instruments of the Lessee or any one of them which Lessor has
or which may come into its possession and may apply, credit or off-set the same
against any amounts owing by
6
<PAGE>
the Lessees or any one of them to Lessor. Any monies, debts or other obligations
owed by the Lessees, or any one of them, to Lessors for any reason whatsoever
whether arising out of this Lease or otherwise shall be the joint and several
obligation of all of the Lessees hereunder and all such payments shall be made
by the Lessees to the Lessors in cash from their own separate funds.
21. NOTICES. Any written notice or demand under this Agreement must be
given to Lessor or Lessee by mailing it to the respective party at its address
set forth therein, or at such address as the party may provide in writing from
time to time by certified mail, return receipt requested. Notice or demand so
mailed shall be effective when deposited in the United States mail, duly
addressed and postage prepaid.
22. OWNERSHIP. Title to the Equipment shall at all times remain in
Lessor. Replacements, additions, repairs or alterations made to or placed in or
upon the Equipment shall become a component part thereof and title therein shall
immediately vest in Lessor and shall be included under the terms and provisions
of this Lease. The Equipment shall always remain and shall be admitted to be
personal property, even though attached to realty.
23. GOVERNING LAW. This Lease shall be governed and construed in
accordance with the laws of the State of Florida. The parties agree that any
action arising under their Agreement shall be tried in Hillsborough County,
Florida.
24. CONSENT TO JURISDICTION. Lessee consents to the exclusive
jurisdiction of the courts of the State of Florida in any and all actions and
proceedings between the parties hereto arising under or growing out of this
Lease and irrevocably agrees to service of process by any means authorized under
Florida law.
25. MISCELLANEOUS. This Lease shall be deemed to have been entered into
at the offices of Lessor in Florida and all performance on the part of Lessee,
including the payment of all sums due hereunder, shall be deemed to have been
required to be performed by Lessee at the offices of Lessor in Florida. Time is
of the essence of this Lease. Whenever the singular is used herein the plural is
included if applicable.
26. SEVERABILITY. If any provision of this Lease is held invalid, such
invalidity shall not affect the other provisions which can be given effect
without the invalid provision and to this end the provisions of this Lease are
declared to be severable.
27. EXPENSES OF ENFORCEMENT. Lessee shall pay to Lessor all costs and
expenses, including reasonable attorney=, fees and fees of collection agencies,
incurred by Lessor in exercising any of its rights or remedies hereunder or in
enforcing any of the terms or provisions hereof.
28. ENTIRE AGREEMENT - WAIVER. This instrument, together with other
written instruments, documents, or other Agreements executed by the parties
hereto which refers to and/or secures the performance of this rental Agreement,
constitutes the entire Agreement between Lessor and Lessee with respect to the
Equipment
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only, and it shall not be amended, altered or changed except by written
Agreement signed by lessor and any one Lessee hereto. Waiver by Lessor of any
provision hereof in any instance shall not constitute a waiver as to any other
instance.
29. AUTHORIZATION OF TRANSMITTEE. It is hereby agreed by and between
all the parties hereto that any delivery or installation of Equipment,
acceptance of said Equipment, rendering of any statement, invoice or demand for
payment or reimbursement by Lessor to any co-lessee) hereinafter referred to as
"Transmitted") shall be deemed as being made to or for all other Lessees and
Lessee hereby authorizes Transmittee to accept all deliveries and installations
of said Equipment and to acknowledge receipt for said Equipment in good
condition and repair.
30. APPLICABILITY. Lessor shall have the right at any time and
without notice to make this Lease applicable to any goods or services leased by
the Lessor to the Lessees, or any one of them or to any other person, firm,
partnership, or corporation in which any of the Lessees have any interest
whatsoever (except mere ownership of stock in a publicly owned corporation) or
which Lessees or any one of them may be an officer.
31. TIME OF ESSENCE. With respect to all provisions of this Lease, time
shall be of the essence.
32. STATEMENTS OF FINANCIAL CONDITION. Lessor may require from time to
time, and Lessee agrees to furnish, statements setting forth the financial
condition of operation of Lessee.
33. CONSEQUENTIAL DAMAGES. Lessee agrees that Lessor shall not be
liable for any consequential damages resulting from any cause whatsoever
including but not limited to the failure of Lessor to deliver any item of said
Equipment.
IN WITNESS WHEREOF, the undesigned have executed this Agreement on this
____ day of ________________________, 1995.
LESSOR: D&E ENTERPRISES
C.B.B.A., INC.
By:
- --------------------------- -----------------------------
Witness Ronald L. Anderson,
President C.B.B.A., Inc.
By:
- --------------------------- ------------------------------
Witness David Brosman, M.D.,
President, D&E Enterprises
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LESSEE: MAGIC PROMOTIONS,
INC.
By:
- --------------------------- ---------------------------
Witness Joe Marsh, President,
Magic Promotions
By:
- -------------------------- ---------------------------
Witness Lee Marshall, Vice
President, Magic Promotions
By:
- -------------------------- ---------------------------
Witness Glenn Bechdel, Vice
President, Magic Promotions
9
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the captions "Experts" and
"Selected Combined Financial Data" and to the use of our report dated September
13, 1996, with respect to the combined financial statements of Magic Promotions,
Inc. included in the Registration Statement (Form S-1) of Magicworks
Entertainment Incorporated for the registration of shares of its common stock.
Ernst & Young LLP
Miami, Florida
September 25, 1996
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the captions "Experts" and to the
use of our report dated September 11, 1996, with respect to the financial
statements of Diamond Bullet Merchandising, Inc. included in the Registration
Statement (Form S-1) of Magicworks Entertainment Incorporated for the
registration of shares of its common stock.
Ernst & Young LLP
Miami, Florida
September 25, 1996
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the captions "Experts" and to the
use of our report dated September 13, 1996, with respect to the financial
statements of Movietime Entertainment, Inc. included in the Registration
Statement (Form S-1) of Magicworks Entertainment Incorporated for the
registration of shares of its common stock.
Ernst & Young LLP
Miami, Florida
September 25, 1996
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the captions "Experts" and to the
use of our report dated September 13, 1996, with respect to the historical
supplemental pooled financial statements of Magic Promotions, Inc. and Movietime
Entertainment, Inc. included in the Registration Statement (Form S-1) of
Magicworks Entertainment Incorporated for the registration of shares of its
common stock.
Ernst & Young LLP
Miami, Florida
September 25, 1996
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the captions "Experts" and to the
use of our report dated April 11, 1996, with respect to the combined financial
statements of Magicworks Entertainment, included in the Registration Statement
(Form S-1) of Magicworks Entertainment Incorporated for the registration of
shares of its common stock.
Ernst & Young LLP
Miami, Florida
September 25, 1996
