As filed with the Securities and Exchange Commission on April 14, 1997
Registration No. 333-13127
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST - EFFECTIVE
AMENDMENT NO. 1 TO
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. [_]
----------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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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>
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, APRIL 14, 1997
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 (the "Shares") of Common Stock, $.001 par value (the
"Common Stock"), 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 the
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 $3.00
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 listed on the Nasdaq 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 American Stock Exchange ("AMEX"). On
April 1, 1997, the last reported bid price of the Common Stock was $4.00
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 OTC
Bulletin Board 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
<PAGE>
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 APRIL __, 1997
<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 Securities and Exchange
Commission (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 at http://www.sec.gov. Quotations relating to the
Company's Common Stock appear on the OTC Bulletin Board, and reports, proxy
statements and other information concerning the Company may 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 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 MERGER AS DEFINED BELOW AND THE CONSOLIDATION DESCRIBED UNDER "CONSOLIDATION
TRANSACTIONS AND S CORPORATION DISTRIBUTIONS"
THE COMPANY
GENERAL
Magicworks Entertainment Incorporated (the "Company"), through its
subsidiaries and related partnerships, 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 addition, the Company's strategy with respect to its
theatrical production business was and continues to focus upon production of
popular, proven hits rather than first run productions.
The Company is the successor by merger to the business of Magicworks
Entertainment Incorporated, a Florida corporation ("MEI"). On July 29, 1996,
certain of the Company's predecessors in interest consummated a business
combination pursuant to which their operations were consolidated (the
"Consolidation"). On the same date, MEI issued and sold 400.06 units
("Units"), each unit consisting of an unsecured senior convertible note in the
principal amount of $12,500 bearing interest at a rate of 10% per annum
(collectively, the "Notes"), and 5,000 shares of its common stock, par value
$.001 per share (the "MEI Common Stock"), in a private placement (the
"Private Placement") from which it received net proceeds in the amount of
$8,782,832. On September 27, 1996, the Company sold an additional 14.8 Units
pursuant to the Private Placement from which it received additional net proceeds
in the amount $333,000.
Upon completion of the Private Placement, MEI merged with and into the
Company (the "Merger"). In accordance with the terms of the Merger, each share
of MEI Common Stock issued and outstanding was converted into one share of the
Company's common stock, $.001 par value (the "Common Stock"). The Company was
the surviving corporation in the Merger and investors in the Private Placement
became security holders of the Company. Upon consummation of the Merger, the
Board of Directors and management of MEI were elected to corresponding positions
with the Company and the Company changed its name from Shadow Wood Corporation
to Magicworks Entertainment Incorporated.
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Over the past several years, the Company has 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.
In keeping with its strategy to expand its 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"), a company that has developed an interactive telecommunications
service that provides digital telephone delivery systems to movie theaters. The
Company has decided recently to reduce funding for MovieTime and plans to phase
out MovieTimes' operations.
On December 31, 1996, the Company acquired all of the issued and
outstanding capital stock of the Space Agency Concerts and Theatricals, which
operates under the name Space Agency, Inc. ("Space Agency"). Space Agency
produces Broadway subscriptive series in Salt Lake City, Utah, and Vancouver and
Calgary, Canada and has managed or promoted concerts and musicals in more than
50 North American cities. Both acquisitions have been accounted for as poolings
of interests and, accordingly, the historical results of operations of the
Company have been restated to include the accounts of Movietime and Space Agency
since inception.
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Further, as of October 1996, Touring Artists Group, Inc., a
wholly-owned subsidiary of the Company ("TAG"), and two unrelated entities
entered into a limited liability company agreement (the "LLC Agreement") to form
The Booking Group, LLC, a New York limited liability company (the "Booking
Group"). Pursuant to the LLC Agreement, TAG owns a 33 1/3% interest in the
Booking Group.
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 listed on the OTC
Bulletin Board. The Company has applied
for the listing of the Common Stock on
AMEX.
Trading Symbol....................... "MAJK"
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SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data set forth below has been
derived from the consolidated financial statements of the Company. The
consolidated financial statements as of and for the year ended December 31, 1996
have been audited by Arthur Andersen LLP, independent certified public
accountants, and such consolidated financial statements and the report thereon
are included elsewhere in this registration statement. The combined financial
statements of Magicworks Entertainment as of December 31, 1995 and for the two
years in the period ended December 31, 1995 have been audited by Ernst & Young
LLP, independent certified public accountants, and the report thereon are
included elsewhere in this Registration Statement. The combined financial
statements as of and for the year ended December 31, 1992 are derived from the
unaudited consolidated 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 following summary financial data includes the accounts of the
Company and its subsidiaries and partnerships as more fully described in Note 1
to the Consolidated Financial Statements. In 1996 the Company acquired MovieTime
and Space Agency in transactions accounted for as poolings of interests. The
historical financial statements of the Company have been restated to include the
accounts of MovieTime and Space Agency since the Company's inception.
The selected financial data set forth below should be read in
conjunction with the consolidated financial statements of the Company contained
elsewhere herein, including the notes thereto.
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YEAR ENDED DECEMBER 31,
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1992 1993 1994 1995 1996
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STATEMENT OF OPERATIONS DATA:
Revenues:
Production.......................... $ 662,222 $18,250,149 $23,346,244 $31,638,078 $30,255,931
Promotion........................... 3,663,269 19,069,954 13,283,612 17,406,082 36,310,528
Merchandising....................... 2,368,060 2,461,577 2,338,619 2,474,214 2,686,238
Other............................... 831,605 1,473,103 1,560,837 2,191,605 2,330,418
------------ ------------ -------------- ----------- --------------
Total revenues.......................... 7,525,156 41,254,783 40,529,312 53,709,979 71,583,115
------------ ------------ -------------- ----------- --------------
Operating expenses:
Production.......................... 651,645 15,281,557 21,783,840 29,251,937 28,019,575
Promotion........................... 2,635,949 16,361,755 9,909,580 13,505,270 30,765,158
Salaries, wages and benefits........ 679,244 1,692,190 1,935,974 2,649,670 3,699,334
Cost of goods sold.................. 1,929,003 1,860,777 1,824,102 1,462,364 1,933,983
General and administrative.......... 994,054 1,272,826 1,548,202 2,252,106 3,892,705
------------ ------------ -------------- ----------- --------------
Total operating expenses................ 6,889,895 36,469,105 37,001,698 49,121,347 68,310,755
------------ ------------ -------------- ----------- --------------
Income from operations.................. 635,261 4,785,678 3,527,614 4,588,632 3,272,360
Other income (expense):
Interest income..................... 1,296 35,166 64,781 310,668 286,596
Interest expense.................... (77,294) (79,767) (20,011) (132,192) (491,630)
Income from investments
in partnerships................... 440,963 364,976 417,071 418,679 83,922
------------ ------------ -------------- ----------- --------------
Income before minority interests
and provision for income taxes.... 1,000,226 5,106,053 3,989,455 5,185,787 3,151,248
Minority interests.................. 3,640 (1,828,358) (1,460,444) (1,446,888) 11,731
------------ ------------ -------------- ----------- --------------
Income before provision for income taxes 1,003,866 3,277,695 2,529,011 3,738,899 3,162,979
Provision for income taxes.............. - - - - (597,216)
------------ ------------ -------------- ----------- --------------
Net income before pro forma income
taxes for periods prior to
July 29, 1996 1,003,866 3,277,695 2,529,011 3,738,899 2,565,763
Pro forma income taxes(1)............... (391,507) (1,278,301) (986,314) (1,458,170) (1,161,758)
------------ ------------ -------------- ----------- --------------
Pro forma net income(1)................. $612,359 $1,999,394 $1,542,697 $2,280,729 $1,404,005
============ ============ ============== =========== ==============
Pro forma net income
per common share.................... $ .03 $ .09 $ .07 $ .10 $ .06
============ ============ ============== =========== ==============
Weighted Average Common Shares
outstanding......................... 21,831,180 21,831,180 21,831,180 21,831,180 25,080,885
============ ============ ============== =========== ==============
YEAR ENDED DECEMBER 31,
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1992 1993 1994 1995 1996
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BALANCE SHEET DATA:
Working capital..................... $1,208,959 $ 792,113 $2,309,935 $ 1,379,721 $ 6,633,127
Total assets........................ 3,137,895 4,152,388 8,396,494 11,717,054 14,854,716
Total liabilities................... 2,483,147 2,510,397 5,897,370 9,487,822 10,247,611
Total stockholders' equity.......... 654,748 1,641,991 2,499,124 2,229,232 4,607,105
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(1) Reflects the effect of a pro forma provision for income taxes on
historical statement of operations data at 39% which would have been
recorded had the Company been a taxable entity for all periods presented.
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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 AND SECTION 21E OF THE EXCHANGE 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
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<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 83.5% 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. The Company, which acquired
MovieTime in August 1996, has decided recently to reduce funding for MovieTime
and plans to phase out MovieTimes' operations. See "Business."
-8-
<PAGE>
AUTHORIZATION OF PREFERRED STOCK. The Company's Certificate
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 ACTIVE TRADING MARKET; DISCLOSURE RELATING TO LOW PRICED
STOCKS. The Common Stock presently has no active trading market. There can be no
assurance that a trading market will develop or, if developed, that it will be
maintained. The Company has applied for listing of the Common Stock on Amex.
However, there can be no assurance that the Company will succeed in obtaining a
listing for the Common Stock on AMEX, or that if it is successful in obtaining
such listing that it will be able to meet the maintenance criteria for continued
quotation of the Common Stock on AMEX. If the Common Stock were to be listed and
subsequently removed from AMEX, trading, if any, in the Common Stock might
thereafter have to be resumed in the over-the-counter market in the so-called
"pink sheets" or, if then available, be conducted in the Nasdaq National Market,
the Nasdaq SmallCap Market or another exchange. 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, as the Common Stock has no active trading market
and the trading price of the Common Stock is less than $5.00 per share, trading
in the Common Stock is subject to the requirements of Rule 15g-9 promulgated
under 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 Common Stock is also subject to the Securities Enforcement
Remedies and Penny Stock Reform Act of 1990, which requires additional
disclosure in connection with any trades involving a stock defined as a penny
stock (generally, according to recent regulations adopted by the 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
-9-
<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 be listed Amex, or if listed, that the Company will be able to
maintain such listing. If the Common Stock continues to have a market price of
less than $5.00 and fails to be listed on Amex or another active trading market,
or, if so listed, is subsequently delisted, the Common Stock will be treated as
a penny stock.
SHARES ELIGIBLE FOR FUTURE SALE. 22,763,179 of the Company's
24,394,300 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. As a result, all of the shares being registered
hereunder will be freely tradeable without registration or other restrictions
under the Securities Act following their offering and sale under this
prospectus. 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
19,892,457 shares of authorized but unissued Common Stock available for issuance
without further stockholder approval. As a result, any issuance of additional
shares of Common Stock may cause current stockholders 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."
-10-
<PAGE>
THE MERGER
GENERAL
In conjunction with the initial closing of the Private
Placement on July 29, 1996, the Company consummated the Merger. The Company was
the surviving entity in the Merger. Upon consummation of the Merger the Board of
Directors and management of MEI were elected to corresponding positions with the
Company. Pursuant to the Merger, the Company issued one share of Common Stock
for each share of MEI Common Stock then outstanding, and changed its name from
Shadow Wood Corporation 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
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 29, 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.
S CORPORATION DISTRIBUTIONS
Prior to the consummation of the Consolidation, the
Constituent Corporations elected to be treated as S corporations for federal and
state income tax purposes. As a result, the Constituent Corporations paid no
federal or state income tax, and all earnings of the Constituent Corporations
were subject to federal and state taxation directly at the shareholder level.
The practice of 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 Corpoations). No further S corporation
distributions will be made. Effective upon consummation of the Corsolidation,
the Constituent Corporations ceased to be treated as S corporations, and,
accordingly, are now fully subject to federal and state income tax.
-11-
<PAGE>
The accompanying consolidated statements of operations include pro forma income
taxes due for periods prior to the Merger as if the Company had 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 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 $1.0 million, all of which will be borne
by the Company.
PRICE RANGE OF COMMON STOCK
The 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. Such
over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not necessarily represent actual
transactions. Prior to the Merger, there was no active trading market for the
Common Stock.
HIGH LOW
- -----------------------------------------------------------------------------
1996
Third Quarter $4.25 $3.50
Fourth Quarter $4.00 $3.00
1997
First Quarter $4.25 $2.75
On April 1, 1997, the last reported bid price of the Common
Stock was $4.00 per share. As of that date, there were approximately 250
holders of record of the Common Stock.
-12-
<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. 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.
-13-
<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1996, the
capitalization of the Company.
DECEMBER 31, 1996
------------------
Short-term debt................................. $ 302,956
-------------
Long-term debt.................................. 6,177,492
-------------
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,
24,394,300 shares issued and
outstanding(1)...................... $ 24,394
Additional paid in capital...................... 4,151,026
Retained earnings............................... 431,685
-------------
Total stockholders' equity ..................... 4,607,105
-------------
Total capitalization............................ $11,087,553
=============
- --------------------------------------
(1) Does not include (i) 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 (ii)
1,750,000 shares issuable upon exercise of options granted and
to be granted under the Plans and (iii) 500,000 shares
issuable under a settlement agreement. See "Business-Legal
Proceedings," "Management Stock Option Plans" and "Description
of Securities."
-14-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below has been
derived from the consolidated financial statements of the Company. The
consolidated financial statements as of and for the year ended December 31, 1996
have been audited by Arthur Andersen LLP, independent certified public
accountants, and such consolidated financial statements and the report thereon
are included elsewhere in this registration statement. The combined financial
statements of Magicworks Entertainment as of December 31, 1995 and for the two
years in the period ended December 31, 1995 have been audited by Ernst & Young
LLP, independent certified public accountants, and such consolidated financial
statements and the report thereon are included elsewhere in this Registration
Statement. The combined financial statements as of and for the year ended
December 31, 1992 are derived from the unaudited consolidated 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 following selected financial data includes the accounts of the
Company and its subsidiaries and partnerships as more fully described in Note 1
to the Consolidated Financial Statements. In 1996 the Company acquired MovieTime
and Space Agency in transactions accounted for as poolings of interests. The
historical financial statements of the Company have been restated to include the
accounts of MovieTime and Space Agency since the Company's inception.
The selected financial data set forth below should be read in
conjunction with the consolidated financial statements of the Company contained
elsewhere herein, including the notes thereto.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1992 1993 1994 1995 1996
------------ ------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Production.......................... $ 662,222 $18,250,149 $23,346,244 $31,638,078 $30,255,931
Promotion........................... 3,663,269 19,069,954 13,283,612 17,406,082 36,310,528
Merchandising....................... 2,368,060 2,461,577 2,338,619 2,474,214 2,686,238
Other............................... 831,605 1,473,103 1,560,837 2,191,605 2,330,418
------------ ------------ -------------- ----------- --------------
Total revenues.......................... 7,525,156 41,254,783 40,529,312 53,709,979 71,583,115
------------ ------------ -------------- ----------- --------------
Operating expenses:
Production.......................... 651,645 15,281,557 21,783,840 29,251,937 28,019,575
Promotion........................... 2,635,949 16,361,755 9,909,580 13,505,270 30,765,158
Salaries, wages and benefits........ 679,244 1,692,190 1,935,974 2,649,670 3,699,334
Cost of goods sold.................. 1,929,003 1,860,777 1,824,102 1,462,364 1,933,983
General and administrative.......... 994,054 1,272,826 1,548,202 2,252,106 3,892,705
------------ ------------ -------------- ----------- --------------
Total operating expenses................ 6,889,895 36,469,105 37,001,698 49,121,347 68,310,755
------------ ------------ -------------- ----------- --------------
Income from operations.................. 635,261 4,785,678 3,527,614 4,588,632 3,272,360
Other income (expense):
Interest income..................... 1,296 35,166 64,781 310,668 286,596
Interest expense.................... (77,294) (79,767) (20,011) (132,192) (491,630)
Income from investments
in partnerships................... 440,963 364,976 417,071 418,679 83,922
------------ ------------ -------------- ----------- --------------
Income before minority interests
and provision for income taxes.... 1,000,226 5,106,053 3,989,455 5,185,787 3,151,248
Minority interests.................. 3,640 (1,828,358) (1,460,444) (1,446,888) 11,731
------------ ------------ -------------- ----------- --------------
Income before provision for income taxes 1,003,866 3,277,695 2,529,011 3,738,899 3,162,979
Provision for income taxes.............. - - - - (597,216)
------------ ------------ -------------- ----------- --------------
Net income before pro forma income
taxes for periods prior to
July 29, 1996 1,003,866 3,277,695 2,529,011 3,738,899 2,565,763
Pro forma income taxes(1)............... (391,507) (1,278,301) (986,314) (1,458,170) (1,161,758)
------------ ------------ -------------- ----------- --------------
Pro forma net income(1)................. $612,359 $1,999,394 $1,542,697 $2,280,729 $1,404,005
============ ============ ============== =========== ==============
Pro forma net income
per common share.................... $ .03 $ .09 $ .07 $ .10 $ .06
============ ============ ============== =========== ==============
Weighted average common shares
outstanding......................... 21,831,180 21,831,180 21,831,180 21,831,180 25,080,885
============ ============ ============== =========== ==============
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1992 1993 1994 1995 1996
------------ ------------ -------------- ----------- --------------
BALANCE SHEET DATA:
Working capital..................... $1,208,959 $ 792,113 $2,309,935 $ 1,379,721 $ 6,633,127
Total assets........................ 3,137,895 4,152,388 8,396,494 11,717,054 14,854,716
Total liabilities................... 2,483,147 2,510,397 5,897,370 9,487,822 10,247,611
Total stockholders' equity.......... 654,748 1,641,991 2,499,124 2,229,232 4,607,105
- -----------------------------------
</TABLE>
(1) Reflects the effect of a pro forma provision for income taxes on
historical statement of operations data at 39% which would have been
recorded had the Company been a taxable entity for all periods presented.
-15-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company, through its subsidiaries and related partnerships,
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 addition, the
Company's strategy with respect to its theatrical production business was and
continues to focus upon production of popular, proven hits rather than first run
productions.
The Company is the successor by merger to the business of Magicworks
Entertainment Incorporated, a Florida corporation ("MEI"). On July 29, 1996,
certain of the Company's predecessors in interest consummated the Consolidation.
On the same date, MEI issued and sold 400.06 Units in the Private Placement from
which it received net proceeds in the amount of $8,782,832. On September 27,
1996, the Company sold an additional 14.8 Units pursuant to the Private
Placement from which it received additional net proceeds in the amount $333,000.
Upon completion of the Private Placement, MEI merged with and into the
Company. In accordance with the terms of the Merger, each share of MEI Common
Stock issued and outstanding was converted into one share of the Company's
Common Stock. The Company was the surviving corporation in the Merger and
investors in the Private Placement became security holders of the Company. Upon
consummation of the Merger, the Company changed its name from Shadow Wood
Corporation to Magicworks Entertainment Incorporated.
GENERAL
The Company's revenues are derived principally from its production and
promotion activities, which, in 1996, accounted for approximately 42.3% and
50.7%, respectively, of the Company's total revenues.
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 historically derived a significant
percentage of its revenues and profits from one production, "The Magic of David
Copperfield." 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.
-16-
<PAGE>
The majority of the Company's operating expenses consist of the
operating costs of its concert and theatrical productions and the amortization
of preproduction costs. 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, 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.
The accompanying consolidated financial statements include the accounts
of the following partnerships involved in equity and non-equity theatrical
production: The Judas Company ("Judas") which was formed in 1992, Dolliko, which
was formed in 1994, Impossible Touring Company ("Impossible") which was formed
in 1993, Ain't Misbehavin' Company ("Ain't Misbehavin") which was formed in 1995
and The Deathtrap Company ("Deathtrap") which was formed in 1996. Although at
December 31, 1996, the Company held less than a 51% ownership interest in these
partnerships, their results are consolidated as the Company exercises control
over the operating and financial policies of these partnerships, both
contractually and in practice, and such control is not expected to be temporary.
The percentages of these partnerships not owned by the Company are presented as
minority interests in the consolidated financial statements.
The following table sets forth the shows that the Company either
produced or co-produced in each year from 1992 through 1996:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1992 1993 1994 1995 1996
Phantom of the Opera Phantom of the Opera Jesus Christ Superstar Jesus Christ Superstar A Chorus Line
David Copperfield David Copperfield Man of La Mancha Hello, Dolly! Ain't Misbehavin'
Jesus Christ Superstar Hello, Dolly! David Copperfield Deathtrap
Man of La Mancha David Copperfield Nutcracker on Ice Styx/Lynyrd Skynyrd
Nutcracker on Ice She Loves Me Jesus Christ Superstar
She Loves Me Ain't Misbehavin' Hello, Dolly!
David Copperfield
Nutcracker on Ice
She Loves Me
Total for 1992: 2 Total for 1993: 4 Total for 1994: 6 Total for 1995: 6 Total for 1996: 9
</TABLE>
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenues increased by $17.9 million, or 33.3%, to $71.6 million in 1996
from $53.7 million in 1995, primarily because the Company produced or promoted
more shows in 1996 including the Company's promotion of "Phantom of the Opera"
in 1996 and the Southeast Asia tour of "David Copperfield."
-17-
<PAGE>
Production revenue decreased by $1.4 million, or 4.4%, to $30.3 in 1996
from $31.6 million in 1995. The decrease resulted primarily from decreased
revenues from "Hello, Dolly!" (which ended its tour in January 1996 and
recommenced touring in September of 1996) and "Jesus Christ Superstar" which
went on hiatus during the summer of 1996. Revenue from "Hello, Dolly!" decreased
by $9.1 million, to $1.5 million in 1996 from $10.6 million in 1995. This
decrease was partially offset by the commencement of the concert division
productions of the "Styx/Kansas" and "The Lynyrd Skynyrd/Doobie Brothers" tours
and productions of "Cufolk Dance Troup" and "The Night in New Orleans Tour."
Promotion revenue increased by $18.9 million, or 108.6%, to $36.3
million in 1996 from $17.4 million in 1995, primarily as a result of the
successful promotions of "The Phantom of the Opera" and the Southeast Asia tour
of "David Copperfield."
Merchandising revenues increased $0.2 million, or 8.6%, to $2.7 million
in 1996 from $2.5 million in 1995. In 1996, the Company provided merchandising
for fourteen shows as opposed to eight in 1995.
As a percentage of revenues, operating expenses increased to 95.4% in
1996 from 91.5% in 1995 as a result of the Company increasing its overhead due
to costs associated with being public as well as incurring a full year of start
up expenses for MovieTime in addition to the costs described below.
Production expenses decreased by $1.2 million, or 4.2%, to $28.0
million in 1996 from $29.3 million in 1995, primarily as a result of the
significant decrease in expenses for "Hello, Dolly!," and "Jesus Christ
Superstar" partially offset by increased expenses from the commencement of the
concert division described above. As a percentage of production revenues,
production expenses remained relatively constant, at 92.6% in 1996 and 92.5% in
1995.
Promotion expenses increased by $17.3 million, or 127.8%, to $30.8
million in 1996 from $13.5 million in 1995, primarily from the proportional
increase from the successful promotion of "The Phantom of the Opera" and "David
Copperfield". As a percentage of promotion revenues, promotion expenses
increased to 84.7% in 1996 from 77.6% in 1995, primarily from the increased
costs associated with promoting concerts dates which commenced in 1996.
Salaries, wages and benefits increased by $1.1 million, or 39.6%, to
$3.7 million in 1996 from $2.6 million in 1995. The increase resulted from
non-recurring pension expense of $0.1 million in connection with the termination
of the Company's status as an S-Corporation, the hiring of five additional
employees in the transportation division, two additional marketing employees,
and six additional administrative employees in anticipation of future growth. As
a percentage of revenues, salaries, wages and benefits increased to 5.2% in 1996
as compared to 4.9% in 1995.
As a percentage of merchandising revenue, the costs of goods sold
increased to 72.0% in 1996 from 59.1% in 1995, primarily due to a $0.1 million
write down of merchandise that occurred in the fourth quarter of 1996.
General and administrative expenses increased by $1.6 million, or
72.8%, to $3.9 million in 1996 from $2.3 million in 1995. The increase was due
to inclusion of a full year of expenses in 1996 from MovieTime compared to only
seven months of operations in 1995 ($0.5 million in 1996 compared to $0.2
million in 1995), additional depreciation on the Company's buses, five of which
were acquired in the fourth quarter of 1995 and the commencement of the concerts
division which incurred $0.5 million in expenses in 1996. Also included are
expenses associated with being a public company that were not present in the
preceding year.
Interest income remained relatively constant at $0.3 million in 1996
and 1995.
The Company had interest expense of $0.5 million in 1996 compared to
$0.1 million in 1995. The increase was attributable to the interest relating to
the Notes issued in the Private Placement.
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Income from investments in partnerships not consolidated by the Company
decreased by $0.3 million to $0.1 million in 1996 from $0.4 million in 1995. The
decrease is attributable to the closing of the "Nutcracker" and "Tommy" in 1996
partially offset by the commencement of "Chorus Line."
Minority interests decreased by approximately $1.5 million, to $11,000
in 1996 from $1.5 million in 1995. The expense related to the portions of
"Hello, Dolly!," "She Loves Me," "Jesus Christ Superstar," "Ain't
Misbehavin'-Non Union Tour" and "Deathtrap" not owned by the Company were
insignificant in 1996. In 1995, the expenses related to such interests in "Jesus
Christ Superstar," "Hello Dolly!", "Ain't Misbehavin'-Union Tour" and "She Loves
Me" increased significantly due to higher minority profits earned with respect
to these shows. The amount of minority interest liability fluctuates depending
on the timing of productions and distributions.
Income before provision for income taxes decreased by $0.5 million to
$3.2 million in 1996 from $3.7 million in 1995 as a result of the foregoing in
addition to the $0.6 million tax charge incurred by the Company as a result of
its switch from S-Corporation status to C-Corporation status in 1996. Pro forma
net income decreased by $0.8 million to $1.4 in 1996 from $2.3 in 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues increased by $13.2 million, or 32.5%, to $53.7 million in 1995
from $40.5 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." In addition,
the Company promoted a successful run of "Les Miserables" in 1995.
Production revenue increased by $8.3 million, or 35.5%, to $31.6
million in 1995 from $23.3 million in 1994. The increase resulted primarily 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 Star Superstar" from $14.7
million in 1994 to $10.4 million in 1995.
Promotion revenue increased by $4.1 million, or 31.0%, to $17.4 million
in 1995 from $13.3 million in 1994, primarily from successful promoter dates of
"Les Miserables."
Merchandising revenues increased by $0.2 million, or 5.8%, to $2.5
million in 1995 from $2.3 million in 1994. In 1995, the Company provided
merchandising for eight shows, as opposed to nine shows in 1994. Revenue
increased, however, as a result of the increase in the number of tour dates for
David Copperfield in 1995.
As a percentage of revenues, operating expenses stayed relatively
constant (91.5% in 1995 compared to 91.3% in 1994) as a result of the Company's
increase in overhead, which increase was proportionate to the Company's increase
in revenues during the period.
Production expenses increased by $7.5 million, or 34.3%, to $29.3
million in 1995 from $21.8 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 production revenues, production expenses remained relatively
constant, at 92.5% in 1995 and 93.3% in 1994.
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Promotion expenses increased by $3.6 million, or 36.3%, to $13.5
million in 1995 from $9.9 million in 1994, primarily from the successful run of
"Les Miserables" in 1995. As a percentage of promotion revenues, promotion
expenses remained relatively constant at 77.6% in 1995 and 74.6% in 1994.
Salaries, wages and benefits increased by $0.7 million, or 36.8%, to
$2.6 million in 1995 from $1.9 million in 1994. The increase resulted from
additional personnel, primarily in the booking and promotional divisions, as
well as additional personnel to oversee the "David Copperfield" tour. As a
percentage of revenues, salaries, wages and benefits increased to 4.9% in 1995
as compared to 4.8% 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 administrative expenses increased by $0.7 million, or
45.5%, to $2.3 million in 1995 from $1.6 million in 1994. The primary reason for
the increase related to increased maintenance and repairs for tour buses and
incremental costs associated with leasing of additional buses in 1995 and the
expansion of the box office operations in Salt Lake City.
Interest income increased by $0.2 to $0.3 million in 1995 from $0.1
million in 1994 primarily from advance ticket sales held by the Company in
interest bearing accounts.
The Company had interest expense of $0.1 million in 1995 compared to
$20,000 in 1994. The increase was attributable to the increase in the amount of
outstanding bus loans the Company incurred in 1995.
Income from investments in partnerships not produced by the Company
remained stable at $0.4 million in 1995 and 1994.
Minority interests were 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 before provision for income taxes increased by $1.2 million
(47.8%) as a result of the foregoing, to $3.7 million in 1995 from $2.5 million
in 1994. Pro forma net income increased by $0.7 million (47.8%) to $2.3 million
in 1995 from $1.6 million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had working capital of $6.6 million
compared to $1.4 million at December 31, 1995. Through July 1996, the Company
financed its operations primarily through borrowings and cash flow from
operations. During 1996, the Company received net proceeds of $9.1 million from
the sale of 414.86 Units in the Private Placement.
During 1996, the Company made S-Corporation distributions aggregating
$4,211,972, as compared to $4,171,129 in 1995, to the stockholders of the
Constituent Corporations. No further S-Corporation distributions will be made.
The Company has a line of credit and other short term borrowings which
are payable on demand (the "Credit Line"). The Credit Line provides for
short-term borrowings of up to $1.2 million with interest at prime plus 3/4%.
The Credit Line is collateralized by substantially all of the Company's assets
and is guaranteed by certain executive officers of the Company. At December 31,
1996, the full amount of the Credit Line was available for borrowing. The
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Company's remaining indebtedness consists of $1.3 million, collateralized by
buses used in the Company's business, and $5.2 million of Notes sold in the
Private Placement.
The Company's principal anticipated capital expenditures over the next
several years will relate to acquisitions, if suitable opportunities arise, and
the production of additional theatrical productions.
Net cash provided by operating activities decreased in 1996 to $1.5
million as compared to $4.9 million in 1995 and $5.6 million in 1994. The
decrease in net cash provided by operating activities in 1996 related to a
decrease in advance ticket sales and an increase in accounts receivable,
partially offset by an increase in accounts payable and accrued liabilities. The
decrease in net cash provided by operating activities in 1995 related primarily
to a substantial increase in preproduction costs during the period relating
primarily to "Hello, Dolly!" offset in part by an increase in accounts payable
and receipt of advance ticket sales.
Net cash used in investing activities totaled $1.7 million in 1996, as
compared to $0.9 million in 1995 and $0.4 million in 1994. The increase in cash
used in investing activities for 1996 related primarily to the payment of loans
due to affiliates and investments in new theatrical shows for 1997 as well as
the purchase of three buses. The increase in cash used in investing activities
in 1995 related primarily to the purchase of five new buses.
Net cash provided (used) by financing activities totaled $1.5 million
in 1996 as compared to $(3.3) million in 1995 and $(2.1) million in 1994. During
1996 the Company received net proceeds from the Private Placement of
approximately $9.1 million after deduction of all fees and expenses associated
therewith, offset by the repayment of certain indebtedness under the Line of
Credit. The increase in cash used in financing activities in 1995 from 1994
related primarily to the additional distributions made to principals of the
Company and to minority partners, partially offset by an increase in proceeds
received from debt.
CHANGE IN ACCOUNTANTS
In November 1996, the Company's Board of Directors replaced Ernst & Young
LLP, certified public accountants ("Ernst & Young"), with Arthur Andersen LLP as
its independent auditor. The report of Ernst & Young on the combined financial
statements of Magicworks Entertainment as of and for the three years ended
December 31, 1995 contained no adverse opinion or disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or accounting
principles and there were no disagreements with Ernst & Young on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure which, if not resolved to the satisfaction of Ernst & Young,
would have caused it to make reference thereto in its report on the combined
financial statements of Magicworks Entertainment for such years.
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BUSINESS
GENERAL
The Company, through its subsidiaries and related partnerships,
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 addition, the
Company's strategy with respect to its theatrical production business was and
continues to focus upon production of popular, proven hits rather than first run
productions.
BACKGROUND
The Company is the successor by merger to the business of MEI. On July
29, 1996, certain of the Company's predecessors in interest consummated the
Consolidation pursuant to which their operations were consolidated. On the same
date, the Company issued and sold 400.06 Units ("Units"), each unit consisting
of a Note in the principal amount of $12,500 bearing interest at a rate of 10%
per annum and 5,000 shares of MEI Common Stock in the Private Placement from
which it received net proceeds in the amount of $8,782,832. On September 27,
1996, the Company sold an additional 14.8 Units pursuant to the Private
Placement from which it received additional net proceeds in the amount $333,000.
Upon completion of the Private Placement, MEI merged with and into the
Company. In accordance with the terms of the Merger, each share of MEI Common
Stock issued and outstanding was converted into one share of the Company's
Common Stock. The Company was the surviving corporation in the Merger and
investors in the Private Placement became security holders of the Company. Upon
consummation of the Merger, the Company changed its name from Shadow Wood
Corporation to Magicworks Entertainment Incorporated.
GROWTH STRATEGY
Over the past several years, the Company has 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.
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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.
In keeping with its strategy to expand its 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"), a company that has developed an interactive telecommunications
service that provides digital telephone delivery systems to movie theaters. The
Company has decided recently to reduce funding for MovieTime and plans to phase
out MovieTimes' operations.
On December 31, 1996, the Company acquired all of the issued and
outstanding capital stock of the Space Agency Concerts and Theatricals, which
operates under the name Space Agency, Inc. ("Space Agency"). Space Agency
produces Broadway subscriptive series in Salt Lake City, Utah, and Vancouver and
Calgary, Canada and has managed or promoted concerts and musicals in more than
50 North American cities. Both acquisitions have been accounted for as poolings
of interests and, accordingly, the historical results of operations of the
Company have been restated to include the accounts of Movietime and Space Agency
since inception.
Further, as of October 1996, Touring Artists Group, Inc., a
wholly-owned subsidiary of the Company ("TAG"), and two unrelated entities
entered into a limited liability company agreement (the "LLC Agreement") to form
The Booking Group, LLC, a New York limited liability company (the "Booking
Group"). Pursuant to the LLC Agreement, TAG owns a 33 1/3% interest in the
Booking Group.
THE THEATRICAL PRODUCTION BUSINESS
The development and production of musical stage productions requires a
substantial investment of time and capital. A period of 12 to 24 months
typically elapses between the time a producer acquires the theatrical stage
rights to a production and the date on which the production is first performed
before the public.
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,
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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.
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."
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Since 1992, the Company has acted as producer or co-producer for, or
has become contractually obligated to produce, the following productions:
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997*
<S> <C> <C> <C> <C> <C>
PHANTOM OF THE PHANTOM OF THE JESUS CHRIST JESUS CHRIST A CHORUS LINE SKOAL "ROAR"
OPERA OPERA SUPERSTAR SUPERSTAR TOUR
AIN'T MISBEHAVIN'
DAVID COPPERFIELD DAVID COPPERFIELD MAN OF LA HELLO, DOLLY! JEKYLL & HYDE
MANCHA DEATHTRAP
JESUS CHRIST DAVID THE SOUND OF
SUPERSTAR HELLO, DOLLY! COPPERFIELD STYX/SKYNYRD MUSIC
MAN OF LA DAVID COPPERFIELD NUTCRACKER ON JESUS CHRIST INTERNATIONAL
MANCHA ICE SUPERSTAR WARNER BROTHERS
NUTCRACKER ON ICE FAMILY ICE SHOW
SHE LOVES ME HELLO, DOLLY!
SINGIN' IN THE
AIN'T DAVID COPPERFIELD RAIN
MISBEHAVIN'
NUTCRACKER ON ICE A CHORUS LINE
SHE LOVES ME SUMMER DAZE
TOUR '97
RINGO STARR &
HIS ALL STAR BAND
STYX' GRAND
ILLUSION TOUR
LYNYRD SKYNYRD
TOUR
DAVID COPPERFIELD
THE HUNCHBACK OF
NOTRE DAME
TOTAL FOR 1992: 2 TOTAL FOR 1993: 4 TOTAL FOR 1994: 5 TOTAL FOR 1995: 6 TOTAL FOR 1996: 9 TOTAL TO DATE FOR 1997: 12
</TABLE>
*Column represents shows with respect to which the Company has signed a
production agreement.
The Company's revenues from its production activities have increased
significantly, from $23.3 million in the year ended December 31, 1994 to $30.2
million in the year ended December 31, 1996. For the years ended December 31,
1994, 1995 and 1996, production activities accounted for approximately 57.6%,
58.9% and 42.3%, respectively, of the Company's revenues.
MAJOR PRODUCTIONS
The following is a summary discussion of the major productions that the
Company produced or co-produced during 1994, 1995 and 1996, the major
productions that the Company is currently producing or co-producing and the
shows that the Company is contractually bound to produce in the future:
"JESUS CHRIST SUPERSTAR"
The Company's co-production of "Jesus Christ Superstar", by Andrew
Lloyd Webber and Tim Rice, opened in December 1992. The production starred Ted
Neeley and Carl Anderson, the original stars from the motion picture, and in
January 1997 concluded a record 4 years of touring.
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"DAVID COPPERFIELD"
"The Magic of David Copperfield" has been co-produced by the Company on
a continuous basis since 1982, and is presently booked through 1998. The Company
has a contract with David Copperfield that runs through December 1999.
"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 ran through June
1996. The Company then restaged the show in order to allow the show to tour in
smaller markets. The restaged show commenced touring in October 1996, and is
expected to run through April 1997.
"A CHORUS LINE"
The Company's non-equity co-production of "A Chorus Line" commenced in
September 1996 and is expected to run through June 1997. The Company then
expects to commence an equity tour of "A Chorus Line" in August 1997 which is
expected to run through June 1998.
"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. The show's tour
commenced in September 1996 and is expected to run through April 1997.
"SINGIN' IN THE RAIN"
In January 1997 the Company commenced co-production of a touring
production of "Singin' in the Rain," which is based on the movie of the same
name. This stage production features the original Comden and Green book and
includes all of the song-and-dance numbers associated with the cinematic
production.
"THE HUNCHBACK OF NOTRE DAME"
The Company has contracted 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 commence its tour in 1997.
"INTERNATIONAL WARNER BROTHERS FAMILY ICE SHOW"
This production features professional ice skaters playing the roles of
Batman and Robin as well as the Looney Tunes characters. The show is scheduled
to commence a tour in Southeast Asia beginning in June 1997.
"SOUND OF MUSIC"
The Company's production is scheduled to be played in Hong Kong,
Singapore and Bangkok during May, June and July of 1997. The show is expected to
feature Marie Osmond.
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"JEKYLL AND HYDE"
The Company is co-producing this musical production which opened in New
York in March 1997. The show had a successful nationwide tour in 1996 which led
to its Broadway premiere. This show stars Linda Edder.
"MAN OF LA MANCHA"
The Company co-produced a non-equity North American tour of "Man of La
Mancha" which commenced September 1993 and played through April 1994. The tour
played in 95 cities included Mexico City, Vancouver and Anchorage.
"NUTCRACKER ON ICE"
The Company's co-production of "Nutcracker on Ice", featuring Olympic
ice skaters Rudy Galindo, Karyn Kadavy, Debi Thomas, Calla Urbansky and Rocky
Marvel, commenced in the fall of 1994 and ran through the fall of 1996.
"HELLO, DOLLY!"
The Company launched a tour of "Hello, Dolly!," starring Carol
Channing, in July 1994. The show toured the United States through February
1997.
"SHE LOVES ME"
The Company produced a non-equity tour of "She Loves Me" which
commenced in October 1995 and played through April 1995. The Company's
production was the first touring production of this show following its Broadway
equity revival.
SUMMER MUSIC TOURS
The Company co-produced two major summer tours in 1996: a 65-city
summer tour of the musical group Styx that featured 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 that featured Lynyrd Skynyrd together
with the Doobie Brothers. During 1997 the Company has contracted to produce the
Skoal "Roar" tour, Summer Daze Tour '97, Ringo Starr and his All Star Band,
Barry Manilow, Grand Illusion tour starring Styx and Lynyrd Skynyrd.
THE THEATRICAL PROMOTION BUSINESS
The promotion of theater and concert events involves the presentation
of such events at particular venues in which they are to play. The promoter is
responsible for ticket sales, advertising and marketing of the event. Generally,
the promoter guaranties the producer of the event a certain amount of revenue.
Any revenue over this amount generated by the promoter, less the expenses
incurred in connection with promotion of the event, is retained by the promoter.
THE COMPANY'S THEATRICAL AND CONCERT PROMOTIONS
The Company promoted during 1996 or is contractually obligated to
promote in 1997, the following shows:
"PHANTOM OF THE OPERA"
The Company presented sixteen weeks of this popular musical in Salt
Lake City, Utah.
"LES MISERABLES"
The Company presented nine weeks of this show in San Jose, Long Beach,
Fresno and Bakersfield, California and Salt Lake City, Utah. The Company is
expected to present approximately 20 weeks over the next two years.
"JESUS CHRIST SUPERSTAR"
The Company presented "Jesus Christ Superstar", by Andrew Lloyd Webber
and Tim Rice, for approximately 130 dates during 1996 in Canada, the continental
United States and Alaska.
"BB KING"
The Company promoted this show in 15 cities in the United States and
Canada.
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"RIVERDANCE"
The Company co-promoted an extended run of approximately 20 shows in
the Rosemont theater in Chicago, Illinois.
"STYX/KANSAS"
The Company presented six dates.
"DAVID COPPERFIELD"
The Company co-presented selected dates of "Tbe Copperfield Tour"
United States, a first time four week run in Australia, a four week run in
Southeast Asia including the cities Jakarta, Singapore, and Hong Kong, and a
successful first time run on Broadway. The Company has a contract with Mr.
Copperfield to present his show in major United States cities as well as South
America in 1997.
"BARRY MANILOW"
The Company has contracted to present Mr. Manilow in 46 shows
throughout the United States during 1997.
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 booking agent for over 23 shows including the
Broadway productions of "Rent," "Annie," and "Big"; the Off-Broadway comedy
"Full Gallop"; the national touring companies of "State Fair," "A Chorus Line"
and "West Side Story"; and variety attractions such as "Blue Suede Shoes,"
"Cirque Ingineux"
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<PAGE>
and Hal Holbrook in "Mark Twain Tonight!", and musical acts such as Bobby Short
and the Preservation Hall Jazz Band. The Company's booking division recently
signed an exclusive agreement with the Broadway hit musical "Bring in 'Da
Noise/Bring in 'Da Funk" for all touring bookings in the United States exclusive
of New York.
The Company's revenues from its management and booking activities have
increased from $0.5 million in the year ended December 31, 1992 to $1.4 million
in the year ended December 31, 1996. The Company successfully booked and managed
the 1993 tour of "Jesus Christ Superstar" by Andrew Lloyd Webber and Tim Rice.
This success was followed by the Company's booking of the pre-Broadway tour of
"Hello, Dolly!" starring Carol Channing in 1994; the post-Broadway tour of "She
Loves Me" and the national tour of "The Pointer Sisters' Ain't Misbehavin'" in
1995 and the national tours of the Broadway drama "Having Our Say" and the
Pulitzer Prize winning "Three Tall Women" in 1996. 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.
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
Amphitheater 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.
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. 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, if ever. The Company is currently negotiating a date certain with the
City of North Miami by which permit approvals must be received.
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 will pay to the City: (i) an annual minimum return subject to annual
adjustment based on the consumer price index, but not to 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 and permits 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. See "-Legal Proceedings."
-29-
<PAGE>
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. The Company currently
handles all trucking requirements of its internally produced shows.
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 1996 included tours of
"Fiddler on the Roof," "Hello, Dolly!," "Stomp," "A Chorus Line," "Carousel,"
"Tap Dogs," "Applause," "Ain't Misbehavin'," "The Magic of David Copperfield"
and "Annie." In addition, the Company has acquired the merchandising rights to
the upcoming tours of "Jekyll & Hyde," and "Push On" and will also provide
vending services for the North American tour of U2 and the Summer Daze Tour '97.
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 1996, 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," "The Magic of David Copperfield" and
"Riverdance."
MOVIETIME
MovieTime was formed in May of 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.
The Company, which acquired MovieTime in August 1996, has decided
recently to reduce funding for MovieTime and plans to phase out MovieTime's
operations.
COMPETITION
The Company competes with a wide range of entertainment alternatives,
including movies, theatrical presentations, sporting events, concerts, and
others. Within its own industry segment, the Company competes with other
producers and 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.
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<PAGE>
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 approximately $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. The Company also leases office space in Salt Lake
City, Utah from John W. Ballard, a director of the Company and the President of
Space Agency, pursuant to a lease expiring in December 2000 which provides for
an annual rent of approximately $36,000. See "Certain Transactions."
LEGAL PROCEEDINGS
An arbitration proceeding (the "Statement of Claim") had 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 Company's predecessors. DBC's claim had been for rescission, fraud and
breach of fiduciary duty in connection with a 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. In March 1997 the Company and Ferman settled the
proceeding. Pursuant to the settlement agreement, the Company has agreed to sell
to Ferman 500,000 shares of Common Stock (the "Settlement Shares") for a
purchase price of $2,000,000, the market value of the Settlement Shares on the
date of the settlement agreement ($4.00). The Company has also granted to Ferman
certain registration rights with respect to the Settlement Shares. Ferman has
issued to the Company his three year, non-recourse promissory note (the "Note")
in payment for the Settlement Shares. The Settlement Shares will be held in
escrow as security for the Note by the Company pending payment of the Note.
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.
In February 1997, Kerri A. Strug brought an action in the United States
District Court for the district of Arizona (the "Arizona Action") against Magic
Promotions, Inc., a wholly-owned subsidiary of the Company ("MPI"), in
connection with the "Goldmedal Gymnastics Tour" that has been touring in the
United States for anticipatory breach of her contract and a declaratory judgment
that Ms. Strug be released from her obligations under the contract. Ms. Strug
has claimed damages in excess of $850,000. Subsequently, on March 14, 1997, MPI
filed a complaint in the United States District Court for the Southern District
of Florida (the "Florida Action") against Ms. Strug and her agent, Steve Rosner,
and Mr. Rosner's company, Integrated Sports International ("ISI"). The complaint
in the Florida Action contains three counts: breach of contract by Ms. Strug,
fraud in the inducement by Ms. Strug, Mr. Rosner and ISI, and rescission against
Ms. Strug. The Company believes Ms. Strug's claims are without merit and intends
to pursue vigorously the Florida Action and to defend the Arizona Action.
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.
In December 1996, Performing Arts Management of North Miami, Inc., a
wholly-owned subsidiary of the Company ("PAM"), has commenced an action in the
Eleventh Judicial Circuit Court for the State of Florida against the City of
North Miami (the "City") for failure to perform under the operating management
agreement between PAM and the City relating to PAM's management of the North
Miami Performing Arts Center. In January 1997 the City filed a counterclaim
alleging that the Company had breached the management contract. The dispute
stems from the City's inability to deliver a permit to the Company to build the
performing arts center as required under the operating agreement by failing to
make certain payments alleged to be required thereunder. The suit is currently
in a 45 day settlement period. The Company intends to pursue its suit vigorously
and to defend itself against the City's counterclaim. Management believes, based
on the advice of counsel, that the City's counterclaim 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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<PAGE>
MANAGEMENT
The directors, executive officers and key employees of the
Company are as follows:
NAME AGE POSITION
- ---------------------- --- ------------------------------------------------
Brad Krassner......... 45 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
John W. Ballard....... 49 Director and Chief Executive Officer,
Space Agency
Glenn Bechdel......... 52 Vice President, Magic Promotions
Larry Turk............ 50 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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<PAGE>
Group LLP, certified public accountants, in Miami, Florida. From 1991 to 1994,
Mr. Chaby worked as an accountant with the certified public accounting firm of
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.
JOHN W. BALLARD, a director and the Chief Executive Officer of
Space Agency since December 1996. Prior to the Company's acquisition of Space
Agency, Mr. Ballard acted as the President of Space Agency since its founding in
1979. Mr Ballard holds an MBA from the Harvard University Business School and a
bachelor of science degree from Stanford University.
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.
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. 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 Engle Homes, Inc. and Vacation
Break U.S.A., Inc., the common stock of each of which is publicly traded.
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 stockholders 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 a stipend
of $2,000 per meeting of the Board of Directors or of any Committee thereof upon
which such director sits 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.
The Company maintains an audit committee and a compensation
committee each of which is composed of Messrs. Gutnick and Korn.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or
accrued by the Company, for services rendered during 1996, to the Company's
Chief Executive Officer and to each of the five most highly compensated of the
Company's other executive officers whose total 1996 salary and bonus exceeded
$100,000 (collectively the "Named Officers"). The Company did not grant any
stock options, stock awards or stock appreciation rights in 1996.
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION(1)(2)
- -------------------------------------------------- ---- -------- --------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Brad Krassner..................................... 1996 $ 82,461 ___ ___ $ 170,790
Chief Executive Officer and Co-Chairman of 1995 -0- ___ ___ $ 471,000
the Board
Joe Marsh......................................... 1996 $255,769 ___ ___ $1,419,772
Co-Chairman of the Board 1995 $300,000 ___ ___ $2,081,057
Lee Marshall...................................... 1996 $170,769 ___ ___ $ 473,256
President and Chief Operating Officer 1995 $130,000 ___ ___ $ 760,044
Glenn Bechdel..................................... 1996 $128,462 ___ ___ $ 473,256
Vice President, Magic Promotions, Inc. 1995 $130,000 ___ ___ $ 701,839
John W. Ballard(3)................................ 1996 $150,000 ___ ___ $1,472,861
President, Space Agency
Stephen Boulay(3)................................. 1996 $ 60,000 $90,000 ___ $ 133,470
Vice President, Space Agency
</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 has received S Corporation
distributions based on their interests in certain of the Constituent
Corporations or, in the case of Messrs. Ballard and Boulay, their
interests in Space Agency. The aggregate of such distributions received by
Messrs. Krassner, March, Marshall and Bechdel in 1995 were $223,210,
$2,081,057, $760,044 and $701,839, respectively. The aggregate of such
distributions received by Messrs. Krassner, Marsh, Marshall, Bechdel,
Ballard and Boulay in 1996 were $140,040, $1,419,772, $473,256, $473,256,
$1,472,861 and $133,470, respectively. In addition, Mr. Krassner
received management fees in 1995 paid by Diamond Bullet Merchandising,
Inc.($25,750). See "Certain Transactions" and "Consolidation Transactions
and S Corporation Distributions."
(3) Messrs. Ballard and Boulay became executive officers of Space Agency upon
consummation of the Company's acquisition of Space Agency in December
1996.
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.
In December 1996, Space Agency entered into 3 year employment
agreements with John W. Ballard and Steven Boulay, which provide for annual base
salaries of $150,000 and $100,000, respectively. 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
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<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.
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<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....................................................... 8,487,012 34.8%
Brad Krassner................................................... 3,232,426 13.3%
Lee Marshall.................................................... 3,460,872 14.2%
Glenn Bechdel................................................... 3,228,846 13.2%
H. Yale Gutnick................................................. 10,000 *
Ronald J. Korn.................................................. 2,000 *
John W. Ballard................................................. 1,188,001 4.9%
Stephen Boulay.................................................. 132,000 *
All directors and executive officers as a group (10 persons).... 20,364,850 83.5%
<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 24,394,300 shares outstanding.
</FN>
</TABLE>
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<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 as of
March 31, 1997.
<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) TO OFFERING HEREBY(4)
- ------------------------------------------------------------- ---------------- ----------------- --------------
<S> <C> <C> <C>
Abraxas Partners, Ltd. 5,178 * 5,250
Windermere House
404 East Bay Street
P.O. Box SS-6238
Nassau, The Bahamas
Philip Altheim 8,631 * 8,750
270 Pond Crossing
Lawrence, NY 11559
Apec Arc, Inc. 8,632 * 17,500
c/o Clifford Spelke
2001 Marcus Avenue, Su. N-215
Lake Success, NY 11042
Arbinter-Omnivalor, S.A. 138,096 * 140,000
4 Cours De Rive
1211 Geneve 3
Switzerland
Renee Arsan 10 * 10
1500 Bay Road #88
Miami Beach, FL 33139
Pierre Asselin 10 * 10
400 S. Pointe Dr., #405
Miami Beach, FL 33139
Jack Balter and Deborah Balter, JTWROS 8,631 * 8,750
8919 Atwell
Houston, TX 77096
Banca Del Gottardo 172,620 * 175,000
Viale Stefano Franscini 8
6901 Lugano, Switzerland
Attn: Diego Lucchini (MFTB)
Banque de Patrimoines Prives Geneve BPG SA 8,631 * 8,750
Attn: Mr. Dan Caropiche
20-22, Avenue de Miremont
CH-1211 Geneve 25
Switzerland
Banque Populaire Suisse Geneva 34,524 * 35,000
Attn: Mr. Laurent Perrin
Case Postale 2054
1211 Geneve 2
Switzerland
Banque Privee Endmond de Rothschild S.A. 94,941 * 96,250
Geneva
Attn: Mrs. Lisiane Spicher
18 rue de Hesse
1204 Geneva, Switzerland
Ryan Baril 10 * 10
3373 Whispering Pines Lane
Eau Claire, WI 54701
Beatrice Barnett 8,631 * 8,750
Attn: Ian Barnett
c/o 7A Albert Br. Road
London SW11 4PX
England
Gary Barnett 8,631 * 8,750
621 South Saltair Avenue
Los Angeles, CA 90049
Banque De Financement & D'Investissement Geneve 43,155 * 43,750
Mr. Marcel Cerutti
2, rue Jean-Petitot
Case postale 5710
1211 Geneve 11, Switzerland
Kathy Barrett 10 * 10
15070 SW 127th Court
Miami, fL 33186
Adam Bechdel 10 * 10
1117 Floridian Court
Cape Coral, FL 33904
Allen J. Bechdel 10 * 10
7660 Peck Road
Ravenna, OH 44266
Brian Bechdel 10 * 10
1711 SE 8th Street
Cape Coral, FL 33904
Curtis A. Bechdel 10 * 10
4589 Bassett Road
Atwater, OH 44201
John Bechdel 10 * 10
1117 Floridian Court
Cape Coral, FL 33904
Karyle D. Bechdel 10 * 10
1117 Floridian Court
Cape Coral, FL 33904
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
Fred Bernstein 10 * 10
7512 Chapelhill Drive
Orlando, FL 32819
Oystein Bjorge 8,631 * 8,750
Bastadruggen 21
1370 Asker, Norway
George L. Black Trust 8,631 * 8,750
11401 Highway 301 North
Thonotosassa, FL 33592
Meredith Blair 10 * 10
401 E. 34th Street #33-D
New York, NY 10016
Ronald L. Book, P.A. Employees Profit Sharing Trust 8,631 * 8,750
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 8,631 * 8,750
P.B. 1128
2601 Lillehammer, Norway
Bostar A/S 34,524 * 35,000
Parkveien 55
P.O.B. 2416, Solli
N-0201, Oslo
Norway
Attn: Ove Hoegh
Sandra Breiterman 10 * 10
4220 Post Avenue
Miami Beach, FL 33140
Shelley M. Brennan 10 * 10
63-A E. Summit
Chagin Fallas, OH 44022
Harvey R. Brice BSSC Master Defined Contribution M/P Pension Plan 8,631 * 8,750
70 Bethone Street
New York, NY 10014-1758
Attn: Harvey R. Brice
Bruce Bronstein 10 * 10
34 Harbor Circle
Freehold, NJ 07728
Norman Brooks 103,572 * 105,000
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
David R. Bruni 10 * 10
2355 S. Linden Street
Alliance, OH 44601
Lawrence Burstein 8,631 * 8,750
114 East 90th Street
Apt. 3-B
New York, NY 10128
C.N. Limited 8,631 * 8,750
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 8,631 * 8,750
Apalveien 30
0371 Oslo
Norway
Attn: Ole J. Gjerpen
Tammy J. Cain 10 * 10
1012 Sunview Drive
Mogadoe, OH 44260
Cameo Trust Corporation Limited 8,636 * 38,500
c/o Chris Bateson
Cameo House, 18 Hope Street
Douglas, Isle of Man
British Isles IM1 1AQ
Jeffrey Capas and Katherine Capas, JTWROS 8,631 * 8,750
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. 8,631 * 8,750
c/o 7A Albert Br. Road
London SW11 4PX
England
Bob Cayne 10 * 10
PO Box 8187
Incline Village, NV 89452
Melissa A. Cayne 10 * 10
PO Box 8187
Incline Village, NV 89452
Phyllis J. Cayne 10 * 10
PO Box 8187
Incline Village, NV 89452
Steve Chaby 10 * 10
600 NE 36th Street
Miami, FL 33137
Jeff Chrzozon 10 * 10
321 W 78th Street #7-F
New York, NY 10024
Clariden Bank 8,631 * 8,750
Clariden Street, 26
CH-8002 Zurich
Switzerland
Attn: Karl Wiedmer
Charles G. Claypool, Jr. 10 * 10
PO Box 684
E. Liverpool, OH 43920
Clissold Lane 10 * 10
2413 Butternut Circle
Salt Lake City, UT 84124
John R. Coleman 10 * 10
4164 Ross Hollow Road
New Albany, IN 47150
Kirk Coleman 10 * 10
540 Weatherend Court
Alpharetta, GA 30202
Lisa Coleman 10 * 10
540 Weatherend Court
Alpharetta, GA 30202
Rona Coty 8,631 * 8,750
7612 Mar Della Terrace
Boca Raton, FL 33433
Crescent Capital Company, LLC 43,155 * 43,750
135 Wood Road
Braintree, MA 02184-2503
Attn: Richard W. Brown
Bobbie Crowe 10 * 10
1915 Tudor Street
Cuyahoga Falls, OH 44221
Cody Crowe 10 * 10
1915 Tudor Street
Cuyahoga Falls, OH 44221
Geoff Crowe 10 * 10
1540 Viogross Avenue
Akron, OH 44310
<PAGE>
Jamie Crowe 10 * 10
1540 Viogross Avenue
Akron, OH 44310
Jeff Crowe 10 * 10
1540 Viogross Avenue
Akron, OH 44310
Jenn Crowe 10 * 10
1540 Viogross Avenue
Akron, OH 44310
Joanne Crowe 10 * 10
508 Loomis Avenue
Cuyahoga Falls, OH 44221
Katy Crowe 10 * 10
1540 Viogross Avenue
Cuyahoga Falls, OH 44221
Kingsley Crowe 10 * 10
508 Lommis Avenue
Cuyahoga Falls, OH 44221
Lisa Crowe 10 * 10
508 Loomis Avenue
Cuyahoga Falls, OH 44221
Marci Crowe 10 * 10
1915 Tudor Street
Cuyahoga Falls, OH 44221
Mike Crowe 10 * 10
1915 Tudor Street
Cuyahoga Falls, OH 44221
Gerald A. Cunningham 10 * 10
307 Greenfield Road
New Wilmington, PA 16142
Philip Datlof, M.D. 8,631 * 8,750
17867 Lake Estates Drive
Boca Raton, FL 33496
Robert A. Davis 10 * 10
8943 Garland Avenue
Surfside, FL 33154
Delaware Charter Guarantee & Trust Co. 4,315 * 4,375
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
Caley Detweiler 10 * 10
508 Loomis Avenue
Cuyahoga Falls, OH 44221
Nick Detweiler 10 * 10
508 Loomis Avenue
Cuyahoga Falls, OH 44221
Sam Detweiler 10 * 10
508 Loomis Avenue
Cuyahoga Falls, OH 44221
</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>
Delores Drumm 10 * 10
7274 Longview Avenue
Mentor, OH 44060
John Drumm 10 * 10
7274 Longview Avenue
Mentor, OH 44060
Edgeport Nominees Ltd. 44,000 * 44,000
44 Worship Street
London, EC2A 2JT
England
Attn: Ian Goldbart
Tamara Elwood 10 * 10
6835 Richmond Road #34
Solon, Oh 44139
Emanon Partners, L.P. 81,132 * 82,250
237 Park Avenue
Suite 901
New York, NY 10017
Attn: Michael Schaenen
David Ettinger & Beth Ettinger, JTWROS 8,631 * 8,750
21873 Town Place Drive
Boca Raton, FL 33433
Attn: Mr. and Mrs. D. Ettinger
Falcon Management Corporation 17,262 * 17,500
James Leitner - President
c/o Anne-Lee Shachian
795 B. Franklin Avenue
Franklin Lakes, NJ 07417
Marjorie Farber 10 * 10
4321 Post Avenue
Miami Beach, FL 33140
Peter Farber 10 * 10
4321 Post Avenue
Miami Beach, FL 33140
Samantha Farber 10 * 10
4321 Post Avenue
Miami Beach, FL 33140
Christopher Fox 25,000 * 25,000
Schaenen, Fox Capital Management
237 Park Avenue, Suite 900
New York, NY 10017
Steve Foxhall 10 * 10
7274 Longview Avenue
Mentor, OH 44060
Leonard Frankel 103,572 * 105,000
3686 N.W. 195 Lane
Aventura, FL 33180
Laurie May Frey 10 * 10
4137 River Street
Willoughby, OH 44094
J. Lee Friedman 10 * 10
1850 Lenox Road NE
Atlanta, GA 30306
Lynn Friedman 10 * 10
1850 Lenox Road NE
Atlanta, GA 30306
Jonathan Fryd 77,679 * 78,750
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
Jennifer A. Gaglione
656 Solon Blvd
Solon, Oh 44139
Galaxy Investments, Inc. 17,262 * 17,500
1280 Terminal Way Suite
Reno, NV 89502
Attn: Gladys Greene, President
Pam Gerber 10 * 10
PO Box 507
Dover, OH 44622
Teresa Geyer 10 * 10
7512 Chapelhill Drive
Orlando, FL 32819
Gary Glickstein 10 * 10
1210 W. 60th Street
Miami Beach, FL 33140
Goran Enterprises Limited 17,262 * 17,500
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. 17,262 * 17,500
International Trade Center TM 126
Piscadera Bay
Curacao
Netherlands Antilles
Charles L. Greenberg and Donna Greenberg, JTWROS 17,262 * 17,500
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 8,631 * 8,750
3832 Wilshire Boulevard
Los Angeles, CA 90010
Attn: Mr. David Greenberg
Bear, Stearns Securities Corp. 8,631 * 8,750
Custodian David Greenberg
IRA Rollover #402-95170-1-0-353
245 Park Avenue
New York, NY 10167
Susan Greenberg 8,631 * 8,750
1185 Corsica Drive
Los Angeles, CA 90272
Donald Gross 8,631 * 8,750
474 Fulton Avenue
Hempstead, NY 11550
Saul Gross 10 * 10
2900 Flamingo Road
Miami Beach, FL 33140
David R. Groves 10 * 10
1670 Parkgate Road
Columbus, OH 43229
Steven Haas 10 * 10
4431 Nautilus Drive
Miami Beach, FL 33140
<PAGE>
H. Yale Gutnick 18,631 * 18,631
1000 Grandview Avenue, #501
Pittsburgh, PA 15211
Edward Haymes 17,262 * 17,500
7108 Queenferry Circle
Boca Raton, FL 33496
Amy Joe Weisberg Head 10 * 10
2853 Grinstead Drive #3
Louisville, KY 40205
Doug Herman 10 * 10
4605 SW 10th Avenue
Cape Coral, FL 33914
Heptagon Investments Limited 34,524 * 35,000
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 517,860 1.3% 525,000
c/o Brown Brothers Harriman & Co.
69 Wall Street
New York, NY 10005
Attn: OSG Dept.
Heritage Finance & Trust Co. (Geneva) 34,524 * 35,000
Acct No.: 4608840
c/o Brown Brothers Harriman, NY
Attn: OSG Dept.
69 Wall Street
New York, NY 10005
Stanley Hollander IRA 17,262 * 17,500
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. 17,262 * 17,500
c/o Peter B. Evans
P.O. Box N-341
Charlotte House, Charlotte Street
Nassau, Bahamas
Alan Jacobs 97,205 * 97,205
6840 Lion's Head
Boca Raton, FL 33496
Alan D. Jacobson, IRA 17,262 * 17,500
c/o 122 East 42nd Street
New York, New York 10168
Lenard E. Jacobson, M.D. 8,631 * 8,750
150 East 69th Street
New York, NY 10021
Christopher D. Jennings 12,947 * 13,125
1431 Warnall Avenue
Los Angeles, CA 90024
Kamdex International Limited 8,631 * 8,750
Celtic House
Victoria Street
Douglas, Isle of Man
UK 1M1 2SJ
Attn: Martin Neville
A/S Kapitalutvikling 8,631 * 8,750
Strandveien 20
N-1324 Lysaker
Norway
Attn: Knut W. Wang
Kensington Partners L.P. 69,048 * 70,000
c/o Keim Wilson Associates
237 Park Avenue, 9th Floor
New York, NY 10017
Attn: Richard Keim
Madlyne King 10 * 10
12404 Gooderham Way
N. Potomac, MD 20878
Sam King 10 * 10
12404 Gooderham Way
N. Potomac, MD 20878
Steve King 10 * 10
12404 Gooderham Way
N. Potomac, MD 20878
Tracy King 29,000 * 29,000
12404 Gooderham Way
N. Potomac, MD 20878
Peter Barrington Kirk 25,893 * 26,250
Overbergum 22B
1315 Nesoya
Norway
Manny Kladitis 10 * 10
234 W. 44th Street #902
New York, NY 10036
Ronald Koenig 17,262 * 17,500
Capital Growth International
660 Steamboat Road, 2nd Floor
Greenwich, CT 06830
Kirsti M.B. Kolbeinsen 8,631 * 8,750
Holger Lysto, 23C
0280 Oslo
Norway
Stephen Kornfeld IRA 17,262 * 17,500
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
Elaine Krassner 29,000 * 29,000
705 Horton Drive
Silver Spring, MD 20902
Laine Krassner 10 * 10
2040 N. Bay Road
Miami Beach, FL 33140
Sherri T. Krassner 29,000 * 29,000
2040 N. Bay Road
Miami Beach, FL 33140
Jerry Krause 10 * 10
4701 Willowbrook
Mentor, OH 44060
Kathy Krause 10 * 10
4701 Willowbrook
Mentor, OH 44060
Megan Krause 10 * 10
4701 Willowbrook
Mentor, OH 44060
KTB Enterprises, Ltd. 8,631 * 8,750
c/o 7A Albert Br. Road
London SW11 4PX
England
Attn: Ian Barnett
William Kunzweiler 34,524 * 35,000
5420 LBJ Freeway, Suite 515
Dallas, TX 75240
Tonia Kwiatkowski 10 * 10
2232 Heatherland Drive
Broadview Heights, OH 44147
Eddie Lambert 10 * 10
1549 Verna Street
New Orleans, LA 70019
Selena Lambert 10 * 10
1549 Verna Street
New Orleans, LA 70019
Debbie Leibowitz 10 * 10
8.W. Rivo Alto Drive
Miami Beach, FL 33139
</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. 86,310 * 87,500
International Trade Center TM 126
Piscadera Bay
Curacao
Netherlands Antilles
Joel Lewis and Patricia Lewis JTWROS 8,631 * 8,750
11501 N.W. 4th Street
Plantation, FL 33325
Charles A. Loughlin 10 * 10
5820 S. Penn
Oklahoma City, OK 73119
Larry Magrid and Barbara Magrid, JTWROS 8,631 * 8,750
1231 Vine Street
Philadelphia, PA 19107
Attn: Larry Magrid
Dr. Mannie Magrid and Jeanette Magrid, JTWROS 8,631 * 8,750
8111 Meadow Crest
Houston, TX 77071
Grace Mallah 10 * 10
540 W. 51st Terrace
Miami Beach, FL 33140
John Mallah 10,000 * 10,000
540 W. 51st Terrace
Miami Beach, FL 33140
William P. Marino 8,631 * 8,750
1041 4th Street N.E.
New Philadelphia, OH 44663
Edward A. Marod 10 * 10
4 Surrey Road
Palm Beach Gaardens, FL 33418
Andrew Marsh 10 * 10
9005 Streamview Lane
Vienna, VA 22185
Brian Marsh 10 * 10
PO Box 507
Dover, OH 44622
Brian W. Marsh 8,631 * 8,750
6167 Harmony Valley Road
Newcomerstown, OH 43832
Carol Marsh 10 * 10
9005 Streamview Lane
Vienna, VA 2185
Colby Marsh 10 * 10
9005 Streamview Lane
Vienna, VA 22185
Joe Marsh 8,465,480 36.8% 8,465,480
2040 North Bay Road
Miami Beach, FL
John Marsh 10 * 10
9005 Streamview Lane
Vienna, VA 22185
John J. Marsh, Jr. 8,631 * 8,750
217 Gooding Avenue, N.W.
New Philadelphia, OH 44663
Nichole Marsh 10 * 10
PO Box 507
Dover, OH 44622
Brian Marsh, Jr. 10 * 10
PO Box 507
Dover, OH 44622
Carrie Marshall 10 * 10
3423 Lincoln Avenue
Lorain, OH 44052
Dale Marshall 10 * 10
11751 Rose Lane
Springdale, OH 45246
Jessica Marshall 10 * 10
615 Len Court
Aurora, OH 44202
Karen Marshall 10 * 10
615 Len Court
Aurora, OH 44202
Kathy Marshall 10 * 10
11751 Rose Lane
Springdale, OH 45246
Lauren Marshall 10 * 10
615 Len Court
Aurora, OH 44202
Lee Marshall 3,450,338 15.0% 3,450,338
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Lois Marshall 10 * 10
233 Brookfield Road
Avon Lake, OH 44012
Todd Marshall 10 * 10
3423 Lincolne Avenue
Lorain, OH 44052
Cecil Travis Martin 10 * 10
3454 W. Highway 76
Branson, MD 65616
Beth Matosko 29,000 * 29,000
14742 Rolling Green Way
Gaitersburg, MD 20878
Jessica Matosko 10 * 10
14742 Rolling Green Way
Gaitersburg, MD 20878
Jillian Matosko 10 * 10
14742 Rolling Green Way
Gaitersburg, MD 20878
Jordan Matosko 10 * 10
14742 Rolling Green Way
Gaitersburg, MD 20878
Scott Matosko 10 * 10
14742 Rolling Green Way
Gaitersburg, MD 20878
Joseph D. Maurer 10 * 10
1117 Floridian Court
Cape Coral, FL 33904
Timothy W. McCann 10 * 10
494 Edgewood Road
Sharon, PA 16146
<PAGE>
Gordon R. Miller, M.D. 8,631 * 8,750
10250 Collins Avenue, #304
Bal Harbor, FL 33154
Jody Mong 10 * 10
3619 Charring Cross drive
Stowe, OH 44224
Steve Mong 10 * 10
3619 Charring Cross drive
Stowe, OH 44224
Morgan Steel Ltd. 34,524 * 35,000
c/o P. Kevin Perry
One Sydney Mount, Circular Rd.
Douglas, Isle of Man, U.K.
Napier Brown Holdings Ltd. 25,893 * 26,250
International House
1 St. Katherine's Way
London E1 9UN
England
Attn: A.S.P. Drake
Elizabeth Thoele Nelson 10 * 10
N. 5492 Mann Road
Spooner, WI 54801
Ronald L. Nilsen and Carolyn M. Nilsen, JTWROS 8,631 * 8,750
22 Candlestick Road
Clementon, NJ 08021
Attn: Ronald L. Nilsen
Jane Norby 10 * 10
3373 Wispering Pines Lane
Eau Claire, WI 54701
John T. Norman 10 * 10
1020 Waloo Way
Twinsburg, OH 44087
Panache Partnership 34,524 * 35,000
c/- Azzurra
P.O. Box 12075
Penrose Auckland, New Zealand
Sid Paterson 8,631 * 8,750
1385 York Avenue
New York, NY 10021
Greg Pavek 10 * 10
2115 Laurel Street
Eau Claire, WI 54701
Michelle Pavek 10 * 10
2115 Laurel Street
Eau Claire, WI 54701
Irma Perez 10 * 10
9770 SW 44th Street
Miami, FL 33165
Sherry E. Perrupato 8,631 * 8,750
2635 South Holbrook Street
Philadelphia, PA 19142
Jean-Claude Pfister 4,786 * 4,786
2301 Collins Avenue #1103-A
Miami Beach, FL 33139
Pictet & Cie 8,631 * 8,750
29 bd Georges-Favon
1204 Geneva
Switzerland
Attn: Claude-Alain Cherubini
<PAGE>
Cowen & Company 4,316 * 4,375
IRA Dept. Asher Plaut
IRA #58-03134
Financial Square
New York, NY 10005
Pyramid Partners, LP 19,506 * 19,775
c/o Steven Blatt
Tanner Mainstain Hoffer
10866 Wilshire Blvd., 10th Floor
Los Angeles, CA 90024
Michael Ralby 50,000 * 50,000
Concorde Centre II, PH 8
2999 N.E. 191st Street
Aventura, FL 33180
</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 34,524 * 35,000
22B Stafford Court
174 Kensington High Street
London W8 7DJ
England
P.G. Ridgwell 25,893 * 26,250
c/o Napier Brown Holdings Ltd.
International House
1 St. Katherine's Way
London E1 9UN
England
Republic National Bank of NY (Luxembourg) SA 112,203 * 113,750
32, Boulevard Royal
L-2449 Luxembourg
Attn: Jean-Louis Thill
RNB (France) Monaco 17,260 * 17,500
15 Bis-17, Avenue D'Ostende
MC 98000 Monaco
Attn: Rachel Balet
Trond Ronning 8,631 * 8,750
Revesporet 9B
N-1347
Hosle, Norway
Rosebud Capital Growth Fund Ltd. 290,000 * 294,000
Charlotte House
Charlotte Street
Nassau, Bahamas
Attn: Dawn E. Davies
Cheryl Lynn Rubin 8,631 * 8,750
Billingstadaasen 20
Billingstad 1362, Norway
Bear, Stearns Securities Corp. 8,631 * 8,750
Custodian Allan Rudnick
IRA Rollover #402-95158-1-6-300
245 Park Avenue
New York, NY 10167
Rush & Co. 34,520 * 35,000
c/o European Stockbrokers, Ltd.
20 Conduit Street
London W1R 9TD
England
Attn: Philip Gould
Rush & Co. 276,160 * 280,000
Swiss American Securities, Inc.
100 Wall Street, 4th Floor
New York, NY 10005
Saracen International Incorporated 25,893 * 26,250
Celtic House, 3rd Floor
Victoria Street
Douglas, Isle of Man
UK 1M1 2SJ
Attn: Luay Allawi
Debbie Scarcelli 10 * 10
4337 River Street
Willoughby, OH 44094
Jason Scarcelli 10 * 10
4337 River Street
Willoughby, OH 44094
Joe Scarcelli 10 * 10
4337 River Street
Willoughby, OH 44094
<PAGE>
Michael Schaenen 25,000 * 25,000
Schaenen, Fox Capital Management
237 Park Avenue, Suite 900
New York, New York 10017
Albert Schmier 8,631 * 8,750
17879 Lake Estates Drive
Boca Raton, FL 33496
Seth H. Schreiber 8,631 * 8,750
460 West 34th Street
New York, NY 10001
SEIF Limited 25,893 * 26,250
c/o Barings (Guernsey) Ltd.
Arnold House, St. Julian's Ave.
St. Peter Port
Guernsey, GY1 3DA, Channel Islands
Attn: Shaun Baker
Larry Seitz 10 * 10
1540 Viogross Avenue
Akron, OH 44301
John J. Serio 10 * 10
63-A E. Summit Street
Chagrin Falls, OH 44022
Robert Setzer 10 * 10
8306 Mills Drive #553
Miami, FL 33183
Richard Shack 112,650 * 112,650
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
Hy Shapiro 8,630 * 8,750
2400 South Dixie Highway
Miami, FL 33133
Walter Shealy 34,524 * 35,000
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
Emmanuelle Simonet 10 * 10
760 Euclid #5
Miami Beach, FL 33139
Betsy Singer 10 * 10
9240 W. Bay Harbor Drive
Unit #3-C
Bay Harbor Island, FL 33154
Fred Singer 10 * 10
9240 W. Bay Harbor Drive
Unit #3-C
Bay Harbor Island, FL 33154
Skips A/S Canopus 8,631 * 8,750
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 8,631 * 8,750
P.O. Box 2472 Solli
0202 Oslo, Norway
Fred Snitzer 8,631 * 8,750
75 Henry Street
Brooklyn, NY 11201
Daniel Sokoloff and Deena Sokoloff, as Tenants by the Entirety 8,631 * 8,750
10230 Seagrape Way
Palm Beach Gardens, FL 33418
Attn: Daniel Sokoloff
Charla Sparks 10 * 10
12724 Holdridge Road
Silver Spring, MD 20906
Clifford W. Spelke 17,262 * 17,500
2001 Marcus Avenue, Su. N-215
Lake Success, NY 11042
Adam Spivak 8,631 * 8,750
136 Chinaberry Drive
Lafayette, PA 19444
Allen Spivak 8,631 * 8,750
713 Waverly Road
Bryn Mawr, PA 19010
Merrill Lynch Acct. #53M 13719 (R. Spivak) 17,262 * 17,500
Suite 210A
794 Pennllyn Pike
Bluebill, PA 19422
Attn: Adam Goldman
Kyle J. Stencovage 10 * 10
1117 Floridian court
Cape Coral, FL 33904
Orrin S. Stern and Jeffrie K. Stern TBE 8,631 * 8,750
2409 N.W. 64th Street
Boca Raton, FL 33496
Attn: Orrin S. Stern
Carrie Strogin 10 * 10
4213 SW 6th Avenue
Cape Coral, FL 33904
Sylvaner Corporation 8,631 * 8,750
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
The Diamond Bullet Corp 10,534 * 10,534
Pension Plan
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Fl 33139
Barry Thoele 10 * 10
Route #1, Box 241
Cushing, MN 56443
Faith Thoele 10 * 10
421 W. Tyler
Eau Claire, WI 54701
James Thoele 10 * 10
Route #1, Box 241
Cushing, MN 56443
Jesse Thoele 10 * 10
Route #1, Box 241
Cushing, MN 56443
Katie Thoele 10 * 10
Route #1, Box 241
Cushing, MN 56443
Norbert L. Thoele 29,000 * 29,000
421 W. Tyler
Eau Claire, WI 54701
Sandra L. Thoele 29,000 * 29,000
P.O. Box 5599
Snowmass Village, CO 81615
Larry Turk 238,624 1.0% 238,624
c/o Magicworks Entertainment Incorporated
930 Washington Avenue
Miami Beach, Florida 33139
David L. Vanderkar 10 * 10
1724 Liberty Street
Alliance, OH 44601
Matias A. Vega and Carmella K. Vega JTWROS 8,631 * 8,750
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 8,631 * 8,750
Raadfhusgaten 7B
0151 Oslo, Norway
Attn: Bjarne Odegaard
W&P Bank & Trust Company Ltd. 51,786 * 52,500
Cumberland House
27 Cumberland Street
Nassau, Bahamas
Attn: Pascal Cristiano
Brad J. Wavra 10 * 10
850 Nautilus Drive
Aurora, OH 44202
Brian K. Wedge 10 * 10
13236 Gar Highway
Chardon, OH 44024
Julie Weisberg 10 * 10
893 Cedar Creek N.
Marietta, GA 30069
Laurie Weisberg 10 * 10
2655 Collins Avenue #702
Miami Beach, FL 33140
Stuart Weisberg 23,000 * 23,000
2655 Collins Avenue #702
Miami Beach, FL 33140
Dr. Lawrence S. Weisman IRA 34,524 * 35,000
c/o Bear Sterns Corp.
IRA Acct #: 689-95590-14-E73
245 Park Avenue
New York, NY 10167
Dr. Lawrence S. Weisman 8,631 * 8,750
12216 134th Way
Scottsdale, AZ 85259-2235
Mark L. Weiss and Tobi Weiss, JTWROS 8,631 * 8,750
12926 Cherry Road
North Miami, FL 33181
Attn: Mark L. Weiss
Joel S. Weissglass 8,631 * 8,750
14 Takolusa Drive
Holmdel, NJ 07733-1232
Lago Wernstedt and Mi Wernstedt 17,262 * 17,500
Fritiofsy 5
S-18264 Djursholm
430908-0838
Attn: Lago Wernstedt
</TABLE>
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<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>
Jeff A. Williamson 10 * 10
2015 Broad Street
Albany, OH 45710
Brad Young 10 * 10
806 Bayridge Avenue
Willowick,OH 44095
Carol Young 10 * 10
3502 Octavia Street
New Orleans, LA 70125
Jimmy Young 10 * 10
3502 Octavia Street
New Orleans, LA 70125
Ruth Zelinka 4,316 * 4,375
200 E. 57th Street
Apt. 11-B
New York, NY 10022
Elizabeth Zveibel 10 * 10
8281 SW 107 Avenue #D
Miami, FL 33173
<FN>
- ------------------------------------
* Less than 1%.
(1) Unless otherwise indicated, each shareholder has sole voting and
investment power with respect to the Common Stock indicated as
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>
<PAGE>
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 March 31, 1991, 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>
Rush & Co. 40,000 8.0 40,000
C/O Swiss American Securities
Mr. Glenn Pizer
100 Wall Street, 4th Floor
New York, NY 10005
Josephthal Lyon & Ross Incorporated 9,375 1.9 9,375
Robert Moses
200 Park Avenue
New York, NY 10166
Michael Ralby 10,625 2.1 10,625
Concorde Centre II, PH 8
2999 N.E. 191st Street
Aventura, FL 33180
Christopher Fox 2,500 * 2,500
Schaenen, Fox Capital Management
237 Park Avenue, Suite 900
New York, NY 10017
First National Fund 3,750 * 3,750
C/O Josephthal Lyon & Ross Incorporated
Hershel Krasnow
1111 Kane Concourse
Bay Harbor Islands, FL 33154
Sachem Corporate Finance 3,100 * 3,100
Mira Merme
Eagle Court
6-7 St. John's Lane
London, England EC1M 4BH
Edgeport Nominees, Ltd. 5,500 1.1 5,500
C/O Townsley & Co.
44 Worship Street
London, England EC2A 2JT
Robert Zelinka 5,000 1.0 5,000
C/O Capital Growth International, L.L.C.
777 South Flagler Drive
West Tower, 8th Floor
West Palm Beach, FL 33401
Pellet Investments C/O Capital Management 3,125 * 3,125
Attn: Ron Pearson
305 Walnut Street
Newtonville, MA 02160
Cheviot Capital 1,250 * 1,250
Devonshire House
146 Bishopsgate
London, England EC1
Helix Investments, Ltd. 5,063 1.0 5,063
Cameo House
18 Hope Street
Douglas, Isle of Man
British Isles IM1 1AQ
Brill Securities 625 * 625
Asher Plaut
152 W. 57th Street
New York, NY 10019
Michael Schaenen 2,500 * 2,500
Schaenen, Fox Capital Management
237 Park Avenue, Suite 900
New York, NY 10017
<PAGE>
Brookbank Holdings Limited 1,875 * 1,875
C/O Latour Trust Limited
Elaine Heuston
P.O. Box 344, Osprey house
5 Old Street
St. Helier, Jersey, JE4 8UZ
Channel Islands
Credit Suisse (Guernsey) Ltd. 14,540 2.9 14,540
Mark Trenchard
Helvetia Court
P.O. Box 368
St. Peter Port, Guernsey, GY1 4EJ
Channel Islands
Vital Miljo 15,625 3.1 15,625
C/O Abacus Management AS
Raadhusgaten 7B
Oslo, Norway
0151
Prime Grieb & Co. 2,500 * 2,500
Walter Prime
19 Loudon Road
London, England NW8 OLY
Gesico International 18,585 3.7 18,585
C/O Brown Brothers Harriman
Attn: Ralph Firmeno, OSG Dept.
59 Wall Street
New York, NY 10005
Eurocapital Ltd. 12,500 1.5 12,500
C/O GFI Servizi Finanziari SA
Attn: Oscar Garzotto
Via Balestra 27
Lugano, Switzerland 6900
Gibesgelt 27,875 5.6 27,875
C/O BFI Banque De Financement &
D'Investissement, geneve
Attn: Xavier Justo
2, rue Jean-Petitot
Casa Postale 5710
1211 Geneve 11, Switzerland
Auric Investments, Ltd 235,565 47.1 235,565
24 St. Georges St.
Douglas, Isle of Man
IM11AH, British Isles
Alan Jacobs 78,522 15.7 78,522
6840 Lion's Head
Boca Raton, FL 33496
</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.
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<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,
$701,839 and $324,000 to Messrs. Krassner, Marsh, Marshall, Bechdel and Ballard,
respectively. In 1996, the Company declared and paid distributions to Messrs.
Krassner, Marsh, Marshall, Bechdel and Ballard in the respective amounts of
$145,040, $1,419,772, $473,256 $473,256 and $1,472,861. Such distributions were
in addition to the salaries paid to Messrs. Marsh, Marshall, Bechdel and
Ballard.
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 years ended December 31, 1995 and 1996 in the amounts of
$39,000 and $27,306, respectively.
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 and 1996 in the aggregate
amounts of $33,000 and $37,984, respectively.
In December 1996, the Company entered into lease for its Salt
Lake City, which is co-owned by Mr. Ballard. The lease, which expires in
December 2000 calls for monthly rental payments of approximately $3,000. The
Company paid rent pursuant to such lease during 1995 and 1996 in the aggregate
amounts of $18,100 and $31,000, respectively.
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 $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 which was paid
in August 1996..
In July and September 1996, the Company closed the Private
Placement in which it received aggregate 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 $25,750,
$53,218 and $75,378 in 1996, 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 Merril 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 during August 1996, which
indebtedness has been paid in full.
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<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 Common Stock 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 stockholders over common stockholders. 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
stockholder 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 stockholders.
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.
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 Securities 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
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<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
American Stock Transfer & Trust Company.
-48-
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus covers the sale of Shares by the Selling
Shareholders and the sale of Placement Agent Warrants by the holders thereof
(such holders, together with the Selling Shareholders are referred to herein
collectively as the "Selling Securityholders"). See "Selling Shareholders." Any
distribution of any such securities by the Selling Securityholders, 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
the OTC Bulletin Board 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
Securities 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
Securityholders will sell any of the securities offered hereby.
The Selling Securityholders 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
securities as agents for others or as principals for their own account. The
Selling Securityholders 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
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 Securityholder 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 Securityholders, any discounts,
commissions and other items constituting compensation from the Selling
Securityholders 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 Shares and
the Placement Agent Warrants under federal and state securities laws. The
Company and each Selling Securityholder
-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 March 31, 1997, the Company had 24,394,300 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, and 311,120 shares are freely tradeable without restrictions 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.
As a result, all of the shares being registered hereunder will
be freely tradeable without registration or other restriction under the
Securities Act following their offering and sale under this prospectus.
In connection with the Private Placement, all of the Company's
officers and directors, the MEI Shareholders and the shareholders of Movietime
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 Securities offered hereby will be passed
upon for the Company by Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel,
P.A., Miami, Florida.
EXPERTS
The consolidated financial statements of Magicworks
Entertainment Incorporated as of December 31, 1996 and for the year then ended
in this prospectus and elsewhere in the registration statement have been audited
by Arthur Andersen LLP, independent certified public accountants, as indicated
in their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving such report. The consolidated
financial statements of Magicworks Entertainment Incorporated and subsidiaries
as of December 31, 1995 and for each of the two years ended December 31, 1995
included herein have been audited, as to combination only, by Arthur Andersen
LLP. Such financial statements have been derived in part from the financial
statements of Magicworks Entertainment Incorporated as of December 31, 1995 and
for each of the two years in the period ended December 31, 1995, which have been
audited by Ernst & Young LLP, independent certified public accountants, as
indicated in their report with respect thereto, and which report is included
herein in reliance upon authority of said firm as experts in accounting and
auditing. The financial statements of MovieTime Entertainment Inc., as of
December 31, 1995 and for the period from May 24, 1995 (inception) through
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 report thereon appearing elsewhere herein,and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing. The financial statements of Space Agency, Inc. as of
December 31, 1995 and the period ended December 31, 1995 in this prospectus and
registration statement have been audited by Nievaard, Kofoed & Teran, P.C.,
independent certified public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said report.
-50-
<PAGE>
MAGICWORKS ENTERTAINMENT INCORPORATED AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Magicworks Entertainment Incorporated and Subsidiaries -
Reports of Independent Certified Public Accountants F-2
Consolidated Balance Sheets F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-9
MovieTime Entertainment, Inc. -
Report of Independent Certified Public Accountants F-22
Balance Sheet F-23
Statement of Operations F-24
Statement of Stockholders' Equity F-25
Statement of Cash Flows F-26
Notes to Financial Statements F-27
Space Agency, Inc. -
Reports of Independent Certified Public Accountants F-30
Balance Sheets F-32
Statements of Operations F-33
Statements of Stockholders' Equity F-34
Statements of Cash Flows F-35
Notes to Financial Statements F-36
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of Magicworks Entertainment Incorporated:
We have audited the accompanying consolidated balance sheet of Magicworks
Entertainment Incorporated (a Delaware corporation) and subsidiaries as of
December 31, 1996, and the related consolidated statements of operations,
stockholders' equity 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 Magicworks Entertainment
Incorporated and subsidiaries as of December 31, 1996, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
We have also audited, as to combination only, the accompanying consolidated
financial statements of Magicworks Entertainment Incorporated and subsidiaries
as of December 31, 1995 and for each of the two years in the period ended
December 31, 1995. As described in Note 1, these statements have been combined
from the consolidated statements of Magicworks Entertainment Incorporated and
subsidiaries, MovieTime Entertainment, Inc. and Space Agency, Inc. The reports
of other auditors who have audited these statements appear elsewhere in this
Form S-1 Registration Statement. In our opinion, the accompanying consolidated
financial statements as of December 31, 1995 and for each of the two years in
the period ended December 31, 1995 have been properly combined on the basis
described in Note 1.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 14, 1997 (except with respect
to the matters discussed in Note 12,
as to which the date is March 25, 1997).
F-2
<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 the related
combined statements of income, changes in capital and cash flows for each of the
two 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 the combined results of its operations
and its cash flows for each of the two years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
April 11, 1996
Miami, Florida
F-3
<PAGE>
<TABLE>
<CAPTION>
MAGICWORKS ENTERTAINMENT INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
----------------------------------
1996 1995
------------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,367,179 $ 5,097,588
Accounts receivable 1,921,356 1,237,040
Inventories 268,959 160,930
Preproduction costs 610,697 1,508,314
Due from affiliates 3,213 -
Advances and temporary deposits 525,975 408,194
Other current assets 731,604 592,321
------------- -------------
Total current assets 10,428,983 9,004,387
PROPERTY AND EQUIPMENT, net 2,076,310 1,346,410
INVESTMENTS IN PARTNERSHIPS 918,564 347,783
DEFERRED COSTS, net 1,105,114 564,032
INTANGIBLE ASSETS, net 325,745 454,442
------------- -------------
$ 14,854,716 $ 11,717,054
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 302,956 $ 137,870
Accounts payable 1,467,843 911,401
Accrued liabilities 1,043,553 892,674
Advance ticket sales 844,373 3,612,204
Deferred income taxes 137,131 -
Short-term debt - 1,920,489
Due to affiliates - 150,028
------------- -------------
Total current liabilities 3,795,856 7,624,666
------------- -------------
DEFERRED INCOME TAXES 274,263 -
------------- -------------
LONG-TERM DEBT, net of current maturities 6,177,492 392,699
------------- -------------
MINORITY INTERESTS - 1,470,457
------------- -------------
COMMITMENTS AND CONTINGENCIES (Notes 10 and 12)
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; 5,000,000 shares
authorized; none issued and outstanding - -
Common stock, $.001 par value; 50,000,000 shares authorized, 24,394,300
in 1996 and 21,831,179 in 1995 issued and outstanding 24,394 21,831
Additional paid-in capital 4,151,026 129,507
Retained earnings 431,685 2,077,894
------------- -------------
Total stockholders' equity 4,607,105 2,229,232
------------- -------------
$ 14,854,716 $ 11,717,054
============= =============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-4
<PAGE>
<TABLE>
<CAPTION>
MAGICWORKS ENTERTAINMENT INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES:
Production $ 30,255,931 $ 31,638,078 $ 23,346,244
Promotion 36,310,528 17,406,082 13,283,612
Merchandising 2,686,238 2,474,214 2,338,619
Other 2,330,418 2,191,605 1,560,837
-------------- -------------- --------------
Total revenues 71,583,115 53,709,979 40,529,312
-------------- -------------- --------------
OPERATING EXPENSES:
Production 28,019,575 29,251,937 21,783,840
Promotion 30,765,158 13,505,270 9,909,580
Salaries, wages and benefits 3,699,334 2,649,670 1,935,974
Cost of goods sold 1,933,983 1,462,364 1,824,102
General and administrative 3,892,705 2,252,106 1,548,202
-------------- -------------- --------------
Total operating expenses 68,310,755 49,121,347 37,001,698
-------------- -------------- --------------
INCOME FROM OPERATIONS 3,272,360 4,588,632 3,527,614
-------------- -------------- --------------
OTHER INCOME (EXPENSE):
Interest income 286,596 310,668 64,781
Interest expense (491,630) (132,192) (20,011)
Income from investments in partnerships 83,922 418,679 417,071
-------------- -------------- --------------
Income before minority interests 3,151,248 5,185,787 3,989,455
and provision for income taxes
MINORITY INTERESTS 11,731 (1,446,888) (1,460,444)
-------------- -------------- --------------
Income before provision for income taxes 3,162,979 3,738,899 2,529,011
PROVISION FOR INCOME TAXES (597,216) - -
-------------- -------------- --------------
Net income before pro forma income taxes
for periods prior to July 29, 1996 2,565,763 3,738,899 2,529,011
PRO FORMA INCOME TAXES (1,161,758) (1,458,170) (986,314)
-------------- -------------- --------------
Pro forma net income $ 1,404,005 $ 2,280,729 $ 1,542,697
============== ============== ==============
PRO FORMA NET INCOME PER COMMON SHARE $ .06 $ .10 $ .07
============== ============== ==============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 25,080,885 21,831,180 21,831,180
============== ============== ==============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
MAGICWORKS ENTERTAINMENT INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1993, as
previously reported $ 19,311 $ 8,368 $ 1,361,305 $ 1,388,984
Shares issued in connection with
the MovieTime acquisition
(Note 1) 1,200 121,139 - 122,339
Shares issued in connection with
the Space acquisition (Note 1) 1,320 - 251,686 253,006
----------- ----------- ----------- -----------
BALANCE, December 31, 1993, as
restated 21,831 129,507 1,612,991 1,764,329
Distributions - - (1,671,878) (1,671,878)
Net income - - 2,529,011 2,529,011
----------- ----------- ----------- -----------
BALANCE, December 31, 1994 21,831 129,507 2,470,124 2,621,462
Capital contributions - - 40,000 40,000
Distributions - - (4,171,129) (4,171,129)
Net income - - 3,738,899 3,738,899
----------- ----------- ----------- -----------
BALANCE, December 31, 1995 21,831 129,507 2,077,894 2,229,232
Issuance of common stock, net of
costs of $1,255,668 2,563 3,927,519 - 3,930,082
Stock options granted to
nonemployees - 94,000 - 94,000
Distributions - - (4,211,972) (4,211,972)
Net income - - 2,565,763 2,565,763
----------- ----------- ----------- -----------
BALANCE, December 31, 1996 $ 24,394 $ 4,151,026 $ 431,685 $ 4,607,105
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
MAGICWORKS ENTERTAINMENT INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,565,763 $ 3,738,899 $ 2,529,011
Adjustments to reconcile net income to net
cash provided by (used in) operating activities-
Depreciation and amortization 526,318 233,186 173,444
Write-down of investments in partnerships - 101,994 68,715
Deferred income tax provision 411,394 - -
Loss on sale of property and equipment 27,734 - 1,408
Minority interests (11,731) 1,446,888 1,460,444
Income from investments in partnerships (83,922) - -
Stock options granted to nonemployees 94,000 - -
Changes in operating assets and liabilities:
Accounts receivable (684,316) (574,170) (25,162)
Inventories (108,029) (16,289) 2,598
Preproduction costs 897,617 (449,633) (1,058,681)
Advances and temporary deposits (117,781) (17,105) (33,656)
Other current assets (139,283) (493,889) 217,563
Deferred costs 182,929 (244,659) (114,516)
Accounts payable 556,442 83,224 (66,756)
Accrued liabilities 150,879 (716,340) 1,470,002
Advance ticket sales (2,767,831) 1,761,275 946,985
-------------- -------------- --------------
Net cash provided by operating activities 1,500,183 4,853,381 5,571,399
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (953,930) (1,006,045) (110,667)
Proceeds from sale of assets - - 7,500
Investments in partnerships (624,570) 76,443 (132,941)
Payments from (advances to) affiliates (153,241) 136,598 14,588
Intangible assets 4,952 (63,914) (160,289)
-------------- -------------- --------------
Net cash used in investing activities (1,726,789) (856,918) (381,809)
-------------- -------------- --------------
</TABLE>
(Continued)
F-7
<PAGE>
<TABLE>
<CAPTION>
MAGICWORKS ENTERTAINMENT INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt $ 1,914,057 $ 2,523,677 $ 83,091
Repayment of debt (3,070,417) (264,985) (326,054)
Net proceeds from private placement 9,115,832 - -
Distributions to minority interests in excess of
contributions by minority interests (1,458,726) (1,381,291) (191,564)
Distributions (4,211,972) (4,171,129) (1,671,878)
Capital contributions - 40,000 -
Deferred debt issuance costs (792,577) - -
-------------- -------------- --------------
Net cash provided by (used in) financing activities 1,496,197 (3,253,728) (2,106,405)
-------------- -------------- --------------
Net increase in cash and cash equivalents 1,269,591 742,735 3,083,185
CASH AND CASH EQUIVALENTS, beginning of year 5,097,588 4,354,853 1,271,668
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS, end of year $ 6,367,179 $ 5,097,588 $ 4,354,853
============== ============== ==============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 490,628 $ 83,518 $ 28,726
============== ============== ==============
Income taxes $ 250,000 $ - $ -
============== ============== ==============
SUPPLEMENTAL INFORMATION OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Distribution of notes receivable to affiliates $ - $ 666,288 $ -
============== ============== ==============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-8
<PAGE>
MAGICWORKS ENTERTAINMENT INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES:
- ---------------------------------------
NATURE OF OPERATIONS
Magicworks Entertainment Incorporated (the "Company"), through its subsidiaries
and partnerships, produces, promotes and represents live theatrical acts and
events and provides ancillary services including merchandising and
transportation.
On July 29, 1996, the Company consummated a simultaneous merger (the "Merger")
with certain other affiliated businesses. On the same date, the Company issued
and sold 400.06 Units in a private placement (see Note 5) from which it received
net proceeds in the amount of $8,782,832. Each unit consists of an unsecured
senior convertible note (the "Notes") in the principal amount of $12,500 bearing
interest at a rate of 10% per annum, and 5,000 shares of common stock. On
September 27, 1996, the Company sold an additional 14.8 Units pursuant to the
private placement from which it received additional net proceeds in the amount
$333,000. Upon completion of the private placement, the Company merged with and
into Shadow Wood Corporation ("Shadow Wood"), a publicly-traded Delaware
corporation. In accordance with the terms of the Merger, each share of the
Company's common stock issued and outstanding was converted into one share of
Shadow Wood's common stock. Shadow Wood was the surviving corporation and
investors in the private placement became security holders of Shadow Wood.
Shadow Wood changed its name to Magicworks Entertainment Incorporated.
For periods prior to July 29, 1996, the Financial Statements present the
combined results of Magic Promotion, Inc., Magic Promotions, Inc., Touring
Artists Group, Inc., Performing Arts Management of North Miami, Inc., Diamond
Bullet Merchandising, Inc., MovieTime Entertainment Inc. and Space Agency, Inc.
On August 28, 1996, the Company acquired all of the outstanding capital stock of
MovieTime Entertainment, Inc. ("MovieTime") in exchange for 1,199,999 shares of
the Company's common stock. MovieTime was formed in May 1995. The principals of
MovieTime are the same as the principals and management of the Company.
Accordingly, the acquisition was accounted for on a historical cost basis in a
manner similar to a pooling of interests. The consolidated financial statements
have been restated to reflect the accounts of MovieTime since inception.
Revenues and loss generated by MovieTime and included in the accompanying
consolidated statements of operations are as follows:
1996 1995
----------- -----------
Revenues $ 81,077 $ -
=========== ===========
Loss before pro forma income taxes $ (674,703) $ (402,963)
=========== ===========
Revenues and loss generated by MovieTime prior to the date of acquisition and
included in the accompanying consolidated statements of operations for the year
ended December 31, 1996 were $59,546 and ($449,161), respectively.
F-9
<PAGE>
On December 31, 1996, the Company acquired all of the outstanding capital stock
of Space Agency, Inc. ("Space") in exchange for 1,320,001 shares of the
Company's common stock. The acquisition has been accounted for using the pooling
of interests method of accounting. Accordingly, the consolidated financial
statements have been restated to reflect the accounts of Space since inception.
Revenues, income and distributions to stockholders generated by Space included
in the accompanying consolidated statements of operations are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 24,740,750 $ 10,975,880 $ 7,113,119
============ ============ ============
Income before pro forma income taxes $ 1,149,712 $ 457,054 $ 400,813
============ ============ ============
Distributions to stockholders $ 1,606,331 $ 355,000 $ 55,000
============ ============ ============
</TABLE>
The accompanying consolidated financial statements include the accounts of the
following partnerships involved in equity and non-equity theatrical production:
The Judas Company ("Judas") which was formed in 1992, Dolliko which was formed
in 1994, Impossible Touring Company, Ain't Misbehavin' Company ("Ain't
Misbehavin") which commenced in 1995 and The Deathtrap Company ("Deathtrap")
which was formed in 1996. Although at December 31, 1996, the Company held less
than a 51% ownership interest in these partnerships, their results are
consolidated as the Company exercises control over the operating and financial
policies of these partnerships, both contractually and in practice, and such
control is not expected to be temporary.
The percentage of the partnerships not owned by the Company are presented as
minority interests in the consolidated financial statements. The amount of
minority interest liability fluctuates depending on the timing of performances
and distributions. Income from operations from the partnerships included in the
consolidated statements of operations was $338,624, $2,065,804 and $1,710,017 in
1996, 1995 and 1994, respectively.
The accompanying consolidated financial statements also include the accounts of
the following wholly-owned subsidiaries:
Touring Artists Group, Inc. ("TAG"), formed in 1993 to book live theatrical
performances and other entertainment related events throughout the United States
on behalf of the Company and third parties.
Performing Arts Management of North Miami, Inc. ("PAM"), formed in January 1991
to operate, manage and engage in the business of development, management and
promotion of cultural performance centers. See Notes 10 and 12.
Diamond Bullet Merchandising, Inc. ("DBM"), formed in 1988 to sell souvenir
related merchandise for Company produced and third party entertainment
productions.
Magic Promotions, Inc. and Magic Promotion, Inc., formed in 1993 and 1994,
respectively, to produce and promote live theatrical entertainment and to
provide ancillary services including merchandising and transportation.
All significant intercompany balances and transactions have been eliminated in
the consolidated financial statements.
F-10
<PAGE>
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. Included in cash and cash equivalents are
interest bearing deposits of $3,886,969 and $315,398 at December 31, 1996 and
1995, respectively.
INVENTORIES
Inventories are valued at the lower of cost, determined on a first-in first-out
basis, or net realizable value.
PREPRODUCTION COSTS
Preproduction costs consist mainly of pre-opening advertising and promotion,
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.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation and
amortization. Assets are depreciated using the straight-line method over the
estimated useful lives of the assets or the lease terms if shorter as follows:
Leasehold improvements Life of the lease
Furniture and equipment 5 to 7 years
Vehicles 10 to 15 years
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.
INVESTMENTS IN PARTNERSHIPS
The Company has limited partnership interests, ranging from 1% to 24%, 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 at cost, $397,331 and $152,384 at
December 31, 1996 and 1995, respectively, and income is only recognized when
received in the form of distributions. The Company recognized income from
distributions of $0, $418,679 and $417,071 in 1996, 1995 and 1994, respectively.
The Company has nine joint venture interests ranging from 25% to 50%, in various
seasonal productions. Because the Company exercises influence over the operating
and financial policies of these productions, these investments are accounted for
under the equity method. The carrying value of such investments was $521,233 and
$195,399 at December 31, 1996 and 1995, respectively. The Company recognized
income from investments in partnerships of $83,922, $0, and $0 in 1996, 1995 and
1994, respectively.
F-11
<PAGE>
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
10) and deferred debt costs incurred in connection with the private placement by
the Company discussed in Note 5.
Deferred costs relating to the Performing Arts Center amounting to $337,646 will
be amortized over a maximum period of three years once operations commence. If
construction begins and progresses on schedule, the facility is expected to
begin operations in 1998.
Deferred debt costs of $767,468, net of accumulated amortization of $68,566, are
being amortized over the 5 year term of the related debt. Amortization of
deferred debt costs amounted to $68,566 in 1996.
INTANGIBLE ASSETS
Intangible assets result from the allocation of the excess cost of acquisitions
over the fair value of net assets acquired. Intangible assets primarily included
booking agreements of $341,595 resulting from the acquisition of the National
Artists Management Company, Inc. in 1992 and a management operating agreement in
the amount of $466,962 are being amortized over the terms of the agreements of 5
and 30 years, respectively. Amortization of intangible assets amounted to
$123,745, $147,593 and $93,951, for 1996, 1995 and 1994, respectively. Total
accumulated amortization of cost in excess of net assets acquired was $482,812
and $359,067 in 1996 and 1995, respectively. The Company continually evaluates
whether events and circumstances have occurred that indicate the remaining net
book value of intangibles may warrant revision or may not be recoverable.
REVENUES
Revenues are recognized when earned, which is generally at the time of the
theatrical performance or entertainment events. Production revenues represent
the Company's share of performance revenues. Cash received in advance of a
performance is reflected as advance ticket sales in the accompanying
consolidated balance sheets. Promotion revenues represent the Company's share of
performance operating results where the Company serves as promoter.
Receivables include amounts due from shows which the Company acts as the
promoter, advances to shows for start-up costs which will be repaid from profit
distributions, and amounts due from theaters for ticket sales. The Company
provides an allowance for losses on accounts receivable based on a monthly
review of the outstanding receivables and evaluation of their collectibility. At
December 31, 1996 and 1995, no allowances were recorded.
A substantial portion of the Company's revenues are derived from the production
and promotion of live entertainment acts and events throughout the United
States, Canada and Mexico. Changes in the entertainment preferences of the
general populations could affect the Company's future revenues.
F-12
<PAGE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As of December 31, 1996 and 1995, the carrying amount of cash and cash
equivalents, accounts receivable, other current assets, accounts payable and
accrued liabilities approximates fair value due to the short-term nature of
these accounts.
CONCENTRATIONS OF CREDIT RISK
The Company has no significant off balance sheet concentration of credit risk.
The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of cash and cash equivalents.
PRO FORMA NET INCOME PER COMMON SHARE
Pro forma net income per common share is computed by dividing pro forma net
income by the weighted average number of common shares and dilutive common stock
equivalents outstanding for each period. Common stock equivalents include the
dilutive effect of all outstanding stock options and warrants after application
of the treasury stock method. Fully diluted net income per common share also
assumes the maximum dilutive effect from stock options and warrants, and
conversion of the Company's convertible notes (see Note 5). For all periods
presented, primary and fully diluted net income per share are the same.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). The
impact of adopting SFAS 121 in 1996 was immaterial.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 applies to transactions with nonemployees
after December 15, 1995. The expense recognized for stock options issued to
consultants in fiscal
F-13
<PAGE>
1996, as more fully described in Note 11, was reflected under the provisions of
SFAS 123. The Company intends to continue applying the provisions of Accounting
Principles Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB
25"), for transactions with employees, as permitted by SFAS 123.
(2) PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
Leasehold improvements $ 121,001 $ 83,600
Furniture and equipment 617,823 410,819
Vehicles 2,085,022 1,453,146
----------- ------------
2,823,846 1,947,565
Less - Accumulated depreciation and
amortization 747,536 601,155
----------- ------------
Property and equipment, net $ 2,076,310 $ 1,346,410
=========== ===========
Assets held under capital leases were fully depreciated at December 31, 1996.
(3) ACCRUED LIABILITIES:
Accrued liabilities consists of the following at December 31:
1996 1995
----------- ------------
Accrued royalties $ 574,103 $ 304,733
Payroll-related accruals 190,495 420,893
Other 278,955 167,048
----------- ------------
$ 1,043,553 $ 892,674
=========== ===========
</TABLE>
F-14
<PAGE>
(4) SHORT-TERM DEBT:
Short-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
--------- ------------
<S> <C> <C>
$750,000 revolving credit line, interest at commercial paper
rate charged by Merrill Lynch plus 2.9% payable monthly.
Repaid in August 1996. $ - $ 692,351
$350,000 unsecured demand promissory note, interest at
prime rate charged by Society National Bank plus 3/4%,
payment of interest to be paid monthly. Repaid in August
1996. - 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. Repaid in
August 1996. - 435,156
$400,000 note payable, interest at 10%, principal due
monthly, collateralized by vehicles. Repaid in August 1996. - 352,000
$100,000 unsecured convertible note, interest at 8.5%,
principal and interest convertible to 20% of stock in DBM.
Repaid in August 1996. - 100,000
--------- ------------
$ - $ 1,920,489
========= ============
</TABLE>
(5) PRIVATE PLACEMENT:
On July 29, 1996, the Company issued and sold 400.06 Units for which it received
net proceeds of $8,782,832. On September 27, 1996, the Company sold an
additional 14.8 Units pursuant to the private placement for which it received
additional net proceeds of $333,000. Each unit consists of an unsecured senior
convertible note (the "Notes") in the principal amount of $12,500 bearing
interest at a rate of 10% per annum, and 5,000 shares of common stock. The value
attributable to the common shares was $2.50 per share. As a placement fee, the
placement agent received 488,820 shares of the Company's common stock.
The Notes require interest payments semi-annually on June 30 and December 31.
The Notes contain mandatory sinking fund requirements which are calculated to
retire 75% of the face amount of the Notes after payment of seven consecutive
equal quarterly contributions, the first such contribution to occur on October
1, 1999 and every ninety days thereafter.
The principal amount and accrued and unpaid interest on each Note is convertible
(in whole but not in part), at any time prior to July 30, 2001, at a conversion
price of $3.50 per share (subject to adjustment in certain circumstances). The
Notes may be prepaid by the Company at its option at the principal amount plus
accrued but unpaid interest.
F-15
<PAGE>
In addition to the placement fee described above, the Company issued the
placement agent 500,000 warrants at an exercise price of $3.00 per share,
(subject to adjustment in certain circumstances), and has authorized up to
1,481,643 redeemable warrants that may be issued in connection with the
prepayment of the Notes in certain circumstances at $3.50 per share.
(6) LONG-TERM DEBT:
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Various notes payable with interest ranging from
9.75% to 10.9%, principal due monthly through
February 2001. Collateralized by vehicles. $ 1,276,348 $ 489,791
Convertible notes (see Note 5) 5,185,750 -
Capital lease obligation payable in monthly
installments through September 1997 including
interest imputed at a rate of 10%, collateralized by
a vehicle. 18,350 40,778
------------ -----------
6,480,448 530,569
Less- Current maturities 302,956 137,870
------------ -----------
$ 6,177,492 $ 392,699
============ ===========
</TABLE>
Scheduled maturities of long-term debt are as follows:
1997 $ 302,956
1998 299,040
1999 869,142
2000 2,472,464
2001 2,536,846
------------
$ 6,480,448
============
The Company has a line of credit with a bank which provides for short-term
borrowings of up to $1.2 million with interest at prime plus 3/4%. The line of
credit is guaranteed by certain executive officers of the Company. At December
31, 1996, the full amount of the line of credit was available for borrowing.
(7) EMPLOYEE BENEFIT PLANS:
Effective January 1, 1988, the Company 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. The Company contributes an amount not to
exceed 25% of the participating employee's compensation or $30,000. In addition,
the Plan permits the Company to make additional discretionary contributions to
the Plan. Total contributions to the Plan were $55,792, $69,000, and $70,446 in
1996, 1995 and 1994, respectively. Employees vest in the Company's discretionary
contributions at the rate of 20% per year upon completion of two years of
service.
Space has a qualified profit sharing plan for the employees. Contributions to
the plan are determined by the Board of Directors each year, and are limited to
an amount not to exceed 15% of eligible compensation paid to participants for
the year. Employees are eligible to participate in the plan after one year if
they are over 21 and work at least 1,000 hours each year. Space made
contributions to the plan of $59,222, $53,408 and $35,983 in 1996, 1995 and
1994, respectively.
F-16
<PAGE>
The Company does not currently provide any other post employment or retirement
benefits.
(8) RELATED PARTY TRANSACTIONS:
In the normal course of its business, the Company conducts business with certain
stockholders and their respective affiliates. In the opinion of management, the
transactions with related parties are equivalent to terms from unrelated
parties.
Fees paid by the Company for accounting, general management, office and other
administrative services to entities controlled by certain principal stockholders
were $25,750, $53,218, and $75,378 in 1996, 1995 and 1994, respectively, and are
reflected in general and administrative expenses in the accompanying
consolidated statements of operations.
The Company entered into three 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 $80,504,
$89,924 and $91,526 in 1996, 1995 and 1994, respectively. See Note 10 for a
summary of future minimum commitments under these noncancelable operating
leases.
Included in due from affiliates and due to affiliates are the net balances of
receivables and payables due from entities controlled by certain stockholders
and minority partners and due to certain stockholders. Receivables with an
outstanding balance, including accrued interest, totaled $75,945 and $678,949 at
December 31, 1996 and 1995, respectively. Payables due to certain stockholders
with an outstanding balance, including accrued interest, totaled $72,732 and
$828,977 at December 31, 1996 and 1995, respectively.
(9) INCOME TAXES:
The provision for income taxes consists of the following:
1996
--------------
Current $ 185,822
Deferred 411,394
--------------
$ 597,216
==============
Federal $ 514,028
State 83,188
--------------
$ 597,216
==============
There is no provision for income taxes for 1995 and 1994 as prior to July 29,
1996, the stockholders included their proportionate share of the Company's
income in their respective tax returns. Pro forma income taxes represent the
estimated tax provision, at 39%, which would have been recorded had the Company
been a taxable entity for all periods presented.
F-17
<PAGE>
A reconciliation of the difference between the expected provision for income
taxes using the statutory Federal tax rate and the Company's actual provision is
as follows:
1996
--------------
Provision using statutory rate of 34% $ 1,071,424
State income taxes 50,745
Income earned in period prior to July 29, 1996 (1,161,758)
Deferred income taxes recorded at July 29, 1996 548,525
Other 88,280
--------------
$ 597,216
==============
Deferred taxes are due to timing differences in reporting of certain income and
expense items for book purposes and income tax purposes. Deferred taxes at
December 31, 1996 consist primarily of the impact, prior to July 29, 1996, of
the Company reporting its income on a cash basis.
(10) COMMITMENTS AND CONTINGENCIES:
LITIGATION
In October 1994, a former independent contractor filed a complaint against a
partnership of the Company in the Common Pleas Court of Philadelphia County
seeking consequential damages of $5,000,000 arising from the termination of an
employment contract. The Company believes that the claim is without merit, and
that the matter will be resolved without a material adverse effect to the
Company's financial position.
The Company filed a complaint against a former financial advisor for rescission,
fraud and breach of fiduciary duty in connection with a consulting agreement.
The individual filed a counter claim and seeks damages relating to his
involvement in the private placement of the Company. See Note 12.
GENERAL MANAGER AGREEMENTS
The Company entered into management agreements with Niko Associates ("Niko"), an
unrelated entity, to manage the daily general operations 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 reimbursement of certain overhead related costs.
Management fees paid by the Company to Niko amounted to $635,000, $309,498 and
$238,408 in 1996, 1995 and 1994, respectively, and are reflected in production
expenses in the accompanying consolidated statements of operations.
F-18
<PAGE>
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 begin in 1998) and will continue for a period of 30 years.
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. See Note 12.
OPERATING LEASES
The Company leases office space from affiliated entities under operating lease
agreements which extend through June 2001. The following is a schedule of
approximate future minimum lease payments required under such noncancelable
operating leases at December 31, 1996:
YEAR ENDING DECEMBER 31, TOTAL
----------------------- ------------
1997 $ 116,009
1998 80,730
1999 83,286
2000 85,842
2001 25,560
------------
$ 391,427
============
The Company has month-to-month leases with unaffiliated entities. Rent expense
amounted to $161,140, $155,200 and $153,821 for the years ended December 31,
1996, 1995 and 1994, respectively, and is included in general and administrative
expenses in the accompanying consolidated statements of operations.
ROYALTY AGREEMENTS
The Company has royalty agreements with certain authors, actors, directors and
choreographers and their respective unions. These agreements are for the length
of the shows and may include incentive bonuses based upon specified goals. The
aggregate commitment for future royalties, excluding bonuses, as of December 31,
1996, was approximately $1,724,000.
F-19
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with key personnel that
require future minimum payments as follows:
YEAR ENDING DECEMBER 31, TOTAL
------------------------ ------------
1997 $ 1,119,167
1998 1,191,667
1999 1,291,667
2000 1,141,667
2001 800,000
------------
$ 5,544,168
============
(11) STOCK OPTIONS:
At the discretion of management, the Company may grant options to purchase the
Company's stock to employees, directors, consultants, and other unrelated
parties. In 1996, the Company granted options to purchase an aggregate of
216,500 shares as follows:
<TABLE>
<CAPTION>
OPTIONS EXERCISE PRICE
------------ --------------
<S> <C> <C>
Balance, December 31, 1995 - -
Grants 216,500 $2.50 - $3.75
Exercises - -
Cancellations - -
----------- --------------
Balance, December 31, 1996 216,500 $2.50 - $3.75
============ ==============
Options exercisable, December 31, 1996 162,500
==========
</TABLE>
The Company applies APB 25 and its related interpretations in accounting for
options granted to employees. Accordingly, no compensation cost has been
recognized related to such grants. Had compensation cost for the Company's stock
options been based on fair value at the grant dates for awards granted,
consistent with the provisions of SFAS 123, the Company's 1996 pro forma net
income and pro forma income per share would have been reduced to the amounts
indicated below:
<TABLE>
<S> <C> <C>
Pro forma net income As reported $ 1,404,005
Pro forma for the impact of SFAS 123 $ 1,384,146
Pro forma income per share As reported $ .06
Pro forma for the impact of SFAS 123 $ .06
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions: expected
volatility of 25.0%, risk-free interest rate of 6.5%, expected dividends of $0
and expected terms of 3 years.
F-20
<PAGE>
In 1996, the Company recorded expense of $94,000 related to 200,000 stock
options granted to nonemployees of the Company. In determining the expense to be
recorded, the Company applied the Black-Scholes model using the same assumptions
described above.
(12) SUBSEQUENT EVENTS:
(a) Merger
In January 1997, TAG completed the merger of its operations with another booking
office to form The Booking Group, LLC, (the "Booking Group"). TAG will
participate as a 33.33% partner. TAG will account for its investment in the
Booking Group using the equity method.
(b) Litigation
In January 1997, the Company filed suit against the City for failure to perform
under the current operating management agreement (see Note 10). The City filed a
counter claim alleging the Company had breached the management contract. The
Company intends to vigorously defend its position in the counter suit and
believes that the matter will be resolved without a material adverse effect to
the Company's financial position.
In March 1997, KAS Enterprises, Incorporated ("KAS"), which represents a
performer, filed suit against the Company for breach of contract and declaratory
relief seeking damages in excess of $850,000. On March 14, 1997, the Company
filed a suit for breach of contract, fraud in the inducement and rescission. The
Company intends to vigorously defend its position and believes that the matter
will be resolved without a material adverse effect to the Company's financial
position.
(c) Settlement Agreement
On March 25, 1997, the Company entered into a settlement agreement with a former
financial advisor concluding and dismissing all claims see Note 10. The advisor
was permitted to acquire 500,000 shares of the Company's Common Stock at the
current market price in exchange for a note payable. The note will be secured by
the shares of stock acquired.
F-21
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
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-22
<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-23
<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-24
<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-25
<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-26
<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 marketing 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-27
<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-28
<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-29
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of Space Agency, Inc.:
We have audited the accompanying balance sheet of Space Agency, Inc. (a Utah
corporation) as of December 31, 1996, and the related statements of operations,
stockholders' equity 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 Space Agency, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Miami, Florida,
February 14, 1997.
F-30
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of Space Agency, Inc.:
We have audited the accompanying balance sheet of Space Agency, Inc. (a Utah
corporation) as of December 31, 1995, and the related statements of operations,
stockholders' equity and cash flows for each of the two 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 financial position of Space Agency, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
NIEVAARD, KOFOED & TERAN, P.C.
November 15, 1996,
Salt Lake City, Utah.
F-31
<PAGE>
<TABLE>
<CAPTION>
SPACE AGENCY, INC.
BALANCE SHEETS
DECEMBER 31,
----------------------------------
1996 1995
------------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 908,809 $ 4,082,986
Marketable securities 80,332 147,998
Accounts receivable 172,732 40,743
Advances and temporary deposits - 65,000
Note receivable from related party - 13,530
Preproduction costs 117,363 237,658
------------- -------------
Total current assets 1,279,236 4,587,915
PROPERTY AND EQUIPMENT, net 101,483 47,106
------------- -------------
Total assets $ 1,380,719 $ 4,635,021
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 292,092 $ 321,944
Advance ticket sales 844,373 3,612,204
------------- -------------
Total current liabilities 1,136,465 3,934,148
------------- -------------
COMMITMENTS (Note 6)
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value; 50,000 shares authorized, 11,111 shares
issued and outstanding in 1996 and 1995 5,556 5,556
Additional paid-in capital 15,444 15,444
Retained earnings 223,254 679,873
------------- -------------
Total stockholders' equity 244,254 700,873
------------- -------------
Total liabilities and stockholders' equity $ 1,380,719 $ 4,635,021
============= =============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
F-32
<PAGE>
<TABLE>
<CAPTION>
SPACE AGENCY, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------
1996 1995 1994
--------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Promotion $ 24,525,872 $ 10,737,410 $ 7,015,339
Other 214,878 238,470 97,780
-------------- -------------- --------------
Total revenues 24,740,750 10,975,880 7,113,119
-------------- -------------- --------------
OPERATING EXPENSES:
Promotion 22,700,066 9,811,463 6,243,549
Salaries, wages and benefits 693,145 593,331 406,674
General and administrative 347,338 256,293 110,655
-------------- -------------- --------------
Total operating expenses 23,740,549 10,661,087 6,760,878
-------------- -------------- --------------
Income from operations 1,000,201 314,793 352,241
-------------- -------------- --------------
OTHER INCOME (EXPENSE):
Interest income 167,753 201,608 49,980
Interest expense (18,242) (39,347) -
Loss on sale of investment - (20,000) -
Loss on sale of asset - - (1,408)
-------------- -------------- --------------
Income before pro forma income taxes 1,149,712 457,054 400,813
PRO FORMA INCOME TAXES (448,000) (179,000) (156,800)
-------------- -------------- --------------
Pro forma net income $ 701,712 $ 278,054 $ 244,013
============== ============== ==============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-33
<PAGE>
<TABLE>
<CAPTION>
SPACE AGENCY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1993 $ 5,556 $ 15,444 $ 232,006 $ 253,006
Distributions - - (55,000) (55,000)
Net income - - 400,813 400,813
----------- ----------- ----------- -----------
BALANCE, December 31, 1994 5,556 15,444 577,819 598,819
Distributions - - (355,000) (355,000)
Net income - - 457,054 457,054
----------- ----------- ----------- -----------
BALANCE, December 31, 1995 5,556 15,444 679,873 700,873
Distributions - - (1,606,331) (1,606,331)
Net income - - 1,149,712 1,149,712
----------- ----------- ----------- -----------
BALANCE, December 31, 1996 $ 5,556 $ 15,444 $ 223,254 $ 244,254
=========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-34
<PAGE>
<TABLE>
<CAPTION>
SPACE AGENCY, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,149,712 $ 457,054 $ 400,813
Adjustments to reconcile net income to net
cash provided by (used in) operating activities-
Depreciation and amortization 19,579 14,184 10,053
Loss on sale of property and equipment - - 1,408
Loss on sale of investment - 20,000 -
Changes in operating assets and liabilities:
Accounts receivable (131,989) 7,055 (40,194)
Preproduction costs 120,295 (214,160) 255,769
Advances and temporary deposits 65,000 45,000 (110,000)
Accounts payable (29,852) 106,613 25,188
Advance ticket sales (2,767,831) 1,761,275 946,985
-------------- -------------- --------------
Net cash provided by (used in) operating activities (1,575,086) 2,197,021 1,490,022
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (73,956) (15,865) (15,280)
Proceeds from sale of assets - 4,000 7,500
Sale (purchase) of marketable securities 67,666 (78,096) (69,902)
-------------- -------------- --------------
Net cash used in investing activities (6,290) (89,961) (77,682)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (1,606,331) (355,000) (55,000)
Principal received on note receivable 13,530 1,290 -
-------------- -------------- --------------
Net cash used in financing activities (1,592,801) (353,710) (55,000)
--------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents (3,174,177) 1,753,350 1,357,340
CASH AND CASH EQUIVALENTS, beginning of year 4,082,986 2,329,636 972,296
-------------- -------------- ---------------
CASH AND CASH EQUIVALENTS, end of year $ 908,809 $ 4,082,986 $ 2,329,636
============== ============== ==============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 18,242 $ 39,347 $ -
============== ============== ==============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-35
<PAGE>
SPACE AGENCY, INC.
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES:
- ---------------------------------------
NATURE OF OPERATIONS
Space Agency, Inc. (the "Company") promotes live theatrical entertainment. On
December 31, 1996, the Company was acquired by Magicworks Entertainment
Incorporated, an unaffiliated entity. In connection with the acquisition, all
the Company's outstanding capital stock was exchanged for 1,320,001 shares of
common stock of Magicworks. The acquisition has been accounted for using the
pooling of interests method of accounting.
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. Included in cash and cash equivalents are
interest bearing deposits of $835,536 and $3,735,202 at December 31, 1996 and
1995, respectively.
PREPRODUCTION COSTS
Preproduction costs consist mainly of pre-opening advertising, printing and
rental deposits 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.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation and
amortization. Assets are depreciated using the straight-line method over the
estimated useful lives of the assets or the lease terms if shorter as follows:
Leasehold improvements Life of the lease
Furniture and equipment 5 to 7 years
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.
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 as advance ticket sales in the accompanying balance
sheets. Promotion revenues represent the Company's share of performance
operating results where the Company serves as promoter.
F-36
<PAGE>
Receivables include amounts due from shows which the Company acts as the
promoter, advances to shows for start-up costs which will be repaid from profit
distributions, and amounts due from theaters for ticket sales. The Company
provides an allowance for losses on accounts receivable based on a monthly
review of the outstanding receivables and evaluation of their collectibility. At
December 31, 1996 and 1995, no allowances were recorded.
A substantial portion of the Company's revenues are derived from the promotion
of live theater in Salt Lake City, Utah and Vancouver and Calgary, Canada.
Changes in the entertainment preferences of the general populations could affect
the Company's future revenues.
INCOME TAXES
The Company has elected S Corporation status for Federal income tax reporting.
Accordingly, the stockholders include their proportionate share of the Company's
income in their respective tax returns.
Pro forma income taxes represent the estimated tax provision, at 39%, which
would have been recorded had the Company been a taxable entity for all periods
presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As of December 31, 1996 and 1995, the carrying amount of accounts receivable,
other current assets, accounts payable and accrued liabilities approximates fair
value due to the short-term nature of these accounts.
CONCENTRATIONS OF CREDIT RISK
The Company has no significant off balance sheet concentration of credit risk.
The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of cash and cash equivalents.
NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). The
impact of adopting SFAS 121 in 1996 was immaterial.
(2) MARKETABLE SECURITIES:
- ---------------------------------------
Marketable securities at December 31, 1996 and 1995, represent U.S. Treasury
Bills with maturities of less than seven months. The U.S. Treasury Bills had an
interest rate of 5.4% in 1996 and 4.75% in 1995. The treasury bills were valued
at year-end by subtracting the amortized discount from their face value.
F-37
<PAGE>
(3) PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Leasehold improvements $ 55,133 $ 17,732
Furniture and equipment 111,782 75,227
----------- -----------
166,915 92,959
Less - Accumulated depreciation and
amortization 65,432 45,853
----------- -----------
Property and equipment, net $ 101,483 $ 47,106
=========== ===========
</TABLE>
(4) EMPLOYEE BENEFIT PLANS:
- ---------------------------------------
The Company has a qualified profit sharing plan for the employees. Contributions
to the plan are determined by the Board of Directors each year, and are limited
to an amount not to exceed 15% of eligible compensation paid to participants for
the year. Employees are eligible to participate in the plan after one year if
they are over 21 and work at least 1,000 hours each year. The Company made
contributions to the plan of $59,222, $53,408 and $35,983 in 1996, 1995 and
1994, respectively.
The Company does not currently provide any other post employment or retirement
benefits.
(5) RELATED PARTY TRANSACTIONS:
- ---------------------------------------
In the normal course of its business, the Company conducts business with certain
stockholders and their respective affiliates. In the opinion of management, the
transactions with related parties are equivalent to terms from unrelated
parties.
The Company entered into a noncancelable operating lease for office space with a
related stockholder. The Company is required to pay taxes, maintenance,
insurance and utility costs. Payments under these leases totaled $31,000,
$18,100 and $16,800 in 1996, 1995 and 1994, respectively. See Note 6 for a
summary of future minimum commitments under this noncancelable operating lease.
In 1995, the Company had a note receivable from a related party at December 31,
1996 which bore interest at 5.5%, and was repaid in 1996.
(6) COMMITMENTS:
- ---------------------------------------
OPERATING LEASE
The Company leases office space from an affiliated entity under an operating
lease agreement which extends through December 2000. The following is a schedule
of approximate future minimum lease payments required under such noncancelable
operating lease at December 31, 1996:
YEAR ENDING DECEMBER 31, TOTAL
------------------------ -----------
1997 $ 36,000
1998 36,000
1999 36,000
2000 36,000
-----------
$ 144,000
===========
F-38
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with key personnel that
require future minimum payments as follows:
YEAR ENDING DECEMBER 31, TOTAL
------------------------ -----------
1997 $ 250,000
1998 250,000
1999 250,000
-----------
$ 750,000
===========
F-39
<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 IN 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
Dividend Policy.................................................... 13
Use of Proceeds.................................................... 12
Price Range of Common Stock........................................ 12
Capitalization..................................................... 14
Selected Financial Data............................................ 15
Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 16
Business........................................................... 22
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............. $32,196
NASD filing fee................................................. $17,500
Printing expenses............................................... $77,000
Accounting fees and expenses.................................... $305,000
Legal fees and expenses......................................... $500,000
Listing fees.................................................... $50,000
Fees and expenses (including legal fees) for qualifications
under state securities laws..................................... $15,000
Transfer agent's fees and expenses.............................. $10,000
Miscellaneous................................................... $20,000
------------
Total........................................................... $1,026,696
============
All amounts except the Securities and Exchange
Commission registration fee and the NASD filing fee are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State
of Delaware provides that directors and officers of Delaware corporations are
entitled, under certain circumstances, to be indemnified against expenses
(including attorneys' fees) and other liabilities actually and reasonably
incurred by them as a result of any suit brought against them in their capacity
as a director or officer, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful. Section 145 also
provides that directors and officers may also be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by them in
connection with a derivative suit if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made without court approval
if such person was adjudged liable to the corporation.
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
July 30, 1996 Capital Growth International, (2)
488,820 shares of Common Stock and 500,000 Warrants LLC
19,000,000 shares of Common Stock July 30, 1996 Former shareholders of the (3)
Constituent Corporations
1,199,999 shares of Common Stock August 28, 1996 Former shareholders of Movietime (4)
Entertainment Incorporated
1,320,001 shares of Common Stock December 31, 1996 Former shareholders of Space Agency, Inc. (5)
500,000 shares of Common Stock March 1996 Robert L. Fermar (6)
<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. 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.
(3) Such shares were issued in exchange for the ownership interests of all
of the former shareholders of the Constituent Corporation in
connection with the Consolidation.
(4) Such shares were issued in exchange for the ownership interests of all
of the former shareholders of Movietime in connection with the
Movietime Acquisition.
(5) Such shares were issud in exchange for the ownership interests of all
of the former shareholders of Space Agency in connection with the
Space Agency Acquisition.
(6) Such shares to be issued in connection with a settlement agreement
between the Company and Mr. Ferman.
</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>
3.1 Registrant's Articles of Incorporation*
3.2 Registrant's By-Laws
4.1 Form of Specimen Common Stock Certificate
4.2 Form of Redeemable Common Stock Purchase Warrant*
4.3 Form of Unsecured Senior Convertible Note*
5.1 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.*
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.*
10.11 Management Operating Agreement dated May 27, 1992 by and between the City of North
Miami, Florida and Performing Arts Management of North Miami, Inc.
10.12 Lease Agreement dated July 1, 1996 between Marbrad, Inc. and Magicworks Entertainment
Incorporated*
10.13 Lease Agreement dated November 4, 1994 between Karen and Lee Marshall and Magic
Promotions, Inc.*
21.1 Subsidiaries of Registrant*
23.1 Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel P.A. (included in
Exhibit 5.1)*
23.2 Consent of Ernst & Young LLP
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Nievaard, Kofoed & Teran, P.C.
<FN>
- ---------------------
* Previously filed
</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; and
(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
<PAGE>
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) 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.
(c) 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 Post-Effective Amendment No. 1 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Miami Beach, State of Florida, on April __,
1997.
MAGICWORKS ENTERTAINMENT INCORPORATED
By: /s/ BRAD KRASSNER
---------------------------------------
Brad Krassner, Co-Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment No. 1 to the 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 April __, 1997
- -------------------- Chief Executive Officer
Brad Krassner (Principal Executive Officer)
/s/ JOE MARSH Co-Chairman of the Board April __, 1997
- --------------------
Joe Marsh
/s/ LEE MARSHALL President, Chief Operating Officer April __, 1997
- -------------------- and Director
Lee Marshall
/s/ STEVEN CHABY Chief Financial Officer and April __, 1997
- -------------------- Treasurer (Principal Financial and
Steven Chaby Accounting Officer)
/s/ H. YALE GUTNICK Director April __, 1997
- --------------------
H. Yale Gutnick
/s/ RONALD J. KORN Director February __, 1997
- --------------------
Ronald J. Korn
/s/ JOHN W. BALLARD Director April __, 1997
- --------------------
John W. Ballard
II-5
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
- ------- -----------
3.2 Registrant's By-Laws
4.1 Form of Specimen Common Stock Certificate
5.1 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A.
10.11 Management Operating Agreement dated May 27, 1992 by and between the
City of North Miami, Florida and Performing Arts Management of North
Miami, Inc.
10.12 Lease Agreement dated July 1, 1996 between Marbrad, Inc. and
Magicworks Entertainment Incorporated
10.13 Lease Agreement dated November 4, 1994 between Karen and Lee Marshall
and Magic Promotions, Inc.
23.1 Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel P.A.
(included in Exhibit 5.1)*
23.2 Consents of Ernst & Young LLP
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Nievaard, Kofoed & Teran, P.C.
BYLAWS
OF
MAGICWORKS ENTERTAINMENT INCORPORATED
(A DELAWARE CORPORATION)
<PAGE>
INDEX
-----
PAGE
NUMBER
------
ARTICLE ONE - OFFICES
1. Registered Office........................................ 1
2. Other Offices............................................ 1
ARTICLE TWO - MEETINGS OF SHAREHOLDERS
1. Place.................................................... 1
2. Time of Annual Meeting................................... 1
3. Call of Special Meetings................................. 1
4. Conduct of Meetings...................................... 1
5. Notice and Waiver of Notice.............................. 2
6. Business of Special Meeting.............................. 2
7. Quorum................................................... 2
8. Voting Per Share......................................... 3
9. Voting of Shares......................................... 3
10. Proxies.................................................. 3
11. Shareholder List......................................... 4
12. Action Without Meeting................................... 4
13. Fixing Record Date....................................... 4
14. Inspectors and Judges.................................... 5
15. Voting for Directors..................................... 5
ARTICLE THREE - DIRECTORS
1. Number, Election and Term................................ 5
2. Vacancies................................................ 6
3. Powers................................................... 6
4. Place of Meetings........................................ 6
5. Annual Meeting........................................... 6
6. Regular Meetings......................................... 6
7. Special Meetings and Notice.............................. 6
8. Quorum; Required Vote; Presumption
of Assent............................................. 7
9. Action Without Meeting................................... 7
10. Conference by Telephone or Similar
Communications Equipment Meetings..................... 7
11. Committees............................................... 7
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12. Compensation of Directors................................. 8
13. Chairman of the Board..................................... 8
ARTICLE FOUR - OFFICERS
1. Positions................................................. 8
2. Election of Specified Officers by Board................... 8
3. Election or Appointment of Other
Officers................................................ 8
4. Salaries.................................................. 9
5. Term; Resignation......................................... 9
6. President................................................. 9
7. Vice Presidents........................................... 9
8. Secretary................................................. 9
9. Treasurer................................................. 10
10. Other Officers, Employees and Agents...................... 10
ARTICLE FIVE - CERTIFICATES FOR SHARES
1. Issue of Certificates..................................... 10
2. Legends for Preferences and Restrictions
on Transfer............................................. 10
3. Facsimile Signatures...................................... 11
4. Lost Certificates......................................... 11
5. Transfer of Shares........................................ 11
6. Registered Shareholders................................... 11
7. Redemption of Control Shares.............................. 11
ARTICLE SIX - GENERAL PROVISIONS
1. Dividends................................................. 12
2. Reserves.................................................. 12
3. Checks.................................................... 12
4. Fiscal Year............................................... 12
5. Seal...................................................... 12
6. Gender.................................................... 12
ARTICLE SEVEN - AMENDMENTS OF BYLAWS.................................... 12
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<PAGE>
MAGICWORKS ENTERTAINMENT INCORPORATED
BYLAWS
ARTICLE ONE
OFFICES
Section 1. REGISTERED OFFICE. The registered office of MAGICWORKS
ENTERTAINMENT INCORPORATED, a Delaware corporation (the "Corporation"), shall be
located in the City of Tallahassee, State of Florida, unless otherwise
designated by the Board of Directors.
Section 2. OTHER OFFICES. The Corporation may also have offices at such
other places, either within or without the State of Florida, as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine or as the business of the Corporation may require.
ARTICLE TWO
MEETINGS OF SHAREHOLDERS
Section 1. PLACE. All annual meetings of shareholders shall be held at
such place, within or without the State of Florida, as may be designated by the
Board of Directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof. Special meetings of shareholders may be held at such
place, within or without the State of Florida, and at such time as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. TIME OF ANNUAL MEETING. Annual meetings of shareholders
shall be held on such date and at such time fixed, from time to time, by the
Board of Directors, provided that there shall be an annual meeting held every
year at which the shareholders shall elect a Board of Directors and transact
such other business as may properly be brought before the meeting.
Section 3. CALL OF SPECIAL MEETINGS. Special meetings of the
shareholders shall be held if called by the Board of Directors, the President,
or if the holders of not less than fifty percent (50%) of all the votes entitled
to be cast on any issue proposed to be considered at the proposed special
meeting sign, date, and deliver to the Secretary one or more written demands for
the meeting describing the purpose or purposes for which it is to be held.
Section 4. CONDUCT OF MEETINGS. The Chairman of the Board (or in his
absence, the President or such other designee of the Chairman of the Board)
shall preside at the annual and special meetings of shareholders and shall be
given full discretion in establishing the rules
<PAGE>
and procedures to be followed in conducting the meetings, except as otherwise
provided by law or in these Bylaws.
Section 5. NOTICE AND WAIVER OF NOTICE. Except as otherwise provided by
law, written or printed notice stating the place, day and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) nor more than sixty
(60) days before the day of the meeting, either personally or by first-class
mail, by or at the direction of the President, the Secretary, or the officer or
person calling the meeting, to each shareholder of record entitled to vote at
such meeting. If the notice is mailed at least thirty (30) days before the date
of the meeting, it may be done by a class of United States mail other than
first-class. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail addressed to the shareholder at his address
as it appears on the stock transfer books of the Corporation, with postage
thereon prepaid. If a meeting is adjourned to another time and/or place, and if
an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the Board
of Directors, after adjournment, fixes a new record date for the adjourned
meeting. Whenever any notice is required to be given to any shareholder, a
waiver thereof in writing signed by the person or persons entitled to such
notice, whether signed before, during or after the time of the meeting stated
therein, and delivered to the Corporation for inclusion in the minutes or filing
with the corporate records, shall be equivalent to the giving of such notice.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the shareholders need be specified in any written waiver of
notice. Attendance of a person at a meeting shall constitute a waiver of (a)
lack of or defective notice of such meeting, unless the person objects at the
beginning to the holding of the meeting or the transacting of any business at
the meeting, or (b) lack of defective notice of a particular matter at a meeting
that is not within the purpose or purposes described in the meeting notice,
unless the person objects to considering such matter when it is presented.
Section 6. BUSINESS OF SPECIAL MEETING. Business transacted at any
special meeting shall be confined to the purposes stated in the notice thereof.
Section 7. QUORUM. Shares entitled to vote as a separate voting group
may take action on a matter at a meeting only if a quorum of these shares exists
with respect to that matter. Except as otherwise provided in the Articles of
Incorporation or by law, a majority of the shares entitled to vote on the matter
by each voting group, represented in person or by proxy, shall constitute a
quorum at any meeting of shareholders, but in no event shall a quorum consist of
less than one-third (1/3) of the shares of each voting group entitled to vote.
If less than a majority of outstanding shares entitled to vote are represented
at a meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. After a quorum has been established at
any shareholders' meeting, the subsequent withdrawal of shareholders, so as to
reduce the number of shares entitled to vote at the meeting below the number
required for a quorum, shall not affect the validity of any action taken at the
meeting or any adjournment thereof. Once a share is represented for any purpose
at a meeting, it is deemed present for
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quorum purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for that adjourned meeting.
Section 8. VOTING PER SHARE. Except as otherwise provided in the
Articles of Incorporation or by law, each shareholder is entitled to one (1)
vote for each outstanding share held by him on each matter voted at a
shareholders' meeting.
Section 9. VOTING OF SHARES. A shareholder may vote at any meeting of
shareholders of the Corporation, either in person or by proxy. Shares standing
in the name of another corporation, domestic or foreign, may be voted by the
officer, agent or proxy designated by the bylaws of such corporate shareholder
or, in the absence of any applicable bylaw, by such person or persons as the
board of directors of the corporate shareholder may designate. In the absence of
any such designation, or, in case of conflicting designation by the corporate
shareholder, the chairman of the board, the president, any vice president, the
secretary and the treasurer of the corporate shareholder, in that order, shall
be presumed to be fully authorized to vote such shares. Shares held by an
administrator, executor, guardian, personal representative, or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name or the name of his
nominee. Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by such person without the transfer thereof into his name. If shares stand of
record in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary of the Corporation is given
notice to the contrary and is furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is so provided, then
acts with respect to voting shall have the following effect: (a) if only one
votes, in person or by proxy, his act binds all; (b) if more than one vote, in
person or by proxy, the act of the majority so voting binds all; (c) if more
than one vote, in person or by proxy, but the vote is evenly split on any
particular matter, each faction is entitled to vote the share or shares in
question proportionally; or (d) if the instrument or order so filed shows that
any such tenancy is held in unequal interest, a majority or a vote evenly split
for purposes hereof shall be a majority or a vote evenly split in interest. The
principles of this paragraph shall apply, insofar as possible, to execution of
proxies, waivers, consents, or objections and for the purpose of ascertaining
the presence of a quorum.
Section 10. PROXIES. Any shareholder of the Corporation, other person
entitled to vote on behalf of a shareholder pursuant to law, or attorney-in-fact
for such persons may vote the shareholder's shares in person or by proxy. Any
shareholder of the Corporation may appoint a proxy to vote or otherwise act for
him by signing an appointment form, either personally or by his
attorney-in-fact. An executed telegram or cablegram appearing to have been
transmitted by such person, or a photographic, photostatic, or equivalent
reproduction of an appointment form, shall be deemed a sufficient appointment
form. An appointment of a proxy is effective when received by the Secretary of
the Corporation or such other officer or agent which is authorized
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<PAGE>
to tabulate votes, and shall be valid for up to 11 months, unless a longer
period is expressly provided in the appointment form. The death or incapacity of
the shareholder appointing a proxy does not affect the right of the Corporation
to accept the proxy's authority unless notice of the death or incapacity is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. An appointment
of a proxy is revocable by the shareholder unless the appointment is coupled
with an interest.
Section 11. SHAREHOLDER LIST. After fixing a record date for a meeting
of shareholders, the Corporation shall prepare an alphabetical list of the names
of all its shareholders who are entitled to notice of the meeting, arranged by
voting group with the address of, and the number and class and series, if any,
of shares held by each. The shareholders' list must be available for inspection
by any shareholder for a period of ten (10) days prior to the meeting or such
shorter time as exists between the record date and the meeting and continuing
through the meeting at the Corporation's principal office, at a place identified
in the meeting notice in the city where the meeting will be held, or at the
office of the Corporation's transfer agent or registrar. Any shareholder of the
Corporation or his agent or attorney is entitled on written demand to inspect
the shareholders' list (subject to the requirements of law), during regular
business hours and at his expense, during the period it is available for
inspection. The Corporation shall make the shareholders' list available at the
meeting of shareholders, and any shareholder or his agent or attorney is
entitled to inspect the list at any time during the meeting or any adjournment.
Section 12. ACTION WITHOUT MEETING. Any action required by law to be
taken at a meeting of shareholders, or any action that may be taken at a meeting
of shareholders, may be taken without a meeting or notice if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted with respect to the subject
matter thereof, and such consent shall have the same force and effect as a vote
of shareholders taken at such a meeting.
Section 13. FIXING RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purposes, the
Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than sixty
(60) days, and, in case of a meeting of shareholders, not less than ten (10)
days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which the notice of the meeting is mailed or the date on which the
resolutions of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section 13, such determination
shall apply to any adjournment thereof, except where the Board of Directors
fixes a new record date for the adjourned meeting or as required by law.
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Section 14. INSPECTORS AND JUDGES. The Board of Directors in advance of
any meeting may, but need not, appoint one or more inspectors of election or
judges of the vote, as the case may be, to act at the meeting or any
adjournment(s) thereof. If any inspector or inspectors, or judge or judges, are
not appointed, the person presiding at the meeting may, but need not, appoint
one or more inspectors or judges. In case any person who may be appointed as an
inspector or judge fails to appear or act, the vacancy may be filled by the
Board of Directors in advance of the meeting, or at the meeting by the person
presiding thereat. The inspectors or judges, if any, shall determine the number
of shares of stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots and consents, hear and determine
all challenges and questions arising in connection with the right to vote, count
and tabulate votes, ballots and consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all shareholders.
On request of the person presiding at the meeting, the inspector or inspectors
or judge or judges, if any, shall make a report in writing of any challenge,
question or matter determined by him or them, and execute a certificate of any
fact found by him or them.
Section 15. VOTING FOR DIRECTORS. Unless otherwise provided in the
Articles of Incorporation, directors shall be elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present.
ARTICLE THREE
DIRECTORS
Section 1. NUMBER, ELECTION AND TERM. The number of directors of the
Corporation shall be fixed from time to time, within the limits specified by the
Articles of Incorporation, by resolution of the Board of Directors; provided,
however, no director's term shall be shortened by reason of a resolution
reducing the number of directors. The directors shall be elected at the annual
meeting of the shareholders, except as provided in Section 2 of this Article,
and each director elected shall hold office for the term for which he is elected
and until his successor is elected and qualified or until his earlier
resignation, removal from office or death. Directors must be natural persons who
are 18 years of age or older but need not be residents of the State of Florida,
shareholders of the Corporation or citizens of the United States. Any director
may be removed at any time, with or without cause, at a special meeting of the
shareholders called for that purpose.
Section 2. VACANCIES. A director may resign at any time by giving
written notice to the Corporation, the Board of Directors or the Chairman of the
Board. Such resignation shall take effect when the notice is delivered unless
the notice specifies a later effective date, in which event the Board of
Directors may fill the pending vacancy before the effective date if they provide
that the successor does not take office until the effective date. Any vacancy
occurring in the Board of Directors and any directorship to be filled by reason
of an increase in the size of the Board of Directors shall be filled by the
affirmative vote of a majority of the current
5
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directors though less than a quorum of the Board of Directors, or may be filled
by an election at an annual or special meeting of the shareholders called for
that purpose, unless otherwise provided by law. A director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office, or
until the next election of one or more directors by shareholders if the vacancy
is caused by an increase in the number of directors.
Section 3. POWERS. Except as provided in the Articles of Incorporation
and by law, all corporate powers shall be exercised by or under the authority
of, and the business and affairs of the Corporation shall be managed under the
direction of, its Board of Directors.
Section 4. PLACE OF MEETINGS. Meetings of the Board of Directors,
regular or special, may be held either within or without the State of Florida.
Section 5. ANNUAL MEETING. The first meeting of each newly elected
Board of Directors shall be held, without call or notice, immediately following
each annual meeting of shareholders.
Section 6. REGULAR MEETINGS. Regular meetings of the Board of Directors
may also be held without notice at such time and at such place as shall from
time to time be determined by the Board of Directors.
Section 7. SPECIAL MEETINGS AND NOTICE. Special meetings of the Board
of Directors may be called by the Chairman of the Board or by the President and
shall be called by the Secretary on the written request of any two directors.
Written notice of special meetings of the Board of Directors shall be given to
each director at least forty-eight (48) hours before the meeting. Except as
required by statute, neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting. Notices to directors shall be
in writing and delivered personally or mailed to the directors at their
addresses appearing on the books of the Corporation. Notice by mail shall be
deemed to be given at the time when the same shall be received. Notice to
directors may also be given by telegram, teletype or other form of electronic
communication. Notice of a meeting of the Board of Directors need not be given
to any director who signs a written waiver of notice before, during or after the
meeting. Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting and a waiver of any and all objections to the place of
the meeting, the time of the meeting and the manner in which it has been called
or convened, except when a director states, at the beginning of the meeting or
promptly upon arrival at the meeting, any objection to the transaction of
business because the meeting is not lawfully called or convened.
Section 8. QUORUM; REQUIRED VOTE; PRESUMPTION OF ASSENT. A majority of
the number of directors fixed by, or in the manner provided in, these bylaws
shall constitute a quorum for the transaction of business; provided, however,
that whenever, for any reason, a vacancy occurs in the Board of Directors, a
quorum shall consist of a majority of the remaining directors until the vacancy
has been filled. The act of a majority of the directors present at a
6
<PAGE>
meeting at which a quorum is present when the vote is taken shall be the act of
the Board of Directors. A director of the Corporation who is present at a
meeting of the Board of Directors or a committee of the Board of Directors when
corporate action is taken shall be presumed to have assented to the action
taken, unless he objects at the beginning of the meeting, or promptly upon his
arrival, to holding the meeting or transacting specific business at the meeting,
or he votes against or abstains from the action taken.
Section 9. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at a meeting of the Board of Directors or a committee thereof may be
taken without a meeting if a consent in writing, setting forth the action taken,
is signed by all of the members of the Board of Directors or the committee, as
the case may be, and such consent shall have the same force and effect as a
unanimous vote at a meeting. Action taken under this section is effective when
the last director signs the consent, unless the consent specifies a different
effective date. A consent signed under this Section 9 shall have the effect of a
meeting vote and may be described as such in any document.
Section 10. CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT
MEETINGS. Members of the Board of Directors may participate in a meeting of the
Board by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation in such a meeting shall constitute presence in
person at the meeting, except where a person participates in the meeting for the
express purpose of objecting to the transaction of any business on the ground
the meeting is not lawfully called or convened.
Section 11. COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the full Board of Directors, may designate from among its
members an executive committee and one or more other committees, each of which,
to the extent provided in such resolution, shall have and may exercise all of
the authority of the Board of Directors in the business and affairs of the
Corporation except where the action of the full Board of Directors is required
by statute. Each committee must have two or more members who serve at the
pleasure of the Board of Directors. The Board of Directors, by resolution
adopted in accordance with this Article Three, may designate one or more
directors as alternate members of any committee, who may act in the place and
stead of any absent member or members at any meeting of such committee.
Vacancies in the membership of a committee shall be filled by the Board of
Directors at a regular or special meeting of the Board of Directors. The
executive committee shall keep regular minutes of its proceedings and report the
same to the Board of Directors when required. The designation of any such
committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed
upon it or him by law.
Section 12. COMPENSATION OF DIRECTORS. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and
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receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 13. CHAIRMAN OF THE BOARD. The Board of Directors may, in its
discretion, choose a chairman of the board or Co-Chairman of the Board who shall
preside at meetings of the shareholders and of the directors and shall be ex
officio member(s) of all standing committees. The Chairman of the Board shall
have such other powers and shall perform such other duties as shall be
designated by the Board of Directors. The Chairman of the Board shall be a
member of the Board of Directors but no other officers of the Corporation need
be a director. The Chairman of the Board shall serve until his successor is
chosen and qualified, but he may be removed at any time by the affirmative vote
of a majority of the Board of Directors.
ARTICLE FOUR
OFFICERS
Section 1. POSITIONS. The officers of the Corporation shall consist of
a President, a Secretary, a Treasurer, and, if elected by the Board of Directors
by resolution, a Chairman or Co-Chairman of the Board and/or one or more Vice
Presidents and such other officers as may be determined by the Board of
Directors. Any two or more offices may be held by the same person.
Section 2. ELECTION OF SPECIFIED OFFICERS BY BOARD. The Board of
Directors at its first meeting after each annual meeting of shareholders shall
elect a President, a Secretary, a Treasurer and may elect one or more Vice
Presidents.
Section 3. ELECTION OR APPOINTMENT OF OTHER OFFICERS. Such other
officers and assistant officers and agents as may be deemed necessary may be
elected or appointed by the Board of Directors, or, unless otherwise specified
herein, appointed by the President of the Corporation. The Board of Directors
shall be advised of appointments by the President at or before the next
scheduled Board of Directors meeting.
Section 4. SALARIES. The salaries of all officers of the Corporation to
be elected by the Board of Directors pursuant to Article Four, Section 2 hereof
shall be fixed from time to time by the Board of Directors or pursuant to its
discretion. The salaries of all other elected or appointed officers of the
Corporation shall be fixed from time to time by the President of the Corporation
or pursuant to his direction.
Section 5. TERM; RESIGNATION. The officers of the Corporation shall
hold office until their successors are chosen and qualified. Any officer or
agent elected or appointed by the Board of Directors or the President of the
Corporation may be removed, with or without cause, by the Board of Directors.
Any officers or agents appointed by the President of the Corporation pursuant to
Section 3 of this Article Four may also be removed from such officer positions
by the President, with or without cause. Any vacancy occurring in any office of
the Corporation by
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death, resignation, removal or otherwise shall be filled by the Board of
Directors, or, in the case of an officer appointed by the President of the
Corporation, by the President or the Board of Directors. Any officer of the
Corporation may resign from his respective office or position by delivering
notice to the Corporation. Such resignation is effective when delivered unless
the notice specifies a later effective date. If a resignation is made effective
at a later date and the Corporation accepts the future effective date, the Board
of Directors may fill the pending vacancy before the effective date if the Board
provides that the successor does not take office until the effective date.
Section 6. PRESIDENT. The President shall be the Chief Executive
Officer of the Corporation, shall have general and active management of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect. In the absence of the Chairman of
the Board or in the event the Board of Directors shall not have designated a
chairman of the board, the President shall preside at meetings of the
shareholders and the Board of Directors.
Section 7. VICE PRESIDENTS. The Vice Presidents in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President. They shall perform such other duties and have such
other powers as the Board of Directors shall prescribe or as the President may
from time to time delegate.
Section 8. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and record all the
proceedings of the meetings of the shareholders and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation and, when authorized by the Board of
Directors, affix the same to any instrument requiring it.
Section 9. TREASURER. The Treasurer shall have the custody of corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors at its regular meetings or when the
Board of Directors so requires an account of all his transactions as treasurer
and of the financial condition of the Corporation unless otherwise specified by
the Board of Directors, the Treasurer shall be the Corporation's Chief Financial
Officer.
Section 10. OTHER OFFICERS, EMPLOYEES AND AGENTS. Each and every other
officer, employee and agent of the Corporation shall possess, and may exercise,
such power and authority,
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and shall perform such duties, as may from time to time be assigned to him by
the Board of Directors, the officer so appointing him and such officer or
officers who may from time to time be designated by the Board of Directors to
exercise such supervisory authority.
ARTICLE FIVE
CERTIFICATES FOR SHARES
Section 1. ISSUE OF CERTIFICATES. The Corporation shall deliver
certificates representing all shares to which shareholders are entitled; and
such certificates shall be signed by the Chairman of the Board, President or a
Vice President, and by the Secretary or an Assistant Secretary of the
Corporation, and may be sealed with the seal of the Corporation or a facsimile
thereof.
Section 2. LEGENDS FOR PREFERENCES AND RESTRICTIONS ON TRANSFER. The
designations, relative rights, preferences and limitations applicable to each
class of shares and the variations in rights, preferences and limitations
determined for each series within a class (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the Corporation will furnish the
shareholder a full statement of this information on request and without charge.
Every certificate representing shares that are restricted as to the sale,
disposition, or transfer of such shares shall also indicate that such shares are
restricted as to transfer and there shall be set forth or fairly summarized upon
the certificate, or the certificate shall indicate that the Corporation will
furnish to any shareholder upon request and without charge, a full statement of
such restrictions. If the Corporation issues any shares that are not registered
under the Securities Act of 1933, as amended, and registered or qualified under
the applicable state securities laws, the transfer of any such shares shall be
restricted substantially in accordance with the following legend:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER
THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AT
HOLDER'S EXPENSE, AN OPINION (SATISFACTORY TO THE CORPORATION) OF
COUNSEL (SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT
REQUIRED."
Section 3. FACSIMILE SIGNATURES. The signatures of the Chairman of the
Board, the President or a Vice President and the Secretary or Assistant
Secretary upon a certificate may be facsimiles, if the certificate is manually
signed by a transfer agent, or registered by a registrar, other than the
Corporation itself or an employee of the Corporation. In case any officer who
has signed or whose facsimile signature has been placed upon such certificate
shall have ceased to
10
<PAGE>
be such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of the
issuance.
Section 4. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.
Section 5. TRANSFER OF SHARES. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 6. REGISTERED SHAREHOLDERS. The Corporation shall be entitled
to recognize the exclusive rights of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the State
of Florida.
Section 7. REDEMPTION OF CONTROL SHARES. As provided by the Florida
Business Corporation Act, if a person acquiring control shares of the
Corporation does not file an acquiring person statement with the Corporation,
the Corporation may redeem the control shares at fair market value at any time
during the 60-day period after the last acquisition of such control shares. If a
person acquiring control shares of the Corporation files an acquiring person
statement with the Corporation, the control shares may be redeemed by the
Corporation only if such shares are not accorded full voting rights by the
shareholders as provided by law.
ARTICLE SIX
GENERAL PROVISIONS
Section 1. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
cash, property, or its own shares pursuant to law and subject to the provisions
of the Articles of Incorporation.
11
<PAGE>
Section 2. RESERVES. The Board of Directors may by resolution create a
reserve or reserves out of earned surplus for any proper purpose or purposes,
and may abolish any such reserve in the same manner.
Section 3. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the Corporation shall end on
December 31 of each year and may be changed from time to time by resolution of
the Board of Directors.
Section 5. SEAL. The corporate seal shall have inscribed thereon the
name and state of incorporation of the Corporation. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
Section 6. GENDER. All words used in these Bylaws in the masculine
gender shall extend to and shall include the feminine and neuter genders.
ARTICLE SEVEN
AMENDMENTS OF BYLAWS
Unless otherwise provided by law, these Bylaws may be altered, amended
or repealed or new Bylaws may be adopted by action of the Board of Directors.
12
*SEE REVERSE FOR RESTRICTIVE LEGEND*
NUMBER SHARES
[MAGICWORKS LOGO]
Magicworks Entertainment
I n c o r p o r a t e d
AUTHORIZED COMMON STOCK: 50,000,000 SHARES
PAR VALUE: $.001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
SHARES OF COMMON STOCK OF MAGICWORKS ENTERTAINMENT INCORPORATED
TRANSFERABLE ON THE BOOKS OF THE CORPORATION IN PERSON OR BY DULY AUTHORIZED
ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED. THIS CERTIFICATE
IS NOT VALID UNTIL COUNTERSIGNED BY THE TRANSFER AGENT AND REGISTERED BY THE
REGISTRAR.
WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE
SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
DATED:
MAGICWORKS ENTERTAINMENT INCORPORATED
CORPORATE SEAL
DELAWARE
_____________________________ _____________________________
SECRETARY PRESIDENT
<PAGE>
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a
saving bank), or a trust company. The following abbreviations,
when used in the inscription on the face of this certificate,
shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM -- a tenants in common UNIF GIFT MIN ACT -- _______Custodian_______
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act _________________________
in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received,________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably consitute and appoint
- ------------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ------------------
--------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE
IN THE EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER
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.
</TABLE>
December 18, 1996
Magicworks Entertainment Incorporated
930 Washington Avenue, 5th Floor
Miami Beach, Florida 33193
Re: REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
We have acted as counsel to Magicworks Entertainment Incorporated, a
Delaware corporation (the "Company"), in connection with the registration
statement on Form S-1, as amended (the Registration Statement"), filed by the
Company under the Securities Act of 1933, as amended, with respect to 26,226,465
shares (the "Shares") of the Company's common stock, par value $.001 per share
(the "Common Stock"), and 500,000 warrants to purchase Common Stock (the
"Placement Agent Warrants") which may be sold from time to time by the selling
securityholders (the "Selling Securityholders") named therein. Of the Shares to
be sold by the Selling Securityholders, (i) 22,763,179 of such Shares (the
"Outstanding Shares") are issued and outstanding; (ii) 500,000 of such Shares
(the "Placement Agent Warrant Shares") are issuable to certain of the Selling
Securityholders upon exercise of Placement Agent Warrants held by such
<PAGE>
Magicworks Entertainment Incorporated
December 18, 1996
Page 2
Selling Securityholders; (iii) 1,481,643 of such Shares (the "Notes Shares") are
issuable to certain of the Selling Securityholders upon conversion of the
Company's unsecured senior convertible notes (collectively, the "Notes"); and
(iv) 1,481,643 of such Shares (the "Redeemable Warrant Shares") are issuable to
certain of the Selling Securityholders upon exercise of certain redeemable
warrants (the "Redeemable Warrants") that are issuable upon conversion of the
Notes in certain circumstances.
In connection with the Registration Statement, we have examined,
considered and relied upon the following documents (collectively, the
"Documents"): the Registration Statement; the Agreement and Plan of Merger dated
July 24, 1996 among the Company, Shadow Wood Corporation, Robert L. Wright and
Mark Archibald; the Placement Agent Warrants; the form of Redeemable Warrant;
the form of Note; the Placement Agent Agreement dated June 12, 1996 between the
Company and Capital Growth International LLC, the Company's Certificate of
Incorporation and Bylaws, each as amended to date, and corporate minute book;
and such matters of law as we have considered necessary or appropriate for the
expression of the opinions contained herein.
In rendering the opinions set forth below, we have assumed without
investigation the genuineness of all signatures and the authenticity of all
documents submitted to us as originals, the conformity to authentic original
documents of all documents submitted to us as copies, and the veracity of the
Documents. As to questions of fact material to the opinions expressed herein, we
have relied upon the representations and warranties of the Company, the Selling
Securityholders and the other parties to the Documents.
Based solely upon and subject to the Documents, and subject to the
qualifications set forth below, we are of the opinion that (i) the Outstanding
Shares have been duly authorized and are validly issued, fully paid and
non-assessable; (ii) the Placement Agent Warrant Shares, the Redeemable Warrant
Shares and the Note Shares have been duly authorized and, when issued and
delivered in accordance with the terms of the Placement Agent Warrants, the
Redeemable Warrants and the Notes, respectively, will be validly issued, fully
paid and non-assessable; and (iii) the Placement Agent Warrants have been duly
authorized and are validly issued
Although we have acted as counsel to the Company in connection with
certain other matters, our engagement is limited to matters about which we have
been consulted. Consequently, there exist matters of a legal nature involving
the Company in which we have not been consulted and have not represented the
Company. This opinion letter is limited to the matters stated herein and no
opinions may be implied or inferred beyond the matters expressly stated herein.
The opinions expressed herein are given as of this date, and we assume no
obligation to update or supplement our opinions to reflect any facts or
circumstances that may come to our attention or any change in law that may occur
or become effective at a later date.
<PAGE>
Magicworks Entertainment Incorporated
December 18, 1996
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the prospectus contained in the Registration Statement.
Very truly yours,
GREENBERG, TRAURIG, HOFFMAN,
LIPOFF, ROSEN & QUENTEL, P.A.
By: /s/ FERN S. WATTS
-------------------------------
Fern S. Watts
MANAGEMENT OPERATING AGREEMENT
THIS AGREEMENT, made and entered into as of the 27th day of May, 1992,
by and between the City of North Miami, Florida (hereinafter called the ~CITY"),
a body corporate and a political subdivision of the State of Florida, duly
organized and existing under the laws of said State, and PERFORMING ARTS
MANAGEMENT OF NORTH MIAMI, INC., a corporation organized under the laws of the
State of Florida (hereinafter sometimes referred to as "OPERATOR");
WHEREAS, the CITY desires to contract with OPERATOR for OPERATOR to
develop and construct thereon, and manage pursuant to the terms hereof, a
cultural facility for the performing and visual arts (hereinafter sometimes
referred to as the "Facility" or "Premises"); and
WHEREAS, CITY desires the OPERATOR to prepare plans and specifications
and arrange the financing for the construction of a modern performing arts
facility and related facilities on the Site (the Site and Facilities together
are sometimes hereinafter referred to as the "ProJect"); and
WHEREAS, it in the intention of the CITY that the ProJect be acquired,
financed, constructed and operated so that the citizens of the City of North
Miami and the South Florida area shall have the benefit of the finest performing
and visual arts programs and events essential to the educational, recreational,
historical, political and cultural development of the community to be served;
and
WHEREAS, the parties acknowledge that the development, operation and
management of the ProJect must be undertaken in a manner which will produce the
desired results and anticipated benefits for the CITY and the community, and
that such undertaking presents unusual and difficult problems demanding
extraordinary and specialized knowledge and experience;
NOW, THEREFORE, in consideration of the payments hereinafter required
to be made and the performance of the mutual promises herein contained at the
time and in the manner specified, the parties hereto agree as follows:
SECTION 1. GENERAL OBLIGATIONS OF OPERATOR
1.1. The OPERATOR shall, undertake the following obligations and
undertakings, all of which shall 1.1.t theThe OPERATOR shall, undertake the
following obligations and undertakings, all of which shall be at the sole cost
and expense of the OPERATOR:
a. Design the ProJect subject to the approval of CITY to
accommodate and fulfill the purpose and intent of this
Agreement. OPERATOR is directed to design a ProJect on
<PAGE>
behalf of CITY which ProJect is to be a first class
state-of-the-art outdoor performing arts facility with a
capacity of 7,900 permanent seats and additional room to
accommodate temporary and berm seating.
b. Obtain, with the approval and cooperation of CITY, all
necessary governmental regulatory approvals and
authorizations required to permit the development of the
ProJect in accordance with the plans at no cost to CITY.
OPERATOR shall prepare all plans and specifications for
the construction of the Facility and obtain all required
building permits for the construction of all improvements
specified by the plans and specifications. OPERATOR shall
not be charged fees for building permits required and
issued by CITY.
All plans and specifications shall be subject to review
and approval by CITY, and no substantial modification
thereto shall be made once-so approved without CITY
Council approval which approvals shall not be arbitrarily
or capriciously denied.
CITY may, at its expense, utilize an outside consultant to
review and monitor such plans and specifications including
but not limited to structural, electrical, plumbing, etc.,
and to monitor construction activities for compliance with
such Plans. CITY Council review shall be in addition to
review and approval by CITY'S building official. It is
understood and agreed that CITY'S costs for construction
review and monitoring shall be an item eligible for soft
cost reimbursement to CITY in the event a bond issue
financing mechanism is utilized under Section l.l(d) and
Section 29, of this Agreement, to the extent allowed by
law.
c. Develop and construct the Facility on a site of up to
fifteen (15) acres, the location of which is to be
indicated by CITY within thirty (30) days of execution of
this Agreement, with the location to be designated within
the Site Plan required under Section 1.1(c)(5) below; and
to develop and construct all parking areas referenced in
Section 7.8 upon an area to be designated in the Site Plan
referenced above. Such development and construction shall
be in accordance with the plans and specifications to be
prepared by OPERATOR.
Both the Facility location and the parking area location
shall be subject to final designation within CITY'S
Landfill Closure Plan. The total ProJect Site size (made
available from CITY land) shall be of sufficient size to
enable OPERATOR to provide parking areas for at least
6,500 vehicles (2,000 to serve the
<PAGE>
Facility and 4,500 to serve all authorized users of the
former Landfill Site), if necessary.
In the event that the OPERATOR finds the Facility location
or parking area location, as established by the above
procedure, to be unacceptable, this Agreement shall
immediately be terminated upon written notice by either
party to the other, with no party being obligated to the
other.
It is recognized that a sufficient roadway segment within
the four (4) acres + entrance way delineated on Exhibit
"A" shall remain preserved as an ingress/egress for this
ProJect as well as for an ingress/egress for any other
uses which May be hereafter constructed on land adjacent
to the ProJect or upon the landfill.
c.1 It is acknowledged by OPERATOR and CITY that in
OPERATOR'S planning, development and management of
the facility that N.E. 135 Street shall not now,
or ever, be used or developed as an ingress or
egress to the Facility. OPERATOR shall construct
and develop the entrance road area depicted on
Exhibit ~A" as the primary access to the ProJect
and shall likewise develop and construct road
access in the vicinity of N.E. 151 Street if so
designated.
c.2 CITY shall make available (at no charge to
OPERATOR) enough non-exclusive property (from
available CITY lands) to the OPERATOR and OPERATOR
shall provide thereon for two (2) separate ingress
and egress entrances for locations as described in
c.1. above. OPERATOR agrees that, at its expense,
it shall pay for all improvements related to the
ingress and egress. OPERATOR further agrees that
during the course of the Contract, it shall pay
for all maintenance required during the time that
it is the exclusive user of the ingress and
egress. At such time that additional users are
incorporated into the landsite, each new user may
be assessed a portion of such initial cost for
development, operation and maintenance of the
ingress and egress as determined by the CITY
Council based upon such additional user's,
pro-rata of CITY owned land.
c.3 OPERATOR shall commence the construction of the
Facility and related improvements and site work
within ninety (90) days after obtaining CITY'S
approvals and authorizations of CITY pursuant to
l.l(b), l.l(c)(4) and l.l(d) hereof and approval
-3-
<PAGE>
of an applicable funding program, which
construction shall be completed within one (1)
year of said commencement. SubJect to the terms of
Section l.l(c)(6), if such construction is not so
commenced, the contract shall be deemed terminated
immediately upon the written notice from either
party to the other, and no party shall have any
obligation to the other.
c.4 As a component of OPERATOR'S Facility design work,
OPERATOR, through its engineering and
architectural consultants, shall provide all
necessary information, data and plans to enable
CITY'S Munisport Landfill Site closure Project
Manager, to include the Facility and all parking
areas, as a component of CITY'S Munisport Landfill
closure design, which CITY is preparing under
D.E.R. Contract SW-48. CITY shall include the
Facility in its Landfill Closure Design. CITY
shall use its best efforts to obtain government
approval of CITY'S Landfill Closure Design.
Once the Landfill Closure Design is approved by
all government entities with Jurisdiction thereof,
OPERATOR shall be responsible for providing for
the building and construction of the Facility into
the Landfill Closure. OPERATOR shall be
responsible for the cost of site preparation,
clearing of brush, drainage, grading, methane gas
control and venting, application of clean fill
material, construction of foundation and all other
components and appurtenances of the Facility. The
above described responsibility of OPERATOR shall
not extend to other portions of the 170 acre
Landfill site which are not used either for the
Facility or not used for the parking space" to be
constructed hereunder.
The OPERATOR'S responsibilities described above
shall be fulfilled directly by OPERATOR'S
construction of such item. in coordination with
CITY'S construction of closure of the entire 170
acre landfill (exclusive of the Facility and
parking sites). At CITY'S option, if required by
any regulatory authority, the OPERATOR shall pay
the CITY, in advance, all necessary funds for CITY
to complete those items which are OPERATOR'S
responsibility regarding the closure of OPERATOR'S
segment of the 170 acre landfill site and
including the Facility Site location and parking
areas referred to in Section 7.8. The
-4-
<PAGE>
term "necessary funds" shall include all actual
construction costs, as well as the fees and costs
paid by CITY for an engineer to supervise such
construction. In exercising this option, CITY
shall take into consideration OPERATOR'S
construction costs and shall seek to obtain and
use the best cost factors available. In either
event, all work shall be subject to the approval
of CITY'S Landfill Closure Project Manager, all
items shall be accomplished, and no reimbursement
shall be made or owing to OPERATOR. The option
provision of this section shall apply only to
aspects of closure and not general construction of
the Facility.
CITY shall furnish OPERATOR with closure cost
estimates relating to OPERATOR'S landfill closure
construction responsibilities under this Section
prior to any closure work being done at OPERATOR'S
expense. No construction on the Amphitheater
project will commence prior to OPERATOR and CITY
mutually agreeing to OPERATOR'S closure cost
responsibilities under this Agreement. If the CITY
and OPERATOR fail to agree, this Agreement shall
immediately be terminated upon written notice from
either party to the other, and no party shall have
any obligation to the other.
c.5 OPERATOR recognizes that the adoption of a site
approval ordinance of the CITY, pursuant to
Section 29.12.1 of the City code is a condition
precedent to the development of the property under
this Agreement, and that OPERATOR shall apply to
CITY for such site approval and diligently pursue
same.
c.6 Upon commencement of construction said
construction shall be diligently prosecuted to
completion, excepting only~delays caused by acts
of God which OPERATOR could not have reasonably
foreseen and provided for, or strikes, boycotts or
like obstructive action" by employee or labor
organizations which are beyond the control of
OPERATOR and which OPERATOR cannot overcome with
reasonable effort and could not reasonably have
foreseen and provided for, or any war or
declaration of a state of national emergency, or
the imposition by government action or authority
of restrictions upon the procurement of labor or
materials necessary for the completion of the
ProJect, or any litigation (which litigation is
-5-
<PAGE>
not initiated or directly caused by actions of
OPERATOR) relating to the validity of this
Agreement or the proposed plan of financing,
acquisition, construction, equipping and operation
of the Project. It is recognized by OPERATOR and
the CITY that the ProJect or a portion of the
Project will be constructed on a former sanitary
landfill site, and that construction problems,
which problems, if any, are currently unknown and
hence as of this date are not herein capable of
definition, that reasonable delay in completion of
the Project due to its construction on or near
said sanitary landfill will be considered an "Act
of God H " Any act or event not within the
reasonable control of either party shall be deemed
an "Act of God". Provided, however, no extension
of time to perform shall be granted for more than
a two (2) year period.
c.7 All improvements constructed pursuant to this
Agreement shall be so constructed that upon
completion they will fully comply with the
requirements of all applicable laws, rules,
orders, codes, ordinances, requirements and
regulations of municipal, regional, state, federal
and other governmental authorities having
Jurisdiction, whether or not the same are now in
the contemplation of the parties or require
amendments to the plans or specifications or
require reconstruction of work in progress or work
in place, and whether the same be structural or
otherwise.
c.8 OPERATOR shall promptly obtain any and all
certificates of occupancy and permits which are
required to be obtained to permit the improvements
to be used for the purposes contemplated by this
Agreement. CITY shall not charge OPERATOR for any
City of North Miami required permits.
c.9 Upon the completion of the construction OPERATOR
shall provide the CITY with two complete sets of
"as built plans" of facility, along with a survey
of the project.
d. Within thirty (30) days after all governmental approvals
of CITY 'So landfill closure design, OPERATOR shall
arrange a financing package so as to finance the costs of
the construction and development of the Project. Any
financing shall be in form satisfactory to
-6-
<PAGE>
the governing body of the CITY and the CITY'S attorney. It
being acknowledged that an express condition of such
financing shall be that the CITY shall have no general
fiscal obligation pursuant thereto, and that the financing
arranged shall have guarantees satisfactory to the CITY
and its counsel so as to insure that the CITY in not
obligated pursuant thereto or encumbered thereby. The CITY
shall cooperate with the OPERATOR in arranging any such
financing including therein, issuing a thirty (30) year
Industrial/Development revenue bond pursuant to Chapter
159, Florida Statutes, or other applicable statutory
provisions, upon confirmation by the City Council and City
Attorney that the CITY is not liable thereon and that no
recourse to the CITY is created by such financing. The
attorney may require the opinion of Bond Counsel prior to
issuance of such Bonds. OPERATOR may apply in CITY'S name,
with approval of the CITY for participation in any grant
or tax sharing revenue programs which might include but
not be limited to tourist development packages or State or
Federal packages so long a" there is no recourse or
reimbursement required on behalf of CITY. The financing
package shall include a demolition bond in favor of CITY
should OPERATOR or its approved successors abandon the
ProJect prior to successful completion. It is recognized
that construction shall not commence unless and until the
financing plan is approved by the CITY Council, which
approval shall not be arbitrarily or capriciously denied.
Once construction commences, OPERATOR shall provide weekly
written progress reports to the City Council in a format
approved by the City Manager. The parties agree that if a
financing package is not approved in accordance herewith
or in the event funds to be provided by the approved
financing are not provided within six (6) months after
approval, either party may immediately terminate this
contract upon written notice to the other, and no party
shall be obligated to the other.
e. To manage and operate the Facility pursuant to the terms
of this Agreement.
SECTION 2. TERM OF AGREEMENT
2.1. CITY and OPERATOR hereby agree that OPERATOR shall be the
exclusive Operator of the ProJect for and during the term of this Agreement in
furtherance of the public purpose for which the Project is to be built, to wit:
performing and visual arts facility and exhibit hall. Such use shall include,
without limitation the presentation of performing artists, shows, concerts,
cultural displays, exhibits and other types of similar performances and all
-7-
<PAGE>
other incidental and related uses. The term of this Agreement shall commence on
the date hereof and the OPERATOR'S management and the operation term shall
commence on the date of occupancy of the 2.1.ect aCITY and OPERATOR hereby agree
that OPERATOR shall be the exclusive Operator of the ProJect for and during the
term of this Agreement in furtherance of the public purpose for which the
Project is to be built, to wit: performing and visual arts facility and exhibit
hall. Such use shall include, without limitation the presentation of performing
artists, shows, concerts, cultural displays, exhibits and other types of similar
performances and all other incidental and related uses. The term of this
Agreement shall commence on the date hereof and the OPERATOR'S management and
the operation term shall commence on the date of occupancy of the Project and
shall continue for a period of thirty (30) years thereafter. .
2.2. date of occupancy of Project" or Date of occupancy" shall mean the
date the ProJect is completed and ready for operation as evidenced by a
Certificate of Occupancy and a written notice thereof (pursuant to Section 2.3)
has been served on OPERATOR or the date when OPERATOR commences operation of the
ProJect, or January 1, 1996, whichever shall first occur.
2.3. When the Project is completed and ready for occupancy, CITY shall
give notice of the same to OPERATOR in writing and the term hereof shall
commence pursuant to the terms hereof.
SECTION 3. OPERATING POLICY AND INTENT
3.1. CITY and OPERATOR hereby agree that the Project shall be managed
so as to furnish educational, recreational, athletic, historical, political and
cultural benefits to the community, without 3.1.ncialCITY and OPERATOR hereby
agree that the Project shall be managed so as to furnish educational,
recreational, athletic, historical, political and cultural benefits to the
community, without financial burden to the taxpayer. of the City of North Miami,
Florida.
3.2. The CITY agrees that during the term of this Agreement it will
not, without the OPERATOR'S consent, levy any special tax or assessment on the
Facility and/or the use of said Facility and will in all ways, endeavor to
cooperate with OPERATOR in carrying out the terms and intent of this Agreement,
as determined reasonably by City Council. The OPERATOR recognizes that CITY may
levy a special tax or assessment authorized by law if it is a prerequisite to
CITY'S authority to levy such special tax or assessment against other similarly
situated Facilities or uses that such special tax or assessment be levied on the
Facility or the use of said Facility.
SECTION 4. SCOPE OF OPERATOR SERVICES
4.1. In operating and managing the Facility, the OPERATOR shall provide
to the CITY, at 4.1.ATOR'In operating and managing the Facility, the OPERATOR
shall provide to the CITY, at OPERATOR'S sole cost and expense, the following
services:
a. OPERATOR shall provide all day to day and general
management policy making and implementation thereof for
the ProJect, and all necessary personnel and equipment to
handle the day to day management, operation and
maintenance of the Facility including therein the
dispensing of food and beverage service, the manning of
all concession and ticket booths, accounting and
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budgeting, advertising, the booking and acquisition of
entertainment, maintenance, security, market research,
parking, supervision of ushers and insurance.
b. Performance and payment bonds and other financing
guaranty. in form satisfactory to the CITY fully insuring
the development and construction of the Facility and
further guaranteeing the CITY the minimum payment, a.
defined herein, together with assurance in form
satisfactory to the CITY that the CITY will be held
harmless as not liable for the costs of acquisition,
construction, operation and management of the Facility.
All surety companies shall meet the standards applicable
to sureties acceptable for CITY public works construction
projects. All bonds and guarantees shall be subject to
approval of CITY attorney and CITY Risk Management
Division. The maintenance and repair of the Facility shall
be further assured by the escrow fund to be established
under Section 18.4 hereof. No building permit shall be
issued until all necessary performance and payment bonds
are posted pertaining to such construction activities.
SECTION 5. PAYMENT TO CITY
5 1
5.1.1 MINIMUM RETURN ON CITY INVESTMENT: OPERATOR agrees to pay to CITY
in equal quarterly installments in arrears, beginning on or before the tenth
(10th) day of the third full calendar month next following the Commencement Date
and by the tenth (10th) day of each quarter thereafter, an annual minimum return
on CITY investment of Two Hundred Thousand ($200,000.00) Dollars, which sum
shall be adjusted annually to reflect any changes occasioned by cost of living
increases as shown by the Consumer Price Index prepared by the Department of
Labor for the local geographic area with a maximum cap of said minimum return
not to exceed Five Hundred Thousand ($500,000.00) Dollars per annum during the
term hereof. It is recognized that this Consumer Price Index cap shall not, in
any way, operate to reduce payments due to CITY directly udder Section 5.1.2 or
Section 5.1.3 of this Agreement.
5.1.2 PER TICKET USE CHARGE DUE CITY: OPERATOR shall collect and pay to
the CITY by OPERATOR as a use fee charge a sum equivalent to five (5%) percent
of the box office ticket sale revenues, less any sales, use or excise tax
thereon. This fee shall be added to the established box office sales price of
the ticket. The use fees collected by the OPERATOR pursuant to this provision
shall be totally due to the CITY and shall be remitted to the CITY by OPERATOR
on a quarterly bases. This remittance to CITY pursuant to this provision shall
be credited against payments due pursuant to section 5.1.1. Except for tickets
donated to or used by charitable, educational or philanthropic organizations and
for
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tickets distributed for promotional purposes not exceeding 7.5% (percent) of
the total number of tickets available for any show or event, (which promotional
tickets shall be used exclusively to market the Facility or to promote an event
at the Facility and as to which promotional tickets, no trade or barter not
benefiting the Facility occurs), OPERATOR shall account for and pay to CITY the
use fee charge provided herein for all tickets used for admission.
OPERATOR shall facilitate compliance with these provisions pertaining
to promotional tickets by placing contractual provisions reflecting such in its
contracts with third parties, an necessary.
5.1.3 PERCENTAGE PAYMENT FROM OPERATIONS; In addition, during the term
of this Agreement, OPERATOR shall pay CITY on or before the tenth (10th) day of
each third calendar month, a percentage from the operations of the Facility in
an amount equal to five (5%) percent of the gross monies actually received by
OPERATOR, as defined in section 5.2 of this Agreement. Any remittance to CITY
pursuant to this provision shall be credited against payments due pursuant to
section 5.1.1.
5.1.4 INITIAL PAYMENT: OPERATOR shall deposit with CITY, immediately
upon the approval by all Federal, State, County and local regulatory and
administrative agencies with Jurisdiction of a closure plan for the entire 170
acre landfill site including therein authority for construction of this ProJect,
as an approved part of said closure, and approval by the CITY of OPERATOR'S
financing package pursuant to the terms hereof, a sum of One Million Five
Hundred Thousand ($1,500,000.00) Dollars which money shall be used by CITY
toward payment of construction, operation and monitoring costs associated with
the landfill site, exclusive of OPERATOR'S responsibilities under section
1.1.(c)(4) above. CITY may additionally use such funds towards CITY'S C.E.R.C.
L.A. site remediation after paying all of its cost of closure.
5.1.5 OPERATOR REIMBURSEMENT: With reference to that payment made by
OPERATOR pursuant to 5.1.4 OPERATOR shall be entitled to a repayment from CITY'S
share of Facility revenues of said sum as follows:
a. In years one (1) through ten (10) of the term thereof,
CITY shall be responsible for payment of interest only on
that sum set forth in section 5.1.4 above at the prime
rate, not to exceed a rate of eight (8%) percent.
b. In years eleven (11) through thirty (30), CITY shall pay
interest and principal amortized over the twenty (20) year
term at the prime rate, not to exceed the rate of eight
(8%) percent.
c. All payments as set forth in "a" and "b" above shall be
paid quarterly.
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d. The CITY may reduce the amount to be reimbursed pursuant
to this provision from contributions or reimbursements
from third parties which third parties may include but not
be limited to other users of CITY owned property. Any such
third party user may be required as a condition of its USE
to pro-rata contribute to the CITY funds to reduce the
CITY'S obligation to OPERATOR, as determined by CITY. The
CITY shall reserve the right to pre-pay principal at any
time with no penalty.
e. In the case of any third party contributions or
reimbursements OF the obligations of the CITY to the
OPERATOR a. set forth in this subsection, CITY'S
obligation shall be reduced by said sums so paid to the
OPERATOR and the amortized payments as set forth above
shall be proportionately reduced over the remaining term
of said amortization.
5.1.6 PAYMENT OF DEBT SERVICE: If required by any lender as a segment
of OPERATOR'S approved financing package and notwithstanding and in addition to
the other terms of this Agreement, OPERATOR shall, on or before the tenth (10th)
day of each calendar month, pay the bond trustee or lender an amount equal to
1/12th of the annual debt service of any financing packages, including revenue
bonds, which are issued under the name of CITY. The CITY and the OPERATOR
acknowledge that the payment of debt service is to be undertaken and made by
OPERATOR before any distribution to the OPERATOR is made from the revenues of
the Project.
5.2. DEFINITION OF GROSS REVENUES:OSS REVENUES:
Gross Revenues are defined as follows:
a. All food, beverages and novelty sales, (except that food
provided to the performers which shall not be included),
derived from direct sales made by OPERATOR and monies
received by OPERATOR from concessionaires engaged in the
sale of food, beverage or novelties.
b. Miscellaneous income, including all other gross monies
received by OPERATOR relating to the Facility, and related
improvements (such as, but not limited to, parking,
advertising contracts, off-site video and corporate
sponsorships, telecast, project, performances, flat rental
fees, broadcast and video production payments and
corporate and other sponsorships, all less applicable tax
and outside commission.
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c. Revenues expressly not included in definition of Gross
Revenues are Box Office ticket sales revenues, taxes, CITY
Use Fees, money escrowed pursuant to section 18.4 and
reimbursable equipment and labor fees.
5.3. PLACE OF PAYMENTS: All payments due and payable by OPERATOR to
CITY shall be paid to the office of the City Manager of the CITY during the
regular working hours at 776 N.E. 125 Street, North Miami, Florida 33161, unless
otherwise authorized in writing by the CITY.
5.4. ANNUAL RECONCILIATION: Within ninety (90) days after the close of
each calendar year, an annual reconciliation of Gross Revenues for such calendar
year shall be provided to CITY by OPERATOR for determination of compliance with
this Agreement and determine what, if any, remaining funds are due and owing
CITY based upon the provisions of this Agreement. If such reconciliation
reflects an overpayment, then that amount shall be deducted from the next
payment due CITY from OPERATOR, if OPERATOR has underpaid CITY during such
calendar year, then, in that event, OPERATOR shall forthwith pay CITY said
funds, and if such underpayment was the result of fraud, gross negligence or
willful neglect on the part of OPERATOR, the OPERATOR shall additionally pay to
CITY such underpayment amount together with interest at twelve (12%) percent per
annum, calculated from the date reconciliation reflects such funds are due.
Each annual reconciliation provided by OPERATOR to CITY pursuant to the
provisions of this section shall be accompanied with an "Opinion as to Accuracy
and Sufficiency" prepared by a certified public accounting firm retained by
OPERATOR, subject to the approval of CITY, based upon a review of OPERATOR'S
books, records and accounting procedures. The parties recognize that material
underpayments caused directly by the fraud or willful act of OPERATOR'S
principals shall constitute a breach of this Agreement by OPERATOR.
5.4.1 OPERATOR agrees to keep within Dade County, Florida, full,
complete and proper accounts of all gross sales, which books and accounts shall
be at all reasonable times open to inspection by CITY or its auditors or other
authorized representative or agent. Acceptance by CITY of any monies paid by
OPERATOR in accordance with such statement shall not be an admission of the
accuracy of such statement nor of the sufficiency of the amount of such
additional percentage payment, but CITY shall be entitled at any time within two
(2) years after receipt of such statement to question the sufficiency thereof or
the accuracy of such statement. OPERATOR shall accordingly, for a period of two
(2) years after furnishing such statement, keep safe and intact all of its gross
sales and any authorized deduction therefrom. If CITY does not question the
amount of any such payment so paid by OPERATOR by giving OPERATOR written demand
for an audit within said two (2)
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years and proceeding therewith within sixty (60) days after the end of such two
(2) years, CITY shall be 'deemed finally and conclusively to have accepted the
amount paid by OPERATOR as full performance of OPERATOR!S obligation. for
additional percentage payment for the year(s) involved.
5.4.2 OPERATOR shall maintain and shall require OPERATOR'S
subcontractors, concessionaires and licensees to maintain at the premises, or at
such other addresses within Dade County, Florida, as OPERATOR from time to time
shall designate, complete, permanent, and accurate financial record" including
books of account and records of all gross sales upon the Premises, together with
all supporting records. Such books and record. shall be preserved intact for at
least two (2) years following the close of this calendar year to which they
relate. CITY and its agents may at any reasonable time inspect and audit any of
said books and records.
5.4.3 Any audit made by CITY pursuant to Section 5.5.1 shall be at the
expense of CITY, except that if CITY makes any such audit for any year and if
the gross sales shown by OPERATOR'S statement (including statements of
any-subcontractor, concessionaire or licensees) for such are found to be
understated by more than five (5%) percent, OPERATOR shall pay to CITY the
reasonable expense of such audit. Any willful or fraudulent understatement made
directly by OPERATOR'S principals shall constitute a breach of this Agreement.
5.4.4 All statements and accounting procedures of OPERATOR shall be
prepared in accordance with generally accepted accounting principles. OPERATOR
shall utilize procedures in conformance with industry standards for like
Facilities to assure accuracy of records and secure revenue handling and
reporting procedures.
SECTION 6. PROHIBITION AGAINST WASTE
OPERATOR shall not keep, use, sell or offer for Male at the Premises
any article which may be prohibited by the standard form of fire insurance
policies or other applicable provisions of law. OPERATOR shall not commit or
suffer to be committed any waste upon the Premises.
SECTION 7. USE OF FACILITY OR PREMISES
7.1. OPERATOR may use the Premises only for the purpose of producing
and staging entertainment, cultural events and special events (including
recording, filming, broadcasting, etc.) to be held in the Facility or the Site
and conducting food, beverage and merchandise sales incidental to said events.
CITY will cooperate with OPERATOR in any effort of OPERATOR to obtain an
alcoholic beverage license for the Facility. OPERATOR shall develop and
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implement a comprehensive program to control alcohol consumption so as to
maintain decorum at the Facility subject to CITY'S approval. No part of the
Premises may be used for any purpose other than as specified in this section
without prior written consent of CITY, which consent shall not be arbitrarily or
capriciously denied or withheld.
7.2. For each year of the Management and Operating term of this
Agreement, an to the then current calendar year only, at least two (2) months
prior to the opening of any event at the Facility the OPERATOR shall provide in
writing to the CITY a calendar of tentative operating days. OPERATOR shall
continuously advise CITY of any changes in ! the calendar.
7.3. CITY DAYS AND OTHER COMMUNITY USES: The CITY may, if it so
desires, schedule CITY sponsored non-commercial events seven (7) days a year at
the ProJect, with all operating maintenance and repair costs (excluding any debt
service and cost of road maintenance) attributable to CITY'S use to be at the
CITY'S expense ("CITY DAYS"), but at no use charge for the Facility and all
parking areas. Unless expressly approved by OPERATOR, no more than two (2)
calendar days of "City Days" shall be consecutive. No later than January 1st of
each year, CITY shall give OPERATOR written notice of the seven (7) days which
CITY desires to designate as City Days" during the current year. OPERATOR agrees
to reserve for CITY the 4th of July each year as "City Day". CITY shall not
designate Labor Day Weekend or the days November 25 -January 2, March 25 - April
7; May 20 - 27 for "City Days". All costs and expenses of operating the Facility
during "City Days" (except as provided above as to debt service and road
maintenance) shall be borne by City, including CITY'S Special Event liability
insurance premium, if any, traffic and crowd control, clean-up, and employee
salaries and benefits, catering, and entertainers used. CITY shall be permitted
to assess patrons a nominal charge for noncommercial City Days.
OPERATOR and CITY shall establish a fund into which each year both
parties shall contribute a sum based on a 60/40 OPERATOR/CITY ratio for the sum
of $50,000 per year which funds shall be used by the parties for the purpose of
having OPERATOR produce at least two community events which can provide free
admission for the young or disadvantaged members of the North Miami Community.
7.4. OTHER OPERATIONS: OPERATOR agrees that OPERATOR shall not, without
CITY'S prior written consent, during the term of this Agreement engage in any
business which directly competes with the Facility with respect to entertainment
facilities with a seating capacity (fixed plus lawn) of more than 7,000 people
located within a 35 mile radius of the Facility. This provision shall apply even
in the event OPERATOR sells or otherwise hypothecates its interest under this
Agreement. In its proprietary capacity, CITY shall not authorize or engage in
any other performing arts arena or similar
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performing arts entertainment facility which would directly or indirectly
compete with the ProJect or Facility. This provision shall not apply to
performances held at CITY community centers or stadium, or to sporting
exhibitions.
7.5. BALANCING OF PROGRAMMING: Part of the consideration inherent in
CITY executing this Agreement is the fact that CITY considers the Facility a
significant community asset, but only so long as programming at the Facility is
balanced in substantially the manner hereinafter provided. Facility programming
shall be balanced so as to ensure a reasonably proportioned blend of special
events, cultural experiences, recognizing and accepting the fact that some
(e.g., so called, "high arts) may not be as profitable an others (e.g.,"rock and
roll"). For the purpose of this Agreement, "balance" shall mean in addition to
dance, drama, symphony, comedy and theater a reasonable assortment of varied
types of music events appealing to the varied tastes of the general population
including, without limitation, popular, rock and roll, blues, soul, Jazz, folk,
classical, country and western music, dance, comedy and theater. CITY and
OPERATOR acknowledge that the examples contained in this section, though
applicable to 1992 tastes may not so exist during the entire term of this
Agreement. It is the intent of the parties throughout the term of this Agreement
to appeal to the varied entertainment tastes of the general public as such
tastes change over time. Failure to provide balanced programming shall
constitute a BREACH.
7.6. HIRING PRACTICES: OPERATOR shall, when reasonably possible, hire
its personnel from City of North Miami residents. Further, OPERATOR shall
develop and implement an unpaid internship program to benefit students and
residents of the community.
7.7. SOUND: OPERATOR shall design, construct and operate the Facility
in a reasonable manner such that sound emanating from the Facility, parking or
related improvements shall not create a nuisance or annoyance to nearby homes.
In this regard the CITY and OPERATOR realize that the placement of the Facility
on the site is of primary importance. CITY reserves the right to impose by
resolution of the City Council specific reasonable operational and/or sound
level limitations on the operation of the Facility, including, but not limited
to, restricting hours of operation of the Facility should any decibel sound
emanating from the Facility exceed an average performance reading of 50 decibels
as established by the current code of CITY, at the property line of any
homeowner's property.
7.8. PARKING: The primary parking area to be built by OPERATOR on CITY
land designated by CITY, at OPERATOR'S sole cost and expense, to serve the
Facility shall be a parking area of 2,000 parking spaces in close proximity to
the Facility. Except as provided below in this Section and except as to the CITY
or
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community days under Section 7.3, these 2,000 spaces are intended to exclusively
serve the Facility.
In addition, OPERATOR shall provide to the CITY as additional
consideration under this Agreement, at OPERATOR'S sole cost and expense, the
design and construction, including all necessary permits and regulatory
approval, of a supplemental parking area consisting of an additional 4,500
parking spaces on other land of the CITY (in reasonable close proximity)
situated upon the Munisport Landfill Site, which land shall be designated by
CITY and provided at no cost to OPERATOR.
This supplemental parking area shall be so designed and constructed as
to primarily serve as a component of the Landfill Closure, while incidentally
serving as a supplemental parking area. Moreover, OPERATOR recognizes that CITY
may use (at no charge) the 4,500 parking space area for multiple or other uses,
so long as such does not conflict with the use of such area for parking
purposes.
The CITY may use this supplemental parking area at no charge during the
term hereof on a non-exclusive basin for parking purposes for other facilities
or uses to be placed on other CITY owned property or on the former Landfill
Site. Except as otherwise provided below as to CITY'S reservation, OPERATOR
shall have a first priority use of the supplemental parking spaces for any
performance, function or events conducted by the OPERATOR at the Facility and
OPERATOR shall notify the CITY, except as may otherwise be mutually agreed upon,
at least thirty (30) days in advance of OPERATOR'S use of said additional
parking.
CITY may reserve, upon at least ninety ( 90) days prior notice to
OPERATOR, fifteen (15) days per year (not more than ten (10) days in any month
and not more than two (2) weekends in any month) for CITY'S use of all the
primary and supplemental parking areas described above for special events
conducted by the CITY or operators of other facilities which may be built on
CITY land. These fifteen (15) days shall be in addition to the seven (7)
potential days to be utilized by CITY under Section 7.3, and are intended to
accommodate substantial exhibitions or attractions that may be located on the
CITY'S lands.
OPERATOR shall cooperate with all other lawful users of other portions
of the former Landfill Site, including CITY and other operators authorized by
CITY to operate on other CITY lands or premises. OPERATOR shall not claim the
priority use of the parking at the Project under Section 7.8, unless OPERATOR
actually has a regularly scheduled show, so as to assure that such parking will
be available to CITY or operators of other facilities on CITY'S lands.
Under those circumstances in which CITY or other operator of CITY
(other than OPERATOR hereunder) uses the primary or
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supplemental parking described above for an event or exhibition for CITY or such
other operator, CITY'S covenant of indemnification under Section 12.B of this
agreement shall be applicable (a" to CITY'S events), and CITY shall require any
such other operators to provide a Special Events Insurance policy in the minimum
amount of One Million ($1,000,000.00) Dollars combined single limit, for
personal injury and property damage, with CITY and OPERATOR named an additional
insured. CITY may, in its discretion, require a higher limit from third party
users. In lieu of such Special Events policy, CITY may require a covenant of
indemnification from such other operator, so as to protect CITY and OPERATOR.
These indemnification and Special Event policy provisions are intended to
protect OPERATOR from liability to third persons for incidents which occur when
such other operators or CITY are using and are in control of these parking areas
as to damage. or injuries which are solely caused by CITY'S or by such other
operator's activities.
7.9. TRAFFIC CROWD CONTROL AND CLEANUP: OPERATOR, at its expense, shall
be responsible for cleanup of the Facility and related parking areas, as well as
crowd control, security and traffic control satisfactory to the Chief of Police.
OPERATOR shall also pay CITY no more than fifteen (15) days after billing, any
and all extra costs actually incurred by CITY related to any performance at the
Facility. If not otherwise provided by OPERATOR, CITY shall provide at
OPERATOR'S sole cost, those services, which according to industry standards, are
provided by a municipality at levels which are consistent with said industry
standards. It shall be the primary responsibility of OPERATOR to provide the
above services at its costs relating to any event occurring at the Facility. The
Chief of Police may establish guidelines for public safety purposes, which may
include, at OPERATOR'S expense, the hiring of City of North Miami Police
officers for assistance in traffic and crowd control. OPERATOR agree's to use at
least one North Miami Police officer per scheduled event to coordinate security
at the facility.
SECTION 8. ASSIGNMENT
8.1. OPERATOR may transfer or assign this Agreement or any interest
therein held by OPERATOR to any person or entity whomsoever only with the
consent in writing of CITY; provided however, the CITY shall not unreasonably
withhold consent to any proposed assignment. Prior to determining whether
consent shall be given, the CITY may hold two (2) public hearings directed
solely to determine as to whether the proposed assignee or transferee is
qualified to perform this Agreement. The determination of the qualifications of
the transferee or assignee shall be based on experience, financial resources and
track record at similar facilities. Such consent shall be deemed given or waived
unless written objection is made within sixty (60) days of receipt of written
notice by CITY of OPERATOR'S intent to assign hereunder.
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Upon presentation of its financing package, OPERATOR shall disclose to CITY the
identity and address of all directors and officers of OPERATOR and those
shareholders owning five (5~) percent or greater of the outstanding shares of
stock in the corporate entity. Each year, at the time for filing its corporate
report with the Secretary of State, OPERATOR shall advise CITY of the latest
officer, director and shareholder information as initially required above.
Subsequent to approval of financing, a sale or transfer of in excess of
thirty-five (35%) percent of outstanding shares of stock or a transfer or sale
which shifts the controlling interest from one shareholder to another
shareholder (outside of the shareholders on the date of execution of this
Agreement) shall be considered to be an assignment or transfer under Section 8.1
of this Agreement.
8.2. Any consent given by CITY to OPERATOR to transfer or assign the
Agreement or any portion thereof or to assign this Agreement shall not be
construed as a consent to any other assignment or transfer, or a. a wolves of
CITY'S right to object to any assignment or transfer to which CITY'S consent in
writing has not been obtained. Any assignment contrary to the provisions of thin
Agreement shall be null and void.
8.3. OPERATOR shall not have the right to assignment if in default.
8.4. Any assignee or transferee shall assume the responsibility for any
past obligations of the OPERATOR, unless otherwise agreed in writing by CITY.
SECTION 9. ENCUMBRANCE OF OPERATOR'S CONTRACT
9.1. OPERATOR, as part of its financing package, may encumber to a
lender its interest in this Management Operating Agreement. The holder of any
encumbrance or lien against thin Contract shall effectuate and hold same with no
recourse to the CITY and shall at the time of the creation of said encumbrance
or lien notify the CITY in writing that said encumbrance or lien holder agrees
to be bound by this Management Operating Agreement, and shall perform all terms
and provisions and obligations contained herein, should said lien or encumbrance
holder inure to, or by any means whatsoever, take over position of the OPERATOR
in this Agreement.
9.2. The CITY shall recognize such lien or encumbrance holder as above
set forth as successor to OPERATOR subject to the terms and provisions as
hereinabove set forth and the full and faith performance of all of the
OPERATOR'S obligations as set forth herein by such lien or encumbrance holder.
Any lien or encumbrance shall be subject to CITY'S interests hereunder as owner,
and CITY'S interests shall not be subordinated to such lien or encumbrances.
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9.3. CITY shall send any lien or encumbrance holder (i) a copy of all
notices sent by CITY to OPERATOR or received by CITY from OPERATOR pertaining to
an event of default and (ii) a copy of all notices pertaining to an event of
default received by the CITY from, or sent by the CITY to, any other party. CITY
shall not have any duty to send a copy of any notice to any lien holder or
encumbrance holder who doe" not by written notice to CITY specify the address to
which copies are to be sent. All notices and copies required to be sent or
delivered pursuant to thy subsection shall be sent certified or registered mall,
return receipt requested. Failure by CITY to send any notice required hereunder
shall have no effect if the lien or encumbrance holder has actual notice of the
event of default.
9.4. Lien or encumbrance holders shall have the same curative rights
after written notice as OPERATOR except such lien or encumbrance holders shall
have ninety (90) days to cure or in the event of a material breach which cannot
be cured within said ninety (90) day period, to commence such cure within such
ninety (90) day period and diligently prosecute to completion a cure of said
breach, as set forth in Section 12.
9.5. Any lien or encumbrance holder shall have the right to cure any
default of OPERATOR under this Agreement, and CITY shall accept such performance
by or at the instance of such lien or encumbrance holder as if the same had been
made by OPERATOR. Upon the failure of lien or encumbrance holder to cure such
default, all outstanding interests and rights of such lien or encumbrance
holders shall be terminated.
9.6. In the event that a lien or encumbrance holder shall succeed to
the interest of OPERATOR, any further transfer or assignment by such lien or
encumbrance holder shall be subject to the provisions of Section " 8 n hereof.
SECTION 10. DEBT SERVICE AND UTILITY PAYMENTS
AND PERSONAL PROPERTY TAXES
10.1. OPERATOR shall pay, throughout the term of this Agreement and
before delinquency, all charges for water, power and other utilities or
necessary services supplied to the Premises and any or all of debt service
payments relevant to the Project. Said utilities shall be separately metered for
the Premises 10.1.gh mOPERATOR shall pay, throughout the term of this Agreement
and before delinquency, all charges for water, power and other utilities or
necessary services supplied to the Premises and any or all of debt service
payments relevant to the Project. Said utilities shall be separately metered for
the Premises through meters to be installed and paid for by OPERATOR.
10.2. OPERATOR shall also pay prior to delinquency any and all taxes
and assessments levied or assessed, and becoming payable during the term hereof,
upon OPERATOR'S personal property, possessory or other interests located upon or
in connection with the Premises.
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SECTION 11. RIGHT OF INSPECTION
CITY shall have the right to enter upon the Premises for the purposes
of inspection, serving or posting notices, making any necessary repairs to the
Premises, complying with laws, ordinances or regulations, including, but not
limited to, all landfill closure monitoring, protecting the Premises or any
other lawful purpose. CITY shall exercise such rights reasonably, at any time,
and in such manner as not to interfere with the business or security of
OPERATOR.
SECTION 12. OPERATOR'S DEFAULT
12.1. In the event of any material breach of this Agreement by
OPERATOR, which breach is not cured within sixty (60) days after giving of
written notice thereof from CITY to OPERATOR, and any approved lien or
encumbrance holder, or in the event of a material breach which cannot be cured
within said sixty (60) day period, if OPERATOR has not commenced within sixty
(60) days of written notice and thereafter diligently prosecuted a cure of such
breach, or upon OPERATOR'S abandonment of the property, CITY, along with all
other rights and remedies it may have, shall have the following rights:
a. To elect to allow thin Agreement to continue in full force
and effect without terminating OPERATOR'S right of
possession and to enforce all of CITY'S rights and
remedies under this Agreement, including the right to
recover payment as it becomes due under the Agreement.
b. To elect to terminate the Agreement, to reenter and remove
all persons and property from the Premises, and to store
at OPERATOR'S cost all of OPERATOR'S property on the
Premises, and to recover from OPERATOR the following
amounts, less any amounts received by CITY on account of
retaining the Premises after the date of Agreement
termination during the balance of the Agreement term
specified herein:
(1) Any unpaid sums which had been earned at the time
of termination, and
(2) Any other ascertainable and calculable amounts
necessary to compensate CITY for all damages
proximately caused by OPERATOR'S failure to
perform its obligations under the Agreement.
12.2. An a precondition to pursuing any remedy for an alleged default
by OPERATOR, CITY shall, before pursuing any such remedy, give notice of default
to OPERATOR and to all qualifying subcontractor. whose names and addresses were
previously given to CITY in a notice or notices from OPERATOR or any qualifying
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encumbrance stating that the notice was for the purpose of notice under this
provision. A qualifying subcontractor is a subcontractor in possession under an
existing agreement which is proper under this Agreement. A qualifying
encumbrance is an encumbrance under any documented securing device then existing
and relating to construction or financing of improvements to or in connection
with the Premises or any part thereof, which encumbrance has been approved or
authorized by the CITY. Each notice of default shall describe the alleged
default. CITY shall afford any such qualified lien or encumbrance holder all
rights to cure OPERATOR'S default as set forth in this Agreement.
12.3. If OPERATORS principals are found upon clear and convincing
evidence by Judgment of a Court of Law to have committed a willful or fraudulent
understatement of gross revenues it shall be deemed that such finding is a
default.
12.4. Notwithstanding the above, the CITY shall have all rights and
remedies as provided by law. Any damage award shall not exceed revenues which
the CITY would have received.
SECTION 12.A. CITY'S DEFAULT
12.A.1 In the event of any material breach of this Agreement by CITY,
which breach is not cured within ninety (90) days after giving of written notice
thereof from OPERATOR to CITY, or in the event of a material breach which cannot
be cured within said ninety (90) day period,,!if CITY has not commenced within
ninety (90) days of written notice and thereafter diligently prosecuted a cure
of such breach, OPERATOR shall have all rights and remedies at law or equity
subsequent to completion of construction. Subsequent to completion of
construction, CITY shall not be liable for damages in excess of total revenues
received by CITY over prior years of this Agreement, not to exceed the total
actual revenues received over the prior seven and one-half (7 1/2) year period.
SECTION 12.B. CITY INDEMNIFICATION
Subject to the monetary limits of section 768.28 Florida Statute., CITY
shall hold OPERATOR, and its respective agents, employees, officers, lien and/or
encumbrance holders harmless and defend OPERATOR and said parties against any
and all losses, damages, claims and/or liabilities for any damage to any
property or person caused solely by reason of the gross negligence or willful
misconduct which may hereafter be caused by CITY, its employees or agents.
Throughout the term of this Agreement, CITY covenants to defend and indemnify
the OPERATOR for any claim made against OPERATOR to the extent such claim is
made against OPERATOR on a technical basis as a result of the status of OPERATOR
as the present operator of this Facility situated upon a portion of the
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property which constituted a portion of the former Munisport Landfill site, if
such claim i" solely predicated or based upon those operations and activities
which occurred at the landfill site prior to the execution of this Agreement,
and subject to the limitation and restriction that this covenant shall not
operate to expand the CITY'S liability exposure which already results from the
CITY'S status as owner of the former landfill site during the course of disposal
activities which previously occurred at the site at such time that the site was
an active landfill and that would exist as a result of CITY'S status as owner
during the term of this Agreement. Thin provision shall survive the termination
of this Agreement.
SECTION 12.C. HOLD HARMLESS
OPERATOR does further expressly agree to indemnify and defend and save
the CITY, its officers, agents and employees harmless from any and all claims
for loss, damage, injury including death or liability of whatsoever nature and
howsoever or to whomsoever the same may be caused or may arise resulting
directly or indirectly from the exercise of this Agreement, the condition of the
Facility or Project site, including all parking areas used by OPERATOR, or the
occupation of the Premises herein permitted to be used or the Premises of the
CITY to which the OPERATOR, its agents, employees, or licensees may have access
by reason of this Agreement, except only as to matters arising from the sole
gross negligence or willful acts of the CITY.
SECTION 13. OPERATOR'S LIABILITY INSURANCE
13.1. During the entire term of this Agreement, OPERATOR shall maintain
and pay all premiums for a policy or policies of comprehensive public Liability
insurance in an amount of not less than Five Million ($5,000,000.00) Dollars,
combined single limit covering any occurrence on or adjacent to the Project
resulting in property damage or bodily injury or death to person or persons.
Insurance shall be re-evaluated no more frequently then every five (5) years of
the term and mutually readjusted upon such reevaluation. Such insurance shall
never be less than the monetary limits of section 768.28(5) Florida Statutes.
13.2. All such policies shall name the CITY, and at OPERATOR'S option
the holder of any encumbrance covering the Premises, as additional insureds with
respect to the operations and activities of OPERATOR on or in any way connected
with the Premises, including the parking and access areas.
13.3. Each such policy shall include as a condition that before any
such action can be taken by the insurer, the insurer must give CITY thirty (30)
days prior written notice of any cancellation or change in scope or amount of
coverage of such
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policy. CITY shall be furnished a certificate of insurance and an endorsement to
the insurance policies evidencing OPERATOR'S compliance with the requirements of
this section. CITY will not be liable for any premiums or assessments on
insurance required. OPERATOR shall not open the facility to the public on any
day in which the insurance is not in full force and effect, unless agreed to in
writing by CITY.
SECTION 13A. WORKERS' COMPENSATION INSURANCE
OPERATOR and each of its subcontractors shall comply with the Florida
Workers' Compensation Law, Chapter 440, Florida Statutes, as applicable, and
provide proof of current compliance therewith at all time-, throughout the term
hereof.
SECTION 14. BUILDING INSURANCE AND CASUALTY DAMAGE
14.1. At all times during the term of this Agreement and any extension
hereof, OPERATOR shall cause to be effected upon the improvements upon the
Premise" installed or constructed, fire insurance with extended coverage
provisions (including Builder's Risk Insurance during any term of construction
of the Facility) in the amount not less than full replacement cost of said
Facility. CITY and OPERATOR shall be named as insureds in any policy above
provided for, and the loss under any such policy, if any, shall be payable to
CITY and OPERATOR Jointly for the purpose of the repair and restoration of said
building and improvements subject to the provisions of this Section 14. Any
portion of the proceeds of such insurance not required to be used to repair and
restore or to payoff any approved debt as aforesaid shall be paid to and be
equally divided between OPERATOR and CITY, but only to the extent CITY is not
otherwise fully compensated for lost revenues. Excess proceeds payable to
OPERATOR shall be used for the marketing or improvement of the Facility.
OPERATOR agrees to provide CITY with certificates of insurance issued by the
insurance carriers, which certificates shall show compliance with the
requirements of this section and shall provide that such insurance may not be
altered or canceled except after thirty (30) days notice in writing to CITY.
14.2. If by reason of the provisions of any lawful encumbrance on the
Facility, fire insurance is required to be made payable to the Lien holder
and/or the policies of insurance placed in its custody, CITY hereby consents
thereto, provided that the Lien holder in question shall first agree in writing
that the proceeds of said insurance shall be available for the repair and
restoration of the improvements.
14.3. The failure of OPERATOR to effect or maintain said insurance in
the names and amounts herein called for, or to pay the premiums therefor, or to
deliver said policies or a certificate of
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insurance unto CITY, shall permit CITY itself to effect said insurance and pay
the requisite premiums therefore, which premiums shall be repayable unto CITY
with the next installment of payment. This shall not excuse any breach.
14.4. Any premiums paid by OPERATOR on insurance, the term of which
extends beyond the term of this Agreement, shall be, upon the termination of the
Agreement, due OPERATOR and CITY shall have no obligation thereon.
14.5. Unless this Agreement is terminated as provided in Section 14.7,
if the Premises or any improvements thereon made or installed by OPERATOR, are
damaged or destroyed by an insured casualty during the term of this Agreement or
any extensions or renewals thereof, OPERATOR, to the extent insurance proceeds
are available therefor, shall commence within sixty (60) days after the
occurrence of such casualty and shall thereafter diligently prosecute the
restoration sod the replacement of the same substantially to the condition
thereof immediately prior to such damage or destruction.
14.6. INTERRUPTION OF BUSINESS POLICY: The OPERATOR shall carry at its
expense a business interruption insurance policy, if available, to at least the
extent any debt service with any lien or encumbrance holder being the payee on
the policy to the extent of said debt.
14.7. If any casualty occurs within the last ten (10) years of the term
hereof to the extent of twenty (201) percent or more of the then replacement
costs thereof, and which damages OPERATOR is obligated to restore, then, and in
any such event, within thirty (30) days after the event of casualty, OPERATOR
may terminate this Agreement by giving written notice to CITY. In the event of
such termination any insurance proceeds shall be paid to and be the exclusive
property of CITY and OPERATOR and shall be used to pay off any indebtedness of
the ProJect, and at CITY'S option to demolish facility, with the balance after
such payment to be equitably divided between OPERATOR and CITY upon the basis
that OPERATOR'S share shall be in proportion to the balance of the remaining
term of this Agreement and any renewals hereto.
SECTION 15. WAIVER OF SUBROGATION RIGHTS
CITY and OPERATOR shall each, forthwith after the execution of this
Agreement, procure from and cause each of the insurers under all policies of
insurance, including but not limited to liability, fire and property, now or
hereafter during the term hereof existing and purchased by either or both
insuring or covering the Premises, or any part of the Facility and/or any
improvements thereon, a waiver of all rights of subrogation which the insurer
under said
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policies might otherwise, if at all, have as against the other hereto, said
waiver to be in writing and for the express benefit of the other. Said waiver
shall extend only to claims arising within the Facility and the areas adjacent
thereto including parking and access areas used in connection with the Facility.
SECTION 16. CONDEMNATION
16.1. TOTAL CONDEMNATION: In the event of condemnation of the Premises,
the award made shall first be paid to lien holders then to CITY for value of
CITY land and the balance divided between CITY and OPERATOR as they may mutually
agree or if they fail to reach such agreement within forty-five (45) days of the
making of the 16.1., thTOTAL CONDEMNATION: In the event of condemnation of the
Premises, the award made shall first be paid to lien holders then to CITY for
value of CITY land and the balance divided between CITY and OPERATOR as they may
mutually agree or if they fail to reach such agreement within forty-five (45)
days of the making of the award, then as a court of competent jurisdiction may
decree.
16.2. PARTIAL CONDEMNATION: In the event proceedings be taken, on one
or more occasions, by any lawful authority to condemn or otherwise acquire by
eminent domain, a substantial part of the Premises or, in the aggregate, in
excess of twenty-five (25%) percent of the parking area available to, or
reserved for OPERATOR, the OPERATOR shall have the option at any time after such
proceedings are instituted, and prior to thirty (30) days after such taking of
acquisition, to terminate this Agreement upon giving fifteen (15) days notice in
writing to CITY. Said termination shall be effective as of the date possession
of the building or Premises is taken by the condemning authority. In the event
of such termination, any unearned payment shall be refunded to OPERATOR and the
award for the condemnation shall be appropriated in the manner set forth in
Section 16.1 hereof.
16.2.A. CITY may avoid a termination by OPERATOR by supplying
comparable additional parking in replacement of parking taken.
Should OPERATOR not elect to so terminate this Agreement, or should any
taking not be sufficient to allow OPERATOR such option to terminate, thin
Agreement shall continue in full force and effect, and OPERATOR, at its own cost
and expense, but only to the extent the condemnation award is made available
therefor, shall restore, repair and remodel the improvements to the Premises to
a condition suitable for the business of OPERATOR permitted to be conducted
therein under the provisions of this Agreement. Provided OPERATOR demonstrates
that the revenue production capabilities of the Facility are reduced by the
taking, OPERATOR shall be entitled to a reasonable reduction in the annual
minimum payment provided for in the Agreement, thereafter required to be paid
hereunder taking into consideration the potential revenue loss. OPERATOR shall
also be entitled to a reasonable suspension or diminution of the payment
required to be paid hereunder during the time required for any restoration and
repair required by reason of the exercise of eminent domain according to the
portion of the Premises rendered
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unusable, taking into consideration the time and extent of interference with
OPERATOR'S business therein.
Should OPERATOR not elect to terminate this Agreement, or should any
taking not be Sufficient to allow OPERATOR the option to terminate, all sums,
including damages and interest awarded shall be deposited promptly with a
federally insured depository and shall be distributed and disbursed in the
following order of priority:
First, to OPERATOR the cost of restoring the improvements;
Second, to OPERATOR, the cost of restoring any and all improvements
originally installed by OPERATOR, plus any amount awarded for detriment to
business and/or for the reduction in the value of OPERATOR'S Agreement;
Third, to CITY a sum equal to the value of the Premises taken, valued
as land exclusive of improvements and unburdened by all Agreements;
Fourth, to CITY any expenses or disbursements reasonably and
necessarily incurred or paid by or on behalf of CITY or in connection with the
condemnation proceedings;
Fifth, to OPERATOR any expenses or disbursements reasonably and
necessarily incurred or paid by or on behalf of OPERATOR for or in connection
with the condemnation proceedings;
Sixth, to CITY any residue.
16.3. APPLICABILITY. This Section 16, shall only apply to formal
eminent domain proceedings, and shall not apply to actions for inverse
condemnation or regulatory taking litigation.
SECTION 17. ALTERATIONS BY CITY OR OPERATOR
17.1. OPERATOR with the written approval of the CITY shall have the
right to make any alterations or additions to the improvements to be constructed
on the Facility which OPERATOR deems necessary or desirable in the exercise of
prudent business Judgment, for the purpose of fulfilling the purposes for which
this Agreement was granted. CITY shall not unreasonably withhold it" approval.
CITY'S approval shall not be required for any alteration or addition costing
less than Twenty-Five Thousand ($25,000.00) Dollars.
17.2. Except as otherwise required by this Agreement, CITY shall not,
without the prior written consent of OPERATOR, which consent shall not be
unreasonably withheld, make or perform or suffer to be made or performed any of
the following:
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a. Any alterations or additions to any of the improvements on
or to the ProJect, except the non-exclusive parking areas.
b. Any mayor alterations to any elements or item. of
landscaping to the ProJect (excluding the non-exclusive
parking area). Provided, however, CITY may modify
landscaping provided that CITY pays for such
modifications. Such alteration. or modifications shall not
disrupt the functioning of the Facility.
SECTION 18. REPAIRS AND MAINTENANCE
18.1. OPERATOR during the entire term of this Agreement shall keep,
maintain and repair all improvements to the ProJect, including all parking areas
and access roads made or installed by CITY or OPERATOR, including but without
being limited to, structure, fixtures and furnishings, in good order, condition
and repair, and upon termination of this Agreement by lapse of time or
otherwise, OPERATOR shall deliver up said improvement-, including but without
being limited to, structure, fixtures and furnishings, in good condition and
repair, ordinary wear and tear thereof from reasonable and normal use and wear
excepted. OPERATOR and CITY shall mutually agree on a formula for CITY or other
parties to contribute a fair share to the cost of maintaining access roads and
parking area. based on the extent of such parties use thereof. However, upon
failure of the parties to agree on a fair share formula, the matter shall be
subject to the CITY'S reasonable discretion as to a fair pro-ration for a period
of one (1) year. At the conclusion of one (1) year if OPERATOR is not satisfied
with CITY'S formula, OPERATOR may ask for binding arbitration to set a formula
for future years.
18.2. Should OPERATOR, after notice from CITY, fail to make with
reasonable promptness any repairs which are the obligation of OPERATOR
hereunder, CITY may (but shall not be required to do so) enter the ProJect and
put the same in good order, condition and repair; and the reasonable cost
thereof shall become due and payable by OPERATOR to CITY upon demand. When CITY
makes such demand for payment, CITY shall furnish OPERATOR an itemized statement
of the repairs and charges at the time such demand is made and thereafter shall
substantiate such demand by proper invoices.
18.3. OPERATOR shall during the term of this Agreement and any
extensions or renewals thereof maintain or cause to be maintained in a manner
befitting a first-class public facility all of the land and improvements under
OPERATOR'S control.
18.4. Commencing in year two (2) of the term, the first two (2~)
percent of Gross Revenue. as hereinabove defined shall
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annually be escrowed by OPERATOR as a reserve against the necessity for mayor
repairs or maintenance. The conditions of the escrow and the depository shall be
subject to the approval of the CITY, which approval shall not be unreasonably
withheld. For the period after the first five (5) years of the term, OPERATOR
may present to CITY an adjustable mechanism to cap or limit accrual of funds in
this account so as to adequately address potential or scheduled mayor repair
items. Said reserve fund shall be accounted for in accordance with the terms
hereof and be used by OPERATOR to accomplish any mayor repairs that are
required. This reserve fund shall not be deemed part of Gross Revenues as
defined herein for distribution purposes. All unexpended funds shall be
distributed to CITY upon termination of this Agreement. Funds in this account
shall not be used for any purpose other than repairs and maintenance. The
account shall be an interest bearing account.
SECTION 19. GOVERNMENTAL COMPLIANCE
19.1. OPERATOR shall duly observe, conform to and comply with all valid
requirements of any governmental authority relative to the ProJect and shall
require all persons using the same or attending events therein to conform to and
comply with all such requirements. This provision shall not in any way shift
OPERATOR'S management and operational duties to CITY nor shall any rights be
created hereby for the benefit of any third party.
19.2. CITY represents that it will comply with all terms and provisions
of a certain Consent Agreement and Decree entered into on the 24th day of
September, 1991, between CITY and the Environmental Protection Agency, sad all
provisions and obligations contained therein. Further, CITY represents that it
will comply with all lawful regulatory and administrative directions, orders and
laws, and otherwise fully comply with all applicable federal, state and local
laws and regulations dealing with, or having to do with, the former landfill
site. The above representations shall not prejudice CITY'S right to contest any
administrative or regulatory orders or directives. This shall not release
OPERATOR of its responsibilities under 1.1.(c)(4).
SECTION 20. OPERATOR'S RIGHT TO SUBCONTRACT
OPERATOR may perform any obligation or duty required of it pursuant to
this Agreement by itself through its own personnel or by contracting for the
performance thereof by others. This provision shall not supersede restriction on
assignment. Any subcontractor must be bonded and insured to same extent as
OPERATOR and shall likewise name the CITY as additional insured, and provide
evidence of compliance to CITY.
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SECTION 21. OPERATOR'S RIGHT TO CONTRACT
SubJect to the limitations, conditions and restrictions of this
Agreement, all agreements relating to the use of the Project, or any part
thereof, including specifically but without limitation, advertising contracts,
contracts with restaurant or club operators, contracts or agreements with
persons conducting events in the Project, shall be negotiated solely by OPERATOR
and shall be executed by OPERATOR without recourse to the CITY.
CITY shall receive a copy of any such agreement. from OPERATOR, upon
CITY'S request.
All such Contracts shall specifically state that CITY has no liability
thereunder.
No such contract shall be entered into that would be detrimental to
CITY'S image a. a prominent and progressive municipality.
SECTION 22. NAME OF FACILITY, SIGNAGE AND LANDSCAPE
OPERATOR shall conspicuously use the name and term "North Miami. in all
advertising of the Facility and events to be held at the Facility.
OPERATOR shall develop with the approval of CITY appropriate
directional and identifying signage and landscaping for the Project and shall
maintain same at OPERATOR'S cost during the term hereof. The CITY shall not
unreasonably withhold approval of the signage and landscaping plans upon their
submission to CITY.
SECTION 23. LIENS
OPERATOR will not permit any Liens or encumbrances of whatsoever nature
or kind to stand against the Premises for any labor or material furnished in
connection with any work performed by or at the direction of OPERATOR. OPERATOR
shall secure a completion bond for any construction done by or at OPERATOR'S
direction, for any construction over Twenty-Five Thousand ($25,000.00) Dollars.
Only encumbrances approved by CITY shall be permitted.
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SECTION 24. NOTICES
24.1. All notices or demands of any kind which either party is required
or desires to give or make upon the other in connection with the Agreement or
arising out of the relationship created hereby, shall be in writing and shall be
given or made (subject to the right of either party to designate a different
address by notice given as provided herein) by United States registered or
certified mail, postage prepaid, addressed in the case of CITY to:
City of North Miami
776 N.E. 125 Street
North Miami, FL 33161
Attention: City Manager and City Attorney
and addressed in the case of OPERATOR to:
PERFORMING ARTS MANAGEMENT OF NORTH MIAMI, INC.
930 Washington Avenue, Fifth Floor
Miami Beach, FL 33140
24.2. Any notice so sent shall be deemed to have been given forty-eight
(48) hours after the same has been deposited in the United States mail,
registered or certified mail, within the State of Florida with postage thereof
fully prepaid.
SECTION 25. VALIDITY OF AMENDMENTS
No amendment, nor modification, nor interpretation of this Agreement
shall be valid unless signed by both of the parties hereto. Unless otherwise
provided for, the City Council shall act for CITY. CITY Council action on an
amendment shall be by resolution at a duly advertised public hearing.
SECTION 26. RENEWAL PROVISION
If this Agreement is otherwise in full force and effect and not
otherwise in material default upon the conclusion of the thirty (30) year term
hereof, the OPERATOR may, by giving written notice to CITY at least six (6)
months before the termination of the term, shall be granted an extension of this
Agreement for an additional ten (10) year term upon the terms as contained
herein. OPERATOR shall likewise have a second and final ten (10) year extension
after conclusion of first extension. Provided, however, that notwithstanding any
other provision of this Section, the renewal period shall be provided upon a
revision to Section 5 "Payments to CITY," so that CITY is paid 25% of the
additional monies made available as a result of the retiring and extinguishment
of the initial debt service by OPERATOR, in addition to other funds paid to CITY
under Section 5. Such additional monies shall be paid to
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CITY by OPERATOR each month. Each month subsequent to the thirty (30) year
initial term, OPERATOR shall provide at least one (1) show per month during any
renewal term(s).
SECTION 27. MISCELLANEOUS PROVISIONS
27.1. Captions of sections and parts of this Agreement are for
convenience only and shall not be 27.1.dereCaptions of sections and parts of
this Agreement are for convenience only and shall not be considered in resolving
any questions of interpretation or construction.
27.2. Whenever in this Agreement words of obligation or duty are used,
such words shall have the force and effect of covenants; subject in each case to
grace periods provided. Any obligation imposed on either party hereto shall
included the imposition on such party of the obligations to pay all costs and
expenses necessary to perform such obligation. The timely and complete
performance of every duty, and the-trust and accuracy of each and every warranty
and representation made by either party hereunder, shall be a condition
precedent to the other parties' obligations hereunder; and the complete
performance of every provision of this Agreement to be performed by the OPERATOR
shall be a condition precedent to its right to retain operation and management
of the Premises.
27.3. Each and all of the covenants, provision. and conditions of this
Agreement are to be performed by or on the part of the CITY or OPERATOR, whether
affirmative or negative in nature, are intended to and shall bind CITY or
OPERATOR, its Successors and assigns at any time and from time to time, and
shall inure to the benefit of OPERATOR or CITY, its successors and assigns.
27.4. Both parties certify to their full familiarity with the
provisions hereof and agree that the provisions hereof are not to be construed
either for or against either party.
27.5. Nothing herein contained shall be deemed for any purpose as
creating any relation between the parties hereto other than the relationship of
independent contracting parties. A landlord-tenant relationship is not hereby
created.
27.6. This Agreement and Exhibits hereto contain all the terms,
covenants and conditions between CITY and OPERATOR relating in any manner to the
payments, use and occupancy of the Premises, and shall supersede any prior
discussions or negotiations, specifically the Agreement of January 22, 1991 as
approved by Resolution R-91-5 is hereby canceled and superseded.
27.7. This Agreement shall be governed exclusively by the provisions
hereof and by the laws of the State of Florida as the same from time to time may
exist.
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27.8. As used in this Agreement and when required by the context, each
number (singular or plural) shall include all numbers, and each gender shall
include all genders.
27.9. Time is and shall be of the essence of this Agreement and of each
term and provision hereof.
27.10. Should any provision of this Agreement be held as illegal,
unconstitutional or unenforceable, all other terms and provisions not so held
shall remain in full force and effect.
27.11. All disputes that may occur between CITY and OPERATOR if not
amicably resolved by said parties shall be submitted to binding arbitration in
accordance with the rules of the American Arbitration Association. Either party
may withdraw dispute from arbitration by written notice to the other party
within fifteen (15) days of receipt of notice of the demand for arbitration from
(or notice of exercise of Jurisdiction by) the American Arbitration Association.
Thereupon, arbitration shall not be applicable as to such dispute.
27.12. Nothing in this Agreement shall be construed to waive or limit
CITY'S governmental authority an a political subdivision of the State of
Florida. Unless specified otherwise, where approval or consent of CITY is
required under this Agreement, such consent or approval shall be deemed to refer
to the CITY'S consent or approval as owner, and such consent or approval shall
be contractual in nature and shall not be in lieu of any required governmental
approval of CITY. It in understood that CITY'S approval shall be at its
discretion (unless otherwise specified herein) and denial of such approval shall
not be the basis for a cause of action by OPERATOR. The City Council shall act
for CITY in matters relating to contractual approvals hereunder, except as
otherwise provided by the City Council or specified herein. The City Council in
exercising its discretion shall not act in an arbitrary and/or capricious
manner.
27.13. OPERATOR shall allow a representative of CITY Finance Department
to be present at show" to monitor the receipt and handling of monies.
27.14. OPERATOR shall post a sufficient demolition bond to assure
removal and demolition at CITY'S option only, of the facility in the event the
facility ceases or abandons regular operations during the first five (5) years
of the term. CITY must exercise such option within six (6) months of any such
abandonment.
27.15. OPERATOR recognizes that CITY shall not issue building permits
for the project unless OPERATOR shall make necessary improvements if required to
Biscayne Boulevard access required for efficient ingress and egress to facility.
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27.16. OPERATOR agrees that under any circumstances in which OPERATOR
shall make any claim against CITY for any matter in any way arising under this
Agreement prior to completion of construction, CITY shall not be liable for
OPERATOR'S loss of time, profit or incidental or consequential damage, and
OPERATOR'S claim shall solely be limited to actual out-of-pocket loss or
expense. This provision shall not waive any limitation on CITY'S liability
provided under other provisions of this Agreement or law.
27.17. CITY shall have the right to relocate all the nonexclusive
parking areas for the ProJect to another location on the Landfill Site, at any
time, at CITY'S sole cost and expense without disruption of the Facility.
27.18. Subject to final resolution by Judicial action, CITY shall have
the authority to fairly settle and resolve any dispute between OPERATOR and
other operators of other facilities developed upon the former Landfill Site.
CITY'S decision shall control unless arbitrary or capricious.
27.19. SubJect to CITY imposing the same restriction on other operators
of commercial facilities developed on the CITY'S Landfill Site, OPERATOR agrees
that OPERATOR shall not conduct concession sales on dates upon which it does not
have a show upon those days which operator's of other facilities on CITY lands
do have an event or exhibition, so that such other operators will have the
exclusive opportunity to make concession sale. to patrons of its events. It is
the intent of this provision that each operator of a facility have the exclusive
opportunity to make concession sales to the patrons of its events. This shall
not preclude concession sales from any public park facility, if any, to visitors
of such facility.
27.20. CITY shall not enter into contracts with third parties for
development of projects upon the former Munisport Landfill Site, which would
directly disrupt and interfere with OPERATOR'S activities under this Agreement
and would be directly in conflict with the purposes of this Agreement. Any Claim
hereunder shall be subject to resolution by the City Manager, and if unresolved,
shall be subject to arbitration, with no right of withdrawal from arbitration.
SECTION 28. NONDISCRIMINATION
OPERATOR and its employees shall not discriminate because of race, age,
religion, color, ancestry, sex, physical handicap or national origin against any
person by refusing to furnish such person any accommodation, facility, service
or privilege offered to or enjoyed by the general public. Nor shall OPERATOR or
its employees publicize the accommodations, facilities, services or privileges
in any manner that would directly or inferentially
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reflect upon or question the unacceptability of the patronage of any person
because of race, age, religion, color, ancestry, sex, physical handicap or
national origin.
In the performance of this contract, OPERATOR will not discriminate
against any employee or applicant for employment because of race, age, color,
religion, ancestry, sex, physical handicap or national origin. OPERATOR will
take affirmative action to ensure that applicants are employed and that
employees are treated during employment, without regard to their race, color,
religion, age, ancestry, sex, physical handicap or national origin. Such action
shall include, but not be limited to the following: employment upgrading,
demotion or transfer, recruitment or recruitment advertising, layoff or
termination, rates of pay or other forms of compensation and selection for
training, including apprenticeship.
OPERATOR will permit access to his records of employment, employment
advertising, application form" and other pertinent data and records by the CITY.
SECTION 29. SOFT COSTS REIMBURSEMENT
OPERATOR shall be entitled, if applicable, to receive reasonable
reimbursement for such out-of-pocket soft costs as defined in Florida Statute
159.02(13) for soft costs incurred in the acquisition, development or
construction of the Project from the proceeds of any revenue bond issued and
CITY shall cooperate with OPERATOR in obtaining such reimbursement to the extent
of funds available.
SECTION 30. TITLE TO PROPERTY
Title to the ProJect shall remain in CITY. Title of all personal
property and fixtures placed in the ProJect by OPERATOR shall remain in
OPERATOR. Title to all fixtures placed in the ProJect by OPERATOR which replace
fixtures owned by CITY shall belong to CITY. Title to personal property and
fixtures placed in ProJect by OPERATOR'S suboperators or concessionaires shall,
subject to the provisions of this Agreement, be controlled by OPERATOR'S
contract with any such suboperator or concessionaire, as the case may be, but
shall not be deemed property of CITY. CITY shall have a lien on all personal
property and fixtures owned by OPERATOR, which lien shall be subordinate to
OPERATORS lender. This lien shall secure OPERATORS compliance with the
provisions of this agreement.
IN WITNESS WHEREOF, this Agreement in executed as of the date hereto:
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PERFORMING ARTS MANAGEMENT OF
Attest: NORTH MIAMI, INC.
______________________________ By:__________________________
Secretary President
CITY OF NORTH MIAMI
By:__________________________
City Manager
APPROVED BY:
Attest:
______________________________ _____________________________
CITY ATTORNEY City Clerk
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LEASE
Lease between MARBRAD, INC., a Florida corporation having an office c/o
Streamline Management Corp., 1125 Washington Avenue, Miami Beach, Florida
("Landlord") and the tenant described in Line 1 of the Terms Sheet attached
hereto as Exhibit A ("Tenant").
1. GRANT
Upon the terms and conditions set forth in this Lease, Landlord leases
to Tenant and Tenant leases from Landlord, the "Premises" described in
Line 2 of the Terms Sheet, which Premises are located in the
Intercontinental Bank Office Building, 930 Washington Avenue, Miami
Beach, Florida (the "Real Property"). The approximate boundaries of the
Premises are shown hatched in the schematic sketch attached to this
Lease as Exhibit "B".
2. TERM OF LEASE
The Term of this Lease shall be as set forth in Line 3 of the Terms
Sheet.
3. BASE RENT
As Base Rent, Tenant shall pay Landlord, at Landlord's address set
forth above, or at such other address specified in writing by Landlord,
the amount set forth in Line 4 of the Terms Sheet. Base Rent is payable
in advance, without setoff, further notice, or demand on the first day
of each calendar month. In addition to each monthly installment of Base
Rent, Tenant shall pay all applicable rental or sales taxes. If the
Commencement Date or the Expiration Date of the Term are on a day other
than the first day of a calendar month, the Base Rent for said
fractional month shall be prorated on a per diem basis. Payment of the
first month's installment of Base Rent is hereby acknowledged.
4. SECURITY DEPOSIT
As security for the full and prompt performance of all Tenant's
obligations under the Lease, concurrent with the execution of this
Lease, Tenant shall deposit with Landlord a Security Deposit in the
amount set forth in Line 5 of the Terms Sheet. If Tenant fails to make
any payments under this Lease when due, or fails to comply with each of
the terms, covenants, and conditions of this Lease, Landlord may, but
is not obligated to, apply the Security Deposit to the payments due or
to the payment of Landlord's costs and expenses (including reasonable
attorneys fees) in connection with performing Tenant Is obligations on
Tenant's behalf, regaining possession of the Premises, or reletting the
Premises, without
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thereby curing Tenant's default or releasing Tenant from any of
Tenant's obligations under this Lease. Landlord may commingle the
Security Deposit with Landlord's other funds, and Landlord shall not be
required to pay Tenant any interest on the Security Deposit. If Tenant
fully and promptly performs all Tenant's obligations under this Lease,
within 30 days following the Expiration Date, Landlord shall return the
Security Deposit to Tenant at Tenant's address set forth in this Lease
or at such other address specified by Tenant in a notice to Landlord
received by Landlord before the Expiration Date.
5. PARKING
Tenant is hereby granted the exclusive use of the parking spaces set
forth in Line 6 of the Terms Sheet. Landlord reserves the right to
change the location of Tenant's designated parking spaces from time to
time so long as the number of spaces is not affected thereby. Tenant
acknowledges' that all other spaces in the parking facility serving the
Building are allocated for the exclusive use of other tenants of the
Building and that neither Tenant, nor Tenant's guests or invitees shall
use any spaces other then the ones set forth in Line 6 of the Terms
Sheet. Tenant further acknowledges that the parking facility is
patrolled by a towing company and cars parked in a space allocated to
another tenant may be towed.
6. USE
Tenant may use the Premises for general and administrative offices and
for no other purpose. Tenant shall not permit the Premises to be used
for any unlawful or immoral purpose. In the conduct of Tenant's
business, Tenant shall, at Tenant's expense, comply with all applicable
laws, ordinances, rules and regulations, the reasonable requirements of
all insurance underwriters providing insurance to ' the Premises and
the Building, and the Rules and Regulations attached to this Lease as
Exhibit "C", as they may be amended by Landlord from time to time.
Tenant shall not use the Premises in a manner that increases the fire
insurance premiums for the Building. Tenant shall not install safes,
heavy file cabinets, or other heavy equipment in the Premises without
Landlord's prior approval of the installation, location, and method of
installation. In the conduct of Tenant's business operations, Tenant
shall not make any noise or odor objectionable to other tenants, the
public, or Landlord, and Tenant shall not create or maintain a nuisance
in the Premises. Tenant shall not use, create, store or permit any
toxic or hazardous material anywhere on the Real Property. Tenant shall
keep the Premises free of debris, dangerous, noxious, or offensive
items, fire hazards, and undue vibration, heat or noise.
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In Tenant's use of the Premises, Tenant shall not obstruct or permit
the obstruction of the sidewalks, driveways, entrances, passages,
lobby, corridors, stairs, or elevators of the Building. Tenant may not
move Tenant's furniture, equipment, supplies, or other persona property
or permit deliveries of such items through the Common Areas except at
such hours and upon such conditions as Landlord may reasonably require
from time to time. Tenant shall reimburse Landlord with 10 days after
Landlord's demand for any damage or injury to persons or property
resulting from Tenant's movement of such items or delivery to tenant of
such items through the Common Areas. Landlord may, as a condition for
granting permission to Tenant to move furniture and equipment through
the common areas of the Building, require a damage deposit from Tenant.
7. UTILITIES AND SERVICES
Landlord shall furnish the following utilities and services to the
Building and the Premises as reasonably required in connection with
Tenant's use of the Premises, Monday through Friday, during business
hours (8:00 a.m. to 6:00 p.m.) except on federal bank holidays:
(a) janitorial services (during non-business hours Monday through
Friday), except that shampooing and replacement of carpet as
required by Tenant shall be at Tenant's expenses;
(b) Periodic trash removal;
(c) Elevator service in common with other tenants;
(d) Air conditioning is provided on Monday through Friday from 8:00
a.m. to 6:00 p.m. and on Saturday from 8:00 a.m. to 1:00 p.m.,
except on Memorial Day, Fourth of July, Labor Day, Thanksgiving
Day, Christmas Day and New Year's Day.
(e) Electricity for standard lights, air-conditioning, and standard
office equipment. Electricity for extraordinary office
equipment and additional air-conditioning required in
connection with computers or other extraordinary office
equipment shall be separately metered and shall be available to
Tenant only with Landlord's prior written approval;
(f) Water for drinking, ordinary lavatory purposes, and the fire
sprinkler system (if applicable);
(g) Common use restrooms on each floor of the Building, including
maintenance, periodic cleaning, and supplies.
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Landlord is not responsible to Tenant for any interruption in utility
and other services unless caused by Landlord's negligence or willful
misconduct.
Should Tenant desire utilities or services to be provided by Landlord
at times other than those times set forth in this Lease, Landlord may,
but is not obligated to, furnish such additional utilities or services
as are requested by Tenant. In a written notice to Landlord at least 48
hours before Tenant requires the utilities or services. Tenant shall
pay Landlord, within 10 days after Landlord's demand, for all
Landlord's costs in providing such additional utilities or services.
8. TENANT'S APPURTENANT RIGHTS
During the Term, Landlord grants Tenant a non-exclusive right to use
the Common Assets, including the right of ingress and egress to the
Premises. This right may be exercised by Tenant, its agents, employees,
independent contractors, invitees, and customers, subject to similar
rights granted from time to time to other parties, and subject to the
Rules and Regulations attached to this Lease as Exhibit "C", as they
may be amended by Landlord from time to time.
9. LANDLORD'S RIGHT OF ACCESS
Landlord, and other authorized by Landlord, may enter the Premises at
reasonable times and upon reasonable prior verbal or written notice to
Tenant for those purposes reasonably related to Landlord's ownership
and operation of the Building, including inspection, maintenance and
repair, emergencies, and showing the Premises to prospective tenants or
purchasers.
10. MAINTENANCE, REPAIR AND REPLACEMENT
Tenant shall, at Tenant's sole expense, keep the interior of the
Premises in good condition and repair. Tenant shall promptly repair any
injury or damage to the Building, the parking facility serving the
Building, or the Real Property caused by Tenant's unauthorized use of
the Premises or by the fault or neglect of Tenant, Tenant's employees,
customers, invitees, and others permitted on the Premises by Tenant's
employees, customer, invitees, and others permitted on the Premises by
Tenant. If Tenant does not promptly and adequately perform its
obligations under this paragraph after written notice from Landlord
specifying the nature of Tenant's failure, in addition to any other
remedy Landlord may have under this Lease or pursuant to law, Landlord
may perform Tenant's obligations on Tenant's behalf and Tenant shall,
upon demand, reimburse Landlord for the reasonable costs and expenses
so incurred. Landlord shall maintain and repair all
4
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other elements of the Building, the parking facility serving the
Building, and the Real Property, including plumbing, lighting, HVAC
service, plate glass,k and structural components.
All repairs, maintenance, and replacements by Landlord and Tenant shall
be performed in a good and workmanlike manner, in compliance with all
applicable governmental laws, regulations, ordinances, rules, and
codes, and shall incorporate materials and techniques equal to or
exceeding the quality of the items repaired, maintained, replaced.
11. CONDITION OF PREMISES
Tenant acknowledges that Tenant has inspected the Premises and that the
Premises are suitable for Tenant's use. Tenant accepts the Premises in
"as-is" condition. Tenant acknowledges that no work needs to be
performed by Landlord to prepare the Premises for Tenant's occupancy.
Landlord makes no warranties or representations as to the condition of
the Premises or their suitability for Tenant's use.
12. NO LEASEHOLD IMPROVEMENTS
Tenant shall not make any alterations, additions, or improvements
within, or to the Premises, without first obtaining Landlord's approval
in writing, which approval may be denied for any reason whatsoever.
13. TENANT'S INSURANCE
From the date Landlord grants Tenant access to the Premises and during
the Term, Tenant shall at Tenant's sole expense, maintain comprehensive
general liability insurance with a combined single limit coverage of
not less than $500,000.00, with a reputable insurance underwriter
reasonably acceptable to Landlord. The comprehensive policy shall name
Landlord and Landlord's agent as an additional insured and provide that
Landlord's right to insurance proceeds shall not be subject to
invalidation by reason of Tenant's acts or omissions. All insurance
policies shall include a provision that the coverage may not be reduced
or cancelled without 30 days prior written notice to Landlord.
14. WAIVER OF SUBROGATION
To the extent that any loss suffered by Tenant is covered by insurance,
Tenant waives all claims it may have against Landlord, and, to the
extent possible without voiding the insurance coverage, each insurance
policy obtained by Tenant concerning the Premises and the Building
shall include a waiver of subrogation endorsement.
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15. TENANT'S INDEMNIFICATION
Tenant shall indemnify, defend Landlord from, and hold Landlord
harmless against any claim, suit, liability, loss, damage, cost, and
expense in connection with any construction work, additions,
alterations, or improvements by Tenant in or about the Premises, or in
connection with loss of life, personal injury, or damage to property
arising from Tenant's use or occupancy of the Premises, but not to the
extent caused by the willful misconduct of Landlord, its agents or
employees. This indemnity applies to Tenant's use and occupancy of the
Premises prior to the Commencement Date and throughout the Term and
shall survive the termination of this Lease.
16. LANDLORD'S EXCULPATION AND TENANT'S ATTORNMENT
If Landlord defaults under this Lease, Tenant agrees to look solely to
the Landlord's interest in the Building and the Real Property, and
neither Landlord nor any of its partners, officers, directors or
shareholders shall have any personal liability to Tenant for Landlord's
defaults under this Lease or for the breach of any representation,
warranty, covenant or agreement. Any judgments entered against Landlord
based upon Landlord's default under this Lease shall be satisfied
solely from the proceeds of the sale of Landlord's interest in the
Building and the Real Property. If Landlord sells the Building,
Landlord shall be released from any future obligation or liability to
Tenant under this Lease.
17. DAMAGE BY FIRE AND OTHER CASUALTY
Tenant shall give Landlord prompt notice of any damage to the Premises
by fire or casualty. If the Building is partially or totally destroyed
Landlord may, at its option, terminate this Lease as of the date of the
casualty, and all periodic payments required of Tenant under this Lease
shall be equitably adjusted.
18. CONDEMNATION
If the Building and the Real Property are taken by the power of eminent
domain (or conveyed to the condemning authority under threat of
condemnation), this Lease shall terminate on the date the condemning
authority takes possession, and all periodic payments made by Tenant
under this Lease shall be equitably adjusted.
If a portion of the Building or Real Property is taken by the power of
eminent domain (or conveyed to the condemning authority under threat of
condemnation), at Landlord's option exercised on or before the date the
condemning authority takes
6
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possession, this Lease shall terminate effective as of the date the
condemning authority takes possession. If Landlord does not exercise
its option to terminate this Lease, to the extent possible following
the taking, Landlord shall repair and restore those portions of the
Premises and the Building originally provided by Landlord, and Tenant
shall repair and restore all other portions of the Premises.
During the period of Landlord's repair and restoration of the Premises,
all Base Rent and Adjusted Rent shall abate in an amount bearing the
same ratio to the Base Rent and Adjusted Rent otherwise due for such
period as the untenantable portion of the Premises from time to time
bears to the entire Premises. All periodic payments required of Tenant
under this Lease shall be equitably adjusted as of the date the
condemning authority takes possession to reflect any permanent
reduction in the usable portion of the Premises.
Tenant waives Tenant's right to all proceeds of condemnation (or of
conveyance to the condemning authority under threat of condemnation)
representing the value of Tenant's leasehold interest or of the
leasehold improvements in the Premises. Nothing in this paragraph,
however, shall prevent Tenant from pursuing a separate claim for
business damages or moving expenses against the condemning authority,
so long as the award or proceeds paid to Tenant does not reduce the
award or proceeds otherwise payable to Landlord.
19. SURRENDER
On the Expiration Date (or sooner termination of the Term) Tenant shall
remove all Tenant's personal property and trade fixtures from the
Premises, and Tenant shall surrender possession of the Premises to
Landlord in as good condition, as existed when Tenant took possession,
reasonable wear and tear and insured casualty damages excepted. All
personal property or trade fixtures not removed by Tenant shall, upon
the Expiration Date (or sooner termination of the Term) become
Landlord's property, and Landlord may, at its option, either retain the
personal property and trade fixtures or dispose of all or any portion
of them at Tenant's expense. Tenant shall reimburse Landlord upon
demand for all Landlord's expenses incurred in connection with
disposing of Tenant's personal property and trade fixtures. This
obligation shall survive the expiration or termination of this Lease.
If this Lease terminates as a result of an insured casualty, Tenant is
not obliged to repair and restore the Premises, but Landlord is
entitled to a portion of the proceeds from Tenant's insurance
sufficient to reimburse Landlord for the reasonable cost of returning
the interior to the Premises to the condition existing immediately
before the casualty.
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20. DEFAULT
Time is of the essence with regard to the performance of the Tenant s
obligations under this Lease. Any of the following constitutes a
Default of this Lease by Tenant:
(a) Failure to pay any periodic payment of Base Rent or any other
payment required of Tenant under this Lease within 5 days after
any such payment is due.
Tenant shall pay Landlord interest at the rate of 18% simple
interest per year on all periodic payments due under this Lease
that are not made on the date when due, from the date when due
until paid in full. All partial payments of past due amounts
shall be applied first to interest accrued, then to past due
installments of Base Rent.
(b) Failure to cure any other default of Tenant s obligations under
this Lease for a period of 15 days after notice specifying the
nature of the default.
(c) Abandonment of the Premises.
(d) Tenant files a voluntary petition in bankruptcy or is
adjudicated insolvent or a bankrupt, or makes an assignment for
the benefit of creditors, or files a petition for relief under
any applicable bankruptcy law, or consents to the appointment
of a trustee or receiver of all or any substantial part of its
property.
(e) An involuntary petition under any applicable bankruptcy law is
filed against Tenant and is not vacated within 60 days.
21. LANDLORD'S REMEDIES
Upon Tenant's default and the expiration or any applicable grace
period, Landlord may, at Landlord's option take any one or more of the
following actions without further notice or demand;
(a) Declare all Base Rent or Adjusted Rent for the entire remaining
portion of the Term immediately due and payable.
(b) Bring an action against Tenant to collect all Base Rent or
other sums due and owing the Landlord, or to enforce any other
term or provision of this Lease.
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(c) Terminate this Lease by three days' written notice to Tenant.
In the event of termination, Tenant agrees to immediately
surrender possession of the Premises. If Landlord terminates
this Lease, Landlord may recover from Tenant all damages
Landlord incurs by reason of Tenant's default, including
damages equal to the present value of the difference between
the Base Rent and Adjusted Rent due for the remainder of the
term and the market value rent rate for the remainder of the
term, and all Landlord's costs and expenses (including
reasonable attorneys' fees).
(d) Landlord may pay or perform, or cause to be paid or performed,
any obligation of Tenant under this Lease, for Tenant's
account, and Tenant shall promptly reimburse Landlord, upon
demand, for all Landlord's costs and expenses (including
reasonable attorneys' fees) so incurred.
(e) Relet the Premises for Tenant's account without terminating
this Lease. All sums received by Landlord's from reletting
shall be applied first to Landlord's reasonable costs and
expenses incurred in relation (including, without limitation,
reasonable attorneys' fees, advertising costs, brokerage
commissions, and alterations, improvements, and repairs to the
Premises), then to the payment of all sums due under this
Lease. Upon Landlord's demand, Tenant shall pay any deficiency
to Landlord as it arises.
Landlord's remedies in this paragraph are cumulative and in addition to
any other remedies available at law or in equity.
22. ATTORNEYS' FEES
In any legal action (including appellate proceedings) filed with
respect to this Lease, the prevailing party shall receive reimbursement
from the other party of its costs and expenses (including reasonable
attorneys' fees awarded by a court of competent jurisdiction).
23. ASSIGNMENT AND SUBLETTING
Tenant shall not assign Lease or encumber or sublet the Premises
without Landlord's prior written consent.
24. SUBORDINATION
Tenant's right, title, and interest in the Premises shall be subject
and subordinate to any present or future lease of the entire Building
or to the lien of any mortgage now or hereafter encumbering the
Premises, the Building, or the Real
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Property. Although no further act by Tenant is necessary to effectuate
Tenant's subordination, Tenant shall, upon Landlord's request, execute,
acknowledge, and deliver to Landlord all documents Landlord may
reasonably require confirming Tenant's subordination of its interest in
the Premises to the interest of any holder of a mortgage encumbering
the Premises, the Building, or the Real Property.
25. TENANT ESTOPPEL CERTIFICATE
Tenant shall, upon Landlord's request, execute, acknowledge, and
deliver to Landlord, a written statement certifying that this Lease is
in full force and effect, that it is unmodified (or specifying the
modifications), specifying the date through which all periodic payments
required under this Lease have been paid, and specifying any defaults
of this Lease to the Tenant.
26. HOLD OVER
If Tenant holds over after the expiration of this Lease, Landlord shall
be entitled to collect rent at a rate equal to twice the Base Rent or
Adjusted Rent in effect on the Expiration Date.
27. QUIET ENJOYMENT
Landlord covenants that, if Tenant pays all sums required under this
Lease and performs all the terms, covenants, and conditions required of
Tenant under this Lease, Tenant may peaceably and quietly have, hold,
and enjoy the Premises during the Term, subject to:
(a) The claims or all persons arising other than by, through, or
under Landlord,
(b) the rights of all existing and future ground leases or lessees
of the entire Building, and
(c) all existing and future lenders holding mortgages encumbering
the Premises, the Building, or the Real Property.
28. NOTICES
All notices given in connection with this Lease shall be in writing,
and shall be considered delivered when mailed by United States
certified mail, return receipt requested, postage prepaid, if to
Landlord, at the address set forth in the preamble of this Lease and if
to Tenant, at the Premises.
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Either Landlord or Tenant may change the address for notices by giving
proper notice of the new address to the other party.
29. BENEFITS AND BURDENS
The provisions of this Lease bind, and are for the benefit of the
Landlord, the Tenant, and their respective successors and assigns.
30. BROKER S FEES
Tenant warrants to Landlord that no broker other than the one set forth
on Line 7 of the Terms Sheet was a procuring cause of this Lease.
Tenant shall indemnify, defend, and hold Landlord harmless from all
claims, losses, suits, damages, costs, and expenses (including
attorneys fees) that Landlord may suffer in connection with an
assertion by a broker or other finding agent (other than the broker
specified on Line 7 of the Terms Sheet) that he or she assisted or
otherwise dealt with Tenant with respect to the negotiation or
execution of this Lease.
31. MECHANICS LIENS
Tenant is not required or obliged under this Lease to make alterations
or improvements to the Premises, and nothing in this Lease shall be
construed as a consent by Landlord to subject Landlord's reversionary
interest in the Premises to liability under the Florida Mechanics' Lien
Law. If, as a result of the installation of any improvements by Tenant
on the Premises, or Tenant's maintenance and repair of the Premises, a
claim of lien is filed against the Premises, the Building or the Real
Property, within ten (10) days after it is filed, Tenant shall either
satisfy the claim of lien or transfer it to a bond as permitted by
Chapter 713 of the Florida Statutes. If Tenant fails to do so within
the ten (10) day period, Landlord may transfer the lien to a bond as
permitted by Chapter 713 of the Florida Statutes, and Tenant shall
reimburse Landlord for all Landlord's costs and expenses (including
reasonable attorneys fees) incurred in connection therewith.
32. ALL PAYMENTS CONSTITUTE RENT
All payments required of Tenant under this Lease constitute "rent" and
are due without setoff or deduction in legal United States tender, at
the times and at the addresses specified in this Lease, or so otherwise
specified from time to time by Landlord, together with all sales taxes
or similar taxes imposed by the State of Florida upon or with respect
to rent.
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33. ENTIRE AGREEMENT
This Lease and the attached exhibits, addendums, and riders (if any)
constitute the entire agreement between the parties. No subsequent
alteration, amendment, or addition to this Lease will bind the Landlord
or the Tenant unless it is in writing and signed by the party to be
bound.
34. COUNTERPARTS
This Lease may be executed in two or more identical counterparts, each
of which shall be treated as an original.
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"RADON GAS: Radon is a naturally occurring radioactive gas that when it has
accumulated in a building in sufficient quantities may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit."
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EXHIBIT "C"
RULES AND REGULATIONS
1. Lessee will refer all contractors, contractors' representatives and
installation technicians rendering any service for Lessee to Lessor for
Lessors' supervision and approval before performance of any such
contractual services. This shall apply to all work performed in the
building including, but not limited to, installation of telephones,
telegraph equipment, electrical devices and attachments, and
installations of any and every nature affecting floors, walls,
woodwork, trim, windows, ceilings, equipment or any other physical
portion of the building. None of this work will be done by Lessee
without Lessor's written approval first had and obtained.
2. The work of the janitor or cleaning personnel shall not be hindered by
Lessee after 5:30 p.m., and such work may be done at any time when the
offices are vacant. The windows, doors, and fixtures may be cleaned at
any time. Lessee shall provide adequate waste and rubbish receptacles,
cabinets, book cases, map cases, etc. necessary to prevent unreasonable
hardship to Lessor in discharging its obligation regarding cleaning
service.
3. Movement in or out or flee building or furniture or office equipment,
or dispatch or receipt by Lessee of any merchandise which requires the
use of elevators or stairways, or movement through the building
entrances or lobby shall be restricted to the hours designated by
Lessor from time to time. All such movement shall be as directed by
Lessor and in a manner to be agreed upon between Lessee and Lessor by
prearrangement before performance. Such prearrangement initiated by
Lessee shall include termination by Lessor, and subject to its decision
and control of the time, method, and routing of movement, limitations
imposed by safety or other concerns which may prohibit any article,
equipment or any other item from being brought into the building.
Lessee expressly assumes all risk of damage to any and all articles so
moved, as well as injury to any person or persons or to the public
engaged or not engaged in such movement, including equipment, property,
and personnel of Lessor if damaged or injured as a result of any acts
in connection with carrying out this service for Lessee from the time
of entering property to completion of the work; and Lessor shall not be
liable for the act or acts of any person or persons so engaged in, or
any damage or loss to any property of persons resulting directly or
indirectly from any act in connection with such service performed by or
for Lessee.
14
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4. No sign or signs will be allowed in any form on the exterior of
building or on any window or windows inside or outside of the building
and no sign or signs, except in uniform location and uniform style
fixed by Lessor, will be permitted in the public corridors or on
corridor doors or entrance to Lessee's space. All signs will be
contracted for by Lessor or Lessee at the rate fixed by Lessor from
time to time, and Lessee will be billed and pay for such service
accordingly. Written consent from Lessor is an absolute prerequisite
for any such sign or signs any Lessee may be so permitted to use.
5. Nothing shall be placed on the outside of the building or on the
windows, window sills or projections.
6. Lessee shall not place, install or operate on the demised premises or
in any part of the building, any engine, stove, or machinery, or
conduct mechanical operations or cook thereon or therein, or place, use
in, or about the demised premises any explosives, gasoline, kerosene,
oil, acids, caustics, or any other inflammable, explosive or hazardous
material without the written consent of Lessor first had and obtained.
7. Lessor will not be responsible for any lost or stolen personal
property, equipment, money or jewelry from the leased premises, the
building or the parking area regardless of whether such loss occurs
when the area is locked against entry or not.
8. No birds, animals bicycles or vehicle shall be brought into or kept in
or about the building.
9. Lessor may permit entrance to Lessee's offices by use of pass keys
controlled by Lessor or employees, contractors, or service personnel,
supervised or employed by Lessor.
10. None of the entries, passages, doors, elevators, elevator doors,
hallways, or stairways shall be blocked or obstructed, or any rubbish,
litter, trash, or material of any nature placed, emptied or thrown into
these areas, nor shall such areas be used at any time for access or
egress by Lessee, Lessee's agents, employees or invitees.
11. Lessor shall have the right to determine and prescribe the weight and
proper position of any unusually heavy equipment including safes, large
files, etc., that are to be placed in the building, and only those
which in the opinion of Lessor will not do damage to the floors,
structure or elevators may be moved into said building. Any damage
occasioned in connection with the moving or installing of such
aforementioned articles in the buildings or the existence of same in
the building shall be paid for by Lessee.
15
<PAGE>
12. No additional locks shall be placed on any door or changes be made to
existing locks in Building without proper written consent of Lessor.
Lessor will furnish two keys to each lock on doors in the Leased
Premises and Lessor, upon the request of Lessee, shall provide
additional duplicate keys at Lessee's expense. Lessor may at all times
keep a pass key to the Leased Premises. All keys shall be returned to
Lessor promptly upon termination of this Lease.
13. Lessee, its officers, agents, servants and employees shall, before
leaving Leased Premises unattended, close and lock all doors and shut
off all utilities; damage resulting from failure lo do so shall be paid
by Lessee.
14. Lessee, its employees, agents or invitees shall not use Leased Premises
for lodging, sleeping or cooking of food without the prior written
consent of Lessor.
15. The plumbing/ballroom facilities shall not be used for any other
purpose than that for which they are constructed, and no foreign
substance of any kind shall be thrown therein, and the expense of any
breakage, stoppage, or damage resulting from a violation of this
provision shall be borne by Lessee, who shall, or whose officers,
employees, agents, servants, patrons, customers, licensees, visitors or
invitees shall have caused it.
16. Canvassing, soliciting and peddling in the building or parking
facilities is prohibited and each Lessee shall cooperate to prevent the
same. In this respect, Lessee shall promptly report such activities to
the Building Manager's office.
THE ABOVE RULES, HEREBY ACCEPTED BY LESSEE, ARE PRESCRIBED BY LESSOR TO ENABLE
LESSOR TO MAINTAIN HIGH STANDARDS OF ENVIRONMENT, COMFORT AND CONVENIENCE FOR
ITS LESSEES. IT WILL BE APPRECIATED IF ANY UNDESIRABLE CONDITIONS OR LACK OF
COURTESY OR ATTENTION BY ITS EMPLOYEES OR CONTRACTORS IS REPORTED DIRECTLY TO
LESSOR.
16
<PAGE>
EXHIBIT A - TERMS SHEET
This Terms Sheet is attached to and is a part of that certain lease between
MARBRAD, INC. and the tenant described below.
1. TENANT: Consolidated Entertainment, Inc.
930 Washington Avenue
Miami Beach, Florida 33139
2. LEASED PREMISES: The entire fifth (5th) floor.
3. TERM: Five (5) years beginning July 1, 1996 (the
"Commencement Date") and ending June 30, 2001
(tine Expiration Date").
4. BASE RENT: 07/01/96 - 06/30/97 $3,250/mo plus sales tax
07/01/97 - 06/30/98 $3,400/mo plus sales tax
07/01/98 - 06/30/99 $3,600/mo plus sales tax
07/01/99 - 06/30/00 $3,800/mo plus sales tax
07/01/00 - 06/30/01 $4,000/mo plus sales tax
5. SECURITY DEPOSIT: None
6. ASSIGNED PARKING: Spaces 1, 2, 3 and 4 in the main parking lot.
Spaces 12-15 in annex parking lot at 910
Pennsylvania Ave.
7. BROKER: None
8. Wherever the phrase "Base Rent" is used in the Lease, the phrase "Gross
Rent" shall be deemed substituted therefor.
9. Modifying Section 5 of the Lease:
During the term of this Lease, no charge will be passed through to
Tenant for parking.
10. Modifying Section 7 of the Lease:
Section 7(b) is hereby deemed deleted. The words "including trash
removal" are added to Section 7(a) after the words "Janitorial
services".
The hours during which air conditioning shall be provided, at no
additional cost to Tenant, are changed as follows: Monday through Friday
8:00 AM to 8:00 PM and on Saturday none.
11. Modifying Section 12 of the Lease:
The words "may be denied for any reason whatsoever" shall be deemed
deleted and the words "shall not be unreasonably withheld" shall be
substituted therefor.
12. Modifying Section 17 of the Lease:
If Tenant's means of ingress or egress to the Premises is eliminated by
fire or casualty or if more than twenty (20%) percent of the Premises is
damaged by fire or casualty, then Tenant shall have the option to cancel
this lease by notice to Landlord given within thirty (30) days of the
occurrence of the casualty, such cancellation effective upon the giving
of said notice.
17
<PAGE>
13. Modifying Section 18 of the Lease:
The following words in the last sentence of the second paragraph shall
be deemed deleted "and Tenant shall repair and restore all other
portions of the Premises".
14. Modifying Section 20 of the Lease:
(a) The five (5) day period set forth in clause (a) shall be
increased to ten (10) days.
(b) The late charge shall only be imposed if the rent is not paid
prior to the expiration of the ten (10) day grace period.
(c) The fifteen (15) day period set forth in clause (b) shall be
increased to thirty (30) days.
15. Modifying Section 23 of the Lease:
Landlord shall not unreasonably withhold its consent to an assignment of
the Lease or a subletting of the Premises.
16. Modifying Section 26 of the Lease:
The holdover rent shall be reduced from twice the Gross Rent to one and
one-half times the Gross Rent.
17. Modifying Rule and Regulation Number 12:
Tenant is hereby granted permission by Landlord to install its own
burglar alarm system.
IN WITNESS WHEREOF, Landlord and Tenant have _______ to be executed as
of July 1, 1996.
LANDLORD:
MARBRAD, INC.
By:_____________________________
Brad Krassner, President
TENANT:
CONSOLIDATED ENTERTAINMENT, INC.
By:_____________________________
Brad Krassner, President
18
LEE & KAREN MARSHALL
615 Len Court
Aurora, OH 44202
This Lease Agreement, made this Fourth day of November, 1994, by and
between Karen and Lee Marshall, hereinafter referred to as "Lessor" and
Magic Promotions and Theatricals, a Florida Corporation, hereinafter
referred to as "Lessee,"
WITNESSETH:
1. DESCRIPTION OF PREMISES. The premises subject to this Lease consist
of the property commonly known as 199 East Garfield Road, together with the
building erected thereon, located at Aurora, Ohio and being situated in Summit
County.
2. PURPOSE. Said premises are to be used for the purpose of carrying on
the business of an office for promoting theatrical touring shows, concerts and
entertainment events.
3. TERM. The period of Thirty Eight (38) months beginning on the 1st
day of November, 1994 and terminating on the 31st day of December, 1997.
4. RENT. Lessee shall pay Lessor as rent for said premises a monthly
installment of Three Thousand One Hundred and Twenty Six Dollars and Twenty Nine
Cents ($3,126.29), due no later than the last day of each month. The payment
shall be made directly to National City Bank as the monthly payment in full on a
fixed rate loan payment.
5. UTILITIES. Lessee shall be responsible for and shall make direct
payment for water, sewer, gas, and electric current together with any license
fees, inspections fees and other charges in connection with the operation of the
business which may be assessed or charged against said Lessee during said term.
6. REAL ESTATE TAXES. Lessee shall be responsible for all real estate
taxes on the premises.
7. PARKING AREA AND LANDSCAPING MAINTENANCE. Lessee agrees to provide,
at its expense the maintenance of the parking, sidewalk and landscaped areas
including grass mowing, snow and ice removal and other normal and necessary
repairs. Lessee shall store all trash and rubbish within the premises and
arrange for a regular pickup of such trash and rubbish at Lessee's expense if
required.
8. REPAIRS AND MAINTENANCE. The Lessee shall make, at its own expense,
all necessary repairs and replacements to the leased property.
Page 1 of 2
<PAGE>
IN WITNESS WHEREOF, the Lessor and Lessee have agreed to the above terms and
acknowledge by the signatures hereunder.
LESSOR:
_______________________________________
Lee Marshall for Karen and Lee Marshall
LESSEE:
_______________________________________
Joe Marsh for Magic Promotions and Theatricals
Page 2 of 2
<PAGE>
c/o Joe Marsh
805 Surfside Drive
Akron, OH 44319
This Lease Agreement, made this Twenty Second day of December, 1991, by and
between Lee Marshall, Joe Marsh and Glenn Bechdel, hereinafter referred to as
"Lessor" and Magic Promotions, Inc., an Ohio Corporation, hereinafter referred
to as "Lessee,"
WITNESSETH:
1. DESCRIPTION OF PREMISES. The premises subject to this Lease consist
of the property commonly known as 9263 Olde Eight Road, together with the
building erected hereon, located at Northfield Center, Ohio and being situated
in Summit County.
2. PURPOSE. Said premises are to be used for the purpose of carrying on
the business of an office for promoting theatrical touring shows, concerts and
entertainment events.
3. TERM. The period of Two (2) years beginning on the 1st day of
January, 1992 and terminating on this 31st day of December, 1993.
4. RENT. Lessee shall pay Lessor as rent for said premises a monthly
installment of approximately Six Hundred and Ten Dollars ($610.00), due no later
than the last day of each month. The payment shall be made directly to National
City bank as the monthly payment in full on a variable rate loan payment.
5. UTILITIES. Lessee shall be responsible for and shall make direct
payment for water, sewer, gas, and electric current together with any license
fees, inspections fees and other charges in connection with the operating of the
business which may be assessed or charged against said Lessee during said term.
6. REAL ESTATE TAXES. Lessee shall be responsible for all real estate
taxes on the premises.
7. PARKING AREA AND LANDSCAPING MAINTENANCE. Lessee agrees to provide,
at its expense the maintenance of the parking, sidewalk and landscaped areas
including grass mowing, snow and ice removal and other normal and necessary
repairs. Lessee shall store all trash and rubbish within the premises and
arrange for a regular pickup of such trash and rubbish at Lessee's expense if
required.
Page 1 of 2
<PAGE>
8. REPAIRS AND MAINTENANCE. The Lessee shall make, at its own expense,
all necessary repairs and replacements to the leased property.
IN WITNESS WHEREOF, the Lessor and Lessee have agreed to the above terms and
acknowledge by the signatures hereunder.
LESSOR:
______________________________________
Joe Marsh for Lee Marshall, Joe Marsh
and Glenn Bechdel
LESSEE:
______________________________________
Lee Marshall for Magic Promotions, Inc.
Page 2 of 2
EXHIBIT 23.2
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 Post-Effective Amendment
No. 1 to the Registration Statement (Form S-1 - Registration No. 333-13127)
of Magicworks Entertainment Incorporated for the registration of shares of its
common stock.
Ernst & Young LLP
Miami, Florida
March 31, 1996
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated April
11, 1996, with respect to the combined financial statements of Magicworks
Entertainment, included in Post-Effective Amendment No. 1 to the Registration
Statement (Form S-1 - Registration No. 333-13127) of Magicworks Entertainment
Incorporated for the registration of shares of its common stock.
Ernst & Young LLP
Miami, Florida
December 31, 1996
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of
reports, (and to all references to our Firm) included in or
made a part of this registration statement.
ARTHUR ANDERSEN LLP
Miami, Florida,
April 11, 1997
EXHIBIT 23.4
[LETTERHEAD]
NIEVAARD, KOFOED & TERAN, P.C.
NK Certified Public Accountants
&T Hans Nievaard, CPA
Alfred Kofoed, CPA
Bruce M. Teran, CPA
Magicworks Entertainment Incorporated
930 Washington Avenue, 5th Floor
Miami Beach, Florida 33139
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
reports, (and all references to our Firm) included in or made a part of this
registration statement.
/s/ NIEVAARD, KOFOED & TERAN, P.C.
- ----------------------------------
Nievaard, Kofoed & Teran, P.C.
Salt Lake City, Utah 84124
April 11, 1997
