SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant[ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
MAGICWORKS ENTERTAINMENT INCORPORATED
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
N/A
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- -------------------------------------------------------------------------------
(5) Total fee paid:
N/A
- -------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- -------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date Filed:
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<PAGE>
MAGICWORKS ENTERTAINMENT INCORPORATED
930 WASHINGTON AVENUE, MIAMI BEACH, FLORIDA 33139
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 19, 1997
-------------------------
To the Stockholders of Magicworks Entertainment Incorporated:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders
(the "Annual Meeting") of Magicworks Entertainment Incorporated, a Delaware
corporation (the "Company"), will be held at 10:00 a.m., local time, on
Thursday, June 19, 1997, at the Aurora Country Club, 50 Trails End, Aurora, Ohio
for the following purposes:
(1) To elect six members to the Company's Board of Directors to
hold office until the Company's 1998 Annual Meeting of
Stockholders or until their successors are duly elected and
qualified; and
(2) To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements
thereof.
The Board of Directors has fixed the close of business on June 2, 1997
as the record date for determining those stockholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournments or postponements thereof.
Whether or not you expect to be present, please sign, date and return
the enclosed proxy card in the enclosed pre-addressed envelope as promptly as
possible. No postage is required if mailed in the United States.
By Order of the Board of Directors
Brad Krassner
CO-CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Miami Beach, Florida
June 4, 1997
THIS IS AN IMPORTANT MEETING AND ALL STOCKHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. ALL STOCKHOLDERS ARE RESPECTFULLY URGED TO EXECUTE AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. STOCKHOLDERS WHO EXECUTE A
PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY AND VOTE
THEIR SHARES IN PERSON.
<PAGE>
1997 ANNUAL MEETING OF STOCKHOLDERS
OF
MAGICWORKS ENTERTAINMENT INCORPORATED
-----------------------------------
PROXY STATEMENT
-----------------------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Magicworks Entertainment Incorporated, a Delaware
corporation (the "Company"), of proxies from the holders of the Company's Common
Stock, par value $.001 per share (the "Common Stock"), for use at the 1997
Annual Meeting of Stockholders (the "Annual Meeting") of the Company to be held
at 10:00 a.m., local time, on Thursday, June 19, 1997 at the Aurora Country
Club, 50 Trails End, Aurora, Ohio, or at any adjournment(s) or postponements(s)
thereof, pursuant to the foregoing Notice of Annual Meeting of Stockholders.
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to stockholders is June 4, 1997. Stockholders should
review the information provided herein in conjunction with the Company's 1996
Annual Report to Stockholders, which accompanies this Proxy Statement. The
Company's principal executive offices are located at 930 Washington Avenue,
Miami Beach, Florida 33139, and its telephone number is (305) 532-1566.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any stockholder giving the proxy so desire. Stockholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Stockholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies. The Company may reimburse
such persons for their expenses in so doing.
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<PAGE>
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's stockholders will consider and
vote upon the following matters:
(1) To elect six members to the Company's Board of Directors to
hold office until the Company's 1998 Annual Meeting of
Stockholders or until their successors are duly elected and
qualified; and
(2) To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements
thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted FOR the election of the nominees for director named below. In the
event a stockholder specifies a different choice by means of the enclosed proxy,
his shares will be voted in accordance with the specification so made.
The Board of Directors does not know of any other matters that may be
brought before the Annual Meeting nor does it foresee or have reason to believe
that proxy holders will have to vote for substitute or alternate nominees. In
the event that any other matter should come before the Annual Meeting or any
nominee is not available for election, the persons named in the enclosed proxy
will have discretionary authority to vote all proxies not marked to the contrary
with respect to such matters in accordance with their best judgment.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on June 2, 1997 as
the record date (the "Record Date") for determining stockholders of the Company
entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
there were 24,394,300 shares of Common Stock issued and outstanding, all of
which are entitled to be voted at the Annual Meeting. Each share of Common Stock
is entitled to one vote on each matter submitted to stockholders for approval at
the Annual Meeting. Stockholders do not have the right to cumulate their votes
for directors.
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by a plurality of
the votes cast by the shares of Common Stock represented in person or by proxy
at the Annual Meeting. Any other matter that may be submitted to a vote of the
stockholders will be approved if the number of shares of Common Stock voted in
favor of the matter exceeds the number of shares voted in opposition to the
matter, unless such matter is one for which a greater vote is required by law or
by the Company's Certificate of Incorporation or Bylaws. If less than a majority
of outstanding shares entitled to vote are represented at the Annual Meeting, a
majority of the shares so represented may adjourn the Annual Meeting to another
date, time or place, and notice need not be given of the new date, time, or
place if the new date, time, or place is announced at the meeting before an
adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof. Abstentions will
be considered as shares present and entitled to vote at the Annual Meeting and
will be counted as votes cast at the Annual Meeting, but will not be counted as
votes cast for or against any given matter.
A broker or nominee holding shares registered in its name, or in the
name of its nominee, which are beneficially owned by another person and for
which it has not received instructions as to voting from the beneficial owner,
may have discretion to vote the beneficial owner's shares with respect to the
election of directors and other matters addressed at the Annual Meeting. Any
such shares which are not represented at the Annual Meeting either in person or
by proxy will not be considered to have cast votes on any matters addressed at
the Annual Meeting.
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<PAGE>
A list of stockholders entitled to vote at the Annual Meeting will be
available at the Company's offices, 930 Washington Avenue, Miami Beach, Florida
33139, for a period of ten days prior to the Annual Meeting and at the Annual
Meeting itself for examination by any stockholder.
SECURITY OWNERSHIP
The following table sets forth information, as of May 15, 1997, with
respect to the beneficial ownership of shares of Common Stock by (i) each person
known to the Company to own beneficially more than 5% of the outstanding shares
of Common Stock, (ii) the Company's Named Executive Officers (as defined
hereafter), (iii) each director and nominee for election as a director and (iv)
all directors and officers of the Company as a group. Each of the persons, or
group of persons, in the table below has sole voting power and sole dispositive
power as to of the shares shown as beneficially owned by them.
<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(3) *
Ronald J. Korn................................................ 2,000(3) *
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%
</TABLE>
* 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.
(3) Includes 2,000 shares issuable upon exercise of presently exercisable
options to purchase Common Stock at an exercise price of $4.00 per share.
Such options were granted pursuant to the Company's Directors Stock Option
Plan.
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<PAGE>
ELECTION OF DIRECTORS; NOMINEES
The Company's Certificate of Incorporation provides that the Board of
Directors shall consist of not less than two nor more than nine members with the
exact number to be fixed from time to time by the Board of Directors in the
manner set forth in the Company's By-Laws. The Board of Directors has fixed at
six the number of directors that will constitute the Board of Directors for the
ensuing year. Each of the six persons currently serving on the Board of
Directors is nominated for election as a director to serve until the next Annual
Meeting and until the director's successor is duly elected and qualified.
Although management anticipates that all of the nominees will be able to serve,
if any nominee is unable or unwilling to serve at the time of the Annual
Meeting, proxies solicited hereunder will be voted in favor of the remaining
nominees, if any, and for such other persons as may be designated by the Board
of Directors, unless directed by a proxy to do otherwise.
The following table sets forth certain information as to the persons
nominated for election as directors of the Company at the Annual Meeting.
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTOR
NAME AGE POSITION DIRECTOR SINCE
- ----------------------------------------- ---- ----------------------------------------------- --------------
<S> <C> <C>
Brad Krassner....................... 45 Co-Chairman of the Board and Chief Executive 1996
Officer
Joe Marsh........................... 43 Co-Chairman of the Board 1996
Lee Marshall........................ 39 President, Chief Operating Officer and Director 1996
H. Yale Gutnick..................... 54 Director 1996
Ronald J. Korn...................... 56 Director 1996
John W. Ballard..................... 49 Director and Chief Executive Officer of 1997
Magicspace Corporation
</TABLE>
BRAD KRASSNER co-founded Magicworks Entertainment Incorporated, a
Florida corporation and the predecessor by merger to the business of the Company
("MEI") in June 1996, and has been the Company's Co-Chairman of the Board and
Chief Executive Officer since the consummation of the merger of MEI into the
Company (the "Merger") in July 1996. 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. See "Certain Transactions."
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., a wholly-owned subsidiary of the Company ("MPI"), 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 has been
responsible for the production 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." See "Certain Transactions."
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<PAGE>
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 MPI, the Company's
theatrical production division. He has been 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 also has served as the secretary and treasurer of MPI since 1984,
and has been the president of Touring Artists Group, Inc., a wholly-owned
subsidiary of the Company ("TAG"), since 1992. See "Certain Transactions."
H. YALE GUTNICK served as a director of MEI from June 1996 until
consummation of the Merger and has held the same position with the Company since
the consummation of the Merger. Mr. Gutnick is the senior shareholder/member of
the law firm of Strassburger McKenna Gutnick & Potter, which has offices in
Pittsburgh, Pennsylvania and Greensburg, Pennsylvania. Mr. Gutnick graduated
with honors from Ohio Wesleyan University in 1964 and from the University of
Pittsburgh Law School in 1967. He began his legal career in the Honors Program
with the United States Department of Justice in Washington, D.C., where he was a
trial and appellate lawyer from 1967 through 1969, when he entered private
practice in Pittsburgh, Pennsylvania. In the 25 years he has been in private
practice, Mr. Gutnick has specialized in complex civil and criminal litigation
and entertainment and media law.
RONALD J. KORN, a certified public accountant and an attorney-at-law,
has been a director of the Company since September 1996. Since July 1991, Mr.
Korn has served as President of Ronald Korn Consulting, a business consulting
firm, and as Chairman of the Board of Carole Korn Interiors, Inc., an interior
design firm. 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.
JOHN W. BALLARD has been a director and the Chief Executive Officer of
Magicspace Corporation, a wholly-owned subsidiary of the Company ("Magicspace")
formerly known as Space Agency, Inc. since December 1996. Prior to the Company's
acquisition of Space Agency, Inc. ("Space Agency") in December 1996, 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.
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 reimburses 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 Company's 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.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1996, the Board of Directors
held two meetings. No director attended fewer than 75% of the meetings of the
Board of Directors or any committee thereof held during fiscal year 1996 during
the period of such director's service.
The Compensation Committee currently consists of Messrs. H. Yale
Gutnick and Ronald J. Korn. The Compensation Committee met one time in 1996. The
primary function of the Compensation Committee is to
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<PAGE>
review and approve the Company's compensation policies and practices, propose
compensation levels for directors and officers, and propose changes in the
Company's benefit plans.
The Stock Option Committee currently consists of Messrs. H. Yale
Gutnick and Ronald J. Korn. The Stock Option Committee met four times in 1996.
The primary function of the Stock Option Committee is to review and approve the
Company's stock option policies and practices, propose stock grant levels for
directors, officers and employees, and propose changes in the Company's stock
incentive plans.
The Company does not have a Nominating Committee. The Company's Board
of Directors performs the functions of a Nominating Committee.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's outstanding Common Stock, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock. Such persons are required by SEC
regulation to furnish the Company with copies of all such reports they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners have been met
except that Ronald J. Korn filed a late report upon his appointment as a
director of the Company.
EXECUTIVE OFFICERS
Brad Krassner, Lee Marshall, Joe Marsh and John W. Ballard, each of
whom is a director of the Company, are also executive officers of the Company
and/or subsidiaries of the Company. Reference is made to the description of the
business experience of such individuals set forth above under "Election of
Directors."
The other executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- ---------------------------------------
<S> <C>
Steven Chaby...................................... 30 Chief Financial Officer
Glenn Bechdel..................................... 52 Vice President - Magic Promotions, Inc.
Larry Turk........................................ 49 President and Chief Operating Officer -
Magic Promotions, Inc.
Michel Vega....................................... 29 President - Touring Artists Group, Inc.
</TABLE>
STEVEN CHABY served as Chief Financial Officer and Treasurer of MEI
from May 1996 until the consummation of the Merger 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 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.
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<PAGE>
GLENN BECHDEL has served as Vice President of MPI since 1983. Mr.
Bechdel's primary responsibility since co-founding MPI in 1983 has been to act
as operations officer of the transportation and merchandising division of such
corporation. Since joining MPI, 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 Secretary of the Company and the President and Chief
Operating Officer of Diamond Bullet Merchandising, Inc., a wholly-owned
subsidiary of the Company ("DBM"), has been an officer of DBM since 1988, acting
from 1988-1993 as the Vice President and Chief Operating Officer of DBM, and
since that date in the offices he now holds.
MICHEL VEGA has served as the President of TAG since March 1992. Mr.
Vega has also served as Vice President and Senior Vice President of TAG. Prior
to joining TAG, Mr. Vega was the tour director for NAMCO Booking, a theatrical
booking agency.
The Company's officers are elected annually and serve at the pleasure
of the Board of Directors. See "Employment Agreements." There are no family
relationships among any of the Company's executive officers and directors.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate compensation paid during
each of the years ended December 31, 1996 and 1995 to each of the six most
highly compensated executive officers of the Company during 1996. Such executive
officers are sometimes referred to herein as the "Named Executive Officers."
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------------------------------------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS ALL OTHER ANNUAL COMPENSATION (1)(2)
- ---------------------------------------------- ---- ------- ------- -------------------------------------
<S> <C> <C> <C>
Brad Krassner 1996 $ 82,461 -- $ 170,000
Chief Executive Officer and Co-Chairman of 1995 -- -- $ 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, Magicspace Corporation 1995 -- -- --
Stephen Boulay(3) 1996 $ 60,000 $90,000 $ 133,470
Vice President, Magicspace Corporation 1995 -- -- --
-----------
</TABLE>
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<PAGE>
(1) The aggregate amount of perquisites and other personal benefits provided to
each Named Executive Officer is less than 10% of the total annual salary
and bonus of such officer.
(2) Each of the Named Executive Officers in the past has received S Corporation
distributions based on their interests in certain of the Company's
predecessors in interest (the "Constituent Corporations") or, in the case
of Messrs. Ballard and Boulay, their interests in Space Agency, which was
acquired by the Company in December 1996. The aggregate of such
distributions received by Messrs. Krassner, Marsh, 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 $145,040, $1,419,772,
$473,256, $473,256, $1,472,861 and $133,470, respectively. In addition, Mr.
Krassner received management fees in 1995 and 1996 paid by DBM in the
amounts of $53,218 and $25,750, respectively. See "Certain Transactions."
(3) Messrs. Ballard and Boulay became executive officers of Magicspace 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, Magicspace entered into three year employment
agreements with John W. Ballard and Steven Boulay, which provide for annual base
salaries of $150,000 and $100,000, respectively. If either 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 Director's Stock Option Plan (the "Directors Plan," and together 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>
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative shareholder returns
from a $100 investment in the Company's Common Stock and reinvestment of
dividends from August 2, 1996 (the date the Common Stock was first registered
pursuant to the Securities Exchange Act of 1934, as amended) through December
31, 1996 with (i) companies with market capitalizations comparable to that of
the Company (which includes all companies listed on the American Stock Exchange,
the New York Stock Exchange and NASDAQ having market capitalizations between
$75,000,000 and $100,000,000 as of March 31, 1997) and (ii) companies listed on
the American Stock Exchange, the New York Stock Exchange and NASDAQ with SIC
Codes ranging from 7920 to 7929. The Company did not pay any dividends on its
Common Stock during this period.
<TABLE>
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG MAGICWORKS ENTERTAINMENT INCORPORATED, COMPANIES WITH
MARKET CAPITALIZATION BETWEEN $75,000,000 AND $100,000,000
AND A PEER GROUP INDEX COMPOSED OF COMPANIES WITH SIC CODES 7920-7929
[GRAPHIC OMITTED]
- ---------------------------------------------------------------------------------------------------------------------
LEGEND
<S> <C> <C> <C> <C> <C> <C> <C>
SYMBOL TOTAL RETURNS INDEX FOR: 08/02/96 8/30/96 9/30/96 10/31/96 11/29/96 12/31/96
- ------ ------------------------ -------- ------- ------- -------- -------- --------
/bullet/ NYSE/AMEX/NASDAQ STOCKS (SIC 100.000 99.117 102.348 99.463 103.245 99.620
7920-7929 US COMPANIES)
/box/ CRSP TOTAL RETURNS INDEX FOR THE 100.000 103.174 104.776 100.215 101.565 102.149
NYSE/AMEX/NASDAQ COMPANIES WITH MARKET
CAPITALIZATION OF $75M-$100M
AS OF 03-31-97
/diamond/ THE COMPANY 100.000 96.875 100.000 87.500 90.625 78.125
Notes:
A. The lines represent monthly index levels derived from compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is
used.
D. The index level for all series was set to $100.0 on 08/02/96
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The comparisons in this table are required by the Securities and
Exchange Commission and are not intended to forecast or be indicative of
possible future performance of the Common Stock.
-10-
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
PHILOSOPHY. The Compensation Committee's executive compensation
philosophy is to provide competitive levels of compensation, integrate the
compensation of its executive officers with the achievement of the Company's
annual and long-term performance goals, reward above average corporate
performance, recognize individual initiative and achievement and assist the
Company in attracting and retaining qualified management. To meet these
objectives, the Compensation Committee attempts to set the compensation of its
executive officers at levels that it believes are competitive with other
companies of the same size in the Company's industry, in light of the Company's
then current and anticipated performance. The Compensation Committee endorses
the position that the ownership of equity interests in the Company by management
is beneficial in aligning executive officers' and stockholders' interests in the
enhancement of shareholder value.
COMPONENTS OF EXECUTIVE COMPENSATION. Compensation of the Company's
executive officers consists of both cash payments and grants of stock options.
The annual cash compensation consists of a base salary and a bonus. Long-term
incentives are provided through the grant of stock options under the Company's
1996 Stock Option Plan.
BASE SALARIES AND BONUSES. The Compensation Committee attempts to set
base salaries and bonuses of its executive officers at levels that it believes
are competitive with other companies of the same size in the Company's industry.
Information about appropriate salary and bonus levels has been determined by
reviewing the public disclosure of the Company's competitors and through the
Company's recruiting activities. In July 1996, the Board of Directors approved,
and each of Messrs. Krassner, Marsh, Marshall and Bechdel entered into, a
five-year employment agreement with the Company. Each such agreement provides
for an initial annual base salary with automatic annual salary increases of
$25,000 during its term.
STOCK OPTIONS. The Compensation Committee grants stock options to the
Company's executive officers pursuant to the Company's 1996 Stock Option Plan.
The Compensation Committee has the authority to determine the individuals to
whom stock options are awarded, the terms at which option grants are made, the
duration of the options and the number of shares subject to each option. The
size of the option grants are generally based on the position level of the
recipient. Through the award of stock options, the objective of aligning
executive officers' long range interests with those of the stockholders is met
by providing the executive officers with the opportunity to build a meaningful
stake in the Company.
It is the Compensation Committee's intention that, over time,
compensation opportunities from option grants will constitute a significant
portion of each executive officer's total compensation. However, there are not
automatic grants to each executive officer every year. Instead, the Compensation
Committee reviews the performance of the Company overall and of each individual
executive officer, as well as past option grants to each executive officer, and
makes decisions about recipients and grant sizes for the year. The Compensation
Committee did not grant any stock options during 1996, although it intends to
grant stock options during 1997 based on the criteria discussed above.
In December 1994, the Internal Revenue Service issued amendments to the
proposed regulations previously issued under Section 162(m) ("Section 162(m)")
of the Internal Revenue Code of 1986, as amended. In general, Section 162(m)
disallows a public company's deduction for compensation to any employee in
excess of $1.0 million per year, unless such compensation is paid in connection
with the attainment of performance goals established by the compensation
committee of the board of directors and approved by the stockholders of such
company in advance of the period during which services relating to such
compensation were rendered. None of the executive officers of the Company
presently receives, and the Compensation Committee does not anticipate that such
persons will receive, annual cash compensation in excess of the $1 million cap
provided in Section 162(m). The Compensation Committee intends to take the
necessary steps to ensure compliance with Section 162(m).
H. Yale Gutnick
Ronald J. Korn
-11-
<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 Company's
private placement in July 1996 (the "Private Placement") of units (the "Units")
comprised of shares of Common Stock and unsecured senior convertible notes (the
"Notes"), MEI issued shares of Common Stock to the stockholders 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 stockholder 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 Internal
Revenue Code of 1986, as amended. In connection therewith, the Constituent
Corporations declared and paid distributions during 1995 in the amounts of
$223,210, $2,081,057, $760,044, $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 a lease renewal for its Salt
Lake City office, 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 the right to receive 75,167 of the shares of the Company to be received by
Mr. Krassner at the time of the Merger in exchange for Mr. Krassner's stock
ownership interests in the Constituent Corporations. 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 full by Mr.
Krassner 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 and
Lee Marshall, each of whom is a director and executive officer of the Company,
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).
-12-
<PAGE>
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 borrowing of up to $1.2 million. All of the Company's indebtedness
under the Credit Line 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.
Prior to the Merger, the Company had paid management fees for
accounting, general management, office and other administrative services to DBM,
an entity then 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 Entertainment Incorporated, a Florida
corporation ("Movietime"), which was acquired by the Company in August 1996, was
indebted to the Company in the amount of $459,398 plus accrued interest. The
Company obtained such funds under a credit line with Merrill Lynch. As a result
of the Company's acquisition of Movietime, the indebtedness to the Company was
eliminated in consolidation and the Company became indebted to Merrill Lynch
during August 1996, which indebtedness has been paid in full.
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, respectively.
In connection with the Private Placement, the Company paid Capital
Growth International, Inc. ("Capital Growth") (as the placement agent for the
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 warrants to purchase 500,000 shares of Common Stock.
The Company has agreed to indemnify Capital Growth against certain
liabilities in connection with the Private Placement, including liabilities
under the Securities Act of 1933, as amended.
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 stockholders 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.
-13-
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC 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.
The firm of Arthur Andersen LLP served as the Company's independent
public accountants for the fiscal year ended December 31, 1996. The Board of
Directors has selected Arthur Andersen LLP as the Company's independent public
accountants for the fiscal year ending December 31, 1997. One or more
representatives of Arthur Andersen LLP are expected to be present at the Annual
Meeting, will have the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions from
stockholders.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no other business to be presented at the Company's 1997 Annual
Meeting of Stockholders. If any other business should properly come before the
Company's 1997 Annual Meeting of Stockholders, the persons named in the
accompanying proxy will vote thereon as in their discretion they may deem
appropriate, unless they are directed by a proxy to do otherwise.
GENERAL INFORMATION
Deadline for Stockholder Proposals. Proposals by holders of the
Company's Common Stock which are intended to be presented at the next annual
meeting of stockholders must be received by the Company for inclusion in the
Company's next proxy statement and form of proxy relating to that meeting no
later than February 1, 1998. Such proposals must also comply in full with the
requirements of Rule 14a-8 promulgated under the Securities Exchange Act of
1934.
By Order of the Board of Directors,
Brad Krassner
CO-CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
Miami, Florida
June 4, 1997
-14-
<PAGE>
MAGICWORKS ENTERTAINMENT INCORPORATED
930 WASHINGTON AVENUE
MIAMI BEACH, FLORIDA 33139
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
The undersigned holder of Common Stock of Magicworks Entertainment
Incorporated, a Delaware corporation (the "Company"), hereby appoints Brad L.
Krassner and Lee Marshall, and each of them, as proxies for the undersigned,
each with full power of substitution, for and in the name of the undersigned to
act for the undersigned and to vote, as designated below, all of the shares of
common stock of the Company that the undersigned is entitled to vote at the 1997
Annual Meeting of Stockholders of the Company, to be held on Thursday, June 19,
1997, at 10:00 a.m., local time, at the Aurora Country Club, 50 Trails End,
Aurora, Ohio, and at any adjournment(s) or postponement(s) thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE
DIRECTOR NOMINEES LISTED IN PROPOSAL (1) BELOW.
Proposal 1. Election of Joe Marsh, Lee Marshall, Brad L. Krassner, John W.
Ballard, H. Yale Gutnick and Ronald J. Korn as directors of the
Company.
[ ] VOTE FOR all nominees listed above, except vote withheld
from the following nominee(s) (if any).
- -------------------------------------------------------------------------------
[ ] VOTE WITHHELD from all nominees.
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting, and
any adjournments or postponements thereof.
-15-
<PAGE>
(CONTINUED FROM OTHER SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" ELECTION OF ALL OF THE DIRECTOR NOMINEES.
The undersigned hereby acknowledges receipt of (i) the Notice of Annual
Meeting, (ii) the Proxy Statement and (iii) the Company's 1996 Annual Report to
Stockholders.
Dated: __________________________, 1997
--------------------------------------------
(Signature)
--------------------------------------------
(Signature if held jointly)
IMPORTANT: Please sign exactly as your name
appears hereon and mail it promptly even
though you may plan to attend the meeting.
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full corporate
name by president or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD
AND PROMPTLY RETURN IT IN THE ENVELOPE
PROVIDED. NO POSTAGE NECESSARY IF MAILED IN
THE UNITED STATES.
-16-
