<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 1997
REGISTRATION NO. 33-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BEACHPORT ENTERTAINMENT CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
UTAH 7922 87-428148
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYMENT
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
517 NORTH ROBERTSON BOULEVARD 517 NORTH ROBERTSON BOULEVARD
LOS ANGELES, CALIFORNIA 90048 LOS ANGELES, CALIFORNIA 90048
(310) 278-5114 (ADDRESS OF PRINCIPAL PLACE OF BUSINESS OR INTENDED
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES) PRINCIPAL PLACE OF BUSINESS)
</TABLE>
------------------------
BARRY MENDELSON
517 NORTH ROBERTSON BOULEVARD
LOS ANGELES, CALIFORNIA 90048
(310) 278-5114
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPY OF ALL COMMUNICATIONS TO:
GERALD A. ADLER, ESQ.
STACEY R. WOLOSHIN, ESQ.
BONDY & SCHLOSS LLP
6 EAST 43RD STREET
NEW YORK, N.Y. 10017
(212) 661-3535
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
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, as amended, 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 statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is 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. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PROPOSED MAXIMUM REGISTRATION
TO BE REGISTERED REGISTERED PER SECURITY(1)(2) OFFERING PRICE(2) FEE(3)
<S> <C> <C> <C> <C>
Common Stock par value $.002(1)........... 8,997,507 $1.75 $15,745,637 $4,771
</TABLE>
(1) Such securities have been registered for issuance by the Registrant on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the 'Act').
(2) Estimated solely for the purpose of computing the amount of the registration
fee in accordance with Rule 457(c) promulgated under the Act.
(3) Calculated pursuant to Rule 457(a) based on a bona fide estimate of the
maximum offering price.
------------------------
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, AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
CAPTION AND LOCATION
FORM SB-2 ITEM NUMBER AND HEADING IN PROSPECTUS
----------------------------------------------------------------------- ------------------------------------
<C> <S> <C>
1. Front of Registration Statement and Outside Front Cover Page of
Prospectus........................................................... Front of Registration Statement and
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus................ Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information and Risk Factors................................... Prospectus Summary and Risk Factors
4. Use of Proceeds........................................................ Use of Proceeds
5. Determination of Offering Price........................................ Not applicable
6. Dilution............................................................... Not applicable
7. Selling Security Holders............................................... Selling Securityholders
8. Plan of Distribution................................................... Plan of Distribution
9. Legal Proceedings...................................................... Business -- Legal Proceedings
10. Directors, Executive Officers, Promoters and Control Persons........... Management
11. Security Ownership of Certain Beneficial Owners and Management......... Principal Shareholders
12. Description of Securities.............................................. Description of Securities
13. Interest and Named Experts and Counsel................................. Experts; Legal Matters
14. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities.......................................................... Management -- Limitations on
Personal Liability of Directors
15. Organization within Last Five Years.................................... Business
16. Description of Business................................................ Business
17. Management's Discussion and Analysis and Plan of Operation............. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
18. Description of Property................................................ Business -- Properties
19. Certain Relationships and Related Transactions......................... Certain Transactions
20. Market for Common Equity and Related Stockholder Matters............... Market Prices of Common Stock
21. Executive Compensation................................................. Management -- Executive Compensation
22. Financial Statements................................................... Financial Statements
23. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................. Not applicable
</TABLE>
<PAGE>
<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.
SUBJECT TO COMPLETION, DATED AUGUST 13, 1997
PROSPECTUS
BEACHPORT ENTERTAINMENT CORPORATION
8,997,507 SHARES OF COMMON STOCK $.002 PAR VALUE
OF WHICH 6,374,864 UNDERLY WARRANTS, OPTIONS AND
SHARES OF CONVERTIBLE PREFERRED STOCK.
This prospectus relates to 8,997,507 shares of common stock $.002 per share
of which 6,374,864 underly issued and outstanding options, warrants and shares
of Series A Convertible Preferred Stock (the 'Preferred Shares') of Beachport
Entertainment Corporation (the 'Company'). The shares being registered herewith
and the shares issuable from time to time by the Company upon the exercise of
the options, warrants and conversion of the Preferred Shares (hereinafter
collectively, the 'Shares'), when issued may be offered and sold from time to
time by the Selling Securityholders named herein (the 'Selling
Securityholders'). See 'Plan of Distribution.'
The warrants and options entitle the holder thereof to purchase shares of
common stock at varying exercise prices ranging from $.25 to $5.00 per share.
The Company's common stock is traded on the over-the-counter electronic
Bulletin Board under the symbol 'BPRT.' On August 12, 1997, the closing bid and
asked price of the common stock was $1.69 and $1.84 per share, respectively.
------------------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE 'RISK FACTORS'
BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OF 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 will not receive any of the proceeds from the sale of the
Shares by the Selling Securityholders. The Company will bear all costs relating
to the registration of the Shares, which are estimated to be approximately
$100,000. See 'Selling Securityholders.'
THE DATE OF THIS PROSPECTUS IS AUGUST , 1997.
<PAGE>
<PAGE>
NO 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 SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING SECURITYHOLDERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF THE SHARES AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE AFFECTED ON THE OVER-THE-COUNTER ELECTRONIC BULLETIN BOARD
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
The Company intends to furnish its shareholders with annual reports
containing audited financial statements of the Company, after the end of each
fiscal year, and make available such other periodic reports as the Company may
deem appropriate or as may be required by law.
2
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information, including the financial
statements and notes thereto, appearing elsewhere in this Prospectus. Each
prospective investor is therefore urged to read this prospectus in its entirety.
Unless the context otherwise requires, the term 'the Company' refers to
Beachport Entertainment Corporation, a Utah corporation and its wholly-owned
subsidiaries On Ice, Inc., a Delaware corporation and The Royal Lipizzaner
Stallions, Inc., a Nevada corporation. This Prospectus contains forward looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward looking
statements as a result of certain factors discussed under the caption 'Risk
Factors.'
THE COMPANY
The Company is engaged in the development, production and distribution of
live family entertainment and made-for-television programs for networks and
independent television stations, cable, home video and pay television, both
domestically and internationally, predominantly in the fields of figure skating
and equestrian events.
In July 1995, the Company acquired from Barry Mendelson, the Company's
President and Chief Executive Officer, all of the issued and outstanding shares
of capital stock of On Ice, Inc. ('On Ice'), which produces family oriented ice
skating entertainment.
The Company, through On Ice, has produced and is currently producing a
number of On Ice touring shows, including the annual 'Nutcracker On Ice' based
on an adaptation of Tchaikovsky's classic ballet for theater performances,
domestic arena performances and overseas exhibition. The 'Nutcracker On Ice' has
been touring since 1993 and has been televised annually on NBC. The stars of
these shows have included Olympic champions Oksana Baiul, Viktor Petrenko and
Peggy Flemming, former U.S. national champion Nicole Bobek, world skating
champion Todd Eldredge, Linda Fratianne, Randy Gardner and Tai Babilonia.
Beginning in the fourth quarter of 1997, On Ice will commence its fall tour of
'The Memory of All That . . . Gershwin On Ice,' ('Gershwin On Ice') a tribute to
American composers George and Ira Gershwin on the centennial of their birth. See
'Business.'
On Ice with its joint venture partner P.S./Stargames LLC ('P.S./Stargames')
entered into an agreement with Capital Cities/ABC Video Publishing, Inc.
('Capital Cities/ABC') for the production, manufacture and distribution by
Capital Cities/ABC of five videos entitled 'Fairy Tales on Ice'. The first
video, 'Alice through the Looking Glass' is completed and features Olympic
Silver Medalist Nancy Kerrigan and Academy-Award Winner Geena Davis as the
narrator with music by Academy-Award Winners Marvin Hamlisch and Ron Grant and
lyrics by David Zippel. This video is anticipated to be released in the fourth
quarter of 1997. The second video, 'Sleeping Beauty' featuring the St.
Petersburg Ice Ballet, awaits final editing and is anticipated to be released in
the first quarter of 1998. On-Ice has completed negotiations with Buena Vista
Home Video, subsequent to its merger with Capital Cities/ABC, to reacquire all
rights to this project and is currently negotiating a relationship with a new
distributor. The Company is negotiating with a video distribution company to
fund the production of the remaining three videos. No assurance can be given
that the Company will produce any of the three remaining videos. See 'Business.'
Effective August 4, 1997, the Company acquired from Gary and Elizabeth
Lashinsky, through a merger with The Royal Lipizzaner Stallions, Inc. ('RLS'), a
newly formed subsidiary of the Company, the business of Entertainment
Specialists Ltd., Inc. ('ESL'), the presenter of 'The Royal Lipizzaner
Stallions,' a family arena attraction founded in 1970 featuring horses and
riders from Europe.
RLS is the producer of a unique family arena show featuring the
world-famous Royal Lipizzaner Stallions under various banners, including 'A
Symphony in White' and 'The Wonderful World of Horses.' RLS has been producing
these shows since 1970 and owns twenty-nine Lipizzaner, Spanish Andalusian and
Arabian horses which perform in touring units.
3
<PAGE>
<PAGE>
The shows produced by RLS are the only touring presentations of the Royal
Lipizzaner Stallions in North America and feature horses and riders that emulate
the classic Spanish Riding School of Vienna in its presentation of the
Lipizzaner Stallions, which performs the horses' famous maneuvers in a
government-owned facility in Vienna. The RLS shows maintain the classicism of
the Spanish Riding School program within an entertainment-oriented format,
adding elements such as music and costuming.
The RLS horses perform over five hundred shows per year in arenas,
coliseums, equestrian centers and state fairs throughout North America. The
shows have also played in England and Latin America. The Royal Lipizzaner
Stallions will tour Australia for the first time in the fall of 1997. See
'Business.'
Through its operating division, Beachport Entertainment Digital Group
('Beachport Digital'), the Company designs and develops interactive CD-ROM
computer software, computer enhanced digital effects for feature film projects,
Internet, World Wide Web and Microsoft Network computer home page sites, and
interactive video game software for various high-tech manufacturers such as
Sega, Nintendo and Sony.
Through an agreement with Tyndale New Media, a division of Tyndale House
Publishers ('Tyndale'), Beachport Digital has designed and is producing an
interactive CD-ROM game based on the animated character 'McGee.' McGee has
starred in a series of videos called 'McGee and Me' and has sold approximately
2.5 million videos. Beachport Digital's CD-ROM game features Bible stories,
puzzles, trivia, drawing, painting and digitized video animation.
The Company's operating strategy is to (i) expand the activities of On Ice
and RLS by developing additional domestic and international touring shows in
1998 and developing additional television and video programming; (ii) expand the
merchandising activities for its ice and equestrian shows; (iii) identify and
develop brand name programming such as 'Nutcracker On Ice' that translates into
touring shows, television projects and other entertainment projects; (iv)
building a library of 100% owned family entertainment content; (v) obtain
sponsors and promotional partners for its ice shows and equestrian events; (vi)
increase attendance for the equestrian events through group sales promotions and
aggressive ticket pricing; (vii) expand the activities of Beachport Digital by
co-venturing CD-ROM projects focused on special interest markets such as the
religious market; and (viii) implement strategic acquisitions of, or enter into
joint venture agreements with other companies. The Company regularly evaluates
acquisition and joint venture possibilities. Except as otherwise described in
this Prospectus, there are no present arrangements or understandings with
respect to any potential acquisitions or joint ventures.
The Company's senior management has extensive experience in the
entertainment industry. Barry Mendelson, the Company's President and Chief
Executive Officer was a former executive vice president for Madison Square
Garden Enterprises, a managing partner of Ticket Master Associates and has had
27 years of experience in the entertainment industry. Sidney Shlenker, the
Company's Chairman of the Board, was a former majority owner and chairman of the
board of the NBA Denver Nuggets, president and chief operating officer of the
Houston based Astrodome Corporation and has over 30 years experience in the
entertainment industry. Linda Azarone, Chief Operating Officer, is a former vice
president of ice shows for the Walt Disney Company's Consumer Product Division
with extensive experience in the production and promotion of ice skating shows.
See 'Management.'
The Company was incorporated in November 1985. The Company's executive
offices are located at 517 North Robertson Boulevard, Los Angeles, California
90048 and its telephone number is (310) 278-5114.
THE OFFERING
Securities Offered:
8,977,507 shares of common stock of which 6,374,864 are issuable by
the Company upon the exercise of warrants, options and conversions of the
Preferred Shares which are being offered by Selling Securityholders named
herein. See 'Selling Securityholders' and 'Plan of Distribution.'
4
<PAGE>
<PAGE>
The Selling Securityholders can only sell their Shares as long as a current
registration statement is in effect and as long as they deliver a current
prospectus to the purchaser. See 'Selling Securityholders.'
Use of Proceeds:
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Securityholders. However, the Company will receive
proceeds from the issuance of Shares of common stock upon the exercise of
warrants and options ranging from $.25 to $5.00 per share. If all of the
warrants and options are exercised, the Company would receive gross
proceeds of approximately $7,585,282.
Risk Factors:
An investment in the Shares offered hereby involves a high degree of
risk and, therefore the Shares should not be purchased by anyone who cannot
afford the loss of their entire investment. Prospective purchasers of the
Shares should carefully review and consider the factors set forth under
'Risk Factors' as well as other information contained herein, before
purchasing any of the Shares. See 'Risk Factors.'
5
<PAGE>
<PAGE>
SUMMARY AND PRO FORMA FINANCIAL INFORMATION
The following table sets forth summary historical financial data of
Beachport and ESL for the three months and year ended March 31, 1997 and
December 31, 1996, respectively. The historical financial data for each company
for the year ended December 31, 1996 are derived from the audited financial
statements of each company. Beachport's financial statements have been audited
by Malone & Bailey, PLLC, independent certified public accountants, whose report
is included elsewhere in this registration statement. ESL's financial statements
have been audited by Van Buren & Hauke, LLC, independent certified public
accountants, whose report is also included elsewhere in this registration
statement. The summary historical financial data should be read in conjunction
with the financial statements and notes thereto of Beachport and ESL and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' included elsewhere in this registration statement. The financial
data of both companies for the three months ended March 31, 1997 and 1996 are
unaudited, but, in the opinion of management, reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
representation of results for all interim periods. The operating results for the
interim periods are not necessarily indicative of results for the full fiscal
year. The following table also sets forth pro forma financial data of the
Company as if (i) the acquisition, (ii) the debt financing, and (iii) the
lawsuit settlement, occurring in June and August 1997 had occurred March 31,
1997 for balance sheet results and debt financing and lawsuit settlement
operating data, and January 1, 1996 for acquisition operating data. The pro
forma financial data was derived from the unaudited pro forma financial
statements appearing elsewhere in this registration statement. The summary pro
forma financial data should be read in conjunction with the Company's pro forma
financial statements and the notes thereto. The pro forma balance sheet data as
of March 31, 1997 and the pro forma statements of operations for the three
months and year ended March 31, 1997 and December 31, 1996, respectively, are
unaudited, but, in the opinion of management, reflect all adjustments
(consisting of only normal recurring adjustments and pro forma adjustments to
reflect the acquisition, debt financing and lawsuit settlement) necessary for a
fair presentation of pro forma results of operations. The pro forma operating
results are not necessarily indicative of the Company's future results of
operations.
SUMMARY HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
THE COMPANY ESL
--------------------------------------- ------------------
THREE MONTHS ENDED YEAR ENDED THREE MONTHS ENDED
MARCH 31, 1997 DECEMBER 31, 1996 MARCH 31, 1997
------------------ ----------------- ------------------
<S> <C> <C> <C>
Operating Data
Historical:
Net sales........................................ $ 87,617 $ 1,080,656 $2,481,995
Costs of performances............................ 269,058 1,165,874 1,351,640
Selling.......................................... -- -- 550,688
General and administrative....................... 398,047 2,291,752 227,538
Asset writeoffs.................................. -- 179,192 --
Bad debts........................................ -- 211,722 --
Depreciation and amortization.................... 23,870 94,553 10,200
Interest......................................... 60,135 1,092,357 --
Other income (expense)........................... -- -- (11,824)
Income tax benefit............................... -- 452 --
Net income (loss)................................ (663,493) (3,954,342) $ 265,019
Per share data:
Net income (loss)................................ $ (0.09) $ (0.58) --
Weighted average number of shares outstanding.... 7,499,116 6,807,910 --
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Operating Data
Historical:
Net sales........................................ $ 5,896,018
Costs of performances............................ 3,734,553
Selling.......................................... 1,521,365
General and administrative....................... 805,758
Asset writeoffs.................................. --
Bad debts........................................ --
Depreciation and amortization.................... 37,427
Interest......................................... --
Other income (expense)........................... (23,795)
Income tax benefit............................... --
Net income (loss)................................ $ (276,880)
Per share data:
Net income (loss)................................ --
Weighted average number of shares outstanding.... --
</TABLE>
SUMMARY PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1997
------------------
<S> <C>
Pro forma operating data:
Net sales............................................................................ $2,569,612
Costs of performances................................................................ 1,620,698
Selling.............................................................................. 550,688
General and administrative........................................................... 690,671
Asset writeoffs...................................................................... --
Bad debts............................................................................ --
Depreciation and amortization........................................................ 34,070
Interest............................................................................. 1,282,332
Gain on lawsuit settlement........................................................... 403,186
Other income (expense)............................................................... (11,824)
Income tax benefit................................................................... --
Net income (loss).................................................................... (1,217,485)
Per share data:
Net income (loss).................................................................... $ (0.14)
Weighted average number of shares outstanding........................................ 8,694,822
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31, 1996
-------------------
<S> <C>
Pro forma operating data:
Net sales............................................................................ $ 6,976,674
Costs of performances................................................................ 4,900,427
Selling.............................................................................. 1,521,365
General and administrative........................................................... 3,147,510
Asset writeoffs...................................................................... 179,192
Bad debts............................................................................ 211,722
Depreciation and amortization........................................................ 131,980
Interest............................................................................. 1,092,357
Gain on lawsuit settlement........................................................... --
Other income (expense)............................................................... (23,795)
Income tax benefit................................................................... 452
Net income (loss).................................................................... (4,231,222)
Per share data:
Net income (loss).................................................................... $ (0.53)
Weighted average number of shares outstanding........................................ 8,003,616
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1997
---------------------------
ACTUAL(1) PRO FORMA(2)
----------- ------------
<S> <C> <C>
Balance sheet data:
Working capital (deficit)............................................................. $(3,716,653) $(4,407,696)
Total assets.......................................................................... 1,450,716 2,948,687
Long-term obligations................................................................. -- --
Retained earnings (deficit)........................................................... (5,768,751) (5,768,751)
Stockholders' equity (deficit)........................................................ (2,375,994) (1,375,994)
<CAPTION>
ADJUSTED(3)
-----------
<S> <C>
Balance sheet data:
Working capital (deficit)............................................................. $(3,729,704)
Total assets.......................................................................... 7,111,789
Long-term obligations................................................................. --
Retained earnings (deficit)........................................................... (6,587,762)
Stockholders' equity (deficit)........................................................ (658,627)
</TABLE>
- - ------------
(1) Represents the Company
(2) Includes ESL, with assets revalued to fair market value
(3) Includes debt financing and lawsuit settlement
6
<PAGE>
<PAGE>
RISK FACTORS
An investment in the Shares being offered hereby involves a high degree of
risk. Prior to making any investment decision, prospective investors should
carefully consider the following risk factors together with the other
information presented in this Prospectus including the financial statements (and
notes thereto).
SIGNIFICANT OPERATING LOSSES, ACCUMULATED DEFICIT, NO HISTORY OF COMBINED
OPERATIONS
Beachport Entertainment Corporation ('Beachport') and On Ice reported a net
loss for the year ended December 31, 1996 of $3,954,342 and net income for the
year ended December 31, 1995 of $624,429. ESL reported a net loss for the year
ended December 31, 1996 of $226,880 and net income for the year ended December
31, 1995 of $538,306. On a pro forma basis, after giving effect to the
acquisition of ESL, the Company would have had a net loss for the year ended
December 31, 1996 of $4,231,222. As of December 31, 1996, Beachport and On Ice
had an accumulated deficit in stockholders equity of $2,303,001. There can be no
assurance that the Company's operations will be profitable in the future or if
achieved, that such profitability will be sustained. The Company acquired ESL on
August 4, 1997 and prior to said date, ESL was operating as a separate
independent entity. The Company's profitability will depend upon the ability of
its management to integrate the companies into a single cohesive business entity
with a single business philosophy. There can be no assurance that the Company's
management will be successful in managing the combined operations or in
implementing the Company's business strategy. See 'Managements Discussion and
Analysis of Financial Conditions and Results of Operations.'
ADDITIONAL FINANCING
The Company has funded its operations to date primarily through equity and
debt financing. The Company may need to raise additional funds to continue to
fund operating expenses and/or implement its operating strategy. Although, in
the past, the Company has been successful in obtaining financing, there can be
no assurance that in the future, additional financing will be available or if
available will be on favorable terms. Failure to obtain such additional
financing could have a material adverse effect on the Company's business,
financial condition or results of operation. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources' and the Company's financial statements and notes thereto.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent to a great extent upon the experience, abilities
and continued services of Barry Mendelson, the Company's President and Chief
Executive Officer, Sidney Shlenker, the Company's Chairman of the Board, Linda
Azarone, the Company's Chief Operating Officer Gary Lashinsky, the Chairman and
Chief Executive Officer of RSL and Christopher Riggs, the President of the
Company's Beachport Digital division. The Company has entered into employment
agreements with Messrs. Mendelson Shlenker and Lashinsky. The loss of services
of any one of these individuals could have a material adverse effect on the
Company's business, financial condition or results of operation. The Company
presently has $750,000 of key man life insurance on the lives of Barry Mendelson
and Sidney Shlenker. See 'Management and Management -- Significant Employees.'
POTENTIAL LIABILITY; AVAILABILITY OF INSURANCE
The Company, from time to time, is subject to lawsuits as a result of its
business and currently maintains insurance relating to personal injury in
amounts that it considers adequate and customary for the entertainment industry.
While the Company has been able to obtain such insurance in the past, no
assurances can be given that it will be able to maintain these insurance
policies in the future. In addition, any successful claim against the Company,
in an amount exceeding its insurance coverage, could have a material adverse
effect on its business, financial condition and results of operations.
7
<PAGE>
<PAGE>
QUARTERLY FLUCTUATIONS; SEASONALITY; POSSIBLE VOLATILITY OF STOCK PRICE
The Company's operating results are subject to seasonal fluctuations.
Historically, the Company has realized its highest revenues in the fourth
quarter from its 'Nutcracker on Ice' tours which run from Thanksgiving to
Christmas. With the acquisition of ESL, the Company anticipates additional
revenues in the months of September through May. However, it will only have
limited revenues during June, July and August and will have to meet its working
capital requirements for these months from cash flow earned during such other
periods. Variations in cash flow could cause the market price of the Company's
common stock to fluctuate substantially. In addition, the stock markets in the
United States have, from time to time, experienced significant price and volume
fluctuations that are unrelated or disproportionate to the operating performance
of individual companies. Such fluctuations may adversely affect the price of the
Company's common stock.
CONTINUING CHANGES IN THE ENTERTAINMENT INDUSTRY; DEPENDENCE ON ATTRACTING
WELL-KNOWN ENTERTAINERS
The results of operations of entertainment industry businesses are affected
by, among other things, changes in consumer tastes, national, regional and local
economic conditions, demographic trends and the type, number and location of
competing entertainment shows. Since each project is an individual artistic work
and its commercial success is primarily determined by audience reaction, which
is unpredictable, there can be no assurance as to the economic success of any
entertainment property. Even if a production is an artistic success or
recognized favorably by critics, there is no assurance that it will generate
sufficient audience acceptance. In addition, the Company is highly dependent
upon its ability to attract well-known entertainers. Competition for such
persons, especially in the field of ice skating, is intense. Although the
Company has previously been successful in hiring persons having the requisite
skills and experience, there can be no assurance that such persons will be
available in the future, or if available, on terms acceptable to the Company.
COMPETITION
The entertainment industry is highly competitive. The Company competes
with, and will compete with many organizations, including major film studios and
independent production companies, individual producers and others, in all forms
of entertainment, including arena and theatrical ice skating, theatrical
productions and films and products distributed through network, syndication and
pay television and home video markets. Most of these competitors are larger,
more established and have greater financial and other resources than the
Company. Some of the Company's major ice show competitors include the
International Skating Union, United States Figure Skating Association and
Jefferson Pilot, each of which have championship competitions. Most high
quality, well known skaters prefer to compete in championships before performing
in ice skating shows and thus, the Company may find it harder to find high
quality, well-known skaters during these competitions. In addition, the Company
competes with other ice show producers including Tour of Champions, Ice Capades,
IMG Stars on Ice, Disney on Ice and Holiday On Ice. The Company also competes to
obtain creative talents, story properties, advertiser support and broadcast
rights, which are essential to the success of the Company's theatrical and
filmed entertainment.
Moreover, the entertainment industry is currently evolving into an industry
in which certain multinational, multimedia entities, including Viacom/Paramount
Pictures, The News Corporation, The Walt Disney Company/Cap Cities-ABC, Time
Warner/Turner Broadcasting and Westinghouse/CBS are anticipated to be in a
position, both financially, by virtue of their control over key film, magazine,
and/or television content, and by virtue of their control of key network and
cable outlets, to dominate certain entertainment and communication industry
activities. These competitors have numerous competitive advantages, including
the ability to acquire and attract superior properties, personnel and financing.
The Royal Lipizzaner Stallions shows over the past twenty-eight years have
not had any direct competition except for a brief tour by the Spanish Riding
School of Vienna. However, since the Royal Lipizzaner show is marketed to a
general family audience the Company believes there are a number of other arena
shows that tour annually throughout North America which compete for the same
consumer dollars, including: The Ringling Bros. and Barnum & Bailey Circus, Walt
Disney's World On Ice, Ice
8
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<PAGE>
Capades and other major ice shows competitors, The Harlem Globetrotters, Sesame
Street Live, and the Barney arena show, plus many other live concerts, sporting
and entertainment events that also appeal to families. Being successful in any
one market often depends on the time of the year in which you are able to secure
dates, and RLS is competing for dates with some of the more prominent companies
in live entertainment. Moreover, many of these other properties are also touring
overseas and will be competing with the RLS shows for both audiences and dates.
Many of the RLS competitors are larger, more established and have greater
financial and other resources than the Company. These competitors, may
therefore, have numerous competitive advantages, including the ability to
acquire and attract superior properties, personnel and financing.
ADDITIONAL COMPENSATION TO CEO AND OTHER KEY EMPLOYEE
Pursuant to an agreement relating to the Company's acquisition of On Ice,
the Company is obligated to pay Barry Mendelson, its Chief Executive Officer,
50% of any fees generated by him as producer of Company related projects. Mr.
Mendelson will receive approximately $37,500 in producer's fee in 1997 which
were earned in 1996 and can be expected to earn at least the same amount in
producer fees in 1997.
Christopher Riggs, the President of the Company's Beachport Digital
division is entitled to receive 40% of the profits of said division until the
Company has received $400,000 of reimbursements for past investments in said
division at which time, the profit participation of Mr. Riggs increases to 50%.
Upon the sale or other disposition of said division, Mr. Riggs is entitled to
receive 40% of the proceeds therefrom. To date, the Beachport Digital division
has not been profitable.
The obligation to make the aforesaid payments to Messrs. Mendelson and
Riggs will reduce the amount available to the Company for operations.
SIGNIFICANT OUTSTANDING OPTIONS AND WARRANTS
As of the date of this Prospectus, there were outstanding immediately
exercisable stock options and warrants to purchase an aggregate of 6,374,864
shares of common stock at exercise prices ranging from $.25 to $5.00 per share,
and Preferred Shares that are immediately convertible into approximately 100,946
shares of common stock. To the extent that such options, warrants and Preferred
Shares are exercised or converted, dilution to the Company's shareholders will
occur. Moreover, the terms upon which the Company will be able to obtain
additional equity capital may be adversely affected, since the holders of such
options, warrants and Preferred Shares can be expected to exercise or convert
them at a time when the Company would, in all likelihood, be able to obtain any
needed capital on terms more favorable to the Company than the exercise and
conversion terms provided in such securities.
ABSENCE OF DIVIDENDS
The Company has never declared or paid any cash dividends on its common
stock. The Company intends to retain its earnings, if any, to finance the growth
and development of its business and therefore does not anticipate paying any
cash dividends on its common stock in the foreseeable future.
CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO EXERCISE WARRANTS AND
OPTIONS
At such time as the Shares underlying the warrants and options become
registered under the Securities Act, holders of the warrants and options will be
able to exercise the warrants and options only if (i) a current Prospectus under
the Securities Act relating to the Shares is then in effect and (ii) the Shares
are qualified for sale or exempt from qualification under the applicable
securities laws of the state in which the various holders of warrants and
options reside. Although the Company has agreed to use its best efforts to
maintain a current registration covering the Shares, there can be no assurance
that the Company will be able to do so. The value of the Shares may be greatly
reduced if a registration statement covering the Shares is not kept current or
if the Shares are not qualified, or exempt from qualification, in the states in
which the holders of warrants and options reside. Persons holding warrants and
options who reside in jurisdictions in which the Shares are not qualified and in
9
<PAGE>
<PAGE>
which there is no exemption will be unable to exercise their warrants and
options and would either have to sell their warrants and options or allow them
to expire unexercised.
LACK OF TRADEMARK PROTECTION FOR ON ICE
Because of the existence of other 'on ice' performances, it is unlikely
that the Company will be able to rely upon trademark or service mark protection
for the name 'On Ice.' As a result, there is no protection against others using
the name 'On Ice' for the production of entertainment events some of which may
be of substandard quality. The Company's own ice shows could be negatively
impacted by association with any substandard productions.
PENNY STOCK RULE
Trading in the Company's securities is conducted on the NASD's Electronic
Bulletin Board or 'pink sheets.' In the absence of the common stock being quoted
on Nasdaq, or the Company having $2,000,000 in net tangible assets, trading in
the common stock would be covered by Rule 15g-9 promulgated under the Securities
Exchange Act of 1934, as amended (the 'Exchange Act') for non-Nasdaq and
non-exchange listed securities. Under such rule, broker-dealers who recommend
such securities to persons other than established customers and accredited
investors must make a special written suitability determination for the
purchaser and receive the purchaser's written agreement to a transaction prior
to sale. Securities are exempt from this rule if the market price is at least
$5.00 per share.
The Securities and Exchange Commission (the 'Commission') has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exemptions.
Such exemptions include an equity security listed on Nasdaq and an equity
security issued by an issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer has been in continuous operation for three (3) years,
(ii) net tangible assets of at least $5,000,000, if such issuer has been in
continuous operation for less than three (3) years, or (iii) average revenue of
at least $6,000,000 for the proceeding three (3) years. Unless an exemption is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith. As the Company's common stock is
presently subject to the regulations on penny stock, the market liquidity for
the common stock could be severely and adversely affected due to the limitations
on the ability of broker-dealers to sell the common stock in the public market.
SHARES ELIGIBLE FOR FUTURE SALE
The Company has outstanding 10,782,115 shares of common stock. Of these
shares, 6,862,820 are freely tradable without restriction or registration under
the Securities Act, except that any shares purchased by an 'affiliate' of the
Company (as defined in the rules and regulations promulgated under the
Securities Act) will be subject to the resale limitations under Rule 144 under
the Securities Act. The remaining 3,919,295 shares of outstanding common stock
were issued by the Company in private transactions in reliance upon exemptions
from registration under the Securities Act. Such shares may be sold only
pursuant to an effective registration statement filed by the Company or an
applicable exemption, including the exemption contained in Rule 144 promulgated
under the Securities Act. In general, under Rule 144 as currently in effect, a
shareholder, including an affiliate of the Company, may sell shares of common
stock after at least one year has elapsed since such shares were acquired from
the Company or an affiliate of the Company. The number of shares of common stock
which may be sold within any three-month period is limited to the greater of one
percent of the then outstanding common stock or the average weekly trading
volume in the common stock during the four calendar weeks preceding the date on
which notice of such sale was filed under Rule 144. Certain other requirements
of Rule 144 concerning availability of public information, manner of sale and
notice of sale must also be satisfied. In addition, a shareholder who is not an
affiliate of the Company (and who has not been an affiliate of the Company for
90 days prior to the sale) and who has beneficially owned shares acquired from
the Company or an affiliate of the Company for over two years may resell the
shares without compliance with the foregoing requirements under Rule 144.
10
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<PAGE>
No predictions can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the common stock prevailing from time to time. Nevertheless, sales of
substantial amounts of common stock, or the perception that such sales may
occur, could have a material adverse effect on prevailing market prices. See
'Description of Securities -- Shares Eligible for Future Sale.
AUTHORIZATION OF PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
preferred stock with such designation, rights and preferences as may be
determined from time to time by the Board of Directors. The Company has
designated a class of shares of preferred stock as Series A Cumulative
Convertible Preferred Stock (the 'Series A Preferred Stock'). As of July 31,
1997, there were 6 shares of Series A Preferred Stock outstanding. The Series A
Preferred Stock has a liquidation preference of $25,000 per share plus accrued
and unpaid dividends and is currently convertible, subject to adjustments in
certain circumstances, at the option of the holder, at a rate of 11,111 shares
of common stock for each preferred share. The holders of the Preferred Shares
have the right to elect a majority of the Board of Directors in the event the
Company is in arrears in the payment of two consecutive quarterly dividend
payments. The Board of Directors is empowered, without shareholder approval to
make additional issuances of preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the voting power
or other rights of the holder of the Company's common stock. In the event of
additional issuance, the Preferred Shares 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 additional shares of its preferred stock, there can be no assurance that the
Company will not do so in the future. See 'Description of Securities.'
FORWARD LOOKING STATEMENTS
This Prospectus and the information incorporated herein by reference
contains various 'forward-looking statements' within the meaning of Federal and
state securities laws, including those identified or predicated by the words
'believes,' 'anticipates,' 'expects,' 'plans' or similar expressions. Such
statements are subject to a number of uncertainties that could cause the actual
results to differ materially from those projected. Such factors include, but are
not limited to, those described under 'Risk Factors.' Given these uncertainties,
prospective purchasers are cautioned not to place undue reliance upon such
statements.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Securityholders. However, the Company will receive
proceeds from the issuance of Shares upon the exercise of warrants and options
ranging from $0.25 to $5.00 per share. If all of the warrants and options are
exercised, the Company would receive gross proceeds of approximately $7,585,282.
DIVIDEND POLICY
The Company has never paid dividends on its common stock and does not
anticipate paying such dividends in the foreseeable future. The payment of
future cash dividends by the Company on its common stock will be at the
discretion of the Board of Directors and will depend on its earnings, financial
condition, cash flows, capital requirements and other considerations as the
Board of Directors may consider relevant, including any contractual prohibitions
with respect to the payment of dividends.
11
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<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of Beachport and
On Ice and the 'pro forma' capitalization of the Company giving effect to the
acquisition of ESL, the completion of debt financing in July 1997 and the
settlement of litigation in June 1997 as if such events occurrred at March 31,
1997. The table should be read in conjunction with the financial statements and
notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
---------- ----------
<S> <C> <C>
Total current liabilities............................................................. $3,826,729 $7,770,416
Long-term debt........................................................................ -- --
Shareholder's equity:
Preferred Stock, par value $1.00 per share; 1,000,000 shares authorized; 8 shares
issued and outstanding.......................................................... 8 8
Common Stock, par value $.002 per share; 50,000,000 shares authorized; 9,048,526
shares issued and outstanding................................................... 15,706 18,097
Additional paid-in capital....................................................... 3,337,043 5,911,030
Retained earnings (deficit)...................................................... (5,768,751) (6,587,762)
Total stockholders equity (deficit).............................................. (2,375,994) (658,627)
---------- ----------
Total capitalization................................................... $1,450,716 7,111,789
---------- ----------
---------- ----------
</TABLE>
12
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<PAGE>
SUMMARY AND PRO FORMA FINANCIAL INFORMATION
The following table sets forth summary historical financial data of
Beachport and ESL for the three months and year ended March 31, 1997 and
December 31, 1996, respectively. The historical financial data for each company
for the year ended December 31, 1996 are derived from the audited financial
statements of each company. Beachport's financial statements have been audited
by Malone & Bailey, PLLC, independent certified public accountants, whose report
is included elsewhere in this registration statement. ESL's financial statements
have been audited by Van Buren & Hauke, LLC, independent certified public
accountants, whose report is also included elsewhere in this registration
statement. The summary historical financial data should be read in conjunction
with the financial statements and notes thereto of Beachport and ESL and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' included elsewhere in this registration statement. The financial
data of both companies for the three months ended March 31, 1997 and 1996 are
unaudited, but, in the opinion of management, reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
representation of results for all interim periods. The operating results for the
interim periods are not necessarily indicative of results for the full fiscal
year. The following table also sets forth pro forma financial data of the
Company as if (i) the acquisition, (ii) the debt financing, and (iii) the
lawsuit settlement, occurring in June and August 1997 had occurred March 31,
1997 for balance sheet results and debt financing and lawsuit settlement
operating data, and January 1, 1996 for acquisition operating data. The pro
forma financial data was derived from the unaudited pro forma financial
statements appearing elsewhere in this registration statement. The summary pro
forma financial data should be read in conjunction with the Company's pro forma
financial statements and the notes thereto. The pro forma balance sheet data as
of March 31, 1997 and the pro forma statements of operations for the three
months and year ended March 31, 1997 and December 31, 1996, respectively, are
unaudited, but, in the opinion of management, reflect all adjustments
(consisting of only normal recurring adjustments and pro forma adjustments to
reflect the acquisition, debt financing and lawsuit settlement) necessary for a
fair presentation of pro forma results of operations. The pro forma operating
results are not necessarily indicative of the Company's future results of
operations.
SUMMARY HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
THE COMPANY ESL
--------------------------------------- ------------------
THREE MONTHS ENDED YEAR ENDED THREE MONTHS ENDED
MARCH 31, 1997 DECEMBER 31, 1996 MARCH 31, 1997
------------------ ----------------- ------------------
<S> <C> <C> <C>
Operating Data
Historical:
Net sales........................................ $ 87,617 $ 1,080,656 $2,481,995
Costs of performances............................ 269,058 1,165,874 1,351,640
Selling.......................................... -- -- 550,688
General and administrative....................... 398,047 2,291,752 227,538
Asset writeoffs.................................. -- 179,192 --
Bad debts........................................ -- 211,722 --
Depreciation and amortization.................... 23,870 94,553 10,200
Interest......................................... 60,135 1,092,357 --
Other income (expense)........................... -- -- (11,824)
Income tax benefit............................... -- 452 --
Net income (loss)................................ (663,493) (3,954,342) $ 265,019
Per share data:
Net income (loss)................................ $ (0.09) $ (0.58) --
Weighted average number of shares outstanding.... 7,499,116 6,807,910 --
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Operating Data
Historical:
Net sales........................................ $ 5,896,018
Costs of performances............................ 3,734,553
Selling.......................................... 1,521,365
General and administrative....................... 805,758
Asset writeoffs.................................. --
Bad debts........................................ --
Depreciation and amortization.................... 37,427
Interest......................................... --
Other income (expense)........................... (23,795)
Income tax benefit............................... --
Net income (loss)................................ $ (276,880)
Per share data:
Net income (loss)................................ --
Weighted average number of shares outstanding.... --
</TABLE>
SUMMARY PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1997
------------------
<S> <C>
Pro forma operating data:
Net sales............................................................................ $2,569,612
Costs of performances................................................................ 1,620,698
Selling.............................................................................. 550,688
General and administrative........................................................... 690,671
Asset writeoffs...................................................................... --
Bad debts............................................................................ --
Depreciation and amortization........................................................ 34,070
Interest............................................................................. 1,282,332
Gain on lawsuit settlement........................................................... 403,186
Other income (expense)............................................................... (11,824)
Income tax benefit................................................................... --
Net income (loss).................................................................... (1,217,485)
Per share data:
Net income (loss).................................................................... $ (0.14)
Weighted average number of shares outstanding........................................ 8,694,822
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31, 1996
-------------------
<S> <C>
Pro forma operating data:
Net sales............................................................................ $ 6,976,674
Costs of performances................................................................ 4,900,427
Selling.............................................................................. 1,521,365
General and administrative........................................................... 3,147,510
Asset writeoffs...................................................................... 179,192
Bad debts............................................................................ 211,722
Depreciation and amortization........................................................ 131,980
Interest............................................................................. 1,092,357
Gain on lawsuit settlement........................................................... --
Other income (expense)............................................................... (23,795)
Income tax benefit................................................................... 452
Net income (loss).................................................................... (4,231,222)
Per share data:
Net income (loss).................................................................... $ (0.53)
Weighted average number of shares outstanding........................................ 8,003,616
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1997
---------------------------
ACTUAL(1) PRO FORMA(2)
----------- ------------
<S> <C> <C>
Balance sheet data:
Working capital (deficit)............................................................. $(3,716,653) $(4,407,696)
Total assets.......................................................................... 1,450,716 2,948,687
Long-term obligations................................................................. -- --
Retained earnings (deficit)........................................................... (5,768,751) (5,768,751)
Stockholders' equity (deficit)........................................................ (2,375,994) (1,375,994)
<CAPTION>
ADJUSTED(3)
-----------
<S> <C>
Balance sheet data:
Working capital (deficit)............................................................. $(3,729,704)
Total assets.......................................................................... 7,111,789
Long-term obligations................................................................. --
Retained earnings (deficit)........................................................... (6,587,762)
Stockholders' equity (deficit)........................................................ (658,627)
</TABLE>
- - ------------
(1) Represents the Company
(2) Includes ESL, with assets revalued to fair market value
(3) Includes debt financing and lawsuit settlement
13
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company was incorporated under the laws of the state of Utah on
November 18, 1985, originally under the name Mace, Inc. Effective April 14, 1994
and pursuant to a Reorganization Agreement, the Company acquired all of the
issued and outstanding shares of common and preferred stock of Beachport
Entertainment Corporation, a Texas corporation ('Beachport Texas'), in exchange
for shares of common and preferred stock of the Company. Beachport Texas became
a wholly-owned subsidiary of the Company. On April 14, 1994, the Company changed
its name to Beachport Entertainment Corporation.
The Company is engaged in the entertainment business and derives
substantially all of its revenue from either production fees earned in
connection with Company originated productions; production fees earned in
connection with productions on behalf of others and distribution fees from the
exploitation of its own products as well as products acquired from others.
The Company's operating strategy is to (i) expand the activities of On Ice
and RLS by developing additional domestic and international touring shows in
1998 and developing additional television and video programming; (ii) expand the
merchandising activities for its ice and equestrian shows; (iii) identify and
develop brand name programming such as Nutcracker On Ice that translates into
touring shows, television projects and other entertainment projects; (iv)
building a library of 100% owned family entertainment content; (v) obtain
sponsors and promotional partners for its ice shows equestrian events; (vi)
increase attendance for the equestrian events through group sales promotions and
aggressive ticket pricing; (vi) expand the activities of Beachport Digital by
co-venturing CD-ROM projects focused on special interest markets such as the
religious market; and (vii) implement strategic acquisitions of, or enter into
joint venture agreements with other companies. The Company regularly evaluates
acquisition and joint venture possibilities. Except as otherwise described in
this Prospectus, there are no present arrangements or understandings with
respect to any potential acquisitions or joint ventures.
RESULTS OF OPERATIONS
BEACHPORT ENTERTAINMENT CORPORATION
The following sets forth, in tabular form, a comparison of the results of
operations for the three months ended March 31, 1997 and 1996 and the years
ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
-------------------- -------------------
1997 1996 1996 1995
------- -------- ------- -------
<S> <C> <C> <C> <C>
Revenues........................................................ 100.0 % 100.0% 100.0% 100.0%
Cost of performances............................................ 307.1 % 105.4% 107.9% 66.6%
Selling, general and administrative expense..................... 454.3 % 150.4% 248.2% 16.5%
Depreciation and amortization................................... 27.2 % 10.0% 8.7% 2.4%
Interest expense................................................ 68.6 % 178.9% 101.1% 1.1%
Net profit (loss)............................................... (757.30%) (344.5%) (365.9%) 18.2%
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Revenues. Revenues decreased $147,402 to $87,617 for the three months ended
March 31, 1997 as compared to $235,019 for the three months ended March 31,
1996. The decrease was primarily due to On Ice's European Tour of Nutcracker on
Ice in January 1996 which did not occur in 1997. During the first quarter of
1997, the Company had no income generating activity and had to rely on capital
generated from fund raising activities to meet its capital requirements. In
1996, the Company produced the England tour of the Nutcracker On Ice and entered
into a producer agreement with the Ice Capades which was cancelled in November
1996.
14
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<PAGE>
Cost of Performances. Cost of Performances increased $21,281 to $269,058
for the three months ended March 31, 1997 as compared to $247,777 for the three
months ended March 31, 1996. This increase was due to the costs related to start
up expenses of the Gershwin On Ice Spring Tour.
Selling, General and Administrative Expenses. Selling, general and
administrative costs increased by $44,681 to $398,047 for the three months ended
March 31, 1997 as compared to $353,366 for the three months ended March 31,
1996. The increase was mainly attributable to increased salaries, benefits, rent
and general overhead increases as On Ice prepared for the debut of Gershwin On
Ice and the addition of the Company's Chief Operating Officer in October 1996 as
the Company prepared to expand its operations into other areas of live
entertainment through acquisitions.
Depreciation, Amortization and Interest Expense. Depreciation, amortization
and interest expense decreased by $359,870 to $84,005 for the three months ended
March 31, 1997 as compared to $443,875 for the three months ended March 31,
1996. The interest expense decreased because of the changes in the Company's
short term bridge financings and the significant interest costs associated with
raising the short term bridge financing in early 1996.
Net Profit (Loss). The net loss of the Company was ($663,493) for the three
months ended March 31, 1997 or $(0.09) per share as compared to a net loss of
($809,546) or $(0.12) per share for the three months ended March 31, 1996. The
decrease of $146,053 was the result of the increased Cost of Performances for
the Gershwin On Ice tour and the reduction of interest cost from the fund
raising activities in 1997.
THE YEARS ENDED DECEMBER 31, 1996 AND 1995
Revenues. Revenues decreased $2,352,017 to $1,080,656 for the year ended
December 31, 1996 as compared to $3,432,673 for the same period in 1995. The
decrease was primarily due to the difficulty of the Company's wholly owned
subsidiary On Ice obtaining reasonable ice skating talent for an arena tour of
Nutcracker On Ice. On Ice's revenues in 1996 were generated from theater and
arena tours of the Nutcracker On Ice and the home video sales.
Cost of Performance. Cost of Performance decreased $1,165,874 to $1,118,723
for the year ended December 31, 1996 from $2,284,597 for the year ended December
31, 1995. The decrease was attributable to the reduced number of arena tour
dates of the Nutcracker On Ice in 1996. The lack of named ice skating talent and
the lack of arena dates was the reason for the reduced Arena Tour.
Selling, General and Administrative Expenses. Selling, general and
administrative costs increased $2,116,628 to $2,682,666 for the year ended
December 31, 1966 from $566,038 for the year ended December 31, 1995. This was
primarily due to the cost of raising bridge financing and the general increase
overhead expenses as the Company prepared to increase its live entertainment
products.
Depreciation, Amortization and Interest Expense. Depreciation, amortization
and interest expense increased $1,067,984 to $1,186,910 in 1996 as compared to
$118,926 in 1995. This increase was primarily due to the interest expenses
related to the short term bridge financing obtained by the Company in 1996 and
purchase of assets which increased depreciation expense.
Net Profit (Loss). The net loss of the Company was $3,954,342 for the year
ended December 31, 1996 or ($.58) per share as compared to a net profit of
$624,400 or $.17 per share for the same period in 1995. This loss was primarily
due to the cost of raising capital for the Company's expanding live
entertainment product for 1997 and the reduced revenue from its reduced 1996
Nutcracker On Ice arena tour. These are non recurring items.
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ENTERTAINMENT SPECIALISTS LTD. INC.
The following sets forth, in tabular form, a comparison of the results of
operations for the three months ended March 31, 1997 and 1996 and the years
ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
-------------------- -------------------
1997 1996 1996 1995
------- -------- ------- -------
<S> <C> <C> <C> <C>
Revenues........................................................ 100.00 % 100.0% 100.0% 100.0%
Cost of performances............................................ 50.4 % 47.9% 54.6% 51.1%
Selling, general and administrative expense..................... 35.6 % 40.6% 48.3% 41.7%
Depreciation and amortization................................... 0.2 % 0.2% 0.4% 0.4%
Interest expense................................................ 0.2 % 0.0% 0.2% 0.1%
Net profit (loss)............................................... 13.3 % 11.3% (3.8%) 6.2%
</TABLE>
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Revenues. Revenues increased $171,584 to $2,481,995 for the three months
ended March 31, 1997 as compared to $2,310,411 for the three months ended March
31, 1996. Revenues increased as a result of RLS's first performance of the Royal
Lipizzaner Stallions in Great Britain since 1995. The tour went to three major
in the United States cities prior to their departure for Great Britain which
increased revenues.
Cost of Performances. Cost of performances increased $144,263 to $1,251,419
for the three months ended March 31, 1997 as compared to $1,107,156 for the
three months ended March 31, 1996. This increase was attributable to increased
tour costs for the arena and the related expenses as a result of the Great
Britain performances and the performances in three major cities in the United
States where RLS appeared in March 1997. In addition, the U.K. tour resulted in
increased costs for lodging for the RLS's riders and transportation for RLS's
horses to the United Kingdom.
Selling, General and Administrative Expenses. Selling, general and
administrative costs decreased $54,187 to $88,647 for the three months ended
March 31, 1997 as compared to $942,834 for the three months ended March 31,
1996. The advertising and promotion expense increased in 1997 as a result of the
Great Britain tour and the three major city markets which performances did not
occur in 1996. The advertising cost are greater in these markets. However, the
training expenses decreased because of the elimination of a trainer in 1997 and
the non-repetitive expenses in 1996 relating to RLS's move to the Oviedo,
Florida property. The 1996 feed and shavings costs were high as a result of
moving to the new facility and the anticipated increase in the need for these
supplies in the new facility.
Depreciation, Amortization and Interest Expense. Depreciation, amortization
and interest expense increased $6,239 to $11,239 for the three months ended
March 31, 1997 as compared to $5,000 for the three months ended March 31, 1996.
Depreciation expense increased as a result of the remodeling cost of the second
floor offices. The interest expense resulted from increased borrowings needed
for operations in 1997.
Net Profit (Loss). Net profit increased $68,928 to $330,105 for the three
months ended March 31, 1997 as compared to $261,177 for the three months ended
March 31, 1996. The Great Britain tour and the additional revenues in the three
major city markets in early 1997 increased the revenues and the reduction of
personnel and generated the increased profits for the Company.
THE YEAR ENDED DECEMBER 31, 1996 AND 1995
Revenues. Revenues decreased $2,743,857 to $5,896,018 for the year ended
December 31, 1996 as compared to $8,639,875 for the year ended December 31,
1995. The Royal Lipizzaner Stallions experienced near sell out crowds as a
result of their inaugural tour in Great Britain in 1995. RLS did not have any
major tour in 1996 which equaled the success of the Great Britain tour in 1995.
Revenue decreases also occurred in novelty sales.
Cost of Performance. Cost of performances decreased $1,196,191 to
$3,216,413 for the year ended December 31, 1996 as compared to $4,412,604 for
the year ended December 31, 1995. The tour cost for
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arena and the associated expenses decreased from the high levels experienced
during the Great Britain performances. The single largest expense decrease was
in co-promotion expenses because RLS handles all the promotion responsibilities
for most of the U.S. and Canada tour dates. The 1996 tour increased RLS's costs
for employee payroll as a result of the increased number of performances for the
riders and tour staff in the U.S.
Selling, General and Administrative Expenses. Selling, general and
administrative costs decreased $761,169 to $2,882,690 for the year ended
December 31, 1996 as compared to $3,643,859 for the year ended December 31,
1995. The advertising and promotion expense returned to normal levels in 1997
following the Great Britain tour in 1995. The advertising cost reflected the
less expensive U.S. markets. The training expenses continued to decrease as a
result of the reduction in training staff. The supply costs increased as a
result of the new Ovieda facility and RLS expenses decreased toward the end of
the year.
Depreciation, Amortization and Interest Expense. Depreciation, amortization
and interest expense decreased $3,708 to $34,719 for the year ended December 31,
1996 as compared to $38,427 for the year ended December 31, 1995. Depreciation
expense decreased in 1996 as a result of changes in RLS's assets. The interest
expense resulted from the increased borrowings needed for operating cash flow in
late 1996.
Net Profit (Loss). Net profit decreased $765,186 to ($226,880) for the year
ended December 31, 1996 as compared to $538,306 for the year ended December 31,
1995. The success of the Great Britain tour in 1995 as compared to the standard
United States tour was responsible for a decrease in revenues and profits for
1996. Furthermore, the increased personnel cost relating to the domestic
tour contributed to RLS's operating loss.
LIQUIDITY AND CAPITAL RESOURCE
The entertainment industry is highly capital intensive. At March 31, 1997,
the Beachport had approximately $87,171 in cash and cash equivalents 0 in
accounts receivable and working capital deficiency of approximately
$(13,716,653). At December 31, 1996 the Company had
approximately $32,355 in cash and cash
equivalents, $5,552 in accounts receivable and working capital deficiency of
approximately $(3,306,709). In comparison to approximately $145,333 in cash and
cash equivalents and working capital of approximately ($1,125,117) as of
December 31, 1995. The decrease of cash and working capital in 1996 was
primarily a result of the reduced Nutcracker on Ice arena tour and the increased
cost of expanding the Company's live entertainment products for 1997 and the
Company's debt financing efforts. Historically, Beachport and On Ice have
financed its working capital requirements by equity and debt financings.
At March 31, 1997, RLS had approximately $3,765 in cash and cash equivalents,
$144,826 in accounts receivable and working capital deficiency of approximately
$(59,582). At December 31, 1996, the Company had approximately $2,114 in cash
and cash equivalents, $31,453 in accounts receivable and working capital
deficency of approximately $(329,037). In comparison to approximately
$17,899 in cash and cash equivalents and $15,528 in accounts
receivable and working capital of approximately $(125,876) as of
December 31, 1995. The decrease of cash and working capital in 1996 was
primarily a result of the reduced attendance on the tour. Historically,
RLS has financed its working capital requirements be equity financings
and short term loans.
In the first half of 1996, in order to finance the acquisition of On Ice,
the Company in off shore transactions borrowed $939,550 and sold 285,800 shares
of its common stock. The promissory notes bear interest at the rate of 12.0% per
annum are due upon the earlier of February 28, 1997, as extended from December
31, 1996 or the closing of a public offering.
In the third quarter of 1996 the Company raised gross proceeds of $900,000.
The Company issued its 12% promissory notes due upon the earlier of December 31,
1996 or the closing of a public offering and 450,000 warrants to purchase shares
of common stock exercisable at $1.50 per share. These notes were extended and
paid off in conjunction with the June 1997 private fundraising. The proceeds
were used to fund the Company's portion of its China Tour of Cinderella On Ice
with CITIC, a Hong Kong based International Conglomerate, pay startup expenses
relating to the 1996 Nutcracker On Ice tours, and provide working capital for
the expansion of its live entertainment product for 1997.
In August 1996, ESL entered into an agreement with Barnett Bank NA to open
an operating line of credit for ESL. In September 1996, ESL drew down on
the line of credit for $35,000 and repaid the advance in October 1996.
Subsequently, later in October 1996, ESL started drawing down on the
line of credit and the balance as of 8-12-97 is $48,500.
During December 1996 ESL borrowed $74,319 from its profit sharing account.
The current balance of the outstanding loan is $71,353.
In June 1997, the Company raised $3,789,709 net proceeds in private
financings. The proceeds were used as follows: (i) to pay $1,002,765 of
indebtedness incurred in connection with the acquisition of On Ice; (ii) to pay
approximately $650,000 in accounts payable; (iii) to fund the costs of the
Company's expansion strategy $900,000; (iv) for general corporate purposes,
including working capital requirements $1,236,944.
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In June 1997, the Company completed a private placement to 'accredited
investors' of 37.25 Units to 79 of its 12% Senior Secured Original Issue
Discount Promissory Notes ('Senior Notes') in the face amount of $106,000 per
Unit and warrants to purchase 22,000 shares of common stock per unit and 10.03
Units of 12% Junior Original Issue Discount Promissory Notes ('Junior Notes') in
the face amount of $106,000 per Unit and Warrants to purchase 22,000 shares of
Common Stock per Unit. The aggregate dollar amount of Senior Notes and Junior
Notes sold in the offering was $3,725,000 and $1,002,765 respectively. The
offering was made pursuant to Rule 506 of Regulation D.
The Company anticipates that its working capital, cash flow from operations
and revenues from operations will be adequate to fund the Company's currently
proposed activities for at least the next 12 months. However, without the
exercise of the Company's outstanding warrants and options additional financing
may be needed after this 12 month period. The Company anticipates using
financing vehicles such as bank debt, leasing, and other sources of funding,
such as additional equity offerings, to fund its operations. There can be no
assurance that the Company will be successful in obtaining funds from any such
resources. If additional funds are raised by issuing equity securities, further
dilution to the Company's stockholders may result. If additional funds are not
available, the Company may be required to alter its expansion plans.
BUSINESS
THE COMPANY
The Company, through its subsidiaries On Ice and RLS, is engaged in the
development, production and distribution of live family entertainment and
made-for-television programs for networks and independent television stations,
cable, home video and pay television, both domestically and internationally,
predominantly in the field of ice skating and equestrian events. Through its
Beachport Digital Division, it designs and develops CD-ROM computer software for
entertainment and special interest markets.
In July 1995, the Company acquired from Barry Mendelson, the Company's
President and Chief Executive Officer all of the issued and outstanding shares
of capital stock of On Ice which produces family oriented ice skating
entertainment.
In August 1997, the Company acquired from Gary and Elizabeth Lashinsky,
through a merger with RLS, a newly formed subsidiary of the Company, the
business of ESL, the presenter of 'The Royal Lipizzaner Stallions,' a family
arena attraction founded in 1970 featuring horses and riders from Europe.
The Company's operating strategy is to (i) expand the activities of On Ice
and RLS by developing additional domestic and international touring shows in
1998 and developing additional television and video programming; (ii) expand the
merchandising activities for its ice and equestrian shows; (iii) identify and
develop brand name programming such as 'Nutcracker On Ice' that translates into
touring shows, television projects and other entertainment projects; (iv)
building a library of 100% owned family entertainment content; (v) obtain
sponsors and promotional partners for its ice shows and obtain sponsors and
promotional partners for its equestrian events; (vi) increase attendance for the
equestrian events through group sales promotions and aggressive ticket pricing;
(vi) expand the activities of Beachport Digital by co-venturing CD-ROM projects
focused on special interest markets such as the religious market; and (vii)
implement strategic acquisitions of, or enter into joint venture agreements
with, other companies. The Company regularly evaluates acquisition and joint
venture possibilities. Except as otherwise described in this Prospectus, there
are no present arrangements or understandings with respect to any potential
acquisitions or joint ventures.
The Company's operating results are subject to seasonal fluctuations.
Historically, the Company has realized its highest revenues in the fourth
quarters due to the 'Nutcracker on Ice' tours which run from Thanksgiving to
Christmas. Until the acquisition of RLS the Company had no material income
generating activity for the other quarterly periods. With the acquisition of the
RLS, the Company anticipates additional revenues in the fourth through the
second quarters although it will have insufficient revenues in June, July and
August to fund operations, and therefore will be required to meet its working
capital requirements in such period from cash flow earned during the other
quarters.
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The Company's senior management has extensive experience in the
entertainment industry. Barry Mendelson, the Company's President and Chief
Executive Officer was a former Executive Vice President for Madison Square
Garden Enterprises, a managing partner of Ticket Master Associates and has had
27 years of experience in the entertainment industry. Sidney Shlenker, the
Company's Chairman of the Board, was a former majority owner and chairman of the
board of the NBA Denver Nuggets, president and chief operating officer of the
Houston based Astrodome Corporation and has over 30 years experience in the
entertainment industry. Linda Azarone, Chief Operating Officer is a former vice
president of ice shows for the Walt Disney Company's Consumer Products Division
with extensive experience in the production and promotion of ice skating shows.
See 'Management.'
ON ICE, INC.
On Ice is a leading domestic and international producer of live family ice
skating and theatrical entertainment. On Ice takes advantage of network
television, home video, merchandising and CD-ROM opportunities created from
these performances. The Company believes the artistry and beauty of figure
skating adapts well to live entertainment, television and home video markets.
The Company also believes that the elegance of figure skating coupled with
Olympic performers, exquisite costumes and sets has thrust figure skating into
the hearts and souls of audiences worldwide. On Ice will continue the
penetration of this expanding marketplace with its creative, professional and
entertaining adaptations of family-oriented entertainment from literature and
music.
The Company, through its On Ice subsidiary, has produced and is currently
producing On Ice touring shows, including the annual 'Nutcracker On Ice' based
on an adaptation of Tchaikovsky's classic ballet for theater performances,
domestic arena performances and overseas exhibition. Until July 1997, it
co-produced these shows with Magicworks Entertainment, Inc. ('Magicworks') at
which time it acquired Magicworks interest. Under the terms of its Agreement,
Magicworks will receive 5% of the net profits from the show for the next three
years. The 'Nutcracker On Ice' show has been touring since 1993 and has been
televised annually on NBC since 1994. ESPN will also televise the show in
December 1997. The 1996 tour was a nine city tour. The 1995 domestic arena tour
encompassed twenty cities including a sold-out run in Harrah's Casino in
Atlantic City, while the European tour encompassed five cities in England. The
stars of these shows have included Olympic champions Oksana Baiul, Viktor
Petrenko and Peggy Flemming, former U.S. national champion Nicole Bobek, world
skating champion Todd Eldredge, Linda Fratianne, Randy Gardner and Tai
Babilonia. On Ice will commence its 1997 tour with at least three theatrical
touring units of 'Nutcracker On Ice' in November. This tour will include 10
performances in Moscow in January 1998.
In the spring of 1997, On Ice produced 'The Memory of All
That . . . Gershwin On Ice' ('Gershwin On Ice'), a tribute to American composers
George and Ira Gershwin, on the centennial of their birth. On September 28,
1997, a two hour special of the show will be seen on the A&E Network starring
Dorothy Hamill. A home videocassette of the television special will also be
distributed in the fourth quarter of 1997. A six-month tour of Gershwin On Ice
will commence in October 1997 and is schedule to play in approximately 60
cities. The tour is being booked by International Creative Management, Inc.
PRODUCTION AND DISTRIBUTION
The production of an On Ice show consists of contracting with third parties
to author, design and choreograph a performance. The Company presently produces
two types of live ice shows, one for arenas and one for theaters. The difference
between an arena performance and a theater performance consists mainly in
presentation. Arena shows are performed on large ice surfaces and have many
physical sets and props which the skaters use during the performances. The
theater tours are performed on small ice surfaces and require scenery to be
painted on curtain drops. Theater tours have fewer skaters than arena tours and
well known skaters are less likely to perform on these smaller ice surfaces.
The Company distributes its live ice productions either directly to venues
(i.e. theaters or arenas) or to promoters in the entertainment industry who are
responsible for site identification. The Company currently employs ICM for their
booking services relating to the 'Nutcracker On Ice' and 'Gershwin
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On Ice' tours. ICM identifies potential show sites and/or promoters and
negotiates and executes venue and promoters contracts on the Company's behalf.
Once a location is identified, the Company determines to either sell the show to
a promoter or present the show itself. The Company receives a fixed payment for
the show from the promoter, and the promoter is responsible for all venue and
promotional expenses, including the lease expenses, staffing, advertising,
ticketing, parking, beverages and food. If the Company elects to present the
show itself, it is responsible for all such venue and promotional expenses. In
either event, the Company is responsible for tour expenses, including skater
compensation, costumes, props and hotel accommodations. Generally, the Company
also receives a percentage of revenues generated on the sale of souvenirs, such
as T-shirts, sweatshirts and other memorabilia and the site retains all revenue
generated from the sale of food and beverages and parking. Although the Company
has generally not experienced any difficulty in obtaining high quality, well-
known skaters for any of its productions, however, occasionally the Company has
had trouble obtaining a high quality skater due to the Olympics and other major
championships. The failure, in the future, to obtain such skaters may have a
materially adverse effect on the Company's business, financial condition and
results of operations. See 'Risk Factors -- Continuing Changes in the
Entertainment Industry; Dependence on Attracting Well-Known Entertainers.'
MARKETING
The marketing of a performance is the responsibility of the promotor and
the venue manager, unless the Company elects to present the show itself. In
either case marketing is generally accomplished through local television and
radio advertising and is geared toward the entire family. In addition,
newspapers and billboards provide essential information regarding ticket sales,
cost of admission, location and time of performances.
NUTCRACKER ON ICE -- PRODUCTION, DISTRIBUTION AND LICENSE AGREEMENT.
On Ice entered into a video production and distribution agreement with NBC
Sports Ventures, Inc., ('NBC Sports') in January 1995 pursuant to which NBC
Sports was granted the right to distribute and sell the home videocassette
featuring highlights from the 1994 television broadcast of the 'Nutcracker on
Ice' (the 'NBC Sports Venture Agreement'). NBC Sports has created the packaging
and edited the 'Nutcracker on Ice' event into a home videocassette. Pursuant to
the terms of the agreement, On Ice will be paid 55% of all revenues after the
recoupment by NBC Sports of its costs.
On February 15, 1995, On Ice and NBC Sports, a division of the National
Broadcasting Company, Inc. pursuant to the NBC Sports Venture Agreement, entered
into a video recording rights licensing agreement with CBS/Fox Video, a division
of The CBS/Fox Company ('CBS/Fox') pursuant to which CBS/Fox was granted a
ten-year exclusive right to the wholesale and retail distribution of all
versions of On Ice's home video production of 'The Nutcracker On Ice'
(the'Program') including the right to market and sell the Program in areas where
the live performances of 'Nutcracker on Ice' are presented. The Company retained
the non-exclusive rights to sell the 'Nutcracker On Ice' for direct marketing on
broadcast TV and cable outlets. While CBS/Fox is not obligated to market the
Program, if it withholds the Program from distribution for two successive
Christmas seasons, On Ice and NBC Sports have the right, to regain all rights
granted to CBS/FOX unless CBS/Fox distributes the program the next Christmas. In
accordance with the terms of the License, CBS/Fox has paid NBC and On Ice an
advance of $125,000 and is required to pay a royalty of 15% of the wholesale
list price as and when CBS/Fox is paid for the licensed video recordings which
percentage is subject to reduction under certain circumstances.
PS/FAIRY TALES ON ICE JOINT VENTURE AND DISTRIBUTION AGREEMENT
On Ice entered into a joint venture agreement dated as of September 15,
1995, with P.S./StarGames ('StarGames') called FTI, LLC. ('FTI') to produce up
to five themed ice skating videos to be distributed on videotape, television, CD
ROM and any other forms of media. All budget, creative and exploitative
decisions for this joint venture are to be approved by both parties with the
budget managed and administered by On Ice. On Ice is the producer and line
producer for the products, with both
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parties acting as co-executive producers. Copyrights to any product produced or
any original music used in the tapes are to be jointly owned by On Ice and
StarGames.
On November 10, 1995, FTI entered into a distribution agreement with
Capital Cities/ABC Video Publishing, Inc. ('Capital Cities') for the production,
manufacture and distribution by Capital Cities of five videos based upon well
known Children's Fairy Tales entitled 'Fairy Tales on Ice.' Pursuant to the
agreement, Capital Cities was responsible for funding the productions,
manufacturing, marketing and distribution of these videos. Pursuant to the terms
of the Agreement, Capital Cities agreed to fund production of five programs and
pay a producing fee to FTI in the amount of $35,000. For all sponsorship
agreements relating to the 'Fairy Tales On Ice,' Capital Cities has agreed to
pay FTI a sum equal to 50% of the net proceeds, if any, derived from the
exploitation of the rights granted, and a sponsorship fee equal to 15% of gross
receipts received by Capital Cities from any sponsor sold and serviced by FTI.
The first video 'Alice Through the Looking Glass' is completed and features
Olympic Silver Medalist, Nancy Kerrigan, and Academy-Award Winner Geena Davis as
the narrator, with music by Academy-Award winners Marvin Hamlisch and Ron Grant
and lyrics by David Zippel. The second video, 'Sleeping Beauty,' awaits the
editing of a master video and packaging. These video releases were planned for
the fourth quarter of 1996 but were delayed by the Disney/Capital Cities Merger.
The Company is currently negotiating with Disney's Home Video Unit, Buena Vista,
to reacquire the rights to the project in order to make its own distribution
arrangements. The Company is also negotiating with P.S./Stargames to acquire its
interest in the project. No assurance can be given that the Company will be
successful in its negotiations. As a result of the foregoing, the Company's
anticipated revenues from the project may be delayed or reduced. There are no
current plans to produce the remaining three videos.
COMPETITION
The entertainment industry is highly competitive. The Company competes
with, and will compete with many organizations, including major film studios and
independent production companies, individual producers and others, in all forms
of entertainment, including theatrical productions and films and products
distributed through network, syndication and pay television and home video
markets. Many of these competitors are larger, more established and have greater
financial and other resources than the Company. Some of the Company's major Ice
Show Competitors include the International Skating Union, United States Figure
Skaters Association and Jefferson Pilot each of which have championship
competitions. Most high quality, well-known skaters prefer to compete in
championships before performing in ice skating shows and thus, the Company may
find it harder to find high quality, well known skaters during these
competitions. In addition, the Company competes with other Ice Shows as well
including Tour of Champions, IMG Stars On Ice, Ice Capades, Disney On Ice and
Holiday On Ice. The Company also competes to obtain creative talents, story
properties, advertiser support and broadcast rights, which are essential to the
success of the Company's theatrical and filmed entertainment.
Moreover, the entertainment industry is currently evolving into an industry
in which certain multinational, multimedia entities, including, without
limitation, Viacom/Paramount Pictures, The News Corporation, The Walt Disney
Company/Cap Cities-ABC, Time Warner/Turner Broadcasting and Westinghouse/CBS are
anticipated to be in a position, both financially, by virtue of their control
over key film, magazine, and/or television content, and by virtue of their
control of key network and cable outlets, to dominate certain entertainment and
communications industries activities. These competitors, may therefore, have
numerous competitive advantages, including the ability to acquire and attract
superior properties, personnel and financing.
THE ROYAL LIPIZZANER STALLIONS, INC.
In August 1997, the Company acquired from Gary and Elizabeth Lashinsky,
through a merger with RLS, a newly formed subsidiary of the Company, the
business of ESL, the presenter of 'The Royal Lipizzaner Stallions,' a family
arena attraction founded in 1970 featuring horses and riders form Europe.
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RLS is the producer of a unique family arena show featuring the
world-famous Royal Lipizzaner Stallions under various banners, including 'A
Symphony in White' and 'The Wonderful World of Horses.' RLS has been producing
these shows since 1970 and owns twenty-nine Lipizzaner, Spanish Andalusian and
Arabian horses which perform in touring units. One such unit recently completed
an extended run of five years at the Excalibur Hotel in Las Vegas. Approximately
fourteen horses perform in each show, while the non-performing horses are in
training at RLS's facility in Oveida, Florida.
The shows RLS produce are the only touring presentations of the Royal
Lipizzaner Stallions in North America and feature horses and riders that emulate
the classic Spanish Riding School of Vienna in its presentation of Lipizzaner
Stallions, which perform the horses' famous maneuvers in a government-owned
facility in Vienna. The RLS shows maintain the classicism of the Spanish Riding
School program within an entertainment-oriented format, adding elements such as
music and costuming.
The RLS horses perform over five hundred shows per year in arenas,
coliseums, equestrian centers and state fairs throughout North America. The
shows have also played in England and Latin America. The Royal Lipizzaner
Stallions will tour Australia for the first time in fall of 1997. The show will
usually skip any one market for a two to three year period to avoid saturation.
1997 represents the 28th Anniversary season of 'The Wonderful World of
Horses' with a special salute to the world famous Spanish Riding School in
Vienna, entitled 'An Evening in Vienna.' All new music, choreography and
routines have been incorporated in this anniversary edition with a major
emphasis on the historical background and foundation of the Lipizzaner breed,
from its original breeding and use as a horse of war to a horse of nobility and
aristocracy to a living form of equestrian art. The Lipizzaner is a rare and
unique breed. Its history and culture are known worldwide, in part, due to the
dramatic rescue of the horses by General Patton's men during World War II from
Czechoslovakia and their return to Austria.
The show emulates the Spanish Riding School of Vienna, Austria, in its
presentation of the Lipizzaners, and maintains a traditional as well as
entertaining performance. Included in the performance is a segment called 'Airs
Above the Ground.' These are the spectacular leaps and maneuvers, once used by
riders in saddles to protect and defend themselves on the battlefield, which are
now performed as an equestrian work of art.
MARKETING
The marketing of a performance is the responsibility of the Company.
Marketing is generally accomplished through local television, radio and print
advertising and is directed towards a general family audience. In most markets
this is accomplished through the direct buying of advertising time and space as
well as through barter deals with promotional partners such as television and
radio stations. There may also be promotional deals with retailers who will
provide 'piggyback' advertising in exchange for tickets. All advertising
provides essential information regarding ticket sales, cost of admission,
location and times of performances. Publicity also generates interest in the
show that can translate into ticket sales.
COMPETITION
The Royal Lipizzaner Stallions shows over the past twenty-eight years have
not had any direct competition except for a brief tour by the Spanish Riding
School of Vienna. However, since the Royal Lipizzaner show is marketed to a
general family audience the Company believes there are a number of other arena
shows that tour annually throughout North America which compete for the same
consumer dollars, including: The Ringling Bros. and Barnum & Bailey Circus, Walt
Disney's World On Ice, Ice Capades and other major ice shows competitors, The
Harlem Globetrotters, Sesame Street Live, and the Barney arena show, plus many
other live concerts, sporting and entertainment events that also appeal to
families. Being successful in any one market often depends on the time of the
year in which you are able to secure dates, and RLS is competing for dates with
some of the more prominent companies in live entertainment. Moreover, many of
these other properties are also touring overseas and will be competing with the
RLS shows for both audiences and dates. Many of the RLS competitors
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are larger, more established and have greater financial and other resources than
the Company. These competitors, may therefore, have numerous competitive
advantages, including the ability to acquire and attract superior properties,
personnel and financing.
BEACHPORT DIGITAL ENTERTAINMENT GROUP
Beachport Digital designs and develops interactive CD-ROM computer
software, computer enhanced digital effects for feature film projects, Internet,
World Wide Web and Microsoft Network computer home page sites, and interactive
video game software for various high-tech manufacturers such as Sega, Nintendo
and Sony.
The current shift by major movie studio giants in the entertainment
marketplace evidences the convergence of television, video, CD-ROM, computers
and other forms of communication to create an industry currently referred to as
'Interactive Multimedia.' Current estimates show that this industry will mature
into a multi-billion dollar industry. Existing corporate and individual
financial heavyweights such as AT&T, GTE, Viacom, Paramount, Disney, Sony, 3DO,
Hasbro Toys, and Microsoft have already entered into this field and have
expended millions of dollars in an attempt to take advantage of the current
opportunity. Beachport Digital believes it has established a niche in which it
believes it can compete and capitalize upon. Given the Company's overall
resources in the live family entertainment market, Beachport Digital has
positioned itself to design, develop and market family oriented CD-ROMs from
well-known and established entertainment marketing licenses.
Through an Agreement with Tyndale, Beachport Digital has designed and is
producing an interactive CD-ROM game based on the animated character 'McGee.'
McGee has starred in a series of videos called 'McGee and Me' and has sold
approximately 2.5 million videos. Beachport Digital's CD-ROM game will feature
Bible stories, puzzles, trivia, drawing, painting and digitized video animation.
Beachport Digital is also developing a CD-ROM which will highlight the
religious locations in the Holy Land. Beachport Digital is using computerphoto
realistic technology and anticipates completing this project for distribution in
December 1997 subject to obtaining a distributor. No assurance can be given that
Beachport Digital will succeed in obtaining a distributor.
Pursuant to an agreement dated October 11, 1995. All net operating profits
of the Beachport Digital are to be divided between the Company and Mr. Riggs on
a 60% - 40% basis, respectively, until the Company has received $400,000 of
credit for past investments and on a 50% - 50% basis thereafter. Upon the sale
or other disposition of Beachport Digital, Mr. Riggs would be entitled to 40% of
the proceeds thereof. To date, the Beachport Digital division has not been
profitable.
MCGEE'S NEW MEDIA KID'S BIBLE
In April 1996, Beachport Digital entered into a software production
agreement with TLC Entertainment ('TLC'). The agreement provides that Beachport
Digital perform all software design, technological, and production services
necessary to complete a fully functional interactive CD-ROM product, tentatively
entitled 'McGee's New Bible for Kid's CD-ROM' (the 'McGee Product'). Pursuant to
the terms of Agreement, Beachport Digital will provide all equipment and
supplies and be solely responsible for any and all costs and expenses incurred,
and TLC is responsible for securing distribution outlets for the McGee Product
and the McGee character and the animation necessary to complete the project.
A joint CD-ROM computer project between Beachport Digital, Tyndale and TLC
will feature the well known animated character McGee of 'McGee and Me.' Tyndale,
a division of the International Bible Society, is best known for its paraphrased
release of 'The Living Bible' which has sold over 40 million copies. TLC's
animated character, McGee, has starred in the series of 13 videos of 'McGee and
Me' and sold approximately 2.5 million individual videos. The Company
anticipates that the Beachport Digital's CD-ROM family entertainment computer
game will be released the fourth quarter of 1997. The game will include the
following features: Early Reader, Paint, Draw, Puzzle, Trivia, Digitized Video
Animation and CD-ROM sound. See ' -- Current Technology,' for explanation.
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Tyndale has agreed to serve as the religious distributor of the McGee
Product. The production budget for this project is approximately $150,000 of
which Tyndale has advanced $50,000, with the balance of the remaining $100,000
to be funded by TLC and Beachport Digital. Any additional advances that are able
to be secured through new or existing distributors will be equally split with
Tyndale, and thereafter, all remaining funds will be equally divided between TLC
and Beachport Digital.
ISRAEL: A VIRTUAL TOUR
Beachport Digital developed a joint CD-ROM computer project that highlights
the religious locations in the Holy Land. It takes the user to the places that
he or she has heard of in the New and Old Testaments. Beachport Digital had a
project development team in Israel during June and July 1996 taking photographs
using the unique photo realistic technology which is being developed by Apple
Computer and field tested by Beachport Digital. Beachport Digital anticipates
completing this project for distribution in December 1997, subject to obtaining
a distributor for said project for which no assurance can be given. The CD-ROM
will feature the following: Digitized Video, Photo Realistic Video Overlays,
Video Animated Characters and Quick Time Virtual Reality Nodes. See ' -- Current
Technology' for explanation.
SAFE HOUSE
Beachport Digital prepared the computer enhanced digital effects for the
feature film 'Safe House' in conjunction with FilmQuest Pictures and Showtime.
Beachport Digital provided all the on-screen digital effects sequences including
the remote video surveillance scenes, Perimeter Security, Internet Access, Data
Security, Data Archiving, E-Mail, Medical Website Visuals and Global Data Bomb.
The Company received a fee of $35,000 for the project.
CURRENT TECHNOLOGY
Beachport Digital believes it has discovered a niche in the developing
computer technology area. It has been focused on finding creative applications
of this technology. The following list describes the major technology inventory
Beachport Digital has developed:
'Early Reader' Computer model engine -- This computer program allows
the computer to display art and text with automated highlighting of phrase.
The highlighted text is synchronized with an audio track of the narrator
reading to the user.
Interactive Puzzle -- Turns still screen art into user buildable
interactive puzzles. This feature allows the user to choose the desired
skill level of the puzzle and change the challenge level of the game. This
feature gives younger users a 'Clue' button to assist them in completing
the puzzle if it becomes too difficult for them.
Color by Numbers -- This allows the user to turn the computer screen
into a painting easel. The program allows the user to access a selection of
colors and personalize the outline art related to the computer game.
Multiple Question Trivia -- The technology allows the user to select
the level of difficulty of related trivia questions. Currently it supports
over 500 questions and can be expanded to thousands of questions and
answers.
Digitized Video -- Beachport Digital has acquired all the necessary
in-house equipment and software necessary to capture and play back video
within the CD-ROM environment. The user can select the digitized video
which will enhance and personalize their enjoyment of the CD-ROM game.
Photo Realistic Video Overlays -- This feature allows Beachport
Digital to blend video and photographs to create a unique 'TV like' look
and feel. It will operate on an average multimedia computer and will not
need expensive additional equipment to experience this exciting application
of computer technology.
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Quick Time Virtual Reality Nodes -- Beachport Digital has the ability
to capture and create a 360 degree panoramic node from a series of still
photographs. The user can visually enter a still picture and 'look around'
as if they were physically there.
Video Animated Characters -- The capabilities to capture and insert
live characters into an animated or photographic environment. This is the
technology that allowed Forest Gump to meet the Presidents.
Advanced Internet Development -- Beachport Digital has the creativity
to apply much of the previous technology to on-line interactivity which
will include full sound and motion video.
EMPLOYEES
As of July 31, 1997, the Company had 51 full-time employees of whom 11 are
employed in executive positions, 30 are show performers and related personnel, 3
concession personnel and 7 are employed in general or administrative positions.
The Company has 3 part-time employees and hires part-time employees on a
contract basis to choreograph and perform in the Company's performances.
LEGAL PROCEEDINGS
The Company is not currently subject to any material legal proceedings.
In July 1997, Beachport, Stuart Benjamin Productions, Sidney Shlenker and
Stuart Benjamin entered into a settlement agreement with JB Oxford & Company,
RKS Financial Group, Inc. and JB Oxford Holdings, Inc. in which Beachport
received approximately $1,300,308 and 22,500 shares of common stock of JB Oxford
Holdings, Inc.
PROPERTIES
The Company's principal executive offices are located in approximately
2,100 square feet in Los Angeles, California. The Company's entered into a
sublease agreement, dated May 30, 1996. The sublease agreement terminated on May
31, 1997 and the Company is currently a month to month tenant, at an annual rent
of approximately $41,000. The Company is actively looking for new executive
offices and intends to move its office before the end of this year and
anticipates its rent increasing by 50 to 100%.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- - --------------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Barry Mendelson.............................. 54 President, Chief Executive Officer, Director
Sidney Shlenker.............................. 60 Chairman of the Board
Robert L. Barland............................ 50 Vice President, Secretary, Treasurer, Chief
Financial Officer, Chief Accounting Officer
Linda Azarone................................ 40 Chief Operating Officer
Robert Wussler............................... 60 Director
Walter J. Richards........................... 49 Director
Ronald Wilson................................ 42 Director
Jeremiah J. Harris........................... 41 Director
Richard L. Tuch.............................. 43 Director
Gary Lashinsky............................... 57 Director
</TABLE>
The business experience of each of the directors and executive officers of
the Company for at least the last five years is as follows.
Sidney L. Shlenker has been a Director of the Company since January 1994
and Chairman of the Board since April 1994. From 1964 to the present, Mr.
Shlenker has created, produced, packaged and promoted an array of entertainment
events in this country and abroad, including Broadway musicals, television
specials, stadium concerts, heavy-weight championship fights, close circuit
television broadcasts, pay-per-view contests, major league baseball, and
professional basketball. Mr. Shlenker has also served on the Board of Directors
of Ringling Bros. Barnum & Bailey Circus. Mr. Shlenker was also the founding
partner of PACE Management Corporation, a large entertainment company. While
with PACE, Mr. Shlenker was appointed president and chief operating officer of
the Houston based Astrodomain Corporation. In this capacity, he was responsible
for the management and operations of Astroworld Hotels (1,000 rooms), Astrohall
(a 900,000 square foot exhibition and convention center), Astroarena (a 6,000
seat venue), Astroworld theme park, the Astrodome stadium and the Houston Astros
Baseball team. From 1981 to 1984, Mr. Shlenker was the majority owner of two
independent television stations in Houston and Dallas. From 1982 to 1985, Mr.
Shlenker was a minority owner of the Houston Rockets, an NBA basketball team. In
1985 he became majority owner of the Denver Nuggets franchise of the NBA. On May
27, 1993, Mr. Shlenker filed a bankruptcy petition in the United States
Bankruptcy Court, Southern District of Texas -- Houston Division, Case Number
93-44130-H2-7 which was discharged on September 29, 1994. The petition was filed
as a result of contingent liabilities incurred from debt associated with the
Pyramid Joint Venture project in Memphis, Tennessee, which filed bankruptcy
proceedings in July 1991. These liabilities were incurred as a result of the
Pyramid Joint Venture's removal by the City of Memphis and County of Shelby,
Tennessee, as manager of the Pyramid project and subsequent dissolution of the
Joint Venture.
Barry Mendelson has been the President and a Director of the Company since
July 1995 and Chief Executive Officer since October 1, 1996 and has been the
producer and owner of On Ice since 1991. See 'Business -- On Ice.' From 1988 to
1990, Mr. Mendelson was the executive vice president of Madison Square Garden
Enterprises, responsible for the development, direction, marketing, production
and management of over 300 events yearly in Madison Square Garden, the Felt
Forum, the Beacon Theater and other outside ventures. The events were primarily
in the music, family entertainment and sports field and included the Circus, Ice
Capades, Big East Basketball Championship, NBA All Star Game, Virginia Slims
Tennis Championships, Sesame Street, Muppets, Monster Trucks, Supercross, St
John's University Basketball, and a variety of musical concerts that alone
numbered close to 90 per year. Events also included concerts starring such
artists as Elton John, Sting, Eric Clapton, Whitney Houston and Prince. His
responsibilities also included producing events in Tokyo, Japan. Prior to 1988,
Mr. Mendelson was the managing partner and owner of Ticket Master Associates,
the computer ticket
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operations for four Southern states, general partner of Saenger Performing Arts
Center, Inc. which owns the Saenger Theater, New Orleans, LA, an historic
landmark theater. In addition, Mr. Mendelson was also the owner and president of
Barry Mendelson Presents ('BMP'), a company which marketed and produced live
music, entertainment and sports events. BMP has produced over 600 events,
including Bruce Springsteen, Tina Turner, Harry Connick, Jr., Madonna, The
Rolling Stones, Bette Midler, Richard Pryor, Lionel Richie, Diana Ross, New Kids
on the Block, Rod Stewart, Phil Collins, Van Halen, Grand Prix Tennis,
Leonard/Hagler and Tyson/Spinks CCTV fights. Mr. Mendelson was also vice
president and then executive vice president of the NBA New Orleans Jazz
Basketball Team, responsible for marketing, advertising, public relationensing,
business affairs, promotions, and comptroller's office.
Robert L. Barland has been Vice President, Secretary, Treasurer, Chief
Financial Officer and Chief Accounting Officer of the Company since January
1994. Mr. Barland has 25 years of management experience. From 1991 to 1993, Mr.
Barland was a financial consultant for development and financial service
projects. From 1989 to 1991, Mr. Barland was employed by the Great American
Pyramid Joint Venture, a 5220 million public-private joint development project
which was formed to develop a 22,000 seat arena and theme park complex (the
'Pyramid Joint Venture'). He was responsible for the development of the
financial, computer and communication systems for the venture. In July 1991, the
Pyramid Joint Venture filed bankruptcy, as a result of its removal by the City
of Memphis and County of Shelby, Tennessee, as manager of the project. Prior to
1990, Mr. Barland was executive vice president and chief financial officer of
the National Basketball Association ('NBA') Denver Nuggets. He started with the
Denver Nuggets as its controller and his responsibilities expanded to include
financial management of Denver Nuggets and chief financial officer. Mr. Barland
was also the business manager of Denver Freightliner, Inc. a transportation
company, and general manager of Lion Truck Leasing, Inc., a truck leasing
company, in Denver, Colorado. He was a member of the Board of Directors and was
also responsible for the business operations of both companies which grew to $35
million dollars in sales annually prior to his departure. In addition, Mr.
Barland worked in the transportation leasing business for both the Hertz
Corporation -- Truck Leasing Division, a division of RCA and Ryder Truck Rental,
Inc.
Linda Azarone has been the Chief Operating Officer since October 1996. Ms
Azarone has 14 years of management experience in the entertainment industry in a
variety of capacities, including show development, marketing, advertising,
merchandising, planning and budgeting. From 1987 to 1988, Ms. Azarone was
director of finance for the Walt Disney Company's Consumer Products Division.
She was responsible for the strategic planning, budgeting, reporting, analysis
and control functions of the division. From 1988 to 1996, Ms. Azarone assumed
control of Walt Disney's relationship with the producers of Walt Disney's World
on Ice, first as director of marketing and then as vice president. In these
capacities, she supervised and supported the worldwide tours of shows attracting
audiences of close to 10 million annually.
Robert J. Wussler has been a Director and Vice Chairman of the Board of
Directors of the Company since January 1997. Mr. Wussler has been president and
chief executive officer of Affiliate Enterprises, Inc., a company owned by over
fifty media organizations which serves approximately 115 ABC television
affiliated stations covering in excess of fifty-five percent of U.S. TV
households. Since 1992, Mr. Wussler has also been the president and chief
executive officer of the Wussler Group, an international media company that
serves a broad spectrum of domestic and global media organizations. From 1989 to
1992, Mr. Wussler was president and chief executive officer of COMSAT Video
Enterprises, the largest provider of satellite delivered entertainment to the
U.S. lodging industry. From 1980 to 1989, Mr. Wussler held various positions,
including senior executive vice president and corporate executive vice president
for the Turner Broadcasting System ('TBS') and president of SuperStation WTBS.
Mr. Wussler provided broad leadership and business management to Cable News
Network (CNN), Headline News, TNT, the Atlanta Hawks, the Goodwill Games and TBS
Sports. Mr. Wussler managed all TBS staff functions. From 1978 to 1980, Mr.
Wussler was chairman and president of Pyramid Enterprises, Ltd., a television
production company producing syndicated programming for the international
marketplace, specializing in Japan, France and the former Soviet Union. From
1957 to 1978, Mr. Wussler held various positions for CBS, Inc., including
becoming the president of CBS Sports Division and CBS Television Network. He is
the 1992 recipient of the Television Arts and Sciences
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Trustees award. He also has been presented with five national Emmy Awards, four
Awards for Cable Excellence and numerous international awards. Mr. Wussler is a
director of Command Performance Network and Command Entertainment, Inc., two
publicly traded companies in the United States and Canada.
Walter J. Richards has been a Director of the Company since October, 1994.
Since 1991, Mr. Richards has been a partner of White-Richards and Associates, a
marketing, public relations and financial consulting firm for public and private
organizations in Nashville, Tennessee. The firm also identifies areas of
opportunity for business enterprise participation and primarily services
companies in the Health Care Industry. From 1990 to 1991, Mr. Richards was chief
financial officer of the Pyramid Joint Venture. In July 1991, the Pyramid Joint
Venture filed bankruptcy, as a result of its removal by the City of Memphis and
County of Shelby, Tennessee, as manager of the project. Prior to 1990, Mr.
Richards was a minority owner of the Denver Nuggets, Inc., an NBA franchise, and
held the positions of vice chairman of the board of directors and chief
financial officer. Mr. Richards has been involved in community affairs both in
Denver, Colorado, and Memphis, Tennessee. He served on the District Attorney's
Crime Advisory Commission in Denver and on the boards of directors for the
following organization: Memphis Chamber of Commerce, Memphis Convention and
Visitors Bureau; Memphis in May; Memphis Orchestral Society; Planned Parenthood;
and Youth Villages.
Ronald Wilson has been a Director of the Company since 1994. Mr. Wilson is
presently a member of the Texas House of Representatives having been elected to
the House in 1976 at the age of twenty two. Rep. Wilson is currently in his
ninth term with the House and has served on a number of committees and as
chairman of Legislative Black Caucus. During the 72nd he served as chairman of
the Liquor Regulation Committee, was a member of the Ways & Means Committee, the
Legislative Council, the Committee on Redistricting and was Chairman of the
interim Select Committee on Rules. He has been involved in introducing
significant legislation for Texas citizens including bills establishing the
Texas Human Rights Commission. He also initially introduced, during the 68th
Legislative Session, a bill relating to the establishment and operation of a
state lottery which was subsequently reintroduced by Rep. Wilson. The lottery
measure successfully passed the House and Senate during the 72nd Legislative
First Called Special Session with a constitutional amendment being passed by
Texas citizens approving the lottery in November 1991. Rep. Wilson has taught
courses on Politics at the University of Texas and Texas Southern University. He
is also a partner of the Houston law firm of Fisher, Gallagher & Lewis.
Jeremiah J. Harris has been a Director of the Company since June 1996.
Since January 1, 1996, Mr. Harris has been chairman of Production Resource Group
('PRO'), a corporation which provides design, engineering and technical
services, production management, scenic fabrication, lighting, engineered show
action equipment and scenic motion control systems to theatrical shows, theme
parks, corporate and industrial events, retail and restaurant establishments.
Since 1982, Mr. Harris has been president and chief executive officer of PRO's
division, Harris Production Services where has was responsible for purchasing
and managing such events as Ronald Regan's Inaugural Ceremonies in 1985 and FFX
or the MOM Grand Hotel and Casino staring Michael Crawford in 1994. Since 1996,
Mr. Harris has been a director of F & D Scenery in Canada and Stage Technology
in England.
Richard L. Tuch has been a Director of the Company since February 1997.
Since 1996, Mr. Tuch has been a managing partner of Alpha Ventures, ARRT
Partners and Alpha Trading Partners, investment companies. In 1975, Mr. Tuch was
the founder and president of Leisure Time Marketing Corporation, a
manufacturer's representative company. Leisure Time was instrumental in
launching from a sales and marketing perspective, such companies as Imagic,
Nintendo, Worlds of Wonder and Yes! Entertainment. Mr. Tuch is a Board member of
African Medical Development, a Telemedicine Device Company. He is also a Board
member of the Newton Group, an assisted living development company.
Gary Lashinsky President of the Royal Lipizzaner Stallions, Inc., the
Company's wholly owned subsidiary has been a Director of the Company since July
1997. He commenced his professional career in 1960 with his father, producing
and promoting Ringling Bros. Barnum & Bailey Circus when it went from a tent to
a touring arena production. His involvement in family oriented attractions
through North America, South America, Europe and Australia includes such
presentations as the Ringling Bros.
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Barnum & Bailey Circus, Ice Capades, Ice Follies, Holiday on Ice, Disney on
Parade, the Harlem Globetrotters, plus numerous Broadway theatrical productions,
including Yul Brynner in 'The King and I'. He has also produced concert tours of
popular recording artists, such as the Rolling Stones, The Who, Led Zepplin,
Olivia Newton-John, Elvis Presley and the Doors. In 1970, he produced his first
touring unit of the 'Wonderful World of Horses' starring the 'World Famous'
Royal Lipizanner Stallions, which has since played to millions of fans
throughout North America, South America, Puerto Rico, Mexico and the United
Kingdom. He has created two units of his Lipizanner Stallions show, one of which
will tour to approximately 140 cities in North America, the United Kingdom and
Australia during 1997 and which is currently touring North America and a second
unit which recently completed an extended engagement at the Excalibur Hotel and
Casino in Las Vegas, Nevada.
All directors hold office until the next annual meeting of shareholders or
until their successors are elected and qualified. Officers are appointed by the
Board of Directors and serve at the discretion of the Board. Messrs. Mendelson,
Barland, Shlenker and Lashinsky have employment agreements with the Company. See
'Employment Agreements.'
SIGNIFICANT EMPLOYEES
Christopher Riggs, has been president of Beachport Entertainment Digital
since 1995. He was president of Enigma Interactive, Inc., an inactive subsidiary
of the Company since its formation in 1993. From 1990 to 1993, he was President
of Radiance Software, an independent designer and developer of video games for
Sega and Nintendo Platforms. From 1989 to 1990, Mr. Riggs was director of
product development for CAPCOM USA, a company which produced Walt Disney,
MegaMan, and Streetfighter video games. Mr. Riggs, through his company Radiance
Group, Inc., has been responsible for the development of a number of video games
including, Where's Waldo, Darkwing Duck, Tail Spin, Andre Agassi-Tennis, Steven
Seagal's Final Option. Pursuant to an agreement dated October 11, 1995, Mr.
Riggs has agreed to finance the operations of Beachport Digital. All net
operating profits of the Beachport Digital are to be divided among the Company
and Riggs on a 60% - 40% basis, respectively, until the Company has received
$400,000 of credit for past investments and on a 50% - 50% basis thereafter.
Upon the sale or other disposition of Beachport Digital, Mr. Riggs would be
entitled to 40% of the proceeds thereof.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE.
The following table sets forth the annual and long-term compensation for
services in all capabilities to the Company for the three years ended December
31, 1996 of Barry Mendelson, the Company's President, Chief Executive Officer
and Chief Operating Officer. The Company did not pay any compensation exceeding
$100,000 to any other executive officers for the year ended December 31, 1996.
See 'Employment Agreements.'
<TABLE>
<CAPTION>
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- - --------------------------------------------------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Barry Mendelson, President and Chief Executive Officer............... 1996 $200,000 $ -- $8,900
1995 $ 53,846 $ 22,275 $6,300
1994 $120,000 $130,000 $8,300
</TABLE>
The Company has no retirement, pension or profit sharing program for the
benefit of its directors, officers or other employees but the Board of Directors
may recommend one or more such programs for adoption in the future.
DIRECTOR COMPENSATION
Directors of the Company who are not salaried officers will receive a fee
of $500 for attending each Board meeting or meeting of a committee of the Board.
In addition, all directors will be reimbursed for their reasonable out-of-pocket
expenses incurred in connection with attending Board and committee meetings.
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EMPLOYMENT AGREEMENTS
As of June 30, 1996, the Company entered into an employment agreement with
Barry Mendelson to serve as the Company's President and Chief Executive Officer
for a term of four years which agreement is subject to automatic one year
renewals unless earlier terminated. Pursuant to the terms of this agreement, Mr.
Mendelson is required to devote his full business time and attention to the
business of the Company. Mr. Mendelson will receive a base salary of $200,000
with subsequent increases in salary at the discretion of the Company's Board of
Directors. In addition to his base salary, Mr. Mendelson will receive 50% of the
fees generated by him as producer. Mr. Mendelson will also have the right to
participate in all benefit plans afforded or which may be afforded to other
executive officers during the term of the agreement including, without
limitation, group insurance, health, hospital, dental, major medical, life and
disability insurance, stock option plans and other similar fringe benefits. If
Mr. Mendelson dies or is unable to perform his duties on account of illness,
injury or other incapacity and the agreement is terminated, he or his legal
representative shall receive from the Company his normal monthly compensation
for a period of one year in the event of death and six additional months in the
event of illness, injury or other incapacity. Mr. Mendelson employment agreement
contains certain confidentiality and non-competition provisions. The Company has
$750,000 of key-man life insurance for the benefit of the Company on the life of
Mr. Mendelson.
In October 1996, the Company entered into an employment agreement with
Sidney Shlenker to serve as the Company's Chairman. The employment agreement is
for a five-year term and is subject to automatic one-year renewals unless
earlier terminated. Pursuant to the terms of this employment agreement, Mr.
Shlenker is required to devote his full business time and attention to fulfill
his duties and responsibilities to the Company. Mr. Shlenker's salary for the
term of his agreement will be an amount to be set by the Board of Directors of
the Company. Mr. Shlenker will also have the right to participate in all
benefits plans afforded or which may be afforded to other executive officers
during the term of the agreement including without limitation, group insurance,
health, hospital, dental, major medical, life and disability insurance, stock
option plans and other similar fringe benefits. If Mr. Shlenker dies or is
unable to perform his duties on account of illness, injury or other incapacity
and the agreement is terminated, he or his legal representative shall receive
from the Company his normal monthly compensation for a period of one year in the
event of death and six additional months in the event of illness, injuries or
other incapacity. Mr. Shlenker's employment agreement contains certain
confidentiality and non-competitive provisions. The Company has $750,000 of
key-man life insurance for the benefit of the Company on the life of Mr.
Shlenker.
In October 1996, the Company entered into an employment agreement with
Robert L. Barland to serve as the Company's Vice President, Secretary and
Treasurer. The employment agreement is for a one term and is subject to
automatic annual renewal unless earlier terminated. Pursuant to the terms of
this agreement, Mr. Barland is required to devote his full business time and
attention to fulfill his duties and responsibilities to the Company. Mr. Barland
will receive a base salary of $120,000 for the first year of the term of the
employment agreement and the Company's Board of Directors may subsequently
increase Mr. Barland's salary or pay discretionary bonuses as it deems
appropriate. Mr. Barland will also have the right to participate in all benefit
plans afforded or which may be afforded to other executive officers during the
term of the agreement including, without limitation, group insurance, health,
hospital, dental, major medical, life and disability insurance, stock option
plans and other similar fringe benefits. If Mr. Barland dies or is unable to
perform his duties on account of illness, injury or other incapacity and the
agreement is terminated, he or his legal representative shall receive from the
Company his normal monthly compensation for a period of one year in the event of
his death and six additional months in the event of illness, injury or other
incapacity. Mr. Barland's employment agreement contains certain confidentiality
and noncompetitive provisions.
As of July 1, 1997, the Company entered into an employment agreement with
Gary Lashinsky to serve as the Chairman and Chief Executive Officer of RLS. The
employment agreement is for a three year term and is subject to automatic annual
renewal unless earlier terminated. Pursuant to the terms of this agreement, Mr.
Lashinsky is required to devote his full business time and attention to fulfill
his duties and responsibilities to the Company. Mr. Lashinsky will receive a
base salary of $144,000 per annum and the Company's Board of Directors may
subsequently increase Mr. Lashinsky's salary or pay
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discretionary bonuses as it deems appropriate. Mr. Lashinsky will also have the
right to participate in all benefit plans afforded or which may be afforded to
other executive officers during the term of the agreement including, without
limitation, group insurance, health, hospital, dental, major medical, life and
disability insurance, stock option plans and other similar fringe benefits. In
the event of Mr. Lashinsky's disability for a period of six consecutive months,
the Company is obligated to pay Mr. Lashinsky for a period of an additional six
months following delivery of a disability notice to him by the Company. In the
event of Mr. Lashinsky's death, the normal monthly compensation due him will be
payable to his estate for a period of one year. Mr. Lashinsky's employment
agreement contains certain confidentiality and noncompetitive provisions.
As of July 1, 1997, the Company entered into an employment agreement with
Elizabeth Lashinsky to serve as President of RLS. The employment agreement is
for a three year term and is subject to automatic annual renewal unless earlier
terminated. Pursuant to the terms of this agreement, Ms. Lashinsky is required
to devote her full business time and attention to fulfill her duties and
responsibilities to the Company. Ms. Lashinsky will receive a base salary of
$144,000 for per annum and the Company's Board of Directors may subsequently
increase Ms. Lashinsky's salary or pay discretionary bonuses as it deems
appropriate. Ms. Lashinsky will also have the right to participate in all
benefit plans afforded or which may be afforded to other executive officers
during the term of the agreement including, without limitation, group insurance,
health, hospital, dental, major medical, life and disability insurance, stock
option plans and other similar fringe benefits. In the event of Ms. Lashinsky's
disability for a period of six consecutive months, the Company is obligated to
pay Ms. Lashinsky for a period of an additional six months following delivery of
a disability notice to her by the Company. In the event of Ms. Lashinsky's
death, the normal monthly compensation due her will be payable to her estate for
a period of one year. Ms. Lashinsky's employment agreement contains certain
confidentiality and noncompetitive provisions.
OPTION PLAN
In June 1996, the Board of Directors adopted and the stockholders approved
the Option Plan. The Option Plan provides for the grant of incentive stock
options ('ISOs'), intended to qualify for preferential tax treatment under
Section 422 of the Internal Revenue Code of 1986, as amended, and nonstatutory
stock options ('NSOs') that do not qualify for such treatment. Only employees
(including officers and directors who are also employees) of the Company or any
of its subsidiaries are eligible to receive grants of ISOs. Employees, officers,
directors, consultants, contractors and advisers of the Company or any
subsidiary are eligible to receive grants of NSOs. The purpose of the Option
Plan is to attract and retain exemplary directors, employees, agents and
consultants. No options can be granted under the Option Plan at less than 100%
of the fair market value of the Company's securities on the date of grant.
The Option Plan provides that a maximum of 1,000,000 shares of common stock
may be issued upon the exercise of options granted under the Option Plan. If an
option granted under the Option Plan expires or terminates for any reason
without having been exercised in full, then the unpurchased shares subject to
that option will be available for additional option grants. As of the date of
this Prospectus, no options have been granted under the Option Plan.
The Option Plan is administered by the Board of Directors of the Company
which determines, in its discretion, among other things, the recipients of
grants, whether a grant will consist of ISOs or NSOs, or a combination thereof,
and the number of shares of common stock to be subject to such options. The
Board of Directors of the Company may, in its discretion, delegate its power,
duties and responsibilities under the Option Plan to a committee consisting of
two or more directors who are 'disinterested persons' within the meaning of Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended.
LIMITATIONS ON PERSONAL LIABILITY OF DIRECTORS AND OFFICERS
The Utah Revised Business Corporation Act, in general, allows corporations
to indemnify their directors and officers against expenses (including attorneys'
fees), judgments, fines and settlement
31
<PAGE>
<PAGE>
amounts actually and reasonably incurred by such person in connection with suits
or proceedings, if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation. In the case of a criminal action, the director or officer must have
had no reasonable cause to believe that person's conduct was unlawful. Under
current law, no indemnification may be made if in connection with a proceeding
or in the right of the corporation in which the director or officer was adjudged
to be liable to the corporation or that person derived an improper personal
benefit.
The Company's Certificate of Incorporation and By-Laws provided that the
Company shall indemnify its directors and officers to the fullest extent
permitted by Utah Law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company 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.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the common stock, as of the date of this Prospectus, by
(i) each person who is known by the Company to beneficially own more than 5% of
the common stock, (ii) each director of the Company, (iii) each of the Company's
named executive officers and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(14)
------------------------------------------------------------------
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OWNED AFTER
THE OFFERING SHARES THE OFFERING
---------------------- OFFERED IN --------------------------
BENEFICIAL OWNER(14) NUMBER PERCENTAGE THE OFFERING NUMBER PERCENTAGE(15)
- - ---------------------------------------------------- --------- ---------- ------------ --------- --------------
<S> <C> <C> <C> <C> <C>
Barry Mendelson(1).................................. 800,000 7.4% -- 800,000 4.7
Robert L. Barland(2)................................ 75,000 * -- 75,000 *
Linda Azarone(3).................................... 50,000 * 50,000 -- --
Walter J. Richards(4)............................... 120,000 1.1 10,000 110,000 1.0%
Sidney Shlenker(5).................................. 863,000 8.0 -- 863,000 5.0
Ronald Wilson(6).................................... 13,000 * 10,000 3,000 *
Jeremiah J. Harris(7)............................... 22,000 * 22,000 -- --
Robert Wussler(8)................................... 350,000 3.1 -- 350,000 2.0
Richard Tuch(9)..................................... 20,845 * 20,845 -- --
Gary Lashinsky(10).................................. 336,879 3.1 -- 336,879 2.0
Elizabeth Lashinsky(11)............................. 336,880 3.1 -- 336,880 2.0
Gary & Elizabeth....................................
Lashisky JTWROS(10)(11)............................. 35,461 * -- -- --
Wasserstein Perella Securities, Inc.(12)............ 600,000 5.3 600,000 -- --
Liviakis Financial Communications(13)............... 1,850,000 15.6 1,850,000 -- --
All executive officers and directors as a group (10
persons).......................................... 3,023,065 26.9 112,845 2,910,220 16.7%
</TABLE>
- - ------------
* less than one percent of the shares of Common Stock.
(1) Mr. Mendelson's business is 517 North Robertson Blvd., Suite 200, Los
Angeles, CA 90048. See 'Certain Transactions -- Transactions with Executive
Officers.'
(2) Mr. Barland's business address is 517 North Robertson Blvd., Suite 200, Los
Angeles, CA 90048.
(3) Include options to purchase 50,000 shares of common stock at $1.75 per
share. Mr. Azarone's business address is 517 North Robertson Blvd., Suite
200, Los Angeles CA 90048.
(footnotes continued on next page)
32
<PAGE>
<PAGE>
(footnotes continued from previous page)
(4) Include warrants to purchase to 10,000 shares of Common Stock at $.93 per
share. Mr. Richard's business address is 220 Athens Way #405, Nashville, TN
37228.
(5) Includes 777,000 shares of common stock owned by Mr. Shlenker's wife and
children for which Mr. Shlenker disclaims beneficial ownership of. Mr.
Shlenker's business address is 517 North Robertson Blvd., Suite 200, Los
Angeles, CA 90048.
(6) Includes warrants to purchase 10,000 shares of common stock exercisable at
$.93 per share and 3,000 shares of common stock owned by Mr. Wilson's
children. Mr. Wilson's business address is 24 Greenway Plaza #616, Weslayan
Tower, Houston, TX 77046.
(7) Includes options to purchase 12,000 shares of common stock at an exercise
price of $2.50 per share and options to purchase 10,000 shares of common
stock at $.93 per share. Mr. Harris's business address is 4170 W. Harmon
Avenue, Suite 6, Las Legas, Nevada.
(8) Includes options to purchase 200,000 shares of common stock at an exercise
price of $.50 per share and options to purchase 150,000 shares exercisable
at the lowest closing price for the year ended December 31, 1997 or any
date in 1997. Mr. Wussler's business address is 2 Wisconsin Circle, Chevy
Chase, MD 20815. Excludes options to purchase 150,000 of common stock
exercisable at the lowest closing price for the year ended December 31,
1998 or any date in 1998.
(9) Includes warrants to purchase 20,845 shares of Common Stock (15,000
exercisable at $1.20 and 5,845 exercisable at $1.375) Mr. Tuch's business
address is 6 Wells Avenue, Newton, MA 02159.
(10) Mr. Lashinsky's business address is 1053 Van Arsdale, Oveida FL 32765.
(11) Ms. Lashinsky's business address is 1053 Van Arsdale, Oveida FL 32765.
(12) Includes options to purchase 600,000 shares of common stock at $.25 per
share. Wasserstein Perella Securities, Inc.'s address is 31 West 52nd
Street, New York, NY 10019.
(13) Includes options to acquire 1,050,000 shares of the Company's common stock
at $1.120 per share. Liviakis Financial Communications business address is
2420 K Street, Sacramento, CA 95816-6149.
(14) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated, subject to community property
laws where applicable. The number of shares of Common Stock outstanding
proir to the offering is 10,782,115. For purposes of this table, a person
or group of persons is deemed to have 'beneficial ownership' of any shares
which such person has the right to acquire within 60 days. For purposes of
computing the percentage of outstanding shares held by each person or group
of persons named above, any security which such person or group of persons
has the right to acquire within 60 days after such date is deemed to be
outstanding for the purpose of computing the percentage ownership for such
person or persons, but is not deemed to be outstanding for the purpose of
computing the percentage of ownership of any other person.
(15) Assumes all warrants and options are exercised and all shares of preferred
stock are converted.
SELLING SECURITYHOLDERS
Up to 8,997,507 Selling Securityholder's shares of common stock are being
offered by Selling Securityholders. The Company has agreed to bear all expenses
(other than underwriting or selling commissions or any fees and disbursements of
counsel to such Selling Securityholders) in connection with the registration of
their securities.
The following table sets forth certain information with respect to holders
for whom the Company is registering shares of common stock. Except as otherwise
indicated herein, none of the holders has held
33
<PAGE>
<PAGE>
any position or office or has had a material relationship with the Company or
any of its affiliates within the past three years. Except as set forth herein,
the Company believes that none of the holders listed below owns any other
securities of the Company.
<TABLE>
<CAPTION>
TOTAL SHARES SHARES OF
SHARES OF BENEFICIALLY COMMON STOCK SHARES BENEFICIALLY
COMMON STOCK OWNED PRIOR BEING OWNED AFTER THE
SHARES OF UNDERLYING TO OFFERING OFFERED REGISTRATION
COMMON WARRANTS/OPTIONS & ------------------- ------------ --------------------
BENEFICIAL OWNER STOCK PREFERRED STOCK(1) NUMBER PERCENT NUMBER TOTAL NUMBER %
- - ----------------------------- --------- ------------------ --------- ------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
155964 Canada, Inc. ......... -- 17,383 17,383 * 17,383 0 --
Abramowitz Michael........... -- 11,000 11,000 * 11,000 0 --
Adler Gerald A.(2)........... -- 200,000 200,000 1.82% 200,000 0 --
Agranoff Gerald.............. -- 11,000 11,000 * 11,000 0 --
Alex Segal Family Trust...... 120,000 -- 120,000 1.11% 120,000 0 --
Alpha Ventures, LLC.......... -- 83,311 83,311 * 83,311 0 --
Ardinger H. T. Jr. .......... -- 11,000 11,000 * 11,000 0 --
Arizona National Resources... -- 7,480 7,480 * 7,480 0 --
Astaire & Partners, Ltd. .... -- 552,141 552,141 4.87% 552,141 0 --
Atlanta Allergy & Asthma..... -- 22,000 22,000 * 22,000 0 --
Azaronne Linda(3)............ -- 50,000 50,000 * 50,000 0 --
Block Michael................ -- 22,000 22,000 * 22,000 0 --
BlueStone Capital
Partners(4)................ -- 73,150 73,150 * 73,150 0 --
Blum Edis.................... -- 1,100 1,100 * 1,100 0 --
Chanowski Fred............... 15,000 15,000 * 15,000 0 --
Chasanoff Ted................ -- 2,750 2,750 * 2,750 0 --
Clarke Kevin, IRA............ -- 5,500 5,500 * 5,500 0 --
Cohen Murray................. -- 5,500 5,500 * 5,500 0 --
Comings William/Margaret..... -- 5,500 5,500 * 5,500 0 --
Curnyn Arnold................ -- 22,000 22,000 * 22,000 0 --
Dana Investments............. -- 3,689 3,689 * 3,689 0 --
Darienzo Ralph A. ........... -- 5,500 5,500 * 5,500 0 --
Decter Irving................ -- 5,500 5,500 * 5,500 0 --
Deluca Gary.................. -- 125,000 125,000 1.15% 125,000 0 --
Dembow George F. ............ -- 7,260 7,260 * 7,260 0 --
Dembow George F. III......... -- 7,260 7,260 * 7,260 0 --
DLJ f/b/o Francis E.
Lammers.................... 19,575 15,000 34,575 * 34,575 0 --
DMN Capital.................. 55,000 -- 55,000 * 55,000 0 --
Domeco Venture............... -- 5,500 5,500 * 5,500 0 --
Edelman Darryll and Kagan
Lawrence................... -- 5,500 5,500 * 5,500 0 --
Eurotrade/Securities......... 65,258 -- 65,258 * 65,258 0 --
Fatoullah Carol.............. -- 2,750 2,750 * 2,750 0 --
Fatoullah Elliott............ -- 2,750 2,750 * 2,750 0 --
Fedler Anthony............... -- 11,000 11,000 * 11,000 0 --
FIBI Bank (Schweiz) AG....... -- 22,000 22,000 * 22,000 0 --
Fin-Atlantic Corporation..... 218,750 -- 218,750 2.03% 218,750 0 --
Flynn Robert A. ............. 45,100 -- 45,100 * 45,100 0 --
Freundlich Kenneth........... -- 50,000 50,000 * 50,000 0 --
FYJIGIM, Inc. ............... 50,000 -- 50,000 * 50,000 0 --
Galterio Robert J. .......... 36,098 30,000 66,098 * 66,098 0 --
Goldman Harvey............... 7,375 -- 7,375 * 7,375 0 --
Goldstein Michael............ -- 5,500 5,500 * 5,500 0 --
Goodman Allen................ -- 15,000 15,000 * 15,000 0 --
Gopen Robert L. ............. -- 15,000 15,000 * 15,000 0 --
Grillo Joan.................. -- 5,500 5,500 * 5,500 0 --
Gross John IRA............... -- 2,750 2,750 * 2,750 0 --
Harari Chaya................. -- 2,750 2,750 * 2,750 0 --
Harris Jeremiah J.(5)........ -- 22,000 22,000 * 22,000 0 --
</TABLE>
(table continued on next page)
34
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
TOTAL SHARES SHARES OF
SHARES OF BENEFICIALLY COMMON STOCK SHARES BENEFICIALLY
COMMON STOCK OWNED PRIOR BEING OWNED AFTER THE
SHARES OF UNDERLYING TO OFFERING OFFERED REGISTRATION
COMMON WARRANTS/OPTIONS & ------------------- ------------ --------------------
BENEFICIAL OWNER STOCK PREFERRED STOCK(1) NUMBER PERCENT NUMBER TOTAL NUMBER %
- - ----------------------------- --------- ------------------ --------- ------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Harrison C. Scott............ 94,340 -- 94,340 * 94,340 0 --
Hight Norton F. ............. -- 5,500 5,500 * 5,500 0 --
Hight Randall................ -- 5,500 5,500 * 5,500 0 --
Hodas Martin................. -- 11,000 11,000 * 11,000 0 --
Hoffstein Richard A. ........ -- 22,000 22,000 * 22,000 0 --
Hughes Judy C. .............. 36,000 -- 36,000 * 36,000 0 --
Jaffoni & Collins............ -- 75,000 75,000 * 75,000 0 --
Janssen Peter................ 20,000 480,000 500,000 4.44% 500,000 0 --
Karfunkel George............. -- 11,000 11,000 * 11,000 0 --
Kroning Greg................. -- 100,000 100,000 * 100,000 0 --
Laidlaw Securities........... -- 67,500 67,500 * 67,500 0 --
Lazar Ronald & Barbara....... -- 2,750 2,750 * 2,750 0 --
Lerman Roy................... -- 40,000 40,000 * 40,000 0 --
Levesque Gerald S. .......... -- 15,000 15,000 * 15,000 0 --
Levine Jerry................. -- 5,500 5,500 * 5,500 0 --
Levine Mark J. .............. -- 15,000 15,000 * 15,000 0 --
Levy Benton.................. -- 50,000 50,000 * 50,000 0 --
Liviakis Financial
Communications(6).......... 800,000 1,050,000 1,850,000 15.64% 1,850,000 0 --
Longmoore John T. ........... 11,000 11,000 * 11,000 0 --
Lotner Gary Z. .............. 5,500 5,500 * 5,500 0 --
Love Richard................. 100,000 100,000 * 100,000 0 --
Lowrie Management, Ltd....... 11,000 11,000 * 11,000 0 --
Lucchese Joseph.............. 8,250 8,250 * 8,250 0 --
Lulloff Rolf ................ 78,729 60,000 138,729 1.28% 78,729 0 --
Lyons Community Property..... 102,000 102,000 * 102,000 0 --
Mallory Factor............... 60,000 60,000 * 60,000 0 --
Malone Robert E. ............ 5,500 5,500 * 5,500 0 --
Marks Roger P. .............. 2,750 2,750 * 2,750 0 --
Merel Mark................... 16,500 16,500 * 16,500 0 --
Miller Gary.................. 5,500 5,500 * 5,500 0 --
Millman Paul M. ............. 2,750 2,750 * 2,750 0 --
Mosberg Robert............... 39,801 39,801 * 39,801 0 --
Moseson Rivka Perlstein...... 151,752 120,000 271,752 2.49% 271,752 0 --
Organization Services........ 11,000 11,000 * 11,000 0 --
Pamnani Sanjeev.............. 22,000 22,000 * 22,000 0 --
Parner Harriet............... 11,000 11,000 * 11,000 0 --
Parnes Alan.................. 22,000 22,000 * 22,000 0 --
Parnes Irwin................. 11,000 11,000 * 11,000 0 --
Pocisk George B. ............ 11,000 11,000 * 11,000 0 --
Polak Anthony G. ............ 5,500 5,500 * 5,500 0 --
Polak Fredrick B. ........... 5,500 5,500 * 5,500 0 --
Polak Jack, Keogh............ 5,500 5,500 * 5,500 0 --
Prag Robert B. .............. 200,000 350,000 550,000 4.94% 550,000 0 --
Re Charles, G. .............. 5,500 5,500 * 5,500 0 --
Reinartz Jchuda.............. 5,500 5,500 * 5,500 0 --
Richards Walter J.(7)........ 10,000 10,000 * 10,000 0 --
RL Capital Partners.......... 11,000 11,000 * 11,000 0 --
Roman Steve.................. -- 5,500 5,500 * 5,500 0 --
Rooney Timothy J. ........... 108,831 90,000 198,831 1.82% 198,831 0 --
Ross Alfred S. .............. -- 83,399 83,399 * 83,399 0 --
Rothschild Jonathan.......... -- 22,000 22,000 * 22,000 0 --
</TABLE>
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35
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
TOTAL SHARES SHARES OF
SHARES OF BENEFICIALLY COMMON STOCK SHARES BENEFICIALLY
COMMON STOCK OWNED PRIOR BEING OWNED AFTER THE
SHARES OF UNDERLYING TO OFFERING OFFERED REGISTRATION
COMMON WARRANTS/OPTIONS & ------------------- ------------ --------------------
BENEFICIAL OWNER STOCK PREFERRED STOCK(1) NUMBER PERCENT NUMBER TOTAL NUMBER %
- - ----------------------------- --------- ------------------ --------- ------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Sandgrain Securities,
Inc.(8).................... -- 300,000 300,000 2.71% 300,000 0 --
Santero John F. ............. -- 100,946 100,946 * 100,946 0 --
Scheinfeld Mark.............. -- 11,000 11,000 * 11,000 0 --
Schmidt Ronald............... -- 44,000 44,000 * 44,000 0 --
SES Family Trading........... -- 110,000 110,000 1.01% 110,000 0 --
Seybold Wayne................ 25,000 25,000 50,000 * 50,000 0 --
Shapiro Irwin................ -- 5,500 5,500 * 5,500 0 --
Silver Bruce A. ............. -- 1,100 1,100 * 1,100 0 --
Silverstein Lee H. .......... -- 11,000 11,000 * 11,000 0 --
Sitnycky Nicholas............ -- 11,000 11,000 * 11,000 0 --
Smyth Thomas D. ............. 155,855 120,000 275,855 2.53% 275,855 0 --
South Ferry II, L. P. ....... 193,179 150,000 343,179 3.14% 343,179 0 --
Spangler Dennis L. .......... -- 22,000 22,000 * 22,000 0 --
Stadtmauer Gary.............. -- 5,500 5,500 * 5,500 0 --
Stadtmauer Murry............. -- 5,500 5,500 * 5,500 0 --
Steinberg Arthur IRA......... -- 16,500 16,500 * 16,500 0 --
Szikman Michael.............. -- 5,500 5,500 * 5,500 0 --
Tarica Michele............... -- 5,500 5,500 * 5,500 0 --
Taub Israel IRA.............. -- 2,750 2,750 * 2,750 0 --
Teuma David C. .............. -- 10,000 10,000 * 10,000 0 --
Thompson Orville K. RLT...... -- 11,000 11,000 * 11,000 0 --
Tuch Family Ltd
Partnership(9)............. -- 20,845 20,845 * 20,845 0 --
Wasserman Eric............... -- 50,000 50,000 * 50,000 0 --
Wasserstein & Perella
Securities, Inc.(10)....... -- 600,000 600,000 5.27% 600,000 0 --
Waterman Daniel.............. -- 11,000 11,000 * 11,000 0 --
Weiner Myron................. -- 5,500 5,500 * 5,500 0 --
Wellington Corp.............. -- 30,000 30,000 * 30,000 0 --
Wiley Tom.................... -- 10,000 10,000 * 10,000 0 --
Wilson Ronald(11)............ -- 10,000 10,000 * 10,000 0 --
Wolfson Paul ................ -- 22,000 22,000 * 22,000 0 --
Zuck Alfred C. .............. -- 5,500 5,500 * 5,500 0 --
Zung Murry .................. -- 11,000 11,000 * 11,000 0 --
--------- ------------------ --------- ------------
2,622,643 6,286,564 8,909,207 8,909,207
</TABLE>
- - ------------
* Less than 1.0% Beneficial Ownership.
(1) Unless otherwise indicated, each person has sole investment and voting power
with respect to the shares indicated, subject to community property laws
where applicable. The number of shares of Common Stock outstanding proir to
the offering is 10,782,115. For purposes of this table, a person or group of
persons is deemed to have 'beneficial ownership' of any shares which such
person has the right to acquire within 60 days. For purposes of computing
the percentage of outstanding shares held by each person or group of persons
named above, any security which such person or group of persons has the
right to acquire within 60 days after such date is deemed to be outstanding
for the purpose of computing the percentage ownership for such person or
persons, but is not deemed to be outstanding for the purpose of computing
the percentage of ownership of any other person.
(2) Mr. Adler is a partner of Bondy & Schloss LLP, counsel to the Company.
(3) Ms. Azaronne is the Chief Operating Officer of the Company and has agreed
not to sell said shares for a period of one year from the effective date.
(footnotes continued on next page)
36
<PAGE>
<PAGE>
(footnotes continued from previous page)
(4) BlueStone Capital Partners acted as placement agent for the Company in
connection with the placement of the Company's June 1997 offering of senior
and junior debt and continues to provide investment banking services to the
Company.
(5) Mr. Harris is a Director of the Company.
(6) Liviakis Financial Communications provides financial public relations for
the Company.
(7) Mr. Richards is a Director of the Company.
(8) Sandgrain, Inc. is a business and financial consultant to the Company.
(9) Mr. Tuch is a Director of the Company and a partner of the Tuch Family Ltd.
Partnership.
(10) Wasserstein & Perella Securities, Inc. has acted and continues to advise
the Company in connection with potential mergers and acquisitions.
(11) Mr. Wilson is a Director of the Company.
The Selling Securityholders can only sell their Shares as long as a current
registration statement is in effect and as long as they deliver a current
Prospectus to the purchaser.
CERTAIN TRANSACTIONS
TRANSACTIONS WITH EXECUTIVE OFFICERS
In June 1995, the Company entered into an option agreement with On Ice and
Barry Mendelson, the Company's President and Chief Executive Officer, pursuant
to which the Company acquired an option to purchase, subject to the terms and
conditions contained therein, all of the issued and outstanding shares of
capital stock of On Ice for $500,000 and 800,000 shares of common stock of the
Company. Upon exercise of the option, the Company further agreed to reimburse
Mr. Mendelson the funds he advanced for On Ice's 1995 operating expenses
aggregating $552,500. All such reimbursements are to be paid out of operating
profits of On Ice. The Company entered into an option exercise agreement dated
as of July 1996 and exercised said option. Mr. Mendelson, pursuant to the terms
of the option agreement is entitled to receive 50% of any fees generated by him
as a producer of Company related projects. As of June 30, 1996, the Company
entered into an employment agreement with Barry Mendelson. See
'Management -- Employment Agreement'.
In August 1996, the Company issued Jeremiah Harris, a Director of the
Company, an option to purchase 12,000 shares of common stock at an option price
of $2.50 per share which expires on August 15, 1999, in consideration for Mr.
Harris agreeing to serve on the Board of Directors of the Company.
On October 11, 1996, the Company issued Linda Azarone, the Company's Chief
Operating Officer, to purchase 50,000 shares of common stock at an exercise
price of $1.75 per share which warrants expire on September 30, 1999, for
services rendered.
On December 27, 1996, the Company issued to Robert Wussler, a Director of
the Company, an option to purchase 500,000 shares of Common Stock of which
200,000 options are exerciseable at $.50 per share and expire on December 27,
1999, 150,000 options are exerciseable at the lowest closing bid price of the
common stock for the year ended December 31, 1997 or three years from any other
date he selects to exercise his options in 1997 and expire three years from such
date and 150,000 options are exerciseable at the lowest closing bid price of the
common stock for the year ended December 31, 1998 or three years from any other
date he selects to exercise his options in 1998 and expire three years from such
date, in consideration for his agreeing to become a Director of the Company.
During December 1996, ESL borrowed $74,319 from its profit sharing account.
The current balance of the outstanding loan is $71,353.
On January 17, 1997, the Company issued options to purchase 10,000 shares
of common stock at an exercise price of $.93 per share which options expire on
January 17, 2000 each to Jeremiah Harris, Ronald Wilson and Walter J. Richards,
for services rendered as members of the Company's Board of Directors.
37
<PAGE>
<PAGE>
On July 1, 1997, the Company issued 336,879 shares of common stock to Gary
Lashinsky, 336,880 shares of common stock to Elizabeth Lashinsky and 35,461
shares of common stock to Gary and Elizabeth Lashinsky, as joint tenants, all in
connection with the merger of ESL into RSL, a wholly owned subsidiary of the
Company.
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale of the Shares by
the Selling Securityholders; however, the Company will receive proceeds from the
issuance of shares of common stock upon the exercise of the warrants and options
ranging from $.25 to $5.00 per share. If the warrants and options are exercised
in full, the Company will receive $7,585,282 of gross proceeds therefrom. Each
of the Selling Securityholders may sell Shares directly or through
broker-dealers who may act solely as agents, or who may acquire Shares as
principals. The Shares may be sold from time to time by the Selling
Securityholders, or by pledgees, donees, transferees or other successors in
interest to the Selling Securityholders. The distribution of the Shares may be
affected in one or more transactions that may take place through the NASD
over-the-counter bulletin board, including block trades or ordinary broker's
transactions, or through privately negotiated transactions, or through a
combination of any such methods of sale, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Securityholders in connection with such
sales.
The aggregate proceeds to the Selling Securityholders from the sale of the
Shares will be the purchase price of the Shares sold less the aggregate agents'
commissions and other expenses of issuance and distribution not borne by the
Company. The Selling Securityholders and any dealers or agents that participate
in the distribution of the Shares may be deemed to be 'underwriters' within the
meaning of the Securities Act, and any profit on the sale of the Shares by them
and any commissions received by any such dealers or agents may be deemed to be
underwriting discounts and commissions under the Securities Act.
The Selling Securityholders may effect transactions by selling the Shares
directly or through broker-dealers acting either as principal or as agent, and
such broker-dealers may receive compensation in the form of usual and customary
or specifically negotiated underwriting discounts, concessions or commissions
from the Selling Securityholders.
The Company will bear all of the expenses of registration of the Shares
under the Federal and state securities laws, including filing fees. Such
expenses payable by the Company are currently estimated to be $100,000.
Pursuant to certain agreements, the Company has agreed to indemnify the
Selling Securityholders against certain liabilities, including certain potential
liabilities under the Securities Act, or to contribute to payments the Selling
Securityholders may be required to make in respect thereof.
DESCRIPTION OF SECURITIES
The Company's authorized capital consists of 50,000,000 shares of common
stock, par value $.002 per share, and 1,000,000 shares of Preferred Stock, $1.00
par value.
COMMON STOCK
As of the date of this Prospectus, the Company had outstanding 10,782,115
shares of common stock. Each share of common stock is entitled to one vote at
all meetings of shareholders. Shareholders are not permitted to cumulate votes
in the election of directors. All shares of common stock are equal to each other
with respect to liquidation rights and dividend rights. There are no preemptive
rights to purchase any additional common stock. In the event of liquidation,
dissolution or winding up of the Company, holders of the common stock will be
entitled to receive on a pro rata basis all assets of the Company remaining
after satisfaction of all liabilities and preferences of the outstanding
Preferred Stock. The outstanding shares of common stock are duly and validly
issued, fully paid and nonassessable.
38
<PAGE>
<PAGE>
PREFERRED STOCK
As of June 30, 1997, the Company had outstanding 6 shares of Preferred
Stock. Additional Preferred Stock may be issued from time to time in one or more
series with such designations, voting powers, if any, preferences and relative,
participating, optional or other special rights, and such qualifications,
limitations and restrictions thereof, as are determined by resolution of the
Board of Directors. The Company has filed a statement of designation of rights
and preferences in which a series of preferred stock consisting of 240 shares
has been designated as 10% Non-Voting Cumulative Convertible Preferred Stock,
$1.00 par value.
TRANSFER AND WARRANT AGENT
The Company has retained Fidelity Transfer Company, 1800 S. West Temple,
Suite 301, Salt Lake City, Utah 84115, as Transfer Agent for its common stock.
MARKET PRICES OF COMMON STOCK
The Company's common stock is traded on the OTC Electronic Bulletin Board
and in the over-the-counter market 'pink sheets' under the symbol 'BPRT.' The
following table sets forth the range of the quarterly high and low bid prices,
as reported by the National Quotation Bureau, Incorporated.
<TABLE>
<CAPTION>
CALENDAR QUARTER HIGH LOW
- - ----------------------------------------------------------------------------- ----- -----
<S> <C> <C>
First Quarter 1995........................................................... $ .38 $ .05
Second Quarter 1995.......................................................... $ .13 $ .03
Third Quarter 1995........................................................... $2.50 $ .25
Fourth Quarter 1995.......................................................... $5.38 $ .38
First Quarter 1996........................................................... $4.94 $3.25
Second Quarter 1996.......................................................... $4.30 $3.63
Third Quarter 1996........................................................... $3.63 $1.31
Fourth Quarter 1996.......................................................... $2.13 $1.00
First Quarter 1997........................................................... $1.63 $1.00
Second Quarter 1997.......................................................... $2.28 $1.03
</TABLE>
On August 12, 1997, the closing bid price of the Common Stock as reported
on the over-the-counter Electronic Bulletin Board was $1.69.
SHARES ELIGIBLE FOR FUTURE SALE
All Shares of common stock being offered hereby will be immediately
tradable without restriction or further registration under the Securities Act.
The outstanding Shares of common stock include 3,919,295 Shares of common stock
outstanding deemed to be 'restricted securities,' as that term is defined under
Rule 144 promulgated under the Securities Act, in that such Shares were
purchased or acquired by such stockholders of the Company in transactions not
involving a public offering, and, as such, may only be sold pursuant to a
registration statement under the Securities Act, in compliance with the
exemption provisions of Rule 144, or pursuant to another exemption under the
Securities Act. Substantially all of such restricted Shares of common stock are
eligible for sale under Rule 144, subject to the volume limitations prescribed
by the Rule.
In general, under Rule 144 as currently in effect, a shareholder, including
an affiliate of the Company, may sell shares of Common Stock after at least one
year has elapsed since such shares were acquired from the Company or an
affiliate of the Company. The number of shares of common stock which may be sold
within any three-month period is limited to the greater of one percent of the
then outstanding common stock or the average weekly trading volume in the common
stock during the four calendar weeks preceding the date on which notice of such
sale was filed under Rule 144. Certain other requirements of Rule 144 concerning
availability of public information, manner of sale and notice of sale must also
be satisfied. In addition, a shareholder who is not an affiliate of the Company
(and who has not been an affiliate of the Company for 90 days prior to the sale)
and who has beneficially owned
39
<PAGE>
<PAGE>
shares acquired from the Company or an affiliate of the Company for over two
years may resell the shares of common stock without compliance with the
foregoing requirements under Rule 144.
No predictions can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the common stock prevailing from time to time. Nevertheless, sales of
substantial amounts of common stock, or the perception that such sales may
occur, could have a material adverse effect on prevailing market prices and
could impair the Company's ability to raise capital through the sale of its
equity securities.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Bondy & Schloss LLP, New York, New York. Gerald A. Adler, a partner
of Bondy & Schloss LLP has warrants to purchase 200,000 shares of Common Stock
of the Company exercisable at $.93 per share. See 'Selling Securityholders.'
EXPERTS
The audited consolidated balance sheet of the Company as of December 31,
1996, the audited consolidated income statements, cash flow and stockholders,
equity for the years ended December 31, 1996 and 1995 have been included herein
and in the Registration Statement in reliance upon the report, appearing
elsewhere herein, of Malone & Bailey, PLCC, independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing. The audited balance sheet of The Royal Lipizzaner Stallions, Inc. as
at December 31, 1996 and the audited Income Statements, cash flow and
stockholders' equity for the years ended December 31, 1996 and 1995 have been
included herein and in the Registration Statement in reliance upon the report,
appearing elsewhere herein, of Van Buren & Hauke, LLC, independent certified
public accountant and upon the authority of said firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form SB-2 under the
Securities Act, with the Securities and Exchange Commission (the 'Commission'),
with respect to the Shares offered hereby. This Prospectus does not contain all
of the information set forth in or annexed as exhibits to the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and this Offering, reference is made to the Registration Statement,
including the financial statements, exhibits and schedules, copies of which may
be obtained at prescribed rates from the Commission at its principal office at
450 Fifth Street, N.W. Washington D.C. 20549, or at its New York regional office
at 7 World Trade Center, Suite 1300, New York, New York 10048. Electronic
registration statements made through the Electronic Data Gathering, Analysis and
Retrieval System are publicly available through the Commission's web site
(http://www.sec.gov). Statements contained in this Prospectus as to the contents
of any contract, agreement or other document filed as an exhibit to the
Registration Statement are not necessarily complete and each such description is
qualified by reference to such agreement, contract or document.
Prior to this Offering, the Company has not been a reporting company under
the Exchange Act. Reports and other information filed by the Company may be
inspected and copied at the public reference facilities of the Commission at 450
Fifth Street, N.W. Washington D.C. 20549 and at the regional offices referred to
above, and copies of such material can be obtained from the public reference
section of the Commission, Washington, D.C. 20549 at prescribed rates.
40
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
BEACHPORT ENTERTAINMENT CORPORATION
Independent Accountants' Report................................................................... F-2
Consolidated Balance Sheet as at December 31, 1996................................................ F-3
Consolidated Income Statements For the Years Ended December 31, 1996 and 1995..................... F-4
Consolidated Statements of Stockholders' Equity For the Years Ended December 31, 1996 and 1995.... F-5
Consolidated Statements of Cash Flows For the Years Ended December 31, 1996 and 1995.............. F-6
Notes to Financial Statements..................................................................... F-8
BEACHPORT ENTERTAINMENT CORPORATION (UNAUDITED)
Independent Accountants' Report................................................................... F-13
Consolidated Balance Sheet as at March 31, 1997................................................... F-14
Consolidated Income Statements For the Three Months Ended March 31, 1997 and 1996................. F-15
Consolidated Statements of Stockholders' Equity For the Three Months Ended March 31, 1997 and
1996............................................................................................. F-16
Combined Statements of Cash Flows For the Three Months Ended March 31, 1996 and 1995.............. F-17
Notes to Financial Statements..................................................................... F-18
ENTERTAINMENT SPECIALISTS LTD., INC.
Report of Independent Certified Public Accountants................................................ F-19
Balance Sheets as at December 31, 1996 and 1995 and March 31, 1997 and 1996 (Unaudited)........... F-20
Statements of Operations and Retained Earnings (Deficit) For the Year Ended December 31, 1996 and
1995 and for the Three Months Ended March 31, 1997 and 1996 (Unaudited).......................... F-21
Statements of Cash Flows For the Year Ended December 31, 1996 and 1995 and for the Three Months
Ended March 31, 1997 and 1996 (Unaudited)........................................................ F-22
Notes to Financial Statements..................................................................... F-23
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Pro Forma Consolidated Condensed Balance Sheet as at March 31, 1997 (Unaudited)................... F-27
Pro Forma Consolidated Statements of Income For the Year Ended December 31, 1996 and for the Three
Months Ended March 31, 1997 (Unaudited).......................................................... F-28
Notes to Pro Forma Consolidated Statements of Income and Condensed Balance Sheet.................. F-30
</TABLE>
F-1
<PAGE>
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
May 30, 1997
To the Board of Directors and Stockholders of
BEACHPORT ENTERTAINMENT CORPORATION
Los Angeles, California
We have audited the accompanying consolidated balance sheets of Beachport
Entertainment Corporation (formerly Omni International Corporation) and
subsidiaries as of December 31, 1996 and the related consolidated statements of
income, stockholders' equity and cash flows for the two years 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 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Beachport
Entertainment Corporation and subsidiaries as of December 31, 1996 and 1995, and
the results of its operations and cash flows for the years then ended in
conformity with generally accepted accounting principles.
MALONE & BAILEY, PLLC
F-2
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets
Cash.......................................................................................... $ 32,355
Accounts receivable........................................................................... 5,522
-----------
Total current assets..................................................................... 37,877
-----------
Software........................................................................................... 100,000
Touring Group Sets, net of depreciation............................................................ 120,000
Video Cassette Rights, net of amortization......................................................... 416,800
Advance to Entertainment Specialists, Ltd., Inc.................................................... 100,000
Film production costs.............................................................................. 155,888
Temecula net profits interest...................................................................... 96,820
Other -- net of depreciation....................................................................... 14,200
-----------
Total assets....................................................................................... $ 1,041,585
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable................................................................................. $ 2,441,550
Accounts payable.............................................................................. 505,067
Accrued interest, wages and payroll taxes..................................................... 152,098
Payable to stockholders....................................................................... 245,871
-----------
Total current liabilities................................................................ 3,344,586
-----------
Contingent liabilities
Stockholders' equity
Convertible preferred stock, $1 par, 1,000,000 shares authorized, no shares issued and
outstanding.................................................................................. 0
Common stock, $.002 par, 50,000,000 shares authorized, 7,022,820 issued and outstanding....... 14,046
Paid-in capital............................................................................... 2,788,211
Retained (deficit)............................................................................ (5,105,258)
-----------
Total stockholders' equity............................................................... (2,303,001)
-----------
Total liabilities and stockholders' equity......................................................... $ 1,041,585
-----------
-----------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
CONSOLIDATED INCOME STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Revenues............................................................................. $ 1,080,656 $3,432,673
Cost of performances
Performer/agent fees............................................................ 536,943 1,583,402
Production costs................................................................ 628,931 701,195
----------- ----------
Total cost of performances................................................. 1,165,874 2,284,597
----------- ----------
Gross (deficit) margin..................................................... (85,218) 1,148,076
----------- ----------
Operating expenses
Selling......................................................................... 43,601
General and administrative...................................................... 2,291,752 522,437
Asset writeoffs................................................................. 179,192
Bad debts....................................................................... 211,722
Depreciation and amortization................................................... 94,553 81,021
Interest........................................................................ 1,092,357 37,905
----------- ----------
Total operating expenses................................................... 3,869,576 684,964
----------- ----------
Income (loss) from continuing operations............................................. (3,954,794) 463,112
(Loss) from discontinued operations............................................. -- (9,000)
----------- ----------
Income (loss) before taxes and extraordinary item............................... (3,954,794) 454,112
Income taxes (benefit).......................................................... (452) 158,308
----------- ----------
Income (loss) before extraordinary item......................................... (3,954,342) 295,804
Extraordinary item -- debt forgiveness, less applicable income taxes of $0........... 328,625
----------- ----------
Net income (loss).......................................................... $(3,954,342) $ 624,429
----------- ----------
----------- ----------
Earnings (loss) per common share
Income (loss) before extraordinary item
Primary......................................................................... $ (0.58) $ 0.09
Fully diluted (n/a -- anti-dilutive)............................................ 0.09
Extraordinary item
Primary......................................................................... $ 0.09
Fully diluted................................................................... 0.09
Weighted average shares outstanding
Primary......................................................................... 6,807,910 3,487,182
Fully diluted................................................................... 11,715,070 3,717,182
</TABLE>
See notes to financial statements.
F-4
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK
---------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL (DEFICIT) TOTALS
---------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1994................. 9,864,796 $ 19,730 $1,111,722 $(1,775,345) $ (643,893)
5:1 Reverse stock split..................... (7,891,775) (15,784) 15,784
Common stock issued for cash, net of
offering costs of $35,000................. 3,525,000 7,050 523,950 531,000
Common stock issued in connection with
purchase of On Ice, Inc................... 800,000 1,600 126,400 128,000
Common stock issued to employees for
services rendered......................... 294,979 590 46,606 47,196
1995 Net income............................. 624,429 624,429
---------- -------- ---------- ----------- -----------
Balances, December 31, 1995................. 6,593,000 13,186 1,824,462 (1,150,916) 686,732
Common stock issued for services and $.09
per share cash in connection with 1996
debt financing............................ 289,820 580 357,695 358,275
Common stock canceled....................... (30,000) (60) 60
Warrants for common stock issued to
consultants in connection with 1996 debt
financing................................. 340,000 340,000
Warrants for common stock issued to
consultants for services rendered......... 96,334 96,334
Common stock issued to consultants for
services rendered......................... 170,000 340 169,660 170,000
1996 Net (loss)............................. (3,954,342) (3,954,342)
---------- -------- ---------- ----------- -----------
Balances, December 31, 1996................. 7,022,820 $ 14,046 $2,788,211 $(5,105,258) $(2,303,001)
---------- -------- ---------- ----------- -----------
---------- -------- ---------- ----------- -----------
</TABLE>
See notes to financial statements.
F-5
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income (loss)................................................................ $(3,954,342) $ 624,429
Non-cash items:
Depreciation and amortization............................................... 94,553 81,021
Costs of debt paid with issuance of 285,820 shares of stock sold at prices
below market.............................................................. 331,551
Accrued interest and amortization of debt issue discount.................... 236,813
Bad debts................................................................... 211,722
Interest and consulting expenses paid with issuance of stock and stock
warrants with exercise prices below market................................ 607,333
Officer and employee compensation paid in stock............................. 147,196
Forgiveness of debt income.................................................. (328,625)
Writedown of investments carrying value..................................... 179,192
Changes in
Accounts receivable......................................................... 503,303 (720,546)
Other current assets........................................................ 313,184 (313,184)
Accounts payable............................................................ (45,985) 283,760
Accrued interest, wages and payroll taxes................................... (2,358) 54,304
Deferred income taxes....................................................... (36,047) 36,047
----------- ---------
Cash (used for) operating activities........................................ (1,561,081) (235,598)
----------- ---------
Cash flows from investing activities
Purchase of net assets of On Ice, Inc............................................ (400,000) (100,000)
Film production costs, net of non-recourse financing by joint venture partner of
$366,978........................................................................ (155,888)
Advance to Entertainment Specialists, Ltd., Inc.................................. (100,000)
Purchase of net assets of Enigma, Inc............................................ (53,592)
Non-current investments.......................................................... (25,000)
Increase in other assets......................................................... (6,393) (7,809)
----------- ---------
Cash (used for) investing activities........................................ (662,281) (186,401)
----------- ---------
Cash flows from financing activities
Proceeds from short-term bridge loans............................................ 2,178,395 270,200
Repayment of short-term bridge loans............................................. (115,000)
Proceeds from stockholders....................................................... 38,000
Repayment of stockholder cash loans.............................................. (40,643) (210,739)
Issuance of common stock, net of issuance costs of $0 in 1996 and $35,000 in
1995............................................................................ 25,723 531,000
----------- ---------
Cash flows from financing activities........................................ 2,048,475 628,461
----------- ---------
</TABLE>
See notes to Financial statements.
F-6
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Net increase (decrease) in cash.......................................................... $(174,559) $206,462
Cash at beginning of period.............................................................. 206,914 452
--------- --------
Cash at end of period.................................................................... $ 32,355 $206,914
--------- --------
--------- --------
Expenses paid in cash
Interest............................................................................ $ 183,992 $ 0
Income taxes........................................................................ 35,595 157,856
Noncash financing transactions
Offset of debt contingent upon realization of investment asset...................... $ 50,000
Acquisition of On Ice, Inc.
Note payable, net of amount paid in 1995....................................... 400,000
Assumption of accounts payable................................................. 79,975
Stock (128,000 shares valued at $.16).......................................... 128,000
</TABLE>
See notes to Financial statements.
F-7
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Incorporation. The Company was incorporated in Utah on November 18, 1985.
Its name was changed from Omni International Corporation ('Omni') on April 4,
1994, when it acquired Beachport Entertainment Corporation, a Texas corporation.
This transaction was accounted for as a 'reverse merger' or purchase of Omni by
Beachport. The Company became a multi-faceted entertainment company with
acquisitions planned in the entertainment industry. The Company was in the
development stage from inception until these early 1994 acquisitions.
Reverse Stock Splits. The Company enacted a 1 for 5 reverse stock split on
June 10, 1995. Total outstanding shares of 9,864,796 was reduced by 7,891,775
shares.
Consolidation of wholly-owned subsidiaries include Enigma Interactive,
Inc., and On Ice, Inc. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Earnings Per Share are computed based on a weighted number of shares
outstanding during the year, including all outstanding stock options and
warrants. The June, 1995 stock split is counted as having occurred at the
beginning of 1995. Shares issued for cash, acquisitions and for services
rendered are counted as of the issue dates. Outstanding options and warrants are
included as if they were all exercised as of the first day of the year.
Cash and Cash Equivalents includes cash in bank and marketable temporary
financial instruments of a 3 month maturity or less.
Depreciation of office equipment and touring group sets is using the
straight line method over their estimated useful lives of 5 years. Video
cassette rights are being amortized using the straight line method over their
estimated significant revenue streams of 10 years. These revenue streams are
expected to remain constant, consistent with the classic Holiday season appeal
of the entertainment material.
Foreign Operations consisted only of brief tours of England, France and
Mexico during the 1995-1996 Holiday season. Foreign currency conversions were
immaterial and foreign taxes are accounted for as described in Note 8.
Estimates and assumptions by management that affect certain reported
amounts and disclosures are required in the preparation of financial statements
in conformity with generally accepted accounting principles. Accordingly, actual
results could differ from those estimates.
Concentration of Credit Risk. As the Company is in the entertainment
business, substantially all accounts receivable are from ice show venues,
television broadcasting companies and related sponsoring companies. As of
December 31, 1996, no receivable was considered significant. In accordance with
standard industry practices, no collateral or liens on revenues receivable
exist.
NOTE 2 -- SOFTWARE
The Company acquired Enigma Systems, Inc. in 1994. Enigma's sole
significant asset was a beta version of the Popeye Sega 16-bit game cartridge.
The Company invested $313,467 to complete a marketable version in 1994 and 1995
and capitalized $254,192 in these years. The Company wrote this investment down
by $154,192 in 1996 to reflect management's revised estimate as of May 30, 1997
of its net realizable value. The Company has a tentative agreement with STT
Video Partners, L.P. to market Popeye on the Sega Television Channel.
NOTE 3 -- TOURING GROUP SETS AND VIDEO CASSETTE RIGHTS
On July 1, 1995, the Company acquired On Ice, Inc., a seasonal
family-oriented ice skating entertainment production company. The Company paid
$500,000 cash plus 800,000 shares of its common stock, then representing 27% of
fully-diluted stock ownership in the Company, plus assumption of net trade
payables of $79,975, in exchange for 100% of the outstanding stock of On Ice,
Inc. The stock
F-8
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
component of the purchase was valued at $.16 per share ($128,000), which is
equal to the selling price per share of common stock at that time. $100,000 of
the cash due was paid prior to year-end, and the balance was paid in February,
1996.
The total purchase price was $707,975, and was allocated to assets acquired
based on their fair values. These are amortized using the straight-line method
over their estimated useful lives as follows:
<TABLE>
<CAPTION>
ACCUMULATED ESTIMATED
PURCHASE DEPRECIATION OR NET BOOK VALUATION
VALUATION AMORTIZATION VALUE LIFE
--------- --------------- -------- ---------
<S> <C> <C> <C> <C>
Touring Group Sets................................ $ 200,000 $ (80,000) $120,000 5 years
Video Cassette Rights............................. 507,975 (91,175) 416,800 10 years
---------
Total........................................ $ 707,975
---------
---------
</TABLE>
NOTE 4 -- ADVANCE TO ENTERTAINMENT SPECIALISTS, LTD., INC.
On December 5, 1996, the Company signed an agreement with Entertainment
Specialists, Ltd., Inc. ('ESL') whereby they paid $100,000 for the right to
negotiate a purchase of ESL. As of May 30, 1997, the Company and ESL have
tentatively agreed for the Company to purchase ESL for a total of $1,000,000 in
cash and $1,000,000 in stock. ESL owns two show companies of Royal Lipizzaner
Stallions and grossed $6 million in sales in 1996.
NOTE 5 -- FILM PRODUCTION COSTS
In 1995, the Company signed an agreement with Capital Cities/ABC Video
Publishing, Inc. ('ABCVP') whereby the Company, through a 50%-owned subsidiary,
FTI, L.L.C., agreed to produce five TV video programs in a series titled 'Fairy
Tales on Ice'. During 1995 and early 1996, ABCVP provided a total of $436,978
for two videos, and agreed to market the videos to network and/or cable TV.
$70,000 was recognized by the Company as income in 1995 for creating and
organizing the projects. An additional $155,888 in additional production costs
has been capitalized. As of May 30, 1997 the two videos were mostly completed.
In 1996, the parent company of ABCVP was acquired by Buena Vista
International. This agreement was renegotiated whereby the Company will market
the distribution rights and repay Buena Vista solely from the proceeds. The
Company expects to receive in excess of $675,000, which is required to first
repay Buena Vista and then recoup all capitalized costs.
There are no current plans to produce the remaining three videos.
NOTE 6 -- TEMECULA NET PROFITS INTEREST
An interest in a to-be-built southern California suburb entertainment
facility was acquired in early 1994 in exchange for stock and the promise to
obtain equity financing. The Company invested $147,000 in pre-construction
planning costs, but defaulted on its obligation due to a lack of additional
funding. The Company subsequently agreed to trade its interest in the project
for its previously issued stock, plus (1) a promise to repay the $147,000
invested and (2) a 10% net profits interest in the project. In 1995, the Company
netted $50,000 in related notes payable against the asset cost, because
repayment of this obligation is contingent upon realization of project
financing. The net capitalized cost is carried as an asset pending the outcome
of long-term financing efforts for the project by that suburb. As of May 30,
1997, Temecula was proceeding with project financing.
F-9
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- NOTES PAYABLE
<TABLE>
<CAPTION>
<S> <C>
Notes payable to sixteen different private entities, no collateral, interest at
8%, due December 31, 1996..................................................... $1,350,000
Notes payable to investment bankers on behalf of eight different private
entities, no collateral, interest at 12%, due February 28, 1997............... 879,550
Notes payable to investment bankers, no collateral and no interest.............. 212,000
----------
Total...................................................................... $2,441,550
----------
----------
</TABLE>
The Company is delinquent paying the above obligations, which were supposed
to have been repaid from the proceeds of a larger equity offering. See Note 15
regarding a planned 1997 offering.
Total 1996 interest of $1,092,357 includes debt financing costs of
$940,006, including $92,955 in note discounts given, $175,500 in debt
acquisition commissions paid in cash, and discounted stock and stock options
given to investment bankers valued at $671,551, which represents the difference
between the market value and the purchase or exercise price of 285,820 shares
and 500,000 options.
NOTE 8 -- ACCRUED EXPENSES
<TABLE>
<CAPTION>
<S> <C>
Interest on notes payable......................................................... $131,902
Wages and payroll taxes........................................................... 23,969
--------
Total........................................................................ $155,871
--------
--------
</TABLE>
NOTE 9 -- PAYABLE TO STOCKHOLDERS FOR CASH LOANS
<TABLE>
<CAPTION>
<S> <C>
Note payable to a corporation partially owned by a stockholder, due March 31,
1995, with interest at 8%, with no collateral................................... $200,000
Accrued interest.................................................................. 41,568
Other............................................................................. 530
--------
Total........................................................................ $242,098
--------
--------
</TABLE>
NOTE 10 -- INCOME TAXES
Income taxes are accounted for under Statement of Financial Accounting
Standards (SFAS) No. 109 'Accounting for Income Taxes.' As of December 31, 1996,
the Company had unused net operating loss carryforwards of approximately
$4,700,000, which expire in 2010. Under Internal Revenue Code Section 382, use
of these net operating losses is limited whenever Company stock ownership
turnover, as defined, exceeds 50% in any 36-month period. During 1995, such a
turnover occurred and the use of about $1 million of such losses is limited to
approximately $370,000 per year.
NOTE 11 -- EXTRAORDINARY ITEM
During late 1995, the Company negotiated debt forgiveness from various
current and former employees, lawyers and investment bankers, totaling $328,625.
No income taxes are related to this income, because it is entirely offset by
prior period net operating losses.
NOTE 12 -- COMMON STOCK OPTIONS AND WARRANTS
The Company has a qualified stock option plan for its employees. As of May
30, 1997, there has been no stock options granted to employees under this plan.
F-10
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
As of May 30, 1997, the Company has issued a total of 5,197,160 options and
warrants to various entities at exercise prices ranging from $.05 to $10.00 per
share, and summarized as follows:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE
OF SHARES (RANGE PER SHARE)
--------- -----------------
<S> <C> <C> <C> <C>
Outstanding at January 1, 1995............................ 200,000 $ .05 -- $10.00
Granted................................................... 265,000 $ .10 -- $ 2.31
---------
---------
Outstanding at January 1, 1996............................ 465,000
Granted................................................... 4,792,160 $0.25 -- $ 1.37
Canceled.................................................. (80,000)
---------
Outstanding at December 31, 1996.......................... 5,197,160 $0.05 -- $10.00
---------
---------
(1) (2)
----- ---
Exercisable at December 31, 1996.......................... 1,385,000 $0.05 -- $ 0.63 $0.31 41
3,342,160 $0.93 -- $ 2.50 1.23 48
110,000 $5.00 -- $10.00 7.27 36
--------- ----- ---
4,837,160 $1.06 44
--------- ----- ---
--------- ----- ---
</TABLE>
- - ------------
(1) Weighted average exercise price as of December 31, 1996.
(2) Weighted average remaining exercise period in months as of December 31,
1996.
------------------------
During 1995, the Company issued 294,979 shares of stock to two officers and
two employees as partial compensation for services rendered. These shares were
valued at $.16, which approximates the prevailing price received for shares sold
in 1995.
No options or warrants were granted to employees during 1996.
In accordance with the disclosure requirements of SFAS 123, stock
compensation is valued for income statement expense purposes using the intrinsic
value method, whereby the related expense is the excess of the current stock
trading price over the option price. For the year ended December 31, 1996, fair
value of the 1996 options granted using the Black-Scholes option pricing
mathematical model exceeds the values recorded using the intrinsic value method
by $5,700,000 or $.84 per share.
NOTE 13 -- CONTINGENT LIABILITIES
A total of $486,978 in contingent liabilities exists, as discussed in two
different notes above, and are dependent on the success of the two investment
ventures. The Company is not obligated to repay these amounts if these ventures
do not return cash flow. See Notes 5 and 6.
The Company is involved as plaintiff in a lawsuit against a former
investment banker for a contract dispute. As of May 30, 1997, the lawsuit was
still in the discovery stage, and no outcome is being predicted by management.
On January 22, 1996, the Company entered into an agreement with Ice
Capades, Inc. ('Ice Capades'), a subsidiary of Del Wilber Associates, Inc., to
manage ice skating events produced by Ice Capades. The Company sued Del Wilber
Associates, Inc. for non-performance in late 1996. As of May 30, 1997, the
lawsuit was still in the discovery stage, and no outcome is being predicted by
management.
NOTE 14 -- SIGNIFICANT CUSTOMERS
During 1996, the Company received $360,166 from Ice Capades, Inc. (see Note
) and $413,352 from Harrah's -- Atlantic City. During 1995, the Company earned
$373,210 from National Broadcasting
F-11
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company for 1995 sales of its 1994 'Nutcracker On Ice' videocassette, of which
$211,722 was reported in 1996 as a bad debt. No other single source accounted
for more than 10% of gross revenues during 1996 or 1995.
NOTE 15 -- 1997 STOCK AND DEBT ISSUANCE
The Company is currently conducting two private securities offerings of
debt with stock warrants and convertible preferred stock to raise up to
$5,000,000 in additional financing from accredited investors for operating
capital, debt repayment and additional entertainment-related acquisitions.
The convertible preferred stock converts at 11,111 shares of common stock
for each share of preferred. Convertible holders may convert at any time, and if
the common stock is trading at less than $2.25 per share, the conversion rate is
adjusted to 75% of the actual average trading price, with a floor of $.80. As of
May 30, 1997 none of the convertible preferred stock has been tendered for
conversion.
For 1997 through May 30, the Company has borrowed $147,000, sold common
stock for $500,000 and sold 14 shares of convertible preferred stock for
$350,000. Related costs of $41,000 will be charged against paid in capital.
NOTE 16 -- LOSS ON DISCONTINUED OPERATIONS
Due to a lack of funding in 1994, the Company negotiated dispositions of
certain investments, with net losses on dispositions totaling $175,527, of which
$9,000 was recognized in 1995.
NOTE 17 -- NET PROFITS INTEREST
The employee responsible for software development has a 40% net profits
interest in any income generated from sales of software after the Company's
total investment is recouped. This total investment amount is currently in
excess of $500,000.
F-12
<PAGE>
<PAGE>
INDEPENDENT ACCOUNTANT'S REPORT
May 30, 1997
To the Board of Directors
BEACHPORT ENTERTAINMENT CORPORATION
Los Angeles, California
We have reviewed the accompanying consolidated balance sheet of Beachport
Entertainment Corporation as of March 31, 1997, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the
three-month periods ended March 31, 1997, and March 31, 1996. These financial
statements are the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
MALONE & BAILEY, PLLC
F-13
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets
Cash.......................................................................................... $ 87,171
Other current assets.......................................................................... 22,885
-----------
Total current assets..................................................................... 110,056
-----------
Touring group sets, net of $90,000 depreciation.................................................... 110,000
Video cassette rights, net of $117,225 amortization................................................ 403,775
Advance to Russ Potts Productions, Inc............................................................. 350,000
Film production costs.............................................................................. 167,539
Software........................................................................................... 100,000
Advance to Entertainment Specialists, Ltd., Inc.................................................... 100,000
Temecula net profits interest...................................................................... 96,820
Other -- net of $6,801 depreciation................................................................ 12,526
-----------
Total assets............................................................................. $ 1,450,716
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable................................................................................. $ 2,556,550
Accounts payable.............................................................................. 716,609
Accrued interest, wages and payroll taxes..................................................... 183,229
Payable to stockholders....................................................................... 370,321
-----------
Total current liabilities................................................................ 3,826,709
-----------
Contingent liabilities
Stockholders' equity
Convertible preferred stock, $1 par, 1,000,000 shares authorized, 8 shares issued and
outstanding.................................................................................. 8
Common stock, $.002 par, 50,000,000 shares authorized, 7,852,820 shares issued and
outstanding.................................................................................. 15,706
Paid-in capital............................................................................... 3,377,043
Retained (deficit)............................................................................ (5,768,751)
-----------
Total stockholders' equity............................................................... (2,375,994)
-----------
Total liabilities and stockholders' equity............................................... $ 1,450,716
-----------
-----------
</TABLE>
See notes to financial statements.
F-14
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
CONSOLIDATED INCOME STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Revenues.............................................................................. $ 87,617 $ 235,019
Cost of performances
Performer/agent fees............................................................. 23,219 195,641
Other............................................................................ 245,839 52,136
---------- ----------
Total cost of performances.................................................. 269,058 247,777
---------- ----------
Gross margin................................................................ (181,441) (12,758)
---------- ----------
Operating expenses
General and administrative....................................................... 398,047 353,366
Depreciation and amortization.................................................... 23,870 23,414
Interest......................................................................... 60,135 420,461
---------- ----------
Total operating expenses.................................................... 482,052 797,240
---------- ----------
(Loss) before taxes.............................................................. (663,493) (809,998)
Income tax benefit............................................................... 452
---------- ----------
Net (loss).................................................................. $ (663,493) $ (809,546)
---------- ----------
---------- ----------
Net (loss) per common share
Primary.......................................................................... $(0.09) $(0.12)
Fully-diluted n/a (anti-dilutive)................................................
Weighted average shares outstanding................................................... 7,499,116 6,919,272
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
F-15
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------- ------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) TOTALS
------ ------ --------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1995............... 6,593,000 $13,186 $1,824,462 $(1,150,916) $ 686,732
Common stock issued for $25,724 cash, and
valued at $1.25 per share or $357,275,
net of offering costs of $25,000........ $ 285,820 572 331,703 332,275
Common stock issued for cash.............. 4,000 8 992 1,000
Net (loss)................................ (809,546) ( 809,546)
--------- ------- ---------- ----------- -----------
Balances, March 31, 1996.................. 6,882,820 $13,766 $2,157,157 $(1,960,462) $ 210,461
--------- ------- ---------- ----------- -----------
--------- ------- ---------- ----------- -----------
Balances, December 31, 1996............... 7,022,820 $14,046 $2,788,211 $(5,105,258) $(2,303,001)
Preferred stock issued for $200,000 cash,
net of $15,000 per share offering
costs................................... 8 $ 8 184,992 185,000
Exercise of common stock warrants for
cash.................................... 30,000 60 5,440 5,500
Sale of common stock for $.50 cash........ 800,000 1,600 399,400 400,000
Net (loss)................................ (663,493) (663,493)
-
------ --------- ------- ---------- ----------- -----------
Balances, March 31, 1997.................. 8 $ 8 7,852,820 $15,706 $3,377,043 $(5,768,751) $(2,375,994)
-
-
------ --------- ------- ---------- ----------- -----------
------ --------- ------- ---------- ----------- -----------
</TABLE>
See notes to financial statements.
F-16
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income (loss).................................................................. $(663,492) $(809,546)
Non-cash items:
Depreciation and amortization................................................. 23,870 23,414
Debt issuance costs, representing stock issued to brokers at below-market
prices...................................................................... 331,551
Changes in
Accounts receivable........................................................... 5,522 508,826
Receivable from officer....................................................... (31,896)
Other current assets.......................................................... (22,885) 66,311
Accounts payable.............................................................. 211,541 (408,423)
Accrued expenses.............................................................. 36,481 19,420
Deferred income taxes......................................................... (36,047)
Accounts payable to stockholders.............................................. (2,495)
--------- ---------
Cash provided (used for) operating activities................................. (408,963) (338,885)
--------- ---------
Cash flows from investing activities
Advance to Russ Potts Productions, Inc............................................. (350,000)
Film production costs, net of non-recourse financing by joint venture partner of
$366,978 and $300,000, respectively............................................... ( 11,651) ( 13,922)
Decrease in other assets........................................................... 830 3,006
--------- ---------
Cash used for investing activities............................................ (360,821) (10,916)
--------- ---------
Cash flows from financing activities
Proceeds from short-term debt
From stockholders............................................................. 119,100
From third parties............................................................ 115,000 648,550
Proceeds from stock sales, net of issuance costs of $15,000 and $25,000,
respectively...................................................................... 590,500 1,724
Payment of purchase note for On Ice, Inc. acquisition.............................. (400,000)
--------- ---------
Cash flows from financing activities.......................................... 824,600 250,274
--------- ---------
Net increase (decrease) in cash......................................................... 54,816 (99,527)
Cash at beginning of period............................................................. 32,355 206,914
--------- ---------
Cash at end of period................................................................... $ 87,171 $ 107,387
--------- ---------
--------- ---------
Expenses paid in cash
Interest........................................................................... $ 0 $ 0
Income taxes....................................................................... 0 0
</TABLE>
See notes to financial statements.
F-17
<PAGE>
<PAGE>
BEACHPORT ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Interim unaudited financial statements contain all adjustments necessary to
present fairly the financial statements of the Company for the periods
presented. The accompanying financial information should be read in conjunction
with the Company's 1996 Annual Report on Securities and Exchange Commission Form
10-KSB. Footnote disclosures that substantially duplicate those in the Company's
Annual Audited Report on Form 10-KSB, including significant accounting policies,
have been omitted.
NOTE 2 -- ADVANCE TO RUSS POTTS PRODUCTION, INC.
The Company advanced $350,000 in first quarter, 1997 to a prospective
acquisition. Negotiations terminated in May, 1997 and the total advance is to be
refunded in June, 1997.
F-18
<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
ENTERTAINMENT SPECIALISTS LTD., INC.
We have audited the accompanying balance sheets of Entertainment
Specialists Ltd., Inc.. (A Subchapter 'S' Corporation) as of December 31, 1996
and 1995, and the related statements of operations and shareholders' equity and
cash flows for each of the two years in the period ended December 31, 1996.
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 Entertainment Specialists
Ltd., Inc. as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of two years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The additional information
schedules on Pages 10 and 11 is presented for the purposes of additional
analysis and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
New York, New York
July 3, 1997, except for Note 9,
as to which the date is August 4, 1997
F-19
<PAGE>
<PAGE>
ENTERTAINMENT SPECIALISTS LTD., INC.
(A SUBCHAPTER 'S' CORPORATION)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995 (AUDITED)
AND MARCH 31, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------------- --------------------
1996 1995 1997 1996
--------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash....................................................... $ 2,114 $ 17,899 $ 3,765 $ 56,764
Accounts receivable........................................ 31,453 15,528 144,826 134,184
Inventories -- concessions................................. 16,958 9,067 8,000 5,500
Due from employees......................................... 2,576 1,899 14,129 31,684
Prepaid expenses........................................... 134,252 54,064 267,669 64,683
--------- -------- -------- --------
Total current assets.................................. 187,353 98,457 438,389 292,815
Property and equipment, net..................................... 273,502 231,768 263,302 244,396
Other assets
Security deposits.......................................... 10,208 8,280 12,591 9,932
--------- -------- -------- --------
Total assets.......................................... $ 471,063 $338,505 $714,282 $547,143
--------- -------- -------- --------
--------- -------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank overdrafts............................................ $ 35,507 $ 37,858 $ 35,863 $ 79,307
Accounts payable and accrued expenses...................... 279,603 176,297 202,501 123,644
Loan payable -- pension plan............................... 74,329 -- 72,329 --
Payroll taxes payable...................................... 79,351 10,178 139,278 13,866
Notes payable -- current................................... 47,600 -- 48,000 --
--------- -------- -------- --------
Total current liabilities............................. 516,390 224,333 497,971 216,817
--------- -------- -------- --------
Other liabilities
Due to officer............................................. 18,381 -- -- --
--------- -------- -------- --------
Total liabilities..................................... 534,771 224,333 497,971 --
--------- -------- -------- --------
Sharholders' equity
Common stock; $1.00 par value, 500 shares authorized;
issued and outstanding................................... 500 500 500 500
Additional paid in capital................................. 100,000 -- 100,000 --
Retained earnings.......................................... (164,208) 113,672 115,811 329,826
--------- -------- -------- --------
Total shareholders' equity (deficit).................. (63,708) 114,172 216,311 330,326
--------- -------- -------- --------
Total liabilities and shareholders' equity....... $ 471,063 $338,505 $714,282 $547,143
--------- -------- -------- --------
--------- -------- -------- --------
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE>
<PAGE>
ENTERTAINMENT SPECIALISTS LTD., INC.
(A SUBCHAPTER 'S' CORPORATION)
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 (AUDITED)
AND FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------ ------------------------
1996 1995 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Show revenues....................................... $5,058,397 $7,631,792 $2,153,445 $1,983,279
Concession revenues................................. 837,621 1,008,083 328,550 327,132
---------- ---------- ---------- ----------
Total revenues................................. 5,896,018 8,639,875 2,481,995 2,310,411
---------- ---------- ---------- ----------
Direct costs
Show expenses....................................... 640,359 1,454,234 295,693 314,957
Arena rental and expense............................ 790,415 987,462 431,375 341,543
Payroll and fringes................................. 1,126,235 863,766 280,912 272,754
Horse maintenance and supplies...................... 203,469 430,819 86,337 51,106
Travel and lodging.................................. 254,259 421,417 70,486 51,090
Concession expenses................................. 67,982 113,654 53,532 44,323
Auto and truck expenses............................. 86,661 77,017 23,717 24,629
Printing programs................................... 32,693 43,239 -- --
Wardrobe and maintenance............................ 14,340 20,996 9,367 6,754
---------- ---------- ---------- ----------
Total direct costs............................. 3,216,413 4,412,604 1,251,419 1,107,156
---------- ---------- ---------- ----------
Gross Profit................................... 2,679,605 4,227,271 1,230,576 1,203,255
---------- ---------- ---------- ----------
Operating expenses
Advertising and promotion........................... 1,521,365 1,925,852 550,688 514,035
Oviedo barn expenses................................ 518,140 562,935 100,221 203,275
General and administrative expenses................. 843,185 1,155,072 237,738 225,524
---------- ---------- ---------- ----------
Total operating expenses....................... 2,882,690 3,643,859 888,647 942,834
---------- ---------- ---------- ----------
Total operating income......................... (203,085) 583,412 341,929 260,421
---------- ---------- ---------- ----------
Other income (expense)
Interest earned..................................... 1,525 19,365 44 756
Penalties........................................... (12,428) (26,406) (11,868) --
Foreign taxes paid.................................. -- (31,883) -- --
Loss on sale of assets.............................. (12,892) (6,182) -- --
---------- ---------- ---------- ----------
Total.......................................... (23,795) (45,106) (11,824) 756
---------- ---------- ---------- ----------
Net income............................................... (226,880) 538,306 330,105 261,177
Retained earnings -- beginning of period................. 113,672 30,451 (164,208) 113,672
---------- ---------- ---------- ----------
(113,208) 568,757 165,897 374,849
Distributions to shareholders............................ (50,000) (455,085) (65,086) (45,023)
---------- ---------- ---------- ----------
Retained earnings -- end of period....................... $ (163,208) $ 113,672 $ 100,811 $ 329,826
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE>
<PAGE>
ENTERTAINMENT SPECIALISTS LTD., INC.
(A SUBCHAPTER 'S' CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 (AUDITED)
AND FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------- ----------------------
1996 1995 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $(227,880) $ 538,306 $ 345,105 $ 261,177
Adjustments to reconcile net income (loss) to net cash
provided by operating activities......................
Depreciation............................................ 37,427 53,303 10,200 9,200
Increase (Decrease) in accounts payable................. 103,306 (9,823) (77,102) (52,653)
Increase (Decrease) in payroll taxes payable............ 69,173 (111,955) 59,927 3,688
Decrease in investments................................. -- 26,005 -- --
(Increase) Decrease in prepaid expenses................. (80,188) 49,569 (133,417) (10,619)
(Increase) Decrease in accounts receivable.............. (15,925) 3,757 (113,373) (118,656)
(Increase) Decrease in due from employees............... (677) 1,168 (11,553) (29,785)
(Increase) Decrease in inventories...................... (7,891) (4,342) 8,958 3,567
(Increase) in security deposits......................... (1,928) (1,738) (2,383) (1,652)
--------- --------- --------- ---------
Net cash provided by operating activities.................... (124,583) 544,250 86,362 64,267
--------- --------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment; net of
retirements........................................... (79,161) (9,341) -- (21,828)
--------- --------- --------- ---------
Cash flows from financing activities:
Additional paid in capital.............................. 100,000 -- -- --
Distribution to shareholders............................ (50,000) (455085) (65,086) (45,023)
Increase (Decrease) in bank overdrafts.................. (2,351) (33,158) 356 41,449
Increase (Decrease) in notes payable.................... 47,600 (17,870) 400 --
Increase (Decrease) in due to officer................... 18,381 (10,897) (18,381) --
--------- --------- --------- ---------
Net cash provided by financing activities.................... 113,630 (517,010) (82,711) (3,574)
--------- --------- --------- ---------
Net increase (decrease) in cash.............................. (90,114) 17,899 3,651 38,865
Cash at beginning of period.................................. 17,899 -- 2,114 17,899
--------- --------- --------- ---------
Cash at end of period........................................ $ (72,215) $ 17,899 $ 5,765 $ 56,764
--------- --------- --------- ---------
--------- --------- --------- ---------
Supplemental disclosure of interest paid..................... $ 13,955 $ 4,468 $ 2,239 $ --
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE>
<PAGE>
ENTERTAINMENT SPECIALISTS LTD., INC.
(A SUBCHAPTER 'S' CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. GENERAL
Entertainment Specialists Ltd., Inc. (Company) is a corporation that was
organized under the laws of the state of Florida on March 2, 1988.
The Company is wholly-owned by two shareholders who are both executive
officers of the Company and are ultimately responsible for both the management
and the results of operations.
The Company is in the entertainment industry earning its revenues by
producing and performing live shows presenting 'Royal Lipizzaner Stallions'
throughout the world. This family-arena attraction features horses and riders
from Europe that emulate the Spanish riding school of Vienna in its presentation
of Lipizzans, thus providing a traditional as well as entertaining performance.
The Company also earns revenues from concessions at the shows selling
programs, hats, tote bags, jewelry and other accessories as souvenirs of the
show.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
METHOD OF ACCOUNTING
Assets, liabilities, revenues and expenses are recognized on the accrual
method of accounting for financial statement presentation and for federal income
tax purposes.
ACCOUNTS RECEIVABLE
The accounts receivable represent revenues due from the shows and
concession sales. The Company does not provide for any allowance for
uncollectible accounts.
REVENUE RECOGNITION
Revenues and the related expenses are recognized at the time the shows are
performed. Concession revenues and the related costs are recognized when the
goods are sold.
BANK OVERDRAFT
The bank overdraft represents the amount of checks outstanding in excess of
cash in bank.
LINE OF CREDIT
The notes payable -- current represents a revolving line of credit up to
$50,000 secured by a demand note to Barnett Bank at the bank prime rate plus
2.5%. Interest on the amounts borrowed is charged against the checking account
monthly.
INCOME TAXES
The Company has elected to be taxed under the provisions of subchapter S
('S' Corporation) of the Internal Revenue Code. Under these provisions, the
Company does not pay Federal corporate income taxes on its taxable income.
Instead, the shareholders are liable for the individual Federal income tax on
the Company's taxable income. Therefore, no provision for income taxes has been
provided in the income statement.
F-23
<PAGE>
<PAGE>
ENTERTAINMENT SPECIALISTS LTD., INC.
(A SUBCHAPTER 'S' CORPORATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996 AND 1995
FAIR VALUE OF FINANCIAL INSTRUMENTS
As of December 31, 1996 and 1995, the carrying amount of cash, accounts
receivable, bank overdrafts, accounts payable, accrued expenses, loans and notes
payable approximates fair value due to the short maturity of these instruments.
CONCENTRATION OF CREDIT RISK
The accounts receivable are all short term and the Company has no
significant off-balance sheet concentration of credit risk.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited interim financial statements as of March 31, 1997 and 1996
and for the three months ended March 31, 1997 and 1996 have been prepared on the
same basis as the audited financial statements included herein. In the opinion
of management, such unaudited financial statements include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the results of such periods. The operating results for the three months ended
March 31, 1997 are not necessarily indicative of the operating results to be
expected for the full fiscal year or for any future period.
PROPERTY AND EQUIPMENT
The Company's property and equipment includes the building in Oviedo,
Florida, twenty-nine (29) horses, transportation equipment, leasehold
improvements and office equipment. Expenditures for maintenance and repairs are
charged to expense and major additions to fixed assets are capitalized.
DEPRECIATION
The Company depreciates its fixed assets over their estimated useful lives
using accelerated methods (MACRS) for financial statement presentation and for
federal income tax purposes.
INVENTORIES
Inventories consist of concessions goods (clothing and accessories,
jewelry, programs, tapes -- all of which are souvenir products) held for resale
at shows and are valued at cost or market, whichever is lower. Cost was
determined by using the first-in, first-out method.
F-24
<PAGE>
<PAGE>
ENTERTAINMENT SPECIALISTS LTD., INC.
(A SUBCHAPTER 'S' CORPORATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996 AND 1995
3. PROPERTY AND EQUIPMENT
The Company owns property and equipment which is classified as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- --------------------
1996 1995 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Barn -- Oviedo, Fl..................................... $207,335 $207,335 $207,335 $207,335
Horses................................................. 174,501 174,501 174,501 174,501
Leasehold improvements................................. 61,407 -- 61,407 --
Machinery and equipment................................ 52,482 57,203 52,482 57,203
Transportation equipment............................... 19,794 19,794 19,794 40,273
Furnishings -- -- -- 1,349
-------- -------- -------- --------
515,519 458,833 515,519 480,661
Less accumulated depreciation.......................... 242,017 227,065 252,217 236,265
-------- -------- -------- --------
$273,502 $231,768 $263,302 $244,396
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
4. PREPAID EXPENSES
Prepaid expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------- -------------------
1996 1995 1997 1996
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Prepaid advertising costs................................ $ 76,417 $ -- $109,825 $15,182
Arena deposits........................................... 15,831 14,260 13,921 13,758
Prepaid production expenses.............................. 3,597 -- 78,921 --
Prepaid lease expense.................................... 8,000 4,061 8,000 --
Prepaid concession stock................................. -- -- 26,595 --
Prepaid insurance........................................ 30,407 35,743 30,407 35,743
-------- ------- -------- -------
$134,252 $54,064 $267,670 $64,683
-------- ------- -------- -------
-------- ------- -------- -------
</TABLE>
5. RELATED PARTY TRANSACTIONS
LEASE OBLIGATIONS
The Company incurred lease obligations with the shareholders during 1996
and 1995 as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
------- -------
<S> <C> <C>
Horses.................................................................. $16,500 $19,200
Barn.................................................................... 12,000 15,800
Office.................................................................. 8,000 --
Pasture................................................................. 6,000 --
Farm equipment.......................................................... 5,000 --
Transportation equipment................................................ -- 1,000
------- -------
$47,500 $36,000
------- -------
------- -------
</TABLE>
On January 1, 1997, the Company entered into a two (2) year lease agreement
with a monthly rental of $7,000.00 which covers the following properties:
1. Horses -- (11 Lipizzan/9 Andulusian/1 Arabian)
F-25
<PAGE>
<PAGE>
ENTERTAINMENT SPECIALISTS LTD., INC.
(A SUBCHAPTER 'S' CORPORATION)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996 AND 1995
2. Property:
Barn extension -- Oviedo, Fl.
Office and warehouse -- Oviedo, Fl.
Pasture property -- 1430 Van Ardsdale Street, Oviedo, Fl.
3. John Deere Tractor.
6. NOTES PAYABLE -- CURRENT
The Company has a revolving line of credit secured by a promissory demand
note with an interest rate of 2.5% over the bank prime rate dated August 29,
1996 with a credit limit of $50,000.00. At December 31, 1996 there was a balance
due of $47,600.00. The note calls for the payment monthly of all accrued
interest on the outstanding debt.
7. LOAN PAYABLE -- PENSION PLAN
The Company borrowed $74,328.00 on December 4, 1996 from Entertainment
Specialists Ltd., Inc. Employee Profit Sharing Plan. The loan is secured by a
demand note with a 8% annual interest rate.
8. PENSION PLAN
In 1993, the Company instituted a defined contribution 'Profit Sharing
Plan' and 401k deferred compensation plan for the benefit of all its employees.
The Company contributions to these plans for 1996 and 1995 were $34,740.00 and
$65,512.00, respectively.
9. SUBSEQUENT EVENT
On June 13, 1997, the Company entered into a merger agreement with
Beachport Entertainment Corporation (BEC) whereby BEC will acquire all of the
issued and outstanding shares of the Company for a specified amount of cash, a
number of shares of the common stock of BEC determined by a formula that takes
into consideration the average closing price of BEC's common stock for the 60
day period immediately prior to closing or $3.00, whichever is lower, with
additional shares issuable over the next three years based upon an earnings
formula and the yearly average of BEC's common stock, as defined. The two
principals of the Company have entered into a three (3) year employment
agreement with BEC. The Company closed on its merger agreement on July 1, 1997,
and as of that date no longer qualified as a Subchapter 'S' Corporation. The
merger was effective on August 4, 1997 upon meeting the filing requirements of
the states of Florida and Nevada.
F-26
<PAGE>
<PAGE>
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
The following pro forma balance sheet has been derived from the balance
sheets of the Company ('BEC') at March 31, 1997 and adjusts such information to
give effect to (1) the acquisition of Entertainment Specialists, Ltd. ('ESL'),
(2) the completion of debt financing in July, 1997, and (3) the settlement of
major litigation in June, 1997, as if such events had occurred at March 31,
1997. The pro forma balance sheet is presented for informational purposes only
and does not purport to be indicative of the financial condition that actually
would have resulted if the acquisition, debt financing, and lawsuit settlement
had all been consummated at March 31, 1997. The pro forma balance sheet should
be read in conjunction with the notes thereto and the financial statements of
the Company and of ESL contained elsewhere in this registration statement.
<TABLE>
<CAPTION>
ESL
(AT HISTORICAL
BEC COST) ADJUSTMENTS PRO FORMA
----------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents....................... $ 87,171 $ 3,765(1) $ (631,460)
(2) 2,343,000
(3) 1,300,297 $3,102,773
Accounts receivable, net........................ 144,826 144,826
Other........................................... 22,885 289,798(3) 36,486 349,169
----------- -------------- ----------- ----------
Total current assets....................... 110,056 438,389 3,048,323 3,596,768
Horses............................................... 100,000(1) 385,250 485,250
Other property and equipment, net.................... 110,000 163,302 273,302
Video cassette rights, net........................... 403,775 403,775
Software and film production costs................... 267,539 267,539
Goodwill............................................. (1) 1,129,899 1,129,899
Advances to acquisition targets...................... 450,000 (1) (100,000) 350,000
Other assets......................................... 109,346 12,591(3) 39,375 161,312
----------- -------------- ----------- ----------
$ 1,450,716 $714,282 $ 4,502,847 $6,667,845
----------- -------------- ----------- ----------
----------- -------------- ----------- ----------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable................................ $ 716,610 $238,364 $ 954,974
Notes payable................................... 2,556,550 120,329(2) $ 2,945,500 5,622,379
Payable to stockholders......................... 370,321 370,321
Accrued expenses................................ 183,229 139,278 322,507
----------- -------------- ----------- ----------
Total current liabilities.................. 3,826,710 497,971 2,945,500 7,270,181
----------- -------------- ----------- ----------
Stockholders' equity
Convertible preferred stock, $1 par, 1,000,000
shares authorized, 8 shares issued and
outstanding................................... 8 8
Common stock, $.002 par, 50,000,000 shares
authorized, 9,048,526 shares issued and (1) 1,418
outstanding................................... 15,706 (3) 973 18,097
Common stock, $1 par, 500 shares authorized,
issued and outstanding........................ 500(1) 500 --
Additional paid-in capital...................... 3,377,043 100,000(1) 998,582
(1) (100,000)
(2) 563,406
(3) 971,999 5,911,030
Retained earnings (deficit).......................... (5,768,751) 115,811(1) 115,811
(x) (762,720) (6,531,471)
----------- -------------- ----------- ----------
Total stockholders' equity................. (2,375,994) 216,311 1,557,347 (602,336)
----------- -------------- ----------- ----------
$ 1,450,716 $714,282 $ 4,502,847 $6,667,845
----------- -------------- ----------- ----------
----------- -------------- ----------- ----------
</TABLE>
F-27
<PAGE>
<PAGE>
PRO FORMA FINANCIAL DATA
(UNAUDITED)
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
The following unaudited pro forma statements of income have been derived
from the statements of income of the Company for the fiscal year ended December
31, 1996 and the three months ended March 31, 1997 and adjusts such information
to give effect to (1) the acquisition of Entertainment Specialists, Ltd.
('ESL'), (2) the completion of debt financing in July, 1997, and (3) the
settlement of major litigation in June, 1997, as if such events had occurred at
March 31, 1997. The pro forma statements of income are presented for
informational purposes only and do not purport to be indicative of the results
of operations that actually would have resulted if the acquisition, financing,
and lawsuit settlement had all been consummated at March 31, 1997. The Pro Forma
Consolidated Statements of Income should be read in conjunction with the notes
thereto and the financial statements of the Company and of ESL contained
elsewhere in this registration statement.
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
ESL
(AT HISTORICAL
BEC COST) ADJUSTMENTS PRO FORMA
---------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales............................................. $ 87,617 $2,481,995 $ 2,569,612
Operating costs and expenses
Cost of sales.................................... 269,058 1,351,640 1,620,698
Selling, general and administrative expenses..... 421,917 853,512 1,275,429
---------- -------------- -----------
Operating income............................... (603,358) 276,843 (326,515)
Interest expense...................................... 60,135 (2) $(1,222,197) 1,282,332
Gain on lawsuit settlement............................ (3) 403,186 (403,186)
Other................................................. 11,824 11,824
---------- -------------- ----------- -----------
Income (loss) before income tax.................. (663,493) 265,019 (819,011) (1,217,485)
Provision for taxes...................................
---------- -------------- ----------- -----------
Net income (loss)........................... $ (663,493) $ 265,019(x) (819,011) (1,217,485)
---------- -------------- ----------- -----------
---------- -------------- ----------- -----------
(Loss) per share of common stock...................... $(0.09) $(0.14)
Weighted average number of common shares
outstanding......................................... 7,499,116 8,694,822
</TABLE>
F-28
<PAGE>
<PAGE>
FOR THE YEAR ENDED DECEMBER 31, 1996 BEC ESL
<TABLE>
<CAPTION>
BEC ESL
ACTUAL ACTUAL ADJUSTMENTS PRO FORMA
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales............................................... $ 1,080,656 $5,896,018 $ 6,976,674
Operating costs and expenses
Cost of sales...................................... 1,165,874 3,734,553 4,900,427
Selling, general and administrative expenses....... 2,777,219 2,414,550 5,191,769
----------- ---------- -----------
Operating income................................. (2,862,437) (253,085) (3,115,522)
Interest expense........................................ 1,092,357 1,092,357
Gain on lawsuit settlement..............................
Other................................................... 23,795 23,795
----------- ---------- -----------
Income (loss) before income tax.................... (3,954,794) (216,880) (4,231,674)
Income tax benefit...................................... 452 452
Net (loss).................................... $(3,954,342) $ (276,880) $(4,231,222)
----------- ---------- -----------
----------- ---------- -----------
(Loss) per share of common stock........................ $(0.58) $(0.51)
Weighted average number of common shares outstanding.... 6,807,910 8,003,616
</TABLE>
- - ------------
(1) To record purchase of Entertainment Specialists Ltd., Inc.
(2) To record debt financing
(3) To record J.B. Oxford settlement
F-29
<PAGE>
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
AND CONDENSED BALANCE SHEET
(1) Adjustment to reflect acquisition of Entertainment Specialists, Ltd.
('ESL'), dated June 13, 1997. ESL was purchased for $731,460 plus 709,220
common shares of the Company, valued at current market price of $1.41 per
share. In addition, additional Company stock is payable to the selling
shareholders of ESL contingent on a comparison of ESL separate earnings
before income taxes ('EBIT') during the next 3 years with consolidated
Company EBIT for the third year alone. If ESL's EBIT equals Company EBIT
(excluding ESL), then additional Company stock equal to 12.25% of then-toal
outstanding shares is due. This percentage rises rapidly if ESL makes money
and other Company operations fail to make money. A change of control would
occur if the Company (excluding ESL) loses more than half as much as ESL
makes, under this formula.
No stock is due ESL's owners during the next two years unless ESL's separate
EBIT exceeds $1 million per year.
The acquisition was recorded using the purchase method, whereby, excepting
the 29 Lipizzaner and other horses acquired with a fair market value of
$485,250, fair market value approximated cost for all other assets and
liabilities acquired. Goodwill was recorded for the difference between the
purchase price of $1,731,460 and fair value of net assets purchased of
$601,561, or $1,129,899.
(2) In June, 1997, the Company completed a short-term debt placement with a face
value of $4,448,500, note discounts of $435,291 all accounted for as
interest expense for net cash proceeds of $3,789,709. Of this amount,
$1,002,765 was used to retire certain other Company notes payable, leaving
net cash available for Company use of $2,786,944.
These notes carry an interest rate of 12%, mature December, 1997 and are
renewable for 2 three-month extensions at the option of the Company.
In connection with this debt issuance, the Company issued one warrant to
purchase one share of Company common stock at $1.375 per share for each
$4.82 in notes payable, or 819,500 warrants issued to debtholders, plus
81,950 warrants issued to the placement agents. With Company stock selling
at an average market price of $2 per share, these 901,450 warrants are
valued at $.625 each, or $563,406, accounted for as interest expense and a
related increase in paid in capital. In addition, these warrants will change
in both total quantity issued (by increasing) and exercise price (by
decreasing) if the Company fails to achieve net income of $4 million during
the 12 months ended June 30, 1998. These warrants are exercisable anytime
during the next 5 years.
(3) On June 24, 1997, the Company agreed to an out-of-court settlement of its
two-year-old litigation against its former investment banker, J.B. Oxford
Holdings, Inc. ('Oxford'). The Company realized a net gain of $403,186,
after contingent legal fees, plus additional cash and other assets of
$972,972 from the sale of 486,486 shares of Company common stock to Oxford
valued at the current Company stock market price of $2 per share.
F-30
<PAGE>
<PAGE>
_________________________________ ________________________________
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MAY NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE SECURITIES OFFERED
BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SHARES OF COMMON STOCK IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................ 3
Risk Factors.................................. 7
Use of Proceeds............................... 11
Dividend Policy............................... 11
Capitalization................................ 12
Selected Financial Data....................... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 14
Business...................................... 17
Management.................................... 24
Principal Shareholders........................ 30
Selling Securityholders....................... 31
Certain Transactions.......................... 35
Plan of Distribution.......................... 36
Description of Securities..................... 36
Market Price of Common Stock.................. 37
Shares Eligible for Future Sale............... 37
Legal Matters................................. 38
Experts....................................... 38
Additional Information........................ 38
Index to Financial Statements................. F-1
</TABLE>
_________________________________ ___
_________________________________ ___
BEACHPORT ENTERTAINMENT
CORPORATION
- - ------------------------
8,997,507 SHARES
COMMON STOCK
PROSPECTUS
, 1997
- - ------------------------
_________________________________ ________________________________
<PAGE>
<PAGE>
PART II
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Utah Revised Business Corporation Act, in general, allows corporations
to indemnify their directors and officers against expenses (including attorneys'
fees), judgments, fines and settlement amounts actually and reasonably incurred
by such person in connection with suits or proceedings, if the person acted in
good faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation. In the case of a criminal
action, the director or officer must have had no reasonable cause to believes
that person's conduct was unlawful. Under current law, no indemnification may be
made if in connection with a proceeding or in the right of the corporation in
which the director or officer was adjudged to be liable to the corporation or
that person derived an improper personal benefit.
The Company's Certificate of Incorporation and By-Laws provide that the
Company shall indemnify its directors and officers to the fullest extent
permitted by Utah Law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be borne by the
Company (also referred to herein as the Registrant) in connection with the
issuance and distribution of the Shares pursuant to the Offering.
<TABLE>
<S> <C>
SEC registration fee.............................................................. $ 5,400
Legal fees and expenses........................................................... 100,000
Accounting fees................................................................... 35,000
Blue Sky fees and expenses........................................................ *
Printing and engraving expenses................................................... *
Miscellaneous..................................................................... *
--------
Total fees and expenses...................................................... $ *
--------
--------
</TABLE>
- - ------------
* To be completed by amendment
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following paragraphs set forth certain information with respect to all
securities sold by the Company within the past three years without registration
under the Securities Act of 1933, as amended (the 'Securities Act'). The
information includes the names of the purchasers, the date of issuance, the
title and number of securities sold and the consideration received by the
Company for the issuance of these shares.
The following securities were issued by the Company without registration
under the Securities Act by reason of the exemption from registration afforded
by the provisions of Section 4(2) thereof, as transactions by an issuer not
involving a public offering:
On November 15, 1994, the Company issued an option to Danny Katz, for
services rendered, to purchase 80,000 shares of common stock at $.10 per
share.
In July 1995, the Company issued 800,000 shares of common stock to
Barry Mendelson in partial consideration for the purchase of On Ice, Inc.
On August 1, 1995, the Company issued an option to Duane S. Jenssen
and Jeff D. Jenssen, for services rendered, to purchase 10,000 shares of
common stock at $.25 per share.
On August 7, 1995, the Company issued an option to Jaffoni & Collins,
for services rendered, to purchase 75,000 shares of common sStock at $.625
per share.
On August 25, 1995, the Company issued an option to Wayne Seybold, for
services rendered, to purchase 50,000 shares of common stock at varying
prices, as follows: 20,000 at $.10 per share; 15,000 at $1.00 per share and
15,000 at $2.00 per share.
II-1
<PAGE>
<PAGE>
On October 1, 1995, the Company issued an option to Mark Adleman, for
services rendered, to purchase 5,000 shares of common stock at $2.31 per
share.
On October 1, 1995, the Company issued an option to Eric Wasserman,
for services rendered, to purchase 25,000 shares of common stock at $2.31
per share.
On October 1, 1995, the Company issued an option to Benton Levy, for
professional services rendered, to purchase 50,000 shares of common stock
at $2.31 per share.
On October 1, 1995, the Company issued an option to Kenneth
Freundlich, for professional services rendered, to purchase 50,000 shares
of common stock at $2.31 per share.
On August 15, 1996, the Company issued an option to Jeremiah J. Harris
in consideration of his agreeing to serve as a member of the Company's
Board of Directors, to purchase 12,000 shares of common stock at $2.50 per
share.
On October 9, 1996, the Company issued warrants to Swan Alley
Nominees, Ltd., on behalf of its clients, to purchase 155,160 shares of
common stock at $1.25 per share in consideration of extending the due dates
of certain loans to the Company from July, August, and September 1996 to
April 30, 1997.
On October 9, 1996, the Company issued warrants to 155964 Canada Inc.,
to purchase 10,000 shares of common stock at $1.25 per share in
consideration of extending the due date of its loan to the Company from
August 1996 to April 30, 1997.
On October 9, 1996, the Company issued warrants to Astaire & Partners
Ltd., to purchase 25,000 shares of common stock at $1.25 per share in
consideration of their negotiating the terms of certain loan extension
agreements with their clients.
On October 10, 1996, the Company issued an option to Tom Wiley, for
professional services rendered, to purchase 10,000 shares of common stock
at $1.50 per share.
On October 11, 1996, the Company issued an option to Linda Azarone,
the Company's Chief Operating Officer, to purchase 50,000 shares of common
stock at $1.75 per share for services rendered.
On October 16, 1996 the Company issued an option to David C. Teuma to
purchase 10,000 shares of common stock at $1.25 per share for services
rendered.
On December 27, 1996, the Company issued to Robert Wussler, a Director
of the Company, an option to purchase 500,000 shares of common stock of
which 200,000 options are exercisable at $.50 per share, 150,000 options
are exercisable at the lowest closing bid price for the year ended December
31, 1997 or three years from any other date he selects to exercise his
options in 1997 and 150,000 options are exercisable at the lowest closing
bid price for the year ended December 31, 1998 or three years from any
other date he selects to exercise his options in 1998, in connection for
his agreeing to become a member of the Board of Directors of the Company.
On December 30, 1996 the Company issued to Gerald A. Adler an option
to purchase 200,000 shares of common stock at $.93 per share for services
rendered.
On December 30, 1991, the Company issued to Wasserstein Perella
Securities, Inc. an option to purchase 600,000 shares of common stock at
$.25 per share for services rendered.
On December 30, 1996, the Company issued option to purchase 40,000
shares of common stock at $.93 per share to Roy Lerman for services
rendered.
On December 30, 1996 the Company issued to Peter Jenssen, options to
purchase 500,000 shares of common stock at $.25 per share for services
rendered.
On January 17, 1997 the Company issued options to purchase 10,000
shares of common stock at $.93 per share each to Jeremiah Harris, Ronald
Wilson and Walter J. Richards, for services rendered at members of the
Company's Board of Directors.
On February 28, 1997, the Company issued options to Gary De Luca to
purchase 500,000 shares of common stock at $.25 per share for services
rendered.
II-2
<PAGE>
<PAGE>
On March 1, 1997 the Company issued to Laidlaw Securities, Inc. an
option to purchase 67,500 shares of common stock at $1.50 per share for
services rendered.
On March 15, 1997 the Company issued to Greg Kroning an option to
purchase 100,000 shares of common stock at $1.75 per share for services
rendered.
On March 26, 1997, the Company issued an option to Eric Wasserman, for
services rendered to purchase 25,000 shares of common stock at $.93 per
share.
On May 1, 1997 the Company issued to Gerald Agranoff an option to
purchase 11,000 shares of common stock at $1.375 per share for services
rendered.
On June 4, 1997 the Company issued an option to Ricahrd Love to
purchase 100,000 shares of common stock at $1.00 per share for legal
services rendered.
On July 1, 1997 the Company issued 336,879 shares of common stock to
Gary Lashinsky, 336,880 shares of common stock to Elizabeth Lashinsky and
35,461 shares of common stock to Gary and Elizabeth Lashinsky, as joint
tenants, all in connection with the merger of ESL into RSL, a wholly owned
subsidiary of the Company.
On August 8, 1997 the Company issued to DMN Capital Investment, Inc.
55,000 shares of common stock in partial settlement of loans previously
made to the Company.
The following shares of common stock were issued by the Company
without registration under the Securities Act in accordance with Rule 506
of Regulation D of the Securities Act.
On September 30, 1996, the Company completed an offering of an
aggregate of $725,000 of its 8% non-negotiable promissory notes to 14
'accredited investors', as that term is defined by Rule 501 of Regulation
D, which notes were due on December 31, 1996. The offering was made
pursuant to Rule 506 of the Regulation D. In consideration of extending the
due dates on such notes, the Company issued to its lenders, warrants to
purchase 125,000 shares of common stock at $1.20 per share.
In June 1997, the Company completed a private placement to 'accredited
investors' of 37.25 Units to 79 of its 12% Senior Secured Original Issue
Discount Promissory Notes ('Senior Notes') in the face amount of $106,000
per Unit and warrants to purchase 22,000 shares of common stock per week
and 10.03 Units of 12% Junior Original Issue Discount Promissory Notes
('Junior Notes') in the face amount of $106,000 per Unit and Warrants to
purchase 22,000 shares of Common Stock per Unit. The aggregate dollar
amount of Senior Notes and Junior Notes sold in the offering was $3,725,000
and $1,002,765 respectively. The offering was made pursuant to Rule 506 of
Regulation D.
The following shares of common stock were issued by the Company
without registration under the Securities Act in accordance with Rule 504
of Regulation D of the Securities Act.
1. In December 1995, the Company completed a private placement issuing
3,600,000 shares of Common Stock for $552,000 as follows:
<TABLE>
<CAPTION>
NUMBER OF PURCHASE
NAME SHARES PRICE
- - ------------------------------------------------------------ --------- --------
<S> <C> <C>
Gerald A. Adler............................................. 150,000 $ 24,000
Alex Segall Family Trust.................................... 75,000 12,000
DMN Capital Investment, Inc................................. 450,000 72,000
Dover Securities, Ltd....................................... 600,000 96,000
Thomas Ebert................................................ 225,000 36,000
Christian Geiger............................................ 225,000 36,000
Isabella Hauser............................................. 225,000 36,000
Klaus P. Keuncecke.......................................... 225,000 36,000
Margaux S.A. Inc............................................ 300,000 48,000
Paris Group, Ltd............................................ 150,000 24,000
James Pristsiolas........................................... 150,000 24,000
Milfred Rau/Angelika Konig.................................. 75,000 12,000
</TABLE>
(table continued on next page)
II-3
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
NUMBER OF PURCHASE
NAME SHARES PRICE
- - ------------------------------------------------------------ --------- --------
<S> <C> <C>
Norbert Schulz.............................................. 225,000 36,000
Victor Squitieri............................................ 75,000 12,000
Jurgen Vanselow............................................. 225,000 36,000
Joery Widenhoff............................................. 75,000 12,000
Candice Pokross............................................. 75,000 12,000
</TABLE>
The following securities were issued by the Company without
registration under the Securities Act pursuant to Regulation S.
In January 1996, the Company issued a $125,000 12% promissory note and
50,000 shares of common stock to 3 purchasers, all of whom are non-U.S.
persons, for an aggregate of U.S. $130,000.
In February 1996, the Company issued 12% promissory notes aggregating
$589,550 and 235,820 shares of common stock to 28 purchasers, all of whom
are non-U.S. persons, for an aggregate of U.S. $613,132.
In June 1996, the Company issued 12% promissory notes aggregating
$215,000 and warrants to purchase 215,000 shares of common stock at an
exercise price of $3.25 per share to 5 purchasers, all of whom are non-U.S.
persons, for an aggregate of $215,000.
ITEM 27. EXHIBITS
<TABLE>
<C> <S>
3.1 -- Articles of Incorporation of Mace, Inc.
3.2 -- Article of Amendment to the Articles of Incorporation of Mace, Inc.
3.3 -- Articles of Amendment to the Articles of Incorporation of Mace, Inc.
3.4 -- Articles of Amendment to the Articles of Incorporation of Action Covers, Inc.
3.5 -- Articles of Amendment to the Articles Incorporation of Omni International Corporation.
3.6 -- Articles of Amendment to the Articles of Incorporation of Omni International Corporation.
3.7 -- Articles of Amendment to the Articles of Incorporation of Beachport Entertainment Corporation.
*3.8 -- By-laws.
5.1 -- Opinion and consent of Bondy & Schloss LLP.
10.1 -- Option Agreement, dated June 30, 1995, by and between Beachport Entertainment, Corporation, Barry
Mendelson and On Ice.
10.2 -- Option Exercise Agreement, dated July 28, 1995, by and between Beachport Entertainment Corporation, Barry
Mendelson and On Ice.
10.3 -- Agreement, dated January 18, 1995, by and between On Ice and NBC Sports Ventures, Inc.
10.4 -- License Agreement, dated February 16, 1995, by and between NBC Sports, On Ice and the CBS/Fox Company.
10.5 -- Agreement, dated March 28, 1995, by and between D&F Consulting, Ltd. and On Ice.
10.6 -- Agreement, dated May 31, 1995, by and between NBC Sports and D&F Consulting Ltd.
10.7 -- Agreement, dated September 15, 1995, by and between On Ice and P.S./StarGames.
10.8 -- Agreement, dated November 10, 1995, by and between Capital Cities/ABC Video Publishing, Inc. and FTI,
Inc.
10.9 -- Agreement, dated November 15, 1995, by and between PS/StarGames On Ice and Nak, Inc.
10.10 -- Agreement, dated January 19, 1996, by and between On Ice and Bresner Management.
10.11 -- Agreement dated February 1996 among FTI, Inc., David Zippel and Marvin Hamlisch, Inc.
10.12 -- Renewal of Agreement, dated March 28, 1996, made by D&F Consulting, Ltd.
10.13 -- Agreement, dated April 3, 1996, by and between TLC Entertainment and Beachport Entertainment Digital
Group.
10.14 -- Agreement, dated April 24, 1996, by and between FTI, Inc. and Gorfine & Schwartz Agency.
</TABLE>
II-4
<PAGE>
<PAGE>
<TABLE>
<C> <S>
10.15 -- Employment, Non-Competition and Confidentiality Agreement dated as of June 30, 1996 by and between
Beachport Entertainment Corporation and Barry Mendelson.
10.16 -- Employment, Non-Competition and Confidentiality Agreement dated October, 1996 by and between Beachport
Entertainment Corporation and Sidney Shlenker.
10.17 -- Employment, Non-Competition and Confidentiality Agreement dated October, 1996 by and between Beachport
Entertainment Corporation and Robert L. Barland.
10.18 -- Employment, Non-Competition and Confidentiality Agreement dated as of July 1, 1997 by and between
Beachport Entertainment Corporation and Elizabeth Lashinsky.
10.19 -- Employment, Non-Competition and Confidentiality Agreement by and between Beachport Entertainment
Corporation and Gary Lashinsky.
10.20 -- Agreement between Magic Promotions, Inc. and On Ice, Inc. dated November 10, 1994.
*10.23 -- Option plan of Beachport Entertainment Corporation.
10.21 -- Settlement Agreement between On Ice, Inc. and Magicworks Entertainment Incorporated dated June 12, 1997.
10.22 -- Merger Agreement and Plan or Reorganization dated June 13, 1997 by and among Beachport Entertainment
Corporation and The Royal Lipizzaner Stallions, Inc. and Entertainment Specialists, Ltd. and Gary and
Elizabeth Lashinsky.
23.1 -- Consents of Malone & Bailey, PLLC.
23.2 -- Consents of Van Buren and Hauke LLC.
23.3 -- Consent of Bondy & Schloss (included in Exhibit 5.1).
24.1 -- Power of Attorney (See page II-7).
</TABLE>
- - ------------
* To be filed by amendment
ITEM 28. 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 to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
'Calculation of Registration Fee' table in the effective registration
statement.
(iii) include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) For the purpose of determining any liability under the Securities
Act of 1933, treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the securities at
that time to be the initial bona fide offering.
(3) Registrant will 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.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the 'Act') may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer 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 Registration the successful defense of any action,
suit or proceeding) is
II-5
<PAGE>
<PAGE>
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.
For the purpose of determining any liability under the Act, 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. The Registrant further undertakes 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-6
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of New
York, State of New York on the 12 day of August, 1997.
BEACHPORT ENTERTAINMENT CORPORATION
By: /S/ BARRY MENDELSON
...................................
BARRY MENDELSON, PRESIDENT
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ BARRY MENDELSON President, Chief Executive Officer Director August 12, 1997
.........................................
(BARRY MENDELSON)
/s/ SIDNEY SHLENKER Chairman of the Board August 12, 1997
.........................................
(SIDNEY SHLENKER)
/s/ ROBERT L. BARLAND Vice President, Secretary, Treasurer, Chief August 12, 1997
......................................... Financial Officer, Chief Accounting
(ROBERT L. BARLAND) Officer
/s/ LINDA AZARONE Chief Operating Officer August 12, 1997
.........................................
(LINDA AZARONE)
/s/ WALTER J. RICHARDS Director August 12, 1997
.........................................
(WALTER J. RICHARDS)
/s/ RONALD WILSON Director August 12, 1997
.........................................
(RONALD WILSON)
/s/ JEREMIAH J. HARRIS Director August 12, 1997
.........................................
(JEREMIAH J. HARRIS)
/s/ ROBERT WUSSLER Director August 12, 1997
.........................................
(ROBERT WUSSLER)
/s/ RICHARD L. TUCH Director August 12, 1997
.........................................
(RICHARD L. TUCH)
/s/ GARY LASHINSKY Director August 12, 1997
.........................................
(GARY LASHINSKY)
</TABLE>
II-6
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints Sidney Shlenker and Barry
Mendelson, or either of them, as such person's true and lawful attorneys-in-fact
and agents, will full powers of substitution and re-substitution, for such
person in name, place and stead, to sign in any and all amendments (including
post-effective amendments) to this Registration Statement on Form SB-2, in any
and all capacities, and to file the same, with all exhibits thereto and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ BARRY MENDELSON President, Chief Executive Officer Director August 12, 1997
.........................................
(BARRY MENDELSON)
/s/ SIDNEY SHLENKER Chairman of the Board August 12, 1997
.........................................
(SIDNEY SHLENKER)
/s/ ROBERT L. BARLAND Vice President, Secretary, Treasurer, Chief August 12, 1997
......................................... Financial Officer, Chief Accounting
(ROBERT L. BARLAND) Officer
/s/ LINDA AZARONE Chief Operating Officer August 12, 1997
.........................................
(LINDA AZARONE)
/s/ WALTER J. RICHARDS Director August 12, 1997
.........................................
(WALTER J. RICHARDS)
/s/ RONALD WILSON Director August 12, 1997
.........................................
(RONALD WILSON)
/s/ JEREMIAH J. HARRIS Director August 12, 1997
.........................................
(JEREMIAH J. HARRIS)
/s/ ROBERT WUSSLER Director August 12, 1997
.........................................
(ROBERT WUSSLER)
/s/ RICHARD L. TUCH Director August 12, 1997
.........................................
(RICHARD L. TUCH)
/s/ GARY LASHINSKY Director August 12, 1997
.........................................
(GARY LASHINSKY)
</TABLE>
II-7
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
- - ------- --------------------------------------------------------------------------------------- -------------------
<C> <S> <C>
3.1 -- Articles of Incorporation of Mace, Inc..............................................
3.2 -- Article of Amendment to the Articles of Incororation of Mace, Inc...................
3.3 -- Articles of Amendment to the Articles of Incorporation of Mace, Inc.................
3.4 -- Articles of Amendment to the Articles of Incorporation of Action Covers, Inc........
3.5 -- Articles of Amendment to the Articles Incorporation of Omni International
Corporation..........................................................................
3.6 -- Articles of Amendment to the Articles of Incorporation of Omni International
Corporation..........................................................................
3.7 -- Articles of Amendment to the Articles of Incorporation of Beachport Entertainment
Corporation..........................................................................
*3.8 -- By-laws.............................................................................
5.1 -- Opinion and consent of Bondy & Schloss LLP..........................................
10.1 -- Option Agreement, dated June 30, 1995, by and between Beachport Entertainment,
Corporation, Barry Mendelson and On Ice..............................................
10.2 -- Option Exercise Agreement, dated July 28, 1995, by and between Beachport
Entertainment Corporation, Barry Mendelson and On Ice................................
10.3 -- Agreement, dated January 18, 1995, by and between On Ice and NBC Sports Ventures,
Inc..................................................................................
10.4 -- License Agreement, dated February 16, 1995, by and between NBC Sports, On Ice and
the CBS/Fox Company..................................................................
10.5 -- Agreement, dated March 28, 1995, by and between D&F Consulting, Ltd. and On Ice.....
10.6 -- Agreement, dated May 31, 1995, by and between NBC Sports and D&F Consulting Ltd.....
10.7 -- Agreement, dated September 15, 1995, by and between On Ice and P.S./StarGames.......
10.8 -- Agreement, dated November 10, 1995, by and between Capital Cities/ABC Video
Publishing, Inc. and FTI, Inc........................................................
10.9 -- Agreement, dated November 15, 1995, by and between PS/StarGames On Ice and Nak,
Inc..................................................................................
10.10 -- Agreement, dated January 19, 1996, by and between On Ice and Bresner Management.....
10.11 -- Agreement dated February 1996 among FTI, Inc., David Zippel and Marvin Hamlisch,
Inc..................................................................................
10.12 -- Renewal of Agreement, dated March 28, 1996, made by D&F Consulting, Ltd.............
10.13 -- Agreement, dated April 3, 1996, by and between TLC Entertainment and Beachport
Entertainment Digital Group..........................................................
10.14 -- Agreement, dated April 24, 1996, by and between FTI, Inc. and Gorfine & Schwartz
Agency...............................................................................
10.15 -- Employment, Non-Competition and Confidentiality Agreement dated as of June 30, 1996
by and between Beachport Entertainment Corporation and Barry Mendelson...............
10.16 -- Employment, Non-Competition and Confidentiality Agreement dated October, 1996 by and
between Beachport Entertainment Corporation and Sidney Shlenker......................
10.17 -- Employment, Non-Competition and Confidentiality Agreement dated October, 1996 by and
between Beachport Entertainment Corporation and Robert L. Barland....................
10.18 -- Employment, Non-Competition and Confidentiality Agreement dated as of July 1, 1997
by and between Beachport Entertainment Corporation and Elizabeth Lashinsky...........
10.19 -- Employment, Non-Competition and Confidentiality Agreement by and between Beachport
Entertainment Corporation and Gary Lashinsky.........................................
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
- - ------- --------------------------------------------------------------------------------------- -------------------
<S> <C> <C>
10.20 -- Agreement between Magic Promotions, Inc. and On Ice, Inc. dated November 10,
1994.................................................................................
*10.21 -- Option plan of Beachport Entertainment Corporation..................................
10.21 -- Settlement Agreement between On Ice, Inc. and Magicworks Entertainment Incorporated
dated June 12, 1997..................................................................
10.22 -- Merger Agreement and Plan or Reorganization dated June 13, 1997 by and among
Beachport Entertainment Corporation and The Royal Lipizzaner Stallions, Inc. and
Entertainment Specialists, Ltd. and Gary and Elizabeth Lashinsky.....................
23.1 -- Consents of Malone & Bailey, PLLC...................................................
23.2 -- Consents of Van Buren and Hauke LLC.................................................
23.3 -- Consent of Bondy & Schloss (included in Exhibit 5.1)................................
24.1 -- Power of Attorney (See page II-7)...................................................
</TABLE>
- - ------------
*Filed by amendment.
<PAGE>
<PAGE>
[DIVISION OF CORPORATIONS SEAL]
ARTICLES OF INCORPORATION
OF
MACE, INC.
We, the undersigned natural persons of the age of eighteen years or more,
acting as incorporators of the corporation under the provisions of the Utah
Business Corporation Act (hereinafter called the "Act"), do hereby adopt the
following Articles of Incorporation for such Corporation.
ARTICLE I
Name. The name of the corporation (hereinafter called the "Corporation") is
MACE, INC.
ARTICLE II
Period of Duration. The period of duration of the Corporation is perpetual.
ARTICLE III
Purpose and Powers. The purposes for which this Corporation is organized is
to invest in all forms of investment, including real and personal property,
stocks and bonds, including, but not limited to, the acquisition of a business
opportunity in any industry including industries such as manufacturing, finance,
service, natural resources, high technology, product development, medical,
communications or any other industry; and to engage in all other lawful
business.
<PAGE>
<PAGE>
ARTICLE IV
Capitalization. The Corporation shall have the authority to issue
100,000,000 (one hundred million) shares of stock each having a par value of
one-tenth of one cent ($0.001). All stock of the Corporation shall be of the
same class and shall have the same rights and preferences. Fully paid stock of
this Corporation shall not be liable for further call or assessment. The
authorized trading shares shall be issued at the discretion of the Directors.
ARTICLE V
Commencement of Business. The Corporation shall not commence business until
at least One Thousand Dollars ($1,000) has been received by the Corporation as
consideration for the issuance of its shares.
ARTICLE VI
Initial Registered Office and Initial Registered Agent. The address of the
initial registered office of the Corporation is 4596 Russell Street, Salt Lake
City, UT 84117, and the initial registered Agent at such office is Steve D.
Moulton.
ARTICLE VII
Directors. The Corporation shall be governed by a Board of Directors
consisting of no less than three (3) and no more than nine (9) directors.
Directors need not be stockholders of the Corporation. The number of Directors
constituting the initial Board of Directors is three (3) and the names and post
office addresses of the persons who shall serve as Directors until their
successors are elected and qualified are:
2
<PAGE>
<PAGE>
Steve D. Moulton 4596 Russell Street
Salt Lake City, UT 84117
Whitney D. Lund 1505 N. American Towers
Salt Lake City, UT 84101
Hal W. Griffith 2883 West 8750 South
West Jordan, UT 84084
ARTICLE VIII
Incorporators. The name and post office address of each incorporator is:
Steve D. Moulton 4596 Russell Street
Salt Lake City, UT 84117
Whitney D. Lund 1505 N. American Towers
Salt Lake City, UT 84101
Hal W. Griffith 2883 West 8750 South
West Jordan, UT 84064
ARTICLE IX
Pre-emptive Rights. There shall be no pre-emptive rights to acquire
unissued and/or treasury shares of the stock of the Corporation.
ARTICLE X
Voting of Shares. Each outstanding share of common stock of the Corporation
shall be entitled to one vote on each matter submitted to a vote at the meeting
of the stockholders. Each stockholder shall be entitled to vote his or its
shares in person or by proxy, executed in writing by such stockholders, or by
his duly authorized attorney-in-fact. At each election of Directors, every
stockholder entitled to vote in such election shall have the right to vote, in
person or by proxy, the number of shares owned by him or it for as many persons
as there are Directors to be elected and for whose election he or it has the
right to vote, but the
3
<PAGE>
<PAGE>
Shareholder shall have no right to accumulate his or its votes with regard to
such election.
Steve D. Moulton, hereby accepts the appointment as registered agent for
Mace, Inc.
/s/ STEVE D. MOULTON
__________________________________________
Registered Agent
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
On the 15th day of Nov., 1985, personally appeared before me, Steve D.
Moulton, who being by me first duly sworn, severally declared that he is the
registered agent who signed the foregoing document as the registered agent.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 15th day of
Nov., 1985.
/s/ DAVID J. KRIVANEE
__________________________________________
NOTARY PUBLIC
Residing at Bountiful
My Commission Expires:
3/13/89
_____________________________
4
<PAGE>
<PAGE>
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
On the 15th day of Nov., 1985, personally appeared before me STEVE D.
MOULTON, WHITNEY D. LUND, and HAL W. GRIFFITH, who acknowledged to me that they
are the persons who signed the foregoing Articles of Incorporation as
incorporators and that they have read the foregoing Articles of Incorporation
and know the content thereof, and that the same is true of their knowledge as to
those matters upon which they operate on information and belief, and as to those
matters believe them to be true.
/s/ STEVE D. MOULTON
__________________________________________
Steve D. Moulton
/s/ WHITNEY D. LUND
__________________________________________
Whitney D. Lund
/s/ HAL W. GRIFFITH
__________________________________________
Hal W. Griffith
SUBSCRIBED AND SWORN TO before me this 15th day of Nov., 1985.
/s/ DAVID J. KRIVANEE
__________________________________________
NOTARY PUBLIC
Residing at Bountiful
My Commission Expires:
3/13/89
_____________________________
5
<PAGE>
<PAGE>
[DEPARTMENT OF COMMERCE SEAL]
ARTICLES OF AMENDMENT TO THE
ATICLES OF INCORPORATION OF
MACE, INC.
Pursuant to the provisions of Section 16-10-57 of the Utah Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is Mace, Inc.
SECOND: The following amendment to the Articles of Incorporation was
adopted by the shareholders of the corporation on the 21st day of April, 1989,
in the manner prescribed by the said Business Corporation Act. Article IV is
hereby amended to read as follows:
ARTICLE IV
Capitalization. The Corporation shall have the authority to issue
50,000,000 (fifty million) shares of stock each having a par value of one-fifth
of one cent ($0.002). All stock of the Corporation shall be of the same class
and shall have the same rights and preferences. Fully paid stock of this
Corporation shall not be liable for further call or assessment. The authorized
trading shares shall be issued at the discretion of the Directors.
THIRD: The total number of shares of the corporation outstanding at the
time of said adoption was 4,006,000.
FOURTH: That the designation and the number of outstanding shares of each
class entitled to vote thereon were as follows:
<PAGE>
<PAGE>
The Capital Stock is all of one class, and there are 4,006,000 shares
entitled to vote thereon.
FIFTH: The number of shares voted for such amendment was 2,672,000, and the
number of shares voted against such amendment was 299,500.
SIXTH: The manner, if not set forth in such amendment, in which any
exchange, reclassification or cancellation of issued shares provided for in the
amendments shall be effected as follows:
A two for one (2 for 1) reverse split, so that for every two shares owned
prior to this amendment, the shareholders will only own one share after this
amendment.
SEVENTH: The manner in which such amendments effect changes in the amount
of capital as changed by such amendments are as follows:
No change in the total authorized capital.
DATED this 23 day of May, 1989.
MACE, INC.
BY: /s/ JACK BLANK
---------------------
BY: /s/ HAL W. GRIFFITH
---------------------
STATE OF UTAH )
)ss.
COUNTY OF SALT LAKE )
On the 23, day of May, 1989, personally appeared before me Jack Blank,
President and Hal W. Griffith, secretary, to me personally known, being by me
duly sworn deposed and said that
-2-
<PAGE>
<PAGE>
they are respectively, in the order named, President and Secretary of Mace,
Inc., the Corporation aforesaid; that the statements therein contained are true,
and that the said instrument was signed in behalf of said Corporation by
authority of its Board of Directors; and that the same was the free act and deed
of said Corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal the day and year above written in this certificate.
/s/ STEVEN W. CHRISTENSEN
--------------------------
N0TARY PUBLIC
Residing in:
My Commission Expires:
May 1, 1993
[NOTARY SEAL]
-3-
<PAGE>
<PAGE>
[DEPARTMENT OF COMMERCE SEAL]
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
MACE, INC.
Pursuant to the provisions of Section 16-10-57 of the Utah Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of incorporation:
FIRST: The name of the corporation is Mace, Inc.
SECOND: The following amendment to the Articles of Incorporation was
adopted by the shareholders of the corporation on the 21st day of April, 1989,
in the manner prescribed by the said Business Corporation Act. Article I is
hereby amended to read as follows:
ARTICLE I
NAME. The name of the corporation (hereinafter called the "Corporation") is
ACTION COVERS, INC.
THIRD: The total number of shares of the corporation outstanding at the
time of said adoption was 2,003,000.
FOURTH: That the designation and the number of outstanding shares of each
class entitled to vote thereon were as follows:
The Capital Stock is all of one class, and there are 2,003,000 shares
entitled to vote thereon.
FIFTH: The number of shares voted for such amendment was 2,672,000, and the
number of shares voted against such amendment was 299,500.
<PAGE>
<PAGE>
SIXTH: The manner, if not set forth in such amendment, in which any
exchange, reclassification or cancellation of issued shares provided for in the
amendments shall be effected as follows:
No. Change.
SEVENTH: The manner in which such amendments effect changes in the amount
of capital as changed by such amendments are as follows:
No change in the total authorized capital.
DATED this 23 day of May, 1989.
MACE, INC.
BY: /s/ HAL W. GRIFFITH
-----------------------
BY: /s/ JUDITH C. GRIFFITH
-----------------------
STATE OF UTAH )
)ss.
COUNTY OF SALT LAKE )
On the 23 day of May, 1989, personally appeared before me Hal W. Griffith,
President and Judith C. Griffith, secretary, to me personally known, being by me
duly sworn deposed and said that they are respectively, in the order named,
President and Secretary of Mace, Inc., the Corporation aforesaid; that the
statements therein contained are true, and that the said instrument was signed
in behalf of said Corporation by authority of its Board of Directors; and that
the same was the free act and deed of said Corporation.
2
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<PAGE>
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal the day and year above written in this certificate.
/s/ STEVEN W. CHRISTENSEN
----------------------------------
NOTARY PUBLIC
Residing in:
My Commission Expires: [NOTARY SEAL]
May 1993
- - ------------------------
3
<PAGE>
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF
INCORPORATION OF
ACTION COVERS, INCORPORATED
1. The name of the corporation is "Action Covers, Inc."
2. ARTICLE I of the Articles of Incorporation is hereby amended to read
as follows:
Name. The name of the corporation (hereinafter called "corporation"
is Omni International Corporation.
3. The foregoing amendment was adopted by the shareholders at a meeting
held January 14, 1992.
4. The number of shares outstanding and entitled to vote upon such
amendment was 32,219,000.
5. The number of shares voted for the amendment was 28,261,500;
against was -0-; and abstained was 4,000.
6. The foregoing amendment does not provide for an exchange, reclassification,
or cancellation of issued shares of the corporation.
7. The foregoing amendment does not effect a change in the amount of stated
capital of the corporation.
Dated: January 15, 1922
Attest: Action Covers, Inc.
/s/ STEVEN D. MOULTON /s/ BARRETT W. HICKEN
- - ----------------------------- ----------------------------
Steven D. Moulton, Secretary Barrett W. Hicken, President
[DEPARTMENT OF COMMERCE SEAL]
<PAGE>
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
OMNI INTERNATIONAL CORPORATION
Pursuant to the provisions of Section 16-10a-1006 of the Utah Revised
Business Corporation Act, the undersigned corporation hereby adopts the
following Articles of Amendment to its Articles of Incorporation.
FIRST: The name of the corporation is Omni International Corporation.
SECOND: The following amendment to the Articles of Incorporation of Omni
International Corporation was duly adopted by the stockholders of the
corporation at a meeting held on October 27, 1993, in the manner prescribed by
the Utah Revised Business Corporation Act and for the purpose of reflecting a
reverse split of the corporation's stock:
RESOLVED that the 32,219,000 outstanding shares of the corporation's $0.002
par value common voting stock be reverse split on a basis of one share for
fifteen, retaining the authorized shares at 50,000,000 and retaining the par
value at $0.002 per share, with appropriate adjustments being made in the
additional paid in capital and stated capital accounts of the corporation, and
resulting in a total of approximately 2,147,933 shares of $0.002 par value
common voting stock being outstanding.
THIRD: With the exception that every fifteen presently outstanding shares
shall be converted to one outstanding post-split share pursuant to the foregoing
reverse split, the foregoing amendment does not provide for any exchange,
reclassification or cancellation of issued shares.
FOURTH: This amendment was adopted by the stockholders at a meeting held
October 27, 1993.
FIFTH: This amendment was not adopted by the incorporators or the Board of
Directors without stockholder action.
SIXTH: (a) The designation and number of outstanding pre-split shares of
each class entitled to vote thereon as a class were as follows:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES
----- ----------------
<S> <C>
Common 32,219,000
</TABLE>
28,019,000 voting shares were represented at the meeting of stockholders.
(b) The number of shares voted for such amendments was 28,017,500, with
1,500 opposing and none abstaining.
[DEPARTMENT OF COMMERCE SEAL]
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the undersigned Vice President and Secretary, having
been thereunto duly authorized, have executed the foregoing Articles of
Amendment for the corporation under the penalties of perjury this 17th day of
February, 1994.
OMNI INTERNATIONAL CORPORATION
By /s/ NANCY ROWLEY
_______________________________________
Nancy Rowley, Vice President
Attest:
/s/ Kenneth P. Rowley
_______________________________
Kenneth P. Rowley, Secretary
2
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<PAGE>
[DEPARTMENT OF COMMERCE SEAL]
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
OMNI INTERNATIONAL CORPORATION
Pursuant to the provisions of Section 16-10a-1006 of the Utah Revised
Business Corporation Act, the undersigned corporation hereby adopts the
following Articles of Amendment to its Articles of Incorporation.
FIRST: The name of the corporation is Omni International Corporation.
SECOND: The following amendments to the Articles of Incorporation of Omni
International Corporation (the "Corporation") were duly adopted by the
stockholders of the Corporation at a special meeting held April 4, 1994, in the
manner prescribed by the Utah Revised Business Corporation Act, to-wit:
ARTICLE I - NAME
The name of this Corporation is:
BEACHPORT ENTERTAINMENT CORPORATION
ARTICLE IV - CAPITALIZATION
The Corporation shall be authorized to issue two classes of stock: common
and preferred, described as follows:
A. Common Stock. The Corporation shall be authorized to issue Fifty Million
(50,000,000) shares of common stock having a par value of two mills ($0.002) per
share.
B. Preferred Stock. The Corporation shall also be authorized to issue
preferred stock of the Corporation, which preferred stock shall be designated as
"No Par Value Per Share Series A Preferred Stock" (the "Series A Preferred
Stock"), consisting of 1,000,000 shares, and hereby fixes the designations,
powers, preferences, and the relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof, as
follows, to-wit:
1. Certain Definitions. Unless otherwise indicated or the context otherwise
requires, the terms defined in this Section 1 shall, for all purposes of this
resolution, have the meanings herein specified.
Board of Directors. The term "Board of Directors" shall mean the Board
of Directors of the Corporation.
<PAGE>
<PAGE>
Common Stock. The term "Common Stock" shall mean the common stock, par
value $.002 per share, of this Corporation, whether now or hereafter authorized.
Junior Stock. The term "Junior Stock" shall mean the Common Stock, all
shares hereafter authorized of any other class of common stock, and any other
class or series of stock of the Corporation that is not Senior Stock or Parity
Stock.
Liquidation Price. The term "Liquidation Price" shall mean $100 per full
share of Series A Preferred Stock as increased by any accrued and unpaid
dividends.
Parity Stock. The term "Parity Stock" shall mean any class or series of
stock of the Corporation entitled to receive payment of dividends on a parity
with the Series A Preferred Stock or any other class or series of stock of the
Corporation entitled to receive assets upon liquidation, dissolution or winding
up of the affairs of the Corporation on a parity with the Series A Preferred
Stock.
Record Date. The term "Record Date" shall mean in the case of dividends,
March 15, June 15, September 15 and December 15, and in all other matters the
date fixed by the Board of Directors for purposes of determining the holders of
outstanding Series A Preferred Stock entitled to vote on matters submitted to a
vote of the Corporation's shareholders.
Senior Stock. The term "Senior Stock" shall mean any class or series
of stock of the Corporation ranking senior to the Series A Preferred Stock in
respect of the right to receive dividends or in respect of the right to
participate in any distribution upon liquidation, dissolution or winding up of
the affairs of the Corporation.
2. Dividends.
2.1 Amount, Payment Dates: Form. The holders of the shares of Series A
Preferred Stock shall be entitled to receive when, as and if declared by the
Board of Directors, out of funds legally available for the payment of dividends,
cumulative dividends in the amount of 5% of the Liquidation Price per annum.
Such dividends shall be payable on each February 28, May 31, August 31, and
November 30, commencing on May 31, 1994 with respect to periods ending on the
next preceding Record Date for the payment of dividends, provided, however, the
Corporation, in its sole and absolute discretion, may elect to accrue all
dividends payable on or prior to November 30, 1995, with such dividends, to the
extent accrued, to be payable not later than August 31, 1996. All dividends paid
to holders of Series A Preferred Stock shall be paid to holders of record at the
close of business on the next preceding Record Date for the payment of
dividends. Each of the dividends shall be fully cumulative and shall accrue
(whether or not declared) from the first day of the period for which such
dividend is payable through the next preceding Record Date. Generally, dividend
periods shall be for the three month periods ending February 15, May 15, August
15 and November 15, except that the initial dividend period shall run from
January 1, 1994 through May 15, 1994. Any dividends that accrue hereunder shall
be paid in the sole discretion of each holder of Series A Preferred Stock, in
whole or in part, in cash
2
<PAGE>
<PAGE>
or by issuing fully-paid and non-assessable shares of Common Stock. Any such
shares of Common Stock shall be valued at the lower of (i) $5 per share, and
(ii) the Average Price (as hereinafter defined) as of the Record Date applicable
to such dividend, subject to such discount as the Board of Directors may
determine in good faith in the event such shares of Common Stock are not
registered and freely transferable by the holder thereof; provided, however,
that the Corporation shall not issue any fractional shares of Common Stock, and
in lieu thereof, shall pay cash to the holder for such fractional share. The
Corporation shall notify each holder of Series A Preferred Stock of the
declaration of a dividend hereunder and the payment date therefor. No later than
the (10) days following the date of such notice, the holders of the Series A
Preferred Stock shall notify the Corporation of their election to receive the
dividend next payable in Common Stock or cash. If any holder of Series A
Preferred Stock shall not notify the Corporation of its election, the
Corporation shall have the option of paying such dividend in cash or Common
Stock (valued as hereinabove provided). If dividends are not paid on any date on
which dividends are payable (including dividends which are accrued pursuant to
this Section 2.1), such accrued dividends shall be added to the Liquidation
Price, including for the purpose of calculating the dividends payable on the
Series A Preferred Stock.
2.2 Partial Dividends. If full dividends are not paid or made available to
the holders of all outstanding shares of Series A Preferred Stock and the Parity
Stock, the entire amount of dividends which are paid to the outstanding shares
of Series A Preferred Stock and the Parity Stock shall be distributed among the
holders of the Series A Preferred Stock and the Parity Stock, ratably, in
proportion to the dividend amounts to which they would otherwise be respectively
entitled to receive.
2.3 Priority as to Dividends. No dividends or other distributions shall be
declared, paid or set apart for payment on any Junior Stock unless full
cumulative dividends have been declared and paid for the Series A Preferred
Stock for all dividend periods terminating on or prior to the payment date of
any dividend or other distribution on the Junior Stock.
3. Redemption. The Series A Preferred Stock shall not be subject to
redemption prior to June 30, 1999. Thereafter, the Series A Preferred Stock
shall be redeemable at any time in whole or in part, at the option of the
Corporation on thirty (30) days prior written notice to the holders for a price
equal to 120% of the Liquidation Price, plus all accrued but unpaid dividends.
In the event that less than all shares of Series A Preferred Stock are to be
redeemed by the Corporation, the Corporation shall redeem the Series A Preferred
Stock ratably from each holder.
4. Conversion.
4.1 Basic Conversion Privilege. Subject to Sections 4.4 and 4.5 hereof, the
holders of Series A Preferred Stock shall have the right at any time prior to
March 31, 1999 and after June 30, 1999, to convert each share of Series A
Preferred stock into twenty-three (23) shares of Common Stock.
3
<PAGE>
<PAGE>
4.2 Special Conversion Privilege. Subject to Sections 4.4 and 4.5 hereof,
during the period commencing April 1, 1999 through and including June 30, 1999,
the holders of Series A Preferred Stock shall have the right to convert each
share of Series A Preferred Stock into shares of Common Stock (i) at the rate of
twenty-three (23) shares of Common Stock for each share of Series A Preferred
Stock; provided however, if the Average Price (as hereinafter defined) at the
time of conversion is $10 per share or more, each share of Series A Preferred
Stock shall be convertible into twenty (20) shares of Common Stock, or (ii) if
it would result in such holder receiving a greater number of shares of Common
Stock, pursuant to the following formula: (a) the average market price for the
Corporation's Common Stock (the "Average Price") shall be determined for the
sixty (60) trading days immediately prior to April 1, 1999, by taking the
average of the closing price for Common Stock on each such sixty (60) trading
days on the principal securities exchange (or facilities of NASDAQ) on which the
Common Stock is then listed (or if it is not listed, by averaging the closing
bid and asked prices for Common Stock as quoted by the five principal market
makers [or if there are fewer than five market makers, the actual number of
market makers] for such stock on such date) (if no trades occurred on a
particular trading day, the average of the closing bid and asked prices on such
day shall be used); (b) 120% of the then Liquidation Price per share of Series A
Preferred Stock shall be divided by the Average Price; (c) the resulting number
shall be the number of shares of Common Stock into which a share of Series A
Preferred Stock may be converted pursuant to this Section 4.2(ii), provided that
the maximum number of shares of Common Stock into which a share of Series A
Preferred Stock may be converted shall not exceed forty (40) shares of Common
Stock, subject to Section 4.5 hereof.
4.3 Mechanics of Conversion. In order for any holder of Series A Preferred
stock to convert Series A Preferred Stock into shares of Common Stock, such
holder shall: (a) provide written notice of the election to convert the Series A
Preferred Stock into Common Stock pursuant to this Section 4 and of the name or
names of those persons to whom the certificate or certificates for the Common
Stock are to be issued, and (b) surrender the certificate or certificates for
the Series A Preferred Stock to be converted, duly endorsed to the Corporation,
to the Corporation's Secretary at the principal office of the Corporation. The
Corporation shall, as soon as practicable thereafter, issue and deliver to such
holder, or such holder's nominee or nominees, a certificate or certificates for
the number of shares of Common Stock to be issued on such conversion, computed
in accordance with this Section 4. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of surrender of the
Series A Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date. Any holder of Series A Preferred Stock after the
Record Date for a dividend on such shares, but before the payment date for such
dividend, shall be entitled to receive such dividend if such holder held his or
her shares on the Record Date.
4.4 No Fractional Shares. Neither fractional shares of Common Stock nor
scrip or warrants evidencing such shares shall be issued upon conversion of
Series A Preferred Stock. In lieu of any fractional shares, scrip or warrants to
which a holder would otherwise be entitled,
4
<PAGE>
<PAGE>
the Corporation shall pay cash equal to such fraction multiplied by the then
fair market value of a share of Common Stock, as determined in good faith by the
Board of Directors.
4.5 Anti-Dilution Adjustments. The number and kinds of securities issuable
on conversion of the Series A Preferred Stock shall be subject to adjustment as
follows:
(a) In case the Corporation shall pay a dividend or make a
distribution on its shares of Common Stock in shares of Common Stock, subdivide
or reclassify its outstanding Common Stock into a greater number of shares, or
combine or reclassify its outstanding Common Stock into a smaller number of
shares, the conversion ratio under Section 4.1 or 4.2 hereof in effect at the
time of the Record Date for such dividend or distribution or of the effective
date of such subdivision, combination or reclassification shall be
proportionately adjusted so that by converting a share of Series A Preferred
Stock after such date a holder shall be entitled to receive the same number of
shares which, if such share of Series A Preferred Stock had been converted
immediately prior to such date, the holder would have received upon such date.
For example, if there should be a 2-for-1 stock split of the Common Stock, the
conversion ratio shall be multiplied by two and the number of shares issuable
upon conversion of a share of Series A Preferred Stock shall be doubled. Such an
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock of the Corporation, or in case of
any consolidation or merger of the Corporation with or into another corporation
(other than a merger in which the Corporation is the surviving corporation and
which does not result in any reclassification, capital reorganization or other
change of outstanding shares issuable upon conversion of the Series A Preferred
Stock), or in case of any sale or conveyance to another corporation of all or
substantially all of the assets of the Corporation, the Corporation shall, as a
condition precedent to such transaction, cause effective provisions to be made
so that a holder of Series A Preferred Stock shall have the right thereafter by
converting his or her Series A Preferred Stock to receive the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, reorganization, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock which might have
been received upon conversion of such Series A Preferred Stock followed
immediately by such reclassification, reorganization, change, consolidation,
merger, sale or conveyance. Any such provisions shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(c) In the event that any time, as a result of an adjustment made
pursuant to the provisions of this Section 4.5, the holders of Series A
Preferred Stock hereafter shall become entitled to receive any shares of the
Corporation, other than Common Stock, thereafter the number of such other shares
so receivable upon conversion of the Series A Preferred Stock shall be subject
to adjustment from time to time in a manner and on terms as
5
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<PAGE>
nearly equivalent as practicable to the provisions with respect to the Common
Stock contained in this Section 4.5.
(d) No adjustment of the conversion ratio shall be made in any event
in respect of any accrued but unpaid dividends on the Series A Preferred Stock,
provided however that the Corporation shall be obligated to pay all such accrued
but unpaid dividends not withstanding the conversion of the Series A Preferred
Stock on which such dividends accrued.
4.6 Reservations of Shares of Common Stock Issuable upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Series A Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding Series A Preferred Stock. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all such Series A Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
5. Notices to Holders.
5.1 Notices of Adjustments. Promptly after any adjustment is made under
Section 4.5 hereof in the numbers or types of securities issuable upon
conversion of the Series A Preferred Stock, the Corporation shall cause to be
prepared a written notice describing such adjustment and the related facts. A
copy of the notice shall be filed with the Corporation's Secretary and mailed to
each holder of Series A Preferred Stock at his or her last known address.
5.2 Notices of Proposed Transactions. In the event of (a) any proposed
extraordinary dividend or other distribution or granting of other rights by the
Corporation to holders of outstanding shares of its capital stock, (b) the
proposed dissolution, liquidation or winding up of the Corporation or (c) a
proposed recapitalization, reorganization (other than the one contemplated by
the Corporation in early 1994), consolidation, merger or sale or conveyance of
all or substantially all of the assets of the Corporation with, into or to
another corporation, the Corporation shall give to each holder of Series A
Preferred Stock, at least thirty (30) days prior to the Record Date for
determination of shareholders entitled to participate in the transaction, or the
date of the transaction if there is no such Record Date, a written notice
specifying the Record Date and describing the nature and timing of the proposed
transaction.
5.3 Effectiveness of Notices. Any notice required by the provisions of this
Section 5 to be given to a holder shall be deemed given five (5) days after such
notice is deposited in the United States mail, postage prepaid, and addressed to
that holder, at his or her address appearing on the books of the Corporation.
6. Distributions upon Liquidation, Dissolution or Winding Up. In the event
of any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of this
6
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<PAGE>
Corporation, the holders of the Series A Preferred Stock shall be entitled to
receive, prior to any distribution of the assets or surplus funds of the
Corporation to the holders of Junior Stock by reason of their ownership thereon,
an amount per share equal to the Liquidation Price plus the amount of any
accrued and unpaid dividends thereof, in cash or property at its fair market
value (as determined by the Board of Directors in good faith), or both. The
holders of Series A Preferred Stock shall be entitled to no further
participation in any remaining assets of the Corporation (or any other rights of
any type) after receiving the foregoing amounts per share. If, upon distribution
of the Corporation's assets in liquidation, dissolution or winding up, the
assets of the Corporation are to be distributed among the holders of the
preferential amounts to which they are entitled, then the entire assets of the
Corporation shall be distributed among the holders of the Series A Preferred
Stock and the Parity Stock, ratably in proportion to the full amounts to which
they would otherwise be respectively entitled. Neither the sale or lease of all
or substantially all of the assets of the Corporation nor the merger of the
Corporation with or into any other Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the affairs of this Corporation,
voluntary or involuntary, for purposes of this Section 6.
7. Voting Rights. The holders of Series A Preferred Stock shall have
the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to
vote on all matters submitted to a vote of the Corporation's stockholders. Each
share of Series A Preferred Stock shall have the same number of votes as such
holder would have if the Series A Preferred Stock were converted into Common
Stock immediately prior to such vote;
(b) Except as provided by law or as otherwise set forth herein, the
holders of the Series A Preferred Stock and Common Stock shall vote together as
one class on all matters submitted to a vote of the Corporation's stockholders;
(c) So long as the Series A Preferred Stock is outstanding, the
Corporation shall not take any of the following actions without the consent of
the holders of a majority of the Series A Preferred Stock, voting as a class:
(i) issue any Senior Stock or Parity Stock; or (ii) redeem, repurchase or retire
any Common Stock or any other Junior Stock or Parity Stock.
8. Rank. The Series A Preferred Stock shall rank, with respect to
rights and priority of payment of dividends and rights on voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, on a parity with any Parity Stock of the Corporation and junior and
subordinate to any Senior Stock of the Corporation.
9. Exclusion of Other Rights. Except as may otherwise be required by
law, the shares of Series A Preferred Stock shall not have any preferences or
relative, participating, optional or other rights, other than those specifically
set forth in this resolution and in the Certificate of Incorporation of the
Corporation.
10. Headings of Sections. The headings of the various sections hereof
are for
7
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<PAGE>
convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.
11. Severability of Provisions. If any power, preference, right,
qualification, limitation or restriction of the Series A Preferred Stock set
forth in this resolution is invalid, unlawful or incapable of being enforced by
reason of any rule of law or public policy, all other powers, preferences,
rights, qualifications, limitations and restrictions set forth in this
resolution which can be given effect without the invalid, unlawful or
unenforceable power, preference right, qualification, limitation or restriction
shall, nevertheless, remain in full force and effect, and no power, preference,
right, qualification, limitation or restriction herein set forth shall be deemed
dependent upon any other such power, preference, right, qualification,
limitation or restriction unless so expressed herein.
THIRD: These amendments do not provide for any exchange,
reclassification or cancellation of issued shares; however, pursuant to the
resolution adopted by the stockholders of the Corporation at the meeting held
April 4, 1994, the 2,147,875 two mill ($0.002) par value common voting shares
issued and outstanding were reverse split on a basis of .613436 for one,
retaining the authorized shares at 50,000,000 and retaining the par value at two
mills ($0.002) per share, with appropriate adjustments being made in the
additional paid in capital and stated capital accounts of the Corporation.
FOURTH: The amendments adopting the reverse split of the Corporation's
Common Stock and the change of name to "Beachport Entertainment Corporation"
were adopted by the stockholders at a meeting held April 4, 1994.
FIFTH: These amendments were not adopted by the incorporators or the
Board of Directors without stockholder action.
SIXTH: (a) The designation and number of outstanding shares of each
class entitled to vote thereon as a class were as follows, to wit:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES
----- ----------------
<S> <C>
Common 2,147,875
</TABLE>
(b) The number of shares voted for such amendments was
1,583,329, with none opposing and none abstaining.
8
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<PAGE>
IN WITNESS WHEREOF, the undersigned President and Assistant Secretary,
having been thereunto duly authorized, have executed the foregoing Articles of
Amendment for the Corporation under the penalties of perjury this 24 day of
April, 1994.
OMNI INTERNATIONAL CORPORATION
By /s/ STEVEN D. MOULTON
--------------------------------
Steven D. Moulton, President
Attest:
/s/ SHERYL ROSS
- - ------------------------------------
Sheryl Ross, Assistant Secretary
9
<PAGE>
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
BEACHPORT ENTERTAINMENT CORPORATION
Pursuant to the provisions of Section 16-10a-1006 of the Utah Revised
Business Corporation Act, the undersigned corporation hereby adopts the
following Articles of Amendment to its Articles of Incorporation.
FIRST: The name of the corporation is Beachport Entertainment Corporation.
SECOND: The following amendment to the Articles of Incorporation
(hereinafter referred to as "Proposition 2") of Beachport Entertainment
Corporation (the "Corporation") was duly adopted by the stockholders of the
Corporation at a special meeting held May 31, 1995, in the manner prescribed by
the Utah Revised Business Corporation Act, to-wit:
ARTICLE XI
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if one or
more consents in writing, setting forth the action so taken, shall be signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take the action at a meeting at
which all shares entitled to vote thereon were present and voted.
THIRD: This amendment does not provide for any exchange, reclassification
or cancellation of issued shares; however, pursuant to the resolution adopted by
the stockholders of the Corporation at the meeting held May 31, 1995
(hereinafter referred to as "Proposition 1"), the 9,864,796 two mills ($0.002)
par value common voting shares issued and outstanding were reverse split on a
basis of one for five, retaining the authorized shares at 50,000,000 and
retaining the par value at two mills ($0.002) per share, with appropriate
adjustments being made in the additional paid in capital and stated capital
accounts of the Corporation. The reverse split is to become effective on the
10th day of July, 1995, at 8:00 o'clock a.m., Mountain Daylight Time.
FOURTH: The resolutions adopting the reverse split of the Corporation's
Common Stock and the authorization to take action without stockholder approval
were adopted by the stockholders at a meeting held May 31, 1995.
FIFTH: These amendments were not adopted by the incorporators or the Board
of Directors without stockholder action.
<PAGE>
<PAGE>
SIXTH: (a) The designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows, to-wit:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES
----- ----------------
<S> <C>
Common 9,864,796
</TABLE>
(b) The number of shares voted for such amendments was as follows,
to-wit:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
PROPOSITION 1
Common Stock 6,378,489 40,009 -0-
PROPOSITION 2
Common Stock 6,418,417 81 -0-
</TABLE>
IN WITNESS WHEREOF, the undersigned President and Secretary, having been
thereunto duly authorized, have executed the foregoing Articles of Amendment for
the Corporation under the penalties of perjury this 22nd day of June, 1995.
BEACHPORT ENTERTAINMENT CORPORATION
By /s/ WALTER J. RICHARDS
------------------------------
Walter J. Richards, Vice President
Attest:
/s/ ROBERT L. BARLAND
Robert L. Barland, Secretary
2
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<PAGE>
[BONDY & SCHLOSS LETTERHEAD]
August 12, 1997
BOARD OF DIRECTORS
Beachport Entertainment Corp.
517 North Robertson Blvd.
Los Angeles, CA 90049
Re: Beachport Entertainment Corp.
Registration Statement on Form SB-2
Gentlemen:
We refer to the Registration Statement on Form SB-2 (the "Registration
Statement") filed by Beachport Entertainment Corp. (the "Company") in
connection with the registration under the Securities Act of 1933, as amended
of a total of 8,997,507 shares of common stock of which 6,374,864 shares are
issuable upon the exercise of certain warrants or options and or the conversion
of shares of preferred stock (collectively, the "Shares"). We understand that
the Shares are to be sold from time to time on the over-the-counter electronic
Bulletin Board at prevailing prices or as otherwise described in the
Registration Statement. As your counsel, we have examined the proceedings
proposed to be taken by you in connection with the sale of the Shares.
It is our opinion that upon exercise of the warrants and/or options and
upon conversion of the preferred stock into Shares, the Shares when issued and
sold in the manner described in the Registration Statement, would be legally
and validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm appearing under the
caption "Legal Matters" in the prospectus forming part thereof, and any
amendments thereto.
Very truly yours,
/s/ BONDY & SCHLOSS LLP
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Option Agreement.
This Agreement made as of the 30 day of June, 1995 by and among Beachport
Entertainment Corporation, a Utah corporation (the "Purchaser"), Barry Mendelson
(the "Seller"), and On Ice, Inc., a Delaware corporation (the "Company").
WHEREAS, the Purchaser desires to acquire the outstanding shares of capital
stock of the Company; and
WHEREAS, the Seller, the sole shareholder of the Company desires to sell
his shares of capital stock to the Purchaser and hereby grants Purchaser an
option to acquire the Shares;
NOW, THEREFORE, in consideration of the agreements hereinafter contained,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, and intending to be legally bound, the parties hereto
agree as follows:
ARTICLE I
THE TRANSACTION
1.1. Grant of Option. The Seller hereby grants Purchaser an option (the
"Option") to acquire all of the issued and outstanding shares of Common Stock of
the Company (the "Shares") at an exercise
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price of Five Hundred Thousand ($500,000) Dollars (the "Exercise Price"). In
consideration of Seller granting Purchaser the Option, Purchaser agrees to issue
to Seller 800,000 shares of Purchaser's common stock (the "Beachport Shares").
1.2 Term of Option. Unless further extended by the Seller, the Option shall
expire six months from the date of the Offering Memorandum pursuant to which the
Company is offering up to 3,150,000 shares of its common stock pursuant to Rule
504 of Regulation D of the Securities Act of 1933, as amended (the "Securities
Act").
1.3 Purchase and Sale of Stock. Upon exercise of the Option, and payment of
the "Exercise Price", Seller shall sell, transfer and deliver to the Purchaser
and the Purchaser shall acquire the Shares, free and clear of all liens,
pledges, encumbrances, charges and claims thereon.
1.4 Expense Reimbursement. Upon exercise of the Option and payment of the
Exercise Price, Purchaser further agrees to reimburse Seller for all monies
advanced for the Company's 1995 operating expenses which are estimated to
aggregate $360,000 for the months January 1995 through and including July 1995;
$82,500 in August 1995; and $110,000 per month from September 1995 through
December 1995. All such reimbursements are to be funded out of the operational
profits of the Company.
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1.5. Employment Agreement. Upon the execution of this Agreement, the
Purchaser agrees to enter into an employment agreement with Seller for a salary
of $200,000 per year plus fifty (50%) percent of the fees generated by him as
producer for Company related projects. Seller shall be employed, as of the date
hereof as the President and Chief Operating Officer of the Purchaser and named a
Director of the Purchaser. In the event that the Purchaser does not exercise the
Option, or the right of Purchaser to exercise the option is not extended by the
Seller, Seller shall have the right to resign his position with the Purchaser.
In such event, Seller agrees to surrender to Purchaser the Beachport Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLER
The Company and the Seller represent and warrant to the Purchaser as
follows:
2.1 Corporate Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to carry on its business as
it is now being conducted.
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2.2 Capitalization. The authorized capital stock of the Company consists of
1,000 shares of common stock, no par value and there is no other capital stock
authorized for issuance. As of the date hereof 100 shares of common stock were
validly issued and outstanding, fully paid and non assessable and no shares were
reserved for issuance nor were there outstanding any options, warrants,
convertible instruments of other rights, agreements, or commitments (contingent
or otherwise) obligating the Company to issue shares of capital stock.
2.3 Authority Relative to This Agreement. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid and
binding Agreement of the Company and is enforceable in accordance with its
terms. The Company has all requisite corporate power and authority to enter into
this Agreement and its doing so has been duly and sufficiently authorized.
2.4 Absence of Breach; No consents. The execution, delivery and performance
of this Agreement, and the performance by the Company of its obligations
hereunder, do not (1) conflict with or result in a breach of any of the
provisions of the Articles of Incorporation or Bylaws of the Company; (2) to its
knowledge contravene any law, ordinance, rule or regulation of any State or
Commonwealth or political subdivision of either, or of the United States, or of
any applicable foreign jurisdiction, or contravene
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any order, writ, judgment, injunction, decree, determination, or award of any
court or other authority having jurisdiction, or cause the suspension or
revocation of any authorization, consent, approval, or license, presently in
effect, which affects or binds the Company or any of its material properties,
except in any such case where such contravention will not have a material
adverse effect on the business condition (financial or otherwise), operations,
or prospects of the Company, taken as a whole, and will not have a material
adverse effect on the validity of this Agreement; (3) conflict with or result in
a material breach of or default under any material indenture or loan or credit
agreement or any other material agreement or instrument to which the Company is
a party or by which it or any of its material properties may be affected or
bound; (4) to its knowledge, requires the authorization, consent, approval or
license of any third party; or (5) to its knowledge, constitutes grounds for the
loss or suspension of any permits, licenses or other authorizations used in the
business of the Company.
2.5 Taxes. The Company has duly filed or caused to be filed all federal,
state, county and municipal tax returns, reports and declarations which are
required to be filed and have paid or have made full and adequate provision of
payment of all federal, state, local and foreign income and other taxes properly
due for the periods covered by such returns, reports, and declarations.
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2.6 Proprietary Rights. The Company possesses full ownership of, or
adequate and enforceable long term licenses or other rights to use, all
trade secrets, copyrights, patents, trademarks, service marks, and all similar
types of intangible property developed, created or owned by the Company
or used in connection with its business (the "Proprietary Rights"); the Company
has not received any notice of conflict which asserts the rights of others
with respect thereto; and the Company has in all material respects performed
all of the obligations required to be performed by it, and is not in default in
any material respect, under any agreement relating to any Proprietary Rights.
2.7 Ownership of Assets. To its knowledge the Company has good, marketable
and insurable title, or valid effective and continuing leasehold rights in the
case of leased property, to all real property (as to which, in the case of owned
property, such title is fee simple) and all personal property owned or leased by
it or used by it in the conduct of its business in such a manner as to create
the appearance or reasonable expectation that the same is owned or leased by it;
such ownership is free and clear of all liens, claims, encumbrances and charges,
except liens for taxes not yet due and minor imperfections of title and
encumbrances, if any, which, singly and in the aggregate, are not substantial in
amount and do not materially detract from the value of the property subject
thereto or materially impair the use thereof; no other person has any ownership
or similar right in, or contractual or
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other right to acquire any such right in, any of such assets. The Company does
not know of any potential action by any party, governmental or other and no
proceedings with respect thereto have been instituted of which the Company has
notice that would materially effect the Company's ability to use and to utilize
each of such assets in its business. The Company has received no notices from
any mortgagee regarding any leased properties of the Company or the leasehold
interest.
2.8 Litigation. (a) No material investigation or review by any governmental
entity with respect to the Company is pending or, to the best knowledge of the
Company, threatened (other than inspections and review customarily made of
businesses such as that of the Company) nor has any governmental entity
indicated to the Company an intention to conduct the same; and (b) there is no
action, suit, or proceeding pending or, to the Company's knowledge, threatened
against the Company which would or could affect the Company's obligations under
this Agreement, its business, the assets, the Proprietary Rights, or the
interest of the Company therein. The Company is not aware of any fact,
condition, event or circumstance upon which any claim, judgment, order,
proceeding or governmental investigation against and adversely affecting it, its
business, assets or Proprietary Rights might reasonably be based.
2.9 Compliance with Laws. To its best knowledge, the Company is operating
its business in compliance with all laws, regulations
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and orders and has obtained all governmental permits, licenses or
authorizations, if any, required for the conduct of its business.
ARTICLE III
REPRESENTATION AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Seller:
3.1 Corporate Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Utah and
has the corporate power to carry on its business as now conducted.
3.2 Capitalization. The authorized capital stock of the Purchaser consists
of 50,000,000 shares of common stock, $.002 par value and there is no other
capital stock authorized for issuance. As of the date hereof, including
the Beachport Shares to be issued to Seller herewith, 2,993,000 shares of common
stock were validly issued and outstanding, fully paid and non assessable. With
the exception of up to 3,150,000 shares of common stock reserved for issuance in
connection with an offering of Purchaser's securities pursuant to Rule 504 of
Regulation D of the Securities Act and 230,000 shares of common stock reserved
for issuance upon the exercise of outstanding warrants, no other shares are
reserved for issuance nor are there any outstanding options, warrants,
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convertible instruments or other rights, agreements, or commitments (contingent
or otherwise) obligating the Purchaser to issue shares of capital stock.
3.3 Authority Relative to This Agreement. The Purchaser has the requisite
corporate power and authority to enter into this Agreement and to carry out
their obligations hereunder. The execution and delivery of this Agreement have
been duly authorized and approved by the requisite level of corporate authority
of Purchaser and no other corporate proceedings on its part is necessary to
approve and adopt this Agreement.
3.4 Absence of Breach; No consents. The execution, delivery and performance
of this Agreement, and the performance by the Purchaser of its obligations
hereunder, do not (1) conflict with or result in a breach of any of the
provisions of the Articles of Incorporation or Bylaws of the Purchaser; (2) to
its knowledge contravene any law, ordinance, rule or regulation of any State or
Commonwealth or political subdivision of either or of the United States, or of
any applicable foreign jurisdiction, or contravene any order, writ, judgment,
injunction, decree, determination, or award of any court or other authority
having jurisdiction, or cause the suspension or revocation of any authorization,
consent, approval, or license, presently in effect, which affects or binds the
Purchaser or any of its material properties, except in any such case where such
contravention will not have a material adverse
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effect on the business condition (financial or otherwise), operations, or
prospects of the Purchaser, taken as a whole, and will not have a material
adverse effect on the validity of this Agreement; (3) conflict with or result in
a material breach of or default under any material indenture or loan or credit
agreement or any other material agreement or instrument to which the Purchaser
is a party or by which it or any of their material properties may be affected or
bound; (4) to its knowledge require the authorization, consent, approval or
license of any third party; or (5) to its knowledge constitute grounds for the
loss or suspension of any permits, licenses or other authorizations used in the
business of the Purchaser.
ARTICLE IV
MISCELLANEOUS
4.1 Brokers and Expenses. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried on directly by the
Purchaser with Seller, without the intervention of any broker, finder,
investment banker or other third party. Seller agrees that he will indemnify the
Purchaser against and in respect to any and all damages, losses, liabilities and
expenses, including attorneys' fees, which may be incurred by the Purchaser as a
result of any claims asserted against the Purchaser by any broker or other
person on the basis of any arrangements or agreements made or alleged to have
been made by
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Seller; and the Purchaser agrees that it will indemnify Seller in respect of any
and all damages, losses, liabilities and expenses, including attorneys's fees,
which may be incurred by Seller as a result of any claims against Seller by any
broker or other person on the basis of any arrangements or agreements made or
alleged to have been made by Purchaser.
Each party hereto shall pay its own expenses and costs incident to the
preparation of this Agreement and to the consummation of the transactions
contemplated herein.
4.2 Notices. All notices, requests, instructions, or other documents to be
given hereunder shall be in writing and sent by registered mail:
If to Seller: Barry Mendelson
517 North Robertson
Suite 200
Los Angeles, CA 90048
If to the Purchaser: Beachport Entertainment
Corporation
Suite 200
517 North Robertson
Los Angeles, CA 90048
with copies to Gerald A. Adler, Esg.
Loselle Greenawalt
Kaplan Blair & Adler
140 East 45th Street
New York, New York 10017
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4.3 Jurisdiction. This Agreement shall be controlled, construed and
enforced in accordance with the laws of the State of California.
4.4 Assignment. This Agreement shall not be assignable by either party
without the prior written consent of the other.
4.5 Headings. All paragraph headings herein are inserted for convenience
only. This Agreement may be executed in several counterparts, each of which
shall be deemed an original, which together shall constitute one and the same
instrument.
4.6 Entire Agreement. This Agreement sets forth the entire understanding
between the parties, there being no terms, conditions, warranties or
representations other than those contained herein and no amendments hereto shall
be valid unless made in writing and signed by the parties hereto.
4.7 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the heirs, executors, administrators and assigns of Blum
and upon the successors and assigns of the Purchaser.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this
agreement as of the date and year first written above.
Beachport Entertainment Corporation
By: /s/ Robert L. Barland
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Robert L. Barland, Vice President
On Ice, Inc.
By: /s/ Barry Mendelson
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Barry Mendelson, President
/s/ Barry Mendelson
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Barry Mendelson
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Option Exercise Agreement
Agreement made as of the 28th day of July 1995 by and between Beachport
Entertainment Corporation, a Utah corporation (the "Purchasers"), On Ice, Inc.,
a Delaware corporation (the "Company") and Barry Mendelson (the "Seller").
Whereas the Purchaser acquired an option to purchase all of the issued and
outstanding shares of common stock of the Company from the Seller, as of the
30th day of June 1995 (the "Option"); and
Whereas, as of July 1, 1995, the Purchaser and Seller agreed to amend
certain terms of the Option Agreement as hereinafter set forth and wish to set
forth those amendments herein;
Now, therefore, it is hereby agreed as follows:
1. Except as hereinafter set forth, all of the terms, representations and
warranties of the parties to the Option Agreement are incorporated herein as if
fully stated herein.
2. All defined terms in the Option Agreement shall have the same meaning as
if fully set forth herein.
3. The Seller acknowledges that as of July 1, 1995, the Option has been
exercised by the Purchaser and the exercise price has been
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paid by delivery of the Purchaser's promissory note to the Seller in the amount
of $500,000 (the "Notes"), a copy of which Note is attached hereto as Exhibit A.
4. That pursuant to the terms of the Note, the Purchaser has agreed to pay
the Seller in the following installments (hereinafter, the "Installment
Payments"):
(i) $100,000 on or before December 29, 1995;
(ii) $100,000 on or before January 30, 1996; and
(iii) $300,000 on or before February 15, 1996.
5. If any of the Installment Payments are not made on or before the dates
set forth in Section 4 above, the purchase price for the Seller's shares shall
be increased to $1,000,000, which amount shall become immediately due and
payable to Seller as of the date of any such default, less any amounts
previously paid to Seller.
6. Seller acknowledges receipt of the Beachport Shares.
7. Purchser acknowledges receipt of the Shares.
8. No course of dealing on the part of the Seller nor any failure or delay
on the part of the Seller with respect to the exercise of any right, power or
privilege given or granted hereunder, the Note, the Option Agreement or any
other document or
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instrument executed in connection herewith shall operate as a waiver thereof as
to any future defaults, or any single or partial exercise by the Seller of any
right, power or privilege granted or contained herein or therein shall preclude
the Seller from later or further exercise of any right, power or privileges as
to any future defaults. The rights and remedies of Seller are cumulative and not
exclusive of any other remedies under law. This Agreement, shall not be amended
nor shall any right hereunder be deemed waived except by a written agreement
expressly setting forth the amendment or waiver and signed by the parties
hereto.
IN WITNESS WHEREFOF, each of the parties hereto has duly executed this
agreement as of the date and year first written above.
Beachport Entertainment Corporation
By: /s/ Robert L. Barland
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Robert L. Barland, Vice President
On Ice, Inc.
By: /s/ Barry Mendelson
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Barry Mendelson, President
/s/ Barry Mendelson
__________________________________
Barry Mendelson
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VIDEO PRODUCTION AND DISTRIBUTION AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of the 18th day of
January, 1995, by and between On Ice, Inc. a Delaware corporation (hereinafter
referred to as "OII") and NBC Sports Ventures, Inc., a Delaware corporation
(hereinafter referred to as "NBC"):
Preamble
OII owns the home videocassette distribution rights to the 1994 figure skating
event entitled "Nutcracker on Ice". (the "Event").
NBC is experienced in the production, marketing, distribution and sale of home
video products.
NBC and OII desire to develop a home videocassette featuring highlights from the
television broadcast of the Event (the "Program").
Accordingly, OII and NBC agree to the following:
Terms and Conditions
1. Term. The term ("Term") of this Agreement shall commence as of December
11, 1994 and expire on December 31, 2004. At the end of the Term all rights to
the Program revert to OII. Following the end of the Term, NBC shall have the
right for six months (the "sell-off period") to advertise, sell and distribute
and otherwise market, all remaining copies of the Program. NBC shall not
distribute any Programs following the end of the sell-off period.
2. Responsibilities of the Parties. The parties agree to the following
terms relative to production and distribution of the Program:
A. NBC Obligations. NBC shall be responsible for editing the Event
television program into a home videocassette of a length to be agreed
upon by the parties and creating the packaging for the Program ("Program
Production"). In addition, NBC shall be responsible for the distribution
and marketing of the Program and make all fulfillment arrangements
("Program Distributions"). In connection with the Program Distribution
NBC agrees to run direct response promotional spots for the video, the
frequency and positioning of which shall be determined by NBC in its
sole discretion based upon NBC's projected sales resulting from the
spots.
B. OII Obligations. OII shall secure the home videocassette rights to
all elements of the Program including music and Event participants.
3. Rights to Distribute Program. NBC in consultation with OII shall have
the right to distribute and sell the Program in any and all home video media in
the world. All sums received by NBC or credited to NBC's account in connection
with such distribution and sales shall be accounted for and distributed in
accordance with Section 5 below.
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4. Production Expense Obligations and Budget. NBC agrees that it will be solely
responsible for all production expenses associated with the Program, including
the royalty buy-out payment to the Program director, set designer, and lighting
designer, which are currently budgeted at Four Thousand Dollars ($4,000) (see
itemized breakdown on Exhibit B) and royalties to Viktor Petrenko, Oksana Baiul
and Vladimir Petrenko (the "Artists") pursuant to the performance agreements
between the Artists, OII and NBC (collectively referred to herein as "Costs").
NBC agrees to notify OII and obtain its approval if it desires to exceed the
budget.
5. Distribution of Revenues. All monies received from the sale, lease or other
exploitation of the Program ("Revenue") shall be distributed between the parties
as follows:
A. Revenues shall first be applied to the recoupment by NBC of all Costs.
B. Fifty-five percent (55%) of all remaining Revenue shall be paid by NBC to
OII and NBC shall retain the remaining Forty-five percent (45%) (the
"Profits").
NBC shall distribute the Profits, if any, to OII within thirty (30) days of
NBC's receipt of such.
6. Reporting Requirements. NBC agrees to account to OII on a quarterly basis
regarding Costs and Revenue.
7. Books and Records. NBC agrees to keep accurate and complete books and records
of account showing all costs incurred and all monies received by it in
connection with the Program. OII or its representative shall have the right at
all reasonable times (prior to the expiration of one (1) year following the
expiration of the Term) to inspect and make copies of the books and records of
NBC insofar as they shall relate to the costs or receipt of monies in connection
with the Program.
8. Termination. If either party fails to perform its duties under this
Agreement, the other party may at its option give written notice to the
defaulting party, specifying the nature of the alleged default and demanding
that the default be cured. Upon receipt of the notice, the party claimed to be
in default shall have thirty (30) days within which to cure any default that may
exist. If the default is not cured within the time allowed, the non-defaulting
party may terminate this Agreement by written notice, in addition to any other
remedies available at law or in equity.
9. Section Headings. The section and other headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning of
interpretation of the Agreement.
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10. Counterparts. This Agreement may be executed in any number of counterparts,
and all of these counterparts together shall constitute one and the same
Agreement.
11. No Assignment. This Agreement and any rights herein granted are personal
to the parties hereto and shall not be assigned, sublicensed, encumbered or
otherwise transferred by either party without the prior written consent of the
other party, and any attempt at violative assignment sublicense, encumbrance or
other transfer, whether voluntary or by operation of law, shall be void and of
no force and effect.
12. No Waiver. Failure of either party to complain of any act or omission on the
part of the other party, no matter how long the same may continue, shall not be
deemed to be a waiver by either party of its rights under this Agreement.
13. Relationship of Parties. This Agreement shall not constitute or be
considered a partnership, employer-employee relationship, joint venture, or
agency between the parties hereto nor by or between any of their employees or
agents.
14. Governing Law. This Agreement shall be governed and construed and the
legal relations shall be determined in accordance with the laws of the State of
New York, United States of America.
15. Binding Effect. Subject to the provisions of this Agreement governing
assignment, the Agreement shall be binding upon and inure to the benefit of the
successors of the parties hereto.
16. Severance. If any term, covenant, condition or provision of this Agreement
or the application thereof to any person or circumstance shall to any extent be
invalid or unenforceable the remainder of this Agreement or application of such
term or provision to any person or circumstance other than those as to which it
is held invalid or unenforceable, shall not be affected thereby, and each term,
covenant, condition, or provision of this Agreement shall be valid and shall be
enforced to the fullest extent provided by law.
17. Notice. Notice by either party is deemed given when mailed, postage paid,
certified or registered, return receipt requested, addressed to the other party
at the address appearing below:
OII
ON ICE, INCORPORATED
517 North Robertson Blvd.
Suite 200
Los Angeles, CA 90048
Attention: Barry Mendelsohn
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cc: Eric Greenspan, Esq.
Myman, Abell, Fineman, Greenspan & Rowan
11777 San Vincente Blvd.
Suite 880
Los Angeles, CA 90049
NBC
NBC SPORTS VENTURES, INC.
30 Rockefeller Plaza
Suite 1550
New York, NY 10112
Attention: Vice President
Either party may, by written notice to the other, change the address to
which any such communications shall be sent. After notice of such change has
been received, any communications shall be sent directly to such party at such
changed address.
18. Authority. Each of the parties hereby represents and warrants to the other
party that it has the right, power and legal authority to enter into and fully
perform the Agreement in accordance with its terms and that this Agreement when
executed and delivered by the parties will be a legal, valid and binding
obligation enforceable against the parties in accordance with its terms.
19. Representation and Warranty; Indemnification. OII represents and warrants to
NBC that it has secured the home videocassette rights to the Event and has
received all necessary releases and authorization to include all elements of the
Event in the Program. Each of the parties hereby agree to indemnify and hold the
other party (and its respective officers, directors, employees, agents, members
and affiliates) harmless from and against any and all costs, damages, claims and
expenses (including, without limitation, all attorneys' fees and expenses, even
if incident to any appeals) incurred by the indemnitee as a result of or
relating to a breach of any provision of this agreement, including any
representation or warranty made herein by the indemnitor.
20. Modification. No modification or waiver of any provision of this Agreement
shall be effective unless in writing and signed by both parties.
21. Attachments. All attachments to this Agreement are hereby incorporated
within and made a part hereof.
22. No Prior Agreements. This Agreement shall be deemed to supercede all prior
agreements between the parties in respect to the subject matter addressed in
this Agreement.
23. Entire Agreement. This Agreement embodies the whole agreement of the parties
and there are no promises, terms, conditions, or obligations other than those
herein contained.
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24. Bankruptcy or Insolvency. Either party reserves the right to terminate this
Agreement, effective upon ten (10) days prior written notice to the other party,
if such other party shall file in any court pursuant to any statute of either
the United States or any state, a petition of bankruptcy or insolvency, or for
reorganization, or for the appointment of a receiver or trustee of all or a
substantial portion of such party's property or if such party makes an
arrangement for the benefit of creditors, or a petition in bankruptcy is filed
against such party.
IN AGREEMENT to the foregoing terms and conditions, the parties hereto set
their hands below this 18 day of January, 1995.
ON ICE, INC. NBC SPORTS VENTURES, SAC
By: /s/ BARRY MENDELSOHN By: /s/ GARY ZENKEL
__________________________ ___________________________
Barry Mendelsohn Gary Zenkel
Presdent Vice President
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VIDEO RECORDING RIGHTS
LICENSE AGREEMENT
AGREEMENT dated as of February 16, 1995, between NBC SPORTS, a division of
National Broadcasting Company, Inc., 30 Rockefeller Plaza, New York, NY 10112
("NBC") and On Ice Productions, Inc., 517 North Robertson Boulevard, Suite 200,
Los Angeles, CA 90048 ("On Ice") (collectively, NBC and On Ice shall be referred
to as "Grantor" herein) and The CBS/FOX Company, 1330 Avenue of the Americas,
New York, N.Y. 10019 ("CBS/FOX").
1. PROGRAM: The home video program entitled:
"THE NUTCRACKER ON ICE"
more fully described on Schedule "A" annexed hereto. Grantor represents that the
Program is in color and was produced pursuant to first class technical
standards. The Program is one hundred seven (107) minutes in length and shall
include the complete performance broadcast nationally in the United States on
the NBC Television Network on December 29, 1994 (the "Broadcast") plus an
additional twenty (20) minutes of ice skating footage not shown on the Broadcast
and an additional eight (8) minutes of "behind the scenes" footage not shown on
the Broadcast. Notwithstanding the foregoing, CBS/FOX acknowledges and agrees
that the Program licensed hereunder shall feature Vladimir Petrenko in the role
of the Cavalier Prince, rather than Brian Boitano. CBS/FOX and Grantor will have
mutual rights of approval over the final content of the Program, including,
without limitation, with respect to concept, treatment, rough cut, and final cut
of the Program. CBS/FOX hereby acknowledges that it has approved the final
content of the Program and each of the foregoing elements.
2. DEFINITIONS: For purposes of this Agreement, the following terms shall have
the corresponding definitions:
(a) "Advance": Shall mean a non-returnable amount recoupable by CBS/FOX from
royalties to be paid to Grantor pursuant to this Agreement and to the
Schedules hereof.
(b) "Availability Date": On a country-by-country basis, the date upon which
the following events have occurred: (i) Delivery, as defined below; and (ii)
the Program is available for Home Video Distribution by CBS/FOX in the
applicable country of the Territory.
(c) "Date of Initial Home Video Release": On a country-by-country basis, the
date that CBS/FOX releases the Program on Video Recordings in commercial
quantities in the Territory.
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(d) Deleted Intentionally
(e) "Delivery": The date upon which all the following events have occurred:
(i) Grantor has completed physical delivery of all the Delivery
Materials required hereunder including an executed copy of this
Agreement;
(ii) CBS/FOX has accepted delivery of all Delivery Materials.
(f) "Direct Mail Distribution": Distribution of Licensed Video Recordings
directly to consumers through any direct mail or mail order distribution
method, including club distribution and television and/or radio broadcast
mail order or telephone order distribution.
(g) "Home Video Distribution": The wholesale and retail distribution of
Licensed Video Recordings for Home Video Use.
(h) "Home Video Use": The non-public exhibition of a Video Recording in a
private home or residence only, without an admission fee or viewing charge
of any kind or nature being charged to those viewing the Program, other than
the purchase price or rental fee paid by the consumer for the Video
Recording. Home Video Use shall further include the non-public exhibition of
a Video Recording by a patron of a hotel, motel or resort using an
individual video recording playback apparatus in that patron's lodging or
room.
(i) "Including": Examples used after the word including are illustrative
only and shall not limit the generality of the words preceding the word
including.
(j) "Licensed Video Recording": Shall mean Video Recordings of the Program
that are manufactured or distributed hereunder, or otherwise subject to the
terms of this Agreement.
(k) "Licensee, Sublicensee, Subgrantee" (collectively "Licensees"): Shall
mean any Person, whether or not affiliated with CBS/FOX, to whom CBS/FOX
licenses or grants the Home Video Distribution rights to the Program.
(1) "Non-Standard Television Exhibition": Any and all forms of television
transmission, distribution, projection and display, other than Standard
Television Exhibition, whether now existing or hereafter devised, including
satellite-to-home, direct broadcast satellite, microwave transmission,
cable, broadcast, wire, fiber-optic, multi-point distribution service,
master antenna and pay cable systems, in each case on a subscription,
rental, pay-per-view, license, sale or any other basis.
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(m) "Non-Theatrical Exhibition": The distribution of the Program for
screening directly before an audience by institutions not primarily engaged
in the business of exhibiting Motion Pictures to the public, including
educational, social and religious institutions, churches, businesses,
industrial and civic organizations, hospitals, libraries, nursing homes,
prisons, convents, orphanages, oil rigs and military installations, hotel
and motel exhibition (not covered by Paragraph 2(h) above), and exhibition
by airlines and ships wherever located, whether in 35mm, 16mm or 8mm gauge,
or by means of a videocassette or videodisc not intended for Home Video Use.
(n) "Pay-Per-View Exhibition": The exhibition of motion pictures with
respect to which viewers are charged a separate fee for the reception of a
single motion picture or program. Such separate fee shall not, in any way
resemble a periodic, monthly, regular or ongoing Subscription Fee, and shall
not be charged to viewers as a result of a "negative option" subscription
(i.e., Book-of-the-Month Club). Pay-Per-View Exhibition shall include: (i)
marketing, promotion and sales efforts, the object of which is to expand
viewership or revenue of Pay-Per-View Exhibition, including but not limited
to charging a single fee for the reception of several motion pictures or
programs; and (ii) multiple exhibitions of any single motion picture or
program during any 24 hour period for a single fee.
(o) "Person": Any individual, corporation, partnership, joint venture,
organization, agency or other business or governmental entity.
(p) "Program": Shall mean the Program and any Sequel Programs acquired
hereunder.
(q) "Standard Television Exhibition": Any form of conventional, free,
over-the-air television transmission by VHF or UHF television broadcast
stations, station groups or networks, the video and audio portions of which
are intended to be intelligibly received without charge by means of a
standard, home, roof-top antenna or television set, self-contained antenna,
or other similar means.
(r) "Theatrical Exhibition": The exhibition of a Program in conventional or
drive-in theatres open to the general public on a regularly scheduled basis
where a fee is charged for admission to view the Program.
(s) "Videocassette": All forms of Video Recordings other than Videodiscs
whether now known or unknown where a prerecorded tape is contained in a
cassette or magazine and when used in combination with or as part of a
television-type playback system or device permits the motion picture
embodied thereon to be perceived visually and heard.
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(t) "Video Recordings": All forms of videocassettes, videodiscs, videotape
or any other prerecorded or computer generated and/or computer interactive
video devices, now known or hereafter devised, designed to be used in
conjunction with a reproduction apparatus which causes a visual image
(whether or not synchronized with sound) to be seen on the screen of a
television receiver or any comparable device, now known or hereafter
devised, viewed at the place of exhibition or origination and primarily
intended for Home Video Use.
(u) "Videodisc": All forms of Video Recordings manufactured on a disc.
(v) "Licensed Languages": All languages of the World.
(w) "Wholesale List Price": Shall mean the published distributor price. In
countries or territories where there is no published distributor price, the
Wholesale List Price shall be the published list price less the standard
distributor discount. In territories or countries where there is no
published distributor price and no standard distributor discount, it shall
mean the published list price less the average distributor discount for the
applicable territory or country computed on a quarterly accounting basis.
3. TERM: On a country-by-country basis, the term of this Agreement ("Term")
shall commence on the date hereof and shall expire no earlier than ten (10)
years following the Date of Initial Home Video Release.
4. TERRITORY: The Territory within which the Rights Granted (as defined in
Paragraph 6 hereof) may be exercised is the entire World.
5. HOLDBACKS:
(a) Availability: The Program shall be available for exploitation by CBS/FOX
immediately upon Delivery.
(b) Television Exhibition Holdbacks: Grantor shall not nor shall Grantor
authorize or permit any Person to broadcast, transmit, exhibit or otherwise
exploit the Program by means of Standard or Non-Standard Television
Exhibition as follows (the "Television Exhibition Holdback"):
(i) Non-Standard Television Exhibition (including Pay-Per-View and Canal
Plus): On a country-by-country basis, with respect to Non-Standard
Television Exhibition, Grantor shall not authorize such exhibition of
the Program until at least three (3) years following the Date of Initial
Home Video Release (the "Non-Standard Television Exhibition Holdback").
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(ii) Standard Television Exhibition: On a country-by-country basis, with
respect to Standard Television Exhibition, Grantor shall not authorize
such exhibition of the Program until at least three (3) years following
the Date of Initial Home Video Release (the "Standard Television
Exhibition Holdback"); provided, however, that Grantor shall have the
right to re-broadcast the Program on the NBC Television Network one (1)
time only by no later than December 1995.
(iii) The Non-Standard and Standard Television Exhibition Holdbacks
shall be applicable to all promotional advertising related to the
Program.
6. RIGHTS GRANTED: Subject only to Paragraph 6A below, Grantor hereby grants,
sells, assigns and sets over during the Term and any extensions thereof and
throughout the Territory, and CBS/FOX shall be vested with and own absolutely
throughout the Territory, the sole and exclusive and irrevocable right, under
copyright and otherwise, to exercise all rights of Home Video Distribution for
all versions of the Program and its respective trailer thereof (including all
"making of" programs produced in connection with the Program to the extent that
such "making of" programs are under Grantor's ownership and/or control) in the
Licensed Languages (collectively the "Rights Granted"). Notwithstanding anything
to the contrary contained herein, Grantor expressly acknowledges and agrees that
the Rights Granted shall include the sole and exclusive right to market and sell
(or to designate other persons to market and sell) the Program in arenas where
live performances of "The Nutcracker On Ice" are presented ("Arena Sales
Rights"). It is the intent of the parties hereto that to the fullest extent
permitted by law CBS/FOX acquire a present ownership interest in the Rights
Granted in the Program.
(a) Without limiting the generality of the foregoing Rights Granted, and in
all cases subject to the terms and conditions of this Agreement, CBS/FOX
shall have the right in connection with the marketing, distribution and
exploitation of the Program to:
(i) manufacture and distribute prints of the Program and Video
Recordings thereof;
(ii) publicize and advertise the Program and Video Recordings thereof in
connection with the exercise of any of the Rights Granted; and
(iii) license and authorize others to perform any or all of the
foregoing on CBS/FOX's behalf upon such terms and conditions as CBS/FOX
in its sole discretion may deem to be proper or expedient.
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(b) Without limiting the scope of the foregoing, the Rights Granted for the
Program shall include the following rights:
(i) Titles: To use the title or titles by which the Program is or may be
known or identified in connection with CBS/FOX's exercise of the Rights
Granted. CBS/FOX shall have the right to change the title of the
Program, subject to Grantor's right of absolute approval.
(ii) Versions: To make dubbed and subtitled versions of the Program in
the Licensed Languages, including synchronized and superimposed versions
for use in such parts of the Territory as CBS/FOX may deem advisable.
(iii) Advertising and Publicity: To advertise, promote and publicize the
Program and Licensed Video Recordings thereof in any and all media, and
to prepare advertising and publicity materials or authorize others to do
so, to such extent as CBS/FOX in its discretion may deem desirable;
provided, however that CBS/FOX expressly acknowledges and agrees that
Grantor shall have a right of consultation, but not approval,
regarding CBS/FOX's marketing plans for the Program. Notwithstanding the
foregoing, in connection with publicizing, advertising and promoting the
Program, CBS/FOX agrees to submit all footage (including footage which
is reproduced in print advertisements) and print advertisements to
Grantor for prior review and clearance. CBS/FOX and its Licensees may
prepare and/or use synopses and excerpts from the Program, use all
characters, situations, objects, properties, wardrobes, designs,
equipment and events depicted or described in the Program and use all
pre-existing advertisements, publicity pieces and promotional materials,
in whole or in part, respecting the Program. Subject to Grantor's prior
approval, such approval not to be unreasonably delayed or withheld,
CBS/FOX and its Licensees shall also have the right to use and exhibit
Licensed Video Recordings and/or portions thereof in connection with
advertising, promoting, publicizing and/or demonstrating Licensed Video
Recording.
(iv) Names and Likenesses: Subject to Grantor's approval, such approval
not to be unreasonably delayed or withheld, to use, license, and
authorize others to use the name, physical likeness and voice (and any
simulation or reproduction thereof) of any Person rendering services in
connection with the Program for the purpose of advertising, publicizing
or exploiting the Program and Licensed Video Recordings thereof. CBS/FOX
shall not use or authorize the use of the name, likeness, or voice of
any Person connected with the Program to directly endorse any product or
service.
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(v) Use of Name and Trademark: To use such names and trademarks of
CBS/FOX and its Licensees as CBS/FOX and its Licensees may elect, in all
packaging of Licensed Video Recordings, advertising and publicity
relating to the Program or Licensed Video Recordings, and in such
manner, position, form and substance as CBS/FOX or its Licensees may
elect.
(vi) Deleted Intentionally.
(vii) Coupling: The right to include the Program, or any portion
thereof, with other program material selected by CBS/FOX whether
acquired under this Agreement or otherwise on any Video Recording,
subject to Grantor's right of absolute approval.
(viii) Stereophonic Soundtrack: If the Program is not available with a
stereophonic soundtrack, the right to create a stereophonic soundtrack
or to enhance or rechannel the soundtrack by any means to simulate
stereo for use on Licensed Video Recordings.
(ix) Promotional Material: To incorporate promotional material on
Licensed Video Recordings, subject to Grantor's prior approval, such
approval not to be unreasonably delayed or withheld.
(x) Distribution and Exploitation: CBS/FOX shall have complete control
of the distribution, exhibition, exploitation and other disposition of
Licensed Video Recordings directly or by any Licensee, in accordance
with such sales methods, plans, programs, policies, terms and conditions
as CBS/FOX in its sole discretion may determine proper. The decision of
CBS/FOX in all such manners shall be final and conclusive. CBS/FOX shall
have the right to exploit Licensed Video Recordings as part of a
package, by means of Direct Mail Distribution, on a free, bonus or
no-charge basis, and/or as part of sales incentives or premium plans.
(xi) Refrain From Distribution: CBS/FOX and its Licensees shall have the
right to withhold or withdraw such Program from the Territory or any
part thereof, and shall not be deemed thereby to have abandoned,
relinquished or in any way prejudiced any of the Rights Granted for any
portion of the Term; provided, however, that in the event that CBS/FOX
withholds the Program from distribution for two (2) successive Christmas
seasons, Grantor shall have the right to give CBS/FOX written notice in
accordance with Paragraph 20 below that unless CBS/FOX returns the
Program to distribution in the next succeeding Christmas season, the
Rights Granted shall revert to Grantor.
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(xii) Alteration of Program: CBS/FOX shall have the right to cut, edit,
change or add to, delete from or revise the Program for time
compression, or to comply with censorship or other legal requirements
and to edit the footage contained in the Program into different
configurations for release in different countries of the Territory.
6A. RESERVED RIGHTS: Notwithstanding the foregoing, CBS/FOX acknowledges and
agrees that Grantor shall have the limited non-exclusive right to make "off-air"
telephone sales of Licensed Video Recordings of the Program to consumers in the
United States through either:
(a) On-air spots or tags either on the Broadcast or elsewhere in the NBC
television programming schedule; or
(b) On-air spots placed by Grantor or its designee, Laurel Canyon
Productions, on other television broadcast or cable outlets.
In connection with Grantor's exercise of its non-exclusive "off-air" rights,
Grantor shall purchase Licensed Video Recordings of the Program exclusively from
CBS/FOX at a cost equal to U.S.$3.80 per unit. ("CBS/FOX Off-Air Revenue").
Grantor hereby expressly acknowledges and agrees that, notwithstanding anything
to the contrary contained herein, all CBS/FOX Off-Air Revenues shall be
royalty-free and shall be retained by CBS/FOX for its sole account in their
entirety. Notwithstanding the foregoing, CBS/FOX acknowledges and agrees that:
(i) Grantor has previously advised CBS/FOX that Grantor has previously
purchased a quantity of Licensed Video Recordings of the Program from a
source other than CBS/FOX and, as of the date hereof, has a remaining
inventory of approximately Two Thousand (2000) of said Licensed Video
Recordings (the "Remaining Inventory"); and
(ii) Grantor shall have the right to dispose of said Remaining Inventory
prior to purchasing Licensed Licensed Video Recordings from CBS/FOX in
connection with this Paragraph 6A.
Notwithstanding the foregoing, in the event that Grantor offers the Program for
sale to consumers at a retail price which is less than CBS/FOX's then-current
suggested retail price for the Program, Grantor shall pay CBS/FOX its
then-current standard wholesale price for all licensed Licensed Video Recordings
of the Program Grantor purchases from CBS/FOX from that time forward.
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7. PROGRAM MARKETING:
(a) In-Arena Marketing and Sales: In connection with CBS/FOX's Arena Sales
Rights, Grantor hereby expressly acknowledges and agrees that in each arena
where "The Nutcracker On Ice" is performed during the Term in the Territory,
CBS/FOX shall receive at no cost:
(i) an advertisement for the Program of no less than one (1) page in
"The Nutcracker On Ice" printed programs sold or otherwise distributed
in each arena; and
(ii) appropriate signage and other promotional vehicles to advertise the
availability for purchase of the Program in each Arena; and
(iii) guaranteed access to arena concessionaires who shall sell the
Program in the Arena.
(b) Personal Appearances/Media: Grantor hereby expressly acknowledges and
agrees that it is a material term of this Agreement that:
(i) Oksana Baiul ("Baiul") will:
(A) make no fewer than six (6) personal appearances in connection
with CBS/FOX's sales launch of the Program during the period between
August 1995 through November 1995 at locations to be selected by
CBS/FOX. Subject to Baiul's reasonable professional availability,
Grantor shall also make reasonable efforts to cause Baiul to appear
at the V.S.D.A. video trade show to be held in Dallas, Texas in May
1995, as well to make as a reasonable number of additional personal
appearances throughout the Term promote the sale of the Program; and
(B) participate in ten (10) television broadcast appearances, ten
(10) radio interviews and twenty (20) print interviews promoting the
Program, as described more particularly in Schedule "D" annexed
hereto and incorporated by reference herein.
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(ii) Viktor Petrenko ("Petrenko") will make no fewer than three (3)
personal appearances in connection with CBS/FOX's sales launch of the
Program during the period between August 1995 through November 1995 at
locations to be selected by CBS/FOX as well as a reasonable number of
additional personal appearances throughout the Term (subject to
Petrenko's reasonable professional availability) to promote the sale of
the Program.
CBS/FOX expressly acknowledges and agrees that the personal appearances
described herein shall be subject to the performers' reasonable professional
availability; provided, however, that Grantor hereby acknowledges and agrees
that Grantor shall make and cause Baiul and Petrenko to make all reasonable
efforts to accommodate CBS/FOX's desired schedule of personal appearances;
provided, however, that any failure to make such personal appearance(s)
caused by the legitimate unavailability of Baiul or Petrenko shall not
constitute a breach of this Agreement. Additionally, Grantor has advised to
CBS/FOX that Baiul will make "autograph" appearances in each city in which
"The Nutcracker On Ice" is performed and represented to CBS/FOX that
CBS/FOX's video devices of the Program will be made available for purchase
and autographing at all such appearances.
(c) Cross-Promotional Opportunities: Grantor hereby expressly acknowledges
and agrees that during the Term in the Territory CBS/FOX will have
opportunities for cross-promotion (including, without limitation by use of
"hang-tags") with all other "The Nutcracker On Ice" related merchandise
and/or Oksana Baiul-related merchandise controlled by On Ice Productions.
For promotional purposes, Grantor shall ensure that CBS/FOX shall have the
right to buy all such merchandise on an "at cost" basis.
(d) Performance Tickets: Grantor will provide to CBS/FOX free of charge no
less than ten (10) tickets to each performance of all tours of "The
Nutcracker on Ice" during the Term in the Territory.
(e) Off-Air Merchandise Sales: CBS/FOX acknowledges and agrees that Licensed
Video Recordings of the Program manufactured by CBS/FOX for sale in the
United States and Canada shall include an on-screen card (the "Card")
following the end credits directing viewers to a telephone number and/or
address for the purchase of merchandise related to the Program. Grantor
hereby acknowledges and agrees that:
(i) Grantor shall have sole responsibility for fulfillment of all
merchandise orders generated through the Card, including without
limitation, with respect to the payment of all costs incurred in
connection with the purchase and sale of the merchandise and fulfillment
of merchandise orders ("Costs"); and
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(ii) In consideration of including the Card on Licensed Video Recordings
of the Program, Grantor shall pay CBS/FOX Ten Percent (10%) of "Net
Receipts" derived from merchandise sales. For purposes of this
Agreement, "Net Receipts" shall equal gross receipts less Grantor's
Costs. Grantor shall provide CBS/FOX with quarterly accounting
statements during the Term showing gross receipts from merchandise sales
and deductions therefrom and said accounting statements shall be
accompanied by a check for Net Receipts due CBS/FOX, if any. Grantor
acknowledges and agrees that CBS/FOX shall have a right to audit such
accounting statements and all books and records relating thereto;
provided, however, that: (A) CBS/FOX shall give Grantor at least thirty
(30) days prior written notice with respect to any such audit; and (B)
such right to audit shall be limited to a maximum of one (1) audit per
calendar year of the Term.
8. SEQUEL RIGHTS/REMAKES: In the event that Grantor elects to produce any
sequel programs to the Program ("Sequels") (e.g., any other story-on-ice
presentations featuring any or all of the members of the cast), Grantor
acknowledges and agrees that CBS/FOX shall have successive options ("Options")
to acquire and distribute any and all Sequels under the terms and conditions set
forth herein. In the event CBS/FOX notifies Grantor of its decision not to
exercise any of said Options, CBS/FOX shall waive its right to future sequels.
Notwithstanding anything to the contrary contained herein, in the event "The
Nutcracker on Ice" is performed with different cast members in future years,
Grantor shall not have the right to create home video versions thereof, except
with the express prior written agreement of CBS/FOX.
9. ADVANCE:
(a) In consideration of the Rights Granted and Grantor's representations and
warranties contained herein, and subject to Grantor's compliance with and
performance of all material representations, warranties and agreements
hereunder, including prompt Delivery of the Delivery Materials, CBS/FOX
shall pay to Grantor as an Advance the amount of One Hundred Twenty-Five
United States Dollars (U.S.$125,000). The Advance shall be payable as
follows:
(i) Fifty Thousand United States Dollars (U.S.$50,000) promptly
following "Delivery" as defined in Paragraph 2(e) above; provided
however, that execution of this Agreement shall not be a condition of
the foregoing payment, the receipt of which is hereby acknowledged by
Grantor; and
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(ii) Seventy-Five Thousand United States Dollars (U.S.$75,000) promptly
following the Date of Initial Home Video Release in the Territory;
provided, however, that CBS/FOX has received an executed copy of this
Agreement.
(b) CBS/FOX shall recoup such Advance from any royalties payable to Grantor
under this Agreement.
10. ROYALTIES: In consideration of the Rights Granted and Grantor's
representations and warranties hereunder, CBS/FOX agrees to pay to Grantor as a
royalty an amount equal to the percentage indicated below (the "Royalty Rate")
of the "Royalty Computation Base", as herein defined, for the sale and rental of
Licensed Video Recordings ("Royalties").
(a) Basic Royalty Rate: The "Basic Royalty Rate" for all Licensed Video
Recordings sold or rented by CBS/FOX (with the express exception of Licensed
Video Recordings sold to NBC (or any designee of NBC approved by CBS/FOX) in
connection with the Reserved Rights pursuant to Paragraph 6A above) shall be
Fifteen Percent (15%) of the Royalty Computation Base.
(b) Reduced Royalty Rate: A reduced royalty rate ("Reduced Royalty Rate")
shall apply to Licensed Video Recordings of the Program distributed by
CBS/FOX in the following instances:
(i) Following such time, if ever, that CBS/FOX has permanently reduced
the suggested retail price for the Program to less than Fourteen Dollars
and Ninety-Eight Cents (U.S. $14.98) (or its equivalent in local
currency) per unit; and/or
(ii) In connection with all sales of Licensed Video Recordings by
CBS/FOX pursuant to a sponsorship or premium plan.
(Licensed Video Recordings distributed by CBS/FOX pursuant to subparagraphs
10(b)(i) and (ii) above shall be referred to as "Reduced Royalty Rate
Units"). The Reduced Royalty Rate shall be computed by reducing the Basic
Royalty Rate by the same percentage by which the Wholesale List Price for
such Reduced Royalty Rate Units has been reduced from the Wholesale List
Price which was in effect on the date of initial home video release in the
applicable country of the Territory.
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(c) Free, Bonus or Promotional Distribution: No Royalties shall be payable
on Licensed Video Recordings distributed by CBS/FOX for promotional or sales
incentive purposes, or in connection with marketing plans in connection with
the Program.
(d) Royalty Computation Base/Pro Ration:
(i) Roya1ty Computation Base: The "Royalty Computation Base" with
respect to the sale of Licensed Video Recordings in the Territory shall
be the Wholesale List Price in effect in the country of sale or in
the country of manufacture, as and when CBS/FOX is paid, for
Licensed Video Recordings sold and not returned. With respect to
Licensed Video Recordings sold at reduced prices, including Licensed
Video Recordings to be used for premium or promotional incentive
purposes, the Royalty Computation Base shall be the actual selling price
to the customer. The Royalty Computation Base for the rental,
sublicensing or Direct Mail Distribution of Licensed Video Recordings
shall be the actual amount received by CBS/FOX for each such rental,
sublicensing or Direct Mail Distribution. In each instance the Royalty
Computation Base shall be reduced by any quantity or trade discounts,
actual bad debt expenses, cooperative advertising returns for any
reason, including defective or damaged Licensed Video Recordings, and
any excise, sales, use, value-added, remittance, withholding and
comparable or similar taxes actually paid or incurred by CBS/FOX with
respect to Licensed Video Recordings and the per-unit cost of
anti-piracy and anti-counterfeiting devices including any costs
associated with membership in any anti-piracy organizations. Advances
and guarantees received from Licensees shall be included in the Royalty
Computation Base only if and when earned.
(ii) Pro Ration: In any case in which the Program is included with other
program material on a Licensed Video Recording as set forth in Paragraph
6(d)(vii) above, the Royalty Computation Base applicable to such
Licensed Video Recording shall be computed by multiplying the otherwise
applicable Royalty Computation Base by a fraction, the numerator of
which shall be the running time of the Program and the denominator of
which shall be the total running time (including the running time
attributable to the Program) of the entire Licensed Video Recording.
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11. STATEMENTS/PAYMENTS/FOREIGN CURRENCY:
(a) Accounting Statements and Payments: Grantor hereby expressly directs
CBS/FOX to render to NBC, on behalf of Grantor, an accounting statement
("Accounting Statement") on a quarter-annual basis within ninety (90) days
of the end of each quarter showing in reasonable detail the number of
Licensed Video Recordings shipped, the Wholesale List Price and Royalties
owing, if any. Said Accounting Statement shall be mailed to Grantor, in care
of NBC, at the address set forth in the heading of this Agreement or at any
other address designated by Grantor pursuant to this or any other agreement
between the parties hereto for receiving such Accounting Statements, and
shall be accompanied by a check payable to NBC, on behalf of and in full
discharge of CBS/FOX's obligations to Grantor, in U.S. Dollars for the
amount, if any, of Royalties due to Grantor as reflected on the Accounting
Statement. Notwithstanding the foregoing, Grantor expressly acknowledges and
agrees that after three (3) years from the date of this Agreement no
Accounting Statement need be rendered for periods in which no Royalties are
payable to Grantor. Each period covered by an Accounting Statement is
referred to as a "Statement Period". Accounting Statements rendered by
CBS/FOX may be changed from time to time to give effect to year end
adjustments, if any, and to items overlooked to correct errors, and for
other purposes.
(b) Foreign Currencies: CBS/FOX shall use best efforts to promptly remit to
the United States and exchange into United States currency monies paid to
CBS/FOX outside the United States and/or in currency other than United
States Dollars ("Foreign Revenue"). Grantor shall be paid only after receipt
by CBS/FOX in the United States in United States currency, less transmission
and conversion costs at the same rate of exchange as of the time CBS/FOX
sold such Licensed Video Recordings, after deduction of all applicable
foreign taxes. Grantor agrees to be bound by whatever agreement CBS/FOX
shall make for the conversion and remittance of Foreign Revenue and by
whatever cost or rate of exchange is incurred. If CBS/FOX does not receive
payment in United States currency and elects to accept payment in a foreign
currency, or if any Foreign Revenue is frozen or unremittable by virtue of
local law, then CBS/FOX may deposit to Grantor's account in a bank account
designated by Grantor, at Grantor's expense, in the applicable country and
in the currency thereof, that part of Foreign Revenue to which Grantor would
be entitled if the funds were transmitted and paid in the United States in
accordance with the terms hereof. Deposit in accordance with the foregoing
provisions shall be deemed a fulfillment of CBS/FOX's obligation hereunder
with respect to such amounts.
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(c) Withholdings: There shall be deducted from any payments to or for the
account of Grantor hereunder the amount of any tax or other withholding which,
pursuant to the good-faith interpretation by CBS/FOX of applicable laws, is
required to be made by CBS/FOX based upon, measured by, or resulting from
payments to or for the account of Grantor (excluding income taxes or business
taxes incurred by CBS/FOX). CBS/FOX shall not be liable to Grantor for the
amount of such deductions. Grantor shall make and prosecute any and all claims
which Grantor may have relating to such withholdings and/or tax deductions or
credits in connection therewith.
(d) Overpayment/Offset: If CBS/FOX makes any overpayment to Grantor hereunder or
if Grantor becomes indebted to CBS/FOX for any reason, Grantor shall pay to
CBS/FOX such overpayment or indebtedness on demand, or at the election of
CBS/FOX, CBS/FOX may deduct and retain an amount equal to any such overpayment
or indebtedness from any sums that may become due or payable to or for the
account of Grantor, or to any company owned by, owning, or under common
ownership or control with Grantor.
12. AUDIT/INCONTESTABILITY
(a) Audit Rights: If Grantor requests in writing, CBS/FOX shall permit Grantor's
designated representative to examine, audit and copy, at Grantor's sole cost and
expense, those parts of CBS/FOX's books and records which relate to the Program
and to Accounting Statements rendered to Grantor which have not become
incontestable. Such examinations shall be made upon not less than thirty (30)
days prior notice during reasonable business hours at such place where said
books of account are maintained in such manner as not to interfere with
CBS/FOX's normal business activities, and not more frequently than once each
calendar year. A true copy of all reports made by Grantor's authorized
representative shall be delivered to CBS/FOX at the same time as delivered to
Grantor. Such right to examine is limited to the Program and under no
circumstances shall Grantor or its authorized representative have the right to
examine CBS/FOX's manufacturing records relating to CBS/FOX's business generally
or with respect to any other motion picture or other programming exploited by
CBS/FOX for purposes of comparison or otherwise.
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(b)Incontestability: Grantor shall be deemed to have consented to all Accounting
Statements rendered by CBS/FOX to Grantor and said Accounting Statements shall
be conclusive and binding upon Grantor and not subject to any objection by
Grantor for any reason unless Grantor objects in writing setting forth in detail
the transactions or items to which Grantor objects and the basis for such
objection, and delivers said written objections to CBS/FOX within twenty-four
(24) months from the date that the Accounting Statement in which the transaction
or item is first reflected is rendered. Subject to fulfilling the conditions of
the preceding sentence, no action, suit, or proceeding of any nature arising out
of or in any way relating to any Accounting Statement or other accounting
rendered by CBS/FOX hereunder may be maintained against CBS/FOX unless commenced
in a court of competent jurisdiction within four (4) years after the date such
Accounting Statement or other accounting is rendered. The CBS/FOX books of
account and all supporting documentation need not be retained and may be
destroyed upon the expiration of the twenty-four (24) month period described in
this Paragraph 12.
13. GRANTOR'S DELIVERY OBLIGATIONS AND STANDARDS:
(a) Delivery Materials: On or about January 1, 1995, time being of the essence
Grantor, shall deliver, at its sole expense, to CBS/FOX the following Delivery
Materials:
(i) Schedule "B" Materials: The materials and items specified and described
in Schedule "B" annexed hereto, at such place or places as designated by
CBS/FOX. CBS/FOX hereby acknowledges receipt of the required Schedule "B"
materials.
(ii) Deleted Intentionally.
(iii) Instrument of Transfer/Rights and Clearances Documentation: A duly
executed Instrument of Transfer in the form annexed hereto as Schedule "C".
Grantor shall also deliver promptly to CBS/FOX, upon Delivery and at any
time during the Term, any other documentation of rights, clearances and
permissions requested by CBS/FOX, that may in the good faith and reasonable
opinion of CBS/FOX be necessary for CBS/FOX to exploit the Rights Granted
hereunder.
(iv) E & O Insurance: Copies of a Broadcasters Errors & Omissions Insurance
Policy and/or a Certificate of Insurance as described more particularly in
Paragraph 18 below.
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In addition to the Delivery Materials enumerated in (i)-(iv) above, Grantor
shall also provide CBS/FOX with a certificate of copyright registration with the
United States Copyright Office, when such Certificate becomes available to
Grantor.
(b) Incomplete Delivery: CBS/FOX shall have the right to inspect and examine all
Delivery Materials. To the extent that any of the materials delivered hereunder,
in the sole reasonable discretion of CBS/FOX, is incomplete or fails to meet the
requirements and standards specified, CBS/FOX shall so notify Grantor, and
Grantor shall immediately thereafter correct all such deficiencies by delivering
to CBS/FOX the proper materials and items required. Acceptance by CBS/FOX of
less than all of the Delivery Materials for the Program shall not be construed
as a waiver by CBS/FOX of Grantor's obligation to deliver any material or item
required hereunder. The cost of any material or item of delivery which is
omitted by Grantor and is obtained by CBS/FOX from other sources may be set off
against and deducted from the Advance by CBS/FOX and recouped by CBS/FOX from
any Net Receipts due to Grantor hereunder.
(c) Credits: Grantor shall at all times indemnify and hold CBS/FOX and all other
Persons described in Paragraph 17 harmless from and against any and all claims,
actions and causes of action arising as a result of failure of Grantor to
deliver, compliance by CBS/FOX with, or errors in the statement of credits
required to be given to CBS/FOX pursuant to Schedule "B" in accordance with
Paragraph 13(a)(i). CBS/FOX agrees to observe and abide by all of the credit
requirements and restrictions enumerated in Schedule "B". No casual or
inadvertent failure by CBS/FOX or any of its Licensees to comply with the
statement of credits shall constitute a breach of this Agreement. Grantor shall
not be entitled to assert any claim or cause of action of any kind against
CBS/FOX because of the failure by CBS/FOX or any of its Licensees to comply with
the statement of credits unless and until Grantor has given CBS/FOX written
notice of such failure and CBS/FOX, after receipt of such written notice, fails
to comply with such notice. In no event shall failure to comply with the
statement of credits entitle Grantor to terminate this Agreement nor entitle
Grantor to obtain rescission, restraint, injunction or other equitable relief of
any kind.
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(d) Costs: All costs incurred in connection with the creation and manufacture of
Delivery Materials, and obtaining any certificate required hereunder, and
insuring the Delivery Materials against loss, theft or damage, shall be borne by
Grantor. If CBS/FOX requests that Grantor specially prepare any item that does
not exist, and is not required to be delivered pursuant to Schedule "B", (for
example, specially created advertising materials, or a stereo soundtrack),
Grantor shall inform CBS/FOX of the estimated cost and time of preparing any
such item. If CBS/FOX thereafter requests that such item be prepared and
delivered by Grantor, CBS/FOX shall reimburse Grantor for the actual
out-of-pocket costs of preparing such items, but not more than one hundred and
ten percent (110%) of said estimated costs. Any such item so paid for by CBS/FOX
shall be owned by CBS/FOX, but may only be used by CBS/FOX in accordance with
the terms and provisions of this Agreement.
14. RIGHTS AND OBLIGATIONS UPON TERMINATION OF AGREEMENT:
(a) Cessation of Manufacture and Return of Materials: Upon termination of the
Agreement, CBS/FOX shall cease manufacturing Licensed Video Recordings, and
within thirty (30) days thereafter, CBS/FOX shall return to Grantor, at
Grantor's expense, the Reproduction Masters and all advertising and promotional
materials pertaining to the Program then in CBS/FOX's possession; or, at
Grantor's election (by notice to CBS/FOX within such thirty (30) day period),
CBS/FOX shall erase and/or destroy the foregoing materials furnish to Grantor an
affidavit thereof signed by an authorized signatory of CBS/FOX.
(b) Sell-Off Period: For a period of six (6) months following the expiration of
the Term or the termination of the Agreement, CBS/FOX shall have the
non-exclusive right to sell and/or rent the inventory of Licensed Video
Recordings remaining as of such expiration date (the "Sell-Off Period"). Upon
the expiration of the Sell-Off Period, CBS/FOX shall at its election either
erase or destroy its then remaining inventory of such Licensed Video Recordings
and furnish to Grantor an affidavit thereof signed by an authorized signatory of
CBS/FOX.
15. GRANTOR'S REPRESENTATIONS AND WARRANTIES; Grantor represents and warrants to
CBS/FOX as follows:
(a) Unrestricted Right to Grant: Grantor has the absolute and exclusive
right to grant to and vest in CBS/FOX all the Rights Granted to CBS/FOX
hereunder, and Grantor has not heretofore and will not during the Term sell,
assign, license, grant, encumber or utilize the Program or Video Recordings
thereof or any of the literary or musical properties used therein in any way
that may affect or impair the Rights Granted.
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(b) No Prior Grant of Rights: None of the Rights Granted to CBS/FOX
hereunder have heretofore been sold, assigned, licensed or granted to any
third party in any country of the Territory by Grantor.
(c) No Infringement: Neither the Program nor any part thereof, nor any
materials contained therein or synchronized therewith, nor the title
thereof, nor the exercise of any of the Rights Granted, violates or
infringes or will violate or infringe any trademark, tradename, contract,
agreement, copyright (whether common law or statutory), patent, literary,
artistic, dramatic, personal, private, civil right, property right, right of
privacy, "moral right of authors" or any other right whatsoever, or is
slanderous or libelous of any Person whatsoever.
(d) Copyright
(i) Valid Copyright: The copyrights in the Program and in all literary,
dramatic and musical material upon the Program is based or which is
contained in the Program will be valid and subsisting during the Term
with respect to each country of the Territory. Grantor agrees to secure
and register, or to cause others to secure and register all copyrights
in the Program and in all related properties upon each thereof becoming
eligible therefor.
(ii) Protection of Copyright: Grantor shall cooperate with CBS/FOX to
protect all copyrights pertaining to the Program from infringement by
unauthorized parties and in particular, at the request of CBS/FOX,
cooperate with CBS/FOX to take such action and engage in any such
proceedings as may be reasonable to prevent any unauthorized use,
reproduction, performance, exhibition or exploitation by third parties
of the Program or any part thereof or the material on which the Program
is based which may be in contravention of the Rights Granted to CBS/FOX.
The rights of CBS/FOX under this subparagraph constitute a power coupled
with an interest and are irrevocable.
(e) Unrestricted Right to Exercise: CBS/FOX shall not be precluded from
exercising any of the Rights Granted hereunder by reason of censorship,
whether legally or commercially imposed, or by any other restrictions during
the Term hereof in the Territory. On behalf of Grantor, at CBS/FOX's and
Grantor's joint expense, CBS/FOX shall obtain any permits, certificates or
other authorization required by any censorship board or other regulatory
agency prior to Home Video Distribution of the Program in the Territory. Any
actual expenses incurred hereunder shall be fully recouped from any Net
Receipts payable to Grantor pursuant to this Agreement.
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(f) Music Rights: The performing rights to all musical compositions
contained in the Program are: (i) controlled by a performing rights society
or similar association representing the interests of composers, authors and
music publishers in the Territory, (ii) in the public domain in the
Territory, or (iii) controlled by Grantor to the extent required for the
purposes of this Agreement and Grantor similarly controls or has licenses
for and has obtained any necessary synchronization, mechanical and recording
rights, at no cost or expense to CBS/FOX.
(g) Authority: Grantor has the authority to enter this Agreement, and has
taken all corporate and other action necessary to duly and validly authorize
its signature and performance of this Agreement and the Rights Granted to
CBS/FOX hereunder.
(h) Litigation: There is no litigation, proceeding or claim pending or
threatened against Grantor or other party which might materially adversely
affect Grantor's rights in and to the Program, any copyrights pertaining
thereto or the Rights Granted to CBS/FOX hereunder.
(i) Rights Free and Clear: Grantor has the rights herein granted in and to
all literary, musical and dramatic material contained in the Program, and
the agreements and contracts with actors, directors, producers, writers and
others rendering services or supplying materials for the production and
exploitation of the Program does not and will not preclude the exploitation
of the Program as provided in this Agreement.
(j) Payments to Third Parties: Grantor is responsible for and shall
indemnify and hold CBS/FOX harmless with respect to all third party
obligations, including all talent costs, residuals and/or guild costs and
music clearance fees of any kind or nature whatsoever, and footage costs and
shall hold CBS/FOX harmless with respect to payments of same.
16. CBS/FOX REPRESENTATIONS OR WARRANTIES: CBS/FOX agrees to exercise
the Rights Granted hereunder in accordance with its reasonable good faith
business judgment and warrants and represents that it has the authority to
enter this Agreement and has taken all corporate and other action necessary to
duly and validly authorize its signature and performance of this Agreement and
the Rights Granted to CBS/FOX hereunder. Grantor acknowledges and agrees that
CBS/FOX makes no express or implied representation, warranty, or agreement as to
the Royalties to be derived from the Program, the performance by any
subdistributor or Licensee of any contract for the distribution or exploitation
of the Program, or any minimum amount of monies to be expended in connection
with the exercise of the Rights Granted provided that CBS/FOX and its Licensees
have acted in good faith. Grantor acknowledges that the amount of Royalties
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which may be realized from the distribution and exploitation of the Program is
speculative. Under no circumstances shall CBS/FOX be liable or responsible for
any breach of contract or lack of good faith on the part of any of its
Licensees. Grantor agrees that it will not make any claim or bring any action,
suit, or proceeding against CBS/FOX, or any Licensee, whether in law or equity,
based upon or arising from, in whole or in part, any claim that CBS/FOX or any
Licensee has not properly distributed the Program or caused the Program to be
properly distributed, or that better prices or terms could have been obtained or
more business could have been done than was actually obtained or done by CBS/FOX
or any Licensee.
17. INDEMNIFICATION: CBS/FOX and Grantor shall indemnify, defend and hold each
other harmless against any and all liabilities, claims, demands, actions, costs
(including reasonable attorney's fees), or damages, based upon, relating to, or
arising out of a breach or failure of any of the covenants, agreements,
obligations, representations or warranties undertaken by either hereunder. Upon
notice of any such claim, demand or action being advanced or commenced, the
party notified agrees to adjust, settle or defend the same at its cost.
18. E & O INSURANCE: Grantor shall maintain in force a Broadcaster's Errors and
Omissions insurance policy (the "Policy") Insurance with limits of U.S.$5
Million naming CBS/FOX as an additional insured with a term of at least one (1)
year commencing upon the date of initial home video release in the Territory;
provided, however, that: (i) Grantor hereby acknowledges and agrees that said
Policy shall be kept in full force and effect for at least the first three (3)
years of the Term and that Grantor shall furnish CBS/FOX with copies of annual
policy renewals; (ii) Grantor shall have the right to self-insure with respect
to the terms and conditions customarily included in Producer's Errors and
Omissions insurance policies; and (iii) CBS/FOX expressly acknowledges and
agrees that the foregoing insurance is applicable to the Program in the form
delivered to CBS/FOX.
19. TERMINATION: In the event that Grantor fails to fulfill the delivery
requirements as set forth herein, or breaches, defaults or fails to perform any
of its representations, warranties or agreements under this Agreement, CBS/FOX
shall give Grantor written notice of such failure. If such failure has not been
remedied within thirty (30) days, CBS/FOX shall have the right to terminate this
Agreement.
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20. NOTICES: Except as otherwise provided herein, all notices hereunder other
than Accounting Statements must be in writing and given by personal delivery,
regular mail or telegraph (prepaid), at the addresses set forth in the heading
of this Agreement to the attention of the Vice President, Negotiations, or such
other address or addresses as may be designated by the other party. Notices
shall be deemed given when mailed or delivered to a telegraph office, except
that notice of change of address shall be effective only from the date of its
receipt. A copy of any notice to CBS/FOX shall be sent to CBS/FOX Video, a
division of The CBS/FOX Company, 1330 Avenue of the Americas, New York, New York
10019, Attention: Senior Vice President and General Counsel.
21. ASSIGNMENT AND SUBLICENSING: In the event CBS/FOX is dissolved, CBS/FOX
shall have the unrestricted right to assign or sublicense this Agreement, all or
in part, to any party, including without limitation, to its subsidiaries or
affiliates, to Twentieth Century Fox Film Corporation ("Fox") and/or CBS Inc.
("CBS") or their respective subsidiaries, affiliates or divisions, or to any
successor entity or other party acquiring all or substantially all of the
business or assets of CBS/FOX, Fox or CBS or into which any of the foregoing are
merged or consolidated. CBS/FOX acknowledges and agrees that following Delivery,
Grantor may assign this Agreement to its subsidiaries, affiliates or divisions
or to any successor entity or other party acquiring all or substantially all of
the business or assets of Grantor; provided, however, Grantor shall give CBS/FOX
prior written notice of any such assignment.
22. APPLICABLE LAW, CHOICE OF FORUM AND SERVICE OF PROCESS: This agreement has
been entered in the State of New York, and its validity, interpretation and
effect shall be governed by the laws of the State of New York applicable to
contracts executed and performed wholly therein. Any claim or controversy
arising out of or relating to this Agreement shall be adjudicated in a court of
competent jurisdiction in the City and County of New York, New York, and the
parties hereby consent to the jurisdiction of such courts. Service of process in
any action or proceeding arising out of or relating to this Agreement shall be
deemed sufficient if given by registered or certified mail, pre-paid, at the
addresses set forth in the heading of this Agreement, or such other address or
addresses as may be designated by the other party. Service upon the Secretary of
State of New York shall be accepted irrevocably as a valid service upon Grantor;
and that the provisions of this Paragraph shall continue in force and effect so
long as any liability remains outstanding against Grantor under this Agreement.
23. FURTHER DOCUMENTATION: Grantor shall execute or cause to be executed all
further documents including trademark license agreements, as CBS/FOX may
reasonably require to effectuate the purposes and intents of this Agreement.
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24. OBJECTIONS: In any instance where a party has reasonable approval rights
such approval rights must be exercised in writing, and must be sent so as to be
received by the other party within ten (10) days from the date that such
approval is first requested in writing. Any written notice denying a request for
approval shall set forth the specific reasons therefor.
25. NO PARTNERSHIP OR JOINT VENTURE: Nothing herein contained shall in any way
create any association, partnership, joint venture, or the relation of principal
and agent between the parties hereto or be construed to evidence the intention
of the parties to constitute such. Neither of the parties hereto shall hold
itself out contrary to the terms of this provision, by advertising or otherwise.
This Agreement is not for the benefit of any third party.
26. CREDITOR-DEBTOR RELATIONSHIP: Grantor expressly acknowledges the
relationship between Grantor and CBS/FOX to be that of creditor and debtor with
respect to the payment of any monies due Grantor hereunder. Nothing contained
herein shall be construed to create a trust or specific fund as to Net Receipts
or any other monies, or to prevent or preclude CBS/FOX from commingling any
monies due Grantor with any other monies or to give Grantor a lien on Licensed
Video Recordings or an assignment of the proceeds thereof.
27. WAIVER: A waiver by either party hereto of any of the terms or conditions of
this Agreement in any instance shall not be deemed or construed to be a waiver
of such term or condition for the future, or of any subsequent breach thereof.
All remedies, rights, undertakings, obligations and agreements contained in this
Agreement shall be cumulative and none of them shall be in limitation of any
other remedy, right, undertaking, obligation or agreement of either party.
28. UNENFORCEABILITY: If any provision of this Agreement, as applied to any
party or to any circumstance, shall be adjudged in any proceeding to be void or
unenforceable, the same shall in no way affect any other provision of this
Agreement, the application of such provision in any other circumstances, or the
validity or enforceability of this Agreement.
29. ENTIRE AGREEMENT: This Agreement contains the entire understanding of the
parties hereto relating to the subject matter hereof and cannot be amended,
modified or changed except by a written instrument duly signed by authorized
officers of the parties hereto.
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By signing in the space provided below, the parties hereto have agreed to all
the terms and conditions of this Agreement.
CBS/FOX VIDEO, a division NBC SPORTS, a division of NATIONAL
of THE CBS/FOX COMPANY BROADCASTING COMPANY, INC.
By: [signature illegible] By: [signature illegible]
________________________________ ________________________________
Title: President Title: Vice President
____________________________ ____________________________
ON ICE PRODUCTIONS, INC.
By: [signature illegible]
________________________________
Title: President
____________________________
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AGREEMENT
This AGREEMENT ("Agreement") is made effective as of March 28, 1995 by and
between D&F Consulting, Ltd., a Delaware corporation ("D&F"), and On Ice Inc., a
Delaware corporation, ("Producer").
WHEREAS, Producer and D&F entered into an Agreement dated July 13, 1994,
describing the roles and responsibilities of the respective parties with regard
to the tour and telecast of the show entitled Nutcracker on Ice; and
WHEREAS, under Paragraph 17 of said Agreement, Producer granted D&F an
option to renew said Agreement on terms and conditions agreeable to both
parties; and
WHEREAS, Producer represents that it owns and has the exclusive right to,
once again, produce and manage the touring production (hereinafter "Tour") of
the show entitled Nutcracker on Ice ("Nutcracker" or "Show") which will have one
company performing in arenas in major markets ("A Company") and a second company
performing in theatres in secondary or tertiary markets domestically ("B
Company"), which the parties expect and agree will result in the attendance,
participation and awareness by the general public and customers/contacts of the
corporate sponsors, as described in Exhibit A to this Agreement; and
WHEREAS, D&F wishes to exercise its option and purchase, on behalf of its
corporate sponsors ("Sponsors"), and Producer agrees to sell, certain
promotional, sponsorship and other related rights with respect to the Tour,
subject to the terms and conditions as set forth below;
NOW THEREFORE, in consideration of the recitals set forth above and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged and intending to be bound, the parties hereby agree as
follows:
1. Producer's Duties
a. Producer will, at its own expense, organize, promote, produce, run
and perform all acts necessary to stage the Tour, including securing the talent
for such Tour.
b. Producer will arrange and secure the participation of named figure
skating stars to perform the lead roles in the A Company show. Producer shall
consult with D&F on the said stars for the Tour and agrees to secure star
skaters acceptable to D&F, but Producer reserves the right to make final
decisions on casting. Once Producer has secured the commitments of such star
skaters, no substitutions shall be permitted without the express written consent
of D&F or such act shall constitute an Event of Default under Paragraph 11 of
this Agreement. Both parties agree that the following skaters are acceptable if
Producer is able to secure them for the show: Nicole Bobek, Todd Eldredge, Todd
Sands and Jenni Meno, Robin Cousins, Michelle Kwan or Lu Chen.
c. Producer will obtain in advance all permits and licenses required to
conduct the Tour.
d. Producer will comply with any and all federal, state and local rules
and regulations governing the Tour.
e. D&F will have no obligation to perform and/or pay any sums to secure
the performance of any of the foregoing except as otherwise provided herein.
f. Producer shall perform all duties specifically listed on Exhibit A,
attached hereto and incorporated herein by this reference.
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2. Sponsorship Rights: Duties of D&F. Producer has the sole and exclusive
authority to grant, and it hereby grants to D&F, the promotional rights listed
on Exhibit A and Producer grants D&F the right to pass-through and assign such
promotional rights listed on Exhibit A to Sponsors. In consideration of the
grant of such promotional rights, D&F agrees to pay the sponsorship fee set
forth in Section 3 below and to be responsible for the specific obligations set
forth on Exhibit B which is attached hereto and incorporated herein by this
reference.
3. Sponsorship Fee. D&F agrees that it will pay the sum of Two Hundred
Thousand Dollars ($200,000) to Producer in consideration for the benefits listed
on Exhibit A. Payment will be made according to the terms, if any, listed on
Exhibit B.
4. Revenue Sharing.
a. Producer and D&F agree to share on an equal 50/50 basis any site fee
paid to host the Show that will be on the Telecast.
b. D&F shall have a 10% carrying interest for any additional net income
(after agency commissions and talent fees) derived by Producer from home video
sales in the after-market, and a 50% carrying interest for any additional net
income (after agency commissions and talent fees) derived by Producer from
international television rights, cable or network re-broadcast and network
syndication. For purposes of this Agreement, the definition of net income shall
be mutually agreed to by both parties.
c. Both parties shall provide the other party with an accounting of all
income received and expenses incurred with respect to the items stated in
Paragraph 4 herein, on a quarterly basis, so long as income is being received
for such items.
5. Term. This Agreement shall be effective for a period commencing upon
execution of this Agreement and will continue through the conclusion of the 1995
Tour, Telecast and as long as income is being derived from the Show with respect
to the items stated in Paragraph 4 herein (the "Contract Term").
6. Signage. Except as specified on Exhibit A to this Agreement, each
Sponsor secured by D&F shall provide, at its sole expense, all banners and signs
containing the Sponsor's name or logo which such Sponsor is permitted to utilize
during the Tour. Sponsor shall be responsible for cost, production and delivery
of the banners and easel board displays at the start of the Tour and the
Producer shall be responsible for making arrangements to display such banners in
the venues on the Tour (including any costs associated with it), transporting
such banners and easel boards to each city on Tour, and returning such banners
and easel boards to all Sponsors following the conclusion of the Tour. Subject
to the restrictions set forth in Sections 8 and 9 hereof, Producer shall, at its
own expense, provide all other signage, if applicable, including such signs
featuring the Sponsors' name or logos as Producer is permitted to use as
provided herein.
7. Indemnification. Producer agrees to indemnify, defend and hold D&F and
each Sponsor, its parent, its subsidiaries and the affiliates of each such
entities, as well as each officer, agent, distributor, employee, attorney,
dealer, successor and assign of any of the above, harmless from and against any
and all expenses, damages, claims, suits, losses, actions, judgements,
liabilities and costs, whatsoever (including, without limitation, attorney
fees) arising out of: (i) Producer's beach, misrepresentation or non-performance
under this Agreement; (ii) any claim or action for personal injury, death,
bodily injury, property damage or otherwise, suffered by participants,
performers, spectators or others attending each Show on Tour; or (iii) any
payment owed by Producer to persons or entities associated with the Tour.
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8. Insurance.
a. Producer agrees to carry full insurance coverage for the Tour and all
other activities reasonably connected with the Tour and this Agreement, in the
types and on the minimum amounts listed below.
Comprehensive General Liability $1,000,000 Combined Single
Including: Limit, per occurrence
- Broad Form Contractual
- Personal Injury
- Advertising Liability
- Participants and Spectators Liability
Workers' Compensation (endorsed to
cover volunteers if applicable) Statutory limits
Employers Liability $1,000,000 per occurrence
b. Other than the workers' compensation policy, each insurance policy
required hereunder shall name D&F and each of the Sponsors as an additional
insured and all policies shall contain a provision whereby the insurer(s) agrees
not to alter or cancel this coverage without at least 10 days' prior written
notice to D&F and each of the Sponsors. The Comprehensive General Liability
Policy shall have a maximum deductible of no more than $1,000 per occurrence,
with no deductible for any excess. Each such policy shall provide that neither
D&F nor the Sponsors are liable for any premium associated therewith. Producer
shall furnish D&F and each of the Sponsors with Certificates of Insurance
evidencing the above coverages within thirty (30) days of contract execution.
c. Nothing herein shall limit or prohibit D&F or any of the Sponsors
from obtaining insurance for their own account and any proceeds payable
thereunder shall be payable as provided in the underlying policy.
9. Trademark
a. Each of the Sponsors may, from time to time, grant to Producer the
right to use trademarks, trade names, service marks or logos owned by each
respective Sponsor. Producer and its affiliates and agents, if any, shall have
no interest in or right to the use of such names, marks or logos, except for any
limited right of usage which each of the Sponsors may grant in writing pursuant
to this Agreement.
b. The limited license granted hereunder is nonassignable and does not
inure to the benefit of Producer's permitted assigns and successors. In the
event Producer or any affiliate or agents attempts to transfer or assign this
limited license, such limited license shall terminate immediately without
further action from such respective Sponsor.
c. Subject to Producer's prior approval, Producer hereby grants to each
of the Sponsors a limited right to use any trademark, tradename or other name or
logo which is in the integral part of the name of the Show or Tour in each
Sponsor's advertising and promotional materials. Sponsors shall have no other
right to or interest in promotions reasonably incident thereto.
10. Prior Approval.
a. Any advertising or other material prepared by Producer which contains
any of the Sponsors' name or logo which otherwise utilizes any trademark, trade
name, service mark or logo owned by each respective Sponsor shall be provided
to such Sponsor in advance of publication for such Sponsor to
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review. All such materials must receive the written approval of each Sponsor
prior to any publication thereof, such approval not to be unreasonably withheld.
b. For this Tour D&F and Producer shall have the right to disapprove any
additional secondary sponsor or local advertiser for the Tour, if it determines,
that participation of such additional sponsor or advertiser would be detrimental
to the Title Sponsor or one of the other Sponsors of the Tour.
c. Producer shall not announce this Tour with Chrysler's title
sponsorship without the prior written approval of D&F. All announcement shall be
mutually approved by both parties.
11. Default; Remedies.
a The following events shall constitute an Event of Default ("Event of
Default") under this Agreement regardless of whether any such event shall be
voluntary or involuntary or shall result from the operation of applicable laws,
rules or regulations or shall be pursuant to or in compliance with any judgment,
decree or order of any court of competent jurisdiction:
(I) Producer shall fail to cause to be carried and maintained the
insurance required under Section 8 hereof;
(ii) Either party shall make any material misrepresentation or shall
breach any warranty made herein;
(iii) Either party shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or similar law, or shall make a general assignment for
the benefit of creditors, or shall have an involuntary case or other proceeding
instituted against it seeking similar relief; or
(iv) Either party shall otherwise fail to perform or observe any
other covenant or condition set forth herein and such failure shall continue
unremedied for a period of thirty (30) days after the receipt of written notice
thereof from the nondefaulting party.
(v) Either party should commit an act which brings its name into
disrepute, or otherwise substantially diminishes the value of the sponsorship
association for the other party.
b. Upon the occurrence of an Event of Default, and at any time
thereafter so long as the same shall be continuing, the nondefaulting party may
declare, at its option, this Agreement to be in default and: (1) may immediately
terminate this Agreement without any liability whatsoever; (2) may seek
enforcement by appropriate court action of the terms hereof and recover damages
for the breach hereof; (3) may exercise any other right or remedy available to
it under law or in equity; or (4) may seek any permitted combination of such
remedies. No remedy is intended to be exclusive, but each shall be cumulative
and the exercise of any such remedy shall not preclude the simultaneous or later
exercise of any other remedy.
12. Representations, Warranties and Covenants of Promoter. Each party
represents and warrants to the other party that: (1) the execution, delivery
and performance of this Agreement have been duly authorized by all necessary
actions; (2) this Agreement is a valid and binding obligation of each party
enforceable against it in accordance with its terms; (3) there are no pending
actions or proceedings, or threatened actions or proceedings, which if adversely
determined would impair either party's right to perform its obligations
hereunder; and (4) Producer has sole and exclusive authority to grant the
promotional rights to D&F which are the subject of this Agreement.
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13. Performance.
a. Force Majeure. In the event inclement weather or other force majeure
outside the reasonable control of Producer forces Producer to stage the Show or
Tour at another time during the year, or to close the Show or Tour, subject to
Paragraph 13.c. herein below, such a failure to hold the Show or Tour on its
originally scheduled date shall not be treated as a breach of this Agreement
provided Producer uses its best efforts to reschedule the Show or Tour as
quickly as possible and Producer bears all costs associated with the
rescheduling and repromoting of the Show or Tour.
b. Cancellation. If the Tour is canceled in its entirety during the
Contract Term for any cause whatsoever not the fault of D&F, and the Tour is not
thereafter rescheduled, or there are not a minimum of eighteen (18) performances
in seventeen (17) markets by the A Company, then D&F shall be entitled to a
pro-rated reduction in the fee paid to Producer under this Agreement based on
the number of Shows below eighteen (18) canceled as a percentage of the minimum
number of performances of eighteen (18) required by the Producer.
c. Further it is understood and agreed by Producer, that due to the
nature of each Sponsor's business, its reputation and prestige are extremely
important. Therefore, any continued use by Producer of each Sponsor's
trademarks, service marks or other identification, after termination of this
Agreement will result in irreparable harm to such Sponsors. Each Sponsor shall,
therefore, have an absolute right to an immediate injunction to enjoin the
future use of its trademarks, service marks, and other identification by
Producer, in the future promotion or advertising of the Show and Tour. Such
Sponsor shall be entitled to reasonable attorneys' fees and costs incurred by
obtaining said injunction; provided, however, that such Sponsor shall first
provide notice to Producer of such breach and allow Producer a reasonable amount
of time to cure such breach before seeking an injunction. Such Sponsor shall not
hold Producer responsible for the retrieval of promotional materials already
disseminated prior to the termination of this Agreement.
14. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors and permitted assigns.
Producer may not assign its rights or obligations under this Agreement without
D&F's prior written consent.
15. Survival. Each party's duties, obligations and responsibility for
compliance with the provisions of Sections 5, 6, 7, 8, 9, 10, 12, 14 and 15 of
this Agreement shall survive this Agreement's cancellation, termination or
expiration.
16. Independence. The parties shall at all times act independently. Nothing
contained in this Agreement shall be construed to make one party the partner,
joint venturer, principal, agent or employee of the other party hereto.
Specifically, Producer shall have no express or implied authority to act for or
on behalf of D&F or its Sponsors. Further, no officer, director, employee,
agent, affiliate or contractor retained by Producer to perform work on D&F's and
each of the Sponsor's behalf hereunder shall be deemed to be an employee, agent,
or contractor of D&F or such Sponsor. Producer is solely responsible for payment
of (1) all income, disability, withholding, and other employment taxes as well
as (2) all medical benefit premiums, vacation pay, sick pay or other fringe
benefits resulting from Producer's retention of any such officers, directors,
employees, agents, affiliates or contractors. Producer shall indemnify, defend,
and hold D&F and Sponsors harmless from any claim for any such tax or benefit
payment.
17. Renewal and Right of First Refusal.
a. Producer grants to D&F an option to renew this Agreement subject to
both parties meeting within ninety (90) days after completion of the Tour and
reaching an agreement as to the terms and conditions of such renewal, with the
understanding that D&F shall have input and approval of the star performers of
the Tour in the future as long as D&F continues to secure the title sponsor of
the Tour.
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b. Should D&F elect not to renew this Agreement, Producer grants to D&F
the right of first refusal for one year thereafter to match any competitive
offer from another party for similar rights and privileges for the next
subsequent Tour. D&F is required to exercise this right of first refusal within
ten (10) days of receipt of written notice from Producer of such competitive
offer which notice sets forth the terms and conditions of such offer.
18. Governing Law. The validity, interpretation and construction of this
Agreement, and all other matters related to this Agreement, shall be interpreted
and governed by the laws of the State of Delaware.
19. Headings. The headings herein used are for convenience purposes only
and shall not be used to construe the meaning of this Agreement in any respect.
20. Entire Agreement. This Agreement, together with the Exhibits hereto and
any extensions or renewals hereof, constitutes the parties' entire agreement
with respect to the subject matter hereof and supersedes all prior statements or
agreements, both written and oral. This Agreement may be amended only by a
writing signed by the party against which enforcement is sought.
21. Severability. If any court of competent jurisdiction finds any
provision of this Agreement to be unenforceable or invalid, then such provision
shall be ineffective to the extent of the court's finding without affecting the
enforceability or validity of this Agreement's remaining provisions.
22. Attorneys' Fees. Should either party institute or participate in a
legal or equitable proceeding against the other seeking to enforce or interpret
this Agreement, the non-prevailing party in the proceeding shall pay the
prevailing party's costs, expert and professional fees, and attorneys' fees,
including costs and fees on appeal. Said obligation of the non-prevailing party
will be deemed to accrue on the date of commencement of such proceeding.
23. Notices. Whenever notice is to be served hereunder, service shall be
made personally or by registered or certified mail, return receipt requested,
postage prepaid. Notice shall be effective only upon receipt by the party being
served, except notice shall be deemed received 72 hours after posting by the
United States Post Office, by method described above. All notices shall be sent
to the addresses described below:
To D&F:
D&F Consulting, Ltd.
5301 Wisconsin Avenue, N.W.
Suite 325
Washington, D.C. 20015
Attn: Stephen L. Disson
To Producer
On Ice, Inc.
517 North Robertson Boulevard
Suite #200
Los Angeles, California 90048
Attn: Barrie Mendelson
24. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original instrument and all of
which together shall constitute the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
D&F CONSULTING, LTD.
By: /s/ Stephen L. Disson
_______________________________
Its: President
______________________________
ON ICE, INC.
By: /s/ Barry Mendelson
_______________________________
Its: President
______________________________
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<PAGE>
[NBC LETTERHEAD]
[NBC LOGO]
May 31, 1995
D & F Consulting, Ltd.
5301 Wisconsin Ave., N.W.
Suite 325
Washington, D.C. 20015
Attention: Mr. Stephen Disson
Gentlemen:
This will confirm the agreement between NBC Sports, a division of National
Broadcasting Company, Inc. ("NBC") and D & F Consulting, Ltd. ("Rights Owner")
wherein NBC agrees to make available the 4:00-6:00PM Eastern standard time
period over the NBC Television Network on January 1, 1996 (the "Program Date")
for the telecast of the figure skating exhibition featuring many of the top
skaters in the World entitled the "Chrysler Cirrus Presents Nutcracker on Ice"
(the "Event"; the telecast of the Event is hereinafter referred to as the
"Program") on the following terms and conditions:
1. Basic Undertaking
NBC will proceed on the basis that the Program be brought to NBC as a fully sold
advertiser-supplied program. Rights Owner or its designee shall produce the
Program. Rights Owner or its designee will assume the responsibility of
obtaining the sponsors who will enter into sponsorship contracts as described
below.
Rights Owner will be fully responsible for the Program and all production
elements. The Program must conform with all usual and customary technical and
program standards of NBC.
Rights Owner hereby grants to NBC the following rebroadcast rights during the
six (6) month period following the Program beginning February 1, 1996 and
concluding July 1, 1996 (the "Rebroadcast Period"):
(i) NBC may elect to repeat the telecast of the Program (the "Replay"), at
no cost to NBC, provided NBC agrees to (a) refer to the Event as described
in the first paragraph of this Agreement, (b) only sell to advertisers in
product categories that do not conflict with those that appeared in the
initial telecast of the Program, (c) give Rights Owner ten (10) 30-second
units to sell in the Replay to advertisers approved by NBC and (d)
rebroadcast the Replay once during the Rebroadcast Period;
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[NBC LOGO]
(ii) During the Rebroadcast Period NBC SuperChannel may rebroadcast the
Program on a non-exclusive basis, at no cost to NBC or NBC SuperChannel,
provided NBC SuperChannel does not televise the Program until thirty (30)
days after the initial Program on NBC and NBC SuperChannel refers to the
Event as described in the first paragraph of this Agreement, and provided
further that all revenues received from the sale of commercial inventory in
the NBC SuperChannel rebroadcast, net of any agency sales commissions, will
be shared equally by NBC and Rights Owner. NBC and Rights Owner shall each
sell such inventory, it being understood that NBC shall not sell to any
advertiser in an advertising category that conflicts with a sponsor of the
Program; and
(iii) NBC shall incorporate highlights from the Program in NBC inflight
programming known as Skybox, provided NBC refers to the highlights using
the Event title set forth in the first paragraph of this Agreement.
lb. Production Services
Rights Owner shall provide a fully edited one inch format videotape (Track #1
shall be the mix track; Track #2 shall be international sound and music; and
Track #3 shall be the time code) of the Program. The coverage must meet network
"broadcast quality" technical standards and NBC's production requirements,
including without limitation audio, video, slo-motion, and other video
electronic visual effects. Rights Owner shall use infinite graphics and be fully
responsible for the composite of the Program. Rights Owner agrees to reimburse
NBC if the composite session is held at NBC's production facilities.
The videotape shall be 120 minutes in length after inclusion of all network
commercials, station breaks, network indentifications, up to three (3) minutes
and twenty-five (25) seconds for an NBC Sports Update segment, and any network
promotional or advertiser billboard material which may be included.
The tape shall be delivered to NBC, in acceptable form, in time for broadcast.
If, due to time constraints, it becomes necessary to transmit the Program via
satellite or ground lines to NBC headquarters in New York, Rights Owner will be
responsible for all costs associated with such transmission.
2. Time Sale
As payment for the Program, and the forty (40) 30-second commercial units
contained therein (the "Units"), Rights Owner hereby agrees to pay NBC in
the amount of Four Hundred Thirty Thousand Dollars ($430,000) net of agency
commission (the "Time Charge Amount"). The Time Charge Amount shall be paid to
NBC no later than thirty (30) days after the Program.
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[NBC LOGO]
Time Charge Amount shall be paid by wire transfer to NBC as follows:
Bank: Chase Manhattan Bank
ABA: 021000021
Address: 4 Metrotech Center
Brooklyn, NY 11245
Account Number: 038-1063114
Name: National Broadcasting Company, Inc.
Bank Contact: Luz Rodriguez
Telephone: 718-242-8244
Rights Owner shall specify on the wire transfer that it is in connection with
the Program.
In addition, if not timely paid by each advertiser, Rights Owner shall pay to
NBC the Integrated Networking Charges referred to in Section 6 herein within ten
(10) days of notice by NBC that funds are due. Said notice shall not be given
prior to thirty (30) days after a Program Date.
To insure that NBC is fully paid, Rights Owner shall cause to have issued, at
least sixty (60) days prior to the Program Date (i.e., by November 1, 1995), a
stand-by irrevocable Letter of Credit naming NBC as the beneficiary in an amount
equal to the Time Charge Amount. The Letter of Credit shall be effective for at
least (90) days after the Program Date, and shall contain language acceptable to
NBC that will enable NBC to draw on it if either (i) Rights Owner fails to remit
payment to NBC as described in this Section 2, or (ii) if Rights Owner fails to
deliver the Program for broadcast or the alternate programming as described in
Section 7 herein. Alternatively, Rights Owner may, in lieu of issuing a Letter
of Credit, pay the full sum of the Time Charge Amount to NBC in two (2) equal
installments of $215,000 each, the first of which shall be paid to NBC no later
than November 1, 1995 and the second of which shall be paid to NBC no later than
December 23, 1995. If Rights Owner fails to meet its obligations under this
Section 2, NBC shall not be required to make available the time period described
in the preamble of this Agreement, and reserves all other available remedies.
3. Advertiser Compliance
Since the Program will fall within the classification of a so-called
advertiser-supplied program, Rights Owner or its designee agrees to use good
faith efforts to cause each advertiser to enter a binding agreement with Rights
Owner or its designee that requires such advertiser to abide by the rules and
satisfy the obligations set forth in Sections 7, 27, 30, 32, 33 and 35 of NBC's
standard Participating Sponsorship Agreement attached hereto as Exhibit A.
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[NBC LOGO]
In addition, Rights Owner or its designee shall submit to NBC's Department of
Broadcast Standards the names and addresses of each advertiser, and the number
of Units purchased by such advertiser as well as a copy of the commercial
advertisement and any billboard material or other form of in-Program exposure to
be made available to an advertiser by Rights Owner or its designee, at the
earliest opportunity, but no later than fifteen (15) days prior to the air date
of the Program or as soon thereafter as possible. Rights Owner or its designee
must specifically identify any commercial announcement which include appearances
of any of the participants in the Program. NBC's Department of Broadcast
Standards reserves the right, not to be unreasonably exercised, to reject any
commercial advertisement that does not satisfy NBC policy. NBC agrees to notify
Rights Owner of any rejected commercial promptly after its submission.
4. Station Breaks and Advertiser Commercial Time
The one hundred twenty (120) minute telecast will contain the following
commercial elements and station breaks:
20 network commercial minutes.
2 21-second NI promo/94-second internal station break.
1 21-second NI promo/64-second terminal station break.
1 unit within each sponsored Update insert (at NBC's discretion, to be
sold, and revenue retained, by NBC, provided the advertiser is
approved by Rights Owner, such approval not to be unreasonably
withheld).
Rights Owner may vary the lengths of the commercial positions to create 60, 90
and 120 second commercial positions provided the total amount of commercial time
does not exceed 5 minutes for the half hour. It will be Rights Owner's
responsibility to allocate the advertisers' commercials within the above format.
5. Commercial Billboards
Any advertiser sponsoring 90 seconds or more in the Program will be entitled to
a 5-second billboard. It is understood that there will be two (2) sets of
billboards during the telecast, and in no event may the open billboards or
closing billboards exceed 20 seconds (total 40 seconds).
6. Integrated Networking Charge
Each advertiser will be responsible to NBC for an Integrated Networking charge
of $250 gross for each commercial insertion.
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[NBC LOGO]
7. Cancellation of Event
If the Event is delayed or cancelled for any reason, Rights Owner will be
required to make available alternate programming, approved by NBC, such approval
not to be unreasonably withheld, on a commercial basis to fill the time period
of the delayed or cancelled telecast. In the event Rights Owner is unable to
provide acceptable alternate programming, NBC will endeavor to find replacement
programming, in which case Rights Owner will be liable to NBC for the difference
between the Time Charge Amount and the amount NBC receives for the time period
specified in the first paragraph of this Agreement, it being understood and
agreed that if NBC is unable to sell the time period Rights Owner will be
responsible for the payment of the full Time Charge Amount.
8. Compliance and Practices
Rights Owner shall be obligated, at no additional cost to NBC, to comply with
the requirements of NBC's Department of Broadcast Standards. The Department
shall have the approval of the title of the Program. The title set forth in the
preamble is deemed acceptable to NBC. Rights Owner further agrees to execute the
Sports Program Disclosure Letter and associated forms, attached hereto, as a
condition precedent to NBC's obligation to make available the time period
specified in the first paragraph of this agreement. Rights Owner, in addition,
shall supply to NBC's Department of Broadcast Standards, at the earliest
possible opportunity, the complete rules, if any, for the conduct of any
competition contained in the Program (including tie-breaking procedures); full
disclosure of all prize monies available to Event participants and whether or
not guaranteed appearance fees were promised, if any; identification of any
scheduled commercial announcements which include appearances of any of the
participants in the Event; and an explanation of any and all forms of in-program
exposure to be made available to commercial sponsors by Rights Owner. NBC's
Department of Broadcast Standards reserves the right to reject such in-program
exposure including signage if it violates NBC Broadcast Standards. Without
limiting the generality of the foregoing provisions, Rights Owner specifically
acknowledges that any and all arrangements involving or contemplating receipt of
production assistance in any form whatsoever, from personnel at the Event site
in connection with the coverage of the Event, shall be subject to the prior
approval of NBC's Department of Broadcast Standards.
9. Announcers and Production Personnel
NBC shall furnish, at its expense, the on-air talent and a
coordinator, who will insure that the calibre of production meets NBC's
standards. NBC may designate representatives to act in consulting capacities,
and they may, at NBC's option, be in attendance through all phases of coverage
and editing.
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[NBC LOGO]
No such consultation or attendance of NBC personnel shall relieve Rights Owner
of total responsibility for coverage and satisfactory completion of the finished
product according to NBC's telecast requirements.
NBC shall use its best efforts to cause the NBC talent assigned to the Event to
meet with the Program producer prior to the Event, at Rights Owner's cost.
10. Warranty and Indemnity
Rights Owner warrants and represents that it has the right to enter into and to
make these arrangements with NBC, and has obtained an agreement from each
participant in the Event to appear on NBC, and to grant NBC the rights granted
herein. Rights Owner further represents and warrants that it or its advertisers
have obtained all necessary rights for the performance and use of all the
commercial announcements including the talent, music and other material
incorporated therein and billboards (the above shall hereinafter be collectively
referred to as the "Advertising Material"). NBC warrants and represents that it
has the right to enter into and to make these arrangements with Rights Owner.
Rights Owner will defend and indemnify NBC, the stations over which the Program
is carried and their respective officers, directors, and employees against any
claims, actions, judgments, liabilities, damages and losses (including
reasonable attorney's fees) arising out of wholly or in part (i) the licensed
use of the elements furnished by Rights Owner including all elements of the
Program and all Advertising Material, (ii) the exercise of rights granted to NBC
herein, and (iii) the breach of any of the representations, warranties or
agreements made by Rights owner herein and NBC will so defend and indemnify
(including reasonable attorney's fees) Rights Owner as to representations,
warranties and agreements of, and the elements furnished by NBC. For purposes of
these indemnities, either indemnifying party may use counsel of its own choice.
The indemnifying party shall control the defense and settlement of such claims.
The indemnified party shall promptly inform the indemnifying party of any claim
upon its being made, and shall cooperate in the defense or settlement of such
claim.
11. Rights to Subsequent Events
The parties hereby agree that the Time Charge Amount for the program featuring
the next Event (the "1997 Program"), if Rights Owner elects to televise the
Event, the following year will be $450,000 for a two-hour time period and the
forty (40) units contained herein. During the period beginning with the
conclusion of the 1997 Program and ending four (4) months thereafter, the
parties hereto shall discuss in good faith the terms and conditions for the
television exhibition rights to the next
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[NBC LOGO]
Event. If the parties agree upon such terms and conditions, similar discussions
shall take place at comparable times for the television exhibition rights to the
subsequent Event.
If the parties do not reach agreement regarding such subsequent Event, Rights
Owner shall not enter into an agreement with any third party on terms that are
more favorable than those last offered by NBC without first affording NBC an
opportunity to match all such terms that can be reduced to a determinable amount
of money. NBC shall have five (5) business days after notice of such terms by
which to accept or reject the same. If NBC rejects said offer or fails to accept
the same within the time above specified, then and then only shall Rights Owner
be free to reach agreement with such third party on such terms. If Rights Owner
does not accept such offer, the terms hereof shall apply to any subsequent offer
received by or made by Rights Owner.
Rights Owner shall not accept, and NBC shall not be required to meet the
provisions of, any such offer unless it has been reduced to writing, signed by
the offeror, and delivered to NBC with Rights Owner's written advice to NBC as
provided above, together with Rights Owner's written acknowledgement of
willingness to accept same. NBC's failure to accept shall not constitute a
waiver for the first refusal with respect to subsequent offers.
12. General
All material furnished in connection with the above telecast must comply with
NBC's customary technical, programming and broadcast standards, policies and
requirements.
It is understood and agreed that due to exigencies, world events, or other
conditions beyond NBC's control, NBC may interrupt the telecast of the Program.
In such case, the "Time Charge Amount" shall be reduced by an amount equal to
the Time Charge Amount divided by forty (40) multiplied by the difference of
forty (40) minus the number of Units actually included in the telecast (e.g.,
$430,000 - ($430,000/40 X [40-38] = $408,500).
The parties further understand and agree that NBC may incorporate into the
Program an NBC Sports Update segment (the "Segment") of up to three (3) minutes
and twenty-five (25) seconds in length during the Program, which may contain,
subject to Rights Owners' prior approval, not to be unreasonably withheld, a
commercial unit inside the Update segment.
Rights Owner agrees that NBC shall have the right to display at the Event,
within view of cameras or otherwise, certain NBC banners in such locations as
are reasonably selected by NBC and approved by Rights Owner not to be
unreasonably withheld; and NBC agrees that advertisers of the Program and Event
shall have the right to display at the Event, within view of cameras or
otherwise, advertiser banners on the dasherboards at ice level which are
appropriate for such Event.
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[NBC LOGO]
This is the entire agreement between the parties which is to be interpreted
under the laws of the State of New York, excluding all principles of referral to
laws of other jurisdictions which might otherwise be applicable under doctrines
of conflicts of laws.
Please indicate your acceptance and agreement by September in the space
indicated below.
Very truly yours,
NBC Sports, a Division of
NATIONAL BROADCASTING COMPANY, INC.
By /s/ GARY ZINK
--------------------------------------
Name: Gary Zink
Title: VP
ACCEPTED AND AGREED:
D & F CONSULTING, Ltd.
By /s/ STEPHEN L. DISSON
-----------------------------------
Name: Stephen L. Disson
Title: President
<PAGE>
<PAGE>
AGREEMENT
This agreement (hereinafter referred to as "Agreement") is made and entered
into this 15 day of Sept, 1995, between On Ice, Inc. (hereinafter referred to as
"On Ice") and P.S./StarGames (hereinafter referred to as "StarGames"), for the
purpose of entering into a joint venture (hereinafter referred to as "Venture")
to produce up to five (5) figure skating shows with a fairy tale theme to be
distributed on videotape, television, CD ROM and any and all other forms of
media.
WITNESSETH
WHEREAS, the parties wish to form this Venture; and
WHEREAS, StarGames and On Ice wish to produce up to five (5) figure skating
shows with a fairy tale theme for videotape, CD ROM, television and other forms
of media (hereinafter referred to as "Product(s)") for public distribution; and
NOW THEREFORE, in consideration of the mutual promises listed below and
intending to be legally bound, the parties agree as follows:
1. TERM OF AGREEMENT.
This Agreement shall remain in full force and effect from the day on which
it is executed until terminated in accordance with the terms and conditions
hereof, or extended as set forth hereinbelow.
2. DUTIES/CONSIDERATION.
The parties agree that they shall perform the following duties in
conjunction with the Agreement:
a. If necessary, each party agrees to advance the Venture Twenty-Five
Thousand U.S. Dollars ($25,000) for a total of Fifty-Thousand Dollars ($50,000)
for pre-production costs relating to the production of the Products, with any
additional pre-production costs to be mutually agreed upon by the parties and
shared equally;
b. All budget, creative and exploitative decisions for this Venture,
including the fairy tales and performances used, will be jointly agreed upon and
approved by On Ice and StarGames, with the budget to be managed and administered
by On Ice. Further, the parties agree that any expenses that were not included
in the original or mutually agreed upon amended budget must be approved by both
parties before being incurred;
1
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c. On Ice shall act as Producer and Line Producer for the Products,
with both parties acting as co-Executive Producers;
d. The party confirming a sponsorship agreement for the Products shall
be paid a fifteen percent (15%) commission on the gross amount paid from such
sponsorship agreements. Such commissions shall be paid as the sponsorship monies
are received. The sale of video, television or other media distribution rights
shall not be considered a sponsorship agreement;
e. The parties agree that subject to paragraph three (3) herein, the
Venture will be paid a producer's fee of Thirty-Five Thousand Dollars ($35,000)
for videotapes and television shows. In this connection, the parties agree that
On Ice shall retain two and one-half (2.5) times the amount that StarGames
receives from said producer's fee no matter the amount. For example, with a
Thirty-Five Thousand Dollar ($35,000) producer's fee, On Ice would retain
Twenty-Five Thousand Dollars ($25,000) and StarGames would retain Ten Thousand
Dollars ($10,000). Thereafter, StarGames shall retain all of the profits and/or
royalties from each Product until such time as the total amount StarGames
receives including the up-front producer's fee equals the amount retained by On
Ice. Thereafter, the Profits and/or royalties shall be split on an equal basis
between StarGames and On Ice.
f. Profits shall be defined as all gross revenues generated from the
production of the Products minus approved expenses including sponsor
commissions. The parties shall split equally the profits after the fees set
forth in sub-paragraph 3(d) and sub-paragraph 3(e) have been paid;
g. On Ice and StarGames will jointly own the copyright in perpetuity
to any Products produced;
h. On Ice and StarGames will jointly own the copyright in perpetuity
of any original music used in the Tapes;
i. Unless otherwise agreed upon, Nancy Kerrigan shall star in each
production of the Products. In this connection, the parties agree to enter into
an agreement with Nancy Kerrigan for her services;
j. The parties shall equally own all materials and property that are
used in all the productions including, but not limited to, sets, props,
costumes, etc.;
k. The parties agree that StarGames and On Ice shall receive a minimum
of opening and closing and/or a mutually agreed upon number of credits and
mentions in each Product;
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l. The parties will make their best efforts to select a name for the
Venture at their earliest convenience.
3. THIRD PARTIES.
Notwithstanding anything else contained herein, it is the intent of the
parties to have the Venture enter into third party agreements for distribution
of the Products. In this connection, the parties agree and acknowledge that the
terms of this Agreement may be changed and become subject to said third party
agreements from time to time. Any terms of a third party agreement that effect
this Agreement must be mutually acceptable to both StarGames and On Ice,
including the terms that are modified or changed herein.
4. EXCLUSIVITY.
The parties agree that their involvement in the production of Products as
defined herein shall be exclusive with respect to fairy tale themes, and that
neither party will, for a period of three (3) years following the production of
the last videotape as contemplated herein, produce or in any way be involved in
any similar product utilizing a fairy tale theme. Notwithstanding the above, the
parties acknowledge that StarGames has entered into an agreement with the
William Morris Agency to produce a figure skating show starring Nancy Kerrigan
and Oksana Baiul and that said agreement and any production resulting therefrom
shall not be considered a breach of this agreement. Further, the parties
acknowledge that StarGames owns and operates an annual figure skating event with
a Halloween theme called "Halloween on Ice" with Nancy Kerrigan and that said
annual event will not be considered a breach of this Agreement. Lastly, the
parties acknowledge that On Ice owns and operates a series of events or tour
known as "Nutcracker on Ice". Said events or tour shall not be considered a
breach of this Agreement.
4. ASSIGNABILITY.
Neither On Ice nor StarGames shall have the right to sell, exchange, assign
or transfer any of its rights, duties or obligations under this Agreement, in
whole or in part, to any person and/or entity, unless specifically agreed upon
in writing.
5. NOTICES.
All notices, statements, consents, approvals, documents and other
communications to be given hereunder shall be in writing and given by one party
to the other either by personal delivery, by certified mail, or by telegram and
shall be addressed as follows:
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If to StarGames:
Jerry Solomon
1101 Wilson Blvd.
Suite 1800
Arlington, Va. 22209
If to On Ice:
Barry Mendelson
On Ice, Inc.
517 N. Robertson Blvd.
Suite 200
Los Angeles, Ca 90048
or at such other addresses as a party may specify from time to time. Notice
given by personal delivery, certified mail, or telegram shall be deemed given
upon the date of personal delivery, mailing or delivery of such telegram to a
telegraph office, charges prepaid, as applicable.
6. ENTIRE AGREEMENT.
This Agreement constitutes the entire understanding between StarGames and
On Ice and cannot be altered or modified except by an agreement in writing
signed by the parties. Upon its execution, this Agreement shall supersede all
prior negotiations, understandings and agreements, whether written or oral, and
such prior agreements shall thereupon be null and void and without further
legal effect.
7. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of California.
Any suit or action arising out of breach of this Agreement shall be filed in a
court of competent jurisdiction in Los Angeles, California. The parties hereby
consent to the personal jurisdiction of said court.
8. ARBITRATION.
Any disputes arising out of this Agreement shall be submitted for binding
arbitration under the Rules of the American Arbitration Association, with the
agreed-to venue in the American Arbitration Association office in Los Angeles,
California. Judgment on the arbitrator's award may be taken in U.S. District
Court or any other court having jurisdiction over the non-prevailing party.
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9. RIGHT TO CONTRACT.
Each party hereto represents to the other that it is authorized to enter
into this Agreement and provide the services to be provided hereunder and the
exercise of the rights granted to the other party hereunder will not conflict
with any commitments or agreements previously entered into between the
representing party and any other party.
10. INDEMNIFICATION.
On Ice agrees to protect, indemnify, and save harmless StarGames from and
against any and all expenses, damages, claims, lawsuits, actions, judgments, and
costs whatsoever, including reasonable attorney's fees, arising out of, or in
any way connected with any claim or action arising out of or caused by any
actions of On Ice, unless such claims arise from the gross negligence or wanton
and willful acts of StarGames. StarGames agrees to protect, indemnify, and save
harmless On Ice from and against any and all expenses, damages, claims,
lawsuits, actions, judgments, and costs whatsoever, including reasonable
attorney's fees, arising out of, or in any way connected with any claim or
action arising out of or caused by any actions of StarGames, unless such claims
arise from the gross negligence or wanton and willful acts of On Ice.
11. ATTORNEY'S FEES
In the event of a dispute arising out of this Agreement which results in
legal action, the prevailing party in that action shall be entitled to recover
its attorneys' fees and costs.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
[signature illegible]
- - ---------------------------------
P.S./StarGames
Exec V.P. 9/13/95
- - --------------------------------- ----------------------------------
Title Date
/s/ Barry Mendelson
- - ---------------------------------
On Ice Inc.
President 9/14/95
- - --------------------------------- ----------------------------------
Title Date
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CAPITAL CITIES/ABC VIDEO PUBLISHING, INC.
1200 HIGH RIDGE ROAD, STAMFORD, CT 06905
[ABC VIDEO LOGO]
JON R. PEISINGER TEL: (203) 329-6400
PRESIDENT FAX: (203) 329-6464
November 10, 1995
Mr. Barry Mendelson
Mr. Jerry Solomon
FTI, Inc.
c/o StarGames
1101 Wilson Boulevard
Suite 1800
Arlington, VA 22209
Dear Barry and Jerry:
This will confirm the agreement ("Agreement") entered into by and between
CAPITAL CITIES/ABC VIDEO PUBLISHING, INC. ("ABCVP") located at 1200 High Ridge
Road, Stamford, Connecticut 06907, and FTI, Inc. ("FTI") located at 1101 Wilson
Boulevard, Suite 1800, Arlington, VA 22209, for the production, manufacture and
distribution by ABCVP of five (5) live action "Fairy Tales on Ice" programs, as
defined below (each such program is herein referred to as a "Program" and all
five generally referred to as "Programs"). This Agreement shall have a term (the
"Term") beginning on the date the Agreement is signed, and ending when all
parties have performed all of their obligations hereunder. The parties agree as
follows:
1. GRANT: FTI hereby grants to ABCVP the exclusive rights (as specified in
Paragraph 7 hereof) to manufacture, vend, rent, sell, advertise, license,
lease, market, promote, exploit, publicize and otherwise distribute
(collectively "Distribute") the Programs in all media in perpetuity and
ABCVP shall use best efforts to Distribute the Programs. The terms of such
grant are set forth herein below.
2. TERRITORY: The Territory of the grant herein includes the following
geographical area: the universe.
3. PROGRAMS: FTI shall produce and deliver to ABCVP five (5) Programs in
accordance with the terms and delivery requirements set forth below. Each
Program shall be a thematic ice skating video based upon a classic story
for children (such as "Cinderella," "Alice Through the Looking Glass,"
"Snow White," and "Thumbelina"), and approximately sixty (60) to ninety
(90) minutes in length. No fewer than three (3) of the five (5) Programs
shall star Nancy Kerrigan; and FTI hereby represents and warrants that it
has entered into a binding agreement with Nancy Kerrigan, obligating her to
provide all services reasonably necessary and desirable to effectuate the
purposes of this Agreement. The lead actor or actress in each Program not
featuring Nancy Kerrigan shall be mutually agreed upon in good faith
between ABCVP and FTI. The content and title of each
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Program shall be mutually agreed upon in good faith between ABCVP and FTI.
In addition, each Program shall be narrated by a prominent celebrity such
as Diana Ross, Meryl Streep, Jessica Lange or someone of similar stature
and reputation (the "Celebrity Narrator"). Compensation paid to the
Celebrity Narrator shall be subject to the mutual agreement and approval of
ABCVP and FTI as a Program budget item. In the event that FTI and ABCVP
have mutually agreed to pay a royalty to the Celebrity Narrator, all fees
paid to the Celebrity Narrator shall be deemed an advance against such
royalty.
4. PROGRAM BUDGETS: Commencing on the date hereof, ABCVP agrees to fund
production of the five (5) Programs, subject to the delivery requirements
set forth below, with the content, script, casting, director, production
schedules, and production budgets to be mutually agreed upon and approved
in good faith between ABCVP and FTI, such approval not to be unreasonably
withheld. ABCVP shall pay all production costs pursuant to the approved
budget, not to exceed Two Hundred and Fifty Thousand Dollars ($250,000) per
Program, provided however that this budget cap shall increase four percent
(4%) at the end of each year of the term of the Agreement. The approved
budget for each Program shall include a producing services fee to FTI in
the amount of Thirty Five Thousand Dollars ($35,000), which has been
pre-approved by ABCVP. In addition, the approved budget for each Program
shall include a producing and performance services fee to Ms. Kerrigan or
the other lead actor or actress agreed upon by the parties hereunder in the
amount of Thirty Five Thousand Dollars ($35,000), which has been
pre-approved by ABCVP. ABCVP shall fund only those costs identified in the
approved budget. All overages (defined as costs incurred during production
in excess of the approved budget) not approved in writing in advance by
ABCVP shall be the obligation solely of FTI. Production costs pursuant to
the approved budget shall be advanced by ABCVP: one fourth (1/4) 180 days
prior to the commencement of principal photography, subject to agreement
upon content, script and principal cast, by ABCVP and FTI; one fourth (1/4)
upon the commencement of principal photography; one fourth (1/4) upon
completion of principal photography; and one fourth (1/4) upon delivery of
the applicable Program an accordance with the terms set forth below,
provided however that all production costs advanced by ABCVP in connection
with each Program not delivered by FTI shall be refunded by FTI to ABCVP
upon demand.
5. DELIVERY: FTI agrees to make delivery of the Programs to ABCVP in
accordance with the Delivery Requirements attached hereto as Exhibit "A"
and as follows: the first two (2) Programs shall be delivered to ABCVP no
later than May 1, 1996; the third and fourth Programs shall be delivered to
ABCVP no later than May 1, 1997; the fifth Program shall be delivered to
ABCVP no later than May 1, 1998. FTI shall obtain copyright registration of
each new title in the name of FTI, Inc., with all rights hereunder assigned
in perpetuity to ABCVP or its designee. It is expressly agreed that
delivery of the Programs to ABCVP will not be complete unless and until
appropriate documents showing insurance and the chain of title and clear
ownership of the Programs by FTI have been both delivered to ABCVP and
approved in writing by ABCVP's attorneys (such approval not to be
unreasonably withheld).
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6. PROMOTION: FTI hereby represents and warrants that Ms. Kerrigan has agreed
to provide exclusive services for no fewer than seven (7) consecutive or
nonconsecutive days of publicity and promotion (not including travel days)
for each Program featuring Ms. Kerrigan at times to be selected by ABCVP
subject to Ms. Kerrigan's prior bona fide professional and personal
commitments and reasonable notice by ABCVP. In connection therewith, Ms.
Kerrigan shall cooperate with ABCVP and be actively involved in the
promotion of each Program, including but not limited to giving interviews
to the press and conducting in store and other public appearances. ABCVP
agrees to fund pre-approved costs and expenses of Ms. Kerrigan (i.e., only
those costs and expenses incurred personally by Ms. Kerrigan and no other
person) incurred in connection with promotion of the Programs and provide
and fund the cost of providing security for Ms. Kerrigan at each promotion
location as distribution expenses, as defined herein and in the General
Terms attached hereto. FTI shall have the right to approve in advance, such
approval not to be unreasonably withheld, ABCVP's use of Ms. Kerrigan's
name or likeness in promotion and Distribution of the Programs, provided
however that once given, such right of approval shall be deemed satisfied
for all subsequent similar uses by ABCVP. It is understood by the parties
that Ms. Kerrigan's efforts to publicize and promote the Programs and
ABCVP's use of Ms. Kerrigan's name or likeness in promotion and
Distribution of the Programs is an essential and material term of this
Agreement. Nothing contained herein shall grant to ABCVP or any other third
party or entity the right to use Ms. Kerrigan's name, photograph, likeness,
facsimile thereof or endorsement for purposes of endorsing, either
expressly or by implication, any product, company and/or service, except
for the Program(s). In connection with the promotion, ABCVP shall provide
FTI with thirty (30) complimentary copies of each Program.
7. RIGHTS AND EXCLUSIVITY: It is expressly understood and agreed that ABCVP
shall own, exclusively and forever, throughout the universe, the following
motion picture and allied rights in all languages in the Programs: all
Motion Picture rights, all Television Motion Picture rights (including,
without limitation, Live Television Rights), all Radio Rights, all
Legitimate Stage Rights, all home video rights, and all allied and
subsidiary rights, including, without limitation, music publishing rights,
Soundtrack Album Rights, Merchandising Rights, and promotional and
advertising rights including, without limitation, the right to broadcast,
over radio, television and all other media, advertisements with respect to
the Programs hereunder. The rights herein granted include the right to
distribute, transmit, exhibit, broadcast, and otherwise exploit all
Programs by means of any and all media and devices whether now known or
hereafter devised, including, without limitation, video cassettes and
discs, interactive media and any and all computer driven optical or other
non-linear media, and in any and all markets whatsoever. ABCVP agrees to
consult with FTI regarding all exploitation and Distribution of the
Programs hereunder. FTI expressly represents, warrants and agrees that FTI
has not prior to the date hereof and will not hereafter make any grant to
any third party which would or might in any way limit or infringe upon the
exclusive rights granted to ABCVP hereunder. Additionally, with respect to
each country of the Territory, FTI agrees that it will not authorize or
allow any distribution, broadcast or telecast of the Programs or any
portion thereof within such country, whether such broadcast or telecast
shall be by "over-the-air," means or by means of cable or other "closed
circuit" techniques or by any other means whether now known or hereafter
invented. ABCVP represents, warrants and agrees that during the period
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commencing upon execution of this Agreement and ending upon delivery by FTI
of the fifth Program, ABCVP shad not enter into any agreement with a third
party to produce a thematic ice skating video based upon a classic story
for children without first negotiating in good faith with FTI regarding the
production of such video.
8. SUBSEQUENT PROGRAMS: In addition to those rights specified above, ABCVP
shall have the first opportunity to fund and acquire the rights specified
herein relating to any Program(s) produced or developed for production by
FTI in addition to the five (5) Programs contemplated hereunder under terms
to be negotiated in good faith, provided however that in the event no
agreement is reached within thirty (30) business days after commencement of
negotiations, FTI may enter into negotiations relating to such rights with
third parties. If FTI is prepared to accept a bona fide offer from a third
party with respect to all or part of such rights, then in each such
instance FTI shall notify ABCVP of such offer which FTI is prepared to
accept and the name of the third party who mare the offer, and FTI shall
offer ABCVP the right to enter into an agreement with FTI with respect to
all or part of such rights on the aforesaid terms and conditions. ABCVP
shall have twenty one (21) days from the date of such offer to notify FTI
of its acceptance of such offer (provided, however, that ABCVP shall not be
required to meet any terms or conditions which cannot be as easily met by
one person as another, including, without limitation, the employment of a
specified person, etc.) If ABCVP shall acquire from FTI all or part of such
rights, then FTI agrees to enter into appropriate written agreements with
ABCVP covering said acquisition. If ABCVP shall elect not to purchase the
such rights from FTI then FTI may dispose of such rights, but only to the
aforesaid third party and only upon the terms and conditions specified in
the aforesaid written notice given by FTI to ABCVP, it being understood and
agreed that FTI may not dispose of said such rights either to: (a) any
other proposed transferee; or (b) upon terms and conditions which are more
favorable to any transferee than the terms and conditions previously
offered to ABCVP hereunder, without again offering to enter into an
agreement with ABCVP on: (i) the terms offered to such other transferee; or
(ii) such more favorable terms and conditions offered to said proposed
transferee, whichever of (a) or (b) shall apply.
9. OWNERSHIP: FTI will own the copyright for all Programs.
10. CROSS-COLLATERALIZATION: For the purposes of determining the Contingent
Compensation due FTI pursuant to Paragraph 11 hereof, all five (5) Programs
shall be cross-collateralized.
11. CONTINGENT COMPENSATION: In consideration of all rights granted by FTI
hereunder, and upon condition that FTI is not in default of any of its
obligations hereunder, ABCVP agrees to pay FTI a sum equal to fifty percent
(50%) of one hundred percent (100%) of the Net Proceeds, if any, derived
from the exploitation of the rights granted hereunder. FTI shall be solely
responsible for any and all third party participations and all monies
payable to third parties, contingent or otherwise, including payments
necessary for music clearances, if any, with respect to the Programs. Net
Proceeds shall be defined, accounted for and distributed in accordance with
the definition in the General Terms attached hereto. Notwithstanding such
definition, in determining Net Proceeds the parties have agreed that ABCVP
shall be entitled to recoup, in the following order: a
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distribution fee (the "Distribution Fee") equal to twenty percent (20%) of
gross receipts derived from the Programs; all distribution expenses; all
production costs and interest thereon at the rate of prime, plus one
percentage point, and, if applicable, royalties to be paid to the Celebrity
Narrator in excess of advanced funds. In addition, FTI shall be entitled to
receive a sponsorship fee equal to fifteen percent (15%) of gross receipts
received by ABCVP from the sponsor for all sponsorship agreements relating
to the Programs that are initiated solely by FTI and established and
serviced by FTI. In addition, FTI expressly represents, warrants and agrees
that it shall not enter into or attempt to enter into any agreements with
any third party relating to that third party's participation in the
proceeds of any of the Programs without ABCVP's prior, written approval.
12. CREDITS: FTI shall be fully responsible for providing all screen credits on
the Programs pursuant to the requirements of the applicable guild or union
agreements and production agreements. All other credits shall be subject to
the mutual agreement of FTI and ABCVP, provided however that: FTI's
producer credit shall be given in the name of "StarGames" and "On Ice,
Inc."; ABCVP shall be given an "in association with" credit and shall
designate two executive producer credits; FTI's and ABCVP's credits both
shall appear on the back of each Program videocassette jacket; and each
party shall receive credit on the Programs and on the back of each Program
videocassette jacket in a size, type, style and duration not less than that
accorded to any other party.
13. NETWORK/CABLE BROADCAST BONUS: Upon the condition that FTI is not in
default of any of its obligations hereunder, ABCVP agrees to pay FTI a
one-time bonus in the total amount of Seventy Five Thousand Dollars
($75,000) in the event that three (3) or more of the Programs are licensed
from ABCVP for initial broadcast on ABC, CBS, FBC or NBC (i.e., network
television) and ABCVP agrees to pay FTI a one-time bonus in the total
amount of Twenty Five Thousand Dollars ($25,000) in the event that three
(3) or more of the Programs are licensed from ABCVP for initial broadcast
on non-network television.
14. INDEMNIFICATION: ABCVP hereby agrees to indemnify, save and hold harmless
FTI and its successors, parents, affiliates, licensees, sublicensees,
clients, customers, assigns, directors, shareholders, officers, employees,
agents, attorneys and other representatives from and against any and all
liability, loss, damage, cost and expense (including reasonable attorney's
fees) arising out of or relating to any claim or action by a third party
which, if proved, would constitute a breach by ABCVP of any representation,
warranty or covenant by ABCVP contained herein.
FTI hereby agrees to indemnify, save and hold harmless ABCVP and its
successors, parents, affiliates, licensees, sublicensees, clients,
customers, assigns, directors, shareholders, officers, employees, agents,
attorneys and other representatives from and against any and all liability,
loss, damage, cost and expense (including reasonable attorney's fees)
arising out of or relating to any claim or action by a third party which,
if proved, would constitute a breach by FTI of any representation,
warranty or covenant by FTI contained herein.
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The party seeking indemnification hereunder shall promptly notify the other
party of any matter in respect of which indemnification is to be sought and
shall give the indemnifying party the right to take full control of the
defense and conduct of such claim or proceeding.
15. RELATIONSHIP OF PARTIES: ABCVP and FTI are independent contractors with
respect to each and nothing herein shall create any association,
partnership, joint venture or agency relationship between ABCVP and FTI.
All persons employed by FTI in connection with FTI's performance hereunder
shall be FTI's employees or agents, and, as between ABCVP and FTI, FTI
shall be solely responsible for all matters relating to such persons,
including, without limitation, all compensation, withholding taxes,
workers' compensation insurance and any other payments, deductions and
contributions which may be required by any law, personal service contract
or collective bargaining agreement applicable to FTI and/or such persons.
FTI shall indemnify, defend and hold harmless ABCVP and ABCVP's affiliates,
licensees and assigns from and against the obligation to make any such
payments, deductions or contributions.
16. REFERENCE: This Agreement consists of these principal terms, as well as the
General Terms attached hereto and any and all risers or exhibits attached
hereto, all of which are incorporated herein by reference. Wherever the
terms "this Agreement," "hereof" or similar terms are used, such terms
shall be deemed to refer to these principal terms, the General Terms and
all exhibits and riders attached hereto. To the extent any provision(s)
of the General Terms and any and all riders or exhibits attached hereto
conflict with any provision(s) of these principal terms, the provision(s)
of these principal terms shall prevail.
If the foregoing is in accordance with your understanding, please indicate your
acceptance by signing in the space provided below.
Sincerely,
CAPITAL CITIES/ABC
VIDEO PUBLISHING, INC.
/s/ JON PEISINGER
_________________________________________
JON PEISINGER, President
ACCEPTED AND AGREED TO:
FTI, Inc.
By: /s/ JERRY SOLOMON By: /s/ BARRY MENDELSON
____________________________ ________________________________
JERRY SOLOMON BARRY MENDELSON
Title: Director Title: Director
_________________________ _____________________________
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CAPITAL CITIES/ABC VIDEO PUBLISHING, INC.
DISTRIBUTION AGREEMENT
(General Terms)
1. GRANT
(a) Basic Rights: FTI grants to ABCVP the exclusive and irrevocable rights
set forth in the principal terms, attached hereto.
(b) Editing: In manufacturing Copies, ABCVP shall have the right to edit or
modify same to create compilation programs or in order to meet the
requirements of censorship, foreign distribution, community standards
in any portion of the Territory or physical limitations or economic
constraints in the manufacturing of Copies, all as ABCVP may reasonably
determine. ABCVP agrees, however, that it shall make no change in the
titles or credits of the Property without FTI's prior written approval
(which shall not be unreasonably withheld), excepting the inclusion
in such credits of ABCVP's logos, and ABCVP shall not edit or modify
the copies in a manner that materially and adversely affects the
portrayal of Ms. Kerrigan, the lead actor or actress, if applicable, or
the Celebrity Narrator without consulting with FTI. ABCVP shall also
have the right to utilize time compression techniques customary in the
home video industry.
(c) Dubbing and Subtitling: ABCVP shall have the right to have the Property
dubbed and/or subtitled in any language which ABCVP may deem
appropriate for distribution of Copies in the Territory. The costs of
creating any dubbed or subtitled versions of the Property required by
ABCVP and not heretofore created shall be advanced by ABCVP and
recouped from any monies thereafter payable to FTI pursuant to the
Principal Terms hereof.
(d) Advertising Rights: In addition to the other rights granted to ABCVP
hereunder, FTI hereby grants to ABCVP the right to use any portion of
the Property, and stills therefrom, for the purpose of advertising and
publicizing the sale of the Copies and the pay-per-view exhibition of
the Property. Additionally, ABCVP may use for such purpose any and all
advertising materials delivered by FTI to ABCVP and may use excerpts,
synopses, summaries and resumes of the literary material upon which the
Property is based (not exceeding 7,500 words in each such case) for
such advertising and publicity purposes. ABCVP shall similarly have the
right to use the name, physical likeness (whether by photograph or
otherwise) and voice of any party rendering services in connection with
the Property or any cartoon character appearing in the Property for the
purpose of advertising and publicizing the Copies and the pay-per-view
exhibition of the Property, subject to the limitations set forth in the
Principal Terms. All materials provided by FTI shall be deemed approved
by FTI.
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2. DELIVERY
(a) Initial Delivery: FTI shall deliver to ABCVP, at ABCVP's office, the
materials described in Exhibits A or B attached hereto, in technically
satisfactory condition so that Copies of first-class commercially
acceptable quality may be manufactured therefrom, together with
evidence of insurance as described hereinbelow, and proof of ownership
of the rights granted hereunder. ABCVP will review such materials and
will notify FTI of any defects therein. Delivery shall not be deemed
complete hereunder unless and until ABCVP shall have approved the
technical quality of the aforesaid materials and ABCVP's attorneys have
affirmatively approved in writing the proof of insurance and proof of
ownership of the Property. Except as otherwise expressly provided
herein, delivery and return of all materials shall be at FTI's cost and
expense.
(b) Cure: If ABCVP shall notify FTI of mechanical defects in the delivered
material or in the evidence of insurance or ownership, FTI shall
immediately cause such defects to be corrected and new material to be
made and delivered or new documentation of insurance or ownership to be
delivered, such new material or documentation to again be subject to
ABCVP's approval as described hereinabove. If such cure is not made
within thirty (30) days of ABCVP's notice of its disapproval of any
such materials or documentation, then ABCVP may itself cause such
defects to be corrected and deduct the cost thereof from any monies
payable to FTI hereunder or may, by written notice to FTI, terminate
this Agreement, in which event ABCVP shall be entitled to the return of
all monies which may have theretofore been paid to FTI.
(c) Return of Material: As soon as practicable after the completion of the
delivery of the material described herein, ABCVP shall return to FTI
the original print of the Property delivered hereunder. All other
materials delivered hereunder, as well as the master videotape produced
by ABCVP from such original print shall be retained by ABCVP for the
use and distribution of Copies until the end of the Term. It is
expressly understood and agreed that ABCVP shall own all rights in the
tangible materials manufactured by ABCVP hereunder, including, without
limitation, the master tape, the transfer tape, disc master, disc
stampers and all Copies.
3. REPRESENTATIONS AND WARRANTIES. FTI represents, warrants and agrees that:
(a) Ownership: FTI owns and controls, without any limitations, restrictions
or encumbrances whatsoever, all rights granted or purported to be
granted ABCVP hereunder and all required rights in and to the literary,
dramatic and musical material contained in the Property, and FTI has
obtained or shall obtain all necessary licenses and permissions
required for the manufacture, distribution, exhibition, advertising and
exploitation of the Copies throughout the Territory as may be required
for the full and unlimited exercise and enjoyment by ABCVP of all of
the rights granted and purported to be granted to ABCVP herein. ABCVP
will own, possess and enjoy such rights without any hindrance on the
part of any person, firm or entity whatsoever throughout
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the Term. It is expressly understood and agreed that the review by
ABCVP of the ownership documents supplied by FTI in accordance with
the delivery requirements hereof shall in no way limit the warranties
contained in this paragraph 3.
(b) No Liens: There are no liens, claims, encumbrances, legal proceedings,
restrictions, agreements or understandings which might conflict or
interfere with, limit or be inconsistent with or otherwise affect any
of the provisions of this Agreement or the enjoyment by ABCVP of any
rights granted or purported to be granted to it hereunder, including,
but not limited to, the exclusive right to manufacture and distribute
Copies throughout the Territory, as well as any other exclusivity
provisions described herein. Without limiting the generality of the
foregoing, all obligations with respect to the Property, and the
production, distribution and exploitation thereof, including, but not
limited to, all salaries, royalties, participations, license fees,
service charges, residuals, laboratory charges and the like have been
or will be fully paid, except as set forth herein. Without limiting the
generality of the foregoing, it is expressly agreed that ABCVP will
have no obligations for future salaries, royalties, participations,
residuals, deferments, license fees, service charges, laboratory
charges (except for material ordered directly from a lab by ABCVP) or
any similar payments of any kind or native, it being understood
that, as between ABCVP and FTI, FTI shall have the full responsibility
for all such payments, except as set forth herein. All fees and costs
associated with the use of the music in the Property and all fees
and charges, including but not limited to, payments by reason
of the use of the Property on Copies have been paid or will be paid
by FTI.
(c) No Prior Sale: No Copies have heretofore been manufactured, licensed or
marketed in the Territory.
(d) Authority: FTI has the full right, power, legal capacity and authority
to enter into this Agreement, to carry out the terms hereof and to
grant to ABCVP the rights, licenses and privileges granted or purported
to be granted to it hereunder. If FTI is a limited liability company,
FTI represents that it is, valid, existing and in good standing under
the laws of the jurisdiction in which it was formed. FTI will not grant
any rights in the Property to any third person which might or would
conflict with or be inconsistent with the rights granted or purported
to be granted to ABCVP hereunder.
(e) Non-Infringement: Nothing in the Property shall infringe upon the
copyright or violate any other personal or property rights of any kind
or nature of any person, firm or corporation whatsoever, including,
without limitation, any rights to be free from defamation, any rights
of privacy or publicity and any right to be free from unfair
competition.
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(f) Name and Likeness: All persons, firms and corporations connected with
the production of the Property and all other persons whose names,
voices, photographs, likenesses, work, services and materials have been
used in the Property or its exploitation have authorized the use of
their names, voices, photographs, likenesses, performances and
biographical data in connection with the advertising, promotion and
exploitation of the Property, including, without limitation, such use
and exploitation in connection with Copies manufactured hereunder,
except as to those approvals explicitly set forth herein.
(g) Legal Requirements: In the production of the Property, all laws,
statutes, ordinances, rules and regulations of each country, state,
city or other political entity having jurisdiction have been or
will be complied with, as well as all of the rules, regulations and
requirements of any union or guild having jurisdiction thereof.
(h) Copyright: The Property (including all components thereof and the
literary and music material contained therein and/or on which the
Property is based) is or may be validly copyrighted throughout the
Territory and will not be allowed to fall into the public domain
anywhere in the Territory during the Term hereof or the sell-off
period. The Property, as delivered, will contain all proper copyright
and FBI notices required for protection of the Property, and ABCVP
agrees to include such copyright and FBI notices as so delivered on the
Copies.
(i) Credits: The credit lists and other materials delivered to ABCVP under
this Agreement will be complete and accurate and ABCVP will incur no
liabilities to any third parties arising out of its compliance with
such lists and the use of such materials provided, however, that no
inadvertent or third party failure to comply with the foregoing shall
constitute a breach by ABCVP of this Agreement.
(j) Insurance: FTI will secure and maintain in full force and effect during
the Term and the sell-off period, a standard producer's liability
(errors and omissions) insurance policy issued by a company approved by
ABCVP (such approval not to be unreasonably withheld) with coverage of
at least $1,000,000/$3,000,000 with respect to the Property, without
unusual exclusions or deductions provided for therein. Such policy
shall (i) name ABCVP as an additional insured, (ii) cover all means and
methods of exhibition of the Property licensed to ABCVP hereunder and
(iii) provide that it is noncancelable except upon thirty (30) days
prior written notice to ABCVP. ABCVP shall have the right to cause such
policy to be renewed or extended from time to time. ABCVP shall be
named as a co-insured or additional named insured in such insurance
policy and a certificate of insurance evidencing such insurance shall
be delivered to ABCVP on execution of this Agreement. Subject to audit,
the cost and expense of procuring and maintaining such policy shall be
allocated as a production cost hereunder.
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(k) Censorship: The Property has not and will not be banned by the censors
of, or refused import permit or entry into, any part of the Territory,
and, if a theatrical motion picture, has received or will receive a
rating from the Code and Rating Administration of the Motion Picture
Association of America no more restrictive than "R" without any
requirement for cuts or alterations which ABCVP reasonably deems
harmful to the income potential of the Property.
(j) Term of Representations and Warranties: All of FTI's representations,
warranties and agreements contained in this paragraph 3 are of this
essence of this Agreement and shall survive the expiration or sooner
termination hereof.
4. INDEMNIFICATION
(a) By FTI: FTI hereby agrees to indemnify, save and hold harmless ABCVP,
its parent company and any subsidiaries, and its and their respective
successors, licensees, assigns, directors, shareholders, officers,
employees, agents, attorneys and other representatives from and against
any and all liability, loss, damage, cost and expense (including,
without limitation, reasonable attorneys' fees) arising out of or
relating to (i) any breach or purported breach by FTI of any
representation, warranty or agreement made by it herein and (ii) the
use and exploitation by ABCVP of any rights granted or purported to be
granted hereunder.
(b) By ABCVP: ABCVP agrees to indemnify and hold harmless FTI and its
successors, licensees, assigns, directors, shareholders, officers,
employees, agents, attorneys and other representatives from and against
any and all liability, loss, damage, cost and expense (including
reasonable attorneys' fees) arising out of or relating to any use by
ABCVP of the Copies which exceeds the rights granted or purported to be
granted to ABCVP hereunder.
5. ACCOUNTINGS: "Net Proceeds" shall be defined and all monies due hereunder
shall be paid in accordance with the following terms:
(a) Definition of Net Proceeds: "Net Proceeds" means all monies (subject to
the exclusions in subparagraph 5(b) below) actually received by ABCVP
from the exploitation by ABCVP of the rights granted to ABCVP
hereunder.
(b) Exclusions From Net Proceeds: Net Proceeds shall be determined after
all refunds, credits, discounts, allowances and adjustments granted to
subdistributors, wholesalers, retailers and other licensees, and
whether or not occasioned by condemnation by boards of censorship,
settlement of disputes or otherwise. Neither advance payments nor
security deposits shall be included in net proceeds until earned by the
sale of Copies, forfeited or applied by ABCVP to the Property.
Additionally, net proceeds shall not include and shall be reduced by:
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(i) Any monies derived by any local subdistributor, wholesaler or
retailer from sale of Copies, whether or not such subdistributor,
wholesaler or retailer is owned, operated, managed or controlled
by ABCVP; provided, however, that in the event of any such owned,
operated or managed subdistributor, wholesaler or retailer, ABCVP
agrees that the terms of sale or lack of any Copies to any such
entity shall be reasonable and customary within industry
standards and substantially the same as the terms of sale or
lease of Copies to unrelated entities, in accordance with
industry standards.
(ii) Any sums due, but not paid, to ABCVP; provided, however, that
ABCVP agrees to use all reasonable efforts, consistent with its
prudent business judgment, to collect any sums owed to it. ABCVP
may deduct any costs incurred in connection with the collection
of monies included in net proceeds, including, without
limitation, attorneys' and auditors' fees and costs, and any and
all loss, damage or liability suffered or incurred by ABCVP in
the collection of such monies, whether by litigation or otherwise
in the computation of net proceeds hereunder.
(iii) The salvage value of any videotape, cassettes or other materials
purchased by or manufactured by ABCVP and not sold as Copies.
(iv) Any sums received in a foreign currency and not readily
convertible, or not readily remittable; provided, however, that
ABCVP shall upon receipt of written request from FTI (but not
more frequently than once annually), advise FTI in writing as to
foreign revenues not included in net proceeds as aforesaid and
ABCVP shall, at the written request and expense of FTI (subject
to any and all limitations, restrictions, laws, rules and
regulations affecting such transactions), deposit into a bank
designated by FTI in the country involved or pay to any other
party designated by FTI in such country, such part thereof as
would be payable to FTI hereunder as if all amounts received were
net proceeds. Any such deposit or payment to or for FTI shall
constitute due remittance to FTI, and ABCVP shall have no further
interest therein or responsibility therefor. ABCVP makes no
warranty or representation that any part of any such foreign
currencies may be converted or transferred to the account of FTI
in any foreign country. All costs, discounts and expenses
incurred in obtaining remittance of receipts and conversion of
same, including costs of contesting imposition of restricted
funds, shall be deducted in computing net proceeds hereunder.
(v) The following distribution expenses paid by ABC in connection
with ABC's distribution of the Property hereunder: (i) All costs
and expenses incurred for prints (including video duplication
expenses) and other laboratory charges, if any, and any
conversion expenses for creating masters for non-NTSC format
(i.e., PAL and Secarn); (ii) shipping and storage charges
(including reasonable
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insurance costs); (iii) all costs incurred in the creation of
packaging, marketing and sales materials, duplication, returns
processing, credits, rebates, etc.; (iv) music synchronization
licenses (unless paid by FTI); (v) import fees and licenses; (vi)
advertising, promotion and packaging expenses; (vii) reasonable
legal fees in connection with claims against ABC relating to the
Property unless caused by negligence of ABC; (viii) censorship
charges and fees and all costs in connection with cutting,
editing, re-assembling, etc., to render the Property suitable for
television broadcasting and other exhibition hereunder and/or for
the purpose of meeting censorship requirements, or standards or
continuity acceptance, or any regulations imposed by law or
applicable Industry codes; (ix) expenses for securing trademark
and copyright protection; (x) errors and omissions insurance to
the extent that ABC reasonably determines that such insurance is
necessary beyond the period provided for herein; (xi) any other
distribution expenses (exclusive of overhead) which are
necessarily and directly related to distribution of the Property,
including residual payments to any talent pursuant to a
collective bargaining agreement and/or a personal service
contract; (xii) any distribution fees paid to any third parties;
and (xiii) any manufacturing expenses.
(vi) Any sums paid by ABCVP to unrelated third parties as sales
incentives to the extent such sums are calculated as a percentage
or otherwise on the basis of sales of Copies and are in lieu of a
reduction in the wholesale price of Copies or of the distribution
of Copies as so-called "free goods."
(vii) Any sums paid by ABCVP to unrelated third parties for the purpose
of direct response advertising or cooperate advertising in lieu
of a reduction in the wholesale price of Copies sold to such
third parties.
(c) Taxes: Net proceeds shall not include, and ABCVP may deduct therefrom,
any and all sums paid or accrued on account of sales, use, receipts,
income, excise, remittance and other taxes (however denominated) to any
government authority, assessed upon the Copies or any other materials
relating to the Property, or upon the use or distribution of Copies or
the Property or upon the revenues derived therefrom or any part thereof
or upon the remittance of such revenues or any part thereof, and any
and all sums paid or accrued on account of duties, customs and imports,
costs of acquiring permits, quotas and any similar authority to secure
the entry, licensing, sale, exhibition, performance or other use of
Copies in any country or part thereof regardless of whether such
payments or accruals are assessed against Copies of the Property or the
proceeds thereof or against a group of motion pictures or programs in
which the Property or proceeds thereof may be included. In no event
shall the deductible amount of any such tax (however denominated)
imposed upon ABCVP be decreased (nor the net proceeds increased)
because of the manner in which such taxes are elected to be treated by
ABCVP in filing net income, corporate franchise, excess profits or
similar tax returns. Notwithstanding the foregoing, ABCVP's own income
taxes and franchise
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taxes based on ABCVP's net income and any income taxes paid to any
country or territory by ABCVP based on the net earnings of ABCVP in
such country or territory (to the extent computed and assessed solely
by the reason of voluntary retention in such country or territory by
ABCVP of any portion of net proceeds) shall not be deductible in
computing net proceeds hereunder. Notwithstanding anything to the
contrary contained herein, FTI shall have no right to inspect or copy
any income or franchise tax return of ABCVP or any of its subsidiaries
or affiliates or to require ABCVP or any of its subsidiaries or
affiliates to produce any such tax return or any information contained
therein.
(d) Rendition of Statements: ABCVP shall account to FTI hereunder with
regard to monies due hereunder on a semi-annual basis. The semi-annual
accounting periods shall end on June 30 and December 31 of each year
(or such other semi-annual period as ABCVP may generally use for such
accountings). Accountings shall be rendered by ABCVP to FTI on or
before the date ninety (90) days following the conclusion of each
accounting period. Each statement shall show in summary form the
appropriate calculations relating to the computation of net proceeds,
if any, hereunder. Any portion of net proceeds payable to FTI hereunder
shall be remitted to FTI with the particular statement indicating such
amount to be due. There shall be deducted from any remittance due or
for the account of FTI the amount of any tax required to be withheld by
ABCVP based on payments due for the account of FTI or any other
withholding or deduction which ABCVP may be required to make pursuant
to any law or governmental order. There shall also be deducted
therefrom the unrecouped portion of any advances made by ABCVP (or any
of ABCVP's parents, subsidiaries or affiliates) to FTI with respect to
the Property, but not including advanced production costs and interest
thereon, which shall be deducted in computing net proceeds hereunder,
whether or not such advances were paid pursuant to this Agreement or
any other agreement between the parties or their respective parents,
subsidiaries or affiliates in respect of the Property, plus interest
on such advance at a rate equal to the prime rate charged by ABCVP's
principal bank, as the same may vary from time to time, plus one
percent (1%). All statements hereunder shall be deemed rendered when
deposited, postage prepaid, in the mail, addressed to FTI at the notice
address described in paragraph 11 below.
(e) Finality of Statements: Each statement and all items contained therein
shall be deemed correct and shall be conclusive and binding upon FTI,
and shall constitute an account stated, upon the expiration of twenty
four (24) months from the date rendered unless, within such twenty four
(24) month period, FTI delivers a written notice to ABCVP objecting to
one or more items of such statement and such notice specifies in
reasonable detail the items to which FTI objects and the nature and
reason of FTI's objection thereto. In such event, FTI may question the
particular items objected to, notwithstanding the expiration of such
twenty four (24) month period but only for the particular reasons of
which FTI gave ABCVP such written notice (unless the specific
objections, upon audit, reveal additional objections that could not
have been included in
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FTI's written notice), and not after the expiration of the period of
the applicable statute of limitations established by law.
Notwithstanding anything to the contrary contained hereinabove, in no
event may FTI institute or maintain any action, suit or proceeding or
recover or enforce any judgment, order or decree against ABCVP with
respect to any item contained or not contained in any statement or
with respect to any transaction or accounting had in connection with
any other similar or dissimilar matter relating to the Copies at any
time subsequent to fifteen (15) days prior to the expiration of the
period of time after which ABCVP would be barred by the applicable
statute of limitations or contractual provision from instituting any
action, suit or proceeding against the relevant subdistributor,
wholesaler, retailer or other third party with respect to such item,
transaction, accounting or matter.
(f) Books of Account and Audits: ABCVP shall keep books of account relating
to the distribution of Copies which shall be kept on the same basis and
in the same manner and for the same periods as such records are
customarily kept by ABCVP. FTI may, upon prior written notice to ABCVP,
at its own expense, audit the applicable records, including records
relating to sums paid or accrued on account of taxes, (but not any
records relating to the manufacture of Copies) at the place where ABCVP
maintains same in order to verify statements rendered hereunder by
written notice to ABCVP no later than twenty four (24) months after the
date a particular statement is rendered to FTI. Any such audit shall be
conducted only by a certified public accountant, such audit to take
place during reasonable business hours and in such a manner so as not
to interfere with ABCVP's normal business activities and not later than
one hundred eighty (180) days after the date of written notice
objecting to a particular statement. ABCVP shall be furnished with a
copy of such auditor's report within thirty (30) days after the
completion of such audit. In no event shall an audit with respect to
any statement rendered hereunder commence after the date on which such
statement has become incontestable pursuant to subparagraph 5(e) above
nor shall any audit continue for longer than thirty (30) consecutive
days nor shall audits be made hereunder more frequently than once
annually nor shall the records supporting any such statement be audited
more than once unless reasonable methods of accounting/auditing would
require otherwise.
(g) Allocations: In any instance where revenues are earned or deductions
allowed with regard to a group of motion pictures or programs including
the Property, including, without limitation, with respect to
compilation programs consisting in part of excerpts from the Property,
and such revenues or deductions are not specifically allocated among
such group of motion pictures or programs, ABCVP shall make such
allocations as are determined by ABCVP in good faith and gross receipts
hereunder shall only include the amounts so allocated to the Property.
(h) Returns: ABCVP shall establish an allowance of twenty percent (20%) of
gross receipts for returns of Copies, which twenty percent (20%) shall
be deducted from gross receipts hereunder. ABCVP shall further be
entitled, in the exercise of its
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reasonable business judgment, to establish reserves against additional
returns or other items which ABCVP reasonably anticipates may be
deductible from gross receipts hereunder. Reserves established as
aforesaid shall be liquidated within a reasonable time, not to exceed
two (2) years, after initially established.
(i) No Trust Imposed: Gross receipts are ABCVP's sole and exclusive
property and not trust funds nor otherwise held by ABCVP for FTI's
benefit. ABCVP's obligation to make payments to FTI hereunder is that
of a debtor only. FTI shall not own any interest whatsoever in the
Copies or gross receipts or have any lien or other claim thereon.
ABCVP's obligation to pay FTI hereunder shall not bear interest nor
entitle FTI to gains which may accrue to such funds prior to the
payment thereof to FTI.
(j) Promotional Copies: No royalty shall be payable on any Copies given
away on a promotional or not-for-sale basis.
(k) Relationship of the Parties: Nothing herein shall be construed to
create a partnership or joint venture by or between ABCVP and FTI or to
make either the agent of the other. Each of ABCVP and FTI agrees not to
hold itself out as a partner or agent of the other or to otherwise
state or imply by advertising or otherwise any relationship between the
parties in any manner contrary to the terms of this Agreement and
neither shall become liable or bound by any representation, act,
omission or agreement whatsoever of the other which may be contrary to
the provisions of this Agreement. It is expressly agreed that ABCVP
shall have full and exclusive charge and control of the distribution,
sale, exploitation, rental, leasing or other disposition of the Copies,
and the Copies may be rented, leased, distributed, sold outright,
exploited, marketed or otherwise disposed of by ABCVP throughout the
Territory and during the Term hereof, and ABCVP may in its sole
discretion withhold or withdraw Copies from distribution, either
entirely or with respect to any country or territory or portion
thereof. Nothing herein contained shall be deemed to limit ABCVP from
entering into any agreement with any distributor, wholesaler, retailer
or otherwise with respect to Copies on whatever terms and conditions
ABCVP and such other party may agree. ABCVP shall likewise have the
right to cancel any such contacts in accordance with ABCVP's good faith
business judgment, to adjust and settle all disputes with any third
parties regarding such agreements and to give allowances, rebates and
credits to such persons. Notwithstanding the foregoing, in the event
that ABCVP shall license, sell, lease or otherwise dispose of any
rights in Copies to any party owning, owned by, or under joint
ownership with ABCVP, such disposition shall be made on terms
substantially equivalent to the terms which would apply had such
disposition been made to an unrelated third party. It is the intent and
purpose of this Agreement that absolute and sole control and discretion
with reference to all matters involving the manufacture, production,
distribution, lease, exhibition, sale, licensing and reissuing of
Copies shall, as between ABCVP and FTI, be vested solely and
exclusively in ABCVP and shall be exercised by ABCVP in such manner
as shall in ABCVP's sole judgment and discretion be deemed proper, and
FTI shall have no right of approval or control in
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connection therewith. With respect to its exercise of the above rights,
however, ABCVP agrees to consult with FTI.
(1) Bad Debt Allowance: ABCVP shall establish an allowance of ten percent
(10%) of gross receipts for uncollected accounts, which ten percent
(10%) shall be deducted from gross receipts hereunder. ABCVP shall be
responsible for, and shall not be permitted to deduct from gross
receipts, uncollected accounts in excess of said ten percent (10%)
allowance.
6. FORCE MAJEURE: In the event that FTI is unable to make delivery of the
Property or ABCVP is unable to accept delivery of the Property or, having
accepted delivery of the Property, all or substantially all of ABCVP's
activities with regard to the Property are materially interfered with by
reason of any cause or occurrence beyond the control of ABCVP or FTI,
including, without limitation, fire, flood, epidemic, earthquake,
explosion, accident, war, blockade, embargo, act of a public enemy, civil
disturbance, labor dispute (or threatened dispute), strike, lockout,
enactment of law or any act of God (all of the foregoing are referred to
as events of "force majeure"), then the affected party shall immediately
give notice of such event of force majeure to the other party hereto,
and this Agreement shall be suspended and the Term extended for a period of
such event of force majeure; provided, however, that in the event that such
event of force majeure shall continue for a period in excess of
six (6) months, then either party hereto shall have the right to terminate
this Agreement by notice to the other party during the continuance
of such event of force majeure. In the event that such termination is
made by FTI prior to the recoupment by ABCVP hereunder of all of the
advance made to FTI, then such termination shall not be effective
unless and until FTI shall return to ABCVP any unrecouped portion of
such advance together with interest thereon at of the prime rate plus
one (1) point charged by ABCVP's principal bank; provided, however, that
in the event such amount of interest shall exceed the maximum amount
of interest allowed by law, the provisions of this paragraph 6 shall be
deemed amended to provide for interest at the maximum rate allowed by law.
7. ASSIGNABILITY: ABCVP may assign this Agreement or any of its respective
rights, licenses or privileges hereunder to any person, firm, corporation
or other entity controlled by, controlling, or under common control with
ABCVP, or which acquires all or substantially all of ABCVP's assets.
8. LAWS AND JURISDICTION: It is the express intent of the parties that this
Agreement shall be governed by the laws of the state of New York, United
States of America, with the full force and effect as though this Agreement
had been executed in and fully performed in said state of New York. In the
event of any dispute hereunder, the parties hereto expressly agree that the
courts of said state of New York, shall have full jurisdiction over the
parties hereto, and the parties hereby bind themselves over fully and
completely to the jurisdiction of said courts. In the event that process
must be served in connection with any such dispute, the parties agree that
such process may be served by personal delivery within or without said
state of New York or by registered mail, and the parties hereby appoint the
Secretary of State of
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said state of New York as their agent for receipt of such service of
process in the event of any such dispute.
9. LIMITATION ON REMEDIES: It is expressly understood and agreed that in the
event of any breach or purported breach by ABCVP hereunder, FTI's rights
shall be limited to an action at law for money damages, if any, actually
suffered by FTI as a result thereof, and in no event shall FTI be entitled
to rescission, injunction or other equitable relief of any kind. Likewise,
in the event of any breach or purported breach by FTI hereunder, ABCVP's
rights shall be limited to an action at law for money damages, if any,
actually suffered by ABCVP as a result thereof, and in no event shall ABCVP
be entitled to rescission, injunction or other equitable relief of any
kind, except with respect to the enforcement of ABCVP's exclusive rights
hereunder. Each party's rights hereunder and each party's rights at law and
equity shall be cumulative, and the exercise of one shall in no way limit
any other right of a party in the event of any breach by the other party
hereunder.
10. ADDITIONAL DOCUMENTS/ENFORCEMENT OF RIGHTS: FTI agrees to execute such
additional documents as may be necessary or reasonably desirable for ABCVP
to enforce its rights hereunder. In the event that FTI shall fail to
deliver any such additional documents, FTI hereby irrevocably appoints
ABCVP to execute any such additional documents as FTI's attorney-in-fact.
FTI also hereby irrevocably authorizes ABCVP to proceed, whether in ABCVP's
name or FTI's name, with any appropriate action necessary to enforce
ABCVP's rights hereunder (including, without limitation, all rights of
exclusivity and all holdback rights granted hereunder). Any such action
shall be (subject to the indemnity provisions of paragraph 4 of these
General Terms) at ABCVP's sole cost and expense.
11. NOTICES: Any notice which either party hereto may desire to give or which
is required under terms of this Agreement shall be given in writing by
registered or certified mail or by fax or by personal service (in all
cases, all charges prepaid) to the address first noted in the Principal
Terms. In the event any such notice is given by mail, such notice shall be
deemed given on the date five (5) business days following the date of such
mailing. If notice is given by any other method, such notice shall be
deemed given on the date personal delivery is made or a facsimile is sent.
Copies of all notices to ABCVP shall simultaneously be given by the same
method to Capital Cities/ABC, Inc., Attn: Legal and Business Affairs
Department, 77 West 66th Street, 14th Floor, New York, New York 10023, fax
number (212) 456-1496.
12. SEVERABILITY: Each and every provision of this Agreement shall be
considered severable, and, if for any reason any provision or provisions
herein are determined to be invalid and contrary to any applicable existing
or future laws, such invalidity shall not impair the operation or effect of
any other portion of this Agreement, and this Agreement shall be deemed
modified, but only to the extent necessary to conform with the requirement
of such applicable law.
13. WAIVER AND REMEDIES: No waiver by either of the parties hereto of any
failure by the other party to keep or perform any covenant or condition of
this Agreement shall be deemed a waiver of any preceding or succeeding
breach of the same or any other covenant or condition.
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Except as expressly provided to the contrary, the remedies herein provided
shall be deemed cumulative, and the exercise of one shall not preclude the
exercise of any other remedy nor shall the specifications of remedies
herein exclude any rights or remedies at law or in equity which may be
available in the premises.
14. HEADINGS: The title or headings of provisions herein are used for
convenience only and shall in no way be used to construe the meaning of
the provisions hereof.
15. MISCELLANEOUS: This Agreement represents the entire agreement between the
parties, superseding and replacing all prior oral or written understandings
and representations with regard to the subject-matter hereof. No provision
of this Agreement may be waived or amended, except by a written instrument
executed by the party to be charged. All terms used herein and not defined
are used in accordance with their normal meaning in the entertainment
industry in New York, New York.
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EXHIBIT A
DELIVERY REQUIREMENTS - TAPE
A. One (1) D-2 master videotape and one (1) D-2 protection master of the
Property, with separate music and effects tracks, each such videotape
meeting ABCVP's operational standards and technical requirements. If any
videotape of the Property delivered is not, in ABCVP's sole judgment, of
acceptable technical quality, ABCVP shall have the right to require
delivery of additional videotapes of the Property until ABCVP has approved
such videotape.
B. One (1) D-2 video tape of the textless background of the main and end title
sections of the Property if credits occur over action sequence.
C. One (1) copy of an English dialogue continuity of the Property.
D. Music Cue Sheets: One (1) copy of a music cue sheet showing the particulars
of all music contained in the Property, including the sound equipment used,
the title of each composition, names of composers, publishers and copyright
owners, the usages (whether instrumental, instrumental-visual, vocal,
vocal-visual or otherwise), the place and number of such uses showing the
film footage and running time for each cue, the performing rights society
involved and any other information customarily set forth in music
cue sheets.
E. Dubbed/Subtitled Versions: If the Property was recorded in a language other
than English, FTI shall deliver a version of the Property dubbed in English
or with English subtitles, as ABCVP shall determiine. If a Dubbed Version
is required, ABCVP shall have the right of approval of the voices and
dubbing script. If a Subtitled Version, ABCVP shall have the right of
approval of the subtitling script. If the Property is available to FTI in
more than one language, FTI shall deliver Copies of the print in each such
language.
F. Documentation
1. Employment List: One (1) copy of a complete list verified as true and
correct by FTI of the names (and lending company, if services loaned to
FTI) of all players, screenplay writers, directors, individual
producer, executive producer, composers, lyricists, vocalists,
musicians (including orchestrators, copyists, conductors and leaders)
and other personnel appearing in or rendering services in connection
with the Property.
2. Dubbing Restrictions: A statement of any restrictions as to the dubbing
of the voice of any player, including dubbing dialogue in the language
other than the language in which the Property was recorded.
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3. Prior Distribution: If applicable, an accurate statement of all prior
distribution and exploitation of the Property in any and all media and
a list of all Agreements currently in force with regard to such
distribution, together with either copies of such Agreements or an
accurate summary of all rights granted and exclusivity and/or
holdbacks agreed to.
4. Distribution Restrictions/Obligations: A statement of any restrictions
and/or obligations set forth in Agreements entered into by FTI with
third parties (including artists, financial institutions and
governmental agencies) regarding the exploitation of the Property.
5. Music Licenses: A copy of valid licenses paid for by FTI for the full
period of copyright and renewal thereof for the synchronous recording
of all copyrighted music in the Property and the performance thereof in
the Territory.
6. E&O Insurance: A copy of a "Motion Picture Producer and Producer Errors
and Omissions" insurance policy naming ABCVP as named insured, which
policy shall have limits of at least $1,000,000 with respect to any one
claim relating to the Property and $3,000,000 with respect to all
claims relating to the Property in the aggregate. Said policy shall be
for a term of not less than the Term of this Agreement, plus the
sell-off period. Said policy shall include a provision that it may not
be revised, modified or canceled without the written consent of ABCVP
and shall include a provision that it shall be deemed to be primary
insurance not subject to exposure until the insurance coverage of the
delivered policy shall be exhausted.
G. Publicity and Advertising Materials
FTI shall also make available to ABCVP for copying and use such stills,
transparencies, trailers and other advertising and promotion materials that
FTI has in its possession or to which it has access, and that ABCVP desires
to use for or in connection with the exploitation of the rights granted,
and FTI shall produce and make available to ABCVP at ABCVP's request and
direction still photographs from the Programs for use for or in connection
with the exploitation of the rights granted hereunder. Subject to audit,
the cost and expense of such publicity and advertising materials shall be
allocated as distribution expenses hereunder.
H. Completed Trailer Materials: FTI shall deliver to ABCVP the following
items:
1. Trailer Print: One (1) first-class videotape print of the Trailer in
the same language(s) as the language version(s) of the Property
delivered hereunder, fully timed, with the Soundtrack printed thereon
in perfect synchronization with photographic action in all respects
ready and suitable for the manufacture of a first-class master
videotape.
2. Trailer Soundtrack: The separate dialogue tracks, sound effects tracks,
narration tracks and music tracks, from which the original Trailer
Soundtrack was made.
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3. If FTI does not furnish such trailer materials, ABCVP may finish same
and the costs therefor may be recouped by ABCVP from any monies payable
to FTI pursuant to this Agreement.
J. One (1) copy of a complete credit list for main and end credits comprised
of all production and technical credits for the Property and a list of any
contractual credit requirements for advertising, promotion or packaging.
K. Copies of all Property agreements and a schedule of residuals.
L. Key art suitable for packaging and sufficient to build a promotional
campaign. In the event FTI does not furnish such key art, ABCVP may furnish
same and the costs therefor may be recouped by ABCVP from any monies
payable to FTI pursuant to this Agreement.
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AGREEMENT
This agreement (hereinafter referred to as "Agreement") between P/S
StarGames and On Ice, Inc. (hereinafter referred to as "Venture") and NAK, Inc.
(hereinafter referred to as "NAK") is made and entered into this 15th day of
November 1995, for the purpose of Nancy Kerrigan (hereinafter referred to as
"Athlete"), employee of NAK, participating in up to five (5) figure skating
shows with a fairy tale theme to be distributed on video tape, television, CD
ROM and any and all other forms of media (hereinafter referred to as
"Products").
WITNESSETH
WHEREAS, NAK has the sole right to contract for the services of Athlete;
and
WHEREAS, Athlete is an expert professional ice skater; and
WHEREAS, Venture wishes to produce Products for public distribution
starring Athlete; and
NOW THEREFORE, in consideration of the mutual promises listed below and
intending to be legally bound, the parties agree as follows:
2. TERM OF AGREEMENT.
This Agreement shall remain in full force and effect from the day on which
it is executed, until the number of shows and/or Products are completed as set
forth herein, unless sooner terminated in accordance with the terms and
conditions hereof, or extended as set forth herein below.
3. NAK DUTIES.
The parties agree that NAK shall cause Athlete to perform the following
duties in conjunction with this Agreement:
a. NAK agrees that Athlete shall participate at times and locations to be
mutually agreed upon, in up to five (5) video tapes, television shows and other
Products, based on fairy tale themes;
b. NAK agrees that Athlete shall be restricted in performing in other
television shows and video tapes with fairy tale themes without the approval of
Venture. For purposes of this Agreement, fairy tales shall be defined as
well-known fictitious/classic, public domain stories or fables intended to
please children.
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Nothing contained herein shall preclude Athlete from participating in any
live figure skating show whether or not with a fairy tale theme so long as it is
not produced for television or video tape. In addition, Venture agrees that
Athlete will be able to perform in figure skating shows for television and/or
video tape with other producers or companies (i.e. CBS, NBC, Tom Collins, Ken
Feld, etc.). However, NAK agrees that Athlete will not participate in any
television show, home video or other Product as defined herein and/or video tape
with a fairy tale theme that would, within the reasonable judgment of Venture,
negatively impact the distribution of the Products. Venture acknowledges that
Athlete is currently scheduled to participate in an annual Halloween show
entitled "Halloween on Ice" and is in discussions to participate in a figure
skating show with Oksana Baiul which may employ a fairy tale theme. Venture
agrees that Athlete's participation in these shows will not be considered a
breach of this Agreement. Notwithstanding anything else contained herein, the
parties acknowledge that this Agreement is not intended to hinder Athlete's
growth in any way or preclude her from exploiting various opportunities so long
as such activities are not, as interpreted in the reasonable business judgment
of the parties, injurious to the distribution or production of the Products;
c. If any Product is in fact made, NAK agrees that Athlete shall remain
exclusive for the production of Product(s) with fairy tale themes commencing
with the distribution date of such Product(s) and lasting for a period of three
(3) years from the date the final or last Product in which Athlete appears
begins distribution or is introducted in the marketplace;
d. NAK agrees to make Athlete available for seven (7) consecutive or
non-consecutive days of publicity and promotion for each video tape in which
Athlete participates which shall be subject to Athlete's prior bona fide
professional and personal commitments, and a reasonable number of days for
promotions, advertisements or appearances to promote other Products produced by
Venture. The parties understand that seven (7) to nine (9) days will be required
for production of each video tape and Athlete will make the necessary time
available for said production. The parties will mutually agree on the specific
scheduling of appearances and promotional dates.
4. Consideration.
In consideration for NAK's duties as set forth in paragraph three (3) of
this Agreement, Venture grants to NAK the following rights and benefits in
conjunction with this Agreement:
a. If any video tape is produced, NAK will receive a fee of Thirty-Five
Thousand U.S. Dollars ($35,000) per video tape for a minimum of three (3) video
tapes as an advance payment against royalties as set forth below;
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b. As soon as Athlete is used in one (1) such video tape, Venture becomes
obligated to compensate NAK for three (3) video tapes, whether or not Athlete is
used. Such Payment shall be made according to the schedule attached hereafter
and labeled Exhibit A; NAK shall be compensated with royalty payments in only
those video tapes in which she appears.
c. If no video tape or Product is produced, Venture shall not owe Athlete
any monies related to this Agreement;
d. Subject to the terms set forth herein and subject to the terms and
conditions set forth in the production and distribution agreement between
Capital Cities/ABC Video Publishing, Inc. and Venture ("ABC Contract"),
Venture shall pay to NAK a royalty of twenty percent (20%) of the net profits
Venture receives from the ABC Contract. The royalty payment set forth herein
shall first be applied against the fee set forth in paragraph 4(a). In addition,
subject to the ABC Contract, Venture agrees to pay NAK a one time fee of
Seventy-Five Thousand Dollars ($75,000) in the event that three (3) or more of
the programs are licensed from the ABC Contract for initial broadcast on ABC,
CBS, FBC, or NBC (i.e. Network TV) and Venture agrees to pay NAK a one time
bonus in the total amount of Twenty-Five Thousand Dollars ($25,000) in the event
that three (3) or more of the programs are licensed from the ABC Contract for
initial broadcast on non-network television;
e. NAK shall have the right to inspect the books and records of Venture
related to royalty payments from time to time and at NAK's expense. After each
royalty statement is received, NAK shall have said right to inspect for that
particular statement for a two (2) year period. If there is a significant error
in the payment of royalties found as a result of any such inspection, Venture
shall bear the cost of that particular inspection or audit.
5. APPROVAL.
Venture agrees that Athlete shall be consulted for input in all aspects of
the production of the Products including, but not limited to, skaters used,
music, storylines, costumes, choreography, etc. Further, Venture shall have the
ultimate approval over the above elements of production.
6. ASSIGNABILITY.
Except as stated herein, neither NAK nor Venture shall have the right to
sell, exchange, assign or transfer its rights and duties under this Agreement,
in whole or in part, to any person and/or entity without the others express
approval. NAK shall have the right to assign the financial benefits set forth
herein. Venture shall have the rights hereunder to assign its rights to any
third party distributors in order to
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carry out the obligations hereunder or in the event that Venture is dissolved
for any reason.
7. NOTICES.
All notices, statements, consents, approvals, documents and other
communications to be given hereunder shall be in writing and given by one party
to the other either by personal delivery, by certified mail, or by telegram and
shall be addressed as follows:
If to NAK:
NAK Productions
Jerry Solomon
1101 Wilson Blvd.
Suite 1800
Arlington, Va. 22209
If to Venture:
Barry Mendelson and Alonzo Monk
On Ice, Inc. PS/StarGames
517 N. Robertson Blvd. 24 Yawl St. #2
Suite 200 Marina del Rey, Ca 90292
Los Angeles, Ca 90048
or at such other addresses as a party may specify from time to time. Notice
given by personal delivery, certified mail, or telegram shall be deemed given
upon the date of personal delivery, mailing or delivery of such telegram to a
telegraph office, charges prepaid, as applicable.
8. ENTIRE AGREEMENT.
This Agreement constitutes the entire understanding between Venture and NAK
and cannot be altered or modified except by an agreement in writing signed by
the parties. Upon its execution, this Agreement shall supersede all prior
negotiations, understandings and agreements, whether written or oral, and such
prior agreements shall thereupon be null and void and without further legal
effect.
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9. SEVERABILITY.
Every provision of this Agreement is severable. If any term or provision
hereof is held to be illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not effect the validity of the remainder of this
Agreement.
10. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of California.
Any suit or action arising out of breach of this Agreement shall be filed in a
court of competent jurisdiction in Los Angeles, California. The parties hereby
consent to the personal jurisdiction of said court.
11. ARBITRATION.
Any disputes arising out of this Agreement shall be submitted for binding
arbitration under the Rules of the American Arbitration Association, with the
agreed-to venue in the American Arbitration Association office in Los Angeles,
California. Judgment on the arbitrator's award may be taken in U.S. District
Court or any other court having jurisdiction over the non-prevailing party.
12. INDEMNIFICATION.
NAK agrees to protect, indemnify, and save harmless Venture from and
against any and all expenses, damages, claims, lawsuits, actions, judgments, and
costs whatsoever, including reasonable attorney's fees, arising out of, or in
any way connected with any claim or action arising out of or caused by any
actions of NAK, unless such claims arise from the gross negligence or wanton and
willful acts of Venture. Venture agrees to protect, indemnify, and save harmless
NAK from and against any and all expenses, damages, claims, lawsuits, actions,
judgments, and costs whatsoever,including reasonable attorney's fees, arising
out of, or in any way connected with any claim or action arising out of or
caused by any actions of Venture, unless such claims arise from the gross
negligence or wanton and willful acts of NAK.
13. INDEPENDANT CONTRACTOR.
Nothing contained herein shall be deemed to create a partnership or joint
venture between NAK and Venture. The parties shall be treated as independent
contractors; as such, there shall be no withholding of any taxes from any
payments made hereunder.
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14. CONFIDENTIALITY.
Except to third party distributors and as required by law, the parties
agree not to divulge any of the terms and conditions set forth herein to any
other individual, company, or third party entity, and that the terms and
conditions shall remain strictly confidential.
15. SIGNIFICANCE OF PARAGRAPH HEADINGS.
Paragraph headings contained hereunder are solely for the purpose of aiding
in speedy location of subject matter and are not in any sense to be given weight
in the construction of this Agreement. Accordingly, in case of any question with
respect to the construction of this Agreement, it is to be construed as though
paragraph headings had been omitted.
16. RIGHT TO CONTRACT.
Each party hereto represents to the other that it is authorized to enter
into this Agreement and provide the services to be provided hereunder and the
exercise of the rights granted to the other party hereunder will not conflict
with any commitments or agreements previously entered into between the
representing party and other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
/s/ NANCY A. KERRIGAN 11/15/95
- - ------------------------ ---------------------
NAK, Inc. Date
President
- - ------------------------
Title:
/s/ BARRY MENDELSON
- - ------------------------ ---------------------
Venture Date
Partner
- - ------------------------
Title:
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THE BRESNER MANAGEMENT, INTERNATIONAL
- - --------------------------------------------------------------------------------
CAROL BRESNER, President HOTEL DES ARTISTES
SANFORD ISRAEL, Executive Vice President 1 WEST 67TH STREET
ELIZABETH SKALSKI, Vice President Operations SUITE 202
HELEN MUTSCH, Vice President of Sales NEW YORK, NEW YORK 10023
DONALD AIBEL, Tax/Financial Consultant (212) 877-0788
DAVID GROSSBERG, Esq., Legal Consultant FAX (212) 769-1722
ALAN ORLOFF, Travel
PORTIA ALLEN, Graphics
AGREEMENT
---------
On this date, January 19, 1996 between "ON ICE" of 517 N. Robertston Blvd.,
Suite 200, Los Angeles, CA 90048 as represented by Barry Mendelson acting in his
official position and BRESNER MANAGEMENT hereinafter referred to as "PRODUCER"
(exclusive international management for the St. Petersberg State Ice Ballet of
St. Petersburg, Russia) as the other party, concluded the present Agreement
regarding video taping of the St. Petersburg State Ice Ballet in the Bresner
Management's production of "Sleeping Beauty" on ice.
Article I
VALIDITY OF THE AGREEMENT
--------------------------
Validity period of the present agreement begins from the moment of its signing
by the Parties and continues until the Parties have fulfilled their obligations
and conditions as stipulated in it.
Article II
SUBJECT OF CONTRACT
--------------------
Hereby the Parties agree that ON ICE undertakes to organize video production and
taping of "The Sleeping Beauty" on ice. The taping will take place on February
10, 1996 at the Kravis Center in West Palm Beach, FL. The taping will take place
during one performance of "The Sleeping Beauty" and immediately following the
evening performance. A maximum of 8 hours following the performance is to be
allotted for taping. An additional time required will be at the discretion of
the PRODUCER with the understanding that the ice company has two performances
the following day and that the integrity of those performances is of the utmost
importance.
For "The Sleeping Beauty", PRODUCER will provide: the St. Petersburg State Ice
Ballet company, costumes, set, props, and music. ON ICE to provide all other
aspects necessary for the production; that will include all releases and
financial arrangements for a videogram with the venue and with the unions
involved at venue. ON ICE will provide all overtime pay for PRODUCERS crew that
consists of lighting/sound technicians, head carpenter and company manager. They
are to be paid $100.00 per hour commencing immediately following the
performance.
It is understood that the video of this production shall in no way interfere
with the artistic integrity of the production itself or the audience enjoyment
of the production. Any changes including lighting, etc. are subject to the
approval of the PRODUCER and theater management.
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St. Petersburg State Ice Ballet company to consist of: 24 skaters, 1 tech
director, 2 wardrobe, 1 make-up, 1 translator, 1 choreographer, 1 road manager,
1 general manager, 1 head carpenter, 1 lighting/sound technician.
Article III
ON ICE TO PROVIDE
-----------------
1. All costs required by the venue and unions involved with the theater for
extra time, extra labor and rights to videogram.
2. Food and drinks for the company during entire period of taping.
3. During period of rehearsal and taping ON ICE to provide all insurance
including public liability and venue liability, full coverage for all equipment
regarding the production as well as full occupational and injury coverage for
the artists and crew.
4. 1 (one) 3/4 inch and 6 (six) 1/2 copies of videos "The Sleeping Beauty"
Article IV
ROYALTIES AND PAYMENTS
----------------------
Royalties are to be all inclusive of the fee as described below.
During the indicated period ON ICE guarantees PRODUCER a fee of $65,000.00,
with no deductions.
ON ICE undertakes to pay all the sums to the PRODUCER as follows:
$32,500.00 by Certified check to be paid on or before Feb. 5, 1996.
$32,500.00 to be delivered to Bresner Management by wire transfer as shown below
before the commencement of the taping of February 10, 1996. Receipt of wire
transfer transaction to be presented to Bresner Management representative.
The Bresner Management, Inc.
1 West 67th St. #202
New York, NY 10023
account # 790118637
Republic National Bank of New York
265 Broadway
New York, NY 10007
routing # 021004823
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3.
Article V
EXCLUSIVE RIGHTS
It is understood that ON ICE will negotiate exclusively during the period
of five years from the above date with respect to any performances, recording or
business relationships with the St. Petersburg State Ice Ballet. ON ICE will not
communicate directly with St. Petersburg Ice Ballet in any way.
Article VI
FILMING, RECORDING, INTERVIEWS
It is understood that the only rights given by PRODUCER to ON ICE regarding
the St. Petersburg State Ice Ballet and their production of "The Sleeping
Beauty" are the rights to make videograms in perpetuity and that on other use
had been granted. Any additional use of this videogram, this production and/or
this company must be negotiated separately and with PRODUCER. ON ICE may use the
name and likeness of the Sleeping Beauty Production and the St. Petersburg Ice
Ballet on the home Video Box.
Article VII
BILLING
Billing for company must be as per attached addendum #1. Bresner Management
International is to be noted as producer of St. Petersburg State Ice Ballet's
"The Sleeping Beauty" on ice.
Article VIII
FORCE MAJEURE
Neither of the Parties is responsible for the failure to fulfill any of the
conditions of obligations under the present Agreement in case of force majeure
circumstances, caused by natural calamity, fire, governmental or state bans.
Each of the Parties undertakes to inform the other Party of the force majeure
circumstances immediately upon receiving information about it. All deposit
monies to be returned under these conditions.
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4.
Article IX
ARGUMENTS AND DISAGREEMENTS
Parties shall try to settle all the arguments, disagreements, and complaints in
connection with the present Agreement by way of amicable negotiations. In case
of the failure to reach consent by way of friendly talks then arbitration should
take place in New York under the auspices of the American Arbitration
Association.
Article X
GENERAL POSITIONS OF AGREEMENT
The present Agreement includes all the conditions and appendixes that the
Parties agreed upon. All the amendments and supplements to the present Agreement
shall be introduced in a written form, coordinated and signed by the Parties.
However it is acceptable that the Parties coordinate minor amendments and
changes by fax.
LEGAL ADDRESSES OF THE PARTIES
1. "ON ICE" 517 N. Robertson Blvd., Suite 200, Los Angeles, CA 90048
Tel. 310 278-5114 Fax: 310 278-5195
2. The Bresner Management. 1 West 67th Street, Suite 202, New York, NY 10023
Tel. 212-877-0788 Fax: 212 769-1722
Signed and agreed to:
/s/ BARRY MENDELSON
______________________________ ________________________________
Carol Bresner, President Barry Mendelson
Bresner Management On Ice
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HISTORY OF THE SAINT PETERSBURG STATE ICE BALLET
With its debut in 1967, Constantine Boyarski established ice ballet in Russia.
By combining classical dance with the sport of figure skating, a new genre was
born. On the basis of the "Nutcracker", to music by Tchaikovsky, Boyarski
produced the first ice ballet performance bearing the name of the "Crystal
Palace", which was an immediate success with the discerning Russian audience. As
the repertory grew, so did the talent, scenery and program. Today a company of
one hundred skaters, with more than 800 costumes, grace the mirror-like surface
of the ice. The majority of the performers have been honored with medals and
awards from Russia and international competitions. Since that first performance,
the company has been seen in over 5000 performances by audiences in the Soviet
Union, Poland, Sweden, Finland, Greece, Belgium, the United Kingdom and South
Korea. And now, under the direction of Mikhail Kaminov, and for the first time
in the history of the troupe, the Saint Petersburg State Ice Ballet will tour
the United States in the 1995-96 season.
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THE SLEEPING BEAUTY Addendum #1
A Ballet based on a fairytale in two acts
Music: Peter Illich Tchaikovsky
Choreography: Merited Artist of Russia, Konstantin Rassadin
Costumes: Mikhail Shavdatuashvili
Cast:
King: Mikhail Prokofiev
Queen: Elena Khailova
Princess Aurora: Olga Kuvashova
Prince Desire: Pavel Ivanov
Lilac Fairy: Elena Komarova
Carabosse, the wicked fairy: Leonid Smirnov
Tenderness Fairy: Tatiana Rodionova
Playfulness Fairy: Yulia Ageeva
Generosity Fairy: Ludmila Pantchina
Light-heartedness Fairy (Canary); Irina Shakhovskaya
Catalabutte, Master of Ceremonies: Andrei Stroganov
Suitors: Alexei Pogodin, Oleg Riabov, Pavel Ivanov, Mikhail Lomovsky
Diamond Fairy: Natalia Khazova
Saphire Fairy: Irina Shakhovskaya
Gold Fairy: Tatiana Rodionova
Silver Fairy: Anastasia Bunina
Princesse Florina: Ludmila Pantchina
Bluebird: Oleg Riabov
Red Riding Hood: Yulia Ageeva
Wolf: Alexie Pogodin
White Puss: Galina Kopoteva
Puss in Boots: Sergei Golodnev
Courtiers, Carabosse's Suite, Hunters: dancers of the Ballet
General Manager: Mikhail Kaminov
Principal Choreographer: Merited Artist of Russia, Galina Pirozhnaya
Merited Artist of Russia, Larisa Litvinenko
Elena Markova
Technical Director: Mikhail Shavdatuashvili
Senior Wardrobe Master: Anna Murnrina
Senior Makeup Artist: Galina Schmidt
Lighting Designer: Maya Shavdatuashvil
Produced by:
Bresner Management Internatiomnal, 1 West 67th St. Suite 202, New York, NY 10023
Ice rink provided by: Yontzmat
Production Manager: Kim Hanson
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SYNOPSIS
ACT I - THE CHRISTENING - King Florestan and his Queen have invited all the
Fairies to be present as Godmothers at the christening of the infant
Princess Aurora. Unfortunately, the Fairy Carabosse has been forgotten,
for no one has seen her for more than fifty years. But nevertheless she
arrives, vastly insulted, just as the other Fairies are bestowing their
gifts; she vows, by way of a christening present, that one day Aurora
shall prick her finger with a spindle and die. Happily, the Lilac Fairy
still has her own gift to bestow, and she confounds Carabosse by
promising that Aurora shall not die, but shall instead fall into a deep
sleep, from which she shall be awakened after a hundred years by a
Prince's kiss.
THE SPELL - It is Aurora's sixteenth birthday, and four Princes have
come to woo her. During the festivities Carabosse so engineers events
that Aurora suddenly comes upon an old woman working with a spindle -
an article that the King had forbidden in his domain, in an attempt to
forestall Carabosse curse. Aurora is so beguiled that the old woman
hands her the spindle, and she dances with it. Suddenly she pricks her
finger and collapses. Carabosse triumphantly appears, rejoicing that
her curse has come true, away she vanishes, the Lilac Fairy enters to
fulfill her promise. She cast a spell of sleep over the whole scene and
commands a forest to grow up that will utterly conceal the palace.
ACT II - THE VISITOR - A hundred years later a Prince is on a hunting expedition
in the same forest. He sends his couriers to follow the hunt while he
remains alone, dreaming of finding his ideal of romantic love.
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The Lilac Fairy appears and shows him a vision of Princess Aurora, and
next summons the vision to dance with the Prince. When the vision
disappears, the Prince implores the Lilac Fairy to lead him to the
place where the Beauty sleeps, and the Lilac Fairy guides his steps to
the over-grown and wooded palace where Aurora lies. He enters the
palace, finds Aurora, and awakens her with a kiss.
- THE WEDDING - Fairy-tale characters come to the wedding celebrations
of the Prince and Aurora. They pay their respects to the bride and
bridegroom, and then the whole assembly joins in general dance. In a
final apotheosis the Lilac Fairy appears to bless the marriage.
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THIS AGREEMENT is made as of the _ day of February, 1996, among FTI, Inc.,
c/o Beachport Entertainment Corp., 517 North Robertson Blvd., Los Angeles,
California 90048, Attention: Barry Mendelson, President ("Company"), David
Zippel, 16 West 86th Street, Apt. 2B, New York, New York 10024 ("Zippel") and
Marvin Hamlisch, Inc. ("Lender") f/s/o Marvin Hamlisch ("Hamlisch", together
with Zippel, are referred to herein as "Composers") in connection with the
creation of music by Composers for the "Fairy Tales On Ice" program presently
entitled "Through The Looking Glass" and starring Nancy Kerrigan (the
"Program"). (Lender, together with Zippel, are referred to herein as "Owners").
1. Services. Company hereby engages (i) Lender to provide the services of
Hamlisch to compose the music and (ii) Zippel to write the lyrics for two (2)
original musical compositions (one of which is intended to be the theme song for
the Program, hereinafter referred to as the "Theme Song") to be included in the
Program (the "Compositions").
2. License and Grant of Rights.
(a) Owners hereby grant to Company, its licensees and assigns, the
following exclusive rights and licenses, throughout the world and in perpetuity,
in all media, whether now known or hereafter devised (including, without
limitation, theatrical, non-theatrical, home video, free, pay and satellite
television):
(i) to record and synchronize all or any portion of the
Compositions in timed relation with visual images of the Program (including
promos, clips, advertising and trailers), and to re-record, reproduce and
otherwise make copies of the Compositions as synchronized with the Program in
any and all visual or audiovisual formats, including for use in television and
radio commercials, but only for purposes of news and for promotion of the
Program;
(ii) to record, reproduce and otherwise make copies of the
Compositions in any mechanical format, as a soundtrack album of the Program (a
"Soundtrack Album");
(iii) to market, sell, distribute or disseminate to the public
copies of the Program and a Soundtrack Album by sale, rental, license, lease or
otherwise, in any and all formats; and
(iv) the right to exercise any of the rights granted in
subparagraphs (i), (ii) and (iii) above with respect to a compilation program of
the Program along with portions of other "Fairy Tales" programs produced by
Company or a compilation soundtrack album of compositions from the Program along
with
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compositions from other "Fairy Tales" programs produced by Company (as used
herein, "Program" or "Soundtrack" shall be deemed to include any such
compilation program or soundtrack, as appropriate).
(v) subject to the rights of regularly established performing
rights societies, to broadcast, exhibit, display and/or perform the Compositions
publicly in connection with the Program (it being understood that Owners,
Composers or their designees shall be entitled to receive one hundred (100%)
percent of both writer's and publisher's shares of performance royalties for
television/radio performances from any performing right society to which they
belong).
(b) Company shall have the right and may grant to others the right
to reproduce, print, publish, or disseminate Composers' names, approved
pictures, approved likenesses and approved biographical information in
connection with the Program for advertising purposes.
(c) As between Company, Owners and Composers, Owners and/or
Composers (as the case may be) and/or their respective designees, shall own all
right, title and interest, including, without limitation, the copyright and any
renewals or extensions thereof, throughout the universe, in the Compositions.
(d) It is understood and agreed that Company's exclusive rights in
and to the Compositions are only granted in connection with the Program and a
Soundtrack Album and that Company may only use the Compositions in the Program
(in any and all visual formats in which the Program might be delivered,
transmitted or reproduced, including, without limitation, live performances of
the Program), a Soundtrack Album (in any and all audio formats in which a
Soundtrack Album might be delivered, transmitted or reproduced) and in the
advertising, promotion and marketing of the foregoing, and for no other purpose.
Owners hereby expressly reserve all rights not specifically granted to Company
hereunder. Notwithstanding the foregoing, Composers and Owners agree that they
will not solicit a recording of a Composition by a third party until the date
which is six (6) months following the earlier of (i) recording of a
videocassette of the Program or (ii) release of a videocassette of the Program.
(d) Notwithstanding anything to the contrary contained herein,
Company may not utilize the Compositions in connection with animation, whether
intended for television, videotape, theatrical release or otherwise.
(e) Company agrees that the Theme Song will be included in any
production of the Program produced by Company in accordance with the rights
granted to Company pursuant to this paragraph 2
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3. Delivery. Composers shall deliver the Compositions to Company in such form
as Company shall reasonably request by February 22, 1996. Any expenses of
recording necessary to fulfill Company's request shall be borne by Company.
4. Right of First Refusal. In the event Company or its affiliates, designees
or assignees shall produce additional programs in the "Fairy Tales On Ice"
series, Hamlisch shall have a right of first refusal to compose the musical
compositions for such additional programs with a lyricist to be chosen in
Hamlisch's sole discretion. Lender and/or Hamlisch shall, within thirty (30)
days following receipt of notice from Company of Company's intent to produce an
additional program, notify Company of Hamlisch's exercise of his right to
compose the musical compositions for such additional program. The material terms
of such engagement shall be substantially similar to the terms set forth herein
with respect to the Program, provided that the compensation for such additional
programs shall in no event be less than that set forth herein. The foregoing
right of first refusal shall not apply with respect to the programs entitled
"Sleeping Beauty" and "Peter and the Wolf".
5. Term. The term of this Agreement shall commence on the date hereof and
shall continue until Composers have fully rendered the required services
hereunder.
6. Compensation. As consideration for all services rendered by Composers
hereunder and all rights granted to Company hereunder:
Lender and Zippel shall be entitled to receive the following compensation,
to be paid in equal amounts to Lender and Zippel:
(a) A one-time payment of Fifteen Thousand ($15,000.00) Dollars per
Composition, payable one-half upon execution hereof and one-half upon the
delivery by Composers to Company of the Compositions. The foregoing amount is a
non-returnable, non-recoupable fee for services.
(b) If the Program is broadcast on network television, a one-time
payment of Twenty-Five Thousand ($25,000.00) Dollars per Composition or portion
thereof contained in such broadcast of the Program, payable upon the first
broadcast of the Program;
(c) If the Program is broadcast on basic cable television, a
one-time payment of Five Thousand ($5,000.00) Dollars per Composition or
portion thereof contained in such broadcast of the Program, payable upon the
first broadcast of the Program;
(d) If the Program is broadcast on pay cable or pay-per-view
television, a one-time payment of Fifteen Thousand ($15,000.00) Dollars per
Composition or portion thereof contained in such broadcast of the Program,
payable upon the first broadcast of the Program;
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(e) If the Program is adapted into a motion picture, a one-time
payment of of Fifty Thousand ($50,000.00) Dollars per Composition or portion
thereof contained in such motion picture of the Program, payable upon Company's
securing access to the financing of a substantial portion of the budget of such
motion picture of the Program;
(f) If the Program is released as a home videocassette, a royalty of
Fifteen ($0.15) Cents per Composition or portion thereof contained on such
videocassette of the Program, payable with respect to each videocassette of the
Program distributed and sold.
(g) With respect to performances of the Program before a live
audience, two and one-half (2-1/2%) percent of the gross weekly box office
receipts of the Program. As used herein, "gross weekly box office receipts"
shall mean all sums received from ticket sales to the Program allocable to
performances given in such week, less all applicable federal and other admission
taxes or similar taxes which may be now or hereafter imposed upon admission; any
and all booking commissions, charges or expenses (provided that the contract
with the venue at which such production of the Program is being presented allows
deduction of such commissions against gross weekly box office receipts); any
customary fees or commissions actually paid in connection with subscriptions,
theater parties, group sales or benefits, telephone charge services, credit card
organizations such as, American Express, and automatic ticket distribution or
remote box offices; discounts applicable to subscriptions, theater parties,
group sales or benefits and/or organizations similar to TKTS; and library
discounts and commissions, entertainment taxes, admission taxes, federal, state
or municipal, value added taxes, and foreign artist union taxes, if any.
(h) Owners and Composers acknowledge that (i) Company will not be
required to pay any additional compensation in connection with the use of the
Compositions for news clips, advertising or other promotional purposes and (ii)
the one-time payments referred to in this paragraph 2 shall not apply with
respect to broadcast of a portion of the Program in connection with a segment of
a news, current events, news magazine or similar type of program.
7. Soundtrack.
(a) In addition to the compensation set forth in paragraph 6, with
respect to any Soundtrack Album, Company shall cause the applicable record label
to pay directly to Lender and Zippel a royalty of two and one-half (2-1/2%)
percent of the suggested retail list price for top-line, full priced net sales
of Soundtrack Albums sold throughout the world. Royalties under this paragraph
(a) will be computed, calculated and paid on the same basis (e.g., packaging
deductions, free goods, reserves, discounts, return policy, taxes, etc.), and at
the same times as royalties are computed, calculated, adjusted, reduced and paid
to Company by the applicable record label or distributor. In addition to the
foregoing, Company shall pay to Lender
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and Zippel an amount equal to two and one-half (2-1/2%) percent of any
non-returnable advance received by Company with respect to a Soundtrack Album.
(b) In the event Company or its licensee releases a Soundtrack
Album, Company shall pay (or cause its licensee to pay directly) to Lender
and/or Zippel, or their designees: (a) a mechanical license royalty of one
hundred (100%) percent of the minimum compulsory license rate under the United
States copyright law on the date of delivery of a Soundtrack Album to the
applicable record company based on net sales of albums distributed and sold in
the United States; (b) a mechanical license royalty of one hundred (100%)
percent of the minimum compulsory license rate under the Canadian copyright law
on the date of delivery of a Soundtrack Album to the applicable record company
based on net sales of albums distributed and sold in Canada, and (c) a
mechanical license royalty for records distributed and sold outside of the
United States and Canada at one hundred (100%) percent of the standard rate
payable in the territory of distribution on the date of delivery of a Soundtrack
Album to the applicable record company based on net sales of albums distributed
and sold in such territory.
(c) Owners and Composers hereby grant to Company the right to enter
into an agreement for a Soundtrack Album provided that such agreement shall be
subject to Owner's and Composers' reasonable approval, not to be unreasonably
withheld or delayed.
8. Accounting. Company will use its best efforts to insure that all monies due
pursuant to paragraphs 6 and 7 will be paid directly to Lender and/or Zippel, as
the case may be, by the parties with whom Company has contracted. Company will
use its reasonable effort to insure that all such parties shall send copies of
all statements sent to Company directly to Lender and/or Zippel, as the case may
be. In the event any payments are not made directly to Lender or Zippel, Company
will compute any royalties due hereunder as of each June 30th and December 31st
for the prior calendar half year. Within ninety (90) days from the end of each
calendar half year (or at such intervals as Company is paid by the applicable
distributor), Company will send to Lender and/or Zippel, as the case may be, a
statement covering those royalties and will pay any royalties which are then
due. If Company makes any overpayment hereunder, the recipient of such
overpayment will reimburse Company for it; Company may also deduct it from any
payments due or becoming due to the recipient of such overpayment. Company will
maintain books and records with respect to monies received from the exploitation
of the Compositions. Owners may, at their own expense, examine those books and
records related solely to the monies received from the exploitation of the
Program, for the purpose of verifying the accuracy of the statements sent to it
hereunder. Owners may make such an examination for a particular statement only
once during any twelve (12) month period and only during Company's usual
business hours, and at the place where it keeps the books and records to be
examined. Owners will notify Company at least thirty (30) days before the date
when it plans to begin an examination. Owners may appoint a certified
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<PAGE>
public accountant to make such an examination for them. Company will use its
best efforts to insure that Owners have the right to directly audit, soley with
respect to the Compositions, the books and records of any third party with whom
Company contracts.
9. Termination. In the event Company terminates Composer's services hereunder
without legal justification or reasonable cause, then, Company shall pay Lender
and/or Zippel, as the compensation set forth herein in the same manner and at
the same times as such compensation would otherwise be payable.
10. Credit. Composers shall receive credit with respect to each Composition
included in the Program on two separate lines in the form of "Music by Marvin
Hamlisch, Lyrics by David Zippel" as follows: (i) in the playbill or other
program for live performances of the Program, (ii) screen credit on a separate
card in the main titles of any television broadcast or motion picture of the
Program (or the end titles thereof if the producer, director and writer credits
only appear in the end titles) and (iii) in all paid advertising for the Program
where principal creators of the Program receive credit (whether for a live,
motion picture, television or videotape production of the Program or a
Soundtrack Album) issued by or under Company's direct control in which the
billing block appears.
11. Confidentiality. This Agreement and the contents hereof constitute a
confidential business relationship among the parties. Company acknowledges
that significant damage could be done to Owners and Composers should the
financial terms of this Agreement become public knowledge. Company agrees that
it will not reveal the terms of this Agreement to any third party (excluding
agents, attorneys, representatives and others to whom it has a legal obligation
to disclose such information, including, without limitation, ABC Video
Productions, Inc.) and that it will exercise reasonable precautions to insure
that neither Company nor its employees or agents shall allow the terms of this
Agreement to become public knowledge except as shall be necessary to fulfill the
terms of this Agreement. In connection with the foregoing, Company acknowledges
that the services of Composers are being supplied to Company at a significantly
reduced fee as an accommodation to Company and Company agrees that, in the event
of a breach by Company, an employee or an agent of Company of the terms of this
paragraph 11, Company shall pay to the Owners the additional amount of Fifty
Thousand ($50,000.00) Dollars as additional compensation hereunder.
12. Assignment. Company shall have the right to assign this Agreement, provided
that the assignee assumes all of Company's obligation hereunder in writing and
Company shall remain secondarily liable hereunder. Owners shall not have the
right to assign this Agreement until Owners' and Composers' services are
completed without Company's prior written consent. This Agreement shall inure to
the benefit
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of Company and Owners' and Composers' successors, assigns, licensees and
grantees, as the case may be.
13. Notices. All notices hereunder shall be in writing and shall be given by
personal delivery, registered or certified mail or telegraph (prepaid), at the
addresses shown above, or such other address or addresses as may be designated
by either party. Notices shall be deemed given when mailed or delivered to a
telegraph office, except that notice of change of address shall be effective
only from the date of its receipt. All notices to Company shall be sent to the
attention of Mr. Barry Mendelson. Copies of all notices to Lender, Composers or
Owners shall be sent to Shukat Arrow Hafer & Weber, L.L.P., 111 West 57th
Street, Suite 1120, New York, New York 10019, Attention: Allen H. Arrow, Esq.
Copies of all notices to Company shall be sent to Levy & Freundlich, LLP, 501
Madison Avenue, New York, New York 10022, Attention: Benton J. Levy, Esq.
14. Travel. If Composers are required, pursuant to a specific request by
Company, to travel in connection with the rendition of services hereunder,
Company shall reimburse Composers for reasonable first class travel and
accommodation living expenses.
15. Miscellaneous.
(a) This Agreement has been entered into in the State of New York and the
validity, interpretation and legal effect of this Agreement shall be governed by
the laws of the State of New York applicable to contracts entered into in the
State of New York. The New York Courts (State and Federal) only, will have
jurisdiction of any controversies regarding this Agreement; any action or other
proceeding which involves such a controversy will be brought in those courts,
and not elsewhere. Any process in any such action or proceeding may, among other
methods, be served upon either party by delivering it or mailing it, by
registered or certified mail, directed to the address first above written or
such other address as such party may designate pursuant to paragraph 13. Any
such delivery or mail service shall be deemed to have the same force and effect
as personal service within the State of New York.
(b) This Agreement contains the entire understanding of the parties hereto
relating to the subject matter hereof and cannot be changed or terminated except
by an instrument signed by the parties hereto. A waiver by either party of any
term or condition of this Agreement in any instance shall not be deemed or
construed as a waiver of such term or condition for the future, or of any
subsequent breach thereof. All remedies, rights, undertakings, obligations, and
agreements contained in this Agreement shall be cumulative and none of them
shall be in limitation of an other remedy, right, undertaking, obligation or
agreement of either party. If any provision of this Agreement shall be held
void, voidable, invalid or inoperative, the same shall not affect any other
provision of this agreement.
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(c) This Agreement may be executed in counterparts, each of which
constitutes an original and both of which together constitute one and the same
instrument, which shall be binding and effective as to both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
FTI, INC.
By: /s/ BARRY MENDELSON
----------------------------------
Name:
Title:
MARVIN HAMLISCH, INC.
By: /s/ MARVIN HAMLISCH
----------------------------------
Name:
Title:
/s/ DAVID ZIPPEL
- - ------------------------------------
David Zippel
ACKNOWLEDGED AND AGREED WITH RESPECT
TO PARAGRAPH 11
CAPITAL CITIES/ABC VIDEO PUBLISHING, INC.
By: [signature illegible]
----------------------------------
Name:
Title:
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INDUCEMENT
In order to induce FTI, Inc. ("Company") to enter into the above agreement
with Marvin Hamlisch, Inc. ("Lender") and David Zippel (the "Agreement"), Marvin
Hamlisch ("Hamlisch"):
1. Assents to the execution of the Agreement and agrees to be bound
by all grants, restrictions, and other provisions of it relating to Hamlisch;
and
2. Acknowledges that Company will have no obligation to make any
payments to Hamlisch in connection with the services rendered by Hamlisch.
3. Guarantees, absolutely and unconditionally, the full performance
by Lender of all of Lender's obligations under the Agreement; and
4. Agrees to indemnify and hold Company harmless from any loss,
damage, liability or expense (including, but not limited to outside attorneys,
fees and legal expenses) which arise from any failure by Lender to fulfill
Lender's obligations under the Agreement, or which are incurred by Company in
the enforcement of its rights under this guarantee.
5. Hamlisch's liability under this guarantee is direct and
immediate, and is not conditioned upon the pursuit by Company of any remedy it
may have against Lender.
Dated: /s/ MARVIN HAMLISCH
---------------------- ----------------------------
MARVIN HAMLISCH
<PAGE>
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[D&F LETTERHEAD]
March 28, 1996
Barry Mendelson
On Ice, Inc.
517 North Robertson Boulevard
Suite #200
Los Angeles, California 90048
Dear Barry:
In accordance with Paragraph 17 of the Agreement dated March 28, 1995, I
just wanted to confirm in writing that D&F has exercised its option to renew the
Agreement within ninety (90) days after the completion of the Tour and that moth
parties. D&F and On Ice, have agreed that all terms and conditions of said
Agreement remain the same except as provided below:
1. Under Paragraph 1.b. of the Agreement and Paragraph A.2. of Exhibit A,
both parties agree that the following skaters are acceptable if
Producer is able to secure them for the show: Katerina Gordeeva, Nancy
Kerrigan, Brian Orser, and Viktor Petrenko.
2. Under Paragraph A.3. of Exhibit A, the Tour dates for the A Company
shall be from December 1 through December 30, 1996.
3. Under Paragraph A.5. of Exhibit A, the television broadcast shall be on
NBC on New Year's Day, Wednesday, January 1, 1997. In addition, both
parties have consented to the two (2) year agreement reached with ESPN
to rebroadcast the 1995 Show in 1996 and the 1996 Show in 1997 for a
gross fee of $85,000 and $95,000, respectively, before deduction for
production costs and commissions.
4. Under Paragraph B.2., all arena tickets allocated to Sponsors shall be
delivered to Sponsors no later than November 1, 1996.
5. Under Paragraph D.5., in addition to the one (1) title sponsor, it is
anticipated that there may be up to fourteen (14) support sponsors, of
which four (4) may be Tour-only Sponsors without any commercial units.
6. Add a new Paragraph 4. to Exhibit B, stating as per our discussion and
agreement, Producer shall have the right to secure up to two (2) Tour
Sponsors at a full sponsorship level that includes four (4) commercial
units on the NBC Telecast. If Producer is successful in securing the
commitment from Tyson's Food and/or another company not competitive
with any existing corporate sponsor, prior to June 1, then On Ice will
be entitled to retain the incremental sponsorship revenue receive per
Sponsor over and above $75,000 each, with D&F receiving a minimum of
$75,000 per Sponsor. Producer shall continue to have the right to
secure such Tour Sponsors after June 1, 1996, but only on an "as
available basis."
<PAGE>
<PAGE>
[TLC LOGO]
AGREEMENT
Date: as of April 3, 1996
TLC ENTERTAINMENT BEACHPORT ENTERTAINMENT
- - ----------------- -----------------------
DIGITAL GROUP
-------------
"TLC" "BEACHPORT"
3965 Carpenter Ave. 517 North Robertson, Suite 200
Studio City, CA. 91604 Los Angeles, CA 90048
Contact: Mr. George Taweel 429 Santa Monica Blvd. (After 4/15/96)
Ph: (818) 760-7222 Santa Monica, CA 90404
Fax: (818) 760-8309 Contact: Mr. Chris Riggs
Ph: (310) 278-5114
Fax:_________________________
Fed. ID No.:_________________
RE: McGEE'S NEW BIBLE FOR KIDS CD-ROM (working title)
This Agreement is made as of April 3, 1996 between TLC Entertainment ("TLC"), a
California Joint Venture, and Beachport Entertainment Digital Group
("Beachport"), a California Corporation, whereby Beachport agrees to provide
software design, development, and production services to TLC as the technology
company responsible for the production of the CD-ROM product, tentatively
entitled "McGee's New Bible for Kid's CD-ROM".
1. Services. Beachport hereby agrees to perform, in consultation with TLC and
to TLC's satisfaction, all software design, technological, and production
services ("Services") necessary to complete a fully functional interactive
CD-ROM product based on and/or related to the McGee and Me! video series
(the "Series"), tentatively entitled "McGee's New Bible for Kid's CD-ROM"
(the "Product"). The Product structure will be based upon the presentation
written by TLC and Beachport dated February 7, 1996 (MCD-ROM 105), and
attached herein as Exhibit A.
TLC/Beachport Deal-McGee CD-ROM Page 1.
[TLC LETTERHEAD]
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TLC will be responsible for securing distribution outlets for the product,
including negotiating the Tyndale Deal, as noted below. TLC will also be
responsible for attempting to secure a general market distributor prior to
April 15, 1996, or thereafter, if Tyndale unable to successfully execute
those rights.
Based on the deal ("Tyndale Deal") drafted between the parties (dated March
7, 1996, signed March 14, 1996), Tyndale New Media ("Tyndale"), a division
of Tyndale House Publishers, shall serve as the religious distributor of
the product (and potentially the general market distributor). Beachport and
TLC shall be bound by the terms of that agreement, which has been attached
hereto as Exhibit B, except as amended herein.
The following shall serve as amendments to the March 7, 1996 Tyndale Deal.
Beachport shall perform the Services by delivering the completed concept
design document to TLC by no later then Friday, March 29, 1996. Final
delivery of the "gold master" to TLC will be on or before August 5, 1996.
2. Content. The bulk of the content will be provided by Tyndale, per the
Tyndale Deal; however, Beachport will be responsible for working with TLC
to set reasonable deadlines for the content rewrites, or new or adapted
material that TLC is providing.
3. Approvals. All Work ("Work") produced and provided by Beachport must be
approved by TLC prior to delivery to Tyndale. Beachport will provide
sufficient time for TLC to comment on material, and will make necessary
changes prior to delivery to Tyndale.
4. Funding. The Production Budget for this project has been set at $150,000.
The Funding will be through advances from Tyndale, and potentially other
distributors, as well as funding and deferred compensation from both
Beachport and TLC.
Per the Tyndale Deal, Tyndale will advance $50,000 ("Tyndale's Advance"),
which will be split $15,000 to TLC and $35,000 to Beachport. The payment to
Beachport will be broken down as follows:
TLC/Beachport Deal-McGee CD-ROM Page 2.
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$10,000 Upon TLC's receipt of Tyndale payment (Beachport
acknowledges that TLC Check #101 was paid in this
amount on March 18, 1996)
$16,250 Upon signature of this agreement
$ 8,750 Within fifteen days of Final Delivery payment from Tyndale
-------
$35,000
Of the remaining $100,000 production budget, it is understood that both
Beachport and TLC will be responsible for funding their own company
expenses, including development and travel.
Any additional advances that are able to be secured through new or existing
distributors shall first be split with Tyndale as described in the Tyndale
Deal, thereafter, the remaining funds shall be split 50% to TLC and 50% to
Beachport.
5. Recovery & Profits. The profit percentages received by TLC and Beachport
shall be based on the Tyndale Deal, however, payments from Tyndale will be
made directly to TLC. As such, Tyndale will recoup its advance prior to any
profit split; however, when recoupment is attained, and profits shall be
split 50% to TLC and 50% to Beachport. Within thirty days of TLC's receipt
of profits, if any, from Tyndale, TLC will distribute to Beachport its
share at the address listed in this agreement.
6. Administrative Costs. The tracking of residuals, general accounting, and
Administrative procedures shall be handled by TLC. Any direct
Administrative Costs will be deducted prior to the profit split. TLC will
attempt to keep these costs as minimal as possible.
7. Equipment. Beachport shall provide all equipment and supplies necessary for
performance of the Services and shall be solely responsible for any and all
costs and expense incurred by Beachport in the performance of Services
hereunder, including, but not limited to, the Technical Support provisions
of the Tyndale Deal.
8. Technology. Certain new technological developments will be created for this
project. It is understood that in any future deals
TLC/Beachport Deal-McGee CD-ROM Page 3.
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between Beachport and TLC these technological developments may be used
without additional charges to Beachport or TLC.
9. Copyright. The copyright on any material created for this project by TLC
and Beachport will be shared by TLC and Beachport.
10. Standard Terms and Conditions. TLC and Beachport agree that the Standard
Terms and Conditions attached hereto as Exhibit "C" shall constitute an
integral part of this Agreement and are hereby incorporated into this
Agreement. If any provision set forth above conflicts (or is construed to
conflict) with any provision of the Standard Terms and Conditions, the
provisions hereinabove set forth shall control.
TLC: Beachport:
TAWEEL-LOOS & COMPANY BEACHPORT ENTERTAINMENT
ENTERTAINMENT DIGITAL GROUP
By: /s/ GEORGE TAWEEL By: /s/ CHRIS RIGGS
------------------------ --------------------------
George Taweel Chris Riggs
Its: Partner Its: President
------------------------ --------------------------
By: /s/ ROB LOOS
------------------------
Rob Loos
Its: Partner
------------------------
TLC/Beachport Deal-McGee CD-ROM Page 4.
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THIS AGREEMENT is made as of the 24 day of APRIL, 1996, between FTI, Inc.,
c/o Beachport Entertainment Corp., 517 N. Robertson Blvd., Suite 200, Los
Angeles, California 90048 ("Company") and Gorfine & Schwartz Agency, 3301
Barchan Blvd., Los Angeles, California 90068 (referred to herein as "Composer")
in connection with the creation of an original music score by Composer for the
"Fairy Tales On Ice" program presently entitled "Through The Looking Glass" and
starring Nancy Kerrigan (the "Program").
1. Services. (a) Company hereby employs Composer to compose, arrange and
orchestrate an original, approximately sixty (60) minute, musical score (the
"Score") intended for initial use in the Program and any prequels, sequels,
spin-offs or remakes thereof; to record, and deliver to Company "film mixes"
and, at the election of Company, "record mixes" of the Score reasonably
acceptable to Company; and to conduct an orchestra to record the Score.
(b) All of Company's obligations under this Agreement are conditioned upon
the completion by Composer, to Company's reasonable satisfaction, of an I.N.S.
Employment Eligibility Verification Form ("Form I-9") and upon the submission to
Company of original documents satisfactory to Company to prove Composer's
employment eligibility.
2. License and Grant of Rights.
(a) Composer hereby grants to Company, its licensees and assigns, the
following exclusive rights and licenses, throughout the world and in perpetuity,
in all media, whether now known or hereafter devised (including, without
limitation, theatrical, non-theatrical, home video, free, pay and satellite
television):
(i) to record and synchronize all or any portion of the Score in timed
relation with visual images of the Program (including promos, clips, advertising
and trailers), and to re-record, reproduce and otherwise make copies of the
Score as synchronized with the Program in any and all visual or audiovisual
formats, including for use in television and radio commercials, but only for
purposes of news and for promotion of the Program;
(ii) to record, reproduce and otherwise make copies of the Score in any
mechanical format, as a soundtrack album of the Program (a "Soundtrack Album");
(iii) to market, sell, distribute or disseminate to the public copies
of the Program and a Soundtrack Album by sale, rental, license, lease or
otherwise, in any and all formats; and
(iv) the right to exercise any of the rights granted in subparagraphs
(i), (ii) and (iii) above with respect to a compilation program of the Program
along with portions of any other "Fairy Tales" program(s) produced by Company or
a compilation soundtrack album of the score and/or compositions from the
Program along with compositions and/or the score from other "Fairy Tales"
programs produced by Company (as used herein, "Program" or "Soundtrack" shall be
deemed to include any such compilation program or soundtrack as appropriate).
1
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(v) subject to the rights of regularly established performing rights
societies, to broadcast, exhibit, display and/or perform the Score publicity in
connection with the Program (it being understood that Composer or his designee
shall be entitled to receive one hundred (100%) percent of the writer's and
publisher's shares of performance royalties for television/radio performances
from any performing right society to which Company belong).
(b) Company shall have the right and may grant to others the right to
reproduce, print, publish, or disseminate Composer's name, approved picture,
approved likeness and approved biographical information in connection with the
Program for advertising purposes.
(c) As between Company and Composer and/or his respective designees,
Composer shall own all right, title and interest, including, without limitation,
the copyright and any renewals or extensions thereof, throughout the universe,
in the Score.
(d) It is understood and agreed that Company's exclusive rights in and to
the Score is granted in connection with the Program and a Soundtrack Album and
that Company may only use the Score in the Program (in any and all visual
formats in which the Program might be delivered, transmitted or reproduced,
including, without limitation, live performances of the Program), a Soundtrack
Album (in any audio formats in which a Soundtrack Album might be delivered,
transmitted or reproduced) and in the advertising, promotion and marketing of
the foregoing, and for no other purpose. Composer hereby expressly reserves all
rights not specifically granted to Company hereunder. Notwithstanding the
foregoing, Composer agrees that he will not solicit a recording of the Score
by a third party until the date which is twelve (12) months following the
earlier of (i) recording or a videocassette of the Program or (ii) release of a
videocassette of the Program.
3. Delivery: Composer shall deliver the Score to Company in such form as Company
shall reasonably request by April 12, 1996.
4. Term: The term of this Agreement shall commence on the date hereof and shall
continue until Composer has fully rendered the required services hereunder.
5. Compensation: As consideration for all services rendered by Composer
hereunder and all rights granted to Company hereunder.
Composer shall be entitled to receive the following compensation:
(a) A one-time payment of Five Thousand ($5,000) Dollars, payable
one-half upon execution hereof and one-half upon the delivery by Composer to
Company of the Score. The foregoing amount is a non-returnable, non-recoupable
fee for Composer's services;
(b) If the Program is broadcast on network prime time television, a
one-time payment of Twenty-Five Thousand ($25,000) Dollars if the Score is
contained in such broadcast
2
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of the Program, payable upon the first broadcast of the Program;
(c) If the Program is broadcast on non-prime time network television,
a one time payment of Fifteen Thousand Dollars ($15,000) if the Score is
contained in such broadcast of the Program, payable upon the first broadcast of
the Program;
(d) If the Program is broadcast on basic cable television, a one-time
payment of Five Thousand ($5,000) Dollars if the Score is contained in such
broadcast of the Program, payable upon the first broadcast of the Program;
(e) If the Program is broadcast on pay cable or pay-per-view
television, a one-time payment of Fifteen Thousand ($15,000) Dollars if the
score is contained in such broadcast of the Program, payable upon the first
broadcast of the Program;
(f) If the Program is released as a home videocassette and embodies
the Score, a royalty of Thirty ($0.30) Cents payable with respect to each
videocassette of the Program distributed and sold.
(h) With respect to performances of the Program before a live
audience, two and one-half (2-1/2%) percent of the gross weekly box office
receipts of the Program. As used herein, "gross weekly box office receipts"
shall mean all sums received from ticket sales to the Program allocable to
performances given in such week, less all applicable federal and other admission
taxes or similar taxes which may be now or hereafter imposed upon admission; any
and all booking commissions, charges or expenses (provided that the contract
with the venue at which such production of the Program is being presented allows
deduction of such commissions against gross weekly box office receipts); any
customary fees or commissions actually paid in connection with subscriptions,
theater parties, group sales or benefits, telephone charge services, credit card
organizations such as, American Express, and automatic ticket distribution or
remote box offices; discounts applicable to subscriptions, theater parties,
group sales or benefits and/or organizations similar to TKTS; and library
discounts and commissions, entertainment taxes, admission taxes, federal, state
or municipal, value added taxes, and foreign artist union taxes, if any.
(i) Composer acknowledges that (i) Company will not be required to pay
any additional compensation in connection with the use of the Score for news
clips, advertising or other promotional purposes and (ii) the one-time payments
referred to in this paragraph 2 shall not apply with respect to broadcast of a
portion of the Program in connection with a segment of a news, current events,
news magazine or similar type of program.
6. Soundtrack
(a) In addition to the compensation set forth in paragraph 6, with
respect to any Soundtrack Album, Company shall cause the applicable record label
to pay directly to Composer
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a royalty of two and one-half (2-1/2%) percent of the suggested retail list
price for top-line, full priced net sales of Soundtrack Albums sold throughout
the world. Royalties under this paragraph (a) will be computed, calculated and
paid on the same basis (e.g., packaging deductions, free goods, reserves,
discounts, return policy, taxes, etc.), and at the same time as royalties are
computed, calculated, adjusted, reduced and paid to Company by the applicable
record label or distributor. In addition to the foregoing, Company shall pay to
Composer an amount equal to two and one-half (2-1/2%) percent of any
non-returnable advance, if any, received by Company with respect to a Soundtrack
Album.
(b) In the event Company or its licensee releases a Soundtrack Album,
Company shall pay (or cause its licensee to pay directly) to Composer, or his
designees: (a) a mechanical license royalty of one hundred (100%) percent of the
minimum compulsory license rate under the United States copyright law on the
date of delivery of a Soundtrack Album to the applicable record company based on
net sales of albums distributed and sold in the United States; (b) a media copy
original; and (c) a mechanical license royalty for records distributed and sold
outside of the United States and Canada at one hundred (100%) percent of the
standard rate payable in the territory of distribution on the date of delivery
of a Soundtrack Album to the applicable record company based on net sales of
albums distributed and sold in such territory.
(c) Composer hereby grants to Company the right to enter into an
agreement for a soundtrack Album.
7. Accounting. Company will use its reasonable efforts to insure that all monies
due pursuant to Composer pursuant to paragraphs 6 and 7 will be paid directly to
Composer, by the parties with whom Company has contracted. Company will use its
reasonable effort to insure that all such parties shall send copies of all
statements sent to Company directly to Composer. In the event any payments are
not made directly to Composer, Company will compute any royalties due hereunder
as of each June 30th and December 31st for the prior calendar half year. Within
ninety (90) days from the end of each calendar half year (or at such intervals
as Company is paid by the applicable distributor), Company will send to Composer
a statement covering those royalties and will pay royalties which are then due.
If Company makes any overpayment hereunder, Composer will reimburse Company for
it; Company may also deduct it from any payments due or becoming due to the
recipient of such overpayment. Company will maintain books and records with
respect to monies received from the exploitation of the Score. Composer may, at
its own expense, examine those books and records related solely to the monies
received from the exploitation of the Program, for the purposes of verifying the
accuracy of the statements sent to it hereunder. Composer may make such an
examination for a particular statement only once during any twelve (12) month
period and only during Company's usual business hours, and at the place where it
keeps the books and records to be examined. Composer will notify Company at
least thirty (30) days before the date when it plans to begin an examination.
Composer may appoint a certified public accountant to make such an examination
for them. Company will use its best efforts to insure that Composer has the
right to directly audit, solely with respect to the Score, the books and records
of any third party with whom Company contracts.
4
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8. Termination. In the event Company terminates Composer's services hereunder
without legal justification or reasonable cause, then, Company shall pay
Composer, as the compensation set forth herein in the same manner and at the
same times as such compensation would otherwise be payable.
9. Credit. Composer shall receive credit with respect to the score included in
the Program on two separate lines in the form of "Score by Ron Grant" as
follows: (i) in the playbill or other program for live performances of the
Program, (ii) screen credit on a separate card in the main titles of any
television broadcast or motion picture of the Program (or the end titles thereof
if the producer, director and writer credits only appear in the end titles) and
(iii) in all paid advertising for the Program where principal creators of the
program receive credit (whether for a live, motion picture, television or
videotape production of the Program or a Soundtrack Album) issued by or under
Company's direct control in which the billing block appears.
10. Assignment. Company shall have the right to assign this Agreement, provided
that the assignee assumes all of Company's obligation hereunder in writing and
Company shall remain secondarily liable hereunder. Composer shall not have the
right to assign this Agreement until Composer's services are completed, without
Company's prior written consent. This Agreement shall inure to the benefit of
Company and Composer's successors, assigns, licensees and grantees, as the case
may be.
11. Notices. All notices hereunder shall be in writing and shall be given by
personal delivery, registered or certified mail or telegraph (prepaid), at the
addresses shown above, or such other addresses as may be designated by either
party. Notices shall be deemed given when mailed or delivered to a telegraph
office, except that notice of change of address shall be effective only from the
date of its receipt. All notices to Composer shall be sent to the attention of
Cheryl Tiano at the address first written above. Copies of all notices to
Company shall be sent to Levy & Freundlich, LLP, 501 Madison Avenue, 19th Floor,
New York, New York 10022, Attention: Benton J. Levy, Esq.
12. Miscellaneous.
(a) This Agreement has been entered into in the State of New York and the
validity, interpretation and legal effect of this Agreement shall be governed by
the laws of the State of New York applicable to contracts entered into in the
State of New York. The New York Courts (State and Federal) only, will have
jurisdiction of any controversies regarding this Agreement; any action or other
proceeding which involves such a controversy will be brought in those courts,
and not elsewhere. Any process in any such action or proceeding may, among other
methods, be served upon either party by delivering it or mailing it, by
registered or certified mail, directed to the address first above written or
such other address as such party may designate pursuant to paragraph 11. Any
such delivery or mail service shall be deemed to have the same force and effect
as personal service within the State of New York.
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(b) This Agreement contains the entire understanding of the parties hereto
relating to the subject matter hereof and cannot be changed or terminated except
by an instrument signed by the parties hereto. A waiver by either party of any
term or condition of this Agreement in any instance shall not be deemed or
construed as a waiver of such term or condition for the future, or any
subsequent breach thereof. All remedies, rights, undertakings, obligations, and
agreements contained in this Agreement shall be cumulative and none of them
shall be in limitation of any other remedy, right, undertaking, obligation or
agreement of either party. If any provision of this Agreement shall be held
void, voidable, invalid or inoperative, the same shall not effect any other
provision of this agreement.
(c) This Agreement may be executed in counterparts, each of which
constitutes an original and both of which together constitute one and the same
instrument, which shall be binding and effective as to both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
[signature illegible]
- - ----------------------------------------
By: /s/ BARRY MENDELSON
-------------------------------------
Name: Barry Mendelson
Title: President
/s/ Ron Grant
- - ----------------------------------------
RON GRANT
Soc Sec ####-##-####
6
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EMPLOYMENT, NO-COMPETITION AND
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made as of the 30th day of June, 1996 by and between,
BEACHPORT ENTERTAINMENT CORPORATI0N, a Utah corporation, with its principal
office at 517 North Robertson Blvd., Los Angeles, CA 90048 (the "Company"); and,
BARRY MENDELSON, an individual residing at 1835 Elolmby Ave., Apt. 302, Los
Angeles, California 90025 (the "Executive").
RECITAL
WHEREAS, the Company desires to retain the services of the Executive as
an employee of the Company an the terms and conditions as hereinafter set forth;
and
WHEREAS, the Executive is desirous and willing to accept such employ on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises,
the receipt and sufficiency of such mutual consideration which is hereby
acknowledged and confessed by the Company and the Executive, and in order to
induce Company to hire the Executive on the terms and conditions hereinafter set
forth, the Company and the Executive hereby agree as follows:
I.
EMPLOYMENT
The Company shall employ the Executive as a full time employee, as
President and Chief Operating Officer of the Company. The Executive hereby
accepts such employment with the Company, upon the terms and conditions
hereinafter set forth.
II.
DUTIES DURING EMPLOYMENT PERIOD
During the Employment Period, the Executive shall act as the President
and Chief Operating Officer and have the responsibility for day-to-day
management of its business. Should the Executive be required to relocate his
residence, the Company shall pay any and all relocation expenses for the
Executive and his family during, the term of this Agreement and any renewals end
extensions thereof. If the Executive is elected as a director of the Company or
any subsidiary of the Company, he will serve in such capacity without additional
compensation. The Executive wil1 devote his full time, skill, labor and
attention to the business of the Company and shall promptly and faithfully,
perform all services pertaining thereto that are or may hereafter be required of
him by the Company, provided that such services shall be consistent with his
position as Chairman and Chief Operating Officer.
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Nothing in this agreement shall preclude the Executive from investing his
personal assets and time in his personal investments, provided that such
investments are not in competition with the business of the Company and that
such activities do not unreasonably interfere with the performance of his duties
hereunder and where the form or manner of such investments will not require
services on the part of the Executive in the operation of the affairs of the
business in which such investments are made and which participation is solely
that of a passive investor.
III.
TERM OF EMPLOYMENT
The employment under Section II of this Agreement shall be for a period
four years (4) commencing on the date hereof and ending at the termination of
this Agreement (the "Employment Agreement"), unless sooner terminated in
accordance with one of the following alternatives:
A. The Executive's employment under Section II, if not already terminated
under clause B of this Section III, may be terminated at any time during the
Employment Period for Cause (as hereinafter defined) by action of the Board of
Directors of the Company upon giving the Executive notice of such termination at
least thirty (30) days prior to the date upon which such termination sha11 take
effect. As used herein, the term "Cause" shall mean any of the following events:
1. The Executive's conviction of or plea of guilty or nolo
contendere to a crime involving breach of trust or fraud;
2. The Executive's failure to follow the good faith
instructions, with respect to the Company, or any of its subsidiaries
and their respective operations, of the Exercise Committee or the Board
of Directors of the Company referred to in Section II following written
notice thereof; or
3. The Executive's gross negligence or willful misconduct, or,
neglect of duties or failure to act with respect to duties or actions
previously communicated to the Executive in writing by the Executive
Committee or the Board of Directors of the Company referred to in
Section II.
If the Executive's employment is terminated under the
provisions of this Clause A, all rights of the Executive pursuant to Section IV
hereof shall cease as of the effective date of such termination.
B. The Executive's employment under Section II may be
terminated at any time following the date which is four (4) years after the date
hereof, by action of the Board of Directors of the Company, upon giving the
Executive notice of such termination at least ninety (90) days prior to the date
on which such termination shall take effect. This Employment
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Agreement will automatically renew for successive one (1) year periods upon the
terms and conditions contained herein unless terminated as provided herein. If
the Executive's employment is terminated under the provisions of this clause B.
his rights pursuant to Section IV shall cease as of the effective date of such
termination.
IV.
EMOLUMENT
A. As base compensation for the services rendered by the Executive
hereunder, the Company will pay him a salary of $200,000 per annum, plus fifty
percent (50%) of the fees generated by Executive as producer for Company related
projects. The aforesaid salary shall initially be payable in 26 equal payments
commencing two (2) weeks from the date hereof, or on such other basis, such as
weekly or monthly as determined by the Board of Directors of the Company. The
Board of Directors of the Company may, from time to time, increase the
Executive's salary or pay such discretionary bonuses as it deems appropriate,
but such increases shall neither affect nor alter the fixed obligation of the
Company as herein provided or referred to.
B. Bonuses and Additional Benefits. The Executive may be awarded bonuses
as agreed and set by the Board of Directors of the Company. Executive shall also
be entitled to, and shall be accorded, all rights and benefits under any
executive incentive plan (including the Company's Stock Option Plan), monetary
bonus plan, participation or extra compensation plan, pension plan, profit
sharing plan, disability insurance, health and major medical insurance policy
or policies, and any other plans or benefits that the Company may from time to
time provide for executives or for any senior officer generally during the
Employment Period. The Company shall accord the Executive such rights and
benefits on a basis no less favorable than any other officer or executive of
the Company or its subsidiaries or affiliates.
C. Vacation and Sick Leave. For each year during which this Agreement is
in effect, Executive shall be entitled to a vacation and sick leave benefits,
without a deduction of salary or other compensation in accordance with the
Company's standard policies, but in no event shall the vacation be less than
three (3) weeks. The Executive sha11 have up to three (3) weeks vacation per
year, provided the Executive works full time each year for the Company and under
the terms of this Agreement. Such vacation shall be taken at such time or times
during such year as may be mutually agreed upon by the Company and the
Executive.
D. Business Expenses. The Executive shall be authorized to incur
reasonable business expenses for promoting the business of the Company,
including expenditures for entertainment, gifts and travel, within the
guidelines as are set by the Board of Directors of the Company and which are
consistent with the Internal Revenue Service guidelines, provided that the
Executive submits vouchers therefor in the form reasonably satisfactory to the
Company.
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E. Insurance. The Company shall include Executive under the Company's
group health and life insurance programs, with the same coverage and options
that are available under said policies to all executives of the Company.
F. Other Benefits. The Company will provide the Executive with fringe
benefits in the aggregate not less favorable than those received generally by
other executives of the Company.
G. Life Insurance. The Company, in its discretion may apply for and
procure as owner and for its own benefit, insurance on the life of the
Executive, in such amounts and in such form or forms as the Company may choose.
V.
DISABILITY & DEATH
A. Disability. Notwithstanding any failure or inability of Executive
during the Employment Period, because of illness, injury or similar incapacity,
whether physical or mental ("Disability"), to perform the obligations as
contemplated by this Agreement, the Company, nevertheless shall continue to pay
Executive the compensation and benefits provided for in Section IV hereof and
all other benefits provided by this Agreement, except as provided otherwise in
this Section V.
1. Obligations of the Company. In the event a Disability of the
Executive continues for a period of more than six (6) consecutive months or six
(6) months in the aggregate out of any period of twelve (12) consecutive months,
the Company may, at its option, at any time on or after the last day of the
aforesaid six month Disability period, by written notice to such Executive (the
"Disability Notice"), declare such Executive "disabled" and this Agreement shall
terminate with no further liability on the part of the Company; however such
notice shall be of no force and effect if such Executive has resumed the duties
and responsibilities provided hereunder prior to the delivery of the Disability
Notice.
2. Continuing Obligations. Notwithstanding the delivery of a Disability
Notice to the Executive, the Company shall continue to pay the Executive his
normal monthly compensation as set forth hereinabove, for a period of six (6)
months following delivery of the Liability Notice (the "Additional Payment
Period"), provided however, that any income received by the "disabled" Executive
during the Employment Period from any disability insurance provided to such
Executive by the Company shall reduce the Company's obligations hereunder. In
addition, during the Additional Payment Period, the Company shall be obligated
to continue the benefits set forth in Section IV herein.
B. Death. In the event of death during the Employment Period of the
Executive, the normal monthly compensation of the Executive shall be paid to
the Executive's estate for a period of one (1) year.
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VI.
COVENANT NOT TO COMPETE
A. The Executive hereby acknowledges and recognizes the highly
competitive and confidential nature of the Company's business of developing,
producing and distributing live family entertainment and made-for-television
features, and for the consideration stated above, accordingly agrees
that during the entire period commencing with the date hereof, the Executive's
employment by the Company, to include (18) months after the termination of the
Executive's employment with the Company, Executive will not directly or
indirectly, in any capacity:
1. Engage in any capacity in any business endeavor which has among
its purposes and/or endeavors to develop, produce or distribute live family
entertainment and/or made-for-television features, to include those which,
during the employment period of Executive, have been developed, marketed or
conceived by the Company, any of its personnel and/or any of its subsidiaries,
within 100 miles in any geographic area, city and/or state in which the
Company's products are operating.
2. Induce employees of the Company, or any of its respective
subsidiaries, to terminate their employment or to engage in any activities
hereby prohibited to the Executive;
3. Contact, communicate or solicit any customer and/or any contact
of the Company derived from any customer list, customer lead, mail, printed
material or other information secured from any association with the Company;
4. Discuss any activities, methods of operation, finances,
confidential practices and private business information of the Company with any
other party.
B. It is expressly understood and agreed that although the Executive and
the Company consider the restrictions contained in clause A above reasonable for
the purpose of reserving for the Company or any of its subsidiaries, their good
will and other proprietary rights, if a final judicial determination is made by
a court having jurisdiction at that time or territory or any other restriction
contained in clause A above is an unreasonable or otherwise unenforceable
restriction against the Executive, the provisions of such clause shall not be
rendered void, but shall be deemed amended to apply as to such maximum time and
territory and to such other extent as such Court may judicially determine or
indicate to be reasonable.
C. As to the reasonableness of the non-competition and restrictive
covenants contained herein, Executive further acknowledges and confesses that he
is capable of making a living in employment areas other than developing,
producing and distributing live family entertainment and made-for-television
features engaged in by the Company, and, that the non-competition and
restrictive covenants contained herein will not in the least manner impair or
interfere with Executive from earning a living after the Executive terminates
relations with the Company.
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VII.
DISCLOSURE OF INFORMATION
The Executive acknowledges that the Company's trade secrets, private or
secret processes as they may exist from time to time, and confidential
information concerning their products, development, all technical information,
procurement and sales activities and procedures, promotion and pricing
techniques and credit and financial data concerning customers are valuable,
special and unique assets of the Company and its subsidiaries, access to and
knowledge of which are essential to the performance of the Executive's duties
hereunder. In light of the highly competitive nature of the industry in which
the Company and its subsidiaries' business is conducted, the Executive further
agrees that all knowledge and information described in the preceding sentence
not in the public domain and heretofore or in the future obtained by him as a
result of this employment by the Company or its subsidiaries shall be considered
confidential information. In recognition of this fact, the Executive agrees that
he will not, during or after the Employment Period, disclose any of such
secrets, processes or information to any person or entity for any reason or
purpose whatsoever, except as is necessary in the performance of his duties as
an employee of the Company or its subsidiaries and then only upon a written
confidentiality agreement in such form and content as requested by the Company
from time to time, nor shall the Executive make use of any such secrets,
processes or information (other than information in the public domain) for his
own purposes or for the benefit of any person or other entity (except the
Company and its subsidiaries) under any circumstances during or after the
Employment Period.
VIII.
COMPANY RIGHT TO COPYRIGHTS, TITLES AND SCRIPTS
A. The Executive shall promptly disclose, grant and assign to the
Company for its sole use and benefit any and all scripts, copyrights, movie
titles, sitcom scripts, and ideas, improvements, technical information and
suggestions relating in any way to the products of the Company or capable of
beneficial use by customers of the Company either past conceived, developed or
acquired, or which he may conceive, develop or acquire during the Employment
Period (whether or not during usual working hours), together with all patent
applications, letters patent, copyrights and reissues thereof that may at any
time be granted for or upon any such invention, improvement or technical
information. In connection therewith, the Executive shall promptly at all times
during and after the Employment Period:
1. Execute and deliver such applications, assignments, descriptions and
other instruments as may be necessary or proper in the opinion of the
Company to vest in the Company title to such inventions, improvements,
technical information, patent applications and to enable it to obtain
and maintain the entire right and title thereto throughout the world;
and
2. Render to the Company, at its expense, all such assistance as it may
require in the prosecution of applications for said patents or reissues
thereof, in the prosecution or
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defense of interferences which may be declared involving any said
application or patents, and any litigation in which the Company or its
subsidiaries may be involved relating to any such patents, inventions,
improvements or technical information.
IX.
REMEDIES
The Executive acknowledges and agrees that Company's remedy at law for a
breach of any of the provisions of Sections VI, VII or VIII would be inadequate
and, in recognition of this fact, in the event of a breach by the Executive of
any of the provisions of the Sections VI, VII or VIII it is agreed that, in
addition to its remedy at law, the Company shall be entitled to, and the
Executive agrees not to oppose the Company's request for, equitable relief in
the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
In the event of any such breach, at the election of the Company, all rights of
the Executive under Section IV shall thereupon terminate. The Executive
acknowledges that the granting of a temporary injunction, temporary restraining
order or permanent injunction merely prohibiting the use of trade secrets and
like proprietary information would not be an adequate remedy upon breach, and
consequently agrees, upon any such breach, to the granting of injunctive relief
prohibiting the developing, producing or distributing of products and services
of the kind developed, produced, distributed or provided by the Company or any
of its subsidiaries during the Executive's employment. Nothing herein contained
shall be construed as prohibiting the Company from pursuing any other remedies
available to it for such breach.
X.
NOTICES
Any notice required or permitted to be given under this Agreement shall
be deemed properly given if in writing and if mailed by registered or certified
mail, postage prepaid with return receipt requested, to his residence in the
case of notices to the Executive, or to the principal office of the Company, to
the attention of its President (with a copy to the Chairman of the Board and
General Counsel) in the case of notice to the Company.
XI.
WAIVER OF BREACH
The waiver by the Company or Executive of a breach of any provision of
this Agreement by the Company or the Executive shall not operate or be construed
as a waiver of any subsequent breach by the Company or the Executive.
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XII.
ASSIGNMENT
This Agreement is assignable by the Company and/or any of its
subsidiaries to any successor in interest of the Company's or its subsidiaries'
business.
XIII.
ENTIRE AGREEMENT
This instrument contains the entire agreement between the Company and
Executive relating to the subject matter hereof, and supersedes and replaces in
its entirety any existing Agreement between Company and the Executive. This
Agreement may not be waived, changed, modified, extended or discharged orally;
but, may be amended and/or changed only by a written instrument duly executed by
an authorized representative of the Company and the Executive hereto and
designated on its face as an "Amendment".
XIV.
FAILURE TO ENFORCE
It is expressly agreed and understood that the waiver by a party of its
rights, or any portion of its rights, under this Agreement in any particular
instance or instances, whether intentional or otherwise, shall not be considered
as a continuing waiver which would prevent the subsequent enforcement of such
rights.
XV.
APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with the
of laws the State of California, the principal place of business of the Company.
XVI.
HEADlNGS
The headings of the Sections hereof are for convenience only and shall
not control or affect the meaning, or construction, or limit the scope or intent
of any of the provisions of this Agreement.
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XVII.
MISCELLANEOUS
It is anticipated that variances and deviations from certain provisions
of this Agreement may be necessary and may be allowed or tolerated, but it is
agreed that such variances or deviations, regardless of number, shall not be
reason for altering or modifying the interpretation of any portion of this
Agreement.
This Agreement shall be binding on the assignees, heirs, administrators,
executors, spouses, successors and legal representatives of both parties hereto.
XVIII.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be an original and all of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Employment Agreement as of date and year first above written.
BEACHPORT ENTERTAINMENT CORPORATION
/s/ Sidney L. Shlenker
---------------------------
By: Sidney L. Shlenker,
Chairman of the Board
/s/ Barry Mendelson
----------------------------
Barry Mendelson, Executive
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<PAGE>
EMPLOYMENT, NON-COMPETITION AND
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made as of the 1st day of October, 1996 by and
between, BEACHPORT ENTERTAINMENT CORPORATION, a Utah corporation, with its
principal office at 517 North Robertson Blvd., Los Angeles, CA 90048 (the
"Company"); and, SIDNEY L. SHLENKER, an individual residing at 1922 Bel Air Rd.,
Bel Air, California 90077, Los Angeles, California 90077 (the "Executive").
RECITAL
WHEREAS, the Company desires to retain the services of the Executive as
an employee of the Company on the terms and conditions as hereinafter set forth;
and
WHEREAS, the Executive is desirous and willing to accept such
employment on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises,
the receipt and sufficiency of such mutual consideration which is hereby
acknowledged and confessed by the Company and the Executive, and in order to
induce Company to hire the Executive on the terms and conditions hereinafter set
forth, the Company and the Executive hereby agree as follows:
I.
EMPLOYMENT
The Company shall employ the Executive as a full time employee, as
Chairman of the Board and Chief Executive Officer of the Company. The Executive
hereby accepts such employment with the Company, upon the terms and conditions
hereinafter set forth.
II.
DUTIES DURING EMPLOYMENT PERIOD
During the Employment Period, the Executive shall act as the Chairman
of the Board and Chief Executive Officer and have the responsibility for
day-to-day management of its business. Should the Executive be required to
relocate his residence, the Company shall pay any and all relocation expenses
for the Executive and his family during the term of this Agreement and any
renewals and extensions thereof. If the Executive is elected as a director of
the Company or any subsidiary of the Company, he will serve in such capacity
without additional compensation. The Executive shall devote his full time,
skill, labor and attention to the business of the Company and shall promptly and
faithfully, perform all services pertaining thereto that are or may hereafter be
required of him by the Company, provided that such services shall be consistent
with his position as Chairman of the Board and Chief Executive Officer. Nothing
in this agreement shall preclude the Executive from investing his personal
assets and time in his personal investments, provided that such investments are
not in competition with the business of the Company and that such activities do
not unreasonably
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interfere with the performance of his duties hereunder and where the form or
manner of such investments will not require services on the part of the
Executive in the operation of the affairs of the business in which such
investments are made and which participation is solely that of a passive
investor.
III.
TERM OF EMPLOYMENT
The employment under Section II of this Agreement shall be for a period
of five years (5) commencing on the date hereof and ending at the termination
of this Agreement (the "Employment Agreement"), unless sooner terminated in
accordance with one of the following alternatives:
A. The Executive's employment under Section II, if not already
terminated under clause B of this Section III, may be terminated at any time
during the Employment Period for Cause (as hereinafter defined) by action of the
Board of Directors of the Company upon giving the Executive notice of such
termination at least thirty (30) days prior to the date upon which such
termination shall take effect. As used herein, the term "Cause" shall mean any
of the following events:
1. The Executive's conviction of or plea of guilty or nolo
contendere to a crime involving breach of trust or fraud;
2. The Executive's failure to follow the good faith instructions,
with respect to the Company, or any of its subsidiaries and their respective
operations, of the Executive Committee or the Board of Directors of the Company
referred to in Section II following written notice thereof; or
3. The Executive's gross negligence or willful misconduct, or,
neglect of duties or failure to act with respect to duties or actions previously
communicated to the Executive in writing by the Executive Committee or the Board
of Directors of the Company referred to in Section II.
If the Executive's employment is terminated under the provisions
of this Clause A, all rights of the Executive pursuant to Section IV hereof
shall cease as of the effective date of such termination.
B. The Executive's employment under Section II may be terminated at any
time following the date which is five (5) years after the date hereof, by action
of the Board of Directors of the Company, upon giving the Executive notice of
such termination at least ninety (90) days prior to the date on which such
termination shall take effect. This Employment Agreement will automatically
renew for successive one (1) year periods upon the terms and conditions
contained herein unless terminated as provided herein. If the Executive's
employment is terminated under the provisions of this clause B, his rights
pursuant to Section IV shall cease as of the effective date of such termination.
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IV.
EMOLUMENT
A. As base compensation for the services rendered by the Executive
hereunder, the Company shall pay him a salary during this Employment Agreement
in an amount as set by the Board of Directors of the Company. The Executive
shall not receive any salary the first year of this Agreement, but shall
thereafter receive an annual salary. The aforesaid salary shall initially be
payable in 26 equal payments commencing two (2) weeks from the date hereof, or
on such other basis, such as weekly or monthly as determined by the Board of
Directors of the Company. The Board of Directors of the Company may, from time
to time, increase the Executive's salary or pay such discretionary bonuses as it
deems appropriate, but such increases shall neither affect nor alter the fixed
obligation of the Company as herein provided or referred to.
B. Bonuses and Additional Benefits. The Executive may be awarded
bonuses as agreed and set by the Board of Directors of the Company. Executive
shall also be entitled to, and shall be accorded, all rights and benefits under
any executive incentive plan (including the Company's Stock Option Plan),
monetary bonus plan, participation or extra compensation plan, pension plan,
profit sharing plan, disability insurance, health and major medical insurance
policy or policies, and any other plans or benefits that the Company may from
time to time provide for executives or for any senior officer generally during
the Employment Period. The Company shall accord the Executive such rights and
benefits on a basis no less favorable than any other officer or executive
of the Company or its subsidiaries or affiliates.
C. Vacation and Sick Leave. For each year during which this Agreement
is in effect, Executive shall be entitled to a vacation and sick leave benefits,
without a deduction of salary or other compensation in accordance with the
Company's standard policies, but in no event shall the vacation be less than
three (3) weeks. The Executive shall have up to three (3) weeks vacation per
year, provided the Executive works full time each year for the Company and under
the terms of this Agreement. Such vacation shall be taken at such time or times
during such year as may be mutually agreed upon by the Company and the
Executive.
D. Business Expenses. The Executive shall be authorized to incur
reasonable business expenses for promoting the business of the Company,
including expenditures for entertainment, gifts and travel, within the
guidelines as are set by the Board of Directors of the Company and which are
consistent with the Internal Revenue Service guidelines, provided that the
Executive submits vouchers therefore in the form reasonably satisfactory to the
Company.
E. Insurance. The Company shall include Executive under the Company's
group health and life insurance programs, with the same coverage and options
that are available under said policies to all executives of the Company.
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F. Other Benefits. The Company will provide the Executive with fringe
benefits in the aggregate not less favorable than those received generally by
other executives of the Company.
G. Life Insurance. The Company, in its discretion may apply for and
procure as owner and for its own benefit, insurance on the life of the
Executive, in such amounts and in such form or forms as the Company may choose.
V.
DISABILITY & DEATH
A. Disability. Notwithstanding any failure or inability of Executive
during the Employment Period, because of illness, injury or similar incapacity,
whether physical or mental ("Disability"), to perform the obligations as
contemplated by this Agreement, the Company, nevertheless shall continue to pay
Executive the compensation and benefits provided for in Section IV hereof and
all other benefits provided by this Agreement, except as provided otherwise in
this Section V.
1. Obligations of the Company. In the event a Disability of the
Executive continues for a period of more than six (6) consecutive months or six
(6) months in the aggregate out of any period of twelve (12) consecutive months,
the Company may, at its option, at any time on or after the last day of the
aforesaid six month Disability period, by written notice to such Executive (the
"Disability Notice"), declare such Executive "disabled" and this Agreement shall
terminate with no further liability on the part of the Company; however such
notice shall be of no force and effect if such Executive has resumed the duties
and responsibilities provided hereunder prior to the delivery of the Disability
Notice.
2. Continuing Obligations. Notwithstanding the delivery of a
Disability Notice to the Executive, the Company shall continue to pay the
Executive his normal monthly compensation as set forth hereinabove, for a period
of six (6) months following delivery of the Liability Notice (the "Additional
Payment Period"), provided however, that any income received by the "disabled"
Executive during the Employment Period from any disability insurance provided to
such Executive by the Company shall reduce the Company's obligations hereunder.
In addition, during the Additional Payment Period, the Company shall be
obligated to continue the benefits set forth in Section IV herein.
B. Death. In the event of death during the Employment Period of the
Executive, the normal monthly compensation of the Executive shall be paid to the
Executive's estate for a period of one (1) year.
VI.
COVENANT NOT TO COMPETE
A. The Executive hereby acknowledges and recognizes the highly
competitive and confidential nature of the Company's business of developing,
producing and distributing live
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family entertainment and made-for-television features, and for the consideration
stated above, accordingly agrees that during the entire period commencing with
the date hereof, the Executive's employment by the Company, to include (18)
months after the termination of the Executive's employment with the Company,
Executive will not directly or indirectly, in any capacity:
1. Engage in any capacity in any business endeavor which has among
its purposes and/or endeavors to develop, produce or distribute live family
entertainment and/or made-for-television features, to include those which,
during the employment period of Executive, have been developed, marketed or
conceived by the Company, any of its personnel and/or any of its subsidiaries,
within 100 miles in any geographic area, city and/or state in which the
Company's products are operating.
2. Induce employees of the Company, or any of its respective
subsidiaries, to terminate their employment or to engage in any activities
hereby prohibited to the Executive;
3. Contact, communicate or solicit any customer and/or any contact
of the Company derived from any customer list, customer lead, mail, printed
material or other information secured from any association with the Company;
4. Discuss any activities, methods of operation, finances,
confidential practices and private business information of the Company with any
other party.
B. It is expressly understood and agreed that although the Executive
and the Company consider the restrictions contained in clause A above reasonable
for the purpose of reserving for the Company or any of its subsidiaries, their
good will and other proprietary rights, if a final judicial determination is
made by a court having jurisdiction at that time or territory or any other
restriction contained in clause A above is an unreasonable or otherwise
unenforceable restriction against the Executive, the provisions of such clause
shall not be rendered void, but shall be deemed amended to apply as to such
maximum time and territory and to such other extent as such Court may judicially
determine or indicate to be reasonable.
C. As to the reasonableness of the non-competition and restrictive
covenants contained herein, Executive further acknowledges and confesses that he
is capable of making a living in employment areas other than developing,
producing and distributing live family entertainment and made-for-television
features engaged in by the Company, and, that the non-competition and
restrictive covenants contained herein will not in the least manner impair or
interfere with Executive from earning a living after the Executive terminates
relations with the Company.
VII.
DISCLOSURE OF INFORMATION
The Executive acknowledges that the Company's trade secrets, private or
secret processes as they may exist from time to time, and confidential
information concerning their products, development, all technical information,
procurement and sales activities and procedures, promotion and pricing
techniques and credit and financial data concerning customers are valuable,
special and unique assets of the Company and its subsidiaries, access to and
knowledge of which are essential to the performance of the Executive's duties
hereunder. In light of the highly competitive nature of the industry in which
the Company and
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its subsidiaries' business is conducted, the Executive further agrees that all
knowledge and information described in the preceding sentence not in the public
domain and heretofore or in the future obtained by him as a result of this
employment by the Company or its subsidiaries shall be considered confidential
information. In recognition of this fact, the Executive agrees that he will not,
during or after the Employment Period, disclose any of such secrets, processes
or information to any person or entity for any reason or purpose whatsoever,
except as is necessary in the performance of his duties as an employee of the
Company or its subsidiaries and then only upon a written confidentiality
agreement in such form and content as requested by the Company from time to
time; nor shall the Executive make use of any such secrets, processes or
information (other than information in the public domain) for his own purposes
or for the benefit of any person or other entity (except the Company and its
subsidiaries) under any circumstances during or after the Employment Period.
VIII.
COMPANY RIGHT TO COPYRIGHTS, TITLES AND SCRIPTS
A. The Executive shall promptly disclose, grant and assign to the
Company for its sole use and benefit any and all scripts, copyrights, movie
titles, sitcom scripts and ideas, improvements, technical information and
suggestions relating in any way to the products of the Company or capable of
beneficial use by customers of the Company either past conceived, developed or
acquired, or which he may conceive, develop or acquire during the Employment
Period (whether or not during usual working hours), together with all patent
applications, letters patent, copyrights and reissues thereof that may at any
time be granted for or upon any such invention, improvement or technical
information. In connection therewith, the Executive shall promptly at all times
during and after the Employment Period:
1. Execute and deliver such applications, assignments,
descriptions and other instruments as may be necessary or proper in the opinion
of the Company to vest in the Company title to such inventions, improvements,
technical information, patent applications and to enable it to obtain and
maintain the entire right and title thereto throughout the world; and
2. Render to the Company, at its expense, all such assistance as
it may require in the prosecution of applications for said patents or reissues
thereof, in the prosecution or defense of interferences which may be declared
involving any said application or patents, and in any litigation in which the
Company or its subsidiaries may be involved relating to any such patents,
inventions, improvements or technical information.
IX.
REMEDIES
The Executive acknowledges and agrees that Company's remedy at law for
a breach of any of the provisions of Sections VI, VII or VIII would be
inadequate and, in recognition of this fact, in the event of a breach by the
Executive of any of the provisions of the Sections VI, VII or VIII it is agreed
that, in addition to its remedy at law, the Company shall be entitled to, and
the Executive agrees not to oppose the Company's request for, equitable relief
in the form of specific performance, temporary restraining order, temporary or
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permanent injunction or any other equitable remedy which may then be available.
In the event of any such breach, at the election of the Company, all rights of
the Executive under Section IV shall thereupon terminate. The Executive
acknowledges that the granting of a temporary injunction, temporary restraining
order or permanent injunction merely prohibiting the use of trade secrets and
like proprietary information would not be an adequate remedy upon breach, and
consequently agrees, upon any such breach, to the granting of injunctive relief
prohibiting the developing, producing or distributing of products and services
of the kind developed, produced, distributed or provided by the Company or any
of its subsidiaries during the Executive's employment. Nothing herein contained
shall be construed as prohibiting the Company from pursuing any other remedies
available to it for such breach.
X.
NOTICES
Any notice required or permitted to be given under this Agreement shall
be deemed properly given if in writing and if mailed by registered or certified
mail, postage prepaid with return receipt requested, to his residence in the
case of notices to the Executive, or to the principal office of the Company, to
the attention of its President (with a copy to the Chairman of the Board and
General Counsel) in the case of notice to the Company.
XI.
WAIVER OF BREACH
The waiver by the Company or Executive of a breach of any provision of
this Agreement by the Company or the Executive shall not operate or be construed
as a waiver of any subsequent breach by the Company or the Executive.
XII.
ASSIGNMENT
This Agreement is assignable by the Company and/or any of its
subsidiaries to any successor in interest of the Company's or its subsidiaries'
business.
XIII.
ENTIRE AGREEMENT
This instrument contains the entire agreement between the Company and
Executive relating to the subject matter hereof, and supersedes and replaces in
its entirety any existing Agreement between Company and the Executive. This
Agreement may not be waived, changed, modified, extended or discharged orally,
but, may be amended and/or changed only by a written instrument duly executed by
an authorized representative of the Company and the Executive hereto and
designated on its face as an "Amendment".
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XIV.
FAILURE TO ENFORCE
It is expressly agreed and understood that the waiver by a party of its
rights, or any portion of its rights, under this Agreement in any particular
instance or instances, whether intentional or otherwise, shall not be considered
as a continuing waiver which would prevent the subsequent enforcement of such
rights.
XV.
APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of California, the principal place of business of the
Company.
XVI.
HEADINGS
The headings of the Sections hereof are for convenience only and shall
not control or affect the meaning, or construction, or limit the scope or intent
of any of the provisions of this Agreement.
XVII.
MISCELLANEOUS
It is anticipated that variances and deviations from certain provisions
of this Agreement may be necessary and may be allowed or tolerated, but it is
agreed that such variances or deviations, regardless of number, shall not be
reason for altering or modifying the interpretation of any portion of this
Agreement.
This Agreement shall be binding on the assignees, heirs,
administrators, executors, spouses, successors and legal representatives of both
parties hereto.
XVIII.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be an original, and all of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Employment Agreement as of the date and year first above written.
BEACHPORT ENTERTAINMENT CORPORATION
/s/ Sidney L. Schlenker /s/ Robert L. Barland
- - --------------------------------- ------------------------------------------
SIDNEY L. SHLENKER, Executive By: Robert L. Barland, Secretary/Treasurer
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EMPLOYMENT, NON-COMPETITION AND
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made as of the 1st day of October, 1996 by and between
BEACHPORT ENTERTAINMENT CORPORATION, a Utah corporation, with its principal
office at 517 North Robertson Blvd., Los Angeles, CA 90048 (the "Company"); and
ROBERT L. BARLAND, an individual residing at 9207 Westbrooke Drive, Overland
Park, Kansas, 66214 (the "Executive").
RECITAL
WHEREAS, the Company desires to retain the services of the Executive as an
employee of the Company on the terms and conditions as hereinafter set forth;
and
WHEREAS, the Executive is desirous and willing to accept such employment on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises, the
receipt and sufficiency of such mutual consideration is hereby acknowledged and
confessed by the Company and the Executive, and to induce Company to hire the
Executive on the terms and conditions hereinafter set forth, the Company and the
Executive hereby agree as follows:
I.
EMPLOYMENT
The Company shall employ the Executive as a full time employee, as
Executive Vice President of The Company. The Executive hereby accepts such
employment with the Company, upon the terms and conditions hereinafter set
forth.
II.
DUTIES DURING EMPLOYMENT PERIOD
During the Employment Period, the Executive shall act as the Executive Vice
President and Chief Financial Officer and have the responsibility for day-to-day
management of the business. Should the Executive be required to relocate his
residence, the Company shall pay any and all relocation expenses for the
Executive and his family during the term of this Agreement and any renewals and
extensions thereof. If the Executive is elected as a director the Company or any
subsidiary of the Company, he will serve in such capacity without additional
compensation. The Executive shall devote his full time, skill, labor and
attention to the business of the Company and shall promptly and faithfully,
perform all services pertaining thereto that are or may hereafter be required of
him by the Company, provided that such services shall be consistent with his
position as Executive Vice President and Chief Financial Officer. Nothing in
this agreement shall preclude the Executive from investing his personal assets
and time in his personal investments, provided that such investments are not in
competition with the business of the Company and that such activities do not
unreasonably
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interfere with the performance of his duties hereunder and where
the form or manner of such investments will not require services on the part of
the Executive in the operation of the affairs of the business in which such
investments are made and which participation is solely that of a passive
investor.
III.
TERM OF EMPLOYMENT
The employment under Section II of this Agreement shall be for a period of
one (1) year commencing on the date hereof and ending at the termination of this
Agreement, unless sooner terminated in accordance with one of the following
alternatives:
A. The Executive's employment under Section II, if not already terminated
under clause B of this Section III, may be terminated at any time during the
Employment Period for Cause (as hereinafter defined) by action of the Board of
Directors of the Company upon giving the Executive notice of such termination at
least thirty (30) days prior to the date upon which termination shall take
effect. As used herein, the term "Cause" shall mean any of the following events:
1. The Executive's conviction of or plea of guilty or nolo contendere
to a crime involving moral turpitude;
2. The Executive's failure to follow the good faith instructions, with
respect to the Company, or any of its subsidiaries and their respective
operations, of the Executive Committee or the Board of Directors of the Company
referred to in Section II following written notice thereof; or
3. The Executive's willful misconduct, or, neglect of duties or
failure to act with respect to duties or actions previously communicated to the
Executive in writing by the Executive Committee or the Board of Directors of the
Company referred to in Section II.
If the Executive's employment is terminated under the provisions of this
Clause A, all rights of the Executive pursuant to Section IV hereof shall cease
as of the effective date of such termination.
B. The Executive's employment under Section II may be terminated at any
time following the date which is one (1) year after the date hereof, by action
of the Board of Directors of the Company, upon giving the Executive notice of
such termination at least ninety (90) days prior to the date on which such
termination shall take effect. This Employment Agreement will automatically
renew for successive one (1) year periods upon the terms and conditions
contained herein unless terminated at provided herein. If the Executive's
employment is terminated under the provisions of this clause B, his rights
pursuant to Section IV shall cease as of the effective date of such termination.
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IV.
EMOLUMENT
A. As base compensation for the services rendered by the Executive
hereunder, the Company shall pay him a salary of $120,000 per annum. The
aforesaid salary shall initially be payable in 26 equal payments commencing two
(2) weeks from the date hereof, or on such other basis, such as weekly or
monthly as determined by the Board of Directors of the Company. The Board of
Directors of the Company may, from time to time, increase the Executive's salary
or pay such discretionary bonuses as it deems appropriate, but such increases
shall neither affect nor alter the fixed obligation of the Company as herein
provided or referred to.
B. Bonuses and Additional Benefits. The Executive may be awarded bonuses as
agreed and satisfy the Board of Directors of the Company. Executive shall also
be entitled to, and shall be accorded, all rights and benefits under any
executive incentive plan (including the Company's Stock Option Plan), monetary
bonus plan, participation or extra compensation plan, pension plan, profit
sharing plan, disability insurance, health and major compensation plan,
pension plan, profit sharing plan, disability insurance, health and major
medical insurance policy or policies, and any other plans or benefits that the
Company may from time to time provide for executives or for any senior officer
generally during the Employment Period. The Company shall accord the Executive
such rights and benefits on a basis no less favorable than any other officer
or executive of the Company or its subsidiaries or affiliates.
C. Vacation and Sick Leave. For each year during which this Agreement is
in effect, Executive shall be entitled to a vacation and sick leave benefits,
without a deduction of salary or other compensation in accordance with the
Company's standard policies, but in no event shall the vacation be less than
four (4) weeks. The Executive shall have up to four (4) weeks vacation per year,
provided the Executive works full time each year for the Company and under the
terms of this Agreement. Such vacation shall be taken at such time or times
during such year as may mutually be agreed upon by the Company and the
Executive.
D. Business Expenses. The Executive shall be authorized to incur reasonable
business expenses for promoting the business of the Company, including
expenditures for entertainment, gifts and travel, within the guidelines as are
set by the Board of Directors of the Company and which are consistent with the
Internal Revenue Service guidelines, provided that the Executive submits
vouchers therefor in the form reasonably satisfactory to the Company.
E. Insurance. The Company shall include Executive under the Company's group
health and life insurance programs, with the same coverage and options that are
available under said policies to all executives of the Company.
F. Other Benefits. The Company will provide the Executive with fringe
benefits in the aggregate not less favorable than those received generally by
other executives of the Company.
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G. Life Insurance. The Company, in its discretion may apply for and procure
as owner and for its own benefit insurance on the life of the Executive, in such
amounts and in such form or forms as the Company may choose.
V.
DISABILITY & DEATH
A. Disability. Notwithstanding any failure or inability of Executive during
the Employment period, because of illness, injury or similar incapacity, whether
physical or mental ("Disability"), to perform the obligations as contemplated by
this Agreement, the Company, nevertheless shall continue to pay Executive the
compensation and benefits provided for in Section IV hereof and all other
benefits provided by this Agreement, except as provided otherwise in this
Section V.
1. Obligations of the Company. In the event a Disability of the Executive
continues for a period of more than six (6) consecutive months or six (6) months
in the aggregate out of any period of twelve (12) consecutive months, the
Company may, at its option, at any time on or after the last day of the
aforesaid six month Disability period, by written notice to such Executive (the
"Disability Notice"), declare such Executive "disabled" and this Agreement shall
terminate with no further liability on the part of the Company; however such
notice shall be of no force and effect if such Executive has resumed the duties
and responsibilities provided hereunder prior to the delivery of the Disability
Notice.
2. Continuing Obligations. Notwithstanding the delivery of a
Disability Notice to the Executive, the Company shall continue to pay the
Executive his normal monthly compensation as set forth hereinabove, provided
however, that any income received by the "disabled" Executive during the
Employment Period from any disability insurance provided to such Executive by
the Company shall reduce the Company's obligations hereunder. If the Company
shall deliver a Disability Notice to Executive, the Company shall continue to
pay Executive, when otherwise due, for a period of six (6) months following
delivery of the Disability Notice. In addition, the Company's obligations to
provide those benefits and payments which are intended to remain in effect
including, without limitation, those benefits and payments provided in Section
IV hereof, shall continue for the six (6) month period following delivery of the
Disability Notice.
B. Death. In the event of death during the Employment Period of the
Executive, the normal monthly compensation of the Executive shall be paid to his
survivors for a period of one (1) year. In addition, the Company's obligations
to provide those benefits and payments which are intended to remain in effect
regardless of the termination of this Agreement, including, without limitation,
those benefits and payments provided in Section IV hereof shall survive the
death of the Executive and shall inure to the benefit of the Executive's estate.
In all other respects, this Agreement shall be deemed to terminate upon the
death of the Executive.
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VI.
COVENANT NOT TO COMPETE
A. The Executive hereby acknowledges and recognizes the highly competitive
and confidential nature of the Company's business of developing, producing and
distributing live family entertainment and made-for-television features, and for
the consideration stated above, accordingly agrees that, during the entire
period, commencing with the date hereof, the Executive's employment by the
Company, to include twelve (12) months after termination of the Executive's
employment with the Company, Executive will not directly or indirectly, in any
capacity:
1. Engage in any capacity in any business endeavor which has among its
purposes and/or endeavors to develop, produce or distribute live family
entertainment and/or made-for-television features, to include those which,
during the employment period of Executive, have been developed, marketed or
conceived by the Company, any of its personnel and/or any of its
subsidiaries, within 100 miles in any geographic area, city and/or state in
which the Company's products are operating.
2. Induce employees of the Company, or any of its respective
subsidiaries, to terminate their employment or to engage in any activities
hereby prohibited to the Executive.
3. Contact, communicate or solicit any customer and/or any contact of
the Company derived from any customer list, customer lead, mail, printed
material or other information secured from any association with the
Company;
4. Discuss any activities, methods of operation, finances,
confidential practices and private business information of the Company
with any other party.
B. It is expressly understood and agreed that although the Executive and
the Company consider the restrictions contained in clause A above reasonable for
the purpose of reserving for the Company or any of its subsidiaries, their good
will and other proprietary rights, if a final judicial determination is made by
a Court having jurisdiction at the time or territory or any other restriction
contained in clause A above is an unreasonable or otherwise unenforceable
restriction against the Executive, the provisions of such clause shall not be
rendered void, but shall be deemed amended to apply as to such maximum time and
territory and to such other extent as such Court may judicially determine or
indicate to be reasonable.
C. As to the reasonableness of the non-competition and restrictive
covenants contained herein, Executive further acknowledges and confesses that he
is capable of making a living in employment areas other than developing,
producing and distributing live family entertainment and made-for-television
features engaged in by the Company, and, that the non-competition and
restrictive covenants contained herein will not in the least manner impair or
interfere with Executive from earning a living after the Executive terminates
relations with the Company.
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VII.
DISCLOSURE OF INFORMATION
The Executive acknowledges that the Company's trade secrets, private or
secret processes as they may exist from time to time, and confidential
information concerning their products, development, all technical information,
procurement and sales activities and procedures, promotion and pricing
techniques
and credit and financial data concerning customers are valuable, special and
unique assets of the Company and its subsidiaries, access to and knowledge of
which are essential to the performance of the Executive's duties hereunder. In
light of the highly competitive nature of the industry in which the Company and
its subsidiaries' business is conducted, the Executive further agrees that all
knowledge and information described in the preceding sentence not in the
public domain and heretofore or in the future obtained by him as a result of
this employment by the Company or its subsidiaries shall be considered
confidential information. In recognition of this fact, the Executive agrees that
he will not, during or after the Employment Period, disclose any of such
secrets, processes or information to any person or their entity for any reason
or purpose whatsoever, except as is necessary in the performance of his duties
as an employee of the Company or its subsidiaries and then only upon a written
confidentiality agreement in such form and content as requested by the Company
from time to time; nor shall the Executive make use of any such secrets,
processes or information (other than information in the public domain) for his
own purposes or for the benefit of any person or other entity (except the
Company and its subsidiaries) under any circumstances during or after the
Employment Period.
VIII.
COMPANY RIGHT TO COPYRIGHTS, TITLES AND SCRIPTS
A. The Executive shall promptly disclose, grant and assign to the Company
for its sole use and benefit any and all scripts, copyrights, movie titles,
sitcom scripts and ideas, improvements, technical information and suggestions
relating in any way to the products of the Company or capable of beneficial use
by customers of the Company either past conceived, developed or acquired, or may
conceive, develop or acquire during the Employment Period (whether or not during
usual working hours), together with all patent applications, letters patent,
copyrights and reissues thereof that may at any time be granted for or upon any
such invention, improvement or technical information. In connection therewith,
the Executive shall promptly at all times during and after the Employment
Period:
1. Execute and deliver such applications, descriptions and other
instruments as may be necessary or proper in the opinion of the Company to
vest in the Company title to such inventions, improvements, technical
information, patent applications and to enable it to obtain and maintain
the entire right and title thereto throughout the world; and
2. Render to the Company, at its expense, all such assistance as it
may require in the prosecution of applications for said patents or reissues
thereof, in the prosecution or defense of interferences which may be
declared involving any said application or
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<PAGE>
patents, and in any litigation in which the Company or its subsidiaries may
be involved relating to any such patents, inventions, improvements or
technical information.
IX.
REMEDIES
The Executive acknowledges and agrees that the Company's remedy at law for
a breach of any of the provisions of Sections VI, VII or VIII would be
inadequate and, in recognition of this fact, in the event of a breach by the
Executive or any of the provisions of the Sections VI, VII or VIII it is agreed
that, in addition to its remedy at law, the Company shall be entitled to, and
the Executive agrees not to oppose the Company's request for, equitable relief
in the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
In the event of any such breach, at the election of the Company, all rights of
the Executive under Section IV shall thereupon terminate. The Executive
acknowledges that the granting of a temporary injunction, temporary restraining
order or permanent injunction merely prohibiting the use of trade secrets and
like proprietary information would not be an adequate remedy upon breach, and
consequently agrees, upon any such breach, to the granting of injunctive relief
prohibiting the developing, producing or distributing of products and services
of the kind developed, produced, distributed or provided by the Company or any
of its subsidiaries during the Executive's employment. Nothing herein contained
shall be construed as prohibiting the Company from pursuing any other remedies
available to it for such breach.
X.
ARBITRATION
Any and all disputes between Executive and the Company arising with respect
to this employment by the Company or any of its subsidiaries, including any
dispute arising under this Agreement, shall be submitted to binding, expedited
arbitration in Los Angeles, California under the then-prevailing rules of the
American Arbitration Association.
XI.
NOTICES
Any notice required or permitted to be given under this Agreement shall be
deemed properly given if in writing and if mailed by registered or certified
mail, postage prepaid with return receipt requested, to his residence in the
case of notices to the Executive, or to the principal office of the Company, to
the attention of its President (with a copy to the Chairman of the Board and
General Counsel) in the case of notice to the Company.
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XII.
WAIVER OF BREACH
The waiver by the Company or Executive of a breach of any provision of this
Agreement by the Company or the Executive shall not operate or be construed as a
waiver of any subsequent breach by the Company or the Executive.
XIII.
ASSIGNMENT
This Agreement shall not be assignable by the Executive without the written
consent of the Company; and, only after full disclosure of all terms and
ramifications of said assignment has been made by the Executive. This Agreement
is assignable by the Company and/or any of its subsidiaries to any successor in
interest of the Company's or its subsidiaries' business.
XIV.
ENTIRE AGREEMENT
This instrument contains the entire agreement between the Company and
Executive relating to the subject matter hereof, and supersedes and replaces in
its entirety any existing Agreement between Company and the Executive. This
Agreement may not be waived, changed, modified, extended or discharged orally;
but, may be amended and/or changed only by a written instrument duly executed by
an authorized representative of the Company and the Executive hereto and
designated on its face as an "Amendment."
XV.
FAILURE TO ENFORCE
It is expressly agreed and understood that the waiver by a party of its
rights, or any portion of its rights, under this Agreement in any particular
instance or instances, whether intentional or otherwise, shall not be considered
as a continuing waiver which would prevent the subsequent enforcement of such
rights.
XVI.
APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of California, the principal place of business of the Company.
<PAGE>
<PAGE>
XVII.
HEADINGS
The heading of the Sections hereof are for convenience only and shall not
control or affect the meaning, or construction, or limit the scope or intent of
any of the provisions of this Agreement.
XV.
MISCELLANEOUS
It is anticipated that variances and deviations from certain provisions of
this Agreement may be necessary and may be allowed or tolerated, but it is
agreed that such variances or deviations, regardless of number, shall not be
reason for altering or modifying the interpretation of any portion of this
Agreement.
This Agreement shall be binding on the assignees, heirs, administrators,
executors, spouses, successors and legal representatives of both parties hereto.
IX.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be an original, and all of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Employment
Agreement as of the date and year first above written.
BEACHPORT ENTERTAINMENT CORPORATION
/s/ SIDNEY L. SHLENKER
-----------------------------------
By SIDNEY L. SHLENKER
Chairman of the Board
/s/ ROBERT L. BARLAND
-----------------------------------
ROBERT L. BARLAND, Executive
<PAGE>
<PAGE>
EMPLOYMENT, NON-COMPETITION AND
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made as of the 1st day of July, 1997 by and between,
BEACHPORT ENTERTAINMENT CORPORATION, a Utah corporation, with its principal
office at 517 North Robertson Blvd., Los Angeles, CA 90048 (the "Company"); and,
ELIZABETH LASHINSKY, an individual residing at 4056 Gilder Rose Place, Winter
Park, Florida 32792 (the "Executive").
RECITAL
WHEREAS, the Company desires to retain the services of the Executive as
an employee of the Company on the terms and conditions as hereinafter set forth;
and
WHEREAS, the Executive is desirous and willing to accept such employment
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises,
the receipt and sufficiency of such mutual consideration is hereby acknowledged
and confessed by the Company and the Executive, and to induce Company to hire
the Executive on the terms and conditions hereinafter set forth, the Company and
the Executive hereby agree as follows:
I.
EMPLOYMENT
The Company shall employ the Executive as a full time employee, as
President of The Royal Lippizaner Stallions, Inc. The Executive hereby accepts
such employment with the Company, upon the terms and conditions hereinafter set
forth.
II.
DUTIES DURING EMPLOYMENT PERIOD
During the Employment Period, the Executive shall act as the President
and have the responsibility for day-to-day management of the business. Should
the Executive agree to relocate her residence, the Company shall pay any and all
relocation expenses for the Executive and her family during the term of this
Agreement and any renewals and extensions thereof. If the Executive is elected
as a director of the Company or any subsidiary of the Company, she will serve in
such capacity without additional compensation. The Executive shall devote her
full time, skill, labor and attention to the business of the Company and shall
promptly and faithfully, perform all services pertaining thereto that are or may
hereafter be required of her by the Company, provided that such services shall
be consistent with her position as President. Nothing in this agreement shall
preclude the Executive from investing her personal assets and time in her
personal investments, provided that such investments are not in competition with
the business of the Company and that such activities do not unreasonably
interfere with the performance of her duties hereunder and where the form or
manner of such investments will not require services
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on the part of the Executive in the operation of the affairs of the business in
which such investments are made and which participation is solely that of a
passive investor.
III.
TERM OF EMPLOYMENT
The employment under Section II of this Agreement shall be for a period
three years (3) commencing on the date hereof and ending at the termination of
this Agreement, unless sooner terminated in accordance with one of the following
alternatives:
A. The Executive's employment under Section II, if not already
terminated under clause B of this Section III, may be terminated at any time
during the Employment Period for Cause (as hereinafter defined) by action of the
Board of Directors of the Company upon giving the Executive notice of such
termination at least thirty (30) days prior to the date upon which termination
shall take effect. As used herein, the term "Cause" shall mean any of the
following events:
1. The Executive's conviction of or plea of guilty or nolo
contendere to a crime involving moral turpitude;
2. The Executive's failure to follow the good faith instructions,
with respect to the Company, or any of its subsidiaries and their respective
operations, of the Executive Committee or the Board of Directors of the Company
referred to in Section II following written notice thereof; or;
3. The Executive's willful misconduct, or, neglect of duties or
failure to act with respect to duties or actions previously communicated to the
Executive in writing by the Executive Committee or the Board of Directors of the
Company referred to in Section II.
If the Executive's employment is terminated under the provisions
of this Clause A, all rights of the Executive pursuant to Section IV hereof
shall cease as of the effective date of such termination.
B. The Executive's employment under Section II may be terminated
at any time following the date which is three (3) years after the date hereof,
by action of the Board of Directors of the Company, upon giving the Executive
notice of such termination at least ninety (90) days prior to the date on which
such termination shall take effect. This Employment Agreement will automatically
renew for successive one (1) year periods upon the terms and conditions
contained herein unless terminated as provided herein. If the Executive's
employment is terminated under the provisions of this clause B, her rights
pursuant to Section IV shall cease as of the effective date of such termination.
<PAGE>
<PAGE>
IV.
EMOLUMENT
A. As base compensation for the services rendered by the Executive
hereunder, the Company shall pay her a salary of $144,000 per annum. The
aforesaid salary shall initially be payable in 26 equal payments commencing two
(2) weeks from the date hereof, or on such other basis, such as weekly or
monthly as determined by the Board of Directors of the Company. The Board of
Directors of the Company may, from time to time, increase the Executive's salary
or pay such discretionary bonuses as it deems appropriate, but such increases
shall neither affect nor alter the fixed obligation of the Company as herein
provided or referred to.
B. Bonuses and Additional Benefits. The Executive may be awarded
bonuses as agreed and set by the Board of Directors of the Company. Executive
shall also be entitled to, and shall be accorded, all rights and benefits under
any executive incentive plan (including the Company's Stock Option Plan),
monetary bonus plan, participation or extra compensation plan, pension plan,
profit sharing plan, disability insurance, health and major medical insurance
policy or policies, and any other plans or benefits that the Company may from
time to time provide for executives or for any senior officer generally during
the Employment Period. The Company shall accord the Executive such rights and
benefits on a basis no less favorable than any other officer or executive of the
Company or its subsidiaries or affiliates.
C. Vacation and Sick Leave. For each year during which this Agreement
is in effect, Executive shall be entitled to a vacation and sick leave benefits,
without a deduction of salary or other compensation in accordance with the
Company's standard policies, but in no event shall the vacation be less than
three (3) weeks. The Executive shall have up to three (3) weeks vacation per
year, provided the Executive works full time each year for the Company and
under the terms of this Agreement. Such vacation shall be taken at such time or
times during such year as may be mutually agreed upon by the Company and the
Executive.
D. Business Expenses. The Executive shall be authorized to incur
reasonable business expenses for promoting the business of the Company,
including expenditures for entertainment, gifts and travel, within the
guidelines as are set by the Board of Directors of the Company and which are
consistent with the Internal Revenue Service guidelines, provided that the
Executive submits vouchers therefore in the form reasonably satisfactory to the
Company.
E. Insurance. The Company shall include Executive under the Company's
group health and life insurance programs, with the same coverage and options
that are available under said policies to all executives of the Company.
F. Other Benefits. The Company will provide the Executive with fringe
benefits in the aggregate not less favorable than those received generally by
other executives of the Company.
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G. Life Insurance. The Company, in its discretion may apply for and
procure as owner and for its own benefit insurance on the life of the Executive,
in such amounts and in such form or forms as the Company may choose.
V.
DISABILITY & DEATH
A. Disability. Notwithstanding any failure or inability of Executive
during the Employment Period, because of illness, injury or similar incapacity,
whether physical or mental ("Disability"), to perform the obligations as
contemplated by this Agreement, the Company, nevertheless shall continue to pay
Executive the compensation and benefits provided for in Section IV hereof and
all other benefits provided by this Agreement, except as provided otherwise in
this Section V.
1. Obligations of the Company. In the event a Disability of the
Executive continues for a period of more than six (6) consecutive months or six
(6) months in the aggregate out of any period of twelve (12) consecutive months,
the Company may, at its option, at any time on or after the last day of the
aforesaid six month Disability period, by written notice to such Executive (the
"Disability Notice"), declare such Executive "disabled" and this Agreement shall
terminate with no further liability on the part of the Company; however such
notice shall be of no force and effect if such Executive has resumed the duties
and responsibilities provided hereunder prior to the delivery of the Disability
Notice.
2. Continuing Obligations. Notwithstanding the delivery of a
Disability Notice to the Executive, the Company shall continue to pay the
Executive her normal monthly compensation as set forth hereinabove, provided
however, that any income received by the "disabled" Executive during the
Employment Period from any disability insurance provided to such Executive by
the Company shall reduce the Company's obligations hereunder. If the Company
shall deliver a Disability Notice to Executive, the Company shall continue to
pay Executive, when otherwise due, for a period of six (6) months following
delivery of the Disability Notice. In addition, the Company's obligations to
provide those benefits and payments which are intended to remain in effect
including, without limitation, those benefits and payments provided in Section
IV hereof, shall continue for the six (6) month period following delivery of the
Disability Notice.
B. Death. In the event of death during the Employment Period of the
Executive, the normal monthly compensation of the Executive shall be paid to her
survivors for a period of one (1) year. In addition, the Company's obligations
to provide those benefits and payments which are intended to remain in effect
regardless of the termination of this Agreement, including, without limitation,
those benefits and payments provided in Section IV hereof shall survive the
death of the Executive and shall inure to the benefit of the Executive's estate.
In all other respects, this Agreement shall be deemed to terminate upon the
death of the Executive.
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<PAGE>
VI.
COVENANT NOT TO COMPETE
A. The Executive hereby acknowledges and recognizes the highly
competitive and confidentia1 nature of the Company's business of developing,
producing and distributing live family entertainment and made-for-television
features, and for the consideration stated above, accordingly agrees that,
during the entire period, commencing with the date hereof, the Executive's
employment by the Company, to include eighteen (18) months after the
termination of the Executive's employment with the Company, Executive will
not directly or indirectly, in any capacity:
1. Engage in any capacity in any business endeavor which has among
its purposes and/or endeavors to develop, produce or distribute live family
entertainment and/or made-for-television features, to include those which,
during the employment period of Executive, have been developed, marketed or
conceived by the Company, any of its personnel and/or any of its subsidiaries,
within 100 miles in any geographic area, city and/or state in which the
Company's products are operating;
2. Induce employees of the Company, or any of its respective
subsidiaries, to terminate their employment or to engage in any activities
hereby prohibited to the Executive;
3. Contact, communicate or solicit any customer and/or any contact
of the Company derived from any customer list, customer lead, mail, printed
material or other information secured from any association with the Company;
4. Discuss any activities, methods of operation, finances,
confidential practices and private business information of the Company with any
other party.
B. It is expressly understood and agreed that although the Executive
and the Company consider the restrictions contained in clause A above reasonable
for the purpose of reserving for the Company or any of its subsidiaries, their
good will and other propriety rights, if a final judicial determination is made
by a Court having jurisdiction at the time or territory or any other restriction
contained in clause A above is an unreasonable or otherwise unenforceable
restriction against the Executive, the provisions of such clause shall not be
rendered void, but shall be deemed amended to apply as to such maximum time and
territory and to such other extent as such Court may judicially determine or
indicate to be reasonable.
C. As to the reasonableness of the non-competition and restrictive
covenants contained herein, Executive further acknowledges and confesses that he
is capable of making a living in employment areas other than developing,
producing and distributing live family entertainment and made-for-television
features engaged in by the Company, and, that the non-competition and
restrictive covenants contained herein will not in the least manner impair or
interfere with Executive from earning a living after the Executive terminates
relations with the Company.
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<PAGE>
VII.
DISCLOSURE OF INFORMATION
The Executive acknowledges that the Company's trade secrets, private or
secret processes as they may exist from time to time, and confidential
information concerning their products, development, all technical information,
procurement and sales activities and procedures, promotion and pricing
techniques and credit and financial data concerning customers are valuable,
special and unique assets of the Company and its subsidiaries, access to and
knowledge of which are essential to the performance of the Executive's duties
hereunder. In light of the highly competitive nature of the industry in which
the Company and its subsidiaries' business is conducted, the Executive further
agrees that all knowledge and information described in the preceding sentence
not in the public domain and heretofore or in the future obtained by her as a
result of this employment by the Company or its subsidiaries shall be considered
confidential information. In recognition of this fact, the Executive agrees that
she will not, during or after the Employment Period, disclose any of such
secrets, processes or information to any person or their entity for any reason
or purpose whatsoever, except as is necessary in the performance of her duties
as an employee of the Company or its subsidiaries and then only upon a written
confidentiality agreement in such form and content as requested by the Company
from time to time; nor shall the Executive make use of any such secrets,
processes or information (other than information in the public domain) for her
own purposes or for the benefit of any person or other entity (except the
Company and its subsidiaries) under any circumstances during or after the
Employment Period.
VIII.
COMPANY RIGHT TO COPYRIGHTS, TITLES AND SCRIPTS
A. The Executive shall promptly disclose, grant and assign to the
Company for its sole use and benefit any and all scripts, copyrights, movie
titles, sitcom scripts and ideas, improvements, technical information and
suggestions relating in any way to the products of the Company or capable of
beneficial use by customers of the Company either past conceived, developed or
acquired, or may conceive, develop or acquire during the Employment Period
(whether or not during usual working hours), together with all patent
applications, letters patent, copyrights and reissues thereof that may at any
time be granted for or upon any such invention, improvement or technical
information. In connection therewith, the Executive shall promptly at all times
during and after the Employment Period:
1. Execute and deliver such applications, assignments, descriptions
and other instruments as may be necessary or proper in the opinion of the
Company to vest in the Company title to such inventions, improvements, technical
information, patent applications and to enable it to obtain and maintain the
entire right and title thereto throughout the world; and
2. Render to the Company, at its expense, all such assistance as it
may require in the prosecution of applications for said patents or reissues
thereof, in the prosecution or defense of interferences which may be declared
involving any said application or patents, and in any
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<PAGE>
litigation in which the Company or its subsidiaries may be involved relating to
any such patents, inventions, improvements or technical information.
IX.
REMEDIES
The Executive acknowledges and agrees that Company's remedy at law for
a breach of any of the provisions of Sections VI, VII or VIII would be
inadequate and, in recognition of this fact, in the event of a breach by the
Executive of any of the provisions of the Sections VI, VII or VIII it is agreed
that, in addition to its remedy at law, the Company shall be entitled to, and
the Executive agrees not to oppose the Company's request for, equitable relief
in the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
In the event of any such breach, at the election of the Company, all rights of
the Executive under Section IV shall thereupon terminate. The Executive
acknowledges that the granting of a temporary injunction, temporary restraining
order or permanent injunction merely prohibiting the use of trade secrets and
like proprietary information would not be an adequate remedy upon breach, and
consequently agrees, upon any such breach, to the granting of injunctive relief
prohibiting the developing, producing or distributing of products and services
of the kind developed, produced, distributed or provided by the Company or any
of its subsidiaries during the Executive's employment. Nothing herein contained
shall be construed as prohibiting the Company from pursuing any other remedies
available to it for such breach.
X.
ARBITRATION
Any and all disputes between Executive and the Company arising with
respect to this employment by the Company or any of its subsidiaries, including
any dispute arising under this Agreement, shall be submitted to binding,
expedited arbitration in Los Angeles, California under the then-prevailing rules
of the American Arbitration Association.
XI.
NOTICES
Any notice required or permitted to be given under this Agreement shall
be deemed properly given if in writing and if mailed by registered or certified
mail, postage prepaid with return receipt requested, to her residence in the
case of notices to the Executive, or to the principal office of the Company, to
the attention of its President (with a copy to the Chairman of the Board and
General Counsel) in the case of notice to the Company.
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<PAGE>
XII.
WAIVER OF BREACH
The waiver by the Company or Executive of a breach of any provision of
this Agreement by the Company or the Executive shall not operate or be construed
as a waiver of any subsequent breach by the Company or the Executive.
XIII.
ASSIGNMENT
This Agreement shall not be assignable by the Executive without the
written consent of the Company; and, only after full disclosure of all terms and
ramifications of said assignment has been made by the Executive. This Agreement
is assignable by the Company and/or any of its subsidiaries to any successor in
interest of the Company's or its subsidiaries' business.
XIV.
ENTIRE AGREEMENT
This instrument contains the entire agreement between the Company and
Executive relating to the subject matter hereof, and supersedes and replaces in
its entirety any existing Agreement between Company and the Executive. This
Agreement may not be waived, changed, modified, extended or discharged orally;
but, may be amended and/or changed only by a written instrument duly executed by
an authorized representative of the Company and the Executive hereto and
designated on its fact as an "Amendment".
XV.
FAILURE TO ENFORCE
It is expressly agreed and understood that the waiver by a party of its
rights, or any portion of its rights, under this Agreement in any particular
instance or instances, whether intentional or otherwise, shall not be considered
as a continuing waiver which would prevent the subsequent enforcement of such
rights.
XVI.
APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of California, the principal place of business of the
Company.
XVII.
HEADINGS
The headings of the Sections hereof are for convenience only and shall
not control or affect the meaning, or construction, or limit the scope or intent
of any of the provisions of this Agreement.
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<PAGE>
This Agreement shall be binding on the assignees, heirs, administrators,
executors, spouses, successors and legal representatives of both parties hereto.
XVIII.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be an original, and all of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Employment
Agreement as of the date and year first above written.
BEACHPORT ENTERTAINMENT CORPORATION
/s/ SIDNEY L. SHLENKER
-----------------------------
By: Sidney L. Shlenker,
Chairman of the Board
/s/ ELIZABETH LASHINSKY
-----------------------------
ELIZABETH LASHINSKY, Executive
<PAGE>
<PAGE>
EMPLOYMENT, NON-COMPETITION AND
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made as of the 1st day of July, 1997 by and between,
BEACHPORT ENTERTAINMENT CORPORATION, a Utah corporation, with its principal
office at 517 North Robertson Blvd., Los Angeles, CA 90048 (the "Company");
and, GARY LASHINSKY, an individual residing at 4056 Gilder Rose Place, Winter
Park, Florida 32792 (the "Executive").
RECITAL
WHEREAS, the Company desires to retain the services of the Executive as an
employee of the Company on the terms and conditions as hereinafter set forth;
and
WHEREAS, the Executive is desirous and willing to accept such employment
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises, the
receipt and sufficiency of such mutual consideration which is hereby
acknowledged and confessed by the Company and the Executive, and in order to
induce Company to hire the Executive on the terms and conditions hereinafter set
forth, the Company and the Executive hereby agree as follows:
I.
EMPLOYMENT
The Company shall employ the Executive as a full time employee, as
Chairman and Chief Executive Officer of The Royal Lippizaner Stallions, Inc. The
Executive hereby accepts such employment with the Company, upon the terms and
conditions hereinafter set forth.
II.
DUTIES DURING EMPLOYMENT PERIOD
During the Employment Period, the Executive shall act as the Chairman and
Chief Executive Officer and have the responsibility for day-to-day management of
its business. Should the Executive agree to relocate his residence, the Company
shall pay any and all relocation expenses for the Executive and his family
during the term of this Agreement and any renewals and extensions thereof. If
the Executive is elected as a director of the Company or any subsidiary of the
Company, he will serve in such capacity without additional compensation. The
Executive shall devote his full time, skill, labor and attention to the business
of the Company and shall promptly and faithfully, perform all services
pertaining thereto that are or may hereafter be required of him by the Company,
provided that such services shall be consistent with his position as Chairman
and Chief Executive Officer. Nothing in this agreement shall preclude the
Executive from investing his personal assets and time in his personal
investments, provided that such investments are not in competition with the
business of the Company and that such activities do
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not unreasonably interfere with the performance of his duties hereunder and
where the form or manner of such investments will not require services on the
part of the Executive in the operation of the affairs of the business in which
such investments are made and which participation is solely that of a passive
investor.
III.
TERM OF EMPLOYMENT
The employment under Section II of this Agreement shall be for a period
three (3) years commencing on the date hereof and ending at the termination of
this Agreement (the "Employment Agreement"), unless sooner terminated in
accordance with one of the following alternatives;
A. The Executive's employment under Section II, if not already terminated
under clause B of this Section III, may be terminated at any time during the
Employment Period for Cause (as hereinafter defined) by action of the Board of
Directors of the Company upon giving the Executive notice of such termination at
least thirty (30) days prior to the date upon which such termination shall take
effect. As used herein, the term "Cause" shall mean any of the following events:
1. The Executive's conviction of or plea of guilty or nolo
contendere to a crime involving breach of trust or fraud;
2. The Executive's failure to follow the good faith instructions,
with respect to the Company, or any of its subsidiaries and their respective
operations, of the Executive Committee or the Board of Directors of the Company
referred to in Section II following written notice thereof, or
3. The Executive's gross negligence or willful misconduct, or,
neglect of duties or failure to act with respect to duties or actions previously
communicated to the Executive in writing by the Executive Committee or the
Board of Directors of the Company referred to in Section II.
If the Executive's employment is terminated under the provisions of
this Clause A, all rights of the Executive pursuant to Section IV hereof shall
cease as of the effective date of such termination.
B. The Executive's employment under Section II may be terminated at
any time following the date which is three (3) years after the date hereof, by
action of the Board of Directors of the Company, upon giving the Executive
notice of such termination at least ninety (90) days prior to the date on which
such termination shall take effect. This Employment Agreement will automatically
renew for successive one (1) year periods upon the terms and conditions
contained herein unless terminated as provided herein. If the Executive's
employment is terminated under the provisions of this clause B, his rights
pursuant to Section IV shall cease as of the effective date of such termination.
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<PAGE>
IV.
EMOLUMENT
A. As base compensation for the services rendered by the Executive
hereunder, the Company shall pay him a salary of $144,000 per annum. The
aforesaid salary shall initially be payable in 26 equal payments commencing two
(2) weeks from the date hereof, or on such other basis, such as weekly or
monthly as determined by the Board of Directors of the Company. The Board of
Directors of the Company may, from time to time, increase the Executive's salary
or pay such discretionary bonuses as it deems appropriate, but such increases
shall neither affect nor alter the fixed obligation of the Company as herein
provided or referred to.
B. Bonuses and Additional Benefits. The Executive may be awarded bonuses
as agreed and set by the Board of Directors of the Company. Executive shall also
be entitled to, and shall be accorded, all rights and benefits under any
executive incentive plan (including the Company's Stock Option Plan), monetary
bonus plan, participation or extra compensation plan, pension plan, profit
sharing plan, disability insurance, health and major medical insurance policy
or policies, and any other plans or benefits that the Company may from time to
time provide for executives or for any senior officer generally during the
Employment Period. The Company shall accord the Executive such rights and
benefits on a basis no less favorable than any other officer or executive of
the Company or its subsidiaries or affiliates.
C. Vacation and Sick Leave. For each year during which this Agreement is
in effect, Executive shall be entitled to a vacation and sick leave benefits,
without a deduction of salary or other compensation in accordance with the
Company's standard policies, but in no event shall the vacation be less than
three (3) weeks. The Executive shall have up to three (3) weeks vacation per
year, provided the Executive works full time each year for the Company and under
the terms of this Agreement. Such vacation shall be taken at such time or times
during such year as may be mutually agreed upon by the Company and the
Executive.
D. Business Expenses. The Executive shall be authorized to incur
reasonable business expenses for promoting the business of the Company,
including expenditures for entertainment, gifts and travel, within the
guidelines as are set by the Board of Directors of the Company and which
are consistent with the Internal Revenue Service guidelines, provided that
the Executive submits vouchers therefore in the form reasonably satisfactory
to the Company.
E. Insurance. The Company shall include Executive under the Company's
group health and life insurance programs, with the same coverage and options
that are available under said policies to all executives of the Company.
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F. Other Benefits. The Company will provide the Executive with fringe
benefits in the aggregate not less favorable than those received generally by
other executives of the Company.
G. Life Insurance. The Company, in its discretion may apply for and
procure as owner and for its own benefit, insurance on the life of the
Executive, in such amounts and in such form or forms as the Company may choose.
V.
DISABILITY & DEATH
A. Disability. Notwithstanding any failure or inability of Executive
during the Employment Period, because of illness, injury or similar incapacity,
whether physical or mental ("Disability"), to perform the obligations as
contemplated by this Agreement, the Company, nevertheless shall continue to pay
Executive the compensation and benefits provided for in Section IV hereof and
all other benefits provided by this Agreement, except as provided otherwise in
this Section V.
1. Obligations of the Company. In the event a Disability of the
Executive continues for a period of more than six (6) consecutive months or six
(6) months in the aggregate out of any period of twelve (12) consecutive months,
the Company may, at its option, at any time on or after the last day of the
aforesaid six month Disability period, by written notice to such Executive (the
"Disability Notice"), declare such Executive "disabled" and this Agreement shall
terminate with no further liability on the part of the Company; however such
notice shall be of no force and effect if such Executive has resumed the duties
and responsibilities provided hereunder prior to the delivery of the Disability
Notice.
2. Continuing Obligations. Notwithstanding the delivery of a
Disability Notice to the Executive, the Company shall continue to pay the
Executive his normal monthly compensation as set forth hereinabove, for a period
of six (6) months following delivery of the Liability Notice (the "Additional
Payment Period"), provided however, that any income received by the "disabled"
Executive during the Employment Period from any disability insurance provided to
such Executive by the Company shall reduce the Company's obligations hereunder.
In addition, during the Additional Payment Period, the Company shall be
obligated to continue the benefits set forth in Section IV herein.
B. Death. In the event of death during the Employment Period of the
Executive, the normal monthly compensation of the Executive shall be paid to the
Executive's estate for a period of one (l) year.
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VI.
COVENANT NOT TO COMPETE
A. The Executive hereby acknowledges and recognizes the highly competitive
and confidential nature of the Company's business of developing, producing and
distributing live family entertainment and made-for-television features, and for
the consideration stated above, accordingly agrees that during the entire
period, commencing with the date hereof, the Executive's employment by the
Company, to include (18) months after the termination of the Executive's
employment with the Company, Executive will not directly or indirectly, in any
capacity:
1. Engage in any capacity in any business endeavor which has among
its purposes and/or endeavors to develop, produce or distribute live family
entertainment and/or made-for-television features, to include those which,
during the employment period of Executive, have been developed, marketed or
conceived by the Company, any of its personnel and/or any of its subsidiaries,
within 100 miles in any geographic area, city and/or state in which the
Company's products are operating.
2. Induce employees of the Company, or any of its respective
subsidiaries, to terminate their employment or to engage in any activities
hereby prohibited to the Executive;
3. Contact, communicate or solicit any customer and/or any contact
of the Company derived from any customer list, customer lead, mail, printed
material or other information secured from any association with the Company;
4. Discuss any activities, methods of operation, finances,
confidential practices and private business information of the Company with any
other party.
B. It is expressly understood and agreed that although the Executive and
the Company consider the restrictions contained in clause A above reasonable for
the purpose of reserving for the Company or any of its subsidiaries, their good
will and other proprietary rights, if a final judicial determination is made by
a court having jurisdiction at that time or territory or any other restriction
contained in clause A above is an unreasonable or otherwise unenforceable
restriction against the Executive, the provisions of such clause shall not be
rendered void, but shall be deemed amended to apply as to such maximum time and
territory and to such other extent as such Court may judicially determine or
indicate to be reasonable.
C. As to the reasonableness of the non-competition and restrictive
covenants contained herein, Executive further acknowledges and confesses that he
is capable of making a living in employment areas other than developing,
producing and distributing live family entertainment and made-for-television
features engaged in by the Company, and, that the non-competition and
restrictive covenants contained herein will not in the least manner impair or
interfere with Executive from earning a living after the Executive terminates
relations with the Company.
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VII.
DISCLOSURE OF INFORMATION
The Executive acknowledges that the Company's trade secrets, private or
secret processes as they may exist from time to time, and confidential
information concerning their products, development, all technical information,
procurement and sales activities and procedures, promotion and pricing
techniques and credit and financial data concerning customers are valuable,
special and unique assets of the Company and its subsidiaries, access to and
knowledge of which are essential to the performance of the Executive's duties
hereunder. In light of the highly competitive nature of the industry in which
the Company and its subsidiaries' business is conducted, the Executive further
agrees that all knowledge and information described in the preceding sentence
not in the public domain and heretofore or in the future obtained by him as a
result of this employment by the Company or its subsidiaries shall be considered
confidential information. In recognition of this fact, the Executive agrees that
he will not, during or after the Employment Period, disclose any of such
secrets, processes or information to any person or entity for any reason or
purpose whatsoever, except as is necessary in the performance of his duties as
an employee of the Company or its subsidiaries and then only upon a written
confidentiality agreement in such form and content as requested by the Company
from time to time; nor shall the Executive make use of any such secrets,
processes or information (other than information in the public domain) for his
own purposes or for the benefit of any person or other entity (except the
Company and its subsidiaries) under any circumstances during or after the
Employment Period.
VIII.
COMPANY RIGHT TO COPYRIGHTS, TITLES AND SCRIPTS
A. The Executive shall promptly disclose, grant and assign to the Company
for its sole use and benefit any and all scripts, copyrights, movie titles,
sitcom scripts and ideas, improvements, technical information and suggestions
relating in any way to the products of the Company or capable of beneficial use
by customers of the Company either past conceived, developed or acquired, or
which he may conceive, develop or acquire during the Employment Period (whether
or not during usual working hours), together with all patent applications,
letters patent, copyrights and reissues thereof that may at any time be granted
for or upon any such invention, improvement or technical information. In
connection therewith, the Executive shall promptly at all times during and after
the Employment Period:
1. Execute and deliver such applications, assignments, descriptions
and other instruments as may be necessary or proper in the opinion of the
Company to vest in the Company title to such inventions, improvements, technical
information, patent applications and to enable it to obtain and maintain the
entire right and title thereto throughout the world; and
2. Render to the Company, at its expense, all such assistance as it
may require in the prosecution of applications for said patents or reissues
thereof, in the prosecution or defense
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of interferences which may be declared involving any said application or
patents, and in any litigation in which the Company or its subsidiaries may
be involved relating to any such patents, inventions, improvements or technical
information.
IX
REMEDIES
The Executive acknowledges and agrees that Company's remedy at law for a
breach of any of the provisions of Sections VI, VII or VIII would be inadequate
and, in recognition of this fact, in the event of a breach by the Executive of
any of the provisions of the Sections VI, VII or VIII it is agreed that, in
addition to its remedy at law, the Company shall be entitled to, and the
Executive agrees not to oppose the Company's request for, equitable relief in
the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
In the event of any such breach, at the election of the Company, all rights of
the Executive under Section IV shall thereupon terminate. The Executive
acknowledges that the granting of a temporary injunction, temporary restraining
order or permanent injunction merely prohibiting the use of trade secrets and
like proprietary information would not be an adequate remedy upon breach, and
consequently agrees, upon any such breach, to the granting of injunctive relief
prohibiting the developing, producing or distributing of products and services
of the kind developed, produced, distributed or provided by the Company or any
of its subsidiaries during the Executive's employment. Nothing herein contained
shall be construed as prohibiting the Company from pursuing any other remedies
available to it for such breach.
X.
NOTICES
Any notice required or permitted to be given under this Agreement shall be
deemed properly given if in writing and if mailed by registered or certified
mail, postage prepaid with return receipt requested, to his residence in the
case of notices to the Executive, or to the principal office of the Company, to
the attention of its President (with a copy to the Chairman of the Board and
General Counsel) in the case of notice to the Company.
XI.
WAIVER OF BREACH
The waiver by the Company or Executive of a breach of any provision of
this Agreement by the Company or the Executive shall not operate or be construed
as a waiver of any subsequent breach by the Company or the Executive.
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XII.
ASSIGNMENT
This Agreement is assignable by the Company and/or any of its subsidiaries
to any successor in interest of the Company's or its subsidiaries' business.
XIII.
ENTIRE AGREEMENT
This instrument contains the entire agreement between the Company and
Executive relating to the subject matter hereof, and supersedes and replaces in
its entirety any existing Agreement between Company and the Executive. This
Agreement may not be waived, changed, modified, extended or discharged orally;
but, may be amended and/or changed only by a written instrument duly executed by
an authorized representative of the Company and the Executive hereto and
designated on its face as an "Amendment".
XIV.
FAILURE TO ENFORCE
It is expressly agreed and understood that the waiver by a party of its
rights, or any portion of its rights, under this Agreement in any particular
instance or instances, whether intentional or otherwise, shall not be considered
as a continuing waiver which would prevent the subsequent enforcement of such
rights.
XV.
APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of California, the principal place of business of the Company.
XVI.
HEADINGS
The headings of the Sections hereof are for convenience only and shall not
control or affect the meaning, or construction, or limit the scope or intent of
any of the provisions of this Agreement.
XVII.
MISCELLANEOUS
It is anticipated that variances and deviations from certain provisions of
this Agreement may be necessary and may be allowed or tolerated, but it is
agreed that such variances or deviations, regardless of number, shall not be
reason for altering or modifying the interpretation of any portion of this
Agreement.
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This Agreement shall be binding on the assignees, heirs, administrators,
executors, spouses, successors and legal representatives of both parties hereto.
XVIII.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be an original, and all of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Employment
Agreement as of the date and year first above written.
BEACHPORT ENTERTAINMENT CORPORATION
/s/ SIDNEY L. SHLENKER
-----------------------------
By: Sidney L. Shlenker,
Chairman of the Board
/s/ GARY LASHINSKY
-----------------------------
GARY LASHINSKY, Executive
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[Logo]
November 10, 1994
Mr. Barry Mendelson
ON ICE, INC.
517 North Robertson Blvd.
Suite 200
Los Angeles, CA 90048
Dear Barry:
This will confirm the following agreement reached between MAGIC PROMOTIONS,
INC., an Ohio Corporation, having its place of business at 199 East Garfield
Road, Aurora, OH 44202 (hereinafter referred to as "Magic") and ON ICE, INC. a
Delaware corporation, having its place of business at 517 N. Robertson Blvd.
Suite 200, Los Angeles, CA 90048 (hereinafter referred to as "Producer"):
1. Producer hereby agrees that Magic will invest as a Full Partner in the
Nutcracker on Ice tours (hereinafter referred to as "Productions") encompassing
two (2) separate touring companies listed as the "A" and "B" tours.
2. The "A" tour shall star Oksana Baiul, Viktor Petrenko and Brian Boitano and
shall be presented in mainly arena venues. The "B" tour shall star Brian Orser
and shall be performed in mainly proscenium theatre venues.
3. Both the "A" and the "B" tour shall be mounted for a total budget estimated
at Five Hundred and Fifty Thousand ($550,000.00) for 1994. Inclusive in the
budget is a flat General Management fee of Twenty Thousand Dollars ($20,000.00)
and a flat Producer fee of Ten Thousand Dollars ($10,000.00).
4. The total investment amount from Magic is Two Hundred and Twenty Thousand
Dollars ($220,000.00) As a Full Partner, Magic shall receive a forty percent
(40%) interest in the show (including ownership of sets, costumes, props and the
name) sharing in all profits and overages including, but not limited to, the
following: Show guarantees, show overages, Merchandising, Television, Video
sales, and Sponsorships. All revenue generated by Nutcracker on Ice for Magic
and On Ice, Inc. will be received in perpetuity. As of the date of this
Agreement, the following agreements regarding these revenue streams are being
negotiated:
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On Ice, Inc./Magic Promotions, Inc. Agreement
November 10, 1994
Page 2 of 4
A. Sony Signatures has paid On Ice, Inc. an advance for the tour
Merchandising rights for the 1994 Nutcracker on Ice tour in the amount of
$60,000.00 with an additional $60,000 to be paid in Jan. '95.
B. A television deal is being negotiated with ESPN for rebroadcasting
rights for One Hundred Thousand Dollars. Fifty percent (50%) of that
amount, or Fifty Thousand Dollars ($50,000.00) will be paid directly to On
Ice, Inc.
C. A video deal is being negotiated with CBS/FOX for distribution rights
for VHS videos of Nutcracker on Ice for One Hundred and Twenty Five
Thousand Dollars $125,000.00). Fifty five percent (55%) of that amount, or
Sixty Eight Thousand Seven Hundred and Fifty Thousand Dollars ($68,750.00)
will be paid directly to On Ice, Inc.
D. Revenues for television and tour sponsorships are presently estimated at
Two Hundred and Fifty Thousand Dollars ($250,000.00).
E. Separate from Nutcracker on Ice, On Ice, Inc. has a four year agreement
with Sony Signatures for the Merchandising rights for Oksana Baiul. Fifty
percent (50%) of all profits received by Sony Signatures for this deal goes
directly to On Ice, Inc.
5. This agreement shall be in effect for the entire life of this Production and
any future production of Nutcracker on Ice produced by On Ice, Inc., a
subsidiary of On Ice, Inc. a company affiliated with Barry Mendelson, or a
company assigned to Barry Mendelson or One Ice, Inc.
6. The recoupment for the total budget of Five Hundred and Fifty Thousand
dollars ($550,000.00) will come out of first monies from all revenues listed in
paragraph 4. above, minus the weekly operating expenses. The next Fifty Thousand
Dollars ($50,000.00) for each part of the season shall be paid to Barry
Mendelson as a Producing fee. All monies thereafter shall be split Sixty Percent
(60%) to Producer and Forty Percent (40%) to Magic.
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On Ice, Inc./Magic Promotions, Inc. Agreement
November 10, 1994
Page 3 of 4
7. The daily budget for operating the "A" tour is estimated at Sixty Three
Thousand Dollars ($63,000.00). The weekly budget for operating the "B" tour is
estimated at Seventy Two Thousand Five Hundred Dollars ($72,500.00). In these
amounts there will not be a weekly fee for the General Management or a weekly
Associate Producing Fee.
8. The backup, method of payment and the timetable of payment for the tours
initial investments and all profits shall be as follows:
a. Daily show settlements for the tours shall be faxed to Magic no later
than Noon P.S.T. of the following day and a weekly recap of gross revenues,
overages and expenses shall be distributed via fax on Monday of every week
of the tour, including December 12, 19, 26, 1994 and January 3, 1995.
A. No later than December 30, 1994 all monies from overages shall be
distributed to the Producers for credit against the initial investment.
B. No later than January 25, 1995 all preliminary accounting audits shall
be distributed to the Producers.
C. No later than January 30, 1995, the total distribution of all investment
money and tour profits, along with the final financial tour audit, shall be
paid to the Producers.
9. Producer warrants and represents that it has the right to enter into this
Agreement and that it does not have, nor will it incur, any obligations or
commitments in conflict with the provisions hereof.
10. Producer represents that it has secured the necessary production rights for
performance of the Production and that the cost of mounting the production is
inclusive of costs of all royalties, arrangements, and licensing fees in
connection therewith.
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On Ice, Inc./Magic Promotions, Inc. Agreement
November 10, 1994
Page 4 of 4
11. By combining the Memorandums of Understanding of June 20, 1994 and November
4, 1994, this Agreement constitutes the entire understanding between the parties
and cannot be modified or terminated, except by an instrument in writing signed
by both parties. It shall be construed in accordance with the laws of the State
of Ohio.
Sincerely,
MAGIC PROMOTIONS, INC.
By: /s/ Lee D. Marshall
-------------------------------------
Mr. Lee D. Marshall, Vice President
Agreed and Accepted:
ON ICE, INC.
By: /s/ Barry Mendelson
-------------------------------------
Mr. Barry Mendelson
President
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SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT ("Agreement") is made and entered into on
this 12 day of June, 1997 by and between On Ice, Inc., a corporation organized
and existing under the laws of the state of Delaware and having offices located
at 517 N. Robertson Boulevard, Suite 200, Los Angeles, California 90048-1730
(hereinafter "On Ice") and Magicworks Entertainment, Incorporated, a
corporation organized and existing under the laws of the state of Florida and
having offices located at 199 East Garfield Road, Aurora, Ohio 44201-8886
(hereinafter "Magic") and its affiliated corporations and entities.
WHEREAS, On Ice and Magic previously entered into certain agreements and
understandings, written and oral, with respect to the production and promotion
of the Nutcracker on Ice (hereinafter "Nutcracker") shows for years 1994, 1995,
and 1996.
WHEREAS, the parties desire to resolve all outstanding matters by and
between them with respect to or relating to the Nutcracker and any prior
agreements or understandings which they have with respect thereto by settlement
and agreement.
NOW THEREFORE, in consideration of the foregoing and of the mutual
promises hereinafter set forth, of other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties thereto
promise and agree as follows:
1. On Ice's Payment Responsibility. Magic represents and warrants that it
has remitted payment for all the expenses Magic has incurred for the
1996 Nutcracker On Ice and Magic has provided this information to On
Ice and D&F Consulting Ltd. On Ice shall assume the sole responsibility
for all the expenses On Ice incurred directly, and Magic shall have no
responsibility whatsoever for, the payment of any unpaid bills,
invoices, or charges of any type or nature whatsoever arising from or
relating to producing and promoting the Nutcracker show for 1996,
except for the expenses identified as paid by Magic. Where Magic has
contracted directly with any third party for any expenses relating to
Nutcracker On Ice shows and not notified On Ice of these expenses,
Magic will be responsible for these expenses. The booking fees due the
Booking Group for the Nutcracker On Ice - 1996 theater tour and the
spring tour of Gershwin On Ice as identified on "Exhibit A" are the
responsibility of On Ice, Inc., to pay and the Booking Group will be
paid by July 1, 1997, or this will constitute a material breach of this
agreement and such material breach will be enforceable by Magic or The
Booking Group. On Ice's responsibility and obligations pursuant to this
Paragraph also include, but are not limited to, the obligation to pay
talent fees and royalties, if any. that may be due to talent and others
regarding the home video sales of the Nutcracker.
2. Rights and Assets. Magic waives, releases, and relinquishes any and all
claims which it has, has had, or may hereafter otherwise have with
respect to any revenues, assets, copyrights, television or video sales,
and ancillary exploitation. All the above-mentioned worldwide rights
are included. On Ice will pay Magic, for the 1997, 1998, and 1999
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tours of Nutcracker On Ice, a royalty of five percent (5%) of the net
profits after all direct expenses including the Fifty Thousand dollars
($50,000.00) management fee. Magic's 5% profit participation will be
due and payable by February 28 after the end of such tour. If such
profit participation is not paid on time, it will be considered a
material breach and enforceable by Magic. On Ice will release Magic
from any claims for losses incurred prior to the execution of this
agreement except as identified in Section 1. No On Ice corporate
interest or expenses will be included.
3. Non-Competition. Magic will not enter into any agreement to produce,
promote, or financially back any "Nutcracker" ice skating show directly
or with any other partnerships, corporations or entity of any kind for
the period of royalty payments identified in Paragraph 2 above.
4. Release by On Ice. Except with respect to On Ice's rights pursuant to
this Agreement, all of which are reserved, and except as otherwise
provided in this Paragraph, On Ice, its parent, subsidiary, and
affiliated corporations and entities and each of their directors,
officers, employees, and agents, and each of their heirs, successors
and assigns and each of them (hereinafter "On Ice Releasors") waive,
release, relinquish, and discharge Magic and its affiliated
corporations and entities and its and their directors, officers,
employees, and agents, and its and their heirs, successors, and
assigns, and each of them (hereinafter "Magic Releasees") from any and
all claims, liabilities, suits, damages, actions or manner of actions,
whether in contract, tort, or otherwise which the On Ice Releasors, or
any of them ever had, now has, or hereinafter may have against the
Magic Releasees, or any of them, whether the same be in administrative
proceedings, in arbitration in law, at equity, or mixed, arising from
or relating to any prior relationship between the On Ice Releasors and
the Magic Releasees or otherwise arising from or relating to the
Nutcracker On Ice shows, telecasts, ancillary exploitations.
Notwithstanding the foregoing, in the event that any claim(s) is
asserted against the On Ice Releasors or any of them by a person or an
entity which is not a party to this Agreement, the On Ice Releasors,
and each of them, reserve and retain any and all rights, claims, and
defenses which they, or any of them, now have, have had, or would
otherwise have against Magic Releasees, or any of them, arising out of
the transaction(s) or matter(s) which is the subject of each claim(s)
against On Ice Releasors, or any of them.
5. Release by Magic. Except with respect to Magic's rights pursuant to
this Agreement, all of which are reserved, and except as otherwise
provided in this Paragraph, Magic, its affiliated corporations and
entities and each of their directors, officers, employees, and agents,
each of their heirs, successors and assigns, and each of them (herein
"Magic Releasors") waive, release. relinquish, and discharge On Ice and
its parent, subsidiary, affiliated corporations and entities and its
and their directors, officers, employees, and agents, and its and their
directors, officers, employees and agents, and its and their heirs,
successors and assigns and each of them (hereinafter "On Ice
Releasees") from any and all claims, liabilities, suits, damages,
actions or manner of actions, whether in contract, tort, or otherwise
which the Magic Releasors, or any of them ever had, now has, or
hereinafter may have against On Ice, Releasees or any of them, whether
the same be in administrative proceedings, in arbitration, in law, at
equity, or mixed, arising from or
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relating to any prior relationship between Magic Releasors and the On
Ice Releasees or otherwise arising from or relating to the Nutcracker
On Ice shows, telecasts and ancillary exploitations. Notwithstanding
the foregoing, in the event that any claim(s) is asserted against the
Magic Releasors or any of them by a person or an entity which is not a
party to this Agreement, the Magic Releasors, and each of them, reserve
and retain any and all rights, claims, and defenses, which they, or any
of them, now have, have had, or would otherwise have against the On
Ice Releasees, or any of them, arising out of the transaction(s) or
matter(s) which is the subject matter of each claim(s) against the
Magic Releasors, or any of them.
6. Notice. Notice is to be given under the provisions of this Agreement,
such notice must be in writing and sent by certified mail or registered
mail, return receipt requested, postage prepaid as follows until any
party notify the other in writing of a different address or person as
to whom notice should be sent:
To: On Ice, Inc.
517 N. Robertson Boulevard
Suite 200
Los Angeles,CA 90048-1730
Attention: Barry Mendelson, President
To: Magicworks Entertainment, Incorporated
199 E. Garfield Road
Aurora, OH 44202-8886
Attention: Lee Marshall, President, Chief Operating Officer
Notice shall be deemed to have been given when received or three days
following mailing, whichever first occurs.
7. Attornev's Fees. In the event that either party breaches this Agreement
in any material respect and the non-breaching party prevails in an
action to enforce this Agreement, the non-breaching party shall be
entitled to recover, in addition to any and all other remedies; the
reasonable attorney's fees, expenses and costs which it incurs as a
result thereof, and the breaching party, promises and agrees to pay to
the non-breaching party all such amounts.
8. Waiver. Neither party shall be deemed to have waived any right
hereunder unless such waiver is in writing duly executed by such party.
9. Construction. This Agreement shall not be construed more strictly
against any party hereto merely by virtue of the fact that the
Agreement may have been drafted or prepared by such party, it being
recognized that all of the parties hereto have contributed
substantially and materially to its preparation and that this Agreement
has been the subject of and is the product of negotiations between the
parties.
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10. Consultation with Counsel. Each party respectively represents and
warrants to the other that it has had an opportunity to consult with
counsel of its choosing with respect to this Agreement and all of the
terms and provisions hereof and that it enters into this Agreement
voluntarily and with knowledge as to the terms, provisions, and effect
of the matters set forth herein.
11. Cumulative Remedies. Any right, power, or remedy provided under this
Agreement to any party thereto shall be cumulative and in addition to
any other right, power or remedy provided under this Agreement now or
hereafter existing at law or in equity, and may be exercised singularly
or concurrently.
12. Binding Agreement. This Agreement shall be binding on and shall inure
to the benefits of the parties hereto, and their respective officers,
employees, agents, heirs, personal and legal representatives,
successors, and assigns.
13. Applicable Law. The construction, interpretation, and enforcement of
this Agreement shall at all times and in all respects be governed by
the laws of the State of California relating to the choice of law or
conflict of law provisions or principles.
14. Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject
matter hereof, and no representations, promises, or agreement, oral or
written, relating hereto not herein contained shall be of any force or
effect. No change or modification of this Agreement shall be valid or
binding upon the parties unless and until the same is in writing and
signed by the party against whom enforcement of such change or
modification is sought.
15. Authority. The parties hereto respectively represent and warrant that
the person signing this Agreement on their behalf has the requisite
authority to do so and to make the promises and to undertake the
obligations set forth herein on behalf of the persons and entities
indicated and to legally bind those persons to the terms and provisions
of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
ON ICE, INC.
By: /s/ Barry Mendelson
----------------------------------------------------
Barry Mendelson, President - Chief Executive Officer
MAGICWORKS ENTERTAINMENT, INCORPORATED
By: /s/ Lee Marshall
----------------------------------------------------
Lee Marshall, President - Chief Operating Officer
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MERGER AGREEMENT
AND PLAN OF REORGANIZATION
This Merger Agreement and Plan of Reorganization is made as of June 13, 1997, by
and among Beachport Entertainment Corporation ('Buyer'), a Utah corporation
having its principal office at 517 North Robertson Blvd., Suite 200, Los
Angeles, CA 90048, and The Royal Lipizzaner Stallions, Inc., a Nevada
corporation to be formed ('Buyer Subsidiary') on the one hand, and Entertainment
Specialists, Ltd., Inc. ('Target'), a Florida corporation having its principal
office at 1053 Van Arsdale, Oveida, FL 32765 and Elizabeth Lashinsky and Gary
Lashinksy ('Shareholders'), residing at 1053 Van Arsdale, Oveida, FL 32765 on
the other.
AGREEMENT
THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE
MERGER AGREEMENT: EFFECT OF THE TRANSACTION; TERM
1. On the Effective Date, as defined in this Agreement, a merger shall take
place ('the Merger') whereby Target shall be merged with and into Buyer
Subsidiary, and Buyer Subsidiary shall be the Surviving Corporation. (The term
"Surviving Corporation" appearing in this Agreement denotes Buyer Subsidiary
after consummation of the Merger.) Buyer Subsidiary's corporate name, existence,
and all its purposes, powers, and objectives shall continue unaffected and
unimpaired by the Merger, and as the Surviving Corporation it shall be governed
by the laws of the State of Nevada and succeed to all of Target's rights,
assets, liabilities, and obligations in accordance with the Florida General
Corporation Law.
2. Consummation of the Merger shall be effected as soon as practicable after all
the conditions established in this Agreement have been satisfied, but in no
event later than July 30, 1997. The closing shall be held at 10:00 AM, on or
before July 30, 1997, at the offices of Buyer, or at such other time and place
as the parties may agree. The time and date of closing are called the 'Closing
Date,' and will be the same day as the Effective Date. After the Closing, the
parties will file this Agreement, in the office of the Secretary of State or
other office of each jurisdiction in which such filings are required in order
for the Merger to become effective. It is the intent of the parties that the
transactions contemplated hereby qualify as a
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tax-free reorganization under Section 368 of the Internal Revenue Code of 1986
as amended.
3. The articles of incorporation of Buyer Subsidiary in effect on the Effective
Date of the Merger shall become the articles of incorporation of the Surviving
Corporation. From and after the Effective Date of the Merger, said articles of
incorporation, as they may be amended from time to time as provided by law,
shall be, and may be separately certified as, the articles of incorporation of
the Surviving Corporation.
4. The bylaws of Buyer Subsidiary in effect on the Effective Date of the Merger
shall be the bylaws of the Surviving Corporation until they are thereafter duly
altered, amended, or repealed.
5. The directors of Buyer Subsidiary on the Effective Date of the Merger shall
be the directors of the Surviving Corporation. They shall hold office until
their successors have been elected and qualified. The officers of Buyer
Subsidiary on the Effective Date of the Merger shall be the officers of
Surviving Corporation. Each shall hold office subject to the bylaws and the
pleasure of the directors of Surviving Corporation.
ARTICLE TWO
CONVERSION OF SHARES
6. On the Effective Date:
(a) Each share of Target's common stock issued and outstanding immediately
before the Effective Date shall be converted into one share of common stock of
the Surviving Corporation;
(b) Target's common stock issued and outstanding immediately before the
Effective Date (the 'Target Common Stock') shall by virtue of the Merger and
without action on the part of the Shareholders be converted into the right to
receive from Buyer the following:
(1) $631,460.00 in cash to be wired to Shareholders in accordance with their
instructions delivered to Buyer prior to the Closing, to be paid upon surrender
to Buyer for cancellation of the certificate(s) representing the Target Common
Stock, and
(2) a number of shares of the common stock of Buyer determined by dividing
$1,000,000.00 by the lesser of (i) $3.00 or (ii) the average closing price of
Buyer's common stock, as reported by the NASD OTC Bulletin Board of NASDAQ
and/or the
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American Stock Exchange, if Buyer is listed thereon, for the 60-day period
immediately prior to the Closing.
(c) Buyer will issue an additional number of shares of Buyer's common stock(the
'Contingent Share Amount') at the following times and subject to the following
conditions:
1 - On or about the first anniversary of the Closing, the Shareholders shall
receive additional shares of the common stock of Buyer equal to: (I) the gross
earnings of Surviving Corporation during the twelve (12) month period
immediately following the Closing (the 'First Twelve Months') less One Million
Dollars ($1,000,000.00) divided by (II) the yearly average of the Buyer's share
price during the First Twelve Months (determined by adding the daily share
prices for the frist month of the First Twelve Months to the daily share prices
for the last month of the First Twelve Months and dividing the total by the
total number of trading days in each of said months).
2 - On or about the second anniversary of the Closing, the Shareholders shall
receive additional shares of the common stock of Buyer equal to: (I) the gross
earnings of Surviving Corporation during the twelve (12) month period beginning
immediately after the end of the First Twelve Months (the 'Second Twelve
Months') less One Million Dollars ($1,000,000.00) divided by (II) the yearly
average of Buyer's share price during the Second Twelve Months (determined by
adding the daily share price for the first month of the Second Twelve Months to
the daily share price for the last month of the Second Twelve Months and
dividing the total by the total number of trading days of said months).
3 - On or about the third anniversary of the Closing, the Shareholders shall
receive additional shares of the common stock of Buyer equal to: (I) (a) the
average annual earnings of Surviving Corporation for the three (3) year period
beginning with the Closing multiplied by (b) seventy percent (70%) of the
average profit/earning multiple of Buyer for the twelve month period beginning
immediately after the end of the Second Twelve Months (the 'Third Twelve
Months') (determined by adding the profit/earning for the first month of the
Third Twelve Months to the profit/earning of the last month of the Third
Twelve Months and dividing the sum by two (2)) times thirty-five percent (35%)
divided by (c) the yearly average of the Buyer's share price during the Third
Twelve Months (determined by adding the daily share price for the first month of
the Third Twelve Months to the daily share price for the last month of the Third
Twelve Months and dividing the total by the total number of trading days in each
of said months less (II) the number of shares received by the Shareholders under
paragraphs 6.(C)1 and 6.(C)2. For purposes of this paragraph, all earnings shall
be determined before taxes, but after interest expenses. The parties mutually
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agree that there will not be any intercompany interest expenses, and that all
other intercompany expenses shall be subject to mutual approval between Buyer
and Shareholders. Further, Buyer shall be entitled to an arms-length producer's
fee on all television and home video productions of Surviving Corporation and,
in consideration thereof, shall provide producer and marketing services on
behalf of Surviving Corporation.
7. On the Effective Date, the stock transfer books of Target shall be closed,
and thereafter no transfers of shares of Target Common Stock shall be made or
consummated.
ARTICLE THREE
TARGET'S REPRESENTATIONS AND WARRANTIES
8. Each of Target and Shareholders represents and warrants to Buyer and Buyer
Subsidiary as follows:
9. Target is duly organized, validly existing, and in good standing under the
laws of Florida, and has the corporate power to own all of its properties and
assets and to carry on its business as it is now being conducted. Target is duly
qualified to do business as a foreign corporation and is in good standing in the
states of Nevada and California, and, neither the ownership of its property nor
the conduct of its business requires it to be qualified to do business in any
other jurisdiction. Target's board of directors has authorized the execution of
this Agreement, and Target has the corporate power and is duly authorized,
subject to the approval of this Agreement by its shareholders, to merge Buyer
Subsidiary into Target pursuant to this Agreement. By their execution of this
Agreement, the Shareholders approve of the Merger effected hereby.
10. Target's authorized capital stock consists of 500 shares of common stock,
without par value, of which 500 shares are issued and outstanding, all of which
are owned by the Shareholders. All issued and outstanding shares have been
validly issued in full compliance with all federal and state securities laws,
are fully paid and nonassessable, and have voting rights. There are no
outstanding subscriptions, options, rights warrants, convertible securities, or
other agreements or commitments obligating Target to issue or to transfer from
treasury any additional shares of its capital stock of any class.
11. All of Target's subsidiaries (called collectively 'Target Subsidiaries' or
individually a "Target Subsidiary") are listed in Schedules to be provided by
Target, which correctly set forth as to each Target Subsidiary (1) its
jurisdiction of
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incorporation; (2) the jurisdictions in which it is qualified to do business as
a foreign corporation; (3) the number of shares of its capital stock authorized;
and (4) the number of shares issued and outstanding. Except as specified in such
Schedules, Target or a Target Subsidiary owns all of the outstanding shares of
capital stock of each Target Subsidiary and, except for the securities listed in
the Schedule of Securities to be furnished pursuant to Article Seven, neither
Target nor any Target Subsidiary has any outstanding investment in or advance of
cash to any company other than a Target Subsidiary. There are no outstanding
rights or options to acquire, or any outstanding securities convertible into,
stock of any class of any Target Subsidiary. Each Target Subsidiary (1) is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation; (2) is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
listed with respect to it in the Schedules; (3) has the corporate power to own
all of its property and assets and carry on its business as it is now being
conducted; and (4) except as set forth in the Schedules, is not required, by its
ownership of property, by the conduct of its business, or otherwise, to be
qualified to do business in any other jurisdictions. All of the foregoing
representations and warranties shall be true as of the Closing Date.
12. The balance sheet ('Balance Sheet') of Target as of March 31, 1997 ("Balance
Sheet Date") and the related statement of profits and losses for the period then
ended, and the balance sheet and related statement of profits and losses for the
fiscal year ended December 31, 1996, certified by Gary Lashinsky, Target's Chief
Executive Officer, copies of which have been delivered by Target to Buyer,
fairly present the financial position of Target as of that date and the results
of operations for that period, and have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
that of preceding periods.
13. Except as may be disclosed in the Schedules to be furnished pursuant to
Article Seven, and except for the lien for any current taxes or assessments not
yet delinquent, Target owns free and clear of any liens, claims, charges,
options, or encumbrances all of the property, including trademarks, service
marks, trade names and other intellectual property rights specified on the
Schedules to be provided, reflected on its books at the Balance Sheet Date and
all property acquired since that date, except such property as has been disposed
of in the ordinary course of business consistent with prior practices of Target
or with Buyer's written consent. For purposes of this paragraph, a disposition
of any single asset (other than inventories) carried on the books of Target at
more than $1,000.00 shall be deemed to be a disposition not in the ordinary
course of business.
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14. Except as set forth in the Schedules attached hereto, there is not pending,
or to the best knowledge of the Shareholders and Target, threatened, any suit,
action, arbitration, or legal, administrative, or other proceeding, or
governmental investigation against or affecting Target or its business, assets,
or financial condition. Target is not in default with respect to any order,
writ, injunction, or decree of any federal, state, local, or foreign court,
department, agency or instrumentality.
15. Within six (6) months after the Closing Date, Surviving Corporation will
have collected 100 percent, of the amounts shown as accounts receivable (less
the amount of the reserve in respect of such accounts receivable shown on the
Balance Sheet, which reserve has been established and calculated consistent with
past practice) on the books of Target and Target Subsidiaries at the close of
business on the day before the Effective Date.
16. Except as may be disclosed in the Schedules to be furnished pursuant to
Article Seven, no officer, director, or shareholder of Target or any Target
Subsidiary has any interest in any property, real or personal, tangible or
intangible, including copyrights, trademarks, or trade names, used in or
pertaining to the business of Target or any Target Subsidiary.
17. There are no liabilities of Target or any Target Subsidiary other than the
following:
(a) Liabilities disclosed or provided for in the Balance Sheet, including
any notes to the Balance Sheet;
(b) Liabilities disclosed in the Schedules furnished pursuant to Article
Seven; or
(c) Liabilities incurred in the ordinary course of business since the
Balance Sheet Date, none of which has been adverse to the business of Target or
any Target Subsidiary, and none of which is attributable to any period prior to
the Balance Sheet Date.
18. Since the Balance sheet Date there has not been:
(a) Any change in the business, results of operations, assets, financial
condition, or manner of conducting the business of Target or any Target
Subsidiary other than changes in the ordinary course of business, none of which
has had an adverse effect on the business, results of operations, assets,
financial condition, or prospects of Target or any Target Subsidiary;
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(b) Any damage, destruction, or loss (whether or not covered by insurance)
adversely affecting any aspect of the business or operations of Target or any
Target Subsidiary;
(c) Any director or indirect redemption or other acquisition by Target of
any of Target's shares of capital stock of any class, or any declaration,
setting aside, or payment of any dividend or other distribution in respect of
Target's capital stock of any class;
(d) Any increase in the compensation payable or to become payable by Target
or any Target Subsidiary to any of its officers, employees, or agents, other
than the normal increases granted in the ordinary course of business;
(e) Any option to purchase, or other right to acquire, stock of any class
of Target or any Target Subsidiary granted by Target or any Target Subsidiary to
any person;
(f) Any employment, bonus, or deferred compensation agreement entered into
between Target or any Target Subsidiary and any of its directors, officers, or
other employees or consultants;
(g) Any issuance of capital stock of any class by Target;
(h) Any indebtedness incurred by Target or any Target Subsidiary for
borrowed money or any commitment to borrow money entered into by Target or any
guaranty given by Target; or
(i) Any amendment to Target's articles of incorporation or bylaws.
19. Target and each Target Subsidiary have obtained all necessary permits,
licenses, franchises, and other authorizations and have complied with all laws
applicable to the conduct of their business in the manner and in the areas in
which business is presently being conducted; and all such permits, licenses,
franchises, and authorizations are valid and in full force and effect. Neither
Target nor any Target Subsidiary has engaged in any activity that would cause
revocation or suspension of any such permits, licenses, franchises, or
authorizations; no action or proceeding looking to or contemplating the
revocation or suspension of any of them is pending or threatened; and no
approvals or authorizations will be required after the consummation of the
Merger to permit Surviving Corporation to continue Target's business as
presently conducted.
20. Neither Target nor any Target Subsidiary is a party to or subject to any
judgment, decree, or order entered in any suit or
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proceeding brought by any governmental agency or by any other person, enjoining
Target or any Target Subsidiary with respect to any business practice, the
acquisition of any property, or the conduct of business in any area.
21. To the best knowledge of the Shareholders, during each of the past three (3)
fiscal years, Target and each Target Subsidiary have been adequately insured by
financially sound and reputable insurers with respect to risks normally insured
against and in amounts normally carried by companies similarly situated. All
such policies are in full force and effect; all premiums due on such policies
have been fully paid; and no notice of cancellation or termination has been
received with respect to any policy. Buyer will review all insurance policies
now in force for Target and its subsidiaries and will determine, after
consultation with Target, whether any changes to the existing insurance should
be made prior to the Closing.
22. No work stoppage or other labor dispute in respect to Target or any Target
Subsidiary is pending or threatened, and no application for certification of a
collective bargaining agent is pending or threatened.
23. To the best of the knowledge of the Shareholders, Target and each Target
Subsidiary have complied in all material respects with, and have not been cited
for any violation of, federal, state, and local environmental protection laws
and regulations; and no material capital expenditures will be required for
compliance with any federal, state, or local laws or regulations now in force
relating to the protection of the environment. As used in this paragraph,
"Hazardous Material" means any hazardous or toxic substance, material, or waste
that is regulated by any federal authority or by any state or local authority
where the substance, material, or waste is located. To the best of the knowledge
of Shareholders, there are no underground storage tanks located on the real
property described in the Schedules to this Agreement in which any Hazardous
Material has been or is being stored, nor has there been any spill, disposal,
discharge, or release of any Hazardous Material into, upon, or over that real
property or into or upon ground or surface water on that real property. To the
best of the knowledge of Shareholders, there are no asbestos-containing
materials incorporated into the buildings or interior improvements that ate part
of that real property or into other assets of Target or any Target Subsidiary,
nor is there any electrical transformer, fluorescent light fixture with ballasts
or other equipment containing PCBs on that real property.
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24. No representation or warranty by Target in this Agreement, the Schedules and
other documents to be provided by Target and no statement by Target or any
Target Subsidiary, by any executive officer or other person contained in any
document, certificate, or other writing furnished by or on behalf of Target to
Buyer in connection with this transaction, contains or will contain any untrue
statement of material fact, or omits or will omit to state any material fact
necessary to make it not misleading or necessary to fully provide the
information required to be provided in the document, certificate, or other
writing.
25. Target has no powers of attorney outstanding other than those issued in the
ordinary course of business with respect to insurance, tax, and customs matters.
26. The execution and delivery of this Agreement do not, and the consummation of
the Merger will not, (1) violate any provision of Target's articles of
incorporation or bylaws; (2) violate any provision of, or result in the
acceleration of any obligation under, or result in the imposition of any lien or
encumbrance on any asset of Target pursuant to the terms of any mortgage, note,
lien, lease, franchise, license, permit, agreement, instrument, order,
arbitration award, judgment, or decree; (3) result in the termination of any
license, franchise, lease or permit to which Target is a party or by which
Target is bound; or (4) violate or conflict with any other restriction of any
kind or character to which Target is subject. After Target's shareholders have
adopted the plan of merger as set forth in this Agreement, Target's board of
directors and shareholders will take all actions required by law or by Target's
articles of incorporation or bylaws, or otherwise required or necessary to
authorize the execution and delivery of this Agreement and to authorize the
Merger of Target with Buyer Subsidiary pursuant to this Agreement.
ARTICLE FOUR
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer and Buyer's Subsidiary represent and warrant to Target and the
Shareholders as follows:
27. Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Utah. Buyer Subsidiary will be a wholly
owned subsidiary of Buyer and will be duly organized, validly existing, and in
good standing under the laws of the State of Nevada.
28. Buyer and Buyer Subsidiary have the corporate power to
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execute and deliver this Agreement and have taken (or by the Closing Date will
have taken) all actions required by law, their articles of incorporation, their
bylaws, or otherwise, to authorize the execution and delivery of this Agreement.
This Agreement is a valid and binding agreement of Buyer and Buyer Subsidiary in
accordance with its terms.
29. The execution and delivery of this Agreement do not, and the consummation of
the Merger will not, (1) violate any provision of the articles of incorporation
or bylaws of Buyer or of Buyer Subsidiary; (2) violate any provision of or
result in the acceleration of any obligation under any mortgage, note, lien,
lease, franchise, license, permit, agreement, instrument, order, arbitration
award, judgment, or decree to which Buyer or Buyer Subsidiary is a party or by
which either is bound; (3) result in the termination of any license, franchise,
lease, or permit to which Buyer or Buyer Subsidiary is a party or by which
either is bound; or (4) violate or conflict with any other restriction of any
kind or character to which Buyer or Buyer Subsidiary is subject. After the
boards of directors of Buyer and Buyer Subsidiary and the shareholder(s) of
Buyer Subsidiary have adopted the plan of merger as set forth in this Agreement,
said boards of directors and shareholder(s) will take or will have taken all
actions required by law, their respective articles of incorporation, their
bylaws, or otherwise, to authorize the execution and delivery of this Agreement
and to authorize the Merger.
30. Buyers authorized capital stock consists of (a) 50,000,000 shares of common
stock, $.002 par value, of which 13,066,980 shares are issued and outstanding on
a fully diluted basis and (b) 1,000,000 shares of preferred stock, $1.00 par
value, of which 14 shares are issued and outstanding. The shares of common stock
of Buyer issued to the Shareholders pursuant to Article Two shall, when issued,
be validly issued, fully-paid, non-assessable and with voting rights.
31. For the three (3) year period following the Effective Date, the Buyer shall
file and keep current the information described in 17 C.F.R. Section
230.144(c)(1) and (2) (Rule 144 (c)(1) and (2)).
32. In the event that the Buyer files a registration statement with respect to
its common stock within the next three (3) years, the Buyer shall allow the
Shareholders to "piggy-back" the shares of the common stock of the Buyer
received by the Shareholders pursuant to Article Two on such registration
statement.
33. The Buyer has provided the Shareholders and the Target with the current
copies of the Articles of Incorporation together with all amendments, and Bylaws
of the Buyer.
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ARTICLE FIVE
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to consummate the Merger is subject to the satisfaction, on
or before the Closing Date, of the following conditions:
34. Each of the acts and undertakings of Target to be performed on or before the
Closing Date pursuant to the terms of this Agreement shall have been duly
performed.
35. Target shall have furnished Buyer with a copy, certified by Target's
secretary, of (1) a resolution or resolutions duly adopted by Target's board of
directors authorizing and approving this Merger Agreement and Plan of
Reorganization and directing that it be submitted to a vote of Target's
shareholders; and (2) a resolution or resolutions adopting this Merger Agreement
and Plan of Reorganization, duly approved by the holders of at least a majority
of the total number of outstanding shares of common stock of Target.
36. All of the representations and warranties of Target contained in this
Agreement and in the Schedules furnished pursuant to Article Seven shall be true
in each material respect on and as of the Closing Date, with the same effect as
though such representations and warranties had been made on and as of that date;
and Buyer shall have received at the closing a certificate, dated the Closing
Date and executed by the president or a vice president of Target, containing a
representation and warranty to that effect.
37. Buyer shall have received, or shall have satisfied itself that it will
receive, in form satisfactory to Buyer, all necessary approvals of the
transactions contemplated by this Agreement from authorities having any
jurisdiction over the business of Target or any Target Subsidiary, so that
Target and Target Subsidiaries may continue to carry on their business as
presently conducted after consummation of the Merger; and no such approval and
no license or permit granted to Target or any Target Subsidiary shall have been
withdrawn or suspended.
38. All consents of other parties to the mortgages, notes, leases, franchises,
agreements, licenses, and permits of Target or any Target Subsidiary necessary
to permit consummation of the Merger shall have been obtained.
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39. The Shareholders shall have entered into employment agreements on terms
satisfactory to such executives or employees and their respective counsel and to
Buyer and its counsel, and Gary Lashinsky shall have been elected to the board
of directors of Buyer.
40. Target shall have delivered the Schedules, updated through the Closing Date.
41. In its sole and absolute discretion, Buyer shall be satisfied with any
matter reflected, listed, or disclosed in the updated Schedules which was not
reflected, listed, or disclosed in the original Schedules.
42. Buyer shall have received from Target financial statements for the two years
ended December 31, 1996, audited by Buyer's independent accountants. Such audit
shall not be subject to any qualifications or limitations and the assets,
liabilities and results of operations set forth therein shall in all material
respects comport with the same information provided in the unaudited statements
provided by Target to Buyer.
ARTICLE SIX
CONDITIONS PRECEDENT TO TARGET'S OBLIGATION TO CLOSE
Target's obligation to consummate the Merger is subject to the satisfaction on
or prior to the Closing Date of the following conditions:
43. Each of Buyer's acts and undertakings to be performed on or before the
Closing Date pursuant to this Agreement shall have been performed.
44. Buyer shall have furnished Target with certified copies of (1) resolutions
duly adopted by the board of directors of Buyer and the board of directors of
Buyer Subsidiary authorizing and approving the execution and delivery of this
Merger Agreement and authorizing the consummation of the transactions
contemplated by this Agreement, and (2) resolutions duly adopted by Buyer as
sole shareholder of Buyer Subsidiary, adopting the plan of merger set forth in
this Agreement.
45. The representations and warranties of Buyer contained in this Agreement
shall be true on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of that date; and Target
shall have received at the closing a certificate, dated the Closing Date and
executed on behalf of Buyer by its president or any vice president, containing a
representation and warranty to that effect.
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ARTICLE SEVEN
SCHEDULES
As soon as practicable, but in no event later than July 10, 1997, Target
shall deliver to Buyer Schedules in the form attached to this Agreement as
Appendix A. Each such Schedule shall have been executed by or on behalf of
Target and shall be accompanied by a copy of each document referred to in the
Schedule. Pursuant to Article Five, all Schedules shall be updated through the
Closing Date; however, the updating of the Schedules shall not relieve Target of
its responsibility to indemnify Buyer, as provided in Article Nine.
ARTICLE EIGHT
BUYER'S INVESTIGATION
Prior to the Closing Date, Buyer may directly or through its
representatives make such investigation of the assets and business of Target and
Target Subsidiaries (including, without limitation, confirmation of its cash,
inventories, accounts, accounts receivable and liabilities, and investigation of
its titles to and the condition of its property and equipment) as Buyer deems
necessary or advisable. The investigation shall not affect (1) Target's
representations and warranties contained or provided for in this Agreement
(other than with respect to matters of which Buyer or Buyer's Subsidiary has
actual knowledge), (2) Buyer's right to rely on those representations and
warranties, or (3) Buyer's right to terminate this Agreement as provided in this
Article Eight and in Article Ten. Target shall allow Buyer and its
representatives full access, at reasonable times after the date of execution of
this Agreement, to the premises and to all the books, records, and assets of
Target and Target Subsidiaries, and Target's officers shall furnish to Buyer
such financial and operating data and other information with respect to the
business and properties of Target and each Target Subsidiary as Buyer shall from
time to time reasonably request. Buyer agrees not to disclose any confidential
information obtained in the course of its investigation or use it for any
purpose other than evaluation of Target and Target Subsidiaries with respect to
the contemplated merger. Buyer will disclose to Target any and all matters
disclosed during its investigation which may give rise to a claim for indemnity
by Buyer hereunder, and Target will immediately seek to cure any deficiency so
uncovered.
As soon as practicable, and in any event within 30 days after the receipt
of (1) the last Schedule required to be
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delivered to Buyer by Target pursuant to Article Seven and (2) any supporting
documentation requested by Buyer, Buyer shall give Target notice if Buyer has
decided that it wishes to terminate this Agreement based on any information
contained in any of the Schedules or obtained during the course of its
investigation. The notice shall specify the information contained in the
Schedules or obtained during the investigation on which Buyer's decision to
terminate is based. Target shall have 10 days after the receipt of the notice to
review that information with Buyer. If Buyer does not withdraw its notice within
this 10-day period, then all further obligations of Buyer and of Target under
this Agreement shall terminate without further liability of Buyer to Target or
of Target to Buyer, except their respective obligations to return documents as
provided in Article Ten. If Buyer does not advise Target within the 30-day
period specified in the first sentence above that it wishes to terminate this
Agreement, Buyer shall be deemed to be satisfied with the information relating
to Target and its Subsidiaries contained in the Schedules and/or obtained during
the course of its investigation, subject to Buyer's rights concerning the
continued accuracy of Target's warranties and representations set forth in
Article Five, as disclosed by the Schedules.
ARTICLE NINE
SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND INDEMNITIES
46. The representations, warranties, and indemnities included or provided for in
this Agreement or in any Schedule or certificate or other document delivered
pursuant to this Agreement shall survive the Closing Date for a period of 3
years. No claim may be made under this Article unless written notice of the
claim is given within that three-year period.
47. Notwithstanding Buyer's investigations of Target and Target Subsidiaries
before the Closing Date, and notwithstanding the fact that Buyer may be deemed
satisfied as to certain matters investigated by Buyer, all as provided in
Article Eight, Shareholders and Target shall indemnify, defend, and hold Buyer
and each of its subsidiaries harmless, to the maximum extent from and against
any and all losses, liabilities, costs, expenses, judgments, assessments,
penalties, damages, deficiencies, suits, actions, claims, proceedings, demands,
and causes of action, including but not limited to reasonable attorney fees,
court costs, and related expenses, that were caused by, arose as a result of, or
arose with respect to any of the following:
(a) Any inaccuracy in any representation or warranty (subject to the
Schedules) or any breach of any warranty of Target under this Agreement or any
Schedule, certificate, instrument, or other document delivered pursuant to this
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Agreement (subject to the Schedules);
(b) Any failure of Target duly to perform or observe any term, provision,
covenant, or agreement to be performed or observed by Target pursuant to this
Agreement, and any Schedule, certificate, agreement, or other document entered
into or delivered pursuant to this Agreement; or
(c) Any material inaccuracy in the Balance Sheet;
whether such losses were known or unknown to Shareholders or Target; provided,
however, that Buyer and its subsidiaries shall not be indemnified and held
harmless unless and until such damages, losses, and expenses exceed $10,000,
in which event Buyer and its subsidiaries shall be indemnified and held harmless
in full. If a claim is made against the Surviving Corporation and, pursuant to
the provisions of this Agreement, the Target is responsible to indemnify the
Surviving Corporation (a 'Claim'), the Surviving Corporation shall give written
notice (a 'Claim Notice') to the Shareholders as soon as practical after the
Surviving Corporation becomes aware of any fact, condition or event which may
give rise to a Claim. Failure of the Surviving Corporation to timely give a
Claim Notice shall not affect its rights to indemnification except to the
extent that the Shareholders demonstrate prejudice caused by such failure. After
such Claim Notice, the Shareholders shall have the right undertake the defense,
compromise or settlement of such Claim; provided, however, that the Surviving
Corporation shall have the right to advise and comment with respect to such
Claim at its cost and expense; and provided further that no settlement of any
such Claim shall be effected by Shareholders without the consent of the
Surviving Corporation, which consent shall not be unreasonably withheld. The
Shareholders shall keep the Surviving Corporation reasonably informed of the
progress of such defense, compromise or settlement.
ARTICLE TEN
TERMINATION
48. In addition to the termination rights provided for in Article Eight, this
Agreement and the transactions contemplated under this Agreement may be
terminated at any time prior to the Closing Date, either before or after the
meeting of Target's shareholders:
(a) By mutual consent of Buyer and Target;
(b) By Buyer if there has been a material misrepresentation or a material
breach of warranty in Target's representations and
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warranties set forth in this Agreement or in any Schedule or certificate
delivered pursuant to this Agreement;
(c) By Target if there has been a material misrepresentation or a material
breach of warranty in Buyer's representations and warranties set forth in this
Agreement;
(d) By Buyer or Target if either party shall have determined in its sole
discretion that the transactions contemplated by this Agreement have become
inadvisable or inpracticable by reason of the institution or threat of
institution, by governmental authorities (local, state, or federal) or by any
other person, of material litigation or proceedings against either or both of
the parties, it being understood and agreed that a written request by
governmental authorities for information with respect to the proposed
transactions, which information could be used in connection with such litigation
or proceedings, may be deemed by Buyer or Target to be a threat of material
litigation or proceedings, whether such request is received before or after the
date of this Agreement;
(e) By Buyer if it has determined that the business, assets, or financial
condition of Target and Target Subsidiaries, taken as a whole, have been
materially and adversely affected, whether by reason of changes, developments,
or operations in the ordinary course of business or otherwise;
(f) By Target or by Buyer if the Closing Date referred to in Article One
has not occurred by July 30, 1997; and
(g) By Target if it has determined that the business, assets, or financial
conditions of Buyer and its subsidiaries, taken as a whole, have been adversely
affected, whether by reason of changes, development, or operations in the
ordinary course of business or otherwise.
49. In the event that this Agreement is terminated pursuant to this Article Ten
or Article Eight, or because of the failure to satisfy any of the conditions
specified in Article Five or Article Six, all further obligations of Buyer and
of Target under this Agreement shall terminate without further liability of
Buyer to Target or Target to Buyer, except for damages suffered by the
non-breaching party (in the case of termination as the result of a breach) on
account of any such failure of condition and except for Buyer's obligations
under Paragraph 50 of this Article Ten; provided, however, anything in this
Agreement to the contrary notwithstanding, that if Target fails to furnish any
of the Schedules referred to in Article Seven or fails to satisfy any of the
conditions specified in Article Five, Buyer shall nonetheless have the right, in
its discretion, to proceed with the transactions contemplated by this
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Agreement, and if Buyer fails to satisfy any of the conditions specified in
Article Six, Target shall nonetheless have the right, in its discretion, to
proceed with the transactions contemplated by this Agreement.
50. In the event of the termination of this Agreement for any reason, Buyer will
return to Target all documents, work papers, and other materials (including
copies) relating to the transactions contemplated by this Agreement, whether
obtained before or after execution of this Agreement. Buyer will not use any
information so obtained for any purpose, and will take all practicable steps to
have such information kept confidential.
51. In the event of the termination of this Agreement for any reason, each party
shall bear its own costs and expenses, including attorney fees.
ARTICLE ELEVEN
PUBLIC ANNOUNCEMENT
Neither Buyer nor Target, without the consent of the other, shall make any
public announcement or issue any press release with respect to this Agreement or
the transactions contemplated by it, which consent shall not be unreasonably
withheld, except as required by law.
ARTICLE TWELVE
COVENANT TO OPERATE IN THE ORDINARY COURSE
Between the date of this Agreement and the Closing Date, Target and
Target's Subsidiaries shall operate their businesses only in the ordinary course
and in a normal manner consistent with past practice. During this period, Target
shall not encumber any asset or enter into any transaction or make any
commitment relating to its assets or business otherwise than in the ordinary
course of its business (consistent with its prior practices), or take any action
that would render inaccurate any representation or warranty contained in this
Agreement or would cause a breach of any other covenant under this Agreement,
without first obtaining the written consent of Buyer.
ARTICLE THIRTEEN
GOVERNING LAW; SUCCESSORS AND ASSIGNS;
COUNTERPARTS; ENTIRE AGREEMENT
This Agreement (a) shall be construed under and in accordance with the laws
of the State of Florida; (b) shall be
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binding on and shall inure to the benefit of the parties to the Agreement and
their respective successors and assigns; (c) may be executed in one, or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts shall have been signed by
each of the parties and delivered to Buyer and Target; and (d) embodies the
entire agreement and understanding, superseding all prior agreements and
understandings between Target and Buyer relating to the subject matter of this
Agreement.
ARTICLE FOURTEEN
NOTICES
All notices, request, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom notice is to be given,
or on the third day after mailing if mailed to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid, and
properly addressed to the appropriate party at the address indicated in the
Preamble to this Agreement. Any party may change its address for purposes of
this paragraph by giving the other parties written notice of the new address in
the manner set forth above.
ARTICLE FIFTEEN
COSTS
Except for the brokerage fees or commissions payable to Stenton Leigh
Capital Corp. by Target, each party represents and warrants that it has dealt
with no broker or finder in connection with any transaction contemplated by this
Agreement, and, as far as it knows, no broker or other person is entitled to any
commission or finder's fee in connection with any of these transactions.
ARTICLE SIXTEEN
CERTAIN REPRESENTATIONS AND
WARRANTIES OF SHAREHOLDERS
Each of the Shareholders, severally and not jointly, represents and
warrants to the Buyer as follows:
52. When executed and delivered by a Shareholder, this Agreement will constitute
the valid and legally binding obligation of such Shareholder, enforceable in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting creditors' rights.
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53. Each of the Shareholders believes that he or she has received all of the
information he or she considers necessary or appropriate for deciding whether to
purchase securities hereunder and the Shareholders have been represented by
counsel in connection with the Agreement.
54. (a) this Agreement is made with each Shareholder in reliance upon their
respective representations to the Buyer, which by acceptance hereof each of the
Shareholders hereby confirms, that the common shares to be purchased will be
acquired for investment for an indefinite period, for the Shareholder's own
account and not with a view to the sale or distribution of any part thereof.
55. Each of the Shareholders understands that the common shares are not
registered under the Securities Act of 1933, as amended (the 'Act') on the
ground that the sale provided for in this Agreement and the issuance of
securities is exempt pursuant to Section 4 (2) of the Act, and that the Buyer's
reliance on such exemption is predicated on the representations of the
Shareholders set forth herein.
56. Each of the Shareholders agrees that in no event will the Shareholders make
an unregistered disposition of any of the common shares until the Shareholder
shall have notified the Buyer of the proposed disposition and shall have
furnished the Buyer with an opinion of counsel reasonably satisfactory to the
Buyer to the effect that such disposition will not require registration of such
securities under the Act and appropriate action necessary for compliance with
the Act has been taken.
57. Each of the Shareholders represents that the Shareholder has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of his or her investment, and has the ability to bear the
economic risks of this investment.
58. Each of the Shareholders understands that the Buyer will be under no
obligation to register any of its securities, except as set forth in this
Agreement and that if a registration statement covering the securities under the
Act is not in effect when the Shareholders desire to sell the common shares
acquired hereunder the Shareholders may be required to hold such securities for
an indeterminate period. Each of the Shareholders also understands that any sale
of the common shares acquired hereunder made in reliance upon Rule 144 under the
Act may be made only if the Buyer qualifies for the use of Rule 144, which it is
under no obligation to do, except as expressly provided herein, and then only in
limited amounts in accordance with with terms and conditions of that rule.
59. All certificates for the common shares shall bear the following legend:
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'These securities have not been registered under the
Securities Act of 1993 ('Act'). They may not be sold, offered
for sale, pledged or hypothecated in the absence of an
effective Registration Statement as to the securities under
the Act or an opinion of counsel satisfactory to the Buyer
that such registration is not required.'
ARTICLE SEVENTEEN
AMENDMENT
This Agreement may be amended only by the written agreement of all parties
hereto.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its duly authorized officers, all as of the day and
year first above written.
Entertainment Specialists, Ltd., Inc.,
a Florida corporation
By: /s/ Gary Lashinsky
...................................
Gary Lashinsky, Chief Executive
Officer
By: /s/ Elizabeth Lashinsky
...................................
Elizabeth Lashinsky, President
/s/ Elizabeth Lashinsky
...................................
Elizabeth Lashinsky
/s/ Gary Lashinsky
...................................
Gary Lashinsky
Beachport Entertainment Corporation, a
Utah corporation
By: /s/ Sidney Shlenker
...................................
Sidney Shlenker, Chairman
The Royal Lipizzaner Stallions, Inc.,
a
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Nevada corporation
By: /s/ Sidney Shlenker
...................................
Sidney Shlenker, President
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APPENDIX 'A'
SCHEDULES TO THE AGREEMENT
Schedule
1. Audited financial statements for the two years ended December 31, 1996.
2. Real property owned or leased, including leases.
3. Trucks, automobiles, machinery, equipment owned, leased or in Target's
possession.
4. List of accounts receivable as of March 31, 1997.
5. Trademarks, trade names, service marks, copyrights, renewals and licenses
thereof.
6. Trade secrets.
7. Insurance policies.
8. Exceptions to litigation representation.
9. Exceptions to conflict of interest representation.
10. Articles of incorporation, bylaws and stock registers for Target and Target
Subsidiaries.
11. Employment and collective bargaining agreements, pension, bonus,
profit-sharing, stock option or other agreements.
12. Powers of attorney.
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[MALONE & BAILEY LETTERHEAD]
Consent of Independent Certified Public Accountants
We consent to the use in the Registration Statement on Form SB-2, under
the Securities Act of 1933, of our report dated May 30, 1997 relating to the
financial statement schedules appearing elsewhere in this Registration
Statement.
We also consent to the reference to us under the heading "Summary Historical and
Pro Forma Financial Data" in this registration Statement.
MALONE & BAILEY, PLLC /s/ Malone & Bailey PLLC
Houston, Texas
August 12, 1997
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[LETTERHEAD OF VAN BUREN & HAUKE, LLC]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in the Registration Statement on Form SB-2, under
the Securities Act of 1933, of our report dated July 3, 1997, except for Note 9
as to which the date is August 4, 1997, on the balance sheets of Entertainment
Specialists Ltd., Inc. as of December 31, 1996 and 1995, and the related
statements of operations and retained earnings (deficit) and cash flows for each
year, and to the reference to our firm under the heading "Experts" in the
Prospectus.
/s/ VAN BUREN & HAUKE, LLC
New York, New York
August 12, 1997
