Exhibit
10.18


 


	
  

  	
  Paul d’Eustachio

  President

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE OFFICES

  
	
  July 28, 1997

  	
  1 Harry S. Truman Drive

  
	
   

  	
  Landover Maryland 20785

  
	
   

  	
  (301) 808-4300

  
	
   

  	
  Fax (301) 808-4325

  



 


Ned
S. Goldstein


Senior Vice President

and General Counsel


Ticketmaster
Corporation

8800 Sunset Blvd.

West Hollywood, CA 90069


 


Re:      License Agreement


 


Dear
Mr. Goldstein:


 


Ticketmaster
has raised a question of whether “Additional Payments” are due under the
License Agreement in connection with certain tickets sold by the USAir Arena,
Baltimore Arena and Patriot Center box offices. In response, we have carefully
reviewed the issue of box office sales, sought to compile relevant information
and reached the following conclusions.


 


First,
while there is some ambiguity in the terms of the License Agreement, and in
their application to this matter, TGLP will make an Additional Payment to
Ticketmaster in connection with certain tickets sold by the USAir Arena box
office. Second, TGLP does not believe that Additional Payments are due in connection
with sales by the Baltimore Arena and Patriot Center box offices. Both
conclusions are discussed further below.


 


Turning
first to the USAir Arena, it imposes a $1.00 service charge upon certain
advance sale tickets sold through the box office. There is no service charge
upon season tickets or date-of-event sales. Nor are service charges imposed on
advance sales to certain events, such as Ringling Brothers and Disney on Ice.


 


The
USAir Arena also sells a limited number of tickets on what it refers to as a
consignment basis. This typically involves the advance sale to a third-party of
a block of tickets for a particular event. Service charges for consignments
generally range from $2 to $5 per ticket.


 


USAir
Arena box office employees generate a daily spreadsheet which includes a line
item showing service charges collected that day. Using these spread sheets, the
USAir Arena Accounting Department then prepares monthly spreadsheets compiling
total service charges collected. This line item includes both the $1.00 service
charge applied to certain advance sales and the consignment charges.


 


Total
service charge income for the USAir Arena box office during the previous three
fiscal years (July 1, 1994 through June 30, 1997) was as follows:


 


	
  1995

  	
   

  	
  $

  	
  69,079

  	
   

  
	
  1996

  	
   

  	
  $

  	
  77,240

  	
   

  
	
  1997

  	
   

  	
  $

  	
  87,945

  	
   

  



 


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SPECIAL EVENTS  ·  CLUBS


 

















 


To ensure that
Ticketmaster receives all payments to which it may be entitled under the
License Agreement, we have assumed that each dollar of revenue collected reflects
one ticket sold. In fact, the number of tickets to which a service charge
applied was substantially less, because the service charges applied to
consignments exceeded $1.00 per ticket.


 


Using that assumption, we
then made the following calculations:


 


	
   

  	
   

  	
   

  	
   

  	
  Per Ticket Amount

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Under License

  	
   

  	
   

  	
   

  
	
  Fiscal Year

  	
   

  	
  Number of Tickets

  	
   

  	
  Agreement

  	
   

  	
  Total

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1995

  	
   

  	
  69,079

  	
   

  	
  .07

  	
   

  	
  $

  	
  4,836

  	
   

  
	
  1996

  	
   

  	
  77,240

  	
   

  	
  .08

  	
   

  	
  $

  	
  6,179

  	
   

  
	
  1997

  	
   

  	
  87,945

  	
   

  	
  .08

  	
   

  	
  $

  	
  7.036

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  TOTAL

  	
   

  	
  $

  	
  18,051

  	
   

  



 


The USAir Arena
Accounting Department no longer has records which isolate service charge income
from all other sources of revenue for fiscal years 1992, 1993 and 1994. We
have, however, compiled information enabling us to make a relatively accurate
computation of the number of tickets to which a service charge was applied, and
made assumptions in Ticketmaster’s favor designed to ensure that it receives
all Additional Payments to which it may be entitled.


 


Again assuming that every
dollar of service charge revenue reflects one ticket sold, during each of
fiscal years 1995, 1996 and 1997 approximately 8% of all tickets sold by the
USAir Arena box office carried a service charge. (The total number of box
office sales during fiscal years 1995, 1996 and 1997 were 920,229, 934,982 and
1,120,045, respectively.) Although, for the reasons set forth above, that
assumption substantially overstates the actual number of tickets subject to a
service charge, we have applied the same 8% figure to the total number of
tickets sold by the USAir Arena box office for fiscal years 1992, 1993 and 1994.
Total box office ticket sales those years were 833,925, 828,476 and 8X8,225,
respectively. Applying the 8% figure, this translates to 66,714, 66,278 and
71,058 tickets bearing a service charge during those years.


 


We then made the
following calculations:


 


	
   

  	
   

  	
   

  	
   

  	
  Per Ticket Amount

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Under License

  	
   

  	
   

  	
   

  
	
  Fiscal Year

  	
   

  	
  Number of Tickets

  	
   

  	
  Agreement

  	
   

  	
  Total

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1992

  	
   

  	
  66,714

  	
   

  	
  .06

  	
   

  	
  $

  	
  4,003

  	
   

  
	
  1993

  	
   

  	
  66,278

  	
   

  	
  .06

  	
   

  	
  3,977

  	
   

  
	
  1994

  	
   

  	
  71,058

  	
   

  	
  .07

  	
   

  	
  4,974

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  TOTAL

  	
   

  	
  $

  	
  12,954

  	
   

  



 


2

















 


Enclosed
is a check for $ 31,005, reflecting Additional Payments for the period July 1,
1991 through June 30, 1997, for box office sales at the USAir Arena, 1 believe
that this payment exceeds the maximum amount potentially due under the License
Agreement. In addition, it is our intention to work with the USAir Arena to
establish a system for reporting such sales, and remitting payments to
Ticketmaster, each year going forward.


 


The
USAir Arena also charges season ticket holders a handling fee in connection
with certain transactions, such as the exchange of tickets to one game for
those of another. It is a flat fee (generally $5.00) and does not vary
according to the number of tickets involved. We do not believe that an
Additional Payment is due under the License Agreement in connection with these
handling fees, but provide this information to ensure that the factual record
is complete.


 


Turning
to the Baltimore Arena, I am informed that it imposes a $1.00 service charge on
all tickets purchased at the box office with a credit card. The purpose of the
charge is to offset the credit card commission the City of Baltimore must pay
to the credit card company with respect to such sales. The box office also
sells a small number of consignment tickets to various events, for which the
service charge is $3.00. Both service charges are paid to the City.


 


It
is my understanding that under the current Management Agreement between
Baltimore and Centre Group, Centre Group’s compensation for managing the
Baltimore Arena is based upon the degree of improvement in the net operating
loss of the Arena below $650,000. Net operating loss is defined as gross
revenue less operating expenses. The first $100,000 of improvement goes to the
City; the next $100,000 goes to Centre Group; reductions of net operating loss
of more than $200,000, but less than $800,000, are split 50%-50% between the
City and Centre Group; and reductions of more than $800,000 are shared 65% by
the City and 35% by Centre Group.


 


In
our view, no Additional Payment is due in connection with tickets sold by the
Baltimore Arena box office. The service charges are imposed by the City, are
paid to the City, and principally offset associated credit card expenses. As an
aside, it is my understanding that the total number of ticket sales by the
Baltimore Arena box office to which a service charge is applied is quite small.
Indeed, I am informed that the City’s total service charge income has been less
than $20,000 per year, the bulk of which consists of credit Card charges.
Accordingly, should Ticketmaster disagree with our position, the amount at
issue is less than $2,000 per year, and less than $10,000 for the entire term
of the License Agreement.


 


Next,
I understand that George Mason University imposes a $1.00 service charge on
certain advance ticket sales at the Patriot Center box office. Sales to
University events (such as basketball games) and children’s events (such as
Disney and the Barney Show) are excluded. The service charges are paid to the
University, and are included in the gross revenue of the Patriot Center.


 


It
is my understanding that pursuant to the Management Agreement for the Patriot
Center between the University and Centre Group, Centre Group receives a fixed
fee of $250,000 per year, and a variable fee based on building gross revenue.
The variable fee is two percent of building revenue if building expenses are
more than 70 percent of revenue; 2.5 percent of building revenue if building
expenses are between 60


 


3

















 


percent
and 70 percent of revenue; and three percent of building revenue if building
expenses are less than 60 percent of revenue. The total fee is capped by the
requirement that the fixed fee must be at least 51 percent of the total fee
paid to Centre Group.


 


In
our view, no Additional Payment is due in connection with sales by the Patriot
Center box office. The service charge is paid to the University, and there is
no direct tie between that charge and Centre Group’s compensation. We do not
believe that it was the intent of the License Agreement to require an
Additional Payment in these circumstances. This is illustrated by the fact that
if an Additional Payment was due upon the sale of such tickets, it would
substantially exceed the highest potential increase in Centre Group’s variable
fee by reason of the imposition of the service charge. Specifically, while the
maximum amount of the variable fee can be 2 - 3% of additional revenue
generated (i. e., two
or three cents), the Additional Payment would be eight cents per ticket.
Plainly, neither TGLP nor an affiliate would choose to implement a program
under which, in the best case, it was net out-of-pocket five cents per ticket
sold by reason of the imposition of a service charge.


 


I
am informed by Centre Group that the Patriot Center box office applied the
$1.00 service charge to less than 40,000 tickets annually from 1991 through
today. Accordingly, should Ticketmaster disagree with our position, the amount
at issue is less than $4,000 per year, and less than $20,000 for the entire
term of the License Agreement.


 


This
letter is written for the purpose of resolving disputes between TGLP and
Ticketmaster with respect to the issue of box office sales. While we do not
agree with all of the positions that Ticketmaster has taken with respect to the
relevant terms of the License Agreement (such as the definition of an affiliate
and other relevant terms), the sums involved with respect to the issue of box
office sales are quite small, and in our view should not be a source of ongoing
disagreements. TGLP’s goal is to fully satisfy any obligations owing to
Ticketmaster, and to avoid the recurrence of these issues in the future. To
that end, I am willing to provide Ticketmaster with additional information
concerning these issues, independently of the outstanding litigation. We will
also consider any countervailing points you wish to raise, or proposed
solutions, and address them promptly.


 


In
closing, I must emphasize that much of the information set forth above was
compiled by me (or at my direction), and first came to my attention, as a
result of the questions recently raised. To my knowledge, neither Ticketmaster
nor TGLP previously focused upon these questions. There has never been any intention
to withhold funds owing to Ticketmaster.


 


	
  Sincerely,

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Paul d’Eustachio

  	
   

  
	
  Paul
  d’Eustachio

  	
   

  



 


Enclosure


 


	
  cc:

  	
  Abe
  Pollin

  
	
   

  	
  David
  Osnos

  



 


4