Arts and Cultural Affairs - Theatrical Syndication Financing - Regulation of Theatrical Syndication Financing - Definitions

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§ 23.03. Definitions. 1. The following terms, whenever used or
referred to in this article, shall have the following meanings, unless
the context clearly requires otherwise:

(a) A "theatrical production" shall mean those live-staged dramatic
productions, dramatic-musical productions and concerts, as defined in
this subdivision, which hereafter are shown to the public for profit and
which are financed wholly or in part by the offering or sale in or from
this state, directly, or through agents or distributors, of investment
agreements, evidences of interest, limited partnerships, producer
shares, equity or debt securities, pre-organization subscriptions or any
other syndication participation, when any persons are offered, solicited
to purchase or sell, directly or indirectly, such syndication interests
for moneys or services within or from the state of New York; provided,
however, that for purposes of paragraphs (h) and (i) of this subdivision
a "theatrical production" shall mean any live-staged dramatic
production, dramatic-musical production or concert which is presented to
the public in a place of entertainment as defined in this subdivision.

(b) "Fraud", "deceit", and "defraud", as such terms are used in this
article, are not limited to common-law deceit.

(c) "Syndication" shall mean all forms, methods and devices for
pooling of investment funds for the chief purpose of participating in a
theatrical production company, as defined herein.

(d) A "principal" shall mean and include every person or firm directly
or indirectly controlling the business affairs or operations of a
theatrical production company or of a ticket distributor, as defined
herein.

(e) A "person" shall mean an individual, firm, company, partnership,
corporation, trust or association.

(f) A "concert" shall mean any live performance whether musical or
spoken, dramatic or nondramatic, by one or more performers, which is
presented to the public in a place of entertainment, as defined in this
subdivision.

(g) A "sporting event" shall have the same meaning as set forth in
subdivision three of section 23.23 of this article.

(h) The term "event" shall mean a theatrical production or sporting
event, as those terms are defined in this subdivision, or any other
public exhibition, game, show, contest or performance which is presented
to the public in a place of entertainment as defined in this
subdivision.

(i) A "place of entertainment" shall mean a theatre, dinner theatre,
hall, coliseum, convention center, arena, auditorium, stadium, concert
hall, garden, outdoor space or other place of amusement operated as a
for profit entity and located in this state in which theatrical
productions, sporting events or other events are presented.

(j) A "theatrical production company" shall mean any entity formed to
(i) develop, produce, invest in or otherwise exploit, or any combination
thereof, one or more specified or nonspecified theatrical productions,
and (ii) conduct all activities related thereto.

(k) The term "advance ticket" shall mean a ticket of admission sold
more than twelve hours in advance of the time of performance of the
event for which the ticket is purchased.

(l) The term "ticket distributor" shall have the same meaning as set
forth in subdivision one of section 23.23 of this article.

(m) The term "accredited investor" shall mean (i) a natural person
whose individual net worth (or joint net worth with his or her spouse)
will exceed one million dollars at the time of purchase, or (ii) a
natural person who has an individual income (exclusive of any income
attributable to a spouse) of more than two hundred thousand dollars for
the past two years or joint income with a spouse of more than three
hundred thousand dollars in each of those years and has a reasonable
expectation of reaching the same income level in the current year, or
(iii) an entity in which each equity owner is an accredited investor
under subparagraph (i) or (ii) of this paragraph, or (iv) either an
organization described in section 501 (C)(3) of the Internal Revenue
Code of 1986, as amended, a corporation, a Massachusetts or similar
business trust, or a partnership, in each case not formed for the
specific purpose of acquiring the securities being offered, and with
total assets in excess of five million dollars, or (v) a trust, with
total assets in excess of five million dollars, not formed for the
specific purpose of acquiring the securities, whose purchase of the
securities is directed by a person who has such knowledge and experience
in business and financial matters that he or she is capable, as defined
by the Securities Act of 1933, as amended, of evaluating the merits and
risks of the prospective investment, or a bank, as defined in section
3(a)(2) of the Securities Act of 1933, as amended, (A) acting in its
fiduciary capacity as trustee, or (B) subscribing for the purchase of
securities being offered on its own behalf.

2. Accurate books and records of account shall be maintained by each
theatrical production company. Every producer of a theatrical production
shall at least once for each twelve month fiscal period beginning with
the initial expenditure of investors' funds (other than those of any
principal), within four months after the end of such period or the last
public performance of the original production in New York state,
whichever is sooner, furnish to all investors and to the department of
law a written balance sheet and statement of profit and loss which shall
be prepared by an independent public accountant and contain an express
opinion by such accountant that such statements fairly present the
financial position and results of operations of the theatrical
production company, hereinafter referred to as "certified statement".
Notwithstanding the aforesaid, in no event shall a producer be required
by this subdivision to submit certified statements to investors for any
period less than twelve months following the period covered by a prior
certified statement. Irrespective of the aforesaid, and in addition
thereto, every such producer shall also furnish each investor and the
department of law with an accurate and truthful itemized statement of
income and expenditure for every six month period not covered by a
previously issued certified statement or a certified statement required
to be issued hereunder for a period ending at such time, which
additional statement shall be subscribed to by the producer as accurate,
and may be submitted within three months after the close of such six
month period. Following the last public performance in New York state of
the original production, the producer shall accurately report to the
investors and the department of law, at least once within four months
after the end of each year thereafter, with respect to any subsequent
earnings or expenditures by the theatrical production, which shall be
truthful and accurate and which shall be subscribed to by the producer
as accurate. The attorney general may adopt, promulgate, amend and
rescind rules and regulations setting forth other accounting
requirements than set forth above, which may be selected by a producer
in lieu of the accounting requirements set forth above. Upon conditions
set forth by the attorney general, such rules and regulations may
further provide for the issuance of an exemption from the requirements
herein (i) for offerings of less than two hundred fifty thousand
dollars, (ii) for offerings made to less than thirty-six persons in or
from this state, or (iii) for such other offerings and upon such other
grounds as may be determined by the attorney general.

This subdivision shall not apply to any production whose first
performance in New York state preceded June first, nineteen hundred
sixty-four.

3. (a) Except as otherwise provided herein, no offering of syndication
interests in a theatrical production company, as defined herein, shall
be made within or from this state without the use of a prospectus or
offering circular making full and fair disclosure of material facts
pertaining to the particular venture. The attorney general may also
issue rules and regulations requiring the submission to prospective
investors in such offerings an offering circular and amendments thereto
containing a concise and accurate description of the nature of the
offering, profits to promoters and others, the background of the
producers, a description of subsidiary rights and other pertinent
information as will afford potential investors or purchasers and
participants an adequate basis upon which to found their judgment, but
the attorney general shall accept offering literature filed with the
Securities and Exchange Commission and authorized for use by such agency
as complying therewith as of the date of receipt of a true copy by the
department of law of such literature and proof of authorization by the
Securities and Exchange Commission by affidavit or otherwise. The
attorney general may also provide for the method of filing of offering
literature other than that filed with the Securities and Exchange
Commission, as well as underlying documents, with the department of law
at its office in the city of New York, prior to the offering of the
syndication interest involved; however, any such regulation also shall
provide that all funds derived from the sale of such theatrical
syndication interests shall be held in trust in a special bank account
until the attorney general has issued to the issuer or other offeror a
letter stating that the offering has been permitted to be filed; but in
that event such regulation promulgated by the attorney general shall
also provide that the attorney general, not later than fifteen days
after such submission, shall issue such a letter or, in the alternative,
a notification in writing indicating deficiencies therein.

(b) Where not more than one million dollars is the total amount of the
theatrical offering, including the right to an involuntary overcall, the
provisions of this subdivision shall be deemed to be satisfied by the
use of an investment agreement clearly setting forth in easily readable
print all of the terms of the offering. A copy of such document may be
filed with the department of law in lieu of a prospectus or offering
circular in the manner set forth in this article and shall be deemed to
be offering literature.

(c) The provisions of this subdivision shall not apply to offerings to
fewer than thirty-six persons (plus an unlimited number of accredited
investors) where express waivers in writing to the filing and offering
circular requirements of this subdivision are filed with the department
of law by or on behalf of all investors.

4. A limited partnership that is a theatrical production company is
exempt from the requirement for publishing its certificate or notice
under sections ninety-one, 121-201 and 121-902 of the partnership law so
long as the words "limited partnership" appear in its name. A limited
liability company that is a theatrical production company is exempt from
the requirement for publishing its articles of organization, application
for authority or a notice containing the substance thereof under
sections two hundred six and eight hundred two of the limited liability
company law so long as the words "limited liability company" appear in
its name.

5. It shall be unlawful for any person, in connection with the offer,
sale, or purchase of any syndication interest in any theatrical
production company, as defined herein, directly or indirectly:

(a) To employ any device, scheme, or artifice to defraud;

(b) To willfully make any untrue statement of a material fact or to
omit to state a material fact necessary in order to make such statement
made, not misleading; or

(c) To engage in any act, practice, or course of business which he
knows or reasonably should have known operates or would operate as a
fraud or deceit upon any person.

6. Any person, partnership, corporation, company, trust or association
or any agent or employee thereof, who (or which), having engaged in any
act or practice constituting a violation of subdivision five of this
section, commits additional acts under such circumstances as to
constitute a felony, the crime of conspiracy, petit larceny, or more
than one of the aforesaid, shall be punishable therefor, as well as for
the violation of subdivision five of this section, and may be prosecuted
for each crime, separately or in the same information or indictment,
notwithstanding any other provision of law.