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Spirit of Manitoba Limited Partnership

CONFIDENTIAL INFORMATION CIRCULAR

This Information Circular is confidential and for the use of the Agents, the Sub-Agents and their respective clients only. The contents are not to be reproduced or distributed without the express consent of one of the Agents or the Sub-Agents. This Circular should be read in conjunction with the Offering Memorandum to be dated subsequent to the date hereof. The information contained herein, while obtained from sources which are believed to be reliable, is not guaranteed as to accuracy or completeness. This Circular is for information only and does not constitute an offer to sell or a solicitation to buy the securities referred to herein other than to those persons to whom these securities may be lawfully offered for sale. To the extent that there is any conflict or inconsistency between the terms or disclosure of this Information Circular and the terms or disclosure of the Offering Memorandum, such conflict or inconsistencies will be resolved in favour of the Offering Memorandum and the terms of the Offering Memorandum will prevail.

This Information Circular is not, and under no circumstances is to be construed as a prospectus or an advertisement for an offering of the securities described herein in any jurisdiction where they may not be lawfully offered for sale.

NO SECURITIES COMMISSION OR SIMILAR AUTHORITY IN CANADA OR ELSEWHERE HAS IN ANY WAY PASSED UPON THE MERITS OF THE SECURITIES REFERRED TO HEREIN OR REVIEWED OR WILL REVIEW THE INFORMATION CIRCULAR AND ANY REPRESENTATION TO THE CONTRARY IS AN OFFENCE.

Initial Offering

July 24, 1995

SPIRIT OF MANITOBA LIMITED PARTNERSHIP

$50,000,000

50,000 Limited Partnership Units

Subscription Price

$1,000 per Unit Payable on Closing

Minimum Subscription

$5,000 (5 Units) Payable on Closing

Investment Highlights

Secure the existence of a National Hockey League franchise in Manitoba and provide a catalyst for the construction of a state of the art entertainment complex.

Direct ownership of the Winnipeg Jets National Hockey League franchise.

Tax deductions for the full Subscription Price will be available over three (3) years (see "Analysis of Prospective Returns to Limited Partners").

5% cumulative annual distribution from Net Distributable Cash Flow of the Partnership commencing January 1, 1998 (see "Distributable Cash Flow of the Partnership").

Participation in the distribution of Net Sale Proceeds in the event of a sale of the Winnipeg Jets National Hockey League franchise (see "Net Proceeds of the Partnership From Sale of the Franchise").

MEC Facilities Ltd. will contribute towards the operating costs of the Complex (see "Facility Co." and "Endowco and The Endowment Fund").

Investors acquiring 100 or more Units ($100,000+) will be licenced to use the slogan "Proud to be an Owner of the Winnipeg Jets" for business purposes.

TAX SHELTER IDENTIFICATION NO. TS052852

The Identification Number issued for this Tax Shelter shall be included in any income tax return filed by the investor. Issuance of the identification number is for administrative purposes only and does not, in any way, confirm the entitlement of an investor to claim any tax benefits associated with the tax shelter.

INVESTMENT IN AN NHL HOCKEY FRANCHISE IS HIGHLY SPECULATIVE

There is no market through which the Units described herein may be sold and there is no assurance that a market will develop. Accordingly, investors who acquire Units may not be able to resell them. There are certain risk factors associated with investing in the Units. In certian circumstances, the proteciton of the limited liability may not be available or may be lost. Investors should consult their own professional advisors to assess the income tax, legal and other aspects of the investment. See "Risk Factors" and "Canadian Federal Income Tax Considerations".

SUMMARY OF THE OFFERING

Issuer:

Spirit of Manitoba Limited Partnership (the "Partnership").

General Partner:

Spirit of Manitoba Incorporated ("Spirit")

Issue Size:

$50,000,000 (50,000 Units)

Subscription Price:

$ 1,000 per Unit.

Minimum Subscription:

Five Units ($5,000). Subscriptions in excess of the minimum subscription may be made in multiples of one Unit ($1,000).

Acquisition of Franchise:

The Partnership is expected to acquire on August 15, 1995 the units of the partnership which currently owns the Winnipeg Jets National Hockey League ("NHL") franchise (the "Franchise").

Use of Proceeds:

To acquire the Franchise through the purchase of the units of the partnership which currently owns the Franchise, retire certain liabilities of the Franchise and provide for future operating losses of the Partnership for the years 1995-96 and 1996-97 (see "Partnership Sources and Uses of Funds Prior to Completion of the Complex").

Business of Partnership:

The primary business of the Partnership will be to acquire, own and operate the Franchise. In addition, upon completion the Partnership will manage the Manitoba Entertainment Complex (the "Complex"). The Partnership will also market luxury suites, club seats, and general seasons tickets, as well as advertising, sponsorships and concessions in the Complex. In addition, the Partnership will manage, at cost, the existing facilities owned by Winnipeg Enterprises Corporation ("WEC"), including the Winnipeg Arena (see "The Partnership").

Management of Partnership:

Spirit will manage the Partnership and will engage the services of professional managers to operate the Franchise, to manage the operation of the Complex and to manage the WEC facilities. The Partnership intends to retain hockey operations personnel presently under contract to manage the hockey operations of the Franchise, as well as employees of WEC in respect of the WEC facilities (see "General Partner" and "Management of the Franchise, the Complex and WEC Facilities").

Canadian Federal Income Tax Considerations:

Partners will be allocated income and losses for tax purposes as at December 31 of each year. It is expected that losses will result for the first three years to the extent of the aggregate subscription proceeds. Any losses in excess of the initial subscription proceeds will be carried forward to offset against future income from the Partnership.

Distributions to Limited Partners in excess of their adjusted cost base will be taxable as a capital gain. It is expected that the first five years of distributions will be taxable.

An advance income tax ruling will be obtained to confirm various income tax matters related to the offering (see "Canadian Federal Income Tax Considerations").

Commission to Agents and Sub-Agents:

1% of the aggregate subscription proceeds obtained as a result of securing the allocation of monies previously pledged to the "Save the Jets Campaign" to the purchase of Units and 4% of the aggregate subscription proceeds obtained as a result of any other sales of Units.

Risks of Investment in Units:

An investment in Units is subject to numerous risks, including those associated with hockey operations, NHL obligations, reliance on the Endowment Fund, loss of limited liability, control over the team prior to Closing, foreign currency fluctuations, conflict of interest, failure to complete construction of the Complex and others (see "Risk Factors").

How to Subscribe:

Investors must be Canadian residents for the purposes of the Income Tax Act (Canada). An investor who wishes to subscribe for Units must obtain a Subscription and Power of Attorney Form from Richardson Greenshields of Canada Limited or Wellington West Capital Inc. (the "Agents"), or such other registered dealer as may be authorized by the Agents (collectively, the "Sub-Agents") and forward the following to one of the Agents or Sub-Agents BEFORE AUGUST 9,1995:

(i) a Subscription and Power of Attorney Form duly executed and completed; and

(ii) a cheque in the aggregate amount of $1,000 for each Unit subscribed (minimum 5 Units - $5,000) dated the date of subscription.

Cheques should be made payable to Montreal Trust Company of Canada in trust for Spirit of Manitoba Limited Partnership.

INVESTORS WHO ACQUIRE UNITS WHO HAVE ALSO MADE OR INTEND TO MAKE A CONTRIBUTION TO THE CAMPAIGN TO RAISE CAPITAL FOR THE FUND (THE "ENDOWMENT FUND") TO BE MAINTAINED BY A CORPORATION TO BE INCORPORATED ("ENDOWCO") MAY ADVERSELY AFFECT THE TAX DEDUCTIONS AVAILABLE TO THEM IN RESPECT OF THEIR CONTRIBUTION TO THE ENDOWMENT FUND.

INVESTORS WHO SUBSCRIBE FOR UNITS AND WHO TENDER THE SUBSCRIPTION AND POWER OF ATTORNEY FORM AND CHEQUE NOTED ABOVE MAY WITHDRAW FROM THE AGREEMENT OF PURCHASE AND SALE RESULTING THEREFROM WITHIN 48 HOURS OF THE RECEIPT OR DEEMED RECEIPT BY THE INVESTOR OF THE OFFERING MEMORANDUM.

THE PARTNERSHIP

The Partnership was formed to own and operate the Franchise and, on completion of the Complex, to manage and operate the Complex under a long term lease agreement with Facility Co. The Partnership will also manage the existing facilities of WEC, including the Winnipeg Arena pursuant to an agreement to be entered into between WEC and the Partnership. Through its operations of the Franchise and subsequently the control over the management of the Complex, the Partnership will derive income from various sources, including the sale of tickets to all events in the Complex, rental and parking income from the Complex, the licensing of television and radio rights, the sale of Team merchandise and all revenue accruing to members of an NHL franchise. The Partnership will also be entitled to all on-going advertising, sponsorship and concession payments. The Partnership anticipates that the Complex will be substantially complete prior to the 1997-1998 regular hockey season. The Complex is expected to have a significant beneficial impact on the financial performance of the Partnership (see "Endowco and The Endowment Fund").

GENERAL PARTNER

Spirit is the general partner of the Partnership. Spirit has no assets and no financial interest in the Partnership other than Spirit's entitlement to .0001 % of the net income (loss), tax income (loss) and the net assets of the Partnership upon its liquidation, dissolution or winding up. The General Partner will manage the Partnership and the business conducted by the Partnership, including the operation of the Franchise and the Complex.

Spirit will also, on its own behalf, negotiate contracts and supervise the construction of the Complex for Facility Co.

The Board of Directors of Spirit shall be comprised of the members of the Executive Committee, four persons nominated by Endowco, persons contributing over $1 million but less than $5 million to the Partnership or the City of Winnipeg pursuant to the campaign to raise capital for the Endowment Fund (or their nominee) and persons nominated by the Executive Committee. Presently, the Board of Directors is comprised of the following individuals:

Mr. Mal Anderson

Chief Executive Officer, Credit Union Central of Manitoba

Mr. Gerry Gray

Retired, Former owner of Blackwoods Beverages

Mr. Alan Sweatman

Partner Emeritus, Thompson Dorfman Sweatman

Mr. Charlie Spiring

President, Wellington West Capital Inc.

Mr. Hartley T. Richardson

President, James Richardson & Sons, Limited

Mr. Julian Benson

Secretary to Treasury Board, Government of the Province of Manitoba

Mr. Rick Frost

Chief Commissioner, Board of Commissioners, City of Winnipeg

Mr. John Loewen

President, Comcheq Services Ltd.

Mr. Arni C. Thorsteinson

President, Shelter Canadian Properties, Ltd.

Mr. Ross Robinson

President, B.A. Robinson Co. Ltd.

Mr. Steve Bannatyne

Manager, Finance and Administration, Powell Equipment Limited

Mr. Paul Robson

Chief Executive Officer, Red River Exhibition Association

An Executive Committee shall exercise all the power of and be vested with all the authority of the Board of Directors of Spirit. The Executive Committee shall consist of persons (who shall also be members of the Board of Spirit) who contribute $5 million or more to the Partnership or the City of Winnipeg pursuant to the campaign to raise capital for the Endowment Fund. Such persons will be entitled to nominate to the Executive Committee and the Board of Directors of Spirit that number of persons equal to that person's contribution divided by $5 million. Other members of the Executive Committee will include one person nominated by each of the Province of Manitoba and the City of Winnipeg, one person nominated by Endowco and four members-at-large chosen by the Board.

MANAGEMENT OF THE FRANCHISE, THE COMPLEX AND WEC FACILITIES

The Partnership will engage the services of professional management to operate the Franchise. As well, the Partnership will retain personnel presently under contract to manage the hockey operations of the Franchise and perform the same functions on behalf of the Partnership. The Partnership will also engage professional management to manage the operation of the Complex and the WEC facilities. Endowco will be consulted with respect to the choice of such management. Operation of existing WEC facilities by the Partnership will be undertaken at cost utilizing former employees of WEC which the Partnership has agreed to hire.

FACILITY CO.

Facility Co. has been formed by the City of Winnipeg and the Province of Manitoba to construct and own the Complex. The shares of Facility Co. are beneficially owned equally by the City of Winnipeg and the Province of Mantioba. Facility Co., as tenant, has entered into a lease with the City of Winnipeg, as landlord, in relation to the land upon which the Complex will be constructed and has also, as landlord, entered into a sub-lease (the "Sub-Lease") of the Complex with the Partnership as tenant. The Sub-Lease will provide, among other things, that the Partnership will lease and operate the Complex for a period of approximately 50 years on certain terms and will be entitled to derive all available revenues from such operations. Pursuant to the Sub-Lease, the Partnership will be obligated to pay a "base" rent plus, in certain circumstances, "additional" rent and "termination" rent for the use of the Complex (see "Distributable Cash Flow of the Partnership" and "Net Proceeds of the Partnership From Sale of the Franchise"). Facility Co. will be responsible for all operating costs of the Complex in each fiscal year up to the lesser of (a) the amount of income available from the Endowment Fund resulting from the acquisition of shares of Endowco by Facility Co. and (b) the amount of such costs. The Partnership will be responsible for all excess operating costs of the Complex (see "Facility Co." and "Endowco and The Endowment Fund").

ENDOWCO AND THE ENDOWMENT FUND

Endowco is a not-for-profit corporation to be incorporated as a wholly-owned subsidiary of Facility Co. Endowco's mandate will be to promote the widest use of the Complex, including non-hockey events. A fundraising campaign will be undertaken at the same time as the offering of Units of the Partnership to secure contributions to the City of Winnipeg for funding the acquisition of shares of Endowco by Facility Co. to provide capital for the Endowment Fund. Facility Co. will provide capital for the Endowment Fund, in addition to the capital raised by the campaign, by acquiring additional shares of Endowco with user advances (projected at $7 million). These advances include certain of the payments payable under contracts entered into by or on behalf of Facility Co. for the naming of the Complex, advertising space on the arena clock (scoreboard) or in other areas of the Complex, and the build out or development of luxury suites and concessions in the Complex. As well, Facility Co. will use 50% of the base and termination rent and 100% of the additional rent it receives from the Partnership pursuant to the Sub-Lease to acquire additional shares of Endowco to provide additional capital for the Endowment Fund. The capital and/or income of the Endowment Fund will be used for the following purposes:

1 . Assist Facility Co., if so required, with funding any short fall in the construction costs of $1 11 million of the Complex up to a maximum amount equal to the amount Endowco receives from Facility Co. as share capital as a consequence of Facility Co. receiving user advances (other than user advances in respect of luxury suites which are estimated to total $2 million in the aggregate);

2. Fund Facility Co. in an amount equal to the lesser of operating costs of the Complex and income earned from an amount equal to that part of the capital of the Endowment Fund resulting from the acquisition of shares of Endowco by Facility Co.;

3. Promote the widest possible use of and access to the Complex by the citizens of Manitoba on a long term basis by investing in or making loans to tenants and prospective tenants of the Complex, by payment of subsidies to tenants in order to obtain lower admission prices for patrons of the event staged by the tenant, by purchasing and distributing admission tickets for events staged by tenants and by such other means as Endowco deems advisable;

4. Assume the liability of the City of Winnipeg and the Province of Manitoba with respect to their guarantee of promissory notes (the "Jets Private Sector Notes") issued in respect of the 1991 interim agreement with the present majority owners of the partnership which currently owns the Franchise (approximately $7.8 million).

Endowco and Spirit will work together to establish appropriate arrangements in respect of the sharing of rent, parking and concession revenues generated from non-profit events which Endowco sponsors in the Complex on dates which do not conflict with revenue generating events arranged by the Partnership in the Complex.

Facility Co. and Endowco will agree as to how the Board of Directors of Endowco will be chosen. Initial Board members will be chosen from major contributors. Thereafter, a nominating procedure will be adopted which will ensure that the Board is made up of public spirited citizens with good business judgement.

Endowco shall, on a year to year basis, enter into a standby loan arrangement with the Partnership in return for a standby fee of . 1 %. The amount of the standby facility, which will be determined at the beginning of each fiscal year, shall not exceed the lesser of $30 million and 25 % of the estimated fair market value of the Franchise if it were to be sold outside of Winnipeg. Loans shall incorporate usual commercial provisions with respect to term and interest. Payment of interest and, unless otherwise agreed, repayment of all principal shall occur prior to any use of cash flow to pay rent to Facility Co. or pay the cumulative annual distributions to the Limited Partners. After June 30, 2002, Endowco will review the status of the standby facility arrangement on an annual basis. While the standby facility is in place, the Partnership's budget for the operation of the Franchise will be subject to terms and conditions imposed by Endowco, which will be similar to those typically imposed by financial institutions providing a credit facility.

Facility Co. will have a security interest in the Partnership assets excluding season ticket deposits and amounts to which the Partnership is entitled to receive as its share of fees paid to the NHL in respect of the issue of new franchises or the transfer of existing franchises ("Expansion or Transfer Revenue"). Endowco will have a security interest in the Partnership assets excluding season ticket deposits.

PARTNERSHIP SOURCES AND USES OF FUNDS ($000'S)

PRIOR TO COMPLETION OF THE COMPLEX

Sources: (1)

Proceeds of issue of Units $50,000
User grants and advances relating to season tickets and club seats (2) $13,000
Bank line of credit $12,000
  $75,000

Uses:

Acquisition price for a 64% interest in the Franchise $32,500
Retiring outstanding liabilities of the Franchise $8,000
Provision for losses for 1995-96 and 1996-97 $30,000
Administration, marketing, interim financing and contingency $4,500
  $75,000

(1) Excludes gift from Facility Co. of 36% interest in the Franchise.

(2) Anticipated to be secured prior to the completion of the Complex.

VARIATIONS WILL OCCUR IN CERTAIN OF THE FOREGOING COMPONENTS AND SUCH VARIATIONS MAY BE MATERIAL (SEE "RISK FACTORS").

DISTRIBUTABLE CASH FLOW OF THE PARTNERSHIP

Net Income from Operations of the Partnership is defined as the aggregate revenues of the Partnership generated by the operations of the Franchise and the Complex, less:

(a) the operating expenses of the Franchise;

(b) the operating expenses of the Complex for which the Partnership is responsible, ifany, being those operating expenses not covered by Facility Co. with funds contributed by Endowco from income available

from the Endowment Fund resulting from the acquisition of shares of Endowco by Facility Co.; and

(c) Expansion or Transfer Revenues to the extent that unearned revenue from season ticket sales plus outstanding third party debt exceeds season ticket advance deposits on hand.

Gross Distributable Cash Flow ("GDCF") of the Partnership is defined as Net income From Operations less any amounts due to Endowco under the standby loan arrangement. On commencement of operations in the Complex (scheduled for the 1997/98 regular hockey season) Facility Co. will be entitled to Base Rent calculated as 50 percent of GDCF.

Net Distributable Cash Flow ("NDCF") is defined as GDCF less Base Rent. Commencing January 1, 1998, the Limited Partners will be entitled to receive the lesser of NDCF and a cumulative annual return equal to 5 percent of the capital contributed to the Partnership, including arrears thereof, if any.

Residual Cash Flow ("RCF") is defined as NDCF less cumulative annual returns distributed to the Limited Partners. Facility Co. will be entitled to Additional Rent equal to the lesser of RCF and the amount of operating costs paid by Facility Co. in the fiscal year less 50 percent of the Base Rent in that year. Any undistributed RCF remaining will be available to the Partnership to be dealt with in accordance with the Partnership Agreement.

NET PROCEEDS OF THE PARTNERSHIP FROM SALE OF THE FRANCHISE

The City of Winnipeg and the Province of Manitoba have certain rights to restrict the ability of the Partnership to sell the Franchise. However, in the event of a sale of the Franchise, the sales proceeds, after taking into account NHL transfer fees, if any, and termination costs of the Partnership, will be distributed in the following order:

1. To retire any third party liabilities;

2. To retire any balances owing to Endowco under the standby loan arrangement;

3. To pay all outstanding 50/o cumulative annual return arrears accrued from January 1, 1998 on capital contributed by Limited Partners;

4. To pay a 5 To annual return on capital contributed by Limited Partners in respect of the period from August 15, 1995 to December 31, 1997;

5. Where Net Sale Proceeds (as defined below) exceed an amount equal to 50% of the Total Equity (as defined below), the amount determined pursuant to the following formula shall be paid as Termination Rent and the balance remaining shall be paid to the Limited Partners:

Termination Rent = $9 million + 50% [NSP - 0.5 (TE) ]

where

Total Equity ("TE") = $18 million plus total capital contributed to the Partnership which remains outstanding

Net Sale Proceeds ("NSP") = net sale proceeds from the sale of the Franchise, after taking into account NHL transfer fees, if any, and termination costs of the Partnership, and after paying all amounts provided for in 1-4 above.

6. Where Net Sale Proceeds do not exceed an amount equal to 50% of Total Equity (each as defined in paragraph 5 above), the amount determined pursuant to the following formula shall be paid as Termination Rent and the balance remaining shall be paid to the Limited Partners:

Termination Rent = $18 million x NSP

TE

where NSP and TE are each defined as provided for in paragraph 5 above.

ANALYSIS OF PROSPECTIVE RETURNS TO LIMITED PARTNERS

Readers should refer to the Offering Memorandum relating to this offering which will contain a more extensive discussion of the assumptions used in this illustration. The following information is provided by Spirit for illustrative purposes only and should not be construed as a forecast or projection. The following prospective financial information has been prepared by Spirit and is based on assumptions considered reasonable when prepared, but which is inherently subject to uncertainty and variations depending on evolving events and which may prove to be incorrect. There is absolutely no representation that the prospective results will be realized in whole or in part. Further, the degree of uncertainty associated with future-oriented financial information generally increases with the time periods covered. Since this prospective financial information is based upon assumptions regarding future events, actual results will vary from the information presented, even if the assumptions are realized, and such variations may be material.

Statement of Prospective Revenues and Expenses - Franchise and Complex ($000's)

For the Years Ending June 30 (1)

  1996 1997 1998 1999 2000
Franchise Revenue (2) 25,348 28,128 37,227 39,002 40,752
Complex Revenue (3)     9,422 9,540 9,661
  25,348 28,128 37,227 48,542 50,413
Franchise Expenses          
Player Costs (4) (30,450) (31,330) (30,003) (31,258) (32,484)
Other Franchise Expenses (5) (10,497) (10,808) (10,634) (10,953) (11,279)
Complex Expenses (6)     (3,371) (3,470) (3,579)
Facility Co. Expenses Funded by Endowco(7)     3,371 3,470 3,579
  (40,947) (42,138) (40,637) (42,211) (43,763)
Net income (Loss) From Operations (15,599) (14,010) 6,012 6,331 6,650

Assumptions Underlying the Prospective Financial Information

(1) General

  • Combined net losses for 1995/96 and 1996/97 of about $29.6 million
  • Except where specifically noted, future growth in revenues and expenses are based on annual inflation of 3 percent.
  • Operation of the Complex commences September 1, 1997 with fiscal years ending June 30th.
  • Average attendance of 14,300 for 41 regular season and 4 exhibition hockey games.
  • Average attendance of 5,600 for 70 other events, including concerts and family shows.
  • Excludes potential revenues from playoff games, Expansion or Transfer Revenue and the possibility of future NHL currency protection or revenue sharing arrangements.

(2) Franchise Revenue - 1998

  • Ticket revenue from luxury suites, club seating and season tickets of $20.8 million representing approximately 10,000 seats (excluding user advances of $2.0 million on luxury suites, $8.6 million on club seats and $4.5 million on season tickets).
  • Ticket revenue from walk-ups of approximately $5.2 million per year.
  • Broadcast rights revenue of $8.1 million from both local contracts and NHL revenue sharing, inclusive of future growth in accordance with contractual arrangements.
  • League revenue sharing from merchandise and other rights of approximately $1.7 million. -
  • Program and local merchandising revenues of approximately $725,000 per year.

(3) Complex Revenue - 1998

  • All luxury suites, except one complimentary suite, are assumed to be fully leased generating approximately $1.4 million in annual suite licence fees (exclusive of $1.5 million transferred to the Franchise as the cost of the game tickets and $ 1 00,000 as the cost for parking and other event tickets attributable to occupants of the suites). No increase in luxury suite licence fees between 1997/98 and 1999/2000.
  • All 2,649 club seats are assumed to be fully subscribed for generating annual licence fees of approximately $2.4 million (excluding the cost of tickets to hockey games and other events). No increase in annual license fee revenues between 1997/98 and 1999/2000.
  • Initial parking revenue of $550,000 from proposed revenue sharing agreements with public and private parking lot operators.
  • Net concessions, restaurant and catering revenues of $2.2 million per year.
  • Sponsorships, advertising and annual revenues from building naming rights of $2.0 million (excluding $700,000 attributed to the Franchise) net of user advances.
  • Building and miscellaneous equipment rentals for non-hockey events of $750,000 excluding promoter reimbursements of direct event costs. Building rents are a function of gate receipts from non-hockey events.
  • Other event merchandising revenue of $140,000 per year.

(4) Player Costs

Player costs include player base salaries, bonuses and other player related costs and the net cost of the farm team. The player costs for 1995/96 are consistent with current team management budgets. Notwithstanding historical increases in player costs, it is assumed that player costs will remain relatively constant. Spirit believes that the player costs can be managed effectively to the specified amounts, without materially adversely affecting hockey revenues.

(5) Other Franchise Expenses - 1998

Other hockey operations include costs of $4.9 million, NHL dues and assessments of $1.2 million, general and administration of $2.5 million and other expenses of $2 million.

(6) Complex Expenses - 1998

Operating costs of $3.4 million include wages and benefits of $1.4 million, utilities costs of $725,000, operating and maintenance of $400,000 and marketing costs of $300,000.

(7) Facility Co. Complex Operating Expense Funding

Endowco's Endowment Fund is assumed to sustain sufficient assets derived from share capital to generate adequate income to fully fund Facility Co. in an amount equal to the operating expenses of the Complex. It is assumed that the Endowment Fund will have a balance of approximately $40-$45 million, in September 1997. inclusive of interest earned.

Summary of Prospective Cash Distributions ($000's)

For the Years Ending June 30

  1996 1997 1998 1999 2000
Net Income From Operations     6,012 6,331 6,650
Principal and Interest to Endowco          
Gross Distributable Cash Flow     6,012 6,331 6,650
Base Rent to Facility Co.     (3,006) (3,166) (3,325)
Net Distributable Cash Flow     3,006 3,165 3,325
Cumulative Annual 5% Return Distributed to Limited Partners     (1,250) (2,500) (2,500)
Residual Cash Flow     1,756 665 825
Additional Rent to Facility Co.     (1,756) (665) (825)
Undistributed Residual Cash Flow 0 0 0 0 0

Prospective Statement of Income

for Income Tax Purposes ($000's)

For the Years Ending December 31

  1995 1996 1997 1998 1999
Operations of the Franchise and Complex          
Revenues (1) 12,674 26,738 37,389 47,596 49,478
Expenses (1) (20,474) (41,543) (41,388) (41,424) (42,987)
Net income (loss) From Operations (7,800) (14,805) (3,999) 6,172 6,491
Rent to Facility Co. (2)     (2,381) (4,297) (3,991)
Revenue From User Advances (2) (3)     3,295 4,340 2,090
Amortization of Player Contracts (4) (3,867) (11,600) (11,600) (7,733)  
Amortization of Issue Expenses (4) (167) (500) (500) (500) (500)
Other Marketing and Administration (286) (858) (856)    
  (4,320) (12,958) (12,042) (8,190) (2,401)
Partnership Income (Loss) (12,120) (27,763) (16,041) (2,018) 4,090

(1) Calendar year 1995 assumes one half of operations for the Franchise and Complex for the year ending June 30, 1996.

(2) Calendar year 1997 assumes one half of operations for the Partnership for the yearending June 30, 1998. Includes both Base Rent and Additional Rent.

(3) User Advances are allocated over the term of the underlying contracts.

(4) Calendar year 1995 assumes four months of amortized expenses attributed to the Partnership.

Prospective Income Tax Deductions and Cash Flow

Per Minimum Subscription of 5 Units ($5,000)

for the Years Ending December 31

  1995 1996 1997 1998 1999 Total
Taxable Income (Net of Partnership Loss Carry Forwards)            
Income Tax Deductions 1,212 2,776 1,012     5,000
Subscription Price (5,000)         (5,000)
Tax Savings (50.4% of Income Tax Deductions) 611 1,399 510     2,520
Cash Distributions (Net of 37.8% Capital Gains Tax)       78 156 234
Net Cash (Invested) Returned (4,389) 1,399 510 78 156 (2,246)
Cumulative Net Cash Invested (4,389) (2,990) (2,480) (2,402) (2,246)  

CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

The Partnership is not a taxable entity. The Partnership will calculate income (loss) for tax purposes and this income (or loss) will be allocated to the Limited Partners and Spirit, as general partner. The income (loss) of the Partnership will be allocated on a December 31st year end.

It is expected that for the first four taxation year ends of the Partnership, a loss will result for income tax purposes. This loss will be from three sources:

(a) operating losses prior to the opening of the Complex;

(b) amortization of player contract and negotiation rights over three years (estimated); and

(c) amortization of issue expenses over five years.

Once the Complex is in operation, the Partnership is expected to have income for tax purposes. This income will be from operations including the amortization of revenue from the up front user advances on club seats and season tickets. A sale of the Franchise will also result in income for tax purposes. Any income of the Partnership will be allocated to the Limited Partners and to Spirit as general partner.

A Limited Partner will be entitled to deduct allocated losses to the extent of the "at risk" amount which will initially be equal to the Subscription Price paid. If allocated losses exceed the "at risk" amount, which is expected, these losses will be carried forward as Partnership losses and be deductible against future income allocated from the Partnership.

All losses allocated to Limited Partners will be subject to inclusion in taxable income for purpose of alternative minimum tax.

A Limited Partner will be required to include in income for tax purposes a capital gain related to distributions from the Partnership if the Limited Partner has a "negative adjusted cost base". This capital gain will be income in the year following the distribution. It is expected that a Limited Partner will have a negative adjusted cost base when Partnership distributions begin in 1998, which will continue for at least 5 years.

All Limited Partners must be Canadian residents for income tax purposes. If any Limited Partner is not, the amortization of player contract and negotiation rights will not be available to any of the Limited Partners.

A Limited Partner must not borrow a limited recourse amount for income tax purposes to acquire Units. If any Limited Partner does so, it may affect the deductions available in the Partnership. Limited recourse amounts for purposes of the Income Tax Act (Canada) include any indebtedness for which recourse is limited, either immediately or in the future and either absolutely or contingently. Indebtedness will also be a limited recourse amount unless bona fide arrangements are made for the repayment of debt and interest in a period less than ten years and interest on the indebtedness is paid no later than thirty days after the end of each taxation year at a rate that is equal to or greater than the prescribed rate at the time of the indebtedness. The prescribed rate existing as at August 15, 1995 will be 9%.

An advance income tax ruling is being sought to confirm various aspects of the income tax consequences related to the Partnership including the eligibility to amortize the player contract and negotiation rights. The ruling cannot deal with the actual amount allocated to player contract and negotiation rights nor the amortization period, since that is a question of fact. The amount allocated to the player contract and negotiation rights is limited to the lesser of the cost and fair market value. The amortization period is the average term of the player contracts.

CONDITIONS OF CLOSING

It is expected that the Closing will take place on or about August 14, 1995, provided a minimum of 50,000 Units ($50 million) have been subscribed for. The proceeds of the Offering will be held in escrow by Montreal Trust Company of Canada (the "Escrow Agent") and will be released from escrow only if, among other matters, the following conditions precedent are satisfied on or before August 15, 1995.:

  • Attainment of $30 million capitalization of Endowco for allocation to the Endowment Fund, inclusive of the amount of Jets Private Sector Notes gifted to the City of Winnipeg and the Province of Manitoba.
  • Receipt of an advance tax ruling respecting deductions from the amortization of player contract and negotiation rights and other matters satisfactory to Spirit.
  • Receipt of an advance tax ruling respecting deductibility of contributions made to the City of Winnipeg for payment to Endowco and allocation to the Endowment Fund.
  • Consent of the NHL with respect to the transfer of the ownership of the Franchise to the Partnership.
  • Documentation relating to arrangements between the Partnership, Facility Co., Spirit and Endowco as it relates, among other things, to the construction of the Complex, the responsibility for the operating costs of the Complex, the sharing of Gross Distributable Cash Flow and the distribution of user grants and advances.
  • In connection with the acquisition of the Franchise by the Partnership, all of the documents relating to the acquisition by the Partnership of all the outstanding units of the partnership that currently owns the Franchise shall have been duly executed and delivered and the ownership of such units by the Partnership shall have been consummated or shall be consummated simultaneously with the Closing.

If all of the conditions of closing or of release from escrow are not satisfied by August 15, 1995, the subscription

proceeds shall be forthwith returned to subscribers without interest or deduction.

RISK FACTORS

Subscribers should review an investment in Units with their legal, tax and financial advisors and consider a number

of risk factors before investing in the Partnership, including those discussed below.

Hockey Operations:

The Franchise will account for a significant percentage of the revenues of the Partnership. There are a number of risks involved in the operation of an NHL franchise in general, and the Franchise, in particular, which include, but are not limited to, the following:

Sales of Club Seats and Luxury Suites: The success of the Franchise is dependent to a large extent on the ability of the Partnership to market luxury suites and club seats. To date, 40 of the 48 luxury suites and approximately 1,1 00 of a total of 2,649 club seats have been sold. Inability of the Partnership to sell the remaining club seats will significantly adversely affect the gate revenue anticipated to be generated by the Franchise. In addition, the $8 million user advances anticipated to be received by the Partnership from the sale of club seats will be reduced, which will adversely impact on the ability of the Partnership to fund its obligations without further borrowings. There is no assurance that the remaining club seats and luxury suites will be sold.

Sales of Season Tickets: Certain season tickets will require the payment of a user advance fee, which is a departure from past practice for the Franchise. If the $4.5 million user advances anticipated to be generated from the sale of these season tickets is not obtained, the capital available to the Partnership will be reduced and the ability of the Partnership to fund its obligations without further borrowings will be adversely affected. There is no assurance that all such season tickets will be sold.

Attendance: The Partnership will suffer if interest in the Franchise diminishes and attendance declines. The Partnership is relying on attendance increasing notwithstanding a significant increase in ticket prices. To the extent that there is declining interest in attending the games or resistance to the increase in ticket prices, the anticipated attendance of 14,300 fans per game may not be achieved. Reduced attendance will adversely affect gate and concession revenues in the short term and may adversely affect advertising and broadcast revenue in the long term.

Advertising: Spirit anticipates being able to secure advertising revenue significantly greater than that generated in the Winnipeg Arena. While Spirit believes annual advertising revenue of $2.3 million is achievable, no contracts have, to date, been negotiated. Accordingly, there is no assurance that expected Partnership advertising revenues will be realized.

Broadcast Rights: Spirit anticipates broadcast revenues to continue in accordance with existing contracts. Contract rights representing a significant portion of current revenue will expire prior to the completion of the Complex. There is no assurance that replacement contracts can be negotiated or that similar revenues can be obtained.

Player Costs: Player costs comprise approximately 75% of anticipated total cost of operating the Franchise. The player costs for 1995/96 are consistent with current team management budgets. The increase in Jets actual player costs for 1991/92 to budgeted player costs in 1995 /96 averaged approximately 25 % per year, although the annual increase varied from year-to-year during that period. Nothwithstanding such past increases, Spirit believes that player costs can be managed effectively with nominal increases over the next 5 years without materially adversely affecting hockey revenues. There is no assurance that player costs can be maintained at such levels. To the extent that player costs increase more than proposed, the Partnership's Net Income From Operations may be substantially reduced, if not offset by increases in revenues.

NHL Obligations:

As a franchises member of the NHL, the Partnership will be jointly and severally liable for the debts and obligations of the NHL but not the debts and obligations of other franchisee members. In accordance with restrictions placed upon franchises members by the NHL, the Partnership may be prevented from transferring the Franchise under certain conditions or may be obligated to pay a transfer fee in an amount to be determined in the discretion of the NHL, which may be significant.

Collective Bargaining Agreement:

A new collective bargaining agreement ("CBA") was entered into between the NHL and the Players Association in January, 1995. The full effect the CBA will have on player costs is not presently known. The CBA is open for renegotiation in February, 1998, shortly after the Complex is scheduled to be completed. Any form of player action at that time would adversely affect the ability of the Franchise to generate the revenue expected. In addition, player costs and the ability to manage such costs may be affected by the terms of the CBA when renegotiated.

Reliance on the Endowment Fund:

Spirit is anticipating that the operating costs of the Complex will be funded by the investment income generated by the Endowment Fund. Spirit is also anticipating that the Endowment Fund will have sufficient capital to provide the Partnership with loans under the standby loan arrangement with Endowco to fund operating losses of the Franchise in respect of which no other funds may be available. As a result, the operations of the Partnership will be impacted by both the level of capital in the Endowment Fund and the rate of return the Endowment Fund generates on its capital.

Reliance on Management:

Spirit, as a general partner, has exclusive and complete discretion to manage the Partnership. Spirit has no experience in the operation of an NHL Franchise and no experience in the management or operation of an entertainment facility like the Complex. Similarly, Spirit has no experience in supervising the construction of an entertainment facility like the Complex. The lack of relevant experience by Spirit will be addressed by retaining professional management and by retaining personnel.

Loss of Limited Liability:

Limited liability may be lost under certain circumstances and may be unavailable under the laws of certain jurisdictions.

No Market:

There is currently no market through which the Units may be sold and there may be restrictions on their transfer under applicable securities legislation and the NHL constitution, bylaws and rules.

Control Over Team Prior to Closing:

The control of the Franchise continues to rest with the present majority owners until the Clos-

ing of this offering and the Franchise being acquired by the Partnership. The decisions made by the current management in the interim period could have a material impact on the profitability and value of the Franchise and the adequacy and sufficiency of the funds available to the Partnership.

Failure to Complete Complex Construction:

In the event that the construction of the Complex is not 50% completed by January 1, 1997, the present majority owners, pursuant to the agreement to sell their units in the partnership that presently owns the Franchise to the Partnership, are deemed to be appointed as agents of the Partnership for the purposes of selling the Franchise prior to June 1, 1998. In that event, the Partnership will be entitled to receive approximately $32 million, plus certain expenses, from the sale proceeds. Such funds will be insufficient to allow the Partnership to repay capital to the Limited Partners equal to the Subscription Price paid by Limited Partners. Further, after payment of third party liabilities and amounts owed to Endowco, including loans advanced under the standby loan facility, it is unlikely that Limited Partners will receive any return of the capital.

Foreign Currency Fluctuations:

Certain revenues and expenses of the Franchise are denominated in US dollars and will be subject to fluctuations in the U.S.-Canada exchange rate. Such fluctuations could have a negative impact on the income of the Partnership.

WEC Arrangements:

Pursuant to the arrangements between the Partnership and WEC, the Partnership may become liable to indemnify WEC for claims arising after the opening of the Complex, from the operation of the WEC facilities or from WEC employees.

Conflicts of Interest:

Certain conflicts of interest may exist as a result of the officers and directors of Spirit being also, from time to time, officers and/or directors of Facility Co. and/or Endowco. As well, additional conflicts of interest may arise as a result of Spirit acting as agent for and on behalf of Facility Co. in connection with the negotiation of certain contractual rights associated with the Complex and the arrangement for payment of one time user advances to Facility Co. and annual user licence fees to the Partnership. The total amount payable in respect of any such rights will be allocated as between one time user fees and annual user licence fees by Spirit. Accordingly, a conflict of interest will arise in connection with the determination by Spirit of the allocation of the aggregate amount payable as between the one time user fee payable to Facility Co. and the annual user licence fee payable to the Partnership.

Legal Proceedings:

The Partnership will, upon acquiring the Franchise, become liable for damages in connecton with a judgment obtained in connection with a pension dispute with former NHL players. Although the amount of such damages has not yet been determined, the damages may be significant and may be material to the Partnership.

RESTRICTIONS ON INVESTORS ACQUIRING UNITS

Only investors who are Canadian residents for the purposes of the Income Tax Act (Canada) will be eligible to purchase Units.

Only investors who are prepared to warrant and covenant that any borrowings incurred for the purposes of acquiring Units shall not be limited recourse amounts for the purposes of the Income Tax Act shall be eligible to purchase Units. Limited recourse amounts for purposes of the Income Tax Act include any indebtedness for which recourse is limited, either immediately or in the future and either absolutely or contingently. Indebtedness will also be a limited recourse amount unless bona ride arrangements are made for the repayment of debt and interest in a period less than ten years and interest on the indebtedness is paid no later than 30 days after the end of each taxation year at a rate that is equal to or greater than the prescribed rate at the time of the indebtedness. The prescribed rate existing as at August 15, 1995 will be 9 %.

Officers, umpires, referees, linesman and other employees of the NHL and players and employees of Members (franchisees) of the NHL are not eligible to purchase or hold Units. Units acquired in violation of these restrictions will not be entitled to vote. In addition, under the NHL constitution and by-laws, any transfer of a controlling ownership interest in a Member must be approved by three-fourths of the (franchises) Members.

NATIONAL HOCKEY LEAGUE PARTICIPATION IN INFORMATION CIRCULAR

THE NHL HAS NOT PARTICIPATED IN THE PREPARATION OF THIS DOCUMENT, HAS NOT APPROVED ITS CONTENTS AND IS NOT RESPONSIBLE FOR ANY OF THE CONTENTS THEREOF OR ANY STATEMENTS OR COMMITMENTS CONTAINED HEREIN. IN NO EVENT SHALL THE NHL BE LIABLE IN ANY WAY, DIRECTLY OR INDIRECTLY, FOR ANY LEGAL CAUSES OF ACTION OR GOVERNMENTAL PENALTIES ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS DOCUMENT.